<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-11758
DEAN WITTER, DISCOVER & CO.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 36-3145972
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
TWO WORLD TRADE CENTER
NEW YORK, NY 10048
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-2222
----------------
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
-
As of April 30, 1996, there were 166,798,713 shares of Registrant's Common
Stock, par value $.01 per share, outstanding.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
DEAN WITTER, DISCOVER & CO.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 1996
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income--Three Months Ended March 31, 1996
and 1995 (unaudited)................................................. 1
Consolidated Balance Sheets--March 31, 1996 (unaudited) and December
31, 1995............................................................. 2
Consolidated Statements of Cash Flows--Three Months Ended March 31,
1996 and 1995 (unaudited)............................................ 3
Notes to Consolidated Financial Statements (unaudited)................ 4
Independent Accountants' Report....................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 9
PART II--OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............. 20
Item 6. Exhibits and Reports on Form 8-K................................ 20
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
DEAN WITTER, DISCOVER & CO.
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------
1996 1995
-------- --------
(UNAUDITED)
<S> <C> <C>
Merchant and cardmember fees................................. $ 320.5 $ 240.3
Commissions.................................................. 300.7 234.6
Asset management and administration fees..................... 274.9 245.5
Servicing fees............................................... 200.3 172.3
Principal transactions....................................... 118.9 125.4
Investment banking........................................... 64.7 38.9
Other........................................................ 24.8 27.0
-------- --------
Total non-interest revenues................................ 1,304.8 1,084.0
-------- --------
Interest revenue............................................. 861.4 757.2
Interest expense............................................. 390.7 352.9
-------- --------
Net interest income........................................ 470.7 404.3
Provision for losses on receivables.......................... 228.0 120.7
-------- --------
Net credit income.......................................... 242.7 283.6
-------- --------
Net operating revenues..................................... 1,547.5 1,367.6
-------- --------
Employee compensation and benefits........................... 570.3 483.7
Marketing and business development........................... 191.9 147.7
Information processing and communications.................... 182.1 154.4
Facilities and equipment..................................... 61.2 54.4
Other........................................................ 141.6 165.1
-------- --------
Total non-interest expenses................................ 1,147.1 1,005.3
-------- --------
Income before income taxes................................... 400.4 362.3
Income tax expense........................................... 154.6 140.2
-------- --------
Net income................................................... $ 245.8 $ 222.1
======== ========
Primary net income per share................................. $ 1.41 $ 1.28
======== ========
Primary average common shares outstanding.................... 174.1 173.5
======== ========
Fully diluted net income per share........................... $ 1.41 $ 1.28
======== ========
Fully diluted average common shares outstanding.............. 174.8 173.9
======== ========
</TABLE>
See notes to the consolidated financial statements.
1
<PAGE>
DEAN WITTER, DISCOVER & CO.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents............................. $ 931.3 $ 1,464.5
Cash and securities segregated under federal and other
regulations.......................................... 2,003.3 1,926.4
Receivables
Consumer loans (net of allowances of $663.6 in 1996
and $721.8 in 1995)................................ 18,120.4 20,834.6
Securities clients (net of allowances of $15.8 in
1996 and $16.2 in 1995)............................ 2,583.4 2,588.8
Brokers or dealers.................................. 3,070.6 2,683.7
Other............................................... 756.4 732.4
Amounts due from asset securitizations................ 777.6 653.4
Securities purchased under agreements to resell....... 3,288.2 3,571.9
Securities owned, at market value..................... 1,893.3 1,848.8
Deferred income taxes................................. 742.8 736.9
Office facilities, at cost (less accumulated
depreciation and amortization of $397.3 in 1996 and
$380.5 in 1995)...................................... 354.5 341.0
Goodwill.............................................. 160.2 161.9
Other assets.......................................... 660.1 663.9
--------- ---------
Total assets........................................ $35,342.1 $38,208.2
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Commercial paper.................................... $ 1,789.6 $ 4,688.5
Other short-term borrowings......................... 485.3 1,637.0
Deposits............................................ 6,003.9 6,191.1
Payables
Securities clients................................. 2,798.8 3,183.0
Brokers or dealers................................. 3,212.1 2,629.7
Drafts............................................. 396.7 485.5
Income taxes....................................... 249.7 99.3
Securities sold under agreements to repurchase...... 3,531.2 3,813.4
Securities sold but not yet purchased, at market
value.............................................. 1,166.2 1,125.2
Other liabilities and accrued expenses.............. 2,795.0 2,789.4
Long-term borrowings................................ 8,000.9 6,732.4
--------- ---------
Total liabilities................................... 30,429.4 33,374.5
--------- ---------
Shareholders' Equity
Preferred stock ($0.01 par value, 10.0 shares
authorized, none issued)........................... -- --
Common stock ($0.01 par value, 500.0 shares
authorized, 171.0 and 171.0 shares issued, 167.5
and 168.8 shares outstanding at March 31, 1996 and
December 31, 1995)................................. 1.7 1.7
Paid-in capital..................................... 2,713.5 2,718.3
Retained earnings................................... 2,374.6 2,165.7
--------- ---------
5,089.8 4,885.7
--------- ---------
Common stock held in treasury, at cost ($.01 par
value, 3.5 and 2.2 shares at March 31, 1996 and
December 31, 1995)................................. (170.3) (106.8)
Stock compensation plans............................ 47.5 85.1
Employee stock benefit trust........................ (46.9) (21.5)
Unearned stock compensation......................... (7.4) (8.8)
--------- ---------
Total shareholders' equity.......................... 4,912.7 4,833.7
--------- ---------
Total liabilities and shareholders' equity.......... $35,342.1 $38,208.2
========= =========
</TABLE>
See notes to the consolidated financial statements.
2
<PAGE>
DEAN WITTER, DISCOVER & CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
------------------
1996 1995
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows provided by (used in) operating activities
Net income................................................ $ 245.8 $ 222.1
Adjustments to reconcile net income to net cash flows from
operating activities
Depreciation and amortization............................ 19.6 15.3
Provision for losses on receivables...................... 228.0 120.7
Deferred income taxes.................................... (5.9) (25.6)
Decrease (increase) in operating assets
Cash and securities segregated under federal and other
regulations............................................. (76.9) (342.6)
Receivables
Securities clients...................................... 2.4 (12.6)
Brokers or dealers...................................... (386.9) (295.6)
Other................................................... (24.0) 75.1
Amounts due from asset securitizations................... (124.2) (74.7)
Matched securities purchased under agreements to resell,
net..................................................... (95.7) 7.5
Securities owned and securities sold but not yet pur-
chased, at market value, net............................ (3.6) (373.5)
Other assets............................................. 9.9 24.9
Increase (decrease) in operating liabilities
Payables
Securities clients...................................... (384.2) (77.8)
Brokers or dealers...................................... 582.4 545.4
Drafts.................................................. (88.8) (71.5)
Income taxes............................................ 150.4 153.5
Other liabilities and accrued expenses................... 43.2 (46.6)
-------- --------
Cash provided by (used in) operating activities........ 91.5 (156.0)
-------- --------
Cash flows provided by (used in) investing activities
Net principal received (disbursed) on consumer loans...... (273.3) 507.0
Purchases of consumer loans............................... (5.1) (296.6)
Sales of consumer loans................................... 2,767.6 --
Other..................................................... (37.3) 2.9
-------- --------
Cash provided by investing activities.................. 2,451.9 213.3
-------- --------
Cash flows provided by (used in) financing activities
Proceeds from issuance of commercial paper, net........... (2,936.5) (404.7)
Net decrease in other short-term borrowings............... (1,151.7) (953.3)
Deposits, net............................................. (187.2) 172.5
Proceeds from issuance of long-term borrowings, net....... 1,263.7 373.3
Securities sold under agreements to repurchase, net....... 96.9 214.1
Dividends paid............................................ (26.9) (21.2)
Proceeds from issuance of common stock.................... 15.7 --
Purchase of treasury stock................................ (150.6) (11.2)
-------- --------
Cash used in financing activities...................... (3,076.6) (630.5)
-------- --------
Decrease in cash and cash equivalents...................... (533.2) (573.2)
Cash and cash equivalents, beginning of period............. 1,464.5 1,334.1
-------- --------
Cash and cash equivalents, end of period................... $ 931.3 $ 760.9
======== ========
</TABLE>
See notes to the consolidated financial statements.
3
<PAGE>
DEAN WITTER, DISCOVER & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTRODUCTION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Dean Witter,
Discover & Co. and subsidiaries (the "Company"). The Company is a financial
services organization that provides a broad range of credit and investment
products, with a primary focus on individual customers. Through its wholly-
owned subsidiary NOVUS Credit Services Inc. ("NCSI"), the Company conducts its
credit services business, including the operation of the NOVUSSM Network, a
proprietary network of merchant and cash access locations, and the issuance of
proprietary general purpose credit cards. The Company's securities business is
conducted primarily through its wholly-owned subsidiaries Dean Witter Reynolds
Inc. ("DWR") and Dean Witter InterCapital Inc.
The interim consolidated financial statements as of March 31, 1996, and for
the three months ended March 31, 1996 and 1995, are unaudited; however, in the
opinion of management, all adjustments, consisting only of normal recurring
accruals necessary for fair presentation, have been reflected. All material
intercompany balances and transactions have been eliminated.
The consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended
December 31, 1995 incorporated by reference in the Company's 1995 Annual
Report on Form 10-K filed by the Company under the Securities Exchange Act of
1934. The results of operations for interim periods are not necessarily
indicative of results for the entire year. Certain reclassifications have been
made to prior period amounts to conform to the current presentation.
The calculations of earnings per common share were based on the weighted
average number of common shares outstanding during the three month periods
ended March 31, 1996 and 1995, adjusted for the dilutive effects of stock
options and unissued stock awards under deferred compensation plans.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") Nos. 121 and 122. SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", generally requires that long-lived assets be reported at the lower of
their carrying cost or net realizable value. SFAS No. 122, "Accounting for
Mortgage Servicing Rights, an amendment of SFAS No. 65", requires that rights
to service mortgage loans for others, however acquired, be recorded as
separate assets when the mortgage loans are sold and the servicing rights are
retained. This statement also requires that capitalized mortgage servicing
rights be assessed for impairment based on the fair value of those rights. The
adoption of these statements was not material to the Company's financial
position or results of operations.
The Financial Accounting Standards Board has issued SFAS No. 123,
"Accounting for Stock-Based Compensation", effective for fiscal years
beginning after December 15, 1995. The Company has elected, as permitted by
SFAS No. 123, to adopt the disclosure requirement of that standard but
continue to account for stock-based compensation under APB Opinion No. 25,
"Accounting for Stock Issued to Employees."
2. RISKS AND UNCERTAINTIES
The preparation of the consolidated financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in the financial statements.
Actual results could differ from these estimates.
The allowance for consumer loan losses is a significant estimate that is
regularly evaluated by management for adequacy on a portfolio by portfolio
basis. The evaluations take into consideration such factors as changes in the
nature and volume of the loan portfolio, overall portfolio quality, review of
specific problem loans and current economic conditions that may affect the
borrower's ability to pay.
The Company uses the results of these evaluations to provide an allowance
for loan losses for all loans, making no distinction between consumer loans
that are intended to be securitized and those that are not. The exposure for
credit losses for owned loans is influenced by the performance of the
portfolio and other factors
4
<PAGE>
DEAN WITTER, DISCOVER & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
discussed above, with the Company absorbing all related losses. The exposure
for credit losses for securitized loans is represented by the Company
retaining a contingent risk based on the amount of credit enhancement
provided.
Management believes that its estimates have been historically prudent in
light of the need to allow the market for asset securitizations, in particular
those backed by credit card receivables, to mature, and in light of the
uncertainty of accounting standards for asset securitizations. The Company is
now reassessing its estimate of the allowance for losses required for loans
intended to be securitized based on its experience with losses related to such
loans as the market has matured. This reassessment process has also been
affected by the standard-setting initiatives of the Financial Accounting
Standards Board relating to the accounting for securitization transactions.
Therefore, the Company may revise and reduce its estimate of the allowance for
losses related to loans intended to be securitized. The effect of this
revision in estimate would be to reduce the provision for consumer loan losses
by an amount equal to the allowance that, absent such revision, would have
been provided for loans intended to be securitized. If the Company implements
this revision, it expects that the provision for consumer loan losses
beginning with the third quarter of 1996 would be affected. It is further
expected that loss allowances for outstanding securitizations as of the date
of implementation would continue to be maintained until the related loans are
liquidated. Any revision will be made in light of the facts and circumstances
existing at that time and the effect of any such revision cannot currently be
quantified.
3. CONSUMER LOANS
Consumer loans, classified as to type, were as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
(IN MILLIONS)
<S> <C> <C>
Credit card......................................... $17,804.5 $20,440.4
Real estate-secured and other consumer installment.. 1,085.5 1,233.1
--------- ---------
Total............................................... 18,890.0 21,673.5
Less
Unearned finance charges and unamortized loan
discounts and fees............................... 106.0 117.1
Allowance for loan losses......................... 663.6 721.8
--------- ---------
Consumer loans, net................................. $18,120.4 $20,834.6
========= =========
</TABLE>
Activity in the allowance for consumer loan losses was as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
31,
--------------
1996 1995
------ ------
(IN MILLIONS)
<S> <C> <C>
Balance, beginning of period................................. $721.8 $565.7
Additions
Provision for loan losses.................................. 225.0 117.5
Purchase of loan portfolios................................ 0.1 29.8
------ ------
Total additions.......................................... 225.1 147.3
------ ------
Deductions
Charge-offs................................................ 249.8 135.0
Recoveries................................................. (33.4) (24.8)
------ ------
Net charge-offs.......................................... 216.4 110.2
------ ------
Other(1)..................................................... (66.9) 2.0
------ ------
Balance, end of period....................................... $663.6 $604.8
====== ======
</TABLE>
- --------
(1) Primarily reflects net transfers related to asset securitizations.
5
<PAGE>
DEAN WITTER, DISCOVER & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest accrued on loans subsequently charged-off, recorded as a reduction
of interest revenue, was $41.5 million and $21.7 million in the first quarters
of 1996 and 1995.
The Company received proceeds from asset securitizations of $2,619.9 million
in the first quarter of 1996 and $1,046.8 million in the second quarter
through May 1, 1996. The uncollected balances of consumer loans sold through
securitizations were $12,261.9 million and $10,219.5 million at March 31, 1996
and December 31, 1995. The allowance for loan losses related to securitized
loans, included in other liabilities and accrued expenses, was $411.8 million
and $341.7 million at March 31, 1996 and December 31, 1995. The Company had,
under the provisions of certain securitization transactions, limited recourse
obligations at March 31, 1996 and December 31, 1995 of $126.5 million and
$123.9 million, of which $29.8 million and $30.0 million were included in the
allowance for loan losses related to securitized loans.
4. BORROWINGS
Short-term borrowings
Short-term borrowings consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
(IN MILLIONS)
<S> <C> <C>
Commercial paper...................................... $1,789.6 $4,688.5
Other
Bank borrowings..................................... 485.3 385.3
Bank notes.......................................... -- 529.6
Federal funds purchased............................. -- 720.0
Note payable to Tandy............................... -- 2.1
-------- --------
Total................................................. $2,274.9 $6,325.5
======== ========
</TABLE>
The weighted average interest rate on short-term borrowings, including the
effects of interest rate contracts, was 5.69% and 5.97% at March 31, 1996 and
December 31, 1995.
Long-term borrowings
Long-term borrowings outstanding, which consisted of senior long-term notes,
net of unamortized discount, were as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
(IN MILLIONS)
<S> <C> <C>
Floating rate notes................................... $4,146.3 $3,275.5
Fixed rate notes...................................... 3,854.6 3,456.9
-------- --------
Total................................................. $8,000.9 $6,732.4
======== ========
</TABLE>
The weighted average interest rate on long-term borrowings, including the
effects of interest rate contracts, was 5.91% and 6.28% at March 31, 1996 and
December 31, 1995.
In April 1996, the Company renewed its senior bank credit facility and
increased its amount to $4.0 billion from $3.25 billion. The facility expires
in April 1997. The Company may either (1) with the consent of 51% in interest
of the banks, extend the term of the facility for an additional 364 days; or
(2) convert to term loans having a maximum maturity of 180 days any loans
outstanding at expiration of the facility. The Company
6
<PAGE>
DEAN WITTER, DISCOVER & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
currently plans to renew or replace this facility prior to its expiration.
This facility contains covenants that require the Company to maintain minimum
net worth requirements and specified financial ratios. The Company believes
that the covenant restrictions will not impair its ability to pay its current
level of dividends. As of March 31, 1996, the Company had never borrowed from
its senior bank credit facility.
5. REGULATORY CAPITAL REQUIREMENTS
Under regulatory net capital requirements adopted by the Federal Deposit
Insurance Corporation ("FDIC") and other regulatory capital guidelines, FDIC-
insured financial institutions must maintain (a) 3% to 5% of Tier 1 capital,
as defined, to total assets ("leverage ratio") and (b) 8% combined Tier 1 and
Tier 2 capital, as defined, to risk-weighted assets ("risk-weighted capital
ratio"). At March 31, 1996, the leverage ratio and risk-weighted capital ratio
of each of the Company's FDIC-insured financial institutions exceeded these
and all other regulatory minimums.
DWR, the Company's primary broker-dealer, is subject to the Uniform Net
Capital Rule of the Securities and Exchange Commission ("SEC"). Under the
alternative method permitted by this Rule, the required net capital, as
defined, shall not be less than the greater of (a) one million dollars, (b) 2%
of aggregate debit balances arising from client transactions pursuant to SEC
Rule 15c3-3, or (c) 4% of the funds required to be segregated pursuant to the
Commodity Exchange Act. The New York Stock Exchange, Inc. may also require a
member organization to reduce its business if its net capital is less than the
greater of (a) 4% of aggregate debit balances or (b) 6% of the funds required
to be segregated, and may prohibit a member organization from expanding its
business and declaring cash dividends if its net capital is less than the
greater of (a) 5% of aggregate debit balances or (b) 7% of the funds required
to be segregated. At March 31, 1996, DWR's net capital was $550.1 million and
net capital in excess of the minimum required was $438.1 million. DWR's net
capital was 20.42% of aggregate debit balances and 19.64% of funds required to
be segregated.
6. CONTINGENT LIABILITIES
In the normal course of business, the Company has been named as a defendant
in various lawsuits. Some of these lawsuits involve claims for substantial
amounts. Although the ultimate outcome of these suits cannot be ascertained at
this time, it is the opinion of management, after consultation with outside
counsel, that the resolution of such suits will not have a material adverse
effect on the consolidated financial condition of the Company, but may be
material to the Company's operating results for any particular period,
depending upon the level of the Company's income for such period.
7
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Directors and Shareholders of
Dean Witter, Discover & Co.:
We have reviewed the accompanying consolidated balance sheet of Dean Witter,
Discover & Co. and subsidiaries as of March 31, 1996, and the related
consolidated statements of income and cash flows for the three-month periods
ended March 31, 1996 and 1995. These financial statements are the
responsibility of the management of Dean Witter, Discover & Co.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Dean Witter, Discover & Co. and
subsidiaries as of December 31, 1995, and the related consolidated statements
of income, cash flows and changes in shareholders' equity for the year then
ended (not presented herein); and in our report dated February 21, 1996, we
expressed an unqualified opinion on those consolidated financial statements.
Deloitte & Touche LLP
New York, New York
May 15, 1996
8
<PAGE>
DEAN WITTER, DISCOVER & CO.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
RESULTS OF OPERATIONS
The Company achieved record net income of $245.8 million in the first
quarter of 1996, an 11% increase over the first quarter of 1995. Primary and
fully diluted earnings per common share were $1.41 in the first quarter of
1996 compared to $1.28 in the first quarter of 1995.
Net operating revenues increased 13% in the first quarter of 1996 from the
first quarter of 1995. The increase was due to higher merchant and cardmember
fees, commissions and net interest income partially offset by a higher
provision for losses on receivables.
Non-interest expenses increased 14% in the first quarter of 1996 from the
first quarter of 1995. The increase reflected higher variable compensation
expenses related to increased Securities revenues and higher marketing and
business development and information processing expenses.
9
<PAGE>
CREDIT SERVICES
STATEMENTS OF INCOME (IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
31,
-------------
1996 1995
------ ------
(UNAUDITED)
<S> <C> <C>
Merchant and cardmember fees..................................... $320.5 $240.3
Servicing fees................................................... 200.3 172.3
Other............................................................ 5.1 0.3
------ ------
Total non-interest revenues.................................... 525.9 412.9
------ ------
Interest revenue................................................. 675.2 563.5
Interest expense................................................. 275.1 225.7
------ ------
Net interest income............................................ 400.1 337.8
Provision for loan losses........................................ 225.0 117.5
------ ------
Net credit income.............................................. 175.1 220.3
------ ------
Net operating revenues......................................... 701.0 633.2
------ ------
Employee compensation and benefits............................... 124.2 102.3
Marketing and business development............................... 164.4 124.5
Information processing and communications........................ 114.4 90.9
Facilities and equipment......................................... 14.8 11.8
Other............................................................ 85.8 91.1
------ ------
Total non-interest expenses.................................... 503.6 420.6
------ ------
Income before income taxes....................................... 197.4 212.6
Income tax expense............................................... 73.1 80.6
------ ------
Net income....................................................... $124.3 $132.0
====== ======
</TABLE>
Credit Services net income decreased 6% to $124.3 million in the first
quarter of 1996 from the first quarter of 1995. The change was due to higher
revenues resulting from increased levels of general purpose credit card
transaction volume and loans, offset by increased levels of credit losses and
non-interest expenses.
Non-Interest Revenues. Total non-interest revenues increased 27% in the
first quarter of 1996 from the first quarter of 1995.
Merchant and cardmember fees include revenues from fees charged to merchants
on credit card sales, late payment fees, insurance fees, cash advance fees,
overlimit fees (introduced in February 1996), the administration of credit
card programs and transaction processing services. Merchant and cardmember
fees increased 33% in the first quarter of 1996 from the first quarter of
1995. The increase was due to higher merchant fee revenues, insurance fees,
late payment fees and overlimit fees. The increase in merchant fee revenue was
due to continued growth in credit card transaction volume and the NOVUS
Network merchant base. The increase in insurance fees was due to increased
enrollments, higher premium rates and favorable experience rebates. The
increase in late fees was due to a higher incidence of delinquent accounts.
Servicing fees are revenues derived from consumer loans that have been sold
to investors through asset securitizations. Cash flows from the interest yield
and cardmember fees generated by securitized loans are used to pay investors
in these loans a predetermined fixed or floating rate of return on their
investment, to reimburse the investors for losses to principal through charged
off loans and to pay the Company a fee for servicing the loans. Any excess net
cash flows remaining are paid to the Company. The servicing fees and excess
net cash flows paid to the Company are reported as servicing fees in the
consolidated statements of income. The sale of consumer loans through asset
securitizations therefore has the effect of converting portions of net credit
income and fee income to servicing fees.
10
<PAGE>
The table below presents the components of servicing fees.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Merchant and cardmember fees............................... $ 47.0 $ 31.3
Interest revenue........................................... 493.2 398.1
Interest expense........................................... (189.0) (169.0)
Provision for loan losses.................................. (150.9) (88.1)
------- -------
Servicing fees............................................. $ 200.3 $ 172.3
======= =======
</TABLE>
Servicing fees increased 16% in the first quarter of 1996 compared to the
first quarter of 1995. This increase was due to a higher average level of
securitized loans, which resulted in higher net interest cash flows partially
offset by a higher rate of credit losses on securitized loans.
Net Interest Income. Net interest income is equal to the difference between
interest revenue derived from Credit Services consumer loan and short-term
investment assets and interest expense incurred to finance those assets.
Credit Services assets, primarily consumer loans, earn interest revenue at
both fixed rates and market indexed variable rates. The Company incurs
interest expense at fixed and floating rates to finance Credit Services
assets. Interest expense also includes the effects of interest rate contracts
entered into by the Company as part of its interest rate risk management
program. This program is designed to reduce the volatility of earnings
resulting from changes in interest rates and is accomplished primarily through
matched financing, which entails matching the repricing schedules of consumer
loans and the related financing. Net interest income increased 18% in the
first quarter of 1996 from the first quarter of 1995. This increase was due to
higher average levels of consumer loans outstanding, partially offset by a
shift in the mix of consumer loans from fixed rate loans to lower yielding
variable rate loans. The effects of declining market interest rates on the
Company's variable rate consumer loans was offset by declines in the Company's
cost of funds.
11
<PAGE>
The following tables present analyses of Credit Services average balance
sheets and interest rates for the three months ended March 31, 1996 and 1995
and changes in net interest income during those periods.
TABLE 1
CREDIT SERVICES AVERAGE BALANCE SHEET ANALYSIS (DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------
1996 1995
-------------------------- --------------------------
AVERAGE AVERAGE
BALANCE RATE INTEREST BALANCE RATE INTEREST
--------- ----- -------- --------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
General purpose credit
card loans.............. $16,648.2 13.68% $566.3 $13,877.9 14.82% $507.1
Other consumer loans..... 2,950.3 12.22 89.6 1,752.8 10.68 46.2
Investment securities.... 328.6 5.37 4.4 148.5 5.95 2.2
Federal funds sold and
securities purchased
under agreements to
resell.................. 75.5 5.40 1.0 67.6 5.86 1.0
Other.................... 1,007.0 5.53 13.9 466.6 6.18 7.0
--------- ------ --------- ------
Total interest
earning assets...... 21,009.6 12.93 675.2 16,313.4 14.01 563.5
Allowance for loan
losses.................. (673.1) (572.4)
Non-earning assets....... 1,355.9 1,208.9
--------- ---------
Total assets......... $21,692.4 $16,949.9
========= =========
LIABILITIES &
SHAREHOLDER'S EQUITY
Interest bearing
liabilities:
Interest bearing deposits
Savings................ $ 1,001.1 4.57% $ 11.4 $ 1,117.0 4.89% $ 13.5
Brokered............... 3,156.7 7.12 55.9 3,166.2 7.33 57.2
Other time............. 1,822.0 6.16 27.9 937.5 6.01 13.9
--------- ------ --------- ------
Total interest
bearing deposits.... 5,979.8 6.40 95.2 5,220.7 6.57 84.6
Federal funds purchased
and securities sold
under agreements to
repurchase.............. 259.7 5.85 3.8 71.2 5.97 1.0
Other borrowings......... 11,304.0 6.27 176.1 8,300.5 6.84 140.1
--------- ------ --------- ------
Total interest
bearing
liabilities......... 17,543.5 6.31 275.1 13,592.4 6.73 225.7
Shareholder's
equity/other
liabilities............. 4,148.9 3,357.5
--------- ---------
Total liabilities &
shareholder's
equity.............. $21,692.4 $16,949.9
========= =========
Net interest income...... $400.1 $337.8
====== ======
Net interest margin...... 7.66% 8.40%
Interest rate spread..... 6.62% 7.28%
</TABLE>
12
<PAGE>
TABLE 2
CREDIT SERVICES RATE/VOLUME ANALYSIS (DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1996 VS
1995
----------------------
INCREASE/(DECREASE)
DUE TO CHANGES IN
----------------------
VOLUME RATE TOTAL
------ ------ ------
<S> <C> <C> <C>
INTEREST REVENUE
General purpose credit card loans..................... $104.7 $(45.5) $ 59.2
Other consumer loans.................................. 31.9 11.5 43.4
Investment securities................................. 2.7 (0.5) 2.2
Federal funds sold and securities purchased under
agreements to resell................................. 0.1 (0.1) --
Other................................................. 8.5 (1.6) 6.9
------
Total interest revenue............................ 166.6 (54.9) 111.7
------
INTEREST EXPENSE
Interest bearing deposits
Savings............................................. (1.3) (0.8) (2.1)
Brokered............................................ (0.1) (1.2) (1.3)
Other time.......................................... 13.3 0.7 14.0
------
Total............................................. 13.0 (2.4) 10.6
Federal funds purchased and securities sold under
agreements to repurchase............................. 2.9 (0.1) 2.8
Other borrowings...................................... 51.7 (15.7) 36.0
------
Total interest expense............................ 67.2 (17.8) 49.4
------
Net interest income................................... $ 99.4 $(37.1) $ 62.3
====== ====== ======
</TABLE>
The supplemental table below provides average managed loan balance and rate
information which takes into effect both owned and securitized loans.
TABLE 3
SUPPLEMENTAL CREDIT SERVICES AVERAGE MANAGED LOAN BALANCE SHEET INFORMATION
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------
1996 1995
-------------------------- --------------------------
AVG. BAL. RATE % INTEREST AVG. BAL. RATE % INTEREST
--------- ------ -------- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Consumer loans.......... $31,388.4 14.72% $1,149.1 $25,501.1 15.13% $951.4
General purpose credit
card loans............. 27,455.9 14.89 1,016.3 22,751.0 15.41 864.6
Total interest earning
assets................. 32,799.6 14.33 1,168.4 26,184.2 14.89 961.6
Total interest bearing
liabilities............ 29,333.5 6.36 464.0 23,463.2 6.82 394.7
Consumer loan interest
rate spread............ 8.36% 8.31%
Interest rate spread.... 7.97 8.07
Net interest margin..... 8.64 8.78
</TABLE>
Provision for Loan Losses. The provision for loan losses is the amount
necessary to establish the allowance for loan losses at a level the Company
believes is adequate to absorb estimated losses in its consumer loan portfolio
at the balance sheet date. The Company's allowance for loan losses is
regularly evaluated by
13
<PAGE>
management for adequacy on a portfolio by portfolio basis and was $663.6
million and $604.8 million at March 31, 1996 and 1995. The provision for loan
losses is affected by net charge-offs, loan volume and changes in the amount
of consumer loans estimated to be uncollectable. The provision for loan losses
increased 91% in the first quarter of 1996 from the first quarter of 1995 due
to an increase in net charge-off rates and a higher level of consumer loans
outstanding. Net charge-offs as a percentage of average consumer loans
outstanding increased to 4.44% in the first quarter of 1996 from 2.86% in the
first quarter of 1995. The increase in the Company's net charge-off rate was
consistent with the industry-wide trend of increasing credit loss rates. The
Company believes that the current industry-wide trend of increasing credit
loss rates is related, in part, to increased consumer debt levels and
bankruptcy rates. The Company believes that the trend may continue and the
Company may experience a higher net charge-off rate for the full year 1996
compared to 1995. The Company is reassessing its estimate of the allowance for
losses related to securitized loans. A change in this estimate may affect
future provisions for consumer loan losses as described in note 2 to the
consolidated financial statements on page 4.
Consumer loans are considered delinquent when interest or principal payments
become 30 days past due. Consumer loans are charged off when they become 180
days delinquent, except in the case of bankruptcies, where loans are charged
off after receipt and processing of written notification, and in fraudulent
transactions, where loans are charged off when identified. Loan delinquencies
and charge-offs are primarily affected by changes in economic conditions and
vary throughout the year due to seasonal consumer spending and payment
patterns. The Company believes the increase in consumer loan delinquency rates
was related to the industry-wide credit conditions discussed previously. The
decline in the percentage of consumer loans past due 30 to 89 days as of March
31, 1996 from December 31, 1995 was due to the effects of a program that
allowed selected cardmembers in good standing to defer payment one month. The
following table presents delinquency and net charge-off rates with
supplemental managed loan information.
CREDIT SERVICES ASSET QUALITY (IN MILLIONS)
<TABLE>
<CAPTION>
MARCH 31, 1996 MARCH 31, 1995 DECEMBER 31, 1995
-------------------- -------------------- --------------------
OWNED MANAGED OWNED MANAGED OWNED MANAGED
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Consumer loans.......... $18,784.0 $31,045.9 $15,933.6 $25,999.2 $21,556.4 $31,775.9
Consumer loans
contractually past due
as a percentage of
consumer loans
30 to 89 days......... 3.85% 3.62% 3.01% 2.99% 4.21% 4.05%
90 to 179 days........ 2.56% 2.35% 1.66% 1.66% 2.18% 2.09%
Net charge-offs as a
percentage of average
consumer loans......... 4.44% 4.71% 2.86% 3.16% 3.50% 3.75%
</TABLE>
Non-Interest Expenses. Non-interest expenses increased 20% in the first
quarter of 1996 from the first quarter of 1995.
Employee compensation and benefits expense increased 21% in the first
quarter of 1996 from the first quarter of 1995. Information processing and
communications expense increased 26% in the first quarter of 1996 from the
first quarter of 1995. These increases principally reflect the costs
associated with processing increased transaction volumes, servicing additional
NOVUS Network merchants and active credit card accounts and development costs
of the systems supporting the Company's multi-card strategy. Marketing and
business development expense rose 32% in the first quarter of 1996 from the
first quarter of 1995 due to costs associated with the growth of the Company's
new and existing credit card brands and higher cardmember rewards expense.
Cardmember rewards expense, which includes the Cashback Bonus Award, increased
due to continued growth in credit card transaction volume and increased
cardmember qualification for higher award levels.
14
<PAGE>
SECURITIES
STATEMENTS OF INCOME (IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
31,
-------------
1996 1995
------ ------
(UNAUDITED)
<S> <C> <C>
Commissions...................................................... $300.7 $234.6
Asset management and administration fees......................... 274.9 245.5
Principal transactions........................................... 118.9 125.4
Investment banking............................................... 64.7 38.9
Other............................................................ 19.7 26.7
------ ------
Total non-interest revenues.................................... 778.9 671.1
------ ------
Interest revenue................................................. 186.2 193.7
Interest expense................................................. 115.6 127.2
------ ------
Net interest income............................................ 70.6 66.5
Provision for losses on receivables.............................. 3.0 3.2
------ ------
Net credit income.............................................. 67.6 63.3
------ ------
Net operating revenues......................................... 846.5 734.4
------ ------
Employee compensation and benefits............................... 446.1 381.4
Marketing and business development............................... 27.5 23.2
Information processing and communications........................ 67.7 63.5
Facilities and equipment......................................... 46.4 42.6
Other............................................................ 55.8 74.0
------ ------
Total non-interest expenses.................................... 643.5 584.7
------ ------
Income before income taxes....................................... 203.0 149.7
Income tax expense............................................... 81.5 59.6
------ ------
Net income....................................................... $121.5 $ 90.1
====== ======
</TABLE>
Securities achieved record net income of $121.5 million in the first quarter
of 1996, a 35% increase over the first quarter of 1995. The growth in net
income was due to higher revenues resulting from increased activity in
securities markets and continued emphasis on cost control.
Commissions. Commission revenues arise from agency transactions in listed
and over-the-counter ("OTC") equity securities, and sales of mutual funds,
insurance products, futures and options. Commission revenues increased 28% in
the first quarter of 1996 from the first quarter of 1995 due to increased
equity transactions and mutual fund sales.
Asset Management and Administration Fees. Asset management and
administration fees include fund management fees, distribution-related fees
and other administrative fees. Asset management and administration fees
increased 12% in the first quarter of 1996 from the first quarter of 1995.
Increased revenues from fund management fees, 12b-1 distribution fees and
Investment Consulting Services ("ICS") fees were partially offset by lower
redemption fees. Period end assets under management increased 20% from March
31, 1995, and 5% from December 31, 1995, to a record $83.4 billion at March
31, 1996. The increases in both periods were due to net sales and market value
increases. Average assets under management were 20% higher in the first
quarter of 1996 than in the first quarter of 1995.
15
<PAGE>
Components of assets under management and administration were as follows(1):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, DECEMBER 31,
1996 1995 1995
--------- --------- ------------
(IN BILLIONS)
<S> <C> <C> <C>
Equity funds.............................. $32.4 $24.0 $29.9
Fixed income funds........................ 24.6 24.5 25.4
Money market funds........................ 23.7 19.0 21.6
Investment management services............ 2.7 2.1 2.6
----- ----- -----
Total assets under management and
administration........................... $83.4 $69.6 $79.5
===== ===== =====
- --------
(1) Excludes ICS assets of $9.5 billion and $6.7 billion at March 31, 1996 and
1995, and $8.9 billion at December 31, 1995.
Fund management fees arise from investment management services that the
Company provides to registered investment companies (the "funds") pursuant to
various contractual arrangements. The Company receives management fees based
upon each fund's average net assets. Fund management fees increased 20% in the
first quarter of 1996 from the first quarter of 1995 due to higher average
asset levels.
Components of fund management fees were as follows:
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1996 1995
--------- ------------
(IN MILLIONS)
<S> <C> <C>
Equity funds........................................ $44.3 $33.6
Fixed income funds.................................. 28.6 26.9
Money market funds.................................. 18.2 15.5
----- -----
Total fund management fees.......................... $91.1 $76.0
===== =====
</TABLE>
The Company receives 12b-1 distribution fees for services it provides in
promoting and distributing certain open-ended Dean Witter Funds. These fees
are based on the lesser of average daily fund asset balances or average daily
aggregate net fund sales and are affected by changes in the overall level and
mix of assets under management and administration. In the first quarter of
1996, 12b-1 distribution fees increased 14% from the first quarter of 1995.
ICS fees are derived from private portfolio management services arranged by
the Company for individual investors and are affected by changes in the level
of ICS assets. ICS fees increased 24% in the first quarter of 1996 from the
first quarter of 1995.
The Company receives redemption fees from investors for redemptions of
certain mutual fund shares. The fee is paid from the proceeds of the sale of
shares and is based on the length of time the redeemed shares were held by the
investor. Redemption fees decreased 29% in the first quarter of 1996 from the
first quarter of 1995.
Principal Transactions. Principal transactions include revenues from
customers' purchases and sales of securities in which the Company acts as a
principal and includes gains and losses on securities held for resale. The
Company holds securities for resale primarily to facilitate customer trading
requirements. Principal transaction revenues decreased 5% in the first quarter
of 1996 from the first quarter of 1995 due to decreases in revenues from fixed
income securities transactions, resulting from a lower interest rate
environment, partially offset by higher revenues from OTC equity securities
due to increased market volume.
Investment Banking Revenues. Investment banking revenues are derived from
the underwriting of public offerings of securities and fees from advisory
services. Investment banking revenues increased 66% in the first quarter of
1996 from the first quarter of 1995. This increase was primarily attributable
to higher advisory fees and increased equity underwriting activity.
16
<PAGE>
Net Credit Income. Net credit income consists primarily of interest revenue
from customer margin loans less the cost of financing these loans, and credit
losses. Net credit income is affected by the levels of margin loans,
borrowings that finance these loans and market interest rates. Net credit
income increased 7% in the first quarter of 1996 from the first quarter of
1995.
Non-Interest Expense. Total non-interest expenses increased 10% in the first
quarter of 1996 compared to the first quarter of 1995. As a percentage of net
operating revenues, total non-interest expenses decreased to 76.0% in the
first quarter of 1996 from 79.6% in the first quarter of 1995. Employee
compensation and benefits increased 17% in the first quarter of 1996 from the
first quarter of 1995 due to increased variable compensation related to
increased revenues. As a percentage of net operating revenues employee
compensation and benefits increased to 52.7% in the first quarter of 1996 from
51.9% in the first quarter in 1995.
17
<PAGE>
LIQUIDITY AND CAPITAL
LIQUIDITY
The Company's liquidity policies are designed to provide funding for the
Company's current and future business requirements and to ensure access to
cost effective funding in all business environments. This is accomplished
through diversification of funding sources, extension of funding terms and
staggering of maturities. The Company expects that its future funding and
refinancing requirements will be met through its traditional sources of funds.
In April 1996, the Company renewed its senior bank credit facility and
increased its amount to $4.0 billion from $3.25 billion. The facility expires
in April 1997. The Company may either (1) with the consent of 51% in interest
of the banks, extend the term of the facility for an additional 364 days; or
(2) convert to term loans having a maximum maturity of 180 days and loans
outstanding at expiration of the facility. The Company currently plans to
renew or replace this facility prior to its expiration. This facility contains
covenants that require the Company to maintain minimum net worth requirements
and specified financial ratios. The Company believes that the covenant
restrictions will not impair its ability to pay its current level of
dividends. As of March 31, 1996, the Company had never borrowed from its
senior bank credit facility.
In the first quarter of 1996, the Company issued $1.4 billion of senior
long-term notes consisting of $0.4 billion of underwritten notes with a
weighted average maturity of 13.8 years from the date of issuance and $1.0
billion of medium-term notes with a weighed average maturity of 4.1 years from
the date of issuance. Senior long-term notes in the amount of $0.1 billion
matured in the first quarter of 1996.
In the first quarter of 1996, the Company completed asset securitizations of
$2.6 billion with a weighted average maturity of 6.9 years. In April 1996, the
Company completed a floating rate asset securitization of $1.0 billion with an
expected term of 15 years.
INTEREST RATE RISK
The Company's interest rate risk policies are designed to reduce the
volatility of earnings resulting from changes in interest rates. This is
accomplished primarily through matched financing. The Company is exposed to
the risk that changes in market interest rates will result in declines in net
interest income and servicing fees. Matched financing reduces this risk by
matching the repricing schedules of consumer loans and the related financing.
When necessary, the Company utilizes interest rate contracts to achieve its
matched financing objectives. Interest rate contracts include interest rate
swaps, cost of funds agreements and interest rate caps. Under interest rate
exchange agreements, which include interest rate swaps and cost of funds
agreements, the Company effectively exchanges the interest payments on its
financing with those of a counterparty. Interest rate swap and cap agreements
are entered into with institutions that are established dealers in these
instruments and that maintain certain minimum credit criteria established by
the Company. Cost of funds agreements are entered into as part of agreements
pursuant to which the Company provides private label credit card processing
services to certain of its merchant clients.
Notional amounts of interest rate exchange agreements outstanding were as
follows.
<TABLE>
<CAPTION>
MARCH 31,
1996
---------
<S> <C>
Agreements that converted the interest rate on financing:
From fixed to floating............................................ $4,905.3
From floating to fixed............................................ 1,427.4
From floating to floating......................................... 464.1
--------
Total $6,796.8
========
</TABLE>
At March 31, 1996, the Company had $290.0 million of interest rate cap
agreements outstanding, of which $40.0 million were in effect.
18
<PAGE>
CAPITAL
The Company's shareholders' equity increased to $4,912.7 million at March
31, 1996 from $4,833.7 million at December 31, 1995. At March 31, 1996,
$3,298.6 million of the Company's shareholders' equity was invested in the
equity of its subsidiaries. The remainder of the Company's shareholders'
equity was advanced to its subsidiaries to finance their operations.
For purposes of evaluating the financial performance of its segments, the
Company's shareholders' equity was allocated as follows at March 31, 1996:
Credit Services, $2,667.6 million; Securities, $1,391.8 million.
In January 1996, the Board of Directors of the Company approved an increase
in the Company's quarterly dividend to $0.22 per common share effective the
first quarter of 1996.
The Company purchases shares of its common stock under a general stock
repurchase program and a repurchase program designed specifically for issuance
in connection with the Company's equity-based compensation plans. In the first
quarter of 1996, the Board of Directors of the Company increased the Company's
authorization to purchase its shares under its general stock repurchase
program by $250.0 million. In the first quarter of 1996, the Company purchased
3.0 million shares of its common stock of which 1.9 million were purchased
under the general stock repurchase plan. In the first quarter of 1996, the
Company reissued 1.2 million shares of common stock, which had been held in
treasury, under the terms of employee compensation plans.
CAUTIONARY STATEMENTS
The Company from time to time may provide forward-looking statements
relating to anticipated events and the effect of those anticipated events on
the Company's key success variables and operating results. The cautionary
statements provided below are made pursuant to the provisions of the Private
Securities Litigation Reform Act of 1995 (the "Act") and with the intention of
obtaining the benefits of the "safe harbor" provisions of the Act for any such
forward-looking statements. The Company cautions readers that any forward-
looking statements provided are not guarantees of future performance and that
actual results may differ materially from those in the forward-looking
statements as a result of various factors. In particular, with respect to
Credit Services provision for loan losses, factors that may affect forward-
looking statements include, but are not limited to, the following:
Changes in consumer payment patterns and bankruptcy trends that affect the
level and direction of consumer loan delinquencies and write-offs.
The rate and magnitude of changes in the consumer loan portfolio.
Consumer loan portfolio product mix.
The amount of consumer loans intended to be securitized and accessibility
to the securitization markets.
Changes in management's estimates of the adequacy of loan loss allowances.
Interest rate movements and other general economic conditions.
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders of the Company was held on April 19,
1996.
(c) At the Annual Meeting of Shareholders the following matters were
submitted to a vote of the Shareholders of the Company:
(1) The election of eight directors to the Board of Directors to serve until
the next annual meeting of shareholders or until their successors are elected
and take office:
<TABLE>
<CAPTION>
VOTES
DIRECTOR VOTES FOR WITHHELD
-------- ----------- ---------
<S> <C> <C>
Philip J. Purcell...................................... 136,743,191 2,901,794
Edward A. Brennan...................................... 136,081,238 3,563,747
Alfred C. DeCrane, Jr. ................................ 137,044,671 2,600,314
Robert M. Gardiner..................................... 136,551,362 3,093,623
C. Robert Kidder....................................... 135,568,349 4,076,636
Michael A. Miles....................................... 137,062,626 2,582,359
Sybil C. Mobley........................................ 136,949,935 2,695,050
Clarence B. Rogers, Jr. ............................... 135,795,942 3,849,043
(2) The ratification of the appointment of Deloitte & Touche LLP as the
Company's independent public auditors for the 1996 fiscal year:
</TABLE>
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST ABSTENTIONS
--------- ------------- -----------
<S> <C> <C>
138,442,154 424,370 778,461
</TABLE>
(3) The proposal to approve the Directors' Equity Capital Accumulation Plan
for the Company's non-employee directors:
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST ABSTENTIONS
--------- ------------- -----------
<S> <C> <C>
128,513,711 7,776,451 2,675,058
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
An exhibit index has been filed as part of this Report on Page E-1.
(b) REPORTS ON FORM 8-K
Form 8-K dated January 4, 1996 reporting Items 5 and 7.
Form 8-K dated January 18, 1996 reporting Items 5 and 7.
Form 8-K dated January 23, 1996 reporting Items 5 and 7.
20
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
Dean Witter, Discover & Co.
(REGISTRANT)
/s/ Robert P. Seass
By: _________________________________
Robert P. Seass
Senior Vice President and
Controller
(Principal Accounting Officer and
duly authorized Officer of
Registrant)
Date: May 15, 1996
21
<PAGE>
EXHIBIT INDEX
DEAN WITTER, DISCOVER & CO.
QUARTER ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
SEQUENTIALLY
DESCRIPTION NUMBERED PAGE
----------- -------------
<C> <S> <C>
10.1 $4.0 Billion Credit Agreement, dated April 19, 1996,
between Dean Witter, Discover & Co. and Morgan Guaranty
Trust Company of New York, Chemical Bank and other banks
named therein.
10.2 Key Executive Employment Plan, as amended April 19, 1996.
11 Computation of earnings per share.
12 Computation of ratio of earnings to fixed charges.
15 Letter of awareness from Deloitte & Touche LLP, dated May
15, 1996, concerning unaudited interim financial
information.
27 Financial Data Schedule.
</TABLE>
E-1
<PAGE>
EXHIBIT 10.1
EXECUTION COPY
$4,000,000,000
CREDIT AGREEMENT
dated as of
April 19, 1996
among
DEAN WITTER, DISCOVER & CO.
The BANKS Listed Herein
The MANAGING AGENTS Referred to Herein
CHEMICAL BANK,
as Administrative Agent
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
as Documentation Agent
TABLE OF CONTENTS
_________
The Table of Contents is not a part of this Agreement.
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions........................................ 1
1.02 Accounting Terms and Determinations........................ 16
1.03 Types of Borrowings........................................ 17
ARTICLE II
THE CREDITS
SECTION 2.01 Commitments to Lend................................ 17
2.02 Notice of Committed Borrowing.............................. 19
2.03 Money Market Borrowings.................................... 19
2.04 Notice to Banks; Funding of Loans.......................... 24
2.05 Notes...................................................... 25
2.06 Maturity of Loans ........................................ 25
2.07 Interest Rates............................................. 26
2.08 Facility Fee............................................... 29
2.09 Optional Termination or
Reduction of Commitments................................. 30
2.10 Method of Electing Interest Rates.......................... 30
2.11 Optional Prepayments....................................... 32
2.12 General Provisions as to Payments.......................... 32
2.13 Funding Losses............................................. 33
2.14 Computation of Interest and Fees........................... 34
2.15 Taxes...................................................... 34
2.16 Regulation D Compensation.................................. 36
ARTICLE III
CONDITIONS
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SECTION 3.01 Effectiveness...................................... 37
3.02 Borrowings................................................. 38
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Corporate Existence and Power...................... 39
4.02 Corporate and Governmental
Authorization; No Contravention.......................... 39
4.03 Binding Effect............................................. 40
4.04 Financial Information...................................... 40
4.05 Litigation................................................. 40
4.06 Compliance with ERISA...................................... 41
4.07 Taxes...................................................... 41
4.08 Compliance with Laws....................................... 41
4.09 Full Disclosure............................................ 42
4.10 DWR Capital Maintenance.................................... 42
ARTICLE V
COVENANTS
SECTION 5.01 Information........................................ 42
5.02 Maintenance of Property; Insurance......................... 46
5.03 Conduct of Business and
Maintenance of Existence................................. 46
5.04 Compliance with Laws....................................... 47
5.05 Negative Pledge............................................ 47
5.06 Consolidations, Mergers and
Sales of Assets.......................................... 50
5.07 Use of Proceeds............................................ 50
5.08 Minimum Consolidated Net Worth............................. 51
5.09 Capital Maintenance and Leverage
Ratio of Greenwood Trust................................. 51
ARTICLE VI
DEFAULTS
SECTION 6.01 Events of Default ................................. 51
6.02 Notice of Default.......................................... 54
ARTICLE VII
THE AGENTS
SECTION 7.01 Appointment and Authorization...................... 55
7.02 Agents and Affiliates...................................... 55
7.03 Action by Agents........................................... 55
7.04 Consultation with Experts.................................. 55
7.05 Liability of Agents........................................ 55
7.06 Indemnification............................................ 56
7.07 Credit Decision............................................ 56
7.08 Successor Agent............................................ 56
7.09 Agents' Fees............................................... 57
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01 Basis for Determining Interest
Rate Inadequate or Unfair............................ 57
8.02 Illegality................................................. 58
8.03 Increased Cost and Reduced Return.......................... 59
8.04 Base Rate Loans Substituted for
Affected Fixed Rate Loans................................ 61
8.05 Substitution of Bank....................................... 62
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Notices............................................ 62
9.02 No Waivers................................................. 63
9.03 Expenses; Documentary Taxes;
Indemnification.......................................... 63
9.04 Sharing of Set-Offs........................................ 64
9.05 Amendments and Waivers..................................... 64
9.06 Successors and Assigns..................................... 65
9.07 Collateral................................................. 67
9.08 Governing Law; Submission to Juris-
diction; Severability.................................... 67
9.09 Counterparts; Integration.................................. 68
9.10 WAIVER OF JURY TRIAL....................................... 68
9.11 Restrictions on Transfers.................................. 68
9.12 Confidentiality............................................ 69
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9.13 Termination of Existing Credit
Agreement.......................................... 70
Exhibit A - Note
Exhibit B - Money Market Quote Request
Exhibit C - Invitation for Money Market Quotes
Exhibit D - Money Market Quote
Exhibit E - Opinion of Counsel for the
Borrower
Exhibit F - Opinion of Special Counsel for the
Documentation Agent
Exhibit G - Assignment and Assumption Agreement
Exhibit H - Notice of Committed Borrowing
Exhibit I - Notice of Interest Rate Election
Exhibit J - Confidentiality Letter
Exhibit K - Extension Agreement
CREDIT AGREEMENT
AGREEMENT dated as of April 19, 1996 among DEAN
WITTER, DISCOVER & CO., the BANKS listed on the signature
pages hereof, the MANAGING AGENTS referred to herein,
CHEMICAL BANK, as Administrative Agent, and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Documentation Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms,
as used herein, have the following meanings:
"Absolute Rate Auction" means a solicitation of
Money Market Quotes setting forth Money Market Absolute
Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in
Section 2.07(b).
"Administrative Agent" means Chemical Bank, in its
capacity as administrative agent for the Banks hereunder,
and its successors in such capacity.
"Administrative Questionnaire" means, with respect
to each Bank, an administrative questionnaire in the form
prepared by the Documentation Agent and submitted to the
Administrative Agent (with a copy to the Borrower) duly
completed by such Bank.
"Affiliate" of a given Person means any other
Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, such given Person.
"Agents" means the Administrative Agent and the
Documentation Agent.
"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).
"Assignee" has the meaning set forth in Section
9.06(c).
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"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.
"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 (i) a Committed Loan which
bears interest at the Base Rate pursuant to the applicable
Notice of Committed Borrowing or Notice of Interest Rate
Election or the provisions of Article VIII or (ii) an
overdue amount which was a Base Rate Loan immediately before
it became overdue.
"Benefit Arrangement" means at any time an
employee benefit plan within the meaning of Section 3(3) of
ERISA which is not a Plan or a Multiemployer Plan and which
is maintained or otherwise contributed to by any member of
the ERISA Group.
"Borrower" means Dean Witter, Discover & Co., a
Delaware corporation, and its successors.
"Borrowing" has the meaning set forth in Section
1.03.
"CD Base Rate" has the meaning set forth in
Section 2.07(b).
"CD Loan" means (i) a Committed Loan which bears
interest at a CD Rate pursuant to the applicable Notice of
Committed Borrowing or Notice of Interest Rate Election or
(ii) an overdue amount which was a CD Loan immediately
before it became overdue.
"CD Margin" means a rate per annum determined in
accordance with the Pricing Schedule.
"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 Bank of America
National Trust and Savings Association, Deutsche Bank AG,
Union Bank of Switzerland and The Chase Manhattan Bank, N.A.
"Commitment" means, with respect to each Bank, the
amount set forth opposite the name of such Bank on the
signature pages hereof, as such amount may be reduced from
time to time pursuant to Section 2.09 or changed pursuant to
Section 9.06(c).
"Commitment Termination Date" means April 18, 1997
or, in the case of any Bank, such later date to which the
Commitment Termination Date for such Bank shall have been
extended pursuant to Section 2.01(b), or if any such day is
not a Euro-Dollar Business Day, the next preceding
Euro-Dollar Business Day.
"Committed Loan" means a loan made by a Bank
pursuant to Section 2.01; provided that, if any such loan or
loans (or portions thereof) are combined or subdivided
pursuant to a Notice of Interest Rate Election, the term
"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.
"Confidential Information" means any written or
oral information provided under this Agreement by or on
behalf of the Borrower that has been identified by its
source as confidential.
"Consolidated Net Income" means, for any Person
and for any period, the net income of such Person and its
Consolidated Subsidiaries, determined on a consolidated
basis for such period.
"Consolidated Net Worth" means, at any date, the
consolidated stockholders' equity of the Borrower and its
Consolidated Subsidiaries determined as of such date.
"Consolidated Subsidiary" means, for any Person at
any date, any Subsidiary or other entity the accounts of
which would be consolidated with those of such Person in its
consolidated financial statements if such statements were
4
<PAGE>
prepared as of such date.
"Dean Witter Realty" means Dean Witter Realty
Inc., a Delaware corporation, and its successors.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money properly recordable as a liability on the financial
statements of such Person, and all liabilities of such
Person in respect of deposits, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other
similar instruments properly recordable as a liability on
the financial statements of such Person, (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) the net
present value of future minimum lease payments under all
obligations of such Person as lessee which are capitalized
in accordance with generally accepted accounting principles,
(v) all obligations of such Person to purchase securities
(or other property) which arise out of or in connection with
the sale of the same or substantially similar securities or
property, (vi) all non-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, (vii)
all obligations of such Person to redeem shares of its
capital stock which are redeemable otherwise than at the
sole option of such Person, (viii) all interest rate or
currency swap agreements, interest rate cap or collar
agreements or similar arrangements of such Person
(determined for purposes of any calculation hereunder at the
unrealized net loss position, if any, of such Person under
such arrangement at the time of determination), (ix) 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 (x) all Debt of others Guaranteed by such Person.
"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 Morgan Guaranty Trust
Company of New York in its capacity as documentation agent
for the Banks hereunder, and its successors in such
capacity.
"Domestic Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks in
New York City are authorized by law to close.
"Domestic Lending Office" means, as to each Bank,
its office located at its address set forth in its
Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Bank may hereafter designate as
its Domestic Lending Office by notice to the Borrower and
the Administrative Agent; 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).
"DWR" means Dean Witter Reynolds Inc., a Delaware
corporation, and its successors.
"Effective Date" means the date this Agreement
becomes effective in accordance with Section 3.01.
"Environmental Laws" means any and all federal,
state and local statutes, laws, judicial decisions,
regulations, ordinances, rules, judgments, orders, decrees,
plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental
restrictions applicable to the Borrower relating to the
environment, the effect of the environment on human health
or to emissions, discharges or releases of pollutants,
contaminants, hazardous substances or wastes into the
environment.
"ERISA" means the Employee Retirement Income
5
<PAGE>
Security Act of 1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, any of its
Subsidiaries 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 of its Subsidiaries, are treated as a single
employer under Section 414 of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic
Business Day on which commercial banks are open for
international business (including dealings in dollar
deposits) in London.
"Euro-Dollar Lending Office" means, as to
each Bank, its office, branch or affiliate located at
its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or
affiliate of such Bank as it may hereafter designate as its
Euro-Dollar Lending Office by notice to the Borrower and the
Administrative Agent.
"Euro-Dollar Loan" means (i) 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 or (ii) an overdue amount which was a
Euro-Dollar Loan immediately before it became overdue.
"Euro-Dollar Margin" means a rate per annum
determined in accordance with the Pricing Schedule.
"Euro-Dollar Rate" means a rate of interest
determined pursuant to Section 2.07(c) on the basis of the
London Interbank Offered Rate.
"Euro-Dollar Reference Banks" means the principal
London offices of Bank of America National Trust and Savings
Association, Deutsche Bank AG, Union Bank of Switzerland and
The Chase Manhattan Bank, N.A.
"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).
"Event of Default" has the meaning set forth in
Section 6.01.
"Examining Authority" means The New York Stock
Exchange, Inc., or any other organization designated by the
SEC as the Examining Authority for DWR as provided in
subsection (c)(12) of Rule 15c3-1.
"Exchange Act" means the Securities Exchange Act
of 1934, as amended from time to time, and the rules and
regulations promulgated thereunder.
"Existing Credit Agreement" means the
$3,250,000,000 Credit Agreement dated as of May 5, 1995
among the Borrower, the banks listed on the signature pages
thereof, the lead managers referred to therein, Chemical
Bank, as administrative agent and Morgan Guaranty Trust
Company of New York, as documentation agent.
"Facility Fee Rate" means a per annum rate
determined in accordance with the Pricing Schedule.
"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
6
<PAGE>
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 Chase
Manhattan Bank, N.A. on such day on such transactions as
determined by the Administrative Agent.
"FIRREA" means the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended from time
to time, or any successor statute.
"Fixed Rate Loans" means CD Loans or Euro-Dollar
Loans or Money Market Loans (excluding Money Market LIBOR
Loans bearing interest at the Base Rate pursuant to Section
8.01(a)) or any combination of the foregoing.
"Greenwood Trust" means Greenwood Trust Company, a
Delaware banking corporation.
"Group of Loans" or "Group" means at any time a
group of Loans consisting of (i) all Committed Loans which
are Base Rate Loans at such time or (ii) all Committed Loans
which are Fixed Rate Loans of the same type 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 8.04, 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.
"GTC Adjusted Total Assets" means, at any date,
the consolidated total assets of Greenwood Trust and its
Consolidated Subsidiaries at such date, as adjusted in
accordance with the risk-based capital guidelines
promulgated by the Federal Deposit Insurance Corporation (or
any successor) as in effect at such date.
"GTC Tier 1 Capital" means the Tier 1 capital of
Greenwood Trust and its Consolidated Subsidiaries,
calculated in accordance with the risk-based capital
requirements for federally insured banks promulgated by the
Federal Deposit Insurance Corporation (or any successor)
from time to time.
"GTC Tier 2 Capital" means the Tier 2 capital of
Greenwood Trust and its Consolidated Subsidiaries,
calculated in accordance with the risk-based capital
requirements for federally insured banks promulgated by the
Federal Deposit Insurance Corporation (or any successor)
from time to time.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or
indirectly guaranteeing any Debt of any other Person and,
without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or
services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such
Debt of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary
course of business. The term "Guarantee" used as a verb has
a corresponding meaning.
"Highly Confidential Information" means all
information not publicly disclosed by the Borrower which
consists of, or to the extent that it contains or discusses,
competitively sensitive information, including without
limitation information relating to pricing; expenses; profit
margins; the identity of present or potential customers,
vendors or joint venture participants; marketing plans; and
plans for new products or services.
"Indemnitee" has the meaning set forth in Section
9.03(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 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:
7
<PAGE>
(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 begins before and
would otherwise end after the Maturity Date of any
Bank, as in effect on the first day of such Interest
Period (after giving effect to the Term Loan Election,
if any, exercised on such first day), shall end on such
Maturity Date as so in effect.
(2) with respect to each CD Loan, a period commencing on
the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in the applicable Notice
of Interest Rate Election and ending 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 begins before and
would otherwise end after the Maturity Date of any
Bank, as in effect on the first day of such Interest
Period (after giving effect to the Term Loan Election,
if any, exercised on such first day), shall end on such
Maturity Date as so in effect.
(3) with respect to each Money Market LIBOR Borrowing, the
period commencing on the date of such Borrowing 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) in the case of any Bank, any Interest Period
which would otherwise end after the Maturity Date for
such Bank as in effect on the first day of such
Interest Period (after giving effect to the Term Loan
Election, if any, exercised on such first day) shall
end on the Maturity Date for such Bank as so in effect.
(4) with respect to each Money Market Absolute Rate
Borrowing, the period commencing on the date of such
Borrowing and ending such number of days thereafter (but not
less than 7 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) in the case of any Bank, any Interest Period
which would otherwise end after the Maturity Date for
such Bank as in effect on the first day of such
Interest Period (after giving effect to the Term Loan
Election, if any, exercised on such first day) shall
end on the Maturity Date for such Bank as so in effect.
"Internal Revenue Code" means the Internal Revenue
8
<PAGE>
Code of 1986, as amended, or any successor statute.
"Investment Advisors Act" means the Investment
Advisors Act of 1940, as amended.
"Invitation for Money Market Quotes" has the
meaning set forth in Section 2.03(c).
"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 of any
Person properly recordable as such on the financial
statements of such Person, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind. For
the purposes of this Agreement, the Borrower or any of its
Subsidiaries shall be deemed to own subject to a Lien any
asset properly recordable as such on the financial
statements of the Borrower or such Subsidiary (as the case
may be) which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan
or a Money Market Loan and "Loans" means Domestic Loans or
Euro-Dollar Loans or Money Market Loans or any combination
of the foregoing.
"London Interbank Offered Rate" has the meaning
set forth in Section 2.07(c).
"Managing Agents" means each of the Banks listed
on the signature pages hereof as a "Managing Agent", each in
such capacity.
"Margin Stock" has the meaning set forth in
Regulation U.
"Material Plan" means at any time a Plan or Plans
having aggregate Unfunded Liabilities in excess of
$75,000,000.
"Material Subsidiaries" means, at any time, (i)
Greenwood Trust, NOVUS and DWR and (ii) any Subsidiary of
the Borrower other than those listed in clause (i) that,
together with the Consolidated Subsidiaries of such
Subsidiary, either (x) has a consolidated stockholders'
equity that is not less than 5% of the consolidated
stockholders' equity of the Borrower and its Consolidated
Subsidiaries at such time or (y) had Consolidated Net
Income, total assets or gross revenues for (or, in the case
of total assets, as of the last day of) the fiscal quarter
of the Borrower then most recently ended, that is not less
than 10% of the Consolidated Net Income, total assets or
gross revenues, respectively, of the Borrower and its
Consolidated Subsidiaries for (or, in the case of total
assets, as of the last day of) such fiscal quarter, in each
case considered on a consolidated basis.
"Maturity Date" means, for any Bank, the
Commitment Termination Date for such Bank or, if the Term
Loan Election has been made prior to the Commitment
Termination Date for such Bank, such later date as the
Borrower shall specify in accordance with Section 2.01(c).
"Money Market Absolute Rate" has the meaning set
forth in Section 2.03(d).
"Money Market Absolute Rate Loan" means a loan 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 to be made
by a Bank pursuant to a LIBOR Auction (including such a loan
9
<PAGE>
bearing interest at the Base Rate pursuant to Section
8.01(a)).
"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.
"Moody's" means Moody's Investors Service, Inc.
"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.
"Non-U.S. Institution" shall mean any Bank or
Participant that is not organized under the laws of the
United States or any State thereof or the District of
Columbia.
"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 (as defined in Section 2.02) or a Notice of Money
Market Borrowing (as defined in Section 2.03(f)).
"Notice of Interest Rate Election" has the meaning
set forth in Section 2.10.
"NOVUS" means NOVUS Credit Services Inc., a
Delaware corporation, and its successors.
"Parent" means, with respect to any Bank, any
Person controlling such Bank.
"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, an association, a trust or any other entity or
organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension
benefit plan (other than a Multiemployer Plan) which is
covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Internal Revenue
Code and either (i) is maintained, or contributed to, by any
member of the ERISA Group for employees of any member of the
ERISA Group or (ii) has at any time within the preceding
five years been maintained, or contributed to, by any Person
which was at such time a member of the ERISA Group for
employees of any Person which was at such time a member of
the ERISA Group.
"Prime Rate" means the rate of interest publicly
announced by The Chase Manhattan Bank, N.A. in New York City
from time to time as its Prime Rate.
"Pricing Schedule" means the Schedule attached
hereto identified as such.
"Receivable" means, as of any date, any of the
following: (i) any amount owing by the obligors under (A)
any charge or other arrangement owned or originated by NOVUS
or any Subsidiary of NOVUS, including, without limitation,
amounts owing for the payment of goods and services, cash
advances, finance charges, annual fees and any other fees or
charges, (B) any retail installment sales contracts or
installment sales contracts or installment or other loans
for merchandise, including but not limited to marine
equipment, recreational vehicles, automobiles or light-duty
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trucks, owned by NOVUS or any Subsidiary of NOVUS or (C) any
mortgage or home equity loans of any type owned by NOVUS or
any Subsidiary of NOVUS; (ii) any amount owing to NOVUS or
any Subsidiary of NOVUS with respect to interchange or other
fees by or on behalf of merchants; (iii) any amount owing to
the Borrower or any of its Subsidiaries (A) with respect to
fees for account maintenance and asset management
activities, (B) with respect to funds advanced by the
Borrower or any of its Subsidiaries for the purchase of
securities, (C) in connection with loans to consumers,
including without limitation loans in anticipation of
Internal Revenue Service refunds, unsecured installment
loans or unsecured credit lines accessible by check or
otherwise, (D) with respect to any insurance, insurance-
related or security protection products, (E) in connection
with any commercial loan or line of credit, (F) with respect
to servicing fees, (G) with respect to licensing fees for
proprietary software, (H) in connection with the financing
of insurance premiums, (I) in connection with the brokering
of credit applicants, the sale of loans in the secondary
loan market or other loan brokering and mortgage banking
activities or (J) with respect to participation interests or
undivided interests in loans originated by third parties; or
(iv) any rights with respect to any of the foregoing.
"Receivables Transaction" means for any Person any
transfer of Receivables that is properly reported as a sale
or conveyance by means of contribution to capital by such
Person in accordance with generally accepted accounting
principles or regulatory accounting principles, as
applicable, but, for purposes of this definition only,
without giving effect to any changes in such principles
after the date hereof.
"Receivables Transaction Debt" means for any
Person (i) any Debt of such Person arising as a result of a
Receivables Transaction by such Person and (ii) if such
Person is a Special Purpose Subsidiary, any Debt incurred by
such Person in connection with a Receivables Transaction
(whether or not such Special Purpose Subsidiary is a party
to such Receivables Transaction).
"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.
"Regulations G, T, U and X" means Regulations G,
T, U and X, respectively, of the Board of Governors of the
Federal Reserve System, in each case as in effect from time
to time.
"Required Banks" means at any time Banks having at
least 60% of the aggregate amount of the Commitments or, if
the Commitments shall have been terminated, holding Notes
evidencing at least 60% of the aggregate unpaid principal
amount of the Loans.
"Responsible Officer" means the chief financial
officer or the treasurer of the Borrower or any other
officer of the Borrower designated by its chief financial
officer or treasurer as responsible for the administration
of this Agreement.
"Revolving Credit Period" means, for any Bank, the
period from and including the Effective Date to and
including the Commitment Termination Date for such Bank.
"Rule 15c3-1" means Rule 15c3-1, as promulgated by
the SEC under the Exchange Act (17 C.F.R. Section 240.15c3-1), as
in effect from time to time, or any successor rule or
regulation of the SEC hereafter in effect.
"S&P" means Standard & Poor's Ratings Services.
"SEC" means the Securities and Exchange Commission
or any entity succeeding to any or all of its functions
under the Exchange Act.
"Securities Act" means the Securities Act of 1933,
as amended from time to time, and the rules and regulations
promulgated thereunder.
"Special Purpose Subsidiary" means any Subsidiary
of the Borrower that has been established and is maintained
as a special purpose entity to support or facilitate one or
more Receivables Transactions or to issue Receivables
Transaction Debt, and has no business activities other than
the foregoing and activities incidental thereto.
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"Subsidiary" means, with respect 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.
"Term Loan Election" has the meaning set forth in
Section 2.01(c).
"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.
SECTION 1.02. Accounting Terms and
Determinations. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder
shall be prepared, in accordance with generally accepted
accounting principles as in effect from time to time,
applied on a basis consistent (except for changes concurred
in by the Borrower's independent public accountants) with
the most recent audited consolidated financial statements of
the Borrower and its Consolidated Subsidiaries delivered to
the Banks; provided that, if the Borrower notifies the
Documentation Agent that the Borrower wishes to amend any
covenant in Article V or any related definition to eliminate
the effect of any change in generally accepted accounting
principles after the date hereof on the operation of such
covenant or definition (or if the Documentation Agent
notifies the Borrower that the Required Banks wish to amend
Article V or any related definition for such purpose), then
the Borrower's compliance with such covenant shall be
determined 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
covenant or definition is amended in a manner satisfactory
to the Borrower and the Required Banks.
SECTION 1.03. Types of Borrowings. The term
"Borrowing" denotes the aggregation of Loans of one or more
Banks to be made to the Borrower pursuant to Article II on a
single date all of which Loans are of the same type (subject
to Article VIII) and, except in the case of Base Rate Loans,
have the same initial Interest Period. Borrowings are
classified for purposes of this Agreement either by
reference to the pricing of Loans comprising such Borrowing
(e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of
Euro-Dollar Loans) or by reference to the provisions of
Article II under which participation therein is determined
(i.e., a "Committed Borrowing" is a Borrowing under Section
2.01 in which all Banks participate in proportion to their
Commitments, while a "Money Market Borrowing" is a Borrowing
under Section 2.03 in which the Bank participants are
determined on the basis of their bids in accordance
therewith).
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. (a) Each
Bank severally agrees, on the terms and conditions set forth
in this Agreement, to make loans to the Borrower pursuant to
this Section 2.01(a) from time to time during the Revolving
Credit Period for such Bank in amounts such that the
aggregate principal amount of Committed Loans by such Bank
at any one time outstanding shall not exceed the amount of
its Commitment. Within the foregoing limits, the Borrower
may borrow under this Section 2.01(a), prepay Loans to the
extent permitted by Section 2.11, and reborrow at any time
during the Revolving Credit Period for each Bank under this
Section 2.01(a). The Commitment of each Bank shall
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terminate at the close of business on the Commitment
Termination Date for such Bank. Each Borrowing under this
Section 2.01(a) shall be in an aggregate principal amount of
$75,000,000 or any larger multiple of $5,000,000 (except
that any such Borrowing may be in the aggregate amount equal
to the unused Commitments) and shall be made from the
several Banks ratably in proportion to their respective
Commitments.
(b) Extension of the Commitment Termination Date.
The Commitment Termination Date may be extended in the
manner set forth in this Section 2.01(b), in each case for a
period of 364 days measured from the Commitment Termination
Date then in effect (subject to the definition of Commitment
Termination Date). If the Borrower wishes to request an
extension of the Commitments, it shall give notice to that
effect to the Documentation Agent not less than 30 nor more
than 45 days prior to the Commitment Termination Date then
in effect (but only if the Term Loan Election shall not have
been made), whereupon the Documentation Agent shall promptly
notify each of the Banks of such request. Each Bank will
use its best efforts to respond to such request, whether
affirmatively or negatively, as it may elect in its
discretion, not less than 20 days prior to the Commitment
Termination Date then in effect. If less than all Banks
respond affirmatively to such request by such 20th day, then
the Borrower shall have the right to replace each such Bank
that does not elect to extend its Commitment with a
substitute bank or banks that will agree to assume or extend
such Commitment (which may be one or more of the Banks),
which will purchase the Note and assume the Commitment of
such non-extending Bank pursuant to Section 9.06(c) no later
than 15 days prior to the Commitment Termination Date then
in effect. Any Bank which declines to extend its Commitment
(including by its failure to respond, which shall be deemed
to be a non-extension) hereby agrees promptly to execute an
Assignment and Assumption Agreement substantially in the
form of Exhibit G hereto with any substitute Bank or Banks
so designated by the Borrower (and the Borrower agrees that
it will pay the $2,000 administrative fee referred to in
Section 9.06(c) with respect to each such Assignment and
Assumption Agreement). If Banks holding at least 51% of the
aggregate amount of the Commitments then in effect
(including such Assignees and excluding their respective
transferor Banks) respond affirmatively (such Banks, the
"Continuing Banks"; and any other Banks, the "Non-Continuing
Banks"), then, subject to receipt by the Documentation Agent
of counterparts of an Extension Agreement in substantially
the form of Exhibit K hereto duly completed and signed by
all of the parties hereto other than the Non-Continuing
Banks (and only if the Term Loan Election shall not have
been made), the Commitments of the Continuing Banks shall be
extended for the period specified above (and the Commitment
of each Non-Continuing Bank shall terminate on the
Commitment Termination Date theretofore in effect for such
Bank). Such Extension Agreement shall be executed and
delivered no earlier than 20 days prior to the Commitment
Termination Date then in effect, and no extension of the
Commitments pursuant to this Section 2.01(b) shall be
legally binding on any party hereto unless and until such
Extension Agreement is so executed and delivered.
(c) Term Loan Election. Not more than 45 days
prior to the Commitment Termination Date then in effect (but
only if the Commitment Termination Date then in effect shall
not have been extended for any Bank pursuant to Section
2.01(b)), the Borrower may elect by notice to the
Documentation Agent (the "Term Loan Election") that the
Maturity Date (but not the Commitment Termination Date) with
respect to any Loan then outstanding or for which a Notice
of Borrowing or Notice of Interest Rate Election is
delivered after or simultaneously with such Term Loan
Election be extended to a date, specified in such Term Loan
Election notice, that is not more than 180 days after the
Commitment Termination Date then in effect (or, if such day
is not a Euro-Dollar Business Day, the next preceding Euro-
Dollar Business Day). If a Term Loan Election is made,
Loans outstanding on the Commitment Termination Date shall
thereafter not be revolving loans and amounts thereof repaid
or prepaid may not be reborrowed under this Agreement. The
Documentation Agent shall notify the Banks promptly after a
Term Loan Election is made.
SECTION 2.02. Notice of Committed Borrowing. The
Borrower shall give the Administrative Agent notice,
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substantially in the form attached hereto as Exhibit H (a
"Notice of Committed Borrowing") not later than 10:00 A.M.
(New York City time) on (x) the date of each Base Rate
Borrowing, (y) the second Domestic Business Day before each
CD Borrowing and (z) the third Euro-Dollar Business Day
before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a
Domestic Business Day in the case of a Domestic
Borrowing or a Euro-Dollar Business Day in the case of
a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing
are to bear interest initially at the Base Rate or at a
CD Rate or a Euro-Dollar Rate, and
(d) in the case of a Fixed Rate 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
Money Market Loans to the Borrower during the Revolving
Credit Period. 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 substantially in the form of Exhibit B hereto
so as to be received no later than 10:00 A.M. (New York City
time) on (x) the fifth Euro-Dollar Business Day prior to the
date of Borrowing proposed therein, in the case of a LIBOR
Auction or (y) the Domestic Business Day next preceding the
date of Borrowing proposed therein, in the case of an
Absolute Rate Auction (or, in either case, such other time
or date as the Borrower and the Administrative Agent shall
have mutually agreed and shall have notified to the Banks
not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall
be a Euro-Dollar Business Day in the case of a LIBOR
Auction or a Domestic Business Day in the case of an
Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which
shall be $25,000,000 or a larger multiple of $5,000,000
(or an amount equal to the remaining unused amount of
the Commitments, if less than $25,000,000),
(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.
The Borrower may request offers to make Money Market Loans
for more than one Interest Period in a single Money Market
Quote Request (in the form of Exhibit B). No Money Market
Quote Request shall be given until the Borrower has notified
the Administrative Agent of its acceptance or non-acceptance
of the Money Market Quotes relating to any outstanding 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
substantially in the form of Exhibit C hereto (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
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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) 9:15 A.M. (New York City
time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other time
or date as the Borrower and the Administrative Agent shall
have mutually agreed and shall have notified to the Banks
not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective); provided that Money
Market Quotes submitted by the Administrative Agent (or any
affiliate of the Administrative Agent) in the capacity of a
Bank may be submitted, and may only be submitted, if the
Administrative Agent or such affiliate notifies the Borrower
of the terms of the offer or offers contained therein not
later than (x) one hour prior to the deadline for the other
Banks, in the case of a LIBOR Auction or (y) 15 minutes
prior to the deadline for the other Banks, in the case of an
Absolute Rate Auction. Subject to Articles III and VI, any
Money Market Quote so made shall be irrevocable except with
the written consent of the Administrative Agent given on the
instructions of the Borrower.
(ii) Each Money Market Quote shall be in
substantially the form of Exhibit D hereto and shall in any
case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan
for which each such offer is being made, which
principal amount (w) may be greater than or less than
the Commitment of the quoting Bank, (x) must be
$5,000,000 or a larger multiple of $1,000,000, (y) may
not exceed the principal amount of Money Market Loans
for which offers were requested and (z) may be subject
to an aggregate limitation as to the principal amount
of Money Market Loans for which offers being made by
such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin
above or below the applicable London Interbank Offered
Rate (the "Money Market Margin") offered for each such
Money Market Loan, expressed as a percentage (specified
to the nearest 1/10,000th of 1%) to be added to or
subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the
rate of interest per annum (specified to the nearest
1/10,000th of 1%) (the "Money Market Absolute Rate")
offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate
offers by the quoting Bank with respect to each Interest
Period specified in the related Invitation for Money Market
Quotes.
(iii) Any Money Market Quote shall be disregarded
if it:
(A) is not substantially in conformity with
Exhibit D hereto or does not specify all of the
information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar
language;
(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).
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(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 the
identity of the respective Banks submitting such offers, 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 10:00 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 (A) $25,000,000 or a larger multiple
of $5,000,000, (B) an amount equal to the remaining
unused amount of the Commitments, if less than
$25,000,000 or (C) the aggregate principal amount of
offers, if less than both $25,000,000 and the amount
referred to in clause (B),
(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, and
(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.
(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.
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(b) Not later than 12:00 Noon (New York City
time) on the date of each Borrowing, each Bank participating
therein shall make available its share of such Borrowing, in
Federal or other funds immediately available in New York
City, to the Administrative Agent at its address referred to
in Section 9.01. Unless the Administrative Agent determines
that any applicable condition specified in Article III has
not been satisfied, the Administrative Agent will make the
funds so received from the Banks available to the Borrower,
promptly after the Administrative Agent's receipt thereof,
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. Any such demand shall be made first
upon such Bank and, if such Bank shall have failed to repay
such amount within two Euro-Dollar Business Days after such
demand, then upon the Borrower. 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) Subject to subsection
(b) below, the Loans of each Bank shall be evidenced by a
single Note payable to the order of such Bank for the
account of its Applicable Lending Office in an amount equal
to the aggregate unpaid principal amount of such Bank's
Loans.
(b) Each Bank may, by notice to the Borrower and
the Administrative Agent, request that its Loans of a
particular type be evidenced by a separate Note in an amount
equal to the aggregate unpaid principal amount of such
Loans. Each Note issued to a Bank making such a request
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. If a Bank
making such a request had previously been issued a Note
evidencing all its Loans, such Note shall be surrendered for
cancellation upon issuance of substitute Notes as aforesaid.
Each reference in this Agreement to the "Note" of such Bank
shall be deemed to refer to and include any or all of such
Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to
Section 3.01(b), the Administrative Agent shall forward such
Note to such Bank. Each Bank shall record the date, amount,
type and maturity of each Loan made by it and the date and
amount of each payment of principal made by the Borrower
with respect thereto, and prior to any transfer of its Note
shall 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 the failure of any Bank to make any such recordation or
endorsement shall not 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. Each Committed
Loan shall mature, and the principal amount thereof shall be
due and payable, on the Maturity Date. 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.
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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, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable in
arrears at intervals of 30 days after such Loan became a
Base Rate Loan and on the Maturity Date for the Bank that
made such Loan, 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 Base Rate Loan is so converted. Any
overdue principal of or interest on any Base Rate Loan shall
bear interest, payable on demand, for each day until paid at
a rate per annum equal to the sum of 2% plus the Base Rate
for such day.
(b) Each CD Loan shall bear interest on the
outstanding principal amount thereof, for each day during
each Interest Period applicable thereto, at a rate per annum
equal to the sum of the CD Margin for such day plus the
applicable Adjusted CD Rate; provided that if any CD Loan
shall, as a result of clause (2)(b) of the definition of
Interest Period, have an Interest Period of less than 30
days, such CD Loan shall bear interest on each day during
such Interest Period at the Base Rate 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 plus the Adjusted CD Rate applicable to
such Loan and (ii) the Base Rate for such day.
The "Adjusted CD Rate" applicable to any Interest
Period means a rate per annum determined pursuant to the
following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest
Period is the rate of interest determined by the
Administrative Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing
rates per annum bid at 10:00 A.M. (New York City time) (or
as soon thereafter as practicable) on the first day of such
Interest Period by two or more New York certificate of
deposit dealers of recognized standing for the purchase at
face value from each CD Reference Bank of its certificates
of deposit in an amount comparable to the principal amount
of the CD Loan of such CD Reference Bank to which such
Interest Period applies and having a maturity comparable to
such Interest Period.
"Domestic Reserve Percentage" means for any day
that percentage (expressed as a decimal) which is in effect
on such day, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining
the maximum reserve requirement (including without
limitation any basic, supplemental or emergency reserves)
for a member bank of the Federal Reserve System in New York
City with deposits exceeding five billion dollars in respect
of new non-personal time deposits in dollars in New York
City having a maturity comparable to the related Interest
Period and in an amount of $100,000 or more. The Adjusted
CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve
Percentage.
"Assessment Rate" means for any day the annual
assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund classified as adequately
capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within
the meaning of 12 C.F.R. Section 327.4(a) (or any successor
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provision) to the Federal Deposit Insurance Corporation (or
any successor) for insuring time deposits at offices of such
institution in the United States. The Adjusted CD Rate
shall be adjusted automatically on and as of the effective
date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on
the outstanding principal amount thereof, for each day
during each Interest Period applicable thereto, at a rate
per annum equal to the sum of the Euro-Dollar Margin for
such day plus the applicable London Interbank Offered Rate.
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.
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.
(d) Any overdue principal of or interest on any
Euro-Dollar Loan shall bear interest, payable on demand, for
each day from and including the date payment thereof was due
to but excluding the date of actual payment, at a rate per
annum equal to the sum of 2% plus the higher of (i) the sum
of the Euro-Dollar Margin plus the London Interbank Offered
Rate applicable to such Loan and (ii) the Euro-Dollar Margin
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 six 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).
(e) Subject to Section 8.01(a), 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 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
Base Rate for such day.
(f) The Administrative Agent shall determine each
interest rate applicable to the Loans hereunder. The
Administrative Agent shall give prompt notice to the
Borrower and the participating Banks of each rate of
interest so determined, and its determination thereof shall
be conclusive in the absence of manifest error. The
Administrative Agent will, at the request of the Borrower,
furnish such additional information concerning the
calculation of the interest rate on any Fixed Rate Loan as
the Borrower may reasonably request.
(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
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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. Facility Fee. The Borrower shall
pay to the Administrative Agent for the account of the Banks
ratably in proportion to their Commitments a facility fee
for each day at the Facility Fee Rate for such day. Such
facility fee shall accrue, for each Bank, (x) from and
including the Effective Date to but excluding the Commitment
Termination Date for such Bank (or earlier date of
termination of the Commitments in their entirety), on the
daily average aggregate amount of the Commitments (whether
used or unused) and (y) from and including the Commitment
Termination Date for such Bank (or such earlier date of
termination) to but excluding the date the Loans of such
Bank shall be repaid in their entirety, on the daily average
aggregate outstanding principal amount of the Loans of all
Banks with the same Commitment Termination Date, and shall
be payable quarterly in arrears on each March 31, June 30,
September 30 and December 31 and upon the date of
termination of the Commitments in their entirety (and, if
later, the date the Loans shall be repaid in their
entirety).
SECTION 2.09. Optional Termination or Reduction
of Commitments. During the Revolving Credit Period, the
Borrower may, upon at least three Domestic Business Days'
notice to the Administrative Agent, (i) terminate the
Commitments at any time, if no Loans are outstanding at such
time or (ii) ratably reduce from time to time by an
aggregate amount of $75,000,000 or any larger multiple of
$5,000,000, the aggregate amount of the Commitments in
excess of the aggregate outstanding principal amount of the
Loans. The Administrative Agent shall notify the Banks
promptly upon receipt of any such notice from the Borrower.
SECTION 2.10. Method of Electing Interest Rates.
(a) The Loans included in each Committed Borrowing shall
bear interest initially at the type of rate specified by the
Borrower in the applicable Notice of Committed Borrowing.
Thereafter, the Borrower may from time to time elect to
change or continue the type of interest rate borne by each
Group of Loans (subject in each case to the provisions of
Article VIII), as follows:
(i) if such Loans are Base Rate Loans, the
Borrower may elect to convert such Loans to CD Loans as
of any Domestic Business Day or to Euro-Dollar Loans as
of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may
elect to convert such Loans to Base Rate Loans or
Euro-Dollar Loans or elect to continue such Loans as CD
Loans for an additional Interest Period, in each case
effective on the last day of the then current Interest
Period applicable to such Loans; and
(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
substantially in the form attached hereto as Exhibit I (a
"Notice of Interest Rate Election") to the Administrative
Agent not later than 10:00 A.M. (New York City time) on the
third Euro-Dollar Business Day 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 prior to 10:00 A.M. (New York City
time) on the second Domestic Business Day 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 of the several Banks that
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comprise such Group and (ii) the portion to which such
Notice applies, and the remaining portion to which it does
not apply, are each $75,000,000 or any larger multiple of
$5,000,000.
(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 Fixed Rate 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 Fixed Rate Loans, such
Loans shall be converted into Base Rate Loans on the last
day of the then current Interest Period applicable thereto.
SECTION 2.11. Optional Prepayments. (a) The
Borrower may, upon at least one Domestic Business Day's
notice to the Administrative Agent, prepay the Group of
Loans bearing interest at the Base Rate (or any Money Market
Borrowing bearing interest at the Base Rate pursuant to
Section 8.01(a)) (i) in whole at any time, or (ii) from time
to time in part in amounts aggregating $75,000,000 or any
larger multiple of $5,000,000, 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 or Borrowing.
(b) The Borrower may, upon at least three
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 on the last day of any
Interest Period applicable to such Group, (i) in whole at
any time, or (ii) from time to time in part in amounts
aggregating $75,000,000 or any larger multiple of
$5,000,000, 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) Except as provided in Section 8.02, the
Borrower may not prepay all or any portion of the principal
amount of any Money Market Loan prior to the maturity
thereof.
(d) Upon receipt of a notice of prepayment
pursuant to this Section, the Administrative Agent shall
promptly notify each Bank of the contents thereof and of
such Bank's ratable share (if any) of such prepayment and
such notice shall not thereafter be revocable by the
Borrower.
SECTION 2.12. General Provisions as to Payments.
(a) The Borrower shall make each payment of principal of,
and interest on, the Loans and of fees hereunder, without
setoff or counterclaim, not later than 12:00 Noon (New York
City time) on the date when due, in Federal or other funds
immediately available in New York City, to the
Administrative Agent at its address referred to in Section
9.01. The Administrative Agent will promptly distribute to
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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 of fees shall be due on a day which is not
a Domestic Business Day, the date for payment thereof shall
be extended to the next succeeding Domestic Business Day.
Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall
be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another
calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day.
Whenever any payment of principal of, or interest on, the
Money Market Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall
be extended to the next succeeding Euro-Dollar Business Day.
If the date for any payment of principal is extended by
operation of law or otherwise, interest thereon shall be
payable for such extended time.
(b) Unless the Administrative Agent shall have
received notice from the Borrower prior to the date on which
any payment is due to the Banks hereunder that the Borrower
will not make such payment in full, the Administrative Agent
may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the
Administrative Agent may, in reliance upon such assumption,
cause to be distributed to each Bank on such due date an
amount equal to the amount then due such Bank. If and to
the extent that the Borrower shall not have so made such
payment, each Bank shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date
such amount is distributed to such Bank until the date such
Bank repays such amount to the Administrative Agent, at the
Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower
makes any payment of principal with respect to any Fixed
Rate Loan or any Fixed Rate Loan is converted to a Base Rate
Loan (pursuant to Article VI or VIII or otherwise) on any
day other than the last day of an Interest Period applicable
thereto, or the last day of an applicable period fixed
pursuant to Section 2.07(d), or if the Borrower fails to
borrow, convert, continue or prepay any Fixed Rate Loans
after notice has been given to any Bank in accordance with
Section 2.04(a), 2.10(c) or 2.11(d), 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, convert,
continue or prepay, 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, and provided further that
such loss shall in no event exceed the interest which would
have been payable for the balance of such Interest Period or
other period, less the applicable CD Margin or Euro-Dollar
Margin, as the case may be. Such Bank will, at the request
of the Borrower, furnish such additional information
concerning the determination of such loss as the Borrower
may reasonably request.
SECTION 2.14. 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 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 2.15. Taxes. (a) All payments to or for
the benefit of each Bank and any Participant under this
Agreement are payable free and clear of any and all present
and future taxes, levies, imposts, duties, deductions,
withholdings, fees, liabilities and similar charges levied
or imposed by the United States (or any political
subdivision or tax authority of or in such jurisdiction)
("Taxes"); provided, that the term "Taxes" as used in this
Section 2.15 shall not include (i) any tax imposed on or
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measured by the net income of such Bank or Participant or
any franchise tax, or (ii) any tax imposed by reason of
either (A) the failure of the certification made by such
Bank or Participant on any form provided pursuant to Section
2.15(b) to be accurate and true in all material respects or
(B) the failure of the Administrative Agent, such Bank or
Participant to otherwise comply with Section 2.15(b), unless
any such failure would not have occurred but for a change in
treaty, law or regulation or in the interpretation thereof
by any governmental or regulatory agency or body charged
with the administration or interpretation thereof, or the
introduction of any law or regulation, that occurs on or
after the date hereof (a "Change in Law"). If any Taxes are
required to be withheld or deducted from any amount payable
to or for the benefit of any Bank or Participant hereunder,
the Borrower agrees that the amount payable to or for the
benefit of such Bank or Participant hereunder will be
increased to the amount which, after deduction from such
increased amount of all Taxes required to be withheld or
deducted therefrom, will yield to such Bank or Participant
the amount stated in this Agreement to be payable with
respect thereto; provided, however, that (1) such Bank will
not be entitled to receive (for itself or for the account of
a Participant) additional amounts to compensate the Bank (or
a Participant, as the case may be) for Taxes withheld or
deducted during a fiscal year which ended more than one year
from the date on which the Borrower receives the Bank's (or
the Participant's, as the case may be) request for payment
of additional amounts, and (2) if the Borrower is obligated
to pay any additional amount to any Bank or Participant with
respect to any Taxes under this Section 2.15(a) as a result
of a change in treaty, such Bank or Participant shall change
its Applicable Lending Office upon the request of the
Borrower if such change would avoid the need for the payment
of such additional amount and would not, in the sole
determination of such Bank or Participant, be otherwise
disadvantageous to such Bank or Participant. The
Administrative Agent on behalf of such Bank or Participant
will, as a condition of such payment, provide the Borrower
with evidence satisfactory to it of the imposition of such
payment, together with the calculation of the amounts
payable thereunder. The Borrower will, to the extent it has
made payments of any Taxes, upon the request of the
Administrative Agent on behalf of any Bank or Participant,
provide the Administrative Agent on behalf of any Bank or
Participant with evidence satisfactory to it of the payment
of any Taxes with respect to amounts payable under this
Agreement. If any of the Taxes required to be borne by the
Borrower pursuant to this Section 2.15 are paid by any Bank
or Participant, the Borrower will reimburse such Bank or
Participant on a grossed-up basis for such payments,
together with any interest, penalties and expenses in
connection therewith. If pursuant to this Section 2.15(a)
any Bank or Participant receives an increased payment with
respect to Taxes, and such Bank or Participant also recovers
any portion of such Taxes from the applicable taxing
authority such that the total amount of the payments and the
recovered Taxes exceeds the amount stated to be payable with
respect to such Bank or Participant, such Bank or
Participant shall remit any such excess to the Borrower.
(b) Each Bank and Participant that is a Non-U.S.
Institution covenants and agrees with the Borrower that it
will (i) provide to the Administrative Agent (and the
Administrative Agent hereby agrees to forward to the
Borrower) an appropriately executed copy of Internal Revenue
Service Form 4224 certifying that any payments made to or
for the benefit of such Bank or Participant are effectively
connected with the conduct of a United States trade or
business (or, alternatively, Internal Revenue Service Form
1001, but only if the applicable treaty described in such
form provides for a complete exemption from federal income
tax withholding) or any successor form, (A) on or prior to
the date hereof (or, in the case of an assignee Bank or
Participant, on or prior to the relevant assignment or the
grant of the relevant participation, respectively), (B) in
each subsequent year in the case of Form 4224, or in each
third subsequent year in the case of Form 1001, prior to the
first payment to be made to or for the benefit of such Bank
or Participant in such year, (C) upon the occurrence of any
act by such Bank or Participant which would require the
amendment or resubmission of any such form previously
provided hereunder, and (D) upon the request of the
Borrower, upon the occurrence of any event (other than as a
result of an act by such Bank or Participant) which would
require the amendment or resubmission of any such form
previously provided hereunder, and (ii) notify the
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Administrative Agent (and the Administrative Agent hereby
agrees to notify the Borrower) if the certification made on
any form provided pursuant to this Section 2.15(b) is no
longer accurate and true in all material respects.
SECTION 2.16. Regulation D Compensation. For so
long as any Bank is required to maintain reserves against
"Eurocurrency liabilities" (or 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 such Bank to
United States residents), and, as a result, the cost to such
Bank (or its Euro-Dollar Lending Office) of making or
maintaining its Euro-Dollar Loans is increased, then such
Bank may require the Borrower to pay, contemporaneously with
each payment of interest on the Euro-Dollar Loans,
additional interest on the related Euro-Dollar Loan of such
Bank at a rate per annum up to but not exceeding the excess
of (i) (A) the applicable London Interbank Offered Rate
divided by (B) one minus the Euro-Dollar Reserve Percentage
over (ii) the applicable London Interbank Offered Rate.
Any Bank wishing to require payment of such additional
interest (x) shall so notify the Borrower and the
Administrative Agent, in which case such additional interest
on the Euro-Dollar Loans of such Bank shall be payable to
such Bank at the place indicated in such notice with respect
to each Interest Period commencing at least three
Euro-Dollar Business Days after the giving of such notice
and (y) shall furnish to the Borrower at least five
Euro-Dollar Business Days prior to each date on which
interest is payable on the Euro-Dollar Loans an officer's
certificate setting forth the amount to which such Bank is
then entitled under this Section (which shall be consistent
with such Bank's good faith estimate of the level at which
the related reserves are maintained by it). Each such
certificate shall be accompanied by such information as the
Borrower may reasonably request as to the computation set
forth therein.
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement
shall become effective on the date that each of the
following conditions shall have been satisfied (or waived in
accordance with Section 9.05):
(a) receipt by the Documentation Agent of
counterparts hereof signed by each of the parties
hereto (or, in the case of any Bank as to which an
executed counterpart shall not have been received,
receipt by the Documentation Agent in form satisfactory
to it of telegraphic, telex or other written
confirmation from such Bank of execution of a
counterpart hereof by such Bank);
(b) receipt by the Documentation Agent for the
account of each Bank of a duly executed Note dated on
or before the Effective Date complying with the
provisions of Section 2.05;
(c) receipt by the Documentation Agent of all
fees payable for its own account on or before the
Effective Date pursuant to the letter dated March 29,
1996 between the Borrower and the Documentation Agent;
(d) receipt by the Documentation Agent of
evidence satisfactory to it of (i) the
termination, effective on or before the Effective
Date, of the commitments under the Existing Credit
Agreement, (ii) the repayment in full, not later
than the Effective Date, of all loans (if any)
thereunder, together with interest accrued thereon
to the date of payment and (iii) the receipt by
the proper parties of all accrued and unpaid
facility fees and all other amounts due and
payable for the account of the agents or any other
party under the Existing Credit Agreement;
(e) receipt by the Documentation Agent of an
opinion of Christine A. Edwards, Esq., General Counsel
for the Borrower, or Ronald T. Carman, Esq., Senior
Vice President for the Borrower, substantially in the
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form of Exhibit E hereto;
(f) receipt by the Documentation Agent of an
opinion of Davis Polk & Wardwell, special counsel for
the Documentation Agent, substantially in the form of
Exhibit F hereto and covering such additional matters
relating to the transactions contemplated hereby as the
Required Banks may reasonably request; and
(g) receipt by the Documentation Agent of all
documents it may reasonably request relating to the
existence of the Borrower, the corporate authority for
and the validity of this Agreement and the Notes, and
any other matters relevant to any of the foregoing, all
in form and substance reasonably satisfactory to the
Documentation Agent.
Provided that this Agreement shall not become effective or
be binding on any party hereto unless all of the foregoing
conditions are satisfied (or waived in accordance with
Section 9.05) not later than the close of business on the
fifteenth Domestic Business Day after the date hereof. The
Documentation Agent shall promptly notify the Borrower, the
Administrative Agent and the Banks of the Effective Date,
and such notice shall be conclusive and binding on all
parties hereto.
SECTION 3.02. Borrowings. The obligation of any
Bank to make a Loan on the occasion of any Borrowing
(including the first Borrowing) is subject to the
satisfaction of the following conditions:
(a) receipt by the Administrative Agent of a
Notice of Borrowing as required by Section 2.02 or
2.03, as the case may be;
(b) immediately after such Borrowing, the
aggregate outstanding principal amount of the Loans
will not exceed the aggregate amount of the
Commitments;
(c) immediately before and after such Borrowing,
no Default shall have occurred and be continuing; and
(d) the representations and warranties of the
Borrower contained in this Agreement shall be true on
and as of the date of such Borrowing (or, in the case
of any representation and warranty expressly made only
as to a specific date, as of the date so specified).
Each Borrowing hereunder shall be deemed to be a
representation and warranty by the Borrower on the date of
such Borrowing as to the satisfaction of the conditions
specified in clauses (b), (c) and (d) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The
Borrower has been duly incorporated and is validly existing
as a corporation and in good standing under the laws of
Delaware, with full corporate powers to carry on its
business as presently conducted. The Borrower is duly
qualified, is authorized to do business and is in good
standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires
such qualification, except where the failure to so qualify
would not have a material adverse effect on the business,
financial position or results of operations of the Borrower
and its Consolidated Subsidiaries, considered as a whole.
Each of the Borrower's Material Subsidiaries has been duly
incorporated or organized and is validly existing as a
corporation or banking institution and in good standing
under the laws of its jurisdiction of incorporation or
organization, with full corporate powers to carry on its
business as presently conducted.
SECTION 4.02. Corporate and Governmental
Authorization; No Contravention. The execution, delivery
and performance by the Borrower of this Agreement and the
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Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require
no action by or in respect of, or filing with, any
governmental body, agency or official and do not contravene,
or constitute a default under, any provision of applicable
law or regulation or of the certificate of incorporation or
by-laws of the Borrower or of any agreement, judgment,
injunction, order, decree or other instrument binding upon
the Borrower or any of its Subsidiaries or result in the
creation or imposition of any Lien on any asset of the
Borrower or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement
constitutes a valid and binding agreement of the Borrower
and the Notes, when executed and delivered in accordance
with this Agreement, will constitute valid and binding
obligations of the Borrower, in each case enforceable in
accordance with their respective terms except as (i) the
enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by
equitable principles of general applicability.
SECTION 4.04. Financial Information.
(a) The consolidated statement of financial
position of the Borrower and its Consolidated Subsidiaries
as of December 31, 1995 and the related consolidated
statements of income, stockholder's equity and cash flows
for the fiscal year then ended, reported on by Deloitte &
Touche LLP and set forth in the Borrower's report on Form
10-K filed with the SEC for the year ended December 31,
1995, 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) Except as disclosed in writing to the Banks
prior to the Effective Date, between December 31, 1995 and
the Effective Date, there has been no material adverse
change in the business, financial position or results of
operations of the Borrower and its Consolidated
Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. As of the Effective
Date, the Borrower does not know of any pending legal or
governmental proceeding (i) required to be described in the
Borrower's report on Form 10-K filed with the SEC for the
year ended December 31, 1995 which is not described as
required or (ii) not required to be described pursuant to
clause (i) but which would be required to be described in a
subsequent filing by the Borrower with the SEC pursuant to
the Exchange Act, and which has not been disclosed in
writing to the Banks prior to the Effective Date.
SECTION 4.06. 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 in respect of any Benefit Arrangement,
or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA
or the Internal Revenue Code 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 4.07. Taxes. United States Federal
income tax returns of the Borrower and its Subsidiaries have
been closed through the fiscal year ended December 31, 1982.
All United States Federal income tax returns and all other
material tax returns which are required to be filed by or on
behalf of the Borrower and its Subsidiaries have been filed
and all taxes due pursuant to such returns or pursuant to
any assessment received by or on behalf of the Borrower or
any of its Subsidiaries have been paid, except any taxes
pursuant to any such assessments being contested in good
faith by appropriate proceedings and for payment of which
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<PAGE>
appropriate reserves have been made. 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 4.08. Compliance with Laws. The Borrower
and each of its Subsidiaries are in compliance in all
respects with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities
(including, without limitation, FIRREA and the Investment
Advisors Act) except where (i) the necessity of compliance
therewith is being contested in good faith by appropriate
proceedings or (ii) the failure to comply with which would
not reasonably be expected to have a material adverse effect
on the business, consolidated financial position or
consolidated results of operations of the Borrower and its
Consolidated Subsidiaries, taken as a whole. DWR has
elected by proper written notice to the SEC and to the New
York Stock Exchange, Inc. to comply with the alternative net
capital requirements set forth in Rule 15c3-1 and is subject
to such alternative net capital requirements.
SECTION 4.09. Full Disclosure. All written
information heretofore furnished by the Borrower to any
Agent or any Bank for purposes of or in connection with this
Agreement, taken together, did not contain any untrue
statement of a material fact or omit to state a material
fact necessary in order to make the statements made not
misleading as of the date on which such information was
stated or certified; provided that the Borrower makes no
representations or warranties with respect to any
projections or other non-factual information contained in
any such information.
SECTION 4.10. DWR Capital Maintenance. DWR shall
at all times remain in compliance with the applicable net
capital requirements of Rule 15c3-1. The representation set
forth in this Section shall be deemed to be made at all
times.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has
any Commitment hereunder or any amount payable under any
Note remains unpaid:
SECTION 5.01. Information. The Borrower will
deliver to the Administrative Agent (who will promptly
deliver copies thereof to each of the Banks):
(a) as soon as available and in any event within
110 days after the end of each fiscal year of the
Borrower the consolidated statement of financial
position of the Borrower and its Consolidated
Subsidiaries as of the end of such fiscal year and the
related consolidated statements of income,
stockholders' equity and cash flows for such fiscal
year, setting forth in each case in comparative form
the figures for the previous fiscal year, all reported
on in the manner provided by the SEC for such filing by
Deloitte & Touche LLP or other independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within
60 days after the end of each of the first three
quarters of each fiscal year of the Borrower, the
consolidated statement of financial position of the
Borrower and its Consolidated Subsidiaries as of the
end of such quarter and the related consolidated
statements of income, stockholders' equity and cash
flows for such quarter and for the portion of the
Borrower's fiscal year ended at the end of such
quarter, setting forth in the case of such statements
of income, stockholders' equity and cash flows in
comparative form the figures for the corresponding
quarter and the corresponding portion of the Borrower's
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
principal accounting officer of the Borrower;
(c) simultaneously with the delivery of each set
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of financial statements referred to in clauses (a) and
(b) above, a certificate of the chief financial officer
or the principal accounting officer of the Borrower (i)
setting forth in reasonable detail the calculations
required to establish whether the Borrower was in
compliance with the requirements of Sections 5.08 and
5.09 on the date of such financial statements, (ii)
stating whether the Borrower was in compliance with the
requirements of Section 4.10 on the date of such
financial statements 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;
(d) simultaneously with the delivery of each set
of financial statements referred to in clause (a)
above, a statement of the firm of independent public
accountants which reported on such statements
confirming the calculations set forth in the officer's
certificate delivered simultaneously therewith pursuant
to clause (c) above;
(e) within five days after any Responsible
Officer obtains knowledge of any Default, if such
Default is then continuing, a certificate of the chief
financial officer or the principal accounting officer
of the Borrower setting forth the details thereof and
the action which the Borrower is taking or proposes to
take with respect thereto;
(f) promptly after the mailing thereof to the
shareholders of the Borrower generally, copies of all
financial statements, reports and proxy statements so
mailed;
(g) promptly after 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;
(h) as soon as available and in any event within
60 days after the end of each fiscal quarter of
Greenwood Trust, copies of all quarterly Reports of
Condition and Income made to the Comptroller of the
Currency, the Board of Governors of the Federal Reserve
System or the Federal Deposit Insurance Corporation, as
applicable, except any information included therein
which such agency has allowed to be filed
confidentially; and, to the extent not prohibited by
law or regulation or by the relevant agency and to the
extent such information does not constitute Highly
Confidential Information, promptly after the receipt or
filing thereof, as the case may be, all other reports
submitted by the Borrower or any of its Subsidiaries
to, or received from, the Board of Governors of the
Federal Reserve System or the Federal Deposit Insurance
Corporation the subject matter of which would
reasonably be expected to have a material effect on the
business, consolidated financial position, consolidated
results of operations or prospects of the Borrower and
its Consolidated Subsidiaries, taken as a whole;
(i) (x) as soon as available and in any event
within 45 days after the end of each fiscal quarter of
DWR, each quarterly Financial and Operational Combined
Uniform Single Report of DWR required to be filed on a
quarterly basis with the SEC or the New York Stock
Exchange or any other securities or commodities
exchange (or any report which is required in lieu of
such report); and, (y) to the extent not prohibited by
law or regulation or by the relevant agency or
association and to the extent such information does not
constitute Highly Confidential Information, promptly
after the receipt or filing thereof, as the case may
be, all other material reports submitted by DWR to or
received by DWR from the SEC, any Examining Authority
or any other regulatory agencies, stock, securities or
commodities exchanges, or securities associations (but
excluding any monthly Financial and Operational
Combined Uniform Single Report pursuant to this clause
(y) filed in the ordinary course);
(j) promptly after any Responsible Officer
becomes aware thereof, a notice concerning any actual
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change, and promptly upon receipt thereof by the
Borrower, a copy of any written notice of any proposed
change, in the rating assigned to any of the Borrower's
outstanding debt securities by S&P or Moody's;
(k) if and when any member of the ERISA Group (i)
gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of
ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV
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; (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 in respect of any Benefit
Arrangement or makes any amendment to any Plan or
Benefit Arrangement which has resulted or could result
in the imposition of a Lien or the posting of a bond or
other security, a certificate of the chief financial
officer or the principal accounting officer of the
Borrower setting forth details as to such occurrence
and action, if any, which the Borrower or applicable
member of the ERISA Group is required or proposes to
take; and
(l) from time to time such additional
information, other than Highly Confidential
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 of its
Material Subsidiaries to keep, all property useful and
necessary in its business in good working order and
condition, except for (i) ordinary wear and tear and (ii)
any failure caused by force majeure that would not
reasonably be expected to have a material adverse effect on
the business, consolidated financial position or
consolidated results of operations of the Borrower and its
Consolidated Subsidiaries, taken as a whole, and which
failure the Borrower is using reasonably diligent efforts to
remedy.
(b) The Borrower will, and will cause each of its
Subsidiaries to, provide as self-insurer, or 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 and such amounts of self-insurance)
as are usually insured against in the same general area by
companies of established repute engaged in the same or a
similar business; and 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. (a) The Borrower will continue, and will
cause each of its Material Subsidiaries to continue, to
engage in business of the same general type as now conducted
by the Borrower and such Material Subsidiaries and will
preserve, renew and keep in full force and effect, and will
cause each of its Subsidiaries to preserve, renew and keep
in full force and effect their respective corporate
existence and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of
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<PAGE>
business; provided that nothing in this Section 5.03 shall
prohibit (i) the Borrower or any of its Subsidiaries from
engaging in any investment, lending or savings business, or
any business in support thereof or otherwise related or
incidental to financial or consumer services or (ii) the
merger of a Subsidiary of the Borrower into the Borrower or
the merger or consolidation of a Subsidiary of the Borrower
with or into another Person if the corporation surviving
such consolidation or merger is a Subsidiary of the Borrower
and if, in each case, after giving effect thereto, no
Default shall have occurred and be continuing or (iii) the
termination of the corporate existence of any Subsidiary of
the Borrower or the discontinuation by the Borrower or any
of its Subsidiaries of any businesses in which it or they
are currently engaged or any businesses in which they may be
engaged in the future, if the Borrower in good faith
determines that such termination or discontinuation is in
the best interest of the Borrower or if such discontinuation
is required by applicable law and, in any event, is not
materially disadvantageous to the Banks or (iv) the transfer
by the Borrower or any of its Subsidiaries of any business
or businesses in which it or they are currently engaged or
may in the future be engaged to the Borrower or any of its
Subsidiaries (as applicable), and the discontinuation of the
conduct of such business or businesses by such transferor or
transferors after such transfer or (v) any transaction
expressly permitted by Section 5.06.
(b) The Borrower will pay and discharge, and will
cause each of its Material Subsidiaries to pay and
discharge, at or before maturity, all their respective
obligations and liabilities, including, without limitation,
tax liabilities, except where (i) the same may be contested
in good faith by appropriate proceedings or (ii) any such
failures would not reasonably be expected, in the aggregate,
to have a material adverse effect on the business, financial
position or results of operations of the Borrower and its
Subsidiaries, taken as a whole, and will maintain, and will
cause each of its Subsidiaries to maintain, in accordance
with generally accepted accounting principles, appropriate
reserves for the same.
SECTION 5.04. Compliance with Laws. The Borrower
will comply, and cause each of its Subsidiaries to comply,
with all applicable laws, ordinances, rules, regulations,
and requirements of governmental authorities (including,
without limitation, applicable Environmental Laws, FIRREA,
the Investment Advisors Act 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) the failure to comply with
which would not reasonably be expected to have a material
adverse effect on the business, consolidated financial
position or consolidated results of operations of the
Borrower and its Consolidated Subsidiaries, taken as a
whole.
SECTION 5.05. Negative Pledge. Neither the
Borrower nor any of its Subsidiaries will create, assume or
suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except:
(a) Liens existing on the date of this Agreement
securing Debt outstanding on the date of this Agreement
in an aggregate principal amount not exceeding
$100,000,000;
(b) any Lien existing on any asset of any Person
at the time such Person becomes a Subsidiary of the
Borrower and not created in contemplation of such
event;
(c) any Lien on any asset securing Debt incurred
or assumed for the purpose of financing all or any part
of the cost of acquiring such asset, provided that such
Lien attaches to such asset concurrently with or within
120 days after the acquisition thereof;
(d) any Lien on any asset of any Person existing
at the time such Person is merged or consolidated with
or into the Borrower or any of its Subsidiaries and not
created in contemplation of such event;
(e) any Lien existing on any asset prior to the
acquisition thereof by the Borrower or any of its
Subsidiaries and not created in contemplation of such
acquisition;
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(f) any Lien on any Receivable or proceeds
thereof arising pursuant to any Receivables Transaction
and any Lien on any asset of a Special Purpose
Subsidiary arising in connection with a Receivables
Transaction;
(g) any Lien on assets of a Subsidiary of the
Borrower granted to secure Debt owing by such
Subsidiary to the Borrower or any of its other
Subsidiaries;
(h) any Lien to secure short-term broker loans,
or on securities borrowed or loaned, or to
collateralize repurchase or reverse repurchase
transactions, which such loans or other transactions
are incurred or conducted (as the case may be) in the
ordinary course of its business;
(i) Liens arising in the ordinary course of its
business which (i) do not secure Debt, (ii) do not
secure any obligation in an amount exceeding
$50,000,000 and (iii) do not in the aggregate
materially detract from the value of its assets or
materially impair the use thereof in the operation of
its business;
(j) any Lien on any assets that are carried in
the balance sheet asset account called "cash and
securities subject to federal regulation" and are (i)
owned by any Subsidiary of the Borrower or (ii)
maintained on behalf of customers, and which Liens
arise in connection with commodity or options
transactions executed by any Subsidiary of the Borrower
in the ordinary course on a commodities or options
exchange or through a clearing house;
(k) any Lien on any asset arising pursuant to a
sale/leaseback transaction with respect to real estate,
office facilities or office equipment of the Borrower
or any of its Subsidiaries;
(l) any Lien on any asset segregated or escrowed
as required by any securities, commodities or options
exchange, any clearing house associated with any such
exchange, or any regulatory authority in connection
with the execution or clearing of transactions in the
ordinary course;
(m) any Lien on any asset of Dean Witter Realty
securing Debt for money borrowed by Dean Witter Realty;
(n) any Lien on cash and securities of the
Borrower or any of its Subsidiaries deposited with any
Subsidiary of the Borrower that is a regulated
depositary institution, to collateralize extensions of
credit made or deemed made to any of its "affiliates"
(as defined in Section 23A of the Federal Reserve Act)
as a result of consumer or commercial credit, charge or
similar arrangements with non-"affiliates", as the
Borrower or any of its Subsidiaries deems reasonably
necessary or advisable in order to ensure compliance
with the requirements of such Section 23A;
(o) any Lien on securities arising out of the
rights of Persons to whom such securities are owed in
connection with a failed securities transaction;
(p) any Lien on any asset of SPS Transactions
Services, Inc., or any Subsidiary thereof;
(q) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by
any Lien permitted by the foregoing clauses of this
Section, provided that such Debt is not increased and
is not secured by any additional assets;
(r) any Lien on any asset of Greenwood Trust,
Hurley State Bank, MountainWest Financial Corporation
or Discover Card Bank of New Castle arising out of any
pledge of such assets to a Federal Reserve Bank in
connection with a borrowing from a Federal Reserve
Bank;
(s) Liens on any asset of Greenwood Trust
securing payment obligations owed to merchants, in an
aggregate outstanding amount at no time exceeding
$5,000,000;
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(t) Liens on Margin Stock, if and to the extent
the value of all such Margin Stock of the Borrower and
its Subsidiaries exceeds 25% of the value of the total
assets subject to this Section; and
(u) Liens not otherwise permitted by the
foregoing clauses of this Section securing obligations
in an aggregate principal amount at any time
outstanding not to exceed 8% of Consolidated Net Worth.
SECTION 5.06. Consolidations, Mergers and Sales
of Assets. The Borrower will not (i) consolidate or merge
with or into any other Person or (ii) sell, lease or
otherwise transfer (or permit any Subsidiary to sell, lease
or otherwise transfer), directly or indirectly, all or any
substantial part of the assets of the Borrower and its
Subsidiaries, taken as a whole, to any other Person,
provided that nothing in this Section 5.06 shall prohibit
(t) any sale of Margin Stock for fair value payable in cash
or cash equivalents, (u) any transaction otherwise permitted
in Section 5.03, (v) any sale, lease or other transfer of
assets of the Borrower to its wholly-owned Subsidiaries or
by a Subsidiary of the Borrower to the Borrower or to any of
its wholly-owned Subsidiaries, (w) any Receivables
Transaction, (x) sales of inventory in the ordinary course,
(y) any sale, lease or other transfer of assets of the
Borrower and its Subsidiaries that, together with all other
such assets theretofore transferred in the same fiscal year
(except those transferred pursuant to clause (v), (w) or (x)
above), did not in the aggregate account for more than 20%
of the Consolidated Net Income of the Borrower for the
immediately preceding fiscal year or (z) the Borrower from
merging with another Person if (A) the Borrower is the
corporation surviving such merger and (B) immediately after
giving effect to such merger, no Default shall have occurred
and be continuing.
SECTION 5.07. Use of Proceeds. The proceeds of
the Loans made under this Agreement will be used by the
Borrower for general corporate purposes, including without
limitation the refinancing of short-term commercial paper
notes issued by the Borrower. None of such proceeds will be
used in violation of any applicable law or regulation,
including Regulations G, T, U or X.
SECTION 5.08. Minimum ConsolidatedNet Worth.
Consolidated Net Worth of the Borrower will at no time be
less than $3,750,000,000.
SECTION 5.09. Capital Maintenance and Leverage
Ratio of Greenwood Trust. (a) GTC Tier 1 Capital on the
last day of any fiscal quarter of Greenwood Trust shall not
be less than 4% of the GTC Adjusted Total Assets on such
day.
(b) The sum of (i) GTC Tier 1 Capital plus (ii)
GTC Tier 2 Capital, in each case on the last day of any
fiscal quarter of Greenwood Trust, shall not be less than 8%
of the GTC Adjusted Total Assets on such day.
(c) GTC Tier 1 Capital on the last day of any
fiscal quarter of Greenwood Trust shall not be less than
5.5% of the daily average consolidated total assets of
Greenwood Trust and its Consolidated Subsidiaries during
such fiscal quarter.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more
of the following events ("Events of Default") shall have
occurred and be continuing:
(a) the Borrower shall fail to pay (i) any
principal of any Loan when due or (ii) any interest on
any Loan or any fee or other amount payable by it
hereunder within ten days after the due date thereof;
(b) the Borrower shall fail to observe or perform
any covenant contained in Sections 5.05 to 5.09,
inclusive, for more than five Domestic Business Days;
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(c) the Borrower shall fail to observe or perform
any covenant or agreement contained in this Agreement
(other than those covered by clause (a) or (b) above)
for 30 days after written notice thereof has been given
to the Borrower by the Administrative Agent at the
request of any Bank;
(d) any representation, warranty, certification
or statement made by the Borrower in this Agreement, or
in any certificate, financial statement or other
document delivered pursuant hereto (other than the
representation set forth in Section 4.10), shall prove
to have been incorrect in any material respect when
made (or deemed made); or the representation set forth
in Section 4.10 shall be incorrect for more than three
consecutive Domestic Business Days;
(e) the Borrower and/or any of its Subsidiaries
shall fail to make any payment, when due or within any
applicable grace period, in respect of any Debt or
Debts of the Borrower and/or one or more Subsidiaries
(other than the Notes), arising in one or more related
or unrelated transactions, in an aggregate principal
amount not less than $75,000,000;
(f) any event or condition shall occur which
results in the acceleration of the maturity of any Debt
or Debts of the Borrower and/or any of its Subsidiaries
(other than the Notes and other than Debt under clause
(viii) of the definition thereof) in an aggregate
principal amount not less than $75,000,000 or enables
(or, with the giving of notice or lapse of time or
both, would enable) the holder of such Debt or Debts or
any Person acting on such holder's behalf to accelerate
the maturity thereof or terminate the commitment of any
Person to extend further credit to the Borrower and/or
any of its Subsidiaries thereunder;
(g) the Borrower or any of its Material
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 substantial part of its
property, or shall consent to any such relief or to the
appointment of or taking possession by any such
official in an involuntary case or other proceeding
commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail
generally to pay its debts 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 any of its
Material Subsidiaries 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
substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and
unstayed for a period of 90 days; or an order for
relief shall be entered against the Borrower or any of
its Material Subsidiaries under the federal bankruptcy
laws as now or hereafter in effect;
(i) a conservator or receiver shall be appointed
for any Material Subsidiary that is an "insured
depository institution" as defined in Section 3(c)(2)
of the Federal Deposit Insurance Act, as amended (the
"FDIA"), by the "appropriate Federal banking agency" as
defined in the FDIA, by any state supervisory agency or
by the Federal Deposit Insurance Corporation pursuant
to the FDIA; or a new bank shall be organized by the
FDIC to assume the insured deposits of any Material
Subsidiary pursuant to the FDIA; or a bridge bank shall
be organized by the FDIC to assume the assets and
liabilities of any Material Subsidiary pursuant to the
FDIA;
(j) any member of the ERISA Group shall fail to
pay when due an amount or amounts aggregating in excess
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of $25,000,000 which it shall have become liable to pay
under Title IV of ERISA; or notice of intent to
terminate a Material Plan 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 $75,000,000;
(k) a judgment or order for the payment of money
in excess of $50,000,000 shall be rendered against the
Borrower and/or any of its Subsidiaries and such
judgment or order shall continue unsatisfied and
unstayed for a period of 10 Domestic Business Days; or
(l) 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 the Exchange
Act) of 30% or more of the outstanding shares of common
stock of the Borrower; or, during any period of
thirteen consecutive calendar months, individuals (i)
who were directors of the Borrower on the first day of
such period or on the date hereof or (ii) whose
nomination for election to the board of directors of
the Borrower was recommended or approved by a vote of
at least a majority of the directors then still in
office who were directors of the Borrower either on the
first day of such period or on the date hereof, shall
cease to constitute a majority of the board of
directors of the Borrower;
then, and in every such event, the Administrative Agent
shall (i) if requested by Banks having more than 60% in
aggregate amount of the Commitments, by notice to the
Borrower terminate the Commitments and they shall thereupon
terminate, and (ii) if requested by Banks holding Notes
evidencing more than 50% in aggregate principal amount of
the Loans, by notice to the Borrower declare the Notes
(together with accrued interest thereon) to be, and the
Notes 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 in the case of any of the Events of Default
specified in clause (g) or (h) above with respect to the
Borrower, without any notice to the Borrower or any other
act by any Agent or the Banks, the Commitments shall
thereupon terminate and the Notes (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 Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENTS
SECTION 7.01. Appointment and Authorization.
Each Bank irrevocably appoints and authorizes each Agent to
take such action as agent on its behalf and to exercise such
powers under this Agreement and the Notes as are delegated
to such Agent by the terms hereof or thereof, together with
all such powers as are reasonably incidental thereto.
SECTION 7.02. Agents and Affiliates. The Chase
Manhattan Bank, N.A. and Morgan Guaranty Trust Company of
New York shall have the same rights and powers under this
Agreement as any other Bank and may each exercise or refrain
from exercising the same as though it (or, in the case of
The Chase Manhattan Bank, N.A., one of its affiliates) were
not an Agent. Each of The Chase Manhattan Bank, N.A. and
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Morgan Guaranty Trust Company of New York and 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 (or, in the case of The Chase Manhattan Bank, N.A.,
one of its affiliates) were not an Agent hereunder.
SECTION 7.03. Action by Agents. The obligations
of each of the Agents hereunder are only those expressly set
forth herein. Without limiting the generality of the
foregoing, neither Agent shall be required to take any
action with respect to any Default, except in the case of
the Administrative Agent as expressly provided in Article
VI.
SECTION 7.04. Consultation with Experts. Either
Agent may consult with legal counsel (who may be counsel for
the Borrower), independent public accountants and other
experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or
experts.
SECTION 7.05. Liability of Agents. None of the
Agents, their respective affiliates or their respective
directors, officers, agents or employees shall be liable for
any action taken or not taken by such Agent 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 Agents, 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
herewith or any borrowing hereunder; (ii) the performance or
observance of any of the covenants or agreements of the
Borrower; (iii) the satisfaction of any condition specified
in Article III, except receipt of items required to be
delivered to such Agent; or (iv) the validity, effectiveness
or genuineness of this Agreement, the Notes or any
instrument or writing furnished in connection herewith.
Neither Agent shall incur any liability by acting in
reliance upon any notice, consent, certificate, statement,
or other writing (which may be a bank wire, telex or similar
writing) believed by it to be genuine or to be signed by the
proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall,
ratably in accordance with its Commitment, indemnify each
Agent, its affiliates and their respective directors,
officers, agents and employees (to the extent not reimbursed
by the Borrower) against any cost (including cost of
settlement), expense (including reasonable counsel fees and
disbursements), claim, demand, action, loss or liability
(except such as result from such indemnitees' gross
negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with this Agreement or any
action taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank
acknowledges that it has, independently and without reliance
upon any Agent or any other Bank, 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 Agent or any
other Bank, and based on such documents and information as
it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking any action
under this Agreement.
SECTION 7.08. Successor Agent. Either Agent may
resign at any time by giving notice thereof to the Banks and
the Borrower. Upon any such resignation, the Required Banks
shall have the right to appoint a successor Administrative
Agent or Documentation Agent (as the case may be), with the
prior written consent of the Borrower (which consent shall
not be unreasonably withheld), provided that such successor
meets the requirements set forth below. If no such
successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30
days after such retiring Agent gives notice of resignation,
then the retiring Agent may, on behalf of the Banks, appoint
a successor Administrative Agent or Documentation 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
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least $100,000,000. Upon the acceptance of its appointment
as Administrative Agent or Documentation 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 as Administrative
Agent or Documentation Agent, as the case may be, 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
Administrative Agent or Documentation Agent, as the case may
be.
SECTION 7.09. Agents' Fees. The Borrower shall
pay to each Agent for its own account fees in the amounts
and at the times previously agreed upon between the Borrower
and such Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair. If on or prior to the first day of
any Interest Period for any CD Loan, Euro-Dollar Loan or
Money Market LIBOR Loan:
(a) the Administrative Agent is advised by the
Reference Banks that deposits in dollars (in the
applicable amounts) are not being offered to the
Reference Banks in the relevant market for such
Interest Period, or
(b) in the case of CD Loans or Euro-Dollar Loans,
Banks having 50% or more of the aggregate amount of the
Commitments advise the Administrative Agent that the
Adjusted CD Rate or the 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 or continue
CD Loans or Euro-Dollar Loans, 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 Fixed Rate
Borrowing for which a Notice of Borrowing has previously
been given that it elects not to borrow on such date, (i) if
such Fixed Rate Borrowing is a Committed Borrowing, such
Borrowing shall instead be made as a Base Rate Borrowing and
(ii) if such Fixed Rate 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
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such Bank to make Euro-Dollar Loans, 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 sole judgment of such Bank, be otherwise disadvantageous
to such Bank. If such Bank shall determine that it may not
lawfully continue to maintain and fund any of its
outstanding Euro-Dollar Loans to maturity and shall so
specify in such notice, each Euro-Dollar Loan of such Bank
then outstanding shall be converted immediately to a Base
Rate Loan.
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 any obligation to make Committed Loans 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) with any request
or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency:
(i) shall subject any Bank (or its Applicable
Lending Office) to any tax, duty or other charge with
respect to its Fixed Rate Loans, its Note or its
obligation to make Fixed Rate Loans, or shall change
the basis of taxation of payments to any Bank (or its
Applicable Lending Office) of the principal of or
interest on its Fixed Rate Loans or any other amounts
due under this Agreement in respect of its Fixed Rate
Loans or its obligation to make Fixed Rate Loans
(except for (A) the imposition of or change in any tax
on or measured by the overall net income of such Bank,
(B) the imposition of or change in any tax that is
included in the definition of "Taxes" as used in
Section 2.15, but nevertheless in respect of which the
Borrower is not obligated to pay an additional amount
by reason of the remaining provisions of Section
2.15(a) or (C) the imposition of or change in any
income tax imposed by any governmental or other taxing
authority of or in any jurisdiction other than the
United States); or
(ii) 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 (A) with respect
to any CD Loan any such requirement included in an
applicable Domestic Reserve Percentage and (B) 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 shall impose on
any Bank (or its Applicable Lending Office) 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 or its obligation to
make Fixed Rate Loans;
and the result of any of the foregoing is to increase the
cost to such Bank (or its Applicable Lending Office) of
making or maintaining any Fixed Rate Loan, or to reduce the
amount of any sum received or receivable by such Bank (or
its Applicable Lending Office) under this Agreement or under
its Note with respect thereto, by an amount deemed by such
Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Administrative Agent), the
Borrower shall pay to such Bank such additional amount or
amounts as will compensate such Bank for such increased cost
or reduction.
(b) If any Bank shall have determined that, after
the date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change in any
such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental
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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 (including any determination by any
such authority, central bank or comparable agency that, for
purposes of capital adequacy requirements, the Commitments
hereunder do not constitute commitments with an original
maturity of one year or less), has or would have the effect
of reducing the rate of return on capital of such Bank (or
its Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its
Parent) could have achieved but for such adoption, change,
request or directive (taking into consideration its policies
with respect to capital adequacy) by an amount deemed by
such Bank to be material, then from time to time, within 15
days after demand by such Bank (with a copy to the
Administrative Agent), the Borrower shall pay to such Bank
such additional amount or amounts as will compensate such
Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower
and the Administrative Agent of any event of which it has
knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section
and will, if practicable, with the consent of the Borrower
(which consent shall not unreasonably be withheld),
designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the sole judgment of
such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this
Section and setting forth in reasonable detail its
computation of the additional amount or amounts to be paid
to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may
use any reasonable averaging and attribution methods.
Notwithstanding the foregoing subsections (a) and (b) of
this Section 8.03, the Borrower shall only be obligated to
compensate any Bank for any amount arising or accruing both:
(i) during (A) any time or period commencing (x)
in the case of subsection (a), not earlier than the
first day of any Interest Period in effect on the date
on which, and (y) in the case of subsection (b), not
earlier than the date on which, such Bank notifies the
Administrative Agent and the Borrower that it proposes
to demand such compensation and identifies to the
Administrative Agent and the Borrower the statute,
regulation or other basis upon which the claimed
compensation is or will be based and (B) any time or
period during which, because of the retroactive
application of such statute, regulation or other basis,
such Bank did not know that such amount would arise or
accrue; and
(ii) within six months prior to any demand
therefor, accompanied by a certificate of such Bank
claiming compensation and setting forth in reasonable
detail its computation of the additional amount or
amounts to be paid to it hereunder.
SECTION 8.04. 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(a) and the Borrower
shall, by at least five Euro-Dollar Business Days' prior
notice to such Bank through the Administrative Agent, have
elected that the provisions of this Section shall apply to
such Bank, then, unless and until such Bank notifies the
Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) 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 Fixed Rate Loans of the other Banks), and
(b) after each of its CD Loans or Euro-Dollar
Loans, as the case may be, has been repaid (or
converted to a Base Rate Loan), all payments of
principal which would otherwise be applied to repay
such Fixed Rate Loans shall be applied to repay its
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Base Rate Loans instead.
If such Bank notifies the Borrower that the circumstances
giving rise to such notice no longer apply, the principal
amount of each such Base Rate Loan shall be converted into a
CD Loan or Euro-Dollar Loan, as the case may be, on the
first day of the next succeeding Interest Period applicable
to the related CD Loans or Euro-Dollar Loans of the other
Banks.
SECTION 8.05. Substitution of Bank. If (i) the
obligation of any Bank to make or maintain Euro-Dollar Loans
has been suspended pursuant to Section 8.02, (ii) any Bank
has demanded compensation or given notice of its intention
to demand compensation under Section 8.03 or (iii) the
Borrower is required to pay any additional amount to any
Bank pursuant to Section 2.15(a), 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
under this Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and
other communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile transmission
or similar writing) and shall be given to such party: (x)
in the case of the Borrower or any Agent, at its address or
telex or telecopy number set forth on the signature pages
hereof, (y) in the case of any Bank, at its address or telex
number set forth in its Administrative Questionnaire or (z)
in the case of any party, such other address or telex number
as such party may hereafter specify for the purpose by
notice to each of the Agents 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 mail, 72 hours
after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid or (iii)
if given by telecopy or any other means, when delivered at
the address specified in this Section (and confirmed by
telephone by the sender, in the case of any telecopy notice
to the Borrower); provided that notices to the
Administrative Agent under Article II or Article VIII shall
not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by
any Agent or any Bank in exercising any right, power or
privilege hereunder or under any Note shall operate as a
waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes;
Indemnification. (a) The Borrower shall pay (i) all
reasonable out-of-pocket expenses of the Documentation
Agent, including reasonable fees and disbursements of
special counsel for the Documentation Agent, in connection
with the preparation and administration of this Agreement,
any waiver or consent hereunder or any amendment hereof
(other than any waiver or amendment solely for the benefit
of the Banks the request for which was initiated by the
Banks or the Agents or any of them) or any Default or
alleged Default hereunder and (ii) if an Event of Default
occurs, all out-of-pocket expenses incurred by each Agent
and each Bank, including fees and disbursements of counsel
(who may be employees of such Bank, provided that any
allocation of such expenses is made in accordance with such
Bank's customary practice and is without duplication of the
expense of any outside counsel for such Bank for such
matter), in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom. The Borrower shall
indemnify each Bank against any transfer taxes, documentary
taxes, assessments or charges made by any governmental
authority by reason of the execution and delivery of this
Agreement or the Notes.
(b) The Borrower agrees to indemnify each Agent
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and each Bank, 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
(who may be employees of such Bank, provided that any
allocation of such expenses is made in accordance with such
Bank's customary practice and is without duplication of the
expense of any outside counsel for such Bank for such
matter), which may be incurred by such Indemnitee in
connection with any investigative, administrative or
judicial proceeding (whether or not such Indemnitee shall be
designated a party thereto) brought or threatened relating
to or arising out of this Agreement or any actual or
proposed use of proceeds of Loans hereunder; provided that
no Indemnitee shall have the right to be indemnified
hereunder (i) for such Indemnitee's own gross negligence or
willful misconduct as determined by a court of competent
jurisdiction, (ii) in respect of any litigation instituted
by (x) any Participant against any Bank or any Agent, (y)
any Agent or any Bank against any Participant, any Bank or
any Agent or (z) any holder of any security of any Bank, any
Participant or any Agent (in such holder's capacity as such)
against any Bank, Participant or Agent, to the extent any
such litigation does not arise out of any misconduct
(alleged in good faith by such Bank) by or on behalf of the
Borrower or (iii) for amounts that constitute (A) any taxes
excluded from the definition of Taxes in Section 2.15 hereof
or (B) any Taxes as defined in Section 2.15 hereof.
SECTION 9.04. Sharing of Set-Offs. 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
then due and payable with respect to any Note held by it
which is greater than the proportion received by any other
Bank in respect of the aggregate amount of principal and
interest then due and payable with respect to any Note held
by such other Bank, the Bank receiving such proportionately
greater payment shall purchase such participations in the
Notes 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 then due and payable with respect
to the Notes held by the Banks shall be shared by the Banks
pro rata; provided that 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 under the Notes. The Borrower
agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a
Note, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim
and other rights with respect to such participation as fully
as if such holder of a participation were a direct creditor
of the Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any
provision of this Agreement or the Notes may be amended or
waived if, but only if, such amendment or waiver is in
writing and is signed by the Borrower and the Required Banks
(and, if the rights or duties of the Administrative Agent or
the Documentation Agent are affected thereby, by such
Agent); provided that no such amendment or waiver shall,
unless signed by all the Banks, (i) increase or decrease the
Commitment of any Bank (except for a ratable decrease in the
Commitments of all Banks) or subject any Bank to any
additional obligation, (ii) reduce the principal of or rate
of interest on any Loan or any fees hereunder (provided
that, in the case of Loans comprising a single Money Market
Borrowing, only the signatures of the Borrower and the Banks
making Loans included in such Borrowing shall be required),
(iii) postpone the date fixed for any payment of principal
of or interest on any Loan or any fees hereunder or for any
reduction or termination of any Commitment, (iv) change the
percentage of the Commitments or of the aggregate unpaid
principal amount of the Notes, 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 or (v) amend any provision of this Section 9.05.
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 all Banks.
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(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. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon
notice to the Borrower, the Administrative Agent or
Documentation Agent, such Bank shall remain responsible for
the performance of its obligations hereunder, and the
Borrower, the Administrative Agent and the Documentation
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) or (iii) of Section
9.05 without the consent of the Participant. The Borrower
agrees that each Participant shall, to the extent provided
in its participation agreement, be entitled to the benefits
of Article VIII with respect to its participating interest.
An assignment or other transfer which is not permitted by
subsection (c) or (d) below shall be given effect for
purposes of this Agreement only to the extent of a
participating interest granted in accordance with this
subsection (b). No Bank shall provide to any Participant or
prospective Participant any Confidential Information unless
such Participant or prospective Participant shall
theretofore have delivered to the Borrower a duly executed
Confidentiality Letter substantially in the form of Exhibit
J. No Bank shall transfer any interest in this Agreement or
any Note pursuant to this Section 9.06(b) to any Participant
that is a Non-U.S. Institution, unless such proposed
Participant shall, as a condition to the effectiveness of
such transfer, (i) deliver Internal Revenue Service forms as
provided in Section 2.15(b) to the transferor Bank with
copies to the Borrower and the Administrative Agent and (ii)
agree in writing to be bound by the covenants specified in
Section 2.15(b) for the benefit of the transferor Bank, the
Borrower and the Administrative Agent.
(c) Any Bank may at any time assign to one or
more banks or other institutions (each an "Assignee") all,
or a proportionate part of all (such portion to include,
unless such Assignee is a Bank prior to such assignment, a
Commitment of not less than $10,000,000) 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 G hereto executed by such Assignee and
such transferor Bank, with (and subject to) the subscribed
consent of the Borrower, which consent shall not
unreasonably be withheld, and with notice to the
Administrative Agent and the Documentation Agent; provided
that if an Assignee is a Bank prior to such assignment or is
an affiliate of such transferor Bank, no such consent shall
be required; and provided further that such assignment may,
but need not, include rights of the transferor Bank in
respect of outstanding Money Market Loans. 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 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 Documentation 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 Documentation Agent an administrative fee
for processing such assignment in the amount of $2,000. If
the Assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall, prior
to the first date on which interest or fees are payable
hereunder for its account, 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 2.15. No Bank shall
41
<PAGE>
provide to any prospective Assignee (other than an Assignee
referred to in Section 9.06(d) or any Assignee that is a
Bank prior to such proposed assignment) any Confidential
Information unless such prospective Assignee shall
theretofore have delivered to the Borrower a duly executed
Confidentiality Letter substantially in the form of
Exhibit J.
(d) Any Bank may at any time assign all or any
portion of its rights under this Agreement and its Note to a
Federal Reserve Bank. No such assignment shall release the
transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee
of any Bank's rights shall be entitled to receive any
greater payment under Section 8.03 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 or 8.03 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. Collateral. Each of the Banks
represents to the Agents and each of the other Banks that it
in good faith is not relying upon any Margin Stock as
collateral in the extension or maintenance of the credit
provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to
Jurisdiction; Severability. (a) This Agreement and each
Note shall be governed by and construed in accordance with
the laws of the State of New York. Each of the Borrower and
each Bank 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 (such courts referred to in this sentence,
collectively, "New York Courts") for purposes of all legal
proceedings arising out of or relating to this Agreement or
the transactions contemplated hereby. 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 a New
York Court and any claim that any such proceeding brought in
a New York Court has been brought in an inconvenient forum.
(b) If any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby.
SECTION 9.09. Counterparts; Integration. 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. This Agreement constitutes the entire agreement
and understanding among the parties hereto and supersedes
any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE
BORROWER, THE AGENTS AND THE BANKS 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 9.11. Restrictions on Transfers. Each
Bank agrees that it will not, except by operation of law,
transfer or propose to transfer all or any portion of its
rights and obligations under this Agreement and the Note
held by it, or any participation therein to any Person
except (i) banks (including without limitation Federal
Reserve Banks) or trust companies empowered by law to accept
deposits or (ii) their corporate parents or their Affiliates
which are in the business of lending money and which are
either wholly owned by them or are wholly-owned Subsidiaries
of a common corporate parent, unless such Bank shall have
first delivered to the Borrower an opinion of counsel to the
effect (and in a form reasonably acceptable to the Borrower)
that such transfer may legally be effected without
compliance with the registration and prospectus delivery
requirements of the Securities Act. Each Bank agrees that
it will not transfer all or any portion of any Note held by
it, or any participation therein, in violation of applicable
42
<PAGE>
securities laws.
SECTION 9.12. Confidentiality. Each Agent and
each Bank agrees that any Confidential Information provided
to it in connection with this Agreement (i) will be kept
confidential and will not be disclosed to any third party by
such Agent or Bank or by its affiliates, officers,
directors, counsel, representatives or employees
(collectively, the "Representatives"), except as
specifically set forth in the following sentence, and (ii)
will not be used by such Agent or Bank or its
Representatives other than for the purpose of evaluating the
performance of any Loan hereunder or the compliance by the
Borrower with the terms hereof or for purposes of evaluating
any other extensions of credit to the Borrower by such Agent
or Bank. Each Agent and each Bank agrees to reveal any
Confidential Information only (a) to those of its
Representatives who need to know the Confidential
Information for the purposes set forth in clause (ii) above,
are informed by such Agent or Bank of the confidential
nature of the Confidential Information and are instructed by
such Agent or Bank to treat the Confidential Information
confidentially and in accordance with the terms of this
Agreement; (b) to any public auditors (provided that such
auditors agree in writing prior to such disclosure, for the
benefit of the Borrower (including by a written agreement
for the benefit of borrowers from such Bank generally), to
keep such information confidential on terms substantially
similar to those set forth in this Section 9.12), bank
examiners or regulatory auditors of such Agent or Bank and
to other Banks; (c) in connection with any litigation or
dispute arising from this Agreement involving the Banks, the
Agents or the Borrower or any of its Subsidiaries and
affiliates; provided that any Agent or Bank that wishes to
disclose any Confidential Information pursuant to this
clause (c) in a litigation or dispute not involving the
Borrower or any of its Subsidiaries or affiliates shall
notify the Borrower in writing a reasonable period prior to
so disclosing such information; (d) if and to the extent
required by law or regulation (including oral questions,
interrogatories, subpoena, civil demand or similar process),
provided that any Agent or Bank which may be required to
disclose any Confidential Information pursuant to this
clause (d), shall (I) to the extent permitted by relevant
law, notify the Borrower in writing of any request for
disclosure of any Confidential Information promptly after
receipt of such request (but in any event prior to such
disclosure) and (II) not disclose any such Confidential
Information earlier than such Confidential Information is
required to be so disclosed; and (e) to Participants,
prospective Participants to which sales of participating
interests are permitted pursuant to Section 9.06(b) and
prospective Assignees to which assignments of interests are
permitted pursuant to Section 9.06(c), but only if such
Participant, prospective Participant or prospective Assignee
and the applicable Bank execute and deliver to the Borrower
a Confidentiality Letter substantially in the form of
Exhibit J hereto prior to the delivery of any Confidential
Information to such Participant, prospective Participant or
prospective Assignee. Notwithstanding the foregoing, any
such information supplied to a Bank, Agent, Participant,
prospective Participant or prospective Assignee under this
Agreement shall cease to be Confidential Information if it
is or becomes known to such Person by other than
unauthorized disclosure, or if it becomes a matter of public
knowledge other than by unauthorized disclosure by such
Person. Without limitation of any other provision of this
Agreement, the provisions of this Section 9.12 shall survive
the termination of the Commitments and the repayment of the
Loans.
SECTION 9.13. Termination of Existing Credit
Agreement. The Borrower and each of the Banks that is also
a "Bank" party to the Existing Credit Agreement (x) agrees
that the "Commitments" as defined in the Existing Credit
Agreement shall terminate in their entirety on the Effective
Date. Each of such Banks waives (a) any requirement of
notice of such termination pursuant to Section 2.09 of the
Existing Credit Agreement and (b) any claim to any facility
fees or other fees under the Existing Credit Agreement for
any day on or after the Effective Date. The Borrower (i)
represents and warrants that no loans are, as of the date
hereof, or will be, as of the Effective Date, outstanding
under the Existing Credit Agreement and (ii) covenants that
all accrued and unpaid facility fees and any other amounts
due and payable under the Existing Credit Agreement shall
43
<PAGE>
have been paid on or prior to the Effective Date.
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.
DEAN WITTER, DISCOVER & CO.
By____________________________
Title:
2 World Trade Center
56th Floor
New York, New York 10048
Fax: 212-392-7184
Attn: Janice L. Barefoot
ARRANGERS AND BANKS
$175,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By____________________________
Title:
$175,000,000 THE CHASE MANHATTAN BANK, N.A.
By____________________________
Title:
MANAGING AGENTS
$100,000,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By____________________________
Title:
$100,000,000 THE BANK OF NEW YORK
By____________________________
Title:
$100,000,000 CITIBANK, N.A.
By____________________________
Title:
$100,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By____________________________
Title:
44
<PAGE>
$100,000,000 DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS BRANCH
By____________________________
Title:
$100,000,000 THE FIRST NATIONAL BANK OF
CHICAGO
By____________________________
Title:
$100,000,000 LLOYDS BANK PLC
By____________________________
Title:
By____________________________
Title:
$100,000,000 MELLON BANK, N.A.
By____________________________
Title:
$100,000,000 NATIONSBANK N.A. SOUTH
By____________________________
Title:
$100,000,000 ROYAL BANK OF CANADA
By____________________________
Title:
$100,000,000 SOCIETE GENERALE
NEW YORK BRANCH
By____________________________
Title:
$100,000,000 UNION BANK OF SWITZERLAND
By____________________________
Title:
By____________________________
Title:
45
<PAGE>
$100,000,000 WACHOVIA BANK OF GEORGIA, N.A.
By____________________________
Title:
$100,000,000 WELLS FARGO BANK, N.A.
By____________________________
Title:
LEAD MANAGERS
$75,000,000 ABN AMRO BANK N.V., NEW YORK BRANCH
By____________________________
Title:
By____________________________
Title:
$75,000,000 BANK OF MONTREAL
By____________________________
Title:
$75,000,000 BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By____________________________
Title:
$75,000,000 BARCLAYS BANK PLC
By____________________________
Title:
$75,000,000 BANQUE NATIONALE DE PARIS
NEW YORK BRANCH
By____________________________
Title:
By____________________________
Title:
$75,000,000 CANADIAN IMPERIAL BANK OF
COMMERCE
By____________________________
Title:
46
<PAGE>
$75,000,000 COMMERZBANK AKTIENGESELLSCHAFT
By____________________________
Title:
$75,000,000 THE DAI-ICHI KANGYO BANK, LTD.
CHICAGO BRANCH
By____________________________
Title:
$75,000,000 FLEET NATIONAL BANK
By____________________________
Title:
$75,000,000 THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By____________________________
Title:
$75,000,000 THE SUMITOMO BANK, LIMITED
By____________________________
Title:
$75,000,000 SUNTRUST BANK, ATLANTA
By____________________________
Title:
$75,000,000 SWISS BANK CORPORATION
NEW YORK BRANCH
By____________________________
Title:
PARTICIPANTS
$50,000,000 BANCA NAZIONALE DEL LAVORO,
S.p.A., NEW YORK BRANCH
By____________________________
Title:
By____________________________
Title:
47
<PAGE>
$50,000,000 BANK OF HAWAII
By____________________________
Title:
$50,000,000 BANK ONE, COLUMBUS, N.A.
By____________________________
Title:
$50,000,000 BANQUE PARIBAS
By____________________________
Title:
$50,000,000 CREDIT SUISSE
By____________________________
Title:
$50,000,000 DG BANK, DEUTSCHE GENOSSENSCHAFTS
BANK
By____________________________
Title:
$50,000,000 FIRST BANK NATIONAL ASSOCIATION
By____________________________
Title:
$50,000,000 FIRST NATIONAL BANK OF MARYLAND
By____________________________
Title:
$50,000,000 FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By____________________________
Title:
$50,000,000 THE FUJI BANK, LIMITED
NEW YORK BRANCH
48
<PAGE>
By____________________________
Title:
$50,000,000 THE LONG-TERM CREDIT BANK
OF JAPAN, LTD.
By____________________________
Title:
$50,000,000 NATIONAL AUSTRALIA BANK LIMITED
A.C.N. 004 044 937
By____________________________
Title:
$50,000,000 NATIONAL CITY BANK, COLUMBUS
By____________________________
Title:
$50,000,000 NORDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK/
CAYMAN ISLANDS BRANCH
By____________________________
Title:
$50,000,000 THE NORTHERN TRUST COMPANY
By____________________________
Title:
$50,000,000 THE SAKURA BANK, LIMITED
NEW YORK BRANCH
By____________________________
Title:
$50,000,000 THE SANWA BANK, LIMITED
By____________________________
Title:
$50,000,000 WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By____________________________
Title:
49
<PAGE>
By____________________________
Title:
$25,000,000 AUSTRALIA AND NEW ZEALAND BANKING
GROUP LTD.
By____________________________
Title:
$25,000,000 BANCA COMMERCIALE ITALIANA
By____________________________
Title:
$25,000,000 BANCA POPOLARE DI MILANO
By____________________________
Title:
$25,000,000 BANK AUSTRIA AKTIENGESELLSCHAFT
By____________________________
Title:
By____________________________
Title:
$25,000,000 THE FIRST NATIONAL BANK OF BOSTON
By____________________________
Title:
$25,000,000 BARNETT BANK OF BROWARD COUNTY,
N.A.
By____________________________
Title:
$25,000,000 THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS
By____________________________
Title:
$25,000,000 COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENE
50
<PAGE>
By____________________________
Title:
By____________________________
Title:
$25,000,000 CREDITO ITALIANO S.P.A.
By____________________________
Title:
By____________________________
Title:
$25,000,000 DEN DANSKE BANK AKTIESELSKAB,
CAYMAN ISLANDS BRANCH
By____________________________
Title:
By____________________________
Title:
$25,000,000 FIRST TENNESSEE BANK NATIONAL
ASSOCIATION
By____________________________
Title:
$25,000,000 MIDLAND BANK PLC
By____________________________
Title:
$25,000,000 REPUBLIC NATIONAL BANK OF NEW
YORK
By____________________________
Title:
By____________________________
Title:
$25,000,000 SVENSKA HANDELSBANKEN
By____________________________
Title:
51
<PAGE>
By____________________________
Title:
$25,000,000 UNITED STATES NATIONAL BANK OF
OREGON
By____________________________
Title:
TOTAL COMMITMENTS:
$4,000,000,000
==============
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Documentation Agent
By___________________________
Title:
60 Wall Street
New York, New York 10260-0060
Attention: Laurel Brien
Telex number: 177615
CHEMICAL BANK,
as Administrative Agent
By___________________________
Title:
140 East 45th Street
29th Floor
New York, New York 10017
Attention: Janet M. Belden
Telex number: 353006 ABSC NYK
52
<PAGE>
EXHIBIT 10.2
DEAN WITTER, DISCOVER & CO.
KEY EXECUTIVE EMPLOYMENT PLAN
-----------------------------
[As amended April 19, 1996]
1. ESTABLISHMENT OF PLAN.
---------------------
Dean Witter, Discover & Co. hereby establishes a severance
compensation plan known as the Dean Witter, Discover & Co. Key Executive
Employment Plan (the "Plan"). The purpose of the Plan is to enhance the ability
of Dean Witter, Discover & Co. and its subsidiaries to attract, retain and
motivate the most highly qualified executive officers and key employees and to
reinforce and encourage the continued attention and dedication of such executive
officers and key employees to their assigned duties, without being distracted by
the circumstances associated with the possibility of a Change in Control (as
hereinafter defined). The Plan is intended to constitute an "employee welfare
benefit plan" within the meaning of Section 3(1) of ERISA (as hereinafter
defined) providing benefits for a select group of highly compensated employees
of the Company.
2. DEFINITIONS.
-----------
As used herein, the following words and phrases shall have the
following respective meanings unless the context clearly indicates otherwise.
2.1 Applicable Period. The term "Applicable Period" shall mean, with
-----------------
respect to the Executive, the period commencing on the date the Executive would
cease to be covered under the Company's Medical Plan due to an event giving rise
to a right to receive Severance Benefits under Section 4.1 hereof and ending on
the first to occur of (i) the Executive attains age 65; (ii) the Executive
becomes eligible for coverage under any other group health plan, as an employee
or otherwise, which does not contain any exclusion or limitation with respect to
any preexisting condition of the Executive; or (iii) the Company terminates the
Medical Plan and does not adopt any other group health plan. The
term "Applicable Period" shall mean, with respect to an individual covered under
the Medical Plan by virtue of being a spouse or dependent child of the Executive
on the day before the commencement of the Applicable Period, the period
commencing on the date the Executive's Applicable Period commences and ending on
the
1
<PAGE>
first to occur of: (i) with respect to a spouse, the spouse attains age 65; (ii)
with respect to a dependent child, such child attains an age or status at which
coverage under the Medical Plan would terminate regardless of other factors;
(iii) with respect to a spouse or a dependent child, such individual becomes
eligible for coverage under any other group health plan, as an employee or
otherwise, which does not contain any exclusion or limitation with respect to
any preexisting condition of the spouse or dependent child; or (iv) the Company
terminates the Medical Plan and does not adopt any other group health plan.
2.2 Base Salary. The term "Base Salary" shall mean the amount an
-----------
Executive received as annual base salary, determined without regard to any
deferral thereof pursuant to a salary deferral arrangement (including, without
limitation, any deferral arrangement provided in an employee benefit plan
maintained or sponsored by the Company).
2.3 Board. The "Board" shall mean the Board of Directors of DWD.
-----
If, following a Change in Control, a parent entity owns, directly or indirectly,
at least 50% of the combined voting power of the voting securities of DWD or any
successor thereto, then the "Board" shall mean the Board of Directors of such
parent entity.
2.4 Bonus Amount. The term "Bonus Amount" shall mean the annual
------------
incentive compensation earned by an Executive pursuant to any annual bonus plan
maintained by the Company, determined without regard to any deferral thereof
pursuant to a deferral arrangement (including, without limitation, any deferral
arrangement provided in an employee benefit plan maintained or sponsored by the
Company).
2.5 Cause. "Cause" for termination by the Company of the Executive's
-----
employment shall mean (i) the willful and contin-ued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from Disability) after a written demand for substantial
performance is delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties, or (ii) the
willful engaging by the Executive in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise. For purposes of
clauses (i) and (ii) of this definition (A) no act, or failure to act, on the
2
<PAGE>
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that the
Executive's act, or failure to act, was in the best interest of the Company and
(B) in the event of a dispute concerning the application of this provision, no
claim by the Company that Cause exists shall be given effect unless the Company
establishes to the Committee by clear and convincing evidence that Cause exists.
2.6 Change in Control. A "Change in Control" shall be deemed to have
-----------------
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
(i) any Person is or becomes the beneficial owner, directly or
indirectly, of securities of DWD (not including in the securities beneficially
owned by such Person any securities acquired directly from DWD or any of its
affiliates other than in connection with the acquisition by DWD or any of its
affiliates of a business) representing 25% or more of either the then
outstanding shares of the common stock of DWD or the combined voting power of
DWD's then outstanding voting securities;
(ii) a change in the composition of the Board such that individuals
who, as of the Effective Date, constitute the Board cease for any reason to
constitute at least a majority thereof, provided that any person who becomes a
director subsequent to the Effective Date and whose nomination for election is
approved by at least a majority of the directors as of the Effective Date (other
than a nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of DWD, as such terms are used in Rule 14a-11 of
Regulation 14A under the Exchange Act) shall be deemed a director as of the
Effective Date;
(iii) the stockholders of DWD approve a merger or consolidation of
DWD with any other corporation or approve the issuance of voting securities in
connection with a merger or consolidation of DWD pursuant to applicable stock
exchange requirements, other than (1) a merger or consolidation which would
result in the voting securities of DWD outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other fiduciary
3
<PAGE>
holding securities under an employee benefit plan of the Company, at least 75%
of the combined voting power of the voting securities of DWD or such surviving
entity or any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to implement a
recapitalization of DWD (or similar transaction) in which no Person is or
becomes the beneficial owner (determined pursuant to clause (i) above) directly
or indirectly, of securities of DWD (not including in the securities
beneficially owned by such Person any securities acquired directly from DWD or
any of its affiliates other than in connection with the acquisition by DWD or
any of its affiliates of a business) representing 25% or more of either the then
outstanding shares of the common stock of DWD or the combined voting power of
DWD's then outstanding voting securities; or
(iv) the stockholders of DWD approve a plan of complete liquidation
of DWD or an agreement for the sale or disposition by DWD of all or
substantially all of DWD's assets, other than a sale or disposition by DWD of
all or substantially all of DWD's assets to an entity, at least 75% of the
combined voting power of the voting securities of which are owned by Persons in
substantially the same proportions as their ownership of DWD immediately prior
to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be deemed to have
occurred if there is consummated any transaction or series of integrated
transactions immediately following which the record holders of the common stock
of DWD immediately prior to such transaction or series of transactions continue
to have substantially the same proportionate ownership in an entity which owns
all or substantially all of the assets of DWD immediately prior to such
transaction or series of transactions.
2.7 Committee. "Committee" shall mean (1) the individuals (not less
---------
than three in number) who, on the date six months before a Change in Control,
constitute the Compensation Committee of the Board, plus (2) in the event that
less than three individuals are available from the group specified in clause (1)
above for any reason, such individuals as serve, as of such date, on the Stock
Option Committee of the Board or, if an insufficient number of individuals are
available from the Stock Option Committee, then from the individuals serving, as
of such date, on the Audit Committee of the Board or, if there still remains an
insufficient number of individuals available to serve
4
<PAGE>
as the Committee, such individuals as may be appointed by the individual or
individuals so available (including for this purpose any individual or
individuals previously so appointed under this clause (2)) other than an
individual who first becomes a director or officer of the Company following a
Change in Control.
2.8 Company. "Company" shall mean, collectively, DWD and its
-------
majority-owned subsidiaries.
2.9 DWD. "DWD" shall mean Dean Witter, Discover & Co.
---
2.10 Disability. "Disability" shall mean (i) a physical or mental
----------
infirmity which has been determined to be a total and permanent disability under
and in accordance with the provisions of the Dean Witter Reynolds Inc. Pension
Plan, as amended from time to time, or (ii) a physical or mental infirmity which
impairs an Executive's ability to substantially perform such Executive's duties
which continues for a period of at least one hundred eighty (180) consecutive
days. In the event of a dispute concerning the application of this section, no
claim by the Company regarding the existence or nonexistence of Disability shall
be given effect unless the Company establishes to the Committee, by clear and
convincing evidence, that a Disability exists or does not exist, as the case may
be.
2.11 Effective Date. The "Effective Date" shall mean April 21,
--------------
1995.
2.12 ERISA. "ERISA" shall mean the Employee Retirement Income
-----
Security Act of 1974, as amended from time to time.
2.13 Exchange Act. The "Exchange Act" shall mean the Securities
------------
Exchange Act of 1934, as amended from time to time.
2.14 Executive. An "Executive" shall mean an executive or key
---------
employee of the Company listed on Appendix A attached hereto, and such
additional executives and key employees as may hereafter be designated
Executives under this Plan by the Board (or a committee thereof to which such
authority is delegated). The Board (or such committee) may add executives and
key employees of the Company to Appendix A by resolution thereof and may only
remove executives and key employees of the Company from Appendix A by adopting
an amendment to the Plan which modifies Appendix A.
5
<PAGE>
2.15 Good Reason. "Good Reason" shall mean the occurrence, within
-----------
two years after a Change in Control, of any of the following events or
conditions:
(i) the assignment to the Executive of any duties inconsistent with
the Executive's status as an executive or key employee of the Company or a
substantial adverse alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the Change in
Control;
(ii) a reduction by the Company, for any reason, to the Executive's
Total Compensation as in effect immediately prior to the Change in Control or as
the same may be increased thereafter from time to time, except for a reduction
resulting by reason of the failure of the Executive's applicable business
segment or division to attain applicable "performance standards" as established
under the Company's Executive Incentive Compensation Plan, provided that, with
respect to any such performance standards set following a Change in Control, the
opportunity to attain such performance standards shall be adjusted to ensure
that such performance standards are no more onerous than the opportunity to
attain the performance standards last adopted prior to the Change in Control; or
(iii) the Company's requiring the Executive to be based more than 30
miles from the location at which such Executive was based immediately prior to
the Change in Control, except for required travel on the Company's business.
For purposes of any determination regarding the existence of Good Reason, any
claim by an Executive that Good Reason exists shall be presumed to be accurate
unless the Company establishes to the Committee by clear and convincing evidence
that Good Reason does not exist.
2.16 Medical Plan. The term "Medical Plan" means any plan, program
------------
or arrangement sponsored by the Company under which an Executive is eligible to
receive, through insurance, reimbursement or otherwise, hospital, medical or
surgical services and goods including the DWD Healthcare Partnership Plan, the
Dean Witter Reynolds Inc. Medical Plan, any Health Maintenance Organization
offered by or through the Company and any successors to such plans but excluding
the DWD Dental Plan and Flexible Spending Account.
6
<PAGE>
2.17 Notice of Termination. "Notice of Termination" shall mean a
---------------------
notice which indicates the specific termination provision in this Plan relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of an Executive's employment under
the provision so indicated.
2.18 Person. "Person" shall mean any person (as defined in Section
------
3(a)(9) of the Exchange Act, as such term is modified in Sections 13(d) and
14(d) of the Exchange Act) other than (1) any employee plan established by the
Company, (2) DWD or any of its affiliates (as defined in Rule 12b-2 promulgated
under the Exchange Act), (3) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (4) a corporation owned, directly
or indirectly, by stockholders of DWD in substantially the same proportions as
their ownership of DWD.
2.19 Plan. The "Plan" shall mean this Dean Witter, Discover & Co.
----
Key Executive Employment Plan, as amended from time to time.
2.20 Potential Change in Control. "Potential Change in Control"
---------------------------
shall mean the occurrence of any of the following events or conditions:
(i) DWD enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;
(ii) any Person publicly announces an intention to take or to
consider taking actions which if consummated would constitute a Change in
Control; or
(iii) any Person is or becomes the beneficial owner, directly or
indirectly, of securities of DWD (not including in the securities beneficially
owned by such Person any securities acquired directly from DWD or its affiliates
other than in connection with the acquisition by DWD or any of its affiliates of
a business) representing 10% or more of either the then outstanding shares of
the Common Stock of DWD or the combined voting power of DWD's then outstanding
voting securities.
2.21 Severance Benefits. "Severance Benefits" shall mean the
------------------
benefits payable in accordance with Section 4 of this Plan.
7
<PAGE>
2.22 Termination Date. "Termination Date" shall mean, except as
----------------
provided in Section 4.1(c) hereof, (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30)-day period), (ii)
if the Executive's employment is terminated for any other reason (other than as
specified in clause (iii) below), the date specified in the Notice of
Termination (which, in the case of a termination by the Company, shall not be
less than thirty (30) days (except in the case of a termination for Cause) and,
in the case of a termination by the Executive, shall not be less than fifteen
(15) days nor more than sixty (60) days, respectively, from the date such Notice
of Termination is given), and (iii) if the Executive ceases to be employed by
the Company as a result of a transaction described in Section 4.1(b) hereof, the
date of consummation of such transaction.
2.23 Total Compensation. "Total Compensation" shall mean, with
------------------
respect to any Executive, the aggregate of such Executive's (i) Base Salary,
(ii) Bonus Amount, (iii) all long term incentive compensation (including, but
not limited to stock options and similar equity based compensation) granted to
the Executive on an annual basis, and (iv) any other employee benefits, under
each employee benefit plan in which the Executive participates, on an annual
basis.
3. ELIGIBILITY.
-----------
3.1 Participation. An Executive shall participate in and, subject to
-------------
the terms and conditions of the Plan, be entitled to receive benefits provided
by, the Plan, commencing at the time and continuing so long as such Executive is
included on Appendix A as provided in Section 2.14 hereof. An Executive
entitled to payment of Severance Benefits shall participate in the Plan until
the full amount of the Severance Benefits has been paid to such Executive.
8
<PAGE>
4. SEVERANCE.
---------
4.1 Right to Severance Benefits.
---------------------------
(a) Subject to Sections 4.1(b) and 4.1(c), an Executive shall be
entitled to receive and the Company shall be obligated to pay Severance Benefits
from the Company in the amount determined pursuant to Section 4.2 if (i) a
Change in Control has occurred on or after the Effective Date and (ii) within
two years thereafter, such Executive's employment with the Company is terminated
(1) by the Company other than for Cause or Disability, as defined in Section
2.10(i) only, or (2) by the Executive for Good Reason.
(b) Notwithstanding paragraph (a) above, in the event the Executive
ceases to be employed by the Company after a Change in Control (or, under
circumstances described in paragraph (c) below, prior to a Change in Control) as
a result of the sale, divestiture or other disposition of a division or business
(or part thereof) of the Company, such cessation shall not constitute a
termination of employment of the Executive for purposes of the Plan so long as
(i) the Executive is offered substantially equivalent employment by the acquiror
of such division or business (or part thereof), or an affiliate thereof,
immediately following such sale, divestiture or other disposition; and (ii) such
acquiror, or an affiliate thereof, agrees in writing to adopt the Plan and
assume the obligations of the Company under the Plan with respect to the
Executive and the Committee until the second anniversary of such Change in
Control. For purposes of any determination regarding the applicability of this
Section 4.1(b), any position taken by the Executive shall be presumed to be
accurate unless the Company establishes to the Committee by clear and convincing
evidence that such position is not accurate.
(c) Notwithstanding paragraph (a) above but subject to paragraph (b)
above, if an Executive's employment with the Company is terminated prior to the
date of a Change in Control and such termination (i) was at the request of a
third party who has indicated an intention or taken steps reasonably calculated
to effect a Change in Control and who effectuates a Change in Control or (ii)
otherwise occurred in connection with or in anticipation of a Change in Control
which actually occurs, then for purposes of Section 4.1(a), the Executive's
employment will be deemed to have terminated within two years after
9
<PAGE>
the Change in Control and for all purposes of this Plan, the Termination Date
shall mean the date of such Change in Control. For purposes of any determination
regarding the applicability of this Section 4.1(c), any position taken by the
Executive shall be presumed to be accurate unless the Company establishes to the
Committee by clear and convincing evidence that such position is not accurate.
4.2 Amount of Severance Benefits.
----------------------------
(a) Subject to Section 4.2(b) below, if an Executive's employment is
terminated under circumstances entitling such Executive to Severance Benefits as
provided in Section 4.1, such Executive shall (i) be entitled to receive a lump-
sum payment from the Company, as soon as practicable but in no event later than
30 days following the Termination Date, in an amount equal to two (2) times the
higher of (A) the average of the Executive's aggregate Base Salary and Bonus
Amount in respect of the three fiscal years immediately preceding the fiscal
year in which occurs the Change in Control or (B) the average of the Executive's
aggregate Base Salary and Bonus Amount in respect of the three fiscal years
immediately preceding the fiscal year in which occurs the Termination Date, and
(ii) be entitled, effective immediately following termination of employment, to
elect to remain a participant of, and to continued to be covered under, the
Company's Medical Plan at the same level of coverage as in effect immediately
prior to such termination of employment, so long as such Executive contributes
to the cost of such coverage at the same contribution rate then applicable to
active participants of such plan, for the Applicable Period. The Company shall
be obligated to satisfy the foregoing entitlements of the Executive
notwithstanding the existence of any dispute between the parties concerning the
nature of the termination of the Executive's employment, subject, however, to
the Company's reservation of its right to seek reimbursement of any amounts
previously paid should it ultimately prevail in such dispute. The Company
acknowledges that its failure to make any payments in respect of this paragraph
(a) will constitute irreparable harm to the Executive, giving rise to a right to
a remedy of specific performance, on an expedited basis. Should the Company
fail to pay when due the amounts described in clause (i) above, the Executive
shall also be entitled to receive from the Company an amount representing
interest on any unpaid amounts, from the due date to the date of payment, at a
rate equal to the prime rate of Chemical Bank as in effect on the Termination
Date.
10
<PAGE>
(b) The amount of the Severance Benefits to which an Executive is
otherwise entitled under this Plan shall be reduced (but not below zero) to the
extent necessary so that no portion of the Severance Benefits shall be subject
to the imposition of excise tax under Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"). All determinations required to be made under
this Section 4.2(b) shall be made by a nationally recognized accounting firm
designated by the Company (other than the accounting firm that is regularly
engaged by the person, or any affiliate of the person, who has effectuated a
Change in Control) and reasonably acceptable to an Executive (the "Accounting
Firm"). The Accounting Firm shall provide its determination, together with
detailed supporting calculations and documentation, both to the Company and an
Executive within 15 days after the Executive's Termination Date (or such earlier
time as is requested by the Company). All fees, costs and expenses (including,
but not limited to, the costs of retaining experts) of the Accounting Firm shall
be borne by the Company and the Company shall pay such fees, costs and expenses
as they become due.
5.SUCCESSORS AND ASSIGNS.
----------------------
5.1 Successors and Assigns.
----------------------
This Plan shall be binding upon and shall inure to the benefit of the Company,
its successors and assigns. The term "the Company" as used herein shall include
such successors and assigns.
Neither this Plan nor any right or interest hereunder shall be assignable or
transferable by an Executive or by the Executive's beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Plan shall inure to the benefit of and be enforceable by an Executive's
legal representative.
11
<PAGE>
6. AMENDMENT AND PLAN TERMINATION.
------------------------------
6.1 Amendment and Termination. The Plan may be terminated or amended
-------------------------
in any respect by resolution duly adopted by the Board or a committee thereof
designated by the Board; provided, however that (1) following the occurrence of
--------
a Potential Change in Control but only for so long as such Potential Change in
Control is continuing and (2) following the occurrence of a Change in Control,
the Plan no longer shall be subject to amendment or termination in any manner
adverse to any Executive. This Plan shall automatically terminate on the second
anniversary of a Change in Control, subject to an Executive's right to receive
payment of any Severance Benefits to which such Executive is entitled as a
result of the termination of such Executive's employment on or prior to the date
of termination of the Plan.
7. MISCELLANEOUS.
-------------
7.1 No Rights to Employment. Nothing in the Plan shall confer upon
-----------------------
any Executive the right to continue in the employ of the Company or to be
entitled to any remuneration or benefits not set forth in the Plan or to
interfere with or limit in any way the right of the Company to terminate such
Executive's employment.
7.2 Fees, Expenses and Indemnification. The Company shall pay on a
----------------------------------
current basis, as incurred, all legal fees and related expenses (including the
costs of experts, evidence and counsel) incurred by an Executive in connection
with such Executive's seeking in good faith to obtain or enforce any right or
benefit provided by this Plan. The Company shall indemnify the Committee to the
extent permitted by law with respect to any claims arising out of the acts or
omissions of the Committee.
7.3 Notice. For the purpose of this Plan, notices and all other
------
communications provided for in the Plan (including the Notice of Termination)
shall be in writing and shall be deemed to have been duly given when personally
delivered or sent by certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses last given by each party to the other,
provided that all notices to the Company shall be directed to the attention of
the Committee with a copy to the Secretary of DWD. All notices and
communications shall be deemed to have been received on the date of delivery
thereof or on the third business
12
<PAGE>
day after the mailing thereof, except that notice of change of address shall be
effective only upon receipt.
7.4 Named Fiduciary and Plan Administrator. The Committee is hereby
--------------------------------------
designated the "named fiduciary" (within the meaning of Section 402(a)(2) of
ERISA) of the Plan. The Committee (i) shall have authority for the management,
control and administration of the Plan, including the power to interpret the
terms hereof, and (ii) may allocate to others certain aspects of the management
and operational responsibilities of the Plan, including the employment of
advisors and the delegation of any ministerial duties to qualified individuals.
7.5 Claims Procedure.
----------------
(a) All claims by an Executive or the Company relating to the payment
of Severance Benefits shall be in writing and shall be filed with the Committee.
(b) If the Committee wholly or partially rules against the Company or
the Executive, the Committee shall provide such party with written notice
immediately following the decision and in any event, within sixty (60) days
after the receipt of the claim setting forth:
(i) the specific reason for the Committee's decision;
(ii) specific reference to pertinent Plan provisions on which the
decision is based;
(iii) in the case of a claim by the Executive, a description of
any additional material or information which must be submitted to cause the
Committee to rule favorably upon the Executive's claim, and an explanation of
why such material or information is necessary; and
(iv) an explanation of the Plan's review procedure.
(c) In the event the Committee wholly or partially rules against the
Company or the Executive, the applicable party shall have sixty (60) days after
the day on which such written notice by the Committee is received by such party
to apply (in person or by authorized representative) in writing to
13
<PAGE>
the Committee for a full and fair review of the Committee's ruling. In
connection with such review, the applicable party (or such party's
representative) shall be afforded a reasonable opportunity to review pertinent
documents, and may submit issues and comments in writing.
(d) The Committee shall issue its decision on review within sixty
(60) days after receipt of the applicable party's application for review, unless
in the sole discretion of the Committee special circumstances require an
extension to not later than one hundred twenty (120) days after such receipt.
The decision shall be in writing and shall set forth specific reasons for the
decision and specific references to the pertinent Plan provisions on which the
decision is based.
(e) The Committee shall have the discretionary authority to interpret
and construe the terms of the Plan and to determine eligibility for and
entitlement to Severance Benefits in accordance with the terms of the Plan. Any
reasonable interpretation or construction of the Plan's terms or determinations
made by the Committee as to eligibility or entitlement, adopted in good faith,
shall be final and binding upon the Company and the Executives. In making any
determinations under the Plan, the Committee shall be bound by and shall follow
all provisions of this Plan, including but not limited to those provisions
establishing "clear and convincing evidence" as the standard for determining
whether the Company has satisfied its burden of proof in connection with certain
matters specified hereunder.
(f) Nothing contained herein shall be construed to diminish the right
of an Executive to bring an action to assert rights arising under the Plan or to
seek relief from an adverse determination of the Committee under any applicable
law or before any court of competent jurisdiction.
7.6 Governing Law. Except to the extent preempted by ERISA, this
-------------
Plan shall be governed by and construed and enforced in accordance with the laws
of the State of Delaware without giving effect to the conflict of law principles
thereof.
7.7 Severability. The provisions of this Plan shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of any other provision hereof.
14
<PAGE>
7.8 Unfunded Plan. The Plan shall be unfunded and shall not create
-------------
(or be construed to create) a trust or a separate fund or funds. To the extent
any person holds any rights under the Plan, such rights shall be no greater than
the rights of an unsecured general creditor of the Company.
7.9 Other Plans. Severance Benefits payable under this Plan shall be
-----------
in lieu of any severance benefits payable under any other plan, policy or
practice maintained by the Company (collectively, the "Other Plans"); provided,
however, that if the amount of Severance Benefits to which an Executive is
otherwise entitled hereunder is reduced pursuant to Section 4.2(b) hereof, then
the Executive shall be entitled to benefits under the Other Plans (but only to
the extent of such reduction and then only if and to the extent the payment of
such benefits shall not cause any of such benefits or the Severance Benefits to
be subject to the excise tax under Section 4999 of the Code). All
determinations required to be made under this Section 7.9 shall be made in the
manner, and shall otherwise be subject to the conditions, prescribed by Section
4.2(b) hereof.
15
<PAGE>
APPENDIX A
----------
Dean Witter, Discover & Co. Key Executive Employment Plan
Executives designated pursuant to section 2.14 of the Plan
NAME
COMPANY
- ------------------------
Philip J. Purcell
Mitchell M. Merin
Thomas C. Schneider
Christine A. Edwards
Birendra Kumar
Ronald T. Carman
Michael T. Cunningham
William P. O'Hara
Robert P. Seass
Joseph G. Ciaccio
Thomas H. Burr
SECURITIES
- ------------------------
Richard M. DeMartini
James F. Higgins
Robert J. Dwyer
Charles A. Fiumefreddo
William B. Smith
Stephen R. Miller
Richard F. Powers III
CREDIT SERVICES
- ------------------------
Thomas R. Butler
Billy J. Martin
Nancy S. Donovan
William L. Hodges
Robert L. Wieseneck
16
<PAGE>
EXHIBIT 11
DEAN WITTER, DISCOVER & CO.
COMPUTATION OF EARNINGS PER COMMON SHARE
Three Months Ended March 31,
----------------------------
1996 1995
------------ ------------
Net Income $ 245.8 $ 222.1
============ ============
Average common shares outstanding, excluding
the dilutive effects of stock options and
unissued stock awards 167.6 169.3
============ ============
Earnings per common share:
Primary dilution basis(1)
Earnings per common share $ 1.41 $ 1.28
============ ============
Average common shares outstanding 174.1 173.5
============ ============
Full dilution basis(2)
Earnings per common shares $ 1.41 $ 1.28
============ ============
Average common shares outstanding 174.8 173.9
============ ============
(1) Earnings per common share on a primary dilution basis for the quarters ended
March 31, 1996 and 1995 was calculated using the weighted average price per
share of the Company's common stock during the period, and included the
dilutive effects of stock options and unissued stock awards under deferred
compensation plans.
(2) Earnings per common share on a full dilution basis for the quarters ended
March 31, 1996 and 1995 was calculated using the greater of the period-end
price per share of the Company's common stock or the weighted average price
per share of the Company's common stock during the period and included the
dilutive effects of stock options and unissued stock awards under deferred
compensation plans.
<PAGE>
EXHIBIT 12
DEAN WITTER, DISCOVER & CO.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three Months Ended March 31,
----------------------------
1996 1995
------------ ------------
Earnings
Income before income taxes $ 400.4 $ 362.3
Interest expense 390.7 352.9
Interest factor in rent expense 13.0 12.1
--------- ---------
Total earnings $ 804.1 $ 727.3
========= =========
Fixed charges
Interest expense 390.7 352.9
Interest factor in rent expense 13.0 12.1
--------- ---------
Total fixed charges $ 403.7 $ 365.0
========= =========
Ratio of earnings to fixed shares 2.0 2.0
========= =========
"Earnings" consist of income before income taxes and fixed charges. "Fixed
charges" consist of interest costs, including interest on deposits, and that
portion of rent expense estimated to be representative of the interest factor.
<PAGE>
EXHIBIT 15
To the Directors and Shareholders of
Dean Witter, Discover & Co.:
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited interim
consolidated financial information of Dean Witter, Discover & Co. and
subsidiaries as of March 31, 1996 and for the three month periods ended March
31, 1996 and 1995, as indicated in our report dated May 15, 1996; because we
did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996, is
incorporated by reference in the following Registration Statements of Dean
Witter, Discover & Co.:
Filed on Form S-3:
Registration Statement No. 33-57202
Registration Statement No. 33-60734
Registration Statement No. 33-89748
Registration Statement No. 33-92172
Filed on Form S-8:
Registration Statement No. 33-62374
Registration Statement No. 33-63024
Registration Statement No. 33-63026
Registration Statement No. 33-78038
Registration Statement No. 33-79516
Registration Statement No. 33-82240
Registration Statement No. 33-82242
Registration Statement No. 33-82244
Registration Statement No. 333-4212
We are also aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that
Act.
Deloitte & Touche LLP
New York, New York
May 15, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 931
<SECURITIES> 0
<RECEIVABLES> 25,210
<ALLOWANCES> 679
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 752
<DEPRECIATION> 397
<TOTAL-ASSETS> 35,342
<CURRENT-LIABILITIES> 0
<BONDS> 8,001
0
0
<COMMON> 2
<OTHER-SE> 4,911
<TOTAL-LIABILITY-AND-EQUITY> 35,342
<SALES> 0
<TOTAL-REVENUES> 2,166
<CGS> 0
<TOTAL-COSTS> 1,147
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 228
<INTEREST-EXPENSE> 391
<INCOME-PRETAX> 400
<INCOME-TAX> 155
<INCOME-CONTINUING> 246
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 246
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
</TABLE>
