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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended January 25, 1997 Commission file number 1-10299
WOOLWORTH CORPORATION
(Exact name of Registrant as specified in its charter)
New York 13-3513936
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
233 Broadway, New York, New York 10279-0003
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 553-2000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
<S> <C>
Common Stock, par value $.01 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES _X_ NO ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. _X_
See pages 12 through 17 for Index of Exhibits.
Number of shares of Common Stock outstanding at April 1, 1997: 134,161,532
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Aggregate market value of voting stock held by non-affiliates at April 1, 1997:
$3,054,717,484*
* For purposes of this calculation only (a) all directors plus one executive
officer of the Registrant are deemed to be affiliates of the Registrant and (b)
shares deemed to be "held" by such persons at April 1, 1997, include only
outstanding shares of the Registrant's voting stock with respect to which such
persons had, on such date, voting or investment power.
DOCUMENTS INCORPORATED BY REFERENCE
1. The Registrant's Annual Report to Shareholders (the "Annual Report") for
the fiscal year ended January 25, 1997: Parts I, II and III.
2. The Registrant's definitive Proxy Statement to be dated May 5, 1997 (the
"Proxy Statement") issued in connection with the annual meeting of
shareholders: Part III.
Page 2 of 2 cover pages
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PART I
ITEM 1. BUSINESS
GENERAL
Woolworth Corporation (the "Registrant"), incorporated under the laws of the
State of New York in 1989, has origins dating back to 1879. The Registrant and
its retail divisions operate a multinational retailing business selling a broad
range of merchandise through 7,746 stores in the United States, Canada, Mexico,
Germany, Austria, England, Belgium, Luxembourg, the Netherlands, France, Spain,
Italy, Australia and Hong Kong.
The Registrant's retailing business is conducted through two major segments:
Specialty and General Merchandise. The Specialty segment includes: the Athletic
Group, the Northern Group, Specialty Footwear, and Other Specialty. The General
Merchandise segment includes operations in: Germany, the United States, and
other countries (Canada and Mexico). The financial information concerning
industry segments required by Item 101(b) of Regulation S-K is set forth on
page 25 of the Company's Annual Report to Shareholders ("Annual Report") for
the fiscal year ended January 25,1997 and is incorporated herein by reference.
SPECIALTY SEGMENT
Athletic Group
The Athletic Group, the Registrant's largest and most profitable business,
operates 3,394 stores in North America, Europe, Asia and Australia. In the
United States, this division operates the Foot Locker businesses including: Foot
Locker, Lady Foot Locker, Kids Foot Locker and World Foot Locker, as well as,
Champs Sports and Going to the Game! Athletic Group stores totaling 2,914 are
located primarily in regional malls throughout the United States. Additionally,
it operates an apparel imprint/embroidery factory located in the United States.
The Registrant acquired Eastbay, Inc. ("Eastbay"), a direct marketer of athletic
footwear, apparel, equipment and licensed private label products. The
transaction, which was consummated on January 30, 1997, enables the Registrant
to use Eastbay's established direct-mail distribution channels and athletic
formats to expand their merchandise offerings and provide customer service
differentiation from competing mall formats.
In Europe, there are 228 Foot Locker stores located in the Netherlands, Belgium,
England, Germany, France, Italy, Spain and Luxembourg. In Canada, the division
operates 188 Foot Locker and Champs Sports stores which are primarily located in
regional malls. The division also operates 51 Foot Locker stores in Australia,
11 in Mexico and 2 in Hong Kong.
Northern Group
The Northern Group operates 760 stores in Canada and the United States. The
Northern Group consists of Northern Reflections and Northern Traditions,
offering casual and career apparel for women, Northern Getaway, offering
children's casual apparel, and Northern Elements offering men's casual apparel.
Specialty Footwear
Specialty Footwear includes formats in the United States, Canada, Germany and
Australia, the largest of which is the Kinney shoe store chain. This group
operates 1,199 retail stores and 3 factories located in the United States which
manufacture footwear.
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Other Specialty
Other Specialty operates 1,379 stores. This group is comprised of non-footwear
specialty chains in the United States and abroad. This includes After Thoughts,
The San Francisco Music Box Company, and The Best of Times. After Thoughts
offers moderately priced costume jewelry and accessories, The San Francisco
Music Box Company features music boxes and gifts, and The Best of Times stores
carry a large assortment of watches and clocks.
GENERAL MERCHANDISE SEGMENT
Germany
Through Retail Company of Germany, Inc., the Registrant operates 374 Woolworth
general merchandise stores in Germany and Austria. They offer a wide variety of
household and personal products.
United States
The Registrant operates 413 Woolworth general merchandise stores in the United
States. These stores feature a broad range of staple household items at
competitive prices. In addition, the division is a franchisee of the Burger King
Corporation, with 26 restaurant locations in Woolworth stores.
Other
Woolworth Canada, Inc. operates 171 general merchandise stores in Canada through
The Bargain! Shop chain, generating high volume/low margin sales of
manufacturers' excess inventory.
Woolworth Mexicana, S.A. de C.V., operates 30 Woolworth general merchandise
stores in Mexico.
OTHER INFORMATION
For additional information on format descriptions and number of stores, refer to
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 11 through 17 of the Annual Report which is incorporated
herein by reference.
The Registrant has an overseas network of 11 buying offices in Asia. It also has
a 25 percent interest in Kaufring Beteillgungs GbR, a cooperative purchasing
company, which also operates retail department stores in Germany.
EMPLOYEES
The Registrant and its consolidated subsidiaries had approximately 82,000 full
and part-time employees at January 25, 1997. It considers employee relations to
be satisfactory.
SEASONALITY
The Registrant's retail businesses are highly seasonal in nature. Historically,
the greatest proportion of sales and net income is generated in the fourth
quarter and the lowest proportion of sales and net income is generated in the
first quarter, reflecting seasonal buying patterns.
COMPETITION
The retailing business is highly competitive. Competition is based upon such
factors as price, quality, selection of merchandise, reputation, store location,
advertising and customer service.
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MERCHANDISE PURCHASES
The Registrant and its consolidated subsidiaries purchase merchandise and
supplies from thousands of vendors worldwide including purchases of athletic
footwear and apparel from a major vendor, Nike, Inc., which supplied
approximately 25 percent of the Registrant's merchandise purchases in 1996. The
Registrant considers vendor relations to be satisfactory and does not rely to
any degree upon a backlog of orders for future delivery in either its retailing
or its manufacturing operations.
INFORMATION REGARDING BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
For information regarding sales, operating results and identifiable assets of
the Registrant by business segment and by geographic area as required by Item
101(d) of Regulation S-K, refer to page 25 of the Annual Report. For a
description of the formats contained in each business segment, refer to
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 11 through 17 of the Annual Report which is incorporated
herein by reference.
ITEM 2. PROPERTIES
The properties of the Registrant and its consolidated subsidiaries consist of
land, leased and owned stores, factories, and administrative and distribution
facilities. Total selling area at the end of the year was approximately 26
million square feet, of which approximately 16 million square feet pertained to
the General Merchandise segment and approximately 10 million square feet to
Specialty operations, the majority of which is leased. These properties are
located in the United States (60 percent), Europe (20 percent), and elsewhere
(20 percent). The Registrant operated 10 distribution centers occupying an
aggregate of 3.7 million square feet, the majority of which is leased. The
Registrant also has an additional 7 distribution centers occupying 1.0 million
square feet, the majority of which is leased and sublet. Of the 17 distribution
centers, 11 are located in the United States, 2 are located in Europe and 4 in
other countries. Included among the Registrant's owned properties is the
landmark Woolworth Building in New York City in which its corporate headquarters
and the executive offices of U.S. General Merchandise, Athletic Group, and
Specialty Footwear are located. Additional information regarding the
Registrant's and its consolidated subsidiaries' properties can be found in the
Annual Report on page 26 under the section captioned "Property and Equipment,
Net" and on page 28 under the section captioned "Leases," which pages are herein
incorporated by reference.
ITEM 3. LEGAL PROCEEDINGS
Between March 30, 1994, and April 18, 1994, the Registrant and certain of its
present and former directors and officers were named as defendants in lawsuits
brought by certain shareholders claiming to represent classes of shareholders
that purchased shares of the Registrant's common stock during different periods
between January 1992 and March 1994.
These class action complaints purport to present claims under the federal
securities and other laws and seek unspecified damages based on alleged
misleading disclosures during the class periods.
On April 29, 1994, United States Senior District Judge Richard Owen entered an
order consolidating 25 actions, purportedly brought as class actions, commenced
against the Registrant and certain officers and directors of the Registrant in
the United States District Court for the Southern District of New York, under
the caption In re Woolworth Corporation Securities Class Action Litigation.
Plaintiffs served an Amended and Consolidated Class Action Complaint, to which
the defendants responded. On February 17, 1995, Judge Owen entered an order for
certification of the action as a class action on behalf of all persons who
purchased the Registrant's common stock or options on the Registrant's common
stock from May 12, 1993 to March 29, 1994 inclusive, pursuant to a stipulation
among the parties. On March 13, 1997, the parties' representatives engaged in a
mediation proceeding with a view toward settling the issues in
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dispute. As a result, the parties have agreed in principle to a settlement of
the class action, subject to final documentation and the approval of the court.
In the opinion of management, the settlement, if approved by the court, would
not have a material adverse effect on the financial position, or results of
operation of the Registrant.
Five separate state-court derivative actions filed in April 1994 were
consolidated under the caption In re Woolworth Corporation Derivative Litigation
and are now pending in the Supreme Court of the State of New York, County of New
York. Plaintiffs served a Consolidated Complaint on behalf of the plaintiffs in
these five actions together with the plaintiff in the former federal derivative
action Sternberg v. Woolworth Corp., which has been dismissed. Defendants moved
to dismiss the Consolidated Complaint, and on April 27, 1995, the court granted
defendants' motion, with leave to the plaintiffs to replead. On June 7, 1995,
plaintiffs served a Consolidated Amended Derivative Complaint. On June 27, 1995,
defendants moved to dismiss the Consolidated Amended Derivative Complaint with
prejudice. On April 10, 1996, the court granted defendants' motion with
prejudice. Plaintiffs' have filed a notice of appeal from the dismissal to the
Appellate Division, First Department, which appeal is now pending. There is one
federal derivative action pending in the United States District Court for the
Southern District of New York under the caption Rosenbaum v. Sells et al. There
have been no material developments in this action. These actions are all at a
preliminary stage of proceedings. Accordingly, the outcomes cannot be predicted
with any degree of certainty. As a result, the Registrant cannot determine if
the results of the litigation will have a material adverse effect on the
financial position or results of operations of the Registrant.
During 1994, the staff of the SEC initiated an inquiry relating to the matters
that were reviewed by the Special Committee of the Board of Directors as well as
in connection with trading in the Registrant's securities by certain directors
and officers of the Registrant. The SEC staff has advised that its inquiry
should not be construed as an indication by the SEC or its staff that any
violations of law have occurred. In the opinion of management, the result of the
inquiry will not have a material adverse effect on the financial position or
results of operations of the Registrant.
The information in this section on Legal Proceedings is current as of April 18,
1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of the year ended January 25, 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Executive Officers of the Registrant, as of April 9,
1997, is set forth below:
Chairman of the Board and Chief Executive Officer Roger N. Farah
President and Chief Operating Officer and Director Dale W. Hilpert
Senior Vice President - Corporate Development M. Jeffrey Branman
Senior Vice President - Real Estate John E. DeWolf III
Senior Vice President - Human Resources John F. Gillespie
Senior Vice President and Chief Financial Officer Andrew P. Hines
Vice President, General Counsel and Secretary Gary M. Bahler
Vice President and Treasurer John H. Cannon
Vice President and Controller Bruce L. Hartman
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Roger N. Farah, age 44, has served as Chairman of the Board since December 15,
1994 and Chief Executive Officer since December 11, 1994. From July 1994 to
October 1994, Mr. Farah served as President and Chief Operating Officer of R. H.
Macy & Co., Inc. From June 1991 to July 1994, Mr. Farah served as the Chairman
of the Board and Chief Executive Officer of Federated Merchandising Services,
the central buying and product development arm of Federated Department Stores,
Inc.
Dale W. Hilpert, age 54, has served as President and Chief Operating Officer
since May 15, 1995. From January 1985 to April 1995, Mr. Hilpert served as
Chairman of the Board and Chief Executive Officer of Payless ShoeSource, a
division of The May Department Stores Company.
M. Jeffrey Branman, age 41, has served as Senior Vice President - Corporate
Development since March 4, 1996. From August 1989 to March 4, 1996, Mr. Branman
served as a Managing Director of Financo, Inc.
John E. DeWolf III, age 41, has served as Senior Vice President - Real Estate
since March 11, 1996. From 1993 to February 1996, he was Senior Vice President -
Property Development for The Disney Stores, Inc., a division of The Walt Disney
Company. Mr. DeWolf served as Vice President - Real Estate Counsel of The
Limited, Inc. from 1982 to 1993.
John F. Gillespie, age 49, has served as Senior Vice President - Human Resources
since April 1, 1996. Mr. Gillespie served as Senior Vice President - Human
Resources of Lever Brothers Company, a subsidiary of Unilever, from 1990 to
March 1996.
Andrew P. Hines, age 57, has served as Senior Vice President and Chief Financial
Officer since April 18, 1994. During 1993, Mr. Hines was a consultant to
Pentland PLC in the United States. From 1989 to 1992, Mr. Hines served as
Executive Vice President and Chief Financial Officer of adidas, USA.
Gary M. Bahler, age 45, has served as Vice President and General Counsel since
February 1, 1993, and as Secretary since February 1, 1990. Mr. Bahler served as
Deputy General Counsel from May 1, 1991 until February 1, 1993.
John H. Cannon, age 55, has served as Vice President and Treasurer since October
12, 1983.
Bruce L. Hartman, age 43, has served as Vice President and Controller since
November 18, 1996. From March 1994 to October 1996, Mr. Hartman served as the
Chief Financial Officer of Filene's, a division of the May Department Stores
Company. Mr. Hartman served as Chief Financial Officer of Famous Barr from March
1993 to March 1994, and as Controller of Robinson's from September 1990 to March
1993, both of which are also divisions of The May Department Stores Company.
Except for Andrew P. Hines, all executive officers serve for terms expiring on
August 13, 1997, and when their successors are elected and qualified. Mr. Hines
will resign from his position effective April 30, 1997.
There are no family relationships among the executive officers or directors of
the Registrant.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information related to the market for the Registrant's common stock on pages 32
through 34 of the Annual Report under the sections captioned "Shareholder Rights
Plan", "Stock Plans", "Restricted Stock", "Preferred Stock" and "Shareholder
Information and Market Prices (Unaudited)", is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The Five Year Summary of Selected Financial Data on page 35 of the Annual Report
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 11 through 17 of the Annual Report is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements
The following, included in the Annual Report, are incorporated herein by
reference:
<TABLE>
<CAPTION>
Page(s) in
Annual Report
-------------
<S> <C>
Consolidated Statements of Operations - Years ended
January 25, 1997, January 27, 1996 and January 28, 1995. 18
Consolidated Balance Sheets - January 25, 1997 and January 27,
1996. 19
Consolidated Statements of Shareholders' Equity Years ended January 25,
1997, January 27, 1996 and
January 28, 1995. 20
Consolidated Statements of Cash Flows - Years ended
January 25, 1997, January 27, 1996 and January 28, 1995. 21
Independent Auditors' Report 22
Notes to Consolidated Financial Statements 23 - 34
</TABLE>
(b) Supplementary Data
Quarterly Results on page 34 of the Annual Report are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements between the Registrant and its independent
accountants on matters of accounting principles or practices.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors of the Registrant
Information relative to directors of the Registrant is set forth under the
section captioned "Election of Directors" in the Proxy Statement and is
incorporated herein by reference.
(b) Executive Officers of the Registrant
Information with respect to executive officers of the Registrant is set
forth immediately following Item 4 in Part I hereof on pages 6 and 7.
(c) Information with respect to compliance with Section 16(a) of the
Securities Exchange Act of 1934 is set forth under the section captioned
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy
Statement and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information set forth in the Proxy Statement, beginning with the section
captioned "Directors' Compensation and Benefits; Indemnification Arrangements"
through and including the section captioned "Compensation Committee Interlocks
and Insider Participation" is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information set forth in the Proxy Statement, under the section captioned
"Beneficial Ownership of the Company's Stock" is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information set forth in the Proxy Statement, under the section captioned
"Transactions with Management and Others," is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The required financial statement information is set forth in Item 8
in this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedules
and (d)
No financial statement schedules have been presented since the
required information is shown in the financial statements or Notes
to Consolidated Financial Statements sections of the Annual Report.
Separate financial statements of the parent company have not been
presented since all consolidated subsidiaries of the Registrant are
wholly owned and have indebtedness, not
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guaranteed by the parent company, in the aggregate of less than 5%
of the Registrant's consolidated total assets.
Separate financial statements of subsidiaries less than 50 percent
owned have not been presented since these subsidiaries, both
individually and in the aggregate, do not constitute significant
subsidiaries.
(a)(3) Exhibits
and (c)
An index of the exhibits which are required by this item and which
are included or incorporated herein by reference in this report
appears on pages 12 through 17. Those exhibits which are included in
this Annual Report on Form 10-K immediately follow the index.
(b) Reports on Form 8-K
The Registrant filed a Form 8-K dated November 13, 1996 (date of
earliest event reported), which reported the election of Bruce L.
Hartman as Vice President and Controller of the Registrant,
effective November 18, 1996. Mr. Hartman replaced John A. Wozniak,
who resigned as Vice President and Controller of the Registrant as
of the close of business on November 15, 1996.
The Registrant filed a Form 8-K dated December 2, 1996 (date of
earliest event reported), which announced that a definitive
agreement was signed whereby the Registrant would acquire Eastbay, a
direct marketer of athletic footwear, apparel, equipment and
licensed and private label products.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WOOLWORTH CORPORATION
By: /s/ Roger N. Farah
Roger N. Farah
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on April 9, 1997, by the following persons on behalf of
the Registrant and in the capacities indicated.
/s/ Roger N. Farah /s/ Jarobin Gilbert, Jr.
- -------------------------------- --------------------------------
Roger N. Farah Jarobin Gilbert, Jr.
Chairman of the Board and Director
Chief Executive Officer
/s/ Dale W. Hilpert /s/ Purdy Crawford
- -------------------------------- --------------------------------
Dale W. Hilpert Purdy Crawford
President and Director
Chief Operating Officer
/s/ Andrew P. Hines /s/ Margaret P. MacKimm
- -------------------------------- --------------------------------
Andrew P. Hines Margaret P. MacKimm
Senior Vice President and Director
Chief Financial Officer
/s/ Bruce L. Hartman /s/ John J. Mackowski
- -------------------------------- --------------------------------
Bruce L. Hartman John J. Mackowski
Vice President and Controller Director
(Chief Accounting Officer)
/s/ J. Carter Bacot /s/ James E. Preston
- -------------------------------- --------------------------------
J. Carter Bacot James E. Preston
Director Director
/s/ Helen Galland /s/ Christopher A. Sinclair
- -------------------------------- --------------------------------
Helen Galland Christopher A. Sinclair
Director Director
/s/ Philip H. Geier, Jr.
- --------------------------------
Philip H. Geier, Jr.
Director
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WOOLWORTH CORPORATION
INDEX OF EXHIBITS REQUIRED
BY ITEM 14 OF FORM 10-K
AND FURNISHED IN ACCORDANCE
WITH ITEM 601 OF REGULATION S-K
Exhibit No. in Item 601
of Regulation S-K Description
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1 *
2 *
3(i)(a) Certificate of Incorporation of the
Registrant, as filed by the Department
of State of the State of New York on
April 7, 1989 (incorporated herein by
reference to Exhibit 3(a) to the
Registration Statement on Form S-4
filed by the Registrant with the
Securities and Exchange Commission
("SEC") on May 9, 1989 (Registration
No. 33-28469) (the "S-4 Registration
Statement").
3(i)(b) Certificates of Amendment of the
Certificate of Incorporation of the
Registrant, as filed by the Department
of State of the State of New York on
(a) July 20, 1989 (incorporated herein
by reference to Exhibit 3(b) to the
Registration Statement on Form 8-B
filed by the Registrant with the SEC
on August 7, 1989 (Registration No.
1-10299) (the "8-B Registration
Statement")) and (b) July 24, 1990
(incorporated herein by reference to
Exhibit 4(a) to the Quarterly Report
on Form 10-Q for the quarterly period
ended July 28, 1990, filed by the
Registrant with the SEC on September
7,1990 (the "July 28, 1990 Form
10-Q")).
3(ii) By-laws of the Registrant, as amended
(incorporated herein by reference to
Exhibit 3(ii) to the Registrant's
Annual Report on Form 10-K for the
year ended January 28, 1995, filed by
the Registrant with the SEC on April
24, 1995 (the "1994 10-K")).
4(a) The rights of holders of the
Registrant's equity securities are
defined in the Registrant's
Certificate of Incorporation, as
amended (incorporated herein by
reference to: (a) Exhibit 3(a) to the
S-4 Registration Statement, (b)
Exhibit 3(b) to the 8-B Registration
Statement and (c) Exhibit 4(a) to the
July 28, 1990 Form 10-Q).
- ------------
* Not applicable
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4(b) Rights Agreement dated as of April 4,
1988, as amended January 11, 1989,
between F.W. Woolworth Co. ("FWW") and
Morgan Shareholder Services Trust
Company (now, First Chicago Trust
Company of New York), as Rights Agent
(incorporated herein by reference to
(a) Exhibit 1 to the Registration
Statement on Form 8-A filed by FWW
with the SEC on April 12, 1988
(Registration No. 1-238) and (b) the
Form 8 Amendment to such Form 8-A
filed by FWW with the SEC on January
13, 1989). The rights and obligations
of FWW under said Rights Agreement
were assumed by the Registrant
pursuant to an Agreement and Plan of
Share Exchange dated as of May 4,
1989, by and between FWW and the
Registrant (incorporated herein by
reference to Exhibit 2 to the S-4
Registration Statement).
4(c) Indenture dated as of October 10, 1991
(incorporated herein by reference to
Exhibit 4.1 to the Registration
Statement on Form S-3 (Registration
No. 33-43334) previously filed with
the SEC).
4(d) Forms of Medium-Term Notes (Fixed Rate
and Floating Rate) (incorporated
herein by reference to Exhibits 4.4
and 4.5 to the Registration Statement
on Form S-3 (Registration No.
33-43334) previously filed with the
SEC).
4(e) Form of 8 1/2% Debentures due 2022
(incorporated herein by reference to
Exhibit 4 to Registrant's Form 8-K
dated January 16, 1992).
4(f) Purchase Agreement dated June 1, 1995
and Form of 7% Notes due 2000
(incorporated herein by reference to
Exhibits 1 and 4, respectively, to
Registrant's Form 8-K dated June 7,
1995).
4(g) Distribution Agreement dated July 13,
1995 and Forms of Fixed Rate and
Floating Rate Notes (incorporated
herein by reference to Exhibits 1, 4.1
and 4.2, respectively, to Registrant's
Form 8-K dated July 13, 1995).
5 *
8 *
9 *
10(a) 1986 Woolworth Stock Option Plan
(incorporated herein by reference to
Exhibit 10(b) to the Registrant's 1994
10-K).
- ------------
* Not applicable
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10(b) Amendment to the 1986 Woolworth Stock
Option Plan. (incorporated herein by
reference to exhibit 10(a) to the
Registrant's Annual Report on Form
10-K for the year ended January 27,
1996, filed by the Registrant on April
26, 1996 (the "1995 10-K").
10(c) Woolworth Corporation 1995 Stock
Option and Award Plan (incorporated
herein by reference to Exhibit 10(p)
to the 1994 10-K).
10(d) Executive Supplemental Retirement Plan
(incorporated herein by reference to
Exhibit 10(d) to the 8-B Registration
Statement).
10(d)(i) Amendments to the Executive
Supplemental Retirement Plan
(incorporated herein by reference to
Exhibit 10(c)(i) to the 1994 10-K).
10(d)(ii) Amendment to the Executive
Supplemental Retirement Plan
(incorporated herein by reference to
Exhibit 10(d)(ii) to the 1995 10-K)
10(e) Supplemental Executive Retirement Plan
(incorporated herein by reference to
Exhibit 10(e) to the 1995 10-K)
10(f) Long-Term Incentive Compensation Plan,
as amended and restated (incorporated
herein by reference to Exhibit 10(f)
to the 1995 10-K)
10(g) Annual Incentive Compensation Plan, as
amended and restated (incorporated
herein by reference to Exhibit 10(g)
to the 1995 10-K)
10(h) Form of indemnification agreement, as
amended (incorporated herein by
reference to Exhibit 10(g) to the 8-B
Registration Statement).
10(i) Woolworth Corporation Voluntary
Deferred Compensation Plan
(incorporated herein by reference to
Exhibit 10(i) to the 1995 10-K)
10(j) Trust agreement dated as of November
12, 1987, between FWW and The Bank of
New York, as amended and assumed by
the Registrant (incorporated herein by
reference to Exhibit 10(j) to the 8-B
Registration Statement).
10(k) Woolworth Corporation Directors'
Retirement Plan, as amended
(incorporated herein by reference to
Exhibit 10(k) to the 8-B Registration
Statement).
14
<PAGE> 15
10(k)(i) Amendments to the Woolworth
Corporation Directors' Retirement Plan
(incorporated herein by reference to
Exhibit 10(c) to the Registrant's Form
10-Q for the period ended October 28,
1995 (the "October 28, 1995 10-Q").
10(l) Consulting Agreement dated July 1,
1993, between the Registrant and
Harold E. Sells (incorporated herein
by reference to Exhibit 10 to the
Quarterly Report on Form 10-Q for the
quarterly period ended July 31, 1993).
10(m) Employment agreement with Roger N.
Farah dated as of December 11, 1994
(incorporated herein by reference to
Exhibit 10(d) to the 1994 10-K).
10(n) Restricted Stock Agreement with Roger
N. Farah dated as of January 9, 1995
(incorporated herein by reference to
Exhibit 10(m) to the 1994 10-K).
10(o) Employment agreement with Dale W.
Hilpert dated as of March 23, 1995
(incorporated herein by reference to
Exhibit 10(n) to the 1994 10-K).
10(p) Agreement with Frederick E. Hennig
dated as of April 1, 1995
(incorporated herein by reference to
Exhibit 10(o) to the 1994 10-K).
10(q) Consulting Agreement with DBSS Group,
Inc. dated July 1, 1996.
10(r) Agreement with M. Jeffrey Branman
dated April 24, 1997.
10(r)(i) Supplemental agreement with M. Jeffrey
Branman dated April 24, 1997.
10(r)(ii) Employment Term Sheet for M. Jeffrey
Branman dated February 15, 1996.
10(s) Agreement with John E. DeWolf III
dated April 7, 1997.
10(s)(i) Employment Term Sheet for John E.
DeWolf III dated February 8, 1996.
10(t) Agreement with John F. Gillespie dated
April 7, 1997.
10(t)(i) Employment Term Sheet for John F.
Gillespie dated February 26, 1996.
10(u) Agreement with Andrew P. Hines dated
April 9, 1997.
10(v) Woolworth Corporation Executive
Severance Pay Plan (incorporated
herein by reference to Exhibit 10(u)
to the 1995 10-K).
10(w) Form of Senior Executive Severance
Agreement (incorporated herein by
reference to Exhibit 10(v) to the 1995
10-K).
10(x) Woolworth Corporation Directors' Stock
Plan (incorporated herein by reference
to Exhibit 10(b) to the Registrant's
October 28, 1995 10-Q).
15
<PAGE> 16
10(y) $500 million Credit Agreement dated as
of April 9, 1997.
10(z) Woolworth Corporation Excess Cash
Balance Plan (incorporated herein by
reference to Exhibit 10(cc) to the
1995 10-K).
11 Computation of Net Income (Loss) Per
Common Share.
12 Computation of Ratio of Earnings to
Fixed Charges.
13 The Registrant's 1996 Annual Report to
Shareholders (for the year ended
January 25, 1997). Except for those
portions of the 1996 Annual Report
which are expressly incorporated by
reference in this Form 10-K, the 1996
Annual Report to Shareholders is
furnished for the information of the
SEC and is not to be deemed filed as
part of this Form 10-K.
15 *
16 *
17 *
18 *
19 *
20 *
21 Subsidiaries of the Registrant.
22 *
23(a) Consent of Independent Auditors.
23(b) Consent of former Independent
Auditors.
24 *
25 *
26 *
27 Financial Data Schedule, which is
submitted electronically to the SEC
for information only and not filed.
99 Report of former Independent Auditors.
- -------------------------
* Not applicable
16
<PAGE> 17
Exhibits filed with Form 10-K:
Exhibit No.
- -----------
10(q) Consulting Agreement with DBSS Group, Inc. dated July 1, 1996.
10(r) Agreement with M. Jeffrey Branman dated April 24, 1997.
10(r)(i) Supplemental agreement with M. Jeffrey Branman dated April
24, 1997.
10(r)(ii) Employment Term Sheet for M. Jeffrey Branman dated February
15, 1996.
10(s) Agreement with John E. DeWolf III dated April 7, 1997.
10(s)(i) Employment Term Sheet for John E. DeWolf III dated
February 8, 1996.
10(t) Agreement with John F. Gillespie dated April 7, 1997.
10(t)(i) Employment Term Sheet for John F. Gillespie dated February
26, 1996
10(u) Agreement with Andrew P. Hines dated April 9, 1997.
10(y) $500 million Credit Agreement.
11 Computation of Net Income (Loss) Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
13 1996 Annual Report to Shareholders.
21 Subsidiaries of the Registrant.
23(a) Consent of Independent Auditors.
23(b) Consent of former Independent Auditors.
27 Financial Data Schedule.
99 Report of former Independent Auditors.
17
<PAGE> 1
EXHIBIT 10(q)
CONSULTING AGREEMENT
This Consulting Agreement, dated April 18, 1997, by and between Woolworth
Corporation, a New York corporation (the "Company"), with an address at 233
Broadway, New York, New York 10279, and DBSS Group, Inc., a New York
corporation ("Consultant"), with an address at 301 East 57 Street, New York,
New York 10022.
WHEREAS, Jarobin Gilbert Jr. is currently President and Chief Executive
Officer of the Consultant and has extensive international experience and
knowledge of the business environment in Germany, as well as a working
knowledge of the German language for business and social purposes; and
WHEREAS, Mr. Gilbert is currently a director of the Company and a member
of the Supervisory Board of F. W. Woolworth Co. GmbH ("Woolworth Germany"), a
wholly owned subsidiary of the Company; and
WHEREAS, since July 1, 1996, the Consultant has provided certain
consulting services to the Company related to the Company's businesses in
Germany.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
terms and conditions set forth herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Consulting Services. The Company hereby retains the Consultant to
provide management and consulting services related to the Company's businesses
in Germany (the "Services"). In that regard, the Consultant shall provide such
Services as may, from time to time, be requested by the Company's Chairman of
the Board and Chief Executive Officer or President and Chief Operating Officer.
Consultant agrees that the Services shall be provided by Mr.
Gilbert. The Services to be provided by Mr. Gilbert shall be in addition to the
services that he may provide as a director of the Company or as a member of the
Supervisory Board of Woolworth Germany.
2. Term. The term of this agreement shall commence as of July 1, 1996 and
shall be terminable by either party upon 30 days' prior written notice. This
agreement may also be terminated as provided in Sections 3 and 4 hereof.
3. Termination.
The Company may terminate this agreement immediately upon written
notice if the Consultant violates the provisions of Section 9 hereof or
otherwise breaches this agreement.
4. Death/Disability/Termination of Mr. Gilbert.
The Company's obligation to compensate the Consultant as herein
provided is dependent upon Mr. Gilbert's rendering the Services contemplated
hereunder and, therefore, shall immediately terminate on Mr. Gilbert's death or
disability or his termination of employment with the Consultant.
5. Consulting Fee.
The Company shall pay to the Consultant the fee of $20,000 per year
as payment for all Services the Consultant is to provide pursuant to this
agreement. Payment for a portion of any period will be prorated. Such fee shall
be payable in quarterly installments on January 1, April 1, July 1 and October 1
of each year during the term hereof.
<PAGE> 2
6. Reimbursement of Expenses. Upon receipt of appropriate documentation,
the Company shall promptly reimburse the Consultant for all travel and other
business expenses incurred by Mr. Gilbert for travel undertaken at the request
of the Company in the performance of the Services hereunder, subject to the
Company's travel and reimbursement policies applicable to its senior management
employees.
7. Independent Contractor Relationship. The relationship between the
Company and Consultant is an independent contractor relationship and nothing
herein shall create an employer/employee relationship between the Company and
Consultant. Consultant shall have no authority to act on behalf of the Company
or to obligate the Company to any third party in any way except as expressly
authorized in writing by a duly authorized officer of the Company.
8. Compliance with Law. Consultant shall comply with all applicable
federal, state, local, and foreign laws, ordinances, regulations and codes in
the performance of the Services hereunder, including the procurement of permits
and certificates where required. Consultant shall indemnify and hold the Company
harmless from and against any loss, damages or expense arising from its failure
to so comply.
9. Confidential Information. (a) Consultant agrees that during the term of
this agreement and thereafter it shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge, or
data relating to the Company or its business (which shall be defined as all such
information, knowledge and data coming to its attention by virtue of rendering
services pursuant to this agreement except that which is otherwise public
knowledge or known within the Company's industry). During such period,
Consultant shall not, without the prior written consent of the Company, unless
compelled pursuant to the order of a court or other body having jurisdiction
over such matter and unless required by lawful process or subpoena, communicate
or divulge any such information, knowledge or data to anyone other than the
Company and those designated by it.
(b) Notwithstanding the foregoing, nothing herein shall interfere with the
confidentiality obligations, or other rights or obligations, of Mr. Gilbert as a
member of the Board of Directors of the Company or of the Supervisory Board of
Woolworth Germany.
10. Notices. Any notice to either party hereunder shall be in writing, and
shall be deemed to be sufficiently given to or served on such party, for all
purposes, if the same shall be personally delivered to such party, or sent to
such party by certified mail, postage prepaid, at the address of such party
first given above. Notices to the Company shall be addressed to the General
Counsel. Either party hereto may change the address to which notices are to be
sent to such party hereunder by written notice of such new address given to the
other party hereto. Notices shall be deemed given when received if delivered
personally or three days after mailing if mailed as aforesaid.
11. Applicable Law. This agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to its
principles of conflicts of laws.
12. Arbitration. Any controversy or claim arising out of or relating to
this agreement, or the breach thereof, shall be settled by arbitration in the
City of New York, in accordance with the rules of the American Arbitration
Association (the "AAA"). The decision of the arbitrator(s) shall be final and
binding on the parties hereto, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The costs
assessed by the AAA for arbitration shall be borne equally by both parties.
13. Interpretation. If any provision of this agreement shall be declared
invalid or unenforceable, the remainder of this agreement shall not be affected
thereby, but rather is to be enforced to the greatest extent permitted by law.
Headings in this agreement are inserted for convenience of reference only and
are not to be considered in the construction of the provisions hereof.
<PAGE> 3
14. Miscellaneous.
(a) Consultant shall not use the name of the Company or any of its
subsidiaries or affiliates in any sales or marketing publication or
advertisement without the prior written consent of the Company.
(b) Consultant shall not assign or transfer its interests or
obligations under this agreement without the prior written consent of the
Company.
(c) This agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and may not be amended or
modified except in writing, signed by both parties.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first above written.
WOOLWORTH CORPORATION
/s/ Roger N. Farah
By:________________________
Chairman of the Board and
Chief Executive Officer
DBSS GROUP, INC.
/s/ Jarobin Gilbert Jr.
By:________________________
President
<PAGE> 1
EXHIBIT 10(r)
AGREEMENT
Agreement made as of April 24, 1997, by and between Woolworth
Corporation, a New York corporation with its principal office at 233 Broadway,
New York, New York 10279 (the "Company") and M. Jeffrey Branman, residing at 229
South Mountain Avenue, Montclair, New Jersey 07047 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company believes that the establishment and maintenance
of a sound and vital management of the Company is essential to the protection
and enhancement of the interests of the Company and its shareholders; and
WHEREAS, the Company wishes to offer a form of protection to the
Executive, as one of a select group of officers and key employees of the Company
and its Affiliates, in the event the Executive's employment with the Control
Group terminates; and
WHEREAS, the Company also recognizes that the possibility of a
Change in Control of the Company, with the attendant uncertainties and risks,
might result in the departure or distraction of the Executive to the detriment
of the Company; and
WHEREAS, the Company wishes to induce the Executive to remain with
the Control Group, and to reinforce and encourage the Executive's continued
attention and dedication, when faced with the possibility of a Change in Control
of the Company; and
WHEREAS, this Agreement amends and supersedes any employment
agreement, severance plan, policy and/or practice of the Company in effect for
the Executive.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. DEFINITIONS. The following terms shall have the meanings set
forth in this section as follows:
(a) "AFFILIATE" shall mean the Company and any entity
affiliated with the Company within the meaning of Code Section 414(b) with
respect to a controlled group of corporations, Code Section 414(c) with respect
to trades or businesses under common control with the Company, Code Section
414(m) with respect to affiliated service groups and any other entity required
to be aggregated with the Company under Section 414(o) of the Code. No entity
shall be treated as an Affiliate for any period during which it is not part of
the controlled group, under common control or otherwise required to be
aggregated under Code Section 414.
<PAGE> 2
(b) "BENEFICIARY" shall mean the individual designated by the
Executive, on a form acceptable by the Committee, to receive benefits payable
under this Agreement in the event of the Executive's death. If no Beneficiary is
designated, the Executive's Beneficiary shall be his or her spouse, or if the
Executive is not survived by a spouse, the Executive's estate.
(c) "BOARD" shall mean the Board of Directors of the Company.
(d) "BONUS" shall mean an amount equal to the target bonus
expected to be earned by the Executive under the Company's Annual Incentive
Compensation Plan and/or such other annual bonus plan or program that may then
be applicable to the Executive in a fiscal year, if the applicable target
performance goal is satisfied.
(e) "CAUSE" shall mean (with regard to the Executive's
termination of employment with the Control Group): (i) the refusal or willful
failure by the Executive to substantially perform his or her duties, (ii) with
regard to the Control Group or any of their assets or businesses, the
Executive's dishonesty, willful misconduct, misappropriation, breach of
fiduciary duty or fraud (other than good faith disputes involving expense
account items), or (iii) the Executive's conviction of a felony (other
than a traffic violation) or any other crime involving, in the sole discretion
of the Committee, moral turpitude.
(f) "CHANGE IN CONTROL" shall have the meaning set forth in
Appendix A attached hereto.
(g) "CODE" shall mean the Internal Revenue Code of 1986, as
amended and as hereafter amended from time to time.
(h) "COMMITTEE" shall mean the Compensation Committee of the
Board or an administrative committee appointed by the Compensation Committee.
(i) "COMPETITION" shall mean the (i) participating, directly
or indirectly, as an individual proprietor, stockholder, officer, employee,
director, joint venturer, investor, lender, or in any capacity whatsoever
(within the United States of America, or in any country where any of the
Executive's former employing members of the Control Group does business) in a
business in competition with any business conducted by any member of the Control
Group for which the Executive worked at any time, provided, however, that such
participation shall not include (A) the mere ownership of not more than one
percent (1%) of the total outstanding stock of a publicly held company; (B) the
performance of services for any enterprise to the extent such services are not
performed, directly or indirectly, for a business in which any of the Employee's
employing members of the Control Group is engaged; or (C) any activity engaged
in with the prior written approval of the Board or the Committee; or (ii)
intentional recruiting, soliciting or inducing, of any employee or employees of
the Control Group to terminate their employment with, or otherwise cease their
relationship with the former employing members of the Control Group where such
employee or employees do in fact so terminate their employment.
<PAGE> 3
(j) "CONTROL GROUP" shall mean the Company and its Affiliates.
(k) "GOOD REASON" shall mean (with respect to an Executive's
termination of employment with the Control Group): (i) any material demotion of
the Executive or any material reduction in the Executive's authority or
responsibility, except in each case in connection with the termination of the
Executive's employment for Cause or disability or as a result of the Executive's
death, or temporarily as a result of the Executive's illness or other absence;
(ii) a twenty percent (20%) or greater reduction in a twelve (12) month period
in the Executive's rate of base salary as payable from time to time; (iii) a
reduction in the Executive's annual bonus classification level other than in
connection with a redesign of the applicable bonus plan that affects all
employees at the Executive's bonus level; (iv) a failure of the Company to
continue in effect the benefits applicable to, or the Company's reduction of the
benefits applicable to, the Executive under any benefit plan or arrangement
(including without limitation, any pension, life insurance, health or disability
plan) in which the Executive participates as of the date of the Change in
Control without implementation of a substitute plan(s) providing materially
similar benefits in the aggregate to those discontinued or reduced, except for a
discontinuance of, or reduction under, any such plan or arrangement that is
legally required and/or generally applies to all executives of the Company of a
similar level, provided that in either such event the Company provides similar
benefits (or the economic effect thereof) to the Executive in any manner
determined by the Company; or (v) failure of any successor to the Company to
assume in writing the obligations hereunder.
(l) "SALARY" shall mean an Executive's base monthly cash
compensation rate for services paid to the Executive by the Company or an
Affiliate at the time of his or her termination of employment from the Control
Group. Salary shall not include commissions, bonuses, overtime pay, incentive
compensation, benefits paid under any qualified plan, any group medical, dental
or other welfare benefit plan, noncash compensation or any other additional
compensation but shall include amounts reduced pursuant to an Executive's salary
reduction agreement under Sections 125 or 401(k) of the Code (if any) or a
nonqualified elective deferred compensation arrangement to the extent that in
each such case the reduction is to base salary.
(m) "SEVERANCE BENEFIT" shall mean (i) in the case of the
Executive's termination of employment that does not occur within the twelve (12)
month period following a Change in Control, two (2) weeks' Salary plus prorated
Bonus multiplied by the Executive's Years of Service, with a minimum of
twenty-six (26) weeks; or (ii) in the case of an Executive's termination of
employment within the twelve (12) month period following a Change in Control,
two (2) weeks' Salary plus prorated Bonus multiplied by the Executive's Years of
Service, with a minimum of seventy-eight (78) weeks. The Executive's prorated
Bonus for one (1) week shall equal the Executive's Bonus divided by fifty-two
(52).
(n) "SEVERANCE PERIOD" shall mean (i) in the case of the
Executive's termination of employment that does not occur within the twelve (12)
month period following a Change in Control, two (2) weeks multiplied by the
Executive's Years of Service, with a minimum of twenty-six (26) weeks; or (ii)
in the case of an Executive's termination of employment within the twelve (12)
month period following a Change in Control, two (2) weeks multiplied by the
Executive's Years of Service, with a minimum of seventy-eight (78) weeks.
<PAGE> 4
(o) "YEAR OF SERVICE" shall mean each twelve (12) consecutive
month period commencing on the Executive's date of hire by the Company or an
Affiliate and each anniversary thereof in which the Executive is paid by the
Company or an Affiliate for the performance of full-time services as an
Executive. For purposes of this section, full-time services shall mean that the
Employee is employed for at least thirty (30) hours per week. A Year of Service
shall include any period during which an Employee is not working due to
disability, leave of absence or layoff so long as he or she is being paid by the
Employer (other than through any employee benefit plan). A Year of Service also
shall include service in any branch of the armed forces of the United States by
any person who is an Executive on the date such service commenced, but only to
the extent required by applicable law.
2. TERM. The initial term of this Agreement shall end on December
31 of the year following the year in which this Agreement is entered into. On
December 31 of each year, the term shall be automatically renewed for an
additional one (1) year so that the term shall then be for two years, unless
the Committee notifies the Executive prior to any December 31 that the term
shall not be renewed. Notwithstanding anything in this Agreement to the
contrary, if the Company becomes obligated to make any payment to the Executive
pursuant to the terms hereof at or prior to the expiration of this Agreement,
then this Agreement shall remain in effect until all of the Company's
obligations hereunder are fulfilled.
3. BENEFITS UPON TERMINATION. In the event the Executive's
employment with the Control Group is terminated without Cause or the Executive
terminates employment with the Control Group within sixty (60) days after the
occurrence of a Good Reason event with regard to the Executive, the Executive
shall be entitled to a Severance Benefit as set forth below.
(a) The Executive shall receive fifty percent (50%) of his or
her Severance Benefit in the form of a lump sum cash payment as soon as
administratively feasible following his or her termination of employment with
the Control Group, provided, however, that interest shall be payable beginning
on the tenth day following such termination of employment at the prime rate of
interest as stated in the Wall Street Journal.
(b) The Executive shall receive the remaining fifty percent
(50%) of his or her Severance Benefit in the form of a lump sum cash payment as
soon as administratively feasible following the one (1) year anniversary of the
Executive's termination of employment with the Control Group, subject to (c)
below, provided, however, that interest shall be payable beginning on the tenth
day following such termination of employment at the prime rate of interest as
stated in the Wall Street Journal.
(c) The Executive shall only be entitled to the portion of his
or her Severance Benefit described in (b) above if the Executive does not engage
in Competition during the one (1) year period following his or her termination
of employment with the Control Group and if the Executive has not materially
violated the provisions of Section 14 hereof. If the Executive does engage in
Competition or violates the provisions of Section 14 during such one (1) year
period, the portion of the Executive's Severance Benefit described in (b) above
shall be forfeited. If the restriction set forth in this subsection is found by
any court of competent jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend over the maximum
period of time, range of activities or geographic area as to which it may be
enforceable.
<PAGE> 5
(d) The Executive shall continue, to the extent permitted
under legal and underwriting requirements (if any), to participate during his or
her Severance Period in any group medical, dental or life insurance plan he or
she participated in prior to his or her termination of employment, under
substantially similar terms and conditions as an active Employee; provided
participation in such group medical, dental and life insurance benefits shall
correspondingly cease at such time as the Executive becomes eligible for a
future employer's medical, dental and/or life insurance coverage (or would
become eligible if the Executive did not waive coverage). Notwithstanding the
foregoing, the Executive may not continue to participate in such plans on a
pre-tax or tax-favored basis. Notwithstanding anything else herein, the
Executive shall not be entitled to any benefits during the Severance Period
other than the benefits provided in Section 3 herein and, without limiting the
generality of the foregoing, the Executive specifically shall not be entitled to
continue to participate in any group disability or voluntary accidental death or
dismemberment insurance plan he or she participated in prior to his or her
termination of employment. Without limiting the generality of the foregoing, the
Executive shall not accrue additional benefits under any pension plan of the
Employer (whether or not qualified under Section 401(a) of the Code) during the
Severance Period, provided, however, that payment of any Severance Benefit shall
be included in the Executive's earnings for purposes of calculating the
Executive's benefit under The Woolworth Retirement Plan, Woolworth Corporation
401(k) Plan, and Woolworth Corporation Excess Cash Balance Plan.
(e) In the event of the Executive's death after becoming
eligible for the portion of the Severance Benefit described in (a) above and
prior to payment of such amount, such portion of the Severance Benefit shall be
paid to the Executive's Beneficiary. In addition to the foregoing, in the event
of the Executive's death prior to payment of the portion of the Severance
Benefit described in (b) above, such amount shall be paid to the Executive's
Beneficiary, but only to the extent that the Executive satisfied the provisions
set forth in (c) above for the period following the Executive's termination of
employment with the Control Group and prior to his or her death.
(f) Notwithstanding anything else herein, to the extent the
Executive would be subject to the excise tax under Section 4999 of the Code on
the amounts in (a) or (b) above and such other amounts or benefits he or she
received from the Company and its Affiliates required to be included in the
calculation of parachute payments for purposes of Sections 280G and 4999 of the
Code, the amounts provided under this Agreement shall be automatically reduced
to an amount one dollar less than that, when combined with such other amounts
and benefits required to be so included, would subject the Executive to the
excise tax under Section 4999 of the Code, if, and only if, the reduced amount
received by the Executive, would be greater than the unreduced amount to be
received by the Executive minus the excise tax payable under Section 4999 of the
Code on such amount and the other amounts and benefits received by the Executive
and required to be included in the calculation of a parachute payment for
purposes of Sections 280G and 4999 of the Code.
4. NO DUTY TO MITIGATE/SET-OFF. The Company agrees that if the
Executive's employment with the Company is terminated during the term of this
Agreement, the Executive shall not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to this Agreement. Further, except to the extent provided for in
Section 3(c), the amount of the Severance Benefit provided for in this Agreement
shall not be reduced by any compensation earned by the Executive or benefit
provided to the Executive as the result of employment by another
<PAGE> 6
employer or otherwise. Except as otherwise provided herein, the Company's
obligations to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any circumstances,
including without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Company may have against the Executive. The Executive
shall retain any and all rights under all pension plans, welfare plans, equity
plans and other plans, including other severance plans, under which the
Executive would otherwise be entitled to benefits.
5. FUNDING. Severance Benefits shall be funded out of the general
assets of the Company as and when they are payable under this Agreement. The
Executive shall be solely a general creditor of the Company. If the Company
decides to establish any advance accrued reserve on its books against the future
expense of benefits payable hereunder, or if the Company is required to fund a
trust under this Agreement, such reserve or trust shall not under any
circumstances be deemed to be an asset of this Agreement.
6. ADMINISTRATION. This Agreement shall be administered by the
Committee. The Committee (or its delegate) shall have the exclusive right,
power, and authority, in its sole and absolute discretion, to administer, apply
and interpret the Agreement and to decide all matters arising in connection with
the operation or administration of the Agreement. Without limiting the
generality of the foregoing, the Committee shall have the sole and absolute
discretionary authority: (a) to take all actions and make all decisions with
respect to the eligibility for, and the amount of, benefits payable under the
Agreement; (b) to formulate, interpret and apply rules, regulations and policies
necessary to administer the Agreement in accordance with its terms; (c) to
decide questions, including legal or factual questions, relating to the
calculation and payment of benefits under the Agreement; (d) to resolve and/or
clarify any ambiguities, inconsistencies and omissions arising under the
Agreement; (e) to decide for purposes of paying benefits hereunder, whether,
based on the terms of this Agreement, a termination of employment is for Good
Reason or for Cause; and (f) except as specifically provided to the contrary
herein, to process and approve or deny benefit claims and rule on any benefit
exclusions. All determinations made by the Committee (or any delegate) with
respect to any matter arising under the Agreement shall be final, binding and
conclusive on all parties.
Decisions of the Committee shall be made by a majority of its
members attending a meeting at which a quorum is present (which meeting may be
held telephonically), or by written action in accordance with applicable law.
All decisions of the Committee on any question concerning the interpretation and
administration of the Agreement shall be final, conclusive and binding upon all
parties.
No member of the Committee and no officer, director or employee of
the Company or any other Affiliate shall be liable for any action or inaction
with respect to his or her functions under this Agreement unless such action or
inaction is adjudged to be due to gross negligence, willful misconduct or fraud.
Further, no such person shall be personally liable merely by virtue of any
instrument executed by him or her or on his or her behalf in connection with
this Agreement.
<PAGE> 7
The Company shall indemnify, to the full extent permitted by law and
its Certificate of Incorporation and By-laws (but only to the extent not covered
by insurance) its officers and directors (and any employee involved in carrying
out the functions of the Company under the Agreement) and each member of the
Committee against any expenses, including amounts paid in settlement of a
liability, which are reasonably incurred in connection with any legal action to
which such person is a party by reason of his or her duties or responsibilities
with respect to the Agreement, except with regard to matters as to which he or
she shall be adjudged in such action to be liable for gross negligence, willful
misconduct or fraud in the performance of his or her duties.
7. CLAIMS PROCEDURES. Any claim by the Executive or Beneficiary
("Claimant") with respect to participation, contributions, benefits or other
aspects of the operation of the Agreement shall be made in writing to the
Secretary of the Company or such other person designated by the Committee from
time to time for such purpose. If the designated person receiving a claim
believes, following consultation with the Chairman of the Committee, that the
claim should be denied, he or she shall notify the Claimant in writing of the
denial of the claim within ninety (90) days after his or her receipt thereof
(this period may be extended an additional ninety (90) days in special
circumstances and, in such event, the Claimant shall be notified in writing of
the extension). Such notice shall (a) set forth the specific reason or reasons
for the denial making reference to the pertinent provisions of the Agreement on
which the denial is based, (b) describe any additional material or information
necessary to perfect the claim, and explain why such material or information, if
any, is necessary, and (c) inform the Claimant of his or her right pursuant to
this section to request review of the decision.
A Claimant may appeal the denial of a claim by submitting a written
request for review to the Committee, within sixty (60) days after the date on
which such denial is received. Such period may be extended by the Committee for
good cause shown. The claim will then be reviewed by the Committee. A Claimant
or his or her duly authorized representative may discuss any issues relevant to
the claim, may review pertinent documents and may submit issues and comments in
writing. If the Committee deems it appropriate, it may hold a hearing as to a
claim. If a hearing is held, the Claimant shall be entitled to be represented by
counsel. The Committee shall decide whether or not to grant the claim within
sixty (60) days after receipt of the request for review, but this period may be
extended by the Committee for up to an additional sixty (60) days in special
circumstances. Written notice of any such special circumstances shall be sent to
the Claimant. Any claim not decided upon in the required time period shall be
deemed denied. All interpretations, determinations and decisions of the
Committee with respect to any claim shall be made in its sole discretion based
on the Agreement and other relevant documents and shall be final, conclusive and
binding on all persons.
8. INCOMPETENCY; PAYMENTS TO MINORS. In the event that the Committee
finds that a Participant is unable to care for his or her affairs because of
illness or accident, then benefits payable hereunder, unless claim has been made
therefor by a duly appointed guardian, committee, or other legal representative,
may be paid in such manner as the Committee shall determine, and the application
thereof shall be a complete discharge of all liability for any payments or
benefits to which such Participant was or would have been otherwise entitled
under this Agreement. Any payments to a minor pursuant to this Agreement may be
paid by the Committee in its sole and absolute discretion (a) directly to such
minor; (b) to the legal or natural guardian of such minor; or (c) to any other
person, whether or not appointed guardian of the minor, who shall have the care
and custody of such minor. The receipt by such individual shall be a complete
discharge of all liability under the Agreement therefor.
<PAGE> 8
9. WITHHOLDING. The Company shall have the right to make such
provisions as it deems necessary or appropriate to satisfy any obligations it
may have to withhold federal, state or local income or other taxes incurred by
reason of payments pursuant to this Agreement. In lieu thereof, the Employer
shall have the right to withhold the amount of such taxes from any other sums
due or to become due from the Employer to the Executive upon such terms and
conditions as the Committee may prescribe.
10. ASSIGNMENT AND ALIENATION. Except as provided herein, the
benefits payable under this Agreement shall not be subject to alienation,
transfer, assignment, garnishment, execution or levy of any kind, and any
attempt to cause any benefits to be so subjected shall not be recognized.
11. SUCCESSORS; BINDING AGREEMENT. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder if the Executive had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Executive's Beneficiary, or the
executors, personal representatives or administrators of the Executive's estate.
12. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. All references to sections of the Code or any other law
shall be deemed also to refer to any successor provisions to such sections and
laws.
13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. CONFIDENTIALITY. The Executive shall not at any time during the
term of this Agreement, or thereafter, communicate or disclose to any
unauthorized person, or use for the Executive's own account, without the prior
written consent of the Board, any proprietary processes, or other confidential
information of the Company or any subsidiary concerning their business or
affairs, accounts or customers, it being understood, however, that the
obligations of this section shall not apply to the extent that the aforesaid
matters (a) are disclosed in circumstances in which the Executive is legally
required to do so, or (b) become generally known to and available for use by the
public other than by the Executive's wrongful act or omission.
<PAGE> 9
15. SEVERABILITY. If any provisions of this Agreement shall be
declared to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
16. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in New York, New York, or in such
other city in which the Executive is then located, in accordance with the rules
of the American Arbitration Association then in effect. The determination of the
arbitrators, which shall be based upon a de novo interpretation of this
Agreement (it being understood that any prior determination of the Committee
made under the provisions of Sections 6 or 7 hereof shall not be binding on the
arbitrators), shall be final and binding and judgment may be entered on the
arbitrators' award in any court having jurisdiction. The Company shall pay all
costs of the American Arbitration Association and the arbitrator.
17. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its subsidiary companies and for which the Executive may qualify.
18. GOVERNING LAW. This Agreement shall be construed, interpreted,
and governed by the Employee Retirement Income Security Act of 1974, as amended.
To the extent not so governed, it shall be governed by the laws of the State of
New York (without reference to rules relating to conflicts of law).
19. TOP-HAT PLAN. This Agreement is intended to be a "top-hat"
welfare plan within the meaning of Department of Labor Regulation Section
2520.104-24.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and the Executive's hand has hereunto been set as of the date first set
forth above.
WOOLWORTH CORPORATION
By: /s/ Dale W. Hilpert
-------------------
Dale W. Hilpert
Title: President and Chief
Operating Officer
M. JEFFREY BRANMAN
/s/ M. Jeffrey Branman
<PAGE> 10
APPENDIX A
CHANGE IN CONTROL
A Change in Control shall mean any of the following: (i) (A) the
making of a tender or exchange offer by any person or entity or group of
associated persons or entities (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 (a "Person") (other than the
Company or its Affiliates) for shares of common stock of the Company pursuant to
which purchases are made of securities representing at least twenty percent
(20%) of the total combined voting power of the Company's then issued and
outstanding voting securities; (B) the merger or consolidation of the Company
with, or the sale or disposition of all or substantially all of the assets of
the Company to, any Person other than (a) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or parent entity) fifty
percent (50%) or more of the combined voting power of the voting securities of
the Company or such surviving or parent entity outstanding immediately after
such merger or consolidation; or (b) a merger or capitalization effected to
implement a recapitalization of the Company (or similar transaction) in which no
Person is or becomes the beneficial owner, directly or indirectly (as determined
under Rule 13d-3 promulgated under the Securities Exchange Act of 1934), of
securities representing more than the amounts set forth in (C) below; (C) the
acquisition of direct or indirect beneficial ownership (as determined under Rule
13d-3 promulgated under the Securities Exchange Act of 1934), in the aggregate,
of securities of the Company representing twenty percent (20%) or more of the
total combined voting power of the Company's then issued and outstanding voting
securities by any Person acting in concert as of the date of this Agreement;
provided, however, that the Board may at any time and from time to time and in
the sole discretion of the Board, as the case may be, increase the voting
security ownership percentage threshold of this item (C) to an amount not
exceeding forty percent (40%); or (D) the approval by the shareholders of the
Company of any plan or proposal for the complete liquidation or dissolution of
the Company or for the sale of all or substantially all of the assets of the
Company; or (ii) during any period of not more than two (2) consecutive years,
individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered into
agreement with the Company to effect a transaction described in clause (i))
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof.
<PAGE> 1
EXHIBIT 10(r)(i)
April 24, 1997
Mr. M. Jeffrey Branman
229 South Mountain Avenue
Montclair, New Jersey 07047
Dear Mr. Branman:
You and Woolworth Corporation (the "Company") are parties to a Senior
Executive Severance Agreement dated as of April 24, 1997 (the "Agreement"). In
that regard, you and the Company have agreed that in the event of the
termination of your employment with the Company in a manner that would cause you
to qualify for a Severance Benefit under the provisions of the Agreement, the
Company would make certain additional payments to you, as set forth herein.
1. Capitalized terms used herein that are defined in the Agreement shall
have the meanings provided for in the Agreement, unless otherwise defined
herein. As used herein, the term "Total Severance Payment" shall be an amount
equal to the sum of: (i) your annual base salary at the time of the termination
of your employment by the Company, (ii) the amount of the target bonus expected
to be earned by you under the Company's Annual Incentive Compensation Plan for
the fiscal year of the Company in which your termination of employment occurs,
and (iii) $200,000.
2. In the event your employment with the Company is terminated under
circumstances that would entitle you to the payment of a Severance Benefit under
the provisions of Section 3 of the Agreement, you will be entitled to additional
payments, as follows:
a. If the payment made to you under the provisions of Section 3(a) of
the Agreement (the "Initial Payment") does not equal 50 percent of the Total
Severance Payment, the Company shall pay you an additional amount so that the
Initial Payment and such additional payment shall equal 50 percent of the Total
Severance Payment. Such additional payment shall be made to you at the same time
and in the same manner, and with interest payable thereon under the same
circumstances and in the same manner, as the Initial Payment.
b. If a payment is made to you under the provisions of Section 3(b) of
the Agreement (the "Subsequent Payment") and the Subsequent Payment does not
equal 50 percent of the Total Severance Payment, the Company shall pay you an
additional amount so that the Subsequent Payment and such additional payment
shall equal 50 percent of the Total Severance Payment. Such additional payment
shall be made to you at the same time and in the same manner, and with interest
payable thereon under the same circumstances and in the same manner, as the
Subsequent Payment.
<PAGE> 2
3. In the event that at the time of your termination of employment the
term of the Agreement has not been renewed pursuant to the provisions of Section
2 thereof, (i) your eligibility for the payment described in paragraph 2(a)
hereof shall be determined by whether you would be entitled to a payment under
the provisions of Section 3(a) of the Agreement if the Agreement were then in
effect; (ii) your eligibility for the payment described in paragraph 2(b) hereof
shall be determined by whether you would be entitled to a payment under the
provisions of Section 3(b) of the Agreement if the Agreement were then in
effect; and (iii) the amounts paid to you under the provisions of paragraphs
2(a) and 2(b) hereof shall be calculated as if the Initial Payment and the
Subsequent Payment, in each instance, were in the amount of $1.00.
4. Notwithstanding the provisions of Sections 1(i) and 3(c) of the
Agreement, you shall not be considered to have engaged in Competition during the
one year period following termination of your employment with the Control Group
solely as a result of your providing investment banking advice or services to a
business in competition with any business conducted by any member of the Control
Group; provided, however, that such investment banking services or advice do not
involve (i) representing or assisting any person or group of persons for the
purpose of seeking control of or influencing the management, business, or
policies of, the Company or (ii) any transaction to which the Company, or any
subsidiary or affiliate of the Company, is a party and where you are personally
providing investment banking advice or services to the counter-party with
respect to its transaction with the Company. Notwithstanding the provisions of
the preceding sentence, nothing herein shall prohibit a firm with which you are
affiliated from providing such advice or services provided that you personally
adhere to the provisions of this paragraph.
5. Clause (iii) of Section 1(k) of the Agreement apply only to
your bonus classification level under the Annual Incentive Compensation Plan.
6. Any dispute or controversy arising under or in connection with this
letter agreement shall be settled exclusively by arbitration, conducted in the
same manner, and as part of the same proceeding, if any, as provided for under
the provisions of Section 16 of the Agreement.
Please sign and return the copy of this letter enclosed for that purpose
to indicate your agreement with the foregoing.
Yours truly,
WOOLWORTH CORPORATION
By: /s/ Dale W. Hilpert
Accepted and Agreed: -------------------
Dale W. Hilpert
/s/ M. Jeffrey Branman
M. Jeffrey Branman
Date:
<PAGE> 1
EXHIBIT 10(r)(ii)
WOOLWORTH CORPORATION AND LOGO
Dale W. Hilpert
President
Chief Operating Officer
M. Jeffrey Branman
Title: Senior Vice President - Corporate
Development
Base: $400,000
Bonus Plan: (i) Annual Incentive Compensation Plan:
Threshold Target Max.
$49,943 $200,000 $349,715
plus (ii) Discretionary bonus: Target of $200,000
based on individual performance standards
Minimum Guaranteed Payment 4/97 $100,000
Stock Option: 75,000 - 4/96
75,000 - 4/97
-------
150,000 total
3-Year Long Term Plan: Threshold Target Max.
$162,857 $651,430 $1,257,143
Medical Spending Account: $5,000 per year
LTD Monthly Max: $20,000
Life Insurance: 1x base salary
Personal Financial
Planning: $10,000 year/$6,000 thereafter
SERP.: The Supplemental Cash Balance Plan
provides credit in addition to the
Qualified Cash Balance Plan subject
to certain non-compete covenants.
The "target" annual credit will be
8% of combined salary and annual
bonus. The 8% target will be
modified up or down based on annual
Company performance. The minimum
<PAGE> 2
annual accrual will be 4% of
combined salary and annual bonus,
regardless of performance. The
maximum annual accrual will be 12%
of salary and bonus.
Vacation: Four weeks
Severance: One (1) year's base salary plus bonus
Starting Time: 30 days from signing or less
Other benefits: As previously provided
/s/ M. Jeffrey Branman February 15, 1996
- --------------------------- ----------------------
M. Jeffrey Branman (Date)
/s/ Dale W. Hilpert/pap 15 Feb. 1996
- --------------------------- ----------------------
Dale W. Hilpert (Date)
<PAGE> 1
EXHIBIT 10(s)
AGREEMENT
THIS AGREEMENT made April 7, 1997, by and between WOOLWORTH
CORPORATION, a New York corporation with its principal office at 233 Broadway,
New York, New York 10279 (the "Company") and John DeWolf, residing at 1
Woodbridge Court, Chappaqua, New York 10514 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company believes that the establishment and maintenance of
a sound and vital management of the Company is essential to the protection and
enhancement of the interests of the Company and its shareholders; and
WHEREAS, the Company wishes to offer a form of protection to the
Executive, as one of a select group of officers and key employees of the Company
and its Affiliates, in the event the Executive's employment with the Control
Group terminates; and
WHEREAS, the Company also recognizes that the possibility of a Change in
Control of the Company, with the attendant uncertainties and risks, might result
in the departure or distraction of the Executive to the detriment of the
Company; and
WHEREAS, the Company wishes to induce the Executive to remain with the
Control Group, and to reinforce and encourage the Executive's continued
attention and dedication, when faced with the possibility of a Change in Control
of the Company; and
WHEREAS, this Agreement amends and supersedes any employment agreement,
severance plan, policy and/or practice of the Company in effect for the
Executive.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Definitions. The following terms shall have the meanings set forth
in this section as follows:
(a) "Affiliate" shall mean the Company and any entity affiliated with
the Company within the meaning of Code Section 414(b) with respect to a
controlled group of corporations, Code Section 414(c) with respect to trades or
businesses under common control with the Company, Code Section 414(m) with
respect to affiliated service groups and any other entity required to be
aggregated with the Company under Section 414(o) of the Code. No entity shall be
treated as an Affiliate for any period during which it is not part of the
controlled group, under common control or otherwise required to be aggregated
under Code Section 414.
(b) "Beneficiary" shall mean the individual designated by the Executive,
on a form acceptable by the Committee, to receive benefits payable under this
Agreement in the event of the Executive's death. If no Beneficiary is
designated, the Executive's Beneficiary shall be his or her spouse, or if the
Executive is not survived by a spouse, the Executive's estate.
<PAGE> 2
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Bonus" shall mean an amount equal to the target bonus expected to
be earned by the Executive under the Company's Annual Incentive Compensation
Plan or such other annual bonus plan or program that may then be applicable to
the Executive in a fiscal year, if the applicable target performance goal is
satisfied.
(e) "Cause" shall mean (with regard to the Executive's termination of
employment with the Control Group): (i) the refusal or willful failure by the
Executive to substantially perform his or her duties, (ii) with regard to the
Control Group or any of their assets or businesses, the Executive's dishonesty,
willful misconduct, misappropriation, breach of fiduciary duty or fraud, or
(iii) the Executive's conviction of a felony (other than a traffic violation) or
any other crime involving, in the sole discretion of the Committee, moral
turpitude.
(f) "Change in Control" shall have the meaning set forth in Appendix A
attached hereto.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended and
as hereafter amended from time to time.
(h) "Committee" shall mean the Compensation Committee of the Board or an
administrative committee appointed by the Compensation Committee.
(i) "Competition" shall mean the (i) participating, directly or
indirectly, as an individual proprietor, stockholder, officer, employee,
director, joint venturer, investor, lender, or in any capacity whatsoever
(within the United States of America, or in any country where any of the
Executive's former employing members of the Control Group does business) in a
business in competition with any business conducted by any member of the Control
Group for which the Executive worked at any time, provided, however, that such
participation shall not include (A) the mere ownership of not more than 1
percent of the total outstanding stock of a publicly held company; (B) the
performance of services for any enterprise to the extent such services are not
performed, directly or indirectly, for a business in which any of the Employee's
employing members of the Control Group is engaged; or (C) any activity engaged
in with the prior written approval of the Board or the Committee; or (ii)
intentional recruiting, soliciting or inducing, of any employee or employees of
the Control Group to terminate their employment with, or otherwise cease their
relationship with the former employing members of the Control Group where such
employee or employees do in fact so terminate their employment.
(j) "Control Group" shall mean the Company and its Affiliates.
(k) "Good Reason" shall mean (with respect to an Executive's termination
of employment with the Control Group): (i) any material demotion of the
Executive or any material reduction in the Executive's authority or
responsibility, except in each case in connection with the termination of the
Executive's employment for Cause or disability or as a result of the Executive's
death, or temporarily as a result of the Executive's illness or other absence;
(ii) a 20 percent or greater reduction in a 12 month period in the Executive's
rate of base salary as payable from time to time; (iii) a reduction in the
Executive's annual bonus classification level other than in connection with a
redesign of the applicable bonus plan that affects
<PAGE> 3
all employees at the Executive's bonus level; (iv) a failure of the Company to
continue in effect the benefits applicable to, or the Company's reduction of the
benefits applicable to, the Executive under any benefit plan or arrangement
(including without limitation, any pension, life insurance, health or disability
plan) in which the Executive participates as of the date of the Change in
Control without implementation of a substitute plan(s) providing materially
similar benefits in the aggregate to those discontinued or reduced, except for a
discontinuance of, or reduction under, any such plan or arrangement that is
legally required and/or generally applies to all executives of the Company of a
similar level, provided that in either such event the Company provides similar
benefits (or the economic effect thereof) to the Executive in any manner
determined by the Company; or (v) failure of any successor to the Company to
assume in writing the obligations hereunder.
(l) "Salary" shall mean an Executive's monthly base cash compensation
rate for services paid to the Executive by the Company or an Affiliate at the
time of his or her termination of employment from the Control Group. Salary
shall not include commissions, bonuses, overtime pay, incentive compensation,
benefits paid under any qualified plan, any group medical, dental or other
welfare benefit plan, noncash compensation or any other additional compensation
but shall include amounts reduced pursuant to an Executive's salary reduction
agreement under Sections 125 or 401(k) of the Code (if any) or a nonqualified
elective deferred compensation arrangement to the extent that in each such case
the reduction is to base salary.
(m) "Severance Benefit" shall mean (i) in the case of the Executive's
termination of employment that does not occur within the 12 month period
following a Change in Control, two weeks' Salary plus prorated Bonus multiplied
by the Executive's Years of Service, with a minimum of 26 weeks; or (ii) in the
case of an Executive's termination of employment within the 12 month period
following a Change in Control, two weeks' Salary plus prorated Bonus multiplied
by the Executive's Years of Service, with a minimum of 78 weeks. The Executive's
prorated Bonus for one week shall equal the Executive's Bonus divided by 52.
(n) "Severance Period" shall mean (i) in the case of the Executive's
termination of employment that does not occur within the 12 month period
following a Change in Control, two weeks multiplied by the Executive's Years of
Service, with a minimum of 26 weeks; or (ii) in the case of an Executive's
termination of employment within the 12 month period following a Change in
Control, two weeks multiplied by the Executive's Years of Service, with a
minimum of 78 weeks.
(o) "Year of Service" shall mean each 12 consecutive month period
commencing on the Executive's date of hire by the Company or an Affiliate and
each anniversary thereof in which the Executive is paid by the Company or an
Affiliate for the performance of full-time services as an Executive. For
purposes of this section, full-time services shall mean that the Employee is
employed for at least 30 hours per week. A Year of Service shall include any
period during which an Employee is not working due to disability, leave of
absence or layoff so long as he or she is being paid by the Employer (other than
through any employee benefit plan). A Year of Service also shall include service
in any branch of the armed forces of the United States by any person who is an
Executive on the date such service commenced, but only to the extent required by
applicable law.
<PAGE> 4
2. Term. The initial term of this Agreement shall end on December 31 of
the year following the year in which this Agreement is entered into. On December
31 of each year, the term shall be automatically renewed for an additional one
year so that the term shall then be for two years, unless the Committee notifies
the Executive prior to any December 31 that the term shall not be renewed.
Notwithstanding anything in this Agreement to the contrary, if the Company
becomes obligated to make any payment to the Executive pursuant to the terms
hereof at or prior to the expiration of this Agreement, then this Agreement
shall remain in effect until all of the Company's obligations hereunder are
fulfilled.
3. Benefits Upon Termination. In the event the Executive's employment
with the Control Group is terminated without Cause or the Executive terminates
employment with the Control Group within 60 days after the occurrence of a Good
Reason event with regard to the Executive, the Executive shall be entitled to a
Severance Benefit as set forth below.
(a) The Executive shall receive 50 percent of his or her Severance
Benefit in the form of a lump sum cash payment as soon as administratively
feasible following his or her termination of employment with the Control Group,
provided, however, that interest shall be payable beginning on the tenth day
following such termination of employment at the prime rate of interest as stated
in the Wall Street Journal.
(b) The Executive shall receive the remaining 50 percent of his or her
Severance Benefit in the form of a lump sum cash payment as soon as
administratively feasible following the one year anniversary of the Executive's
termination of employment with the Control Group, subject to (c) below,
provided, however, that interest shall be payable beginning on the tenth day
following such termination of employment at the prime rate of interest as stated
in the Wall Street Journal.
(c) The Executive shall only be entitled to the portion of his or her
Severance Benefit described in (b) above if the Executive does not engage in
Competition during the one year period following his or her termination of
employment with the Control Group and if the Executive has not materially
violated the provisions of Section 14 hereof. If the Executive does engage in
Competition or violates the provisions of Section 14 during such one year
period, the portion of the Executive's Severance Benefit described in (b) above
shall be forfeited. If the restriction set forth in this subsection is found by
any court of competent jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend over the maximum
period of time, range of activities or geographic area as to which it may be
enforceable.
(d) The Executive shall continue, to the extent permitted under legal
and underwriting requirements (if any), to participate during his or her
Severance Period in any group medical, dental or life insurance plan he or she
participated in prior to his or her termination of employment, under
substantially similar terms and conditions as an active Employee; provided
participation in such group medical, dental and life insurance benefits shall
correspondingly cease at such time as the Executive becomes eligible for a
future employer's medical, dental and/or life insurance coverage (or would
become eligible if the Executive did not waive coverage). Notwithstanding the
foregoing, the Executive may not continue to participate in such plans on a
pre-tax or tax-favored basis. Notwithstanding anything else herein, the
Executive shall not be entitled to any benefits during the Severance Period
other than the benefits provided in Section 3 herein and, without limiting the
generality of the foregoing, the Executive specifically shall not be entitled to
continue to participate in any group disability or voluntary accidental death or
<PAGE> 5
dismemberment insurance plan he or she participated in prior to his or her
termination of employment. Without limiting the generality of the foregoing, the
Executive shall not accrue additional benefits under any pension plan of the
Employer (whether or not qualified under Section 401(a) of the Code) during the
Severance Period, provided, however, that payment of any Severance Benefit shall
be included in the Executive's earnings for purposes of calculating the
Executive's benefit under The Woolworth Retirement Plan, Woolworth Corporation
401(k) Plan, and Woolworth Corporation Excess Cash Balance Plan.
(e) In the event of the Executive's death after becoming eligible for
the portion of the Severance Benefit described in (a) above and prior to payment
of such amount, such portion of the Severance Benefit shall be paid to the
Executive's Beneficiary. In addition to the foregoing, in the event of the
Executive's death prior to payment of the portion of the Severance Benefit
described in (b) above, such amount shall be paid to the Executive's
Beneficiary, but only to the extent that the Executive satisfied the provisions
set forth in (c) above for the period following the Executive's termination of
employment with the Control Group and prior to his or her death.
(f) Notwithstanding anything else herein, to the extent the Executive
would be subject to the excise tax under Section 4999 of the Code on the amounts
in (a) or (b) above and such other amounts or benefits he or she received from
the Company and its Affiliates required to be included in the calculation of
parachute payments for purposes of Sections 280G and 4999 of the Code, the
amounts provided under this Agreement shall be automatically reduced to an
amount one dollar less than that, when combined with such other amounts and
benefits required to be so included, would subject the Executive to the excise
tax under Section 4999 of the Code, if, and only if, the reduced amount received
by the Executive, would be greater than the unreduced amount to be received by
the Executive minus the excise tax payable under Section 4999 of the Code on
such amount and the other amounts and benefits received by the Executive and
required to be included in the calculation of a parachute payment for purposes
of Sections 280G and 4999 of the Code.
4. No Duty to Mitigate/Set-off. The Company agrees that if the
Executive's employment with the Company is terminated during the term of this
Agreement, the Executive shall not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to this Agreement. Further, except to the extent provided for in
Section 3(c), the amount of the Severance Benefit provided for in this Agreement
shall not be reduced by any compensation earned by the Executive or benefit
provided to the Executive as the result of employment by another employer or
otherwise. Except as otherwise provided herein, the Company's obligations to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Executive. The Executive shall
retain any and all rights under all pension plans, welfare plans, equity plans
and other plans, including other severance plans, under which the Executive
would otherwise be entitled to benefits.
5. Funding. Severance Benefits shall be funded out of the general
assets of the Company as and when they are payable under this Agreement. The
Executive shall be solely a general creditor of the Company. If the Company
decides to establish any advance accrued reserve on its books against the future
expense of benefits payable hereunder, or if the Company is required to fund a
trust under this Agreement, such reserve or trust shall not under any
circumstances be deemed to be an asset of this Agreement.
<PAGE> 6
6. Administration. This Agreement shall be administered by the
Committee. The Committee (or its delegate) shall have the exclusive right,
power, and authority, in its sole and absolute discretion, to administer, apply
and interpret the Agreement and to decide all matters arising in connection with
the operation or administration of the Agreement. Without limiting the
generality of the foregoing, the Committee shall have the sole and absolute
discretionary authority: (a) to take all actions and make all decisions with
respect to the eligibility for, and the amount of, benefits payable under the
Agreement; (b) to formulate, interpret and apply rules, regulations and policies
necessary to administer the Agreement in accordance with its terms; (c) to
decide questions, including legal or factual questions, relating to the
calculation and payment of benefits under the Agreement; (d) to resolve and/or
clarify any ambiguities, inconsistencies and omissions arising under the
Agreement; (e) to decide for purposes of paying benefits hereunder, whether,
based on the terms of this Agreement, a termination of employment is for Good
Reason or for Cause; and (f) except as specifically provided to the contrary
herein, to process and approve or deny benefit claims and rule on any benefit
exclusions. All determinations made by the Committee (or any delegate) with
respect to any matter arising under the Agreement shall be final, binding and
conclusive on all parties.
Decisions of the Committee shall be made by a majority of its members
attending a meeting at which a quorum is present (which meeting may be held
telephonically), or by written action in accordance with applicable law. All
decisions of the Committee on any question concerning the interpretation and
administration of the Agreement shall be final, conclusive and binding upon all
parties.
No member of the Committee and no officer, director or employee of the
Company or any other Affiliate shall be liable for any action or inaction with
respect to his or her functions under this Agreement unless such action or
inaction is adjudged to be due to gross negligence, willful misconduct or fraud.
Further, no such person shall be personally liable merely by virtue of any
instrument executed by him or her or on his or her behalf in connection with
this Agreement.
The Company shall indemnify, to the full extent permitted by law and its
Certificate of Incorporation and By-laws (but only to the extent not covered by
insurance) its officers and directors (and any employee involved in carrying out
the functions of the Company under the Agreement) and each member of the
Committee against any expenses, including amounts paid in settlement of a
liability, which are reasonably incurred in connection with any legal action to
which such person is a party by reason of his or her duties or responsibilities
with respect to the Agreement, except with regard to matters as to which he or
she shall be adjudged in such action to be liable for gross negligence, willful
misconduct or fraud in the performance of his or her duties.
7. Claims Procedures. Any claim by the Executive or Beneficiary
("Claimant") with respect to participation, contributions, benefits or other
aspects of the operation of the Agreement shall be made in writing to the
Secretary of the Company or such other person designated by the Committee from
time to time for such purpose. If the designated person receiving a claim
believes, following consultation with the Chairman of the Committee, that the
claim should be denied, he or she shall notify the Claimant in writing of the
denial of the claim within 90 days after his or her receipt thereof (this period
may be extended an additional 90 days in special circumstances and, in such
event, the Claimant shall be notified in writing of the extension). Such notice
shall (a) set forth the specific reason or reasons for the denial making
reference to the pertinent provisions of the Agreement on which the denial is
based, (b) describe
<PAGE> 7
any additional material or information necessary to perfect the claim, and
explain why such material or information, if any, is necessary, and (c) inform
the Claimant of his or her right pursuant to this section to request review of
the decision.
A Claimant may appeal the denial of a claim by submitting a written
request for review to the Committee, within 60 days after the date on which such
denial is received. Such period may be extended by the Committee for good cause
shown. The claim will then be reviewed by the Committee. A Claimant or his or
her duly authorized representative may discuss any issues relevant to the claim,
may review pertinent documents and may submit issues and comments in writing. If
the Committee deems it appropriate, it may hold a hearing as to a claim. If a
hearing is held, the Claimant shall be entitled to be represented by counsel.
The Committee shall decide whether or not to grant the claim within 60 days
after receipt of the request for review, but this period may be extended by the
Committee for up to an additional 60 days in special circumstances. Written
notice of any such special circumstances shall be sent to the Claimant. Any
claim not decided upon in the required time period shall be deemed denied. All
interpretations, determinations and decisions of the Committee with respect to
any claim shall be made in its sole discretion based on the Agreement and other
relevant documents and shall be final, conclusive and binding on all persons.
8. Incompetency; Payments to Minors. In the event that the Committee
finds that a Participant is unable to care for his or her affairs because of
illness or accident, then benefits payable hereunder, unless claim has been made
therefor by a duly appointed guardian, committee, or other legal representative,
may be paid in such manner as the Committee shall determine, and the application
thereof shall be a complete discharge of all liability for any payments or
benefits to which such Participant was or would have been otherwise entitled
under this Agreement. Any payments to a minor pursuant to this Agreement may be
paid by the Committee in its sole and absolute discretion (a) directly to such
minor; (b) to the legal or natural guardian of such minor; or (c) to any other
person, whether or not appointed guardian of the minor, who shall have the care
and custody of such minor. The receipt by such individual shall be a complete
discharge of all liability under the Agreement therefor.
9. Withholding. The Company shall have the right to make such
provisions as it deems necessary or appropriate to satisfy any obligations it
may have to withhold federal, state or local income or other taxes incurred by
reason of payments pursuant to this Agreement. In lieu thereof, the Employer
shall have the right to withhold the amount of such taxes from any other sums
due or to become due from the Employer to the Executive upon such terms and
conditions as the Committee may prescribe.
10. Assignment and Alienation. Except as provided herein, the benefits
payable under this Agreement shall not be subject to alienation, transfer,
assignment, garnishment, execution or levy of any kind, and any attempt to cause
any benefits to be so subjected shall not be recognized.
11. Successors; Binding Agreement. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or legal
<PAGE> 8
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder if the Executive had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Executive's Beneficiary, or the
executors, personal representatives or administrators of the Executive's estate.
12. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. All references to sections of the Code or any other law
shall be deemed also to refer to any successor provisions to such sections and
laws.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Confidentiality. The Executive shall not at any time during the term
of this Agreement, or thereafter, communicate or disclose to any unauthorized
person, or use for the Executive's own account, without the prior written
consent of the Board, any proprietary processes, or other confidential
information of the Company or any subsidiary concerning their business or
affairs, accounts or customers, it being understood, however, that the
obligations of this section shall not apply to the extent that the aforesaid
matters (a) are disclosed in circumstances in which the Executive is legally
required to do so, or (b) become generally known to and available for use by the
public other than by the Executive's wrongful act or omission.
15. Special Provisions. Notwithstanding any other provision of this
agreement to the contrary, the Severance Benefit payable hereunder shall be no
less than one year's Salary.
16. Severability. If any provisions of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
17. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in New York, New York, or in such
other city in which the Executive is then located, in accordance with the rules
of the American Arbitration Association then in effect. The determination of the
arbitrators, which shall be based upon a de novo interpretation of this
Agreement, shall be final and binding and judgment may be entered on the
arbitrators' award in any court having jurisdiction. The Company shall pay all
costs of the American Arbitration Association and the arbitrator.
18. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company or any of its
subsidiary companies and for which the Executive may qualify.
<PAGE> 9
19. Governing Law. This Agreement shall be construed, interpreted, and
governed by the Employee Retirement Income Security Act of 1974, as amended. To
the extent not so governed, it shall be governed by the laws of the State of New
York (without reference to rules relating to conflicts of law).
20. Top-hat Plan. This Agreement is intended to be a "top-hat" welfare
plan within the meaning of Department of Labor Regulation Section 2520.104-24.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and the Executive's hand has hereunto been set as of the date first set
forth above.
WOOLWORTH CORPORATION
/s/ Patricia A. Peck
By:_________________________________
/s/ John DeWolf
_________________________________
John DeWolf
<PAGE> 10
APPENDIX A
Change in Control
A Change in Control shall mean any of the following: (i) (A) the making
of a tender or exchange offer by any person or entity or group of associated
persons or entities (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 (a "Person") (other than the Company or its
Affiliates) for shares of common stock of the Company pursuant to which
purchases are made of securities representing at least twenty percent (20%) of
the total combined voting power of the Company's then issued and outstanding
voting securities; (B) the merger or consolidation of the Company with, or the
sale or disposition of all or substantially all of the assets of the Company to,
any Person other than (a) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving or parent entity) fifty percent (50%) or
more of the combined voting power of the voting securities of the Company or
such surviving or parent entity outstanding immediately after such merger or
consolidation; or (b) a merger or capitalization effected to implement a
recapitalization of the Company (or similar transaction) in which no Person is
or becomes the beneficial owner, directly or indirectly (as determined under
Rule 13d-3 promulgated under the Securities Exchange Act of 1934), of securities
representing more than the amounts set forth in (C) below; (C) the acquisition
of direct or indirect beneficial ownership (as determined under Rule 13d-3
promulgated under the Securities Exchange Act of 1934), in the aggregate, of
securities of the Company representing twenty percent (20%) or more of the total
combined voting power of the Company's then issued and outstanding voting
securities by any Person acting in concert as of the date of this Agreement;
provided, however, that the Board may at any time and from time to time and in
the sole discretion of the Board, as the case may be, increase the voting
security ownership percentage threshold of this item (C) to an amount not
exceeding forty percent (40%); or (D) the approval by the shareholders of the
Company of any plan or proposal for the complete liquidation or dissolution of
the Company or for the sale of all or substantially all of the assets of the
Company; or (ii) during any period of not more than two (2) consecutive years,
individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered into
agreement with the Company to effect a transaction described in clause (i))
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof.
<PAGE> 1
EXHIBIT 10(s)(i)
WOOLWORTH CORPORATION AND LOGO
Dale W. Hilpert
President
Chief Operating Officer
John DeWolf
<TABLE>
<S> <C>
Title: Senior Vice President - Real Estate
Base: $350,000 - to be reviewed annually
Bonus: Threshold Target Max.
$43,700 $175,000 $306,000
Minimum guaranteed bonus 4/97 - $150,000
Stock Option: 30,000 shares per year (non-qualified)
3 years - 90,000 total
3-Year Long Term
Plan: Threshold Target Max.
$142,500 $570,000 $1,100,000
Medical Spending
Account: $5,000 per year
LTD Monthly Max: $17,500
Life Insurance: 1x base salary
Personal Financial Planning: $10,000 year /$6,000 thereafter
</TABLE>
<PAGE> 2
-2-
<TABLE>
<S> <C>
SERP: The Supplemental Cash Balance Plan provides
credit in addition to the Qualified Cash Balance Plan
subject to certain non-compete covenants. The
"target" annual credit will be 8% of combined salary
and annual bonus. The 8% target will be modified up
or down based on annual Company performance. The
minimum annual accrual will be 4% of combined salary
and annual bonus, regardless of performance. The
maximum annual accrual will be 12% of salary and
bonus.
Signing Bonus: $200,000
Relocation, including house purchase at original purchase price
Severance: One (1) year's base salary
Starting Time: 30 days from signing or less
Other benefits: As previously provided
</TABLE>
/s/ John DeWolf 2/9/96
- ----------------------- --------
John DeWolf (Date)
/s/ Dale W. Hilpert 2/8/96
- ----------------------- --------
Dale W. Hilpert (Date)
<PAGE> 1
EXHIBIT 10(t)
AGREEMENT
THIS AGREEMENT made April 7, 1997, by and between WOOLWORTH
CORPORATION, a New York corporation with its principal office at 233 Broadway,
New York, New York 10279 (the "Company") and John F. Gillespie, residing at 8
Pond Edge Road, Westport, Connecticut 06880 ("Executive").
W I T N E S S E T H:
WHEREAS, the Company believes that the establishment and maintenance of
a sound and vital management of the Company is essential to the protection and
enhancement of the interests of the Company and its shareholders; and
WHEREAS, the Company wishes to offer a form of protection to the
Executive, as one of a select group of officers and key employees of the Company
and its Affiliates, in the event the Executive's employment with the Control
Group terminates; and
WHEREAS, the Company also recognizes that the possibility of a Change in
Control of the Company, with the attendant uncertainties and risks, might result
in the departure or distraction of the Executive to the detriment of the
Company; and
WHEREAS, the Company wishes to induce the Executive to remain with the
Control Group, and to reinforce and encourage the Executive's continued
attention and dedication, when faced with the possibility of a Change in Control
of the Company; and
WHEREAS, this Agreement amends and supersedes any employment agreement,
severance plan, policy and/or practice of the Company in effect for the
Executive.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Definitions. The following terms shall have the meanings set forth
in this section as follows:
(a) "Affiliate" shall mean the Company and any entity affiliated with
the Company within the meaning of Code Section 414(b) with respect to a
controlled group of corporations, Code Section 414(c) with respect to trades or
businesses under common control with the Company, Code Section 414(m) with
respect to affiliated service groups and any other entity required to be
aggregated with the Company under Section 414(o) of the Code. No entity shall be
treated as an Affiliate for any period during which it is not part of the
controlled group, under common control or otherwise required to be aggregated
under Code Section 414.
(b) "Beneficiary" shall mean the individual designated by the Executive,
on a form acceptable by the Committee, to receive benefits payable under this
Agreement in the event of the Executive's death. If no Beneficiary is
designated, the Executive's Beneficiary shall be his or her spouse, or if the
Executive is not survived by a spouse, the Executive's estate.
<PAGE> 2
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Bonus" shall mean an amount equal to the target bonus expected to
be earned by the Executive under the Company's Annual Incentive Compensation
Plan or such other annual bonus plan or program that may then be applicable to
the Executive in a fiscal year, if the applicable target performance goal is
satisfied.
(e) "Cause" shall mean (with regard to the Executive's termination of
employment with the Control Group): (i) the refusal or willful failure by the
Executive to substantially perform his or her duties, (ii) with regard to the
Control Group or any of their assets or businesses, the Executive's dishonesty,
willful misconduct, misappropriation, breach of fiduciary duty or fraud, or
(iii) the Executive's conviction of a felony (other than a traffic violation) or
any other crime involving, in the sole discretion of the Committee, moral
turpitude.
(f) "Change in Control" shall have the meaning set forth in Appendix A
attached hereto.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended and
as hereafter amended from time to time.
(h) "Committee" shall mean the Compensation Committee of the Board or an
administrative committee appointed by the Compensation Committee.
(i) "Competition" shall mean the (i) participating, directly or
indirectly, as an individual proprietor, stockholder, officer, employee,
director, joint venturer, investor, lender, or in any capacity whatsoever
(within the United States of America, or in any country where any of the
Executive's former employing members of the Control Group does business) in a
business in competition with any business conducted by any member of the Control
Group for which the Executive worked at any time, provided, however, that such
participation shall not include (A) the mere ownership of not more than 1
percent of the total outstanding stock of a publicly held company; (B) the
performance of services for any enterprise to the extent such services are not
performed, directly or indirectly, for a business in which any of the Employee's
employing members of the Control Group is engaged; or (C) any activity engaged
in with the prior written approval of the Board or the Committee; or (ii)
intentional recruiting, soliciting or inducing, of any employee or employees of
the Control Group to terminate their employment with, or otherwise cease their
relationship with the former employing members of the Control Group where such
employee or employees do in fact so terminate their employment.
(j) "Control Group" shall mean the Company and its Affiliates.
(k) "Good Reason" shall mean (with respect to an Executive's termination
of employment with the Control Group): (i) any material demotion of the
Executive or any material reduction in the Executive's authority or
responsibility, except in each case in connection with the termination of the
Executive's employment for Cause or disability or as a result of the Executive's
death, or temporarily as a result of the Executive's illness or other absence;
(ii) a 20 percent or greater reduction in a 12 month period in the Executive's
rate of base salary as payable from time to time; (iii) a reduction in the
Executive's annual bonus classification level other than in connection with a
redesign of the applicable bonus plan that affects
<PAGE> 3
all employees at the Executive's bonus level; (iv) a failure of the Company to
continue in effect the benefits applicable to, or the Company's reduction of the
benefits applicable to, the Executive under any benefit plan or arrangement
(including without limitation, any pension, life insurance, health or disability
plan) in which the Executive participates as of the date of the Change in
Control without implementation of a substitute plan(s) providing materially
similar benefits in the aggregate to those discontinued or reduced, except for a
discontinuance of, or reduction under, any such plan or arrangement that is
legally required and/or generally applies to all executives of the Company of a
similar level, provided that in either such event the Company provides similar
benefits (or the economic effect thereof) to the Executive in any manner
determined by the Company; or (v) failure of any successor to the Company to
assume in writing the obligations hereunder.
(l) "Salary" shall mean an Executive's monthly base cash compensation
rate for services paid to the Executive by the Company or an Affiliate at the
time of his or her termination of employment from the Control Group. Salary
shall not include commissions, bonuses, overtime pay, incentive compensation,
benefits paid under any qualified plan, any group medical, dental or other
welfare benefit plan, noncash compensation or any other additional compensation
but shall include amounts reduced pursuant to an Executive's salary reduction
agreement under Sections 125 or 401(k) of the Code (if any) or a nonqualified
elective deferred compensation arrangement to the extent that in each such case
the reduction is to base salary.
(m) "Severance Benefit" shall mean (i) in the case of the Executive's
termination of employment that does not occur within the 12 month period
following a Change in Control, two weeks' Salary plus prorated Bonus multiplied
by the Executive's Years of Service, with a minimum of 26 weeks; or (ii) in the
case of an Executive's termination of employment within the 12 month period
following a Change in Control, two weeks' Salary plus prorated Bonus multiplied
by the Executive's Years of Service, with a minimum of 78 weeks. The Executive's
prorated Bonus for one week shall equal the Executive's Bonus divided by 52.
(n) "Severance Period" shall mean (i) in the case of the Executive's
termination of employment that does not occur within the 12 month period
following a Change in Control, two weeks multiplied by the Executive's Years of
Service, with a minimum of 26 weeks; or (ii) in the case of an Executive's
termination of employment within the 12 month period following a Change in
Control, two weeks multiplied by the Executive's Years of Service, with a
minimum of 78 weeks.
(o) "Year of Service" shall mean each 12 consecutive month period
commencing on the Executive's date of hire by the Company or an Affiliate and
each anniversary thereof in which the Executive is paid by the Company or an
Affiliate for the performance of full-time services as an Executive. For
purposes of this section, full-time services shall mean that the Employee is
employed for at least 30 hours per week. A Year of Service shall include any
period during which an Employee is not working due to disability, leave of
absence or layoff so long as he or she is being paid by the Employer (other than
through any employee benefit plan). A Year of Service also shall include service
in any branch of the armed forces of the United States by any person who is an
Executive on the date such service commenced, but only to the extent required by
applicable law.
<PAGE> 4
2. Term. The initial term of this Agreement shall end on December 31 of
the year following the year in which this Agreement is entered into. On December
31 of each year, the term shall be automatically renewed for an additional one
year so that the term shall then be for two years, unless the Committee notifies
the Executive prior to any December 31 that the term shall not be renewed.
Notwithstanding anything in this Agreement to the contrary, if the Company
becomes obligated to make any payment to the Executive pursuant to the terms
hereof at or prior to the expiration of this Agreement, then this Agreement
shall remain in effect until all of the Company's obligations hereunder are
fulfilled.
3. Benefits Upon Termination. In the event the Executive's employment
with the Control Group is terminated without Cause or the Executive terminates
employment with the Control Group within 60 days after the occurrence of a Good
Reason event with regard to the Executive, the Executive shall be entitled to a
Severance Benefit as set forth below.
(a) The Executive shall receive 50 percent of his or her Severance
Benefit in the form of a lump sum cash payment as soon as administratively
feasible following his or her termination of employment with the Control Group,
provided, however, that interest shall be payable beginning on the tenth day
following such termination of employment at the prime rate of interest as stated
in the Wall Street Journal.
(b) The Executive shall receive the remaining 50 percent of his or her
Severance Benefit in the form of a lump sum cash payment as soon as
administratively feasible following the one year anniversary of the Executive's
termination of employment with the Control Group, subject to (c) below,
provided, however, that interest shall be payable beginning on the tenth day
following such termination of employment at the prime rate of interest as stated
in the Wall Street Journal .
(c) The Executive shall only be entitled to the portion of his or her
Severance Benefit described in (b) above if the Executive does not engage in
Competition during the one year period following his or her termination of
employment with the Control Group and if the Executive has not materially
violated the provisions of Section 14 hereof. If the Executive does engage in
Competition or violates the provisions of Section 14 during such one year
period, the portion of the Executive's Severance Benefit described in (b) above
shall be forfeited. If the restriction set forth in this subsection is found by
any court of competent jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend over the maximum
period of time, range of activities or geographic area as to which it may be
enforceable.
(d) The Executive shall continue, to the extent permitted under legal
and underwriting requirements (if any), to participate during his or her
Severance Period in any group medical, dental or life insurance plan he or she
participated in prior to his or her termination of employment, under
substantially similar terms and conditions as an active Employee; provided
participation in such group medical, dental and life insurance benefits shall
correspondingly cease at such time as the Executive becomes eligible for a
future employer's medical, dental and/or life insurance coverage (or would
become eligible if the Executive did not waive coverage). Notwithstanding the
foregoing, the Executive may not continue to participate in such plans on a
pre-tax or tax-favored basis. Notwithstanding anything else herein, the
Executive shall not be entitled to any benefits during the Severance Period
other than the benefits provided in Section 3 herein and, without limiting the
generality of the foregoing, the Executive specifically shall not be entitled to
continue to participate in any group disability or voluntary accidental death or
<PAGE> 5
dismemberment insurance plan he or she participated in prior to his or her
termination of employment. Without limiting the generality of the foregoing, the
Executive shall not accrue additional benefits under any pension plan of the
Employer (whether or not qualified under Section 401(a) of the Code) during the
Severance Period, provided, however, that payment of any Severance Benefit shall
be included in the Executive's earnings for purposes of calculating the
Executive's benefit under The Woolworth Retirement Plan, Woolworth Corporation
401(k) Plan, and Woolworth Corporation Excess Cash Balance Plan.
(e) In the event of the Executive's death after becoming eligible for
the portion of the Severance Benefit described in (a) above and prior to payment
of such amount, such portion of the Severance Benefit shall be paid to the
Executive's Beneficiary. In addition to the foregoing, in the event of the
Executive's death prior to payment of the portion of the Severance Benefit
described in (b) above, such amount shall be paid to the Executive's
Beneficiary, but only to the extent that the Executive satisfied the provisions
set forth in (c) above for the period following the Executive's termination of
employment with the Control Group and prior to his or her death.
(f) Notwithstanding anything else herein, to the extent the Executive
would be subject to the excise tax under Section 4999 of the Code on the amounts
in (a) or (b) above and such other amounts or benefits he or she received from
the Company and its Affiliates required to be included in the calculation of
parachute payments for purposes of Sections 280G and 4999 of the Code, the
amounts provided under this Agreement shall be automatically reduced to an
amount one dollar less than that, when combined with such other amounts and
benefits required to be so included, would subject the Executive to the excise
tax under Section 4999 of the Code, if, and only if, the reduced amount received
by the Executive, would be greater than the unreduced amount to be received by
the Executive minus the excise tax payable under Section 4999 of the Code on
such amount and the other amounts and benefits received by the Executive and
required to be included in the calculation of a parachute payment for purposes
of Sections 280G and 4999 of the Code.
4. No Duty to Mitigate/Set-off. The Company agrees that if the
Executive's employment with the Company is terminated during the term of this
Agreement, the Executive shall not be required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to this Agreement. Further, except to the extent provided for in
Section 3(c), the amount of the Severance Benefit provided for in this Agreement
shall not be reduced by any compensation earned by the Executive or benefit
provided to the Executive as the result of employment by another employer or
otherwise. Except as otherwise provided herein, the Company's obligations to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Executive. The Executive shall
retain any and all rights under all pension plans, welfare plans, equity plans
and other plans, including other severance plans, under which the Executive
would otherwise be entitled to benefits.
5. Funding. Severance Benefits shall be funded out of the general
assets of the Company as and when they are payable under this Agreement. The
Executive shall be solely a general creditor of the Company. If the Company
decides to establish any advance accrued reserve on its books against the future
expense of benefits payable hereunder, or if the Company is required to fund a
trust under this Agreement, such reserve or trust shall not under any
circumstances be deemed to be an asset of this Agreement.
<PAGE> 6
6. Administration. This Agreement shall be administered by the
Committee. The Committee (or its delegate) shall have the exclusive right,
power, and authority, in its sole and absolute discretion, to administer, apply
and interpret the Agreement and to decide all matters arising in connection with
the operation or administration of the Agreement. Without limiting the
generality of the foregoing, the Committee shall have the sole and absolute
discretionary authority: (a) to take all actions and make all decisions with
respect to the eligibility for, and the amount of, benefits payable under the
Agreement; (b) to formulate, interpret and apply rules, regulations and policies
necessary to administer the Agreement in accordance with its terms; (c) to
decide questions, including legal or factual questions, relating to the
calculation and payment of benefits under the Agreement; (d) to resolve and/or
clarify any ambiguities, inconsistencies and omissions arising under the
Agreement; (e) to decide for purposes of paying benefits hereunder, whether,
based on the terms of this Agreement, a termination of employment is for Good
Reason or for Cause; and (f) except as specifically provided to the contrary
herein, to process and approve or deny benefit claims and rule on any benefit
exclusions. All determinations made by the Committee (or any delegate) with
respect to any matter arising under the Agreement shall be final, binding and
conclusive on all parties.
Decisions of the Committee shall be made by a majority of its members
attending a meeting at which a quorum is present (which meeting may be held
telephonically), or by written action in accordance with applicable law. All
decisions of the Committee on any question concerning the interpretation and
administration of the Agreement shall be final, conclusive and binding upon all
parties.
No member of the Committee and no officer, director or employee of the
Company or any other Affiliate shall be liable for any action or inaction with
respect to his or her functions under this Agreement unless such action or
inaction is adjudged to be due to gross negligence, willful misconduct or fraud.
Further, no such person shall be personally liable merely by virtue of any
instrument executed by him or her or on his or her behalf in connection with
this Agreement.
The Company shall indemnify, to the full extent permitted by law and its
Certificate of Incorporation and By-laws (but only to the extent not covered by
insurance) its officers and directors (and any employee involved in carrying out
the functions of the Company under the Agreement) and each member of the
Committee against any expenses, including amounts paid in settlement of a
liability, which are reasonably incurred in connection with any legal action to
which such person is a party by reason of his or her duties or responsibilities
with respect to the Agreement, except with regard to matters as to which he or
she shall be adjudged in such action to be liable for gross negligence, willful
misconduct or fraud in the performance of his or her duties.
7. Claims Procedures. Any claim by the Executive or Beneficiary
("Claimant") with respect to participation, contributions, benefits or other
aspects of the operation of the Agreement shall be made in writing to the
Secretary of the Company or such other person designated by the Committee from
time to time for such purpose. If the designated person receiving a claim
believes, following consultation with the Chairman of the Committee, that the
claim should be denied, he or she shall notify the Claimant in writing of the
denial of the claim within 90 days after his or her receipt thereof (this period
may be extended an additional 90 days in special circumstances and, in such
event, the Claimant shall be notified in writing of the extension). Such notice
shall (a) set forth the specific reason or reasons for the denial making
reference to the pertinent provisions of the Agreement on which the denial is
based, (b) describe
<PAGE> 7
any additional material or information necessary to perfect the claim, and
explain why such material or information, if any, is necessary, and (c) inform
the Claimant of his or her right pursuant to this section to request review of
the decision.
A Claimant may appeal the denial of a claim by submitting a written
request for review to the Committee, within 60 days after the date on which such
denial is received. Such period may be extended by the Committee for good cause
shown. The claim will then be reviewed by the Committee. A Claimant or his or
her duly authorized representative may discuss any issues relevant to the claim,
may review pertinent documents and may submit issues and comments in writing. If
the Committee deems it appropriate, it may hold a hearing as to a claim. If a
hearing is held, the Claimant shall be entitled to be represented by counsel.
The Committee shall decide whether or not to grant the claim within 60 days
after receipt of the request for review, but this period may be extended by the
Committee for up to an additional 60 days in special circumstances. Written
notice of any such special circumstances shall be sent to the Claimant. Any
claim not decided upon in the required time period shall be deemed denied. All
interpretations, determinations and decisions of the Committee with respect to
any claim shall be made in its sole discretion based on the Agreement and other
relevant documents and shall be final, conclusive and binding on all persons.
8. Incompetency; Payments to Minors. In the event that the Committee
finds that a Participant is unable to care for his or her affairs because of
illness or accident, then benefits payable hereunder, unless claim has been made
therefor by a duly appointed guardian, committee, or other legal representative,
may be paid in such manner as the Committee shall determine, and the application
thereof shall be a complete discharge of all liability for any payments or
benefits to which such Participant was or would have been otherwise entitled
under this Agreement. Any payments to a minor pursuant to this Agreement may be
paid by the Committee in its sole and absolute discretion (a) directly to such
minor; (b) to the legal or natural guardian of such minor; or (c) to any other
person, whether or not appointed guardian of the minor, who shall have the care
and custody of such minor. The receipt by such individual shall be a complete
discharge of all liability under the Agreement therefor.
9. Withholding. The Company shall have the right to make such
provisions as it deems necessary or appropriate to satisfy any obligations it
may have to withhold federal, state or local income or other taxes incurred by
reason of payments pursuant to this Agreement. In lieu thereof, the Employer
shall have the right to withhold the amount of such taxes from any other sums
due or to become due from the Employer to the Executive upon such terms and
conditions as the Committee may prescribe.
10. Assignment and Alienation. Except as provided herein, the benefits
payable under this Agreement shall not be subject to alienation, transfer,
assignment, garnishment, execution or levy of any kind, and any attempt to cause
any benefits to be so subjected shall not be recognized.
11. Successors; Binding Agreement. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or legal
<PAGE> 8
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still
be payable to the Executive hereunder if the Executive had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Executive's Beneficiary, or the
executors, personal representatives or administrators of the Executive's estate.
12. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. All references to sections of the Code or any other law
shall be deemed also to refer to any successor provisions to such sections and
laws.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Confidentiality. The Executive shall not at any time during the term
of this Agreement, or thereafter, communicate or disclose to any unauthorized
person, or use for the Executive's own account, without the prior written
consent of the Board, any proprietary processes, or other confidential
information of the Company or any subsidiary concerning their business or
affairs, accounts or customers, it being understood, however, that the
obligations of this section shall not apply to the extent that the aforesaid
matters (a) are disclosed in circumstances in which the Executive is legally
required to do so, or (b) become generally known to and available for use by the
public other than by the Executive's wrongful act or omission.
15. Special Provisions. Notwithstanding any other provision of this
agreement to the contrary, the Severance Benefit payable hereunder shall be no
less than one year's Salary.
16. Severability. If any provisions of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
17. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in New York, New York, or in such
other city in which the Executive is then located, in accordance with the rules
of the American Arbitration Association then in effect. The determination of the
arbitrators, which shall be based upon a de novo interpretation of this
Agreement, shall be final and binding and judgment may be entered on the
arbitrators' award in any court having jurisdiction. The Company shall pay all
costs of the American Arbitration Association and the arbitrator.
18. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company or any of its
subsidiary companies and for which the Executive may qualify.
<PAGE> 9
19. Governing Law. This Agreement shall be construed, interpreted, and
governed by the Employee Retirement Income Security Act of 1974, as amended. To
the extent not so governed, it shall be governed by the laws of the State of New
York (without reference to rules relating to conflicts of law).
20. Top-hat Plan. This Agreement is intended to be a "top-hat" welfare
plan within the meaning of Department of Labor Regulation Section 2520.104-24.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and the Executive's hand has hereunto been set as of the date first set
forth above.
WOOLWORTH CORPORATION
By: /s/ Patricia A. Peck
-------------------------------
/s/ John F. Gillespie
-------------------------------
John F. Gillespie
<PAGE> 10
APPENDIX A
Change in Control
A Change in Control shall mean any of the following: (i) (A) the making
of a tender or exchange offer by any person or entity or group of associated
persons or entities (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 (a "Person") (other than the Company or its
Affiliates) for shares of common stock of the Company pursuant to which
purchases are made of securities representing at least twenty percent (20%) of
the total combined voting power of the Company's then issued and outstanding
voting securities; (B) the merger or consolidation of the Company with, or the
sale or disposition of all or substantially all of the assets of the Company to,
any Person other than (a) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving or parent entity) fifty percent (50%) or
more of the combined voting power of the voting securities of the Company or
such surviving or parent entity outstanding immediately after such merger or
consolidation; or (b) a merger or capitalization effected to implement a
recapitalization of the Company (or similar transaction) in which no Person is
or becomes the beneficial owner, directly or indirectly (as determined under
Rule 13d-3 promulgated under the Securities Exchange Act of 1934), of securities
representing more than the amounts set forth in (C) below; (C) the acquisition
of direct or indirect beneficial ownership (as determined under Rule 13d-3
promulgated under the Securities Exchange Act of 1934), in the aggregate, of
securities of the Company representing twenty percent (20%) or more of the total
combined voting power of the Company's then issued and outstanding voting
securities by any Person acting in concert as of the date of this Agreement;
provided, however, that the Board may at any time and from time to time and in
the sole discretion of the Board, as the case may be, increase the voting
security ownership percentage threshold of this item (C) to an amount not
exceeding forty percent (40%); or (D) the approval by the shareholders of the
Company of any plan or proposal for the complete liquidation or dissolution of
the Company or for the sale of all or substantially all of the assets of the
Company; or (ii) during any period of not more than two (2) consecutive years,
individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered into
agreement with the Company to effect a transaction described in clause (i))
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof.
<PAGE> 1
EXHIBIT 10(t)(i)
WOOLWORTH CORPORATION AND LOGO
Dale W. Hilpert
President
Chief Operating Officer
February 26, 1996
JOHN F. GILLESPIE
Title: Senior Vice President Human Resources
Base: $325,000 to be reviewed annually
Bonus: Threshold Target Max.
$37,500 $150,000 $262,000
Minimum Guaranteed Payment 4/97 $100,000
Stock Option: 30,000 shares per year (Non-qualified)
3 years - 90,000 total
3-Year Long Term
Plan: Threshold Target Max.
$122,550 $490,000 $946,000
Medical Spending
Account: $5,000 per year
LTD Monthly Max: $17,500
Life Insurance: 1x base salary
Personal Financial Planning: $10,000 year 1/$6,000 thereafter
<PAGE> 2
SERP: The Supplemental Cash Balance Plan provides
credit in addition to the Qualified Cash
Balance Plan subject to Certain non-compete
covenants. The "target" annual credit will
be 8% of combined salary and annual bonus.
The 8% target will be modified up or down
based on annual Company performance. The
minimum annual accrual will be 4% of
combined salary and annual bonus, regardless
of performance. The maximum annual accrual
will be 12% of salary and bonus.
Signing Bonus: $175,000
Severance: One (1) year's base salary
Starting Time: 30 days from signing or less
Other benefits: As previously provided
/s/ John F. Gillespie 3/4/96
- ------------------------------ ----------------------
John F. Gillespie (Date)
/s/ Dale W. Hilpert/pap February 26, 1996
- ---------------------------- ----------------------
(Date)
<PAGE> 1
EXHIBIT 10(u)
April 9, 1997
Mr. Andrew P. Hines
20 Saddle River Road
Far Hills, New Jersey 07931
Dear Mr. Hines:
This letter sets forth our understanding and agreement with respect to
your resignation as Senior Vice President and Chief Financial Officer of
Woolworth Corporation (the "Company"), and sets forth the arrangements to which
we have agreed.
1. Termination of Employment. You shall resign as Senior Vice President
and Chief Financial Officer of the Company, and from all other positions you
hold with the Company or any of its subsidiaries, as of April 30, 1997 (the
"Resignation Date"), and you shall execute and deliver a letter of resignation
in the form annexed hereto as Attachment A. Although you shall not be required
to appear regularly for work after the close of business on April 9, 1997, you
shall, as may reasonably be requested by the Company, cooperate in performing
the duties of the Company's Chief Financial Officer during the period prior to
the Resignation Date. From May 1, 1997 to January 31, 1998 (the "Termination
Date") you shall be on permanent leave of absence, whereupon your employment
with the Company shall terminate.
2. Payments. The Company shall make the following payments to you or, in
the event of your death prior to the date of any such payment, to your estate:
a. From the date hereof to January 31, 1998, the Company shall continue
to pay you your base salary, at the rate of $30,417 per month, in accordance
with its normal payroll practices and policies.
b. For each of the months of February, March, and April 1998, the
Company shall make a payment to you, no later than the 30th day of each month,
in the amount of $30,417 per month.
c. You shall receive a lump sum payment under the Company's Annual
Incentive Compensation Plan for 1996 in the amount of $188,067, payable on or
before April 30, 1997. You shall be eligible to receive a payment under the
Long-Term Incentive Compensation Plan for the 1994-96 plan period, which is now
estimated to be in the amount of $-0-, in accordance with the terms of that
plan. You shall not be entitled to receive any payment under the Annual
Incentive Compensation Plan for 1997 or under the Long-Term Incentive
Compensation Plan for any other period.
d. The Company shall promptly reimburse you for your legal fees incurred
in the negotiation and preparation of this agreement, up to a maximum amount of
$5,000.
<PAGE> 2
e. All amounts payable to you hereunder shall be subject to appropriate
withholding for federal, state, and local income taxes.
3. Stock Option and Stock Purchase Plans. All unexercised stock options
granted to you prior to the date hereof, and not exercised or cancelled on or
before the Termination Date, pursuant to the provisions of the 1986 Woolworth
Stock Option Plan or the 1995 Woolworth Stock Option and Award Plan, as
applicable, (the "Option Plans"), shall remain exercisable, in accordance with
the relevant provisions of the Option Plans. Attached hereto as Attachment B is
a schedule setting forth such stock options. Your "effective date of
termination" for purposes of the Option Plans shall be the Termination Date and
you shall be deemed to have terminated your employment without cause on that
date. In the event of your death prior to May 1, 1998, your estate shall have
the same rights to exercise such stock options, and for the same period, as you
would have had if you had not died.
Your right to participate in the 1994 Woolworth Employees Stock Purchase
Plan shall be in accordance with the terms of such plan and shall cease as of
the Termination Date.
4. Other Benefits.
a. Your participation in the medical, drug, dental, life insurance, and
voluntary accidental death and dismemberment plans for active employees of the
Company shall cease on the Termination Date, subject to your right to continue
coverage under the provisions of COBRA. Your participation in the long-term
disability plan shall cease on April 30, 1997. After April 30, 1997, you shall
not accrue any further benefits under the Woolworth Retirement Plan or the
Woolworth Excess Cash Balance Plan and you shall not participate in or receive
or accrue further benefits under the Woolworth 401(k) Plan. The Company will
continue payment of the premiums for the universal life insurance policy with
MetLife presently in place through the Termination Date, which policy is owned
by you (or, if it is subsequently determined that such policy is owned by the
Company, the Company will arrange to transfer the policy to you).
b. The Company shall provide to you, at its expense, until the earlier
of April 30, 1998 or such time as you shall have secured other full-time
employment, the services of an out-placement consultant of your choice, at a
total cost to the Company not to exceed $15,000.
5. Confidentiality; Non-Competition; Etc.
a. You agree that during any period during which payments are being made
to you hereunder, and thereafter, you shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge, or
data relating to the Company or its business (which shall be defined as all such
information, knowledge and data coming to your attention by virtue of your
employment at the Company except that which is otherwise public knowledge or
known within the Company's industry). During such period, you shall not, without
the prior written consent of the Company, unless compelled pursuant to the order
of a court or other body having jurisdiction over such matter and unless
required by lawful process or subpoena, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it.
<PAGE> 3
b. You agree that during the period from the date hereof to April 30,
1998, you will not
(i) participate, directly or indirectly, as an individual proprietor,
stockholder, officer, employee, director, consultant, independent contractor,
advisor, joint venturer, investor, lender, or in any capacity whatsoever (within
the United States of America, or in any country where the Company or any of its
subsidiaries does business) (A) in activities competitive with any business
conducted by Company or any subsidiary or affiliate thereof on the date hereof
or contained in the 1997 strategic plan of the Company, or (B) in activities
undertaken for or on behalf of any person listed in Attachment C, or any
subsidiary or affiliate thereof; provided, however, that such participation
shall not include (x) the mere ownership of not more than one percent (1%) of
the total outstanding stock of a publicly held company; or (y) any activity
engaged in with prior written approval of the Company; or
(ii) intentionally recruit, solicit, or induce any employee or employees
of the Company to terminate their employment with, or otherwise cease their
relationship with, the Company.
c. Both parties agree that they will not make, or cause to be made, any
statements, observations or opinions, or communicate any information (whether
oral or written) that disparages or is likely in any way to harm the reputations
of the other and, in the case of Mr. Hines, the reputation of the directors,
officers, employees, divisions and subsidiaries of the Company; provided,
however, that nothing herein will prohibit or in any way limit compliance by the
Company or you with applicable state and federal securities laws.
d. You acknowledge your obligations under the federal securities laws
not to trade in the Common Stock of other securities of the Company while in
possession of material, non-public information concerning the Company. Further,
you agree that between the date hereof and the Termination Date you will not
engage in any transactions in the Common Stock or other securities of the
Company during the seven trading days preceding and the three trading days
following the planned date of each quarterly release of the Company's earnings.
The Company shall notify you of the planned dates of such earnings releases at
the same time it notifies its executive officers.
e. If you violate the provisions of this Section , or if you fail to
perform the duties of the Company's Chief Financial Officer as specified in
Section 1, you will forfeit your entitlement to any payments pursuant to the
provisions of Sections 2(a), 2(b), or 2(d) and to the continuation of the
services specified in Section 4(b) and the Company shall not have any further
obligation under this letter agreement (provided, however, that any continuing
obligation of the Company under any stock option plan or benefit plan or program
by which you are then covered shall not thereby be affected). In addition, you
agree that the Company shall have such other rights, including but not limited
to injunctive relief, as may be provided under applicable law. You acknowledge
that a violation by you of the provisions of Sections 5(a), 5(b), or 5(c) would
cause irreparable injury to the Company, for which there would be no adequate
remedy at law. Notwithstanding the foregoing, if you violate the provisions set
forth in paragraph (b) of this section after January 31, 1998, the Company may
discontinue the payments specified in Section 2(b) hereof, but shall have no
other rights or remedies against you.
6. Release from Claims. a. In consideration of all of the foregoing,
you, for yourself and for your heirs, executors, administrators, successors, and
assigns, hereby release and forever discharge the Company and its subsidiaries
and affiliates, and their respective officers, directors, employees, or agents,
<PAGE> 4
from any and all actions, causes of action, claims, demands, and liabilities of
whatsoever nature arising out of, or in connection with, your employment or the
termination of your employment with the Company and any of its subsidiaries and
affiliates, or otherwise, whether known or unknown which you ever had, now have,
or may hereafter have. The foregoing shall include, but not be limited to, any
claim of employment discrimination under the Age Discrimination in Employment
Act of 1967, the New York State Human Rights Law or any other federal or state
labor relations law, equal employment opportunity law, or civil rights law,
regulation or order, and any claims under your employment agreement with the
Company dated July 3, 1995. Federal law requires that we advise you to consult
with an attorney of your choice (at your own cost). In addition, federal law
also provides that you have 21 days from the date of this letter to consider
your decision to agree to the terms of this agreement, including any release of
the Company and its subsidiaries, from liability as provided in this paragraph.
Furthermore, you have the right to change your mind at any time within one week
after signing. In addition, you hereby acknowledge that you have been given full
opportunity to review this letter, including sufficient opportunity for
appropriate review with any advisors selected by you. Notwithstanding any other
provision of this section to the contrary, this Section 6(a) shall not
constitute a release of any and all claims you may have against the Company (i)
for breach of any of the provisions of this letter agreement or (ii) that (X)
arise out of acts or omissions of the Company occurring after the date hereof
and (Y) do not arise out of, or in connection with, your employment or
termination of employment with the Company or any of its subsidiaries or
affiliates.
b. You understand and agree that the payments and benefits provided for
in this agreement shall be in lieu of any and all amounts that would be payable
to you by or on behalf of the Company, including but not limited to all amounts
that would be payable to you under the provisions of the employment agreement
between you and the Company dated July 3, 1995, and that no other amounts will
be paid to you by or on behalf of the Company for any reason whatsoever.
c. The Company acknowledges that, as of the date hereof, it is not aware
of any claim or cause of action that it has against you arising out of or in
connection with your employment with the
Company and any of its subsidiaries and affiliates, or otherwise.
7. Employment Agreement. The employment agreement between you and the
Company dated July 3, 1995 is hereby terminated, without further obligation by
either party to the other, and shall be of no further force or effect.
8. Mitigation. The Company agrees that you shall have no obligation to
mitigate damages hereunder by seeking other employment and that, other than as
provided for in Section 5(e), no reduction of any amounts paid or payable
pursuant to this agreement shall be made should you receive compensation or
benefits from other employment, nor shall any benefits to which you are entitled
by the terms hereof be reduced except as otherwise expressly provided for
herein.
9. Press Release. The Company shall, promptly following the acceptance
of your resignation as Senior Vice President and Chief Financial Officer, issue
a press release in the form of Attachment D and file a Form 8-K with the
Securities and Exchange Commission that has such press release as an exhibit.
Any other public disclosure concerning your resignation as the Company's Senior
Vice President and Chief Financial Officer will be in a form mutually agreed by
the parties, such agreement not to be unreasonably
<PAGE> 5
withheld; provided, however, that nothing herein will prohibit or in any way
limit compliance by the Company or you with applicable state and federal
securities laws.
10. Assignment. This agreement is binding upon and shall inure to the
benefit of the parties and their respective successors, heirs, and permitted
assigns. Neither this letter agreement, nor any of the rights arising hereunder,
may be assigned by either party, except that, upon written notice to you, the
Company may assign its rights and obligations hereunder to an affiliated or
successor corporation that agrees in writing to be bound hereby. You agree to
execute such additional documents as may be reasonably necessary to carry out
the provisions of this letter agreement.
11. Arbitration. Any controversy or claim arising out of or relating to
this agreement, or the breach thereof, shall be settled by arbitration in the
City of New York, in accordance with the rules of the American Arbitration
Association (the "AAA"). The decision of the arbitrator(s) shall be final and
binding on the parties hereto and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The costs
assessed by the AAA for arbitration shall be borne equally by both parties.
12. Miscellaneous. This letter agreement represents our total
understanding and agreement with regard to the subject matter hereof, and
supersedes any previous discussions or writings. This letter agreement may not
be amended or modified, and no term or provision hereof may be waived or
discharged, unless agreed to in writing by you and the Company. The invalidity
or unenforceability of any provision of this letter agreement shall not affect
the validity or enforceability of any other provision hereof.
The section headings herein are for convenience of reference only and
shall not affect or be utilized in the construction or interpretation of this
agreement.
This letter agreement may be executed in counterparts, each of which,
when so executed, shall be deemed an original and all of which, when taken
together, shall constitute one and the same agreement.
13. Governing Law. This letter agreement shall be governed by, and
construed under, the laws of the State of New York applicable to contracts made
between residents of such state and to be wholly performed in such state.
<PAGE> 6
If this letter agreement correctly sets forth our agreement, please
execute the duplicate copy of this letter agreement enclosed for that purpose,
and deliver it to us, at which time this letter agreement shall serve as a
binding and enforceable agreement between us.
Very truly yours,
WOOLWORTH CORPORATION
By: /s/ John F. Gillespie
------------------------------
Agreed:
/s/ Andrew P. Hines
- ---------------------------
Andrew P. Hines
Witnessed:
/s/ Gary M. Bahler
- ---------------------------
Date: 9 Apr 97
- ---------------------------
<PAGE> 7
ATTACHMENT A
April 9, 1997
Board of Directors
Woolworth Corporation
233 Broadway
New York, New York 10279
Gentlemen and Ladies:
I hereby resign my position as Senior Vice President and Chief Financial
Officer of Woolworth Corporation, and from any other position as an officer or
director that I may hold with Woolworth Corporation and or with any subsidiary
or affiliate thereof, effective at the close of business on April 30, 1997.
Yours truly,
Andrew P. Hines
<PAGE> 8
ATTACHMENT B
<TABLE>
<S> <C>
WOOLWORTH CORPORATION - working STOCK OPTION PERSONNEL SUMMARY AS OF 05/01/97
Andrew Hines ID: ###-##-####
20 Saddle Hill Road Country: USA
Far Hills, NJ 07931 Department: Corp
Termination date - 1/30/98
</TABLE>
<TABLE>
<CAPTION>
GRANT GRANT PLAN/
NUMBER DATE TYPE GRANTED PRICE EXERCISED VESTED CANCELLED UNVESTED OUTSTANDING EXERCISABLE
- ------ -------- ------ ------- --------- --------- ------- --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
003189 07/13/94 86/ISO 12,598 $15.8750 0 12,598 0 0 12,598 12,598
003190 07/13/94 86/NQ 2,402 $15.8750 0 2,402 0 0 2,402 2,402
003200 03/08/95 95/NQ 85,000 $15.3750 0 85,000 0 0 85,000 85,000
003535 04/10/96 95/ISO 19,047 $15.7500 0 6,349 12,698 0 6,349 6,349
003536 04/10/96 95/NQ 23,953 $15.7500 0 7,984 15,969 0 7,984 7,984
------- --------- --------- ------- --------- -------- ----------- -----------
TOTALS 143,000 ($15.5402) 0 114,333 28,667 0 114,333 114,333
</TABLE>
<PAGE> 9
ATTACHMENT C
Nike, Inc.
Reebok
adidas, U.S.A.
<PAGE> 10
ATTACHMENT D
CONTACT: Juris Pagrabs
Vice President
Draft 4/8 Investor Relations
(212) 553-7017
FOR IMMEDIATE RELEASE
WOOLWORTH CORPORATION ANNOUNCES RESIGNATION OF
ANDREW P. HINES, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
NEW YORK, New York, April 9, 1997 - Woolworth Corporation (NYSE:Z) announced
today that Andrew P. Hines, its Senior Vice President and Chief Financial
Officer, will resign effective April 30 to pursue other personal interests. The
Company expects to name a successor to Hines shortly.
"Andy Hines, hard work and expert guidance, during a particularly challenging
rebuilding period, contributed to the success of our financial restructuring,
which was completed a year earlier than originally planned," said Roger N.
Farah, Chairman of the Board and Chief Executive Officer. "We thank him for his
efforts and wish him well."
Woolworth Corporation operates nearly 8,000 stores in North America, Europe,
Australia, and Asia, with names such as Foot Locker, Northern Reflections,
Woolworth, After Thoughts, and Champs Sports.
<PAGE> 1
EXHIBIT 10(y)
CREDIT AGREEMENT
dated as of
April 9, 1997
among
Woolworth Corporation
The Banks Party Hereto
The Co-Agents Party Hereto
NationsBank, N.A.
as Documentation Agent
and
The Bank of New York,
as Administrative Agent, LC Agent
and Swingline Bank
------------------------------------
Syndicated by:
J.P. Morgan Securities Inc.,
as Arranger and Syndication Agent
<PAGE> 2
TABLE OF CONTENTS*
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.................................. 1
SECTION 1.02. Accounting Terms and
Determinations............................... 20
SECTION 1.03. Types of Borrowings.......................... 20
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend.......................... 21
SECTION 2.02. Notice of Committed Borrowing................ 21
SECTION 2.03. Money Market Borrowings...................... 22
SECTION 2.04. Notice to Banks; Funding of Loans............ 26
SECTION 2.05. Notes........................................ 27
SECTION 2.06. Maturity of Loans............................ 28
SECTION 2.07. Interest Rates............................... 28
SECTION 2.08. Method of Electing Interest Rates............ 32
SECTION 2.09. Facility Fees................................ 34
SECTION 2.10. Optional Termination or Reduction
of Commitments............................... 34
SECTION 2.11. Mandatory Termination of
Commitments.................................. 35
SECTION 2.12. Optional and Mandatory Prepayments........... 35
SECTION 2.13. General Provisions as to Payments............ 36
SECTION 2.14. Funding Losses............................... 37
SECTION 2.15. Computation of Interest and Fees............. 38
SECTION 2.16. Termination of Existing Credit
Agreement.................................... 38
SECTION 2.17. Letters of Credit............................ 38
SECTION 2.18. Swingline Loans.............................. 46
ARTICLE III
- --------
*The Table of Contents is not a part of this Agreement.
i
<PAGE> 3
Page
CONDITIONS
SECTION 3.01. Effectiveness of this Agreement;
Closing......................................... 48
SECTION 3.02. Extensions of Credit............................ 49
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power................ 50
SECTION 4.02. Corporate and Governmental
Authorization; No Contravention.............. 50
SECTION 4.03. Binding Effect............................... 51
SECTION 4.04. Financial Information........................ 51
SECTION 4.05. Litigation................................... 52
SECTION 4.06. Compliance with Laws......................... 52
SECTION 4.07. Compliance with ERISA........................ 52
SECTION 4.08. Environmental Matters........................ 52
SECTION 4.09. Taxes........................................ 53
SECTION 4.10. Subsidiaries................................. 53
SECTION 4.11. Not an Investment Company.................... 53
SECTION 4.12. Full Disclosure.............................. 53
ARTICLE V
COVENANTS
SECTION 5.01. Information.................................. 54
SECTION 5.02. Maintenance of Property; Insurance........... 57
SECTION 5.03. Conduct of Business and Maintenance
of Existence................................. 57
SECTION 5.04. Compliance with Laws......................... 58
SECTION 5.05. Inspection of Property, Books and
Records...................................... 58
SECTION 5.06. Negative Pledge.............................. 58
SECTION 5.07. Minimum Consolidated Tangible Net
Worth........................................ 59
SECTION 5.08. Leverage Ratio............................... 60
SECTION 5.09. Limitation on Debt of Subsidiaries........... 60
SECTION 5.10. Fixed Charge Coverage Ratio.................. 60
SECTION 5.11. Consolidations, Mergers and Sales
of Assets.................................... 60
SECTION 5.12. Use of Proceeds.............................. 61
ii
<PAGE> 4
Page
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default............................ 61
SECTION 6.02. Notice of Default............................ 63
SECTION 6.03. Cash Cover................................... 64
ARTICLE VII
THE ADMINISTRATIVE AGENT, DOCUMENTATION AGENT
AND CO-AGENTS
SECTION 7.01. Appointment and Authorization................ 64
SECTION 7.02. Agents and Affiliates........................ 64
SECTION 7.03. Obligations of the Co-Agents and
Documentation Agent.......................... 65
SECTION 7.04. Obligations of Administrative
Agent........................................ 65
SECTION 7.05. Consultation with Experts.................... 65
SECTION 7.06. Liability of Agents.......................... 65
SECTION 7.07. Indemnification.............................. 66
SECTION 7.08. Credit Decision.............................. 66
SECTION 7.09. Successor Administrative Agent............... 66
SECTION 7.10. Administrative Agent's Fees.................. 67
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair......................... 67
SECTION 8.02. Illegality................................... 68
SECTION 8.03. Increased Cost and Reduced Return............ 69
SECTION 8.04. Taxes........................................ 71
SECTION 8.05. Base Rate Loans Substituted for
Affected Fixed Rate Loans.................... 74
SECTION 8.06. Substitution of Bank......................... 74
ARTICLE IX
MISCELLANEOUS
iii
<PAGE> 5
Page
SECTION 9.01. Notices...................................... 75
SECTION 9.02. No Waivers................................... 76
SECTION 9.03. Expenses; Indemnification.................... 76
SECTION 9.04. Sharing of Set-Offs.......................... 76
SECTION 9.05. Amendments and Waivers....................... 77
SECTION 9.06. Successors and Assigns....................... 78
SECTION 9.07. No-Reliance on Margin Stock.................. 80
SECTION 9.08. Governing Law; Submission to
Jurisdiction................................. 80
SECTION 9.09. Counterparts................................. 81
SECTION 9.10. WAIVER OF JURY TRIAL......................... 81
Commitment Schedule
Pricing Schedule
Exhibit A - Form of Note
Exhibit B - Form of Swingline Note
Exhibit C - Form of Money Market Quote Request
Exhibit D - Form of Invitation for Money Market Quotes
Exhibit E - Form of Money Market Quote
Exhibit F - Form of Opinion of Special Counsel for the
Borrower
Exhibit G - Form of Opinion of General Counsel of the
Borrower
Exhibit H - Form of Opinion of Special Counsel for the
Arranger and Syndication Agent
Exhibit I - Form of Assignment and Assumption Agreement
iv
<PAGE> 6
CREDIT AGREEMENT
AGREEMENT dated as of April 9, 1997 among WOOLWORTH CORPORATION, the
BANKS party hereto, the CO-AGENTS party hereto, NATIONSBANK, N.A., as
Documentation Agent, and THE BANK OF NEW YORK, as LC Agent, Administrative Agent
and Swingline Bank.
WHEREAS the Borrower desires to obtain a five-year revolving credit
facility in the amount of $500,000,000; and
WHEREAS the Banks party hereto are willing to provide such credit
facility on the terms and conditions set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Adjusted London Interbank Offered Rate" has the meaning set forth
in Section 2.07(c).
"Administrative Agent" means The Bank of New York, in its capacity
as administrative agent for the Banks hereunder, and its successors in such
capacity.
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative Agent
and submitted to the Administrative Agent (with a copy to the Borrower) duly
completed by such Bank.
<PAGE> 7
"Affiliate" means, as to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such Person,
whether through the ownership of voting securities, by contract or otherwise.
"Agents" means the LC Agent, the Documentation Agent and the
Administrative Agent.
"Aggregate LC Exposure" means, at any time, the sum, without
duplication, of (i) the aggregate amount that is (or may thereafter become)
available for drawing under all Letters of Credit outstanding at such time plus
(ii) the aggregate unpaid amount of all Reimbursement Obligations outstanding at
such time.
"Annual Rent Expense" means, for purposes of calculations pursuant
to Section 5.10 as of the end of each Fiscal Year (the "Relevant Fiscal Year")
and the end of each of the first three Fiscal Quarters of the next Fiscal Year,
the total rent expense (net of sublease income) of the Borrower and its
Consolidated Subsidiaries for the Relevant Fiscal Year, calculated in the same
manner as the $693,000,000 amount shown as such total rent expense (net of
sublease income) for Fiscal Year 1995 under the heading "Leases" on page 29 of
the Borrower's 1995 Annual Report to its shareholders.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of
its Money Market Loans, its Money Market Lending Office.
"Arranger and Syndication Agent" means J.P. Morgan Securities Inc.,
in its capacity as arranger and syndication agent for the credit facility
provided hereunder.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Asset Sale" means any sale, lease or other disposition (including
any such transaction effected by way of merger or consolidation) of any asset by
the Borrower or any of its Subsidiaries, including without limitation any
sale-leaseback transaction, whether or not involving a capital lease, and any
sale of real estate, but excluding (i) dispositions of inventory, cash, cash
equivalents and other cash management investments and obsolete, unused or
unnecessary equipment, in each case in the ordinary course of business, (ii)
dispositions of assets to the Borrower or a Subsidiary and (iii) any transaction
involving a
2
<PAGE> 8
disposition of one or more assets for a consideration less than $250,000.
"Assignee" has the meaning set forth in Section 9.06(c).
"Available Net Cash Proceeds" means:
(i) with respect to any Asset Sale, an amount equal to the cash
proceeds received by the Borrower or any of its Subsidiaries from or in
respect of such Asset Sale (including any cash proceeds received as income
or other proceeds of any noncash proceeds of such Asset Sale), less (x)
any expenses reasonably incurred by such Person in respect of such Asset
Sale, (y) the amount of any Debt secured by a Lien on any asset disposed
of in such Asset Sale and discharged from the proceeds thereof and (z) any
taxes actually paid or to be payable by such Person (as estimated by a
senior financial or accounting officer of the Borrower, giving effect to
the overall tax position of the Borrower and its Subsidiaries) in respect
of such Asset Sale,
(ii) with respect to any Public Debt Issuance, an amount equal to the
cash proceeds received by the Borrower or any of its Subsidiaries in
respect thereof less any expenses reasonably incurred by them in respect
thereof, and
(iii) with respect to any Equity Issuance, an amount equal to the cash
proceeds received by the Borrower or any of its Subsidiaries in respect
thereof less any expenses reasonably incurred by them in respect thereof.
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective
successors. The term "Bank" does not include the Swingline Bank in its capacity
as such.
"Bank Parties" means the Banks, the Swingline Bank and the Agents.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
3
<PAGE> 9
"Base Rate Loan" means a Committed Loan which bears interest at the
Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of
Interest Rate Election or the provisions of Article VIII.
"Borrower" means Woolworth Corporation, a New York corporation, and
its successors.
"Borrower's 1995 Form 10-K" means the Borrower's annual report on
Form 10-K for 1995, as filed with the SEC pursuant to the Exchange Act.
"Borrower's Latest 10-Q" means the Borrower's quarterly report on
Form 10-Q for the quarter ended October 26, 1996, as filed with the SEC pursuant
to the Exchange Act.
"Borrowing" has the meaning set forth in Section 1.03.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan which bears interest at a CD Rate
pursuant to the applicable Notice of Committed Borrowing or Notice of Interest
Rate Election.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Rate" means a rate of interest determined pursuant to Section
2.07(b) on the basis of an Adjusted CD Rate.
"CD Reference Banks" means The Bank of New York, NationsBank and
Morgan.
"Change in Consolidated Net Working Investment" means, for any
Fiscal Quarter, the amount (which may be positive or negative) obtained by
subtracting Consolidated Net Working Investment at the beginning of such Fiscal
Quarter from Consolidated Net Working Investment at the end of such Fiscal
Quarter. For purposes of this definition, "Consolidated Net Working Investment"
means, at any time, the amount obtained by subtracting consolidated accounts
payable of the Borrower and its Consolidated Subsidiaries at such time from
consolidated merchandise inventories of the Borrower and its Consolidated
Subsidiaries at such time.
"Co-Agents" means the Banks designated as Co-Agents on the
signature pages hereof, in their respective
4
<PAGE> 10
capacities as Co-Agents in connection with the credit facility provided
hereunder.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the Commitment Schedule (or, in the case of an
Assignee, the portion of the transferor Bank's Commitment assigned to such
Assignee pursuant to Section 9.06(c)), in each case as such amount may be
reduced from time to time pursuant to Sections 2.10 and 2.11 or changed as a
result of an assignment pursuant to Section 8.06 or 9.06(c). The term
"Commitment" does not include the Swingline Commitment.
"Commitment Schedule" means the Commitment Schedule attached hereto.
"Committed Loan" means a loan made or to be made by a Bank pursuant
to Section 2.01 or Section 2.18(f); provided that, if any such loan or loans (or
portions thereof) are combined or subdivided pursuant to a Notice of Interest
Rate Election, the term "Committed Loan" shall refer to the combined principal
amount resulting from such combination or to each of the separate principal
amounts resulting from such subdivision, as the case may be.
"Consolidated Capital Expenditures" means, for any period, the gross
additions to property, plant and equipment and other capital expenditures of the
Borrower and its Consolidated Subsidiaries for such period.
"Consolidated Debt" means at any date the Debt of the Borrower and
its Consolidated Subsidiaries, determined on a consolidated basis as of such
date.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
its consolidated financial statements if such statements were prepared as of
such date in accordance with generally accepted accounting principles.
"Consolidated Tangible Net Worth" means at any date the consolidated
shareholders' equity of the Borrower and its Consolidated Subsidiaries as of
such date less their consolidated goodwill as of such date.
"Continuing Director" means at any date a member of the Borrower's
board of directors who was either (i) a member of such board twelve months prior
to such date or (ii) nominated for election to such board by at least two-thirds
of the Continuing Directors then in office.
5
<PAGE> 11
"Credit Exposure" means, as to any Bank at any time:
(i) the amount of its Commitment (whether used or unused) at such
time; or
(ii) if the Commitments have terminated in their entirety, the sum
of (x) its Outstanding Committed Amount and (y) the aggregate outstanding
principal amount of its Money Market Loans,
all determined at such time after giving effect to any prior assignments by or
to such Bank pursuant to Section 9.06(c).
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all non-contingent
obligations (and, for purposes of Section 5.06 and the definition of Material
Debt, all contingent obligations) of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (vi) all Debt secured by a Lien on any asset of such Person, whether
or not such Debt is otherwise an obligation of such Person, and (vii) all
Guarantees by such Person of Debt of another Person (each such Guarantee to
constitute Debt in an amount equal to the maximum amount of such other Person's
Debt Guaranteed thereby); provided that the term "Debt" shall not include
amounts borrowed against the cash value of life insurance policies.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Designated Litigation" means (i) the litigation described under the
heading "Legal Proceedings" in the Borrower's 1995 Form 10-K, (ii) subsequent
developments in the foregoing litigation and (iii) any governmental
investigation or subsequent litigation relating to the events and transactions
described in the report of the special committee of the Borrower's board of
directors filed (excluding certain exhibits and the appendix) with the SEC
6
<PAGE> 12
pursuant to the Exchange Act as an exhibit to the Borrower's report on Form 8K
dated May 18, 1994.
"Documentation Agent" means Nationsbank, N.A., in its capacity as
documentation agent for the credit facility provided hereunder.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to close; provided that, when used in Section 2.17 with respect to any
action to be taken by or with respect to the LC Agent, the term "Domestic
Business Day" shall not include any day on which commercial banks are authorized
by law to close in the jurisdiction where the LC Office of the LC Agent is
located.
"Domestic Lending Office" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Administrative Agent; provided that any Bank may
so designate separate Domestic Lending Offices for its Base Rate Loans, on the
one hand, and its CD Loans, on the other hand, in which case all references
herein to the Domestic Lending Office of such Bank shall be deemed to refer to
either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.07(b).
"EBIT" means, for any period, the sum of (i) the consolidated net
income of the Borrower and its Consolidated Subsidiaries for such period plus
(ii) to the extent deducted in determining such consolidated net income, the sum
of (A) Interest Expense, (B) income taxes, (C) the after-tax effect of any
extraordinary non-cash losses (or minus the after-tax effect of any
extraordinary non-cash gains), (D) the before-tax effect of any non-recurring
non-cash losses that are not classified as extraordinary losses (or minus the
before-tax effect of any non-recurring non-cash gains that are not classified as
extraordinary gains) and (E) any pre-tax loss (or minus any pre-tax gain) on the
sale of any ownership or leasehold interest in real property; provided that if
any extraordinary non-cash loss or non-recurring non-cash loss referred to in
clause (C) or (D) of this definition includes a provision for cash
7
<PAGE> 13
payments to be made in future periods, such cash payments shall be deducted in
calculating EBIT for the periods in which they are actually paid.
"Effective Date" means the date on which the Administrative Agent
shall have received the documents specified in or pursuant to Section 3.01.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, injunctions, permits, licenses and agreements relating to the
protection of the environment, to the effect of the environment on human health
or to emissions, discharges or releases of pollutants, contaminants, hazardous
or toxic substances or wastes into the environment including, without
limitation, ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, hazardous or toxic
substances or wastes or the clean-up or other remediation thereof.
"Equity Issuance" means any issuance of equity securities, or any
sale or other transfer of treasury stock, by the Borrower or any of its
Subsidiaries, other than equity securities issued to, or treasury stock sold or
transferred to, the Borrower or any of its Subsidiaries.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of
a controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under subsection (b), (c), (m) or
(o) of Section 414 of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its
8
<PAGE> 14
Euro-Dollar Lending Office by notice to the Borrower and the Administrative
Agent.
"Euro-Dollar Loan" means a Committed Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election.
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c).
"Euro-Dollar Rate" means a rate of interest determined pursuant to
Section 2.07(c) on the basis of an Adjusted London Interbank Offered Rate.
"Euro-Dollar Reference Banks" means the principal London offices of
The Bank of New York, NationsBank and Morgan.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.07(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Existing Banks" means the Banks that are parties to the Existing
Credit Agreement.
"Existing Credit Agreement" means the $1,000,000,000 Three-Year
Credit Agreement dated as of May 26, 1995, as heretofore amended, among the
Borrower, the Banks party thereto and the Agents, Arranging Agents, LC Agent,
Documentation Agent, Administrative Agent and Swingline Bank referred to
therein.
"Extension of Credit" means the making of a Loan or a Swingline Loan
or the issuance or extension of a Letter of Credit.
"Facility Fee Rate" has the meaning set forth in Section 2.09.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New
9
<PAGE> 15
York on the Domestic Business Day next succeeding such day, provided that (i) if
such day is not a Domestic Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Domestic Business
Day as so published on the next succeeding Domestic Business Day, and (ii) if no
such rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to The Bank of
New York on such day on such transactions as determined by the Administrative
Agent.
"Fiscal Quarter" means a fiscal quarter of the Borrower.
"Fiscal Year" means a fiscal year of the Borrower. A Fiscal Year is
identified by the calendar year which includes approximately eleven months of
such Fiscal Year (e.g., Fiscal Year 1995 refers to the Fiscal Year that ended on
January 27, 1996).
"Fixed Rate Loan" means any loan except a Loan that bears interest
at the Base Rate.
"Group of Loans" or "Group" means at any time a group of Committed
Loans consisting of (i) all Committed Loans which are Base Rate Loans at such
time, (ii) all Euro-Dollar Loans having the same Interest Period at such time or
(iii) all CD Loans having the same Interest Period at such time; provided that
if a Committed Loan of any particular Bank is converted to or made as a Base
Rate Loan pursuant to Section 8.02 or 8.05, such Loan shall be included in the
same Group or Groups of Loans from time to time as it would have been in if it
had not been so converted or made.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt (whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Debt of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part), provided that the term Guarantee shall not include
endorsements for collection or deposit, in either case in
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the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Immaterial Subsidiaries" means at any time one or more Subsidiaries
that in the aggregate did not account for (i) more than 5% of the consolidated
revenues or consolidated net income of the Borrower and its Consolidated
Subsidiaries for the then most recent Fiscal Year for which audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries have been
delivered to the Banks or (ii) more than 5% of the consolidated assets of the
Borrower and its Consolidated Subsidiaries at the end of such Fiscal Year.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Interest Expense" means, for any period, the consolidated interest
expense (net of interest income) of the Borrower and its Consolidated
Subsidiaries for such period, calculated in the same manner as the amounts shown
as "interest expense, net" under the heading "Interest expense" on page 16 of
the Borrower's 1995 Annual Report to its shareholders.
"Interest Period" means: (1) with respect to each Euro-Dollar Loan,
a period commencing on the date of borrowing specified in the applicable Notice
of Committed Borrowing or on the date specified in the applicable Notice of
Interest Rate Election and ending one, two, three or six months thereafter, as
the Borrower may elect in the applicable notice; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
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(2) with respect to each CD Loan, a period commencing on the date of borrowing
specified in the applicable Notice of Committed Borrowing or on the date
specified in the applicable Notice of Interest Rate Election and ending 30, 60,
90 or 180 days thereafter, as the Borrower may elect in the applicable notice;
provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Money Market LIBOR Loan, the period commencing on the
date such Loan is made and ending such whole number of months thereafter as the
Borrower may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market Absolute Rate Loan, the period commencing
on the date such Loan is made and ending such number of days thereafter (but not
less than 14 days) as the Borrower may elect in accordance with Section 2.03;
provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
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<PAGE> 18
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise.
"Invitation for Money Market Quotes" means an Invitation for Money
Market Quotes substantially in the form of Exhibit D hereto.
"LC Agent" means The Bank of New York in its capacities as letter of
credit agent in connection with the letter of credit facility provided hereunder
and as the issuer of the letters of credit issued or to be issued hereunder, and
its successors in such capacities.
"LC Exposure" means, with respect to any Bank at any time, an amount
equal to its Pro Rata Share of the Aggregate LC Exposure at such time.
"LC Indemnitees" has the meaning set forth in Section 2.17(m).
"LC Office" means, with respect to the LC Agent, the office at which
the LC Agent books a Letter of Credit.
"Letter of Credit" means a letter of credit issued or to be issued
hereunder by the LC Agent.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
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"Loan" means a Committed Loan or a Money Market Loan and "Loans"
means Committed Loans or Money Market Loans or any combination of the foregoing.
The term "Loan" does not include a Swingline Loan.
"London Interbank Offered Rate" has the meaning set forth in Section
2.07(c).
"Material Adverse Effect" means a material adverse effect on (i) the
business, operations or condition (financial or otherwise) of the Borrower and
its Subsidiaries taken as a whole or (ii) the ability of the Borrower to
perform, or of any Bank Party to enforce, any payment obligation of the Borrower
under this Agreement, the Notes and the Swingline Note.
"Material Assets" means at any time assets that accounted for more
than 5% of the aggregate book value of the consolidated assets of the Borrower
and its Consolidated Subsidiaries at the end of the then most recent Fiscal Year
for which audited consolidated financial statements of the Borrower and its
Consolidated Subsidiaries have been delivered to the Banks.
"Material Debt" means Debt (other than the Loans, Swingline Loans
and Reimbursement Obligations) of the Borrower and/or one or more of its
Subsidiaries, arising in one or more related or unrelated transactions, in an
aggregate principal or face amount exceeding $25,000,000.
"Material Plan" means at any time a Plan (or any two or more Plans,
each of which has Unfunded Liabilities) having aggregate Unfunded Liabilities in
excess of $25,000,000.
"Money Market Absolute Rate" has the meaning set forth in Section
2.03(d).
"Money Market Absolute Rate Loan" means a loan made or to be made by
a Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Borrower
and the Administrative Agent; provided that any Bank may from time to time by
notice to the Borrower and the Administrative Agent designate separate Money
Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and
its Money Market Absolute Rate Loans, on the other hand,
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<PAGE> 20
in which case all references herein to the Money Market Lending Office of such
Bank shall be deemed to refer to either or both of such offices, as the context
may require.
"Money Market LIBOR Loan" means a loan made or to be made by a Bank
pursuant to a LIBOR Auction (including such a loan bearing interest at the rate
applicable to Base Rate Loans by reason of clause (a) of Section 8.01).
"Money Market Loan" means a Money Market LIBOR Loan or a Money
Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03 substantially in the form of Exhibit E
hereto.
"Money Market Quote Request" means a Money Market Quote Request
substantially in the form of Exhibit C hereto.
"Morgan" means Morgan Guaranty Trust Company of New York.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"NationsBank" means NationsBank, N.A.
"Non-Trade LC Fee Rate" means a rate per annum determined in
accordance with the Pricing Schedule.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing or a
Notice of Money Market Borrowing.
"Notice of Committed Borrowing" has the meaning set forth in Section
2.02.
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"Notice of Interest Rate Election" has the meaning set forth in
Section 2.08.
"Notice of Money Market Borrowing" has the meaning set forth in
Section 2.03(f).
"Notice of Swingline Borrowing" has the meaning set forth in Section
2.18(b).
"Outstanding Committed Amount" means, with respect to any Bank at
any time, the sum of (i) the aggregate outstanding principal amount of its
Committed Loans, (ii) its Pro Rata Share of the aggregate outstanding principal
amount of the Swingline Loans (if any) and (iii) its LC Exposure, all determined
at such time after giving effect to any prior assignments by or to such Bank
pursuant to Section 8.06 or 9.06(c).
"Parent" means, with respect to any Bank Party, any Person
controlling such Bank Party.
"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Pricing Schedule" means the Pricing Schedule attached hereto.
"Prime Rate" means a rate of interest per annum equal to the rate of
interest publicly announced from time
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<PAGE> 22
to time in New York City by The Bank of New York as its prime commercial lending
rate, such rate to be adjusted automatically (without notice) on the effective
date of any change in such publicly announced rate.
"Pro Rata Share" means, with respect to any Bank at any time, a
fraction the numerator of which is the amount of such Bank's Commitment at such
time and the denominator of which is the Total Commitments at such time.
"Public Debt Issuance" means the issuance of any Debt by the
Borrower or any of its Subsidiaries for cash in a transaction that is required
to be registered with the SEC (or would have been required to be registered with
the SEC if such transaction had occurred within the United States).
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Reimbursement Obligation" means any obligation of the Borrower to
reimburse the LC Agent pursuant to Section 2.17 for amounts paid by the LC Agent
in respect of drawings under Letters of Credit, including any portion of any
such obligation to which a Bank has become subrogated pursuant to paragraph (1)
of Section 2.17(j).
"Requesting Banks" means at any time one or more Banks having at
least 15% of the aggregate amount of the Commitments.
"Required Banks" means at any time Banks having at least 66 2/3% of
the aggregate amount of the Credit Exposures at such time.
"Responsible Officer" means, with respect to the Borrower, its chief
operating officer, its chief financial officer, its general counsel, its
treasurer, any assistant treasurer or any other officer whose duties include the
administration of this Agreement.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" means, as to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a
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majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by such Person; unless otherwise
specified, "Subsidiary" means a Subsidiary of the Borrower.
"Swingline Bank" means The Bank of New York, in its capacity as the
Swingline Bank under the swingline facility described in Section 2.18, and its
successors in such capacity.
"Swingline Commitment" means the obligation of the Swingline Bank to
make Swingline Loans to the Borrower in an aggregate principal amount at any one
time outstanding not to exceed $50,000,000.
"Swingline Loan" means a loan made by the Swingline Bank pursuant to
Section 2.18(a).
"Swingline Loan Availability Period" means the period from and
including the Effective Date to but excluding the Swingline Maturity Date.
"Swingline Maturity Date" means the day that is 30 days before the
Termination Date.
"Swingline Note" means a promissory note of the Borrower,
substantially in the form of Exhibit B hereto, evidencing the obligation of the
Borrower to repay the Swingline Loans.
"Termination Date" means April 9, 2002, or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day.
"Total Borrowed Funds" means at any date the sum,
without duplication, of
(i) Consolidated Debt at such date,
(ii) the present value of operating lease commitments of the
Borrower and its Consolidated Subsidiaries, and
(iii) the present value of third-party operating lease
payments under guarantees entered into after the date hereof by the
Borrower and its Consolidated Subsidiaries.
The present value referred to in clause (ii) of this definition shall be deemed
to be $2,036,000,000 (being the "present value of operating lease commitments"
of the
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Borrower and its Consolidated Subsidiaries at January 25, 1997) until the first
officer's certificate to be delivered pursuant to Section 5.01(e) is delivered,
and thereafter shall be deemed to be the amount set forth as the present value
of operating lease commitments at the end of the applicable Fiscal Year in the
officer's certificate delivered most recently pursuant to Section 5.01(e). The
present value referred to in clause (iii) of this definition shall be deemed to
be zero until the first officer's certificate to be delivered pursuant to
Section 5.01(e) is delivered, and thereafter shall be deemed to be the amount
set forth as the present value of third-party operating lease payments
guaranteed by the Borrower and its Consolidated Subsidiaries at the end of the
applicable Fiscal Year in the officer's certificate delivered most recently
pursuant to Section 5.01(e).
"Total Capitalization" means at any date the sum of (i) Total
Borrowed Funds at such date and (ii) Consolidated Tangible Net Worth at such
date.
"Total Commitments" means, at any time, the aggregate amount of the
Commitments (whether used or unused) at such time.
"Total Usage" means, at any time, the sum of (i) the aggregate
outstanding principal amount of all Loans and Swingline Loans and (ii) the
Aggregate LC Exposure, all determined at such time.
"UCP" means the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500, as the
same may be revised or amended from time to time.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the
States thereof and the District of Columbia, but excluding its territories and
possessions.
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SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Banks; provided that if the Borrower notifies the Administrative Agent
that the Borrower wishes to amend any provision hereof to eliminate the effect
of any change in generally accepted accounting principles on the operation of
such provision (or if the Administrative Agent notifies the Borrower that the
Required Banks wish to amend any provision hereof for such purpose), then such
provision shall be applied on the basis of generally accepted accounting
principles in effect immediately before the relevant change in generally
accepted accounting principles became effective, until either such notice is
withdrawn or such provision is amended in a manner satisfactory to the Borrower
and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant to
Article II on the same date, all of which Loans are of the same type (subject to
Article VIII) and, except in the case of Base Rate Loans, have the same Interest
Period or initial Interest Period. Borrowings are classified for purposes of
this Agreement either by reference to the pricing of Loans comprising such
Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of
Euro-Dollar Loans) or by reference to the provisions of Article II under which
participation therein is determined (i.e., a "Committed Borrowing" is a
Borrowing under Section 2.01 in which all Banks participate in proportion to
their Commitments, while a "Money Market Borrowing" is a Borrowing under Section
2.03 in which the Bank participants are determined on the basis of their bids).
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ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. Each Bank severally agrees, on
the terms and conditions set forth in this Agreement, to make loans to the
Borrower pursuant to this Section from time to time on and after the Effective
Date and prior to the Termination Date; provided that, immediately after each
such loan is made (and after giving effect to any substantially concurrent
application of the proceeds thereof to repay outstanding Loans and Swingline
Loans):
(i) such Bank's Outstanding Committed Amount shall not exceed its
Commitment; and
(ii) the Total Usage shall not exceed the Total Commitments.
Each Borrowing under this Section shall be in an aggregate principal amount of
$25,000,000 or any larger multiple of $1,000,000; provided that (x) any such
Borrowing may be in an aggregate amount equal to the aggregate unused amount of
the Commitments and (y) if such Borrowing is made on the Swingline Maturity
Date, such Borrowing may be in the aggregate amount of the Swingline Loans
outstanding on such date. Each such Borrowing shall be made from the several
Banks ratably in proportion to their respective Commitments. Within the
foregoing limits, the Borrower may borrow under this Section , prepay Loans to
the extent permitted by Section 2.12, and reborrow under this Section at any
time prior to the Termination Date.
SECTION 2.02. Notice of Committed Borrowing. The Borrower shall give
the Administrative Agent notice (a "Notice of Committed Borrowing") not later
than 11:00 A.M. (New York City time) on (x) the date of each Base Rate
Borrowing, (y) the second Domestic Business Day before each CD Borrowing and (z)
the third Euro-Dollar Business Day before each Euro-Dollar Borrowing,
specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
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<PAGE> 27
(c) whether the Loans comprising such Borrowing are to bear interest
initially at the Base Rate, a CD Rate or a Euro-Dollar Rate, and
(d) if such Borrowing is a CD Borrowing or Euro Dollar Borrowing,
the duration of the initial Interest Period applicable thereto, subject to
the provisions of the definition of Interest Period.
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed Borrowings
pursuant to Section 2.01, the Borrower may, as set forth in this Section,
request the Banks to make offers to make Money Market Loans to the Borrower from
time to time prior to the Termination Date. The Banks may, but shall have no
obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section , it shall transmit to the
Administrative Agent by telex or facsimile transmission a Money Market Quote
Request so as to be received no later than 11:00 A.M. (New York City time) on
(x) the fifth Euro-Dollar Business Day prior to the date of Borrowing proposed
therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next
preceding the date of Borrowing proposed therein, in the case of an Absolute
Rate Auction (or, in either case, such other time or date as the Borrower and
the Administrative Agent shall have mutually agreed and shall have notified to
the Banks not later than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which such change is to be
effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$25,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period, and
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(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Administrative Agent may agree) of any
other Money Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a
Money Market Quote Request, the Administrative Agent shall send to the Banks by
telex or facsimile transmission an Invitation for Money Market Quotes, which
shall constitute an invitation by the Borrower to each Bank to submit Money
Market Quotes offering to make the Money Market Loans to which such Money Market
Quote Request relates in accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank
may submit a Money Market Quote containing an offer or offers to make Money
Market Loans in response to any Invitation for Money Market Quotes. Each Money
Market Quote must comply with the requirements of this subsection (d) and must
be submitted to the Administrative Agent by telex or facsimile transmission at
its offices specified in or pursuant to Section 9.01 not later than (x) 2:00
P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New
York City time) on the proposed date of Borrowing, in the case of an Absolute
Rate Auction (or, in either case, such other time or date as the Borrower and
the Administrative Agent shall have mutually agreed and shall have notified to
the Banks not later than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which such change is to be
effective); provided that Money Market Quotes submitted by the Administrative
Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank
may be submitted, and may only be submitted, if the Administrative Agent or such
affiliate notifies the Borrower of the terms of the offer or offers contained
therein not later than (x) one hour prior to the deadline for the other Banks,
in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the
other Banks, in the case of an Absolute Rate Auction. Subject to Articles III
and VI, any Money Market Quote so made shall be irrevocable except with the
written consent of the Administrative Agent given on the instructions of the
Borrower.
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(ii) Each Money Market Quote shall be in substantially the form of
Exhibit E hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each
such offer is being made, which principal amount (w) may be greater than
or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or
a larger multiple of $1,000,000, (y) may not exceed the principal amount
of Money Market Loans for which offers were requested and (z) may be
subject to an aggregate limitation as to the principal amount of Money
Market Loans for which offers being made by such quoting Bank may be
accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest
per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit E hereto or does
not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language, except an
aggregate limitation permitted by subsection (d)(ii)(B)(z);
(C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Money Market Quotes; or
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(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Administrative Agent shall promptly
notify the Borrower of the terms (x) of any Money Market Quote submitted by a
Bank that is in accordance with subsection (d) and (y) of any Money Market Quote
that amends, modifies or is otherwise inconsistent with a previous Money Market
Quote submitted by such Bank with respect to the same Money Market Quote
Request. Any such subsequent Money Market Quote shall be disregarded by the
Administrative Agent unless such subsequent Money Market Quote is submitted
solely to correct a manifest error in such former Money Market Quote. The
Administrative Agent's notice to the Borrower shall specify (A) the aggregate
principal amount of Money Market Loans for which offers have been received for
each Interest Period specified in the related Money Market Quote Request, (B)
the respective principal amounts and Money Market Margins or Money Market
Absolute Rates, as the case may be, so offered and (C) if applicable,
limitations on the aggregate principal amount of Money Market Loans for which
offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:30 A.M.
(New York City time) on (x) the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Borrower and the Administrative Agent shall have
mutually agreed and shall have notified to the Banks not later than the date of
the Money Market Quote Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective), the Borrower shall notify the
Administrative Agent of its acceptance or non-acceptance of the offers so
notified to it pursuant to subsection (e). In the case of acceptance, such
notice (a "Notice of Money Market Borrowing") shall specify the aggregate
principal amount of offers for each Interest Period that are accepted. The
Borrower may accept any Money Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market Borrowing
may not exceed the applicable amount set forth in the related Money Market
Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$25,000,000 or a larger multiple of $1,000,000,
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(iii) acceptance of offers may only be made on the basis of ascending
Money Market Margins or Money Market Absolute Rates, as the case may be,
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement, and
(v) immediately after such Money Market Borrowing is made (and after
giving effect to any substantially concurrent application of the proceeds
thereof to repay outstanding Loans and Swingline Loans), the Total Usage
shall not exceed the Total Commitments.
(g) Allocation by Administrative Agent. If offers are made by two or
more Banks with the same Money Market Margins or Money Market Absolute Rates, as
the case may be, for a greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related Interest Period, the
principal amount of Money Market Loans in respect of which such offers are
accepted shall be allocated by the Administrative Agent among such Banks as
nearly as possible (in multiples of $1,000,000, as the Administrative Agent may
deem appropriate) in proportion to the aggregate principal amounts of such
offers. Determinations by the Administrative Agent of the amounts of Money
Market Loans shall be conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Administrative Agent
shall promptly notify each Bank of the contents thereof and of such Bank's share
(if any) of such Borrowing and such Notice of Borrowing shall not thereafter be
revocable by the Borrower.
(b) Not later than 1:00 P.M. (New York City time) on the date of
each Borrowing, each Bank participating therein shall make available its share
of such Borrowing, in Federal or other funds immediately available in New York
City, to the Administrative Agent at its address referred to in Section 9.01.
Unless the Administrative Agent determines that any applicable condition
specified in Article III has not been satisfied (which determination may, in the
case of Section 3.02 (c), be based in part on information supplied by the LC
Agent on the date of such Borrowing as to the Aggregate LC Exposure on such
date), the Administrative Agent shall (i) apply the funds so received from the
Banks to repay all Swingline Loans (if any) then outstanding,
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together with interest accrued thereon and any other associated expenses, and
(ii) make the remainder of such funds available to the Borrower not later than
2:00 P.M. (New York City time) at the Administrative Agent's aforesaid address.
(c) Unless the Administrative Agent shall have received notice from
a Bank prior to the date of any Borrowing that such Bank will not make available
to the Administrative Agent such Bank's share of such Borrowing, the
Administrative Agent may assume that such Bank has made such share available to
the Administrative Agent on the date of such Borrowing in accordance with
subsection (b) of this Section 2.04 and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such share available to the Administrative Agent, such Bank and the Borrower
severally agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate
per annum equal to the higher of the Federal Funds Rate and the interest rate
applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank,
the Federal Funds Rate. If such Bank shall repay to the Administrative Agent
such corresponding amount, such amount so repaid shall constitute such Bank's
Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.05. Notes. (a) The Loans of each Bank shall be evidenced
by a single Note payable to the order of such Bank for the account of its
Applicable Lending Office in an amount equal to the aggregate unpaid principal
amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Administrative
Agent, request that its Loans of a particular type be evidenced by a separate
Note in an amount equal to the aggregate unpaid principal amount of such Loans.
Each such Note shall be in substantially the form of Exhibit A hereto with
appropriate modifications to reflect the fact that it evidences solely Loans of
the relevant type. Each reference in this Agreement to the "Note" of such Bank
shall be deemed to refer to and include any or all of such Notes, as the context
may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b),
the Administrative Agent shall forward such Note to such Bank. Each Bank shall
record the date and
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amount of each Loan made by it and the date and amount of each payment of
principal made by the Borrower with respect thereto, and may, if such Bank so
elects in connection with any transfer or enforcement of its Note, endorse on
the schedule forming a part thereof appropriate notations to evidence the
foregoing information with respect to each such Loan then outstanding; provided
that neither the failure by any Bank to make any such recordation or
endorsement, nor any error therein, shall affect the obligations of the Borrower
hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the
Borrower so to endorse its Note and to attach to and make a part of its Note a
continuation of any such schedule as and when required.
SECTION 2.06. Maturity of Loans. (a) Each Committed Loan shall
mature, and the principal amount thereof shall be due and payable, on the
Termination Date.
(b) Each Money Market Loan included in any Money Market Borrowing
shall mature and the principal amount thereof shall be due and payable, on the
last day of the Interest Period applicable to such Borrowing.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due or is converted, at a rate per annum
equal to the Base Rate for such day. Subject to Section 2.06, such interest
shall be payable for each calendar month in arrears on the last Domestic
Business Day thereof and, with respect to the principal amount of any Base Rate
Loan converted to a CD Loan or a Euro-Dollar Loan, on the date such principal
amount is so converted. Any overdue principal of or interest on any Base Rate
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the Base Rate for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period; provided that if any CD
Loan or any portion thereof shall, as a result of clause (2)(b) of the
definition of Interest Period, have an Interest Period of less than 30 days,
such portion shall bear interest for each day during such Interest Period at the
rate applicable to Base Rate Loans for such day. Such interest shall be payable
for each Interest Period on the last day thereof and, if such Interest Period is
longer than 90 days, 90 days after the
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first day thereof. Any overdue principal of or interest on any CD Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 2% plus the higher of (i) the sum of the CD Margin for such
day plus the Adjusted CD Rate applicable to such Loan immediately before such
payment became due and (ii) the Base Rate for such day.
"CD Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest Period means a
rate per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
----------
* The amount in brackets being rounded upward, if necessary, to the next
higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates
per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two or more New York
certificate of deposit dealers of recognized standing for the purchase at face
value from each CD Reference Bank of its certificates of deposit in an amount
comparable to the principal amount of the CD Loan of such CD Reference Bank to
which such Interest Period applies and having a maturity comparable to such
Interest Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is 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
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York
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<PAGE> 35
City with deposits exceeding five billion dollars in respect of new non-personal
time deposits in dollars in New York City having a maturity comparable to the
related Interest Period and in an amount of $100,000 or more. The Adjusted CD
Rate shall be adjusted automatically on and as of the effective date of any
change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.4(a) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the United
States. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the Adjusted London Interbank Offered Rate applicable to such Interest
Period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, three months
after the first day thereof.
"Euro-Dollar Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar
Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which deposits in dollars are
offered to each of the Euro-Dollar Reference Banks in the London interbank
market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days
before the first day of such Interest Period in an amount approximately equal to
the principal amount of the Euro-Dollar Loan of such Euro-Dollar
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<PAGE> 36
Reference Bank to which such Interest Period is to apply and for a period of
time comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is 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 for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for
such day plus the quotient obtained (rounded upward, if necessary, to the next
higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary,
to the next higher 1/16 of 1%) of the respective rates per annum at which one
day (or, if such amount due remains unpaid more than three Euro-Dollar Business
Days, then for such other period of time not longer than three months as the
Administrative Agent may select) deposits in dollars in an amount approximately
equal to such overdue payment due to each of the Euro-Dollar Reference Banks are
offered to such Euro-Dollar Reference Bank in the London interbank market for
the applicable period determined as provided above by (y) 1.00 minus the
Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a)
or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2%
plus the Base Rate for such day) and (ii) the sum of 2% plus the Euro-Dollar
Margin for such day plus the Adjusted London Interbank Offered Rate applicable
to such Loan immediately before such payment became due.
(e) Subject to Section 8.01, each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in accordance with Section
2.07(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar
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Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making
such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan
shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the Money
Market Absolute Rate quoted by the Bank making such Loan in accordance with
Section 2.03. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof. Any overdue principal of
or interest on any Money Market Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the sum of 2% plus the Base
Rate for such day.
(f) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give prompt
notice to the Borrower and the participating Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated by this Section . If any
Reference Bank does not furnish a timely quotation, the Administrative Agent
shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if none of
such quotations is available on a timely basis, the provisions of Section 8.01
shall apply.
SECTION 2.08. Method of Electing Interest Rates. (a) The Loans
included in each Committed Borrowing shall bear interest initially at the type
of rate specified by the Borrower in the applicable Notice of Committed
Borrowing. Thereafter, the Borrower may from time to time elect to change or
continue the type of interest rate borne by each Group of Loans (subject in each
case to the provisions of Article VIII), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to CD Loans as of any Domestic Business Day or to
Euro-Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect to convert
such Loans to Base Rate Loans or Euro-Dollar Loans or elect to continue
such Loans as CD Loans for an additional Interest Period, in each case
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effective on the last day of the then current Interest Period applicable
to such Loans; or
(iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or CD Loans or elect to continue
such Loans as Euro-Dollar Loans for an additional Interest Period, in each
case effective on the last day of the then current Interest Period
applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Administrative Agent at least three Euro-Dollar Business
Days before the conversion or continuation selected in such notice is to be
effective (unless the relevant Loans are to be converted from Domestic Loans to
Domestic Loans of the other type or continued as Domestic Loans of the same type
for an additional Interest Period, in which case such notice shall be delivered
to the Administrative Agent at least three Domestic Business Days before such
conversion or continuation is to be effective). A Notice of Interest Rate
Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such portion
is allocated ratably among the Loans comprising such Group and (ii) the portion
to which such notice applies, and the remaining portion to which it does not
apply, are each $25,000,000 or any larger multiple of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in
such notice is to be effective, which shall comply with the applicable
clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the
new type of Loans and, if such new Loans are CD Loans or Euro-Dollar
Loans, the duration of the initial Interest Period applicable thereto; and
(iv) if such Loans are to be continued as CD Loans or Euro-Dollar
Loans for an additional Interest Period, the duration of such additional
Interest Period.
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Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Administrative Agent shall
promptly notify each Bank of the contents thereof and such notice shall not
thereafter be revocable by the Borrower. If the Borrower fails to deliver a
timely Notice of Interest Rate Election to the Administrative Agent for any
Group of CD Loans or Euro-Dollar Loans, such Loans shall be converted into Base
Rate Loans on the last day of the then current Interest Period applicable
thereto.
SECTION 2.09. Facility Fees. The Borrower shall pay to the
Administrative Agent for the account of each Bank a facility fee, calculated for
each day at the Facility Fee Rate for such day, on the amount of such Bank's
Credit Exposure on such day. Such facility fees shall accrue for each day from
and including the Effective Date to but excluding the day on which the Credit
Exposures are reduced to zero and shall be payable quarterly in arrears on each
September 27, December 27, March 27 and June 27 and on the day on which the
Credit Exposures are reduced to zero.
"Facility Fee Rate" means a rate per annum determined daily in
accordance with the Pricing Schedule.
SECTION 2.10. Optional Termination or Reduction of Commitments.(a)
The Borrower may, without premium or penalty, upon at least three Domestic
Business Days' notice to the Administrative Agent, (i) terminate the Commitments
at any time, if no Bank has an Outstanding Committed Amount at such time or (ii)
ratably reduce the Commitments from time to time, in each case by an aggregate
amount of at least $25,000,000; provided that immediately after such reduction:
(x) no Bank's Outstanding Committed Amount shall exceed its
Commitment as so reduced; and
(y) the Total Usage shall not exceed the Total Commitments.
Upon any such termination or reduction of the Commitments, the Administrative
Agent shall promptly notify each Bank of such termination or reduction.
(b) The Borrower may, upon at least three Domestic Business Days'
notice to the Administrative Agent,
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terminate the Swingline Commitment at any time, if no Swingline Loans are
outstanding at such time.
(c) If the Borrower wishes to replace this Agreement with another
credit agreement at any time, the Borrower may, on the date when such other
credit agreement becomes effective, terminate the Commitments hereunder and
prepay any and all Committed Loans and Swingline Loans then outstanding
hereunder; provided that:
(i) the Borrower notifies each Bank as to the possibility of such
termination and such prepayment (if any) at least three Euro-Dollar
Business Days prior thereto;
(ii) the Borrower gives definitive notice of such termination and
such prepayment (if any) to the Administrative Agent before 10:00 A.M.
(New York City time) on the date of such termination;
(iii) all Committed Loans, Swingline Loans and Reimbursement
Obligations outstanding on the date of such termination (together with
accrued interest thereon) are paid in full on such date;
(iv) in connection with any prepayment of Committed Loans or
Swingline Loans on such date, the Borrower complies with the requirements
of subsections (a) and (b) of Section 2.12, Section 2.14 and subsection
(d) of Section 2.18 in all respects except the timing of definitive notice
of such prepayment; and
(v) no Letter of Credit issued hereunder remains outstanding after
the date of such termination unless the LC Agent shall have agreed to
allow such Letter of Credit to remain outstanding after the Commitments
(and the Banks' participations in such Letter of Credit) terminate.
SECTION 2.11. Mandatory Termination of Commitments. (a) The
Commitments shall terminate on the Termination Date and any Committed Loans then
outstanding (together with accrued interest thereon) shall be due and payable on
such date.
(b) The Swingline Commitment shall terminate on the Swingline
Maturity Date and any Swingline Loans then outstanding (together with accrued
interest thereon) shall be due and payable on such date.
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SECTION 2.12. Optional and Mandatory Prepayments. (a) The Borrower
may upon at least one Domestic Business Day's notice to the Administrative
Agent, prepay the Base Rate Loans (or any Money Market Borrowing bearing
interest at the Base Rate by reason of clause (a) of Section 8.01) in whole at
any time, or from time to time in part in amounts aggregating $10,000,000 or any
larger multiple of $1,000,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment. Each such
optional prepayment shall be applied to prepay ratably the Base Rate Loans of
the several Banks (or the Money Market Loans included in such Money Market
Borrowing).
(b) Subject to Section 2.14, the Borrower may, upon at least two
Domestic Business Days' notice to the Administrative Agent, in the case of a
Group of CD Loans or upon at least three Euro-Dollar Business Days' notice to
the Administrative Agent, in the case of a Group of Euro-Dollar Loans, prepay
the Loans comprising such a Group, in whole at any time, or from time to time in
part in amounts aggregating $10,000,000 or any larger multiple of $1,000,000, by
paying the principal amount to be prepaid together with accrued interest thereon
to the date of prepayment. Each such optional prepayment shall be applied to
prepay ratably the Loans of the several Banks included in such Group.
(c) In connection with any substitution of Banks pursuant to Section
8.06, the Borrower may prepay the Loans of the Bank being replaced, as provided
in clause (ii) of Section 8.06.
(d) Except as provided in Section 2.12(a), the Borrower may not
prepay all or any portion of the principal amount of any Money Market Loan prior
to the maturity thereof.
(e) Upon receipt of a notice of prepayment pursuant to this Section,
the Administrative Agent shall promptly notify each Bank of the contents thereof
and of such Bank's ratable share (if any) of such prepayment and such notice
shall not thereafter be revocable by the Borrower.
SECTION 2.13. General Provisions as to Payments. (a) The Borrower
shall make (i) each payment of principal
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of, and interest on, the Loans and of fees hereunder, not later than 12:00 Noon
(New York City time) on the date when due, in Federal or other funds immediately
available in New York City, to the Administrative Agent at its address referred
to in Section 9.01 and (ii) each payment of Reimbursement Obligations and any
other amounts payable in connection with the Letters of Credit in accordance
with the provisions of Section 2.17. The Administrative Agent will promptly
distribute to each Bank its ratable share of each such payment received by the
Administrative Agent for the account of the Banks. Whenever any payment of
principal of, or interest on, the Domestic Loans or Swingline Loans or of fees
or of Reimbursement Obligations shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, any Euro-Dollar Loans or Money Market LIBOR Loan shall be due on a
day which is not a Euro-Dollar Business Day, the date for payment thereof shall
be extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the date
for payment thereof shall be the next preceding Euro-Dollar Business Day.
Whenever any payment of principal of, or interest on, any Money Market Absolute
Rate Loan shall be due on a day which is not a Euro-Dollar Business Day, the
date for payment thereof shall be extended to the next succeeding Euro-Dollar
Business Day. If the date for any payment of principal or any Reimbursement
Obligation is extended by operation of law or otherwise, interest thereon shall
be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Banks
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent that
the Borrower shall not have so made such payment, each Bank shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Administrative Agent, at the Federal Funds Rate.
SECTION 2.14. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any such Loan is converted to a
Base Rate Loan
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(pursuant to Article II, VI or VIII or otherwise) on any day other than the last
day of an Interest Period applicable thereto, or the last day of an applicable
period fixed pursuant to Section 2.07(d), or if the Borrower fails to borrow or
prepay any Fixed Rate Loans or fails to continue any CD Loan or Euro-Dollar
Loans for an additional Interest Period or fails to convert any outstanding
Loans to CD Loans or Euro-Dollar Loans, in each case after notice of such
borrowing, prepayment, continuation or conversion has been given to any Bank in
accordance with Section 2.04(a), 2.08(c) or 2.12(e), the Borrower shall
reimburse each Bank within 15 days after demand for any resulting loss or
expense incurred by it (or by an existing or prospective Participant in the
related Loan), including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin for the period after any such payment or conversion or failure to borrow,
prepay, continue or convert, provided that such Bank shall have delivered to the
Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
SECTION 2.15. Computation of Interest and Fees. Interest based on
the Prime Rate hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
facility fees shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed (including the first day but excluding the
last day).
SECTION 2.16. Termination of Existing Credit Agreement. On the
Effective Date the commitments of the Existing Banks under the Existing Credit
Agreement shall terminate and the Borrower shall pay in full the principal of
and accrued interest on all loans then outstanding thereunder and all facility
fees accrued thereunder to but excluding the Effective Date.
SECTION 2.17. Letters of Credit.
(a) Issuance of Letters of Credit. The LC Agent agrees, on the terms
and conditions set forth in this Agreement, to issue Letters of Credit for the
account of the Borrower from time to time during the period from and including
the Effective Date to but excluding the date that is 30 days before the
Termination Date; provided that, immediately after each such Letter of Credit is
issued:
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(i) the Aggregate LC Exposure shall not exceed $200,000,000 (of
which the aggregate amount attributable to standby Letters of Credit will
not exceed $75,000,000);
(ii) in the case of each Bank, its Outstanding Committed Amount
shall not exceed its Commitment; and
(iii) the Total Usage shall not exceed the Total Commitments.
Upon the issuance by the LC Agent of each Letter of Credit pursuant to this
subsection (a), the LC Agent shall be deemed, without further action by any
party hereto, to have sold to each Bank and each Bank shall be deemed, without
further action by any party hereto, to have purchased from the LC Agent, a
participation in such Letter of Credit, on the terms set forth in this Section ,
equal to such Bank's Pro Rata Share thereof.
(b) Expiry Dates. No Letter of Credit shall have an expiry date
later than the fifth Domestic Business Day prior to the Termination Date.
Subject to the preceding sentence:
(i) each Letter of Credit shall, when issued, have an expiry date on
or before the first anniversary of the date on which it is issued; and
(ii) the expiry date of any Letter of Credit may, at the request of
the Borrower, be extended from time to time for a period not exceeding one
year so long as the LC Agent agrees to so extend such Letter of Credit
(or, in the case of an "evergreen" Letter of Credit, its right to give a
notice to prevent the extension thereof expires) no earlier than three
months before the then existing expiry date thereof.
(c) Notice of Proposed Issuance. The Borrower shall give the LC Agent
and the Administrative Agent at least one Domestic Business Day's prior notice
specifying the date each Letter of Credit is to be issued and describing the
proposed terms of such Letter of Credit and the nature of the transactions
proposed to be supported thereby.
(d) Conditions to Issuance. The LC Agent shall not issue any Letter
of Credit unless:
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(i) such Letter of Credit shall be satisfactory in form and
reasonably satisfactory in substance to the LC Agent,
(ii) the Borrower shall have executed and delivered such other
instruments and agreements relating to such Letter of Credit as the LC
Agent shall have reasonably requested,
(iii) the LC Agent shall have determined (based on information
supplied by the Administrative Agent on the date of such issuance as to
the amounts specified in subsection (a) of this Section other than the
Aggregate LC Exposure) that the limitations specified in subsection (a) of
this Section will not be exceeded immediately after such Letter of Credit
is issued, and
(iv) the LC Agent shall not have been notified in writing by the
Borrower, the Administrative Agent or the Required Banks that any
condition specified in clause (c), (d) or (e) of Section 3.02 is not
satisfied on the date such Letter of Credit is to be issued.
(e) Notice of Proposed Extensions of Expiry Dates. The LC Agent
shall give the Administrative Agent at least one Domestic Business Day's notice
prior to extending the expiry date of any Letter of Credit (or, in the case of
an "evergreen" Letter of Credit, allowing it to be extended), specifying (i) the
date on which such extension is to be made and (ii) the date to which such
expiry date is to be so extended. The LC Agent shall not extend (or allow the
extension of) the expiry date of such Letter of Credit if it shall have been
notified by the Borrower or the Administrative Agent (at the request of the
Required Banks) that any condition specified in clause (d) or (e) of Section
3.02 is not satisfied on the date of such extension (or, in the case of an
"evergreen" Letter of Credit, the day when the LC Agent's right to give a notice
preventing such extension expires).
(f) Notice of Actual Issuances, Extensions and Amounts Available for
Drawing. Promptly upon issuing any Letter of Credit or extending the expiry date
of any Letter of Credit (or allowing the expiry date of any "evergreen" Letter
of Credit to be extended), the LC Agent will notify the Administrative Agent of
the date of such Letter of Credit, the amount thereof, the beneficiary or
beneficiaries thereof and the expiry date or extended expiry date thereof.
Within three Domestic Business Days after the end of each calendar month, the LC
Agent shall notify the Administrative Agent and each Bank of (i) the daily
average aggregate
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amount available for drawings (whether or not conditions for drawing thereunder
have been satisfied) under all Letters of Credit outstanding during such month,
(ii) the aggregate amount of letter of credit fees accrued during such month
pursuant to subsection (g) of this Section , (iii) each Bank's Pro Rata Share of
such accrued letter of credit fees and (iv) the aggregate undrawn amount of all
Letters of Credit outstanding at the end of such month.
(g) Fees. The Borrower shall pay to the LC Agent, for the account of
the Banks ratably in accordance with their respective Pro Rata Shares, a letter
of credit fee for each day (i) at the Non-Trade LC Fee Rate on the aggregate
amount available for drawings (whether or not conditions for drawing thereunder
have been satisfied) under all Letters of Credit (other than trade Letters of
Credit) outstanding on such day and (ii) at a rate per annum equal to the
Non-Trade LC Fee Rate less 0.125% on the aggregate amount available for drawings
(whether or not conditions for drawing thereunder have been satisfied) under all
trade Letters of Credit outstanding on such day. Such letter of credit fee shall
be payable quarterly in arrears on the last Domestic Business Day of each
calendar quarter and on the fifth Domestic Business Day before the Termination
Date (or any earlier date on which the Commitments shall have terminated in
their entirety and no Letters of Credit are outstanding). Promptly upon
receiving any payment of such fee, the LC Agent will distribute to each Bank its
Pro Rata Share thereof. In addition, the Borrower shall pay to the LC Agent for
its own account fronting fees and reasonable expenses in the amounts and at the
times agreed between the Borrower and the LC Agent.
(h) Drawings. Upon receipt from the beneficiary of any Letter of
Credit of a demand for payment under such Letter of Credit, the LC Agent shall
determine in accordance with the terms of such Letter of Credit whether such
demand for payment should be honored. If the LC Agent determines that any such
demand for payment should be honored, the LC Agent shall make available to such
beneficiary in accordance with the terms of such Letter of Credit the amount of
the drawing under such Letter of Credit. The LC Agent shall thereupon notify the
Borrower of the amount of such drawing paid by it.
(i) Reimbursement and Other Payments by the Borrower. (1) If any
amount is drawn under any Letter of Credit, the Borrower irrevocably and
unconditionally agrees to reimburse the LC Agent for all amounts paid by the LC
Agent upon such drawing, together with any and all reasonable charges and
expenses which the LC Agent may pay
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or incur relative to such drawing and interest on the amount drawn at the
Federal Funds Rate for each day from and including the date such amount is drawn
to but excluding the date such reimbursement payment is due and payable. Such
reimbursement payment shall be due and payable (x) at or before 1:00 P.M. (New
York City time) on the date the LC Agent notifies the Borrower of such drawing,
if such notice is given at or before 10:00 A.M. (New York City time) on such
date, or (y) at or before 10:00 A.M. (New York City time) on the first Domestic
Business Day after the date such notice is given, if such notice is given after
10:00 A.M. (New York City time) on such date; provided that no payment otherwise
required by this sentence to be made by the Borrower at or before 1:00 P.M. (New
York City time) on any day shall be overdue hereunder if arrangements for such
payment satisfactory to the LC Agent, in its reasonable discretion, shall have
been made by the Borrower at or before 1:00 P.M. (New York City time) on such
day and such payment is actually made at or before 3:00 P.M. (New York City
time) on such day.
(2) In addition, the Borrower agrees to pay to the LC Agent interest on
any and all amounts not paid by the Borrower when due hereunder with respect to
a Letter of Credit, for each day from and including the date when such amount
becomes due to but excluding the date such amount is paid in full, whether
before or after judgment, payable on demand, at a rate per annum equal to the
sum of 2% plus the Base Rate for such day.
(3) Each payment to be made by the Borrower pursuant to this subsection
(i) shall be made to the LC Agent in Federal or other funds immediately
available to it at its address referred to in Section 9.01.
(j) Payments by Banks with Respect to Letters of Credit. (1) If the
Borrower fails to reimburse the LC Agent as and when required by subsection (i)
above for all or any portion of any amount drawn under a Letter of Credit, the
LC Agent may notify each Bank of such unreimbursed amount and request that each
Bank reimburse the LC Agent for such Bank's Pro Rata Share thereof. Upon
receiving such notice from the LC Agent, each Bank shall make available to the
LC Agent, at its address referred to in Section 9.01, an amount equal to such
Bank's share of such unreimbursed amount as set forth in such notice, in Federal
or other funds immediately available to the LC Agent, by 3:00 P.M. (New York
City time) on the Domestic Business Day following such Bank's receipt of such
notice from the LC Agent, together with interest on such amount for each day
from and including the date of such drawing to but excluding the day
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such payment is due from such Bank at the Federal Funds Rate for such day. Upon
payment in full thereof, such Bank shall be subrogated to the rights of the LC
Agent against the Borrower to the extent of such Bank's Pro Rata Share of the
related Reimbursement Obligation (including interest accrued thereon). Nothing
in this subsection (j) shall affect any rights any Bank may have against the LC
Agent for any action or omission for which the LC Agent is not indemnified under
subsection (n) of this Section .
(2) If any Bank fails to pay any amount required to be paid by it
pursuant to clause (1) of this subsection (j) on the date on which such payment
is due, interest shall accrue on such Bank's obligation to make such payment,
for each day from and including the date such payment became due to but
excluding the date such Bank makes such payment, whether before or after
judgment, at a rate per annum equal to the Federal Funds Rate for such day. Any
payment made by any Bank after 3:00 P.M. (New York City time) on any Domestic
Business Day shall be deemed for purposes of the preceding sentence to have been
made on the next succeeding Domestic Business Day.
(3) If the Borrower shall reimburse the LC Agent for any drawing
with respect to which any Bank shall have made funds available to the LC Agent
in accordance with clause (1) of this subsection (j), the LC Agent shall
promptly upon receipt of such reimbursement distribute to such Bank its Pro Rata
Share thereof, including interest, to the extent received by the LC Agent.
(k) Exculpatory Provisions. The Borrower's obligations under this
Section shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which the
Borrower may have or have had against the LC Agent, any Bank, the beneficiary of
any Letter of Credit or any other Person. The Borrower assumes all risks of the
acts or omissions of any beneficiary of any Letter of Credit with respect to its
use of such Letter of Credit. None of the LC Agent, the Banks and their
respective officers, directors, employees and agents shall be responsible for,
and the obligations of each Bank to make payments to the LC Agent and of the
Borrower to reimburse the LC Agent for drawings pursuant to this Section (other
than obligations resulting solely from the gross negligence or willful
misconduct of the LC Agent) shall not be excused or affected by, among other
things, (i) the use which may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (ii) the
validity, sufficiency or genuineness of documents presented under any
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Letter of Credit or of any endorsements thereon, even if such documents should
in fact prove to be in any or all respects invalid, insufficient, fraudulent or
forged (and notwithstanding any assertion to such effect by the Borrower); (iii)
payment by the LC Agent against presentation of documents to it which do not
comply with the terms of the relevant Letter of Credit; (iv) any dispute between
or among the Borrower, any of its Subsidiaries, the beneficiary of any Letter of
Credit or any other Person or any claims or defenses whatsoever of the Borrower,
any of its Subsidiaries or any other Person against the beneficiary of any
Letter of Credit; (v) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole; (vi) any breach of this
Agreement by any party hereto (except, in the case of the LC Agent, a breach
resulting solely from its gross negligence or willful misconduct); (vii) any
other circumstance or happening whatsoever, whether or not similar to any of the
foregoing; (viii) the fact that a Default shall have occurred and be continuing;
or (ix) the fact that the Termination Date shall have passed or the Commitments
shall have terminated. The LC Agent shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit. Any action
taken or omitted by the LC Agent or any Bank under or in connection with any
Letter of Credit and the related drafts and documents, if done without willful
misconduct or gross negligence, shall be binding upon the Borrower and shall not
place the LC Agent or any Bank under any liability to the Borrower.
(l) Reliance, Etc. The LC Agent shall be entitled (but not
obligated) to rely, and shall be fully protected in relying, on the
representation and warranty by the Borrower set forth in the last sentence of
Section 3.02 to establish whether the conditions specified in clauses (c), (d)
and (e) of Section 3.02 are met in connection with any issuance or extension of
a Letter of Credit, unless the LC Agent shall have been notified to the contrary
by the Administrative Agent or the Required Banks (in which event the LC Agent
shall be fully protected in relying on such notice). The rights and obligations
of the LC Agent under each Letter of Credit issued by it shall be governed by
the provisions thereof and the provisions of the UCP and/or the Uniform
Commercial Code referred to therein or otherwise applicable thereto.
(m) Indemnification by the Borrower. The Borrower agrees to
indemnify and hold harmless each Bank and
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the LC Agent (collectively, the "LC Indemnitees") from and against any and all
claims and damages, losses, liabilities, costs or expenses (including, without
limitation, the reasonable fees and disbursements of counsel) which any such LC
Indemnitee may reasonably incur (or which may be claimed against any such LC
Indemnitee by any Person whatsoever) by reason of or in connection with the
execution and delivery or transfer of or payment or failure to pay under any
Letter of Credit or any actual or proposed use of any Letter of Credit,
including any claims, damages, losses, liabilities, costs or expenses which the
LC Agent may incur by reason of or in connection with the failure of any Bank to
fulfill or comply with its obligations to the LC Agent hereunder; provided that
the Borrower shall not be required to indemnify the LC Agent for any claims,
damages, losses, liabilities, costs or expenses to the extent, but only to the
extent, caused by (i) the willful misconduct or gross negligence of the LC Agent
in determining whether a request presented under any Letter of Credit issued by
it complied with the terms of such Letter of Credit or (ii) the LC Agent's
failure to pay under any Letter of Credit issued by it after the presentation to
it of a request strictly complying with the terms and conditions of such Letter
of Credit (unless such payment is enjoined or otherwise prevented by order of a
court or other governmental authority). Nothing in this subsection (m) is
intended to change the obligations of the Borrower under any other provision of
this Section .
(n) Indemnification by the Banks. The Banks shall, ratably in
accordance with their respective Pro Rata Shares, indemnify the LC Agent, its
affiliates and their respective directors, officers, agents and employees (to
the extent not reimbursed by the Borrower) against any cost, expense (including
fees and disbursements of counsel), claim, demand, action, loss or liability
(except such as result from the LC Agent's gross negligence or willful
misconduct or the LC Agent's failure to pay, unless such payment is enjoined or
otherwise prevented by order of a court or other governmental authority, under
any Letter of Credit issued by it after the presentation to it of a request
strictly complying with the terms and conditions of such Letter of Credit) that
any such indemnitee may suffer or incur in connection with this Agreement or any
action taken or omitted by such indemnitee under this Agreement.
(o) Dual Capacities. In its capacity as a Bank, the LC Agent shall
have the same rights and obligations under this Section as any other Bank.
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SECTION 2.18. Swingline Loans. (a) Swingline Commitment. The
Swingline Bank agrees, on the terms and conditions set forth in this Agreement,
to make loans to the Borrower pursuant to this Section from time to time during
the Swingline Loan Availability Period; provided that immediately after each
such loan is made (and after giving effect to any substantially concurrent
application of the proceeds thereof to repay outstanding Loans):
(i) the aggregate outstanding principal amount of the Swingline
Loans shall not exceed the Swingline Commitment,
(ii) in the case of each Bank, its Outstanding Committed Amount
shall not exceed its Commitment, and
(iii) the Total Usage shall not exceed the Total Commitments.
Each loan under this Section shall (x) be in a principal amount not less than
$500,000 and shall be in a multiple of $100,000 and (y) bear interest on the
outstanding principal amount thereof for each day from the date such loan is
made until it becomes due at such rate or rates per annum (which shall in no
event be greater than the Base Rate for such day), and be payable on such dates,
as shall be agreed upon from time to time by the Borrower and the Swingline
Bank. Within the foregoing limits, the Borrower may borrow under this Section ,
repay Swingline Loans and reborrow under this Section at any time during the
Swingline Loan Availability Period. If the Swingline Bank and the Borrower are
unable, for any reason, to agree on the interest rate or interest payment date
or dates applicable to any Swingline Loan, the Swingline Bank shall not be
obligated to make, and the Borrower shall not be obligated to borrow, such
Swingline Loan. The Swingline Loans shall be evidenced by the Swingline Note.
(b) Notice of Swingline Borrowing. The Borrower shall give the
Swingline Bank notice (a "Notice of Swingline Borrowing") not later than 2:00
P.M. (New York City time) on the date of each borrowing of a Swingline Loan,
specifying (i) the date of such borrowing, which shall be a Domestic Business
Day, and (ii) the amount of such Swingline Loan.
(c) Funding of Swingline Loans. Not later than 3:00 P.M. (New York
City time) on the date of each borrowing of a Swingline Loan, the Swingline Bank
shall, unless the Swingline Bank determines that any applicable condition
specified in Article III (which determination may, in the case of Section
3.02(c), be based in part on information
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supplied by the LC Agent on the date of such borrowing as to the Aggregate LC
Exposure on such date and on information supplied by the Administrative Agent as
to the aggregate outstanding principal amount of the Loans on such date) has not
been satisfied, make available the amount of such Swingline Loan, in Federal or
other funds immediately available in New York City, to the Borrower at the
Swingline Bank's address referred to in Section 9.01.
(d) Optional Prepayment of Swingline Loans. The Borrower may prepay
the Swingline Loans in whole at any time, or from time to time in part in a
principal amount of at least $500,000, by giving notice of such prepayment to
the Swingline Bank not later than 2:00 P.M. (New York City time) on the date of
prepayment and paying the principal amount to be prepaid (together with (i)
interest accrued thereon to the date of prepayment and (ii) the loss or expense
(if any) resulting from such prepayment which is incurred by the Swingline Bank
(or by an existing or prospective participant in the Swingline Loans) and
documented by the Swingline Bank) to the Swingline Bank at its address referred
to in Section 9.01, in Federal or other funds immediately available in New York
City, not later than 3:00 P.M. on the date of prepayment.
(e) Mandatory Prepayment of Swingline Loans. On the date of each
Borrowing pursuant to Section 2.01 or 2.03, the Borrower shall prepay all
Swingline Loans then outstanding, together with (i) interest accrued thereon to
the date of prepayment and (ii) the loss or expense (if any) resulting from such
prepayment which is incurred by the Swingline Bank (or by an existing or
prospective participant in the Swingline Loans) and documented by the Swingline
Bank.
(f) Refunding Unpaid Swingline Loans. The Swingline Bank may at any
time, by notice to the Banks (including the Swingline Bank, in its capacity as a
Bank), require each Bank to pay to the Swingline Bank an amount equal to such
Bank's Pro Rata Share of the aggregate unpaid principal amount of the Swingline
Loans then outstanding. Such notice shall specify the date on which such
payments are to be made, which shall be the first Domestic Business Day after
such notice is given. Not later than 12:00 Noon (New York City time) on the date
so specified, each Bank shall pay the amount so notified to it to the Swingline
Bank at its address referred to in Section 9.01, in Federal or other funds
immediately available in New York City. The amount so paid by each Bank shall
constitute a Base Rate Loan to the Borrower; provided that, if the Banks are
prevented from making such Loans to the Borrower by the
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provisions of the United States Bankruptcy Code or otherwise, the amount so paid
by each Bank shall constitute a purchase by it of a participation in the unpaid
principal amount of the Swingline Loans (and interest accruing thereon after the
date of such payment). Each Bank's obligation to make such payment to the
Swingline Bank under this subsection (f) shall be absolute and unconditional and
shall not be affected by any circumstance, including, without limitation, (i)
any set-off, counterclaim, recoupment, defense or other right which such Bank or
any other Person may have against the Swingline Bank or the Borrower, (ii) the
occurrence or continuance of a Default or the termination of the Commitments,
(iii) any adverse change in the condition (financial or otherwise) of the
Borrower or any other Person, (iv) any breach of this Agreement by the Borrower
or any other Bank or (v) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing; provided that no Bank shall be
obligated to make any payment to the Swingline Bank under this subsection (f)
with respect to a Swingline Loan made by the Swingline Bank at a time when the
Swingline Bank has determined that a Default had occurred and was continuing.
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness of this Agreement; Closing. This
Agreement shall become effective, and the closing hereunder shall occur, when
the Administrative Agent shall have received the following:
(a) a counterpart hereof signed by each party listed on the
signature pages hereof or facsimile or other written confirmation
satisfactory to the Administrative Agent that each such party has signed a
counterpart hereof;
(b) a duly executed Note for the account of each Bank complying with
the provisions of Section 2.05 and a duly executed Swingline Note for the
account of the Swingline Bank, each dated the Effective Date;
(c) an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special
counsel for the Borrower, substantially in the form of Exhibit F hereto,
dated the Effective Date and covering such additional matters relating to
the transactions contemplated hereby as the Required Banks may reasonably
request;
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(d) an opinion of Gary M. Bahler, General Counsel of the Borrower,
substantially in the form of Exhibit G hereto, dated the Effective Date
and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(e) an opinion of Davis Polk & Wardwell, special counsel for the
Arranger and Syndication Agent, substantially in the form of Exhibit H
hereto, dated the Effective Date and covering such additional matters
relating to the transactions contemplated hereby as the Required Banks may
reasonably request;
(f) evidence satisfactory to the Administrative Agent that the
commitments of the Existing Banks under the Existing Credit Agreement have
terminated and the Borrower has paid (or made arrangements satisfactory to
the Administrative Agent for the payment of) all amounts required to be
paid by the Borrower on the Effective Date pursuant to Section 2.16; and
(g) all documents that the Administrative Agent may reasonably
request relating to the existence of the Borrower, the corporate authority
for and the validity of this Agreement, the Notes and the Swingline Note,
and any other matters relevant hereto, all in form and substance
satisfactory to the Administrative Agent.
The Administrative Agent shall promptly notify the Borrower and the Banks of the
Effective Date, and such notice shall be conclusive and binding on all parties
hereto.
SECTION 3.02. Extensions of Credit. The obligation (i) of any Bank
to make a Loan on the occasion of any Borrowing (other than a Loan pursuant to
Section 2.18(f)), (ii) of the Swingline Bank to make any Swingline Loan and
(iii) of the LC Agent to issue or extend (or allow the extension of) the expiry
date of any Letter of Credit are each subject to the satisfaction of the
following conditions:
(a) the fact that the Effective Date shall have occurred on or prior
to May 1, 1997;
(b) receipt (i) by the Administrative Agent of a Notice of Borrowing
as required by Section 2.02 or 2.03, (ii) by the Swingline Bank of a
Notice of Swingline Borrowing as required by Section 2.18(b) or (iii) by
the LC Agent of a notice of proposed issuance
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or extension as required by Section 2.17(c) or (e), as the case may be;
(c) the fact that, immediately after such Extension of Credit, the
applicable limitations in Section 2.01, 2.03(f), 2.17(a) or 2.18(a), as
the case may be, shall not be exceeded;
(d) the fact that, immediately before and after such Extension of
Credit, no Default shall have occurred and be continuing; and
(e) the fact that each of the representations and warranties of the
Borrower contained in this Agreement shall be true on and as of the date
of such Extension of Credit.
Each Extension of Credit hereunder shall be deemed to be a representation and
warranty by the Borrower on the date of such Extension of Credit as to the facts
specified in clauses (c), (d) and (e) of this Section .
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of New York, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted, except where failures to possess such
licenses, authorizations, consents and approvals could not, in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement, the Notes and the Swingline Note are within the Borrower's corporate
powers, have been duly authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or by-laws
of the Borrower or of any
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agreement, judgment, injunction, order, decree or other instrument binding upon
the Borrower or any of its Subsidiaries or result in the creation or imposition
of any Lien on any asset of the Borrower or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and each of the Notes and the Swingline Note,
when executed and delivered in accordance with this Agreement, will constitute a
valid and binding obligation of the Borrower, in each case enforceable in
accordance with its terms.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of January 27, 1996 and the related consolidated
statements of operations, cash flows and changes in shareholders' equity for the
Fiscal Year then ended, reported on by KPMG Peat Marwick LLP and set forth in
the Borrower's 1995 Form 10-K, a copy of which has been delivered to each of the
Banks, fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such Fiscal Year.
(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of October 26, 1996 and the related unaudited
consolidated statements of operations, cash flows and changes in shareholders'
equity for the nine months then ended, set forth in the Borrower's Latest Form
10-Q, a copy of which has been delivered to each of the Banks, fairly present,
on a basis consistent with the financial statements referred to in subsection
(a) of this Section, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such nine-month period (subject to normal year-end
adjustments).
(c) Since October 26, 1996 there has been no material adverse change
in the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
(d) At January 25, 1997 the present value of operating lease
commitments, calculated on the basis provided for in Section 5.01(e), was
$2,036,000,000.
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SECTION 4.05. Litigation. Except for the Designated Litigation,
there is no action, suit or proceeding pending against, or to the knowledge of
the Borrower threatened against or affecting, the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official which could reasonably be expected to result in a Material Adverse
Effect.
SECTION 4.06. Compliance with Laws. The Borrower and its
Subsidiaries are in compliance in all material respects with all applicable
laws, ordinances, rules, regulations and binding requirements of governmental
authorities, except where (i) the necessity of compliance therewith is being
contested in good faith by appropriate proceedings or (ii) failure to comply
therewith could not, in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
SECTION 4.07. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or made any amendment
to any Plan, which has resulted or will result in the imposition of a Lien under
Section 412(n) of the Internal Revenue Code or in the incurrence of a
requirement under Section 401(a)(29) of the Internal Revenue Code to post a bond
or other security in order to retain the tax-qualified status of such Plan or
(iii) incurred any liability under Title IV of ERISA other than a liability to
the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.08. Environmental Matters. To the knowledge of the
Borrower, (i) the Borrower and its Subsidiaries are in material compliance with
all applicable Environmental Laws, (ii) there are no claims, demands or
investigations against the Borrower or any of its Subsidiaries by any
governmental authority or other person or entity that may reasonably be expected
to result in material liability for the clean up of materials that have been
released into the environment and (iii) there are no conditions that are
reasonably likely to result in such claims, demands or investigations against
the Borrower or any of its Subsidiaries, except for failures to comply and
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liabilities which, in the aggregate, are unlikely to result in a Material
Adverse Effect.
SECTION 4.09. Taxes. The Borrower and its Subsidiaries have filed
all United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any material assessment received by the Borrower or
any Subsidiary, except taxes and assessments which are not yet delinquent or are
being contested in good faith by appropriate proceedings. The charges, accruals
and reserves on the books of the Borrower and its Subsidiaries in respect of
taxes or other governmental charges are, in the opinion of the Borrower,
adequate.
SECTION 4.10. Subsidiaries. Each of the Borrower's corporate
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted,
except where failures to possess such licenses, authorizations, consents and
approvals could not, in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
SECTION 4.11. Not an Investment Company. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.12. Full Disclosure. All information (taken as a whole)
heretofore furnished in writing by the Borrower to any Bank for purposes of or
in connection with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished in writing by the Borrower to any Bank
will be, true in all material respects on the date as of which such information
is stated or certified. Any projections and pro forma financial information
contained in any such writing will be based upon good faith estimates and
assumptions believed by the Borrower to be reasonable at the time made, it being
recognized by the Banks that such projections as to future events are not to be
viewed as facts and that actual results during the period or periods covered by
any such projections may differ from the projected results. The Borrower has
disclosed to the Banks in writing any and all facts which could reasonably be
expected to result in a Material Adverse Effect (to the extent the Borrower can
now reasonably foresee, utilizing reasonable assumptions and the
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information now actually known to the Borrower's Responsible Officers).
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any Credit
Exposure hereunder, the Swingline Commitment remains in effect or any amount
payable under the Swingline
Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after the
end of each Fiscal Year, a consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of the end of such Fiscal Year and the
related consolidated statements of operations, cash flows and changes in
shareholders' equity for such Fiscal Year, setting forth in each case in
comparative form the figures as of the end of and for the previous Fiscal
Year, all reported on (without any qualification that would not be
acceptable to the SEC for purposes of filings under the Exchange Act) by
KPMG Peat Marwick LLP or other independent public accountants of
nationally recognized standing;
(b) as soon as available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year, a
consolidated condensed balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such Fiscal Quarter, the related
consolidated condensed statement of operations for such Fiscal Quarter and
the related consolidated condensed statements of operations, cash flows
and retained earnings for the portion of the Fiscal Year ended at the end
of such Fiscal Quarter, setting forth in comparative form (i) in the case
of such statement of operations, the figures for the corresponding Fiscal
Quarter of the previous Fiscal Year and (ii) in the case of such
statements of operations, cash flows and retained earnings, the figures
for the corresponding portion of the previous Fiscal Year, all certified
(subject to normal year-end adjustments) as to fairness of presentation,
generally accepted accounting principles and consistency by the chief
financial
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officer or the chief accounting officer of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
Borrower's chief financial officer or chief accounting officer (i) setting
forth in reasonable detail the calculations required to establish whether
the Borrower was in compliance with the requirements of Sections 5.06 to
5.10, inclusive, on the date of such financial statements and (ii) stating
whether any Default exists on the date of such certificate and, if any
Default then exists, setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe that
any Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered
simultaneously therewith pursuant to clause (c) above;
(e) as soon as practicable and in any event within 90 days after the
end of each Fiscal Year, a certificate of the Borrower's chief financial
officer setting forth:
(i) the total rent expense (net of sublease income) of the
Borrower and its Consolidated Subsidiaries for such Fiscal Year;
(ii) the present value, at the end of such Fiscal Year, of the
operating lease commitments of the Borrower and its Consolidated
Subsidiaries; and
(iii) the present value, at the end of such Fiscal Year, of
any third-party operating lease payments under guarantees entered
into after the date hereof by the Borrower and its Consolidated
Subsidiaries;
and certifying that the amounts set forth have been calculated on the same
basis as the comparable amounts shown on page 29 of the Borrower's 1995
Annual Report to its shareholders (treating the guaranteed amounts
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set forth pursuant to clause (iii) as if they were direct obligations of
the Borrower and its Consolidated Subsidiaries);
(f) within five Domestic Business Days after any Responsible Officer
obtains knowledge of any Default, if such Default is then continuing, a
certificate of the Borrower's chief financial officer or chief accounting
officer setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(g) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(h) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q
and 8-K (or their equivalents) which the Borrower shall have filed with
the SEC;
(i) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" defined in
PBGC Regulations Sections 2615.11(a), .12(a), .14(a), .16(a), .17(a),
.21(a), .22(a) or .23(a) with respect to any Plan, or, with respect to any
Plan, gives or is required to give notice to the PBGC under Section
4043(b)(3) of ERISA or would be required to give notice under such Section
but for the provisions of Section 4043(b)(2) of ERISA or knows that the
plan administrator of any Plan has given or is required to give notice of
any such reportable event, a copy of the notice of such reportable event
given or required to be given to the PBGC, or that would be required to be
given but for the provisions of Section 4043(b)(2); (ii) receives notice
of complete or partial withdrawal liability under Title IV of ERISA or
notice that any Multiemployer Plan is in reorganization, is insolvent or
has been terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer, any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard under Section 412 of
the Internal Revenue Code, a copy of such application; (v) gives notice of
intent to terminate any Plan under Section 4041(c) of ERISA, a
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copy of such notice and other information filed with the PBGC; (vi) gives
notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a
copy of such notice; or (vii) fails to make any payment or contribution to
any Plan or Multiemployer Plan or makes any amendment to any Plan or which
has resulted or will result in the imposition of a Lien under Section
412(n) of the Internal Revenue Code or the incurrence of a requirement
under Section 401(a)(29) of the Internal Revenue Code to post a bond or
other security in order to retain the tax-qualified status of such Plan, a
certificate of the Borrower's chief financial officer or chief accounting
officer setting forth details as to such occurrence and action, if any,
which the Borrower or applicable member of the ERISA Group has taken or
proposes to take; and
(j) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Administrative Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Maintenance of Property; Insurance. (a) The Borrower
will keep, and will cause each Subsidiary to keep, all material properties
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted.
(b) The Borrower will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Borrower or in such Subsidiary's own name)
with financially sound and responsible insurance companies, insurance on all
their respective properties in at least such amounts and against at least such
risks (and with such risk retention) as are usually insured against in the same
general area by companies of established repute engaged in the same or a similar
business; provided that such risks may be covered by self-insurance programs
consistent with past practice. The Borrower will furnish to the Banks, upon
request from the Administrative Agent, information presented in reasonable
detail as to the insurance so carried.
SECTION 5.03. Conduct of Business and Maintenance of Existence. The
Borrower will continue, and will cause each Subsidiary to continue, to engage in
business of the same general type as now conducted by the Borrower and its
Subsidiaries, and will preserve, renew and keep in full force and effect, and
will cause each Subsidiary to preserve, renew and keep in full force and effect
their respective existence and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business, except
where failures to possess such rights, privileges
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and franchises could not, in the aggregate, reasonably be expected to result in
a Material Adverse Effect; provided that nothing in this Section shall prohibit
(i) the merger of a Subsidiary into the Borrower or the merger or consolidation
of a Subsidiary with or into another Person if the corporation surviving such
consolidation or merger is a Subsidiary and if, in each case, after giving
effect thereto, no Default shall have occurred and be continuing or (ii) the
termination of the existence of any Subsidiary if the Borrower in good faith
determines that such termination is in the best interest of the Borrower and is
not materially disadvantageous to the Banks.
SECTION 5.04. Compliance with Laws. The Borrower will comply, and
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and binding requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and the
rules and regulations thereunder), except where (i) the necessity of compliance
therewith is being contested in good faith by appropriate proceedings or (ii)
failures to comply therewith could not, in the aggregate, reasonably be expected
to result in a Material Adverse Effect.
SECTION 5.05. Inspection of Property, Books and Records. The
Borrower will keep, and will cause each Subsidiary (except for Subsidiaries that
constitute Immaterial Subsidiaries) to keep, proper books of record and account
in which full, true and correct entries shall be made of all dealings and
transactions in relation to its business and activities; and will permit, and
will cause each Subsidiary (except for Subsidiaries that constitute Immaterial
Subsidiaries) to permit, representatives of any Bank at such Bank's expense,
upon reasonable prior notice, to visit and inspect any of their respective
properties, to examine and make abstracts from any of their respective books and
records and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants, all at
such reasonable times and as often as may reasonably be desired.
SECTION 5.06. Negative Pledge. Neither the Borrower nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement
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in an aggregate principal or face amount not exceeding $100,000,000;
(b) any Lien on any asset (or improvement thereon) securing Debt
incurred or assumed solely for the purpose of financing all or any part of
the cost of acquiring such asset (or improvement thereon), provided that
such Lien attaches to such asset (or improvement thereon) concurrently
with or within 90 days after the acquisition thereof;
(c) any Lien existing on any asset of any corporation at the time
such corporation becomes a Subsidiary and not created in contemplation of
such event;
(d) any Lien on any asset of any corporation existing at the time
such corporation is merged or consolidated with or into the Borrower or a
Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition (whether
by purchase, merger or otherwise) thereof by the Borrower or a Subsidiary
and not created in contemplation of such acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the
foregoing clauses of this Section , provided that such Debt is not
increased and is not secured by any additional assets;
(g) Liens on life insurance policies securing amounts borrowed
against the cash value of such policies;
(h) Liens arising in the ordinary course of its business which (i)
do not secure Debt, (ii) do not secure any single obligation or series of
related obligations in an amount exceeding $100,000,000 and (iii) do not
in the aggregate materially detract from the value of its assets or
materially impair the use thereof in the operation of its business; and
(i) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal or face amount at any date
not to exceed 15% of Consolidated Tangible Net Worth.
SECTION 5.07. Minimum Consolidated Tangible Net Worth. Consolidated
Tangible Net Worth will at no time be
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less than the sum of (i) $1,000,000,000 plus (ii) for each Fiscal Quarter ended
at or prior to such time (but after January 25, 1997), 50% of the consolidated
net income of the Borrower and its Consolidated Subsidiaries for such Fiscal
Quarter (if greater than zero).
SECTION 5.08. Leverage Ratio. Total Borrowed Funds will not (i)
exceed 75% of Total Capitalization at any time from the Effective Date through
the end of Fiscal Year 1997 or (ii) exceed 70% of Total Capitalization at any
time thereafter.
SECTION 5.09. Limitation on Debt of Subsidiaries. The total Debt of
all Consolidated Subsidiaries (excluding Debt owed to the Borrower or to another
Consolidated Subsidiary) will not at any time exceed $300,000,000.
SECTION 5.10. Fixed Charge Coverage Ratio. At the end of each Fiscal
Quarter listed below, the ratio of
(i) the sum of EBIT plus 1/3 of Annual Rent Expense, in each case
for the four consecutive Fiscal Quarters then ended, to
(ii) the sum of Interest Expense plus 1/3 of Annual Rent Expense, in
each case for the same four consecutive Fiscal Quarters,
will not be less than the ratio set forth below with respect to such Fiscal
Quarter:
Fiscal Quarter Ratio
-------------- -----
Each Fiscal Quarter
of Fiscal Year 1997 1.50 to 1
Each Fiscal Quarter of
Fiscal Year 1998 1.75 to 1
Each subsequent Fiscal Quarter 2.00 to 1
SECTION 5.11. Consolidations, Mergers and Sales of Assets. The
Borrower will not consolidate or merge with or into any other Person; provided
that the Borrower may merge with another Person if (A) the Borrower is the
corporation surviving such merger and (B) immediately after giving effect to
such merger no Default shall have occurred and be continuing. The Borrower and
its Subsidiaries will not sell, lease or otherwise transfer, directly or
indirectly, all or substantially all of the assets of the Borrower and its
Subsidiaries, taken as a whole, to any
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other Person; provided that the foregoing limitation shall not apply to sales of
inventory or sales and other dispositions of surplus assets, in each case in the
ordinary course of business.
SECTION 5.12. Use of Proceeds. The Letters of Credit and the
proceeds of the Loans and Swingline Loans made under this Agreement will be used
by the Borrower for its general corporate purposes.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail (i) to pay any principal of any Loan,
Swingline Loan or Reimbursement Obligation when due or (ii) to pay any
interest on any Loan, Swingline Loan or Reimbursement Obligation, any fees
or any other amount payable hereunder within two Domestic Business Days
after the due date thereof;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.06 to 5.12, inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
(a) or (b) above) for 30 days after written notice thereof has been given
to the Borrower by the Administrative Agent at the request of any
Requesting Banks;
(d) any representation, warranty, certification or statement made
(or deemed made) by the Borrower in this Agreement or in any certificate,
financial statement or other document delivered pursuant to this Agreement
shall prove to have been incorrect in any material respect when made (or
deemed made);
(e) the Borrower and/or any of its Subsidiaries shall fail to pay,
when due or within any applicable grace period, an amount or amounts
aggregating more than $25,000,000 payable in respect of their Debt;
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(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables the holder of
such Debt or any Person acting on such holder's behalf to accelerate the
maturity thereof;
(g) any of the Borrower or one or more Subsidiaries (unless such
Subsidiaries are Immaterial Subsidiaries) shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian or other similar official of it
or any Material Assets, or shall consent to any such relief or to the
appointment of any such official or to any such official taking possession
of Material Assets, or shall make a general assignment for the benefit of
creditors, or shall state that it is unable to pay its debts generally as
they become due, or shall take any corporate action to authorize any of
the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or one or more Subsidiaries (unless such Subsidiaries
constitute Immaterial Subsidiaries), in each case seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any Material Assets, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a
period of 60 days; or an order for relief shall be entered against the
Borrower or any Subsidiary under the federal bankruptcy laws as now or
hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $10,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan (except for any termination under Section
4041(b) of ERISA) shall be filed under Title IV of ERISA by any member of
the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, to impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or to cause a trustee to be appointed to
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administer, any Material Plan; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur a complete or
partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans
which could cause one or more members of the ERISA Group to incur a
current payment obligation in excess of $25,000,000;
(j) a judgment or order for the payment of money in excess of
$10,000,000 shall be rendered against the Borrower or any Subsidiary and
such judgment or order shall continue unsatisfied and unstayed for a
period of 10 days; or
(k) any person or group of persons (within the meaning of Section 13
or 14 of the Exchange Act) shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the SEC under said Act)
of 20% or more of the outstanding shares of common stock of the Borrower;
or Continuing Directors shall cease to constitute a majority of the board
of directors of the Borrower;
then, and in every such event, the Administrative Agent shall (i) if requested
by Banks having more than 50% in aggregate amount of the Commitments, by notice
to the Borrower terminate the Commitments and the Swingline Commitment and they
shall thereupon terminate, and (ii) if requested by Banks holding more than 50%
in aggregate principal amount of the Loans, by notice to the Borrower declare
the Loans and Swingline Loans (together with accrued interest thereon) to be,
and the Loans and Swingline Loans (together with accrued interest thereon) shall
thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower; provided that if any Event of Default specified in clause (g) or (h)
above occurs with respect to the Borrower, then without any notice to the
Borrower or any other act by the Administrative Agent or the Banks, the
Commitments and the Swingline Commitment shall thereupon terminate and the Loans
and Swingline Loans (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Administrative Agent shall give
notice to the Borrower under Section 6.01(c) promptly upon being requested to do
so by
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any Requesting Banks and shall thereupon notify all the Banks thereof.
SECTION 6.03. Cash Cover. The Borrower agrees, in addition to the
provisions of Section 6.01, that upon the occurrence and during the continuance
of any Event of Default, it shall, if requested by the LC Agent upon the
instruction of the Required Banks, pay to the LC Agent an amount in immediately
available funds (which funds shall be held as collateral pursuant to
arrangements satisfactory to the LC Agent) equal to the aggregate amount
available for drawing under all Letters of Credit then outstanding at such time,
provided that, upon the occurrence of any Event of Default specified in clause
(g) or (h) of Section 6.01 with respect to the Borrower, the Borrower shall pay
such amount forthwith without any notice or demand or any other act by the LC
Agent or the Banks.
ARTICLE VII
THE ADMINISTRATIVE AGENT, DOCUMENTATION AGENT
AND CO-AGENTS
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the Notes as are
delegated to the Administrative Agent by the terms hereof or thereof, together
with all such powers as are reasonably incidental thereto.
SECTION 7.02. Agents and Affiliates. Each Bank acting as an Agent,
Co-Agent or Swingline Bank in connection with this Agreement or the credit
facility provided hereby shall have the same rights and powers under this
Agreement as any other Bank and may exercise or refrain from exercising the same
as though it were not so acting. Each Bank so acting, and each of their
respective affiliates, may accept deposits from, lend money to, and generally
engage in any kind of business with, the Borrower or any Subsidiary or affiliate
of the Borrower as if it were not so acting.
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SECTION 7.03. Obligations of the Co-Agents and Documentation Agent.
The Co-Agents and Documentation Agent, in their capacities as such, shall have
no duties, obligations or liabilities of any kind hereunder.
SECTION 7.04. Obligations of Administrative Agent. The obligations
of the Administrative Agent hereunder are only those expressly set forth herein.
Without limiting the generality of the foregoing, the Administrative Agent shall
not be required to take any action with respect to any Default, except as
expressly provided in Article VI.
SECTION 7.05. Consultation with Experts. The Administrative Agent
and LC Agent may consult with legal counsel (who may be counsel for the
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.
SECTION 7.06. Liability of Agents. None of the Documentation Agent,
the Administrative Agent, their respective affiliates or their respective
directors, officers, agents or employees shall be liable for any action taken or
not taken in connection herewith (i) with the consent or at the request of the
Required Banks or (ii) in the absence of its own gross negligence or willful
misconduct. None of the Documentation Agent, the Administrative Agent, their
respective affiliates or their respective directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty or representation made in connection with
this Agreement or any Extension of Credit; (ii) the performance or observance of
any of the covenants or agreements of the Borrower; (iii) the satisfaction of
any condition specified in Article III except, in the case of the Administrative
Agent, receipt of items required to be delivered to it; or (iv) the validity,
effectiveness or genuineness of this Agreement, the Notes, the Swingline Note or
any other instrument or writing furnished in connection herewith. The LC Agent
shall not incur any liability by acting in reliance upon information supplied by
the Administrative Agent as to the Total Usage at any time (including Loans to
be made pursuant to Notices of Borrowing theretofore received by the
Administrative Agent). The Administrative Agent shall not incur any liability by
acting in reliance upon (i) information supplied to it by the LC Agent as to the
Aggregate LC Exposure at any time or (ii) any notice, consent, certificate,
statement, or other writing (which may be a
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bank wire, telex, facsimile transmission or similar writing) believed by it to
be genuine or to be signed by the proper party or parties.
SECTION 7.07. Indemnification. The Banks shall, ratably in
accordance with their respective Credit Exposures, indemnify the Administrative
Agent and its affiliates, directors, officers, agents and employees (to the
extent not reimbursed by the Borrower) against any cost, expense (including
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from such indemnitees' gross negligence or willful
misconduct) that such indemnitees may suffer or incur in connection with this
Agreement or any action taken or omitted by such indemnitees hereunder.
SECTION 7.08. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Arranger and Syndication Agent or
any other Bank Party, and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon the Arranger and Syndication Agent or any other Bank Party, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking any
action under this Agreement.
SECTION 7.09. Successor Administrative Agent. The Administrative
Agent may resign at any time by giving notice thereof to the Banks and the
Borrower, such resignation to be effective when a successor Administrative Agent
is appointed pursuant to this Section and accepts such appointment. Upon
receiving any such notice of resignation, the Required Banks shall have the
right to appoint a successor Administrative Agent, subject to the approval of
the Borrower (unless an Event of Default shall have occurred and be continuing
at the time of such appointment, in which case the Borrower's approval will not
be required). If no successor Administrative Agent shall have been so appointed
by the Required Banks, and shall have accepted such appointment, within 30 days
after the retiring Administrative Agent gives notice of resignation, then the
retiring Administrative Agent may, on behalf of the other Banks, appoint a
successor Administrative Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of its appointment as the Administrative Agent hereunder by a
successor Administrative
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Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation
hereunder, the provisions of this Article shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the Administrative
Agent.
SECTION 7.10. Administrative Agent's Fees. The Borrower shall pay to
the Administrative Agent for its account, fees in the amounts and at the times
previously agreed upon between the Borrower and the Administrative Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any CD Loan,
Euro-Dollar Loan or Money Market LIBOR Loan:
(a) the Administrative Agent is advised by the Reference Banks that
deposits in dollars (in the applicable amounts) are not being offered to
the Reference Banks in the relevant market for such Interest Period, or
(b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50%
or more of the aggregate principal amount of the affected Loans advise the
Administrative Agent that the Adjusted CD Rate or the Adjusted London
Interbank Offered Rate, as the case may be, as determined by the
Administrative Agent will not adequately and fairly reflect the cost to
such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may
be, for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Banks, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, (i) the
obligations of the Banks to make CD Loans or Euro-Dollar Loans, or to continue
such Loans for an additional Interest Period, as the case may be, or to convert
outstanding Loans into CD Loans or Euro-Dollar
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Loans, as the case may be, shall be suspended and (ii) each outstanding CD Loan
or Euro-Dollar Loan, as the case may be, shall be converted into a Base Rate
Loan on the last day of the then current Interest Period applicable thereto.
Unless the Borrower notifies the Administrative Agent at least two Domestic
Business Days before the date of any affected Borrowing for which a Notice of
Borrowing has previously been given that it elects not to borrow on such date,
(i) if such affected Borrowing is a CD Borrowing or Euro-Dollar Borrowing, such
Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such
affected Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR
Loans comprising such Borrowing shall bear interest for each day from and
including the first day to but excluding the last day of the Interest Period
applicable thereto at the Base Rate for such day.
SECTION 8.02. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, 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 any Bank (or its Euro-Dollar Lending Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency, shall make it unlawful or impossible for any
Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its
Euro-Dollar Loans and such Bank shall so notify the Administrative Agent, the
Administrative Agent shall forthwith give notice thereof to the other Banks and
the Borrower, whereupon until such Bank notifies the Borrower and the
Administrative Agent that the circumstances giving rise to such suspension no
longer exist, the obligation of such Bank to make Euro-Dollar Loans, to continue
Euro-Dollar Loans for an additional Interest Period or to convert outstanding
Loans into Euro-Dollar Loans, shall be suspended. Before giving any notice to
the Administrative Agent pursuant to this Section , such Bank shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need for
giving such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such notice is given, each Euro-Dollar Loan of
such Bank then outstanding shall be converted to a Base Rate Loan either (a) on
the last day of the then current Interest Period applicable to such Euro-Dollar
Loan if such Bank may lawfully continue to maintain and fund such Loan to such
day or (b) immediately if such Bank shall determine that it may not lawfully
continue to maintain and fund such Loan to such day.
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SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after
(x) the date hereof, in the case of any Committed Loan or Swingline Loan or
Letter of Credit or any obligation to make Committed Loans or Swingline Loans or
participate in Letters of Credit or (y) the date of the related Money Market
Quote, in the case of any Money Market Loan, the adoption of any applicable law,
rule or regulation, 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 any Bank (or its Applicable Lending
Office) or the Swingline Bank with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency, shall impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding (i) with respect to any CD Loan any such
requirement included in an applicable Domestic Reserve Percentage and (ii) with
respect to any Euro-Dollar Loan any such requirement included in an applicable
Euro-Dollar Reserve Percentage), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such requirement reflected in an
applicable Assessment Rate) or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Bank (or its Applicable
Lending Office) or the Swingline Bank or shall impose on any Bank (or its
Applicable Lending Office) or the Swingline Bank or on the United States market
for certificates of deposit or the London interbank market any other condition
affecting its Fixed Rate Loans, its Note, its Swingline Loans, its Swingline
Note, its obligation to make Fixed Rate Loans or Swingline Loans or its
obligation to participate in any Letter of Credit and the result of any of the
foregoing is to increase the cost to such Bank (or its Applicable Lending
Office) of making or maintaining any Fixed Rate Loan, or participating in any
Letter of Credit or increase the cost to the Swingline Bank of making or
maintaining any Swingline Loan or to reduce the amount of any sum received or
receivable by such Bank (or its Applicable Lending Office) or the Swingline Bank
under this Agreement or under its Note or Swingline Note with respect thereto,
by an amount deemed by such Bank or the Swingline Bank to be material, then,
within 15 days after receiving a request by such Bank or the Swingline Bank for
compensation under this subsection, accompanied by a certificate complying with
subsection (e) of this Section (with a copy to the Administrative Agent), the
Borrower shall, subject to subsection (f) of this Section , pay to such Bank or
the
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Swingline Bank such additional amount or amounts as will compensate such Bank or
the Swingline Bank for such increased cost or reduction.
(b) If, on or after the date hereof, the adoption of any applicable
law, rule or regulation, 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 LC Agent with any
request or directive (whether or not having the force of law) made on or after
the date of this Agreement by any such authority, central bank or comparable
agency, shall impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System), special deposit, insurance assessment or similar
requirement against any Letter of Credit issued by the LC Agent or shall impose
on the LC Agent any other condition affecting its Letters of Credit or its
obligation to issue Letters of Credit and the result of any of the foregoing is
to increase the cost to the LC Agent of issuing any Letter of Credit or to
reduce the amount of any sum received or receivable by the LC Agent under this
Agreement with respect thereto, by an amount deemed by the LC Agent to be
material, then, within 15 days after demand by the LC Agent (with a copy to the
Administrative Agent), the Borrower shall pay to the LC Agent such additional
amount or amounts as will compensate the LC Agent for such increased cost or
reduction.
(c) If any Bank, the Swingline Bank or the LC Agent shall have
determined that, after the date hereof, the adoption of any applicable law, rule
or regulation regarding capital adequacy, or any change in any such 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 any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on capital of such Bank, the Swingline Bank or the LC Agent, as
the case may be (or its Parent), as a consequence of its obligations hereunder
to a level below that which such Bank, the Swingline Bank or the LC Agent, as
the case may be (or its Parent), could have achieved but for such adoption,
change, request or directive (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by it to be material, then from
time to time, within 15 days after receiving a request by such Bank,
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the Swingline Bank or the LC Agent, as the case may be, for compensation under
this subsection, accompanied by a certificate complying with subsection (e) of
this Section (with a copy to the Administrative Agent), the Borrower shall,
subject to subsection (f) of this Section , pay to such Bank, the Swingline Bank
or the LC Agent, as the case may be, such additional amount or amounts as will
compensate it (or its Parent) for such reduction.
(d) Each Bank, the Swingline Bank and the LC Agent will promptly
notify the Borrower and the Administrative Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle it to
compensation pursuant to this Section and will designate a different Applicable
Lending Office or LC Office if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in its judgment, be
otherwise disadvantageous to it. If a Bank, the Swingline Bank or the LC Agent
fails to notify the Borrower of any such event within 180 days after such event
occurs, it shall not be entitled to compensation under this Section for any
effect of such event arising more than 180 days before it does notify the
Borrower thereof.
(e) Each request by a Bank, the Swingline Bank or the LC Agent for
compensation under this Section shall be accompanied by a certificate, signed by
one of its authorized employees, setting forth in reasonable detail (i) the
basis for claiming such compensation, (ii) the additional amount or amounts to
be paid to it hereunder and (iii) the method of calculating such amount or
amounts, which certificate shall be conclusive in the absence of manifest error.
In determining such amount, such Bank, the Swingline Bank or the LC Agent may
use any reasonable averaging and attribution methods.
(f) Notwithstanding any other provision of this Section, none of the
Banks, the Swingline Bank and the LC Agent shall be entitled to compensation
under subsection (a), (b) or (c) of this Section if it is not then its general
practice to demand compensation in similar circumstances under comparable
provisions of other credit agreements.
SECTION 8.04. Taxes. (a) For purposes of this Section 8.04, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower pursuant to this
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Agreement or under any Note or the Swingline Note, and all liabilities with
respect thereto, excluding (i) in the case of each Bank Party, taxes imposed on
or measured by its income, and franchise or similar taxes imposed on it, by a
jurisdiction under the laws of which it is organized or qualified to do business
(but only if the taxes are imposed solely because such Bank Party is qualified
to do business in such jurisdiction without regard to any Loan) or in which its
principal executive office is located or in which its Applicable Lending Office
or LC Office is located and (ii) in the case of each Bank, any United States
withholding tax imposed on such payments other than such withholding tax imposed
as a result of a change in treaty, law or regulation occurring after a Bank
first becomes subject to this Agreement.
"Other Taxes" means any present or future stamp, documentary or
mortgage recording taxes and any other excise or property taxes, or similar
charges or levies, which arise from any payment made pursuant to this Agreement
or under any Note or the Swingline Note or from the execution, delivery or
enforcement of, or otherwise with respect to, this Agreement, any Note or the
Swingline Note.
(b) Any and all payments by the Borrower to or for the account of
any Bank Party hereunder or under any Note or the Swingline Note shall be made
without deduction for any Taxes or Other Taxes; provided that, if the Borrower
shall be required by law to deduct any Taxes or Other Taxes from any such
payments, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 8.04) such Bank Party receives an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions, (iii) the Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 9.01, the original
or a certified copy of a receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank Party for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section 8.04) paid by such Bank Party and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
provided that Borrower shall not indemnify any Bank Party for any penalties or
interest on any Taxes or Other Taxes accrued
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during the period between the 15th day after such Bank Party has received a
notice from the jurisdiction asserting such Taxes or Other Taxes and such later
day on which such Bank Party has informed the Borrower of the receipt of such
notice. This indemnification shall be paid within 15 days after such Bank Party
makes demand therefor.
(d) Each Bank Party organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each Bank Party listed on the signature pages
hereof and on or prior to the date on which it becomes a Bank Party in the case
of each other Bank Party, and from time to time thereafter if requested in
writing by the Borrower (but only so long as such Bank Party remains lawfully
able to do so), shall provide the Borrower with Internal Revenue Service Form
1001 or 4224, as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Bank Party is entitled to benefits under
an income tax treaty to which the United States is a party which exempts such
Bank Party from United States withholding tax or reduces the rate of withholding
tax on payments of interest for the account of such Bank Party or certifying
that the income receivable pursuant to this Agreement is effectively connected
with the conduct of a trade or business in the United States.
(e) For any period with respect to which a Bank Party has failed to
provide the Borrower with the appropriate form as required by Section 8.04(d)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which such form originally was required to be
provided), such Bank Party shall not be entitled to indemnification under
Section 8.04(b) or (c) with respect to Taxes (including penalties, interest and
expenses) imposed by the United States; provided that if a Bank Party, which is
otherwise exempt from or subject to a reduced rate of withholding tax, becomes
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrower shall take such steps as such Bank Party shall reasonably request
to assist such Bank Party to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank Party pursuant to this Section 8.04, then such Bank
Party will change the jurisdiction of its Applicable Lending Office or LC Office
if, in the judgment of such Bank Party, such change (i) will eliminate or reduce
any such additional payment which may thereafter accrue and (ii) is not
otherwise disadvantageous to such Bank Party.
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(g) If a Bank Party receives a notice from a taxing authority
asserting any Taxes or Other Taxes for which the Borrower is required to
indemnify such Bank Party under Section 8.04(c), it shall furnish to the
Borrower a copy of such notice no later than 90 days after the receipt thereof.
If such Bank Party has failed to furnish a copy of such notice to the Borrower
within such 90-day period as required by this Section 8.04(g), the Borrower
shall not be required to indemnify such Bank Party for any such Taxes or Other
Taxes (including penalties, interest and expenses thereon) arising between the
90th day after such Bank Party has received such notice and the day on which
such Bank Party has furnished to the Borrower a copy of such notice.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make or maintain Euro-Dollar Loans
has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03 or 8.04 with respect to its CD Loans or
Euro-Dollar Loans and, in either case, the Borrower shall, by at least five
Euro-Dollar Business Days' prior notice to such Bank through the Administrative
Agent, have elected that the provisions of this Section shall apply to such
Bank, then, unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for compensation no
longer exist, all Loans which would otherwise be made by such Bank as (or
continued as or converted into) CD Loans or Euro-Dollar Loans, as the case may
be, shall instead be Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related CD Loans or Euro-Dollar Loans of the
other Banks). If such Bank notifies the Borrower that the circumstances giving
rise to such notice no longer apply, the principal amount of each such Base Rate
Loan shall be converted into a CD Loan or Euro-Dollar Loan, as the case may be,
on the first day of the next succeeding Interest Period applicable to the
related CD Loans or Euro-Dollar Loans of the other Banks.
SECTION 8.06. Substitution of Bank. If (i) the obligation of any
Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or
(ii) any Bank has demanded compensation under Section 8.03 or 8.04, the Borrower
shall have the right, with the assistance of the Administrative Agent, to seek a
mutually satisfactory substitute bank or banks (which may be one or more of the
Banks) to replace such Bank. Any substitution under this Section 8.06 may be
accomplished, at the Borrower's option, either (i) by the replaced Bank
assigning its rights and obligations hereunder to the replacement bank or banks
pursuant to Section 9.06(c) at a mutually agreeable price or
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(ii) by the Borrower prepaying all outstanding Loans from the replaced Bank and
terminating its Commitment on a date specified in a notice delivered to the
Administrative Agent and the replaced Bank at least three Euro-Dollar Business
Days before the date so specified (and compensating such Bank for any resulting
funding losses as provided in Section 2.14) and concurrently the replacement
bank or banks assuming a Commitment in an amount equal to the Commitment being
terminated and making Loans in the same aggregate amount and having the same
maturity date or dates, respectively, as the Committed Loans being prepaid, all
pursuant to documents reasonably satisfactory to the Administrative Agent (and
in the case of any document to be signed by the replaced Bank, reasonably
satisfactory to such Bank). No such substitution shall relieve the Borrower of
its obligation to compensate and/or indemnify the replaced Bank as required by
Sections 8.03 and 8.04 with respect to the period before it is replaced and to
pay all accrued interest, accrued fees and other amounts owing to the replaced
Bank hereunder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of the Borrower, the LC Agent, the Swingline Bank or the
Administrative Agent, at its address, facsimile number or telex number set forth
on the signature pages hereof, (y) in the case of any Bank, at its address,
facsimile number or telex number set forth in its Administrative Questionnaire
or (z) in the case of any party, such other address, facsimile number or telex
number as such party may hereafter specify for such purpose by notice to the
Administrative Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
answerback is received, (ii) if given by facsimile transmission, when
transmitted to the facsimile number specified in this Section and confirmation
of receipt is received, (iii) if given by mail, three Domestic Business Days
after such communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid, or (iv) if given by any other means, when
delivered at the address specified in this Section; provided that notices to the
Administrative Agent under Article II or Article VIII and
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notices to the LC Agent or the Swingline Bank under Article II shall not be
effective until received.
SECTION 9.02. No Waivers. No failure or delay by any Bank Party in
exercising any right, power or privilege hereunder or under any Note or the
Swingline Note shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay
(i) all reasonable out-of-pocket expenses of the Arranger and Syndication Agent,
including reasonable fees and disbursements of special counsel for the Arranger
and Syndication Agent, in connection with the negotiation and preparation of
this Agreement, (ii) all reasonable out-of-pocket expenses of the Arranger and
Syndication Agent and the Administrative Agent, including reasonable fees and
disbursements of special counsel for the Arranger and Syndication Agent, in
connection with the administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (iii) if an Event of Default occurs, all out-of-pocket expenses incurred by
the Arranger and Syndication Agent and each Bank Party including (without
duplication) the fees and disbursements of special counsel and the allocated
cost of internal counsel, in connection with any collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify each Bank Party, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder; provided that no Indemnitee shall have the right to
be indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
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SECTION 9.04. Sharing of Set-Offs. (a) Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest that
has become due with respect to the Loans held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of
principal and interest that has become due with respect to the Loans held by
such other Bank, the Bank receiving such proportionately greater payment shall
purchase such participations in the Loans held by the other Banks, and such
other adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to the Loans held by the Banks shall be
shared by the Banks pro rata.
(b) Each Bank further agrees that if it shall, by exercising any
right of set-off or counterclaim or otherwise, receive payment of a proportion
of the aggregate amount of the principal of and interest on the Reimbursement
Obligations held by it or for its account which is greater than the proportion
received in respect of the aggregate amount of the principal of and interest on
the Reimbursement Obligations held by or for the account of any other Bank, the
Bank receiving such proportionately greater payment shall purchase such
participations in the aggregate amount of the principal of and interest on the
Reimbursement Obligations held by or for the account of the other Banks, and
such other adjustments shall be made, as may be required so that all such
payments of the aggregate amount of the principal of and interest on the
Reimbursement Obligations held by or for the account of the Banks shall be
shared by them pro rata.
(c) Nothing in this Section shall impair the right of any Bank to
exercise any right of set-off or counterclaim it may have and to apply the
amount subject to such exercise to the payment of indebtedness of the Borrower
other than its indebtedness hereunder.
(d) The Borrower agrees, to the fullest extent it may effectively do
so under applicable law, that any holder of a participation in a Loan or LC
Reimbursement Obligation, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of the Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of this
Agreement, the Notes or the Swingline Note may be amended or waived if, but only
if, such amendment or
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waiver is in writing and is signed by the Borrower and the Required Banks (and,
if the rights or duties of the Administrative Agent, the LC Agent or the
Swingline Bank are affected thereby, by the Administrative Agent, the LC Agent
or the Swingline Bank, as the case may be); provided that no such amendment or
waiver shall, unless signed by all the Banks, (i) increase or decrease the
Commitment of any Bank (except for a ratable decrease in the Commitments of all
Banks) or subject any Bank to any additional obligation, (ii) reduce the
principal of or rate of interest on any Loan or Swingline Loan or any fees
hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or Swingline Loan or any fees hereunder or for the
termination of any Commitment, (iv) reduce the principal of or rate of interest
on any Reimbursement Obligation, (v) postpone the date fixed for payment by the
Borrower of any Reimbursement Obligation or extend the expiry date of any Letter
of Credit to a date later than the fifth Domestic Business Day prior to the
Termination Date, (vi) unless signed by the Swingline Bank, increase the
Swingline Commitment, postpone the date fixed for termination of the Swingline
Commitment or otherwise affect any of its rights and obligations, or (vii)
change the percentage of the Commitments or of the aggregate unpaid principal
amount of the Loans, or the number of Banks, which shall be required for the
Banks or any of them to take any action under this Section or any other
provision of this Agreement.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of each Bank, the LC Agent and the Swingline Bank.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans or all or any part of its LC Exposure. If any Bank
grants a participating interest to a Participant, whether or not upon notice to
the Borrower and the Administrative Agent, such Bank shall remain responsible
for the performance of its obligations hereunder, such Bank shall remain the
holder of its Loans, and the Borrower and the Administrative Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement. Any agreement pursuant to
which any Bank may grant such a participating interest shall provide that such
Bank shall retain the sole right and responsibility to enforce the obligations
of the
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Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clause (i),
(ii), (iii), (iv) or (v) of Section 9.05 without the consent of the Participant.
The Borrower agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article VIII with
respect to its participating interest. An assignment or other transfer which is
not permitted by subsection (c) or (d) below shall be given effect for purposes
of this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may, in the ordinary course of its business and in
accordance with applicable law, at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to an
initial Commitment of not less than $10,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit I hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consents of the Borrower,
the LC Agent, the Swingline Bank and the Administrative Agent (which consents
shall not be unreasonably withheld); provided that (i) such consents shall not
be required if the Assignee is an affiliate of such transferor Bank or was a
Bank immediately prior to such assignment; (ii) such assignment may, but need
not, include rights of the transferor Bank in respect of outstanding Money
Market Loans and (iii) the $10,000,000 minimum amount specified above for a
partial assignment of the transferor Bank's rights and obligations shall not
apply if the Assignee was a Bank immediately prior to such assignment. Upon
execution and delivery of such instrument and payment by such Assignee to such
transferor Bank of an amount equal to the purchase price agreed between such
transferor Bank and such Assignee, such Assignee shall be a Bank party to this
Agreement and shall have all the rights and obligations of a Bank with a
Commitment as set forth in such instrument of assumption, and the transferor
Bank shall be released from its obligations hereunder (and its Commitment shall
be reduced) to a corresponding extent, and no further consent or action by any
party shall be required. Upon the consummation of any assignment pursuant to
this subsection (c), the transferor Bank, the Administrative Agent and the
Borrower shall make appropriate arrangements so that, if required, a
79
<PAGE> 85
new Note is issued to the Assignee. In connection with any such assignment, the
transferor Bank shall pay to the Administrative Agent an administrative fee for
processing such assignment in the amount of $2,500; provided that the Borrower
shall pay such administrative fee if such assignment is required by the Borrower
pursuant to Section 8.06. If the Assignee is not incorporated under the laws of
the United States of America or a state thereof, it shall deliver to the
Borrower and the Administrative Agent certification as to exemption from
deduction or withholding of any United States federal income taxes in accordance
with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.03 or
8.04 than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 9.07. No-Reliance on Margin Stock. Each of the Banks
represents to the Administrative Agent and each of the other Banks that it in
good faith is not relying upon any "margin stock" (as defined in Regulation U)
as collateral in the extension or maintenance of the credit provided for in this
Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction. (a) Each
Letter of Credit and Section 2.17 shall be subject to the UCP, and, to the
extent not inconsistent therewith, the laws of the State of New York.
(b) SUBJECT TO CLAUSE (a) OF THIS SECTION, THIS AGREEMENT, EACH NOTE
AND THE SWINGLINE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
(c) The Borrower hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Southern District of New York and of
any New York State court sitting in New York City for purposes of all legal
proceedings arising out of or relating to this
80
<PAGE> 86
Agreement, the Notes, the Swingline Note or the transactions contemplated hereby
or thereby. The Borrower irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
SECTION 9.09. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES, THE SWINGLINE NOTE OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
81
<PAGE> 87
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
WOOLWORTH CORPORATION
By /s/ John H. Cannon
--------------------------------
Name: John H. Cannon
Title: Vice President &
Treasurer
233 Broadway
New York, New York 10279-0003
Facsimile number: 212-553-2094
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ James E. Condon
--------------------------------
Name: James E. Condon
Title: Vice President
NATIONSBANK, N.A.
as Documentation Agent and a Bank
By /s/ Marcus A. Boyer
--------------------------------
Name: Marcus A. Boyer
Title: Senior Vice President
THE BANK OF NEW YORK
By /s/ Howard F. Bascom, Jr.
--------------------------------
Name: Howard F. Bascom, Jr.
Title: Vice President
82
<PAGE> 88
THE BANK OF NOVA SCOTIA
as Co-Agent and a Bank
By /s/ J. Alan Edwards
--------------------------------
Name: J. Alan Edwards
Title: Authorized Signatory
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
as Co-Agent and a Bank
By /s/ Amanda S. Ryan
--------------------------------
Name: Amanda S. Ryan
Title: Vice President
TORONTO DOMINION (NEW YORK),INC.
as Co-Agent and a Bank
By /s/ David G. Parker
--------------------------------
Name: David G. Parker
Title: Vice President
BANK OF AMERICA ILLINOIS
By /s/ John W. Pocalyko
--------------------------------
Name: John W. Pocalyko
Title: Vice President
COMMERZBANK AG, NEW YORK AND/OR
GRAND CAYMAN BRANCHES
By /s/ Subash R. Viswanathan
--------------------------------
Name: Subash R. Viswanathan
Title: Vice President
By /s/ Andrew R. Campbell
--------------------------------
Name: Andrew R. Campbell
Title: Assistant Treasurer
83
<PAGE> 89
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Mark Campellone
--------------------------------
Name: Mark Campellone
Title: Vice President
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLAND BRANCH
By /s/ Susan M. O'Connor
--------------------------------
Name: Susan M. O'Connor
Title: Director
By /s/ Peter M. Wood, Jr.
--------------------------------
Name: Peter M. Wood, Jr.
Title: Director
KEYBANK NATIONAL ASSOCIATION
By /s/ Karen A. Lee
--------------------------------
Name: Karen A. Lee
Title: Vice President
WELLS FARGO BANK, N.A.
By /s/ Kathleen S. Barnes
--------------------------------
Name: Kathleen S. Barnes
Title: Vice President
By /s/ Steve Newell
--------------------------------
Name: Steve Newell
Title: Assistant Vice President
84
<PAGE> 90
THE BANK OF NEW YORK
as Administrative Agent, LC Agent
and Swingline Bank
By /s/ Howard F. Bascom, Jr.
--------------------------------
Name: Howard F. Bascom, Jr.
Title: Vice President
One Wall Street, 18th Fl. North
New York, New York 10286
Attention: Carolyn Surles
Assistant Treasurer
Facsimile number: 212-635-6385
85
<PAGE> 91
COMMITMENT SCHEDULE
Bank Commitment
- ---- ----------
Morgan Guaranty Trust Company
of New York $ 75,000,000
NationsBank, N.A. $ 64,500,000
The Bank of New York $ 64,500,000
The Bank of Nova Scotia $ 47,000,000
Bank of Tokyo-Mitsubishi Trust Company $ 47,000,000
Toronto Dominion (New York), Inc. $ 47,000,000
Bank of America Illinois $ 30,000,000
Commerzbank AG, New York and/or Grand
Cayman Branches $ 25,000,000
Credit Lyonnais New York Branch $ 25,000,000
Deutsche Bank AG, New York and/or Cayman
Island Branch $ 25,000,000
KeyBank National Association $ 25,000,000
Wells Fargo Bank, N.A. $ 25,000,000
------------
Total $500,000,000
<PAGE> 92
PRICING SCHEDULE
The "Euro-Dollar Margin", "Non-Trade LC Fee Rate", "CD Margin" and
"Facility Fee Rate" for any day are the respective percentages per annum set
forth below in the applicable row under the column corresponding to the Pricing
Level that applies on such day:
<TABLE>
<CAPTION>
Level Level Level Level Level Level
Pricing Level I II III IV V VI
<S> <C> <C> <C> <C> <C> <C>
Euro-Dollar
Margin and
Non-Trade LC
Fee Rate
If Utiliza- .1700 .2000 .2500 .3000 .4375 .8200
tion is
50% or less
If Utiliza- .1700 .2500 .3250 .3750 .5125 .8950
tion exceeds
50%
CD Margin
If Utiliza- .2950 .3250 .3750 .4250 .5625 .9450
tion is
50% or less
If Utiliza- .2950 .3750 .4500 .5000 .6375 1.0200
tion exceeds
50%
Facility Fee .0800 .1000 .1250 .1500 .1875 .3000
Rate
</TABLE>
For purposes of this Schedule, the following terms have the
following meanings:
"Level I Pricing" applies on any day on which (i) the Borrower's
commercial paper is rated A2 or higher by S&P and P2 or higher by Moody's and
(ii) the Borrower's long-term debt is rated A- or higher by S&P and A3 or higher
by Moody's.
<PAGE> 93
"Level II Pricing" applies on any day on which (i) the Borrower's
commercial paper is rated A2 or higher by S&P and P2 or higher by Moody's and
(ii) the Borrower's long-term debt is rated BBB+ or higher by S&P and Baa1 or
higher by Moody's.
"Level III Pricing" applies on any day on which (i) the Borrower's
commercial paper is rated A2 or higher by S&P and P2 or higher by Moody's and
(ii) the Borrower's long-term debt is rated BBB or higher by S&P and Baa2 or
higher by Moody's.
"Level IV Pricing" applies on any day on which (i) the Borrower's
commercial paper is rated A3 or higher by S&P and P3 or higher by Moody's and
(ii) the Borrower's long-term debt is rated BBB- or higher by S&P and Baa3 or
higher by Moody's.
"Level V Pricing" applies on any day on which (i) the Borrower's
commercial paper is rated A3 or higher by S&P and P3 or higher by Moody's and
(ii) the Borrower's long-term debt is rated BB+ or higher by S&P and Ba1 or
higher by Moody's.
"Level VI Pricing" applies on any day if no other Pricing Level
applies on such day.
"Moody's" means Moody's Investors Service, Inc.
"Pricing Level" refers to the determination of which of Level I
Pricing, Level II Pricing, Level III Pricing, Level IV Pricing, Level V Pricing
or Level VI Pricing applies on any day.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"Utilization" means at any date the percentage equivalent of a
fraction (i) the numerator of which is the Total Usage at such date, after
giving effect to any borrowing or repayment on such date, and (ii) the
denominator of which is the Total Commitments at such date, after giving effect
to any reduction of the Commitments on such date. For purposes of this Schedule,
if for any reason any Bank has any Credit Exposure after the Commitments
terminate, the Utilization on and after the date of such termination shall be
deemed to exceed 50%.
2
<PAGE> 94
The credit ratings to be utilized for purposes of this Schedule are
those assigned to the unsecured commercial paper of the Borrower without
third-party credit enhancement or to the senior unsecured long-term debt
securities of the Borrower without third-party credit enhancement, as the case
may be. Any rating assigned to any other commercial paper or debt security of
the Borrower shall be disregarded. The rating in effect at any date is that in
effect at the close of business on such date.
3
<PAGE> 95
EXHIBIT A
NOTE
New York, New York
, 19
For value received, Woolworth Corporation, a New York corporation
(the "Borrower"), promises to pay to the order of _____________ (the "Bank"),
for the account of its Applicable Lending Office, the unpaid principal amount of
each Loan made by the Bank to the Borrower pursuant to the Credit Agreement
referred to below on the maturity date thereof provided for in the Credit
Agreement. The Borrower promises to pay interest on the unpaid principal amount
of each such Loan on the dates and at the rate or rates provided for in the
Credit Agreement. All such payments of principal and interest shall be made in
lawful money of the United States in Federal or other immediately available
funds at the office of The Bank of New York, One Wall Street, 18 North, New
York, New York.
All Loans made by the Bank, the respective types thereof and all
repayments of the principal thereof shall be recorded by the Bank and, if the
Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that neither the failure of the Bank to make any such
recordation or endorsement, nor any error therein, shall affect the obligations
of the Borrower hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement
dated as of April 9, 1997 among the Borrower, the Banks, Co-Agents,
Documentation Agent, LC
<PAGE> 96
Agent and Swingline Bank party thereto and The Bank of New York, as
Administrative Agent (as the same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the same
meanings. Reference is made to the Credit Agreement for provisions for the
prepayment hereof and the acceleration of the maturity hereof. THIS NOTE SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
WOOLWORTH CORPORATION
By________________________
Title:
2
<PAGE> 97
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- ------------------------------------------------------------------
Amount of
Amount of Principal Notation
Date Loan Repaid Made By
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
3
<PAGE> 98
EXHIBIT B
SWINGLINE NOTE
New York, New York
, 199
For value received, WOOLWORTH CORPORATION, a New York corporation
(the "Borrower"), promises to pay to the order of THE BANK OF NEW YORK (the
"Swingline Bank") the unpaid principal amount of each Swingline Loan made by the
Swingline Bank to the Borrower pursuant to the Credit Agreement referred to
below on the maturity date provided for in the Credit Agreement. The Borrower
promises to pay interest on the unpaid principal amount of each such Swingline
Loan on the dates and at the rate or rates provided for in the Credit Agreement.
All such payments of principal and interest shall be made in lawful money of the
United States in Federal or other immediately available funds at the office of
The Bank of New York, One Wall Street, 18 North, New York, New York.
All Swingline Loans made by the Swingline Bank and all repayments of
the principal thereof shall be recorded by the Swingline Bank and, if the
Swingline Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Swingline Loan then outstanding may be endorsed by the Swingline Bank on
the schedule attached hereto, or on a continuation of such schedule attached to
and made a part hereof; provided that neither the failure of the Swingline Bank
to make any such recordation or endorsement, nor any error therein, shall affect
the obligations of the Borrower hereunder or under the Credit Agreement.
This note is the Swingline Note referred to in the Credit Agreement
dated as of April 9, 1997 among the Borrower, the Banks, Co-Agents,
Documentation Agent, LC Agent and Swingline Bank party thereto and The Bank of
New York, as Administrative Agent (as the same may be amended from time to time,
the "Credit Agreement"). Terms defined in the Credit Agreement are used herein
with the same
<PAGE> 99
meanings. Reference is made to the Credit Agreement for provisions for the
prepayment hereof and the acceleration of the maturity hereof. THIS NOTE SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
WOOLWORTH CORPORATION
By________________________
Title:
2
<PAGE> 100
EXHIBIT C
Form of Money Market Quote Request
[Date]
To: The Bank of New York
(the "Administrative Agent")
From: Woolworth Corporation
Re: Credit Agreement dated as of April 9, 1997 (as amended from time to
time, the "Credit Agreement") among the Borrower, the Banks,
Co-Agents, Documentation Agent, LC Agent and Swingline Bank party
thereto and The Bank of New York, as Administrative Agent
We hereby give notice pursuant to Section 2.03 of the Credit
Agreement that we request Money Market Quotes for the following proposed Money
Market Borrowing(s):
Date of Borrowing:
--------------------
Principal Amount* Interest Period**
- ---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
- --------
*Amount must be $25,000,000 or a larger multiple of $1,000,000.
**Not less than one month (LIBOR Auction) or not less than 14 days
(Absolute Rate Auction), subject to the provisions of the definition of Interest
Period.
<PAGE> 101
Terms used herein have the meanings assigned to them in the Credit
Agreement.
WOOLWORTH CORPORATION
By________________________
Title:
2
<PAGE> 102
EXHIBIT D
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes to
Woolworth Corporation (the "Borrower")
Pursuant to Section 2.03 of the Credit Agreement dated as of April
9, 1997 among the Borrower, the Banks, Co-Agents, Documentation Agent, LC Agent
and Swingline Bank and Documentation Agent party thereto and The Bank of New
York, as Administrative Agent (as amended from time to time, the "Credit
Agreement"), we are pleased on behalf of the Borrower to invite you to submit
Money Market Quotes to the Borrower for the following proposed Money Market
Borrowing(s):
Date of Borrowing:
--------------------
Principal Amount Interest Period
- ---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30
A.M.] (New York City time) on [date].
<PAGE> 103
Terms used herein have the meanings assigned to them in the Credit
Agreement.
THE BANK OF NEW YORK
By______________________
Authorized Officer
2
<PAGE> 104
EXHIBIT E
Form of Money Market Quote
To: The Bank of New York,
as Administrative Agent
Re: Money Market Quote to Woolworth
Corporation (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, 199[ ], we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
___________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- --------- --------- ---------------------------------
$
$
[Provided, that the aggregate principal amount of Money Market Loans for
which the above offers may be accepted shall not exceed$____________.]**
- ----------
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal amount
requested. Specify aggregate limitation if the sum of the individual offers
exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000
or a larger multiple of $1,000,000.
(notes continued on following page)
<PAGE> 105
We understand and agree that the offer(s) set forth above, subject
to the satisfaction of the applicable conditions set forth in the Credit
Agreement dated as of April 9, 1997 among the Borrower, the Banks, Co-Agents,
Documentation Agents, LC Agent and Swingline Bank party thereto and The Bank of
New York, as Administrative Agent (as amended from time to time, the "Credit
Agreement"), irrevocably obligates us to make the Money Market Loan(s) for which
any offer(s) are accepted, in whole or in part.
Terms used herein have the meanings assigned to them in the Credit
Agreement.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
- ----------
*** Not less than one month or not less than 14 days, as specified in the
related Invitation. No more than five bids are permitted for each Interest
Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE> 106
EXHIBIT F
OPINION OF SPECIAL
COUNSEL FOR THE BORROWER
[Effective Date]
The Bank of New York,
as Administrative Agent
and Swingline Bank
One Wall Street
18 North
New York, New York 10286
and
The banks party to the Credit Agreement referred to below, as listed on Schedule
I hereto (the "Banks")
Ladies and Gentlemen:
We have acted as special counsel to Woolworth Corporation, a New
York corporation (the "Borrower"), in connection with the preparation, execution
and delivery of, the Credit Agreement, dated as of April 9, 1997 (the "Credit
Agreement") among the Borrower, the Banks, Co-Agents, Documentation Agent, LC
Agent and Swingline Bank party thereto and The Bank of New York, as
Administrative Agent. This opinion is being delivered pursuant to Section
3.01(c) of the Credit Agreement. Capitalized terms used and not otherwise
defined herein shall have the meanings herein as ascribed thereto in the Credit
Agreement.
In our examination we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to this
opinion which we did not independently establish or verify, we have relied upon
statements and representations of the Borrower and its officers and other
representatives and of public officials, including the facts set forth in the
Borrower's Certificate described below.
<PAGE> 107
In rendering the opinions set forth herein, we have examined and
relied on originals or copies of the following:
(a) the Credit Agreement;
(b) the Notes and Swingline Note delivered to you on the date
hereof;
(c) the certificate of the Borrower executed by Andrew P. Hines
dated the date hereof, a copy of which is attached as Exhibit A hereto
(the "Borrower's Certificate");
(d) certified copies of the Certificate of Incorporation and By-laws
of the Borrower;
(e) a certified copy of certain resolutions of the Board of
Directors of the Borrower adopted on March 12, 1997; and
(f) such other documents as we have deemed necessary or appropriate
as a basis for the opinions set forth below.
The Credit Agreement, the Notes and the Swingline Note shall hereinafter be
referred to collectively as the "Transaction Documents."
Members of our firm are admitted to the bar of the State of New
York. We express no opinion as to the laws of any jurisdiction other than (i)
the laws of the State of New York, and (ii) the federal laws of the United
States of America to the extent specifically referred to herein.
Based on the foregoing and subject to the limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that:
1. The Borrower has been duly incorporated and is validly existing
and in good standing under the laws of the State of New York.
2. The Borrower has the corporate power and authority to (i) carry
on its business as described in the Borrower's 1995 Form 10-K and (ii) execute,
deliver and perform all of its obligations under each of the Transaction
Documents and to borrow and to incur reimbursement obligations with respect to
letters of credit issued thereunder. The execution and delivery of each of the
Transaction Documents and the consummation by the Borrower
2
<PAGE> 108
of the transactions contemplated thereby have been duly authorized by all
requisite corporate action on the part of the Borrower. Each of the Transaction
Documents has been duly executed and delivered by the Borrower.
3. Each of the Transaction Documents constitutes a valid and binding
obligation of the Borrower enforceable against the Borrower in accordance with
its terms, subject to the following qualifications:
(a) enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in equity or at law);
(b) we express no opinion as to the enforceability of any
rights to contribution or indemnification provided for in the Transaction
Documents which are violative of the public policy underlying any law,
rule or regulation (including any federal or state securities law, rule or
regulation); and
(c) we express no opinion as to Section 9.04 of the Credit
Agreement to the extent it authorizes or permits any party to any
Transaction Document or any purchaser of a participation interest for any
such party to set off or apply any deposit, property or indebtedness with
respect to any participation interest.
4. The execution and delivery by the Borrower of each of the
Transaction Documents and the performance by the Borrower of its obligations
under each of the Transaction Documents, each in accordance with its terms, do
not conflict with the Certificate of Incorporation or By-laws of the Borrower.
5. Neither the execution, delivery or performance by the Borrower of
the Transaction Documents nor the compliance by the Borrower with the terms and
provisions thereof will contravene any provision of any Applicable Law (as
hereinafter defined). "Applicable Laws" shall mean those laws, rules and
regulations of the State of New York and of the United States of America
(including, without limitation, Regulations G, U and X of the Federal Reserve
Board) which, in our experience, are normally applicable to transactions of the
type contemplated by the Transaction Documents.
3
<PAGE> 109
6. No Governmental Approval (as hereinafter defined), which has not
been obtained or taken and is not in full force and effect, is required to
authorize or is required in connection with the execution, delivery or
performance of any of the Transaction Documents by the Borrower. "Governmental
Approval" means any consent, approval, license, authorization or validation of,
or filing, recording or registration with, any Governmental Authority (as
hereinafter defined) pursuant to Applicable Laws. "Governmental Authority" means
any New York or federal legislative, judicial, administrative or regulatory
body.
7. Neither the execution, delivery or performance by the Borrower of
its obligations under the Transaction Documents nor compliance by the Borrower
with the terms thereof will contravene any Applicable Order (as hereinafter
defined) against the Borrower. "Applicable Orders" means those orders, judgments
or decrees of Governmental Authorities identified in paragraph 2 of the
Borrower's Certificate.
8. The Borrower is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
In rendering the foregoing opinions, we have assumed, with your
consent, that:
(a) the execution, delivery and performance of any of the Borrower's
obligations under the Transaction Documents does not and will not conflict with,
contravene, violate or constitute a default under (i) to your knowledge, any
lease, indenture, instrument or other agreement to which the Borrower or its
property is subject, (ii) any rule, law or regulation to which the Borrower is
subject (other than Applicable Laws as to which we express our opinion in
paragraph 5 herein) or (iii) any judicial or administrative order or decree of
any governmental authority (other than Applicable Orders as to which we express
our opinion in paragraph 7 herein); and
(b) no authorization, consent or other approval of, notice to or
filing with any court, governmental authority or regulatory body (other than
Governmental Approvals as to which we express our opinion in paragraph 6 herein)
is required to authorize or is required in connection with the execution,
delivery or performance by the Borrower of the Transaction Documents or the
transactions contemplated thereby.
4
<PAGE> 110
We understand that you are separately receiving an opinion, dated as
of the date hereof, with respect to the foregoing from Gary M. Bahler (the
"General Counsel Opinion") and we are advised that such opinion contains
qualifications. Our opinions herein stated are based on the assumptions
specified above and we express no opinion as to the effect on the opinions
herein stated of the qualifications contained in the General Counsel Opinion.
Our opinions are also subject to the following assumptions and
qualifications:
(a) we have assumed each of the Transaction Documents constitutes
the legal, valid and binding obligation of each party to such Transaction
Document (other than the Borrower) enforceable against such party (other than
the Borrower) in accordance with its terms; and
(b) we express no opinion as to the effect on the opinion expressed
herein of (i) the compliance or non-compliance of any party (other than the
Borrower) to the Transaction Documents with any state, federal or other laws or
regulations applicable to it or (ii) the legal or regulatory status or the
nature of the business of any party (other than the Borrower) to the Transaction
Documents.
In rendering the opinions herein stated, we have taken into account
the fact that you have asked the Borrower to make, and the Borrower has made,
the representation set forth in Section 4.02 of the Credit Agreement.
This opinion is being furnished only to you and is solely for your
benefit and is not to be relied upon by any other Person or for any other
purpose without our prior written consent, provided, however, that any Assignee
that becomes a Bank pursuant to Section 9.06(c) of the Credit Agreement may rely
on this opinion as if it were addressed to such Assignee and delivered on the
date hereof.
Very truly yours,
5
<PAGE> 111
Schedule I
to SASM&F Opinion
Lenders
1. Morgan Guaranty Trust Company of New York
2. NationsBank, N.A.
3. The Bank of New York
4. The Bank of Nova Scotia
5. Bank of Tokyo-Mitsubishi Trust Company
6. Toronto Dominion (New York), Inc.
7. Bank of America Illinois
8. Commerzbank AG, New York and/or Grand Cayman
Branches
9. Credit Lyonnais New York Branch
10. Deutsche Bank AG, New York and/or Cayman Island
Branch
11. KeyBank National Association
12. Wells Fargo Bank, N.A.
<PAGE> 112
Exhibit G
[Form of Opinion of Borrower's General Counsel]
[Woolworth letterhead]
April 9, 1997
The Bank of New York,
as Administrative Agent
and Swingline Bank
One Wall Street
18 North
New York, New York 10286
and
The banks party to the
Credit Agreement referred to
below, as listed on Schedule I
hereto (the "Banks")
Ladies and Gentlemen:
I am General Counsel of Woolworth Corporation, a New York
corporation (the "Borrower"), and have acted as such in connection with the
preparation, execution and delivery of, the Credit Agreement, dated as of April
9, 1997 (the "Credit Agreement"), among the Borrower, the Banks, Co-Agents,
Documentation Agent, LC Agent and Swingline Bank party thereto and The Bank of
New York, as Administrative Agent. This opinion is being delivered pursuant to
Section 3.01(d) of the Credit Agreement. Capitalized terms used and not
otherwise defined herein shall have the same meanings herein as ascribed thereto
in the Credit Agreement.
In my examination I have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to me as originals, the conformity to original documents of all
documents submitted to me as certified or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to this
opinion which I
<PAGE> 113
did not independently establish or verify, I have relied upon statements and
representations of the Borrower and its officers and other representatives and
of public officials.
In rendering the opinions set forth herein, I, or a lawyer acting
under my general supervision, have examined and relied on originals or copies of
the following:
(a) the Credit Agreement;
(b) the Notes and the Swingline Note delivered to you on the date
hereof;
(c) certified copies of the Certificate of Incorporation and By-laws
of the Borrower;
(d) a copy of certain resolutions of the Board of Directors of the
Borrower adopted on March 12, 1997; and
(e) such other documents as I have deemed necessary or appropriate
as a basis for the opinions set forth below.
The Credit Agreement, the Notes and the Swingline Note shall
hereinafter be referred to collectively as the "Transaction Documents."
I am a member of the bar of the State of New York and I do not
express any opinion herein concerning any law other than the laws of the State
of New York.
Based upon the foregoing and subject to the limitations,
qualifications, exceptions and assumptions set forth herein, I am of the opinion
that:
1. Each of the Transaction Documents has been duly executed and
delivered by the Borrower.
2. The execution and delivery by the Borrower of each of the
Transaction Documents and the performance by the Borrower of its obligations
under each of the Transaction Documents, each in accordance with its terms, do
not (i) constitute a violation of or a default under any Applicable Contracts
(as hereinafter defined) or (ii) cause the creation of any security interest or
lien upon any of the property of the Borrower pursuant to any Applicable
Contracts. I do not express any opinion, however, as to whether the execution,
delivery or performance by the Borrower of the Transaction Documents will
constitute a violation of or a default under any covenant, restriction or
provision with respect to financial ratios or tests or any
2
<PAGE> 114
aspect of the financial condition or results of operations of the Borrower as
set forth in the Transaction Documents or otherwise. "Applicable Contracts" mean
those agreements or instruments which are material to the business or financial
condition of the Borrower.
3. Except for the Designated Litigation, there is no action, suit or
proceeding pending against, or to the best of my knowledge threatened against or
affecting, the Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official which could reasonably
be expected to result in a Material Adverse Effect.
This opinion is being furnished only to you and is solely for your
benefit and is not to be relied upon by any other Person or for any other
purpose without my prior written consent, provided, however, that any Assignee
that becomes a Bank pursuant to Section 9.06(c) of the Credit Agreement may rely
on this opinion as if it were addressed to such Assignee and delivered on the
date hereof.
Very truly yours,
3
<PAGE> 115
Schedule I
to Woolworth Opinion
Lenders
1. Morgan Guaranty Trust Company of New York
2. NationsBank, N.A.
3. The Bank of New York
4. The Bank of Nova Scotia
5. Bank of Tokyo-Mitsubishi Trust Company
6. Toronto Dominion (New York), Inc.
7. Bank of America Illinois
8. Commerzbank AG, New York and/or Grand Cayman
Branches
9. Credit Lyonnais New York Branch
10. Deutsche Bank AG, New York and/or Cayman Island
Branch
11. KeyBank National Association
12. Wells Fargo Bank, N.A.
<PAGE> 116
EXHIBIT H
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE ARRANGER AND SYNDICATION AGENT
To the Banks, the Swingline Bank and the
Administrative Agent Referred to Below
c/o The Bank of New York,
as Administrative Agent
One Wall Street
18 North
New York, New York 10286
Dear Sirs:
We have participated in the preparation of the Credit Agreement (the
"Credit Agreement") dated as of April 9, 1997 among Woolworth Corporation, a New
York corporation (the "Borrower"), the Banks (the "Banks"), Co-Agents,
Documentation Agent, LC Agent and Swingline Bank party thereto and The Bank of
New York, as Administrative Agent, and have acted as special counsel for the
Arranger and Syndication Agent for the purpose of rendering this opinion
pursuant to Section 3.01(e) of the Credit Agreement. Terms defined in the Credit
Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Credit Agreement, the Notes and the Swingline Note are within the Borrower's
corporate powers
<PAGE> 117
and have been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note and the Swingline Note delivered to you today
constitutes a valid and binding obligation of the Borrower, in each case
enforceable in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York and the federal laws of
the United States of America. In giving the foregoing opinion, we express no
opinion as to the effect (if any) of any law of any jurisdiction (except the
State of New York) in which any Bank is located which limits the rate of
interest that such Bank may charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent; provided that
any Assignee that becomes a Bank pursuant to Section 9.06(c) of the Credit
Agreement may rely on this opinion as if it were addressed to such Assignee and
delivered on the date hereof.
Very truly yours,
2
<PAGE> 118
EXHIBIT I
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the
"Assignor") and [ASSIGNEE] (the "Assignee").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Credit Agreement dated as of April 9, 1997 among Woolworth
Corporation, the Banks, Co-Agents, Documentation Agent, LC Agent and Swingline
Bank party thereto and The Bank of New York, as Administrative Agent (as amended
from time to time, the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Committed Loans to the Borrower and participate in Letters of
Credit issued for the account of the Borrower in an aggregate amount at any time
outstanding not to exceed $__________;
WHEREAS, Committed Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof; and*
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"),
together with a corresponding portion of its outstanding Committed Loans and LC
Exposure, and the Assignee proposes to accept assignment of such rights and
assume the corresponding obligations from the Assignor on such terms;
- --------
*This clause (and certain other provisions herein) should be modified to
reflect the assignment of Money Market Loans if such Loans are being assigned.
<PAGE> 119
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
and purchases such rights from the Assignor and assumes all of the obligations
of the Assignor under the Credit Agreement to the extent of the Assigned Amount,
including the purchase from the Assignor of the corresponding portion of the
principal amount of the Committed Loans made by, and the LC Exposure of, the
Assignor outstanding at the date hereof. Upon the execution and delivery hereof
by the Assignor, the Assignee, the Borrower and the Administrative Agent and the
payment of the amounts specified in Section 3 hereof required to be paid on the
date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights
and be obligated to perform the obligations of a Bank under the Credit Agreement
with a Commitment in an amount equal to the Assigned Amount, and (ii) the
Commitment of the Assignor shall, as of the date hereof, be reduced by a like
amount and the Assignor released from its obligations under the Credit Agreement
to the extent such obligations have been assumed by the Assignee. The assignment
provided for herein shall be without recourse to the Assignor.
SECTION 3. Payments. (a) As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on
the date hereof in Federal funds the amount heretofore agreed between them.* It
is understood that facility fees accrued to the date hereof in respect of the
Assigned Amount are for the account of the Assignor and such fees accruing from
and including the date hereof are for the account of the Assignee. Each of the
Assignor and the Assignee hereby agrees that if it receives any amount under the
Credit Agreement which is for the account of the other party hereto, it shall
receive the same for the account of such other party to the extent of such
- --------
*Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee.
2
<PAGE> 120
other party's interest therein and shall promptly pay the same to such other
party.
(b) The Assignor shall pay the $2500 administrative fee to be paid
by it to the Administrative Agent pursuant to Section 9.06(c) of the Credit
Agreement.*
SECTION 4. Consent of the Borrower and the Administrative Agent.
This Agreement is conditioned upon the consent of the Borrower, the LC Agent,
the Swingline Bank and the Administrative Agent pursuant to Section 9.06(c) of
the Credit Agreement. The execution of this Agreement by the Borrower, the LC
Agent, the Swingline Bank and the Administrative Agent is evidence of this
consent. Pursuant to said Section 9.06(c) the Borrower is obligated to execute
and deliver a Note payable to the order of the Assignee, if required, to reflect
the assignment provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Borrower, or the validity and enforceability of the obligations of the Borrower
in respect of the Credit Agreement or any Note. The Assignee acknowledges that
it has, independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Borrower.
SECTION 6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
- --------
*Section 3(b) should be deleted if the assignment is required by the
Borrower pursuant to Section 8.06 of the Credit Agreement.
3
<PAGE> 121
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By_________________________
Title:
[ASSIGNEE]
By__________________________
Title:
Consented and agreed to:
WOOLWORTH CORPORATION
By__________________________
Title:
THE BANK OF NEW YORK,
as Administrative Agent, LC Agent
and Swingline Bank
By__________________________
Title:
4
<PAGE> 1
EXHIBIT 11
W O O L W O R T H C O R P O R A T I O N
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
(in millions, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCIAL STATEMENT PRESENTATION
Weighted-average number of common shares
outstanding 133.5 132.9 132.3 131.7 130.8
======== ======== ======== ======== ========
Net income (loss) $ 169 $ (164) $ 47 $ (495) $ 280
Less: Preferred dividends -- -- -- -- --
-------- -------- -------- -------- --------
Net income (loss) applicable to common shareholders $ 169 $ (164) $ 47 $ (495) $ 280
======== ======== ======== ======== ========
Net income (loss) per common share $ 1.26 $ (1.23) $ 0.36 $ (3.76) $ 2.14
======== ======== ======== ======== ========
PRIMARY(1)
Weighted-average number of common shares
outstanding and common share equivalents 134.3 132.9 132.3 131.7 131.2
======== ======== ======== ======== ========
Net income (loss) applicable to common shares $ 169 $ (164) $ 47 $ (495) $ 280
======== ======== ======== ======== ========
Net income (loss) per common share $ 1.26 $ (1.23) $ 0.36 $ (3.76) $ 2.13
======== ======== ======== ======== ========
FULLY DILUTED(1)(2)
Weighted-average number of common shares outstanding
and fully diluted common share equivalents 134.5 132.9 132.3 131.9 131.2
Assumed conversion of preferred stock -- 0.6 0.6 0.6 0.7
-------- -------- -------- -------- --------
Adjusted weighted-average number of common
shares and common share equivalents 134.5 133.5 132.9 132.5 131.9
======== ======== ======== ======== ========
Net income (loss) applicable to common shares $ 169 $ (164) $ 47 $ (495) $ 280
======== ======== ======== ======== ========
Net income (loss) per common share $ 1.25 $ (1.23) $ 0.35 $ (3.74) $ 2.12
======== ======== ======== ======== ========
</TABLE>
(1) This calculation is submitted in accordance with Securities Exchange Act
of 1934 Release No. 9083 although not required by footnote 2 to paragraph
14 of APB Opinion No. 15 because it results in dilution of less than 3%.
(2) This calculation is submitted for the 1995 and 1993 net losses in
accordance with Regulation S-K item 601(b)(11) although it is contrary to
paragraph 40 of APB Opinion No. 15 because it produces anti-dilutive
results.
<PAGE> 1
EXHIBIT 12
W O O L W O R T H C O R P O R A T I O N
COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES
($ in millions)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C>
NET EARNINGS
Net income (loss) $169 $(164) $ 47 $(495) $280
Income tax expense (benefit) 111 (69) 49 (303) 157
Gross interest expense,
excluding capitalized interest 77 124 110 86 94
Portion of rents deemed representative
of the interest factor (1/3) 230 224 211 210 199
---- ----- ----- ----- ----
$587 $ 115 $ 417 $(502) $730
==== ===== ===== ===== ====
FIXED CHARGES
Gross interest expense $ 77 $ 124 $ 111 $ 86 $ 94
Portion of rents deemed representative
of the interest factor (1/3) 230 224 211 210 199
---- ----- ----- ----- ----
$307 $ 348 $ 322 $ 296 $293
==== ===== ===== ===== ====
RATIO OF EARNINGS TO FIXED CHARGES 1.9 .3 1.3 -- 2.5
==== ===== ===== ===== ====
</TABLE>
Earnings were not adequate to cover fixed charges by $233 million in 1995 and
$798 million in 1993.
<PAGE> 1
EXHIBIT 13
[WOOLWORTH
CORPORATION LOGO]
PROGRESS
- ----------------------------------------------------------------------------
1996 ANNUAL REPORT
<PAGE> 2
COMPANY PROFILE
Woolworth Corporation is a diversified global retailer operating specialty and
general merchandise stores and related support facilities in North America,
Europe, Australia, and Asia. Specialty formats include such chains as Foot
Locker, Lady Foot Locker, Kids Foot Locker, and Champs Sports athletic footwear
and apparel stores; the Northern Reflections, Northern Traditions, Northern
Elements, and Northern Getaway apparel stores, and the After Thoughts jewelry
stores and Kinney family shoe stores. The Company also operates the familiar
Woolworth general merchandise stores in the United States and abroad.
The Company's 82,000 associates around the world are committed to
providing their customers with quality merchandise at good value.
CONSOLIDATED STATISTICS IN BRIEF
<TABLE>
<CAPTION>
($ in millions, except per share amounts) 1996 1995 1994
- ----------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Sales $8,092 8,224 8,238
Operating profit before non-recurring items $ 421 209 295
Adoption of accounting standard for impairment of
long-lived assets -- (241) --
Net gain on sales of real estate 35 34 41
Disposed operations (45) (43) (62)
Operating profit (loss) $ 411 (41) 274
Net income (loss) $ 169 (164) 47
Per common share
Net income (loss) $ 1.26 (1.23) .36
Dividends declared $ -- -- .74
Capital expenditures $ 134 167 218
Total assets $3,476 3,506 4,145
Shareholders' equity $1,334 1,229 1,358
Number of stores at year end 7,746 8,178 8,629
</TABLE>
<PAGE> 3
DEAR SHAREHOLDERS:
ROGER N. FARAH [PHOTO]
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER (LEFT)
DALE W. HILPERT
PRESIDENT AND
CHIEF OPERATING OFFICER
WOOLWORTH CORPORATION MADE STRONG PROGRESS IN 1996. We continued to aggressively
implement the programs and disciplines that are part of our strategic plan. We
also made significant improvements in our near-term performance, which are
clearly demonstrated by the Company's 1996 results. In addition, in 1996 we set
the stage for creating and sustaining consistent and profitable growth.
In this annual report we will describe our progress. We will show you how the
changes we put in place throughout our organization beginning in 1995 have
enabled Woolworth to now shift its focus from primarily repairing what was
broken, to building and growing our Company into a world-class retailer.
Aggressively implementing our strategic plan is the key to this growth, and we
expect our plan to continue to produce improved earnings and cash flow for the
Company in 1997. It is in this way that we intend to create value for our
shareholders.
REVIEW OF 1996
- - WE ACHIEVED SOLID INCREASES IN OPERATING INCOME AND IN NET INCOME:
Woolworth returned to profitability, recording net income for 1996 of $169
million, or $1.26 per share, and operating profit before non-recurring items of
$421 million, compared to $209 million in 1995.
- - WE GAINED FINANCIAL STRENGTH AND FLEXIBILITY:
The reduction in total debt of $116 million, or 16 percent; decline in interest
expense of $46 million, or 39 percent; elimination of short-term debt, and
creation of cash on hand of $321 million at year-end all contributed to our
stronger financial position and provided us with financial flexibility.
- - WE STRENGTHENED OUR GLOBAL ORGANIZATION:
High-quality management teams were established at both the corporate and
operating division levels to pursue growth opportunities on an international
level.
- - WE ACTIVELY MANAGED OUR ASSETS:
Vigorous efforts in inventory management, expense management, dispositions of
non-strategic real estate, and reductions in the number of unprofitable stores
benefited all corporate and business units.
- - WE SUBSTANTIALLY REDUCED EXPENSES:
Operating costs declined dramatically both in absolute terms and as a percentage
of sales as a result of corporate-wide programs to sharpen productivity.
- - WE IMPROVED OUR INFRASTRUCTURE:
Better distribution processes support our operating businesses, while new, more
focused approaches introduced in human resources, real estate, and information
systems are upgrading the level of services we are providing to our businesses.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT 1.
<PAGE> 4
ELIMINATION OF SHORT-TERM DEBT
($ millions)
<TABLE>
<CAPTION>
TOTAL DEBT
NET OF CASH SHORT TERM
<S> <C> <C>
1994 1,116 853
1995 700 69
1996 276 --
</TABLE>
NOTE: DEBT DOES NOT INCLUDE
OPERATING LEASES
TODAY'S SOUND FINANCIAL POSITION
Woolworth Corporation's substantially improved financial position is one of the
clearest measures of our strong progress. It reflects our efforts over the past
two years to systematically address and correct important financial issues that
needed to be resolved before we could fully devote our efforts to reinvesting in
our businesses to create sustained and productive growth.
Since 1994, we made significant progress in restructuring and reducing debt,
which has lowered interest expense. We also developed programs to actively
manage our assets which provided cash: We lowered inventories by $353 million
(at cost), and upgraded their quality. We lowered our operating expenses by over
$200 million. We disposed of non-strategic businesses and properties which
generated cash proceeds of $222 million. And, as we increased our cash flow, we
also reduced our capital expenditures, focusing our spending on our most
strategic opportunities.
As a result, we moved from consuming cash -- some $1.2 billion between 1992 and
1994 -- to generating a total of $667 million at the end of 1996. At year-end
1996, total debt is 31 percent of total capitalization (excluding operating
leases), compared to 1994, when total debt was 47 percent of total
capitalization.
Our strengthened financial position allowed us to recently reduce our revolving
credit facility from $1 billion to $500 million. This will help in lowering
borrowing costs in future years.
STRONG IMPROVEMENTS IN OPERATING EARNINGS
The Company's substantially increased earnings reflect operating improvements
shown by all of our principal businesses. Our worldwide Athletic Group turned in
an outstanding performance and our Northern Group of apparel stores in the
United States and Canada also made a strong contribution. Improved results were
shown by our general merchandise operations in the United States and Germany as
they aggressively implemented strategic initiatives, which need to continue in
1997.
The outstanding performance of our Athletic Group will be enhanced by our
early-1997 purchase of Eastbay, a leading catalogue retailer of athletic
merchandise. Our strong financial position ensured that we were able to
comfortably make this acquisition while still continuing to generate sufficient
funds to continue our ongoing turnaround efforts.
Our results for 1996 demonstrate the progress that we have made as well as the
challenges that we face in growing our Company as we move ahead and continue to
implement our strategic plan. Our strong financial base is important to us;
however, as a result of our progress over the past two years, we can now turn
our primary efforts to building our businesses by pursuing strategies of growth
and expansion.
OUR STRATEGIC PLAN,
OUR CORPORATE INITIATIVES, AND OUR VISION
In 1995, we began to implement our strategic plan and corporate-wide
initiatives. Our long-term vision at the heart of that plan focuses on Woolworth
Corporation as a global retailer, consistently achieving world-class results: a
fully integrated business with a merchandising focus,
2. WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 5
comprising high-return and high-growth operations sharing a state-of-the-art
infrastructure, and managed from a global perspective. The culture of this
rebuilt company will be one that is stimulated by change, driven by a quest for
excellence, and characterized by intellectual curiosity and agility.
Corporate-wide initiatives help us to organize and focus specific strategies
which will lead to fully realizing our long-term vision. They are a part of our
strategic plan and address common issues faced by our operating businesses, and
are tailored to differences among operations. Our corporate-wide initiatives
require that we effectively manage our asset base, eliminating assets -- whether
businesses or properties -- that are non-strategic or underperforming. We manage
these initiatives at the corporate level and monitor them centrally. We are
making progress against each of these initiatives in line with our strategic
plan.
AGGRESSIVE INVENTORY MANAGEMENT
Over the past two years, we have substantially reduced our inventory levels --
by $353 million (at cost), or 22 percent. As a result, we have lowered our
investment and have, at the same time, improved new-product flow to our stores.
We have taken merchandise out of distribution centers and back rooms and put it
on the selling floors of our retail stores. And, we have taken old and unwanted
merchandise out of the system. As of the end of 1996, we have virtually
eliminated all merchandise older than 12 months, and improved annual merchandise
turnover from 2.1 times at the end of 1994 to 2.5 times at the end of 1996.
Today we are operating with less inventory, and the quality of our inventory is
much improved.
We have embraced the disciplines of merchandise planning and forecasting and
made them a regular part of the way we operate our businesses. In addition, we
have established standards for aging of inventory by operating business and by
category within each business, so that we can continue to regularly flow
exciting and fresh merchandise to our stores.
IMPROVED PRODUCTIVITY THROUGH EXPENSE MANAGEMENT
Over the past two years, vigorous efforts to improve productivity throughout the
Company have enabled us to substantially reduce operating expenses both in
absolute dollars and as a percentage of sales.
We have established Profit Improvement Committees in each of our businesses to
identify ineffective processes. As a result, we have improved productivity in a
variety of different areas. By continuing to reduce the cost of running our
businesses and increase our productivity, we can be assured of becoming a much
more nimble and effective competitor in today's challenging marketplace.
SIGNIFICANT REDUCTION OF UNPROFITABLE STORES AND NON-STRATEGIC BUSINESSES
Dispositions of unprofitable stores and non-strategic businesses allow the
Company to reduce its investment and to reinvest in its most productive assets.
They also enable the Company to focus its efforts on those businesses that are
most meaningful. During 1996, we continued with our aggressive program of
dispositions, eliminating the Rx Place Drug Mart and Accessory Lady chains in
the United
<TABLE>
<CAPTION>
REDUCTION OF INVENTORY
($ millions at cost)
<S> <C>
1994 1,622
1995 1,364
1996 1,269
</TABLE>
WOOLWORTH CORPORATION 1996 ANNUAL REPORT 3.
<PAGE> 6
POSITIVE NET CASH FLOW FROM CONTINUING OPERATIONS
($ millions)
<TABLE>
<CAPTION>
$1.2 B $667 M
CASH CONSUMED GENERATED
------------------------------------ ---------------------
1992 1993 1994 1995 1996
------ -------- ------ ------ ------
<S> <C> <C> <C> <C>
(118) (406) (674) 333 334
</TABLE>
States and the Silk & Satin lingerie chain in Canada. In Germany, we sold the
Lady Plus apparel chain and the Rubin jewelry chain as well as our interest in
the New Yorker Sud jeans business. In addition, we recently completed the
disposition of the Gallery shoe store chain in Australia and the Moderna shoe
store chain in Germany. We will continue our work on dispositions over the
coming year.
Through a combination of store closings and operating improvement programs, we
are making progress in reducing the number of unprofitable stores. Over the
two-year period including 1995 and 1996, we have eliminated 1,443 non-productive
stores.
REAL ESTATE STRATEGIES TO DRIVE GROWTH
We have made changes to our real estate group throughout 1996 and added
considerably to our in-house expertise. These changes strengthened our
organization and better positioned us to grow through opening new stores and
renewing our existing store base through remodelings and relocations. We are
also focusing on updating store designs to ensure that merchandise is showcased
in an environment that is appealing to our customers.
During 1997 we will begin an aggressive program of new-store openings,
remodelings, and relocations to help improve comparable-store growth. We plan to
open about 400 new stores and we will be working on about 500 relocations and
remodelings of existing stores, mostly in specialty concepts. The Athletic Group
and Northern Group formats, our highest-return businesses, will see the heaviest
concentration of these programs. In addition, we will continue our ongoing
remodeling of the Kinney shoe store chain and begin work on a new, updated
design for our After Thoughts jewelry store chain. We also plan to remodel
additional Woolworth general merchandise stores in the United States along the
lines of the prototype stores tested in Wilmington, Delaware in 1996.
MORE EFFICIENT LOGISTICS AND DISTRIBUTION PROCESSES
During 1996, we continued to make progress in redesigning the flow of
merchandise to our stores. We completed the principal consolidation of space in
our North American distribution network, which now consists of four major
service centers -- reduced from 13 facilities at the end of 1994. We are
currently installing a new, warehouse-management system in our Junction City,
Kansas center, which utilizes state-of-the-art equipment and systems to better
manage the distribution process so we can speed merchandise to our stores to
drive our business. We plan to install this system throughout our North American
distribution network over the next several years.
Improved distribution processes have helped us upgrade the level of service to
our stores, while, at the same time, reducing the cost of delivering
merchandise. We will continue to work with our vendors to rationalize the
distribution process on a supply-chain basis, allowing us to leverage our scale
and the synergies that exist
4. WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 7
across divisions. Our logistics and distribution initiatives have also
complemented our inventory management efforts and are helping us keep our
inventories lean.
NEW GLOBAL INFORMATION SYSTEMS
During 1996, we completed an in-depth analysis of our information systems and
established a plan to transform their architecture to more effectively support
our integrated global retailing approach, including creating common
merchandising systems as well as accounting and financial reporting systems. In
rebuilding our information systems, we will use common business processes and
standard measures of performance worldwide, and we will leverage knowledge and
best practices across all operating divisions. Our goal is to have consistency
in practices and quality of information throughout our Company.
We will use our new systems to help drive the growth of our businesses and to
enable us to achieve increased sales and improved gross margin and inventory
turnover levels. We expect that our enhanced systems -- like those we have begun
to install as a part of our logistics initiative -- will help us achieve our
expense-reduction targets. Improved systems will also help us develop a common
information-driven culture and a standard management approach worldwide.
CHANGING THE CULTURE THROUGH HUMAN RESOURCES
We have made good progress in creating a performance-based culture through human
resources processes. We've placed great emphasis on training, and have designed
specific programs to close the gaps in our merchandising skills, which were not
a focus in the past. Human resources is a significant part of our rebuilding
effort and is integrated into how we manage our Company. Since 1995, we have
added first-rate management with skills and experience that had been missing
from the Company. We also de-layered our organization and better aligned
compensation with performance.
During 1996, we made great strides towards completing our senior management
team, and continued to implement our new standard for high-quality leadership.
We also established a worldwide Human Resources Leadership Team, which meets
regularly to develop programs to drive and manage change.
As part of our effort to become a world-class retailer, the Company --
management, associates and directors -- is committed to equal employment
opportunity and having a diverse work force at all levels of our organization.
This commitment is reflected in our Code of Business Conduct, active minority
recruitment programs, and ongoing training programs designed to promote and help
ensure work force diversity.
OUR GLOBAL POINT OF VIEW
We believe that managing Woolworth Corporation from a global perspective can add
significant value to all our operating businesses. We expect that implementing
new, more uniform standards and processes worldwide will lead to consistency in
execution and overall higher performance.
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
($ millions)
<S> <C>
1995 167
1996 134
1997 EST 285
</TABLE>
WOOLWORTH CORPORATION 1996 ANNUAL REPORT 5.
<PAGE> 8
We apply our global approach to our corporate-wide initiatives affecting
operating divisions as well as corporate service functions. We also manage our
businesses globally, and we have recently centralized the management of certain
formats that are located in more than one country: Champs Sports, Kinney, and
After Thoughts stores in Canada will each be managed from the United States.
This approach -- which gives us a consistent point of view plus the flexibility
to adapt to individual market conditions -- has proven successful with our
global Foot Locker format, centrally managed from the United States, and our
Northern Group chains, managed from Canada, which operate stores in the United
States and Canada. Where appropriate, our sales support functions are managed
globally as well.
OPERATING BUSINESSES
Our strategic plan sets out the principles by which we manage our operating
businesses: We will accelerate growth in formats where we are strong, fix
businesses with an upside potential, and divest ourselves of non-strategic
businesses.
- --------------------------------------------------------------------------------
FOR 1997, WE ARE PLANNING AGGRESSIVE GROWTH FOR OUR ATHLETIC GROUP WITH
SUBSTANTIAL NEW-STORE OPENINGS, PLUS REMODELINGS AND RELOCATIONS COMBINED WITH
STRONG MERCHANDISING INITIATIVES.
- --------------------------------------------------------------------------------
POWERFUL GROWTH IN THE ATHLETIC GROUP
The Athletic Group, which includes about 3,400 stores worldwide, has compiled an
outstanding record of increased sales and profits in 1996, a direct result of
more effective merchandising programs as well as a substantially sharpened
inventory position and dramatically reduced expense rates. The powerful
performance of the Athletic Group in 1996 led us to plan a program of aggressive
growth for 1997 both in the United States and internationally. This includes
substantial new-store openings, plus remodelings and relocations combined with
strong merchandising initiatives.
In 1997, we plan to open as many as 250 stores in Athletic Group formats. In the
United States, we will increase our presence in malls with the expansion of the
Lady Foot Locker, Kids Foot Locker, and Champs Sports formats. We are also
opening exciting new-store combinations that link several related Foot Locker
formats to give us a more effective mall presence. In addition, we are planning
to increase Foot Locker's presence outside the malls in the United States.
We also plan to drive sales growth through new merchandise initiatives,
expanding the distribution of key items and increasing our apparel business.
Apparel will receive more emphasis throughout all of our athletic formats,
especially in remodeled locations where we will recapture space no longer needed
for stock-room purposes as a result of our slimmed-down inventory levels. We
also plan to give increased attention to visual merchandising and will update
our stores with fresh designs to best display our merchandise.
Internationally, we plan to grow Foot Locker in Western Europe, Canada, and
Australia. We will also be launching Foot Locker's entry into Japan. This latter
initiative will be led by a senior Foot Locker executive whose experience
6. WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 9
and expertise will give us a strategic advantage in developing this market. Our
approach to Japan is consistent with the success we have had over the past two
years in positioning senior Athletic Group managers to head up key international
operations.
Our recent acquisition of Eastbay will be another engine of growth for the
Athletic Group. Eastbay will provide an additional channel of distribution --
direct marketing. We will be better able to serve our customers in existing
formats by using catalogues to present broader and deeper merchandise
assortments. Eastbay will benefit by having access to the strong vendor
relationships and the merchandising and product development skills of the
Athletic Group.
PROGRESS IN GERMANY
In 1996, we made progress in our general merchandise operations in Germany, but
at a slower rate than we wanted. We will be better able to focus on these
operations as a result of our dispositions of non-strategic specialty businesses
in Germany. While we succeeded in substantially reducing expenses in the German
general merchandise operations, the one-time cost of work force reduction
programs -- which we expect to benefit these operations in future years -- was
very expensive. We also made progress on our initiatives to reduce and manage
inventory and to centralize purchasing processes. These efforts were
complemented by work we did to realign logistics and distribution activities. In
addition, we sold non-strategic real estate to reduce our investment. We
accomplished all this despite the difficult economic environment in Germany,
which continues to challenge our general merchandise stores.
- --------------------------------------------------------------------------------
WE ARE MAKING PROGRESS IN OUR GENERAL MERCHANDISE OPERATIONS IN GERMANY AND THE
UNITED STATES AS WE CONTINUE TO WORK ON OUR CORPORATE-WIDE INITIATIVES.
- --------------------------------------------------------------------------------
In 1997, we will continue to work on these same initiatives, and in addition,
will expand our focus to include the redefinition and refinement of our
merchandising processes. We have examined and analyzed our merchandise
assortments and will be concentrating on transforming what was originally a
store-driven culture to one that is driven by merchandise.
IMPROVEMENTS IN U.S. WOOLWORTH
We worked on many issues in our U.S. Woolworth general merchandise operations
during 1996. These stores began to benefit from point-of-sale equipment,
installed just the year before, and as a result, were able to more effectively
monitor and plan sales. Information generated by the point-of-sale equipment
also helped facilitate the shift to a centralized buying structure with a
substantially reduced number of suppliers. Pricing policies and promotional
strategies were also centralized.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT 7.
<PAGE> 10
During 1996, we tested a new strategic approach to our general merchandise
business in the United States by creating a three-store pilot program in
Wilmington, Delaware. We were encouraged by the pilot stores' results. Our loyal
customers, younger and more affluent than we originally believed, were delighted
to find better merchandise in brighter, cleaner stores. We plan to expand our
pilot-store test to an additional 13 stores in 1997.
We will intensify our efforts to better execute our strategy at store level
throughout the U.S. Woolworth chain during 1997, and we will implement new
programs to improve customer service, upgrade and monitor store upkeep, and
better distribute and replenish merchandise.
- --------------------------------------------------------------------------------
BASED ON THEIR CONTINUED SOLID PERFORMANCE, WE WILL AGGRESSIVELY GROW THE
FORMATS IN THE NORTHERN GROUP IN 1997.
- --------------------------------------------------------------------------------
STRONG PERFORMANCE IN THE NORTHERN GROUP
The Northern Group of apparel concepts posted solid increases in sales and
profits for 1996. The four formats in this group target different members of the
family: the Northern Reflections and Northern Traditions stores offer women's
sportswear and career apparel, Northern Elements provides menswear, and Northern
Getaway, childrenswear. The Northern Group formats offer proprietary merchandise
that is recognized by customers as having high quality, good value, and
distinctive product design in stores throughout the United States and Canada.
The continued strong performance of the Northern Group allows us to continue to
aggressively expand these concepts in 1997, by adding 117 new or remodeled
stores. We are also looking at maximizing productivity by remixing our real
estate. Based on successful trials, we are putting Northern Group concepts
together in certain mall locations. We developed a new format, "The Complete
Northern Experience," combining a full range of the distinctive Northern
merchandise for the entire family. These new, larger stores will feature a
redesigned environment linking all the merchandise, and will have common
stockrooms and shared cash registers for operating efficiencies. Synergies
achieved by combining Northern Group formats in a single store allow us to be
more productive while still maintaining our high sales per square foot. We are
also revisiting the store design of individual Northern Group formats to ensure
that they stay fresh and exciting.
SPECIALTY FOOTWEAR
The Kinney shoe store chain in the United States and Canada, the FootQuarters
chain of off-price branded family shoe stores in the United States, and our
specialty footwear operations in Australia are the principal businesses in the
Specialty Footwear segment.
8. WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 11
During 1996, we made progress in repositioning the Kinney chain. In 1997, we
will continue to work on redefining merchandise assortments to better appeal to
our target customer. We will also continue our program of remodeling Kinney
stores in line with the new design we created. Over the past year, we have been
encouraged by substantially improved results produced by both of these programs.
In 1997, Kinney will no longer operate the shoe departments in the Wal-Mart
Canada stores under the Company's agreement with Wal-Mart.
We made a number of important changes in our specialty footwear operations in
Australia in 1996, including the implementation of merchandise planning and
forecasting processes and organizational changes to refocus operations. We
expect that these actions will help this business in 1997.
OTHER BUSINESSES
Other principal specialty businesses include the After Thoughts chain of costume
jewelry stores and The San Francisco Music Box Company stores. Also included in
this segment are the Weekend Edition women's apparel stores in Canada and the
Randy River menswear stores in the United States and Canada. Other general
merchandise businesses include The Bargain! Shop chain in Canada and the
Woolworth Mexico general merchandise stores.
- --------------------------------------------------------------------------------
WE HAVE MADE STRONG PROGRESS IN REBUILDING WOOLWORTH CORPORATION, AND HAVE
CREATED A STRONG FINANCIAL PLATFORM FROM WHICH TO LAUNCH OUR PLANS FOR
ACCELERATED GROWTH.
- --------------------------------------------------------------------------------
Last year, we made significant improvements in our After Thoughts chain. Having
cleared these stores of old merchandise that was not appealing to our young,
trendy customers, we refocused merchandise assortments and developed exclusive
product designed especially for these customers. This year, we are working on
redesigning our stores to better showcase the new, more focused merchandise. We
are also making progress in rebuilding The San Francisco Music Box Company
chain. During 1996, this business made a significant improvement in its
inventory investment and, as a result, is better positioned for 1997.
We continue to work on our corporate-wide initiatives in all of our other
businesses to enable them to produce returns that meet our standards.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT 9.
<PAGE> 12
- --------------------------------------------------------------------------------
OUR PLANS FOR AGGRESSIVE GROWTH ARE SUPPORTED BY 1997 CAPITAL EXPENDITURES AT
MORE THAN DOUBLE THE PRIOR YEAR'S LEVEL.
- --------------------------------------------------------------------------------
PLANS FOR AN EXCITING FUTURE
Over the past two years, we have made strong progress in rebuilding Woolworth
Corporation, creating a sound financial platform from which to launch our plans
for accelerated growth and expansion. These aggressive plans will be supported
by capital expenditures of $285 million for 1997, more than double the amount
spent the year before.
We plan to invest in our high-performance businesses, like the Athletic and
Northern Groups. And we will open new stores, remodel and relocate existing
stores, and develop focused merchandise programs. We will also seek strategic
acquisitions to support and enhance our growth strategies.
We will continue to work on our general merchandise businesses in an effort to
bring their returns to an acceptable level. The progress that we have made over
the past two years confirms that we are working on the right issues, and we will
focus our attention on executing our strategies.
Finally, we will continue to rebuild our infrastructure to benefit all operating
businesses. We will move ahead on our logistics and distribution initiatives, we
will continue to actively manage our real estate, both by increasing new stores
and managing our existing base, and we will upgrade the quality of our
information systems and human resource practices to enable us to function as a
more integrated organization.
We are grateful for the many shareholders who have recognized our progress. We
are also grateful to our Board of Directors, whose support has been enthusiastic
and unwavering as we have moved ahead on our strategic initiatives. We extend
particular thanks to Helen Galland, a director since 1984, who is retiring this
year. Helen, an experienced merchant, has brought to the Company the benefit of
her years of experience and her passion for the retail business. We greatly
appreciate Helen's many contributions and will miss her wise counsel.
High praise and sincere thanks are also due to our associates around the world
whose dedication and hard work have made our achievements possible. We are
looking forward to working together to transform Woolworth Corporation into an
organization that is, in all respects, truly world-class.
/s/ ROGER N. FARAH
- ------------------------------------
ROGER N. FARAH
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
/s/ DALE W. HILPERT
- -----------------------------------
DALE W. HILPERT
PRESIDENT AND CHIEF OPERATING OFFICER
APRIL 9, 1997
10. WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company operates in two retail business segments, Specialty and General
Merchandise. The Specialty segment includes the Athletic Group, the Northern
Group, Specialty Footwear and Other Specialty. The General Merchandise segment
includes operations in Germany, the United States and other countries. A summary
of sales by segment, after reclassification for disposed operations, is as
follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- ----------------------------------------------------------
<S> <C> <C> <C>
Specialty $5,159 $4,958 $4,757
General Merchandise 2,888 3,125 2,998
Disposed operations 45 141 483
- ----------------------------------------------------------
$8,092 $8,224 $8,238
==========================================================
</TABLE>
A summary of operating results (excluding corporate expense, interest expense
and income taxes) by segment is as follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SPECIALTY:
Operating results before
non-recurring items $ 489 $ 300 $ 272
Charge for adoption of
SFAS No. 121 -- (123) --
Net gain on sales of real estate 1 -- --
Disposed operations (43) (43) (32)
- --------------------------------------------------------------------------------
Total operating results $ 447 $ 134 $ 240
================================================================================
GENERAL MERCHANDISE:
Operating results before
non-recurring items $ (68) $ (91) $ 23
Charge for adoption of
SFAS No. 121 -- (118) --
Net gain on sales of real estate 34 34 41
Disposed operations (2) -- (30)
- --------------------------------------------------------------------------------
Total operating results $ (36) $(175) $ 34
================================================================================
TOTAL COMPANY:
Operating results before
non-recurring items $ 421 $ 209 $ 295
Charge for adoption of
SFAS No. 121 -- (241) --
Net gain on sales of real estate 35 34 41
Disposed operations (45) (43) (62)
- --------------------------------------------------------------------------------
Total operating results $ 411 $ (41) $ 274
================================================================================
</TABLE>
SALES
Total Company sales of $8.1 billion in 1996 decreased 1.6 percent from sales of
$8.2 billion in 1995. Excluding disposed operations and the effect of foreign
currency fluctuations, total Company sales increased 0.7 percent as compared
with 1995. Comparable-store sales increased by 0.3 percent in 1996. The
Specialty segment sales of $5.2 billion in 1996 were 4.0 percent higher as
compared with 1995 while the General Merchandise segment sales fell to $2.9
billion in 1996 as compared with $3.1 billion in the prior year.
Sales of $8.2 billion in 1995 were comparable with 1994. Excluding operations
disposed in 1995 and the impact of foreign currency fluctuations, sales
increased by 2.0 percent as compared with 1994. Comparable-store sales decreased
by 0.4 percent in 1995.
OPERATING RESULTS
The Company reported an operating profit of $411 million in 1996 compared with
an operating loss of $41 million in 1995. Operating profit before non-recurring
items increased to $421 million in 1996 from $209 million in the prior year.
Major contributing factors to this improvement were the positive sales
performance by the Specialty segment, specifically in the Athletic Group, higher
gross margins resulting from inventory improvement programs, and the continuing
success of the Company's expense management initiatives. The 1996 ratio of
selling, general, and administrative expenses to sales declined by 1.5
percentage points compared with 1995. The 1996 operating profit of $411 million
includes a $33 million charge for severance and other costs incurred by the
German general merchandise business to streamline its work force, which is
expected to lower the future years' expense levels. Operating results for 1996
also include a total reduction of $32 million in the restructuring reserve
established in 1991 and the repositioning reserve established in 1993. This
adjustment was made to revise original estimates based on actual experience to
date.
The Company's operating loss for 1995 was $41 million which included a
non-cash pre-tax charge of $241 million arising from the adoption of SFAS No.
121, net gains from sales of real estate of $34 million, and a $43 million
charge for disposed operations. Operating results for 1995 were also negatively
impacted by inventory improvement programs which necessitated markdowns 34.8
percent higher than 1994.
The Company made significant progress in 1996 and 1995 toward its goal of
reducing its under-performing stores and non-strategic properties. In 1996, the
Company recognized gains on sales of non-strategic real estate of $35 million.
The Company also sold or disposed of five businesses, the Accessory Lady and Rx
Place Drug Mart chains in the United States, the Silk & Satin chain in Canada,
the Lady Plus and Rubin chains in Germany, as well as its investment in the New
Yorker Sued business. In addition, the Company recently completed the
disposition of the Gallery chain in Australia and its Moderna chain in
Germany. This completed the disposition of all German
WOOLWORTH CORPORATION 1996 ANNUAL REPORT 11.
<PAGE> 14
specialty operations. During 1995, the Company sold or disposed of four
businesses. The cost related to disposed operations was $45 million in 1996 and
$43 million in 1995.
For the two-year period including 1995 and 1996, the Company opened 560
stores and closed 1,443 stores, of which 806 were under-performing stores
related to ongoing formats and 637 were from disposed operations.
SEGMENTS
The results by segment are as follows:
SPECIALTY SEGMENT
ATHLETIC GROUP
<TABLE>
<CAPTION>
($ in millions) 1996 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 3,615 $ 3,424 $3,212
=================================================================================
Operating profit before
non-recurring items $ 462 $ 305 $ 211
Charge for adoption of
SFAS No. 121 -- (28) --
Disposed operations (1) -- --
- ---------------------------------------------------------------------------------
Operating profit $ 461 $ 277 $ 211
=================================================================================
Sales as a percentage of
consolidated total 45% 42% 39%
Number of stores at year end 3,394 3,367 3,389
Selling square footage (millions) 5.49 5.29 5.30
=================================================================================
</TABLE>
The Athletic Group is the Company's largest and most profitable business, whose
major formats include the Foot Locker businesses: Foot Locker, Lady Foot Locker,
Kids Foot Locker, World Foot Locker, as well as Champs Sports and Going to the
Game! These stores are in North America, Europe, Asia and Australia. As the
largest retailer of branded athletic footwear and apparel in the United States,
the Athletic Group had record worldwide sales of $3.6 billion in 1996,
representing an increase of $191 million, or 5.6 percent, compared with 1995.
Comparable-store sales growth was 5.0 percent in 1996. These higher sales,
combined with higher gross margins, lower operating expenses and successful
inventory management, generated an operating profit of $462 million as compared
with an operating profit of $305 million in the prior year (before non-recurring
items). The current year's results are reflective of the continuing three-year
trend of record sales and operating profits.
The Athletic Group is well-poised to continue this upward trend through
innovative merchandising initiatives and aggressive expansion plans. In excess
of $100 million has been allocated in 1997 for approximately 250 new store
openings and 300 store remodelings and relocations in the Athletic Group.
Storage space will be reallocated to retail space as part of the Company's
remodeling effort. Domestically, the Athletic Group will be continuing its
"Triplex" and "Combo" store concepts, which leverage the presence of different
Foot Locker and Champs Sports stores in one location. The Company also intends
to grow its apparel business through increased merchandise assortment and
strengthening relationships with vendors. Internationally, the Athletic Group
has aggressive expansion plans, particularly in Europe.
In 1995, the Athletic Group reported sales of $3.4 billion, an increase of
6.6 percent compared with 1994. Comparable-store sales growth was 4.0 percent in
1995. Operating profit before non-recurring items in 1995 was $305 million,
representing a 44.5 percent increase over the prior year. All formats showed
performance improvement, particularly those in Europe.
NORTHERN GROUP
<TABLE>
<CAPTION>
($ in millions) 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $426 $ 367 $320
- -------------------------------------------------------------------------------
Operating profit before
non-recurring items $ 42 $ 38 $ 38
Charge for adoption of
SFAS No. 121 -- (6) --
- -------------------------------------------------------------------------------
Operating profit $ 42 $ 32 $ 38
===============================================================================
Sales as a percentage of
consolidated total 5% 4% 4%
Number of stores at year end 760 692 622
Selling square footage (millions) 1.27 1.19 1.04
===============================================================================
</TABLE>
The Northern Group consists of four formats: Northern Reflections, Northern
Traditions, Northern Getaway, and Northern Elements. These stores sell specialty
apparel in Canada and the United States, specializing in a range of casual and
career apparel for women, and casual apparel for men and children. Of the 760
Northern Group stores in operation at January 25, 1997, 398 stores are located
in Canada and 362 stores are in the United States. The Northern Group is the
Company's fastest growing business with sales of $426 million reported in 1996,
an increase of 16.1 percent compared with the prior year. This increase was
driven by 81 new store openings and comparable-store sales gains of 4.0 percent.
Operating profit before non-recurring items in 1996 was $42 million as compared
with $38 million in 1995. The Northern Group has developed "The Complete
Northern Experience" concept which links each of the four store formats together
in contiguous space in a mall, creating cross-shopping opportunities and
operating efficiencies. With the planned rollout of this new concept, in
conjunction with the introduction of new merchandise categories and planned new
store openings, the Company expects the growth in sales and operating
performance of the Northern Group to continue. To facilitate this expansion, the
Company has increased this group's capital expenditure budget to accommodate
approximately 75 planned new store openings, including The Complete Northern
Experience concept.
12. WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 15
Sales for 1995 increased by 14.7 percent over 1994, as a result of the
opening of 80 new stores together with a slight increase in comparable-store
sales. Operating profit for the year, prior to the $6 million charge for the
adoption of SFAS No. 121, reflected increased markdowns under inventory
improvement programs.
SPECIALTY FOOTWEAR
<TABLE>
<CAPTION>
($ in millions) 1996 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 721 $ 729 $ 763
=================================================================================
Operating profit (loss) before
non-recurring items $ (11) $ (18) $ 33
Charge for adoption of
SFAS No. 121 -- (43) --
Net gain on sales of real estate 1 -- --
- ---------------------------------------------------------------------------------
Operating profit (loss) $ (10) $ (61) $ 33
=================================================================================
Sales as a percentage of
consolidated total 9% 9% 9%
Number of stores at year end 1,199 1,382 1,440
Selling square footage (millions) 1.97 2.66 2.70
=================================================================================
</TABLE>
Specialty Footwear consists of various footwear store formats in the United
States, Canada, Germany and Australia, the largest of which is the Kinney shoe
store chain operating in the United States and Canada. Sales of $721 million in
1996 represented a slight decline over the prior year's performance, mainly due
to the closing of 85 under-performing stores and a 1.0 percent decline in
comparable-store sales. The current year's operating loss improved by $7 million
as compared with 1995 (before non-recurring items). The 1996 operating loss
includes a positive adjustment of $11 million arising from a re-evaluation of
the repositioning reserves originally established in 1993. The 1993 charge
reflected the estimated cost to close under-performing specialty footwear stores
in the United States or convert them to other formats. The 1996 adjustment was
made for revisions to original estimates of operating expenses, severance and
other personnel-related costs. The Company is developing new store designs and
merchandise assortments to improve the results of this group and in 1997, the
Company plans to remodel or relocate approximately 50 specialty footwear stores.
The Specialty Footwear group's 1995 sales decreased by 4.5 percent as
compared to 1994. This sales decline was due to the closing of 35 Kinney stores,
partially offset by increased sales in the leased shoe departments in Canadian
Wal-Mart stores. Under the terms of an agreement with Wal-Mart, effective at the
close of business on January 25, 1997, the Company will no longer operate these
departments. These businesses generated sales and operating profit in 1996 of
$103 million and $8 million, respectively.
Results of operations in 1995 reflected higher markdowns as compared to 1994
as a result of inventory reduction programs to clear aged merchandise. Operating
results for 1995 were also negatively impacted by a $43 million charge for the
adoption of SFAS No. 121.
OTHER SPECIALTY
<TABLE>
<CAPTION>
($ in millions) 1996 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 397 $ 438 $ 462
Disposed operations 45 141 483
- ----------------------------------------------------------------------------------
Total sales $ 442 $ 579 $ 945
==================================================================================
Operating loss before
non-recurring items $ (4) $ (25) $ (10)
Charge for adoption of
SFAS No. 121 -- (46) --
Disposed operations (42) (43) (32)
- ----------------------------------------------------------------------------------
Operating loss $ (46) $ (114) $ (42)
==================================================================================
Sales as a percentage of
consolidated total 5% 7% 12%
Number of stores at year end 1,379 1,715 2,151
Selling square footage (millions) 1.24 1.74 3.15
==================================================================================
</TABLE>
Other Specialty consists of non-footwear specialty chains including After
Thoughts, The San Francisco Music Box Company and The Best of Times. After
Thoughts offers moderately priced costume jewelry and accessories. The San
Francisco Music Box Company features music boxes and gifts. The Best of Times
stores carry a large assortment of watches and clocks.
Sales declined by $137 million in 1996 as compared with 1995. This decline in
sales was mainly attributable to the closing of 352 stores, of which 271 stores
primarily related to disposed businesses and 81 were under-performing stores
from ongoing businesses. In the United States, the Accessory Lady and Rx Place
Drug Mart businesses were discontinued and the Company sold its Silk & Satin
chain in Canada and its Rubin and Lady Plus chains in Germany. Operating results
improved in 1996 due to the closure of under-performing stores, higher margins
related to a better mix of current merchandise, and lower expense levels as a
result of expense management programs. The Company plans to further improve
operating results of the remaining businesses by improving merchandise
assortments and in-store visual presentation and by continuing with its
successful expense management programs. There will also be a focus on ongoing
store remodeling and relocation.
Sales declined by $366 million in 1995 as compared with 1994. This was mainly
attributable to the closing of 493 stores, of which 357 stores related to
disposed businesses and 136 were under-performing stores from ongoing
businesses. In Canada, the Karuba business and the Canary Island businesses were
discontinued. The majority of the Canary Island stores were converted to
Northern Elements stores. The 1995 operating loss
WOOLWORTH CORPORATION 1996 ANNUAL REPORT 13.
<PAGE> 16
increased due to lower comparable-store sales, declines in gross margins due to
heightened promotional activity in the Company's costume jewelry businesses and
costs associated with store closures. Operating results for 1995 included a
charge of $46 million for the adoption of SFAS No. 121.
GENERAL MERCHANDISE SEGMENT
Woolworth is the Company's principal general merchandise format in Germany, the
United States and Mexico. The Bargain! Shop chain is the Canadian general
merchandise format.
GERMANY
<TABLE>
<CAPTION>
($ in millions) 1996 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 1,624 $ 1,733 $ 1,476
==================================================================================
Operating loss before
non-recurring items $ (30) $ (30) $ (16)
Charge for adoption of
SFAS No. 121 -- (57) --
Net gain on sales of real estate 27 6 37
Disposed operations 1 -- --
- ----------------------------------------------------------------------------------
Operating profit (loss) $ (2) $ (81) $ 21
==================================================================================
Sales as a percentage of
consolidated total 20% 21% 18%
Number of stores at year end 374 368 353
Selling square footage (millions) 4.72 4.71 4.43
==================================================================================
</TABLE>
Woolworth Germany's sales of $1.6 billion in 1996, were 6.3 percent less than
last year. Excluding the impact of foreign exchange fluctuations, sales
decreased 1.2 percent, while comparable-store sales declined by 3.1 percent.
This business operates within a difficult retail environment, mainly due to the
economic recession since reunification. The high unemployment levels and record
low levels of consumer spending are reflected in this year's performance.
Operating results, however, have improved since 1995. The Company's current year
focus on expense management was very successful. The German investment base was
also reduced through sales of non-strategic real estate resulting in net gains
of $27 million. With the introduction of new senior management at Woolworth
Germany, redefinition of merchandise assortment, centralization of purchasing
and continued focus on expense management, the Company is expecting future
improvement in results. As part of a Woolworth Germany initiative to operate
with a more flexible, smaller work force, the Company incurred a charge of $33
million for severance and other costs associated with transferring associates
from full-time to part-time employment. Before these costs, the 1996 operating
profit was $3 million.
In 1995, sales increased 17.4 percent from 1994 levels, reflecting a stronger
German mark at that time. Excluding the impact of foreign currency fluctuations,
those sales increased 4.3 percent primarily as a result of opening new stores.
The operating loss in 1995 was $81 million (including the $57 million charge for
the adoption of SFAS No. 121) as compared with an operating profit of $21
million in 1994. The 1995 and 1994 operating results included $6 million and $37
million, respectively, of net gains from the sales of real estate.
UNITED STATES
<TABLE>
<CAPTION>
($ in millions) 1996 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 1,044 $ 1,150 $1,240
=================================================================================
Operating profit (loss) before
non-recurring items $ (37) $ (58) $ 33
Charge for adoption of
SFAS No. 121 -- (25) --
Net gain on sales of real estate 7 28 4
- ---------------------------------------------------------------------------------
Operating profit (loss) $ (30) $ (55) $ 37
=================================================================================
Sales as a percentage of
consolidated total 13% 14% 15%
Number of stores at year end 439 437 448
Selling square footage (millions) 7.43 7.41 7.62
=================================================================================
</TABLE>
Sales for the U.S. general merchandise group in 1996 decreased 9.2 percent as
compared to 1995 coupled with a comparable-store sales decline of 7.0 percent.
The overall sales decline resulted from both a difficult retail environment and
a comparable-store sales decline impacted by the discontinuance of certain
unprofitable merchandise categories.
The operating loss in 1996, before non-recurring items, was $37 million.
Although an improvement as compared to the prior year, the loss resulted from a
combination of lower-than-expected sales, a decline in gross margins and
slower-than-anticipated results from merchandising initiatives. This includes a
positive adjustment of $21 million to the restructuring and repositioning
reserves established in 1991 and 1993 for the U.S. general merchandise
operations. The adjustment was made for revisions to original estimates based on
actual experience relating to lease costs, operating expenses, severance and
other personnel-related costs. Prior to this adjustment, operating results for
1996 were comparable with 1995. To improve the Company's competitive position,
the 1997 plan includes the roll out of the recently tested prototype format,
which has generated encouraging results to date.
Sales for 1995 decreased 7.3 percent as compared with 1994 and
comparable-store sales declined 5.2 percent. Operating results in 1995 compared
unfavorably with 1994, mainly due to the inventory reduction programs undertaken
to clear aged inventories.
Operating results included a LIFO credit of $4 million in 1996, a LIFO charge
of $5 million in 1995, and a LIFO credit of $8 million in 1994.
14. WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 17
OTHER
<TABLE>
<CAPTION>
($ in millions) 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 220 $ 242 $ 282
===============================================================================
Operating profit (loss) before
non-recurring items $ (1) $ (3) $ 6
Charge for adoption of
SFAS No. 121 -- (36) --
Disposed operations (3) -- (30)
- -------------------------------------------------------------------------------
Operating loss $ (4) $ (39) $ (24)
===============================================================================
Sales as a percentage of
consolidated total 3% 3% 3%
Number of stores at year end 201 217 226
Selling square footage (millions) 3.52 3.39 3.50
===============================================================================
</TABLE>
Other general merchandise includes The Bargain! Shop stores in Canada and the
Woolworth general merchandise stores in Mexico. Sales in 1996 decreased by 9.1
percent as compared with 1995 and by 6.2 percent, excluding the impact of
foreign exchange fluctuations. Sales in Canada declined primarily as a result of
closing 16 stores, while the impact of exchange rate fluctuations accounted for
most of the sales decline in Mexico. Operating results for 1996 are comparable
with 1995 before non-recurring items. Despite declines in sales, the operating
loss was held to comparable levels as a result of expense management in both
Canada and Mexico.
Sales decreased by 14.2 percent in 1995 as compared to 1994. The 1995
increase in Canadian general merchandise sales was more than offset by a
reduction in Mexican sales arising from lower exchange rates following the peso
devaluation. Additionally, 1995 operating results were negatively impacted by
higher promotional markdowns in both operations.
COSTS AND EXPENSES
CORPORATE EXPENSE
Corporate expense totaled $58 million, $73 million and $71 million in 1996, 1995
and 1994, respectively. The reduction in the 1996 expense reflects lower
severance and other payroll costs and distribution center consolidation savings
as well as reduced legal and other professional fees. The 1995 expense included
severance and related costs arising from the consolidation of accounting
centers, the closing of three distribution centers, and other corporate
reorganization costs. The 1994 expense included severance costs, Special
Committee of the Board of Directors investigation fees, and costs to consolidate
accounting centers.
INTEREST EXPENSE
<TABLE>
<CAPTION>
($ in millions) 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest expense $ 73 $ 119 $ 107
===============================================================================
Weighted-average interest rate
during the year:
Short-term debt:
Without facility fees 6.0% 6.8% 5.4%
With facility fees 16.7% 9.2% 6.1%
Long-term debt 7.7% 8.1% 7.3%
Total debt 7.4% 8.8% 6.3%
===============================================================================
Short-term debt outstanding
during the year:
High $ 302 $ 1,043 $ 1,478
Weighted-average $ 111 $ 804 $ 1,081
===============================================================================
</TABLE>
In 1996, interest expense was reduced by 39 percent primarily as a result of
significantly lower borrowing levels. In 1996, the Company successfully reduced
total outstanding debt levels by $116 million. Weighted-average short-term debt
fell by $693 million, or 86.2 percent, as compared with 1995. The difference
between the short-term weighted-average rate excluding facility fees and
including facility fees was due to lower average borrowing levels during the
course of the year. In early 1997, the Company reduced its revolving credit
facility from $1 billion to $500 million. This will result in lower borrowing
costs in future years.
In 1995, the Company reduced total debt outstanding by $475 million, with the
short-term debt component decreasing by $784 million as compared with 1994
levels. Net interest expense increased to $119 million, however, due to higher
weighted-average borrowing costs including the cost of debt refinanced, offset
partially by the impact of lower borrowing levels.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
Cash flow from operations of $468 million in 1996 decreased from $520 million in
1995, resulting primarily from the more significant decline in merchandise
inventories in 1995. The Company's lower cost structure and improved earnings
contributed to positive cash flow from operations. Other significant sources and
uses of cash included proceeds from sales of real estate and dispositions of
specialty businesses, predominantly in Germany.
The most significant use of cash in 1996 was for the Company's capital
expenditures program which concentrated on new store openings and remodeling of
existing facilities, particularly in the Athletic and Northern Groups which
opened in excess of 200 stores. Cash used in financing activities reflects
payments of short and long-term debt obligations.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT 15.
<PAGE> 18
The Company's strong cash position as of January 25, 1997 supported the
January 30, 1997 acquisition of Eastbay, Inc., ("Eastbay"), a leading U.S.
catalogue company specializing in the direct marketing of athletic goods, for a
purchase price of approximately $140 million.
In 1995 and 1994, cash provided by or used in operating activities together
with available revolving credit facilities and other long-term financing
provided the needed resources to support seasonal working capital requirements,
store openings and other capital expenditures.
Net cash provided by operations in 1995 reflected the positive impact of
inventory and cost reduction programs. Net cash used in investing activities
reflected capital expenditures and European investments, partially offset by
cash proceeds from the sale of assets. Net cash used in financing activities
reflected debt principal repayment and the payment of the common stock dividend.
Cash provided by operating activities in 1996 and 1995 was adequate to fund
substantially all investing and financing activities. In the two-year period,
the Company was able to generate $988 million from operating activities which
was more than $250 million in excess of funding requirements for its investing
and financing activities over the period. This cash flow from operations, along
with anticipated cash flow from future operations, will support the Company's
strategic initiatives to grow its businesses through reinvestment.
In 1994, operating activities, capital expenditures and dividend payments
were funded by sales of assets and borrowings.
Future cash flows from operating activities are expected to be sufficient to
cover any short-term and long-term debt and capital lease repayment obligations
as well as the planned increase in capital expenditures. Planned capital
expenditures for 1997 are approximately $285 million, of which $138 million
relates to new store openings and modernization of existing stores, $67 million
relates to the development of management information systems and $80 million
relates to distribution centers and other support facilities.
CAPITAL STRUCTURE
The Company's improved financial condition is expected to provide a solid base
for growth opportunities and enhanced financial flexibility. During 1996, the
Company was again able to reduce overall borrowings. Short-term debt was
eliminated and approximately $26 million of long-term debt was repaid before
year end.
In early 1997, the Company and its bankers finalized modifications to its
domestic revolving credit agreement. At the Company's election, the previous $1
billion facility was reduced to a $500 million facility available through 2002.
Management believes current domestic and international credit facilities and
cash provided by operations will be adequate to finance its working capital
requirements and support the development of the Company's short and long-term
strategies. At year end, the entire amount of the credit facility was unused.
The Company has a registration statement filed with the Securities and
Exchange Commission which allows for the additional issuance of up to $360
million of debt securities and warrants to purchase debt securities. Depending
on market conditions and capital needs, additional long-term financing may be
utilized.
For purposes of calculating debt to total capitalization, the Company
includes the present value of operating lease commitments. These commitments are
the primary financing vehicle used to fund store expansion. The following table
sets forth the components of the Company's capitalization, both with and without
the present value of operating leases:
<TABLE>
<CAPTION>
($ in millions) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Short-term debt $ -- $ 69
Long-term debt and capital lease obligations 597 644
Present value of operating leases 2,036 2,136
- -------------------------------------------------------------------------------
Total debt 2,633 2,849
Shareholders' equity 1,334 1,229
===============================================================================
Total capitalization $3,967 $4,078
===============================================================================
Debt capitalization percent 66% 70%
Debt capitalization percent without
operating leases 31% 37%
===============================================================================
</TABLE>
As a result of the Company's earnings, positive cash flow trend and store
dispositions, the debt to capital ratio improved to 66 percent from 70 percent
in 1995. Total debt (including the present value of operating leases) decreased
by $216 million in 1996 and shareholders' equity increased due to the current
year net income of $169 million offset by a foreign currency translation
adjustment of $61 million. Management's objective is to further reduce its ratio
of debt to capitalization.
CREDIT RATINGS
The Company's debt credit ratings are as follows:
<TABLE>
<CAPTION>
1996 1995
==============================================================
<S> <C> <C>
COMMERCIAL PAPER:
Standards & Poor's A-3 A-3
Moody's Investors Service P3 P3
LONG-TERM DEBT:
Standards & Poor's BBB- BBB-
Moody's Investors Service Baa3 Baa2
==============================================================
</TABLE>
16. WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 19
STRATEGIC PLAN
The financial structure of the Company has strengthened over the past two years
and is expected to provide the platform from which to execute its strategies for
future growth, including new store openings, remodeling of existing facilities,
strategic acquisitions and infrastructure investments to benefit all businesses.
Its return on investment has increased to 6.9 percent from 3.6 percent in 1994.
The Company's progress in implementing its strategic plan initiatives and
improving its financial and operational health is evidenced by the current
year's performance and resultant improved financial condition. During the year,
the Company significantly reduced operating costs, lowered its working capital
needs through enhanced inventory management and distribution, reduced
outstanding debt levels, and disposed of non-strategic investments. Also,
operating expense reductions are ahead of the Company's four-year goal,
inventory levels are down and aged inventory has been dramatically reduced.
Strategic initiatives like the acquisition of Eastbay will provide the
Company with the opportunity to more effectively service many of its customers
through direct marketing and will enable it to capitalize upon the existing
vendor relationships and product development capabilities of the Athletic Group.
In 1997 and beyond, the Company expects to further its long term objectives
by continuing to dispose of non-strategic businesses and real estate, and focus
on opportunities with the highest potential returns, optimizing the use of
Company-wide resources.
SEASONALITY
The Company's retail businesses are highly seasonal in nature. Historically, the
greatest proportion of sales and net income is generated in the fourth quarter
and the lowest proportion of sales and net income is generated in the first
quarter, reflecting seasonal buying patterns.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT 17.
<PAGE> 20
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(in millions, except per share amounts) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES $ 8,092 $ 8,224 $ 8,238
- ------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of sales 5,581 5,735 5,626
Selling, general and administrative expenses 2,006 2,166 2,231
Depreciation and amortization 187 239 233
Interest expense 73 119 107
Other income (35) (43) (55)
Adoption of accounting standard for impairment of long-lived assets -- 241 --
- ------------------------------------------------------------------------------------------------------
7,812 8,457 8,142
- ------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 280 (233) 96
Income tax expense (benefit) 111 (69) 49
- ------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 169 $ (164) $ 47
- ------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER COMMON SHARE $ 1.26 $ (1.23) $ .36
- ------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements on pages 23 to 34.
18. WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 21
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in millions) 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 321 $ 13
Merchandise inventories 1,269 1,364
Other current assets 233 241
- ------------------------------------------------------------------------------------------
1,823 1,618
PROPERTY AND EQUIPMENT, NET 1,058 1,225
DEFERRED CHARGES AND OTHER ASSETS 595 663
- ------------------------------------------------------------------------------------------
$3,476 $3,506
- ------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ -- $ 69
Accounts payable 334 321
Accrued liabilities 505 426
Current portion of long-term debt and obligations under capital leases 17 25
- ------------------------------------------------------------------------------------------
856 841
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES 580 619
DEFERRED TAXES 58 88
OTHER LIABILITIES 648 729
SHAREHOLDERS' EQUITY 1,334 1,229
COMMITMENTS
- ------------------------------------------------------------------------------------------
$3,476 $3,506
- ------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements on pages 23 to 34.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT 19.
<PAGE> 22
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------ ------------------
(shares in thousands, amounts in millions) SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PREFERRED STOCK
$2.20 Series A Convertible Preferred, par value
$1 per share, 7 million shares authorized
Outstanding at beginning of year 97 $ -- 101 $ -- 109 $ 1
Converted during year (97) -- (4) -- (8) (1)
- ----------------------------------------------------------------------------------------------------------------------
Outstanding at end of year -- -- 97 -- 101 --
- ----------------------------------------------------------------------------------------------------------------------
COMMON STOCK AND PAID-IN CAPITAL
Par value $.01 per share,
500 million shares authorized
Issued at beginning of year 133,051 290 132,505 282 131,926 277
Issued upon conversion of preferred shares 461 -- 21 -- 47 1
Issued under employee stock plans 535 9 525 7 532 4
- ----------------------------------------------------------------------------------------------------------------------
Issued at end of year 134,047 299 133,051 289 132,505 282
- ----------------------------------------------------------------------------------------------------------------------
Common stock in treasury at beginning of year -- -- -- -- (3) --
Acquired at cost -- -- -- -- (200) (3)
Reissued under employee stock plans/agreements -- -- -- -- 3 --
Restricted stock -- -- -- -- 200 3
Common stock in treasury at end of year -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Amortization of stock issued under restricted
stock option plan -- 1 -- 1 -- --
Redemption of preferred stock -- (1) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Common stock outstanding and paid-in capital
at end of year 134,047 299 133,051 290 132,505 282
- ----------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at beginning of year 891 1,055 1,106
Net income (loss) 169 (164) 47
Change in subsidiaries' year end (10) -- --
Cash dividends declared:
Common stock -- -- (98)
Preferred stock -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Balance at end of year 1,050 891 1,055
- ----------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY BEFORE ADJUSTMENTS 1,349 1,181 1,337
- ----------------------------------------------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Balance at beginning of year 83 31 (4)
Aggregate translation adjustment, net of
deferred tax benefit (61) 52 35
- ----------------------------------------------------------------------------------------------------------------------
Balance at end of year 22 83 31
- ----------------------------------------------------------------------------------------------------------------------
MINIMUM PENSION LIABILITY ADJUSTMENT
Balance at beginning of year (35) (10) (31)
Change during year, net of deferred tax benefit (2) (25) 21
- ----------------------------------------------------------------------------------------------------------------------
Balance at end of year (37) (35) (10)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY $ 1,334 $ 1,229 $ 1,358
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements on pages 23 to 34.
20. WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 23
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM OPERATING ACTIVITIES
Net income (loss) $ 169 $(164) $ 47
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 187 239 233
Adoption of accounting standard for impairment of long-lived assets -- 241 --
Change in deferred taxes 18 (100) 66
Gain on sales of real estate (35) (34) (41)
Change in assets and liabilities, net of acquisitions:
Merchandise inventories 63 287 (24)
Accounts payable 22 (45) (506)
Repositioning and restructuring reserves (63) (63) (185)
Other, net 107 159 70
- ---------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 468 520 (340)
- ---------------------------------------------------------------------------------------------------------
FROM INVESTING ACTIVITIES
Proceeds from sales of real estate 53 110 5
Capital expenditures (134) (167) (218)
Cost of acquisitions, net of cash acquired -- (10) --
Purchase of investments -- (64) --
Proceeds from sales of assets and investments 26 33 376
- ---------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (55) (98) 163
- ---------------------------------------------------------------------------------------------------------
FROM FINANCING ACTIVITIES
(Decrease) increase in short-term debt (69) (784) 321
Proceeds from issuance of long-term debt -- 332 --
Principal payments of long-term debt (19) (21) (33)
Reduction in capital lease obligations (6) (6) (5)
Issuance of common stock 7 7 7
Purchase of treasury stock -- -- (3)
Dividends paid -- (20) (116)
- ---------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (87) (492) 171
- ---------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE FLUCTUATIONS ON CASH AND CASH EQUIVALENTS (18) 11 21
- ---------------------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 308 (59) 15
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 13 72 57
- ---------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 321 $ 13 $ 72
- ---------------------------------------------------------------------------------------------------------
CASH PAID DURING THE YEAR:
Interest $ 59 $ 108 $ 98
Income taxes $ 55 $ 23 $ 26
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements on pages 23 to 34.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT 21.
<PAGE> 24
MANAGEMENT'S REPORT
The integrity and objectivity of the financial statements and other financial
information presented in this annual report are the responsibility of management
of the Company. The financial statements have been prepared in conformity with
generally accepted accounting principles and necessarily include amounts based
on the best estimates and judgment of management.
The Company maintains accounting systems and related internal policies and
procedures designed to provide reasonable assurance that assets are safeguarded,
transactions are executed in accordance with management's authorization and are
properly recorded, and accounting records may be relied upon for the preparation
of financial statements and other financial information. The design, monitoring
and revision of internal accounting control procedures involve, among other
things, management's judgment with respect to the relative costs and expected
benefits related to specific control measures. The Company also maintains an
internal audit group which evaluates and formally reports on the adequacy and
effectiveness of internal accounting controls, policies and procedures.
The Company's financial statements have been audited by KPMG Peat Marwick
LLP, the Company's independent auditors, whose report expresses their opinion
with respect to the fairness of the presentation of the statements.
The Audit Committee of the Board of Directors, which is comprised solely of
directors who are not officers or employees of the Company, meet regularly with
the Company's management, internal auditors and legal counsel, and KPMG Peat
Marwick LLP to review the activities of each group and to satisfy itself that
each is properly discharging its responsibility. In addition, the Audit
Committee meets on a periodic basis with KPMG Peat Marwick LLP, without
management's presence, to discuss the audit of the financial statements as well
as other auditing and financial reporting matters. The Company's internal
auditors and independent auditors have direct access to the Audit Committee.
/s/ ROGER N. FARAH
ROGER N. FARAH, Chairman of the Board and Chief Executive Officer
/s/ DALE W. HILPERT
DALE W. HILPERT, President and Chief Operating Officer
/s/ ANDREW P. HINES
ANDREW P. HINES, Senior Vice President and Chief Financial Officer
April 9, 1997
INDEPENDENT AUDITORS' REPORT
[KPMG PEAT MARWICK LLP LOGO]
To the Board of Directors
and Shareholders of
Woolworth Corporation
We have audited the accompanying consolidated balance sheets of Woolworth
Corporation and subsidiaries as of January 25, 1997 and January 27, 1996, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for the years then ended, appearing on pages 18 through 34. These
consolidated financial statements are the responsibility of Woolworth
Corporation's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. The accompanying
consolidated financial statements of Woolworth Corporation and subsidiaries as
of and for the year ended January 28, 1995 were audited by other auditors whose
report thereon dated March 8, 1995, expressed an unqualified opinion on those
statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the January 25, 1997 and January 27, 1996 consolidated
financial statements referred to above present fairly, in all material respects,
the financial position of Woolworth Corporation and subsidiaries as of January
25, 1997 and January 27, 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
As discussed in note 3 to the consolidated financial statements, in 1995
Woolworth Corporation adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of."
/s/ KPMG PEAT MARWICK LLP
New York, NY
March 11, 1997
22. WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Woolworth
Corporation and its domestic and international subsidiaries, all of which are
wholly owned. All significant intercompany amounts have been eliminated. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent liabilities at the date of the financial statements, and the reported
amounts of revenue and expense during the reporting period. Actual results are
not expected to differ significantly from those estimates.
REPORTING YEAR
The reporting period for the Company and its subsidiaries is the 52 or 53 week
period ending on the last Saturday in January, with the exception of the Mexican
and certain European operations, which have a reporting year ending on December
31. The 1996, 1995, and 1994 reporting years represent the 52 weeks ended
January 25, 1997, January 27, 1996, and January 28, 1995, respectively.
In 1996, the Company changed the reporting period for its German operations
from a calendar year ending December 31 to the 52 week period ending on the last
Saturday in January. The results of operations for the period from January 1
through January 25, 1997 amounted to a loss of approximately $10 million. This
loss was charged to retained earnings during the year in order to report only 12
months' operating results.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with remaining maturities of
three months or less when purchased to be cash equivalents.
MERCHANDISE INVENTORIES
Merchandise inventories are valued at the lower of cost or market using the
retail method. Cost is determined on the last-in, first-out (LIFO) basis for
most domestic inventories, and the first-in, first-out (FIFO) basis for
international inventories.
PROPERTY AND EQUIPMENT
Significant additions and improvements to property and equipment are
capitalized. Maintenance and repairs are charged to current operations as
incurred.
DEPRECIATION AND AMORTIZATION
Owned property and equipment is depreciated on a straight-line basis over the
estimated useful lives of the assets: 25 to 45 years for buildings and 3 to 10
years for furniture, fixtures and equipment. Leased property and equipment under
capital leases and improvements to leased premises are amortized on a
straight-line basis over the lesser of the life of the asset or the remaining
term of the lease.
GOODWILL
Excess purchase price over the fair value of assets acquired is amortized on a
straight-line basis over periods not exceeding 40 years. Recoverability of
goodwill is evaluated based upon estimated future profitability and cash flows.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are used by the Company to manage its interest
rate and international currency exposures. The Company does not hold derivative
financial instruments for trading or speculative purposes. For interest rate
swap agreements, the interest rate differential to be paid or received under the
agreement is recognized over the life of the swap agreement and is included as
an adjustment to interest expense. The carrying amount of each interest rate
swap is reflected in the Consolidated Balance Sheets as a current receivable or
payable as appropriate. For forward foreign exchange contracts, gains and losses
designated as hedges of inventory purchases are deferred and included in the
cost of inventory. Gains and losses that result from hedges of net investments
in international subsidiaries are recognized as part of the foreign currency
translation adjustment included in shareholders' equity until such time as the
investment is liquidated.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is determined by reference to various
market data and other valuation techniques as appropriate. The carrying value of
cash and cash equivalents, other current receivables, and short-term debt
approximate fair value. Quoted market prices of the same or similar instruments
are used to determine fair value of long-term investments, long-term debt,
interest rate swaps, and forward foreign exchange contracts. Discounted cash
flows are used to determine the fair value of long-term receivables and
mortgages if quoted market prices on these instruments are unavailable.
RECOVERABILITY OF LONG-LIVED ASSETS
An impairment loss is recognized whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Beginning in 1995, with the adoption of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS No. 121"), assets are grouped and
evaluated at the lowest level for which there are identifiable cash flows that
are largely independent of the cash flows of other groups of assets. The Company
has identified this lowest level to be principally individual stores. The
Company considers historical performance and future estimated results in its
evaluation of potential impairment and then compares the carrying amount of the
asset to the estimated future cash flows expected to result from the use of the
asset. If the carrying amount of the asset exceeds estimated expected
undiscounted future cash flows, the Company measures the amount of the
impairment by comparing the carrying amount of the asset to its fair value. The
23.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 26
estimation of fair value is generally measured by discounting expected future
cash flows at the rate the Company utilizes to evaluate potential investments.
The Company estimates fair value based on the best information available making
whatever estimates, judgments and projections are considered necessary.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS No. 123") encourages, but does not require, companies to
record compensation cost for stock-based employee compensation at fair value.
The Company has chosen to continue to account for stock-based compensation using
the intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB No. 25.") In accordance
with APB No. 25, compensation expense is not recorded for options granted if the
option price is equal to the quoted market price at the date of grant.
Compensation expense is also not recorded for employee purchases of stock under
the 1994 Stock Purchase Plan since the plan is non-compensatory as defined in
APB No. 25.
INCOME TAXES
The Company determines its deferred tax provision under the liability method,
whereby deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax bases of assets and
liabilities and their reported amounts using presently enacted tax rates.
Deferred tax assets are recognized for tax credit and net operating loss
carryforwards, reduced by a valuation allowance which is established when "it is
more likely than not" that some portion or all of the deferred tax assets will
not be realized. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment
date.
Provision for U.S. income taxes on undistributed earnings of foreign
subsidiaries is made only on those amounts in excess of the funds considered to
be permanently reinvested.
STORE PRE-OPENING AND CLOSING COSTS
Store pre-opening costs are charged to expense as incurred. In the event a store
is closed before its lease has expired, the estimated lease obligation, less
sublease rental income, is provided for when a decision to close the store is
made.
FOREIGN CURRENCY TRANSLATION
The functional currency of the Company's international operations is the
applicable local currency. The translation of the applicable foreign currency
into U.S. dollars is performed for balance sheet accounts using current exchange
rates in effect at the balance sheet date, and for revenue and expense accounts
using the weighted-average rates of exchange prevailing during the year. The
unearned gains and losses resulting from such translation are included as a
separate component of shareholders' equity.
EARNINGS PER SHARE
Net income (loss) per share is computed by dividing net income (loss), after
deducting preferred dividends on convertible preferred stock, by the
weighted-average number of shares of common stock outstanding during the year.
RECLASSIFICATIONS
Certain balances in prior fiscal years have been reclassified to conform with
the presentation adopted in the current fiscal year.
2 ACQUISITION
On January 30, 1997, the Company acquired Eastbay, Inc. ("Eastbay") in a
transaction accounted for as a purchase. Under the purchase agreement,
stockholders of Eastbay received cash in amounts between $22 and $24 for each of
their shares. The cash acquisition cost was $140 million with an additional $6
million contingently payable for attaining certain performance goals. The
Company's consolidated results of operations will include those of Eastbay
beginning with the date the acquisition was consummated. The excess of cost over
net assets acquired of approximately $107 million will be amortized using the
straight-line method over twenty years.
3 IMPAIRMENT OF LONG-LIVED ASSETS
In 1995, the Company adopted SFAS No. 121 and recorded a non-cash pre-tax charge
of $241 million ($165 million after-tax). Of the total impairment loss
recognized upon adoption, $209 million represented impairment of long-lived
assets such as properties, store fixtures and leasehold improvements, $24
million related to goodwill and $8 million pertained to other intangibles. The
current year pre-tax impairment of $8 million is included in selling, general
and administrative expenses.
24.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 27
4 SEGMENT INFORMATION
The Company's stores are categorized into two segments: Specialty and General
Merchandise. The Specialty segment includes: the Athletic Group, the Northern
Group, Specialty Footwear and Other Specialty. The General Merchandise segment
includes operations in: Germany, the United States and other countries.
SALES
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- ----------------------------------------------------------
SPECIALTY:
<S> <C> <C> <C>
Athletic Group $3,615 $3,424 $3,212
Northern Group 426 367 320
Specialty Footwear 721 729 763
Other Specialty 442 579 945
- ----------------------------------------------------------
5,204 5,099 5,240
- ----------------------------------------------------------
GENERAL MERCHANDISE:
Germany 1,624 1,733 1,476
United States 1,044 1,150 1,240
Other 220 242 282
- ----------------------------------------------------------
2,888 3,125 2,998
- ----------------------------------------------------------
$8,092 $8,224 $8,238
- ----------------------------------------------------------
</TABLE>
See Management's Discussion and Analysis of Financial Condition and Results of
Operations for further commentary.
OPERATING RESULTS
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- ---------------------------------------------------------------
SPECIALTY:
<S> <C> <C> <C>
Athletic Group $461 $ 277 $211
Northern Group 42 32 38
Specialty Footwear (10) (61) 33
Other Specialty (46) (114) (42)
- ---------------------------------------------------------------
447 134 240
- ---------------------------------------------------------------
GENERAL MERCHANDISE:
Germany (2) (81) 21
United States (30) (55) 37
Other (4) (39) (24)
- ---------------------------------------------------------------
(36) (175) 34
- ---------------------------------------------------------------
Operating results 411 (41) 274
Corporate expense 58 73 71
Interest expense 73 119 107
- ---------------------------------------------------------------
Income (loss) before income taxes $280 $(233) $ 96
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION AND AMORTIZATION CAPITAL EXPENDITURES TOTAL ASSETS
---------------------------- ------------------------- -----------------------------
(in millions) 1996 1995 1994 1996 1995 1994 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
SPECIALTY:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Athletic Group $ 76 $ 85 $ 86 $ 53 $ 40 $ 76 $1,083 $1,050 $1,229
Northern Group 11 11 11 10 13 9 307 222 172
Specialty Footwear 13 21 23 16 8 15 279 302 381
Other Specialty 13 27 30 5 7 21 172 251 426
- -------------------------------------------------------------------------------------------------------------------------
113 144 150 84 68 121 1,841 1,825 2,208
GENERAL MERCHANDISE:
Germany 44 56 47 12 60 61 997 1,064 1,046
United States 17 23 23 33 27 12 364 453 552
Other 1 3 1 2 4 15 11 39 137
- -------------------------------------------------------------------------------------------------------------------------
62 82 71 47 91 88 1,372 1,556 1,735
Corporate 12 13 12 3 8 9 263 125 202
- -------------------------------------------------------------------------------------------------------------------------
Total Company $187 $239 $233 $134 $167 $218 $3,476 $3,506 $4,145
- -------------------------------------------------------------------------------------------------------------------------
SALES OPERATING RESULTS TOTAL ASSETS
------------------------------ ------------------------- -----------------------------
(in millions) 1996 1995 1994 1996 1995 1994 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
United States $5,084 $5,116 $5,439 $372 $ 110 $266 $1,925 $1,885 $2,378
Europe 1,942 2,021 1,695 16 (100) 20 1,175 1,196 1,210
Canada 798 814 772 28 (33) (16) 264 312 366
Pacific Rim 221 217 222 (6) (12) 5 80 82 127
Mexico 47 56 110 1 (6) (1) 32 31 64
- -------------------------------------------------------------------------------------------------------------------------
$8,092 $8,224 $8,238 $411 $ (41) $274 $3,476 $3,506 $4,145
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
25.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 28
5 REPOSITIONING AND RESTRUCTURING RESERVES
The Company recorded charges of $558 million in 1993 and $390 million in 1991 to
reflect the anticipated costs to sell or close under-performing specialty and
general merchandise stores in the United States and Canada. The 1993 charge
included estimated cash outlays for lease liabilities and other occupancy and
facilities-related costs of $245 million, operating expenses during the shutdown
period of $88 million, and severance and other personnel and related costs of
$28 million. Non-cash charges cover asset and inventory write-downs of $197
million. The 1991 charge included estimated cash outlays for lease liabilities
and other occupancy and facilities-related costs of $123 million, operating
expenses during the shutdown period of $106 million, and severance and other
personnel and related costs of $47 million. Non-cash charges cover asset and
inventory write-downs of $114 million.
Under the 1993 repositioning program, approximately 970 stores were identified
for closing or conversion to other formats. Approximately 13,000 store and
distribution center employees were terminated under this program. Under the 1991
restructuring program, approximately 900 stores were closed or converted to
other formats. Approximately 7,700 store employees were terminated and 2,300
employees were transferred to other stores.
In 1996, an adjustment of $32 million was made to revise the original estimates
based on actual experience to date. This adjustment is comprised of $21 million
related to reserves originally established for general merchandise operations
and $11 million for specialty operations.
The activity in the reserves was as follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995
- ---------------------------------------------------------------
<S> <C> <C>
Balance at beginning of year $147 $193
Interest on net present value
of lease obligations 6 8
Cash payments (37) (54)
Adjustment for revision of estimates (32) --
- ---------------------------------------------------------------
Balance at end of year $ 84 $147
===============================================================
Components of the balance are as follows:
(in millions) 1996 1995
- ---------------------------------------------------------------
Real estate and related occupancy costs $61 $ 93
Facilities-related costs 19 25
Personnel and related costs 4 29
- ---------------------------------------------------------------
$84 $147
===============================================================
</TABLE>
The remaining balance of $84 million, which is included in other liabilities and
accrued liabilities, is expected to be adequate for all remaining liabilities.
This liability relates primarily to lease obligations for approximately 300
stores and will be funded over the next few years.
6 MERCHANDISE INVENTORIES
<TABLE>
<CAPTION>
(in millions) 1996 1995
- ----------------------------------------------------------------
<S> <C> <C>
LIFO inventories $ 741 $ 671
FIFO inventories 528 693
- ----------------------------------------------------------------
Total merchandise inventories $1,269 $1,364
================================================================
Excess of current cost (FIFO)
over stated LIFO cost $ 98 $ 102
================================================================
</TABLE>
7 OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
(in millions) 1996 1995
- ----------------------------------------------------------------
<S> <C> <C>
Net receivables $129 $121
Operating supplies and prepaid expenses 58 55
Deferred taxes 42 52
Other 4 13
- ----------------------------------------------------------------
$233 $241
================================================================
</TABLE>
8 PROPERTY AND EQUIPMENT, NET
<TABLE>
<CAPTION>
(in millions) 1996 1995
- ----------------------------------------------------------------
<S> <C> <C>
LAND $ 118 $ 141
BUILDINGS:
Owned 744 862
Leased 37 59
FURNITURE, FIXTURES AND EQUIPMENT:
Owned 1,114 1,185
Leased 11 16
- ----------------------------------------------------------------
2,024 2,263
Less accumulated depreciation 1,186 1,262
- ----------------------------------------------------------------
838 1,001
ALTERATIONS TO LEASED AND OWNED BUILDINGS,
NET OF ACCUMULATED AMORTIZATION 220 224
- ----------------------------------------------------------------
$1,058 $1,225
================================================================
</TABLE>
26.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 29
9 DEFERRED CHARGES AND OTHER ASSETS
<TABLE>
<CAPTION>
(in millions) 1996 1995
- ----------------------------------------------------------------
<S> <C> <C>
Deferred taxes $320 $346
Goodwill (net of accumulated amortization) 86 89
Lease acquisition costs 61 66
Pension intangible 16 22
Other 112 140
- ----------------------------------------------------------------
$595 $663
================================================================
10 ACCRUED LIABILITIES
(in millions) 1996 1995
- ----------------------------------------------------------------
Payroll and related costs $160 $122
Taxes other than income taxes 72 83
Store closings and real estate-related costs 58 45
Income taxes payable 52 19
Repositioning and restructuring 25 32
Deferred taxes 11 12
Other operating costs 127 113
- ----------------------------------------------------------------
$505 $426
================================================================
11 SHORT-TERM DEBT
($ in millions) 1996 1995
- ----------------------------------------------------------------
Bank loans $-- $ 69
================================================================
Weighted-average interest rate
on year-end balance -- 6.0%
================================================================
</TABLE>
At January 25, 1997, unused lines of credit under which the Company may borrow
funds totaled $1.07 billion, of which domestic credit lines totaled $1.0 billion
and international credit lines totaled $68 million. During 1996, the Company
chose not to renew $218 million of international credit lines which expired
during the year. Additionally, credit overdraft facilities for international
operating units will be maintained only for temporary needs. At January 25,
1997, the Company had revolving credit agreements in the United States with 34
lending institutions which provide seasonal borrowing capacity. The Company also
has informal agreements with certain banks in the United States, Canada, Germany
and Australia.
The $1.5 billion credit agreement which was negotiated in 1995 included a $1.0
billion three-year facility and an additional $500 million facility for the
first year of the agreement, which has now expired. At the Company's election,
in February 1997, the $1.0 billion facility was reduced to $500 million and the
terms were later modified. Restrictive covenants under the new agreement include
tangible net worth levels, leverage ratios and a fixed-charge coverage ratio.
Upfront fees paid under the modified agreement will be amortized over the life
of the facility on a pro rata basis. In addition, the Company paid annual fees,
based on the Company's credit rating, of 0.3125 percent for the original
three-year agreement. The modified fee going forward will be 0.15 percent based
upon the Company's current credit rating. The new five-year agreement will
expire in 2002.
12 LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES
During 1995, the Company issued $200 million of domestic notes bearing interest
at 7.0 percent with a 5-year maturity, $50 million of notes bearing interest at
6.98 percent with a 6-year maturity, and $40 million of notes bearing interest
at 7.0 percent with a 7-year maturity. In connection with a European investment,
the Company issued a $36 million (DM 59 million) note bearing interest at 6.45
percent maturing in 1998.
Following is a summary of long-term debt and obligations under capital leases:
<TABLE>
<CAPTION>
(in millions) 1996 1995
- ----------------------------------------------------------
<S> <C> <C>
8.5% debentures payable 2022 $200 $200
7.0% debentures payable 2000 200 200
6.93% to 7.43% medium-term
notes payable through 2002 115 125
3.75% to 10.5% mortgage
obligations on real estate
payable through 2013 22 28
Other 38 48
- ----------------------------------------------------------
Total long-term debt 575 601
Obligations under capital leases 22 43
- ----------------------------------------------------------
597 644
Less: current portion 17 25
- ----------------------------------------------------------
$580 $619
==========================================================
</TABLE>
Maturities of long-term debt and minimum rent payments under capital leases in
future periods are:
<TABLE>
<CAPTION>
LONG-TERM CAPITAL
(in millions) DEBT LEASES TOTAL
- ----------------------------------------------------------
<S> <C> <C> <C>
1997 $ 12 $ 7 $ 19
1998 53 9 62
1999 2 4 6
2000 202 2 204
2001 52 1 53
Thereafter 254 8 262
- ----------------------------------------------------------
575 31 606
Less: Imputed interest -- 6 6
Executory expenses -- 3 3
Current portion 12 5 17
- ----------------------------------------------------------
$563 $17 $580
==========================================================
</TABLE>
27.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 30
13 LEASES
The Company is obligated under capital and operating leases for a major portion
of its store properties. Some of the store leases contain purchase or renewal
options with varying terms and conditions. Management expects that in the normal
course of business, expiring leases will generally be renewed or, upon making a
decision to relocate, replaced by leases on other premises. Operating lease
periods generally range from 5 to 10 years with options to renew, with terms
ranging from 5 to 10 years. Certain leases provide for additional rent payments
based on a percentage of store sales. Rent expense consists of the following:
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Minimum rent $689 $671 $634
Contingent rent based on sales:
Operating leases 38 45 47
Capital leases -- -- 3
Sublease income (21) (23) (19)
- ---------------------------------------------------------------
Total rent expense $706 $693 $665
===============================================================
</TABLE>
Future minimum lease payments under non-cancelable operating leases are:
<TABLE>
<CAPTION>
(in millions)
- ----------------------------------------------------------
<S> <C>
1997 $ 506
1998 471
1999 412
2000 340
2001 271
Thereafter 723
- ----------------------------------------------------------
Total operating lease commitments $2,723
==========================================================
Present value of operating lease commitments $2,036
==========================================================
</TABLE>
14 OTHER LIABILITIES
<TABLE>
<CAPTION>
(in millions) 1996 1995
- ----------------------------------------------------------
<S> <C> <C>
Pension benefits $279 $302
Other post-retirement benefits 209 212
Repositioning and restructuring 59 115
Other 101 100
- ----------------------------------------------------------
$648 $729
==========================================================
</TABLE>
15 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
FOREIGN EXCHANGE RISK MANAGEMENT
The Company enters into forward foreign exchange and option contracts to reduce
the effect of fluctuations in currency exchange rates. Exposures arising from
short-term intercompany transactions, inventory purchases, and hedges of the
Company's net investment in international subsidiaries are managed through the
use of forward and option contracts. Determination of hedge activity is based
upon market conditions, magnitude of inventory commitments, and perceived risks.
All contracts mature within one year.
The following table presents gross forward foreign exchange commitments, by
currency and type:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
($U.S. in millions) BUY SELL BUY SELL
- ----------------------------------------------------------
INVENTORY PURCHASES:
<S> <C> <C> <C> <C>
U.S. dollar 72 -- 95 --
Other currencies 4 -- 9 --
==========================================================
INTERCOMPANY:
Canadian dollar 19 -- 67 17
German mark -- -- 64 --
Other currencies 2 15 29 19
==========================================================
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of certain financial instruments are as follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
CARRYING FAIR CARRYING FAIR
(in millions) AMOUNT VALUE AMOUNT VALUE
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term investments $ 39 $ 24 $ 56 $ 52
Long-term debt $575 $570 $601 $585
===========================================================
</TABLE>
The carrying value approximates fair value for all other financial instruments.
28.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 31
INTEREST RATE RISK MANAGEMENT
The Company uses interest rate swaps to reduce its exposure to fluctuations in
interest rates. In October 1992, the Company entered into a $200 million,
five-year swap agreement which effectively converted the interest rate on its
8.5 percent debentures to a floating rate equal to the six-month LIBOR plus 3.05
percent. The effective interest rate on the debentures was 8.81 percent in 1996,
9.44 percent in 1995 and 7.74 percent in 1994. As security for its obligation
under this swap agreement, both the Company and the swap counter-party have
agreed to deliver cash collateral if certain conditions are met. Such collateral
is to be delivered when projected exposure for either party exceeds $0.5
million. At January 25, 1997, the Company had $0.6 million on deposit as
collateral.
CREDIT RISK
Credit risk of interest rate swaps and forward foreign exchange contracts is
considered minimal, as management closely monitors the financial condition of
the counter-parties to the contracts, which are financial institutions with
credit ratings of A- or higher.
BUSINESS RISK
The retailing business is highly competitive. Price, quality and selection of
merchandise, reputation, store location, advertising and customer service are
important competitive factors in the Company's business. The Company purchases
merchandise and supplies from thousands of vendors worldwide including purchases
of athletic footwear and apparel from one major vendor, which supplied
approximately 25 percent, 22 percent and 17 percent of the Company's merchandise
purchases in 1996, 1995 and 1994, respectively. The Company considers vendor
relations to be satisfactory.
16 INCOME TAXES
Following are the domestic and international components of pre-tax income
(loss):
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- ----------------------------------------------------------
<S> <C> <C> <C>
Domestic $263 $ (44) $115
International 17 (189) (19)
- ----------------------------------------------------------
Total pre-tax income (loss) $280 $(233) $ 96
==========================================================
</TABLE>
The income tax (benefit) provision consists of the following:
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- ----------------------------------------------------------
CURRENT:
<S> <C> <C> <C>
Federal $ 61 $ (4) $(14)
State and local 21 6 16
International 19 2 --
- ----------------------------------------------------------
Total current tax provision 101 4 2
- ----------------------------------------------------------
DEFERRED:
Federal 11 (16) 55
State and local (1) (1) (3)
International -- (56) (5)
- ----------------------------------------------------------
Total deferred tax provision
(benefit) 10 (73) 47
- ----------------------------------------------------------
Total income tax provision
(benefit) $111 $(69) $ 49
==========================================================
</TABLE>
Provision has been made in the accompanying Consolidated Statements of
Operations for additional income taxes applicable to dividends received or
expected to be received from international subsidiaries. The amount of
unremitted earnings of international subsidiaries, for which no such tax is
provided and which is considered to be permanently reinvested in the
subsidiaries, totaled $368 million at January 25, 1997. If such earnings had not
been considered permanently reinvested, approximately $19 million of deferred
income taxes, consisting primarily of foreign withholding taxes, would have been
provided. Such taxes, if ultimately paid, might be recoverable as foreign tax
credits.
A reconciliation of the significant differences between the federal statutory
income tax rate and the effective income tax rate on pre-tax income (loss) is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income
tax rate 35.0% (35.0)% 35.0%
State and local income taxes,
net of federal tax benefit 4.8 1.4 8.6
International income taxed
at varying rates 1.3 3.9 9.4
Targeted jobs tax credit -- (0.4) (1.3)
Other, net (1.4) 0.5 (0.6)
- --------------------------------------------------------------
Effective income tax rate 39.7% (29.6)% 51.1%
==============================================================
</TABLE>
29.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 32
Items that gave rise to significant portions of the deferred tax accounts are as
follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995
- ----------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Tax loss/credit carryforwards $191 $174
Employee benefits 115 130
Repositioning and restructuring reserves 70 94
Other 50 74
- ----------------------------------------------------------------
Total 426 472
Valuation allowance (64) (74)
- ----------------------------------------------------------------
Total deferred tax assets, net 362 398
- ----------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Inventories 48 47
Property and equipment 10 1
Other 11 52
- ----------------------------------------------------------------
Total deferred tax liabilities 69 100
- ----------------------------------------------------------------
Net deferred tax asset $293 $298
================================================================
BALANCE SHEET CAPTION REPORTED IN:
Other current assets $ 42 $ 52
Deferred charges and other assets 320 346
Accrued liabilities (11) (12)
Deferred taxes (58) (88)
- ----------------------------------------------------------------
$293 $298
================================================================
</TABLE>
As of January 25, 1997, the Company had a valuation allowance of $64 million to
reduce its deferred tax assets to estimated realizable value. The valuation
allowance primarily relates to the deferred tax assets arising from state tax
loss carryforwards of certain domestic operations, tax loss carryforwards of
certain European operations, and tax loss and capital loss carryforwards of the
Canadian operations.
Based upon the level of historical taxable income and projections for future
taxable income over the periods in which the temporary differences are
anticipated to reverse, management believes it is more likely than not that the
Company will realize the benefits of these deductible differences, net of the
valuation allowances at January 25, 1997. However, the amount of the deferred
tax asset considered realizable could be adjusted in the future if estimates of
taxable income are revised.
At January 25, 1997, the Company had international operating loss
carryforwards of approximately $383 million. Those expiring between 1997 and
2003 were $236 million and those that do not expire were $116 million. The
Company has state net operating loss carryforwards ranging from $1 million to
$40 million in the sixteen states where the Company does not file a combined
return. These loss carryforwards expire between 2007 and 2012. Foreign tax
credits of approximately $23 million expiring between 1998 and 2002 are also
available to the Company.
Deferred tax liabilities related to property and equipment were reduced to $1
million in 1995 from $92 million, primarily due to the recognition of deferred
tax benefits arising from the 1995 recording of impairment on certain property
under SFAS No. 121.
17 RETIREMENT PLANS AND OTHER BENEFITS
RETIREMENT PLANS
The Company has defined benefit pension plans covering most of its employees.
Benefits generally are based on years of service and career-average
compensation. Plans are funded in accordance with the provisions of the laws of
the countries where the plans are in effect. Substantially all of the unfunded
projected benefit obligation represents the German pension accrual for which
there are no offsetting plan assets, as permitted by local statutory
requirements. Plan assets consist primarily of stocks, bonds and temporary
investments.
<TABLE>
<CAPTION>
PRINCIPAL ASSUMPTIONS 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted-average discount rate 7.5% 7.3% 8.6%
Weighted-average rate of
compensation increase 4.4% 4.4% 4.6%
Weighted-average long-term
rate of return on assets 9.8% 10.0% 10.0%
===========================================================================
</TABLE>
The components of net pension expense are:
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Service cost: benefits earned
during period $ 17 $ 19 $ 24
Interest cost on projected
benefit obligation 70 76 71
Actual return on plan assets (60) (140) 34
Net amortization and deferral 7 81 (88)
Curtailment gain -- (8) --
- ---------------------------------------------------------------
Net pension expense $ 34 $ 28 $ 41
===============================================================
</TABLE>
In 1995, the Company curtailed a supplemental retirement plan for executives
which resulted in a gain of $8 million.
30.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 33
The following table sets forth the plans' funded status and amounts recognized
in the Consolidated Balance Sheets:
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
ASSETS ABO ASSETS ABO
EXCEED EXCEEDS EXCEED EXCEEDS
(in millions) ABO ASSETS ABO ASSETS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of obligations:
Vested $ 4 $ 904 $ 5 $ 934
Nonvested -- 20 -- 21
- -----------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation (ABO) 4 924 5 955
Obligation for future salary increases -- 48 -- 41
- -----------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation (PBO) 4 972 5 996
Plan assets at fair value 6 646 7 656
- -----------------------------------------------------------------------------------------------------------------------------
Amount of plan assets over (under) PBO 2 (326) 2 (340)
Unrecognized net asset at transition (3) (17) (3) (26)
Unrecognized prior service cost -- 25 -- 31
Unrecognized net loss 2 111 3 108
Recognition of a portion of the minimum liability as an intangible asset -- (16) -- (22)
Recognition of remaining minimum liability -- (57) -- (55)
- -----------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost $ 1 $(280) $ 2 $(304)
=============================================================================================================================
</TABLE>
POST-RETIREMENT PLANS OTHER THAN PENSIONS
In addition to providing pension benefits, the Company sponsors post-retirement
medical and life insurance plans which are available to most of its retired U.S.
employees. In order to be eligible for these plans, employees must retire from
the Company and have been previously covered under the Company's active medical
or life insurance plans. The level of benefits available depends on the year of
retirement and the plan in effect at that time. The plans are contributory and
are not funded. Contributions are adjusted annually and depend on year of
retirement and, in some cases, years of service.
The weighted-average discount rate used to determine the accumulated
post-retirement benefit obligation was 7.5 percent in 1996 and 7.15 percent in
1995.
The following table sets forth the plans' combined accrued post-retirement
benefit obligation:
<TABLE>
<CAPTION>
(in millions) 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees $104 $158
Fully eligible active plan participants 8 6
Other active plan participants 5 3
- ----------------------------------------------------------------------
117 167
Unrecognized actuarial gain 92 45
- ----------------------------------------------------------------------
Accrued post-retirement
benefit obligation $209 $212
======================================================================
</TABLE>
For measurement purposes, a 9.6 percent increase in the cost of covered health
care benefits was assumed for 1996. The rate was assumed to decline gradually to
five percent in 2008 and remain at that level thereafter. A one percent increase
in the health care cost trend rate would increase the 1996 accumulated
post-retirement benefit obligation by $8 million and the 1996 expense by $1
million.
Post-retirement medical and life insurance expense was $3 million in 1996, $10
million in 1995, and $14 million in 1994. Substantially all of the expense
represents interest on the accumulated post-retirement benefit obligation; the
service cost component was not significant. The cash cost to provide retiree
medical and life insurance benefits was $7 million in each of 1996 and 1995, and
$8 million in 1994.
401(k) PLAN
In January 1996, the Company established a savings plan under Section 401(k) of
the Internal Revenue Code. This savings plan allows eligible employees to
contribute up to 15 percent of their compensation on a pre-tax basis. The
Company matches 25 percent of the first 4 percent of the employees'
contribution. Such matching Company contributions are vested incrementally over
7 years. The charge to operations for the Company's matching contribution was
$1.5 million in 1996 and $0.2 million in 1995.
31.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 34
18 SHAREHOLDER RIGHTS PLAN
The Company has issued one-half of a preferred stock purchase right for each
outstanding share of common stock. Each right entitles a shareholder to purchase
one one-hundredth of a share of Series B Participating Preferred Stock at an
exercise price of $200, subject to adjustment. Generally, the rights become
exercisable only if a person or group acquires 20 percent or more of the
Company's outstanding voting stock or announces a tender offer for 20 percent or
more of the Company's outstanding voting stock, other than pursuant to an offer
for all outstanding shares of the Company which the Board of Directors
determines to be fair to, and otherwise in the best interests of, the Company
and its shareholders. The Company will be able to redeem the rights at $0.05 per
right at any time during the period prior to the 10th business day following the
date a person or group acquires 20 percent or more of the Company's voting
stock.
Upon exercise of the right, each holder of a right will be entitled to receive
common stock (or, in certain circumstances, cash, property or other securities
of the Company) having a value equal to two times the exercise price of the
right. The rights, which cannot vote and cannot be transferred separately from
the shares of common stock to which they are presently attached, expire on April
14, 1998, unless earlier redeemed.
19 STOCK PLANS
Under the Company's 1995 Stock Option and Award Plan, options to purchase shares
of common stock may be granted to officers and key employees at the market price
on the date of grant. Under the plan, the Company may grant officers and other
key employees, including those at the subsidiary level, stock options, stock
appreciation rights (SARs), restricted stock, or other stock-based awards.
One-half of each stock option is exercisable on each of the first two
anniversary dates of the date of grant. Generally, for stock options granted
beginning in 1996, one-third of each stock option is exercisable on each of the
first three anniversary dates of the date of grant. The options terminate up to
10 years from the date of grant. The 1995 Stock Option and Award Plan provides
for awards of up to 6,000,000 shares of the Company's common stock. The number
of shares reserved for issuance as restricted stock cannot exceed 1,500,000
shares.
In addition, options to purchase shares of common stock remain outstanding
under the Company's 1986 Stock Option Plan. The ability to grant options under
the 1986 Stock Option Plan expired in June 1996. Options granted under that plan
generally have terms similar to those granted under the 1995 plan, except that a
majority of the options become exercisable in two equal installments on the
first and the second anniversary of the date of grant.
In 1996, the Company established the Directors' Stock Plan (the "Directors'
Plan"). Under the Directors' Plan, non-employee directors receive 50 percent of
their annual retainer in shares of common stock and may elect to receive up to
100 percent of their retainer in common stock. The maximum number of shares of
common stock that may be issued under the Directors' Plan is 250,000 shares.
Under the Company's 1994 Stock Purchase Plan, participating employees may
contribute up to 10 percent of their annual compensation to acquire shares of
common stock at 85 percent of the lower market price on one of two specified
dates in each plan year. Of the 8,000,000 shares of common stock authorized for
purchase under the 1994 plan, 2,150 participating employees purchased 320,622
shares during the year.
When common stock is issued under these plans, the proceeds from options
exercised or shares purchased are credited to common stock to the extent of the
par value of the shares issued, and the excess is credited to additional paid-in
capital. When treasury common stock is issued, the difference between the
average cost of treasury stock used and the proceeds from options exercised or
shares awarded or purchased is charged or credited, as appropriate, to either
additional paid-in capital or retained earnings. The tax benefits relating to
amounts deductible for federal income tax purposes which are not included in
income for financial reporting purposes have been credited to additional paid-in
capital.
The Financial Accounting Standards Board issued SFAS No. 123, which requires
disclosure of the impact on earnings per share if the fair value method of
accounting for stock-based compensation is applied for companies electing to
continue to account for stock-based plans under APB No. 25. Accounting for the
Company's 1996 and 1995 grants for stock-based compensation in accordance with
the fair value method provisions of SFAS No.123 would have resulted in the
following:
<TABLE>
<CAPTION>
($ in millions, except per share amounts:) 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C>
NET INCOME (LOSS) AS REPORTED $ 169 $ (164)
NET INCOME (LOSS) PRO FORMA $ 165 $ (167)
NET INCOME (LOSS) PER SHARE AS REPORTED $1.26 $(1.23)
NET INCOME (LOSS) PER SHARE PRO FORMA $1.23 $(1.25)
=====================================================================
</TABLE>
These pro forma amounts are not expected to be indicative of the effects of
applying the fair-value based method on future earnings since the Company's
stock options vest over several periods.
The fair values of the Company's various stock option and purchase plans were
estimated at the grant date using a Black-Scholes option pricing model. Model
assumptions for 1996 and 1995 for the Company's stock option plans were:
weighted-average risk-free interest rates of 6.05 percent and 6.33 percent,
respectively; a volatility factor of 30 percent; a two-year weighted-average
expected award life and a zero dividend yield. The weighted-average fair value
of options granted during 1996 and 1995 was $5.31 and $4.72 per option,
respectively. Model assumptions for 1996 and 1995, for the Company's Stock
Purchase Plan were: weighted average risk-free interest rates of 6.03 percent
and 6.02 percent, respectively; a volatility factor of 25 percent; an expected
life of 0.7 years and a zero dividend yield. The weighted-average fair value of
those purchase rights granted in 1996 and 1995 was $5.14 and $3.24 per right,
respectively.
32.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 35
The information set forth in the following table covers options granted under
the Company's stock option plans:
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------ -----------------
WEIGHTED- WEIGHTED- WEIGHTED-
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
(in thousands, except prices per share) SHARES PRICE SHARES PRICE SHARES PRICE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of year 6,913 $24.13 6,183 $26.13 4,725 $28.70
Granted 1,757 $16.25 1,288 $15.32 1,747 $19.26
Exercised 159 $17.27 2 $10.55 29 $11.33
Expired or canceled 1,135 $26.59 556 $26.18 260 $28.32
- -----------------------------------------------------------------------------------------------------------------------------
Options outstanding at end of year 7,376 $22.02 6,913 $24.13 6,183 $26.13
- -----------------------------------------------------------------------------------------------------------------------------
Options exercisable at end of year 5,155 $24.59 5,026 $27.03 4,079 $28.73
- -----------------------------------------------------------------------------------------------------------------------------
Options available for future grant at end of year 3,798 6,087 831
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options outstanding and
exercisable at January 25, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- --------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
(in thousands, except prices per share) CONTRACTUAL EXERCISE EXERCISE
RANGE OF EXERCISE PRICE SHARES LIFE PRICE SHARES PRICE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$12.44 to $14.94 964 8.0 years $13.72 872 $13.69
$15.13 to $18.81 2,491 8.8 15.71 496 15.60
$20.25 to $24.69 1,218 5.1 23.26 1,084 23.36
$27.75 to $29.94 1,735 4.8 29.22 1,735 29.22
$30.06 to $34.25 968 3.6 32.07 968 32.07
- ------------------------------------------------------------------------------------------------------------------------------
$12.44 to $34.25 7,376 6.5 years $22.02 5,155 $24.59
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20 RESTRICTED STOCK
In 1994, 200,000 restricted shares of common stock were granted to an officer of
the Company. The market value of the shares at the date of grant amounted to $3
million and is recorded within shareholders' equity in the accompanying
Consolidated Financial Statements. The market value is being amortized as
compensation expense over the related vesting period. The compensation expense
was $0.8 million and $1.4 million in 1996 and 1995, respectively.
21 PREFERRED STOCK
In August 1996, the Company called for the redemption of the issued and
outstanding shares of the $2.20 Series A Convertible Preferred Stock ("Preferred
Stock") at the redemption price of $45 per share on October 23, 1996 (the
"Redemption Date"). Shares of Preferred Stock were convertible into 5.68 shares
of the Company's common stock for each share of Preferred Stock. Conversion
privileges expired on the Redemption Date. Substantially all of the outstanding
shares of Preferred Stock were converted by the holders into the Company's
common stock.
22 COMMITMENTS
In connection with the sales of various businesses, the Company guarantees the
payment of lease commitments transferred to third parties pursuant to those
sales. The Company is operating certain stores for which lease termination
agreements are in the process of being negotiated with landlords. Although there
is no contractual commitment to make these contingent payments, it is likely
that a final contract will be executed. Management believes that the probable
resolution of such contingencies will not materially affect the financial
position or result of operations of the Company.
23 LEGAL PROCEEDINGS
Between March 30, 1994 and April 18, 1994, the Company and certain of its
present and former directors and officers were named as defendants in lawsuits
brought by certain shareholders claiming to represent classes of shareholders
that purchased shares of the Company's common stock during different periods
between January 1992 and March 1994. In April 1994, these lawsuits were
consolidated in an action styled In re: Woolworth Corporation Class Action
Securities Litigation pending in federal court in New York.
33.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 36
These class action complaints purport to present claims under the federal
securities and other laws and seeks unspecified damages based on alleged
misleading disclosures during the class period between May 1993 and March 1994.
On March 13, 1997, the parties' representatives engaged in a mediation
proceeding with a view toward settling the issues in dispute. As a result, the
parties have agreed in principle to a settlement of the class action, subject to
final documentation and the approval of the court. In the opinion of management,
the settlement, if approved by the court, would not have a material adverse
effect on the financial position or results of operations of the Company.
The staff of the Securities and Exchange Commission ("SEC") is conducting an
inquiry relating to the matters that were reviewed by a Special Committee of the
Board of Directors as well as in connection with trading in the Company's
securities by certain directors and officers of the Company. The SEC staff has
advised that its inquiry should not be construed as an indication by the SEC or
its staff that any violations of law have occurred. In the opinion of
management, the result of the inquiry will not have a material adverse effect on
the financial position or results of operations of the Company.
In addition to the matters discussed above, various legal proceedings that
have arisen during the course of the Company's business are pending against the
Company and its subsidiaries. In the opinion of management the ultimate outcome
to the Company and its subsidiaries as a result of legal proceedings is
adequately covered by insurance, or if not covered, would not have a material
adverse effect on the financial position or results of operations of the
Company.
24 SHAREHOLDER INFORMATION AND MARKET PRICES (UNAUDITED)
Woolworth Corporation common stock is listed on the New York, Toronto,
Amsterdam, as well as the Lausanne and Elektronische Boerse Schweiz (EBS) stock
exchanges in Switzerland. In addition, the stock is traded on the Boston,
Cincinnati, Chicago, Philadelphia and Pacific stock exchanges. The New York
Stock Exchange ticker symbol for the Company's common stock is "Z."
At January 25, 1997, 42,905 shareholders of record owned 134,046,720 common
shares.
Market prices for the Company's common and preferred stock is as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
HIGH LOW CLOSE HIGH LOW CLOSE
- ----------------------------------------------------------------------
COMMON STOCK
QUARTER
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st Q 19 3/4 10 7/8 19 3/8 19 3/8 14 3/4 16
2nd Q 23 1/4 18 1/4 19 3/4 16 3/8 14 3/8 15 3/4
3rd Q 22 3/8 18 5/8 21 5/8 16 7/8 12 3/4 14 5/8
4th Q 25 1/4 20 1/4 20 1/2 15 3/4 9 3/8 11 1/4
- ----------------------------------------------------------------------
PREFERRED STOCK
QUARTER
- ----------------------------------------------------------------------
1st Q 112 61 110 1/4 106 85 88 1/2
2nd Q 131 3/8 104 121 89 80 89
3rd Q 130 3/8 105 3/8 122 3/4 94 76 94
4th Q -- -- -- 86 62 63 1/2
- ----------------------------------------------------------------------
</TABLE>
25 QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
(in millions, except
per share amounts) 1ST Q 2ND Q 3RD Q 4TH Q YEAR
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SALES
1996 $1,820 1,856 2,048 2,368 $8,092
1995 $1,794 1,922 2,071 2,437 $8,224
GROSS PROFIT (a)
1996 $ 525 583 663 740 $2,511
1995 $ 489 588 652 760 $2,489
OPERATING PROFIT (LOSS) (b)
1996 $ -- 69 143 199 $ 411
1995 $ (79) 30 99 (91) $ (41)
NET INCOME (LOSS)
1996 $ (22) 22 69 100 $ 169
1995 $ (80) (11) 34 (107) $ (164)
NET INCOME (LOSS)
PER SHARE
1996 $ (.17) .17 .52 .74 $ 1.26
1995 $ (.60) (.09) .26 (.80) $(1.23)
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Gross profit represents sales less cost of sales.
(b) Operating profit (loss) represents income (loss) before income taxes,
interest expense, and corporate expense.
34.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 37
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(in millions, except per share amounts) 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Sales $ 8,092 8,224 8,238 9,558 9,922
Cost of sales 5,581 5,735 5,626 6,747 6,683
Selling, general and administrative expenses 2,006 2,166 2,201 2,615 2,501
Depreciation and amortization 187 239 233 257 254
Interest expense 73 119 107 79 87
Other income (35) (43) (55) (68) (40)
Adoption of accounting standard for impairment
of long-lived assets -- 241 -- -- --
Provision for disposition of Woolco -- -- 30 168 --
Repositioning and restructuring charges -- -- -- 558 --
Income tax expense (benefit) 111 (69) 49 (303) 157
- ----------------------------------------------------------------------------------------------------------------
Net income (loss) $ 169 (164) 47 (495) 280
- ----------------------------------------------------------------------------------------------------------------
Per common share $ 1.26 (1.23) .36 (3.76) 2.14
Common stock dividends declared $ -- -- .74 1.16 1.12
Preferred stock dividends declared $ 1.10 2.20 2.20 2.20 2.20
Weighted-average common shares
outstanding 133.5 132.9 132.3 131.7 130.8
================================================================================================================
FINANCIAL CONDITION
Merchandise inventories $ 1,269 1,364 1,622 1,579 2,269
Property and equipment, net $ 1,058 1,225 1,521 1,531 1,626
Total assets $ 3,476 3,506 4,145 4,593 4,692
Short-term debt $ -- 69 853 533 164
Current portion of long-term debt and obligations
under capital leases $ 17 25 26 32 21
Long-term debt and obligations under capital leases $ 580 619 309 336 372
Total shareholders' equity $ 1,334 1,229 1,358 1,349 2,059
Common shareholders' equity $ 1,334 1,225 1,354 1,344 2,054
Common shareholders' equity per share $ 9.96 9.21 10.22 10.19 15.64
================================================================================================================
FINANCIAL RATIOS
Return on beginning common equity (ROE) 13.8% (12.1) 3.5 (24.0) 13.8
Return on average investment (ROI) 6.9% 0.8 3.6 (6.7) 9.3
Operating profit (loss) as a percentage of sales 5.1% (0.5) 3.3 (6.8) 5.8
Net income (loss) as a percentage of sales 2.1% (2.0) 0.6 (5.2) 2.8
Debt capitalization percent 66.4% 69.9 71.2 69.2 56.5
Debt capitalization percent (without present
value of operating leases) 30.9% 36.7 46.7 40.0 21.3
Current ratio 2.1X 1.9 1.2 1.2 1.6
================================================================================================================
Number of stores at year end 7,746 8,178 8,629 8,368 8,990
================================================================================================================
</TABLE>
35.
WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 38
BOARD OF
DIRECTORS
ROGER N. FARAH (1)
Chairman of the Board and Chief Executive Officer
DALE W. HILPERT
President and Chief Operating Officer
J. CARTER BACOT (1,4,6)
Chairman of the Board and Chief Executive Officer The Bank of New York Company,
Inc. and Chairman of the Board of The Bank of New York (banking services)
PURDY CRAWFORD (1,2,5)
Chairman of the Board Imasco Limited (consumer products and services)
HELEN GALLAND (1,2,5)
President and Chief Executive Officer Helen Galland Associates (marketing and
business consulting services)
PHILIP H. GEIER JR. (1,3)
Chairman of the Board and Chief Executive Officer Interpublic Group of
Companies, Inc. (advertising agencies and other marketing communication
services)
JAROBIN GILBERT JR. (1,2,4)
President and Chief Executive Officer DBSS Group, Inc. (management, planning and
trade consulting)
MARGARET P. MACKIMM (1,3,5)
Former Senior Vice President - Communications Kraft Foods, Inc. (multinational
marketer and processor of food products)
JOHN J. MACKOWSKI (1,2,5)
Director of various companies
JAMES E. PRESTON (1,3,4,6)
Chairman of the Board and Chief Executive Officer Avon Products, Inc.
(manufacture and sale of beauty and related products)
CHRISTOPHER A. SINCLAIR (1,6)
President and Chief Executive Officer Quality Food Centers, Inc. (supermarket
chain)
CORPORATE OFFICERS
ROGER N. FARAH
Chairman of the Board and Chief Executive Officer
DALE W. HILPERT
President and Chief Operating Officer
Senior Vice Presidents
M. JEFFREY BRANMAN
Corporate Development
JOHN E. DEWOLF III
Real Estate
JOHN F. GILLESPIE
Human Resources
ANDREW P. HINES
Chief Financial Officer
Vice Presidents
GARY M. BAHLER
General Counsel and Secretary
THOMAS A. BEAUCHAMP
Information Systems
GARY H. BROWN
Real Property
JOHN H. CANNON
Treasurer
BRUCE L. HARTMAN
Controller
CYNTHIA M. KRASNE
Strategic Planning and Analysis
MARK J. LARSON
General Auditor
MARYANN M. MCGEORGE
Merchandise Operations
HENRY C. MINER III
Taxation
JURIS PAGRABS
Investor Relations
PATRICIA A. PECK
Human Resources
RICHARD J. PRICE
Logistics
VIVIAN J. SHAW
Financial Planning and Analysis
FRANCES E. TRACHTER
Public Affairs
CONSOLIDATED OPERATIONS
ATHLETIC FOOTWEAR AND APPAREL DIVISION
WILLIAM L. DEVRIES
President and Chief Executive Officer
RETAIL COMPANY OF GERMANY, INC.
MANFRED SCHOENMEIER
President and Chief Executive Officer
F.W. WOOLWORTH CO.
PAUL T. DAVIES
President and Chief Executive Officer
WOOLWORTH CANADA INC.
ALAN M. BEAM
President and Chief Executive Officer
SPECIALTY FOOTWEAR DIVISION
CAROL G. GREER
President and Chief Executive Officer
CORPORATE INFORMATION
CORPORATE HEADQUARTERS
Woolworth Building
233 Broadway
New York, New York 10279-0003
(212) 553-2000
TRANSFER AGENTS AND REGISTRARS
First Chicago Trust
Company of New York
P.O. Box 2500
Jersey City, New Jersey 07303-2500
(800) 519-3111
The R-M Trust Company
Corporate Trust Services
P.O. Box 7010
Adelaide Street Postal Station
Toronto, Ontario M5C 2W9
(800) 387-0825
(416) 813-4500
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, NY 10154
(212) 758-9700
FORM 10-K
A copy of Woolworth Corporation's 1996 Annual Report on Form 10-K filed with the
Securities and Exchange Commission is available, without charge, by request to
the Corporate Secretary at the Corporate Headquarters.
SHAREHOLDERS' MEETING
The next annual meeting of shareholders will be held at the New York Marriott
Financial Center Hotel, 85 West Street, New York, New York 10006 at 10:00 A.M.
(local time) on June 12, 1997. The formal notice of the meeting, proxy
statement, and form of proxy will be mailed to each shareholder on or about May
5, 1997, at which time proxies will be requested by management.
NOTE THAT THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS IN THE SHAREHOLDERS'
LETTER AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, WHICH REFLECT MANAGEMENT'S CURRENT VIEWS OF FUTURE EVENTS
AND FINANCIAL PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON MANY
ASSUMPTIONS AND FACTORS INCLUDING THE EFFECTS OF CURRENCY FLUCTUATIONS, CONSUMER
PREFERENCES, AND ECONOMIC CONDITIONS WORLDWIDE. ANY CHANGES IN SUCH ASSUMPTIONS
OR FACTORS COULD PRODUCE SIGNIFICANTLY DIFFERENT RESULTS.
(C) 1997 Woolworth Corporation
(1) MEMBER OF EXECUTIVE COMMITTEE
(2) MEMBER OF AUDIT COMMITTEE
(3) MEMBER OF COMPENSATION COMMITTEE
(4) MEMBER OF NOMINATING AND ORGANIZATION COMMITTEE
(5) MEMBER OF RETIREMENT INVESTMENT COMMITTEE
(6) MEMBER OF ACQUISITIONS AND FINANCE COMMITTEE
The service marks and trademarks appearing in this report (except for Wal-Mart)
are owned by Woolworth Corporation or its subsidiaries.
Investor inquiries should be directed to the Investor Relations Department at
(212) 553-2600.
36. WOOLWORTH CORPORATION 1996 ANNUAL REPORT
<PAGE> 39
WOOLWORTH CORPORATION
WOOLWORTH BUILDING
233 BROADWAY
NEW YORK, NEW YORK 10279-0003
<PAGE> 1
EXHIBIT 21
WOOLWORTH CORPORATION AND SUBSIDIARIES 1/
April 15, 1997
<TABLE>
<CAPTION>
State or Other
Name Jurisdiction of Incorporation
- ---- -----------------------------
<S> <C>
Woolworth Corporation New York
Foot Locker Asia, Inc. Delaware
Foot Locker Asia Limited Hong Kong
Foot Locker Australia, Inc. Delaware
Foot Locker Belgium N.V Belgium
Foot Locker Europe B.V. Netherlands
Foot Locker France S.A. France
Faust S.A.R.L. France
Florentin Freres-Primaprix S.A. France
Les Nouveautes du Centre S.A.R.L. France
Foot Locker Germany GmbH Germany
Foot Locker Italy S.r.l. Italy
Foot Locker Japan, Inc. Delaware
Foot Locker Netherlands B.V. Netherlands
Foot Locker Singapore Pte. Ltd. Singapore
Foot Locker Spain S.L. Spain
Foot Locker (Thailand) Co., Ltd. Thailand
Foot Locker U.K. Limited U.K.
Freedom Sportsline Limited U.K.
Kids Mart, Inc. 2/ Florida
Kids Mart Inc. Delaware
Kinney New Zealand Limited New Zealand
Little Folk Shop Inc. Delaware
Northern Reflections Inc. Delaware
Randy River, Inc. Delaware
</TABLE>
- ---------------------
1/ The name of each subsidiary company is indented under the name of its
parent company and, unless otherwise noted in a footnote, each such
subsidiary company is 100% owned by its parent. Directors' qualifying
shares, if any, are deemed to be beneficially owned by a subsidiary's
parent company. All subsidiaries wholly owned, directly or indirectly,
by Woolworth Corporation are consolidated with Woolworth Corporation
for accounting and financial reporting purposes.
[FOOTNOTES CONTINUED ON LAST PAGE]
<PAGE> 2
<TABLE>
<S> <C>
[WOOLWORTH CORPORATION -- (CONT.)]
The Richman Brothers Company Ohio
Custom Cut, Inc. Delaware
RX Place, Inc. Delaware
The San Francisco Music Box Company California
Team Edition Apparel, Inc. Florida
F. W. Woolworth Co. New York
Afterthoughts Boutiques, Inc. Delaware
Barclay Park and Church Advertising Inc. Delaware
Checklot Service Center, Inc. Delaware
Eastbay, Inc. Wisconsin
Frame Scene, Inc. Delaware
Herald Square Stationers, Inc. Delaware
Lamston 37-33/45 Seventy-Fourth Street Corp. New York
Lamston 69-73/5 Grand Avenue Corp. New York
Lamston 1279 Third Avenue Corp. New York
Red Grille of Hawaii, Inc. Delaware
Red Grille of Louisiana, Inc. Delaware
Trade Center Realty, Inc. Delaware
Woolco Fashionwear Corp. Delaware
Woolco Inc. Delaware
340 Supply Co. Pennsylvania
Rosedale Accessory Lady, Inc. Minnesota
Accessory Lady, Inc. Texas
Atlanta Southlake Accessory Lady, Inc. Georgia
Beachwood Accessory Lady, Inc. Ohio
Brea Accessory Lady, Inc. California
Bridgewater Commons Accessory Lady, Inc. New Jersey
Buckland Hills Accessory Lady, Inc. Connecticut
Cherry Hill Accessory Lady, Inc. New Jersey
Chesterfield Accessory Lady, Inc. Virginia
Chicago Accessory Lady, Inc. Illinois
Copley Place Accessory Lady, Inc. Massachusetts
Colonie Center Accessory Lady, Inc. New York
Crabtree Mall Accessory Lady, Inc. North Carolina
Dadeland Center Accessory Lady, Inc. Florida
Delamo Accessory Lady, Inc. California
Fashion Valley Accessory Lady, Inc. California
Four Seasons Accessory Lady, Inc. North Carolina
Fox Valley Accessory Lady, Inc. Illinois
Garden State Accessory Lady, Inc. New Jersey
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
[WOOLWORTH CORPORATION -- (CONT.)]
[F. W. WOOLWORTH CO. -- (CONT.)]
[ROSEDALE ACCESSORY LADY, INC. -- (CONT.)]
The Gardens Accessory Lady, Inc. Florida
Glendale Accessory Lady, Inc. California
Grand Avenue Accessory Lady, Inc. Wisconsin
Hanes Mall Accessory Lady, Inc. North Carolina
Hawthorne Center (IL.) Accessory Lady, Inc. Illinois
Lakeside Accessory Lady, Inc. Louisiana
Mainplace Accessory Lady, Inc. California
Mall Del Norte Accessory Lady, Inc. Texas
McAllen Accessory Lady, Inc. Texas
McLean Accessory Lady, Inc. Virginia
Menlo Park Accessory Lady, Inc. New Jersey
Montclair Accessory Lady, Inc. California
Montgomery Accessory Lady, Inc. Maryland
Northbrook Accessory Lady, Inc. Illinois
North County Fair Accessory Lady, Inc. California
Northridge Accessory Lady, Inc. California
Oakbrook Center Accessory Lady, Inc. Illinois
The Oaks Accessory Lady, Inc. California
Orlando Accessory Lady, Inc. Florida
Paradise Valley Accessory Lady, Inc. Arizona
Palm Beach Mall Accessory Lady, Inc. Florida
Paramus Park Accessory Lady, Inc. New Jersey
The Parks Accessory Lady, Inc. Texas
Penn Square Accessory Lady, Inc. Oklahoma
Pentagon City Accessory Lady, Inc. Virginia
Raceway Accessory Lady, Inc. New Jersey
Randhurst Accessory Lady, Inc. Illinois
Regency Square Accessory Lady, Inc. Florida
Ridgedale Accessory Lady, Inc. Minnesota
Riverside Hackensack Accessory Lady, Inc. New Jersey
Roosevelt Field Accessory Lady, Inc. New York
Scottsdale Accessory Lady, Inc. Arizona
Southdale Accesory Lady, Inc. Minnesota
St. Louis Galleria Accessory Lady, Inc. Missouri
Stoneridge Accessory Lady, Inc. California
Stonestown Accessory Lady, Inc. California
Sunrise Boulevard (Fla.) Accessory Lady, Inc. Florida
Sunvalley Accessory Lady, Inc. California
Towson Accessory Lady, Inc. Maryland
Tri-County Accessory Lady, Inc. Ohio
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
[WOOLWORTH CORPORATION -- (CONT.)]
[F. W. WOOLWORTH CO. -- (CONT.)]
[ROSEDALE ACCESSORY LADY, INC. -- (CONT.)]
Tysons Corner Accessory Lady, Inc. Virginia
Valley Fair Accessory Lady, Inc. California
Willowbrook Accessory Lady, Inc. New Jersey
Woodman Avenue Accessory Lady, Inc. California
Kinney Shoe Corporation New York
Armel, Inc. Florida
Armel Acquisition, Inc. Florida
Champs of Crossgates, Inc. Florida
Champs of Holyoke, Inc. Florida
Champs Sporting Goods of
Esplanade, Inc. Florida
Champs Sporting Goods, Inc. Tennessee
Champs Sport Shops, Inc. of Maryville Florida
Champs Sport Shops, Inc. of Cutler Ridge Florida
Champs Sport Shops, Inc. of Broward Florida
Champs Sport Shops of Daytona, Inc. Florida
San Del of Jacksonville, Inc. Florida
Champs Sport Shops, Inc. of 163rd Street Florida
San Del, Inc. of Atlanta Florida
Champs Four Seasons, Inc. North Carolina
Joe Chichelo, Inc. Florida
Champs Sport Shops, Inc. Florida
Champs Sport Shops, Inc. of Aventura Florida
Champs Sporting Goods of N.C., Inc. North Carolina
Champs Sport Shops, Inc. of
Miami International Florida
Champs Sporting Goods, Inc. Louisiana
Champs Sport Shops, Inc. of Omni Florida
Champs Sport Shops, Inc. of Nashville Florida
Champs Sport Shops, Inc. of Houston Florida
Champs Sport Shops, Inc. of Fort Lauderdale Florida
Sneakers Inc. of Greensboro North Carolina
Sneakers Inc. of Knoxville Tennessee
Sneakers Inc. of Daytona Beach Florida
Champs of Maryland, Inc. Florida
Champs of Virginia, Inc. Florida
SneaKee Feet of Maryland, Inc. Florida
SneaKee Feet of Montgomery Village, Inc. Florida
SneaKee Feet of North Carolina, Inc. Florida
Runner-Up of Orlando, Inc. Florida
SneaKee Feet of Tampa, Inc. Florida
SneaKee Feet of Washington Outlet Mall, Inc. Florida
SneaKee Feet, Inc. Florida
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
[Woolworth Corporation -- (Cont.)]
[KINNEY SHOE CORPORATION -- (CONT.)]
[ARMEL, INC. -- (CONT.)]
Champs of Missouri, Inc. Missouri
Champs Sport Shops of Maryland, Inc. Maryland
Champs of Connecticut, Inc. Connecticut
Champs Sport Shops of Massachusetts, Inc. Massachusetts
Champs of Georgia, Inc. Georgia
Champs of New Jersey, Inc. New Jersey
Champs of Oklahoma, Inc. Oklahoma
Champs of Tennessee, Inc. Tennessee
Menlo Trading Company California
Athletic Shoe Factory, Inc. California
Simpson's Ferry Leasing Corp. Delaware
Janess Properties, Inc. Delaware
Kinney Service Corporation Delaware
Kinney Trading Corp. New York
Robby's Sporting Goods, Inc. Florida
Woolworth Realty Corporation New York
Woolworth World Trade Corp. New York
Woolworth Holding S.A. de C.V. Mexico
Woolworth Mexicana, S.A. de C.V. Mexico
Foot Locker de Mexico, S.A. de C.V. Mexico
Distribuidora Foot Locker S.A. de C.V. Mexico
Woolworth Canada Inc. Canada
142739 Canada Limited Canada
Woolco Pharmacy (Saskatchewan) Ltd. Canada
Woolworth Overseas Corp. Delaware
Kinney Shoes (Australia) Limited Australia
Colorado Adventure Clothing Pty. Ltd. Australia
Mathers Enterprises Limited Australia
Williams The Shoemen Pty. Ltd. Australia
Retail Company of Germany, Inc. Delaware
F. W. Woolworth Co. GmbH Germany
F. W. Woolworth Co. Ges. mbH Austria
Tappiser & Werner GmbH Germany
Krone Grundstucksgesellschaft mbH 3/ Germany
LIDOS Verwaltung GMBH & Co.
Vermietungs KG 4/ Germany
Meyer Der Schuh Beteiligungs-GmbH
u. Co. KG 5/ Germany
Christa Grundstucks-Vermietungsgesellschaft
mbH & Co. Objekt Frankfurt KG 6/ Germany
Merkur Einkaufsgesellschaft KAUFRING-
WOOLWORTH mbH 7/ Germany
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
[WOOLWORTH CORPORATION -- (CONT.)]
[WOOLWORTH WORLD TRADE CORP. (CONT.)]
[RETAIL COMPANY OF GERMANY, INC. {CONT.}]
[F.W. WOOLWORTH CO. GMBH. {CONT.}]
EMPTIO I Beteiligungsgesellschaft GbR 8/ Germany
Kaufring AG 9/ Germany
Meyer Der Schuh Beteiligungs-gesellschaft mbH Germany
</TABLE>
- ------------------------
2/ 1 million shares of Series A Convertible Preferred Stock, par value
$.0001 per share pursuant to a Stock Acquisition Agreement dated
May 30, 1996.
3/ 0.29% owned by Retail Company of Germany, Inc.; 99.71% owned by F. W.
Woolworth Co. GmbH.
4/ Krone Grundstucksgesellschaft mbH acquired 99% of the shares as a
limited partner in 1995.
5/ 99% of the capital is owned Krone Grundstucksgesellschaft mbH (limited
partner) and 1% of the capital is owned by Meyer Der Schuh
Beteiligungs-GmbH (unlimited partner).
6/ F. W. Woolworth Co. GmbH owns 99% of the capital of this subsidiary and
15% of the voting. rights.
7/ 50% owned by F. W. Woolworth Co. GmbH; 50% owned by Kaufring AG.
8/ 50% owned by F. W. Woolworth Co. GmbH; 50% owned by Commerzbank AG.
9/ 25% of the capital is owned by EMPTIO I Beteiligungsgesellschaft GbR.
<PAGE> 1
EXHIBIT 23(a)
WOOLWORTH CORPORATION
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Woolworth Corporation:
We consent to the incorporation by reference in the Registration Statements
Numbers 33- 10783, 33-91888, 33-91886, 33-97832, 333-07215 and 333-21131 on Form
S-8 and Numbers 33-43334 and 33-86300 on Form S-3 of Woolworth Corporation and
subsidiaries of our report dated March 11, 1997, relating to the consolidated
balance sheets of Woolworth Corporation and subsidiaries as of January 25, 1997
and January 27, 1996 and the related consolidated statements of operations,
shareholders' equity and cash flows for the years then ended, which report
appears in the January 25, 1997 Annual Report on Form 10-K of Woolworth
Corporation and subsidiaries.
Our report refers to the adoption of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", in
1995.
/s/KPMG Peat Marwick LLP
New York, New York
April 24, 1997
<PAGE> 1
EXHIBIT 23(b)
WOOLWORTH CORPORATION
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-10783, 33-91888, 33-91886, 33-97832, 333-07215
and 333-21131) and in the Prospectuses constituting part of the Registration
Statements on Form S-3 (No. 33-43334 and No. 33-86300) of Woolworth Corporation
of our report dated March 8, 1995 appearing in this Form 10-K.
/s/ Price Waterhouse LLP
Avenue of the Americas
New York, New York
April 22, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF INCOME FOR THE TWELVE MONTHS ENDED JANUARY 25, 1997
AND THE CONSOLIDATED BALANCE SHEET AS OF JANUARY 25, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-START> JAN-28-1996
<PERIOD-END> JAN-25-1997
<CASH> 321
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,269
<CURRENT-ASSETS> 1,823
<PP&E> 1,058
<DEPRECIATION> 1,186
<TOTAL-ASSETS> 3,476
<CURRENT-LIABILITIES> 856
<BONDS> 580
0
0
<COMMON> 0
<OTHER-SE> 1,035
<TOTAL-LIABILITY-AND-EQUITY> 3,476
<SALES> 8,092
<TOTAL-REVENUES> 8,127
<CGS> 5,581
<TOTAL-COSTS> 5,581
<OTHER-EXPENSES> 187
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73
<INCOME-PRETAX> 280
<INCOME-TAX> 111
<INCOME-CONTINUING> 169
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99
WOOLWORTH CORPORATION
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Woolworth Corporation:
In our opinion, the financial statements as of and for each of the two years in
the period ended January 28, 1995 appearing on pages 18 through 34 of the
Woolworth Corporation 1996 Annual Report to Shareholders which has been
incorporated by reference in this Form 10-K Annual Report presented fairly, in
all material respects, the financial position, results of operations and cash
flows of Woolworth Corporation and its consolidated subsidiaries as of and for
each of the two years in the period ended January 28, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform an audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above. We have not
audited the financial statements of Woolworth Corporation and its consolidated
subsidiaries for any period subsequent to January 28, 1995.
As discussed in the Legal Proceedings note to the financial statements, the
Company is a defendant in class action shareholder lawsuits alleging misleading
disclosures and other claims under federal securities and other laws during the
class period. The ultimate outcome of the litigation can not be determined at
present. No provision for any liability that may result upon adjudication has
been made in the financial statements as of January 28, 1995.
/s/Price Waterhouse
New York, New York
March 8, 1995
