<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
-----------------
Commission file no. 1-10299
-------
VENATOR GROUP, INC.
-------------------
(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: (212)-553-2000
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
---- ----
Number of shares of Common Stock outstanding at November 27, 1998: 135,614,566
-----------
<PAGE> 2
VENATOR GROUP, INC.
-------------------
TABLE OF CONTENTS
-----------------
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets.......................1
Condensed Consolidated Statements
of Operations............................................2
Condensed Consolidated Statements
of Comprehensive Income (Loss)...........................3
Condensed Consolidated Statements
of Retained Earnings.....................................4
Condensed Consolidated Statements
of Cash Flows............................................5
Notes to Condensed Consolidated
Financial Statements...................................6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.........9-15
Part II. Other Information
Item 1. Legal Proceedings......................................16
Item 6. Exhibits and Reports on Form 8-K.......................16
Signature..............................................17
Index to Exhibits...................................18-20
i
<PAGE> 3
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. FINANCIAL STATEMENTS
- ------- --------------------
VENATOR GROUP, INC.
-------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(in millions)
<TABLE>
<CAPTION>
October 31, October 25, January 31,
1998 1997 1998
---- ---- ----
(Unaudited) (Unaudited) (Audited)
ASSETS
------
<S> <C> <C> <C>
Current assets
Cash and cash equivalents ........... $ 147 $ 17 $ 81
Merchandise inventories ............. 1,112 886 754
Net assets of discontinued operations 220 597 619
Other current assets ................ 136 149 131
----- ----- -----
1,615 1,649 1,585
Property and equipment, net ............ 916 511 625
Deferred charges and other assets ...... 614 655 585
----- ----- -----
$3,145 $ 2,815 $ 2,795
===== ===== =====
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities
Short-term debt ..................... $ 371 $ 21 $ --
Accounts payable and accrued
liabilities ...................... 652 490 507
Current portion of reserve for
discontinued operations .......... 217 128 72
Current portion of long-term debt
and obligations under capital
leases ......................... 20 13 19
---- ---- ----
1,260 652 598
Long-term debt and obligations
under capital leases ................ 508 510 508
Deferred taxes and other liabilities ... 345 432 400
Reserve for discontinued operations .... 30 67 18
Shareholders' Equity
Common stock and paid-in capital .... 327 315 317
Retained earnings ................... 860 925 1,033
Accumulated other comprehensive loss . (185) (86) (79)
----- ---- -----
Total shareholders' equity ............ 1,002 1,154 1,271
Commitments ............................
----- ----- -----
$ 3,145 $ 2,815 $ 2,795
===== ===== =====
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
1
<PAGE> 4
VENATOR GROUP, INC.
-------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
-------------------- -----------------------
October 31, October 25, October 31, October 25,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales......................... $ 1,122 $ 1,107 $ 3,223 $ 3,198
Costs and expenses
Cost of sales............... 840 741 2,324 2,167
Selling, general and
administrative expenses . 302 252 827 744
Depreciation and amortization 38 30 108 90
Interest expense, net....... 18 8 35 25
Other income................ - - (19) -
----- ----- ----- -----
1,198 1,031 3,275 3,026
----- ----- ----- -----
Income (loss) from continuing
operations before income
taxes ...................... (76) 76 (52) 172
Income tax expense (benefit) . (36) 26 (26) 65
Income (loss) from continuing ---- ---- ---- ----
operations ................. (40) 50 (26) 107
Income (loss) from discontinued
operations, net of income tax
expense (benefit) of $6, $5,
$(14) and $(26), respectively 6 5 (26) (37)
Net loss on disposal of
discontinued operations, net
of income tax expense (benefit)
of $52, $0, $52, and $(115),
respectively ............... (121) - (121) (195)
----- ----- ----- -----
Net income (loss) ............ $ (155) $ 55 $ (173) $ (125)
====== ===== ====== ======
Basic earnings per share:
Income (loss) from continuing
operations ............... $ (0.29) $ 0.37 $ (0.19) $ 0.80
Income (loss) from
discontinued operations .. (0.85) 0.04 (1.08) (1.73)
------ ---- ------ ------
Net income (loss) .......... $ (1.14) $ 0.41 $ (1.27) $ (0.93)
===== ===== ===== =====
Weighted-average common shares
outstanding .............. 135.6 134.9 135.4 134.5
Diluted earnings per share:
Income (loss) from continuing
operations ............. $ (0.29) $ 0.37 $ (0.19) $ 0.79
Income (loss) from discontinued
operations ............... (0.85) 0.03 (1.08) (1.71)
----- ----- ----- -----
Net income (loss) ....... $ (1.14) $ 0.40 $ (1.27) $ (0.92)
Weighted-average common shares ===== ===== ===== =====
assuming dilution .......... 135.6 136.3 135.4 135.8
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 5
VENATOR GROUP, INC.
-------------------
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
----------------------------------------------------------------
(Unaudited)
(in millions)
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
-------------------- -----------------------
October 31, October 25, October 31, October 25,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss)........... $ (155) $ 55 $ (173) $ (125)
Other comprehensive income
(loss), net of tax:
Foreign currency translation
adjustments:
Translation adjustments
arising during period
(pre-tax $(216), $10,
$(216), and $(114),
respectively)........... (108) 6 (108) (71)
Less: reclassification
adjustment for gains included
in net income (loss)
(pre-tax $298).......... 149 - 149 -
----- ----- ----- -----
41 6 41 (71)
Minimum pension liability
adjustments (pre-tax $4) 2 - 2 -
----- ----- ----- -----
Comprehensive income (loss). $ (112) $ 61 $ (130) $ (196)
===== ===== ===== =====
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 6
VENATOR GROUP, INC.
-------------------
CONDENSED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
------------------------------------------------------
(Unaudited)
(in millions)
<TABLE>
<CAPTION>
Thirty-nine weeks ended
-----------------------------
October 31, October 25,
1998 1997
---- ----
<S> <C> <C>
Retained earnings at beginning of year ... $ 1,033 $ 1,050
Net loss ................................. (173) (125)
----- -----
Retained earnings at end of interim period $ 860 $ 925
===== =====
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 7
VENATOR GROUP, INC.
-------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
(in millions)
<TABLE>
<CAPTION>
Thirty-nine weeks ended
-----------------------
October 31, October 25,
1998 1997
---- ----
<S> <C> <C>
From Operating Activities:
Net loss ....................................... $ (173) $ (125)
Adjustments to reconcile net loss to net cash ..
provided by (used in) operating activities:
Non-cash charge for discontinued operations,
net of tax ................................. 121 195
Discontinued operations reserve activity . (127) (104)
Depreciation and amortization ............ 108 90
Net gain on sales of real estate ......... - (3)
Net gain on sales of assets and investments (19) -
Deferred income taxes .................... (38) (37)
Change in assets and liabilities, net of acquisition:
Merchandise inventories .................. (356) (238)
Accounts payable and other liabilities ... 146 29
Net assets of discontinued operations .... (56) 299
Other, net ............................... (15) (54)
Net cash provided by (used in) operating ---- ----
activities ............................... (409) 52
---- ----
From Investing Activities:
Net proceeds from businesses disposed ........ 495 -
Proceeds from sales of assets and investments 22 -
Proceeds from sales of real estate ........... - 3
Capital expenditures ......................... (395) (114)
Payments for businesses acquired, net of cash
acquired ................................... (29) (148)
Net cash provided by (used in) investing ---- ----
activities ................................. 93 (259)
---- ----
From Financing Activities:
Increase in short-term debt .................. 371 21
Reduction in long-term debt and capital lease
obligations ................................ (2) (2)
Issuance of common stock ..................... 10 16
---- ----
Net cash provided by financing activities .. 379 35
---- ----
Effect of exchange rate fluctuations
on Cash and Cash Equivalents ................. 3 (8)
---- ----
Net change in Cash and Cash Equivalents ......... 66 (180)
Cash and Cash Equivalents at beginning of year .. 81 197
---- ----
Cash and Cash Equivalents at end of interim period $ 147 $ 17
==== ====
Cash paid during the period:
Interest ..................................... $ 32 $ 21
Income taxes ................................. $ 14 $ 58
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 8
VENATOR GROUP, INC.
-------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
Basis of Presentation
- ---------------------
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Notes to Consolidated Financial
Statements contained in the Registrant's Form 10-K for the year ended January
31, 1998, as filed with the Securities and Exchange Commission (the "SEC") on
April 21, 1998. The Condensed Consolidated Statement of Comprehensive Income
(Loss) was prepared in conformity with generally accepted accounting principles
and was not required for the year ended January 31, 1998. Certain items included
in these statements are based on management's estimates. In the opinion of
management, all material adjustments, which are of a normal recurring nature,
necessary for a fair presentation of the results for the interim periods have
been included. The results for the thirty-nine weeks ended October 31, 1998 are
not necessarily indicative of the results expected for the year. All financial
statements have been restated to reflect the discontinuance of the Specialty
Footwear and International General Merchandise segments.
Name Change
- -----------
The Registrant changed its name to Venator Group, Inc. (formerly Woolworth
Corporation) effective June 11, 1998.
Discontinued Operations
- -----------------------
On September 22, 1998, the Registrant announced that it is exiting its
International General Merchandise segment. On October 22, 1998, the Registrant
completed the sale of its 357 store German general merchandise business for $563
million, pursuant to a definitive agreement. The Registrant recorded a net gain
on the disposal of the International General Merchandise segment of $174 million
before-tax, or $39 million after-tax, in the third quarter 1998. The disposition
of the International General Merchandise segment will be completed in 1999.
On September 16, 1998, the Registrant announced that it is exiting its
Specialty Footwear segment including 467 Kinney Shoe stores and 103 Footquarters
stores. The Registrant expects to convert approximately 60 of these locations to
its Lady Foot Locker, Kids Foot Locker, and Colorado formats. Additionally, the
Registrant will launch a new athletic outlet chain utilizing approximately 35
Footquarters locations and 40 existing Foot Locker and Champs Sports outlet
stores. The remaining stores are expected to close or be disposed of in 1999.
The Registrant recorded a charge to earnings of $243 million before-tax, or $160
million after-tax, for the loss on disposal of the Specialty Footwear
operations.
On July 17, 1997, the Registrant announced that it was exiting its 400
store Domestic General Merchandise segment and recorded a charge to earnings of
$310 million before-tax, or $195 million after-tax, for the loss on disposal of
discontinued operations. The Registrant plans to convert approximately 150
locations to Foot Locker, Champs Sports, and other athletic or specialty
formats. The Registrant has opened 147 stores in former domestic general
merchandise locations through October 31, 1998.
The results of operations for all periods presented for the International
General Merchandise segment, the Specialty Footwear segment, and the Domestic
General Merchandise segment have been classified as discontinued operations in
the Condensed Consolidated Statements of Operations.
Sales and net income or loss from discontinued operations for the quarter
and year-to-date periods through the date of discontinuance of each segment are
presented below.
6
<PAGE> 9
<TABLE>
<CAPTION>
Sales Thirteen weeks ended Thirty-nine weeks ended
- ----- -------------------- -----------------------
(in millions) October 31, October 25, October 31, October 25,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
International General Merchandise $ 234 $ 340 $ 842 $ 1,040
Specialty Footwear .............. 79 136 301 384
Domestic General Merchandise .... - - - 427
---- ---- ----- -----
Total ........................... $ 313 $ 476 $ 1,143 $ 1,851
==== ==== ===== =====
Net income (loss) Thirteen weeks ended Thirty-nine weeks ended
- ----------------- -------------------- -----------------------
(in millions) October 31, October 25, October 31, October 25,
1998 1997 1998 1997
---- ---- ---- ----
International General Merchandise $ (1) $ 4 $ (9) $ (2)
Specialty Footwear .............. 7 1 (17) (7)
Domestic General Merchandise .... - - - (28)
---- ---- ---- ----
Total ........................... $ 6 $ 5 $ (26) $ (37)
==== ==== ==== ====
The following is a summary of the net assets of discontinued operations:
(in millions) October 31, October 25, Jan. 31,
1998 1997 1998
---- ---- ----
International General Merchandise
Assets .......................... $ 57 $ 854 $ 786
Liabilities ..................... 13 419 354
Net assets of discontinued ---- ---- ----
operations .................... $ 44 $ 435 $ 432
==== ==== ====
Specialty Footwear
Assets .......................... $ 190 $ 244 $ 213
Liabilities ..................... 26 33 33
Net assets of discontinued ---- ---- ----
operations .................... $ 164 $ 211 $ 180
==== ==== ====
Domestic General Merchandise
Assets .......................... $ 46 $ 100 $ 28
Liabilities ..................... 34 149 21
Net assets (liabilities) of ---- ---- ----
discontinued operations ....... $ 12 $ (49) $ 7
==== ==== ====
Total Net Assets of discontinued
operations ................... $ 220 $ 597 $ 619
==== ==== ====
</TABLE>
The assets of each segment consist primarily of inventory and fixed assets.
The liabilities of the International General Merchandise segment at October 25,
1997 and January 31, 1998 predominantly include amounts due to vendors and
pension liabilities. The decrease in net assets of International General
Merchandise discontinued operations at October 31, 1998 reflects the sale of the
German general merchandise operations on October 22, 1998. The liabilities of
the Specialty Footwear and Domestic General Merchandise segments primarily
reflect amounts due to vendors.
7
<PAGE> 10
The discontinued operations reserve for International General Merchandise
of $41 million was reduced by a $2 million foreign currency translation
adjustment. Disposition activity of $48 million for the period from September
16, 1998 to October 31, 1998 reduced the reserve of $243 million recorded for
Specialty Footwear discontinued operations to $195 million. Disposition activity
related to the discontinued operations reserve for the quarter and year-to-date
periods ended October 31, 1998 was approximately $32 million and $77 million,
respectively, for the domestic general merchandise business. The remaining
reserve balance at October 31, 1998 was $13 million.
Earnings Per Share
- ------------------
Basic earnings per share is computed as net earnings divided by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur from common
shares issuable through stock-based compensation including stock options,
restricted stock awards and other convertible securities. A reconciliation of
weighted-average common shares outstanding to weighted-average common shares
assuming dilution follows:
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
-------------------- -----------------------
October 31, October 25, October 31, October 25,
(in millions) 1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted-average common shares
outstanding ................ 135.6 134.9 135.4 134.5
Incremental common shares
issuable ................... - 1.4 - 1.3
Weighted-average common shares ----- ----- ----- -----
assuming dilution .......... 135.6 136.3 135.4 135.8
===== ===== ===== =====
</TABLE>
Incremental common shares were not included in the computation for the
quarter and year-to-date periods ended October 31, 1998 since their inclusion in
periods when the Registrant reported a loss from continuing operations would be
antidilutive. For the thirteen and the thirty-nine weeks ended October 25, 1997,
options with an exercise price greater than the average market price are not
included in the computation of diluted earnings per share and would not have a
material impact on diluted earnings per share.
Comprehensive Income
- --------------------
The Registrant adopted Statement of Financial Accounting Standards ("SFAS")
No. 130, "Reporting Comprehensive Income," in the first quarter of 1998. SFAS
No. 130 establishes standards for reporting and display of comprehensive income
or loss and its components in the financial statements. Comprehensive income is
a more inclusive financial reporting methodology that includes the disclosure of
certain financial information that has not been recognized in the calculation of
net income or loss, such as foreign currency translations and changes in minimum
pension liability which are recorded directly to shareholders' equity.
Accumulated other comprehensive loss was comprised of foreign currency
translation adjustments of $142 million, $49 million, and $34 million, and
minimum pension liability adjustments of $43 million, $37 million, and $45
million, at October 31, 1998, October 25, 1997, and January 31, 1998,
respectively.
Reclassifications
- -----------------
Certain balances in prior periods have been reclassified to conform with
the presentation adopted in the current period. As discussed above, all
financial statements have been restated to reflect the discontinuance of the
Specialty Footwear and International General Merchandise segments.
Legal Proceedings
- -----------------
There are no material legal proceedings.
8
<PAGE> 11
Recent Accounting Pronouncements
- --------------------------------
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
which is effective for financial statements issued for fiscal years beginning
after December 15, 1997 and therefore, effective for the Registrant in 1998. The
Registrant will adopt the provisions of this standard in the fourth quarter of
1998. SFAS No. 131 supersedes previously established standards for reporting
operating segments in the financial statements and requires disclosures
regarding selected information about operating segments in interim and annual
financial reports.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which is effective for fiscal
years beginning after December 15, 1997 and therefore, effective for the
Registrant in 1998. This statement revises employers' disclosures about pensions
and other postretirement benefit plans. It does not change the measurement or
recognition of those plans.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal quarters of
fiscal years beginning after June 15, 1999 and therefore, effective for the
Registrant in 2000. SFAS No. 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts, and hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Registrant is in the
process of evaluating SFAS No. 133 to determine its impact on the consolidated
financial statements.
Short-Term Debt
- ---------------
On September 25, 1998, the Registrant borrowed $180 million under a
separate loan agreement ,in addition to amounts borrowed under its April 9, 1997
$500 million revolving credit agreement ("revolving credit agreement"). This
facility was subsequently repaid with proceeds received from the sale of its
German general merchandise business. Due to lower than planned earnings in the
quarter and the charges related to the closing of the Registrant's Specialty
Footwear operations, the Registrant obtained a waiver with regard to certain
financial covenants contained in the revolving credit agreement for the period
from October 31, 1998 through March 19, 1999. During the waiver period, the
Registrant is prohibited from paying cash dividends or repurchasing, redeeming,
retiring, or acquiring any shares of its capital stock. The Registrant is in the
process of amending its revolving credit agreement and expects to have an
amended credit facility in place prior to expiration of the waiver.
Subsequent Event
- ----------------
On June 22, 1998, the Registrant entered into an agreement to sell its
Corporate Headquarters building in New York, the Woolworth Building, and lease
back four floors. These transactions were completed on December 4, 1998 for
gross proceeds of $137.5 million. The Registrant will record a gain on the sale
totaling approximately $55 million after-tax, a substantial portion of which
will be recongnized in the fourth quarter with the remainder recognized over the
lease terms.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
As discussed more fully in the footnotes to the Condensed Consolidated
Financial Statements, the Registrant announced that it was exiting its Specialty
Footwear and its International General Merchandise segments. Accordingly, the
results of operations for all periods presented for these businesses have been
classified as discontinued operations and all financial statements have been
restated.
Total sales for the 1998 third quarter increased 1.4 percent to $1,122
million as compared with $1,107 million for the third quarter of 1997,
reflecting sales from 384 additional stores, offset by a comparable-store sales
decline of 5.3 percent. Excluding the effect of foreign currency fluctuations
and sales from disposed operations, sales increased 2.8 percent for the quarter.
Sales for the thirty-nine weeks ended October 31, 1998 increased 0.8
percent to $3,223 million as compared with $3,198 million for the same period a
year earlier. Excluding the effect of foreign currency fluctuations and sales
from disposed operations, sales increased 2.0 percent as compared with the
corresponding prior-year period. Year-to-date comparable-store sales decreased
6.4 percent.
9
<PAGE> 12
Gross margin, as a percentage of sales, decreased 790 basis points to 25.1
percent for the quarter and decreased from 32.2 percent to 27.9 percent for the
year-to-date period in 1998, as compared with the corresponding periods a year
earlier. These declines primarily reflect increased markdowns as a result of the
Registrant's decision to embark on an aggressive inventory reduction program in
the third quarter 1998 to ensure that inventories remain current in order to
enhance its competitiveness for 1999.
Selling, general and administrative expenses increased $50 million and $83
million for the thirteen and thirty-nine weeks ended October 31, 1998 as
compared with the corresponding prior-year periods. These increases primarily
reflect the incremental costs associated with the additional stores
year-over-year attributable to the new store program. These increases were
partially offset by decreases in net pension and net postretirement benefit
expense, which primarily reflects the amortization of the plans' unrecognized
gains and losses over the average remaining life expectancy of inactive
participants, who now comprise the majority of the plans' participants.
Previously, the unrecognized gains and losses were amortized over the average
remaining service period of active participants.
Third quarter operating results from continuing operations (before
corporate expense, interest expense and income taxes) reflect a $30 million loss
for 1998 as compared with a profit of $91 million for the third quarter of 1997,
reflecting a significant increase in inventory markdown activity and an increase
in selling, general and administrative expenses. For the thirty-nine weeks ended
October 31, 1998, operating profit declined to $43 million from $245 million in
the corresponding prior-year period.
Interest expense, net of interest income, increased $10 million for the
1998 third quarter and year-to-date periods as compared with the corresponding
prior-year periods. The incremental interest expense is attributable to
increased short- term borrowing levels during 1998 and is partially offset by
interest income of approximately $7 million related to a franchise tax
settlement in the second quarter.
The Registrant reported a loss from continuing operations for the thirteen
weeks ended October 31, 1998 of $40 million, or $0.29 per diluted share, as
compared with income of $50 million, or $0.37 per diluted share for the
prior-year period ended October 25, 1997. Year-to-date continuing operations
include a $26 million loss for 1998 as compared with $107 million in income for
the prior-year period.
During the quarter the effective tax rate was adjusted to 47.4 percent and
50 percent for the quarter and year-to-date periods ended October 31, 1998,
respectively, as compared with 34.2 percent and 37.8 percent for the
corresponding prior-year periods. The increase reflects the impact of
non-deductible terms, such as goodwill amortization, at lower earnings levels.
The net loss for the quarter of $155 million or $1.14 per diluted share
includes $115 million (after-tax) or $0.85 per diluted share for discontinued
operations. This compares with net income of $55 million, or $0.40 per diluted
share for the corresponding prior-year period. The net loss for the thirty-nine
weeks ended October 31, 1998 of $173 million or $1.27 per diluted share,
includes $147 million (after-tax), or $1.08 per diluted share for discontinued
operations. This compares with a net loss of $125 million, or $0.92 per diluted
share for the corresponding prior-year period, which includes $232 million
(after-tax) or $1.71 per diluted share for discontinued operations.
Consistent with an announcement made by the Registrant during the quarter,
in light of current trends, particularly in athletic apparel, and based upon its
intention to continue to position its inventory properly for the beginning of
1999, the Registrant expects fourth quarter earnings to be below plan.
The Registrant ended the third quarter with 5,964 stores consisting of
3,869 in the Athletic Group, 914 in the Northern Group and 1,181 in Other
Specialty. This compares with 5,580 stores at the end of the corresponding
prior-year period. During the thirty-nine weeks ended October 31, 1998, the
Registrant opened 500 stores, closed or disposed of 258 stores and remodeled or
relocated 361 stores. Of the 500 stores opened, 90 stores represent the first
quarter acquisition of Athletic Fitters stores.
10
<PAGE> 13
SALES
- -----
The following table summarizes sales for continuing operations by segment and
geographic area:
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
-------------------- -----------------------
(in millions) October 31, October 25, October 31, October 25,
By Segment: ................ 1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Specialty:
Athletic Group .......... $ 945 $ 912 $ 2,730 $ 2,685
Northern Group .......... 97 110 256 270
Other Specialty ......... 80 79 233 229
----- ----- ----- -----
Specialty total ............ 1,122 1,101 3,219 3,184
===== ===== ===== =====
Disposed operations ........ - 6 4 14
----- ----- ----- -----
$ 1,122 $ 1,107 $ 3,223 $ 3,198
===== ===== ===== =====
By Geographic Area:
Domestic ................ $ 936 $ 909 $ 2,711 $ 2,681
International ........... 186 192 508 503
Disposed operations ..... - 6 4 14
----- ----- ----- -----
$ 1,122 $ 1,107 $ 3,223 $ 3,198
===== ===== ===== =====
</TABLE>
Athletic Group sales increased by 3.6 percent for the 1998 third quarter
and by 1.7 percent for the year-to-date period, as compared with the
corresponding periods a year earlier. The increase was primarily attributable to
sales from 360 additional stores and also, in part, to increased sales from
remodeled stores. Comparable-store sales declined by 5.1 percent and by 7.1
percent for the quarter and year-to-date periods reflecting decreased sales of
branded and licensed product, offset by improved sales from several athletic
footwear categories, such as running, trail and basketball.
Excluding the impact of foreign currency fluctuations, the Northern Group's
sales decreased by 8.7 percent and by 1.9 percent for the thirteen and
thirty-nine week periods, respectively. Comparable-store sales declined by 15.7
percent and 9.6 percent, respectively, reflecting the impact of a change in
merchandise mix and decreased sales from stores in the southern United States,
which experienced unusually mild weather in the fall.
Other Specialty 1998 third quarter and year-to-date comparable-store sales
increased by 9.9 percent and by 7.4 percent, as compared with the corresponding
prior-year periods. The afterthoughts format is primarily responsible for these
increases, reflecting, in part, the success of the format's larger-store design.
11
<PAGE> 14
OPERATING RESULTS
- -----------------
Operating results from continuing operations (before corporate expense, interest
expense, and income taxes) are as follows:
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
-------------------- -----------------------
(in millions) October 31, October 25, October 31, October 25
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Specialty .................... $ (30) $ 92 $ 26 $ 247
Disposed operations .......... - (1) 17 (2)
---- ---- ---- ----
$ (30) $ 91 $ 43 $ 245
==== ==== ==== ====
By Geographic Area:
Domestic ..................... $ (36) $ 75 $ 24 $ 225
International ................ 6 17 2 22
Disposed operations .......... - (1) 17 (2)
---- ---- ---- ----
$ (30) $ 91 $ 43 $ 245
==== ==== ==== ====
</TABLE>
The Specialty segment reported a loss of $30 million for the 1998 third
quarter as compared with a profit of $92 million in the 1997 third quarter. The
Athletic Group sales increases were more than offset by the increased
promotional markdowns taken as part of the aggressive inventory reduction
program undertaken by the Registrant in the third quarter, in order to keep the
product assortment current and enhance the Registrant's competitiveness for
1999. Operating results for the Northern Group for the 1998 third quarter and
year-to-date periods decreased due to disappointing sales. Other Specialty
operating results improved by 42.9 percent and by 36.4 percent for the thirteen
and thirty-nine weeks ended October 31, 1998, respectively, as compared with the
corresponding prior year periods, predominantly related to the afterthoughts
format.
Included in disposed operations for the thirty-nine weeks ended October 31,
1998 is a $19 million gain from the sale of the Registrant's six-store nursery
chain. This gain is offset by a $2 million loss, including operating losses, for
the shutdown of the U.S. Randy River operations. This is part of the
Registrant's continuing program to reduce its investment in non-strategic
businesses. The prior-year amount represents the operating results of these
operations.
SEASONALITY
- -----------
The Registrant's businesses are 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. As a result of these seasonal
sales patterns, inventory generally increases in the third quarter in
anticipation of the strong fourth quarter sales.
12
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash used in operating activities was $409 million for the thirty-nine
weeks ended October 31, 1998, as compared with net cash provided by operating
activities of $52 million in the corresponding prior-year period. This
principally reflects the liquidation of the domestic general merchandise
business in the prior year and the operating losses incurred from continuing
operations in 1998. Inventories purchased in 1998 contributed to the increase in
accounts payable, and included inventory for approximately 200 new and remodeled
stores which were scheduled for completion in November.
Net cash from investing activities totaled $93 million for the thirty-nine
weeks ended October 31, 1998, as compared with $259 million net cash used during
the corresponding prior-year period. On October 22, 1998, the Registrant sold
its German general merchandise business for $563 million. Net proceeds received
from the sale amounted to $495 million, the majority of which were used to
reduce short-term borrowings. Cash used in investing activities in the prior
year was predominantly due to the first quarter acquisition of Eastbay, Inc. for
$140 million, in a transaction accounted for as a purchase. Capital expenditures
totaled $395 million for the thirty-nine weeks ended October 31, 1998 as
compared with $114 million for the corresponding prior-year period reflecting
planned expenditures related to the Registrant's aggressive new store and
remodeling program. Additionally, the increase is attributable to unplanned
expenditures relating to the repositioning of 50 additional domestic general
merchandise locations, as well as costs associated with a European distribution
center and the relocation and reduction in size of the Registrant's divisional
and corporate office space in connection with the sale of its Corporate
Headquarters. Capital expenditures for 1998 are expected to total $515 million.
Short-term debt, net of cash, increased by $220 million as of October 31,
1998, from October 25, 1997, reflecting increased borrowings under the
Registrant's revolving credit agreement primarily due to lower than expected
sales and increased capital expenditures. During the quarter, the Registrant
borrowed $180 million under a separate loan agreement, in addition to amounts
borrowed under the revolving credit agreement. This facility was subsequently
repaid with proceeds received from the sale of its German general merchandise
business. Due to lower than planned earnings in the quarter and the charges
related to the closing of the Registrant's Specialty Footwear operations, the
Registrant obtained a waiver with regard to the fixed charge coverage ratio and
the minimum consolidated tangible net worth covenants contained in the revolving
credit agreement for the period from October 31, 1998 through March 19, 1999.
During the waiver period, the Registrant is prohibited from paying cash
dividends or repurchasing, redeeming, retiring, or acquiring any shares of its
capital stock. The Registrant is in the process of amending its revolving credit
agreement and expects to have an amended credit facility in place prior to
expiration of the waiver.
The Registrant completed the sale of its Corporate Headquarters building in
New York, the Woolworth Building, and leased back four floors, on December 4,
1998 for gross proceeds of $137.5 million. The net proceeds will be used for
general corporate purposes.
On September 10, 1998, the Registrant and The Sports Authority, Inc.
jointly announced that they had mutually agreed to terminate, effective
immediately, the merger agreement pursuant to which The Sports Authority would
have become a wholly-owned subsidiary of the Registrant through a pooling of
interests.
13
<PAGE> 16
YEAR 2000 READINESS DISCLOSURE
------------------------------
The Year 2000 ("Y2K") issue is the result of computer programs being
written using two digits, rather than four, to define the applicable year.
Mistaking "00" for the year 1900 could result in miscalculations and errors and
cause significant business interruptions for the Registrant, as well as for the
government and most other companies. The Registrant has instituted a plan to
assess its state of readiness for Y2K, to remediate those systems that are
non-compliant and to assure that material third parties will be Y2K compliant.
State of Readiness
- ------------------
The Registrant has assessed all mainframe, operating and application
systems (including point of sale) for Y2K readiness, giving the highest priority
to those information technology applications (IT) systems that are considered
critical to its business operations. Those applications considered most critical
to the Registrant's business operations have been remediated and testing is
scheduled to begin in December 1998. The remediation of the point of sale
equipment is expected to be completed in early 1999, with pilot testing
anticipated in March and April. Extensive testing of all remediated systems will
be performed throughout 1999 for implementation during that year.
Apart from the Y2K issue, the Registrant had developed and installed
throughout its business units beginning in 1997 a comprehensive information
computer system ("ECLIPSE"), encompassing merchandising, logistics, finance and
human resources. The ECLIPSE project was undertaken for business reasons
unrelated to Y2K. However, the installation of ECLIPSE eliminates the need to
reprogram or replace certain existing software for Y2K compliance.
The Registrant has compiled a comprehensive inventory of its non-IT
systems, which include those systems containing embedded chip technology
commonly found in buildings and equipment connected with a building's
infrastructure. Management is currently in the process of establishing the
priority and possible remediation of systems identified as non-compliant.
Preliminary investigations of the embedded chip systems indicate that Y2K will
not affect systems such as heating, ventilation and security in most store
locations. Ongoing testing and implementation of any remediation required for
the non-IT systems will be performed throughout 1999.
Material Third Parties
- ----------------------
Key vendors and service providers have been identified, whose
non-compliance could have a material impact on the Registrant's ability to
operate worldwide. Management has undertaken to determine the state of readiness
of its approximately 20 key vendors by issuing questionnaires and conducting
meetings and on-site visits. The level of compliance of the Registrant's major
providers of banking services, transportation, telecommunications and utilities
is in the course of being ascertained and the related risks established.
Y2K Costs
- ---------
The Registrant is utilizing both internal and external resources to address
the Y2K issue. Internal resources reflect the reallocation of IT personnel to
the Y2K project from other IT projects. In the opinion of management, the
deferral of such other projects will not have a significant adverse effect on
continuing operations. The total direct cost, excluding ECLIPSE, to remediate
the Y2K issue is estimated to be approximately $5 million, of which $1.2 million
has been spent. All costs, excluding ECLIPSE, are being expensed as incurred and
are funded through operating cash flows. The Registrant's Y2K costs are based on
management's best estimates and may be updated as additional information becomes
available. Management does not expect the total Y2K remediation costs to be
material to the Registrant's results of operations or financial condition.
Contingency Plan/Risks
- ----------------------
The Registrant is in the process of developing contingency plans for those
areas which might be affected by Y2K. Although the full consequences are
unknown, the failure of either the Registrant's critical systems or those of its
material third parties to be Y2K compliant could result in the interruption of
its business, which could have a material adverse effect on the results of
operations or financial condition of the Registrant.
14
<PAGE> 17
IMPACT OF EUROPEAN MONETARY UNION
- ---------------------------------
The European Union is comprised of fifteen member states, eleven of which
will adopt a common currency, the "euro," effective January 1, 1999. From that
date until January 1, 2002, the transition period, the national currencies will
remain legal tender in the participating countries as denominations of the euro.
Monetary, capital, foreign exchange and interbank markets will convert to the
euro and non-cash transactions will be possible in euros. On January 1, 2002,
euro bank notes and coins will be issued and the former national currencies will
be withdrawn from circulation no later than July 1, 2002.
The Registrant has reviewed the impact of the euro conversion on its
information systems, accounting systems, vendor payments and human resources.
Modifications required to be made to the point of sale hardware and software
will be facilitated by the Y2K remediation.
The adoption of a single European currency will lead to greater product
pricing transparency and a more competitive environment. The Registrant will
display the euro equivalent price of merchandise as a customer service during
the transition period, as will many retailers until the official euro conversion
in 2002. The Registrant does not expect the euro conversion to have a material
adverse effect on its results of operations or financial condition.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
- -----------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of the federal
securities laws. All statements, other than statements of historical facts,
which address activities, events or developments that the Registrant expects or
anticipates will or may occur in the future, including such things as future
capital expenditures, expansion, strategic plans, growth of the Registrant's
business and operations, Y2K and euro related actions and other such matters are
forward-looking statements. These forward-looking statements are based on many
assumptions and factors including effects of currency fluctuations, consumer
preferences and economic conditions worldwide and the ability of the Registrant
to implement, in a timely manner, the programs and actions related to the Y2K
and euro issues. Any changes in such assumptions or factors could produce
significantly different results.
15
<PAGE> 18
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- -------------------------
There are no material legal proceedings.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
--------
An index of the exhibits that are required by this item, and which are
furnished in accordance with Item 601 of Regulation S-K, appears on
pages 18 through 20. The exhibits which are in this report immediately
follow the index.
(b) Reports on Form 8-K
--------------------
The Registrant filed a report on Form 8-K dated August 12, 1998 (date
of earliest event reported) reporting that the Board of Directors
amended the By-laws of the Registrant to provide that the fiscal year
of the Registrant shall end on the Saturday closest to the last day in
January of each year, rather than on the last Saturday in January.
The Registrant filed a report on Form 8-K dated September 10, 1998
(date of earliest event reported) reporting that the Registrant and
The Sports Authority, Inc. jointly announced that they had mutually
agreed to terminate the merger agreement, effective immediately,
pursuant to which the Registrant would have acquired The Sports
Authority, Inc. in a tax-free exchange of shares.
The Registrant filed a report on Form 8-K dated September 16, 1998
(date of earliest event reported) reporting that: (i) the Registrant
announced that it is exiting its Specialty Footwear operations,
including 467 Kinney Shoe stores and 103 Footquarters stores, on
September 16, 1998, and (ii) on September 22, 1998, the Registrant
announced that it is exiting its International General Merchandise
business, including its 357 store German general merchandise
operations, which are being sold pursuant to a definitive agreement in
a management led buy-out backed by Electra Fleming, based in London.
16
<PAGE> 19
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VENATOR GROUP, INC.
--------------------
(Registrant)
Date: December 14, 1998 /s/ Reid Johnson
--------------------------
REID JOHNSON
Senior Vice President
and Chief Financial Officer
17
<PAGE> 20
VENATOR GROUP, INC.
-------------------
INDEX OF EXHIBITS REQUIRED BY ITEM 6(a) OF FORM 10-Q
AND FURNISHED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K
-----------------------------------------------------------
Exhibit No. in Item 601
of Regulation S-K Description
----------------- -----------
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(i)(a) to the Quarterly Report on Form 10-Q
for the quarterly period ended July 26, 1997, filed by
the Registrant with the SEC on September 4, 1997 (the
"July 26, 1997 Form 10-Q")).
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 (b) July 24, 1990 (c) July 9, 1997
(incorporated herein by reference to Exhibit 3(i)(b) to
the July 26, 1997 Form 10-Q) and (d) June 11, 1998
(incorporated herein by reference to Exhibit 4.2(a) of
the Registration Statement on Form S-8 (Registration
No. 333-62425) previously filed with the SEC).
3(ii) By-laws of the Registrant, as amended (incorporated
herein by reference to Exhibit 4.2 of the Registration
Statement on Form S-8 (Registration No. 333-62425)
previously filed with the SEC).
4.1 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 Exhibits 3(i)(a) and 3(i)(b) to the July
26, 1997 Form 10-Q and Exhibit 4.2(a) to the
Registration Statement on Form S-8 (Registration No.
333-62425) previously filed with the SEC).
4.2 Rights Agreement dated as of March 11, 1998, between
Venator Group, Inc. and First Chicago Trust Company of
New York, as Rights Agent (incorporated herein by
reference to Exhibit 4 to the Form 8-K dated March 11,
1998).
4.3 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).
4.4 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).
18
<PAGE> 21
Exhibit No. in Item 601
of Regulation S-K Description
----------------- -----------
4.5 Form of 8 1/2 % Debentures due 2022 (incorporated
herein by reference to Exhibit 4 to the Registrant's
Form 8-K dated January 16, 1992).
4.6 Purchase Agreement dated June 1, 1995 and Form of 7%
Notes due 2000 (incorporated herein by reference to
Exhibits 1 and 4, respectively, to the Registrant's
Form 8-K dated June 7, 1995).
4.7 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 the Registrant's Form 8-K dated July 13, 1995).
5 *
8 *
9 *
10.1 Venator Group Executive Severance Pay Plan.
10.2 Form of Senior Executive Severance Agreement.
10.3 Bridge Loan Agreement dated as of September 25, 1998.
10.4 Waiver dated as of November 6, 1998 to the Credit
Agreement dated April 9, 1997.
10.5 Agreement with S. Ronald Gaston dated November 10,
1998.
10.6 Agreement with Reid Johnson, dated September 17, 1998
10.7 Purchase and Sale Agreement, as amended.
11 *
12 *
13 *
15 Letter re: Unaudited Interim Financial Statements.
16 *
17 *
18 *
19 *
20 *
21 *
22 *
23 *
24 *
25 *
19
<PAGE> 22
Exhibit No. in Item 601
of Regulation S-K Description
----------------- -----------
26 *
27.1 Financial Data Schedule, October 31, 1998 (which is
submitted electronically to the SEC for information
only and not filed).
27.2 Restated Financial Data Schedule - October 25, 1997
(which is submitted electronically to the SEC for
information only and not filed).
99 Independent Accountants' Review Report.
- -------------------
* Not applicable
20
<PAGE> 23
Exhibits filed with this Form 10-Q:
Exhibit No. Description
- ----------- -----------
10.1 Venator Group Executive Severance Pay Plan.
10.2 Form of Senior Executive Severance Agreement.
10.3 Bridge Loan Agreement dated as of September 25, 1998.
10.4 Waiver dated as of November 6, 1998 to the Credit
Agreement dated April 9, 1997.
10.5 Agreement with S. Ronald Gaston dated November 10,
1998.
10.6 Agreement with Reid Johnson dated, September 17, 1998.
10.7 Purchase and Sale Agreement, as amended.
15 Letter re: Unaudited Interim Financial Statements.
27.1 Financial Data Schedule - October 31, 1998.
27.2 Restated Financial Data Schedule - October 25, 1997.
99 Independent Accountants' Review Report.
<PAGE> 1
EXHIBIT 10.1
As Amended August 12, 1998
VENATOR GROUP, INC.
EXECUTIVE SEVERANCE PAY PLAN
(Effective February 1, 1996)
INTRODUCTION
The purpose of this Executive Severance Pay Plan (the "Plan") is to enable
Venator Group, Inc. (the Company') to offer a form of protection to officers and
other key employees of the Company and its Affiliates in the event their
employment with the Company and its Affiliates terminates.
Accordingly, the Company's Board of Directors has adopted this Plan, upon
the recommendation of the Compensation Committee, effective February 1, 1996 for
selected officers and key employees of the Company and its Affiliates in an
effort to assist in replacing the loss of income caused by a termination of
employment under the circumstances described herein.
The Plan, effective February 1, 1996, amended as of August 12, 1998, amends
and supersedes any severance plan, policies and/or practices of the Company or
any Affiliate in effect for Participants in the Plan. Any Participant in the
Plan shall not be eligible to participate in any other severance plan, policy or
practice of the Company or any Affiliate.
ARTICLE I
Definitions
1.1 "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.
1.2 "Board" shall mean the Board of Directors of the Company.
1.3 "Bonus" shall mean an amount equal to the target bonus expected to be
earned by an Employee under the Company's Annual Incentive Compensation Plan or
such other annual bonus plan or program that may be applicable to the Employee
in a fiscal year, if the applicable target performance goal is satisfied.
1.4 "Cause" shall mean (with regard to a Participant's termination of
employment with the Control Group): (a) with regard to any member of the Control
Group or any of such member's assets or business, the refusal or willful failure
by the
1
<PAGE> 2
Participant to substantially perform his or her duties, (b) with regard to any
member of the Control Group or any of such member's assets or business, the
Participant's dishonesty, willful misconduct, misappropriation, breach of
fiduciary duty or fraud, or (c) the Participant's conviction of a felony (other
than a traffic violation) or any other crime involving, in the sole discretion
of the Committee, moral turpitude.
1.5 "Change in Control" shall have the meaning set forth in Appendix A
attached hereto.
1.6 "Code" shall mean the Internal Revenue Code of 1986, as amended and as
hereafter amended from time to time.
1.7 "Committee" shall mean the Compensation Committee of the Board or an
administrative committee appointed by the Compensation Committee.
1.8 "Company" shall mean Venator Group, Inc., a New York corporation, and
any successor as provided in Article VI hereof.
1.9 "Control Group" shall mean the Company and its Affiliates.
1.10 "Effective Date" shall mean February 1, 1996.
1.11 "Employee" shall mean any officer, member of senior management or
other key employee employed by an Employer.
1.12 "Employer" shall mean the Company and any Affiliate which has adopted
this Plan in accordance with Section 6.1 hereof.
1.13 "Good Reason" shall mean (with respect to a Participant's termination
of employment with the Control Group): (a) any material demotion of the
Participant or any material reduction in the Participant's authority or
responsibility, except in each case in connection with the termination of the
Participant's employment for Cause or disability or as a result of the
Participant's death, or temporarily as a result of the Participant's illness or
other absence; (b) prior to a Change in Control, a reduction in the
Participant's rate of base salary as payable from time to time, other than a
reduction that occurs in connection with, and in the same percentage as, an
across-the-board reduction over any three-year period in the base salaries of
all Employees of the Company of a similar level and where the reduction is less
than 20 percent of the Participant's base salary measured from the beginning of
such three-year period; or (c) a reduction in the Participant's annual bonus
classification level other than in connection with a redesign of the applicable
bonus plan that affects all Employees at the Participant's bonus level.
1.14 "Participant" shall mean any Employee designated by the Committee to
be a participant in the Plan. The Committee may, in its sole discretion,
terminate the participation of a Participant at any time.
2
<PAGE> 3
1.15 "Plan" shall mean the Venator Group Executive Severance Pay Plan.
1.16 "Salary" shall mean an Employee's base monthly cash compensation rate
for services paid by the Employer to the Employee at the time of his or her
termination of employment from the Control Group, as reflected in the Employer's
payroll records. 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
Employee'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.
1.17 "Severance Benefit" shall mean (a) in the case of a Participant's
termination of employment that does not occur within the twelve (12) month
period following a Change in Control, one (1) week's Salary multiplied by the
Participant's Years of Service, with a minimum of thirteen (13) weeks; or (b) in
the case of a Participant's termination of employment within the twelve (12)
month period following a Change in Control, two (2) week's Salary plus prorated
Bonus for two (2) weeks multiplied by the Participant's Years of Service, with a
minimum of twenty-six (26) weeks. A Participant's prorated Bonus for one (1)
week shall equal a Participant's Bonus divided by fifty-two (52).
1.18 "Severance Period" shall mean (a) in the case of a Participant's
termination of employment that does not occur within the twelve (12) month
period following a Change in Control, one (1) week multiplied by the
Participant's Years of Service, with a minimum of thirteen (13) weeks; or (b) in
the case of a Participant's termination of employment within the twelve (12)
month period following a Change in Control, two (2) weeks multiplied by the
Participant's Years of Service, with a minimum of twenty-six (26) weeks.
1.19 "Year of Service" shall mean each twelve (12) consecutive month period
commencing on the Employee's date of hire by the Employer and each anniversary
thereof in which the Employee is paid by the Employer for the performance of
full-time services as an Employee. 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 an 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 Employee on the date such service
commenced, but only to the extent required by applicable law. If an Employee
terminates his or her employment prior to completing a Year of Service during
the period commencing on his or her date of hire or an anniversary thereof, the
Employee shall be credited with a fractional Year of Service equal to the number
of consecutive months he or she has been paid by the Employer for the
performance of full-time services as an Employee from his or her date of hire or
anniversary thereof through the date of the Employee's termination of
employment, over twelve (12).
3
<PAGE> 4
ARTICLE II
Benefits
2.1 Eligibility for Benefits. Any Participant whose employment with the
Control Group is terminated without Cause by an Employer or who terminates
employment with the Control Group within sixty (60) days after the occurrence of
a Good Reason event with regard to such Participant, shall be entitled to a
Severance Benefit in the manner set forth in Section 2.2 below. A Participant
shall not be entitled to a Severance Benefit if he or she is terminated for
Cause.
2.2 Form of Benefits. Any Participant described in Section 2.1 above shall
receive 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.
2.3 Additional Benefits. A Participant entitled to receive a Severance
Benefit 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 Participant becomes eligible for a future employer's medical, dental and/or
life insurance coverage (or would become eligible if the Participant did not
waive coverage). Notwithstanding the foregoing, the Participant may not continue
to participate in such plans on a pre-tax or tax-favored basis. Notwithstanding
anything else herein, a Participant shall not be entitled to any benefits during
the Severance Period other than the benefits provided in Sections 2.2 and 2.3
herein and, without limiting the generality of the foregoing, a Participant
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, a Participant 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 a
Participant's earnings for purposes of calculating a Participant's benefit under
the Venator Group Retirement Plan, Venator Group 401(k) Plan, and Venator Group
Excess Cash Balance Plan.
2.4 Release. As a condition of receiving benefits hereunder, the
Participant shall be required to provide the Employer with a release of all
claims of any kind whatsoever against the Control Group, its officers, directors
and employees, known or unknown, as of the date of his or her termination of
employment. The release shall be in such form as requested by the Employer.
4
<PAGE> 5
2.5 No Duty to Mitigate/Set-Off. No Participant entitled to receive a
Severance Benefit hereunder shall be required to seek other employment or to
attempt in any way to reduce any amounts payable to him or her pursuant to this
Plan. Further, the amount of the Severance Benefit payable hereunder shall not
be reduced by any compensation earned by the Participant as a result of
employment by another employer or otherwise. An Employer's obligations to make
payment of Severance Benefits 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 an Employer may
have against the Participant.
ARTICLE III
Funding
3.1 Funding. The Plan shall be funded out of the general assets of the
Company as and when benefits are payable under the Plan. All Participants shall
be solely general creditors 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
Plan, such reserve or trust shall not under any circumstances be deemed to be an
asset of the Plan.
ARTICLE IV
Administration of the Plan
4.1 Plan Administrator. The general administration of the Plan on behalf of
the Employers shall be placed with the Committee.
4.2 Reimbursement of Expenses of Plan Committee. The Company may, in its
sole discretion, pay or reimburse the members of the Committee for all
reasonable expenses incurred in connection with their duties hereunder.
4.3 Action by the Plan Committee. 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 selection of Participants and the interpretation and administration of the
Plan shall be final, conclusive and binding upon all parties.
4.4 Decisions of Plan Committee are Binding on All Persons. 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 Plan and
any other Plan documents and to decide all matters arising in connection with
the operation or administration of the Plan. Without limiting the generality of
the foregoing, the Committee (or its delegate) 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
Plan; (b) to formulate, interpret and apply rules, regulations and policies
necessary to administer the Plan in accordance with its terms; (c) to decide
questions, including legal
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or factual questions, relating to the calculation and payment of benefits under
the Plan; (d) to resolve and/or clarify any ambiguities, inconsistencies and
omissions arising under the Plan or other Plan documents; (e) to decide for
purposes of paying benefits hereunder, whether, based on the terms of the Plan,
a termination of employment is for Good Reason or for Cause; and (f) except as
specifically provided to the contrary in Section 4.11, to process and approve or
deny benefit claims and rule on any benefit exclusions. All determinations made
by the Committee (or any delate) with respect to any matter arising under the
Plan and any other Plan documents shall be final, binding and conclusive on all
parties.
4.5 Delegation of Authority. The Committee may delegate any and all of its
powers and responsibilities hereunder to other persons by formal resolution
filed with and accepted by the Board. Any such delegation shall not be effective
until it is accepted by the Board and the persons designated and may be
rescinded at any time by written notice from the Committee to the person to whom
the delegation is made.
4.6 Retention of Professional Assistance. The Committee may employ such
legal counsel, accountants and other persons as may be required in carrying out
its work in connection with the Plan.
4.7 Accounts and Records. The Committee shall maintain such accounts and
records regarding the fiscal and other transactions of the Plan and such other
data as may be required to carry out its functions under the Plan and to comply
with all applicable laws.
4.8 Compliance with Applicable Law. The Company shall be deemed the Plan
Administrator for the purposes of any applicable law and shall be responsible
for the preparation and filing of any required returns, reports, statements or
other filings with appropriate governmental agencies. The Company shall also be
responsible for the preparation and delivery of information to persons entitled
to such information under any applicable law.
4.9 Liability. No member of the Committee and no officer, director or
employee of the Company or any other member of the Control Group shall be liable
for any action or inaction with respect to his or her functions under the Plan
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 the Plan.
4.10 Indemnification. Each Employer 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 such Employer under the Plan)
and each member of the Committee (and any employee designated by the Committee
as a delegate) 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 Plan (other than as a Participant), except with
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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.
4.11 Claims Procedure. Any claim by a Participant with respect to
eligibility, participation, contributions, benefits or other aspects of the
operation of the Plan 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 Participant 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 Participant 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 Plan or of Plan documents 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 Participant of his or her right pursuant
to this Section 4.11 to request review of the decision.
A Participant 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
Participant 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 Participant 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 Participant. 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 Plan and other relevant documents and shall be final,
conclusive and binding on all persons.
ARTICLE V
Amendment and Termination
5.1 Amendment and Termination. The Company reserves the right, in its sole
and absolute discretion to amend or terminate, in whole or in part, any or all
of the provisions of this Plan by action of the Board (or a duly authorized
committee thereof) at any time, provided that any amendment reducing the
benefits provided hereunder or any Plan termination (a) shall not be effective
prior to the second anniversary of the Effective Date and (b) no such amendment
or Plan termination may take effect sooner than one (1) year following the date
on which the Board takes such action. Any termination or amendment of the Plan,
however, shall not affect the Severance Benefit or other benefits hereunder, if
any, payable to any Participant who is entitled to such Severance Benefit or
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other benefits as of the date of the amendment or termination of the Plan.
ARTICLE VI
Participating Employers and Successors
6.1 Participating Employers. Upon approval by the Committee, this Plan may
be adopted by any Affiliate of the Company. Upon such adoption, the Affiliate
shall become an Employer hereunder and the provisions of the Plan shall be fully
applicable to the Employees of that Affiliate.
6.2 Successors. Subject to Section 5.1 hereof, the Company shall require
any successor or assignee, whether direct or indirect, by purchase, merger,
consolidation or otherwise, to all or substantially all the business or assets
of the Company, expressly and unconditionally to assume and agree to perform the
Company's obligations under this Plan, in the same manner and to the same extent
that the Company would be required to perform if no such succession or
assignment had taken place. In such event, the term "Company," as used in this
Plan, shall mean the Company as hereinbefore defined and any successor or
assignee to the business or assets which by reason hereof becomes bound by the
terms and provisions of this Plan. In the event an Affiliate ceases to be a
member of the Control Group, it may by such written agreement, but shall not be
obligated to, continue the Plan as a separate plan and all references to the
"Company" shall become reference to the Affiliate. If this Plan is not
specifically continued by the Affiliate, it shall terminate as to Employees of
such Affiliate. If this Plan is specifically continued by the Affiliate, the
Affiliate, but not the Company, shall be liable to the Employees of the
Affiliate for any benefits due hereunder.
ARTICLE VII
Miscellaneous
7.1 Rights of Employees. Nothing herein contained shall be held or
construed to create any liability or obligation upon the Employer to retain any
Employee in its service. All Employees shall remain subject to discharge or
discipline to the same extent as if the Plan had not been put into effect.
7.2 Headings. The headings of the Plan are inserted for convenience of
reference only and shall have no effect upon the meaning of the provisions
hereof.
7.3 Use of Words. Whenever used in this instrument, a masculine pronoun
shall be deemed to include the masculine and feminine gender, and a singular
word shall be deemed to include the singular and plural, in all cases where the
context so requires.
7.4 Controlling Law. The construction and administration of the Plan shall
be 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).
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7.5 Withholding. The Employer shall have the right to make such provisions
as it deems necessary or appropriate to satisfy any obligations it reasonably
believes it may have to withhold federal, state or local income or other taxes
incurred by reason of payments pursuant to this Plan. 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 Participant upon such
terms and conditions as the Committee may prescribe.
7.6 Severability. Should any provisions of the Plan be deemed or held to be
unlawful or invalid for any reason, such fact shall not adversely affect the
other provisions of the Plan unless such determination shall render impossible
or impracticable the functioning of the Plan, and in such case, an appropriate
provision or provisions shall be adopted so that the Plan may continue to
function properly.
7.7 Incompetency. 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 Plan.
7.8 Payments to a Minor. Any payments to a minor from this Plan may be paid
by the Committee in its sole and absolute discretion (a) directly to such minor;
(b) to the legal or natural guardian or 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 Plan therefor.
7.9 Assignment and Alienation. The benefits payable under the Plan 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.
7.10 Top-hat Plan. This Plan is intended to be a "top-hat" welfare plan
within the meaning of Department of Labor Regulation Section 2520.104-24.
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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
Exchange Act of 1934) (a "Person") (other than the Company or its Affiliates)
for shares of common stock 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
Exchange Act), 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 the Plan; 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 shareholders 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.
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Exhibit 10.2
AGREEMENT
---------
THIS AGREEMENT made as of [Date] by and between VENATOR GROUP, INC., a New
York corporation with its principal office at 233 Broadway, New York, New York
10279 (the "Company") and [Executive], residing at [Address] (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.
(c) "Board" shall mean the Board of Directors of the Company.
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(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) prior to a Change
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in Control, a reduction in the Executive's rate of base salary as payable from
time to time, other than a reduction that occurs in connection with, and in the
same percentage as, an across-the-board reduction over any three-year period in
the base salaries of all executives of the Company of a similar level and where
the reduction is less than 20 percent of the Executive's base salary measured
from the beginning of such three-year period; (iii) on or after a Change in
Control, any reduction in the Executive's rate of base salary as payable from
time to time; (iv) 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; (v) 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 (vi) 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 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. In
no event, however, shall the Severance Benefit payable to an Executive hereunder
be less than 12 months' Salary.
(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 52 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
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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 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. Notwithstanding the foregoing, if a Change in
Control occurs prior to the Executive's receipt of the remaining 50 percent of
his or her Severance Benefit, the Executive shall receive such remaining 50
percent within 10 days following the Change in Control (and, if not paid within
such 10 day period, with interest payable beginning on the tenth day following
the Change in Control 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.
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(d) Notwithstanding anything to the contrary contained herein, if the
Executive's employment with the Control Group is terminated as described in the
introductory paragraph to this Section 3 following a Change in Control, (i) the
Executive shall receive 100 percent of his or her Severance Benefit in the form
of a lump sum cash payment within 10 days following his or her termination of
employment with the Control Group (and, if not paid within such 10 day period,
with interest payable beginning on the tenth day following such termination of
employment at the prime rate of interest as stated in The Wall Street Journal),
and (ii) the restriction on competition contained in Section 3(c) shall not
apply.
(e) 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 Venator Group Retirement Plan, Venator Group
401(k) Plan, and Venator Group Excess Cash Balance Plan.
(f) 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.
(g) 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
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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.
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.
6
<PAGE> 7
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 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
7
<PAGE> 8
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 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.
8
<PAGE> 9
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. 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, 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.
VENATOR GROUP, INC.
By:____________________________
____________________________
[Executive]
9
<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.
srexec
10
<PAGE> 1
Exhibit 10.3
BRIDGE LOAN AGREEMENT
dated as of
September 25, 1998
among
Venator Group, Inc.
The Banks Party Hereto
and
Morgan Guaranty Trust Company of New York,
as Administrative Agent
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<PAGE> 2
TABLE OF CONTENTS
----------------------
Page
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ARTICLE 1
Definitions
Section 1.01. Definitions...............................................1
Section 1.02. Accounting Terms and Determinations......................13
Section 1.03. Types of Borrowings......................................13
ARTICLE 2
The Credits
Section 2.01. Commitments to Lend......................................13
Section 2.02. Notice of Borrowing......................................14
Section 2.03. Notice to Banks; Funding of Loans........................14
Section 2.04. Notes....................................................15
Section 2.05. Maturity of Loans........................................15
Section 2.06. Interest Rates...........................................15
Section 2.07. Method of Electing Interest Rates........................17
Section 2.08. Commitment Fee...........................................18
Section 2.09. Optional Termination or Reduction of Commitments.........18
Section 2.10. Mandatory Termination or Reduction of Commitments........18
Section 2.11. Optional Prepayments.....................................19
Section 2.12. Mandatory Prepayments....................................19
Section 2.13. General Provisions as to Payments........................20
Section 2.14. Funding Losses...........................................21
Section 2.15. Computation of Interest and Fees.........................21
ARTICLE 3
Conditions
Section 3.01. Effectiveness of this Agreement; Closing.................21
Section 3.02. Extensions of Credit.....................................22
ARTICLE 4
Representations and Warranties
Section 4.01. Corporate Existence and Power............................23
Section 4.02. Concentration and Governmental Authorization; No
Contravention..................................................23
Section 4.03. Binding Effect...........................................23
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<PAGE> 3
Page
----
Section 4.04. Financial Information....................................23
Section 4.05. Litigation...............................................24
Section 4.06. Compliance with Laws.....................................24
Section 4.07. Compliance with ERISA....................................24
Section 4.08. Environmental Matters....................................25
Section 4.09. Taxes....................................................25
Section 4.10. Subsidiaries.............................................25
Section 4.11. Not an Investment Company................................25
Section 4.12. Full Disclosure..........................................25
ARTICLE 5
Covenants
Section 5.01. Information..............................................26
Section 5.02. Maintenance of Property; Insurance.......................29
Section 5.03. Conduct of Business and Maintenance of Existence.........29
Section 5.04. Compliance with Laws.....................................29
Section 5.05. Inspection of Property, Books and Records................30
Section 5.06. Negative Pledge..........................................30
Section 5.07. Minimum Consolidated Tangible Net Worth..................31
Section 5.08. Leverage Ratio...........................................31
Section 5.09. Limitation on Debt of Subsidiaries.......................31
Section 5.10. Fixed Charge Coverage Ratio..............................31
Section 5.11. Consolidations, Mergers and Sales of Assets..............32
Section 5.12. Use of Proceeds..........................................32
Section 5.13. Restricted Payments......................................32
Section 5.14. German Purchase Agreement................................32
ARTICLE 6
Defaults
Section 6.01. Events of Default........................................32
Section 6.02. Notice of Default........................................35
ARTICLE 7
The Administrative Agent
Section 7.01. Appointment and Authorization............................35
Section 7.02. Administrative Agents and Affiliates.....................35
Section 7.03. Obligations of Administrative Agent......................35
Section 7.04. Consultation with Experts................................35
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ii
<PAGE> 4
Page
----
Section 7.05. Liability of Agents......................................35
Section 7.06. Indemnification..........................................36
Section 7.07. Credit Decision..........................................36
Section 7.08. Successor Administrative Agent...........................36
Section 7.09. Administrative Agent's Fees..............................37
ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair.37
Section 8.02. Illegality...............................................38
Section 8.03. Increased Cost and Reduced Return........................38
Section 8.04. Taxes....................................................40
Section 8.05. Base Rate Loans Substituted for Affected Euro-Dollar
Loans..........................................................42
Section 8.06. Substitution of Bank.....................................42
ARTICLE 9
Miscellaneous
Section 9.01. Notices..................................................43
Section 9.02. No Waivers...............................................44
Section 9.03. Expenses; Indemnification................................44
Section 9.04. Sharing of Set-offs......................................44
Section 9.05. Amendments and Waivers...................................45
Section 9.06. Successors and Assigns...................................45
Section 9.07. No-Reliance on Margin Stock..............................47
Section 9.08. Governing Law; Submission to Jurisdiction................47
Section 9.09. Counterparts.............................................47
Section 9.10. Waiver of Jury Trial.....................................48
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iii
<PAGE> 5
Commitment Schedule
Exhibit A - Form of Note
Exhibit B - Form of Opinion of Special Counsel for the Borrower
Exhibit C - Form of Opinion of General Counsel of the Borrower
Exhibit D - Form of Opinion of Special Counsel for the
Administrative Agent
Exhibit E - Form of Assignment and Assumption Agreement
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<PAGE> 6
BRIDGE LOAN AGREEMENT
AGREEMENT dated as of September 25, 1998 among VENATOR GROUP, INC., the
BANKS party hereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent.
The parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.06(b).
"Administrative Agent" means Morgan Guaranty Trust Company 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.
"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.
"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
$611,000,000 amount shown as total rent expense (net of sublease income) for
Fiscal Year 1997 in Note 14 ("Leases") to the audited financial statements of
the Borrower contained in the Borrower's 1997 Form 10-K.
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<PAGE> 7
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Base Rate Loans, its Domestic Lending Office and (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"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 in connection with the liquidation of the Kinney Shoes and
Footquarters divisions, (iii) dispositions of assets to the Borrower or a
Subsidiary and (iv) any transaction involving a disposition of one or more
assets for a consideration less than $250,000. Asset Sale shall include, in any
event, any sale, lease or other disposition of (i) the Borrower's headquarters
building at 233 Broadway, New York, New York (the "Headquarters Building") or
(ii) the "Woolworth Group" as defined in the German Purchase Agreement.
"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 (w) any
expenses reasonably incurred by such Person in respect of such Asset Sale,
(x) the amount of any Debt secured by a Lien on any asset disposed of in
such Asset Sale and discharged from the proceeds thereof, (y) 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 and (z) up to $30,000,000 of proceeds from the sale of the
Headquarters Building that are transferred to a "qualified intermediary" as
defined in Treasury Reg. $1.1031(k) - 1(g)(4),
(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
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<PAGE> 8
(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.
"Bank Parties" means the Banks and the Administrative Agent.
"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.
"Base Rate Loan" means a Loan which bears interest at the Base Rate
pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election or the provisions of Article VIII.
"Borrower" means Venator Group, Inc., a New York corporation, and its
successors.
"Borrower's 1997 Form 10-K" means the Borrower's annual report on Form 10-K
for 1997, 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 August 1, 1998, as filed with the SEC pursuant to the
Exchange Act.
"Borrowing" has the meaning set forth in Section 1.03.
"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.
"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
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3
<PAGE> 9
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 2.09 and 2.10 or changed as a
result of an assignment pursuant to Section 8.06 or 9.06(c).
"Commitment Schedule" means the Commitment Schedule attached hereto.
"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.
"Credit Exposure" means, as to any Bank at any time, the sum of (i) its
Commitment plus (ii) the aggregate outstanding principal amount of its 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
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4
<PAGE> 10
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.
"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.
"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;
"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.
"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,
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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 Euro-Dollar Lending Office by notice to the Borrower
and the Administrative Agent.
"Euro-Dollar Loan" means a Loan which bears interest at a Euro-Dollar Rate
pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election.
"Euro-Dollar Margin" has the meaning set forth in Section 2.06(b).
"Euro-Dollar Rate" means a rate of interest determined pursuant to Section
2.06(b) on the basis of an Adjusted London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.06(b).
"Event of Default" has the meaning set forth in Section 6.01.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Extension of Credit" means the making of a Loan.
"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 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 Morgan 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 1998 refers to the Fiscal Year that will end
on January 30, 1999).
"German Purchase Agreement" means the Purchase Agreement dated as of
September 20, 1998 between Retail Company of Germany, Inc., Venator Group, Inc.,
Dr. Peter Wessels Vermogensverwaltungs GmbH and Dr. Peter Wessels
Beteiligungsverwaltungs GmbH.
"Group of Loans" or "Group" means at any time a group of Loans consisting
of (i) all Loans which are Base Rate Loans at such time and (ii) all Euro-Dollar
Loans having the same Interest Period at such time; provided that if a 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
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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 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" in the consolidated statements of operations of the Borrower contained
in the Borrower's 1997 Form 10-K.
"Interest Period" means, with respect to each Euro-Dollar Loan, a period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in the applicable Notice of Interest Rate
Election and ending one week thereafter; 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.
"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.
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'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.
"Loan" means a loan made or to be made by a Bank pursuant to Section 2.01;
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 "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.
"London Interbank Offered Rate" has the meaning set forth in Section
2.06(b).
"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 and the Notes.
"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) 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.
"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
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<PAGE> 15
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.
'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" has the meaning set forth in Section 2.02.
"Notice of Interest Rate Election" has the meaning set forth in Section
2.07.
"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.
"Prime Rate" means a rate of interest per annum equal to the rate of
interest publicly announced from time to time in New York City by Morgan as its
Prime Rate.
"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
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with the SEC (or would have been required to be registered with the SEC if such
transaction had occurred within the United States).
"Reduction Event" means the receipt by the Borrower or a Subsidiary of
Available Net Cash Proceeds in respect of any one or more Asset Sales, Public
Debt Issuances or Equity Issuances in an aggregate amount equal to or greater
than $10,000,000.
"Reference Bank" means the principal London office of Morgan.
'Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Requesting Banks" means at any time one or more Banks having at least 15%
of the aggregate amount of the Credit Exposures at such time.
"Required Banks" means at any time Banks having more than 50% 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.
"Restricted Payment" means (i) any dividend or other distribution on any
shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock of the same class) or (ii) any payment on account of
the purchase, redemption, retirement or acquisition of (a) any shares of the
Borrower's capital stock or (b) any option, warrant or other rights to acquire
shares of the Borrower's capital stock (but not including payments of principal,
premium (if any) or interest made pursuant to the terms of convertible debt
securities prior to conversion).
"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 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.
"Termination Date" means November 16, 1998, or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day.
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"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 $1,952,000,000 (being the "present value of operating lease commitments"
of the Borrower and its Consolidated Subsidiaries at January 31, 1998) 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.
"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 initial
Interest Period. Borrowings are classified for purposes of this Agreement by
reference to the pricing of Loans comprising such Borrowing (i.e., a
"Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans and a Base
Rate Borrowing" is a Borrowing comprised of Base Rate Loans).
ARTICLE 2
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 the aggregate principal amount of
Loans made by such Bank on any date shall not exceed its Commitment at such
date. Each Borrowing under this Section shall be in an aggregate principal
amount of $10,000,000 or any larger multiple of $1,000,000; provided that any
such Borrowing may be in an aggregate amount equal to the then aggregate amount
of the Commitments. Each such Borrowing shall be made from the several Banks
ratably in proportion to their respective Commitments. The Commitments are not
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<PAGE> 19
revolving in nature, and amounts prepaid or repaid may not be reborrowed
hereunder.
Section 2.02. Notice of Borrowing. The Borrower shall give the
Administrative Agent notice (a "Notice of Borrowing") not later than 11:00 A.M.
(New York City time) on (x) the date of each Base Rate Borrowing and (y) 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 Base Rate Borrowing or a Euro-Dollar Business Day in the case of a
Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing, and
(c) whether the Loans comprising such Borrowing are to bear interest
initially at the Base Rate or a Euro-Dollar Rate.
Section 2.03. 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 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 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 the Administrative Agent shall make the funds
so received from the Banks 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 2.03 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
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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 2.06 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 2.04. 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 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 2.05. Maturity of Loans. Each Loan shall mature, and the principal
amount thereof shall be due and payable, together with accrued interest thereon,
on the Termination Date.
Section 2.06. 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 (or is converted from a Euro-Dollar Loan to a Base Rate Loan) until
it becomes due or is converted, at a rate per annum equal to the Base Rate for
such day. Accrued interest shall be payable for each calendar month in arrears
on the last Domestic Business Day thereof and, with respect to the principal
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amount of any Base Rate Loan converted to 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 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.
"Euro-Dollar Margin" means 1.00% per annum.
The "Adjusted London Interbank Offered Rate" applicable to (a) any Interest
Period (other than an Interest Period beginning on September 25, 1998 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 and (b) the
Interest Period beginning on September 25, 1998 means the rate per annum
determined by the Administrative Agent in the manner agreed by the Borrower and
the Administrative Agent on September 24, 1998.
The "London Interbank Offered Rate" applicable to any Interest Period
(other than an Interest Period beginning on the September 25, 1998) means the
rate per annum at which deposits in dollars are offered to the Reference Bank 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
the 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.
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(c) 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 sum of 2% plus the Base Rate for such day.
(d) 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 Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(e) The Reference Bank agrees to use its best efforts to furnish quotations
to the Administrative Agent as contemplated by this Section. If the Reference
Bank does not furnish a timely quotation, the provisions of Section 8.01 shall
apply.
Section 2.07. Method of Electing Interest Rates. (a) The Loans included in
each Borrowing shall bear interest initially at the type of rate specified by
the Borrower in the applicable Notice of 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 Euro-Dollar Loans as of any Euro-Dollar Business
Day; or
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate 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. 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 $10,000,000 or any larger multiple
of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify: (NY)
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(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
(iv) if such Loans are to be continued as Euro-Dollar Loans for an
additional Interest Period, such election.
(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 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 2.08. Commitment Fee. The Borrower shall pay to the Administrative
Agent for the account of each Bank a commitment fee at the rate of 0.10% per
annum on the daily average amount of such Bank's Commitment. Such commitment
fees shall accrue for each day from and including the Effective Date to but
excluding the Termination Date (or earlier date of termination of the
Commitments in their entirety) and shall be payable in arrears on the
Termination Date (or earlier date of termination of the Commitments in their
entirety).
Section 2.09. Optional Termination or Reduction of Commitments. 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 or (ii) ratably reduce the Commitments from time to time, in each case by
an aggregate amount of at least $10,000,000. Upon any such termination or
reduction of the Commitments, the Administrative Agent shall promptly notify
each Bank of such termination or reduction.
Section 2.10. Mandatory Termination or Reduction of Commitments. (a) The
Commitments shall terminate on the Termination Date and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable on
such date.
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(b) On the date of each Borrowing, the Commitment of each Bank shall be
automatically reduced by the amount of its Loan included in such Borrowing.
(c) On the date upon which any Reduction Event occurs, the Commitments
shall be automatically and ratably reduced by an amount equal to the largest
multiple of $1,000,000 which does not exceed the excess, if any, of (i) the
aggregate Available Net Cash Proceeds in respect of such Reduction Event over
(ii) the portion of such Available Net Cash Proceeds to be applied to the
prepayment of Loans pursuant to Section 2.12.
Section 2.11. Optional Prepayments. (a) The Borrower may upon at least one
Domestic Business Day's notice to the Administrative Agent, prepay the Base Rate
Loans 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.
(b) Subject to Section 2.14, the Borrower may, 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) 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 of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
Section 2.12. Mandatory Prepayments. (a) Upon the occurrence of a Reduction
Event, the Borrower shall prepay a principal amount of the Loans equal to the
largest multiple of $1,000,000 which does not exceed the aggregate amount of
Available Net Cash Proceeds in respect of such Reduction Event. Such prepayment
shall be made not later than the second Euro-Dollar Business Day following the
date of such Reduction Event, and shall be applied ratably to the Loans of the
Banks included in such outstanding Group or Groups of Loans as the
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Borrower may designate in the notice required by subsection (b) or, failing such
designation by the Borrower, as the Administrative Agent may specify by notice
to the Borrower and the Banks.
(b) The Borrower shall notify the Administrative Agent of each Reduction
Event and the related Available Net Cash Proceeds not later than the date of
such Reduction Event. The Administrative Agent shall promptly notify each Bank
of the contents of each such notice received by it and of such Bank's ratable
share of any prepayment pursuant to this Section 2.12 or reduction of the
Commitments pursuant to Section 2.10(c) in respect of such Reduction Event.
Section 2.13. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal 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. 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 Base Rate Loans
or fees 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
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. If the date for any payment of principal 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.
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Section 2.14. Funding Losses. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan or any such Loan is converted to
a Base Rate Loan (pursuant to Article 2, 6 or 8 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 2.06(c), or if the Borrower fails
to borrow or prepay any Euro-Dollar Loans or fails to continue any Euro-Dollar
Loans for an additional Interest Period or fails to convert any outstanding
Loans to 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 2.03(a), 2.07(c), 2.11(d) or 2.12(b), 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 commitment 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).
ARTICLE 3
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 2.04 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 B hereto, dated the
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Effective Date and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(d) an opinion of Gary M. Bahler, General Counsel of the Borrower,
substantially in the form of Exhibit C 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
Administrative Agent, substantially in the form of Exhibit D hereto, dated the
Effective Date and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request; and
(f) 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 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 of any Bank to make a
Loan on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) the fact that the Effective Date shall have occurred on or prior to
September 25, 1998;
(b) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.02;
(c) the fact that, immediately before and after such Extension of Credit,
no Default shall have occurred and be continuing; and
(d) 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) and (d) of this Section.
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ARTICLE 4
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. Concentration and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement and the Notes 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 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, 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 31, 1998 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 1997 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 August 1, 1998 and the related unaudited
consolidated statements of operations, cash flows and changes in shareholders'
equity for the six months then ended, set forth in the Borrower's Latest Form
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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 six-month period (subject to normal year-end
adjustments).
(c) Since August 1, 1998 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.
Section 4.05. 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
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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 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 information now
actually known to the Borrower's Responsible Officers).
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ARTICLE 5
Covenants
The Borrower agrees that, so long as any Bank has any Credit Exposure
hereunder:
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
officer or the chief accounting officer of the Borrower;
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(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 in Note 14 ("Leases") to the audited financial
statements of the Borrower contained in the Borrower's 1997 Form 10-K (treating
the guaranteed amounts 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;
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(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 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 (including, without
limitation, the status of the transactions contemplated by the German Purchase
Agreement) 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)
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<PAGE> 34
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 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
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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 April 4, 1997 securing Debt outstanding on April 4,
1997 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
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(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 less than the sum of (i) $800,000,000 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 1998 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 1.75 to 1
Fiscal Year 1998
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 other Person; provided that the foregoing limitation shall not
apply
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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 proceeds of the Loans made under this
Agreement will be used by the Borrower for its working capital needs.
Section 5.13. Restricted Payments. Neither the Borrower nor any Subsidiary
will declare or make any Restricted Payment.
Section 5.14. German Purchase Agreement. The Borrower shall not permit the
German Purchase Agreement to be amended, supplemented or otherwise modified if
the effect thereof would be to (i) materially reduce the purchase price (or the
portion thereof payable in cash), (ii) materially delay the consummation of the
transactions contemplated therein or (iii) impose any additional material
conditions to the consummation of the transactions contemplated therein.
ARTICLE 6
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 when due
or (ii) to pay any interest on any Loan, 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 5.14, 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);
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(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;
(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 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
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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 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 (together with
accrued interest thereon) to be, and the 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 shall thereupon terminate and the 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
any Requesting Banks and shall thereupon notify all the Banks thereof.
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ARTICLE 7
The Administrative Agent
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. Administrative Agents and Affiliates. Morgan 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 the Administrative
Agent. Morgan, and each of its 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 the Administrative
Agent.
Section 7.03. 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 6.
Section 7.04. Consultation with Experts. The Administrative 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 7.05. Liability of Agents. None of the Administrative Agent, its
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 Administrative Agent,
its 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 3 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 or any other
instrument or writing furnished in connection herewith. The Administrative Agent
shall not incur any liability by acting in reliance upon any notice, consent,
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certificate, statement, or other writing (which may be a 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 7.06. 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 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon 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 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 7.08. 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 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
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shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Agent.
Section 7.09. 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 8
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 Euro-Dollar Loan:
(a) the Administrative Agent is advised by the Reference Bank that deposits
in dollars (in the applicable amounts) are not being offered to the Reference
Bank in the London interbank market for such Interest Period, or
(b) Banks having 50% or more of the aggregate principal amount of the
affected Loans advise the Administrative Agent that the Adjusted London
Interbank Offered Rate as determined by the Administrative Agent will not
adequately and fairly reflect the cost to such Banks of funding their
Euro-Dollar Loans 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 Euro-Dollar Loans, or to continue such Loans
for an additional Interest Period, or to convert outstanding Loans into
Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan
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, such Borrowing shall instead be made
as a Base Rate Borrowing
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
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(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.
Section 8.03. Increased Cost and Reduced Return. (a) 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 any Bank (or its Applicable 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 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
with respect to any Euro-Dollar Loan any such requirement included in an
applicable Euro-Dollar Reserve Percentage), special deposit, insurance
assessment 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 shall impose on any Bank (or its Applicable Lending Office) or the London
interbank market any other condition affecting its Euro-Dollar Loans, its Note
or its obligation to make Euro-Dollar Loans 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 Euro-Dollar Loan, or to reduce the amount
of any sum received or receivable by such Bank (or its Applicable Lending
Office) under this Agreement or under its Note with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after receiving
a request by such Bank for compensation under this subsection, accompanied by a
certificate complying with subsection (d) of this Section (with a copy to the
Administrative Agent), the Borrower shall, subject to subsection (e) of this
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Section, pay to such Bank such additional amount or amounts as will compensate
such Bank for such increased cost or reduction.
(b) If any Bank 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 (or its Parent) as a consequence of its obligations hereunder to a
level below that which such Bank (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 for compensation under this subsection, accompanied by a certificate
complying with subsection (d) of this Section (with a copy to the Administrative
Agent), the Borrower shall, subject to subsection (e) of this Section, pay to
such Bank such additional amount or amounts as will compensate it (or its
Parent) for such reduction.
(c) Each Bank 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 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 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
(d) Each request by a Bank 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 may use any
reasonable averaging and attribution methods.
(e) Notwithstanding any other provision of this Section, none of the Banks
shall be entitled to compensation under subsection (a) or (b) of this Section if
it is not then its general practice to demand compensation in similar
circumstances under comparable provisions of other credit agreements.
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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 Agreement or under any 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
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 from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement or any Note.
(b) Any and all payments by the Borrower to or for the account of any Bank
Party hereunder or under any 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
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Other Taxes accrued 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 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.
(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
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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 Euro-Dollar 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 Euro-Dollar Loans and 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) Euro-Dollar Loans shall instead be
Base Rate Loans (on which interest and principal shall be payable
contemporaneously with the related 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 Euro-Dollar Loan on the first day of the next succeeding
Interest Period applicable to the related 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 (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 Loans being prepaid, all pursuant to documents
reasonably satisfactory to the Administrative Agent (and in the case of any
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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 9
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 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 2 or Article 8 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 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 Administrative Agent, including
reasonable fees and disbursements of special counsel for the Administrative
Agent, in connection with the negotiation and preparation of this Agreement,
(ii) all reasonable out-of-pocket expenses of the Administrative Agent and the
Administrative Agent, including reasonable fees and disbursements of special
(NY) 27009/335/CA/ca.98
43
<PAGE> 49
counsel for the Administrative 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 Administrative 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.
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) 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.
(c) The Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in a Loan, 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.
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44
<PAGE> 50
Section 9.05. Amendments and Waivers. Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Administrative Agent are affected thereby, by the
Administrative Agent); 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 any fees hereunder, (iii) postpone the date fixed for
any payment of principal of or interest on any Loan or any fees hereunder or for
the termination of any Commitment or (iv) 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.
(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. 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 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) or (iv) 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).
(NY) 27009/335/CA/ca.98
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<PAGE> 51
(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 portion (not less than $10,000,000)
of its Commitment and/or its Loans, and of its rights and obligations under this
Agreement and the Notes with respect thereto, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit E hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consents of the Borrower
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) the 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; and (iii) no such consent of the
Borrower shall be required if at the time an Event of Default shall exist. 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 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
(NY) 27009/335/CA/ca.98
46
<PAGE> 52
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) THIS AGREEMENT
AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
(b) 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 Agreement, the Notes 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 OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY.
(NY) 27009/335/CA/ca.98
47
<PAGE> 53
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.
VENATOR GROUP, INC.
By /s/ John H. Cannon
---------------------------
Name: John H. Cannon
Title: Vice President and Treasurer
233 Broadway
New York, New York 10279-0003
Facsimile number: 212-553-2152
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Administrative Agent and a Bank
By /s/ Unn Boucher
---------------------------
Name: Unn Boucher
Title: Vice President
60 Wall Street
New York, New York 10260-0060
Facsimile number:
(NY) 27009/335/CA/ca.98
48
<PAGE> 54
COMMITMENT SCHEDULE
Bank Commitment
Morgan Guaranty Trust Company
of New York $250,000,000
Total $250,000,000
(NY) 27009/335/CA/ca.98
<PAGE> 55
EXHIBIT A
NOTE
New York, New York
, 19
For value received, Venator Group, Inc., 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 Bridge Loan Agreement
referred to below on the maturity date thereof provided for in the Bridge Loan
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
Bridge Loan 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 Morgan Guaranty Trust Company of New York, 60 Wall
Street, 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 Bridge Loan Agreement.
This note is one of the Notes referred to in the Bridge Loan Agreement
dated as of September 25, 1998 among the Borrower, the Banks party thereto and
Morgan Guaranty Trust Company of New York, as Administrative Agent (as the same
may be amended from time to time, the "Bridge Loan Agreement"). Terms defined in
the Bridge Loan Agreement are used herein with the same meanings. Reference is
made to the Bridge Loan Agreement for provisions for the prepayment hereof and
(NY) 27009/335/CA/ca.98
<PAGE> 56
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.
VENATOR GROUP, INC.
By________________________
Title:
(NY) 27009/335/CA/ca.98
2
<PAGE> 57
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of Amount of Notation
Date Loan Principal Repaid Made By
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<PAGE> 58
EXHIBIT B
OPINION OF SPECIAL
COUNSEL FOR THE BORROWER
[Effective Date]
Morgan Guaranty Trust Company of New York,
as Administrative Agent
60 Wall Street
New York, New York 10260-0060
Ladies and Gentlemen:
We have acted as special counsel to Venator Group, Inc., a New York
corporation (the "Borrower"), in connection with the preparation, execution and
delivery of, the Bridge Loan Agreement, dated as of September __, 1998 (the
"Bridge Loan Agreement") among the Borrower, the Banks, and Morgan Guaranty
Trust Company of New York, as Administrative Agent. This opinion is being
delivered pursuant to Section 3.01(c) of the Bridge Loan Agreement. Capitalized
terms used and not otherwise defined herein shall have the meanings herein as
ascribed thereto in the Bridge Loan 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.
In rendering the opinions set forth herein, we have examined and relied on
originals or copies of the following:
(a) the Bridge Loan Agreement;
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<PAGE> 59
(b) the Notes 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 ____________, 1998; and
(f) such other documents as we have deemed necessary or appropriate as
a basis for the opinions set forth below.
The Bridge Loan Agreement and the Notes 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 1997 Form 10-K and (ii) execute, deliver
and perform all of its obligations under each of the Transaction Documents and
to borrow thereunder. The execution and delivery of each of the Transaction
Documents and the consummation by the Borrower 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.
(NY) 27009/335/CA/ca.98
2
<PAGE> 60
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 Bridge Loan
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 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.
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
(NY) 27009/335/CA/ca.98
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<PAGE> 61
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
(NY) 27009/335/CA/ca.98
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<PAGE> 62
(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.
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 Bridge Loan
Agreement.
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<PAGE> 63
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 Bridge Loan Agreement may rely
on this opinion as if it were addressed to such Assignee and delivered on the
date hereof.
Very truly yours,
6
(NY) 27009/335/CA/ca.98
<PAGE> 64
Schedule I
to SASM&F Opinion
Lenders
Morgan Guaranty Trust Company of New York
(NY) 27009/335/CA/ca.98
<PAGE> 65
Exhibit C
[Form of Opinion of Borrower's General Counsel]
[Venator letterhead]
September __, 1998
Morgan Guaranty Trust Company
of New York,
as Administrative Agent
60 Wall Street
New York, New York 10260-0060
Ladies and Gentlemen:
I am General Counsel of Venator Group, Inc., a New York corporation (the
"Borrower"), and have acted as such in connection with the preparation,
execution and delivery of, the Bridge Loan Agreement, dated as of September __,
1998 (the "Bridge Loan Agreement'), among the Borrower, the Banks and Morgan
Guaranty Trust Company of New York, as Administrative Agent. This opinion is
being delivered pursuant to Section 3.01(d) of the Bridge Loan Agreement.
Capitalized terms used and not otherwise defined herein shall have the same
meanings herein as ascribed thereto in the Bridge Loan 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 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.
(NY) 27009/335/CA/ca.98
<PAGE> 66
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 Bridge Loan Agreement;
(b) the Notes 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 __________, 1998; and
(e) such other documents as I have deemed necessary or appropriate as
a basis for the opinions set forth below.
The Bridge Loan Agreement and the Notes 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 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.
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<PAGE> 67
3. 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 Bridge Loan
Agreement may rely on this opinion as if it were addressed to such Assignee
and delivered on the date hereof.
Very truly yours,
(NY) 27009/335/CA/ca.98
3
<PAGE> 68
Schedule I
to Venator Opinion
Lenders
Morgan Guaranty Trust Company of New York
(NY) 27009/335/CA/ca.98
<PAGE> 69
EXHIBIT D
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE ADMINISTRATIVE AGENT
To the Banks and the
Administrative Agent Referred to Below
c/o Morgan Guaranty Trust Company
of New York,
as Administrative Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
We have participated in the preparation of the Bridge Loan Agreement (the
"Bridge Loan Agreement") dated as of September __, 1998 among Venator Group,
Inc. a New York corporation (the "Borrower"), the Banks (the "Banks"), and
Morgan Guaranty Trust Company 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 Bridge Loan
Agreement. Terms defined in the Bridge Loan 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:
(NY) 27009/335/CA/ca.98
<PAGE> 70
1. The execution, delivery and performance by the Borrower of the Bridge
Loan Agreement and the Notes are within the Borrower's corporate powers and have
been duly authorized by all necessary corporate action.
2. The Bridge Loan Agreement constitutes a valid and binding agreement of
the Borrower and each 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 Bridge Loan
Agreement may rely on this opinion as if it were addressed to such Assignee and
delivered on the date hereof.
Very truly yours,
(NY) 27009/335/CA/ca.98
2
<PAGE> 1
Exhibit 10.4
WAIVER
WAIVER dated as of November 6, 1998 to the Credit Agreement dated as of
April 9, 1997, as heretofore amended (the "Credit Agreement") among VENATOR
GROUP, INC. (formerly named Woolworth Corporation), the BANKS party thereto, the
CO-AGENTS party thereto, NATIONSBANK, N.A., as Documentation Agent, and THE BANK
OF NEW YORK, as LC Agent, Administrative Agent and Swingline Bank.
W I T N E S S E T H :
WHEREAS, the Borrower has requested that the Banks waive any failure by the
Borrower to comply with the provisions of Sections 5.07 (Minimum Consolidated
Tangible Net Worth) and 5.10 (Fixed Charge Coverage Ratio) of the Credit
Agreement during the period from and including October 31, 1998 to and including
March 19, 1999 (the "Waiver Period");
WHEREAS, the undersigned Banks are willing to grant such waiver, subject to
the terms and conditions set forth herein, if (i) the Borrower agrees that with
respect to interest and fees accrued during the Waiver Period, the Pricing
Schedule referred to in the Credit Agreement shall mean the Pricing Schedule
attached hereto and (ii) the Borrower agrees to limit Restricted Payments (as
defined below) as set forth in Section 5 hereto;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Defined Terms; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Credit Agreement has the
meaning assigned to such term in the Credit Agreement.
Section 2. Minimum Consolidated Tangible Net Worth. The undersigned Banks
hereby waive any failure by the Borrower to comply with the provisions of
Section 5.07 of the Credit Agreement during the Waiver Period, but only if and
so long as Consolidated Tangible Net Worth at any time during the Waiver Period
is not less than (i) $750,000,000 at any time prior to January 30, 1999 or (ii)
$850,000,000 at any time on or after January 30, 1999.
Section 3. Fixed Charge Coverage Ratio. The undersigned Banks hereby waive
any failure by the Borrower to comply with the provisions of Section 5.10 of
(NY) 27009/335/WAIVERS/waiver1.wpd
<PAGE> 2
the Credit Agreement at the end of the third and fourth Fiscal Quarters of
Fiscal Year 1998, but only if the ratio set forth in said Section is not less
than (i) 0.90 to 1 at the end of the third Fiscal Quarter of Fiscal Year 1998 or
(ii) 0.50 to 1 at the end of the fourth Fiscal Quarter of Fiscal Year 1998.
Section 4. Increase in Pricing. The Borrower agrees that for purposes of
calculating any interest and fees for any day during the Waiver Period, the
Pricing Schedule attached hereto shall be used instead of the Pricing Schedule
referred to in the Credit Agreement.
Section 5. Restricted Payments. The Borrower agrees that during the Waiver
Period, neither the Borrower nor any Subsidiary will declare or make any
Restricted Payment. As used herein, "Restricted Payment" means (i) any dividend
or other distribution on any shares of the Borrower's capital stock (except
dividends payable solely in shares of its capital stock of the same class) or
(ii) any payment on account of the purchase, redemption, retirement or
acquisition of (a) any shares of the Borrower's capital stock or (b) any option,
warrant or other rights to acquire shares of the Borrower's capital stock (but
not including payments of principal, premium (if any) or interest made pursuant
to the terms of convertible debt securities prior to conversion). The Borrower
agrees that failure to comply with this Section 5 shall constitute an Event of
Default under the Credit Agreement.
Section 6. Governing Law. This Waiver shall be governed by and construed in
accordance with the laws of the State of New York.
Section 7. Counterparts. This Waiver 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 8. Effectiveness. This Waiver shall become effective as of the date
hereof when the Administrative Agent shall have received from each of the
Borrower and the Required Banks a counterpart hereof signed by such party or
facsimile or other written confirmation (in form satisfactory to the
Administrative Agent) that such party has signed a counterpart hereof. On the
later of November 6, 1998 and the date this Waiver becomes effective, the
Borrower agrees to pay to the Administrative Agent for the account of the Banks
who deliver a counterpart of this Waiver to the Administrative Agent on or
before the later of 1:00 P.M. (New York City time) on (i) November 6, 1998 and
(ii) the date this Waiver becomes effective, a fee in an aggregate amount equal
to 0.10% of the aggregate amount of the Commitments of such Banks on such
effective date. The Borrower agrees that the failure to pay such fee when due
shall be an Event of Default.
(NY) 27009/335/WAIVERS/waiver1.wpd
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly
executed as of the date first above written.
VENATOR GROUP, INC.
By:/s/ John H. Cannon
--------------------------------
Title: Vice President - Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:/s/ Unn Boucher
--------------------------------
Title: Vice President
NATIONSBANK, N.A.
By:/s/ Bill Manley, Sr.
--------------------------------
Title: Senior Vice President
THE BANK OF NEW YORK
By:/s/ Howard F. Bascom
--------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By:/s/ J. Alan Edwards
--------------------------------
Title: Authorized Signatory
(NY) 27009/335/WAIVERS/waiver1.wpd
<PAGE> 4
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By:/s/ N. Saffra
--------------------------------
Title: Vice President
TORONTO DOMINION (NEW YORK), INC.
By:/s/ Jorge A. Garcia
--------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:/s/ Bill Manley, Sr.
--------------------------------
Title: Senior Vice President
COMMERZANK AG, NEW YORK AND/OR
GRAND CAYMAN BRANCHES
By:/s/ David T. Whitworth
--------------------------------
Title: Senior Vice President
By:/s/ A. Oliver Welsch-Lehmann
--------------------------------
Title: Assistant Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By:/s/ Vladimir Labon
--------------------------------
Title: First Vice President-Manager
(NY) 27009/335/WAIVERS/waiver1.wpd
<PAGE> 5
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By:/s/ Susan M. O'Connor
--------------------------------
Title: Director
By: /s/ Stephen A. Wiedeman
-------------------------------
Title: Director
KEYBANK NATIONAL ASSOCIATION
By:_______________________________
Title:
WELLS FARGO BANK, N.A.
By: /s/ Razia Damji
-------------------------------
Title: Vice President
By:_______________________________
Title:
UNION BANK OF CALIFORNIA, N.A.
By:/s/ Corinne Heyning
-------------------------------
Title: Vice President
(NY) 27009/335/WAIVERS/waiver1.wpd
<PAGE> 6
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 Level Level
I II III IV V VI VII VIII
================================================================================
Pricing Level
Euro-Dollar
Margin and
Non-Trade LC Fee
Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C>
If Utiliza- .1700 .2750 .3500 .6250 .7000 1.0250 1.3750 1.7500
tion is
50% or less
If Utiliza- .1700 .3750 .4750 .8750 .9500 1.2750 1.6250 2.0000
tion exceeds
50%
================================================================================
CD Margin
If Utiliza- .2950 .4000 .4750 .7500 .8250 1.1500 1.5000 1.8750
tion is
50% or less
If Utiliza- .2950 .5000 .6000 1.0000 1.0750 1.4000 1.7500 2.1250
tion exceeds
50%
================================================================================
Facility
Fee Rate .0800 .1250 .1500 .2500 .3000 .3500 .3750 .5000
================================================================================
</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.
"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.
(NY) 27009/335/WAIVERS/waiver1.wpd
<PAGE> 7
"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 (A) BB+ or higher by S&P and Baa3 or higher
by Moody's or (B) BBB- or higher by S&P and Ba1 or higher by Moody's.
"Level VI Pricing" applies on any day on which the Borrower's long-term
debt is rated BB+ or higher by S&P and Ba1 or higher by Moody's.
"Level VII Pricing" applies on any day on which the Borrower's long-term
debt is rated BB or higher by S&P and Ba2 or higher by Moody's.
"Level VIII 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, Level VI
Pricing, Level VII Pricing or Level VIII 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%.
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.
(NY) 27009/335/WAIVERS/waiver1.wpd
<PAGE> 1
Exhibit 10.5
November 10, 1998
Samuel Gaston
496 N. Ferndale Drive
Bigfork, Mt. 59911
Dear Ron:
This will confirm our recent discussions regarding our offer of employment that
was extended to you to join the Venator Group as Senior Vice President and Chief
Information Officer reporting to me.
The terms of our offer as discussed are outlined below:
Annual Base Salary: $400,000 ($33,333.34 paid monthly)
Annual Bonus Program: Participation in the annual bonus plan
50% of base salary at target. Bonus will
be pro-rated from date of hire to the
end of the fiscal year.
Fiscal Year Fiscal year 1998-1999
Bonus Guarantee: $50,000 (Payable in April 1999)
Fiscal year 1999 - 2000
$100,000 (Payable in April 2000)
Cash Sign-On Bonus: $50,000
Stock options: We will recommend a stock option grant
of 30,000 shares of the company's common
stock be awarded to you by the
Compensation Committee of the Board of
Directors as part of your sign on
package. You will be eligible to
participate in the annual share option
grant program at a level determined by
the Compensation Committee of the Board
of Directors commensurate with your
position in the organization.
<PAGE> 2
Long-Term Incentive Program: Prorated participation in the 1998-2000
and 2000 - 2001 periods, based on date
of employment.
Life Insurance: Company-paid 1x base salary.
Medical: $5,000 reimbursement - no gross-up.
Vacation: Four (4) weeks, plus 13 Company-paid
Holidays and two (2) personal days.
Severance: You will be a participant in the Senior
Executive Severance Agreement of which
we will provide a copy for you. If you
are discharged for any reason (except
cause) you will receive a lump sum
payment equal to a minimum of one (1)
years base salary less applicable taxes
(no other offsets allowable). You will
also receive full settlement of any
outstanding gross up benefits relating
to your relocation. Additional benefits
available in our Senior Executive
Severance Policy will also be made
available to you.
Financial Planning: Company-paid up to $10,000 for the first
year, $6,000 thereafter.
Relocation: In accordance with the policy for
homeowners, which includes moving your
household goods, three months temporary
living-including reasonable meals, two
trips a month to unite family, and
real estate locator fees related to
searching for a new residence.
Should you voluntarily choose to terminate your employment with the company, on
your own initiative, excluding catastrophic or serious health reasons, during
the first twelve (12) months of employment, you agree to reimburse the total
amount of the expenses incurred by the Company in connection with your
relocation expenses and signing bonus (gain net of taxes).
<PAGE> 3
We have agreed that your service as a director on the Boards of other
non-competing companies (retailers included) is desirable and authorized.
We are very enthusiastic about your joining our dynamic team. We know you will
grow personally and professionally in our exciting environment.
Please indicate your acceptance of the above noted terms by faxing a signed copy
of this letter to Connie Williams at (212) 553-2475 then returning the enclosed
original signed copy of this letter.
If you have any questions, please feel free to contact me directly.
We look forward to your joining us.
Very truly yours,
/s/ Samuel Gaston /s/ Dale Hilpert
- ------------------------ -------------------------
Samuel Gaston Dale Hilpert
11/10/98 11/10/98
- ------------------------ ------------------------
Date Date
<PAGE> 1
Exhibit 10.6
AGREEMENT
THIS AGREEMENT made as of September 17, 1998 by and between VENATOR GROUP,
INC., a New York corporation with its principal office at 233 Broadway, New
York, New York 10279 (the "Company") and Reid Johnson, residing at 200 Central
Park South, New York, New York 10019 (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.
(c) "Board" shall mean the Board of Directors of the Company.
1
<PAGE> 2
(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) prior to a Change
in Control, a reduction in the Executive's rate of base salary as payable from
time to time, other than a reduction that occurs in connection with, and in the
same percentage as, an across-the-board reduction over any three-year period in
the base salaries of all executives of the Company of a similar
2
<PAGE> 3
level and where the reduction is less than 20 percent of the Executive's base
salary measured from the beginning of such three-year period; (iii) on or after
a Change in Control, any reduction in the Executive's rate of base salary as
payable from time to time; (iv) 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; (v) 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 (vi) 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 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. In
no event, however, shall the Severance Benefit payable to an Executive hereunder
be less than 12 months' Salary.
(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 52 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
3
<PAGE> 4
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 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. Notwithstanding the foregoing, if a Change in
Control occurs prior to the Executive's receipt of the remaining 50 percent of
his or her Severance Benefit, the Executive shall receive such remaining 50
percent within 10 days following the Change in Control (and, if not paid within
such 10 day period, with interest payable beginning on the tenth day following
the Change in Control 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.
4
<PAGE> 5
(d) Notwithstanding anything to the contrary contained herein, if the
Executive's employment with the Control Group is terminated as described in the
introductory paragraph to this Section 3 following a Change in Control, (i) the
Executive shall receive 100 percent of his or her Severance Benefit in the form
of a lump sum cash payment within 10 days following his or her termination of
employment with the Control Group (and, if not paid within such 10 day period,
with interest payable beginning on the tenth day following such termination of
employment at the prime rate of interest as stated in The Wall Street Journal),
and (ii) the restriction on competition contained in Section 3(c) shall not
apply.
(e) 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 Venator Group Retirement Plan, Venator Group
401(k) Plan, and Venator Group Excess Cash Balance Plan.
(f) 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.
(g) 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
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<PAGE> 6
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.
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.
6
<PAGE> 7
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 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
7
<PAGE> 8
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 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.
8
<PAGE> 9
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 and Bonus.
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.
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.
9
<PAGE> 10
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.
VENATOR GROUP, INC.
By:/s/ John F. Gillespie
------------------------
/s/ Reid Johnson
------------------------
Reid Johnson
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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.
a:reidsev
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<PAGE> 1
Exhibit 10.7
CONFIDENTIAL
PURCHASE AND SALE AGREEMENT
between
233 BROADWAY, INC.,
as Seller,
and
233 BROADWAY OWNERS, LLC,
as Purchaser
Dated: June 20, 1998
Premises:
227-237 Broadway
21 Barclay Street
and
22 Park Place
New York, New York
228463.07-New YorkS4A
1
<PAGE> 2
Page
TABLE OF CONTENTS
Page
ARTICLE I.
Sale of Property...............................................1
1.1. Sale. ..................................................1
1.2. Excluded Property. .....................................3
1.3. Like Kind Exchange.......................................4
1.4. License Agreement. .....................................4
ARTICLE II.
Purchase Price.................................................4
2.1. Purchase Price. ........................................4
ARTICLE III.
Deposit........................................................5
3.1. Deposit. ................................................5
3.2. Application of Deposit. .................................6
3.3. Escrow Agent.............................................6
ARTICLE IV.
Closing, Prorations and Closing Costs..........................9
4.1. Closing..................................................9
4.2. Prorations...............................................9
4.3. Transfer Taxes...........................................15
4.4. Closing Costs............................................15
ARTICLE V.
Title and Survey Matters.......................................16
5.1. Title....................................................16
5.2. Seller's Inability to Convey Title.......................18
5.3. Violations...............................................18
228463.07-New YorkS4A
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<PAGE> 3
Page
ARTICLE VI.
Representations and Warranties of Seller.......................19
6.1. Seller's Representations.................................19
6.2. Seller's Knowledge.......................................23
6.3. Change in Representation/Waiver..........................23
6.4. Survival.................................................24
6.5. Limitation of Liability..................................24
6.6. "AS IS" Sale.............................................25
ARTICLE VII.
Representations and Warranties of Purchaser....................25
7.1. Authority................................................25
7.2. Bankruptcy or Debt of Purchaser..........................25
7.3. No Financing Contingency.................................26
7.4. Purchaser's Acknowledgment...............................26
7.5. Survival.................................................27
ARTICLE VIII.
Seller's Interim Operating Covenants...........................27
8.1. Operations...............................................27
8.2. Maintain Insurance.......................................28
8.3. Personal Property........................................28
8.4. No Sales.................................................28
8.5. Tenant Leases............................................28
8.6. Reserved.................................................29
8.7. Tenant Estoppels.........................................29
8.8. Contracts................................................29
8.9. Tax Appeal Proceedings...................................30
8.10. Notices of Violation.....................................30
8.11. Access...................................................30
228463.07-New YorkS4A
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<PAGE> 4
Page
ARTICLE IX.
Closing Conditions..............................................31
9.1. Conditions to Obligations of Seller.......................31
9.2. Conditions to Obligations of Purchaser....................32
ARTICLE X.
Closing.........................................................33
10.1. Seller's Closing Obligations.............................33
10.2. Purchaser's Closing Obligations..........................36
ARTICLE XI.
Risk of Loss....................................................38
11.1. Condemnation and Casualty................................38
11.2. Condemnation not Material................................38
11.3. Casualty not Material....................................38
11.4. Materiality..............................................39
11.5. General Obligations Law..................................39
ARTICLE XII.
Default.........................................................39
12.1. Default by Seller........................................39
12.2. Default by Purchaser. ..................................40
ARTICLE XIII.
Brokers.........................................................40
13.1. Brokerage Indemnity......................................40
ARTICLE XIV.
Confidentiality.................................................41
14.1. Publication..............................................41
228463.07-New YorkS4A
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<PAGE> 5
Page
ARTICLE XV.
15.1. Employment Responsibilities..............................41
15.2. Collective Bargaining Agreements.........................43
15.3. Survival.................................................43
ARTICLE XVI.
Miscellaneous...................................................43
16.1. Notices..................................................43
16.2. Governing Law; Venue.....................................45
16.3. Headings.................................................45
16.4. Business Days............................................45
16.5. Counterpart Copies.......................................45
16.6. Binding Effect...........................................46
16.7. Successors and Assigns...................................46
16.8. Assignment...............................................46
16.9. Interpretation...........................................46
16.10. Entire Agreement........................................46
16.11. Severability............................................47
16.12. Survival................................................47
16.13. Exhibits................................................47
16.14. Limitation of Liability.................................47
16.15. Prevailing Party........................................47
16.16. Real Estate Reporting Person............................48
16.17. No Recording............................................48
16.18. No Other Parties........................................48
16.19. Waiver of Trial by Jury.................................48
16.20. Rule 314................................................48
ARTICLE XVII.
Purchaser Guaranty..............................................49
17.1. Purchaser Guaranty.......................................49
17.2. Waivers..................................................49
228463.07-New YorkS4A
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<PAGE> 6
Page
17.3. Absolute Obligation......................................49
17.4. Enforcement Costs........................................50
17.5. Waiver of Subrogation....................................50
17.6. Waiver of Defenses.......................................50
ARTICLE XVIII.
Venator Lease...................................................50
18.1. Venator Lease............................................50
18.2. Disputes.................................................51
18.3. Alterations..............................................52
ARTICLE XIX.
Seller Guaranty.................................................52
19.1. Seller Guaranty..........................................52
19.2. Waivers..................................................52
19.3. Absolute Obligation......................................52
19.4. Enforcement Costs........................................53
19.5. Waiver of Subrogation....................................53
19.6. Waiver of Defenses.......................................53
228463.07-New YorkS4A
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<PAGE> 7
LIST OF EXHIBITS AND SCHEDULES
Exhibits:
Exhibit A-1 - Broadway Parcel
Exhibit A-2 - Barclay Parcel
Exhibit A-3 - Park Place Parcel
Exhibit B - Form of License Agreement
Exhibit C - Permitted Exceptions
Exhibit D - Leases
Exhibit E - Rent Roll
Exhibit F - Term Sheet for Venator Lease
Exhibit G - Form of Deed
Exhibit H - Form of Assignment and Assumption of Leases
Exhibit I - Form of Assignment and Assumption of Contracts
Exhibit J - Form of Seller's Letter to Tenants
Exhibit K - Form of Seller's Bring-Down Certificate
Exhibit L - Form of Bill of Sale
Exhibit M - Form of FIRPTA Certificate
Exhibit N - Form of Non-Multiple Dwelling Affidavit
Exhibit O - Form of Venator SNDA
Exhibit P - Form of Purchaser's Bring-Down Certificate
228463.07-New YorkS4A
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<PAGE> 8
Exhibit Q - Memorandum Regarding Alterations in Venator
Premises
Exhibit R - Intentionally Omitted
Exhibit S - Form of Landlord's Estoppel Certificate
Schedules:
Schedule 1 - Excluded Assets
Schedule 2 - Lease Defaults
Schedule 3 - Intentionally Omitted
Schedule 4 - Contracts
Schedule 5 - Tax Appeals
Schedule 6 - Insurance Policies
Schedule 7 - Litigation
Schedule 8 - Employees
228463.07-New YorkS4A
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<PAGE> 9
CONFIDENTIAL
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered
into as of the 20th day of June, 1998, by and between 233 BROADWAY, INC., a New
York corporation ("Seller"), and 233 BROADWAY OWNERS, LLC, a New York limited
liability company ("Purchaser").
In consideration of the mutual promises, covenants and agreements
hereinafter set forth and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as
follows:
ARTICLE I.
Sale of Property
1.1. Sale. Seller hereby agrees to sell, assign and convey to Purchaser and
Purchaser agrees to purchase from Seller, the following:
1.1.1. Those certain parcels of real property lying and being situated in
the City, County and State of New York and being more particularly described (i)
on Exhibit A-1 attached hereto (the "Broadway Parcel"), (ii) on Exhibit A-2
attached hereto (the "Barclay Parcel") and (iii) on Exhibit A-3 attached hereto
(the "Park Place Parcel")(the Broadway Parcel, the Barclay Parcel and the Park
Place Parcel are hereinafter collectively referred to as the "Land");
1.1.2. All buildings, structures and improvements now or hereafter erected
or situate on the Land or any portion thereof (the "Improvements");
1.1.3. All rights of Seller, if any, in and to any land lying in the bed of
any street, road or avenue, opened or proposed, in front of or adjoining the
Land or any portion thereof, to the center line thereof, and any strips and
gores adjacent to the Land or any portion thereof, and all right, title and
interest of Seller in and to any award made or to be made in lieu thereof and in
and to any unpaid award for damage to the Land and Improvements or any portion
thereof by reason of any change of grade of any street;
228463.07-New YorkS4A
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CONFIDENTIAL
1.1.4. All rights, privileges, grants and easements appurtenant to Seller's
interest in the Land and the Improvements, if any, including, without
limitation, all of Seller's right, title and interest, if any, in and to all
easements, licenses, covenants and other rights-of-way or other appurtenances
used in connection with the beneficial use and enjoyment of the Land and the
Improvements (the Land, the Improvements, all rights and interests described in
Section 1.1.3 and all such easements, grants and appurtenances are sometimes
collectively referred to herein as the "Real Property");
1.1.5. All leases, licenses and other occupancy agreements covering
offices, stores and other spaces at or within the Improvements (together with
any and all amendments, modifications or supplements thereto, collectively, the
"Leases") and, subject to Section 4.2.6 below, the security deposits under such
Leases (the "Security Deposits") which have not been applied in accordance with
the provisions of such Leases;
1.1.6. All fixtures, equipment, castings and personal property, if any,
used solely in connection with the ownership, management, maintenance or
operation of the Improvements and located at the Real Property as of the date
hereof, and all inventory used solely in connection with the ownership,
management, maintenance or operation of the Improvements and located on the Real
Property on the date of Closing (the "Per sonal Property"); and
1.1.7. All (i) service, utility, maintenance and other contracts or
agreements to which Seller is a party or which otherwise would be binding on
Purchaser or the Property (as hereinafter defined), and all union or other
collective bargaining contracts (collectively, the "Contracts") in effect with
respect to the Property (as hereinafter defined) as of the Closing Date and not
terminated by Seller under Section 8.8 and (ii) guarantees, licenses, approvals,
certificates, permits and warranties relating to the Property (collectively, the
"Permits and Licenses"), all to the extent assignable (the Contracts and the
Permits and Licenses are sometimes hereinafter collectively referred to as the
"Intangible Property").
(The Real Property, the Leases, the Security Deposits, the Personal
Property, the Intangible Property and the foregoing other property interests
held by Seller in connection with the ownership, management, maintenance or
operation of the Real Property are sometimes collectively hereinafter referred
to as the "Property").
228463.07-New YorkS4A
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<PAGE> 11
CONFIDENTIAL
1.2. Excluded Property. Notwithstanding the provisions of Section 1.1,
Seller shall not sell, assign, transfer or deliver to Purchaser and Purchaser
shall not purchase, acquire or accept from Seller:
1.2.1. Except as provided in Section 1.4, all trademarks and tradenames, if
any, of Seller or any of Seller's affiliated companies used or useful in
connection with the Real Property (including, without limitation, the name
"Woolworth" and all moveable artwork and memorabilia relating to Frank Woolworth
and/or F.W. Wool worth Co.).
1.2.2. All fixtures, equipment and personal property of Seller and its
affiliates used solely in connection with the ownership and operation of its or
their busi nesses (other than the business of owning, managing, maintaining or
operating the Prop erty) and/or the premises currently occupied by Venator
Group, Inc. or any of its affiliates or to be demised under the Venator Lease
(as hereinafter defined) (collectively, the "Venator Premises") and located in
the Venator Premises as of the date hereof, and all inventory used in connection
with the ownership and operation of its or their businesses (other than the
business of owning, managing, maintaining or operating the Property) and/or the
Venator Premises and located at the Venator Premises on the Closing Date.
1.2.3. Any other assets of Seller described on Schedule 1 attached hereto
(all of the foregoing being collectively referred to herein as the "Excluded
Assets").
1.2.4. Notwithstanding the foregoing, any Excluded Assets remaining in a
portion of the Property not leased to Seller or any of its affiliates as of the
Closing Date shall be deemed abandoned and shall be Purchaser's property from
and after the Closing Date.
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1.3. Like Kind Exchange.
1.3.1. Purchaser acknowledges that Seller intends to exchange the Real
Property for other property to be held by Seller for productive use in trade or
business, or for investment, in an exchange (the "Exchange") which will qualify
for non-recognition of gain under Section 1031 of the Internal Revenue Code of
1986, as amended (the "Code"), and the Treasury Regulations promulgated
thereunder (the "Treasury Regula tions"). Purchaser further acknowledges that,
in connection with such Exchange, Seller may at any time assign all of its
rights, title and interest in, to and under this Agreement to a "qualified
intermediary" (as such term is defined in Treasury Regulation 1.1031(k)-1(g)(4))
(the "Qualified Intermediary") and that in the event of such assignment the
Purchaser shall pay the Purchase Price to the Qualified Intermediary. Seller
shall remain liable to Purchaser for its obligation hereunder notwithstanding
any such assignment.
1.3.2. Purchaser hereby covenants and agrees that it shall cooperate fully
with Seller and the Qualified Intermediary in connection with any Exchange,
including, without limitation, by taking such actions and executing such
documents as may reasonably be required in connection with an Exchange, provided
that Purchaser shall not be required to incur any additional expenses (other
than nominal expenses) or additional liabilities, unless Seller agrees to
reimburse or indemnify Purchaser with respect to the same.
1.4. License Agreement. On the Closing Date, Seller shall license (or cause
to be licensed by the party authorized to do so) to Purchaser the limited,
non-exclusive right to use the name "Woolworth" solely in connection with the
ownership of the Improvements upon the Broadway Parcel and otherwise in
accordance with the conditions set forth in the license agreement ("License
Agreement") attached hereto as Exhibit B.
ARTICLE II.
Purchase Price
2.1. Purchase Price. The purchase price for the Property shall be One
Hundred Forty Six Million Five Hundred Thousand Dollars ($146,500,000) (the
"Purchase Price"). No portion of the Purchase Price is attributable to the
Personal Property or the
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Leases. The Purchase Price, net of all prorations as provided for herein, shall
be paid by Purchaser as follows:
(i) Ten Million Dollars ($10,000,000) (together with all interest, if
any, earned thereon, the "Initial Deposit") shall be paid to
Skadden, Arps, Slate, Meagher & Flom LLP (the "Escrow Agent") by
wire transfer of immediately available federal funds
simultaneously with the execution and delivery of this Agreement
by Purchaser;
(ii) Five Million Dollars ($5,000,000) (together with all interest, if
any, earned thereon, the "Additional Deposit"; the Initial
Deposit and the Additional Deposit are, together, the "Deposit" )
shall be paid to the Escrow Agent by wire transfer of immediately
available federal funds on or before 3:00 p.m. on November 2,
1998 (the "Additional Deposit Payment Date") (time being of the
essence with respect thereto). In the event that Pur chaser shall
fail for any reason to so pay the Additional Deposit, then Seller
shall have the immediate right to terminate this Agreement and to
collect and retain the Deposit. Payment of the Additional Deposit
is being guaranteed by Steven C. Witkoff (the "Guarantor") in
accordance with the provisions of Article XVII hereof. The
Deposit shall be held in escrow and shall be payable in
accordance with Article III hereof; and
(iii)The balance of the Purchase Price (the "Balance of the Purchase
Price") shall be paid on the Closing Date by wire transfer of
immediately available federal funds to or as directed by Seller.
ARTICLE III.
Deposit
3.1. Deposit. Concurrently with the execution of this Agreement, and as a
condition precedent to the formation of this Agreement, Purchaser shall deposit
with the Escrow Agent the Initial Deposit, the receipt of which is hereby
acknowledged by Escrow Agent's execution hereof. The Initial Deposit (and, when
received, the Additional Deposit) shall be held in escrow, and not in trust, by
the Escrow Agent in an interest bearing account at Citibank, N.A, provided that
Purchaser provides Escrow Agent with Pur chaser's taxpayer identification
number. The Escrow Agent shall pay the Deposit to Seller at the Closing or
otherwise in accordance with this Agreement. All interest on the Deposit shall
belong to the party entitled to the Deposit hereunder, unless the Closing
occurs, in which case such interest shall belong 50% to Seller and 50% to
Purchaser.
3.2. Application of Deposit.
3.2.1. If the Closing occurs as contemplated hereunder, then the Deposit
shall be paid to Seller (or, in the case of an Exchange, to the Qualified
Intermediary).
3.2.2. In the event that the Closing does not occur as contemplated
hereunder because of a default by Purchaser under this Agreement, the Deposit
shall be paid to and retained by Seller.
3.2.3. In the event that the Closing does not occur as contemplated
hereunder because of a default by Seller under this Agreement, the Deposit shall
be paid to and retained by Purchaser.
3.2.4. If either party makes a demand upon the Escrow Agent for delivery of
the Deposit, the Escrow Agent shall give notice to the other party of such
demand. If a notice of objection to the proposed payment is not received from
the other party within seven (7) days after the giving of notice by the Escrow
Agent, the Escrow Agent is hereby authorized to deliver the Deposit to the party
who made the demand. If the Escrow Agent receives a notice of objection within
said seven (7) day period, or if for any other reason the Escrow Agent in good
faith elects not to deliver the Deposit, then the Escrow Agent shall continue to
hold the Deposit and thereafter pay it to the party entitled thereto when the
Escrow Agent receives (i) a notice from the objecting party withdrawing the
objection, (ii) a notice signed by both parties directing disposition of the
Deposit or (iii) a final judgment or order of a court of competent jurisdiction.
3.3. Escrow Agent. The parties further agree that:
3.3.1. Escrow Agent shall accept the Deposit with the understanding of the
parties that Escrow Agent is not a party to this Agreement except to the extent
of its specific responsibilities hereunder, and does not assume or have any
liability for the performance or non-performance of Purchaser or Seller
hereunder to either of them;
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3.3.2. The Escrow Agent shall be protected in relying upon the accuracy,
acting in reliance upon the contents, and assuming the genuineness of any
notice, demand, certificate, signature, instrument or other document which is
given to the Escrow Agent without verifying the truth or accuracy of any such
notice, demand, certificate, signature, instrument or other document;
3.3.3. The Escrow Agent shall not be bound in any way by any other
agreement or understanding between the parties hereto, whether or not the Escrow
Agent has knowledge thereof or consents thereto unless such consent is given in
writing;
3.3.4. The Escrow Agent's sole duties and responsibilities shall be to hold
and disburse the Deposit in accordance with this Agreement;
3.3.5. The Escrow Agent shall not be liable for any action taken or omitted
by the Escrow Agent in good faith and believed by the Escrow Agent to be au
thorized or within its rights or powers conferred upon it by this Agreement,
except for damage caused by the gross negligence, bad faith or wilful misconduct
of the Escrow Agent;
3.3.6. Upon the disbursement of the Deposit in accordance with this
Agreement, the Escrow Agent shall be relieved and released from any liability
under this Agreement;
3.3.7. The Escrow Agent may resign at any time upon at least ten (10) days
prior written notice to the parties hereto. If, prior to the effective date of
such resignation, the parties hereto shall all have approved, in writing, a
successor escrow agent, then upon the resignation of the Escrow Agent, the
Escrow Agent shall deliver the Deposit to such successor escrow agent. The
parties hereby acknowledge that Chicago Title Insurance Company (or any
subsidiary thereof that is a Qualified Intermediary) is an acceptable successor
escrow agent. Purchaser agrees to approve as a successor escrow agent any other
Qualified Intermediary proposed by Seller that is reasonably acceptable to
Purchaser. From and after such resignation and the delivery of the Deposit to
such successor escrow agent, the Escrow Agent shall be fully relieved of all of
its duties, responsibilities and obligations under this Agreement, all of which
duties, responsibilities and obligations shall be performed by the appointed
successor escrow agent. If for any reason the parties hereto shall not approve a
successor escrow agent within such period, the Escrow Agent may bring any
appropriate action or proceeding for leave to deposit the
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Deposit with a court of competent jurisdiction, pending the approval of a
successor es crow agent, and upon such deposit the Escrow Agent shall be fully
relieved of all of its duties, responsibilities and obligations under this
Agreement;
3.3.8. Seller and Purchaser hereby agree to, jointly and severally,
indemnify, defend and hold the Escrow Agent harmless from and against any
liabilities, damages, losses, costs or expenses incurred by, or claims or
charges made against, the Escrow Agent (including attorneys' fees, expenses and
court costs) by reason of the Escrow Agent's acting or failing to act in
connection with any of the matters contemplated by this Agreement or in carrying
out the terms of this Agreement, except as a result of the Escrow Agent's gross
negligence, bad faith or willful misconduct;
3.3.9. In the event that a dispute shall arise in connection with this
Agreement, or as to the rights of any of the parties in and to, or the
disposition of, the Deposit, the Escrow Agent shall have the right to (w) hold
and retain all or any part of the Deposit until such dispute is settled or
finally determined by litigation, arbitration or otherwise, or (x) deposit the
Deposit in an appropriate court of law, following which the Escrow Agent shall
thereby and thereafter be relieved and released from any liability or obligation
under this Agreement, or (y) institute an action in interpleader or other
similar action permitted by stakeholders in the State of New York, or (z)
interplead any of the parties in any action or proceeding which may be brought
to determine the rights of the parties to all or any part of the Deposit;
3.3.10. The Escrow Agent shall not have any liability or obligation for
loss of all or any portion of the Deposit by reason of the insolvency or failure
of the institution of depository with whom the escrow account is maintained; and
3.3.11. The parties hereto represent that prior to the negotiation and
execution of this Agreement they were advised that the Escrow Agent was
representing Seller as such party's attorney in connection with this Agreement
and the transaction referred to herein and the parties hereto covenant that they
shall not object, on the grounds of conflict of interest or otherwise, to the
Escrow Agent continuing to act as the attorney for Seller in connection with
this Agreement and the transaction contemplated herein, or to act as Seller's
attorney in connection with any dispute in connection herewith or any other
matter, as well as act as the Escrow Agent hereunder; provided, however, that
the Escrow Agent deposits the Deposit with a court of competent jurisdiction or
transfers the Deposit and all accrued interest thereon to a mutually agreeable
substitute escrow agent.
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ARTICLE IV.
Closing, Prorations and Closing Costs
4.1. Closing.
4.1.1. The closing of the purchase and sale of the Property (the "Clos
ing") shall be held at the offices of Skadden, Arps, Slate, Meagher & Flom LLP,
919 Third Avenue, New York, New York or at the offices of Purchaser's lender's
counsel, if requested by Purchaser's lender, at 10:00 a.m. local time on
December 31, 1998. The date of Closing is referred to in this Agreement as the
"Closing Date". In addition to any other adjournment rights afforded to the
Seller hereunder, Seller shall have the right, exercisable by giving not less
than ten (10) days prior written notice to Purchaser on any number of occasions
prior to the then scheduled Closing Date, to adjourn the Closing to any business
day designated by Seller in the period December 31, 1998 through January 28,
1999, both dates inclusive (time being of the essence with respect to any date
between January 15, 1998 and January 28, 1998, both dates inclusive, which is
designated by Seller upon not less than thirty (30) days prior written notice to
Purchaser).
4.1.2. Notwithstanding the provisions of Section 4.1.1, Seller shall have
the right, on thirty (30) days prior written notice to the Purchaser, to
accelerate the Closing Date to any business day occurring on or after September
14, 1998, and, in such event, Purchaser shall have the right to adjourn such
accelerated Closing Date one or more times for up to an aggregate of thirty (30)
days (time being of the essence with respect to such thirtieth (30th) day).
4.2. Prorations. All matters involving prorations or adjustments to be made
in connection with Closing and not specifically provided for in another Section
of this Agreement shall be adjusted in accordance with this Section 4.2. Except
as otherwise set forth herein, all items to be prorated pursuant to this Section
4.2 shall be prorated as of 12:01 A.M. on the Closing Date, with Purchaser to be
treated as the owner of the Property, for purposes of prorations of income and
expenses, on and after the Closing Date. Notwithstanding the foregoing, in the
event that the Purchase Price is not disbursed to or as directed by Seller (or,
in the case of an Exchange, to or as directed by the Qualified Intermediary) on
or before 3:00 p.m. (eastern time) on the Closing Date, then the Closing shall
be deemed to have occurred on the next business day and all adjustments
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shall be recomputed accordingly. Except as otherwise set forth herein, all
prorations shall be done in accordance with the customs with respect to title
closings recommended by The Real Estate Board of New York, Inc.
The following items shall be prorated:
4.2.1. Real Estate and Property Taxes. Real estate and personal property
taxes, business improvement district assessments and charges, vault charges and
special assessments, if any. Seller shall pay all real estate and personal
property taxes, business improvement district assessments and charges, vault
charges and special assess ments attributable to the Property through, but not
including, the Closing Date. If the tax rate, assessment and/or assessed value
for any of the foregoing items has not been set for the tax period in which the
Closing occurs, then the proration of such items shall be based upon the rate,
assessment and/or assessed value for the immediately preceding tax period and
such proration shall be adjusted in cash between Seller and Purchaser upon
presen tation of written evidence that the actual amount paid for the tax period
in which the Closing occurs differs from the amounts used in the Closing in
accordance with the provi sions of Section 4.2.13 hereof. Any discount received
for an early payment shall be prorated between Seller and Purchaser.
4.2.2. Insurance Premiums. There shall be no proration of Seller's
insurance premiums or assignment of Seller's insurance policies with respect to
the Property and Seller shall cancel all of its existing policies with respect
to the Property as of the Closing Date, except as provided in Article XI.
4.2.3. Utilities and Services. Purchaser and Seller hereby acknowl edge and
agree that the amounts of all telephone, electric, sewer, water, gas, steam and
other utility bills, trash removal bills, janitorial and maintenance service
bills and all other operating and administrative expenses relating to the
Property and allocable to the period prior to the Closing Date (other than such
items which are the obligation of a Tenant under its Lease) shall be determined
and paid by Seller before Closing, if possible, or shall be paid thereafter by
Seller or adjusted between Purchaser and Seller immediately after the same have
been determined. Seller shall have all base building meters read not more than
fifteen (15) days prior to the Closing Date. Purchaser shall cause all utility
services Purchaser desires to be placed in Purchaser's name as of the Closing
Date. All deposits, if any, furnished by Seller to any utility company or other
service provider shall continue to be owned by Seller.
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4.2.4. Base Rents. Base or fixed rents due under Leases shall be adjusted
on an if, as and when collected basis. If, on the Closing Date, any tenant under
a Lease (a "Tenant") (other than Venator Group, Inc. and its affiliates, which
for all purposes under this Agreement shall be deemed to be current in their
obligations under all of their Leases through the end of the month in which the
Closing Date occurs) is in arrears in the payment of such rent, then any amounts
received by Seller or Purchaser from any such Tenant after the Closing on
account of such rent (net of reasonable costs of collec tion, including
reasonable attorneys fees and disbursements) shall be applied in the following
order of priority: (i) first apportioned between Purchaser and Seller for the
month in which the Closing occurred, (ii) then to Purchaser for any amounts then
due to Pur chaser for any month or months following the month in which the
Closing occurred, and (iii) then to Seller for the period prior to the month
preceding the month in which the Closing occurred. If rents or any portion
thereof received by Seller or Purchaser after the Closing are payable to the
other party by reason of this allocation, the appropriate sum, less a
proportionate share of any reasonable attorneys' fees and costs and expenses of
collection thereof, shall be promptly paid to the other party. Seller shall have
the right, after Closing, to proceed against Tenants for delinquent rents
allocable solely to the period of Seller's ownership of the Property. Purchaser
agrees that it shall use commercially reasonable efforts to collect any such
delinquent rents allocable to the period of Seller's ownership of the Property,
but Purchaser shall not be obligated to commence any actions to dispossess any
of the Tenants (except that Purchaser shall continue any dispossession actions
against any Tenant currently in monetary default under its Lease (as set forth
on Schedule 2) if same was initiated by Seller prior to Closing for so long as
Seller continues to pay for the costs and expenses relating to such action). For
a one (1) year period subsequent to the Closing, Seller shall have the right,
from time to time, on prior written notice to Purchaser, to review Purchaser's
books and records with respect to the Property during ordinary business hours,
to ascertain the status of Purchaser's billing and collection of base and fixed
rents. No action which results in the compromising of any claim against any
Tenant with respect to base or fixed rents due under such Tenant's Lease for the
period prior to the Closing shall be made without Seller's prior written
approval, but Purchaser shall not be obligated to continue any actions against
any Tenant after Seller has rejected any good faith compromise reached by
Purchaser with any such Tenant which does not unfairly discriminate against
Seller's claims against such Tenant.
4.2.5. Additional Rents. If any Tenants are required to pay percentage
rents, escalation charges for increases in real estate taxes or operating
expenses, porter's wage increases, cost-of-living increases, charges for
electricity, water, cleaning or overtime
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services, "sundry charges" or other charges of a similar nature ("Additional
Rents"), the same shall be adjusted on an if, as and when collected basis. If
any Additional Rents are collected by Purchaser after the Closing Date which are
attributable in whole or in part to any period prior to the Closing, then
Purchaser shall promptly pay to Seller its proportion ate share thereof, less a
proportionate share of any reasonable attorneys' fees and costs and expenses of
collection thereof. With respect to any estimated Additional Rents paid or
payable by Tenants for any period prior to the Closing which, pursuant to the
applicable Lease, are to be recalculated after the Closing based upon actual
expenses and other relevant factors, (i) Seller agrees, with respect to such
adjustments which are in favor of any such Tenant, to reimburse Purchaser,
within fifteen (15) days after written demand and presentation to Seller of
documentation in support of such adjustments, for the amount of such adjustments
which Purchaser has paid or credited to such Tenant and (ii) Purchaser agrees,
with respect to such adjustments which are in favor of landlord, to pay to
Seller the amount of such adjustments which the Tenant pays to Purchaser, within
ten (10) days after receipt thereof by Purchaser. Purchaser shall indemnify,
defend and hold Seller harmless from and against any and all losses, damages,
costs and expenses (including reasonable attorneys fees and disbursements)
incurred by Seller as a result of any claims brought by any Tenant against
Seller with respect to adjustments for which Seller has made full payment to
Purchaser under clause (i) of the preceding sentence. Seller shall have the
right, after Closing, to proceed against Tenants for delinquent Additional Rent
allocable solely to the period of Seller's ownership of the Property. Purchaser
agrees that it shall use commercially reasonable efforts to collect any such
delinquent Additional Rents allocable to the period of Seller's ownership of the
Property but Purchaser shall not be obligated to commence any actions to
dispossess any of the Tenants (except that Purchaser shall continue any
dispossess actions against any Tenant currently in monetary default under its
Lease (as set forth on Schedule 2) if same was initiated by Seller prior to the
Closing for so long as Seller continues to pay for the costs and expenses
relating to such action. For a one (1) year period subsequent to the Closing,
Seller shall have the right, from time to time, on prior written notice to
Purchaser, to review Purchaser's books and records with respect to the Property
during ordinary business hours, to ascertain the status of Purchaser's billing
and collection of Additional Rents. No action which results in the compromising
of any claim against any Tenant with respect to Additional Rent due under such
Tenant's Lease for the period prior to the Closing shall be made without
Seller's prior written approval, but Purchaser shall not be obligated to
continue any actions against any Tenant after Seller has rejected any good faith
compromise reached by Purchaser with any such Tenant. The calculation of the
proration of Additional Rents hereunder shall be computed on a straight- line
basis for the calendar year in which the Closing occurs (except for Additional
Rents arising from submetered electric charges, which shall be computed based on
actual usage).
4.2.6. Tenant Security Deposits. Security Deposits held by Seller (to the
extent, subject to the provision of this Section 4.2.6, not applied by Seller
pursuant to any Lease) shall be turned over by Seller to Purchaser at the
Closing by crediting such amount (less the amount of any interest or
administrative charges for the period prior to the Closing which the landlord
under such Lease would be entitled to retain) to Purchaser. No allocation shall
be made of Security Deposits applied by Seller pursuant to any Lease, and Seller
may retain such amounts; provided, however, that Seller shall not apply any
Security Deposits during the thirty (30) days prior to the Closing or to cure
any non-monetary Tenant defaults. Security Deposits (net the reasonable costs,
if any, of realizing upon the same, including reasonable attorneys fees and
disbursements) applied after the Closing Date shall be applied in the following
order of priority: (i) first apportioned between Purchaser and Seller on account
of amounts due under the applicable Lease for the month in which the Closing
occurred, (ii) then to Purchaser for any amounts then due to Pur chaser on
account of amounts due under the applicable Lease for any month or months
following the month in which the Closing occurred, and (iii) then to Seller on
account of amounts due under the applicable Lease for the period prior to the
month preceding the month in which the Closing occurred. At Closing, Purchaser
shall deliver to Seller a receipt for any Security Deposits turned over by
Seller to Purchaser and Purchaser shall indemnify Seller with respect thereto
pursuant to, and in accordance with, the Assignment and Assumption of Leases (as
hereinafter defined).
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4.2.7. Brokerage Commissions/Tenant Improvements
(i) Except as set forth below, Seller shall be responsible for all leasing
and brokerage commissions, tenant improvement costs and expenses and tenant
"buy-out" or lease surrender costs with respect to the Leases executed prior to
the date hereof (the "Leasing Cut-off Date");
(ii) With respect to the Leases executed prior to the Leasing Cut-off Date,
and only to the extent that such costs are attributable to the exercise, after
the Leasing Cut-off Date, of a lease renewal or expansion option which is
contained in the applicable Lease on the date hereof, (a) Purchaser shall be
responsible for all tenant improvement costs and expenses and tenant "buy-out"
or lease surrender costs, (b) Purchaser shall be responsible for the first
$400,000, and any amounts exceeding
$650,000, with respect to any leasing and brokerage commissions, and (c) Seller
shall be responsible for any amounts exceeding $400,000, to a maximum of
$250,000, with respect to any leasing and brokerage commissions. Any such
brokerage commissions or tenant improvement costs and expenses payable by Seller
or Purchaser pursuant to this Section 4.2.7 shall be payable by Seller or
Purchaser only when such commissions, costs and expenses become due and payable
pursuant to the terms of the respective brokerage agreements or Leases.
(iii) Purchaser shall be responsible for all leasing and brokerage commis
sions, tenant improvement costs and expenses and tenant "buy-out" or lease
surrender costs with respect to all Leases executed on or after the Leasing
Cut-off Date in accor dance with Section 8.5.
4.2.8. Employees. Salaries, wages, vacation pay, bonuses and any other
fringe benefits (including, without limitation, social security, unemployment
compensation, employee disability insurance, sick pay, welfare and pension fund
contributions, payments and deposits, if any) of all Employees (as hereinafter
defined) shall be the sole obligation of Seller, except as set forth in Article
XV hereof.
4.2.9. Fuel. The value of fuel stored on the Property by Seller, if any, at
Seller's most recent cost, including any taxes, on the basis of a reading made
within ten (10) days prior to the Closing by Seller's supplier, shall be paid
for by Purchaser.
4.2.10. Contracts. Charges and payments under transferable Contracts or
permitted renewals or replacements thereof, but only to the extent such
Contracts are assignable and are actually assigned to Purchaser at Closing.
4.2.11. Permit Fees. Fees and other amounts payable under the Licenses and
Permits, but only to the extent same are assignable and are actually assigned to
Purchaser at Closing pursuant to this Agreement.
4.2.12. Inventory. The value of all inventory and supplies in unopened
containers usable in connection with the management, maintenance or operation of
the Improvements and located on the Real Property on the date of Closing, if
any, at Seller's most recent cost, including any taxes, shall be paid for by
Purchaser.
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4.2.13. Method of Calculation. For purposes of calculating prorations,
Purchaser shall be deemed to be the owner of the Property, and therefore
entitled to the income therefrom and responsible for the expenses thereof for
the entire day upon which the Closing occurs. All such prorations shall be made
on the basis of the actual number of days of the month which shall have elapsed
as of the day of the Closing and based upon the actual number of days in the
month and a three hundred sixty five (365) day year. The amount of such
prorations shall be initially performed at Closing but shall be subject to
adjustment in cash after the Closing as and when complete and accurate
information becomes available, if such information is not available at the
Closing. Seller and Purchaser agree to cooperate and use their best efforts to
make such adjustments within sixty (60) days after the Closing. Except as set
forth in this Section 4.2, all items of income and expense which accrue for the
period prior to the Closing will be for the account of Seller and all items of
income and expense which accrue for the period on and after the Closing will be
for the account of Purchaser.
4.2.14. Survival. The provisions of this Section 4.2 shall survive the
Closing.
4.3. Transfer Taxes. Seller shall pay (or shall credit Purchaser for) all
transfer taxes imposed upon the conveyance of the Real Property hereunder
pursuant to Section 1402 of the New York State Tax Law and Title 11 of Chapter
21 of the Administrative Code of the City of New York (the "Transfer Taxes").
Purchaser shall file all neces sary tax returns with respect to all such
Transfer Taxes and, to the extent required by applicable law, Seller will join
in the execution of any such Tax Returns.
4.4. Closing Costs. Purchaser shall pay all recording fees and charges
associ ated with the recordation of the Deed, other than the Transfer Taxes,
which are payable by Seller under Section 4.3. Seller shall pay all fees and
commissions due to the Broker in accordance with Section 13.1. Purchaser shall
pay all title insurance premiums, title examination fees and survey costs
incurred by Purchaser. All other costs, fees, expenses and charges of any kind
incident to the sale and conveyance of the Property from Seller to Purchaser,
including attorneys' fees and consultants' fees, shall be borne by the party
incurring the same.
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ARTICLE V.
Title and Survey Matters
5.1. Title.
5.1.1. Updated Commitment and Survey. Purchaser shall, at its sole cost and
expense, within five (5) business days from the date hereof, order a title
insurance commitment for an owner's policy of title insurance for the Real
Property (the "Pur chaser's Title Commitment") from TitleServe Agency of New
York City, Inc. (the "Title Company") and such other title insurance companies
as co-insurer or re-insurer as Purchaser may elect, setting forth the status of
title to the Real Property and any defects in or objections or exceptions to
title to the Real Property, together with true and correct copies of all
instruments giving rise to such defects, objections or exceptions. Purchaser
shall cause the Title Company to forward a copy of the Purchaser's Title
Commitment and any updates thereof to Seller's attorney simultaneously with the
issuance thereof to Purchaser. Seller has delivered to Purchaser copies of three
surveys of the parcels comprising the Real Property initially prepared by J.
George Hollerith (collectively, the "Survey"), dated July 13, 1906, March 24,
1911 and June 19, 1920, respectively, all most recently updated as of June 12,
1998, by Manhattan Surveying, P.C.
5.1.2. Title Objections. If the Purchaser's Title Commitment, any updates
to the Survey or any further update of either shall reveal or disclose any
defects, objections or exceptions in the title to the Real Property which
Purchaser is not required to accept or have been deemed to have accepted under
the terms of this Agreement ("Title Objections"), then, within 20 business days
after Purchaser's receipt of the Purchaser's Title Commitment, updated Survey or
any further update of either first revealing any such Title Objection, but in no
event later than fifteen (15) days prior to the Closing Date (unless such Title
Objection is first disclosed by an update to the Purchaser's Title Commitment or
Survey first delivered to Purchaser within such fifteen (15) day period, in
which case Purchaser shall notify Seller of such Title Objection as soon as
reasonably practicable), Purchaser shall notify Seller of such Title Objections
in writing. If Purchaser does not timely notify Seller in writing of any such
Title Objections, then Purchaser shall be deemed to have accepted the state of
title to the Real Property reflected in the Purchaser's Title Commitment, the
updated Survey or any further updates of either received by Purchaser and to
have waived any claims or defects which it might otherwise have raised with
respect
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to the matters reflected therein and the same shall be and shall be deemed to be
Permitted Exceptions for all purposes of this Agreement.
5.1.3. Elimination of Liens. If any Title Objections appear in the
Purchaser's Title Commitment, the Survey or any updates thereof, then Seller
may, at its election, undertake to eliminate such Title Objections, it being
agreed that Seller shall have no obligation to incur any expense in connection
with curing such Title Objections, except that Seller shall cure and eliminate
all Title Objections which were caused by, resulted from or arose out of (1)
judgments against Seller, (2) a grant by Seller of a mortgage or other security
interest, (3) items which can be satisfied by payment of a liquidated amount or
(4) Seller's affirmative acts after the date hereof; provided, however, that
Seller's obligation to cure such judgments as described in clause 1 or 3 of this
sentence shall be limited to judgments in an amount not to exceed $10,000,000.
Seller, in its discretion, may adjourn the Closing for up to sixty (60) days in
the aggregate in order to eliminate such Title Objections. In lieu of
eliminating any Title Objections which Seller may elect, or be required,
pursuant to the express terms hereof, to eliminate under this Agreement, Seller
may deposit with the Title Company such amount of money as may be determined by
the Title Company as being sufficient to induce the Title Company, without the
payment of any additional premium by Purchaser, to omit such Title Objections
from Purchaser's title insurance policy. If Seller is unable to so eliminate or
omit all such Title Objections in accordance with the terms of this Agreement on
or before such adjourned date for the Closing, then Purchaser shall elect either
to (i) terminate this Agreement by notice given to Seller, in which event the
provisions of Section 5.2 shall apply, or (ii) accept title to the Property
subject to such Title Objections and receive no credit against or reduction of
the Purchase Price, except that Purchaser shall be entitled to a credit against
the Purchase Price in an amount equal to $10,000,000.
5.1.4. Payment from Balance of Purchase Price. Any unpaid taxes, water
charges, sewer rents and assessments, together with the interest and penalties
thereon to a date not more than five (5) business days following the Closing
Date (in each case subject to any applicable apportionment), and any mortgages
or other liens created by Seller which can be satisfied by payment of a
liquidated amount and judgments against Seller, which Seller is obligated to pay
and discharge pursuant to the terms of this Agree ment, together with the cost
of recording or filing any instruments necessary to discharge such liens and
such judgments, may be paid out of the Balance of the Purchase Price pay able at
the Closing. Seller hereby agrees to deliver to Purchaser, on the Closing Date,
instruments in recordable form sufficient to discharge any such mortgages or
other liens
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which can be satisfied by payment of a liquidated amount and judgments, which
Seller is obligated to pay and discharge pursuant to the terms of this
Agreement. Upon request of Seller, delivered to Purchaser no later than two (2)
business days prior to the Closing, Purchaser shall provide at the Closing
separate certified checks, or bank checks for the foregoing payable to the order
of the holder of any such lien, charge, or judgment, or a wire transfer of
federal funds as Seller shall direct, in an aggregate amount not to exceed the
Balance of the Purchase Price, as adjusted for apportionments required under
this Agreement, payable at the Closing.
5.1.5. Affidavits. If the Purchaser's Title Commitment discloses judgments,
bankruptcies or other returns against other persons having names the same as or
similar to that of Seller, Seller, on request, shall deliver to the Title
Company affidavits showing that such judgments, bankruptcies or other returns
are not against Seller, or any affiliates. Upon request by Purchaser, Seller
shall deliver any such affidavits and documen tary evidence as are reasonably
required by the Title Company in order to issue its owner's policy of title
insurance to Purchaser free and clear of matters other than the Permitted
Exceptions.
5.1.6. Permitted Exceptions. Seller shall convey and Purchaser shall accept
fee simple title to the Real Property subject only to those matters set forth on
Exhibit C attached hereto (collectively, the "Permitted Exceptions") and such
other matters as may be deemed Permitted Exceptions under Section 5.1.2.
5.2. Seller's Inability to Convey Title. If Seller is unable to convey
title in accordance with the terms of this Agreement and, pursuant to Section
5.1.3, Purchaser elects to terminate this Agreement, the Deposit shall be
returned to Purchaser, and this Agreement shall terminate and neither party to
this Agreement shall have any further rights or obligations hereunder other than
the Surviving Termination Obligations.
5.3. Violations. Purchaser agrees to purchase the Property subject to any
and all notes or notices of violations of law, or municipal ordinances, orders,
designations or requirements whatsoever noted in or issued by any federal,
state, municipal or other governmental department, agency or bureau or any other
governmental authority having jurisdiction over the Property (collectively,
"Violations"), or any lien imposed in connec tion with any of the foregoing, or
any condition or state of repair or disrepair or other matter or thing, whether
or not noted, which, if noted, would result in a violation being placed on the
Property provided the same do not arise from a default by Seller in the
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performance or observance of its obligations under Section 8.1. Seller shall
have no duty to remove or comply with or repair any condition, matter or thing,
whether or not noted, which, if noted, would result in a violation being placed
on the Property provided the same do not arise from a default by Seller in the
performance or observance of its obligations under Section 8.1. Provided the
same do not arise from a default by Seller in the perfor mance or observance of
its obligations under Section 8.1, Seller shall have no duty to remove or comply
with or repair any of the aforementioned Violations, liens or other conditions,
and Purchaser shall accept the Property subject to all such Violations and
liens, the existence of any conditions at the Property which would give rise to
such Violations or liens, if any, and any governmental claims arising from the
existence of such Violations and liens, in each case without any abatement of or
credit against the Purchase Price. Notwith standing the foregoing, but subject
to Section 5.1.3, to the extent that any Violations shall constitute a lien upon
the Property, Seller shall either satisfy or discharge the same or cause the
Title Company to omit the same from Purchaser's title insurance policy.
Notwithstand ing anything to the contrary, if the cost to cure the Violations on
the Closing Date shall exceed $10,000,000, then Purchaser shall have the right
to terminate this Agreement by giving notice thereof to Seller on or prior to
the Closing Date and, unless Seller agrees (by notice to Purchaser given within
ten (10) days of Purchaser's termination notice) to pay to Purchaser the amount
in excess of $10,000,000 necessary to cure such Violations, the Deposit shall be
returned to Purchaser, this Agreement shall terminate and neither party to this
Agreement shall have any further rights or obligations other than the surviving
Termina tion Obligations.
ARTICLE VI.
Representations and Warranties of Seller
6.1. Seller's Representations. Seller represents and warrants that the
following matters are true and correct as of the date hereof with respect to the
Property:
6.1.1. Authority. Seller is a corporation duly organized and validly exist
ing under the laws of the State of New York. This Agreement has been duly
authorized, executed and delivered by Seller, is the legal, valid and binding
obligation of Seller, and does not violate any provision of any agreement or
judicial order to which Seller is a party or to which Seller is subject. All
documents to be executed by Seller which are to be delivered at Closing will, at
the time of Closing, be duly authorized, executed and delivered
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by Seller, be legal, valid and binding obligations of Seller, and will not
violate any provision of any agreement or judicial order to which Seller is a
party or to which Seller is subject.
6.1.2. Bankruptcy or Debt of Seller. Seller has not made a general as
signment for the benefit of creditors, filed any voluntary petition in
bankruptcy or suffered the filing of an involuntary petition by Seller's
creditors, suffered the appointment of a receiver to take possession of all, or
substantially all, of Seller's assets, suffered the attachment or other judicial
seizure of all, or substantially all, of Seller's assets, admitted in writing
its inability to pay its debts as they come due or made an offer of settlement,
extension or composition to it creditors generally.
6.1.3. Foreign Person. Seller is not a foreign person within the meaning of
Section 1445(f) of the Code, and Seller agrees to execute any and all documents
necessary or reasonably required by the Internal Revenue Service or Purchaser in
connection with such declaration.
6.1.4. Leases; Brokerage Commissions.
(i) Seller has delivered or made available to Purchaser true and correct
copies of the Leases. Exhibit D attached hereto contains a description of all
Leases and tenancies and all amendments or extensions thereto affecting the
Property as of the date of this Agreement and to which Seller is a party or
bound. Except as set forth on Exhibit D, there are no leases, licenses or other
occupancy agreements affecting the Property to which Seller is a party or bound.
Except with respect to the Venator Lease or any other Lease with any affiliate
of Seller, no representation is made as to (a) possible assignments of any of
the Leases not consented to by Seller or (b) any subleases or underlettings
under any of the Leases not consented to by Seller.
(ii) To Seller's knowledge, Seller has not received any written notice of a
default on the part of Seller under any of the Leases and to Seller's knowledge,
Seller is not in material default under any of the Leases. Except as set forth
on Schedule 2 attached hereto, Seller has not sent any notices of default (which
remain outstanding) to any Tenant and, to Seller's knowledge, no material
default by any Tenant exists, except as set forth on Schedule 2.
(iii) Except with respect to the Venator Lease or any other Lease with any
affiliate of Seller, Seller does not warrant that any particular Lease will be
in force or effect
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at the Closing or that the Tenants will have performed their obligations
thereunder. Except for the Venator Lease or any other Lease with any affiliate
of Seller, the termination of any Lease prior to the Closing shall not affect
the obligations of Purchaser under this Agree ment, or entitle Purchaser to an
abatement of or credit against the Purchase Price or give rise to any claim on
the part of Purchaser against Seller, unless such termination results from
Seller's breach of such Lease or the terms of this Agreement.
(iv) Commissions payable under any brokerage agreements shall be adjusted
and prorated as set forth in Section 4.2.7.
6.1.5. Contracts. Seller has delivered or made available to Purchaser true
and complete copies of the Contracts. To Seller's knowledge, there are no
contracts or agreements other than those listed on Schedule 4 to which the
Property is subject and which would remain in effect after the Closing Date.
6.1.6. Condemnation. Seller has not received any written notice of any
existing, pending or contemplated condemnation, eminent domain or similar
proceeding with respect to the Real Property, or any portion thereof.
6.1.7. Tax Appeal Proceedings. Except as set forth on Schedule 5 attached
hereto, Seller has not filed, and has not retained anyone to file, notices of
protest against, or to commence actions to review, real property tax assessments
against the Real Property.
6.1.8. Permits and Licenses. Seller has delivered or made available to
Purchaser true and complete copies of the Permits and Licenses (to the extent
the same are in Seller's possession). To Seller's knowledge, Seller has received
no written notice (other than written notices that have been subsequently
rescinded) and Seller has no knowledge that any of the Permits and Licenses are
not in full force and effect or that there is a violation of such Permits and
Licenses. Seller will pay all fees which are due in connection with the Permits
and Licenses for the period prior to the Closing. Purchaser acknowledges that
the Improvements located on the Broadway Parcel are not covered by a certificate
of occupancy.
6.1.9. Insurance Policies. Schedule 6 annexed hereto and made a part hereof
is a true, correct and complete schedule of all insurance policies maintained by
Seller with respect to the Property and the amount of coverage afforded by each
such
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policy. All premiums due (or in the event that such premiums are payable in
installments, all installments of such premium payments due) on such insurance
policies have been fully paid. To Seller's knowledge, Seller has not received
any written notice nor does Seller have any knowledge that it is in default
under any insurance policy and to the best of Seller's knowledge, Seller has not
received any written request for the performance of any work or alteration with
respect to the Property from any insurance company or Board of Fire
Underwriters.
6.1.10. Legal Action Against Seller. Except for matters which Seller
anticipates are fully covered by insurance and/or noted on Schedule 7, there are
no judgments, orders, or decrees of any kind against Seller unpaid or
unsatisfied of record or otherwise. There is no action, suit or other legal or
administrative agency action relating to the Property which would adversely
affect the Property for its present use or affect Seller's ability to perform
its obligations under this Agreement, nor does Seller have any knowl edge of any
threatened legal action, suit or other legal or administrative proceeding
relating to the Property.
6.1.11. Rent Roll. Attached hereto as Exhibit E is a rent roll for the
Property (the "Rent Roll") listing: all Tenants as of the date hereof, the base
rent and Additional Rent billed to Tenants during the months of June and July,
1998 and the Security Deposit held (which is the amount required to be held
pursuant to the applicable Leases) by Seller with respect to each Tenant as of
the date hereof. The information set forth in the Rent Roll is true and correct
in all material respects. With respect to any monetary amounts described in the
Rent Roll (other than Security Deposits), the term "true and correct in all
material respects" shall be construed to mean that, to the extent that the Rent
Roll overstates or understates the actual amounts of such items, the net annual
adverse economic effect on Purchaser of such overstatements or understatements
in the aggregate does not exceed an amount equal to $250,000 (the "Threshold
Economic Effect"). The representations and warranties and provisions of this
Section 6.1.11 (other than with respect to Security Deposits) shall expire upon
the close of business on June 24, 1998, and shall thereafter be of no further
force or effect, provided, however, that in the event that Seller receives a
notice from Purchaser prior to such date as a result of inaccu racies in the
representations contained in this Section which create a Threshold Economic
Effect, Seller shall pay to Purchaser monthly (from and after the Closing) one
twelfth (1/12) of the annual amount over the five (5) period following the
Closing Date by which the actual annual overstatement exceeds the Threshold
Economic Effect. The calculation of the annual payment due pursuant to the
preceding sentence shall be based upon the terms
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of the Leases with respect to which the overstatement relates on the Closing
Date. In addition, any increases in rent pursuant to the applicable Lease after
the date hereof shall be excluded in calculating overstatements. For example, if
a portion of the overstatement relates to a Lease which by its terms expires two
years from the Closing Date, the overstatement shall not include the economic
effect of such lease in calculating the annual payment due in the third, fourth
and fifth years from the Closing Date.
6.1.12. Employees. Attached hereto as Schedule 8 is a listing of all
employees employed by Seller at the Real Property on the date hereof whose
duties are restricted to the management, maintenance or operation of the
Improvements and the other Property the "Employees"), together with their
respective salaries, wages, vacation pay and other fringe benefits.
6.1.13. Transfer to Seller. The Property has been transferred to Seller by
the immediately prior owner of the Property prior to the date hereof.
6.2. Seller's Knowledge. For purposes of this Agreement and any document
delivered at Closing, whenever the phrases "to Seller's knowledge", "to the
current, actual knowledge of Seller" or the "knowledge" of Seller and/or Venator
Group, Inc. or words of similar import are used, they shall be deemed to refer
to the actual knowledge only of Seller, Venator Group, Inc., and/or any
affiliate or predecessor of Seller or Venator Group, Inc. and not any implied,
imputed or constructive knowledge, without any inde pendent investigation having
been made or any implied duty to investigate.
6.3. Change in Representation/Waiver. Notwithstanding anything to the
contrary contained herein, Purchaser acknowledges that Purchaser shall not be
entitled to bring any action after the Closing Date based on any representation
made by Seller in this Article VI to the extent that, prior to Closing,
Purchaser shall have or shall obtain actual knowledge (and not merely any
implied, imputed or constructive knowledge, without any independent
investigation having been made or any implied duty to investigate) of any
information that was contradictory to such representation or warranty. In
furtherance thereof, Purchaser and Seller expressly agree that Seller shall have
no liability with respect to any of the foregoing representations and warranties
to the extent that, prior to the Closing, Purchaser obtains actual knowledge
(and not merely any implied, imputed or constructive knowledge, without any
independent investigation having been made or any implied duty to investigate)
(from whatever source, including, without limitation, any property manager, any
materials furnished to Purchaser, the Estoppel Certificates,
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Purchaser's due diligence tests, investigations and inspections of the Property,
or written disclosure by Seller or Seller's agents and employees) that renders
any of the foregoing representations and warranties untrue or incorrect, and
Purchaser nevertheless consum mates the transaction contemplated by this
Agreement.
6.4. Survival. The express representations and warranties made in this
Agree ment by Seller shall not merge into any instrument of conveyance delivered
at the Closing and all of the representations and warranties made in this
Agreement by Seller (other than those set forth in Section 6.1.11, which shall
expire upon the close of business on June 24, 1998 and be of no further force or
effect thereafter except as provided therein) shall survive the Closing for a
period of six (6) months; provided, however, that any action, suit or proceeding
with respect to the truth, accuracy or completeness of such representations and
warranties shall be commenced, if at all, on or before the date which is seven
(7) months after the date of the Closing and, if not commenced on or before such
date, thereafter shall be void and of no force or effect. The terms and
provisions of this Section 6.4 shall survive the Closing.
6.5. Limitation of Liability. Notwithstanding anything to the contrary or
incon sistent in this Agreement or in any of the agreements, certificates or
affidavits delivered by Seller pursuant to this Agreement, except with respect
to the matters covered under Section 4.2.7 hereof (i) Seller shall have no
liability for any particular loss, claim, cost or expense suffered or incurred
by Purchaser as a result of the inaccuracy of any of the representations or
warranties of Seller hereunder and/or under any of the agreements, certificates
or affidavits of Seller set forth in or delivered pursuant to this Agreement if
the same shall have a monetary value (or be in a monetary amount claimed) of
less than Twenty-Five Thousand Dollars ($25,000) and (ii) the aggregate
liability of Seller arising pursuant to or in connection with the
representations and warranties of Seller and/or the agreements or certificates
or affidavits of Seller set forth in or delivered pursuant to this Agreement
shall not exceed Ten Million Dollars ($10,000,000). Purchaser expressly waives,
relinquishes and releases any right of rescission it may have against Seller
after the Closing as a result of Seller's breach of representation or warranty.
Notwithstanding anything to the contrary, Seller shall indemnify Purchaser and
Purchaser shall indemnify Seller for any and all leasing commissions that are
due with respect to any lease renewal or expansion and are not paid by the
indemnifying party in accordance with Section 4.2.7. The terms and provisions of
this Section 6.5 shall survive Closing and/or termination of this Agreement.
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6.6. "AS IS" Sale. Subject only to Seller's covenants, representations,
warranties and indemnifications in this Agreement, Purchaser shall purchase the
Property in its "AS IS" condition at the Closing Date, subject to all latent and
patent defects (whether physical, financial or legal, including title defects),
based solely on Purchaser's own inspec tion, analysis and evaluation of the
Property and not in reliance on any records or other information obtained from
Seller or on Seller's behalf. Purchaser acknowledges that it is not relying on
any statement or representation (other than representations, warranties,
covenants and indemnifications contained in this Agreement) that has been made
or that in the future may be made by Seller or any of Seller's employees,
agents, attorneys or repre sentatives concerning the condition of the Property
(whether relating to physical conditions, operation performance, title, or legal
matters).
ARTICLE VII.
Representations and Warranties of Purchaser
Purchaser represents and warrants to Seller that the following matters are
true and correct as of the date hereof.
7.1. Authority. Purchaser is a limited liability company duly organized and
validly existing under the laws of the State of New York. This Agreement has
been duly autho rized, executed and delivered by Purchaser, is the legal, valid
and binding obligation of Purchaser, and does not violate any provision of any
agreement or judicial order to which Purchaser is a party or to which Purchaser
is subject. All documents to be executed by Purchaser which are to be delivered
at Closing will, at the time of Closing, be duly authorized, executed and
delivered by Purchaser, be legal, valid and binding obligations of Purchaser,
and will not violate any provision of any agreement or judicial order to which
Purchaser is a party or to which Purchaser is subject.
7.2. Bankruptcy or Debt of Purchaser. Purchaser represents and warrants to
Seller that Purchaser has not made a general assignment for the benefit of
creditors, filed any voluntary petition in bankruptcy or suffered the filing of
an involuntary petition by Purchaser's creditors, suffered the appointment of a
receiver to take possession of all, or substantially all, of Purchaser's assets,
suffered the attachment or other judicial seizure of all, or substantially all,
of Purchaser's assets, admitted in writing its inability to pay its debts
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as they come due or made an offer of settlement, extension or composition to its
creditors generally.
7.3. No Financing Contingency. It is expressly acknowledged by Purchaser
that this transaction is not subject to any financing contingency and that no
financing for this transaction shall be provided by Seller. Purchaser has or
will have at the Closing Date, sufficient cash, available lines of credit or
other sources of immediately good funds to enable it to make payment of the
Purchase Price and any other amounts to be paid by it hereunder.
7.4. Purchaser's Acknowledgment. Purchaser acknowledges and agrees that,
except as expressly provided in this Agreement, Seller has not made, does not
make and specifically disclaims any representations, warranties, promises,
covenants, agreements or guaranties of any kind or character whatsoever, whether
express or implied, oral or written, of, as to, concerning or with respect to
(a) the nature, quality or condition of the Property, including, without
limitation, the water, soil and geology, (b) the income to be derived from the
Property, (c) the suitability of the Property for any and all activities and
uses which Purchaser may conduct thereon, (d) the compliance of or by the
Property or its operation with any laws, rules, ordinances, designations or
regulations of any applicable governmental authority or body, including, without
limitation, the Americans with Disabili ties Act, any applicable federal, state
or local landmark designations, and any rules and regulations promulgated under
or in connection with any of the foregoing, (e) the habit ability,
merchantability or fitness for a particular purpose of the Property, (f) the
current or future real estate tax liability, assessment or valuation of the
Property, (g) the availability or non-availability or withdrawal or revocation
of any benefits or incentives conferred by any federal, state or municipal
authorities, or (h) any other matter with respect to the Property, and
specifically that Seller has not made, does not make and specifically disclaims
any representations regarding solid waste, as defined by the U.S. Environmental
Protection Agency regulations at 40 C.F.R., Part 261, or the disposal or
existence, in or on the Property, of any hazardous substance, as defined by the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, and applicable state laws, and regulations promulgated thereunder.
Purchaser further acknowledges and agrees that, except as expressly provided in
this Agreement, having been given the oppor tunity to inspect the Property,
Purchaser is relying solely on its own investigation of the Property and not on
any information provided or to be provided by Seller. Purchaser further
acknowledges and agrees that any information provided or to be provided with
respect to the Property was obtained from a variety of sources and that Seller,
except as
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otherwise provided herein, has not made any independent investigation or
verification of such information. Purchaser further acknowledges and agrees
that, except as expressly provided in this Agreement, and as a material
inducement to the Seller's execution and delivery of this Agreement, the sale of
the Property as provided for herein is and on an "as is, where is" condition and
basis. Purchaser acknowledges, represents and warrants that Purchaser is not in
a significantly disparate bargaining position with respect to Seller in
connection with the transaction contemplated by this Agreement; that Purchaser
freely and fairly agreed to this waiver as part of the negotiations for the
transaction contemplated by this Agreement; and that Purchaser is represented by
legal counsel in connection with this transaction and Purchaser has conferred
with such legal counsel concerning this waiver. The terms and provisions of this
Section 7.4 shall survive the Closing and/or termination of this Agreement.
7.5. Survival. The express representations and warranties made in this
Agree ment by Purchaser shall not merge into any instrument or conveyance
delivered at the Closing and all of the representations and warranties made in
this Agreement by Purchaser shall survive the Closing for a period of six (6)
months; provided, however, that any action, suit or proceeding with respect to
the truth, accuracy or completeness of all such represen tations and warranties
shall be commenced, if at all, on or before the date which is six (6) months
after the date of the Closing and, if not commenced on or before such date,
thereafter shall be void and of no force or effect. The terms and provisions of
this Section 7.5 shall survive the Closing.
ARTICLE VIII.
Seller's Interim Operating Covenants
8.1. Operations. Seller agrees to continue to operate, manage and maintain
the Improvements through the Closing Date or the termination of this Agreement
in the ordinary course of Seller's business and substantially in accordance with
Seller's present practice, subject to ordinary wear and tear and further subject
to Article XI of this Agreement. Notwithstanding the foregoing, Seller shall
only be responsible for one-half (1/2) of the cost of the facade repairs to the
Improvements, up to a maximum of $450,000 ("Seller's Share"), and Purchaser
agrees on the Closing Date to assume and reimburse Seller for any and all
liabilities and obligations of Seller with respect to such repairs above
Seller's Share under any contract with respect to such repairs approved by
Seller and
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Purchaser, whether arising prior to or after the Closing Date. Seller's and
Purchaser's consent shall be required to approve any contractors and agreements
necessary for the completion of such repairs, which consent shall not be
unreasonably withheld.
8.2. Maintain Insurance. Seller agrees to maintain until the Closing Date
or the termination of this Agreement the insurance on the Property which is at
least equivalent in all material respects to the insurance policies identified
in Schedule 6.
8.3. Personal Property. Seller agrees not to transfer to any third party or
remove any Personal Property from the Improvements after the date hereof, except
for repair or replacement thereof and except in the case of any termination of
this Agreement. Any items of Personal Property replaced after the date hereof
shall be promptly installed prior to Closing and shall be of substantially
similar quality to the item of Personal Property being replaced, subject to
Section 8.1.
8.4. No Sales. Except for the execution of tenant leases pursuant to
Section 8.5 and except in the case of any termination of this Agreement, Seller
agrees that it shall not convey any interest in the Property to any third party.
8.5. Tenant Leases. Seller shall not, from and after the date hereof and
until the termination of this Agreement, (i) modify, renew or waive any material
rights under the Leases or grant any consent under the Leases, (ii) terminate
any Lease except by reason of a default by the Tenant thereunder or as required
by law, (iii) enter into a new tenant lease, or (iv) accept a surrender,
termination or cancellation of any Lease by the Tenant thereun der, except if
Seller's consent is not required in accordance with the terms of such Lease or
as required by law, in each case without the prior written approval of
Purchaser. If Purchaser approves of Seller's entering into a new tenant lease,
then Purchaser shall pay to Seller on the Closing Date, in the same manner as
the Purchase Price the following, to the extent actually approved by Purchaser:
(i) the amount of the brokerage commission due in connection with such lease,
(ii) the cost of any tenant improvements to be performed by the landlord under
the terms of such lease, and (iii) the amount of any cash work allow ances
required to be given by the landlord to the tenant under the terms of such lease
(the "Letting Expenses"), to the extent actually paid by Seller on or before the
Closing Date in accordance with agreements approved by Purchaser. Except as set
forth in Section 10.2.1, Purchaser and Seller acknowledge that Seller shall be
required to pay all Letting Expenses relating to the Venator Lease. Upon
Seller's execution and delivery of any such lease approved by Purchaser
(including, without limitation, the Venator Lease), the same
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shall be and be deemed to be a Lease for all purposes under this Agreement.
Seller shall deliver to Purchaser copies of all default notices delivered to or
received from Tenants promptly after such delivery or receipt.
8.6. Reserved.
8.7. Tenant Estoppels. Seller shall promptly deliver to each Tenant for
such Tenant's execution an estoppel certificate certified to Purchaser (each, an
"Estoppel Certificate") substantially in the form of the estoppel certificate
attached to each such Tenant's Lease, or, with respect to any Lease that does
not include a form of estoppel certificate, an estoppel certificate which
substantially incorporates the estoppel provisions expressly contained in any
such Lease. Seller shall cause all of its affiliates, including, without
limitation, Venator Group, Inc., to execute and return an Estoppel Certificate
to Seller and Seller shall use reasonable efforts to cause all other Tenants to
execute and return the Estoppel Certificates to Seller not later than five (5)
business days prior to Closing, but Seller shall not be required to expend any
money (other than nominal sums), provide any financial accommodations or
commence any litigation. Seller shall use reasonable efforts to deliver to
Purchaser a copy of each Estoppel Certificate promptly after Seller's receipt
thereof. Subject to Section 9.2.3, in no event shall Purchaser have any right to
terminate this Agreement, nor shall Purchaser be entitled to a reduction of the
Purchase Price or otherwise be relieved from its obligations hereunder on
account of any statement made or information contained in any Estoppel
Certificate, but Purchaser's rights hereunder with respect to Seller's
representations and warranties shall, subject to Section 6.3, remain unimpaired
thereby. To the extent that Seller delivers an Estoppel Certificate from a
Tenant subsequent to Seller's delivery of an Estoppel Certificate in the form of
Exhibit S executed by Seller with respect to such Tenant, Seller shall be
released from any liability in connection with Seller's representations
contained therein.
8.8. Contracts. Seller may, between the date hereof and the Closing,
extend, renew, replace or modify any Contract or enter into any new Contract if
the terms thereof are on commercially reasonable and competitive terms and the
term thereof is cancellable upon no more than thirty (30) days prior written
notice, without premium or penalty. At Purchaser's option exercisable by giving
written notice to Seller at least ten (10) business days prior to the Closing,
Seller shall use its best efforts to terminate all Contracts (and Purchaser
shall cooperate with Seller in connection therewith) by giving written notice
thereof to the parties to each of the Contracts. Seller shall pay the
termination fees due
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under the property management agreement with Park Tower Management and all other
termination fees.
8.9. Tax Appeal Proceedings. Purchaser hereby agrees and acknowledges that
Seller shall have the right to continue to prosecute any tax appeal or tax
abatement proceeding with respect to the Property for the tax years prior to the
1998/1999 tax year which was commenced by Seller prior to the date hereof. If
any such tax appeals or tax abatement proceedings result in tax refunds or
rebates from the applicable taxing authori ties, then, after deduction for
Seller's reasonable costs and expenses (including reasonable attorneys' fees)
incurred in connection with such tax appeal or abatement proceedings and subject
to the rights, if any, of Tenants under their Leases with respect thereto (i)
Seller shall be entitled to receive any such refund or rebate with respect to
the period prior to the Closing and (ii) Purchaser shall be entitled to receive
any such refund or rebate with respect to the period from and after the Closing.
The party which actually receives such tax refunds or rebates from the taxing
authorities shall promptly notify the other party thereof and pay to such party
the amounts due to such party pursuant to the terms hereof. At the Closing,
Seller shall assign to Purchaser all tax appeals and tax abatement proceed ings
pending with respect to the Property for the 1998/1999 tax year and any
subsequent tax years. Seller agrees that it will not commence any tax appeal or
tax abatement proceeding after the date hereof without Purchaser's consent and
shall commence any such action (at Purchaser's sole cost and expense) promptly
upon Purchaser's request. The terms and provisions of this Section 8.9 shall
survive the Closing.
8.10. Notices of Violation. Seller shall promptly notify Purchaser of, and
shall promptly deliver to Purchaser a copy of any notice Seller may receive, on
or before the Closing, from any governmental authority, concerning a violation
of laws at or a discharge of hazardous substances from or upon the Property.
8.11. Access. Seller agrees to afford Purchaser and its employees and autho
rized agents with access to the Property prior to the Closing, at reasonable
times and upon reasonable advance notice, provided that neither Purchaser nor
any of its employees or agents shall enter any portion of the Property unless
accompanied by a representative of Seller and that Seller shall not be required
to incur any cost or expense or commence any action to afford Purchaser with
such access. Purchaser specifically agrees that neither it nor any of its
employees or agents shall communicate directly with any Employees or Tenants
unless such communication shall have been approved by Veronica Hackett (or any
other representative of Seller designated by Seller for such purposes), which
approval
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shall not be unreasonably withheld. Seller shall be entitled to have a
representative present during any communications between Purchaser and any of
the Employees or Tenants.
ARTICLE IX.
Closing Conditions
9.1. Conditions to Obligations of Seller. The obligations of Seller under
this Agreement to sell the Property and consummate the other transactions
contemplated hereby shall be subject to the satisfaction of the following
conditions on or before the Closing Date, except to the extent that any of such
conditions may be waived by Seller in writing at Closing in the Seller's sole
and absolute discretion.
9.1.1. Representations, Warranties and Covenants of Purchaser. All
representations and warranties of Purchaser in this Agreement shall be true and
correct in all material respects as of the Closing Date, with the same force and
effect as if such representations and warranties were made anew as of the
Closing Date, and Purchaser shall have performed and complied in all material
respects with all covenants and agree ments required by this Agreement to be
performed or complied with by Purchaser on or prior to the Closing Date.
Notwithstanding the foregoing, Purchaser may cure any breach of representation
or warranty and otherwise satisfy all conditions to Seller's obligation to close
set forth in this Section 9.1.1 by paying the Balance of the Purchase Price and
performing all other obligations of Purchaser hereunder of a monetary nature on
the Closing Date.
9.1.2. No Orders. No order, writ, injunction or decree shall have been
entered and be in effect by any court of competent jurisdiction or any
authority, and no statute, rule, regulation or other requirement of any
governmental authority shall have been promulgated or enacted and be in effect,
that restrains, enjoins or invalidates the transac tions contemplated hereby.
9.1.3. Termination. Subject to Article XII, in the event Seller shall elect
not to close due to the failure of any one or more of the conditions precedent
to Seller's obligation to sell set forth in this Section 9.1 which has not been
waived by Seller in writing in Seller's sole and absolute discretion, Seller
shall so notify Purchaser on the day of Closing in writing specifying the
unfulfilled conditions, Seller shall direct the Escrow Agent
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to return the Deposit to Purchaser and this Agreement shall terminate, and
neither party shall have any further obligation under this Agreement (except the
Surviving Termination Obligations). Notwithstanding anything to the contrary
contained herein, in the event that Seller delivers a termination notice to
Purchaser pursuant to this Section 9.1.3, Purchaser shall have the right
(provided that it delivers a notice to Seller within five (5) business days of
its receipt of Seller's termination notice), to extend the scheduled Closing
Date for a period of up to thirty (30) business days in order to allow the
satisfaction of the unfulfilled conditions to the obligations of Seller
specified in Seller's termination notice.
9.2. Conditions to Obligations of Purchaser. The obligations of Purchaser
under this Agreement to purchase the Property and consummate the other
transactions contemplated hereby shall be subject to the satisfaction of the
following conditions on or before the Closing Date, except to the extent that
any of such conditions may be waived by Purchaser in writing at Closing in the
Purchaser's sole and absolute discretion.
9.2.1. Representations, Warranties and Covenants of Seller. All
representations and warranties of Seller in this Agreement shall be true and
correct in all material respects as of the Closing Date, with the same force and
effect as if such repre sentations and warranties were made anew as of the
Closing Date, any changes to such representations disclosed by Seller pursuant
to Section 10.1.9 shall be acceptable to Pur chaser in its sole discretion, and
Seller shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied
with by Seller prior to the Closing Date.
9.2.2. No Orders. No order, writ, injunction or decree shall have been
entered and be in effect by any court of competent jurisdiction or any
authority, and no statute, rule, regulation or other requirement shall have been
promulgated or enacted and be in effect, that restrains, enjoins or invalidates
the transactions contemplated hereby.
9.2.3. Estoppels. Purchaser shall not have received Estoppel Certifi cates
dated not earlier than thirty (30) days prior to the Closing Date in the form
required by this Agreement from (i) all affiliates of Seller occupying all or
any portion of the Property and (ii) Tenants (other than those described in
clause (i) of this sentence) occupying an aggregate of 175,000 square feet of
the Improvements; provided, however, the condition set forth in this clause (ii)
shall be deemed satisfied if Seller delivers a Seller's Estoppel Certificate
executed by Seller and Seller's Affiliate (in the form set forth on Exhibit S)
with respect to Leases for Tenants (other than those described in clause (i) of
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this sentence) occupying the balance of the required 175,000 square feet of the
Improve ments not satisfied by direct Estoppel Certificates from Tenants. Seller
may supplement a Tenant's Estoppel Certificate dated more than thirty (30) days
prior to the Closing Date by delivering a Seller's Estoppel Certificate limited
to the period between the date of the Tenant Estoppel Certificate and the
Closing Date.
9.2.4. Title. At the time of Closing, title to the Property shall be as
provided in this Agreement.
9.2.5. Termination. Subject to Article XII, in the event Purchaser shall
elect not to close due to the failure of any one or more of the conditions
precedent to Purchaser's obligation to consummate this transaction set forth in
this Section 9.2 which has not been waived by Purchaser in writing in
Purchaser's sole and absolute discretion, Purchaser shall so notify Seller on
the day of Closing in writing specifying the unfulfilled conditions, Seller
shall direct the Escrow Agent to return the Deposit to Purchaser and this
Agreement shall terminate, and neither party shall have any further obligation
under this Agreement (except the Surviving Termination Obligations).
Notwithstanding anything to the contrary contained herein, in the event that
Purchaser delivers a termination notice to Seller pursuant to this Section
9.2.4, Seller shall have the right (provided that it delivers a notice to
Purchaser within two (2) business days of its receipt of Purchaser's termination
notice), to extend the scheduled Closing Date for a period of up to ten (10)
business days in order to allow the satisfaction of the unfulfilled conditions
to the obligations of Purchaser specified in Purchaser's termination notice.
ARTICLE X.
Closing
10.1. Seller's Closing Obligations. Seller shall, at its sole cost and
expense, execute, acknowledge (where applicable) and deliver or cause to be
delivered to Pur chaser at Closing the following:
10.1.1. A bargain and sale deed without covenant against grantor's acts
(the "Deed") substantially in the form attached hereto as Exhibit G, conveying
to Purchaser the Land and Improvements in fee simple, subject only to the
Permitted Excep tions.
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10.1.2. An "Assignment and Assumption of Leases" in the form of Exhibit H
attached hereto, with respect to the Leases and the Security Deposits.
10.1.3. An "Assignment and Assumption of Contracts" in the form of Exhibit
I attached hereto.
10.1.4. A list of Security Deposits required to be held pursuant to the
applicable Leases.
10.1.5. Copies of the Contracts, the Licenses and Permits and the
warranties and guarantees (originals will be provided if available).
10.1.6. Originals (to the extent in Seller's possession or control,
otherwise photostatic copies thereof) of all Leases in effect on such date and
all other documents in the possession of Seller relating to the Tenants,
including any Estoppel Certificates received by Seller from any of the Tenants.
10.1.7. Written notices executed by Seller and addressed to each Tenant (i)
advising each such Tenant of the sale of the Property and the transfer of the
unapplied amount of its security deposit (if any) to Purchaser in accordance
with New York General Obligations Law Section 7-105 and (ii) indicating that
rent should thereafter be paid to Purchaser and giving instructions therefor,
substantially in the form of Exhibit J attached hereto. Purchaser agrees to
deliver such notices to the Tenants, by registered or certified mail, within
five (5) days after the Closing Date and hereby agrees to indemnify and hold
Seller harmless from and against all loss, cost and expense incurred by Seller
as a result of Purchaser's failure to so deliver such notices to the Tenants.
Purchaser's obligations under this Section 10.1.7 shall survive the Closing.
10.1.8. Written notices executed by Seller, addressed to each party
performing services pursuant to a Contract indicating that the Property has been
sold to Purchaser and that either (i) all rights of Seller thereunder have been
assigned to Purchaser or (ii) if requested by Purchaser in accordance with
Section 8.8, Seller has terminated such Contract.
10.1.9. A certificate in the form of Exhibit K attached hereto, indicating
that the representations and warranties of Seller set forth in Article VI are
true and correct on the Closing Date, or, if there have been changes, describing
such changes.
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10.1.10. A bill of sale in the form attached hereto as Exhibit L convey
ing, transferring and selling to Purchaser (with no value separate from the Real
Property) all right, title and interest of Seller in and to the Personal
Property.
10.1.11. The License Agreement.
10.1.12. A certificate substantially in the form attached hereto as Exhibit
M certifying that Seller is not a "foreign person" as defined in Section 1445 of
the Code.
10.1.13. A New York City Real Property Transfer Tax Return and New York
State Combined Real Estate Transfer Tax Return and Credit Line Mortgage
Certificate (Form TP-584) (together, the "Transfer Tax Returns"), each duly
signed by Seller, together with the payment of the amount of the Transfer Taxes,
if any, due in connection with the transactions contemplated hereunder, in each
case by delivery to the Title Company of a certified check payable to the order
of the Commissioner of Finance in the amount of the Transfer Tax due to New York
City and a certified check payable to the order of the New York State Department
of Taxation and Finance in the amount of the Transfer Tax due to New York State
(unless Seller elects to have Purchaser make such payments with a credit against
the Purchase Price, in which case such payments shall be so made by Purchaser).
10.1.14. The following items to the extent in Seller's possession or under
Seller's control: (i) keys for all entrance doors in the Improvements, (ii) all
original (or copies if originals are not available) books, records, tenant
files, operating reports, files, plans and specifications and other materials
related to the operation of the Property; (iii) the originals (or copies where
originals are not available) of the Contracts and the Licenses and Permits, and
(iv) a revised Rent Roll certified by an authorized officer of Seller, updated
to within ten (10) business days of the Closing.
10.1.15. Evidence reasonably satisfactory to Purchaser and the Title
Company that the person executing the Closing documents on behalf of Seller has
full right, power and authority to do so.
10.1.16. An affidavit in lieu of registration as required by Chapter 664 of
the Laws of 1978 in the form of Exhibit N.
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10.1.17. Affidavits and other matters as are reasonably requested by the
Title Company pursuant to Section 5.1.5 of this Agreement.
10.1.18. At Closing, Seller shall have delivered possession of the Property
to Purchaser, subject to the Permitted Exceptions and the rights of Tenants
under the Leases.
10.1.19. The Venator SNDA.
10.1.20. Such other documents as may be reasonably necessary or appropriate
to effect the consummation of the transactions which are the subject of this
Agreement.
10.2. Purchaser's Closing Obligations. Purchaser, at its sole cost and
expense, shall deliver or cause to be delivered to Seller (or, in the case of an
Exchange, to the Qualified Intermediary) or the Tenant under the Venator Lease,
as applicable, at Closing the following:
10.2.1. The Balance of the Purchase Price, after all adjustments are made
at the Closing as herein provided to Seller, and a payment to the tenant under
the Venator Lease in respect of such tenant's initial improvements to the
Venator Premises that were completed prior to the Closing Date, up to
$11,000,000, in each case by Federal Reserve wire transfer of immediately
available funds. To the extent that such initial improvements have not been
completed prior to the Closing Date, then, in order to secure Purchaser's
obligation to pay $11,000,000 (minus amounts paid pursuant to the immediately
preceding sentence) to the tenant under the Venator Lease, Purchaser shall pay
to the Escrow Agent, at the Closing, by Federal Reserve wire transfer of
immediately available funds, the balance thereof remaining to be paid to the
tenant under the Venator Lease so that Purchaser's total payment equals
$11,000,000 and the tenant under the Venator Lease, the Escrow Agent and
Purchaser shall enter into an escrow agreement, in form and substance reasonably
satisfactory to the parties thereto, governing disbursement of said $11,000,000
(minus amounts paid pursuant to the immediately preceding sentence) in
accordance with the terms of the Venator Lease, provided, however, that the only
condition to the disbursement of the $11,000,000 (minus amounts paid pursuant to
the immediately preceding sentence) shall be Purchaser's receipt of a
certification from the tenant under the Venator Lease that the initial tenant
improvements have been completed.
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10.2.2. Purchaser shall duly execute, acknowledge (as appropriate) and
deliver:
(i) the Assignment and Assumption of Leases;
(ii) the Assignment and Assumption of Contracts;
(iii) receipt for delivery and acceptance of the Security Deposits;
(iv) the License Agreement; and
(v) the Transfer Tax Returns.
10.2.3. A non-disturbance agreement (the "Venator SNDA") in favor of the
tenant under the Venator Lease, duly executed, acknowledged and delivered by the
holder of any mortgage granted by Purchaser with respect to the Real Property or
any portion thereof, in the form of Exhibit O attached hereto.
10.2.4. Evidence reasonably satisfactory to Seller and the Title Company
that the person executing the Closing documents on behalf of Purchaser has full
right, power and authority to do so.
10.2.5. A certificate in the form of Exhibit P attached hereto, indicating
that the representations and warranties of Purchaser set forth in Article VII
are true and correct on the Closing Date, or, if there have been changes,
describing such changes.
10.2.6. Such other documents as may be reasonably necessary or appropriate
to effect the consummation of the transactions which are the subject of this
Agreement.
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ARTICLE XI.
Risk of Loss
11.1. Condemnation and Casualty. If, prior to the Closing Date, all or any
portion of the Property is taken by eminent domain, or is the subject of a
pending taking which has not been consummated, or is destroyed or damaged by
fire or other casualty, Seller shall notify Purchaser of such fact promptly
after Seller obtains knowledge thereof. If such condemnation or casualty is
Material (as such term is hereinafter defined), Pur chaser shall have the option
to terminate this Agreement upon notice to Seller given not later than fifteen
(15) business days after receipt of Seller's notice, or the Closing Date,
whichever is earlier. If this Agreement is terminated, the Deposit shall be
returned to Purchaser and thereafter neither Seller nor Purchaser shall have any
further rights or obligations to the other hereunder except with respect to the
Surviving Termination Obligations. If this Agreement is not terminated, Seller
shall not be obligated to repair any damage or destruction but (x) Seller shall
assign and turn over to Purchaser the insurance proceeds as they relate to
property damage to Property that the Purchaser will have an interest in after
the Closing or condemnation awards, as applicable, net of any costs of repairs
and net of reasonable collection costs (or, if such have not been awarded, all
of its right to receive the same) authorized by Purchaser to be paid and
actually paid by Seller with respect to such fire or other casualty or
condemnation, including any rent abatement insurance accruing after the Closing
for such casualty or condemnation, provided that Purchaser shall retain the
exclusive right to file and prosecute the adjustment, compromise or settlement
of any claim for the insurance proceeds as they relate to property damage to
Property that the Purchaser will have an interest in after the Closing, and (y)
the parties shall proceed to Closing pursuant to the terms hereof without
abatement of the Purchase Price except for a credit in the amount of the
applicable insurance deductible.
11.2. Condemnation not Material. If the condemnation is not Material, then
the Closing shall occur without abatement of the Purchase Price and, after
deducting Seller's reasonable costs and expenses incurred in collecting any
award, Seller shall assign all remaining awards or any rights to collect awards
to Purchaser on the Closing Date.
11.3. Casualty not Material. If the Casualty is not Material, then the
Closing shall occur without abatement of the Purchase Price (except for a credit
against the Purchase Price in the amount of the applicable deductible under
Seller's insurance policies), Seller shall not be obligated to repair such
damage or destruction and Seller shall
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assign and turn over to Purchaser all of the insurance proceeds net of any costs
of repairs and net of reasonable collection costs (or, if such have not been
awarded, all of its right, title and interest therein) authorized by Purchaser
to be paid and actually paid by Seller with respect to such fire or such
casualty, including any rent abatement insurance accruing after the Closing for
such casualty.
11.4. Materiality. For purposes of this Article XI, the term "Material"
shall mean:
(i) with respect to a taking by eminent domain, a taking of (x) any portion
of the Broadway Parcel or the Improvement thereon, or (y) the entirety of either
the Barclay Parcel or the Park Place Parcel, or both, and the Improvements
located thereon, excluding, however, any taking solely of subsurface rights or
takings for utility easements or right of way easements, if the surface of such
Land, after such taking, may be used in substantially the same manner as though
such rights had not been taken; and
(ii) with respect to a casualty, any casualty such that the cost of repair,
as reasonably estimated by an independent engineer licensed to do business in
the State of New York acceptable to Seller and Purchaser, is in excess of
$10,000,000.
11.5. General Obligations Law. The provisions of this Article XI are
intended to supersede those of Section 5-1311 of the General Obligations Law of
New York.
ARTICLE XII.
Default
12.1. Default by Seller. Except as set forth below, in the event the
Closing and the transactions contemplated hereby do not occur as provided herein
by reason of the default of Seller, Purchaser may elect, as the sole and
exclusive remedy of Purchaser, to (i) terminate this Agreement and receive the
Deposit from the Escrow Agent in accordance with the terms and provisions of
Section 3.2 hereof, and in such event Seller shall not have any liability
whatsoever to Purchaser hereunder other than with respect to the Surviving
Termination Obligations, or (ii) enforce specific performance of, or seek other
equitable actions under, this Agreement, provided none of the same requests or
entitles Purchaser to any monetary damages from Seller. Purchaser shall be
deemed to have elected to terminate this Agreement (as provided in subsection
(i) above) if Purchaser fails to deliver
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to Seller written notice of its intent to file a cause of action for specific
performance against Seller within thirty (30) days after written notice of
termination from Seller or thirty (30) days after the originally scheduled
Closing Date, whichever shall occur first, or having given Seller notice, fails
to file a lawsuit asserting such cause of action within ninety (90) days after
the originally scheduled Closing Date. Notwithstanding the foregoing, nothing
contained herein shall limit Purchaser's remedies at law or in equity as to the
Surviving Termination Obligations.
12.2. Default by Purchaser. In the event the Closing and the transactions
contemplated hereby do not occur as provided herein by reason of any default of
Pur chaser, Purchaser and Seller agree it would be impractical and extremely
difficult to fix the damages which Seller may suffer. Therefore, Purchaser and
Seller hereby agree a reasonable estimate of the total net detriment Seller
would suffer in the event Purchaser defaults and fails to complete the purchase
of the Property is and shall be, as Seller's sole and exclusive remedy (whether
at law or in equity), a sum equal to the Deposit. Upon such default by
Purchaser, Seller shall have the right to receive the Deposit from the Escrow
Agent, in accordance with the terms and provisions of Section 3.2 hereof, as its
sole and exclusive remedy and thereupon this Agreement shall be terminated and
neither Seller nor Purchaser shall have any further rights or obligations
hereunder except with respect to the Surviving Termination Obligations. The
amount of the Deposit shall be the full, agreed and liquidated damages for
Purchaser's default and failure to complete the purchase of the Property, all
other claims to damages or other remedies being hereby expressly waived by
Seller. Notwithstanding the foregoing, nothing contained herein shall limit
Seller's remedies at law or in equity as to the Surviving Termination
Obligations. Notwithstanding the foregoing, Purchaser may cure any defaults by
paying the Balance of the Purchase Price and performing all other obligations of
Purchaser hereunder of a monetary nature on the Closing Date.
ARTICLE XIII.
Brokers
13.1. Brokerage Indemnity. Purchaser shall indemnify Seller, its
affiliates, and its and their partners, trustees, advisors, officers, and
directors, against all losses, damages, costs, expenses (including reasonable
fees and expenses of attorneys), causes of action, suits or judgments of any
nature arising out of any claim, demand or liability to or asserted
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by any broker, agent or finder, licensed or otherwise, claiming to have dealt
with Purchaser in connection with this transaction other than J.P. Morgan
Securities Inc. and The Georgetown Company (together, the "Broker"). Seller
shall indemnify Purchaser and its affiliates, and its and their partners,
members, trustees, advisors, officers and directors, against all losses,
damages, costs, expenses (including reasonable fees and expenses of attorneys),
causes of action, suits or judgments of any nature arising out of any claim,
demand or liability to or asserted by the Broker in connection with this
transaction or by any broker, agent or finder, licensed or otherwise, claiming
to have dealt with Seller in connection with this transaction. Seller shall pay
the Broker in connection with the consummation of the transactions contemplated
by this Agreement pursuant to a separate agreement between Seller and Broker.
The provisions of this Article XIII shall survive the Closing and/or termination
of this Agreement.
ARTICLE XIV.
Confidentiality
14.1. Publication. Purchaser and Seller shall consult with each other prior
to making any public statements with respect to this Agreement and the
transactions contem plated hereby and, except as otherwise may be required by
law or in connection with any filings required to be made by either party with
the Securities and Exchange Commission, Purchaser and Seller shall not make any
public statements, including, without limitation, any press releases, with
respect to this Agreement and the transactions contemplated hereby, without the
prior written consent of the other party, which consent shall not be unreason
ably withheld. Notwithstanding the foregoing, this Article 14 shall terminate
and be of no further force and effect from and after the Closing.
ARTICLE XV.
Employee Matters
15.1. Employment Responsibilities. Seller shall terminate all Employees on
the Closing Date. Purchaser shall offer to rehire and employ on and after the
Closing not less than 33 Employees, which Seller represents is 60% of the
aggregate number of Employees represented by any and all unions on the date
hereof (collectively, the "Union Employ ees") on substantially the same wages,
terms and conditions as such Union Employees were employed by Seller immediately
prior to Seller's termination of such employment. Except as set forth below,
Purchaser shall be solely responsible for, and hereby assumes all liabilities
whatsoever with respect to: (i) all salaries and wages relating to any Union
Employee hired by Purchaser and attributable to the period on and after the
Closing Date, (ii) benefits relating to any Union Employee hired by Purchaser
and attributable to the period on and after the Closing Date, (iii) benefit
continuation and/or severance payments relating to any Union Employee as a
result of any termination of employment of any Union Employee on and after the
Closing Date, (iv) notices, payments, fines or assessments pursuant to any laws,
rules or regulations with respect to the employment, discharge or layoff of
Union Employees on or after the Closing Date, including, but not limited to,
such liability as arises under the Worker Adjustment and Retraining Notification
Act, Section 4980B of the Code (COBRA) and any rules or regulations as have been
issued in connec tion with any of the foregoing and (v) any withdrawal liability
under any multiemployer pension plans or similar arrangements with respect to
the Union Employees (the aggregate amount of liabilities pursuant to clauses
(iii), (iv) and (v) being hereinafter collectively referred to as the "Employee
Termination Liabilities"). Subject to the provisions of the next sentence,
Seller shall be responsible for one-half (1/2) of the Employee Termination
Liabilities (defined herein) up to a maximum of $250,000 (the "Maximum
Termination Responsibility"). Purchaser may elect, without notice to Seller, to
decrease the percent age of Union Employees which Purchaser is obligated to
offer to rehire from 33 to any number (but not less than 27), provided that
Purchaser shall, in addition to Purchaser's liabilities set forth above, be
solely responsible for, and hereby assumes all Employee Termination Liabilities,
with respect to a number of Union Employees equal to 33 minus the number of
Union Employees Purchaser actually offered to hire. Solely for purposes of
calculating Purchaser's liability pursuant to the immediately preceding
sentence, Seller shall select which Union Employees shall be used in
apportioning liability from the list of Union Employees which Purchaser did not
offer employment.
<PAGE> 48
Subject to Seller's Maximum Termination Responsibility, Purchaser and
Seller each hereby agrees to indemnify the other and their respective affiliates
against, and agrees to defend and hold them harmless from any and all claims,
losses, damages and expenses (including, without limitation, reasonable
attorneys' fees) and other liabilities and obligations incurred or suffered as a
result of any claim by or on behalf any Union Employee that arises under
federal, state or local statute (including, without limitation, Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination
in Employment Act of 1990, the Equal Pay Act, the Americans with Disabilities
Act of 1990, the Employ ee Retirement Income Security Act of 1974 and all other
statutes regulating the terms and conditions of employment), regulation or
ordinance, under the common law or in equity (including any claims for wrongful
discharge or otherwise, but specifically excluding any claims under any policy,
agreement, understanding or promise, written or oral, formal or informal (other
than the CBAs), between Seller and the Union Employees), arising solely as a
result of termination of employment on the Closing Date. Seller shall indemnify
and hold Purchaser harmless from any of the foregoing to the extent arising out
of any acts or omissions that occurred (or, in the case of omissions, failed to
occur) prior to the Closing Date.
15.2. Collective Bargaining Agreements. Effective as of the Closing,
Purchaser shall diligently proceed in good faith to enter into or otherwise
become a party or subject to and thereafter observe, pay and perform all
obligations and liabilities under, arising from or otherwise relating to (i) the
1996 Commercial Building Agreement between Local 32B-32J, Service Employees
International Union, AFL-CIO and the Realty Advisory Board on Labor Relations,
Inc. and (ii) the 1998 Engineer Agreement between the Realty Advisory Board of
Labor Relations, Incorporated and Local 94-94A-94B, International Union of
Operating Engineers AFL-CIO (hereafter, collectively, the "CBAs"). Purchaser
shall have sole responsibility for all such obligations and liabilities arising
under or relating to the CBAs , to the extent entered into or binding upon
Purchaser (subject to Seller's Maximum Termination Responsibility) on or at any
time after the Clos ing Date and hereby agrees to indemnify and hold Seller
harmless from and against all loss, cost and expense incurred by Seller as a
result of Purchaser's failure to perform its obligation under this Section 15.2.
15.3. Survival. The provisions of this Article XV shall survive the
Closing.
ARTICLE XVI.
Miscellaneous
16.1. Notices. Any and all notices, requests, demands or other
communications hereunder shall be deemed to have been duly given if in writing
and if transmitted by hand delivery with receipt therefor, by facsimile delivery
(with confirmation by hard copy), by overnight courier, or by registered or
certified mail, return receipt requested, first class postage prepaid addressed
as follows (or to such new address as the addressee of such a
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communication may have notified the sender thereof) (the date of such notice
shall be the date of actual delivery to the recipient or recipients refusal to
accept thereof):
To Purchaser: 233 Broadway Owners, LLC
c/o The Witkoff Group LLC
220 East 42nd Street
New York, New York 10017
Attn: James Stomber, Esq.
Fax No.: (212) 672-3434
With a copy to: Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
Attn: Neil Shapiro, Esq.
Fax No.: (212) 889-7577
To Seller: 233 Broadway, Inc.
c/o Venator Group, Inc.
233 Broadway
New York, New York 10279
Attn: General Counsel
Fax No.: (212) 553-7038
With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Benjamin F. Needell, Esq.
Fax No.: (212) 735-2000
To Escrow Agent: Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: James F. O'Rorke, Jr., Esq.
Fax No.:(212) 735-2000
With a copy to: Each of the other parties to this Agreement
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Purchaser's counsel may give any notices or other communications hereunder
on behalf of Purchaser and Seller's counsel may give any notices or other
communications hereunder on behalf of Seller.
16.2. Governing Law; Venue.
16.2.1. This Agreement was negotiated in the State of New York and was
executed and delivered by Seller and Purchaser in the State of New York, which
State the parties agree has a substantial relationship to the parties and to the
underlying transactions embodied hereby, and in all respects, including, without
limiting the generality of the foregoing, matters of construction, validity,
enforcement and performance, this Agreement and the obligations arising
hereunder shall be governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and performed wholly within such
State, without giving effect to the principles of conflicts of law of such
jurisdiction. To the fullest extent permitted by law, the parties hereby uncondi
tionally and irrevocably waive and release any claim that the law of any other
jurisdiction governs this Agreement and this Agreement shall be governed and
construed in accor dance with the laws of the State of New York as aforesaid
pursuant to Section 5-1401 of the New York General Obligations Law.
16.3. Headings. The captions and headings herein are for convenience and
reference only and in no way define or limit the scope or content of this
Agreement or in any way affect its provisions.
16.4. Business Days. If any date herein set forth for the performance of
any obligations of Seller or Purchaser or for the delivery of any instrument or
notice as herein provided should be on a Saturday, Sunday or legal holiday, the
compliance with such obligations or delivery shall be deemed acceptable on the
next business day following such Saturday, Sunday or legal holiday. As used
herein, the term "legal holiday" means any state or Federal holiday for which
financial institutions or post offices are generally closed in the state of New
York.
16.5. Counterpart Copies. This Agreement may be executed in two or more
counterpart copies, all of which counterparts shall have the same force and
effect as if all parties hereto had executed a single copy of this Agreement.
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16.6. Binding Effect. This Agreement shall be not become a binding
obligation upon Seller unless and until the same has been fully executed by
Purchaser and Seller and a fully executed counterpart delivered by Seller to
Purchaser
16.7. Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns.
16.8. Assignment. This Agreement may not be assigned by Purchaser except to
a directly or indirectly wholly-owned subsidiary or subsidiaries of Purchaser,
or to a partnership, corporation or limited liability company in which Guarantor
(or any of his family members) and/or Lehman Brothers Holdings Inc. (or an
affiliate thereof) owns, either directly or indirectly, at least 75% of the
profits thereof and controls the management of the affairs of such entity (any
such entity, a "Permitted Assignee") and any other assignment or attempted
assignment by Purchaser shall constitute a default by Purchaser hereunder and
shall be deemed null and void and of no force or effect. Notwithstanding
anything to the contrary contained herein, Purchaser may (i) assign the right to
purchase the Broadway Parcel, the Barclay Parcel and the Park Place Parcel and
the Improvements relating to each such parcel to different entities, provided,
however, that each of such entities is a Permitted Assignee, and (ii)
collaterally assign this Agreement to any institu tional lender. A copy of any
assignment permitted hereunder, together with an agreement of the assignee
assuming all of the terms and conditions of this Agreement to be performed by
Purchaser, in form reasonably satisfactory to counsel for Seller, shall be
delivered to the attorneys for Seller prior to the Closing, and in any event no
such assignment shall relieve Purchaser from Purchaser's obligations under this
Agreement nor result in a delay in the Closing.
16.9. Interpretation. This Agreement shall not be construed more strictly
against one party than against the other merely by virtue of the fact that it
may have been prepared by counsel for one of the parties, it being recognized
that both Seller and Purchaser have contributed substantially and materially to
the preparation of this Agree ment.
16.10. Entire Agreement. This Agreement and the Exhibits and Schedules
attached hereto contain the final and entire agreement between the parties
hereto with respect to the sale and purchase of the Property and are intended to
be an integration of all prior negotiations and understandings. Purchaser,
Seller and their agents shall not be
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bound by any terms, conditions, statements, warranties or representations, oral
or written, not contained herein. No change or modifications to this Agreement
shall be valid unless the same is in writing and signed by the parties hereto.
Each party reserves the right to waive any of the terms or conditions of this
Agreement which are for their respective benefit and to consummate the
transactions contemplated by this Agreement in accordance with the terms and
conditions of this Agreement which have not been so waived. Any such waiver must
be in writing signed by the party for whose benefit the provision is being
waived.
16.11. Severability. If any one or more of the provisions hereof shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein, unless and to the
extent that the invalidation of any such term or provision materially alters the
intent of the parties hereto.
16.12. Survival. Except as otherwise specifically provided for in this
Agreement (collectively, the "Surviving Termination Obligations"), the
provisions of this Agree ment and the representations and warranties herein
shall not survive after the conveyance of title and payment of the Purchase
Price but be merged therein.
16.13. Exhibits. Exhibits A through R and Schedules 1 through 8 attached
hereto are incorporated herein by reference.
16.14. Limitation of Liability. Subject to Article XIX, the obligations of
Seller are intended to be binding only on Seller and Seller's assets, and shall
not be personally binding upon, nor shall any resort be had to, any of the
partners, officers, directors, shareholders, advisors, trustees, agents, or
employees of Seller, or its affiliates or any of their respective properties.
16.15. Prevailing Party. Should either party employ an attorney to enforce
any of the provisions hereof (whether before or after Closing, and including any
claims or actions involving amounts held in escrow), then the nonprevailing
party in any final judgment agrees to pay the other party's reasonable
attorneys' fees and expenses in or out of litigation and, if in litigation,
trial, appellate, bankruptcy or other proceedings, expended or incurred in
connection therewith, as determined by a court of competent jurisdiction.
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The provisions of this Section 16.15 shall survive Closing and/or any
termination of this Agreement and shall not be subject to any limitations on
liability set forth herein.
16.16. Real Estate Reporting Person. Escrow Agent is hereby designated the
"real estate reporting person" for purposes of Section 6045 of the Code and
Treasury Regulation 1.6045-4 and any instructions or settlement statement
prepared by Escrow Agent shall so provide. Upon the consummation of the
transaction contemplated by this Agreement, Escrow Agent shall file Form 1099
information return and send the statement to Seller as required under the
aforementioned statute and regulation. Seller and Pur chaser shall promptly
furnish their federal tax identification numbers to Escrow Agent and shall
otherwise reasonably cooperate with Escrow Agent in connection with Escrow
Agent's duties as real estate reporting person.
16.17. No Recording. Neither this Agreement nor any memorandum or short
form hereof shall be recorded or filed in any public land or other public
records of any jurisdiction, by either party and any attempt to do so may be
treated by the other party as a breach of this Agreement.
16.18. No Other Parties. This Agreement is not intended, nor shall it be
con strued, to confer upon any person or entity, except the parties hereto and
their respective heirs, successors and permitted assigns, any rights or remedies
under or by reason of this Agreement.
16.19. Waiver of Trial by Jury. The respective parties hereto shall and
hereby do waive trial by jury in any action, proceeding or counterclaim brought
by either of the parties hereto against the other on any matters whatsoever
arising out of or in any way connected with this Agreement, or for the
enforcement of any remedy under any statute, emergency or otherwise.
16.20. Rule 314. Seller agrees to cooperate with the appropriate owning
party in connection with any audit pursuant to Rule 314 promulgated by the
Securities and Exchange Commission, and to execute a representation certificate
in compliance with applicable law, provided that Purchaser shall be responsible
for Seller's reasonable costs and expenses (including reasonable attorney's
fees) in connection with such cooperation and representation certificate.
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ARTICLE XVII.
Purchaser Guaranty
17.1. Purchaser Guaranty. In order to induce Seller to enter into this
Agree ment, the Guarantor hereby unconditionally and irrevocably guarantees (the
"Purchaser Guaranty") the full and prompt payment when due of the Additional
Deposit. The Guarantor shall be primarily (rather than merely secondarily)
liable hereunder with respect to the Additional Deposit.
17.2. Waivers. The Purchaser Guaranty is a continuing guaranty and shall
remain in force until the Additional Deposit has been paid in full to the Escrow
Agent and is independent of every other recourse which Seller may at any time
hold or have for the Additional Deposit. The Guarantor waives all diligence,
presentment and protest, and also notice of dishonor, protest and nonpayment. No
failure by Seller to assert any right or pursue any remedy with respect to
Purchaser or the Purchaser Guaranty shall relieve the Guarantor from his
obligations with respect to the Additional Deposit. The Purchaser Guaranty is a
guaranty of payment and not merely of collection and the Guarantor hereby waives
any right to require that any action be brought against Purchaser or that the
Agreement be enforced by Seller without Seller first taking any steps or
proceedings against Purchaser.
17.3. Absolute Obligation. The Guarantor agrees that the Purchaser Guaranty
shall not be diminished or affected, in any way, by any bankruptcy,
reorganization, arrangement, liquidation or similar proceeding with respect to
Purchaser or by dissolution of Purchaser or by any default hereunder by Seller.
The Purchaser Guaranty shall continue in full force and effect notwithstanding
any merger, consolidation, sale of assets or any other similar transaction by
Purchaser or the Guarantor. In addition, the Purchaser Guaranty shall not be
affected by any act, omission, matter or thing which, but for this provision,
might operate to release or otherwise exonerate the Guarantor from the Purchaser
Guaranty or affect the Guarantor's obligations with respect to the Additional
Deposit, including, without limitation and whether or not known to the
Guarantor:
17.3.1. any variation of this Agreement or any other document delivered
pursuant hereto or any time, indulgence, waiver or consent at any time given to
Purchaser or any other person or entity;
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17.3.2. any compromise or release of, or abstention from obtaining,
perfecting or enforcing any security or other right or remedy whatsoever from or
against Purchaser or any other person or entity;
17.3.3. any legal limitation, disability, incapacity or other circumstances
relating to Purchaser or any other person or entity; and
17.3.4. any irregularity, unenforceability or invalidity of this Agreement.
17.4. Enforcement Costs. The Guarantor further agrees to pay all reasonable
costs and expenses, including, without limitation, reasonable attorneys' fees,
at any time paid or incurred by or on behalf of Seller in enforcing the
Purchaser Guaranty.
17.5. Waiver of Subrogation. The Guarantor irrevocably waives all rights to
enforce or collect upon any rights which it now has or may acquire against
Purchaser either by way of subrogation, indemnity, reimbursement or contribution
for any amount paid under the Purchaser Guaranty or by way of any other
obligations whatsoever of Purchaser to the Guarantor, nor shall the Guarantor
file, assert or receive payment on any claim, whether now existing or hereafter
arising, against Purchaser in the event of any bankruptcy, reorganization,
arrangement, liquidation or similar proceeding with respect to Purchaser.
17.6. Waiver of Defenses. The Guarantor absolutely, unconditionally and
irrevocably waives any and all right to assert or interpose any defense (other
than the final and indefeasible payment in full to the Escrow Agent of the
Additional Deposit), setoff, counterclaim or crossclaim of any nature whatsoever
with respect to the Purchaser Guaranty or the Additional Deposit.
ARTICLE XVIII.
Venator Lease
18.1. Venator Lease. Seller and Purchaser hereby agree to proceed in good
faith to expeditiously finalize a lease (the "Venator Lease") governing the
tenancy of Venator Group, Inc. or an affiliate thereof (acceptable to Purchaser
subject to the terms of Exhibit F at the Improvements upon the Broadway Parcel
and the Park Place Parcel from and after the Closing Date, such Venator Lease to
incorporate the terms and conditions set
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forth in the term sheet attached hereto as Exhibit F and otherwise be upon such
commer cially reasonable terms and conditions as Seller and Purchaser shall
agree upon on or before July 15, 1998. Promptly after the Venator Lease has been
finalized in accordance with this Article XVIII, Seller shall execute the
Venator Lease and shall cause the tenant thereunder to execute the Venator Lease
and, upon such execution, the Venator Lease shall be deemed a Lease for all
purposes under this Agreement and Seller shall deliver a copy of the Venator
Lease to Purchaser.
18.2. Disputes. In the event that, on or before July 15, 1998 (or such
additional period of time thereafter as Seller and Purchaser may mutually agree
upon in writing), Seller and Purchaser shall be unable to agree upon any of the
terms and conditions of the Venator Lease (other than those set forth on Exhibit
F), then either party may, upon notice to the other identifying with specificity
the matter in dispute, submit the resolution of such dispute to the first to
accept of Robert S. Nash, Gerald R. Uram, Lawrence D. Eisenberg and L. Stanton
Towne (the "Lease Mediator"), such individuals to be requested to serve as Lease
Mediator in the order in which their names appear herein. In the event of any
such submission, each party shall, at any time during the ten (10) business days
following the initiating party's notice (which notice shall identify the Lease
Mediator), submit to the Lease Mediator a written proposal for the resolution of
such dispute. In the event that one (but not both) of the parties to this
Agreement shall fail to so submit its proposal to the Lease Mediator within such
ten (10) day period, then the Lease Mediator shall proceed to resolve the
dispute without the benefit of the other proposal. Within ten (10) business days
after the Lease Mediator's receipt of such proposals (or, in the event that only
one proposal is submitted to the Lease Mediator, within ten (10) business days
after the later to occur of (i) the expiration of the ten (10) business day
period for submis sion of written proposals and (ii) the receipt of a single
proposal), the Lease Mediator shall resolve the dispute by drafting appropriate
provisions for incorporation into, and/or deletion of specific provisions from,
the Venator Lease. During such ten (10) business day period, the Lease Mediator
may conduct such hearings and investigations as he may deem appropriate. The
determination of the Lease Mediator shall be final and binding upon the parties.
Each party shall pay its own counsel fees and expenses, if any, in connection
with any dispute resolution under this Section. The costs and expenses of the
Lease Mediator shall be borne equally by Seller and Purchaser. In the event of
the death or incapacitation of the Lease Mediator, then the parties shall
promptly and in good faith agree upon the identity of a successor Lease Mediator
from the list of individuals identified above.
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18.3. Alterations. Purchaser hereby consents to and approves of the
alterations to the Venator Premises described in the memorandum annexed hereto
as Exhibit Q, provided, that such alterations (i) shall not affect the
structural integrity of the Improve ments, (ii) shall not adversely affect the
building systems in the Improvements, and (iii) are completed in a manner
consistent with corporate headquarters in buildings similar to the Improvements
on the Broadway Parcel.
ARTICLE XIX.
Seller Guaranty
19.1. Seller Guaranty. In order to induce Purchaser to enter into this
Agree ment, Venator Group, Inc. (the "Seller Affiliate") hereby unconditionally
and irrevoca bly guarantees (the "Seller Guaranty") the full and prompt payment,
performance and observance of the Seller's obligations hereunder (the "Seller
Obligations"). The Seller Affiliate shall be primarily (rather than merely
secondarily) liable hereunder with respect to the Seller Obligations.
19.2. Waivers. The Seller Guaranty is a continuing guaranty and shall
remain in force until the Seller Obligations has been paid or performed in full
and is independent of every other recourse which Purchaser may at any time hold
or have for the Seller Obliga tions, subject to the limitations set forth in
this Agreement. The Seller Affiliate waives all diligence, presentment and
protest, and also notice of dishonor, protest and nonpayment. No failure by
Purchaser to assert any right or pursue any remedy with respect to Seller or the
Seller Guaranty shall relieve the Seller Affiliate from its obligations with
respect to the Seller Obligations. The Seller Guaranty is a guaranty of payment
and performance and not merely of collection and the Seller Affiliate hereby
waives any right to require that any action be brought against Seller or that
the Agreement be enforced by Purchaser against Seller without Purchaser first
taking any steps or proceedings against Seller.
19.3. Absolute Obligation. The Seller Affiliate agrees that the Seller
Guaranty shall not be diminished or affected, in any way, by any bankruptcy,
reorganization, arrangement, liquidation or similar proceeding with respect to
Seller or by dissolution of Seller. The Seller Guaranty shall continue in full
force and effect notwithstanding any merger, consolidation, sale of assets or
any other similar transaction by Seller or the Seller Affiliate. In addition,
the Seller Guaranty shall not be affected by any act, omission, matter
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or thing which, but for this provision, might operate to release or otherwise
exonerate the Seller Affiliate from the Seller Guaranty or affect the Seller
Affiliate's obligations with respect to the Seller Obligations, including,
without limitation and whether or not known to the Seller Affiliate:
19.3.1. any variation of this Agreement or any other document delivered
pursuant hereto or any time, indulgence, waiver or consent at any time given to
Seller or any other person or entity;
19.3.2. any compromise or release of, or abstention from obtaining,
perfecting or enforcing any security or other right or remedy whatsoever from or
against Seller or any other person or entity;
19.3.3. any legal limitation, disability, incapacity or other circumstances
relating to Seller or any other person or entity; and
19.3.4. any irregularity, unenforceability or invalidity of this Agreement.
19.4. Enforcement Costs. The Seller Affiliate further agrees to pay all
reason able costs and expenses, including, without limitation, reasonable
attorneys' fees, at any time paid or incurred by or on behalf of Purchaser in
enforcing the Seller Guaranty.
19.5. Waiver of Subrogation. The Seller Affiliate irrevocably waives all
rights to enforce or collect upon any rights which it now has or may acquire
against Seller either by way of subrogation, indemnity, reimbursement or
contribution for any amount paid under the Seller Guaranty or by way of any
other obligations whatsoever of Seller to the Seller Affiliate, nor shall the
Seller Affiliate file, assert or receive payment on any claim, whether now
existing or hereafter arising, against Seller in the event of any bankruptcy,
reorganiza tion, arrangement, liquidation or similar proceeding with respect to
Seller.
19.6. Waiver of Defenses. The Seller Affiliate absolutely, unconditionally
and irrevocably waives any and all right to assert or interpose any defense
(other than the final and indefeasible payment and performance of the Seller
Obligations), setoff, counterclaim or crossclaim of any nature whatsoever with
respect to the Seller Guaranty or the Seller Obligations.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
SELLER:
233 BROADWAY, INC., a New York corporation
By: /s/ Gary H. Brown
-------------------
Name: Gary H. Brown
Title: Vice President
PURCHASER:
233 BROADWAY OWNERS, LLC,
a New York limited liability company
By: 233 Broadway Next Generation LLC,
its managing member
By: /s/ James F. Stomber Jr.
--------------------------
Name: James F. Stomber Jr.
Title: Authorized signatory
FOR PURPOSES OF ARTICLE XVII HEREOF:
/s/ Steven C. Witkoff
-----------------------------------
Steven C. Witkoff, individually and
not in any representative capacity
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FOR PURPOSES OF ARTICLE XVIII HEREOF:
VENATOR GROUP, INC.
By: /s/ Gary H. Brown
-----------------------
Name: Gary H. Brown
Title: Vice President
The Escrow Agent hereby executes this Agreement for the sole purpose of
acknowledging receipt of the Initial Deposit and its responsibilities hereunder
and to evidence its consent to serve as Escrow Agent in accordance with the
terms of this Agreement.
ESCROW AGENT:
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM LLP
By: /s/ Benjamin F. Needell
------------------------
Name: Benjamin F. Needell
Title: Partner
228463.07-New YorkS4A
51
<PAGE> 61
233 BROADWAY, INC.
c/o Venator Group, Inc.
233 Broadway
New York, New York 10279
September 11, 1998
233 Broadway Owners, LLC
c/o The Witkoff Group, LLC
220 East 42nd Street
New York, New York 10017
Re: Woolworth Building
Ladies and Gentlemen:
Reference is hereby made to that certain Purchase and Sale Agree- ment,
dated June 20, 1998 (the "Agreement"), by and between 233 Broadway, Inc.
("Seller"), as seller, and 233 Broadway Owners, LLC ("Purchaser"), as purchaser.
All initially capitalized terms used herein without definition and which are
defined in the Agreement shall have the meaning set forth for such terms in the
Agreement.
This will serve to confirm and clarify that the term "CBA's", as such term
is defined in Section 15.2 of the Agreement, shall, for purposes of such
Section, include any rider, amendment or addendum which may be negotiated
between the unions(s) and Purchaser as a condition of Purchaser entering into or
becoming a party or subject to the CBA's.
In addition, the second full paragraph of Section 15.1 shall be amended so
as to delete the words "Subject to Seller's Maximum Termination Responsibility,
Purchaser and Seller each hereby agrees to indemnify the other and their
respective affiliates against" from the beginning of the first sentence thereof
and to substitute therefore the words "Subject to Seller's Maximum Termination
Responsibility, Purchaser hereby agrees to indemnify Seller and its respective
affiliates against".
Lastly, Seller and Purchaser have agreed to extend the date by which Seller
and Purchaser are to have agreed upon the terms and conditions of the Venator
Lease through September 18, 1998. Thus, the references to July 15, 1998 in
Sections 18.1 and 18.2 of the Agreement are hereby replaced with references to
September 18, 1998.
245948.02-New YorkS4A
1
<PAGE> 62
233 Broadway Owners, LLC
September 11, 1998
Page 2
In all other respects, the Agreement remains in full force and effect.
Very truly yours,
233 BROADWAY, INC.
By: /s/ John H. Cannon
------------------
Acknowledged and Agreed to:
233 BROADWAY OWNERS, LLC
By: 233 Broadway Next Generation LLC,
its managing member
By: /s/ James F. Stomber Jr.
------------------------
/s/ Steven C. Witkoff
- -----------------------------------
Steven C. Witkoff, individually and
not in any representative capacity
VENATOR GROUP, INC.
By: /s/ John H. Cannon
-------------------------
Name: John H. Cannon
Title:
245948.02-New YorkS4A
2
<PAGE> 63
233 BROADWAY, INC.
VENATOR GROUP, INC.
233 Broadway
New York, New York 10279
October 13, 1998
233 Broadway Owners, LLC
and Steven C. Witkoff
c/o The Witkoff Group, LLC
220 East 42nd Street
New York, New York 10017
Re: Woolworth Building
Ladies and Gentlemen:
Reference is hereby made to that certain Purchase and Sale Agree ment,
dated June 20, 1998 (as amended by those certain letter agreements dated as of
September 11, 1998 and September 18, 1998, the "Agreement"), by and between 233
Broadway, Inc. ("Seller"), as seller, and 233 Broadway Owners, LLC
("Purchaser"), as purchaser. All initially capitalized terms used herein without
definition shall have the meaning set forth for such terms in the Agreement.
The Agreement is hereby amended to provide that the Closing Date shall be
October 15, 1998 (time being of the essence with respect thereto). Thus, the
Closing shall occur at the offices of Skadden, Arps, Slate, Meagher & Flom LLP,
919 Third Avenue, New York, New York or at the offices of Purchaser's lender's
counsel, if requested by Purchaser's lender, at 10:00 a.m. local time on October
15, 1998 (time being of the essence with respect thereto).
In all other respects, the Agreement remains in full force and effect.
249660.02-New YorkS4A
1
<PAGE> 64
233 Broadway Owners, LLC
October 13, 1998
Page 2
Please signify your agreement with the foregoing by signing and dating the
enclosed counterpart of this letter where indicated below. This letter may be
executed in one or more counterparts, all of which together shall constitute one
and the same original.
Very truly yours,
233 BROADWAY, INC. VENATOR GROUP, INC.
By: /s/ John H. Cannon By: /s/ John H. Cannon
------------------ ------------------
Acknowledged and Agreed:
- -----------------------
233 BROADWAY OWNERS, LLC
By: 233 Broadway Next Generation LLC,
its managing member
By: /s/ Steven C. Witkoff
---------------------
/s/ Steven C. Witkoff
- -----------------------------------
Steven C. Witkoff, individually and
not in any representative capacity
249660.02-New YorkS4A
2
<PAGE> 65
233 BROADWAY, INC.
233 Broadway
New York, New York 10279
October 14, 1998
233 Broadway Owners, LLC and Steven C. Witkoff
c/o The Witkoff Group, LLC
220 East 42nd Street
New York, New York 10017
Re: Woolworth Building
Ladies and Gentlemen:
Reference is hereby made to that certain Purchase and Sale Agreement, dated
June 20, 1998 (as amended by those certain letter agreements dated as of
September 11, 1998, September 18, 1998 and October 13, 1998, the "Agreement"),
by and between 233 Broadway, Inc. ("Seller"), as seller, and 233 Broadway
Owners, LLC ("Purchaser"), as purchaser. All initially capitalized terms used
herein without definition shall have the meaning set forth for such terms in the
Agreement. Purchaser and Seller have agreed to make certain further amendments
to the Agreement as and to the extent hereinafter set forth.
1. Seller and Purchaser hereby confirm that each has agreed upon the
terms and conditions of, and have finalized, the Venator Lease in
the form of Exhibit A attached hereto and Seller shall
concurrently herewith execute, and cause the tenant thereunder to
execute, such agreed-upon Venator Lease as contemplated by
Section 18.1 of the Agree ment.
2. Section 4.1.1 of the Agreement is hereby deleted in its entirety and
replaced with the following new Section 4.1.1:
"4.1.1 The closing of the purchase and sale of the Property (the
"Closing") shall be held at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, 919 Third Avenue, New York, New York or at the
offices of Purchaser's lender's counsel, if requested by Pur chaser's
lender, at 10:00 a.m. local time on December 4, 1998 (time being of
the essence with respect thereto). The date of Closing is referred to
in this Agreement as the "Closing Date". "
Section 4.1.2 of the Agreement is hereby deleted in its entirety.
3. Notwithstanding Section 3.1 of the Agreement, Escrow Agent is
hereby authorized and instructed to immediately release the
Initial Deposit, together with all interest earned thereon to
date, to or at the direction of Seller and upon such release
Escrow
247306.08-New YorkS4A
1
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233 Broadway Owners, LLC and
Steven C. Witkoff
October 14, 1998
Page 2
Agent shall be relieved and released from any liability under the
Agreement. Upon consummation of the Closing, as contemplated by
the Agreement, Purchaser shall be entitled to receive a credit
against the Purchase Price equal to $44,370.64, such amount being
one-half (50%) of the amount of interest earned through October
14, 1998 on the Initial Deposit.
4. The definition of the term "Purchase Price", as such defined term
appears in Section 2.1 of the Agreement, is hereby amended so as
to delete therefrom the reference to $146,500,000 and to
substitute therefor a reference to $126,500,000.
5. Clause (ii) of Section 2.1 of the Agreement is hereby amended and
restated in its entirety to read as follows:
"(ii) Five Million Dollars ($5,000,000) (the "First Additional
Deposit") shall be paid directly to or at the direction of the Seller
by wire transfer of immediately available federal funds on or before
5:00 p.m. on October 19, 1998 (the "First Additional Deposit Payment
Date") (time being of the essence with respect thereto). Two Million
Five Hundred Thousand Dollars ($2,500,000) (the "Sec ond Additional
Deposit") shall be paid directly to or at the direction of the Seller
by wire transfer of immediately available federal funds on or before
5:00 p.m. on November 9, 1998 (the "Second Additional Deposit Payment
Date") (time being of the essence with respect thereto). Seven Million
Five Hundred Thousand Dollars ($7,500,000) (the "Third Additional
Deposit") shall be paid directly to or at the direction of the Seller
by wire transfer of immediately available federal funds on or before
5:00 p.m. on November 16, 1998 (the "Third Additional Deposit Payment
Date") (time being of the essence with respect thereto). The First
Additional Deposit, the Second Additional Deposit and the Third
Additional Deposit are collectively referred to herein as the
"Additional Deposit", and the Initial Deposit and the Additional
Deposit are collectively referred to herein as the "Deposit." In the
event that Purchaser shall fail for any reason to so pay any of the
First Additional Deposit or the Second Additional Deposit or the Third
Addi tional Deposit on the First Additional Deposit Payment Date and
the Second Additional Deposit Payment Date and the Third Additional
Deposit Payment Date, respectively, then Purchaser shall be in
material default under this Agreement and this Agreement shall
automatically terminate without further action by the parties and
neither party shall have any further rights or obligations hereunder
other than Purchaser's obligation to pay any remaining unpaid portion
of the Deposit to Seller, which shall expressly survive any such
termination. Payment of the First Additional Deposit is guaranteed by
Steven C. Witkoff (the "Guarantor") in accordance with the provisions
of Article XVII hereof."
247306.08-New YorkS4A
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233 Broadway Owners, LLC and
Steven C. Witkoff
October 14, 1998
Page 3
Payment of the Additional Deposit shall be made pursuant to Seller's wire
transfer instructions attached hereto as Exhibit D, or such other wire transfer
instructions as Seller may deliver to Purchaser in accordance with Section 16.1
of the Agreement.
The provisions of Article III of the Agreement with respect to the
maintenance, retention, and release of the Deposit by the Escrow Agent in escrow
are hereby deleted and of no further force or effect, except that Purchaser's
and Seller's indemnification obliga tions in favor of the Escrow Agent shall
survive.
From and after the release of the Initial Deposit to Seller as provided
hereby, references in the Agreement to payments of the Additional Deposit and/or
the Deposit to or by Escrow Agent shall be deemed to be references to payments
to or by Seller, as the case may be. Without limiting the foregoing, Seller
agrees to deliver and apply the Deposit as provided in Section 3.2 of the
Agreement.
6. (a) Steven C. Witkoff, by his signature hereto, hereby ratifies and
confirms his guaranty of the payment of the First Additional Deposit (as
modified pursuant to this letter agreement) in accordance with the
provisions of Article XVII of the Agree ment. Notwithstanding anything to
the contrary contained herein or in the Agreement, all references in
Article XVII to the "Additional Deposit" shall be deemed to be references
to the First Additional Deposit.
(b) Venator Group, Inc., by its signature hereto, hereby ratifies and
confirms its guaranty of the Seller Obligations (as modified pursuant to this
letter agree ment) in accordance with the provisions of Article XIX of the
Agreement.
7. Purchaser hereby acknowledges its receipt and approval of copies of the
Estoppel Certificates received by the Seller from each of the Tenants
identified on Exhibit B hereto and acknowledges and agrees that the
Seller's obligations under Section 8.7 and Section 9.2.3 of the Agreement
have been fully satisfied (other than with respect to delivery of Estoppel
Certificates from Seller and Seller's Affiliates) and that Purchaser shall
have no right to terminate the Agreement, nor shall Purchaser be entitled
to a reduction of the Purchase Price or otherwise be relieved from its
obligations under the Agreement on account of any statement made or
information contained in any such Estoppel Certificate. Without limiting
the generality of the foregoing, Purchaser acknowl edges and agrees that
(A) Seller shall have no basis to object to any of the Estoppel
Certificates on the basis that any of the same are dated more than thirty
(30) days prior to the Closing Date provided for herein and (B) Seller
shall not be required to provide, and the Closing shall in no event be
conditioned upon the Purchaser's receipt of, any further Estoppel
Certificates from any Tenants or an Estoppel Certificate executed by Seller
with
247306.08-New YorkS4A
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233 Broadway Owners, LLC and
Steven C. Witkoff
October 14, 1998
Page 4
respect to Leases for any Tenants, other than Estoppel Certificates from all
affiliates of Seller occupying all or any portion of the Property (including,
without limitation, an Estoppel Certificate from Venator Group Inc. with respect
to the Venator Lease) which Seller will cause to be delivered to Purchaser on
the Closing Date, dated as of the Closing Date.
8. Exhibit C to the Agreement is hereby deleted and replaced with Exhibit C
attached hereto and made a part hereof. Purchaser agrees to accept title to
the Property subject to those matters set forth on, and in the manner shown
on, Exhibit C attached hereto and any other matters caused, created or
consented to by Purchaser.
9. Purchaser acknowledges its receipt of copies of (i) a complaint filed in
the Supreme Court of the State of New York, County of New York in an action
entitled Harry's at the Woolworth Building, Inc. vs. Venator Group
Speciality, Inc. (f/k/a F.W. Woolworth Co.) (Index No. 98/604764) (the
"Harry's Action") and (ii) a notice of appeal filed in the civil court of
the City of New York, County of New York in an action entitled F.W.
Woolworth Co. against Harad Realty Corp. and Harry's at the Woolworth
Building, Inc. (Index No. L&T 81281/98) (the "Landlord- Tenant Action" and,
collectively, with the Harry's Action, the "Harry's Litigation"). Schedules
2 and 7 of the Agreement and Seller's representations contained in Section
6.1.4(ii) are each hereby amended to refer to the Harry's Litigation, and
the allegations contained therein, as well as a certain offer of settlement
made by Harry's at the Woolworth Building, Inc. (the "Plaintiff") in
connection therewith. Seller represents and warrants that together herewith
it has delivered to Pur chaser copies of the material court filings in the
Harry's Litigation and shall hereafter deliver to Purchaser any future
court filings as well as such other information as Purchaser may reasonably
request. Purchaser acknowledges and agrees that, at the Closing, Pur chaser
shall take title to the Property subject to the pendency of and any relief
afforded to the Plaintiff in the Harry's Litigation, if any, provided,
however that Seller agrees that (a) it shall indemnify, defend and hold the
Purchaser harmless from and against any claims or judgments for monetary
damages awarded to the Plaintiff in the Harry's Litigation and reasonable
out-of-pocket costs and expenses related thereto, including, without
limitation, any abatement, set-off or reductions of the rent now or
hereafter due and owing under the Plaintiff's lease for the period prior to
the Closing Date and/or damages, or reasonable out- of-pocket costs or
expenses arising out of any court-ordered modification of such lease (and
Seller shall continue to defend and prosecute the Harry's Action subsequent
to the Closing (if it is not sooner resolved)), (b) it shall use
commercially reasonable efforts prior to the Closing to cause the eviction
of the Plaintiff from the Property pursuant to the Landlord-Tenant Action,
(c) it shall not modify or amend the Plaintiff's Lease or waive any default
thereunder without the approval of Purchaser and (d) it shall not settle
the Harry's Action or the Landlord-Tenant Action in any manner which would
permit the Plaintiff to
247306.08-New YorkS4A
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233 Broadway Owners, LLC and
Steven C. Witkoff
October 14, 1998
Page 5
retain occupancy of its premises subsequent to the Closing Date without
Purchaser's consent. From and after the Closing Date, Purchaser shall take
over and have all rights and responsibilities in, and shall take the
Property subject to, the Landlord-Tenant Action and matters relating to the
Plaintiff's possession of the Property and the Plaintiff's Lease, except
with respect to monetary claims under the Harry's Action, which Seller
shall continue to prosecute and defend (if not sooner resolved) as set
forth above and monetary judgments under the Landlord-Tenant Action (to
which Seller is and shall remain entitled to retain). Purchaser and Seller
each agree to reasonably co-operate with the other in connection with the
Harry's Action and the Landlord-Tenant Action subsequent to the Closing.
The provisions of the Section 9 shall survive the Closing.
10. Section 12.1 of the Agreement is hereby amended to provide that in the
event the Closing and the transactions contemplated by the Agreement (as
amended by this letter agreement) do not occur as provided in the Agreement
(as amended by this letter agree ment) by reason of the default of Seller,
Purchaser's sole remedy shall be to terminate the Agreement and receive the
Deposit from Seller. Without limiting the generality of the foregoing,
Purchaser hereby irrevocably waives any right to (and agrees not to seek or
prosecute any action to) enforce specific performance of, or seek other
equitable relief or actions under, the Agreement in the event the Closing
and the transactions contemplated thereby do not occur as provided therein
by reason of the default of Seller.
11. Purchaser agrees that it shall, on or before October 23, 1998, deliver to
CT Corporation for filing with the New York Secretary of State, an
amendment to the Articles of Organization of Purchaser providing the
following (the "Articles Amendment"):
"Notwithstanding anything to the contrary contained in these Articles, the
sole business and purpose of the Company shall be the acquisition of the
property located at 233 Broadway, New York, New York (the "Property") and
to exercise all powers enumerated in the LLC Law necessary or convenient to
the conduct, promotion or attainment of such purpose. From the date hereof
through the date of the Company's acquisition of the Property, the Company
shall have an independent member (the "IM"), who shall have no financial
interest in the Company or affiliation (as employee, owner or otherwise)
with The Witkoff Group, LLC. The IM shall be an employee of CT Corporation
or shall otherwise be reasonably acceptable to 233 Broadway, Inc.
("Seller"), and any individual IM may be replaced at any time, upon request
of the Company, by another individual IM employed by CT Corporation or
otherwise reasonably acceptable to Seller. The Company may not commence a
bankruptcy proceeding without the consent of the IM. The IM shall have no
rights or interests in the Company or otherwise with respect to the Company
or the Property and shall have no right to vote on any issue, other than
the right to grant or withhold its consent pursuant to the immediately
preceding sentence. Notwithstanding any provision hereof to the contrary,
the following shall govern: When acting on matters
247306.08-New YorkS4A
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233 Broadway Owners, LLC and
Steven C. Witkoff
October 14, 1998
Page 6
subject to the vote of the members, notwithstanding that the Company is not
then insol vent, all of the members shall take into account the interest of
the Company's creditors, as well as those of the members. The terms of this
paragraph shall be null and void from and after the date of the Company's
acquisition of the Property or on any earlier date with Seller's consent
(which may be granted or withheld in Seller's sole and absolute discre
tion)."
Seller agrees to act reasonably and promptly in granting its written consent to
an IM and to any replacement IM. At the Closing, upon the request of Purchaser,
Seller shall execute any confirmation reasonably requested by Purchaser in order
to amend its Articles to delete the Articles Amendment. In the event that (i)
Purchaser fails to deliver the Articles Amendment as set forth above on or
before October 25, 1998; or (ii) Purchaser amends its Articles to modify or
remove the Articles Amendment prior to Closing without Seller's consent; or
(iii) Purchaser breaches the Articles Amendment, then (x) Purchaser shall be in
material default under the Agreement and the Additional Deposit shall be
immediately due and payable to or at the direction of Seller and, when paid,
shall be non-refundable and (y) if such failure, modification or breach shall
continue for two (2) business days after notice from Seller, then Seller shall
be entitled to terminate the Agreement and neither party shall have any further
rights or obligations thereunder, other than Purchaser's obligation to pay any
remaining unpaid portion of the Deposit to Seller.
12. The second and third grammatical sentences of Section 8.1 of the Agreement
are hereby deleted and replaced with the following:
"Subsequent to the Closing, Purchaser has the right, but not the
obligation, to undertake certain repairs to the facade of the Improvements
substantially in accordance with the specifications attached hereto as
Exhibit F (the "Facade Repairs"). Seller agrees that subsequent to Closing
Purchaser may make any and all repairs it desires to the Improve ments and,
if all or any portion of the Facade Repairs are made by Purchaser, Seller
shall promptly after written request reimburse Purchaser for one-half (1/2)
of the amounts actually expended by Purchaser in connection with such
Facade Repairs, up to a maximum of $450,000 ("Seller's Share"). The
provisions of the Section 8.1 shall survive the Closing."
247306.08-New YorkS4A
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233 Broadway Owners, LLC and
Steven C. Witkoff
October 14, 1998
Page 7
13. The second grammatical sentence of Section 4.2.6 of the Agreement is hereby
amended to restate the proviso at the end thereof as follows: "provided,
however, that Seller shall not apply any Security Deposits to cure any
non-monetary Tenant defaults", it being expressly agreed that Seller may
apply any Security Deposits in accordance with the terms of the Leases
during the thirty (30) days prior to the Closing to cure monetary Tenant
defaults.
14. Intentionally omitted.
15. (a) Purchaser and Steven C. Witkoff hereby jointly and severally represent
and warrant to Seller that the execution, delivery and performance by the
Purchaser of this agreement and all actions taken by Purchaser hereunder
have each been duly authorized, executed and delivered by Purchaser, that
this agreement is the legal, valid and binding obligation of Purchaser, and
that neither this agreement nor any of the actions taken by Purchaser
hereunder violate any provision of any agreement or judicial order to which
Purchaser is a party or to which Purchaser or any of its constituent
members is subject. Without limiting the generality of the foregoing,
Purchaser and Steven C. Witkoff each jointly and severally specifically
represent and warrant to Seller that no consent, approval, waiver or other
authorization which has not been obtained by Purchaser and is in full force
and effect on the date hereof is required to be obtained by Purchaser in
connec tion with the execution, delivery and/or performance by Purchaser of
its obligations hereunder and under the Agreement.
(b) Seller hereby represents and warrants to Purchaser that the execu tion,
delivery and performance by the Seller of this agreement and all actions taken
by Seller hereunder have each been duly authorized, executed and delivered by
Seller, that this agreement is the legal, valid and binding obligation of
Seller, and that neither this agree ment nor any of the actions taken by Seller
hereunder violate any provision of any agreement or judicial order to which
Seller is a party or to which Seller is subject. Without limiting the generality
of the foregoing, Seller represents and warrants to Purchaser that no consent,
approval, waiver or other authorization which has not been obtained by Seller
and is in full force and effect on the date hereof is required to be obtained by
Seller in connec tion with the execution, delivery and/or performance by Seller
of its obligations hereunder and under the Agreement.
247306.08-New YorkS4A
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233 Broadway Owners, LLC and
Steven C. Witkoff
October 14, 1998
Page 8
16. (a) Purchaser hereby confirms that, as of the date hereof, it has no
knowledge of any defenses, personal or otherwise, offsets or counterclaims
to all or any of the obligations of the Purchaser hereunder or under the
Agreement and, to the extent that any of the same are known to the
Purchaser, Purchaser hereby waives and releases the same.
(b) Seller hereby confirms that, as of the date hereof, it has no knowl
edge of any defenses, personal or otherwise, offsets or counterclaims to
all or any of the obligations of the Seller hereunder or under the
Agreement and, to the extent that any of the same are known to the Seller,
Seller hereby waives and releases the same.
17. In all other respects, the Agreement remains in full force and effect and
is hereby ratified and affirmed by the parties as modified hereby.
Please signify your agreement with the foregoing by signing and dating the
enclosed counterpart of this letter where indicated below. This letter may be
executed in one or more counterparts, all of which together shall constitute one
and the same original.
Very truly yours,
233 BROADWAY, INC.
By: /s/ John E. DeWolf III
----------------------
FOR PURPOSES OF SECTION 6(b) HEREOF:
VENATOR GROUP, INC.
By: /s/ John E. DeWolf III
----------------------
Acknowledged and Agreed:
- -----------------------
233 BROADWAY OWNERS, LLC
By: 233 Broadway Next Generation LLC,
its managing member
By: /s/ James F. Stomber Jr.
-------------------------
FOR PURPOSES OF SECTION 6(a) and SECTION 15(a) HEREOF:
/s/ Steven C. Witkoff
- -----------------------------------
Steven C. Witkoff, individually and
not in any representative capacity
247306.08-New YorkS4A
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<PAGE> 73
EXHIBIT A
---------
FORM OF VENATOR LEASE
See Attached.
247306.08-New YorkS4A
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<PAGE> 74
EXHIBIT B
ACCEPTED ESTOPPEL CERTIFICATES
1. Steve Golfarb and Arthur Greenberg
2. The Southmont Foundation
3. Tellerman, Paticoff & Greenberg
4. Joseph Cella
5. Mel Sachs
6. The Bank of New York
7. Friedland, Fisbein, Laifer & Robbins
8. Friedland, Fisbein, Laifer & Robbins
9. William M. Kimball
10. Stuart Shestack, Hayes Young, Michael Wofson and John Carroll
11. Jack Goldstein and Donald Wallman
12. The Basket Shop
13. BDB Development Enterprise Corp.
14. Madison Newstand VIII, Inc.
15. Russell Guba
16. Schneider, Kleinick, Weitz, Damashek, Godosky & Gentile
17. Schneider, Kleinick, Weitz, Damashek, Godosky & Gentile
18. Staat Personnel, Inc.
19. Paragon Process Service
20. Robert T. Schumpert
21. Dick Dunphy Advertising Specialties, Inc.
22. Panken, Besterman, Winer, Becker & Sherman, LLP
23. Basichas & Sherman, P.C.
24. Franklin Gould, Norman Reimer & Robert Gottfried
25. Thomas O'Rourke & Ronald Degen
26. Fasulo, Freidson & Joyce
27. Gargiulo & Co
28. Engitech Resources, Inc.
29. Revinson & Reis
30. Sheila Dugan
31. Superior Officers Council
32. Lionard Drexler
33. Mark E. Seitelman
34. Mark E. Seitelman
35. Isidore R. Tucker
36. Irving Fein, Peter Jakab, Jay B. Ringel and John M. Paige
37. Daniel McCarthy
38. Marvin Salenger and Robert Sack
39. Doar Devorkin & Rieck
40. Doar Devorkin & Rieck
41. Serving by Irving, Inc.
247306.08-New YorkS4A
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<PAGE> 75
42. Eisenberg, Margolis, Friedman & Basichas
43. Stanley Young
44. William S. Hocking Realty
45. Electronic Instrument Co.
46. Fromme, Schwartz, Newman & Cornicello, LLP
47. Hanley Goble & Dennis LLP
48. Richard A. Deinst and Allan G. Serrins
49. Melito & Adolfsen, P.C.
50. Dudley Gaffin
51. Jeffrey T. Schwartz
52. Associated Commodity Corp.
53. Bruce Clark
54. Stuart Perry & David Schwarz
55. Solomon Pearl Blum & Quinn LLP
56. Melvyn Jacknowitz
57. Marcel Weisman
58. DeBlasio & Alton, P.C.
59. Downing & Mehrtens, P.C.
60. Seymour Ostrow
61. Kramer, Dillof
62. Theobald J. Dengler
63. Iannuzzi and Iannuzzi, John Nicholas Iannuzzi
64. Kaplan, Ostheimer & Kuflik (Lamb & Lerch)
65. Ginsburg, Becker & Weaver, LLP
247306.08-New YorkS4A
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EXHIBIT C
PRO FORMA TITLE POLICY
(See Attached)
247306.08-New YorkS4A
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<PAGE> 77
EXHIBIT D
WIRE TRANSFER INSTRUCTIONS
Bank: M&I Marshall & Ilsley Bank, Milwaukee, WI
Abbreviated Name: MARSHALL MILW
ABA: 075000051
Credit: The Chicago Trust Company
Account No. 01-24-2202
Further Credit to: Trust Number: 385600010
Trust Name: 233 Broadway, Inc./CDEC
Telephone Confirmation: Chicago Deferred Exchange Commission
1-312-223-2931 or
1-800-621-1919 ext. 2931
Attn: Mary Cunningham
247306.08-New YorkS4A
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EXHIBIT E
INTENTIONALLY OMITTED
247306.08-New YorkS4A
14
<PAGE> 78
EXHIBIT F
FACADE REPAIR SPECIFICATIONS
(See Attached)
247306.08-New YorkS4A
15
<PAGE> 79
233 BROADWAY, INC.
233 Broadway
New York, New York 10279
as of November 9, 1998
233 Broadway Owners, LLC and Steven C. Witkoff
c/o The Witkoff Group, LLC
220 East 42nd Street
New York, New York 10017
Re: Woolworth Building
------------------
Ladies and Gentlemen:
Reference is hereby made to that certain Purchase and Sale Agreement, dated
June 20, 1998 (as amended by those certain letter agreements dated as of
September 11, 1998, September 18, 1998, October 13, 1998 and October 14, 1998,
the "Agreement"), by and between 233 Broadway, Inc. ("Seller"), as seller, and
233 Broadway Owners, LLC ("Purchaser"), as purchaser. All initially capitalized
terms used herein without definition shall have the meaning set forth for such
terms in the Agreement. Purchaser and Seller have agreed to make certain further
amendments to the Agreement as and to the extent hereinafter set forth.
1. Seller and Purchaser hereby confirm that clause (ii) of Section 2.1 of
the Agreement (as such clause appears in Section 5 of the October 14, 1998
amendment to the Agreement) is hereby amended so as to delete therefrom the
references to November 9, 1998 and November 16, 1998 and to substitute therefor,
in each case, a reference to November 19, 1998. Thus, the Second Additional
Deposit Payment Date and the Third Additional Payment Date shall be, and each of
the Second Additional Deposit and the Third Additional Deposit shall be due on,
November 19, 1998 (time being of the essence with respect thereto).
2. Purchaser hereby acknowledges and agrees that the Venator Lease, the
form of which is attached as Exhibit A to the October 14, 1998 amendment to the
Agreement, shall be amended in the following respects:
253036.04-New YorkS4A
1
<PAGE> 80
233 Broadway Owners, LLC and
Steven C. Witkoff
as of November 9, 1998
Page 2
(a) the reference, in the second (2nd) sentence of Section 28A, to 6:00
p.m. shall be deleted and a reference to 7:00 p.m. substituted in lieu thereof;
and
(b) the third (3rd) sentence of Section 28A shall be deleted in its
entirety as the following substituted therefor:
Tenant shall have the additional right, without additional charge (except
as hereinafter expressly provided), (i) to exclusively use not less than
(1) of the freight elevators (such freight elevator(s) to be designated by
Tenant) at any time during the Term on ten (10) Business Days advance
notice to Landlord (which may be telephonic) in order to relocate from the
1998 Office Space, the 1999 Office Space, the Retail Space and/or the
Kinney Storage Space to the Office Space and shall pay for any such freight
elevator usage on or after July 1, 1999 at an hourly rate equal to $75.00
during Overtime Periods, (ii) to exclusively use two (2) of the four (4)
passenger elevators serving the "tower floors" of the Woolworth Building
during Overtime Periods in order to relocate from the 1998 Office Space and
1999 Office Space located on such "tower floors" of the Woolworth Building
to the Office Space and (iii) to up to one-half (1/2) hour of reserved
freight elevator service each Business Day for the moving of fixtures and
equipment using a freight elevator to be designated by Tenant.
3. In all other respects, the Agreement remains in full force and effect and
is hereby ratified and affirmed by the parties as modified hereby.
253036.04-New YorkS4A
2
<PAGE> 81
233 Broadway Owners, LLC and
Steven C. Witkoff
as of November 9, 1998
Page 3
Please signify your agreement with the foregoing by signing and dating the
enclosed counterpart of this letter where indicated below. This letter may be
executed in one or more counterparts, all of which together shall constitute one
and the same original.
Very truly yours,
233 BROADWAY, INC.
By: /s/ Gary H. Brown
-----------------
ACKNOWLEDGED AND AGREED:
- -----------------------
233 BROADWAY OWNERS, LLC
By: 233 Broadway Next Generation LLC,
its managing member
By: /s/ James F. Stomber Jr.
-----------------------
/s/ Steven C. Witkoff
- ----------------------------------
Steven C. Witkoff, individually and
not in any representative capacity
VENATOR GROUP, INC.
By: /s/ Gary H. Brown
------------------
253036.04-New YorkS4A
3
<PAGE> 82
233 BROADWAY, INC.
233 Broadway
New York, New York 10279
November 19, 1998
233 Broadway Owners, LLC and Steven C. Witkoff
c/o The Witkoff Group, LLC
220 East 42nd Street
New York, New York 10017
Re: Woolworth Building
Ladies and Gentlemen:
Reference is hereby made to that certain Purchase and Sale Agreement, dated
June 20, 1998 (as amended by those certain letter agreements dated as of
September 11, 1998, September 18, 1998, October 13, 1998, October 14, 1998 and
November 9, 1998, the "Agreement"), by and between 233 Broadway, Inc.
("Seller"), as seller, and 233 Broadway Owners, LLC ("Purchaser"), as purchaser.
All initially capitalized terms used herein without definition shall have the
meaning set forth for such terms in the Agreement. Purchaser and Seller have
agreed to reinstate the Old Agreement and make certain further amendments to the
Agreement as and to the extent hereinafter set forth.
1. Seller and Purchaser hereby agree that, notwithstanding the termination of
the Agreement on November 19, 1998 in accordance with Section 2.1(ii) of
the Agreement, the Agreement is hereby reinstated on the terms and
conditions set forth therein and herein.
2. Seller and Purchaser hereby confirm that clause (ii) of Section 2.1 of the
Agreement (as such clause appears in Section 5 of the October 14, 1998
amendment to the Agreement and was amended in Section 1 of the November 9,
1998 amendment to the Agreement) is hereby amended and restated in its
entirety to read as follows:
"(ii) Five Million Dollars ($5,000,000) (the "First Additional Deposit")
shall be paid directly to or at the direction of the Seller by wire
transfer of immediately
<PAGE> 83
233 Broadway Owners, LLC and
Steven C. Witkoff
November 19, 1998
Page 2
available federal funds on or before 5:00 p.m. on October 19, 1998 (the
"First Additional Deposit Payment Date") (time being of the essence with
respect thereto). Five Million Dollars ($5,000,000) (the "Second Additional
Deposit") shall be paid directly to or at the direction of the Seller by
wire transfer of immedi ately available federal funds on November 20, 1998
(the "Second Additional Deposit Payment Date") (time being of the essence
with respect thereto). The First Additional Deposit and the Second
Additional Deposit are collectively referred to herein as the "Additional
Deposit", and the Initial Deposit and the Additional Deposit are
collectively referred to herein as the "Deposit." Purchaser shall initiate
the wire transfer of the Second Additional Deposit and advise Seller and
its counsel in writing as to reference number applicable thereto (which
advice may be given by telecopy only) on or before 12:00 noon on the Second
Additional Deposit Payment Date. In the event that Purchaser shall fail for
any reason to so pay any of the First Additional Deposit or the Second
Additional Deposit on the First Additional Deposit Payment Date and the
Second Additional Deposit Pay ment Date, respectively, and to advise the
Seller as to the reference number applicable to the Second Additional
Deposit, then Purchaser shall be in material default under this Agreement
and this Agreement shall automatically terminate without further action by
the parties and neither party shall have any further rights or obligations
hereunder other than Purchaser's obligation to pay any remaining unpaid
portion of the Deposit to Seller, which shall expressly survive any such
termination. Payment of the First Additional Deposit is guaranteed by
Steven C. Witkoff (the "Guarantor") in accordance with the provisions of
Article XVII hereof."
3. Purchaser hereby confirms that, as of the date hereof, it has no knowledge
of any defenses, personal or otherwise, offsets or counterclaims to all or
any of the obligations of the Purchaser hereunder or under the Agreement
and, to the extent that any of the same are known to the Purchaser,
Purchaser hereby waives and releases the same.
4. Purchaser and Seller each hereby confirm that the Agreement, as reinstated
and amended by this letter agreement, constitutes the entire and final
agreement between the parties with respect to the subject matter thereof
and hereof and that there are no other agreements, written or oral, with
respect thereto or hereto. This letter agreement may not be changed,
terminated or otherwise varied, except by a writing duly executed by the
parties hereto.
5. In all other respects, the Agreement remains in full force and effect and
is hereby reinstated, ratified and affirmed by the parties as modified
hereby.
254271.02-New YorkS4A
2
<PAGE> 84
233 Broadway Owners, LLC and
Steven C. Witkoff
November 19, 1998
Page 3
Please signify your agreement with the foregoing by signing and dating the
enclosed counterpart of this letter where indicated below. This letter may be
executed in one or more counterparts, all of which together shall constitute one
and the same original.
Very truly yours,
233 BROADWAY, INC.
By: /s/ John H. Cannon
-------------------
ACKNOWLEDGED AND AGREED:
- -----------------------
233 BROADWAY OWNERS, LLC
By: 233 Broadway Next Generation LLC,
its managing member
By: /s/ James F. Stomber Jr.
----------------------------
/s/ Steven c. Witkoff
- -----------------------------------
Steven C. Witkoff, individually and
not in any representative capacity
VENATOR GROUP, INC.
By: /s/ John H. Cannon
-------------------
254271.02-New YorkS4A
3
<PAGE> 1
EXHIBIT 15
Accountants' Acknowledgment
---------------------------
Venator Group, Inc.
New York, New York
Board of Directors:
Re: Registration Statements Numbers 33-10783, 33-91888, 33-91886, 33-97832,
333- 07215, 333-21131 and 333-62425 on Form S-8 and Numbers 33-43334 and
33-86300 on Form S-3
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated November 19, 1998 related to
our review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Act.
/s/ KPMG Peat Marwick LLP
New York, New York
December 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED October 31, 1998
AND THE CONSOLIDATED BALANCE SHEET AS OF October 31, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-1-1998
<PERIOD-END> OCT-31-1998
<CASH> 147
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,112
<CURRENT-ASSETS> 1,615
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,145
<CURRENT-LIABILITIES> 1,260
<BONDS> 508
0
0
<COMMON> 0
<OTHER-SE> 1,002
<TOTAL-LIABILITY-AND-EQUITY> 3,145
<SALES> 3,223
<TOTAL-REVENUES> 3,223
<CGS> 2,324
<TOTAL-COSTS> 2,324
<OTHER-EXPENSES> 89
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> (52)
<INCOME-TAX> (26)
<INCOME-CONTINUING> (26)
<DISCONTINUED> (147)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (173)
<EPS-PRIMARY> (1.27)
<EPS-DILUTED> (1.27)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED October 25, 1997
AND THE CONSOLIDATED BALANCE SHEET AS OF October 25, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> JAN-26-1997
<PERIOD-END> OCT-25-1997
<CASH> 17
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 886
<CURRENT-ASSETS> 1,649
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,815
<CURRENT-LIABILITIES> 652
<BONDS> 510
0
0
<COMMON> 0
<OTHER-SE> 1,154
<TOTAL-LIABILITY-AND-EQUITY> 2,815
<SALES> 3,198
<TOTAL-REVENUES> 3,198
<CGS> 2,167
<TOTAL-COSTS> 2,167
<OTHER-EXPENSES> 90
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25
<INCOME-PRETAX> 172
<INCOME-TAX> 65
<INCOME-CONTINUING> 107
<DISCONTINUED> (232)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (125)
<EPS-PRIMARY> (0.93)
<EPS-DILUTED> (0.92)
</TABLE>
<PAGE> 1
EXHIBIT 99
Independent Accountants' Review Report
--------------------------------------
The Board of Directors and Shareholders
Venator Group, Inc.:
We have reviewed the accompanying condensed consolidated balance sheets of
Venator Group, Inc. (formerly Woolworth Corporation) and subsidiaries as of
October 31, 1998 and October 25, 1997, and the related condensed consolidated
statements of operations, comprehensive income (loss), retained earnings, and
cash flows for the thirteen and thirty-nine week periods ended October 31, 1998
and October 25, 1997. These condensed consolidated financial statements are the
responsibility of Venator Group Inc.'s management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Venator Group, Inc. and
subsidiaries as of January 31, 1998, and the related consolidated statements of
operations, changes in shareholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated March 11, 1998, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of January 31, 1998, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ KPMG Peat Marwick LLP
New York, New York
November 19, 1998
