<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended January 30, 1999
Commission file number 1-10299
VENATOR GROUP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
Registrant's telephone number, including area code: (212) 553-2000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
-------------------- -----------------------------------------
<S> <C>
Common Stock, par value $.01 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---
See pages 11 through 14 for Index of Exhibits.
Number of shares of Common Stock outstanding at April 26, 1999: 137,223,806
Aggregate market value of voting stock held by non-affiliates at April 26,
1999: $*909,102,474
* For purposes of this calculation only (a) all directors plus one executive
officer and owners of five percent or more of the Registrant are deemed to
be affiliates of the Registrant and (b) shares deemed to be "held" by such
persons at April 26, 1999, include only outstanding shares of the
Registrant's voting stock with respect to which such persons had, on such
date, voting or investment power.
DOCUMENTS INCORPORATED BY REFERENCE
1. The Registrant's Annual Report to Shareholders (the "Annual Report") for
the fiscal year ended January 30, 1999: Parts I, II and III.
2. The Registrant's definitive Proxy Statement (the "Proxy Statement")to be
filed in connection with the 1999 annual meeting of shareholders: Part III.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I
Item 1 Business 1
Item 2 Properties 5
Item 3 Legal Proceedings 5
Item 4 Submission of Matters to a Vote of Security Holders 5
PART II
Item 5 Market for the Registrant's Common Equity
and Related Stockholder Matters 6
Item 6 Selected Financial Data 6
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Item 7A Quantitative and Qualitative Disclosures about Market Risk 7
Item 8 Consolidated Financial Statements and Supplementary Data 8
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 8
PART III
Item 10 Directors and Executive Officers of the Registrant 8
Item 11 Executive Compensation 8
Item 12 Security Ownership of Certain Beneficial Owners and Management 8
Item 13 Certain Relationships and Related Transactions 8
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 9
</TABLE>
<PAGE> 3
PART I
Item 1. Business
General
Venator Group, Inc. (the "Registrant"), incorporated under the laws of the
State of New York in 1989, is the leading global retailer operating 6,002
primarily mall-based stores in North America, Europe, Asia and Australia. Since
the Registrant's establishment in 1879, the Registrant has evolved from a
company with a strong heritage in general merchandise retailing into a specialty
retailer, principally of athletic footwear and apparel. The Registrant operates
in two business segments, the Global Athletic Group, which includes Foot Locker,
Lady Foot Locker, Kids Foot Locker, Champs Sports, Colorado and Eastbay, and the
Northern Group. The remaining businesses are grouped in the "All Other"
category, which consists primarily of the Afterthoughts jewelry format and The
San Francisco Music Box and Gift Company. The following table indicates the
sales and percent of total sales generated by each of the businesses in 1998:
<TABLE>
<CAPTION>
Business Sales Percent of Total Sales
- -------- ----- ----------------------
($ in millions)
<S> <C> <C>
Athletic Group $ 3,753 82%
Northern Group 415 9
All Other 387 9
------ -----
Total $ 4,555 100%
====== =====
</TABLE>
The financial information concerning industry segments required by Item
101(b) of Regulation S-K is set forth on page 36 of the Registrant's Annual
Report to Shareholders ("Annual Report") for the fiscal year ended January 30,
1999 and is incorporated herein by reference.
Store Profile
<TABLE>
<CAPTION>
At January 31, January 30,
Formats 1998 Opened Closed 1999
- ------- ---- ------ ------ ----
<S> <C> <C> <C> <C>
Foot Locker ............................. 2,008 249 125 2,132
Lady Foot Locker ........................ 649 59 14 694
Kids Foot Locker ........................ 274 101 6 369
Champs Sports ........................... 657 53 41 669
Colorado ................................ 37 24 - 61
------ ----- ----- ------
Total Global Athletic Group ............. 3,625 486 186 3,925
------ ----- ----- -----
Northern Reflections .................... 557 37 12 582
Northern Getaway ........................ 139 57 2 194
Northern Elements ....................... 80 25 3 102
Northern Traditions ..................... 51 13 2 62
---- ---- ---- ----
Total Northern Group .................... 827 132 19 940
---- ---- ---- ----
Afterthoughts ........................... 791 27 45 773
The San Francisco Music Box and Gift Company 181 - 13 168
Weekend Edition ......................... 165 1 57 109
Randy River ............................. 96 2 31 67
Food Services ........................... 20 3 3 20
Other ................................... 3 - 3 -
----- ---- ---- -----
Total All Other ......................... 1,256 33 152 1,137
----- ---- ---- -----
Total continuing operations .......... 5,708 651 357 6,002
----- --- --- -----
Specialty Footwear ...................... 1,003 9 698 314
International General Merchandise ....... 526 3 378 151
----- ---- ----- ----
Total discontinued operations ........ 1,529 12 1,076 465
----- ---- ----- ----
Total ................................ 7,237 663 1,433 6,467
===== ==== ===== =====
</TABLE>
The service marks and trademarks appearing on this page and elsewhere in
this report (except for Burger King) are owned by Venator Group, Inc. or its
subsidiaries.
-1-
<PAGE> 4
Global Athletic Group
The Global Athletic Group, the Registrant's largest and most profitable
business, operates 3,925 stores in North America, Europe, Asia and Australia
under the Foot Locker, Lady Foot Locker, Kids Foot Locker, Colorado and Champs
Sports formats. In addition to retail stores, the Global Athletic Group includes
Eastbay, the leading direct marketer of athletic footwear, apparel and sports
equipment. The Registrant's portfolio strategy is unique in the athletic
industry, with specialized retail formats targeted specifically to the men's,
women's and children's segments of the market, allowing the Registrant to tailor
their merchandise and service offerings more effectively to their target
customers.
The following is a brief description of the Global Athletic Group's key
operating businesses:
Foot Locker - Foot Locker is the leading global athletic footwear and
apparel retailer. Its stores offer the latest in athletic-inspired
technical and performance products, manufactured primarily by the leading
athletic brands. Foot Locker offers products for a wide variety of
activities including running, basketball, hiking, tennis, aerobics,
fitness, baseball, football and soccer. Its 2,132 stores are located in 14
countries including 1,638 in the United States, 152 in Canada, 281 in
Europe, 56 in Australia and 5 in Japan and range in size from 1,000 to
12,000 selling square feet.
Lady Foot Locker - Lady Foot Locker is a leading U.S. retailer of
athletic footwear, apparel and accessories for women. Its stores carry all
major athletic footwear and apparel brands, as well as casual wear and an
assortment of proprietary merchandise designed for a variety of activities,
including running, basketball, walking and fitness. Its 694 stores are
located in the United States and Puerto Rico and range in size from 1,000
to 4,000 selling square feet.
Kids Foot Locker - Kids Foot Locker is a national children's athletic
retailer that offers the largest selection of brand name athletic footwear,
apparel and accessories for infants, boys and girls, primarily on an
exclusive basis. Its stores feature an entertaining environment geared to
both parents and children. Its 369 stores are located in the United States
and Puerto Rico and range in size from 1,000 to 4,000 selling square feet.
Champs Sports - Champs Sports is, after Foot Locker, the second
largest mall-based sporting goods retailer, selling both branded and
private label sporting goods. Its product categories include athletic
footwear, apparel and accessories, and a focused assortment of equipment.
This combination allows Champs Sports to differentiate itself from other
mall-based stores by presenting complete product assortments in a select
number of sporting activities. Its 669 stores are located throughout the
United States and Canada and range in size from 4,000 to 15,000 selling
square feet.
Eastbay /eVenator - Acquired in 1997, Eastbay, Inc. ("Eastbay") is the
largest direct marketer of athletic footwear, apparel, equipment and
licensed private-label merchandise in the United States. Its distinctive
catalog and 24-hour operations provide convenience, superior customer
service and a broad selection of products. eVenator was formed in March
1999 to build on the core distribution competencies the Registrant acquired
with Eastbay and to accelerate the development of its direct marketing
efforts via the Internet. The Registrant has also reached an agreement in
principle to become the National Football League's official catalog and
e-commerce retailer, which includes managing the NFL catalog and e-commerce
businesses. eVenator will design, merchandise and fulfill the NFL's
official catalog, which will be renamed NFL Shop, and the new on-line
e-commerce site linked to www.NFL.com.
Colorado - Colorado offers top quality brand name and proprietary
merchandise designed for the active lifestyle and outdoor consumer through
61 stores in the United States and Australia that typically range in size
from 1,400 to 4,000 selling square feet.
-2-
<PAGE> 5
Northern Group
The Northern Group operates 940 stores in the United States and Canada that
offer exclusively private label casual apparel for women (Northern Reflections),
children (Northern Getaway), and men (Northern Elements), in addition to women's
private label coordinates for dressy, non-formal occasions (Northern
Traditions). The Northern Group's stores typically range in size from 1,500 to
5,000 selling square feet.
All Other
The Registrant's remaining businesses are in the "All Other" category,
including Afterthoughts, The San Francisco Music Box and Gift Company, Weekend
Edition, Randy River and Burger King formats.
The following is a brief description of the "All Other" businesses:
Afterthoughts - Afterthoughts operates 773 stores throughout the
United States and Canada that provide pre-teen and teenage girls, as well
as young women, with the latest in fashion jewelry, accessories, cosmetics
and gifts in a fun and exciting shopping environment. Stores sizes range in
size from 800 to 2,000 selling square feet.
The San Francisco Music Box and Gift Company - The San Francisco Music
Box and Gift Company operates in the United States 168 year-round stores
and approximately 200 temporary stores during the Christmas holiday season
that sell exclusive and licensed musical and non-musical giftware. Stores
range in size from 800 to 1,500 selling square feet.
Weekend Edition - The Weekend Edition format operates 109 stores in
Canada and features women's casual wear. Stores range in size from 1,000 to
2,500.
Randy River - The Randy River format operates 67 stores in Canada and
features trend setting teen casual wear and accessories. Stores range in
size from 1,000 to 1,800.
Food Services - The Registrant operates 20 franchisees, which
primarily include Burger King locations.
-3-
<PAGE> 6
Information Regarding Business Segments and Geographic Areas
For information regarding sales, operating results and identifiable assets
of the Registrant by business segment and by geographic area as required by Item
101(d) of Regulation S-K, refer to footnote 4 to the Consolidated Financial
Statements on page 36 of the Annual Report. For additional information on format
descriptions, refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 24 and 25 of the Annual Report
which is incorporated herein by reference.
Employees
The Registrant and its consolidated subsidiaries had 23,184 full-time and
51,934 part-time employees at January 30, 1999. The Registrant considers
employee relations to be satisfactory.
Seasonality
The Registrant's retail businesses are seasonal in nature. Historically,
the greatest proportion of sales and net income is generated in the fourth
quarter and the lowest proportions of sales and net income are generated in the
first and second quarters, reflecting seasonal buying patterns. As a result of
these seasonal sales patterns, inventory generally increases in the third
quarter in anticipation of increased fourth quarter sales.
Competition
The retailing business is highly competitive. Competition is based upon
such factors as price, quality, selection of merchandise, reputation, store
location, advertising and customer service.
Merchandise Purchases
The Registrant and its consolidated subsidiaries purchase merchandise and
supplies from thousands of vendors worldwide. The Registrant purchased
approximately 44 percent of its 1998 merchandise from one major vendor. The
Registrant considers vendor relations to be satisfactory and maintains a minimal
amount of backlog orders in its retailing operations.
The Registrant's policy is to maintain sufficient quantities of inventory
on hand in its retail stores and distribution centers so that it can offer
customers a full selection of current merchandise. The Registrant emphasizes
turnover and takes markdowns where required to keep merchandise fresh and
current with trends.
-4-
<PAGE> 7
Item 2. Properties
The properties of the Registrant and its consolidated subsidiaries consist
of land, leased and owned stores, factories and administrative and distribution
facilities. Total selling area at the end of the year was approximately 11.07
million square feet, of which approximately 8.41 million square feet pertained
to the Global Athletic Group segment and approximately 1.66 million square feet
to the Northern Group segment. These properties are primarily located in the
United States, Canada and Europe. The Registrant operated 7 distribution
centers, of which 2 are owned and 5 are leased, occupying an aggregate of 2.64
million square feet. Each of the distribution centers serve major regions. The
Registrant also has an additional 4 distribution centers occupying 0.72 million
square feet, the majority of which is leased and sublet. Of the 11 distribution
centers, 7 are located in the United States, 2 are located in Canada and 1 in
both Europe and Australia. Refer to footnote 9 on page 38 of the Annual Report
for additional information regarding the Registrant's and its consolidated
subsidiaries' properties.
Item 3. Legal Proceedings
The only legal proceedings pending against the Registrant or its
consolidated subsidiaries consist of ordinary, routine litigation, including
administrative proceedings, incident to the businesses of the Registrant, as
well as litigation incident to the sale and disposition of businesses that have
occurred in the past several years. Management does not believe that the outcome
of such proceedings will have a material effect on the Registrant's consolidated
financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of the year ended January 30, 1999.
Executive Officers of the Registrant
Information with respect to Executive Officers of the Registrant, as of
April 1, 1999, is set forth below:
<TABLE>
<S> <C>
Chairman of the Board and Chief Executive Officer Roger N. Farah
President and Chief Operating Officer and Director Dale W. Hilpert
Senior Vice President, General Counsel and Secretary Gary M. Bahler
Senior Vice President--Corporate Development M. Jeffrey Branman
Senior Vice President--Real Estate John E. DeWolf III
Senior Vice President and Chief Information Officer Samuel R. Gaston
Senior Vice President--Merchandise Operations Maryann M. McGeorge
Senior Vice President--Human Resources John F. Gillespie
Senior Vice President and Chief Financial Officer Bruce. L. Hartman
Vice President and Treasurer John H. Cannon
Vice President and Controller Lauren B. Peters
</TABLE>
Roger N. Farah, age 46, has served as Chairman of the Board and Chief
Executive Officer since December 1994. Mr. Farah served as President and Chief
Operating Officer of R. H. Macy & Co., Inc. from July 1994 to October 1994. He
has also served as Chairman of the Board and Chief Executive Officer of
Federated Merchandising Services, the central buying and product development arm
of Federated Department Stores, Inc. from June 1991 to July 1994. He is
currently a director of Liz Claiborne, Inc.
Dale W. Hilpert, age 56, has served as President and Chief Operating
Officer since May 1995. Mr. Hilpert served as Chairman and Chief Executive
Officer of Payless ShoeSource, a division of the May Department Stores Company
from January 1985 to April 1995.
Gary M. Bahler, age 47, has served as Senior Vice President since August
1998, General Counsel since February 1993 and Secretary since February 1990. He
served as Vice President from February 1993 to August 1998.
M. Jeffrey Branman, age 43, has served as Senior Vice President-Corporate
Development since March 1996. Mr. Branman served as a Managing Director of
Financo, Inc. from August 1989 to March 1996.
John E. DeWolf III, age 43, has served as Senior Vice President-Real Estate
since March 1996. Mr. DeWolf served as Senior Vice President-Property
Development for The Disney Store, Inc., a division of The Walt Disney Company
from June 1993 to February 1996.
-5-
<PAGE> 8
Samuel R. Gaston, age 57, has served as Senior Vice President and Chief
Information Officer since November 1998. Mr. Gaston served as Executive Vice
President and Chief Financial Officer of Fabric-Centers of America, Inc., a
retail fabric chain, from August 1996 to October 1997. He previously served as
Executive Vice President and Chief Financial Officer of the Woman's Apparel
Group of The Limited, Inc.
Maryann M. McGeorge, age 46, has served as Senior Vice
President-Merchandise Operations since August 1998, and as Vice
President-Merchandise Operations from September 1995 to August 1998. She
previously served as Senior Vice President-Planning/MIS of Federated
Merchandising Services, a division of Federated Department Stores, from February
1992 to June 1995.
John F. Gillespie, age 51, has served as Senior Vice President-Human
Resources since April 1996. Mr. Gillespie served as Senior Vice President Human
Resources of Lever Brothers Company, a subsidiary of Unilever, from 1990 to
April 1996.
Bruce L. Hartman, age 45, has served as Senior Vice President and Chief
Financial Officer since February 1999. Mr. Hartman served as Vice
President-Corporate Shared Services from September 1998 to February 1999 and as
Vice President and Controller from November 1996 to September 1998. He served as
the Chief Financial Officer of various divisions of the May Department Stores
Company from March 1993 to October 1996.
John H. Cannon, age 57, has served as Vice President and Treasurer since
October 1983.
Lauren B. Peters, age 37, has served as Vice President and Controller since
September 1998. She served as Retail Controller from March 1997 to September
1998. She also served as Divisional Vice President, Assistant Controller at
Robinson's-May, a division of the May Department Stores Company, from June 1994
to March 1997, and Director of Accounts Payable from February 1993 to June 1994.
There are no family relationships among the executive officers or directors
of the Registrant.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Information related to the market for the Registrant's common stock
on pages 43 to 46 of the Annual Report under the sections captioned "Shareholder
Rights Plan," "Stock Plans," "Restricted Stock" and "Shareholder Information and
Market Prices (Unaudited)" is incorporated herein by reference.
Item 6. Selected Financial Data
The Five Year Summary of Selected Financial Data on page 47 of the
Annual Report is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's Discussion and Analysis of Financial Condition and Results
of Operations on pages 22 through 27 of the Annual Report is incorporated
herein by reference.
-6-
<PAGE> 9
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Derivatives
Derivative financial instruments are used by the Registrant to manage its
market risk exposure to interest rates and foreign currency exchange rate
fluctuations. The Registrant, as a matter of policy, does not hold derivative
financial instruments for trading or speculative purposes.
Interest Rates
The Registrant's major exposure to market risk is changes in interest
rates, primarily in the U.S. There is no cash flow exposure to rate changes for
long-term debt obligations, which are fixed interest rate liabilities,
denominated in U.S. dollars. Short-term debt obligations reflect variable
interest rate borrowings under the Registrant's revolving credit agreement.
Interest rate swaps have been utilized by the Registrant to minimize its
exposure to interest rate fluctuations. There were no swap agreements in effect
at January 30, 1999 or January 31, 1998. The table below presents the fair value
of principal cash flows and related weighted-average interest rates by maturity
dates of the Registrant's debt obligations.
<TABLE>
<CAPTION>
January 31,
(in millions) 1999 2000 2001 2002 2003 Thereafter Total 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-term debt $ 250 - - - - - $ 250 $ -
Variable rate
Weighted-average
interest rate 5.63%
Long-term debt $ - 199 48 38 - 169 $ 454 $539
Fixed rate
Weighted-average
interest rate 7.61% 7.84% 8.09% 8.31% 8.50% 8.50%
</TABLE>
Foreign Currency Exchange Rates
The Registrant's international operations purchase significant levels of
inventory in U.S. dollars. In order to minimize the impact of foreign currency
fluctuations on its results of operations, the Registrant hedges these purchases
through forward foreign currency exchange contracts. The Registrant also enters
into forward contracts to reduce its exposure to currency fluctuations on
intercompany transactions. All instruments mature within twelve months. Foreign
currency exchange gains and losses did not have a material impact on the
Registrant's results of operations in 1998. The Registrant's exposure to foreign
currency exchange rate fluctuations was mitigated by the disposal of its German
general merchandise business during the year.
The table below presents the notional amounts and weighted-average exchange
rates of foreign exchange forward contracts outstanding at January 30, 1999.
<TABLE>
<CAPTION>
Contract Value Weighted-Average
(US in millions) Exchange Rate
----------------- ----------------
<S> <C> <C>
Inventory
Receive $US/ Pay $Australian $ 21 0.6323
Receive $US/ Pay $Canadian 34 0.6592
Receive $US/ Pay Netherlands guilder 4 0.5187
Receive $US/ Pay German mark 20 0.5651
----
$ 79
====
Intercompany
Receive German mark/Pay $US $ 29 0.6024
Receive $US/Pay German mark $ 11 0.5894
Receive $US/Pay Netherlands guilder $ 11 0.5240
</TABLE>
-7-
<PAGE> 10
Item 8. Consolidated Financial Statements and Supplementary Data
a) Consolidated Financial Statements
The following, included in the Annual Report, are incorporated herein
by reference:
<TABLE>
<CAPTION>
Page (s) in
Annual Report
--------------
<S> <C>
Independent Auditors' Report 28
Consolidated Statements of Operations - Years ended
January 30, 1999, January 31, 1998 and January 25, 1997 29
Consolidated Statements of Comprehensive Income (Loss) -
Years ended January 30, 1999, January 31, 1998
and January 25, 1997 29
Consolidated Balance Sheets -As of January 30, 1999
and January 31, 1998 30
Consolidated Statements of Shareholders' Equity -
Years ended January 30, 1999, January 31, 1998
and January 25, 1997 31
Consolidated Statements of Cash Flows -
Years ended January 30, 1999, January 31, 1998
and January 25, 1997 32
Notes to Consolidated Financial Statements 33-46
</TABLE>
b) Supplementary Data
Quarterly Results on page 46 of the Annual Report is incorporated
herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no disagreements between the Registrant and its independent
accountants on matters of accounting principles or practices.
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Directors of the Registrant
Information relative to directors of the Registrant is set forth
under the section captioned "Election of Directors" in the Proxy
Statement and is incorporated herein by reference.
(b) Executive Officers of the Registrant
Information with respect to executive officers of the Registrant
is set forth immediately following Item 4 in Part I hereof on pages 5
and 6.
(c) Information with respect to compliance with Section 16(a) of the
Securities Exchange Act of 1934 is set forth under the section
captioned "Section 16(a) Beneficial Ownership Reporting Compliance" in
the Proxy Statement and is incorporated herein by reference.
Item 11. Executive Compensation
Information set forth in the Proxy Statement, beginning with the section
captioned "Director's Compensation and Benefits; Indemnification Arrangements"
through and including the section captioned "Compensation Committee Interlocks
and Insider Participation" is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information set forth in the Proxy Statement, under the section captioned
"Beneficial Ownership of the Registrant's Stock" is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
Information set forth in the Proxy Statement, under the section captioned
"Transactions with Management and Others" is incorporated herein by reference.
-8-
<PAGE> 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements
The list of financial statements required by this item is set
forth in Item 8 "Consolidated Financial Statements and Supplementary
Data" in this Annual Report on Form 10-K and is incorporated herein by
reference.
(a)(2) and(d) Financial Statement Schedules
No financial statement schedules have been presented since the
required information is shown in the financial statements or Notes to
Consolidated Financial Statements sections of the Annual Report.
Separate financial statements of the parent company have not been
presented since all consolidated subsidiaries of the Registrant are
wholly owned and have indebtedness, not guaranteed by the parent
company, in the aggregate of less than five percent of the
Registrant's consolidated total assets.
(a)(3) and (c) Exhibits
An index of the exhibits which are required by this item and
which are included or incorporated herein by reference in this report
appears on pages 11 through 14. Those exhibits which are included in
this Annual Report on Form 10-K immediately follow the index.
(b) Reports on Form 8-K
The Registrant filed a report on Form 8-K, and an amendment
thereto on Form 8-K/A, dated October 22, 1998 (date of earliest event
reported) reporting the completion of the disposition of its general
merchandise operations in Germany and Austria and to provide the pro
forma financial information required by Item 7 of Form 8-K.
-9-
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
VENATOR GROUP, INC.
By: /s/ Roger N. Farah
-------------------
Roger N. Farah
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on April 14, 1999, by the following persons on behalf of
the Registrant and in the capacities indicated.
<TABLE>
<S> <C>
/s/Roger N. Farah /s/ Jarobin Gilbert Jr.
------------------- -----------------------
Roger N. Farah Jarobin Gilbert Jr.
Chairman of the Board and Director
Chief Executive Officer
/s/ Dale W. Hilpert /s/ Allan Z. Loren
--------------------- -------------------
Dale W. Hilpert Allan Z. Loren
President and Director
Chief Operating Officer
/s/ Bruce L. Hartman /s/ Margaret P. MacKimm
----------------------- -------------------------
Bruce L. Hartman Margaret P. MacKimm
Senior Vice President and Director
Chief Financial Officer
/s/ Lauren B. Peters /s/ John J. Mackowski
----------------------- -------------------------
Lauren B. Peters John J. Mackowski
Vice President and Controller Director
/s/ J. Carter Bacot /s/ James E. Preston
------------------------ -----------------------
J. Carter Bacot James E. Preston
Director Director
/s/ Purdy Crawford /s/ Christopher A. Sinclair
------------------------ ---------------------------
Purdy Crawford Christopher A. Sinclair
Director Director
/s/ Philip H. Geier Jr
------------------------
Philip H. Geier Jr
Director
</TABLE>
-10-
<PAGE> 13
VENATOR GROUP, INC
INDEX OF EXHIBITS REQUIRED
BY ITEM 14 OF FORM 10-K
AND FURNISHED IN ACCORDANCE
WITH ITEM 601 OF REGULATION S-K
<TABLE>
<CAPTION>
Exhibit No.
in item 601 of
Regulation S-K Description
- -------------- ------------
<S> <C>
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 (a) 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).
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).
</TABLE>
-11-
<PAGE> 14
<TABLE>
<CAPTION>
Exhibit No.
in item 601 of
Regulation S-K Description
- --------------- ------------
<S> <C>
5 *
8 *
9 *
10.1 1986 Venator Group Stock Option Plan (incorporated
herein by reference to Exhibit 10(b) to the
Registrant's Annual Report on Form 10-K for the year
ended January 28, 1995, filed by the Registrant with
the SEC on April 24, 1995 (the "1994 10-K")).
10.2 Amendment to the 1986 Venator Group Stock Option Plan
(incorporated herein by reference to Exhibit 10(a) to
the Registrant's Annual Report on Form 10-K for the
year ended January 27, 1996, filed by the Registrant on
April 26, 1996 (the "1995 10-K")).
10.3 Venator Group 1995 Stock Option and Award Plan
(incorporated herein by reference to Exhibit 10(p) to
the 1994 10-K).
10.4 Venator Group 1998 Stock Option and Award Plan
(incorporated herein by reference to Exhibit 10.4 to
the Registrant's Annual Report on Form 10-K for the
year ended January 31, 1998 (the "1997 10-K") adopted
by the Board of Directors on April 8, 1998, subject to
shareholder approval at the 1998 annual meeting of
shareholders.
10.5 Executive Supplemental Retirement Plan (incorporated
herein by reference to Exhibit 10(d) to the
Registration Statement on Form 8-B filed by the
Registrant with the SEC on August 7, 1989 (Registration
No. 1-10299) (the "8-B Registration Statement")).
10.6 Amendments to the Executive Supplemental Retirement
Plan (incorporated herein by reference to
Exhibit 10(c)(i) to the 1994 10-K).
10.7 Amendment to the Executive Supplemental Retirement Plan
(incorporated herein by reference to Exhibit 10(d)(ii)
to the 1995 10-K).
10.8 Supplemental Executive Retirement Plan (incorporated
herein by reference to Exhibit 10(e) to the 1995 10-K).
10.9 Long-Term Incentive Compensation Plan, as amended and
restated (incorporated herein by reference to
Exhibit 10(f) to the 1995 10-K).
10.10 Annual Incentive Compensation Plan, as amended and
restated (incorporated herein by reference to
Exhibit 10(g) to the 1995 10-K).
10.11 Form of indemnification agreement, as amended
(incorporated herein by reference to Exhibit 10(g) to
the 8-B Registration Statement).
10.12 Venator Group Voluntary Deferred Compensation Plan
(incorporated herein by reference to Exhibit 10(i) to
the 1995 10-K).
</TABLE>
-12-
<PAGE> 15
<TABLE>
<CAPTION>
Exhibit No.
in item 601 of
Regulation S-K Description
- --------------- ----------------
<S> <C>
10.13 Trust Agreement dated as of November 12, 1987, between
F.W. Woolworth Co. and The Bank of New York, as amended
and assumed by the Registrant (incorporated herein by
reference to Exhibit 10(j) to the 8-B Registration
Statement).
10.14 Venator Group Directors' Retirement Plan, as amended
(incorporated herein by reference to Exhibit 10(k) to
the 8-B Registration Statement).
10.15 Amendments to the Venator Group Directors' Retirement
Plan (incorporated herein by reference to Exhibit 10(c)
to the Registrant's Quarterly Report on Form 10-Q for
the period ended October 28, 1995, filed with the SEC
on December 11, 1995 (the "October 28, 1995 10-Q")).
10.16 Employment Agreement with Roger N. Farah of dated as of
April 14, 1991.
10.17 Restricted Stock Agreement with Roger N. Farah dated
as of January 9, 1995 (incorporated herein by reference
to Exhibit 10(m) to the 1994 10-K).
10.17(a) Restricted Stock Agreement with Roger N. Farah dated as
of April 26, 1999.
10.18 Employment Agreement with Dale W. Hilpert dated as of
April 14, 1999.
10.19 Termination of Consulting Agreement with DBSS Group,
Inc. dated December 21, 1998.
10.20 Supplemental Agreement with M. Jeffrey Branman dated
April 24, 1997 (incorporated herein by reference to
Exhibit 10(r)(i) to the 1996 10-K).
10.21 Amendment to Supplemental Agreement with M. Jeffrey
Branman dated February 19, 1999.
10.22 Employment Term Sheet for M. Jeffrey Branman dated
February 15, 1996 (incorporated herein by reference to
Exhibit 10(r)(ii) to the 1996 10-K).
10.23 Employment Term Sheet for John E. DeWolf III dated
February 8, 1996 (incorporated herein by reference to
Exhibit 10(s)(i) to the 1996 10-K).
10.24 Employment Term Sheet for John F. Gillespie dated
February 26, 1996 (incorporated herein by reference to
Exhibit 10(t)(i) to the 1996 10-K).
10.25 Venator Group Executive Severance Pay Plan
(incorporated herein by reference to Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the
period ended October 31, 1998 (the "October 31, 1998
10-Q").
10.26 Form of Senior Executive Severance Agreement
(incorporated herein by reference to Exhibit 10.2 to
the October 31, 1998 10-Q).
10.27 Venator Group, Inc. Directors' Stock Plan
(incorporated herein by reference to Exhibit 10(b) to
the Registrant's October 28, 1995 10-Q).
10.28 Venator Group, Inc. Excess Cash Balance Plan
(incorporated herein by reference to Exhibit 10(c) to
the 1995 10-K).
10.29 Agreement with S. Ronald Gaston dated November 10,
1998 (incorporated herein by reference to Exhibit 10.5
to the October 31, 1998 10-Q).
</TABLE>
-13-
<PAGE> 16
<TABLE>
<CAPTION>
Exhibit No.
in item 601 of
Regulation S-K Description
- ---------------- ---------------
<S> <C>
10.30 Form of Restricted Stock Agreement.
10.31 Amendment No. 3 dated as of March 19, 1999 to the
Credit Agreement dated as of April 9, 1997.
10.32 Amendment No. 4 dated as of March 19, 1999 to the
Credit Agreement dated as of April 9, 1997.
10.33 Amended and Restated Credit Agreement dated as of
April 9, 1997 and amended and restated as of March 19,
1999.
10.34 Second Amended and Restated Credit Agreement dated as
of April 9, 1997 and amended and restated as of March
19, 1999.
10.35 Letter of Credit Agreement dated as of March 19, 1999
11 *
12 Computation of Ratio of Earnings to Fixed Charges.
13 1998 Annual Report to Shareholders.
15 *
16 *
17 *
18 *
19 *
20 *
21 Subsidiaries of the Registrant.
22 *
23 Consent of Independent Auditors.
24 *
25 *
26 *
27.1 Financial Data Schedule, which is submitted
electronically to the SEC for information only and not
filed.
27.2 1997 Restated Financial Data Schedule, which is
submitted electronically to the SEC for information
only and not filed.
27.3 1996 Restated Financial Data Schedule, which is
submitted electronically to the SEC for information
only and not filed.
99 *
</TABLE>
* Not applicable
-14-
<PAGE> 17
Exhibits filed with Form 10-K:
<TABLE>
<CAPTION>
Exhibits No.
- -------------
<S> <C>
10.16 Employment Agreement with Roger N. Farah dated as of April
14, 1999 10.19 Termination of Consulting Agreement with DBSS
Group, Inc. dated December 21, 1998.
10.17(a) Restricted Stock Agreement with Roger N. Farah dated as of
April 26, 1999.
10.18 Employment Agreement with Dale W. Hilpert dated as of April
14, 1999.
10.19 Termination of Consulting Agreement with DBSS Group, Inc.
date December 21, 1998.
10.21 Amendment to Supplemental agreement with M. Jeffrey Branman
dated February 19, 1999.
10.30 Form of Restricted Stock Agreement.
10.31 Amendment No. 3 dated as of March 19, 1999 to the Credit
Agreement dated as of April 9, 1997.
10.32 Amendment No. 4 dated as of March 19, 1999 to the Credit
Agreement dated as of April 9, 1997.
10.33 Amended and Restated Credit Agreement dated as of April 9,
1997 and amended and restated as of March 19, 1999.
10.34 Second Amended and Restated Credit Agreement dated as of
April 9, 1997 and amended and restated as of March 19, 1999.
10.35 Letter of Credit Agreement dated as of March 19, 1999.
12 Computation of Ratio of Earnings to Fixed Charges.
13 1998 Annual Report to Shareholders.
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
27.1 1998 Financial Data Schedule.
27.2 1997 Restated Financial Data Schedule.
27.3 1996 Restated Financial Data Schedule.
</TABLE>
-15-
<PAGE> 1
EXHIBIT - 10.16
EMPLOYMENT AGREEMENT
AGREEMENT made as of April 14, 1999, by and between Venator Group, Inc., a
New York corporation having its principal place of business at 233 Broadway, New
York, NY 10279 (the "Company"), and Roger N. Farah, (the "Executive").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Executive is employed by the Company as its Chairman of the
Board and Chief Executive Officer pursuant to the provisions of an employment
agreement dated as of December 11, 1994 (the "1994 Agreement"), the term of
which ends on January 31, 2000; and
WHEREAS, the Company desires the Executive to continue as its Chairman of
the Board and Chief Executive Officer for a period extending beyond January 31,
2000, and the Executive is willing to serve in such capacity beyond such date;
and
WHEREAS, the Company and the Executive desire to set forth the terms and
conditions of such continued employment; and
WHEREAS, the Executive and the Company desire to terminate the 1994
Agreement as of April 14, 1999, so that, from and after April 15, 1999, the
terms and conditions of the employment of the Executive with the Company shall
be governed by the provisions of this agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the Company and the Executive agree
as follows:
1. Employment. (a) The Company hereby agrees to continue the employment of
the Executive as its Chairman of the Board and Chief Executive Officer and the
Executive hereby agrees to accept such continued employment with the Company, on
the terms and conditions herein contained.
<PAGE> 2
(b) Except for earlier termination as provided pursuant to this Agreement,
the Executive's employment under this Agreement shall be for a period commencing
on April 15, 1999 and ending on January 31, 2003 (the "Employment Period").
2. Duties. (a) The Executive shall serve during the Employment Period as
Chairman of the Board and Chief Executive Officer of the Company, reporting only
to the Board of Directors (the "Board"). The Executive agrees that in such
offices he shall perform such duties and functions as are commensurate with his
status as Chairman of the Board and Chief Executive Officer of the Company as
may from time to time be determined by the Board. The Executive shall devote
substantially all of his working time, attention, skill and efforts to the
performance of his duties hereunder; provided, however, that with the prior
approval of the Board, which it may grant or deny in its sole discretion, the
Executive may serve on the boards of directors of other for-profit corporations,
if such service does not conflict with his duties hereunder or his fiduciary
duty to the Company. It is further understood and agreed that nothing herein
shall prevent the Executive from managing his passive personal investments
(subject to applicable Company policies on permissible investments), and
(subject to applicable Company policies) participating in charitable and civic
endeavors, so long as such activities do not interfere in more than a de minimis
manner with the Executive's performance of his duties hereunder. The services to
be performed by the Executive pursuant to the terms of this Agreement shall be
rendered principally at the Company's principal offices; provided, however, that
the Executive agrees to travel for reasonable periods of time for business
purposes whenever such travel is necessary or appropriate to the performance of
his duties hereunder.
(b) Upon request of the Board, the Executive shall also serve as an officer
and director of subsidiaries and affiliates of the Company.
3. Compensation and Benefits. As full compensation for his services
hereunder, and subject to all the provisions hereof:
(a) During the Employment Period, the Company shall pay the Executive, in
accordance with its normal payroll practices and subject to required
withholding, a salary calculated at such rate per annum as may be fixed by the
Compensation Committee of the Board from time to time, but in no event at a rate
less than One Million Dollars ($l,000,000) per annum ("Base Salary").
2
<PAGE> 3
(b) During the Employment Period, the Executive shall be eligible to
participate in all bonus, incentive and equity plans that are maintained by the
Company from time to time for its senior executive employees in accordance with
the terms of such plans at the time of participation, provided (i) that the
bonus payable to the Executive at target under the Company's Annual Incentive
Compensation Plan shall be no less than 100 percent of Base Salary and (ii)
that, subject to the provisions of the 1998 Stock Option and Award Plan (the
"1998 Plan") or any other applicable plan, Executive shall, during the
Employment Period, receive an annual stock option grant, at the same time and on
the same terms and conditions as other senior executives of the Company, for a
number of shares no less than the number calculated by dividing 5,000,000 by the
"fair market value" of a share of the Common Stock of the Company on the date of
such grant, as such term is defined in the 1998 Stock Option and Award Plan. The
Company and the Executive recognize that under the provisions of Section 5(b) of
the 1998 Plan, the total number of options and other stock-based grants that may
be made to any individual may not exceed 10 percent of the total number of
shares of Common Stock authorized for issuance under such plan, and that under
the provisions of Section 5(c) of the 1998 Plan, awards of all types granted to
any individual may not exceed 600,000 shares of Common Stock in any "Plan Year",
as defined therein. In the event that, on any date during the term of the
Agreement when stock options are issued to other senior executives of the
Company, there are not sufficient shares available for issuance to the Executive
under the 1998 Plan or under any other similar plans for the Company to grant to
Executive the stock options provided for under clause (ii) of the first sentence
in this paragraph (b), the Company shall seek shareholder approval, at the
annual meeting of shareholders next following, for an amendment to the 1998 Plan
or for a new plan, so that the Company may issue such options to Executive. In
the event that the shareholders of the Company fail to approve such amendment or
new plan, the Company and Executive shall negotiate in good faith to agree upon
an arrangement that will afford Executive a compensation opportunity reasonably
equivalent to both the Executive and the Company to that which would have been
afforded by such stock options that cannot be granted because of the limitations
contained in Section 5(b) or Section 5(c) of the 1998 Plan.
3
<PAGE> 4
(c) During the Employment Period, the Executive shall be eligible to
participate in all pension, welfare and fringe benefit plans, as well as
perquisites, maintained by the Company from time to time for its senior
executive employees in accordance with their respective terms as in effect from
time to time (other than any special arrangement entered into by contract with
an executive). In addition, during the Employment Period, the Company shall
reimburse the Executive for his net premiums on his current term life insurance
policy for coverage of three million six hundred thousand dollars ($3,600,000)
with Aetna Life Insurance Company.
(d) During the Employment Period, the Executive shall be reimbursed for his
out-of-pocket travel and entertainment expenses in accordance with the Company's
normal policy for senior executive officers, including appropriate
documentation.
(e) The Executive shall be entitled to four (4) weeks vacation for each
fiscal year during the Employment Period to be taken at such time as mutually
convenient to the Executive and the Company. Unused vacation shall be forfeited.
(f) Within 30 days of the date hereof, the Compensation Committee shall
grant the Executive 275,000 shares of restricted stock under the 1998 Stock
Option and Award Plan (the "Restricted Stock"), such shares to be subject to a
restriction related to Executive's continued employment with the Company, with
such restrictions to lapse in three equal installments on January 31, 2000,
January 31, 2001 and January 31, 2002.
(g) The Executive shall be provided with a car and driver to be used for
business purposes.
(h) The Company shall pay for personal financial planning services for
Executive up to an amount of $15,000 per year.
4. Termination. The Employment Period shall terminate upon the earliest of
the following: (a) the Executive's death;
(b) the Executive's disability in accordance with Section 6;
4
<PAGE> 5
(c) the Executive's termination for cause in accordance with Section 7;
(d) the termination of the Executive by the Company without cause;
(e) the termination by the Executive in accordance with Section 8; or
(f) the termination by the Executive in accordance with Section 10.
5. Death. The death of the Executive shall serve to terminate the
Employment Period, in which event the Company shall have no liability or further
obligation except as follows:
(a) The Company shall pay the Executive's estate (or, if properly
designated under an applicable plan or arrangement, his beneficiary) when
otherwise due any unpaid Base Salary for the period prior to such termination of
the Employment Period, any declared but unpaid bonuses, any declared but unpaid
amounts due under any incentive plan and any other unpaid amounts due the
Executive under employee benefit, fringe benefit or incentive plans
("Entitlements").
(b) The Executive shall have such rights under any employee benefit, fringe
benefit or incentive plan, including any stock option plan, as provided in such
plans and any grants thereunder ("Rights").
(c) The Executive's estate or his designated beneficiary shall be entitled
to receive those benefits afforded by the Company under its then existing
policies to employees who die while employed by the Company.
5
<PAGE> 6
6. Disability. If the Board reasonably shall determine that the Executive
has become physically or mentally incapable of performing his material duties as
provided in Section 2 of this Agreement and such incapacity is likely to last
for a period of at least one hundred eighty (180) days from the onset of such
incapacity, the Company may, at its election at any time thereafter while the
Executive remains incapable of performing his duties, terminate the Executive's
employment hereunder effective immediately by giving the Executive written
notice of such termination. In such event, the Company shall continue the
Executive as an employee on payroll but not as an officer hereunder) at his same
Base Salary until he qualifies for the Company's long term disability policy and
the Company shall have no other obligation to the Executive or his dependents
other than Entitlements, Rights, amounts due under the Company's long term
disability plan, and any benefits offered by the Company under its then policy
to employees who become disabled while employed by the Company.
7. Cause. (a) If the Board shall determine that there are grounds for
terminating the Employment Period and discharging the Executive for "cause" (as
hereinafter defined), the Company may, at its election at any time within six
months after the Company shall obtain knowledge of the grounds for termination,
give the Executive notice of its intention to terminate the Executive for cause,
stating the grounds for termination and specifying a reasonable date (the
"Meeting Date") on which the Executive shall be given an opportunity if he
desires to discuss such grounds for termination at a meeting of the Board.
(b) If the grounds for termination are those specified in clause (ii)(X),
(iv) or (vi) of paragraph (d) hereof, the Executive shall have a period of ten
(10) days from the Meeting Date (the "Cure Period") to cure the neglect, refusal
or breach, as the case may be, provided that if similar grounds arise again
within one (1) year of such cure, no new notice need be given and the Company,
at its option, may immediately terminate the Executive for cause.
(c) If the grounds for termination are those specified in clauses (i),
(ii)(Y), (iii) or (v) of paragraph (d) hereof, it is understood and agreed that
no satisfactory cure is available. If, following discussion with the Executive
of the grounds for his termination at the Board meeting or, if the Executive
does not appear, following the Board meeting, the Company shall continue intent
on discharging the Executive for cause on the grounds specified in clause (i),
(ii)(Y), (iii) or (v) of paragraph (d), the Company shall so notify the
Executive, and such termination shall be effective immediately.
6
<PAGE> 7
(d) For purposes of this Section 7 and Section 9 hereof, the term "cause"
shall mean:
(i) the conviction (or plea of guilty or nolo contendere) of the Executive
of any felony, or of any crime involving fraud, dishonesty or misappropriation,
or moral turpitude or, if any of the foregoing involves the Company or any
subsidiary or affiliate (collectively the "Control Group"), the commission of
any of the foregoing (other than good faith disputes involving expense account
items);
(ii) the Executive's (X) continued willful neglect of his duties and
responsibilities under this Agreement or (Y) gross negligence;
(iii) the Executive's willful misconduct with regard to the Control Group;
(iv) the Executive's refusal to follow the written direction of the Board
with regard to the Executive's responsibilities as set forth herein;
(v) the Executive's willful failure to comply with the covenants in Section
10 hereof; or
(vi) material breach of any of the provision of this Agreement by the
Executive.
(e) if the Company shall terminate the Executive's employment pursuant to
this Section 7, it shall have no further liability or obligation hereunder
except as follows:
7
<PAGE> 8
(i) The Company shall promptly pay the Executive his then current Base
Salary through the effective date of such termination;
(ii) The Executive shall receive the benefits, if any, and have the rights
afforded by the Company under its then existing policies to employees whose
employment is terminated for cause or under the specific terms of any welfare,
fringe benefit or incentive plan.
8. Good Reason. In the event that the Company shall (i) fail to continue
the appointment of the Executive as Chairman of the Board and Chief Executive
Officer of the Company, or (ii) reduce the Executive's annual salary below the
Base Salary, or (iii) materially diminish the duties and responsibilities of the
Executive as Chairman of the Board and Chief Executive Officer, assign to the
Executive duties and responsibilities inconsistent with his positions or
materially diminish his authority, or (iv) locate the Executive at other than at
the Company's main executive office, or (v) breach any payment provision of this
Agreement (to the extent not disputed in good faith) or any other material
provision of this Agreement (each of the foregoing hereinafter referred to as a
"Triggering Event"), then the Executive may give notice to the Company of his
election to terminate the Employment Period pursuant to this Section 8,
effective thirty (30) days from the date of such notice, unless the Company
shall have cured prior thereto the default giving rise to his notice of election
to terminate. Such notice from the Executive shall state the Triggering Event
which provides the grounds for his termination, and such notice must be given,
if at all, within ninety (90) days of the date the Executive obtains knowledge
of the Triggering Event referred to as providing such grounds for termination.
Within the thirty (30) day period specified in the Executive's notice to the
Company (the "Cure Period"), the Company shall have the opportunity to cure the
default involved in the Triggering Event specified by the Executive. If the
Employment Period is terminated pursuant to this Section 8, the Company shall
have no liability or further obligation hereunder except as provided in Section
9 hereof. If the Executive does not give notice to the Company of his election
to terminate within ninety (90) days following the occurrence of a Triggering
Event, then the Executive shall be deemed to have waived his right to terminate
the Employment Period based on such Triggering Event, but such waiver shall not
prejudice his right to terminate pursuant to this Section 8 based on the
occurrence of another Triggering Event occurring subsequent in time, whether of
the same or a different type.
8
<PAGE> 9
9. Termination. In the event of a termination of the Employment Period
pursuant to Section 8 hereof, or in the event the Company shall terminate the
Employment Period without cause, then, except as provided in Section 10 hereof,
the Company shall have no obligation to the Executive except as follows:
(a) The Executive shall receive his Entitlements and have his Rights.
Thereafter, and during the period until the earliest of (i) the later of January
31, 2003 or two years from the date of termination, (ii) the Executive's death,
or (iii) the Executive's violation of the post employment requirements of
Section 13 hereof, and subject to paragraph (g) below, following the date of
such termination (hereinafter referred to as the "Severance Period"), the
Company shall make payments to the Executive, either bi-weekly or monthly as the
Company shall elect, calculated at the annual rate of Base Salary which the
Executive was receiving pursuant to Section 3(a) hereof immediately prior to
such termination.
(b) In addition to any payments to which Executive may be entitled pursuant
to the provisions of paragraph (a) of this section, if the sum of the payments
that the Company would anticipate, as of the date of termination of employment,
making to Executive under the provisions of the second sentence of paragraph
(a), without adjustment for the time value of money, (the "Section 9(a)
Payments") is less than the "Guaranteed Severance Amount", as defined below,
then the Company shall make a lump sum cash payment of the difference between
the Guaranteed Severance Amount and the Section 9(a) Payments within five
business days of the date of the termination of the Employment Period. For
purposes of this paragraph, if the date of the termination of the Employment
Period (the "Termination Date") is earlier than January 31, 2000, the Guaranteed
Severance Amount is $4,500,000; if the Termination Date is February 1, 2000 to
and including January 31, 2001, the Guaranteed Severance Amount is $4,000,000;
if the Termination Date is after January 31, 2001, the Guaranteed Severance
Amount is $3,000,000.
9
<PAGE> 10
(c) During the Severance Period the Executive shall not be an employee and
shall not be entitled to receive any fringes, perquisites or benefits from the
Company, except the Company shall pay the premiums for his and his dependents'
health coverage under COBRA until the earliest of (i) such time as he commences
other employment (ii) such time as he or a dependent, as the case may be, is no
longer entitled to COBRA coverage or (iii) as provided in paragraph (h) below.
(d) The Company shall provide the Executive, at no cost to the Executive,
with out-placement at a level commensurate with the Executive's position.
(e) To the extent any shares issued to Executive pursuant to a Restricted
Stock Agreement between the Company and Executive dated January 9, 1995 have not
vested, such shares shall immediately vest, as provided therein.
(f) The Executive shall not be required to mitigate the amount of any
payment provided for in the second sentence of paragraph (a) by seeking other
employment nor shall any amounts to be received by the Executive hereunder be
reduced by any other compensation earned.
(g) The Company shall be entitled to withhold from any payments made to the
Executive under paragraphs (a) and (c) of this Section 9 any amounts required to
be withheld by applicable federal, state or local tax law.
(h) Any amounts being paid to or on behalf of the Executive under this
Section 9 shall immediately cease if the Executive enters into Competition with
the Control Group. For purposes of this Agreement, "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 the Control Group does business) in any of the entities listed on
Exhibit A hereto or any successor to any such entity, provided, however, that
10
<PAGE> 11
such participation shall not include (x) the mere ownership of not more than one
percent (1%) of the total outstanding stock of a publicly held company; or (y)
any activity engaged in with the prior written approval of the Board; 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 Control Group where such employee or
employees do in fact so terminate their employment.
If any restriction set forth with regard to Competition is found by any
court of competent jurisdiction, or an arbitrator, 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.
10. Change in Control. (A) In the event of a Change in Control, as defined
in Exhibit B hereto, the Executive shall have the right to terminate the
Employment Period by written notice given within the thirty (30) day period
following three (3) months after such Change in Control. Such Employment Period
shall cease upon the giving of such notice. In such event, or in the event the
Company shall terminate the Executive's employment without cause or the
Executive shall terminate his employment for Good Reason during the one year
period after the Change in Control, the Company shall have no obligation to the
Executive except as follows:
(a) The Executive shall receive all amounts and benefits under Section 9
hereof as if he had terminated his employment for Good Reason pursuant to
Section 8 hereof except that subpart (ii) of paragraph (a), subpart (iii) of
paragraph (c) and paragraph (h) of Section 9 shall not apply; provided, however,
that all such amounts shall be payable as a lump sum, without adjustment for the
time value of money, within five business days of the date of termination of the
Employment Period.
(b) Upon a Change in Control the forfeiture period with regard to the
Restricted Stock shall terminate and such Shares shall become immediately
vested.
11
<PAGE> 12
(c) In addition to any payments to which the Executive may be entitled
pursuant to the provisions of paragraph (a) of this section, if the sum of the
payments that the Company would anticipate making to the Executive under the
provisions of the second sentence of Section 9(a) and Section 9(b) (the "Section
9 Payments"), is less than 3 multiplied by Executive's Base Salary (at the rate
payable immediately prior to such Change in Control) plus bonus payable under
the Annual Incentive Compensation Plan at target in the year of the termination
of the Employment Period (the "Change-in-Control Amount"), then the Company
shall make a lump sum cash payment of the difference between the
Change-in-Control Amount and the Section 9 Payments to Executive within five
business days of the date of termination of the Employment Period.
11. Gross-up. (a) In the event that the Executive shall become entitled to
the payments and/or benefits provided by Section 10 or any other amounts
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, any person whose actions result in a change of
ownership covered by Section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended (the "Code") or any person affiliated with the Company or such person)
(collectively the "Company Payments"), and such Company Payments will be subject
to the tax (the "Excise Tax") imposed by Section 4999 of the Code (and any
similar tax that may hereafter be imposed), subject to paragraph (f) below, the
Company shall pay to the Executive at the time specified in paragraph (d) below
an additional amount (the "Gross-up Payment") such that the net amount retained
by the Executive, after deduction of any Excise Tax on the Company Payments and
any federal, state and local income tax and Excise Tax upon the Gross-up Payment
provided for by this paragraph (a), but before deduction for any federal, state
or local income tax on the Company Payments, shall be equal to the Company
Payments.
(b) For purposes of determining whether any of the Company Payments and
Gross-up Payments (collectively the "Total Payments") will be subject to the
Excise Tax and the amount of such Excise Tax, (a) the Total Payments shall be
treated as "parachute payments" within the meaning of section 280G(b)(2) of the
Code, and all "parachute payments" in excess of the "base amount" (as defined
under Code Section 280G(b)(3)) shall be treated as subject to the Excise Tax,
unless and except to the extent that, in the opinion of the Company's
12
<PAGE> 13
independent certified public accountants appointed prior to any change in
ownership (as defined under Code Section 280G(b)(2)) or tax counsel selected by
such accountants (the "Accountants") such Total Payments (in whole or in part)
either do not constitute "parachute payments," represent reasonable compensation
for services actually rendered within the meaning of Section 280G(b)(4) of the
Code in excess of the "base amount" or are otherwise not subject to the Excise
Tax, and (b) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Accountants in accordance with the principles
of Section 280G of the Code.
(c) For purposes of determining the amount of the Gross-up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's residence for the
calendar year in which the Company Payment is to be made, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes if paid in such year. In the event that the Excise Tax is
subsequently determined by the Accountants to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, the Executive shall
repay to the Company, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the prior Gross-up Payment
attributable to such reduction net of any federal, state, or local income tax
incurred on the original receipt of such portion of the prior Gross-up Payment
(after taking into account the tax benefit, if any, that the Executive receives
on such repayment) (plus the portion of the Gross-up Payment attributable to the
Excise Tax and federal and state and local income tax imposed on the portion of
the Gross-up Payment being repaid by the Executive if such repayment results in
a reduction in Excise Tax or a federal and state and local income tax
deduction), plus interest on the amount of such repayment at the rate provided
in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the
event any portion of the Gross-up Payment to be refunded to the Company has been
paid to any federal, state or local tax authority, repayment thereof (and
related amounts) shall not be required until actual refund or credit of such
portion has been made to the Executive, and interest payable to the Company
shall not exceed the interest received or credited to the Executive by such tax
authority for the period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued (and the method of
allocating the expense thereof) if the Executive's claim for refund or credit is
denied.
13
<PAGE> 14
In the event that the Excise Tax is later determined by the Accountant or
the Internal Revenue Service to exceed the amount taken into account hereunder
at the time the Gross-up Payment is made (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-up
Payment), the Company shall make an additional Gross-up Payment in respect of
such excess (plus any interest or penalties payable with respect to such excess)
at the time that the amount of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided for in paragraph (c)
above shall be paid not later than the thirtieth day following an event
occurring which subjects the Executive to the Excise Tax; provided, however,
that if the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to the Executive on such
day an estimate, as determined in good faith by the Accountant, of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code),
subject to further payments pursuant to paragraph (c) hereof, as soon as the
amount thereof can reasonably be determined, but in no event later than the
ninetieth day after the occurrence of the event subjecting the Executive to the
Excise Tax. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to the Executive, payable on the fifth day after demand by
the Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(e) The Company shall be responsible for all charges of the Accountant.
12. Non-Renewal. In the event the Company does not offer to extend this
agreement under the same terms and conditions then existing (other than with
respect to the one-year extension provision of this Section 12) for an
additional one year, then the Company shall, within five business days of the
end of the Employment Period, make a lump sum cash payment to Executive in the
amount of $1,500,000.
14
<PAGE> 15
13. Confidential Information. Nondisparagement (a) In consideration of the
covenants by the Company contained herein, the Executive undertakes and agrees
that during the Employment Period and thereafter he shall hold in a fiduciary
capacity for the benefit of the Control Group all secret or confidential
information, knowledge or data relating to the Control Group or its business
(which shall be defined as all such information, knowledge and data coming to
the Executive's attention by virtue of his employment at the Company except that
which is otherwise public knowledge or known within the Company's industry).
During such period, the Executive shall not, without prior written consent of
the Company, unless compelled pursuant to the order of a court or other body
having jurisdiction over such matter or unless required by lawful process or
subpoena, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. The foregoing shall
not limit the disclosure by the Executive of such information in the course of
the performance of his duties as Chairman of the Board and Chief Executive
Officer so long as such disclosure is in good faith.
(b) During the Employment Period and thereafter while the Executive is
receiving any amounts pursuant to Section 9(a) hereof or Section 10 hereof, the
Executive shall not make any statements or comments (i) to any form of media or
likely to come to the attention of any form of media of a negative nature that
reasonably could be considered to have an adverse impact on the business or
reputation of the Control Group, the Board or any senior officer of the Control
Group, or (ii) to any employee of the Control Group or to any supplier or
customer of the Control Group of a negative nature that reasonably could be
considered to have an adverse impact on the business or reputation of the
Control Group or, the Board or any senior officer of the Control Group, provided
that in no event shall the foregoing limitation apply to (i) compliance with
legal process or subpoena, (ii) statements in response to inquiry from a court
or regulatory body, (iii) in rebuttal of media stories with regard to the
Executive, (iv) to a possible future employer in connection with employment
discussions, or (v) in response to inquiry from the Board.
15
<PAGE> 16
(c) Furthermore, during the Employment Period, or, if fired for cause,
prior to January 31, 2003, the Executive shall not enter into Competition with
the Control Group, as defined in Section 9(h) hereof.
(d) Notwithstanding any other provision of this Agreement, in the event of
a breach or threatened breach by the Executive of any provision of this Section,
the Executive and the Company agree that the Company shall be entitled to
injunctive and declaratory relief from a court of competent jurisdiction to
restrain the Executive from committing such breach of the Agreement. Nothing in
this Agreement shall be construed as prohibiting the Company from pursuing any
other remedy or remedies including, without limitation, the recovery of damages.
(e) The provisions of this Section 13 shall survive the expiration of this
Agreement or the termination of the Agreement for any reason.
14. Indemnification. The Company agrees that the Executive shall be
entitled to the benefits of the indemnity provisions set forth in the By-laws
from time to time in accordance with their terms both during his employment and
thereafter with regard to his actions as an officer or director of the Company
and that the Company shall enter into an indemnification agreement with
Executive in the form of its standard indemnification agreement with executive
officers. In addition, the Company agrees to continue in effect for the benefit
of the Executive during the Employment Period directors' and officers' liability
insurance of the type and in the amount currently maintained by the Company to
the extent such insurance is available at a premium cost which the Company
considers reasonable and, thereafter, with regard to his prior activities as an
officer or director, such insurance as is maintained for active directors and
officers.
15. Assignment. This Employment Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors, heirs (in
the case of the Executive) and permitted assigns. This Agreement is personal to
the Executive and neither this Agreement or any rights hereunder may be assigned
by the Executive. No rights or obligations of the Company under this Employment
Agreement may be assigned or transferred by the Company except that such rights
16
<PAGE> 17
or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or pursuant to
a sale of all or substantially all of the assets of the Company, provided that
the assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Employment
Agreement, either contractually or as a matter of law. The Company further
agrees that, in the event of a sale as described in the preceding sentence, it
shall use its best efforts to cause such assignee or transferee to expressly
assume the liabilities, obligations and duties of the Company hereunder.
16. Arbitration. Any controversy or claim arising out of or relating to
this Employment Agreement, or the breach thereof, other than injunctive relief
pursuant to Section 13(d) hereof, shall be settled by arbitration in the City of
New York, in accordance with the rules of the American Arbitration Association
(the "AAA") before three arbitrators. The decision of the arbitrators shall be
final and binding on the parties hereto and judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof. The
costs assessed by the AAA for arbitration shall be borne equally by both
parties.
17. Notice. Any notice to either party hereunder shall be in writing, and
shall be deemed to be sufficiently given to or served on such party, for all
purposes, if the same shall be personally delivered to such party, or sent to
such party by registered mall, postage prepaid, at, in the case of the Company,
the address of such party first given above and, in the case of the Executive,
his principal residence address as shown in the records of the Company. Notice
to the Company shall be addressed to the Chairman of the Compensation Committee
with a copy similarly sent to the General Counsel. Either party hereto may
change the address to which notices are to be sent to such party hereunder by
written notice of such new address given to the other party hereto. Notices
shall be deemed given when received if delivered personally or three days after
mailing if mailed as aforesaid.
17
<PAGE> 18
18. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York applicable to
contracts to be performed therein.
19. 1994 Agreement. The 1994 Agreement is hereby terminated, effective as
of April 14, 1999, without further obligation of either party to the other, and
shall thereafter be of no force and effect.
20. Miscellaneous. (a) This Employment Agreement represents the entire
understanding of the parties hereto, supersedes any prior understandings or
agreements between the parties, and the terms and provisions of this Employment
Agreement may not be modified or amended except in a writing signed by both
parties.
(b) No waiver by either party of any breach by the other party of any
condition or provision contained in this Employment Agreement to be fulfilled or
performed by such other party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same or any prior or subsequent time.
Except to the extent otherwise specifically provided herein, any waiver must be
in writing and signed by the Executive or an authorized officer of the Company,
as the case may be.
21. Beneficiary. The Executive shall be entitled to select (and change, to
the extent permitted under any applicable law) a beneficiary or beneficiaries to
receive any compensation or benefit payable under this Employment Agreement
following his death by giving the Company written notice thereof in accordance
with applicable Company policies. in the event of the Executive's death or a
judicial determination of his incompetence, reference in this Employment
Agreement to the Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
18
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Employment Agreement as of the day and year first above written.
VENATOR GROUP, INC.
By: /s/ Dale W. Hilpert
-----------------------
DALE W. HILPERT
/s/ Roger N. Farah
-----------------------
ROGER N. FARAH
19
<PAGE> 20
Exhibit A
---------
List of Competitive Companies
- - The Finish Line, Inc.
- - Footstar, Inc.
- - Hibbetts Sporting Goods, Inc.
- - Just For Feet, Inc.
- - The Sports Authority, Inc.
- - Any entity owning, operating, or franchising Athlete's Foot stores (not
including a general merchandise or department store that solely operates
Athlete's Foot departments as an incidental part of its stores)
20
<PAGE> 21
Exhibit B
- ---------
Change in Control of the Company 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 subsidiaries) 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 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 of Directors of the Company (referred to
herein as 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
<PAGE> 22
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.
farahagmt
22
<PAGE> 1
EXHIBIT 10.17(a)
RESTRICTED STOCK AWARD AGREEMENT
UNDER THE VENATOR GROUP
1998 STOCK OPTION AND AWARD PLAN
This Restricted Stock Award Agreement (the "Agreement") made under the
Venator Group 1998 Stock Option and Award Plan (the "Plan") as of the 26th day
of April 1999 by and between Venator Group, Inc., a New York corporation with
its principal office located at 233 Broadway, New York, New York 10279 (the
"Company") and Roger N. Farah (the "Executive").
The Compensation Committee of the Board of Directors of the Company granted
the Executive an award of 275,000 shares of Restricted Stock under the Plan,
subject to the terms of the Plan and the restrictions set forth in this
Agreement, effective as of the date hereof (the "Date of Grant").
1. Grant of Shares
The Company is transferring to the Executive 275,000 shares of validly
issued Common Stock of the Company, par value $.01 per share. Such shares are
fully paid and nonassessable and upon transfer shall be validly issued and
outstanding. The shares are subject to certain restrictions pursuant to Section
3 hereof, which restrictions shall expire as provided in Section 3.3 hereof.
2. Restrictions on Transfer
The Employee shall not sell, transfer, pledge, hypothecate, assign or
otherwise dispose of the Restricted Stock, except as set forth in this
Agreement. Any attempted sale, transfer, pledge, hypothecation, assignment or
other disposition of the shares in violation of this Agreement shall be void and
of no effect and the Company shall have the right to disregard the same on its
books and records and to issue "stop transfer" instructions to its transfer
agent.
3. Restricted Stock
3.1 Deposit of Certificates. The Executive will deposit with and deliver to
the Company the stock certificate or certificates representing the Restricted
Stock, each duly endorsed in blank or accompanied by stock powers duly executed
in blank. In the event the Executive receives a stock dividend on the Restricted
Stock or the Restricted Stock is split or the Executive receives any other
shares, securities, monies, or property representing a dividend on the
Restricted Stock (other than regular cash dividends on and after the date of
this Agreement) or representing a distribution or return of capital upon or in
respect of the Restricted Stock or any part thereof, or resulting from a
split-up, reclassification or other like changes of the Restricted Stock, or
otherwise received in exchange therefor, and any warrants, rights or options
issued to the Executive in respect of the Restricted Stock (collectively the "RS
Property"), the Executive will also immediately deposit with and deliver to the
1
<PAGE> 2
Company any of such RS Property, including any certificates representing shares
duly endorsed in blank or accompanied by stock powers duly executed in blank,
and such RS Property shall be subject to the same restrictions, including that
of this Section 3.1, as the Restricted Stock with regard to which they are
issued and shall herein be encompassed within the term "Restricted Stock."
3.2 Rights with Regard to the Restricted Stock. The Restricted Stock has
been transferred from either the Company's treasury or newly issued stock and,
therefore, upon delivery to the Executive will constitute issued and outstanding
shares of Common Stock for all corporate purposes. From and after the date of
transfer, the Executive will have the right to vote the Restricted Stock, to
receive and retain all regular cash dividends payable to record holders of
Common Stock on and after the transfer of the Restricted Stock (although such
dividends shall be treated, to the extent required by law, as additional
compensation for tax purposes if paid on Restricted Stock), and to exercise all
other rights, powers and privileges of a holder of Common Stock with respect to
the Restricted Stock, with the exceptions that (i) the Executive will not be
entitled to delivery of the stock certificate or certificates representing the
Restricted Stock until the restriction period shall have expired and unless all
other vesting requirements with respect thereto shall have been fulfilled, (ii)
the Company will retain custody of the stock certificate or certificates
representing the Restricted Stock and the other RS Property during the
restriction period, (iii) no RS Property shall bear interest or be segregated in
separate accounts during the restriction period and (iv) the Executive may not
sell, assign, transfer, pledge, exchange, encumber or dispose of the Restricted
Stock during the restriction period.
3.3 Vesting. The Restricted Stock shall become vested and cease to be
Restricted Stock (but still subject to the other terms of the Plan and this
Agreement) as follows if the Executive has been continuously employed by the
Company or its subsidiaries within the meaning of Section 424 of the Internal
Revenue Code of 1986, as amended (the "Control Group") until such date:
January 31, 2000 91,666 shares
January 31, 2001 91,667 shares
January 31, 2002 91,667 shares
Other than as may be provided for under Section 3.4 hereof, there shall be
no proportionate or partial vesting in the periods prior to the appropriate
vesting date and all vesting shall occur only on the appropriate vesting date.
When any Restricted Stock becomes vested, the Company shall promptly issue
and deliver to the Executive a new stock certificate registered in the name of
the Executive for such shares without the legend set forth in Section 4 hereof
and deliver to the Executive any related other RS Property.
In addition, as provided under the terms of the Plan, all shares of
Restricted Stock shall become immediately vested and cease to be Restricted
Stock upon any Change in Control as defined in Appendix A hereto.
2
<PAGE> 3
3.4 Forfeiture. In the event of the Executive's death, disability, or
resignation, the Executive shall forfeit to the Company, without compensation,
all unvested shares of Restricted Stock; provided that (i) in the event of the
death or disability of the Executive, (ii) in the event that the Executive
ceases to be employed by the Company or any subsidiary or affiliate of the
Company as a result of the closing, sale, spin-off or other divestiture of any
operation of the Company, or (iii) in the event of the Executive's resignation
from the Company prior to the next applicable vesting date, the Compensation
Committee of the Board of Directors of the Company may, in its sole discretion,
but shall not be obligated to, fully vest and not forfeit all or any portion of
the Executive's Restricted Stock.
3.5 Adjustments. In the event of any stock dividend, split up, split-off,
spin-off, distribution, recapitalization, combination or exchange of shares,
merger, consolidation, reorganization or liquidation or the like, the Restricted
Stock shall, where appropriate in the sole discretion of the Compensation
Committee of the Board of Directors of the Company, receive the same
distributions as other shares of Common Stock or on some other basis as
determined by the Compensation Committee of the Board of Directors. In any such
event, the Compensation Committee of the Board of Directors may, in its sole
discretion, determine to award additional Restricted Stock in lieu of the
distribution or adjustment being made with respect to other shares of Common
Stock. In any such event, the determination made by the Compensation Committee
of the Board of Directors shall be conclusive. The Compensation Committee of the
Board of Directors may, in its sole discretion, at any time fully vest and not
forfeit all or any portion of the Executive's Restricted Stock.
3.6 Withholding. The Employee agrees that, subject to subsection 3.7 below,
(a) No later than the date on which any Restricted Stock shall have become
vested, the Executive will pay to the Company, or make arrangements satisfactory
to the Company regarding payment of, any federal, state or local taxes of any
kind required by law to be withheld with respect to any Restricted Stock which
shall have become so vested;
(b) The Company shall, to the extent permitted by law, have the right to
deduct from any payment of any kind otherwise due to the Executive any federal,
state or local taxes of any kind required by law to be withheld with respect to
any Restricted Stock which shall have become so vested; and
(c) In the event the Executive does not satisfy (a) above on a timely
basis, the Company may, but shall not be required to, pay such required
withholding and treat such amount as a demand loan to the Employee at the
maximum rate permitted by law, with such loan, at the Company's sole discretion
and provided the Company so notifies the Employee within thirty (30) days of the
making of the loan, secured by the shares of Common Stock and any failure by the
Executive to pay the loan upon demand shall entitle the Company to all of the
rights at law of a creditor secured by the shares of Common Stock. The Company
may hold as security any certificates representing any shares of Common Stock
and, upon demand of the Company, the Executive shall deliver to the Company any
certificates in his possession representing shares of Common Stock together with
a stock power duly endorsed in blank.
3
<PAGE> 4
3.7 Section 83(b). If the Executive properly elects (as required by Section
83(b) of the Internal Revenue Code of 1986, as amended) within thirty (30) days
after the issuance of the Restricted Stock to include in gross income for
federal income tax purposes in the year of issuance the fair market value of
such Restricted Stock, the Executive shall pay to the Company or make
arrangements satisfactory to the Company to pay to the Company upon such
election, any federal, state or local taxes required to be withheld with respect
to such Restricted Stock. If the Executive shall fail to make such payment, the
Company shall, to the extent permitted by law, have the right to deduct from any
payment of any kind otherwise due to the Executive any federal, state or local
taxes of any kind required by law to be withheld with respect to such Restricted
Stock, as well as the rights set forth in Section 3.6(c) hereof. The Executive
acknowledges that it is his sole responsibility, and not the Company's, to file
timely the election under Section 83(b) of the Internal Revenue Code of 1986, as
amended, and any corresponding provisions of state tax laws if he elects to
utilize such election.
3.8 Special Incentive Compensation. The Executive agrees that the award of
the Restricted Stock hereunder is special incentive compensation and that it,
any dividends paid thereon (even if treated as compensation for tax purposes)
and any other RS Property will not be taken into account as "salary" or
"compensation" or "bonus" in determining the amount of any payment under any
pension, retirement or profit-sharing plan of the Company or any life insurance,
disability or other benefit plan of the Company.
3.9 Delivery Delay. The delivery of any certificate representing Restricted
Stock or other RS Property may be postponed by the Company for such period as
may be required for it to comply with any applicable federal or state securities
law, or any national securities exchange listing requirements and the Company is
not obligated to issue or delivery any securities if, in the opinion of counsel
for the Company, the issuance of such shares shall constitute a violation by the
Executive or the Company of any provisions of any law or of any regulations of
any governmental authority or any national securities exchange.
4. Legend. All certificates representing shares of Restricted Stock shall
have endorsed thereon a legend referring to the terms conditions and
restrictions applicable to such Restricted Stock, substantially in the following
form:
"The anticipation, alienation, attachment, sale, transfer, assignment,
pledge, encumbrance or charge of the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture) of the Venator Group
(the "Company") 1998 Stock Option and Award Plan and an Agreement entered into
between the registered owner and the Company dated , 1999. Copies of such Plan
and Agreement are on file at the principal office of the Company."
4
<PAGE> 5
5. Not an Employment Agreement. The issuance of the shares of Restricted
Stock hereunder does not constitute an agreement by the Company to continue to
employ the Executive during the entire, or any portion of the, term of this
Agreement, including but not limited to any period during which the Restricted
Stock is outstanding.
6. Power of Attorney. The Company, its successors and assigns, is hereby
appointed the attorney-in-fact, with full power of substitution, of the
Executive for the purpose of carrying out the provisions of this Agreement and
taking any action and executing any instruments which such attorney-in-fact may
deem necessary or advisable to accomplish the purposes hereof, which appointment
as attorney-in-fact is irrevocable and coupled with an interest. The Company, as
attorney-in-fact for the Executive, may, in the name and stead of the Executive,
make and execute all conveyances, assignments and transfers of the Restricted
Stock, Shares and property provided for herein, and the Executive hereby
ratifies and confirms all that the Company, as said attorney-in-fact, shall do
by virtue hereof. Nevertheless, the Executive shall, if so requested by the
Company, execute and deliver to the Company all such instruments as may, in the
judgment of the Company, be advisable for the purpose.
7. Miscellaneous.
7.1 This Agreement shall inure to the benefit of and be binding upon all
parties hereto and their respective heirs, legal representatives, successors and
assigns.
7.2 This Agreement constitutes the entire agreement between the parties and
cannot be changed or terminated orally. No modification or waiver of any of the
provisions hereof shall be effective unless in writing and signed by the party
against whom it is sought to be enforced.
7.3 This Agreement may be executed in one or more counterparts, all of
which taken together shall constitute one contract.
7.4 The failure of any party hereto at any time to require performance by
another party of any provision of this Agreement shall not affect the right of
such party to require performance of that provision, and any waiver by any party
of any breach of any provision of this Agreement shall not be construed as a
waiver of any continuing or succeeding breach of such provision, a waiver of the
provision itself, or a waiver of any right under this Agreement.
7.5 This Agreement is subject, in all respects, to the provisions of the
Plan, and to the extent any provision of this Agreement contravenes or is
inconsistent with any provision of the Plan, the provisions of the Plan shall
govern.
7.6 The headings of the sections of this Agreement have been inserted for
convenience of reference only and shall in no way restrict or modify any of the
terms or provisions hereof.
5
<PAGE> 6
7.7 All notices, consents, requests, approvals, instructions and other
communications provided for herein shall be in writing and validly given or made
when delivered, or on the second succeeding business day after being mailed by
registered or certified mail, whichever is earlier, to the persons entitled or
required to receive the same, at the address of the Company set forth at the
heading of this Agreement and at the address shown on the records of the Company
for the Executive or to such other address as either party may designate by like
notice. Notices to the Company shall be addressed to the Chairman of the
Compensation Committee with a copy similarly sent to the General Counsel.
7.8 This Agreement shall be governed and construed and the legal
relationships of the parties determined in accordance with the internal laws of
the State of New York.
7.9 To indicate your acceptance of the terms of this Restricted Stock Award
Agreement, you must sign and deliver or mail not later than June 13, 1999, a
copy of this Agreement to the General Counsel of the Company at the address
provided in the heading of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
VENATOR GROUP, INC.
By:/s/ John F. Gillespie
----------------------
JOHN F. GILLESPIE
Senior Vice President
/s/ Roger N. Farah
----------------------
ROGHER N. FARAH
Chairman of the Board
and Chief Executive Officer
6
<PAGE> 7
ACKNOWLEDGMENT
STATE OF NEW YORK )
- ---------------------------------- ) s.s.:
COUNTY OF NEW YORK )
- ----------------------------------
On this 26th day of April 1999, before me personally appeared Roger N.
Farah, to me known to be the person described in and who executed the foregoing
agreement, and acknowledged that he executed the same as his free act and deed.
/s/ Sheilagh M. Clarke
-----------------------
SHEILAGH M. CLARKE
Notary Public
SHEILAGH M. CLARKE
Notary Public, State of New York
No. 01CL4739218
Qualified in New York County
Commission Expires May 31, 2001
7
<PAGE> 8
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 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
of Directors of the Company (referred to herein as 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.
8
<PAGE> 1
EXHIBIT 10.18
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of April 14, 1999, by and between Venator Group,
Inc., a New York corporation, having its principal place of business at 233
Broadway, New York, New York 10279 (the "Company"), and Dale W. Hilpert (the
"Executive").
W I T N E S S E T H :
WHEREAS, the Executive is employed by the Company as its President and
Chief Operating Officer pursuant to the provisions of an employment agreement
dated as of April 30, 1997 (the "1997 Agreement"), the term of which ends on
April 30, 2000; and
WHEREAS, the Company desires the Executive to continue as its President and
Chief Operating Officer for a period extending beyond April 30, 2000, and the
Executive is willing to serve in such capacity beyond such date; and
WHEREAS, the Company and the Executive desire to set forth the terms and
conditions of such continued employment; and
WHEREAS, the Executive and the Company desire to terminate the 1997
Agreement as of April 14, 1999, so that, from and after April 15, 1999, the
terms and conditions of the employment of the Executive with the Company shall
be governed by the provisions of this agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the Company and the Executive agree
as follows:
1
<PAGE> 2
1. Employment. (a) The Company hereby agrees to continue the employment of
the Executive as its President and Chief Operating Officer, and the Executive
hereby agrees to accept such continued employment with the Company, on the terms
and conditions herein contained. The Executive shall continue to serve as
President and Chief Operating Officer and as a member of the Board of Directors
of the Company (the "Board").
(b) Except for earlier termination as provided pursuant to this Agreement,
the Executive's employment under this Agreement shall be for a period commencing
on April 15, 1999 (the "Commencement Date"), and ending on January 31, 2002 (the
"Employment Period").
2. Duties. (a) The Executive shall serve during the Employment Period as
President and Chief Operating Officer of the Company, reporting only to the
Chairman of the Board and Chief Executive Officer of the Company (the "CEO").
The Executive agrees that in such offices he shall perform such duties and
functions as are commensurate with his status as President and Chief Operating
Officer of the Company as may from time to time be determined or directed by the
Board or by the CEO. The Executive shall devote substantially all of his working
time, attention, skill, and efforts to the performance of his duties hereunder;
provided, however, that with the prior approval of the CEO, which he may grant
or deny in his sole discretion, the Executive may serve on the boards of
directors of other for-profit corporations, if such service does not conflict
with his duties hereunder or his fiduciary duty to the Company. It is further
understood and agreed that nothing herein shall prevent the Executive from
managing his passive personal investments (subject to applicable Company
policies on permissible investments), and (subject to applicable Company
policies) participating in charitable and civic endeavors, so long as such
activities do not interfere in more than a de minimis manner with the
Executive's performance of his duties hereunder. The services to be performed by
the Executive pursuant to the terms of this Agreement shall be rendered
principally at the Company's principal offices; provided, however, that the
Executive agrees to travel for reasonable periods of time for business purposes
whenever such travel is necessary or appropriate to the performance of his
duties hereunder.
2
<PAGE> 3
(b) Upon request of the CEO, the Executive shall also serve as an officer
and director of subsidiaries and affiliates of the Company without additional
compensation.
3. Compensation and Benefits. As full compensation for his services
hereunder, and subject to all the provisions hereof:
(a) During the Employment Period, the Company shall pay the Executive, in
accordance with its normal payroll practices and subject to required
withholding, a salary calculated at such rate per annum as may be fixed by the
Compensation Committee of the Board from time to time, but in no event at a rate
of less than $825,000 per annum ("Base Salary").
(b) During the Employment Period, the Executive shall be eligible to
participate in all bonus, incentive and equity plans that are maintained by the
Company from time to time for its senior executive employees in accordance with
the terms of such plans at the time of participation. Executive shall be
eligible to earn a bonus, at target, under the Annual Incentive Compensation
Plan equal to no less than 75 percent of his Base Salary.
(c) During the Employment Period, the Executive shall be eligible to
participate in all pension, welfare and fringe benefit plans, as well as
perquisites, maintained by the Company from time to time for its senior
executive employees in accordance with their respective terms as in effect from
time to time (other than any special arrangement entered into by contract with
an executive). In addition, during the Executive's active employment during the
Employment Period, the Company shall provide the Executive with life insurance,
with its group term life insurance plan or otherwise, on the life of the
Executive for the benefit of his designated beneficiaries in amount equal to
three times his annual earnings reported as "wages" for Form W-2 purposes (other
than earnings attributable to the exercise of stock options or attributable to
other equity-based incentive plans).
3
<PAGE> 4
(d) During the Employment Period, the Executive shall be reimbursed for his
out-of-pocket travel and entertainment expenses in accordance with the Company's
normal policy for senior executive officers, including appropriate
documentation.
(e) The Executive shall be entitled to four weeks vacation for each fiscal
year during the Employment Period to be taken at such time as mutually
convenient to the Executive and the Company. Unused vacation shall be forfeited.
(f) The Company shall provide to Executive a transportation allowance of
$10,000 per year.
(g) The Company shall pay for personal financial planning services for
Executive up to an amount of $15,000 per year.
4. Termination. The Employment Period shall terminate upon the earliest of
the following:
(a) the Executive's death; (b) the Executive's disability in
accordance with Section 6;
(c) the Executive's termination for cause in accordance with Section
7;
(d) the termination of the Executive by the Company without cause;
(e) the termination by the Executive in accordance with Section 8; or
(f) the termination of the Executive in accordance with Section 10.
5. Death. The death of the Executive shall serve to terminate the
Employment Period, in which event the Company shall have no liability or further
obligation except as follows:
(a) The Company shall pay the Executive's estate (or, if properly
designated under an applicable plan or arrangement, his beneficiary) when
otherwise due any unpaid Base Salary for the period prior to such termination of
the Employment Period, any declared but unpaid bonuses, any declared but unpaid
amounts due under any incentive plan, and any other unpaid amounts due the
Executive under employee benefit, fringe benefit or incentive plans
("Entitlements").
4
<PAGE> 5
(b) The Executive shall have such rights under any employee benefit, fringe
benefit or incentive plan, including any stock option plan, as provided in such
plans and any grants thereunder ("Rights").
(c) The Executive's estate or his designated beneficiary shall be entitled
to receive those benefits afforded by the Company under its then existing
policies to employees who die while employed by the Company.
6. Disability. If the Company reasonably shall determine that the Executive
has become physically or mentally incapable of performing his material duties as
provided in Section 2 of this Agreement and such incapacity is likely to last
for a period of at least 180 days from the onset of such incapacity, the Company
may, at its election at any time after the date of such onset while the
Executive remains incapable of performing his duties, terminate the Executive's
employment hereunder effective immediately by giving the Executive written
notice of such termination. In such event, the Company shall continue the
Executive as an employee on payroll (but not as an officer hereunder) at his
same Base Salary until he qualifies for the Company's long term disability
policy and the Company shall have no other obligation to the Executive or his
dependents other than Entitlements, Rights, amounts due under the Company's long
term disability plan, and any benefits offered by the Company under its then
policy to employees who become disabled while employed by the Company.
7. Cause. (a) If the Company shall determine that there are grounds for
terminating the Employment Period and discharging the Executive for "cause" (as
hereinafter defined), the Company may, at its election at any time within six
months after the Company shall obtain knowledge of the grounds for termination,
give the Executive notice of its intention to terminate the Executive for cause
and stating the grounds for termination. In the event of any arbitration in
accordance with Section 17 hereof with regard to the Company's determination of
cause, the determination by the Company shall be reviewed on a de novo basis by
the arbitrator(s).
5
<PAGE> 6
(b) If the grounds for termination are those specified in clause (ii)(X),
(iv) or (vi) of paragraph (d) hereof, the Executive shall have a period of ten
days from giving of the notice to cure the neglect, refusal, or breach, as the
case may be, provided that if similar grounds arise again within one year of
such cure, no new notice need be given and the Company, at its option, may
immediately terminate the Executive for cause.
(c) If the grounds for termination are those specified in clauses (i),
(ii)(Y), (ii)(Z), (iii) or (v) of paragraph (d) hereof, it is understood and
agreed that no satisfactory cure is available and such termination shall be
effective immediately upon notice by the Company.
(d) For purposes of this Section 7 and Section 9 hereof, the term "cause"
shall mean:
(i) the conviction (or plea of guilty or nolo contendere) of the Executive
of any felony, or of any crime involving fraud, dishonesty or misappropriation,
or moral turpitude or, if any of the foregoing involves the Company or any
subsidiary or affiliate (collectively the "Control Group"), the commission of
any of the foregoing (other than good faith disputes involving expense account
items);
(ii) the Executive's (X) continued willful neglect of his duties and
responsibilities under this Agreement; (Y) grossly negligent conduct in
connection with his duties and responsibilities under this Agreement; or (Z)
gross negligence in connection with his handling of the assets of the Company or
any other member of the Control Group;
6
<PAGE> 7
(iii) the Executive's willful misconduct with regard to the Control Group;
(iv) the Executive's refusal to follow the written direction of the Board
or the CEO with regard to the Executive's responsibilities as set forth herein;
(v) the Executive's willful failure to comply with the covenants in Section
13 hereof; or
(vi) material breach of any of the provision of this Agreement by the
Executive.
(e) If the Company shall terminate the Executive's employment pursuant to
this Section 7, it shall have no further liability or obligation hereunder
except as follows:
(i) The Company shall promptly pay the Executive his then current Base
Salary through the effective date of such termination;
(ii) The Executive shall receive the benefits, if any, and have the rights
afforded by the Company under its then existing policies to employees whose
employment is terminated for cause or under the specific terms of any welfare,
pension, fringe benefit or incentive plan.
8. Good Reason. In the event that the Company shall (i) fail to continue
the appointment of the Executive as President and Chief Operating Officer of the
Company, or (ii) reduce the Executive's annual salary below the Base Salary, or
(iii) materially diminish the duties and responsibilities of the Executive as
President and Chief Operating Officer, assign to the Executive duties and
responsibilities inconsistent with his positions, or materially diminish his
authority, or (iv) locate the Executive at other than at the Company's main
executive office, or (v) breach any payment provision of this Agreement (to the
extent not disputed in good faith) or any other material provision of this
Agreement (each of the foregoing hereinafter referred to as a "Triggering
Event"), then the Executive may give notice to the Company of his election to
terminate the Employment Period pursuant to this Section 8, effective thirty
(30) days from the date of such notice, unless the Company shall have cured
prior thereto the default giving rise to his notice of election to terminate.
7
<PAGE> 8
Such notice from the Executive shall state the Triggering Event which provides
the grounds for his termination, and such notice must be given, if at all,
within 90 days of the date the Executive obtains knowledge of the Triggering
Event referred to as providing such grounds for termination. Within the 30 day
period specified in the Executive's notice to the Company, the Company shall
have the opportunity to cure the default involved in the Triggering Event
specified by the Executive. If the Employment Period is terminated pursuant to
this Section 8, the Company shall have no liability or further obligation
hereunder except as provided in Section 9 hereof. If the Executive does not give
notice to the Company of his election to terminate within 90 days following the
occurrence of a Triggering Event, then the Executive shall be deemed to have
waived his right to terminate the Employment Period based on such Triggering
Event, but such waiver shall not prejudice his right to terminate pursuant to
this Section 8 based on the occurrence of another Triggering Event occurring
subsequent in time, whether of the same or a different type.
9. Termination. In the event of a termination of the Employment Period
pursuant to Section 8 hereof, or in the event the Company shall terminate the
Employment Period without cause, or if as of January 31, 2002, the Company does
not offer to extend this agreement under the same terms and conditions then
existing (other than with respect to the one-year extension provision under this
Section 9) for an additional one year, then, except as provided in Section 10
hereof, the Company shall have no obligation to the Executive except as follows:
(a) The Executive shall receive his Entitlements and have his Rights.
Thereafter, and during the period until the earliest of (i) the later of January
31, 2002 or one year from the date of termination, (ii) the Executive's death,
or (iii) the Executive's violation of the post employment requirements of
Section 13 hereof, and subject to paragraph (f) below, following the date of
such termination (hereinafter referred to as the "Severance Period"), the
Company shall make payments to the Executive, either bi-weekly or monthly as the
Company shall elect, calculated at the annual rate of Base Salary which the
Executive was receiving pursuant to Section 3(a) hereof immediately prior to
such termination.
8
<PAGE> 9
(b) During the Severance Period the Executive shall not be an employee and
shall not be entitled to receive any fringes, perquisites or benefits from the
Company, except the Company shall pay the premiums for his and his dependents'
health coverage under COBRA until the earliest of (i) such time as he commences
other employment, (ii) such time as he or a dependent, as the case may be, is no
longer entitled to COBRA coverage, or (iii) as provided in paragraph (f) below.
(c) The Company shall provide the Executive, at no cost to the Executive,
with out-placement at a level commensurate with the Executive's position.
(d) The Executive shall not be required to mitigate the amount of any
payment provided for in the second sentence of paragraph (a) or in paragraph (b)
by seeking other employment nor shall any amounts to be received by the
Executive hereunder be reduced by any other compensation earned.
(e) The Company shall be entitled to withhold from any payments made to the
Executive under this Section 9 any amounts required to be withheld by applicable
federal, state or local tax law.
(f) Any amounts being paid to or on behalf of the Executive under this
Section 9 (other than vested benefits that are required to be paid under the
Company's tax-qualified pension plans pursuant to the provisions of the Employee
Retirement Income Security Act of 1974, as amended) shall immediately cease if
the Executive enters into Competition with the Control Group. For purposes of
this Agreement, "Competition" shall mean the:
9
<PAGE> 10
(i) participating, directly or indirectly, as an individual proprietor,
stockholder, officer, employee, director, consultant, joint venturer, investor,
lender, or in any capacity whatsoever (within the United States of America, or
in any country where the Control Group does business) in activities competitive
with any business of the Control Group, provided, however, that such
participation shall not include (x) the mere ownership of not more than one
percent of the total outstanding stock of a publicly held company; or (y) any
activity engaged in with the prior written approval of the Board; or
(ii) intentionally recruiting, soliciting or inducing, any employee or
employees of the Control Group to terminate their employment with, or otherwise
cease their relationship with, the Control Group where such employee or
employees do in fact so terminate their employment.
If any restriction set forth with regard to Competition is found by any
court of competent jurisdiction, or an arbitrator, 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.
10. Change in Control. In the event of the occurrence of a Change in
Control, as defined in Exhibit A hereto, and (i) the Company shall terminate the
Executive's employment without cause or the Executive shall terminate his
employment for Good Reason (as defined in Section 8 hereof) within one year
following such Change in Control, or (ii) within one year following such Change
in Control the person who is CEO of the Company immediately prior to such Change
in Control ceases to be CEO of the Company, and the Executive, within 90 days of
the date such person shall cease to be CEO of the Company, gives written notice
terminating the Employment Period (and such Employment Period shall cease upon
the giving of such notice), then the Company shall have no obligation to the
Executive except as follows:
10
<PAGE> 11
(a) The Executive shall receive all amounts and benefits under Section 9
hereof as if he had terminated his employment for Good Reason pursuant to
Section 8 hereof.
(b) In addition to any payments to which the Executive may be entitled
pursuant to the provisions of paragraph (a) of this section, if the sum of the
payments that the Company would anticipate making to the Executive under the
provisions of the second sentence of Section 9(a) if such payments continued
until the later of January 31, 2002 or one year from the date of termination,
without adjustment for the time value of money (the "Section 9(a) Payments"), is
less than 3 multiplied by Executive's Base Salary (at the rate payable
immediately prior to such Change in Control) plus bonus payable under the Annual
Incentive Compensation Plan at target in the year of the termination of the
Employment Period (the "Change-in-Control Amount"), then the Company shall make
a lump sum cash payment of the difference between the Change-in-Control Amount
and the Section 9(a) Payments to Executive within five business days of the date
of the termination of the Employment Period.
11. Gross-up. (a) In the event that the Executive shall become entitled to
the payments and/or benefits provided by Section 10 or any other amounts
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, any person whose actions result in a change of
ownership covered by Section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended (the "Code") or any person affiliated with the Company or such person)
(collectively the "Company Payments"), and such Company Payments will be subject
to the tax (the "Excise Tax") imposed by Section 4999 of the Code (and any
similar tax that may hereafter be imposed), subject to paragraph (f) below, the
Company shall pay to the Executive at the time specified in paragraph (d) below
an additional amount (the "Gross-up Payment") such that the net amount retained
by the Executive, after deduction of any Excise Tax on the Company Payments and
any federal, state and local income tax and Excise Tax upon the Gross-up Payment
provided for by this paragraph (a), but before deduction for any federal, state
or local income tax on the Company Payments, shall be equal to the Company
Payments.
11
<PAGE> 12
(b) For purposes of determining whether any of the Company Payments and
Gross-up Payments (collectively the "Total Payments") will be subject to the
Excise Tax and the amount of such Excise Tax, (a) the Total Payments shall be
treated as "parachute payments" within the meaning of section 280G(b)(2) of the
Code, and all "parachute payments" in excess of the "base amount" (as defined
under Code Section 280G(b)(3)) shall be treated as subject to the Excise Tax,
unless and except to the extent that, in the opinion of the Company's
independent certified public accountants appointed prior to any change in
ownership (as defined under Code Section 280G(b)(2)) or tax counsel selected by
such accountants (the "Accountants") such Total Payments (in whole or in part)
either do not constitute "parachute payments", represent reasonable compensation
for services actually rendered within the meaning of Section 280G(b)(4) of the
Code in excess of the "base amount" or are otherwise not subject to the Excise
Tax, and (b) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Accountants in accordance with the principles
of Section 280G of the Code.
(c) For purposes of determining the amount of the Gross-up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's residence for the
calendar year in which the Company Payment is to be made, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes if paid in such year. In the event that the Excise Tax is
subsequently determined by the Accountants to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, the Executive shall
repay to the Company, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the prior Gross-up Payment
attributable to such reduction net of any federal, state, or local income tax
incurred on the original receipt of such portion of the prior Gross-up Payment
(after taking into account the tax benefit, if any, that the Executive receives
on such repayment) (plus the portion of the Gross-up Payment attributable to the
Excise Tax and federal and state and local income tax imposed on the portion of
the Gross-up Payment being repaid by the Executive if such repayment results in
a reduction in Excise Tax or a federal and state and local income tax
deduction), plus interest on the amount of such repayment at the rate provided
in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the
event any portion of the Gross-up Payment to be refunded to the Company has been
paid to any federal, state or local tax authority, repayment thereof (and
related amounts) shall not be required until actual refund or credit of such
portion has been made to the Executive, and interest payable to the Company
shall not exceed the interest received or credited to the Executive by such tax
authority for the period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued (and the method of
allocating the expense thereof) if the Executive's claim for refund or credit is
denied.
12
<PAGE> 13
In the event that the Excise Tax is later determined by the Accountant or
the Internal Revenue Service to exceed the amount taken into account hereunder
at the time the Gross-up Payment is made (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-up
Payment), the Company shall make an additional Gross-up Payment in respect of
such excess (plus any interest or penalties payable with respect to such excess)
at the time that the amount of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided for in paragraph (c)
above shall be paid not later than the thirtieth day following an event
occurring which subjects the Executive to the Excise Tax; provided, however,
that if the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to the Executive on such
day an estimate, as determined in good faith by the Accountant, of the minimum
amount of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Code Section 1274(b)(2)(B) of the Code),
subject to further payments pursuant to paragraph (c) hereof, as soon as the
amount thereof can reasonably be determined, but in no event later than the
ninetieth day after the occurrence of the event subjecting the Executive to the
Excise Tax. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to the Executive, payable on the fifth day after demand by
the Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(e) The Company shall be responsible for all charges of the Accountant.
13
<PAGE> 14
12. Supplemental Executive Retirement Plan. During the Employment Period,
Executive shall participate in the Company's Supplemental Executive Retirement
Plan (the "SERP"). If, at the time of a termination of the Employment Period (a)
pursuant to Section 8 hereof, (b) without cause, (c) pursuant to Section 10
hereof, or (d) on January 31, 2002 (if the Company and Executive have not
entered into an employment agreement extending Executive's employment with the
Company beyond such date) (the "Retirement Events"), the Total Retirement
Benefit, as hereinafter defined, is less than $1,300,000, the Company shall,
effective as of the date of such termination of the Employment Period, increase
the amount of Executive's Account in the SERP by the difference between the
Total Retirement Benefit and $1,300,000. Further, if at any time during the
Employment Period the Board freezes or terminates the SERP or terminates the
participation of Executive thereunder, (i) Executive shall, as of the day
preceding such action, if it is not the case, be deemed to be at least 55 years
of age and have at least five "Years of Service" as defined in the SERP and,
(ii) the Company shall, if the Total Retirement Benefit to which the Executive
would be entitled, as of the day preceding such action, is less than $1,300,000,
increase the amount of Executive's Account in the SERP by the difference between
the Total Retirement Benefit, calculated as of such date, and $1,300,000. For
purposes of this section, Total Retirement Benefit shall be the sum of (a) the
lump sum benefit to which Executive is entitled under the provisions of Section
4.03 (C) (2) of the Venator Group Retirement Plan plus (b) the amount of the
lump sum Excess Cash Balance Benefit payable under the provisions of the Excess
Cash Balance Plan plus (c) the amount of Executive's Account under the SERP,
prior to any adjustment provided for herein. In the event a Retirement Event
occurs and either (i) such Retirement Event occurs before the Executive reaches
age 55 or (ii) such Retirement Event occurs after the Executive has reached age
55 and the Compensation Committee of the Board does not provide the consent
required by Section 2(v) of the SERP to permit Executive's "Retirement", as
defined therein, to occur before he attains age 65, then the Company shall make
a payment to Executive equal to the amount that would have been in Executive's
Account in the SERP following the adjustment, if any, provided for in this
section, such payment to be made to Executive in the same manner, and subject to
the same restrictions, as provided for in the SERP.
14
<PAGE> 15
13. Confidential Information, Nondisparagement. (a) In consideration of the
covenants by the Company contained herein, the Executive undertakes and agrees
that during the Employment Period and thereafter he shall hold in a fiduciary
capacity for the benefit of the Control Group all secret or confidential
information, knowledge, or data relating to the Control Group or its business
(which shall be defined as all such information, knowledge, and data coming to
the Executive's attention by virtue of his employment at the Company except that
which is otherwise public knowledge or known within the Company's industry).
During such period, the Executive shall not, without prior written consent of
the Company, unless compelled pursuant to the order of a court or other body
having jurisdiction over such matter or unless required by lawful process or
subpoena, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. The foregoing shall
not limit the disclosure by the Executive of such information in the course of
the performance of his duties as President and Chief Operating Officer so long
as such disclosure is in good faith.
(b) During the Employment Period and thereafter while the Executive is
receiving any amounts pursuant to Section 9(a), Section 10, or Section 12
hereof, the Executive shall not make any statements or comments (i) to any form
of media or likely to come to the attention of any form of media of a negative
nature that reasonably could be considered to have an adverse impact on the
business or reputation of the Control Group, the Board or any senior officer of
the Control Group, or (ii) to any employee of the Control Group or to any
supplier or customer of the Control Group of a negative nature that reasonably
could be considered to have an adverse impact on the business or reputation of
the Control Group or the Board or any senior officer of the Control Group,
provided that in no event shall the foregoing limitation apply to (i) compliance
with legal process or subpoena, (ii) statements in response to inquiry from a
court or regulatory body, (iii) in rebuttal of media stories with regard to the
Executive, (iv) to a possible future employer in connection with employment
discussions, or (v) in response to inquiry from the Board or the CEO.
15
<PAGE> 16
(c) Furthermore, (i) during the Employment Period, (ii) thereafter while
the Executive is receiving any amounts pursuant to Section 9(a) hereof, or,
(iii) if the employment of Executive hereunder is terminated for cause, prior to
January 31, 2002, the Executive shall not enter into Competition with the
Control Group, as defined in Section 9(f) hereof.
(d) Notwithstanding any other provision of this Agreement, in the event of
a breach or threatened breach by the Executive of any provision of this Section,
the Executive and the Company agree that the Company shall be entitled to
injunctive and declaratory relief from a court of competent jurisdiction to
restrain the Executive from committing such breach of the Agreement. Nothing in
this Agreement shall be construed as prohibiting the Company from pursuing any
other remedy or remedies including, without limitation, the recovery of damages.
(e) The provisions of this section shall survive the expiration of this
Agreement or the termination of the Agreement for any reason.
14. Indemnification. The Company agrees that the Executive shall be
entitled to the benefits of the indemnity provisions set forth in the By-laws
from time to time in accordance with their terms both during his employment and
thereafter with regard to his actions as an officer or director of the Company.
In addition, the Company agrees to continue in effect for the benefit of the
Executive during the Employment Period directors' and officers' liability
insurance of the type and in the amount currently maintained by the Company to
the extent such insurance is available at a premium cost which the Company
considers reasonable and, thereafter, with regard to his prior activities as an
officer or director, such insurance as is maintained for active directors and
officers.
16
<PAGE> 17
15. Assignment. This Employment Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors, heirs (in
the case of the Executive) and permitted assigns. This Agreement is personal to
the Executive and neither this Agreement nor any rights hereunder may be
assigned by the Executive. No rights or obligations of the Company under this
Employment Agreement may be assigned or transferred by the Company except that
such rights or obligations may be assigned or transferred pursuant to a merger
or consolidation in which the Company is not the continuing entity, or pursuant
to a sale of all or substantially all of the assets of the Company, provided
that the assignee or transferee is the successor to all or substantially all of
the assets of the Company and such assignee or transferee assumes the
liabilities, obligations and duties of the Company, as contained in this
Employment Agreement, either contractually or as a matter of law. The Company
further agrees that, in the event of a sale as described in the preceding
sentence, it shall use its best efforts to cause such assignee or transferee to
expressly assume the liabilities, obligations, and duties of the Company
hereunder.
16. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, other than injunctive relief pursuant to
Section 13(d) hereof, shall be settled by arbitration in the City of New York,
in accordance with the rules of the American Arbitration Association (the "AAA")
before three arbitrators. The decision of the arbitrators shall be final and
binding on the parties hereto and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. The costs
assessed by the AAA for arbitration shall be borne equally by both parties.
17
<PAGE> 18
17. Notice. Any notice to either party hereunder shall be in writing, and
shall be deemed to be sufficiently given to or served on such party, for all
purposes, if the same shall be personally delivered to such party, or sent to
such party by registered mail, postage prepaid, at, in the case of the Company,
the address first given above and, in the case of the Executive, his principal
residence address as shown in the records of the Company. Notices to the Company
shall be addressed to the CEO with a copy similarly sent to the General Counsel.
Either party hereto may change the address to which notices are to be sent to
such party hereunder by written notice of such new address given to the other
party hereto. Notices shall be deemed given when received if delivered
personally or three days after mailing if mailed as aforesaid.
18. Applicable Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York applicable to
contracts to be performed therein.
19. 1997 Agreement. The 1997 Agreement is hereby terminated, effective as
of the close of business on April 14, 1999, without further obligation of either
party to the other, and shall thereafter be of no force or effect.
20. Miscellaneous. (a)This Agreement represents the entire understanding
of the parties hereto, supersede any prior understandings or agreements between
the parties, and the terms and provisions of this Agreement may not be modified
or amended except in a writing signed by both parties.
(b) No waiver by either party of any breach by the other party of any
condition or provision contained in this Agreement to be fulfilled or performed
by such other party shall be deemed a waiver of a similar or dissimilar
condition or provision at the same or any prior or subsequent time. Except to
the extent otherwise specifically provided herein, any waiver must be in writing
and signed by the Executive or an authorized officer of the Company, as the case
may be.
18
<PAGE> 19
21. Beneficiary. The Executive shall be entitled to select (and change, to
the extent permitted under any applicable law) a beneficiary or beneficiaries to
receive any compensation or benefit payable under this Agreement following his
death by giving the Company written notice thereof in accordance with applicable
Company policies. In the event of the Executive's death or a judicial
determination of his incompetence, reference in this Agreement to the Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other
legal representative.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
VENATOR GROUP, INC.
By: /s/ Roger N. Farah
---------------------
ROGER N. FARAH
/s/ Dale W. Hilpert
---------------------
DALE W. HILPERT
19
<PAGE> 20
Exhibit A
---------
Change in Control of the Company 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 subsidiaries) 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 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 of Directors of the Company (referred to
herein as 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.
Hilpert
20
<PAGE> 1
EXHIBIT 10.19
Tel: 212-553-2452
Fax: 212-553-2152
December 21, 1998
Mr. Jarobin Gilbert
President and Chief Executive Officer
DBSS Group, Inc.
301 East 57th Street
New York, NY 10022
Re: Consulting Agreement Dated April 18, 1997
-----------------------------------------
Dear Jarobin:
In reference to the Consulting Agreement between DBSS Group, Inc. and Venator
Group, Inc. (formerly known as Woolworth Corporation) dated April 18, 1997 (the
"Agreement"), the parties hereby mutually agree to terminate the Agreement
effective as of December 31, 1998. The Agreement shall be of no further force or
effect as of such date, with the exception of Section 9 concerning confidential
information.
Please indicate your acknowledgment of and your agreement with the foregoing by
executing a copy of this letter in the space provided below and returning it to
me in the envelope provided.
Sincerely,
VENATOR GROUP, INC.
By:/s/ Gary M. Bahler
------------------
Gary M. Bahler
Senior Vice President,
General Counsel and Secretary
Acknowledged and Agreed:
DBSS GROUP, INC.
By:/s/ Jarobin Gilbert Jr.
-----------------------
Jarobin Gilbert Jr.
President and Chief Executive
Officer
<PAGE> 1
EXHIBIT 10.21
February 19, 1999
Mr. M. Jeffrey Branman
229 South Mountain Avenue
Montclair, NJ 07047
Dear Mr. Branman:
This letter amends the supplemental agreement dated April 24, 1997 (the
"Supplemental Agreement") between Venator Group, Inc. (formerly Woolworth
Corporation), a New York corporation, and you, as follows.
1. The reference in the first paragraph of the Supplemental Agreement to
the Senior Executive Severance Agreement dated April 24, 1997 is
hereby amended to refer to the Senior Executive Severance Agreement
dated as of February 19, 1999.
2. Paragraph 5 of the Supplemental Agreement is hereby amended to read in
its entirety as follows: "Clause (iv) of Section 1(k) of the Agreement
shall not apply to the discretionary bonus based on individual
performance standards provided for under the terms of your
employment."
All provisions of the Supplemental Agreement not expressly amended hereby shall
remain unmodified and unamended and the entire Supplemental Agreement, as
amended hereby, shall continue in full force and effect in accordance with the
terms of the Supplemental Agreement.
VENATOR GROUP, INC.
By:/s/ John F. Gillespie
----------------------
Senior Vice President-
Human Resources
ACCEPTED AND AGREED:
/s/ M. Jeffrey Branman
- -----------------------
M. Jeffrey Branman
February 25, 1999
- -----------------
Date
<PAGE> 1
EXHIBIT 10.30
ESTRICTED STOCK AWARD AGREEMENT
UNDER THE VENATOR GROUP
1998 STOCK OPTION AND AWARD PLAN
This Restricted Stock Award Agreement (the "Agreement") made under the
Venator Group 1998 Stock Option and Award Plan (the "Plan") as of the
______________ day of _______________ ____ by and between Venator Group, Inc., a
New York corporation with its principal office located at 233 Broadway, New
York, New York 10279 (the "Company") and __________________, residing at
________________________ (the "Executive").
Effective __________________, ______ (the "Date of Grant"), the
Compensation Committee of the Board of Directors of the Company granted the
Executive an award of __________ shares of Restricted Stock under the Plan,
subject to the terms of the Plan and the restrictions set forth in this
Agreement.
1. Grant of Shares
----------------
The Company is transferring to the Executive ________ shares of validly
issued Common Stock of the Company, par value $.01 per share. Such shares are
fully paid and nonassessable and upon transfer shall be validly issued and
outstanding. The shares are subject to certain restrictions pursuant to Section
3 hereof, which restrictions shall expire as provided in Section 3.3 hereof.
2. Restrictions on Transfer
------------------------
The Employee shall not sell, transfer, pledge, hypothecate, assign or
otherwise dispose of the Restricted Stock, except as set forth in this
Agreement. Any attempted sale, transfer, pledge, hypothecation, assignment or
other disposition of the shares in violation of this Agreement shall be void and
of no effect and the Company shall have the right to disregard the same on its
books and records and to issue "stop transfer" instructions to its transfer
agent.
3. Restricted Stock
----------------
3.1 Deposit of Certificates. The Executive will deposit with and deliver to
the Company the stock certificate or certificates representing the Restricted
Stock, each duly endorsed in blank or accompanied by stock powers duly executed
in blank. In the event the Executive receives a stock dividend on the Restricted
Stock or the Restricted Stock is split or the Executive receives any other
shares, securities, monies, or property representing a dividend on the
Restricted Stock (other than regular cash dividends on and after the date of
this Agreement) or representing a distribution or return of capital upon or in
respect of the Restricted Stock or any part thereof, or resulting from a
split-up, reclassification or other like changes of the Restricted Stock, or
otherwise received in exchange therefor, and any warrants, rights or options
issued to the Executive in respect of the Restricted Stock (collectively the "RS
Property"), the Executive will also immediately deposit with and deliver to the
Company any of such RS Property, including any certificates representing shares
duly endorsed in blank or accompanied by stock powers duly executed in blank,
and such RS Property shall be subject to the same restrictions, including that
of this Section 3.1, as the Restricted Stock with regard to which they are
issued and shall herein be encompassed within the term "Restricted Stock."
<PAGE> 2
3.2 Rights with Regard to the Restricted Stock. The Restricted Stock has
been transferred from either the Company's treasury or newly issued stock and,
therefore, upon delivery to the Executive will constitute issued and outstanding
shares of Common Stock for all corporate purposes. From and after the date of
transfer, the Executive will have the right to vote the Restricted Stock, to
receive and retain all regular cash dividends payable to record holders of
Common Stock on and after the transfer of the Restricted Stock (although such
dividends shall be treated, to the extent required by law, as additional
compensation for tax purposes if paid on Restricted Stock), and to exercise all
other rights, powers and privileges of a holder of Common Stock with respect to
the Restricted Stock, with the exceptions that (i) the Executive will not be
entitled to delivery of the stock certificate or certificates representing the
Restricted Stock until the restriction period shall have expired and unless all
other vesting requirements with respect thereto shall have been fulfilled, (ii)
the Company will retain custody of the stock certificate or certificates
representing the Restricted Stock and the other RS Property during the
restriction period, (iii) no RS Property shall bear interest or be segregated in
separate accounts during the restriction period and (iv) the Executive may not
sell, assign, transfer, pledge, exchange, encumber or dispose of the Restricted
Stock during the restriction period.
3.3 Vesting.
--------
(a) The Restricted Stock shall become 100% vested and cease to be
Restricted Stock (but still subject to the other terms of the Plan and this
Agreement) on February 1, 2004 if the Executive has been continuously employed
by the Company or its subsidiaries within the meaning of Section 424 of the
Internal Revenue Code of 1986, as amended (the "Control Group") until such date.
(b) The vesting of the Restricted Stock shall be accelerated, so that it
will become 100% vested on March 15, 2002 for individuals who have been
continuously employed by the Control Group from February 1, 1999 to March 15,
2002, provided that the sum of the actual earnings per share of the Company as
reported for the years 1999, 2000 and 2001 equal or exceed the sum of (i) the
earnings per share for 1999 shown in the 1999 operating budget of the Company
approved by the Board of Directors for 1999, (ii) the earnings per share for
2000 shown in the 2000 operating budget of the Company approved by the Board of
Directors for 2000, and (iii) the earnings per share for 2001 shown in the 2001
operating budget of the Company approved by the Board of Directors for 2001.
Other than as may be provided for under Section 3.4 hereof, there shall be
no proportionate or partial vesting in the periods prior to the appropriate
vesting date and all vesting shall occur only on the appropriate vesting date.
<PAGE> 3
When any Restricted Stock becomes vested, the Company shall promptly issue
and deliver to the Executive a new stock certificate registered in the name of
the Executive for such shares without the legend set forth in Section 4 hereof
and deliver to the Executive any related other RS Property.
In addition, all shares of Restricted Stock shall become immediately vested
and cease to be Restricted Stock upon any Change in Control as defined in
Appendix A hereto.
3.4 Forfeiture. In the event of the Executive's death, disability, or
resignation, the Executive shall forfeit to the Company, without compensation,
all unvested shares of Restricted Stock; provided that (i) in the event of the
death or disability of the Executive or (ii) in the event that the Executive
ceases to be employed by the Company or any subsidiary or affiliate of the
Company as a result of the closing, sale, spin-off or other divestiture of any
operation of the Company, the Compensation Committee of the Board of Directors
of the Company may, in its sole discretion, but shall not be obligated to, fully
vest and not forfeit all or any portion of the Executive's Restricted Stock.
3.5 Adjustments. In the event of any stock dividend, split up, split-off,
spin-off, distribution, recapitalization, combination or exchange of shares,
merger, consolidation, reorganization or liquidation or the like, the Restricted
Stock shall, where appropriate in the sole discretion of the Compensation
Committee of the Board of Directors of the Company, receive the same
distributions as other shares of Common Stock or on some other basis as
determined by the Compensation Committee of the Board of Directors. In any such
event, the Compensation Committee of the Board of Directors may, in its sole
discretion, determine to award additional Restricted Stock in lieu of the
distribution or adjustment being made with respect to other shares of Common
Stock. In any such event, the determination made by the Compensation Committee
of the Board of Directors shall be conclusive. The Compensation Committee of the
Board of Directors may, in its sole discretion, at any time fully vest and not
forfeit all or any portion of the Executive's Restricted Stock.
3.6 Withholding. The Employee agrees that, subject to subsection 3.7 below,
(a) No later than the date on which any Restricted Stock shall have become
vested, the Executive will pay to the Company, or make arrangements satisfactory
to the Company regarding payment of, any federal, state or local taxes of any
kind required by law to be withheld with respect to any Restricted Stock which
shall have become so vested;
(b) The Company shall, to the extent permitted by law, have the right to
deduct from any payment of any kind otherwise due to the Executive any federal,
state or local taxes of any kind required by law to be withheld with respect to
any Restricted Stock which shall have become so vested; and
(c) In the event the Executive does not satisfy (a) above on a timely
basis, the Company may, but shall not be required to, pay such required
withholding and treat such amount as a demand loan to the Employee at the
maximum rate permitted by law, with such loan, at the Company's sole discretion
and provided the Company so notifies the Employee within thirty (30) days of the
making of the loan, secured by the shares of Common Stock and any failure by the
Executive to pay the loan upon demand shall entitle the Company to all of the
rights at law of a creditor secured by the shares of Common Stock. The Company
may hold as security any certificates representing any shares of Common Stock
and, upon demand of the Company, the Executive shall deliver to the Company any
certificates in his possession representing shares of Common Stock together with
a stock power duly endorsed in blank.
<PAGE> 4
3.7 Section 83(b). If the Executive properly elects (as required by Section
83(b) of the Internal Revenue Code of 1986, as amended) within thirty (30) days
after the issuance of the Restricted Stock to include in gross income for
federal income tax purposes in the year of issuance the fair market value of
such Restricted Stock, the Executive shall pay to the Company or make
arrangements satisfactory to the Company to pay to the Company upon such
election, any federal, state or local taxes required to be withheld with respect
to such Restricted Stock. If the Executive shall fail to make such payment, the
Company shall, to the extent permitted by law, have the right to deduct from any
payment of any kind otherwise due to the Executive any federal, state or local
taxes of any kind required by law to be withheld with respect to such Restricted
Stock, as well as the rights set forth in Section 3.6(c) hereof. The Executive
acknowledges that it is his sole responsibility, and not the Company's, to file
timely the election under Section 83(b) of the Internal Revenue Code of 1986, as
amended, and any corresponding provisions of state tax laws if he elects to
utilize such election.
3.8 Special Incentive Compensation. The Executive agrees that the award of
the Restricted Stock hereunder is special incentive compensation and that it,
any dividends paid thereon (even if treated as compensation for tax purposes)
and any other RS Property will not be taken into account as "salary" or
"compensation" or "bonus" in determining the amount of any payment under any
pension, retirement or profit-sharing plan of the Company or any life insurance,
disability or other benefit plan of the Company.
3.9 Delivery Delay. The delivery of any certificate representing Restricted
Stock or other RS Property may be postponed by the Company for such period as
may be required for it to comply with any applicable federal or state securities
law, or any national securities exchange listing requirements and the Company is
not obligated to issue or delivery any securities if, in the opinion of counsel
for the Company, the issuance of such shares shall constitute a violation by the
Executive or the Company of any provisions of any law or of any regulations of
any governmental authority or any national securities exchange.
4. Legend. All certificates representing shares of Restricted Stock shall
have endorsed thereon a legend referring to the terms conditions and
restrictions applicable to such Restricted Stock, substantially in the following
form:
"The anticipation, alienation, attachment, sale, transfer, assignment,
pledge, encumbrance or charge of the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture) of the Venator Group
(the "Company") 1998 Stock Option and Award Plan and an Agreement entered into
between the registered owner and the Company dated ________ , 1999. Copies of
such Plan and Agreement are on file at the principal office of the Company."
5. Not an Employment Agreement. The issuance of the shares of Restricted
Stock hereunder does not constitute an agreement by the Company to continue to
employ the Executive during the entire, or any portion of the, term of this
Agreement, including but not limited to any period during which the Restricted
Stock is outstanding.
<PAGE> 5
6. Power of Attorney. The Company, its successors and assigns, is hereby
appointed the attorney-in-fact, with full power of substitution, of the
Executive for the purpose of carrying out the provisions of this Agreement and
taking any action and executing any instruments which such attorney-in-fact may
deem necessary or advisable to accomplish the purposes hereof, which appointment
as attorney-in-fact is irrevocable and coupled with an interest. The Company, as
attorney-in-fact for the Executive, may, in the name and stead of the Executive,
make and execute all conveyances, assignments and transfers of the Restricted
Stock, Shares and property provided for herein, and the Executive hereby
ratifies and confirms all that the Company, as said attorney-in-fact, shall do
by virtue hereof. Nevertheless, the Executive shall, if so requested by the
Company, execute and deliver to the Company all such instruments as may, in the
judgment of the Company, be advisable for the purpose.
7. Miscellaneous.
-------------
7.1 This Agreement shall inure to the benefit of and be binding upon all
parties hereto and their respective heirs, legal representatives, successors and
assigns.
7.2 This Agreement constitutes the entire agreement between the parties and
cannot be changed or terminated orally. No modification or waiver of any of the
provisions hereof shall be effective unless in writing and signed by the party
against whom it is sought to be enforced.
7.3 This Agreement may be executed in one or more counterparts, all of
which taken together shall constitute one contract.
7.4 The failure of any party hereto at any time to require performance by
another party of any provision of this Agreement shall not affect the right of
such party to require performance of that provision, and any waiver by any party
of any breach of any provision of this Agreement shall not be construed as a
waiver of any continuing or succeeding breach of such provision, a waiver of the
provision itself, or a waiver of any right under this Agreement. 7.5 This
Agreement is subject, in all respects, to the provisions of the Plan, and to the
extent any provision of this Agreement contravenes or is inconsistent with any
provision of the Plan, the provisions of the Plan shall govern.
7.6 The headings of the sections of this Agreement have been inserted for
convenience of reference only and shall in no way restrict or modify any of the
terms or provisions hereof.
7.7 All notices, consents, requests, approvals, instructions and other
communications provided for herein shall be in writing and validly given or made
when delivered, or on the second succeeding business day after being mailed by
registered or certified mail, whichever is earlier, to the persons entitled or
required to receive the same, at the addresses set forth at the heading of this
Agreement or to such other address as either party may designate by like notice.
Notices to the Company shall be addressed to the Chairman of the Compensation
Committee with a copy similarly sent to the General Counsel.
<PAGE> 6
7.8 This Agreement shall be governed and construed and the legal
relationships of the parties determined in accordance with the internal laws of
the State of New York.
7.9 To indicate your acceptance of the terms of this Restricted Stock Award
Agreement, you must sign and deliver or mail not later than ____________, a copy
of this Agreement to the General Counsel of the Company at the address provided
in the heading of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
VENATOR GROUP, INC.
By:
---------------------
---------------------
Executive
<PAGE> 7
ACKNOWLEDGMENT
STATE OF ____________________________________)
) s.s.:
COUNTY OF____________________________________)
On this ________ day of ______ _______, before me personally appeared
____________________, to me known to be the person described in and who executed
the foregoing agreement, and acknowledged that he executed the same as his free
act and deed.
------------------
Notary Public
<PAGE> 8
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 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
of Directors of the Company (referred to herein as 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 ( )
of the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof.
<PAGE> 1
EXHIBIT 10.31
AMENDMENT NO. 3 TO CREDIT AGREEMENT
AMENDMENT No. 3 dated as of March 19, 1999 to the Credit Agreement dated as
of April 9, 1997 (as in effect immediately prior to the effectiveness of this
Amendment, the "Existing Credit Agreement") among VENATOR GROUP, INC. (formerly
known as Woolworth Corporation), the BANKS party thereto, the CO-AGENTS party
thereto, BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, as Documentation
Agent, THE BANK OF NEW YORK, as LC Agent, Administrative Agent and Swingline
Bank and the LEAD ARRANGERS party hereto.
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Existing Credit Agreement
as set forth herein;
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 Existing Credit Agreement
has the meaning assigned to such term in the Existing Credit Agreement. Each
reference to "hereof", "hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" and each other similar
reference contained in the Existing Credit Agreement shall, on and as of the
date hereof, refer to the Existing Credit Agreement as amended hereby.
Section 2. Required Banks Amendment. On and as of the date hereof, upon
satisfaction of the conditions set forth in Section 3 below, the Existing Credit
Agreement is hereby amended and restated in its entirety as set forth in Exhibit
A hereto. The amendment and restatement of the Existing Credit Agreement
effected pursuant to this Section 2 is referred to herein as the "Required Banks
Amendment", and the Existing Credit Agreement as amended and restated pursuant
to the Required Banks Amendment is referred to herein as the "First Restated
Credit Agreement". Upon the effectiveness of the Required Bank Amendment, the
Commitment of each Bank shall be the amount set forth opposite the name of such
Bank on the Commitment Schedule to the First Restated Credit Agreement.
<PAGE> 2
Section 3. Effectiveness of Required Banks Amendment. The Required Banks
Amendment shall become effective on and as of the date hereof upon satisfaction
of each of the following conditions:
(a) receipt by the Administrative Agent of a counterpart hereof signed by
the Borrower and the Required Banks (or facsimile or other written confirmation
satisfactory to the Administrative Agent that each such party has signed a
counterpart hereof);
(b) receipt by the Administrative Agent of a duly executed Note for the
account of each Bank complying with the provisions of Section 2.05 of the First
Restated Credit Agreement and a duly executed Swingline Note (as defined in the
First Restated Credit Agreement) for the account of the Swingline Bank, each
dated the date hereof;
(c) receipt by the Administrative Agent of a counterpart of the Subsidiary
Guarantee substantially in the form of Exhibit H to the First Restated Credit
Agreement (the "Subsidiary Guarantee") signed by each party listed on the
signature pages thereof (or facsimile or other written confirmation satisfactory
to the Administrative Agent that each such party has signed a counterpart
thereof);
(d) receipt by the Administrative Agent of an opinion of Skadden, Arps,
Slate, Meagher & Flom LLP, special counsel for the Borrower, in form and
substance reasonably satisfactory to the Required Banks;
(e) receipt by the Administrative Agent of an opinion of Gary Bahler,
General Counsel of the Borrower, in form and substance reasonably satisfactory
to the Required Banks;
(f) receipt by the Administrative Agent of an opinion of Davis Polk &
Wardwell substantially in the form of Exhibit B hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(g) receipt by the Administrative Agent, for the account of each Bank from
which the Administrative Agent has received the executed counterpart (or other
written confirmation) described in clause (a) above on or prior to the date
hereof, of an amendment fee in an amount equal to 0.375% of such Bank's
Commitment as in effect under the First Restated Credit Agreement upon the
effectiveness of the Required Banks Amendment;
(h) the fact that the Borrower shall have paid all expenses (including
without limitation all expenses payable by it pursuant to Sections 9.03(a)(i)
and 9.03(b) of the Credit Agreement) with respect to which the Borrower shall
have received an invoice at least one Domestic Business Day prior to the date of
effectiveness of the Required Banks Amendment;
2
<PAGE> 3
(i) (i) the fact that the representations and warranties set forth in the
First Restated Credit Agreement and in the Subsidiary Guarantee shall be true
and correct on and as of the date hereof and (ii) receipt by the Administrative
Agent of a certificate of a Responsible Officer of the Borrower and each
Subsidiary of the Borrower party to the Subsidiary Guarantee (each, a
"Subsidiary Guarantor") so certifying;
(j) (i) the fact that, immediately after giving effect to the Required
Banks Amendment, no Default (as defined in the First Restated Credit Agreement)
shall have occurred and be continuing and (ii) receipt by the Administrative
Agent of a certificate of a Responsible Officer of the Borrower so certifying;
(k) receipt by each Bank of a schedule identifying certain ownership
interests in real property held by the Borrower and its Subsidiaries and the
date constituting the "Final Disposition Date" referred to in the First Restated
Credit Agreement with respect to each such ownership interest (which shall be
the last date on which the Borrower or any of its Subsidiaries intends to
consummate the sale or other disposition of such ownership interest), which
schedule shall be satisfactory to the Lead Arrangers; and
(l) receipt by the Administrative Agent of all documents that the
Administrative Agent may reasonably request relating to the existence of the
Borrower and each Subsidiary Guarantor, the corporate authority for and the
validity of this Amendment, the First Restated Credit Agreement, the Subsidiary
Guarantee, the Notes and the Swingline Note, and any other matters relevant
hereto, all in form and substance satisfactory to the Administrative Agent.
Section 4. Counterparts. This Amendment 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 5. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date 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: 212-553-2094
J.P. MORGAN SECURITIES INC.,
as Lead Arranger
By /s/ Jenny Y. Lee
-----------------
Name: JENNY Y. LEE.
Title: Vice President
BNY CAPITAL MARKETS, INC.,
as Lead Arranger
By /s/ Jeffrey D. Landau
----------------------
Name: JEFFREY D. LANDAU
Title: Managing Director
NATIONSBANK MONTGOMERY LLC,
as Lead Arranger
By /s/ Bill Manley
-----------------
Name: BILL MANLEY
Title: Managing Director
<PAGE> 5
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Unn Boucher
----------------
Name: UNN BOUCHER
Title: Vice President
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION,
as Documentation Agent and a Bank
By /s/ Bill Manley
----------------
Name: BILL MANLEY
Title: Managing Director
NATIONSBANK, N.A.
By /s/ Bill Manley
----------------
Name: BILL MANLEY
Title: Managing Director
THE BANK OF NEW YORK
By /s/ Howard F. Bascom, Jr.
--------------------------
Name: HOWARD F. BASCOM, JR.
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Co-Agent and a Bank
By /s/ J. Alan Edwards
--------------------
Name: J. ALAN EDWARDS
Title: Authorized Signatory
<PAGE> 6
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as Co-Agent and a Bank
By /s/ Jim Brown
----------------
Name:JIM BROWN
Title: Vice President
TORONTO DOMINION (NEW YORK), INC.,
as Co-Agent and a Bank
By /s/ David G. Parker
---------------------
Name: DAVID G. PARKER
Title: Vice President
COMMERZBANK AG, NEW YORK BRANCH
By /s/ David T. Whitworth
------------------------
Name: DAVID T. WHITWORTH
Title: Senior Vice President
By /s/ Robert J. Donohue
-----------------------
Name: ROBERT J. DONOHUE
Title: Senior Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Vladimir Labun
----------------------
Name: VLADIMIR LABUN
Title: First Vice President-Manager
<PAGE> 7
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By /s/ Susan M. O'Connor
----------------------
Name: SUSAN M. O'CONNOR
Title: Director
By /s/ Sheryl L.Paynter
---------------------
Name: SHERYL L. PAYNTER
Title: Associate
KEYBANK NATIONAL ASSOCIATION
By /s/ Daniel W. Lally
-------------------
Name: DANIEL W. LALLY
Title: Assistant Vice President
WELLS FARGO BANK, NATIONAL
ASSOCIATION
By /s/ Razia Damji
----------------
Name: RAZIA DAMJI
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By /s/ Corinne Heyning
--------------------
Name: CORINNE HEYNING
Title: Vice President
<PAGE> 8
THE BANK OF NEW YORK, as Administrative
Agent, LC Agent and Swingline Bank
By /s/ Howard F. Bascom, Jr.
------------------------
Name: HOWARD F. BASCOM, JR.
Title: Vice President
<PAGE> 1
EXHIBIT 10.32
[EXECUTION COPY]
AMENDMENT NO. 4 TO CREDIT AGREEMENT
AMENDMENT No. 4 dated as of March 19, 1999 to the Credit Agreement dated as
of April 9, 1997 and amended and restated as of March 19, 1999 (as in effect
immediately prior to the effectiveness of this Amendment, the "Existing Credit
Agreement") among VENATOR GROUP, INC. (formerly known as Woolworth Corporation)
(the "Company"), the Subsidiary Borrowers listed on the signature pages hereof
(the "Subsidiary Borrowers"), the BANKS party thereto, the CO-AGENTS party
thereto, BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, as Documentation
Agent, THE BANK OF NEW YORK, as Administrative Agent, LC Agent and Swingline
Bank, and the LEAD ARRANGERS party thereto.
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Existing Credit Agreement
by making each Subsidiary Borrower a party to the Existing Credit Agreement;
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 Existing Credit Agreement
has the meaning assigned to such term in the Existing Credit Agreement. Each
reference to "hereof", "hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" and each other similar
reference contained in the Existing Credit Agreement shall, on and as of the
date hereof, refer to the Existing Credit Agreement as amended hereby.
Section 2. 100% Vote Amendment. On and as of the date hereof, immediately
after (and subject to) the effectiveness of the Required Banks Amendment (as
defined in Amendment No. 3 to the Existing Credit Agreement dated as of March
19, 1999 among the parties to the Existing Credit Agreement) and upon
satisfaction of the conditions set forth in Section 3 below, the Existing Credit
Agreement is hereby amended and restated in its entirety as set forth in Exhibit
A hereto. The amendment and restatement of the Existing Credit Agreement
effected pursuant to this Section 2 is referred to herein as the "100% Vote
Amendment", and the Existing Credit Agreement as amended and restated pursuant
to the 100% Vote Amendment is referred to herein as the "Second Restated Credit
Agreement".
<PAGE> 2
Section 3. Effectiveness of 100% Vote Amendment. The 100% Vote Amendment
shall become effective as of the date hereof upon satisfaction of each of the
following conditions:
(a) receipt by the Administrative Agent of a counterpart hereof signed by
the Company, each Subsidiary Borrower and all the Banks (or facsimile or other
written confirmation satisfactory to the Administrative Agent that each such
party has signed a counterpart hereof);
(b) receipt by the Administrative Agent of an opinion of Skadden, Arps,
Slate, Meagher & Flom LLP, special counsel for the Company, in form and
substance reasonably satisfactory to the Required Banks;
(c) receipt by the Administrative Agent of an opinion of Gary Bahler,
General Counsel of the Borrower, in form and substance reasonably satisfactory
to the Required Banks;
(d) (i) the fact that the representations and warranties set forth in the
Second Restated Credit Agreement and the other Loan Documents shall be true and
correct on and as of the date hereof and (ii) receipt by the Administrative
Agent of a certificate of a Responsible Officer of the Company and each
Subsidiary Borrower so certifying;
(e) (i) the fact that, immediately after giving effect to the 100% Vote
Amendment, no Default (as defined in the Second Restated Credit Agreement) shall
have occurred and be continuing and (ii) receipt by the Administrative Agent of
a certificate of a Responsible Officer of the Company so certifying; and
(f) receipt by the Administrative Agent of all documents that the
Administrative Agent may reasonably request relating to the existence of the
Company and each Subsidiary Borrower, the corporate authority for and the
validity of this Amendment, the Second Restated Credit Agreement and any other
matters relevant hereto, all in form and substance satisfactory to the
Administrative Agent.
Section 4. Counterparts. This Amendment 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 5. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
VENATOR GROUP, INC.
By /s/ John H. Cannon
--------------------
Name: JOHN H. CANNON
Title: Vice President and Treasurer
<PAGE> 4
Each of the Subsidiary Borrowers listed below hereby consents to this Amendment
and agrees to be a party to, and be bound by, the Existing Credit Agreement as
amended and restated by the 100% Vote Amendment.
eVENATOR, INC.
By /s/ Bruce Hartman
------------------
Name: BRUCE HARTMAN
Title: Senior Vice President and
Chief Financial/Officer
VENATOR GROUP RETAIL, INC.
By /s/ Bruce Hartman
------------------
Name: BRUCE HARTMAN
Title: Senior Vice President and
Chief Financial/Officer
TEAM EDITION APPAREL, INC.
By /s/ Bruce Hartman
-------------------
Name: BRUCE HARTMAN
Title: Senior Vice President and
Chief Financial/Officer
NORTHERN REFLECTIONS INC.
By /s/ Bruce Hartman
--------------------
Name: BRUCE HARTMAN
Title: Senior Vice President and
Chief Financial/Officer
VENATOR GROUP SPECIALTY, INC.
By /s/ Bruce Hartman
--------------------
Name: BRUCE HARTMAN
Title: Senior Vice President and
Chief Financial/Officer
<PAGE> 5
THE SAN FRANCISCO MUSIC BOX COMPANY
By /s/ John H. Cannon
--------------------
Name: JOHN H. CANNON
Title: Vice President and Treasurer
FOOT LOCKER EUROPE B.V.
By /s/ John H. Cannon
---------------------
Name: JOHN H. CANNON
Title: Vice Pesident and Treasurer
FOOT LOCKER JAPAN K.K.
By /s/ John H. Cannon
----------------------
Name: JOHN H. CANNON
Title: Vice President and Treasurer
VENATOR GROUP AUSTRALIA LIMITED
By /s/ John H. Cannon
---------------------
Name: JOHN H. CANNON
Title: Vice President and Treasurer
VENATOR GROUP CANADA INC.
By /s/ John H. Cannon
----------------------
Name: JOHN H. CANNON
Title: Vice President and Treasurer
<PAGE> 6
J.P. MORGAN SECURITIES INC.,
as Lead Arranger
By /s/ Jenny Y. Lee
---------------------
Name: JENNY Y. LEE
Title: Vice President
BNY CAPITAL MARKETS, INC.,
as Lead Arranger
By /s/ Jeffrey D. Landau
------------------------
Name: JEFFREY D. LANDAU
Title: Managing Director
NATIONSBANK MONTGOMERY LLC,
as Lead Arranger
By /s/ Bill Manley
--------------------
Name: BILL MANLEY
Title: Managing Director
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Unn Boucher
---------------------
Name: UNN BOUCHER
Title: Vice President
<PAGE> 7
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION,
as Documentation Agent and a Bank
By /s/ Bill Manley
--------------------
Name: BILL MANLEY
Title: Managing Director
NATIONSBANK, N.A.
By /s/ Bill Manley
---------------------
Name: BILL MANLEY
Title: Managing Director
THE BANK OF NEW YORK
By /s/ Howard F. Bascom, Jr.
---------------------------
Name: HOWARD F. BASCOM, JR.
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Co-Agent and a Bank
By /s/ J. Alan Edwards
-----------------------
Name: J. ALAN EDWARDS
Title: Authorized Signatory
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as Co-Agent and a Bank
By /s/ Jim Brown
------------------
Name: JIM BROWN
Title: Vice President
<PAGE> 8
TORONTO DOMINION (NEW YORK), INC.,
as Co-Agent and a Bank
By /s/ David G. Parker
---------------------
Name: DAVID G. PARKER
Title: Vice President
COMMERZBANK AG, NEW YORK BRANCH
By /s/ David T. Whitworth
-------------------------
Name: DAVID T. WHITWORTH
Title: Senior Vice President
By /s/ Robert J. Donohue
------------------------
Name: ROBERT J. DONOHUE
Title: Senior Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Vladimir Labun
----------------------------
Name: VLADIMIR LABUN
Title: First Vice President-Manager
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By /s/ Susan M. O'Connor
---------------------------
Name: SUSAN M. O'CONNOR
Title: Director
By /s/ Sheryl L. Paynter
----------------------------
Name: SHERYL L. PAYNTER
Title: Associate
<PAGE> 9
KEYBANK NATIONAL ASSOCIATION
By /s/ Daniel W. Lally
------------------------
Name: DANIEL W. LALLY
Title: Assistant Vice President
WELLS FARGO BANK, NATIONAL
ASSOCIATION
By /s/ Razia Damji
---------------------
Name: RAZIA DAMJI
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By /s/ Corinne Heyning
----------------------
Name: CORINNE HEYNING
Title: Vice President
<PAGE> 10
THE BANK OF NEW YORK, as Administrative
Agent, LC Agent and Swingline Bank
By /s/ Howard F. Bascom, Jr.
----------------------------
Name: HOWARD F. BASCOM, JR.
Title: Vice President
<PAGE> 11
Acknowledged and consented to by:
EASTBAY, INC.
eVENATOR, INC.
FOOT LOCKER JAPAN, INC.
NORTHERN REFLECTIONS INC.
RICHMAN BROTHERS COMPANY
ROBBY'S SPORTING GOODS, INC.
TEAM EDITION APPAREL, INC.
THE SAN FRANCISCO MUSIC BOX
COMPANY
VENATOR GROUP CORPORATE SERVICES,
INC.
VENATOR GROUP HOLDINGS, INC.
VENATOR GROUP RETAIL, INC.
VENATOR GROUP SOURCING, INC.
VENATOR GROUP SPECIALITY, INC.
By: /s/ John H. Cannon
----------------------
Name: JOHN H. CANNON
Title: Vice President and Treasurer
RETAIL COMPANY OF GERMANY, INC.
By: /s/ Bruce Hartman
---------------------
Name: BRUCE HARTMAN
Title: Senior Vice President and
Chief Operating Officer
<PAGE> 1
EXHIBIT 10.33
[EXHIBIT A TO
AMENDMENT NO. 3]
$400,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of April 9, 1997
and
amended and restated as of
March 19, 1999
among
Venator Group, Inc.
(formerly known as Woolworth Corporation)
The Banks Party Hereto
The Co-Agents Party Hereto
Bank of America National Trust & Savings Association,
as Documentation Agent
The Bank of New York,
as Administrative Agent, LC Agent
and Swingline Bank
and
J.P. Morgan Securities Inc.
BNY Capital Markets, Inc.
NationsBank Montgomery Securities LLC,
as Lead Arrangers
<PAGE> 2
Page
TABLE OF CONTENTS
----------------------
Page
ARTICLE 1
Definitions
Section 1.01. Definitions.....................................................1
Section 1.02. Accounting Terms and Determinations............................24
Section 1.03. Types of Borrowings............................................25
ARTICLE 2
The Credits
Section 2.01. Commitments to Lend............................................26
Section 2.02. Notice of Committed Borrowing..................................26
Section 2.03. Money Market Borrowings........................................27
Section 2.04. Notice to Banks; Funding of Loans..............................31
Section 2.05. Notes..........................................................32
Section 2.06. Maturity of Loans; Mandatory Prepayments of Loans..............32
Section 2.07. Interest Rates.................................................34
Section 2.08. Method of Electing Interest Rates..............................38
Section 2.09. Facility Fees..................................................39
Section 2.10. Optional Termination or Reduction of Commitments...............40
Section 2.11. Mandatory Reduction of Commitments.............................41
Section 2.12. Mandatory Termination of Commitments...........................42
Section 2.13. Optional and Mandatory Prepayments.............................42
Section 2.14. General Provisions as to Payments..............................43
Section 2.15. Funding Losses.................................................44
Section 2.16. Computation of Interest and Fees...............................44
Section 2.17. Letters of Credit..............................................44
Section 2.18. Swingline Loans................................................51
ARTICLE 3
Conditions
Section 3.01. Effective Date.................................................53
Section 3.02. Consequences of Effectiveness..................................53
Section 3.03. Extensions of Credit...........................................54
<PAGE> 3
Page
ARTICLE 4
Representations and Warranties
Section 4.01. Corporate Existence and Power..................................55
Section 4.02. Corporate and Governmental Authorization; No
Contravention..................................................55
Section 4.03. Binding Effect.................................................55
Section 4.04. Financial Statements...........................................56
Section 4.05. Litigation.....................................................56
Section 4.06. Compliance with Laws...........................................56
Section 4.07. Compliance with ERISA..........................................56
Section 4.08. Environmental Matters..........................................57
Section 4.09. Taxes..........................................................57
Section 4.10. Subsidiaries...................................................57
Section 4.11. Not an Investment Company......................................58
Section 4.12. Full Disclosure................................................58
Section 4.13. Year 2000 Compliance...........................................58
Section 4.14. Ranking........................................................58
ARTICLE 5 Page
Covenants
Section 5.01. Information....................................................59
Section 5.02. Maintenance of Property; Insurance.............................63
Section 5.03. Conduct of Business and Maintenance of Existence...............63
Section 5.04. Compliance with Laws...........................................63
Section 5.05. Inspection of Property, Books and Records......................64
Section 5.06. Negative Pledge................................................64
Section 5.07. Minimum Consolidated Tangible Net Worth........................66
Section 5.08. Leverage Ratio.................................................66
Section 5.09. Limitation on Debt of Subsidiaries.............................67
Section 5.10. Fixed Charge Coverage Ratio....................................68
Section 5.11. Consolidations, Mergers and Sales of Assets....................69
Section 5.12. Use of Proceeds................................................69
Section 5.13. Limitation on Capital Expenditures.............................69
Section 5.14. Investments and Business Acquisitions..........................71
Section 5.15. Restricted Payments............................................72
Section 5.16. New Subordinated Debt..........................................73
Section 5.17. Refunding of the 7% Debentures; Escrow Arrangements............73
Section 5.18. Transactions with Affiliates...................................74
Section 5.19. Additional Guarantors..........................................75
Section 5.20. Collateral Documents...........................................75
<PAGE> 4
Page
ARTICLE 6
Defaults
Section 6.01. Events of Defaults.............................................77
Section 6.02. Notice of Default..............................................80
Section 6.03. Cash Cover.....................................................80
ARTICLE 7
The Administrative Agent, Lead Arrangers, Documentation Agent and
Co-Agents
Section 7.01. Appointment and Authorization..................................80
Section 7.02. Agents and Affiliates..........................................81
Section 7.03. Obligations of the Co-agents and Document Agent................81
Section 7.04. Obligations of Administrative Agent and Lead Arrangers.........81
Section 7.05. Consultation with Experts......................................81
Section 7.06. Liability of Agents and Lead Arrangers.........................81
Section 7.07. Indemnification................................................82
Section 7.08. Credit Decision................................................82
Section 7.09. Successor Administrative Agent.................................82
Section 7.10. Administrative Agent's Fees....................................83
ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair.......83
Section 8.02. Illegality.....................................................84
Section 8.03. Increased Cost and Reduced Return..............................84
Section 8.04. Taxes..........................................................87
Section 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans......89
Section 8.06. Substitution of Bank...........................................90
ARTICLE 9
Miscellaneous
Section 9.01. Notices........................................................90
Section 9.02. No Waivers.....................................................91
Section 9.03. Expenses; Indemnificaiton......................................91
<PAGE> 5
Page
Section 9.04. Sharing of Set-offs ...........................................92
Section 9.05. Amendments and Waivers.........................................93
Section 9.06. Successors and Assigns.........................................93
Section 9.07. No-Reliance on Margin Stock....................................95
Section 9.08. Governing Law; Submission to Jurisdiction......................95
Section 9.09. Counterparts...................................................96
Section 9.10. WAIVER OF JURY TRIAL...........................................96
Commitment Schedule
Pricing Schedule
Schedule 1.01(a) - Material Trademarks
Schedule 1.01(b) - Debt That May Be Refinanced
Schedule 1.01(c) - Existing Standby Letters of Credit
Schedule 5.06 - Existing Capital Leases
Schedule 5.20(b) - Real Property To Be Mortgaged
Exhibit A - Form of Note
Exhibit B - Form of Swingline Note
Exhibit C - Form of Money Market Quote Request
Exhibit D - Form of Invitation for Money Market Quotes
Exhibit E - Form of Money Market Quote
Exhibit F - Form of Security Agreement
Exhibit G - Form of Pledge Agreement
Exhibit H - Form of Guarantee Agreement
Exhibit I - Form of Assignment and Assumption Agreement
Exhibit J - Form of Notice of Committed Borrowing
<PAGE> 6
AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 9, 1997 and amended
and restated as of March 19, 1999 among VENATOR GROUP, INC. (formerly known as
Woolworth Corporation), the BANKS party hereto, the CO-AGENTS party hereto, BANK
OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, as Documentation Agent, THE
BANK OF NEW YORK, as Administrative Agent, LC Agent and Swingline Bank, and the
LEAD ARRANGERS party hereto.
WHEREAS, the Borrower, the banks party thereto (the "Existing Banks"), the
co-agents party thereto, Bank of America National Trust & Savings Association,
as Documentation Agent and The Bank of New York, as Administrative Agent, LC
Agent and Swingline Bank, and the Lead Arrangers party thereto are parties to a
Credit Agreement dated as of April 9, 1997 (as in effect immediately prior to
the effectiveness of this Amended Agreement (as defined in Section 1.01 below),
the "Existing Credit Agreement");
WHEREAS, the parties to the Existing Credit Agreement desire to amend and
restate the Existing Credit Agreement as provided in this Amended Agreement
subject to the terms and conditions set forth in Amendment No. 3 to the Existing
Credit Agreement dated as of March 19, 1999 ("Amendment No. 3") among the
Borrower, the Existing Banks, Bank of America National Trust & Savings
Association, as Documentation Agent and The Bank of New York, as Administrative
Agent, LC Agent and Swingline Bank;
WHEREAS, all the conditions to effectiveness to Amendment No. 3 have been
satisfied;
NOW, THEREFORE, the Existing Credit Agreement is amended and restated in
its entirety as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes setting
forth Money Market Absolute Rates pursuant to Section 2.03.
<PAGE> 7
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.07(c).
"Administrative Agent" means The Bank of New York, in its capacity as
administrative agent for the Banks under the Loan Documents, 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, (i) any Person that directly, or indirectly through one
or more intermediaries, controls the Borrower (a "Controlling Person") or (ii)
any Person (other than the Borrower or a Subsidiary) which is controlled by or
is under common control with a Controlling Person. As used herein, the term
"control" means possession, directly or indirectly, of the power to vote 10% or
more of any class of voting securities of a Person or to direct or cause the
direction of the management or policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Agents" means the LC Agent, the Documentation Agent and the Administrative
Agent.
"Aggregate LC Exposure" means, at any time, the sum, without duplication,
of (i) the aggregate amount that is (or may thereafter become) available for
drawing under all Letters of Credit outstanding at such time plus (ii) the
aggregate unpaid amount of all Reimbursement Obligations outstanding at such
time.
"Agreement", when used in reference to this Agreement, means the Amended
Agreement, as it may be further amended or amended and restated from time to
time.
"Amended Agreement" means this Amended and Restated Credit Agreement dated
as of April 9, 1997 and amended and restated as of March 19, 1999.
"Amendment No. 3 " has the meaning set forth in the second WHEREAS clause.
<PAGE> 8
"Annual Rent Expense" means, as of the end of each Fiscal Year (the
"Relevant Fiscal Year") and the end of each of the first three Fiscal Quarters
of the next Fiscal Year, the total rent expense (net of sublease income) of the
Borrower and its Consolidated Subsidiaries for the Relevant Fiscal Year,
calculated in the same manner as the $693,000,000 amount shown as such total
rent expense (net of sublease income) for Fiscal Year 1995 under the heading
"Leases" on page 29 of the Borrower's 1995 Annual Report to its shareholders,
subject to the provisions of Section 1.02(b).
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its
Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its
Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Asset Sale" means any sale, lease or other disposition (including any such
transaction effected by way of merger or consolidation) of any asset by the
Borrower or any of its Subsidiaries, including without limitation any
sale-leaseback transaction, whether or not involving a capital lease, and any
sale of any interest in real estate (including without limitation a leasehold
interest), including without limitation any disposition of a leasehold interest
to the relevant landlord by way of early termination thereof, but excluding (i)
dispositions of inventory, cash, cash equivalents and other cash management
investments and obsolete, unused or unnecessary equipment, in each case in the
ordinary course of business, (ii) dispositions of assets to the Borrower or a
Subsidiary; provided that any such dispositions by an Obligor to a Subsidiary
that is not a Subsidiary Guarantor shall be excluded pursuant to this clause
(ii) only if consummated in the ordinary course of business, (iii) dispositions
of any Real Property Held For Sale, but only if disposed of on or prior to its
Final Disposition Date, and (iv) any disposition of assets not described in
clauses (i) through (iii) hereof consummated in any Fiscal Year, but only to the
extent that the Net Cash Proceeds therefrom, together with the Net Cash Proceeds
of all other dispositions consummated in such Fiscal Year and not constituting
an "Asset Sale" by reliance on this clause (iv), do not exceed $5,000,000 (or,
in the case of Fiscal Year 2002, $2,500,000).
"Assignee" has the meaning set forth in Section 9.06.
"Bank" means each bank listed on the signature pages hereof, each Assignee
which becomes a Bank pursuant to Section 9.06(c), and their respective
successors. The term "Bank" does not include the Swingline Bank in its capacity
as such.
<PAGE> 9
"Bank of America" means Bank of America National Trust & Savings
Association.
"Bank Parties" means the Banks, the Swingline Bank, the Agents and the Lead
Arrangers.
"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 Committed Loan which bears interest at the Base
Rate pursuant to the applicable Notice of Committed Borrowing or Notice of
Interest Rate Election or the provisions of Article 8.
"Base Rate Margin" has the meaning set forth in Section 2.07(a).
"Borrower" means Venator Group, Inc. (formerly known as Woolworth
Corporation), a New York corporation, and its successors.
"Borrower's 1997 Form 10-K" means the Borrower's annual report on Form 10-K
for the1997 Fiscal Year, 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 Fiscal Quarter ended October 31, 1998, as filed with the SEC pursuant to
the Exchange Act.
"Borrowing" has the meaning set forth in Section 1.03.
"Business Acquisition" means (i) an Investment by the Borrower or any of
its Subsidiaries in any other Person (including an Investment by way of
acquisition of securities of any other Person) pursuant to which such Person
shall become a Subsidiary or shall be merged into or consolidated with the
Borrower or any of its Subsidiaries or (ii) an acquisition by the Borrower or
any of its Subsidiaries of the property and assets of any Person (other than the
Borrower or any of its Subsidiaries) that constitute substantially all the
assets of such Person or any division or other business unit of such Person. The
description of any transaction as falling within the above definition does not
affect any limitation on such transaction imposed by Article 5 of this
Agreement.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
<PAGE> 10
"CD Loan" means a Committed Loan which bears interest at a CD Rate pursuant
to the applicable Notice of Committed Borrowing or Notice of Interest Rate
Election.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Rate" means a rate of interest determined pursuant to Section 2.07(b)
on the basis of an Adjusted CD Rate.
"CD Reference Banks" means The Bank of New York, Bank of America and
Morgan.
"Co-Agents" means the Banks designated as Co-Agents on the signature pages
hereof, in their respective capacities as Co-Agents in connection with the
credit facility provided hereunder.
"Collateral" means the collateral purported to be subject to the Liens of
all the Collateral Documents.
"Collateral Documents" means the Security Agreement, the Pledge Agreement,
each mortgage entered into pursuant to Section 5.20(b) and any additional
security agreements, pledge agreements, mortgages or other agreements required
to be delivered pursuant to the Loan Documents to secure the obligations of the
Obligors under the Loan Documents (including without limitation any additional
pledge agreements delivered by any Obligor pursuant to the provisions of the
Pledge Agreement), and any instruments of assignment or other instruments or
agreements executed pursuant to the foregoing.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the Commitment Schedule (or, in the case of an
Assignee, the portion of the transferor Bank's Commitment assigned to such
Assignee pursuant to Section 9.06(c)), in each case as such amount may be
reduced from time to time pursuant to Sections 2.10 and 2.11 or changed as a
result of an assignment pursuant to Section 8.06 or 9.06(c). The term
"Commitment" does not include the Swingline Commitment.
"Commitment Schedule" means the Commitment Schedule attached hereto.
"Committed Loan" means a loan made or to be made by a Bank pursuant to
Section 2.01 or Section 2.18(f); provided that, if any such loan or loans (or
portions thereof) are combined or subdivided pursuant to a Notice of Interest
Rate Election, the term "Committed Loan" shall refer to the combined principal
<PAGE> 11
amount resulting from such combination or to each of the separate principal
amounts resulting from such subdivision, as the case may be.
"Consolidated Capital Expenditures" means, for any period, the gross
additions to property, plant and equipment and other capital expenditures of the
Borrower and its Consolidated Subsidiaries for such period, as the same are or
would be set forth in the cash flow statement of the Borrower and its
Consolidated Subsidiaries for such period (if such statement were prepared for
such period), but excluding any such expenditures constituting a Business
Acquisition permitted pursuant to Section 5.14 to the extent that the
consideration paid by the Borrower and its Subsidiaries with respect thereto
consists solely of common stock of the Borrower.
"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, adjusted to exclude
the effect of any changes in the cumulative foreign currency translation
adjustments.
"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:
(i) the amount of its Commitment (whether used or unused) at such
time; or
(ii) if the Commitments have terminated in their entirety, the sum of
(x) its Outstanding Committed Amount and (y) the aggregate outstanding
principal amount of its Money Market Loans,
all determined at such time after giving effect to any prior assignments by or
to such Bank pursuant to Section 8.06 or 9.06.
<PAGE> 12
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all non-contingent
obligations (and, for purposes of Section 5.06 and the definition of Material
Debt, all contingent obligations) of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (vi) all Debt secured by a Lien on any asset of such Person, whether
or not such Debt is otherwise an obligation of such Person, and (vii) all
Guarantees by such Person of Debt of another Person (each such Guarantee to
constitute Debt in an amount equal to the maximum amount of such other Person's
Debt Guaranteed thereby).
"Debt Incurrence" means the incurrence or issuance of any Debt by the
Borrower or any of its Subsidiaries other than (i) the Loans, the Swingline
Loans and the Reimbursement Obligations, (ii) other Debt of the Borrower
incurred under bank loan facilities and letter of credit facilities for the
purpose of financing working capital and capital expenditures, (iii) Debt
secured by a Lien permitted by Section 5.06(a)(ii), (iv) Debt owed to the
Borrower or any Subsidiary, (v) Debt of any Subsidiary permitted by Section 5.09
and (vi) Debt of the Borrower not described in any of the foregoing clauses but
only to the extent the Net Cash Proceeds from the incurrence or issuance
thereof, in the aggregate, do not exceed $5,000,000.
"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.
"Documentation Agent" means Bank of America National Trust & Savings
Association in its capacity as documentation agent for the credit facility
provided hereunder.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close; provided that, when used in Section 2.17 with respect to any action to
be taken by or with respect to the LC Agent, the term "Domestic Business Day"
shall not include any day on which commercial banks are authorized by law to
close in the jurisdiction where the LC Office of the LC Agent is located.
<PAGE> 13
"Domestic Lending Office" means, as to each Bank, its office located at its
address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Administrative Agent; provided that any Bank may
so designate separate Domestic Lending Offices for its Base Rate Loans, on the
one hand, and its CD Loans, on the other hand, in which case all references
herein to the Domestic Lending Office of such Bank shall be deemed to refer to
either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b).
"EBIT" means, for any period, the sum of (i) the consolidated net income of
the Borrower and its Consolidated Subsidiaries for such period plus (ii) to the
extent deducted in determining such consolidated net income, the sum of (A)
Interest Expense, (B) income taxes, (C) the after-tax effect of any
extraordinary non-cash losses (or minus the after-tax effect of any
extraordinary non-cash gains), (D) the before-tax effect of any non-recurring
non-cash losses that are not classified as extraordinary losses (or minus the
before-tax effect of any non- recurring non-cash gains that are not classified
as extraordinary gains) and (E) any pre-tax loss (or minus any pre-tax gain) on
the sale of any ownership or leasehold interest in real property, subject to the
provisions of Section 1.02(b).
"EBITDA" means, for any period, (i) EBIT for such period plus (ii) to the
extent deducted in determining consolidated net income for such period,
depreciation and amortization.
"Effective Date" has the meaning set forth in Section 3.01.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, injunctions, permits, licenses and agreements relating to the protection
of the environment, to the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, hazardous or
toxic substances or wastes into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, hazardous or toxic substances
or wastes or the clean-up or other remediation thereof.
<PAGE> 14
"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 (i) equity securities issued to, or treasury stock sold or
transferred to, the Borrower or any of its Subsidiaries, (ii) common stock of
the Borrower issued as consideration for a Business Acquisition permitted
pursuant to Section 5.14 and (iii) equity securities of the Borrower issued
pursuant to employee stock plans in an aggregate amount not to exceed
$5,000,000.
"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.
"Escrow Account" has the meaning set forth in Section 5.17(b).
"Escrow Agent" has the meaning set forth in Section 5.17(b).
"Escrow Agreement" has the meaning set forth in Section 5.17(b).
"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 Committed Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election.
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c).
"Euro-Dollar Rate" means a rate of interest determined pursuant to Section
2.07(c) on the basis of an Adjusted London Interbank Offered Rate.
<PAGE> 15
"Euro-Dollar Reference Banks" means the principal London offices of The
Bank of New York, Bank of America and Morgan.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.07(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
'Existing Standby Letters of Credit" means the standby letters of credit
listed on Schedule 1.01(c).
"Extension of Credit" means the making of a Loan or a Swingline Loan or the
issuance or extension of a Letter of Credit.
"Facility Fee Rate" has the meaning set forth in Section 2.09.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to The Bank of New York on such day on such
transactions as determined by the Administrative Agent.
"Final Disposition Date" means, with respect to any Real Property Held For
Sale, the date identified as such by the Borrower to the Banks prior to the
Effective Date with respect to such Real Property Held For Sale.
"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 ended on
January 30, 1999).
<PAGE> 16
"Fixed Charge Coverage Ratio" means, at the last day of any Fiscal Quarter,
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.
"Fixed Rate Loan" means any loan except a Loan that bears interest at the
Base Rate.
"Foreign Subsidiary" means any Subsidiary organized under the laws of a
jurisdiction, and conducting substantially all its operations, outside the
United States.
"Group of Loans" or "Group" means at any time a group of Committed Loans
consisting of (i) all Committed Loans which are Base Rate Loans at such time,
(ii) all Euro-Dollar Loans having the same Interest Period at such time or (iii)
all CD Loans having the same Interest Period at such time; provided that if a
Committed Loan of any particular Bank is converted to or made as a Base Rate
Loan pursuant to Section 8.02 or 8.05, such Loan shall be included in the same
Group or Groups of Loans from time to time as it would have been in if it had
not been so converted or made.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation 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 or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation 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.
"Guarantee Agreement" means the Guarantee Agreement dated as of the
Effective Date among the initial Subsidiary Guarantors and the Administrative
Agent, substantially in the form of Exhibit H, as amended from time to time.
"Immaterial Subsidiary" means at any time any Subsidiary that (i) does not
hold any material patents, trademarks or other intellectual property, (ii) on a
<PAGE> 17
consolidated basis, together with its Subsidiaries, holds assets with an
aggregate fair market value of less than $2,000,000, (iii) on a consolidated
basis, together with its Subsidiaries, does not account for more than 1% of the
consolidated revenues of the Borrower and its Consolidated Subsidiaries and (iv)
on a consolidated basis, together with its Subsidiaries, does not have
consolidated net income in excess of $500,000. The determinations in clauses
(ii), (iii) and (iv) shall be made on the basis of the financial statements most
recently delivered by the Borrower to the Banks pursuant to Sections 5.01(a) or
5.01(b), as the case may be. The parties hereto acknowledge and agree that each
of the trademarks listed on Schedule 1.01(a) is a material trademark.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Indenture" means the Indenture dated as of October 10, 1991 between the
Borrower and The Bank of New York, as Trustee, as in effect on the Effective
Date.
"Interest Expense" means, for any period, the consolidated interest expense
(net of interest income) of the Borrower and its Consolidated Subsidiaries for
such period, calculated in the same manner as the amounts shown as "interest
expense, net" under the heading "Interest expense" on page F-4 of the Borrower's
1997 Form 10-K, subject to the provisions of Section 1.02(b).
"Interest Period" means: (1) with respect to each Euro-Dollar Loan, a
period commencing on the date of borrowing specified in the applicable Notice of
Committed Borrowing or on the date specified in the applicable Notice of
Interest Rate Election and ending one, two, three or six months thereafter, as
the Borrower may elect in the applicable notice; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
<PAGE> 18
2) with respect to each CD Loan, a period commencing on the date of borrowing
specified in the applicable Notice of Committed Borrowing or on the date
specified in the applicable Notice of Interest Rate Election and ending 30, 60,
90 or 180 days thereafter, as the Borrower may elect in the applicable notice;
provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and (b) any Interest Period which would otherwise
end after the Termination Date shall end on the Termination Date.
(3) with respect to each Money Market LIBOR Loan, the period commencing on the
date such Loan is made and ending such whole number of months thereafter as the
Borrower may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market Absolute Rate Loan, the period commencing
on the date such Loan is made and ending such number of days thereafter (but not
less than 14 days) as the Borrower may elect in accordance with Section 2.03;
provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
<PAGE> 19
"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, Guarantee or otherwise.
"Invitation for Money Market Quotes" means an Invitation for Money Market
Quotes substantially in the form of Exhibit D hereto.
"LC Agent" means The Bank of New York in its capacities as letter of credit
agent in connection with the letter of credit facility provided hereunder and as
the issuer of the letters of credit issued or to be issued hereunder, and its
successors in such capacities; provided that, for purposes of Section 2.17 only,
when used to refer to the issuer of the Existing Standby Letter of Credit in the
face amount of $250,000 issued by KeyBank National Association, and its
successors in such capacity.
"LC Collateral Account" has the meaning set forth in the Security
Agreement; provided that, at any time prior to the execution of the Security
Agreement, "LC Collateral Account" shall mean a collateral account established
pursuant to arrangements satisfactory to the LC Agent and the Administrative
Agent.
"LC Exposure" means, with respect to any Bank at any time, an amount equal
to its Pro Rata Share of the Aggregate LC Exposure at such time.
"LC Fee Rate" has the meaning set forth in the Pricing Schedule.
"LC Indemnitees" has the meaning set forth in Section 2.17(m).
"LC Office" means, with respect to the LC Agent, for any Letter of Credit,
the office at which the LC Agent books such Letter of Credit.
"Lead Arrangers" means J.P. Morgan Securities Inc., BNY Capital Markets,
Inc. and NationsBank Montgomery Securities LLC in their respective capacities as
lead arrangers for the credit facility provided hereunder.
"Letter of Credit" means a letter of credit issued or to be issued
hereunder by the LC Agent, and any Existing Standby Letter of Credit.
<PAGE> 20
"LIBOR Auction" means a solicitation of Money Market Quotes setting forth
Money Market Margins based on the London Interbank Offered Rate pursuant to
Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of the Loan Documents, 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. The issuance of trade letters of credit for
the account of the Borrower or any of its Subsidiaries to finance the purchase
of inventory whereby title documents to the related goods are consigned to the
order of the letter of credit issuer shall not be considered to create a "Lien"
on inventory for the purposes of the Loan Documents. In addition, the parties
hereto acknowledge and agree that precautionary UCC-1 filings made with respect
to obligations of the Borrower or any of its Subsidiaries under operating leases
do not constitute a "Lien".
"Loan" means a Committed Loan or a Money Market Loan and "Loans" means
Committed Loans or Money Market Loans or any combination of the foregoing. The
term "Loan" does not include a Swingline Loan.
"Loan Documents" means this Agreement, the Guarantee Agreement, the
Collateral Documents, the Notes and the Swingline Note.
"London Interbank Offered Rate" has the meaning set forth in Section
2.07(c).
"Major Casualty Proceeds" means (i) the aggregate insurance proceeds
received in connection with one or more related events by the Borrower or any of
its Subsidiaries under any Property Insurance Policy or (ii) any award or other
cash compensation with respect to any one or more related condemnations of
property (or any transfer or disposition of property in lieu of condemnation)
received by the Borrower or any of its Subsidiaries if, in the case of either
clause (i) or (ii), the amount of such aggregate insurance proceeds or award or
other cash compensation exceeds $500,000.
"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, (ii) the ability of any Obligor to perform
any payment obligation of such Obligor under the Loan Documents or (iii) the
ability of any Bank Party to enforce any rights or remedies under the Loan
Documents with respect to the Collateral or any payment obligation of any
Obligor under the Loan Documents.
<PAGE> 21
"Material Debt" means Debt (other than the Loans, Swingline Loans and
Reimbursement Obligations) of the Borrower and/or one or more of its
Subsidiaries, arising in one or more related or unrelated transactions, in an
aggregate principal or face amount exceeding $5,000,000.
"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 $5,000,000.
"Money Market Absolute Rate" has the meaning set forth in Section 2.03(d).
"Money Market Absolute Rate Loan" means a loan made or to be made by a Bank
pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic Lending
Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Borrower
and the Administrative Agent; provided that any Bank may from time to time by
notice to the Borrower and the Administrative Agent designate separate Money
Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and
its Money Market Absolute Rate Loans, on the other hand, in which case all
references herein to the Money Market Lending Office of such Bank shall be
deemed to refer to either or both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan made or to be made by a Bank
pursuant to a LIBOR Auction (including such a loan bearing interest at the rate
applicable to Base Rate Loans by reason of clause (a) of Section 8.01).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money Market Loan
in accordance with Section 2.03 substantially in the form of Exhibit E hereto.
<PAGE> 22
"Money Market Quote Request" means a Money Market Quote Request
substantially in the form of Exhibit C hereto.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Morgan" means Morgan Guaranty Trust Company of New York.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Net Cash Proceeds" means:
(i) with respect to any Asset Sale (including for this purpose
any disposition that would be an Asset Sale but for clause (iv) of the
definition of 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 or any
amounts described in clause (z) in excess of amounts actually paid
pursuant to post-closing purchase price adjustments), 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 (and required to be so discharged by the terms of such Debt),
(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) any amounts
constituting post-closing purchase price adjustments in respect of
such Asset Sale, to the extent a reserve has been established with
respect thereto in accordance with GAAP,
(ii) with respect to any Debt Incurrence (including for this
purpose any incurrence or issuance of Debt that would be a Debt
Incurrence but for clause (vi) of the definition of Debt Incurrence),
an amount equal to the cash proceeds received by the Borrower or any
of its Subsidiaries in respect thereof less any customary fees and
commissions and expenses reasonably incurred by them in respect
thereof,
<PAGE> 23
(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 customary fees and commissions and expenses
reasonably incurred by them in respect thereof; and
(iv) with respect to the occurrence of the Refinancing Date, an
amount equal to the amount on deposit in the Escrow Account on such
Date (after giving effect to any withdrawals made therefrom on such
Date the proceeds of which have been applied to repay or repurchase
any 7% Debentures then outstanding).
"New Subordinated Debt" means any Debt of the Borrower described in clauses
(i) or (ii) of the definition of Debt and incurred after the Effective Date
which (i) has a final maturity no earlier than December 31, 2002, (ii) requires
no scheduled principal payments thereof prior to December 31, 2002, (iii) is not
Guaranteed by any Person other than a Subsidiary Guarantor, (iv) is subordinated
(and the Guarantees of which are subordinated) to the obligations of the
Borrower (and any applicable Subsidiary Guarantor) under the Loan Documents on
customary capital market terms approved by the bank affiliate of each Lead
Arranger and (v) permits (and the Guarantees of which permit) the Borrower (and
any applicable Subsidiary Guarantor) to create, incur, assume or suffer to exist
Liens securing the obligations of the Obligors under the Loan Documents upon any
of its property, assets or revenues, whether now owned or hereafter acquired,
without any restrictions (including without limitation any requirement to
equally and ratably secure any such Debt (or Guarantee thereof)).
"Notes" means promissory notes of the Borrower, substantially in the form
of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing or a Notice of
Money Market Borrowing.
"Notice of Committed Borrowing" has the meaning set forth in Section 2.02.
"Notice of Interest Rate Election" has the meaning set forth in Section
2.08.
<PAGE> 24
"Notice of Money Market Borrowing" has the meaning set forth in Section
2.03(f).
"Notice of Swingline Borrowing" has the meaning set forth in Section
2.18(b).
"Obligor" means the Borrower or any Subsidiary Guarantor, and "Obligors"
means all of them.
"Other Refinancing" means any issuance for cash proceeds by the Borrower of
Other Refinancing Debt or New Subordinated Debt, but solely to the extent the
cash proceeds thereof are applied contemporaneously by the Borrower to refinance
the Debt set forth on Schedule 1.01(b).
"Other Refinancing Debt" means any Debt of the Borrower described in
clauses (i) or (ii) of the definition of Debt and incurred after the Effective
Date which (i) has a final maturity no earlier than December 31, 2002, (ii)
requires no scheduled principal payments thereof prior to December 31, 2002,
(iii) is not Guaranteed by any Person and (iv) permits the Borrower to create,
incur, assume or suffer to exist Liens securing the obligations of the Obligors
under the Loan Documents upon any of its property, assets or revenues, whether
now owned or hereafter acquired, without any restrictions (including without
limitation any requirement to equally and ratably secure any such Debt).
"Outstanding Committed Amount" means, with respect to any Bank at any time,
the sum of (i) the aggregate outstanding principal amount of its Committed
Loans, (ii) its Pro Rata Share of the aggregate outstanding principal amount of
the Swingline Loans (if any) and (iii) its LC Exposure, all determined at such
time after giving effect to any prior assignments by or to such Bank pursuant to
Section 8.06 or 9.06(c).
"Parent" means, with respect to any Bank Party, any Person controlling such
Bank Party.
"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
<PAGE> 25
"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.
"Pledge Agreement" means the Pledge Agreement to be entered into among the
Obligors and the Administrative Agent, substantially in the form of Exhibit G,
as amended from time to time, pursuant to which (and to additional foreign
pledge agreements referred to therein) each Obligor party thereto shall pledge
the capital stock of each Subsidiary held by such Obligor, subject to the
exceptions and limitations set forth therein.
"Pricing Schedule" means the Pricing Schedule attached hereto.
"Prime Rate" means a rate of interest per annum equal to the rate of
interest publicly announced from time to time in New York City by The Bank of
New York as its prime commercial lending rate, such rate to be adjusted
automatically (without notice) on the effective date of any change in such
publicly announced rate.
"Pro Rata Share" means, with respect to any Bank at any time, a fraction
the numerator of which is the amount of such Bank's Commitment at such time (or,
if the Commitments have terminated in their entirety, such Bank's Commitment as
in effect immediately prior to such termination) and the denominator of which is
the Total Commitments at such time (or, if the Commitments have terminated in
their entirety, Total Commitments as in effect immediately prior to such
termination).
"Property Insurance Policy" means any insurance policy maintained by the
Borrower or any of its Subsidiaries covering losses with respect to tangible
real or personal property or improvements, but excluding coverage for losses
from business interruption.
"Real Property Held For Sale" means each ownership interest in real
property held by the Borrower or any Subsidiary and identified by the Borrower
to the Banks prior to the Effective Date.
"Reduction Event" means (i) any Asset Sale, (ii) any Debt Incurrence (other
than a 7% Debentures Refinancing or an Other Refinancing), (iii) any Equity
Issuance, (iv) the receipt by the Borrower or any Subsidiary of Major Casualty
Proceeds or (v) the occurrence of the Refinancing Date; provided that an event
described in clause (iv) hereof shall not give rise to a Reduction Event (x) so
long as at the time of receipt of the relevant Major Casualty Proceeds, no
Default has occurred and is continuing and (y) to the extent that (1) within ten
<PAGE> 26
Domestic Business Days after receipt of such Major Casualty Proceeds, the
Borrower shall have delivered to the Administrative Agent the certificate
referred to in Section 5.01(g)(x) with respect thereto, (2) within 90 days after
receipt of such Major Casualty Proceeds, the Borrower shall have delivered to
the Administrative Agent the certificate referred to in Section 5.01(g)(y) with
respect thereto and (3) within 270 days after receipt of such Major Casualty
Proceeds, the Borrower shall have actually expended such Major Casualty Proceeds
to purchase or repair property, plant and equipment so that the Reduction Event,
if any, occurring pursuant to clause (iv) hereof by reason of the receipt of
such Major Casualty Proceeds shall be deemed to occur on (A) the tenth Domestic
Business Day following receipt thereof, as to the amount thereof, if no
certificate with respect thereto has been delivered by the Borrower to the
Administrative Agent pursuant to Section 5.01(g)(x), (B) the 90th day following
receipt thereof, as to the amount thereof not committed to be expended for the
purchase or repair of property, plant and equipment in the certificate with
respect thereto delivered by the Borrower to the Administrative Agent pursuant
to Section 5.01(g)(y), or if no such certificate has been so delivered by such
time and (C) the 270th day following receipt thereof, as to the amount thereof
not so expended on or prior to such day. The description of any transaction as
falling within the above definition does not affect any limitation on such
transaction imposed by Article 5 of this Agreement.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference
Banks, as the context may require, and "Reference Bank" means any one of such
Reference Banks.
"Refinancing Date" means the first date on which no 7% Debentures are
outstanding.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Reimbursement Obligation" means any obligation of the Borrower to
reimburse the LC Agent pursuant to Section 2.17 for amounts paid by the LC Agent
in respect of drawings under Letters of Credit, including any portion of any
such obligation to which a Bank has become subrogated pursuant to paragraph (1)
of Section 2.17(j).
<PAGE> 27
"Requesting Banks" means at any time one or more Banks having at least 15%
of the aggregate amount of the Commitments.
"Required Banks" means at any time Banks having at least 66 2/3% of the
aggregate amount of the Credit Exposures at such time.
"Required Escrow Amount" has the meaning set forth in Section 5.17(b).
"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).
"S&P" means Standard & Poor's Rating Services, a division of the
McGraw-Hill Companies, Inc., and its successors.
"SEC" means the Securities and Exchange Commission.
"Security Agreement" means the Security Agreement to be entered into among
the Obligors and the Administrative Agent, substantially in the form of Exhibit
F, as amended from time to time.
"7% Debentures" means the 7% Notes due June 1, 2000 in the aggregate
principal amount of $200,000,000 issued by the Borrower pursuant to the
Indenture.
"7% Debentures Refinancing" means any issuance for cash proceeds by the
Borrower of any New Subordinated Debt, but only to the extent that the Net Cash
Proceeds thereof (i) together with the Net Cash Proceeds of any prior issuances
of New Subordinated Debt that constitute a 7% Debentures Refinancing, do not
exceed $200,000,000 and (ii) are applied by the Borrower to repay or repurchase
the 7% Debentures or are deposited in the Escrow Account in accordance with the
provisions of Section 5.17(b).
<PAGE> 28
"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.
"Subsidiary Guarantor" means each Subsidiary that from time to time is a
party to the Guarantee Agreement.
"Swingline Bank" means The Bank of New York, in its capacity as the
Swingline Bank under the swingline facility described in Section 2.18, and its
successors in such capacity.
"Swingline Commitment means the obligation of the Swingline Bank to make
Swingline Loans to the Borrower in an aggregate principal amount at any one time
outstanding not to exceed the lesser of (i) $40,000,000 and (y) 10% of the Total
Commitments at such time.
"Swingline Loan" means a loan made by the Swingline Bank pursuant to
Section 2.18(a).
"Swingline Loan Availability Period" means the period from and including
the Effective Date to but excluding the Swingline Maturity Date.
"Swingline Maturity Date" means the day that is 30 days before the
Termination Date.
"Swingline Note" means a promissory note of the Borrower, substantially in
the form of Exhibit B hereto, evidencing the obligation of the Borrower to repay
the Swingline Loans.
"Target Date" means the first date on which (i) the Loans to the Borrower
are expressly rated at least BBB- by S&P and at least Baa3 by Moody's and (ii)
the Total Commitments do not exceed $350,000,000.
"Temporary Cash Investment" means any Investment in (i) direct obligations
of the United States or any agency thereof or obligations guaranteed by the
United States or any agency thereof, (ii) commercial paper rated at least A- 1
by S&P and at least P-1 by Moody's, (iii) time deposits with, including
certificates of deposit issued by, any office located in the United States of
any Bank or any bank or trust company which is organized or licensed under the
laws of the United States or any State thereof and has capital, surplus and
undivided profits aggregating at least $1,000,000,000, (iv) repurchase
agreements with respect to securities described in clause (i) above entered into
<PAGE> 29
with an office of a bank or trust company meeting the criteria specified in
clause (iii) above or (v) in the case of Investments made by a Foreign
Subsidiary, Investments substantially similar to those described in clauses (i)
through (iv) and denominated in the local currency of the jurisdiction in which
such Foreign Subsidiary conducts its operations; provided in each case that such
Investment matures within one year after it is acquired by the Borrower or a
Subsidiary.
"Termination Date" means April 9, 2002, or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day.
"Total Commitments" means, at any time, the aggregate amount of the
Commitments (whether used or unused) at such time.
"Total Usage" means, at any time, the sum of (i) the aggregate outstanding
principal amount of all Loans and Swingline Loans and (ii) the Aggregate LC
Exposure, all determined at such time.
"UCP" means the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, as the same
may be revised or amended from time to time.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the States
thereof and the District of Columbia, but excluding its territories and
possessions.
Section 1.02. Accounting Terms and Determinations. (a) 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
<PAGE> 30
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.
(b) For purposes of determining compliance with the provisions of Sections
5.08 on any date prior to January 29, 2000, "EBIT" for the relevant period shall
be "EBIT" for the period from and including January 31, 1999 to and including
the then most recently ended Fiscal Quarter, annualized on a simple arithmetic
basis. For purposes of determining compliance with the provisions of Sections
5.10 on the last day of any Fiscal Quarter ended prior to January 29, 2000,
"EBIT" and "Interest Expense" for the relevant period shall be "EBIT" or
"Interest Expense", as the case may be, for the period from and including
January 31, 1999 to and including the last day of such Fiscal Quarter, and
"Annual Rent Expense" shall be $136,250,000 (for purposes of determining
compliance on the last day of the first Fiscal Quarter 1999), $272,500,000 (for
purposes of determining compliance on the last day of the second Fiscal Quarter
1999) and $408,750,000 (for purposes of determining compliance on the last day
of the third Fiscal Quarter 1999), which amounts constitute the total rent
expense (net of sublease income) of the Borrower and its Consolidated
Subsidiaries for the Fiscal Year 1998 included in the projections of financial
performance of the Borrower set forth in the $500,000,000 Senior Credit Facility
Amendment Confidential Information Memorandum dated February, 1999 multiplied by
1/4, 1/2 and 3/4, respectively.
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 2 on the same date, all of which Loans are of the same type (subject to
Article 8) and, except in the case of Base Rate Loans, have the same Interest
Period or initial Interest Period. Borrowings are classified for purposes of
this Agreement either by reference to the pricing of Loans comprising such
Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of
Euro-Dollar Loans) or by reference to the provisions of Article 2 under which
participation therein is determined (i.e., a "Committed Borrowing" is a
Borrowing under Section 2.01 in which all Banks participate in proportion to
their Commitments, while a "Money Market Borrowing" is a Borrowing under Section
2.03 in which the Bank participants are determined on the basis of their bids).
<PAGE> 31
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, immediately after each such loan
is made (and after giving effect to any substantially concurrent application of
the proceeds thereof to repay outstanding Loans and Swingline Loans):
(i) such Bank's Outstanding Committed Amount shall not exceed its
Commitment; and
(ii) the Total Usage shall not exceed the Total Commitments.
Each Borrowing under this Section shall be in an aggregate principal amount of
$15,000,000 or any larger multiple of $1,000,000; provided that (x) any such
Borrowing may be in an aggregate amount equal to the aggregate unused amount of
the Commitments and (y) if such Borrowing is made on the Swingline Maturity
Date, such Borrowing may be in the aggregate amount of the Swingline Loans
outstanding on such date. Each such Borrowing shall be made from the several
Banks ratably in proportion to their respective Commitments. Within the
foregoing limits and subject to Section 2.11, the Borrower may borrow under this
Section, prepay Loans to the extent permitted by Section 2.13, and reborrow
under this Section at any time prior to the Termination Date.
Section 2.02. Notice of Committed Borrowing. (a) The Borrower shall give
the Administrative Agent a notice substantially in the form of Exhibit J (a
"Notice of Committed Borrowing") not later than 11:00 A.M. (New York City time)
on (x) the date of each Base Rate Borrowing, (y) the second Domestic Business
Day before each CD Borrowing and (z) the third Euro-Dollar Business Day before
each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business Day in
the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a
Euro-Dollar Borrowing,
<PAGE> 32
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to bear interest
initially at the Base Rate, a CD Rate or a Euro-Dollar Rate, and
(iv) if such Borrowing is a CD Borrowing or EuroDollar Borrowing, the
duration of the initial Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
Section 2.03. Money Market Borrowings. (a) The Money Market Option. In
addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as
set forth in this Section, request the Banks to make offers to make Money Market
Loans to the Borrower from time to time on or after the Target Date and prior to
the Termination Date. The Banks may, but shall have no obligation to, make such
offers and the Borrower may, but shall have no obligation to, accept any such
offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to request offers
to make Money Market Loans under this Section, it shall transmit to the
Administrative Agent by telex or facsimile transmission a Money Market Quote
Request so as to be received no later than 11:00 A.M. (New York City time) on
(x) the fifth Euro-Dollar Business Day prior to the date of Borrowing proposed
therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next
preceding the date of Borrowing proposed therein, in the case of an Absolute
Rate Auction (or, in either case, such other time or date as the Borrower and
the Administrative Agent shall have mutually agreed and shall have notified to
the Banks not later than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which such change is to be
effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar Business
Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an
Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be $15,000,000 or
a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto, subject to
the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a Money
Market Margin or a Money Market Absolute Rate.
<PAGE> 33
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Administrative Agent may agree) of any
other Money Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a Money
Market Quote Request, the Administrative Agent shall send to the Banks by telex
or facsimile transmission an Invitation for Money Market Quotes, which shall
constitute an invitation by the Borrower to each Bank to submit Money Market
Quotes offering to make the Money Market Loans to which such Money Market Quote
Request relates in accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money Market
Quote must comply with the requirements of this subsection (d) and must be
submitted to the Administrative Agent by telex or facsimile transmission at its
offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M.
(New York City time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New
York City time) on the proposed date of Borrowing, in the case of an Absolute
Rate Auction (or, in either case, such other time or date as the Borrower and
the Administrative Agent shall have mutually agreed and shall have notified to
the Banks not later than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which such change is to be
effective); provided that Money Market Quotes submitted by the Administrative
Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank
may be submitted, and may only be submitted, if the Administrative Agent or such
affiliate notifies the Borrower of the terms of the offer or offers contained
therein not later than (x) one hour prior to the deadline for the other Banks,
in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the
other Banks, in the case of an Absolute Rate Auction. Subject to Article 3 and
6, any Money Market Quote so made shall be irrevocable except with the written
consent of the Administrative Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit E hereto and shall in any case specify:
(A) the proposed date of Borrowing,
<PAGE> 34
(B) the principal amount of the Money Market Loan for which each
such offer is being made, which principal amount (w) may be greater
than or less than the Commitment of the quoting Bank, (x) must be
$5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the
principal amount of Money Market Loans for which offers were requested
and (z) may be subject to an aggregate limitation as to the principal
amount of Money Market Loans for which offers being made by such
quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or
subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest
per annum (specified to the nearest 1/10,000th of 1%) (the "Money
Market Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit E hereto or
does not specify all of the information required by subsection
(d)(ii);
(B) contains qualifying, conditional or similar language, except
an aggregate limitation permitted by subsection (d)(ii)(B)(z);
(C) proposes terms other than or in addition to those set forth
in the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Administrative Agent shall promptly
notify the Borrower of the terms (x) of any Money Market Quote
<PAGE> 35
submitted by a Bank that is in accordance with subsection (d) and (y) of any
Money Market Quote that amends, modifies or is otherwise inconsistent with a
previous Money Market Quote submitted by such Bank with respect to the same
Money Market Quote Request. Any such subsequent Money Market Quote shall be
disregarded by the Administrative Agent unless such subsequent Money Market
Quote is submitted solely to correct a manifest error in such former Money
Market Quote. The Administrative Agent's notice to the Borrower shall specify
(A) the aggregate principal amount of Money Market Loans for which offers have
been received for each Interest Period specified in the related Money Market
Quote Request, (B) the respective principal amounts and Money Market Margins or
Money Market Absolute Rates, as the case may be, so offered and (C) if
applicable, limitations on the aggregate principal amount of Money Market Loans
for which offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:30 A.M. (New York
City time) on (x) the third Euro-Dollar Business Day prior to the proposed date
of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Administrative Agent shall have
mutually agreed and shall have notified to the Banks not later than the date of
the Money Market Quote Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective), the Borrower shall notify the
Administrative Agent of its acceptance or non-acceptance of the offers so
notified to it pursuant to subsection (e). In the case of acceptance, such
notice (a "Notice of Money Market Borrowing") shall specify the aggregate
principal amount of offers for each Interest Period that are accepted. The
Borrower may accept any Money Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market Borrowing
may not exceed the applicable amount set forth in the related Money
Market Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$15,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be,
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement, and
<PAGE> 36
(v) immediately after such Money Market Borrowing is made (and after giving
effect to any substantially concurrent application of the proceeds thereof to
repay outstanding Loans and Swingline Loans), the Total Usage shall not exceed
the Total Commitments.
(g) Allocation by Administrative Agent. If offers are made by two or more
Banks with the same Money Market Margins or Money Market Absolute Rates, as the
case may be, for a greater aggregate principal amount than the amount in respect
of which such offers are accepted for the related Interest Period, the principal
amount of Money Market Loans in respect of which such offers are accepted shall
be allocated by the Administrative Agent among such Banks as nearly as possible
(in multiples of $1,000,000, as the Administrative Agent may deem appropriate)
in proportion to the aggregate principal amounts of such offers. Determinations
by the Administrative Agent of the amounts of Money Market Loans shall be
conclusive in the absence of manifest error.
Section 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a
Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of
the contents thereof and of such Bank's share (if any) of such Borrowing and
such Notice of Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 1:00 P.M. (New York City time) on the date of each
Borrowing, each Bank participating therein shall make available its share of
such Borrowing, in Federal or other funds immediately available in New York
City, to the Administrative Agent at its address referred to in Section 9.01.
Unless the Administrative Agent determines that any applicable condition
specified in Article 3 has not been satisfied (which determination may, in the
case of Section 3.03(c), be based in part on information supplied by the LC
Agent on the date of such Borrowing as to the Aggregate LC Exposure on such
date), the Administrative Agent shall (i) apply the funds so received from the
Banks to repay all Swingline Loans (if any) then outstanding, together with
interest accrued thereon and any other associated expenses, and (ii) make the
remainder of such funds available to the Borrower not later than 2:00 P.M. (New
York City time) at the Administrative Agent's aforesaid address.
(c) Unless the Administrative Agent shall have received notice from a Bank
prior to the date of any Borrowing that such Bank will not make available to the
Administrative Agent such Bank's share of such Borrowing, the Administrative
Agent may assume that such Bank has made such share available to the
Administrative Agent on the date of such Borrowing in accordance with subsection
(b) of this Section 2.04 and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such share available
to the Administrative Agent, such Bank and the Borrower severally agree to repay
to the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
<PAGE> 37
Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal
to the higher of the Federal Funds Rate and the interest rate applicable thereto
pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds
Rate. If such Bank shall repay to the Administrative Agent such corresponding
amount, such amount so repaid shall constitute such Bank's Loan included in such
Borrowing for purposes of this Agreement.
Section 2.05. Notes. (a) The Loans of each Bank shall be evidenced by a
single Note payable to the order of such Bank for the account of its Applicable
Lending Office in an amount equal to the aggregate unpaid principal amount of
such Bank's Loans at any time.
(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, 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 2.06. Maturity of Loans; Mandatory Prepayments of Loans. (a) Each
Committed Loan shall mature, and the principal amount thereof shall be due and
payable, on the Termination Date.
<PAGE> 38
(b) Each Money Market Loan included in any Money Market Borrowing shall
mature and the principal amount thereof shall be due and payable, on the last
day of the Interest Period applicable to such Borrowing.
(c) On each date on which the Commitments are permanently reduced pursuant
to subsection (a), (b) or (c) of Section 2.11, the Borrower shall prepay
outstanding Loans, and shall cash collateralize Letters of Credit (without
duplication, in the case of any reduction of the Commitments pursuant to Section
2.11(c), of any prepayment or cash collateralization made by the Borrower
pursuant to subsection (d)) in such amounts so that, after giving effect to such
prepayments and such cash collateralization, the Total Usage shall not exceed
the Total Commitments as then reduced. In determining Total Usage on any date
for purposes of this subsection (c), Aggregate LC Exposure shall be reduced by
an amount equal to the amount on deposit in the LC Collateral Account on such
day (immediately prior to giving effect to any deposits made therein on such day
pursuant to the immediately preceding sentence).
(d) To the extent the terms of any Debt issued by the Borrower or any of
its Subsidiaries after the Effective Date (including without limitation any New
Subordinated Debt) would otherwise require the prepayment or repurchase (or
offer to repurchase) of such Debt upon receipt by the Borrower or any of its
Subsidiaries of cash proceeds of any Asset Sales (or any disposition of assets
excluded from the definition of Asset Sale pursuant to clauses (i) through (iv)
thereof) or any Major Casualty Proceeds (or any proceeds excluded from the
definition of Major Casualty Proceeds pursuant to clauses (i) or (ii) thereof)
but for the provisions of this subsection (d), upon receipt by the Borrower or
any of its Subsidiaries of such cash proceeds, the Borrower will prepay Loans
and cash collateralize Letters of Credit in an amount equal to the amount that
is necessary in order to excuse the Borrower or any of its Subsidiaries from
prepaying or repurchasing (or offering to repurchase) such Debt.
(e) During each Clean-Down Period there shall be at least fifteen
consecutive days on which the sum of (i) the aggregate outstanding principal
amount of all Committed Loans plus (ii) the aggregate outstanding principal
amount of all Swingline Loans plus (iii) the aggregate amount of Reimbursement
Obligations (excluding, for this purpose, any Reimbursement Obligation that is
not yet overdue pursuant to Section 2.17(i)) does not exceed $50,000,000. The
Borrower will prepay Loans to the extent necessary to comply with the
immediately preceding sentence. For purposes of this subsection (e), "Clean-
Down Period" means each period from and including the first day of the fourth
Fiscal Quarter of each Fiscal Year to and including the last day of such Fiscal
Quarter.
<PAGE> 39
(f) The prepayments and the cash collateralization (if applicable) to be
made pursuant to subsections (c), (d) and (e) shall be effected as follows:
first, the Borrower shall prepay any Swingline Loans then outstanding, until all
Swingline Loans have been paid in full, second, the Borrower shall prepay any
Committed Loans then outstanding, until all Committed Loans have been paid in
full, third, the Borrower shall deposit immediately available funds in the LC
Collateral Account, until an amount equal to the then Aggregate LC Exposure has
been deposited in the LC Collateral Account and fourth, the Borrower shall
prepay any Money Market Loans then outstanding (in the order in which they were
made), until all Money Market Loans have been paid in full. The Borrower shall
give the Agent at least three Euro-Dollar Business Days' notice of each
prepayment required to be made pursuant to this subsection (f).
Section 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest
on the outstanding principal amount thereof, for each day from the date such
Loan is made until it becomes due or is converted, at a rate per annum equal to
the Base Rate plus the Base Rate Margin, in each case for such day. Subject to
Section 2.06, such interest shall be payable for each calendar month in arrears
on the last Domestic Business Day thereof and, with respect to the principal
amount of any Base Rate Loan converted to a CD Loan or a Euro-Dollar Loan, on
the date such principal amount is so converted. Any overdue principal of or
interest on any Base Rate Loan shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 2% plus the rate
otherwise applicable to such Base Rate Loan for such day.
"Base Rate Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
(b) Each CD Loan shall bear interest on the outstanding principal amount
thereof, for each day during each Interest Period applicable thereto, at a rate
per annum equal to the sum of the CD Margin for such day plus the Adjusted CD
Rate applicable to such Interest Period; provided that if any CD Loan or any
portion thereof shall, as a result of clause (2)(b) of the definition of
Interest Period, have an Interest Period of less than 30 days, such portion
shall bear interest for each day during such Interest Period at the rate
applicable to Base Rate Loans for such day. Such interest shall be payable for
each Interest Period on the last day thereof and, if such Interest Period is
longer than 90 days, 90 days after the first day thereof. Any overdue principal
of or interest on any CD Loan shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 2% plus the higher of (i)
the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to
such Loan immediately before such payment became due and (ii) the rate
applicable to Base Rate Loans for such day.
<PAGE> 40
The "CD Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest Period means a rate per
annum determined pursuant to the following formula:
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
* The amount in brackets being rounded upward, if necessary, to the next higher
1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates
per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two or more New York
certificate of deposit dealers of recognized standing for the purchase at face
value from each CD Reference Bank of its certificates of deposit in an amount
comparable to the principal amount of the CD Loan of such CD Reference Bank to
which such Interest Period applies and having a maturity comparable to such
Interest Period.
"Domestic Reserve Percentage" means for any day that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including without limitation any basic,
supplemental or emergency reserves) for a member bank of the Federal Reserve
System in New York City with deposits exceeding five billion dollars in respect
of new non-personal time deposits in dollars in New York City having a maturity
comparable to the related Interest Period and in an amount of $100,000 or more.
The Adjusted CD Rate shall be adjusted automatically on and as of the effective
date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in effect on
such day which is payable by a member of the Bank Insurance Fund classified as
adequately capitalized and within supervisory subgroup "A" (or a comparable
successor assessment risk classification) within the meaning of 12 C.F.R.
327.4(a) (or any successor provision) to the Federal Deposit Insurance
Corporation (or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the United States. The
Adjusted CD Rate shall be adjusted automatically on and as of the effective date
of any change in the Assessment Rate.
<PAGE> 41
(c) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus
the Adjusted London Interbank Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, three months after the
first day thereof.
"Euro-Dollar Margin" means a rate per annum determined in accordance with
the Pricing Schedule.
The "Adjusted London Interbank Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London
Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period means
the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which deposits in dollars are offered to each of
the Euro-Dollar Reference Banks in the London interbank market at approximately
11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of
such Interest Period in an amount approximately equal to the principal amount of
the Euro-Dollar Loan of such Euro-Dollar 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.
<PAGE> 42
(d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such day plus
the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of
1%) by dividing (x) the average (rounded upward, if necessary, to the next
higher 1/16 of 1%) of the respective rates per annum at which one day (or, if
such amount due remains unpaid more than three Euro-Dollar Business Days, then
for such other period of time not longer than three months as the Administrative
Agent may select) deposits in dollars in an amount approximately equal to such
overdue payment due to each of the Euro-Dollar Reference Banks are offered to
such Euro-Dollar Reference Bank in the London interbank market for the
applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar
Reserve Percentage (or, if the circumstances described in clause (a) or (b) of
Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the
Base Rate for such day) and (ii) the sum of 2% plus the Euro-Dollar Margin for
such day plus the Adjusted London Interbank Offered Rate applicable to such Loan
immediately before such payment became due.
(e) Subject to Section 8.01, each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in accordance with Section
2.07(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.03. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.03. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest, payable
on demand, for each day until paid at a rate per annum equal to the sum of 2%
plus the rate applicable to Base Rate Loans for such day.
<PAGE> 43
(f) The Administrative Agent shall determine each interest rate applicable
to the Loans hereunder. The Administrative Agent shall give prompt notice to the
Borrower and the participating Banks of each rate of interest so determined, and
its determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated by this Section. If any
Reference Bank does not furnish a timely quotation, the Administrative Agent
shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if none of
such quotations is available on a timely basis, the provisions of Section 8.01
shall apply.
Section 2.08. Method of Electing Interest Rates. (a) The Loans included in
each Committed Borrowing shall bear interest initially at the type of rate
specified by the Borrower in the applicable Notice of Committed Borrowing.
Thereafter, the Borrower may from time to time elect to change or continue the
type of interest rate borne by each Group of Loans (subject in each case to the
provisions of subsection (d) below and Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to CD Loans as of any Domestic Business Day or to
Euro-Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect to convert
such Loans to Base Rate Loans or Euro-Dollar Loans or elect to continue
such Loans as CD Loans for an additional Interest Period, in each case
effective on the last day of the then current Interest Period applicable to
such Loans; or
(iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or CD Loans or elect to continue such
Loans as Euro-Dollar Loans for an additional Interest Period, in each case
effective on the last day of the then current Interest Period applicable to
such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Administrative Agent at least three Euro-Dollar Business
Days before the conversion or continuation selected in such notice is to be
effective (unless the relevant Loans are to be converted from Domestic Loans to
Domestic Loans of the other type or continued as Domestic Loans of the same
<PAGE> 44
type for an additional Interest Period, in which case such notice shall be
delivered to the Administrative Agent at least three Domestic Business Days
before such conversion or continuation is to be effective). A Notice of Interest
Rate Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such portion
is allocated ratably among the Loans comprising such Group and (ii) the portion
to which such notice applies, and the remaining portion to which it does not
apply, are each $15,000,000 or any larger multiple of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in such
notice is to be effective, which shall comply with the applicable clause of
subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the new
type of Loans and, if such new Loans are CD Loans or Euro-Dollar Loans, the
duration of the initial Interest Period applicable thereto; and
(iv) if such Loans are to be continued as CD Loans or Euro-Dollar
Loans for an additional Interest Period, the duration of such additional
Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the Borrower
pursuant to subsection (a) above, the Administrative Agent shall promptly notify
each Bank of the contents thereof and such notice shall not thereafter be
revocable by the Borrower. If the Borrower fails to deliver a timely Notice of
Interest Rate Election to the Administrative Agent for any Group of CD Loans or
Euro-Dollar Loans, such Loans shall be converted into Base Rate Loans on the
last day of the then current Interest Period applicable thereto.
(d) The Borrower shall not be entitled to elect to convert any Committed
Loans to, or continue any Committed Loans for an additional Interest Period as,
CD Loans or Euro-Dollar Loans if a Default shall have occurred and be continuing
when the Borrower delivers notice of such election to the Administrative Agent
or when such conversion or continuation would otherwise be effective.
<PAGE> 45
Section 2.09. Facility Fees. The Borrower shall pay to the Administrative
Agent for the account of each Bank a facility fee, calculated for each day at
the Facility Fee Rate for such day, on the amount of such Bank's Credit Exposure
on such day. Such facility fees shall accrue for each day from and including the
Effective Date to but excluding the day on which the Credit Exposures are
reduced to zero and shall be payable quarterly in arrears on each September 19,
December 19, March 19 and June 19 and on the day on which the Credit Exposures
are reduced to zero.
"Facility Fee Rate" means a rate per annum determined daily in accordance
with the Pricing Schedule.
Section 2.10. Optional Termination or Reduction of Commitments. (a) The
Borrower may, without premium or penalty, upon at least three Domestic Business
Days' notice to the Administrative Agent, (i) terminate the Commitments at any
time, if no Bank has an Outstanding Committed Amount at such time or (ii)
ratably reduce the Commitments from time to time, in each case by an aggregate
amount of at least $15,000,000; provided that immediately after such reduction:
(x) no Bank's Outstanding Committed Amount shall exceed its Commitment
as so reduced;
(y) the Total Usage shall not exceed the Total Commitments; and;
(y) the aggregate outstanding principal amount of the Swingline Loans
shall not exceed the Swingline Commitment (after giving effect to any
reduction thereof pursuant to Section 2.11(d)).
Upon any such termination or reduction of the Commitments, the Administrative
Agent shall promptly notify each Bank of such termination or reduction.
(b) The Borrower may, upon at least three Domestic Business Day' notice to
the Administrative Agent, terminate the Swingline Commitment at any time, if no
Swingline Loans are outstanding at such time.
(c) If the Borrower wishes to replace this Agreement with another credit
agreement at any time, the Borrower may, on the date when such other credit
agreement becomes effective, terminate the Commitments hereunder and prepay any
and all Committed Loans and Swingline Loans then outstanding hereunder; provided
that:
<PAGE> 46
(i) the Borrower notifies each Bank as to the possibility of such
termination and such prepayment (if any) at least three Euro-Dollar
Business Days prior thereto;
(ii) the Borrower gives definitive notice of such termination and such
prepayment (if any) to the Administrative Agent before 10:00 A.M. (New York
City time) on the date of such termination;
(iii) all Committed Loans, Swingline Loans and Reimbursement
Obligations outstanding on the date of such termination (together with
accrued interest thereon) are paid in full on such date;
(iv) in connection with any prepayment of Committed Loans or Swingline
Loans on such date, the Borrower complies with the requirements of
subsections (a) and (b) of Section 2.13, Section 2.15 and subsection (d) of
Section 2.18 in all respects except the timing of definitive notice of such
prepayment; and
(v) no Letter of Credit issued hereunder remains outstanding after the
date of such termination unless the LC Agent shall have agreed to allow
such Letter of Credit to remain outstanding after the Commitments (and the
Banks' participations in such Letter of Credit) terminate.
Section 2.11. Mandatory Reduction of Commitments. (a) On February 15, 2000,
the Commitments will be reduced to $300,000,000.
(b) On the fifth Euro-Dollar Business Day after the date on which the
Borrower or any of its Subsidiaries receives any Net Cash Proceeds in respect of
any Reduction Event, the Total Commitments shall be permanently reduced by an
amount equal to such Net Cash Proceeds, until the Total Commitments do not
exceed $350,000,000; provided that if the Net Cash Proceeds in respect of any
Reduction Event is less than $5,000,000, no such permanent reduction shall be
required until the Net Cash Proceeds with respect to such Reduction Event,
together with the Net Cash Proceeds with respect to all other Reduction Events
in respect of which no permanent reduction under this subsection (b) shall have
theretofore been made, is equal to at least $5,000,000.
<PAGE> 47
(c) To the extent the terms of any Debt issued by the Borrower or any of
its Subsidiaries after the Effective Date (including without limitation any New
Subordinated Debt) would otherwise require the prepayment or repurchase (or
offer to repurchase) of such Debt upon receipt by the Borrower or any of its
Subsidiaries of cash proceeds of any Asset Sale (or any disposition of assets
excluded from the definition of Asset Sale pursuant to clauses (i) through (iv)
thereof) or any Major Casualty Proceeds (or any proceeds excluded from the
definition of Major Casualty Proceeds pursuant to clauses (i) or (ii) thereof)
but for the provisions of this subsection (c), upon receipt by the Borrower or
any of its Subsidiaries of such cash proceeds, the Commitments shall be
permanently reduced by an amount equal to the amount that is necessary in order
to excuse the Borrower or any of its Subsidiaries from prepaying or repurchasing
(or offering to repurchase) such Debt.
(d) On any date on which the Commitments are reduced pursuant to Section
2.11, the Swingline Commitment will be reduced by such amount as shall be
necessary so that, after giving effect to such reduction, the Swingline
Commitment shall not exceed 10% of the Total Commitments as so reduced.
Section 2.12. Mandatory Termination of Commitments. (a) The Commitments
shall terminate on the Termination Date and any Committed Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such date.
(b) The Swingline Commitment shall terminate on the Swingline Maturity Date
and any Swingline Loans then outstanding (together with accrued interest
thereon) shall be due and payable on such date.
Section 2.13. Optional and Mandatory Prepayments. (a) The Borrower may upon
at least one Domestic Business Day's notice to the Administrative Agent, prepay
the Base Rate Loans (or any Money Market Borrowing bearing interest at the Base
Rate by reason of clause (a) of Section 8.01) in whole at any time, or from time
to time in part in amounts aggregating $10,000,000 or any larger multiple of
$1,000,000, by paying the principal amount to be prepaid together with accrued
interest thereon to the date of prepayment. Each such optional prepayment shall
be applied to prepay ratably the Base Rate Loans of the several Banks (or the
Money Market Loans included in such Money Market Borrowing).
(b) Subject to Section 2.15, the Borrower may, upon at least two Domestic
Business Days' notice to the Administrative Agent, in the case of a Group of CD
Loans or upon at least three Euro-Dollar Business Days' notice to the
Administrative Agent, in the case of a Group of Euro-Dollar Loans, prepay the
Loans comprising such a Group, in whole at any time, or from time to time in
part in amounts aggregating $10,000,000 or any larger multiple of $1,000,000, by
paying the principal amount to be prepaid together with accrued interest thereon
to the date of prepayment. Each such optional prepayment shall be applied to
prepay ratably the Loans of the several Banks included in such Group.
<PAGE> 48
(c) In connection with any substitution of Banks pursuant to Section 8.06,
the Borrower may prepay the Loans of the Bank being replaced, as provided in
clause (ii) of Section 8.06.
(d) Except as provided in Sections 2.06 and 2.13(a), the Borrower may not
prepay all or any portion of the principal amount of any Money Market Loan prior
to the maturity thereof.
(e) Upon receipt of a notice of prepayment pursuant to this Section, the
Administrative Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share (if any) of such prepayment and such notice shall
not thereafter be revocable by the Borrower.
Section 2.14. General Provisions as to Payments. (a) The Borrower shall
make (i) 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 and (ii) each
payment of Reimbursement Obligations and any other amounts payable in connection
with the Letters of Credit in accordance with the provisions of Section 2.17.
The Administrative Agent will promptly distribute to each Bank its ratable share
of each such payment received by the Administrative Agent for the account of the
Banks. Whenever any payment of principal of, or interest on, the Domestic Loans
or Swingline Loans or of fees or of Reimbursement Obligations shall be due on a
day which is not a Domestic Business Day, the date for payment thereof shall be
extended to the next succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, any Euro-Dollar Loans or Money Market LIBOR Loan
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding Euro-Dollar
Business Day. Whenever any payment of principal of, or interest on, any Money
Market Absolute Rate Loan shall be due on a day which is not a Euro-Dollar
Business Day, the date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day. If the date for any payment of principal or
any Reimbursement Obligation is extended by operation of law or otherwise,
interest thereon shall be payable for such extended time.
<PAGE> 49
(b) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Banks hereunder
that the Borrower will not make such payment in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Bank on such due date an amount
equal to the amount then due such Bank. If and to the extent that the Borrower
shall not have so made such payment, each Bank shall repay to the Administrative
Agent forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the Administrative Agent, at
the Federal Funds Rate.
Section 2.15. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any such Loan is converted to a
Base Rate Loan (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 2.07(d), or if the Borrower fails
to borrow or prepay any Fixed Rate Loans or fails to continue any CD Loan or
Euro- Dollar Loans for an additional Interest Period or fails to convert any
outstanding Loans to CD Loans or Euro-Dollar Loans, in each case after notice of
such borrowing, prepayment, continuation or conversion has been given to any
Bank in accordance with Section 2.04(a), 2.06(f), 2.08(c) or 2.13(e), the
Borrower shall reimburse each Bank within 15 days after demand for any resulting
loss or expense incurred by it (or by an existing or prospective Participant in
the related Loan), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, but excluding
loss of margin for the period after any such payment or conversion or failure to
borrow, prepay, continue or convert, provided that such Bank shall have
delivered to the Borrower a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of manifest error.
Section 2.16. Computation of Interest and Fees. Interest based on the Prime
Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days
in a leap year) and paid for the actual number of days elapsed (including the
first day but excluding the last day). All other interest and facility fees
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last day).
<PAGE> 50
Section 2.17. Letters of Credit.
(a) Issuance of Letters of Credit. The LC Agent agrees, on the terms and
conditions set forth in this Agreement, to issue Letters of Credit for the
account of the Borrower from time to time during the period from and including
the Effective Date to but excluding the date that is 30 days before the
Termination Date; provided that, immediately after each such Letter of Credit is
issued:
(i) the Aggregate LC Exposure shall not exceed $160,000,000 (of which
the aggregate amount attributable to standby Letters of Credit will not
exceed $60,000,000);
(ii) in the case of each Bank, its Outstanding Committed Amount shall
not exceed its Commitment; and
(iii) the Total Usage shall not exceed the Total Commitments.
Upon the issuance by the LC Agent of each Letter of Credit pursuant to this
subsection (a), the LC Agent shall be deemed, without further action by any
party hereto, to have sold to each Bank and each Bank shall be deemed, without
further action by any party hereto, to have purchased from the LC Agent, a
participation in such Letter of Credit, on the terms set forth in this Section,
equal to such Bank's Pro Rata Share thereof. In addition, on the Effective Date,
the LC Agent shall be deemed, without further action by any party hereto, to
have sold to each Bank, and each Bank shall be deemed, without further action by
any party hereto, to have purchased from the LC Agent, a participation in each
Existing Standby Letter of Credit, on the terms set forth in this Section, equal
to such Bank's Pro Rata Share thereof.
(b) Expiry Dates. No Letter of Credit shall have an expiry date later than
the fifth Domestic Business Day prior to the Termination Date. Subject to the
preceding sentence:
(i) each Letter of Credit shall, when issued, have an expiry date on
or before the first anniversary of the date on which it is issued; and
(ii) the expiry date of any Letter of Credit may, at the request of
the Borrower, be extended from time to time for a period not exceeding one
year so long as the LC Agent agrees to so extend such Letter of Credit (or,
in the case of an "evergreen" Letter of Credit, its right to give a notice
to prevent the extension thereof expires) no earlier than three months
before the then existing expiry date thereof.
<PAGE> 51
(c) Notice of Proposed Issuance. The Borrower shall give the LC Agent and
the Administrative Agent at least one Domestic Business Day's prior notice
specifying the date each Letter of Credit is to be issued and describing the
proposed terms of such Letter of Credit and the nature of the transactions
proposed to be supported thereby.
(d) Conditions to Issuance. The LC Agent shall not issue any Letter of
Credit unless: (i) such Letter of Credit shall be satisfactory in form and
reasonably satisfactory in substance to the LC Agent,
(ii) the Borrower shall have executed and delivered such other
instruments and agreements relating to such Letter of Credit as the LC
Agent shall have reasonably requested,
(iii) the LC Agent shall have determined (based on information
supplied by the Administrative Agent on the date of such issuance as to the
amounts specified in subsection (a) of this Section other than the
Aggregate LC Exposure) that the limitations specified in subsection (a) of
this Section will not be exceeded immediately after such Letter of Credit
is issued, and
(iv) the LC Agent shall not have been notified in writing by the
Borrower, the Administrative Agent or the Required Banks that any condition
specified in clause (c), (d) or (e) of Section-3.03 is not satisfied on the
date such Letter of Credit is to be issued.
(e) Notice of Proposed Extensions of Expiry Dates. The LC Agent shall give
the Administrative Agent at least one Domestic Business Day's notice prior to
extending the expiry date of any Letter of Credit (or, in the case of an
"evergreen" Letter of Credit, allowing it to be extended), specifying (i) the
date on which such extension is to be made and (ii) the date to which such
expiry date is to be so extended. The LC Agent shall not extend (or allow the
extension of) the expiry date of such Letter of Credit if it shall have been
notified by the Borrower or the Administrative Agent (at the request of the
Required Banks) that any condition specified in clause (d) or (e) of Section
3.03 is not satisfied on the date of such extension (or, in the case of an
"evergreen" Letter of Credit, the day when the LC Agent's right to give a notice
preventing such extension expires).
<PAGE> 52
(f) Notice of Actual Issuances, Extensions and Amounts Available for
Drawing. Promptly upon issuing any Letter of Credit or extending the expiry date
of any Letter of Credit (or allowing the expiry date of any "evergreen" Letter
of Credit to be extended), the LC Agent will notify the Administrative Agent of
the date of such Letter of Credit, the amount thereof, the beneficiary or
beneficiaries thereof and the expiry date or extended expiry date thereof.
Within three Domestic Business Days after the end of each calendar month, the LC
Agent shall notify the Administrative Agent and each Bank of (i) the daily
average aggregate amount available for drawings (whether or not conditions for
drawing thereunder have been satisfied) under all Letters of Credit outstanding
during such month, (ii) the aggregate amount of letter of credit fees accrued
during such month pursuant to subsection (g) of this Section, (iii) each Bank's
Pro Rata Share of such accrued letter of credit fees and (iv) the aggregate
undrawn amount of all Letters of Credit outstanding at the end of such month.
(g) Fees. The Borrower shall pay to the LC Agent, for the account of the
Banks ratably in accordance with their respective Pro Rata Shares, a letter of
credit fee for each day at the LC Fee Rate on the aggregate amount available for
drawings (whether or not conditions for drawing thereunder have been satisfied)
under all Letters of Credit outstanding on such day. Such letter of credit fee
shall be payable quarterly in arrears on the last Domestic Business Day of each
calendar quarter and on the fifth Domestic Business Day before the Termination
Date (or any earlier date on which the Commitments shall have terminated in
their entirety and no Letters of Credit are outstanding). Promptly upon
receiving any payment of such fee, the LC Agent will distribute to each Bank its
Pro Rata Share thereof. In addition, the Borrower shall pay to the LC Agent for
its own account fronting fees and reasonable expenses in the amounts and at the
times agreed between the Borrower and the LC Agent.
(h) Drawings. Upon receipt from the beneficiary of any Letter of Credit of
a demand for payment under such Letter of Credit, the LC Agent shall determine
in accordance with the terms of such Letter of Credit whether such demand for
payment should be honored. If the LC Agent determines that any such demand for
payment should be honored, the LC Agent shall make available to such beneficiary
in accordance with the terms of such Letter of Credit the amount of the drawing
under such Letter of Credit. The LC Agent shall thereupon notify the Borrower of
the amount of such drawing paid by it.
(i) Reimbursement and Other Payments by the Borrower. (1) If any amount is
drawn under any Letter of Credit, the Borrower irrevocably and unconditionally
agrees to reimburse the LC Agent for all amounts paid by the LC Agent upon such
drawing, together with any and all reasonable charges and expenses which the LC
Agent may pay or incur relative to such drawing and interest on the amount drawn
at the Federal Funds Rate for each day from and including the date such amount
<PAGE> 53
is drawn to but excluding the date such reimbursement payment is due and
payable. Such reimbursement payment shall be due and payable (x) at or before
1:00 P.M. (New York City time) on the date the LC Agent notifies the Borrower of
such drawing, if such notice is given at or before 10:00 A.M. (New York City
time) on such date, or (y) at or before 10:00 A.M. (New York City time) on the
first Domestic Business Day after the date such notice is given, if such notice
is given after 10:00 A.M. (New York City time) on such date; provided that no
payment otherwise required by this sentence to be made by the Borrower at or
before 1:00 P.M. (New York City time) on any day shall be overdue hereunder if
arrangements for such payment satisfactory to the LC Agent, in its reasonable
discretion, shall have been made by the Borrower at or before 1:00 P.M. (New
York City time) on such day and such payment is actually made at or before 3:00
P.M. (New York City time) on such day.
(2) In addition, the Borrower agrees to pay to the LC Agent interest on any
and all amounts not paid by the Borrower when due hereunder with respect to a
Letter of Credit, for each day from and including the date when such amount
becomes due to but excluding the date such amount is paid in full, whether
before or after judgment, payable on demand, at a rate per annum equal to the
sum of 2% plus rate applicable to Base Rate Loans for such day.
(3) Each payment to be made by the Borrower pursuant to this subsection (i)
shall be made to the LC Agent in Federal or other funds immediately available to
it at its address referred to in Section 9.01.
(j) Payments by Banks with Respect to Letters of Credit. (1) If the
Borrower fails to reimburse the LC Agent as and when required by subsection (i)
above for all or any portion of any amount drawn under a Letter of Credit, the
LC Agent may notify each Bank of such unreimbursed amount and request that each
Bank reimburse the LC Agent for such Bank's Pro Rata Share thereof. Upon
receiving such notice from the LC Agent, each Bank shall make available to the
LC Agent, at its address referred to in Section 9.01, an amount equal to such
Bank's share of such unreimbursed amount as set forth in such notice, in Federal
or other funds immediately available to the LC Agent, by 3:00 P.M. (New York
City time) on the Domestic Business Day following such Bank's receipt of such
notice from the LC Agent, together with interest on such amount for each day
from and including the date of such drawing to but excluding the day such
payment is due from such Bank at the Federal Funds Rate for such day. Upon
payment in full thereof, such Bank shall be subrogated to the rights of the LC
Agent against the Borrower to the extent of such Bank's Pro Rata Share of the
<PAGE> 54
related Reimbursement Obligation (including interest accrued thereon). Nothing
in this subsection (j) shall affect any rights any Bank may have against the LC
Agent for any action or omission for which the LC Agent is not indemnified under
subsection (n) of this Section.
(2) If any Bank fails to pay any amount required to be paid by it pursuant
to clause (1) of this subsection (j) on the date on which such payment is due,
interest shall accrue on such Bank's obligation to make such payment, for each
day from and including the date such payment became due to but excluding the
date such Bank makes such payment, whether before or after judgment, at a rate
per annum equal to the Federal Funds Rate for such day. Any payment made by any
Bank after 3:00 P.M. (New York City time) on any Domestic Business Day shall be
deemed for purposes of the preceding sentence to have been made on the next
succeeding Domestic Business Day.
(3) If the Borrower shall reimburse the LC Agent for any drawing with
respect to which any Bank shall have made funds available to the LC Agent in
accordance with clause (1) of this subsection (j), the LC Agent shall promptly
upon receipt of such reimbursement distribute to such Bank its Pro Rata Share
thereof, including interest, to the extent received by the LC Agent.
(k) Exculpatory Provisions. The Borrower's obligations under this
Section shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which the
Borrower may have or have had against the LC Agent, any Bank, the beneficiary of
any Letter of Credit or any other Person. The Borrower assumes all risks of the
acts or omissions of any beneficiary of any Letter of Credit with respect to its
use of such Letter of Credit. None of the LC Agent, the Banks and their
respective officers, directors, employees and agents shall be responsible for,
and the obligations of each Bank to make payments to the LC Agent and of the
Borrower to reimburse the LC Agent for drawings pursuant to this Section (other
than obligations resulting solely from the gross negligence or willful
misconduct of the LC Agent) shall not be excused or affected by, among other
things, (i) the use which may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (ii) the
validity, sufficiency or genuineness of documents presented under any Letter of
Credit or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged
(and notwithstanding any assertion to such effect by the Borrower); (iii)
payment by the LC Agent against presentation of documents to it which do not
comply with the terms of the relevant Letter of Credit; (iv) any dispute between
or among the Borrower, any of its Subsidiaries, the beneficiary of any Letter of
Credit or any other Person or any claims or defenses whatsoever of the Borrower,
any of its Subsidiaries or any other Person against the beneficiary of any
Letter of Credit; (v) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole; (vi) any breach of this
Agreement by any party hereto (except, in the case of the LC Agent, a breach
resulting solely from its gross negligence or willful misconduct); (vii) any
other circumstance or happening whatsoever, whether or not similar to any of the
foregoing; (viii) the fact that a Default shall have occurred and be continuing;
or (ix) the fact that the Termination Date shall have passed or the Commitments
shall have terminated. The LC Agent shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
<PAGE> 55
advice, however transmitted, in connection with any Letter of Credit. Any action
taken or omitted by the LC Agent or any Bank under or in connection with any
Letter of Credit and the related drafts and documents, if done without willful
misconduct or gross negligence, shall be binding upon the Borrower and shall not
place the LC Agent or any Bank under any liability to the Borrower.
(l) Reliance, Etc. The LC Agent shall be entitled (but not obligated) to
rely, and shall be fully protected in relying, on the representation and
warranty by the Borrower set forth in the last sentence of Section 3.03 to
establish whether the conditions specified in clauses (c), (d) and (e) of
Section 3.03 are met in connection with any issuance or extension of a Letter of
Credit, unless the LC Agent shall have been notified to the contrary by the
Administrative Agent or the Required Banks (in which event the LC Agent shall be
fully protected in relying on such notice). The rights and obligations of the LC
Agent under each Letter of Credit issued by it shall be governed by the
provisions thereof and the provisions of the UCP and/or the Uniform Commercial
Code referred to therein or otherwise applicable thereto.
(m) Indemnification by the Borrower. The Borrower agrees to indemnify and
hold harmless each Bank and the LC Agent (collectively, the "LC Indemnitees")
from and against any and all claims and damages, losses, liabilities, costs or
expenses (including, without limitation, the reasonable fees and disbursements
of counsel) which any such LC Indemnitee may reasonably incur (or which may be
claimed against any such LC Indemnitee by any Person whatsoever) by reason of or
in connection with the execution and delivery or transfer of or payment or
failure to pay under any Letter of Credit or any actual or proposed use of any
Letter of Credit, including any claims, damages, losses, liabilities, costs or
expenses which the LC Agent may incur by reason of or in connection with the
failure of any Bank to fulfill or comply with its obligations to the LC Agent
hereunder; provided that the Borrower shall not be required to indemnify the LC
Agent for any claims, damages, losses, liabilities, costs or expenses to the
<PAGE> 56
extent, but only to the extent, caused by (i) the willful misconduct or gross
negligence of the LC Agent in determining whether a request presented under any
Letter of Credit issued by it complied with the terms of such Letter of Credit
or (ii) the LC Agent's failure to pay under any Letter of Credit issued by it
after the presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit (unless such payment is enjoined or
otherwise prevented by order of a court or other governmental authority).
Nothing in this subsection (m) is intended to change the obligations of the
Borrower under any other provision of this Section.
(n) Indemnification by the Banks. The Banks shall, ratably in accordance
with their respective Pro Rata Shares, indemnify the LC Agent, its affiliates
and their respective directors, officers, agents and employees (to the extent
not reimbursed by the Borrower) against any cost, expense (including fees and
disbursements of counsel), claim, demand, action, loss or liability (except such
as result from the LC Agent's gross negligence or willful misconduct or the LC
Agent's failure to pay, unless such payment is enjoined or otherwise prevented
by order of a court or other governmental authority, under any Letter of Credit
issued by it after the presentation to it of a request strictly complying with
the terms and conditions of such Letter of Credit) that any such indemnitee may
suffer or incur in connection with this Agreement or any action taken or omitted
by such indemnitee under this Agreement.
(o) Dual Capacities. In its capacity as a Bank, the LC Agent shall have the
same rights and obligations under this Section as any other Bank.
Section 2.18. Swingline Loans. (a) Swingline Commitment. The Swingline Bank
agrees, on the terms and conditions set forth in this Agreement, to make loans
to the Borrower pursuant to this Section from time to time during the Swingline
Loan Availability Period; provided that immediately after each such loan is made
(and after giving effect to any substantially concurrent application of the
proceeds thereof to repay outstanding Loans):
(i) the aggregate outstanding principal amount of the Swingline Loans
shall not exceed the Swingline Commitment,
(ii) in the case of each Bank, its Outstanding Committed Amount shall
not exceed its Commitment, and
(iii) the Total Usage shall not exceed the Total Commitments.
<PAGE> 57
Each loan under this Section shall (x) be in a principal amount not less than
$500,000 and shall be in a multiple of $100,000 and (y) bear interest on the
outstanding principal amount thereof for each day from the date such loan is
made until it becomes due at such rate or rates per annum (which shall in no
event be greater than the rate applicable to Base Rate Loans for such day), and
be payable on such dates, as shall be agreed upon from time to time by the
Borrower and the Swingline Bank. Within the foregoing limits and subject to
Section 2.11(d), the Borrower may borrow under this Section, repay Swingline
Loans and reborrow under this Section at any time during the Swingline Loan
Availability Period. If the Swingline Bank and the Borrower are unable, for any
reason, to agree on the interest rate or interest payment date or dates
applicable to any Swingline Loan, the Swingline Bank shall not be obligated to
make, and the Borrower shall not be obligated to borrow, such Swingline Loan.
The Swingline Loans shall be evidenced by the Swingline Note.
(b) Notice of Swingline Borrowing. The Borrower shall give the Swingline
Bank notice (a "Notice of Swingline Borrowing") not later than 2:00 P.M. (New
York City time) on the date of each borrowing of a Swingline Loan, specifying
(i) the date of such borrowing, which shall be a Domestic Business Day, and (ii)
the principal amount of such Swingline Loan.
(c) Funding of Swingline Loans. Not later than 3:00 P.M. (New York City
time) on the date of each borrowing of a Swingline Loan, the Swingline Bank
shall, unless the Swingline Bank determines that any applicable condition
specified in Article 3 (which determination may, in the case of Section 3.03(c),
be based in part on information supplied by the LC Agent on the date of such
borrowing as to the Aggregate LC Exposure on such date and on information
supplied by the Administrative Agent as to the aggregate outstanding principal
amount of the Loans on such date) has not been satisfied, make available the
amount of such Swingline Loan, in Federal or other funds immediately available
in New York City, to the Borrower at the Swingline Bank's address referred to in
Section 9.01.
(d) Optional Prepayment of Swingline Loans. The Borrower may prepay the
Swingline Loans in whole at any time, or from time to time in part in a
principal amount of at least $500,000, by giving notice of such prepayment to
the Swingline Bank not later than 2:00 P.M. (New York City time) on the date of
prepayment and paying the principal amount to be prepaid (together with (i)
interest accrued thereon to the date of prepayment and (ii) the loss or expense
(if any) resulting from such prepayment which is incurred by the Swingline Bank
(or by an existing or prospective participant in the Swingline Loans) and
documented by the Swingline Bank) to the Swingline Bank at its address referred
to in Section 9.01, in Federal or other funds immediately available in New York
City, not later than 3:00 P.M. on the date of prepayment.
<PAGE> 58
(e) Mandatory Prepayment of Swingline Loans. (i) On the date of each
Borrowing pursuant to Section 2.01 or 2.03, the Borrower shall prepay all
Swingline Loans then outstanding, together with (x) interest accrued thereon to
the date of prepayment and (y) the loss or expense (if any) resulting from such
prepayment which is incurred by the Swingline Bank (or by an existing or
prospective participant in the Swingline Loans) and documented by the Swingline
Bank.
(ii) On each date on which the Swingline Commitment is reduced pursuant to
Section 2.11(d), the Borrower shall prepay outstanding Swingline Loans in such
amounts such that, after giving effect to such prepayments, the aggregate
outstanding principal amount of the Swingline Loans will not exceed the
Swingline Commitment as then reduced.
(f) Refunding Unpaid Swingline Loans. The Swingline Bank may at any time,
by notice to the Banks (including the Swingline Bank, in its capacity as a
Bank), require each Bank to pay to the Swingline Bank an amount equal to such
Bank's Pro Rata Share of the aggregate unpaid principal amount of the Swingline
Loans then outstanding. Such notice shall specify the date on which such
payments are to be made, which shall be the first Domestic Business Day after
such notice is given. Not later than 12:00 Noon (New York City time) on the date
so specified, each Bank shall pay the amount so notified to it to the Swingline
Bank at its address referred to in Section 9.01, in Federal or other funds
immediately available in New York City. The amount so paid by each Bank shall
constitute a Base Rate Loan to the Borrower; provided that, if the Banks are
prevented from making such Loans to the Borrower by the provisions of the United
States Bankruptcy Code or otherwise, the amount so paid by each Bank shall
constitute a purchase by it of a participation in the unpaid principal amount of
the Swingline Loans (and interest accruing thereon after the date of such
payment). Each Bank's obligation to make such payment to the Swingline Bank
under this subsection (f) shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which such Bank or any other
Person may have against the Swingline Bank or the Borrower, (ii) the occurrence
or continuance of a Default or the termination of the Commitments, (iii) any
adverse change in the condition (financial or otherwise) of the Borrower or any
other Person, (iv) any breach of this Agreement by the Borrower or any other
Bank or (v) any other circumstance, happening or event whatsoever, whether or
not similar to any of the foregoing; provided that no Bank shall be obligated to
make any payment to the Swingline Bank under this subsection (f) with respect to
a Swingline Loan made by the Swingline Bank at a time when the Swingline Bank
has determined that a Default had occurred and was continuing.
<PAGE> 59
ARTICLE 3
Conditions
Section 3.01. Effective Date. This Amended Agreement shall become effective
on the date (the "Effective Date") on which all of the conditions set forth in
Section 3 of Amendment No. 3 shall have been satisfied. 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. Consequences of Effectiveness. (a) On the Effective Date,
without further action by any of the parties thereto, the Existing Credit
Agreement will be automatically amended and restated to read as this Amended
Agreement reads.
(b) Each Loan outstanding under the Existing Credit Agreement on the
Effective Date shall mature as specified in this Amended Agreement. The interest
rates determined in accordance with Section 2.07 of this Amended Agreement shall
be effective on the Effective Date; provided that (i) the interest rate
applicable to each CD Loan outstanding on the Effective Date for each remaining
day during the then current Interest Period applicable thereto shall be the rate
per annum equal to the sum of the CD Margin (as defined in this Amended
Agreement) for such day plus the Adjusted CD Rate applicable to such Loan for
such Interest Period (as determined pursuant to Section 2.07(b) of the Existing
Credit Agreement) and (ii) the interest rate applicable to each Euro-Dollar Loan
outstanding on the Effective Date for each remaining day during the then current
Interest Period applicable thereto shall be the rate per annum equal to the sum
of the Euro-Dollar Margin (as defined in this Amended Agreement) for such day
plus the Adjusted London Interbank Offered Rate applicable to such Loan for such
Interest Period (as determined pursuant to Section 2.07(c) of the Existing
Credit Agreement). Facility fees and letter of credit fees accrued under the
Existing Credit Agreement and unpaid as of the Effective Date will be payable on
the first date on which fees are payable in accordance with Section 2.09.
(c) On and after the Effective Date, the rights and obligations of the
parties hereto shall be governed by the provisions hereof. The rights and
obligations of the parties to the Existing Credit Agreement with respect to the
period before the Effective Date shall continue to be governed by the provisions
thereof as in effect before the Effective Date.
Section 3.03. Extensions of Credit. The obligation (i) of any Bank to make
a Loan on the occasion of any Borrowing (other than a Loan pursuant to Section
2.18(f)), (ii) of the Swingline Bank to make any Swingline Loan and (iii) of the
LC Agent to issue or extend (or allow the extension of) the expiry date of any
Letter of Credit are each subject to the satisfaction of the following
conditions:
(a) the fact that the Effective Date shall have occurred on or prior
to March 19, 1999;
(b) receipt (i) by the Administrative Agent of a Notice of Borrowing
as required by Section 2.02 or 2.03, (ii) by the Swingline Bank of a Notice
of Swingline Borrowing as required by Section 2.18(b) or (iii) by the LC
Agent of a notice of proposed issuance or extension as required by Section
2.17(c) or (e), as the case may be;
(c) the fact that, immediately after such Extension of Credit, the
applicable limitations in Section 2.01, 2.03(f), 2.17(a) or 2.18(a), as the
case may be, shall not be exceeded;
(d) the fact that, immediately before and after such Extension of
Credit, no Default shall have occurred and be continuing; and
<PAGE> 60
(e) the fact that each of the representations and warranties of the
Obligors contained in the Loan Documents shall be true on and as of the
date of such Extension of Credit.
Each Extension of Credit hereunder shall be deemed to be a representation and
warranty by the Borrower on the date of such Extension of Credit as to the facts
specified in clauses (c), (d) and (e) of this Section.
ARTICLE 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. Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by the Borrower of each Loan Document to
which it is a party 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. Each Loan Document to which the Borrower is a
party (other than the Notes and the Swingline Note) constitutes a valid and
binding agreement of the Borrower and each of the Notes and the Swingline Note,
when executed and delivered in accordance with this Agreement, will constitute a
valid and binding obligation of the Borrower, in each case enforceable in
accordance with its terms.
<PAGE> 61
Section 4.04. Financial Statements. (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 shareholders'
equity for the Fiscal Year then ended, reported on by KPMG 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 condensed consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of October 31, 1998 and the related unaudited
condensed consolidated statements of operations, cash flows and retained
earnings for the nine months then ended, set forth in the Borrower's Latest Form
10-Q, a copy of which has been delivered to each of the Banks, fairly present,
on a basis consistent with the financial statements referred to in subsection
(a) of this Section, the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such nine-month period (subject to normal year-end
adjustments).
(c) Since October 31, 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
<PAGE> 62
Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan or made any
amendment to any Plan, which has resulted or will result in the imposition of a
Lien under Section 412(n) of the Internal Revenue Code or in the incurrence of a
requirement under Section 401(a)(29) of the Internal Revenue Code to post a bond
or other security in order to retain the tax-qualified status of such Plan or
(iii) incurred any liability under Title IV of ERISA other than a liability to
the PBGC for premiums under Section 4007 of ERISA.
Section 4.08. Environmental Matters. To the knowledge of the Borrower, (i)
the Borrower and its Subsidiaries are in material compliance with all applicable
Environmental Laws, (ii) there are no claims, demands or investigations against
the Borrower or any of its Subsidiaries by any governmental authority or other
person or entity that may reasonably be expected to result in material liability
for the clean up of materials that have been released into the environment and
(iii) there are no conditions that are reasonably likely to result in such
claims, demands or investigations against the Borrower or any of its
Subsidiaries, except for failures to comply and 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. (a) 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.
(b) The Subsidiary Guarantors are all of the Subsidiaries of the Borrower
on the Effective Date, other than Foreign Subsidiaries and Immaterial
Subsidiaries.
<PAGE> 63
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 the Loan Documents or any transaction contemplated thereby
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).
Section 4.13. Year 2000 Compliance. The Borrower has (i) initiated a review
and assessment of all areas within the business and operations of the Borrower
and each of its Subsidiaries that could reasonably be expected to be materially
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by it or any of its Subsidiaries may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999), (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis and (iii) to date,
implemented such plan substantially in accordance with such timetable. The
Borrower reasonably believes that all computer applications that are material to
the business or operations of the Borrower or any of its Subsidiaries will on a
timely basis be able to perform properly date-sensitive functions for all dates
before and from and after January 1, 2000 (that is, be "Year 2000 Compliant")
except to the extent that a failure to do so could not reasonably be expected to
have a Material Adverse Effect.
Section 4.14. Ranking. The Loans, the Swingline Loans and the Reimbursement
Obligations rank (i) senior to any other Debt of the Borrower with respect to
the Collateral pledged by the Borrower, (ii) pari passu with other unsecured
Debt of the Borrower (other than any such Debt described in clause (iii)) with
respect to any assets of the Borrower (other than the Collateral pledged by the
Borrower) and (iii) senior to any other Debt of the Borrower which by its terms
is subordinated thereto, including without limitation any New Subordinated Debt.
<PAGE> 64
ARTICLE 5
Covenants
The Borrower agrees that, so long as any Bank has any Credit Exposure
hereunder, the Swingline Commitment remains in effect or any amount payable
under the Swingline Note remains unpaid:
Section 5.01. Information. The Borrower will deliver to each of the Banks:
(a) as soon as available and in any event within 90 days after the end of
each Fiscal Year, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of operations, cash flows and 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 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;
(c) as soon as available and in any event within 30 days after the end of
each month of each Fiscal Year, a consolidated condensed balance sheet of the
<PAGE> 65
Borrower and its Consolidated Subsidiaries as of the end of such month and the
related consolidated condensed statements of operations and cash flows for the
portion of the Fiscal Year ended at the end of such month, all certified
(subject to normal quarter-end and 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;
(d) 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, and
Sections 5.13 to 5.15, inclusive, on the date of such financial statements, (ii)
setting forth (x) if such certificate is being delivered together with each set
of financial statements referred to in clause (a) above, the names of each
Subsidiary of the Borrower that is an Immaterial Subsidiary as of the last day
of the Fiscal Year with respect to which such financial statements relate and
the calculations required to establish that each such Subsidiary is an
Immaterial Subsidiary and (y) if such certificate is being delivered together
with each set of financial statements referred to in clause (b) above for any
Fiscal Quarter of any Fiscal Year, the names of each Subsidiary of the Borrower
that is an Immaterial Subsidiary as of the last day of the Fiscal Quarter with
respect to which such financial statements relate and which was not listed as an
Immaterial Subsidiary on previous certificates delivered by the Borrower
pursuant to this subsection (d) together with financial statements for previous
Fiscal Quarters of such Fiscal Year and the calculations required to establish
that each such Subsidiary is an Immaterial Subsidiary and (iii) 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;
(e) 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 (d) above;
(f) as soon as practicable and in any event within 45 days after the first
day of each Fiscal Year, operating plans and financial forecasts, including cash
flow projections covering proposed fundings, repayments, additional advances,
investments, capital expenditures and other cash receipts and disbursements, for
such Fiscal Year;
<PAGE> 66
(g) (x) within ten Domestic Business Days of receipt of any Major Casualty
Proceeds that would constitute a Reduction Event but for the delivery of a
certificate pursuant to this subsection, a certificate of the Borrower setting
forth the amount of such Major Casualty Proceeds and the transaction giving rise
to them and stating that the Borrower shall notify the Administrative Agent,
within ninety days of receipt of such Major Casualty Proceeds of its
determination as to whether such Major Casualty Proceeds (or any portion
thereof) shall be expended for the purchase or repair of property, plant and
equipment and (y) within 90 days of receipt of any Major Casualty Proceeds with
respect to which the Borrower has delivered to the Administrative Agent a
certificate pursuant to clause (x) of this subsection, a certificate of the
Borrower setting forth the amount of such Major Casualty Proceeds that will be
expended by the Borrower and its Subsidiaries for the purchase or repair of
property, plant and equipment and a reasonably detailed plan of such purchase or
repair;
(h) within ten 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;
(i) within ten Domestic Business Days after any Responsible Officer obtains
knowledge of the commencement of an action, suit or proceeding against the
Borrower or any Subsidiary before any court or arbitrator or any governmental
body, agency or official which could reasonably be expected to result in a
Material Adverse Effect, or which in any manner draws into question the validity
or enforceability of any Loan Document, a certificate of a Responsible Officer
setting forth the nature of such pending or threatened action, suit or
proceeding and such additional information with respect thereto as may be
reasonably requested by any Bank;
(j) within ten Domestic Business Days after any Responsible Officer
determines that any computer application that is material to the business or
operations of the Borrower or any of its Subsidiaries will fail to be "Year 2000
Compliant" (as defined in Section 4.13) in all material respects and on a timely
basis, a certificate of a Responsible Officer setting forth the details of such
failure, the expected consequences thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(k) within ten Domestic Business Days after any Responsible Officer obtains
knowledge of any actual or proposed material change in any material contract
arrangements between the Borrower or any of its Subsidiaries and any material
vendors or suppliers, a certificate of a Responsible Officer setting forth the
details thereof and the action which the Borrower is taking or proposes to take
with respect thereto;
<PAGE> 67
(l) promptly upon the mailing thereof to the shareholders of the Borrower
generally, copies of all financial statements, reports and proxy statements so
mailed;
(m) 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;
(n) 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
<PAGE> 68
(o) from time to time such additional information regarding the financial
position or business of the Borrower and its Subsidiaries as the Administrative
Agent, at the request of any Bank, may reasonably request.
Section 5.02. Maintenance of Property; Insurance. (a) The Borrower will
keep, and will cause each Subsidiary to keep, all material properties useful and
necessary in its business in good working order and condition, ordinary wear and
tear excepted.
(b) The Borrower will, and will cause each of its Subsidiaries to, maintain
(either in the name of the Borrower or in such Subsidiary's own name) with
financially sound and responsible insurance companies, insurance on all their
respective properties in at least such amounts and against at least such risks
(and with such risk retention) as are usually insured against in the same
general area by companies of established repute engaged in the same or a similar
business; provided that such risks may be covered by self-insurance programs
consistent with past practice. The Borrower will furnish to the Banks, upon
request from the Administrative Agent, information presented in reasonable
detail as to the insurance so carried.
Section 5.03. Conduct of Business and Maintenance of Existence. The
Borrower will continue, and will cause each Subsidiary to continue, to engage in
business of the same general type as now conducted by the Borrower and its
Subsidiaries, and will preserve, renew and keep in full force and effect, and
will cause each Subsidiary to preserve, renew and keep in full force and effect
their respective existence and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business, except
where failures to possess such rights, privileges 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) any merger or
consolidation permitted under Section 5.11 or (ii) the termination of the
existence of any Immaterial Subsidiary if the Borrower in good faith determines
that such termination is in the best interests 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.
<PAGE> 69
Section 5.05. Inspection of Property, Books and Records. The Borrower will
keep, and will cause each Subsidiary (except for Subsidiaries that constitute
Immaterial Subsidiaries) to keep, proper books of record and account in which
full, true and correct entries shall be made of all dealings and transactions in
relation to its business and activities; and will permit, and will cause each
Subsidiary (except for Subsidiaries that constitute Immaterial Subsidiaries) to
permit, representatives of any Bank at such Bank's expense, upon reasonable
prior notice, to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants, all at such reasonable
times and as often as may reasonably be desired.
Section 5.06. Negative Pledge. (a) 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 (subject to the last sentence of this
subsection (a)):
(i) Liens existing on the date of this Agreement securing (i) any Debt
described in clause (iv) of the definition of Debt outstanding on the date
of this Agreement in an aggregate principal or face amount not exceeding
$50,000,000 and listed on Schedule 5.06 and (ii) other Debt outstanding on
the date of this Agreement in an aggregate principal or face amount not
exceeding $10,000,000;
(ii) any Lien on any asset (or improvement thereon) securing Debt
(including without limitation any Debt described in clause (iv) of the
definition of 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 (x) such Lien attaches to such asset (or
improvement thereon) concurrently with or within 90 days after the
acquisition thereof and (y) the aggregate principal or face amount of Debt
secured by Liens incurred in reliance on this clause (ii) shall not exceed
$40,000,000;
(iii) 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;
(iv) 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;
<PAGE> 70
(v) 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;
(vi) 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;
(vii) Liens on amounts on deposit in the Escrow Account securing (x)
the obligations of the Borrower under any New Subordinated Debt any portion
of the proceeds of which have been deposited in the Escrow Account and (y)
the payment to the Escrow Agent of amounts payable to it pursuant to the
Escrow Agreement, on the terms permitted by Section 5.17(b);
(viii) (x) Liens not securing Debt and consisting of (i) zoning
restrictions, easements, covenants and other restrictions on the use of any
interest of real property, minor irregularities or defects of title and
similar encumbrances on any interest in real property incurred or suffered
in the ordinary course of business, (y) statutory or contractual Liens of
landlords, Liens of carriers, warehousemen, mechanics and materialmen and
other similar Liens, in each case incurred in the ordinary course of
business for sums not yet due or the payment of which is not delinquent or
which are being contested in good faith by appropriate proceedings and (z)
Liens consisting of a mortgage on Store 1127 located in Miami, Florida and
a mortgage on the Champs office located in Bradenton, Florida, in each case
securing obligations of the Borrower outstanding on the Effective Date;
(ix) Liens (other than Liens described in clause (viii)) arising in
the ordinary course of its business which (x) do not secure Debt, (y) do
not secure any single obligation or series of related obligations in an
amount exceeding $5,000,000 and (z) 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
(x) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt of any Subsidiary permitted under Section 5.09;
provided that the aggregate principal or face amount of Debt of all
Subsidiaries secured by Liens incurred in reliance on this clause (x) shall
not exceed $10,000,000.
<PAGE> 71
Neither the Borrower nor any Subsidiary will create, assume or suffer to
exist any Lien on any Collateral (or any asset that will constitute "Collateral"
upon execution of the Collateral Documents), except as permitted by the
Collateral Documents or any inventory now owned or hereafter acquired by it,
other than (1) any Lien permitted by subsections (a)(viii) or (a)(ix) and (2)
solely with respect to any Collateral, the Lien created under the Collateral
Document pursuant to which such Collateral is purportedly pledged.
(b) Neither the Borrower nor any of its Subsidiaries will enter into any
agreement with any Person which prohibits or limits the ability of the Borrower
or any Subsidiary to create, incur, assume or suffer to exist any Lien securing
the obligations of the Obligors under the Loan Documents upon any of its
property, assets or revenues, whether now owned or hereafter acquired (any such
agreement, a "Negative Pledge") and which is more restrictive than the Negative
Pledge set forth in the Indenture; provided that nothing in this subsection (b)
shall be construed to prohibit the Borrower or any of its Subsidiaries from
entering in the ordinary course of business into supply contracts, purchase
contracts and leaseholds with respect to real property containing in each case
customary non- assignment provisions.
Section 5.07. Minimum Consolidated Tangible Net Worth. Consolidated
Tangible Net Worth will at no time be less than the sum of (i) $940,000,000 plus
(ii) for each Fiscal Quarter ended at or prior to such time (but after January
30, 1999), 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. On any date during any period set forth
below, the ratio of (i)(x) Consolidated Debt on such date minus (y) solely if
such date occurs prior to the Refinancing Date, the aggregate amount on deposit
in the Escrow Account on such date to (ii) EBITDA for the period of four
consecutive Fiscal Quarters ended on or most recently prior to such date, shall
not exceed the ratio set forth below opposite such period:
<PAGE> 72
<TABLE>
<CAPTION>
Period Maximum
Ratio
<S> <C>
- --------------------------------------------------------------------------------
From and including January 31, 1999 to but excluding last Not applicable
day of second fiscal quarter 1999
- --------------------------------------------------------------------------------
From and including last day of second fiscal quarter 1999 to 7.5:1
but excluding last day of third fiscal quarter 1999
- --------------------------------------------------------------------------------
From and including last day of third fiscal quarter 1999 to 5.5:1
but excluding last day of fourth fiscal quarter 1999
- --------------------------------------------------------------------------------
From and including last day of fourth fiscal quarter 1999 to 4.0:1
but excluding last day of first fiscal quarter 2000
- --------------------------------------------------------------------------------
From and including last day of first fiscal quarter 2000 to 3.5:1
but excluding last day of second fiscal quarter 2000
- --------------------------------------------------------------------------------
From and including last day of second fiscal quarter 2000 to 3.25:1
but excluding last day of third fiscal quarter 2000
- --------------------------------------------------------------------------------
From and including last day of third fiscal quarter 2000 to 3.00:1
but excluding last day of fourth fiscal quarter 2000
- --------------------------------------------------------------------------------
From and including last day of fourth fiscal quarter 2000 to 2.75:1
but excluding last day of first fiscal quarter 2001
- --------------------------------------------------------------------------------
From and including last day of first fiscal quarter 2001 to 2.5:1
but excluding last day of second fiscal quarter 2001
- --------------------------------------------------------------------------------
From and including last day of second fiscal quarter 2001 to 2.45:1
but excluding last day of third fiscal quarter 2001
- --------------------------------------------------------------------------------
From and including last day of third fiscal quarter 2001 to 2.35:1
but excluding last day of fourth fiscal quarter 2001
- --------------------------------------------------------------------------------
Thereafter 2.15:1
- --------------------------------------------------------------------------------
</TABLE>
Section 5.09. Limitation on Debt of Subsidiaries. The total Debt of all
Subsidiaries (excluding (i) Debt owed to the Borrower or to another Subsidiary,
(ii) Debt under the Guarantee Agreement, (iii) Debt of any Subsidiary Guarantor
consisting of a Guarantee of reimbursement obligations of the Borrower under
trade letters of credit (other than any Letter of Credit) which reimbursement
obligations are outstanding no more than one Domestic Business Day, (iv) Debt of
any Subsidiary Guarantor consisting of a Guarantee of New Subordinated Debt,
<PAGE> 73
so long as the obligations of such Subsidiary Guarantor under such Guarantee are
subordinated to the obligations of such Subsidiary Guarantor under the Loan
Documents at least to the same extent as the obligations of the Borrower under
such New Subordinated Debt, and (v) Debt of any Subsidiary Guarantor consisting
of a Guarantee of any unsecured Debt of the Borrower outstanding at January 30,
1999 and reflected on the balance sheet of the Borrower at January 30, 1999, so
long as the obligations of such Subsidiary Guarantor under such Guarantee are
subordinated to the obligations of such Subsidiary Guarantor under the Loan
Documents on customary capital markets terms approved by the bank affiliate of
each Lead Arranger) will not at any time exceed $50,000,000.
Section 5.10. Fixed Charge Coverage Ratio. At the end of each Fiscal
Quarter listed below, the Fixed Charge Coverage Ratio will not be less than the
ratio set forth below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Minimum Ratio
<S> <C>
----------------------------------------------------------------
First Fiscal Quarter 1999 .35:1
----------------------------------------------------------------
Second Fiscal Quarter 1999 .55:1
----------------------------------------------------------------
Third Fiscal Quarter 1999 .75:1
----------------------------------------------------------------
Fourth Fiscal Quarter 1999 1.0:1
----------------------------------------------------------------
First Fiscal Quarter 2000 1.0:1
----------------------------------------------------------------
Second Fiscal Quarter 2000 1.0:1
----------------------------------------------------------------
Third Fiscal Quarter 2000 1.0:1
----------------------------------------------------------------
Fourth Fiscal Quarter 2000 1.3:1
----------------------------------------------------------------
First Fiscal Quarter 2001 1.3:1
----------------------------------------------------------------
Second Fiscal Quarter 2001 1.3:1
----------------------------------------------------------------
Third Fiscal Quarter 2001 1.3:1
----------------------------------------------------------------
Fourth Fiscal Quarter 2001 1.4:1
----------------------------------------------------------------
First Fiscal Quarter 2002 1.4:1
----------------------------------------------------------------
Second Fiscal Quarter 2002 1.4:1
----------------------------------------------------------------
</TABLE>
<PAGE> 74
Section 5.11. Consolidations, Mergers and Sales of Assets. The Borrower
will not, and will not permit any of its Subsidiaries to, consolidate or merge
with or into any other Person; provided that (i) the Borrower may merge with
another Person if (x) the Borrower is the corporation surviving such merger and
(y) unless such other Person was a Subsidiary Guarantor immediately prior to
giving effect to such merger, immediately after giving effect to such merger no
Default shall have occurred and be continuing and (ii) any Subsidiary may merge
with another Person if (x) a Subsidiary is the survivor to such merger and (y)
if such Subsidiary was a Subsidiary Guarantor immediately prior to giving effect
to such merger, the survivor to such merger is a Subsidiary Guarantor (and, if
the survivor was not a Subsidiary Guarantor immediately prior to giving effect
to such merger and is a Foreign Subsidiary, the Administrative Agent shall have
received evidence reasonably satisfactory to it that the obligations of such
Subsidiary Guarantor under the Guarantee Agreement shall be enforceable in the
jurisdictions in which such Subsidiary Guarantor holds assets and conducts its
operations). The Borrower and its Subsidiaries will not sell, lease or otherwise
transfer, directly or indirectly (1) all or substantially all of the assets of
the Borrower and its Subsidiaries, taken as a whole, to any other Person, (2)
any assets of any Obligor to any Subsidiary that is not a Subsidiary Guarantor,
except in the ordinary course of business or (3) all or any substantial part of
the Foot Locker Business or the Champs Business to any other Person; provided
that the foregoing limitations shall not apply to sales of inventory or sales
and other dispositions of surplus assets, in each case in the ordinary course of
business. For purposes of this Section 5.11, "Foot Locker Business" means the
operations of the Borrower and its Subsidiaries conducted in North America under
the names "Foot Locker", "Lady Foot Locker", "Kids Foot Locker" and "World Foot
Locker" (including the stock of any Subsidiary through which any such operations
are conducted and the tangible and intangible assets held by any such
Subsidiary) and "Champs Business" means the operations of the Borrower and its
Subsidiaries conducted in North America under the name "Champs Sports"
(including the stock of any Subsidiary through which any such operations are
conducted and the tangible and intangible assets held by any such Subsidiary).
Section 5.12. Use of Proceeds. The proceeds of the Loans and the Swingline
Loans made under this Agreement will be used by the Borrower solely to finance
its working capital and, until the Borrower has issued New Subordinated Debt for
gross proceeds of not less than $350,000,000 in the aggregate, to finance
Consolidated Capital Expenditures to the extent permitted under Section 5.13.
Section 5.13. Limitation on Capital Expenditures. (a) Consolidated Capital
Expenditures will not, for any fiscal period set forth below, exceed the amount
set forth below opposite such period:
<PAGE> 75
<TABLE>
<CAPTION>
Fiscal Period Maximum Amount
<S> <C>
---------------------------------------------------------------
Fiscal Year 1999 $ 175,000,000
---------------------------------------------------------------
Fiscal Year 2000 $ 150,000,000
---------------------------------------------------------------
Fiscal Year 2001 $ 150,000,000
---------------------------------------------------------------
From and including the first day of the $ 75,000,000
first Fiscal Quarter 2002 to and
including the last day of the second
Fiscal Quarter 2002
---------------------------------------------------------------
</TABLE>
;provided that to the extent Consolidated Capital Expenditures for any fiscal
period set forth above are less than the amount set forth above opposite such
period, 50% of such unused amount may be carried over to the immediately
succeeding fiscal period (or, in the case of any unused amount for the Fiscal
Year 2001, 25%). Consolidated Capital Expenditures made in any fiscal period
will be allocated first to reduce the amount set forth above opposite such
period, and second, to reduce any amount carried over from the immediately
preceding fiscal period.
(b) In addition to the restrictions set forth in subsection (a),
Consolidated Capital Expenditures will not, for any fiscal period set forth
below, exceed the amount set forth below opposite such period:
<TABLE>
<CAPTION>
---------------------------------------------------------------
Fiscal Period Maximum Amount
<S> <C>
---------------------------------------------------------------
From and including the first day of the $114,000,000
first Fiscal Quarter 1999 to and
including the last day of the second
Fiscal Quarter 1999
---------------------------------------------------------------
From and including the first day of the $ 81,000,000
third Fiscal Quarter 1999 to and
including the last day of the fourth
Fiscal Quarter 1999
---------------------------------------------------------------
From and including the first day of the $ 99,00,000
first Fiscal Quarter 2000 to and
including the last day of the second
Fiscal Quarter 2000
---------------------------------------------------------------
From and including the first day of the $ 71,000,000
third Fiscal Quarter 2000 to and
including the last day of the fourth
Fiscal Quarter 2000
---------------------------------------------------------------
From and including the first day of the $ 91,000,000
first Fiscal Quarter 2001 to and
including the last day of the second
Fiscal Quarter 2001
---------------------------------------------------------------
From and including the first day of the $ 71,000,000
third Fiscal Quarter 2001 to and
including the last day of the fourth
Fiscal Quarter 2001
---------------------------------------------------------------
From and including the first day of the $ 56,000,000
first Fiscal Quarter 2002 to and
including the last day of the second
Fiscal Quarter 2002
---------------------------------------------------------------
</TABLE>
;provided that to the extent Consolidated Capital Expenditures for any fiscal
period set forth above consisting of the first two Fiscal Quarters of any Fiscal
Year are less than the amount set forth above opposite such period, such unused
amount may be carried over to the immediately succeeding fiscal period.
Consolidated Capital Expenditures made in any fiscal period will be allocated
first to reduce the amount set forth above opposite such period, and second, to
reduce any amount carried over from the immediately preceding fiscal period.
<PAGE> 76
Section 5.14. Investments and Business Acquisitions. Neither the Borrower
nor any Subsidiary will hold, make or acquire any Investment in any Person or
make any Business Acquisition other than:
(a) Investments in existence on the Effective Date in an aggregate
amount not to exceed $1,000,000;
(b) (i) any Investment in Persons which are Subsidiaries immediately
prior to the making of such Investment and (ii) any Investment in the
Borrower; provided that any Investment by an Obligor in a Subsidiary that
is not a Subsidiary Guarantor shall be permitted pursuant to this clause
(b) only if consummated in the ordinary course of business;
(c) Temporary Cash Investments (and, solely with respect to any
amounts on deposit in the Escrow Account, such other Investments as shall
be permitted by the terms of the Escrow Agreement); and
(d) any Investment not otherwise permitted by the foregoing clauses of
this Section and any Business Acquisition if (x) the aggregate amount of
any single such Investment or Business Acquisition (or series of related
Investments or Business Acquisitions) does not exceed $10,000,000, (y)
immediately after any such Investment or Business Acquisition is made or
acquired, the aggregate amount (without duplication) of all Investments and
Business Acquisitions made in reliance on this clause (d) does not exceed
$50,000,000 and (z) solely with respect to any Business Acquisition,
immediately after giving effect to such Business Acquisition, (1) the
Borrower would be in pro forma compliance with the covenants set forth in
Sections 5.08, 5.09, 5.10 and 5.13 (calculated giving effect to any Debt to
be incurred or assumed by the Borrower and its Subsidiaries in connection
with such Business Acquisition and assuming that such Business Acquisition
was consummated in the first day of the most recent fiscal period with
respect to which each covenant is calculated) and (2) together with the
delivery of the financial statements pursuant to Section 5.01(c) with
respect to the month in which such Business Acquisition was consummated,
the Borrower shall have delivered to the Administrative Agent a certificate
of a Responsible Officer certifying such pro forma compliance and showing
in reasonable detail the calculation thereof.
Section 5.15. Restricted Payments. Neither the Borrower nor any Subsidiary
will declare or make any Restricted Payment on any date (with respect to any
proposed Restricted Payment, a "Measurement Date") unless (i) such Restricted
Payment is declared or made after the last day of the first Fiscal Quarter of
Fiscal Year 2000, (ii) immediately before and after giving effect thereto, no
Default has occurred and is continuing, (iii) the Fixed Charge Coverage Ratio
for the period of four consecutive Fiscal Quarters most recently ended prior to
the relevant Measurement Date and with respect to which the Borrower has
delivered the financial statements required to be delivered by it pursuant to
Section 5.01(a) or (b), as the case may be, is at least 2.5:1 and (iv) the
aggregate amount of Restricted Payments made by the Borrower since January 29,
2000 does not exceed 20% of the consolidated net income of the Borrower and its
Consolidated Subsidiaries for the period from and including January 29, 2000 to
and including the last day of the Fiscal Quarter most recently ended prior to
the relevant Measurement Date (treated as a single accounting period); provided
that regardless of whether the conditions set forth in clauses (i) through (iv)
are satisfied, the Borrower may make Restricted Payments consisting of (1)
<PAGE> 77
repurchases of its common stock pursuant to employee stock plans in an aggregate
amount not to exceed $500,000 in any Fiscal Year and (2) payments in respect of
shareholders rights plans in an aggregate amount not to exceed $1,500,000.
Section 5.16. New Subordinated Debt. (a) The Borrower will not issue any
Debt securities in the capital markets on or after the Effective Date which rank
pari passu with the Loans, the Swingline Loans and the Reimbursement Obligations
(determined without regard to the existence of the Lien on the Collateral
created under the Collateral Documents) until the Borrower will have issued New
Subordinated Debt for gross proceeds of not less than $350,000,000 in the
aggregate.
(b) The Borrower will not, and will not permit any Subsidiary to, enter
into any amendment or waiver of any agreement or instrument governing any New
Subordinated Debt (or any Guarantee thereof) which (i) would increase the
interest rate, shorten the final maturity or the weighted average life, or
change the subordination provisions of such New Subordinated Debt (or Guarantee
thereof) or make any of the covenants or events of default applicable to such
New Subordinated Debt (or Guarantee thereof) more restrictive than the covenants
or events of default applicable under this Agreement or (ii) could otherwise be
reasonably expected to have an adverse effect on the Banks, without in each case
the prior written consent of the Required Banks. The Borrower will not enter
into any amendment or waiver of the Escrow Agreement which (i) would alter the
provisions regarding the deposit, withdrawal, application or investment of
amounts on deposit therein (including without limitation the timing or amount of
any such deposit or withdrawal) or the creation or termination or release of any
Liens on amounts on deposit therein or (ii) could otherwise be reasonably
expected to have an adverse effect on the Banks, without in each case the prior
written consent of the Required Banks.
(c) Neither the Borrower nor any Subsidiary will optionally prepay, redeem,
purchase, acquire or make any other payment in respect of any New Subordinated
Debt other than regularly scheduled payments of interest thereon.
Section 5.17. Refunding of the 7% Debentures; Escrow Arrangements. (a) On
or prior to February 15, 2000, the Borrower shall have repaid or repurchased in
full all outstanding 7% Debentures, together with accrued and unpaid interest
thereon and all other amounts due and payable at such time with respect thereto
(or shall have on deposit in the Escrow Account (as defined below) an amount
equal to the aggregate principal amount of the 7% Debentures then outstanding)
and, should such repayment, repurchase or deposit be made with the proceeds of
any Debt, such Debt shall be New Subordinated Debt.
<PAGE> 78
(b) The Borrower shall deposit into an escrow account (the "Escrow
Account") established with a financial institution reasonably acceptable to the
Borrower and the bank affiliate of each Lead Arranger (the "Escrow Agent")
pursuant to an escrow agreement in form and substance reasonably satisfactory to
the bank affiliate of each Lead Arranger (as amended from time to time in
accordance with Section 5.16(b), the "Escrow Agreement"), the Net Cash Proceeds
from the issuance by the Borrower of any New Subordinated Debt consummated prior
to the Refinancing Date, until the amount deposited in the Escrow Account equals
the aggregate principal amount of the 7% Debentures then outstanding (the
"Required Escrow Amount"). The Net Cash Proceeds from the issuance by the
Borrower of any New Subordinated Debt in excess of the Required Escrow Amount
may be retained by the Borrower, subject to being applied as required by
Sections 2.06 and 2.11 (to the extent contemplated thereby). The Escrow
Agreement will provide that (i) amounts on deposit in the Escrow Account will be
invested, at the direction of, if no Default shall have occurred and be
continuing, the Borrower or, if a Default shall have occurred and be continuing,
the Administrative Agent, in Temporary Cash Investments or such other
Investments as shall have been approved by the bank affiliate of each Lead
Arranger, and, prior to the Refinancing Date, may be withdrawn only to repay or
repurchase the 7% Debentures and (ii) on the Refinancing Date, amounts then on
deposit in the Escrow Account (after giving effect to any withdrawals made
therefrom on such Date the proceeds of which have been applied to repay or
repurchase any 7% Debentures then outstanding) will be applied as required by
Sections 2.06 and 2.11 (to the extent contemplated thereby) and any excess will
be released to the Borrower (so long as the Escrow Agent has not received
written notice from the trustee under the indenture pursuant to which the New
Subordinated Debt, any portion of the proceeds of which have been deposited in
the Escrow Account, was issued that a default has occurred and is then
continuing thereunder). Amounts on deposit in the Escrow Account (and no other
amounts or other assets) may be pledged to secure the obligations of the
Borrower under the New Subordinated Debt any portion of the proceeds of which
have been deposited in the Escrow Account; provided that the Lien securing such
obligations on any amounts on deposit in the Escrow Account will automatically
be released upon withdrawal of such amounts for the uses specified in the
immediately preceding sentence so long as the Escrow Agent has not received
written notice from such trustee that a default has occurred and is then
continuing thereunder.
Section 5.18. Transactions with Affiliates. The Borrower will not, and will
not permit any Subsidiary to, directly or indirectly, (i) pay any funds to or
for the account of any Affiliate, (ii) make any investment in any Affiliate
(whether by acquisition of stock or indebtedness, by loan, advance, transfer of
property, guarantee or other agreement to pay, purchase or service, directly or
indirectly, any Debt, or otherwise), (iii) lease, sell, transfer or otherwise
dispose of any assets, tangible or intangible, to any Affiliate, or (iv)
<PAGE> 79
participate in, or effect, any transaction with any Affiliate, except in each
case on an arms-length basis on terms at least as favorable to the Borrower or
such Subsidiary as could have been obtained from a third party that was not an
Affiliate; provided that the foregoing provisions of this Section shall not
prohibit any such Person from declaring or paying any lawful dividend or other
payment ratably in respect of all its capital stock of the relevant class so
long as, after giving effect thereto, no Default shall have occurred and be
continuing (including without limitation pursuant to Section 5.15).
Section 5.19. Additional Guarantors. The Borrower shall cause (x) any
Person which becomes a Subsidiary (other than, subject to clause (z), any
Foreign Subsidiary or any Immaterial Subsidiary) after the date hereof, (y) any
Immaterial Subsidiary (other than, subject to clause (z), any Foreign
Subsidiary) that ceases to be an Immaterial Subsidiary after the date hereof and
(z) any Foreign Subsidiary and any Immaterial Subsidiary that has entered into,
or is proposing to enter into, a Guarantee of any other Debt of the Borrower or
any of its Subsidiaries, including without limitation any New Subordinated Debt,
any Other Refinancing Debt or any Debt of the Borrower described in clause (v)
of the parenthetical set forth in Section 5.09 (other than, with respect to any
Foreign Subsidiary, any Guarantee of any Debt of any of its Subsidiaries that is
a Foreign Subsidiary) to (i) enter into the Guarantee Agreement, (ii) become
bound by the Pledge Agreement and the Security Agreement and, if applicable,
enter into such additional agreements or instruments, each in form and substance
satisfactory to the Administrative Agent, as may be necessary or desirable in
order to grant a perfected first priority interest upon all of the Collateral
purportedly pledged by such Subsidiary pursuant to the Pledge Agreement and the
Security Agreement (subject to Liens on such Collateral permitted by the last
sentence of Section 5.06(a)) and (iii) deliver such certificates, evidences of
corporate or other organizational actions, notations and registrations,
financing statements, opinions of counsel, powers of attorney and other
documents relating thereto as the Administrative Agent may reasonably request,
all in form and substance reasonably satisfactory to the Administrative Agent,
in each case within (x) ten days after the date on which the relevant event
described in clauses (x), (y) or (z) occurs (or, if later, the date on which the
Borrower must have satisfied the requirements set forth in Section 5.20), in the
case of entering into the Guarantee Agreement and becoming bound by the Pledge
Agreement and the Security Agreement and (y) within 30 days after the date on
which the relevant event described in clauses (x), (y) or (z) occurs (or, if
later, the date on which the Borrower must have satisfied the requirements set
forth in Section 5.20), in the case of the other actions described in this
Section.
<PAGE> 80
Section 5.20. Collateral Documents. (a) On or prior to 90 days after the
Effective Date, the Borrower will, and will cause each of its Subsidiaries
(other than any Foreign Subsidiary or any Immaterial Subsidiary, unless any such
Subsidiary has entered into, or is proposing to enter into, a Guarantee of any
other Debt of the Borrower or any of its Subsidiaries, including without
limitation any New Subordinated Debt, any Other Refinancing Debt or any Debt of
the Borrower described in clause (v) of the parenthetical set forth in Section
5.09 (other than, with respect to any Foreign Subsidiary, any Guarantee of any
Debt of any of its Subsidiaries that is a Foreign Subsidiary)) to (i) enter into
the Pledge Agreement and the Security Agreement and, if applicable, enter into
such additional agreements or instruments, each in form and substance
satisfactory to the Administrative Agent, as may be necessary or desirable in
order to grant a perfected first priority security interest in all of the
Collateral purportedly pledged by the Borrower or such Subsidiary pursuant to
the Pledge Agreement and the Security Agreement (subject to Liens on such
Collateral permitted by the last sentence of Section 5.06(a)) and (ii) deliver
such certificates, evidences of corporate or other organizational actions,
notations and registrations, financing statements, opinions of counsel, powers
of attorney and other documents relating thereto as the Administrative Agent may
reasonably request, all in form and substance reasonably satisfactory to the
Administrative Agent.
(b) On or prior to 90 days after the Effective Date, the Borrower will, and
will cause each of its Subsidiaries to, enter into mortgages and such other
agreements, each in form and substance reasonably satisfactory to the
Administrative Agent, as may be necessary or desirable in order to grant the
Administrative Agent, for the benefit of the Bank Parties, a perfected first
priority mortgage Lien on each ownership interest in real property held by the
Borrower or such Subsidiary and listed on Schedule 5.20(b) (subject to Liens on
such Collateral permitted by Section 5.06(a)(viii)(z) and by the last sentence
of Section 5.06(a)). If on the first date after the Final Disposition Date with
respect to any Real Property Held For Sale the Borrower or any Subsidiary holds
such Real Property Held For Sale (other than any Real Property Held For Sale
constituting a leasehold interest in real property which has been subleased in
its entirety by the Borrower or any of its Subsidiaries on or prior to the Final
Disposition Date with respect thereto) then, within 90 days thereafter, the
Borrower will, or will cause such Subsidiary to, enter into a mortgage and such
other agreements, each in form and substance reasonably satisfactory to the
Administrative Agent, as may be necessary or desirable in order to grant the
Administrative Agent, for the benefit of the Bank Parties, a perfected first
priority mortgage Lien on such Real Property Held For Sale (subject to Liens on
such Collateral permitted by the last sentence of Section 5.06(a)). If at any
time after the Effective Date the Borrower or any of its Subsidiaries (other
than any Foreign Subsidiary) acquires any ownership interest in real property
with a fair market value in excess of $2,000,000, the
<PAGE> 81
Borrower will, or will cause such Subsidiary to, enter into a mortgage and such
other agreements, each in form and substance satisfactory to the Administrative
Agent, as may be necessary or desirable in order to grant the Administrative
Agent, for the benefit of the Bank Parties, a perfected first priority mortgage
Lien on such ownership interest (subject to Liens on such Collateral permitted
by the last sentence of Section 5.06(a)); provided that neither the Borrower nor
any of its Subsidiaries shall be required to grant any Lien pursuant to this
Section so long as doing so would trigger a requirement to equally and ratably
secure securities issued under the Indenture. Together with the execution of any
mortgage pursuant to this subsection, the Borrower will, or will cause its
Subsidiaries to, deliver such real property surveys, certificates, evidences of
corporate or other organizational actions, notations and registrations,
financing statements, opinions of counsel, powers of attorney and other
documents relating thereto as the Administrative Agent may reasonably request,
all in form and substance reasonably satisfactory to the Administrative Agent.
Each mortgage or other agreement entered into pursuant to this subsection (b)
and granting the Administrative Agent a Lien for the benefit of the Bank Parties
shall contain provisions regarding the release of the Collateral mortgaged
thereunder having substantially the same effect as the provisions regarding the
release of Collateral contained in the form of Security Agreement and the form
of Pledge Agreement set forth as Exhibits F and G to this Agreement.
ARTICLE 6
Defaults
Section 6.01. Events of Defaults. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail (i) to pay any principal of any Loan,
Swingline Loan or Reimbursement Obligation when due or (ii) to pay any
interest on any Loan, Swingline Loan or Reimbursement Obligation, any fees
or any other amount payable hereunder within two Domestic Business Days
after the due date thereof;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.03 (as it relates to maintenance of existence) and
Section 5.06 to 5.20, inclusive;
(c) any Obligor shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
(a) or (b) above) or any other Loan Document for 30 days after
<PAGE> 82
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 any Obligor in any Loan Document or in any certificate,
financial statement or other document delivered pursuant to any Loan
Document shall prove to have been incorrect in any material respect when
made (or deemed made);
(e) the Borrower and/or any of its Subsidiaries shall fail to pay,
when due or within any applicable grace period, any amount payable in
respect of any Material 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 of its assets, or shall consent to any such relief or to the
appointment of any such official or to any such official taking possession
of any of its 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 of its 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 $5,000,000 which it shall
<PAGE> 83
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 or more members
of the ERISA Group to incur a current payment obligation in excess of
$5,000,000;
(j) a judgment or order for the payment of money in excess of
$5,000,000 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;
(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;
(l) the Guarantee granted by any Subsidiary Guarantor pursuant to the
Guarantee Agreement shall cease for any reason to be in full force and
effect (other than a result of the release of such Guarantee with respect
to any Subsidiary Guarantor pursuant to the release provisions contained
therein), or any Obligor shall so assert in writing; or
(m) (i) any Lien created by any Collateral Document shall at any time
on or after such Collateral Document has been executed fail to constitute a
valid and perfected Lien on all the Collateral purported to be subject
thereto, securing the obligations purported to be secured thereby (other
than (x) to the extent attributable to the failure of the Administrative
Agent to maintain possession of any Collateral possession of which is
necessary in order to perfect such Lien or (y) a result of the release of
such Lien with respect to any Collateral pursuant to the release provisions
contained in the relevant Collateral Document) or (ii) any Obligor shall so
assert in writing;
<PAGE> 84
then, and in every such event, the Administrative Agent shall (i) if requested
by Banks having more than 50% in aggregate amount of the Commitments, by notice
to the Borrower terminate the Commitments and the Swingline Commitment and they
shall thereupon terminate, and (ii) if requested by Banks holding more than 50%
in aggregate principal amount of the Loans, by notice to the Borrower declare
the Loans and Swingline Loans (together with accrued interest thereon) to be,
and the Loans and Swingline Loans (together with accrued interest thereon) shall
thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower; provided that if any Event of Default specified in clause (g) or (h)
above occurs with respect to the Borrower, then without any notice to the
Borrower or any other act by the Administrative Agent or the Banks, the
Commitments and the Swingline Commitment shall thereupon terminate and the Loans
and Swingline Loans (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower.
Section 6.02. Notice of Default. The Administrative Agent shall give notice
to the Borrower under Section 6.01(c) promptly upon being requested to do so by
any Requesting Banks and shall thereupon notify all the Banks thereof.
Section 6.03. Cash Cover. The Borrower agrees, in addition to the
provisions of Section 6.01, that upon the occurrence and during the continuance
of any Event of Default, it shall, if requested by the LC Agent upon the
instruction of the Required Banks, deposit in the LC Collateral Account an
amount in immediately available funds equal to the aggregate amount available
for drawing under all Letters of Credit then outstanding at such time, provided
that, upon the occurrence of any Event of Default specified in clause (g) or (h)
of Section 6.01 with respect to the Borrower, the Borrower shall deposit such
amount forthwith without any notice or demand or any other act by the LC Agent
or the Banks.
ARTICLE 7
The Administrative Agent, Lead Arrangers, Documentation Agent and
Co-Agents
Section 7.01. Appointment and Authorization. Each Bank irrevocably appoints
and authorizes the Administrative Agent and the Lead Arrangers to take such
action as agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Administrative Agent or the Lead Arrangers by
the terms thereof, together with all such powers as are reasonably incidental
thereto.
<PAGE> 85
Section 7.02. Agents and Affiliates. Each Bank acting as an Agent, Co-
Agent, Lead Arranger or Swingline Bank in connection with the Loan Documents or
the credit facility provided hereby shall have the same rights and powers under
this Agreement as any other Bank and may exercise or refrain from exercising the
same as though it were not so acting. Each Bank so acting, and each of their
respective affiliates, may accept deposits from, lend money to, and generally
engage in any kind of business with, the Borrower or any Subsidiary or affiliate
of the Borrower as if it were not so acting.
Section 7.03. Obligations of the Co-agents and Document Agent. The
Co-Agents and Documentation Agent, in their capacities as such, shall have no
duties, obligations or liabilities of any kind hereunder.
Section 7.04. Obligations of Administrative Agent and Lead Arrangers. The
obligations of the Administrative Agent, the Lead Arrangers and the affiliates
of each Lead Arranger under the Loan Documents are only those expressly set
forth therein. 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 7.05. Consultation with Experts. The Administrative Agent, each
Lead Arranger, the LC Agent and the affiliates of each Lead Arranger may consult
with legal counsel (who may be counsel for any Obligor), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
Section 7.06. Liability of Agents and Lead Arrangers. None of the
Documentation Agent, the Administrative Agent, any Lead Arranger, their
respective affiliates or their respective directors, officers, agents or
employees shall be liable for any action taken or not taken in connection
herewith (i) with the consent or at the request of the Required Banks or (ii) in
the absence of its own gross negligence or willful misconduct. None of the
Documentation Agent, the Administrative Agent, any Lead Arranger, their
respective affiliates or their respective directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty or representation made in connection with
any Loan Document or any Extension of Credit; (ii) the performance or observance
of any of the covenants or agreements of any Obligor; (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
<PAGE> 86
to it; (iv) the validity, effectiveness or genuineness of any Loan Document or
any other instrument or writing furnished in connection therewith; or (v) the
existence, validity or sufficiency of any Collateral. The LC Agent shall not
incur any liability by acting in reliance upon information supplied by the
Administrative Agent as to the Total Usage at any time (including Loans to be
made pursuant to Notices of Borrowing theretofore received by the Administrative
Agent). The Administrative Agent shall not incur any liability by acting in
reliance upon (i) information supplied to it by the LC Agent as to the Aggregate
LC Exposure at any time or (ii) any notice, consent, certificate, statement, or
other writing (which may be a bank wire, telex, facsimile transmission or
similar writing) believed by it to be genuine or to be signed by the proper
party or parties.
Section 7.07. Indemnification. The Banks shall, ratably in accordance with
their respective Credit Exposures, indemnify the Administrative Agent and the
Lead Arrangers and their respective affiliates, directors, officers, agents and
employees (to the extent not reimbursed by the Obligors) 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
the Loan Documents or any action taken or omitted by such indemnitees
thereunder.
Section 7.08. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Lead Arrangers or any Bank Party,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each Bank
also acknowledges that it will, independently and without reliance upon the Lead
Arrangers or any Bank Party, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking any action under this Agreement.
Section 7.09. Successor Administrative Agent. The Administrative Agent may
resign at any time by giving notice thereof to the Banks and the Borrower, such
resignation to be effective when a successor Administrative Agent is appointed
pursuant to this Section and accepts such appointment. Upon receiving any such
notice of resignation, the Required Banks shall have the right to appoint a
successor Administrative Agent, subject to the approval of the Borrower (unless
an Event of Default shall have occurred and be continuing at the time of such
appointment, in which case the Borrower's approval will not be required). If no
successor Administrative Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent gives notice of resignation, then the retiring
Administrative Agent may, on behalf of the other Banks, appoint a successor
Administrative Agent, which shall be a commercial bank organized or licensed
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of its appointment as the Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Administrative Agent's resignation hereunder, the provisions of this Article
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Agent.
<PAGE> 87
Section 7.10. Administrative Agent's Fees. The Borrower shall pay to the
Administrative Agent for its account, fees in the amounts and at the times
previously agreed upon between the Borrower and the Administrative Agent.
ARTICLE 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 CD Loan, Euro-Dollar
Loan or Money Market LIBOR Loan:
(a) the Administrative Agent is advised by the Reference Banks that
deposits in dollars (in the applicable amounts) are not being offered to
the Reference Banks in the relevant market for such Interest Period, or
(b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50% or
more of the aggregate principal amount of the affected Loans advise the
Administrative Agent that the Adjusted CD Rate or the Adjusted London
Interbank Offered Rate, as the case may be, as determined by the
Administrative Agent will not adequately and fairly reflect the cost to
such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may
be, for such Interest Period,the Administrative Agent shall forthwith give
notice thereof to the Borrower and the Banks, whereupon until the
Administrative Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (i) the obligations of the Banks
to make CD Loans or Euro-Dollar Loans, or to continue such Loans for an
additional Interest Period, as the case may be, or to convert outstanding
Loans into CD Loans or Euro-Dollar Loans, as the case may be, shall be
suspended and (ii) each outstanding CD Loan or Euro-Dollar Loan, as the
case may be, shall be converted into a Base Rate Loan on the last day of
the then current Interest Period applicable thereto. Unless the Borrower
notifies the Administrative Agent at least two Domestic Business Days
before the date of any affected Borrowing for which a Notice of Borrowing
has previously been given that it elects not to borrow on such date, (i) if
such affected Borrowing is a CD Borrowing or Euro-Dollar Borrowing, such
Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such
affected Borrowing is a Money Market LIBOR Borrowing, the Money Market
LIBOR Loans comprising such Borrowing shall bear interest for each day from
and including the first day to but excluding the last day of the Interest
Period applicable thereto at the Base Rate for such day.
Section 8.02. Illegality. If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency, shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Bank shall so notify the Administrative Agent, the Administrative Agent
shall forthwith give notice thereof to the other Banks and the Borrower,
whereupon until such Bank notifies the Borrower and the Administrative Agent
that the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans, to continue Euro-Dollar Loans
for an additional Interest Period or to convert outstanding Loans into
Euro-Dollar Loans, shall be suspended. Before giving any notice to the
Administrative Agent pursuant to this Section, such Bank shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need for
giving such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such notice is given, each Euro-Dollar Loan of
such Bank then outstanding shall be converted to a Base Rate Loan either (i) 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 (ii) 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 (x) the
date hereof, in the case of any Committed Loan or Swingline Loan or Letter of
Credit or any obligation to make Committed Loans or Swingline Loans or
participate in Letters of Credit or (y) the date of the related Money Market
Quote,
<PAGE> 88
in the case of any Money Market Loan, the adoption of any applicable law, rule
or regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) or the Swingline Bank with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency, shall impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding (i) with respect to any CD Loan any such
requirement included in an applicable Domestic Reserve Percentage and (ii) with
respect to any Euro-Dollar Loan any such requirement included in an applicable
Euro-Dollar Reserve Percentage), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such requirement reflected in an
applicable Assessment Rate) or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Bank (or its Applicable
Lending Office) or the Swingline Bank or shall impose on any Bank (or its
Applicable Lending Office) or the Swingline Bank or on the United States market
for certificates of deposit or the London interbank market any other condition
affecting its Fixed Rate Loans, its Note, its Swingline Loans, its Swingline
Note, its obligation to make Fixed Rate Loans or Swingline Loans or its
obligation to participate in any Letter of Credit and the result of any of the
foregoing is to increase the cost to such Bank (or its Applicable Lending
Office) of making or maintaining any Fixed Rate Loan, or participating in any
Letter of Credit or increase the cost to the Swingline Bank of making or
maintaining any Swingline Loan or to reduce the amount of any sum received or
receivable by such Bank (or its Applicable Lending Office) or the Swingline Bank
under this Agreement or under its Note or Swingline Note with respect thereto,
by an amount deemed by such Bank or the Swingline Bank to be material, then,
within 15 days after receiving a request by such Bank or the Swingline Bank for
compensation under this subsection, accompanied by a certificate complying with
subsection (e) of this Section (with a copy to the Administrative Agent), the
Borrower shall, subject to subsection (f) of this Section, pay to such Bank or
the Swingline Bank such additional amount or amounts as will compensate such
Bank or the Swingline Bank for such increased cost or reduction.
(b) If, on or after the date hereof, the adoption of any applicable law,
rule or regulation, or any change in any applicable law, rule or regulation, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the LC Agent with any request or
directive (whether or not having the force of law) made on or after the date of
this Agreement by any such authority, central bank or comparable agency, shall
<PAGE> 89
impose, modify or deem applicable any reserve (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal Reserve
System), special deposit, insurance assessment or similar requirement against
any Letter of Credit issued by the LC Agent or shall impose on the LC Agent any
other condition affecting its Letters of Credit or its obligation to issue
Letters of Credit and the result of any of the foregoing is to increase the cost
to the LC Agent of issuing any Letter of Credit or to reduce the amount of any
sum received or receivable by the LC Agent under this Agreement with respect
thereto, by an amount deemed by the LC Agent to be material, then, within 15
days after demand by the LC Agent (with a copy to the Administrative Agent), the
Borrower shall pay to the LC Agent such additional amount or amounts as will
compensate the LC Agent for such increased cost or reduction.
(c) If any Bank, the Swingline Bank or the LC Agent shall have determined
that, after the date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change in any such law, rule or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on capital of such Bank, the Swingline Bank or the LC Agent, as
the case may be (or its Parent), as a consequence of its obligations hereunder
to a level below that which such Bank, the Swingline Bank or the LC Agent, as
the case may be (or its Parent), could have achieved but for such adoption,
change, request or directive (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by it to be material, then from
time to time, within 15 days after receiving a request by such Bank, the
Swingline Bank or the LC Agent, as the case may be, for compensation under this
subsection, accompanied by a certificate complying with subsection (e) of this
Section (with a copy to the Administrative Agent), the Borrower shall, subject
to subsection (f) of this Section, pay to such Bank, the Swingline Bank or the
LC Agent, as the case may be, such additional amount or amounts as will
compensate it (or its Parent) for such reduction.
(d) Each Bank, the Swingline Bank and the LC Agent will promptly notify the
Borrower and the Administrative Agent of any event of which it has knowledge,
occurring after the date hereof, which will entitle it to compensation pursuant
to this Section and will designate a different Applicable Lending Office or LC
Office if such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in its judgment, be otherwise disadvantageous to
it. If a Bank, the Swingline Bank or the LC Agent fails to notify the Borrower
of any such event within 180 days after such event occurs, it shall not be
entitled to compensation under this Section for any effect of such event arising
more than 180 days before it does notify the Borrower thereof.
<PAGE> 90
(e) Each request by a Bank, the Swingline Bank or the LC Agent for
compensation under this Section shall be accompanied by a certificate, signed by
one of its authorized employees, setting forth in reasonable detail (i) the
basis for claiming such compensation, (ii) the additional amount or amounts to
be paid to it hereunder and (iii) the method of calculating such amount or
amounts, which certificate shall be conclusive in the absence of manifest error.
In determining such amount, such Bank, the Swingline Bank or the LC Agent may
use any reasonable averaging and attribution methods.
(f) Notwithstanding any other provision of this Section, none of the Banks,
the Swingline Bank and the LC Agent shall be entitled to compensation under
subsection (a), (b) or (c) of this Section if it is not then its general
practice to demand compensation in similar circumstances under comparable
provisions of other credit agreements.
Section 8.04. Taxes. (a) For purposes of this Section 8.04, the following
terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings with respect to any payment by the Borrower
pursuant to the Loan Documents, and all liabilities with respect thereto,
excluding (i) in the case of each Bank Party, taxes imposed on or measured by
its income, and franchise or similar taxes imposed on it, by a jurisdiction
under the laws of which it is organized or qualified to do business (but only if
the taxes are imposed solely because such Bank Party is qualified to do business
in such jurisdiction without regard to any Loan) or in which its principal
executive office is located or in which its Applicable Lending Office or LC
Office is located and (ii) in the case of each Bank, any United States
withholding tax imposed on such payments other than such withholding tax imposed
as a result of a change in treaty, law or regulation occurring after a Bank
first becomes subject to this Agreement.
"Other Taxes" means any present or future stamp, documentary or mortgage
recording taxes and any other excise or property taxes, or similar charges or
levies, which arise from any payment made pursuant to the Loan Documents or from
the execution, delivery or enforcement of, or otherwise with respect to, the
Loan Documents.
(b) Any and all payments by the Borrower to or for the account of any Bank
Party under any Loan Document shall be made without deduction for any Taxes or
Other Taxes; provided that, if the Borrower shall be required by law to
<PAGE> 91
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
any Taxes or Other Taxes (including, without limitation, any Taxes or Other
Taxes imposed or asserted by any jurisdiction on amounts payable under this
Section 8.04) paid by such Bank Party and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, provided that
Borrower shall not indemnify any Bank Party for any penalties or interest on any
Taxes or Other Taxes accrued 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.
<PAGE> 92
(f) If the Borrower is required to pay additional amounts to or for the
account of any Bank Party pursuant to this Section 8.04, then such Bank Party
will change the jurisdiction of its Applicable Lending Office or LC Office if,
in the judgment of such Bank Party, such change (i) will eliminate or reduce any
such additional payment which may thereafter accrue and (ii) is not otherwise
disadvantageous to such Bank Party.
(g) If a Bank Party receives a notice from a taxing authority asserting any
Taxes or Other Taxes for which the Borrower is required to indemnify such Bank
Party under Section 8.04(c), it shall furnish to the Borrower a copy of such
notice no later than 90 days after the receipt thereof. If such Bank Party has
failed to furnish a copy of such notice to the Borrower within such 90-day
period as required by this Section 8.04(g), the Borrower shall not be required
to indemnify such Bank Party for any such Taxes or Other Taxes (including
penalties, interest and expenses thereon) arising between the 90th day after
such Bank Party has received such notice and the day on which such Bank Party
has furnished to the Borrower a copy of such notice.
Section 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. If
(i) the obligation of any Bank to make or maintain Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation
under Section 8.03 or 8.04 with respect to its CD Loans or Euro- Dollar Loans
and, in either case, the Borrower shall, by at least five Euro-Dollar Business
Days' prior notice to such Bank through the Administrative Agent, have elected
that the provisions of this Section shall apply to such Bank, then, unless and
until such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist, all Loans which would
otherwise be made by such Bank as (or continued as or converted into) CD Loans
or Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans (on
which interest and principal shall be payable contemporaneously with the related
CD Loans or Euro-Dollar Loans of the other Banks). If such Bank notifies the
Borrower that the circumstances giving rise to such notice no longer apply, the
principal amount of each such Base Rate Loan shall be converted into a CD Loan
or Euro-Dollar Loan, as the case may be, on the first day of the next succeeding
Interest Period applicable to the related CD Loans or Euro-Dollar Loans of the
other Banks.
<PAGE> 93
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 2.15) and concurrently the replacement bank or banks
assuming a Commitment in an amount equal to the Commitment being terminated and
making Loans in the same aggregate amount and having the same maturity date or
dates, respectively, as the Committed Loans being prepaid, all pursuant to
documents reasonably satisfactory to the Administrative Agent (and in the case
of any document to be signed by the replaced Bank, reasonably satisfactory to
such Bank). No such substitution shall relieve the Borrower of its obligation to
compensate and/or indemnify the replaced Bank as required by Sections 8.03 and
8.04 with respect to the period before it is replaced and to pay all accrued
interest, accrued fees and other amounts owing to the replaced Bank hereunder.
ARTICLE 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: (a) in the
case of the Borrower, the LC Agent, the Swingline Bank or the Administrative
Agent, at its address, facsimile number or telex number set forth on the
signature pages hereof, (b) in the case of any Lead Arranger or its affiliate,
at its address, facsimile number or telex number set forth in its Administrative
Questionnaire or (c) in the case of any Bank, at its address, facsimile number
or telex number set forth in its Administrative Questionnaire or (d) 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 and notices to the LC Agent or the Swingline Bank under Article 2
shall not be effective until received.
<PAGE> 94
Section 9.02. No Waivers. No failure or delay by any Bank Party in
exercising any right, power or privilege under any Loan Document 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 provided in the Loan Documents shall be
cumulative and not exclusive of any rights or remedies provided by law.
Section 9.03. Expenses; Indemnificaiton. (a) The Borrower shall pay (i) all
reasonable out-of-pocket expenses of the Lead Arrangers and their affiliates,
including reasonable fees and disbursements of special counsel, in connection
with the negotiation and preparation of the Loan Documents, (ii) all reasonable
out-of-pocket expenses of the Lead Arrangers, the Administrative Agent and the
affiliates of each Lead Arranger, including reasonable fees and disbursements of
special counsel and reasonable fees and disbursements of accountants and any
other advisors to the Lead Arrangers, the Administrative Agent and the
affiliates of each Lead Arranger, in connection with the administration of the
Loan Documents, any waiver or consent thereunder or any amendment thereof or any
Default or alleged Default thereunder, and the allocated cost of internal
counsel of each Bank Party in connection with any waiver or consent under the
Loan Documents or any amendment thereof and (iii) if an Event of Default occurs,
all out-of-pocket expenses incurred by the Lead Arrangers and each Bank Party
including (without duplication) the fees and disbursements of special counsel
and the allocated cost of internal counsel and the fees and disbursements of
accountants and any other advisors to the Lead Arrangers or any Bank Party, 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
<PAGE> 95
designated a party thereto) brought or threatened relating to or arising out of
the Loan Documents or any actual or proposed use of proceeds of Loans or Letters
of Credit 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) Each Bank further agrees that if it shall, by exercising any right of
set-off or counterclaim or otherwise, receive payment of a proportion of the
aggregate amount of the principal of and interest on the Reimbursement
Obligations held by it or for its account which is greater than the proportion
received in respect of the aggregate amount of the principal of and interest on
the Reimbursement Obligations held by or for the account of any other Bank, the
Bank receiving such proportionately greater payment shall purchase such
participations in the aggregate amount of the principal of and interest on the
Reimbursement Obligations held by or for the account of the other Banks, and
such other adjustments shall be made, as may be required so that all such
payments of the aggregate amount of the principal of and interest on the
Reimbursement Obligations held by or for the account of the Banks shall be
shared by them pro rata.
(c) Nothing in this Section shall impair the right of any Bank to exercise
any right of set-off or counterclaim it may have and to apply the amount subject
to such exercise to the payment of indebtedness of the Borrower other than its
indebtedness hereunder.
(d) The Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in a Loan or LC
Reimbursement Obligation, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of the Borrower in the amount of such participation.
<PAGE> 96
Section 9.05. Amendments and Waivers. (a) Any provision of this Agreement,
the Notes or the Swingline Note 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, the LC Agent,
the Swingline Bank or the Lead Arrangers and their affiliates are affected
thereby, by the Administrative Agent, the LC Agent, the Swingline Bank, the Lead
Arrangers or the Co-Agents, as the case may be); provided that no such amendment
or waiver shall, unless signed by all the Banks, (i) increase or decrease the
Commitment of any Bank (except for a ratable decrease in the Commitments of all
Banks) or subject any Bank to any additional obligation, (ii) reduce the
principal of or rate of interest on any Loan or Swingline Loan or any fees
hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or Swingline Loan or any fees hereunder or for the
termination of any Commitment, (iv) reduce the principal of or rate of interest
on any Reimbursement Obligation, (v) postpone the date fixed for payment by the
Borrower of any Reimbursement Obligation or extend the expiry date of any Letter
of Credit to a date later than the fifth Domestic Business Day prior to the
Termination Date, (vi) unless signed by the Swingline Bank, increase the
Swingline Commitment, postpone the date fixed for termination of the Swingline
Commitment or otherwise affect any of its rights and obligations, or (vii)
change the percentage of the Commitments or of the aggregate unpaid principal
amount of the Loans, or the number of Banks, which shall be required for the
Banks or any of them to take any action under this Section or any other
provision of this Agreement (including without limitation subsection (b) of this
Section 9.05).
(b) Any provision of the Collateral Documents or the Guarantee Agreement
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed by each Obligor party thereto and the Administrative Agent with
the consent of the Required Banks; provided that no such amendment or waiver
shall, unless signed by each Obligor party thereto and the Administrative Agent
with the consent of all the Banks, (i) effect or permit a release of all or
substantially all of the Collateral, or (ii) release all or substantially all of
the Obligors from their obligations under the Guarantee Agreement or permit
termination of the Guarantee Agreement, except in each case as expressly
permitted by the terms thereof.
Section 9.06. Successors and Assigns. (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Borrower may not assign or
otherwise transfer any of its rights under this Agreement without the prior
written consent of each Bank, the LC Agent and the Swingline Bank.
<PAGE> 97
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans or all or any part of its LC Exposure. If any Bank
grants a participating interest to a Participant, whether or not upon notice to
the Borrower and the Administrative Agent, such Bank shall remain responsible
for the performance of its obligations hereunder, such Bank shall remain the
holder of its Loans or LC Exposure, as the case may be, 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), (iv) or (v) of Section 9.05(a) or clause
(i) or (ii) of Section 9.05(b) 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 8 with respect
to its participating interest. An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given effect for purposes of
this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may, in the ordinary course of its business and in accordance
with applicable law, at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to an
initial Commitment of not less than $5,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit I hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consents of the Borrower,
the LC Agent, the Swingline Bank and the Administrative Agent (which consents
shall not be unreasonably withheld); provided that (i) such consents shall not
be required if the Assignee is an affiliate of such transferor Bank or was a
Bank immediately prior to such assignment or if, at the time of the proposed
assignment, an Event of Default has occurred and is continuing; (ii) such
assignment may, but need not, include rights of the transferor Bank in respect
of outstanding Money Market Loans and (iii) the $5,000,000 minimum amount
specified above for a partial assignment of the transferor Bank's rights and
obligations shall not apply if the Assignee was a Bank immediately prior to such
assignment. Upon execution and delivery of such instrument and payment by such
Assignee to such transferor Bank of an amount equal to the purchase price agreed
between such transferor Bank and such Assignee, such Assignee
<PAGE> 98
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 $3,500; 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 or Swingline Bank may at any time assign all or any portion of
its rights under this Agreement and its Notes or Swingline Notes, as the case
may be, to a Federal Reserve Bank. No such assignment shall release the
transferor Bank or Swingline Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights shall
be entitled to receive any greater payment under Section 8.03 or 8.04 than such
Bank would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the Borrower's prior written consent or by
reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to
designate a different Applicable Lending Office under certain circumstances or
at a time when the circumstances giving rise to such greater payment did not
exist.
Section 9.07. No-Reliance on Margin Stock. Each of the Banks represents to
the Administrative Agent and each of the other Banks that it in good faith is
not relying upon any "margin stock" (as defined in Regulation U) as collateral
in the extension or maintenance of the credit provided for in this Agreement.
Section 9.08. Governing Law; Submission to Jurisdiction. (a) Each Letter of
Credit and Section 2.17 shall be subject to the UCP, and, to the extent not
inconsistent therewith, the laws of the State of New York.
(b) SUBJECT TO CLAUSE (a) OF THIS SECTION, EACH LOAN DOCUMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 99
(c) The Borrower hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York and of any
New York State court sitting in New York City for purposes of all legal
proceedings arising out of or relating to any Loan Document or the transactions
contemplated 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 ANY LOAN DOCUMENT OR TRANSACTIONS CONTEMPLATED THEREBY.
<PAGE> 100
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______________________________
Name:
Title:
233 Broadway
New York, New York 10279-0003
Facsimile number: 212-553-2094
J.P. MORGAN SECURITIES INC.,
as Lead Arranger
By______________________________
Name:
Title:
BNY CAPITAL MARKETS, INC.,
as Lead Arranger
By______________________________
Name:
Title:
NATIONSBANK MONTGOMERY LLC,
as Lead Arranger
By______________________________
Name:
Title:
<PAGE> 101
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By______________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION,
as Documentation Agent and a Bank
By______________________________
Name:
Title:
NATIONSBANK, N.A.
By______________________________
Name:
Title:
THE BANK OF NEW YORK
By______________________________
Name:
Title:
THE BANK OF NOVA SCOTIA,
as Co-Agent and a Bank
By______________________________
Name:
Title:
<PAGE> 102
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as Co-Agent and a Bank
By______________________________
Name:
Title:
TORONTO DOMINION (NEW YORK), INC.,
as Co-Agent and a Bank
By______________________________
Name:
Title:
COMMERZBANK AG, NEW YORK BRANCH
By______________________________
Name:
Title:
By______________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By______________________________
Name:
Title:
<PAGE> 103
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By______________________________
Name:
Title:
By______________________________
Name:
Title:
KEYBANK NATIONAL ASSOCIATION
By______________________________
Name:
Title:
WELLS FARGO BANK, NATIONAL
ASSOCIATION
By______________________________
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.
By______________________________
Name:
Title:
<PAGE> 104
THE BANK OF NEW YORK, as Administrative
Agent, LC Agent and Swingline Bank
By______________________________
Name:
Title:
<PAGE> 105
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
- ------------------------------------------------------------- ------------------------------------
<S> <C>
Bank Commitment
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Morgan Guaranty Trust Company of New York $ 60,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
NationsBank, N.A. $ 51,600,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
The Bank of New York $ 51,600,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
The Bank of Nova Scotia $ 37,600,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Bank of Tokyo-Mitsubishi Trust Company $ 37,600,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Toronto Dominion (New York), Inc. $ 29,600,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Bank of America National Trust & Savings Association $24,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Commerzbank AG, New York and/or Grand Cayman Branches $ 20,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Credit Lyonnais New York Branch $ 20,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Deutsche Bank AG, New York and/or Cayman Island Branch $ 20,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
KeyBank National Association $ 20,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Wells Fargo Bank, N.A. $ 20,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Union Bank of California, N.A. $ 8,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Total $400,000,000
- ------------------------------------------------------------- ------------------------------------
</TABLE>
<PAGE> 106
PRICING SCHEDULE
The "Euro-Dollar Margin", "LC Fee Rate", "CD Margin" and "Facility Fee
Rate" for any day are the respective percentages per annum set forth in the
table below in the applicable row under the column corresponding to the Pricing
Level that applies on such day (subject to the sentence immediately following
such table):
<TABLE>
<CAPTION>
========================================================================================================
Level I Level II Level III Level IV Level V Level VI Level VII
Pricing Level
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Euro-Dollar
Margin and LC Fee
Rate
If Utiliza-
tion is .3500 .6250 .9500 1.6500 2.0000 2.1250 2.2500
50% or less
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
If Utiliza- .4750 .8750 1.2000 1.9000 2.2500 2.5000 2.7500
tion exceeds
50%
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
CD Margin
If Utiliza- .4750 .7500 1.0750 1.7750 2.1250 2.250 2.3750
tion is
50% or less
If Utiliza- .6000 1.0000 1.3250 2.0250 2.3750 2.6250 2.8750
tion exceeds
50%
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Facility Fee Rate .1500 .2500 .3000 .3500 .5000 .7500 1.000
- --------------------------------------------------------------------------------------------------------
</TABLE>
On any date after October 31, 1999, each rate per annum set forth in the
table above shall be increased by 0.50% if such date is prior to the Refinancing
Date and the aggregate amount on deposit in the Escrow Account on such date is
less than the Required Escrow Amount.
"Base Rate Margin" means, on any day, (i) the Euro-Dollar Margin for such
day minus (i) 1.00%.
<PAGE> 107
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
Loans are expressly rated BBB or higher by S&P and Baa2 or higher by Moody's.
"Level II 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 Loans are expressly rated BBB- or higher by S&P and Baa3 or higher by
Moody's.
"Level III 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 Loans are expressly 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 IV Pricing" applies on any day on which the Loans are expressly
rated BB+ or higher by S&P and Ba1 or higher by Moody's.
"Level V Pricing" applies on any day on which the Loans are expressly rated
BB or higher by S&P and Ba2 or higher by Moody's.
"Level VI Pricing" applies on any day on which Loans are expressly rated
BB- or higher by S&P and Ba3 or higher by Moody's.
"Level VII Pricing" applies on any day if no other Pricing Level applies on
such day.
"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 or Level VII Pricing applies on any day.
"Utilization" means at any date the percentage equivalent of a fraction (i)
the numerator of which is the Total Usage at such date, after giving effect to
any borrowing or repayment on such date, and (ii) the denominator of which is
the Total Commitments at such date, after giving effect to any reduction of the
Commitments on such date. For purposes of this Schedule, if for any reason any
Bank has any Credit Exposure after the Commitments terminate, the Utilization on
and after the date of such termination shall be deemed to exceed 50%.
2
<PAGE> 108
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 the Loans made to the Borrower, as the case may be. Any
rating assigned to any other commercial paper or other debt security of the
Borrower shall be disregarded. The rating in effect at any date is that in
effect at the close of business on such date.
3
<PAGE> 109
Schedule 1.01(a)
MATERIAL TRADEMARKS
Actra
AfterThoughts
Athletic Shoe Factory
Authentic Northern Experience
The Bargain Shop
Champs Sports
Colorado
Cottage Essentials
Eastbay
Element Boreal
Foot Locker
Foot Locker Athletic Club
Going to the Game
Kids Foot Locker
Kinney
Lady Foot Locker
Loon Design
Northern Elements
Northern Getaway
Northern Reflections
Northern Traditions
Randy River
Referee Design
Reflet Boreal
Reflexions
The San Francisco Music Box Company
The San Francisco Music Box & Gift Company
Venator Group
Vestiaire Sportif
Village Wheels
Weekend Edition
Williams the Shoemen
Woolco
Woolworth
World Foot Locker
<PAGE> 110
5
Schedule 1.01(b)
DEBT THAT MAY BE REFINANCED
<TABLE>
<CAPTION>
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
Issuance Original Interest Maturity Balance O/S
Date Amount Rate Date Jan. 30, 1999
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C>
$200 Million 01/16/92 $ 200,000,000 8.50% 01/15/22 $ 200,000,000
30-Year Note
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
$200 Million 06/08/95 $ 200,000,000 7.00% 06/01/00 $ 200,000,000
5-Year Note
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
$50 Million 10/05/95 $ 50,000,000 6.98% 10/15/01 $ 50,000,000
6-Year Note
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
$40 Million 10/13/95 $ 40,000,000 7.00% 10/15/02 $ 40,000,000
7-Year Note
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
Total $ 490,000,000
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
</TABLE>
2
<PAGE> 111
Schedule 1.01(c)
EXISTING STANDBY LETTERS OF CREDIT
<TABLE>
<CAPTION>
- --------------------------- -------------------------- ------------------ ------------------------
Standby
Banks Beneficiary Amount Expiry Date
- --------------------------- -------------------------- ------------------ ------------------------
- --------------------------- -------------------------- ------------------ ------------------------
<S> <C> <C> <C>
Key Bank Richman Brothers $ 250,000 11/01/99
- --------------------------- -------------------------- ------------------ ------------------------
- --------------------------- -------------------------- ------------------ ------------------------
Bank of New York Kemper Insurance $ 14,500,000 01/31/00
- --------------------------- -------------------------- ------------------ ------------------------
- --------------------------- -------------------------- ------------------ ------------------------
Bank of New York Travelers Insurance $ 12,831,397 07/27/99
- --------------------------- -------------------------- ------------------ ------------------------
- --------------------------- -------------------------- ------------------ ------------------------
Total $ 27,581,397
- --------------------------- -------------------------- ------------------ ------------------------
</TABLE>
3
<PAGE> 112
Schedule 5.06
EXISTING CAPITAL LEASES
<TABLE>
--------------------------------------------------------- -------------------------
<S> <C>
Junction City Distribution Center..................... $13,371,386
--------------------------------------------------------- -------------------------
--------------------------------------------------------- -------------------------
Point of Sale Equipment............................... $ 3,881,952
--------------------------------------------------------- -------------------------
--------------------------------------------------------- -------------------------
Footlocker Stores..................................... $ 179,231
--------------------------------------------------------- -------------------------
--------------------------------------------------------- -------------------------
Capital Leases entered into prior to 1998............. $ 6,177,774
--------------------------------------------------------- -------------------------
--------------------------------------------------------- -------------------------
Capital Leases entered into in 1998................... $ 1,977,100
--------------------------------------------------------- -------------------------
--------------------------------------------------------- -------------------------
Total $25,587,443
--------------------------------------------------------- -------------------------
--------------------------------------------------------- -------------------------
</TABLE>
4
<PAGE> 113
Schedule 5.20(b)
REAL PROPERTY TO BE MORTGAGED
<TABLE>
<CAPTION>
- ----------------------------- ----------------- --------- -------------------- -------------------
Gross Book
Store # City State Value Value
- ----------------------------- ----------------- --------- -------------------- -------------------
- ----------------------------- ----------------- --------- -------------------- -------------------
<S> <C> <C> <C> <C>
1127 Miami FL $ 2,130,000 $ 1,835,000
- ----------------------------- ----------------- --------- -------------------- -------------------
- ----------------------------- ----------------- --------- -------------------- -------------------
Office/Warehouse Camp Hill PA $ 6,700,000 $ 7,219,000
- ----------------------------- ----------------- --------- -------------------- -------------------
- ----------------------------- ----------------- --------- -------------------- -------------------
Champs Office Bradenton FL $ 6,000,000 $ 6,828,000
- ----------------------------- ----------------- --------- -------------------- -------------------
- ----------------------------- ----------------- --------- -------------------- -------------------
Milton Warehouse Milton ONT $ 4,725,000 $ 6,650,000
- ----------------------------- ----------------- --------- -------------------- -------------------
- ----------------------------- ----------------- --------- -------------------- -------------------
Total $ 19,555,000 $ 22,532,000
- ----------------------------- ----------------- --------- -------------------- -------------------
- ----------------------------- ----------------- --------- -------------------- -------------------
</TABLE>
5
<PAGE> 114
EXHIBIT A
NOTE
New York, New York
March __ , 1999
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 Credit Agreement referred
to below on the maturity date thereof provided for in the Credit Agreement. The
Borrower promises to pay interest on the unpaid principal amount of each such
Loan on the dates and at the rate or rates provided for in the Credit Agreement.
All such payments of principal and interest shall be made in lawful money of the
United States in Federal or other immediately available funds at the office of
The Bank of New York, One Wall Street, 18 North, New York, New York.
All Loans made by the Bank, the respective types thereof and all repayments
of the principal thereof shall be recorded by the Bank and, if the Bank so
elects in connection with any transfer or enforcement hereof, appropriate
notations to evidence the foregoing information with respect to each such Loan
then outstanding may be endorsed by the Bank on the schedule attached hereto, or
on a continuation of such schedule attached to and made a part hereof; provided
that neither the failure of the Bank to make any such recordation or
endorsement, nor any error therein, shall affect the obligations of the Borrower
hereunder or of the Borrower or any other Obligor under any Loan Document.
1
<PAGE> 115
This note is one of the Notes referred to in the Credit Agreement dated as
of April 9, 1997 and amended and restated as of March 19, 1999 among the
Borrower, the Banks party thereto, Co-Agents party thereto, Bank of America
National Trust & Savings Association, as Documentation Agent, The Bank of New
York as Administrative Agent, LC Agent and Swingline Bank and the Lead Arrangers
party thereto (as the same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the same
meanings. Reference is made to the Credit Agreement for provisions for the
prepayment hereof, the acceleration of the maturity hereof and the basis upon
which this Note is guaranteed and secured.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
VENATOR GROUP, INC.
By ________________________
Name:
Title:
2
<PAGE> 116
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of
Amount of Principal Notation
Date Loan Repaid Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3
<PAGE> 117
EXHIBIT B
SWINGLINE NOTE
New York, New York
March __, 1999
For value received, VENATOR GROUP, INC., a New York corporation (the
"Borrower"), promises to pay to the order of THE BANK OF NEW YORK (the
"Swingline Bank") the unpaid principal amount of each Swingline Loan made by the
Swingline Bank to the Borrower pursuant to the Credit Agreement referred to
below on the maturity date provided for in the Credit Agreement. The Borrower
promises to pay interest on the unpaid principal amount of each such Swingline
Loan on the dates and at the rate or rates provided for in the Credit Agreement.
All such payments of principal and interest shall be made in lawful money of the
United States in Federal or other immediately available funds at the office of
The Bank of New York, One Wall Street, 18 North, New York, New York.
All Swingline Loans made by the Swingline Bank and all repayments of the
principal thereof shall be recorded by the Swingline Bank and, if the Swingline
Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Swingline Loan then outstanding may be endorsed by the Swingline Bank on
the schedule attached hereto, or on a continuation of such schedule attached to
and made a part hereof; provided that neither the failure of the Swingline Bank
to make any such recordation or endorsement, nor any error therein, shall affect
the obligations of the Borrower hereunder or of the Borrower or any other
Obligor under any Loan Document.
This note is the Swingline Note referred to in the Credit Agreement dated
as of April 9, 1997 and amended and restated as of March 19, 1999 among the
Borrower, the Banks party thereto, Co-Agents party thereto, Bank of America
National Trust & Savings Association, as Documentation Agent, The Bank of New
York as Administrative Agent, LC Agent and Swingline Bank and the Lead Arrangers
party thereto (as the same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the same
meanings. Reference is made to the Credit Agreement for provisions for the
prepayment hereof, the acceleration of the maturity hereof and the basis upon
which this Note is guaranteed and secured.
1
<PAGE> 118
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
VENATOR GROUP, INC.
By________________________
Name:
Title:
2
<PAGE> 119
Swingline Note (cont'd)
SWINGLINE LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of Amount of
Swingline Principal Notation
Date Loan Repaid Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3
<PAGE> 120
EXHIBIT C
FORM OF MONEY MARKET QUOTE REQUEST
[Date]
To: The Bank of New York, as Administrative Agent
One Wall Street
18 North
New York, New York 10286
From: Venator Group, Inc.
Re: Credit Agreement dated as of April 9, 1997 and amended and restated as
of March 19, 1999 (as amended from time to time, the "Credit
Agreement") among Venator Group, Inc., the Banks party thereto, the Co-
Agents party thereto, Bank of America National Trust & Savings
Association, as Documentation Agent, The Bank of New York, as
Administrative Agent (the "Administrative Agent"), LC Agent and
Swingline Bank and the Lead Arrangers party thereto.
We hereby give notice pursuant to Section 2.03 of the Credit Agreement that
we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________
Principal Amount1/ Interest Period 2/
- ---------------- ---------------
$
- --------
1 Amount must be $15,000,000 or a larger multiple of $1,000,000.
2 Not less than one month (LIBOR Auction) or not less than 14 days (Absolute
Rate Auction), subject to the provisions of the definition of Interest
Period.
1
<PAGE> 121
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Terms used herein have the meanings assigned to them in the Credit
Agreement.
VENATOR GROUP, INC.
By________________________
Name:
Title:
2
<PAGE> 122
EXHIBIT D
FORM OF INVITATION FOR MONEY MARKET QUOTES
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Venator Group, Inc. (the
"Borrower")
Pursuant to Section 2.03 of the Credit Agreement dated as of April 9, 1997
and amended and restated as of March 19, 1999 among the Borrower, the Banks
party thereto, the Co-Agents party thereto, Bank of America National Trust &
Savings Association, as Documentation Agent, The Bank of New York, as
Administrative Agent (the "Administrative Agent"), LC Agent and Swingline Bank
and the Lead Arrangers party thereto (as further amended from time to time, the
"Credit Agreement"), we are pleased on behalf of the Borrower to invite you to
submit Money Market Quotes to the Borrower for the following proposed Money
Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
- ---------------- --------------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30 A.M.]
(New York City time) on [date].
1
<PAGE> 123
Terms used herein have the meanings assigned to them in the Credit
Agreement.
THE BANK OF NEW YORK,
as Administrative Agent
By______________________
Authorized Officer
2
<PAGE> 124
EXHIBIT E
FORM OF MONEY MARKET QUOTE
To: The Bank of New York,
as Administrative Agent
Re: Money Market Quote to Venator Group, Inc. (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, ______, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount**/ Period***/ [Margin****/] [Absolute Rate*****/]
- --------- --------- ---------------------------------
$
[Provided, that the aggregate principal amount of Money Market Loans for
which the above offers may be accepted shall not exceed$____________.]**
__________
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the amount the Bank is willing to lend. Bids must be made
for $5,000,000 or a larger multiple of $1,000,000.
[notes continued on following page]
1
<PAGE> 125
We understand and agree that the offer(s) set forth above, subject to the
satisfaction of the applicable conditions set forth in the Credit Agreement
dated as of April 9, 1997 and amended and restated as of March 19, 1999 among
Venator Group, Inc., the Banks party thereto, the Co-Agents party thereto, Bank
of America National Trust & Savings Association, as Documentation Agent, The
Bank of New York, as Administrative Agent (the "Administrative Agent"), LC Agent
and Swingline Bank and the Lead Arrangers party thereto (as amended from time to
time, the "Credit Agreement"), irrevocably obligates us to make the Money Market
Loan(s) for which any offer(s) are accepted, in whole or in part.
Terms used herein have the meanings assigned to them in the Credit
Agreement.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
__________
*** Not less than one month or not less than 14 days, as specified in the
related Invitation. No more than five bids are permitted for each Interest
Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of
1%) and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE> 126
EXHIBIT F
SECURITY AGREEMENT
AGREEMENT dated as of __________, 1999 among Venator Group, Inc. a New York
corporation (with its successors, the "Company"), each of the Subsidiaries of
the Company listed on the signature pages hereof and each other Subsidiary of
the Company that may from time to time become a party hereto in accordance with
Section 20 (each, with its successors, a "Subsidiary Guarantor") and The Bank of
New York, as Administrative Agent (with its successors, the "Administrative
Agent").
W I T N E S S E T H :
WHEREAS, the Company, the banks party thereto (the "Banks"), the co- agents
party thereto, Bank of America National Trust & Savings Association, as
Documentation Agent, The Bank of New York, as Administrative Agent, LC Agent and
Swingline Bank and the Lead Arrangers party thereto are parties to a Credit
Agreement dated as of April 9, 1997 and amended and restated as of March 19,
1999 (as amended or amended and restated from time to time, the "Credit
Agreement"); and
WHEREAS, the Subsidiary Guarantors and the Administrative Agent are parties
to a Guarantee Agreement dated as of March 19, 1999 (as amended from time to
time, the "Guarantee Agreement"); and
WHEREAS, pursuant to Section 5.20 of the Credit Agreement, the Company has
agreed to enter into, and to cause each of its Subsidiaries (other than any
Foreign Subsidiary or any Immaterial Subsidiary) to enter into, a Security
Agreement substantially in the form hereof; and
WHEREAS, in consideration of the financial and other support that the
Company has provided, and such financial and other support as the Company may in
the future provide, to the Subsidiary Guarantors, the Subsidiary Guarantors are
willing to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE> 127
Section 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Collateral" has the meaning specified in Section 3.
"Designated Foreign Jurisdiction" means, with respect to each Obligor, any
jurisdiction outside the United States where such Obligor conducts its
operations on and as of the date on which such Obligor becomes a party to this
Agreement.
"General Intangibles" means, with respect to each Obligor, all "general
intangibles" (as defined in the UCC) now owned or hereafter acquired by such
Obligor and consisting of copyrights, copyright licenses, Patents, Patent
Licenses, Trademarks, Trademark Licenses, rights in other intellectual property,
goodwill, trade names, service marks, trade secrets, and any rights of such
Obligor under any contract or agreement with respect to any of the foregoing.
"Hedging Agreement" means any interest rate protection agreement, foreign
currency exchange agreement or other interest or currency exchange rate hedging
arrangement.
"Hedging Obligations" means, with respect to each Obligor, all obligations
of such Obligor under any Hedging Agreement between such Obligor and any Bank
Party (or any affiliate of any Bank Party).
"LC Collateral Account" has the meaning specified in Section 5(a).
"Liquid Investments" has the meaning specified in Section 5(c).
"Obligor" means the Company or any Subsidiary Guarantor, and "Obligors"
means all of them.
"Patents" means, with respect to each Obligor, (i) all letters patent of
the United States or any other country held by such Obligor, all registrations
and recordings thereof, and all applications by such Obligor for letters patent
of the United States or any other country, including registrations, recordings
and applications in the PTO or in any similar office or agency of the United
States or any other country or any political subdivision thereof, including
those described in the Perfection Certificate of such Obligor, and (ii) all
reissues, continuations, continuations-in-part or extensions thereof.
2
<PAGE> 128
"Patent License" means, with respect to each Obligor, any written agreement
now or hereafter in existence granting to such Obligor any right to practice any
invention on which a patent (including without limitation a Patent of any other
Obligor) is in existence.
"Patent Security Agreement" means a Patent Security Agreement executed and
delivered by an Obligor in favor of the Administrative Agent, for the benefit of
the Secured Parties, substantially in the form of Exhibit B to this Agreement,
as the same may be amended from time to time.
"Perfection Certificate" means, with respect to each Obligor, a certificate
substantially in the form of Exhibit A hereto, completed and supplemented with
the schedules and attachments contemplated thereby to the satisfaction of the
Administrative Agent, and duly executed by a Responsible Officer of such
Obligor.
"Proceeds" means, with respect to each Obligor, all proceeds of, and all
other profits, products, rents or receipts, in whatever form, arising from the
collection, sale, lease, exchange, assignment, licensing or other disposition
of, or other realization upon, collateral pledged by such Obligor, including
without limitation all claims of such Obligor against third parties for loss of,
damage to or destruction of, or any past, present or future dilution,
infringement or unauthorized use of, unfair competition with, or violation of
intellectual property rights in connection with or injury to, any such
collateral or for injury to the goodwill associated with any of the foregoing,
in each case whether now existing or hereafter arising.
"PTO" means the United States Patent and Trademark Office.
"Secured Obligations" means, with respect to each Obligor, (i) all
principal of and interest and premium (if any) on any Loan or Swingline Loan
payable by such Obligor under, or any Note or Swingline Note issued by such
Obligor pursuant to, the Credit Agreement (including, without limitation, any
interest which accrues after or would accrue but for the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of such Obligor, whether or not allowed or allowable as a claim
in any such proceeding), (ii) all Reimbursement Obligations of such Obligor with
respect to any Letter of Credit issued pursuant to the Credit Agreement and all
interest payable by such Obligor thereon (including, without limitation, any
interest which accrues after or would accrue but for the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of such Obligor, whether or not allowed or allowable as a claim
in any such proceeding), (iii) if such Obligor is a Subsidiary Guarantor, all
3
<PAGE> 129
amounts payable by such Obligor under the Guarantee Agreement, (iv) all other
amounts payable by such Obligor under the Loan Documents, (v) all Hedging
Obligations of such Obligor, and (vi) any amendments, restatements, renewals,
extensions or modifications of any of the foregoing; provided that the Secured
Obligations of each Subsidiary Guarantor described in clause (iii) above and any
amendment, restatement, renewal, extension or modification thereof described in
clause (vi) above (collectively, with respect to each Subsidiary Guarantor, such
Subsidiary Guarantor's "Subsidiary Guaranteed Obligations"), shall be
subordinate and junior in rank with respect to payment to the other Secured
Obligations of such Subsidiary Guarantor for purposes of this Security
Agreement. Pursuant to the proposed Amendment No. 4 to the Existing Credit
Agreement, upon satisfaction of the conditions precedent set forth therein, the
Credit Agreement will be amended and restated to include certain Subsidiaries of
the Company as borrowers under the Credit Agreement, and the parties hereto
agree that, upon effectiveness of such amendment and restatement, for purposes
of the definition of "Secured Obligations", the term "Obligors" will mean the
Company, any of its Subsidiaries that are borrowers under the Credit Agreement
and the Subsidiary Guarantors, and "Obligor" will mean any one of them.
"Secured Parties" means the Banks, the LC Agent, the Swingline Bank, the
Administrative Agent and the Lead Arrangers.
"Security Interests" means the security interests in the Collateral granted
hereunder securing the Secured Obligations.
"Specified Trademarks" means, with respect to each Obligor (i) the
Trademarks listed on Schedule 2B under such Obligor's name and (ii) any other
Trademark held by such Obligor registrered or to be registered by such Obligor
in the United States or any Trademark held by such Obligor and constituting the
name of a store used by such Obligor outside the United States.
"Specified Trademark License" means, with respect to each Obligor, any
Trademark License held by such Obligor with respect to any Specified Trademark
held by such Obligor.
"Trademarks" means, with respect to each Obligor, (i) all trademarks, trade
names, corporate names, company names, business names, logos, other source or
business identifiers, designs and general intangibles of like nature held by
such Obligor, and all applications in connection therewith, including
registrations, recordings and applications in the PTO or in any similar office
or agency of the United States, any State thereof or any other country or any
political subdivision thereof, including those described in the Perfection
4
<PAGE> 130
Certificate of such Obligor, (ii) all extensions or renewals thereof and (iii)
the goodwill of the business symbolized by any of the foregoing.
"Trademark License" means, with respect to each Obligor, any written
agreement now or hereafter in existence granting to such Obligor any right to
use a Trademark (including without limitation a Trademark of any other Obligor).
"Trademark Security Agreement" means a Trademark Security Agreement
executed and delivered by an Obligor in favor of the Administrative Agent, for
the benefit of the Secured Parties, substantially in the form of Exhibit C to
this Agreement, as the same may be amended from time to time.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of New York; provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
Section 2. Representations and Warranties. Each Obligor represents and
warrants as follows:
(a) Such Obligor has good and marketable title to all of the Collateral,
free and clear of any Liens other than Liens permitted under Section 5.06(a)(ix)
of the Credit Agreement.
(b) Such Obligor has not performed any acts which could reasonably be
expected to prevent the Administrative Agent from enforcing any of the terms of
this Agreement or which would limit the Administrative Agent in any such
enforcement. Other than Patent Security Agreements, Trademark Security
Agreements, financing statements or other similar or equivalent documents or
instruments with respect to the Security Interests, no financing statement,
mortgage, security agreement or similar or equivalent document or instrument
covering all or any part of the Collateral of such Obligor and consisting of
Patents, Patent Licenses, Specified Trademarks and Specified Trademark Licences
is on file or of record in any jurisdiction or office (including without
limitation the PTO) in the United States or in any Designated Foreign
Jurisdiction with respect to such Obligor and in which such filing or recording
would be effective to perfect a Lien on such Collateral. No Collateral of such
Obligor is in the possession of any Person (other than such Obligor) asserting
5
<PAGE> 131
any claim thereto or security interest therein, except that the Administrative
Agent or its designee may have possession of such Collateral as contemplated
hereby.
(c) Such Obligor has delivered its Perfection Certificate to the
Administrative Agent. The information specified therein is correct and complete.
Within 60 days after the date hereof, such Obligor shall furnish to the
Administrative Agent file search reports from the PTO confirming that a filing
with respect to each Patent and Patent License listed on Schedule 2A and held by
such Obligor on the date hereof and each Specified Trademark of such Obligor on
the date hereof and naming the Administrative Agent as secured party has been
made; provided that any failure of an Obligor timely to furnish any such report
caused by delay by the relevant office to respond to a request shall not
constitute a default by such Obligor of its obligations hereunder.
(d) Schedule 2A (as supplemented from time to time in accordance with
Section 4(c)) lists all Patents and Patent Licenses held by such Obligor.
Schedule 2B (as supplemented from time to time in accordance with Section 4(c))
lists all Specified Trademarks held by such Obligor and all Specified Trademark
Licenses held by such Obligor.
(e) The Security Interests in the Collateral of such Obligor constitute
valid security interests under the UCC securing the Secured Obligations of such
Obligor. When UCC financing statements in the form specified in Exhibit A shall
have been filed in the offices specified in the Perfection Certificate of such
Obligor, the Security Interests shall constitute perfected security interests in
the Collateral of such Obligor in which a security interest may be perfected by
filing under the UCC (but excluding in any event any Collateral of such Obligor
described in the succeeding sentences of this subsection (e)), prior to all
other Liens and rights of others therein. When a Patent Security Agreement of
such Obligor has been recorded with the PTO, such Security Interests shall
constitute perfected Security Interests in all right, title and interest of such
Obligor in the Patents listed in Schedule 1 to such Agreement, prior to all
other Liens and rights of others therein. When a Trademark Security Agreement of
such Obligor has been recorded with the PTO, such Security Interests shall
constitute perfected Security Interests in all right, title and interest of such
Obligor in the Trademarks listed in Schedule 1 to such Agreement, prior to all
other Liens and rights of others therein.
Section 3. The Security Interests. (a) In order to secure the full and
punctual payment of its Secured Obligations in accordance with the terms
thereof, each Obligor grants to the Administrative Agent for the ratable benefit
of the Secured Parties a continuing security interest in and to all of the
following property of such Obligor, whether now owned or existing or hereafter
6
<PAGE> 132
acquired or arising and regardless of where located (all being collectively
referred to as the "Collateral" of such Obligor):
(i) General Intangibles;
(ii) Patents and Patent Licenses;
(iii) Trademarks and Trademark Licenses;
(iv) The LC Collateral Account, all cash deposited therein from time
to time, and any Liquid Investments made pursuant to Section
5(c);
(v) All books and records (including, without limitation, computer
programs, printouts and other computer materials and records) of
such Obligor pertaining to any of its Collateral described in
clauses (i) thorough (iv) hereof; and
(vi) All Proceeds of the Collateral described in clauses (i) through
(v) hereof.
(b) The Security Interests are granted as security only and shall not
subject the Administrative Agent or any Secured Party to, or transfer or in any
way affect or modify, any obligation or liability of any Obligor with respect to
any of the Collateral or any transaction in connection therewith.
Section 4. Further Assurances; Covenants. (a) Each Obligor will not change
its name, identity or corporate structure in any manner or change the location
of its chief executive office or chief place of business from the location
described in the Perfection Certificate of such Obligor unless, in each case,
such Obligor shall have given the Administrative Agent at least 30 day's prior
notice thereof and delivered to the Banks an opinion of counsel at the cost and
expense of such Obligor, in form and substance reasonably satisfactory to the
Administrative Agent, to the effect that, after giving effect to such change in
name, identity, corporate structure or location, the Security Interests in the
Collateral of such Obligor shall remain perfected; provided that the provisions
of the foregoing sentence shall not apply to any change in the location of the
chief executive office of any Obligor from any location in New York City to any
other location in New York City. Each Obligor shall not in any event change the
location of any of its Collateral if such change would cause the Security
Interests in such Collateral to lapse or cease to be perfected.
(b) Each Obligor will, from time to time, at its expense, execute, deliver,
file and record any statement, assignment, instrument, document, agreement,
7
<PAGE> 133
recording or other paper and take any other action (including, without
limitation, any filings of financing or continuation statements under the UCC
and any additional of substitute filings with the PTO) that from time to time
may be necessary or desirable, or that the Administrative Agent may request, in
order to create, preserve, perfect, confirm or validate the Security Interests
or to enable the Secured Parties to obtain the full benefits of this Agreement,
or to enable the Administrative Agent to exercise and enforce any of its rights,
powers and remedies hereunder with respect to any of the Collateral of such
Obligor; provided that no Obligor shall be required to take any such action with
respect to any Trademark that is not a Specified Trademark or any Trademark
License that is not a Specified Trademark License. To the extent permitted by
applicable law, each Obligor hereby authorizes the Administrative Agent to
execute and file financing statements or continuation statements without such
Obligor's signature appearing thereon. Each Obligor agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. Each Obligor shall
pay the costs of, or incidental to, any recording or filing of any financing or
continuation statements or any filings with the PTO concerning the Collateral of
such Obligor.
(c) Within 30 Domestic Business Days after the end of each Fiscal Quarter,
each Obligor shall provide to the Administrative Agent (i) copies of all
applications for (1) the registration of any Patent or any Patent License and
(2) the registration of any Specified Trademark or Specified Trademark License
filed by such Obligor during such Fiscal Quarter, (ii) a Patent Security
Agreement executed by such Obligor with respect to each Patent or Patent License
of such Obligor described in clause (1), (iii) a Trademark Security Agreement
with respect to each Specified Trademark and Specified Trademark License
described in clause (2) and (iv) a list of each Patent and Trademark that such
Obligor has determined to abandon, or that such Obligor has determined not to
maintain the registration of, during the immediately succeeding Fiscal Quarter,
and a brief statement of the reasons on the basis on which such Obligor has made
such determination (it being understood that nothing in this clause (iv) shall
be construed to limit or modify in any manner the obligations of such Obligor
under subsection (d) below). Upon delivery of a Patent Security Agreement or a
Trademark Security Agreement by any Obligor, Schedule 2A or 2B, as the case may
be, shall be deemed to have been amended to reflect the Patents and Patent
Licenses or Specified Trademarks and Specified Trademark Licences with respect
to which such Patent Security Agreement or a Trademark Security Agreement, as
the case may be, relates. If an Obligor has filed no applications for the
registration of any Patent, License, Specified Trademark or Specified Trademark
License during any Fiscal Quarter, such Obligor shall, within 30 Domestic
Business Days after the end of such Fiscal Quarter, provide a certificate to the
Administrative Agent certifying the same.
8
<PAGE> 134
(d) Each Obligor will take all steps which it reasonably determines are
necessary and appropriate in the circumstances, including, without limitation,
in any proceeding before the PTO, or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue each
application (and to obtain the relevant registration) and to maintain each
registration of its material Patents and Specified Trademarks, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability except, in each case, for such applications or
registrations which such other Obligor determines in good faith are no longer
useful or material to the business of such Obligor.
(e) In the event that any material Patent or Specified Trademark is
infringed, misappropriated or diluted by a third party, the Obligor that holds
such Patent or Trademark shall promptly notify the Administrative Agent after it
learns thereof, if such infringement, misappropriation or dilution could
reasonably be expected to have a Material Adverse Effect, and take such other
actions as such Obligor shall reasonably deem appropriate under the
circumstances, or as the Administrative Agent shall reasonably request, to
protect such Patent or Specified Trademark, as the case may be.
(f) Each Obligor shall notify the Administrative Agent as soon as
practicable if such Obligor knows that any application or registration relating
to any material Patent or Specified Trademark may become abandoned or dedicated
or of any determination or development (including the institution of, or any
such determination or development in, any proceeding in the PTO or any court or
tribunal) regarding such Obligor's ownership of any material Patent or Specified
Trademark, its right to register the same, or to keep and maintain the same.
(g) Each Obligor will, promptly upon request, provide to the Administrative
Agent all information and evidence it may reasonably request concerning its
Collateral to enable the Administrative Agent to enforce the provisions of this
Agreement.
Section 5. LC Collateral Account. (a) There is hereby established with the
Administrative Agent an account (the "LC Collateral Account") on the books of
The Bank of New York in the name and under the control of the Administrative
Agent into which there shall be deposited from time to time the amounts required
to be deposited therein by the Company pursuant to Sections 2.06(f) and 6.03 of
the Credit Agreement or any other provision of the Loan Documents. Any income
received by the Administrative Agent with respect to the balance from time to
time standing to the credit of the LC Collateral Account, including any interest
9
<PAGE> 135
or capital gains on Liquid Investments, shall remain, or be deposited, in the LC
Collateral Account. All right, title and interest in and to the cash amounts on
deposit from time to time in the LC Collateral Account together with any Liquid
Investments from time to time made pursuant to subsection (c) hereof shall
constitute part of the Collateral hereunder and shall not constitute payment of
the Secured Obligations until applied thereto as hereinafter provided. If and
when any portion of Aggregate LC Exposure on which any deposit in the LC
Collateral Account was based (the "Relevant Contingent Exposure") shall become
fixed (a "Direct Exposure") as a result of the payment by the LC Agent of a
draft presented under a Letter of Credit, the amount of such Direct Exposure
(but not more than the amount in the LC Collateral Account at the time) shall be
withdrawn by the Administrative Agent from the LC Collateral Account and shall
be paid to the Banks in accordance with their Pro Rata Share, and the Relevant
Contingent Exposure shall thereupon be reduced by such amount. If at any time
the amount in the LC Collateral Account exceeds the aggregate Relevant
Contingent Exposure, the excess amount shall, so long as no Event of Default
shall have occurred and be continuing, be promptly withdrawn by the
Administrative Agent and paid to, or as directed by, the Company. If an Event of
Default shall have occurred and be continuing, such excess amount shall be
retained in the LC Collateral Account. If immediately available cash on deposit
in the LC Collateral Account is not sufficient to make any distribution to, or
as directed by, the Company referred to in this Section 5(a), the Administrative
Agent shall cause to be liquidated as promptly as practicable such Liquid
Investments in the LC Collateral Account designated by the Company as required
to obtain sufficient cash to make such distribution and, notwithstanding any
other provision of this Section 6, such distribution shall not be made until
such liquidation has taken place.
(b) Upon the occurrence and continuation of an Event of Default, the
Administrative Agent shall, if so instructed by the Required Banks, apply or
cause to be applied (subject to collection) any or all of the balance from time
to time standing to the credit of the LC Collateral Account in the manner
specified in Section 9.
(c) Amounts on deposit in the LC Collateral Account shall be invested and
re-invested from time to time in such Liquid Investments as the Company shall
determine, which Liquid Investments shall be held in the name and be under the
control of the Administrative Agent, provided that, if an Event of Default has
occurred and is continuing, the Administrative Agent shall, if instructed by the
Required Banks, determine the Liquid Investments in which such amounts are
invested and re-invested and shall liquidate any such Liquid Investments and
apply or cause to be applied the proceeds thereof to the payment of the Secured
Obligations in the manner specified in Section 9. For this purpose, "Liquid
10
<PAGE> 136
Investments" means Temporary Cash Investments of the type described in clauses
(i) through (iv) of the definition thereof; provided that (x) each Liquid
Investment shall mature within 30 days after it is acquired by the
Administrative Agent and (y) in order to provide the Administrative Agent, for
the benefit of the Secured Parties, with a perfected security interest therein,
each Liquid Investment shall be either:
(i) evidenced by negotiable certificates or instruments, or if
non-negotiable then issued in the name of the Administrative Agent, which
(together with any appropriate instruments of transfer) are delivered to,
and held by, the Administrative Agent or an agent thereof (which shall not
be the Company or any of its Affiliates) in the State of New York; or
(ii) in book-entry form and issued by the United States and as to
which (in the opinion of counsel to the Administrative Agent) appropriate
measures shall have been taken for perfection of the Security Interests in
such Liquid Investments.
Section 6. General Authority. Each Obligor hereby irrevocably appoints the
Administrative Agent its true and lawful attorney, with full power of
substitution, in the name of such Obligor, the Administrative Agent, the Secured
Parties or otherwise, for the sole use and benefit of the Secured Parties, but
at such Obligor's expense, to the extent permitted by law to exercise, at any
time and from time to time while an Event of Default has occurred and is
continuing, all or any of the following powers with respect to all or any of the
Collateral of such Obligor:
(a) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due thereon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto,
(c) to sell, transfer, assign or otherwise deal in or with the same or
the proceeds or avails thereof, as fully and effectually as if the
Administrative Agent were the absolute owner thereof,
(d) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto, and
(e) in the case of any Patents or Trademarks or any other rights which
constitute patents or trademarks under common law (all such patents and
trademarks hereinafter being referred to as "Common Law Rights"), to
execute and deliver any and all agreements, instruments,
11
<PAGE> 137
documents, and papers as the Administrative Agent may reasonably require to
evidence the Security Interests in any such Patent, Trademark or Common Law
Rights and the goodwill and general intangibles of such Obligor relating
thereto or represented thereby;
provided that the Administrative Agent shall give each Obligor not less than ten
days' prior notice of the time and place of any sale or other intended
disposition of any of its Collateral. The Administrative Agent and each Obligor
agree that such notice constitutes "reasonable notification" within the meaning
of Section 9-504(3) of the UCC.
Section 7. Remedies upon Event of Default. (a) If any Event of Default has
occurred and is continuing, the Administrative Agent may exercise on behalf of
the Secured Parties all rights of a secured party under the UCC (whether or not
in effect in the jurisdiction where such rights are exercised) and, in addition,
the Administrative Agent may, without being required to give any notice, except
as herein provided or as may be required by mandatory provisions of law, (i)
apply cash, if any, then held by it as Collateral as specified in Section 9 and
(ii) if there shall be no such cash or if such cash shall be insufficient to pay
all the Secured Obligations in full, sell the Collateral or any part thereof at
public or private sale, for cash, upon credit or for future delivery, and at
such price or prices as the Administrative Agent may deem satisfactory. Any
Secured Party may be the purchaser of any or all of the Collateral so sold at
any public sale (or, if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
standard price quotations, at any private sale). Each Obligor will execute and
deliver such documents and take such other action as the Administrative Agent
deems necessary or advisable in order that any such sale may be made in
compliance with law. Upon any such sale the Administrative Agent shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral so
sold. Each purchaser at any such sale shall hold the Collateral so sold to it
absolutely and free from any claim or right of whatsoever kind, including any
equity or right of redemption of any Obligor which may be waived, and each
Obligor, to the extent permitted by law, hereby specifically waives all rights
of redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale required by
Section 6 shall (A) in the case of a public sale, state the time and place fixed
for such sale, and (B) in the case of a private sale, state the day after which
such sale may be consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the
Administrative Agent may fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Administrative Agent may determine. The Administrative Agent shall not be
obligated to make any such sale pursuant to any such notice. The Administrative
12
<PAGE> 138
Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned ,subject to the Administrative Agent giving
the notice required to be given pursuant to Section 6. In the case of any sale
of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Administrative Agent until the selling
price is paid by the purchaser thereof, but the Administrative Agent shall not
incur any liability in the case of the failure of such purchaser to take up and
pay for the Collateral so sold and, in the case of any such failure, such
Collateral may again be sold upon like notice. The Administrative Agent, instead
of exercising the power of sale herein conferred upon it, may proceed by a suit
or suits at law or in equity to foreclose the Security Interests and sell the
Collateral, or any portion thereof, under a judgment or decree of a court or
courts of competent jurisdiction.
(b) For the purpose of enforcing any and all rights and remedies under this
Agreement the Administrative Agent may (i) require each Obligor to, and each
Obligor agrees that it will, at its expense and upon the request of the
Administrative Agent, forthwith assemble all or any part of its Collateral as
directed by the Administrative Agent and make it available at a place designated
by the Administrative Agent which is, in its opinion, reasonably convenient to
the Administrative Agent and such Obligor, whether at the premises of such
Obligor or otherwise, (ii) have access to and use such Obligor's books and
records relating to the Collateral and (iii) prior to the disposition of the
Collateral, prepare the Collateral for disposition in any manner and to the
extent the Administrative Agent deems appropriate and, in connection with such
preparation and disposition, use without charge any Trademark, Patent, copyright
or technical process used by any Obligor. The Administrative Agent may also
render any or all of the Collateral unusable at any Obligor's premises and may
dispose of such Collateral on such premises without liability for rent or costs.
(c) Without limiting the generality of the foregoing, if any Event of
Default has occurred and is continuing, (i) the Administrative Agent may
license, or sublicense, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any Patents or Trademarks or Common Law Rights
included in the Collateral throughout the world for such term or terms, on such
conditions and in such manner as the Administrative Agent shall in its sole
discretion determine, (ii) the Administrative Agent may (without assuming any
obligations or liability thereunder), at any time and from time to time, enforce
(and shall have the exclusive right to enforce) against any licensor, licensee
or sublicensee all rights and remedies of any Obligor in, to and under any
Patent Licenses or Trademark Licenses and take or refrain from taking any action
under any thereof, and each Obligor hereby releases the Administrative Agent and
13
<PAGE> 139
each of the other Secured Parties from, and agrees to hold the Administrative
Agent and each of the other Secured Parties free and harmless from and against
any claims arising out of, any lawful action so taken or omitted to be taken
with respect thereto, except any such claim to the extent that it arises solely
as the result of the gross negligence or willful misconduct of any Secured Party
and (iii) upon request by the Administrative Agent, each Obligor will execute
and deliver to the Administrative Agent a further power of attorney, in form and
substance satisfactory to the Administrative Agent, for the implementation of
any lease, assignment, license, sublicense, grant of option, sale or other
disposition of a Patent, Trademark, Patent License or Trademark License. In the
event of any such disposition pursuant to this Section, each Obligor shall
supply its know-how and expertise relating to the manufacture and sale of the
products bearing Trademarks or the products or services made or rendered in
connection with Patents, and its customer lists and other records relating to
such Patents or Trademarks and to the distribution of said products, to the
Administrative Agent.
Section 8. Limitation on Duty of Administrative Agent in Respect of
Collateral. Beyond the exercise of reasonable care in the custody thereof, the
Administrative Agent shall have no duty as to any Collateral in its possession
or control or in the possession or control of any agent or bailee or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. The Administrative Agent shall be deemed to have
exercised reasonable care in the custody of the Collateral in its possession if
the Collateral is accorded treatment substantially equal to that which it
accords its own property, and shall not be liable or responsible for any loss or
damage to any of the Collateral, or for any diminution in the value thereof, by
reason of the act or omission of any warehouseman, carrier, forwarding agency,
consignee or other agent or bailee selected by the Administrative Agent in good
faith.
Section 9. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral pledged by any Obligor and
any cash held in the LC Collateral Account shall be applied by the
Administrative Agent in the following order of priorities:
first, to pay the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the
Administrative Agent, and all expenses, liabilities and advances incurred
or made by the Administrative Agent in connection therewith, and any other
unreimbursed expenses for which any Secured Party is to be reimbursed
pursuant to the Credit Agreement (including without limitation Section
9.03(a) thereof) or Section 12 hereof and any unpaid fees owing to any
Secured Party under the Loan Documents;
14
<PAGE> 140
second, to the ratable payment of accrued but unpaid interest on the
Secured Obligations of such Obligor (other than, in the case of any
Subsidiary Guarantor, its Subsidiary Guaranteed Obligations) in accordance
with the provisions of the Credit Agreement;
third, to the ratable payment of unpaid principal of, and
reimbursement obligations constituting, the Secured Obligations of such
Obligor (other than, in the case of any Subsidiary Guarantor, its
Subsidiary Guaranteed Obligations);
fourth, in the case of any Subsidiary Guarantor, to the ratable
payment of accrued but unpaid interest on its Subsidiary Guaranteed
Obligations, until all such Secured Obligations shall have been paid in
full;
fifth, in the case of any Subsidiary Guarantor, to the ratable payment
of unpaid principal of, and reimbursement obligations constituting its
Subsidiary Guaranteed Obligations, until all such Secured Obligations shall
have been paid in full;
sixth, to pay ratably all other Secured Obligations, until all Secured
Obligations shall have been paid in full; and
finally, to pay to such Obligor or its successors or assigns, or as a
court of competent jurisdiction may direct, any surplus then remaining from
such proceeds.
The Administrative Agent may make distributions hereunder in cash or in kind or,
on a ratable basis, in any combination thereof. For purposes of making any
distribution hereunder, the principal amount of any Hedging Obligation shall be
the amount of the relevant Obligor's Hedging Obligations due and payable at the
time such distribution is made.
Section 10. Concerning the Administrative Agent. The provisions of Article
7 of the Credit Agreement shall inure to the benefit of the Administrative Agent
in respect of this Agreement and shall be binding upon the parties to the Credit
Agreement and the parties hereto in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Administrative Agent
therein specified:
(a) The Administrative Agent is authorized to take all such action as is
provided to be taken by it as Administrative Agent hereunder and all other
action reasonably incidental thereto. As to any matters not expressly provided
15
<PAGE> 141
for herein (including, without limitation, the timing and methods of realization
upon the Collateral) the Administrative Agent shall act or refrain from acting
in accordance with written instructions from the Required Banks or, in the
absence of such instructions, in accordance with its discretion.
(b) The Administrative Agent shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity, perfection,
priority or enforceability of the Security Interests in any of the Collateral,
whether impaired by operation of law or by reason of any action or omission to
act on its part hereunder. The Administrative Agent shall have no duty to
ascertain or inquire as to the performance or observance of any of the terms of
this Agreement by any Obligor.
Section 11. Appointment of Co-Administrative Agents. At any time or times,
in order to comply with any legal requirement in any jurisdiction, the
Administrative Agent may appoint another bank or trust company or one or more
other persons, either to act as co-agent or co-agents, jointly with the
Administrative Agent, or to act as separate agent or agents on behalf of the
Secured Parties with such power and authority as may be necessary for the
effectual operation of the provisions hereof and may be specified in the
instrument of appointment (which may, in the discretion of the Administrative
Agent, include provisions for the protection of such co-agent or separate agent
similar to the provisions of Section 10).
Section 12. Expenses. If any Obligor fails to comply with the provisions of
any Loan Document to which it is a party, such that the value of any Collateral
or the validity, perfection, rank or value of any Security Interest is thereby
diminished or potentially diminished or put at risk, the Administrative Agent if
requested by the Required Banks may, but shall not be required to, effect such
compliance on behalf of such Obligor, and such Obligor shall reimburse the
Administrative Agent for the costs thereof on demand. All insurance expenses and
all expenses of protecting, storing, warehousing, appraising, insuring,
handling, maintaining, and shipping the Collateral, any and all excise,
property, sales, and use taxes imposed by any state, federal, or local authority
on any of the Collateral, or in respect of periodic appraisals and inspections
of the Collateral to the extent the same may be requested by the Required Banks
from time to time, or in respect of the sale or other disposition thereof shall
be borne and paid by each Obligor; and if any Obligor fails to promptly pay any
portion thereof when due, any Secured Party may, at its option, but shall not be
required to, pay the same and charge such Obligor's account therefor, and such
Obligor agrees to reimburse such Secured Party therefor on demand. All sums so
paid or incurred by any Secured Party for any of the foregoing and any and all
other sums for which any Obligor may become liable hereunder and all costs and
16
<PAGE> 142
expenses (including attorneys' fees, legal expenses and court costs) reasonably
incurred by any Secured Party in enforcing or protecting the Security Interests
or any of their rights or remedies under this Agreement and, in each case, not
paid in a timely manner shall, together with interest thereon until paid at the
rate applicable to Base Rate Loans, be additional Secured Obligations hereunder.
Section 13. Termination of Security Interests; Release of Collateral. (a)
Upon the repayment in full of all Secured Obligations (other than those
described in clause (v) of the definition thereof and any amendments,
restatements, renewals, extensions or modifications thereof), the termination of
the Commitments under the Credit Agreement and the termination or cancellation
of all Letters of Credit (unless such Letters of Credit have been fully cash
collateralized pursuant to arrangements satisfactory to the LC Agent, or back-
stopped by a separate letter of credit, in form and substance and issued by an
issuer satisfactory to the LC Agent), the Security Interests shall terminate and
all rights to the Collateral of each Obligor shall revert to such Obligor.
(b) Upon the consummation of any Asset Sale (or any sale or other
disposition described in clause (iv) of the definition of Asset Sale) permitted
by the terms of the Credit Agreement and consisting of the disposition of any
Collateral or of the capital stock of any Obligor other than the Company (any
such transaction, a "Permitted Collateral Sale") the Security Interests in such
Collateral or in the Collateral pledged by such Obligor, as the case may be (but
not, in any case, in any Proceeds thereof) shall be released. Such release shall
not be subject to the consent of any Bank, and the Administrative Agent shall be
fully protected in relying on a certificate of an Obligor as to whether any
particular transaction consummated by such Obligor constitutes a Permitted
Collateral Sale.
(c) In addition to the release of Collateral effected by subsection (b), at
any time and from time to time prior to the termination of the Security
Interests, the Administrative Agent may release any of the Collateral with the
prior written consent of the Required Banks; provided that the Administrative
Agent may release of all or substantially all of the Collateral (for purposes of
this subsection (c), as defined in the Credit Agreement) only with the prior
written consent of all the Banks.
(d) Upon any termination of the Security Interests or release of Collateral
in accordance with this Section, the Administrative Agent will, at the expense
of the relevant Obligor, execute and deliver to such Obligor such documents as
such Obligor shall reasonably request (including without limitation any
reassignments) to evidence the termination of the Security Interests or the
release of such Collateral, as the case may be.
17
<PAGE> 143
Section 14. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile or similar writing) and
shall be given to such party at its address or facsimile number set forth on the
signature pages hereof or at such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the Administrative
Agent and the Company. Each such notice, request or other communication shall be
effective (i) if given by facsimile, when transmitted to the facsimile number
referred to in this Section and confirmation of receipt is received, or (ii) if
given by any other means, when delivered at the address referred to in this
Section.
Section 15. Waivers, Non-Exclusive Remedies. No failure on the part of the
Administrative Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent of any right under this Agreement or any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
in this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law.
Section 16. Successors and Assigns. This Agreement shall be binding upon
each Obligor and its successors and permitted assigns. This Agreement is for the
benefit of each Secured Party and its successors and permitted assigns, and in
the event of an assignment of all or any of any Bank's interest in and to its
rights and obligations under the Credit Agreement in accordance with the Credit
Agreement, the assignor's rights hereunder, to the extent applicable to the
indebtedness or obligation so assigned, shall automatically be transferred with
such indebtedness or obligation.
Section 17. Changes in Writing. Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by each Obligor and the Administrative Agent, subject to the provisions
of Section 9.05(b) of the Credit Agreement.
Section 18. New York Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, except as otherwise
required by mandatory provisions of law and except to the extent that remedies
provided by the laws of any jurisdiction other than New York are governed by the
laws of such jurisdiction.
Section 19. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Secured Parties in
18
<PAGE> 144
order to carry out the intentions of the parties hereto as nearly as may be
possible; and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
Section 20. Additional Obligors. Any Subsidiary Guarantor may become an
Obligor party hereto and bound hereby by executing a counterpart hereof and
delivering the same to the Administrative Agent.
Section 21. 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 OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 22. Limitation on Collateral. Notwithstanding the foregoing,
"Collateral" shall not include any General Intangibles or other rights arising
under contracts which contain a valid and enforceable restriction on the grant
of a security interest therein (other than any such restriction which is
rendered ineffective pursuant to Section 9-318(4) of the UCC) to the extent such
grant would constitute a violation of such restriction, unless and until any
such restriction is removed, waived or no longer valid and enforceable. Each
Obligor represents and warrants that none of the Trademarks listed on Schedule
1.01(b) is subject to any such restriction.
19
<PAGE> 145
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:_________________________
Name:
Title:
EASTBAY, INC.
eVENATOR, INC.
FOOT LOCKER JAPAN, INC.
NORTHERN REFLECTIONS INC.
RETAIL COMPANY OF GERMANY,
INC.
THE RICHMAN BROTHERS COMPANY
ROBBY'S SPORTING GOODS, INC.
TEAM EDITION APPAREL, INC.
THE SAN FRANCISCO MUSIC BOX
COMPANY
VENATOR GROUP CORPORATE
SERVICES, INC.
VENATOR GROUP HOLDINGS, INC.
VENATOR GROUP RETAIL, INC.
VENATOR GROUP SOURCING, INC.
VENATOR GROUP SPECIALITY, INC.
By:___________________________
Name:
Title:
20
<PAGE> 146
THE BANK OF NEW YORK, as
Administrative Agent
By:_________________________________
Name:
Title:
21
<PAGE> 147
SCHEDULE 2A
Patents & Patent Licenses
[to come]
22
<PAGE> 148
SCHEDULE 2B
Trademark & Trademark Licenses
[to come]
23
<PAGE> 149
EXHIBIT A
TO SECURITY AGREEMENT
PERFECTION CERTIFICATE
The undersigned, an officer of [NAME OF OBLIGOR], a _______________
corporation (the "Obligor"), hereby certify with reference to the Security
Agreement dated as of _____, 1999 among Venator Group, Inc., the Obligor and the
other Subsidiaries party thereto and The Bank of New York, as Administrative
Agent (terms defined therein being used herein as therein defined), to the
Secured Parties as follows:
1. Names. (a) The exact corporate name of the Obligor as it appears in its
certificate of incorporation is as follows:
(b) Specified below is each other corporate name (including trade names or
similar appellations) the Obligor has had in the last five years:
(c) Except as specified in Schedule 1, the Obligor has not changed its
identity or corporate structure in any way within the past five years.
[Changes in identity or corporate structure would include mergers,
consolidations and acquisitions, as well as any change in the form, nature
or jurisdiction of corporate organization. If any such change has occurred,
include in Schedule 1 the information required by paragraphs 1, 2 and 3 of
this certificate as to each acquiree or constituent party to a merger or
consolidation.]
2. Current Locations. (a) The chief executive office of the Obligor is
located at the following address:
Mailing Address County State
- ------------------------------------- ---------------------- --------------
<PAGE> 150
(b) The following are all the places of business of the Obligor not
identified above:
Mailing Address County State
- ------------------------------------- ---------------------- --------------
3. Prior Locations. (a) Specified below is the information required by
subparagraphs 2(a) and 2(b) above with respect to each location or place of
business maintained by the Obligor at any time during the past five years:
4. UCC Filings. A duly signed financing statement on Form UCC-1 in
substantially the form of Schedule 4(A) hereto has been delivered to the
Administrative Agent for filing in the Uniform Commercial Code filing office in
each jurisdiction identified in paragraph 2 hereof. .
5. Schedule of Filings. Attached hereto as Schedule 5 is a schedule setting
forth filing information with respect to the filings described in paragraph 4
above.
6. Filing Fees. All filing fees and taxes payable in connection with the
filings described in paragraph 6 above have been paid.
2
<PAGE> 151
IN WITNESS WHEREOF, I have hereunto set my hand this __ day of
________________, 1999.
By: _______________________
Name:
Title:
3
<PAGE> 152
SCHEDULE 4(A)
DESCRIPTION OF COLLATERAL
[to include the description of "Collateral"
set forth in the Security Agreement and related definitions]
<PAGE> 153
SCHEDULE 5
SCHEDULE OF FILINGS
Debtor Filing Officer File Number Date of Filing 1/
- ----------- ---------------- --------------- -----------------
- -------------------
1 Indicate lapse date, if other than fifth anniversary.
<PAGE> 154
EXHIBIT B TO
SECURITY AGREEMENT
FORM OF PATENT SECURITY AGREEMENT
WHEREAS, [Name of Obligor], a _____________ corporation (herein referred to
as "Grantor") owns, or in the case of licenses, is a party to, the Patent
Collateral (as defined below);
WHEREAS, Venator Group, Inc., the banks party thereto, the co-agents party
thereto, Bank of America National Trust & Savings Association, as Documentation
Agent, The Bank of New York, as Administrative Agent, LC Agent and Swingline
Bank and the Lead Arrangers party thereto are parties to a Credit Agreement
dated as of April 9, 1997 and amended and restated as of March 19, 1999 (as
amended or amended and restated from time to time, the "Credit Agreement"); and
WHEREAS, pursuant to the terms of a related Security Agreement dated as of
_____________, 1999 (as amended from time to time, the "Security Agreement")
among Venator Group, Inc., its Subsidiaries party thereto and The Bank of New
York, as Administrative Agent for the Secured Parties referred to therein (in
such capacity, together with its successors in such capacity, "Grantee"),
Grantor has granted to Grantee for the benefit of such Secured Parties a
continuing security interest in and to the assets of Grantor specified therein,
including all right, title and interest of Grantor in and to the Patent
Collateral, whether now owned or existing or hereafter acquired or arising, to
secure the Secured Obligations (as defined in the Security Agreement) of
Grantor;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee, to secure the Secured Obligations, a continuing security interest in
and to all of Grantor's right, title and interest in and to the following (all
of the following items or types of property being herein collectively referred
to as the "Patent Collateral"), whether now owned or existing or hereafter
acquired or arising:
(i) each Patent (as defined in the Security Agreement) owned by Grantor,
including, without limitation, each U.S. Patent and Patent application referred
to in Schedule 1 hereto;
(ii) each Patent License (as defined in the Security Agreement), including,
without limitation, each Patent License identified in Schedule 1 hereto; and
1
<PAGE> 155
(iii) all proceeds of, and all other profits, products, rents or receipts,
in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or other realization upon, any
Patent Collateral described in clauses (i) and (ii), including without
limitation all claims against third parties for loss of, damage to or
destruction of, or any past, present or future dilution, infringement or
unauthorized use of, unfair competition with, or violation of intellectual
property rights in connection with or injury to, any such collateral or for
injury to the goodwill associated with any of the foregoing, in each case
whether now existing or hereafter arising.
Grantor hereby irrevocably constitutes and appoints Grantee and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full power and authority in the name of Grantor or in its
name, from time to time, in Grantee's discretion, so long as an Event of Default
has occurred and is continuing, to take with respect to the Patent Collateral
any and all appropriate action which is permitted under the Security Agreement.
The foregoing security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor does
hereby further acknowledge and affirm that the rights and remedies of Grantee
with respect to the security interest in the Patent Collateral granted hereby
are more fully set forth in the Security Agreement, the terms and provisions of
which are incorporated by reference herein as if fully set forth herein.
2
<PAGE> 156
IN WITNESS WHEREOF, Grantor has caused this Patent Security Agreement to be
duly executed by its officer thereunto duly authorized as of the ___th day of
_______________.
[NAME OF GRANTOR]
By:________________________
Name:
Title:
Acknowledged:
THE BANK OF NEW YORK,
as Administrative Agent
By: ___________________
Name:
Title:
3
<PAGE> 157
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, ___________________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that ______________________,
_________________________ of [NAME OF GRANTOR], personally known to me to be the
same person whose name is subscribed to the foregoing instrument as such
__________, appeared before me this day in person and acknowledged that he
signed, executed and delivered the said instrument as his own free and voluntary
act and as the free and voluntary act of said Company, for the uses and purposes
therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this __th day of __________.
[Seal]
__________________________
Signature of notary public
My Commission expires
1
<PAGE> 158
Schedule 1
to Patent
Security Agreement
U.S. PATENT REGISTRATIONS
-------------------------
Registration No. Registration Date Mark
- --------------- -------------------- -----
1
<PAGE> 159
EXCLUSIVE PATENT LICENSES
--------- ------ --------
Name of Parties Date of Subject
Agreement Licensor/Licensee Agreement Matter
- --------- ----------------- ----------- ---------
As Licensee
- -- --------
As Licensor
- -- --------
2
<PAGE> 160
EXHIBIT C TO
SECURITY AGREEMENT
FORM OF TRADEMARK SECURITY AGREEMENT
WHEREAS, [Name of Obligor], a _____________ corporation (herein referred to
as "Grantor") owns, or in the case of licenses, is a party to, the Trademark
Collateral (as defined below);
WHEREAS, Venator Group, Inc., the banks party thereto, the co-agents party
thereto, Bank of America National Trust & Savings Association, as Documentation
Agent, The Bank of New York, as Administrative Agent, LC Agent and Swingline
Bank and the Lead Arrangers party thereto are parties to a Credit Agreement
dated as of April 9, 1997 and amended and restated as of March 19, 1999 (as
amended or amended and restated from time to time, the "Credit Agreement"); and
WHEREAS, pursuant to the terms of a related Security Agreement dated as of
_____________, 1999 (as amended from time to time, the "Security Agreement")
among Venator Group, Inc., its Subsidiaries party thereto and The Bank of New
York, as Administrative Agent for the Secured Parties referred to therein (in
such capacity, together with its successors in such capacity, "Grantee"),
Grantor has granted to Grantee for the benefit of such Secured Parties a
continuing security interest in and to the assets of Grantor specified therein,
including all right, title and interest of Grantor in and to the Patent
Collateral, whether now owned or existing or hereafter acquired or arising, to
secure the Secured Obligations (as defined in the Security Agreement) of
Grantor;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee, to secure the Secured Obligations, a continuing security interest in
all of Grantor's right, title and interest in, to and under the following (all
of the following items or types of property being herein collectively referred
to as the "Trademark Collateral"), whether now owned or existing or hereafter
acquired or arising:
(i) each Trademark (as defined in the Security Agreement) owned by Grantor,
including, without limitation, each U.S. Trademark registration and application
referred to in Schedule 1 hereto, and the goodwill of the business symbolized
by, each Trademark;
1
<PAGE> 161
(ii) each Trademark License (as defined in the Security Agreement),
including, without limitation, each Trademark License identified in Schedule 1
hereto; and
(iii) all proceeds of, and all other profits, products, rents or receipts,
in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or other realization upon, any
Trademark Collateral described in clauses (i) and (ii), including without
limitation all claims against third parties for loss of, damage to or
destruction of, or any past, present or future dilution, infringement or
unauthorized use of, unfair competition with, or violation of intellectual
property rights in connection with or injury to, any such collateral or for
injury to the goodwill associated with any of the foregoing, in each case
whether now existing or hereafter arising.
Grantor hereby irrevocably constitutes and appoints Grantee and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full power and authority in the name of Grantor or in its
name, from time to time, in Grantee's discretion, so long as an Event of Default
has occurred and is continuing, to take with respect to the Trademark Collateral
any and all appropriate action which is permitted under the Security Agreement.
The foregoing security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor does
hereby further acknowledge and affirm that the rights and remedies of Grantee
with respect to the security interest in the Trademark Collateral granted hereby
are more fully set forth in the Security Agreement, the terms and provisions of
which are incorporated by reference herein as if fully set forth herein.
2
<PAGE> 162
IN WITNESS WHEREOF, Grantor has caused this Trademark Security Agreement to
be duly executed by its officer thereunto duly authorized as of the ___th day of
_______________.
[NAME OF GRANTOR]
By: _____________________
Name:
Title:
Acknowledged:
THE BANK OF NEW YORK,
as Administrative Agent
By:_____________________
Name:
Title:
3
<PAGE> 163
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, ___________________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that ______________________,
_________________________ of [NAME OF GRANTOR], personally known to me to be the
same person whose name is subscribed to the foregoing instrument as such
__________, appeared before me this day in person and acknowledged that he
signed, executed and delivered the said instrument as his own free and voluntary
act and as the free and voluntary act of said Company, for the uses and purposes
therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this __th day of __________.
[Seal]
__________________________
Signature of notary public
My Commission expires
1
<PAGE> 164
Schedule 1
to Trademark
Security Agreement
U.S. TRADEMARK REGISTRATIONS
------------------------------
Registration No. Registration Date Mark
- --------------- ----------------- ------
1
<PAGE> 165
EXCLUSIVE TRADEMARK LICENSES
Name of Parties Date of Subject
Agreement Licensor/Licensee Agreement Matter
- --------- ----------------- ---------- -------
As Licensee
- -----------
As Licensor
- ------------
2
<PAGE> 166
EXHIBIT G
PLEDGE AGREEMENT
AGREEMENT dated as of ____________, 1999 among Venator Group, Inc. a New
York corporation (with its successors, the "Company"), each of the Subsidiaries
of the Company listed on the signature pages hereof and each other Subsidiary of
the Company that may from time to time become a party hereto in accordance with
Section 23 (each, with its successors, a "Subsidiary Guarantor") and The Bank of
New York, as Administrative Agent (with its successors, the "Administrative
Agent").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company, the banks party thereto (the "Banks"), the co- agents
party thereto, Bank of America National Trust & Savings Association, as
Documentation Agent, The Bank of New York, as Administrative Agent, LC Agent and
Swingline Bank and the Lead Arrangers party thereto are parties to a Credit
Agreement dated as of April 9, 1997 and amended and restated as of March 19,
1999 (as amended or amended and restated from time to time, the "Credit
Agreement"); and
WHEREAS, the Subsidiary Guarantors and the Administrative Agent are parties
to a Guarantee Agreement dated as of March 19, 1999 (as amended from time to
time, the "Guarantee Agreement"); and
WHEREAS, pursuant to Section 5.20 of the Credit Agreement, the Company has
agreed to enter into, and to cause each of its Subsidiaries (subject to certain
exceptions set forth in the Credit Agreement) to enter into, a Pledge Agreement
substantially in the form hereof; and
WHEREAS, in consideration of the financial and other support that the
Company has provided, and such financial and other support as the Company may in
the future provide, to the Subsidiary Guarantors, the Subsidiary Guarantors are
willing to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE> 167
Section 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Cash Distributions" means dividends and other payments and distributions
made upon or with respect to the Pledged Stock in cash.
"Collateral" has the meaning assigned to such term in Section 3(a).
"Direct Subsidiary" means, with respect to each Obligor, any Subsidiary of
such Obligor whose capital stock or other equity interests are owned directly by
such Obligor.
"Excluded Subsidiary" means, with respect to each Obligor, any Direct
Subsidiary of such Obligor other than any such Direct Subsidiary which neither
transacts any substantial portion of its business nor regularly maintains any
substantial portion of its fixed assets within the United States, Canada or
Germany. An "Excluded Subsidiary" shall cease to be an "Excluded Subsidiary"
when the conditions set forth in the first sentence of Section 3(d) are
satisfied.
"Hedging Agreement" means any interest rate protection agreement, foreign
currency exchange agreement or other interest or currency exchange rate hedging
arrangement.
"Hedging Obligations" means, with respect to each Obligor, all obligations
of such Obligor under any Hedging Agreement between such Obligor and any Bank
Party (or any affiliate of any Bank Party).
"Issuer" means each Person listed on Schedule 1 and each Person that
becomes a Direct Subsidiary (other than an Excluded Subsidiary) of any Obligor
after the Effective Date.
"Obligor" means the Company or any Subsidiary Guarantor, and "Obligors"
means all of them.
"Pledged Equity Interests" means (i) the Subsidiary Equity Interests and
(ii) any other capital stock or other equity interests required to be pledged by
the Obligor to the Administrative Agent under this Agreement pursuant to
Sections 3(b), 3(c) or 3(d).
"Secured Obligations" means, with respect to each Obligor, (i) all
principal of and interest and premium (if any) on any Loan or Swingline Loan
2
<PAGE> 168
payable by such Obligor under, or any Note or Swingline Note issued by such
Obligor pursuant to, the Credit Agreement (including, without limitation, any
interest which accrues after or would accrue but for the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of such Obligor, whether or not allowed or allowable as a claim
in any such proceeding), (ii) all Reimbursement Obligations of such Obligor with
respect to any Letter of Credit issued pursuant to the Credit Agreement and all
interest payable by such Obligor thereon (including, without limitation, any
interest which accrues after or would accrue but for the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of such Obligor, whether or not allowed or allowable as a claim
in any such proceeding), (iii) if such Obligor is a Subsidiary Guarantor, all
amounts payable by such Obligor under the Guarantee Agreement, (iv) all other
amounts payable by such Obligor under the Loan Documents, (v) all Hedging
Obligations of such Obligor, and (vi) any amendments, restatements, renewals,
extensions or modifications of any of the foregoing; provided that the Secured
Obligations of each Subsidiary Guarantor described in clause (iii) above and any
amendment, restatement, renewal, extension or modification thereof described in
clause (vi) above (collectively, with respect to each Subsidiary Guarantor, such
Subsidiary Guarantor's "Subsidiary Guaranteed Obligations"), shall be
subordinate and junior in rank with respect to payment to the other Secured
Obligations of such Subsidiary Guarantor for purposes of this Pledge Agreement.
Pursuant to the proposed Amendment No. 4 to the Existing Credit Agreement, upon
satisfaction of the conditions precedent set forth therein, the Credit Agreement
will be amended and restated to include certain Subsidiaries of the Company as
borrowers under the Credit Agreement, and the parties hereto agree that, upon
effectiveness of such amendment and restatement, for purposes of the definition
of "Secured Obligations", the term "Obligors" will mean the Company, any of its
Subsidiaries that are borrowers under the Credit Agreement and the Subsidiary
Guarantors, and "Obligor" will mean any one of them.
"Secured Parties" means the Banks, the LC Agent, the Swingline Bank, the
Administrative Agent and the Lead Arrangers.
"Security Interests" means the security interests in the Collateral granted
hereunder securing the Secured Obligations.
"Subsidiary Equity Interests" means, with respect to each Issuer listed on
Schedule 1 hereto, the capital stock or other equity interests listed on
Schedule 1 hereto opposite such Issuer's name, which capital stock or other
equity interests constitute 65% of the aggregate outstanding capital stock or
other equity interests of such Issuer.
3
<PAGE> 169
Unless otherwise defined herein, or unless the context otherwise requires,
all terms used herein which are defined in the New York Uniform Commercial Code
as in effect on the date hereof shall have the meanings therein stated.
Section 2. Representations and Warranties. Each Obligor represents and
warrants as follows:
(a) Title to Pledged Equity Interests. Such Obligor owns all of its Pledged
Equity Interests, free and clear of any Liens other than the Security Interests
and Liens permitted under Section 5.06(a)(ix) of the Credit Agreement. All of
the Pledged Equity Interests of such Obligor have been duly authorized and
validly issued, and are fully paid and non-assessable, and are subject to no
options to purchase or similar rights of any Person. The Persons listed on
Schedule 1 under the name of such Obligor constitute all of the Persons that are
Direct Subsidiaries of such Obligor on the date hereof (other than any Excluded
Subsidiaries) and all of such Persons are wholly-owned Direct Subsidiaries
(excluding directors' qualifying shares). The Pledged Equity Interests of such
Obligor represent 65% of the aggregate capital stock and other equity interests
held by such Obligor of any Person that is a Direct Subsidiary (other than any
Excluded Subsidiary) and is a Foreign Subsidiary. Such Obligor is not and will
not become a party to or otherwise bound by any agreement, other than this
Agreement and any additional pledge agreements referred to in Section 2(b) which
restricts in any manner the rights of any present or future holder of any of the
Pledged Equity Interests of such Obligor with respect thereto.
(b) Validity, Perfection and Priority of Security Interests. (i) A UCC-1
financing statement naming such Obligor as debtor and the Administrative Agent
as secured party has been filed in each of the jurisdictions referred to in
Section 2(c) with respect to such Obligor.
[representation regarding steps needed to perfect in each foreign
jurisdiction to come once jurisdictions have been identified]
(ii) Other than as set forth in the preceding clauses of this Section, no
registration, recordation or filing with any governmental body, agency or
official or any other Person is required in connection with the execution or
delivery of this Agreement or necessary for the validity or enforceability
hereof or for the perfection or enforcement of the Security Interests in any of
the Collateral of any Obligor.
(iii) Neither such Obligor nor any of its Subsidiaries has performed or
will perform any acts which could reasonably be expected to prevent the
Administrative Agent from enforcing any of the terms and conditions of this
4
<PAGE> 170
Agreement or which would limit the Administrative Agent in any such enforcement.
(c) UCC Filing Locations. The chief executive office of each Obligor is
located at the address set forth on the signature pages hereof. With respect to
each Obligor, under the Uniform Commercial Code as in effect in the State in
which such office is located, a local filing in [ ] is required to perfect a
security interest consisting of general intangibles.
Section 3. Grant of the Security Interests. (a) In order to secure the full
and punctual payment of the Secured Obligations in accordance with the terms
thereof, each Obligor hereby collaterally assigns and pledges to and with the
Administrative Agent for the benefit of the Secured Parties and grants to the
Administrative Agent for the benefit of the Secured Parties security interests
in:
(i) the Pledged Equity Interests of such Obligor and all of its rights
and privileges with respect to such Pledged Equity Interests;
(ii) all interest, dividends, earnings, income, profits and other
payments and distributions with respect to any and all of the foregoing,
and all proceeds of any and all of the foregoing (the items in clauses (i)
through (ii), inclusive, being collectively referred to, with respect to
such Obligor, as the "Collateral" of such Obligor).
(b) In the event that any Person becomes a Direct Subsidiary (other than an
Excluded Subsidiary) of an Obligor after the date hereof, such Obligor will
promptly, and in any event within 45 days after such event (or such other number
of days as the Administrative Agent and such Obligor may agree to), pledge and
deposit with the Administrative Agent certificates representing shares of
capital stock or other equity interests of such Person held by such Obligor as
additional security for the Secured Obligations of such Obligor and take such
other steps as may be necessary or appropriate, or as the Administrative Agent
shall reasonably request, to ensure that such shares of capital stock or other
equity interests constitute additional security for the Secured Obligations of
such Obligor, and that the Security Interests therein are perfected, first
priority security interests; provided that no Obligor shall be required to
pledge or deposit any certificates or take any other steps pursuant to this
subsection (b) to the extent that after giving effect to any such pledge or
deposit, or the taking of any such step, shares of capital stock or other equity
interests representing more than 65% of the aggregate capital stock or other
equity interests of any Direct Subsidiary that is a Foreign Subsidiary would be
in pledge or deposit hereunder.
5
<PAGE> 171
(c) In the event that any Issuer at any time issues to any Obligor any
additional or substitute shares of capital stock of any class or any other
equity interests of any class such Obligor will promptly, and in any event
within 45 days after such event (or such other number of days as the
Administrative Agent and such Obligor may agree to), pledge and deposit with the
Administrative Agent certificates representing all such shares of capital stock
or other equity interests as additional security for the Secured Obligations of
such Obligor and take such other steps as may be necessary or appropriate, or as
the Administrative Agent shall reasonably request, to ensure that such shares of
capital stock or other equity interests constitute additional security for the
Secured Obligations of such Obligor, and that the Security Interests therein are
perfected, first priority security interests; provided that no Obligor shall be
required to pledge or deposit any certificates or take any other steps pursuant
to this subsection (c) to the extent that after giving effect to any such pledge
or deposit, or the taking of any such step, shares of capital stock or other
equity interests representing more than 65% of the aggregate capital stock or
other equity interests of any Direct Subsidiary that is a Foreign Subsidiary
would be in pledge or deposit hereunder.
(d) Any Excluded Subsidiary of any Obligor shall cease to be an Excluded
Subsidiary on the first day on which such Obligor shall be able to pledge the
capital stock or other equity interests of such Direct Subsidiary hereunder
without triggering a requirement to equally and ratably secure securities issued
under the Indenture. Promptly, and in any event within 45 days after any
Excluded Subsidiary of any Obligor shall cease to be an Excluded Subsidiary (or
such other number of days as the Administrative Agent and such Obligor may agree
to), such Obligor will pledge and deposit with the Administrative Agent
certificates representing shares of capital stock or other equity interests of
such Direct Subsidiary as additional security for the Secured Obligations of
such Obligor and take such other steps as may be necessary or appropriate, or as
the Administrative Agent shall reasonably request, to ensure that such shares of
capital stock or other equity interests constitute additional security for the
Secured Obligations of such Obligor, and that the Security Interests therein are
perfected, first priority security interests; provided that no Obligor shall be
required to pledge or deposit any certificates or take any other steps pursuant
to this subsection (d) to the extent that after giving effect to any such pledge
or deposit, or the taking of any such step, shares of capital stock or other
equity interests representing more than 65% of the aggregate capital stock or
other equity interests of any Direct Subsidiary that is a Foreign Subsidiary
would be in pledge or deposit hereunder.
(e) Any shares of capital stock or other equity interests pledged by any
Obligor to the Administrative Agent pursuant to subsections (b), (c) or (d)
6
<PAGE> 172
above constitute Pledged Equity Interests of such Obligor and are subject to all
provisions of this Agreement.
(f) The Security Interests are granted as security only and shall not
subject the Administrative Agent or any Secured Party to, or transfer or in any
way affect or modify, any obligation or liability of any Obligor or any of its
Subsidiaries with respect to any of the Collateral or any transaction in
connection therewith.
Section 4. Delivery of Pledged Equity Interests. Unless otherwise required
by the laws of any jurisdiction in order to perfect the Security Interests in
Collateral the perfection of which is governed by the laws of such jurisdiction,
all certificates representing Pledged Equity Interests of any Obligor shall be
delivered to the Administrative Agent in the State of New York by such Obligor
pursuant hereto and shall be in suitable form for transfer by delivery, or shall
be accompanied by duly executed instruments of transfer or assignment in blank,
and accompanied by any required transfer tax stamps, all in form and substance
reasonably satisfactory to the Administrative Agent.
Section 5. Further Assurances. Each Obligor agrees that it will, at its
expense and in such manner and form as the Administrative Agent may reasonably
require, execute, deliver, file and record any financing statement, specific
assignment, supplemental pledge agreement, confirmation or other paper and take
any other action that may be necessary or desirable, or that the Administrative
Agent may reasonably request, in order to create, preserve, perfect or validate
any Security Interest or to enable the Administrative Agent to exercise and
enforce its rights hereunder with respect to any of the Collateral of such
Obligor. Each Obligor agrees that it will not change its name, identity or
corporate structure in any manner or the location of its chief executive office
in the United States unless, in each case, it shall have given the
Administrative Agent not less than 30 days' prior notice thereof.
Section 6. Record Ownership of Pledged Equity Interests. If an Event of
Default shall have occurred and be continuing, the Administrative Agent may, in
its sole discretion, cause any or all of the Pledged Equity Interests to be
transferred of record into the name of the Administrative Agent or its nominee.
Each Obligor will promptly give to the Administrative Agent copies of any
notices or other communications received by it with respect to Pledged Equity
Interests registered in the name of such Obligor and the Administrative Agent
will promptly give to each Obligor copies of any notices and communications
received by the Administrative Agent with respect to Pledged Equity Interests of
such Obligor registered in the name of the Administrative Agent or its nominee.
7
<PAGE> 173
Section 7. Right to Receive Distributions on Collateral. The Administrative
Agent shall have the right to receive and, during the continuance of any Event
of Default, to retain as Collateral hereunder all dividends, interest and other
payments and distributions made upon or with respect to the Collateral of each
Obligor and each Obligor shall take all such action as the Administrative Agent
may deem necessary or appropriate to give effect to such right; provided that
unless an Event of Default has occurred and is continuing, the foregoing
sentence shall not apply to Cash Distributions. All such dividends, interest and
other payments and distributions which are received by any Obligor (except Cash
Distributions received when no Event of Default has occurred and is continuing)
shall be received in trust for the benefit of the Secured Parties and, if the
Administrative Agent so directs during the continuance of an Event of Default,
shall be segregated from other funds of such Obligor and shall, forthwith upon
demand by the Administrative Agent during the continuance of an Event of
Default, be paid over to the Administrative Agent as Collateral in the same form
as received (with any necessary endorsement). After all Events of Defaults have
been cured, the Administrative Agent's right to retain dividends, interest and
other payments and distributions (including Cash Distributions) under this
Section 7 shall cease and the Administrative Agent shall pay over to each
Obligor any such Collateral of such Obligor retained by it during the
continuance of an Event of Default.
Section 8. Right to Vote Pledged Equity Interests. Unless an Event of
Default shall have occurred and be continuing, each Obligor shall have the
right, from time to time, to vote and to give consents, ratifications and
waivers with respect to its Pledged Equity Interests, and the Administrative
Agent shall, upon receiving a written request from any Obligor accompanied by a
certificate signed by a Responsible Officer of the Company stating that no Event
of Default has occurred and is continuing, deliver to such Obligor or as
specified in such request such proxies, powers of attorney, consents,
ratifications and waivers in respect of any of its Pledged Equity Interests
which is registered in the name of the Administrative Agent or its nominee as
shall be specified in such request and be in form and substance satisfactory to
the Administrative Agent.
If an Event of Default shall have occurred and be continuing, the
Administrative Agent shall have the right to the extent permitted by law and
each Obligor shall take all such action as may be necessary or appropriate to
give effect to such right, to vote and to give consents, ratifications and
waivers, and take any other action with respect to any or all of the Pledged
Equity Interests of such Obligor with the same force and effect as if the Agent
were the absolute and sole owner thereof.
8
<PAGE> 174
Section 9. General Authority. Each Obligor hereby irrevocably appoints the
Administrative Agent its true and lawful attorney, with full power of
substitution, in the name of such Obligor, the Administrative Agent, the Secured
Parties or otherwise, for the sole use and benefit of the Secured Parties, but
at the expense of such Obligor, to the extent permitted by law, to exercise at
any time and from time to time while an Event of Default has occurred and is
continuing, all or any of the following powers with respect to all or any of the
Collateral:
(a) to demand, sue for, collect, receive and give acquittance for any and
all monies due or to become due upon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto,
(c) to sell, transfer, assign or otherwise deal in or with the same or the
proceeds or avails thereof, as fully and effectually as if the Administrative
Agent were the absolute owner thereof, and
(d) to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto;
provided that the Administrative Agent shall give each Obligor not less than ten
days' prior notice of the time and place of any sale or other intended
disposition of any of the Collateral of such Obligor. The Administrative Agent
and each Obligor agree that such notice constitutes "reasonable notification"
within the meaning of Section 9-504(3) of the Uniform Commercial Code.
Section 10. Remedies upon Event of Default. If any Event of Default shall
have occurred and be continuing, the Administrative Agent may exercise on behalf
of the Secured Parties all the rights of a secured party after default under the
Uniform Commercial Code (whether or not in effect in the jurisdiction where such
rights are exercised) and, in addition, the Administrative Agent may, without
being required to give any notice, except as herein provided or as may be
required by mandatory provisions of law, (i) withdraw all cash, if any, then
held by it as Collateral and apply it as specified in Section 13 and (ii) if
there shall be no such cash or if such cash shall be insufficient to pay all the
Secured Obligations in full, sell the Collateral or any part thereof at public
or private sale or at any broker's board or on any securities exchange, for
cash, upon credit or for future delivery, and at such price or prices as the
Administrative Agent may reasonably deem satisfactory. Any Secured Party may be
the purchaser of any or all of the Collateral so sold at any public sale (or, if
the Collateral is of a type customarily sold in a recognized market or is of a
type which is the subject of widely distributed standard price quotations, at
any private sale).
9
<PAGE> 175
The Administrative Agent is authorized, in connection with any such sale, if it
deems it advisable so to do, (a) to restrict the prospective bidders on or
purchasers of any of the Pledged Equity Interests to a limited number of
sophisticated investors who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
sale of any of such Pledged Equity Interests, (b) to cause to be placed on
certificates for any or all of the Pledged Equity Interests or on any other
securities pledged hereunder a legend to the effect that such security has not
been registered under the Securities Act of 1933, as amended, and may not be
disposed of in violation of the provision of said Act, and (c) to impose such
other limitations or conditions in connection with any such sale as the
Administrative Agent reasonably deems necessary or advisable in order to comply
with said Act or any other law. Each Obligor will execute and deliver such
documents and take such other action as the Administrative Agent reasonably
deems necessary or advisable in order that any such sale may be made in
compliance with law. Upon any such sale the Administrative Agent shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral so
sold. Each purchaser at any such sale shall hold the Collateral so sold
absolutely and free from any claim or right of whatsoever kind, including any
equity or right of redemption of any Obligor which may be waived, and each
Obligor, to the extent permitted by law, hereby specifically waives all rights
of redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice of such sale required by Section 9
shall (1) in the case of a public sale, state the time and place fixed for such
sale, (2) in the case of a sale at a broker's board or on a securities exchange,
state the board or exchange at which such sale is to be made and the day on
which the Collateral, or the portion thereof so being sold, will first be
offered for sale at such board or exchange, and (3) in the case of a private
sale, state the day after which such sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Administrative Agent may fix in the notice of such
sale. At any such sale the Collateral may be sold in one lot as an entirety or
in separate parcels, as the Administrative Agent may determine. The
Administrative Agent shall not be obligated to make any such sale pursuant to
any such notice. The Administrative Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned, subject
to the Administrative Agent giving the notice required to be given pursuant to
Section 9. In the case of any sale of all or any part of the Collateral on
credit or for future delivery, the Collateral so sold may be retained by the
Administrative Agent until the selling price is paid by the purchaser thereof,
but the Administrative Agent shall not incur any liability in the case of the
failure of such purchaser to take up and pay for the Collateral so sold and, in
the case of any such failure, such Collateral may again be sold upon like
notice.
10
<PAGE> 176
The Administrative Agent, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
Section 11. Expenses. Each Obligor agrees that it will forthwith upon
demand pay to the Administrative Agent:
(a) the amount of any taxes which the Administrative Agent may have been
required to pay by reason of the Security Interests or to free any of the
Collateral of such Obligor from any Lien thereon, and
(b) the amount of any and all out-of-pocket expenses, including the
reasonable fees and disbursements of counsel and of any other experts, which the
Administrative Agent may incur in connection with (i) the enforcement of this
Agreement, including such expenses as are incurred to preserve the value of the
Collateral of such Obligor and the validity, perfection, rank and value of any
Security Interest, (ii) the collection, sale or other disposition of any of the
Collateral of such Obligor, (iii) the exercise by the Administrative Agent of
any of the rights conferred upon it hereunder, or (iv) any Default.
Any such amount not paid in a timely manner shall bear interest at the rate
applicable to Base Rate Loans from time to time and shall be an additional
Secured Obligation hereunder.
Section 12. Limitation on Duty of Administrative Agent in Respect of
Collateral. Beyond the exercise of reasonable care in the custody thereof, the
Administrative Agent shall have no duty as to any Collateral in its possession
or control or in the possession or control of any agent or bailee or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. The Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which it accords its own property, and shall not be liable or responsible
for any loss or damage to any of the Collateral, or for any diminution in the
value thereof, by reason of the act or omission of any agent or bailee selected
by the Administrative Agent in good faith.
Section 13. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral pledged by any Obligor shall
be applied by the Administrative Agent in the following order of priorities:
11
<PAGE> 177
first, to pay the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the
Administrative Agent, and all expenses, liabilities and advances incurred
or made by the Administrative Agent in connection therewith, and any other
unreimbursed expenses for which any Secured Party is to be reimbursed
pursuant to the Credit Agreement (including without limitation Section
9.03(a) thereof) or Section 11 hereof and any unpaid fees owing to any
Secured Party under the Loan Documents;
second, to the ratable payment of accrued but unpaid interest on the
Secured Obligations of such Obligor (other than, in the case of any
Subsidiary Guarantor, its Subsidiary Guaranteed Obligations) in accordance
with the provisions of the Credit Agreement;
third, to the ratable payment of unpaid principal of, and
reimbursement obligations constituting, the Secured Obligations of such
Obligor (other than, in the case of any Subsidiary Guarantor, its
Subsidiary Guaranteed Obligations);
fourth, in the case of any Subsidiary Guarantor, to the ratable
payment of accrued but unpaid interest on its Subsidiary Guaranteed
Obligations, until all such Secured Obligations shall have been paid in
full;
fifth, in the case of any Subsidiary Guarantor, to the ratable payment
of unpaid principal of, and reimbursement obligations constituting its
Subsidiary Guaranteed Obligations, until all such Secured Obligations shall
have been paid in full;
sixth, to pay ratably all other Secured Obligations, until all Secured
Obligations shall have been paid in full; and
finally, to pay to such Obligor or its successors or assigns, or as a
court of competent jurisdiction may direct, any surplus then remaining from
such proceeds.
The Administrative Agent may make distributions hereunder in cash or in kind or,
on a ratable basis, in any combination thereof. For purposes of making any
distribution hereunder, the principal amount of any Hedging Obligation shall be
the amount of the relevant Obligor's Hedging Obligations due and payable at the
time such distribution is made.
12
<PAGE> 178
Section 14. Concerning the Administrative Agent. The provisions of Article
7 of the Credit Agreement shall inure to the benefit of the Administrative Agent
in respect of this Agreement and shall be binding upon the parties to the Credit
Agreement and the parties hereto in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Administrative Agent
therein set forth:
(a) The Administrative Agent is authorized to take all such action as is
provided to be taken by it as Administrative Agent hereunder and all other
action reasonably incidental thereto. As to any matters not expressly provided
for herein (including, without limitation, the timing and methods of realization
upon the Collateral) the Administrative Agent shall act or refrain from acting
in accordance with written instructions from the Required Banks or, in the
absence of such instructions, in accordance with its discretion.
(b) The Administrative Agent shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity, perfection,
priority or enforceability of the Security Interests in any of the Collateral,
whether impaired by operation of law or by reason of any action or omission to
act on its part hereunder. The Administrative Agent shall have no duty to
ascertain or inquire as to the performance or observance of any of the terms of
this Agreement by any Obligor.
Section 15. Appointment of Co-agents. At any time or times, in order to
comply with any legal requirement in any jurisdiction, the Administrative Agent
may appoint another bank or trust company or one or more other persons, either
to act as co-agent or co-agents, jointly with the Administrative Agent, or to
act as separate agent or agents on behalf of the Secured Parties with such power
and authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment (which may, in the
discretion of the Administrative Agent, include provisions for the protection of
such co-agent or separate agent similar to the provisions of Section 14).
Section 16. Termination of Security Interests; Release of Collateral. (a)
Upon the repayment in full of all Secured Obligations (other than those
described in clause (v) of the definition thereof and any amendments,
restatements, renewals, extensions or modifications thereof), the termination of
the Commitments under the Credit Agreement and the termination or cancellation
of all Letters of Credit (unless such Letters of Credit have been fully cash
collateralized pursuant to arrangements satisfactory to the LC Agent, or back-
stopped by a separate letter of credit, in form and substance and issued by an
issuer satisfactory to the LC Agent), the Security Interests shall terminate and
all rights to the Collateral of each Obligor shall revert to such Obligor.
13
<PAGE> 179
(b) Upon the consummation of any Asset Sale (or any sale or other
disposition described in clause (iv) of the definition of Asset Sale) permitted
by the terms of the Credit Agreement and consisting of the disposition of any
Collateral or of the capital stock of any Obligor other than the Company (any
such transaction, a "Permitted Collateral Sale"), the Security Interests in such
Collateral or in the Collateral pledged by such Obligor, as the case may be (but
not, in any case, in any Proceeds thereof) shall be released. Such release shall
not be subject to the consent of any Bank, and the Administrative Agent shall be
fully protected in relying on a certificate of an Obligor as to whether any
particular transaction consummated by such Obligor constitutes a Permitted
Collateral Sale.
(c) In addition to the release of Collateral effected by subsection (b), at
any time and from time to time prior to the termination of the Security
Interests, the Administrative Agent may release any of the Collateral with the
prior written consent of the Required Banks; provided that the Administrative
Agent may release all or substantially all of the Collateral (for purposes of
this subsection (c), as defined in the Credit Agreement) only with the prior
written consent of all the Banks.
(d) Upon any termination of the Security Interests or release of Collateral
in accordance with this Section, the Administrative Agent will, at the expense
of the relevant Obligor, execute and deliver to such Obligor such documents as
such Obligor shall reasonably request to evidence the termination of the
Security Interests or the release of such Collateral, as the case may be.
Section 17. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile or similar writing) and
shall be given to such party at its address or facsimile number set forth on the
signature pages hereof or at such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the Administrative
Agent and the Company. Each such notice, request or other communication shall be
effective (i) if given by facsimile, when transmitted to the facsimile number
referred to in this Section and confirmation of receipt is received, or (ii) if
given by any other means, when delivered at the address referred to in this
Section.
Section 18. Waivers, Non-Exclusive Remedies. No failure on the part of the
Administrative Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent of any right under this Agreement or any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
in this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law.
14
<PAGE> 180
Section 19. Successors and Assigns. This Agreement shall be binding upon
each Obligor and its successors and permitted assigns. This Agreement is for the
benefit of each Secured Party and its successors and permitted assigns, and in
the event of an assignment of all or any of any Bank's interest in and to its
rights and obligations under the Credit Agreement in accordance with the Credit
Agreement, the assignor's rights hereunder, to the extent applicable to the
indebtedness or obligation so assigned, shall automatically be transferred with
such indebtedness or obligation.
Section 20. Changes in Writing. Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by each Obligor and the Administrative Agent, subject to the provisions
of Section 9.05(b) of the Credit Agreement.
Section 21. New York Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, except as otherwise
required by mandatory provisions of law and except to the extent that remedies
provided by the laws of any jurisdiction other than New York are governed by the
laws of such jurisdiction.
Section 22. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Secured Parties in
order to carry out the intentions of the parties hereto as nearly as may be
possible; and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
Section 23. Additional Obligors. Any Subsidiary Guarantor may become an
Obligor party hereto and bound hereby by executing a counterpart hereof and
delivering the same to the Administrative Agent.
Section 24. 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 OR THE TRANSACTIONS CONTEMPLATED HEREBY.
15
<PAGE> 181
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:________________________
Name:
Title:
EASTBAY, INC.
EVENATOR, INC.
FOOT LOCKER JAPAN, INC.
GEORGETOWN CONSTRUCTION
CORPORATION
NORTHERN REFLECTIONS, INC.
RETAIL COMPANY OF GERMANY,
INC.
RICHMAN BROTHERS COMPANY
ROBBY'S SPORTING GOODS, INC.
TEAM EDITION APPAREL, INC.
THE SAN FRANCISCO MUSIC BOX
COMPANY
VENATOR GROUP CORPORATE
SERVICES, INC.
VENATOR GROUP HOLDINGS, INC.
VENATOR GROUP RETAIL, INC.
VENATOR GROUP SOURCING, INC.
VENATOR GROUP SPECIALITY, INC.
By:________________________________
Name:
Title:
16
<PAGE> 182
THE BANK OF NEW YORK, as
Administrative Agent
By:______________________________
Name:
Title:
17
<PAGE> 183
Schedule 1
Stock Pledged by Venator Group, Inc.
<TABLE>
<CAPTION>
=====================================================================================================
Issuer Number of Shares Certificate Number
=====================================================================================================
<S> <C> <C>
Venator Group (Australia) Ltd.
- -----------------------------------------------------------------------------------------------------
Foot Locker Austria GmbH
- -----------------------------------------------------------------------------------------------------
Foot Locker Belgium N.V.
- -----------------------------------------------------------------------------------------------------
Foot Locker Denmark ApS
- -----------------------------------------------------------------------------------------------------
Foot Locker Europe, B.V.
- -----------------------------------------------------------------------------------------------------
Foot Locker France S.A.
- -----------------------------------------------------------------------------------------------------
Foot Locker Italy S.r.l.
- -----------------------------------------------------------------------------------------------------
Foot Locker Japan K.K.
- -----------------------------------------------------------------------------------------------------
Foot Locker Netherlands B.V.
- -----------------------------------------------------------------------------------------------------
Foot Locker Spain S.L.
- -----------------------------------------------------------------------------------------------------
Foot Locker Sweden AB
- -----------------------------------------------------------------------------------------------------
Foot Locker UK Limited
- -----------------------------------------------------------------------------------------------------
Woolworth Holding S.A. de C.V.
======================================================================================================
</TABLE>
<PAGE> 184
EXHIBIT H
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT dated as of March ___, 1999 among each of the
Subsidiaries of the Company (as defined below) listed on the signature pages
hereof and each other Subsidiary of the Company that may from time to time
become a party hereto in accordance with Section 19 (each such Subsidiary, with
its successors, a "Subsidiary Guarantor") and The Bank of New York, as
Administrative Agent (with its successors, the "Administrative Agent"), for the
benefit of the Bank Parties (as defined in the Credit Agreement referred to
below).
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Venator Group, Inc., a New York corporation (with its successors,
the "Company"), the banks party thereto (the "Existing Banks"), the co-agents
party thereto, Bank of America National Trust & Savings Association, as
Documentation Agent and The Bank of New York, as Administrative Agent, LC Agent
and Swingline Bank are parties to a Credit Agreement dated as of April 9, 1997
(as in effect immediately prior to the effectiveness of Amendment No. 3 referred
to below, the "Existing Credit Agreement" and, as amended by Amendment No. 3 and
as further amended or amended and restated from time to time, the "Credit
Agreement"); and
WHEREAS, pursuant to Amendment No. 3 to the Existing Credit Agreement dated
as of the date hereof ("Amendment No. 3") among the Company, the Existing Banks,
the co-agents party thereto, Bank of America National Trust & Savings
Association, as Documentation Agent, The Bank of New York, as Administrative
Agent, LC Agent and Swingline Bank and the Lead Arrangers party thereto, the
parties to the Existing Credit Agreement desire to amend and restate the
Existing Credit Agreement as provided therein, subject to satisfaction of the
conditions set forth therein; and
WHEREAS, it is a condition to effectiveness of the amendment to the
Existing Credit Agreement effected by Amendment No. 3 that each Subsidiary
Guarantor enter into a Guarantee Agreement substantially in the form hereof; and
WHEREAS, in consideration of the financial and other support that the
Company has provided, and such financial and other support as the Company may in
the future provide, to the Subsidiary Guarantors, the Subsidiary Guarantors are
willing to enter into this Guarantee Agreement;
<PAGE> 185
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein, except that the term "Loan Documents" shall include any document
with respect to any Hedging Obligations. Pursuant to the proposed Amendment No.
4 to the Existing Credit Agreement ("Amendment No. 4"), upon satisfaction of the
conditions precedent set forth therein, the Credit Agreement will be amended and
restated to include certain Subsidiaries of the Company as borrowers under the
Credit Agreement, and the parties hereto agree that, upon effectiveness of such
amendment and restatement, the term "Obligors" will mean the Company, any of its
Subsidiaries that are borrowers under the Credit Agreement and the Subsidiary
Guarantors, and "Obligor" will mean any one of them. The following additional
terms, as used herein, have the following meanings:
"Guaranteed Obligations" means, with respect to each Subsidiary Guarantor,
(i) all principal of and interest and premium (if any) on any Loan or Swingline
Loan payable by the Company or any other Obligor (other than such Subsidiary
Guarantor) under, or any Note or Swingline Note issued pursuant to, the Credit
Agreement (including, without limitation, any interest which accrues after or
would accrue but for the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of the Company or such
other Obligor, whether or not allowed or allowable as a claim in any such
proceeding), (ii) all Reimbursement Obligations of the Company or any other
Obligor (other than such Subsidiary Guarantor) with respect to any Letter of
Credit issued pursuant to the Credit Agreement and all interest payable by the
Company or such other Obligor thereon (including, without limitation, any
interest which accrues after or would accrue but for the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company or such other Obligor, whether or not allowed or
allowable as a claim in any such proceeding), (iii) all Hedging Obligations of
the Company or any other Obligor (other than such Subsidiary Guarantor), (iv)
all other amounts payable by the Company or any other Obligor (other than such
Subsidiary Guarantor) under the Loan Documents and (v) any renewals, extensions
or modifications of any of the foregoing.
"Hedging Agreement" means any interest rate protection agreement, foreign
currency exchange agreement or other interest or currency exchange rate hedging
arrangement.
2
<PAGE> 186
"Hedging Obligations" means, with respect to any Obligor, all obligations
of such Obligor under any Hedging Agreement between such Obligor and any Bank
Party (or any affiliate of any Bank Party).
Section 2. The Guarantees. Each of the Subsidiary Guarantors, jointly and
severally, hereby unconditionally guarantees the full and punctual payment when
due (whether at stated maturity, upon acceleration or otherwise) of the
Guaranteed Obligations. Upon failure by any Obligor to pay punctually any
Guaranteed Obligation when due, each Subsidiary Guarantor agrees jointly and
severally that it shall forthwith on demand pay such Guaranteed Obligation at
the place and in the manner specified in the Credit Agreement or the other
relevant Loan Document, as the case may be.
Section 3. Guarantees Unconditional. The obligations of each Subsidiary
Guarantor hereunder shall be unconditional and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of any Obligor or any other Person under any Loan
Document, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to any Loan Document or
any Letter of Credit (including without limitation any amendment and restatement
of the Credit Agreement pursuant to the proposed Amendment No. 4, a copy of
which has been delivered to such Subsidiary Guarantor);
(iii) any release, impairment, non-perfection or invalidity of any direct
or indirect security for any obligation of any Obligor or any other Person under
any Loan Document or with respect to any Letter of Credit;
(iv) any change in the corporate existence, structure or ownership of any
Obligor or any other Person or any of their respective subsidiaries, or any
insolvency, bankruptcy, reorganization or other similar proceeding affecting any
Obligor or any other Person or any of their respective subsidiaries or any of
their respective assets or any resulting release or discharge of any obligation
of any Obligor or any other Person contained in any Loan Document;
(v) the existence of any claim, set-off or other rights which such
Subsidiary Guarantor may have at any time against any other Obligor or any Bank
Party, whether in connection herewith or with any unrelated transactions;
3
<PAGE> 187
provided that nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against any Obligor
or any other Person for any reason of any Loan Document or any Letter of Credit,
or any provision of applicable law or regulation purporting to prohibit the
payment by any Obligor or any other Person of the principal of or interest on
any Loan, any Swingline Loan, any Note, any Swingline Note or any Reimbursement
Obligation or any other amount payable by any Obligor under any Loan Document;
or
(vii) any other act or omission to act or delay of any kind by any Obligor,
any Bank Party or any other party to any Loan Document, or any other
circumstance whatsoever which might, but for the provisions of this Section,
constitute a legal or equitable discharge of or defense to obligations of such
Subsidiary Guarantor hereunder.
Section 4. Discharge Only upon Payment in Full; Reinstatement In Certain
Circumstances; Release of Subsidiary Guarantors. (a) Each Subsidiary Guarantor's
obligations hereunder shall remain in full force and effect until the repayment
in full of all Guaranteed Obligations, the termination of all Commitments under
the Credit Agreement and the expiration or cancellation of all Letters of Credit
(unless such Letters of Credit have been fully cash collateralized pursuant to
arrangements satisfactory to the LC Agent, or back-stopped by a separate letter
of credit, in form and substance and issued by an issuer satisfactory to the LC
Agent). If at any time any payment of any Guaranteed Obligation is rescinded or
must be otherwise restored or returned upon the insolvency or receivership of
the Company or any other Obligor or otherwise, each Subsidiary Guarantor's
obligations hereunder with respect thereto shall be reinstated as though such
payment had been due but not made at such time.
(b) Upon (w) the consummation of any Asset Sale (or any sale or other
disposition described in clause (iv) of the definition of Asset Sale) permitted
by the terms of the Credit Agreement and consisting of the disposition of all of
the capital stock of a Subsidiary Guarantor (any such transaction, a "Guarantor
Asset Sale"), (x) if applicable, application of the proceeds of such Guarantor
Asset Sale in accordance with the provisions of the Credit Agreement, (y)
release of such Subsidiary Guarantor from its obligations under any Guarantee of
any other Debt of the Company or any of its Subsidiaries (including without
limitation any New Subordinated Debt, any Other Refinancing Debt or any Debt of
the Company described in clause (v) of the parenthetical set forth in Section
5.09 of the Credit Agreement) (or automatic termination of the obligations of
such Subsidiary Guarantor under any such Guarantee) and (z) if such Subsidiary
4
<PAGE> 188
Guarantor is a borrower under the Credit Agreement, repayment in full of all
outstanding Loans made to it and all Reimbursement Obligations owed by it and
cancellation or termination of all Letters of Credit issued for its account (or
the assumption on the terms set forth in the Credit Agreement by the Company or
any other borrower under the Credit Agreement of the reimbursement obligations
with respect to such Letters of Credit), such Subsidiary Guarantor shall be
released from all of its obligations hereunder (and such release shall not
require the consent of any Bank Party). The Administrative Agent shall be fully
protected in relying on a certificate of the Company as to whether any
particular transaction constitutes a Guarantor Asset Sale, whether the proceeds
of such Guarantor Asset Sale have been applied in accordance with the provisions
of the Credit Agreement, and whether the releases from, or termination of, any
applicable Guarantees by such Subsidiary Guarantor have been effected.
(c) In addition to the release of any Subsidiary Guarantor from its
obligations hereunder permitted pursuant to subsection (b), at any time and from
time to time prior to the termination of each Subsidiary Guarantor's obligations
hereunder, the Administrative Agent may release any Subsidiary Guarantor from
its obligations hereunder with the prior written consent of the Required Banks;
provided that any release of all or substantially all of the Subsidiary
Guarantors shall require the consent of all of the Banks.
Section 5. Waiver by the Subsidiary Guarantors. Each Subsidiary Guarantor
irrevocably waives acceptance hereof, presentment, demand, protest and any
notice, as well as any requirement that at any time any action be taken by any
Person against such Subsidiary Guarantor, any other Subsidiary Guarantor, the
Company or any other Person.
Section 6. Subrogation and Contribution. Upon making any payment hereunder
with respect to the obligations of any Obligor, each Subsidiary Guarantor shall
be subrogated to the rights of the payee against such Obligor with respect to
the portion of such obligation paid by such Subsidiary Guarantor; provided that
such Subsidiary Guarantor shall not enforce any payment by way of subrogation,
or by reason of contribution, against any other guarantor of the Guaranteed
Obligations (including without limitation any other Subsidiary Guarantor), until
the repayment in full of all Guaranteed Obligations of all Subsidiary
Guarantors, the termination of the Commitments under the Credit Agreement and
the expiration or cancellation of all Letters of Credit (unless such Letters of
Credit have been fully cash collateralized pursuant to arrangements satisfactory
to the LC Agent, or back-stopped by a separate letter of credit, in form and
substance and issued by an issuer satisfactory to the LC Agent).
5
<PAGE> 189
Section 7. Stay of Acceleration. If acceleration of the time for payment of
any Guaranteed Obligations payable by any Subsidiary Guarantor is stayed upon
the insolvency, bankruptcy or reorganization of such Subsidiary Guarantor or
otherwise, all such Guaranteed Obligations otherwise subject to acceleration
under the terms of any Loan Document shall nonetheless be payable by each other
Subsidiary Guarantor hereunder forthwith on demand by the Administrative Agent
made at the request of the Required Banks.
Section 8. Representations and Warranties. Each Subsidiary Guarantor
represents and warrants that:
(a) Such Subsidiary Guarantor 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.
(b) The execution, delivery and performance by such Subsidiary Guarantor of
this Guarantee Agreement are within such Subsidiary Guarantor'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 such Subsidiary Guarantor or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Company or any of its Subsidiaries
or result in the creation or imposition of any Lien on any asset of the Company
or any of its Subsidiaries.
(c) This Guarantee Agreement constitutes a valid and binding agreement of
such Subsidiary Guarantor.
(d) The obligations of such Subsidiary Guarantor hereunder rank (i) senior
to any other Debt of such Subsidiary Guarantor with respect to the collateral
pledged by such Subsidiary Guarantor, (ii) pari passu with other unsecured Debt
of such Subsidiary Guarantor (other than any such Debt described in clause
(iii)) with respect to any assets of such Subsidiary Guarantor (other than any
collateral referred to in clause (i)) and (iii) senior to any other Debt of such
Subsidiary Guarantor which by its terms is subordinated thereto, including
without limitation any Guarantee of any New Subordinated Debt granted by such
Guarantor.
6
<PAGE> 190
Section 9. Amendments. Any provision of this Guarantee Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by each Subsidiary Guarantor and the Administrative Agent, subject to the
provisions of Section 9.05(b) of the Credit Agreement.
Section 10. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile or similar writing) and
shall be given to such party at its address or facsimile number set forth on the
signature pages hereof or at such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the Administrative
Agent and the Company. Each such notice, request or other communication shall be
effective (i) if given by facsimile, when transmitted to the facsimile number
referred to in this Section and confirmation of receipt is received, or (ii) if
given by any other means, when delivered at the address referred to in this
Section.
Section 11. Taxes. Each Subsidiary Guarantor agrees to be bound by the
provisions of Section 8.04 of the Credit Agreement with respect to any payments
made by such Subsidiary Guarantor under this Guarantee Agreement.
Section 12. Continuing Guarantees. This Guarantee Agreement is a continuing
Guarantee of each Subsidiary Guarantor and shall be binding upon each Subsidiary
Guarantor and its successors and assigns. This Guarantee Agreement is for the
benefit of each Bank Party and its successors and permitted assigns, and in the
event of an assignment of all or any of any Bank's interest in and to its rights
and obligations under the Credit Agreement in accordance with the Credit
Agreement, the assignor's rights hereunder, to the extent applicable to the
indebtedness or obligation so assigned, shall automatically be transferred with
such indebtedness or obligation.
Section 13. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Bank Parties in
order to carry out the intentions of the parties hereto as nearly as may be
possible, and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
Section 14. Limitation on the Obligations of Subsidiary Guarantors. The
obligations of each Subsidiary Guarantor hereunder shall be limited to an
aggregate amount that is equal to the largest amount that would not render the
obligations of such Subsidiary Guarantor hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
applicable law.
7
<PAGE> 191
Section 15. Governing Law; Jurisdiction. This Guarantee Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York. Each Subsidiary Guarantor 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 Guarantee Agreement or the
transactions contemplated hereby. Each Subsidiary Guarantor 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 16. Appointment of Agent for Service Of Process. (a) Each
Subsidiary Guarantor hereby irrevocably designates, appoints, authorizes and
empowers as its agent for service of process, the secretary of Venator Group,
Inc. to accept and acknowledge for and on behalf of such Subsidiary Guarantor
service of any and all process, notices or other documents that may be served in
any suit, action or proceeding relating hereto in any New York State or Federal
court sitting in The State of New York.
(b) In lieu of service upon its agent, each Subsidiary Guarantor consents
to process being served in any suit, action or proceeding relating hereto by
mailing a copy thereof by registered or certified air mail, postage prepaid,
return receipt requested, to its address set forth on the signature pages
hereof, provided that a copy thereof is mailed concurrently to the Secretary of
Venator Group, Inc. Each Subsidiary Guarantor agrees that such service (1) shall
be deemed in every respect effective service of process upon it in any such
suit, action or proceeding and (2) shall, to the fullest extent permitted by
law, be taken and held to be valid personal service upon and personal delivery
to it.
(c) Nothing in this Section shall affect the right of any party hereto to
serve process in any manner permitted by law, or limit any right that any party
hereto may have to bring proceedings against any other party hereto in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
Section 17. 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 GUARANTEE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
8
<PAGE> 192
Section 18. Counterparts. This Guarantee 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 19. Additional Guarantors. Any Subsidiary may become a Subsidiary
Guarantor party hereto and bound hereby by executing a counterpart hereof and
delivering the same to the Administrative Agent.
9
<PAGE> 193
IN WITNESS WHEREOF, the parties hereto have caused this Guarantee Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
EASTBAY, INC.
eVENATOR, INC.
FOOT LOCKER JAPAN, INC.
NORTHERN REFLECTIONS INC.
THE RICHMAN BROTHERS COMPANY
ROBBY'S SPORTING GOODS, INC.
TEAM EDITION APPAREL, INC.
THE SAN FRANCISCO MUSIC BOX COMPANY
VENATOR GROUP CORPORATE SERVICES,
INC.
VENATOR GROUP HOLDINGS, INC.
VENATOR GROUP RETAIL, INC.
VENATOR GROUP SOURCING, INC.
VENATOR GROUP SPECIALITY, INC.
By:______________________________________
Name:
Title:
RETAIL COMPANY OF GERMANY, INC.
By:______________________________________
Name:
Title:
THE BANK OF NEW YORK,
as Administrative Agent
By____________________________
Name:
Title:
<PAGE> 194
EXHIBIT I
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, ____ among [ASSIGNOR] (the "Assignor") and
[ASSIGNEE] (the "Assignee").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates
to the Credit Agreement dated as of April 9, 1997 and amended and restated as of
March 19, 1999 among Venator Group, Inc., the Banks Party thereto, Co-Agents
party thereto, Bank of America National Trust & Savings Association, as
Documentation Agent, The Bank of New York as Administrative Agent, LC Agent and
Swingline Bank and the Lead Arrangers party thereto (as further amended from
time to time, the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Committed Loans to the Borrower and participate in Letters of
Credit issued for the account of the Borrower in an aggregate amount at any time
outstanding not to exceed $__________;
WHEREAS, Committed Loans made to the Borrower by the Assignor under the
Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof; and 1/
WHEREAS, the Assignor proposes to assign to the Assignee all of the rights
of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $__________ 2/ (the "Assigned
Amount"), together with a corresponding portion of its outstanding Committed
Loans and LC Exposure, and the Assignee proposes to accept assignment of such
rights and assume the corresponding obligations from the Assignor on such terms;
- --------
1 This clause (and certain other provisions herein) should be modified to
reflect the assignment of Money Market Loans if such Loans are being
assigned.
2 Must be in an amount of not less than $5,000,000 if the Assignee was not a
Bank immediately prior to such assignment.
1
<PAGE> 195
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined herein
have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
and purchases such rights from the Assignor and assumes all of the obligations
of the Assignor under the Credit Agreement to the extent of the Assigned Amount,
including the purchase from the Assignor of the corresponding portion of the
principal amount of the Committed Loans made by, and the LC Exposure of, the
Assignor outstanding at the date hereof. Upon the execution and delivery hereof
by the Assignor, the Assignee, [the Borrower]3/ and the Administrative Agent and
the payment of the amounts specified in Section 3 hereof required to be paid on
the date hereof (i) the Assignee shall, as of the date hereof, succeed to the
rights and be obligated to perform the obligations of a Bank under the Credit
Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii)
the Commitment of the Assignor shall, as of the date hereof, be reduced by a
like amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee. The
assignment provided for herein shall be without recourse to the Assignor.
SECTION 3. Payments. (a) As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.4/ It is
understood that facility fees accrued to the date hereof in respect of the
Assigned Amount are for the account of the Assignor and such fees accruing from
and including the date hereof are for the account of the Assignee. Each of the
Assignor and the Assignee hereby agrees that if it receives any amount under the
Credit Agreement or any other Loan Document which is for the account of the
other party hereto, it shall receive the same for the account of such other
party to the extent of such other party's interest therein and shall promptly
pay the same to such other party.
- --------
3 Include if Borrower's consent to assignment is required under Section
9.06(c) of the Credit Agreement
4 Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee.
2
<PAGE> 196
(b) The Assignor shall pay the $3,500 administrative fee to be paid by it
to the Administrative Agent pursuant to Section 9.06(c) of the Credit
Agreement.5
[SECTION 4. Consent of the Borrower and the Administrative Agent. This
Agreement is conditioned upon the consent of the Borrower, the LC Agent, the
Swingline Bank and the Administrative Agent pursuant to Section 9.06(c) of the
Credit Agreement. The execution of this Agreement by the Borrower, the LC Agent,
the Swingline Bank and the Administrative Agent is evidence of this consent.
Pursuant to said Section 9.06(c) the Borrower is obligated to execute and
deliver a Note payable to the order of the Assignee, if required, to reflect the
assignment provided for herein.]
SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation
or warranty in connection with, and shall have no responsibility with respect
to, the solvency, financial condition, or statements of the Borrower or any
other Obligor, or the validity and enforceability of the obligations of the
Borrower or any other Obligor in respect of any Loan Document. The Assignee
acknowledges that it has, independently and without reliance on the Assignor,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement and will
continue to be responsible for making its own independent appraisal of the
business, affairs and financial condition of any Obligor.
SECTION 6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
- --------
5 Section 3(b) should be deleted if the assignment is required by the
Borrower pursuant to Section 8.06 of the Credit Agreement.
3
<PAGE> 197
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
[ASSIGNOR]
By_________________________
Title:
[ASSIGNEE]
By______________________
Title:
[Consented and agreed to:
VENATOR GROUP, INC.
By__________________________
Title:
THE BANK OF NEW YORK,
as Administrative Agent, LC Agent
and Swingline Bank
By__________________________
Title:]
4
<PAGE> 198
EXHIBIT J
NOTICE OF COMMITTED BORROWING 1/
To The Bank of New York,
as Administrative Agent under
the Credit Agreement referred to below
One Wall Street
18 North
New York, New York 10286
Attention:_______________
This notice shall constitute a "Notice of Committed Borrowing" pursuant to
Section 2.02 of the Credit Agreement dated as of April 9, 1997 and amended and
restated as of March 19, 1999 among Venator Group, Inc., the Banks party
thereto, the Co-Agents party thereto, Bank of America National Trust & Savings
Association, as Documentation Agent, The Bank of New York, as Administrative
Agent (the "Administrative Agent"), LC Agent and Swingline Bank and the Lead
Arrangers party thereto (as further amended from time to time, the "Credit
Agreement"). Capitalized terms not otherwise defined herein have the meanings
ascribed to them in the Credit Agreement.
1. The date of Borrowing will be _____ __, ____.2/
2. The aggregate principal amount of the Borrowing will be
$____________.3/
- ------------------
1 To be delivered not later than 11:00 A.M. (New York City time) on (x) the
date of each Base Rate Borrowing, (y) the second Domestic Business Day
before each CD Borrowing and (z) the third Euro-Dollar Business Day before
each Euro-Dollar Borrowing.
2 The date of Borrowing shall be a Domestic Business Day in the case of a
Domestic Borrowing or a Euro-Dollar Business Day in case of a Euro-Dollar
Borrowing.
3 Each Borrowing shall be in an aggregate principal amount of $15,000,000 or
any larger multiple of $1,000,000 and further subject to the provisions of
clauses (i) and (ii) of Section 2.01 of the Credit Agreement.
1
<PAGE> 199
3. The initial interest rate for the Loans comprising the Borrowing will
be at [a Base Rate] [a CD Rate] [a Euro-Dollar Rate].
[4. The initial Interest Period for the Loans comprising the Borrowing
will be _____.]4
VENATOR GROUP, INC.
By:________________________
Title:
Date:
- ----------------------
4 This paragraph applies only if the Borrowing is a CD Borrowing or a
Euro-Dollar Borrowing and is subject to the provisions of the definition of
Interest Period.
2
<PAGE> 1
EXHIBIT 10.34
[EXHIBIT A TO
AMENDMENT NO. 4]
$400,000,000
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of April 9, 1997
and
amended and restated as of
March 19, 1999
among
Venator Group, Inc.
(formerly known as Woolworth Corporation)
The Subsidiaries Party Hereto
The Banks Party Hereto
The Co-Agents Party Hereto
Bank of America National Trust & Savings Association
as Documentation Agent
The Bank of New York,
as Administrative Agent, LC Agent
and Swingline Bank
and
J.P. Morgan Securities Inc.
BNY Capital Markets, Inc.
NationsBank Montgomery Securities LLC,
as Lead Arrangers
<PAGE> 2
Page
TABLE OF CONTENTS
----------------------
Page
ARTICLE 1
Definitions
Section 1.01. Definitions.....................................................2
Section 1.02. Accounting Terms and Determinations............................25
Section 1.03. Types of Borrowings............................................26
ARTICLE 2
The Credits
Section 2.01. Commitments to Lend............................................26
Section 2.02. Notice of Committed Borrowing..................................27
Section 2.03. Money Market Borrowings........................................27
Section 2.04. Notice to Banks; Funding of Loans..............................32
Section 2.05. Notes..........................................................33
Section 2.06. Maturity of Loans; Mandatory Prepayments of Loans..............33
Section 2.07. Interest Rates.................................................35
Section 2.08. Method of Electing Interest Rates..............................39
Section 2.09. Facility Fees..................................................40
Section 2.10. Optional Termination or Reduction of Commitments...............41
Section 2.11. Mandatory Reduction of Commitments.............................42
Section 2.12. Mandatory Termination of Commitments...........................43
Section 2.13. Optional and Mandatory Prepayments.............................43
Section 2.14. General Provisions as to Payments..............................44
Section 2.15. Funding Losses.................................................45
Section 2.16. Computation of Interest and Fees...............................45
Section 2.17. Letters of Credit..............................................45
Section 2.18. Swingline Loans................................................52
ARTICLE 3
Conditions
Section 3.01. Effective Date.................................................54
Section 3.02. Consequences of Effectiveness..................................54
Section 3.03. Extensions of Credit...........................................55
<PAGE> 3
Page
ARTICLE 4
Representations and Warranties
Section 4.01. Corporate Existence and Power..................................56
Section 4.02. Corporate and Governmental Authorization; No Contravention.....56
Section 4.03. Binding Effect.................................................57
Section 4.04. Financial Statements...........................................57
Section 4.05. Litigation.....................................................57
Section 4.06. Compliance with Laws...........................................58
Section 4.07. Compliance with ERISA..........................................58
Section 4.08. Environmental Matters..........................................58
Section 4.09. Taxes..........................................................58
Section 4.10. Subsidiaries...................................................59
Section 4.11. Not an Investment Company......................................59
Section 4.12. Full Disclosure................................................59
Section 4.13. Year 2000 Compliance...........................................59
Section 4.14. Ranking........................................................60
ARTICLE 5
Covenants
Section 5.01. Information....................................................60
Section 5.02. Maintenance of Property; Insurance.............................64
Section 5.03. Conduct of Business and Maintenance of Existence...............64
Section 5.04. Compliance with Laws...........................................65
Section 5.05. Inspection of Property, Books and Records......................65
Section 5.06. Negative Pledge................................................65
Section 5.07. Minimum Consolidated Tangible Net Worth........................67
Section 5.08. Leverage Ratio.................................................67
Section 5.09. Limitation on Debt of Subsidiaries.............................69
Section 5.10. Fixed Charge Coverage Ratio....................................70
Section 5.11. Consolidations, Mergers and Sales of Assets....................71
Section 5.12. Use of Proceeds................................................71
Section 5.13. Limitation on Capital Expenditures.............................72
Section 5.14. Investments and Business Acquisitions..........................73
Section 5.15. Restricted Payments............................................74
Section 5.16. New Subordinated Debt..........................................75
Section 5.17. Refunding of the 7% Debentures; Escrow Arrangements............75
Section 5.18. Transactions with Affiliates...................................76
Section 5.19. Additional Guarantors..........................................77
<PAGE> 4
Page
Section 5.20. Collateral Documents...........................................78
ARTICLE 6
Defaults
Section 6.01. Events of Defaults.............................................79
Section 6.02. Notice of Default..............................................82
Section 6.03. Cash Cover.....................................................82
ARTICLE 7
The Administrative Agent, Lead Arrangers, Documentation Agent and
Co-Agents
Section 7.01. Appointment and Authorization..................................83
Section 7.02. Agents and Affiliates..........................................83
Section 7.03. Obligations of the Co-agents and Document Agent................83
Section 7.04. Obligations of Administrative Agent and Lead Arrangers.........83
Section 7.05. Consultation with Experts......................................83
Section 7.06. Liability of Agents and Lead Arrangers.........................83
Section 7.07. Indemnification................................................84
Section 7.08. Credit Decision................................................84
Section 7.09. Successor Administrative Agent.................................84
Section 7.10. Administrative Agent's Fees....................................85
ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair.......85
Section 8.02. Illegality.....................................................86
Section 8.03. Increased Cost and Reduced Return..............................87
Section 8.04. Taxes..........................................................89
Section 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans......91
Section 8.06. Substitution of Bank...........................................92
ARTICLE 9
Miscellaneous
Section 9.01. Notices........................................................93
Section 9.02. No Waivers.....................................................93
Section 9.03. Expenses; Indemnificaiton......................................93
Section 9.04. Sharing of Set-offs............................................94
<PAGE> 5
Page
Section 9.05. Amendments and Waivers.........................................95
Section 9.06. Successors and Assigns.........................................96
Section 9.07. No-Reliance on Margin Stock....................................98
Section 9.08. Governing Law; Submission to Jurisdiction......................98
Section 9.09. Counterparts...................................................99
Section 9.10. WAIVER OF JURY TRIAL...........................................99
Section 9.11. Judgment Currency..............................................99
ARTICLE 10
Guaranty
Section 10.01. The Guaranty.................................................100
Section 10.02. Guaranty Unconditional.......................................100
Section 10.03. Discharge Only Upon Payment In Full; Reinstatement In
Certain Circumstances........................................101
Section 10.04. Waiver by the Company........................................101
Section 10.05. Subrogation..................................................101
Section 10.06. Stay of Acceleration.........................................102
<PAGE> 6
Page
Commitment Schedule
Pricing Schedule
Schedule 1.01(a) - Material Trademarks
Schedule 1.01(b) - Debt That May Be Refinanced
Schedule 1.01(c) - Existing Standby Letters of Credit
Schedule 5.06 - Existing Capital Leases
Schedule 5.20(b) - Real Property To Be Mortgaged
Exhibit A - Form of Note
Exhibit B - Form of Swingline Note
Exhibit C - Form of Money Market Quote Request
Exhibit D - Form of Invitation for Money Market Quotes
Exhibit E - Form of Money Market Quote
Exhibit F - Form of Security Agreement
Exhibit G - Form of Pledge Agreement
Exhibit H - Form of Guarantee Agreement
Exhibit I - Form of Assignment and Assumption Agreement
Exhibit J - Form of Notice of Committed Borrowing
<PAGE> 7
SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 9, 1997 and
amended and restated as of March 19, 1999 among VENATOR GROUP, INC. (formerly
known as Woolworth Corporation), the SUBSIDIARIES party hereto, the BANKS party
hereto, the CO-AGENTS party hereto, BANK OF AMERICA NATIONAL TRUST & SAVINGS
ASSOCIATION, as Documentation Agent, THE BANK OF NEW YORK, as Administrative
Agent, LC Agent and Swingline Bank, and the LEAD ARRANGERS party hereto.
WHEREAS, the Company, the banks party thereto (the "Existing Banks"), the
co-agents party thereto, Bank of America National Trust & Savings Association,
as Documentation Agent, The Bank of New York, as Administrative Agent, LC Agent
and Swingline Bank, and the Lead Arrangers party thereto are parties to a Credit
Agreement dated as of April 9, 1997 and amended and restated as of March 19,
1999 (as in effect immediately prior to the effectiveness of this Amended
Agreement (as defined in Section 1.01 below), the "Existing Credit Agreement");
WHEREAS, the parties to the Existing Credit Agreement desire to amend and
restate the Existing Credit Agreement as provided in this Amended Agreement
subject to the terms and conditions set forth in Amendment No. 4 to the Existing
Credit Agreement dated as of March 19, 1999 ("Amendment No. 4) among the
Company, the Subsidiaries named as parties hereto, the Existing Banks, Bank of
America National Trust & Savings Association, as Documentation Agent and The
Bank of New York, as Administrative Agent, LC Agent and Swingline Bank;
WHEREAS, all the conditions to effectiveness to Amendment No. 4 have been
satisfied;
NOW, THEREFORE, the Existing Credit Agreement is amended and restated in
its entirety as follows:
<PAGE> 8
ARTICLE 1
Definitions
Section 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes setting
forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.07(c).
"Administrative Agent" means The Bank of New York, in its capacity as
administrative agent for the Banks under the Loan Documents, 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 Company) duly
completed by such Bank.
"Affiliate" means, (i) any Person that directly, or indirectly through one
or more intermediaries, controls the Company (a "Controlling Person") or (ii)
any Person (other than the Company or a Subsidiary) which is controlled by or is
under common control with a Controlling Person. As used herein, the term
"control" means possession, directly or indirectly, of the power to vote 10% or
more of any class of voting securities of a Person or to direct or cause the
direction of the management or policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Agents" means the LC Agent, the Documentation Agent and the Administrative
Agent.
"Aggregate LC Exposure" means, at any time, the sum, without duplication,
of (i) the aggregate amount that is (or may thereafter become) available for
drawing under all Letters of Credit outstanding at such time plus (ii) the
aggregate unpaid amount of all Reimbursement Obligations outstanding at such
time.
<PAGE> 9
"Agreement", when used in reference to this Agreement, means the Amended
Agreement, as it may be further amended or amended and restated from time to
time.
"Amended Agreement" means this Amended and Restated Credit Agreement dated
as of April 9, 1997 and amended and restated as of March 19, 1999.
"Amendment No. 4 " has the meaning set forth in the second WHEREAS clause.
"Annual Rent Expense" means, 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
Company and its Consolidated Subsidiaries for the Relevant Fiscal Year,
calculated in the same manner as the $693,000,000 amount shown as such total
rent expense (net of sublease income) for Fiscal Year 1995 under the heading
"Leases" on page 29 of the Company's 1995 Annual Report to its shareholders,
subject to the provisions of Section 1.02(b).
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its
Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its
Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Asset Sale" means any sale, lease or other disposition (including any such
transaction effected by way of merger or consolidation) of any asset by the
Company or any of its Subsidiaries, including without limitation any
sale-leaseback transaction, whether or not involving a capital lease, and any
sale of any interest in real estate (including without limitation a leasehold
interest), including without limitation any disposition of a leasehold interest
to the relevant landlord by way of early termination thereof, but excluding (i)
dispositions of inventory, cash, cash equivalents and other cash management
investments and obsolete, unused or unnecessary equipment, in each case in the
ordinary course of business, (ii) dispositions of assets to the Company or a
Subsidiary; provided that any such dispositions by an Obligor to a Subsidiary
that is not a Subsidiary Guarantor shall be excluded pursuant to this clause
(ii) only if consummated in the ordinary course of business, (iii) dispositions
of any Real Property Held For Sale, but only if disposed of on or prior to its
Final Disposition Date, and (iv) any disposition of assets not described in
clauses (i) through (iii) hereof consummated in any Fiscal Year, but only to the
extent that the Net Cash Proceeds therefrom,
<PAGE> 10
together with the Net Cash Proceeds of all other dispositions consummated in
such Fiscal Year and not constituting an "Asset Sale" by reliance on this clause
(iv), do not exceed $5,000,000 (or, in the case of Fiscal Year 2002,
$2,500,000).
"Assignee" has the meaning set forth in Section 9.06.
"Bank" means each bank listed on the signature pages hereof, each Assignee
which becomes a Bank pursuant to Section 9.06(c), and their respective
successors. The term "Bank" does not include the Swingline Bank in its capacity
as such.
"Bank of America" means Bank of America National Trust & Savings
Association.
"Bank Parties" means the Banks, the Swingline Bank, the Agents and the Lead
Arrangers.
"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 Committed Loan which bears interest at the Base
Rate pursuant to the applicable Notice of Committed Borrowing or Notice of
Interest Rate Election or the provisions of Article 8.
"Base Rate Margin" has the meaning set forth in Section 2.07(a).
"Borrower" means the Company or any Subsidiary Borrower, as the context may
require, and their respective successors, and "Borrowers" means all of the
foregoing. When used in connection with a particular Loan or Swingline Loan or
Letter of Credit, the term "Borrower" means the borrower (or proposed borrower)
of such Loan or Swingline Loan or the borrower on whose request such Letter of
Credit is (or is proposed to be) issued. As the context may require, the terms
"Borrower" and "Borrowers" includes the Company in its capacity as guarantor of
the obligations of the Subsidiary Borrowers hereunder.
"Borrowing" has the meaning set forth in Section 1.03.
"Business Acquisition" means (i) an Investment by the Company or any of its
Subsidiaries in any other Person (including an Investment by way of acquisition
of securities of any other Person) pursuant to which such Person shall become a
Subsidiary or shall be merged into or consolidated with the Company or any of
its Subsidiaries or (ii) an acquisition by the Company or any of its
<PAGE> 11
Subsidiaries of the property and assets of any Person (other than the Company or
any of its Subsidiaries) that constitute substantially all the assets of such
Person or any division or other business unit of such Person. The description of
any transaction as falling within the above definition does not affect any
limitation on such transaction imposed by Article 5 of this Agreement.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan which bears interest at a CD Rate pursuant
to the applicable Notice of Committed Borrowing or Notice of Interest Rate
Election.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Rate" means a rate of interest determined pursuant to Section 2.07(b)
on the basis of an Adjusted CD Rate.
"CD Reference Banks" means The Bank of New York, Bank of America and
Morgan.
"Co-Agents" means the Banks designated as Co-Agents on the signature pages
hereof, in their respective capacities as Co-Agents in connection with the
credit facility provided hereunder.
"Collateral" means the collateral purported to be subject to the Liens of
all the Collateral Documents.
"Collateral Documents" means the Security Agreement, the Pledge Agreement,
each mortgage entered into pursuant to Section 5.20(b) and any additional
security agreements, pledge agreements, mortgages or other agreements required
to be delivered pursuant to the Loan Documents to secure the obligations of the
Obligors under the Loan Documents (including without limitation any additional
pledge agreements delivered by any Obligor pursuant to the provisions of the
Pledge Agreement), and any instruments of assignment or other instruments or
agreements executed pursuant to the foregoing.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the Commitment Schedule (or, in the case of an
Assignee, the portion of the transferor Bank's Commitment assigned to such
Assignee pursuant to Section 9.06(c)), in each case as such amount may be
reduced from time to time pursuant to Sections 2.10 and 2.11 or changed as a
result of an assignment pursuant to Section 8.06 or 9.06(c). The term
"Commitment" does not include the Swingline Commitment.
<PAGE> 12
"Commitment Schedule" means the Commitment Schedule attached hereto.
"Committed Loan" means a loan made or to be made by a Bank pursuant to
Section 2.01 or Section 2.18(f); provided that, if any such loan or loans (or
portions thereof) are combined or subdivided pursuant to a Notice of Interest
Rate Election, the term "Committed Loan" shall refer to the combined principal
amount resulting from such combination or to each of the separate principal
amounts resulting from such subdivision, as the case may be.
"Company" means Venator Group, Inc. (formerly known as Woolworth
Corporation), a New York corporation, and its successors.
"Company's 1997 Form 10-K" means the Company's annual report on Form 10-K
for the1997 Fiscal Year, as filed with the SEC pursuant to the Exchange Act.
"Company's Latest 10-Q" means the Company's quarterly report on Form 10-Q
for the Fiscal Quarter ended October 31, 1998, as filed with the SEC pursuant to
the Exchange Act.
"Consolidated Capital Expenditures" means, for any period, the gross
additions to property, plant and equipment and other capital expenditures of the
Company and its Consolidated Subsidiaries for such period, as the same are or
would be set forth in the cash flow statement of the Company and its
Consolidated Subsidiaries for such period (if such statement were prepared for
such period), but excluding any such expenditures constituting a Business
Acquisition permitted pursuant to Section 5.14 to the extent that the
consideration paid by the Company and its Subsidiaries with respect thereto
consists solely of common stock of the Company.
"Consolidated Debt" means at any date the Debt of the Company 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 Company 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 Company and its Consolidated Subsidiaries as of such
date less their consolidated goodwill as of such date, adjusted to exclude the
effect of any changes in the cumulative foreign currency translation
adjustments.
<PAGE> 13
"Continuing Director" means at any date a member of the Company'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:
(i) the amount of its Commitment (whether used or unused) at such
time; or
(ii) if the Commitments have terminated in their entirety, the sum of
(x) its Outstanding Committed Amount and (y) the aggregate outstanding
principal amount of its Money Market Loans,
all determined at such time after giving effect to any prior assignments by or
to such Bank pursuant to Section 8.06 or 9.06.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all non-contingent
obligations (and, for purposes of Section 5.06 and the definition of Material
Debt, all contingent obligations) of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (vi) all Debt secured by a Lien on any asset of such Person, whether
or not such Debt is otherwise an obligation of such Person, and (vii) all
Guarantees by such Person of Debt of another Person (each such Guarantee to
constitute Debt in an amount equal to the maximum amount of such other Person's
Debt Guaranteed thereby).
"Debt Incurrence" means the incurrence or issuance of any Debt by the
Company or any of its Subsidiaries other than (i) the Loans, the Swingline Loans
and the Reimbursement Obligations, (ii) other Debt of the Company incurred under
bank loan facilities and letter of credit facilities for the purpose of
financing working capital and capital expenditures, (iii) Debt secured by a Lien
permitted by Section 5.06(a)(ii), (iv) Debt owed to the Company or any
Subsidiary, (v) Debt of any Subsidiary permitted by Section 5.09 and (vi) Debt
of the Company not described in any of the foregoing clauses but only to the
extent the Net Cash Proceeds from the incurrence or issuance thereof, in the
aggregate, do not exceed $5,000,000.
<PAGE> 14
"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.
"Documentation Agent" means Bank of America in its capacity as
documentation agent for the credit facility provided hereunder.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close; provided that, when used in Section 2.17 with respect to any action to
be taken by or with respect to the LC Agent, the term "Domestic Business Day"
shall not include any day on which commercial banks are authorized by law to
close in the jurisdiction where the LC Office of the LC Agent is located.
"Domestic Lending Office" means, as to each Bank, its office located at its
address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Company and the Administrative Agent; provided that any Bank may
so designate separate Domestic Lending Offices for its Base Rate Loans, on the
one hand, and its CD Loans, on the other hand, in which case all references
herein to the Domestic Lending Office of such Bank shall be deemed to refer to
either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b).
"EBIT" means, for any period, the sum of (i) the consolidated net income of
the Company 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, subject to the
provisions of Section 1.02(b).
<PAGE> 15
"EBITDA" means, for any period, (i) EBIT for such period plus (ii) to the
extent deducted in determining consolidated net income for such period,
depreciation and amortization.
"Effective Date" has the meaning set forth in Section 3.01.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, injunctions, permits, licenses and agreements relating to the protection
of the environment, to the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, hazardous or
toxic substances or wastes into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, hazardous or toxic substances
or wastes or the clean-up or other remediation thereof.
"Equity Issuance" means any issuance of equity securities, or any sale or
other transfer of treasury stock, by the Company or any of its Subsidiaries,
other than (i) equity securities issued to, or treasury stock sold or
transferred to, the Company or any of its Subsidiaries, (ii) common stock of the
Company issued as consideration for a Business Acquisition permitted pursuant to
Section 5.14 and (iii) equity securities of the Company issued pursuant to
employee stock plans in an aggregate amount not to exceed $5,000,000.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company, 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 Company or any
Subsidiary, are treated as a single employer under subsection (b), (c), (m) or
(o) of Section 414 of the Internal Revenue Code.
"Escrow Account" has the meaning set forth in Section 5.17(b).
"Escrow Agent" has the meaning set forth in Section 5.17(b).
"Escrow Agreement" has the meaning set forth in Section 5.17(b).
"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.
<PAGE> 16
"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 Company
and the Administrative Agent.
"Euro-Dollar Loan" means a Committed Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election.
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c).
"Euro-Dollar Rate" means a rate of interest determined pursuant to Section
2.07(c) on the basis of an Adjusted London Interbank Offered Rate.
"Euro-Dollar Reference Banks" means the principal London offices of The
Bank of New York, Bank of America and Morgan.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.07(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Existing Standby Letters of Credit" means the standby letters of credit
listed on Schedule 1.01(c).
"Extension of Credit" means the making of a Loan or a Swingline Loan or the
issuance or extension of a Letter of Credit.
"Facility Fee Rate" has the meaning set forth in Section 2.09.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New 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
<PAGE> 17
succeeding Domestic Business Day, and (ii) if no such rate is so published on
such next succeeding Domestic Business Day, the Federal Funds Rate for such day
shall be the average rate quoted to The Bank of New York on such day on such
transactions as determined by the Administrative Agent.
"Final Disposition Date" means, with respect to any Real Property Held For
Sale, the date identified as such by the Company to the Banks prior to the
Effective Date with respect to such Real Property Held For Sale.
"Fiscal Quarter" means a fiscal quarter of the Company.
"Fiscal Year" means a fiscal year of the Company. 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 ended on
January 30, 1999).
"Fixed Charge Coverage Ratio" means, at the last day of any Fiscal Quarter,
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.
"Fixed Rate Loan" means any loan except a Loan that bears interest at the
Base Rate.
"Foreign Subsidiary" means any Subsidiary organized under the laws of a
jurisdiction, and conducting substantially all its operations, outside the
United States.
"Group of Loans" or "Group" means at any time a group of Committed Loans
consisting of (i) all Committed Loans to the same Borrower which are Base Rate
Loans at such time, (ii) all Euro-Dollar Loans to the same Borrower which have
the same Interest Period at such time or (iii) all CD Loans to the same Borrower
which have the same Interest Period at such time; provided that if a Committed
Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant
to Section 8.02 or 8.05, such Loan shall be included in the same Group or Groups
of Loans from time to time as it would have been in if it had not been so
converted or made.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such
<PAGE> 18
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation 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.
"Guarantee Agreement" means the Guarantee Agreement dated as of the
Effective Date among the initial Subsidiary Guarantors and the Administrative
Agent, substantially in the form of Exhibit H, as amended from time to time.
"Guarantor" means the Company, in respect of its obligations under Article
10, and any Subsidiary Guarantor, and "Guarantors" means all of them.
"Immaterial Subsidiary" means at any time any Subsidiary that (i) does not
hold any material patents, trademarks or other intellectual property, (ii) on a
consolidated basis, together with its Subsidiaries, holds assets with an
aggregate fair market value of less than $2,000,000, (iii) on a consolidated
basis, together with its Subsidiaries, does not account for more than 1% of the
consolidated revenues of the Company and its Consolidated Subsidiaries and (iv)
on a consolidated basis, together with its Subsidiaries, does not have
consolidated net income in excess of $500,000. The determinations in clauses
(ii), (iii) and (iv) shall be made on the basis of the financial statements most
recently delivered by the Company to the Banks pursuant to Sections 5.01(a) or
5.01(b), as the case may be. The parties hereto acknowledge and agree that each
of the trademarks listed on Schedule 1.01(a) is a material trademark.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Indenture" means the Indenture dated as of October 10, 1991 between the
Company and The Bank of New York, as Trustee, as in effect on the Effective
Date.
"Interest Expense" means, for any period, the consolidated interest expense
(net of interest income) of the Company and its Consolidated Subsidiaries for
such period, calculated in the same manner as the amounts shown as "interest
expense, net" under the heading "Interest expense" on page F-4 of the Company's
1997 Form 10-K, subject to the provisions of Section 1.02(b).
<PAGE> 19
"Interest Period" means: (1) with respect to each Euro-Dollar Loan, a
period commencing on the date of borrowing specified in the applicable Notice of
Committed Borrowing or on the date specified in the applicable Notice of
Interest Rate Election and ending one, two, three or six months thereafter, as
the Borrower may elect in the applicable notice; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each CD Loan, a period commencing on the date of borrowing
specified in the applicable Notice of Committed Borrowing or on the date
specified in the applicable Notice of Interest Rate Election and ending 30, 60,
90 or 180 days thereafter, as the Borrower may elect in the applicable notice;
provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Money Market LIBOR Loan, the period commencing on the
date such Loan is made and ending such whole number of months thereafter as the
Borrower may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
<PAGE> 20
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market Absolute Rate Loan, the period
commencing on the date such Loan is made and ending such number of days
thereafter (but not less than 14 days) as the Borrower may elect in accordance
with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(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, Guarantee or otherwise.
"Invitation for Money Market Quotes" means an Invitation for Money Market
Quotes substantially in the form of Exhibit D hereto.
"LC Agent" means The Bank of New York in its capacities as letter of credit
agent in connection with the letter of credit facility provided hereunder and as
the issuer of the letters of credit issued or to be issued hereunder, and its
successors in such capacities; provided that, for purposes of Section 2.17 only,
when used to refer to the issuer of the Existing Standby Letter of Credit in the
face amount of $250,000 issued by KeyBank National Association for the benefit
of Richman Brothers, "LC Agent" means KeyBank National Association, and its
successors in such capacity.
"LC Collateral Account" has the meaning set forth in the Security
Agreement; provided that, at any time prior to the execution of the Security
Agreement, "LC Collateral Account" shall mean a collateral account established
pursuant to arrangements satisfactory to the LC Agent and the Administrative
Agent.
<PAGE> 21
"LC Exposure" means, with respect to any Bank at any time, an amount equal
to its Pro Rata Share of the Aggregate LC Exposure at such time.
"LC Fee Rate" has the meaning set forth in the Pricing Schedule.
"LC Indemnitees" has the meaning set forth in Section 2.17(m).
"LC Office" means, with respect to the LC Agent, for any Letter of Credit,
the office at which the LC Agent books such Letter of Credit.
"Lead Arrangers" means J.P. Morgan Securities Inc., BNY Capital Markets,
Inc. and NationsBank Montgomery Securities LLC in their respective capacities as
lead arrangers for the credit facility provided hereunder.
"Letter of Credit" means a letter of credit issued or to be issued
hereunder by the LC Agent, and any Existing Standby Letter of Credit.
"LIBOR Auction" means a solicitation of Money Market Quotes setting forth
Money Market Margins based on the London Interbank Offered Rate pursuant to
Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of the Loan Documents, the
Company 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. The issuance of trade letters of credit for
the account of the Company or any of its Subsidiaries to finance the purchase of
inventory whereby title documents to the related goods are consigned to the
order of the letter of credit issuer shall not be considered to create a "Lien"
on inventory for the purposes of the Loan Documents. In addition, the parties
hereto acknowledge and agree that precautionary UCC-1 filings made with respect
to obligations of the Company or any of its Subsidiaries under operating leases
do not constitute a "Lien".
"Loan" means a Committed Loan or a Money Market Loan and "Loans" means
Committed Loans or Money Market Loans or any combination of the foregoing. The
term "Loan" does not include a Swingline Loan.
<PAGE> 22
"Loan Documents" means this Agreement, the Guarantee Agreement, the
Collateral Documents, the Notes and the Swingline Note.
"London Interbank Offered Rate" has the meaning set forth in Section
2.07(c).
"Major Casualty Proceeds" means (i) the aggregate insurance proceeds
received in connection with one or more related events by the Company or any of
its Subsidiaries under any Property Insurance Policy or (ii) any award or other
cash compensation with respect to any one or more related condemnations of
property (or any transfer or disposition of property in lieu of condemnation)
received by the Company or any of its Subsidiaries if, in the case of either
clause (i) or (ii), the amount of such aggregate insurance proceeds or award or
other cash compensation exceeds $500,000.
"Material Adverse Effect" means a material adverse effect on (i) the
business, operations or condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole, (ii) the ability of any Obligor to perform
any payment obligation of such Obligor under the Loan Documents or (iii) the
ability of any Bank Party to enforce any rights or remedies under the Loan
Documents with respect to the Collateral or any payment obligation of any
Obligor under the Loan Documents.
"Material Debt" means Debt (other than the Loans, Swingline Loans and
Reimbursement Obligations) of the Company 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 $5,000,000.
"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 $5,000,000.
"Money Market Absolute Rate" has the meaning set forth in Section 2.03(d).
"Money Market Absolute Rate Loan" means a loan made or to be made by a Bank
pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic Lending
Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Company
and the Administrative Agent; provided that any Bank may from time to time by
notice to the Company and the Administrative Agent designate separate Money
<PAGE> 23
Market Lending Offices for its Money Market LIBOR Loans, on the one hand,
and its Money Market Absolute Rate Loans, on the other hand, or for its Loans to
different Borrowers, in which case all references herein to the Money Market
Lending Office of such Bank shall be deemed to refer to either or both of such
offices, as the context may require.
"Money Market LIBOR Loan" means a loan made or to be made by a Bank
pursuant to a LIBOR Auction (including such a loan bearing interest at the rate
applicable to Base Rate Loans by reason of clause (a) of Section 8.01).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money Market Loan
in accordance with Section 2.03 substantially in the form of Exhibit E hereto.
"Money Market Quote Request" means a Money Market Quote Request
substantially in the form of Exhibit C hereto.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Morgan" means Morgan Guaranty Trust Company of New York.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Net Cash Proceeds" means:
(i) with respect to any Asset Sale (including for this purpose any
disposition that would be an Asset Sale but for clause (iv) of the
definition of Asset Sale), an amount equal to the cash proceeds received by
the Company 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 or any amounts described in clause
(z) in excess of amounts actually paid pursuant to post-closing purchase
price adjustments), less (w) any expenses reasonably incurred by such
Person in respect of such Asset Sale, (x) the amount of any Debt secured by
<PAGE> 24
a Lien on any asset disposed of in such Asset Sale and discharged from the
proceeds thereof (and required to be so discharged by the terms of such
Debt), (y) any taxes actually paid or to be payable by such Person (as
estimated by a senior financial or accounting officer of the Company,
giving effect to the overall tax position of the Company and its
Subsidiaries) in respect of such Asset Sale and (z) any amounts
constituting post-closing purchase price adjustments in respect of such
Asset Sale, to the extent a reserve has been established with respect
thereto in accordance with GAAP,
(ii) with respect to any Debt Incurrence (including for this purpose
any incurrence or issuance of Debt that would be a Debt Incurrence but for
clause (vi) of the definition of Debt Incurrence), an amount equal to the
cash proceeds received by the Company or any of its Subsidiaries in respect
thereof less any customary fees and commissions and expenses reasonably
incurred by them in respect thereof,
(iii) with respect to any Equity Issuance, an amount equal to the cash
proceeds received by the Company or any of its Subsidiaries in respect
thereof less any customary fees and commissions and expenses reasonably
incurred by them in respect thereof; and
(iv) with respect to the occurrence of the Refinancing Date, an amount
equal to the amount on deposit in the Escrow Account on such Date (after
giving effect to any withdrawals made therefrom on such Date the proceeds
of which have been applied to repay or repurchase any 7% Debentures then
outstanding).
"New Subordinated Debt" means any Debt of the Company described in clauses
(i) or (ii) of the definition of Debt and incurred after the Effective Date
which (i) has a final maturity no earlier than December 31, 2002, (ii) requires
no scheduled principal payments thereof prior to December 31, 2002, (iii) is not
Guaranteed by any Person other than a Subsidiary Guarantor, (iv) is subordinated
(and the Guarantees of which are subordinated) to the obligations of the Company
(and any applicable Subsidiary Guarantor) under the Loan Documents on customary
capital market terms approved by the bank affiliate of each Lead Arranger and
(v) permits (and the Guarantees of which permit) the Company (and any applicable
Subsidiary Guarantor) to create, incur, assume or suffer to exist
<PAGE> 25
Liens securing the obligations of the Obligors under the Loan Documents upon any
of its property, assets or revenues, whether now owned or hereafter acquired,
without any restrictions (including without limitation any requirement to
equally and ratably secure any such Debt (or Guarantee thereof)).
"Notes" means promissory notes of a Borrower, substantially in the form of
Exhibit A hereto, evidencing such Borrower's obligation to repay the Loans made
to it, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing or a Notice of
Money Market Borrowing.
"Notice of Committed Borrowing" has the meaning set forth in Section 2.02.
"Notice of Interest Rate Election" has the meaning set forth in Section
2.08.
"Notice of Money Market Borrowing" has the meaning set forth in Section
2.03(f).
'Notice of Swingline Borrowing" has the meaning set forth in Section
2.18(b).
"Obligor" means any Borrower or any Subsidiary Guarantor, and "Obligors"
means all of them.
"Other Refinancing" means any issuance for cash proceeds by the Company of
Other Refinancing Debt or New Subordinated Debt, but solely to the extent the
cash proceeds thereof are applied contemporaneously by the Company to refinance
the Debt set forth on Schedule 1.01(b).
"Other Refinancing Debt" means any Debt of the Company described in clauses
(i) or (ii) of the definition of Debt and incurred after the Effective Date
which (i) has a final maturity no earlier than December 31, 2002, (ii) requires
no scheduled principal payments thereof prior to December 31, 2002, (iii) is not
Guaranteed by any Person and (iv) permits the Company to create, incur, assume
or suffer to exist Liens securing the obligations of the Obligors under the Loan
Documents upon any of its property, assets or revenues, whether now owned or
hereafter acquired, without any restrictions (including without limitation any
requirement to equally and ratably secure any such Debt).
<PAGE> 26
"Outstanding Committed Amount" means, with respect to any Bank at any time,
the sum of (i) the aggregate outstanding principal amount of its Committed
Loans, (ii) its Pro Rata Share of the aggregate outstanding principal amount of
the Swingline Loans (if any) and (iii) its LC Exposure, all determined at such
time after giving effect to any prior assignments by or to such Bank pursuant to
Section 8.06 or 9.06(c).
"Parent" means, with respect to any Bank Party, any Person controlling such
Bank Party.
"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Pledge Agreement" means the Pledge Agreement to be entered into among the
Company, the Subsidiary Guarantors and the Administrative Agent, substantially
in the form of Exhibit G, as amended from time to time, pursuant to which (and
to additional foreign pledge agreements referred to therein) each Obligor party
thereto shall pledge the capital stock of each Subsidiary held by such Obligor,
subject to the exceptions and limitations set forth therein.
"Pricing Schedule" means the Pricing Schedule attached hereto.
"Prime Rate" means a rate of interest per annum equal to the rate of
interest publicly announced from time to time in New York City by The Bank of
New York as its prime commercial lending rate, such rate to be adjusted
automatically (without notice) on the effective date of any change in such
publicly announced rate.
<PAGE> 27
"Pro Rata Share" means, with respect to any Bank at any time, a fraction
the numerator of which is the amount of such Bank's Commitment at such time (or,
if the Commitments have terminated in their entirety, such Bank's Commitment as
in effect immediately prior to such termination) and the denominator of which is
the Total Commitments at such time (or, if the Commitments have terminated in
their entirety, Total Commitments as in effect immediately prior to such
termination).
"Property Insurance Policy" means any insurance policy maintained by the
Company or any of its Subsidiaries covering losses with respect to tangible real
or personal property or improvements, but excluding coverage for losses from
business interruption.
"Real Property Held For Sale" means each ownership interest in real
property held by the Company or any Subsidiary and identified by the Company to
the Banks prior to the Effective Date.
"Reduction Event" means (i) any Asset Sale, (ii) any Debt Incurrence (other
than a 7% Debentures Refinancing or an Other Refinancing), (iii) any Equity
Issuance, (iv) the receipt by the Company or any Subsidiary of Major Casualty
Proceeds or (v) the occurrence of the Refinancing Date; provided that an event
described in clause (iv) hereof shall not give rise to a Reduction Event (x) so
long as at the time of receipt of the relevant Major Casualty Proceeds, no
Default has occurred and is continuing and (y) to the extent that (1) within ten
Domestic Business Days after receipt of such Major Casualty Proceeds, the
Company shall have delivered to the Administrative Agent the certificate
referred to in Section 5.01(g)(x) with respect thereto, (2) within 90 days after
receipt of such Major Casualty Proceeds, the Company shall have delivered to the
Administrative Agent the certificate referred to in Section 5.01(g)(y) with
respect thereto and (3) within 270 days after receipt of such Major Casualty
Proceeds, the Company shall have actually expended such Major Casualty Proceeds
to purchase or repair property, plant and equipment so that the Reduction Event,
if any, occurring pursuant to clause (iv) hereof by reason of the receipt of
such Major Casualty Proceeds shall be deemed to occur on (A) the tenth Domestic
Business Day following receipt thereof, as to the amount thereof, if no
certificate with respect thereto has been delivered by the Company to the
Administrative Agent pursuant to Section 5.01(g)(x), (B) the 90th day following
receipt thereof, as to the amount thereof not committed to be expended for the
purchase or repair of property, plant and equipment in the certificate with
respect thereto delivered by the Company to the Administrative Agent pursuant to
Section 5.01(g)(y), or if no such certificate has been so delivered by such time
and (C) the 270th day following receipt thereof, as to the amount thereof not so
expended on or prior to such day. The description of any transaction as falling
within the above definition does not affect any limitation on such transaction
imposed by Article 5 of this Agreement.
<PAGE> 28
"Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference
Banks, as the context may require, and "Reference Bank" means any one of such
Reference Banks.
"Refinancing Date" means the first date on which no 7% Debentures are
outstanding.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Reimbursement Obligation" means any obligation of a Borrower to reimburse
the LC Agent pursuant to Section 2.17 for amounts paid by the LC Agent in
respect of drawings under Letters of Credit issued upon the request and for the
account of such Borrower, including any portion of any such obligation to which
a Bank has become subrogated pursuant to paragraph (1) of Section 2.17(j).
"Requesting Banks" means at any time one or more Banks having at least 15%
of the aggregate amount of the Commitments.
"Required Banks" means at any time Banks having at least 66 2/3% of the
aggregate amount of the Credit Exposures at such time.
"Required Escrow Amount" has the meaning set forth in Section 5.17(b).
"Responsible Officer" means, with respect to any Obligor, 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 Company'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
Company's capital stock or (b) any option, warrant or other rights to acquire
shares of the Company'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).
<PAGE> 29
"S&P" means Standard & Poor's Rating Services, a division of the
McGraw-Hill Companies, Inc., and its successors.
"SEC" means the Securities and Exchange Commission.
"Security Agreement" means the Security Agreement to be entered into among
the Company, the Subsidiary Guarantors and the Administrative Agent,
substantially in the form of Exhibit F, as amended from time to time.
"7% Debentures" means the 7% Notes due June 1, 2000 in the aggregate
principal amount of $200,000,000 issued by the Company pursuant to the
Indenture.
"7% Debentures Refinancing" means any issuance for cash proceeds by the
Company of any New Subordinated Debt, but only to the extent that the Net Cash
Proceeds thereof (i) together with the Net Cash Proceeds of any prior issuances
of New Subordinated Debt that constitute a 7% Debentures Refinancing, do not
exceed $200,000,000 and (ii) are applied by the Company to repay or repurchase
the 7% Debentures or are deposited in the Escrow Account in accordance with the
provisions of Section 5.17(b).
"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 Company.
"Subsidiary Borrowers" means eVenator, Inc., a Delaware corporation,
Venator Group Retail, Inc., a New York corporation, Team Edition Apparel, Inc.,
a Florida corporation, Northern Reflections Inc., a Delaware corporation,
Venator Group Specialty, Inc., a New York corporation, The San Francisco Music
Box Company, a California corporation, Foot Locker Europe B.V., a Netherlands
corporation, Foot Locker Japan K.K., a Japanese corporation, Venator Group
Australia Limited, an Australian corporation and Venator Group Canada Inc., a
Canadian corporation.
"Subsidiary Guarantor" means each Subsidiary that from time to time is a
party to the Guarantee Agreement.
"Swingline Bank" means The Bank of New York, in its capacity as the
Swingline Bank under the swingline facility described in Section 2.18, and its
successors in such capacity.
<PAGE> 30
"Swingline Commitment" means the obligation of the Swingline Bank to make
Swingline Loans in an aggregate principal amount at any one time outstanding not
to exceed the lesser of (i) $40,000,000 and (y) 10% of the Total Commitments at
such time.
"Swingline Loan" means a loan made by the Swingline Bank pursuant to
Section 2.18(a).
"Swingline Loan Availability Period" means the period from and including
the Effective Date to but excluding the Swingline Maturity Date.
"Swingline Maturity Date" means the day that is 30 days before the
Termination Date.
"Swingline Note" means a promissory note of a Borrower, substantially in
the form of Exhibit B hereto, evidencing the obligation of such Borrower to
repay the Swingline Loans made to it.
"Target Date" means the first date on which (i) the Loans to the Company
are expressly rated at least BBB- by S&P and at least Baa3 by Moody's and (ii)
the Total Commitments do not exceed $350,000,000.
"Temporary Cash Investment" means any Investment in (i) direct obligations
of the United States or any agency thereof or obligations guaranteed by the
United States or any agency thereof, (ii) commercial paper rated at least A- 1
by S&P and at least P-1 by Moody's, (iii) time deposits with, including
certificates of deposit issued by, any office located in the United States of
any Bank or any bank or trust company which is organized or licensed under the
laws of the United States or any State thereof and has capital, surplus and
undivided profits aggregating at least $1,000,000,000, (iv) repurchase
agreements with respect to securities described in clause (i) above entered into
with an office of a bank or trust company meeting the criteria specified in
clause (iii) above or (v) in the case of Investments made by a Foreign
Subsidiary, Investments substantially similar to those described in clauses (i)
through (iv) and denominated in the local currency of the jurisdiction in which
such Foreign Subsidiary conducts its operations; provided in each case that such
Investment matures within one year after it is acquired by the Company or a
Subsidiary.
"Termination Date" means April 9, 2002, or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day.
"Total Commitments" means, at any time, the aggregate amount of the
Commitments (whether used or unused) at such time.
<PAGE> 31
"Total Usage" means, at any time, the sum of (i) the aggregate outstanding
principal amount of all Loans and Swingline Loans and (ii) the Aggregate LC
Exposure, all determined at such time.
"UCP" means the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, as the same
may be revised or amended from time to time.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the States
thereof and the District of Columbia, but excluding its territories and
possessions.
Section 1.02. Accounting Terms and Determinations. (a) 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 Company's
independent public accountants) with the most recent audited consolidated
financial statements of the Company and its Consolidated Subsidiaries delivered
to the Banks; provided that if the Company notifies the Administrative Agent
that the Company 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 Company 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 Company and the Required
Banks.
(b) For purposes of determining compliance with the provisions of Sections
5.08 on any date prior to January 29, 2000, "EBIT" for the relevant period shall
be "EBIT" for the period from and including January 31, 1999 to and including
<PAGE> 32
the then most recently ended Fiscal Quarter, annualized on a simple arithmetic
basis. For purposes of determining compliance with the provisions of Sections
5.10 on the last day of any Fiscal Quarter ended prior to January 29, 2000,
"EBIT" and "Interest Expense" for the relevant period shall be "EBIT" or
"Interest Expense", as the case may be, for the period from and including
January 31, 1999 to and including the last day of such Fiscal Quarter, and
"Annual Rent Expense" shall be $136,250,000 (for purposes of determining
compliance on the last day of the first Fiscal Quarter 1999), $272,500,000 (for
purposes of determining compliance on the last day of the second Fiscal Quarter
1999) and $408,750,000 (for purposes of determining compliance on the last day
of the third Fiscal Quarter 1999), which amounts constitute the total rent
expense (net of sublease income) of the Company and its Consolidated
Subsidiaries for the Fiscal Year 1998 included in the projections of financial
performance of the Company set forth in the $500,000,000 Senior Credit Facility
Amendment Confidential Information Memorandum dated February, 1999 multiplied by
1/4, 1/2 and 3/4, respectively.
Section 1.03. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to a single Borrower by one
or more Banks pursuant to Article 2 on the same date, all of which Loans are of
the same type (subject to Article 8) and, except in the case of Base Rate Loans,
have the same Interest Period or initial Interest Period. Borrowings are
classified for purposes of this Agreement either by reference to the pricing of
Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing
comprised of Euro-Dollar Loans) or by reference to the provisions of Article 2
under which participation therein is determined (i.e., a "Committed Borrowing"
is a Borrowing under Section 2.01 in which all Banks participate in proportion
to their Commitments, while a "Money Market Borrowing" is a Borrowing under
Section 2.03 in which the Bank participants are determined on the basis of their
bids).
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 Borrowers
pursuant to this Section from time to time on and after the Effective Date and
prior to the Termination Date; provided that, immediately after each such loan
is made (and after giving effect to any substantially concurrent application of
the proceeds thereof to repay outstanding Loans and Swingline Loans):
<PAGE> 33
(i) such Bank's Outstanding Committed Amount shall not exceed its
Commitment;
(ii) the Total Usage shall not exceed the Total Commitments; and
(iii) subject to Section 3.02(c), the aggregate outstanding principal
amount of Loans to the Company and Swingline Loans does not exceed
$50,000,000.
Each Borrowing under this Section shall be in an aggregate principal amount of
$15,000,000 or any larger multiple of $1,000,000; provided that (x) any such
Borrowing may be in an aggregate amount equal to the aggregate unused amount of
the Commitments and (y) if such Borrowing is made on the Swingline Maturity
Date, such Borrowing may be in the aggregate amount of the Swingline Loans
outstanding on such date. Each such Borrowing shall be made from the several
Banks ratably in proportion to their respective Commitments. Within the
foregoing limits and subject to Section 2.11, the Borrowers may borrow under
this Section, prepay Loans to the extent permitted by Section 2.13, and reborrow
under this Section at any time prior to the Termination Date.
Section 2.02. Notice of Committed Borrowing. (a) The Borrower shall give
the Administrative Agent a notice substantially in the form of Exhibit J (a
"Notice of Committed Borrowing") not later than 11:00 A.M. (New York City time)
on (x) the date of each Base Rate Borrowing by it, (y) the second Domestic
Business Day before each CD Borrowing by it and (z) the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing by it, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to bear interest
initially at the Base Rate, a CD Rate or a Euro-Dollar Rate, and
(iv) if such Borrowing is a CD Borrowing or EuroDollar Borrowing, the
duration of the initial Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
Section 2.03. Money Market Borrowings. (a) The Money Market Option. In
addition to Committed Borrowings pursuant to Section 2.01, any Borrower may, as
set forth in this Section, request the Banks to make offers to make Money
<PAGE> 34
Market Loans to such Borrower from time to time on or after the Target Date and
prior to the Termination Date. The Banks may, but shall have no obligation to,
make such offers and such Borrower may, but shall have no obligation to, accept
any such offers in the manner set forth in this Section.
(b) Money Market Quote Request. When a Borrower wishes to request offers to
make Money Market Loans under this Section, it shall transmit to the
Administrative Agent by telex or facsimile transmission a Money Market Quote
Request so as to be received no later than 11:00 A.M. (New York City time) on
(x) the fifth Euro-Dollar Business Day prior to the date of Borrowing proposed
therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next
preceding the date of Borrowing proposed therein, in the case of an Absolute
Rate Auction (or, in either case, such other time or date as the Company and the
Administrative Agent shall have mutually agreed and shall have notified to the
Banks not later than the date of the Money Market Quote Request for the first
LIBOR Auction or Absolute Rate Auction for which such change is to be effective)
specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day
in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$15,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
A Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request by any Borrower shall be given within five Euro-Dollar Business Days (or
such other number of days as the Company and the Administrative Agent may agree)
of any other Money Market Quote Request by any Borrower.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a Money
Market Quote Request, the Administrative Agent shall send to the Banks by telex
or facsimile transmission an Invitation for Money Market Quotes, which shall
constitute an invitation by the Borrower to each Bank to submit Money Market
Quotes offering to make the Money Market Loans to which such Money Market Quote
Request relates in accordance with this Section.
<PAGE> 35
(d) Submission and Contents of Money Market Quotes. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money Market
Quote must comply with the requirements of this subsection (d) and must be
submitted to the Administrative Agent by telex or facsimile transmission at its
offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M.
(New York City time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New
York City time) on the proposed date of Borrowing, in the case of an Absolute
Rate Auction (or, in either case, such other time or date as the Company and the
Administrative Agent shall have mutually agreed and shall have notified to the
Banks not later than the date of the Money Market Quote Request for the first
LIBOR Auction or Absolute Rate Auction for which such change is to be
effective); provided that Money Market Quotes submitted by the Administrative
Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank
may be submitted, and may only be submitted, if the Administrative Agent or such
affiliate notifies the Borrower of the terms of the offer or offers contained
therein not later than (x) one hour prior to the deadline for the other Banks,
in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the
other Banks, in the case of an Absolute Rate Auction. Subject to Article 3 and
6, any Money Market Quote so made shall be irrevocable except with the written
consent of the Administrative Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit E hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each
such offer is being made, which principal amount (w) may be greater
than or less than the Commitment of the quoting Bank, (x) must be
$5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the
principal amount of Money Market Loans for which offers were requested
and (z) may be subject to an aggregate limitation as to the principal
amount of Money Market Loans for which offers being made by such
quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or
subtracted from such base rate,
<PAGE> 36
(D) in the case of an Absolute Rate Auction, the rate of interest
per annum (specified to the nearest 1/10,000th of 1%) (the "Money
Market Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit E hereto or
does not specify all of the information required by subsection
(d)(ii);
(B) contains qualifying, conditional or similar language, except
an aggregate limitation permitted by subsection (d)(ii)(B)(z);
(C) proposes terms other than or in addition to those set forth
in the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Administrative Agent shall promptly
notify the Borrower of the terms (x) of any Money Market Quote
submitted by a Bank that is in accordance with subsection (d) and (y)
of any Money Market Quote that amends, modifies or is otherwise
inconsistent with a previous Money Market Quote submitted by such Bank
with respect to the same Money Market Quote Request. Any such
subsequent Money Market Quote shall be disregarded by the
Administrative Agent unless such subsequent Money Market Quote is
submitted solely to correct a manifest error in such former Money
Market Quote. The Administrative Agent's notice to the Borrower shall
specify (A) the aggregate principal amount of Money Market Loans for
which offers have been received for each Interest Period specified in
the related Money Market Quote Request, (B) the respective principal
amounts and Money Market Margins or Money Market Absolute Rates, as
the case may be, so offered and (C) if applicable, limitations on the
aggregate principal amount of Money Market Loans for which offers in
any single Money Market Quote may be accepted.
<PAGE> 37
(f) Acceptance and Notice by Borrower. Not later than 10:30 A.M.
(New York City time) on (x) the third Euro-Dollar Business Day prior
to the proposed date of Borrowing, in the case of a LIBOR Auction or
(y) the proposed date of Borrowing, in the case of an Absolute Rate
Auction (or, in either case, such other time or date as the Company
and the Administrative Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective), the Borrower shall notify the
Administrative Agent of its acceptance or non-acceptance of the offers
so notified to it pursuant to subsection (e). In the case of
acceptance, such notice (a "Notice of Money Market Borrowing") shall
specify the aggregate principal amount of offers for each Interest
Period that are accepted. The Borrower may accept any Money Market
Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market Borrowing
may not exceed the applicable amount set forth in the related Money
Market Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$15,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be,
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement, and
(v) immediately after such Money Market Borrowing is made (and
after giving effect to any substantially concurrent application of the
proceeds thereof to repay outstanding Loans and Swingline Loans), (1)
the Total Usage shall not exceed the Total Commitments and (2) the
aggregate outstanding principal amount of Loans to the Company shall
not exceed $50,000,000.
(g) Allocation by Administrative Agent. If offers are made by two or
more Banks with the same Money Market Margins or Money Market Absolute
Rates, as the case may be, for a greater aggregate principal amount than
the amount in respect of which such offers are accepted for the related
Interest Period, the principal amount of Money Market Loans in respect of
which such offers are accepted shall be allocated by the Administrative
Agent among such Banks as nearly as possible (in multiples of $1,000,000,
as the Administrative Agent may deem appropriate) in proportion to the
aggregate principal amounts of such offers. Determinations by the
Administrative Agent of the amounts of Money Market Loans shall be
conclusive in the absence of manifest error.
<PAGE> 38
Section 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a
Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of
the contents thereof and of such Bank's share (if any) of such Borrowing and
such Notice of Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 1:00 P.M. (New York City time) on the date of each
Borrowing, each Bank participating therein shall make available its share of
such Borrowing, in Federal or other funds immediately available in New York
City, to the Administrative Agent at its address referred to in Section 9.01.
Unless the Administrative Agent determines that any applicable condition
specified in Article 3 has not been satisfied (which determination may, in the
case of Section 3.03(c), be based in part on information supplied by the LC
Agent on the date of such Borrowing as to the Aggregate LC Exposure on such
date), the Administrative Agent shall (i) apply the funds so received from the
Banks to repay all Swingline Loans (if any) then outstanding, together with
interest accrued thereon and any other associated expenses, and (ii) make the
remainder of such funds available to the Borrower not later than 2:00 P.M. (New
York City time) at the Administrative Agent's aforesaid address.
(c) Unless the Administrative Agent shall have received notice from a Bank
prior to the date of any Borrowing that such Bank will not make available to the
Administrative Agent such Bank's share of such Borrowing, the Administrative
Agent may assume that such Bank has made such share available to the
Administrative Agent on the date of such Borrowing in accordance with subsection
(b) of this Section 2.04 and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such share available
to the Administrative Agent, such Bank and the Borrower severally agree to repay
to the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal
to the higher of the Federal Funds Rate and the interest rate applicable thereto
pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds
Rate. If such Bank shall repay to the Administrative Agent such corresponding
amount, such amount so repaid shall constitute such Bank's Loan included in such
Borrowing for purposes of this Agreement.
<PAGE> 39
Section 2.05. Notes. (a) Each Borrower's obligation to repay the Loans made
to it by each Bank shall be evidenced by a single Note of such Borrower 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 at
any time.
(b) Each Bank may, by notice to a Borrower and the Administrative Agent,
request that such Borrower's obligation to repay such Bank's Loans of a
particular type to such Borrower 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 Borrower payable to
the order 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 Notes, the Administrative Agent shall
forward such Notes to such Bank. Each Bank shall record the date and amount of
each Loan made by it to each Borrower and the date and amount of each payment of
principal made with respect thereto, and may, if such Bank so elects in
connection with any transfer or enforcement of its Note of any Borrower, endorse
on the schedule forming a part thereof appropriate notations to evidence the
foregoing information with respect to each of its Loans to such Borrower 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 any such Borrower under any Loan Documents. Each Bank is hereby irrevocably
authorized by each Borrower so to endorse such Borrower's Note payable to the
order of such Bank and to attach to and make a part of such Note a continuation
of any such schedule as and when required.
Section 2.06. Maturity of Loans; Mandatory Prepayments of Loans. (a) Each
Committed Loan shall mature, and the principal amount thereof shall be due and
payable, on the Termination Date.
(b) Each Money Market Loan included in any Money Market Borrowing shall
mature and the principal amount thereof shall be due and payable, on the last
day of the Interest Period applicable to such Borrowing.
(c) On each date on which the Commitments are permanently reduced pursuant
to subsection (a), (b) or (c) of Section 2.11, the Borrowers shall prepay
<PAGE> 40
outstanding Loans, and shall cash collateralize Letters of Credit (without
duplication, in the case of any reduction of the Commitments pursuant to Section
2.11(c), of any prepayment or cash collateralization made by the Borrowers
pursuant to subsection (d)) in such amounts so that, after giving effect to such
prepayments and such cash collateralization, the Total Usage shall not exceed
the Total Commitments as then reduced. In determining Total Usage on any date
for purposes of this subsection (c), Aggregate LC Exposure shall be reduced by
an amount equal to the amount on deposit in the LC Collateral Account on such
day (immediately prior to giving effect to any deposits made therein on such day
pursuant to the immediately preceding sentence).
(d) To the extent the terms of any Debt issued by the Company or any of its
Subsidiaries after the Effective Date (including without limitation any New
Subordinated Debt) would otherwise require the prepayment or repurchase (or
offer to repurchase) of such Debt upon receipt by the Company or any of its
Subsidiaries of cash proceeds of any Asset Sales (or any disposition of assets
excluded from the definition of Asset Sale pursuant to clauses (i) through (iv)
thereof) or any Major Casualty Proceeds (or any proceeds excluded from the
definition of Major Casualty Proceeds pursuant to clauses (i) or (ii) thereof)
but for the provisions of this subsection (d), upon receipt by the Company or
any of its Subsidiaries of such cash proceeds, the Borrowers will prepay Loans
and cash collateralize Letters of Credit in an amount equal to the amount that
is necessary in order to excuse the Company or any of its Subsidiaries from
prepaying or repurchasing (or offering to repurchase) such Debt.
(e) During each Clean-Down Period there shall be at least fifteen
consecutive days on which the sum of (i) the aggregate outstanding principal
amount of all Committed Loans plus (ii) the aggregate outstanding principal
amount of all Swingline Loans plus (iii) the aggregate amount of Reimbursement
Obligations (excluding, for this purpose, any Reimbursement Obligation that is
not yet overdue pursuant to Section 2.17(i)) does not exceed $50,000,000. The
Borrowers will prepay Loans to the extent necessary to comply with the
immediately preceding sentence. For purposes of this subsection (e), "Clean-
Down Period" means each period from and including the first day of the fourth
Fiscal Quarter of each Fiscal Year to and including the last day of such Fiscal
Quarter.
(f) The prepayments and the cash collateralization (if applicable) to be
made pursuant to subsections (c), (d) and (e) shall be effected as follows:
first, the Company shall prepay any Swingline Loans then outstanding, until all
Swingline Loans have been paid in full, second, the Borrowers shall prepay any
Committed Loans then outstanding, until all Committed Loans have been paid in
full, third, the Borrowers shall deposit immediately available funds in the LC
<PAGE> 41
Collateral Account, until an amount equal to the then Aggregate LC Exposure
has been deposited in the LC Collateral Account and fourth, the Borrowers shall
prepay any Money Market Loans then outstanding (in the order in which they were
made), until all Money Market Loans have been paid in full. Each Borrower making
a prepayment pursuant to this subsection (f) shall give the Agent at least three
Euro-Dollar Business Days' notice of such prepayment required.
Section 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest
on the outstanding principal amount thereof, for each day from the date such
Loan is made until it becomes due or is converted, at a rate per annum equal to
the Base Rate plus the Base Rate Margin, in each case for such day. Subject to
Section 2.06, such interest shall be payable for each calendar month in arrears
on the last Domestic Business Day thereof and, with respect to the principal
amount of any Base Rate Loan converted to a CD Loan or a Euro-Dollar Loan, on
the date such principal amount is so converted. Any overdue principal of or
interest on any Base Rate Loan shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 2% plus the rate
otherwise applicable to such Base Rate Loan for such day.
"Base Rate Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
(b) Each CD Loan shall bear interest on the outstanding principal amount
thereof, for each day during each Interest Period applicable thereto, at a rate
per annum equal to the sum of the CD Margin for such day plus the Adjusted CD
Rate applicable to such Interest Period; provided that if any CD Loan or any
portion thereof shall, as a result of clause (2)(b) of the definition of
Interest Period, have an Interest Period of less than 30 days, such portion
shall bear interest for each day during such Interest Period at the rate
applicable to Base Rate Loans for such day. Such interest shall be payable for
each Interest Period on the last day thereof and, if such Interest Period is
longer than 90 days, 90 days after the first day thereof. Any overdue principal
of or interest on any CD Loan shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 2% plus the higher of (i)
the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to
such Loan immediately before such payment became due and (ii) the rate
applicable to Base Rate Loans for such day.
"CD Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest Period means a rate per
annum determined pursuant to the following formula:
<PAGE> 42
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
* The amount in brackets being rounded upward, if necessary, to the next higher
1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates
per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two or more New York
certificate of deposit dealers of recognized standing for the purchase at face
value from each CD Reference Bank of its certificates of deposit in an amount
comparable to the principal amount of the CD Loan of such CD Reference Bank to
which such Interest Period applies and having a maturity comparable to such
Interest Period.
"Domestic Reserve Percentage" means for any day that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including without limitation any basic,
supplemental or emergency reserves) for a member bank of the Federal Reserve
System in New York City with deposits exceeding five billion dollars in respect
of new non-personal time deposits in dollars in New York City having a maturity
comparable to the related Interest Period and in an amount of $100,000 or more.
The Adjusted CD Rate shall be adjusted automatically on and as of the effective
date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in effect on
such day which is payable by a member of the Bank Insurance Fund classified as
adequately capitalized and within supervisory subgroup "A" (or a comparable
successor assessment risk classification) within the meaning of 12 C.F.R.
327.4(a) (or any successor provision) to the Federal Deposit Insurance
Corporation (or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the United States. The
Adjusted CD Rate shall be adjusted automatically on and as of the effective date
of any change in the Assessment Rate.
<PAGE> 43
(c) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus
the Adjusted London Interbank Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, three months after the
first day thereof.
"Euro-Dollar Margin" means a rate per annum determined in accordance with
the Pricing Schedule.
The "Adjusted London Interbank Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London
Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period means
the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which deposits in dollars are offered to each of
the Euro-Dollar Reference Banks in the London interbank market at approximately
11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of
such Interest Period in an amount approximately equal to the principal amount of
the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest
Period is to apply and for a period of time comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.
(d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such day plus
<PAGE> 44
the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of
1%) by dividing (x) the average (rounded upward, if necessary, to the next
higher 1/16 of 1%) of the respective rates per annum at which one day (or, if
such amount due remains unpaid more than three Euro-Dollar Business Days, then
for such other period of time not longer than three months as the Administrative
Agent may select) deposits in dollars in an amount approximately equal to such
overdue payment due to each of the Euro-Dollar Reference Banks are offered to
such Euro-Dollar Reference Bank in the London interbank market for the
applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar
Reserve Percentage (or, if the circumstances described in clause (a) or (b) of
Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the
Base Rate for such day) and (ii) the sum of 2% plus the Euro-Dollar Margin for
such day plus the Adjusted London Interbank Offered Rate applicable to such Loan
immediately before such payment became due.
(e) Subject to Section 8.01, each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in accordance with Section
2.07(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.03. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.03. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest, payable
on demand, for each day until paid at a rate per annum equal to the sum of 2%
plus the rate applicable to Base Rate Loans for such day.
(f) The Administrative Agent shall determine each interest rate applicable
to the Loans hereunder. The Administrative Agent shall give prompt notice to the
Borrower and the participating Banks of each rate of interest so determined, and
its determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated by this Section. If any
Reference Bank does not furnish a timely quotation, the Administrative Agent
shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if none of
such quotations is available on a timely basis, the provisions of Section 8.01
shall apply.
<PAGE> 45
Section 2.08. Method of Electing Interest Rates. (a) The Loans included in
each Committed Borrowing shall bear interest initially at the type of rate
specified by the Borrower in the applicable Notice of Committed Borrowing.
Thereafter, the Borrower may from time to time elect to change or continue the
type of interest rate borne by each Group of Loans (subject in each case to the
provisions of subsection (d) below and Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to CD Loans as of any Domestic Business Day or to
Euro-Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect to convert
such Loans to Base Rate Loans or Euro-Dollar Loans or elect to
continue such Loans as CD Loans for an additional Interest Period, in
each case effective on the last day of the then current Interest
Period applicable to such Loans; or
(iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or CD Loans or elect to continue
such Loans as Euro-Dollar Loans for an additional Interest Period, in
each case effective on the last day of the then current Interest
Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Administrative Agent at least three Euro-Dollar Business
Days before the conversion or continuation selected in such notice is to be
effective (unless the relevant Loans are to be converted from Domestic Loans to
Domestic Loans of the other type or continued as Domestic Loans of the same type
for an additional Interest Period, in which case such notice shall be delivered
to the Administrative Agent at least three Domestic Business Days before such
conversion or continuation is to be effective). A Notice of Interest Rate
Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such portion
is allocated ratably among the Loans comprising such Group and (ii) the portion
to which such notice applies, and the remaining portion to which it does not
apply, are each $15,000,000 or any larger multiple of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify:
<PAGE> 46
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in such
notice is to be effective, which shall comply with the applicable clause of
subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the new
type of Loans and, if such new Loans are CD Loans or Euro-Dollar Loans, the
duration of the initial Interest Period applicable thereto; and
(iv) if such Loans are to be continued as CD Loans or Euro-Dollar
Loans for an additional Interest Period, the duration of such additional
Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Administrative Agent shall
promptly notify each Bank of the contents thereof and such notice shall not
thereafter be revocable by the Borrower. If the Borrower fails to deliver a
timely Notice of Interest Rate Election to the Administrative Agent for any
Group of CD Loans or Euro-Dollar Loans, such Loans shall be converted into
Base Rate Loans on the last day of the then current Interest Period
applicable thereto.
(d) The Borrower shall not be entitled to elect to convert any
Committed Loans to, or continue any Committed Loans for an additional
Interest Period as, CD Loans or Euro-Dollar Loans if a Default shall have
occurred and be continuing when the Borrower delivers notice of such
election to the Administrative Agent or when such conversion or
continuation would otherwise be effective.
Section 2.09. Facility Fees. The Company shall pay to the Administrative
Agent for the account of each Bank a facility fee, calculated for each day at
the Facility Fee Rate for such day, on the amount of such Bank's Credit Exposure
on such day. Such facility fees shall accrue for each day from and including the
Effective Date to but excluding the day on which the Credit Exposures are
reduced to zero and shall be payable quarterly in arrears on each September 19,
December 19, March 19 and June 19 and on the day on which the Credit Exposures
are reduced to zero.
<PAGE> 47
"Facility Fee Rate" means a rate per annum determined daily in accordance
with the Pricing Schedule.
Section 2.10. Optional Termination or Reduction of Commitments. (a) The
Company may, without premium or penalty, upon at least three Domestic Business
Days' notice to the Administrative Agent, (i) terminate the Commitments at any
time, if no Bank has an Outstanding Committed Amount at such time or (ii)
ratably reduce the Commitments from time to time, in each case by an aggregate
amount of at least $15,000,000; provided that immediately after such reduction:
(x) no Bank's Outstanding Committed Amount shall exceed
its Commitment as so reduced;
(y) the Total Usage shall not exceed the Total
Commitments; and;
(y) the aggregate outstanding principal amount of the
Swingline Loans shall not exceed the Swingline Commitment
(after giving effect to any reduction thereof pursuant to
Section 2.11(d)).
Upon any such termination or reduction of the Commitments, the Administrative
Agent shall promptly notify each Bank of such termination or reduction.
(b) The Company may, upon at least three Domestic Business Days' notice to
the Administrative Agent, terminate the Swingline Commitment at any time, if no
Swingline Loans are outstanding at such time.
(c) If the Company wishes to replace this Agreement with another credit
agreement at any time, the Company may, on the date when such other credit
agreement becomes effective, terminate the Commitments hereunder and prepay any
and all Committed Loans and Swingline Loans then outstanding hereunder; provided
that:
(i) the Company notifies each Bank as to the possibility of such
termination and such prepayment (if any) at least three Euro-Dollar
Business Days prior thereto;
(ii) the Company gives definitive notice of such termination and such
prepayment (if any) to the Administrative Agent before 10:00 A.M. (New
York City time) on the date of such termination;
<PAGE> 48
(iii) all Committed Loans, Swingline Loans and Reimbursement
Obligations outstanding on the date of such termination (together with
accrued interest thereon) are paid in full on such date;
(iv) in connection with any prepayment of Committed Loans or Swingline
Loans on such date, the Company complies with the requirements of
subsections (a) and (b) of Section 2.13, Section 2.15 and subsection
(d) of Section 2.18 in all respects except the timing of definitive
notice of such prepayment; and
(v) no Letter of Credit issued hereunder remains outstanding after the
date of such termination unless the LC Agent shall have agreed to
allow such Letter of Credit to remain outstanding after the
Commitments (and the Banks' participations in such Letter of Credit)
terminate.
Section 2.11. Mandatory Reduction of Commitments. (a) On February 15, 2000,
the Commitments will be reduced to $300,000,000.
(b) On the fifth Euro-Dollar Business Day after the date on which the
Company or any of its Subsidiaries receives any Net Cash Proceeds in respect of
any Reduction Event, the Total Commitments shall be permanently reduced by an
amount equal to such Net Cash Proceeds, until the Total Commitments do not
exceed $350,000,000; provided that if the Net Cash Proceeds in respect of any
Reduction Event is less than $5,000,000, no such permanent reduction shall be
required until the Net Cash Proceeds with respect to such Reduction Event,
together with the Net Cash Proceeds with respect to all other Reduction Events
in respect of which no permanent reduction under this subsection (b) shall have
theretofore been made, is equal to at least $5,000,000.
(c) To the extent the terms of any Debt issued by the Company or any of its
Subsidiaries after the Effective Date (including without limitation any New
Subordinated Debt) would otherwise require the prepayment or repurchase (or
offer to repurchase) of such Debt upon receipt by the Company or any of its
Subsidiaries of cash proceeds of any Asset Sale (or any disposition of assets
excluded from the definition of Asset Sale pursuant to clauses (i) through (iv)
thereof) or any Major Casualty Proceeds (or any proceeds excluded from the
definition of Major Casualty Proceeds pursuant to clauses (i) or (ii) thereof)
but for the provisions of this subsection (c), upon receipt by the Company or
any of its Subsidiaries of such cash proceeds, the Commitments shall be
permanently reduced by an amount equal to the amount that is necessary in order
to excuse the Company or any of its Subsidiaries from prepaying or repurchasing
(or offering to repurchase) such Debt.
<PAGE> 49
(d) On any date on which the Commitments are reduced pursuant to Section
2.11, the Swingline Commitment will be reduced by such amount as shall be
necessary so that, after giving effect to such reduction, the Swingline
Commitment shall not exceed 10% of the Total Commitments as so reduced.
Section 2.12. Mandatory Termination of Commitments. (a) The Commitments
shall terminate on the Termination Date and any Committed Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such date.
(b) The Swingline Commitment shall terminate on the Swingline Maturity Date
and any Swingline Loans then outstanding (together with accrued interest
thereon) shall be due and payable on such date.
Section 2.13. Optional and Mandatory Prepayments. (a) The Borrower may upon
at least one Domestic Business Day's notice to the Administrative Agent, prepay
the Base Rate Loans (or any Money Market Borrowing bearing interest at the Base
Rate by reason of clause (a) of Section 8.01) in whole at any time, or from time
to time in part in amounts aggregating $10,000,000 or any larger multiple of
$1,000,000, by paying the principal amount to be prepaid together with accrued
interest thereon to the date of prepayment. Each such optional prepayment shall
be applied to prepay ratably the Base Rate Loans of the several Banks (or the
Money Market Loans included in such Money Market Borrowing).
(b) Subject to Section 2.15, the Borrower may, upon at least two Domestic
Business Days' notice to the Administrative Agent, in the case of a Group of CD
Loans or upon at least three Euro-Dollar Business Days' notice to the
Administrative Agent, in the case of a Group of Euro-Dollar Loans, prepay the
Loans comprising such a Group, in whole at any time, or from time to time in
part in amounts aggregating $10,000,000 or any larger multiple of $1,000,000, by
paying the principal amount to be prepaid together with accrued interest thereon
to the date of prepayment. Each such optional prepayment shall be applied to
prepay ratably the Loans of the several Banks included in such Group.
(c) In connection with any substitution of Banks pursuant to Section 8.06,
the Borrower may prepay the Loans of the Bank being replaced, as provided in
clause (ii) of Section 8.06.
(d) Except as provided in Sections 2.06 and 2.13(a), the Borrower may not
prepay all or any portion of the principal amount of any Money Market Loan prior
to the maturity thereof.
<PAGE> 50
(e) Upon receipt of a notice of prepayment pursuant to this Section, the
Administrative Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share (if any) of such prepayment and such notice shall
not thereafter be revocable by the Borrower.
Section 2.14. General Provisions as to Payments. (a) The Borrowers shall
make (i) 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 and (ii) each
payment of Reimbursement Obligations and any other amounts payable in connection
with the Letters of Credit in accordance with the provisions of Section 2.17.
The Administrative Agent will promptly distribute to each Bank its ratable share
of each such payment received by the Administrative Agent for the account of the
Banks. Whenever any payment of principal of, or interest on, the Domestic Loans
or Swingline Loans or of fees or of Reimbursement Obligations shall be due on a
day which is not a Domestic Business Day, the date for payment thereof shall be
extended to the next succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, any Euro-Dollar Loans or Money Market LIBOR Loan
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding Euro-Dollar
Business Day. Whenever any payment of principal of, or interest on, any Money
Market Absolute Rate Loan shall be due on a day which is not a Euro-Dollar
Business Day, the date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day. If the date for any payment of principal or
any Reimbursement Obligation is extended by operation of law or otherwise,
interest thereon shall be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice from a
Borrower prior to the date on which any payment is due from such Borrower to the
Banks hereunder that such Borrower will not make such payment in full, the
Administrative Agent may assume that such 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
such payment shall not have been so made, 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.
<PAGE> 51
Section 2.15. Funding Losses. If a Borrower makes any payment of principal
with respect to any Fixed Rate 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 2.07(d), or if a Borrower fails to borrow or
prepay any Fixed Rate Loans or fails to continue any CD Loan or Euro- Dollar
Loans for an additional Interest Period or fails to convert any outstanding
Loans to CD Loans or Euro-Dollar Loans, in each case after notice of such
borrowing, prepayment, continuation or conversion has been given to any Bank in
accordance with Section 2.04(a), 2.06(f), 2.08(c) or 2.13(e), such 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
such Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
Section 2.16. Computation of Interest and Fees. Interest based on the Prime
Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days
in a leap year) and paid for the actual number of days elapsed (including the
first day but excluding the last day). All other interest and facility fees
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last day).
Section 2.17. Letters of Credit.
(a) Issuance of Letters of Credit. The LC Agent agrees, on the terms and
conditions set forth in this Agreement, to issue Letters of Credit for the
account of any Borrower from time to time during the period from and including
the Effective Date to but excluding the date that is 30 days before the
Termination Date; provided that, immediately after each such Letter of Credit is
issued:
(i) the Aggregate LC Exposure shall not exceed $160,000,000 (of which
the aggregate amount attributable to standby Letters of Credit will not
exceed $60,000,000);
(ii) the aggregate face amount of all Letters of Credit issued for the
account of the Company (other than Letters of Credit with respect to which
any Subsidiary Borrower is a co-account party) will not exceed $60,000,000;
<PAGE> 52
(iii) in the case of each Bank, its Outstanding Committed Amount shall
not exceed its Commitment; and
(iv) the Total Usage shall not exceed the Total Commitments.
Upon the issuance by the LC Agent of each Letter of Credit pursuant to this
subsection (a), the LC Agent shall be deemed, without further action by any
party hereto, to have sold to each Bank and each Bank shall be deemed, without
further action by any party hereto, to have purchased from the LC Agent, a
participation in such Letter of Credit, on the terms set forth in this Section,
equal to such Bank's Pro Rata Share thereof. In addition, on the Effective Date,
the LC Agent shall be deemed, without further action by any party hereto, to
have sold to each Bank, and each Bank shall be deemed, without further action by
any party hereto, to have purchased from the LC Agent, a participation in each
Existing Standby Letter of Credit, on the terms set forth in this Section, equal
to such Bank's Pro Rata Share thereof.
(b) Expiry Dates. No Letter of Credit shall have an expiry date later than
the fifth Domestic Business Day prior to the Termination Date. Subject to the
preceding sentence:
(i) each Letter of Credit shall, when issued, have an expiry date on
or before the first anniversary of the date on which it is issued; and
(ii) the expiry date of any Letter of Credit may, at the request of
the Borrower, be extended from time to time for a period not exceeding
one year so long as the LC Agent agrees to so extend such Letter of
Credit (or, in the case of an "evergreen" Letter of Credit, its right
to give a notice to prevent the extension thereof expires) no earlier
than three months before the then existing expiry date thereof.
(c) Notice of Proposed Issuance. The Borrower shall give the LC Agent and
the Administrative Agent at least one Domestic Business Day's prior notice
specifying the date each Letter of Credit is to be issued and describing the
proposed terms of such Letter of Credit and the nature of the transactions
proposed to be supported thereby.
(d) Conditions to Issuance. The LC Agent shall not issue any Letter of
Credit unless:
(i) such Letter of Credit shall be satisfactory in form and reasonably
satisfactory in substance to the LC Agent,
<PAGE> 53
(ii) the Borrower shall have executed and delivered such other
instruments and agreements relating to such Letter of Credit as the LC
Agent shall have reasonably requested,
(iii) the LC Agent shall have determined (based on information
supplied by the Administrative Agent on the date of such issuance as
to the amounts specified in subsection (a) of this Section other than
the Aggregate LC Exposure) that the limitations specified in
subsection (a) of this Section will not be exceeded immediately after
such Letter of Credit is issued, and
(iv) the LC Agent shall not have been notified in writing by the
Borrower, the Administrative Agent or the Required Banks that any
condition specified in clause (c), (d) or (e) of Section 3.03 is not
satisfied on the date such Letter of Credit is to be issued.
(e) Notice of Proposed Extensions of Expiry Dates. The LC Agent shall give
the Administrative Agent at least one Domestic Business Day's notice prior to
extending the expiry date of any Letter of Credit (or, in the case of an
"evergreen" Letter of Credit, allowing it to be extended), specifying (i) the
date on which such extension is to be made and (ii) the date to which such
expiry date is to be so extended. The LC Agent shall not extend (or allow the
extension of) the expiry date of such Letter of Credit if it shall have been
notified by the Borrower or the Administrative Agent (at the request of the
Required Banks) that any condition specified in clause (d) or (e) of Section
3.03 is not satisfied on the date of such extension (or, in the case of an
"evergreen" Letter of Credit, the day when the LC Agent's right to give a notice
preventing such extension expires).
(f) Notice of Actual Issuances, Extensions and Amounts Available for
Drawing. Promptly upon issuing any Letter of Credit or extending the expiry date
of any Letter of Credit (or allowing the expiry date of any "evergreen" Letter
of Credit to be extended), the LC Agent will notify the Administrative Agent of
the date of such Letter of Credit, the amount thereof, the beneficiary or
beneficiaries thereof and the expiry date or extended expiry date thereof.
Within three Domestic Business Days after the end of each calendar month, the LC
Agent shall notify the Administrative Agent and each Bank of (i) the daily
average aggregate amount available for drawings (whether or not conditions for
drawing thereunder have been satisfied) under all Letters of Credit outstanding
during such month, (ii) the aggregate amount of letter of credit fees accrued
during such month pursuant to subsection (g) of this Section, (iii) each Bank's
Pro Rata Share of such accrued letter of credit fees and (iv) the aggregate
undrawn amount of all Letters of Credit outstanding at the end of such month.
<PAGE> 54
(g) Fees. The Company shall pay to the LC Agent, for the account of the
Banks ratably in accordance with their respective Pro Rata Shares, a letter of
credit fee for each day at the LC Fee Rate on the aggregate amount available for
drawings (whether or not conditions for drawing thereunder have been satisfied)
under all Letters of Credit outstanding on such day. Such letter of credit fee
shall be payable quarterly in arrears on the last Domestic Business Day of each
calendar quarter and on the fifth Domestic Business Day before the Termination
Date (or any earlier date on which the Commitments shall have terminated in
their entirety and no Letters of Credit are outstanding). Promptly upon
receiving any payment of such fee, the LC Agent will distribute to each Bank its
Pro Rata Share thereof. In addition, the Company shall pay to the LC Agent for
its own account fronting fees and reasonable expenses in the amounts and at the
times agreed between the Company and the LC Agent.
(h) Drawings. Upon receipt from the beneficiary of any Letter of Credit of
a demand for payment under such Letter of Credit, the LC Agent shall determine
in accordance with the terms of such Letter of Credit whether such demand for
payment should be honored. If the LC Agent determines that any such demand for
payment should be honored, the LC Agent shall make available to such beneficiary
in accordance with the terms of such Letter of Credit the amount of the drawing
under such Letter of Credit. The LC Agent shall thereupon notify the Borrower of
the amount of such drawing paid by it.
(i) Reimbursement and Other Payments by the Borrower. (1) If any amount is
drawn under any Letter of Credit, the Borrower irrevocably and unconditionally
agrees to reimburse the LC Agent for all amounts paid by the LC Agent upon such
drawing, together with any and all reasonable charges and expenses which the LC
Agent may pay or incur relative to such drawing and interest on the amount drawn
at the Federal Funds Rate for each day from and including the date such amount
is drawn to but excluding the date such reimbursement payment is due and
payable. Such reimbursement payment shall be due and payable (x) at or before
1:00 P.M. (New York City time) on the date the LC Agent notifies the Borrower of
such drawing, if such notice is given at or before 10:00 A.M. (New York City
time) on such date, or (y) at or before 10:00 A.M. (New York City time) on the
first Domestic Business Day after the date such notice is given, if such notice
is given after 10:00 A.M. (New York City time) on such date; provided that no
payment otherwise required by this sentence to be made by the Borrower at or
before 1:00 P.M. (New York City time) on any day shall be overdue hereunder if
arrangements for such payment satisfactory to the LC Agent, in its reasonable
discretion, shall have been made by the Borrower at or before 1:00 P.M. (New
York City time) on such day and such payment is actually made at or before 3:00
P.M. (New York City time) on such day.
<PAGE> 55
(2) In addition, the Borrower agrees to pay to the LC Agent interest on any
and all amounts not paid by the Borrower when due hereunder with respect to a
Letter of Credit, for each day from and including the date when such amount
becomes due to but excluding the date such amount is paid in full, whether
before or after judgment, payable on demand, at a rate per annum equal to the
sum of 2% plus rate applicable to Base Rate Loans for such day.
(3) Each payment to be made by the Company or any Borrower pursuant to this
subsection (i) shall be made to the LC Agent in Federal or other funds
immediately available to it at its address referred to in Section 9.01.
(j) Payments by Banks with Respect to Letters of Credit. (1) If the
Borrower fails to reimburse the LC Agent as and when required by subsection (i)
above for all or any portion of any amount drawn under a Letter of Credit, the
LC Agent may notify each Bank of such unreimbursed amount and request that each
Bank reimburse the LC Agent for such Bank's Pro Rata Share thereof. Upon
receiving such notice from the LC Agent, each Bank shall make available to the
LC Agent, at its address referred to in Section 9.01, an amount equal to such
Bank's share of such unreimbursed amount as set forth in such notice, in Federal
or other funds immediately available to the LC Agent, by 3:00 P.M. (New York
City time) on the Domestic Business Day following such Bank's receipt of such
notice from the LC Agent, together with interest on such amount for each day
from and including the date of such drawing to but excluding the day such
payment is due from such Bank at the Federal Funds Rate for such day. Upon
payment in full thereof, such Bank shall be subrogated to the rights of the LC
Agent against the Borrower to the extent of such Bank's Pro Rata Share of the
related Reimbursement Obligation (including interest accrued thereon). Nothing
in this subsection (j) shall affect any rights any Bank may have against the LC
Agent for any action or omission for which the LC Agent is not indemnified under
subsection (n) of this Section.
(2) If any Bank fails to pay any amount required to be paid by it pursuant
to clause (1) of this subsection (j) on the date on which such payment is due,
interest shall accrue on such Bank's obligation to make such payment, for each
day from and including the date such payment became due to but excluding the
date such Bank makes such payment, whether before or after judgment, at a rate
per annum equal to the Federal Funds Rate for such day. Any payment made by any
Bank after 3:00 P.M. (New York City time) on any Domestic Business Day shall be
deemed for purposes of the preceding sentence to have been made on the next
succeeding Domestic Business Day.
(3) If the Borrower shall reimburse the LC Agent for any drawing with
respect to which any Bank shall have made funds available to the LC Agent in
<PAGE> 56
accordance with clause (1) of this subsection (j), the LC Agent shall promptly
upon receipt of such reimbursement distribute to such Bank its Pro Rata Share
thereof, including interest, to the extent received by the LC Agent.
(k) Exculpatory Provisions. Each Borrower's obligations under this
Section shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which the
Borrower may have or have had against the LC Agent, any Bank, the beneficiary of
any Letter of Credit or any other Person. The Borrower assumes all risks of the
acts or omissions of any beneficiary of any Letter of Credit with respect to its
use of such Letter of Credit. None of the LC Agent, the Banks and their
respective officers, directors, employees and agents shall be responsible for,
and the obligations of each Bank to make payments to the LC Agent and of the
Borrower to reimburse the LC Agent for drawings pursuant to this Section (other
than obligations resulting solely from the gross negligence or willful
misconduct of the LC Agent) shall not be excused or affected by, among other
things, (i) the use which may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (ii) the
validity, sufficiency or genuineness of documents presented under any Letter of
Credit or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged
(and notwithstanding any assertion to such effect by the Borrower); (iii)
payment by the LC Agent against presentation of documents to it which do not
comply with the terms of the relevant Letter of Credit; (iv) any dispute between
or among the Borrower or the Company or any of its other Subsidiaries, the
beneficiary of any Letter of Credit or any other Person or any claims or
defenses whatsoever of the Borrower or any other Person against the beneficiary
of any Letter of Credit; (v) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of the
Borrower or the Company and its Subsidiaries taken as a whole; (vi) any breach
of this Agreement by any party hereto (except, in the case of the LC Agent, a
breach resulting solely from its gross negligence or willful misconduct); (vii)
any other circumstance or happening whatsoever, whether or not similar to any of
the foregoing; (viii) the fact that a Default shall have occurred and be
continuing; or (ix) the fact that the Termination Date shall have passed or the
Commitments shall have terminated. The LC Agent shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit. Any action taken or omitted by the LC Agent or any Bank under or in
connection with any Letter of Credit and the related drafts and documents, if
done without willful misconduct or gross negligence, shall be binding upon the
Borrower and shall not place the LC Agent or any Bank under any liability to the
Borrower.
<PAGE> 57
(l) Reliance, Etc. The LC Agent shall be entitled (but not obligated) to
rely, and shall be fully protected in relying, on the representation and
warranty by the Company set forth in the last sentence of Section 3.03 to
establish whether the conditions specified in clauses (c), (d) and (e) of
Section 3.03 are met in connection with any issuance or extension of a Letter of
Credit, unless the LC Agent shall have been notified to the contrary by the
Administrative Agent or the Required Banks (in which event the LC Agent shall be
fully protected in relying on such notice). The rights and obligations of the LC
Agent under each Letter of Credit issued by it shall be governed by the
provisions thereof and the provisions of the UCP and/or the Uniform Commercial
Code referred to therein or otherwise applicable thereto.
(m) Indemnification by the Borrower. The Borrower agrees to indemnify and
hold harmless each Bank and the LC Agent (collectively, the "LC Indemnitees")
from and against any and all claims and damages, losses, liabilities, costs or
expenses (including, without limitation, the reasonable fees and disbursements
of counsel) which any such LC Indemnitee may reasonably incur (or which may be
claimed against any such LC Indemnitee by any Person whatsoever) by reason of or
in connection with the execution and delivery or transfer of or payment or
failure to pay under any Letter of Credit or any actual or proposed use of any
Letter of Credit, including any claims, damages, losses, liabilities, costs or
expenses which the LC Agent may incur by reason of or in connection with the
failure of any Bank to fulfill or comply with its obligations to the LC Agent
hereunder; provided that the Borrower shall not be required to indemnify the LC
Agent for any claims, damages, losses, liabilities, costs or expenses to the
extent, but only to the extent, caused by (i) the willful misconduct or gross
negligence of the LC Agent in determining whether a request presented under any
Letter of Credit issued by it complied with the terms of such Letter of Credit
or (ii) the LC Agent's failure to pay under any Letter of Credit issued by it
after the presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit (unless such payment is enjoined or
otherwise prevented by order of a court or other governmental authority).
Nothing in this subsection (m) is intended to change the obligations of the
Borrower under any other provision of this Section.
(n) Indemnification by the Banks. The Banks shall, ratably in accordance
with their respective Pro Rata Shares, indemnify the LC Agent, its affiliates
and their respective directors, officers, agents and employees (to the extent
not reimbursed by the Borrower or any Guarantor) against any cost, expense
(including fees and disbursements of counsel), claim, demand, action, loss or
liability (except such as result from the LC Agent's gross negligence or willful
misconduct or the LC Agent's failure to pay, unless such payment is enjoined or
otherwise prevented by order of a court or other governmental
<PAGE> 58
authority, under any Letter of Credit issued by it after the presentation to it
of a request strictly complying with the terms and conditions of such Letter of
Credit) that any such indemnitee may suffer or incur in connection with this
Agreement or any action taken or omitted by such indemnitee under this
Agreement.
(o) Dual Capacities. In its capacity as a Bank, the LC Agent shall have the
same rights and obligations under this Section as any other Bank.
Section 2.18. Swingline Loans. (a) Swingline Commitment. The Swingline Bank
agrees, on the terms and conditions set forth in this Agreement, to make loans
to the Company pursuant to this Section from time to time during the Swingline
Loan Availability Period; provided that immediately after each such loan is made
(and after giving effect to any substantially concurrent application of the
proceeds thereof to repay outstanding Loans):
(i) the aggregate outstanding principal amount of the Swingline Loans
shall not exceed the Swingline Commitment,
(ii) in the case of each Bank, its Outstanding Committed Amount shall
not exceed its Commitment, and
(iii) the Total Usage shall not exceed the Total Commitments.
Each loan under this Section shall (x) be in a principal amount not less than
$500,000 and shall be in a multiple of $100,000 and (y) bear interest on the
outstanding principal amount thereof for each day from the date such loan is
made until it becomes due at such rate or rates per annum (which shall in no
event be greater than the rate applicable to Base Rate Loans for such day), and
be payable on such dates, as shall be agreed upon from time to time by the
Company and the Swingline Bank. Within the foregoing limits and subject to
Section 2.11(d), the Company may borrow under this Section, repay Swingline
Loans and reborrow under this Section at any time during the Swingline Loan
Availability Period. If the Swingline Bank and the Company are unable, for any
reason, to agree on the interest rate or interest payment date or dates
applicable to any Swingline Loan, the Swingline Bank shall not be obligated to
make, and the Company shall not be obligated to borrow, such Swingline Loan. The
Swingline Loans shall be evidenced by the Swingline Note.
(b) Notice of Swingline Borrowing. The Company shall give the Swingline
Bank notice (a "Notice of Swingline Borrowing") not later than 2:00 P.M. (New
York City time) on the date of each borrowing of a Swingline Loan, specifying
(i) the date of such borrowing, which shall be a Domestic Business Day, and (ii)
the principal amount of such Swingline Loan.
<PAGE> 59
(c) Funding of Swingline Loans. Not later than 3:00 P.M. (New York City
time) on the date of each borrowing of a Swingline Loan, the Swingline Bank
shall, unless the Swingline Bank determines that any applicable condition
specified in Article 3 (which determination may, in the case of Section 3.03(c),
be based in part on information supplied by the LC Agent on the date of such
borrowing as to the Aggregate LC Exposure on such date and on information
supplied by the Administrative Agent as to the aggregate outstanding principal
amount of the Loans on such date) has not been satisfied, make available the
amount of such Swingline Loan, in Federal or other funds immediately available
in New York City, to the Company at the Swingline Bank's address referred to in
Section 9.01.
(d) Optional Prepayment of Swingline Loans. The Company may prepay the
Swingline Loans in whole at any time, or from time to time in part in a
principal amount of at least $500,000, by giving notice of such prepayment to
the Swingline Bank not later than 2:00 P.M. (New York City time) on the date of
prepayment and paying the principal amount to be prepaid (together with (i)
interest accrued thereon to the date of prepayment and (ii) the loss or expense
(if any) resulting from such prepayment which is incurred by the Swingline Bank
(or by an existing or prospective participant in the Swingline Loans) and
documented by the Swingline Bank) to the Swingline Bank at its address referred
to in Section 9.01, in Federal or other funds immediately available in New York
City, not later than 3:00 P.M. on the date of prepayment.
(e) Mandatory Prepayment of Swingline Loans. (i) On the date of each
Borrowing pursuant to Section 2.01 or 2.03, the Company shall prepay all
Swingline Loans then outstanding, together with (x) interest accrued thereon to
the date of prepayment and (y) the loss or expense (if any) resulting from such
prepayment which is incurred by the Swingline Bank (or by an existing or
prospective participant in the Swingline Loans) and documented by the Swingline
Bank.
(ii) On each date on which the Swingline Commitment is reduced pursuant to
Section 2.11(d), the Company shall prepay outstanding Swingline Loans in such
amounts such that, after giving effect to such prepayments, the aggregate
outstanding principal amount of the Swingline Loans will not exceed the
Swingline Commitment as then reduced.
(f) Refunding Unpaid Swingline Loans. The Swingline Bank may at any time,
by notice to the Banks (including the Swingline Bank, in its capacity as a
Bank), require each Bank to pay to the Swingline Bank an amount equal to such
Bank's Pro Rata Share of the aggregate unpaid principal amount of the Swingline
<PAGE> 60
Loans then outstanding. Such notice shall specify the date on which such
payments are to be made, which shall be the first Domestic Business Day after
such notice is given. Not later than 12:00 Noon (New York City time) on the date
so specified, each Bank shall pay the amount so notified to it to the Swingline
Bank at its address referred to in Section 9.01, in Federal or other funds
immediately available in New York City. The amount so paid by each Bank shall
constitute a Base Rate Loan to the Company; provided that, if the Banks are
prevented from making such Loans to the Company by the provisions of the United
States Bankruptcy Code or otherwise, the amount so paid by each Bank shall
constitute a purchase by it of a participation in the unpaid principal amount of
the Swingline Loans (and interest accruing thereon after the date of such
payment). Each Bank's obligation to make such payment to the Swingline Bank
under this subsection (f) shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which such Bank or any other
Person may have against the Swingline Bank or the Company, (ii) the occurrence
or continuance of a Default or the termination of the Commitments, (iii) any
adverse change in the condition (financial or otherwise) of the Company or any
other Person, (iv) any breach of this Agreement by any Obligor or any other Bank
or (v) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing; provided that no Bank shall be obligated to
make any payment to the Swingline Bank under this subsection (f) with respect to
a Swingline Loan made by the Swingline Bank at a time when the Swingline Bank
has determined that a Default had occurred and was continuing.
ARTICLE 3
Conditions
Section 3.01. Effective Date. This Amended Agreement shall become effective
on the date (the "Effective Date") on which all of the conditions set forth in
Section 3 of Amendment No. 4 shall have been satisfied. The Administrative Agent
shall promptly notify the Company and the Banks of the Effective Date, and such
notice shall be conclusive and binding on all parties hereto.
Section 3.02. Consequences of Effectiveness. (a) On the Effective Date,
without further action by any of the parties thereto, the Existing Credit
Agreement will be automatically amended and restated to read as this Amended
Agreement reads.
<PAGE> 61
(b) Each Loan outstanding under the Existing Credit Agreement on the
Effective Date shall mature as specified in this Amended Agreement. The interest
rates determined in accordance with Section 2.07 of this Amended Agreement shall
be effective on the Effective Date; provided that (i) the interest rate
applicable to each CD Loan outstanding on the Effective Date for each remaining
day during the then current Interest Period applicable thereto shall be the rate
per annum equal to the sum of the CD Margin (as defined in this Amended
Agreement) for such day plus the Adjusted CD Rate applicable to such Loan for
such Interest Period (as determined pursuant to Section 2.07(b) of the Existing
Credit Agreement) and (ii) the interest rate applicable to each Euro-Dollar Loan
outstanding on the Effective Date for each remaining day during the then current
Interest Period applicable thereto shall be the rate per annum equal to the sum
of the Euro-Dollar Margin (as defined in this Amended Agreement) for such day
plus the Adjusted London Interbank Offered Rate applicable to such Loan for such
Interest Period (as determined pursuant to Section 2.07(c) of the Existing
Credit Agreement). Facility fees and letter of credit fees accrued under the
Existing Credit Agreement and unpaid as of the Effective Date will be payable on
the first date on which fees are payable in accordance with Section 2.09.
(c) The parties hereto acknowledge and agree that, on and as of the
Effective Date, there are Loans made to the Company pursuant to the Existing
Credit Agreement and outstanding under this Amended Agreement in an aggregate
principal amount equal to $250,000,000 and that the Interest Period applicable
to such Loans ends on March 30, 1999. On March 30, 1999, the Company shall repay
Loans made to it in an aggregate principal amount such that, after giving effect
to such repayment, the aggregate outstanding principal amount of Loans to the
Company shall not exceed $50,000,000.
(d) On and after the Effective Date, the rights and obligations of the
parties hereto shall be governed by the provisions hereof. The rights and
obligations of the parties to the Existing Credit Agreement with respect to the
period before the Effective Date shall continue to be governed by the provisions
thereof as in effect before the Effective Date.
Section 3.03. Extensions of Credit. The obligation (i) of any Bank to make
a Loan on the occasion of any Borrowing (other than a Loan pursuant to Section
2.18(f)), (ii) of the Swingline Bank to make any Swingline Loan and (iii) of the
LC Agent to issue or extend (or allow the extension of) the expiry date of any
Letter of Credit are each subject to the satisfaction of the following
conditions:
(a) the fact that the Effective Date shall have occurred on or prior
to March 19, 1999;
<PAGE> 62
(b) receipt (i) by the Administrative Agent of a Notice of Borrowing
as required by Section 2.02 or 2.03, (ii) by the Swingline Bank of a
Notice of Swingline Borrowing as required by Section 2.18(b) or (iii)
by the LC Agent of a notice of proposed issuance or extension as
required by Section 2.17(c) or (e), as the case may be;
(c) the fact that, immediately after such Extension of Credit, the
applicable limitations in Section 2.01, 2.03(f), 2.17(a) or 2.18(a),
as the case may be, shall not be exceeded;
(d) the fact that, immediately before and after such Extension of
Credit, no Default shall have occurred and be continuing; and
(e) the fact that each of the representations and warranties of the
Obligors contained in the Loan Documents 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 Company on the date of such Extension of Credit as to the facts
specified in clauses (c), (d) and (e) of this Section.
ARTICLE 4
Representations and Warranties
Each Borrower represents and warrants that:
Section 4.01. Corporate Existence and Power. Such Borrower 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 4.02. Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by such Borrower of each Loan Document
to which it is a party are within such 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
<PAGE> 63
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 Company or any of its Subsidiaries or result
in the creation or imposition of any Lien on any asset of the Company or any of
its Subsidiaries.
Section 4.03. Binding Effect. Each Loan Document to which such Borrower is
a party (other than its Notes and its Swingline Note) constitutes a valid and
binding agreement of such Borrower and each of its Notes and its Swingline Note,
when executed and delivered in accordance with this Agreement, will constitute a
valid and binding obligation of such Borrower, in each case enforceable in
accordance with its terms.
Section 4.04. Financial Statements. (a) The consolidated balance sheet of
the Company and its Consolidated Subsidiaries as of January 31, 1998 and the
related consolidated statements of operations, cash flows and shareholders'
equity for the Fiscal Year then ended, reported on by KPMG LLP and set forth in
the Company'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 Company and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such Fiscal Year.
(b) The unaudited condensed consolidated balance sheet of the Company and
its Consolidated Subsidiaries as of October 31, 1998 and the related unaudited
condensed consolidated statements of operations, cash flows and retained
earnings for the nine months then ended, set forth in the Company's Latest Form
10-Q, a copy of which has been delivered to each of the Banks, fairly present,
on a basis consistent with the financial statements referred to in subsection
(a) of this Section, the consolidated financial position of the Company and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such nine-month period (subject to normal year-end
adjustments).
(c) Since October 31, 1998 there has been no material adverse change in the
business, financial position, results of operations or prospects of the Company
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 Company threatened against or affecting, the
Company 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.
<PAGE> 64
Section 4.06. Compliance with Laws. The Company 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 such Borrower, (i)
the Company and its Subsidiaries are in material compliance with all applicable
Environmental Laws, (ii) there are no claims, demands or investigations against
the Company or any of its Subsidiaries by any governmental authority or other
person or entity that may reasonably be expected to result in material liability
for the clean up of materials that have been released into the environment and
(iii) there are no conditions that are reasonably likely to result in such
claims, demands or investigations against the Company 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 Company 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 Company 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 Company and its Subsidiaries in respect of
taxes or other governmental charges are, in the opinion of the Company,
adequate.
<PAGE> 65
Section 4.10. Subsidiaries. (a) Each of the Company'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.
(b) The Subsidiary Guarantors are all of the Subsidiaries of the Company on
the Effective Date, other than Foreign Subsidiaries and Immaterial Subsidiaries.
Section 4.11. Not an Investment Company. Such 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 such Borrower to any Bank for purposes of or
in connection with the Loan Documents or any transaction contemplated thereby
is, and all such information hereafter furnished in writing by such 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 such 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.
Such 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 such Borrower can now reasonably foresee, utilizing reasonable
assumptions and the information now actually known to the Company's Responsible
Officers).
Section 4.13. Year 2000 Compliance. The Company has (i) initiated a review
and assessment of all areas within the business and operations of the Company
and each of its Subsidiaries that could reasonably be expected to be materially
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by it or any of its Subsidiaries may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999), (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis and (iii) to date,
implemented such plan substantially in accordance with such timetable. The
Company reasonably believes that all computer applications that are material to
the business or operations of the Company or any of its Subsidiaries will on a
timely basis be able to perform properly date-sensitive functions for all dates
before and from and after January 1, 2000 (that is, be "Year 2000 Compliant")
except to the extent that a failure to do so could not reasonably be expected to
have a Material Adverse Effect.
<PAGE> 66
Section 4.14. Ranking. The Loans, the Swingline Loans and the Reimbursement
Obligations of such Borrower rank (i) senior to any other Debt of such Borrower
with respect to the Collateral pledged by such Borrower, (ii) pari passu with
other unsecured Debt of such Borrower (other than any such Debt described in
clause (iii)) with respect to any assets of such Borrower (other than the
Collateral pledged by such Borrower) and (iii) senior to any other Debt of such
Borrower which by its terms is subordinated thereto, including without
limitation any New Subordinated Debt (or any Guarantee thereof, as the case may
be).
ARTICLE 5
Covenants
The Company agrees that, so long as any Bank has any Credit Exposure
hereunder, the Swingline Commitment remains in effect or any amount payable
under the Swingline Note remains unpaid:
Section 5.01. Information. The Company 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 Company and its
Consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of operations, cash flows and 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 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 Company 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 Company;
(c) as soon as available and in any event within 30 days after the end of
each month of each Fiscal Year, a consolidated condensed balance sheet of the
Company and its Consolidated Subsidiaries as of the end of such month and the
related consolidated condensed statements of operations and cash flows for the
portion of the Fiscal Year ended at the end of such month, all certified
(subject to normal quarter-end and 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 Company;
(d) simultaneously with the delivery of each set of financial statements
referred to in clauses (a) and (b) above, a certificate of the Company's chief
financial officer or chief accounting officer (i) setting forth in reasonable
detail the calculations required to establish whether the Company was in
compliance with the requirements of Sections 5.06 to 5.10, inclusive, and
Sections 5.13 to 5.15, inclusive, on the date of such financial statements, (ii)
setting forth (x) if such certificate is being delivered together with each set
of financial statements referred to in clause (a) above, the names of each
Subsidiary of the Company that is an Immaterial Subsidiary as of the last day of
the Fiscal Year with respect to which such financial statements relate and the
calculations required to establish that each such Subsidiary is an Immaterial
Subsidiary and (y) if such certificate is being delivered together with each set
of financial statements referred to in clause (b) above for any Fiscal Quarter
of any Fiscal Year, the names of each Subsidiary of the Company that is an
Immaterial Subsidiary as of the last day of the Fiscal Quarter with respect to
which such financial statements relate and which was not listed as an Immaterial
Subsidiary on previous certificates delivered by the Company pursuant to this
subsection (d) together with financial statements for previous Fiscal Quarters
of such Fiscal Year and the calculations required to establish that each such
Subsidiary is an Immaterial Subsidiary and (iii) 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 Company is taking or proposes
to take with respect thereto;
<PAGE> 67
(e) 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 (d) above;
(f) as soon as practicable and in any event within 45 days after the first
day of each Fiscal Year, the Company's operating plans and financial forecasts,
including cash flow projections covering proposed fundings, repayments,
additional advances, investments, capital expenditures and other cash receipts
and disbursements, for such Fiscal Year;
(g) (x) within ten Domestic Business Days of receipt of any Major Casualty
Proceeds that would constitute a Reduction Event but for the delivery of a
certificate pursuant to this subsection, a certificate of the Company setting
forth the amount of such Major Casualty Proceeds and the transaction giving rise
to them and stating that the Company shall notify the Administrative Agent,
within ninety days of receipt of such Major Casualty Proceeds of its
determination as to whether such Major Casualty Proceeds (or any portion
thereof) shall be expended for the purchase or repair of property, plant and
equipment and (y) within 90 days of receipt of any Major Casualty Proceeds with
respect to which the Company has delivered to the Administrative Agent a
certificate pursuant to clause (x) of this subsection, a certificate of the
Company setting forth the amount of such Major Casualty Proceeds that will be
expended by the Company and its Subsidiaries for the purchase or repair of
property, plant and equipment and a reasonably detailed plan of such purchase or
repair;
(h) within ten Domestic Business Days after any Responsible Officer of the
Company obtains knowledge of any Default, if such Default is then continuing, a
certificate of the Company's chief financial officer or chief accounting officer
setting forth the details thereof and the action which the Company is taking or
proposes to take with respect thereto;
(i) within ten Domestic Business Days after any Responsible Officer of the
Company obtains knowledge of the commencement of an action, suit or proceeding
against the Company or any Subsidiary before any court or arbitrator or any
governmental body, agency or official which could reasonably be expected to
result in a Material Adverse Effect, or which in any manner draws into question
the validity or enforceability of any Loan Document, a certificate of a
Responsible Officer of the Company setting forth the nature of such pending or
threatened action, suit or proceeding and such additional information with
respect thereto as may be reasonably requested by any Bank;
<PAGE> 68
(j) within ten Domestic Business Days after any Responsible Officer of the
Company determines that any computer application that is material to the
business or operations of the Company or any of its Subsidiaries will fail to be
"Year 2000 Compliant" (as defined in Section 4.13) in all material respects and
on a timely basis, a certificate of a Responsible Officer of the Company setting
forth the details of such failure, the expected consequences thereof and the
action which the Company is taking or proposes to take with respect thereto;
(k) within ten Domestic Business Days after any Responsible Officer of the
Company obtains knowledge of any actual or proposed material change in any
material contract arrangements between the Company or any of its Subsidiaries
and any material vendors or suppliers, a certificate of a Responsible Officer of
the Company setting forth the details thereof and the action which the Company
is taking or proposes to take with respect thereto;
(l) promptly upon the mailing thereof to the shareholders of the Company
generally, copies of all financial statements, reports and proxy statements so
mailed;
(m) 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 Company shall have filed with the SEC;
(n) 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 Company's chief financial officer or chief accounting officer
setting forth details as to such occurrence and action, if any, which the
Company or applicable member of the ERISA Group has taken or proposes to take;
and
<PAGE> 69
(o) from time to time such additional information regarding the financial
position or business of the Company and its Subsidiaries as the Administrative
Agent, at the request of any Bank, may reasonably request.
Section 5.02. Maintenance of Property; Insurance. (a) The Company 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 Company will, and will cause each of its Subsidiaries to, maintain
(either in the name of the Company or in such Subsidiary's own name) with
financially sound and responsible insurance companies, insurance on all their
respective properties in at least such amounts and against at least such risks
(and with such risk retention) as are usually insured against in the same
general area by companies of established repute engaged in the same or a similar
business; provided that such risks may be covered by self-insurance programs
consistent with past practice. The Company 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 Company
will continue, and will cause each Subsidiary to continue, to engage in business
of the same general type as now conducted by the Company 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,
<PAGE> 70
reasonably be expected to result in a Material Adverse Effect; provided that
nothing in this Section shall prohibit (i) any merger or consolidation permitted
under Section 5.11 or (ii) the termination of the existence of any Immaterial
Subsidiary if the Company in good faith determines that such termination is in
the best interests of the Company and is not materially disadvantageous to the
Banks.
Section 5.04. Compliance with Laws. The Company 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 Company will
keep, and will cause each Subsidiary (except for Subsidiaries that constitute
Immaterial Subsidiaries) to keep, proper books of record and account in which
full, true and correct entries shall be made of all dealings and transactions in
relation to its business and activities; and will permit, and will cause each
Subsidiary (except for Subsidiaries that constitute Immaterial Subsidiaries) to
permit, representatives of any Bank at such Bank's expense, upon reasonable
prior notice, to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants, all at such reasonable
times and as often as may reasonably be desired.
Section 5.06. Negative Pledge. (a) Neither the Company nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except (subject to the last sentence of this
subsection (a)):
(i) Liens existing on the date of this Agreement securing (i) any Debt
described in clause (iv) of the definition of Debt outstanding on the
date of this Agreement in an aggregate principal or face amount not
exceeding $50,000,000 and listed on Schedule 5.06 and (ii) other Debt
outstanding on the date of this Agreement in an aggregate principal or
face amount not exceeding $10,000,000;
(ii) any Lien on any asset (or improvement thereon) securing Debt
(including without limitation any Debt described in clause (iv) of the
definition of 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 (x) such Lien attaches to such
asset (or improvement thereon) concurrently with or within 90 days
after the acquisition thereof and (y) the aggregate principal or face
amount of Debt secured by Liens incurred in reliance on this clause
(ii) shall not exceed $40,000,000;
<PAGE> 71
(iii) 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;
(iv) any Lien on any asset of any corporation existing at the time
such corporation is merged or consolidated with or into the Company or
a Subsidiary and not created in contemplation of such event;
(v) any Lien existing on any asset prior to the acquisition (whether
by purchase, merger or otherwise) thereof by the Company or a
Subsidiary and not created in contemplation of such acquisition;
(vi) 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;
(vii) Liens on amounts on deposit in the Escrow Account securing (x)
the obligations of the Company under any New Subordinated Debt any
portion of the proceeds of which have been deposited in the Escrow
Account and (y) the payment to the Escrow Agent of amounts payable to
it pursuant to the Escrow Agreement, on the terms permitted by Section
5.17(b);
(viii) Liens not securing Debt and consisting of (i) zoning
restrictions, easements, covenants and other restrictions on the use
of any interest of real property, minor irregularities or defects of
title and similar encumbrances on any interest in real property
incurred or suffered in the ordinary course of business, (y) statutory
or contractual Liens of landlords, Liens of carriers, warehousemen,
mechanics and materialmen and other similar Liens, in each case
incurred in the ordinary course of business for sums not yet due or
the payment of which is not delinquent or which are being contested in
good faith by appropriate proceedings and (z) Liens consisting of a
mortgage on Store 1127 located in Miami, Florida and a mortgage on the
Champs office located in Bradenton, Florida, in each case securing
obligations of the Borrower outstanding on the Effective Date;
<PAGE> 72
(ix) Liens (other than Liens described in clause (viii)) arising in
the ordinary course of its business which (x) do not secure Debt, (y)
do not secure any single obligation or series of related obligations
in an amount exceeding $5,000,000 and (z) 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
(x) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt of any Subsidiary (other than a Subsidiary
Borrower) permitted under Section 5.09; provided that the aggregate
principal or face amount of Debt of all Subsidiaries secured by Liens
incurred in reliance on this clause (x) shall not exceed $10,000,000.
Neither the Company nor any Subsidiary will create, assume or suffer
to exist any Lien on any Collateral (or any asset that will constitute
"Collateral" upon execution of the Collateral Documents), except as
permitted by the Collateral Documents or any inventory now owned or
hereafter acquired by it, other than (1) any Lien arising by operation
of law and permitted by subsections (a)(viii) and (a)(ix) and (2)
solely with respect to any Collateral, the Lien created under the
Collateral Document pursuant to which such Collateral is purportedly
pledged.
(b) Neither the Company nor any of its Subsidiaries will enter into any
agreement with any Person which prohibits or limits the ability of the Company
or any Subsidiary to create, incur, assume or suffer to exist any Lien securing
the obligations of the Obligors under the Loan Documents upon any of its
property, assets or revenues, whether now owned or hereafter acquired (any such
agreement, a "Negative Pledge") and which is more restrictive than the Negative
Pledge set forth in the Indenture; provided that nothing in this subsection (b)
shall be construed to prohibit the Company or any of its Subsidiaries from
entering in the ordinary course of business into supply contracts, purchase
contracts and leaseholds with respect to real property containing in each case
customary non- assignment provisions.
Section 5.07. Minimum Consolidated Tangible Net Worth. Consolidated
Tangible Net Worth will at no time be less than the sum of (i) $940,000,000 plus
(ii) for each Fiscal Quarter ended at or prior to such time (but after January
30, 1999), 50% of the consolidated net income of the Company and its
Consolidated Subsidiaries for such Fiscal Quarter (if greater than zero).
Section 5.08. Leverage Ratio. On any date during any period set forth
below, the ratio of (i)(x) Consolidated Debt on such date minus (y) solely if
such date occurs prior to the Refinancing Date, the aggregate amount on deposit
in the Escrow Account on such date to (ii) EBITDA for the period of four
consecutive Fiscal Quarters ended on or most recently prior to such date, shall
not exceed the ratio set forth below opposite such period:
<PAGE> 73
- --------------------------------------------------------------------------------
Period Maximum
Ratio
- --------------------------------------------------------------------------------
From and including January 31, 1999 to but excluding last Not applicable
day of second fiscal quarter 1999
- --------------------------------------------------------------------------------
From and including last day of second fiscal quarter 1999 to 7.5:1
but excluding last day of third fiscal quarter 1999
- --------------------------------------------------------------------------------
From and including last day of third fiscal quarter 1999 to 5.5:1
but excluding last day of fourth fiscal quarter 1999
- --------------------------------------------------------------------------------
From and including last day of fourth fiscal quarter 1999 to 4.0:1
but excluding last day of first fiscal quarter 2000
- --------------------------------------------------------------------------------
From and including last day of first fiscal quarter 2000 to 3.5:1
but excluding last day of second fiscal quarter 2000
- --------------------------------------------------------------------------------
From and including last day of second fiscal quarter 2000 to 3.25:1
but excluding last day of third fiscal quarter 2000
- --------------------------------------------------------------------------------
From and including last day of third fiscal quarter 2000 to 3.00:1
but excluding last day of fourth fiscal quarter 2000
- --------------------------------------------------------------------------------
From and including last day of fourth fiscal quarter 2000 to 2.75:1
but excluding last day of first fiscal quarter 2001
- --------------------------------------------------------------------------------
From and including last day of first fiscal quarter 2001 to 2.5:1
but excluding last day of second fiscal quarter 2001
- --------------------------------------------------------------------------------
From and including last day of second fiscal quarter 2001 to 2.45:1
but excluding last day of third fiscal quarter 2001
- --------------------------------------------------------------------------------
From and including last day of third fiscal quarter 2001 to 2.35:1
but excluding last day of fourth fiscal quarter 2001
- --------------------------------------------------------------------------------
Thereafter 2.15:1
- --------------------------------------------------------------------------------
Section 5.09. Limitation on Debt of Subsidiaries. The total Debt of all
Subsidiaries (excluding (i) Debt owed to the Company or to another Subsidiary,
(ii) Debt under the Guarantee Agreement, (iii) Debt of any Subsidiary Guarantor
consisting of a Guarantee of non-contingent reimbursement obligations of the
Company under trade letters of credit (other than any Letter of Credit) which
reimbursement obligations are outstanding no more than one Domestic Business
Day, (iv) Debt of any Subsidiary Guarantor consisting of a Guarantee of New
<PAGE> 74
Subordinated Debt, so long as the obligations of such Subsidiary Guarantor under
such Guarantee are subordinated to the obligations of such Subsidiary Guarantor
under the Loan Documents at least to the same extent as the obligations of the
Company under such New Subordinated Debt, (v) Debt of any Subsidiary Guarantor
consisting of a Guarantee of any unsecured Debt of the Company outstanding at
January 30, 1999 and reflected on the balance sheet of the Company at January
30, 1999, so long as the obligations of such Subsidiary Guarantor under such
Guarantee are subordinated to the obligations of such Subsidiary Guarantor under
the Loan Documents on customary capital markets terms approved by the bank
affiliate of each Lead Arranger and (vi) the Loans and the Swingline Loans made
to any Subsidiary Borrower and the Reimbursement Obligations of any Subsidiary
Borrower) will not at any time exceed $50,000,000.
Section 5.10. Fixed Charge Coverage Ratio. At the end of each Fiscal
Quarter listed below, the Fixed Charge Coverage Ratio will not be less than the
ratio set forth below opposite such Fiscal Quarter:
- --------------------------------------------------------------------------------
Fiscal Quarter Minimum Ratio
- --------------------------------------------------------------------------------
First Fiscal Quarter 1999 .35:1
- --------------------------------------------------------------------------------
Second Fiscal Quarter 1999 .55:1
- --------------------------------------------------------------------------------
Third Fiscal Quarter 1999 .75:1
- --------------------------------------------------------------------------------
Fourth Fiscal Quarter 1999 1.0:1
- --------------------------------------------------------------------------------
First Fiscal Quarter 2000 1.0:1
- --------------------------------------------------------------------------------
Second Fiscal Quarter 2000 1.0:1
- --------------------------------------------------------------------------------
Third Fiscal Quarter 2000 1.0:1
- --------------------------------------------------------------------------------
Fourth Fiscal Quarter 2000 1.3:1
- --------------------------------------------------------------------------------
First Fiscal Quarter 2001 1.3:1
- --------------------------------------------------------------------------------
Second Fiscal Quarter 2001 1.3:1
- --------------------------------------------------------------------------------
Third Fiscal Quarter 2001 1.3:1
- --------------------------------------------------------------------------------
Fourth Fiscal Quarter 2001 1.4:1
- --------------------------------------------------------------------------------
First Fiscal Quarter 2002 1.4:1
- --------------------------------------------------------------------------------
Second Fiscal Quarter 2002 1.4:1
- --------------------------------------------------------------------------------
<PAGE> 75
Section 5.11. Consolidations, Mergers and Sales of Assets. The Company will
not, and will not permit any of its Subsidiaries to, consolidate or merge with
or into any other Person; provided that (i) the Company may merge with another
Person if (x) the Company is the corporation surviving such merger and (y)
unless such other Person was a Subsidiary Guarantor immediately prior to giving
effect to such merger, immediately after giving effect to such merger no Default
shall have occurred and be continuing and (ii) any Subsidiary may merge with
another Person if (x) a Subsidiary is the survivor to such merger, (y) if such
Subsidiary was a Subsidiary Guarantor immediately prior to giving effect to such
merger, the survivor to such merger is a Subsidiary Guarantor (and, if the
survivor was not a Subsidiary Guarantor immediately prior to giving effect to
such merger and is a Foreign Subsidiary, the Administrative Agent shall have
received evidence reasonably satisfactory to it that the obligations of such
Subsidiary Guarantor under the Guarantee Agreement shall be enforceable in the
jurisdictions in which such Subsidiary Guarantor holds assets and conducts its
operations) and (z) if such Subsidiary was a Subsidiary Borrower immediately
prior to giving effect to such merger, such Subsidiary Borrower is the survivor
to such merger. The Company and its Subsidiaries will not sell, lease or
otherwise transfer, directly or indirectly (1) all or substantially all of the
assets of the Company and its Subsidiaries, taken as a whole, to any other
Person, (2) any assets of the Company or any Subsidiary Guarantor to any
Subsidiary that is not a Subsidiary Guarantor, except in the ordinary course of
business or (3) all or any substantial part of the Foot Locker Business or the
Champs Business to any other Person; provided that the foregoing limitations
shall not apply to sales of inventory or sales and other dispositions of surplus
assets, in each case in the ordinary course of business. For purposes of this
Section 5.11, "Foot Locker Business" means the operations of the Company and its
Subsidiaries conducted in North America under the names "Foot Locker", "Lady
Foot Locker", "Kids Foot Locker" and "World Foot Locker" (including the stock of
any Subsidiary through which any such operations are conducted and the tangible
and intangible assets held by any such Subsidiary) and "Champs Business" means
the operations of the Company and its Subsidiaries conducted in North America
under the name "Champs Sports" (including the stock of any Subsidiary through
which any such operations are conducted and the tangible and intangible assets
held by any such Subsidiary).
Section 5.12. Use of Proceeds. The proceeds of the Loans and the Swingline
Loans made under this Agreement will be used by the Borrowers solely to finance
their working capital and, until the Company has issued New Subordinated Debt
for gross proceeds of not less than $350,000,000 in the aggregate, to finance
Consolidated Capital Expenditures to the extent permitted under Section 5.13.
<PAGE> 76
Section 5.13. Limitation on Capital Expenditures. (a) Consolidated Capital
Expenditures will not, for any fiscal period set forth below, exceed the amount
set forth below opposite such period:
-------------------------------------------------------------------
Fiscal Period Maximum Amount
-------------------------------------------------------------------
Fiscal Year 1999 $ 175,000,000
-------------------------------------------------------------------
Fiscal Year 2000 $ 150,000,000
-------------------------------------------------------------------
Fiscal Year 2001 $ 150,000,000
-------------------------------------------------------------------
From and including the first day of the $ 75,000,000
first Fiscal Quarter 2002 to and
including the last day of the second
Fiscal Quarter 2002
-------------------------------------------------------------------
;provided that to the extent Consolidated Capital Expenditures for any fiscal
period set forth above are less than the amount set forth above opposite such
period, 50% of such unused amount may be carried over to the immediately
succeeding fiscal period (or, in the case of any unused amount for the Fiscal
Year 2001, 25%). Consolidated Capital Expenditures made in any fiscal period
will be allocated first to reduce the amount set forth above opposite such
period, and second, to reduce any amount carried over from the immediately
preceding fiscal period.
(b) In addition to the restrictions set forth in subsection (a),
Consolidated Capital Expenditures will not, for any fiscal period set forth
below, exceed the amount set forth below opposite such period:
-------------------------------------------------------------------
Fiscal Period Maximum Amount
From and including the first day of the $114,000,000
first Fiscal Quarter 1999 to and
including the last day of the second
Fiscal Quarter 1999
-------------------------------------------------------------------
From and including the first day of the $ 81,000,000
third Fiscal Quarter 1999 to and
including the last day of the fourth
Fiscal Quarter 1999
-------------------------------------------------------------------
From and including the first day of the $ 99,00,000
first Fiscal Quarter 2000 to and
including the last day of the second
Fiscal Quarter 2000
-------------------------------------------------------------------
From and including the first day of the $ 71,000,000
third Fiscal Quarter 2000 to and
including the last day of the fourth
Fiscal Quarter 2000
-------------------------------------------------------------------
From and including the first day of the $ 91,000,000
first Fiscal Quarter 2001 to and
including the last day of the second
Fiscal Quarter 2001
-------------------------------------------------------------------
From and including the first day of the $ 71,000,000
third Fiscal Quarter 2001 to and
including the last day of the fourth
Fiscal Quarter 2001
-------------------------------------------------------------------
From and including the first day of the $ 56,000,000
first Fiscal Quarter 2002 to and
including the last day of the second
Fiscal Quarter 2002
-------------------------------------------------------------------
;provided that to the extent Consolidated Capital Expenditures for any fiscal
period set forth above consisting of the first two Fiscal Quarters of any Fiscal
Year are less than the amount set forth above opposite such period, such unused
amount may be carried over to the immediately succeeding fiscal period.
Consolidated Capital Expenditures made in any fiscal period will be allocated
first to reduce the amount set forth above opposite such period, and second, to
reduce any amount carried over from the immediately preceding fiscal period.
Section 5.14. Investments and Business Acquisitions. Neither the Company
nor any Subsidiary will hold, make or acquire any Investment in any Person or
make any Business Acquisition other than:
(a) Investments in existence on the Effective Date in an aggregate
amount not to exceed $1,000,000;
(b) (i) any Investment in Persons which are Subsidiaries immediately
prior to the making of such Investment and (ii) any Investment in the
Company; provided that any Investment by the Company or a Subsidiary
Guarantor in a Subsidiary that is not a Subsidiary Guarantor shall be
permitted pursuant to this clause (b) only if consummated in the
ordinary course of business;
<PAGE> 77
(c) Temporary Cash Investments (and, solely with respect to any
amounts on deposit in the Escrow Account, such other Investments as
shall be permitted by the terms of the Escrow Agreement); and
(d) any Investment not otherwise permitted by the foregoing clauses of
this Section and any Business Acquisition if (x) the aggregate amount
of any single such Investment or Business Acquisition (or series of
related Investments or Business Acquisitions) does not exceed
$10,000,000, (y) immediately after any such Investment or Business
Acquisition is made or acquired, the aggregate amount (without
duplication) of all Investments and Business Acquisitions made in
reliance on this clause (d) does not exceed $50,000,000 and (z) solely
with respect to any Business Acquisition, immediately after giving
effect to such Business Acquisition, (1) the Company would be in pro
forma compliance with the covenants set forth in Sections 5.08, 5.09,
5.10 and 5.13 (calculated giving effect to any Debt to be incurred or
assumed by the Company and its Subsidiaries in connection with such
Business Acquisition and assuming that such Business Acquisition was
consummated in the first day of the most recent fiscal period with
respect to which each covenant is calculated) and (2) together with
the delivery of the financial statements pursuant to Section 5.01(c)
with respect to the month in which such Business Acquisition was
consummated, the Company shall have delivered to the Administrative
Agent a certificate of a Responsible Officer certifying such pro forma
compliance and showing in reasonable detail the calculation thereof.
Section 5.15. Restricted Payments. Neither the Company nor any Subsidiary
will declare or make any Restricted Payment on any date (with respect to any
proposed Restricted Payment, a "Measurement Date") unless (i) such Restricted
Payment is declared or made after the last day of the first Fiscal Quarter of
Fiscal Year 2000, (ii) immediately before and after giving effect thereto, no
Default has occurred and is continuing, (iii) the Fixed Charge Coverage Ratio
for the period of four consecutive Fiscal Quarters most recently ended prior to
the relevant Measurement Date and with respect to which the Company has
delivered the financial statements required to be delivered by it pursuant to
Section 5.01(a) or (b), as the case may be, is at least 2.5:1 and (iv) the
aggregate amount of Restricted Payments made since January 29, 2000 does not
exceed 20% of the consolidated net income of the Company and its Consolidated
Subsidiaries for the period from and including January 29, 2000 to and including
the last day of the Fiscal Quarter most recently ended prior to the relevant
<PAGE> 78
Measurement Date (treated as a single accounting period); provided that
regardless of whether the conditions set forth in clauses (i) through (iv) are
satisfied, the Company may make Restricted Payments consisting of (1)
repurchases of its common stock pursuant to employee stock plans in an aggregate
amount not to exceed $500,000 in any Fiscal Year and (2) payments in respect of
shareholders rights plans in an aggregate amount not to exceed $1,500,000.
Section 5.16. New Subordinated Debt. (a) The Company will not issue any
Debt securities in the capital markets on or after the Effective Date which rank
pari passu with the Loans and the Swingline Loans made to the Company and the
Reimbursement Obligations of the Company (determined without regard to the
existence of the Lien on the Collateral created under the Collateral Documents)
until the Company will have issued New Subordinated Debt for gross proceeds of
not less than $350,000,000 in the aggregate.
(b) The Company will not, and will not permit any Subsidiary to, enter into
any amendment or waiver of any agreement or instrument governing any New
Subordinated Debt (or any Guarantee thereof) which (i) would increase the
interest rate, shorten the final maturity or the weighted average life, or
change the subordination provisions of such New Subordinated Debt (or Guarantee
thereof) or make any of the covenants or events of default applicable to such
New Subordinated Debt (or Guarantee thereof) more restrictive than the covenants
or events of default applicable under this Agreement or (ii) could otherwise be
reasonably expected to have an adverse effect on the Banks, without in each case
the prior written consent of the Required Banks. The Company will not enter into
any amendment or waiver of the Escrow Agreement which (i) would alter the
provisions regarding the deposit, withdrawal, application or investment of
amounts on deposit therein (including without limitation the timing or amount of
any such deposit or withdrawal) or the creation or termination or release of any
Liens on amounts on deposit therein or (ii) could otherwise be reasonably
expected to have an adverse effect on the Banks, without in each case the prior
written consent of the Required Banks.
(c) Neither the Company nor any Subsidiary will optionally prepay, redeem,
purchase, acquire or make any other payment in respect of any New Subordinated
Debt other than regularly scheduled payments of interest thereon.
Section 5.17. Refunding of the 7% Debentures; Escrow Arrangements. (a) On
or prior to February 15, 2000, the Company shall have repaid or repurchased in
full all outstanding 7% Debentures, together with accrued and unpaid interest
thereon and all other amounts due and payable at such time with respect thereto
(or shall have on deposit in the Escrow Account (as defined below) an amount
equal to the aggregate principal amount of the 7% Debentures then outstanding)
and, should such repayment, repurchase or deposit be made with the proceeds of
any Debt, such Debt shall be New Subordinated Debt.
<PAGE> 79
(b) The Company shall deposit into an escrow account (the "Escrow Account")
established with a financial institution reasonably acceptable to the Company
and the bank affiliate of each Lead Arranger (the "Escrow Agent") pursuant to an
escrow agreement in form and substance reasonably satisfactory to the bank
affiliate of each Lead Arranger (as amended from time to time in accordance with
Section 5.16(b), the "Escrow Agreement"), the Net Cash Proceeds from the
issuance by the Company of any New Subordinated Debt consummated prior to the
Refinancing Date, until the amount deposited in the Escrow Account equals the
aggregate principal amount of the 7% Debentures then outstanding (the "Required
Escrow Amount"). The Net Cash Proceeds from the issuance by the Company of any
New Subordinated Debt in excess of the Required Escrow Amount may be retained by
the Company, subject to being applied as required by Sections 2.06 and 2.11 (to
the extent contemplated thereby). The Escrow Agreement will provide that (i)
amounts on deposit in the Escrow Account will be invested, at the direction of,
if no Default shall have occurred and be continuing, the Company or, if a
Default shall have occurred and be continuing, the Administrative Agent, in
Temporary Cash Investments or such other Investments as shall have been approved
by the bank affiliate of Lead Arranger, and, prior to the Refinancing Date, may
be withdrawn only to repay or repurchase the 7% Debentures and (ii) on the
Refinancing Date, amounts then on deposit in the Escrow Account (after giving
effect to any withdrawals made therefrom on such Date the proceeds of which have
been applied to repay or repurchase any 7% Debentures then outstanding) will be
applied as required by Sections 2.06 and 2.11 (to the extent contemplated
thereby) and any excess will be released to the Company (so long as the Escrow
Agent has not received written notice from the trustee under the indenture
pursuant to which the New Subordinated Debt, any portion of the proceeds of
which have been deposited in the Escrow Account, was issued that a default has
occurred and is then continuing thereunder). Amounts on deposit in the Escrow
Account (and no other amounts or other assets) may be pledged to secure the
obligations of the Company under the New Subordinated Debt any portion of the
proceeds of which have been deposited in the Escrow Account; provided that the
Lien securing such obligations on any amounts on deposit in the Escrow Account
will automatically be released upon withdrawal of such amounts for the uses
specified in the immediately preceding sentence so long as the Escrow Agent has
not received written notice from such trustee that a default has occurred and is
then continuing thereunder.
Section 5.18. Transactions with Affiliates. The Company will not, and will
not permit any Subsidiary to, directly or indirectly, (i) pay any funds to or
for the account of any Affiliate, (ii) make any investment in any Affiliate
(whether by acquisition of stock or indebtedness, by loan, advance, transfer of
property, guarantee or other agreement to pay, purchase or service, directly or
indirectly, any Debt, or otherwise), (iii) lease, sell, transfer or otherwise
dispose of any assets, tangible or intangible, to any Affiliate, or (iv)
participate in, or effect, any transaction with any Affiliate, except in each
case on an arms-length basis on terms at least as favorable to the Company or
such Subsidiary as could have been obtained from a third party that was not an
Affiliate; provided that the foregoing provisions of this Section shall not
prohibit any such Person from declaring or paying any lawful dividend or other
payment ratably in respect of all its capital stock of the relevant class so
long as, after giving effect thereto, no Default shall have occurred and be
continuing (including without limitation pursuant to Section 5.15).
<PAGE> 80
Section 5.19. Additional Guarantors. The Company shall cause (x) any Person
which becomes a Subsidiary (other than, subject to clause (z), any Foreign
Subsidiary or any Immaterial Subsidiary) after the date hereof, (y) any
Immaterial Subsidiary (other than, subject to clause (z), any Foreign
Subsidiary) that ceases to be an Immaterial Subsidiary after the date hereof and
(z) any Foreign Subsidiary and any Immaterial Subsidiary that has entered into,
or is proposing to enter into, a Guarantee of any other Debt of the Company or
any of its Subsidiaries, including without limitation any New Subordinated Debt,
any Other Refinancing Debt or any Debt of the Company described in clause (v) of
the parenthetical set forth in Section 5.09 (other than, with respect to any
Foreign Subsidiary, any Guarantee of any Debt of any of its Subsidiaries that is
a Foreign Subsidiary) to (i) enter into the Guarantee Agreement, (ii) become
bound by the Pledge Agreement and the Security Agreement and, if applicable,
enter into such additional agreements or instruments, each in form and substance
satisfactory to the Administrative Agent, as may be necessary or desirable in
order to grant a perfected first priority interest upon all of the Collateral
purportedly pledged by such Subsidiary pursuant to the Pledge Agreement and the
Security Agreement (subject to Liens on such Collateral permitted by the last
sentence of Section 5.06(a)) and (iii) deliver such certificates, evidences of
corporate or other organizational actions, notations and registrations,
financing statements, opinions of counsel, powers of attorney and other
documents relating thereto as the Administrative Agent may reasonably request,
all in form and substance reasonably satisfactory to the Administrative Agent,
in each case within (x) ten days after the date on which the relevant event
described in clauses (x), (y) or (z) occurs (or, if later, the date on which the
Company must have satisfied the requirements set forth in Section 5.20), in the
case of entering into the Guarantee Agreement and becoming bound by the Pledge
Agreement and the Security Agreement and (y) within 30 days after the date on
which the relevant event described in clauses (x), (y) or (z) occurs (or, if
later, the date on which the Company must have satisfied the requirements set
forth in Section 5.20), in the case of the other actions described in this
Section.
<PAGE> 81
Section 5.20. Collateral Documents. (a) On or prior to 90 days after the
Effective Date, the Company will, and will cause each of its Subsidiaries (other
than any Foreign Subsidiary or any Immaterial Subsidiary, unless any such
Subsidiary has entered into, or is proposing to enter into, a Guarantee of any
other Debt of the Company or any of its Subsidiaries, including without
limitation any New Subordinated Debt, any Other Refinancing Debt or any Debt of
the Company described in clause (v) of the parenthetical set forth in Section
5.09 (other than, with respect to any Foreign Subsidiary, any Guarantee of any
Debt of any of its Subsidiaries that is a Foreign Subsidiary)) to (i) enter into
the Pledge Agreement and the Security Agreement and, if applicable, enter into
such additional agreements or instruments, each in form and substance
satisfactory to the Administrative Agent, as may be necessary or desirable in
order to grant a perfected first priority security interest in all of the
Collateral purportedly pledged by the Company or such Subsidiary pursuant to the
Pledge Agreement and the Security Agreement (subject to Liens on such Collateral
permitted by the last sentence of Section 5.06(a)) and (ii) deliver such
certificates, evidences of corporate or other organizational actions, notations
and registrations, financing statements, opinions of counsel, powers of attorney
and other documents relating thereto as the Administrative Agent may reasonably
request, all in form and substance reasonably satisfactory to the Administrative
Agent.
(b) On or prior to 90 days after the Effective Date, the Company will, and
will cause each of its Subsidiaries to, enter into mortgages and such other
agreements, each in form and substance reasonably satisfactory to the
Administrative Agent, as may be necessary or desirable in order to grant the
Administrative Agent, for the benefit of the Bank Parties, a perfected first
priority mortgage Lien on each ownership interest in real property held by the
Company or such Subsidiary and listed on Schedule 5.20(b) (subject to Liens on
such Collateral permitted by Section 5.06(a)(viii)(z) and by the last sentence
of Section 5.06(a)). If on the first date after the Final Disposition Date with
respect to any Real Property Held For Sale the Company or any Subsidiary holds
such Real Property Held For Sale (other than any Real Property Held For Sale
constituting a leasehold interest in real property which has been subleased in
its entirety by the Company or any of its Subsidiaries on or prior to the Final
Disposition Date with respect thereto) then, within 90 days thereafter, the
Company will, or will cause such Subsidiary to, enter into a mortgage and such
other agreements, each in form and substance reasonably satisfactory to the
Administrative Agent, as may be necessary or desirable in order to grant the
Administrative Agent, for the benefit of the Bank Parties, a perfected first
priority mortgage Lien on such Real Property Held For Sale (subject to Liens on
Collateral permitted by the last sentence of Section 5.06(a)). If at any time
after the Effective Date the Company or any of its Subsidiaries (other than any
Foreign Subsidiary) acquires any ownership interest in real property with a fair
market value in excess of $2,000,000, the Company will, or will cause such
Subsidiary to, enter into a mortgage and such other agreements, each in form and
substance satisfactory to the Administrative Agent, as may be necessary or
desirable in order to grant the Administrative Agent, for the benefit of the
Bank Parties, a perfected first priority mortgage Lien on such ownership
interest (subject to Liens on Collateral permitted by the last sentence of
Section 5.06(a)); provided that neither the Company nor any of its Subsidiaries
shall be required to grant any Lien pursuant to this Section so long as doing so
would trigger a requirement to equally and ratably secure securities issued
under the Indenture. Together with the execution of any mortgage pursuant to
this subsection, the Company will, or will cause its Subsidiaries to, deliver
such real property surveys, certificates, evidences of corporate or other
organizational actions, notations and registrations, financing statements,
opinions of counsel, powers of attorney and other documents relating thereto as
the Administrative Agent may reasonably request, all in form and substance
reasonably satisfactory to the Administrative Agent.
<PAGE> 82
ARTICLE 6
Defaults
Section 6.01. Events of Defaults. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) any Borrower shall fail (i) to pay any principal of any Loan,
Swingline Loan or Reimbursement Obligation when due or (ii) to pay any
interest on any Loan, Swingline Loan or Reimbursement Obligation, any
fees or any other amount payable hereunder within two Domestic
Business Days after the due date thereof;
(b) the Company shall fail to observe or perform any covenant
contained in Sections 5.03 (as it relates to maintenance of existence)
and Section 5.06 to 5.20, inclusive;
(c) any Obligor shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by
clause (a) or (b) above) or any other Loan Document for 30 days after
written notice thereof has been given to the Company by the
Administrative Agent at the request of any Requesting Banks;
(d) any representation, warranty, certification or statement made (or
deemed made) by any Obligor in any Loan Document or in any
certificate, financial statement or other document delivered pursuant
to any Loan Document shall prove to have been incorrect in any
material respect when made (or deemed made);
(e) the Company and/or any of its Subsidiaries shall fail to pay, when
due or within any applicable grace period, any amount payable in
respect of any Material 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 Company 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 of its assets, or shall consent to any
such relief or to the appointment of any such official or to any such
official taking possession of any of its 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 Company 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 of its 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 Company 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 $5,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
<PAGE> 83
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 or more members of the ERISA
Group to incur a current payment obligation in excess of $5,000,000;
(j) a judgment or order for the payment of money in excess of
$5,000,000 shall be rendered against the Company or any Subsidiary and
such judgment or order shall continue unsatisfied and unstayed for a
period of 10 days;
(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
Company; or Continuing Directors shall cease to constitute a majority
of the board of directors of the Company;
(l) the Guarantee granted by any Subsidiary Guarantor pursuant to the
Guarantee Agreement or the Guarantee granted by the Company pursuant
to Article 10 hereof shall cease for any reason to be in full force
and effect (other than a result of the release of such Guarantee with
respect to any Subsidiary Guarantor or the Company, as the case may
be, pursuant to the release provisions contained therein), or any
Obligor shall so assert in writing; or
(m) (i) any Lien created by any Collateral Document shall at any time
on or after such Collateral Document has been executed fail to
constitute a valid and perfected Lien on all the Collateral purported
to be subject thereto, securing the obligations purported to be
secured thereby (other than (x) to the extent attributable to the
failure of the Administrative Agent to maintain possession of any
Collateral possession of which is necessary in order to perfect such
Lien or (y) a result of the release of such Lien with respect to any
Collateral pursuant to the release provisions contained in the
relevant Collateral Document) or (ii) any Obligor shall so assert in
writing;
<PAGE> 84
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 Company terminate the Commitments and the Swingline Commitment and they
shall thereupon terminate, and (ii) if requested by Banks holding more than 50%
in aggregate principal amount of the Loans, by notice to the Company declare the
Loans and Swingline Loans (together with accrued interest thereon) to be, and
the Loans and Swingline Loans (together with accrued interest thereon) shall
thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by each
Borrower; provided that if any Event of Default specified in clause (g) or (h)
above occurs with respect to any Borrower, then without any notice to any
Borrower or any other act by the Administrative Agent or the Banks, the
Commitments and the Swingline Commitment shall thereupon terminate and the Loans
and Swingline Loans (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by each Borrower.
Section 6.02. Notice of Default. The Administrative Agent shall give notice
to the Company under Section 6.01(c) promptly upon being requested to do so by
any Requesting Banks and shall thereupon notify all the Banks thereof.
Section 6.03. Cash Cover. The Borrowers agree, in addition to the
provisions of Section 6.01, that upon the occurrence and during the continuance
of any Event of Default, they shall, if requested by the LC Agent upon the
instruction of the Required Banks, deposit in the LC Collateral Account an
amount in immediately available funds equal to the aggregate amount available
for drawing under all Letters of Credit then outstanding at such time, provided
that, upon the occurrence of any Event of Default specified in clause (g) or (h)
of Section 6.01 with respect to any Borrower, each Borrower shall deposit such
amount forthwith without any notice or demand or any other act by the LC Agent
or the Banks.
<PAGE> 85
ARTICLE 7
The Administrative Agent, Lead Arrangers, Documentation Agent and
Co-Agents
Section 7.01. Appointment and Authorization. Each Bank irrevocably appoints
and authorizes the Administrative Agent and the Lead Arrangers to take such
action as agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Administrative Agent or the Lead Arrangers by
the terms thereof, together with all such powers as are reasonably incidental
thereto.
Section 7.02. Agents and Affiliates. Each Bank acting as an Agent, Co-
Agent, Lead Arranger or Swingline Bank in connection with the Loan Documents or
the credit facility provided hereby shall have the same rights and powers under
this Agreement as any other Bank and may exercise or refrain from exercising the
same as though it were not so acting. Each Bank so acting, and each of their
respective affiliates, may accept deposits from, lend money to, and generally
engage in any kind of business with, the Company or any Subsidiary or affiliate
of the Company as if it were not so acting.
Section 7.03. Obligations of the Co-agents and Document Agent. The
Co-Agents and Documentation Agent, in their capacities as such, shall have no
duties, obligations or liabilities of any kind hereunder.
Section 7.04. Obligations of Administrative Agent and Lead Arrangers. The
obligations of the Administrative Agent, the Lead Arrangers and the affiliates
of each Lead Arranger under the Loan Documents are only those expressly set
forth therein. 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 7.05. Consultation with Experts. The Administrative Agent, each
Lead Arranger, the LC Agent and the affiliates of each Lead Arranger may consult
with legal counsel (who may be counsel for any Obligor), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
Section 7.06. Liability of Agents and Lead Arrangers. None of the
Documentation Agent, the Administrative Agent, any Lead Arranger, their
respective affiliates or their respective directors, officers, agents or
employees shall be liable for any action taken or not taken in connection
herewith (i) with the
<PAGE> 86
consent or at the request of the Required Banks or (ii) in the absence of its
own gross negligence or willful misconduct. None of the Documentation Agent, the
Administrative Agent, any Lead Arranger, their respective affiliates or their
respective directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any statement, warranty
or representation made in connection with any Loan Document or any Extension of
Credit; (ii) the performance or observance of any of the covenants or agreements
of any Obligor; (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; (iv) the validity, effectiveness or genuineness of any Loan
Document or any other instrument or writing furnished in connection therewith;
or (v) the existence, validity or sufficiency of any Collateral. The LC Agent
shall not incur any liability by acting in reliance upon information supplied by
the Administrative Agent as to the Total Usage at any time (including Loans to
be made pursuant to Notices of Borrowing theretofore received by the
Administrative Agent). The Administrative Agent shall not incur any liability by
acting in reliance upon (i) information supplied to it by the LC Agent as to the
Aggregate LC Exposure at any time or (ii) any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex, facsimile
transmission or similar writing) believed by it to be genuine or to be signed by
the proper party or parties.
Section 7.07. Indemnification. The Banks shall, ratably in accordance with
their respective Credit Exposures, indemnify the Administrative Agent and the
Lead Arrangers and their respective affiliates, directors, officers, agents and
employees (to the extent not reimbursed by the Obligors) 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
the Loan Documents or any action taken or omitted by such indemnitees
thereunder.
Section 7.08. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Lead Arrangers or any Bank Party,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each Bank
also acknowledges that it will, independently and without reliance upon the Lead
Arrangers or any Bank Party, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking any action under this Agreement.
Section 7.09. Successor Administrative Agent. The Administrative Agent may
resign at any time by giving notice thereof to the Banks and the Company, such
resignation to be effective when a successor Administrative Agent
<PAGE> 87
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 Company (unless an Event of Default shall have occurred and be continuing at
the time of such appointment, in which case the Company'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
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Agent.
Section 7.10. Administrative Agent's Fees. The Company shall pay to the
Administrative Agent for its account, fees in the amounts and at the times
previously agreed upon between the Company 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 CD Loan, Euro-Dollar
Loan or Money Market LIBOR Loan:
(a) the Administrative Agent is advised by the Reference Banks that
deposits in dollars (in the applicable amounts) are not being offered
to the Reference Banks in the relevant market for such Interest
Period, or
(b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50% or
more of the aggregate principal amount of the affected Loans advise
the Administrative Agent that the Adjusted CD Rate or the Adjusted
London Interbank Offered Rate, as the case may be, as determined by
the Administrative Agent will not adequately and fairly reflect the
cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as
the case may be, for such Interest Period,
<PAGE> 88
the Administrative Agent shall forthwith give notice thereof to the
Company and the Banks, whereupon until the Administrative Agent
notifies the Company that the circumstances giving rise to such
suspension no longer exist, (i) the obligations of the Banks to make
CD Loans or Euro-Dollar Loans, or to continue such Loans for an
additional Interest Period, as the case may be, or to convert
outstanding Loans into CD Loans or Euro-Dollar Loans, as the case may
be, shall be suspended and (ii) each outstanding CD Loan or
Euro-Dollar Loan, as the case may be, shall be converted into a Base
Rate Loan on the last day of the then current Interest Period
applicable thereto. Unless the Borrower notifies the Administrative
Agent at least two Domestic Business Days before the date of any
affected Borrowing for which a Notice of Borrowing has previously been
given that it elects not to borrow on such date, (i) if such affected
Borrowing is a CD Borrowing or Euro-Dollar Borrowing, such Borrowing
shall instead be made as a Base Rate Borrowing and (ii) if such
affected Borrowing is a Money Market LIBOR Borrowing, the Money Market
LIBOR Loans comprising such Borrowing shall bear interest for each day
from and including the first day to but excluding the last day of the
Interest Period applicable thereto at the Base Rate for such day.
Section 8.02. Illegality. If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency, shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans to
any Borrower and such Bank shall so notify the Administrative Agent, the
Administrative Agent shall forthwith give notice thereof to the other Banks and
the Company, 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 such
Borrower, to continue Euro-Dollar Loans to such Borrower for an additional
Interest Period or to convert outstanding Loans of such Borrower 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 to such
<PAGE> 89
Borrower shall be converted to a Base Rate Loan either (i) 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 (ii)
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 (x) the
date hereof, in the case of any Committed Loan or Swingline Loan or Letter of
Credit or any obligation to make Committed Loans or Swingline Loans or
participate in Letters of Credit or (y) the date of the related Money Market
Quote, in the case of any Money Market Loan, the adoption of any applicable law,
rule or regulation, or any change in any applicable law, rule or regulation, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) or the Swingline Bank with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency, shall impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding (i) with respect to any CD Loan any such
requirement included in an applicable Domestic Reserve Percentage and (ii) with
respect to any Euro-Dollar Loan any such requirement included in an applicable
Euro-Dollar Reserve Percentage), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such requirement reflected in an
applicable Assessment Rate) or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Bank (or its Applicable
Lending Office) or the Swingline Bank or shall impose on any Bank (or its
Applicable Lending Office) or the Swingline Bank or on the United States market
for certificates of deposit or the London interbank market any other condition
affecting its Fixed Rate Loans, its Note, its Swingline Loans, its Swingline
Note, its obligation to make Fixed Rate Loans or Swingline Loans or its
obligation to participate in any Letter of Credit and the result of any of the
foregoing is to increase the cost to such Bank (or its Applicable Lending
Office) of making or maintaining any Fixed Rate Loan, or participating in any
Letter of Credit or increase the cost to the Swingline Bank of making or
maintaining any Swingline Loan or to reduce the amount of any sum received or
receivable by such Bank (or its Applicable Lending Office) or the Swingline Bank
under this Agreement or under its Note or Swingline Note with respect thereto,
by an amount deemed by such Bank or the Swingline Bank to be material, then,
within 15 days after receiving a request by such Bank or the Swingline Bank for
compensation under this subsection, accompanied by a certificate complying with
subsection (e) of this Section (with a copy to the Administrative Agent), the
relevant Borrower shall, subject to subsection (f) of this Section, pay to such
Bank or the Swingline Bank such additional amount or amounts as will compensate
such Bank or the Swingline Bank for such increased cost or reduction.
<PAGE> 90
(b) If, on or after the date hereof, the adoption of any applicable law,
rule or regulation, or any change in any applicable law, rule or regulation, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the LC Agent with any request or
directive (whether or not having the force of law) made on or after the date of
this Agreement by any such authority, central bank or comparable agency, shall
impose, modify or deem applicable any reserve (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal Reserve
System), special deposit, insurance assessment or similar requirement against
any Letter of Credit issued by the LC Agent or shall impose on the LC Agent any
other condition affecting its Letters of Credit or its obligation to issue
Letters of Credit and the result of any of the foregoing is to increase the cost
to the LC Agent of issuing any Letter of Credit or to reduce the amount of any
sum received or receivable by the LC Agent under this Agreement with respect
thereto, by an amount deemed by the LC Agent to be material, then, within 15
days after demand by the LC Agent (with a copy to the Administrative Agent), the
relevant Borrower shall pay to the LC Agent such additional amount or amounts as
will compensate the LC Agent for such increased cost or reduction.
(c) If any Bank, the Swingline Bank or the LC Agent shall have determined
that, after the date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change in any such law, rule or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on capital of such Bank, the Swingline Bank or the LC Agent, as
the case may be (or its Parent), as a consequence of its obligations hereunder
to a level below that which such Bank, the Swingline Bank or the LC Agent, as
the case may be (or its Parent), could have achieved but for such adoption,
change, request or directive (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by it to be material, then from
time to time, within 15 days after receiving a request by such Bank, the
Swingline Bank or the LC Agent, as the case may be, for compensation under this
subsection, accompanied by a certificate complying with subsection (e) of this
Section (with a copy to the Administrative Agent), the Company shall, subject to
subsection (f) of this Section, pay to such Bank, the Swingline Bank or the LC
Agent, as the case may be, such additional amount or amounts as will compensate
it (or its Parent) for such reduction.
<PAGE> 91
(d) Each Bank, the Swingline Bank and the LC Agent will promptly notify the
Company and the Administrative Agent of any event of which it has knowledge,
occurring after the date hereof, which will entitle it to compensation pursuant
to this Section and will designate a different Applicable Lending Office or LC
Office if such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in its judgment, be otherwise disadvantageous to
it. If a Bank, the Swingline Bank or the LC Agent fails to notify the Company 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 Company thereof.
(e) Each request by a Bank, the Swingline Bank or the LC Agent for
compensation under this Section shall be accompanied by a certificate, signed by
one of its authorized employees, setting forth in reasonable detail (i) the
basis for claiming such compensation, (ii) the additional amount or amounts to
be paid to it hereunder and (iii) the method of calculating such amount or
amounts, which certificate shall be conclusive in the absence of manifest error.
In determining such amount, such Bank, the Swingline Bank or the LC Agent may
use any reasonable averaging and attribution methods.
(f) Notwithstanding any other provision of this Section, none of the Banks,
the Swingline Bank and the LC Agent shall be entitled to compensation under
subsection (a), (b) or (c) of this Section if it is not then its general
practice to demand compensation in similar circumstances under comparable
provisions of other credit agreements.
Section 8.04. Taxes. (a) For purposes of this Section 8.04, the following
terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings with respect to any payment by any Borrower
pursuant to the Loan Documents, and all liabilities with respect thereto,
excluding (i) in the case of each Bank Party, taxes imposed on or measured by
its income, and franchise or similar taxes imposed on it, by a jurisdiction
under the laws of which it is organized or qualified to do business (but only if
the taxes are imposed solely because such Bank Party is qualified to do business
in such jurisdiction without regard to any Loan) or in which its principal
executive office is located or in which its Applicable Lending Office or LC
Office is located and (ii) in the case of each Bank, any United States
withholding tax imposed on such payments other than such withholding tax imposed
as a result of a change in treaty, law or regulation occurring after a Bank
first becomes subject to this Agreement.
<PAGE> 92
"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 the Loan Documents or from
the execution, delivery or enforcement of, or otherwise with respect to, the
Loan Documents.
(b) Each payment by a Borrower to or for the account of any Bank Party
under any Loan Document shall be made without deduction for any Taxes or Other
Taxes; provided that, if a Borrower shall be required by law to deduct any Taxes
or Other Taxes from any such payment, (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) such Borrower shall make such deductions, (iii) such
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law and (iv) such 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 relevant Borrower agrees to indemnify each Bank Party for the full
amount of any 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 such Borrower shall not indemnify any Bank Party for any penalties
or interest on any Taxes or 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 such 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 Company (but only so long as such Bank Party remains lawfully able to do
so), shall provide the Company with Internal Revenue Service Form 1001 or 4224,
as appropriate, or any successor form prescribed by the Internal Revenue
Service,
<PAGE> 93
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 Company 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 Borrowers shall take such steps as such Bank Party shall reasonably request
to assist such Bank Party to recover such Taxes.
(f) If any Borrower is required to pay additional amounts to or for the
account of any Bank Party pursuant to this Section 8.04, then such Bank Party
will change the jurisdiction of its Applicable Lending Office or LC Office if,
in the judgment of such Bank Party, such change (i) will eliminate or reduce any
such additional payment which may thereafter accrue and (ii) is not otherwise
disadvantageous to such Bank Party.
(g) If a Bank Party receives a notice from a taxing authority asserting any
Taxes or Other Taxes for which any Borrower is required to indemnify such Bank
Party under Section 8.04(c), it shall furnish to such Borrower a copy of such
notice no later than 90 days after the receipt thereof. If such Bank Party has
failed to furnish a copy of such notice to such Borrower within such 90-day
period as required by this Section 8.04(g), such 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 such Borrower a copy of such notice.
Section 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. If
(i) the obligation of any Bank to make or maintain Euro-Dollar Loans to any
Borrower has been suspended pursuant to Section 8.02 or (ii) any Bank has
demanded compensation under Section 8.03 or 8.04 with respect to its CD Loans or
Euro-Dollar Loans to any Borrower and, in either case, the Company shall, by at
least five Euro-Dollar Business Days' prior notice to such Bank through the
<PAGE> 94
Administrative Agent, have elected that the provisions of this Section shall
apply to such Bank, then, unless and until such Bank notifies the Company that
the circumstances giving rise to such suspension or demand for compensation no
longer exist, all Loans to such Borrower which would otherwise be made by such
Bank as (or continued as or converted into) CD Loans or Euro-Dollar Loans, as
the case may be, shall instead be Base Rate Loans (on which interest and
principal shall be payable contemporaneously with the related CD Loans or
Euro-Dollar Loans of the other Banks). If such Bank notifies the Company that
the circumstances giving rise to such notice no longer apply, the principal
amount of each such Base Rate Loan shall be converted into a CD Loan or
Euro-Dollar Loan, as the case may be, on the first day of the next succeeding
Interest Period applicable to the related CD Loans or Euro-Dollar Loans of the
other Banks.
Section 8.06. Substitution of Bank. If (i) the obligation of any Bank to
make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any
Bank has demanded compensation under Section 8.03 or 8.04, the Company 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 Company'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 Company
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 2.15) and concurrently the replacement bank or banks
assuming a Commitment in an amount equal to the Commitment being terminated and
making Loans in the same aggregate amount and having the same maturity date or
dates, respectively, as the Committed Loans being prepaid, all pursuant to
documents reasonably satisfactory to the Administrative Agent (and in the case
of any document to be signed by the replaced Bank, reasonably satisfactory to
such Bank). No such substitution shall relieve the Borrowers of their 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.
<PAGE> 95
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: (a) in the
case of any Borrower, the LC Agent, the Swingline Bank or the Administrative
Agent, at its address, facsimile number or telex number set forth on the
signature pages hereof, (b) in the case of any Lead Arranger or its affiliate,
at its address, facsimile number or telex number set forth on the signature
pages hereof, (c) in the case of any Bank, at its address, facsimile number or
telex number set forth in its Administrative Questionnaire or (d) 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 Company. 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 and notices to the LC Agent or the Swingline Bank under Article 2
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 under any Loan Document 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 provided in the Loan Documents shall be
cumulative and not exclusive of any rights or remedies provided by law.
Section 9.03. Expenses; Indemnificaiton. (a) The Company shall pay (i) all
reasonable out-of-pocket expenses of the Lead Arrangers and their affiliates,
including reasonable fees and disbursements of special counsel, in connection
with the negotiation and preparation of the Loan Documents, (ii) all reasonable
out-of-pocket expenses of the Lead Arrangers, the Administrative Agent and the
affiliates of each Lead Arranger, including reasonable fees and disbursements of
special counsel and reasonable fees and disbursements of accountants and any
other advisors to the Lead Arrangers, the Administrative Agent and the
affiliates of each Lead Arranger, in connection with the administration of the
Loan Documents, any waiver or consent thereunder or any amendment thereof or any
<PAGE> 96
Default or alleged Default thereunder, and the allocated cost of internal
counsel of each Bank Party in connection with any waiver or consent under the
Loan Documents or any amendment thereof and (iii) if an Event of Default occurs,
all out-of-pocket expenses incurred by the Lead Arrangers and each Bank Party
including (without duplication) the fees and disbursements of special counsel
and the allocated cost of internal counsel and the fees and disbursements of
accountants and any other advisors to the Lead Arrangers or any Bank Party, in
connection with any collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom.
(b) The Company 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 the Loan Documents or any actual or proposed use of
proceeds of Loans or Letters of Credit 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) Each Bank further agrees that if it shall, by exercising any right of
set-off or counterclaim or otherwise, receive payment of a proportion of the
aggregate amount of the principal of and interest on the Reimbursement
Obligations held by it or for its account which is greater than the proportion
received in respect of the aggregate amount of the principal of and interest on
the Reimbursement Obligations held by or for the account of any other Bank, the
Bank receiving such proportionately greater payment shall purchase such
participations in the aggregate amount of the principal of and interest on the
Reimbursement Obligations held by or for the account of the other Banks, and
<PAGE> 97
such other adjustments shall be made, as may be required so that all such
payments of the aggregate amount of the principal of and interest on the
Reimbursement Obligations held by or for the account of the Banks shall be
shared by them pro rata.
(c) Nothing in this Section shall impair the right of any Bank to exercise
any right of set-off or counterclaim it may have and to apply the amount subject
to such exercise to the payment of indebtedness of the relevant Borrower other
than its indebtedness hereunder.
(d) Each Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in a Loan, Swingline
Loan or Reimbursement Obligation, whether or not acquired pursuant to the
foregoing arrangements, may exercise rights of set-off or counterclaim and other
rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of such Borrower in the amount of such
participation.
Section 9.05. Amendments and Waivers. (a) Any provision of this Agreement,
the Notes or the Swingline Note may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrowers and the
Required Banks (and, if the rights or duties of the Administrative Agent, the LC
Agent, the Swingline Bank, or the Lead Arrangers and their affiliates are
affected thereby, by the Administrative Agent, the LC Agent, the Swingline Bank,
or the Lead Arrangers and their affiliates, as the case may be); provided that
no such amendment or waiver shall, unless signed by all the Banks, (i) increase
or decrease the Commitment of any Bank (except for a ratable decrease in the
Commitments of all Banks) or subject any Bank to any additional obligation, (ii)
reduce the principal of or rate of interest on any Loan or Swingline Loan or any
fees hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or Swingline Loan or any fees hereunder or for the
termination of any Commitment, (iv) reduce the principal of or rate of interest
on any Reimbursement Obligation, (v) postpone the date fixed for payment by the
Borrower of any Reimbursement Obligation or extend the expiry date of any Letter
of Credit to a date later than the fifth Domestic Business Day prior to the
Termination Date, (vi) unless signed by the Swingline Bank, increase the
Swingline Commitment, postpone the date fixed for termination of the Swingline
Commitment or otherwise affect any of its rights and obligations, (vii) release
the Company from its obligations under Article 10 hereof, or (vii) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Loans, or the number of Banks, which shall be required for the Banks or any of
them to take any action under this Section or any other provision of this
Agreement (including without limitation subsection (b) of this Section 9.05).
<PAGE> 98
(b) Any provision of the Collateral Documents or the Guarantee Agreement
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed by each Obligor party thereto and the Administrative Agent with
the consent of the Required Banks; provided that no such amendment or waiver
shall, unless signed by each Obligor party thereto and the Administrative Agent
with the consent of all the Banks, (i) effect or permit a release of all or
substantially all of the Collateral, or (ii) release all or substantially all of
the Obligors from their obligations under the Guarantee Agreement or permit
termination of the Guarantee Agreement, except in each case as expressly
permitted by the terms thereof.
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 no Borrower may assign or
otherwise transfer any of its rights under this Agreement without the prior
written consent of each Bank, the LC Agent and the Swingline Bank; provided that
(w) upon the consummation of any Asset Sale (or any sale or other disposition
described in clause (iv) of the definition of Asset Sale) permitted by the terms
of this Agreement and consisting of the disposition of all of the capital stock
of a Subsidiary Borrower (any such transaction, a "Subsidiary Borrower Asset
Sale"), (x) if applicable, application of the proceeds of such Subsidiary
Borrower Asset Sale in accordance with the provisions of this Agreement, (y)
release of such Subsidiary Borrower from its obligations under any Guarantee of
any other Debt of the Company or any of its Subsidiaries (including without
limitation any New Subordinated Debt, any Other Refinancing Debt or any Debt of
the Company described in clause (v) of the parenthetical set forth in Section
5.09 of this Agreement) (or automatic termination of the obligations of such
Subsidiary Borrower under any such Guarantee) and (z) repayment in full of all
outstanding Loans made to such Subsidiary Borrower and all Reimbursement
Obligations owed by such Subsidiary Borrower and cancellation or termination of
all Letters of Credit issued for its account (or the assumption on the terms set
forth in this Agreement by the Company or any other Borrower under the Credit
Agreement of the reimbursement obligations with respect to such Letters of
Credit), such Subsidiary Borrower shall be released from its obligations
hereunder (and such release shall not require the consent of any Bank Party).
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans or all or any part of its LC Exposure. If any Bank
grants a participating interest to a Participant, whether or not upon notice to
any of the Borrowers or the Administrative Agent, such Bank shall remain
responsible for the performance of its obligations hereunder, such Bank shall
remain the holder of its Loans or LC Exposure, as the case may be, and the
Borrowers and the
<PAGE> 99
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 Borrowers hereunder including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement; provided that such participation agreement may
provide that such Bank will not agree to any modification, amendment or waiver
of this Agreement described in clause (i), (ii), (iii), (iv) or (v) of Section
9.05(a) or clause (i) or (ii) of Section 9.05(b) without the consent of the
Participant. Each Borrower agrees that each Participant shall, to the extent
provided in its participation agreement, be entitled to the benefits of
Article 8 with respect to its participating interest. An assignment or other
transfer which is not permitted by subsection (c) or (d) below shall be given
effect for purposes of this Agreement only to the extent of a participating
interest granted in accordance with this subsection (b).
(c) Any Bank may, in the ordinary course of its business and in accordance
with applicable law, at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to an
initial Commitment of not less than $5,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit I hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consents of the Company,
the LC Agent, the Swingline Bank and the Administrative Agent (which consents
shall not be unreasonably withheld); provided that (i) such consents shall not
be required if the Assignee is an affiliate of such transferor Bank or was a
Bank immediately prior to such assignment or if, at the time of the proposed
assignment, an Event of Default has occurred and is continuing; (ii) such
assignment may, but need not, include rights of the transferor Bank in respect
of outstanding Money Market Loans and (iii) the $5,000,000 minimum amount
specified above for a partial assignment of the transferor Bank's rights and
obligations shall not apply if the Assignee was a Bank immediately prior to such
assignment. Upon execution and delivery of such instrument and payment by such
Assignee to such transferor Bank of an amount equal to the purchase price agreed
between such transferor Bank and such Assignee, such Assignee shall be a Bank
party to this Agreement and shall have all the rights and obligations of a Bank
with a Commitment as set forth in such instrument of assumption, and the
transferor Bank shall be released from its obligations hereunder (and its
Commitment shall be reduced) to a corresponding extent, and no further consent
or action by any party shall be required. Upon the consummation of any
assignment pursuant to this subsection (c), the transferor Bank, the
Administrative Agent and the Borrowers shall make appropriate
<PAGE> 100
arrangements so that, if required, new Notes are 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 $3,500; provided that the Company shall pay such administrative fee if
such assignment is required by the Company 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 or Swingline Bank may at any time assign all or any portion of
its rights under this Agreement and its Notes or Swingline Notes, as the case
may be, to a Federal Reserve Bank. No such assignment shall release the
transferor Bank or Swingline 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 Company's prior written consent or by
reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to
designate a different Applicable Lending Office under certain circumstances or
at a time when the circumstances giving rise to such greater payment did not
exist.
Section 9.07. No-Reliance on Margin Stock. Each of the Banks represents to
the Administrative Agent and each of the other Banks that it in good faith is
not relying upon any "margin stock" (as defined in Regulation U) as collateral
in the extension or maintenance of the credit provided for in this Agreement.
Section 9.08. Governing Law; Submission to Jurisdiction. (a) Each Letter of
Credit and Section 2.17 shall be subject to the UCP, and, to the extent not
inconsistent therewith, the laws of the State of New York.
(b) SUBJECT TO CLAUSE (a) OF THIS SECTION, EACH LOAN DOCUMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(c) Each 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 any Loan Document or the transactions
contemplated thereby. Each Borrower irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
<PAGE> 101
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 ANY LOAN DOCUMENT OR TRANSACTIONS CONTEMPLATED THEREBY.
Section 9.11. Judgment Currency. If for the purposes of enforcing the
obligations of any Borrower hereunder it is necessary to convert a sum due from
such Person in U.S. dollars ("dollars") into another currency, the parties
hereto agree, to the fullest extent that they may effectively do so, that the
rate of exchange used shall be that at which in accordance with normal banking
procedures the Agent and the Banks could purchase dollars with such currency at
or about 11:00 A.M. (New York City time) on the Domestic Business Day preceding
that on which final judgment is given. The obligations in respect of any sum due
to the Agent and the Banks hereunder shall, notwithstanding any adjudication
expressed in a currency other than dollars, be discharged only to the extent
that on the Domestic Business Day following receipt by the Agent and the Banks
of any sum adjudged to be so due in such other currency the Agent and the Banks
may in accordance with normal banking procedures purchase dollars with such
other currency; if the amount of dollars so purchased is less than the sum
originally due to the Agent and the Banks in dollars, each Borrower agrees, to
the fullest extent that it may effectively do so, as a separate obligation and
notwithstanding any such adjudication, to indemnify the Agent and the Banks
against such loss, and if the amount of dollars so purchased exceeds the sum
originally due to the Agent and the Banks, it shall remit such excess to such
Borrower.
<PAGE> 102
ARTICLE 10
Guaranty
Section 10.01. The Guaranty. The Company hereby unconditionally guarantees
the full and punctual payment when due (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Loan made to
any Subsidiary Borrower pursuant to this Agreement, and the full and punctual
payment of all other amounts payable by any Subsidiary Borrower under the Loan
Documents to which it is a party. Upon failure by any Subsidiary Borrower to pay
punctually any such amount when due, the Company shall forthwith on demand pay
the amount not so paid at the place and in the manner specified in this
Agreement.
Section 10.02. Guaranty Unconditional. The obligations of the Company under
this Article 10 shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of any Subsidiary Borrower under the Loan
Documents to which it is a party, by operation of law or otherwise;
(b) any modification or amendment of or supplement to any Loan
Document;
(c) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of any Subsidiary
Borrower under any Loan Document to which it is a party;
(d) any change in the corporate existence, structure or ownership of
any Subsidiary Borrower, or any bankruptcy, insolvency, reorganization
or other similar proceeding affecting any Subsidiary Borrower or its
assets or any resulting release or discharge of any obligation of any
Subsidiary Borrower contained in any Loan Document to which it is a
party;
(e) the existence of any claim, set-off or other rights which the
Company may have at any time against any Subsidiary Borrower, the
Administrative Agent, any Lender or any other Person, whether in
connection with the Loan Documents or any unrelated transactions,
provided that nothing herein shall prevent the assertion of any such
claim by separate suit or compulsory counterclaim;
<PAGE> 103
(f) any invalidity or unenforceability relating to or against any
Subsidiary Borrower for any reason of any Loan Document to which it is
a party, or any provision of applicable law or regulation purporting
to prohibit the payment by any Subsidiary Borrower of the principal of
or interest on any of its Notes or any other amount payable by it
under any Loan Document to which it is a party; or
(g) any other act or omission to act or delay of any kind by any
Subsidiary Borrower, the Administrative Agent, any Lender or any other
Person or any other circumstance whatsoever which might, but for the
provisions of this Section, constitute a legal or equitable discharge
of the Company's obligations hereunder.
Section 10.03. Discharge Only Upon Payment In Full; Reinstatement In
Certain Circumstances. The Company's obligations under this Article 10 shall
remain in full force and effect until the Commitments shall have terminated, all
Letters of Credit shall have terminated or been canceled (unless such Letters of
Credit have been fully cash collateralized pursuant to arrangements satisfactory
to the LC Agent, or back-stopped by a separate letter of credit, in form and
substance and issued by an issuer satisfactory to the LC Agent) and the
principal of and interest on the Loans and the Swingline Loans made to each
Subsidiary Borrower, the Reimbursement Obligations of each Subsidiary Borrower
and all other amounts payable by each Subsidiary Borrower under the Loan
Documents shall have been paid in full. If at any time any payment of the
principal of or interest on any Loan or Swingline Loan made to any Subsidiary
Borrower or any Reimbursement Obligation of such Subsidiary Borrower or other
amount payable by such Subsidiary Borrower under the Loan Documents is rescinded
or must be otherwise restored or returned upon the bankruptcy, insolvency or
reorganization of such Subsidiary Borrower or otherwise, the Company's
obligations hereunder with respect to such payment shall be reinstated at such
time as though such payment had been due but not made at such time.
Section 10.04. Waiver by the Company. The Company irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
Person against any Subsidiary Borrower or any other Person.
Section 10.05. Subrogation. Upon making full payment with respect to any
obligation of any Subsidiary Borrower under this Article 10, the Company shall
be subrogated to the rights of the payee against such Subsidiary Borrower with
respect to such obligation; provided that the Company shall not enforce any
payment by way of subrogation against such Subsidiary Borrower so long as (i)
any Lender has any Commitment hereunder, (ii) any Letter of Credit is
outstanding or (iii) any amount payable by any Subsidiary Borrower hereunder
remains unpaid.
<PAGE> 104
Section 10.06. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by any Subsidiary Borrower under the Loan
Documents is stayed upon any bankruptcy, insolvency or reorganization of such
Subsidiary Borrower or otherwise, all such amounts otherwise subject to
acceleration under the terms of this Agreement shall nonetheless be payable by
the Company hereunder forthwith on demand by the Administrative Agent made at
the request of the Required Lenders.
<PAGE> 105
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______________________________
Name:
Title:
233 Broadway
New York, New York 10279-0003
Facsimile number: 212-553-2094
eVENATOR, INC.
By______________________________
Name:
Title:
VENATOR GROUP RETAIL, INC.
By______________________________
Name:
Title:
TEAM EDITION APPAREL, INC.
By______________________________
Name:
Title:
<PAGE> 106
NORTHERN REFLECTIONS INC.
By______________________________
Name:
Title:
VENATOR GROUP SPECIALTY, INC.
By______________________________
Name:
Title:
THE SAN FRANCISCO MUSIC BOX COMPANY
By______________________________
Name:
Title:
FOOT LOCKER EUROPE B.V.
By______________________________
Name:
Title:
FOOT LOCKER JAPAN K.K.
By______________________________
Name:
Title:
<PAGE> 107
VENATOR GROUP AUSTRALIA LIMITED
By______________________________
Name:
Title:
VENATOR GROUP CANADA INC.
By______________________________
Name:
Title:
J.P. MORGAN SECURITIES INC.,
as Lead Arranger
By______________________________
Name:
Title:
BNY CAPITAL MARKETS, INC.,
as Lead Arranger
By______________________________
Name:
Title:
NATIONSBANK MONTGOMERY LLC,
as Lead Arranger
By______________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By______________________________
Name:
Title:
<PAGE> 108
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION,
as Documentation Agent and a Bank
By______________________________
Name:
Title:
NATIONSBANK, N.A.
By______________________________
Name:
Title:
THE BANK OF NEW YORK
By______________________________
Name:
Title:
THE BANK OF NOVA SCOTIA,
as Co-Agent and a Bank
By______________________________
Name:
Title:
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY, as Co-Agent and a Bank
By______________________________
Name:
Title:
<PAGE> 109
TORONTO DOMINION (NEW YORK), INC.,
as Co-Agent and a Bank
By______________________________
Name:
Title:
COMMERZBANK AG, NEW YORK BRANCH
By______________________________
Name:
Title:
By______________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By______________________________
Name:
Title:
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By______________________________
Name:
Title:
By______________________________
Name:
Title:
<PAGE> 110
KEYBANK NATIONAL ASSOCIATION
By______________________________
Name:
Title:
WELLS FARGO BANK, NATIONAL
ASSOCIATION
By______________________________
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.
By______________________________
Name:
Title:
THE BANK OF NEW YORK, as Administrative
Agent, LC Agent and Swingline Bank
By______________________________
Name:
Title:
<PAGE> 110
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
- ------------------------------------------------------------- ------------------------------------
<S> <C>
Bank Commitment
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Morgan Guaranty Trust Company of New York $ 60,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
NationsBank, N.A. $ 51,600,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
The Bank of New York $ 51,600,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
The Bank of Nova Scotia $ 37,600,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Bank of Tokyo-Mitsubishi Trust Company $ 37,600,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Toronto Dominion (New York), Inc. $ 29,600,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Bank of America National Trust & Savings Association $24,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Commerzbank AG, New York and/or Grand Cayman Branches $ 20,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Credit Lyonnais New York Branch $ 20,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Deutsche Bank AG, New York and/or Cayman Island Branch $ 20,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
KeyBank National Association $ 20,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Wells Fargo Bank, N.A. $ 20,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Union Bank of California, N.A. $ 8,000,000
- ------------------------------------------------------------- ------------------------------------
- ------------------------------------------------------------- ------------------------------------
Total $400,000,000
- ------------------------------------------------------------- ------------------------------------
</TABLE>
<PAGE> 111
PRICING SCHEDULE
The "Euro-Dollar Margin", "LC Fee Rate", "CD Margin" and "Facility Fee
Rate" for any day are the respective percentages per annum set forth in the
table below in the applicable row under the column corresponding to the Pricing
Level that applies on such day (subject to the sentence immediately following
such table):
<TABLE>
<CAPTION>
========================================================================================================
Level I Level II Level III Level IV Level V Level VI Level VII
Pricing Level
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Euro-Dollar
Margin and LC Fee
Rate
If Utiliza-
tion is .3500 .6250 .9500 1.6500 2.0000 2.1250 2.2500
50% or less
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
If Utiliza- .4750 .8750 1.2000 1.9000 2.2500 2.5000 2.7500
tion exceeds
50%
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
CD Margin
If Utiliza- .4750 .7500 1.0750 1.7750 2.1250 2.250 2.3750
tion is
50% or less
If Utiliza- .6000 1.0000 1.3250 2.0250 2.3750 2.6250 2.8750
tion exceeds
50%
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Facility Fee Rate .1500 .2500 .3000 .3500 .5000 .7500 1.000
- --------------------------------------------------------------------------------------------------------
</TABLE>
On any date after October 31, 1999, each rate per annum set forth in the
table above shall be increased by 0.50% if such date is prior to the Refinancing
Date and the aggregate amount on deposit in the Escrow Account on such date is
less than the Required Escrow Amount.
"Base Rate Margin" means, on any day, (i) the Euro-Dollar Margin for such
day minus (i) 1.00%.
For purposes of this Schedule, the following terms have the following
meanings:
1
<PAGE> 112
"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
Loans are expressly rated BBB or higher by S&P and Baa2 or higher by Moody's.
"Level II 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 Loans are expressly rated BBB- or higher by S&P and Baa3 or higher by
Moody's.
"Level III 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 Loans are expressly 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 IV Pricing" applies on any day on which the Loans are expressly
rated BB+ or higher by S&P and Ba1 or higher by Moody's.
"Level V Pricing" applies on any day on which the Loans are expressly rated
BB or higher by S&P and Ba2 or higher by Moody's.
"Level VI Pricing" applies on any day on which Loans are expressly rated
BB- or higher by S&P and Ba3 or higher by Moody's.
"Level VII Pricing" applies on any day if no other Pricing Level applies on
such day.
"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 or Level VII Pricing applies on any day.
"Utilization" means at any date the percentage equivalent of a fraction (i)
the numerator of which is the Total Usage at such date, after giving effect to
any borrowing or repayment on such date, and (ii) the denominator of which is
the Total Commitments at such date, after giving effect to any reduction of the
Commitments on such date. For purposes of this Schedule, if for any reason any
Bank has any Credit Exposure after the Commitments terminate, the Utilization on
and after the date of such termination shall be deemed to exceed 50%.
2
<PAGE> 113
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 the Loans made to the Borrower, as the case may be. Any
rating assigned to any other commercial paper or other debt security of the
Borrower shall be disregarded. The rating in effect at any date is that in
effect at the close of business on such date.
3
<PAGE> 114
Schedule 1.01(a)
---------------------
MATERIAL TRADEMARKS
Actra
AfterThoughts
Athletic Shoe Factory
Authentic Northern Experience
The Bargain Shop
Champs Sports
Colorado
Cottage Essentials
Eastbay
Element Boreal
Foot Locker
Foot Locker Athletic Club
Going to the Game
Kids Foot Locker
Kinney
Lady Foot Locker
Loon Design
Northern Elements
Northern Getaway
Northern Reflections
Northern Traditions
Randy River
Referee Design
Reflet Boreal
Reflexions
The San Francisco Music Box Company
The San Francisco Music Box & Gift Company
Venator Group
Vestiaire Sportif
Village Wheels
Weekend Edition
Williams the Shoemen
Woolco
Woolworth
World Foot Locker
<PAGE> 115
Schedule 1.01(b)
DEBT THAT MAY BE REFINANCED
<TABLE>
<CAPTION>
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
Issuance Original Interest Maturity Balance O/S
Date Amount Rate Date Jan. 30, 1999
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C>
$200 Million 01/16/92 $ 200,000,000 8.50% 01/15/22 $ 200,000,000
30-Year Note
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
$200 Million 06/08/95 $ 200,000,000 7.00% 06/01/00 $ 200,000,000
5-Year Note
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
$50 Million 10/05/95 $ 50,000,000 6.98% 10/15/01 $ 50,000,000
6-Year Note
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
$40 Million 10/13/95 $ 40,000,000 7.00% 10/15/02 $ 40,000,000
7-Year Note
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
Total $ 490,000,000
- ---------------------- ----------------- --------------------- ------------- ----------------- ---------------------
</TABLE>
2
<PAGE> 116
Schedule 1.01(c)
EXISTING STANDBY LETTERS OF CREDIT
<TABLE>
<CAPTION>
- --------------------------- -------------------------- ------------------ ------------------------
Standby
Banks Beneficiary Amount Expiry Date
- --------------------------- -------------------------- ------------------ ------------------------
- --------------------------- -------------------------- ------------------ ------------------------
<S> <C> <C> <C>
Key Bank Richman Brothers $ 250,000 11/01/99
- --------------------------- -------------------------- ------------------ ------------------------
- --------------------------- -------------------------- ------------------ ------------------------
Bank of New York Kemper Insurance $ 14,500,000 01/31/00
- --------------------------- -------------------------- ------------------ ------------------------
- --------------------------- -------------------------- ------------------ ------------------------
Bank of New York Travelers Insurance $ 12,831,397 07/27/99
- --------------------------- -------------------------- ------------------ ------------------------
- --------------------------- -------------------------- ------------------ ------------------------
Total $ 27,581,397
- --------------------------- -------------------------- ------------------ ------------------------
</TABLE>
3
<PAGE> 117
Schedule 5.06
EXISTING CAPITAL LEASES
<TABLE>
--------------------------------------------------------- -------------------------
<S> <C>
Junction City Distribution Center..................... $13,371,386
--------------------------------------------------------- -------------------------
--------------------------------------------------------- -------------------------
Point of Sale Equipment............................... $ 3,881,952
--------------------------------------------------------- -------------------------
--------------------------------------------------------- -------------------------
Footlocker Stores..................................... $ 179,231
--------------------------------------------------------- -------------------------
--------------------------------------------------------- -------------------------
Capital Leases entered into prior to 1998............. $ 6,177,774
--------------------------------------------------------- -------------------------
--------------------------------------------------------- -------------------------
Capital Leases entered into in 1998................... $ 1,977,100
--------------------------------------------------------- -------------------------
--------------------------------------------------------- -------------------------
Total $25,587,443
--------------------------------------------------------- -------------------------
--------------------------------------------------------- -------------------------
</TABLE>
4
<PAGE> 118
Schedule 5.20(b)
REAL PROPERTY TO BE MORTGAGED
<TABLE>
<CAPTION>
- ----------------------------- ----------------- --------- -------------------- -------------------
Gross Book
Store # City State Value Value
- ----------------------------- ----------------- --------- -------------------- -------------------
- ----------------------------- ----------------- --------- -------------------- -------------------
<S> <C> <C> <C> <C>
1127 Miami FL $ 2,130,000 $ 1,835,000
- ----------------------------- ----------------- --------- -------------------- -------------------
- ----------------------------- ----------------- --------- -------------------- -------------------
Office/Warehouse Camp Hill PA $ 6,700,000 $ 7,219,000
- ----------------------------- ----------------- --------- -------------------- -------------------
- ----------------------------- ----------------- --------- -------------------- -------------------
Champs Office Bradenton FL $ 6,000,000 $ 6,828,000
- ----------------------------- ----------------- --------- -------------------- -------------------
- ----------------------------- ----------------- --------- -------------------- -------------------
Milton Warehouse Milton ONT $ 4,725,000 $ 6,650,000
- ----------------------------- ----------------- --------- -------------------- -------------------
- ----------------------------- ----------------- --------- -------------------- -------------------
Total $ 19,555,000 $ 22,532,000
- ----------------------------- ----------------- --------- -------------------- -------------------
- ----------------------------- ----------------- --------- -------------------- -------------------
</TABLE>
5
<PAGE> 119
EXHIBIT A
NOTE
New York, New York
March __ , 1999
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 Credit Agreement referred
to below on the maturity date thereof provided for in the Credit Agreement. The
Borrower promises to pay interest on the unpaid principal amount of each such
Loan on the dates and at the rate or rates provided for in the Credit Agreement.
All such payments of principal and interest shall be made in lawful money of the
United States in Federal or other immediately available funds at the office of
The Bank of New York, One Wall Street, 18 North, New York, New York.
All Loans made by the Bank, the respective types thereof and all repayments
of the principal thereof shall be recorded by the Bank and, if the Bank so
elects in connection with any transfer or enforcement hereof, appropriate
notations to evidence the foregoing information with respect to each such Loan
then outstanding may be endorsed by the Bank on the schedule attached hereto, or
on a continuation of such schedule attached to and made a part hereof; provided
that neither the failure of the Bank to make any such recordation or
endorsement, nor any error therein, shall affect the obligations of the Borrower
hereunder or of the Borrower or any other Obligor under any Loan Document.
1
<PAGE> 120
This note is one of the Notes referred to in the Second Amended and
Restated Credit Agreement dated as of April 9, 1997 and amended and restated as
of March 19, 1999 among the Borrower, the Banks party thereto, Co-Agents party
thereto, Bank of America National Trust & Savings Association, as Documentation
Agent, The Bank of New York as Administrative Agent, LC Agent and Swingline Bank
and the Lead Arrangers party thereto (as the same may be amended from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit Agreement for
provisions for the prepayment hereof, the acceleration of the maturity hereof
and the basis upon which this Note is guaranteed and secured.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
VENATOR GROUP, INC.
By ________________________
Name:
Title:
2
<PAGE> 121
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of
Amount of Principal Notation
Date Loan Repaid Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3
<PAGE> 122
EXHIBIT B
SWINGLINE NOTE
New York, New York
March __, 1999
For value received, VENATOR GROUP, INC., a New York corporation (the
"Borrower"), promises to pay to the order of THE BANK OF NEW YORK (the
"Swingline Bank") the unpaid principal amount of each Swingline Loan made by the
Swingline Bank to the Borrower pursuant to the Credit Agreement referred to
below on the maturity date provided for in the Credit Agreement. The Borrower
promises to pay interest on the unpaid principal amount of each such Swingline
Loan on the dates and at the rate or rates provided for in the Credit Agreement.
All such payments of principal and interest shall be made in lawful money of the
United States in Federal or other immediately available funds at the office of
The Bank of New York, One Wall Street, 18 North, New York, New York.
All Swingline Loans made by the Swingline Bank and all repayments of the
principal thereof shall be recorded by the Swingline Bank and, if the Swingline
Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Swingline Loan then outstanding may be endorsed by the Swingline Bank on
the schedule attached hereto, or on a continuation of such schedule attached to
and made a part hereof; provided that neither the failure of the Swingline Bank
to make any such recordation or endorsement, nor any error therein, shall affect
the obligations of the Borrower hereunder or of the Borrower or any other
Obligor under any Loan Document.
This note is the Swingline Note referred to in the Second Amended and
Restated Credit Agreement dated as of April 9, 1997 and amended and restated as
of March 19, 1999 among the Borrower, the Banks party thereto, Co-Agents party
thereto, Bank of America National Trust & Savings Association, as Documentation
Agent, The Bank of New York as Administrative Agent, LC Agent and Swingline Bank
and the Lead Arrangers party thereto (as the same may be amended from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit Agreement for
provisions for the prepayment hereof, the acceleration of the maturity hereof
and the basis upon which this Note is guaranteed and secured.
1
<PAGE> 123
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
VENATOR GROUP, INC.
By________________________
Name:
Title:
2
<PAGE> 124
Swingline Note (cont'd)
SWINGLINE LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of Amount of
Swingline Principal Notation
Date Loan Repaid Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3
<PAGE> 125
EXHIBIT C
FORM OF MONEY MARKET QUOTE REQUEST
[Date]
To: The Bank of New York, as Administrative Agent
One Wall Street
18 North
New York, New York 10286
From: Venator Group, Inc.
Re: Second Amended and Restated Credit Agreement dated as of April 9,
1997 and amended and restated as of March 19, 1999 (as amended from
time to time, the "Credit Agreement") among Venator Group, Inc., the
Banks party thereto, the Co-Agents party thereto, Bank of America
National Trust & Savings Association, as Documentation Agent, The Bank
of New York, as Administrative Agent (the "Administrative Agent"), LC
Agent and Swingline Bank and the Lead Arrangers party thereto.
We hereby give notice pursuant to Section 2.03 of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________
Principal Amount 1/ Interest Period 2/
$
- --------------------
1 Amount must be $15,000,000 or a larger multiple of $1,000,000.
2 Not less than one month (LIBOR Auction) or not less than 14 days
(Absolute Rate Auction), subject to the provisions of the
definition of Interest Period.
1
<PAGE> 126
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Terms used herein have the meanings assigned to them in the Credit
Agreement.
VENATOR GROUP, INC.
By________________________
Name:
Title:
2
<PAGE> 127
EXHIBIT D
FORM OF INVITATION FOR MONEY MARKET QUOTES
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Venator Group, Inc. (the
"Borrower")
Pursuant to Section 2.03 of the Second Amended and Restated Credit
Agreement dated as of April 9, 1997 and amended and restated as of March 19,
1999 among the Borrower, the Banks party thereto, the Co-Agents party thereto,
Bank of America National Trust & Savings Association, as Documentation Agent,
The Bank of New York, as Administrative Agent (the "Administrative Agent"), LC
Agent and Swingline Bank and the Lead Arrangers party thereto (as further
amended from time to time, the "Credit Agreement"), we are pleased on behalf of
the Borrower to invite you to submit Money Market Quotes to the Borrower for the
following proposed Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30 A.M.]
(New York City time) on [date].
1
<PAGE> 128
Terms used herein have the meanings assigned to them in the Credit
Agreement.
THE BANK OF NEW YORK,
as Administrative Agent
By______________________
Authorized Officer
2
<PAGE> 129
EXHIBIT E
FORM OF MONEY MARKET QUOTE
To: The Bank of New York,
as Administrative Agent
Re: Money Market Quote to Venator Group, Inc. (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, ______, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*/
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount**/ Period***/ [Margin****/ [Absolute Rate*****/]
$
[Provided, that the aggregate principal amount of Money Market Loans for
which the above offers may be accepted shall not exceed$____________.]**/
__________
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the amount the Bank is willing to lend. Bids must be made
for $5,000,000 or a larger multiple of $1,000,000.
[Notes continued on following page]
1
<PAGE> 130
We understand and agree that the offer(s) set forth above, subject to the
satisfaction of the applicable conditions set forth in the Second Amended and
Restated Credit Agreement dated as of April 9, 1997 and amended and restated as
of March 19, 1999 among Venator Group, Inc., the Banks party thereto, the Co-
Agents party thereto, Bank of America National Trust & Savings Association, as
Documentation Agent, The Bank of New York, as Administrative Agent (the
"Administrative Agent"), LC Agent and Swingline Bank and the Lead Arrangers
party thereto (as amended from time to time, the "Credit Agreement"),
irrevocably obligates us to make the Money Market Loan(s) for which any offer(s)
are accepted, in whole or in part.
Terms used herein have the meanings assigned to them in the Credit
Agreement.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
__________
*** Not less than one month or not less than 14 days, as specified in the
related Invitation. No more than five bids are permitted for each Interest
Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of
1%) and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE> 131
EXHIBIT F
SECURITY AGREEMENT
AGREEMENT dated as of __________, 1999 among Venator Group, Inc. a New York
corporation (with its successors, the "Company"), each of the Subsidiaries of
the Company listed on the signature pages hereof and each other Subsidiary of
the Company that may from time to time become a party hereto in accordance with
Section 20 (each, with its successors, a "Subsidiary Guarantor") and The Bank of
New York, as Administrative Agent (with its successors, the "Administrative
Agent").
W I T N E S S E T H :
WHEREAS, the Company, the banks party thereto (the "Banks"), the co- agents
party thereto, Bank of America National Trust & Savings Association, as
Documentation Agent, The Bank of New York, as Administrative Agent, LC Agent and
Swingline Bank and the Lead Arrangers party thereto are parties to a Second
Amended and Restated Credit Agreement dated as of April 9, 1997 and amended and
restated as of March 19, 1999 (as amended or amended and restated from time to
time, the "Credit Agreement"); and
WHEREAS, the Subsidiary Guarantors and the Administrative Agent are parties
to a Guarantee Agreement dated as of March 19, 1999 (as amended from time to
time, the "Guarantee Agreement"); and
WHEREAS, pursuant to Section 5.20 of the Credit Agreement, the Company has
agreed to enter into, and to cause each of its Subsidiaries (other than any
Foreign Subsidiary or any Immaterial Subsidiary) to enter into, a Security
Agreement substantially in the form hereof; and
WHEREAS, in consideration of the financial and other support that the
Company has provided, and such financial and other support as the Company may in
the future provide, to the Subsidiary Guarantors, the Subsidiary Guarantors are
willing to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE> 132
Section 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Collateral" has the meaning specified in Section 3.
"Designated Foreign Jurisdiction" means, with respect to each Obligor, any
jurisdiction outside the United States where such Obligor conducts its
operations on and as of the date on which such Obligor becomes a party to this
Agreement.
"General Intangibles" means, with respect to each Obligor, all "general
intangibles" (as defined in the UCC) now owned or hereafter acquired by such
Obligor and consisting of copyrights, copyright licenses, Patents, Patent
Licenses, Trademarks, Trademark Licenses, rights in other intellectual property,
goodwill, trade names, service marks, trade secrets, and any rights of such
Obligor under any contract or agreement with respect to any of the foregoing.
"Hedging Agreement" means any interest rate protection agreement, foreign
currency exchange agreement or other interest or currency exchange rate hedging
arrangement.
"Hedging Obligations" means, with respect to each Obligor, all obligations
of such Obligor under any Hedging Agreement between such Obligor and any Bank
Party (or any affiliate of any Bank Party).
"LC Collateral Account" has the meaning specified in Section 5(a).
"Liquid Investments" has the meaning specified in Section 5(c).
"Obligor" means the Company or any Subsidiary Guarantor, and "Obligors"
means all of them.
"Patents" means, with respect to each Obligor, (i) all letters patent of
the United States or any other country held by such Obligor, all registrations
and recordings thereof, and all applications by such Obligor for letters patent
of the United States or any other country, including registrations, recordings
and applications in the PTO or in any similar office or agency of the United
States or any other country or any political subdivision thereof, including
those described in the Perfection Certificate of such Obligor, and (ii) all
reissues, continuations, continuations-in-part or extensions thereof.
2
<PAGE> 133
"Patent License" means, with respect to each Obligor, any written agreement
now or hereafter in existence granting to such Obligor any right to practice any
invention on which a patent (including without limitation a Patent of any other
Obligor) is in existence.
"Patent Security Agreement" means a Patent Security Agreement executed and
delivered by an Obligor in favor of the Administrative Agent, for the benefit of
the Secured Parties, substantially in the form of Exhibit B to this Agreement,
as the same may be amended from time to time.
"Perfection Certificate" means, with respect to each Obligor, a certificate
substantially in the form of Exhibit A hereto, completed and supplemented with
the schedules and attachments contemplated thereby to the satisfaction of the
Administrative Agent, and duly executed by a Responsible Officer of such
Obligor.
"Proceeds" means, with respect to each Obligor, all proceeds of, and all
other profits, products, rents or receipts, in whatever form, arising from the
collection, sale, lease, exchange, assignment, licensing or other disposition
of, or other realization upon, collateral pledged by such Obligor, including
without limitation all claims of such Obligor against third parties for loss of,
damage to or destruction of, or any past, present or future dilution,
infringement or unauthorized use of, unfair competition with, or violation of
intellectual property rights in connection with or injury to, any such
collateral or for injury to the goodwill associated with any of the foregoing,
in each case whether now existing or hereafter arising.
"PTO" means the United States Patent and Trademark Office.
"Secured Obligations" means, with respect to each Obligor, (i) all
principal of and interest and premium (if any) on any Loan or Swingline Loan
payable by such Obligor under, or any Note or Swingline Note issued by such
Obligor pursuant to, the Credit Agreement (including, without limitation, any
interest which accrues after or would accrue but for the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of such Obligor, whether or not allowed or allowable as a claim
in any such proceeding), (ii) all Reimbursement Obligations of such Obligor with
respect to any Letter of Credit issued pursuant to the Credit Agreement and all
interest payable by such Obligor thereon (including, without limitation, any
interest which accrues after or would accrue but for the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of such Obligor, whether or not allowed or allowable as a claim
in any such proceeding), (iii) if such Obligor is a Subsidiary Guarantor, all
3
<PAGE> 134
amounts payable by such Obligor under the Guarantee Agreement, (iv) all other
amounts payable by such Obligor under the Loan Documents, (v) all Hedging
Obligations of such Obligor, and (vi) any amendments, restatements, renewals,
extensions or modifications of any of the foregoing; provided that the Secured
Obligations of each Subsidiary Guarantor described in clause (iii) above and any
amendment, restatement, renewal, extension or modification thereof described in
clause (vi) above (collectively, with respect to each Subsidiary Guarantor, such
Subsidiary Guarantor's "Subsidiary Guaranteed Obligations"), shall be
subordinate and junior in rank with respect to payment to the other Secured
Obligations of such Subsidiary Guarantor for purposes of this Security
Agreement. Pursuant to the proposed Amendment No. 4 to the Existing Credit
Agreement, upon satisfaction of the conditions precedent set forth therein, the
Credit Agreement will be amended and restated to include certain Subsidiaries of
the Company as borrowers under the Credit Agreement, and the parties hereto
agree that, upon effectiveness of such amendment and restatement, for purposes
of the definition of "Secured Obligations", the term "Obligors" will mean the
Company, any of its Subsidiaries that are borrowers under the Credit Agreement
and the Subsidiary Guarantors, and "Obligor" will mean any one of them.
"Secured Parties" means the Banks, the LC Agent, the Swingline Bank, the
Administrative Agent and the Lead Arrangers.
"Security Interests" means the security interests in the Collateral granted
hereunder securing the Secured Obligations.
"Specified Trademarks" means, with respect to each Obligor (i) the
Trademarks listed on Schedule 2B under such Obligor's name and (ii) any other
Trademark held by such Obligor registrered or to be registered by such Obligor
in the United States or any Trademark held by such Obligor and constituting the
name of a store used by such Obligor outside the United States.
"Specified Trademark License" means, with respect to each Obligor, any
Trademark License held by such Obligor with respect to any Specified Trademark
held by such Obligor.
"Trademarks" means, with respect to each Obligor, (i) all trademarks, trade
names, corporate names, company names, business names, logos, other source or
business identifiers, designs and general intangibles of like nature held by
such Obligor, and all applications in connection therewith, including
registrations, recordings and applications in the PTO or in any similar office
or agency of the United States, any State thereof or any other country or any
political subdivision thereof, including those described in the Perfection
4
<PAGE> 135
Certificate of such Obligor, (ii) all extensions or renewals thereof and (iii)
the goodwill of the business symbolized by any of the foregoing.
"Trademark License" means, with respect to each Obligor, any written
agreement now or hereafter in existence granting to such Obligor any right to
use a Trademark (including without limitation a Trademark of any other Obligor).
"Trademark Security Agreement" means a Trademark Security Agreement
executed and delivered by an Obligor in favor of the Administrative Agent, for
the benefit of the Secured Parties, substantially in the form of Exhibit C to
this Agreement, as the same may be amended from time to time.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of New York; provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
Section 2. Representations and Warranties. Each Obligor represents and
warrants as follows:
(a) Such Obligor has good and marketable title to all of the Collateral,
free and clear of any Liens other than Liens permitted under Section 5.06(a)(ix)
of the Credit Agreement.
(b) Such Obligor has not performed any acts which could reasonably be
expected to prevent the Administrative Agent from enforcing any of the terms of
this Agreement or which would limit the Administrative Agent in any such
enforcement. Other than Patent Security Agreements, Trademark Security
Agreements, financing statements or other similar or equivalent documents or
instruments with respect to the Security Interests, no financing statement,
mortgage, security agreement or similar or equivalent document or instrument
covering all or any part of the Collateral of such Obligor and consisting of
Patents, Patent Licenses, Specified Trademarks and Specified Trademark Licences
is on file or of record in any jurisdiction or office (including without
limitation the PTO) in the United States or in any Designated Foreign
Jurisdiction with respect to such Obligor and in which such filing or recording
would be effective to perfect a Lien on such Collateral. No Collateral of such
Obligor is in the possession of any Person (other than such Obligor) asserting
5
<PAGE> 136
any claim thereto or security interest therein, except that the Administrative
Agent or its designee may have possession of such Collateral as contemplated
hereby.
(c) Such Obligor has delivered its Perfection Certificate to the
Administrative Agent. The information specified therein is correct and complete.
Within 60 days after the date hereof, such Obligor shall furnish to the
Administrative Agent file search reports from the PTO confirming that a filing
with respect to each Patent and Patent License listed on Schedule 2A and held by
such Obligor on the date hereof and each Specified Trademark of such Obligor on
the date hereof and naming the Administrative Agent as secured party has been
made; provided that any failure of an Obligor timely to furnish any such report
caused by delay by the relevant office to respond to a request shall not
constitute a default by such Obligor of its obligations hereunder.
(d) Schedule 2A (as supplemented from time to time in accordance with
Section 4(c)) lists all Patents and Patent Licenses held by such Obligor.
Schedule 2B (as supplemented from time to time in accordance with Section 4(c))
lists all Specified Trademarks held by such Obligor and all Specified Trademark
Licenses held by such Obligor.
(e) The Security Interests in the Collateral of such Obligor constitute
valid security interests under the UCC securing the Secured Obligations of such
Obligor. When UCC financing statements in the form specified in Exhibit A shall
have been filed in the offices specified in the Perfection Certificate of such
Obligor, the Security Interests shall constitute perfected security interests in
the Collateral of such Obligor in which a security interest may be perfected by
filing under the UCC (but excluding in any event any Collateral of such Obligor
described in the succeeding sentences of this subsection (e)), prior to all
other Liens and rights of others therein. When a Patent Security Agreement of
such Obligor has been recorded with the PTO, such Security Interests shall
constitute perfected Security Interests in all right, title and interest of such
Obligor in the Patents listed in Schedule 1 to such Agreement, prior to all
other Liens and rights of others therein. When a Trademark Security Agreement of
such Obligor has been recorded with the PTO, such Security Interests shall
constitute perfected Security Interests in all right, title and interest of such
Obligor in the Trademarks listed in Schedule 1 to such Agreement, prior to all
other Liens and rights of others therein.
Section 3. The Security Interests. (a) In order to secure the full and
punctual payment of its Secured Obligations in accordance with the terms
thereof, each Obligor grants to the Administrative Agent for the ratable benefit
of the Secured Parties a continuing security interest in and to all of the
following property of such Obligor, whether now owned or existing or hereafter
6
<PAGE> 137
acquired or arising and regardless of where located (all being collectively
referred to as the "Collateral" of such Obligor):
(i) General Intangibles;
(ii) Patents and Patent Licenses;
(iii) Trademarks and Trademark Licenses;
(iv) The LC Collateral Account, all cash deposited therein from time
to time, and any Liquid Investments made pursuant to Section
5(c);
(v) All books and records (including, without limitation, computer
programs, printouts and other computer materials and records) of
such Obligor pertaining to any of its Collateral described in
clauses (i) thorough (iv) hereof; and
(vi) All Proceeds of the Collateral described in clauses (i) through
(v) hereof.
(b) The Security Interests are granted as security only and shall not
subject the Administrative Agent or any Secured Party to, or transfer or in any
way affect or modify, any obligation or liability of any Obligor with respect to
any of the Collateral or any transaction in connection therewith.
Section 4. Further Assurances; Covenants. (a) Each Obligor will not change
its name, identity or corporate structure in any manner or change the location
of its chief executive office or chief place of business from the location
described in the Perfection Certificate of such Obligor unless, in each case,
such Obligor shall have given the Administrative Agent at least 30 days' prior
notice thereof and delivered to the Banks an opinion of counsel at the cost and
expense of such Obligor, in form and substance reasonably satisfactory to the
Administrative Agent, to the effect that, after giving effect to such change in
name, identity, corporate structure or location, the Security Interests in the
Collateral of such Obligor shall remain perfected; provided that the provisions
of the foregoing sentence shall not apply to any change in the location of the
chief executive office of any Obligor from any location in New York City to any
other location in New York City. Each Obligor shall not in any event change the
location of any of its Collateral if such change would cause the Security
Interests in such Collateral to lapse or cease to be perfected.
(b) Each Obligor will, from time to time, at its expense, execute, deliver,
file and record any statement, assignment, instrument, document, agreement,
7
<PAGE> 138
recording or other paper and take any other action (including, without
limitation, any filings of financing or continuation statements under the UCC
and any additional of substitute filings with the PTO) that from time to time
may be necessary or desirable, or that the Administrative Agent may request, in
order to create, preserve, perfect, confirm or validate the Security Interests
or to enable the Secured Parties to obtain the full benefits of this Agreement,
or to enable the Administrative Agent to exercise and enforce any of its rights,
powers and remedies hereunder with respect to any of the Collateral of such
Obligor; provided that no Obligor shall be required to take any such action with
respect to any Trademark that is not a Specified Trademark or any Trademark
License that is not a Specified Trademark License. To the extent permitted by
applicable law, each Obligor hereby authorizes the Administrative Agent to
execute and file financing statements or continuation statements without such
Obligor's signature appearing thereon. Each Obligor agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. Each Obligor shall
pay the costs of, or incidental to, any recording or filing of any financing or
continuation statements or any filings with the PTO concerning the Collateral of
such Obligor.
(c) Within 30 Domestic Business Days after the end of each Fiscal Quarter,
each Obligor shall provide to the Administrative Agent (i) copies of all
applications for (1) the registration of any Patent or any Patent License and
(2) the registration of any Specified Trademark or Specified Trademark License
filed by such Obligor during such Fiscal Quarter, (ii) a Patent Security
Agreement executed by such Obligor with respect to each Patent or Patent License
of such Obligor described in clause (1), (iii) a Trademark Security Agreement
with respect to each Specified Trademark and Specified Trademark License
described in clause (2) and (iv) a list of each Patent and Trademark that such
Obligor has determined to abandon, or that such Obligor has determined not to
maintain the registration of, during the immediately succeeding Fiscal Quarter,
and a brief statement of the reasons on the basis on which such Obligor has made
such determination (it being understood that nothing in this clause (iv) shall
be construed to limit or modify in any manner the obligations of such Obligor
under subsection (d) below). Upon delivery of a Patent Security Agreement or a
Trademark Security Agreement by any Obligor, Schedule 2A or 2B, as the case may
be, shall be deemed to have been amended to reflect the Patents and Patent
Licenses or Specified Trademarks and Specified Trademark Licences with respect
to which such Patent Security Agreement or a Trademark Security Agreement, as
the case may be, relates. If an Obligor has filed no applications for the
registration of any Patent, License, Specified Trademark or Specified Trademark
License during any Fiscal Quarter, such Obligor shall, within 30 Domestic
Business Days after the end of such Fiscal Quarter, provide a certificate to the
Administrative Agent certifying the same.
8
<PAGE> 139
(d) Each Obligor will take all steps which it reasonably determines are
necessary and appropriate in the circumstances, including, without limitation,
in any proceeding before the PTO, or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue each
application (and to obtain the relevant registration) and to maintain each
registration of its material Patents and Specified Trademarks, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability except, in each case, for such applications or
registrations which such other Obligor determines in good faith are no longer
useful or material to the business of such Obligor.
(e) In the event that any material Patent or Specified Trademark is
infringed, misappropriated or diluted by a third party, the Obligor that holds
such Patent or Trademark shall promptly notify the Administrative Agent after it
learns thereof, if such infringement, misappropriation or dilution could
reasonably be expected to have a Material Adverse Effect, and take such other
actions as such Obligor shall reasonably deem appropriate under the
circumstances, or as the Administrative Agent shall reasonably request, to
protect such Patent or Specified Trademark, as the case may be.
(f) Each Obligor shall notify the Administrative Agent as soon as
practicable if such Obligor knows that any application or registration relating
to any material Patent or Specified Trademark may become abandoned or dedicated
or of any determination or development (including the institution of, or any
such determination or development in, any proceeding in the PTO or any court or
tribunal) regarding such Obligor's ownership of any material Patent or Specified
Trademark, its right to register the same, or to keep and maintain the same.
(g) Each Obligor will, promptly upon request, provide to the Administrative
Agent all information and evidence it may reasonably request concerning its
Collateral to enable the Administrative Agent to enforce the provisions of this
Agreement.
Section 5. LC Collateral Account. (a) There is hereby established with the
Administrative Agent an account (the "LC Collateral Account") on the books of
The Bank of New York in the name and under the control of the Administrative
Agent into which there shall be deposited from time to time the amounts required
to be deposited therein by the Company pursuant to Sections 2.06(f) and 6.03 of
the Credit Agreement or any other provision of the Loan Documents. Any income
received by the Administrative Agent with respect to the balance from time to
time standing to the credit of the LC Collateral Account, including any interest
9
<PAGE> 140
or capital gains on Liquid Investments, shall remain, or be deposited, in the LC
Collateral Account. All right, title and interest in and to the cash amounts on
deposit from time to time in the LC Collateral Account together with any Liquid
Investments from time to time made pursuant to subsection (c) hereof shall
constitute part of the Collateral hereunder and shall not constitute payment of
the Secured Obligations until applied thereto as hereinafter provided. If and
when any portion of Aggregate LC Exposure on which any deposit in the LC
Collateral Account was based (the "Relevant Contingent Exposure") shall become
fixed (a "Direct Exposure") as a result of the payment by the LC Agent of a
draft presented under a Letter of Credit, the amount of such Direct Exposure
(but not more than the amount in the LC Collateral Account at the time) shall be
withdrawn by the Administrative Agent from the LC Collateral Account and shall
be paid to the Banks in accordance with their Pro Rata Share, and the Relevant
Contingent Exposure shall thereupon be reduced by such amount. If at any time
the amount in the LC Collateral Account exceeds the aggregate Relevant
Contingent Exposure, the excess amount shall, so long as no Event of Default
shall have occurred and be continuing, be promptly withdrawn by the
Administrative Agent and paid to, or as directed by, the Company. If an Event of
Default shall have occurred and be continuing, such excess amount shall be
retained in the LC Collateral Account. If immediately available cash on deposit
in the LC Collateral Account is not sufficient to make any distribution to, or
as directed by, the Company referred to in this Section 5(a), the Administrative
Agent shall cause to be liquidated as promptly as practicable such Liquid
Investments in the LC Collateral Account designated by the Company as required
to obtain sufficient cash to make such distribution and, notwithstanding any
other provision of this Section 6, such distribution shall not be made until
such liquidation has taken place.
(b) Upon the occurrence and continuation of an Event of Default, the
Administrative Agent shall, if so instructed by the Required Banks, apply or
cause to be applied (subject to collection) any or all of the balance from time
to time standing to the credit of the LC Collateral Account in the manner
specified in Section 9.
(c) Amounts on deposit in the LC Collateral Account shall be invested and
re-invested from time to time in such Liquid Investments as the Company shall
determine, which Liquid Investments shall be held in the name and be under the
control of the Administrative Agent, provided that, if an Event of Default has
occurred and is continuing, the Administrative Agent shall, if instructed by the
Required Banks, determine the Liquid Investments in which such amounts are
invested and re-invested and shall liquidate any such Liquid Investments and
apply or cause to be applied the proceeds thereof to the payment of the Secured
Obligations in the manner specified in Section 9. For this purpose, "Liquid
Investments" means Temporary Cash Investments of the type described in clauses
10
<PAGE> 141
(i) through (iv) of the definition thereof; provided that (x) each Liquid
Investment shall mature within 30 days after it is acquired by the
Administrative Agent and (y) in order to provide the Administrative Agent, for
the benefit of the Secured Parties, with a perfected security interest therein,
each Liquid Investment shall be either:
(i) evidenced by negotiable certificates or instruments, or if
non-negotiable then issued in the name of the Administrative Agent, which
(together with any appropriate instruments of transfer) are delivered to,
and held by, the Administrative Agent or an agent thereof (which shall not
be the Company or any of its Affiliates) in the State of New York; or
(ii) in book-entry form and issued by the United States and as to
which (in the opinion of counsel to the Administrative Agent) appropriate
measures shall have been taken for perfection of the Security Interests in
such Liquid Investments.
Section 6. General Authority. Each Obligor hereby irrevocably appoints the
Administrative Agent its true and lawful attorney, with full power of
substitution, in the name of such Obligor, the Administrative Agent, the Secured
Parties or otherwise, for the sole use and benefit of the Secured Parties, but
at such Obligor's expense, to the extent permitted by law to exercise, at any
time and from time to time while an Event of Default has occurred and is
continuing, all or any of the following powers with respect to all or any of the
Collateral of such Obligor:
(a) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due thereon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto,
(c) to sell, transfer, assign or otherwise deal in or with the same or
the proceeds or avails thereof, as fully and effectually as if the
Administrative Agent were the absolute owner thereof,
(d) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto, and
(e) in the case of any Patents or Trademarks or any other rights which
constitute patents or trademarks under common law (all such patents and
trademarks hereinafter being referred to as "Common Law Rights"), to
execute and deliver any and all agreements, instruments,
11
<PAGE> 142
documents, and papers as the Administrative Agent may reasonably require to
evidence the Security Interests in any such Patent, Trademark or Common Law
Rights and the goodwill and general intangibles of such Obligor relating
thereto or represented thereby;
provided that the Administrative Agent shall give each Obligor not less than ten
days' prior notice of the time and place of any sale or other intended
disposition of any of its Collateral. The Administrative Agent and each Obligor
agree that such notice constitutes "reasonable notification" within the meaning
of Section 9-504(3) of the UCC.
Section 7. Remedies upon Event of Default. (a) If any Event of Default has
occurred and is continuing, the Administrative Agent may exercise on behalf of
the Secured Parties all rights of a secured party under the UCC (whether or not
in effect in the jurisdiction where such rights are exercised) and, in addition,
the Administrative Agent may, without being required to give any notice, except
as herein provided or as may be required by mandatory provisions of law, (i)
apply cash, if any, then held by it as Collateral as specified in Section 9 and
(ii) if there shall be no such cash or if such cash shall be insufficient to pay
all the Secured Obligations in full, sell the Collateral or any part thereof at
public or private sale, for cash, upon credit or for future delivery, and at
such price or prices as the Administrative Agent may deem satisfactory. Any
Secured Party may be the purchaser of any or all of the Collateral so sold at
any public sale (or, if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
standard price quotations, at any private sale). Each Obligor will execute and
deliver such documents and take such other action as the Administrative Agent
deems necessary or advisable in order that any such sale may be made in
compliance with law. Upon any such sale the Administrative Agent shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral so
sold. Each purchaser at any such sale shall hold the Collateral so sold to it
absolutely and free from any claim or right of whatsoever kind, including any
equity or right of redemption of any Obligor which may be waived, and each
Obligor, to the extent permitted by law, hereby specifically waives all rights
of redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale required by
Section 6 shall (A) in the case of a public sale, state the time and place fixed
for such sale, and (B) in the case of a private sale, state the day after which
such sale may be consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the
Administrative Agent may fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Administrative Agent may determine. The Administrative Agent shall not be
obligated to make any such sale pursuant to any such notice. The Administrative
12
<PAGE> 143
Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned ,subject to the Administrative Agent giving
the notice required to be given pursuant to Section 6. In the case of any sale
of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Administrative Agent until the selling
price is paid by the purchaser thereof, but the Administrative Agent shall not
incur any liability in the case of the failure of such purchaser to take up and
pay for the Collateral so sold and, in the case of any such failure, such
Collateral may again be sold upon like notice. The Administrative Agent, instead
of exercising the power of sale herein conferred upon it, may proceed by a suit
or suits at law or in equity to foreclose the Security Interests and sell the
Collateral, or any portion thereof, under a judgment or decree of a court or
courts of competent jurisdiction.
(b) For the purpose of enforcing any and all rights and remedies under this
Agreement the Administrative Agent may (i) require each Obligor to, and each
Obligor agrees that it will, at its expense and upon the request of the
Administrative Agent, forthwith assemble all or any part of its Collateral as
directed by the Administrative Agent and make it available at a place designated
by the Administrative Agent which is, in its opinion, reasonably convenient to
the Administrative Agent and such Obligor, whether at the premises of such
Obligor or otherwise, (ii) have access to and use such Obligor's books and
records relating to the Collateral and (iii) prior to the disposition of the
Collateral, prepare the Collateral for disposition in any manner and to the
extent the Administrative Agent deems appropriate and, in connection with such
preparation and disposition, use without charge any Trademark, Patent, copyright
or technical process used by any Obligor. The Administrative Agent may also
render any or all of the Collateral unusable at any Obligor's premises and may
dispose of such Collateral on such premises without liability for rent or costs.
(c) Without limiting the generality of the foregoing, if any Event of
Default has occurred and is continuing, (i) the Administrative Agent may
license, or sublicense, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any Patents or Trademarks or Common Law Rights
included in the Collateral throughout the world for such term or terms, on such
conditions and in such manner as the Administrative Agent shall in its sole
discretion determine, (ii) the Administrative Agent may (without assuming any
obligations or liability thereunder), at any time and from time to time, enforce
(and shall have the exclusive right to enforce) against any licensor, licensee
or sublicensee all rights and remedies of any Obligor in, to and under any
Patent Licenses or Trademark Licenses and take or refrain from taking any action
under any thereof, and each Obligor hereby releases the Administrative Agent and
13
<PAGE> 144
each of the other Secured Parties from, and agrees to hold the Administrative
Agent and each of the other Secured Parties free and harmless from and against
any claims arising out of, any lawful action so taken or omitted to be taken
with respect thereto, except any such claim to the extent that it arises solely
as the result of the gross negligence or willful misconduct of any Secured Party
and (iii) upon request by the Administrative Agent, each Obligor will execute
and deliver to the Administrative Agent a further power of attorney, in form and
substance satisfactory to the Administrative Agent, for the implementation of
any lease, assignment, license, sublicense, grant of option, sale or other
disposition of a Patent, Trademark, Patent License or Trademark License. In the
event of any such disposition pursuant to this Section, each Obligor shall
supply its know-how and expertise relating to the manufacture and sale of the
products bearing Trademarks or the products or services made or rendered in
connection with Patents, and its customer lists and other records relating to
such Patents or Trademarks and to the distribution of said products, to the
Administrative Agent.
Section 8. Limitation on Duty of Administrative Agent in Respect of
Collateral. Beyond the exercise of reasonable care in the custody thereof, the
Administrative Agent shall have no duty as to any Collateral in its possession
or control or in the possession or control of any agent or bailee or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. The Administrative Agent shall be deemed to have
exercised reasonable care in the custody of the Collateral in its possession if
the Collateral is accorded treatment substantially equal to that which it
accords its own property, and shall not be liable or responsible for any loss or
damage to any of the Collateral, or for any diminution in the value thereof, by
reason of the act or omission of any warehouseman, carrier, forwarding agency,
consignee or other agent or bailee selected by the Administrative Agent in good
faith.
Section 9. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral pledged by any Obligor and
any cash held in the LC Collateral Account shall be applied by the
Administrative Agent in the following order of priorities:
first, to pay the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the
Administrative Agent, and all expenses, liabilities and advances incurred
or made by the Administrative Agent in connection therewith, and any other
unreimbursed expenses for which any Secured Party is to be reimbursed
pursuant to the Credit Agreement (including without limitation Section
9.03(a) thereof) or Section 12 hereof and any unpaid fees owing to any
Secured Party under the Loan Documents;
14
<PAGE> 145
second, to the ratable payment of accrued but unpaid interest on the
Secured Obligations of such Obligor (other than, in the case of any
Subsidiary Guarantor, its Subsidiary Guaranteed Obligations) in accordance
with the provisions of the Credit Agreement;
third, to the ratable payment of unpaid principal of, and
reimbursement obligations constituting, the Secured Obligations of such
Obligor (other than, in the case of any Subsidiary Guarantor, its
Subsidiary Guaranteed Obligations);
fourth, in the case of any Subsidiary Guarantor, to the ratable
payment of accrued but unpaid interest on its Subsidiary Guaranteed
Obligations, until all such Secured Obligations shall have been paid in
full;
fifth, in the case of any Subsidiary Guarantor, to the ratable payment
of unpaid principal of, and reimbursement obligations constituting its
Subsidiary Guaranteed Obligations, until all such Secured Obligations shall
have been paid in full;
sixth, to pay ratably all other Secured Obligations, until all Secured
Obligations shall have been paid in full; and
finally, to pay to such Obligor or its successors or assigns, or as a
court of competent jurisdiction may direct, any surplus then remaining from
such proceeds.
The Administrative Agent may make distributions hereunder in cash or in kind or,
on a ratable basis, in any combination thereof. For purposes of making any
distribution hereunder, the principal amount of any Hedging Obligation shall be
the amount of the relevant Obligor's Hedging Obligations due and payable at the
time such distribution is made.
Section 10. Concerning the Administrative Agent. The provisions of Article
7 of the Credit Agreement shall inure to the benefit of the Administrative Agent
in respect of this Agreement and shall be binding upon the parties to the Credit
Agreement and the parties hereto in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Administrative Agent
therein specified:
(a) The Administrative Agent is authorized to take all such action as is
provided to be taken by it as Administrative Agent hereunder and all other
action reasonably incidental thereto. As to any matters not expressly provided
for herein
15
<PAGE> 146
(including, without limitation, the timing and methods of realization upon the
Collateral) the Administrative Agent shall act or refrain from acting in
accordance with written instructions from the Required Banks or, in the absence
of such instructions, in accordance with its discretion.
(b) The Administrative Agent shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity, perfection,
priority or enforceability of the Security Interests in any of the Collateral,
whether impaired by operation of law or by reason of any action or omission to
act on its part hereunder. The Administrative Agent shall have no duty to
ascertain or inquire as to the performance or observance of any of the terms of
this Agreement by any Obligor.
Section 11. Appointment of Co-Administrative Agents. At any time or times,
in order to comply with any legal requirement in any jurisdiction, the
Administrative Agent may appoint another bank or trust company or one or more
other persons, either to act as co-agent or co-agents, jointly with the
Administrative Agent, or to act as separate agent or agents on behalf of the
Secured Parties with such power and authority as may be necessary for the
effectual operation of the provisions hereof and may be specified in the
instrument of appointment (which may, in the discretion of the Administrative
Agent, include provisions for the protection of such co-agent or separate agent
similar to the provisions of Section 10).
Section 12. Expenses. If any Obligor fails to comply with the provisions of
any Loan Document to which it is a party, such that the value of any Collateral
or the validity, perfection, rank or value of any Security Interest is thereby
diminished or potentially diminished or put at risk, the Administrative Agent if
requested by the Required Banks may, but shall not be required to, effect such
compliance on behalf of such Obligor, and such Obligor shall reimburse the
Administrative Agent for the costs thereof on demand. All insurance expenses and
all expenses of protecting, storing, warehousing, appraising, insuring,
handling, maintaining, and shipping the Collateral, any and all excise,
property, sales, and use taxes imposed by any state, federal, or local authority
on any of the Collateral, or in respect of periodic appraisals and inspections
of the Collateral to the extent the same may be requested by the Required Banks
from time to time, or in respect of the sale or other disposition thereof shall
be borne and paid by each Obligor; and if any Obligor fails to promptly pay any
portion thereof when due, any Secured Party may, at its option, but shall not be
required to, pay the same and charge such Obligor's account therefor, and such
Obligor agrees to reimburse such Secured Party therefor on demand. All sums so
paid or incurred by any Secured Party for any of the foregoing and any and all
other sums for which any Obligor may become liable hereunder and all costs and
16
<PAGE> 147
expenses (including attorneys' fees, legal expenses and court costs) reasonably
incurred by any Secured Party in enforcing or protecting the Security Interests
or any of their rights or remedies under this Agreement and, in each case, not
paid in a timely manner shall, together with interest thereon until paid at the
rate applicable to Base Rate Loans, be additional Secured Obligations hereunder.
Section 13. Termination of Security Interests; Release of Collateral. (a)
Upon the repayment in full of all Secured Obligations (other than those
described in clause (v) of the definition thereof and any amendments,
restatements, renewals, extensions or modifications thereof), the termination of
the Commitments under the Credit Agreement and the termination or cancellation
of all Letters of Credit (unless such Letters of Credit have been fully cash
collateralized pursuant to arrangements satisfactory to the LC Agent, or back-
stopped by a separate letter of credit, in form and substance and issued by an
issuer satisfactory to the LC Agent), the Security Interests shall terminate and
all rights to the Collateral of each Obligor shall revert to such Obligor.
(b) Upon the consummation of any Asset Sale (or any sale or other
disposition described in clause (iv) of the definition of Asset Sale) permitted
by the terms of the Credit Agreement and consisting of the disposition of any
Collateral or of the capital stock of any Obligor other than the Company (any
such transaction, a "Permitted Collateral Sale") the Security Interests in such
Collateral or in the Collateral pledged by such Obligor, as the case may be (but
not, in any case, in any Proceeds thereof) shall be released. Such release shall
not be subject to the consent of any Bank, and the Administrative Agent shall be
fully protected in relying on a certificate of an Obligor as to whether any
particular transaction consummated by such Obligor constitutes a Permitted
Collateral Sale.
(c) In addition to the release of Collateral effected by subsection (b), at
any time and from time to time prior to the termination of the Security
Interests, the Administrative Agent may release any of the Collateral with the
prior written consent of the Required Banks; provided that the Administrative
Agent may release of all or substantially all of the Collateral (for purposes of
this subsection (c), as defined in the Credit Agreement) only with the prior
written consent of all the Banks.
(d) Upon any termination of the Security Interests or release of Collateral
in accordance with this Section, the Administrative Agent will, at the expense
of the relevant Obligor, execute and deliver to such Obligor such documents as
such Obligor shall reasonably request (including without limitation any
reassignments) to evidence the termination of the Security Interests or the
release of such Collateral, as the case may be.
17
<PAGE> 148
Section 14. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile or similar writing) and
shall be given to such party at its address or facsimile number set forth on the
signature pages hereof or at such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the Administrative
Agent and the Company. Each such notice, request or other communication shall be
effective (i) if given by facsimile, when transmitted to the facsimile number
referred to in this Section and confirmation of receipt is received, or (ii) if
given by any other means, when delivered at the address referred to in this
Section.
Section 15. Waivers, Non-Exclusive Remedies. No failure on the part of the
Administrative Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent of any right under this Agreement or any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
in this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law.
Section 16. Successors and Assigns. This Agreement shall be binding upon
each Obligor and its successors and permitted assigns. This Agreement is for the
benefit of each Secured Party and its successors and permitted assigns, and in
the event of an assignment of all or any of any Bank's interest in and to its
rights and obligations under the Credit Agreement in accordance with the Credit
Agreement, the assignor's rights hereunder, to the extent applicable to the
indebtedness or obligation so assigned, shall automatically be transferred with
such indebtedness or obligation.
Section 17. Changes in Writing. Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by each Obligor and the Administrative Agent, subject to the provisions
of Section 9.05(b) of the Credit Agreement.
Section 18. New York Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, except as otherwise
required by mandatory provisions of law and except to the extent that remedies
provided by the laws of any jurisdiction other than New York are governed by the
laws of such jurisdiction.
Section 19. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Secured Parties in
18
<PAGE> 149
order to carry out the intentions of the parties hereto as nearly as may be
possible; and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
Section 20. Additional Obligors. Any Subsidiary Guarantor may become an
Obligor party hereto and bound hereby by executing a counterpart hereof and
delivering the same to the Administrative Agent.
Section 21. 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 OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 22. Limitation on Collateral. Notwithstanding the foregoing,
"Collateral" shall not include any General Intangibles or other rights arising
under contracts which contain a valid and enforceable restriction on the grant
of a security interest therein (other than any such restriction which is
rendered ineffective pursuant to Section 9-318(4) of the UCC) to the extent such
grant would constitute a violation of such restriction, unless and until any
such restriction is removed, waived or no longer valid and enforceable. Each
Obligor represents and warrants that none of the Trademarks listed on Schedule
1.01(b) is subject to any such restriction.
19
<PAGE> 150
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:________________________
Name:
Title:
EASTBAY, INC.
eVENATOR, INC.
FOOT LOCKER JAPAN, INC.
NORTHERN REFLECTIONS INC.
RETAIL COMPANY OF GERMANY,
INC.
THE RICHMAN BROTHERS COMPANY
ROBBY'S SPORTING GOODS, INC.
TEAM EDITION APPAREL, INC.
THE SAN FRANCISCO MUSIC BOX
COMPANY
VENATOR GROUP CORPORATE
SERVICES, INC.
VENATOR GROUP HOLDINGS, INC.
VENATOR GROUP RETAIL, INC.
VENATOR GROUP SOURCING, INC.
VENATOR GROUP SPECIALITY, INC.
By:________________________________
Name:
Title:
20
<PAGE> 151
THE BANK OF NEW YORK, as
Administrative Agent
By:_________________________________
Name:
Title:
21
<PAGE> 152
SCHEDULE 2A
Patents & Patent Licenses
[to come]
22
<PAGE> 153
SCHEDULE 2B
Trademark & Trademark Licenses
[to come]
23
<PAGE> 154
EXHIBIT A
TO SECURITY AGREEMENT
PERFECTION CERTIFICATE
The undersigned, an officer of [NAME OF OBLIGOR], a _______________
corporation (the "Obligor"), hereby certify with reference to the Security
Agreement dated as of _____, 1999 among Venator Group, Inc., the Obligor and the
other Subsidiaries party thereto and The Bank of New York, as Administrative
Agent (terms defined therein being used herein as therein defined), to the
Secured Parties as follows:
1. Names. (a) The exact corporate name of the Obligor as it appears in
its certificate of incorporation is as follows:
(b) Specified below is each other corporate name (including trade
names or similar appellations) the Obligor has had in the last five years:
(c) Except as specified in Schedule 1, the Obligor has not changed its
identity or corporate structure in any way within the past five years.
[Changes in identity or corporate structure would include mergers,
consolidations and acquisitions, as well as any change in the form,
nature or jurisdiction of corporate organization. If any such change
has occurred, include in Schedule 1 the information required by
paragraphs 1, 2 and 3 of this certificate as to each acquiree or
constituent party to a merger or consolidation.]
2. Current Locations. (a) The chief executive office of the Obligor is
located at the following address:
Mailing Address County State
------------------------------- ----------------------- ---------------
<PAGE> 155
(b) The following are all the places of business of the Obligor not
identified above:
Mailing Address County State
------------------------------- ----------------------- ---------------
3. Prior Locations. (a) Specified below is the information required by
subparagraphs 2(a) and 2(b) above with respect to each location or place of
business maintained by the Obligor at any time during the past five years:
4. UCC Filings. A duly signed financing statement on Form UCC-1 in
substantially the form of Schedule 4(A) hereto has been delivered to the
Administrative Agent for filing in the Uniform Commercial Code filing
office in each jurisdiction identified in paragraph 2 hereof. .
5. Schedule of Filings. Attached hereto as Schedule 5 is a schedule
setting forth filing information with respect to the filings described in
paragraph 4 above.
6. Filing Fees. All filing fees and taxes payable in connection with
the filings described in paragraph 6 above have been paid.
2
<PAGE> 156
IN WITNESS WHEREOF, I have hereunto set my hand this __ day of
________________, 1999.
By: __________________________
Title:
3
<PAGE> 157
SCHEDULE 4(A)
DESCRIPTION OF COLLATERAL
[to include the description of "Collateral"
set forth in the Security Agreement and related definitions]
<PAGE> 158
SCHEDULE 5
SCHEDULE OF FILINGS
Debtor Filing Officer File Number Date of Filing 1/
- -------------- ------------------ -------------- --------------------
- ------------------
1 Indicate lapse date, if other than fifth anniversary.
<PAGE> 159
EXHIBIT B TO
SECURITY AGREEMENT
FORM OF PATENT SECURITY AGREEMENT
WHEREAS, [Name of Obligor], a _____________ corporation (herein referred to
as "Grantor") owns, or in the case of licenses, is a party to, the Patent
Collateral (as defined below);
WHEREAS, Venator Group, Inc., the banks party thereto, the co-agents party
thereto, Bank of America National Trust & Savings Association, as Documentation
Agent, The Bank of New York, as Administrative Agent, LC Agent and Swingline
Bank and the Lead Arrangers party thereto are parties to a Second Amended and
Restated Credit Agreement dated as of April 9, 1997 and amended and restated as
of March 19, 1999 (as amended or amended and restated from time to time, the
"Credit Agreement"); and
WHEREAS, pursuant to the terms of a related Security Agreement dated as of
_____________, 1999 (as amended from time to time, the "Security Agreement")
among Venator Group, Inc., its Subsidiaries party thereto and The Bank of New
York, as Administrative Agent for the Secured Parties referred to therein (in
such capacity, together with its successors in such capacity, "Grantee"),
Grantor has granted to Grantee for the benefit of such Secured Parties a
continuing security interest in and to the assets of Grantor specified therein,
including all right, title and interest of Grantor in and to the Patent
Collateral, whether now owned or existing or hereafter acquired or arising, to
secure the Secured Obligations (as defined in the Security Agreement) of
Grantor;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee, to secure the Secured Obligations, a continuing security interest in
and to all of Grantor's right, title and interest in and to the following (all
of the following items or types of property being herein collectively referred
to as the "Patent Collateral"), whether now owned or existing or hereafter
acquired or arising:
(i) each Patent (as defined in the Security Agreement) owned by Grantor,
including, without limitation, each U.S. Patent and Patent application referred
to in Schedule 1 hereto;
(ii) each Patent License (as defined in the Security Agreement), including,
without limitation, each Patent License identified in Schedule 1 hereto; and
1
<PAGE> 160
(iii) all proceeds of, and all other profits, products, rents or receipts,
in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or other realization upon, any
Patent Collateral described in clauses (i) and (ii), including without
limitation all claims against third parties for loss of, damage to or
destruction of, or any past, present or future dilution, infringement or
unauthorized use of, unfair competition with, or violation of intellectual
property rights in connection with or injury to, any such collateral or for
injury to the goodwill associated with any of the foregoing, in each case
whether now existing or hereafter arising.
Grantor hereby irrevocably constitutes and appoints Grantee and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full power and authority in the name of Grantor or in its
name, from time to time, in Grantee's discretion, so long as an Event of Default
has occurred and is continuing, to take with respect to the Patent Collateral
any and all appropriate action which is permitted under the Security Agreement.
The foregoing security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor does
hereby further acknowledge and affirm that the rights and remedies of Grantee
with respect to the security interest in the Patent Collateral granted hereby
are more fully set forth in the Security Agreement, the terms and provisions of
which are incorporated by reference herein as if fully set forth herein.
2
<PAGE> 161
IN WITNESS WHEREOF, Grantor has caused this Patent Security
Agreement to be duly executed by its officer thereunto duly authorized as of the
___th day of _______________.
[NAME OF GRANTOR]
By:__________________________
Name:
Title:
Acknowledged:
THE BANK OF NEW YORK,
as Administrative Agent
By:___________________
Name:
Title:
3
<PAGE> 162
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, ___________________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that ______________________,
_________________________ of [NAME OF GRANTOR], personally known to me to be the
same person whose name is subscribed to the foregoing instrument as such
__________, appeared before me this day in person and acknowledged that he
signed, executed and delivered the said instrument as his own free and voluntary
act and as the free and voluntary act of said Company, for the uses and purposes
therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this __th day of __________.
[Seal]
__________________________
Signature of notary public
My Commission expires
1
<PAGE> 162
Schedule 1
to Patent
Security Agreement
U.S. PATENT REGISTRATIONS
-------------------------
Registration No. Registration Date Mark
- --------------- ----------------- ----
1
<PAGE> 163
EXCLUSIVE PATENT LICENSES
--------------------------
Name of Parties Date of Subject
Agreement Licensor/Licensee Agreement Matter
--------- ------------------ --------- -------
As Licensee
- -----------
As Licensor
- -----------
2
<PAGE> 164
EXHIBIT C TO
SECURITY AGREEMENT
FORM OF TRADEMARK SECURITY AGREEMENT
WHEREAS, [Name of Obligor], a _____________ corporation (herein referred to
as "Grantor") owns, or in the case of licenses, is a party to, the Trademark
Collateral (as defined below);
WHEREAS, Venator Group, Inc., the banks party thereto, the co-agents party
thereto, Bank of America National Trust & Savings Association, as Documentation
Agent, The Bank of New York, as Administrative Agent, LC Agent and Swingline
Bank and the Lead Arrangers party thereto are parties to a Second Amended and
Restated Credit Agreement dated as of April 9, 1997 and amended and restated as
of March 19, 1999 (as amended or amended and restated from time to time, the
"Credit Agreement"); and
WHEREAS, pursuant to the terms of a related Security Agreement dated as of
_____________, 1999 (as amended from time to time, the "Security Agreement")
among Venator Group, Inc., its Subsidiaries party thereto and The Bank of New
York, as Administrative Agent for the Secured Parties referred to therein (in
such capacity, together with its successors in such capacity, "Grantee"),
Grantor has granted to Grantee for the benefit of such Secured Parties a
continuing security interest in and to the assets of Grantor specified therein,
including all right, title and interest of Grantor in and to the Patent
Collateral, whether now owned or existing or hereafter acquired or arising, to
secure the Secured Obligations (as defined in the Security Agreement) of
Grantor;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee, to secure the Secured Obligations, a continuing security interest in
all of Grantor's right, title and interest in, to and under the following (all
of the following items or types of property being herein collectively referred
to as the "Trademark Collateral"), whether now owned or existing or hereafter
acquired or arising:
(i) each Trademark (as defined in the Security Agreement) owned by Grantor,
including, without limitation, each U.S. Trademark registration and application
referred to in Schedule 1 hereto, and the goodwill of the business symbolized
by, each Trademark;
1
<PAGE> 165
(ii) each Trademark License (as defined in the Security Agreement),
including, without limitation, each Trademark License identified in Schedule 1
hereto; and
(iii) all proceeds of, and all other profits, products, rents or receipts,
in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or other realization upon, any
Trademark Collateral described in clauses (i) and (ii), including without
limitation all claims against third parties for loss of, damage to or
destruction of, or any past, present or future dilution, infringement or
unauthorized use of, unfair competition with, or violation of intellectual
property rights in connection with or injury to, any such collateral or for
injury to the goodwill associated with any of the foregoing, in each case
whether now existing or hereafter arising.
Grantor hereby irrevocably constitutes and appoints Grantee and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full power and authority in the name of Grantor or in its
name, from time to time, in Grantee's discretion, so long as an Event of Default
has occurred and is continuing, to take with respect to the Trademark Collateral
any and all appropriate action which is permitted under the Security Agreement.
The foregoing security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor does
hereby further acknowledge and affirm that the rights and remedies of Grantee
with respect to the security interest in the Trademark Collateral granted hereby
are more fully set forth in the Security Agreement, the terms and provisions of
which are incorporated by reference herein as if fully set forth herein.
2
<PAGE> 166
IN WITNESS WHEREOF, Grantor has caused this Trademark Security Agreement to
be duly executed by its officer thereunto duly authorized as of the ___th day of
_______________.
[NAME OF GRANTOR]
By: _____________________
Name:
Title:
Acknowledged:
THE BANK OF NEW YORK,
as Administrative Agent
By:__________________________
Name:
Title:
3
<PAGE> 167
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, ___________________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that ______________________,
_________________________ of [NAME OF GRANTOR], personally known to me to be the
same person whose name is subscribed to the foregoing instrument as such
__________, appeared before me this day in person and acknowledged that he
signed, executed and delivered the said instrument as his own free and voluntary
act and as the free and voluntary act of said Company, for the uses and purposes
therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this __th day of __________.
[Seal]
__________________________
Signature of notary public
My Commission expires
1
<PAGE> 168
Schedule 1
to Trademark
Security Agreement
U.S. TRADEMARK REGISTRATIONS
----------------------------
Registration No. Registration Date Mark
- ---------------- ----------------- -----
1
<PAGE> 169
EXCLUSIVE TRADEMARK LICENSES
Name of Parties Date of Subject
Agreement Licensor/Licensee Agreement Matter
- --------- ----------------- --------- ------
As Licensee
- -----------
As Licensor
- -----------
2
<PAGE> 170
EXHIBIT G
PLEDGE AGREEMENT
AGREEMENT dated as of ____________, 1999 among Venator Group, Inc. a New
York corporation (with its successors, the "Company"), each of the Subsidiaries
of the Company listed on the signature pages hereof and each other Subsidiary of
the Company that may from time to time become a party hereto in accordance with
Section 23 (each, with its successors, a "Subsidiary Guarantor") and The Bank of
New York, as Administrative Agent (with its successors, the "Administrative
Agent").
W I T N E S S E T H :
WHEREAS, the Company, the banks party thereto (the "Banks"), the co- agents
party thereto, Bank of America National Trust & Savings Association, as
Documentation Agent, The Bank of New York, as Administrative Agent, LC Agent and
Swingline Bank and the Lead Arrangers party thereto are parties to a Second
Amended and Restated Credit Agreement dated as of April 9, 1997 and amended and
restated as of March 19, 1999 (as amended or amended and restated from time to
time, the "Credit Agreement"); and
WHEREAS, the Subsidiary Guarantors and the Administrative Agent are parties
to a Guarantee Agreement dated as of March 19, 1999 (as amended from time to
time, the "Guarantee Agreement"); and
WHEREAS, pursuant to Section 5.20 of the Credit Agreement, the Company has
agreed to enter into, and to cause each of its Subsidiaries (subject to certain
exceptions set forth in the Credit Agreement) to enter into, a Pledge Agreement
substantially in the form hereof; and
WHEREAS, in consideration of the financial and other support that the
Company has provided, and such financial and other support as the Company may in
the future provide, to the Subsidiary Guarantors, the Subsidiary Guarantors are
willing to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE> 171
Section 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Cash Distributions" means dividends and other payments and distributions
made upon or with respect to the Pledged Stock in cash.
"Collateral" has the meaning assigned to such term in Section 3(a).
"Direct Subsidiary" means, with respect to each Obligor, any Subsidiary of
such Obligor whose capital stock or other equity interests are owned directly by
such Obligor.
"Excluded Subsidiary" means, with respect to each Obligor, any Direct
Subsidiary of such Obligor other than any such Direct Subsidiary which neither
transacts any substantial portion of its business nor regularly maintains any
substantial portion of its fixed assets within the United States, Canada or
Germany. An "Excluded Subsidiary" shall cease to be an "Excluded Subsidiary"
when the conditions set forth in the first sentence of Section 3(d) are
satisfied.
"Hedging Agreement" means any interest rate protection agreement, foreign
currency exchange agreement or other interest or currency exchange rate hedging
arrangement.
"Hedging Obligations" means, with respect to each Obligor, all obligations
of such Obligor under any Hedging Agreement between such Obligor and any Bank
Party (or any affiliate of any Bank Party).
"Issuer" means each Person listed on Schedule 1 and each Person that
becomes a Direct Subsidiary (other than an Excluded Subsidiary) of any Obligor
after the Effective Date.
"Obligor" means the Company or any Subsidiary Guarantor, and "Obligors"
means all of them.
"Pledged Equity Interests" means (i) the Subsidiary Equity Interests and
(ii) any other capital stock or other equity interests required to be pledged by
the Obligor to the Administrative Agent under this Agreement pursuant to
Sections 3(b), 3(c) or 3(d).
"Secured Obligations" means, with respect to each Obligor, (i) all
principal of and interest and premium (if any) on any Loan or Swingline Loan
2
<PAGE> 172
payable by such Obligor under, or any Note or Swingline Note issued by such
Obligor pursuant to, the Credit Agreement (including, without limitation, any
interest which accrues after or would accrue but for the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of such Obligor, whether or not allowed or allowable as a claim
in any such proceeding), (ii) all Reimbursement Obligations of such Obligor with
respect to any Letter of Credit issued pursuant to the Credit Agreement and all
interest payable by such Obligor thereon (including, without limitation, any
interest which accrues after or would accrue but for the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of such Obligor, whether or not allowed or allowable as a claim
in any such proceeding), (iii) if such Obligor is a Subsidiary Guarantor, all
amounts payable by such Obligor under the Guarantee Agreement, (iv) all other
amounts payable by such Obligor under the Loan Documents, (v) all Hedging
Obligations of such Obligor, and (vi) any amendments, restatements, renewals,
extensions or modifications of any of the foregoing; provided that the Secured
Obligations of each Subsidiary Guarantor described in clause (iii) above and any
amendment, restatement, renewal, extension or modification thereof described in
clause (vi) above (collectively, with respect to each Subsidiary Guarantor, such
Subsidiary Guarantor's "Subsidiary Guaranteed Obligations"), shall be
subordinate and junior in rank with respect to payment to the other Secured
Obligations of such Subsidiary Guarantor for purposes of this Pledge Agreement.
Pursuant to the proposed Amendment No. 4 to the Existing Credit Agreement, upon
satisfaction of the conditions precedent set forth therein, the Credit Agreement
will be amended and restated to include certain Subsidiaries of the Company as
borrowers under the Credit Agreement, and the parties hereto agree that, upon
effectiveness of such amendment and restatement, for purposes of the definition
of "Secured Obligations", the term "Obligors" will mean the Company, any of its
Subsidiaries that are borrowers under the Credit Agreement and the Subsidiary
Guarantors, and "Obligor" will mean any one of them.
"Secured Parties" means the Banks, the LC Agent, the Swingline Bank, the
Administrative Agent and the Lead Arrangers.
"Security Interests" means the security interests in the Collateral granted
hereunder securing the Secured Obligations.
"Subsidiary Equity Interests" means, with respect to each Issuer listed on
Schedule 1 hereto, the capital stock or other equity interests listed on
Schedule 1 hereto opposite such Issuer's name, which capital stock or other
equity interests constitute 65% of the aggregate outstanding capital stock or
other equity interests of such Issuer.
3
<PAGE> 173
Unless otherwise defined herein, or unless the context otherwise requires,
all terms used herein which are defined in the New York Uniform Commercial Code
as in effect on the date hereof shall have the meanings therein stated.
Section 2. Representations and Warranties. Each Obligor represents and
warrants as follows:
(a) Title to Pledged Equity Interests. Such Obligor owns all of its Pledged
Equity Interests, free and clear of any Liens other than the Security Interests
and Liens permitted under Section 5.06(a)(ix) of the Credit Agreement. All of
the Pledged Equity Interests of such Obligor have been duly authorized and
validly issued, and are fully paid and non-assessable, and are subject to no
options to purchase or similar rights of any Person. The Persons listed on
Schedule 1 under the name of such Obligor constitute all of the Persons that are
Direct Subsidiaries of such Obligor on the date hereof (other than any Excluded
Subsidiaries) and all of such Persons are wholly-owned Direct Subsidiaries
(excluding directors' qualifying shares). The Pledged Equity Interests of such
Obligor represent 65% of the aggregate capital stock and other equity interests
held by such Obligor of any Person that is a Direct Subsidiary (other than any
Excluded Subsidiary) and is a Foreign Subsidiary. Such Obligor is not and will
not become a party to or otherwise bound by any agreement, other than this
Agreement and any additional pledge agreements referred to in Section 2(b) which
restricts in any manner the rights of any present or future holder of any of the
Pledged Equity Interests of such Obligor with respect thereto.
(b) Validity, Perfection and Priority of Security Interests. (i) A UCC-1
financing statement naming such Obligor as debtor and the Administrative Agent
as secured party has been filed in each of the jurisdictions referred to in
Section 2(c) with respect to such Obligor.
[representation regarding steps needed to perfect in each foreign
jurisdiction to come once jurisdictions have been identified]
(ii) Other than as set forth in the preceding clauses of this Section, no
registration, recordation or filing with any governmental body, agency or
official or any other Person is required in connection with the execution or
delivery of this Agreement or necessary for the validity or enforceability
hereof or for the perfection or enforcement of the Security Interests in any of
the Collateral of any Obligor.
(iii) Neither such Obligor nor any of its Subsidiaries has performed or
will perform any acts which could reasonably be expected to prevent the
Administrative Agent from enforcing any of the terms and conditions of this
4
<PAGE> 174
Agreement or which would limit the Administrative Agent in any such
enforcement.
(c) UCC Filing Locations. The chief executive office of each Obligor is
located at the address set forth on the signature pages hereof. With respect to
each Obligor, under the Uniform Commercial Code as in effect in the State in
which such office is located, a local filing in [ ] is required to perfect a
security interest consisting of general intangibles.
Section 3. Grant of the Security Interests. (a) In order to secure the full
and punctual payment of the Secured Obligations in accordance with the terms
thereof, each Obligor hereby collaterally assigns and pledges to and with the
Administrative Agent for the benefit of the Secured Parties and grants to the
Administrative Agent for the benefit of the Secured Parties security interests
in:
(i) the Pledged Equity Interests of such Obligor and all of its rights
and privileges with respect to such Pledged Equity Interests;
(ii) all interest, dividends, earnings, income, profits and other
payments and distributions with respect to any and all of the foregoing,
and all proceeds of any and all of the foregoing (the items in clauses (i)
through (ii), inclusive, being collectively referred to, with respect to
such Obligor, as the "Collateral" of such Obligor).
(b) In the event that any Person becomes a Direct Subsidiary (other than an
Excluded Subsidiary) of an Obligor after the date hereof, such Obligor will
promptly, and in any event within 45 days after such event (or such other number
of days as the Administrative Agent and such Obligor may agree to), pledge and
deposit with the Administrative Agent certificates representing shares of
capital stock or other equity interests of such Person held by such Obligor as
additional security for the Secured Obligations of such Obligor and take such
other steps as may be necessary or appropriate, or as the Administrative Agent
shall reasonably request, to ensure that such shares of capital stock or other
equity interests constitute additional security for the Secured Obligations of
such Obligor, and that the Security Interests therein are perfected, first
priority security interests; provided that no Obligor shall be required to
pledge or deposit any certificates or take any other steps pursuant to this
subsection (b) to the extent that after giving effect to any such pledge or
deposit, or the taking of any such step, shares of capital stock or other equity
interests representing more than 65% of the aggregate capital stock or other
equity interests of any Direct Subsidiary that is a Foreign Subsidiary would be
in pledge or deposit hereunder.
5
<PAGE> 175
(c) In the event that any Issuer at any time issues to any Obligor any
additional or substitute shares of capital stock of any class or any other
equity interests of any class such Obligor will promptly, and in any event
within 45 days after such event (or such other number of days as the
Administrative Agent and such Obligor may agree to), pledge and deposit with the
Administrative Agent certificates representing all such shares of capital stock
or other equity interests as additional security for the Secured Obligations of
such Obligor and take such other steps as may be necessary or appropriate, or as
the Administrative Agent shall reasonably request, to ensure that such shares of
capital stock or other equity interests constitute additional security for the
Secured Obligations of such Obligor, and that the Security Interests therein are
perfected, first priority security interests; provided that no Obligor shall be
required to pledge or deposit any certificates or take any other steps pursuant
to this subsection (c) to the extent that after giving effect to any such pledge
or deposit, or the taking of any such step, shares of capital stock or other
equity interests representing more than 65% of the aggregate capital stock or
other equity interests of any Direct Subsidiary that is a Foreign Subsidiary
would be in pledge or deposit hereunder.
(d) Any Excluded Subsidiary of any Obligor shall cease to be an Excluded
Subsidiary on the first day on which such Obligor shall be able to pledge the
capital stock or other equity interests of such Direct Subsidiary hereunder
without triggering a requirement to equally and ratably secure securities issued
under the Indenture. Promptly, and in any event within 45 days after any
Excluded Subsidiary of any Obligor shall cease to be an Excluded Subsidiary (or
such other number of days as the Administrative Agent and such Obligor may agree
to), such Obligor will pledge and deposit with the Administrative Agent
certificates representing shares of capital stock or other equity interests of
such Direct Subsidiary as additional security for the Secured Obligations of
such Obligor and take such other steps as may be necessary or appropriate, or as
the Administrative Agent shall reasonably request, to ensure that such shares of
capital stock or other equity interests constitute additional security for the
Secured Obligations of such Obligor, and that the Security Interests therein are
perfected, first priority security interests; provided that no Obligor shall be
required to pledge or deposit any certificates or take any other steps pursuant
to this subsection (d) to the extent that after giving effect to any such pledge
or deposit, or the taking of any such step, shares of capital stock or other
equity interests representing more than 65% of the aggregate capital stock or
other equity interests of any Direct Subsidiary that is a Foreign Subsidiary
would be in pledge or deposit hereunder.
(e) Any shares of capital stock or other equity interests pledged by any
Obligor to the Administrative Agent pursuant to subsections (b), (c) or (d)
above
6
<PAGE> 176
constitute Pledged Equity Interests of such Obligor and are subject to all
provisions of this Agreement.
(f) The Security Interests are granted as security only and shall not
subject the Administrative Agent or any Secured Party to, or transfer or in any
way affect or modify, any obligation or liability of any Obligor or any of its
Subsidiaries with respect to any of the Collateral or any transaction in
connection therewith.
Section 4. Delivery of Pledged Equity Interests. Unless otherwise required
by the laws of any jurisdiction in order to perfect the Security Interests in
Collateral the perfection of which is governed by the laws of such jurisdiction,
all certificates representing Pledged Equity Interests of any Obligor shall be
delivered to the Administrative Agent in the State of New York by such Obligor
pursuant hereto and shall be in suitable form for transfer by delivery, or shall
be accompanied by duly executed instruments of transfer or assignment in blank,
and accompanied by any required transfer tax stamps, all in form and substance
reasonably satisfactory to the Administrative Agent.
Section 5. Further Assurances. Each Obligor agrees that it will, at its
expense and in such manner and form as the Administrative Agent may reasonably
require, execute, deliver, file and record any financing statement, specific
assignment, supplemental pledge agreement, confirmation or other paper and take
any other action that may be necessary or desirable, or that the Administrative
Agent may reasonably request, in order to create, preserve, perfect or validate
any Security Interest or to enable the Administrative Agent to exercise and
enforce its rights hereunder with respect to any of the Collateral of such
Obligor. Each Obligor agrees that it will not change its name, identity or
corporate structure in any manner or the location of its chief executive office
in the United States unless, in each case, it shall have given the
Administrative Agent not less than 30 days' prior notice thereof.
Section 6. Record Ownership of Pledged Equity Interests. If an Event of
Default shall have occurred and be continuing, the Administrative Agent may, in
its sole discretion, cause any or all of the Pledged Equity Interests to be
transferred of record into the name of the Administrative Agent or its nominee.
Each Obligor will promptly give to the Administrative Agent copies of any
notices or other communications received by it with respect to Pledged Equity
Interests registered in the name of such Obligor and the Administrative Agent
will promptly give to each Obligor copies of any notices and communications
received by the Administrative Agent with respect to Pledged Equity Interests of
such Obligor registered in the name of the Administrative Agent or its nominee.
7
<PAGE> 177
Section 7. Right to Receive Distributions on Collateral. The Administrative
Agent shall have the right to receive and, during the continuance of any Event
of Default, to retain as Collateral hereunder all dividends, interest and other
payments and distributions made upon or with respect to the Collateral of each
Obligor and each Obligor shall take all such action as the Administrative Agent
may deem necessary or appropriate to give effect to such right; provided that
unless an Event of Default has occurred and is continuing, the foregoing
sentence shall not apply to Cash Distributions. All such dividends, interest and
other payments and distributions which are received by any Obligor (except Cash
Distributions received when no Event of Default has occurred and is continuing)
shall be received in trust for the benefit of the Secured Parties and, if the
Administrative Agent so directs during the continuance of an Event of Default,
shall be segregated from other funds of such Obligor and shall, forthwith upon
demand by the Administrative Agent during the continuance of an Event of
Default, be paid over to the Administrative Agent as Collateral in the same form
as received (with any necessary endorsement). After all Events of Defaults have
been cured, the Administrative Agent's right to retain dividends, interest and
other payments and distributions (including Cash Distributions) under this
Section 7 shall cease and the Administrative Agent shall pay over to each
Obligor any such Collateral of such Obligor retained by it during the
continuance of an Event of Default.
Section 8. Right to Vote Pledged Equity Interests. Unless an Event of
Default shall have occurred and be continuing, each Obligor shall have the
right, from time to time, to vote and to give consents, ratifications and
waivers with respect to its Pledged Equity Interests, and the Administrative
Agent shall, upon receiving a written request from any Obligor accompanied by a
certificate signed by a Responsible Officer of the Company stating that no Event
of Default has occurred and is continuing, deliver to such Obligor or as
specified in such request such proxies, powers of attorney, consents,
ratifications and waivers in respect of any of its Pledged Equity Interests
which is registered in the name of the Administrative Agent or its nominee as
shall be specified in such request and be in form and substance satisfactory to
the Administrative Agent.
If an Event of Default shall have occurred and be continuing, the
Administrative Agent shall have the right to the extent permitted by law and
each Obligor shall take all such action as may be necessary or appropriate to
give effect to such right, to vote and to give consents, ratifications and
waivers, and take any other action with respect to any or all of the Pledged
Equity Interests of such Obligor with the same force and effect as if the Agent
were the absolute and sole owner thereof.
8
<PAGE> 178
Section 9. General Authority. Each Obligor hereby irrevocably appoints the
Administrative Agent its true and lawful attorney, with full power of
substitution, in the name of such Obligor, the Administrative Agent, the Secured
Parties or otherwise, for the sole use and benefit of the Secured Parties, but
at the expense of such Obligor, to the extent permitted by law, to exercise at
any time and from time to time while an Event of Default has occurred and is
continuing, all or any of the following powers with respect to all or any of the
Collateral:
(a) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due upon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto,
(c) to sell, transfer, assign or otherwise deal in or with the same or
the proceeds or avails thereof, as fully and effectually as if the
Administrative Agent were the absolute owner thereof, and
(d) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
provided that the Administrative Agent shall give each Obligor not less than ten
days' prior notice of the time and place of any sale or other intended
disposition of any of the Collateral of such Obligor. The Administrative Agent
and each Obligor agree that such notice constitutes "reasonable notification"
within the meaning of Section 9-504(3) of the Uniform Commercial Code.
Section 10. Remedies upon Event of Default. If any Event of Default shall
have occurred and be continuing, the Administrative Agent may exercise on behalf
of the Secured Parties all the rights of a secured party after default under the
Uniform Commercial Code (whether or not in effect in the jurisdiction where such
rights are exercised) and, in addition, the Administrative Agent may, without
being required to give any notice, except as herein provided or as may be
required by mandatory provisions of law, (i) withdraw all cash, if any, then
held by it as Collateral and apply it as specified in Section 13 and (ii) if
there shall be no such cash or if such cash shall be insufficient to pay all the
Secured Obligations in full, sell the Collateral or any part thereof at public
or private sale or at any broker's board or on any securities exchange, for
cash, upon credit or for future delivery, and at such price or prices as the
Administrative Agent may reasonably deem satisfactory. Any Secured Party may be
the purchaser of any or all of the Collateral so sold at any public sale (or, if
the Collateral is of a type customarily sold in a recognized market or is of a
type which is the subject of widely distributed standard price quotations, at
any private sale). The Administrative
9
<PAGE> 179
Agent is authorized, in connection with any such sale, if it deems it advisable
so to do, (a) to restrict the prospective bidders on or purchasers of any of the
Pledged Equity Interests to a limited number of sophisticated investors who will
represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or sale of any of such
Pledged Equity Interests, (b) to cause to be placed on certificates for any or
all of the Pledged Equity Interests or on any other securities pledged hereunder
a legend to the effect that such security has not been registered under the
Securities Act of 1933, as amended, and may not be disposed of in violation of
the provision of said Act, and (c) to impose such other limitations or
conditions in connection with any such sale as the Administrative Agent
reasonably deems necessary or advisable in order to comply with said Act or any
other law. Each Obligor will execute and deliver such documents and take such
other action as the Administrative Agent reasonably deems necessary or advisable
in order that any such sale may be made in compliance with law. Upon any such
sale the Administrative Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser at any
such sale shall hold the Collateral so sold absolutely and free from any claim
or right of whatsoever kind, including any equity or right of redemption of any
Obligor which may be waived, and each Obligor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted. The notice of
such sale required by Section 9 shall (1) in the case of a public sale, state
the time and place fixed for such sale, (2) in the case of a sale at a broker's
board or on a securities exchange, state the board or exchange at which such
sale is to be made and the day on which the Collateral, or the portion thereof
so being sold, will first be offered for sale at such board or exchange, and (3)
in the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Administrative Agent
may fix in the notice of such sale. At any such sale the Collateral may be sold
in one lot as an entirety or in separate parcels, as the Administrative Agent
may determine. The Administrative Agent shall not be obligated to make any such
sale pursuant to any such notice. The Administrative Agent may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned, subject to the Administrative Agent giving the notice required to be
given pursuant to Section 9. In the case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Administrative Agent until the selling price is paid by the
purchaser thereof, but the Administrative Agent shall not incur any liability in
the case of the failure of such purchaser to take up and pay for the Collateral
so sold and, in the case of any such failure, such Collateral may again be sold
upon like notice.
10
<PAGE> 180
The Administrative Agent, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
Section 11. Expenses. Each Obligor agrees that it will forthwith upon
demand pay to the Administrative Agent:
(a) the amount of any taxes which the Administrative Agent may have been
required to pay by reason of the Security Interests or to free any of the
Collateral of such Obligor from any Lien thereon, and
(b) the amount of any and all out-of-pocket expenses, including the
reasonable fees and disbursements of counsel and of any other experts, which the
Administrative Agent may incur in connection with (i) the enforcement of this
Agreement, including such expenses as are incurred to preserve the value of the
Collateral of such Obligor and the validity, perfection, rank and value of any
Security Interest, (ii) the collection, sale or other disposition of any of the
Collateral of such Obligor, (iii) the exercise by the Administrative Agent of
any of the rights conferred upon it hereunder, or (iv) any Default.
Any such amount not paid in a timely manner shall bear interest at the rate
applicable to Base Rate Loans from time to time and shall be an additional
Secured Obligation hereunder.
Section 12. Limitation on Duty of Administrative Agent in Respect of
Collateral. Beyond the exercise of reasonable care in the custody thereof, the
Administrative Agent shall have no duty as to any Collateral in its possession
or control or in the possession or control of any agent or bailee or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. The Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which it accords its own property, and shall not be liable or responsible
for any loss or damage to any of the Collateral, or for any diminution in the
value thereof, by reason of the act or omission of any agent or bailee selected
by the Administrative Agent in good faith.
Section 13. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral pledged by any Obligor shall
be applied by the Administrative Agent in the following order of priorities:
11
<PAGE> 181
first, to pay the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the
Administrative Agent, and all expenses, liabilities and advances incurred
or made by the Administrative Agent in connection therewith, and any other
unreimbursed expenses for which any Secured Party is to be reimbursed
pursuant to the Credit Agreement (including without limitation Section
9.03(a) thereof) or Section 11 hereof and any unpaid fees owing to any
Secured Party under the Loan Documents;
second, to the ratable payment of accrued but unpaid interest on the
Secured Obligations of such Obligor (other than, in the case of any
Subsidiary Guarantor, its Subsidiary Guaranteed Obligations) in accordance
with the provisions of the Credit Agreement;
third, to the ratable payment of unpaid principal of, and
reimbursement obligations constituting, the Secured Obligations of such
Obligor (other than, in the case of any Subsidiary Guarantor, its
Subsidiary Guaranteed Obligations);
fourth, in the case of any Subsidiary Guarantor, to the ratable
payment of accrued but unpaid interest on its Subsidiary Guaranteed
Obligations, until all such Secured Obligations shall have been paid in
full;
fifth, in the case of any Subsidiary Guarantor, to the ratable payment
of unpaid principal of, and reimbursement obligations constituting its
Subsidiary Guaranteed Obligations, until all such Secured Obligations shall
have been paid in full;
sixth, to pay ratably all other Secured Obligations, until all Secured
Obligations shall have been paid in full; and
finally, to pay to such Obligor or its successors or assigns, or as a
court of competent jurisdiction may direct, any surplus then remaining from
such proceeds.
The Administrative Agent may make distributions hereunder in cash or in kind or,
on a ratable basis, in any combination thereof. For purposes of making any
distribution hereunder, the principal amount of any Hedging Obligation shall be
the amount of the relevant Obligor's Hedging Obligations due and payable at the
time such distribution is made.
12
<PAGE> 182
Section 14. Concerning the Administrative Agent. The provisions of Article
7 of the Credit Agreement shall inure to the benefit of the Administrative Agent
in respect of this Agreement and shall be binding upon the parties to the Credit
Agreement and the parties hereto in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Administrative Agent
therein set forth:
(a) The Administrative Agent is authorized to take all such action as is
provided to be taken by it as Administrative Agent hereunder and all other
action reasonably incidental thereto. As to any matters not expressly provided
for herein (including, without limitation, the timing and methods of realization
upon the Collateral) the Administrative Agent shall act or refrain from acting
in accordance with written instructions from the Required Banks or, in the
absence of such instructions, in accordance with its discretion.
(b) The Administrative Agent shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity, perfection,
priority or enforceability of the Security Interests in any of the Collateral,
whether impaired by operation of law or by reason of any action or omission to
act on its part hereunder. The Administrative Agent shall have no duty to
ascertain or inquire as to the performance or observance of any of the terms of
this Agreement by any Obligor.
Section 15. Appointment of Co-agents. At any time or times, in order to
comply with any legal requirement in any jurisdiction, the Administrative Agent
may appoint another bank or trust company or one or more other persons, either
to act as co-agent or co-agents, jointly with the Administrative Agent, or to
act as separate agent or agents on behalf of the Secured Parties with such power
and authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment (which may, in the
discretion of the Administrative Agent, include provisions for the protection of
such co-agent or separate agent similar to the provisions of Section 14).
Section 16. Termination of Security Interests; Release of Collateral. (a)
Upon the repayment in full of all Secured Obligations (other than those
described in clause (v) of the definition thereof and any amendments,
restatements, renewals, extensions or modifications thereof), the termination of
the Commitments under the Credit Agreement and the termination or cancellation
of all Letters of Credit (unless such Letters of Credit have been fully cash
collateralized pursuant to arrangements satisfactory to the LC Agent, or back-
stopped by a separate letter of credit, in form and substance and issued by an
issuer satisfactory to the LC Agent), the Security Interests shall terminate and
all rights to the Collateral of each Obligor shall revert to such Obligor.
13
<PAGE> 183
(b) Upon the consummation of any Asset Sale (or any sale or other
disposition described in clause (iv) of the definition of Asset Sale) permitted
by the terms of the Credit Agreement and consisting of the disposition of any
Collateral or of the capital stock of any Obligor other than the Company (any
such transaction, a "Permitted Collateral Sale"), the Security Interests in such
Collateral or in the Collateral pledged by such Obligor, as the case may be (but
not, in any case, in any Proceeds thereof) shall be released. Such release shall
not be subject to the consent of any Bank, and the Administrative Agent shall be
fully protected in relying on a certificate of an Obligor as to whether any
particular transaction consummated by such Obligor constitutes a Permitted
Collateral Sale.
(c) In addition to the release of Collateral effected by subsection (b), at
any time and from time to time prior to the termination of the Security
Interests, the Administrative Agent may release any of the Collateral with the
prior written consent of the Required Banks; provided that the Administrative
Agent may release all or substantially all of the Collateral (for purposes of
this subsection (c), as defined in the Credit Agreement) only with the prior
written consent of all the Banks.
(d) Upon any termination of the Security Interests or release of Collateral
in accordance with this Section, the Administrative Agent will, at the expense
of the relevant Obligor, execute and deliver to such Obligor such documents as
such Obligor shall reasonably request to evidence the termination of the
Security Interests or the release of such Collateral, as the case may be.
Section 17. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile or similar writing) and
shall be given to such party at its address or facsimile number set forth on the
signature pages hereof or at such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the Administrative
Agent and the Company. Each such notice, request or other communication shall be
effective (i) if given by facsimile, when transmitted to the facsimile number
referred to in this Section and confirmation of receipt is received, or (ii) if
given by any other means, when delivered at the address referred to in this
Section.
Section 18. Waivers, Non-Exclusive Remedies. No failure on the part of the
Administrative Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent of any right under this Agreement or any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
in this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law.
14
<PAGE> 184
Section 19. Successors and Assigns. This Agreement shall be binding upon
each Obligor and its successors and permitted assigns. This Agreement is for the
benefit of each Secured Party and its successors and permitted assigns, and in
the event of an assignment of all or any of any Bank's interest in and to its
rights and obligations under the Credit Agreement in accordance with the Credit
Agreement, the assignor's rights hereunder, to the extent applicable to the
indebtedness or obligation so assigned, shall automatically be transferred with
such indebtedness or obligation.
Section 20. Changes in Writing. Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by each Obligor and the Administrative Agent, subject to the provisions
of Section 9.05(b) of the Credit Agreement.
Section 21. New York Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, except as otherwise
required by mandatory provisions of law and except to the extent that remedies
provided by the laws of any jurisdiction other than New York are governed by the
laws of such jurisdiction.
Section 22. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Secured Parties in
order to carry out the intentions of the parties hereto as nearly as may be
possible; and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
Section 23. Additional Obligors. Any Subsidiary Guarantor may become an
Obligor party hereto and bound hereby by executing a counterpart hereof and
delivering the same to the Administrative Agent.
Section 24. 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 OR THE TRANSACTIONS CONTEMPLATED HEREBY.
15
<PAGE> 185
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:_______________________
Name:
Title:
EASTBAY, INC.
eVENATOR, INC.
FOOT LOCKER JAPAN, INC.
NORTHERN REFLECTIONS INC.
RETAIL COMPANY OF GERMANY,
INC.
THE RICHMAN BROTHERS COMPANY
ROBBY'S SPORTING GOODS, INC.
TEAM EDITION APPAREL, INC.
THE SAN FRANCISCO MUSIC BOX
COMPANY
VENATOR GROUP CORPORATE
SERVICES, INC.
VENATOR GROUP HOLDINGS, INC.
VENATOR GROUP RETAIL, INC.
VENATOR GROUP SOURCING, INC.
VENATOR GROUP SPECIALITY, INC.
By:__________________________
Name:
Title:
16
<PAGE> 186
THE BANK OF NEW YORK, as
Administrative Agent
By:____________________________
Name:
Title:
17
<PAGE> 187
Schedule 1
Stock Pledged by Venator Group, Inc.
<TABLE>
<CAPTION>
====================================================================================================
Issuer Number of Shares Certificate Number
====================================================================================================
<S> <C> <C>
Venator Group (Australia) Ltd.
- ----------------------------------------------------------------------------------------------------
Foot Locker Austria GmbH
- ----------------------------------------------------------------------------------------------------
Foot Locker Belgium N.V.
- ----------------------------------------------------------------------------------------------------
Foot Locker Denmark ApS
- ----------------------------------------------------------------------------------------------------
Foot Locker Europe, B.V.
- ----------------------------------------------------------------------------------------------------
Foot Locker France S.A.
- ----------------------------------------------------------------------------------------------------
Foot Locker Italy S.r.l.
- ----------------------------------------------------------------------------------------------------
Foot Locker Japan K.K.
- ----------------------------------------------------------------------------------------------------
Foot Locker Netherlands B.V.
- ----------------------------------------------------------------------------------------------------
Foot Locker Spain S.L.
- ----------------------------------------------------------------------------------------------------
Foot Locker Sweden AB
- ----------------------------------------------------------------------------------------------------
Foot Locker UK Limited
- ----------------------------------------------------------------------------------------------------
Woolworth Holding S.A. de C.V.
=====================================================================================================
</TABLE>
<PAGE> 188
EXHIBIT H
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT dated as of March ___, 1999 among each of the
Subsidiaries of the Company (as defined below) listed on the signature pages
hereof and each other Subsidiary of the Company that may from time to time
become a party hereto in accordance with Section 19 (each such Subsidiary, with
its successors, a "Subsidiary Guarantor") and The Bank of New York, as
Administrative Agent (with its successors, the "Administrative Agent"), for the
benefit of the Bank Parties (as defined in the Credit Agreement referred to
below).
W I T N E S S E T H :
WHEREAS, Venator Group, Inc., a New York corporation (with its successors,
the "Company"), the banks party thereto (the "Existing Banks"), the co-agents
party thereto, Bank of America National Trust & Savings Association, as
Documentation Agent and The Bank of New York, as Administrative Agent, LC Agent
and Swingline Bank are parties to a Credit Agreement dated as of April 9, 1997
(as in effect immediately prior to the effectiveness of Amendment No. 3 referred
to below, the "Existing Credit Agreement" and, as amended by Amendment No. 3 and
as further amended or amended and restated from time to time, the "Credit
Agreement"); and
WHEREAS, pursuant to Amendment No. 3 to the Existing Credit Agreement dated
as of the date hereof ("Amendment No. 3") among the Company, the Existing Banks,
the co-agents party thereto, Bank of America National Trust & Savings
Association, as Documentation Agent, The Bank of New York, as Administrative
Agent, LC Agent and Swingline Bank and the Lead Arrangers party thereto, the
parties to the Existing Credit Agreement desire to amend and restate the
Existing Credit Agreement as provided therein, subject to satisfaction of the
conditions set forth therein; and
WHEREAS, it is a condition to effectiveness of the amendment to the
Existing Credit Agreement effected by Amendment No. 3 that each Subsidiary
Guarantor enter into a Guarantee Agreement substantially in the form hereof; and
WHEREAS, in consideration of the financial and other support that the
Company has provided, and such financial and other support as the Company may in
the future provide, to the Subsidiary Guarantors, the Subsidiary Guarantors are
willing to enter into this Guarantee Agreement;
<PAGE> 189
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein, except that the term "Loan Documents" shall include any document
with respect to any Hedging Obligations. Pursuant to the proposed Amendment No.
4 to the Existing Credit Agreement ("Amendment No. 4"), upon satisfaction of the
conditions precedent set forth therein, the Credit Agreement will be amended and
restated to include certain Subsidiaries of the Company as borrowers under the
Credit Agreement, and the parties hereto agree that, upon effectiveness of such
amendment and restatement, the term "Obligors" will mean the Company, any of its
Subsidiaries that are borrowers under the Credit Agreement and the Subsidiary
Guarantors, and "Obligor" will mean any one of them. The following additional
terms, as used herein, have the following meanings:
"Guaranteed Obligations" means, with respect to each Subsidiary Guarantor,
(i) all principal of and interest and premium (if any) on any Loan or Swingline
Loan payable by the Company or any other Obligor (other than such Subsidiary
Guarantor) under, or any Note or Swingline Note issued pursuant to, the Credit
Agreement (including, without limitation, any interest which accrues after or
would accrue but for the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of the Company or such
other Obligor, whether or not allowed or allowable as a claim in any such
proceeding), (ii) all Reimbursement Obligations of the Company or any other
Obligor (other than such Subsidiary Guarantor) with respect to any Letter of
Credit issued pursuant to the Credit Agreement and all interest payable by the
Company or such other Obligor thereon (including, without limitation, any
interest which accrues after or would accrue but for the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company or such other Obligor, whether or not allowed or
allowable as a claim in any such proceeding), (iii) all Hedging Obligations of
the Company or any other Obligor (other than such Subsidiary Guarantor), (iv)
all other amounts payable by the Company or any other Obligor (other than such
Subsidiary Guarantor) under the Loan Documents and (v) any renewals, extensions
or modifications of any of the foregoing.
"Hedging Agreement" means any interest rate protection agreement, foreign
currency exchange agreement or other interest or currency exchange rate hedging
arrangement.
2
<PAGE> 190
"Hedging Obligations" means, with respect to any Obligor, all obligations
of such Obligor under any Hedging Agreement between such Obligor and any Bank
Party (or any affiliate of any Bank Party).
Section 2. The Guarantees. Each of the Subsidiary Guarantors, jointly and
severally, hereby unconditionally guarantees the full and punctual payment when
due (whether at stated maturity, upon acceleration or otherwise) of the
Guaranteed Obligations. Upon failure by any Obligor to pay punctually any
Guaranteed Obligation when due, each Subsidiary Guarantor agrees jointly and
severally that it shall forthwith on demand pay such Guaranteed Obligation at
the place and in the manner specified in the Credit Agreement or the other
relevant Loan Document, as the case may be.
Section 3. Guarantees Unconditional. The obligations of each Subsidiary
Guarantor hereunder shall be unconditional and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of any Obligor or any other Person under any Loan
Document, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to any Loan Document or
any Letter of Credit (including without limitation any amendment and restatement
of the Credit Agreement pursuant to the proposed Amendment No. 4, a copy of
which has been delivered to such Subsidiary Guarantor);
(iii) any release, impairment, non-perfection or invalidity of any direct
or indirect security for any obligation of any Obligor or any other Person under
any Loan Document or with respect to any Letter of Credit;
(iv) any change in the corporate existence, structure or ownership of any
Obligor or any other Person or any of their respective subsidiaries, or any
insolvency, bankruptcy, reorganization or other similar proceeding affecting any
Obligor or any other Person or any of their respective subsidiaries or any of
their respective assets or any resulting release or discharge of any obligation
of any Obligor or any other Person contained in any Loan Document;
(v) the existence of any claim, set-off or other rights which such
Subsidiary Guarantor may have at any time against any other Obligor or any Bank
Party, whether in connection herewith or with any unrelated transactions;
3
<PAGE> 191
provided that nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against any Obligor
or any other Person for any reason of any Loan Document or any Letter of Credit,
or any provision of applicable law or regulation purporting to prohibit the
payment by any Obligor or any other Person of the principal of or interest on
any Loan, any Swingline Loan, any Note, any Swingline Note or any Reimbursement
Obligation or any other amount payable by any Obligor under any Loan Document;
or
(vii) any other act or omission to act or delay of any kind by any Obligor,
any Bank Party or any other party to any Loan Document, or any other
circumstance whatsoever which might, but for the provisions of this Section,
constitute a legal or equitable discharge of or defense to obligations of such
Subsidiary Guarantor hereunder.
Section 4. Discharge Only upon Payment in Full; Reinstatement In Certain
Circumstances; Release of Subsidiary Guarantors. (a) Each Subsidiary Guarantor's
obligations hereunder shall remain in full force and effect until the repayment
in full of all Guaranteed Obligations, the termination of all Commitments under
the Credit Agreement and the expiration or cancellation of all Letters of Credit
(unless such Letters of Credit have been fully cash collateralized pursuant to
arrangements satisfactory to the LC Agent, or back-stopped by a separate letter
of credit, in form and substance and issued by an issuer satisfactory to the LC
Agent). If at any time any payment of any Guaranteed Obligation is rescinded or
must be otherwise restored or returned upon the insolvency or receivership of
the Company or any other Obligor or otherwise, each Subsidiary Guarantor's
obligations hereunder with respect thereto shall be reinstated as though such
payment had been due but not made at such time.
(b) Upon (w) the consummation of any Asset Sale (or any sale or other
disposition described in clause (iv) of the definition of Asset Sale) permitted
by the terms of the Credit Agreement and consisting of the disposition of all of
the capital stock of a Subsidiary Guarantor (any such transaction, a "Guarantor
Asset Sale"), (x) if applicable, application of the proceeds of such Guarantor
Asset Sale in accordance with the provisions of the Credit Agreement, (y)
release of such Subsidiary Guarantor from its obligations under any Guarantee of
any other Debt of the Company or any of its Subsidiaries (including without
limitation any New Subordinated Debt, any Other Refinancing Debt or any Debt of
the Company described in clause (v) of the parenthetical set forth in Section
5.09 of the Credit Agreement) (or automatic termination of the obligations of
such Subsidiary Guarantor under any such Guarantee) and (z) if such Subsidiary
4
<PAGE> 192
Guarantor is a borrower under the Credit Agreement, repayment in full of all
outstanding Loans made to it and all Reimbursement Obligations owed by it and
cancellation or termination of all Letters of Credit issued for its account (or
the assumption on the terms set forth in the Credit Agreement by the Company or
any other borrower under the Credit Agreement of the reimbursement obligations
with respect to such Letters of Credit), such Subsidiary Guarantor shall be
released from all of its obligations hereunder (and such release shall not
require the consent of any Bank Party). The Administrative Agent shall be fully
protected in relying on a certificate of the Company as to whether any
particular transaction constitutes a Guarantor Asset Sale, whether the proceeds
of such Guarantor Asset Sale have been applied in accordance with the provisions
of the Credit Agreement, and whether the releases from, or termination of, any
applicable Guarantees by such Subsidiary Guarantor have been effected.
(c) In addition to the release of any Subsidiary Guarantor from its
obligations hereunder permitted pursuant to subsection (b), at any time and from
time to time prior to the termination of each Subsidiary Guarantor's obligations
hereunder, the Administrative Agent may release any Subsidiary Guarantor from
its obligations hereunder with the prior written consent of the Required Banks;
provided that any release of all or substantially all of the Subsidiary
Guarantors shall require the consent of all of the Banks.
Section 5. Waiver by the Subsidiary Guarantors. Each Subsidiary Guarantor
irrevocably waives acceptance hereof, presentment, demand, protest and any
notice, as well as any requirement that at any time any action be taken by any
Person against such Subsidiary Guarantor, any other Subsidiary Guarantor, the
Company or any other Person.
Section 6. Subrogation and Contribution. Upon making any payment hereunder
with respect to the obligations of any Obligor, each Subsidiary Guarantor shall
be subrogated to the rights of the payee against such Obligor with respect to
the portion of such obligation paid by such Subsidiary Guarantor; provided that
such Subsidiary Guarantor shall not enforce any payment by way of subrogation,
or by reason of contribution, against any other guarantor of the Guaranteed
Obligations (including without limitation any other Subsidiary Guarantor), until
the repayment in full of all Guaranteed Obligations of all Subsidiary
Guarantors, the termination of the Commitments under the Credit Agreement and
the expiration or cancellation of all Letters of Credit (unless such Letters of
Credit have been fully cash collateralized pursuant to arrangements satisfactory
to the LC Agent, or back-stopped by a separate letter of credit, in form and
substance and issued by an issuer satisfactory to the LC Agent).
5
<PAGE> 193
Section 7. Stay of Acceleration. If acceleration of the time for payment of
any Guaranteed Obligations payable by any Subsidiary Guarantor is stayed upon
the insolvency, bankruptcy or reorganization of such Subsidiary Guarantor or
otherwise, all such Guaranteed Obligations otherwise subject to acceleration
under the terms of any Loan Document shall nonetheless be payable by each other
Subsidiary Guarantor hereunder forthwith on demand by the Administrative Agent
made at the request of the Required Banks.
Section 8. Representations and Warranties. Each Subsidiary Guarantor
represents and warrants that:
(a) Such Subsidiary Guarantor 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.
(b) The execution, delivery and performance by such Subsidiary Guarantor of
this Guarantee Agreement are within such Subsidiary Guarantor'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 such Subsidiary Guarantor or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Company or any of its Subsidiaries
or result in the creation or imposition of any Lien on any asset of the Company
or any of its Subsidiaries.
(c) This Guarantee Agreement constitutes a valid and binding agreement of
such Subsidiary Guarantor.
(d) The obligations of such Subsidiary Guarantor hereunder rank (i) senior
to any other Debt of such Subsidiary Guarantor with respect to the collateral
pledged by such Subsidiary Guarantor, (ii) pari passu with other unsecured Debt
of such Subsidiary Guarantor (other than any such Debt described in clause
(iii)) with respect to any assets of such Subsidiary Guarantor (other than any
collateral referred to in clause (i)) and (iii) senior to any other Debt of such
Subsidiary Guarantor which by its terms is subordinated thereto, including
without limitation any Guarantee of any New Subordinated Debt granted by such
Guarantor.
6
<PAGE> 194
Section 9. Amendments. Any provision of this Guarantee Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by each Subsidiary Guarantor and the Administrative Agent, subject to the
provisions of Section 9.05(b) of the Credit Agreement.
Section 10. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile or similar writing) and
shall be given to such party at its address or facsimile number set forth on the
signature pages hereof or at such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the Administrative
Agent and the Company. Each such notice, request or other communication shall be
effective (i) if given by facsimile, when transmitted to the facsimile number
referred to in this Section and confirmation of receipt is received, or (ii) if
given by any other means, when delivered at the address referred to in this
Section.
Section 11. Taxes. Each Subsidiary Guarantor agrees to be bound by the
provisions of Section 8.04 of the Credit Agreement with respect to any payments
made by such Subsidiary Guarantor under this Guarantee Agreement.
Section 12. Continuing Guarantees. This Guarantee Agreement is a continuing
Guarantee of each Subsidiary Guarantor and shall be binding upon each Subsidiary
Guarantor and its successors and assigns. This Guarantee Agreement is for the
benefit of each Bank Party and its successors and permitted assigns, and in the
event of an assignment of all or any of any Bank's interest in and to its rights
and obligations under the Credit Agreement in accordance with the Credit
Agreement, the assignor's rights hereunder, to the extent applicable to the
indebtedness or obligation so assigned, shall automatically be transferred with
such indebtedness or obligation.
Section 13. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Bank Parties in
order to carry out the intentions of the parties hereto as nearly as may be
possible, and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
Section 14. Limitation on the Obligations of Subsidiary Guarantors. The
obligations of each Subsidiary Guarantor hereunder shall be limited to an
aggregate amount that is equal to the largest amount that would not render the
obligations of such Subsidiary Guarantor hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
applicable law.
7
<PAGE> 195
Section 15. Governing Law; Jurisdiction. This Guarantee Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York. Each Subsidiary Guarantor 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 Guarantee Agreement or the
transactions contemplated hereby. Each Subsidiary Guarantor 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 16. Appointment of Agent for Service Of Process. (a) Each
Subsidiary Guarantor hereby irrevocably designates, appoints, authorizes and
empowers as its agent for service of process, the secretary of Venator Group,
Inc. to accept and acknowledge for and on behalf of such Subsidiary Guarantor
service of any and all process, notices or other documents that may be served in
any suit, action or proceeding relating hereto in any New York State or Federal
court sitting in The State of New York.
(b) In lieu of service upon its agent, each Subsidiary Guarantor consents
to process being served in any suit, action or proceeding relating hereto by
mailing a copy thereof by registered or certified air mail, postage prepaid,
return receipt requested, to its address set forth on the signature pages
hereof, provided that a copy thereof is mailed concurrently to the Secretary of
Venator Group, Inc. Each Subsidiary Guarantor agrees that such service (1) shall
be deemed in every respect effective service of process upon it in any such
suit, action or proceeding and (2) shall, to the fullest extent permitted by
law, be taken and held to be valid personal service upon and personal delivery
to it.
(c) Nothing in this Section shall affect the right of any party hereto to
serve process in any manner permitted by law, or limit any right that any party
hereto may have to bring proceedings against any other party hereto in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
Section 17. 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 GUARANTEE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
8
<PAGE> 196
Section 18. Counterparts. This Guarantee 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 19. Additional Guarantors. Any Subsidiary may become a Subsidiary
Guarantor party hereto and bound hereby by executing a counterpart hereof and
delivering the same to the Administrative Agent.
9
<PAGE> 197
IN WITNESS WHEREOF, the parties hereto have caused this Guarantee Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
EASTBAY, INC.
eVENATOR, INC.
FOOT LOCKER JAPAN, INC.
NORTHERN REFLECTIONS INC.
THE RICHMAN BROTHERS COMPANY
ROBBY'S SPORTING GOODS, INC.
TEAM EDITION APPAREL, INC.
THE SAN FRANCISCO MUSIC BOX COMPANY
VENATOR GROUP CORPORATE SERVICES,
INC.
VENATOR GROUP HOLDINGS, INC.
VENATOR GROUP RETAIL, INC.
VENATOR GROUP SOURCING, INC.
VENATOR GROUP SPECIALITY, INC.
By:______________________________________
Name:
Title:
RETAIL COMPANY OF GERMANY, INC.
By:______________________________________
Name:
Title:
THE BANK OF NEW YORK,
as Administrative Agent
By____________________________
Name:
Title:
<PAGE> 198
EXHIBIT I
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, ____ among [ASSIGNOR] (the "Assignor") and
[ASSIGNEE] (the "Assignee").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates
to the Second Amended and Restated Credit Agreement dated as of April 9, 1997
and amended and restated as of March 19, 1999 among Venator Group, Inc., the
Banks Party thereto, Co-Agents party thereto, Bank of America National Trust &
Savings Association, as Documentation Agent, The Bank of New York as
Administrative Agent, LC Agent and Swingline Bank and the Lead Arrangers party
thereto (as further amended from time to time, the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Committed Loans to the Borrower and participate in Letters of
Credit issued for the account of the Borrower in an aggregate amount at any time
outstanding not to exceed $__________;
WHEREAS, Committed Loans made to the Borrower by the Assignor under the
Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof; and 1/
WHEREAS, the Assignor proposes to assign to the Assignee all of the rights
of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $__________ 2/ (the "Assigned
Amount"), together with a corresponding portion of its outstanding Committed
Loans and LC Exposure, and the Assignee proposes to accept assignment of such
rights and assume the corresponding obligations from the Assignor on such terms;
- ---------------------------
1 This clause (and certain other provisions herein) should be modified to
reflect the assignment of Money Market Loans if such Loans are being
assigned.
2 Must be in an amount of not less than $5,000,000 if the Assignee was not a
Bank immediately prior to such assignment.
1
<PAGE> 199
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined herein
have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
and purchases such rights from the Assignor and assumes all of the obligations
of the Assignor under the Credit Agreement to the extent of the Assigned Amount,
including the purchase from the Assignor of the corresponding portion of the
principal amount of the Committed Loans made by, and the LC Exposure of, the
Assignor outstanding at the date hereof. Upon the execution and delivery hereof
by the Assignor, the Assignee, [the Borrower]3/ and the Administrative Agent and
the payment of the amounts specified in Section 3 hereof required to be paid on
the date hereof (i) the Assignee shall, as of the date hereof, succeed to the
rights and be obligated to perform the obligations of a Bank under the Credit
Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii)
the Commitment of the Assignor shall, as of the date hereof, be reduced by a
like amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee. The
assignment provided for herein shall be without recourse to the Assignor.
SECTION 3. Payments. (a) As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.4/ It is
understood that facility fees accrued to the date hereof in respect of the
Assigned Amount are for the account of the Assignor and such fees accruing from
and including the date hereof are for the account of the Assignee. Each of the
Assignor and the Assignee hereby agrees that if it receives any amount under the
Credit Agreement or any other Loan Document which is for the account of the
other party hereto, it shall receive the same for the account of such other
party to the extent of such other party's interest therein and shall promptly
pay the same to such other party.
- -----------------------------------
3 Include if Borrower's consent to assignment is required under Section
9.06(c) of the Credit Agreement
4 Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee.
2
<PAGE> 200
(b) The Assignor shall pay the $3,500 administrative fee to be paid by it
to the Administrative Agent pursuant to Section 9.06(c) of the Credit
Agreement.5/
[SECTION 4. Consent of the Borrower and the Administrative Agent. This
Agreement is conditioned upon the consent of the Borrower, the LC Agent, the
Swingline Bank and the Administrative Agent pursuant to Section 9.06(c) of the
Credit Agreement. The execution of this Agreement by the Borrower, the LC Agent,
the Swingline Bank and the Administrative Agent is evidence of this consent.
Pursuant to said Section 9.06(c) the Borrower is obligated to execute and
deliver a Note payable to the order of the Assignee, if required, to reflect the
assignment provided for herein.]
SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation
or warranty in connection with, and shall have no responsibility with respect
to, the solvency, financial condition, or statements of the Borrower or any
other Obligor, or the validity and enforceability of the obligations of the
Borrower or any other Obligor in respect of any Loan Document. The Assignee
acknowledges that it has, independently and without reliance on the Assignor,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement and will
continue to be responsible for making its own independent appraisal of the
business, affairs and financial condition of any Obligor.
SECTION 6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
- --------------------------------------
5 Section 3(b) should be deleted if the assignment is required by the
Borrower pursuant to Section 8.06 of the Credit Agreement.
3
<PAGE> 201
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
[ASSIGNOR]
By_________________________
Title:
[ASSIGNEE]
By_______________________
Title:
[Consented and agreed to:
VENATOR GROUP, INC.
By__________________________
Title:
THE BANK OF NEW YORK,
as Administrative Agent, LC Agent
and Swingline Bank
By__________________________
Title:]
4
<PAGE> 202
EXHIBIT J
NOTICE OF COMMITTED BORROWING 1/
To The Bank of New York,
as Administrative Agent under
the Credit Agreement referred to below
One Wall Street
18 North
New York, New York 10286
Attention:_______________
This notice shall constitute a "Notice of Committed Borrowing" pursuant to
Section 2.02 of the Second Amended and Restated Credit Agreement dated as of
April 9, 1997 and amended and restated as of March 19, 1999 among Venator Group,
Inc., the Banks party thereto, the Co-Agents party thereto, Bank of America
National Trust & Savings Association, as Documentation Agent, The Bank of New
York, as Administrative Agent (the "Administrative Agent"), LC Agent and
Swingline Bank and the Lead Arrangers party thereto (as further amended from
time to time, the "Credit Agreement"). Capitalized terms not otherwise defined
herein have the meanings ascribed to them in the Credit Agreement.
1. The date of Borrowing will be _____ __, ____.2/
2. The aggregate principal amount of the Borrowing will be
$____________.3/
- ----------------------------
1 To be delivered not later than 11:00 A.M. (New York City time) on (x) the
date of each Base Rate Borrowing, (y) the second Domestic Business Day
before each CD Borrowing and (z) the third Euro-Dollar Business Day before
each Euro-Dollar Borrowing.
2 The date of Borrowing shall be a Domestic Business Day in the case of a
Domestic Borrowing or a Euro-Dollar Business Day in case of a Euro-Dollar
Borrowing.
3 Each Borrowing shall be in an aggregate principal amount of $15,000,000 or
any larger multiple of $1,000,000 and further subject to the provisions of
clauses (i) and (ii) of Section 2.01 of the Credit Agreement.
1
<PAGE> 203
3. The initial interest rate for the Loans comprising the Borrowing
will be at [a Base Rate] [a CD Rate] [a Euro-Dollar Rate].
[4. The initial Interest Period for the Loans comprising the
Borrowing will be _____.]4/
VENATOR GROUP, INC.
By:_______________________
Title:
Date:
- ---------------------------
4 This paragraph applies only if the Borrowing is a CD Borrowing or a
Euro-Dollar Borrowing and is subject to the provisions of the definition of
Interest Period.
2
<PAGE> 1
EXHIBIT 10.35
EXECUTION COPY
$45,000,000
LETTER OF
CREDIT AGREEMENT
dated as of March 19, 1999
among
Venator Group, Inc.,
The Co-Applicants Party Hereto,
The Banks Party Hereto
and
The Bank of New York,
as Agent
Arranged by
BNY Capital Markets, Inc.,
as Lead Arranger
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
Section 1.01 Definitions....................................................4
Section 1.02 Accounting Terms and Determinations............................8
ARTICLE II
The LETTERS OF Credit
Section 2.01. Issuance of Letters of Credit..................................8
Section 2.02. Expiry Dates...................................................9
Section 2.03. Notice of Proposed Issuance....................................9
Section 2.04. Conditions to Issuance.........................................9
Section 2.05. Extension of Expiry Dates.....................................10
Section 2.06. Notices of Actual Issuances, Extensions and Amounts Available
for Drawing...................................................10
Section 2.07. (a) Letter of Credit Fees.................................10
(b) Facility Fees.........................................10
Section 2.08. Drawings......................................................10
Section 2.09. Reimbursement and Other Payments by the Applicant.............11
Section 2.10. Payments by Banks with Respect to Letters of Credit...........11
Section 2.11. Optional Termination or Reduction of Commitments..............12
Section 2.12. Computation of Interest and Fees..............................12
Section 2.13. Exculpatory Provisions........................................12
Section 2.14. Reliance, Etc.................................................13
Section 2.15. Indemnification by Applicant..................................13
Section 2.16. Indemnification by Banks......................................14
Section 2.17. Certain Administrative Provisions with respect to Letters of
Credit........................................................14
ARTICLE III
Conditions
Section 3.01. Conditions to Issuance of Initial Letter of Credit............15
Section 3.02. Conditions to Issuance of each Letter of Credit...............16
i
<PAGE> 3
ARTICLE IV
Representations and Warranties
Section 4.01. Corporate Existence and Power.................................17
Section 4.02. Corporate and Governmental Authorization; No Contravention....17
Section 4.03. Binding Effect................................................17
Section 4.04. Litigation....................................................17
Section 4.05. Subsidiary Guarantors.........................................17
ARTICLE V
Covenants
Section 5.01. Information...................................................17
Section 5.02. Conduct of Business and Maintenance of Existence..............18
Section 5.03. Compliance with Laws..........................................18
Section 5.04. Inspection of Property, Books and Records.....................18
Section 5.05. Additional Guarantors.........................................18
ARTICLE VI
Defaults
Section 6.01. Events of Defaults............................................19
Section 6.02. Notice of Default.............................................19
Section 6.03. Cash Cover....................................................19
ARTICLE VII
The Agent
Section 7.01. Appointment and Authorization.................................21
Section 7.02. Dual Capacity.................................................21
Section 7.03. Obligations of Agent..........................................21
Section 7.04. Consultation with Experts.....................................21
Section 7.05. Liability of Agent............................................21
Section 7.06. Credit Decision...............................................21
Section 7.07. Successor Agent...............................................22
Section 7.08. Agent's Fees..................................................22
ii
<PAGE> 4
ARTICLE VIII
Change in Circumstances
Section 8.01. Increased Cost and Reduced Return.............................22
Section 8.02. Taxes.........................................................24
Section 8.03. Substitution of Bank..........................................25
ARTICLE IX
Miscellaneous
Section 9.01. Notices.......................................................26
Section 9.02. No Waivers....................................................26
Section 9.03. Expenses; Indemnification.....................................26
Section 9.04. Sharing of Set-offs...........................................27
Section 9.05. Amendments and Waivers........................................27
Section 9.06. Successors and Assigns........................................28
Section 9.07. Governing Law; Submission to Jurisdiction.....................29
Section 9.08. Counterparts..................................................30
Section 9.09. WAIVER OF JURY TRIAL..........................................30
Co-Applicant Schedule
Commitment Schedule
Exhibit A - Form of Guarantee Agreement
Exhibit B-1 - Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
Exhibit B-2 - Form of Opinion of the General Counsel of the Applicant
Exhibit C - Form of Assignment and Assumption Agreement
iii
<PAGE> 5
LETTER OF CREDIT AGREEMENT dated as of March 19, 1999 among VENATOR GROUP,
INC., the CO-APPLICANTS party hereto, the BANKS party hereto and THE BANK OF NEW
YORK, as Agent.
ARTICLE I
Definitions
-----------
Section 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Applicant) duly completed by such Bank.
"Affiliate" means, (i) any Person that directly, or indirectly through one
or more intermediaries, controls the Applicant (a "Controlling Person") or
(ii) any Person (other than the Applicant, a Co-Applicant or a Subsidiary
Guarantor) which is controlled by or is under common control with a Controlling
Person. As used herein, the term control means possession, directly or
indirectly, of the power to vote 10% or more of any class of voting securities
of a Person or to direct or cause the direction of the management or policies of
a Person, whether through ownership of voting securities, by contract or
otherwise.
"Agent" means The Bank of New York, in its capacities as agent for the
Banks under the Loan Documents and as the issuer of the Letters of Credit issued
or to be issued hereunder, and its successors in such capacities.
"Aggregate LC Exposure" means, at any time, the sum, without duplication,
of (i) the aggregate amount that is (or may thereafter become) available for
drawing under all Letters of Credit outstanding at such time plus (ii) the
aggregate unpaid amount of all Reimbursement Obligations outstanding at such
time.
"Agreement, " when used in reference to this Agreement, means this
Agreement, as it may be amended or amended and restated
from time to time.
"Applicable Co-Applicant" means, with respect to any Letter of Credit, the
Co-Applicant, if any, for whose account such Letter of Credit is issued.
"Applicant" means Venator Group, Inc., a New York corporation, and its
successors.
"Assignee" has the meaning set forth in Section 9.06.
"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 Agent.
-4-
<PAGE> 6
"Co-Applicant" means (a) the Subsidiaries listed on the Co-Applicant
Schedule and (b) other Subsidiaries that shall have executed a counterpart of
this Agreement after the date hereof.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the Commitment Schedule (or, in the case of an
Assignee, the portion of the transferor Bank's Commitment assigned to such
Assignee pursuant to Section 9.06(c)), in each case as such amount may be
reduced from time to time pursuant to Section 2.11 or changed as a result of an
assignment pursuant to Section 8.03 or 9.06(c).
"Commitment Schedule" means the Commitment Schedule attached hereto.
"Consolidated Subsidiary" means at any date any Subsidiary or other entity
the accounts of which would be consolidated with those of the Applicant in its
consolidated financial statements if such statements were prepared as of such
date in accordance with generally accepted accounting principles.
"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 or, if different, the
jurisdiction where the LC Office of the Agent is located, are authorized or
required by law to close.
"Effective Date" means the date hereof.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, injunctions, permits, licenses and agreements relating to the protection
of the environment, to the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, hazardous or
toxic substances or wastes into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, hazardous or toxic substances
or wastes or the clean-up or other remediation thereof.
"Event of Default" has the meaning set forth in Section 6.01.
"Facility Fee Rate" means, at any time, the rate per annum that is equal to
the Facility Fee Rate (as defined in the RC Agreement) in effect at such time.
"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 The Bank of New York on such day on such
transactions as determined by the Agent.
-5-
<PAGE> 7
"Foreign Subsidiary" means any Subsidiary organized under the laws of a
jurisdiction, and conducting substantially all its operations, outside the
United States.
"Guarantee Agreement" means the Guarantee Agreement dated as of the
Effective Date among the Subsidiary Guarantors and the Agent, substantially in
the form of Exhibit A hereof, as amended from time to time.
"Immaterial Subsidiary" means at any time any Subsidiary that (i) does not
hold any material patents, trademarks or other intellectual property, (ii) on a
consolidated basis, together with its Subsidiaries, holds assets with an
aggregate fair market value of less than $2,000,000, (iii) on a consolidated
basis, together with its Subsidiaries, does not account for more than 1% of the
consolidated revenues of the Applicant and its Consolidated Subsidiaries and
(iv) on a consolidated basis, together with its Subsidiaries, does not have
consolidated net income in excess of $500,000. The determinations in clauses
(ii), (iii) and (iv) shall be made on the basis of the financial statements most
recently delivered by the Applicant to the Banks pursuant to Sections 5.01(a) or
5.01(b), as the case may be, of the RC Agreement.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.
"LC Collateral Account" shall mean a collateral account established
pursuant to an arrangement satisfactory to the Agent.
"LC Exposure" means, with respect to any Bank at any time, an amount equal
to its Pro Rata Share of the Aggregate LC Exposure at such time.
"LC Fee Rate" means, at any time, the rate per annum that is 50% of the LC
Fee Rate (as defined in the RC Agreement) in effect at such time.
"LC Indemnitees" has the meaning set forth in Section 2.15.
"LC Office" means, with respect to the Agent, for any Letter of Credit, the
office at which the Agent books such Letter of Credit and, with respect to any
Bank, for any Letter of Credit, the office at which such Bank books its
participating interest in such Letter of Credit.
"Letter of Credit" means a letter of credit issued or to be issued
hereunder by the Agent.
"Loan Documents" means this Agreement and the Guarantee Agreement.
"Material Adverse Effect" means a material adverse effect on (i) the
business, operations or condition (financial or otherwise) of the Applicant and
its Subsidiaries taken as a whole, (ii) the ability of any Obligor to perform
any payment obligation of such Obligor under the Loan Documents or (iii) the
ability of any Bank Party to enforce any rights or remedies under the Loan
Documents with respect to any payment obligation of any Obligor under the Loan
Documents.
-6-
<PAGE> 8
"Obligor" means the Applicant, each Co-Applicant or any Subsidiary
Guarantor, and "Obligors" means all of them.
"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).
"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.
"Pro Rata Share" means, with respect to any Bank at any time, a fraction
the numerator of which is the amount of such Bank's Commitment at such time (or,
if the Commitments have terminated in their entirety, such Bank's Commitment as
in effect immediately prior to such termination) and the denominator of which is
the Total Commitments at such time (or, if the Commitments have terminated in
their entirety, the Total Commitments as in effect immediately prior to such
termination).
"RC Agreement" means the Second Amended and Restated Credit Agreement dated
as of April 9, 1997 and amended and restated as of March 19, 1999 among Venator
Group, Inc. (formerly known as Woolworth Corporation), subsidiaries of the
Applicant party thereto, the Banks party thereto, the Co-Agents party thereto,
Bank of America NT & SA, as Documentation Agent, The Bank of New York, as
Administrative Agent, LC Agent and Swingline Bank, and J.P. Morgan Securities,
Inc., BNY Capital Markets, Inc., and NationsBank Montgomery Securities LLC, as
Lead Arrangers, as amended or amended and restated or otherwise modified or
supplemented from time to time.
"RC Commitment" means, at any time, the "Total Commitments" under, and as
defined in, the RC Agreement at such time.
"Reimbursement Obligation" means any obligation of the Applicant and the
Applicable Co-Applicants to reimburse the Agent pursuant to Article II for
amounts paid by the Agent in respect of drawings under Letters of Credit,
including any portion of any such obligation to which a Bank has become
subrogated pursuant to Section 2.10(a).
"Required Banks" means at any time Banks having at least a majority of the
aggregate amount of the Commitments at such time.
"Responsible Officer" means, with respect to any Obligor, 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.
"Steamship/Airway Indemnity" means, with respect to any Letter of Credit, a
steamship guarantee, airway release or similar undertaking providing for the
release of the goods related to such Letter of Credit to the Applicant or
Applicable Co-Applicant or the designee of the Applicant or such Applicable
Co-Applicant notwithstanding the unavailability of the applicable bill of lading
or other shipping documents.
-7-
<PAGE> 9
"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 Applicant.
"Subsidiary Guarantor" means each Subsidiary that from time to time is a
party to the Guarantee Agreement.
"Termination Date" means the 364th day following the Effective Date;
provided that, in the event that the RC Commitment shall have been reduced to
zero or otherwise terminated prior to such 364th day, the Termination Date shall
thereupon be deemed to be the date of such reduction or termination.
"Total Commitments" means, at any time, the aggregate amount of the
Commitments (whether used or unused) at such time.
"UCP" means the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, as the same
may be revised or amended from time to time.
"United States" means the United States of America, including the States
thereof and the District of Columbia, but excluding its territories and
possessions.
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 Applicant's
independent public accountants) with the most recent audited consolidated
financial statements of the Applicant and its Consolidated Subsidiaries
delivered to the Banks.
ARTICLE II
The LETTERS OF Credit
---------------------
Section 2.01. Issuance of Letters of Credit. (a) The Agent agrees, on the
terms and conditions set forth in this Agreement, to issue Letters of Credit
from time to time during the period from and including the Effective Date to but
excluding the date that is 30 days before the Termination Date; provided that,
immediately after each such Letter of Credit is issued:
(i) the Aggregate LC Exposure shall not exceed the Total Commitments;
and
(ii) in the case of each Bank, its LC Exposure shall not exceed its
Commitment.
-8-
<PAGE> 10
Each Letter of Credit shall be issued for the account of the Applicant and, if
applicable, the Applicable Co-Applicant.
(b) Upon the issuance by the Agent of each Letter of Credit pursuant to
this Section 2.01, the Agent shall be deemed, without further action by any
party hereto, to have sold to each Bank and each Bank shall be deemed, without
further action by any party hereto, to have purchased from the Agent, a
participation in such Letter of Credit, on the terms set forth in this Article
II, equal to such Bank's Pro Rata Share thereof.
(c) In connection with any Letter of Credit, the Applicant or the
Applicable Co-Applicant may request that the Agent issue a Steamship/Airway
Indemnity, whereupon, and as a condition to the issuance thereof, the Applicant
or the Applicable Co-Applicant shall execute and deliver to the Agent
counterparts of the Agent's then standard forms of applicable application,
guarantee and trust receipt or other documentation reasonably required by the
Agent. For all purposes hereof, including but not limited to Sections 2.13, 2.15
and 2.16, the Applicant, the Co-Applicants and the Banks acknowledge and agree
that the Agent shall be entitled to honor drawings under Letters of Credit with
respect to which Steamship/Airway Indemnities have been issued without regard to
whether the documents submitted in connection with any such drawing are
sufficient or conform to the requirements of the applicable Letter of Credit,
and the Agent's honoring of such drawings shall not constitute gross negligence
or willful misconduct or otherwise impair the Agent's entitlement to the
benefits of the indemnification and other exculpatory provisions hereunder.
-9-
<PAGE> 11
Section 2.02. Expiry Dates. Each Letter of Credit shall, when issued, have
an expiry date on or before the earlier of (i) 180 days from the date such
Letter of Credit was issued and (ii) the fifth Domestic Business Day prior to
the Termination Date.
Section 2.03. Notice of Proposed Issuance. The Applicant or the Applicable
Co-Applicant shall give the Agent at least one Domestic Business Day's prior
notice specifying the date each Letter of Credit is to be issued and describing
the proposed terms of such Letter of Credit and the nature of the transactions
proposed to be supported thereby.
Section 2.04. Conditions to Issuance. Without limiting the provisions of
Sections 3.01 and 3.02 hereof, the Agent shall not issue any Letter of Credit
unless:
(a) such Letter of Credit shall be satisfactory in form and reasonably
satisfactory in substance in all respects affecting the Agent;
(b) the Agent shall be satisfied that the goods related to it shall be
effectively consigned to the Agent and that the applicable bills of lading and
other shipping documents shall be negotiable and drawn to the order of the
Agent;
(c) the Applicant and any Applicable Co-Applicant shall have executed and
delivered such other instruments and agreements relating to such Letter of
Credit as the Agent shall have reasonably requested;
(d) the Agent shall not have been notified in writing by the Applicant or
the Required Banks that any condition specified in clause (c), (d), (e), (f) or
(g) of Section 3.02 is not satisfied on the date such Letter of Credit is to be
issued; and
(e) if such Letter of Credit is being issued for the account of a
Subsidiary, such Subsidiary shall be a Co-Applicant.
Section 2.05. Extension of Expiry Dates. The Agent shall not extend (or
allow the extension of) the expiry date of such Letter of Credit if it shall
have been notified by the Applicant or the Required Banks that any condition
specified in clause (c), (d), (e), (f) or (g) of Section 3.02 is not satisfied
on the date of such extension.
Section 2.06. Notices of Actual Issuances, Extensions and Amounts Available
for Drawing. Within fifteen Domestic Business Days after the end of each
calendar month, the Agent shall notify each Bank of (i) the daily average
aggregate amount available for drawings (whether or not conditions for drawing
thereunder have been satisfied) under all Letters of Credit outstanding during
such month, (ii) the aggregate amount of letter of credit fees accrued during
such month pursuant to Section 2.07, (iii) each Bank's Pro Rata Share of such
accrued letter of credit fees and (iv) the aggregate undrawn amount of all
Letters of Credit outstanding at the end of such month.
Section 2.07. (a) Letter of Credit Fees. The Applicant (and, with respect
to each particular Letter of Credit, the Applicable Co-Applicant), on a joint
and several basis with the Applicant shall pay to the Agent, for the account of
the Banks ratably in accordance with their respective Pro Rata Shares, a letter
of credit fee for each day at the LC Fee Rate on the aggregate amount available
for drawings (whether or not conditions for drawing thereunder have been
satisfied) under all Letters of Credit outstanding on such day. Such letter of
credit fee shall be payable quarterly in arrears on within three Domestic
Business Day after the end of each calendar quarter and on the second Domestic
Business Day before the Termination Date (or any earlier date on which the
Commitments shall have terminated in their entirety and no Letters of Credit are
outstanding). Promptly upon receiving any payment of such fee, the Agent will
distribute to each Bank its Pro Rata Share thereof. In addition, the Applicant
shall pay to the Agent for its own account fronting fees and reasonable expenses
in the amounts and at the times agreed between the Applicant and the Agent.
(b) Facility Fees. The Applicant shall pay to the Agent for the account of
each Bank a facility fee, calculated for each day at the Facility Fee Rate for
such day, on the amount of such Bank's Commitment on such day. Such facility
fees shall accrue for each day from and including the Effective Date to but
excluding the day on which the Total Commitments are reduced to zero and shall
be payable quarterly in arrears on the last Domestic Business Day of each
calendar quarter and on the day on which the Total Commitments are reduced to
zero.
Section 2.08. Drawings. Upon receipt from the beneficiary of any Letter of
Credit of a demand for payment under such Letter of Credit, the Agent shall
determine in accordance with the terms of such Letter of Credit whether such
demand for payment should be honored. If the Agent determines that any such
demand for payment should be honored in accordance with its customary practice,
the Agent shall make available to such beneficiary in accordance with the terms
of such Letter of Credit the amount of the drawing under such Letter of Credit.
The Agent shall thereupon notify the Applicant and the Applicable Co-Applicant
of the amount of such drawing paid by the Agent.
-10-
<PAGE> 12
Section 2.09. Reimbursement and Other Payments by the Applicant and
Applicable Co-Applicants. (a) If any amount is drawn under any Letter of Credit,
the Applicant and the Applicable Co-Applicant irrevocably and unconditionally
agree on a joint and several basis to reimburse the Agent on the day of such
drawing for all amounts paid by the Agent upon such drawing, together with any
and all reasonable charges and expenses which the Agent may pay or incur
relative to such drawing. For all purposes of this Agreement, the issuance by
the Agent of a Steamship/Airway Indemnity with respect to a Letter of Credit
shall be deemed a drawing under such Letter of Credit, and a payment by the
Agent in respect thereof, in the amount of the portion of such Letter of Credit
represented by the goods to which such Steamship/Airway Indemnity relates, and
the Agent shall be entitled to immediate reimbursement thereof as hereinabove
provided.
(b) In addition, the Applicant and the Applicable Co-Applicant agrees on a
joint and several basis to pay to the Agent interest on any and all amounts not
paid by the Applicant when due hereunder with respect to a Letter of Credit, for
each day from and including the date when such amount becomes due to but
excluding the date such amount is paid in full, whether before or after
judgment, payable on demand, at a rate per annum equal to the sum of 2% plus the
rate that would be applicable to "Base Rate Loans" under, and as defined in, the
RC Agreement for such day (determined without regard to whether the RC Agreement
is then in effect).
(c) Each payment to be made by the Applicant or any Applicable Co-Applicant
pursuant to this Section 2.09 shall be made to the Agent in Federal or other
funds immediately available to it at its address referred to in Section 9.01.
Section 2.10. Payments by Banks with Respect to Letters of Credit. (a) If
the Applicant or any Applicable Co-Applicant fails to reimburse the Agent as and
when required by Section 2.09 above for all or any portion of any amount drawn
under a Letter of Credit, or fails to deposit funds as required pursuant to
Section 6.03, the Agent may notify each Bank of such unreimbursed amount or
failure to deposit and request that each Bank reimburse or fund the Agent for
such Bank's Pro Rata Share thereof. Upon receiving such notice from the Agent,
each Bank shall make available to the Agent, at its address referred to in
Section 9.01, an amount equal to such Bank's share of such unreimbursed amount
or required deposit amount as set forth in such notice, in Federal or other
funds immediately available to the Agent, by 3:00 P.M. (New York City time) on
the Domestic Business Day following such Bank's receipt of such notice from the
Agent, together with, in the case of any such unreimbursed amount, interest on
such amount for each day from and including the date of such drawing to but
excluding the day such payment is due from such Bank at the Federal Funds Rate
for such day. Upon payment in full thereof, such Bank shall be subrogated to the
rights of the Agent against the Applicant or such Applicable Co-Applicant to the
extent of such Bank's Pro Rata Share of the related Reimbursement Obligation
(including interest accrued thereon). Nothing in this Section 2.10 shall affect
any rights any Bank may have against the Agent for any action or omission for
which the Agent is not indemnified under Section 7.06.
-11-
<PAGE> 13
(b) If any Bank fails to pay any amount required to be paid by it pursuant
to clause (a) of this Section 2.10 on the date on which such payment is due,
interest shall accrue on such Bank's obligation to make such payment, for each
day from and including the date such payment became due to but excluding the
date such Bank makes such payment, whether before or after judgment, at a rate
per annum equal to the Federal Funds Rate for such day. Any payment made by any
Bank after 3:00 P.M. (New York City time) on any Domestic Business Day shall be
deemed for purposes of the preceding sentence to have been made on the next
succeeding Domestic Business Day.
(c) If the Applicant or any Applicable Co-Applicant shall reimburse the
Agent for any drawing with respect to which any Bank shall have made funds
available to the Agent in accordance with clause (a) of this Section 2.10, the
Agent shall promptly upon receipt of such reimbursement distribute to such Bank
its Pro Rata Share thereof, including interest, to the extent received by the
Agent.
Section 2.11. Optional Termination or Reduction of Commitments. The
Applicant may, without premium or penalty, upon at least three Domestic Business
Days' notice to the Agent, (i) terminate the Commitments at any time, if no Bank
has an LC Exposure at such time or (ii) ratably reduce the Commitments from time
to time, in each case by an aggregate amount of at least $5,000,000; provided
that immediately after such reduction the Aggregate LC Exposure shall not exceed
the Total Commitments. Upon any such termination or reduction of the
Commitments, the Agent shall promptly notify each Bank of such termination or
reduction.
Section 2.12. Computation of Interest and Fees. All interest and fees
payable hereunder shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding the
last day).
Section 2.13. Exculpatory Provisions. The obligations of the Applicant and
each Applicable Co-Applicant under this Article shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which the Applicant or such Applicable
Co-Applicant may have or have had against the Agent, any Bank, the beneficiary
of any Letter of Credit or any other Person (other than the defense of payment).
The Applicant and, with respect to Letters of Credit issued for its own account,
each Applicable Co-Applicant assumes all risks of the acts or omissions of any
beneficiary of any Letter of Credit with respect to its use of such Letter of
Credit. None of the Agent, the Banks and their respective officers, directors,
employees and agents shall be responsible for, and the obligations of each Bank
to make payments to the Agent and of the Applicant or the Applicable
Co-Applicant to reimburse the Agent for drawings pursuant to this Section (other
than obligations resulting solely from the gross negligence or willful
misconduct of the Agent or the Applicable Co-Applicant) shall not be excused or
affected by, among other things, (a) the use which may be made of any Letter of
Credit or any acts or omissions of any beneficiary or transferee in connection
therewith; (b) the validity, sufficiency or genuineness of documents presented
under any Letter of Credit or of any endorsements thereon, even if such
documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged (and notwithstanding any assertion to such
effect by the Applicant); (c) payment by the Agent against presentation of
documents to it which do not comply with the terms of the relevant Letter of
Credit; (d) any dispute between or among the Applicant, any of its Subsidiaries,
-12-
<PAGE> 14
the beneficiary of any Letter of Credit or any other Person or any claims or
defenses whatsoever of the Applicant, any of its Subsidiaries or any other
Person against the beneficiary of any Letter of Credit; (e) any adverse change
in the business, operations, properties, assets, condition (financial or
otherwise) or prospects of the Applicant and its Subsidiaries taken as a whole;
(f) any breach of this Agreement by any party hereto (except, in the case of the
Agent, a breach resulting solely from its gross negligence or willful
misconduct); (g) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; (h) the fact that a Default shall have occurred
and be continuing; or (i) the fact that the Termination Date shall have passed
or the Commitments shall have terminated. The Agent shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit. Any action taken or omitted by the Agent or any Bank under or in
connection with any Letter of Credit and the related drafts and documents, if
done without willful misconduct or gross negligence, shall be binding upon the
Applicant and the Applicable Co-Applicant and shall not place the Agent or any
Bank under any liability to the Applicant or such Applicable Co-Applicant.
Section 2.14. Reliance, Etc. The Agent shall be entitled (but not
obligated) to rely, and shall be fully protected in relying, on the
representation and warranty by the Applicant and the Applicable Co-Applicants
set forth in the last sentence of Section 3.02 to establish whether the
conditions specified in clauses (c), (d), (e), (f) and (g) of Section 3.02 are
met in connection with any issuance or extension of a Letter of Credit, unless
the Agent shall have been notified to the contrary by the Required Banks (in
which event the Agent shall be fully protected in relying on such notice). The
rights and obligations of the Agent under each Letter of Credit issued by it
shall be governed by the provisions thereof and the provisions of the UCP and/or
the Uniform Commercial Code referred to therein or otherwise applicable thereto.
Section 2.15. Indemnification by Applicant. The Applicant and, with respect
to the Letters of Credit issued for its own account each Applicable Co-Applicant
agrees, on a joint and several basis, to indemnify and hold harmless each Bank
and the Agent (collectively, the "LC Indemnitees") from and against any and all
claims and damages, losses, liabilities, costs or expenses (including, without
limitation, the reasonable fees and disbursements of counsel) which any such LC
Indemnitee may reasonably incur (or which may be claimed against any such LC
Indemnitee by any Person whatsoever) by reason of or in connection with the
execution and delivery or transfer of or payment or failure to pay under any
Letter of Credit or any actual or proposed use of any Letter of Credit,
including any claims, damages, losses, liabilities, costs or expenses which the
Agent may incur by reason of or in connection with the failure of any Bank to
fulfill or comply with its obligations to the Agent hereunder; provided that
neither the Applicant nor the Applicable Co-Applicant shall be required to
indemnify the Agent for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by (i) the willful
misconduct or gross negligence of the Agent in determining whether a request
presented under any Letter of Credit issued by it complied with the terms of
such Letter of Credit or (ii) the Agent's failure to pay under any Letter of
Credit issued by it after the presentation to it of a request strictly complying
with the terms and conditions of such Letter of Credit (unless such payment is
enjoined or otherwise prevented by order of a court or other governmental
authority). Nothing in this Section 2.15 is intended to change the obligations
of the Applicant or any Applicable Co-Applicant under any other provision of
this Agreement.
-13-
<PAGE> 15
Section 2.16. Indemnification by Banks. The Banks shall, ratably in
accordance with their respective Pro Rata Shares, indemnify the Agent, its
affiliates and their respective directors, officers, agents and employees (to
the extent not reimbursed by the Obligors) against any cost, expense (including
fees and disbursements of counsel), claim, demand, action, loss or liability
(except such as result from the Agent's gross negligence or willful misconduct)
that any such indemnitee may suffer or incur in connection with the Loan
Documents or any action taken or omitted by such indemnitee under the Loan
Documents.
Section 2.17. Certain Administrative Provisions with respect to Letters of
Credit. The following shall apply with respect to each Letter of Credit:
(a) The Applicant or the Applicable Co-Applicant will promptly examine the
copy of such Letter of Credit (and any amendments thereof) sent to the Applicant
or such Applicable Co-Applicant by the Agent, as well as all other instruments
and documents delivered to the Applicant or such Applicable Co-Applicant from
time to time, and, in the event the Applicant or such Applicable Co-Applicant
has any claim of noncompliance with its instructions with respect to such Letter
of Credit or of any discrepancy or other irregularity, the Applicant or such
Applicable Co-Applicant will immediately notify the Agent thereof in writing,
and the Applicant and the Applicable Co-Applicant will conclusively be deemed to
have waived any such claim against the Agent and its correspondents unless such
immediate notice is given as aforesaid.
(b) The Agent may (but need not) pay any drafts otherwise in order which
are signed or issued by, or accompanied by required statements or documents
otherwise in order which are signed or issued by, the custodian, executor,
administrator, trustee in bankruptcy, debtor in possession, assignees for the
benefit of creditors, liquidator, receiver or other agent or legal
representative of the beneficiary of such Letter of Credit or other party who is
authorized under such Letter of Credit to draw or issue any drafts, required
statements or other documents.
(c) Either the Applicant or the Applicable Co-Applicant will cause the
goods and other property covered by such Letter of Credit to be adequately
insured in amounts, against risks and by companies reasonably satisfactory to
the Agent, and, if requested by the Agent, assign the policies or certificates
thereof to the Agent or make loss payable to the Agent, at its option, and
furnish the Agent upon request evidence of compliance with the foregoing. If the
Agent at any time deems such insurance inadequate for any reason, the Agent may
procure such insurance as it deems necessary, at the Applicant's or the
Applicable Co-Applicant's expense.
(d) The Applicant or the Applicable Co-Applicant will procure promptly
necessary import, export or shipping licenses for the goods and other property
covered by such Letter of Credit, comply with all governmental regulations,
foreign or domestic (including exchange regulations) with regard thereto or the
financing thereof, and furnish to the Agent, upon request, certificates
evidencing the foregoing, and on demand, pay to the Agent any amount(s) the
Agent may be required to expend in respect thereto.
(e) For a Letter of Credit expiring at the Agent's counters, the Agent is
the nominated bank for payment or acceptance. For Letters of Credit not expiring
at the Agent's counters, if the Applicant or the Applicable Co-Applicant does
not nominate a bank to be available for payment, acceptance or negotiation of
the Letter of Credit, then the Agent may, with the consent of the Applicant or
the Applicable Co-Applicant (such consent not to be unreasonably withheld),
issue the Letter of Credit as negotiable by any bank or the Agent may, with the
consent of the Applicant or the Applicable Co-Applicant (such consent not to be
unreasonably withheld), nominate any of its branches or affiliates or any
correspondents of its choice. It is further understood that the Agent may, with
the consent of the Applicant or the Applicable Co-Applicant (such consent not to
be unreasonably withheld), waive its stipulation of the nominated bank and
accept presentations of documents from a bank not so nominated by the Applicant
or such Applicable Co-Applicant.
-14-
<PAGE> 16
Section 2.18. Additional Co-Applicants. Any Subsidiary may become a
Co-Applicant party hereto and bound hereby by executing a counterpart hereof and
delivering the same to the Agent.
ARTICLE III
Conditions
----------
Section 3.01. Conditions to Issuance of Initial Letter of Credit.
The obligation of the Agent to issue the initial Letter of Credit is subject to
the satisfaction of the following conditions:
(a) receipt by the Agent of a counterpart hereof signed by the Applicant,
each of the Co-Applicants party hereto at such time and the Banks (or facsimile
or other written confirmation satisfactory to the Agent that each party has
signed a counterpart hereof);
(b) receipt by the Agent of a counterpart of the Guarantee signed by each
party listed on the signature pages thereof (or facsimile or other written
confirmation satisfactory to the Agent that each party has signed a counterpart
hereof);
(c) receipt by the Agent of an opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, special counsel for the Applicant, substantially in the form of
Exhibit B-1 hereto;
(d) receipt by the Agent of an opinion of the General Counsel of the
Applicant, substantially in the form of Exhibit B-2 hereto;
(e) the fact that the Applicant shall have paid all expenses (including
without limitation all expenses payable by it pursuant to Section 9.03(b)
hereof) with respect to which the Applicant shall have received an invoice at
least one Domestic Business Day prior to the date of such issuance;
(f) (i) the fact that the representations and warranties set forth herein
and in the Guarantee Agreement shall be true and correct on and as of the date
hereof and (ii) receipt by the Agent of a certificate of a Responsible Officer
of the Applicant and each Subsidiary so certifying;
-15-
<PAGE> 17
(g) (i) the fact that no Default shall occur and be continuing and
(ii) receipt by the Agent of a certificate of a Responsible Officer of the
Applicant and each Subsidiary so certifying;
(h) receipt by the Agent of all documents that the Agent may request
relating to the existence of the Applicant, each Co-Applicant and each
Subsidiary Guarantor, the corporate authority for and the validity of the Loan
Documents, and any other matters relevant hereto, all in form and substance
satisfactory to the Agent; and
(i) the fact that the RC Agreement shall have become effective and receipt
by the Agent of a certified copy thereof.
Section 3.02. Conditions to Issuance of each Letter of Credit. The
obligation of the Agent to issue (which shall include any amendment to an
outstanding Letter of Credit that increases the amount available thereunder) or
extend (or allow the extension of) the expiry date of any Letter of Credit is
subject to the satisfaction of the following conditions:
(a) receipt by the Agent of a notice of proposed issuance or extension as
required by Section 2.04;
(b) the Agent shall have determined that the conditions set forth in 2.03
with regard to such issuance or extension have been satisfied;
(c) the fact that, immediately after such issuance or extension, the
applicable limitations in Section 2.01 shall not be exceeded;
(d) the fact that, immediately before and after such issuance or extension,
no Default shall have occurred and be continuing;
(e) the fact that each of the representations and warranties of the
Obligors contained in the Loan Documents shall be true on and as of the date of
such issuance or extension;
(f) the fact that each of the conditions to the making of Loans (as defined
in the RC Agreement) under the RC Agreement could be satisfied at such time (or,
if any such conditions could not be satisfied, the Agent shall have received
evidence satisfactory to it of the waiver thereof); and
(g) the fact that the aggregate amount of the RC Commitments shall be not
less than $150,000,000 at such time and that the availability thereof to the
Applicant shall not have been limited or restricted in any way not expressly set
forth in the RC Agreement as in effect on the date hereof.
-16-
<PAGE> 18
Each issuance or extension of a Letter of Credit hereunder shall be deemed to be
a representation and warranty by the Applicant on the date of such issuance or
extension as to the facts specified in clauses (c), (d), (e), (f) and (g) of
this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
The Applicant represents and warrants that:
Section 4.01. Corporate Existence and Power. Each Obligor 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 4.02. Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by each Obligor of each Loan Document to
which it is party is within such Obligor'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 any Obligor or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Applicant or any of its Subsidiaries or result in the creation
or imposition of any lien or other encumbrance on any asset of the Applicant or
any of its Subsidiaries.
Section 4.03. Binding Effect. Each of the Loan Documents constitutes a
valid and binding agreement of each Obligor party thereto, enforceable in
accordance with its terms.
Section 4.04. Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of the Applicant threatened against or affecting,
the Applicant 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 4.05. Subsidiary Guarantors. The Subsidiary Guarantors are all of
the Subsidiaries of the Applicant, other than Subsidiaries not required to be a
party to the Guarantee Agreement.
ARTICLE V
COVENANTS
---------
The Applicant agrees that:
Section 5.01. Information. The Applicant will deliver to each of the Banks:
-17-
<PAGE> 19
(a) the financial statements, accountantS' reports, forecasts,
projections, notices and other materials required to be delivered pursuant
to Section 5.01 of the RC Agreement, on the earlier of (i) the day on which
such materials are delivered thereunder and (ii) the last day by which such
materials are required to be delivered thereunder; and
(b) from time to time such additional information regarding the
financial position or business of the Applicant and its Subsidiaries as the
Agent may reasonably request.
Section 5.02. Conduct of Business and Maintenance of Existence. The
Applicant will continue, and will cause each Subsidiary to continue, to engage
in business of the same general type as now conducted by the Applicant 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,
and except as otherwise permitted by the RC Agreement;
Section 5.03. Compliance with Laws. The Applicant 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 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 5.04. Inspection of Property, Books and Records. The Applicant will
keep, and will cause each Subsidiary (except for Subsidiaries that constitute
Immaterial Subsidiaries) to keep, proper books of record and account in which
full, true and correct entries shall be made of all dealings and transactions in
relation to its business and activities; and will permit, and will cause each
Subsidiary (except for Subsidiaries that constitute Immaterial Subsidiaries) to
permit, representatives of any Bank at such Bank's expense, upon reasonable
prior notice, to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants, all at such reasonable
times and as often as may reasonably be desired.
Section 5.05. Additional Guarantors. The Applicant shall cause any Person
which becomes a Subsidiary (other than any Foreign Subsidiary or any Immaterial
Subsidiary) after the date hereof, and any Immaterial Subsidiary (other than any
Foreign Subsidiary) that ceases to be an Immaterial Subsidiary after the date
hereof to (i) enter into the Guarantee Agreement and (ii) deliver such
certificates, evidences of corporate or other organizational actions, notations
and registrations, opinions of counsel, powers of attorney and other documents
relating thereto as the Agent may reasonably request, all in form and substance
reasonably satisfactory to the Agent, in each case within ten days after the
date on which such Person becomes a Subsidiary or ceases to be an Immaterial
Subsidiary.
-18-
<PAGE> 20
ARTICLE VI
DEFAULTS
--------
Section 6.01. Events of Defaults. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) any Obligor shall fail to pay any principal of any Reimbursement
Obligation, any interest on any Reimbursement Obligation, any fees or any other
amount payable hereunder within two Domestic Business Days after the due date
thereof;
(b) any Obligor shall fail to observe or perform any covenant or agreement
contained in this Agreement (other than those covered by clause (a) above) or
any other Loan Document for 30 days after written notice thereof has been given
to the Applicant by the Agent at the request of the Required Banks;
(c) any representation, warranty, certification or statement made (or
deemed made) by any Obligor in any Loan Document or any certificate, financial
statement or other document delivered pursuant to any Loan Document shall prove
to have been incorrect in any material respect when made (or deemed made);
(d) the obligations of any Subsidiary Guarantor pursuant to the Guarantee
Agreement shall cease for any reason to be in full force and effect (other than
a result of the release of such obligations with respect to any Subsidiary
Guarantor pursuant to the release provisions contained therein), or any Obligor
shall so assert in writing; or
(e) an Event of Default shall have occurred and be continuing under, and as
defined in, the RC Agreement, it being understood that any such Event of Default
that shall have been waived in accordance with the RC Agreement or cured
pursuant to an amendment to the RC Agreement shall be no longer "continuing" for
purposes hereof;
then, and in every such event, the Agent may, and shall, if requested by Banks
having more than 50% in aggregate amount of the Commitments, by notice to the
Applicant terminate the Commitments; provided however, that if any Event of
Default specified in clause (e) above occurs with respect to any Obligor as the
result of the occurrence of an "Event of Default" specified in clauses (g) or
(h) of Section 6.01 of the RC Agreement, then without any notice to the
Applicant or any other act by the Agent or the Banks, the Commitments shall
thereupon terminate.
Section 6.02. Notice of Default. The Agent shall give notice to the
Applicant under Section 6.01(b) promptly upon being requested to do so by the
Required Banks and shall thereupon notify all the Banks thereof.
Section 6.03. Cash Cover. The Applicant and each Applicable Co-Applicant
agrees, on a joint and several basis, in addition to the provisions of Section
6.01, that upon the occurrence and during the continuance of any Event of
Default, it shall, if requested by the Agent upon the instruction of the
Required Banks, deposit in the LC Collateral Account an amount in immediately
available funds equal to the aggregate amount available for drawing under, in
-19-
<PAGE> 21
the case of the Applicant, all Letters of Credit then outstanding at such time
and, in the case of such Applicable Co-Applicant, all Letters of Credit then
outstanding at such time issued for its account, provided that, upon the
occurrence of (i) the Termination Date or (ii) any Event of Default specified in
clause (e) of Section 6.01 as the result of the occurrence of an "Event of
Default" specified in clauses (g) or (h) of Section 6.01 of the RC Agreement
with respect to the Applicant or such Applicable Co-Applicant, the Applicant or
such Applicable Co-Applicant, as the case may be, shall deposit such amount
forthwith without any notice or demand or any other act by the Agent or the
Banks.
-20-
<PAGE> 22
ARTICLE VII
THE AGENT
---------
Section 7.01. Appointment and Authorization. Each Bank irrevocably appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under the Loan Documents as are delegated to the Agent by
the terms thereof, together with all such powers as are reasonably incidental
thereto.
Section 7.02. Dual Capacity. In its capacity as a Bank, the Agent shall
have the same rights and obligations under the Loan Documents as any other Bank.
Section 7.03. Obligations of Agent. The obligations of the Agent under this
Agreement are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Agent shall not be required to take any action
with respect to any Default, except as expressly provided in Article VI.
Section 7.04. Consultation with Experts. The Agent may consult with legal
counsel (who may be counsel for any Obligor), 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 Agent. None of the Agent, its respective
affiliates or its 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 Agent, its respective
affiliates or its 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 any Loan Document
or any issuance or extension of a Letter of Credit; (ii) the performance or
observance of any of the covenants or agreements of any Obligor; (iii) the
satisfaction of any condition specified in Article III except, in the case of
the Agent, receipt of items required to be delivered to it; or (iv) the
validity, effectiveness or genuineness of any Loan Document or any other
instrument or writing furnished in connection herewith.
-21-
<PAGE> 23
Section 7.06. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon any 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 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 7.07. Successor Agent. The Agent may resign at any time by giving
notice thereof to the Banks and the Applicant, such resignation to be effective
when a successor 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 Agent, subject to the approval of
the Applicant (unless an Event of Default shall have occurred and be continuing
at the time of such appointment, in which case the Applicant's approval will not
be required). If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the other Banks, appoint a successor 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 Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations hereunder.
After any retiring Agent's resignation hereunder, the provisions of this Article
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Agent.
Section 7.08. Agent's Fees. The Applicant shall pay to the Agent for its
account, fees in the amounts and at the times previously agreed upon between the
Applicant and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
-----------------------
Section 8.01. Increased Cost and Reduced Return. (a) If on or after the
date hereof, in the case of any Letter of Credit or any obligation to
participate in Letters of Credit, 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 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) special deposit, insurance assessment,
or similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Bank or shall impose on any Bank any other condition
affecting its obligation to participate in any Letter of Credit and the result
of any of the foregoing is to increase the cost to such Bank of participating in
any Letter of Credit, then, within 15 days after receiving a request by such
Bank for compensation under this subsection, accompanied by a certificate
complying with subsection (e) of this Section (with a copy to the Agent), the
Applicant shall, subject to subsection (f) of this Section, pay to such Bank
such additional amount or amounts as will compensate such Bank for such
increased cost or reduction.
(b) If, on or after the date hereof, the adoption of any applicable law,
rule or regulation, or any change in any applicable law, rule or regulation, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
-22-
<PAGE> 24
administration thereof, or compliance by the Agent with any request or directive
(whether or not having the force of law) made on or after the date of this
Agreement by any such authority, central bank or comparable agency, shall
impose, modify or deem applicable any reserve (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal Reserve
System), special deposit, insurance assessment or similar requirement against
any Letter of Credit issued by the Agent or shall impose on the Agent any other
condition affecting its Letters of Credit or its obligation to issue Letters of
Credit and the result of any of the foregoing is to increase the cost to the
Agent of issuing any Letter of Credit or to reduce the amount of any sum
received or receivable by the Agent under this Agreement with respect thereto,
by an amount deemed by the Agent to be material, then, within 15 days after
demand by the Agent, the Applicant shall pay to the Agent such additional amount
or amounts as will compensate the Agent for such increased cost or reduction.
(c) If any Bank or the Agent shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank or the Agent, as the case may be (or its Parent), as a
consequence of its obligations hereunder to a level below that which such Bank
or the Agent, as the case may be (or its Parent), could have achieved but for
such adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by it to be
material, then from time to time, within 15 days after receiving a request by
such Bank or the Agent, as the case may be, for compensation under this
subsection, accompanied by a certificate complying with subsection (e) of this
Section, the Applicant shall, subject to subsection (f) of this Section, pay to
such Bank or the Agent, as the case may be, such additional amount or amounts as
will compensate it (or its Parent) for such reduction.
(d) Each Bank and the Agent will promptly notify the Applicant 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 LC
Office if such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in its judgment, be otherwise disadvantageous to
it. If a Bank or the Agent fails to notify the Applicant 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 Applicant thereof.
(e) Each request by a Bank or the Agent for compensation under this Section
shall be accompanied by a certificate, signed by one of its authorized
employees, setting forth in reasonable detail (i) the basis for claiming such
compensation, (ii) the additional amount or amounts to be paid to it hereunder
and (iii) the method of calculating such amount or amounts, which certificate
shall be conclusive in the absence of manifest error. In determining such
amount, such Bank or the Agent may use any reasonable averaging and attribution
methods.
-23-
<PAGE> 25
(f) Notwithstanding any other provision of this Section, none of the Banks
or the Agent shall be entitled to compensation under subsection (a), (b) or (c)
of this Section if it is not then its general practice to demand compensation in
similar circumstances under comparable provisions of other credit agreements.
Section 8.02. Taxes. (a) For purposes of this Section 8.02, 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 Applicant
pursuant to the Loan Documents, 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 issuance or extension of Letter of
Credit) or in which its principal executive office is located or in which its LC
Office is located, and (ii) in the case of each Bank, any United States
withholding tax imposed on such payments other than such withholding tax imposed
as a result of a change in treaty, law or regulation occurring after a Bank
first becomes subject to this Agreement.
"Other Taxes" means any present or future stamp, documentary or mortgage
recording taxes and any other excise or property taxes, or similar charges or
levies, which arise from any payment made pursuant to the Loan Documents or from
the execution, delivery or enforcement of, or otherwise with respect to, the
Loan Documents.
(b) Any and all payments by the Applicant or any Applicable Co-Applicant to
or for the account of any Bank Party under any Loan Document shall be made
without deduction for any Taxes or Other Taxes; provided that, if the Applicant
or such Applicable Co-Applicant 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 8.02) such Bank Party
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Applicant or such Applicable Co-Applicant shall
make such deductions, (iii) the Applicant or such Applicable Co-Applicant shall
pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law and (iv) the Applicant or such
Applicable Co-Applicant shall furnish to the Agent, at its address referred to
in Section 9.01, the original or a certified copy of a receipt evidencing
payment thereof.
(c) The Applicant and each Applicable Co-Applicant agree, on a joint and
several basis, 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 8.02) paid by
such Bank Party and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, provided that neither the Applicant
-24-
<PAGE> 26
nor such Applicable Co-Applicant shall indemnify any Bank Party for any
penalties or interest on any Taxes or 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 Applicant or such Applicable Co-Applicant 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 Applicant (but only so long as such Bank Party remains lawfully able to do
so), shall provide the Applicant 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 Applicant with the appropriate form as required by Section 8.02(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 8.02(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 Applicant shall take such steps as such Bank Party shall reasonably request
to assist such Bank Party to recover such Taxes.
(f) If the Applicant or any Applicable Co-Applicant is required to pay
additional amounts to or for the account of any Bank Party pursuant to this
Section 8.02, then such Bank Party will change the jurisdiction of its LC Office
if, in the judgment of such Bank Party, such change (i) will eliminate or reduce
any such additional payment which may thereafter accrue and (ii) is not
otherwise disadvantageous to such Bank Party.
(g) If a Bank Party receives a notice from a taxing authority asserting any
Taxes or Other Taxes for which the Applicant or any Applicable Co-Applicant is
required to indemnify such Bank Party under Section 8.02(c), it shall furnish to
the Applicant or such Applicable Co-Applicant a copy of such notice no later
than 90 days after the receipt thereof. If such Bank Party has failed to furnish
a copy of such notice to the Applicant or such Applicable Co-Applicant within
such 90-day period as required by this Section 8.02(g), the Applicant or such
Applicable Co-Applicant 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 Applicant or
such Applicable Co-Applicant a copy of such notice.
Section 8.03. Substitution of Bank. If any Bank has demanded compensation
under Section 8.01 or 8.02, the Applicant shall have the right, with the
assistance of the Agent, to seek a mutually satisfactory substitute bank or
banks (which may be one or more of the Banks) to replace such Bank. Any
-25-
<PAGE> 27
substitution under this Section 8.03 may be accomplished, at the Applicant'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 Applicant terminating its Commitment on
a date specified in a notice delivered to the Agent and the replaced Bank at
least three Domestic Business Days before the date so specified and concurrently
the replacement bank or banks assuming a Commitment in an amount equal to the
Commitment being terminated, all pursuant to documents reasonably satisfactory
to the Agent (and in the case of any document to be signed by the replaced Bank,
reasonably satisfactory to such Bank). No such substitution shall relieve the
Applicant or any Applicable Co-Applicant of its obligation to compensate and/or
indemnify the replaced Bank as required by Sections 8.01 and 8.02 with respect
to the period before it is replaced and to pay all accrued interest, accrued
fees and other amounts owing to the replaced Bank hereunder.
ARTICLE IX
MISCELLANEOUS
-------------
Section 9.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telex, facsimile
transmission or similar writing) and shall be given to such party: (x) in the
case of the Applicant, any Co-Applicant or the 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 Agent and the Applicant. 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 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 under any Loan Document 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 provided in this Agreement shall be
cumulative and not exclusive of any rights or remedies provided by law.
Section 9.03. Expenses; Indemnification. (a) The Applicant shall pay
(i) all reasonable out-of-pocket expenses of the Agent, including reasonable
fees and disbursements of special counsel, in connection with the negotiation
and preparation of the Loan Documents, (ii) all reasonable out-of-pocket
expenses of the Agent, including reasonable fees and disbursements of special
-26-
<PAGE> 28
counsel and reasonable fees and disbursements of accountants and any other
advisors to the Agent, in connection with the administration of the Loan
Documents, any waiver or consent thereunder or any amendment thereof or any
Default or alleged Default thereunder and (iii) if an Event of Default occurs,
all out-of-pocket expenses incurred by the Agent and each Bank Party including
(without duplication) the fees and disbursements of special counsel and the
allocated cost of internal counsel and the fees and disbursements of accountants
and any other advisors to the Agent or any Bank Party, in connection with any
collection, bankruptcy, insolvency and other enforcement proceedings resulting
therefrom.
(b) The Applicant 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 the Loan Documents or any actual or proposed use of
proceeds of Letters of Credit 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 the principal of and interest on the
Reimbursement Obligations held by it or for its account which is greater than
the proportion received in respect of the aggregate amount of the principal of
and interest on the Reimbursement Obligations held by or for the account of any
other Bank, the Bank receiving such proportionately greater payment shall
purchase such participations in the aggregate amount of the principal of and
interest on the Reimbursement Obligations held by or for the account of the
other Banks, and such other adjustments shall be made, as may be required so
that all such payments of the aggregate amount of the principal of and interest
on the Reimbursement Obligations held by or for the account of the Banks shall
be shared by them pro rata.
(b) The Applicant and each Applicable Co-Applicant agrees, to the fullest
extent it may effectively do so under applicable law, that any holder of a
participation in a Reimbursement Obligation, whether or not acquired pursuant to
the foregoing arrangements, may exercise rights of set-off or counterclaim and
other rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Applicant or such Applicable
Co-Applicant in the amount of such participation.
(c) Nothing in this Section shall impair the right of any Bank to exercise
any right of set-off or counterclaim it may have and to apply the amount subject
to such exercise to the payment of indebtedness of the Applicant or any
Applicable Co-Applicant other than its indebtedness hereunder.
Section 9.05. Amendments and Waivers. (a) Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed by the Applicant and the Required Banks (and, if the rights or
duties of the Agent or any Co-Applicant are affected thereby, by the Agent or
such Co-Applicant); provided that no such amendment or waiver shall, unless
-27-
<PAGE> 29
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 Reimbursement Obligation, (iii) postpone the date fixed for
payment by the Applicant or any Applicable Co-Applicant of any Reimbursement
Obligation or extend the expiry date of any Letter of Credit to a date later
than the fifth Domestic Business Day prior to the Termination Date, or
(iv) change the percentage of the Commitments 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 (including without limitation
subsection (b) of this Section 9.05).
(b) Any provision of the Guarantee Agreement may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by each
Obligor party thereto and the Agent with the consent of the Required Banks;
provided that no such amendment or waiver shall, unless signed by each Obligor
party thereto and the Agent with the consent of all the Banks, release all or
substantially all of the Obligors from their obligations under the Guarantee
Agreement or permit termination of the Guarantee Agreement, except in each case
as expressly permitted by the terms thereof.
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 neither the Applicant nor any
Co-Applicant may assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of each Bank and the Agent.
(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
all or any part of its LC Exposure. If any Bank grants a participating interest
to a Participant, whether or not upon notice to the Applicant and the Agent,
such Bank shall remain responsible for the performance of its obligations
hereunder, such Bank shall remain the holder of its LC Exposure, and the
Applicant or the Applicable Co-Applicant and the 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 Applicant or
the Applicable Co-Applicant 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) or (iii) of Section 9.05(a) or in the proviso to
Section 9.05(b) without the consent of the Participant. The Applicant and each
Co-Applicant agree that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of this Article with
respect to its participating interest. An assignment or other transfer which is
not permitted by subsection (c) or (d) below shall be given effect for purposes
of this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may, in the ordinary course of its business and in accordance
with applicable law, at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to an
initial Commitment of not less than $5,000,000) of all, of its rights and
obligations under this Agreement, and such Assignee shall assume such rights and
-28-
<PAGE> 30
obligations, pursuant to an Assignment and Assumption Agreement in substantially
the form of Exhibit C hereto executed by such Assignee and such transferor Bank,
with (and subject to) the subscribed consents of the Applicant and the 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 or if, at the
time of the proposed assignment, an Event of Default has occurred and is
continuing; and (ii) the $5,000,000 minimum amount specified above for a partial
assignment of the transferor Bank's rights and obligations shall not apply if
the Assignee was a Bank immediately prior to such assignment. Upon execution and
delivery of such instrument and payment by such Assignee to such transferor Bank
of an amount equal to the purchase price agreed between such transferor Bank and
such Assignee, such Assignee shall be a Bank party to this Agreement and shall
have all the rights and obligations of a Bank with a Commitment as set forth in
such instrument of assumption, and the transferor Bank shall be released from
its obligations hereunder (and its Commitment shall be reduced) to a
corresponding extent, and no further consent or action by any party shall be
required. In connection with any such assignment, the transferor Bank shall pay
to the Agent an administrative fee for processing such assignment in the amount
of $3,500; provided that the Applicant shall pay such administrative fee if such
assignment is required by the Applicant pursuant to Section 8.03. If the
Assignee is not incorporated under the laws of the United States of America or a
state thereof, it shall deliver to the Applicant and the Agent certification as
to exemption from deduction or withholding of any United States federal income
taxes in accordance with Section 8.02.
(d) Any Bank may at any time assign all or any portion of its rights under
this Agreement 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 8.01 or 8.02 than such
Bank would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the Applicant's prior written consent or by
reason of the provisions of Section 8.01 or 8.02 requiring such Bank to
designate a different LC Office under certain circumstances or at a time when
the circumstances giving rise to such greater payment did not exist.
Section 9.07. Governing Law; Submission to Jurisdiction. (a) Each Letter of
Credit and Article II shall be subject to the UCP, and, to the extent not
inconsistent therewith, the laws of the State of New York.
(b) SUBJECT TO CLAUSE (a) OF THIS SECTION, EACH LOAN DOCUMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(c) The Applicant and each Co-Applicant 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 any Loan Document or the
transactions contemplated thereby. The Applicant and each Co-Applicant
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.
-29-
<PAGE> 31
Section 9.08. 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 9.09. 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 ANY LOAN DOCUMENT OR TRANSACTIONS CONTEMPLATED THEREBY.
-30-
<PAGE> 32
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: 212-553-2094
VENATOR GROUP RETAIL, INC.
By: /s/ John H. Cannon
---------------------------
Name: JOHN H. CANNON
Title: Vice President and Treasurer
VENATOR GROUP SPECIALTY, INC.
By: /s/ John H. Cannon
----------------------------
Name: JOHN H. CANNON
Title: Vice President and Treasurer
-31-
<PAGE> 33
THE BANK OF NEW YORK, as Agent and Bank
By: /s/ Howard F. Bascom, Jr.
-----------------------------
Name: HOWARD F. BASCOM, JR.
Title: Vice President
One Wall Street
New York, New York 10286
Facsimile number: 212-635-1481
-32-
<PAGE> 34
Co-Applicant Schedule
---------------------
Venator Group Retail, Inc.
Venator Group Specialty, Inc.
-33-
<PAGE> 35
Commitment Schedule
-------------------
Bank Commitment
- ---- ----------
The Bank of New York $45,000,000
-34-
<PAGE> 36
EXHIBIT A
FORM OF GUARANTEE AGREEMENT
GUARANTEE AGREEMENT dated as of March 19, 1999 among each of the
Subsidiaries of the Company (as defined below) listed on the signature pages
hereof and each other Subsidiary of the Company that may from time to time
become a party hereto in accordance with Section 19 (each such Subsidiary, with
its successors, a "Subsidiary Guarantor") and The Bank of New York, as Agent
(with its successors, the "Agent"), for the benefit of the Bank Parties (as
defined in the Credit Agreement referred to below).
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, it is a condition to effectiveness of the Letter of Credit
Agreement dated as of the date hereof among Venator Group, Inc., the Banks party
thereto, the Co-Applicants party thereto and The Bank of New York, as Agent (as
amended or amended and restated or otherwise modified or supplemented from time
to time, the "Credit Agreement") that each Subsidiary Guarantor enter into a
Guarantee Agreement substantially in the form hereof; and
WHEREAS, in consideration of the financial and other support that the
Company has provided, and such financial and other support as the Company may in
the future provide, to the Subsidiary Guarantors, the Subsidiary Guarantors are
willing to enter into this Guarantee Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
meanings:
"Guaranteed Obligations" means, with respect to each Subsidiary Guarantor,
(i) all Reimbursement Obligations of the Company or any other Obligor (other
than such Subsidiary Guarantor) with respect to any Letter of Credit issued
pursuant to the Credit Agreement and all interest payable by the Company or such
other Obligor thereon (including, without limitation, any interest which accrues
after or would accrue but for the commencement of any case, proceeding or other
action relating to the bankruptcy, insolvency or reorganization of the Company
or such other Obligor, whether or not allowed or allowable as a claim in any
such proceeding), (ii) all other amounts payable by the Company or any other
Obligor (other than such Subsidiary Guarantor) under the Loan Documents and
(iii) any renewals, extensions or modifications of any of the foregoing.
Section 2. The Guarantees. Each of the Subsidiary Guarantors, jointly and
severally, hereby unconditionally guarantees the full and punctual payment when
due (whether at stated maturity, upon acceleration or otherwise) of the
Guaranteed Obligations. Upon failure by any Obligor to pay punctually any
Guaranteed Obligation when due, each Subsidiary Guarantor agrees jointly and
severally that it shall forthwith on demand pay such Guaranteed Obligation at
the place and in the manner specified in the Credit Agreement.
<PAGE> 37
Section 3. Guarantees Unconditional. The obligations of each Subsidiary
Guarantor hereunder shall be unconditional and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of any Obligor or any other Person under any
Loan Document, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to any Loan
Document or any Letter of Credit;
(iii) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of any Obligor or any other
Person under any Loan Document or with respect to any Letter of Credit;
(iv) any change in the corporate existence, structure or ownership of
any Obligor or any other Person or any of their respective subsidiaries, or
any insolvency, bankruptcy, reorganization or other similar proceeding
affecting any Obligor or any other Person or any of their respective
subsidiaries or any of their respective assets or any resulting release or
discharge of any obligation of any Obligor or any other Person contained in
any Loan Document;
(v) the existence of any claim, set-off or other rights which such
Subsidiary Guarantor may have at any time against any other Obligor or any
Bank Party, whether in connection herewith or with any unrelated
transactions; provided that nothing herein shall prevent the assertion of
any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against any
Obligor or any other Person for any reason of any Loan Document or any
Letter of Credit, or any provision of applicable law or regulation
purporting to prohibit the payment by any Obligor or any other Person of
the principal of or interest on any Reimbursement Obligation or any other
amount payable by any Obligor under any Loan Document; or
(vii) any other act or omission to act or delay of any kind by any
Obligor, any Bank Party or any other party to any Loan Document, or any
other circumstance whatsoever which might, but for the provisions of this
Section, constitute a legal or equitable discharge of or defense to
obligations of such Subsidiary Guarantor hereunder.
Section 4. Discharge Only upon Payment in Full; Reinstatement In Certain
Circumstances; Release of Subsidiary Guarantors. (a) Each Subsidiary Guarantor's
obligations hereunder shall remain in full force and effect until the repayment
in full of all Guaranteed Obligations, the termination of all Commitments under
the Credit Agreement and the expiration or cancellation of all Letters of Credit
(unless such Letters of Credit have been fully cash collateralized pursuant to
arrangements satisfactory to the Agent, or back-stopped by a separate letter of
credit, in form and substance and issued by an issuer satisfactory to the
Agent). If at any time any payment of any Guaranteed Obligation is rescinded or
must be otherwise restored or returned upon the insolvency or receivership of
the Company or any other Obligor or otherwise, each Subsidiary Guarantor's
obligations hereunder with respect thereto shall be reinstated as though such
payment had been due but not made at such time.
<PAGE> 38
(b) Upon (x) the consummation of any Asset Sale, as such such term is
defined in the RC Agreement (or any sale or other disposition described in
clause (iv) of such definition of Asset Sale) permitted by the terms of the RC
Agreement and consisting of the disposition of all of the capital stock of a
Subsidiary Guarantor (any such transaction, a "Guarantor Asset Sale"), (y) the
satisfaction of the conditions to the release of such Subsidiary Guarantor from
its obligations under the Guarantee Agreement entered into in connection with
the RC Agreement and (z) repayment in full of all Reimbursement Obligations owed
by such Subsidiary Guarantor in respect of, and cancellation or termination of,
all Letters of Credit issued for its account, such Subsidiary Guarantor shall be
released from all of its obligations hereunder (and such release shall not
require the consent of any Bank Party). The Agent shall be fully protected in
relying on a certificate of the Company as to whether any particular transaction
constitutes a Guarantor Asset Sale and whether such conditions have been
satisfied.
(c) In addition to the release of any Subsidiary Guarantor from its
obligations hereunder permitted pursuant to subsection (b), at any time and from
time to time prior to the termination of each Subsidiary Guarantor's obligations
hereunder, the Agent may release any Subsidiary Guarantor from its obligations
hereunder with the prior written consent of the Required Banks; provided that
any release of all or substantially all of the Subsidiary Guarantors shall
require the consent of all of the Banks.
Section 5. Waiver by the Subsidiary Guarantors. Each Subsidiary Guarantor
irrevocably waives acceptance hereof, presentment, demand, protest and any
notice, as well as any requirement that at any time any action be taken by any
Person against such Subsidiary Guarantor, any other Subsidiary Guarantor, the
Company or any other Person.
Section 6. Subrogation and Contribution. Upon making any payment hereunder
with respect to the obligations of any Obligor, each Subsidiary Guarantor shall
be subrogated to the rights of the payee against such Obligor with respect to
the portion of such obligation paid by such Subsidiary Guarantor; provided that
such Subsidiary Guarantor shall not enforce any payment by way of subrogation,
or by reason of contribution, against any other guarantor of the Guaranteed
Obligations (including without limitation any other Subsidiary Guarantor), until
the repayment in full of all Guaranteed Obligations of all Subsidiary
Guarantors, the termination of the Commitments under the Credit Agreement and
the expiration or cancellation of all Letters of Credit (unless such Letters of
Credit have been fully cash collateralized pursuant to arrangements satisfactory
to the Agent, or back-stopped by a separate letter of credit, in form and
substance and issued by an issuer satisfactory to the Agent).
Section 7. Stay of Acceleration. If acceleration of the time for payment of
any Guaranteed Obligations payable by any Subsidiary Guarantor is stayed upon
the insolvency, bankruptcy or reorganization of such Subsidiary Guarantor or
otherwise, all such Guaranteed Obligations otherwise subject to acceleration
under the terms of any Loan Document shall nonetheless be payable by each other
Subsidiary Guarantor hereunder forthwith on demand by the Agent made at the
request of the Required Banks.
<PAGE> 39
Section 8. Representations and Warranties. Each Subsidiary Guarantor
represents and warrants that:
(a) Such Subsidiary Guarantor 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.
(b) The execution, delivery and performance by such Subsidiary Guarantor of
this Guarantee Agreement are within such Subsidiary Guarantor'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 such Subsidiary Guarantor or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Company or any of its Subsidiaries
or result in the creation or imposition of any lien or other encumbrance on any
asset of the Company or any of its Subsidiaries.
(c) This Guarantee Agreement constitutes a valid and binding agreement of
such Subsidiary Guarantor.
(d) The obligations of such Subsidiary Guarantor hereunder rank (i) pari
passu with other unsecured indebtedness of such Subsidiary Guarantor (other than
any such indebtedness described in clause (ii)) with respect to any assets of
such Subsidiary Guarantor and (ii) senior to any other indebtedness of such
Subsidiary Guarantor which by its terms is subordinated thereto.
Section 9. Amendments. Any provision of this Guarantee Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by each Subsidiary Guarantor and the Agent, subject to the provisions of
Section 9.05(b) of the Credit Agreement.
Section 10. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile or similar writing) and
shall be given to such party at its address or facsimile number set forth on the
signature pages hereof or at such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the Agent and the
Company. Each such notice, request or other communication shall be effective if
given by facsimile, when transmitted to the facsimile number referred to in this
Section and confirmation of receipt is received, or (ii) if given by any other
means, when delivered at the address referred to in this Section 10.
<PAGE> 40
Section 11. Taxes. Each Subsidiary Guarantor agrees to be bound by the
provisions of Section 8.02 of the Credit Agreement with respect to any payments
made by such Subsidiary Guarantor under this Guarantee Agreement.
Section 12. Continuing Guarantees. This Guarantee Agreement is a continuing
Guarantee of each Subsidiary Guarantor and shall be binding upon each Subsidiary
Guarantor and its successors and assigns. This Guarantee Agreement is for the
benefit of each Bank Party and its successors and permitted assigns, and in the
event of an assignment of all or any of any Bank's interest in and to its rights
and obligations under the Credit Agreement in accordance with the Credit
Agreement, the assignor's rights hereunder, to the extent applicable to the
indebtedness or obligation so assigned, shall automatically be transferred with
such indebtedness or obligation.
Section 13. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Bank Parties in
order to carry out the intentions of the parties hereto as nearly as may be
possible, and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
Section 14. Limitation on the Obligations of Subsidiary Guarantors. The
obligations of each Subsidiary Guarantor hereunder shall be limited to an
aggregate amount that is equal to the largest amount that would not render the
obligations of such Subsidiary Guarantor hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
applicable law.
Section 15. Governing Law; Jurisdiction. This Guarantee Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York. Each Subsidiary Guarantor 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 Guarantee Agreement or the
transactions contemplated hereby. Each Subsidiary Guarantor 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 16. Appointment of Agent for Service Of Process. (a) Each
Subsidiary Guarantor hereby irrevocably designates, appoints, authorizes and
empowers as its agent for service of process, the secretary of Venator Group,
Inc. to accept and acknowledge for and on behalf of such Subsidiary Guarantor
service of any and all process, notices or other documents that may be served in
any suit, action or proceeding relating hereto in any New York State or Federal
court sitting in The State of New York.
(b) In lieu of service upon its agent, each Subsidiary Guarantor consents
to process being served in any suit, action or proceeding relating hereto by
mailing a copy thereof by registered or certified air mail, postage prepaid,
return receipt requested, to its address set forth on the signature pages
hereof, provided that a copy thereof is mailed concurrently to the Secretary of
Venator Group, Inc. Each Subsidiary Guarantor agrees that such service (1) shall
be deemed in every respect effective service of process upon it in any such
suit, action or proceeding and (2) shall, to the fullest extent permitted by
law, be taken and held to be valid personal service upon and personal delivery
to it.
<PAGE> 41
(c) Nothing in this Section shall affect the right of any party hereto to
serve process in any manner permitted by law, or limit any right that any party
hereto may have to bring proceedings against any other party hereto in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
Section 17. Section 17. 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 GUARANTEE AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 18. Section 18. Counterparts. This Guarantee 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 19. Section 19. Additional Guarantors. Any Subsidiary may become a
Subsidiary Guarantor party hereto and bound hereby by executing a counterpart
hereof and delivering the same to the Agent.
<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have caused this Guarantee Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
[ SUBSIDIARY GUARANTOR]
By _____________________________
Name:
Title:
THE BANK OF NEW YORK
as agent
By _____________________________
Name:
Title:
<PAGE> 43
EXHIBIT B-1
March 19, 1999
The Bank of New York,
as Agent
One Wall Street
New York, New York 10286
and
The lenders party to the
Credit Agreement referred to
below, as listed on Schedule I
hereto (the "Banks")
Ladies and Gentlemen:
We have acted as special counsel to Venator Group, Inc., a New York
corporation (the "Company"), in connection with the preparation, execution and
delivery of the Letter of Credit Agreement, dated as of the date hereof (the
"Credit Agreement"), among the Company, the Co-Applicants party thereto, the
banks party thereto and The Bank of New York, as agent (the "Agent"). This
opinion is being delivered pursuant to Section 3.01(c) of the Credit Agreement.
Capitalized terms used and not otherwise defined herein shall have the meanings
herein as ascribed thereto in the Credit Agreement. The subsidiaries of the
Company listed on Sched ule II hereto shall hereinafter be referred to
collectively as the "Subsidiary Guaran tors". The subsidiaries of the Company
listed on Schedule III hereto shall hereinafter be referred to collectively as
the "Co-Applicants". The Subsidiary Guarantors and the Co-Applicants shall
hereinafter be referred to collectively as the "Subsidiary
<PAGE> 44
The Bank of New York
March 19, 1999
Page 2
Parties". The Company and the Subsidiary Parties shall hereinafter be referred
to collectively as the "Credit Parties".
In our examination we have assumed the genuineness of all signa tures, the
legal capacity of natural persons, the authenticity of all documents submit ted
to us as originals, the conformity to original documents of all documents submit
ted 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 Company and its officers and other representatives and of
public officials, including the facts set forth in the Opinion Certificate
described below.
In rendering the opinions set forth herein, we have examined and relied on
originals or copies of the following:
(a) the Credit Agreement;
(b) the Guarantee Agreement, dated as of the date hereof, between the
Subsidiary Guarantors and the Administrative Agent;
(c) the certificate of the Credit Parties dated the date hereof, a
copy of which is attached as Exhibit A hereto (the "Opinion
Certificate");
(d) certified copies of the Certificate of Incorporation and By-laws
of the Company;
(e) a certified copy of certain resolutions of the Board of Directors
of the Company adopted on March 15, 1999; and
(f) such other documents as we have deemed necessary or appropriate
as a basis for the opinions set forth below.
<PAGE> 45
The Bank of New York
March 19, 1999
Page 3
The documents referred to in clauses (a) and (b) above shall hereinaf ter
be referred to collectively as the "Transaction Documents."
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 upon the foregoing and subject to the limitations, qualifica tions,
exceptions and assumptions set forth herein, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing and in
good standing under the laws of the State of New York.
2. The Company has the corporate power and authority to (i) carry on its
business as described in the Company's 1997 Form 10-K and (ii)
execute, deliver and perform all of its obligations under each of the
Transaction Documents and to borrow under the Credit Agreement and to
incur reimbursement obligations with respect to letters of credit
issued thereunder. The execution and delivery of each of the
Transaction Documents and the consummation by the Company of the
transac tions contemplated thereby have been duly authorized by all
requisite corporate action on the part of the Company. Each of the
Transaction Documents has been duly executed and delivered by the
Company.
3. Each of the Transaction Documents constitutes the valid and binding
obligation of each Credit Party which is a party thereto enforceable
against each such Credit Party in accordance with its terms, subject
to the following qualifi cations:
(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);
<PAGE> 46
The Bank of New York
March 19, 1999
Page 4
(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);
(c) we call to your attention that (i) effective enforcement of a
claim denominated in a foreign currency may be limited by requirements that
the claim (or a judgement in respect of such claim) be converted into
United States dollars at a rate of exchange prevailing on a specified date
and (ii) we express no opinion as to whether a federal or state court would
award a judgment in a currency other than United States dollars; and
(d) we express no opinion as to Section 9.04 of the Credit Agreement
to the extent it authorizes or permits any party to any Transaction
Document or any purchaser of a participation interest for any such party to
set off or apply any deposit, property or indebtedness with respect to any
partic ipation interest.
4. The execution and delivery by the Company of each of the
Transaction Documents and the performance by the Company 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
Company.
5. Neither the execution, delivery or performance by the Credit
Parties of the Transaction Documents nor the compliance by the Credit
Parties 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.
<PAGE> 47
The Bank of New York
March 19, 1999
Page 5
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 Credit Parties.
"Governmental Approval" means any consent, approval, license, authorization
or validation of, or filing, recording or registration with, any
Governmental Authority (as hereinafter defined) pursuant to Applicable
Laws. "Governmental Authority" means any New York or federal legislative,
judicial, administrative or regulatory body.
7. Neither the execution, delivery or performance by the Credit
Parties of its obligations under the Transaction Documents nor compliance
by the Credit Parties with the terms thereof will contravene any Applicable
Order (as hereinafter defined) against the Credit Parties. "Applicable
Orders" means those orders, judgements or decrees of Governmental
Authorities identified in paragraph 2 of the Opinion Certificate.
8. No Credit Party is 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) each Subsidiary Party has been duly incorporated and is validly
existing and in good standing under the laws of the jurisdiction of its
incorpo ration;
(b) each Subsidiary Party has the corporate power and authority to (i)
carry on its business as described in the Company's 1997 Form 10-K and (ii)
execute, deliver and perform all of its obligations under each of the
Transaction Documents to which it is a party, and in the case of the
Subsidiary Borrowers, to borrow under the Credit Agreement and to incur
reimbursement obligations with respect to letters of credit issued
thereunder;
<PAGE> 48
The Bank of New York
March 19, 1999
Page 6
(c) the execution and delivery of each of the Transaction Docu ments
by each Subsidiary Party which is a party thereto and the consummation by
each Subsidiary Party of the transactions contemplated thereby have been
duly authorized by all requisite corporate action on the part of each
Subsidiary Party;
(d) each of the Transaction Documents has been duly executed and
delivered by each of the Subsidiary Parties which is a party thereto;
(e) the execution and delivery of, and the performance of each Credit
Party's obligations under, the Transaction Documents does not and will not
conflict with, contravene, violate or constitute a default under (i) any
lease, indenture, instrument or other agreement to which any Credit Party
or its property is subject, (ii) any rule, law or regulation to which any
Credit Party is subject (other than Appli cable 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
(f) 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 any Credit Party of the Transaction
Documents to which it is a party or the transac tions 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.
<PAGE> 49
The Bank of New York
March 19, 1999
Page 7
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 Credit Parties) enforceable against such party
(other than the Credit Parties) 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
Credit Parties) to the Transaction Documents with any state, federal or
other laws or regu lations applicable to it or (ii) the legal or regulatory
status or the nature of the business of any party (other than the Credit
Parties) to the Transaction Documents.
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 be comes a Bank pursuant to Section 9.06(c) of the Credit
Agreement may rely on this opinion as if it were addressed to such Assignee
and delivered on the date hereof.
Very truly yours,
<PAGE> 50
Schedule I
to SASM&F Opinion
-----------------
Banks
-----
The Bank of New York
<PAGE> 51
Schedule II to
SASM&F Opinion
--------------
Subsidiary Guarantors
---------------------
Eastbay, Inc.
eVenator, Inc.
Foot Locker Japan, Inc.
Northern Reflections, Inc.
Retail Company of Germany, Inc.
The Richman Brothers Company
Robby's Sporting Goods, Inc.
Team Edition Apparel, Inc.
The San Francisco Music Box Company
Venator Group Corporate Services, Inc.
Venator Group Holdings, Inc.
Venator Group Retail, Inc.
Venator Group Sourcing, Inc.
Venator Group Speciality, Inc.
<PAGE> 52
Schedule III to
SASM&F Opinion
--------------
Co-Applicants
-------------
Venator Group Retail, Inc.
Venator Group Specialty, Inc.
<PAGE> 53
Exhibit A
to SASM&F Opinion
-----------------
Officer's Certificate
---------------------
The undersigned are duly elected, authorized and acting officers of the
corpora tions listed on the signature page hereof (the "Credit Parties"). Each
of the undersigned understands that in connection with the Credit Agreement
(these and other capitalized terms used herein and not otherwise defined have
the meanings set forth in the Opinion, as defined below) and the consummation of
the transactions contemplated thereby, Skadden, Arps, Slate, Meagher & Flom LLP
is rendering an opinion dated the date hereof with respect thereto (the
"Opinion"), and is relying on this certificate in rendering such Opinion.
With regard to the foregoing, on behalf of the Credit Parties, each of the
under signed do hereby certify that:
1. Set forth below are all consents, approvals, licenses, authorizations or
validations of, or filings, recordings or registrations with any legislative,
judicial, administrative or regulatory governmental authorities which are
required in connection with the execution and delivery of the Transaction
Documents:
None.
2. Set forth below are all of the orders, judgements and decrees of any
govern mental authority which are required in connection with the execution and
delivery of the Transaction Documents:
None.
3. Less than 25 percent of the assets of the Credit Parties on a
consolidated basis and on an unconsolidated basis consist of margin stock (as
such term is defined in Regulation U of the Board of Governors of the Federal
Reserve System).
4. None of the Credit Parties (i) is or holds itself out as being, engaged
primarily nor does it propose to engage primarily, in the business of investing,
reinvesting or trading in Securities (as hereinafter defined), (ii) is engaged
in, nor proposes to engage in, the business of issuing Face-Amount Certificates
of the Installment Type (as hereinafter defined) and has no such certificate
outstanding and (iii) is engaged nor proposes to engage in the business of
investing, reinvesting, owning, holding or trading in Securities, whether or not
-1-
<PAGE> 54
as its primary activity, nor owns or proposes to acquire Investment Securities
(as hereinafter defined) having a Value exceeding 40% of the Value of the total
assets of the Company (exclusive of Government Securities (as hereinafter
defined)) on an unconsolidated basis.
As used in this Certificate, the following terms shall have the following
meanings:
"Control" means the power to exercise a controlling influence over the
manage ment or policies of a company, unless such power is solely the result of
an official position with such company;
"Face-Amount Certificate of the Installment Type" means any certificate,
investment contract, or other Security that represents an obligation on the part
of its issuer to pay a stated or determinable sum or sums at a fixed or
determinable date or dates more than 24 months after the date of issuance, in
consideration of the payment of periodic installments of a stated or
determinable amount;
"Government Securities" means all Securities issued or guaranteed as to
principal or interest by the United States, or by a person controlled or
supervised by and acting as an instrumentality of the government of the United
States pursuant to authority granted by the Con gress of the United States; or
any certificate of deposit for any of the foregoing;
"Investment Securities" includes all Securities except (A) Government
Securities, (B) Securities issued by employees' securities companies, and (C)
Securities issued by Majority- Owned Subsidiaries of the Borrower which are not
engaged and do not propose to be engaged in activities within the scope of
clauses (i), (ii) or (iii) of paragraph 4 of this Certificate;
"Majority-Owned Subsidiary" of a person means a company 50% or more of the
outstanding Voting Securities of which are owned by such person, or by a company
which, within the meaning of this paragraph, is a Majority-Owned Subsidiary of
such person. Notwith standing the foregoing, a company shall not be considered a
Majority-Owned Subsidiary of a person if Control of such company rests with
someone other than such person;
"Security" means any note, stock, treasury stock, bond, debenture, evidence
of indebtedness, certificate of interest or participation in any profit-sharing
agreement, collateral- trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security (including a certificate of deposit) or on any group or index of
securities (including any interest therein or based on the value thereof), or
any put, call, straddle, option, or privilege entered into
-2-
<PAGE> 55
on a national securities exchange relating to foreign currency, or, in general,
any interest or instrument commonly known as a "security," or any certificate of
interest or participation in, temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to or purchase, any of the
foregoing;
"Value" means (i) with respect to Securities owned at the end of the last
preceding fiscal quarter for which market quotations are readily available, the
market value at the end of such quarter; (ii) with respect to other Securities
and assets owned at the end of the last preceding fiscal quarter, fair value at
the end of such quarter, as determined in good faith by or under the direction
of the board of directors; and (iii) with respect to securities and other assets
acquired after the end of the last preceding fiscal quarter, the cost thereof;
"Voting Security" means any security presently entitling the owner or
holder thereof to vote for the election of directors of a company.
5. Other than as described on Schedule 1, neither the Company nor any
Subsid iary owns or operates facilities used for the generation, transmission or
distribution of electric energy for sale ("electric utility facilities").
6. Neither the Company nor any Subsidiary owns or operates facilities used
for the distribution at retail of natural or manufactured gas for heat, light or
power ("gas utility facilities").
7. Neither the Company nor any Subsidiary, directly or indirectly, or
through one or more intermediary companies, owns, controls or holds with power
to vote (a) 10% or more of the outstanding securities, such as notes, drafts,
stock, treasury stock, bonds, debentures, certif icates of interest or
participation in any profit sharing agreements or in oil, gas, other mineral
royalties or leases, collateral-trust certificates, preorganization certificates
or subscriptions, transferable shares, investment contracts, voting-trust
certificates, certificates of deposit for a security, receiver's or trustee's
certificates or instruments commonly known as a "security" (including
certificates of interest or participation in, temporary or interim certificates
for, receipt for, guaranty of, assumption of liability on or warrants or right
to subscribe to or purchase any of the foregoing) presently entitling the owner
or holder thereof to vote in the direction or manage ment of, or any such
instrument issued under or pursuant to any trust, agreement or arrangement
whereby a trustee or trustees or agent or agents for the owner or holder of such
instrument is presently entitled to vote in the direction or management of, any
corporation, partnership, association, joint-stock company, joint venture or
trust that owns or operates any electric utility facilities or gas utility
facilities or (b) any other interest, directly or indirectly, or through one or
more intermediary entities, in (i) any corporation, partnership, association,
joint-stock company,
-3-
<PAGE> 56
joint venture or trust that owns or operates any electric utility facilities or
gas utility facilities or (ii) any of the foregoing types of entities which have
received notice of the sort described in Paragraph 8 below.
8. Neither the Company nor any Subsidiary has received notice that the
Securities and Exchange Commission has determined, or may determine, that the
Company or any Subsidiary exercises a controlling influence over the management
or direction of the policies of a gas utility company or any electric utility
company as to make it subject to the obligations, duties and liabilities imposed
upon holding companies by the Public Utility Holding Company Act of 1935, as
amended.
-4-
<PAGE> 57
IN WITNESS WHEREOF, the undersigned have executed this certificate on
behalf of the Credit Parties this day of March, 1999.
Eastbay, Inc.
eVenator, Inc.
Foot Locker Japan, Inc.
Northern Reflections, Inc.
The Richman Brothers Company
Robby's Sporting Goods, Inc.
Team Edition Apparel, Inc.
The San Francisco Music Box Company
Venator Group Corporate Services, Inc.
Venator Group Holdings, Inc.
Venator Group, Inc.
Venator Group Retail, Inc.
Venator Group Sourcing, Inc.
Venator Group Speciality, Inc.
By: __________________________
Name:
Title:
Retail Company of Germany, Inc.
By: __________________________
Name:
Title:
-5-
<PAGE> 58
Schedule 1
----------
The Company owns an approximately 1 percent limited partnership interest in two
California limited partnerships that operate "wind farms", which generate
electricity.
-6-
<PAGE> 59
Exhibit B-2
March 19, 1999
The Bank of New York,
as Agent
One Wall Street
New York, New York 10286
and
The lenders party to the
Credit Agreement referred to
below, as listed on Schedule I
hereto (the "Banks")
Ladies and Gentlemen:
I am a Senior Vice President and the General Counsel of Venator Group,
Inc., a New York corporation (the "Company"), and as such have acted as counsel
for the company and each of the subsidiaries of the Company listed on Schedule
II hereto (the "Subsidiary Guarantors") and each of the subsidiaries of the
Company listed on Schedule III hereto (the "Co-Applicants", and together with
the Subsidiary Guarantors, the "Subsidiary Parties"), in connection with the
preparation, execution and delivery of the Letter of Credit Agreement, dated as
of the date hereof (the "Credit Agreement"), among the Company, the
Co-Applicants party thereto, the banks party thereto and The Bank of New York,
as agent (the "Agent"). This opinion is being delivered pursuant to Section
3.01(d) of the Credit Agreement. Capitalized terms used and not otherwise
defined herein shall have the meanings herein as ascribed thereto in the Credit
Agreement. The Subsidiary Parties and the Company are sometimes collectively
referred to herein as the "Credit Parties."
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
<PAGE> 60
The Bank of New York
March 19, 1999
Page 2
not independently establish or verify, I have relied upon statements and
representations of the Credit Parties and their respective officers and other
representatives and of public officials.
In rendering the opinions set forth herein, I, or a lawyer acting under my
general supervision, have examined and relied on originals or copies of the
following:
(a) the Credit Agreement;
(b) the Guarantee Agreement, dated as of the date hereof, between the
Subsidiary Guarantors and the Agent;
(c) certified copies of the Certificate of Incorporation and By-laws
of the Credit Parties;
(d) a certified copy of certain resolutions of the Boards of Directors
of the Credit Parties;
(e) a certified copy of certain resolutions of the Acquisitions and
Finance Committee of the Boards of Directors of the Company; and
(f) such other documents as I have deemed necessary or appropriate as
a basis for the opinions set forth below.
The documents referred to in clauses (a) and (b) above 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 (i) the laws of the State of New
York, (ii) the General Corporation Law of the State of Delaware, and (iii) based
solely on the certificates and telegrams from public officials in Wisconsin,
Florida, California and Ohio (the "Foreign Jurisdictions") with respect to the
opinions herein regarding valid incorporation and good standing of Eastbay, Inc.
(a Wisconsin corporation), Robby's Sporting Goods, Inc. and Team Edition
Apparel, Inc. (both Florida corporations), The Richman Brothers Company (an Ohio
corporation) and The San Francisco Music Box Company (a California corporation).
<PAGE> 61
The Bank of New York
March 19, 1999
Page 3
Please note that I am not admitted to practice in the Foreign Jurisdictions, and
am not an expert in the laws of any such jurisdictions.
Based upon the foregoing and subject to the limitations, qualifications,
exceptions and assumptions set forth herein, I am of the opinion that:
1. Each Subsidiary Party has been duly incorporated and is validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
2. Each Subsidiary Party has the corporate power and authority to (i) carry
on its business as described in the Company's 1997 Form 10-K and (ii) execute,
deliver and perform all of its obligations under each of the Transaction
Documents to which it is a party, and in the case of the Co-Applicants, to incur
reimbursement obligations with respect to letters of credit issued thereunder.
The execution and delivery of each of the Transaction Documents by each
Subsidiary Party which is a party thereto and the consummation by each
Subsidiary Party of the transactions contemplated thereby have been duly
authorized by all requisite corporate action on the part of each Subsidiary
Party.
3. Each of the Transaction Documents has been duly executed and delivered
by each of the Subsidiary Parties which is a party thereto.
4. The execution and delivery by each Credit Party of each of the
Transaction Documents to which it is a party and the performance by each Credit
Party 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 Credit
Parties pursuant to any Applicable Contracts. I do not express any opinion,
however, as to whether the execution, delivery or performance by any Credit
Party 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 any
Credit Party as set forth in the Transaction Documents, the Applicable
Contracts, or otherwise. "Applicable Contracts" mean those agreements or
instruments which are material to the business or financial condition of the
Credit Parties, taken as a whole.
<PAGE> 62
The Bank of New York
March 19, 1999
Page 4
5. There is no action, suit or proceeding pending against, or to the best
of my knowledge threatened against or affecting, any Credit Party before any
court or arbitrator or any governmental body, agency or official which could
reasonably be expected to result in a Material Adverse Effect.
This opinion is being furnished only to you and is solely for your benefit
and is not to be relied upon by any other Person or for any other purpose
without my prior written consent, provided, however, that any Assignee that
becomes a Bank pursuant to Section 9.06(c) of the Credit Agreement may rely on
this opinion as if it were addressed to such Assignee and delivered on the date
hereof.
Very truly yours,
<PAGE> 63
Schedule I to
General Counsel Opinion
-----------------------
Banks
-----
The Bank of New York
<PAGE> 64
Schedule II to
General Counsel Opinion
-----------------------
Subsidiary Guarantors
---------------------
Eastbay, Inc.
eVenator, Inc.
Foot Locker Japan, Inc.
Northern Reflections Inc.
Retail Company of Germany, Inc.
The Richman Brothers Company
Robby's Sporting Goods, Inc.
Team Edition Apparel, Inc.
The San Francisco Music Box Company
Venator Group Corporate Services, Inc.
Venator Group Holdings, Inc.
Venator Group Retail, Inc.
Venator Group Sourcing, Inc.
Venator Group Speciality, Inc.
<PAGE> 65
Schedule III to
General Counsel Opinion
-----------------------
Co-Applicants
-------------
Venator Group Retail, Inc.
Venator Group Specialty, Inc.
<PAGE> 66
Exhibit C
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of ___________, ________ among [ASSIGNOR] )the
"Assignor") and [ASSIGNEE] (the "Assignee").
WITNESSETH
WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates
to the Letter of Credit Agreement dated as of March 19, 1999 among Venator
Group, Inc., the Co-Applicants party thereto, the Banks party thereto and The
Bank of New York as Agent (as further amended from time to time, the "Credit
Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to participate in Letters of Credit issued for the account of the
Applicant or any Co-Applicant in an aggregate amount at any time outstanding not
to exceed $ _________; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the rights
of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $ __________1/ (the "Assigned
Amount"), together with a corresponding portion of its LC Exposure, and the
Assignee proposes to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined herein
have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
and purchases such rights from the Assignor and assumes all of the obligations
of the Assignor under the Credit Agreement to the extent of the Assigned Amount,
including the purchase from the Assignor of the corresponding portion of the
principal amount of the LC Exposure of the Assignor outstanding at the date
hereof. Upon the execution and delivery hereof by the Assignor, the Assignee,
the Applicant and the Agent and the payment of the amounts specified in Section
3 hereof required to be paid on the date hereof (i) the Assignee shall, as of
the date hereof, succeed to the rights and be obligated to perform the
obligations of a Bank under the Credit Agreement with a Commitment in an amount
equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as
of the date hereof, be reduced by a like amount and the Assignor released from
its obligations under the Credit Agreement to the extent such obligations have
been assumed by the Assignee. The assignment provided for herein shall be
without recourse to the Assignor.
- -----------------------------
1/ Must be in an amount of not less than $5,000,000 if the Assignee was not a
Bank immediately prior to such assignment.
<PAGE> 67
SECTION 3. Payments. (a) As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.2/ It is
understood that facility fees accrued to the date hereof in respect of the
Assigned Amount are for the account of the Assignor and such fees accruing from
and including the date hereof are for the account of the Assignee. Each of the
Assignor and the Assignee hereby agrees that if it receives any amount under the
Credit Agreement or any other Loan Document which is for the account of the
other party hereto, it shall receive the same for the account of such other
party to the extent of such other party's interest therein and shall promptly
pay the same to such other party.
(b) The Assignor shall pay the $3,500 administrative fee to be paid by it
to the Agent pursuant to Section 9.06(c) of the Credit Agreement.3/
[SECTION 4. Consent of the Applicant and the Agent. This Agreement is
conditioned upon the consent of the Applicant and the Agent pursuant to Section
9.06(c) of the Credit Agreement. The execution of this Agreement by the
Applicant and the Agent is evidence of this consent.]
SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation
or warranty in connection with, and shall have no responsibility with respect
to, the solvency, financial condition, or statements of the Applicant or any
other Obligor, or the validity and enforceability of the obligations of the
Applicant or any other Obligor in respect of any Loan Document. The Assignee
acknowledges that it has, independently and without reliance on the Assignor,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement and will
continue to be responsible for making its own independent appraisal of the
business, affairs and financial condition of any Obligor.
SECTION 6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
- ---------------------------------
2/ Amount should combine principal togerher with accrued interest and breakage
compensation, if any, to be paid by the Assignee.
3/ Section 3(b) should be deleted if the assignment is required by the
Applicant pursuant to Section 8.03 of the Credit Agreement.
<PAGE> 68
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
[ASSIGNOR]
By
---------------------------
Title
[ASSIGNEE]
By
---------------------------
Title:
[Consented and agreed to:
VENATOR GROUP, INC.
By
----------------------
Title:
THE BANK OF NEW YORK,
as Agent
By
---------------------
Title:
<PAGE> 1
EXHIBIT 12
VENATOR GROUP, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
($ in millions)
<TABLE>
<CAPTION>
Fiscal Years Ended
--------------------------------------------------
Jan. 30, Jan. 31, Jan. 25, Jan. 27, Jan. 25
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET EARNINGS
Net income from continuing
operations $ 3 $ 213 $ 209 $ 29 $ 23
Income tax expense (benefit) (42) 120 139 34 41
Interest expense, excluding
capitalized interest 57 36 53 91 85
Portion of rents deemed
representative of the
interest factor (1/3) 180 163 162 157 150
---- ---- ---- ---- ----
$ 198 $ 532 $ 563 $ 311 $ 299
==== ==== ==== ==== ====
FIXED CHARGES
Gross interest expense 64 36 53 91 85
Portion of rents deemed
representative of the
interest factor (1/3) 180 163 162 157 150
---- ---- ---- ---- ----
$ 244 $ 199 $ 215 $ 248 $ 235
==== ==== ==== ==== ====
RATIO OF EARNINGS TO FIXED
CHARGES 0.8 2.7 2.6 1.3 1.3
==== ==== ==== ==== ====
</TABLE>
Earnings were not adequate to cover fixed charges by $46 million for the fiscal
year ended January 30, 1999.
<PAGE> 1
VENATOR GROUP
Positioned to Win
1998 Annual Report
[GRAPHIC]
<PAGE> 2
Venator Group
===============================================================================
On June 12, 1998 the Company adopted a new identity, Venator Group, Inc.,
opening a new chapter in it's history. Venator is inspired by a classical word
for "sportsman", one whose energy and skill bring home the prize. The challenge
of the marketplace invigorates us; we are driven to set new standards of
excellence as we strive to win the global retail game.
While the old name, Woolworth Corporation, served for 118 years, it no
longer relfects who we are today. Our new name, Venator Group, embodies those
attributes at our core: high-quality performance; teamwork within individual
organizations and among the various parts of the business; the universality that
connects each team member to colleagues and customers around the world;
sportsmanship in the way we work together.
Venator also reflects the energy and spirit behind the active lifestyle
that characterize the retail formats we offer to our customers.
<TABLE>
<CAPTION>
Financial Highlights
($ in millions, exept per share amounts) 1998 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 4,555 $ 4,612 $ 4,504
- ------------------------------------------------------------------------------------------
Income from continuing operations $ 3 $ 213 $ 209
- ------------------------------------------------------------------------------------------
Earnings per share from continuing
operations (diluted) $ 0.02 $ 1.57 $ 1.55
- ------------------------------------------------------------------------------------------
Cash and cash equivalents $ 193 $ 81 $ 197
- ------------------------------------------------------------------------------------------
Merchandise inventories $ 837 $ 754 $ 617
- ------------------------------------------------------------------------------------------
Capital expenditures $ 549 $ 249 $ 86
- ------------------------------------------------------------------------------------------
Total assets $ 2,876 $ 2,798 $ 2,807
- ------------------------------------------------------------------------------------------
Debt, net of cash $ 574 $ 446 $ 322
- ------------------------------------------------------------------------------------------
Shareholders' equity $ 1,038 $ 1,271 $ 1,334
- ------------------------------------------------------------------------------------------
Number of stores at year end 6,002 5,708 5,527
- ------------------------------------------------------------------------------------------
</TABLE>
Contents
Profile of Venator Group 2
Message from the Chairman 4
Message from the President 6
Global Athletic Group 8
Northern Group 16
Other Specialty Group 18
Financial Report 21
Directors and Officers 48
Corporate Information 49
<PAGE> 3
Designed for Growth
The Aresenal Mall Foot Locker in Watertown, Massachusetts is a high tech,
lifestyle-focused multimedia enviornment where the interplay of video, audio and
lights create an "urban playground". Connected to a redesigned Lady Foot Locer
and Kids Foot Locker, the 11,000 square foot concept has been given the 1998
International Store Design Award sponsored by the Institute of Store Planners
and Visual Merchandising & Store Design Magazine.
[GRAPHIC]
<PAGE> 4
Profile of Venator Group
January 30, 1999
<TABLE>
<CAPTION>
===================================================================================================================================
New or Remodeled Stores (1)
Number --------------------------- Range in Size
Format of Stores Number % (Selling Square Footage)
===================================================================================================================================
<S> <C> <C> <C> <C>
Global Foot Locker 1,638 581 35 1,000 - 12,000
Athletic Athletic footwear and apparel.
Group --------------------------------------------------------------------------------------------------------------------
3,925 Stores Lady Foot Locker 694 242 35 1,000 - 4,000
Athletic footwear and apparel.
--------------------------------------------------------------------------------------------------------------------
Kids Foot Locker 369 273 74 1,000 - 4,000
Athletic footwear and apparel.
--------------------------------------------------------------------------------------------------------------------
Foot Locker International 494 238 48 1,000 - 5,000
Athletic footwear and apparel.
--------------------------------------------------------------------------------------------------------------------
Champs Sports 640 196 31 4,000 - 15,000
Athletic footwear, apparel and equipment.
--------------------------------------------------------------------------------------------------------------------
eVenator/Eastbay -- -- -- --
Internet commerce and direct marketer
of athletic footwear apparel and equipment.
--------------------------------------------------------------------------------------------------------------------
Colorado 61 41 67 1,400 - 4,000
Active outdoor lifestyle footwear and apparel.
--------------------------------------------------------------------------------------------------------------------
Going to the Game 29 -- -- 500 - 1,500
Athletic licensed apparel.
===================================================================================================================================
Northern Northern Reflections 582 226 39 1,500 - 5,000
Group Exclusive casual apparel for women.
940 Stores --------------------------------------------------------------------------------------------------------------------
Northern Getaway 194 146 75 1,500 - 2,500
Exclusive casual apparel for children.
--------------------------------------------------------------------------------------------------------------------
Northern Elements 102 71 70 1,500 - 2,500
Exclusive casual apparel for men.
--------------------------------------------------------------------------------------------------------------------
Northern Traditions 62 38 61 1,500 - 2,500
Exclusive dressy non-formal apparel.
===================================================================================================================================
Other Afterthoughts 773 128 17 800 - 2,000
Speciality Fashion jewelry, accessories, cosmetics and gifts.
Group --------------------------------------------------------------------------------------------------------------------
1,424 Randy River 67 20 30 1,000 - 1,800
Stores (2) Trendsetting apparel and accessories.
--------------------------------------------------------------------------------------------------------------------
San Francisco Music Box 168 15 9 800 - 1,500
Unique musical giftware.
--------------------------------------------------------------------------------------------------------------------
Weekend Edition 109 82 75 1,000 - 2,500
Exclusive casual apparel for women.
--------------------------------------------------------------------------------------------------------------------
Williams/Mathers/Jensens 307 73 24 1,200 - 2,300
Family shoe stores.
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) New or remodeled during last four years.
(2) Includes open stores in discontinued operations.
(2) | VENATOR GROUP, INC.
<PAGE> 5
[GRAPHIC]
<PAGE> 6
A Message from the Chairman
================================================================================
"Today we are a more focused Company, poised to regain profitable top-line
growth momentum in our core businesses."
The year 1998 certainly proved to be difficult for retailers in the
athletic industry. Despite the challenges, the year was pivotal for Venator
Group. The sale of our German general merchandise business and the closing of
our Specialty Footwear operations during 1998 completed the last major component
of our repositioning strategy that we began in 1995. It's important to note just
how much we have accomplished in the last four years. We eliminated 27
non-strategic businesses around the world and closed or sold 3,846 stores,
generating nearly $1 billion in cash proceeds. We reduced debt, net of cash by
48 percent, from $1.1 billion to $574 million. We upgraded the real estate of
our core specialty businesses by designing new store prototypes and opening or
renovating over 2,300 stores, representing 38 percent of our total store base.
We strengthened our global organization. We consolidated our world-wide
distribution center infrastructure from 17 to 7 centers. We significantly
improved information systems and we drastically reduced old inventories and
operating costs.
However, despite the progress made, our financial performance in 1998 was a
disappointment, particularly for our athletic group of stores. A number of
issues impacted the year. Some were common to the athletic industry at large,
others specific to our operations.
Industry issues included a shift in consumer preferences away from high-end
performance footwear, our core strength, to more moderately priced styles.
Demand for branded and licensed apparel significantly declined and the industry
was saturated with close-out inventories, which led to a highly promotional
selling environment. Additionally, the decline in Asian tourism impacted our
stores in Hawaii, the West Coast and key European cities.
The internal issues related primarily to an ambitious real estate effort,
which recognized an urgent need to modernize our core athletic stores to
maintain our competitiveness, as well as take advantage of an unique real estate
opportunity relating to 155 new stores at former general merchandise locations.
As 1998 progressed, our real estate team became overwhelmed with projects
scheduled for completion. Commendably, they completed over 1,100 of these
projects. Nevertheless, new store openings and renovations became delayed, which
caused inventories to escalate. This situation forced us to embark on a major
inventory reduction program to ensure inventories were positioned properly for
1999, which impacted our profitability.
The good news is that industry inventory levels have stabilized and we are
comfortable that the oversupply situation that caused markdowns in 1998 is
unlikely to recur in 1999. Innovative, high-ticket products continue to sell
extremely well in the marketplace. Enthusiasm for professional sports and the
"athletic look" is resurging with the resolution of the NBA lockout and the
advent of the Year 2000 Olympics.
Last year, we introduced new store prototypes for seven of our businesses N
Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Northern
Experience, Afterthoughts and Colorado. The new store designs are larger N many
are double the size of existing stores, which are undersized by today's
standards.
We are filling these new stores with a wider assortment of exclusive and
proprietary product, and have implemented an aggressive strategy to work more
closely with vendors on exclusive offerings. We want more items like Nike's
"Tuned Air" shoe, a Venator Group exclusive that was an instant success and will
continue to deliver significant results into 1999.
We created a new company, eVenator, Inc., to provide focused management
attention on Internet commerce and direct marketing by leveraging Eastbay's
existing infrastructure. Last April, we established an extensive presence on the
Internet by creating e-commerce Web sites for Foot Locker, Lady Foot Locker,
Kids Foot Locker, Champs Sports and Eastbay. Our Internet sales have been very
exciting, encouraging us to proceed in its development as an alternative retail
channel.
4 | VENATOR GROUP, INC.
<PAGE> 7
================================================================================
[PHOTO]
Today we are a much more focused Company, poised to regain profitable
top-line growth momentum in our core businesses. It has been a long haul, but we
will look back on 1998 as the year in which we essentially completed our
restructuring, enabling us to shift our efforts from fixing a troubled Company
to building a dynamic one.
Tremendous growth opportunities exist in the global athletic market, which
is expected to reach $150 billion by the year 2001. We have made a significant
investment in our Company and now we expect to maximize that investment and to
enhance our global market position.
We have identified five priorities for 1999 designed to foster growth and
continued success.
1. Generate profitable top-line sales. We are focused on driving sales
through our existing store base, with more targeted assortments, fresh
inventories and enhanced proprietary brand programs. And we will continue to
optimize growth opportunities in the under served women's and children's market
in the United States as well as the overall market in Europe.
2. Improve gross margin contribution. We are escalating corporate oversight
of receipt flow and inventory management processes and we plan to enhance our
promotional product offerings to include value price offerings at full margin.
We expect to open 85 percent of our planned new stores by August, minimizing
missed sales opportunities and unplanned markdowns and to take advantage of the
full fall selling season. And we will utilize our strong supplier relationships
to create shorter buying lead times to improve speed to market and reduce
fashion risk.
3. Reduce capital expenditures and improve capital productivity. We have
targeted capital spending to $175 million, with a greater proportion of the
investment allocated to remodeling and relocation than to new stores, improving
productivity in markets in which we currently operate. And we will maximize the
value of our former general merchandise locations by determining their highest
and best use, and when appropriate, sell the properties to supplement our
working capital needs.
4. Continue to reduce expenses Company-wide. We are committed to reducing
corporate and divisional operating expenses by a minimum of $100 million. We are
simplifying our organization to cut corporate costs to one percent of sales by
2001. We have established a Corporate Shared Services division to identify and
implement sustainable cost reductions.
5. Build a world-class organization. We are implementing best practice
tools for merchandising and training throughout our organization and continue to
raise the organizational capability bar with existing and new talent.
Venator Group stands on the threshold of an exciting future. Our 75,000
passionate associates have worked hard to create a solid financial and
operational foundation that will begin to payoff in 1999. We can not thank them
enough for their efforts.
We are moving into a new phase, one that will see us focus more closely on
the quality of the shopping experience consumers have in our stores. We are
unified by a single, clear sense of our mission and what it takes to succeed.
Every store and employee is vital to that success. The entire organization is
finally moving in the same direction, together as an integrated, global company.
/s/ Roger N. Farah
- -------------------
Roger N. Farah
Chairman of the Board and Chief Executive Officer
April 14, 1999
5 | VENATOR GROUP, INC.
<PAGE> 8
A Message from the President
================================================================================
"...We continued a cycle of investment in our business, committing nearly $1
billion over the past four years to new stores, remodels and infrastructure."
Venator Group faced many challenges in 1998. Nevertheless, we succeeded in
reaching our repositioning goals designed to focus the Company strategically on
its most productive specialty retailing operations. These multi-faceted programs
required significant Company resources in terms of personnel, expense and time.
We now can more narrowly focus on our remaining businesses, particularly our
industry-leading athletic group of retail stores.
During 1998, we undertook a number of significant asset sales and
dispositions, including the sale of our 357 store German general-merchandise
operations. It took three years and a great deal of effort to turn this business
from a loss to a profit maker. Venator's commitment to bringing Germany back to
profitability yielded net proceeds of $495 million.
As part of our repositioning to focus on the athletic footwear and apparel
categories, we moved out of the Specialty Footwear business, shutting down 467
Kinney Shoe stores and 103 Footquarters stores in the United States. After
taking a good hard look at the long term viability of the business it became
clear that neither Kinney nor Footquarters would return to profitability in the
near future or meet our stated standard for return on investment. The
discontinuance resulted in an after-tax charge of $160 million, or $1.18 per
share.
Other non-strategic asset actions in 1998 included the sale of six
full-line Garden Center nursery stores in California, and the shut-down of the
83 store Canadian Kinney Shoe operation, the 11 store Randy River specialty
store operations in the United States and the Eagle Rock Factories in the United
States that served Kinney and Footquarters.
Finally, at the end of 1998, we sold our Corporate Headquarters, the
historic Woolworth Building in New York, for $137.5 million in gross proceeds.
The building remains our corporate headquarters, as it has been since its
construction in 1913, although we are now occupying four floors versus eight.
In 1998 we continued a cycle of investment in our business that began four
years ago, committing nearly $1 billion over that period to new store openings,
remodels and relocations, a redefined logistics infrastructure, and developing
entirely new information systems and processes. Last year, we invested $549
million in capital expenditures, $417 million of which was for 1,110 new and
remodeled/relocated stores. We also closed 343 underperforming stores from
continuing operations. By the year 2001, more than 50 percent of our stores will
be less than four years old.
We also acquired Athletic Fitters, a mall-based athletic footwear and
apparel retailer with 94 stores in 17 Midwestern and Western states. This was an
excellent fit to our existing athletic business. Almost half the Athletic
Fitters stores are located in key secondary markets not currently served by a
Foot Locker store. In malls where both Foot Locker and Athletic Fitters have
stores, we converted the acquired store to a new larger Foot Locker and used the
existing location for either a new Lady Foot Locker or Kids Foot Locker.
The closing of our Specialty Footwear operations provided a unique
opportunity to further develop our outlet strategy with additional real estate.
We have taken 29 former Footquarters locations and 40 existing Foot Locker and
Champs Sports outlet stores and launched a new outlet strategy that provides us
with a new avenue to clear aged product. More importantly, the outlet strategy
will keep our concept stores filled with fresh, trend-setting merchandise.
These new outlet stores round out our range of retail formats in two
important ways. First, by offering quality products for the more value-conscious
consumer, we are broadening our customer base. At the same time, it provides us
with an opportunity to compete in the increasingly important off-price segment
of the athletic business.
Our primary logistics project in 1998 was the construction of a 250,000
square foot European Distribution Center in Heijen, the Netherlands, which
opened in March 1999. This new state-of-the-art facility will have a major
impact on how we do business across Europe. Currently,
6 | VENATOR GROUP, INC.
<PAGE> 9
================================================================================
[PHOTO]
we have 281 stores in Europe and that number is expected to grow significantly
during the next several years. The center employs PkMs, a pick management system
that tracks the receipt of all goods, which will improve service levels to our
stores. Its cross-dock functionality will allow us to keep a constant flow of
fresh, new product into our stores within days, not weeks, of receipt.
In North America we have streamlined our warehouse operations down from 14
to 5 facilities. Our largest center in Junction City, Kansas supports the
"Lockers." Maumelle, Arkansas is the home of our Champs Sports facility; Wausau,
Wisconsin is domicile for Eastbay; Milton, Ontario supports the Northern Group;
while Afterthoughts and San Francisco Music Box utilize a facility located in
Milwaukee, Wisconsin. PkMs has been installed in the Milton facility and the
next implementation of PkMs is scheduled at Junction City this winter.
Less visible than our real estate work is the continued investment in new
information systems to make us more competitive. Including 1999, in the last
three years we will have invested $160 million to upgrade system applications,
including merchandising, buying, logistics, human resources, and finance.
We also launched Merchandise 2000, or M2K, as a pilot program at Foot
Locker. M2K allows us to reinvent and streamline our merchandising processes and
to get most-wanted merchandise to our customers faster than ever before.
M2K is an integrated and standardized merchandising process that transforms
the way goods are purchased, distributed and merchandised throughout the chain.
It transforms us into a more analytical, fact-based organization. Here's how M2K
works: each of Foot Locker's 14 buyers is teamed with a strategic planning
counterpart and a distribution specialist to work together toward mutual goals
and objectives. The buyer focuses on product and building the assortment; the
planner focuses on the analytical and planning side of the business; the
distributor ensures that the assortment is in the correct locations in proper
depth. Together they make sure that assortment plans are more formally linked to
Foot Locker's financial and merchandise strategy objectives.
M2K ensures that everyone is working the same way at every step of the
process. It forces merchants to take a more proactive approach to trends
affecting Foot Locker customers. This emphasis on planning ahead enables us to
work more closely with vendors at the front end, resulting in more focused
assortments, more singular presentations and more trendy merchandise.
We expect the M2K process to contribute to improved financial performance
through stronger sales, healthier margins and faster inventory turns.
Continuing Venator's quest to rationalize and simplify our operations N and
reduce costs N we created a Corporate Shared Services Division. This group
identifies issues that are common across all operating divisions, so that
standard procedures and solutions can be transmitted and implemented. We expect
that this and other cost control strategies will reduce corporate expenses by
$100 million in 1999.
True to the spirit of sportsmanship embodied by our name, Venator did not
lose sight of its goals through this year's difficult and often daunting course
of events. We have emerged leaner, fitter, smarter and poised to regain
profitable top-line growth in our core businesses.
/s/ Dale W. Hilpert
- ---------------------
Dale W. Hilpert
President and Chief Operating Officer
April 14, 1999
7 | VENATOR GROUP, INC.
<PAGE> 10
Global Athletic Group
================================================================================
Foot Locker
- -----------
Foot Locker has been a team player with American youth for nearly 25 years. We
help them enjoy their active lifestyles with products that are always fresh and
new. And they've rewarded us with a loyalty that has made Foot Locker's 1,638
stores America's number one store for athletic footwear and apparel.
Our new Foot Locker concept stores have forward-looking appeal. Their
high-tech, high-impact industrial look communicates energy and excitement. Some
have oversized video walls and ceiling-suspended monitors that play a range of
product-oriented music videos and inspirational imagery.
As our core 13 to 19 year old customers apparel needs change, we are
evolving with them through an ambitious three-tier apparel strategy:
The first tier capitalizes on the popularity of the brands, featuring an
expanded assortment of athletic inspired apparel from Nike, Adidas, Reebock and
others, which incorporate the latest styles and technologies as well as products
made exclusively for Foot Locker.
Second, we've leveraged the Foot Locker name and logo to a new line of Foot
Locker Basics - long and short sleeve t-shirts, shorts, nylon windwear, fleece
and polar fleece tops and bottoms, all at very attractive price points. When our
customers need to coordinate exclusive basic apparel with footwear, they won't
have to go anywhere else to find them. With exclusive apparel, Foot Locker is
building its own brand equity as it increases the size, breadth and depth of
important targeted items.
The final tier, and our most fashion-forward program, features new trending
brands that have instant consumer acceptance not only in urban markets but
across main street USA.
We are linking the Foot Locker name with some of the most respected and
popular brands through exclusive licensing agreements. Foot Locker is designing,
manufacturing and retailing a new exclusive Champion Footwear line in categories
such as running, tennis, basketball, and cross training.
Our customers are responding enthusiastically. Foot Locker's exclusive
launch of Nike's Tuned Air footwear line - which employs a new technology that
offers unprecedented cushioning and stability - has been selling at an
accelerated rate.
Our new expanded store allows us to layer in additional assortments,
providing new technology, fashion and value.
[PHOTO]
Photo caption: The Foot Locker brand, among the most broadly recognized
specialty retail brand in the world, enjoys a 97% name recognition.
8 | VENATOR GROUP, INC.
<PAGE> 11
[FOOT LOCKER LOGO]
o Foot Locker offers the latest in technical performance and athletic
inspired products, both branded as well as private label.
================================================================================
[PHOTO]
Photo caption: Exclusive product launches like Nike's Tuned Air are generating
consumer excitement and differentiating Foot Locker from its competitors.
9 | VENATOR GROUP, INC.
<PAGE> 12
[LADY FOOT LOCKER LOGO]
o Lady Foot Locker is the premier retailer of athletic footwear, apparel and
related products for today's active woman.
================================================================================
Lady Foot Locker
- ---------------
There's a new energy today at Lady Foot Locker. Women shop confidently with us
because we offer them products that help them achieve their personal best.
Our 694 stores across the United States, Hawaii and Puerto Rico is the only
national specialty store chain that specializes in women's athletic footwear and
apparel for a variety of sports including running, basketball and aerobics,
cross-training, walking and tennis. We also offer a distinctive selection of
accessories such as socks, bags, sports bras, headbands, backpacks, caps and
visors.
Lady Foot Locker offers the largest assortment of major brands, including
Nike, Reebok, Adidas, New Balance, K-Swiss, DKNY, Fila, Saucony, Ryka, Asics,
Champion, and Converse, as well as our own popular Actra brand.
Women's participation in sports and fitness is growing. In 1972, 1 in 27
girls played high school sports. Today that ratio is one in three.
Our sales associates are trained to bring a personal perspective to their
work. Many are athletes who know and understand women's athletic needs. Our
customers can rely on this expertise to help select the right products to give
them optimum performance.
Our customers have also come to rely on the success of our growing range of
exclusive apparel that not only fits their active lifestyle, but also color
coordinates with their footwear purchase.
Lady Foot Locker recognizes that even though our customers have an active
lifestyle, they appreciate a relaxed shopping experience. The new Lady Foot
Locker store prototype takes a decidedly calmer approach, creating a soothing,
spa-like shopping environment that speaks to our customers' physical and
emotional well-being.
With double the sales space of the earlier format, the prototype unit
presents an expanded array of product lines, including an attractive assortment
of bath and body products, as well as branded eyewear, watches, exercise bags
and accessories.
Marking an even more dramatic departure from its traditional offerings, the
new Lady Foot Locker concept presents health-conscious women with a wide
selection of exercise and fitness literature, including videos, books and
magazines.
Lady Foot Locker is proud of our customers' loyalty and confidence. Our
brand is dedicated to serving them as a complete athletic store for women.
[GRAPHIC]
[PHOTO CAPTION]
Over 50% of Lady Foot Locker merchandise is unique to our stores, an
accomplishment made possible by strong supplier relationships.
10 | VENATOR GROUP, INC.
<PAGE> 13
[KIDS FOOT LOCKER LOGO]
o Kids Foot Locker offers the largest selection of exclusive brand name and
proprietary merchandise for infants, boys and girls.
================================================================================
Kids Foot Locker
- ----------------
Every parent knows how active even the youngest kids can be, and at Kids Foot
Locker, we want to make sure children get the most out of their active young
lives.
Kids Foot Locker is the only national specialty store for children's
athletic footwear and apparel, with 369 stores in the United States, Hawaii and
Puerto Rico. We've successfully leveraged Foot Locker's world-class format to
satisfying the need for children's shoes. Our customers expect something special
at Kids Foot Locker. We have the exciting new technology, fashion and value that
only a market leader can provide.
This year, Nike and Adidas have created new technology for first walkers
that will launch exclusive to Kids Foot Locker. We want customers to start at
our store and stay with us as their children grow. Unlike many chains where the
parent fits the shoe to their child's foot, we offer both exciting products and
superior service that build customer loyalty. Our sales people are highly
trained to fit the children and to interact with both children and parents.
No other specialty retailer can match our unique assortment of shoes for
kids, including brands such as Nike, Reebok, Adidas, Fila Airwalk, Vans and
Skechers. We even sell canvas casuals, sandals, boots and other lifestyle
footwear for kids from the major athletic brands.
Clothing at Kids Foot Locker includes branded and licensed wind suits,
outerwear, fleece, T-shirts, shorts, skirts, infant wear, caps, socks, plus
backpacks and sports duffels and a full line of shoe care accessories. Our
popular line of replica jerseys feature NFL, NBA and Major League Baseball
logos.
This year we launched a baby boom all our own with our new, larger Kids
Foot Locker store prototypes. The design evokes a child's fantasy toy closet,
with oversize models of sports equipment in bright colors placed throughout the
store. The motif adds lots of excitement to the many colorful displays.
The new stores also feature a cushioned area for jumping and an in-store
video system that shows kaleidoscopic images of the merchandise sold in the
store. It's all part of our strategy to make shopping a fun experience for kids.
At Kids Foot Locker, kids are every bit as important to us as their
parents. We want them to enjoy authentic athletic product that is always
appropriate to their age and needs. We know that if we serve them well, they
will be Foot Locker customers for life.
[PHOTO]
Photo caption: Our store portfolios are distinctive, such as Kids Foot Locker
where tailored merchandise assortments and unique store environments
specifically target today's youth.
VENATOR GROUP, INC. | 11
<PAGE> 14
================================================================================
Foot Locker International
- -------------------------
At Foot Locker International we've learned that people around the world are
more alike than different. When it comes to casual active lifestyle footwear and
apparel, Foot Locker International speaks a universal language.
We've succeeded in becoming the largest international athletic and active
lifestyle specialty retailer by offering our customers consistent high-quality
assortments in all our markets. Foot Locker International today has nearly 500
stores in 13 countries: Canada, Australia, Japan, Austria, Belgium, Denmark,
England, France, Germany, Italy, Luxembourg, the Netherlands and Spain.
Our international customer looks to us for classic styles from Adidas, Nike
and other leading manufacturers, as well as popular regional brands such as
Buffalo in Northern Europe. And we're complementing this core business with new
offerings from Foot Locker Basics and other exciting exclusive products.
Internationally, Foot Locker continued to build momentum in 1998. We
implemented a completely new software system that directs all major warehouse
operations, enabling us to deliver a constant flow of fresh, new product to
stores within days of receipt. It was piloted in our Canadian service center and
is next being introduced in Europe. And we implemented standard operating
procedures across the division, ensuring consistency and quality throughout.
In Europe we expanded to Austria and Denmark, bringing our total number of
European stores to 281. We also put the finishing touches on our new European
Service Center in Heijen, The Netherlands. This facility revolutionizes our
warehousing, fulfillment and customer service capabilities on the continent, and
provides the infrastructure for our continued growth.
Foot Locker Australia modernized and expanded 4 stores and opened 8
additional units in the larger prototype, for a total of 56 units. Foot Locker
Japan opened its fifth store, in Osaka, heralding the chain's first expansion
outside Tokyo.
Foot Locker Canada continued a strong pace of store openings and
remodelings, and introduced several marketing initiatives with strong regional
appeal, such as a special order program that allows shoppers to buy hockey and
football jerseys in selected locations.
Foot Locker is truly a global success story. Our distinctive
black-and-white striped logo symbolizes the spirit of sportsmanship around the
world. We have succeeded because we continue to connect our customers to the
attributes of achievement, through products whose appeal transcends national
boundaries.
[GRAPHIC]
Australia 56
Austria 4
Belgium 11
Canada 152
Denmark 1
England 30
France 32
Germany 88
Italy 48
Japan 5
Luxembourg 2
Netherlands 40
Spain 25
[PHOTO]
Photo caption: Our worldwide staff, including those in our recently opened
downtown Tokyo store, are trained to ensure that all customers receive prompt,
personalized attention.
12 | VENATOR GROUP, INC.
<PAGE> 15
[FOOT LOCKER LOGO]
o Foot Locker International takes the spirit of our American brand worldwide
offering the latest in athletic inspired products.
================================================================================
[PHOTO]
Photo caption: We have been international since 1909. Every store in our real
estate network, such as this store in Osaka, Japan, provides us with the ability
to better understand and respond to regional and worldwide differences in
consumer tastes and fashion trends.
VENATOR GROUP, INC. | 13
<PAGE> 16
[CHAMPS LOGO]
o Champs Sports offers the latest in both branded and exclusive label
athletic footwear, apparel and sporting goods.
================================================================================
Champs Sports
- -------------
Sports is serious fun at Champs Sports. We provide enthusiasts of all kind --
from the active participant to the all-important athlete -- with the latest
trends in authentic sports-oriented lifestyle apparel, footwear and equipment.
Our key customers, 12 to 25 year old males, view sports as a social
activity as well as a competitive one. To better serve them, our product mix
includes sports merchandise, with a selective range of athletic equipment
offerings. This enables us to drive customer interest by keeping stores filled
with fresh concepts in athletic inspired activewear.
The new Champs Sports stores reflect this positioning. They recreate the
look of an old-fashioned gymnasium, with leather-like wrapped poles, large
gym-style windows and floors with both wood and concrete textures. Giant photo
murals show people having fun while participating in recreational sports.
Since one-third of our customers are women, the new stores also feature our
first-ever women's department. With an emphasis on fitness, they feature a broad
assortment of apparel for running and exercise.
We've also tripled the amount of store space devoted to footwear, with
greater emphasis on running styles as well as basketball and casual shoes.
Champs Sports now stocks more national and private brand goods in all
apparel categories. Along with flagship national brands such as Nike, Adidas and
Reebok, customers have a greater choice of goods bearing our own brand names.
In addition to our popular Champs Sports line, we launched a new exclusive
label this year, called O.U.T., for Outdoor Urban Terrain. The O.U.T. line
features technically sound, functional apparel ranging from fleece tops and
bottoms to jackets and backpacks.
We've narrowed our mix of sports equipment, with a more dominant
presentation of hardlines like fitness equipment, but with fewer categories in a
smaller area. Our new stores employ cross-merchandised vignettes, bringing
together hardlines, apparel and footwear to create a total sports story.
We're telling our story to consumers through our first-ever national
television campaign, "Champs Cam," which launched in August 1998, just in time
for the back-to-school season. Catering to our hip, young and predominately male
audience, the commercials feature a video technique sometimes used in sports
broadcasting that enables viewers to become part of the action. The ads feature
merchandise from Nike, Adidas and Reebok, as well as the new O.U.T. brand.
Our new identity is summed up by the campaign's tag line: "Champs Sports:
When you really live sports."
[PHOTO]
Photo caption: Shoppers can find the coolest sports gear at Champs Sports which
features the hottest brands, latest blades and boards and great accessories too.
14 | VENATOR GROUP, INC.
<PAGE> 17
[ EASTBAY LOGO]
o Eastbay is the largest direct marketer of athletic goods through catalogs
and the internet.
[COLORADO LOGO]
o Colorado offers top quality name brand and exclusive merchandise for the
active outdoor consumer.
================================================================================
eVenator and Eastbay
- --------------------
In March 1999 eVenator, Inc. was formed to assemble a strong internet business,
building on the core distribution competencies we have in Eastbay, the leading
direct marketer of athletic footwear, apparel and equipment.
eVenator provides focused management to accelerate the development of our
direct marketing effort via the Internet, where last April we launched five
Websites featuring items for sale from the Eastbay catalog as well as from the
three Foot Locker formats and Champs Sports. These commercial sites are far
beyond anything yet seen in the retail sports community.
Internet sales represent an enormous growth opportunity for Venator Group's
retail concepts, particularly among our target consumer. Eastbay is one of the
few direct marketers that can provide security, online verifications of
inventory availability and a real-time shopping experience.
Acquired in 1997, Eastbay's distinctive full color catalogs market a broad
selection of athletic products primarily to 12 to 24-year olds who participate
in organized athletics. Eastbay has an active list of over 10 million households
and will mail 80 million catalogs in 1999. Ninety-five percent of approved
orders ship within 24 hours of receipt, with 99 percent accuracy. Our 82,000
stock-keeping units offer the industry's largest assortment of sports-specific
products.
Eastbay's direct marketing expertise strengthens our bonds with customers
by providing insight into their needs and giving us more opportunities to engage
them.
Colorado
- --------
Colorado appeals to the active outdoor enthusiast of every age and ability. Our
stores offer technically inspired performance sportswear, footwear and
accessories with an emphasis on quality construction, functionality and
exclusivity. Colorado features leading brand names such as The North Face and
Timberland, as well as Colorado branded goods.
In the past year, Colorado has developed a wide range of exclusive
assortments across a number of categories. These complement existing brand-name
goods and offer customers more choice and better value.
Our manufacturing processes use the latest technology. An innovative
product data management software system lets developers at Colorado
electronically design and e-mail factory ready specifications to manufacturers
overseas without leaving their desks.
This ensures quality and builds value into all Colorado products.
[PHOTO]
Photo caption: Young athletes who know what they need to perform and reach their
goals turn to Eastbay for a wide array of products.
[PHOTO]
Photo caption: Colorado's innovative store environment projects the authenticity
of Colorado's own brand label and showcases an impressive assortment of leading
brands.
VENATOR GROUP, INC. | 15
<PAGE> 18
Northern Group
================================================================================
Northern
- --------
The Northern Group is a Canadian-based casual apparel chain with 940 stores in
major shopping malls across Canada and the United States. We offer quality
exclusive merchandise at excellent prices in four distinct retail concepts:
Northern Reflections, a leader in women's casual outdoor clothing, is
committed to delivering a unique range of classic, functional yet moderately
priced apparel. Our attractive product mix and outstanding customer focus builds
strong relationships with our core customers, 25 to 45 year old suburban
family-oriented women.
We clearly communicate our customer-oriented philosophy in the
"Satisfaction Guarantee" posted in every store. Northern Reflections offers an
unconditional commitment on all garments, an assurance of quality, an
exceptional level of customer service and unparalleled value.
Northern Getaway carries lifestyle apparel for kids, reflecting the fun and
excitement of the outdoors. Northern Getaway targets the children ages 6 to 12
of our adult Northern customer, with an emphasis on back-to-basics value.
All Northern Getaway garments are designed to play hard and look great,
made to fit better and last longer. Most are preshrunk or shrink-resistant and
come with our unconditional guarantee.
Our store image captures fond memories of "The Great Outdoors." Design
elements such as a tree house, cabins, bunk beds, "outhouse" changing rooms,
trees, tents and raft-ing table, depict fun and adventure.
Northern Traditions caters to the professional woman with coordinates for
dressy, non-formal occasions. Many of our customers also shop at Northern
Reflections. Our classic, timeless, yet pleasantly contemporary product styling
offers customers a fashion solution for the dressy part of their wardrobe. A
consistent value package and superior service supports our Traditional Values
Guarantee.
Northern Elements extends the Northern concept to menswear. Our typical
customer is the twenty-plus suburban male, often the counterpart of the Northern
Reflections shopper. We feature high-quality clothing for everyday and casual
Friday that embodies the spirit of the North American outdoors.
In 1998, The Northern Group launched a new retail format, "The Authentic
Northern Experience." It unites our four concepts N Northern Reflections,
Northern Getaway, Northern Traditions and Northern Elements N in a single,
contiguous mall space, providing greater cross-shopping opportunities and
operating efficiencies.
[PHOTO]
Photo caption: Our new Authentic Northern Experience stores, ranging in size up
to 10,000 square feet, provide one-stop shopping for the entire family.
16 | VENATOR GROUP, INC.
<PAGE> 19
[NORTHERN REFLECTIONS LOGO]
[NORTHERN GETAWAY LOGO]
[NORTHERN TRADITIONS LOGO]
[NORTHERN ELEMENTS LOGO]
o Northern offers a unique range of exclusive casual apparel for men, women
and children.
================================================================================
[PHOTO]
Photo caption: Unique Northern merchandise, featuring detailed embroidery and
silk screening, are sought by our loyal, family-oriented consumer.
VENATOR GROUP, INC. | 17
<PAGE> 20
Other Specialty Group
================================================================================
Afterthoughts
- -------------
For the latest in fashion accessories and personal care products, today's young
shopper visits Afterthoughts. Our 773 stores offer an assortment that is all our
own. We design most of our merchandise in-house and roll it into every store on
a monthly basis: jewelry, fashion accessories, cosmetics, bath and body products
and gifts. Always fresh, and in the cutting-edge styles teens and pre-teens
demand.
This year we quadrupled the space devoted to our successful exclusive bath
and body product line. We now offer four distinct private brands, all originated
by Afterthoughts' product-development team. Each brand has its own image to
address the needs of the various age groups that shop the stores: Princie, for
our youngest customer; Cuddle Club, for preteens; Rain Dance, for 13 to 19
year-olds; and a new aromatherapy line for older teens and "young" thinking
moms.
Afterthoughts builds customer loyalty through its fun, casual shopping
environment. We provide ample try-on zones and extra services such as free ear
piercing. Our sales associates actively advise customers on their fashion
choices, fostering confidence, trust and repeat visits.
The new millenium store concept adds dramatic street appeal. It embodies
the excitement of being backstage at a rock concert. Against a backdrop of music
videos that complement the merchandise, the "creating a show" theme reflects the
customer's sense of creating a look just for herself. Currently in 121 stores,
we are adding 50 more in 1999.
These new stores nearly double our square footage and enable Afterthoughts
to serve to our primary female audience better while offering an inviting
environment to our growing number of male customers. Our combination of
fashion-right and constantly new product in a distinctive, destination shopping
environment makes Afterthoughts the fashion headquarters for America's
trend-conscious teens.
San Francisco Music Box
- -----------------------
Discerning shoppers across America rely on The San Francisco Music Box and Gift
Co. for unique gift items for home and office.
In 1998 we expanded our product assortment for stronger year-round appeal,
adding general gift mer chandise to our signature musical gift items; and we
changed our name to signal this new broader focus to customers.
We now offer a range of home-decor and tabletop accessories, such as fine
glassware, candles and potpourri, chosen to fit our customers' casual, eclectic
lifestyles. A new line of gifts for men, featuring a range of golf-related and
desktop items, lets customers do more shopping with us. Exclusive merchandise
based on national licenses plays a growing role in our product mix. In 1998 we
added exclusive items featuring the Muppets characters and Raggedy Ann and Andy
to our other licensed exclusives such as Betty Boop and National Geographic. Our
expanded product range, flexible store formats and emphasis on exclusive
merchandise position us well in the specialty gift category.
[PHOTO]
Photo caption: "Backstage" make up tables at our new Afterthoughts millennium
stores provide interactive excitement and fun for teens. [PHOTO]
18 | VENATOR GROUP, INC.
<PAGE> 21
[AFTERHOUGHTS LOGO]
o Afterthoughts offers the latest in fashion jewelry, accessories, cosmetic
and gifts for today's pre-teen, teenage girls, and young women.
[SAN FRANCISCO MUSIC BOX LOGO]
o The San Francisco Music Box specializes in unique musical giftware in an
enchanting shopping environment.
[PHOTO]
Photo caption: Afterthought's bath and body products, cosmetics and fashion
accessories provide today's trend-conscious teens with what they are looking
for, showcased in a distinctive shopping environment.
VENATOR GROUP, INC. | 19
<PAGE> 22
[PHOTO]
<PAGE> 23
Financial Report
================================================================================
Sales
(in billions)
94 $ 4.5
95 4.4
96 4.5
97 4.6
98 4.6
- --------------------------------------------------------------------------------
Debt, net of cash
(in millions)
94 $1,104
95 597
96 322
97 446
98 574
- --------------------------------------------------------------------------------
Income from Continuing Operations
(in millions)
94 $ 23
95 29
96 209
97 213
98 3
- --------------------------------------------------------------------------------
Capital Expenditures
(in millions)
94 $ 116
95 70
96 86
97 249
98 549
- --------------------------------------------------------------------------------
Contents
Management's Discussion and Analysis of
Financial Condition and Results of Operations 22
Management's Report 28
Independent Auditors' Report 28
Consolidated Statements of Operations 29
Consolidated Statements of Comprehensive Income (Loss) 29
Consolidated Balance Sheets 30
Consolidated Statements of Shareholders' Equity 31
Consolidated Statements of Cash Flows 32
Notes to Consolidated Financial Statements 33
Five Year Summary of Selected Financial Data 47
Board of Directors 48
Corporate and Operating Officers 48
Corporate Information 49
VENATOR GROUP, INC. | 21
<PAGE> 24
Management's Discussion and Analysis of Financial Condition and Results of
Operations
================================================================================
The Company operates in two reportable business segments, the Global Athletic
Group and the Northern Group. The Global Athletic Group is the largest athletic
footwear and apparel retailer in the world, whose major formats include Foot
Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports and Colorado. The
Global Athletic Group also includes Eastbay, the largest direct marketer of
athletic footwear, apparel and equipment in the United States. The Northern
Group consists of four apparel formats: Northern Reflections, Northern
Traditions, Northern Getaway and Northern Elements. The remainder of the
Company's operations are grouped in the "All Other" category, which includes the
Afterthoughts format and The San Francisco Music Box and Gift Company. In the
third quarter of 1998, the Company discontinued its Specialty Footwear and
International General Merchandise segments and, accordingly, prior year
financial information has been restated.
A summary of sales by segment, after reclassification for disposed
operations (representing businesses closed other than the discontinued
businesses) is as follows:
(in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
Global Athletic Group $3,753 $3,746 $3,622
Northern Group 415 455 426
All Other 383 380 383
Disposed operations 4 31 73
- --------------------------------------------------------------------------------
$4,555 $4,612 $4,504
================================================================================
A summary of operating results (excluding corporate expense, corporate gains on
real estate, interest expense and income taxes) by segment, reconciled to income
(loss) from continuing operations before income taxes, is as follows:
(in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
Global Athletic Group $ 12 $ 376 $ 466
Northern Group (26) 40 42
All Other 10 3 (1)
- --------------------------------------------------------------------------------
Operating profit (loss) from
ongoing operations (4) 419 507
Disposed operations 17 (1) (49)
- --------------------------------------------------------------------------------
Total operating profit 13 418 458
Corporate expense, net 8 50 60
Interest expense, net 44 35 50
- --------------------------------------------------------------------------------
Income (loss) from continuing
operations before income taxes $ (39) $ 333 $ 348
================================================================================
Sales
- --------------------------------------------------------------------------------
Sales of $4,555 million in 1998 decreased 1.2 percent from sales of $4,612
million in 1997, reflecting the impact of 294 additional stores offset by a
comparable-store sales decline of 5.5 percent. The impact of foreign currency
fluctuations and disposed operations did not have a significant impact on sales
in 1998.
Sales of $4,612 million in 1997 increased 2.4 percent from sales of $4,504
million in 1996, reflecting the impact of 181 additional stores, offset by a
comparable-store sales decline of 4.0 percent. Excluding disposed operations and
the effect of foreign currency fluctuations, 1997 sales increased by 4.4 percent
as compared with 1996.
The 1997 reporting year included 53 weeks compared to 52 weeks in the 1998
and 1996 reporting years. The impact on sales and operating results of the
additional week was not significant to 1997.
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Difficult industry trends as well as internal issues impacted the 1998 financial
results. The industry witnessed a major fashion shift away from high-end
athletic footwear to more moderately priced footwear, as well as weak branded
and licensed apparel sales. Internal factors contributing to the decline include
delayed store openings that resulted in escalating inventories and increased
markdowns.
Gross Margin
Gross margin declined to 26.8 percent in 1998 compared to 32.2 percent in 1997
primarily reflecting aggressive markdown activity in order to clear excess or
slow-selling inventory. The effect of taking these markdowns was to position
inventories properly for the upcoming year, and to enhance the Company's
competitiveness. Gross margin in 1997 remained consistent compared to 32.9
percent in 1996.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") increased by $158 million
in 1998 compared to 1997. The increase was primarily attributable to the
incremental costs related to additional stores. SG&A also included a $28 million
before-tax ($17 million after-tax) asset impairment charge; the 1997 charge was
not significant. SG&A in 1997 increased by $33 million as compared with 1996;
however, as a percentage of sales, SG&A remained consistent.
Corporate expense totaled $90 million, $62 million and $60 million for
1998, 1997 and 1996, respectively. The 1998 increase was attributed to several
factors, including $16 million for the installation of the Company's
comprehensive information computer system ("ECLIPSE") and Y2K costs of $3
million. In addition, costs associated with reducing the size of the corporate
office were $3 million. Corporate income totaled $82 million in 1998 and $12
million in 1997, representing income on sales of corporate properties and the
sale of a vacant distribution center in 1997. Included in 1998 is income of $73
million, representing the portion of the gain recognized in the current year on
the sale of the corporate headquarters, the Woolworth Building.
Operating Results
Operating profit declined to $13 million in 1998 compared to $418 million in
1997. Ongoing operations reported a loss of $4 million in 1998 as compared with
a profit of $419 million in 1997.
22 | VENATOR GROUP, INC.
<PAGE> 25
================================================================================
These declines in 1998 resulted from decreases in gross margin, primarily in the
Global Athletic Group. Operating results for 1998 included a total reduction of
$3 million in the 1991 restructuring reserve and the 1993 repositioning reserve;
operating results for 1997 included a total reduction of $22 million in these
reserves. These adjustments were made to revise original estimates based on
actual experience to date. The Company reported operating profit of $418 million
in 1997, compared to $458 million in 1996. The decrease was primarily the result
of increased markdowns.
Interest Expense, Net
($ in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
Interest expense, net of interest income $ 44 $ 35 $ 50
Weighted-average interest rate
(excluding facility fees):
Short-term debt 6.2% 6.3% 6.1%
Long-term debt 7.7% 8.0% 7.7%
Total debt 7.1% 7.9% 7.5%
Short-term debt outstanding during the year:
High $ 695 $ 207 $ 302
Weighted-average $ 291 $ 22 $ 101
- --------------------------------------------------------------------------------
Interest expense, net of interest income, increased by 25.7 percent in 1998 as a
result of increased borrowings under the Company's revolving credit facility,
which was partially offset by interest income of approximately $7 million
related to a franchise tax settlement.
In 1997, interest expense, net of interest income, was 30.0 percent less
than in 1996, primarily as a result of lower weighted-average short-term debt
and reduced facility fees. Weighted-average short-term debt in 1997 was $79
million, or 78.2 percent, less than in 1996. In early 1997, the Company reduced
the amount of its revolving credit facility from $1 billion to $500 million.
Income Taxes
The change in the 1998 effective tax rate compared to the 1997 rate primarily
reflected the impact of utilizing available foreign tax credits as a result of
the sale of various businesses and assets, offset by the impact of
non-deductible items, such as goodwill amortization, and a one-time gain on the
surrender of company-owned life insurance policies. The 1997 effective tax rate
was 36.0 percent compared to 40.1 percent in 1996, reflecting the change in the
valuation allowance principally due to the use of state and foreign tax
carryforwards.
Store Count
The Company ended the year with 6,002 stores consisting of 3,925 Global Athletic
Group stores, 940 Northern Group stores and 1,137 other stores, which included
773 Afterthoughts stores and 168 San Francisco Music Box and Gift stores. During
1998, the Company opened 651 stores, closed 357 stores (including disposed and
sold operations) and remodeled or relocated 459 stores.
Disposed Operations
- --------------------------------------------------------------------------------
Disposed operations represents those businesses sold or closed other than the
discontinued segments and are therefore included in continuing operations.
During 1998, the Company sold its Garden Center nursery business and closed its
Randy River stores in the United States and its Ashbrooks stores in Canada as
part of its continuing program to exit under-performing businesses. In 1997, the
Company disposed of Foot Locker in Hong Kong. In 1996, the Company disposed of
the Accessory Lady and Rx Place Drug Mart chains in the United States, the Silk
& Satin chain in Canada, the Lady Plus and Rubin chains in Germany and Woolworth
Germany's investment in the New Yorker Sud business.
Discontinued Operations
- --------------------------------------------------------------------------------
In September 1998, the Company discontinued both its Specialty Footwear and
International General Merchandise segments. The Company recorded a third quarter
charge of $243 million before-tax, or $160 million after-tax, for the loss on
disposal of the Specialty Footwear segment. Major components of the charge
include estimated outlays for lease liabilities and other occupancy costs of $91
million, operating losses and other expenses during the shutdown period of $68
million, and severance and personnel costs of $19 million. Non-cash charges
included asset and inventory write-downs of $65 million. On October 22, 1998,
the Company completed the sale of the general merchandise operations in Germany
for gross proceeds of $563 million. The net gain on the disposal of the
International General Merchandise segment was $174 million before-tax, or $39
million after-tax. The loss from discontinued operations reflects a $17 million
after-tax loss for the Specialty Footwear segment and a $9 million after-tax
loss for the International General Merchandise segment through the respective
measurement dates.
In 1997, the Company discontinued the Domestic General Merchandise segment
and recorded a charge for the disposal of $310 million before-tax ($195 million
after-tax). The charge included outlays for lease liabilities and other
occupancy costs of $108 million, severance and other personnel related costs of
$72 million and non-cash charges to cover asset write-downs of $42 million. Also
included in the cost was the charge for liquidation of inventory and other shut
down costs. The loss from discontinued operations recorded through July 17, 1997
was $47 million before-tax ($28 million after-tax).
In the fourth quarter of 1998, the Company recorded income from
discontinued operations of $8 million after-tax. This adjustment resulted from
revisions to estimates due to better than anticipated results in exiting the
Specialty Footwear segment and the sale of certain Domestic General Merchandise
properties.
Prior year financial statements have been restated to present the operating
results of these businesses as discontinued operations.
VENATOR GROUP, INC. | 23
<PAGE> 26
- --------------------------------------------------------------------------------
Segments
- --------------------------------------------------------------------------------
The results by segment are as follows:
Global Athletic Group
($ in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
Sales $ 3,753 $ 3,746 $ 3,622
Disposed operations -- 3 12
- --------------------------------------------------------------------------------
Total sales $ 3,753 $ 3,749 $ 3,634
================================================================================
Operating profit from
ongoing operations $ 12 $ 376 $ 466
Disposed operations -- (1) (5)
- --------------------------------------------------------------------------------
Total operating profit $ 12 $ 375 $ 461
================================================================================
Sales as a percentage of
consolidated total 82% 81% 81%
Number of stores at year end 3,925 3,625 3,421
Selling square footage (in millions) 8.41 6.36 5.53
- --------------------------------------------------------------------------------
The Global Athletic Group, the Company's largest segment, includes the Foot
Locker businesses: Foot Locker, Lady Foot Locker, and Kids Foot Locker, as well
as Champs Sports, Eastbay and Colorado. The Foot Locker formats are located in
North America, Europe, Asia and Australia. Champs Sports operates in the United
States and Canada. Eastbay, acquired in January 1997, is the largest direct
marketer of athletic footwear, apparel and equipment in the United States.
Colorado offers top quality brand name and proprietary merchandise designed for
the active lifestyle and outdoor customer in the United States and Australia.
The Global Athletic Group's sales totaled $3,753 million in 1998, reflecting 300
additional stores offset by a comparable-store sales decline of 6.1 percent.
This decline was primarily attributable to a major fashion shift away from
high-end athletic footwear, as well as soft branded and licensed apparel sales.
Operating profit from ongoing operations in 1998 was $12 million compared
to $376 million in 1997. The decline was primarily a result of lower gross
margins due to significantly higher markdowns. Oversupplied inventory and a
shift in customer preferences from higher priced footwear, particularly
basketball, to lower price point product necessitated the higher than normal
markdowns. Additionally, in 1998 the Global Athletic Group recorded a $19
million before-tax ($11 million after-tax) asset impairment charge consistent
with the Company's impairment of long-lived assets policy.
In 1997, the Global Athletic Group reported sales of $3,746 million,
excluding disposed operations, an increase of 3.4 percent compared to 1996,
while comparable-store sales decreased 4.9 percent in 1997. The increase in
sales was attributable to 204 additional stores offset by the comparable-store
sales decline. Operating profit from ongoing operations in 1997 was $376 million
compared to $466 million in 1996. This decline was primarily a result of lower
gross margins due to higher markdowns to maintain current inventories.
Northern Group
($ in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
Sales $ 415 $ 455 $ 426
================================================================================
Operating profit (loss) $ (26) $ 40 $ 42
================================================================================
Sales as a percentage of consolidated total 9% 10% 9%
Number of stores at year end 940 827 760
Selling square footage (in millions) 1.66 1.34 1.27
- --------------------------------------------------------------------------------
The Northern Group consists of four formats: Northern Reflections, Northern
Traditions, Northern Getaway and Northern Elements. These stores sell specialty
apparel in Canada and the United States, specializing in a range of casual and
career apparel for women and casual apparel for men and children. Of the 940
Northern Group stores in operation at year end, 428 stores are in Canada and 512
stores are in the United States. The Northern Group sales of $415 million in
1998 decreased 8.8 percent from 1997 and 11.0 percent on a comparable-store
basis. Excluding the impact of foreign currency fluctuations, sales decreased by
5.4 percent. This decline is attributable to the impact of a change in
merchandise mix and poor performance of the United States stores due, in part,
to the unseasonably warm weather.
Operations in 1998 resulted in a loss of $26 million compared to a profit
of $40 million in 1997. This profit decline resulted primarily from increased
markdown activity and an asset impairment charge of $7 million before-tax, or $4
million after-tax.
Sales for 1997 increased by 6.8 percent compared to 1996 as a result of the
opening of 85 new stores and comparable-store sales gains of 1.9 percent.
Operating profit in 1997 was $40 million as compared with $42 million in 1996,
primarily resulting from increased occupancy and wage costs associated with
additional stores.
All Other Businesses
The Company's remaining businesses are in the "All Other" category, including
the Afterthoughts jewelry format, The San Francisco Music Box and Gift Company
format, featuring musical and nonmusical giftware, the Weekend Edition format,
featuring women's casual wear and the Randy River format, featuring teen casual
wear and accessories.
($ in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
Sales $ 383 $ 380 $ 383
Disposed operations 4 28 61
- --------------------------------------------------------------------------------
Total sales $ 387 $ 408 $ 444
================================================================================
Operating profit (loss)
from ongoing operations $ 10 $ 3 $ (1)
Disposed operations 17 -- (44)
- --------------------------------------------------------------------------------
Total operating profit (loss) $ 27 $ 3 $ (45)
================================================================================
Sales as a percentage of consolidated total 9% 9% 10%
Number of stores at year end 1,137 1,256 1,346
Selling square footage (in millions) 1.00 1.22 1.22
- --------------------------------------------------------------------------------
24 | VENATOR GROUP, INC.
<PAGE> 27
================================================================================
Sales, excluding disposed operations, for 1998, 1997 and 1996 remained
consistent for each of the three years. The increase in operating profit from
ongoing operations since 1996 was primarily the result of the continued
improvement in the Afterthoughts and The San Francisco Music Box and Gift
Company formats. The decline in sales from disposed operations in the same
periods reflects the divestiture of underperforming formats. Operating results
from disposed operations also includes the related shutdown costs of such
operations. Disposed operations in 1998 included a $19 million gain on the sale
of the Garden Centers nursery business offset by the costs associated with the
closing of Randy River stores in the United States and Ashbrooks stores in
Canada.
Liquidity and Capital Resources
- --------------------------------------------------------------------------------
Cash Flow
Cash used in operations was $11 million in 1998 compared to cash provided by
operations of $149 million in 1997. This change reflects the $210 million
decline in income from continuing operations in 1998 compared to 1997.
Cash flow from operations of $149 million in 1997 decreased from $331
million in 1996, resulting primarily from the increase in merchandise
inventories in 1997.
Cash used in investing activities in 1998 totaled $405 million compared to
$377 million in 1997. Cash generated in 1998 primarily includes the proceeds on
the sale of the Company's corporate headquarters, the Woolworth Building, of
$137.5 million. The cash used in investing activities in 1998 primarily reflects
capital expenditures of $549 million, a $300 million increase compared to 1997.
The Company's capital expenditures program concentrated on new store openings
and remodeling of existing facilities, particularly in the Global Athletic and
Northern Groups, which opened in excess of 400 stores. Since 1995, approximately
2,300 stores or 38 percent of the Company's total store base has been opened,
remodeled or expanded. Also included in capital expenditures is the cost of the
Company's new comprehensive information systems totaling $70 million and $61
million for 1998 and 1997, respectively. Investing activities in 1997 include
the acquisition of Eastbay, a leading direct marketer of athletic goods in the
United States, for a purchase price of approximately $140 million.
Cash used in investing activities of $377 million in 1997 increased by $321
million compared to 1996, reflecting the Eastbay acquisition and increased
capital expenditures in line with the Company's aggressive capital expenditure
program.
Cash provided by financing activities increased by $238 million in 1998
compared to 1997, which reflects short-term debt borrowings of $250 million in
1998. Cash used in financing activities of $84 million in 1996 primarily
reflects repayments of short-term and long-term debt.
Net cash provided by discontinued operations in 1998 represents the net
proceeds from the sale of the German general merchandise operations of $495
million before-tax ($360 million after-tax) offset by the discontinuance of the
Specialty Footwear segment, as well as further utilization of the Domestic
General Merchandise reserve. The discontinuance of the Domestic General
Merchandise segment in 1997 did not require a net outlay of cash, as the
proceeds from the sales of inventories exceeded payments required.
Cash flows from operating activities are expected to be sufficient to cover
any short-term debt and the current portion of long-term debt and capital lease
repayment obligations, as well as the planned capital expenditures in 1999.
Planned capital expenditures for 1999 are approximately $175 million, of which
$100 million relates to 350 new store openings and modernization of existing
stores and $75 million relates to the development of management information
systems, logistics and other support facilities.
Capital Structure
During 1997, the Company amended its revolving credit agreement to reduce the
facility from $1 billion to $500 million, available through 2002.
On March 19, 1999, the Company further amended this revolving credit
agreement. In accordance with the amended agreement, the facility was reduced to
$400 million, with a further reduction to $300 million by February 15, 2000. If
certain assets are sold or debt or equity is issued, the revolving credit
agreement may be reduced earlier than February 2000 to $350 million. Under the
terms of the amended agreement, the Company is required to satisfy certain
financial and operating covenants, which include: maximum ratio of total debt to
earnings before interest, taxes, depreciation and amortization, minimum fixed
charge coverage ratio, minimum tangible net worth and limits on capital
expenditures. In addition, the Company is required to fund the repayment of the
7.0% debentures, which are redeemable in June 2000, by February 15, 2000. This
facility is unsecured relating to the Company's inventory; however, it does
include collateralization of certain properties as defined in the agreement. The
amended agreement also restricts consolidations or mergers with third parties,
investments and acquisitions, payment of dividends and stock repurchases.
Management believes current domestic and international credit facilities
and cash provided by operations will be adequate to finance its working capital
requirements and support the development of its short-term and long-term
strategies. The Company expects to fund the repayment of its $200 million in
notes due in June 2000 through future financing and/or asset sales. As of
January 30, 1999, $250 million was outstanding under the revolving credit
facility.
The Company has a registration statement filed with the Securities and
Exchange Commission, which allows for the additional issuance of up to $360
million of debt securities and warrants to purchase debt securities. Depending
on market conditions and capital needs, additional long-term financing may be
utilized.
For purposes of calculating debt to total capitalization, the Company
includes the present value of operating lease commitments. These commitments are
the primary financing vehicle used to fund store expansion.
VENATOR GROUP, INC. | 25
<PAGE> 28
================================================================================
The following table sets forth the components of the Company's
capitalization, both with and without the present value of operating leases:
($ in millions) 1998 1997
- --------------------------------------------------------------------------------
Debt, net of cash and capital lease obligations (1) $ 574 $ 446
Present value of operating leases 1,630 1,542
- --------------------------------------------------------------------------------
Total debt (1) 2,204 1,988
Shareholders' equity 1,038 1,271
- --------------------------------------------------------------------------------
Total capitalization $3,242 $3,259
================================================================================
Net debt capitalization percent (1) 68.0% 61.0%
Net debt capitalization percent without
operating leases (1) 35.6% 26.0%
- --------------------------------------------------------------------------------
(1) Represents total debt, net of cash and cash equivalents.
Total debt, net of cash (including the present value of operating leases)
increased by $216 million in 1998 and shareholders' equity decreased by $233
million. The decrease in shareholders' equity relates to the current year loss
of $136 million, which was reduced by the realization of foreign currency
translation gains related to discontinued operations of $149 million.
The Company's credit ratings have been lowered to BB and Ba3 by Standard &
Poor's and Moody's Investors Service, respectively. This change in ratings may
increase the Company's future cost of borrowings.
New Accounting Pronouncements
- --------------------------------------------------------------------------------
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income" ("SFAS No. 130"), in the first quarter of
1998. SFAS No. 130 establishes standards for reporting 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.
In the fourth quarter of 1998, the Company adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131"), and added the required disclosures. This statement supersedes previously
established standards for reporting operating segments in the consolidated
financial statements.
Effective February 1, 1998, the Company adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" ("SFAS No. 132"),
which revises employers' disclosures about pensions and other postretirement
benefits plans and added the required disclosures. SFAS No. 132 does not change
the measurement or recognition of those plans.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"),
which establishes accounting and reporting standards for derivative instruments
and hedging activities. The Company will adopt SFAS No. 133 in 2000 and is in
the process of evaluating its impact on its financial position and results of
operations, which is not expected to be significant.
Seasonality
- --------------------------------------------------------------------------------
The Company's businesses are seasonal in nature. Historically, the greatest
proportion of sales and net income is generated in the fourth quarter and the
lowest proportions of sales and net income are generated in the first and second
quarters, reflecting seasonal buying patterns. As a result of these seasonal
sales patterns, inventory generally increases in the third quarter in
anticipation of increased fourth quarter sales.
Year 2000 Readiness Disclosure
- --------------------------------------------------------------------------------
The 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 Company, as well as for the government and most other
companies. The Company 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 Company 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 Company's business operations have been remediated. In-house
certification testing of all application systems is currently in progress.
Comprehensive testing of the Company's operating systems, software and mainframe
application systems will be performed in July and will incorporate a disaster
recovery test. Code changes have been made to the merchandising and logistics
legacy systems, remediation is complete, and testing is in progress. The
necessary enhancements to the point of sale equipment are substantially complete
and ongoing testing will enable the commencement of the pilot testing in stores
in April 1999.
Apart from the Y2K issue, the Company has developed and installed
throughout its businesses beginning in 1997 an information computer system
("ECLIPSE"), which will be installed in most divisions for the finance and human
resources functions during 1999. 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 Company 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.
26 | VENATOR GROUP, INC.
<PAGE> 29
================================================================================
Management has established the priority of systems identified as non-compliant
and ongoing testing and implementation of any changes required for the non-IT
systems will be performed throughout 1999. Investigations of the embedded chip
systems indicate that Y2K will not affect systems such as heating, ventilation
and security in most store locations.
Material Third Party Suppliers
The Company in 1998 purchased approximately 44 percent of its merchandise from
one major vendor. As a result, the Company's ability to operate could be
materially affected by the non-compliance of this key supplier. Management has
determined through several meetings and interviews that the vendor's Y2K
readiness program is substantially complete. Electronic Data Interchange
software was successfully tested with this vendor and management intends to
develop joint contingency plans for distribution and order entry. Management has
issued questionnaires to its approximately 20 key vendors to determine their
state of readiness. The Company's efforts to obtain written certifications have
not been successful, for the most part, and management will continue its efforts
to assess the vendors' Y2K readiness through other means. The level of
compliance of the Company's major providers of banking services, transportation,
telecommunications and utilities is being ascertained and the related risks
evaluated.
Y2K Costs
The Company 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 affect on continuing
operations. The total direct cost, excluding ECLIPSE, to remediate the Y2K issue
is estimated to be approximately $5 million, of which $3 million has been spent
in 1998. All costs, excluding ECLIPSE, are being expensed as incurred and are
funded through operating cash flows. The Company'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 significant to its results of operations or financial condition.
Contingency Plan/Risks
The Company is in the process of developing contingency plans for those areas
that might be affected by Y2K. Although the full consequences are unknown, the
failure of either its critical systems or those of its material third party
suppliers to be Y2K compliant would result in the interruption of the Company's
business, which could have a significant adverse affect on its results of
operations or financial condition. If the distribution channels were to be
disrupted, alternative methods of delivering merchandise to both the Company's
stores and its customers will exist. However, if any business interruptions
occur in January 2000, and they are promptly corrected, management expects it
would not significantly impact the Company's results of operations or financial
position. Typically, at that time of year, after the holiday season, there is
lower customer demand and borrowing requirements are not at their peak. In
addition, successful inventory and working capital management, along with
contingency plans for store operations, will help mitigate the risks associated
with the Y2K issue. However, some business disruptions may occur even with
defensive contingency plans.
Impact of the European Monetary Union
- --------------------------------------------------------------------------------
The European Union is comprised of fifteen member states, eleven of which
adopted 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 have converted to the
euro, and non-cash transactions are 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 Company 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 Company 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 euro conversion is not expected to have a significant effect on the
Company's results of operations or financial condition.
Disclosure Regarding Forward-Looking Statements
- --------------------------------------------------------------------------------
This report, including 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 Company expects or anticipates will or may occur in the future,
including such things as future capital expenditures, expansion, strategic
plans, growth of the Company'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 Company 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.
VENATOR GROUP, INC. | 27
<PAGE> 30
Management's Report
================================================================================
The integrity and objectivity of the financial statements and other financial
information presented in this annual report are the responsibility of the
management of the Company. The financial statements have been prepared in
conformity with generally accepted accounting principles and include, when
necessary, amounts based on the best estimates and judgments of management.
The Company maintains a system of internal controls designed to provide
reasonable assurance, at appropriate cost, that assets are safeguarded,
transactions are executed in accordance with management's authorization, and the
accounting records provide a reliable basis for the preparation of the financial
statements. The system of internal accounting controls is continually reviewed
by management and improved and modified as necessary in response to changing
business conditions. The Company also maintains an internal audit function for
evaluating and formally reporting on the adequacy and effectiveness of internal
accounting controls, policies and procedures.
The Company's financial statements have been audited by KPMG LLP, the
Company's independent auditors, whose report expresses their opinion with
respect to the fairness of the presentation of the statements.
The Audit Committee of the Board of Directors, which is comprised solely of
directors who are not officers or employees of the Company, meet regularly with
the Company's management, internal auditors, legal counsel and KPMG LLP to
review the activities of each group and to satisfy itself that each is properly
discharging its responsibility. In addition, the Audit Committee meets on a
periodic basis with KPMG LLP, without management's presence, to discuss the
audit of the financial statements as well as other auditing and financial
reporting matters. The Company's internal auditors and independent auditors have
direct access to the Audit Committee.
/s/ ROGER N. FARAH
- --------------------
Roger N. Farah
Chairman of the Board and Chief Executive Officer
/s/ DALE W. HILPERT
- ---------------------
Dale W. Hilpert
President and Chief Operating Officer
/s/ BRUCE HARTMAN
- ------------------
Bruce Hartman
Senior Vice President and Chief Financial Officer
April 14, 1999
Independent Auditors' Report
================================================================================
[KPMG LOGO]
KPMG
To the Board of Directors and Shareholders of
Venator Group, Inc.
We have audited the accompanying consolidated balance sheets of Venator Group,
Inc. (formerly Woolworth Corporation) and subsidiaries as of January 30, 1999
and January 31, 1998 and the related consolidated statements of operations,
comprehensive income (loss), shareholders' equity and cash flows for each of the
years in the three-year period ended January 30, 1999. These consolidated
financial statements are the responsibility of Venator Group, Inc. management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Venator
Group, Inc. and subsidiaries as of January 30, 1999 and January 31, 1998, and
the results of their operations and their cash flows for each of the years in
the three-year period ended January 30, 1999 in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
- -----------------
New York, NY
March 10, 1999, except for note 23
which is as of March 19, 1999
28 | VENATOR GROUP, INC.
<PAGE> 31
Consolidated Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in millions, except per share amounts) 1998 1997 1996
====================================================================================================================================
<S> <C> <C> <C>
Sales $ 4,555 $ 4,612 $ 4,504
- ------------------------------------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of sales 3,333 3,127 3,020
Selling, general and administrative expenses 1,166 1,008 975
Depreciation and amortization 152 122 114
Interest expense, net 44 35 50
- ------------------------------------------------------------------------------------------------------------------------------------
4,695 4,292 4,159
Other income, net (101) (13) (3)
- ------------------------------------------------------------------------------------------------------------------------------------
4,594 4,279 4,156
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before income taxes (39) 333 348
Income tax expense (benefit) (42) 120 139
- ------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations $ 3 $ 213 $ 209
- ------------------------------------------------------------------------------------------------------------------------------------
Loss from discontinued operations, net of income tax benefit
of $(14), $(13) and $(28), respectively (26) (28) (40)
Net loss on disposal of discontinued operations, net
of income tax expense (benefit) of $57 and $(115), respectively (113) (195) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (136) $ (10) $ 169
====================================================================================================================================
Basic earnings per share:
Income from continuing operations $ 0.02 $ 1.58 $ 1.56
Loss from discontinued operations (1.02) (1.66) (0.30)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (1.00) $ (0.08) $ 1.26
====================================================================================================================================
Diluted earnings per share:
Income from continuing operations $ 0.02 $ 1.57 $ 1.55
Loss from discontinued operations (1.02) (1.64) (0.29)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (1.00) $ (0.07) $ 1.26
====================================================================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
Consolidated Statements of Comprehensive Income (Loss)
================================================================================
<TABLE>
<CAPTION>
(in millions) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) $ (136) $ (10) $ 169
Other comprehensive income (loss), net of tax Foreign currency translation
adjustment:
Translation adjustment arising during the period, net of deferred tax (expense)
benefit of $(26), $33 and $41, respectively 39 (56) (61)
Less: reclassification adjustment for net gain included in net loss on
disposal of discontinued operations, net of deferred tax expense of $149 (149) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net foreign currency translation adjustment (110) (56) (61)
Minimum pension liability adjustment, net of deferred tax (expense) benefit
of $(2), $5 and $1, respectively 2 (8) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) $ (244) $ (74) $ 106
====================================================================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
VENATOR GROUP, INC. | 29
<PAGE> 32
Consolidated Balance Sheets
================================================================================
<TABLE>
<CAPTION>
(in millions) 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 193 $ 81
Merchandise inventories 837 754
Net assets of discontinued operations 97 604
Other current assets 148 135
- ------------------------------------------------------------------------------------------------------------------------------------
1,275 1,574
Property and equipment, net 974 625
Deferred taxes 358 336
Intangible assets, net 183 181
Other assets 86 82
- ------------------------------------------------------------------------------------------------------------------------------------
$2,876 $2,798
====================================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt $ 250 $ --
Accounts payable 245 267
Accrued liabilities 296 251
Current portion of reserve for discontinued operations 167 72
Current portion of long-term debt and obligations under capital leases 6 19
- ------------------------------------------------------------------------------------------------------------------------------------
964 609
Long-term debt and obligations under capital leases 511 508
Reserve for discontinued operations 30 18
Other liabilities 333 392
Shareholders' equity 1,038 1,271
- ------------------------------------------------------------------------------------------------------------------------------------
$2,876 $2,798
====================================================================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
30 | VENATOR GROUP, INC.
<PAGE> 33
Consolidated Statements of Shareholders' Equity
================================================================================
<TABLE>
<CAPTION>
1998 1997 1996
(shares in thousands, amounts in millions) Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Preferred Stock
$2.20 Series A Convertible Preferred, par value
$1 per share, 7 million shares authorized
Outstanding at beginning of year -- $ -- -- $ -- 97 $ --
Converted during year -- -- -- -- (97) --
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock and Paid-In Capital
Par value $.01 per share,
500 million shares authorized
Issued at beginning of year 134,986 317 134,047 299 133,051 290
Issued upon conversion of preferred shares -- -- -- -- 461 --
Issued under director and employee stock plans,
net of related tax benefit 668 11 939 18 535 9
- ------------------------------------------------------------------------------------------------------------------------------------
Issued at end of year 135,654 328 134,986 317 134,047 299
- ------------------------------------------------------------------------------------------------------------------------------------
Common stock in treasury at beginning of year (10) -- -- -- -- --
Acquired at cost -- -- (10) -- -- --
Exchange of options (9) -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Common stock in treasury at end of year (19) -- (10) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Amortization of stock issued under restricted
stock option plan -- -- -- -- -- 1
Redemption of preferred stock -- -- -- -- -- (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Common stock outstanding and paid-in
capital at end of year 135,635 328 134,976 317 134,047 299
- ------------------------------------------------------------------------------------------------------------------------------------
Retained Earnings
Balance at beginning of year 1,033 1,050 891
Net income (loss) (136) (10) 169
Change in subsidiaries' year end -- (7) (10)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 897 1,033 1,050
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity Before Adjustments 1,225 1,350 1,349
Accumulated Other Comprehensive Income (Loss)
Foreign Currency Translation Adjustment
Balance at beginning of year (34) 22 83
Aggregate translation adjustment, net of deferred tax benefit (110) (56) (61)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year (144) (34) 22
- ------------------------------------------------------------------------------------------------------------------------------------
Minimum Pension Liability Adjustment
Balance at beginning of year (45) (37) (35)
Change during year, net of deferred tax (expense) benefit 2 (8) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year (43) (45) (37)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Accumulated Other Comprehensive Loss (187) (79) (15)
Total Shareholders' Equity $ 1,038 $ 1,271 $ 1,334
====================================================================================================================================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
VENATOR GROUP, INC. | 31
<PAGE> 34
Consolidated Statements of Cash Flows
================================================================================
<TABLE>
<CAPTION>
(in millions) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
From Operating Activities
Net income (loss) $(136) $ (10) $ 169
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities of continuing operations:
Net loss on disposal of discontinued operations, net of tax 113 195 --
Loss from discontinued operations, net of tax 26 28 40
Depreciation and amortization 152 122 114
Impairment charge 28 1 5
Gains on sales of real estate (82) (12) --
Gain on sales of assets and investments (19) -- --
Deferred income taxes 30 10 22
Change in assets and liabilities, net of acquisitions:
Merchandise inventories (78) (111) 49
Accounts payable and other accruals 16 67 58
Repositioning and restructuring reserves (16) (47) (63)
Income taxes payable (27) (103) (32)
Other, net (18) 9 (31)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities of continuing operations (11) 149 331
- ------------------------------------------------------------------------------------------------------------------------------------
From Investing Activities
Proceeds from sales of real estate 151 20 14
Proceeds from sales of assets and investments 22 -- 16
Capital expenditures (549) (249) (86)
Payments for businesses acquired, net of cash acquired (29) (148) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities of continuing operations (405) (377) (56)
- ------------------------------------------------------------------------------------------------------------------------------------
From Financing Activities
Increase (decrease) in short-term debt 250 -- (69)
Reduction in long-term debt (15) (10) (19)
Reduction in capital lease obligations (3) (2) (3)
Issuance of common stock 10 16 7
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities of continuing operations 242 4 (84)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Cash from Discontinued Operations 288 107 --
Effect of Exchange Rate Fluctuations on Cash and Cash Equivalents (2) 1 (4)
Net Change in Cash and Cash Equivalents 112 (116) 187
Cash and Cash Equivalents at Beginning of Year 81 197 10
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 193 $ 81 $ 197
====================================================================================================================================
Cash Paid During the Year:
Interest $ 60 $ 41 $ 54
Income taxes $ 16 $ 51 $ 53
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
32 | VENATOR GROUP, INC.
<PAGE> 35
Notes to Consolidated Financial Statements
================================================================================
1. Summary of Significant Accounting Policies
- --------------------------------------------------------------------------------
Basis of Presentation
The consolidated financial statements include the accounts of Venator Group,
Inc. and its domestic and international subsidiaries (the "Company"), all of
which are wholly owned. All significant intercompany amounts have been
eliminated. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent liabilities at the date of the financial statements,
and the reported amounts of revenue and expense during the reporting period.
Actual results are not expected to differ significantly from those estimates.
Name Change
The Company changed its name to Venator Group, Inc. (formerly Woolworth
Corporation) effective June 11, 1998.
Reporting Year
Beginning with 1998, the reporting period for the Company and its subsidiaries
is the Saturday closest to the last day in January, representing the 52 weeks
ended January 30, 1999. Previously, the reporting period ended on the last
Saturday in January. The 1997 reporting year represents the 53 weeks ended
January 31, 1998. The 1996 reporting year represents the 52 weeks ended January
25, 1997. References to years in this annual report relate to fiscal years
rather than calendar years.
In 1997, the Company changed the reporting period for its Foot Locker
Europe operations from a calendar year ending December 31, to the 53-week period
ended on the last Saturday in January. The results of operations for the period
from January 1 through January 31, 1998 were charged to retained earnings for
the reporting year ended January 31, 1998 in order to report only 12 months'
operating results.
In 1996, the Company changed the reporting period for its German operations
from a calendar year ending December 31, to the 52-week period ended on the last
Saturday in January. The results of operations for the period from January 1
through January 25, 1997 were charged to retained earnings for the reporting
year ended January 25, 1997 in order to report only 12 months' operating
results.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
Merchandise Inventories
Merchandise inventories are valued at the lower of cost or market using the
retail method. Cost is determined on the last-in, first-out (LIFO) basis for
most domestic inventories and on the first-in, first-out (FIFO) basis for
international inventories.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation and
amortization. Significant additions and improvements to property and equipment
are capitalized. Maintenance and repairs are charged to current operations as
incurred. Major renewals or replacements that substantially extend the useful
life of an asset are capitalized and depreciated.
Capitalized Software
Capitalized software included in property and equipment reflects certain costs
related to software developed for internal use that are capitalized and
amortized, after substantial completion of the project, on a straight-line basis
over periods not exceeding 8 years.
Depreciation and Amortization
Owned property and equipment is depreciated on a straight-line basis over the
estimated useful lives of the assets: 25 to 45 years for buildings and 3 to 10
years for furniture, fixtures and equipment. Property and equipment under
capital leases and improvements to leased premises are amortized on a
straight-line basis over the shorter of the estimated useful life of the asset
or the remaining lease term.
Intangible Assets
Intangible assets primarily reflect goodwill. Goodwill represents the excess
purchase price over the fair value of assets acquired and is amortized on a
straight-line basis over periods not exceeding 40 years. Goodwill arising from
acquisitions made since 1995 is amortized over periods not exceeding 20 years.
Recoverability of goodwill is evaluated based upon estimated future
profitability and cash flows. Accumulated amortization amounted to $50.2 million
and $41.8 million at January 30, 1999 and January 31, 1998, respectively.
Derivative Financial Instruments
Derivative financial instruments are used by the Company to manage its interest
rate and international currency exposures. The Company does not hold derivative
financial instruments for trading or speculative purposes. For interest rate
swap agreements, the interest rate differential to be paid or received under the
agreement is recognized over the life of the swap agreement and is included as
an adjustment to interest expense. The carrying amount of each interest rate
swap is reflected in the Consolidated Balance Sheets as a current receivable or
payable as appropriate. For forward foreign exchange contracts, gains and losses
designated as hedges of inventory purchases are deferred and included in the
cost of inventory.
VENATOR GROUP, INC. | 33
<PAGE> 36
================================================================================
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"), which establishes accounting and
reporting standards for derivative instruments and hedging activities. The
Company will adopt SFAS No. 133 in 2000 and is in the process of evaluating its
impact on the consolidated financial statements.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to various
market data and other valuation techniques as appropriate. The carrying value of
cash and cash equivalents, other current receivables and short-term debt
approximate fair value. Quoted market prices of the same or similar instruments
are used to determine fair value of long-term debt, interest rate swaps and
forward foreign exchange contracts. Discounted cash flows are used to determine
the fair value of long-term receivables and mortgages if quoted market prices on
these instruments are unavailable.
Recoverability of Long-Lived Assets
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" ("SFAS No. 121"), an impairment loss is recognized whenever
events or changes in circumstances indicate that the carrying amounts of
long-lived tangible and intangible assets may not be recoverable. Assets are
grouped and evaluated at the lowest level for which there are identifiable cash
flows that are largely independent of the cash flows of other groups of assets.
The Company has identified this lowest level to be principally individual
stores. The Company considers historical performance and future estimated
results in its evaluation of potential impairment and then compares the carrying
amount of the asset to the estimated future cash flows expected to result from
the use of the asset. If the carrying amount of the asset exceeds estimated
expected undiscounted future cash flows, the Company measures the amount of the
impairment by comparing the carrying amount of the asset to its fair value. The
estimation of fair value is generally measured by discounting expected future
cash flows at the rate the Company utilizes to evaluate potential investments.
The Company estimates fair value based on the best information available using
estimates, judgments and projections as considered necessary.
Stock-Based Compensation
The Company accounts for stock-based compensation by applying Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB No. 25") as permitted by Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," ("SFAS No. 123"). In accordance
with APB No. 25, compensation expense is not recorded for options granted if the
option price is equal to the quoted market price at the date of grant.
Compensation expense is also not recorded for employee purchases of stock under
the 1994 Stock Purchase Plan since the plan is non- compensatory as defined in
APB No. 25.
Income Taxes
The Company determines its deferred tax provision under the liability method,
whereby deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax bases of assets and
liabilities and their reported amounts using presently enacted tax rates.
Deferred tax assets are recognized for tax credit and net operating loss
carryforwards, reduced by a valuation allowance which is established when "it is
more likely than not" that some portion or all of the deferred tax assets will
not be realized. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment
date.
Provision for U.S. income taxes on undistributed earnings of foreign
subsidiaries is made only on those amounts in excess of the funds considered to
be permanently reinvested.
Store Pre-Opening and Closing Costs
Store pre-opening costs are charged to expense as incurred. In the event a store
is closed before its lease has expired, the estimated lease obligation, less
sublease rental income, is provided for when a decision to close the store is
made.
Foreign Currency Translation
The functional currency of the Company's international operations is the
applicable local currency. The translation of the applicable foreign currency
into U.S. dollars is performed for balance sheet accounts using current exchange
rates in effect at the balance sheet date and for revenue and expense accounts
using the weighted-average rates of exchange prevailing during the year. The
unearned gains and losses resulting from such translation are included as a
separate component of accumulated other comprehensive income (loss) within
shareholders' equity.
34 | VENATOR GROUP, INC.
<PAGE> 37
================================================================================
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
outstanding assuming dilution follows:
<TABLE>
<CAPTION>
(in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted-average common
shares outstanding 135.4 134.6 133.5
Incremental common shares issuable .5 1.2 .8
- --------------------------------------------------------------------------------
Weighted-average common shares
outstanding assuming dilution 135.9 135.8 134.3
================================================================================
</TABLE>
Options with an exercise price greater than the average market price were
not included in the computation of diluted earnings per share and would not have
had a significant impact on diluted earnings per share.
Reclassifications
Certain balances in prior fiscal years have been reclassified to conform with
the presentation adopted in the current fiscal year.
As discussed in note 5 to the consolidated financial statements, all
financial statements and related footnotes have been restated to reflect the
discontinued operations.
2. Acquisitions
- --------------------------------------------------------------------------------
On February 26, 1998, the Company acquired 94 Athletic Fitters stores from
Athletic Fitters, Inc. ("Athletic Fitters"), a Minneapolis-based company, for a
cash price of approximately $29 million. This acquisition was accounted for as a
purchase and the resulting intangible assets of approximately $12 million are
amortized using the straight-line method over 10 years.
On January 30, 1997, the Company acquired Eastbay, Inc. ("Eastbay") in a
transaction accounted for as a purchase. Under the purchase agreement,
stockholders of Eastbay received cash in amounts between $22 and $24 for each of
their shares, for a total acquisition cost of $140 million. The Company's
consolidated results of operations include those of Eastbay beginning with the
date the acquisition was consummated. The excess of cost over net assets
acquired of approximately $107 million is amortized using the straight-line
method over 20 years.
On August 18, 1997, the Company acquired the assets of Koenig Sporting
Goods, Inc. for approximately $8 million in cash in a transaction that was
accounted for as a purchase. The Company has successfully converted 21 stores
into the Champs Sports format.
3. Impairment of Long-Lived Assets
- --------------------------------------------------------------------------------
In 1998, the Company recorded a non-cash pre-tax charge of $28 million ($17
million after-tax), which represented impairment of long-lived assets such as
properties, store fixtures and leasehold improvements. Of the total impairment
loss recognized, $19 million related to the Global Athletic Group and $7 million
related to the Northern Group. Formats included in the "All Other" category were
impaired by $2 million. Pre-tax impairment was $1 million and $5 million for
1997 and 1996 for continuing operations, respectively. The impairment charges
are included in selling, general and administrative expenses.
VENATOR GROUP, INC. | 35
<PAGE> 38
================================================================================
4. Segment Information
- --------------------------------------------------------------------------------
On January 30, 1999, the Company adopted Statement of Financial Accounting
Standards No. 131, " Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"), which establishes criteria to determine
reportable information about operating segments using the management approach.
SFAS No. 131 also requires disclosures about products, geographic areas, and
major customers.
The Company has determined that its reportable segments are those that are
based on its method of internal reporting, which disaggregates its business by
product category. The Company's reportable segments are the Global Athletic
Group and the Northern Group. The Global Athletic Group sells branded athletic
footwear and apparel through its various retail and catalog formats. The
Northern Group specializes in casual and career apparel for women, and casual
apparel for men and children. The Afterthoughts jewelry format and The San
Francisco Music Box and Gift Company, among others, are reflected in the "All
Other" category.
The accounting policies of the segments are the same as those described in
the "Summary of Significant Accounting Policies." There are no intersegment
sales. The Company evaluates performance based on several factors, of which the
primary financial measure is operating results. Operating results reflect
earnings before corporate expense, corporate gains on sales of real estate,
interest, and income taxes.
<TABLE>
<CAPTION>
Sales
(in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Athletic Group $3,753 $3,749 $3,634
Northern Group 415 455 426
All Other 387 408 444
- --------------------------------------------------------------------------------
Total sales $4,555 $4,612 $4,504
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Operating Results
(in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Athletic Group $ 12 $ 375 $ 461
Northern Group (26) 40 42
All Other 27 3 (45)
- --------------------------------------------------------------------------------
Operating profit 13 418 458
Corporate expense, net 8 50 60
Interest expense, net 44 35 50
- --------------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes $ (39) $ 333 $ 348
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Depreciation and
Amortization Capital Expenditures Total Assets
-------------------------- -------------------------- --------------------------
(in millions) 1998 1997 1996 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Global Athletic Group $ 102 $ 81 $ 77 $ 405 $ 138 $ 54 $1,874 $1,318 $1,082
Northern Group 13 10 11 37 23 10 297 250 276
All Other 12 12 14 28 14 5 135 142 157
Corporate 25 19 12 79 74 17 473 484 412
Discontinued operations, net 97 604 880
- ------------------------------------------------------------------------------------------------------------------------------------
Total Company $ 152 $ 122 $ 114 $ 549 $ 249 $ 86 $2,876 $2,798 $2,807
====================================================================================================================================
</TABLE>
Sales and long-lived asset information by geographic area as of and for the
fiscal years ended January 30, 1999, January 31, 1998, and January 25, 1997 are
presented below. Sales are attributed to the country in which the sales
originate, which is where the legal subsidiary is domiciled. Long-lived assets
reflect property and equipment. No individual country included in the Other
International category is significant.
<TABLE>
<CAPTION>
Sales
(in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $3,811 $3,857 $3,706
Canada 404 456 477
Other International 340 299 321
- --------------------------------------------------------------------------------
Total sales $4,555 $4,612 $4,504
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Long-Lived Assets
(in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $881 $548 $407
Canada 34 38 40
Other International 59 39 33
- --------------------------------------------------------------------------------
Total long-lived assets $974 $625 $480
================================================================================
</TABLE>
36 | VENATOR GROUP, INC.
<PAGE> 39
================================================================================
5. Discontinued Operations
On September 22, 1998, the Company announced that it was exiting its
International General Merchandise segment. On October 22, 1998, the Company
completed the sale of its 357 store German general merchandise business for $563
million. The Company 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 of 1998. The reserve balance at January 30, 1999
of $41 million represents the costs associated with the disposal of the
remaining business of the International General Merchandise segment, which will
be completed in 1999.
On September 16, 1998, the Company announced that it was exiting its
Specialty Footwear segment including 467 Kinney Shoe stores and 103 Footquarters
stores. The Company expects to convert approximately 90 of these locations to
its Lady Foot Locker, Kids Foot Locker and Colorado formats. Additionally, the
Company will launch a new athletic outlet chain utilizing 29 Footquarters
locations and 40 existing Foot Locker and Champs Sports outlet stores. The
remaining businesses are expected to close or be disposed of in 1999. The
Company recorded a charge to earnings of $243 million before-tax, or $160
million after-tax, in the third quarter of 1998 for the loss on disposal of the
Specialty Footwear segment. Major components of the charge include estimated
cash outlays for lease liabilities and other occupancy costs of $91 million,
operating losses and other expenses during the shutdown period of $68 million,
and severance and personnel costs of $19 million. Non-cash charges reflect asset
and inventory write-downs of $65 million. In the fourth quarter of 1998, the
Company recorded a reduction to the reserve of $9 million before-tax, or $5
million after-tax, reflecting revisions to original estimates based on actual
experience primarily related to better than expected results of inventory
liquidation. Disposition activity of $113 million for the period from September
16, 1998 to January 30, 1999 was charged to the reserve. The remaining reserve
balance of $121 million at January 30, 1999 primarily includes real estate and
other asset disposition costs.
On July 17, 1997, the Company 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 Company has converted many of the prime locations
into 155 stores including: Foot Locker, Champs Sports, and other athletic or
specialty formats. Net disposition activity for 1998 and 1997 was approximately
$51 million and $220 million, respectively, which represented the payments for
leasehold and real estate disposition expenses, severance and benefit costs and
other related expenses. Gains from planned disposals of real estate related to
domestic general merchandise operations were $34 million in the fourth quarter
of 1998, which reflected the disposition of leased and owned stores in prime
real estate locations. As a result of these transactions and other actual
experience better than anticipated, the Company reduced the reserve by $4
million before-tax, $3 million after-tax. The remaining reserve balance of $35
million at January 30, 1999 consists principally of real estate disposition
costs.
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 Consolidated Statements of Operations.
Sales and net loss from discontinued operations for fiscal years 1998, 1997
and 1996 through the respective date of discontinuance of each segment are
presented below. The net loss from discontinued operations for each of the years
presented includes interest expense allocations based on intercompany debt
balances attributable to each segment. The interest expense allocation for the
Specialty Footwear segment amounted to $5 million, $6 million, and $4 million in
1998, 1997 and 1996, respectively. Also included in 1997 and 1996 is allocated
interest of $8 million and $14 million, respectively, for the Domestic General
Merchandise segment. No interest expense was allocated for the International
General Merchandise segment.
<TABLE>
<CAPTION>
Sales
(in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
International General Merchandise $ 842 $1,479 $1,803
Specialty Footwear 301 533 710
Domestic General Merchandise -- 427 1,075
- --------------------------------------------------------------------------------
Total sales $1,143 $2,439 $3,588
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Net Loss
(in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
International General Merchandise $ (9) $ 8 $(11)
Specialty Footwear (17) (8) (5)
Domestic General Merchandise -- (28) (24)
- --------------------------------------------------------------------------------
Total net loss $(26) $(28) $(40)
================================================================================
</TABLE>
<TABLE>
<CAPTION>
The following is a summary of the net assets of discontinued operations:
(in millions) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
International General Merchandise
Assets $ 47 $786
Liabilities 11 354
- --------------------------------------------------------------------------------
Net assets of discontinued operations $ 36 $432
- --------------------------------------------------------------------------------
Specialty Footwear
Assets $ 63 $193
Liabilities 17 28
- --------------------------------------------------------------------------------
Net assets of discontinued operations $ 46 $165
- --------------------------------------------------------------------------------
Domestic General Merchandise
Assets $ 23 $ 28
Liabilities 8 21
- --------------------------------------------------------------------------------
Net assets of discontinued operations $ 15 $ 7
- --------------------------------------------------------------------------------
Total net assets of discontinued operations $ 97 $604
================================================================================
</TABLE>
The assets of the discontinued operations consist primarily of inventory and
fixed assets. The liabilities of the International
VENATOR GROUP, INC. | 37
<PAGE> 40
================================================================================
General Merchandise segment in 1997 predominantly included amounts due to
vendors and pension liabilities. The decrease in net assets of the International
General Merchandise discontinued operations in 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.
6. Repositioning and Restructuring Reserves
- --------------------------------------------------------------------------------
The Company recorded charges of $558 million in 1993 and $390 million in 1991 to
reflect the anticipated costs to sell or close under-performing specialty and
general merchandise stores in the United States and Canada. Under the 1993
repositioning program, approximately 970 stores were identified for closing and
approximately 13,000 store and distribution center employees were terminated.
Approximately 900 stores were closed under the 1991 restructuring program, which
resulted in the termination of approximately 7,700 store employees and the
transfer of 2,300 employees to other stores.
Included in operating results are adjustments of $3 million and $22 million for
1998 and 1997, respectively, which reflects revisions based on actual experience
better than original estimates relating to lease costs and operating expenses.
<TABLE>
<CAPTION>
The activity in the reserves was as follows:
(in millions) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of year $ 37 $ 84
Interest on net present value of lease obligations 4 5
Cash payments (17) (30)
Adjustment for revision of estimates (3) (22)
- --------------------------------------------------------------------------------
Balance at end of year $ 21 $ 37
================================================================================
</TABLE>
Components of the balance are as follows:
(in millions) 1998 1997
- --------------------------------------------------------------------------------
Real estate and related occupancy costs $16 $32
Facilities-related costs 5 5
- --------------------------------------------------------------------------------
$21 $37
================================================================================
To date, the Company has substantially completed its negotiations to cancel
leases or sell the properties in the reserve. The remaining balance, which is
included in accrued and other liabilities, will be required to satisfy the lease
cancellations or property sales over the next few years.
<TABLE>
<CAPTION>
7. Merchandise Inventories
- --------------------------------------------------------------------------------
(in millions) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
LIFO inventories $642 $582
FIFO inventories 195 172
- --------------------------------------------------------------------------------
Total merchandise inventories $837 $754
- --------------------------------------------------------------------------------
Excess of current cost (FIFO) over stated LIFO cost $ 1 $ 1
================================================================================
</TABLE>
<TABLE>
<CAPTION>
8. Other Current Assets
- --------------------------------------------------------------------------------
(in millions) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Net receivables $ 98 $ 78
Operating supplies and prepaid expenses 26 29
Deferred taxes 22 25
Other 2 3
- --------------------------------------------------------------------------------
$148 $135
================================================================================
</TABLE>
<TABLE>
<CAPTION>
9. Property and Equipment, Net
- --------------------------------------------------------------------------------
(in millions) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Land $ 5 $ 10
Buildings 38 89
Furniture, fixtures and equipment:
Owned 1,019 815
Leased 33 24
- --------------------------------------------------------------------------------
1,095 938
Less: accumulated depreciation (476) (535)
- --------------------------------------------------------------------------------
619 403
Alterations to leased and owned buildings,
net of accumulated amortization 355 222
- --------------------------------------------------------------------------------
$ 974 $ 625
================================================================================
</TABLE>
<TABLE>
<CAPTION>
10. Accrued Liabilities
- --------------------------------------------------------------------------------
(in millions) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Payroll and related costs $ 48 $ 55
Pension and postretirement benefits 40 38
Taxes other than income taxes 34 25
Store closings and real estate related costs 27 25
Repositioning and restructuring 11 19
Other operating costs 136 89
- --------------------------------------------------------------------------------
$296 $251
================================================================================
</TABLE>
<TABLE>
<CAPTION>
11. Short-Term Debt
- --------------------------------------------------------------------------------
($ in millions) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Bank loans $250 $ --
================================================================================
Weighted-average interest rate on year-end balance 5.63% --
================================================================================
</TABLE>
At January 30, 1999, unused lines of credit under which the Company may borrow
funds totaled $262 million, of which domestic credit lines totaled $250 million
and international lines totaled $12 million. The $250 million domestic credit
lines consisted of a revolving credit agreement with 12 lending institutions for
general corporate purposes. The $12 million international credit lines consisted
of overdraft facilities maintained for temporary needs. The Company has
additional informal agreements with certain banks in the United States.
38 | VENATOR GROUP, INC.
<PAGE> 41
================================================================================
Due to lower than planned earnings and the charges related to the
discontinuance of its Specialty Footwear segment in the third quarter, the
Company 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 Company was prohibited from paying
cash dividends or repurchasing, redeeming, retiring, or acquiring any shares of
its capital stock. On March 19, 1999, the Company amended its revolving credit
agreement, (see note 23).
At the Company's election in 1997, the $1 billion credit facility was
reduced to $500 million and the terms modified. Up-front fees paid under the
modified agreement are amortized over the life of the facility on a pro-rata
basis. In addition, the Company paid an annual facility fee based on the
Company's 1998 credit rating of 0.15 percent based on the total available
facility.
12. Long-Term Debt and Obligations under Capital Leases
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Following is a summary of long-term debt and obligations under capital leases:
(in millions) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
8.5% debentures payable 2022 $200 $200
7.0% debentures payable 2000 200 200
6.98% to 7.43% medium-term notes
payable through 2002 90 105
Other 1 1
- --------------------------------------------------------------------------------
Total long-term debt 491 506
Obligations under capital leases 26 21
- --------------------------------------------------------------------------------
517 527
Less: current portion 6 19
- --------------------------------------------------------------------------------
$511 $508
================================================================================
</TABLE>
Maturities of long-term debt and minimum rent payments under capital leases in
future periods are:
<TABLE>
<CAPTION>
Long-Term Capital
(in millions) Debt Leases Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1999 $ -- $ 7 $ 7
2000 201 5 206
2001 50 1 51
2002 40 1 41
2003 -- -- --
Thereafter 200 14 214
- --------------------------------------------------------------------------------
491 28 519
Less: Imputed interest -- 2 2
Current portion -- 6 6
- --------------------------------------------------------------------------------
$491 $ 20 $511
- --------------------------------------------------------------------------------
</TABLE>
13. Leases
The Company is obligated under capital and operating leases for a major portion
of its store properties. Some of the store leases contain purchase or renewal
options with varying terms and conditions. Management expects that in the normal
course of business, expiring leases will generally be renewed or, upon making a
decision to relocate, replaced by leases on other premises. Operating lease
periods generally range from 5 to 10 years with options to renew, with terms
ranging from 5 to 10 years. Certain leases provide for additional rent payments
based on a percentage of store sales. The present value of operating leases is
discounted using various interest rates ranging from 6 percent to 8 percent.
Rent expense consists of the following:
<TABLE>
<CAPTION>
(in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Rent $ 540 $ 490 $ 485
Contingent rent based on sales 12 19 23
Sublease income (7) (11) --
- --------------------------------------------------------------------------------
Total rent expense $ 545 $ 498 $ 508
================================================================================
</TABLE>
Future minimum lease payments under non-cancelable operating leases are:
<TABLE>
<CAPTION>
(in millions)
- --------------------------------------------------------------------------------
<S> <C>
1999 $ 374
2000 342
2001 301
2002 261
2003 215
Thereafter 601
- --------------------------------------------------------------------------------
Total operating lease commitments $2,094
================================================================================
Present value of operating lease commitments $1,630
================================================================================
</TABLE>
14. Other Liabilities
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in millions) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Pension benefits $ 65 $103
Other postretirement benefits 186 198
Repositioning and restructuring 10 18
Other 72 73
- --------------------------------------------------------------------------------
$333 $392
================================================================================
</TABLE>
VENATOR GROUP, INC. | 39
<PAGE> 42
================================================================================
15. Financial Instruments and Risk Management
Foreign Exchange Risk Management
The Company enters into forward foreign exchange and option contracts to reduce
the effect of fluctuations in currency exchange rates. Exposures arising from
short-term intercompany transactions and inventory purchases are managed through
the use of forward and option contracts. Determination of hedge activity is
based upon market conditions, magnitude of inventory commitments and perceived
risks. All contracts mature within one year.
The following table presents gross forward foreign exchange commitments, by
currency and type:
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
($U.S. in millions) Buy Sell Buy Sell
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inventory purchases:
U.S. dollar $79 $-- $61 $--
Other currencies $-- $-- $-- $11
Intercompany:
Canadian dollar $-- $-- $37 $--
German mark $29 $11 $32 $--
Netherlands guilder $-- $11 $ 2 $--
- --------------------------------------------------------------------------------
</TABLE>
Fair Value of Financial Instruments
The carrying value and estimated fair value of long-term debt was $491 million
and $454 million, respectively, at January 30, 1999, and $506 million and $539
million, respectively, at January 31, 1998. The carrying value approximates fair
value for all other financial instruments.
Interest Rate Risk Management
The Company has used interest rate swaps to manage its exposure to fluctuations
in interest rates. In October 1992, the Company entered into a $200 million,
five-year swap agreement that matured in October 1997. The swap agreement
effectively converted the interest rate on the Company's 8.5 percent debentures
to a floating rate equal to the six-month LIBOR plus 3.05 percent. The effective
interest rate on the debentures was 8.87 percent in 1997 and 8.81 percent in
1996.
Credit Risk
Credit risk of interest rate swaps and forward foreign exchange contracts is
considered minimal, as management closely monitors the financial condition of
the counter-parties to the contracts, which are financial institutions with
credit ratings of A- or higher.
Business Risk
The retailing business is highly competitive. Price, quality and selection of
merchandise, reputation, store location, advertising and customer service are
important competitive factors in the Company's business. The Company purchased
merchandise and supplies from thousands of vendors worldwide. The Company
purchased approximately 44 percent of its 1998 merchandise from one major
vendor. The Company considers vendor relations to be satisfactory.
16. Income Taxes
- --------------------------------------------------------------------------------
Following are the domestic and international components of pre-tax income
(loss):
<TABLE>
<CAPTION>
(in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $(19) $287 $313
International (20) 46 35
- --------------------------------------------------------------------------------
Total pre-tax $(39) $333 $348
================================================================================
</TABLE>
The income tax (benefit) provision consists of the following:
<TABLE>
<CAPTION>
(in millions) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ (70) $ 68 $ 75
State and local (2) 16 23
International -- 26 19
- --------------------------------------------------------------------------------
Total current tax provision (benefit) (72) 110 117
- --------------------------------------------------------------------------------
Deferred:
Federal 27 18 14
State and local 2 (9) --
International 1 1 8
- --------------------------------------------------------------------------------
Total deferred tax provision 30 10 22
- --------------------------------------------------------------------------------
Total income tax provision (benefit) $(42) $ 120 $ 139
================================================================================
</TABLE>
Provision has been made in the accompanying Consolidated Statements of
Operations for additional income taxes applicable to dividends received or
expected to be received from international subsidiaries. The amount of
unremitted earnings of international subsidiaries, for which no such tax is
provided and which is considered to be permanently reinvested in the
subsidiaries, totaled $216 million at January 30, 1999.
A reconciliation of the significant differences between the federal
statutory income tax rate and the effective income tax rate on pre-tax income
(loss) is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate (35.0)% 35.0% 35.0%
State and local income taxes, net of
federal tax benefit -- 4.4 4.6
International income taxed at varying rates 9.3 1.4 1.7
Foreign tax credit utilization (150.7) 0.9 2.7
Increase (decrease) in valuation allowance 17.7 (4.3) --
Work opportunity credit (0.6) -- --
Gain on surrender of company-owned
life insurance 48.5 -- --
Goodwill amortization 7.4 -- --
Other, net (4.3) (1.4) (3.9)
- -------------------------------------------------------------------------------
Effective income tax rate (107.7)% 36.0% 40.1%
===============================================================================
</TABLE>
40 | VENATOR GROUP, INC.
<PAGE> 43
================================================================================
Items that gave rise to significant portions of the deferred tax accounts are as
follows:
<TABLE>
<CAPTION>
(in millions) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Tax loss/credit carryforwards $ 157 $ 167
Employee benefits 116 127
Reserve for discontinued operations 120 60
Repositioning and restructuring reserves 18 32
Property and equipment 86 50
Other -- 6
- -------------------------------------------------------------------------------
Total deferred tax assets 497 442
Valuation allowance (87) (44)
- -------------------------------------------------------------------------------
Total deferred tax assets, net 410 398
- -------------------------------------------------------------------------------
Deferred tax liabilities:
Inventories 14 37
Other 16 --
- -------------------------------------------------------------------------------
Total deferred tax liabilities 30 37
- -------------------------------------------------------------------------------
Net deferred tax asset $ 380 $ 361
================================================================================
Balance Sheet caption reported in:
Other current assets $ 22 $ 25
Deferred taxes 358 336
- -------------------------------------------------------------------------------
$ 380 $ 361
================================================================================
</TABLE>
As of January 30, 1999, the Company had a valuation allowance of $87
million to reduce its deferred tax assets to estimated realizable value. The
valuation allowance primarily relates to the deferred tax assets arising from
state tax loss carryforwards of certain domestic operations, tax loss
carryforwards of certain European operations and tax loss and capital loss
carryforwards of the Canadian operations, as well as other discontinued
operations. The net change in the total valuation allowance for the year ended
January 30, 1999 was principally due to the potential expiration of foreign and
state tax loss carryforwards.
Based upon the level of historical taxable income and projections for
future taxable income over the periods in which the temporary differences are
anticipated to reverse, management believes it is more likely than not that the
Company will realize the benefits of these deductible differences, net of the
valuation allowances at January 30, 1999. However, the amount of the deferred
tax asset considered realizable could be adjusted in the future if estimates of
taxable income are revised.
At January 30, 1999, the Company had international operating loss
carryforwards of approximately $222 million. Those expiring between 1999 and
2004 are $190 million and those that do not expire are $32 million. The Company
has state net operating loss carryforwards with a potential tax benefit of $34
million, which principally relates to the 16 states where the Company does not
file a combined return. These loss carryforwards expire between 1999 and 2018.
Foreign tax credits of approximately $9 million expiring in 2002 are also
available to the Company. The Company has U.S. Federal alternative minimum tax
credits of approximately $18 million which do not expire.
17. Retirement Plans and Other Benefits
- --------------------------------------------------------------------------------
Pension and Other Postretirement Plans
The Company has defined benefit pension plans covering most of its employees,
which are funded in accordance with the provisions of the laws of the countries
where the plans are in effect. Plan assets consist primarily of stocks, bonds
and temporary investments. In addition to providing pension benefits, the
Company sponsors postretirement medical and life insurance plans, which are
available to most of its retired U.S. employees. These plans are contributory
and are not funded.
The following tables set forth the plans' changes in benefit obligations
and plan assets, funded status and amounts recognized in the Consolidated
Balance Sheets:
<TABLE>
<CAPTION>
Pension Postretirement
Benefits Benefits
-------------- ---------------
(in millions) 1998 1997 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation
at beginning of year $ 776 $ 806 $ 112 $ 117
Service cost 8 9 -- --
Interest cost 50 56 5 8
Plan participants' contributions -- -- 4 5
Actuarial (gain) loss 8 7 (35) (7)
Foreign currency translation
adjustments (4) (8) -- --
Benefits paid (99) (111) (11) (14)
Curtailment -- 17 -- 3
- --------------------------------------------------------------------------------
Benefit obligation at end of year $ 739 $ 776 $ 75 $ 112
- --------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at
beginning of year $ 626 $ 651
Actual return on plan assets 62 69
Employer contribution 37 24
Foreign currency translation
adjustments (3) (7)
Benefits paid (100) (111)
- --------------------------------------------------------------------------------
Fair value of plan assets
at end of year $ 622 $ 626
- --------------------------------------------------------------------------------
Funded status
Funded status $(117) $(150) $ (75) $(112)
Unrecognized net asset
at transition (3) (12) -- --
Unrecognized prior service cost 8 11 -- --
Unrecognized net (gain) loss 87 88 (118) (93)
- --------------------------------------------------------------------------------
Accrued benefit liability $ (25) $ (63) $(193) $(205)
================================================================================
Balance Sheet caption reported in:
Other liabilities $ (65) $(103) $(186) $(198)
Accrued liabilities (33) (31) (7) (7)
Intangible assets -- 2 -- --
Other assets 1 1 -- --
Accumulated other
comprehensive income, pre-tax 72 68 -- --
- --------------------------------------------------------------------------------
$ (25) $ (63) $(193) $(205)
================================================================================
</TABLE>
VENATOR GROUP, INC. | 41
<PAGE> 44
================================================================================
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $736 million, $714 million, and $618 million,
respectively, as of January 30, 1999, and $773 million, $753 million, and $621
million, respectively, as of January 31, 1998.
In connection with the sale of its German general merchandise business on
October 22, 1998, the Company disposed of its accumulated benefit obligation
representing the unfunded German pension plan. The discontinuance of the
Specialty Footwear segment had no impact on the accumulated pension and
postretirement benefit obligations as of January 30, 1999. The shutdown was
assumed to occur at the end of the year.
During 1997, the Company revised the actuarial estimates of a supplemental
retirement plan liability for executives resulting in an $8 million charge to
pension expense. The discontinuance of the Domestic General Merchandise segment
in 1997 resulted in increases of $9 million and $3 million, respectively, in the
accumulated pension and postretirement benefit obligations as of January 31,
1998. The curtailment charges of $9 million and $3 million were included in the
1997 loss on disposal of discontinued operations.
Principal Assumptions
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
--------------------------- ----------------------------
1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted-average discount rate 6.71% 7.12% 7.55% 6.75% 7.00% 7.50%
Weighted-average rate of compensation increase 4.71% 4.95% 4.96% 5.00% 5.00% 5.00%
Weighted-average long-term rate of return on assets 9.87% 9.86% 9.79%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The components of net benefit expense are:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
--------------------------- ----------------------------
(in millions) 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 8 $ 9 $ 12 $ -- $ -- $ --
Interest cost 50 56 57 5 8 8
Expected return on plan assets (53) (54) (57) -- -- --
Amortization of net asset at transition (9) (9) (9) -- -- --
Amortization of prior service cost 3 3 4 -- -- --
Amortization of net (gain) loss 3 6 8 (9) (5) (5)
Curtailment -- 8 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net benefit expense (income) $ 2 $ 19 $ 15 $ (4) $ 3 $ 3
====================================================================================================================================
</TABLE>
The amortization period of the domestic plans' unrecognized gains and
losses in 1998 was changed to the average future life expectancy of inactive
plan participants, who now comprise the majority of plan participants, resulting
in decreases of approximately $4 million and $3 million, respectively, in net
pension and net postretirement benefit expense. Previously, the unrecognized
gains and losses were amortized over the average future working lifetime of
active plan participants.
In 1998, a medical plan dropout assumption for retirees was introduced to
the postretirement benefit obligation calculation. For measurement purposes, an
8.4 percent increase in the cost of covered health care benefits was assumed for
1998. The rate was assumed to decline gradually to five percent in 2008 and
remain at that level thereafter. A one percent increase in the health care cost
trend rate would increase the 1998 accumulated postretirement benefit obligation
by $4.6 million and the 1998 expense by $0.3 million. A one percent decrease in
the health care cost trend rate would decrease the 1998 accumulated
postretirement benefit obligation by $4.0 million and the 1998 expense by $0.3
million.
401(k) Plan
In January 1996, the Company established a savings plan under Section
401(k) of the Internal Revenue Code. This savings plan allows eligible employees
to contribute up to 15 percent of their compensation on a pre-tax basis. The
Company matches 25 percent of the first 4 percent of the employees'
contributions with Company stock. Effective January 1, 1998, such matching
Company contributions are vested incrementally over 5 years. The charge to
operations for the Company's matching contribution was $1.4 million, $1.3
million, and $1.5 million in 1998, 1997 and 1996, respectively.
42 | VENATOR GROUP, INC.
<PAGE> 45
================================================================================
18. Shareholder Rights Plan
- --------------------------------------------------------------------------------
Effective April 14, 1998, simultaneously with the expiration of the then
existing rights, the Company has issued one right for each outstanding share of
common stock. Each right entitles a shareholder to purchase one two-hundredth of
a share of Series B Participating Preferred Stock at an exercise price of $100,
subject to adjustment. Generally, the rights become exercisable only if a person
or group of affiliated or associated persons (i) becomes an "Interested
Shareholder" as defined in Section 912 of the New York Business Corporation Law
(an "Acquiring Person") or (ii) announces a tender or exchange offer that
results in that person or group becoming an Acquiring Person, other than
pursuant to an offer for all outstanding shares of the common stock of the
Company which the Board of Directors determines not to be inadequate and to
otherwise be in the best interests of, the Company and its shareholders. The
Company will be able to redeem the rights at $0.01 per right at any time during
the period prior to the 10th business day following the date a person or group
becomes an Acquiring Person.
Upon exercise of the right, each holder of a right will be entitled to
receive common stock (or, in certain circumstances, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the right. The rights, which cannot vote and cannot be transferred separately
from the shares of common stock to which they are presently attached, expire on
April 14, 2008 unless extended prior thereto by the Board, or earlier redeemed
or exchanged by the Company.
19. Stock Plans
- --------------------------------------------------------------------------------
Under the Company's 1998 Stock Option and Award Plan (the "1998 Plan"),
options to purchase shares of common stock may be granted to officers and key
employees at not less than the market price on the date of grant. Under the
plan, the Company may grant officers and other key employees, including those at
the subsidiary level, stock options, stock appreciation rights (SARs),
restricted stock or other stock-based awards. Unless a longer period is
established at the time of the option grant, up to one-half of each stock option
may be exercised on each of the first two anniversary dates of the date of
grant. Generally, for stock options granted beginning in 1996, one-third of each
stock option is exercisable on each of the first three anniversary dates of the
date of grant. The options terminate up to 10 years from the date of grant. The
1998 Plan provides for awards of up to 6,000,000 shares of the Company's common
stock. The number of shares reserved for issuance as restricted stock cannot
exceed 1,500,000 shares.
In addition, options to purchase shares of common stock remain outstanding
under the Company's 1995 and 1986 Stock Option Plans. The 1995 Stock Option and
Award Plan is substantially the same as the 1998 Plan. Options granted under the
1986 Stock Option and Award Plan generally become exercisable in two equal
installments on the first and the second anniversary of the date of grant.
In 1996, the Company established the Directors' Stock Plan (the "Directors'
Plan"). Under the Directors' Plan, non-employee directors receive 50 percent of
their annual retainer in shares of common stock and may elect to receive up to
100 percent of their retainer in common stock. The maximum number of shares of
common stock that may be issued under the Directors' Plan is 250,000 shares.
Under the Company's 1994 Stock Purchase Plan, participating employees may
contribute up to 10 percent of their annual compensation to acquire shares of
common stock at 85 percent of the lower market price on one of two specified
dates in each plan year. Of the 8,000,000 shares of common stock authorized for
purchase under the 1994 plan, 1,461 participating employees purchased 210,008
shares in 1998. To date, a total of 784,261 shares have been purchased under the
Stock Purchase Plan.
When common stock is issued under these plans, the proceeds from options
exercised or shares purchased are credited to common stock to the extent of the
par value of the shares issued and the excess is credited to additional paid-in
capital. When treasury common stock is issued, the difference between the
average cost of treasury stock used and the proceeds from options exercised or
shares awarded or purchased is charged or credited, as appropriate, to either
additional paid-in capital or retained earnings. The tax benefits relating to
amounts deductible for federal income tax purposes which are not included in
income for financial reporting purposes have been credited to additional paid-in
capital.
The Financial Accounting Standards Board issued SFAS No. 123, which
requires disclosure of the impact on earnings per share if the fair value method
of accounting for stock-based compensation is applied for companies electing to
continue to account for stock-based plans under APB No. 25. Accounting for the
Company's grants for stock-based compensation during the three-year period ended
January 30, 1999 in accordance with the fair value method provisions of SFAS No.
123 would have resulted in the following:
<TABLE>
<CAPTION>
(in millions, except per share amounts) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss):
As reported $ (136) $ (10) $ 169
Pro forma $ (142) $ (18) $ 165
Basic earnings per share:
As reported $ (1.00) $ (0.08) $ 1.26
Pro forma $ (1.05) $ (0.13) $ 1.23
Diluted earnings per share:
As reported $ (1.00) $ (0.07) $ 1.26
Pro forma $ (1.05) $ (0.13) $ 1.23
- --------------------------------------------------------------------------------
</TABLE>
These pro forma amounts are not expected to be indicative of the effects of
applying the fair-value based method on future earnings since the Company's
stock options vest over several periods.
VENATOR GROUP, INC. | 43
<PAGE> 46
================================================================================
The fair values of the Company's various stock option and purchase plans were
estimated at the grant date using a Black-Scholes option pricing model.
<TABLE>
<CAPTION>
Stock Option Plans Stock Purchase Plan
---------------------------------- -----------------------------------
1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted-average risk free rate of interest 4.57% 6.44% 6.05% 4.62% 5.84% 6.03%
Expected volatility 35% 30% 30% 29% 25% 25%
Weighted-average expected award life 2 years 2 years 2 years .7 years .7 years .7 years
Dividend yield -- -- -- -- -- --
Weighted-average fair value $ 7.67 $ 7.52 $ 5.31 $ 1.80 $ 6.44 $ 5.14
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The information set forth in the following table covers options granted under
the Company's stock option plans:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------- ------------------------- -------------------------
Weighted- Weighted- Weighted-
Number Average Number Average Number Average
(in thousands, except prices per share) of Shares Exercise Price of Shares Exercise Price of Shares Exercise Price
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of year 7,450 $ 21.45 7,376 $ 22.02 6,913 $ 24.13
Granted 2,537 $ 21.89 2,321 $ 21.68 1,757 $ 16.25
Exercised 260 $ 16.83 565 $ 16.76 159 $ 17.27
Expired or canceled 1,670 $ 25.39 1,682 $ 25.84 1,135 $ 26.59
- -----------------------------------------------------------------------------------------------------------------------------------
Options outstanding at end of year 8,057 $ 20.93 7,450 $ 21.45 7,376 $ 22.02
===================================================================================================================================
Options exercisable at end of year 4,429 $ 20.86 4,466 $ 22.34 5,155 $ 24.59
- -----------------------------------------------------------------------------------------------------------------------------------
Options available for future grant at end of year 6,131 1,896 3,798
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options outstanding and
exercisable at January 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ ------------------------
Weighted-Average Weighted- Weighted-
Range of Exercise Price Remaining Average Average
(in thousands, except prices per share) Shares Contractual Life Exercise Price Shares Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 4.63 to $15.38 1,744 7.0 $12.69 1,172 $13.97
$15.66 to $21.22 1,639 7.2 16.62 1,126 16.20
$21.25 to $24.69 1,909 7.6 22.76 969 23.25
$25.28 to $27.75 1,753 8.4 25.51 165 27.66
$28.13 to $34.25 1,012 2.8 30.71 997 30.75
- ------------------------------------------------------------------------------------------------------------------------------------
$ 4.63 to $34.25 8,057 6.9 $20.93 4,429 $20.86
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
44 | VENATOR GROUP, INC.
<PAGE> 47
================================================================================
20. Restricted Stock
- --------------------------------------------------------------------------------
In 1998, 60,000 restricted shares of common stock were granted to a key
employee. In 1994, 200,000 restricted shares of common stock were granted to an
officer of the Company. The market values of the shares at the date of grant
amounted to $0.6 million and $3.0 million, respectively, and are recorded within
shareholders' equity. The market values are being amortized as compensation
expense over the related vesting periods. The compensation expense was $0.3
million, $0.5 million, and $0.8 million in 1998, 1997 and 1996, respectively.
On February 1, 1999, the Company awarded 810,000 restricted shares of
common stock to several of its key employees. The market value of the shares at
the date of grant amounted to $4.3 million and will be recorded within
shareholders' equity and will be amortized as compensation expense over the
vesting period.
21. Other Income
- --------------------------------------------------------------------------------
On December 4, 1998, the Company completed the sale of its corporate
headquarters building in New York, the Woolworth Building, for gross proceeds of
$137.5 million, and leased back a portion of the building. Other income includes
a $73 million gain recognized on the building sale. The deferred gain of $29
million related to the leased back portion will be recognized over the lease
terms, through 2008.
In addition, other corporate properties were sold for $13 million in 1998
generating real estate gains of $9 million. The 1998 other income also includes
the $19 million gain on sale of the Garden Centers nursery business for proceeds
of $22 million.
22. Legal Proceedings
- --------------------------------------------------------------------------------
The only legal proceedings pending against the Company or its consolidated
subsidiaries consist of ordinary, routine litigation, including administrative
proceedings, incident to the businesses of the Company, as well as litigation
incident to the sale and disposition of businesses that have occurred in the
past several years. Management does not believe that the outcome of such
proceedings will have a material effect on the Company's consolidated financial
position or results of operations.
23. Subsequent Event
- --------------------------------------------------------------------------------
On March 19, 1999, the Company amended its revolving credit agreement. In
accordance with the amended agreement, the facility was reduced to $400 million,
with a further reduction to $300 million by February 15, 2000. If certain assets
are sold or debt or equity is issued, the revolving credit agreement may be
reduced earlier than February 2000 to $350 million. Under the terms of the
amended agreement, the Company is required to satisfy certain financial and
operating covenants, which include: maximum ratio of total debt to earnings
before interest, taxes, depreciation and amortization; minimum fixed charge
coverage ratio; minimum tangible net worth and limits on capital expenditures.
In addition, the Company is required to fund the repayment of the 7.0%
debentures, which are redeemable in June 2000, by February 15, 2000. This
facility is unsecured relating to the Company's inventory; however, it does
include collateralization of certain properties as defined in the agreement. The
amended agreement also restricts consolidations or mergers with third parties,
investments and acquisitions, payment of dividends on common stock and
repurchases of common stock.
VENATOR GROUP, INC. | 45
<PAGE> 48
================================================================================
24. Quarterly Results (Unaudited)
<TABLE>
<CAPTION>
(in millions, except per share amounts) 1st Q 2nd Q 3rd Q 4th Q Year
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales
1998 $ 1,058 1,043 1,122 1,332 4,555
1997 $ 1,058 1,033 1,107 1,414 4,612
- ------------------------------------------------------------------------------------------------------------------------------------
Gross margin (a)
1998 $ 310 307 282 323 1,222
1997 $ 332 333 366 454 1,485
- ------------------------------------------------------------------------------------------------------------------------------------
Operating profit (loss) (b)
1998 $ 49 24 (30) (30) 13
1997 $ 73 81 91 173 418
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
1998 $ 8 6 (40) 29 3
1997 $ 28 29 50 106 213
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)
1998 $ (5) (13) (155) 37 (136)
1997 $ 1 (181) 55 115 (10)
- ------------------------------------------------------------------------------------------------------------------------------------
Basic earnings per share:
1998
Income (loss) from continuing operations $ 0.06 0.04 (0.29) 0.21 0.02
Income (loss) from discontinued operations $ (0.10) (0.13) (0.85) 0.06 (1.02)
Net income (loss) $ (0.04) (0.09) (1.14) 0.27 (1.00)
1997
Income from continuing operations $ 0.21 0.22 0.37 0.78 1.58
Income (loss) from discontinued operations $ (0.20) (1.57) 0.04 0.07 (1.66)
Net income (loss) $ 0.01 (1.35) 0.41 0.85 (0.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share:
1998
Income (loss) from continuing operations $ 0.06 0.04 (0.29) 0.21 0.02
Income (loss) from discontinued operations $ (0.10) (0.13) (0.85) 0.06 (1.02)
Net income (loss) $ (0.04) (0.09) (1.14) 0.27 (1.00)
1997
Income from continuing operations $ 0.21 0.21 0.37 0.78 1.57
Income (loss) from discontinued operations $ (0.20) (1.54) 0.03 0.07 (1.64)
Net income (loss) $ 0.01 (1.33) 0.40 0.85 (0.07)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Gross margin represents sales less cost of sales.
(b) Operating profit (loss) represents income (loss) before income taxes,
interest expense, corporate expense and corporate gains on real estate.
25. Shareholder Information and Market Prices (Unaudited)
- --------------------------------------------------------------------------------
Venator Group, Inc. common stock is listed on the New York, Toronto, and
Amsterdam stock exchanges as well as on the Lausanne and Elektronische Borse
Schweiz (EBS) stock exchanges in Switzerland. In addition, the stock is traded
on the Boston, Cincinnati, Chicago, Philadelphia and Pacific stock exchanges.
The New York Stock Exchange ticker symbol for the Company's common stock is "Z."
At January 30, 1999, the Company had 36,008 shareholders of record owning
135,634,566 common shares.
Market prices for the Company's common stock were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------ ----------------------
High Low High Low
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
Quarter
1st Q 27 1/4 21 1/2 24 1/8 18 1/2
2nd Q 23 1/4 14 5/16 28 19 3/8
3rd Q 14 7/16 6 3/4 28 3/4 19 1/4
4th Q 12 9/16 4 1/4 23 1/4 18 1/4
- --------------------------------------------------------------------------------
</TABLE>
46 | VENATOR GROUP, INC.
<PAGE> 49
Five Year Summary of Selected Financial Data
================================================================================
The selected financial data below should be read in conjunction with the
Consolidated Financial Statements and the notes thereto and other information
contained elsewhere in this report. All selected financial data has been
restated for discontinued operations, except for return on average investment
("ROI").
<TABLE>
<CAPTION>
($ in millions, except per share amounts) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of Continuing Operations
<S> <C> <C> <C> <C> <C>
Sales $ 4,555 4,612 4,504 4,383 4,484
Gross margin 1,222 1,485 1,484 1,375 1,447
Selling, general and administrative expenses 1,166 1,008 975 1,025 1,160
Depreciation and amortization 152 122 114 137 140
Interest expense, net 44 35 50 88 83
Other income, net (101) (13) (3) (18) --
Income from continuing operations 3 213 209 29 23
Basic earnings per share 0.02 1.58 1.56 0.22 0.17
Diluted earnings per share 0.02 1.57 1.55 0.21 0.17
Common stock dividends declared -- -- -- -- 0.74
Preferred stock dividends declared -- -- 1.10 2.20 2.20
Weighted-average common shares outstanding (in millions) 135.4 134.6 133.5 132.9 132.3
Weighted-average common shares outstanding
assuming dilution (in millions) 135.9 135.8 134.3 133.5 132.9
====================================================================================================================================
Financial Condition
Cash and cash equivalents $ 193 81 197 10 14
Merchandise inventories 837 754 617 663 825
Property and equipment, net 974 625 480 569 713
Total assets 2,876 2,798 2,807 2,776 3,465
Short-term debt 250 -- -- 69 853
Long-term debt and obligations under capital leases 517 527 519 538 265
Total shareholders' equity 1,038 1,271 1,334 1,229 1,358
====================================================================================================================================
Financial Ratios
Return on equity (ROE) 0.2% 16.3 16.3 2.2 1.7
Return on average investment (ROI) 2.7% 8.3 6.9 0.8 3.6
Operating profit as a percentage of sales 0.3% 9.1 10.2 4.5 4.6
Income from continuing operations as a percentage of sales 0.1% 4.6 4.6 0.7 0.5
Net debt capitalization percent (1) 68.0% 61.0 58.3 64.3 66.9
Net debt capitalization percent (without present
value of operating leases) (1) 35.6% 26.0 19.4 32.7 44.8
Current ratio 1.3 2.6 3.6 3.6 1.7
====================================================================================================================================
Capital expenditures $ 549 249 86 70 116
Number of stores at year end 6,002 5,708 5,527 5,763 6,147
Total selling square footage at year end (in millions) 11.07 8.92 8.02 8.25 9.51
====================================================================================================================================
</TABLE>
(1) Represents total debt, net of cash and cash equivalents.
47 | VENATOR GROUP, INC.
<PAGE> 50
Board of Directors
================================================================================
Roger N. Farah 1
Chairman of the Board and
Chief Executive Officer
Dale W. Hilpert
President and
Chief Operating Officer
J. Carter Bacot 1, 4, 6
Former Chairman of the Board
and Chief Executive Officer
The Bank of New York Company,
Inc. and Chairman of the Board
of The Bank of New York
(banking service)
Purdy Crawford 1, 2, 5
Chairman of the Board
Imasco Limited
(consumer products and service)
Philip H. Geier Jr. 1, 3
Chairman of the Board and
Chief Executive Officer
Interpublic Group of
Companies, Inc.
(advertising agencies and other
marketing communication service)
Jarobin Gilbert Jr. 1, 2, 4
President and Chief Executive
Officer DBSS Group, Inc.
(management, planning and
trade consulting)
Allan Z. Loren 1,2
Executive Vice President and Chief
Information Officer
American Express Company
(travel and financial service)
Margaret P. MacKimm 1, 3, 5
Former Senior Vice President -
Communications
Kraft Foods, Inc.
(multinational marketer and
processor of food products)
John J. Mackowski 1, 2, 5
Director of various companies
James E. Preston 1, 3, 4, 6
Retired Chairman of the Board
Avon Products, Inc.
(manufacture and sale of beauty
and related products)
Christopher A. Sinclair 1, 6
President and Chief Executive
Officer Caribiner International
(business communications)
1 Member of Executive Committee
2 Member of Audit Committee
3 Member of Compensation Committee
4 Member of Nominating and Organization Committee
5 Member of Retirement Investment Committee
6 Member of Acquisitions and Finance Committee
Corporate Officers
================================================================================
Roger N. Farah
Chairman of the Board and
Chief Executive Officer
Dale W. Hilpert
President and
Chief Operating Officer
Senior Vice Presidents
Gary M. Bahler
General Counsel and Secretary
M. Jeffrey Branman
Corporate Development
John E. DeWolf III
Real Estate
S. Ronald Gaston
Chief Information Officer
John F. Gillespie
Human Resources
Bruce Hartman
Chief Financial Officer
Maryann M. McGeorge
Merchandise Operations
Vice Presidents
Gary H. Brown
Real Property
John H. Cannon
Treasurer
Judith A. Fishman
Organization and
Leadership Development
Stephen R. Hanon
Strategic Planning and Analysis
Worldwide Athletic
Robert W. McHugh
Taxation
Juris Pagrabs
Investor Relations
Patricia A. Peck
Human Resources
Lauren B. Peters
Controller
Richard J. Price
Logistics
Vivian J. Shaw
Financial Planning and Analysis
Thomas J. Slover
Worldwide Sourcing
Frances E. Trachter
Public Affairs
48 | VENATOR GROUP, INC.
<PAGE> 51
- ---------------------------
Z
===========================
Listed
===========================
NYSE [LOGO]
THE NEW YORK STOCK EXCHANGE
- ---------------------------
Venator Group has traded on the
New York Stock Exchange under the
ticker symbol "Z" since 1912, one
of the original compainies to recieve
a single letter ticker symbol.
Corporate Information
===============================================================================
Corporate Headquarters
233 Broadway
New York, New York 10279-0003
(212) 553-2000
Transfer Agents and Registrars
First Chicago Trust Co., a division of EquiServe
P.O. Box 2500
Jersey City, NJ 07303-2500
(800) 519-3111
CIBC Mellon Trust Company
Corporate Trust Service
P.O. Box 7010
Adelaide Street Postal Station
Toronto, Ontario M5C2W9
(800) 387-0825
(416) 643-5500
Independent Auditors
KPMG LLP
345 Park Avenue
New York, NY 10154
(212) 758-9700
Form 10-K
A copy of the Venator Group, Inc. 1998 Annual Report on Form 10-K filed with the
Securities and Exchange Commission is available, without charge, by request to
the Corporate Secretary at the Corporate Headquarters.
Investor Inforamtion
Investor inquiries should be directed to the Investor Relations Department at
(212) 553-2600.
World Wide Web Site
Our website at www.venatorgroup.com offers information about our Company, as
well as online versions of our Annual Report, SEC reports, quarterly results
and press releases.
The Venator Group, eVenator, Foot Locker, Lady Foot Locker, Kids Foot Locker,
Champs Sports, Eastbay, Colorado, Going To The Game, Northern Reflections,
Northern Getaway, Northern Elements, Northern Traditions, The Authentic Northern
Experience, Afterthoughts, Randy River, San Farancisco Music Box Company,
Weekend Edition, Williams the Shoemen, Mathers, Jensens, Basics by Foot Locker,
Actra, O.U.T., Outdoor Urban Terrain, When You Really Live Sports, Cuddle Club,
Princie and Rain Dance service marks and trademarks are owned by Venator Group,
Inc. or its affiliates.
<PAGE> 52
VENATOR GROUP [LOGO]
Venator Group, Inc.
233 Broadway
New York, NY 10279-0003
<PAGE> 1
EXHIBIT 21
VENATOR GROUP, INC. AND SUBSIDIARIES 1/
April 1, 1999
<TABLE>
<CAPTION>
State or Other
Name Jurisdiction of Incorporation
- ---- -----------------------------
<S> <C>
Venator Group, Inc. New York
AfterThoughts, Inc. Delaware
eVenator, Inc. Delaware
Eastbay, Inc. Wisconsin
Foot Locker Asia, Inc. Delaware
Foot Locker Asia Limited Hong Kong
Foot Locker Australia, Inc. Delaware
Foot Locker Austria GmbH Austria
Foot Locker Belgium N.V. Belgium
Foot Locker Denmark ApS Denmark
Foot Locker China, Inc. Delaware
Foot Locker Europe B.V. Netherlands
Foot Locker France S.A. France
CB Diffusion S.A. France
Faust S.A.R.L. France
Florentin Freres-Primaprix S.A. France
Les Nouveautes du Centre S.A.R.L. France
Privilege S.A. France
Foot Locker Germany GmbH Germany
Foot Locker Italy S.r.l. Italy
Foot Locker Japan, Inc. Delaware
Foot Locker Japan K.K. Japan
FootLocker Netherlands B.V. Netherlands
Foot Locker Singapore Pte. Ltd. Singapore
Foot Locker Spain S.L. Spain
Foot Locker Sweden Aktiebolag Sweden
Foot Locker (Thailand) Co., Ltd. Thailand
</TABLE>
- ----------------------------------
1/ The name of each subsidiary company is indented under the name of its
parent company and, unless otheriwse noted in a footnote, each such
subsidiary company is % owned by its parent. Directors' qualifying
shares, if any, are deemed to be beneficially owned by a subsidiary's
parent company. All subsidiaries wholly owned, directly or indirectly,
by Venator Group, Inc. are consolidated with Venator Group, Inc. for
accounting and financial reporting purposes.
<PAGE> 2
<TABLE>
<CAPTION>
State or Other
Name Jurisdiction of Incorporation
- ---- ------------------------------
<S> <C>
[Venator Group, Inc.]
Foot Locker U.K. Limited U.K.
Freedom Sportsline Limited U.K.
Venator Group Realty Europe Limited U.K.
Kids Mart, Inc.2/ Florida
Kids Mart, Inc. Delaware
Little Folk Shop Inc. Delaware
Northern Reflections Inc. Delaware
Randy River, Inc. Delaware
The Richman Brothers Company Ohio
Custom Cut, Inc. Delaware
RX Place, Inc. Delaware
The San Francisco Music Box Company California
Specialty Times, Inc. Delaware
Team Edition Apparel, Inc. Florida
Venator Group Specialty, Inc. New York
Afterthoughts Boutiques, Inc. Delaware
Barclay Park and Church Advertising Inc. Delaware
Checklot Service Center, Inc. Delaware
Frame Scene, Inc. Delaware
Herald Square Stationers, Inc. Delaware
Lamston 37-33/45 Seventy-Fourth Street Corp. New York
Lamston 69-73/5 Grand Avenue Corp. New York
Lamston 1279 Third Avenue Corp. New York
Red Grille of Hawaii, Inc. Delaware
Red Grille of Louisiana, Inc. Delaware
Trade Center Realty, Inc. Delaware
Woolco Fashionwear Corp. Delaware
Woolco Inc. Delaware
233 Broadway, Inc. New York
340 Supply Co. Pennsylvania
Venator Group Franchises LLC Delaware
Venator Group Investments LLC Delaware
Rosedale Accessory Lady, Inc. Minnesota
Accessory Lady, Inc. Texas
Atlanta Southlake Accessory Lady, Inc. Georgia
</TABLE>
- ---------------------------------------
2/ 1 million shares of Series A Convertible Preferred Stock, par value
$.001 per share, pursuant to a Stock Acquisition Agreement dated May 20, 1996.
<PAGE> 3
<TABLE>
<CAPTION>
State or Other
Name Jurisdiction of Incorporation
- ---- ------------------------------
<S> <C>
[Venator Group, Inc. -- (Cont.)]
[Venator Group Specialty, Inc. -- (Cont.)]
[Rosedale Accessory Lady, Inc. -- (Cont.)]
Beachwood Accessory Lady, Inc. Ohio
Brea Accessory Lady, Inc. California
Bridgewater Commons Accessory Lady, Inc. New Jersey
Buckland Hills Accessory Lady, Inc. Connecticut
Cherry Hill Accessory Lady, Inc. New Jersey
Chesterfield Accessory Lady, Inc. Virginia
Chicago Accessory Lady, Inc. Illinois
Copley Place Accessory Lady, Inc. Massachusetts
Colonie Center Accessory Lady, Inc. New York
Crabtree Mall Accessory Lady, Inc. North Carolina
Dadeland Center Accessory Lady, Inc. Florida
Delamo Accessory Lady, Inc. California
Fashion Valley Accessory Lady, Inc. California
Four Seasons Accessory Lady, Inc. North Carolina
Fox Valley Accessory Lady, Inc. Illinois
Garden State Accessory Lady, Inc. New Jersey
The Gardens Accessory Lady, Inc. Florida
Glendale Accessory Lady, Inc. California
Grand Avenue Accessory Lady, Inc. Wisconsin
Hanes Mall Accessory Lady, Inc. North Carolina
Hawthorne Center (IL.) Accessory Lady, Inc. Illinois
Lakeside Accessory Lady, Inc. Louisiana
Mainplace Accessory Lady, Inc. California
Mall Del Norte Accessory Lady, Inc. Texas
McAllen Accessory Lady, Inc. Texas
Penn Square Accessory Lady, Inc. Oklahoma
Pentagon City Accessory Lady, Inc. Virginia
Raceway Accessory Lady, Inc. New Jersey
Randhurst Accessory Lady, Inc. Illinois
Regency Square Accessory Lady, Inc. Florida
Ridgedale Accessory Lady, Inc. Minnesota
McLean Accessory Lady, Inc. Virginia
Menlo Park Accessory Lady, Inc. New Jersey
Montclair Accessory Lady, Inc. California
Montgomery Accessory Lady, Inc. Maryland
Northbrook Accessory Lady, Inc. Illinois
North County Fair Accessory Lady, Inc. California
Northridge Accessory Lady, Inc. California
Oakbrook Center Accessory Lady, Inc. Illinois
The Oaks Accessory Lady, Inc. California
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
State or Other
Name Jurisdiction of Incorporation
- ---- ------------------------------
<S> <C>
[Venator Group, Inc. -- (Cont.)]
[Venator Group Specialty, Inc. -- (Cont.)]
[Rosedale Accessory Lady, Inc. -- (Cont.)]
Orlando Accessory Lady, Inc. Florida
Paradise Valley Accessory Lady, Inc. Arizona
Palm Beach Mall Accessory Lady, Inc. Florida
Paramus Park Accessory Lady, Inc. New Jersey
The Parks Accessory Lady, Inc. Texas
Riverside Hackensack Accessory Lady, Inc. New Jersey
Roosevelt Field Accessory Lady, Inc. New York
Scottsdale Accessory Lady, Inc. Arizona
Southdale Accesory Lady, Inc. Minnesota
St. Louis Galleria Accessory Lady, Inc. Missouri
Stoneridge Accessory Lady, Inc. California
Stonestown Accessory Lady, Inc. California
Sunrise Boulevard (Fla.) Accessory Lady, Inc. Florida
Sunvalley Accessory Lady, Inc. California
Towson Accessory Lady, Inc. Maryland
Tri-County Accessory Lady, Inc. Ohio
Tysons Corner Accessory Lady, Inc. Virginia
Valley Fair Accessory Lady, Inc. California
Willowbrook Accessory Lady, Inc. New Jersey
Woodman Avenue Accessory Lady, Inc. California
Venator Group Retail, Inc. New York
Armel, Inc. Florida
Armel Acquisition, Inc. Florida
Champs of Crossgates, Inc. Florida
Champs of Holyoke, Inc. Florida
Champs Sporting Goods of
Esplanade, Inc. Florida
Champs Sporting Goods, Inc. Tennessee
Champs Sport Shops, Inc. of Maryville Florida
Champs Sport Shops, Inc. of Cutler Ridge Florida
Champs Sport Shops, Inc. of Broward Florida
Champs Sport Shops of Daytona, Inc. Florida
San Del of Jacksonville, Inc. Florida
Champs Sport Shops, Inc. of 163rd Street Florida
San Del, Inc. of Atlanta Florida
Champs Four Seasons, Inc. North Carolina
Joe Chichelo, Inc. Florida
Champs Sport Shops, Inc. Florida
Champs Sport Shops, Inc. of Aventura Florida
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
State or Other
Name Jurisdiction of Incorporation
- ---- ------------------------------
<S> <C>
[Venator Group, Inc. -- (Cont.)]
[Venator Group Retail, Inc. -- (Cont.)]
[Armel, Inc. -- (Cont.)]
Champs Sporting Goods of N.C., Inc. North Carolina
Champs Sport Shops, Inc. of
Miami International Florida
Champs Sporting Goods, Inc. Louisiana
Champs Sport Shops, Inc. of Omni Florida
Champs Sport Shops, Inc. of Nashville Florida
Champs Sport Shops, Inc. of Houston Florida
Champs Sport Shops, Inc. of Fort Lauderdale Florida
Sneakers Inc. of Greensboro North Carolina
Sneakers Inc. of Knoxville Tennessee
Sneakers Inc. of Daytona Beach Florida
Champs of Maryland, Inc. Florida
Champs of Virginia, Inc. Florida
SneaKee Feet of Maryland, Inc. Florida
SneaKee Feet of Montgomery Village, Inc. Florida
SneaKee Feet of North Carolina, Inc. Florida
Runner-Up of Orlando, Inc. Florida
SneaKee Feet of Tampa, Inc. Florida
SneaKee Feet, Inc. Florida
Champs of Missouri, Inc. Missouri
Champs Sport Shops of Maryland, Inc. Maryland
Champs of Connecticut, Inc. Connecticut
Champs Sport Shops of Massachusetts, Inc. Massachusetts
Champs of Georgia, Inc. Georgia
Champs of New Jersey, Inc. New Jersey
Champs of Oklahoma, Inc. Oklahoma
Champs of Tennessee, Inc. Tennessee
SneaKee Feet of Washington Outlet Mall, Inc.Florida
Foot Locker Atlantic City LLC Delaware
Menlo Trading Company California
Athletic Shoe Factory, Inc. California
Simpson's Ferry Leasing Corp. Delaware
Janess Properties, Inc. Delaware
Venator Group Corporate Services, Inc. Delaware
Kinney Trading Corp. New York
Robby's Sporting Goods, Inc. Florida
SFMB Specialty Corporation California
Venator Group Realty Corporation New York
Venator Group Holdings, Inc. New York
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
State or Other
Name Jurisdiction of Incorporation
- ---- ------------------------------
<S> <C>
[Venator Group, Inc. -- (Cont.)]
Retail Company of Germany, Inc. Delaware
Woolworth Holding S.A. de C.V. Mexico
Foot Locker de Mexico, S.A. de C.V. Mexico
Distribuidora Foot Locker S.A. de C.V. Mexico
Venator Group Canada Inc. Canada
142739 Canada Limited Canada
Venator Group Sourcing, Inc. Delaware
Venator Group Australia Limited Australia
Colorado Adventure Clothing Pty. Ltd. Australia
Mathers Enterprises Limited Australia
Williams the Shoemen Pty. Ltd. Australia
</TABLE>
<PAGE> 1
EXHIBIT 23
VENATOR GROUP, INC.
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
Venator Group, Inc.
We consent to the incorporation by reference in the 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 of Venator
Group, Inc. (formerly Woolworth Corporation) and subsidiaries of our report
dated March 10, 1999, except for note 23 which is as of March 19, 1999, relating
to the consolidated balance sheets of Venator Group, Inc. and subsidiaries as of
January 30, 1999 and January 31, 1998 and the related consolidated statements of
operations, comprehensive income (loss), shareholders' equity and cash flows for
each of the years in the three-year period ended January 30, 1999, which report
appears in the January 30, 1999 Annual Report on Form 10-K of Venator Group,
Inc. and subsidiaries.
/s/ KPMG LLP
New York, New York
April 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED JANUARY 30,
1999 AND THE CONSOLIDATED BALANCE SHEET AS OF JANUARY 30, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-1-1998
<PERIOD-END> JAN-30-1999
<CASH> 193
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 837
<CURRENT-ASSETS> 1,275
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,876
<CURRENT-LIABILITIES> 964
<BONDS> 511
0
0
<COMMON> 0
<OTHER-SE> 1,038
<TOTAL-LIABILITY-AND-EQUITY> 2,876
<SALES> 4,555
<TOTAL-REVENUES> 4,555
<CGS> 3,333
<TOTAL-COSTS> 3,333
<OTHER-EXPENSES> 51
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44
<INCOME-PRETAX> (39)
<INCOME-TAX> (42)
<INCOME-CONTINUING> 3
<DISCONTINUED> (139)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (136)
<EPS-PRIMARY> (1.00)<F1>
<EPS-DILUTED> (1.00)
<FN>
<F1> THE AMOUNT IS REPORTED AS EPS BASIC AND NOT FOR EPS PRIMARY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED JANUARY 31,
1998 AND THE CONSOLIDATED BALANCE SHEET AS OF JANUARY 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> JAN-26-1997
<PERIOD-END> JAN-31-1998
<CASH> 81
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 754
<CURRENT-ASSETS> 1,574
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,798
<CURRENT-LIABILITIES> 609
<BONDS> 508
0
0
<COMMON> 0
<OTHER-SE> 1,271
<TOTAL-LIABILITY-AND-EQUITY> 2,798
<SALES> 4,612
<TOTAL-REVENUES> 4,612
<CGS> 3,127
<TOTAL-COSTS> 3,127
<OTHER-EXPENSES> 109
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 333
<INCOME-TAX> 120
<INCOME-CONTINUING> 213
<DISCONTINUED> (223)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10)
<EPS-PRIMARY> (0.08)<F1>
<EPS-DILUTED> (0.07)
<FN>
<F1>THE AMOUNT IS RPORTED AS EPS BASIC AND NOT FOR EPS PRIMARY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED JANUARY 25,
1997 AND THE CONSOLIDATED BALANCE SHEET AS OF JANUARY 25, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-START> JAN-28-1996
<PERIOD-END> JAN-25-1997
<CASH> 197
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 617
<CURRENT-ASSETS> 1,836
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,807
<CURRENT-LIABILITIES> 505
<BONDS> 507
0
0
<COMMON> 0
<OTHER-SE> 1,334
<TOTAL-LIABILITY-AND-EQUITY> 2,807
<SALES> 4,504
<TOTAL-REVENUES> 4,504
<CGS> 3,020
<TOTAL-COSTS> 3,020
<OTHER-EXPENSES> 111
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50
<INCOME-PRETAX> 348
<INCOME-TAX> 139
<INCOME-CONTINUING> 209
<DISCONTINUED> (40)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169
<EPS-PRIMARY> 1.26<F1>
<EPS-DILUTED> 1.26
<FN>
<F1>THE AMOUNT IS REPORTED AS EPS BASIC NOT FOR EPS PRIMARY.
</FN>
</TABLE>
