SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[ X ] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended FEBRUARY 3, 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 0-1308
----------
STRAWBRIDGE & CLOTHIER
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1131660
- ---------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
801 Market Street
Philadelphia, Pennsylvania 19107-3199
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 629-6000
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each
Title of each class exchange on which registered
None None
- ---------------------------------------- ------------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Series A Common Stock, par value $1 per share
---------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES __X__ NO _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. (box with X)
The aggregate market value of the Series A Common Stock and the Series B
Common Stock, par value $1 per share, of the registrant held by nonaffiliates
of the registrant as of April 11, 1996 was $150,668,287.
The number of shares of Series A Common Stock, par value $1 per share, of the
registrant outstanding at April 11, 1996 was 7,617,359.
The number of shares of Series B Common Stock, par value $1 per share, of the
registrant outstanding at April 11, 1996 was 2,997,162.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the 1995 Annual Report to shareholders are incorporated by
reference in Part II.
<PAGE>
PART I
------
Item 1. Business.
---------
Strawbridge & Clothier (the "Company") operates 13 department stores
at its original location in Philadelphia and in the surrounding Delaware
Valley area of Pennsylvania, New Jersey and Delaware. The Company operates,
under the Clover name, 26 discount stores in the same market area as well as
in the Lehigh Valley area of Pennsylvania. The Company also operates one Home
Furnishings store in northern Delaware. The Company is the successor to a
business begun in 1868.
All of the Company's department stores carry most of the classes of
general merchandise usually offered by full-line department stores. Among the
principal types of merchandise sold are men's, women's and children's apparel,
including men's and boys' clothing, furnishings and footwear, women's coats,
suits, dresses, furs, sportswear, intimate apparel, accessories, shoes and
jewelry and infants' and children's clothing and accessories; smallwares,
including cosmetics, stationery and candy; home furnishings, including
domestics, draperies, lamps, housewares, furniture, rugs, television sets,
audio equipment, china, glassware and silverware; and gifts. The department
stores also provide various services such as interior decorating, beauty
salons, restaurants, jewelry repair and fur storage. The Company has
arrangements with several common carriers for the delivery by truck of
merchandise to its department store customers throughout the Company's trading
area.
The Clover stores offer a complete range of general merchandise
exclusive of major appliances and furniture. No home delivery or other
services are provided except for cafeteria-style restaurant service in one
store, snack bars in 25 stores, pharmacies in nine stores and beauty salons in
nine stores.
The Home Furnishings store, opened in 1995, carries furniture,
bedding, floor coverings, curtains, draperies, lamps and a full-service
interior design studio.
The Company's merchandise is sold under a broad variety of brand
names including the Company's own brand names, manufacturers' brand names, and
several brand names owned by the Associated Merchandising Corporation, of
which the Company is a member.
Strawbridge & Clothier charge cards, VISA, MasterCard, American
Express and Discover cards are accepted at both the department stores and
Clover stores.
In the fiscal year ended February 3, 1996, approximately 34% of sales
were on a cash basis and 66% of sales were credit sales. The Company's stores
have sales activity throughout the year. Approximately 29% of annual sales
are made in the peak period of November and December.
As of February 3, 1996, the Company had 4,260 full time employees,
2,787 regular part time employees and 5,874 contingent employees who are
scheduled as needed.
The general merchandise business in the Company's principal market of
downtown Philadelphia and the surrounding Delaware Valley area of southeastern
Pennsylvania, southern New Jersey and northern Delaware is highly competitive.
The Company competes on the basis of quality of merchandise, customer service,
price and store location. The Company's department and discount stores are in
active competition with national chain, regional chain and local retail stores
within their market areas, including conventional and discount department
stores, specialty stores and mail order companies. Many of the Company's
competitors have considerably larger national sales and financial resources
than the Company.
<PAGE>
Recent Events
-------------
On April 4, 1996, the Company entered into an Asset Purchase
Agreement (the "May Agreement") with The May Department Stores Company ("May")
for the sale by the Company to May of certain real estate interests and
certain other assets, including inventory and accounts receivable,
constituting the thirteen Company department stores, the home furnishings
store, one distribution center, one downtown service building and one parking
garage (collectively, the "Department Store Assets"). The purchase price for
the Department Store Assets will be paid by May with approximately 4.2 million
shares of May common stock (valued on April 4, 1996 at approximately
$200,000,000) and the assumption of approximately $392,000,000 of Company
liabilities. The total purchase price is subject to adjustment as set forth
in the Agreement.
Additionally, pursuant to the terms of an Asset Option Agreement
("Option Agreement") dated April 4, 1996, if at any time prior to consummation
of the above-proposed acquisition (i) an unrelated third party acquires more
than 25% of the voting power of the outstanding shares of the Company's common
stock, (ii) the Company enters into an agreement relating to, or consummates a
merger, consolidation or other business combination of the Company, or (iii)
the Agreement otherwise terminates prior to the date of the sale by reason of
the Company's default or the failure by its shareholders to approve the
transaction, the Company has granted May an irrevocable option to purchase one
or more of the following Company department stores: Willow Grove Park, Cherry
Hill Mall, Concord Mall and the Concord Mall Home Furnishing Store. The
aggregate purchase price for these four stores will be paid by May in cash of
approximately $56,240,000 ($18,960,000 for Willow Grove Park, $20,640,000 for
Cherry Hill Mall, $12,480,000 for Concord Mall (less an amount for present
value of future lease payments ("PVOL")) and $4,160,000 for the Concord Mall
Home Furnishing Store (less an amount for PVOL).
The Company and May intend to consummate the purchase and sale of the
Department Store Assets (the "Initial Sale") in July, 1996, subject to the
terms and conditions set forth in the Agreement, including the termination or
expiration of any applicable Hart-Scott-Rodino waiting period.
The Company has also entered into an agreement in principle with
Kimco Realty Corporation ("Kimco") for the sale by the Company to Kimco of
substantially all the real estate of the Company's Clover Division and related
rights (the "Clover Assets"). Kimco will pay approximately $40,000,000 for
the Clover Assets and will assume certain liabilities. The sale of the Clover
Assets will likely be completed in multiple closings based on the satisfaction
of certain closing conditions with respect to each Clover store property to be
sold.
The net cash proceeds received by the Company in the Kimco
transaction, along with the net cash proceeds realized by the Company in other
asset sale transactions, will be transferred by the Company to May in exchange
for the number of shares of May common stock determined by dividing the cash
proceeds by the average daily per share closing prices for shares of May
common stock for the 20 consecutive trading days immediately prior to the
closing of such transfer (the "Second Sale"). The closing of the Second Sale
will occur on a date no earlier than 30 days after the date of the closing of
the Initial Sale and no later than the business day preceding the first
anniversary of the closing of the Initial Sale.
Not later than the first anniversary of the closing of the Initial
Sale, the Company will dissolve and distribute to its shareholders the shares
of May common stock received in the Initial Sale and the Second Sale and any
other remaining assets which have not been transferred to May pursuant to the
Agreement, subject to any assets held in escrow or other arrangements to
adequately provide for the payment of all of the Company's remaining
liabilities.
2
<PAGE>
Item 2. Properties.
-----------
The Company's main department store is in downtown Philadelphia and
its 12 suburban branch department stores are located in the surrounding
Delaware Valley area of southeastern Pennsylvania (seven stores), southern New
Jersey (three stores) and northern Delaware (two stores). The Philadelphia
department store contains approximately 1,065,000 square feet of floor area.
The suburban branch department stores generally contain from 150,000 to
255,000 square feet, with one store containing 108,000 square feet of floor
area. All of the branch department stores are located in shopping centers or
malls. The Company's 26 Clover discount stores are located in the same market
area as its department stores (16 in southeastern Pennsylvania, six in
southern New Jersey and two in northern Delaware), as well as in the Lehigh
Valley (two stores) area of Pennsylvania. The Clover stores contain from
70,000 to 157,000 square feet of floor area. The Company's Home Furnishings
store is located at a shopping mall in northern Delaware and contains 54,000
square feet of floor area. The Company owns 16 of its stores, of which five
are on leased land and ten are subject to mortgages or similar liens. The
Company leases the remainder of the stores from third parties with, in most
cases, long-term renewal rights or an option to purchase. The Company also
maintains warehouse and distribution facilities in Philadelphia and New
Jersey.
Item 3. Legal Proceedings.
------------------
There are no material pending legal proceedings to which the Company
or its subsidiaries is a party or of which any of their property is subject.
The Company is a party to ordinary routine legal proceedings incidental to the
conduct of its business, none of which are material.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
This item is not applicable because there were no matters submitted
to a vote of security holders during the fourth quarter of fiscal year 1995.
Executive Officers of the Registrant.
- -------------------------------------
Office
Held
Name Age Office(1) Since(2)
- ---- --- --------- --------
Francis R. Strawbridge, III(3) 58 Chairman of the Board 1984
Peter S. Strawbridge(3) 57 President 1979
Robert G. Muskas 57 Executive Vice President 1980
Warren W. White 64 Executive Vice President 1979
Steven L. Strawbridge(3) 52 Vice President, Treasurer and
Secretary 1982
Ronald B. Avellino 57 Vice President 1987
Louis F. Busico 61 Vice President 1979
George T. Gorman 44 Vice President 1996
Harry T. Hinkel 57 Vice President 1993
Robert A. Hoffner 53 Vice President 1984
Charles D. Hollander 65 Vice President 1988
3
<PAGE>
Office
Held
Name Age Office(1) Since(2)
- ---- --- --------- --------
Alexander B. Jervis 52 Vice President 1992
Alice T. Kanigowski 57 Vice President 1986
John J. Leahy 65 Vice President 1969
Thelma A. Newman 56 Vice President 1994
E. Spencer Quill 54 Vice President 1990
Thomas S. Rittenhouse 54 Vice President 1978
G. Leonard Shea 62 Vice President 1977
David W. Strawbridge(3) 56 Vice President 1978
William A. Timmons 60 Vice President 1979
__________
(1) Each executive officer has been employed by the Company as an executive
officer for at least the past five years, except for George T. Gorman who
was a Divisional Merchandise Manager prior to his election in 1996;
Alexander B. Jervis who was Director of Assets Protection prior to his
election in 1992; Harry T. Hinkel who was a Store Manager prior to his
election in 1993; and Thelma A. Newman who was a Divisional Merchandise
Manager prior to her election in 1994.
(2) The executive officers of the Company are elected annually to hold office
until the annual organization meeting of the Board of Directors and until
their respective successors shall have been duly elected and qualified.
(3) Peter S. Strawbridge and Steven L. Strawbridge are brothers and are first
cousins of Francis R. Strawbridge, III and David W. Strawbridge, who also
are brothers.
PART II
-------
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
-----------------------------------------------------
The information appearing in the section captioned "Market and
Dividend Information" from the portions of the Company's 1995 Annual Report to
shareholders filed as Exhibit 13 to this Form 10-K is incorporated herein by
reference.
Item 6. Selected Financial Data.
------------------------
The information appearing in the section captioned "Five-Year
Financial Summary" from the portions of the Company's 1995 Annual Report to
shareholders filed as Exhibit 13 to this Form 10-K is incorporated herein by
reference.
4
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
-----------------------------------------------------------
The information appearing in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" from
the portions of the Company's 1995 Annual Report to shareholders filed as
Exhibit 13 to this Form 10-K is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
--------------------------------------------
The information appearing in the sections captioned "Consolidated
Statements of Operations," "Consolidated Balance Sheets," "Consolidated
Statements of Cash Flows," "Consolidated Statements of Shareholders' Equity,"
"Notes to Consolidated Financial Statements," "Statement of Management
Responsibility" and "Report of Ernst & Young LLP, Independent Auditors" from
the portions of the Company's 1995 Annual Report to shareholders filed as
Exhibit 13 to this Form 10-K is incorporated herein by reference.
The information appearing in the section captioned "Quarterly Results
of Operations" from the portions of the Company's 1995 Annual Report to
shareholders filed as Exhibit 13 to this Form 10-K is incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
-----------------------------------------------------------
This item is not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
---------------------------------------------------
Directors of the Registrant
---------------------------
PRINCIPAL DIRECTOR
NAME OCCUPATION AGE SINCE
- ---- ---------- --- --------
Jennifer S. Braxton ........ Assistant Advertising Director ... 33 1994
Isaac H. Clothier, IV ...... Attorney ......................... 63 1975
Richard H. Hall ............ Retired .......................... 69 1987
Thomas B. Harvey, Jr. ...... Attorney ......................... 60 1988
Anne C. Longstreth ......... Realtor, Emlen Wheeler Co. ....... 74 1984
Paul E. Shipley ............ Retired .......................... 66 1988
David W. Strawbridge ....... Vice President ................... 56 1971
Francis R. Strawbridge, III. Chairman of the Board ............ 58 1968
Peter S. Strawbridge ....... President ........................ 57 1968
Steven L. Strawbridge ...... Vice President, Treasurer
and Secretary .................. 52 1975
Natalie B. Weintraub ....... Retired .......................... 67 1994
Warren W. White ............ Executive Vice President ......... 64 1981
Each of the directors indicated above as being employed by the
Company has been so employed during the past five years. Mr. Harvey is an
attorney and has been in practice since 1963. Until her retirement from the
Company in 1994, Mrs. Weintraub was Vice President and General Merchandise
Manager, Department Stores since 1976. Mr. Clothier has been a partner of
Dechert, Price & Rhoads since 1966. Mr. Shipley retired in 1993 as a Vice
President of Wilmington Trust Company, where he was employed since 1972, and
he continues to be active in civic and community affairs. Until his
retirement from the Company in 1991, Mr. Hall was Executive Vice President,
Control, Operations and Personnel, Department Stores since 1978. Mrs.
Longstreth for 37 years has been a realtor with Emlen Wheeler Co. and is
active in community affairs.
5
<PAGE>
Peter S. Strawbridge and Steven L. Strawbridge are brothers and are
first cousins of Francis R. Strawbridge, III and David W. Strawbridge who also
are brothers. Each is a first cousin of Mr. Harvey and Mr. Shipley who also
are first cousins. Jennifer S. Braxton is the daughter of Peter S.
Strawbridge and the niece of Steven L. Strawbridge.
Francis R. Strawbridge, III is a director of Mellon PSFS. Peter S.
Strawbridge is a director of CoreStates Financial Corp.
The required information as to executive officers is set forth in
Part I hereof and incorporated herein by reference.
Item 11. Executive Compensation.
-----------------------
The following table sets forth certain information concerning
compensation paid for the Company's last three fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------
ALL
OTHER SECURITIES OTHER
NAME AND ANNUAL UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTIONS SATION(1)
- ------------------ ---- -------- ------------ ---------- ---------
Peter S. Strawbridge 1995 $340,000 0 0 $1,219
President and Co-Chief 1994 $310,000 0 0 $1,780
Executive Officer 1993 $310,000 0 0 $2,500
Francis R. Strawbridge, III 1995 $340,000 0 0 $1,108
Chairman of the Board 1994 $300,000 0 0 $1,892
and Co-Chief Executive 1993 $300,000 0 0 $2,458
Officer
Warren W. White
Executive Vice President 1995 $300,000 0 0 $ 921
and General Manager, 1994 $275,000 0 0 $2,079
Clover Stores 1993 $260,000 0 0 $2,167
Robert G. Muskas 1995 $192,500 0 0 $1,000
Executive Vice President 1994 $180,000 0 0 $2,000
for Merchandise and Sales 1993 $180,000 0 0 $1,500
Promotion, Department Stores
Louis F. Busico 1995 $192,000 0 0 $1,025
Vice President and General 1994 $177,000 0 0 $1,975
Merchandise Manager, 1993 $167,000 0 0 $1,392
Clover Stores
_______________
(1) Amounts contributed or accrued by the Company under the Company's
401(k) Retirement Savings Plan.
6
<PAGE>
EMPLOYMENT AGREEMENTS AND CONSULTING ARRANGEMENT
Each of the 20 current executive officers of the Company, who also
are the participants in the Company's Deferred Compensation Plan, has entered
into a three year renewable employment contract with the Company terminable by
either party triannually, which establishes the employee's basic annual rate
of compensation, subject to periodic increases and bonuses. The Company has a
consulting arrangement with G. Stockton Strawbridge, the former Chairman of
the Executive Committee until his retirement from the Company, whereby Mr.
Strawbridge receives $100,000 per annum for consulting services to the
Company. See "Beneficial Ownership of Voting Securities."
DEFERRED COMPENSATION PLAN
The following table illustrates estimated retirement benefits for the
Company's Deferred Compensation Plan members based on years of service with
the Company.
PENSION PLAN TABLE
YEARS OF SERVICE
REMUNERATION 15 20 25 30 35 OR MORE(1)
- ------------ ------- -------- -------- -------- ----------
$125,000 ..... $32,813 $ 43,750 $ 54,688 $ 65,625 $ 75,000
150,000 ..... 39,375 52,500 65,625 78,750 90,000
200,000 ..... 52,500 70,000 87,500 105,000 120,000
250,000 ..... 65,625 87,500 109,375 131,250 150,000
300,000 ..... 78,750 105,000 131,250 157,500 180,000
325,000 ..... 85,313 113,750 142,188 170,625 195,000
350,000 ..... 91,875 122,500 153,125 183,750 210,000
_______________
(1) Based on maximum service credit of 60%.
Strawbridge & Clothier's Deferred Compensation Plan for Key Executive
Employees, as amended and restated effective February 1, 1985, and as further
amended effective as of July 1, 1994 and as of July 1, 1995, provides for the
payment of monthly retirement benefits computed on the basis of 1 3/4% of the
participant's "Average Monthly Earnings" for the 24 month period for which the
participant's total compensation is highest during the 60 months (or during
the actual number of months employed if less than 60) of the participant's
service immediately preceding the participant's retirement (or other
termination) or attaining age 70, whichever shall be earlier, multiplied by
the participant's years of service, with an adjustment by the use of an
actuarial factor for retirement prior to age 65 and after age 60 if service is
less than 15 years on the date of the participant's early retirement and for
retirement prior to age 60 and at or after age 50 with at least 25 years of
service, with an adjustment by the use of an actuarial factor for benefit
commencement prior to age 60. A minimum benefit of 50% of Average Monthly
Earnings (subject to reduction by an actuarial factor for benefit commencement
prior to age 60) will be paid to a participant who has 15 years of service as
a participant under the Plan or who has 20 years of service with the Company
including 10 years of service as a participant under the Plan. For most
participants, retirement benefits under the plan may not exceed 60% of Average
Monthly Earnings. The amounts of each monthly benefit in connection with
retirement, disability or death, and the amounts of minimum and maximum
benefits under the Plan, are subject to reduction by use of an actuarial
formula in the case of any participant who elects, under the Plan's contingent
annuitant option, to provide monthly benefits after the participant's death,
to a contingent annuitant of choice. As of April 1, 1995, the executive
officers named in the compensation table above have the following years of
credited service under the Deferred Compensation Plan: P.S. Strawbridge, 34
1/2 years; F.R. Strawbridge, III, 34 1/2 years; W.W. White, 39 years; R.G.
Muskas, 36 1/2 years; and L.F. Busico, 37 years.
7
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
Set forth in the table below is information concerning individual
grants of stock options made during the fiscal year ended February 3, 1996 to
the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- ---------------------------------------------------------------------------------- --------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- ----------- ------------ ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Peter S. Strawbridge -- -- -- -- -- --
Francis R. Strawbridge, III -- -- -- -- -- --
Warren W. White -- -- -- -- -- --
Robert G. Muskas 5,000 52.6% $18.6875 11/25/06 $58,762 $148,915
Louis F. Busico -- -- -- -- -- --
</TABLE>
Set forth in the table below is information concerning stock options
exercised during the fiscal year ended February 3, 1996 and the value of stock
options held at the end of the fiscal year ended February 3, 1996 by executive
officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END OPTIONS AT FY-END
------------------------- ---------------------- --------------------
SHARES ACQUIRED VALUE EXER- UNEXER- EXER- UNEXER-
NAME ON EXERCISE REALIZED CISABLE CISABLE CISABLE CISABLE
---- --------------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Peter S. Strawbridge 0 $ 0 21,218 0 $ 0 N/A
Francis R. Strawbridge, III 0 0 21,218 0 0 N/A
Warren W. White 0 0 10,609 0 0 N/A
Robert G. Muskas 406 9,643 8,401 0 18,001 N/A
Louis F. Busico 0 0 5,304 0 0 N/A
</TABLE>
8
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
The following table sets forth the shareholdings as of April 11, 1996
of persons owning beneficially more than 5% of the outstanding shares of
Series A Common Stock or Series B Common Stock of the Company, the nominees
and continuing directors, certain executive officers and all executive
officers and directors as a group. As is indicated below, ownership of the
Series B Common Stock, which is convertible at all times into Series A Common
Stock on a share-for-share basis, also is deemed to be beneficial ownership of
Series A Common Stock pursuant to Rule 13d-3 under the Securities Exchange Act
of 1934.
9
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OWNED BENEFICIALLY (1)(2)
-----------------------------------------------------------------
SERIES B SERIES A
COMMON STOCK COMMON STOCK
-------------------------------------------- --------------------
SOLE SHARED PERCENT PERCENT
VOTING VOTING OF VOTING OF
AND OR SERIES B AND SERIES A
NAME AND ADDRESS OF INVESTMENT INVESTMENT COMMON INVESTMENT COMMON
BENEFICIAL OWNER POWER POWER TOTAL STOCK(3) POWER(4) STOCK(5)
- ---------------------------- ---------- ------------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
(6) (7)(8)(9)(10) (10)
G. Stockton Strawbridge..... 275,649 1,137,136 1,412,785 47.1% 5,390 15.6%
801 Market Street
Philadelphia, PA 19107-3199
PNC Bank, National (7)(8)(13) (14)
Association(11)(12)...... 1,190,501 1,190,501 39.7 146,999 15.2
Broad and Chestnut Streets
Philadelphia, PA 19101
(18)
FMR Corp.(17)............... 814,600 10.7
82 Devonshire Street
Boston, MA 02109
(7) (15)
Peter S. Strawbridge........ 18,233 659,453 677,686 22.6 21,885 8.4
801 Market Street
Philadelphia, PA 19107-3199
(8)(10) (10)
Henry M. Clews.............. 481,498 481,498 16.1 5,390 6.0
22A School Street
Hanover, NH 03755
(8)(10) (10)
Christopher S. Clews........ 481,498 481,498 16.1 5,390 6.0
799 South Street
Portsmouth, NH 03801
(16) (15)
Francis R. Strawbridge, III. 33,938 219,701 253,639 8.5 21,882 3.5
801 Market Street
Philadelphia, PA 19107-3199
(6)
Paul E. Shipley............. 79,307 211,557 290,864 9.7 3.7
P.O. Box 4295
Greenville, DE 19807
(16)
Thomas B. Harvey, Jr. ...... 30,292 136,000 166,292 5.5 2.1
40 Cranbury Neck Road
Cranbury, NJ 08512
(13)
Isaac H. Clothier, IV ...... 116,180 101,243 217,423 7.3 7,833 2.9
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103-2793
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OWNED BENEFICIALLY (1)(2)
-----------------------------------------------------------------
SERIES B SERIES A
COMMON STOCK COMMON STOCK
-------------------------------------------- --------------------
SOLE SHARED PERCENT PERCENT
VOTING VOTING OF VOTING OF
AND OR SERIES B AND SERIES A
NAME AND ADDRESS OF INVESTMENT INVESTMENT COMMON INVESTMENT COMMON
BENEFICIAL OWNER POWER POWER TOTAL STOCK(3) POWER(4) STOCK(5)
- ---------------------------- ---------- ------------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS
(15)
Jennifer S. Braxton......... 10 10 176
(13)
Isaac H. Clothier, IV....... 116,180 101,243 217,423 7.3% 7,833 2.9%
Richard H. Hall............. 4,499 4,499 525
(16)
Thomas B. Harvey, Jr. ...... 30,292 136,000 166,292 5.5 2.1
Anne C. Longstreth.......... 18,168 6,325 24,493 33,187
(6)
Paul E. Shipley............. 79,307 211,557 290,864 9.7 3.7
(15)
David W. Strawbridge........ 29,908 29,908 11,099
(16) (15)
Francis R. Strawbridge, III. 33,938 219,701 253,639 8.5 21,882 3.5
(7) (15)
Peter S. Strawbridge........ 18,233 659,453 677,686 22.6 21,885 8.4
(15)
Steven L. Strawbridge....... 22,830 22,830 10,947
Natalie B. Weintraub........ 2,895 2,895 323
(15)
Warren W. White............. 7,288 7,288 11,243
CERTAIN EXECUTIVE
OFFICERS
(15)
Robert G. Muskas............ 1,497 1,497 8,993
(15)
Louis F. Busico............. 2,818 2,818 6,546
All executive officers and
directors as a group (15)
(27 persons)............. 376,097 1,198,279 1,574,376 52.5 241,966 19.4
</TABLE>
11
<PAGE>
(1) Includes, pursuant to Rule 13d-3, shares as to which sole or shared voting
power (which includes the power to vote, or to direct the voting of, such
shares) and/or sole or shared investment power (which includes the power
to dispose, or to direct the disposition, of such shares) is possessed.
Also includes shares subject to stock options as discussed in footnote
(15) below. Does not include any shares as to which neither voting power
nor investment power is possessed, even where the traditional economic
interest in the shares (i.e., the right to receive dividends and the
right to receive proceeds upon sale) is possessed.
(2) The shares of Series B Common Stock beneficially owned by all of the
persons indicated in the table total 2,119,719 shares, which ownership
of Series B Common Stock, together with the 386,522 shares of Series A
Common Stock owned by such persons, represents 56.1% of the combined
voting power of the Series A and Series B Common Stock. In addition,
approximately 758,470 shares of Series B Common Stock are beneficially
owned by other members of the Strawbridge family and the Clothier family
and trusts for their benefit. Such ownership of Series B Common Stock,
together with the approximately 283,634 shares of Series A Common Stock
owned by such family members and trusts, represent 21.0% of the voting
power.
(3) Percentages of less than 1% are not shown. There were 2,997,162 shares of
Series B Common Stock outstanding on April 11, 1996.
(4) The voting and investment power is sole unless otherwise indicated. The
amounts shown do not include shares of Series A Common Stock deemed to be
beneficially owned pursuant to Rule 13d-3 by virtue of ownership of
Series B Common Stock which is convertible on a share-for-share basis
into Series A Common Stock.
(5) The percentages represent the amount owned beneficially which includes
shares of Series A Common Stock deemed to be owned pursuant to Rule 13d-3
by virtue of ownership by the person or group of Series B Common Stock.
The percentages are based on the outstanding shares of Series A Common
Stock (7,617,359 at April 11, 1996), plus the shares of Series B Common
Stock owned beneficially by the person or group. Percentages of less
than 1% are not shown.
(6) Includes 211,001 shares as to which G.S. Strawbridge has sole voting
power and shares investment power with P.E. Shipley.
(7) Includes 655,441 shares as to which G.S. Strawbridge, P.S. Strawbridge
and PNC Bank, National Association share voting and investment power.
(8) Includes 418,825 shares as to which G.S. Strawbridge, H.M. Clews, C.S.
Clews and PNC Bank, National Association share voting and investment
power.
(9) Not included are the 211,001 shares referred to in footnote (6) above.
(10) Includes 62,673 Series B shares and 5,390 Series A shares as to which
G.S. Strawbridge, H.M. Clews and C.S. Clews share voting and
investment power.
(11) The information relating to this person is presented in reliance upon
information set forth in a Schedule 13G filed with the Securities and
Exchange Commission reporting as of December 31, 1995.
(12) Does not include any shares held by the bank in purely custodial
accounts.
(13) Includes 94,302 shares as to which I.H. Clothier, IV and PNC Bank,
National Association share voting and investment power.
12
<PAGE>
(14) With respect to 89,334 of the shares, the voting or investment power is
shared.
(15) The numbers shown include shares of Series A Common Stock owned by the
individual or the members of the group through the Company's 401(k)
Retirement Savings Plan as of March 31, 1996 as follows: F.R.
Strawbridge, III, 656 shares; S.L. Strawbridge, 308 shares; J.S.
Braxton, 84 shares; D.W. Strawbridge, 490 shares; P.S. Strawbridge, 667
shares; W.W. White, 634 shares; R.G. Muskas, 501 shares; L.F. Busico,
477 shares; and all executive officers and directors as a group (21
persons) a total of 8,940 shares. The numbers shown also include
shares of Series A Common Stock which the individual or members of the
group have the right to acquire within 60 days upon the exercise of stock
options, as follows: F.R. Strawbridge, III, 21,218 shares; S.L.
Strawbridge, 10,609 shares; D.W. Strawbridge, 10,609 shares; P.S.
Strawbridge, 21,218 shares; W.W. White, 10,609 shares; R.G. Muskas,
8,401 shares; L.F. Busico, 5,304 shares; and all executive officers and
directors as a group (20 persons) a total of 173,427 shares. In
computing the percent of each series owned by an individual or the group,
the number of shares subject to options held by the individual or the
group are deemed outstanding.
(16) Includes 136,000 shares as to which F.R. Strawbridge, III and T.B.
Harvey, Jr. share voting and investment power with another co-trustee.
(17) The information relating to this person is presented in reliance upon
information set forth in a Schedule 13G filed with the Securities and
Exchange Commission reporting as of February 29, 1996.
(18) FMR Corp. has no power to vote or to direct the vote of 254,300 of the
shares.
Item 13. Certain Relationships and Related Transactions.
-----------------------------------------------
None.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
----------------------------------------------------------------
(a) All financial statements and schedules.
---------------------------------------
A list of the financial statements and supporting schedule included
in this Report appears on page F-1 hereof.
(b) Reports on Form 8-K.
--------------------
No reports on Form 8-K were filed during the last fiscal quarter of
the fiscal year covered by this Report.
(c) Exhibits.
---------
(2.1) Asset Purchase Agreement, dated April 4, 1996, between the
Company and The May Department Stores Company.
(2.2) Asset Option Agreement, dated April 14, 1996, between the
Company, S&C, Cherry Hill, Inc., S&C, Concord, Inc. and The
May Department Stores Company.
(3) (i) Restated Articles of the Company filed on July 28, 1995 with
the Department of State of the Commonwealth of
Pennsylvania.
13
<PAGE>
(ii) By-Laws, effective October 1, 1989, as filed as Exhibit 3(b)
to Form 10-K for the fiscal year ended February 3, 1990, are
incorporated herein by reference.
(4.1) Note Purchase Agreement dated as of November 1, 1977
relating to 8 1/2% Secured Notes of S&C, Center Square,
Inc. due August 1, 2003.*
(4.2) Note Agreement dated November 22, 1985 relating to 11.50%
Senior Notes of Strawbridge & Clothier due November 15,
2000.*
(4.3) Indenture dated as of October 15, 1993 relating to 6 5/8%
Notes of Strawbridge & Clothier due October 15, 2003.*
(4.4) Note Agreement dated September 14, 1989 relating to
Strawbridge & Clothier Senior Notes, 9.20% Series A due
September 30, 2004 and 9.00% Series B due September 30,
1999.*
(4.5) Note Agreement dated October 13, 1992 relating to
Strawbridge & Clothier 7.04% Senior Notes due October 15,
1997.*
(10.1) Deferred Compensation Plan for Key Executive Employees of
Strawbridge & Clothier as amended and restated effective
February 1, 1985, as filed as Exhibit (10) to Form 10-K for
the fiscal year ended February 2, 1985, is incorporated
herein by reference.**
(10.2) 1985 Stock Option Plan of Strawbridge & Clothier as amended
effective February 22, 1989, as filed as Exhibit 10(b) to
Form 10-K for the fiscal year ended January 28, 1989, is
incorporated herein by reference.**
(10.3) 1991 Stock Option Plan of Strawbridge & Clothier, as filed
as Exhibit 10(c) to Form 10-K for the fiscal year ended
February 1, 1992, is incorporated herein by reference.**
(10.4.1) Form of Employment Agreement for executive officers of the
Company as filed as Exhibit 10.4.1 to Form 10-K for the
fiscal year ended January 30, 1993, is incorporated herein
by reference.**
(10.4.2) Schedule of certain terms of Employment Agreements for the
executive officers named in the Company's Summary
Compensation Table for the fiscal year ended February 3,
1996.**
(10.4.3) Form of Supplemental Agreement for the executive officers of
the Company.**
(10.4.4) Form of Supplemental Employment Agreement to Employment
Agreement for the executive officers of the Company.**
- ------------
* Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the document listed
is not filed with this Report. Registrant agrees to furnish a copy
of such document to the Commission upon request.
** Management contract or compensatory plan or arrangement required to be
filed or incorporated by reference as an exhibit.
14
<PAGE>
(10.5) Strawbridge & Clothier Separation Pay Plan dated as of
February 26, 1996.**
(10.6) Amended and Restated Receivables Purchase Agreement, dated
as of November 20, 1995, among the Company, S&C, Funding,
Inc., Market Street Capital Corp. and PNC Bank, National
Association.
(10.7) Credit Agreement, dated as of November 21, 1995, among the
Company, certain banks party thereto and PNC Bank, National
Association as Administrative Agent and CoreStates Bank,
N.A. and First Fidelity Bank, N.A. as Co-Agents.
(10.7.1) Waiver and First Amendment to the Credit Agreement dated as
of December 20, 1995.
(11) Statement re: Computation of per share earnings.
(13) Portions of the 1995 Annual Report to Shareholders, included
as part of this Report.
(21) Subsidiaries of Strawbridge & Clothier.
(23) Consent of Ernst & Young LLP, Independent Auditors.
(27) Financial Data Schedule.
(99) Press Release, dated April 4, 1996, issued by the Company.
15
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
STRAWBRIDGE & CLOTHIER
(Registrant)
By /s/Francis R. Strawbridge, III
------------------------------------
Francis R. Strawbridge, III
Chairman of the Board
Dated: May 1, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/Francis R. Strawbridge, III May 1, 1996
------------------------------------
Francis R. Strawbridge, III
Director and Chairman of the Board
(co-principal executive officer)
/s/Peter S. Strawbridge May 1, 1996
------------------------------------
Peter S. Strawbridge
Director and President
(co-principal executive officer)
/s/Warren W. White May 1, 1996
------------------------------------
Warren W. White
Director and Executive Vice President
/s/Steven L. Strawbridge May 1, 1996
------------------------------------
Steven L. Strawbridge
Director, Vice President,
Treasurer and Secretary
(principal financial officer)
/s/David W. Strawbridge May 1, 1996
------------------------------------
David W. Strawbridge
Director and Vice President
/s/Thomas S. Rittenhouse May 1, 1996
------------------------------------
Thomas S. Rittenhouse
Vice President-Operations,
Administration & Controller
(principal accounting officer)
S-1
<PAGE>
/s/Jennifer S. Braxton May 1, 1996
------------------------------------
Jennifer S. Braxton
Director
/s/Isaac H. Clothier, IV May 1, 1996
------------------------------------
Isaac H. Clothier, IV
Director
/s/Richard H. Hall May 1, 1996
------------------------------------
Richard H. Hall
Director
/s/Thomas B. Harvey, Jr. May 1, 1996
------------------------------------
Thomas B. Harvey, Jr.
Director
/s/Anne C. Longstreth May 1, 1996
------------------------------------
Anne C. Longstreth
Director
/s/Paul E. Shipley May 1, 1996
------------------------------------
Paul E. Shipley
Director
/s/Natalie B. Weintraub May 1, 1996
------------------------------------
Natalie B. Weintraub
Director
S-2
<PAGE>
FORM 10-K -- ITEM 14(a)(1) and (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
The following consolidated financial statements of Strawbridge & Clothier and
subsidiaries and the report of independent auditors thereon and a statement of
management responsibility, included in the 1995 Annual Report to shareholders,
are incorporated by reference in Item 8:
Consolidated Statements of Operations--Fiscal years ended February 3,
1996, January 28, 1995 and January 29, 1994
Consolidated Balance Sheets--February 3, 1996 and January 28, 1995
Consolidated Statements of Cash Flows--Fiscal years ended February 3,
1996, January 28, 1995 and January 29, 1994
Consolidated Statements of Shareholders' Equity--Fiscal years ended
February 3, 1996, January 28, 1995 and January 29, 1994
Notes to Consolidated Financial Statements
The following consolidated financial statement schedule of Strawbridge &
Clothier and subsidiaries is included herein:
Schedule II--Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
F-1
<PAGE>
Exhibit Index
Exhibit No. Page No.
(2.1) Asset Purchase Agreement, dated April 4, 1996, between
the Company and The May Department Stores Company.
(2.2) Asset Option Agreement, dated April 4, 1996, between
the Company, S&C, Cherry Hill, Inc., S&C, Concord, Inc.
and The May Department Stores Company.
(3)(i) Restated Articles of the Company filed on July 28, 1995
with the Department of State of the Commonwealth of
Pennsylvania.
(10.4.2) Schedule of certain terms of Employment Agreements for
the executive officers named in the Company's Summary
Compensation Table for the fiscal year ended February
3, 1996.
(10.4.3) Form of Supplemental Agreement for the executive officers
of the Company.**
(10.4.4) Form of Supplemental Agreement to the Employment Agreement
for the executive officers of the Company.**
(10.5) Strawbridge & Clothier Separation Pay Plan dated as
of February 26, 1996.**
(10.6) Amended and Restated Receivables Purchase Agreement,
dated as of November 20, 1995, among the Company,
S&C, Funding, Inc., Market Street Capital Corp. and
PNC Bank, National Association.
(10.7) Credit Agreement, dated as of November 21, 1995,
among the Company, certain banks party thereto
and PNC Bank, National Association as Administrative
Agent and CoreStates Bank, N.A. and First Fidelity
Bank, N.A. as Co-Agents.
(10.7.1) Waiver and First Amendment to the Credit Agreement
dated as of December 20, 1995.
(11) Statement re: Computation of per share earnings.
(13) Portions of the 1995 Annual Report to Shareholders,
included as part of this Report.
(21) Subsidiaries of Strawbridge & Clothier.
(23) Consent of Ernst & Young LLP, Independent Auditors.
<PAGE>
(27) Financial Data Schedule.
(99) Press Release, dated April 14, 1996, issued by the
Company.
<PAGE>
<TABLE>
<CAPTION>
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
- --------------------------------------------------------------------------------------------------------
COL. A | COL. B | COL. C | COL. D | COL. E
- -----------------------------------|------------|-----------------------------|--------------|----------
| | ADDITIONS | |
| |-----------------------------| |
| | (1) (2) | |
| | Charged Charged | |
DESCRIPTION | Balance at | to Costs to Other | | Balance
| Beginning | and Accounts-- | Deductions-- | at End
| of Period | Expenses Describe | Describe | of Period
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fiscal year ended February 3, 1996:
- -----------------------------------
Reserves and allowances
deducted from asset accounts:
Allowance for doubtful accounts $5,544 $14,177 $-0- $17,781(1)(2) $1,940
====== ======= ==== ======= ======
Fiscal year ended January 28, 1995:
- -----------------------------------
Reserves and allowances
deducted from asset accounts:
Allowance for doubtful accounts $5,000 $10,281 $-0- $ 9,737(1)(3) $5,544
====== ======= ==== ======= ======
Fiscal year ended January 29, 1994:
- -----------------------------------
Reserves and allowances
deducted from asset accounts:
Allowance for doubtful accounts $5,000 $ 4,724 $-0- $ 4,724(1) $5,000
====== ======= ==== ======= ======
(1) Accounts written off during year, net of recoveries.
(2) Includes $7,560 reclassified to accrued expenses to provide for estimated
recourse obligations on accounts receivable sold.
(3) Includes $1,756 reclassified to accrued expenses to provide for estimated
recourse obligations on accounts receivable sold.
</TABLE>
Exhibit 2.1
ASSET PURCHASE AGREEMENT
BETWEEN
THE MAY DEPARTMENT STORES COMPANY
AND
STRAWBRIDGE & CLOTHIER
DATED AS OF APRIL 4, 1996
=============================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 "Accounts Receivable" . . . . . . . . . . 2
Section 1.2 "Affiliates" . . . . . . . . . . . . . . 2
Section 1.3 "Aged Department Store Inventory" . . . . 2
Section 1.4 "Alternative Transaction" . . . . . . . . 3
Section 1.5 "Assumed Department Store Liabilities" . 3
Section 1.6 "Assumed Long-Term Liabilities Amount" . 4
Section 1.7 "Bill of Sale" . . . . . . . . . . . . . 4
Section 1.8 "Business Day" . . . . . . . . . . . . . 4
Section 1.9 "Buyer Filings" . . . . . . . . . . . . . 4
Section 1.10 "Buyer Financial Statements". . . . . . . 4
Section 1.11 "Buyer Registration Statement" . . . . . 5
Section 1.12 "Closing Balance Sheet Accounts
Receivable Amount" . . . . . . . . . . 5
Section 1.13 "Closing Balance Sheet Cash Amount" . . . 5
Section 1.14 "Closing Balance Sheet Inventory Amount". 5
Section 1.15 "Closing Balance Sheet Net Working
Capital Amount" . . . . . . . . . . . 5
Section 1.16 "Closing Balance Sheet Payables Amount" . 6
Section 1.17 "Closing Cash Transfer" . . . . . . . . . 6
Section 1.18 "Closing Settlement Schedule" . . . . . . 6
Section 1.19 "Code". . . . . . . . . . . . . . . . . . 6
Section 1.20 "Cost Complement" . . . . . . . . . . . . 6
Section 1.21 "Department Store Assets" . . . . . . . . 6
Section 1.22 "Department Store Cash" . . . . . . . . . 7
Section 1.23 "Department Store Contracts". . . . . . . 7
Section 1.24 "Department Store Distribution Centers" . 8
Section 1.25 "Department Store Division" . . . . . . . 8
Section 1.26 "Department Store Division Balance Sheet" 8
Section 1.27 "Department Store Equipment, Machinery
and Fixtures" . . . . . . . . . . . . 8
Section 1.28 "Department Store Files and Records". . . 8
Section 1.29 "Department Store Intellectual Property". 8
Section 1.30 "Department Store Inventory". . . . . . . 9
Section 1.31 "Department Store Land" . . . . . . . . . 9
Section 1.32 "Department Store Leases" . . . . . . . . 9
Section 1.33 "Department Store Leased Real Property" . 9
Section 1.34 "Department Store Merchandise on Order" . 10
Section 1.35 "Department Store Premises" . . . . . . . 10
Section 1.36 "Department Store Purchase Orders". . . . 10
Section 1.37 "Department Store Real Property". . . . . 10
Section 1.38 "Department Stores" . . . . . . . . . . . 10
Section 1.39 "Department Store Space Leases" . . . . . 10
Section 1.40 "Department Store Subsidiaries" . . . . . 10
Section 1.41 "Disposition Proceeds". . . . . . . . . . 10
Section 1.42 "Effective Time". . . . . . . . . . . . . 11
Section 1.43 "Employee Benefit Plan" . . . . . . . . . 11
Section 1.44 "Employee Pension Benefit Plan" . . . . . 11
Section 1.45 "Employee Welfare Benefit Plan" . . . . . 11
Section 1.46 "ERISA" . . . . . . . . . . . . . . . . . 11
Section 1.47 "Escrow Agent". . . . . . . . . . . . . . 11
(1)
<PAGE>
Section 1.48 "Escrow Agreement". . . . . . . . . . . . 11
Section 1.49 "Escrowed Stock Consideration". . . . . . 11
Section 1.50 "Excluded Assets" . . . . . . . . . . . . 11
Section 1.51 "Excluded Liabilities". . . . . . . . . . 12
Section 1.52 "Face Amount" . . . . . . . . . . . . . . 14
Section 1.53 "First Closing" . . . . . . . . . . . . . 15
Section 1.54 "First Closing Date". . . . . . . . . . . 15
Section 1.55 "First Closing Estimated Stock Delivery". 15
Section 1.56 "First Closing Stock Consideration" . . . 15
Section 1.57 "GAAP". . . . . . . . . . . . . . . . . . 15
Section 1.58 "Government" . . . . . . . . . . . . . . 15
Section 1.59 "HSR Act" . . . . . . . . . . . . . . . . 15
Section 1.60 "Improvements". . . . . . . . . . . . . . 16
Section 1.61 "Inventory Date". . . . . . . . . . . . . 16
Section 1.62 "Licenses and Permits". . . . . . . . . . 16
Section 1.63 "Lien" . . . . . . . . . . . . . . . . . 16
Section 1.64 "Material Adverse Effect" . . . . . . . . 16
Section 1.65 "May Common Stock". . . . . . . . . . . . 16
Section 1.66 "Multiemployer Plan". . . . . . . . . . . 17
Section 1.67 "NYSE". . . . . . . . . . . . . . . . . . 17
Section 1.68 "Other Department Store Contracts". . . . 17
Section 1.69 "P&L Accounts". . . . . . . . . . . . . . 17
Section 1.70 "PBGC". . . . . . . . . . . . . . . . . . 17
Section 1.71 "Permitted Encumbrances" . . . . . . . . 17
Section 1.72 "Person". . . . . . . . . . . . . . . . . 17
Section 1.73 "Preliminary Closing Date Balance Sheet". 18
Section 1.74 "Pro Forma Department Store Division
Financial Statements" . . . . . . . . 18
Section 1.75 "Proxy Statement/Prospectus". . . . . . . 18
Section 1.76 "Reorganization". . . . . . . . . . . . . 18
Section 1.77 "SEC" . . . . . . . . . . . . . . . . . . 18
Section 1.78 "Second Closing". . . . . . . . . . . . . 18
Section 1.79 "Second Closing Cash Amount". . . . . . . 18
Section 1.80 "Second Closing Date" . . . . . . . . . . 18
Section 1.81 "Second Closing May Stock Price". . . . . 19
Section 1.82 "Second Closing Stock Consideration". . . 19
Section 1.83 "Securities Act". . . . . . . . . . . . . 19
Section 1.84 "Securities Exchange Act" . . . . . . . . 19
Section 1.85 "Seller Common Stock" . . . . . . . . . . 19
Section 1.86 "Seller Filings". . . . . . . . . . . . . 19
Section 1.87 "Seller Financial Statements" . . . . . . 19
Section 1.88 "Seller Series A Common Stock". . . . . . 19
Section 1.89 "Seller Series B Common Stock". . . . . . 20
Section 1.90 "Sellers" . . . . . . . . . . . . . . . . 20
Section 1.91 "Significant Subsidiary". . . . . . . . . 20
Section 1.92 "Stock Consideration" . . . . . . . . . . 20
Section 1.93 "Subsidiaries". . . . . . . . . . . . . . 20
Section 1.94 "Taxes" . . . . . . . . . . . . . . . . . 20
Section 1.95 "Tax Returns" . . . . . . . . . . . . . . 20
Section 1.96 "Ticketed Retail Price" . . . . . . . . . 20
Section 1.97 "Trading Day" . . . . . . . . . . . . . . 21
Section 1.98 "Transferring Employees". . . . . . . . . 21
Section 1.99 "WARN". . . . . . . . . . . . . . . . . . 21
(2)
<PAGE>
ARTICLE II
PURCHASE AND SALE; THE FIRST CLOSING . . . . . . . . . . . . . 21
Section 2.1 Purchase and Sale of the Department
Store Assets . . . . . . . . . . . . . 21
Section 2.2 Consideration for the Department
Store Assets . . . . . . . . . . . . . 22
Section 2.3 Time and Place of First Closing . . . . . 22
Section 2.4 Deliveries by the Seller . . . . . . . . 22
Section 2.5 Deliveries by the Buyer . . . . . . . . . 24
Section 2.6 Escrow Deliveries . . . . . . . . . . . . 24
Section 2.7 Escrow . . . . . . . . . . . . . . . . . 24
Section 2.8 Purchase Price Adjustment . . . . . . . . 24
ARTICLE III
THE SECOND CLOSING. . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.1 Purchase and Sale of the Second Closing
Cash Amount . . . . . . . . . . . . . 29
Section 3.2 Consideration for the Second Closing
Cash Amount . . . . . . . . . . . . . 29
Section 3.3 Time and Place of Second Closing . . . . 29
Section 3.4 Deliveries by the Seller . . . . . . . . 29
Section 3.5 Deliveries by the Buyer . . . . . . . . . 30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER. . . . . . . . . . 30
Section 4.1 Corporate Organization . . . . . . . . . 30
Section 4.2 Due Authorization . . . . . . . . . . . . 30
Section 4.3 Department Store Subsidiaries Stock . . . 31
Section 4.4 Consents and Approvals; No Violation . . 31
Section 4.5 Financial Statements; SEC Filings . . . . 32
Section 4.6 Absence of Changes . . . . . . . . . . . 33
Section 4.7 Absence of Undisclosed Liabilities . . . 33
Section 4.8 Litigation . . . . . . . . . . . . . . . 34
Section 4.9 Taxes . . . . . . . . . . . . . . . . . . 34
Section 4.10 Title and Related Matters . . . . . . . . 35
Section 4.11 Department Store Leases . . . . . . . . . 36
Section 4.12 Other Department Store Contracts. . . . . 36
Section 4.13 Department Store Inventory. . . . . . . . 37
Section 4.14 Department Store Intellectual Property. . 37
Section 4.15 Employee Benefit Plans. . . . . . . . . . 37
Section 4.16 Employment and Severance Agreements . . . 40
Section 4.17 Accounts Receivable . . . . . . . . . . . 40
Section 4.18 Assets Necessary to the Business. . . . . 40
Section 4.19 Proxy Statement/Prospectus; Registration
Statement . . . . . . . . . . . . . . 40
Section 4.20 Brokers and Finders . . . . . . . . . . . 41
Section 4.21 Pennsylvania Business Corporation Law . . 41
Section 4.22 Voting Requirement. . . . . . . . . . . . 41
Section 4.23 Labor Matters . . . . . . . . . . . . . . 41
Section 4.24 Insurance . . . . . . . . . . . . . . . . 42
Section 4.25 Environmental . . . . . . . . . . . . . . 42
(3)
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER . . . . . . . . . . 43
Section 5.1 Corporate Organization . . . . . . . . . 43
Section 5.2 Capitalization . . . . . . . . . . . . . 43
Section 5.3 Subsidiaries Stock; Significant
Subsidiaries . . . . . . . . . . . . 44
Section 5.4 Due Authorization . . . . . . . . . . . . 44
Section 5.5 Consents and Approvals; No Violation . . 45
Section 5.6 Financial Statements; SEC Filings . . . . 45
Section 5.7 Absence of Changes . . . . . . . . . . . 46
Section 5.8 Absence of Undisclosed Liabilities . . . 47
Section 5.9 Litigation . . . . . . . . . . . . . . . 47
Section 5.10 Taxes . . . . . . . . . . . . . . . . . . 47
Section 5.11 Employee Benefit Plans. . . . . . . . . . 48
Section 5.12 Proxy Statement/Prospectus; Registration
Statement . . . . . . . . . . . . . . 50
Section 5.13 Brokers and Finders . . . . . . . . . . . 50
Section 5.14 Ownership of Seller Common Stock. . . . . 50
ARTICLE VI
COVENANTS OF THE PARTIES. . . . . . . . . . . . . . . . . . . . 51
Section 6.1 Conduct of Business of the Department
Store Division . . . . . . . . . . . . 51
Section 6.2 Disposition of the Excluded Assets. . . . 56
Section 6.3 Access and Investigation. . . . . . . . . 56
Section 6.4 Proxy Statement/Prospectus; Buyer
Registration Statement . . . . . . . . 57
Section 6.5 Shareholder Meeting . . . . . . . . . . . 59
Section 6.6 Acquisition Proposals . . . . . . . . . . 59
Section 6.7 Consents. . . . . . . . . . . . . . . . . 59
Section 6.8 Filings . . . . . . . . . . . . . . . . . 60
Section 6.9 Best Efforts; Further Assurances. . . . . 60
Section 6.10 Publicity . . . . . . . . . . . . . . . . 60
Section 6.11 Collective Bargaining Agreements. . . . . 61
Section 6.12 NYSE Listing. . . . . . . . . . . . . . . 61
Section 6.13 Dissolution; Dissolution Escrow and Trust 61
Section 6.14 Sales and Transfer Taxes. . . . . . . . . 62
Section 6.15 Use of Name . . . . . . . . . . . . . . . 63
Section 6.16 Temporary Use of Corporate Offices. . . . 63
Section 6.17 Temporary Continuation of R.D.I. Contract 64
Section 6.18 Island Avenue Condemnation. . . . . . . . 64
Section 6.19 Department Store Space Leases . . . . . . 64
ARTICLE VII
EMPLOYEES AND EMPLOYEE PLANS. . . . . . . . . . . . . . . . . . 65
Section 7.1 Offer of Employment . . . . . . . . . . . 65
Section 7.2 Collective Bargaining Agreements. . . . . 66
Section 7.3 Severance Plans . . . . . . . . . . . . . 66
Section 7.4 Employee Benefit Plans. . . . . . . . . . 66
Section 7.5 Retirement Savings Plan and Pension
Benefit Plan . . . . . . . . . . . . . 68
Section 7.6 Supplemental Executive Retirement Plan. . 70
(4)
<PAGE>
Section 7.7 Retiree Health Plan . . . . . . . . . . . 71
Section 7.8 Consulting Contracts. . . . . . . . . . . 71
ARTICLE VIII
CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 8.1 Conditions to the Obligations of Each
Party to Effect the Acquisition. . . . 72
Section 8.2 Additional Conditions to the Obligations
of the Seller. . . . . . . . . . . . . 73
Section 8.3 Additional Conditions to the Obligations
of the Buyer . . . . . . . . . . . . . 73
ARTICLE IX
TERMINATION AND ABANDONMENT . . . . . . . . . . . . . . . . . . 75
Section 9.1 Termination . . . . . . . . . . . . . . . 75
Section 9.2 Procedure and Effect of Termination . . . 76
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 10.1 Survival of Representations and
Warranties . . . . . . . . . . . . . 76
Section 10.2 Costs and Expenses . . . . . . . . . . . 76
Section 10.3 Notices. . . . . . . . . . . . . . . . . 76
Section 10.4 Amendment. . . . . . . . . . . . . . . . 77
Section 10.5 Entire Agreement . . . . . . . . . . . . 78
Section 10.6 Counterparts . . . . . . . . . . . . . . 78
Section 10.7 Applicable Law . . . . . . . . . . . . . 78
Section 10.8 Descriptive Headings . . . . . . . . . . 78
Section 10.9 Assignment . . . . . . . . . . . . . . . 78
Section 10.10 Validity . . . . . . . . . . . . . . . . 78
Section 10.11 Specific Performance . . . . . . . . . . 78
Section 10.12 No Third Party Beneficiary . . . . . . . 79
(5)
<PAGE>
ASSET PURCHASE AGREEMENT, dated as of April 4, 1996 (the
"Agreement"), between The May Department Stores Company, a New York
corporation (the "Buyer"), and Strawbridge & Clothier, a Pennsylvania
corporation (the "Seller").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Seller is engaged in the business of operating
department stores and discount stores;
WHEREAS, the Buyer desires to purchase from the Seller the
Department Store Assets and is willing to acquire the Disposition Proceeds;
WHEREAS, prior to the First Closing of the transactions contemplated
herein and during the twelve month period following the First Closing Date,
the Seller intends to sell or otherwise dispose of the Excluded Assets through
one or more asset sale transactions (the "Disposition");
WHEREAS, the Seller is willing to transfer to the Buyer the
Department Store Assets and some or all of the Disposition Proceeds in
exchange for the assumption by the Buyer of the Assumed Department Store
Liabilities and the issuance and delivery by the Buyer of the Stock
Consideration;
WHEREAS, pursuant to this Agreement, the Buyer and the Seller
propose to effect a tax-free reorganization under Section 368(a)(1)(C) of the
Code, whereby (i) at the First Closing, the Seller will transfer to the Buyer
the Department Store Assets and a portion of the proceeds from the
Disposition, and in consideration therefor, the Buyer will assume the Assumed
Department Store Liabilities and issue and deliver to the Seller a portion of
the Stock Consideration, (ii) within 12 months following the First Closing
Date the Seller will transfer the remainder of the proceeds from the
Disposition to the Buyer in exchange for the balance of the Stock
Consideration, and (iii) not later than the first anniversary of the First
Closing Date, the Seller will dissolve, and pursuant to the dissolution and as
a part of the Reorganization, will distribute to the holders of Seller Common
Stock the shares received as the Stock Consideration and any other remaining
assets of the Seller that have not been transferred to the Buyer pursuant to
this Agreement, subject to an escrow and other arrangements that adequately
provide for the payment of all liabilities of the Seller as provided in
Section 6.13 of this Agreement;
1
<PAGE>
WHEREAS, this Agreement is intended to constitute the plan of
reorganization pursuant to which the Reorganization under Section 368(a)(1)(C)
is effected; and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to the Buyer's willingness to
enter into this Agreement, the Seller and the Buyer have entered into an asset
option agreement in the form attached hereto as Exhibit A (the "Option
Agreement");
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, covenants, agreements and conditions
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, each of the following terms shall have
the following meaning:
Section 1.1 "ACCOUNTS RECEIVABLE" shall mean all of the proprietary
credit card accounts of the Sellers (as defined in Section 1.90) with retail
customers for retail purchases on credit, including without limitation, all
such accounts that are P&L Accounts or may have been assigned, transferred or
conveyed, in whole or in part, by the Sellers for financing purposes.
Section 1.2 "AFFILIATES" shall mean, with respect to any Person, any
other Person directly or indirectly controlling, controlled by or under direct
or indirect common control with such Person.
Section 1.3 "AGED DEPARTMENT STORE INVENTORY" shall mean all
Department Store Inventory last received by the Seller more than six (6)
months prior to the Inventory Date, except that, as to Department Store
Inventory in the departments listed on Schedule 1.3 (the "Extended Age
Departments"), it shall mean last received more than 12 months but less than
24 months prior to the Inventory Date.
2
<PAGE>
Section 1.4 "ALTERNATIVE TRANSACTION" shall mean any proposal or
offer, other than a proposal or offer by the Buyer or any of its Affiliates,
for a tender or exchange offer, a merger, consolidation or other business
combination transaction which would involve or otherwise affect the Department
Store Assets or any proposal or offer to acquire in any manner all or any
portion of the Department Store Assets.
Section 1.5 "ASSUMED DEPARTMENT STORE LIABILITIES" shall mean:
(a) the outstanding principal balance, as of the Effective
Time, under the Seller's 9.2% Series A Senior Notes due 2004;
(b) the outstanding principal balance, as of the Effective
Time, under the Seller's 9.0% Series B Senior Notes due 1999;
(c) the outstanding principal balance, as of the Effective
Time, under the Seller's 7.04% Allstate Senior Notes due 1997;
(d) the outstanding principal balance, as of the Effective
Time, under the Seller's 10.00% Michael Reich Mortgage Note due 2007 ;
(e) the outstanding principal balance, as of the Effective
Time, under the Seller's 8.75% S&C Echelon Equitable Mortgage Note due 1997;
(f) the outstanding principal balance, as of the Effective
Time, under the Seller's 6 5/8% Notes due 2003;
(g) the accounts receivable facility payment necessary to cause
all Accounts Receivable in which PNC has any interest to be transferred to the
Buyers free of Lien at the First Closing;
(h) the liabilities, obligations and duties of the Sellers
accruing and arising after the Effective Time under the Department Store
Contracts; and
(i) other liabilities, obligations and duties of the Sellers
(including those being assumed by the Buyer pursuant to Article VII) to the
extent included in the Closing Balance Sheet Net Working Capital Amount.
Section 1.6 "ASSUMED LONG-TERM LIABILITIES AMOUNT" shall mean the
sum of (a) the aggregate outstanding principal amount as of the Effective
Time, of the obligations described in paragraphs (a) through (e) of Section
1.5, increased by
3
<PAGE>
the prepayment penalties, make whole/yield maintenance premiums and other
prepayment charges, if any, computed as of the Effective Time, that
would be required to be paid for such obligations pursuant to the terms
thereof if the Buyer were to elect to prepay them as of the Effective Time;
plus (b) the amount, computed as of the Effective Time, that would be required
to be deposited with the trustee of the obligation described in paragraph (f)
of Section 1.5 were the Buyer to elect to fully defease such obligation as of
the Effective Time, including all fees, costs and expenses of the trustee or
otherwise under such indenture, plus $40,000; plus (c) the amount necessary to
cause all Accounts Receivable not owned by the Sellers free of Lien as
described in paragraph (g) of Section 1.5 to be transferred to the Buyer free
of Lien and other obligations at the First Closing; plus (d) the present value
(using an annual discount rate of 9%) of all rental payments required under
the Department Store Leases for (i) if the remaining years of the existing
term are 25 or more, the existing term or (ii) if the remaining years of the
existing term are less than 25, the remaining years of the existing term and
all renewal options which would extend each of the Department Store Leases to
at least 25 years. The calculation of the Assumed Long-Term Liabilities
Amount shall be set forth on Schedule 1.6.
Section 1.7 "BILL OF SALE" shall mean the bill of sale substantially
in the form of Schedule 1.7.
Section 1.8 "BUSINESS DAY" shall mean any day other than Saturday,
Sunday and any day which is a legal holiday or a day on which banking
institutions in New York City are authorized by law or other governmental
action to close.
Section 1.9 "BUYER FILINGS" shall mean the filings made by the Buyer
or any Subsidiaries of the Buyer with the SEC referred to in Section 5.6(b).
Section 1.10 "BUYER FINANCIAL STATEMENTS" shall mean the
consolidated balance sheets of the Buyer and its Subsidiaries as of January
28, 1995 and January 29, 1994, and the related consolidated statements of
earnings and consolidated statements of cash flows for each of the three
fiscal years ended January 28, 1995, January 29, 1994 and January 30, 1993,
incorporated by reference in the Annual Report on Form 10-K of the Buyer for
the fiscal year ended January 28, 1995, as filed with the SEC and the
unaudited condensed consolidated balance sheet of the Buyer as of October 28,
1995, and the related unaudited condensed consolidated statements of earnings
for the 13 and 39 weeks ended October 28, 1995 and the unaudited consolidated
statement of cash flows for the 39 week periods respectively then ended
included in the Quarterly Report on Form 10-Q for the quarterly period ended
October 28, 1995, as filed with the SEC.
4
<PAGE>
Section 1.11 "BUYER REGISTRATION STATEMENT" shall mean the
Registration Statement on Form S-4 to be filed with the SEC by the Buyer in
connection with the issuance of the Stock Consideration.
Section 1.12 "CLOSING BALANCE SHEET ACCOUNTS RECEIVABLE AMOUNT"
shall mean the Face Amount of the accounts included in the Accounts Receivable
(other than P&L Accounts) multiplied by (a) 93% where the Face Amount of the
account does not reflect any amount that is 90 days or more past due, (b) 40%,
where the Face Amount of the account reflects any amount that is 90 days to
209 days past due, and (c) 20% where the Face Amount of the account reflects
any amount that is 210 days or more past due. No amount shall be included in
the Closing Settlement Schedule for P&L Accounts.
Section 1.13 "CLOSING BALANCE SHEET CASH AMOUNT" shall mean the
amount of the Closing Cash Transfer plus the Department Store Cash.
Section 1.14 "CLOSING BALANCE SHEET INVENTORY AMOUNT" means the
amount calculated, as of the Effective Time, by multiplying the Ticketed
Retail Price for all Department Store Inventory (except as provided in the
next sentence) by the corresponding Cost Complement on a first-in, first-out
basis. The Closing Balance Sheet Inventory Amount for each item of (a) Aged
Department Store Inventory shall be equal to 50% of the Closing Balance Sheet
Inventory Amount as otherwise would be calculated for such item in the
preceding sentence, (b) floor sample Department Store Inventory in the
Extended Age Departments noted with an asterisk on Schedule 1.3 shall be
reduced (or further reduced, as the case may be) by 20% of the Closing Balance
Sheet Inventory Amount as otherwise would be calculated for such floor sample
in this Section 1.14, and (c) Department Store Inventory received 24 months or
more prior to the Inventory Date shall be zero.
Section 1.15 "CLOSING BALANCE SHEET NET WORKING CAPITAL AMOUNT"
shall mean the net working capital amount of the Department Store Division, as
of the Effective Time, derived from the calculation prescribed in Schedule
1.15.
Section 1.16 "CLOSING BALANCE SHEET PAYABLES AMOUNT" shall mean the
amount payable, as of the Effective Time, by the Seller in respect of the
Department Store Division for the purchase of goods or services in the
ordinary course of business and reflected on the Closing Settlement Schedule
in accordance with GAAP.
5
<PAGE>
Section 1.17 "CLOSING CASH TRANSFER" shall mean that amount of cash,
if any, which is wire transferred by the Seller to the Buyer at the Effective
Time pursuant to Section 2.4(a). The Seller shall have the right in its sole
discretion to fix such amount, if any, but shall be obligated to establish
such amount by notice to the Buyer delivered pursuant to this Agreement not
later than 5 Business Days prior to the First Closing Date, and if such notice
is not so delivered then such amount shall be zero.
Section 1.18 "CLOSING SETTLEMENT SCHEDULE" shall have the meaning
prescribed in Section 2.8(c).
Section 1.19 "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
Section 1.20 "COST COMPLEMENT" shall mean the "Applicable Cumulative
Cost" to original retail price (plus any additional markup) relationship for
goods purchased during the year-to-date fiscal period ending immediately prior
to the Inventory Date as reflected on the Department Store Division's books
and records on a first-in, first-out basis. The "Applicable Cumulative Cost"
means invoice cost less cash discount taken plus freight costs from the vendor
to the Department Store Distribution Centers. The Cost Complement shall be
calculated on a Department Store Division departmental basis, in accordance
with the retail method of accounting for merchandise inventory and cost
determination and in accordance with GAAP, but excluding any internal loads
and charges (such as advertising loads) and capitalized inventory costs, and
reduced by all rebates, credits, allowances and discounts (such as cash
discounts and cash discount loads).
Section 1.21 "DEPARTMENT STORE ASSETS" shall mean:
(a) the Closing Balance Sheet Cash Amount;
(b) the Accounts Receivable;
(c) the Department Store Equipment, Machinery and Fixtures;
(d) the Department Store Files and Records;
(e) the Department Store Intellectual Property;
(f) the Department Store Inventory;
6
<PAGE>
(g) the Department Store Premises;
(h) the rights to $9.2 million (no less, no more) of award and
proceeds from the condemnation of the Seller's distribution center at 4800
South Island Avenue, Philadelphia, Pennsylvania, and which, if paid in whole
or in part to the Sellers, at any time, shall be delivered by the Seller to
the Buyer on the later of the First Closing or the date received by the
Sellers, and shall not be included in the Closing Settlement Schedule nor in
the Second Closing Cash Amount;
(i) the good will of the business of the Department Store
Division; and
(j) all other property and assets reflected in the Department
Store Division Balance Sheet, plus all items of a nature customarily carried
as assets for the Department Store Division which have been or will be
acquired in the ordinary course of business by the Department Store Division
between the date of the Department Store Division Balance Sheet and the
Effective Time, less any items which have been or, subject to Section 6.1,
will be disposed of or consumed in the ordinary course of business by the
Department Store Division between the date of the Department Store Division
Balance Sheet and the Effective Time.
Section 1.22 "DEPARTMENT STORE CASH" shall mean the amount of cash
actually held in the Department Stores at the Effective Time, plus the amount
of prepaid postage in postage meters in the Department Stores at the Effective
Time.
Section 1.23 "DEPARTMENT STORE CONTRACTS" shall mean the Department
Store Leases, the Department Store Space Leases and the Other Department Store
Contracts.
Section 1.24 "DEPARTMENT STORE DISTRIBUTION CENTERS" shall mean the
distribution centers for the Department Store Division, all of which are
described on Schedule 1.24.
Section 1.25 "DEPARTMENT STORE DIVISION" shall mean the business
activities and operations conducted by the department store division of the
Seller and shall include all of the Seller's department store business
activities and operations conducted by the Seller or the Department Store
Subsidiaries; and shall specifically exclude the Hopewell vacant land and,
except for the Accounts Receivable, all business activities and operations of
the Seller's discount store operations under the name "Clover."
7
<PAGE>
Section 1.26 "DEPARTMENT STORE DIVISION BALANCE SHEET" shall mean
the pro forma balance sheet of the Department Store Division as of February 3,
1996, attached hereto as Schedule 1.26.
Section 1.27 "DEPARTMENT STORE EQUIPMENT, MACHINERY AND FIXTURES"
shall mean: (a) all the building operating systems and equipment, other
systems and equipment (including without limitation, all POS, ticketing,
sensormatic, phone, security and energy management systems and equipment),
machinery, furniture, furnishings, fixtures, trade fixtures and improvements,
tooling, spare parts and supplies (including forms and packaging supplies,
fuel, oil and light bulbs, and housekeeping, restaurant and other supplies)
located in the Improvements as of the applicable dates on which the Buyer
inspected each of the Department Store Premises; (b) all rolling stock
(tractors, trailers, etc.) used in connection with the Department Store
Division; and (c) any rights of the Sellers to the warranties (to the extent
assignable), software, licenses and other rights to the use thereof received
in connection with the aforesaid items.
Section 1.28 "DEPARTMENT STORE FILES AND RECORDS" shall mean all
files, plans, surveys and documents, whether in hard copy or magnetic format,
of the Sellers specifically relating to the Department Store Assets or the
Assumed Department Store Liabilities, including without limitation, all books
and records relating to employees, purchase of goods, supplies and services,
financial, accounting and operations matters and dealings with customers of
the Department Store Division.
Section 1.29 "DEPARTMENT STORE INTELLECTUAL PROPERTY" shall mean all
trademarks, service marks, trade names, brands, private labels, patents,
copyrights, know-how or trade secrets and licenses and rights with respect to
the foregoing that the Sellers own or possess and which relate to the
Department Store Division, including without limitation, the trade name
"Strawbridge & Clothier" and those that are listed on Schedule 4.14.
Section 1.30 "DEPARTMENT STORE INVENTORY" shall mean (a) all items
of merchandise located in the Department Stores on the Inventory Date which
are held at the Department Stores in the ordinary course of business for
resale to customers in the ordinary course of business of the Department Store
Division and (b) all items of Department Stores merchandise located in the
Department Store Distribution Centers on the Inventory Date in the ordinary
course of business of the Department Store Division which are held for
delivery to the Department Stores, and in both cases which are reflected in
accordance with GAAP on the books and records of the Department Store Division
as inventory and which are owned by and have been paid
8
<PAGE>
for in full (or provisions for payment have been made in the Closing
Balance Sheet Payables Amount) by the Sellers, but does not include any
broken, damaged, defective or incomplete merchandise, any merchandise being
held for return to vendors, any merchandise held on lay-away, consignment or
under similar arrangements and any merchandise owned by licensees or other
third parties.
Section 1.31 "DEPARTMENT STORE LAND" shall mean all parcels of land
owned by the Sellers and all parcels of land demised under the Department
Store Leases, in either case, at the locations described on Schedule 1.31,
together with all of the Sellers' right, title and interest in and to all
rights of way, easements, reciprocal easement agreements and other rights of
the Sellers appurtenant to the foregoing and all right, title and interest, if
any, of the Sellers in and to the strips and gores, streets, highways and
alleys abutting or adjacent thereto. Department Store Land specifically
excludes the Hopewell vacant land.
Section 1.32 "DEPARTMENT STORE LEASES" shall mean all of the leases
of the Sellers relating to the business of the Department Store Division (as
lessee), all of which are listed in Schedule 1.32.
Section 1.33 "DEPARTMENT STORE LEASED REAL PROPERTY" shall mean all
of the Sellers' right, title and interest, as tenant, under the Department
Store Leases in and to the Department Store Land described thereunder and the
Improvements on the Department Store Land and/or demised under the Department
Store Leases.
Section 1.34 "DEPARTMENT STORE MERCHANDISE ON ORDER" shall mean the
Department Stores merchandise ordered but not delivered by the Effective Time
that is the subject of the Department Store Purchase Orders.
Section 1.35 "DEPARTMENT STORE PREMISES" shall mean the Department
Store Real Property and the Department Store Leased Real Property.
Section 1.36 "DEPARTMENT STORE PURCHASE ORDERS" shall mean those
purchase orders which were placed in the ordinary course of business of the
Department Store Division for Department Stores merchandise to be delivered to
the Department Stores or to the Department Store Distribution Centers for
subsequent delivery to the Department Stores, which are not cancelled by the
Sellers pursuant to Section 6.1(b)(x) or otherwise.
Section 1.37 "DEPARTMENT STORE REAL PROPERTY" shall mean all of the
Sellers' right, title and interest in and to the fee simple title to all of the
9
<PAGE>
Department Store Land and the Improvements thereon, all of which are
described on Schedule 1.37.
Section 1.38 "DEPARTMENT STORES" shall mean the department stores in
the Department Store Division, all of which are listed on Schedule 1.38.
Section 1.39 "DEPARTMENT STORE SPACE LEASES" shall mean those leases
(as well as other occupancy agreements) of space at the Department Store
Premises under which any of the Sellers is the lessor, all of which are
described on Schedule 1.39.
Section 1.40 "DEPARTMENT STORE SUBSIDIARIES" shall mean the directly
or indirectly owned Subsidiaries of the Seller included in the Department
Store Division, all of which are identified on Schedule 4.3.
Section 1.41 "DISPOSITION PROCEEDS" shall mean the cash proceeds
from the Disposition which are received directly or indirectly by the Seller
on or prior to the Second Closing Date after payment of or provision for any
Taxes paid or payable as a result of the Disposition and any out-of-pocket
costs or expenses associated with or arising out of the Disposition and after
payment of or provision for any Excluded Liabilities which have not otherwise
been paid or provided for at the time of the Second Closing.
Section 1.42 "EFFECTIVE TIME" shall mean the close of business of
the First Closing Date at which time the First Closing and all transactions
contemplated thereby shall be deemed to have occurred simultaneously;
provided, the First Closing has actually occurred.
Section 1.43 "EMPLOYEE BENEFIT PLAN" shall mean an Employee Pension
Benefit Plan, a Multiemployer Plan and an Employee Welfare Benefit Plan, where
no distinction is required by the context in which the term is used.
Section 1.44 "EMPLOYEE PENSION BENEFIT PLAN" shall have the meaning
set forth in Section 3(2) of ERISA.
Section 1.45 "EMPLOYEE WELFARE BENEFIT PLAN" shall have the meaning
set forth in Section 3(1) of ERISA.
Section 1.46 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
10
<PAGE>
Section 1.47 "ESCROW AGENT" shall mean the escrow agent appointed
pursuant to Section 2.7.
Section 1.48 "ESCROW AGREEMENT" shall mean the Escrow Agreement to
be entered into at the First Closing among the Buyer, the Seller and the
Escrow Agent substantially in the form of Exhibit B.
Section 1.49 "ESCROWED STOCK CONSIDERATION" shall mean 630,000
shares of May Common Stock that shall be delivered by the Buyer to the Escrow
Agent pursuant to the Escrow Agreement.
Section 1.50 "EXCLUDED ASSETS" shall mean all properties and assets
of the Sellers not constituting the Department Store Assets, including those
assets listed on Schedule 1.50 and the following:
(a) The real property interests of the Sellers in the South
Island Avenue distribution center that are the subject of condemnation
proceedings;
(b) All rights, title and interests of the Sellers in the
Hopewell vacant land;
(c) Subsidiaries' stock;
(d) The Clover stores, the Clover distribution center and the
Clover Burlington vacant land; and
(e) American Express, Mastercard, Visa and other similar third
party credit card receivables.
Section 1.51 "EXCLUDED LIABILITIES" shall mean all the liabilities
and obligations of the Sellers (other than the Assumed Department Store
Liabilities) of whatever kind or nature, known or unknown, fixed or
contingent, accrued or unaccrued, including without limitation:
(a) any obligation or liability under any financing or other
encumbrance on, affecting or related to any of the Department Store Assets or
any of the Excluded Assets;
(b) any obligations or liabilities for any Taxes, including
without limitation, (i) any Taxes relating to the Department Store Assets or
the
11
<PAGE>
Assumed Department Store Liabilities in respect of any and all periods
ending on or prior to the transfer of the Department Store Assets to
and the assumption of the Assumed Department Store Liabilities by the Buyer or
the Excluded Assets in respect of any and all periods, (ii) any income Taxes
imposed on the gain, if any, realized on the transfer of the Department Store
Assets and the assumption of the Assumed Department Store Liabilities, whether
imposed on the Buyer, the Seller or any holder of the Seller Common Stock, or
any sales, use, real property, transfer or gains or other similar Taxes
arising from the transfer of the Department Store Assets to and the assumption
of the Assumed Department Store Liabilities by the Buyer, (iii) any Taxes
imposed in respect of the asset sale transactions consummated pursuant to the
Disposition and (iv) any Taxes imposed upon the Sellers' operations (including
any several liability imposed upon any Subsidiaries of the Seller under
Treasury Regulation Section 1.1502-6 (and any comparable state, local or
foreign law or regulation));
(c) any employment related obligations or liabilities of the
Sellers in respect of the personnel employed by the Sellers, including,
without limitation, obligations or liabilities arising from or in any way
related to policies, authorizations, licenses and accounts required by
applicable laws or any obligations for Taxes, accrued salaries, wages,
commissions, bonuses, pension (including, without limitation, profit sharing),
worker and unemployment compensation, vacation pay, severance pay, sick pay,
benefit plan contributions or other employee benefits) for any of the Sellers'
employees or any amounts for which the Sellers may become liable to any Person
under the provisions of ERISA, the Family and Medical Leave Act, the Americans
With Disabilities Act, the Equal Employment Opportunities Act or the
regulations promulgated under any of the foregoing;
(d) any obligations or liabilities which may arise under any
Multiemployer Plan or any obligations or liabilities, including liabilities
for post-retirement or post-termination benefits under any insurance or
employee benefit plan or program or any formal or informal benefit practice
maintained, or contributed to, by the Sellers;
(e) any obligations or liabilities arising from or relating to
any of the transactions consummated pursuant to the Disposition;
(f) any obligations or liabilities with respect to any
litigation commenced or claims (including, without limitation, workers'
compensation, auto liability, product liability and general liability) made at
any time (before, on or after the Effective Time) relating to (i) the
Department Store Assets or the Assumed
12
<PAGE>
Department Store Liabilities, (ii) the Excluded Assets, (iii) transfer
of the Department Store Assets to the Buyer, and (iv) the Sellers' operations;
(g) any obligations or liabilities relating to payment for
inventory or amounts owed by the Sellers or any indebtedness of the Sellers to
any bank, credit card company, lending institution, vendor or supplier or any
indebtedness of the Sellers under any notes or commercial paper issued by the
Sellers;
(h) (i) any obligations or liabilities in respect of the
employment of any personnel employed by the Sellers (including, without
limitation, any obligations or liabilities under Seller Plans (as defined in
Section 4.15(a)) or any employment contracts) at any time and/or in respect of
the termination of the employment of any such personnel by the Sellers,
including, without limitation, any liabilities for monies payable under labor,
union or collective bargaining agreements in respect of any such personnel by
the Sellers or any obligations or liabilities under WARN or any similar plant
closing act, law or ordinance; and (ii) any obligations or liabilities arising
in respect of any claim by employees employed by the Sellers at any time or in
respect of periods prior to the Effective Time, including all amounts accrued
or payable for pension, retirement or other benefits;
(i) all obligations or liabilities under any agreement, the
benefits of the Sellers in, to and/or under which are not included in the
Department Store Assets;
(j) any obligations or liabilities for returned checks arising
from checks accepted or issued by the Sellers;
(k) any obligations for the Sellers' liabilities under any
civil rights laws, wage and hour laws or equal employment opportunity acts,
laws, ordinances or regulations;
(l) any obligation or liability with respect to any leased or
licensed department;
(m) any obligation or liability in connection with the Sellers'
deferred compensation plan described in Note 5 to the Seller's Consolidated
Financial Statements for the fiscal year ended January 28, 1995;
13
<PAGE>
(n) any obligation or liability arising out of the Sellers'
retiree health care plan described in Note 5 to the Seller's Consolidated
Financial Statements for the fiscal year ended January 28, 1995; and
(o) any obligation or liability arising out of any toxic
substance or hazardous material or any other environmental condition or
contamination.
Section 1.52 "FACE AMOUNT" shall mean the aggregate of all amounts
receivable as of the Effective Time for the Accounts Receivable reflected in
the Closing Balance Sheet Net Working Capital Amount, after posting all
payments (cash or check) received and credits given through the Effective
Time, less the sum of: (a) all credits (such as back room discounts, billing
errors and adjustments, and other allowances resulting from transactions that
occurred before the Effective Time) given from the Effective Time through the
60th day following the Effective Time; plus (b) the amount of all Accounts
Receivable which, as of the Effective Time, are P&L Accounts; plus (c) all
amounts for purchases made during any liquidation or similar sale. The Face
Amount of all Accounts Receivable in the Sellers' credit plan # 318-001,
312-001, 403-004, 406-004, 412-004, 101-903, 101-906, 101-912, 110-010, 110-
903, 136-903 and 136-906 shall be discounted to obtain a finance charge yield
equivalent to the finance charge yield on a typical revolving account without
deferred billing and receiving no grace period other than for payment of the
account in full within 30 days; provided, however, that if the aggregate Face
Amount, as of the Effective Time, of all such Accounts Receivable is less than
$8,000,000, the provisions of this sentence shall not be applicable. Face
Amount shall not include finance charges and late charges not billed as of the
Effective Time.
Section 1.53 "FIRST CLOSING" shall mean the consummation of the
transactions contemplated by Article II of this Agreement in accordance with
the terms and conditions set forth in Article II.
Section 1.54 "FIRST CLOSING DATE" shall mean the last Business Day
of the fiscal month in which all of the conditions to each party's obligations
hereunder have been satisfied or waived; or such other date as the parties
hereto agree upon in writing.
Section 1.55 "FIRST CLOSING ESTIMATED STOCK DELIVERY" shall mean
3,570,000 shares of May Common Stock that shall be delivered by the Buyer to
the Seller pursuant to Section 2.5(a).
14
<PAGE>
Section 1.56 "FIRST CLOSING STOCK CONSIDERATION" shall mean that
number of shares of May Common Stock determined pursuant to the calculation
prescribed in Schedule 1.56 in accordance with Section 2.8 and including the
Payless Spin-Off Equivalent Shares (as defined in Schedule 1.56) if required
by Schedule 1.56.
Section 1.57 "GAAP" shall mean United States generally accepted
accounting principles applied on a year-end basis.
Section 1.58 "GOVERNMENT" shall mean any agency, division,
subdivision, audit group or procuring office of the government of the United
States, any state or territory thereof, or any city, county or municipality
thereof or any foreign government, including the employees or agents thereof.
Section 1.59 "HSR ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the regulations thereunder.
Section 1.60 "IMPROVEMENTS" shall mean the buildings, improvements
and structures on the Department Store Land and/or demised under the
Department Store Leases.
Section 1.61 "INVENTORY DATE" shall mean the day immediately prior
to the First Closing Date.
Section 1.62 "LICENSES AND PERMITS" shall mean the permits,
authorizations and licenses issued by any Government in connection with the
business of the Department Store Division or the Department Store Premises.
Section 1.63 "LIEN" shall mean any mortgage, pledge, security
interest, encumbrance, lien (statutory or other), conditional sale agreement,
option or right of refusal, first offer, termination, participation or
purchase, other than Permitted Encumbrances.
Section 1.64 "MATERIAL ADVERSE EFFECT" shall mean (a)(i) with
respect to the Department Store Division, any change in or effect on the
business of the Department Store Division that is materially adverse to the
business, prospects, results of operations, properties, assets, liabilities or
condition (financial or otherwise) of the Department Store Division taken as a
whole or (ii) with respect to the Department Store Premises, any change in or
effect on any one of them that is materially adverse to the value thereof or
to its ability to be operated as presently operated by the Seller;
15
<PAGE>
and (b) with respect to the Buyer, any change in or effect on the business
of the Buyer and its Subsidiaries that is materially adverse to the business,
prospects, results of operations, properties, assets, liabilities or condition
(financial or otherwise) of the Buyer and its Subsidiaries taken as a whole.
Section 1.65 "MAY COMMON STOCK" shall mean the common stock, par
value $.50 per share, of the Buyer and any capital stock or other securities
into which the May Common Stock is converted or which are issued in respect of
the May Common Stock in either case in connection with any reclassification,
recapitalization, stock split or dividend (other than any dividend to be
distributed to effect the Payless Spin-Off, as defined in Schedule 1.56),
merger, combination, exchange of shares or other similar transaction if the
record date for such transaction is prior to the Effective Time, and, in all
such cases, references to a share of May Common Stock shall be deemed a
reference to all securities into which such share is convertible or has been
converted or to such share of May Common Stock together with all such
securities issued or issuable with respect to such share of May Common Stock.
Section 1.66 "MULTIEMPLOYER PLAN" shall have the meaning set forth
in Section 3(37) of ERISA.
Section 1.67 "NYSE" shall mean the New York Stock Exchange, Inc.
Section 1.68 "OTHER DEPARTMENT STORE CONTRACTS" shall mean the
contracts, agreements and commitments of the Sellers in respect of the
Department Store Assets or the Assumed Department Store Liabilities, but
limited to (a) the Department Store Purchase Orders, (b) the contracts,
agreements and commitments listed in Schedule 4.12, and (c) the agreements and
commitments of the Sellers which are entered into between the date of this
Agreement and the Effective Time with the Buyer's approval; excluding,
however, all contracts, agreements and commitments which expire or are
terminated in the ordinary course of business prior to the Effective Time.
Section 1.69 "P&L ACCOUNTS" shall mean all Accounts Receivable
which, as of or prior to the Effective Time: (i) have been placed with an
attorney or collection agency for collection proceedings; (ii) relate to a
person who is deceased or has filed for protection under the Bankruptcy Code
or other creditor's rights laws; (iii) are subject to a claim of fraud; (iv)
have not had an actual payment (cash or cleared check) in an amount equal to
or greater than the required monthly, unadjusted, minimum payment for a period
of 12 months; or (v) shall have been written off as uncollectible or doubtful
accounts.
16
<PAGE>
Section 1.70 "PBGC" shall mean the Pension Benefit Guaranty
Corporation.
Section 1.71 "PERMITTED ENCUMBRANCES" shall mean (a) those
exceptions to title to the Department Store Premises set forth on Schedule
4.10(b); and (b) statutory liens for current real estate taxes or assessments
not yet due without interest or penalty;
Section 1.72 "PERSON" shall mean any individual, corporation,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or Government.
Section 1.73 "PRELIMINARY CLOSING DATE BALANCE SHEET" shall mean the
balance sheet as of the First Closing Date for the Department Store Division
prepared in accordance with Section 2.8.
Section 1.74 "PRO FORMA DEPARTMENT STORE DIVISION FINANCIAL
STATEMENTS" shall mean the pro forma consolidated financial statements of the
Department Store Division referred to in Section 4.5(b).
Section 1.75 "PROXY STATEMENT/PROSPECTUS" shall mean the proxy
statement relating to the meeting of the Seller's shareholders to be held in
connection the Reorganization.
Section 1.76 "REORGANIZATION" shall mean the reorganization of the
Seller under Section 368(a)(1)(C) of the Code contemplated by the terms of
this Agreement which includes the transfer of substantially all of the assets
of the Seller, including the Department Store Assets and the Disposition
Proceeds, to the Buyer in exchange for the Stock Consideration and the Buyer's
assumption of the Assumed Department Store Liabilities, followed by the
distribution in liquidation by the Seller of the Stock Consideration received
from the Buyer plus any other assets retained by the Seller to the holders of
the Seller Common Stock and to the liquidating trust established pursuant to
Section 6.13 of this Agreement.
Section 1.77 "SEC" shall mean the Securities and Exchange
Commission.
Section 1.78 "SECOND CLOSING" shall mean the consummation of the
transactions contemplated by Article III of this Agreement in accordance with
the terms and conditions set forth in Article III.
17
<PAGE>
Section 1.79 "SECOND CLOSING CASH AMOUNT" is generally contemplated
to be generated out of Disposition Proceeds and shall mean specifically the
amount of cash determined by the Seller and set forth in a notice delivered to
the Buyer pursuant to this Agreement not less than 15 days prior to the Second
Closing Date specified in such notice.
Section 1.80 "SECOND CLOSING DATE" shall mean the date specified by
the Seller in the notice establishing the Second Closing Cash Amount which
will in no event be sooner than 30 days following the First Closing Date nor
later than the Business Day preceding the first anniversary of the First
Closing Date.
Section 1.81 "SECOND CLOSING MAY STOCK PRICE" shall mean the dollar
amount carried out to the fourth decimal point equal to the average of the
daily per share closing prices for May Common Stock for the 20 consecutive
Trading Days immediately preceding the Second Closing Date as such closing
prices are reported on the principal consolidated transaction reporting system
with respect to securities listed on the NYSE.
Section 1.82 "SECOND CLOSING STOCK CONSIDERATION" shall mean the
number of shares of May Common Stock determined by dividing the Second Closing
Cash Amount by the Second Closing May Stock Price.
Section 1.83 "SECURITIES ACT" shall mean the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.
Section 1.84 "SECURITIES EXCHANGE ACT" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
Section 1.85 "SELLER COMMON STOCK" shall mean the Seller Series A
Common Stock and the Seller Series B Common Stock.
Section 1.86 "SELLER FILINGS" shall mean the filings made by the
Sellers with the SEC referred to in Section 4.5(c).
Section 1.87 "SELLER FINANCIAL STATEMENTS" shall mean the
consolidated balance sheets of the Sellers as of January 28, 1995 and January
29, 1994, and the related consolidated statements of operations and
consolidated statements of cash flows for each of the three fiscal years ended
January 28, 1995, and January 29, 1994 and January 30, 1993, incorporated by
reference in the Annual
18
<PAGE>
Report on Form 10-K of the Seller for the fiscal year ended January 28,
1995, as filed with the SEC and the unaudited condensed consolidated
balance sheet of the Seller as of October 28, 1995, and the related unaudited
condensed consolidated statements of operations for the nine months and
trailing years ended October 28, 1995 and October 29, 1994 and statements of
cash flows for the nine-month periods respectively then ended included in the
Quarterly Report on Form 10-Q of the Seller for the quarterly period ended
October 28, 1995, as filed with the SEC.
Section 1.88 "SELLER SERIES A COMMON STOCK" shall mean the Series A
Common Stock, par value $1.00 per share, of the Seller.
Section 1.89 "SELLER SERIES B COMMON STOCK" shall mean the Series B
Common Stock, par value $1.00 per share, of the Seller.
Section 1.90 "SELLERS" shall mean the Seller and/or the Subsidiaries
of the Seller. All acts, representations, warranties and covenants herein of
the "Sellers" shall be deemed those of the Seller on its own behalf and on
behalf of all applicable Subsidiaries of the Seller. All references to
"Sellers" (including, without limitation, as relates to assets, rights,
obligations or liabilities) shall be deemed references to the Seller and/or
all applicable Subsidiaries of the Seller, unless the context clearly
indicates otherwise. The Seller shall cause each of its applicable
Subsidiaries to observe and perform all provisions of this Agreement
applicable to such Subsidiaries.
Section 1.91 "SIGNIFICANT SUBSIDIARY" shall mean any "significant
subsidiary" within the meaning of Rule 1.02 of Regulation S-X of the SEC.
Section 1.92 "STOCK CONSIDERATION" shall mean the First Closing
Stock Consideration plus the Second Closing Stock Consideration.
Section 1.93 "SUBSIDIARIES" when used in reference to any other
Person shall mean any corporation of which outstanding securities having
ordinary voting power to elect a majority of the board of directors of such
corporation are owned directly or indirectly by such other Person.
Section 1.94 "TAXES" shall mean all taxes, however denominated,
including any interest, penalties or additions to tax that may become payable
in respect thereof, imposed by any Government, which taxes shall include,
without limitation, all income taxes, payroll and employee withholding taxes,
unemployment, insurance, social security, sales and use taxes, excise taxes,
franchise taxes, gross receipt taxes,
19
<PAGE>
occupation taxes, real and personal property taxes, stamp taxes, transfer
taxes, workmen's compensation taxes and other obligations of the same or
a similar nature, whether arising before, on or after the Effective Time;
and "Tax" shall mean any one of the foregoing.
Section 1.95 "TAX RETURNS" shall mean all returns, reports,
schedules and other information filed or required to be filed with any taxing
authority with respect to Taxes.
Section 1.96 "TICKETED RETAIL PRICE" shall mean the lower of (a) the
lower of (i) the lowest ticketed retail price on the sales floor of the
applicable merchandise marked down in accordance with GAAP to reflect
customary markdowns for aged merchandise and (ii) the lowest sale price at
which the applicable merchandise was offered for sale or sold, excluding
"Temporary Markdowns", and (b) the lowest price at which the applicable
merchandise is reflected in accordance with GAAP on the books and records of
the Seller. The term "Temporary Markdowns" shall mean any non-permanent
markdowns which meet all of the following criteria: (1) such markdowns are
less than 41% off the original ticketed retail price on the sales floor, which
original ticketed retail price shall be the same as originally reflected on
the Seller's stock ledger, and (2) such markdowns (at whatever rate or rates
less than 41%) have been taken for less than (x) 10 consecutive days, (y) 14
days in the 21-day period prior to the First Closing, and (z) two out of three
days in a weekend (Friday, Saturday and Sunday) for less than the three
weekends, during which the Department Stores are open for business,
immediately prior to the First Closing.
Section 1.97 "TRADING DAY" shall mean a day on which the NYSE is
open for the transaction of business and the May Common Stock actually trades
on such exchange.
Section 1.98 "TRANSFERRING EMPLOYEES" shall have the meaning set
forth in Section 7.1 of this Agreement.
Section 1.99 "WARN" shall mean the Worker Adjustment and Retraining
Notification Act.
20
<PAGE>
ARTICLE II
PURCHASE AND SALE; THE FIRST CLOSING
Section 2.1 Purchase and Sale of the Department Store Assets.
Subject to the satisfaction of all of the conditions to each party's
obligations set forth in Article VIII (or, with respect to any condition not
satisfied, the waiver thereof by the party or parties for whose benefit the
condition exists), on the First Closing Date the Sellers will sell, convey,
assign, transfer and deliver all of the Department Store Assets, and the Buyer
will purchase, acquire, accept and pay for, as hereinafter provided, the
Department Store Assets and will assume the Assumed Department Store
Liabilities.
Section 2.2 Consideration for the Department Store Assets.
(a) The aggregate consideration for the Department Store Assets
shall consist of (i) the First Closing Stock Consideration, and (ii) the
assumption by the Buyer of the Assumed Department Store Liabilities.
(b) Notwithstanding anything in this Agreement to the contrary,
the Buyer will not assume or otherwise be liable or responsible for the
Excluded Liabilities or any other liabilities or obligations of the Sellers
except to the extent provided in Section 2.2(a) hereof with respect to the
Assumed Department Store Liabilities.
Section 2.3 Time and Place of First Closing. Subject to the terms
and conditions of this Article II, the First Closing will take place at the
offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York,
New York 10022, at 9:30 a.m. (local time) on the First Closing Date or at
such other place or time or both as the parties may agree.
Section 2.4 Deliveries by the Seller. At the First Closing, the
Sellers shall deliver the following to the Buyer:
(a) The Closing Cash Transfer, if any, by wire transfer of
immediately available funds to a bank account of the Buyer designated by the
Buyer at least two Business Days prior to the First Closing Date.
(b) A duly executed Bill of Sale together with such other
appropriate instruments of transfer as the Buyer may reasonably request,
transferring
21
<PAGE>
to the Buyer all of the personal and intangible property as of the
Effective Time which is included in the Department Store Assets.
(c) Special warranty deeds, in recordable form, with respect to
the Department Store Real Property.
(d) Duly executed instruments of assignment of the Department
Store Leases, in recordable form.
(e) Duly executed instruments of assignment of the Department
Store Space Leases, in recordable form.
(f) Duly executed instruments of assignment of the Other
Department Store Contracts.
(g) Duly executed instruments of assignment of the Department
Store Intellectual Property in form suitable for recording in the appropriate
office or bureau, and the original certificates, if available, of the
Department Store Intellectual Property together with any powers of attorney
necessary to make the conveyance effective.
(h) Duly executed instruments of assignment of the Accounts
Receivable.
(i) Duly executed instruments of assignment of $9,200,000 in
award and proceeds for the condemnation of the distribution center at 4800
South Island Avenue, Philadelphia, Pennsylvania.
(j) The estoppel certificates contemplated by Section 8.3(d).
(k) The Department Store Files and Records.
(l) Copies of all consents obtained as contemplated by Section
8.1(f).
(m) An Undertaking and Indemnity Agreement substantially in the
form of Exhibit C, together with any other instruments of assumption relating
to the Excluded Liabilities which may be reasonably requested by the Buyer,
duly executed by the Seller.
22
<PAGE>
(n) The certificates contemplated by Section 8.3(c).
(o) Such other and further instruments of conveyance,
assignment and transfer as the Buyer may reasonably request for the effective
conveyance and transfer of any of the Department Store Assets.
(p) Possession of the Department Store Assets (including the
Department Store Cash).
Section 2.5 Deliveries by the Buyer. At the First Closing, the
Buyer shall deliver the following to the Seller:
(a) Stock certificates representing the First Closing Estimated
Stock Delivery.
(b) An executed Undertaking and Indemnity Agreement
substantially in the form of Exhibit C, together with any other instruments of
assumption relating to the Assumed Department Store Liabilities which may be
reasonably requested by the Seller, duly executed by the Buyer.
(c) The certificates contemplated by Section 8.2(c).
Section 2.6 Escrow Deliveries. At the First Closing, the
following shall be delivered in connection with the escrow created by the
Escrow Agreement:
(a) The Buyer shall deliver duly signed counterparts of the
Escrow Agreement to the Seller and the Escrow Agent.
(b) The Seller shall deliver duly signed counterparts of the
Escrow Agreement to the Buyer and the Escrow Agent.
(c) The Escrow Agent shall deliver duly signed counterparts of
the Escrow Agreement to the Buyer and the Seller.
(d) The Buyer shall deliver the Escrowed Stock Consideration to
the Escrow Agent.
Section 2.7 Escrow. At or prior to the First Closing, the
Buyer and the Seller shall enter into the Escrow Agreement. At the First
Closing, the Buyer shall deposit with the Escrow Agent, in trust, the Escrowed
Stock Consideration. The
23
<PAGE>
Escrow Agent shall hold the Escrowed Stock Consideration in accordance with
the terms of the Escrow Agreement.
Section 2.8 Purchase Price Adjustment.
(a) Within 60 days following the First Closing Date, the Seller
shall, at its expense, cause the Preliminary Closing Date Balance Sheet to be
prepared and delivered to the Buyer. The Preliminary Closing Date Balance
Sheet will present fairly the financial position of the Department Store
Division as of the Effective Time, all in conformity with GAAP, and will be
accompanied by schedules prepared in the form of Schedule 1.15 (Closing
Balance Sheet Net Working Capital Amount) and Schedule 1.6 (Assumed Long-Term
Liabilities Amount), setting forth the amounts specified therein and taken or
derived from the Preliminary Closing Date Balance Sheet (such schedules being
collectively called the "Preliminary Closing Schedules"). The Preliminary
Closing Date Balance Sheet and the Preliminary Closing Schedules shall, in
addition to the other provisions of this Agreement, be prepared in accordance
with the following principles and requirements:
(i) On the Inventory Date, the Sellers shall
undertake and complete a physical count of all Department Store
Inventory and the Department Store Cash while the Department Stores
are closed to the public. The cost of taking such physical count
shall be shared one-half by the Sellers and one-half by the Buyer.
At its own cost, the Buyer shall have the right to observe such
physical count. The procedures used to count the Department Store
Inventory and the Department Store Cash shall be in accordance with
the Hartz Data Scan Inventory System (or similar type), mutually
agreed upon between the Buyer and the Sellers and in accordance
with GAAP, with such other safeguards as may reasonably be
requested by the Buyer or the Sellers. Upon completion of the
physical count and preliminary calculation of the Closing Balance
Sheet Inventory Amount and the Department Store Cash, Seller shall
include with the Preliminary Closing Schedules a summary of such
calculations together with copies of all work papers, backup
calculations and information as Buyer may reasonably request in
order to verify the Seller's calculations.
(ii) The Preliminary Closing Schedules shall be
accompanied by a summary of the calculation of the Closing Balance
Sheet Accounts Receivable Amount and the Miscellaneous Current
Assets (as defined in Schedule 1.15) together with copies of all work
24
<PAGE>
papers, backup calculations and information as the Buyer may
reasonably request in order to verify the Seller's calculations.
(iii) The Preliminary Closing Schedules shall be
accompanied by a summary of the calculation of the Closing Balance
Sheet Payables Amount and the Other Current Liabilities (as defined
in Schedule 1.15) together with copies of all work papers, backup
calculations and information as the Buyer may reasonably request in
order to verify the Seller's calculations.
(iv) The Preliminary Closing Schedules shall be
accompanied by a summary of the calculation of the Assumed Long-
Term Liabilities Amount together with copies of all work papers,
backup calculations and information as the Buyer may reasonably
request in order to verify the Seller's calculations.
(v) The Preliminary Closing Schedules shall be
accompanied by a summary of the calculation of the following items
together with copies of all work papers, backup calculations and
information as the Buyer may reasonably request in order to verify
the Seller's calculations:
(1) Accrued vacation pay liability and related
Taxes as provided in Section 7.4(a);
(2) Employee Pension Benefit Plan deficiency as
provided in Section 7.5(d) and in accordance with Schedule 7.5;
(3) The "rule of 70" (as defined in Schedule
7.5) additional amount as provided in Section 7.5(d) and in
accordance with Schedule 7.5;
(4) The Rabbi Trust Funding Amount (as defined
in Section 7.6);
(5) The amounts added to other Current
Liabilities in Schedule 1.15 or deducted from the amount of
$320,000,000 set forth in Schedule 1.56, as provided in
Section 7.7; and
25
<PAGE>
(6) The amounts added to Other Current
Liabilities in Schedule 1.15 and/or deducted from the amount
of $320,000,000 (as adjusted, if at all, pursuant to Section
2.8(a)(v)(5)) set forth in Schedule 1.56, as provided in
Section 7.8.
The Preliminary Closing Date Balance Sheet shall be accompanied by an
unqualified opinion of Ernst & Young LLP to the effect that the
Preliminary Closing Date Balance Sheet presents fairly the financial position
of the Department Store Division as of the First Closing Date and has been
prepared in accordance with GAAP. The Buyer and the Seller shall fully
cooperate in good faith in the preparation of the Preliminary Closing Date
Balance Sheet and the Preliminary Closing Schedules, such cooperation to
include, without limiting the generality of the foregoing, full access to the
books and records of the Seller and the Department Store Files and Records for
such purpose.
(b) Upon receipt of the Preliminary Closing Date Balance Sheet
and the Preliminary Closing Schedules, the Buyer and its accountants shall
have the right during the succeeding 30 day period or until the 90th day
following the Effective Time, whichever is longer, to examine, at the Buyer's
expense, the Preliminary Closing Date Balance Sheet and the Preliminary
Closing Schedules and all work papers, backup calculations, information and
records used for or relevant to the preparation of the Preliminary Closing
Date Balance Sheet and the Preliminary Closing Schedules. The Buyer shall
notify the Seller in writing on or before the last day of such period, of any
good faith objections to the Preliminary Closing Date Balance Sheet and the
Preliminary Closing Schedules, setting forth a reasonably specific description
of the Buyer's objections and the dollar amount of each objection, and shall
deliver therewith a statement of all credits given as provided in Section 1.52
which shall be posted to the Preliminary Closing Schedules. If the Buyer does
not deliver such notice or statement within such period, the Preliminary
Closing Date Balance Sheet and the Preliminary Closing Schedules shall be
deemed to have been accepted by the Buyer.
(c) If the Buyer in good faith objects to the Preliminary
Closing Date Balance Sheet or the Preliminary Closing Schedules, the Seller
and the Buyer shall attempt to resolve any such objections within 15 days
after the Seller's receipt of the Buyer's objections. If the Seller and the
Buyer are unable to resolve the matter within such 15 day period, they shall
jointly appoint a mutually acceptable firm of independent accountants of
national reputation which is one of the so-called "big six" (or, if they
cannot agree on a mutually acceptable firm, they shall cause their
26
<PAGE>
respective accounting firms to select such firm) within three (3) days
following the end of such 15 day period. The fees of such selected
independent public accountants shall be divided equally between the Buyer and
the Seller. The Buyer and the Seller shall provide such accounting firm full
cooperation. Such firm shall be instructed to reach its conclusion regarding
the disputes within 15 Business Days of such instruction. Such firm's
resolution of the disputes shall be rendered in a written decision determining
all disputes and shall be conclusive and binding upon the Buyer and the
Seller. The Preliminary Closing Schedules after the acceptance thereof by the
Buyer or the resolution of all disputes in connection therewith are together
referred to herein as the "Closing Settlement Schedule."
(d) Promptly after the Closing Settlement Schedule has come
into existence, the Buyer and the Seller shall jointly prepare Schedule 1.56
(the First Closing Stock Consideration Schedule) and compare the amount of the
First Closing Stock Consideration set forth in the First Closing Stock
Consideration Schedule with the sum of the First Closing Estimated Stock
Delivery plus the Escrowed Stock Consideration. If the First Closing Stock
Consideration is greater than or equal to such sum, the Escrow Agent shall
deliver all of the Escrowed Stock Consideration and the Escrowed Dividends (as
defined in the Escrow Agreement) to the Seller and the Buyer shall issue and
deliver the balance of the undelivered First Closing Stock Consideration to
the Seller directly. If the First Closing Stock Consideration is equal to or
exceeds the First Closing Estimated Stock Delivery by a number of shares that
is less than the Escrowed Stock Consideration, then the Escrow Agent shall
deliver that number of shares of the Escrowed Stock Consideration equal to
such excess, if any, to the Seller and the balance to the Buyer, and shall
distribute the Escrowed Dividends to the Seller and the Buyer in the same
ratio it distributes the Escrowed Stock Consideration to the Seller and the
Buyer. If the First Closing Stock Consideration is less than the First
Closing Estimated Stock Delivery, then the Escrow Agent shall deliver all the
shares of the Escrowed Stock Consideration and the Escrowed Dividends to the
Buyer, and the Seller shall return to the Buyer a number of shares of May
Common Stock equal to the difference between the First Closing Estimated Stock
Delivery and the First Closing Stock Consideration. In the event that the
Seller or the Buyer shall be required, pursuant to this Section 2.8(d), to
deliver to the other party shares of May Common Stock outside of escrow, the
shares delivered by the Seller shall be accompanied by a cash payment equal to
the amount of all cash dividends paid on, or for which there is a record date
for, such shares, from the Effective Time to the date of delivery of such
shares, and the shares delivered by the Buyer shall be accompanied by a number
of additional shares equal to the quotient of (i) the cash dividends that
would have been paid on, or for which there would have been a record date for,
such shares, from the Effective Time to the date of delivery
27
<PAGE>
of such shares, had such shares been delivered at the First Closing,
divided by (ii) the closing price per share of May Common Stock as
reported on the NYSE Consolidated Tape on the day before the day on which
this Agreement is executed and delivered.
ARTICLE III
THE SECOND CLOSING
Section 3.1 Purchase and Sale of the Second Closing Cash Amount.
Subject to the continued satisfaction of the conditions to each party's
obligations set forth in Article VIII (or, with respect to any condition not
satisfied, the waiver thereof by the party or parties for whose benefit the
condition exists), on the Second Closing Date the Seller will sell, convey,
assign, transfer and deliver the Second Closing Cash Amount, and the Buyer
will purchase, acquire, accept and pay for, as hereinafter provided, the
Second Closing Cash Amount.
Section 3.2 Consideration for the Second Closing Cash Amount. The
aggregate consideration for the Second Closing Cash Amount shall consist of
the Second Closing Stock Consideration.
Section 3.3 Time and Place of Second Closing. Subject to the terms
and conditions of this Article III, the Second Closing will take place at the
offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York,
New York 10022, at 9:30 a.m. (local time) on the Second Closing Date or at
such other place or time or both as the parties may agree; provided, that in
no event will the Second Closing Date be earlier than 30 days following the
First Closing date nor later than the Business Day preceding the first
anniversary of the First Closing Date.
Section 3.4 Deliveries by the Seller. At the Second Closing, the
Seller shall deliver to the Buyer cash equal to the Second Closing Cash Amount
by wire transfer of immediately available federal funds to a bank account of
the Buyer designated by the Buyer at least two Business Days prior to the
Second Closing Date.
Section 3.5 Deliveries by the Buyer. At the Second Closing, the
Buyer shall deliver to the Seller stock certificates representing the Second
Closing Stock Consideration.
28
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer as follows:
Section 4.1 Corporate Organization. Each of the Seller and the
Department Store Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has corporate power to own all of its properties and assets and
to carry on its business as it is now being conducted, and is duly qualified
to do business and is in good standing in all jurisdictions where its
ownership, operation or leasing of property or assets or the conduct of its
business requires it to be so qualified, except in such jurisdictions, if any,
where the failure to be so qualified or in good standing would not,
individually or in the aggregate, have a Material Adverse Effect. Each of the
Seller and the Department Store Subsidiaries has all necessary Government
authorizations to own, lease and operate all of its properties and assets and
to carry on its business as now being conducted, except any such
authorizations the failure to obtain which would not have or would not be
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect. True and complete copies of the Articles and Bylaws of the
Seller and similar charter documents for each of the Department Store
Subsidiaries as currently in effect have been provided to the Buyer. Schedule
4.1 sets forth a complete and correct list of all jurisdictions in which the
Seller and each of its Subsidiaries are qualified or licensed to carry on the
business of the Department Store Division.
Section 4.2 Due Authorization. Other than the requisite approval of
this Agreement by the holders of Seller Common Stock, the execution, delivery
and performance of this Agreement and the Escrow Agreement have been duly
authorized by all necessary corporate action on the part of the Sellers and
this Agreement has been duly executed, and at the First Closing the Escrow
Agreement will be executed, by a duly authorized officer of the Seller and
this Agreement constitutes and, upon execution the Escrow Agreement will
constitute, a valid and binding agreement of the Sellers, enforceable against
them in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and subject to general principles of equity
(regardless of whether enforcement is sought in equity or law).
Section 4.3 Department Store Subsidiaries Stock. Schedule 4.3 sets
forth (a) the name of all Department Store Subsidiaries, (b) the
capitalization thereof
29
<PAGE>
and the percentage of each class of capital stock owned by the Seller
or any of its Subsidiaries, and (c) the jurisdiction of incorporation
of such Department Store Subsidiaries. Except as set forth on Schedule 4.3,
the Seller owns, directly or indirectly, all of the issued and outstanding
capital stock of each of the Department Store Subsidiaries free and clear of
any Lien.
Section 4.4 Consents and Approvals; No Violation. Subject to (a)
the requisite approval of this Agreement by the holders of the Seller Common
Stock, (b) the expiration or earlier termination of all waiting periods under
the HSR Act, and (c) compliance with all applicable requirements of the
Securities Act and the Exchange Act, the execution and delivery of this
Agreement and the Escrow Agreement do not, and the consummation of the
transactions contemplated hereby and thereby will not, (i) violate or conflict
with any provision of the Seller's Articles or Bylaws or other similar charter
documents of any of its Subsidiaries, (ii) except as set forth in Schedule 4.4
hereto, violate or conflict with or result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of, any note, bond, mortgage, indenture, license,
lease, agreement or other instrument or obligation to which the Sellers are a
party or by which the Sellers or any of the Department Store Assets may be
bound, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents either have been
obtained by the Sellers or the obtaining of which has been waived by the
Buyer, or (iii) violate any order, writ, injunction, decree, arbitration
award, statute, rule or regulation applicable to the Sellers or any of the
Department Store Assets (other than any applicable "bulk sales" laws),
excluding from the foregoing clauses (ii) and (iii) such defaults and
violations which, individually or in the aggregate, would not have a Material
Adverse Effect.
Section 4.5 Financial Statements; SEC Filings.
(a) True and complete copies of the Seller Financial Statements
have been made available by the Seller to the Buyer. The Seller Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis, except as noted in the Seller Financial Statements, and present fairly
the consolidated financial position of the Sellers at the respective dates
thereof and the consolidated results of operations and changes in financial
position of the Sellers for the periods respectively then ended subject, in
the case of unaudited interim statements, to normal year-end adjustments. The
Seller Financial Statements referred to in this Agreement shall be deemed to
include any notes and schedules to such financial statements.
30
<PAGE>
(b) The Seller has previously furnished to the Buyer the
unaudited pro forma consolidated statements of operations and changes in
financial position of the Department Store Division for each of the three
years ended January 29, 1994, January 28, 1995, and February 3, 1996,
respectively, and the Department Store Division Balance Sheet. The pro forma
financial statements described in this Section 4.5(b) are collectively
referred to herein as the "Pro Forma Department Store Division Financial
Statements." Except as set forth in the notes to the Pro Forma Department
Store Division Financial Statements, (i) the Department Store Division Balance
Sheet presents fairly the financial position of the Department Store Division
as of the date thereof, and the statements of operations included in the Pro
Forma Department Store Division Financial Statements present fairly the
results of operations of the Department Store Division for the respective
period therein set forth; and (ii) each of the fiscal year end Pro Forma
Department Store Division Financial Statements was prepared on a basis
consistent with the accounting principles, methods and practices employed in
the preparation and presentation of the Seller's audited financial statements
for the same periods and for prior periods.
(c) Since January 1, 1993, the Sellers have filed with the SEC
all forms, reports and documents required to be filed by them pursuant to the
Securities Act and the Exchange Act, all of which, as of their respective
filing dates, complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act. The Seller has
heretofore made available to the Buyer a true and complete copy of each
registration statement, final prospectus and definitive proxy statement filed
by the Sellers with the SEC since January 1, 1993, and each report filed by
the Sellers with the SEC since January 1, 1993; none of the Seller Filings as
of the respective dates on which they were filed with the SEC contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 4.6 Absence of Changes. Except as disclosed in
Schedule 4.6 hereto, since the date of the Department Store Division Balance
Sheet, the business of the Department Store Division has been conducted in the
ordinary course and there has not been:
(a) any Material Adverse Effect or any event which is
reasonably likely to result in a Material Adverse Effect;
31
<PAGE>
(b) any change by the Seller in the accounting methods,
principles or practices relating to the Department Store Division, other than
changes required by generally accepted accounting principles;
(c) any acquisition of, or commitment to acquire, any
Department Store Assets, or any entry or commitment to enter into any
Department Store Contracts, or any undertaking or commitment to incur or
undertake any Assumed Department Store Liabilities, in any such case which is
material to the Department Store Division.
For purposes of this Section 4.6, a Material Adverse Effect shall not
be deemed to include any effect upon the business, prospects, results
of operations, properties, assets, liabilities or condition (financial
or otherwise) of the Department Store Division taken as a whole arising out of
or resulting from the execution of this Agreement and the Escrow Agreement or
the consummation of the transactions contemplated hereby and thereby.
Section 4.7 Absence of Undisclosed Liabilities. The Sellers have no
liabilities or obligations of any kind whatsoever, whether or not accrued and
whether or not contingent or absolute, determined or determinable, that are
Assumed Department Store Liabilities, other than (a) liabilities and
obligations which are disclosed or accrued in the Department Store Division
Balance Sheet or the notes thereto or the Schedules to this Agreement, (b)
liabilities and obligations incurred on behalf of the Department Store
Division in connection with this Agreement and the Escrow Agreement and the
transactions contemplated hereby and thereby, and (c) liabilities and
obligations incurred in the ordinary course of business after the date of the
Department Store Division Balance Sheet, none of which, either individually or
in the aggregate, have a reasonable likelihood of resulting in a Material
Adverse Effect.
Section 4.8 Litigation. Except as disclosed in Schedule 4.8, in the
Seller Filings, the Seller Financial Statements or the Pro Forma Department
Store Division Financial Statements, there are no claims, actions, suits,
proceedings or investigations pending or, to the best knowledge of the Seller,
threatened against the Sellers, the Department Store Division or the
Department Store Assets before any Government which, individually or in the
aggregate, have a reasonable likelihood of resulting in a Material Adverse
Effect. The Sellers are not subject to any outstanding order, writ,
injunction or decree which has had or could be reasonably expected to have a
Material Adverse Effect.
32
<PAGE>
Section 4.9 Taxes. The Sellers have duly and timely filed or caused
to be filed, or will duly and timely file or cause to be filed, all income Tax
Returns and all other material Tax Returns required to be filed at or before
the Effective Time, taking into account any extension for time to file granted
to or obtained on behalf of the Sellers. All such Tax Returns (including
amendments) are, or will be when filed, complete and accurate in all material
respects. The Sellers have paid (or there has been paid on their behalf), or
have established, or, with respect to Taxes which are or will be due but not
yet payable as of the Effective Time, will establish, reserves which are
adequate for the payment of, all Taxes for all taxable periods (or portions
thereof) ending on or before the Effective Time. The Sellers are not
delinquent in the payment of any Tax. Except as set forth in Schedule 4.9, no
material deficiencies for any Tax have been proposed, asserted or assessed
(tentatively or definitely), in each case by any taxing authority, against the
Sellers. Except as set forth on Schedule 4.9, as of the date of this
Agreement, there are no pending requests for waivers of the time to assess any
such Tax. The federal income Tax Returns of the Seller and each of its
Subsidiaries that has been a member of the affiliated group of corporations of
which the Seller is the common parent for all periods during its existence
have been audited by the Internal Revenue Service through the taxable year
ended on the date set forth on Schedule 4.9 and the federal income Tax Returns
of each of its Subsidiaries that has not been a member of the affiliated group
of corporations of which the Seller is the common parent for all periods
during its existence have been audited through the taxable year ended on the
date set forth on Schedule 4.9. Except as set forth on Schedule 4.9, no
employee benefit plan for which the Sellers file, or are required to file, an
Internal Revenue Service Form 5500 is currently under employee plan
examination by the Internal Revenue Service. Neither the Sellers nor any
representative of such benefit plans has received verbal or written
notification from the Internal Revenue Service of an impending employee plan
examination. The Sellers have not filed an election under Section 341(f) of
the Code to be treated as a consenting corporation.
Section 4.10 Title and Related Matters.
(a) Schedule 1.37 is a true and complete schedule of all of the
Department Store Real Property owned in fee by the Sellers. The Sellers have
good and marketable title to the Department Store Land described on Schedule
1.31 and the Improvements located thereon, all of which will be free and clear
of any Lien, at the Effective Time. After the Effective Time, the Buyer will
have, good and marketable title (such as any reputable title insurance company
licensed to do business in the state in which such Department Store Real
Property is located will approve and insure without exceptions other than
Permitted Encumbrances) to all of the Department Store
33
<PAGE>
Real Property free and clear of any Lien. Each of the agreements under
which the Sellers own the Department Store Real Property is valid and
binding and in full force and effect and no notice of default or termination
thereunder has been given or received by the Sellers which describes
a default which has not been cured, and to the best knowledge of the
Sellers, no events have occurred which would, with the giving of notice or
passage of time or both, give the Sellers the right to deliver a notice of
default or give a third party the right to deliver a notice of default to the
Sellers.
(b) Except as set forth on Schedule 4.10(b) and subject to
Permitted Encumbrances, the Sellers have, and after the Effective Time, the
Buyer will have, good and marketable title to all of the Department Store
Assets (other than the Department Store Real Property, as provided in Section
4.10(a), and the Department Store Leases, as provided in Section 4.11),
subject to no Lien.
(c) The Seller is entitled to receive from the City of
Philadelphia on or before February 1, 1997, and has the right to assign to the
Buyer as provided herein, an award and proceeds in the amount of $9.2 million
from the condemnation by the City of Philadelphia of the Seller's distribution
center at 4800 South Island Avenue, Philadelphia, Pennsylvania. Except as set
forth in Schedule 4.10(c), there are no conditions to the assignment to the
Buyer, or the receipt by the Buyer pursuant thereto, of such award and
proceeds.
Section 4.11 Department Store Leases. Schedule 1.32 and Schedule
1.39 set forth, respectively, a true and complete list of (a) all Department
Store Leases (including amendments, modifications and supplements or other
agreements), and (b) all Department Store Space Leases, including without
limitation, subleases, licenses and other occupancy agreements (including
amendments, modifications and supplements or other agreements). The legal
descriptions for each of the Department Store Leases are set forth in Schedule
1.32. Each of the Department Store Leases and each of the Department Store
Space Leases is valid, binding and in full force and effect, all rent and
other sums and charges payable by or to the Sellers thereunder are current
within applicable grace and notice periods, and no notice of default or
termination under any Department Store Leases or Department Store Space Leases
has been given or received by the Sellers which describes a default which has
not been cured, and to the best knowledge of the Sellers, no events have
occurred which would, with the giving of notice or the passage of time or
both, constitute a default. None of the Sellers nor any Affiliates of the
Sellers has an ownership, financial or other interest in the landlord under
any Department Store Leases. After the Effective Time, the Buyer will have,
good and marketable title (such as any reputable title insurance company
licensed to do business in the state in which such Department Store Leases
34
<PAGE>
are located will approve and insure without exceptions other than Permitted
Encumbrances) to all of the Department Store Leases subject to no Lien.
Section 4.12 Other Department Store Contracts. Schedule 4.12 sets
forth a true and complete list of each of the Other Department Store Contracts
which (a) is a reciprocal easement agreement or supplemental agreement, or (b)
provides for aggregate future payment of more than $60,000, or (c) has a term
exceeding one year and which may not be cancelled upon ninety or fewer days'
notice without any liability, penalty or premium (other than a nominal
cancellation fee or charge), or (d) is material to the business, operations or
financial condition of the Department Store Division; provided, that Schedule
4.12 does not list any of the Other Department Store Contracts for the
purchase or sale of goods or services entered into in the ordinary course of
business which may be cancelled on ninety or fewer days' notice without any
liability, penalty or premium (other than a nominal cancellation fee or
charge). Except as set forth in Schedule 4.12, each of the Other Department
Store Contracts is valid, binding and in full force and effect, and no notice
of default or termination under any Other Department Store Contracts has been
given or received by the Sellers which describes a default which has not been
cured, and to the best knowledge of the Sellers, no events have occurred which
would, with the giving of notice or the passage of time or both, constitute a
default.
Section 4.13 Department Store Inventory. All Department Store
Inventory included in the Department Store Assets is, and will be as of the
Effective Time, usable and saleable in the ordinary course of business of the
Department Store Division, and will be subject to no Lien at the Effective
Time.
Section 4.14 Department Store Intellectual Property. Schedule 4.14
sets forth a true and complete list of all trademarks, service marks, trade
names, brands, private labels, patents, copyrights, know-how or trade secrets
and licenses and rights with respect to the foregoing that the Sellers own or
possess the rights to use relating to the Department Store Division. Subject
to the licenses and other restrictions listed in Schedule 4.14, the Sellers
own or hold, and at the Effective Time, the Buyer will own or hold exclusive
rights to the Department Store Intellectual Property, in each case free from
Lien or restrictions. Except as set forth in Schedule 4.14, nothing has come
to the attention of the Sellers to the effect that: (a) any product, patent,
trademark, service mark, trade name, brand, private label, copyright,
know-how, trade secret or license presently being sold or employed by the
Department Store Division may infringe any rights owned or held by any other
Person; (b) the Sellers do not have exclusive rights to the trade name,
trademark and service mark "Strawbridge & Clothier" or (c) there is pending
or, to the best knowledge of the Sellers, threatened any claim or litigation
against the Sellers or the Department Store
35
<PAGE>
Division contesting the rights of the Sellers or the Department Store
Division with respect to any Department Store Intellectual Property.
Section 4.15 Employee Benefit Plans.
(a) Schedule 4.15 contains a written list of each Employee
Benefit Plan and benefit practices, policies, programs and arrangements which
cover the Seller's or any of its Subsidiaries' employees, former employees or
retired employees, including each Employee Pension Benefit Plan which is
qualified under Section 401(a) of the Code, and all collective bargaining
agreements relating to employee benefits with respect to which the Sellers
have incurred, or may incur, any future obligations to the Sellers' employees,
including, without limitation, all plans, agreements or arrangements relating
to deferred compensation, pensions, profit sharing, retirement income or other
benefits, severance arrangements, health benefits and insurance benefits
(other than plans, arrangements or agreements applying to employees of the
Sellers generally which are funded by insurance) (collectively, the "Seller
Plans"). The Seller has furnished or made available to the Buyer complete and
correct copies of all Seller Plans and the most recent actuarial valuation
reports and reports on Form 5500 for the most recent three years for each of
the Seller Plans that is a defined benefit plan (within the meaning of Section
3(35) of ERISA).
(b) Each of the Seller Plans has been administered and operated
in compliance with its terms and applicable law in all material respects,
including, without limitation, in accordance with the Code and ERISA, except
where the failure to be so administered or operated would not have a Material
Adverse Effect. The Seller has received a favorable determination letter from
the IRS with respect to each of the Seller Plans which is intended to be a
"qualified" plan under Section 401(a) of the Code and, to the best knowledge
of the Sellers, the IRS has taken no action to revoke any such letter. Except
as set forth on Schedule 4.15(b), no material liability under ERISA or the
Code or otherwise has been incurred or, to the knowledge of the Sellers, is
reasonably likely to be incurred by the Sellers, with respect to any Seller
Plans.
(c) The Sellers have not engaged in any transaction in
connection with which the Sellers, directly or indirectly, would be subject to
either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Code other than penalties or taxes which would
not have or would not be reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect.
36
<PAGE>
(d) There are no actions, suits, claims or proceedings, pending
or, to the best of knowledge of the Sellers, threatened (other than routine
claims for benefits) with respect to:
(i) any Seller Plans or any trust related thereto
(other than the Pension Plans (as defined in Section 7.5(d)) which
would be reasonably likely to result in any liability to the
Sellers or to any Seller Plans which would have or would be
reasonably likely to have a Material Adverse Effect; or
(ii) the Pension Plans or any trust related thereto
which would be reasonably likely to result in any liability to the
Sellers or to a Pension Plan or any trust related thereto, which
would adversely affect the funded status of a Pension Plan which is
a defined benefit plan (within the meaning of Section 3(35) of
ERISA).
(e) Except as set forth on Schedule 4.15(b), no liability
(other than liability for premium payments required by Section 4007 of ERISA,
which premiums have been paid when due to the PBGC), exists or has been
incurred with respect to any Seller Plans subject to Title IV of ERISA which
would or would be reasonably likely to have a Material Adverse Effect.
(f) The actuarial present value of all accrued benefits,
determined in accordance with actuarial assumptions and methods set forth in
the most recently completed actuarial valuation report, under each of the
Seller Plans which is a defined benefit plan within the meaning of Section
3(35) of ERISA and which is subject to Subtitles C and D of Title IV of ERISA
(each such plan being hereinafter referred to as a "Title IV Plan") and
maintained or contributed to by the Sellers, as from time to time in effect,
did not, as of the date of the most recently completed annual actuarial
valuation for each such plan, exceed the fair market value of the assets of
each of such Seller Plans as of such date.
(g) There have not been any "reportable events," as that term
is defined in Section 4043 of ERISA, with respect to any Title IV Plan
required to be reported to the PBGC since January 31, 1993.
(h) None of the Seller Plans subject to Part 3 of Subtitle B of
Title I or to Title II of ERISA nor any trusts have incurred any "accumulated
funding deficiency," as such term is defined in Section 302 of ERISA or
Section 412 of the Code (whether or not waived), since January 31, 1993, and
full payment has been
37
<PAGE>
made of all contributions required to be made under the terms of each of
the Seller Plans.
(i) With respect to the Strawbridge & Clothier Retiree Health
Plan described in Note 5 to the Seller Financial Statements for the fiscal
year ended January 28, 1995, which is a program within the Strawbridge &
Clothier Medical Plan (such program, herein called the "Retiree Health Plan"),
the Seller has furnished or made available to the Buyer complete and correct
copies of all Seller Plans which relate to the Retiree Health Plan, copies of
all communications or benefit summaries describing the Retiree Health Plan and
the actuarial valuation reports and reports on Form 5500, if any, for the most
recent three years for each of the Seller Plans that relate to the Retiree
Health Plan.
(j) With respect to the Seller's Deferred Compensation Plan for
Key Executives, described in Note 5 to the Seller Financial Statements for the
fiscal year ended January 28, 1995 ("Seller SERP"), the Seller has furnished
or made available to the Buyer complete and correct copies of the Seller SERP
documents, including trust agreements and insurance policies, if any, and
actuarial or other valuation reports prepared for the Seller SERP for the most
recent three years. The Sellers have not done and shall not do anything that
increases the present value of benefits accrued under the Seller SERP over the
present value of such benefits accrued as of January 1, 1996.
Section 4.16 Employment and Severance Agreements. Except as set
forth on Schedule 4.16, there are no employment, severance or termination
agreements to which the Sellers or the Department Store Division is a party
and which are Other Department Store Contracts.
Section 4.17 Accounts Receivable. The Accounts Receivable are
genuine and represent the valid and binding obligation of the obligor thereon,
enforceable in accordance with their terms, subject to any bankruptcy,
insolvency and similar laws affecting creditors' rights generally, and will be
subject to no Lien at the Effective Time.
Section 4.18 Assets Necessary to the Business. Except as set forth
in Schedule 4.18, the Department Store Assets constitute all of the assets
necessary to operate the Department Stores as traditional department stores.
Section 4.19 Proxy Statement/Prospectus; Registration Statement.
None of the information supplied or to be supplied by the Seller specifically
for
38
<PAGE>
inclusion or incorporation by reference in (a) the Buyer Registration
Statement, (b) the Proxy Statement/Prospectus, and (c) any other
document to be filed with the SEC or any Government by the Sellers or the
Buyer in connection with the transactions contemplated by this Agreement
("Other Filings") will, at the respective times filed with the SEC or such
Government and, in addition, (i) in the case of the Proxy Statement/
Prospectus, at the date it or any amendment or supplement is mailed to
shareholders, at the time of the meeting of shareholders of the Seller to be
held in connection with the Reorganization and at the Effective Time, and (ii)
in the case of the Buyer Registration Statement, when it becomes effective
under the Securities Act and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. The Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Exchange Act, except that no representation is
made by the Seller with respect to statements made therein based on
information supplied by the Buyer specifically for inclusion or incorporation
by reference in the Proxy Statement/Prospectus.
Section 4.20 Brokers and Finders. Except for Peter J. Solomon
Company Limited and Lehman Brothers, whose fees the Seller shall be solely
responsible for, no financial adviser, broker, agent or finder has been
retained by the Sellers in connection with this Agreement or any transaction
contemplated hereby and, except for Peter J. Solomon Company Limited and
Lehman Brothers, no such financial adviser, broker, agent or finder is
entitled to any fee or other compensation from the Sellers on account of this
Agreement or any transaction contemplated hereby.
Section 4.21 Pennsylvania Business Corporation Law. The
Pennsylvania Business Corporation Law anti-takeover provisions are
inapplicable to this Agreement and the Escrow Agreement and the transactions
contemplated hereby and thereby.
Section 4.22 Voting Requirement. The affirmative vote of a majority
of votes entitled to be cast by the holders of the Seller Series A Common
Stock and the Seller Series B Common Stock, voting separately as a series and
together, at a meeting of holders of outstanding shares of Seller Common Stock
at which there is a quorum, in favor of this Agreement and the transactions
contemplated hereby are the only votes of the holders of any class or series
of the Seller's capital stock necessary to approve this Agreement, the Escrow
Agreement and the transactions contemplated hereby and thereby under any
applicable law, rule or regulation or pursuant to the requirements of the
Seller's Articles and Bylaws.
39
<PAGE>
Section 4.23 Labor Matters. There is no unfair labor practice
complaint against the Sellers pending before the National Labor Relations
Board or any other Government performing similar functions. There is no
proceeding with respect to the Sellers actually pending before the National
Labor Board. There is no labor strike, dispute, slowdown or stoppage actually
pending or, to the best knowledge of the Sellers, threatened against or
involving the Sellers. There is no pending representation question respecting
the employees of the Sellers. No labor grievance has been filed with the
Sellers which has had or may have a Material Adverse Effect on the Sellers,
and no arbitration proceeding under any collective bargaining agreement, which
has had or may have such an effect, is pending or, to the Sellers' knowledge,
threatened. No collective
40
<PAGE>
bargaining agreement is currently being negotiated by the Sellers.
Schedule 7.2 sets forth a complete and accurate list of all collective
bargaining agreements affecting any employees of the Department Store
Division.
Section 4.24 Insurance. Schedule 4.24 contains an accurate and
complete description of all policies of liability, fire, workers' compensation
and other forms of insurance owned or held by the Sellers and covering the
Department Store Division or any of the Seller Plans. All such policies are
valid and enforceable and in full force and effect, are underwritten by
unaffiliated financially sound and reputable insurers, are sufficient for all
applicable requirements of law and provide insurance, including, without
limitation, fire, general liability and product liability insurance, in such
amounts and against such risks as is customary for companies engaged in
similar businesses to protect the Department Store Assets.
Section 4.25 Environmental. Schedule 4.25 contains an accurate and
complete description of all environmental reports known to the Sellers that
affect any of the Department Store Assets, and the Sellers have delivered a
complete copy of each such report to the Buyer. Except as set forth in
Schedule 4.25 or in the reports listed therein, the Sellers have no knowledge
of the presence or release of any toxic substance or hazardous material or of
any other environmental condition or contamination in or from the Department
Store Assets.
Section 4.26 Disclosure. No representation or warranty by the
Sellers in this Agreement and no statement contained in any document
(including, without limitation, financial statements, disclosure schedules and
the confidential selling memorandum), certificate or other writing furnished
or to be furnished by the Sellers pursuant to the provisions hereof contains
or will contain any untrue statement of material fact or omits or will omit to
state any material fact necessary to make the statements herein or therein not
misleading, it being understood that as used in this Section "material" means
material to the Department Store Division taken as a whole.
41
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as follows:
Section 5.1 Corporate Organization. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of New York, has corporate power to own all of its properties and assets and
to carry on its business as it is now being conducted, and is duly qualified
to do business and is in good standing in all jurisdictions where its
ownership, operation or leasing of property or assets or the conduct of its
business requires it to be so qualified, except in such jurisdictions, if any,
where the failure to be so qualified or in good standing would not,
individually or in the aggregate, have a Material Adverse Effect. The Buyer
has all necessary Government authorizations to own, lease and operate all of
its properties and assets and to carry on its business as now being conducted,
except any such authorizations the failure to obtain which would not have or
would not be reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect. True and complete copies of the Articles of
Incorporation and Bylaws of the Buyer as currently in effect have been
provided to the Seller.
Section 5.2 Capitalization. The authorized capital stock of the
Buyer consists of 51,323 shares of Preferred Stock, no par value, of which
11,974 were issued and outstanding as of February 3, 1996, 73,273 shares of
$1.80 Preference Stock, no par value, of which 26,653 were issued and
outstanding as of February 3, 1996, 9,878 shares of 3-3/4% Cumulative
Preference Stock, par value $100.00 per share, of which no shares were issued
and outstanding as of February 3, 1996, 25,000,000 shares of Preference Stock,
including ESOP Preference Shares, par value $0.50 per share, of which 722,126
were issued and outstanding as of February 3, 1996, and 700,000,000 shares of
May Common Stock, of which 248,871,118 were issued and outstanding and
64,765,878 were held in treasury by the Buyer as of February 3, 1996. There
are no outstanding obligations, options or rights to acquire shares of May
Common Stock or any outstanding securities or other instruments convertible
into shares of May Common Stock, other than pursuant to this Agreement, as
disclosed in the Buyer Filings or the Buyer Financial Statements or employee
stock options.
42
<PAGE>
Section 5.3 Subsidiaries Stock; Significant Subsidiaries.
(a) Except as set forth in the Buyer Financial Statements or
the Buyer Filings or in Schedule 5.3, the Buyer owns, directly or indirectly,
all of the outstanding shares of capital stock of its Subsidiaries free and
clear of any Lien and has made no material investment in, or material advance
to, any company, partnership, joint venture or other business association or
entity, other than Buyer's Subsidiaries. There are no outstanding options,
warrants or other rights to acquire, nor any outstanding securities
convertible into, capital stock of any class of any Subsidiaries of the Buyer.
There are no voting trusts or other agreements or understandings to which the
Buyer or any Buyer's Subsidiaries is a party or is bound with respect to the
voting of the capital stock of the Buyer or any Buyer's Subsidiaries. All of
the outstanding shares of capital stock of the Buyer's Subsidiaries owned
directly or indirectly by the Buyer have been validly issued and are fully
paid, non-assessable and free of preemptive rights.
(b) Each Significant Subsidiary of the Buyer is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has corporate power and all necessary
Government authorizations to own, operate or lease all of its properties and
assets and to carry on its business as it is now being conducted, except any
such authorizations the failure to obtain which would not have or would not be
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect or prevent the consummation of the transactions contemplated
hereby and by the Escrow Agreement, and is duly qualified to do business and
is in good standing in each jurisdiction where its ownership, operation, or
leasing of property or the conduct of its business requires such
qualification, except in such jurisdictions, if any, where the failure to be
so qualified or in good standing would not have or would not be reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect.
Section 5.4 Due Authorization. The execution, delivery and
performance of this Agreement and the Escrow Agreement have been duly
authorized by all necessary corporate action on the part of the Buyer and this
Agreement has been duly executed, and at the First Closing the Escrow
Agreement will be executed, by a duly authorized officer of the Buyer and this
Agreement constitutes and, upon execution the Escrow Agreement will
constitute, a valid and binding agreement of the Buyer, enforceable against it
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and subject to general principles of equity (regardless of whether
enforcement is sought in equity or law).
43
<PAGE>
Section 5.5 Consents and Approvals; No Violation. Subject to
(a) the expiration or earlier termination of all waiting periods under the HSR
Act, (b) compliance with all applicable requirements of the Securities Act and
the Exchange Act, and (c) the approval for listing, subject to official notice
of issuance, of the Stock Consideration on the NYSE, the execution and
delivery of this Agreement and the Escrow Agreement do not, and the
consummation of the transactions contemplated hereby and thereby will not, (i)
violate or conflict with any provision of the Buyer's Restated Articles of
Incorporation or By-laws, (ii) except as set forth in Schedule 5.5, violate or
conflict with or result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions
or provisions of, any note, bond, mortgage, indenture, license, lease,
agreement or other instrument or obligation to which the Buyer or any of its
Subsidiaries is a party or by which the Buyer or any of its Subsidiaries or
any of their respective properties or assets may be bound, except for such
defaults (or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents either have been obtained by the Buyer or the
obtaining of which has been waived by the Seller, or (iii) violate any order,
writ, injunction, decree, arbitration award, statute, rule or regulation
applicable to the Buyer, any of its Subsidiaries or any of their respective
properties or assets (other than any applicable "bulk sales" laws), excluding
from the foregoing clauses (ii) and (iii) such defaults and violations which,
individually or in the aggregate, would not have a Material Adverse Effect.
Section 5.6 Financial Statements; SEC Filings.
(a) True and complete copies of the Buyer Financial Statements
have been made available by the Buyer to the Seller. The Buyer Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis, except as noted in the Buyer Financial Statements, and present fairly
the consolidated financial position of the Buyer and its Subsidiaries at the
respective dates thereof and the consolidated results of operations and
changes in financial position of the Buyer and its Subsidiaries for the
periods respectively then ended subject, in the case of unaudited interim
statements, to normal year-end adjustments. The Buyer Financial Statements
referred to in this Agreement shall be deemed to include any notes and
schedules to such financial statements.
(b) Since January 1, 1993, each of the Buyer and any of its
Subsidiaries that is required to make filings under the Securities Act or the
Exchange Act has filed with the SEC all forms, reports and documents required
to be filed by it pursuant to the Securities Act and the Exchange Act, all of
which, as of their respective filing dates, complied in all material respects
with all applicable
44
<PAGE>
requirements of the Securities Act and the Exchange Act. The Buyer has
heretofore made available to the Seller a true and complete copy of
each registration statement, final prospectus and definitive proxy statement
filed by the Buyer or any of its Subsidiaries with the SEC since January 1,
1993, and each report filed by the Buyer or its Subsidiaries with the SEC
since January 1, 1993; none of the Buyer Filings as of the respective dates on
which they were filed with the SEC contained any untrue statement of a
material fact or omitted to state a material fact necessary to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 5.7 Absence of Changes. Except as disclosed in
Schedule 5.7, the Buyer Filings or the Buyer Financial Statements, and except
as contemplated by this Agreement, since January 28, 1995, the Buyer and its
Subsidiaries have conducted their respective businesses in the ordinary course
and there has not been:
(a) any Material Adverse Effect or any event which is
reasonably likely to result in a Material Adverse Effect;
(b) any change by the Buyer in the accounting methods,
principles or practices, other than changes required by generally accepted
accounting principles;
(c) any material amendment or termination by the Buyer or its
Subsidiaries of any contract, agreement or license which is material to the
Buyer and its Subsidiaries taken as a whole;
(d) any entering into by the Buyer or its Subsidiaries of any
contract, agreement or license which is material to the Buyer and its
Subsidiaries taken as a whole;
(e) any indebtedness incurred by the Buyer or its Subsidiaries
in respect of borrowed money or any commitment in respect of borrowed money
entered into by the Buyer or its Subsidiaries other than in the ordinary
course of business; or
(f) any revaluation by the Buyer of any of its assets,
including without limitation, writing down the value of inventory or writing
off notes or accounts receivable other than in the ordinary course of
business.
45
<PAGE>
Section 5.8 Absence of Undisclosed Liabilities. There are no
liabilities or obligations of the Buyer or its Subsidiaries of any kind
whatsoever, whether or not accrued and whether or not contingent or absolute,
determined or determinable, that are material to the Buyer and its
Subsidiaries taken as a whole, other than (a) liabilities or obligations which
are disclosed, accrued or reserved against in the Buyer Financial Statements,
(b) liabilities and obligations disclosed in the Buyer Filings or on any of
the Schedules to this Agreement, (c) liabilities incurred on behalf of the
Buyer in connection with this Agreement, and (d) liabilities incurred in the
ordinary course of business since October 28, 1995, none of which, either
individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect.
Section 5.9 Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Buyer,
threatened against the Buyer or its Subsidiaries before any domestic or
foreign court or governmental or regulatory authority or body which,
individually or in the aggregate, have a reasonable likelihood of resulting in
a Material Adverse Effect. Neither the Buyer nor any of its Subsidiaries is
subject to any outstanding order, writ, injunction or decree which has had or
could be reasonably expected to have a Material Adverse Effect.
Section 5.10 Taxes. The Buyer and its Subsidiaries have duly
and timely filed or caused to be filed, or will duly and timely file or cause
to be filed, all income Tax Returns and all other material Tax Returns
required to be filed at or before the Effective Time, taking into account any
extension for time to file granted to or obtained on behalf of the Buyer and
its Subsidiaries. All such Tax Returns (including amendments) are, or will be
when filed, complete and accurate in all material respects. The Buyer and its
Subsidiaries have paid (or there has been paid on their behalf), or have
established, or, with respect to Taxes which are or will be due but not yet
payable as of the Effective Time, will establish, reserves which are adequate
for the payment of, all Taxes for all taxable periods (or portions thereof)
ending on or before the Effective Time. Neither the Buyer nor any of its
Subsidiaries is delinquent in the payment of any Tax. No material
deficiencies for any Tax have been proposed, asserted or assessed (tentatively
or definitely), in each case by any taxing authority, against the Buyer or any
of its Subsidiaries. Except as set forth on Schedule 5.10, as of the date of
this Agreement, there are no pending requests for waivers of the time to
assess any such federal Tax. The federal income Tax Returns of the Buyer and
each of its Subsidiaries that has been a member of the affiliated group of
corporations of which the Buyer is the common parent for all periods during
its existence have been audited by the Internal Revenue Service through the
taxable year ending February 2, 1991 and the federal income Tax Returns of
each of its Subsidiaries that has not been a member of the affiliated group of
corporations of
46
<PAGE>
which the Buyer is the common parent for all periods during its existence
have been audited through the taxable year ending February 2, 1991.
Section 5.11 Employee Benefit Plans.
(a) Schedule 5.11 contains a written list of every Employee
Pension Benefit Plan which is "qualified" under Section 401(a) of the Code and
which covers current employees of the Buyer. The Buyer has furnished or made
available to the Seller complete and correct copies of all such plans and the
most recent actuarial valuation report for each the such plan that is a
defined benefit plan (within the meaning of Section 3(35) of ERISA). None of
the such plans is a Multiemployer Plan.
(b) Each of the plans referred to in clause (a) above has been
administered and operated in compliance with its terms and applicable law in
all material respects, including, without limitation, in accordance with the
Code and ERISA, except where the failure to be so administered or operated
would not have a Material Adverse Effect. The Buyer has received a favorable
determination letter from the IRS with respect to each of such plans and, to
the best knowledge of the Buyer, the IRS has taken no action to revoke any
such letter. No material liability under ERISA or the Code or otherwise has
been incurred or, to the best knowledge of the Buyer, is reasonably likely to
be incurred by the Buyer, with respect to any of such plans.
(c) Neither the Buyer nor, to the best knowledge of the Buyer,
any of its Subsidiaries has engaged in any transaction in connection with
which the Buyer or any of its Subsidiaries, directly or indirectly, would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code other than penalties or taxes
which would not have or would not be reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect.
(d) There are no actions, suits, claims or proceedings, pending
or, to the best knowledge of the Buyer, threatened (other than routine claims
for benefits), which would be reasonably likely to result in any liability to
the Buyer or to any of its Subsidiaries with respect to any of the plans
referred to in clause (a) above or any trust related thereto which would have
or would be reasonably likely to have a Material Adverse Effect.
47
<PAGE>
(e) No liability (other than liability for premium payments
required by Section 4007 of ERISA, which premiums have been paid when due to
the PBGC), exists or has been incurred with respect to any of the plans
referred to in clause (a) above subject to Title IV of ERISA which would or
would be reasonably likely to have a Material Adverse Effect.
(f) The actuarial present value of all accrued benefits,
determined in accordance with actuarial assumptions and methods set forth in
the most recently completed actuarial valuation report, under each of the
plans referred to in clause (a) above which is a Title IV Plan and maintained
or contributed to by the Buyer and any of its Subsidiaries, as from time to
time in effect, did not, as of the date of the most recently completed annual
actuarial valuation for each such plan, exceed the value of the assets of each
such plan as of such date.
(g) There have not been any "reportable events", as that term
is defined in Section 4043 of ERISA, with respect to any Title IV Plan
required to be reported to the PBGC since January 31, 1993.
(h) None of the plans referred to in clause (a) above subject
to Part 3 of Subtitle B of Title I or to Title II of ERISA nor any trusts have
incurred any "accumulated funding deficiency", as such term is defined in
Section 302 of ERISA or Section 412 of the Code (whether or not waived), since
January 31, 1993, and full payment has been made of all contributions required
to be made under the terms of each such plan.
Section 5.12 Proxy Statement/Prospectus; Registration Statement.
None of the information supplied by the Buyer specifically for inclusion or
incorporation by reference in (a) the Buyer Registration Statement, (b) the
Proxy Statement/Prospectus, and (c) the Other Filings will, at the respective
times filed with the SEC or such Government and, in addition, (i) in the case
of the Proxy Statement/Prospectus, at the date it or any amendment or
supplement is mailed to shareholders, at the time of the meeting of
shareholders of the Seller to be held in connection with the Reorganization
and at the Effective Time, and (ii) in the case of the Buyer Registration
Statement, when it becomes effective under the Securities Act and at the
Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. The Buyer Registration Statement will comply as to
form in all material respects with the provisions of the Securities Act,
except that no representation is made by the Buyer with respect to statements
made therein based on information
48
<PAGE>
supplied by the Seller specifically for inclusion or incorporation by
reference in the Buyer Registration Statement.
Section 5.13 Brokers and Finders. Except for Gleacher Natwest &
Co., whose fees the Buyer shall be solely responsible for, no financial
adviser, broker, agent or finder has been retained by the Buyer in connection
with this Agreement or any transaction contemplated hereby and, except for
Gleacher, Natwest & Co., no such financial adviser, broker, agent or finder is
entitled to any fee or other compensation from the Buyer on account of this
Agreement or any transaction contemplated hereby.
Section 5.14 Ownership of Seller Common Stock. Immediately prior to
entering into this Agreement, neither the Buyer nor any of its Subsidiaries
owned any shares of Seller Common Stock.
ARTICLE VI
COVENANTS OF THE PARTIES
Section 6.1 Conduct of Business of the Department Store Division.
Except as expressly provided in this Agreement, during the period from the
date of this Agreement to the Effective Time, the Seller will and will cause
the Department Store Division to conduct its business and operations according
to its ordinary and usual course of business.
(a) Without limiting the generality of the foregoing, and,
except as otherwise expressly provided in this Agreement, prior to the
Effective Time, without the prior written consent of the Buyer, the Seller
will not and will not permit any of its Subsidiaries or the Department Store
Division to:
(i) create, incur or assume any long-term debt
(including obligations in respect of leases), or except in the
ordinary course of business under existing lines of credit, create,
incur, assume, maintain or permit to exist any short-term debt
(other than intercompany loans and advances to or from any
Department Store Subsidiaries in a net aggregate amount at any one
time outstanding not exceeding $100,000), if, in either such case,
such long-term or short-term debt would constitute Assumed
Department Store Liabilities or a liability of any Department Store
Subsidiaries;
49
<PAGE>
(ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other Person, if such assumption,
guarantee, endorsement or other liability would constitute Assumed
Department Store Liabilities or a liability of any Department Store
Subsidiaries; provided, that the Seller, the Department Store
Division and the Department Store Subsidiaries may endorse
negotiable instruments in the ordinary course of business;
(iii) make any loans, advances or capital
contributions to, or investments in, any other Person, if the
receivable with respect to such loan would constitute Department
Store Assets;
(iv) without the consent of the Buyer which shall
not be unreasonably withheld, increase in any manner the
compensation of any of the Department Store Division employees,
except such increases and promotions as are granted pursuant to
normal periodic performance reviews and related compensation and
benefit increases (but not any general across-the-board increases)
or normal promotions to fill positions being vacated (provided that
the foregoing shall not apply to any non-Affected Employees so long
as the same does not in any way affect the obligations or
liabilities of the Buyer under this Agreement, particularly Article
VII); or pay or agree to pay any pension, retirement allowance or
other employee benefit not required or permitted by any existing
plan, agreement or arrangement to any Affected Employees (as
defined in Section 7.5(a)); or commit itself to any additional
pension, profit-sharing, bonus, incentive, deferred compensation,
stock purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other employee benefit
plan, agreement or arrangement, or to any employment agreement or
consulting agreement with or for the benefit of any Affected
Employees, or to amend any of the Seller Plans (including without
limitation the Employee Pension Benefit Plan, the Employee Welfare
Benefit Plan, the Savings Plan (as defined in Section 7.5(b)), the
Retiree Health Plan (as defined in Section 4.15(i)) and the Seller
SERP (as defined in Section 4.15 (j))) in which any Affected
Employees, participate or are parties;
(v) permit any of its current insurance (or
reinsurance) policies to be cancelled or terminated or any of the
50
<PAGE>
coverage thereunder to lapse if such policy covers the
Department Store Assets or any Department Store Division
employees, former employee or retired employee, or insures risks,
contingencies or liabilities which could result in Assumed
Department Store Liabilities or a liability of any Department Store
Subsidiaries, unless simultaneously with such termination,
cancellation or lapse, replacement policies providing coverage
equal to or greater than the coverage remaining under those
cancelled, terminated or lapsed policies are in full force and
effect;
(vi) (x) sell, lease or transfer any Department
Store Premises, (y) create any Lien on any Department Store Assets;
or (z) except in the ordinary course of business sell, transfer or
otherwise dispose of or agree to sell, transfer or otherwise
dispose of, any other Department Store Assets;
(vii) without the consent of the Buyer which shall
not be unreasonably withheld, amend any charter document of any of
the Department Store Subsidiaries, or sell transfer or divest any
interest in any of the Department Store Subsidiaries;
(viii) amend, modify, supplement or terminate any
Department Store Leases or any Department Store Space Leases or any
Other Department Store Contracts with respect to the Department
Store Real Property or enter into any new agreement with respect to
the Department Store Real Property or the Department Store Leased
Real Property (except, with the consent of the Buyer which shall
not be unreasonably withheld, the Sellers may execute subordination
agreements, estoppel certificates and similar instruments required
to be executed pursuant to the terms of the Department Store Leases
in respect of the Department Store Leased Real Property; provided,
the Seller shall deliver to the Buyer copies of such proposed
subordination agreements, estoppel certificates and similar
instruments no less than two Business Days before the execution
thereof);
(ix) waive or release any rights of any material
value of or with respect to the business of the Department Store
Division;
51
<PAGE>
(x) without the consent of the Buyer which shall not
be unreasonably withheld, change any accounting methods, principles
or practices relating to the Department Store Division, other than
changes required by generally accepted accounting principles;
(xi) without the consent of the Buyer which shall
not be unreasonably withheld, enter into any other agreement,
commitments or contracts, except agreement, commitments or
contracts made in the ordinary course of business and of the usual
size and duration;
(xii) without the consent of the Buyer which shall
not be unreasonably withheld, permit any right with respect to
Department Store Intellectual Property to lapse or be cancelled;
(xiii) take any other action which would cause any
of the representations and warranties of the Seller set forth in
Article IV not to be true and correct as of the date of this
Agreement and as of the First Closing Date as though made as of
such date, except as expressly contemplated by this Agreement;
(xiv) open, at any Clover store, new proprietary
credit card accounts that would be Accounts Receivable;
(xv) permit deferred billing for any purchases on
Accounts Receivable;
(xvi) without the consent of the Buyer which shall
not be unreasonably withheld, modify any terms, policies, practices
or procedures relating to the Accounts Receivable; or
(xvii) enter into any agreement to do any of the
foregoing.
(b) Without limiting the generality of the preceding obligation
of the Seller to cause the Department Store Division to conduct its business
and operations according to its ordinary course of business, the Seller shall
and shall cause each of its Subsidiaries and the Department Store Division to:
52
<PAGE>
(i) perform their respective obligations under the
Department Store Contracts and the Permitted Encumbrances in
accordance with their terms, including the making of all payments
when due;
(ii) comply in all material respects with all
statutes, laws, ordinances, rules and regulations applicable to the
Department Store Assets and Assumed Department Store Liabilities;
(iii) pay in full the cost of all work which is
performed in the Department Store Premises promptly after it is
completed and in any event prior to the Effective Time;
(iv) immediately notify the Buyer if the Seller
receives any notices from any lessor, Government, insurance company
or other Person of any default or the need for any repairs,
alterations or improvements to the Department Store Premises, or
that any of the Department Store Premises are or may be in
violation of any law, and promptly cure the default or cause
compliance at the Seller's cost;
(v) immediately notify the Buyer if the Seller
receives any notices of or otherwise becomes aware of any
condemnation proceeding affecting the Department Store Premises;
(vi) obtain the Buyer's approval, which shall not be
unreasonably withheld, before (x) renewing, or (y) electing not to
renew any Department Store Leases or Department Store Space Leases;
(vii) obtain the Buyer's approval, which shall not
be unreasonably withheld, before (x) renewing, or (y) electing not
to renew any material Department Store Contracts;
(viii) maintain all insurance policies and name the
Buyer as additional insured/loss payee on all policies that relate
to the Department Store Assets;
(ix) immediately notify the Buyer of any pending or
threatened investigation by or proceeding before the IRS or
Department of Labor relating to any Seller Plans which are defined
benefit pension plans;
53
<PAGE>
(x) cancel, as and when reasonably requested by the
Buyer, Department Store Purchase Orders slated for delivery after
the Effective Time; and
(xi) maintain and comply in all material respects
with the Seller Plans.
Section 6.2 Disposition of the Excluded Assets.
(a) During the period from the date of this Agreement until the
Second Closing Date the Seller shall use best efforts to consummate the
Disposition.
(b) The parties intend that the Disposition will not create,
give rise to or result in any liability or obligation to the Buyer. In this
regard, the Seller will (i) on or prior to the First Closing Date with respect
to any Disposition that occurs and is consummated on or prior to the First
Closing Date, or on or prior to the Second Closing Date but after the First
Closing Date with respect to any Disposition that occurs or is consummated
after the First Closing Date but before the Second Closing Date, pay or cause
to be paid or satisfy or cause to be satisfied any liabilities or obligations
arising from or otherwise attributable to the Disposition that become due on
or prior to the First Closing Date or the Second Closing Date, as the case may
be and (ii) establish an adequate reserve for any known, actual or contingent
liabilities or obligations of the Seller or any of its Subsidiaries arising
from or attributable to the Disposition, which reserve shall become part of
the Dissolution Escrow and Trust to be established under Section 6.13 of this
Agreement.
Section 6.3 Access and Investigation.
(a) During the period from the date of this Agreement to the
Effective Time the Buyer at its discretion may locate one or more of its
representatives at the headquarters of the Department Store Division. During
such period the Seller will cause its representatives and those of the
Department Store Division to consult as requested by the Buyer on a regular
basis with such representatives of the Buyer and to discuss the ongoing
operations of the Department Store Division. The Seller will promptly notify
the Buyer of any significant change in the normal course of business of the
Department Store Division and of any complaints, investigations or hearings
(or communications indicating that the same may be contemplated) by or of any
Government, or the institution or threat of any significant litigation, in
each case involving the Department Store Division, and will
54
<PAGE>
keep the Buyer fully informed of such events and permit the Buyer's
representatives access to all material prepared in connection therewith.
(b) Between the date of this Agreement and the Effective Time,
representatives of the Buyer, including, without limitation, directors,
officers, accountants, attorneys and financial advisors, may make such
investigation of the business and operations of the Department Store Division,
the Department Store Assets and the Assumed Department Store Liabilities,
including the confirmation of Department Store Cash, the Department Store
Inventory and the Department Store Accounts Receivable, as it deems necessary
or advisable, but such investigation shall not affect any representations and
warranties of the Sellers hereunder.
(c) Between the date of this Agreement and the Effective Time,
the Seller agrees to permit the representatives of the Buyer to have access
during normal business hours, upon reasonable notice, to all Department Store
Files and Records and all other books and records of the Sellers, including
tax returns and accountants' work papers, which in any way involve or relate
to the Department Store Division, the Department Store Assets or the Assumed
Department Store Liabilities.
(d) Until the Effective Time, all information obtained by the
Buyer and its representatives pursuant to this Section 6.3 shall be kept
confidential in accordance with the terms and conditions of the
Confidentiality Agreement, dated November 9, 1995, between the Buyer and Peter
J. Solomon Company Limited, on behalf of the Seller.
Section 6.4 Proxy Statement/Prospectus; Buyer Registration
Statement.
(a) Promptly after the execution of this Agreement, the Buyer
and the Seller shall cooperate with each other and use all reasonable efforts
to prepare and, as soon as is reasonably practicable, file with the SEC the
Proxy Statement/Prospectus, together with appropriate forms of proxy, with
respect to the shareholder meeting of the Seller referred to in Section 6.5,
and the Buyer shall file the Buyer Registration Statement under the Securities
Act for the purpose of registering the Stock Consideration issuable pursuant
to Articles II and III hereof, which shall contain the Proxy
Statement/Prospectus. The parties shall use all reasonable efforts to have
the Buyer Registration Statement declared effective under the Securities Act,
the Proxy Statement/Prospectus cleared by the SEC as promptly as practicable
after filing and, as promptly as practicable after the Proxy
Statement/Prospectus has been so cleared and the Buyer Registration Statement
declared effective, shall mail the Proxy Statement/Prospectus that is a part
of the
55
<PAGE>
Buyer Registration Statement to the shareholders of the Seller as of
the record date for the shareholder meeting referred to in Section 6.5.
The Buyer and the Seller shall also take such actions as reasonably may be
required to be taken under applicable "blue sky" laws in connection with the
issuance of the Stock Consideration. The Buyer and the Seller each agree to
correct any information provided by it for use in the Buyer Registration
Statement or the Proxy Statement/Prospectus which shall have become false or
misleading in any material respect and shall take all steps necessary to cause
the Buyer Registration Statement and the Proxy Statement/Prospectus as so
corrected to be filed with the SEC to be disseminated to the shareholders of
the Seller Common Stock as and to the extent required by applicable law.
(b) Each of the parties hereto shall notify the other party
hereto promptly of the receipt by it of any comments of the SEC and of any
request by the SEC for amendments or supplements to the Proxy
Statement/Prospectus or the Buyer Registration Statement and will supply the
other party hereto with copies of all correspondence between it and its
representatives, on the one hand, and the SEC or the members of its staff or
any other Government official, on the other hand, with respect to the Proxy
Statement/Prospectus or the Buyer Registration Statement. The Buyer and the
Seller each shall use all reasonable efforts to respond promptly to any
comments made by the SEC or any other Government official with respect to the
Proxy Statement/Prospectus or the Buyer Registration Statement.
(c) Prior to the Effective Time, the Seller shall cause to be
delivered to the Buyer a letter identifying all persons who may be deemed to
have been at the time of the record date for the shareholder meeting referred
to in Section 6.5, "affiliates" of the Seller for purposes of Rule 145 under
the Securities Act. The Seller shall provide the Buyer with such information
and documents as the Buyer shall reasonably request for purposes of reviewing
such letter. The Seller will use its reasonable best efforts to obtain from
each Person who is identified in such letter as an affiliate of the Seller
after the date of this Agreement and prior to the Effective Time a written
agreement, in a form reasonably satisfactory to the Buyer, that such affiliate
will not sell, offer to sell or otherwise dispose of any of the May Common
Stock received by such affiliate in the Reorganization otherwise than within
the limits and in accordance with the provisions of Rule 145, as amended from
time to time, or except in a transaction that, in the opinion of legal counsel
reasonably satisfactory to the Buyer, is exempt from registration under the
Securities Act; provided that in no event will such affiliate sell, offer to
sell or otherwise dispose of any shares of May Common Stock prior to the
publication of financial results covering at least 30 days of post-Effective
Time of the Buyer's use of the Department Store Assets as required by SEC
Accounting Series Release No. 135. The Buyer Registration Statement will
56
<PAGE>
include such information as may be requested by the Seller to permit
resales of the May Common Stock received by a Person who may be deemed
to be an underwriter of May Common Stock pursuant to Rule 145, and the
effectiveness of the Buyer Registration Statement under the Securities Act and
applicable "blue sky" laws shall be maintained for as long as is possible
after the Effective Time without being required to file a post-effective
amendment containing updated financial statements. Each of the Buyer and such
affiliates will provide customary indemnification to one another with respect
to the foregoing.
Section 6.5 Shareholder Meeting. The Seller shall take all action
necessary in accordance with applicable law and its Articles and Bylaws to
convene a meeting of its shareholders as promptly as possible for the purpose
of obtaining shareholder approval of the Reorganization. The Proxy
Statement/Prospectus shall contain the recommendation of the Board of
Directors of the Seller that the shareholders of the Seller vote to approve
the Reorganization, and the Seller shall use its reasonable best efforts to
solicit from shareholders of the Seller proxies in favor of such approval.
Section 6.6 Acquisition Proposals. Unless and until this Agreement
shall have been terminated pursuant to the terms hereof, except as otherwise
contemplated by this Agreement, the Seller will not (and will not permit any
of its Subsidiaries to and will use its reasonable best efforts to cause its
officers, directors and employees and any investment banker, attorney,
accountant or other agent retained by it or any of its Subsidiaries not to)
initiate or solicit, directly or indirectly, any proposal or offer to acquire
all or any substantial part of the business and properties or capital stock of
the Seller or any of its Subsidiaries, whether by merger, purchase of assets,
tender offer or otherwise (an "Acquisition Proposal"), or initiate, directly
or indirectly, any contact with any Person in an effort to or with a view
towards soliciting any Acquisition Proposal except as expressly provided in
Section 6.2 hereof in respect of the Disposition. In the event the Seller or
any of its Subsidiaries shall receive an Acquisition Proposal, the Seller
shall immediately inform the Buyer as to any such Acquisition Proposal and the
details thereof and shall deliver to the Buyer a copy of any letter, proposal
or other document in which an Acquisition Proposal is expressed.
Section 6.7 Consents. The Buyer and the Seller shall use their
respective reasonable best efforts to obtain all consents and approvals
required in connection with, and waivers of any violations, breaches and
defaults that may be caused by, the consummation of the transactions
contemplated by this Agreement or the Escrow Agreement.
57
<PAGE>
Section 6.8 Filings. The Buyer and the Seller shall, as promptly as
practicable, make any required filings and any other required submissions
under any law, statute, order, rule or regulation with respect to the
transactions contemplated by this Agreement or the Escrow Agreement and shall
cooperate with each other with respect to the foregoing.
Section 6.9 Best Efforts; Further Assurances.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use its reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations,
including, without limitation, the Pennsylvania Business Corporation Law, or
to remove any judgments, injunctions, orders, decrees or other impediments or
delays, legal or otherwise, to consummate the transactions contemplated by
this Agreement and the Escrow Agreement.
(b) If at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement or the
Escrow Agreement, the proper officers and directors of the parties hereto
shall take, or cause to be taken, all such necessary action.
(c) Neither the Seller nor the Buyer shall knowingly take any
action that, or knowingly fail to take any action the failure of which, would
reasonably likely jeopardize the Reorganization contemplated herein to qualify
as a reorganization within the meaning of Section 368(a) of the Code.
Section 6.10 Publicity. The initial press release(s) with respect
to the execution of this Agreement shall be acceptable to the Buyer and the
Seller. Thereafter, so long as this Agreement is in effect, neither the Buyer
or the Seller nor any Subsidiaries of either shall issue or cause the
publication of any press release or other announcement with respect to this
Agreement, the Escrow Agreement or the transactions contemplated hereby or
thereby without prior consultation with the other party, except as may be
required by law or by any listing agreement with a national securities
exchange.
Section 6.11 Collective Bargaining Agreements. Nothing contained in
this Agreement shall require the Buyer to assume, adopt or otherwise be bound
by the terms of any collective bargaining agreement to which the Seller or any
of its Subsidiaries has been, is now or shall become, a party, and the Buyer
expressly
58
<PAGE>
disclaims any intent or obligation to assume, adopt or otherwise be bound
by the terms of any such collective bargaining agreement.
Section 6.12 NYSE Listing. To the extent necessary under applicable
rules and regulations of the NYSE, the Buyer shall use all reasonable efforts
to prepare and submit to the NYSE a listing application covering the Stock
Consideration and shall use all reasonable efforts to obtain, prior to the
Effective Time, approval for the listing of such shares, upon official notice
of issuance.
Section 6.13 Dissolution; Dissolution Escrow and Trust.
(a) Within 12 months after the First Closing Date, the Seller
will effect the Dissolution pursuant to which the Seller will distribute in
complete liquidation the shares of May Common Stock received as the Stock
Consideration (other than those shares subject to the Dissolution Escrow and
Trust described below) and all other assets that were retained by the Seller
and not transferred to the Buyer pursuant to this Agreement (other than those
assets subject to the Dissolution Escrow and Trust described below) to the
holders of the Seller Common Stock.
(b) The Seller will, prior to the Dissolution (i) cause to be
paid or satisfied all of the Seller's and its Subsidiaries' liabilities that
become due on or prior to the date of Dissolution, and (ii) establish an
escrow and trust (the "Dissolution Escrow and Trust") the terms of which will
qualify it as a liquidating trust for U.S. federal income tax purposes
containing cash (or, to the extent, the Seller's available cash shall be
insufficient, shares of May Common Stock received as Stock Consideration) and,
to the extent determined by the Seller, other assets in an amount (the
"Dissolution Escrow Amount") reasonably believed by the board of directors of
the Seller to satisfy the requirements of the Pennsylvania Business
Corporation Law and be sufficient to pay or adequately provide for all known,
actual or contingent liabilities or obligations of the Seller or any of its
Subsidiaries, or arising out of the transactions contemplated by this
Agreement and the Escrow Agreement that may be asserted against the Seller or
any of its Subsidiaries by the Buyer or any of its Subsidiaries, following the
Effective Time or the Trustee under the Dissolution Escrow and Trust. In
addition to the Dissolution Escrow Amount, the Seller shall transfer to the
Dissolution Escrow and Trust any Excluded Assets that the Seller is unable to
sell, dispose of or otherwise liquidate on or prior to the date the Seller
commences its Dissolution; such transfer shall be for the primary purpose of
liquidating the Excluded Assets. The Seller shall prepare, in good faith, a
written preliminary estimate of the Dissolution Escrow Amount and shall
deliver a copy thereof to the Buyer at least 45 days prior to the date of
Dissolution for the Buyer's
59
<PAGE>
information. Written notice of the determination of the Dissolution
Escrow Amount by the Seller's board of directors and the terms thereof,
including copies of the minutes of any meeting or any consents related
thereto, shall be delivered to the Buyer for the Buyer's information
at least 10 Business Days prior to the date of Dissolution.
(c) The Dissolution Escrow and Trust shall be established with
an independent third party escrow agent reasonably acceptable to the Buyer
pursuant to an escrow and trust agreement in form prepared by the Sellers'
counsel and delivered to the Buyer within 30 days from the date hereof for the
Buyer's reasonable approval.
Section 6.14 Sales and Transfer Taxes. All sales and transfer Taxes
and fees, including without limitation, any real estate transfer (subject to
the next sentence) or gains Taxes, patent and trademark transfer Taxes and
recording fees, incurred in connection with the transactions contemplated by
this Agreement will be borne by the Seller, and the Seller will, at its own
expense, file all necessary Tax Returns and other documentation with respect
to all such sales, transfer and recording Taxes and fees, and, if required by
law, the Buyer will join in the execution of any such Tax Returns or other
documentation. The Buyer shall be responsible for the lesser of (a) one-half
or (b) $1,700,000 of the total real estate transfer taxes arising in
connection with the transfer of the Department Store Assets. The Sellers
shall provide the Buyer with copies of any Tax returns or other documentation
relating to such real estate transfer Taxes at least 20 business days prior to
the due date thereof, accompanied by a statement setting forth the calculation
of the Buyer's share of any Taxes shown due and owing on such Tax returns,
which share shall be calculated in accordance with the immediately preceding
sentence (the "Buyer's Transfer Taxes"). The Buyer shall have the right to
review such Tax returns prior to their filing. If the Buyer disputes the
amount of the Buyer's Transfer Taxes, the Buyer and the Sellers shall consult
and resolve in good faith the amount due and owing by the Buyer. Upon
agreement, the Buyer shall issue a check or checks payable directly to the
relevant Taxing authorities in an amount or amounts equal in the aggregate to
the Buyer's Transfer Taxes and shall deliver such check(s) to the Sellers not
later than three business days before the due date of the relevant Tax
returns. The Sellers shall include such check(s) in the filing of any such
Tax return to which such check(s) relate(s).
Section 6.15 Use of Name. The Buyer will use a trade name
consisting of or containing the word "Strawbridge" to identify its traditional
department store operations (including those currently operating under the
trade name Hecht's) in the Philadelphia area continually following the
Effective Time unless the
60
<PAGE>
Buyer's traditional department store operations in the United States
are operated under less than three trade names.
Section 6.16 Temporary Use of Corporate Offices. For a period of 12
months after the Effective Time, the Buyer shall grant to the Seller a license
to continue to use the ninth and tenth floors and portions of the eighth (for
Accounts Payable), eleventh (for Human Resources) and lower level (for Mail
Room) floors of the Main Store at 801 Market Street for, and limited to,
corporate offices of the Seller for the sole purpose of winding up the
Seller's business to effectuate the Dissolution. The Seller shall pay a pro
rata share of real and personal property taxes and property and general
liability insurance incurred by the Buyer for such Main Store. The Seller may
cause an early termination of the license or portions thereof by giving 30
days' notice thereof to the Buyer. All costs directly relating to the use of
the space by the Seller, including without limitation utilities,
telecommunications, security, supplies and janitorial services during the term
of the license shall be borne by the Seller. The Buyer reserves the right to
relocate, at its cost, such space within or without the building. During the
term of the license, the Buyer shall also permit the Seller to use, on a
non-exclusive basis, all telecommunication equipment, furniture and
furnishings located in such space that are Department Store Equipment,
Machinery and Fixtures, without any additional cost or fee. The Seller agrees
to use the space in a good and orderly fashion, to abide by rules, regulations
and security measures reasonably established by the Buyer for access to and
use of such space, and to return the same and the Department Store Equipment,
Machinery and Fixtures contained therein, in the same condition as at the
Effective Time, ordinary wear and tear and damage caused by casualty excepted.
The Buyer shall have reasonable access to and through the space occupied by
the Seller for maintenance and other operational purposes related to the Main
Store. The Seller shall indemnify, defend and hold harmless the Buyer and its
officers, directors, employees, agents and contractors from and against any
and all claims, demands, causes of action, losses, damages, liabilities, cost
and expenses (including, without limitation, attorneys' fees and
disbursements), for uninsured physical damage to such space or death or bodily
injury suffered or incurred by the Buyer or any other Person and arising out
of or in connection with the use of such space, or caused by the Seller, its
employees or agents during the term of the license.
Section 6.17 Temporary Continuation of R.D.I. Contract. For the
period between the Effective Time and January 15, 1997, the Seller shall
maintain the Seller's contract, dated October 26, 1981, as supplemented June
5, 1995, with Retail Distributors, Inc. (the "RDI Contract") so that Retail
Distributors, Inc. shall provide to the Buyer with respect to the Buyer's
merchandise the same receiving, marking,
61
<PAGE>
warehousing, packing, distribution and other services as it presently
provides to the Seller under the RDI Contract. The Buyer may cause
an early termination of this services agreement by giving 30 days' notice
thereof to the Seller. The Buyer shall pay a pro rata share of real and
personal property taxes and property and general liability insurance incurred
by the Seller for such distribution center. In addition, all fees and
expenses, not otherwise included above, payable by the Seller to Retail
Distributors, Inc. under the RDI Contract for services provided to the Buyer
at the distribution center, after deducting all rents payable to the Seller by
Retail Distributors, Inc. under the RDI Contract, during the term of this
services agreement between the Seller and the Buyer shall be borne by the
Buyer; provided, however, that in no event shall the Buyer be responsible for
or charged with any fees, expenses or other costs or liabilities for or
associated with termination of the RDI Contract, reduction in the level or
type of requested services, transfer of work, discontinuance of business,
severance, ERISA, WARN, trade union claims, or other similar or dissimilar
claims or obligations under the RDI Contract.
Section 6.18 Island Avenue Condemnation. The Sellers shall take all
actions necessary to (a) enable the Sellers to carry out the provisions of
Section 6.17, and (b) satisfy the conditions set forth in Schedule 4.10(c),
including all environmental remediation, so that the Buyer shall receive from
the City of Philadelphia the sum set forth in Section 4.10(c) on or before the
date set forth in Section 4.10(c).
Section 6.19 Department Store Space Leases. The Sellers shall
cause, prior to the First Closing Date, all of the Department Stores Space
Leases noted as required to be terminated on Schedule 1.39 to be terminated so
that the occupants thereunder shall have vacated the Department Store Premises
prior to the Effective Time and removed all personal property owned by such
parties without damaging the Department Store Premises. All liability which
may arise in connection with the existence or termination of the such
Department Store Space Leases shall be borne solely by the Sellers.
62
<PAGE>
ARTICLE VII
EMPLOYEES AND EMPLOYEE PLANS
Section 7.1 Offer of Employment.
(a) The Buyer shall offer to hire, effective as of the
Effective Time, in a comparable position at locations reasonably determined by
the Buyer, Seller's full-time regular and part-time regular sales and sales
support associates and their supervisory personnel in the Department Stores
and the Seller's associates in the Service Building and the Eighth & Filbert
Parking Garage described on Schedule 1.24 (but excluding all corporate and
regional employees of the Seller), provided that such employees are not on
leave on the day immediately prior to the First Closing Date. The Buyer shall
also offer to hire any employees who are on approved leave of absence who
would otherwise be within the class of employees to whom offers have to be
made, but for their leave status, whose reemployment rights are guaranteed by
law. The Buyer may also offer to hire such other of the Seller's employees as
the Buyer notifies Seller that it intends to make offers of employment to, but
such offer will not necessarily be in a comparable position. The employees
who are offered employment pursuant to this Section 7.1(a) are referred to as
the "Employment Offerees." The employees who accept such offers of employment
by the Effective Time pursuant to this Section 7.1(a) shall become employees
of the Buyer as of the Effective Time or, if on leave, as of the date of
resumption of employment, and are referred to as the "Transferring Employees."
Except for the Employment Offerees offered employment pursuant to the first
and second sentences of this Section 7.1(a), the Buyer shall have no
obligations or liabilities to make offers to or otherwise hire any employees
of the Seller. The Seller will have sole responsibility for any obligations
or liabilities to all of the Sellers' employees at all locations under WARN,
except only that the Buyer will have sole responsibility for any obligations
and liabilities to the Transferring Employees under WARN to the extent that
WARN thresholds are exceeded as a result of actions taken by the Buyer after
the Effective Time.
(b) Except as otherwise provided in this Article VII, the
employment of the Transferring Employees shall be upon such terms and
conditions as the Buyer, in its sole discretion, shall determine. From and
after the Date of this Agreement, upon the Buyer's request, the Seller shall
provide the Buyer reasonable access to and copies of all data (including
computer data) regarding the dates of hire, hours, compensation and job
description of the Employment Offerees and such other
63
<PAGE>
employment records covering employees of the Department Store Division
as the Buyer may reasonably request.
(c) Transferring Employees shall receive credit for all periods
of employment with the Seller from the most recent date of hire by the Seller
prior to the Effective Time under each Buyer's Employee Benefit Plan for
purposes of eligibility and vesting.
Section 7.2 Collective Bargaining Agreements. All collective
bargaining agreements that apply to any employees, former employees or retired
employees in the Department Store Division are listed on Schedule 7.2. The
Buyer shall not assume and shall have no responsibility in any way relating to
any collective bargaining agreements, including, without limitation, those
listed on Schedule 7.2.
Section 7.3 Severance Plans. The Buyer shall not adopt and shall
have no responsibility in any way relating to any severance, salary
continuation or termination pay plans of the Seller for the benefit of any
employees of the Seller; provided, however, the Buyer shall recognize, for
severance purposes, all service with the Seller that the Buyer recognizes
under each Buyer's Employee Benefit Plan for purposes of eligibility and
vesting pursuant to Section 7.1(c).
Section 7.4 Employee Benefit Plans.
(a) With respect to each employee, former employee and retired
employee (and their dependents), the Seller will retain responsibility for (i)
except as otherwise provided in Section 7.7, any and all obligations, whenever
incurred, under any Seller's Employee Welfare Benefit Plan, and (ii) any and
all claims whenever incurred, whether or not reported, for all worker's
compensation, unemployment compensation and other government mandated benefits
(collectively referred to herein as "Welfare Type Plans"). Except as
otherwise provided in Section 7.7, the Buyer does not assume any obligations
under any Seller's Employee Welfare Benefit Plan or Welfare Type Plans, and
neither the Buyer nor any Buyer's Employee Welfare Benefit Plan, programs,
practices or arrangements will have any liability for any claim for benefits
under any Seller's Employee Welfare Benefit Plan or Welfare Type Plans,
including, without limitation, retiree benefit plans, whenever incurred, of
any employee, former employee or retired employee of the Seller. The Seller
shall take no actions on or after the date hereof that will increase benefits
under the Seller's group health plans; provided, however, that such
modifications of benefits and premium as have been communicated to employees
prior to the date of this Agreement that are scheduled for July 1, 1996, shall
not be considered an increase in benefits for
64
<PAGE>
the purpose hereof. All liability for accrued but unpaid vacation
of all employees, excluding Transferring Employees, shall be the
responsibility of the Seller. The accrued but unpaid vacation with respect to
Transferring Employees shall be credited to the Buyer at First Closing by
including in Other Current Liabilities as identified on Schedule 1.15, an
amount equal to the accrued vacation pay liability and related Taxes
determined, as of the Effective Time, in accordance with GAAP and such accrued
vacation pay shall be paid to Transferring Employees by the Buyer at or prior
to termination of employment with the Buyer.
(b) Effective at the Effective Time, Transferring Employees and
their eligible dependents shall be eligible to enroll in such Employee Welfare
Benefit Plan as the Buyer shall make available to new employees hired at the
Department Stores by the Buyer after the Effective Time and shall otherwise be
subject to the terms and conditions of such Plans; provided that Transferring
Employees who participated in the Seller's Employee Welfare Benefit Plan which
provides medical benefits at the Effective Time shall be eligible to enroll in
the Buyer's Employee Welfare Benefit Plan which provides medical benefits
without application of (i) any waiting periods, (ii) any evidence of
insurability restriction or (iii) any preexisting physical or mental condition
restrictions except to the extent and duration that any waiting periods,
evidence of insurability restriction or preexisting mental or physical
condition restrictions were not satisfied under the Seller's Employee Welfare
Benefit Plan as of the Effective Time.
(c) The Seller shall have sole responsibility for "continuation
coverage" obligations under the Seller's group health plans to all of the
Seller's employees, and "qualified beneficiaries" of such employees for whom a
"qualifying event" occurs with respect to the Seller's group health plans.
The Buyer shall have responsibility only for "continuation coverage" benefits
payable under the Buyer's group health plans to all Transferring Employees and
"qualified beneficiaries" of Transferring Employees for whom a "qualifying
event" occurs with respect to the Buyer's group health plans after the
Effective Time. The phrases "continuation coverage," "qualified
beneficiaries" and "qualifying event" shall have the meaning ascribed to them
in Section 4980B of the Code and Section 601-608 of ERISA.
(d) Except as specifically provided herein with respect to any
Seller's Employee Benefit Plan, the Seller shall be solely liable for making
any and all payments as are required by and under such Seller's Employee
Benefit Plan to Transferring Employees, other current and former employees of
the Seller, and their respective covered dependents pursuant to their terms or
pursuant to applicable law, and neither the Buyer nor any Buyer's Employee
Benefit Plan, programs, practices or
65
<PAGE>
arrangements will have any liability with respect to any Seller's Employee
Benefit Plan.
(e) Except as otherwise provided in Sections 7.5, 7.6 and 7.7,
neither the Buyer nor any Buyer's Employee Benefit Plan, programs, practices
or arrangements will have any liability for post-retirement or
post-termination benefits to any of the Seller's employees, former employees
or retired employees, including without limitation the Transferring Employees
who are, or become, eligible for retirement at or after the Effective Time.
Section 7.5 Retirement Savings Plan and Pension Benefit Plan.
(a) The term "Affected Employees" with respect to a particular
Employee Pension Benefit Plan shall mean all Transferring Employees, former
employees and retired employees who, as of the Effective Time, were
participants (within the meaning given to such term in section 3(7) of ERISA)
in the Seller's Employee Pension Benefit Plan.
(b) The Seller will maintain its current 401(k) retirement
savings plan (the "Savings Plan") and Employee Pension Benefit Plan as they
apply to all employees on the same terms and conditions from the date hereof
until the First Closing.
(c) Contributions by Affected Employees to the Seller's Savings
Plan shall cease at the Effective Time. Contributions made by Affected
Employees through the First Closing Date shall be matched by the Seller to the
extent permitted by the terms of the Savings Plan and such matching
Contribution shall be made as soon as practicable after the First Closing
Date. The Seller shall take such action as is necessary, if any, with respect
to the Savings Plan to vest each of the Affected Employees to a level of 100%
of all of his/her Accounts (as defined in the Savings Plan), whether
attributable to individual or Seller contributions, and as permitted under the
terms of the Saving Plan to effect distribution to each of the Affected
Employees who (i) is a Transferring Employee, (ii) immediately prior to the
First Closing Date was a participant in the Savings Plan and (iii) in the case
of a participant whose interest in the Savings Plan exceeds $3,500, consents
to such distribution, of 100% of any and all of such Affected Employees'
Accounts under the Savings Plan, determined as of the date such determination
would have been made had such Affected Employees terminated employment on the
First Closing Date. Such distribution shall be made as soon after the First
Closing Date as practicable and as permitted under
66
<PAGE>
applicable law (including ERISA and the Code) and in accordance with all
other provisions of the Savings Plan.
(d) As soon as practicable after the Effective Time, the Seller
shall cause the trustees for the Seller's Employee Pension Benefit Plan to
apportion the assets comprising the Employee Pension Benefit Plan in
accordance with the requirements of Section 414(l) of the Code and regulations
thereunder such that, effective as of the Effective Time, the amount of assets
(consisting of cash or, to the extent agreed by the Buyer and the Seller,
marketable securities) equal in value to the present value of the accrued
benefits under the Employee Pension Benefit Plan (valued as determined by the
Seller's enrolled actuary and verified by the Buyer's actuary, with service
for eligibility and benefit accruals determined pursuant to the actuarial
method and assumptions shown on Schedule 7.5 and subject to the limitations
imposed by Section 414(l) of the Code and regulations thereunder) of the
Affected Employees will be transferred, as soon as practicable following
filing of the forms required by the IRS, to the trust forming a part of the
Buyer's retirement plan (the "May Retirement Plan"). The Buyer will cause the
May Retirement Plan to provide with respect to the Affected Employees (i) who
are Transferring Employees full credit for all continuous employment and
service with the Seller for purposes of eligibility and vesting thereunder as
well as full (i.e., 100%) vesting of accrued benefits derived from the
Employee Pension Benefit Plan through the Effective Time, (ii) who are retired
employees, an accrued benefit equal to the retired employee's accrued benefit
under the Employee Pension Benefit Plan, and (iii) who are former employees,
an accrued benefit equal to such former employee's accrued benefit under the
Employee Pension Benefit Plan. Upon the receipt by the May Retirement Plan of
the assets so apportioned and transferred, neither the Seller nor the Employee
Pension Benefit Plan shall have any further liability with respect to any
Affected Employees. The Seller shall cause the Employee Pension Benefit Plan
to be amended, and the Buyer shall cause the May Retirement Plan to be
amended, in each case as necessary or appropriate to effect the transfers
contemplated by this Section 7.5(d). If, and to the extent that, it is
determined that the assets of the Employee Pension Benefit Plan are
insufficient to permit the transfer in full of the present value of accrued
benefits described in this Section 7.5(d), the Other Current Liabilities as
identified in Schedule 1.15 shall be increased for the amount of such
insufficiency. In addition, and whether or not there is such a deficiency,
there shall be added to the Other Current Liabilities in Schedule 1.15 for the
"rule of 70" (as defined in Schedule 7.5) associates the amount determined in
accordance with paragraph 8 of Schedule 7.5. The Buyer shall not be
responsible for any benefits payable under the Employee Pension Benefit Plan
with respect to Employees who are not Affected Employees and no assets
relating to such other employees will be transferred to the May Retirement
Plan. Prior to the transfer
67
<PAGE>
of assets described in Section 7.5(d), the Seller shall satisfy the
Buyer that there are no operational or other defects in the Employee
Pension Benefit Plan which would lead the IRS to threaten to or act to
disqualify the Employee Pension Benefit Plan, or otherwise impose taxes or
penalties on the Employee Pension Benefit Plan that would result in a
liability to the Buyer or the May Retirement Plan.
(e) The Buyer shall not assume any obligations with respect to
any Multiemployer Plan.
(f) Affected Employees who are not Transferring Employees shall
have the benefits provided for such Affected Employees in Section 7.5(d).
Affected Employees who are Transferring Employees shall become members of the
May Retirement Plan as of the Effective Time and shall be entitled to enroll
in The May Department Stores Company Profit Sharing Plan (the "May Profit
Sharing Plan") on the first day of the calendar quarter coincident with or
next following the Effective Time. Transferring Employees who at the
Effective Time are not participants in the Employee Pension Benefit Plan shall
be eligible for membership in the May Retirement Plan and the May Profit
Sharing Plan pursuant to the terms and conditions of such latter plans.
Section 7.6 Supplemental Executive Retirement Plan. The Sellers
shall administer and be liable for the payment of benefits under the Seller
SERP accrued prior to the Effective Time that are due before the Effective
Time. No benefits shall accrue under the Seller SERP after the Effective
Time. The Buyer shall assume the administration and the liability for the
payment of benefits accrued under the Seller SERP prior to the Effective Time
that are due after the Effective Time. Other Current Liabilities in Schedule
1.15 shall be increased by $13,300,000 less the fair market value of the
assets held in the trust for the Seller SERP (the "Rabbi Trust") at the
Effective Time and which are transferred to the Buyer with the Rabbi Trust at
the Effective Time (the "Rabbi Trust Funding Amount"). The Seller shall
notify the Buyer at least 20 Business Days prior to the First Closing if the
Seller elects to have the Buyer place in the Rabbi Trust the Rabbi Trust
Funding Amount, in which event the Buyer will do so at the Effective Time
provided that all steps, if any, necessary to make the Buyer the sponsor of
the Rabbi Trust have been taken, and Other Current Liabilities in Schedule
1.15 shall be further increased by $2,500,000. At no time shall the Buyer (i)
modify the Seller SERP to reduce the benefits of, or the present value of any
benefit of, any participant in the Seller SERP, (ii) merge or consolidate the
Seller SERP or the Rabbi Trust with any other benefit plan or arrangement,
(iii) terminate the Seller SERP or the Rabbi Trust before the full discharge
of the Buyer's liabilities, (iv) add additional
68
<PAGE>
participants to the Seller SERP or so modify the Rabbi Trust as to
increase the class of claimants thereunder, or (v) take any other action the
effect of which would be to divert the assets of the Rabbi Trust to any
purpose other than the required payment of benefits to or on behalf of the
persons who are participants in the Seller SERP at the Effective Time, subject
however, to the continuing conventional exposure of such trust to the
creditors of the sponsor thereof.
Section 7.7 Retiree Health Plan. The Sellers shall administer and
be liable for the payment of claims for benefits "incurred" under the Retiree
Health Plan before the Effective Time. If, at its election, the Seller
requests the Buyer to do so by notice given to the Buyer at least 20 business
days before the First Closing, the Buyer shall assume the administration and
the liability for the payment of claims for benefits "incurred" under the
Retiree Health Plan after the Effective Time. If the Seller's election is (a)
to not so request the Buyer, the amount of $320,000,000 set forth on Schedule
1.56 shall be reduced by $13,800,000 to $306,200,000, or (b) to so request the
Buyer, the Other Current Liabilities in Schedule 1.15 shall be increased by
$34,500,000. Claims for benefits will be deemed "incurred" on the date that
the services giving rise to the expenses were rendered; provided, however,
that, with respect to hospitalization, claims incurred for services or
treatments related to the hospitalization (for example, physician visits,
radiology and pathology fees and expenses during hospitalization) shall be
deemed to be incurred on the date of admission to the hospital.
Section 7.8 Consulting Contracts. The Sellers have employment
contracts with those executives who are listed on a schedule dated April 3,
1996, which the Seller has previously furnished to the Buyer. The Buyer is
not assuming such contracts nor any obligations pursuant thereto; provided,
however, that if, as of the Effective Time, by notice given to the Buyer at
least 20 business days before the First Closing, the Sellers and one or more
of such executives terminate such contracts and such executives elect to
execute consulting contracts with and to the satisfaction of the Buyer in the
form of Schedule 7.8 for the term and the monetary compensation set forth for
such executives on that schedule, the Other Current Liabilities in Schedule
1.15 shall be increased by the amounts shown as total compensation on such
schedule for such electing executives. To the extent any one or more of such
executives do not execute a consulting contract with the Buyer as in this
Section 7.8 provided, the amount of $320,000,000 (as adjusted, if at all,
pursuant to Section 7.7) set forth on Schedule 1.56 shall be reduced by 40% of
the amounts shown as total compensation on such schedule for such executives
who do not execute such consulting contract.
69
<PAGE>
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to the Obligations of Each Party to Effect
the Acquisition. The respective obligations of each party to effect the
transactions contemplated by Articles II and III shall be subject to the
fulfillment at or prior to the First Closing Date of each of the following
conditions:
(a) The Reorganization shall have been approved by the
shareholders of the Seller by the vote required by the Pennsylvania Business
Corporation Law and the Seller's Articles and Bylaws.
(b) All waiting periods (and any extension thereof) applicable
to the consummation of the transactions contemplated by Article II and Article
III under the HSR Act shall have expired or been terminated.
(c) No preliminary or permanent injunction or other order,
decree or ruling issued by a Government nor any statute, rule, regulation or
executive order promulgated or enacted by a Government shall be in effect
which would prevent the consummation of the transactions contemplated by this
Agreement or the Escrow Agreement.
(d) The Registration Statement shall be effective under the
Securities Act and no "stop order" shall have been issued with respect to the
Registration Statement and no proceeding for such purpose shall have been
commenced.
(e) The May Common Stock constituting the Stock Consideration
shall have been approved for listing by the NYSE, subject to official notice
of issuance.
(f) All licenses, permits, consents, approvals, waivers,
authorizations, qualifications and orders of any Government and parties to any
contracts and leases with the Sellers as are necessary in connection with the
consummation of the transactions contemplated by this Agreement or the Escrow
Agreement shall have been obtained.
(g) The Seller shall have received the written opinion of
Morgan, Lewis & Bockius LLP, substantially in the form of such opinion
described
70
<PAGE>
in the Proxy Statement/Prospectus, to the effect that the transactions
contemplated hereby qualify as a tax-free reorganization under
Section 368(a)(1)(C) of the Code.
Section 8.2 Additional Conditions to the Obligations of the
Seller. The obligation of the Seller to effect the transactions contemplated
by Articles II and III is also subject to each of the following conditions:
(a) The Buyer shall in all material respects have performed
each obligation to be performed by it hereunder on or prior to the First
Closing Date.
(b) The representations and warranties of the Buyer set forth
in this Agreement shall be true and correct in all material respects at and as
of the First Closing Date as if made at and as of such time, except to the
extent that any such representation or warranty is made as of a specified
date, in which case such representation or warranty shall have been true and
correct as of such date.
(c) The Buyer shall have delivered such certificates as are
reasonably requested by the Seller certifying the satisfaction of the
foregoing conditions.
Section 8.3 Additional Conditions to the Obligations of the
Buyer. The obligation of the Buyer to effect the transactions contemplated by
Articles II and III is also subject to each of the following conditions:
(a) The Sellers shall in all material respects have performed
each obligation to be performed by them hereunder on or prior to the First
Closing Date.
(b) The representations and warranties of the Seller set forth
in this Agreement shall be true and correct in all material respects at and as
of the First Closing Date as if made at and as of such time, except to the
extent that any such representation or warranty is made as of a specified
date, in which case such representation or warranty shall have been true and
correct as of such date.
(c) The Seller shall have delivered such certificates as are
reasonably requested by the Buyer certifying the satisfaction of the foregoing
conditions.
(d) The Seller shall have delivered to the Buyer estoppel
certificates from all parties to the material Department Stores Contracts that
are not
71
<PAGE>
inconsistent with the Sellers' representations and warranties set forth
in this Agreement and that do not disclose any defaults by the Sellers
thereunder.
(e) A title company reasonably acceptable to the Buyer and the
Sellers shall have issued to the Buyer commitments for the Department Store
Premises reasonably acceptable to the Buyer and consistent with the provisions
of this Agreement.
(f) Prior to the First Closing Date, the Seller shall have
taken all steps necessary to consummate the Reorganization other than the
filing of the Articles of Dissolution of the Seller with the Department of
State of the Commonwealth of Pennsylvania each in a form and by a method
acceptable to the Buyer.
ARTICLE IX
TERMINATION AND ABANDONMENT
Section 9.1 Termination. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned, at any time prior to
the Effective Time:
(a) by mutual consent of the Seller and the Buyer; or
(b) by the Buyer, if there has been a material violation or
breach by the Sellers of any agreement, representation or warranty contained
in this Agreement which has rendered the satisfaction of any condition to the
obligations of the Buyer impossible and such violation or breach has not been
waived by the Buyer; or
(c) by the Seller, if there has been a material violation or
breach by the Buyer of any agreement, representation or warranty contained in
this Agreement which has rendered the satisfaction of any condition to the
obligation of the Seller impossible and such violation or breach has not been
waived by the Seller; or
(d) by either the Seller or the Buyer, if a Government shall
have issued an order, decree or ruling or promulgated or enacted any statute,
rule, regulation or executive order, in each case, permanently restraining,
enjoining or
72
<PAGE>
otherwise prohibiting the transactions contemplated by this Agreement;
provided, that any such order, decree or ruling shall have become final
and nonappealable; or
(e) by either the Seller or the Buyer, if at the shareholders
meeting of the Seller contemplated by Section 6.5 the Reorganization and any
other transactions contemplated hereby that are required to be approved by the
shareholders of the Seller shall fail to be approved by such shareholders by
the vote required by the Pennsylvania Business Corporation Law and the
Seller's Articles; or
(f) by the Buyer, if the Seller shall have (i) withdrawn,
modified or amended in any respect its approval or recommendation of the
Reorganization or the other transactions contemplated hereby that are required
to be approved by the shareholders of the Seller, (ii) failed to include in
the Proxy Statement/Prospectus such recommendation (including the
recommendation that the shareholders of the Seller vote in favor of the
Reorganization and such other transactions), (iii) taken any public position
inconsistent with such recommendation or (iv) if the board of directors of the
Seller shall have resolved to do any of the foregoing; or
(g) by either the Seller or the Buyer, if through no fault of
the party electing to terminate, the Effective Time has not occurred on or
before September 30, 1996.
Section 9.2 Procedure and Effect of Termination. In the event
of termination of this Agreement and abandonment of the transactions
contemplated hereby by the parties pursuant to Section 9.1 (d), (e) or (g),
written notice thereof shall forthwith be given to the other party, and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated pursuant to Section 9.1 (a), (d), (e) or (g), no party
hereto shall have any liability or further obligation to the other party to
this Agreement pursuant to this Agreement. Nothing contained herein shall
affect the Option Agreement.
73
<PAGE>
ARTICLE X
MISCELLANEOUS
Section 10.1 Survival of Representations and Warranties. None of
the representations and warranties made in this Agreement shall survive the
Effective Time for a period of more than 12 months.
Section 10.2 Costs and Expenses. Except as otherwise specifically
provided herein, all legal and other costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses.
Section 10.3 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally or sent by registered or certified mail, postage prepaid,
or by facsimile transmission to the parties at the following addresses or at
such other addresses as shall be specified by the parties by like notice;
provided, that a notice of change of address shall be effective only upon
receipt thereof:
If to the Buyer to:
The May Department Stores Company
611 Olive Street
St. Louis, Missouri 63101
Attention: Louis J. Garr, Jr., Esq.
General Counsel
Facsimile Number: 314-342-6384
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: J. Michael Schell, Esq.
Facsimile Number: 212-735-2000
74
<PAGE>
If to the Seller to:
Strawbridge & Clothier
801 Market Street
Philadelphia, Pennsylvania 19107
Attention: Francis R. Strawbridge III, Chairman
Facsimile Number: 215-629-6833
With a copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
Attention: Donald A. Scott
Facsimile Number: 215-963-5299
Section 10.4 Amendment. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
Section 10.5 Entire Agreement. This Agreement, the Escrow
Agreement, the Confidentiality Agreement, the Option Agreement and the
documents contemplated hereby and thereby constitute the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersede all other prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof and thereof.
Section 10.6 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
Section 10.7 Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania
(without regard to the principles of conflicts of law thereof).
Section 10.8 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
75
<PAGE>
Section 10.9 Assignment. This Agreement and all the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Neither this Agreement
nor any of their rights hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties.
Section 10.10 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 10.11 Specific Performance. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any
court of the United States located in the Commonwealth of Pennsylvania or
State of New York, this being in addition to any other remedy to which such
party is entitled at law or in equity. In addition, each of the parties
hereto (i) consents to submit itself to the personal jurisdiction of any
Federal court located in the Commonwealth of Pennsylvania or State of New York
in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (ii) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, and (iii) agrees that it will not bring
any action relating to this Agreement or any of the transactions contemplated
by this Agreement in any court other than a Federal court sitting in the
Commonwealth of Pennsylvania or State of New York.
Section 10.12 No Third Party Beneficiary. Except for the Seller,
the Buyer and their respective Affiliates and Employee Benefit Plan, no Person
is intended to nor shall be a beneficiary of this Agreement or any provision
hereof.
76
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by the duly
authorized officers of each of the parties hereto as of the day and year first
written above.
THE MAY DEPARTMENT STORES COMPANY
By: __________________________________
Name:
Title:
STRAWBRIDGE & CLOTHIER
By: __________________________________
Name:
Title:
77
<PAGE>
Exhibit A Option Agreement
Exhibit B Escrow Agreement
Exhibit C Undertaking and Indemnity Agreement
Schedules
1.3 Extended Age Departments
1.6 Assumed Long-Term Liabilities Amount
1.7 Bill of Sale
1.15 Closing Balance Sheet Net Working Capital Amount
1.24 Department Store Distribution Centers
1.26 Department Store Division Balance Sheet
1.31 Department Store Land
1.32 Department Store Leases
1.37 Department Store Real Property
1.38 Department Stores
1.39 Department Store Space Leases
1.50 Additional Excluded Assets
1.56 First Closing Stock Consideration
4.1 Jurisdictions Qualifications
4.3 Department Store Subsidiaries
4.4 Seller Violations
4.6 Seller Absence of Change
4.8 Litigation
4.9 Tax Matters
4.10(b) Permitted Encumbrances
4.10(c) Island Avenue Condemnation
4.12 Other Department Store Contracts
4.14 Department Store Intellectual Property
4.15 Seller Employee Benefit Plans
4.15(b) Seller Plans Liabilities
4.16 Employment and Severance Agreements
4.18 Assets Necessary to the Business
4.24 Insurance
4.25 Environmental Disclosures
5.3 Buyer Subsidiaries Ownership
5.5 Buyer Violations
5.7 Buyer Absence of Change
5.10 Buyer Tax Matters
5.11 Buyer Employee Pension Benefit Plans
7.2 Collective Bargaining Agreements
7.5 Actuarial Method and Assumptions
7.8 Consulting Contract Form
Exhibit 2.2
ASSET OPTION AGREEMENT
ASSET OPTION AGREEMENT (the "Option Agreement"), dated as of April __
1996, between The May Department Stores Company, a New York corporation (the
"Buyer"), Strawbridge & Clothier, a Pennsylvania corporation (the "Seller"),
S&C, Cherry Hill, Inc., a Pennsylvania corporation ("CHI") and S&C, Concord,
Inc., a Pennsylvania corporation ("CI"); the Seller, CHI and CI herein
collectively, the "Sellers."
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Buyer and the Seller propose to enter into an Asset
Purchase Agreement, as of the date hereof (the "Asset Purchase Agreement"),
which provides, among other things, that upon the terms and subject to the
conditions set forth in the Asset Purchase Agreement, the Sellers and other
Subsidiaries of the Seller will sell to the Buyer the Department Store Assets
and some or all of the Disposition Proceeds in exchange for the assumption by
the Buyer of the Assumed Department Store Liabilities and the issuance and
delivery by the Buyer of the Stock Consideration; and
WHEREAS, as a condition to the willingness of the Buyer to enter
into the Asset Purchase Agreement, the Buyer has required that the Sellers
agree, and the Sellers have agreed, to grant the Buyer the Option (as
hereinafter defined), on the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, to induce the Buyer to enter into and in
consideration of the entering into the Asset Purchase Agreement and of the
mutual covenants and agreements set forth herein, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. Grant of Option. The Sellers hereby grant to the Buyer an
irrevocable option (the "Option") to purchase "Option Store A," "Option Store
B," "Option Store C" and "Option Store D," as such department stores are
described on Annex I (each an "Option Store," and collectively, the "Option
Stores"). The aggregate consideration for the Option Stores shall be
$56,240,000 ($18,960,000 for Option Store A; $20,640,000 for Option Store B;
$12,480,000 for Option Store C (less an amount computed for such Option Store
pursuant to Section 1.6(b) of the
<PAGE>
Asset Purchase Agreement) and $4,160,000 for Option Store D (less an
amount computed for such Option Store pursuant to Section 1.6(b) of the Asset
Purchase Agreement)) and the assumption of the Option Store Liabilities as
defined in Annex I. The cash amount payable for the Option Stores is referred
to herein in the aggregate and as to each of the Option Stores separately, as
the "Purchase Price."
2. Exercise of Option.
(a) Subject to the provisions set forth below, the Buyer may
exercise the Option as to any or all of the Option Stores (at any one time
prior to the termination of the Option pursuant to Section 21) upon the
occurrence of one or more of the following events: (i) the acquisition of the
beneficial ownership by any person, entity or group (as such terms are used in
the Securities Exchange Act) other than the Buyer or any of its Affiliates of
25% or more of the voting power of the outstanding shares of the Seller Common
Stock on a fully diluted basis; or (ii) the execution by the Seller of an
agreement relating to, or the consummation of, a merger, consolidation or
other similar business combination of the Seller; or (iii) the Asset Purchase
Agreement has been terminated pursuant to Section 9.1(b), 9.1(e) or 9.1(f)
thereof.
(b) If the Buyer wishes to exercise the Option, the Buyer shall
give a written notice to the Seller of its exercise of the Option, which
notice shall specify the Option Stores with respect to which the Buyer is
exercising the Option (such Option Stores are sometimes referred to
hereinafter as the "acquired Option Stores"). The closing of the purchase of
an Option Store pursuant to the Option (each such transaction, a "Closing")
shall be subject to the expiration or early termination of the waiting period
under the HSR Act, if applicable, and the obtaining of any other required
regulatory approvals and shall take place at the offices of Skadden, Arps,
Slate, Meagher & Flom, 919 Third Avenue, New York, New York 10022, on a date
and at a time designated by the Buyer at the time that it gives notice of its
exercise of the Option with respect to such Option Store.
3. Escrow. As promptly as practicable, but in no event later
than 10:30 a.m. New York City time on April 19, 1996, (i) the Buyer and the
Sellers shall execute an escrow agreement (the "Option Escrow Agreement") in a
form acceptable to both the Buyer and the Seller with a mutually acceptable
party (the "Option Escrow Agent") and (ii) the Sellers shall deliver to the
Option Escrow Agent all those transfer documents required pursuant to Section
5 of this Option Agreement which, as of such date, have been executed by the
appropriate parties.
2
<PAGE>
4. Sale of the Option Stores.
(a) Subject to the terms and conditions of this Option
Agreement, if the Option has been exercised, on the date of the Closing, the
Buyer shall deliver to the Seller by wire transfer of immediately available
funds to a bank account designated at least two Business Days before the
Closing by the Seller an amount equal to the Purchase Price of the acquired
Option Stores. If the Buyer exercises the Option with respect to Option Store
A, the Seller shall sell, transfer, convey, assign and deliver to Buyer, and
the Buyer shall purchase, acquire and accept from the Seller, the "Option
Store A Assets (as defined in Annex I), and the Buyer shall assume the "Option
Store A Liabilities" (as defined in Annex I); if the Buyer exercises the
Option with respect to Option Store B, CHI shall sell, transfer, convey,
assign and deliver to Buyer, and the Buyer shall purchase, acquire and accept
from CHI, the "Option Store B Assets" (as defined in Annex I), and the Buyer
shall assume the "Option Store B Liabilities" (as defined in Annex I); if the
Buyer exercises the Option with respect to Option Store C, CI shall sell,
transfer, convey, assign and deliver to the Buyer the "Option Store C Assets"
(as defined in Annex I), and the Buyer shall assume the "Option Store C
Liabilities" (as defined in Annex I); and if the Buyer exercises the Option
with respect to Option Store D, the Seller shall sell, transfer, convey,
assign and deliver to the Buyer the "Option Store D Assets" (as defined in
Annex I), and the Buyer shall assume the "Option Store D Liabilities" (as
defined in Annex I) provided, however, that, subject to the Buyer's approval
as to manner and form, the Seller shall make such adjustments as to the
rights, contracts, properties, assets and goodwill to be purchased and the
liabilities and obligations to be assumed as shall be necessary to settle the
obligations, rights and accounts existing between the acquired Option Stores,
on the one hand, the Seller, its Affiliates and other divisions, on the other
hand, at the time of the Closing so that such obligations, rights and accounts
are settled and cancelled as of the Closing and are not transferred to or
assumed by the Buyer. The Option Store A Assets, the Option Store B Assets,
the Option Store C Assets and the Option Store D Assets are referred to herein
collectively as the "Option Store Assets;" and the Option Store A Liabilities,
the Option Store B Liabilities, the Option Store C Liabilities and the Option
Store D Liabilities are referred to herein collectively as the "Option Store
Liabilities."
(b) At Closing (with respect to the Option Stores acquired at
such Closing), the Sellers shall deliver possession of the Option Stores
"broom clean" and free of all occupancies except for Department Store Space
Leases, if any.
3
<PAGE>
5. Transfer Documents. The sale of the Option Store Assets to the
Buyer shall be effected by the delivery by the Seller to the Buyer of (i) such
bills of sale, special warranty deeds, endorsements, assignments and other
instruments of conveyance and transfer as are necessary or appropriate to vest
in the Buyer good and marketable title (such as any reputable title insurance
company licensed to do business in the state in which such Option Store is
located will approve and insure without exceptions other than Permitted
Encumbrances) to the Option Store Assets free and clear of any Lien, and (ii)
all contracts, commitments, books, records and other data in the possession of
the Seller or any of its Affiliates relating to the Option Store Assets.
Assumption of the Option Store Liabilities by the Buyer shall be effected by
the delivery by the Buyer to the Sellers of such instruments as are necessary
or appropriate to effect the assumption by the Buyer of the Option Store
Liabilities. As soon as possible after the execution and delivery of this
Option Agreement, representatives of the Buyer and the Seller shall commence
and complete preparation of all conveyance and assumption documents necessary
or appropriate to vest in the Buyer ownership of the Option Store Assets and
to effect the assumption by the Buyer of the Option Store Liabilities, as
contemplated by this Option Agreement. If requested by either party, such
documents shall be executed by the appropriate parties and placed in escrow
with the Option Escrow Agent. All such documents shall be delivered by the
Option Escrow Agent to the appropriate party at the Closing in conformity with
this Option Agreement upon tender of payment to the Seller of the applicable
Purchase Price in accordance with Section 4.
6. HSR Act Filings; Approvals. The Sellers and the Buyer shall each
use its best efforts promptly to prepare and to make such filings and provide
such information as may be required under the HSR Act, and any other filings
which may be required with respect to the purchase of the Option Stores
pursuant to the Option.
7. Covenants of the Sellers. Until the Closing (with respect to the
Option Stores acquired at such Closing) or the termination of this Option
Agreement, each of the Sellers covenants and agrees that, unless the Buyer
shall otherwise consent in writing, it shall, and shall cause each of its
Affiliates to:
(a) operate and maintain the Option Stores only in the
usual, regular and ordinary course;
(b) not pledge, sell, lease, transfer, dispose of or otherwise
encumber ("Transfer"), or enter into any agreement for
the Transfer of, (i) all or any part of the
4
<PAGE>
Option Store Assets consisting of real estate or interests
in real estate or (ii) all or any part of the Option Store
Assets consisting of other fixed assets to the extent that
such Transfer would be inconsistent with the continued
operation of the Option Stores in a manner consistent with
past practice;
(c) keep all the Option Store Assets insured (to an extent
substantially consistent with the Seller's practice with
respect to its other assets) against any loss, either by
fire, other casualty, or theft and shall give notice to the
Buyer of any loss involving any of the Option Store
Assets if such loss is at least $200,000 or more and
discuss with the Buyer whether the proceeds of any
claim made in connection with the loss should be used
to replace any property damage or loss. The Seller
shall cause the Buyer to be named as loss payee, as its
interest may appear, on all fire and casualty policies
that provide coverage for the Option Stores. Any
proceeds not used to replace lost or damaged property
shall be for the account of the Buyer if the Closing is
consummated;
(d) maintain all the books, accounts and records relating to
the Option Stores in the usual, regular and ordinary
manner;
(e) promptly advise the Buyer in writing of any material
adverse change in the condition of any of the Option
Stores;
(f) use its reasonable best efforts to comply in all material
respects with the provisions of all laws, regulations,
ordinances and judicial decrees applicable to the
conduct of the Option Stores;
(g) promptly notify the Buyer of the institution of any
legal proceeding which is reasonably likely,
individually or in the aggregate, to have a material
5
<PAGE>
adverse effect on the operations of any of the Option
Stores; and
(h) not take or omit to take any other action nor enter into
any agreement which would have the effect of (i)
frustrating the purpose of this Option Agreement or (ii)
preventing or disabling the Seller from selling or
delivering the Option Stores to the Buyer upon exercise
of the Option or otherwise performing its obligations
under this Option Agreement.
Anything in this Option Agreement to the contrary notwithstanding,
nothing in this Option Agreement shall prohibit the Seller from consummating a
transaction described in clause (ii) of Section 2(a) hereof, or entering into
any agreement relating to such transaction so long as such transaction or
agreement is, to the extent that it involves the Option Store Assets, subject
to the Option and the Buyer's rights hereunder.
8. Representations and Warranties of the Seller. Each of the
Sellers hereby represents and warrants to the Buyer as follows:
(a) Due Authorization. This Option Agreement has been duly
authorized by all necessary corporate action on its part, has been duly
executed by its duly authorized officer, and constitutes its valid and binding
agreement enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors rights generally and subject to general principles of
equity (regardless of whether enforcement is sought in equity or law).
(b) Due Organization. It is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has the requisite corporate power to enter into and perform
this Option Agreement.
(c) Conflicting Instruments. Neither its execution or delivery
nor its performance of this Option Agreement nor the consummation by it of the
transactions contemplated hereby will violate in any material respect (with or
without the giving of notice or the lapse of time, or both), or require any
material
6
<PAGE>
consent, approval, filing or notice under, any provision of law
applicable to it or any of its Affiliates (other than the HSR Act), or will
require any consent, approval or notice under or will conflict with, or result
in the breach or termination of any provisions of, or constitute a default
under or allow the acceleration of the performance of, any of its obligations
or any of its Affiliates under, or result in the creation of a Lien upon any
of the Option Store Assets, pursuant to, any term of its Articles of
Incorporation or By-laws or those of its Affiliates or any term of any note,
bond, mortgage, indenture, lease, license agreement, or other instrument or
any writ, injunction, order, judgment, arbitration award, decree, rule or
regulation of any Government to which it is a party or by which it, any of its
Affiliates or any of the Option Store Assets is subject or bound, other than
violations, conflicts, breaches, terminations or defaults which, individually
or in the aggregate, would not have a material adverse effect on the
operations, assets, liabilities or condition of any Option Store.
(d) Title. It owns and holds the Option Store Assets free and
clear of all Lien, except for liens for real property taxes not yet due and
payable without interest or penalty and except for Permitted Encumbrances.
(e) Environmental. Schedule 4.25 to the Asset Purchase
Agreement contains an accurate and complete description of all environmental
reports known to the Sellers that affect any of the Option Store Assets, and
the Sellers have delivered a complete copy of each such report to the Buyer.
Except as set forth in Schedule 4.25 to the Asset Purchase Agreement or in the
reports listed therein, the Sellers have no knowledge of the presence or
release of any toxic substance or hazardous material or of any other
environmental condition or contamination in or from the Option Store Assets.
9. Representations and Warranties of the Buyer. The Buyer
hereby represents and warrants to the Sellers as follows:
(a) Due Authorization. This Option Agreement has been duly
authorized by all necessary corporate action on the part of the Buyer, has
been duly executed by a duly authorized officer of the Buyer and constitutes a
valid and binding agreement of the Buyer enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors rights generally and
subject to general principles of equity (regardless of whether enforcement is
sought in equity or law).
7
<PAGE>
(b) Due Organization. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of New York and has the requisite corporate power to enter into and perform
this Option Agreement.
10. Indemnification. From and after the Closing, each of the
Sellers, on the one hand, and the Buyer, on the other hand, shall indemnify
and hold the other harmless against any loss, liability, damage or expense
(including, without limitation, reasonable attorneys' fees) sustained by it
resulting from any inaccuracy in any of its representations, warranties or
breach of any covenants contained in this Option Agreement as to which a claim
has been made within 18 months after the Closing. This Section 10 is not
intended to be exclusive of any other rights or remedies under this Option
Agreement arising as a matter of law or otherwise.
11. Tax Indemnification. The Seller shall pay or otherwise be
responsible for (and shall indemnify and hold harmless the Buyer, any
Affiliates thereof and the Option Stores against) any liability for Taxes (i)
arising from or attributable to any income taxes imposed on the gain, if any,
realized on the transfer of the Option Stores, (ii) for any sales, use, real
property, transfer or gains or other similar taxes arising from the transfer
of the Option Stores and (iii) with respect to the acquired Option Stores for
any taxable period ending (or deemed pursuant to this paragraph to end) on or
before the date of the Closing. Any Taxes for a taxable period beginning
before the date of the Closing and ending after such date shall be deemed for
the purposes of the preceding sentence to be apportioned between a taxable
period ending on and including the same date as the Closing and a taxable
period commencing the date following the Closing on the same basis as the Tax
is imposed, based, where relevant, on the actual operations of the acquired
Option Stores in such periods.
12. Consents. Each of the Sellers shall, and shall cause each of
its Affiliates to, give all required notices and use its best efforts to
obtain prior to the Closing all material licenses, permits, consents,
approvals, authorization, qualifications and orders of all Person relating to
the acquired Option Stores as may be required in order to enable the Sellers
to perform their obligations hereunder, including, without limitation all
consents and approvals required to permit them to make the sale to the Buyer
contemplated herein and to enable the Buyer to enjoy after the Closing all
rights and benefits presently enjoyed by the Sellers in respect of the
acquired Option Stores; provided, however, that no contract shall be amended
to increase the amount payable thereunder in order to obtain any such consent,
8
<PAGE>
approval or authorization or otherwise without obtaining the prior written
consent of the Buyer.
13. Survival. All the covenants, representations and warranties
contained herein shall survive the Closing and shall be deemed to have been
made as of the date hereof and as of the date of the Closing.
14. Specific Performance. The Sellers acknowledge that money
damages are an inadequate remedy for breach of this Option Agreement.
Therefore, the Sellers agree that the Buyer shall be entitled to an injunction
or injunctions to prevent breaches of this Option Agreement and to enforce
specifically the terms and provisions of this Option Agreement in any court of
the United States located in the Commonwealth of Pennsylvania or State of New
York, this being in addition to any other remedy to which such party is
entitled at law or in equity. In addition, each of the Sellers (i) consents
to submit itself to the personal jurisdiction of any Federal court located in
the Commonwealth of Pennsylvania or State of New York in the event any dispute
arises out of this Option Agreement or any of the transactions contemplated by
this Option Agreement, (ii) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such
court, and (iii) agrees that it will not bring any action relating to this
Option Agreement or any of the transactions contemplated by this Option
Agreement in any court other than a Federal sitting in the Commonwealth of
Pennsylvania or State of New York.
15. Further Assurances. In the event the Buyer exercises the
Option, each of the Sellers and the Buyer each will execute and deliver all
such further documents and instruments and take all such further action as may
be necessary in order to consummate the transactions contemplated hereby.
16. Cost and Expenses. Except as otherwise specifically provided
herein, all legal and other costs and expenses incurred in connection with
this Option Agreement and the transactions contemplated hereby shall be paid
by the party incurring such expenses.
17. Transfer Taxes. In the event the Buyer exercises the Option,
the Sellers and the Buyer shall each pay one-half of all sales, use, transfer
and like Taxes, if any, required to be paid in connection with the transfer of
the acquired Option Stores.
9
<PAGE>
18. Parties in Interest; Assignments. This Option Agreement is
binding upon and is solely for the benefit of the parties hereto, their
respective Affiliates and their respective successors and assigns. The Buyer
may cause one or more direct or indirect wholly owned Subsidiaries designated
by it to carry out all or part of the transactions contemplated by this Option
Agreement.
19. Amendments. This Option Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
20. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile transmission to the parties at the following addresses or at such
other addresses as shall be specified by the parties by like notice; provided,
that a notice of change of address shall be effective only upon receipt
thereof:
If to the Buyer to:
The May Department Stores Company
611 Olive Street
St. Louis, Missouri 63101
Attention: Louis J. Garr, Jr., Esq.
General Counsel
Facsimile Number: 314-342-6384
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: J. Michael Schell, Esq.
Facsimile Number: 212-735-2000
10
<PAGE>
If to the Sellers to:
Strawbridge & Clothier
801 Market Street
Philadelphia, Pennsylvania 19107
Attention: Francis R. Strawbridge III, Chairman
Facsimile Number: 215-629-6833
With a copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
Attention: Donald A. Scott
Facsimile Number: 215-963-5299
21. Termination. The Option shall expire on the earlier of (i) the
Effective Time, or (ii) the date the Asset Purchase Agreement has been
terminated pursuant to Section 9.1(a) or 9.1(c) thereof, or (iii) the later of
(A) the date 270 days after the Asset Purchase Agreement has been terminated
pursuant to Section 9.1(b), 9.1(d), 9.1(e) or 9.1(f) thereof, (B) if an
"Extension Event" (as defined below) has occurred, 730 days after the Asset
Purchase Agreement has been terminated pursuant to Section 9.1(e) thereof, or
(C) 10 days following consummation or termination of any agreement entered
into by the Seller during the term of this Option Agreement providing for an
Extension Event (but with respect to the foregoing clauses (ii) or (iii) only
if the notice of exercise of the Option shall not have been given prior to
that date); provided that if the Option cannot be exercised as of the
termination date by reason of any injunction, order or similar restraint
issued by a court of competent jurisdiction, the term of the Option shall
extend until the tenth business day after such injunction, order or similar
restraint shall have been dissolved or when such injunction, order or
restraint shall have become permanent and no longer subject to appeal, as the
case may be. "Extension Event" means the occurrence of one or more of the
following events: (i) the acquisition of the beneficial ownership by any
person, entity or group (as such terms are used in the Securities Exchange
Act) other than the Buyer or any of its Affiliates of 25% or more of the
voting power of the outstanding shares of the Seller Common Stock on a fully
diluted basis; or (ii) the
11
<PAGE>
execution by the Seller of an agreement relating to, or the
consummation of, a merger, consolidation or other similar business combination
of the Seller.
22. Applicable Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of New York (without regard
to the principles of conflict of law thereof).
23. Counterparts. This Option Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
24. Descriptive Headings; Defined Terms. The descriptive headings
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Option
Agreement. All terms used herein with initial capital letters and not
otherwise defined herein shall have the meaning ascribed to them in the Asset
Purchase Agreement.
25. No Excuse for Breach of Agreement. Neither this Option
Agreement nor anything contained in it shall relieve any party to the Asset
Purchase Agreement from its breach of the Asset Purchase Agreement nor limit
any claim or remedy for such breach by an aggrieved party to the Asset
Purchase Agreement.
12
<PAGE>
IN WITNESS WHEREOF, this Option Agreement has been signed by the
duly authorized officers of each of the parties hereto as of the day and year
first written above.
THE MAY DEPARTMENT STORES COMPANY
By: _________________________________
Name:
Title:
STRAWBRIDGE & CLOTHIER
By: _________________________________
Name:
Title:
S&C, CHERRY HILL, INC. S&C, CONCORD, INC.
By: ______________________________ By: _________________________________
Name: Name:
Title: Title:
13
<PAGE>
Annex I to Exhibit A
1. Description of the Option Stores:
A. "Option Store A" means the Department Store Real Property
for the Willow Grove Park "Strawbridge & Clothier" store.
B. "Option Store B" means the Department Store Real Property
for the Cherry Hill Mall "Strawbridge & Clothier" store.
C. "Option Store C" means the Department Store Leased Real
Property for the Concord Mall "Strawbridge & Clothier"
department store.
D. "Option Store D" means the Department Store Leased Real
Property for the Concord Mall "Strawbridge & Clothier" home
furnishings store.
2. Description of Option Store Assets:
A. "Option Store A Assets" shall mean the Department Store Real
Property, the Department Store Equipment, Machinery and
Fixtures, and that portion of the Other Department Store
Contracts described in Section 1.68(b) of the Asset Purchase
Agreement, as each of the foregoing relates to Option Store A.
B. "Option Store B Assets" shall mean the Department Store Real
Property, the Department Store Equipment, Machinery and
Fixtures, and that portion of the Other Department Store
Contracts described in Section 1.68(b) of the Asset Purchase
Agreement, as each of the foregoing relates to Option Store B.
C. "Option Store C Assets" shall mean the Department Store Leased
Real Property, the Department Store Equipment, Machinery and
Fixtures, and that portion of the Other Department Store
Contracts described in Section 1.68(b) of the Asset Purchase
Agreement, as each of the foregoing relates to Option Store C.
<PAGE>
D. "Option Store D Assets" shall mean the Department Store
Leased Real Property, the Department Store Equipment,
Machinery and Fixtures, and that portion of the Other
Department Store Contracts described in Section 1.68(b) of the
Asset Purchase Agreement, as each of the foregoing relates to
Option Store D.
3. Description of Option Store Liabilities:
A. "Option Store A Liabilities" shall mean the liabilities,
obligations and duties of the Seller accruing and arising
after the Closing under the Department Store Contracts that
relate to Option Store A, except that with respect to Other
Department Store Contracts such liabilities, obligations and
duties shall be limited to the agreements and commitments
referenced in Section 1.68(b) of the Asset Purchase Agreement.
B. "Option Store B Liabilities" shall mean the liabilities,
obligations and duties of CHI accruing and arising after the
Closing under the Department Store Contracts that relate to
Option Store B, except that with respect to Other Department
Store Contracts such liabilities, obligations and duties shall
be limited to the agreements and commitments referenced in
Section 1.68(b) of the Asset Purchase Agreement.
C. "Option Store C Liabilities" shall mean the liabilities,
obligations and duties of the Seller accruing and arising
after the Closing under the Department Store Contracts that
relate to Option Store C, except that with respect to Other
Department Store Contracts such liabilities, obligations and
duties shall be limited to the agreements and commitments
referenced in Section 1.68(b) of the Asset Purchase Agreement.
D. "Option Store D Liabilities" shall mean the liabilities,
obligations and duties of CI accruing and arising after the
Closing under the Department Store Contracts that relate to
Option Store D, except that with respect to Other Department
Store Contracts such liabilities, obligations and duties shall
be limited to the agreements and commitments referenced in
Section 1.68(b) of the Asset Purchase Agreement.
2
Exhibit 3(i)
RESTATED ARTICLES OF INCORPORATION
OF
STRAWBRIDGE & CLOTHIER
1ST. The name of the Corporation is STRAWBRIDGE & CLOTHIER.
2ND. Said Corporation is formed for the purpose of buying, selling and
dealing in merchandise for personal and household use and ornament, and
generally such articles of merchandise ordinarily dealt in by department
stores, and so far as necessary to carry on said business, the right to
manufacture such goods, wares and merchandise.
3RD. The location and post office address of the registered office of
the Corporation in this Commonwealth is
801 Market Street
Philadelphia, Pennsylvania 19107-3199
4TH. Said Corporation is to exist perpetually.
5TH. The authorized capital stock of the Corporation shall consist of
42,000,000 shares, divided into 2,000,000 shares of Series Preferred Stock
without par value, and 40,000,000 shares of Common Stock of a par value of $1
per share.
A. SERIES PREFERRED STOCK.
The Board of Directors shall have authority by resolution or
resolutions to determine which series of the Series Preferred Stock shall have
full, limited, multiple or fractional, or no voting rights and such
designations, preferences, qualifications, privileges, limitations, options,
conversion rights and other special rights as shall be stated in the
resolution or resolutions.
B. COMMON STOCK.
1. SERIES. The Common Stock shall be divided into 20,000,000 shares
of Series A Common Stock and 20,000,000 shares of Series B Common Stock. Upon
the filing of this amendment to the Articles with the Department of State of
the Commonwealth of Pennsylvania, each issued share of Common Stock of the
Corporation shall, without any action on the part of the
____________
* This statement relates to the amendment filed and effective on
July 23, 1986.
<PAGE>
holders thereof, be reclassified and changed into one share of
Series A Common Stock unless a shareholder shall elect to have all or part of
the shares held by the shareholder reclassified and changed into shares of
Series B Common Stock in which case each such share shall be reclassified and
changed into one share of Series B Common Stock. In order to make the
election, such shareholder shall indicate the election on an appropriate form
to be furnished by the Corporation for such purpose and shall return the form
and surrender to the Corporation the certificate or certificates representing
the shares of Common Stock with respect to which the election is made prior to
the commencement of the meeting of shareholders of the Corporation held for
the purpose of voting upon this amendment.
2. DIVIDENDS AND OTHER DISTRIBUTIONS.
(a) Cash Dividends. At any time shares of Series B Common Stock
are outstanding, as and when cash dividends may be declared by the Board of
Directors, the cash dividend payable on shares of Series A Common Stock shall
in all cases be at least 10% higher on a per share basis than the cash
dividend payable on shares of Series B Common Stock. For purposes of
calculating the cash dividend to be paid on shares of Series A Common Stock
and Series B Common Stock, the amount of the cash dividend declared and
payable on shares of Series A Common Stock, determined in accordance with this
provision, may be rounded up to the next highest cent or fraction thereof.
(b) Other Dividends and Distributions. Each share of Series A
Common Stock and each share of Series B Common Stock shall be equal in respect
of rights to dividends (other than cash) and distributions, when and as
declared, in the form of stock or other property of the Corporation, except
that in the case of dividends or other distributions payable in stock of the
Corporation other than preferred stock, including distributions pursuant to
stock splits or stock dividends, only shares of the Series A Common Stock
shall be distributed with respect to Series A Common Stock and only shares of
Series B Common Stock shall be distributed with respect to Series B Common
Stock.
3. VOTING.
With respect to all matters upon which stockholders are entitled to
vote or to which stockholders are entitled to give consent, the holders of the
outstanding shares of Series A Common Stock and the holders of the outstanding
shares of Series B Common Stock shall vote together without regard to series,
and every holder of the outstanding shares of Series A Common Stock shall be
entitled to cast thereon one vote in person or by proxy for each share of
Series A Common Stock standing in the holder's name and every holder of the
outstanding
2
<PAGE>
shares of Series B Common Stock shall be entitled to cast thereon
ten votes in person or by proxy for each share of Series B Common Stock
standing in the holder's name. With respect to (a) any merger or
consolidation of the Corporation with or into any other corporation, any sale,
lease, exchange or other disposition of all or substantially all of the
Corporation's assets to or with any other person, or any dissolution of the
Corporation, other than a merger or other transaction with a majority-owned
subsidiary of the Corporation or (b) any proposed amendment to the Articles
which would increase or decrease the number of authorized shares of either
Series A Common Stock or Series B Common Stock, authorize the issuance of
Series B Common Stock other than as provided in Section 4 hereof, or alter or
change the powers, preferences, relative voting power or special rights of the
shares of Series A Common Stock or Series B Common Stock, the approval of a
majority of the votes entitled to be cast by the holders of each series,
voting separately as a series, shall be obtained in addition to the approval
of the holders of Series A Common Stock and Series B Common Stock voting
together without regard to series as required by the Articles or applicable
law.
4. ISSUANCE OF SERIES B COMMON STOCK.
Following initial issuance pursuant to Section 1 hereof, the Board
of Directors may only issue shares of Series B Common Stock (a) in the form of
a distribution pursuant to a stock dividend on or split of the shares of
Series B Common Stock and only to the then holders of the outstanding shares
of Series B Common Stock in conjunction with and in the same ratio as a stock
dividend on or split of the shares of Series A Common Stock and (b) upon
exercise of stock options outstanding on the effective date of this amendment.
5. CONVERSION OF SERIES B COMMON STOCK.
Each share of Series B Common Stock may at any time be converted at
the election of the holder thereof into one fully paid and nonassessable share
of Series A Common Stock. Any holder of shares of Series B Common Stock may
elect to convert any or all of such shares at one time or at various times in
such holder's discretion. Such right shall be exercised by the surrender of
the certificate representing each share of Series B Common Stock to be
converted to the agent for the registration of transfer of shares of Series B
Common Stock at its office, or to the Corporation at its principal executive
offices, accompanied by a written notice of the election by the holder thereof
to convert and (if so required by the transfer agent or by the
____________
* This statement relates to the amendment filed and effective on
July 23, 1986.
3
<PAGE>
Corporation) by instruments of transfer, in form satisfactory to the
transfer agent and to the Corporation, duly executed by such holder or the
holder's duly authorized attorney. The issuance of a certificate for shares
of Series A Common Stock upon conversion of shares of Series B Common Stock
shall be made without charge for any stamp or other similar tax in respect of
such issuance. However, if any such certificate is to be issued in a name
other than that of the holder of the share or shares of Series B Common Stock
converted, the person or persons requesting the issuance thereof shall pay to
the transfer agent or to the Corporation the amount of any tax which may be
payable in respect of any such transfer, or shall establish to the
satisfaction of the transfer agent or of the Corporation that such tax has
been paid. As promptly as practicable after the surrender for conversion of a
certificate representing shares of Series B Common Stock and the payment of
any tax as hereinbefore provided, the Corporation will deliver or cause to be
delivered at the office of the transfer agent to, or upon the written order
of, the holder of such certificate, a certificate or certificates representing
the number of shares of Series A Common Stock issuable upon such conversion,
issued in such name or names as such holder may direct. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of the surrender of the certificate representing shares of Series B
Common Stock (if on such date the transfer books of the Corporation shall be
closed, then immediately prior to the close of business on the first date
thereafter that said books shall be open), and all rights of such holder
arising from ownership of shares of Series B Common Stock shall cease at such
time, and the person or persons in whose name or names the certificate
representing shares of Series A Common Stock are to be issued shall be treated
for all purposes as having become the record holder or holders of such shares
of Series A Common Stock at such time and shall have and may exercise all the
rights and powers appertaining thereto. No adjustments in respect of past
cash dividends shall be made upon the conversion of any share of Series B
Common Stock; provided, however, that if any shares of Series B Common Stock
shall be converted subsequent to the record date for the payment of a cash or
stock dividend or other distribution on shares of Series B Common Stock but
prior to such payment, the registered holder of such shares at the close of
business on such record date shall be entitled to receive the cash or stock
dividend or other distribution payable to holders of Series A Common Stock.
The Corporation shall at all times reserve and keep available, solely for the
purpose of issue upon conversion of outstanding shares of Series B Common
Stock, such number of shares of Series A Common Stock as may be issuable upon
the conversion of all such outstanding shares of the Series B Common Stock,
provided that the Corporation may deliver shares of Series A Common Stock held
in the treasury of the Corporation. If any shares of Series A Common Stock
require registration with
4
<PAGE>
or approval of any governmental authority under any federal or state
law before such shares of Series A Common Stock may be issued upon conversion,
the Corporation will cause such shares to be duly registered or approved, as
the case may be.
6. TRANSFER OF SERIES B COMMON STOCK.
(a) No person holding shares of Series B Common Stock of record
(a "Series B Holder") may transfer, and the Corporation shall not register the
transfer of, such shares of Series B Common Stock, as Series B Common Stock,
whether by sale, assignment, gift, bequest, appointment or otherwise, except
to a Permitted Transferee and upon any attempted transfer of shares not
permitted hereunder such shares shall be converted into Series A Common Stock
as provided by subsection (d) of this Section 6. A "Permitted Transferee"
shall mean, with respect to each person from time to time shown as the record
holder of shares of Series B Common Stock:
(i) In the case of a Series B Holder
who is a natural person:
(A) The spouse of such Series B
Holder, any lineal descendant of a great
grandparent of such Series B Holder, and
any spouse of such lineal descendant
(which lineal descendants, their
spouses, the Series B Holder, and his or
her spouse are herein collectively
referred to as "Series B Holder's Family
Members");
(B) The trustee of a trust
(including a voting trust) principally
for the benefit of such Series B
Holder's Family Members provided that
such trust may also grant a general or
special power of appointment to one or
more of such Series B Holder's Family
Members and may permit trust assets to
be used to pay taxes, legacies and other
obligations of the trust or of the
estates of one or more of such Series B
Holder's Family Members payable by
reason of the death of any of such
Family Members; and
(C) The estate of such Series B
Holder.
5
<PAGE>
(ii) In the case of a Series B Holder
holding the shares of Series B Common Stock
in question as trustee pursuant to a trust,
"Permitted Transferee" means (A) any person
transferring Series B Common Stock (or Common
Stock which was reclassified into Series B
Common Stock as a result of this amendment)
to such trust and (B) any Permitted
Transferee of any such transferor determined
pursuant to clause (i) above.
(iii) In the case of a Series B Holder
holding the shares of Series B Common Stock
in question as trustee pursuant to a trust
which was irrevocable on the effective date
of this amendment, "Permitted Transferee"
means (A) any person to whom or for whose
benefit principal may be distributed either
during or at the end of the term of such
trust whether by power of appointment or
otherwise and (B) any Permitted Transferee of
any such person determined pursuant to clause
(i) above.
(iv) In the case of a Series B Holder
which is a corporation or partnership
acquiring record and beneficial ownership of
the shares of Series B Common Stock upon
initial issuance pursuant to Section 1
hereof, "Permitted Transferee" means (A) any
stockholder of such corporation or partner of
such partnership on the effective date of
this amendment and (B) any Permitted
Transferee of such stockholder or partner
determined under clause (i) above.
(v) In the case of a Series B Holder
which is the estate of a deceased Series B
Holder, or which is the estate of a bankrupt
or insolvent Series B Holder, which holds
record and beneficial ownership of the shares
of Series B Common Stock in question,
"Permitted Transferee" means a Permitted
Transferee of such deceased, bankrupt or
insolvent Series B Holder as determined
pursuant to clause (i), (ii), (iii), or (iv)
above, as the case may be.
____________
* This statement relates to the amendment filed and effective on
July 23, 1986.
6
<PAGE>
(vi) In the case of a Series B Holder
who shares with another person beneficial
ownership of the shares of Series B Common
Stock at the time of initial issuance
pursuant to Section 1 hereof, "Permitted
Transferee" means such other beneficial owner
and any Permitted Transferee of such other
beneficial owner determined under clause (i)
above.
(b) Notwithstanding anything to the contrary
set forth herein, any Series B Holder may pledge such holder's
shares of Series B Common Stock to a pledgee pursuant to a bona
fide pledge of such shares as collateral security for
indebtedness due to the pledgee, provided that such shares shall
not be transferred to or registered in the name of the pledgee
and shall remain subject to the provisions of this Section 6. In
the event of foreclosure or other similar action by the pledgee,
such pledged shares of Series B Common Stock may only be
transferred to a Permitted Transferee of the pledgor or converted
into shares of Series A Common Stock, as the pledgee may elect.
(c) For purposes of this Section 6:
(i) The relationship of any person that
is derived by or through legal adoption shall
be considered a natural one.
(ii) Each joint owner of shares of
Series B Common Stock shall be considered a
"Series B Holder" of such shares.
(iii) A minor for whom shares of Series
B Common Stock are held pursuant to a Uniform
Gifts to Minors Act or similar law shall be
considered a Series B Holder of such shares.
(iv) Unless otherwise specified, the
term "person" means both natural persons and
legal entities.
(d) Any transfer of shares of Series B
Common Stock not permitted hereunder shall result in the
conversion of the transferee's shares of Series B Common Stock
into shares of Series A Common Stock, effective the date on which
certificates representing such shares are presented for transfer
on the books of the Corporation. The Corporation may, in
connection with preparing a list of stockholders entitled to vote
at any meeting of stockholders, or as a condition to the transfer
or the registration of shares of Series B Common Stock on the
Corporation's books, require the furnishing of such affidavits or
7
<PAGE>
other proof as it deems necessary to establish that any person is
the beneficial owner of shares of Series B Common Stock or is a
Permitted Transferee.
(e) Shares of Series B Common Stock shall be
registered in the names of the beneficial owners thereof and not
in "street" or "nominee" name. For this purpose, a "beneficial
owner" of any shares of Series B Common Stock shall mean a person
who, or an entity which, possesses the power, either singly or
jointly, to direct the disposition of such shares. The
Corporation shall note on the certificates for shares of Series B
Common Stock the restrictions on transfer and registration of
transfer imposed by this Section 6.
7. AUTOMATIC CONVERSION OF SERIES B COMMON STOCK.
At any time when the number of outstanding shares
of Series B Common Stock as reflected on the stock transfer books
of the Corporation falls below 5% of the aggregate number of the
issued and outstanding shares of Series A Common Stock and Series
B Common Stock of the Corporation, or the Board of Directors and
the holders of a majority of the outstanding shares of Series B
Common Stock approve the conversion of all of the Series B Common
Stock into Series A Common Stock, then, immediately upon the
occurrence of either such event, the outstanding shares of Series
B Common Stock shall be converted into shares of Series A Common
Stock. In the event of such a conversion, certificates formerly
representing outstanding shares of Series B Common Stock shall
thereupon and thereafter be deemed to represent the like number
of shares of Series A Common Stock.
8. OTHER RIGHTS.
Except as otherwise required by the Pennsylvania
Business Corporation Law or as otherwise provided in the
Articles, each share of Series A Common Stock and each share of
Series B Common Stock shall have identical preferences,
qualifications, privileges, limitations and other rights,
including rights in liquidation.
6TH. The shareholders of the Corporation shall not be
entitled to cumulate their votes for the election of directors.
7TH. A special meeting of shareholders may only be called
by the Chairman, the President, the Board of Directors, or
shareholders entitled to cast a majority of the votes which all
shareholders are entitled to cast at the particular meeting or by
such other officers or persons as may be provided in the By-laws.
8
<PAGE>
8TH.** Whenever any corporate action is to be taken by vote
of the shareholders adopting, amending or repealing the By-laws,
or pursuant to Section 311 (Sale of Assets), Section 405A
(Removal of Directors), Section 409.1C (Transactions with
Interested Shareholders), Section 703 (Distributions in Partial
Liquidation) or Articles VIII (Amendment of Articles), IX
(Merger, Consolidation and Certain Other Fundamental
Transactions) or XI (Dissolution) of the Pennsylvania Business
Corporation Law or any successor provisions thereto, in addition
to any other vote required by the Pennsylvania Business
Corporation Law or the Articles, the proposed corporate action
shall be authorized only (i) upon receiving at least two-thirds
of the votes which all voting shareholders are entitled to cast
thereon or (ii) in the event that the corporate action has been
proposed by a majority of the Board of Directors, upon receiving
at least a majority of the votes which all voting shareholders
are entitled to cast thereon.
9TH. Effective after the 1984 annual meeting of
shareholders, nominations for election of directors may be made
by any shareholder entitled to vote for the election of directors
only if written notice (the "Notice") of such shareholder's
intent to nominate a director at the meeting is given by the
shareholder and received by the Secretary of the Corporation in
the manner and within the time specified herein. The Notice
shall be delivered to the Secretary of the Corporation not less
than 45 days prior to the date fixed by the By-laws for the
annual meeting of shareholders; provided, however, that if
directors are to be elected by the shareholders at any other
time, the Notice shall be delivered to the Secretary of the
Corporation not later than the seventh day following the day on
which notice of the meeting was first mailed to shareholders. In
lieu of delivery to the Secretary of the Corporation, the Notice
may be mailed to the Secretary of the Corporation by certified
mail, return receipt requested, but shall be deemed to have been
given only upon actual receipt by the Secretary of the
Corporation.
The Notice shall be in writing and shall contain or be accompanied
by;
(a) the name and residence of such shareholder;
(b) a representation that the shareholder is a
holder of the Corporation's voting stock and intends to
appear in person or by proxy at the meeting to nominate
the person or persons specified in the Notice;
____________
** Paragraph 8th was approved by shareholders on April 10, 1984.
9
<PAGE>
(c) such information regarding each nominee as
would have been required to be included in a proxy
statement filed pursuant to Regulation 14A of the rules
and regulations established by the Securities and
Exchange Commission under the Securities Exchange Act
of 1934 (or pursuant to any successor act or
regulation) had proxies been solicited with respect to
such nominee by the management or Board of Directors of
the Corporation;
(d) a description of all arrangements or
understandings among the shareholder and each nominee
and any other person or persons (naming such person or
persons) pursuant to which such nomination or
nominations are to be made by the shareholder; and
(e) the consent of each nominee to serve as
director of the Corporation if so elected.
The Chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that any nomination made at
the meeting was not made in accordance with the foregoing
procedures and, in such event, the nomination shall be
disregarded.
10TH.*** Section 1. Directors and Officers as Fiduciaries.
A director or officer of the Corporation shall stand in a
fiduciary relation to the Corporation and shall perform his or
her duties as a director or officer, including his or her duties
as a member of any committee of the Board upon which he or she
may serve, in good faith, in a manner he or she reasonably
believes to be in the best interests of the Corporation, and with
such care, including reasonable inquiry, skill and diligence, as
a person of ordinary prudence would use under similar
circumstances. In performing his or her duties, a director or
officer shall be entitled to rely in good faith on information,
opinions, reports or statements, including financial statements
and other financial data, in each case prepared or presented by
one or more officers or employees of the Corporation whom the
director or officer reasonably believes to be reliable and
competent with respect to the matters presented, counsel, public
accountants or other persons as to matters that the director or
officer reasonably believes to be within the professional or
expert competence of such person, or a committee of the Board of
Directors upon which the director or officer does not serve, duly
designated in accordance with law, as to matters within its
designated authority, which committee the director or officer
reasonably believes to merit confidence. A director or
10
<PAGE>
officer shall not be considered to be acting in good faith if he or she
has knowledge concerning the matter in question that would cause
his or her reliance to be unwarranted. Absent breach of
fiduciary duty, lack of good faith or self-dealing, actions taken
as a director or officer of the Corporation or any failure to
take any action shall be presumed to be in the best interests of
the Corporation.
Section 2. Personal Liability of Directors. A
director of the Corporation shall not be personally liable for
monetary damages as such (including, without limitation, any
judgment, amount paid in settlement, penalty, punitive damages or
expense of any nature (including, without limitation, attorneys'
fees and disbursements)) for any action taken, or any failure to
take any action, unless the director has breached or failed to
perform the duties of his or her office under these Articles, the
By-laws of the Corporation or applicable provisions of law and
the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness.
Section 3. Personal Liability of Officers. An officer
of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages as such
(including, without limitation, any judgment, amount paid in
settlement, penalty, punitive damages or expense of any nature
(including, without limitation, attorneys' fees and
disbursements)) for any action taken, or any failure to take any
action, unless the officer has breached or failed to perform the
duties of his or her office under these Articles, the By-laws of
the Corporation or applicable provisions of law and the breach or
failure to perform constitutes self-dealing, willful misconduct
or recklessness.
Section 4. Interpretation of Paragraph. The
provisions of Sections 2 and 3 of this Paragraph 10th shall not
apply to the responsibility or liability of a director or
officer, as such, pursuant to any criminal statute or for the
payment of taxes pursuant to local, state or federal law. The
provisions of this Paragraph 10th have been adopted pursuant to
the authority of sections 204A(10) and 801 of the Pennsylvania
Business Corporation Law, shall be deemed to be a contract with
each director or officer of the Corporation who serves as such at
any time while this Paragraph 10th is in effect, and such
provisions are cumulative of and shall be in addition to and
independent of any and all other limitations on the liabilities
of directors or officers of the Corporation, as such, or rights
of indemnification by the Corporation to which a director or
officer of the Corporation may be entitled, whether such
limitations or rights arise under or are created by any statute,
rule of law, By-law, agreement, vote of shareholders or
disinterested directors or otherwise. Each person who serves as
11
<PAGE>
a director or officer of the Corporation while this Paragraph
10th is in effect shall be deemed to be doing so in reliance on
the provisions of this Paragraph 10th. No amendment to or repeal
of this Paragraph 10th, nor the adoption of any provision of
these Articles inconsistent with this Paragraph 10th, shall apply
to or have any effect on the liability or alleged liability of
any director or officer of the Corporation for or with respect to
any acts or omissions of such director or officer occurring prior
to such amendment, repeal or adoption of an inconsistent
provision. In any action, suit or proceeding involving the
application of the provisions of this Paragraph 10th, the party
or parties challenging the right of a director or officer to the
benefits of this Paragraph 10th shall have the burden of proof.
11TH.**** Article X of the By-laws of the Corporation
providing that Section 910 of the Pennsylvania Business
Corporation Law shall not be applicable to the Corporation, is
hereby rescinded.
____________
**** Paragraph 11th was approved by shareholders on May 24, 1989.
12
EXHIBIT 10.4.2
--------------
SCHEDULE OF CERTAIN TERMS OF
EMPLOYMENT AGREEMENTS FOR THE EXECUTIVE
OFFICERS NAMED IN THE COMPANY'S SUMMARY COMPENSATION
TABLE FOR THE FISCAL YEAR ENDED FEBRUARY 3, 1996
Three-Year Term
Executive Officer Salary Commencing
- ----------------- -------- ----------------
Peter S. Strawbridge $340,000 February 2, 1996
Francis R. Strawbridge, III 340,000 February 2, 1996
Warren W. White 300,000 February 2, 1996
Robert G. Muskas 192,500 February 2, 1996
Louis F. Busico 192,000 February 2, 1996
Exhibit 10.4.3
SUPPLEMENTAL AGREEMENT
----------------------
THIS SUPPLEMENTAL AGREEMENT made and entered into at
Philadelphia, Pennsylvania, by and between STRAWBRIDGE &
CLOTHIER, a corporation organized and existing under the laws of
the Commonwealth of Pennsylvania with its principal office at
Eighth and Market Streets, Philadelphia, Pennsylvania, (the
"Company") and ___________________________________________
(the "Executive");
W I T N E S S E T H:
-------------------
WHEREAS, the parties hereto have previously entered
into an Employment Agreement for Key Executive Employees dated
_____________________ (the "Employment Agreement"); and
WHEREAS, the parties hereto wish to amend the
Employment Agreement in the manner hereinafter provided,
NOW, THEREFORE, the parties hereto, intending to be
legally bound hereby, mutually agree each with the other as
follows:
1. Effective on and after February 1, ____, paragraph
6(a) of the Employment Agreement shall be amended to read as
follows:
"(a) Salary. For all of the services rendered by
the Executive hereunder, including, without limitation, services
as an executive, officer, director or member of any committee of
the Company or of any subsidiary, affiliate, or division thereof,
the Company shall pay the Executive as compensation a salary
payable in equal monthly installments during the term of
employment hereunder at an annual rate equal to $_______________.
During such term of employment, the Company shall review the
Executive's salary in accordance with the same policies and
criteria for salary administration and review which are applied
to other key executive employees of the Company; provided,
however, that the Company shall at no time diminish the
Executive's salary."
2. Except as amended by paragraph 1 of this
Supplemental Agreement, the Employment Agreement shall continue
in full force and effect in accordance with the terms.
IN WITNESS WHEREOF, the parties hereto have set their
hands and seals this ________ day of ___________________, 19___.
STRAWBRIDGE & CLOTHIER
By _______________________________
_______________________________
Executive
Exhibit 10.4.4
SUPPLEMENTAL AGREEMENT TO EMPLOYMENT AGREEMENT
THIS SUPPLEMENTAL AGREEMENT is entered into this ____________ day of
_________________________, 199__ by and between STRAWBRIDGE & CLOTHIER, a
Pennsylvania corporation with its principal office at Eighth and Market
Streets, Philadelphia, Pennsylvania (the "Company") and __________________,
a key executive of the Company (the "Executive").
RECITALS
WHEREAS, on _____________________________, 199__ the Company and the
Executive entered into an Employment Agreement (the "Agreement"); and
WHEREAS, Section 15 of the Agreement provides that the Agreement
cannot be changed or modified except by a written amendment; and
WHEREAS, the parties to the Agreement now desire to modify and
amend the Agreement in certain particulars, as more completely set forth below,
NOW, THEREFORE, the parties hereto hereby agree as follows:
AGREEMENT
1. Section 2 of the Agreement, dealing with Term of Employment, is
hereby modified by deleting therefrom the sentence reading "If such notice is
delivered between any February 1 and July 31, inclusive, the Agreement shall
then terminate at the end of the three-year period that commenced with the
anniversary date immediately preceding the date of such notice."
2. Section 2 of the Agreement is hereby further modified by
substituting therein, in lieu of the sentence deleted as aforesaid, the
following sentence: "If such notice is delivered between any February 1 and
July 31, inclusive, the Agreement shall then terminate at a date which is the
third anniversary of the date on which such notice is actually delivered to
the Executive."
3. Section 9(e) of the Agreement is hereby modified by adding
thereto an additional paragraph, to read as follows:
"Should the employment of the Executive end prior to the date
otherwise contemplated under Section 2 of this Agreement due to the
adoption by the Company of a plan of liquidation or implementation of any
such plan, that termination of employment will be deemed a termination of
employment described in this Subsection (e) rather than a retirement
described in Subsection (b) of this Section, regardless of the age then
attained by the Executive, the number of years of Service then completed
by the Executive, or the existence
<PAGE>
of other retirement or deferred compensation benefits to which the
Executive may be entitled. In addition, as of the date of liquidation of
the Company, the Executive shall be entitled to receive, in lieu of all
future salary payments to which he is entitled pursuant to the first
paragraph of this Subsection, a single-sum amount equal to the sum of the
future payments to which he would otherwise be entitled under this
Subsection (assuming his survival for the entire period for which such
payments would be scheduled), all calculated without reference to any
offset for salary that might thereafter be paid to the Executive by any
other employer, with each such future payment, however, discounted to
present value as of the date of payment at the prime commercial lending
rate reported in the Wall Street Journal for the first business day of
the calendar month in which such single-sum payment is made."
4. The changes made hereby shall be effective as of the date on
which this instrument is executed by both parties. In all other respects, the
Agreement (as the same may have otherwise previously been modified by one or
more supplemental agreements) is ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this
instrument this ____ day of ______________________________, 199__.
STRAWBRIDGE & CLOTHIER
Attest:
______________________________________ By: ___________________________________
Secretary Title:
_______________________________________
Executive
2
Exhibit 10.5
STRAWBRIDGE & CLOTHIER
SEPARATION PAY PLAN
As of February 28, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Page
ARTICLE 1 BACKGROUND, PURPOSE AND TERM OF PLAN . . . . . . . . . . . . . 1
Sec. 1.01 Background. . . . . . . . . . . . . . . . . . . . . 1
Sec. 1.02 Purpose of the Plan . . . . . . . . . . . . . . . . 1
Sec. 1.03 Nature and Term of the Plan . . . . . . . . . . . . 2
ARTICLE 2 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Sec. 2.01 "Administrative Committee". . . . . . . . . . . . . 2
Sec. 2.02 "Benefit" . . . . . . . . . . . . . . . . . . . . . 3
Sec. 2.03 "Board of Directors". . . . . . . . . . . . . . . . 3
Sec. 2.04 "Code". . . . . . . . . . . . . . . . . . . . . . . 3
Sec. 2.05 "Company" . . . . . . . . . . . . . . . . . . . . . 3
Sec. 2.06 "Employee". . . . . . . . . . . . . . . . . . . . . 3
Sec. 2.07 "Employment Termination Date" . . . . . . . . . . . 3
Sec. 2.08 "ERISA" . . . . . . . . . . . . . . . . . . . . . . 3
Sec. 2.09 "Just Cause". . . . . . . . . . . . . . . . . . . . 3
Sec. 2.10 "Named Fiduciary" . . . . . . . . . . . . . . . . . 4
Sec. 2.11 "Participant" . . . . . . . . . . . . . . . . . . . 4
Sec. 2.12 "Plan". . . . . . . . . . . . . . . . . . . . . . . 4
Sec. 2.13 "Plan Administrator". . . . . . . . . . . . . . . . 4
Sec. 2.14 "Plan Sponsor". . . . . . . . . . . . . . . . . . . 4
Sec. 2.15 "Plan Year" . . . . . . . . . . . . . . . . . . . . 4
Sec. 2.16 "Sale of the Company" . . . . . . . . . . . . . . . 5
Sec. 2.17 "Terminated Employee" . . . . . . . . . . . . . . . 5
ARTICLE 3 PARTICIPATION AND ELIGIBILITY FOR BENEFITS . . . . . . . . . . 5
Sec. 3.01 General Benefits Award Requirement. . . . . . . . . 5
Sec. 3.02 Plan Sponsor's Discretion . . . . . . . . . . . . . 6
Sec. 3.03 Exercise of Discretionary Authority . . . . . . . . 7
ARTICLE 4 CALCULATION OF BENEFITS. . . . . . . . . . . . . . . . . . . . 7
Sec. 4.01 Amount of Benefit. . . . . . . . . . . . . . . . . 7
Sec. 4.02 Reductions. . . . . . . . . . . . . . . . . . . . . 11
Sec. 4.03 Additional Services Payment . . . . . . . . . . . . 11
Sec. 4.04 Effect on Other Benefits. . . . . . . . . . . . . . 12
ARTICLE 5 METHOD AND DURATION OF BENEFIT PAYMENTS. . . . . . . . . . . . 12
Sec. 5.01 Method of Payment . . . . . . . . . . . . . . . . . 12
Sec. 5.02 Cessation of Benefit Payments . . . . . . . . . . . 13
ARTICLE 6 THE PLAN ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . 13
Sec. 6.01 Appointment . . . . . . . . . . . . . . . . . . . . 13
Sec. 6.02 Authority and Duties. . . . . . . . . . . . . . . . 13
Sec. 6.03 Compensation of the Plan Administrator. . . . . . . 14
Sec. 6.04 Records, Reporting and Disclosure . . . . . . . . . 14
Sec. 6.05 Bonding . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
ARTICLE 7 AMENDMENT AND TERMINATION. . . . . . . . . . . . . . . . . . . 15
Sec. 7.01 Amendment, Suspension and Termination . . . . . . . 15
ARTICLE 8 DUTIES OF THE PLAN SPONSOR . . . . . . . . . . . . . . . . . . 16
Sec. 8.01 Records . . . . . . . . . . . . . . . . . . . . . . 16
Sec. 8.02 Payment . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 9 CLAIM PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . 16
Sec. 9.01 Claims for Benefits . . . . . . . . . . . . . . . . 16
ARTI- MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 18
CLE 10 Sec. 10.01 Nonalienation of Benefits. . . . . . . . . . . . . 18
Sec. 10.02 No Contract of Employment. . . . . . . . . . . . . 18
Sec. 10.03 Severability of Provisions . . . . . . . . . . . . 19
Sec. 10.04 Heirs, Assigns, and Personal
Representatives . . . . . . . . . . . . . . . . 19
Sec. 10.05 Headings and Captions. . . . . . . . . . . . . . . 19
Sec. 10.06 Gender and Number. . . . . . . . . . . . . . . . . 19
Sec. 10.07 Unfunded Plan. . . . . . . . . . . . . . . . . . . 20
Sec. 10.08 Payments to Incompetent Persons, Etc . . . . . . . 20
Sec. 10.09 Appendices . . . . . . . . . . . . . . . . . . . . 20
Sec. 10.10 Lost Payees. . . . . . . . . . . . . . . . . . . . 21
Sec. 10.11 Controlling Law. . . . . . . . . . . . . . . . . . 21
<PAGE>
ARTICLE 1
BACKGROUND, PURPOSE AND TERM OF PLAN
------------------------------------
Sec. 1.01 BACKGROUND. Strawbridge & Clothier (the
"Plan Sponsor") hereby establishes the Strawbridge & Clothier
Separation Pay Plan to provide severance pay awards to certain
employees who are involuntarily terminated as a result of a sale
of the Company. This instrument sets forth the terms of the
discretionary Separation Pay Plan of the Plan Sponsor as of
February 28, 1996.
Sec. 1.02 PURPOSE OF THE PLAN. The Strawbridge &
Clothier Separation Pay Plan (the "Plan"), as set forth herein,
is intended to reduce financial hardships which may be
experienced by certain of those eligible Employees of the Plan
Sponsor whose employment is terminated involuntarily, without
fault of the Employee as a result of a sale of the Company.
Benefits under the Plan for those eligible Employees are intended
to be supplemental unemployment benefits. The amount of the
Benefit to be provided may be modified by the Plan Sponsor
exercising its rights as a settlor, as set forth in Article 7 of
this document. The Plan is not intended to be an "employee
pension benefit plan" or "pension plan" as those terms are
defined at section 3(2) of ERISA. Rather, the Plan is intended
to constitute a "severance pay plan" within the meaning of
regulations published by the Secretary of Labor at Title 29, Code
of Federal Regulations, section 2510.3-2(b). The Benefits paid by the
- 1 -
<PAGE>
Plan are not intended as deferred compensation, and no Employee
shall have a vested right to such Benefits.
Sec. 1.03 NATURE AND TERM OF THE PLAN. The Plan sets
forth the severance pay policy of the Plan Sponsor. Nothing
herein is intended to, and nothing herein shall be construed to,
change the discretionary nature of the policy and the awarding of
Benefits pursuant thereto. The Plan Sponsor hereby reserves the
right, whether in an individual case or more generally, to alter,
reduce or eliminate any practice, policy or benefit, in whole or
in part, without notice, in accordance with the further
provisions hereof. The Plan will continue until such time as the
Plan Sponsor acting in its sole and absolute discretion, elects
to modify, supersede or terminate the Plan, in accordance with
the further provisions hereof.
ARTICLE 2
DEFINITIONS
-----------
Sec. 2.01 "ADMINISTRATIVE COMMITTEE" means the
committee that the Board of Directors has charged with
responsibility for administration of employee benefits, or any
individual or individuals to whom the Administrative Committee
has delegated some or all of its responsibilities hereunder. The
Administrative Committee shall consist of David Strawbridge, G.
Leonard Shea, and George Scudder of the Plan Sponsor.
- 2 -
<PAGE>
Sec. 2.02 "BENEFIT" means the severance pay award that
a Participant is entitled to receive pursuant to Section 4.01 of
the Plan.
Sec. 2.03 "BOARD OF DIRECTORS" means the board of
directors or other governing body of the Plan Sponsor.
Sec. 2.04 "CODE" means the Internal Revenue Code of
1986, as amended, and any successor statute of similar nature and
purpose.
Sec. 2.05 "COMPANY" means Strawbridge & Clothier.
Sec. 2.06 "EMPLOYEE" means a person rendering service
as a full-time or part-time employee of the Plan Sponsor and who
is a common law employee of the Plan Sponsor. The term does not
include self-employed persons, independent contractors, persons
considered "leased employees" under the Code, contingent
employees, seasonal employees or employees who are represented by
a labor organization for the purpose of collective bargaining.
Sec. 2.07 "EMPLOYMENT TERMINATION DATE" means the date
on which the employment relationship between the Employee and the
Plan Sponsor is terminated as a result of a Sale of the Company.
Sec. 2.08 "ERISA" means the Employee Retirement Income
Security Act of 1974 (P.L. 93-406), as amended, and any successor
statute of similar purpose.
Sec. 2.09 "JUST CAUSE" is any reason for dismissing an
individual from employment with the Plan Sponsor which the Plan
Sponsor determines, in its sole discretion, would constitute
grounds for denying payment of Benefits under the Plan upon the
- 3 -
<PAGE>
individual's dismissal. Just Cause shall include, but shall not
be limited to, dismissal due to breach of trust, clearly
unacceptable behavior, excessive absenteeism or tardiness,
unsatisfactory performance caused by willful misconduct,
insubordination.
Sec. 2.10 "NAMED FIDUCIARY" means the Plan
Administrator and such other persons delegated fiduciary
responsibilities by the Plan Administrator. Each Named Fiduciary
shall have only those particular powers, duties, responsibilities
and obligations as are specifically given such Named Fiduciary
under the Plan. Any Named Fiduciary, if so appointed, may
perform in more than one fiduciary capacity.
Sec. 2.11 "PARTICIPANT" means any Terminated Employee
who is entitled to a Benefit under the Plan pursuant to Article 3.
Sec. 2.12 "PLAN" means the Strawbridge & Clothier
Separation Pay Plan, as set forth herein, and as the same may
from time to time be amended.
Sec. 2.13 "PLAN ADMINISTRATOR" means the
Administrative Committee.
Sec. 2.14 "PLAN SPONSOR" means Strawbridge & Clothier.
The term "Plan Sponsor" shall also include any successor to the
Plan Sponsor if such successor adopts the Plan.
Sec. 2.15 "PLAN YEAR" means the period commencing each
January 1 and ending on the following December 31.
- 4 -
<PAGE>
Sec. 2.16 "SALE OF THE COMPANY" means (i) the direct
or indirect acquisition by any person or related group of persons
of beneficial ownership of securities possessing more than 50% of
the combined voting power of the Company's outstanding
securities, whether pursuant to a sale of securities, merger or
other corporate transaction, (ii) the sale, transfer or other
disposition of more than 75% of the Company's assets in a single
or related series of transactions, or (iii) the sale, transfer or
other disposition of any operating division, unit or other group
of the Company through the sale of its assets or otherwise, as
determined by the Plan Sponsor in its sole and absolute
discretion.
Sec. 2.17 "TERMINATED EMPLOYEE" means an Employee who
has experienced an Employment Termination Date.
ARTICLE 3
PARTICIPATION AND ELIGIBILITY FOR BENEFITS
------------------------------------------
Sec. 3.01 GENERAL BENEFITS AWARD REQUIREMENT.
(a) Subject to Paragraphs (b), (c), and (d) in order
to be eligible to receive a Benefit hereunder, a Terminated
Employee must have been involuntarily terminated as a result of a
Sale of the Company.
(b) Notwithstanding anything in the Plan to the
contrary, in no event shall an Employee be considered to have
involuntarily terminated his or her employment for purposes of
Paragraph (a) if his or her employment with the Plan Sponsor is
- 5 -
<PAGE>
discontinued due to (1) Just Cause, (2) voluntary cessation of
employment (with or without notice), (3) unsatisfactory
performance, (4) retirement, (5) death, or (6) the Sale of the
Company where the Employee has been offered employment with the
new employer, under terms and conditions generally comparable to
the terms and conditions of the Employee's employment with the
Plan Sponsor, and the Employee continues in such employment for a
period of time at least equal to the amount of time the Employee
is entitled to the benefits specified in Section 4.01(f),
assuming that the Employee was otherwise eligible for benefits
under Section 4.01(f).
(c) Notwithstanding anything in the Plan to the
contrary, a Terminated Employee shall not be eligible to receive
a benefit unless he or she executes a release of any claims he or
she may have against Strawbridge & Clothier and its affiliates.
(d) Notwithstanding anything in the Plan to the
contrary, a Terminated Employee shall not be eligible to receive
a benefit if he or she is a party to an Employment Agreement for
Key Executive Employees at the time of the Sale of the Company.
Sec. 3.02 PLAN SPONSOR'S DISCRETION. Any Terminated
Employee who satisfies the requirements of Section 3.01, as
determined by the Plan Sponsor, in its discretion, shall be
entitled to receive a severance pay award under the Plan. The
amount of any such severance pay award shall be determined in
accordance with the provisions of Section 4.01.
- 6 -
<PAGE>
Sec. 3.03 EXERCISE OF DISCRETIONARY AUTHORITY. The
discretionary authority reserved to the Plan Sponsor under
Section 3.02 shall be exercised by David Strawbridge and/or his
designee. In exercising discretionary authority pursuant to
Section 3.02, none of the individuals described in the preceding
sentence shall be acting in a fiduciary capacity, and they shall
be free to act solely on the basis of their business judgment.
ARTICLE 4
CALCULATION OF BENEFITS
-----------------------
Sec. 4.01 AMOUNT OF BENEFIT. A Terminated Employee
who has satisfied the requirements of Section 3.01 and has been
selected to receive a severance pay award pursuant to Section
3.02, shall be entitled to receive an amount specified as
follows:
(a) Persons classified by the Plan Sponsor as
"Divisional Managers" shall be entitled to receive an amount
equal to one year of salary, not including bonuses, regardless of
their length of service.
(b) Persons classified by the Plan Sponsor as "Major
Executives" and "Executive Professionals" shall be entitled to
the greater of six months of salary, not including bonuses, or an
amount equal to the product of (1) and (2) below:
(1) The Participant's length of continuous
service with the Plan Sponsor expressed in terms
of number of whole years rounded up to the next
- 7 -
<PAGE>
whole number if less than a whole year, as
determined by the Plan Sponsor; and
(2) The Participant's annual salary rate in
effect on the Participant's last day of work, as
determined by the Plan Sponsor, divided by 52.
For purposes of this calculation, the
Participant's annual salary rate shall not include
any bonuses;
(c) Persons classified by the Plan Sponsor as
"Executives" and "Professionals" shall be entitled to the greater
of three months of salary, not including bonuses, or an amount
equal to the product of (1) and (2) below:
(1) The Participant's length of continuous
service with the Plan Sponsor expressed in terms
of number of whole years employed rounded up to
the next whole number if less than a full year, as
determined by the Plan Sponsor; and
(2) The Participant's annual salary rate in
effect on the Participant's last day of work, as
determined by the Plan Sponsor, divided by 52.
For purposes of this calculation, the
Participant's annual salary rate shall not include
any bonuses;
(d) Persons classified by the Plan Sponsor as "Regular
Hourly" and "Part-Time Regular Hourly" Employees shall be
entitled an amount equal to the product of (1) and (2) below:
- 8 -
<PAGE>
(1) The Participant's length of continuous
service as a Regular Hourly or Part-Time Regular
Hourly Employees with the Plan Sponsor expressed
in terms of number of whole years employed rounded
up to the next whole number if less than a whole
year, as determined by the Plan Sponsor divided by
two; and
(2) The Participant's current hourly rate
multiplied by the regularly scheduled hours per
week in effect on the Participant's last day of
work, as determined by the Plan Sponsor. For
commission eligible associates the hourly rate
will be adjusted to reflect the commissions earned
in the prior calendar year.
(e) Notwithstanding anything in this Section 4.01 to
the contrary, in the event of the Sale of the Company where the
Employee has been offered employment with the new employer, under
terms and conditions generally comparable to the terms and
conditions of the Employee's employment with the Plan Sponsor,
and the Employee accepts such employment, no benefit payments
shall be due or made for the period of employment with the buyer.
Benefit payments shall commence as of the end of the period of
employment with the buyer and shall continue for the balance of
the period of time described in this Section 4.01. Benefits
which would otherwise be payable but for the Employee's
employment with the buyer shall be forfeited.
- 9 -
<PAGE>
(f) In addition to the benefits set forth above, a
Participant shall be entitled to continue as a participant in all
health plans, life insurance plans and employee discount programs
sponsored by Strawbridge & Clothier that the Participant was a
participant in prior to his or her Employment Termination Date.
All coverage levels, benefits, co-pays, employee contributions
and other benefit terms and conditions shall be the same as a
similarly situated active employee. In the event that there are
no similarly situated active employees, coverage levels,
benefits, co-pays, employee contributions and other benefit terms
and conditions shall be the same as were in effect immediately
prior to the Terminated Employee's termination. For purposes of
Section 4.01(f), an Eligible Terminated Employee shall continue
to be covered under the previously identified plans for the
number of weeks specified below:
Persons Classified
by the Plan Sponsor as Number of Weeks
- ---------------------- ---------------
"Divisional Manager" 52 weeks
"Major Executives" and The greater of 26 weeks or 1
"Executive Professionals" week multiplied by the number of
whole years of service, rounded
up to the next whole number if
less than a whole year
"Executives" and The greater of 13 weeks or 1
"Professionals" week multiplied by the number of
whole years of service, rounded
up to the next whole number if
less than a whole year
"Regular Hourly" And "Part- The number of weeks equal to the
Time Regular Hourly" number of whole years of
Employees service, rounded up to the next
whole year if less than a whole
year, divided by 2.
- 10 -
<PAGE>
A Terminated Employee shall be entitled to purchase Continued
Health Care Coverage in accordance with ERISA, using the date
that coverage ceases to be provided under this Section 4.01(f) as
the date of the first "Qualifying Event," as that phrase is
defined by ERISA.
(g) In the event that a Terminated Employee was
demoted or his or her salary/hourly rate (as applicable) was
reduced within six months prior to his or her Employment
Termination Date (for reasons other than unsatisfactory
performance), such Terminated Employee's employment
classification and/or salary/hourly rate prior to such demotion
and/or reduction shall be used for purposes of determining such
Terminated Employee's benefits under this Section 4.01.
Sec. 4.02 REDUCTIONS. The Benefits payable hereunder
shall be reduced by any and all payments required to be made by
the Plan Sponsor under federal, state and local law, including,
but not limited to the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. section 2101 et seq. or any otherwise
applicable workers' compensation.
Sec. 4.03 ADDITIONAL SEVERANCE PAYMENTS. In addition
to the benefit payable under Section 4.01, the Plan Sponsor, in
its sole discretion, may select and pay certain Participants an
additional severance bonus. The Plan Sponsor shall provide to an
eligible Participant a written notice of such Participant's
selection. Such notice shall specify the terms and conditions
for receipt of this additional benefit.
- 11 -
<PAGE>
Sec. 4.04 EFFECT ON OTHER BENEFITS. There shall not
be drawn from the continued provision by the Plan Sponsor of any
Benefit hereunder any implication of continued employment or of
any continued right to accrual of retirement plan benefits, nor
shall the Terminated Employee accrue vacation days, paid
holidays, or other similar benefits normally associated with
employment for any part of the period during or in respect of
which a Benefit is payable under the Plan, except as provided in
Section 4.01(f).
ARTICLE 5
METHOD AND DURATION OF BENEFIT PAYMENTS
---------------------------------------
Sec. 5.01 METHOD OF PAYMENT. A Participant's Benefit
shall be paid in accordance with normal payroll practices, with
the first payment commencing as soon as practicable after the
Participant's Employment Termination Date. In no event will
interest be credited on the unpaid balance to which a Participant
may become entitled. Payment shall be made by mail to the last
address provided by the Participant to the Plan Sponsor.
If at any time before or after the commencement of
payment, the Plan Sponsor or the Administrative Committee
determine that any conduct of the Participant is adverse to the
interests of the Plan Sponsor, all payments under this Section
shall cease. This paragraph shall become null and void following
a Change of Control as defined in Section 7.01.
- 12 -
<PAGE>
Sec. 5.02 CESSATION OF BENEFIT PAYMENTS. A
Participant shall cease to participate in the Plan, and all
Benefit payments shall cease upon the occurrence of the earliest of:
(a) Completion of payment to the Participant of the
Benefit to which he or she is entitled under Section 4.01;
(b) Termination by the Plan Administrator of the
Terminated Employee's right to be a Participant upon discovery of
the occurrence of Just Cause, whether or not such discovery
occurs before the Employment Termination Date, provided that the
Plan Administrator terminates such benefits prior to a Change of
Control as defined in Section 7.01;
(c) The modification or termination of the Plan; or
(d) The death of the Terminated Employee.
ARTICLE 6
THE PLAN ADMINISTRATOR
----------------------
Sec. 6.01 APPOINTMENT. The Plan Administrator shall
be a committee comprised of David Strawbridge, G. Leonard Shea,
and George Scudder.
Sec. 6.02 AUTHORITY AND DUTIES. The Plan
Administrator shall have the full discretionary power and
authority to construe, interpret and administer the Plan, to
correct deficiencies in the Plan, to make factual determinations
and to supply omissions. All decisions, actions and
- 13 -
<PAGE>
interpretations of the Plan Administrator shall be final, binding
and conclusive upon the parties.
Sec. 6.03 COMPENSATION OF THE PLAN ADMINISTRATOR. The
Plan Administrator shall serve without compensation for its
services as such. However, all reasonable expenses of the Plan
Administrator shall be paid or reimbursed by the Plan Sponsor
upon proper documentation. The Plan Administrator shall be
indemnified by the Plan Sponsor against personal liability for
actions taken in good faith in the discharge of duties as the
Plan Administrator.
Sec. 6.04 RECORDS, REPORTING AND DISCLOSURE. The Plan
Administrator shall keep all individual and group records
relating to Participants and former Participants and all other
records necessary for the proper operation of the Plan. Such
records shall be made available to the Plan Sponsor and to each
Participant for examination during business hours except that a
Participant shall examine only such records as pertain
exclusively to the examining Participant and to the Plan. The
Plan Administrator shall prepare and shall file as required by
law or regulation all reports, forms, documents and other items
required by ERISA, the Code, and every other relevant statute,
each as amended, and all regulations thereunder (except that the
Plan Sponsor, as payor of the Benefits, shall prepare and
distribute to the proper recipients all forms relating to
withholding of income or wage taxes, Social Security taxes, and
other amounts which may be similarly reportable).
- 14 -
<PAGE>
Sec. 6.05 BONDING. The Plan Administrator shall
arrange for such bonding as may be required by law, if any, but
not in an amount in excess of the amount required by law.
ARTICLE 7
AMENDMENT AND TERMINATION
-------------------------
Sec. 7.01 AMENDMENT, SUSPENSION AND TERMINATION. The
Plan Sponsor, by action of the Board of Directors, shall have the
right, at any time and from time to time, to amend, suspend or
terminate the Plan in whole or in part, for any reason, and
without either the consent of or the prior notification to any
Participant. No such amendment or termination shall give the
Plan Sponsor the right to recover any amount paid to a
Participant prior to the date of such amendment or termination.
However, any such amendment or termination may cause the
cessation and discontinuance of payments of Benefits to any
person or persons under the Plan. The Plan Sponsor, by action of
the Board of Directors, shall have the right to delegate its
authority and power hereunder, or any portion thereof, to any
committee of the Plan Sponsor, and the right to rescind any such
delegation in whole or in part.
Notwithstanding anything in the Plan to the contrary,
the Plan may not be amended, suspended or terminated in whole or
in part for three years following a Change of Control. For
purposes of this Plan, Change of Control shall mean a change in
the identity of a majority of the Board of Directors within any
- 15 -
<PAGE>
period of either two calendar years or twenty-four consecutive
months, treating, however, as unchanged for this purpose, the
identity of any member of the Board of Directors who retires or
dies and who, subsequent to such retirement or death, is replaced
by a new member of the Board of Directors appointed by the
remaining Board of Directors.
ARTICLE 8
DUTIES OF THE PLAN SPONSOR
--------------------------
Sec. 8.01 RECORDS. The Plan Sponsor shall supply to
the Plan Administrator all records and information necessary to
the performance of the Plan Administrator's duties.
Sec. 8.02 PAYMENT. The Plan Sponsor shall make
payments from its general assets to Participants who are former
Employees of the Plan Sponsor in accordance with the terms of the
Plan.
ARTICLE 9
CLAIM PROCEDURES
----------------
Sec. 9.01 CLAIMS FOR BENEFITS. The Plan Sponsor will
advise each Terminated Employee of any benefits to which he or
she is entitled under the Plan. If any person believes that the
Plan Sponsor has failed to advise him or her of any benefit to
which he or she is entitled, he or she may file a written claim
with the Plan Administrator. The Plan Administrator shall review
such claim and respond thereto within a reasonable time after
- 16 -
<PAGE>
receiving the claim. The Plan Administrator shall provide to
every claimant who is denied a claim for benefits written notice
setting forth in a manner calculated to be understood by the
claimant:
(1) the specific reason or reasons for the denial;
(2) specific reference to pertinent Plan provisions on
which the denial is based;
(3) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary;
(4) an explanation of the claims review procedure set forth
in the following paragraph.
Within 60 days of receipt by a claimant of a notice denying
a claim under the preceding paragraph, the claimant or his or her
duly authorized representative may request in writing a full and
fair review of the claim by the Administrative Committee. The
Administrative Committee may extend the 60-day period where the
nature of the benefit involved or other attendant circumstances
make such extension appropriate. In connection with such review,
the claimant or his duly authorized representative may review
pertinent documents and may submit issues and comments in
writing. The Administrative Committee shall make a decision
promptly, and not later than 60 days after the Plan's receipt of
a request for review, unless special circumstances (such as the
need to hold a hearing) require an extension of time for
- 17 -
<PAGE>
processing, in which case a decision shall be rendered as soon as
possible, but not later than 120 days after receipt of a request
for review. The decision on review shall be in writing and shall
include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, and specific
references to the pertinent Plan provisions on which the decision
is based.
The Administrative Committee shall have the full
discretionary power and authority to construe, interpret and to
administer the Plan, to correct deficiencies in the Plan, to make
factual determinations and to supply omissions.
ARTICLE 10
MISCELLANEOUS
-------------
Sec. 10.01 NONALIENATION OF BENEFITS. None of the
payments, Benefits or rights of any Participant shall be subject
to any claim of any creditor, and, in particular, to the fullest
extent permitted by law, all such payments, Benefits and rights
shall be free from attachment, garnishment, trustee's process, or
any other legal or equitable process available to any creditor of
such Participant. No Participant shall have the right to
alienate, anticipate, commute, pledge, encumber or assign any of
the Benefits or payments which he or she may expect to receive,
contingently or otherwise, under the Plan.
Sec. 10.02 NO CONTRACT OF EMPLOYMENT. Neither the
establishment of the Plan, nor any modification thereof, nor the
- 18 -
<PAGE>
creation of any fund, trust or account, nor the payment of any
Benefits shall be construed as giving any Participant or
Employee, or any person whosoever, the right to be retained in
the service of the Plan Sponsor, and all Participants and other
Employees shall remain subject to discharge to the same extent as
if the Plan had never been adopted.
Sec. 10.03 SEVERABILITY OF PROVISIONS. If any
provision of the Plan shall be held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other
provisions hereof, and the Plan shall be construed and enforced
as if such provisions had not been included.
Sec. 10.04 HEIRS, ASSIGNS, AND PERSONAL
REPRESENTATIVES. The Plan shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties,
including each Participant, present and future (except that no
successor to the Plan Sponsor shall be considered the Plan
Sponsor unless that successor adopts the Plan).
Sec. 10.05 HEADINGS AND CAPTIONS. The headings and
captions herein are provided for reference and convenience only,
shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.
Sec. 10.06 GENDER AND NUMBER. Except where clearly
indicated by context, the masculine and the neuter shall include
the feminine and the neuter, the singular shall include the
plural, and vice-versa.
- 19 -
<PAGE>
Sec. 10.07 UNFUNDED PLAN. The Plan shall not be
funded. No Participant shall have any right to, or interest in,
any assets of the Plan Sponsor which may be applied by the Plan
Sponsor to the payment of Benefits.
Sec. 10.08 PAYMENTS TO INCOMPETENT PERSONS, ETC. Any
Benefit payable to or for the benefit of a minor, an incompetent
person or other person incapable of receipting therefor shall be
deemed paid when paid to such person's guardian or to the party
providing or reasonably appearing to provide for the care of such
person, and such payment shall fully discharge the Plan Sponsor,
the Plan Administrator and all other parties with respect
thereto.
Sec. 10.09 APPENDICES. From time to time, the Plan
Sponsor may elect, by written resolution, to append provisions of
limited duration to the Plan to govern what the Plan Sponsor
determines to be special circumstances governing a substantial
number of its Employees. Each such Appendix, during the period
stipulated therein, shall be deemed a part of the Plan. Except
as otherwise stated in any such Appendix applicable to any
Employee or Terminated Employee, the rights of such Employee or
Terminated Employee as stated in such Appendix shall supersede
the rights provided under the Plan, the Benefits provided under
such Appendix shall be in lieu of comparable or stipulated
Benefits provided under the Plan, and there shall be no
duplication of Benefits.
- 20 -
<PAGE>
Sec. 10.10 LOST PAYEES. A Benefit shall be deemed
forfeited if the Plan Administrator is unable to locate a
Participant to whom a Benefit is due. Such Benefit shall be
reinstated if application is made by the Participant for the
forfeited Benefit while the Plan is in operation.
Sec. 10.11 CONTROLLING LAW. The Plan shall be
construed and enforced according to Pennsylvania law except to
the extent superseded by federal law.
IN WITNESS WHEREOF, and as evidence of the adoption of the
Plan, the Plan Sponsor has caused the same to be executed by its
duly authorized officers and its corporate seal to be affixed
hereto this ______ day of February, 1996.
STRAWBRIDGE & CLOTHIER
Attest:
By:___________________________________
Title:________________________________
______________________________
Secretary
- 21 -
<PAGE>
FORM OF RESOLUTION TO BE ADOPTED
AT A MEETING OF THE BOARD OF DIRECTORS
RESOLVED, that this corporation revokes, rescinds and terminates
the Strawbridge & Clothier Severance Pay Plan, as originally
adopted effective November 1, 1995, at a meeting of the Board of
Directors held on November 22, 1995;
RESOLVED, that this corporation adopts the Strawbridge & Clothier
Separation Pay Plan (the "Plan"), in the form attached hereto and
made a part hereof, the same to be effective as of February 28,
1996, as a supplemental unemployment benefit plan for the benefit
of those employees of this corporation who may qualify under the
terms of the Plan;
FURTHER RESOLVED, that the proper officers of this corporation
be, and they hereby are, authorized and directed to execute such
instruments and to perform such acts as they, in their sole
discretion, deem necessary or desirable to effectuate the intent
of the foregoing resolution and to implement the Plan and carry
out its intended purpose.
- 22 -
Exhibit 10.6
==============================================================================
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
Dated as of November 20, 1995
Among
S&C, FUNDING, INC.
as Seller
---------
STRAWBRIDGE & CLOTHIER
as Servicer
-----------
and
MARKET STREET CAPITAL CORP.
as Purchaser
------------
and
PNC BANK, NATIONAL ASSOCIATION
as Administrator
----------------
==============================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASES AND REINVESTMENTS. . . . . . . . . . . 2
SECTION 1.01. Commitments to Purchase; Limits on
Purchaser's Obligations. . . . . . . . . . . . . . . 2
SECTION 1.02. Purchase Procedures; Assignment of
Purchaser's Interests. . . . . . . . . . . . . . . . 2
SECTION 1.03. Reinvestments of Certain Collections;
Payment of Remaining Collections . . . . . . . . . . 3
SECTION 1.04. Asset Interest . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
COMPUTATIONAL RULES. . . . . . . . . . . . . 5
SECTION 2.01. Computation of Purchaser's Total
Investment. . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.02. Computation of Earned Discount . . . . . . . . . . . 5
SECTION 2.03. Estimates of Earned Discount Rate, Fees,
etc. . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
SETTLEMENTS. . . . . . . . . . . . . . . 6
SECTION 3.01. Settlement Procedures. . . . . . . . . . . . . . . . 6
SECTION 3.02. Deemed Collections; Reduction of
Purchaser's Total Investment, Etc. . . . . . . . . . 9
SECTION 3.03. Payments and Computations, Etc.. . . . . . . . . . . 10
SECTION 3.04. Treatment of Collections and Deemed
Collections. . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
FEES AND YIELD PROTECTION . . . . . . . . . . . 11
SECTION 4.01. Fees . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.02. Yield Protection . . . . . . . . . . . . . . . . . . 12
SECTION 4.03. Funding Losses . . . . . . . . . . . . . . . . . . . 14
ARTICLE V
CONDITIONS PRECEDENT. . . . . . . . . . . . . 14
SECTION 5.01. Conditions Precedent to Effectiveness. . . . . . . . 14
SECTION 5.02. Conditions Precedent to All Purchases
and Reinvestments. . . . . . . . . . . . . . . . . . 16
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 17
SECTION 6.01. Representations and Warranties of
Seller . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 6.02. Representations and Warranties of
Strawbridge. . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VII
GENERAL COVENANTS OF SELLER AND STRAWBRIDGE. . . . . . . 23
SECTION 7.01. Affirmative Covenants of Seller and
Strawbridge. . . . . . . . . . . . . . . . . . . . . 23
SECTION 7.02. Reporting Requirements of Seller . . . . . . . . . . 25
SECTION 7.03. Reporting Requirements of Strawbridge. . . . . . . . 26
SECTION 7.04. Negative Covenants of Seller . . . . . . . . . . . . 27
SECTION 7.05. Negative Covenants of Strawbridge. . . . . . . . . . 28
SECTION 7.06 Separate Corporate Existence . . . . . . . . . . . . 29
ARTICLE VIII
ADMINISTRATION AND COLLECTION . . . . . . . . . . 32
SECTION 8.01. Designation of Servicer. . . . . . . . . . . . . . . 32
SECTION 8.02. Duties of Servicer . . . . . . . . . . . . . . . . . 33
SECTION 8.03. Rights of the Administrator. . . . . . . . . . . . . 35
SECTION 8.04. Responsibilities of Servicer . . . . . . . . . . . . 36
SECTION 8.05. Further Action Evidencing Purchases and
Reinvestments. . . . . . . . . . . . . . . . . . . . 36
SECTION 8.06. Application of Collections . . . . . . . . . . . . . 37
ARTICLE IX
SECURITY INTEREST . . . . . . . . . . . . . 38
SECTION 9.01. Grant of Security Interest . . . . . . . . . . . . . 38
SECTION 9.02. Further Assurances . . . . . . . . . . . . . . . . . 38
SECTION 9.03. Remedies . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE X
LIQUIDATION EVENTS . . . . . . . . . . . . . 38
SECTION 10.01. Liquidation Events . . . . . . . . . . . . . . . . . 38
SECTION 10.02. Remedies . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE XI
THE ADMINISTRATOR . . . . . . . . . . . . . 41
SECTION 11.01. Authorization and Action . . . . . . . . . . . . . . 41
SECTION 11.02. Administrator's Reliance, Etc. . . . . . . . . . . . 42
SECTION 11.03. PNC Bank and Affiliates. . . . . . . . . . . . . . . 42
ii
<PAGE>
ARTICLE XII
ASSIGNMENT OF PURCHASER'S INTEREST . . . . . . . . . 42
SECTION 12.01. Restrictions on Assignments. . . . . . . . . . . . . 42
SECTION 12.02. Rights of Assignee . . . . . . . . . . . . . . . . . 44
SECTION 12.03. Evidence of Assignment . . . . . . . . . . . . . . . 44
ARTICLE XIII
INDEMNIFICATION. . . . . . . . . . . . . . 44
SECTION 13.01. Indemnities by Seller. . . . . . . . . . . . . . . . 44
ARTICLE XIV
MISCELLANEOUS . . . . . . . . . . . . . . 47
SECTION 14.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . 47
SECTION 14.02. Notices, Etc.. . . . . . . . . . . . . . . . . . . . 47
SECTION 14.03. No Waiver; Remedies. . . . . . . . . . . . . . . . . 47
SECTION 14.04. Binding Effect; Survival . . . . . . . . . . . . . . 48
SECTION 14.05. Costs, Expenses and Taxes. . . . . . . . . . . . . . 48
SECTION 14.06. No Proceedings . . . . . . . . . . . . . . . . . . . 49
SECTION 14.07. Confidentiality of Program Information . . . . . . . 49
SECTION 14.08. Confidentiality of Seller Information. . . . . . . . 51
SECTION 14.09. Captions and Cross References. . . . . . . . . . . . 52
SECTION 14.10. Integration. . . . . . . . . . . . . . . . . . . . . 52
SECTION 14.11. Governing Law. . . . . . . . . . . . . . . . . . . . 53
SECTION 14.12. Waiver Of Jury Trial . . . . . . . . . . . . . . . . 53
SECTION 14.13. Consent To Jurisdiction; Waiver Of
Immunities . . . . . . . . . . . . . . . . . . . . . 53
SECTION 14.14. Execution in Counterparts. . . . . . . . . . . . . . 53
SECTION 14.15. No Recourse Against Other Parties. . . . . . . . . . 53
SECTION 14.16. Substitution of Originator . . . . . . . . . . . . . 54
iii
<PAGE>
APPENDICES
APPENDIX A Definitions
SCHEDULES
SCHEDULE 6.01(n) List of Offices of Seller where Records Are
Kept
SCHEDULE 6.01(o) List of Lock-Box Banks
SCHEDULE 6.01(p)-1 Forms of Contracts
SCHEDULE 6.01(p)-2 Description of Credit and Collection Policy
SCHEDULE 6.02(h) Description of Material Adverse Changes
SCHEDULE 6.02(i) Description of Litigation
EXHIBIT 6.02(k) List of Offices of Strawbridge where Records are
Kept
SCHEDULE A Fiscal Months
EXHIBITS
EXHIBIT 3.01(a) Information Package to be Provided as of Cut-Off
Date
EXHIBIT 5.01(g) Form of Lock-Box Agreement
EXHIBIT 5.01(h)-1 Form of Corporate Opinion of Counsel for Seller
and Strawbridge
EXHIBIT 5.01(h)-2 Form of True Sale/Substantive Opinion
iv
<PAGE>
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
Dated as of November 20, 1995
THIS IS AN AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT,
among S&C, FUNDING, INC., a Delaware corporation ("Seller"),
STRAWBRIDGE & CLOTHIER, a Pennsylvania corporation ("Strawbridge"),
as initial servicer, MARKET STREET CAPITAL CORP., a Delaware
corporation ("Purchaser"), and PNC BANK, NATIONAL ASSOCIATION, a
national banking association, as administrator for Purchaser (in
such capacity, together with any successors thereto in such
capacity, the "Administrator" and in its individual capacity, "PNC
Bank"). Unless otherwise indicated, capitalized terms used in this
Agreement are defined in Appendix A.
Background
----------
1. Strawbridge is engaged in the business of retail sales,
and in connection therewith issues private label credit cards.
2. Strawbridge, Clipper Receivables Corporation ("Clipper"),
State Street Boston Capital Corporation ("State Street"), as
administrator for Clipper, and PNC Bank, as relationship bank,
entered into the Receivables Purchase Agreement, dated as of January
26, 1995 (the "Original Purchase Agreement").
3. Strawbridge has formed Seller as a limited purpose
subsidiary for the purpose of purchasing Receivables and certain
related assets from Strawbridge.
4. Clipper has assigned to Purchaser all of its rights, claims
and obligations under the Original Purchase Agreement and the other
Transaction Documents pursuant to the Assignment and Assumption
Agreement, dated as of the date hereof (the "Assignment Agreement"),
among Clipper, Purchaser, State Street and PNC Bank.
5. The parties hereto desire to amend and restate the Original
Purchase Agreement in its entirety, among other things, to reflect
the assignment to Purchaser and the establishment of Seller.
6. Seller has, and expects to have, Pool Receivables in which
Seller intends to sell an undivided interest. Seller has requested
Purchaser, and Purchaser has agreed, subject to the terms and
conditions contained in this Agreement, to purchase such undivided
interest, referred to herein as the Asset Interest, from Seller from
time to time during the term of this Agreement.
<PAGE>
7. Seller and Purchaser desire that, subject to the terms and
conditions of this Agreement, certain of the daily Collections in
respect of the Asset Interest be reinvested in Pool Receivables,
which reinvestment shall constitute part of the Asset Interest.
8. PNC Bank has been requested, and is willing, to act as the
Administrator.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto, intending to be
legally bound hereby, agree as follows:
ARTICLE I
PURCHASES AND REINVESTMENTS
SECTION 1.01. Commitments to Purchase; Limits on Purchaser's
Obligations. Upon the terms and subject to the conditions of this
Agreement, from time to time prior to the Termination Date, Seller
may request that Purchaser purchase from Seller ownership interests
in the Pool Assets (each being a "Purchase") and Purchaser shall
make such Purchase; provided that no Purchase shall be made by
Purchaser to the extent that, after giving effect thereto, either
(a) the then Purchaser's Total Investment would exceed $150,000,000
(the "Purchase Limit"), or (b) the Asset Interest, expressed as a
percentage of Net Pool Balance, would exceed 95% (the "Allocation
Limit"); and provided further that each Purchase made pursuant to
this Section 1.01 shall have a Purchase Price of at least $5,000,000
and shall be in integral multiples of $1,000,000.
SECTION 1.02. Purchase Procedures; Assignment of Purchaser's
Interests.
(a) Notice of Purchase. Each Purchase from Seller
by Purchaser shall be made on notice from Seller to the
Administrator received by the Administrator not later than
11:00 a.m. (Pittsburgh time) on the Business Day before the date of
such proposed Purchase. Each such notice of a proposed Purchase
shall specify the desired amount and date of such Purchase. The
"Purchase Price" for each Purchase shall be the lesser of (i) the
amount requested by Seller pursuant to this Section 1.02(a) and (ii)
the amount permitted pursuant to Section 1.01.
(b) Funding of Purchase. On the date of each Purchase,
Purchaser shall, upon satisfaction of the applicable conditions set
forth in Article V, make available to the Administrator at the
Administrator's Office the amount of its Purchase in same day funds,
and after receipt by the Administrator of such funds, the
Administrator will make such funds immediately available to Seller
at such office or to such account as Seller shall designate in
2
<PAGE>
writing to the Administrator on or prior to the date hereof (or such
other office or account as Seller shall designate from time to
time).
(c) Assignment of Asset Interests. Seller hereby sells,
assigns and transfers to Purchaser, effective on and as of the date
of each Purchase by the Purchaser hereunder, the Asset Interest in
the Pool Assets.
SECTION 1.03. Reinvestments of Certain Collections; Payment of
Remaining Collections. (a) On the close of business on each
Business Day during the period from the date hereof to the
Termination Date, Servicer shall, out of all Collections received on
such day from Pool Receivables:
(i) determine the portion of such Collections
attributable on such day to the Asset Interest by multiplying
(x) the amount of such Collections times (y) the Asset Interest
(expressed as a percentage of Net Pool Balance);
(ii) out of the portion of such Collections allocated to
the Asset Interest pursuant to clause (i), set aside and hold
in trust for Purchaser an amount equal to the sum of the
estimated amount of Earned Discount accrued in respect of the
Purchaser's Total Investment (based on rate information
provided by the Administrator pursuant to Section 2.03), all
other amounts due to Purchaser or the Administrator and the
Servicer's Fee (in each case, accrued through such day) and not
so previously set aside; provided that unless the Administrator
shall request it to do so in writing (which writing shall set
forth the reason for such request), Servicer shall not be
required to hold Collections that have been set aside in a
separate deposit account containing only such Collections;
(iii) apply the Collections allocated to the Asset
Interest pursuant to clause (i) and not required to be set
aside pursuant to clause (ii) to the purchase from Seller of
ownership interests in Pool Assets (each such purchase being a
"Reinvestment"); provided that (A) if the then Asset Interest,
expressed as a percentage of Net Pool Balance, would exceed the
Allocation Limit, then, Servicer shall not reinvest, but shall
set aside and hold for the benefit of Purchaser, a portion of
such Collections which, together with other Collections
previously set aside and then so held, shall equal the amount
necessary to reduce the Asset Interest to the Allocation Limit;
and (B) if the conditions precedent to Reinvestment in clause
(a), (b) or (d) of Section 5.02 are not satisfied then Servicer
shall not reinvest, but shall set aside and hold for the
benefit of Purchaser, any of such remaining Collections; and
3
<PAGE>
(iv) pay to Seller (A) the portion of such Collections
not allocated to the Asset Interest pursuant to clause (i) and
(B) the Collections applied to Reinvestment pursuant to clause
(iii).
(b) Unreinvested Collections. Servicer shall set aside and
hold in trust for the benefit of Purchaser all Collections which
pursuant to clause (iii) of Section 1.03(a), may not be reinvested
in Pool Assets; provided that unless the Administrator shall request
it to do so in writing (which writing shall set forth the reason for
such request), Servicer shall not be required to hold Collections
that have been set aside in a separate deposit account containing
only such Collections. If, prior to the date when such Collections
are required to be paid to the Administrator for the benefit of
Purchaser pursuant to Section 1.03(c), the amount of Collections so
set aside exceeds the amount, if any, necessary to reduce the Asset
Interest to the Allocation Limit, and the conditions precedent to
Reinvestment set forth in clauses (a), (b) and (d) of Section 5.02
are satisfied, then the Servicer shall apply such Collections (or,
if less, a portion of such Collections equal to the amount of such
excess) to the making of a Reinvestment.
(c) Reduction of Purchaser's Total Investment. The
Purchaser's Total Investment shall not be reduced by the amount of
Collections set aside pursuant to this Section unless and until such
Collections are actually delivered to the Administrator pursuant
hereto.
SECTION 1.04. Asset Interest. (a) Components of Asset
Interest. On any date the Asset Interest will represent Purchaser's
combined undivided percentage ownership interest in (i) all then
outstanding Pool Receivables, (ii) related Contracts, (iii) all
Related Security with respect to such Pool Receivables, (iv) the
Accounts, (v) all Collections with respect to, and other proceeds
of, such Pool Receivables, Contracts and Related Security as at such
date and (vi) all books and records evidencing or related to the
foregoing (collectively, the "Pool Assets").
(b) Computation of Asset Interest. On any date, the Asset
Interest will be equal the following fraction (expressed as a
percentage):
PTI + LR
--------
NPB
where:
PTI = the then Purchaser's Total Investment;
LR = the then Loss Reserve; and
NPB = the then Net Pool Balance;
4
<PAGE>
provided, however, that the Asset Interest, as computed as of the
day immediately preceding the Termination Date, will remain constant
at all times on and after the Termination Date until the Final
Payout Date, unless at any time the Administrator requests a
recalculation of the Asset Interest and such recalculation produces
a higher Asset Interest, in which case the Asset Interest shall
remain constant at such higher amount following such recalculation
until the Final Payout Date, or, if earlier, until the date of the
next such recalculation of a higher Asset Interest; and provided,
further, that the Asset Interest shall not exceed 100%.
(c) Frequency of Computation. The Asset Interest shall be
computed, as provided in Sections 1.04 and 3.01, as of the Cut-Off
Date for each Settlement Period. In addition, the Administrator may
require Servicer to provide an Information Package for purposes of
computing the Asset Interest as of any other date, utilizing the
then most recently available information, and the Servicer agrees to
do so within 3 Business Days of its receipt of the Administrator's
written request.
ARTICLE II
COMPUTATIONAL RULES
SECTION 2.01. Computation of Purchaser's Total Investment. In
making any determination of Purchaser's Total Investment, the
following rules shall apply:
(a) Purchaser's Total Investment shall not be considered
reduced by any allocation, setting aside or distribution of any
portion of Collections unless such Collections shall have been
actually delivered to the Administrator pursuant hereto; and
(b) Purchaser's Total Investment shall not be considered
reduced by any distribution of any portion of Collections if at
any time such distribution is rescinded or otherwise returned
for any reason.
SECTION 2.02. Computation of Earned Discount. In making any
determination of Earned Discount, the following rules shall apply:
(a) the Administrator shall determine the Earned Discount
accruing with respect to the Purchaser's Total Investment, in
accordance with the definition of Earned Discount;
(b) no provision of this Agreement shall require the
payment or permit the collection of Earned Discount in excess
of the maximum permitted by applicable law; and
5
<PAGE>
(c) Earned Discount shall not be considered paid by any
distribution if at any time such distribution is rescinded or
otherwise returned for any reason.
SECTION 2.03. Estimates of Earned Discount Rate, Fees, etc.
For purposes of determining the amounts required to be set aside by
Servicer pursuant to Section 1.03, the Administrator shall notify
Servicer from time to time of the Earned Discount Rate applicable to
the Purchaser's Total Investment and the rates at which fees and
other amounts are accruing hereunder. It is understood and agreed
that (i) the Earned Discount Rate may change from time to time, (ii)
certain rate information provided by the Administrator to Servicer
shall be based upon the Administrator's good faith estimate, (iii)
the amount of Earned Discount actually accrued with respect to any
Settlement Period may exceed, or be less than, the amount set aside
with respect thereto by Servicer, and (iv) the amount of fees or
other payables accrued hereunder with respect to any Settlement
Period may exceed, or be less than, the amount set aside with
respect thereto by Servicer. Failure to set aside any amount so
accrued shall not relieve Servicer of its obligation to remit
Collections to the Administrator with respect to such accrued
amount, as and to the extent provided in Section 3.01.
ARTICLE III
SETTLEMENTS
SECTION 3.01. Settlement Procedures.
The parties hereto will take the following actions with respect
to each Settlement Period:
(a) Information Package. On the seventh Business Day
following the Cut-Off Date for such Settlement Period (each, a
"Reporting Date"), Servicer shall deliver to the Administrator
a diskette containing the information described in Exhibit 3.01
(each, an "Information Package").
(b) Earned Discount; Other Amounts Due. On the first
Business Day following such Cut-Off Date, the Administrator
shall notify Servicer of (i) the amount of Earned Discount that
will have accrued in respect of the Purchaser's Total
Investment during such Settlement Period, and (ii) all fees and
other amounts accrued and payable by Seller under this
Agreement (other than Purchaser's Total Investment).
(c) Settlement Date Procedure - Reinvestment Period. On
the fifteenth day of each month, or if such day is not a
Business Day, the next succeeding Business Day (each, a
"Settlement Date") prior to the Termination Date, the Servicer
6
<PAGE>
shall distribute from Collections set aside pursuant to Section
1.03(a)(ii) and (iii) and (b) during the immediately preceding
Settlement Period the following amounts in the following order:
(1) to the Administrator, an amount equal to the
Earned Discount accrued during such Settlement Period,
plus any previously accrued Earned Discount not paid on a
prior Settlement Date, which amount shall be distributed
by the Administrator to the Purchaser for application to
such Earned Discount;
(2) to the Administrator, an amount equal to the
Program Fee and the Commitment Fee accrued during such
Settlement Period, plus any previously accrued Program Fee
and Commitment Fee not paid on a prior Settlement Date;
(3) to the Servicer, if the Servicer is not
Strawbridge, an amount equal to the Servicer's Fee accrued
during such Settlement Period, to the extent that such
Servicer's Fee does not exceed the Servicer's Fee that
would have accrued if such Servicer's Fee had been
calculated using a Servicer's Fee Rate of 2%;
(4) to the Administrator, all other amounts then due
under this Agreement to the Administrator, the Purchaser,
the Affected Parties or the Indemnified Parties;
(5) to the Administrator, an amount equal to the
amount, if any, necessary to reduce the Asset Interest to
the Allocation Limit, which amount shall be distributed by
the Administrator to the Purchaser for application to the
Purchaser's Total Investment;
(6) to the Servicer, an amount equal to the
Servicer's Fee accrued during such Settlement Period to
the extent not paid pursuant to subparagraph (3) above,
plus any previously accrued Servicer's Fee not paid on a
prior Settlement Date; and
(7) to the Seller, any remaining amounts.
(d) Settlement Date Procedure - Liquidation Period. On
each Settlement Date during the Liquidation Period, the
Servicer shall distribute from Purchaser's Share of Collections
received, or deemed received pursuant to Section 3.02, during
the immediately preceding Settlement Period the following
amounts in the following order:
(1) to the Administrator, an amount equal to the
Earned Discount accrued during such Settlement Period,
plus any previously accrued Earned Discount not paid on a
7
<PAGE>
prior Settlement Date, which amount shall be distributed
by the Administrator to the Purchaser for application to
such Earned Discount;
(2) to the Administrator, an amount equal to the
Program Fee and Commitment Fee accrued during such
Settlement Period, plus any previously accrued Program Fee
and Commitment Fee not paid on a prior Settlement Date;
(3) to the Servicer, if the Servicer is not
Strawbridge, an amount equal to the Servicer's Fee accrued
during such preceding Settlement Period, to the extent
that such Servicer's Fee does not exceed the Servicer's
Fee that would have accrued if such Servicer's Fee had
been calculated using a Servicer's Fee Rate of 2%;
(4) to the Administrator, all other amounts then due
under this Agreement to the Administrator, the Purchaser,
the Affected Parties or the Indemnified Parties;
(5) to the Administrator, an amount equal to the
remaining Purchaser's Share of Collections until the
Purchaser's Total Investment is reduced to zero, which
amount shall be distributed by the Administrator to the
Purchaser for application to the Purchaser's Total
Investment;
(6) to the Servicer, an amount equal to the
Servicer's Fee accrued during such Settlement Period, to
the extent not paid pursuant to subparagraph (3) above,
plus any previously accrued Servicer's Fee not paid on a
prior Settlement Date; and
(7) to the Seller, any remaining amounts.
(e) Non-Distribution of Servicer's Fee. Unless the
Administrator gives written notice to the contrary to Servicer
(which notice may be given at any time), the amounts (if any)
set aside pursuant to Section 1.03 in respect of Servicer's Fee
may be retained by Servicer, in which case no distribution
shall be made in respect of Servicer's Fee pursuant to clause
(c) or (d) above.
(f) Delayed Payment. If on any day described in this
Section 3.01 because Collections during the relevant Settlement
Period were less than the aggregate amounts payable, Servicer
shall not make any payment otherwise required, the next
available Collections in respect of the Asset Interest shall be
applied to such payment, subject to the priorities set forth in
paragraphs (c) and (d) above, and no Reinvestment shall be
8
<PAGE>
permitted hereunder until such amount payable has been paid in
full.
SECTION 3.02. Deemed Collections; Reduction of Purchaser's
Total Investment, Etc.
(a) Deemed Collections. If on any day
(i) the Unpaid Balance of any Pool Receivable is
(A) reduced as a result of any defective, rejected
or returned merchandise or services, any cash discount, or
any incorrect billing or other adjustment by Seller or any
Affiliate of Seller,
(B) reduced or cancelled as a result of a setoff in
respect of any claim by the Obligor thereof against Seller
or any Affiliate of Seller or any other Person (whether
such claim arises out of the same or a related or an
unrelated transaction), or
(C) reduced on account of the obligation of Seller
or any Affiliate of Seller to pay to the related Obligor
any rebate or refund, or
(D) less than the amount included in calculating the
Net Pool Balance for purposes of any Information Package,
or
(ii) any of the representations or warranties of Seller
set forth in Section 6.01(l) or (p) were not true when made
with respect to any Pool Receivable, or any of the
representations or warranties of Seller set forth in
Section 6.01(l) are no longer true with respect to any Pool
Receivable, or
(iii) without duplication, Seller receives a Deemed
Collection (as defined in the Purchase Agreement),
then, on such day, Seller shall be deemed to have received a
Collection of such Pool Receivable
(I) in the case of clause (i) above, in the amount
of such reduction or cancellation or the difference
between the actual Unpaid Balance and the amount included
in calculating such Net Pool Balance, as applicable;
(II) in the case of clause (ii) above, in the amount
of the Unpaid Balance of such Pool Receivable; and
9
<PAGE>
(III) in the case of clause (iii) above, in the
amount so received as a Deemed Collection.
(b) Seller's Optional Reduction of Purchaser's Total
Investment. Seller may at any time elect to reduce the Purchaser's
Total Investment as follows:
(i) Seller shall give the Administrator at least
3 Business Days' prior written notice of such reduction
(including the amount of such proposed reduction and the
proposed date on which such reduction will commence),
(ii) on the proposed date of commencement of such
reduction and on each day thereafter, Servicer shall refrain
from reinvesting Collections pursuant to Section 1.03 until the
amount thereof not so reinvested shall equal the amount of such
reduction, and
(iii) Servicer shall hold such Collections in trust for
Purchaser, pending payment to the Administrator, as provided in
Section 1.03;
provided that,
(A) the amount of any such reduction shall be not
less than $1,000,000 and the Purchaser's Total Investment
after giving effect to such reduction shall be not less
than $10,000,000 (unless such reduction reduces
Purchaser's Total Investment to zero), and
(B) Seller shall use reasonable efforts to attempt
to choose a reduction amount, and the date of commencement
thereof, so that such reduction shall commence and
conclude in the same Settlement Period to the extent
possible.
SECTION 3.03. Payments and Computations, Etc.
(a) Payments. All amounts to be paid or deposited by Seller
or Servicer to the Administrator or any other Person hereunder
(other than amounts payable under Section 4.02) shall be paid or
deposited in accordance with the terms hereof no later than 11:00
a.m. (Pittsburgh time) on the day when due in lawful money of the
United States of America in same day funds (i) in the case of
amounts to be paid or deposited in respect of accrued and unpaid
Earned Discount or in reduction of Purchaser's Total Investment, to
the Administrator at PNC Bank, ABA #043000096, for credit to Account
#1002420425; Reference: Strawbridge Receivables and (ii) in the case
of all fees, expenses and other amounts (other than amounts payable
under Section 4.02), to the Administrator at PNC Bank, ABA
10
<PAGE>
#043000096, for credit to Account #1-188375, Attention: Charlene
Wilson, 7001.
(b) Late Payments. Seller or Servicer, as applicable, shall,
to the extent permitted by law, pay to Purchaser interest on all
amounts not paid or deposited when due hereunder at 1% per annum
above the Alternate Base Rate, payable on demand, provided, however,
that such interest rate shall not at any time exceed the maximum
rate permitted by applicable law.
(c) Method of Computation. All computations of interest,
Earned Discount, any fees payable under Sections 4.01(b) and (c) and
any other fees payable by Seller to Purchaser or the Administrator
in connection with Purchases or the Asset Interest hereunder shall
be made on the basis of a year of 360 days for the actual number of
days (including the first day but excluding the last day) elapsed.
SECTION 3.04. Treatment of Collections and Deemed Collections.
Seller shall forthwith deliver to Servicer all Collections deemed
received by Seller pursuant to Section 3.02(a), and Servicer shall
hold or distribute such Collections as Earned Discount, accrued
Servicer's Fee, repayment of Purchaser's Total Investment, etc. to
the same extent as if such Collections had actually been received on
the date of such delivery to Servicer. If Collections are then
being paid to the Administrator, or lock boxes or accounts directly
or indirectly owned or controlled by the Administrator, Servicer
shall forthwith cause such deemed Collections to be paid to the
Administrator or to such lock boxes or accounts, as applicable, or
as the Collateral Agent shall request in writing. So long as Seller
shall hold any Collections or deemed Collections required to be paid
to Servicer or the Administrator it shall hold such Collections in
trust and shall clearly mark its records to reflect such trust;
provided that unless the Administrator shall request it to do so in
writing, Seller shall not be required to hold such Collections in a
separate deposit account containing only such Collections.
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.01. Fees.
Seller shall pay to the Administrator, for the account of
Purchaser, certain fees, payable on such dates and in such amounts
as are set forth in the letter dated the date hereof from the
Administrator to Seller and Strawbridge (as amended from time to
time, the "Fee Letter").
11
<PAGE>
SECTION 4.02. Yield Protection.
(a) If (i) Regulation D or (ii) any Regulatory Change
occurring after the date hereof
(A) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the
Federal Reserve Board, but excluding any reserve included in
the determination of Earned Discount), special deposit or
similar requirement against assets of any Affected Party,
deposits or obligations with or for the account of any Affected
Party or with or for the account of any affiliate (or entity
deemed by the Federal Reserve Board to be an affiliate) of any
Affected Party, or credit extended by any Affected Party; or
(B) shall change the amount of capital maintained or
required or requested or directed to be maintained by any
Affected Party;
(C) shall impose any other condition affecting any Asset
Interest owned or funded in whole or in part by any Affected
Party, or its obligations or rights, if any, to make Purchases
or Reinvestments or to provide funding therefor; or
(D) shall change the rate for, or the manner in which the
Federal Deposit Insurance Corporation (or a successor thereto)
assesses, deposit insurance premiums or similar charges;
and the result of any of the foregoing is or would be
(x) to increase the cost to (or in the case of Regulation
D referred to above, to impose a cost on) an Affected Party
funding or making or maintaining any Purchases or
Reinvestments, any purchases, reinvestments, or loans or other
extensions of credit under any Program Support Agreement, or
any commitment of such Affected Party with respect to any of
the foregoing,
(y) to reduce the amount of any sum received or
receivable by an Affected Party under this Agreement, or under
any Program Support Agreement with respect thereto, or
(z) in the reasonable determination of such Affected
Party, to reduce the rate of return on the capital of an
Affected Party as a consequence of its obligations hereunder or
arising in connection herewith to a level below that which such
Affected Party could otherwise have achieved but for Regulation
D or such Regulatory Change,
then within thirty days after demand by such Affected Party (which
demand shall be accompanied by a statement setting forth the basis
12
<PAGE>
of such demand), Seller shall pay directly to such Affected Party
such additional amount or amounts as will compensate such Affected
Party for such additional or increased cost or such reduction. This
Section 4.02(a) shall not apply to taxes.
(b) Each Affected Party will promptly notify Seller and the
Administrator of any event of which it has knowledge which will
entitle such Affected Party to compensation pursuant to this Section
4.02; provided, however, no failure to give or delay in giving such
notification shall adversely affect the rights of any Affected Party
to such compensation.
(c) In determining any amount provided for or referred to in
this Section 4.02, an Affected Party may use any reasonable
averaging and attribution methods that it (in its sole discretion)
shall deem applicable. Any Affected Party when making a claim under
this Section 4.02 shall submit to Seller a statement as to such
increased cost or reduced return (including calculation thereof in
reasonable detail), which statement shall, in the absence of
demonstrable error, be conclusive and binding upon Seller.
(d) Subject to Section 4.02(f), any and all payments made
under this Agreement shall be made free and clear of, and without
deduction for, any and all present or future Taxes. If any amount
of Taxes shall be required by law to be deducted from or in respect
of any sum payable hereunder to any Foreign assignee or participant
of Purchaser, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section
4.02(d)), such Foreign assignee or participant of Purchaser, as the
case may be, receives an amount equal to the sum it would have
received had no such deductions been made, (ii) Seller shall make
such deductions and (iii) Seller shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance
with applicable law.
(e) Each Foreign assignee or participant of Purchaser, on or
prior to the date pursuant to which it becomes an assignee or
participant of Purchaser, and from time to time thereafter if
requested in writing by Seller (unless such Foreign assignee or
participant of Purchaser can no longer lawfully do so due to a
change in law subsequent to the date it became an assignee or
participant of Purchaser hereunder), shall provide Seller with
Internal Revenue Service Form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service,
certifying that such Foreign assignee or participant of Purchaser is
entitled to benefits under an income tax treaty to which the United
States is a party which reduces the rate of withholding tax on
payments of interest to zero or certifying that the income
receivable pursuant to this Agreement is effectively connected with
the conduct of a trade or business in the United States.
13
<PAGE>
(f) For any period with respect to which a Foreign assignee or
participant of Purchaser has failed to provide the Seller with the
appropriate form described in Section 4.02(e) (other than if such
failure is due to a change in law occurring subsequent to the date
on which a form originally was required to be provided), such
Foreign assignee or participant of Purchaser shall not be entitled
to payments of additional amounts under Section 4.02(d).
SECTION 4.03. Funding Losses. In the event that any Liquidity
Bank shall incur any loss or expense (including any loss or expense
incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Liquidity Bank to make any Liquidity
Loan or maintain any Liquidity Loan) as a result of (i) any
settlement with respect to any portion of Purchaser's Total
Investment funded by a Liquidity Loan being made on any day other
than a Settlement Date, or (ii) any Purchase not being made in
accordance with a request therefore under Section 1.02 (other than
by reason of (a) a default by such Liquidity Bank, (b) Purchaser's
failure to make available to the Administrator the required funds as
set forth in Section 1.02(b) or (c) the Administrator's failure to
make available the required funds to Seller as set forth in Section
1.02(b)), then, upon written notice from the Administrator to Seller
and Servicer, Seller shall pay to Servicer, and Servicer shall pay
to the Administrator for the account of such Liquidity Bank, the
amount of such loss or expense. Such written notice (which shall
include calculations in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding upon the Seller and
Servicer.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01. Conditions Precedent to Effectiveness. The
effectiveness of this Amended and Restated Receivables Purchase
Agreement is subject to the condition precedent that the
Administrator shall have received, on or before the date of such
effectiveness, the following, each (unless otherwise indicated)
dated such date and in form and substance satisfactory to the
Administrator:
(a) A copy of the resolutions of the Board of Directors
of each of Strawbridge and Seller approving this Agreement and
the other Transaction Documents to be delivered by it hereunder
and the transactions contemplated hereby, certified by its
Secretary or Assistant Secretary;
(b) A good standing certificate for Strawbridge issued by
the Secretary of State of Pennsylvania; good standing
14
<PAGE>
certificates for Seller issued by the Secretaries of State of
Pennsylvania and Delaware;
(c) A certificate of the Secretary or Assistant Secretary
of each of Strawbridge and Seller certifying the names and true
signatures of the officers authorized on its behalf to sign
this Agreement and the other Transaction Documents to be
delivered by it hereunder (on which certificate the
Administrator and Purchaser may conclusively rely until such
time as the Administrator shall receive from Strawbridge or
Seller, as the case may be, a revised certificate meeting the
requirements of this subsection (c));
(d) The Articles of Incorporation of Seller, duly
certified by the Secretary of State of Delaware, as of a recent
date acceptable to the Administrator, together with a copy of
the by-laws of Seller, duly certified by the Secretary or an
Assistant Secretary of Seller; the Articles of Incorporation of
Strawbridge, duly certified by the Secretary of State of
Pennsylvania, as of a recent date acceptable to the
Administrator, together with a copy of the by-laws of
Strawbridge, duly certified by the Secretary or an Assistant
Secretary of Strawbridge;
(e) Acknowledgment copies of (i) proper financing
statements (Form UCC-1), filed on or prior to the date hereof,
naming Seller as the debtor and seller of Receivables or an
undivided interest therein and Purchaser as the secured party
and purchaser, (ii) terminations of the financing statements
filed naming Strawbridge as the debtor and Clipper as the
secured party pursuant to the Original Purchase Agreement, and
(iii) proper financing statements (Form UCC-1), filed on or
prior to the date hereof, naming Strawbridge as the debtor and
seller of Receivables, Seller as the secured party and
purchaser and Purchaser as assignee or, in each case, other,
similar instruments or documents, as may be necessary or, in
the opinion of the Administrator, desirable under the UCC or
any comparable law of all appropriate jurisdictions to perfect
Purchaser's interests in the Pool Assets;
(f) A search report provided in writing to the
Administrator, listing all effective financing statements that
name Strawbridge or Seller as debtor and that are filed in the
jurisdictions in which filings were made pursuant to subsection
(e) above and in such other jurisdictions that Administrator
shall reasonably request, together with copies of such
financing statements (none of which shall cover any Pool
Assets, other than those in favor of Clipper);
(g) Duly executed copies of amended Lock-Box Agreements
with each of the Lock-Box Banks;
15
<PAGE>
(h) Favorable opinions of Morgan, Lewis & Bockius LLP,
counsel to Seller and Strawbridge, in substantially the forms
of Exhibit 5.01(h)-1 and 5.01(h)-2;
(i) Such powers of attorney as the Administrator shall
reasonably request to enable the Administrator to collect all
amounts due under any and all Pool Receivables;
(j) An Information Package, with a Cut-Off Date of
October 28, 1995;
(k) The Purchase Agreement, duly executed by Strawbridge
and Seller, together with a copy of all documents required to
be delivered thereunder;
(l) The Liquidity Agreement, duly executed by Purchaser,
the Liquidity Agent and each Liquidity Bank;
(m) The Assignment Agreement, duly executed by the
parties thereto; and
(n) The Fee Letter, duly executed by Seller and Servicer.
SECTION 5.02. Conditions Precedent to All Purchases and
Reinvestments. Each Purchase and each Reinvestment hereunder shall
be subject to the further conditions precedent that on the date of
such Purchase or Reinvestment the following statements shall be true
(and Seller by accepting the amount of such Purchase or by receiving
the proceeds of such Reinvestment shall be deemed to have certified
that):
(a) the representations and warranties contained in
Article VI are correct in all material respects on and as of
such day as though made on and as of such day and shall be
deemed to have been made on such day,
(b) no event has occurred and is continuing, or would
result from such Purchase or Reinvestment, that constitutes a
Liquidation Event or Unmatured Liquidation Event,
(c) after giving effect to each proposed Purchase or
Reinvestment, Purchaser's Total Investment will not exceed the
Purchase Limit and the Asset Interest, expressed as a
percentage of Net Pool Balance, will not exceed the Allocation
Limit, and
(d) the Termination Date shall not have occurred;
provided, however, the absence of the occurrence and continuance of
an Unmatured Liquidation Event shall not be a condition
16
<PAGE>
precedent to any Reinvestment or any Purchase which does not cause
the Purchaser's Total Investment, after giving effect to such
Reinvestment or Purchase, to exceed the Purchaser's Total Investment
as of the opening of business of the day of such Reinvestment or
Purchase.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties of Seller.
Seller represents and warrants as follows:
(a) Organization and Good Standing. Seller has been duly
organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware, with power
and authority to own its properties and to conduct its business
as such properties are presently owned and such business is
presently conducted, and had at all relevant times, and now
has, all necessary power, authority, and legal right to acquire
and own the Pool Receivables.
(b) Due Qualification. Seller is duly qualified to do
business as a foreign corporation in good standing, and has
obtained all necessary licenses and approvals, in all
jurisdictions in which the failure to so qualify or obtain such
licenses or approvals would have a Material Adverse Effect.
(c) Power and Authority; Due Authorization. Seller (i)
has all necessary power, authority and legal right to (A)
execute and deliver this Agreement and the other Transaction
Documents to which it is a party, (B) carry out the terms of
the Transaction Documents to which it is a party, and (C) sell
and assign the Asset Interest on the terms and conditions
herein provided and (ii) has duly authorized by all necessary
corporate action the execution, delivery and performance of
this Agreement and the other Transaction Documents and the sale
and assignment of the Asset Interest on the terms and
conditions herein provided.
(d) Valid Sale; Binding Obligations. This Agreement
constitutes a valid sale, transfer, and assignment of the Asset
Interest to Purchaser, enforceable against creditors of, and
purchasers from, Seller; and this Agreement constitutes, and
each other Transaction Document to be executed by Seller when
duly executed and delivered will constitute, a legal, valid and
binding obligation of Seller enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, or other similar laws affecting the
enforcement of creditors' rights generally and by general
17
<PAGE>
principles of equity, regardless of whether such enforceability
is considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the other Transaction
Documents and the fulfillment of the terms hereof will not (i)
conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse
of time or both) a default under, (A) the articles of
incorporation or by-laws of Seller, or (B) in any material
respect, any indenture, loan agreement, receivables purchase
agreement, mortgage, deed of trust, or other agreement or
instrument to which Seller is a party or by which it or any of
its properties is bound, (ii) result in the creation or
imposition of any Lien upon any of Seller's properties pursuant
to the terms of any such indenture, loan agreement, receivables
purchase agreement, mortgage, deed of trust, or other agreement
or instrument, other than this Agreement, or (iii) violate any
law or any order, rule, or regulation applicable to Seller of
any court or of any federal or state regulatory body,
administrative agency, or other governmental instrumentality
having jurisdiction over Seller or any of its properties.
(f) No Proceedings. There are no proceedings or
investigations pending, or, to Seller's knowledge, threatened,
before any court, regulatory body, administrative agency, or
other tribunal or governmental instrumentality (i) asserting
the invalidity of this Agreement or any other Transaction
Document to which Seller is a party, (ii) seeking to prevent
the sale and assignment of any Asset Interest or the
consummation of any of the other transactions contemplated by
this Agreement or any other Transaction Document to which
Seller is a party, or (iii) seeking any determination or ruling
that might have a Material Adverse Effect or seeking to
adversely affect the federal income tax attributes of the
Purchases or Reinvestments hereunder.
(g) Bulk Sales Act. No transaction contemplated hereby
requires compliance with any bulk sales act or similar law.
(h) Government Approvals. No authorization or approval
or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for the
due execution, delivery and performance by Seller of this
Agreement or any other Transaction Document, except for the
filing of the UCC financing statements referred to in Article
V, all of which, at the time required in Article V, shall have
been duly made and shall be in full force and effect.
(i) Financial Condition. (x) As of the date hereof
(after giving effect to the transactions contemplated by the
18
<PAGE>
Transaction Documents), Seller is solvent and (y) since the
date of Seller's incorporation, there has been no material
adverse change in Seller's financial condition, business or
results of operations.
(j) Litigation. No injunction, decree or other decision
has been issued or made by any court, governmental agency or
instrumentality thereof that prevents, and no threat by any
person has been made to attempt to obtain any such decision
that would prevent, Seller from conducting a material part of
its business operations.
(k) Margin Regulations. The use of all funds obtained by
Seller under this Agreement will not conflict with or
contravene any of Regulations G, T, U and X promulgated by the
Board of Governors of the Federal Reserve System from time to
time.
(l) Quality of Title. Each Pool Receivable, together
with each other Pool Asset, is owned by Seller free and clear
of any Lien (other than any Lien arising solely as the result
of any action taken by Purchaser (or any assignee thereof) or
by the Administrator); when Purchaser makes a Purchase or
Reinvestment, it shall have acquired and shall at all times
thereafter continuously maintain a valid and perfected first
priority undivided percentage ownership interest to the extent
of the Asset Interest in each Pool Receivable, and each other
Pool Asset, free and clear of any Lien (other than any Lien
arising solely as the result of any action taken by Purchaser
(or any assignee thereof) or by the Administrator); and no
financing statement or other instrument similar in effect
covering any Pool Receivable, or any other Pool Asset is on
file in any recording office except such as may be filed (i) in
favor of Purchaser or the Administrator in accordance with this
Agreement or in connection with any Lien arising solely as the
result of any action taken by Purchaser (or any assignee
thereof) or by the Administrator, (ii) in favor of Seller
pursuant to the Purchase Agreement, or (iii) in favor of the
Liquidity Agent.
(m) Accurate Reports. No Information Package (if
prepared by Seller or its Affiliate, or to the extent
information therein was supplied by Seller or its Affiliate) or
other information, exhibit, financial statement, document,
book, record or report furnished or to be furnished by or on
behalf of Seller or its Affiliates to the Administrator or
Purchaser in connection with this Agreement was or will be
inaccurate in any material respect as of the date it was or
will be dated or (except as otherwise disclosed to the
Administrator and Purchaser at such time) as of the date so
furnished, or contained or will contain any material
19
<PAGE>
misstatement of fact or omitted or will omit to state a
material fact or any fact necessary to make the statements
contained therein not materially misleading.
(n) Offices. The chief place of business and chief
executive office of Seller are located at the address of Seller
referred to in Section 14.02, and the offices where Seller
keeps all its books, records and documents evidencing Pool
Receivables, the related Accounts and Contracts and all other
agreements related to such Pool Receivables are located at the
addresses specified in Schedule 6.01(n) (or at such other
locations, notified to the Administrator in accordance with
Section 7.01(f), in jurisdictions where all action required by
Section 8.05 has been taken and completed).
(o) Lock-Box Accounts. The names and addresses of all
the Lock-Box Banks, together with the account numbers of the
lock-box accounts of Seller at such Lock-Box Banks, are
specified in Schedule 6.01(o) (or have been notified to the
Administrator in accordance with Section 7.03(d)).
(p) Eligible Receivables. Each Receivable included in
the Net Pool Balance as an Eligible Receivable on the date of
any Purchase, Reinvestment or other calculation of the Net Pool
Balance shall be an Eligible Receivable on such date.
(q) No Disclosure Required. Under applicable laws and
regulations in effect on the date hereof, Seller is not
required to file a copy of this Agreement with the Securities
and Exchange Commission or any other governmental authority.
SECTION 6.02. Representations and Warranties of Strawbridge.
Strawbridge, as Servicer, represents and warrants as follows:
(a) Organization and Good Standing. Strawbridge has been
duly organized and is validly existing as a corporation in good
standing under the laws of the Commonwealth of Pennsylvania,
with power and authority to own its properties and to conduct
its business as such properties are presently owned and such
business is presently conducted.
(b) Due Qualification. Strawbridge is duly qualified to
do business as a foreign corporation in good standing, and has
obtained all necessary licenses and approvals, in all
jurisdictions in which the failure to so qualify or obtain such
licenses or approvals would have a Material Adverse Effect.
(c) Power and Authority; Due Authorization. Strawbridge
(i) has all necessary power, authority and legal right to (A)
execute and deliver this Agreement and the other Transaction
Documents to which it is a party, and (B) carry out the terms
20
<PAGE>
of the Transaction Documents to which it is a party, and (ii)
has duly authorized by all necessary corporate action the
execution, delivery and performance of this Agreement and the
other Transaction Documents to which it is a party.
(d) Binding Obligations. This Agreement constitutes, and
each other Transaction Document to be executed by Strawbridge
when duly executed and delivered will constitute, a legal,
valid and binding obligation of Strawbridge enforceable in
accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, or other
similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in
equity or at law.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the other Transaction
Documents and the fulfillment of the terms hereof will not (i)
conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse
of time or both) a default under, (A) the articles of
incorporation or by-laws of Strawbridge, or (B) in any material
respect, any indenture, loan agreement, receivables purchase
agreement, mortgage, deed of trust, or other agreement or
instrument to which Strawbridge is a party or by which it or
any of its properties is bound, (ii) result in the creation or
imposition of any Lien upon any of Strawbridge's properties
pursuant to the terms of any such indenture, loan agreement,
receivables purchase agreement, mortgage, deed of trust, or
other agreement or instrument, other than the Purchase
Agreement or (iii) violate any law or any order, rule, or
regulation applicable to Strawbridge of any court or of any
federal or state regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over
Strawbridge or any of its properties.
(f) No Proceedings. There are no proceedings or
investigations pending, or, to Strawbridge's knowledge,
threatened, before any court, regulatory body, administrative
agency, or other tribunal or governmental instrumentality (i)
asserting the invalidity of this Agreement or any other
Transaction Document to which Strawbridge is a party, (ii)
seeking to prevent the sale and assignment of any Asset
Interest or the consummation of any of the other transactions
contemplated by this Agreement or any other Transaction
Document to which Strawbridge is a party, or (iii) seeking any
determination or ruling that might have a Material Adverse
Effect.
21
<PAGE>
(g) Government Approvals. No authorization or approval
or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for the
due execution, delivery and performance by Strawbridge of this
Agreement or any other Transaction Document to which it is a
party.
(h) Financial Condition. (x) The consolidated balance
sheets of Strawbridge and its consolidated subsidiaries as at
January 28, 1995, and the related statements of income and
shareholders' equity of Strawbridge and its consolidated
subsidiaries for the fiscal year then ended, certified by Ernst
& Young, independent certified public accountants, and the
consolidated balance sheets of Strawbridge and its consolidated
subsidiaries as at July 29, 1995 and the related statements of
income and shareholders' equity of Strawbridge and its
consolidated subsidiaries for the six month period then ended,
copies of which have been furnished to the Administrator,
fairly present the consolidated financial condition, business
and results of operations of Strawbridge and its consolidated
subsidiaries as at such dates and the consolidated results of
the operations of Strawbridge and its consolidated subsidiaries
for the periods ended on such dates, all in accordance with
generally accepted accounting principles consistently applied,
and (y) since July 29, 1995 there has been no material adverse
change in any such condition, business or results of operations
except as described in Schedule 6.02(h).
(i) Litigation. No injunction, decree or other decision
has been issued or made by any court, governmental agency or
instrumentality thereof that prevents, and no threat by any
person has been made to attempt to obtain any such decision
that would prevent, Strawbridge from conducting a material part
of its business operations, except as described in Schedule
6.02(i).
(j) Accurate Reports. No Information Package (if
prepared by Strawbridge or its Affiliate, or to the extent
information therein was supplied by Strawbridge or its
Affiliate) or other information, exhibit, financial statement,
document, book, record or report furnished or to be furnished
by or on behalf of Strawbridge or its Affiliates to the
Administrator or Purchaser in connection with this Agreement
was or will be inaccurate in any material respect as of the
date it was or will be dated or (except as otherwise disclosed
to the Administrator and Purchaser at such time) as of the date
so furnished, or contained or will contain any material
misstatement of fact or omitted or will omit to state a
material fact or any fact necessary to make the statements
contained therein not materially misleading.
22
<PAGE>
(k) Offices. The chief place of business and chief
executive office of Strawbridge are located at the address of
Strawbridge referred to in Section 14.02, and the offices where
Strawbridge keeps all its books, records and documents
evidencing Pool Receivables, the related Accounts and Contracts
and all other agreements related to such Pool Receivables are
located at the addresses specified in Schedule 6.02(k) (or at
such other locations, notified to the Administrator in
accordance with Section 7.01(f)).
(l) Lock-Box Accounts. The names and addresses of all
the Lock-Box Banks, together with the account numbers of the
lock-box accounts at such Lock-Box Banks, are specified in
Schedule 6.01(o) (or have been notified to the Administrator in
accordance with Section 7.03(d)).
(m) Servicing Programs. No license or approval is
required for the Administrator's use of any program used by
Servicer in the servicing of the Receivables, other than those
which have been obtained and are in full force and effect.
(n) No Disclosure Required. Under applicable laws and
regulations in effect on the date hereof, Strawbridge is not
required to file a copy of this Agreement with the Securities
and Exchange Commission or any other governmental authority.
ARTICLE VII
GENERAL COVENANTS OF SELLER AND STRAWBRIDGE
SECTION 7.01. Affirmative Covenants of Seller and Strawbridge.
From the date hereof until the Final Payout Date, each of Seller and
Strawbridge covenants, as to itself, that it will, unless the
Administrator shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material
respects with all applicable laws, rules, regulations and
orders, including those with respect to the Pool Receivables
and related Accounts and Contracts.
(b) Preservation of Corporate Existence. Preserve and
maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and
qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to preserve
and maintain such existence, rights, franchises, privileges and
qualification would have a Material Adverse Effect.
(c) Audits. (i) At any time and from time to time during
regular business hours, permit the Administrator or any of its
23
<PAGE>
agents or representatives, upon at least two Business Days'
prior notice (provided that no such notice shall be required if
a Liquidation Event shall have occurred and be continuing) (A)
to examine and make copies of and abstracts from all books,
records and documents (including, without limitation, computer
tapes and disks) in the possession or under the control of
Seller or Strawbridge, as the case may be, relating to Pool
Receivables, including, without limitation, the related
Accounts and Contracts and other agreements, and (B) to visit
the offices and properties of Seller or Strawbridge, as the
case may be, for the purpose of examining such materials
described in clause (i)(A) next above, and to discuss matters
relating to Pool Receivables or Seller's or Strawbridge's, as
the case may be, performance hereunder with any of its officers
or employees having knowledge of such matters; and (ii) without
limiting the provisions of clause (i) next above, from time to
time on request of Administrator, permit internal auditors or
other employees of the Administrator to conduct, at Seller's or
Strawbridge's, as the case may be, reasonable expense, a review
of Seller's or Strawbridge's, as the case may be, books and
records.
(d) Keeping of Records and Books of Account. Maintain
and implement administrative and operating procedures
(including, without limitation, an ability to recreate records
evidencing Pool Receivables in the event of the destruction of
the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or
advisable for the collection of all Pool Receivables
(including, without limitation, records adequate to permit the
daily identification of each new Pool Receivable and all
Collections of and adjustments to each existing Pool
Receivable).
(e) Performance and Compliance with Receivables and
Contracts. At its expense timely and fully perform and comply
with all provisions, covenants and other promises required to
be observed by it under the Contracts related to the Pool
Receivables and all other agreements related to such Pool
Receivables, except insofar as the failure to perform and
comply would not materially and adversely affect the rights of
Purchaser hereunder or the collectability of such Pool
Receivables.
(f) Location of Records. Keep its chief place of
business and chief executive office, and the offices where it
keeps its records concerning the Pool Receivables, all related
Accounts and Contracts and all other agreements related to such
Pool Receivables (and all original documents relating thereto),
at the address(es) referred to in Section 6.01(n) or 6.02(k),
as the case may be, or, upon 30 days' prior written notice to
24
<PAGE>
the Administrator, at such other locations in jurisdictions
where all action required by Section 8.05 shall have been taken
and completed.
(g) Credit and Collection Policies. Comply in all
material respects with its Credit and Collection Policy in
regard to each Pool Receivable and the related Contract.
(h) Collections. Instruct all Obligors to cause all
Collections of Pool Receivables to be deposited directly with a
Lock-Box Bank. From and after the occurrence of a Liquidation
Event, deposit all Collections received in Strawbridge's stores
or otherwise received by Seller or Strawbridge into an account
at a Lock-Box Bank within one Business Day of receipt.
SECTION 7.02. Reporting Requirements of Seller. From the date
hereof until the Final Payout Date, Seller shall, unless the
Administrator shall otherwise consent in writing, furnish to the
Administrator:
(a) Annual Financial Statements. As soon as available
and in any event within 90 days after the end of each fiscal
year of Seller, copies of the financial statements of Seller
prepared in conformity with generally accepted accounting
principles and duly certified by independent certified public
accountants of recognized standing selected by Seller;
(b) ERISA. Promptly after the filing or receiving
thereof, copies of all reports and notices with respect to any
Reportable Event as defined in Article IV of ERISA which Seller
files under ERISA with the Internal Revenue Service, the
Pension Benefit Guaranty Corporation or the U.S. Department of
Labor or which Seller receives from the Pension Benefit
Guaranty Corporation;
(c) Liquidation Events. As soon as possible and in any
event within three Business Days after the occurrence of each
Liquidation Event and each Unmatured Liquidation Event, a
written statement of the Chairman, President, Treasurer or any
Vice President of Seller setting forth details of such event
and the action that Seller proposes to take with respect
thereto;
(d) Litigation. As soon as possible and in any event
within three Business Days of Seller's knowledge thereof,
notice of (i) any litigation, investigation or proceeding to
which Seller is a party or which could have a Material Adverse
Effect and (ii) any material adverse development in previously
disclosed litigation; and
25
<PAGE>
(e) Other. Promptly, from time to time, such other
information, documents, records or reports respecting the
Receivables or the condition or operations, financial or
otherwise, of Seller as the Administrator may from time to time
reasonably request in order to protect the interests of the
Administrator or Purchaser under this Agreement.
SECTION 7.03. Reporting Requirements of Strawbridge. From the
date hereof until the Final Payout Date, Strawbridge shall, unless
the Administrator shall otherwise consent in writing, furnish to the
Administrator:
(a) Quarterly Financial Statements. As soon as available
and in any event within 45 days after the end of each of the
first three quarters of each fiscal year of Strawbridge, copies
of the financial statements of Strawbridge and its Subsidiaries
prepared on a consolidated basis in conformity with generally
accepted accounting principles, duly certified by the chief
financial officer of Strawbridge;
(b) Annual Financial Statements. As soon as available
and in any event within 90 days after the end of each fiscal
year of Strawbridge, copies of the financial statements of
Strawbridge and its Subsidiaries prepared on a consolidated
basis in conformity with generally accepted accounting
principles and duly certified by independent certified public
accountants of recognized standing selected by Strawbridge;
(c) Reports to Holders and Exchanges. In addition to the
reports required by subsections (a) and (b) next above,
promptly upon the Administrator's request, copies of any
reports which Strawbridge sends to any of its securityholders,
and any reports or registration statements that Strawbridge
files with the Securities and Exchange Commission or any
national securities exchange other than registration statements
relating to employee benefit plans and to registrations of
securities for selling securities;
(d) ERISA. Promptly after the filing or receiving
thereof, copies of all reports and notices with respect to any
Reportable Event as defined in Article IV of ERISA which
Strawbridge files under ERISA with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or which Strawbridge receives from the
Pension Benefit Guaranty Corporation;
(e) Liquidation Events. As soon as possible and in any
event within three Business Days after the occurrence of each
Liquidation Event and each Unmatured Liquidation Event, a
written statement of the Chairman, President, Treasurer or any
Vice President of Strawbridge setting forth details of such
26
<PAGE>
event and the action that Strawbridge proposes to take with
respect thereto;
(f) Litigation. As soon as possible and in any event
within three Business Days of Strawbridge's knowledge thereof,
notice of (i) any litigation, investigation or proceeding which
could have a Material Adverse Effect and (ii) any material
adverse development in previously disclosed litigation;
(g) Change in Credit and Collection Policy. Prior to its
effective date, notice of (i) any material change in the
character of Strawbridge's business or (ii) any change in the
Credit and Collection Policy; and
(h) Other. Promptly, from time to time, such other
information, documents, records or reports respecting the
Receivables or the condition or operations, financial or
otherwise, of Strawbridge as the Administrator may from time to
time reasonably request in order to protect the interests of
the Administrator or Purchaser under this Agreement.
SECTION 7.04. Negative Covenants of Seller. From the date
hereof until the Final Payout Date, Seller will not, without the
prior written consent of the Administrator:
(a) Sales, Liens, Etc. Except as otherwise provided
herein or in the Purchase Agreement, sell, assign (by operation
of law or otherwise) or otherwise dispose of, or create or
suffer to exist any Lien upon or with respect to, any Pool
Receivable or related Account or Contract or Related Security,
or any interest therein, or any lock-box account to which any
Collections of any Pool Receivable are sent, or any right to
receive income or proceeds from or in respect of any of the
foregoing.
(b) Extension or Amendment of Pool Receivables. Except
as otherwise permitted in Section 8.02 or as ordered by a court
of competent jurisdiction, extend, amend or otherwise modify
the terms of any Pool Receivable, or amend, modify or waive any
term or condition of any Contract related thereto.
(c) Change in Business or Credit and Collection Policy.
Make any change in the character of its business or in the
Credit and Collection Policy, which change would, in either
case, impair the collectability of any Pool Receivable or
otherwise adversely affect the interests or remedies of
Purchaser under this Agreement or any other Transaction
Document.
(d) Change in Payment Instructions to Obligors. Add or
terminate any bank as a Lock-Box Bank from those listed in
27
<PAGE>
Schedule 6.01(o) or make any change in its instructions to
Obligors regarding payments to be made to Seller or Servicer or
payments to be made to any Lock-Box Bank, unless the
Administrator shall have received notice of such addition,
termination or change and duly executed copies of Lock-Box
Agreements with each new Lock-Box Bank and shall have approved
the identity of such Lock-Box Bank.
(e) Mergers, Sales, Etc. Be a party to any merger or
consolidation, or sell, transfer, convey or lease all or
substantially all of its assets, or sell or assign with or
without recourse any Pool Receivables or any interest therein
(other than pursuant hereto).
(f) Deposits to Special Accounts. Deposit or otherwise
credit, or cause or permit to be so deposited or credited, to
any Lock-Box Account cash or cash proceeds other than
Collections.
(g) Amend Purchase Agreement or Certificate of
Incorporation. Amend, modify or waive any provisions of the
Purchase Agreement or its certificate of incorporation.
(h) Restricted Payments. Make any payment, dividend,
loan or other distribution of any kind to Strawbridge or any of
its affiliates, purchase or redeem any shares of capital stock
of Seller, or set aside any funds for any such purpose, or make
any payment in cash with respect to the company Note (as
defined in the Purchase Agreement) or the purchase of
Receivables under the Purchase Agreement, unless after giving
effect thereto, Seller's tangible net worth is at least
$15,000,000.
(i) Incurrence of Indebtedness. Incur or permit to exist
any indebtedness or liability for borrowed money or for the
different purchase price of any property or services, except
(i) indebtedness not exceeding $4,995 at any one time
outstanding and (ii) Seller's obligations hereunder and under
the other Transaction Documents.
SECTION 7.05. Negative Covenants of Strawbridge. From the
date hereof until the Final Payout Date, Strawbridge will not,
without the prior written consent of the Administrator:
(a) Extension or Amendment of Pool Receivables. Except
as otherwise permitted in Section 8.02 or as ordered by a court
of competent jurisdiction, extend, amend or otherwise modify
the terms of any Pool Receivable, or amend, modify or waive any
term or condition of any Contract related thereto.
28
<PAGE>
(b) Change in Business or Credit and Collection Policy.
Make any change in the character of its business or in the
Credit and Collection Policy, which change would, in either
case, impair the collectability of any Pool Receivable or
otherwise adversely affect the interests or remedies of
Purchaser under this Agreement or any other Transaction
Document.
(c) Change in Payment Instructions to Obligors. Add or
terminate any bank as a Lock-Box Bank from those listed in
Schedule 6.01(o) or make any change in its instructions to
Obligors regarding payments to be made to Seller or Servicer or
payments to be made to any Lock-Box Bank, unless the
Administrator shall have received notice of such addition,
termination or change and duly executed copies of Lock-Box
Agreements with each new Lock-Box Bank and shall have approved
the identity of such Lock-Box Bank.
(d) Mergers, Sales, Etc. Be a party to any merger or
consolidation, or, except in the ordinary course of its
business, sell, transfer, convey or lease all or substantially
all of its assets, or sell or assign with or without recourse
any Pool Receivables or any interest therein (other than
pursuant hereto), or permit any Subsidiary to be a party to any
merger or consolidation, except for any such merger or
consolidation, sale, transfer, conveyance, lease or assignment
of or by any wholly-owned Subsidiary (other than Seller) into
Strawbridge or into, with or to any other wholly-owned
Subsidiary.
(e) Deposits to Special Accounts. Deposit or otherwise
credit, or cause or permit to be so deposited or credited, to
any Lock-Box Account cash or cash proceeds other than
Collections.
SECTION 7.06 Separate Corporate Existence. Each of
Strawbridge and Seller hereby acknowledges that Purchaser, the
Liquidity Banks and the Administrator, are entering into the
transactions contemplated by this Agreement and the other
Transaction Documents in reliance upon Seller's identity as a legal
entity separate from Strawbridge. Therefore, from and after the
date hereof, Seller shall take all steps specifically required by
this Agreement or by Purchaser or the Administrator to continue
Seller's identity as a separate legal entity and to make it apparent
to third Persons that Seller is an entity with assets and
liabilities distinct from those of Servicer, Strawbridge and any
other Person, and is not a division of Servicer, Strawbridge or any
other Person. Without limiting the generality of the foregoing and
in addition to and consistent with the other covenants set forth
herein, Seller and Strawbridge shall take such actions as shall be
required in order that:
29
<PAGE>
(a) Seller will be a limited purpose corporation whose
primary activities are restricted in its certificate of
incorporation to acquiring receivables from affiliates of the
corporation, selling, pledging or otherwise transferring
undivided fractional ownership interests in such receivables,
entering into agreements relating to the acquisition and
servicing of such receivables, selling, pledging or
transferring such ownership interests, organizing and creating
one or more trusts to engage in all of the foregoing
activities, investing in and selling beneficial interests in
such trusts and engaging in any activity and exercising any
powers permitted to corporations under the laws of the State of
Delaware which are incidental to and necessary or convenient to
accomplishing the foregoing;
(b) Not less than one member of Seller's Board of
Directors (the "Independent Director") shall be an individual
who (i) is in fact independent, (ii) does not have any direct
financial interest or any material indirect financial interest
in the corporation or in any Affiliate of the corporation,
(iii) is not connected with the corporation or any Affiliate of
the corporation as an officer, employee, promoter, underwriter,
trustee, partner or person performing similar functions and
(iv) is not, and has not been for a period of at least five (5)
years, a director of any Affiliate of the corporation. The
certificate of incorporation of Seller shall provide that (i)
Seller's Board of Directors shall not approve, or take any
other action to cause the filing of, a voluntary bankruptcy
petition with respect to Seller unless the Independent Director
shall approve the taking of such action in writing prior to the
taking of such action and (ii) such provision cannot be amended
without the prior written consent of the Independent Director;
(c) The Independent Director shall not at any time serve
as a trustee in bankruptcy for Seller, Strawbridge or any
Affiliate thereof;
(d) Any employee, consultant or agent of Seller will be
compensated from Seller's funds for services provided to
Seller. Seller will engage no agents other than its attorneys,
auditors and other professionals, and a servicer for the
Receivables Pool, which servicer will be fully compensated for
its services to Seller by payment of the Servicer's Fee;
(e) Seller will contract with Servicer to perform for
Seller all operations required on a daily basis to service the
Receivables Pool. Seller will pay Servicer the Servicer's Fee
pursuant hereto. Seller will not incur any material indirect
or overhead expenses for items shared between Seller and
Strawbridge (or any other Affiliate thereof) which are not
reflected in the Servicer's Fee. To the extent, if any, that
30
<PAGE>
Seller and Strawbridge (or any other Affiliate thereof) share
items of expenses not reflected in the Servicer's Fee, such as
legal, auditing and other professional services, such expenses
will be allocated to the extent practical on the basis of
actual use or the value of services rendered, and otherwise on
a basis reasonably related to the actual use or the value of
services rendered, it being understood that Strawbridge shall
pay all expenses relating to the preparation, negotiation,
execution and delivery of the Transaction Documents, including,
without limitation, legal, agency and other fees;
(f) Seller's operating expenses, including, without
limitation, salaries of its employees and fair and reasonable
allocations of overhead, if any, for shared office space, will
not be paid by Strawbridge or any other Affiliate thereof;
(g) Seller shall have stationery and other business forms
and a mailing address and a telephone number separate from that
of Strawbridge or any other Affiliate;
(h) Seller's books and records will be maintained
separately from those of Strawbridge and any other Affiliate
thereof;
(i) All financial statements of Strawbridge or any
Affiliate thereof that are consolidated to include Seller will
contain detailed notes clearly stating that (A) all of Seller's
assets are owned by Seller, and (B) Seller is a separate
corporate entity with creditors who have received security
interests in Seller's assets;
(j) Seller's assets will be maintained in a manner that
facilitates their identification and segregation from those of
Strawbridge or any Affiliate thereof;
(k) Seller will strictly observe corporate formalities in
its dealings with Strawbridge or any Affiliate thereof, and
funds or other assets of Seller will not be commingled with
those of Strawbridge or any Affiliate thereof. Seller shall
not maintain joint bank accounts or other depository accounts
to which Strawbridge or any Affiliate thereof (other than
Strawbridge in its capacity as Servicer) has independent
access;
(l) Any business transactions between Seller and
Strawbridge (or any Affiliate thereof) shall be entered into
upon terms and conditions that are substantially similar to
those that would be available on an arm's-length basis with
third parties other than Strawbridge (or any Affiliate
thereof). Any Person that renders or otherwise furnishes
services to Seller will be compensated by Seller at market
31
<PAGE>
rates for such services it renders or otherwise furnishes to
Seller. Except as contemplated in the Transaction Documents
neither Seller nor Strawbridge will be or will hold itself out
to be responsible for the debts of the other or the decisions
or actions respecting the daily business and affairs of the
other;
(m) Any dividends declared by Seller on any shares of its
capital stock shall be declared only in accordance with all
applicable laws and the provisions of this Agreement;
(n) Seller and Strawbridge shall comply with all
provisions of their respective certificates of incorporation
and by-laws;
(o) Seller shall not make any loans or advances to any
third party (other than those permitted pursuant to
Section 7.04(h));
(p) Except as set forth in this Agreement, Seller shall
not pledge its assets for the benefit of any Person, and
Strawbridge shall not pledge any of its assets for the benefit
of Seller;
(q) Seller shall conduct its business in its own name and
shall be, and at all times shall hold itself out to the public
as, a legal entity separate and distinct from all other
Persons; and
(r) Seller shall file its own tax returns or, if it is a
member of a consolidated group, will join in the consolidated
return of such group as a separate member thereof.
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01. Designation of Servicer.
(a) Seller as Initial Servicer. The servicing, administering
and collection of the Pool Receivables shall be conducted by the
Person designated as Servicer hereunder ("Servicer") from time to
time in accordance with this Section 8.01. Until the Administrator
gives to Strawbridge a Successor Notice (as defined in Section
8.01(b)), Strawbridge is hereby designated as, and hereby agrees to
perform the duties and obligations of, Servicer pursuant to the
terms hereof.
(b) Successor Notice. Upon Strawbridge's receipt of a notice
from the Administrator of the Administrator's designation of a new
32
<PAGE>
Servicer (a "Successor Notice"), Strawbridge agrees that it will
terminate its activities as Servicer hereunder in a manner that the
Administrator reasonably believes will facilitate the transition of
the performance of such activities to the new Servicer, and the
Administrator (or its designee) shall assume each and all of
Strawbridge's obligations to service and administer such
Receivables, on the terms and subject to the conditions herein set
forth, and Strawbridge shall use its best efforts to assist the
Administrator (or its designee) in assuming such obligations. The
Administrator agrees not to give Strawbridge a Successor Notice
until after the occurrence of any Liquidation Event, in which case
such Successor Notice may be given at any time in the
Administrator's discretion. If Strawbridge disputes the occurrence
of a Liquidation Event, Strawbridge may take appropriate action to
resolve such dispute; provided that Strawbridge must terminate its
activities hereunder as Servicer and allow the newly designated
Servicer to perform such activities on the date provided by the
Administrator as described above, notwithstanding the commencement
or continuation of any proceeding to resolve the aforementioned
dispute; provided, further that in the event that such dispute is
resolved in favor of Strawbridge and no other Liquidation Event has
occurred and is continuing, at Strawbridge's written request,
Strawbridge shall be reinstated as Servicer.
(c) Subcontracts. Servicer may, with the prior consent of the
Administrator, subcontract with any other person for servicing,
administering or collecting the Pool Receivables, provided that (i)
Servicer shall remain liable for the performance of the duties and
obligations of Servicer pursuant to the terms hereof and (ii) such
subcontract provides for termination upon the occurrence of a
Liquidation Event.
(d) Servicer's Fee. Seller shall be responsible for the
payment of (and, if paid by Purchaser or Administrator, shall on
demand reimburse Purchaser or the Administrator for) Seller's
Portion of the Servicing Fee. "Seller's Portion of the Servicing
Fee" for any Settlement Period means an amount equal to (i) (w) the
Servicer's Fee Rate times (x) the aggregate Unpaid Balance of the
Pool Receivables as of the first day of such Settlement Period times
(y) 1/360 times (z) the number of days in such Settlement Period
minus (ii) the Servicer's Fee for such Settlement Period.
SECTION 8.02. Duties of Servicer.
(a) Appointment; Duties in General. Each of Seller, Purchaser
and the Administrator hereby appoints as its agent Servicer, as from
time to time designated pursuant to Section 8.01, to enforce its
rights and interests in and under the Pool Receivables, the Related
Security and the related Contracts. Servicer shall take or cause to
be taken all such actions as may be necessary or advisable to
collect each Pool Receivable from time to time, all in accordance
33
<PAGE>
with applicable laws, rules and regulations, with reasonable care
and diligence, and in accordance with the Credit and Collection
Policy.
(b) Allocation of Collections; Segregation. Servicer shall
set aside for the account of Seller and Purchaser their respective
allocable shares of the Collections of Pool Receivables in
accordance with Section 1.03 but shall not be required (unless
otherwise requested by the Administrator) to segregate the funds
constituting such portions of such Collections prior to the
remittance thereof in accordance with said Section. If instructed
by the Administrator, Servicer shall segregate and deposit with a
bank designated by the Administrator, Purchaser's Share of
Collections of Pool Receivables, set aside for Purchaser on the
first Business Day following receipt by Servicer of such Collections
in immediately available funds.
(c) Modification of Receivables. So long as no Liquidation
Event or Unmatured Liquidation Event shall have occurred and be
continuing, Strawbridge, while it is Servicer, may, in accordance
with the Credit and Collection Policy, (i) extend the maturity or
adjust the Unpaid Balance of, or defer payment of, or otherwise
modify the terms of any Receivable as Strawbridge may determine to
be appropriate to maximize Collections thereof; provided that, after
giving effect to such extension of maturity or such adjustment, the
Asset Interest, expressed as a percentage of Net Pool Balance, will
not exceed the Allocation Limit, and the aggregate Unpaid Balance of
the Receivables so extended, adjusted, deferred or modified in any
monthly period does not exceed 10% of the Net Pool Balance for such
period, and (ii) adjust the Unpaid Balance of any Receivable to
reflect the reductions or cancellations described in the first
sentence of Section 3.02(a).
(d) Documents and Records. Seller shall deliver to Servicer,
and Servicer shall hold in trust for Seller and Purchaser in
accordance with their respective interests, all documents,
instruments and records (including, without limitation, computer
tapes or disks) that evidence or relate to Pool Receivables.
(e) Certain Duties to Seller. Servicer shall, as soon as
practicable following receipt, turn over to Seller (i) that portion
of Collections of Pool Receivables representing Seller's undivided
interest therein, and (ii) the Collections of any Receivable which
is not a Pool Receivable. Servicer, if other than Strawbridge,
shall, as soon as practicable upon demand, deliver to Seller all
documents, instruments and records in its possession that evidence
or relate to Receivables of Seller other than Pool Receivables, and
copies of documents, instruments and records in its possession that
evidence or relate to Pool Receivables.
34
<PAGE>
(f) Termination. Servicer's authorization under this
Agreement shall terminate upon the Final Payout Date.
(g) Power of Attorney. Seller hereby grants to Servicer an
irrevocable power of attorney, with full power of substitution,
coupled with an interest, to take in the name of Seller all steps
which are necessary or advisable to endorse, negotiate or otherwise
realize on any writing or other right of any kind held or
transmitted by Seller or transmitted or received by Purchaser
(whether or not from Seller) in connection with any Receivable.
SECTION 8.03. Rights of the Administrator.
(a) Notice to Obligors. At any time the Administrator may
notify the Obligors of Pool Receivables, or any of them, of the
ownership of Asset Interests by Purchaser.
(b) Notice to Lock-Box Banks. At any time following the
earliest to occur of (i) the occurrence of a Liquidation Event, (ii)
the commencement of the Liquidation Period, and (iii) the warranty
in Section 6.01(i) shall no longer be true, the Administrator is
hereby authorized to give notice to the Lock-Box Banks, as provided
in the Lock-Box Agreements, of the transfer to the Administrator of
dominion and control over the lock-boxes and related accounts to
which the Obligors of Pool Receivables make payments. Seller hereby
transfers to the Administrator, effective when the Administrator
shall give notice to the Lock-Box Banks as provided in the Lock-Box
Agreements, the exclusive dominion and control over such lock-boxes
and accounts, and shall take any further action that the
Administrator may reasonably request to assist with such transfer.
(c) Rights on Liquidation Event. At any time following the
designation of a Servicer other than Strawbridge pursuant to Section
8.01:
(i) The Administrator may direct the Obligors of Pool
Receivables, or any of them, to pay all amounts payable under
any Pool Receivable directly to the Administrator.
(ii) Strawbridge shall, at the Administrator's request
and at Strawbridge's expense, give notice of the ownership of
the Pool Receivables by Purchaser to each said Obligor and
direct that payments be made directly to the Administrator.
(iii) Strawbridge shall, at the Administrator's request,
(A) assemble all of the documents, instruments and other
records (including, without limitation, computer programs,
tapes and disks) which evidence the Pool Receivables, and the
related Accounts and Contracts and Related Security, or which
are otherwise reasonably necessary or desirable to service such
Pool Receivables, and make the same available to the
35
<PAGE>
Administrator at a place selected by the Administrator, and (B)
segregate all cash, checks and other instruments received by it
from time to time constituting Collections of Pool Receivables
in a manner reasonably acceptable to the Administrator and
promptly upon receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of
transfer, to the Administrator.
(iv) Each of Strawbridge, Seller and Purchaser hereby
authorizes the Administrator, and grants to the Administrator
an irrevocable power of attorney, to take any and all steps in
Seller's or Strawbridge name and on behalf of Strawbridge,
Seller and Purchaser which are reasonably necessary or
desirable, in the determination of the Administrator, to
collect all amounts due under any and all Pool Receivables,
including, without limitation, endorsing Seller's or
Strawbridge's name on checks and other instruments representing
Collections and enforcing such Pool Receivables and the related
Contracts; provided that the Administrator shall not exercise
its rights under such power of attorney unless a Liquidation
Event shall have occurred and be continuing.
SECTION 8.04. Responsibilities of Servicer. Anything herein
to the contrary notwithstanding:
(a) Contracts. Servicer shall perform all of its obligations
under the Contracts related to the Pool Receivables and under other
agreements related thereto to the same extent as if the Asset
Interest had not been sold hereunder, and the exercise by the
Administrator or its designee of its rights hereunder shall not
relieve Servicer from such obligations.
(b) Limitation of Liability. The Administrator and Purchaser
shall not have any obligation or liability with respect to any Pool
Receivables, Contracts or Accounts related thereto or any other
related agreements, nor shall any of them be obligated to perform
any of the obligations of Seller or Servicer thereunder.
SECTION 8.05. Further Action Evidencing Purchases and
Reinvestments.
(a) Further Assurances. Seller agrees to mark its master data
processing records evidencing such Pool Receivables and the related
Contracts with a legend, acceptable to the Administrator, evidencing
that the Asset Interest has been sold in accordance with this
Agreement. Seller agrees that from time to time, at its expense, it
will promptly execute and deliver all further instruments and
documents, and take all further action that the Administrator or its
designee may reasonably request in order to perfect, protect or more
fully evidence the Purchases hereunder and the resulting Asset
Interest, or to enable Purchaser or the Administrator or its
36
<PAGE>
designee to exercise or enforce any of their respective rights
hereunder or under any Transaction Document. Without limiting the
generality of the foregoing, Seller will upon the request of the
Administrator or its designee execute and file such financing or
continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be necessary
or appropriate.
(b) Additional Financing Statements; Performance by
Administrator. Seller hereby authorizes the Administrator or its
designee to file one or more financing or continuation statements,
and amendments thereto and assignments thereof, relative to all or
any of the Pool Assets now existing or hereafter arising in the name
of Seller. If Seller fails to perform any of its agreements or
obligations under this Agreement, the Administrator or its designee
may (but shall not be required to) itself perform, or cause
performance of, such agreement or obligation, and the reasonable
expenses of the Administrator or its designee incurred in connection
therewith shall be payable by Seller as provided in Section 14.05.
(c) Continuation Statements; Opinion. Without limiting the
generality of subsection (a), Seller shall, not earlier than six (6)
months and not later than three (3) months prior to the fifth
anniversary of the date of filing of the financing statement
referred to in Section 5.01(e) or any other financing statement
filed pursuant to this Agreement or in connection with any Purchase
hereunder, unless the Final Payout Date shall have occurred:
(i) execute and deliver and file or cause to be filed an
appropriate continuation statement with respect to such
financing statement; and
(ii) deliver or cause to be delivered to the
Administrator an opinion of the counsel for Seller referred to
in Section 5.01(h) (or other counsel for Seller reasonably
satisfactory to the Administrator), in form and substance
reasonably satisfactory to the Administrator, confirming and
updating the opinion delivered pursuant to Section 5.01(h)-1 to
the effect that Purchaser's Total Interest hereunder continues
to be a valid and perfected ownership or security interest,
subject to no other Liens of record except as provided herein
or otherwise permitted hereunder.
SECTION 8.06. Application of Collections. Any payment by an
Obligor in respect of any indebtedness owed by it to Seller or
Strawbridge shall, except as otherwise specified by such Obligor, as
required by the underlying Contract or law or unless the
Administrator instructs otherwise, be applied, first, as a
Collection of any Pool Receivable or Receivables then outstanding of
such Obligor in the order of the age of such Pool Receivables,
37
<PAGE>
starting with the oldest of such Pool Receivable and, second, to any
other indebtedness of such Obligor.
ARTICLE IX
SECURITY INTEREST
SECTION 9.01. Grant of Security Interest. To secure all
obligations of Seller arising in connection with this Agreement and
each other Transaction Document to which it is a party, whether now
or hereafter existing, due or to become due, direct or indirect, or
absolute or contingent, including, without limitation, all
Indemnified Amounts, payments on account of Collections and fees,
Seller hereby assigns and grants to Purchaser, for the benefit of
the Secured Parties, a security interest in all of Seller's right,
title and interest (including specifically any undivided interest
retained by Seller hereunder) now or hereafter existing in, to and
under all the Pool Assets and proceeds thereof.
SECTION 9.02. Further Assurances. The provisions of Section
8.05 shall apply to the security interest granted under Section 9.01
as well as to the Purchases, Reinvestments and all the Asset
Interests hereunder.
SECTION 9.03. Remedies. Upon the occurrence of a Liquidation
Event, Purchaser shall have, with respect to the collateral granted
pursuant to Section 9.01, and in addition to all other rights and
remedies available to Purchaser or the Administrator under this
Agreement or other applicable law, all the rights and remedies of a
secured party upon default under the UCC.
ARTICLE X
LIQUIDATION EVENTS
SECTION 10.01. Liquidation Events. The following events
shall be "Liquidation Events" hereunder:
(a) (i) Servicer (if Strawbridge or its Affiliate is
Servicer) shall fail to deliver to Administrator an Information
Package for any Settlement Period on or before 12:00, noon
(Pittsburgh time) of the related Settlement Date or (ii)
Servicer (if Strawbridge or its Affiliate is Servicer) shall
fail to perform or observe in any material respect any other
term, covenant or agreement that is an obligation of Servicer
hereunder (other than as referred to in clause (iii) next
following) and such failure shall remain unremedied for five
Business Days after (1) written notice thereof shall have been
38
<PAGE>
given by the Administrator to Strawbridge or (2) Strawbridge
has actual knowledge thereof or (iii) Servicer (if Strawbridge
or its Affiliate is Servicer) or Seller shall fail to make any
payment or deposit to be made by it hereunder when due and such
failure shall remain unremedied for more than one Business Day;
or
(b) Any representation or warranty made or deemed to be
made by Seller or Strawbridge (or any of their respective
officers) under or in connection with this Agreement or any
Information Package or other information or report delivered
pursuant hereto shall prove to have been false or incorrect in
any material respect when made; provided, that with respect to
the breach of the representations or warranties set forth in
Section 6.01(l) or (p), compliance by Seller with the
provisions of Section 3.02 in respect thereof shall be deemed
to cure such breach; or
(c) Seller or Strawbridge shall fail to perform or
observe in any material respect any other term, covenant or
agreement contained in this Agreement or any of the other
Transaction Documents to which it is a party on its part to be
performed or observed and any such failure shall remain
unremedied for thirty days after (i) written notice thereof
shall have been given by the Administrator to Seller or
Strawbridge, as the case may be, or (ii) Seller or Strawbridge,
as the case may be, has actual knowledge thereof; or
(d) A default shall have occurred and be continuing under
any instrument or agreement evidencing, securing or providing
for the issuance of indebtedness for borrowed money in excess
of $10,000,000 of, or guaranteed by, Strawbridge or any
Affiliate thereof, which default if unremedied, uncured, or
unwaived (with or without the passage of time or the giving of
notice or both) would permit acceleration of the maturity of
such indebtedness and such default shall have continued
unremedied, uncured or unwaived for a period long enough to
permit such acceleration and any notice of default required to
permit acceleration shall have been given; or any default under
any agreement or instrument relating to the purchase of
receivables of Strawbridge, or any other event, shall occur and
shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of
such default is to terminate, or permit the termination of, the
commitment of any party to such agreement or instrument to
purchase receivables or the right of Strawbridge to reinvest in
receivables the principal amount paid by any party to such
agreement or instrument for interest in receivables; or
39
<PAGE>
(e) An Event of Bankruptcy shall have occurred and remain
continuing with respect to Seller, Strawbridge or any Affiliate
thereof; or
(f) (i) Any litigation (including, without limitation,
derivative actions), arbitration proceedings or governmental
proceedings not disclosed in writing by Seller or Strawbridge
to the Administrator and Purchaser prior to the date of
execution and delivery of this Agreement is pending against
Seller, Strawbridge or any Affiliate thereof, or (ii) any
material development not so disclosed has occurred in any
litigation (including, without limitation, derivative actions),
arbitration proceedings or governmental proceedings so
disclosed, which, in the case of clause (i) or (ii), in the
reasonable opinion of the Administrator, has a reasonable
likelihood of having a Material Adverse Effect; or
(g) On any Settlement Date, after giving effect to the
payments made under Section 3.01(c), the Asset Interest exceeds
the Allocation Limit or the Purchaser's Total Investment
exceeds the Purchase Limit; or
(h) There shall exist any event or occurrence (other than
general economic conditions) that is likely to cause a Material
Adverse Effect; or
(i) There shall have occurred any event which materially
adversely impairs the ability of Strawbridge to originate
Receivables of a credit quality which are at least of the
credit quality of the Receivables included in the initial
Purchase; or
(j) The warranty in Section 6.01(i)(y) shall not be true
at any time; or
(k) Seller or Servicer (if Servicer is Strawbridge or its
Affiliate) is subject to a Change-in-Control; or
(l) The Internal Revenue Service shall file notice of a
lien pursuant to Section 6323 of the Internal Revenue Code with
regard to any of the assets of Seller or Strawbridge and such
lien shall not have been released within 5 Business Days, or
the Pension Benefit Guaranty Corporation shall, or shall
indicate its intention to, file notice of a lien pursuant to
Section 4068 of ERISA with regard to any of the assets of
Seller or Strawbridge or any of its Affiliates; or
(m) The average of the Default Ratios for any three
successive Cut-Off Dates exceeds 2%; or
40
<PAGE>
(n) The average of the Delinquency Ratios for any three
successive Cut-Off Dates exceeds 16%; or
(o) The average of the Dilution Ratios for any three
successive Cut-Off Dates exceeds 5%; or
(p) The average of the Payment Rates for any three
successive Cut-Off Dates is less than 10%; or
(q) The average of the Net Yield for any three
consecutive Settlement Periods is less then -2.0%; or
(r) The average of the Charge-Off Ratios for any three
successive Cut-Off Dates exceeds (i) 8.75% for the period
ending on November 25, 1995, (ii) 8.50% for any such period
ending on or before March 30, 1996 and (iii) 6.5% for any
period thereafter.
SECTION 10.02. Remedies.
(a) Optional Liquidation. Upon the occurrence of a
Liquidation Event (other than a Liquidation Event described in
subsection (e) of Section 10.01), the Administrator shall, at the
request, or may with the consent, of Purchaser, by notice to Seller
declare the Purchase Termination Date to have occurred and the
Liquidation Period to have commenced.
(b) Automatic Liquidation. Upon the occurrence of a
Liquidation Event described in subsection (e) of Section 10.01, the
Purchase Termination Date shall occur and the Liquidation Period
shall commence automatically.
(c) Additional Remedies. Upon any Purchase Termination Date
pursuant to this Section 10.02, no Purchases or Reinvestments
thereafter will be made, and the Administrator and Purchaser shall
have, in addition to all other rights and remedies under this
Agreement or otherwise, all other rights and remedies provided under
the UCC of each applicable jurisdiction and other applicable laws,
which rights shall be cumulative.
ARTICLE XI
THE ADMINISTRATOR
SECTION 11.01. Authorization and Action. Purchaser has
appointed and authorized the Administrator (or its designees) to
take such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to the Administrator by the
terms hereof, together with such powers as are reasonably incidental
thereto.
41
<PAGE>
SECTION 11.02. Administrator's Reliance, Etc. The
Administrator, and its directors, officers, agents or employees
shall not be liable for any action taken or omitted to be taken by
it or them under or in connection with the Transaction Documents
(including, without limitation, the servicing, administering or
collecting of Pool Receivables as Servicer pursuant to Section
8.01), except for its or their own gross negligence or willful
misconduct. Without limiting the generality of the foregoing, the
Administrator: (a) may consult with legal counsel (including counsel
for Seller or Strawbridge), independent certified public accountants
and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts;
(b) makes no warranty or representation to Purchaser or any other
holder of any interest in Pool Receivables and shall not be
responsible to Purchaser or any such other holder for any
statements, warranties or representations made in or in connection
with any Transaction Document; (c) shall not have any duty to
ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of any Transaction Document on
the part of Seller or Strawbridge or to inspect the property
(including the books and records) of Seller or Strawbridge; (d)
shall not be responsible to Purchaser or any other holder of any
interest in Pool Receivables for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of any
Transaction Document; and (e) shall incur no liability under or in
respect of this Agreement by acting upon any notice (including
notice by telephone), consent, certificate or other instrument or
writing (which may be by facsimile or telex) reasonably believed by
it to be genuine and signed or sent by the proper party or parties.
SECTION 11.03. PNC Bank and Affiliates. PNC Bank and any of
its Affiliates may generally engage in any kind of business with
Strawbridge, Seller or any Obligor, any of their respective
Affiliates and any Person who may do business with or own securities
of Strawbridge, Seller or any Obligor or any of their respective
Affiliates, all as if PNC Bank were not the Administrator, and
without any duty to account therefor to Purchaser or any other
holder of an interest in Pool Receivables.
ARTICLE XII
ASSIGNMENT OF PURCHASER'S INTEREST
SECTION 12.01. Restrictions on Assignments.
(a) Neither Seller nor Strawbridge may assign its rights, or
delegate its duties hereunder or any interest herein without the
prior written consent of the Administrator. Purchaser may not
assign its rights hereunder (although it may delegate its duties
42
<PAGE>
hereunder as expressly indicated herein) or the Asset Interest (or
any portion thereof) to any Person without the prior written consent
of Seller, which shall not be unreasonably withheld (it being
recognized and understood by all parties hereto that all parties
hereto shall deem it reasonable for Seller to withhold such consent
if any such proposed assignment would, in the reasonable
determination of Seller, cause Seller to be required to pay to any
Affected Party any of the amounts referred to in Section 4.02);
provided, however, that
(i) Purchaser may assign all of its rights and interests
in the Transaction Documents, together with all its interest in
the Asset Interest, to PNC Bank, or both, or any Affiliate of
either of them, or to any "bankruptcy remote" special purpose
entity, the business of which is administered by PNC Bank; and
(ii) Purchaser may assign and grant a security interest
in all of its rights in the Transaction Documents, together
with all of its rights and interest in the Asset Interest, to
the Liquidity Agent, to secure Purchaser's obligations under or
in connection with the Commercial Paper Notes, the Liquidity
Agreement and any other Program Support Agreement, and certain
other obligations of Purchaser incurred in connection with the
funding of the Purchases and Reinvestments hereunder, which
assignment and grant of a security interest (and any subsequent
assignment by the Liquidity Agent) shall not be considered an
"assignment" for purposes of this Section 12.01 or, prior to
the enforcement of such security interest, for purposes of any
other provision of this Agreement.
The parties hereto anticipate that Market Street Capital Corp.
will assign all of its rights and obligations under this Agreement
and the other Transaction Documents to Market Street Funding
Corporation, a Delaware corporation ("Funding"). Seller and
Strawbridge hereby consent to such assignment, and agree that upon
receipt by Strawbridge of notice of such assignment by PNC Bank, (i)
all references herein and in the other Transaction Documents to
"Purchaser" shall be deemed to refer to Funding and (ii) all
references herein and in the other Transaction Documents to the
"Administrator" shall refer to PNC Bank, as administrator for
Funding. Seller and Strawbridge hereby agree to execute and deliver
such documents and instruments, including UCC financing statements,
as the Administrator may reasonably request to evidence such
assignment.
(b) Seller agrees to advise the Administrator within five
Business Days after notice to Seller of any proposed assignment by
Purchaser of the Asset Interest (or any portion thereof), not
otherwise permitted under subsection (a), of Seller's consent or
non-consent to such assignment and, if it does not consent, the
reasons therefor. If Seller does not consent to such assignment,
43
<PAGE>
Purchaser may immediately assign such Asset Interest (or portion
thereof) to PNC Bank or any Affiliate of PNC Bank. All of the
aforementioned assignments shall be upon such terms and conditions
as Purchaser and the assignee may mutually agree.
SECTION 12.02. Rights of Assignee. Upon the assignment by
Purchaser in accordance with this Article XII, the assignee
receiving such assignment shall have all of the rights of Purchaser
with respect to the Transaction Documents and the Asset Interest (or
such portion thereof as has been assigned).
SECTION 12.03. Evidence of Assignment. Any assignment of the
Asset Interest (or any portion thereof) to any Person may be
evidenced by such instrument(s) or document(s) as may be reasonably
satisfactory to Purchaser, the Administrator and the assignee.
ARTICLE XIII
INDEMNIFICATION
SECTION 13.01. Indemnities by Seller.
(a) General Indemnity. Without limiting any other rights
which any such Person may have hereunder or under applicable law,
Seller hereby agrees to indemnify each of the Administrator,
Purchaser, the Liquidity Banks, each other Program Support Provider,
the Liquidity Agent, each of their respective Affiliates, and all
successors, transferees, participants and assigns and all officers,
directors, shareholders, controlling persons, employees and agents
of any of the foregoing (each an "Indemnified Party"), forthwith on
demand, from and against any and all damages, losses, claims,
liabilities and related costs and expenses, including reasonable
attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against
or incurred by any of them arising out of or relating to the
Transaction Documents or the ownership or funding of the Asset
Interest or in respect of any Receivable or Account or any Contract,
excluding, however, (a) Indemnified Amounts to the extent resulting
from gross negligence or willful misconduct on the part of any such
Indemnified Party or (b) recourse (except as otherwise specifically
provided in this Agreement) for Defaulted Receivables. Without
limiting the foregoing, Seller shall indemnify each Indemnified
Party for Indemnified Amounts arising out of or relating to:
(i) the transfer by Seller of any interest in any
Receivable other than the transfer of an Asset Interest to
Purchaser pursuant to this Agreement and the grant of a
security interest to Purchaser pursuant to Section 9.01;
44
<PAGE>
(ii) any representation or warranty made by Seller (or
any of its officers) under or in connection with any
Transaction Document, any Information Package or any other
information or report delivered by or on behalf of Seller
pursuant hereto, which shall have been false, incorrect or
misleading in any material respect when made or deemed made;
(iii) the failure by Seller to comply with any applicable
law, rule or regulation with respect to any Pool Receivable or
the related Account or Contract, or the nonconformity of any
Pool Receivable or the related Contract with any such
applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in Purchaser
an undivided percentage ownership interest, to the extent of
the Asset Interest, in the Receivables in, or purporting to be
in, the Receivables Pool, free and clear of any Lien, other
than a Lien arising solely as a result of an act of Purchaser
or the Administrator, whether existing at the time of any
Purchase or Reinvestment of such Asset Interest or at any time
thereafter, unless such failure is the result of the failure of
Purchaser to execute any necessary financing statements;
(v) the failure to file, or any delay in filing,
financing statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other
applicable laws with respect to any Receivables in, or
purporting to be in, the Receivables Pool, whether at the time
of any Purchase or Reinvestment or at any time thereafter;
(vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the
payment of any Receivable in, or purporting to be in, the
Receivables Pool (including, without limitation, a defense
based on such Receivable's or the related Contract's not being
a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the merchandise or
services related to such Receivable or the furnishing or
failure to furnish such merchandise or services;
(vii) any products liability claim arising out of or in
connection with merchandise or services that are the subject of
any Pool Receivable; or
(viii) any tax or governmental fee or charge (but not
including taxes upon or measured by net income), all interest
and penalties thereon or with respect thereto, and all out-of-
pocket costs and expenses, including the reasonable fees and
expenses of counsel in defending against the same, which may
arise by reason of the purchase or ownership of any Asset
45
<PAGE>
Interest, or any other interest in the Pool Receivables or in
any goods which secure any such Pool Receivables.
(b) Indemnity by Strawbridge. Without limiting any other
rights which any such person may have hereunder under applicable
law, Strawbridge hereby agrees to indemnify each Indemnified Party,
forthwith on demand, from and against any and all Indemnified
Amounts awarded against or incurred by any of them arising out of or
relating to:
(i) any representation or warranty made by Strawbridge
under or in connection with any Transaction Document in its
capacity as Servicer, any Information Package or any other
information or report delivered by or on behalf of Strawbridge
in its capacity as Servicer pursuant hereto, which shall have
been false, incorrect or misleading in any material respect
when made or deemed made;
(ii) the failure by Strawbridge, in its capacity as
Servicer, to comply with any applicable law, rule or regulation
(including truth in lending, fair credit billing, usury, fair
credit reporting, equal credit opportunity, fair debt
collection practices and privacy) with respect to any Pool
Receivable or other related contract; or
(iii) any failure of Strawbridge to perform its duties,
covenants and obligations in accordance with the applicable
provisions of this Agreement.
(c) Contest of Tax Claim; After-Tax Basis. If any Indemnified
Party shall have notice of any attempt to impose or collect any tax
or governmental fee or charge for which indemnification will be
sought from Seller under Section 13.01(a)(viii), such Indemnified
Party shall give prompt and timely notice of such attempt to Seller
and Seller shall have the right, at its expense, to participate in
any proceedings resisting or objecting to the imposition or
collection of any such tax, governmental fee or charge.
Indemnification hereunder shall be in an amount necessary to make
the Indemnified Party whole after taking into account any tax
consequences to the Indemnified Party of the payment of any of the
aforesaid taxes and the receipt of the indemnity provided hereunder
or of any refund of any such tax previously indemnified hereunder,
including the effect of such tax or refund on the amount of tax
measured by net income or profits which is or was payable by the
Indemnified Party.
(d) Contribution. If for any reason the indemnification
provided above in this Section 13.01 is unavailable to an
Indemnified Party or is insufficient to hold an Indemnified Party
harmless, then Seller or Strawbridge, as the case may be, shall
contribute to the amount paid or payable by such Indemnified Party
46
<PAGE>
as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Party on the one hand and
Seller or Strawbridge, as the case may be, on the other hand but
also the relative fault of such Indemnified Party as well as any
other relevant equitable considerations.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement nor consent to any departure by Seller
therefrom shall in any event be effective unless the same shall be
in writing and signed by (a) Seller, the Administrator, Strawbridge
(so long as it is Servicer) and Purchaser (with respect to an
amendment), or (b) the Administrator and Purchaser (with respect to
a waiver or consent by them) or Seller or Strawbridge, as the case
may be, (with respect to a waiver or consent by it), as the case may
be, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. The
parties acknowledge that, before entering into such an amendment or
granting such a waiver or consent, Purchaser may also be required to
obtain the approval of some or all of the Liquidity Banks or to
obtain confirmation from certain rating agencies that such
amendment, waiver or consent will not result in a withdrawal or
reduction of the ratings of the Commercial Paper Notes.
SECTION 14.02. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise stated
herein, be in writing (including facsimile communication) and shall
be personally delivered or sent by express mail or courier or by
certified mail, postage prepaid, or by facsimile, to the intended
party at the address or facsimile number of such party set forth
under its name on the signature pages hereof or at such other
address or facsimile number as shall be designated by such party in
a written notice to the other parties hereto. All such notices and
communications shall be effective, (a) if personally delivered or
sent by express mail or courier or if sent by certified mail, when
received, and (b) if transmitted by facsimile, when sent, receipt
confirmed by telephone or electronic means.
SECTION 14.03. No Waiver; Remedies. No failure on the part of
the Administrator, any Affected Party, any Indemnified Party,
Purchaser or any other holder of the Asset Interest (or any portion
thereof) to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any
47
<PAGE>
remedies provided by law. Without limiting the foregoing, each of
PNC Bank, individually and as Administrator, and each Liquidity Bank
is hereby authorized by Seller at any time and from time to time, to
the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by
PNC Bank and such Liquidity Bank to or for the credit or the account
of Seller, now or hereafter existing under this Agreement, to the
Administrator, any Affected Party, any Indemnified Party or
Purchaser, or their respective successors and assigns.
SECTION 14.04. Binding Effect; Survival. This Agreement shall
be binding upon and inure to the benefit of Seller, the
Administrator, Strawbridge, Purchaser and their respective
successors and assigns, and the provisions of Section 4.02 and
Article XIII shall inure to the benefit of the Affected Parties and
the Indemnified Parties, respectively, and their respective
successors and assigns; provided, however, nothing in the foregoing
shall be deemed to authorize any assignment not permitted by
Section 12.01. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its
terms, and shall remain in full force and effect until the Final
Payout Date. The rights and remedies with respect to any breach of
any representation and warranty made by Seller or Strawbridge
pursuant to Article VI and the indemnification and payment
provisions of Article XIII and Sections 4.02, 14.05, 14.06, 14.07,
14.08 and 14.15 shall be continuing and shall survive any
termination of this Agreement.
SECTION 14.05. Costs, Expenses and Taxes. In addition to its
obligations under Article XIII, Seller agrees to pay on demand:
(a) all reasonable costs and expenses incurred by the
Administrator, the Liquidity Agent and the Purchaser and their
respective Affiliates in connection with the negotiation,
preparation, execution and delivery, the administration
(including periodic auditing) or the enforcement of, or any
actual or claimed breach of, this Agreement and the other
Transaction Documents, including, without limitation (i) the
reasonable fees and expenses of counsel to any of such Persons
incurred in connection with any of the foregoing or in advising
such Persons as to their respective rights and remedies under
any of the Transaction Documents, and (ii) all reasonable out-
of-pocket expenses (including reasonable fees and expenses of
independent accountants), incurred in connection with any
review of Seller's or Strawbridge's books and records either
prior to the execution and delivery hereof or pursuant to
Section 7.01(c); and
(b) all stamp and other taxes and fees payable or
determined to be payable in connection with the execution,
48
<PAGE>
delivery, filing and recording of this Agreement or the other
Transaction Documents, and agrees to indemnify each Indemnified
Party against any liabilities with respect to or resulting from
any delay in paying or omission to pay such taxes and fees.
SECTION 14.06. No Proceedings. Seller, Servicer and PNC Bank
(individually and as Administrator) each hereby agrees that it will
not institute against Purchaser, or join any other Person in
instituting against Purchaser, any insolvency proceeding (namely,
any proceeding of the type referred to in the definition of Event of
Bankruptcy) so long as any Commercial Paper Notes issued by
Purchaser shall be outstanding or there shall not have elapsed one
year plus one day since the last day on which any such Commercial
Paper Notes shall have been outstanding. The foregoing shall not
limit Seller's right to file any claim in or otherwise take any
action with respect to any insolvency proceeding that was instituted
by any Person other than Seller.
SECTION 14.07. Confidentiality of Program Information.
(a) Confidential Information. Each party hereto acknowledges
that PNC Bank regards the structure of the transactions contemplated
by this Agreement to be proprietary, and each such party severally
agrees that:
(i) it will not disclose without the prior written
consent of PNC Bank (other than to the directors, employees,
auditors, counsel or affiliates (collectively, "representatives"
of such party, each of whom shall be informed by such
party of the confidential nature of the Program Information (as
defined below) and of the terms of this Section 14.07), (A) any
information regarding the pricing in, or copies of, this
Agreement or any transaction contemplated hereby, (B) any
information regarding the organization, business or operations
of Purchaser generally or the services performed by the
Administrator for Purchaser, or (C) any information which is
furnished by PNC Bank to such party and which is designated by
PNC Bank to such party as confidential or not otherwise
available to the general public (the information referred to in
clauses (A), (B) and (C) is collectively referred to as the
"Program Information"); provided, however, that such party may
disclose any such Program Information (I) to any other party to
this Agreement for the purposes contemplated hereby, (II) as
may be required by any municipal, state, federal or other
regulatory body having or claiming to have jurisdiction over
such party, (III) in order to comply with any law, order,
regulation, regulatory request or ruling applicable to such
party, or (IV) subject to subsection (c), in the event such
party is legally compelled (by interrogatories, requests for
information or copies, subpoena, civil investigative demand or
similar process) to disclose any such Program Information;
49
<PAGE>
(ii) it will use the Program Information solely for the
purposes of evaluating, administering and enforcing the
transactions contemplated by this Agreement and making any
necessary business judgments with respect thereto; and
(iii) it will, upon demand, return (and cause each of its
representatives to return) to PNC Bank, all documents or other
written material received from PNC Bank as the case may be, in
connection with (a)(i)(B) or (C) above and all copies thereof
made by such party which contain the Program Information.
(b) Availability of Confidential Information. This Section
14.07 shall be inoperative as to such portions of the Program
Information which are or become generally available to the public or
such party on a nonconfidential basis from a source other than PNC
Bank or were known to such party on a nonconfidential basis prior to
its disclosure by PNC Bank.
(c) Legal Compulsion to Disclose. In the event that any party
or anyone to whom such party or its representatives transmits the
Program Information is requested or becomes legally compelled (by
interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process) to disclose any of
the Program Information, such party will:
(i) provide PNC Bank with prompt written notice so that
PNC Bank may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this
Section 14.07; and
(ii) unless PNC Bank waives compliance by such party with
the provisions of this Section 14.07, make a timely objection
to the request or confirmation to provide such Program
Information on the basis that such Program Information is
confidential and subject to the agreements contained in this
Section 14.07.
In the event that such protective order or other remedy is not
obtained, or PNC Bank waives compliance with the provisions of this
Section 14.07, such party will furnish only that portion of the
Program Information which (in such party's good faith judgment) is
legally required to be furnished and will exercise reasonable
efforts to obtain reliable assurance that confidential treatment
will be accorded the Program Information.
(d) Survival. This Section 14.07 shall survive termination of
this Agreement.
50
<PAGE>
SECTION 14.08. Confidentiality of Seller Information.
(a) Confidential Information. Each party hereto acknowledges
that Seller and Strawbridge regard certain financial and portfolio
information to be confidential, and each such party severally agrees
that:
(i) it will not disclose without the prior written
consent of Seller (other than to the directors, employees,
auditors, counsel or affiliates (collectively, "representa-
tives" of such party, each of whom shall be informed by such
party of the confidential nature of the Seller Information (as
defined below) and of the terms of this Section 14.08), (A) any
financial information regarding Seller or Strawbridge, (B) any
pricing information of Seller or Strawbridge, or (C) any
information which is furnished by Seller or Strawbridge to such
party and which is designated by Seller or Strawbridge to such
party as confidential or not otherwise available to the general
public (the information referred to in clauses (A), (B) and (C)
is collectively referred to as the "Seller Information");
provided, however, that such party may disclose any such Seller
Information (I) to any other party to this Agreement for the
purposes contemplated hereby, (II) as may be required by any
municipal, state, federal or other regulatory body having or
claiming to have jurisdiction over such party, (III) in order
to comply with any law, order, regulation, regulatory request
or ruling applicable to such party, (IV) subject to subsection
(c), in the event such party is legally compelled (by
interrogatories, requests for information or copies, subpoena,
civil investigative demand or similar process) to disclose any
such Seller Information, and (V) to the Liquidity Banks, the
other Program Support Providers, any assignee or participant or
potential assignee or participant of any Liquidity Bank or any
other Program Support Provider, the rating agencies rating the
Commercial Paper Notes, and the investors in and dealers of the
Commercial Paper Notes;
(ii) it will use the Seller Information solely for the
purposes of evaluating, administering and enforcing the
transactions contemplated by this Agreement and making any
necessary business judgments with respect thereto; and
(iii) it will, upon demand, return (and cause each of its
representatives to return) to Seller all documents or other
written material received from Seller or Strawbridge, as the
case may be, and all copies thereof made by such party which
contain the Seller Information.
(b) Availability of Confidential Information. This Section
14.08 shall be inoperative as to such portions of the Seller
Information which are or become generally available to the public or
51
<PAGE>
such party on a nonconfidential basis from a source other than
Seller or Strawbridge or were known to such party on a
nonconfidential basis prior to its disclosure by Seller or
Strawbridge.
(c) Legal Compulsion to Disclose. In the event that any party
or anyone to whom such party or its representatives transmits the
Seller Information is requested or becomes legally compelled (by
interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process) to disclose any of
the Seller Information, such party will
(i) provide Seller with prompt written notice so that
Seller or Strawbridge may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions
of this Section 14.08; and
(ii) unless Seller or Strawbridge waives compliance by
such party with the provisions of this Section 14.08, make a
timely objection to the request or confirmation to provide such
Seller Information on the basis that such Seller Information is
confidential and subject to the agreements contained in this
Section 14.08.
In the event that such protective order or other remedy is not
obtained, or Seller or Strawbridge waives compliance with the
provisions of this Section 14.08, such party will furnish only that
portion of the Seller Information which (in such party's good faith
judgment) is legally required to be furnished and will exercise
reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded the Seller Information.
(d) Survival. This Section 14.08 shall survive termination of
this Agreement.
SECTION 14.09. Captions and Cross References. The various
captions (including, without limitation, the table of contents) in
this Agreement are provided solely for convenience of reference and
shall not affect the meaning or interpretation of any provision of
this Agreement. Unless otherwise indicated, references in this
Agreement to any Section, Appendix, Schedule or Exhibit are to such
Section of or Appendix, Schedule or Exhibit to this Agreement, as
the case may be, and references in any Section, subsection, or
clause to any subsection, clause or subclause are to such
subsection, clause or subclause of such Section, subsection or
clause.
SECTION 14.10. Integration. This Agreement and the other
Transaction Documents contain a final and complete integration of
all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire understanding
52
<PAGE>
among the parties hereto with respect to the subject matter hereof,
superseding all prior oral or written understandings.
SECTION 14.11. GOVERNING LAW. THIS AGREEMENT, INCLUDING THE
RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF
PURCHASER IN THE RECEIVABLES IS GOVERNED BY THE LAWS OF THE
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 14.12. WAIVER OF JURY TRIAL. EACH OF SERVICER AND
SELLER HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY AMENDMENT,
INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING OR
OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT A JURY TRIAL.
SECTION 14.13. CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES.
EACH OF SERVICER AND SELLER HEREBY ACKNOWLEDGES AND AGREES THAT:
(A) IT IRREVOCABLY (I) SUBMITS TO THE JURISDICTION,
FIRST, OF ANY UNITED STATES FEDERAL COURT, AND SECOND, IF
FEDERAL JURISDICTION IS NOT AVAILABLE, OF ANY NEW YORK STATE
COURT, IN EITHER CASE SITTING IN NEW YORK, NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, (ii) AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED ONLY IN SUCH
NEW YORK STATE OR FEDERAL COURT AND NOT IN ANY OTHER COURT, AND
(iii) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING.
(B) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM THE JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID TO EXECUTION, EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, IT HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER OR IN CONNECTION WITH THIS AGREEMENT.
SECTION 14.14. Execution in Counterparts. This Agreement may
be executed in any number of counterparts and by the different
parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same Agreement.
SECTION 14.15. No Recourse Against Other Parties. No recourse
under any obligation, covenant or agreement of Purchaser contained
53
<PAGE>
in this Agreement shall be had against any stockholder, employee,
officer, director, or incorporator of Purchaser, provided, however,
that nothing in this Section 14.15 shall relieve any of the
foregoing Persons from any liability which such Person may otherwise
have for his/her or its gross negligence or willful misconduct.
SECTION 14.16. Substitution of Originator. Strawbridge and
Seller contemplate that at a future time, the Receivables will be
originated by a national bank that is an Affiliate of Strawbridge.
At such time, Purchaser and the Administrator agree that, at
Strawbridge's written request, and at Strawbridge's expense, they
will cooperate with Strawbridge and Seller in order to substitute
such bank as the originator and seller under the Purchase Agreement,
provided that (A) such bank provides to Purchaser and the
Administrator the following documents, all of which shall be
satisfactory in form and substance to the Administrator and
Purchaser: (i) the articles of association and by-laws of such bank,
certified by its Secretary or Assistant Secretary; (ii) a copy of
the resolutions of the Board of Directors of such bank approving of
the Transaction Documents to be executed by such bank and the
transactions contemplated thereby; (iii) a certificate of the
Secretary or Assistant Secretary of such bank certifying the names
and true signatures of the officers authorized on its behalf to sign
the Transaction Documents to be delivered by it; (iv) a good
standing certificate from the Office of the Comptroller of the
Currency; (v) acknowledgement copies of proper financing statements
naming such bank as the debtor/assignor, Seller as the secured
party/assignee and Purchaser as the assignee as filed in all
appropriate jurisdictions; (vi) an opinion of counsel to such bank;
(vii) appropriate amendments to the Purchase Agreement and this
Agreement to reflect such substitution; (viii) such powers of
attorney as the Administrator may reasonably request to enable the
Administrator to collect all amounts due under any and all Pool
Receivables; and (ix) such other documents, instruments or opinions
as the Administrator may reasonably request; (B) no Liquidation
Event or Unmatured Liquidation Event shall have occurred and be
continuing, or shall result from such substitution; and (C) the
rating agencies then rating the Commercial Paper Notes shall have
confirmed the rating of such Commercial Paper Notes after giving
effect to such substitution.
54
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized,
as of the date first above written.
STRAWBRIDGE & CLOTHIER,
as initial Servicer
By ____________________________________
Title: Vice President
801 Market Street
Philadelphia, Pennsylvania 19107
Facsimile No.: (215) 629-6833
Attention: Treasurer
S&C, FUNDING, INC.,
as Seller
By ____________________________________
Title: President
801 Market Street
Philadelphia, Pennsylvania 19107
Facsimile No.: (215) 629-6833
Attention: President
AMENDED AND RESTATED
RECEIVABLES PURCHASE
AGREEMENT
S-1
<PAGE>
MARKET STREET CAPITAL CORP.,
as Purchaser
By ____________________________________
Title_______________________________
c/o AMACAR Group, L.L.C.
6707-D Fairview Road
Charlotte, North Carolina 28210
Facsimile No.: (704) 365-1362
Attention: Douglas K. Johnson
AMENDED AND RESTATED
RECEIVABLES PURCHASE
AGREEMENT
S-2
<PAGE>
PNC BANK, NATIONAL ASSOCIATION,
as Administrator
By ____________________________________
Vice President
100 South Broad Street
7th Floor
Philadelphia, Pennsylvania 19101
Facsimile No.: (215) 585-5972
Attention: H. Todd Dissinger
AMENDED AND RESTATED
RECEIVABLES PURCHASE
AGREEMENT
S-3
<PAGE>
APPENDIX A
DEFINITIONS
This is Appendix A to the Receivables Purchase Agreement
dated as of _______________, 1996 among ________ Funding, Inc.,
State Street Boston Capital Corporation, _________________, as
Administrator and Norwest Bank Minnesota, N.A., as Relationship
Bank (as amended, supplemented or otherwise modified from time to
time, this "Agreement"). Each reference in this Appendix A to
any Section, Appendix or Exhibit refers to such Section of or
Appendix or Exhibit to this Agreement.
A. Defined Terms. As used in this Agreement, unless the
context requires a different meaning, the following terms have
the meanings indicated hereinbelow:
"Account" means each revolving credit card or charge account
established pursuant to a Contract between Parent and any Obligor
pursuant to which indebtedness may arise from time to time for
the purchase of goods.
"Administrator" has the meaning set forth in the preamble.
"Administrator's Office" means the office of the
Administrator at 225 Franklin Street, Boston, Massachusetts
02110, Attention: Clipper Funds, or such other address as shall
be designated by the Administrator in writing to Seller and
Purchaser.
"Affected Party" means each of Purchaser, each Liquidity
Bank, any assignee or participant of Purchaser or any Liquidity
Bank, the Credit Bank, any assignee or participant of the Credit
Bank, State Street Capital, any successor to State Street Capital
as Administrator and any sub-agent of the Administrator, Norwest,
any successor to Norwest as Relationship Bank, the Collateral
Agent, any successor of First Chicago as Collateral Agent and any
co-agent or sub-agent of the Collateral Agent.
"Affiliate" when used with respect to a Person means any
other Person controlling, controlled by, or under common control
with, such Person.
"Allocation Limit" has the meaning set forth in Section
1.01.
"Alternate Base Rate" means, on any date, a fluctuating rate
of interest per annum equal to the higher of
<PAGE>
(a) the rate of interest most recently announced by
the Liquidity Agent in Minneapolis, Minnesota as its prime
rate; and
(b) the Federal Funds Rate (as defined below) most
recently determined by the Liquidity Agent plus 0.50% per
annum.
The Alternate Base Rate is not necessarily intended to be the
lowest rate of interest determined by the Liquidity Agent in
connection with extensions of credit.
"Asset Interest" means an undivided ownership interest
determined from time to time as provided in Section 1.04(b) in
all Pool Assets.
"Bank Rate" for any Settlement Period means
(a) in the case of any Settlement Period other than a
Settlement Period described in clause (b), an interest rate
per annum equal to the sum of (x) the Bank Rate Margin, plus
(y) the Eurodollar Rate (Reserve Adjusted) for such
Settlement Period;
(b) in the case of
(i) any Settlement Period on or after the first
day of which Purchaser, the Credit Bank or any
Liquidity Bank shall have notified the Administrator
that (A) the introduction of or any change in or in the
interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for such Person
to fund the Asset Interest (or a portion thereof) at
the rate described in clause (a), or (B) due to market
conditions affecting the interbank eurodollar market,
funds are not reasonably available to such Person in
such market in order to enable it to fund such Asset
Interest (or a portion thereof) at the rate described
in clause (a) (and in the case of subclause (A) or (B),
such Person shall not have subsequently notified the
Administrator that such circumstances no longer exist),
or
(ii) any Settlement Period as to which the
Administrator does not receive notice or determine, by
no later than 12:00 noon (New York City time) on the
third Business Day preceding the first day of such
Settlement Period, that the Asset Interest (or portion
thereof) will be funded by Liquidity Loans and not by
the issuance of Commercial Paper Notes,
- 2 -
<PAGE>
an interest rate per annum equal to the Alternate Base Rate
in effect from time to time during such Settlement Period.
"Bank Rate Margin" means the percentage set forth in the Fee
Letter as the Bank Rate Margin.
"Business Day" means a day on which both (a) the
Administrator at its principal office in Boston, Massachusetts is
open for business and (b) commercial banks in New York City and
Chicago, Illinois are not authorized or required to be closed for
business.
"Change in Control" means (i) any person or group of related
persons, excluding Permitted Shareholders, gains beneficial
ownership of a majority in voting interest of the outstanding
voting stock of Parent or has caused to be elected a majority of
the Board of Directors of Parent, or (ii) all or substantially
all of the assets of Parent are sold or liquidated, or (iii)
Parent fails to own 100% of the outstanding capital stock of
Seller, free and clear of all liens. As used herein, "Permitted
Shareholders" means __________________.
"Charge-Off Ratio" means the product of (i) the ratio
(expressed as a percentage) computed as of the Cut-Off Date by
dividing (x) the aggregate Unpaid Balance of all Receivables that
were charged off in accordance with the Credit and Collection
Policy during the Settlement Period ending on such Cut-Off Date,
minus any recoveries with respect to such charged off Receivables
by (y) the aggregate Unpaid Balance of all Receivables, on the
immediately preceding Cut-Off Date, other than such charged off
Receivables, times (ii) 12.
"Collateral Agent" means First Chicago in its capacity as
collateral agent, together with any successors thereto, under the
Security Agreement.
"Collections" means, with respect to any Receivable, all
funds which either (a) are received by Seller or Servicer from or
on behalf of the related Obligors in payment of any amounts owed
(including, without limitation, purchase prices, finance charges,
interest and all other charges) in respect of such Receivable, or
applied to such amounts owed by such Obligors (including, without
limitation, insurance payments that Seller or Servicer applies in
the ordinary course of its business to amounts owed in respect of
such Receivable and net proceeds of sale or other disposition of
repossessed goods or other collateral or property of the Obligor
or any other party directly or indirectly liable for payment of
such Receivable and available to be applied thereon), or (b) are
deemed to have been received by Seller or any other Person as a
Collection pursuant to Section 3.02.
- 3 -
<PAGE>
"Commercial Paper Holders" means the holders from time to
time of the Commercial Paper Notes.
"Commercial Paper Notes" means short-term promissory notes
issued or to be issued by Purchaser to fund its investments in
accounts receivable or other financial assets.
"Commitment Fee" has the meaning set forth in the Fee
Letter.
"Contract" means a contract between Parent and any Person
pursuant to or under which such Person establishes a revolving
credit card or charge account pursuant to which indebtedness may
arise for the purchase of goods from time to time. A "related"
Contract with respect to the Receivables means a Contract under
which Receivables in the Receivables Pool arise or which is
relevant to the collection or enforcement of such Receivables.
"CP Rate" for any period means a rate per annum calculated
by the Administrator equal to the sum of (i) the rate or, if more
than one rate, the weighted average of the rates, determined by
converting to an interest-bearing equivalent rate per annum the
discount rate (or rates) at which Commercial Paper Notes on each
day during such period have been sold by the commercial paper
placement agents selected by the Administrator, plus (ii) the
commissions and charges charged by such commercial paper
placement agents with respect to such Commercial Paper Notes,
expressed as a percentage of such face amount and converted to an
interest-bearing equivalent rate per annum.
"Credit Agreement" means and includes (a) the Credit
Agreement, dated as of September 24, 1992 between Purchaser and
the Credit Bank and (b) any other agreement (other than the
Liquidity Agreement) hereafter entered into by Purchaser
providing for the issuance of one or more letters of credit for
the account of Purchaser, the making of loans to Purchaser or any
other extensions of credit to or for the account of Purchaser to
support all or any part of Purchaser's payment obligations under
its Commercial Paper Notes or to provide an alternate means of
funding Purchaser's investments in accounts receivable or other
financial assets, in each case as amended, supplemented or
otherwise modified from time to time.
"Credit and Collection Policy" means those credit and
collection policies and practices relating to Contracts,
Accounts, and Receivables described in Schedule 6.01(p)-2, as
modified without violating Section 7.04(c) or 7.05(b).
"Credit Bank" means and includes State Street Bank, as
lender to Purchaser and as issuer of a letter of credit for
Purchaser's account under the Credit Agreement, and any other or
- 4 -
<PAGE>
additional bank or other financial institution now or hereafter
extending credit or having a commitment to extend credit to or
for the account of Purchaser under the Credit Agreement.
"Credit Draw" means a loan made by the Credit Bank pursuant
to the Credit Agreement or a disbursement made by the Credit Bank
under a letter of credit issued pursuant to the Credit Agreement.
"Cut-Off Date" means the last day of each Settlement Period.
"Defaulted Receivable" means, for any Settlement Period, a
Receivable: (a) as to which any payment, or part thereof,
becomes _______________ past due during such Settlement Period,
or (b) as to which the Obligor thereof is the subject of an Event
of Bankruptcy and which has been, or in accordance with the
Credit and Collection Policy should have been, charged off during
such Settlement Period and which is not a Defaulted Receivable
pursuant to clause (a).
"Default Ratio" means the ratio (expressed as a percentage)
computed as of a Cut-Off Date by dividing (x) the aggregate
Unpaid Balance of Receivables that become Defaulted Receivables
during the Settlement Period ending on such Cut-Off Date by (y)
the average of the aggregate Unpaid Balance of all Receivables
during such Settlement Period.
"Delinquency Ratio" means the ratio (expressed as a
percentage) computed as of a Cut-Off Date by dividing (x) the
aggregate Unpaid Balance of Delinquent Receivables on such Cut-
Off Date by (y) the aggregate Unpaid Balance of all Receivables
on such date.
"Delinquent Receivable" means a Receivable as to which any
payment, or part thereof, remains unpaid for more than __________
from the original due date for such payment.
"Dilution Ratio" means, for any Settlement Period, the ratio
(expressed as a percentage) computed by dividing (i) the
aggregate amount of credits, adjustments, rebates, refunds and
setoffs with respect to Receivables granted or allowed by
Servicer, Seller or any Affiliate of Seller during such
Settlement Period by (ii) the average aggregate Unpaid Balance of
all Receivables during such Settlement Period.
"Dollars" means dollars in lawful money of the United States
of America.
"Downgraded Liquidity Bank" means a Liquidity Bank which has
been the subject of a Downgrading Event.
- 5 -
<PAGE>
"Downgrading Event" with respect to any Person means the
lowering of the rating with regard to the short-term securities
of such Person to below (i) A-1 by S&P or (ii) P-1 by Moody's.
"Earned Discount" means for any Settlement Period:
PTI x ER x ED + LF
------------------
360
where:
PTI= the daily average (calculated at the close of business
each day) of the Purchaser's Total Investment during
such Settlement Period,
ER = the Earned Discount Rate for such Settlement Period,
ED = the actual number of days elapsed during such
Settlement Period, and
LF = the Liquidation Fee, if any, during such Settlement
Period.
"Earned Discount Rate" means for any Settlement Period:
(a) in the case of any portion of the Purchaser's
Total Investment funded by a Liquidity Loan, either (i) the
Bank Rate for such Settlement Period or (ii) the Alternate
Base Rate, as elected by Seller set forth in a written
notice to the Administrator and the Liquidity Agent
delivered at least three Business Days prior to such funding
(if such three Business Day prior notice cannot be given
prior to funding, the Earned Discount Rate for such
Settlement Period shall be the Alternate Base Rate);
(b) in the case of any portion of the Purchaser's Total
Investment funded by a Credit Draw, a rate per annum equal
for each day during such Settlement Period to the Alternate
Base Rate in effect on such day plus 2% per annum; and
(c) for any portion of the Purchaser's Total
Investment funded by Commercial Paper Notes, the CP Rate for
the related Settlement Period;
provided, however, that on any day during a Settlement Period
when any Liquidation Event or Unmatured Liquidation Event shall
have occurred and be continuing, the Earned Discount Rate for the
Purchaser's Total Investment shall mean the Alternate Base Rate
in effect on such day plus 2%.
- 6 -
<PAGE>
"Eligible Contract" means a Contract in one of the forms set
forth in Schedule 6.01(p)-1 or otherwise approved by the
Administrator.
"Eligible Receivable" means, at any time, a Receivable:
(a) which is originated by Parent in the ordinary
course of its business and sold to Seller pursuant to the
Purchase Agreement;
(b) which, (i) if the perfection of Purchaser's
undivided ownership interest therein is governed by the
laws of a jurisdiction where the Uniform Commercial Code --
Secured Transactions is in force, constitutes an account or
general intangible as defined in the Uniform Commercial Code
as in effect in such jurisdiction, and (ii) if the
perfection of Purchaser's undivided ownership interest
therein is governed by the law of any jurisdiction where the
Uniform Commercial Code -- Secured Transactions is not in
force, Seller has furnished to the Administrator such
opinions of counsel and other evidence as has reasonably
been requested, establishing to the reasonable satisfaction
of the Administrator that Purchaser's undivided ownership
interest and other rights with respect thereto are not
significantly less protected and favorable than such rights
under the Uniform Commercial Code;
(c) the Obligor of which is resident of the United
States, or any of its possessions or territories, is not an
Affiliate of Seller, and is not a government or a
governmental subdivision or agency;
(d) as to which the payment terms have not been
altered or extended;
(e) the Obligor of which is not the Obligor of any
Defaulted Receivable;
(f) which is not a Defaulted Receivable or a
Delinquent Receivable;
(g) with regard to which the warranty of Seller in
Section 6.01(l) is true and correct;
(h) the sale of an undivided interest in which does
not contravene or conflict with any law;
(i) which is denominated and payable only in Dollars
in the United States;
- 7 -
<PAGE>
(j) which arises under an Eligible Contract, which
contract has been duly authorized by the parties thereto and
that, together with such Receivable, is in full force and
effect and constitutes the legal, valid and binding
obligation of the Obligor of such Receivable enforceable
against such Obligor in accordance with its terms, is not
subject to any dispute, offset, counterclaim or defense
whatsoever;
(k) which, together with the Contract related thereto,
does not contravene any laws, rules or regulations
applicable thereto (including, without limitation, laws,
rules and regulations relating to usury, truth in lending,
fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and
with respect to which no party to the Contract related
thereto is in violation of any such law, rule or regulation
if such violation would impair the collectibility of such
Receivable;
(l) which (i) satisfies all applicable requirements
of the Credit and Collection Policy and (ii) complies with
such other criteria and requirements (other than those
relating to the collectibility of such Receivable) as the
Administrator may from time to time specify to Seller
following ten days' notice; and
(m) the Obligor of which has not exceeded ___% of his
or her credit limit.
"ERISA" means the U.S. Employee Retirement Income Security
Act of 1974, as amended from time to time.
"Eurodollar Rate (Reserve Adjusted)" means, with respect to
any Settlement Period and any portion of the Purchaser's Total
Investment, a rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined pursuant to the following
formula:
Eurodollar Rate = Eurodollar Rate
(Reserve Adjusted) ---------------
1-Eurodollar
Reserve Percentage
where:
"Eurodollar Rate" means, with respect to any Settlement
Period and any portion of the Purchaser's Total Investment, the
rate per annum at which Dollar deposits in immediately available
funds are offered to the Eurodollar Office of the Administrator
two Eurodollar Business Days prior to the beginning of such
period by prime banks in the interbank eurodollar market at or
about 11:00 a.m., New York City time for delivery on the first
- 8 -
<PAGE>
day of such Settlement Period, for the number of days comprised
therein and in an amount equal or comparable to the applicable
portion of the Purchaser's Total Investment for such Settlement
Period.
"Eurodollar Business Day" means a day of the year on which
dealings are carried on in the eurodollar interbank market and
banks are open for business in London and are not required or
authorized to close in New York City or Minneapolis.
"Eurodollar Reserve Percentage" means, with respect to any
Settlement Period, the then applicable percentage (expressed as a
decimal) prescribed by the Federal Reserve Board for determining
reserve requirements applicable to "Eurocurrency Liabilities"
pursuant to Regulation D.
"Event of Bankruptcy" shall be deemed to have occurred with
respect to a Person if either:
(a) a case or other proceeding shall be commenced,
without the application or consent of such Person, in any
court, seeking the liquidation, reorganization, debt
arrangement, dissolution, winding up, or composition or
readjustment of debts of such Person, the appointment of
a trustee, receiver, custodian, liquidator, assignee,
sequestrator or the like for such Person or all or
substantially all of its assets, or any similar action with
respect to such Person under any law relating to bankruptcy,
insolvency, reorganization, winding up or composition or
adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a
period of 60 consecutive days; or an order for relief in
respect of such Person shall be entered in an involuntary
case under the federal bankruptcy laws or other similar laws
now or hereafter in effect; or
(b) such Person shall commence a voluntary case or
other proceeding under any applicable bankruptcy,
insolvency, reorganization, debt arrangement, dissolution
or other similar law now or hereafter in effect, or shall
consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) for, such Person or
for any substantial part of its property, or shall make any
general assignment for the benefit of creditors, or shall
fail to, or admit in writing its inability to, pay its debts
generally as they become due, or, if a corporation or
similar entity, its board of directors shall vote to
implement any of the foregoing.
- 9 -
<PAGE>
"Exchange Act" means the Securities and Exchange Act of
1934, as amended.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal (for each day during such period)
to
(a) the weighted average of the rates on overnight
federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal
Reserve Bank of Chicago; or
(b) if such rate is not so published for any day which
is a Business Day, the average of the quotations for such
day on such transactions received by the Liquidity Agent
from three federal funds brokers of recognized standing
selected by it.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System, or any successor thereto or to the
functions thereof.
"Fee Letter" has the meaning set forth in Section 4.01.
"Final Payout Date" means the date following the Termination
Date on which Purchaser's Total Investment shall have been
reduced to zero and all other amounts payable by Seller under the
Transaction Documents shall have been paid in full.
"Finance Charge Receivables" means all amounts billed to the
Obligors on any Account in respect of finance charges, late
charges and other fees and charges with respect to the Accounts.
"First Chicago" means The First National Bank of Chicago, a
national banking association.
"Foreign" means, with respect to any assignee or participant
of Purchaser hereunder, any Person not organized under the laws
of the United States, one of the states thereof, or the District
of Columbia.
"Funding" has the meaning set forth in Section 12.01.
"Indemnified Amounts" has the meaning set forth in
Section 13.01.
"Indemnified Party" has the meaning set forth in
Section 13.01.
- 10 -
<PAGE>
"Information Package" has the meaning set forth in
Section 3.01.
"Interest Collections" means all Collections received or
deemed received for Finance Charge Receivables.
"Lien" means any mortgage, lien, pledge, encumbrance,
charge, title retention or other security interest of any kind,
whether arising under a security agreement, mortgage, deed of
trust, assignment, pledge or financing statement or arising as a
matter of law, judicial process or otherwise.
"Liquidation Event" has the meaning set forth in
Section 10.01.
"Liquidation Fee" means, for each day in any Settlement
Period during the Liquidation Period, the amount, if any, by
which:
(a) the additional Earned Discount (calculated without
taking into account any Liquidation Fee) which would have
accrued on the reductions of the Purchaser's Total
Investment during such Settlement Period (as so computed) if
such reductions had not been made exceeds.
(b) the income, if any, received by Purchaser from
investing the proceeds of such reductions of the Purchaser's
Total Investment.
"Liquidation Period" means the period commencing on the date
on which the conditions precedent to Purchases and Reinvestments
set forth in Section 5.02 are not satisfied (or expressly waived
by Purchaser) and the Administrator shall have notified the
Relationship Bank, Seller and Servicer in writing that the
Liquidation Period has commenced, and ending on the Final Payout
Date.
"Liquidity Agent" means PNC Bank, as agent for the Liquidity
Banks under the Liquidity Agreement, or any successor to PNC Bank
in such capacity.
"Liquidity Agreement" means and includes (a) the Liquidity
Agreement dated as of ___________, 199_ among Purchaser, as
borrower, Norwest, as Liquidity Agent, and certain other
financial institutions, and (b) any other agreement hereafter
entered into by Purchaser providing for the making of loans or
other extensions of credit to Purchaser secured by a direct or
indirect security interest in the Asset Interest (or any portion
thereof), to support all or part of Purchaser's payment
obligations under the Commercial Paper Notes or to provide an
alternate means of funding Purchaser's investments in accounts
- 11 -
<PAGE>
receivable or other financial assets, and under which the amount
available from such extensions of credit is limited to an amount
calculated by reference to the value or eligible unpaid balance
of such accounts receivable or other financial assets or any
portion thereof or the level of deal-specific credit enhancement
available with respect thereto, as such Liquidity Agreement or
other agreement may be amended, supplemented or otherwise
modified from time to time.
"Liquidity Bank" means any one of, and "Liquidity Banks"
means all of, Norwest and the other commercial lending
institutions that are at any time parties to the Liquidity
Agreement.
"Liquidity Commitment Amount" means, at any time, the then
aggregate amount of the Liquidity Banks' commitments under the
Liquidity Agreement.
"Liquidity Loan" means a loan made by the Liquidity Bank (or
simultaneous loans made by the Liquidity Banks) pursuant to the
Liquidity Agreement.
"Lock-Box Agreement" means a letter agreement, in
substantially the form of Exhibit 5.01(g), among Seller, Parent
and any Lock-Box Bank.
"Lock-Box Bank" means any of the banks holding one or more
lock-box accounts for receiving Collections from Pool
Receivables.
"Loss Reserve" means on any day, an amount equal to the
product of (1) the Purchaser's Total Investment on such day
multiplied by (2) the Loss Reserve Percentage at such time.
"Loss Reserve Percentage" means, on any day, the sum of (1)
the greatest of (A) __%, (B) __ times the average Charge Off
Ratio for the 3 most recent Cut-Off Dates and (C) _____________.
"Material Adverse Effect" with respect to any event or
circumstance, means a material adverse effect on:
(i) the business, assets, financial condition or
results of operations of Servicer, and its consolidated
Subsidiaries, taken as a whole, or of Seller;
(ii) the ability of Servicer or Seller to perform its
obligations under this Agreement or any other Transaction
Document;
- 12 -
<PAGE>
(iii) the validity, enforceability or collectibility
of this Agreement, any other Transaction Document, the
Receivables, the Accounts, or the related Contracts; or
(iv) the status, existence, perfection, priority or
enforceability of Purchaser's interest in the Pool
Receivables.
"Moody's" means Moody's Investors Service, Inc.
"Net Pool Balance" at any time means an amount equal to the
aggregate Unpaid Balance of the Eligible Receivables in the
Receivables Pool at such time.
"Net Yield" means, for any Settlement Period, the Portfolio
Yield for such Settlement Period, minus, the Earned Discount Rate
for such Settlement Period, minus the Servicer's Fee Rate, minus
the Program Fee Rate, minus the greater of the average Charge-Off
Ratio for the three most recent Cut-Off Dates and (ii) 90% of the
average Default Ratio for the three most recent Cut-Off Dates.
"Norwest" has the meaning set forth in the preamble.
"Obligor" means a Person obligated to make payments with
respect to a Receivable, including any guarantor thereof.
"Parent" means ________________________, a ______________
corporation.
"Payment Rate" means the ratio (expressed as a percentage)
computed as of the Cut-Off Date by dividing (x) the Collections
received during the Settlement Period ending on such Cut-Off Date
by (y) the aggregate Unpaid Balance of all Receivables as of the
first day of such Settlement Period.
"Permitted Investments" means any one or more of the
following obligations or securities:
(i) direct non-callable obligations of, and non-
callable obligations fully guaranteed by, the United
States of America, or any agency or instrumentality of
the United States of America the obligations of which
are backed by the full faith and credit of the United
States of America;
(ii) demand and time deposits in, certificates of
deposits of, and bankers' acceptances issued by, any
depository institution or trust company incorporated
under the laws of the United States of America or any
state thereof, having a combined capital and surplus of
at least $500,000,000, and subject to supervision and
- 13 -
<PAGE>
examination by federal and/or state banking
authorities, so long as at the time of such investment
or contractual commitment providing for such investment
the commercial paper or other short-term debt
obligations of such depository institution or trust
company (or, in the case of a depository institution
that is the principal subsidiary of a holding company,
the commercial paper or other short-term debt
obligations of such holding company) have one of the
two highest short-term credit rating available from
Moody's and S&P.
(iii) repurchase obligations with respect to and
collateralized by (A) any security described in
clause (i) above or (B) any other security issued or
guaranteed by an agency or instrumentality of the
United States of America, in each case entered into
with a depository institution or trust company (acting
as principal) of the type described in clause (ii)
above, provided that the Administrator has taken
delivery of such security;
(iv) commercial paper (including both non-
interest-bearing discount obligations and interest-
bearing obligations, but excluding Commercial Paper
(Notes) payable on demand or on a specified date not
more than one year after the date of issuance thereof
having the highest short-term credit rating from
Moody's and S&P at the time of such investment; and
(v) shares in a mutual fund investing solely in
short term securities of the United States government
and/or securities described in clause (iii) above where
the mutual fund custodian has taken delivery of the
collateralizing securities, provided that (i) such fund
shall have one of the two highest short-term credit
rating available from Moody's and S&P and (ii) such
shares shall be freely transferable by the holder on a
daily basis.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture, government or any
agency or political subdivision thereof or any other entity.
"Pool Assets" has the meaning set forth in Section 1.04(a).
"Pool Receivable" means a Receivable in the Receivables
Pool.
- 14 -
<PAGE>
"Portfolio Yield" means, with respect to any Settlement
Period, the annualized percentage equivalent of a fraction, the
numerator of which is the amount of Finance Charge Receivables
accrued during such Settlement Period, and the denominator of
which is the aggregate Unpaid Balance of Receivables as of the
last day of the immediately preceding Settlement Period.
"Principal Collections" means Collections received or deemed
received (other than Interest Collections) for amounts billed to
the Obligors on any Account in respect of purchases of goods.
"Program Administration Agreement" means the Program
Administration Agreement, dated as of September 24, 1992 between
Purchaser and State Street Capital, as Program Administrator, as
the same may be amended, supplemented or otherwise modified from
time to time.
"Program Fee" has the meaning set forth in the Fee Letter.
"Program Fee Rate" has the meaning set forth in the Fee
Letter.
"Program Information" has the meaning set forth in
Section 14.07.
"Purchase" has the meaning set forth in Section 1.01.
"Purchase Agreement" means the Purchase, Sale and
Contribution Agreement, dated as of ___________, 1996, between
Parent and Seller, as it may be amended, supplemented or
otherwise modified from time to time.
"Purchase Limit" has the meaning set forth in Section 1.01.
"Purchase Price" has the meaning set forth in
Section 1.02(a).
"Purchase Termination Date" means that day
(a) the Administrator declares a Purchase Termination
Date in a notice to Seller in accordance with
Section 10.02(a); or
(b) in accordance with Section 10.02(b), becomes the
Purchase Termination Date automatically.
"Purchaser" has the meaning set forth in the preamble.
"Purchaser's Share" of any amount means the then Asset
Interest, expressed as a percentage, times such amount.
- 15 -
<PAGE>
"Purchaser's Total Investment" means at any time with
respect to the Asset Interest an amount equal to (a) the
aggregate of the amounts theretofore paid to Seller for Purchases
pursuant to Section 1.01, less (b) the aggregate amount of
Collections theretofore received and actually distributed to
Purchaser on account of such Purchaser's Total Investment
pursuant to Section 3.01.
"Qualifying Liquidity Bank" means a Liquidity Bank with a
rating of its short-term securities equal to or higher than
(i) A-1 by S&P and (ii) P-1 by Moody's.
"Receivable" means any right to payment from a Person,
whether constituting an account, chattel paper, instrument or a
general intangible, arising under an Account, and includes the
right to payment of any interest or finance charges and other
obligations of such Person with respect thereto.
"Receivables Pool" means at any time all then outstanding
Receivables.
"Regulation D" means Regulation D of the Federal Reserve
Board, or any other regulation of the Federal Reserve Board that
prescribes reserve requirements applicable to nonpersonal time
deposits or "Eurocurrency Liabilities" as presently defined in
Regulation D, as in effect from time to time.
"Regulatory Change" means, relative to any Affected Party
(a) any change in (or the adoption, implementation,
change in phase-in or commencement of effectiveness of) any
(i) United States federal or state law or foreign
law applicable to such Affected Party;
(ii) regulation, interpretation, directive,
requirement or request (whether or not having the force
of law) applicable to such Affected Party of (A) any
court, government authority charged with the
interpretation or administration of any law referred to
in clause (a)(i) or of (B) any fiscal, monetary or
other authority having jurisdiction over such Affected
Party; or
(iii) generally accepted accounting principles or
regulatory accounting principles applicable to such
Affected Party and affecting the application to such
Affected Party of any law, regulation, interpretation,
directive, requirement or request referred to in
clause (a)(i) or (a)(ii) above; or
- 16 -
<PAGE>
(b) any change in the application to such Affected
Party of any existing law, regulation, interpretation,
directive, requirement, request or accounting principles
referred to in clause (a)(i), (a)(ii) or (a)(iii) above.
"Reinvestment" has the meaning set forth in Section 1.03.
"Related Security" means, with respect to any Pool
Receivable: (a) all of Seller's and Parent's right, title and
interest in and to all Contracts that relate to such Pool
Receivable; (b) all of Seller's and Parent's interest in the
merchandise (including returned merchandise), if any, relating to
the sale which gave rise to such Pool Receivable; (c) all other
security interests or liens and property subject thereto from
time to time purporting to secure payment of such Pool
Receivable, whether pursuant to the Contract related to such Pool
Receivable or otherwise; (d) all UCC financing statements
covering any collateral securing payment of such Pool Receivable;
(e) all guarantees and other agreements or arrangements of
whatever character from time to time supporting or securing
payment of such Pool Receivable whether pursuant to the Contract
related to such Pool Receivable or otherwise; and (f) all of
Seller's right, title and interest in and to, and all of Seller's
claims under, the Purchase Agreement. The interest of Purchaser
in any Related Security is only to the extent of Purchaser's
undivided interest, as more fully described in the definition of
Asset Interest.
"Relationship Bank" has the meaning set forth in the
preamble.
"Relationship Bank Agreement" means the Relationship Bank
Agreement, dated as of September 24, 1992, among Purchaser, the
Administrator and the Relationship Bank, as such agreement may be
amended, supplemented or otherwise modified from time to time.
"Reporting Date" has the meaning set forth in
Section 3.01(a).
"S&P" means Standard & Poor's.
"Secured Parties" means Purchaser, the Administrator, the
Relationship Bank, the Indemnified Parties and the Affected
Parties.
"Security Agreement" means the Security Agreement, dated as
of September 24, 1992, between Purchaser, as grantor, and the
Collateral Agent, as secured party, as the same may be amended,
supplemented or otherwise modified from time to time.
"Seller" has the meaning set forth in the preamble.
- 17 -
<PAGE>
"Seller Information" has the meaning set forth in
Section 14.08.
"Seller's Portion of Servicing Fee" has the meaning set
forth in Section 8.01(d).
"Servicer" has the meaning set forth in Section 8.01(a).
"Servicer's Fee" accrued for any day means an amount equal
to (x) the Servicer's Fee Rate, times (y) the amount of the
Purchaser's Total Investment at the close of business on such
day, times (z) 1/360.
"Servicer's Fee Rate" (i) means ___% per annum, so long as
Parent is Servicer and (ii) such higher rate as may be charged by
any other Servicer, provided such rate is a market rate for
servicing portfolios similar to the Pool Receivables at such
time.
"Settlement Date" has the meaning set forth in
Section 3.01(c).
"Settlement Period" means a fiscal month as described on
Schedule A.
"State Street Capital" has the meaning set forth in the
preamble.
"Subsidiary" means a corporation of which Parent and/or its
other Subsidiaries own, directly or indirectly, such number of
outstanding shares as have more than 50% of the ordinary voting
power for the election of directors.
"Successor Notice" has the meaning set forth in
Section 8.01(b).
"Taxes" means, in the case of any assignee or participant of
Purchaser, taxes, levies, imposts, deductions, charges,
withholdings and liabilities, now or hereafter imposed, levied,
collected, withheld or assessed by any country (or any political
subdivision thereof), excluding income or franchise taxes imposed
on it by (i) the jurisdiction under the laws of which such
assignee or participant or Purchaser, is organized (or by any
political subdivision thereof), (ii) any jurisdiction in which an
office of such assignee or participant of Purchaser funding or
maintaining the ownership of Asset Interests is located (or any
political subdivision thereof), or (iii) any jurisdiction in
which such assignee or participant of Purchaser is already
subject to tax.
- 18 -
<PAGE>
"Termination Date" means the earliest of
(a) the date of termination (whether by scheduled
expiration, termination on default or otherwise) of either
the Liquidity Banks' commitments under the Liquidity
Agreement or the Credit Bank's commitment under the Credit
Agreement;
(b) the Purchase Termination Date;
(c) ___________, 1997; and
(d) the date on which any of the following shall
occur:
(1) Failure to obtain a Liquidity Agreement in
substitution for the then-existing Liquidity Agreement
on or before 30 days prior to the expiration of the
commitments of the Liquidity Banks thereunder; or
(2) (i) A Downgrading Event with respect to a
Liquidity Bank shall have occurred and been continuing
for not less than 45 days, (ii) the Downgraded
Liquidity Bank shall not have been replaced by a
Qualifying Liquidity Bank pursuant to a Liquidity
Agreement in form and substance acceptable to Purchaser
and the Administrator, and (iii) the commitment of such
Downgraded Liquidity Bank under the Liquidity Agreement
shall not have been funded or collateralized in such a
manner that such Downgrading Event will not result in a
reduction or withdrawal of the credit rating applied to
the Commercial Paper Notes by any of the rating
agencies then rating the Commercial Paper Notes; or
(3) Purchaser shall become an "investment
company" within the meaning of the Investment Company
Act of 1940, as amended.
"Transaction Documents" means this Agreement, the Lock-Box
Agreements, the Fee Letter, the Purchase Agreement and the other
documents to be executed and delivered in connection herewith.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the applicable jurisdiction or jurisdictions.
"Unmatured Liquidation Event" means any event which, with
the giving of notice or lapse of time, or both, would become a
Liquidation Event.
- 19 -
<PAGE>
"Unpaid Balance" of any Receivable means at any time the
unpaid principal amount thereof, excluding any Finance Charge
Receivables related thereto.
B. Other Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally
accepted accounting principles. All terms used in Article 9 of
the UCC in the State of New York, and not specifically defined
herein, are used herein as defined in such Article 9.
C. Computation of Time Periods. Unless otherwise stated
in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means
"to but excluding".
- 20 -
Exhibit 10.7
==============================================================================
CREDIT AGREEMENT
among
STRAWBRIDGE & CLOTHIER,
THE BANKS PARTY HERETO
and
PNC BANK, NATIONAL ASSOCIATION,
as Administrative Agent
CORESTATES BANK, N.A.
and
FIRST FIDELITY BANK, N.A.,
as Co-Agents
Dated as of November 21, 1995
$100,000,000 CREDIT FACILITY
==============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . 22
SECTION 2. THE CREDIT FACILITIES. . . . . . . . . . . . . . . . . . . . 23
2.1 Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.2 Committed Borrowing Procedure. . . . . . . . . . . . . . . . . 23
2.3 Competitive Bid Procedure. . . . . . . . . . . . . . . . . . . 24
2.4 Committed Loans and Competitive Loans. . . . . . . . . . . . . 27
2.5 Refinancings . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.6 L/C Commitment . . . . . . . . . . . . . . . . . . . . . . . . 29
2.7 Procedure for Issuance of Letters of Credit. . . . . . . . . . 30
2.8 L/C Fees, Commissions and Other Charges. . . . . . . . . . . . 30
2.9 L/C Participations . . . . . . . . . . . . . . . . . . . . . . 31
2.10 Reimbursement Obligation of the Company. . . . . . . . . . . . 32
2.11 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . 33
2.12 Letter of Credit Payments. . . . . . . . . . . . . . . . . . . 33
2.13 Application. . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.14 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.15 Notes; Repayment of Loans. . . . . . . . . . . . . . . . . . . 34
2.16 Interest on Loans and Payment Dates. . . . . . . . . . . . . . 35
2.17 Additional Interest; Alternate Rate of Interest. . . . . . . . 36
2.18 Termination, Reduction and Extension of
Commitments. . . . . . . . . . . . . . . . . . . . . . . . . 37
2.19 Optional Prepayment of Loans . . . . . . . . . . . . . . . . . 38
2.20 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.21 Requirements of Law. . . . . . . . . . . . . . . . . . . . . . 39
2.22 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.23 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.24 Pro Rata Treatment, etc. . . . . . . . . . . . . . . . . . . . 43
2.25 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.26 Conversion and Continuation Options. . . . . . . . . . . . . . 44
2.27 Minimum Amounts of Tranches. . . . . . . . . . . . . . . . . . 45
2.28 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 46
3.1 Corporate Status. . . . . . . . . . . . . . . . . . . . . . . . 46
3.2 Corporate Power and Authority . . . . . . . . . . . . . . . . . 46
3.3 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.4 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.5 Financial Condition . . . . . . . . . . . . . . . . . . . . . . 47
3.6 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.7 Projections . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.8 Material Adverse Change . . . . . . . . . . . . . . . . . . . . 48
3.9 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . 48
3.10 Governmental Approvals . . . . . . . . . . . . . . . . . . . . 48
3.11 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . 48
3.12 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.13 Investment Company Act; Public Utility
Holding Company Act. . . . . . . . . . . . . . . . . . . . . 49
3.14 Compliance With Law. . . . . . . . . . . . . . . . . . . . . . 49
- i -
<PAGE>
Page
----
3.15 Representations and Warranties in
Receivables Program. . . . . . . . . . . . . . . . . . . . . 50
3.16 True and Complete Disclosure . . . . . . . . . . . . . . . . . 50
3.17 Corporate Structure; Capitalization. . . . . . . . . . . . . . 50
3.18 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 50
3.19 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.20 Patents, Trademarks, etc.. . . . . . . . . . . . . . . . . . . 51
3.21 Ownership of Property. . . . . . . . . . . . . . . . . . . . . 52
3.22 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . 52
3.23 Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . 52
3.24 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . 52
3.25 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . 53
4.1 Conditions to Initial Extensions of Credit. . . . . . . . . . . 53
4.2 Conditions to Extension of Credit . . . . . . . . . . . . . . . 55
SECTION 5. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . 56
5.1 Information Covenants . . . . . . . . . . . . . . . . . . . . . 57
5.2 Books, Records and Inspections. . . . . . . . . . . . . . . . . 61
5.3 Maintenance of Insurance. . . . . . . . . . . . . . . . . . . . 61
5.4 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.5 Corporate Franchises. . . . . . . . . . . . . . . . . . . . . . 62
5.6 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . 62
5.7 Performance of Obligations. . . . . . . . . . . . . . . . . . . 62
5.8 Maintenance of Properties . . . . . . . . . . . . . . . . . . . 62
5.9 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . 63
5.10 Conduct of Business and Maintenance of Existence . . . . . . . 63
5.11 Subsequent Credit Terms. . . . . . . . . . . . . . . . . . . . 63
SECTION 6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 64
6.1 Financial Covenants.. . . . . . . . . . . . . . . . . . . . . . 64
6.2 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.3 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.4 Restriction on Fundamental Changes. . . . . . . . . . . . . . . 67
6.5 Sale of Assets. . . . . . . . . . . . . . . . . . . . . . . . . 68
6.6 Contingent Obligations. . . . . . . . . . . . . . . . . . . . . 68
6.7 Advances, Investments and Loans . . . . . . . . . . . . . . . . 68
6.8 Transactions with Affiliates. . . . . . . . . . . . . . . . . . 69
6.9 Limitation on Voluntary Payments and
Modifications of Certain Documents. . . . . . . . . . . . . . 69
6.10 Changes in Business. . . . . . . . . . . . . . . . . . . . . . 70
6.11 Certain Restrictions . . . . . . . . . . . . . . . . . . . . . 70
6.12 Sales and Leasebacks . . . . . . . . . . . . . . . . . . . . . 70
6.13 Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.14 Limitation on Dispositions of Subsidiary Stock . . . . . . . . 71
6.15 Fiscal Year; Fiscal Quarter. . . . . . . . . . . . . . . . . . 71
SECTION 7. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . 71
SECTION 8. THE AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . 75
8.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . 75
- ii -
<PAGE>
Page
----
8.2 Delegation of Duties. . . . . . . . . . . . . . . . . . . . . . 76
8.3 Exculpatory Provisions. . . . . . . . . . . . . . . . . . . . . 76
8.4 Reliance by Administrative Agent. . . . . . . . . . . . . . . . 76
8.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . 77
8.6 Non-Reliance on Administrative Agent and
Other Banks . . . . . . . . . . . . . . . . . . . . . . . . . 77
8.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 78
8.8 Administrative Agent in Its Individual Capacity . . . . . . . . 78
8.9 Successor Administrative Agent. . . . . . . . . . . . . . . . . 79
8.10 Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . . 79
8.11 Co-Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 9. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 79
9.1 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . 79
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
9.3 No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . 81
9.4 Survival of Representations and Warranties. . . . . . . . . . . 81
9.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . 81
9.6 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 82
9.7 Confidentiality; Disclosure of Information. . . . . . . . . . . 87
9.8 Adjustments; Set-off. . . . . . . . . . . . . . . . . . . . . . 87
9.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 88
9.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 88
9.11 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . 88
9.12 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . 88
9.13 Submission To Jurisdiction; Waivers. . . . . . . . . . . . . . 89
9.14 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . 89
9.15 Limitation of Liability. . . . . . . . . . . . . . . . . . . . 90
9.16 WAIVERS OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . 1
- iii -
<PAGE>
SCHEDULES
SCHEDULE I Bank and Commitment Information
SCHEDULE II Receivable Program Documents
SCHEDULE III Refinanced Debt
SCHEDULE IV List of Issuing Banks
SCHEDULE 3.8 Events Causing Material Adverse Effect
SCHEDULE 3.12 ERISA Plans
SCHEDULE 3.17 Subsidiaries; Capital Stock
SCHEDULE 3.18 Environmental Matters
SCHEDULE 3.19 Insurance
SCHEDULE 3.21 Real Property
SCHEDULE 3.25 Labor Matters
SCHEDULE 4.1(h) Locations for Searches
SCHEDULE 6.2 Existing Indebtedness
SCHEDULE 6.3 Existing Liens
SCHEDULE 6.6 Existing Contingent Obligations
EXHIBITS
EXHIBIT A-1 Form of Competitive Bid Request
EXHIBIT A-2 Form of Competitive Bid
EXHIBIT A-3 Form of Competitive Bid Accept/Reject Letter
EXHIBIT A-4 Form of Committed Borrowing Request
EXHIBIT B-1 Form of Competitive Note
EXHIBIT B-2 Form of Committed Note
EXHIBIT C Form of Opinion of Counsel to the Company
EXHIBIT D Form of Assignment and Acceptance
- iv -
<PAGE>
CREDIT AGREEMENT
AGREEMENT, dated as of November 21, 1995, among
STRAWBRIDGE & CLOTHIER, a Pennsylvania corporation (the
"Company"), the several banks and other financial institutions
from time to time parties to this Agreement (the "Banks"), PNC
BANK, NATIONAL ASSOCIATION, a national banking association, as
Administrative Agent for the Banks hereunder (in such capacity,
the "Administrative Agent"), and CORESTATES BANK, N.A. and FIRST
FIDELITY BANK, N.A., as Co-Agents for the Banks (in such
capacities the "Co-Agents").
W I T N E S S E T H:
- - - - - - - - - -
In consideration of the premises and the agreements
hereinafter set forth, and intending to be legally bound hereby,
the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Administrative Fees": as defined in Section 2.14(b).
"Affiliate": with respect to any Person, any other
Person directly or indirectly controlling (including but not
limited to all directors and officers of such Person),
controlled by, or under direct or indirect common control
with, such Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or
indirectly, the power to (i) vote 5% or more of the
securities having ordinary voting power for the election of
directors of such corporation or (ii) direct or cause the
direction of the management and policies of such
corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Agents": the collective reference to the
Administrative Agent and the Co-Agents.
"Applicable Margin": on any date, for a Base Rate Loan
or Eurodollar Committed Loan, the percentage per annum set
forth below in the column entitled Applicable Margin-Base
Rate Loans or Applicable Margin-Eurodollar Committed Loans,
as appropriate, opposite the applicable rating for the
Company's senior long-term non-credit enhanced unsecured
<PAGE>
debt by Moody's and S&P as of the last day of the
immediately preceding fiscal quarter:
Applicable Applicable
Margin-Base Margin-Eurodollar
Debt Rating Rate Loans Committed Loans
----------- ----------- -----------------
Level I 0 .20%
Level II 0 .275%
Level III 0 .325%
Level IV 0 .50%
Level V 0 .65%;
provided, however, if as of the last day of any fiscal
quarter, the applicable rating of the Company's senior
long-term non-credit enhanced unsecured debt by Moody's and
S&P shall place the Company in more than one Level, then for
purposes of calculating the Applicable Margin for the next
fiscal quarter (a) so long as neither of the Levels that the
Company is in are Levels IV or V, the Applicable Margin
shall be that applicable to the lower of the Levels that the
Company is in (i.e., the lower interest rate) and (b) if one
or both of the Levels that the Company is in are Levels IV
or V, the Applicable Margin shall be equal to the sum of the
Applicable Margin for both Levels that the Company is in
divided by two.
"Application": in respect of each Letter of Credit
issued by an Issuing Bank, an application, in such form as
such Issuing Bank may specify from time to time, requesting
issuance of such Letter of Credit.
"Asset Sale": the sale, transfer or other disposition
(whether voluntary or involuntary) by the Company or any of
its Subsidiaries (including, without limitation, by way of
the damage, destruction or condemnation thereof) to any
Person other than the Company or any Subsidiary thereof of
(a) any capital stock of any Subsidiary of the Company; (b)
substantially all the assets of any geographic or other
division or line of business of the Company and any of its
Subsidiaries; or (c) any other asset or assets (excluding
any assets purchased for sale to others in the ordinary
course of business and sales of accounts pursuant to the
Receivables Program) of the Company or any of its
Subsidiaries.
"Assignment and Acceptance": an assignment and
acceptance entered into by a Bank and an assignee, and
accepted by the Administrative Agent, in the form of
Exhibit D or such other form as shall be approved by the
Administrative Agent.
2
<PAGE>
"Available Commitments": at any particular time, an
amount equal to the excess, if any, of (a) the Commitments
at such time over (b) the sum of (i) the aggregate principal
amount of Loans then outstanding and (ii) the aggregate L/C
Obligations then outstanding.
"Base Rate": for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16th of 1%) equal to
the greater of (a) the Prime Rate in effect on such day and
(b) the Federal Funds Effective Rate in effect on such day
plus 1/2 of 1%. If for any reason the Administrative Agent
shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to
ascertain the Federal Funds Effective Rate for any reason,
including the inability or failure of the Administrative
Agent to obtain sufficient quotations in accordance with the
terms thereof, the Base Rate shall be determined without
regard to clause (b) of the first sentence of this
definition until the circumstances giving rise to such
inability no longer exist. Any change in the Base Rate due
to a change in the Prime Rate or the Federal Funds Effective
Rate shall be effective on the effective date of such change
in the Prime Rate or the Federal Funds Effective Rate, as
the case may be.
"Base Rate Borrowing": a Borrowing comprised of Base
Rate Loans.
"Base Rate Loans": Loans bearing interest at a rate
determined by reference to the Base Rate.
"Borrowing": a group of loans of a single Type made by
the Banks (or, in the case of a Competitive Borrowing, by
the Bank or Banks whose Competitive Bids have been accepted
pursuant to Section 2.3) on a single date and as to which a
single Interest Period is in effect.
"Borrowing Date": any Business Day on which a Loan is
to be made at the request of the Company under this
Agreement.
"Business Day": a day other than a Saturday, Sunday or
other day on which commercial banks in Philadelphia,
Pennsylvania or New York, New York are authorized or
required by law to close; provided, however, that, when used
in connection with a Eurodollar Loan, the term "Business
Day" shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London Interbank
Market.
3
<PAGE>
"Capital Expenditures": for any period expenditures by
the Company and its Subsidiaries during such period that, in
conformity with GAAP, are included in "capital
expenditures", "additions to property, plant or equipment"
or comparable items in the consolidated financial statements
of the Company and its Subsidiaries, exclusive of any
expenditures for net non-current assets of businesses
acquired by the Company and its Subsidiaries during that
period, including purchase price adjustments, but only to
the extent such acquisitions are permitted under subsection
6.4(b)(i)(y).
"Capital Lease": at any time, a lease with respect to
which the lessee is required to recognize the acquisition of
an asset and the incurrence of a liability in accordance
with GAAP.
"Capital Lease Obligations": all obligations of the
Company and its Subsidiaries under or in respect of Capital
Leases.
"Cash Equivalents": (a) securities issued or directly
and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided
that the full faith and credit of the United States of
America is pledged in support thereof) having maturities of
not more than 90 days from the date of acquisition, (b) time
deposits and certificates of deposit of any Bank or any
domestic commercial bank of recognized standing having
capital and surplus in excess of $500,000,000 with
maturities of not more than 90 days from the date of
acquisition, (c) fully secured repurchase obligations with a
term of not more than 7 days for underlying securities of
the types described in clause (a) entered into with any bank
meeting the qualifications specified in clause (b) above,
and (d) commercial paper issued by the parent corporation of
any Bank or any domestic commercial bank of record standing
having capital and surplus in excess of $500,000,000 and
commercial paper rated at least A-1 or the equivalent
thereof by S&P or at least P-1 or the equivalent thereof by
Moody's and in each case maturing within 90 days after the
date of acquisition.
"Change of Control": (a) any Person or group of
Persons (within the meaning of Sections 13(d) and 14(d) of
the Exchange Act) (other than any combination of G. Stockton
Strawbridge, the Company's existing executive officers, the
Company's Continuing Directors and trusts for the benefit of
themselves and their family members) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under
4
<PAGE>
the Exchange Act) of 20% or more of the outstanding shares
of any class of outstanding common stock of the Company or
(b) Continuing Directors shall cease to constitute a
majority of the board of directors of the Company.
"Continuing Director" shall mean at any date a member of the
Company's board of directors who was either a member of such
board on the Closing Date or was nominated for election to
such board by at least two-thirds of the Continuing
Directors then in office.
"Cleanup": all actions required to: (a) cleanup,
remove, treat or remediate Materials of Environmental
Concern in the indoor or outdoor environment, (b) prevent
the Release of Materials of Environmental Concern so that
they do not migrate, endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment, (c)
perform pre-remedial studies and investigations and
post-remedial monitoring and care, or (d) respond to any
government requests for information or documents in any way
relating to cleanup, removal, treatment or remediation or
potential cleanup, removal, treatment or remediation of
Materials of Environmental Concern in the indoor or outdoor
environment.
"Closing Date": the date on which the Banks make their
initial Loans.
"Code": the Internal Revenue Code of 1986, as amended
from time to time.
"Commercial Letter of Credit": as defined in Section
2.6(b)(i)(B).
"Commitment": as to any Bank, the obligation of such
Bank to make Committed Loans to and/or issue or participate
in Letters of Credit issued on behalf of the Company
hereunder in an aggregate principal amount and/or face
amount at any one time outstanding not to exceed the amount
set forth opposite such Bank's name on Schedule I, or on the
Register maintained by the Administrative Agent pursuant to
Section 9.6 as the same may be permanently terminated,
reduced and extended from time to time pursuant to the
provisions of Section 2.18.
"Commitment Percentage": as to any Bank at any time,
the percentage of the aggregate Commitments then constituted
by such Bank's Commitment (or, at any time after the
Commitments shall have expired or been terminated, the
percentage which the amount of such Bank's Exposure
constitutes of the aggregate amount of the Exposure of all
the Banks at such time).
5
<PAGE>
"Commitment Period": the period from and including the
date hereof to but not including the Termination Date or
such earlier date on which the Commitments shall terminate
as provided herein.
"Committed Borrowing": a borrowing consisting of
simultaneous Committed Loans from the Banks pursuant to
Section 2.2.
"Committed Borrowing Request": a request made pursuant
to Section 2.2 in the form of Exhibit A-4 or such other form
as shall be acceptable to the Administrative Agent.
"Committed Loans": as defined in Section 2.1. Each
Committed Loan shall be a Eurodollar Committed Loan or a
Base Rate Loan.
"Committed Note": a promissory note of the Company in
the form of Exhibit B-2 executed and delivered as provided
in Section 2.15, as the same may be amended, supplemented or
otherwise modified from time to time.
"Competitive Bid": an offer by a Bank to make a
Competitive Loan pursuant to Section 2.3.
"Competitive Bid Accept/Reject Letter": a notification
made by the Company pursuant to Section 2.3(d) in the form
of Exhibit A-3.
"Competitive Bid Rate": as to any Competitive Bid made
by a Bank pursuant to Section 2.3(b), (a) in the case of a
Eurodollar Competitive Loan, the Margin, and (b) in the case
of a Fixed Rate Loan, the fixed rate of interest offered by
the Bank making such Competitive Bid.
"Competitive Bid Request": a request made pursuant to
Section 2.3 in the form of Exhibit A-1.
"Competitive Borrowing": a borrowing consisting of a
Competitive Loan or concurrent Competitive Loans from the
Bank or Banks whose Competitive Bids for such Borrowing have
been accepted by the Company under the bidding procedure
described in Section 2.3.
"Competitive Loan": a Loan from a Bank to the Company
pursuant to the bidding procedure described in Section 2.3.
Each Competitive Loan shall be a Eurodollar Competitive Loan
or a Fixed Rate Loan.
"Competitive Note": a promissory note of the Company
in the form of Exhibit B-1 executed and delivered as
6
<PAGE>
provided in Section 2.15, as the same may be amended,
supplemented or otherwise modified from time to time.
"Compliance Certificate": as defined in Section
5.1(e).
"Consolidated Assets": at any time, the total
consolidated assets of the Company and its Subsidiaries at
such time, as determined in accordance with GAAP.
"Consolidated Capitalization": at any time, the sum of
Consolidated Total Debt at such time plus Shareholders'
Equity at such time.
"Consolidated EBITDA": for any period, the sum,
without duplication, of (a) Consolidated Net Income for such
period plus (b) Consolidated Interest Expense for such
period plus (c) federal and state income taxes deducted in
calculating Consolidated Net Income for such period, plus
(d) to the extent deducted in the calculation of
Consolidated Net Income for such period, depreciation and
amortization expense, all determined on a consolidated basis
for the Company and its Subsidiaries in accordance with
GAAP.
"Consolidated Fixed Charges": without duplication, for
any period, (a) all Consolidated Interest Expense for such
period, plus (b) Consolidated Rental Expense, all as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense": for any fiscal period
of the Company, the total interest expense (including,
without limitation, interest expense attributable to Capital
Leases in accordance with GAAP) of the Company and its
Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Income": for any period, the net
income (or loss) of the Company and its Subsidiaries on a
consolidated basis for such period (taken as a single
accounting period) determined in accordance with GAAP
provided that there shall be excluded therefrom (a) the
income (or loss) of any Person in which any other Person
(other than the Company or any of its Wholly-Owned
Subsidiaries or any directors holding qualifying shares) has
a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to the
Company or any of its Wholly-Owned Subsidiaries by such
Person during such period, (b) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary or
is merged into or consolidated with the Company or any of
7
<PAGE>
its Subsidiaries or that Person's assets are acquired by the
Company or any of its Subsidiaries, (c) the income of any
Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary of
that income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation
applicable to such Subsidiary, (d) any after tax gains or
losses attributable to Asset Sales and (e) (to the extent
not included in clauses (a) through (d) above) any net
extraordinary gains, as determined in accordance with GAAP,
or net non-cash extraordinary losses, as determined in
accordance with GAAP.
"Consolidated Net Worth": at any time, the sum of the
amount by which the total consolidated assets of the Company
and its Subsidiaries exceeds the total consolidated
liabilities of the Company and its Subsidiaries at such
time, as determined in accordance with GAAP.
"Consolidated Rental Expense": for any period, the
difference between (a) all rents accrued during such period
under operating leases under which the Company or any of its
Subsidiaries is the lessee and (b) all rents accrued during
such period under operating leases under which the Company
or any of its Subsidiaries is the lessor, in each case as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Debt": at any time, all
Indebtedness of the Company and its Subsidiaries, as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Tangible Net Worth": at any time,
Consolidated Net Worth at such time after deducting
therefrom all items classified as "intangibles" in
accordance with GAAP, including, without limitation, all
items such as goodwill, trademarks, tradenames, brand names,
service marks, patents and licenses.
"Contingent Obligation": as to any Person, any
obligation of such Person guaranteeing or intended to
guarantee any Indebtedness, leases, dividends or other
obligations ("Primary Obligations") of any other Person (the
"Primary Obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of
such Person, whether or not contingent, (a) to purchase any
such Primary Obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such Primary
Obligation or (ii) to maintain working capital or equity
capital of the Primary Obligor or otherwise to maintain the
8
<PAGE>
net worth or solvency of the Primary Obligor, (c) to
purchase property, securities or services primarily for the
purposes of assuring the owner of any such Primary
Obligation of the ability of the Primary Obligor to make
payment of such Primary Obligation or (d) otherwise to
assure or hold harmless the owner of such Primary Obligation
against loss in respect thereof; provided, however, that the
term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course
of business. The amount of any Contingent Obligation shall
be deemed to be an amount equal to the stated or
determinable amount of the Primary Obligation in respect of
which such Contingent Obligation is made or, if not stated
or determinable, the maximum anticipated liability in
respect thereof (assuming such Person is required to perform
thereunder) as determined by such Person in good faith.
"Contractual Obligation": as to any Person, any
provision of any agreement, instrument or other undertaking
to which such Person is a party or by which it or any of its
property is bound.
"Default": any of the events specified in Section 7,
whether or not any requirement for the giving of notice, the
lapse of time, or both, or any other condition precedent
therein set forth, has been satisfied.
"Dividend": in respect of any corporation (a)
dividends or other distributions on the capital stock of
such corporation (except distributions in common stock of
such corporation); (b) the redemption or acquisition of such
stock or of warrants, rights or other options to purchase
such stock (except when solely in exchange for common stock
of such corporation); and (c) any payment on account of, or
the setting apart of any assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of any share of any class of
capital stock of such corporation or any warrants or options
to purchase any such stock.
"Dollars" and "$": dollars in lawful currency of the
United States of America.
"Environmental Affiliate": with respect to any Person,
any other Person whose liability for any Environmental Claim
such Person has or may have retained, assumed or otherwise
become liable for (contingently or otherwise), either
contractually or by operation of law.
9
<PAGE>
"Environmental Approval": any permit, license,
approval, ruling, variance, exemption or other authorization
required under applicable Environmental Laws.
"Environmental Claim": with respect to any Person, any
notice, claim, demand or similar communication (written or
oral) by any other Person alleging potential liability for
investigatory costs, cleanup costs, governmental response
costs, natural resources damages, property damages, personal
injuries, fines or penalties arising out of, based on or
resulting from (a) the presence, or release into the
environment, of any Material of Environmental Concern at any
location, whether or not owned by such Person or (b)
circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
"Environmental Laws": any and all foreign, Federal,
state, local or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decrees or binding requirements
of any Governmental Authority, or binding Requirement of Law
regulating, relating to or imposing liability or standards
of conduct concerning protection of human health or the
environment, as now or may at any time hereafter be in
effect (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata),
including without limitation, laws and regulations relating
to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to
the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of
Environmental Concern.
"ERISA": the Employee Retirement Income Security Act
of 1974, as amended from time to time. Section references
to ERISA are to ERISA, as in effect at the date of this
Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Controlled Group": a group consisting of any
ERISA Person and all members of a controlled group of
corporations and all trades or businesses (whether or not
incorporated) under common control with such Person that,
together with such Person, are treated as a single employer
under regulations of the PBGC.
"ERISA Person": a "Person" as defined in Section 3(9)
of ERISA.
"ERISA Plan": (a) any Plan that (i) is not a
Multiemployer Plan and (ii) has Unfunded Benefit Liabilities
10
<PAGE>
in excess of $1,000,000 and (b) any Plan that is a
Multiemployer Plan.
"Eurocurrency Reserve Requirements": for any day as
applied to a Eurodollar Loan, the aggregate (without
duplication) of the rates (expressed as a decimal fraction)
of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of
Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect
thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.
"Eurodollar Base Rate": with respect to any Eurodollar
Loan for any Interest Period, an interest rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%)
equal to the rate determined by the Administrative Agent in
accordance with its usual procedures at which deposits in
U.S. Dollars approximately equal in principal amount to
(a) in the case of a Committed Borrowing, the Administrative
Agent's portion of such Eurodollar Borrowing and (b) in the
case of a Competitive Borrowing, a principal amount equal to
the amount that would have been the Agent's portion of such
Competitive Borrowing had such Competitive Borrowing been a
Committed Borrowing, and in each case for a maturity equal
to the applicable Interest Period, are offered by banks in
the London Interbank Market to prime banks in immediately
available funds in the London Interbank Market at
approximately 11:00 a.m., London Time, two Business Days
prior to the commencement of such Interest Period.
"Eurodollar Borrowing": a Borrowing comprised of
Eurodollar Loans.
"Eurodollar Committed Loan": any Committed Loan
bearing interest at a rate determined by reference to the
Eurodollar Rate.
"Eurodollar Competitive Loan": any Competitive Loan
bearing interest at a rate determined by reference to the
Eurodollar Rate.
"Eurodollar Loan": any Eurodollar Competitive Loan or
Eurodollar Committed Loan.
"Eurodollar Rate": with respect to each day during
each Interest Period pertaining to a Eurodollar Loan, a rate
per annum determined for such day in accordance with the
11
<PAGE>
following formula (rounded upward to the nearest 1/100th of
1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in
Section 7, provided that any requirement for the giving of
notice, the lapse of time, or both, or any other condition,
if any, has been satisfied.
"Exchange Act": the Securities Exchange Act of 1934,
as amended.
"Exposure": as to any Bank at any date, an amount
equal to the sum of (a) the aggregate principal amount of
the Loans made by such Bank then outstanding and (b) such
Bank's share of the L/C Obligations then outstanding.
"Extensions of Credit": the collective reference to
the Loans made and Letters of Credit issued under this
Agreement.
"Facility Fee": as defined in Section 2.14(a) hereof.
"Facility Fee Percentage": on each day during each
fiscal quarter of the Company, the percentage per annum set
forth below opposite the applicable rating for the Company's
senior long-term non-credit enhanced unsecured debt by
Moody's and S&P as of the last day of the immediately
preceding fiscal quarter:
Debt Rating Facility Fee Percentage
----------- -----------------------
Level I .10%
Level II .125%
Level III .175%
Level IV .25%
Level V .275%
provided, however, if as of the last day of any fiscal
quarter, the applicable rating of the Company's senior
long-term non-credit enhanced unsecured debt by Moody's and
S&P shall place the Company in more than one Level, then for
purposes of calculating the Facility Fee Percentage for the
next fiscal quarter (a) so long as neither of the Levels
that the Company is in are Levels IV or V, the Facility Fee
Percentage shall be that applicable to the lower of the
Levels that the Company is in (i.e., the lower Facility Fee
Percentage) and (b) if one or both of the Levels that the
12
<PAGE>
Company is in are Levels IV or V, the Facility Fee
Percentage shall be equal to the sum of the Facility Fee
Percentage for both Levels that the Company is in divided by
two.
"Federal Funds Effective Rate": for any day, the
weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day
of such transactions received by the Administrative Agent
from three Federal funds brokers of recognized standing
selected by it.
"Fee Letter": the letter, dated October 24, 1995,
between the Company and the Administrative Agent relating to
the payment of certain fees and expenses in connection with
the transactions contemplated hereby.
"Fees": the Facility Fee and the Administrative Fees.
"Fixed Rate Borrowing": a Borrowing comprised of Fixed
Rate Loans.
"Fixed Rate Loan": any Competitive Loan bearing
interest at a fixed percentage rate per annum (expressed in
the form of a decimal to no more than four decimal places)
specified by the Bank making such Loan in its Competitive
Bid.
"GAAP": at any time with respect to the determination
of the character or amount of any asset or liability or item
of income or expense, or any consolidation or other
accounting computation, generally accepted accounting
principles as in effect on the date of, or at the end of the
period covered by, the financial statements from which such
asset, liability, item of income, or item of expense, is
derived, or, in the case of any such computation, as in
effect on the date when such computation is required to be
determined.
"Governmental Authority": any nation or government,
any state or other political subdivision thereof and any
entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
"Indebtedness": of any Person, without duplication,
(a) all indebtedness of such Person for borrowed money or
13
<PAGE>
for the deferred purchase price of property or services
(other than trade payables or other expenses on terms of 90
days or less incurred in the ordinary course of business of
such Person), (b) all indebtedness of such Person evidenced
by a note, bond, debenture or similar instrument, (c) the
principal component of all Capital Lease Obligations of such
Person, (d) the face amount of all letters of credit issued
for the account of such Person and, without duplication, all
unreimbursed amounts drawn thereunder, (e) all indebtedness
of any other Person secured by any Lien on any property
owned by such Person, whether or not such indebtedness has
been assumed, (f) all Contingent Obligations of such Person,
(g) all payment obligations of such Person under any
interest rate protection agreement (including, without
limitation, any interest rate swaps, caps, floors, collars
and similar agreements) and currency swaps and similar
agreements and (h) all indebtedness created or arising under
any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the
rights and remedies of the seller or lender thereunder upon
a default are limited to repossession or sale of such
property).
"Interest Payment Date": (a) as to any Base Rate Loan,
the last day of each March, June, September and December to
occur while such Loan is outstanding, (b) as to any
Eurodollar Loan or Fixed Rate Loan having an Interest Period
of three months or less, the last day of such Interest
Period, and (c) as to any Eurodollar Loan or Fixed Rate Loan
having an Interest Period longer than three months, each day
which is three months, or a whole multiple thereof, after
the first day of such Interest Period and the last day of
such Interest Period.
"Interest Period": (a) with respect to any Eurodollar
Committed Loan:
(i) initially the period commencing on the
borrowing or conversion date, as the case may be, with
respect to such Eurodollar Loan and ending one, two,
three or six months thereafter, as selected by the
Company in its notice of borrowing or notice of
conversion, given with respect thereto; and
(ii) thereafter, each period commencing on the
last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two,
three or six months thereafter, as selected by the
Company by irrevocable notice to the Administrative
Agent not less than three Business Days prior to the
14
<PAGE>
last day of the then current Interest Period with
respect thereto;
(b) with respect to any Fixed Rate Loan or Eurodollar
Competitive Loan, the period commencing on the date of such
Loan and ending on the date specified in the Competitive Bid
in which the offer to make such Loan was extended, which
shall not be earlier than seven (7) days after the date of
the making of such Loan nor later than one-hundred eighty
(180) days after the making of such Loan;
provided that, the foregoing provisions relating to Interest
Periods are subject to the following:
(i) if any Interest Period would end on a day
other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless,
with respect to Eurodollar Loans only, such next
succeeding Business Day would fall in the next calendar
month, in which case such Interest Period shall end on
the next preceding Business Day;
(ii) with respect to Eurodollar Loans, any
Interest Period that begins on the last 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 end on the last
Business Day of a calendar month;
(iii) an Interest Period that otherwise would
extend beyond the Termination Date shall end on the
Termination Date; and
(iv) the Company shall select Interest Periods so
as not to require a payment or prepayment of any
Eurodollar Loan during an Interest Period for such
Loan.
"Investment Grade Rating Event": the outstanding,
unsecured, long-term, non-credit enhanced debt securities of
the Company are rated BBB- or higher by S&P or Baa3 or
higher by Moody's for a period of not less than thirty
consecutive days.
"Investments": as defined in Section 6.7.
"Island Avenue Distribution Facility": The Company's
distribution facility located at 4800 Island Avenue,
Philadelphia, Pennsylvania, as such facility is subject to
condemnation proceedings evidenced by the Declaration of
Taking filed by the City of Philadelphia on August 4, 1995
15
<PAGE>
in the Philadelphia Court of Common Pleas, July Term 1995
(#4508).
"Issuing Bank": each Bank listed as an Issuing Bank in
Schedule IV, or such other Banks designated by the Company
to be Issuing Banks and approved by the Required Banks.
"L/C Commitment": $10,000,000.
"L/C Fee Payment Date": the last day of each March,
June, September and December.
"L/C Obligations": at any time, an amount equal to the
sum of (a) 100% of the maximum amount available to be drawn
under all Letters of Credit outstanding at such time
(determined without regard to whether any conditions to
drawing could be met at such time) and (b) the aggregate
amount of drawings under Letters of Credit which have not
then been reimbursed pursuant to Section 2.10(a).
"L/C Participant": in respect of each Letter of
Credit, each Bank (other than the Issuing Bank in respect of
such letter of credit) in its capacity as the holder of a
participating interest in such Letter of Credit.
"Letter of Credit": as defined in Section 2.6(a).
"Level I": the debt rating of the Company shall be in
Level I when the Company's senior long-term non-credit
enhanced unsecured debt shall be rated either (a) A- or
higher by S&P or (b) A3 or higher by Moody's.
"Level II": the debt rating of the Company shall be in
Level II when the Company's senior long-term non-credit
enhanced unsecured debt shall be rated either (a) BBB or
higher by S&P (but below A-) or (b) Baa2 or higher by
Moody's (but below A3).
"Level III": the debt rating of the Company shall be
in Level III when the Company's senior long-term non-credit
enhanced unsecured debt shall be rated either (a) BBB- by
S&P or (b) Baa3 by Moody's.
"Level IV": the debt rating of the Company shall be in
Level IV when the Company's senior long-term non-credit
enhanced unsecured debt shall be rated either (a) BB+ by S&P
or (b) Ba1 by Moody's.
"Level V": the debt of the Company shall be in Level V
when the Company's senior long-term non-credit enhanced
unsecured debt shall be rated either (a) BB or below
16
<PAGE>
(including not being rated) by S&P or (b) Ba2 or below
(including not being rated) by Moody's.
"Leverage Ratio": as of any date, the ratio on such
date of (a) Consolidated Total Debt on such date to (b)
Consolidated Capitalization on such date.
"Lien": any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien
(statutory or other), charge or other security interest or
any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or
other title retention agreement and any Capital Lease having
substantially the same economic effect as any of the
foregoing).
"Loan": a Competitive Loan or a Committed Loan.
"Loan Documents": this Agreement, the Notes and the
Applications.
"Margin": as to any Eurodollar Competitive Loan, the
margin (expressed as a percentage rate per annum in the form
of a decimal to no more than four decimal places) to be
added to the Eurodollar Rate in order to determine the
interest rate applicable to such Loan, as specified in the
Competitive Bid relating to such Loan.
"Margin Stock": as defined in Regulation U and
Regulation G of the Federal Reserve Board.
"Material Adverse Effect": a material adverse effect
on (a) the business, operations, property or condition
(financial or otherwise) of the Company, (b) the ability of
the Company to perform its obligations under this Agreement,
the Notes or any other Loan Documents or (c) the validity or
enforceability of this Agreement, the Notes or any other
Loan Documents or the rights and remedies of the
Administrative Agent or the Banks hereunder or thereunder.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or
petroleum products or any hazardous or toxic substances,
materials or wastes, defined or regulated as such in or
under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphynels, and ureaformaldehyde
insulation.
"Maximum Amount": as defined in Section 6.1(d).
17
<PAGE>
"Moody's": Moody's Investors Services, Inc.
"Multiemployer Plan": a Plan which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"Notes": the collective reference to the Competitive
Note and the Committed Notes.
"Participant": as defined in Section 9.6(f).
"PBGC": the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other
entity of whatever nature.
"Plan": any employee benefit plan covered by Title IV
of ERISA, the funding requirements of which:
(a) were the responsibility of the Company or a
member of its ERISA Controlled Group at any time within
the five years immediately preceding the Closing Date,
(b) are currently the responsibility of the
Company or a member of its ERISA Controlled Group, or
(c) hereafter become the responsibility of the
Company or a member of its ERISA Controlled Group,
including any such plans as may have been, or may hereafter
be, terminated for whatever reason.
"PNC": PNC Bank, National Association.
"Prime Rate": the rate of interest per annum publicly
announced from time to time by PNC as its prime rate in
effect at its principal office in Pittsburgh, Pennsylvania;
each change in the Prime Rate shall be effective on the date
such change is publicly announced as effective.
"Principal Financial Officer": the Company's
President, Treasurer or Assistant Treasurer.
"Purchasing Bank": as defined in Section 9.6(b).
"Receivables Program": the credit card receivables
securitization program conducted by the Company and the
Receivables Subsidiary pursuant to the Receivables Program
Documents.
18
<PAGE>
"Receivables Program Documents": the documents listed
on Schedule II hereto, and all other documentation,
agreements and instruments entered into in connection
therewith, as the same may hereafter be amended, modified or
supplemented from time to time in accordance with the
provisions hereof and thereof.
"Receivables Subsidiary": S&C, Funding, Inc., a
Delaware corporation.
"Refinanced Debt": the Indebtedness of the Company
identified on Schedule III hereto to be repaid in full on
the Closing Date with the proceeds of the initial Loans and
the initial proceeds of the Receivables Program.
"Register": as defined in Section 9.6(d).
"Regulation D": Regulation D of the Federal Reserve
Board as from time to time in effect and any successor to
all or any portion thereof.
"Regulation U": Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in
effect, and all official rulings and interpretations
thereunder or thereof.
"Regulation X": Regulation X of the Board of Governors
of the Federal Reserve System as from time to time in
effect, and all official rulings and interpretations
thereunder or thereof.
"Reimbursement Obligation": in respect of each Letter
of Credit, the obligation of the Company to reimburse the
Issuing Bank of such Letter of Credit for all drawings made
thereunder in accordance with Section 2.10(a) and the
Application related to such Letter of Credit for amounts
drawn under such Letter of Credit.
"Release": any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, ambient air,
surface water, groundwater, and surface or subsurface
strata) or into or out of any property, including the
movement of Materials of Environmental Concern through or in
the air, soil, surface water, groundwater or property.
"Reorganization": with respect to any Multiemployer
Plan, the condition that such plan is in reorganization
within the meaning of Section 4241 of ERISA.
19
<PAGE>
"Reportable Event": as defined in Section 4043(b) of
ERISA (other than a Reportable Event as to which the
provision of 30 days' notice to the PBGC is waived under
applicable regulations), or is the existence of any
condition or the occurrence of any of the events described
in Section 4068(f) or 4063(a) of ERISA.
"Required Banks": at any time, Banks the Commitment
Percentages of which aggregate at least 61%.
"Requirement of Law": as to any Person, the
Certificate of Incorporation and By-Laws or other
organizational or governing documents of such Person, and
any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in
each case binding upon such Person or any of its property or
to which such Person or any of its property is subject.
"Responsible Officer": the chairman or the president
of the Company or, with respect to financial matters, a
Principal Financial Officer.
"S&P": Standard & Poor's Rating Group, a division of
McGraw Hill Corporation.
"Security": "security" as defined in Section 2(1) of
the Securities Act of 1933, as amended.
"Shareholder's Equity": at any time, shareholders'
equity as would be shown on a consolidated balance sheet of
the Company and its Subsidiaries at such time prepared in
accordance with GAAP.
"Solvent": as to any Person, that (a) the sum of the
assets of such Person, both at a fair valuation and at
present fair salable value, will exceed its liabilities,
including contingent liabilities, (b) such Person will have
sufficient capital with which to conduct its business as
presently conducted and as proposed to be conducted and (c)
such Person has not incurred debts, and does not intend to
incur debts, beyond its ability to pay such debts as they
mature. For purposes of this definition, "debt" means any
liability on a claim, and "claim" means (i) a right to
payment, whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured,
or unsecured, or (ii) a right to an equitable remedy for
breach of performance if such breach gives rise to a right
to payment, whether or not such right to an equitable remedy
is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured. With
20
<PAGE>
respect to any contingent liabilities, such liabilities
shall be computed at the amount which, in light of all the
facts and circumstances existing at the time, represents the
amount which can reasonably be expected to become an actual
or matured liability.
"Special Charge": the one-time provision for
uncollectible accounts receivable taken in the fourth
quarter of fiscal year 1994 in the amount of $1,700,000.
"Standby Letter of Credit": as defined in Section
2.6(b)(i)(A).
"Subsidiary": as to any Person, a corporation,
partnership or other entity of which shares of stock or
other ownership interests having ordinary voting power
(other than stock or such other ownership interests having
such power only be reason of the happening of a contingency)
to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity
are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or
more intermediaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary
or Subsidiaries of the Company.
"Taxes": as defined in Section 2.22(a).
"Termination Date": November 20, 1998 or any
anniversary of such date to which the Termination Date shall
have been extended pursuant to Section 2.18(d) hereof.
"Termination Event": (a) a Reportable Event, or (b)
the initiation of any action by the Company, any member of
the Company's ERISA Controlled Group or any ERISA Plan
fiduciary to terminate an ERISA Plan or the treatment of an
amendment to an ERISA Plan as a termination under ERISA, or
(c) the institution of proceedings by the PBGC under Section
4042 of ERISA to terminate an ERISA Plan or to appoint a
trustee to administer any ERISA Plan.
"Total Commitment": at any time the aggregate amount
of the Banks' Commitments, as in effect at such time.
"Tranche": the collective reference to Eurodollar
Committed Loans and Competitive Loans, in each case whose
Interest Periods begin on the same date and end on the same
later date (whether or not such Loans originally were made
on the same day).
21
<PAGE>
"Transaction Documents": the Loan Documents and the
Receivables Program Documents.
"Transactions": each of the transactions contemplated
by the Transaction Documents.
"Type": when used in respect of any Loan or Borrowing,
shall refer to the Rate by reference to which interest on
such Loan or on the Loans comprising such Borrowing is
determined. For purposes hereof, "Rate" shall include the
Eurodollar Rate, the Base Rate and the Fixed Rate.
"Unfunded Benefit Liabilities": with respect to any
Plan at any time, the amount (if any) by which (a) the
present value of all nonforfeitable accrued benefits under
such Plan to the extent such benefits are insured and
guaranteed under Title IV of ERISA exceeds (b) the fair
market value of all Plan assets allocable to such benefits,
all determined as of the then most recent valuation dates
for such Plan (on the basis of assumptions prescribed by the
PBGC for the purpose of Section 4044 of ERISA or, to the
extent applicable, the interest rate prescribed under the
Uruguay Round Agreements Act).
"Uniform Customs": the Uniform Customs and Practice
for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, as the same may be
amended, supplemented or otherwise modified from time to
time.
"Wholly-Owned Subsidiary": at any time, any Subsidiary
one hundred percent (100%) of all of the equity Securities
(except directors' qualifying shares) and voting Securities
of which are owned by any one or more of the Company and the
Company's other Wholly-Owned Subsidiaries at such time.
1.2 Other Definitional Provisions. (a) Unless
otherwise specified therein, all terms defined in this Agreement
shall have the defined meanings when used in the Notes or any
certificate or other document made or delivered pursuant hereto.
(b) As used herein and in the Notes, and any
certificate or other document made or delivered pursuant hereto,
accounting terms relating to the Company and its Subsidiaries not
defined in Section 1.1 and accounting terms partly defined in
Section 1.1, to the extent not defined, shall have the respective
meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular
22
<PAGE>
provision of this Agreement, and Section, subsection, Schedule
and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein
shall be equally applicable to both the singular and plural forms
of such terms.
SECTION 2. THE CREDIT FACILITIES
2.1 Commitments. Subject to the terms and conditions
and relying upon the representations and warranties herein set
forth, each Bank, severally and not jointly, agrees to make
revolving credit loans in Dollars (the "Committed Loans") to the
Company from time to time during the Commitment Period, in an
aggregate principal amount at any time outstanding which, when
added to such Bank's Commitment Percentage of the then
outstanding L/C Obligations, does not exceed the amount of such
Bank's Commitment; provided, however, that no Committed Loan
shall be made if, after giving effect to the making of such
Committed Loan and the simultaneous application of the proceeds
thereof, the sum of (i) the aggregate principal amount of all
Loans then outstanding and (ii) the L/C Obligations then
outstanding would exceed the Total Commitment in effect at such
time. The Commitments may be terminated or reduced from time to
time pursuant to Section 2.18. Within the foregoing limits, the
Company may borrow, repay and reborrow hereunder on or after the
date hereof and prior to the Termination Date, subject to the
terms, provisions and limitations set forth herein.
2.2 Committed Borrowing Procedure. In order to
request a Committed Borrowing, the Company shall hand deliver or
telecopy (or notify by telephone and promptly confirm by hand
delivery or telecopy) to the Administrative Agent the information
requested by the form of Committed Borrowing Request attached as
Exhibit A-4 hereto (a) in the case of a Eurodollar Committed
Borrowing, not later than 11:00 a.m., Philadelphia time, three
Business Days before a proposed Borrowing and (b) in the case of
a Base Rate Borrowing, not later than 11:00 a.m., Philadelphia
time, on the day of a proposed Borrowing. No Fixed Rate Loan
shall be requested or made pursuant to a Committed Borrowing
Request. Such notice shall be irrevocable and shall in each case
specify (i) the principal amount of the Committed Borrowing being
requested, (ii) whether the Committed Borrowing then being
requested is to be a Eurodollar Committed Borrowing or a Base
Rate Borrowing; (iii) the date of such Committed Borrowing (which
shall be a Business Day) and the amount thereof; and (iv) if such
Borrowing is to be a Eurodollar Committed Borrowing, the Interest
Period with respect thereto. If no election as to the Type of
Committed Borrowing is specified in any such notice, then the
23
<PAGE>
requested Committed Borrowing shall be a Base Rate Borrowing. If
no Interest Period with respect to any Eurodollar Committed
Borrowing is specified in any such notice, then the Company shall
be deemed to have selected an Interest Period of one month's
duration. The Administrative Agent shall promptly advise the
Banks of any notice given pursuant to this Section 2.2 and of
each Bank's portion of the requested Borrowing.
2.3 Competitive Bid Procedure. (a) The Company may
request the Banks to make Competitive Bids; provided that, no
Competitive Loan(s) shall be made (i) if, after giving effect to
the making of such Loan(s) and the simultaneous application of
the proceeds thereof, the sum of the aggregate principal amount
of all Loans then outstanding and the L/C Obligations then
outstanding would exceed the Total Commitment in effect at such
time or (ii) unless an Investment Grade Rating Event shall exist
at such time. In order to request Competitive Bids, the Company
shall hand deliver or telecopy to the Administrative Agent a duly
completed Competitive Bid Request in the form of Exhibit A-1
hereto, to be received by the Administrative Agent (i) in the
case of a Eurodollar Competitive Borrowing, not later than
11:00 a.m., Philadelphia time, four Business Days before a
proposed Competitive Borrowing and (ii) in the case of a Fixed
Rate Borrowing, not later than 11:00 a.m., Philadelphia time, one
Business Day before a proposed Competitive Borrowing. No Base
Rate Loan shall be requested in or made pursuant to a Competitive
Bid Request. A Competitive Bid Request that does not conform
substantially to the format of Exhibit A-1 may be rejected in the
Administrative Agent's sole discretion, and the Administrative
Agent shall promptly notify the Company of such rejection by
telecopier. Each request for Competitive Bids shall refer to
this Agreement and specify (x) whether the Competitive Borrowing
then being requested is to be a Eurodollar Borrowing or a Fixed
Rate Borrowing, (y) the date of such Borrowing (which shall be a
Business Day) and the aggregate principal amount thereof which
shall be in a minimum principal amount of $5,000,000 or a whole
multiple of $500,000 in excess thereof, and (z) the Interest
Period with respect thereto (which may not end after the
Termination Date). The Company may request offers to make
Competitive Loans for more than one but no more than three
Interest Periods in a single Competitive Bid Request. Promptly
after its receipt of a Competitive Bid Request that is not
rejected as aforesaid, the Administrative Agent shall invite by
telecopier the Banks to bid, on the terms and conditions of this
Agreement, to make Competitive Loans pursuant to the Competitive
Bid Request.
(b) Each Competitive Bid by a Bank must be
received by the Administrative Agent via telecopier, in the form
of Exhibit A-2 hereto, (i) in the case of a Eurodollar
Competitive Borrowing, not later than 10:00 a.m., Philadelphia
24
<PAGE>
time, three Business Days before a proposed Competitive Borrowing
and (ii) in the case of a Fixed Rate Borrowing, not later than
10:00 a.m., Philadelphia time, on the day of a proposed
Competitive Borrowing. Multiple bids by a Bank will be accepted
by the Administrative Agent, provided that, no Bank shall make
more than five separate Competitive Bids with respect to each
Interest Period specified in the related Competitive Bid Request.
Competitive Bids that do not conform substantially to the format
of Exhibit A-2 may be rejected by the Administrative Agent and
the Administrative Agent shall notify the Bank making such
nonconforming bid of such rejection as soon as practicable. Each
Competitive Bid shall refer to this Agreement and specify (x) the
principal amount (which shall be in a minimum principal amount of
$5,000,000 or a whole multiple of $500,000 in excess thereof and
which may equal the entire principal amount of the Competitive
Borrowing requested by the Company) of the Competitive Loan or
Loans that the Bank is willing to make to the Company, (y) the
Competitive Bid Rate or Rates at which the Bank is prepared to
make the Competitive Loan or Loans and (z) the Interest Period
and the last day thereof. If any Bank shall elect not to make a
Competitive Bid, such Bank shall so notify the Administrative
Agent via telecopier (I) in the case of Eurodollar Competitive
Loans, not later than 10:00 a.m., Philadelphia time, three
Business Days before a proposed Competitive Borrowing, and (II)
in the case of Fixed Rate Loans, not later than 10:00 a.m.,
Philadelphia time, on the day of a proposed Competitive
Borrowing; provided, however, that failure by any Bank to give
such notice shall not cause such Bank to be obligated to make any
Competitive Loan as part of such Competitive Borrowing. A
Competitive Bid submitted by a Bank pursuant to this paragraph
(b) shall be irrevocable.
(c) The Administrative Agent shall promptly (but
not later than 10:30 a.m., Philadelphia time, on the date of a
proposed Competitive Borrowing) notify the Company by telecopier
of each Competitive Bid made, and the relevant Competitive Bid
Rate, Interest Period and principal amount of each such
Competitive Bid and the identity of the Bank that made such bid.
The Administrative Agent shall send a copy of all Competitive
Bids to the Company for its records as soon as practicable after
completion of the bidding process set forth in this Section 2.3.
(d) The Company may in its sole and absolute
discretion, subject only to the provisions of this paragraph (d),
accept or reject any Competitive Bid or portion thereof referred
to in paragraph (c) above. The Company shall notify the
Administrative Agent by telephone, confirmed by telecopier in the
form of a Competitive Bid Accept/Reject Letter, whether and to
what extent it has decided to accept or reject any or all of the
bids referred to in paragraph (c) above, (x) in the case of a
Eurodollar Competitive Borrowing, not later than 11:00 a.m.,
25
<PAGE>
Philadelphia time, three Business Days before a proposed
Competitive Borrowing, and (y) in the case of a Fixed Rate
Borrowing, not later than 11:00 a.m., Philadelphia time, on the
day of a proposed Competitive Borrowing; provided, however, that
(i) the failure by the Company to give such notice prior to the
relevant time shall be deemed to be a rejection of all the bids
referred to in paragraph (c) above, (ii) the Company shall not
accept a bid or portion thereof made at a particular Competitive
Bid Rate if the Company has decided to reject a bid made at a
lower Competitive Bid Rate, (iii) the aggregate amount of the
Competitive Bids accepted by the Company shall not exceed the
principal amount specified in the Competitive Bid Request, (iv)
if the Company wants to accept a bid or bids made at a particular
Competitive Bid Rate but the amount of such bid or bids would
cause the total amount of bids to be accepted by the Company to
exceed the amount specified in the Competitive Bid Request, then
the Company shall accept a portion of such bid or bids in an
amount equal to the amount specified in the Competitive Bid
Request less the amount of all other Competitive Bids accepted
with respect to such Competitive Bid Request, which acceptance,
in the case of multiple bids at such Competitive Bid Rate, shall
be made pro rata in accordance with the amount of each such bid
at such Competitive Bid Rate, and (v) except pursuant to
clause (iv) above, no bid shall be accepted for a Competitive
Loan unless such Competitive Loan is in a minimum principal
amount of $5,000,000 or a whole multiple of $500,000 in excess
thereof; provided further, however, that if a Competitive Loan
must be in an amount less than $5,000,000 because of the
provisions of clause (iv) above, such Competitive Loan must be
for a minimum of $500,000 or any integral multiple thereof, and
in calculating the pro rata allocation of acceptances of portions
of multiple bids at a particular Competitive Bid Rate pursuant to
clause (iv) the amounts shall be rounded to integral multiples of
$500,000 in a manner which shall be in the discretion of the
Company. A notice given by the Company pursuant to this
paragraph (d) shall be irrevocable.
(e) The Administrative Agent shall promptly
notify each bidding Bank whether or not its Competitive Bid has
been accepted (and if so, in what amount and at what Competitive
Bid Rate) by telecopy sent by the Administrative Agent, and each
successful bidder will thereupon become bound, subject to the
other applicable conditions hereof, to make the Competitive Loan
in respect of which its bid has been accepted.
(f) A Competitive Bid Request shall not be made
within five Business Days after the date of any previous
Competitive Bid Request.
(g) If the Administrative Agent shall elect to
submit a Competitive Bid in its capacity as a Bank, it shall
26
<PAGE>
submit such bid directly to the Company one half of an hour
earlier than the latest time at which the other Banks are
required to submit their bids to the Administrative Agent
pursuant to paragraph (b) above.
(h) All Notices required by this Section 2.3
shall be given in accordance with Section 9.2.
(i) Simultaneously with sending to the
Administrative Agent a Competitive Bid Request, the Company shall
pay to the Administrative Agent a fee in the amount set forth in
the Fee Letter.
2.4 Committed Loans and Competitive Loans. (a) Each
Committed Loan shall be made as part of a Borrowing consisting of
Loans made by the Banks ratably in accordance with their
Commitment Percentages; provided, however, that the failure of
any Bank to make any Committed Loan shall not in itself relieve
any other Bank of its obligation to lend hereunder (it being
understood, however, that no Bank shall be responsible for the
failure of any other Bank to make any Loan required to be made by
such other Bank). Each Borrowing of Eurodollar Committed Loans
shall be in a minimum aggregate principal amount equal to
$5,000,000 or a whole multiple of $500,000 in excess thereof (or
if the aggregate Available Commitments at such time are less than
$5,000,000, such lesser amount). Each Borrowing of Base Rate
Loans shall be in a minimum aggregate principal amount equal to
$2,500,000 or a whole multiple of $100,000 in excess thereof (or
if the aggregate Available Commitments at such time are less than
$2,500,000, such lesser amount). Each Competitive Loan shall be
made in accordance with the procedures set forth in Section 2.3.
Each Borrowing of Competitive Loans shall be in the minimum
principal amounts set forth in subsection 2.3(d).
(b) The Committed Loans may from time to time be
(i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination
thereof, as determined by the Company and notified to the
Administrative Agent in accordance with Sections 2.2, 2.5 and
2.26; provided that, no Committed Loan shall be made as a
Eurodollar Loan after the date that is one month prior to the
Termination Date. Each Competitive Borrowing shall be comprised
entirely of Eurodollar Competitive Loans or Fixed Rate Loans.
Borrowings of more than one Type may be outstanding at the same
time. The Company may not, however, at any time have more than
(i) seven Tranches of Eurodollar Committed Loans and Competitive
Loans outstanding if no Base Rate Loans are outstanding, or
(ii) six Tranches of Eurodollar Committed Loans and Competitive
Loans outstanding if Base Rate Loans are outstanding.
(c) Subject to Section 2.5, each Bank shall make
each Committed Loan or Competitive Loan to be made by it
27
<PAGE>
hereunder on the proposed date thereof by wire transfer of
immediately available funds to the Administrative Agent in
Philadelphia, Pennsylvania, not later than 12:00 noon,
Philadelphia time, and the Administrative Agent shall by
3:00 p.m., Philadelphia time, credit the amounts so received to
the general deposit account of the Company with the
Administrative Agent. Competitive Loans shall be made by the
Bank or Banks whose Competitive Bids therefor are accepted
pursuant to Section 2.3 in the amounts so accepted and Committed
Loans shall be made by the Banks pro rata in accordance with
Section 2.24. 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 portion of such Borrowing, the Administrative
Agent may assume that such Bank has made such portion available
to the Administrative Agent on the date of such Borrowing in
accordance with this paragraph (c) and the Administrative Agent
may, in reliance upon such assumption, make available to the
Company on such date a corresponding amount. If and to the
extent that such Bank shall not have made such portion available
to the Administrative Agent, such Bank and the Company (without
prejudice to the Company's rights against such Bank) 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
Company until the date such amount is repaid to the
Administrative Agent at (i) in the case of the Company, the
interest rate applicable at the time to the Loans comprising such
Borrowing and (ii) in the case of such Bank, the Federal Funds
Effective Rate; provided that, if such Bank shall not pay such
amount within three Business Days of the date of such Borrowing,
the interest rate on such overdue amount shall, at the expiration
of such three-Business Day period, be the rate per annum then
applicable to Base Rate Loans. If such Bank shall repay to the
Administrative Agent such corresponding amount, such amount shall
constitute such Bank's Loan as part of such Borrowing for
purposes of this Agreement.
(d) Notwithstanding any other provision of this
Agreement, the Company shall not be entitled to request any
Borrowing if the Interest Period requested with respect thereto
would end after the Termination Date.
2.5 Refinancings. The Company may refinance all or
any part of a Committed Borrowing with a Competitive Borrowing or
a Competitive Borrowing with a Committed Borrowing, subject to
the conditions and limitations set forth herein and elsewhere in
this Agreement. Any Borrowing or part thereof so refinanced
shall be deemed to be repaid in accordance with Section 2.15 with
the proceeds of a new Borrowing hereunder and the proceeds of the
new Borrowing, to the extent they do not exceed the principal
28
<PAGE>
amount of the Borrowing being refinanced, shall not be paid by
the Banks to the Administrative Agent or by the Administrative
Agent to the Company pursuant to Section 2.4(c); provided,
however, that (i) if the principal amount extended by a Bank in a
refinancing is greater than the principal amount extended by such
Bank in the Borrowing being refinanced, then such Bank shall pay
such difference to the Administrative Agent for distribution to
the Banks described in (ii) below, (ii) if the principal amount
extended by a Bank in the Borrowing being refinanced is greater
than the principal amount agreed to be extended by such Bank in
the refinancing, the Administrative Agent shall return the
difference to such Bank out of amounts received pursuant to (i)
above, and (iii) to the extent any Bank fails to pay the
Administrative Agent amounts due from it pursuant to (i) above,
any Loan or portion thereof being refinanced with such amounts
shall not be deemed repaid in accordance with Section 2.15 and
shall be payable by the Company without prejudice to the
Company's rights against any such Bank.
2.6 L/C Commitment. (a) Subject to the terms and
conditions hereof, each Issuing Bank, in reliance on the
agreements of the other Banks set forth in subsection 2.9(a),
agrees to issue letters of credit ("Letters of Credit") for the
account of the Company on any Business Day during the Commitment
Period in such form as may be approved from time to time by such
Issuing Bank; provided, that no Letter of Credit shall be issued
if, after giving effect thereto (i) the sum of (x) the aggregate
amount of the Loans then outstanding and (y) the L/C Obligations
then outstanding would exceed the Total Commitment in effect at
such time, or (ii) the aggregate amount of the L/C Obligations at
such time would exceed the L/C Commitment.
(b) Each Letter of Credit shall;
(i) be denominated in Dollars and shall be
(A) a standby letter of credit (a "Standby Letter of
Credit"), or (B) a commercial letter of credit issued in
respect of the purchase of goods or services (a "Commercial
Letter of Credit") by the Company in the ordinary course of
business; and
(ii) expire no later than the earlier of
(A) 360 days after its date of issuance and (B) 5 Business
Days prior to the Termination Date.
(c) Each Letter of Credit shall be subject to the
Uniform Customs and, to the extent not inconsistent therewith,
the laws of the Commonwealth of Pennsylvania.
(d) Each Issuing Bank shall not at any time be
obligated to issue any Letter of Credit hereunder if such
29
<PAGE>
issuance would conflict with, or cause such Issuing Bank or any
L/C Participant to exceed any limits imposed by, any applicable
Requirement of Law.
2.7 Procedure for Issuance of Letters of Credit. The
Company may from time to time request that an Issuing Bank issue
a Letter of Credit by delivering to such Issuing Bank at its
office for notices specified herein an Application therefor,
completed to the satisfaction of such Issuing Bank, and such
other certificates, documents and other papers and information as
such Issuing Bank may reasonably request. Upon receipt by an
Issuing Bank of any Application, such Issuing Bank will process
such Application and the certificates, documents and other papers
and information delivered to it in connection therewith in
accordance with its customary procedures and shall, after
determining from the Administrative Agent that issuance of the
Letter of Credit requested thereby will be within the limits
imposed by subsection 2.6(a), promptly issue such Letter of
Credit (but in no event shall an Issuing Bank be required to
issue any Letter of Credit earlier than four (4) Business Days
after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating
thereto) by issuing the original of such Letter of Credit to the
beneficiary thereof or as otherwise may be agreed by such Issuing
Bank and the Company. Each Issuing Bank shall advise the
Administrative Agent of the terms of a Letter of Credit on the
date of issuance thereof and shall promptly after issuing a
Standby Letter of Credit furnish copies thereof to the Company
and the Administrative Agent for distribution to the Banks. In
addition, each Issuing Bank shall within ten days after the end
of each month, send to the Administrative Agent, for distribution
to the Company and each Bank, a schedule of outstanding Letters
of Credit issued by such Issuing Bank as of the end of the prior
month detailing for each such outstanding Letter of Credit
(i) the face amount outstanding, (ii) its issuance date,
(iii) its maturity date, (iv) the name of the beneficiary and
(v) the identifying Letter of Credit number.
2.8 L/C Fees, Commissions and Other Charges. (a) The
Company shall pay to the Administrative Agent, for the account of
the Banks (including the Issuing Banks) pro rata according to
their respective Commitment Percentages, a letter of credit
commission with respect to each Letter of Credit, computed at a
rate equal to the then Applicable Margin for Eurodollar Committed
Loans on the daily average undrawn face amount of such Letter of
Credit (computed on the basis of the actual number of days such
Letter of Credit is outstanding in a year of 360 days). Such
commissions shall be payable in arrears on the last Business Day
of each March, June, September and December to occur after the
date of issuance of each Letter of Credit, and on the Termination
Date or such earlier date as the Commitments are terminated, and
30
<PAGE>
shall be nonrefundable. The Company shall also pay to each
Issuing Bank, in respect of each Letter of Credit issued by such
Issuing Bank, a fronting fee for the period from and including
the date of issuance of such Letter of Credit to and including
the date of termination of such Letter of Credit computed at the
rate of 1/8% per annum on the daily average undrawn face amount
of such Letter of Credit (computed on the basis of the actual
number of days such Letter of Credit is outstanding in a year of
360 days). The fees described in the preceding sentence shall be
due and payable quarterly in arrears on the last Business Day of
each March, June, September and December of each year and on the
Termination Date or such earlier date as the Commitments are
terminated, and shall be nonrefundable.
(b) In addition to the foregoing fees and
commissions, the Company shall pay or reimburse each Issuing Bank
for such normal and customary costs and expenses as are incurred
or charged by such Issuing Bank in issuing, effecting payment
under, amending or otherwise administering any Letter of Credit.
(c) The Administrative Agent shall, promptly
following its receipt thereof, distribute to the Issuing Banks
and the Banks all fees and commissions received by the
Administrative Agent for their respective accounts pursuant to
this Section.
2.9 L/C Participations. (a) Each Issuing Bank
irrevocably agrees to grant and hereby grants to each L/C
Participant, and, to induce the Issuing Bank to issue Letters of
Credit hereunder, each L/C Participant irrevocably agrees to
accept and purchase and hereby accepts and purchases from such
Issuing Bank, on the terms and conditions hereinafter stated, for
such L/C Participant's own account and risk, an undivided
interest equal to such L/C Participant's Commitment Percentage in
such Issuing Bank's obligations and rights under each Letter of
Credit issued by such Issuing Bank hereunder and the amount of
each draft paid by such Issuing Bank thereunder. Each L/C
Participant unconditionally and irrevocably agrees with each
Issuing Bank that, if a draft is paid under any Letter of Credit
issued by such Issuing Bank for which such Issuing Bank is not
reimbursed in full by the Company in accordance with the terms of
this Agreement, such L/C Participant shall pay to such Issuing
Bank upon demand at such Issuing Bank's address for notices
specified herein an amount equal to such L/C Participant's
Commitment Percentage of the amount of such draft or any part
thereof, which is not so reimbursed. Any action taken or omitted
by an Issuing Bank under or in connection with a Letter of
Credit, if taken or omitted in the absence of gross negligence or
willful misconduct, shall neither create for such Issuing Bank
any resulting liability to any L/C Participant nor constitute a
defense to an L/C Participant's obligation to make the payments
31
<PAGE>
to such Issuing Bank required by the immediately preceding
sentence.
(b) If any amount required to be paid by any L/C
Participant to an Issuing Bank pursuant to subsection 2.9(a) in
respect of any unreimbursed portion of any payment made by such
Issuing Bank under any Letter of Credit is not paid to such
Issuing Bank on the date such payment is due from such L/C
Participant, such L/C Participant shall pay to such Issuing Bank
on demand an amount equal to the product of (i) such amount,
times (ii) the daily average Federal Funds Effective Rate, as
quoted by such Issuing Bank, during the period from and including
the date such payment is required to the date on which such
payment is immediately available to the Issuing Bank, times (iii)
a fraction the numerator of which is the number of days that
elapse during such period and the denominator of which is 360. A
certificate of an Issuing Bank submitted to any L/C Participant
with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error.
(c) Whenever, at any time after an Issuing Bank
has made payment under any Letter of Credit and has received from
any L/C Participant its pro rata share of such payment in
accordance with subsection 2.9(a), such Issuing Bank receives any
payment related to such Letter of Credit (whether directly from
the Company or otherwise, including by way of set-off or proceeds
of collateral applied thereto by such Issuing Bank), or any
payment of interest on account thereof, such Issuing Bank will
distribute to such L/C Participant its pro rata share thereof;
provided, however, that in the event that any such payment
received by such Issuing Bank shall be required to be returned by
such Issuing Bank, such L/C Participant shall return to such
Issuing Bank the portion thereof previously distributed by such
Issuing Bank to it.
2.10 Reimbursement Obligation of the Company. (a) The
Company agrees to reimburse each Issuing Bank in respect of a
Letter of Credit on each date on which such Issuing Bank notifies
the Company of the date and amount of a draft presented under
such Letter of Credit and paid by such Issuing Bank for the
amount of (i) such draft so paid and (ii) any taxes, fees,
charges or other direct costs or expenses incurred by such
Issuing Bank in connection with such payment. Each such payment
shall be made to the applicable Issuing Bank at its office listed
in Section 9.2 in Dollars and in immediately available funds.
(b) Interest shall be payable on any and all
amounts remaining unpaid by the Company under this Section from
the date such amounts become payable (whether at stated maturity,
by acceleration or otherwise) until payment in full at the per
32
<PAGE>
annum rate of the Base Rate plus 2.0% and shall be payable on
demand by an Issuing Bank.
2.11 Obligations Absolute. (a) The obligations of the
Company under Sections 2.8, 2.10 and 2.11 shall be absolute and
unconditional under any and all circumstances and irrespective of
any set-off, counterclaim or defense to payment which the Company
may have or have had against an Issuing Bank or any beneficiary
of a Letter of Credit or any other Person.
(b) The Company agrees with each Issuing Bank
that no Issuing Bank shall be responsible for, and the Company's
Reimbursement Obligations under Section 2.10(a) shall not be
affected by, among other things, (i) the validity or genuineness
of documents or of any endorsements thereon, even though such
documents shall in fact prove to be invalid, fraudulent or
forged, provided, that reliance upon such documents by such
Issuing Bank shall not have constituted gross negligence or
willful misconduct by such Issuing Bank or (ii) any dispute
between or among the Company and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be
transferred or (iii) any claims whatsoever of the Company against
any beneficiary of such Letter of Credit or any such transferee.
(c) Each Issuing Bank shall not be liable for any
error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit, except for errors or
omissions caused by such Issuing Bank's gross negligence or
willful misconduct.
(d) The Company agrees that any action taken or
omitted by an Issuing Bank under or in connection with any Letter
of Credit or the related drafts or documents, if done in the
absence of gross negligence or willful misconduct, shall be
binding on the Company and shall neither result in any liability
of such Issuing Bank to the Company nor constitute a defense to
the Company's obligation to reimburse such Issuing Bank.
2.12 Letter of Credit Payments. If any draft shall be
presented for payment to an Issuing Bank under any Letter of
Credit, such Issuing Bank shall promptly notify the Company of
the date and amount thereof. The responsibility of an Issuing
Bank to the Company in connection with any draft presented for
payment under any Letter of Credit shall, in addition to any
payment obligation expressly provided for in such Letter of
Credit, be limited to determining that the documents (including
each draft) delivered under such Letter of Credit in connection
with such presentment are in conformity with such Letter of
Credit.
33
<PAGE>
2.13 Application. To the extent that any provision of
any Application related to any Letter of Credit is inconsistent
with the provisions of this Agreement, the provisions of this
Agreement shall apply.
2.14 Fees. (a) The Company agrees to pay to the
Administrative Agent for the account of each Bank on each
March 31, June 30, September 30 and December 31 and on the date
on which Commitments shall be terminated or reduced as provided
in Section 2.18 hereof, a facility fee (the "Facility Fee") at a
rate per annum equal to the Facility Fee Percentage from time to
time in effect on the aggregate amount of the Commitments during
the preceding quarter (or shorter period commencing with the date
hereof or ending with the Termination Date or any date on which
the Commitments shall be terminated or reduced). All Facility
Fees shall be computed on the basis of the actual number of days
elapsed in a year of 360 days. The Facility Fee due to each Bank
shall commence to accrue on the date hereof, and shall cease to
accrue on the earlier of the Termination Date and the termination
of the Commitment of such Bank as provided herein. The
Administrative Agent shall distribute the Facility Fees among the
Banks pro rata in accordance with their respective Commitment
Percentages.
(b) The Company agrees to pay the Administrative
Agent, for its own account, administrative and other fees at the
times and in the amounts set forth in the Fee Letter, including
the fees referred to in subsection 2.3(i) (collectively, the
"Administrative Fees").
(c) All Fees shall be paid on the dates due, in
immediately available funds, to the Administrative Agent for
distribution, if and as appropriate, among the Banks. Once paid,
none of the Fees shall be refundable under any circumstances.
2.15 Notes; Repayment of Loans. The Competitive Loans
made by a Bank shall be evidenced by a single Competitive Note
duly executed on behalf of the Company, dated the Closing Date,
in substantially the form attached hereto as Exhibit B-1 with the
blanks appropriately filled, payable to the order of such Bank in
a principal face amount equal to the Total Commitment. The
Committed Loans made by each Bank shall be evidenced by a single
Committed Note duly executed on behalf of the Company, dated the
Closing Date, in substantially the form attached hereto as
Exhibit B-2 with the blanks appropriately filled, payable to such
Bank in a principal face amount equal to the Commitment of such
Bank. Each Note shall bear interest from the date thereof on the
outstanding principal balance thereof as set forth in Section
2.16. Each Bank shall, and is hereby authorized by the Company
to, endorse on the schedule attached to the relevant Note held by
such Bank (or on a continuation of such schedule attached to such
34
<PAGE>
Note and made a part thereof), or otherwise to record in such
Bank's internal records, an appropriate notation evidencing the
date and amount of each Competitive Loan or Committed Loan, as
applicable, of such Bank, each payment or prepayment of principal
of any Competitive Loan or Committed Loan, as applicable, and the
other information provided for on such schedule, and any such
recordation shall constitute prima facie evidence of the accuracy
of the information so recorded; provided, however, that the
failure of any Bank to make such a notation or any error therein
shall not in any manner affect the obligation of the Company to
repay the Competitive Loans and Committed Loans made by such Bank
in accordance with the terms of the Notes of such Bank. The
Company shall repay to the Administrative Agent for the account
of each Bank which has made a Competitive Loan on the maturity
date of such Competitive Loan (such maturity date being the last
day of the Interest Period specified by the Company in the
related Competitive Bid Request) the then unpaid principal amount
of such Competitive Loan. The Company shall not have the right
to prepay any principal amount of any Competitive Loan without
the prior written consent of the applicable Bank that made such
Competitive Loan. The Company shall repay to the Administrative
Agent for the account of each Bank on the Termination Date the
then unpaid principal amount of the Committed Loans. The Company
may prepay the principal amount of the Committed Loans
outstanding at any time pursuant to, and to the extent permitted
by, Section 2.19.
2.16 Interest on Loans and Payment Dates. (a) Subject
to the provisions of Section 2.17, each Base Loan shall bear
interest (computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case may be) at a
rate per annum equal to the Base Rate plus the Applicable Margin.
(b) Subject to the provisions of Section 2.17,
each Eurodollar Loan shall bear interest (computed on the basis
of the actual number of days elapsed over a year of 360 days) at
a rate per annum equal to (i) in the case of each Eurodollar
Committed Loan, the Eurodollar Rate for the Interest Period in
effect for such Loan plus the Applicable Margin, and (ii) in the
case of each Eurodollar Competitive Loan, the Eurodollar Rate for
the Interest Period in effect for such Loan plus the Margin
offered by the Bank making such Loan and accepted by the Company
pursuant to Section 2.3.
(c) Subject to the provisions of Section 2.17,
each Fixed Rate Loan shall bear interest at a rate per annum
(computed on the basis of the actual number of days elapsed over
a year of 360 days) equal to the fixed rate of interest offered
by the Bank making such Loan and accepted by the Company pursuant
to Section 2.3.
35
<PAGE>
(d) The Eurodollar Rate or the Base Rate for each
Interest Period or day within an Interest Period shall be
determined by the Administrative Agent, and such determination
shall be conclusive absent error in calculation.
(e) Interest on each Loan shall be payable in
arrears on each Interest Payment Date applicable to such Loan;
provided that, interest accruing on overdue amounts pursuant to
Section 2.17 shall be payable on demand as provided in such
Section.
(f) As soon as practicable the Administrative
Agent shall notify the Company and the Banks in writing of (i)
each determination of a Eurodollar Rate and (ii) the effective
date and the amount of each change in the interest rate on a
Eurodollar Loan or Base Rate Loan. Each determination of an
interest rate by the Administrative Agent, pursuant to any
provision of this Agreement (including Sections 2.16 and 2.17)
shall be conclusive and binding on the Company and the Banks in
the absence of manifest error. At the request of the Company,
the Administrative Agent shall deliver to the Company a statement
showing the quotations used by it in determining any interest
rate pursuant to Sections 2.16(a) through 2.16(d).
2.17 Additional Interest; Alternate Rate of Interest.
(a) If the Company shall default in the payment of the principal
of or interest on any Loan or any other amount becoming due
hereunder, the Company shall on demand from time to time pay
interest on any overdue payment of principal (in lieu of the
interest otherwise payable on such principal under Section 2.16)
and, to the extent permitted by law, on overdue payments of
interest and other amounts due hereunder up to the date of actual
payment (after as well as before judgment):
(i) in the case of principal of or interest
on Base Rate Loans, Eurodollar Loans or Fixed Rate Loans, at
a rate determined by the Administrative Agent (such
determination to be conclusive and binding on the Company)
to be 2% per annum above the rate which would otherwise be
payable on such Loans in accordance with the provisions
herein; and
(ii) in the case of any other amount payable
hereunder (other than principal of or interest on any Loan
referred to in clause (i) above), at a rate equal to 2% per
annum above the Base Rate.
(b) In the event, and on each occasion, that
prior to the first day of the commencement of any Interest Period
for a Eurodollar Loan, the Administrative Agent shall have
determined (which determination shall be conclusive and binding
36
<PAGE>
upon the Company) that (i) dollar deposits in the principal
amount of such Eurodollar Loan are not generally available in the
London Interbank Market, (ii) the rate at which such dollar
deposits are being offered will not adequately and fairly reflect
the cost to the Banks of making or maintaining the principal
amount of such Eurodollar Loan during such Interest Period, or
(iii) reasonable means do not exist for ascertaining the
Eurodollar Rate, the Administrative Agent shall, as soon as
practicable thereafter, give written, telegraphic or telephonic
notice of such determination to the Company and the Banks.
Thereafter, and until the circumstances giving rise to such
notice no longer exist, the Company's right to request Eurodollar
Committed Loans or bids for Eurodollar Competitive Loans shall be
suspended and any notice request by the Company for a Eurodollar
Loan or for conversion to or maintenance of a Eurodollar
Committed Loan pursuant to the terms of this Agreement shall be
deemed cancelled and rescinded by the Company. Each
determination by the Administrative Agent hereunder shall be
conclusive absent manifest error in calculation.
2.18 Termination, Reduction and Extension of
Commitments. (a) The Commitments shall be automatically
terminated on the Termination Date.
(b) Upon at least three (3) Business Days' prior
irrevocable written or telecopy notice to the Administrative
Agent, the Company may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the
Total Commitment; provided, however, that (i) each partial
reduction of the Total Commitment shall be in a minimum principal
amount of $1,000,000 or in whole multiples of $1,000,000 in
excess thereof and (ii) no such termination or reduction shall be
made which would, after giving effect thereto and to any
prepayments of the Loans, reduce the Total Commitment to an
amount less than the sum of (x) the aggregate outstanding
principal amount of the Loans then outstanding and (y) the L/C
Obligations then outstanding.
(c) Each reduction in the Total Commitment
hereunder shall be made ratably among the Banks in accordance
with their respective Commitment Percentages. The Company shall
pay to the Administrative Agent for the account of the Banks, on
the date of each termination or reduction, the Facility Fees on
the amount of the Commitments so terminated or reduced accrued to
the date of such termination or reduction.
(d) During the period beginning sixty days prior
to the first and any subsequent anniversary of the Closing Date
and ending on such anniversary, the Company may deliver to the
Administrative Agent (which shall promptly transmit to each Bank)
a notice requesting that the Commitments be extended to the first
37
<PAGE>
anniversary of the Termination Date then in effect. Within 45
days after its receipt of any such notice, each Bank shall notify
the Administrative Agent of its willingness or unwillingness so
to extend its Commitment. Any Bank that shall fail so to notify
the Administrative Agent within such period shall be deemed to
have declined to extend its Commitment. If all of the Banks
agree to extend their Commitments, the Administrative Agent shall
so notify the Company and each Bank, whereupon (i) the respective
Commitments of the Banks shall without further act be extended to
the first anniversary of the Termination Date then in effect and
(ii) the term "Termination Date" shall thereafter mean such first
anniversary. Any such extension shall be evidenced by a written
agreement among the Administrative Agent, the Banks and the
Company, such agreement to be in form and substance acceptable to
the Administrative Agent and the Banks.
2.19 Optional Prepayment of Loans. (a) The Company
shall have the right at any time and from time to time to prepay
any Committed Loan, in whole or in part, without premium or
penalty (but in any event subject to Section 2.23), upon prior
written, telecopy or telephonic notice to the Administrative
Agent given, in the case of Base Rate Loans, no later than
11:00 a.m., Philadelphia time, on the Business Day of any
proposed prepayment and, in the case of Eurodollar Committed
Loans, no later than 11:00 a.m., Philadelphia time, three
Business Days before any such proposed prepayment. On the date
of any termination or reduction of the Commitments pursuant to
Section 2.18, the Company shall pay or prepay so much of the
Committed Borrowings as shall be necessary in order that the sum
of the aggregate principal amount of the Loans then outstanding
and the L/C Obligations then outstanding will not exceed the
Total Commitment after giving effect to such termination or
reduction. In each case the notice shall specify the date and
amount of each such prepayment, whether the prepayment is of
Eurodollar Committed Loans, Base Rate Loans or a combination
thereof, and, if a combination thereof, the amount allocable to
each; provided, however, that each such partial prepayment of (i)
Eurodollar Committed Loans shall be in the principal amount of at
least $5,000,000 or in whole multiples of $500,000 in excess
thereof and (ii) Base Rate Loans shall be in the principal amount
of at least $2,500,000 or in whole multiples of $100,000 in
excess thereof. The Company shall not have the right to prepay
any Competitive Borrowing.
(b) Each notice of prepayment shall be
irrevocable and shall commit the Company to prepay such Loans by
the amount stated therein. All prepayments of Eurodollar Loans
under this Section shall be accompanied by accrued interest on
the principal amount being prepaid to the date of prepayment.
38
<PAGE>
(c) Upon receipt of any notice of prepayment, the
Administrative Agent shall promptly notify each Bank thereof.
(d) All prepayments of Committed Loans under this
Section 2.19 shall, unless otherwise instructed by the Company,
be applied first to any Base Rate Loans then outstanding and the
balance, if any, to Eurodollar Committed Loans then outstanding,
with payments applied to Eurodollar Committed Loans being applied
in order of next maturing Interest Period.
2.20 Illegality. Notwithstanding any other provision
herein, if any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for
any Bank to make or maintain Eurodollar Loans as contemplated by
this Agreement, (a) the commitment of such Bank hereunder to make
Eurodollar Loans, continue Eurodollar Committed Loans as such,
convert Base Rate Loans into Eurodollar Committed Loans and
refinance Base Rate Loans or Fixed Rate Loans to Eurodollar
Committed Loans shall forthwith be cancelled and (b) such Bank's
Loans then outstanding as Eurodollar Loans, if any, shall be
converted automatically to Base Rate Loans on the respective last
days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. If any
such conversion of a Eurodollar Loan occurs on a day which is not
the last day of the then current Interest Period with respect
thereto, the Company shall pay to such Bank such amounts, if any,
as may be required pursuant to Section 2.23.
2.21 Requirements of Law. (a) Notwithstanding any
other provision herein, in the event that any change in any
Requirement of Law or in the interpretation, or application
thereof or compliance by any Bank with any request or directive
(whether or not having the force of law) from any central bank or
other Governmental Authority made subsequent to the date hereof:
(i) shall subject any Bank to any tax of any
kind whatsoever with respect to this Agreement, any Note,
any Letter of Credit, any Application or any Eurodollar Loan
or Fixed Rate Loan made by it, or change the basis of
taxation of payments to such Bank in respect thereof (except
for taxes covered by Section 2.22 and changes in the rate of
tax on the net income of such Bank);
(ii) shall impose, modify or hold applicable
any reserve, special deposit, compulsory loan or similar
requirement against assets held by, deposits or other
liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of
funds by, any office of such Bank which is not otherwise
included in the determination of the interest rate on such
Eurodollar Loan or Fixed Rate Loan hereunder; or
39
<PAGE>
(iii) shall impose on such Bank any other
condition;
and the result of any of the foregoing is to increase the cost to
such Bank, by an amount which such Bank deems to be material, of
making, converting or refinancing into, continuing or maintaining
Eurodollar Loans or Fixed Rate Loans or issuing or participating
in Letters of Credit or to reduce any amount receivable hereunder
in respect thereof then, in any such case, the Company shall as
promptly as practicable pay such Bank, upon its written demand,
any additional amounts necessary to compensate such Bank for such
increased cost or reduced amount receivable. If any Bank becomes
entitled to claim any additional amounts pursuant to this
subsection, it shall as promptly as practicable notify the
Company in writing, through the Administrative Agent, of the
event by reason of which it has become so entitled. A
certificate as to any additional amounts payable pursuant to this
subsection (detailing the basis for calculation of such
additional amounts) submitted by such Bank (with a copy to the
Administrative Agent) to the Company shall be conclusive in the
absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Notes and
all other amounts payable hereunder.
(b) In the event that any Bank shall have
reasonably determined that any change in any Requirement of Law
regarding capital adequacy or in the interpretation or
application thereof or compliance by such Bank or any corporation
controlling such Bank with any request or directive regarding
capital adequacy (whether or not having the force of law) from
any Governmental Authority made subsequent to the date hereof
does or shall have the effect of reducing the rate of return on
such Bank's or such corporation's capital as a consequence of its
obligations hereunder or under any Letter of Credit to a level
below that which such Bank or such corporation could have
achieved but for such change or compliance (taking into
consideration such Bank's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Bank to
be material, then from time to time, after submission as promptly
as practicable by such Bank to the Company (with a copy to the
Administrative Agent) of a written request therefor, the Company
shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such reduction. If any Bank becomes
entitled to claim any additional amounts pursuant to this
subsection, it shall as promptly as practicable notify the
Company in writing, through the Administrative Agent, of the
event by reason of which it has become so entitled. A
certificate as to any additional amounts payable pursuant to this
subsection (detailing the basis for calculation of such
additional amounts) submitted by such Bank (with a copy to the
Administrative Agent) to the Company shall be conclusive in the
40
<PAGE>
absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Notes and
all other amounts payable hereunder.
(c) Each Bank agrees that it will use reasonable
efforts in order to avoid or to minimize, as the case may be, the
payment by the Company of any additional amount under subsections
2.21(a) or (b); provided, however, that no Bank shall be
obligated to incur any expense, cost or other amount in
connection with utilizing such reasonable efforts.
2.22 Taxes. (a) All payments made by the Company
under this Agreement and the Notes shall be made free and clear
of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by
any Governmental Authority, excluding, in the case of the
Administrative Agent and each Bank, net income taxes and
franchise or gross receipts taxes imposed on the Administrative
Agent or such Bank, as the case may be, as a result of a present
or former connection between the jurisdiction of the government
or taxing authority imposing such tax and the Administrative
Agent or such Bank (excluding a connection arising solely from
the Administrative Agent or such Bank having executed, delivered,
performed its obligations or received a payment under, or
enforced, this Agreement or the Notes) or any political
subdivision or taxing authority thereof or therein (all such
non-excluded taxes, levies, imposts, duties, charges, fees,
deductions and withholdings being hereinafter called "Taxes").
If any Taxes are required to be withheld from any amounts payable
to the Administrative Agent or any Bank hereunder or under the
Notes, the amounts so payable to the Administrative Agent or such
Bank shall be increased to the extent necessary to yield to the
Administrative Agent or such Bank (after payment of all Taxes)
interest or any such other amounts payable hereunder at the rates
or in the amounts specified in this Agreement and the Notes.
Whenever any Taxes are payable by the Company, as promptly as
possible thereafter the Company shall send to the Administrative
Agent for its own account or for the account of such Bank, as the
case may be, a certified copy of an original official receipt
received by the Company showing payment thereof. If the Company
fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, the
Company shall indemnify the Administrative Agent and the Banks
for any incremental taxes, interest or penalties that may become
payable by the Administrative Agent or any Bank as a result of
any such failure. The agreements in this subsection shall
survive the termination of this Agreement and the payment of the
Notes and all other amounts payable hereunder.
41
<PAGE>
(b) Each Bank that is not incorporated under the
laws of the United States of America or a state thereof agrees
that it will deliver to the Company and the Administrative Agent
(i) two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 or successor applicable form, as the
case may be, and (ii) an Internal Revenue Service Form W-8 or W-9
or successor applicable form. Each such Bank also agrees to
deliver to the Company and the Administrative Agent two further
copies of the said Form 1001 or 4224 and Form W-8 or W-9, or
successor applicable forms or other manner of certification, as
the case may be, on or before the date that any such form expires
or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered
by it to the Company, and such extensions or renewals thereof as
may reasonably be requested by the Company or the Administrative
Agent, unless in any such case an event (including, without
limitation, any change in treaty, law or regulation) has occurred
prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would
prevent such Bank from duly completing and delivering any such
form with respect to it and such Bank so advises the Company and
the Administrative Agent. Each such Bank shall certify (i) in
the case of a Form 1001 or 4224, that it is entitled to receive
payments under this Agreement without deduction or withholding of
any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United
States backup withholding tax.
(c) Notwithstanding the foregoing subsections
2.22(a) or 2.22(b), the Company shall not be required to pay any
additional amounts to the Administrative Agent or any Bank in
respect of United States withholding tax pursuant to such
subsections if (i) the obligation to pay such additional amounts
would not have arisen but for a failure by the Administrative
Agent or such Bank to comply with the requirements of subsection
2.22(b) or (ii) the Administrative Agent or such Bank shall not
have furnished the Company with such forms listed in subsection
2.22(b) and shall not have taken such other steps as reasonably
may be available to it under applicable tax laws and any
applicable tax treaty or convention to obtain an exemption from,
or reduction (to the lowest applicable rate) of, such United
States withholding tax.
2.23 Indemnity. (a) The Company agrees to indemnify
each Bank and to hold each Bank harmless from any loss or expense
which such Bank may sustain or incur as a consequence of (i)
default by the Company in payment when due of the principal
amount of or interest on any Eurodollar Loan or Fixed Rate Loan,
(ii) default by the Company in making a borrowing of, refinancing
of, conversion into or continuation of Eurodollar Loans or Fixed
Rate Loans, as the case may be, after the Company has given a
42
<PAGE>
notice requesting the same in accordance with the provisions of
this Agreement, (iii) default by the Company in making any
prepayment after the Company has given a notice thereof in
accordance with the provisions of this Agreement or (iv) the
making of a prepayment (whether voluntarily, as a result of
acceleration or otherwise) of Eurodollar Loans or Fixed Rate
Loans on a day which is not the last day of an Interest Period
with respect thereto, including, without limitation, in each
case, any such loss or expense arising from the reemployment of
funds obtained by it or from fees payable to terminate the
deposits from which such funds were obtained. A certificate as
to any amounts that a Bank is entitled to receive under this
Section 2.23 (detailing the basis for calculation of such
additional amounts) submitted by such Bank, through the
Administrative Agent, to the Company shall be conclusive in the
absence of manifest error and all such amounts shall be paid by
the Company promptly upon demand by such Bank. This covenant
shall survive the termination of this Agreement and the payment
of the Notes and all other amounts payable hereunder.
(b) For the purpose of calculation of all amounts
payable to a Bank under this subsection, each Bank shall be
deemed to have actually funded its relevant Eurodollar Loan or
Fixed Rate Loan through the purchase of a deposit bearing
interest at the Eurodollar Rate or the applicable rate for such
Fixed Rate Loan, as the case may be, in an amount equal to the
amount of that Eurodollar Loan or Fixed Rate Loan, as the case
may be, and having a maturity comparable to the relevant Interest
Period; provided, however, that each Bank may fund each of its
Eurodollar Loans or Fixed Rate Loans in any manner it sees fit,
and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this subsection. This
covenant shall survive the termination of this Agreement and the
payment of the Notes and all other amounts payable hereunder.
2.24 Pro Rata Treatment, etc. Except as required
under Section 2.20, each Committed Borrowing, each payment or
prepayment of principal of any Committed Borrowing, each payment
of interest on the Committed Loans, each payment of the Facility
Fees, each reduction of the Commitments, each conversion of
Committed Loans and each refinancing of any Borrowing with a
Committed Borrowing of any Type, shall be made pro rata among the
Banks in accordance with their respective Commitment Percentages.
Each payment of principal of any Competitive Borrowing shall be
allocated pro rata among the Banks participating in such
Borrowing in accordance with the respective principal amounts of
their outstanding Competitive Loans comprising such Borrowing.
Each payment of interest on any Competitive Borrowing shall be
allocated pro rata among the Banks participating in such
Borrowing in accordance with the respective amounts of accrued
and unpaid interest on their outstanding Competitive Loans
43
<PAGE>
comprising such Borrowing. Each Bank agrees that in computing
such Bank's portion of any Borrowing to be made hereunder, the
Administrative Agent may, in its discretion, round each Bank's
percentage of such Borrowing to the next higher or lower whole
dollar amount.
2.25 Payments. (a) The Company shall make each
payment (including principal of or interest on any Borrowing or
any Fees or other amounts) hereunder not later than 12:00 (noon),
Philadelphia time, on the date when due in Dollars to the
Administrative Agent at its offices at Broad and Chestnut
Streets, Philadelphia, Pennsylvania, in immediately available
funds. To the extent any amounts received by the Administrative
Agent are to be distributed to the Banks, the Administrative
Agent shall so distribute such amount to the Banks promptly upon
receipt in like funds as received.
(b) Whenever any payment (including principal of
or interest on any Borrowing or any Fees or other amounts) (but
excluding payments on Eurodollar Loans) hereunder shall become
due, or otherwise would occur, on a day that is not a Business
Day, such payment may be made on the next succeeding Business
Day, and such extension of time shall in such case be included in
the computation of interest or Fees, if applicable.
(c) All payments by the Company to the
Administrative Agent or the Banks hereunder or under the Notes
shall be made without setoff or counterclaim of any kind.
2.26 Conversion and Continuation Options. The Company
shall have the right at any time upon prior irrevocable notice to
the Administrative Agent (i) not later than 11:00 a.m.,
Philadelphia time, on the Business Day of conversion, to convert
any Eurodollar Committed Loan to a Base Rate Loan, (ii) not later
than 11:00 a.m., Philadelphia time, three Business Days prior to
conversion or continuation, to convert any Base Rate Loan into a
Eurodollar Committed Loan or to continue any Eurodollar Committed
Loan as a Eurodollar Committed Loan for any additional Interest
Period and (iii) not later than 11:00 a.m., Philadelphia time,
three Business Days prior to conversion, to convert the Interest
Period with respect to any Eurodollar Committed Loan to another
permissible Interest Period, subject in each case to the
following:
(a) a Eurodollar Committed Loan may not be
converted at a time other than the last day of the Interest
Period applicable thereto;
(b) any portion of a Loan maturing or required to
be repaid in less than one month may not be converted into or
continued as a Eurodollar Committed Loan;
44
<PAGE>
(c) no Eurodollar Committed Loan may be continued
as such and no Base Rate Loan may be converted to a Eurodollar
Committed Loan when any Default has occurred and is continuing;
(d) any portion of a Eurodollar Committed Loan
that cannot be converted into or continued as a Eurodollar
Committed Loan by reason of paragraph 2.26(b) or 2.26(c)
automatically shall be converted at the end of the Interest
Period in effect for such Loan to a Base Rate Loan;
(e) on the last day of any Interest Period for
Eurodollar Committed Loans, if the Company has failed to give
notice of conversion or continuation as described in this
subsection or if such conversion or continuation is not permitted
pursuant to this subsection 2.26, such Loans shall be converted
to Base Rate Loans on the last day of such then expiring Interest
Period; and
(f) Each request by the Company to convert or
continue a Loan shall constitute a representation and warranty
that each of the representations and warranties made by the
Company herein is true and correct in all material respects on
and as of such date as if made on and as of such date.
Accrued interest on a Loan (or portion thereof) being converted
shall be paid by the Company at the time of conversion.
2.27 Minimum Amounts of Tranches. All borrowings,
conversions and continuation of Loans hereunder and all
selections of Interest Periods hereunder shall be in such amounts
and be made pursuant to such elections that, after giving effect
thereto, the aggregate principal amount of the Loans comprising
each Tranche of Eurodollar Committed Loans and each Tranche of
Competitive Loan shall be equal to $5,000,000 or a whole multiple
of $500,000 in excess thereof.
2.28 Use of Proceeds. The proceeds of the Loans made
on the Closing Date shall be used by the Company (a) to refinance
the Refinanced Debt and (b) for working capital and general
corporate purposes in the ordinary course of business. The
proceeds of any Committed Loans or Competitive Loans made after
the Closing Date shall be used by the Company (i) for working
capital purposes and general corporate purposes in the ordinary
course of business or (ii) to finance in whole or in part
acquisitions, but only to the extent such acquisitions are
permitted under this Agreement, including under Section 6.4.
45
<PAGE>
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Banks to enter into this
Agreement, to make the Loans and to issue and/or participate in
Letters of Credit, the Company hereby represents and warrants to
each Agent and each Bank that:
3.1 Corporate Status. Each of the Company and its
Subsidiaries (a) is a duly organized and validly existing
corporation in good standing under the laws of the jurisdiction
of its incorporation, (b) has the corporate power and authority,
and the legal right, to own its property and assets, to lease the
property it operates as lessee and to transact the business in
which it is engaged or presently proposes to engage, (c) has duly
qualified and is authorized to do business and is in good
standing as a foreign corporation in every jurisdiction in which
it owns or leases real property or in which the nature of its
business requires it to be so qualified, except where the failure
to so qualify, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, and
(d) is in compliance with all Requirements of Laws except to the
extent that the failure to comply therewith, individually or in
the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
3.2 Corporate Power and Authority. Each of the
Company and its Subsidiaries has the corporate power and
authority to execute, deliver and carry out the terms and
provisions of each of the Transaction Documents to which it is a
party (including borrowing hereunder) and has taken all necessary
corporate action to authorize the execution, delivery and
performance by it of such Transaction Documents. Each of the
Company and its Subsidiaries has duly executed and delivered each
such Transaction Document, and each such Transaction Document
constitutes its legal, valid and binding obligation, enforceable
in accordance with its terms.
3.3 No Violation. Neither the execution, delivery or
performance by the Company of the Transaction Documents to which
it is a party, nor compliance by it with the terms and provisions
thereof nor the consummation of the Transactions, (a) will
violate any Requirement of Law or (b) will result in any breach
of any of the terms, covenants, conditions or provisions of, or
require a consent under (except to the extent already obtained)
or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien
upon any of the property or assets of the Company or any of its
Subsidiaries pursuant to the terms of any Requirement of Law or
Contractual Obligation or (c) will violate any provision of the
Articles or Certificate of Incorporation or By-Laws of the
Company or any of its Subsidiaries.
46
<PAGE>
3.4 Litigation. There are no actions, suits,
investigations or proceedings pending, or to the Company's best
knowledge, threatened (a) with respect to any of the Transactions
or Transaction Documents or (b) that could, individually or in
the aggregate, reasonably be expected to result in a Material
Adverse Effect.
3.5 Financial Condition. The consolidated balance
sheet of the Company and its consolidated Subsidiaries as at
January 28, 1995 and the related consolidated statements of
income, cash flows and retained earnings for the fiscal year
ended on such date, copies of which have heretofore been
furnished to each Bank, present fairly the consolidated financial
condition of the Company and its consolidated Subsidiaries as at
such date, and the consolidated results of their operations and
their consolidated cash flows for the fiscal year then ended.
The unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries as at July 29, 1995 and the related
unaudited consolidated statements of income, cash flows and
retained earnings for the six-month period ended on such date,
certified by a Principal Financial Officer, copies of which have
heretofore been furnished to each Bank, present fairly the
consolidated financial condition of the Company and its
consolidated Subsidiaries as at such date, and the consolidated
results of their operations and their consolidated cash flows for
the six-month period then ended (subject to normal year-end audit
adjustments). All such financial statements, including the
related schedules and notes thereto, have been prepared in
accordance with GAAP applied consistently throughout the periods
involved. Neither the Company nor any of its consolidated
Subsidiaries had, at the date of the most recent balance sheet
referred to above, any material Contingent Obligation, liability
for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or
foreign currency swap or exchange transaction, which is required
by GAAP to be but is not reflected in the foregoing statements or
in the notes thereto.
3.6 Solvency. On the Closing Date and after giving
effect to the Transactions, each of the Company and the Company
and its Subsidiaries taken as a whole will be Solvent.
3.7 Projections. The projections dated October 24,
1995 previously delivered to the Banks have been prepared on the
basis of the assumptions accompanying them, and such projections
and assumptions, as of the date of preparation thereof and as of
the Closing Date, are reasonable and represent the Company's good
faith estimate of its future financial performance, it being
understood that nothing contained in this Section shall
constitute a representation or warranty that such future
47
<PAGE>
financial performance or results of operations will in fact be
achieved.
3.8 Material Adverse Change. Except as set forth in
Schedule 3.8, since the later of January 28, 1995 and the date of
the most recent financial statements delivered to the Banks
pursuant to Section 5.1(b) there has been no development or event
which has had a Material Adverse Effect.
3.9 Use of Proceeds; Margin Regulations. All proceeds
of each Loan will be used by the Company only in accordance with
the provisions of Section 2.28. No part of the proceeds of any
Loan will be used by the Company to purchase or carry any Margin
Stock or to extend credit to others for the purpose of purchasing
or carrying any Margin Stock. If requested by any Bank or the
Administrative Agent, the Company will furnish to the
Administrative Agent and each Bank a statement to the foregoing
effect in conformity with the requirements of FR Form U-1
referred to in Regulation U. Neither the making of any Loan nor
the use of the proceeds thereof will violate or be inconsistent
with the provisions of Regulations G, T, U or X of the Federal
Reserve Board.
3.10 Governmental Approvals. No order, consent,
approval, license, authorization, or validation of, or filing,
recording or registration with, or exemption by, any Governmental
Authority, or any subdivision thereof, or any other Person
(including stockholders and creditors of the Company) is required
to authorize, or is required in connection with (a) the
execution, delivery and performance of any Transaction Document
or the consummation of any of the Transactions or (b) the
legality, validity, binding effect or enforceability of any
Transaction Document.
3.11 Tax Returns and Payments. The Company and each
of its Subsidiaries has filed all tax returns required to be
filed by it and has paid (a) all taxes and assessments payable by
it which have become due and (b) all other taxes, fees or other
charges imposed on it or any of its property by any Governmental
Authority, other than those not yet delinquent or those that are
reserved against in accordance with GAAP which are being
diligently contested in good faith by appropriate proceedings.
Except as disclosed in Schedule 6.3 hereto, no tax Lien has been
filed against the Company or any of its Subsidiaries.
3.12 ERISA. As of the Closing Date, the Company has
no Plans other than those listed on Schedule 3.12. No
accumulated funding deficiency (as defined in Section 412 of the
Code or Section 302 of ERISA) or Reportable Event has occurred
with respect to any Plan. There are no Unfunded Benefit
Liabilities under any Plan. The Company and each member of its
48
<PAGE>
ERISA Controlled Group have complied with the requirements of
Section 515 of ERISA with respect to each Multiemployer Plan and
is not in "default" (as defined in Section 4219(c)(5) of ERISA)
with respect to payments to a Multiemployer Plan. The aggregate
potential total withdrawal liability, and the aggregate potential
annual withdrawal liability payments of the Company and the
members of its ERISA Controlled Group as determined in accordance
with Title IV of ERISA as if the Company and the members of its
ERISA Controlled Group had completely withdrawn from all
Multiemployer Plans is not greater than $1,000,000 and $500,000,
respectively. To the best knowledge of the Company and each
member of its ERISA Controlled Group, no Multiemployer Plan is or
is likely to be in reorganization (as defined in Section 4241 of
ERISA or Section 418 of the Code) or is insolvent (as defined in
Section 4245 of ERISA). No material liability to the PBGC (other
than required premium payments), the Internal Revenue Service,
any Plan or any trust established under Title IV of ERISA has
been, or is expected by the Company or any member of its ERISA
Controlled Group to be, incurred by the Company or any member of
its ERISA Controlled Group, other than the liability to fund
benefits in the normal course. Except as otherwise disclosed on
Schedule 3.12 hereto, neither the Company nor any member of its
ERISA Controlled Group has any material contingent liability with
respect to any post-retirement benefit under any "welfare benefit
plan" (as defined in Section 3(1) of ERISA), other than liability
for continuation coverage under Part 6 of Title I of ERISA. No
Lien under Section 412(n) of the Code or 302(f) of ERISA or
requirement to provide security under Section 401(a)(29) of the
Code or Section 307 of ERISA has been or is reasonably expected
by the Company or any member of its ERISA Controlled Group to be
imposed on the assets of the Company or any member of its ERISA
Controlled Group.
3.13 Investment Company Act; Public Utility Holding
Company Act. Neither the Company nor any of its Subsidiaries is
(a) an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment
Company Act of 1940, as amended, (b) a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of
either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as
amended, or (c) subject to any other federal or state law or
regulation which purports to restrict or regulate its ability to
borrow money.
3.14 Compliance With Law. The Company and each of its
Subsidiaries is in compliance with all laws, rules, regulations,
orders, judgments, writs and decrees except where such
non-compliance, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
49
<PAGE>
3.15 Representations and Warranties in Receivables
Program. All representations and warranties made by the Company
or any of its Subsidiaries in the Receivables Program Documents,
and, to the best of the Company's knowledge, all representations
made by each other Person in such Documents, are true and correct
in all material respects. None of such representations and
warranties are inconsistent in any material respect with the
representations and warranties of the Company or any of its
Subsidiaries made herein or in any other Loan Document.
3.16 True and Complete Disclosure. All factual
information (taken as a whole) furnished by or on behalf of the
Company or any of its Subsidiaries in writing to the
Administrative Agent or any Bank on or prior to the Closing Date,
for purposes of or in connection with this Agreement or any of
the other Loan Documents is, and all other such factual
information (taken as a whole) hereafter furnished by or on
behalf of the Company or any of its Subsidiaries in writing to
the Administrative Agent or any Bank will be, true and accurate
in all material respects on the date as of which such information
is dated or furnished and not incomplete by omitting to state any
material fact necessary to make such information (taken as a
whole) not misleading at such time. Except as set forth in
Schedule 3.8, as of the Closing Date, there are no facts, events
or conditions known to the Company which, individually or in the
aggregate, have or could reasonably be expected to have a
Material Adverse Effect.
3.17 Corporate Structure; Capitalization. Schedule
3.17 hereto sets forth the number of authorized and issued shares
of capital stock of the Company and each of its Subsidiaries, the
par value thereof and, in the case of Subsidiaries, the
registered owner(s) thereof, in each case as of the Closing Date.
All of such stock has been duly and validly issued and is fully
paid and non-assessable. Except as set forth in such Schedule,
as of the Closing Date, neither the Company nor any such
Subsidiary has outstanding any securities convertible into or
exchangeable for its capital stock nor does the Company or any
such Subsidiary have outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise)
of, or any calls, commitments or claims of any character relating
to, its capital stock.
3.18 Environmental Matters. (a) Except as set forth
in Schedule 3.18, (i) each of the Company and its Subsidiaries
are in compliance with all applicable Environmental Laws, (ii)
each of the Company and its Subsidiaries have all Environmental
Approvals required to operate their businesses as presently
conducted or as reasonably anticipated to be conducted, all such
Environmental Approvals are in effect, no appeal or other action
50
<PAGE>
is pending to revoke any such Environmental Approval, and the
Company and each of its Subsidiaries are in full compliance with
all terms and conditions of such Environmental Approvals,
(iii) none of the Company, its Subsidiaries nor any of their
Environmental Affiliates has received any communication (written
or oral), whether from a Governmental Authority, citizens group,
employee or otherwise, that alleges that the Company or such
Subsidiary or Environmental Affiliate is not in full compliance
with all Environmental Laws, and (iv) to the Company's best
knowledge, there are no circumstances that may prevent or
interfere with such full compliance in the future.
(b) Except as set forth in Schedule 3.18, there
is no Environmental Claim pending or, to the Company's best
knowledge, threatened against the Company, any of its
Subsidiaries or any Environmental Affiliate.
(c) There are no past or present actions,
activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge
or disposal of any Material of Environmental Concern, that could
form the basis of any Environmental Claims against the Company,
any of its Subsidiaries or any of their Environmental Affiliates,
which Environmental Claims, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(d) No Release or Cleanup has occurred at any
property currently owned or leased by the Company or its
Subsidiaries that could result in the assertion or creation of a
Lien on said property by any Governmental Authority with respect
thereto, nor has any such assertion of a Lien been made by any
Governmental Authority with respect thereto.
(e) Without in any way limiting the generality of
the foregoing, except as disclosed in Schedule 3.18, (i) there
are no underground storage tanks located on property owned or
leased by the Company or any of its Subsidiaries and (ii) no
polychlorinated biphenyls (PCB's) are used or stored at any
property owned or leased by the Company or any of its
Subsidiaries.
3.19 Insurance. Schedule 3.19 sets forth a complete
and accurate description of all policies of insurance maintained
by the Company and its Subsidiaries as of the Closing Date. The
Company has paid all premiums due on or prior to the Closing Date
in respect of such policies and all such policies are in full
force and effect.
3.20 Patents, Trademarks, etc. Each of the Company
and its Subsidiaries has obtained and holds in full force and
effect all patents, trademarks, servicemarks, trade names,
51
<PAGE>
copyrights and other such rights, free from burdensome
restrictions, which are necessary for the operation of its
business as presently conducted. To the Company's best
knowledge, no material product, process, method, substance, part
or other material presently sold by or employed by the Company or
any of its Subsidiaries in connection with such business
infringes any patent, trademark, service mark, trade name,
copyright, license or other right owned by any other Person.
There is not pending or overtly threatened any claim or
litigation against or affecting the Company or any of its
Subsidiaries contesting its right to sell or use any such
product, process, method, substance, part or other material.
3.21 Ownership of Property. Schedule 3.21 sets forth,
as of the Closing Date, all the real property owned or leased by
the Company or any of its Subsidiaries and identifies the street
address, the current owner (and current record owner, if
different) and whether such property is leased or owned. The
Company and its Subsidiaries have good and marketable fee simple
title to or valid leasehold interests in all real property owned
or leased by the Company or its Subsidiaries, and good title to
all of their personal property subject to no Lien of any kind
except Liens permitted hereby. The Company and its Subsidiaries
enjoy peaceful and undisturbed possession under all of their
respective leases.
3.22 No Default. Neither the Company nor any of its
Subsidiaries is in default under or with respect to (a) any
Transaction Document or (b) any other Contractual Obligation to
which it is a party or by which it or any of its property is
bound in any respect which could reasonably be expected to result
in a Material Adverse Effect. No Default or Event of Default
exists.
3.23 Licenses, etc. The Company and its Subsidiaries
have obtained and hold in full force and effect, all franchises,
licenses, permits, certificates, authorizations, qualifications,
easements, rights of way and other rights, consents and approvals
which are necessary for the operation of their respective
businesses as presently conducted.
3.24 No Burdensome Restrictions. Neither the Company
nor any of its Subsidiaries is a party to any agreement or
instrument or subject to any other Contractual Obligation or any
charter or corporate restriction or any provision of any
applicable law, rule or regulation which, individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect.
3.25 Labor Matters. Except as set forth on Schedule
3.25, as of the Closing Date, there are no collective bargaining
52
<PAGE>
agreements or Multiemployer Plans covering the employees of the
Company or any of its Subsidiaries, and none of such Persons has
suffered any strikes, walkouts, work stoppages or other material
labor difficulty within the last five years and to the best
knowledge of such Persons, there are none now threatened.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Extensions of Credit. The
agreement of each Bank to make its initial Extensions of Credit
are subject to the satisfaction, immediately prior to or
concurrently with the making of such Extensions of Credit on the
Closing Date, of the following conditions precedent:
(a) Loan Documents. The Administrative Agent
shall have received (i) this Agreement, executed and delivered by
a duly authorized officer of the Company, with a counterpart for
each Bank and (ii) for the account of each Bank, a Committed Note
and a Competitive Note conforming to the requirements hereof and
executed by a duly authorized officer of the Company.
(b) Legal Opinions. The Agent shall have
received a legal opinion, dated the Closing Date, from Morgan,
Lewis & Bockius LLP, counsel to the Company, addressed to the
Agents and the Banks, substantially in the form of Exhibit C
hereto. Such opinion shall also cover such other matters
incident to the transactions contemplated by this Agreement as
the Administrative Agent may reasonably require.
(c) Corporate Documents. The Administrative
Agent shall have received the Articles of Incorporation of the
Company, as amended, modified or supplemented to the Closing
Date, certified to be true, correct and complete by the Secretary
of State of the Commonwealth of Pennsylvania as of a date not
more than ten (10) days prior to the Closing Date, together with
a good standing certificate from such Secretary of State and a
good standing certificate from the Secretaries of State (or the
equivalent thereof) of each other State in which the Company is
required to be qualified to transact business, each to be dated a
date not more than ten (10) days prior to the Closing Date.
(d) Certified Resolutions, etc. The
Administrative Agent shall have received a certificate of the
Secretary or Assistant Secretary of the Company dated the Closing
Date certifying (i) the names and true signatures of the
incumbent officers of the Company authorized to sign the Loan
Documents, (ii) the By-Laws of the Company as in effect on the
Closing Date, (iii) the resolutions of the Company's Board of
Directors approving and authorizing the execution, delivery and
performance of all Transaction Documents and that the resolutions
53
<PAGE>
have not been amended, modified, revoked or rescinded, and (iv)
that there have been no changes in the Articles of Incorporation
of the Company since the date of the most recent certification
thereof by the Secretary of State of the Commonwealth of
Pennsylvania.
(e) Officer's Certificate. The Administrative
Agent shall have received a certificate of a Responsible Officer
of the Company, dated the Closing Date, certifying that to the
best of his or her knowledge, (i) the representations and
warranties contained in Section 3 are true and correct as of the
Closing Date as if made on such date, (ii) the Company is in
compliance with the covenants and agreements contained in this
Agreement, (iii) there is no Event of Default or Default as of
the Closing Date after giving effect to the Transactions, (iv)
the Receivables Program Documents are in full force and effect
and no material term or condition thereof has been amended from
the form thereof delivered to the Administrative Agent, or
waived, except as disclosed to the Administrative Agent or its
counsel prior to the execution of this Agreement and (v) subject
to the foregoing, neither the Company nor, to the best of his or
her knowledge, any such other party is in default in the
performance or compliance with any of the terms or provisions
thereof, except to the extent that performance thereof or
compliance therewith or default has been waived with the prior
written consent of the Banks.
(f) Receivables Program. The Administrative
Agent shall have received satisfactory evidence of the execution,
delivery and effectiveness of the Receivables Program Documents
and of receipt by the Company of not less than $125,000,000 in
net cash proceeds from the initial funding thereunder. The
Administrative Agent shall have received copies of the
Receivables Program Documents and any amendments or supplements
thereto, certified as of the Closing Date by a Responsible
Officer of the Company to be true, correct and complete copies of
such documents.
(g) Refinancing. The Administrative Agent shall
have received evidence satisfactory to it that the Refinanced
Debt, together with all interest, fees, penalties and other
amounts payable in respect hereof, shall have been repaid in full
and that all agreements relating thereto shall have been
terminated.
(h) Lien Search Reports. The Administrative
Agent shall have received satisfactory reports of UCC, tax lien
and judgment searches conducted by a search firm acceptable to
the Administrative Agent with respect to the Company in each of
the locations set forth in Schedule 4.1(h) hereto, together with
54
<PAGE>
satisfactory searches of the United States Patent and Trademark
Office.
(i) Environmental Matters. The Banks shall be
satisfied that neither the Company nor any of its Subsidiaries is
subject to any present or contingent environmental liability
which could have a Material Adverse Effect.
(j) Fees and Expenses. The Administrative Agent
shall have received (a) the fees required to be paid on the
Closing Date pursuant to the Fee Letter and (b) all other fees
and expenses due and payable hereunder on or before the Closing
Date (if then invoiced), including, without limitation, the
reasonable fees and expenses accrued through the Closing Date of
Ballard Spahr Andrews & Ingersoll, counsel to the Administrative
Agent in connection with the transactions contemplated by the
Loan Documents.
(k) Consents, Licenses, Approvals, etc. The
Administrative Agent shall have received copies of all consents,
licenses and approvals, if any, required in connection with the
execution, delivery and performance by the Company or its
Subsidiaries, and the validity and enforceability, of the
Transaction Documents, or in connection with any of the
Transactions, and such consents, licenses and approvals shall be
in full force and effect.
(l) Litigation. There shall be no actions,
suits, investigations or proceedings pending, or to the Company's
best knowledge, threatened (i) with respect to any of the
Transactions or (ii) that could, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect.
(m) Additional Matters. The Administrative Agent
shall have received such other certificates, opinions, documents
and instruments relating to the Transactions as may have been
reasonably requested by the Administrative Agent and all
corporate and other proceedings and all other documents
(including, without limitation, all documents referred to herein
and not appearing as exhibits hereto) and all legal matters in
connection with the Loan Documents shall be satisfactory in form
and substance to the Administrative Agent and its counsel.
4.2 Conditions to Extensions of Credit. The agreement
of each Bank to make any Extension of Credit requested to be made
by it on any date (including, without limitation, its initial
Extension of Credit) is subject to the satisfaction of the
following conditions precedent:
55
<PAGE>
(a) Representations and Warranties. Each of the
representations and warranties made by the Company herein or
which are contained in any certificate, document or financial or
other statement furnished at any time under or in connection
herewith or therewith, shall be true and correct in all material
respects on and as of such date as if made on and as of such
date.
(b) No Default. No Default or Event of Default
shall have occurred and be continuing on such date or after
giving effect to the Extension of Credit requested to be made on
such date.
(c) No Injunction. No law or regulation shall
have been adopted, no order, judgment or decree of any
Governmental Authority shall have been issued, and no litigation,
proceeding or investigation shall be pending or threatened, which
in the judgment of the Required Banks, would enjoin, prohibit or
restrain, or impose or result in the imposition of any material
adverse condition upon, the making or repayment of the Extension
of Credit.
(d) No Material Adverse Effect. No event, act or
condition shall have occurred after January 28, 1995, which, in
the judgment of the Required Banks, has had or could reasonably
be expected to have a Material Adverse Effect.
(e) Additional Matters. All corporate and other
proceedings, and all documents, instruments and other legal
matters in connection with the transactions contemplated by this
Agreement and the other Loan Documents shall be satisfactory in
form and substance to the Administrative Agent, and the
Administrative Agent shall have received such other documents and
legal opinions in respect of any aspect or consequence of the
transactions contemplated hereby or thereby as its shall
reasonably request.
Each Borrowing by and Letter of Credit issued on behalf of the
Company hereunder shall constitute a representation and warranty
by the Company to each Bank and the Agents that all of the
conditions required to be satisfied under this Section 4 in
connection with making of such Extension of Credit have been
satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as the
Commitments remain in effect, any Note remains outstanding and
unpaid, any Letter of Credit remains outstanding or any other
amount is owing to any Bank or any Agent hereunder:
56
<PAGE>
5.1 Information Covenants. The Company shall furnish
to each Bank and to the Administrative Agent:
(a) Quarterly Financial Statements. As soon as
available, but in any event not later than 45 days after the
close of each quarterly accounting period in each fiscal year of
the Company (other than the fourth quarterly accounting period),
unaudited condensed consolidated financial statements of the
Company and its consolidated Subsidiaries, including the
consolidated condensed balance sheet of the Company and its
Subsidiaries as at the end of such quarterly period and the
related consolidated condensed statements of income and condensed
cash flow for such quarterly period and for the elapsed portion
of the fiscal year ended with the last day of such quarterly
period, and in each case (except for the consolidated condensed
balance sheet) setting forth comparative figures for the related
periods in the prior fiscal year. All such financial statements
shall be prepared in reasonable detail and in accordance with
GAAP applied on a basis consistently maintained throughout the
period involved and with prior periods.
(b) Annual Financial Statements. As soon as
available, but in any event not later than 90 days after the
close of each fiscal year of the Company, a copy of the annual
audit report for such year for the Company and its consolidated
Subsidiaries, including therein the consolidated balance sheet of
the Company and its Subsidiaries as at the end of such fiscal
year and the related consolidated statements of income, cash flow
and retained earnings for such fiscal year, setting forth
comparative figures for the preceding fiscal year, all in
reasonable detail, and, with respect to such consolidated
financial statements, certified without qualification by Ernst &
Young, LLP or other independent certified public accountants of
recognized national standing reasonably acceptable to the
Required Banks, in each case together with a report of such
accounting firm stating that in the course of its regular audit
of the consolidated financial statements of the Company, which
audit was conducted in accordance with generally accepted
auditing standards, such accounting firm has obtained no
knowledge of the Company's failure to comply with the provisions
of Sections 6.1, 6.2, 6.5 and 6.7, in each case insofar as they
relate to accounting matters.
(c) Management Letters. Promptly after the
Company's receipt thereof, a copy of any "management letter" or
other material report received by the Company from its certified
public accountants.
(d) Budgets. At the time of the delivery of the
financial statements under clause (b) above, and, in addition,
within forty-five (45) days after a written request therefor from
57
<PAGE>
the Administrative Agent (such request to occur no more
frequently than annually unless a Default shall exist and be
continuing), a budget and/or financial forecast of results of
operations and sources and uses of cash (in form reasonably
acceptable to the Administrative Agent) prepared by the Company
for the fiscal year for which such request is made, accompanied
by a written statement of the assumptions used in connection
therewith. If requested by the Administrative Agent, the
financial statements required to be delivered pursuant to clauses
(a) and (b) above shall be accompanied by a comparison of the
actual financial results set forth in such financial statements
to those contained in the forecasts delivered pursuant to this
clause (d) together with an explanation of any material
variations from the results anticipated in such forecasts.
(e) Officer's Certificates. At the time of the
delivery of the financial statements under clauses (a) and (b)
above, a compliance certificate of a Principal Financial Officer
in a form reasonably acceptable to the Administrative Agent (a
"Compliance Certificate") which certifies (x) that such financial
statements fairly present the financial condition and the results
of operations of the Company and its Subsidiaries on the dates
and for the periods indicated, subject, in the case of interim
financial statements, to normally recurring year-end adjustments
and (y) that such officer has reviewed the terms of the Loan
Documents and has made, or caused to be made under his or her
supervision, a review in reasonable detail of the business and
condition of the Company and its Subsidiaries during the
accounting period covered by such financial statements, and that
as a result of such review such officer has concluded that no
Default or Event of Default has occurred during the period
commencing at the beginning of the accounting period covered by
the financial statements accompanied by such certificate and
ending on the date of such certificate or, if any Default or
Event of Default has occurred, specifying the nature and extent
thereof and, if continuing, the action the Company has taken
and/or proposes to take in respect thereof. The Compliance
Certificate shall also set forth the calculations required to
establish whether the Company was in compliance with the
provisions of Section 6.1 during and as at the end of the
accounting period covered by the financial statements accompanied
by such certificate.
(f) Notice of Default or Litigation. Promptly
and in any event within one Business Day after the Company or any
Subsidiary obtains knowledge thereof, notice of (i) the
occurrence of any Default or Event of Default, (ii) any
litigation or proceeding involving a Governmental Authority
pending or threatened against the Company or any Subsidiary which
could reasonably be expected to result in a Material Adverse
Effect, (iii) any default or event of default under any
58
<PAGE>
Contractual Obligation of the Company or any of its Subsidiaries
which, if not cured, could reasonably be expected to have a
Material Adverse Effect, (iv) any litigation or proceeding
affecting the Company or any of its Subsidiaries in which the
amount involved is $5,000,000 or more and not covered by
insurance, as reasonably determined by the Company's corporate
counsel, or in which injunctive or similar relief is sought, and
(v) any other event, act or condition which could reasonably be
expected to result in a Material Adverse Effect.
(g) ERISA.
(i) As soon as possible and in any event
within 10 days after the Company or any member of its ERISA
Controlled Group knows, or has reason to know, that:
(A) any Termination Event with respect
to a Plan has occurred or will occur, or
(B) any condition exists with respect
to a Plan which presents a material risk of termination
of the Plan or imposition of an excise tax or other
liability in excess of $100,000 on the Company or any
member of its ERISA Controlled Group, or
(C) the Company or any member of its
ERISA Controlled Group has applied for a waiver of the
minimum funding standard under Section 412 of the Code
or Section 302 of ERISA, or
(D) the Company or any member of its
ERISA Controlled Group has engaged in a "prohibited
transaction," as defined in Section 4975 of the Code or
as described in Section 406 of ERISA, that is not
exempt under Section 4975 of the Code and Section 408
of ERISA, or
(E) the aggregate present value of the
Unfunded Benefit Liabilities under all Plans has in any
year increased by $500,000 or to an amount in excess of
$750,000, or
(F) any condition exists with respect
to a Multiemployer Plan which presents a material risk
of a partial or complete withdrawal (as described in
Section 4203 or 4205 of ERISA) by the Company or any
member of its ERISA Controlled Group from a
Multiemployer Plan and a resultant withdrawal liability
greater than $750,000, or
59
<PAGE>
(G) the Company or any member of its
ERISA Controlled Group is in "default" (as defined in
Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan which default (I) has not been
and will not be cured within the time permitted for
such defaults to be cured or (II) is in an amount in
excess $50,000, or
(H) a Multiemployer Plan is in
"reorganization" (as defined in Section 418 of the Code
or Section 4241 of ERISA) or is "insolvent" (as defined
in Section 4245 of ERISA), or
(I) the potential withdrawal liability
(as determined in accordance with Title IV of ERISA) of
the Company and the members of its ERISA Controlled
Group with respect to all Multiemployer Plans has in
any year increased by $500,000 or to an amount in
excess of $1,000,000, or
(J) there is an action brought against
the Company or any member of its ERISA Controlled Group
under Section 502 of ERISA with respect to its failure
to comply with Section 515 of ERISA,
a certificate of a Responsible Officer of the Company setting
forth the details of each of the events described in clauses (A)
through (J) above as applicable and the action which the Company
or the applicable member of its ERISA Controlled Group has taken
and/or proposes to take with respect thereto, together with a
copy of any notice or filing from the PBGC or which may be
required by the PBGC or other agency of the United States
government with respect to each of the events described in
clauses (A) through (J) above, as applicable.
(ii) As soon as possible and in any event
within two Business Days after the receipt by the Company or any
member of its ERISA Controlled Group of a demand letter from the
PBGC notifying the Company or such member of its ERISA Controlled
Group of its final decision finding liability, a copy of such
letter, together with a certificate of a Responsible Officer of
the Company setting forth the action which the Company or such
member of its ERISA Controlled Group has taken and/or proposes to
take with respect thereto.
(h) SEC Filings. Promptly upon transmission
thereof, copies of all regular and periodic financial
information, proxy materials and other information and reports,
if any, which the Company or any of its Subsidiaries shall file
with the Securities and Exchange Commission or any Governmental
60
<PAGE>
Authority substituted therefore or which the Company or any of
its Subsidiaries shall send to its stockholders.
(i) Environmental. Promptly and in any event
within two Business Days after the existence of any of the
following conditions, a certificate of a Responsible Officer of
the Company specifying in detail the nature of such condition and
the Company's or its Subsidiary's, as the case may be, proposed
response thereto: (i) the receipt by the Company or any of its
Subsidiaries of any communication (written or oral), whether from
a Governmental Authority, citizens group, employee or otherwise,
that alleges that it or any Environmental Affiliate is not in
compliance with applicable Environmental Laws, or (ii) the
Company or any of its Subsidiaries shall obtain actual knowledge
that there exists any Environmental Claim pending or threatened
against it or any Environmental Affiliate.
(j) Other Information. From time to time, such
other information or documents (financial or otherwise) as the
Administrative Agent may reasonably request.
5.2 Books, Records and Inspections. The Company
shall, and shall cause each of its Subsidiaries to, keep proper
books of record and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall
be made of all dealings and transactions in relation to its
business and activities. The Company shall, and shall cause each
of its Subsidiaries to, permit officers and designated
representatives of any Bank to visit and inspect any of the
properties of the Company or any of its Subsidiaries, and to
examine the books of record and account of the Company or any of
its Subsidiaries, and to discuss the affairs, finances and
accounts of the Company or any of its Subsidiaries with, and to
be advised as to the same by, its and their officers and
independent accountants, all upon reasonable notice and at such
reasonable times as such Bank may desire.
5.3 Maintenance of Insurance. The Company shall, and
shall cause each of its Subsidiaries to, (a) maintain with
financially sound and reputable insurance companies insurance on
itself and its properties in at least such amounts and against at
least such risks as are customarily insured against in the same
general area by companies engaged in the same or a similar
business, which insurance shall in any event not provide for
materially less coverage than the insurance in effect on the
Closing Date as set forth on Schedule 3.19, and (b) furnish to
the Administrative Agent from time to time, upon written request,
copies of the policies under which such insurance is issued,
certificates of insurance and such other information relating to
such insurance as the Administrative Agent may reasonably
request.
61
<PAGE>
5.4 Taxes. The Company shall pay or cause to be paid,
and shall cause each of its Subsidiaries to pay or cause to be
paid, when due, all taxes, charges and assessments and all other
lawful claims required to be paid by the Company or such
Subsidiary, except as contested in good faith and by appropriate
proceedings diligently conducted, if adequate reserves have been
established with respect thereto in accordance with GAAP.
5.5 Corporate Franchises. The Company shall, and
shall cause each of its Subsidiaries to, do or cause to be done,
all things necessary to preserve and keep in full force and
effect its existence and its patents, trademarks, servicemarks,
tradenames, copyrights, franchises, licenses, permits,
certificates, authorizations, qualifications, accreditation,
easements, rights of way and other rights, consents and approvals
except where the failure to so preserve any of the foregoing
(other than existence) could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect.
5.6 Compliance with Law. The Company shall, and shall
cause each of its Subsidiaries to, comply with all applicable
laws, rules, statutes, regulations, decrees and orders of, and
all applicable restrictions imposed by, any Governmental
Authority, in respect of the conduct of their business and the
ownership of their property, including, without limitation, all
Environmental Laws, except such non-compliance as could not,
individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect. Without limiting the
generality of the foregoing, upon discovery of any violation of
any Environmental Law by the Company or any of its Subsidiaries,
the Company shall take all necessary steps to initiate and
expeditiously complete all investigative, remedial and corrective
and other action to cure such violation and eliminate such
Material Adverse Effect.
5.7 Performance of Obligations. The Company shall,
and shall cause each of its Subsidiaries to, perform all of its
obligations of any nature, including under terms of each
mortgage, indenture, security agreement, debt instrument, lease,
undertaking and contract by which it or any of its properties is
bound or to which it is a party, except where the amount or
validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on the books of the Company or
its Subsidiaries, as the case may be.
5.8 Maintenance of Properties. The Company shall, and
shall cause each of its Subsidiaries to, ensure that its
properties used or useful in its business are kept in good
62
<PAGE>
repair, working order and condition, normal wear and tear
excepted.
5.9 Further Assurances. The Company shall, and shall
cause each of its Subsidiaries to, execute any and all further
documents that may be required under applicable law or which the
Required Banks or the Administrative Agent may reasonably
request, in order to effectuate the transactions contemplated by
the Loan Documents.
5.10 Conduct of Business and Maintenance of Existence.
Subject to Section 6.4 hereof, the Company shall, and shall cause
each of its Subsidiaries to (a) continue to engage in business of
the same general type as now conducted by it and preserve, renew
and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its
business and (b) comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply
therewith could not, in the aggregate, reasonably be expected to
have a Material Adverse Effect.
5.11 Subsequent Credit Terms. The Company shall
notify the Administrative Agent in writing prior to entering into
any new credit agreement or any amendment or modification of any
existing credit arrangement pursuant to which the Company agrees
to any financial and other affirmative or negative covenant
(other than any of the foregoing pursuant to which the Company
provides or agrees to provide collateral for its obligations)
which is less favorable in any material respect to the Company
than the comparable provision contained in this Agreement.
Promptly after entering into such an agreement, the Company shall
provide a copy thereof to the Administrative Agent. Effective
upon the Company's entry into any such agreement, amendment or
modification, the corresponding covenants, terms and conditions
of this Agreement shall be, unless otherwise provided by the
Required Banks, automatically and immediately amended to conform
with and to include the applicable covenant(s), term(s) and/or
condition(s) of such other agreement (until such agreement is
terminated and all amounts owing thereunder are repaid whereupon
such covenants, terms and conditions shall revert to the
provisions contained in this Agreement); provided, however, that
the foregoing shall not be applicable to or be deemed to affect
any provision of this Agreement that, in the sole judgment of the
Required Banks, is more favorable to the Company. The Company
hereby agrees promptly to execute and deliver any and all such
documents and instruments and to take all such further actions as
the Administrative Agent may, in its sole discretion, deem
necessary or appropriate to effectuate the provisions of this
Section 5.11.
63
<PAGE>
SECTION 6. NEGATIVE COVENANTS
The Company hereby agrees that, so long as the
Commitments remain in effect, any Note remains outstanding and
unpaid, any Letter of Credit remains outstanding or any other
amount is owing to any Bank or any Agent hereunder:
6.1 Financial Covenants.
(a) Leverage Ratio. The Company shall not permit
the Leverage Ratio as of the last day of any fiscal quarter of
the Company, commencing with the fiscal quarter ending on
October 28, 1995, to exceed .50:1.0; provided that, in
calculating the Leverage Ratio for the fiscal quarter ending
October 28, 1995, there shall be excluded from Consolidated Total
Debt such Indebtedness as would have been excluded therefrom had
the Receivables Program been in effect on and as of the end of
such fiscal quarter, up to a maximum exclusion of $140,000,000.
(b) Fixed Charge Coverage Ratio. The Company
shall not permit the ratio of (i) the sum of (x) Consolidated
EBITDA and (y) Consolidated Rental Expense to (ii) Consolidated
Fixed Charges for any period of four consecutive fiscal quarters
ending during any period set forth below to be less than the
ratio set forth opposite such period below:
Period Ratio
------ -----
3rd Fiscal Quarter 1995 1.85:1.0
4th Fiscal Quarter 1995 through 3rd Quarter 1996 2.25:1.0
4th Fiscal Quarter 1996 through 3rd Quarter 1997 2.90:1.0
4th Fiscal Quarter 1997 and each Quarter thereafter 3.10:1.0
provided that, in calculating such ratio as of the end of the
third fiscal quarter of 1995, there shall be added to
Consolidated EBITDA the amount deducted therefrom (up to
$1,700,000) in respect of the Special Charge.
(c) Minimum Consolidated Tangible Net Worth. The
Company shall not permit Consolidated Tangible Net Worth on the
last day of any fiscal quarter to be less than the sum of
$215,000,000 plus twenty-five percent (25%) of Consolidated Net
Income for each full fiscal year of the Company commencing with
the fiscal year ending February 1, 1997, and effective for the
fiscal quarter ending on such date, exclusive of any such fiscal
year in which Consolidated Net Income is a negative.
(d) Capital Expenditures. The Company shall not
make or incur (or commit to make or incur) and shall not permit
any of its Subsidiaries to make or incur (or commit to make or
incur) any Capital Expenditures, except Capital Expenditures of
64
<PAGE>
the Company and its Subsidiaries in any fiscal year of the
Company set forth below not in excess, in the aggregate for the
Company and all of its Subsidiaries, of the amount (the "Maximum
Amount") set forth below opposite such fiscal year:
Fiscal Year Ending Maximum Amount
------------------ --------------
February 3, 1996 $44,500,000
February 1, 1997 $17,500,000
January 31, 1998 $23,000,000
January 31, 1999 $28,750,000;
provided that, (i) commencing with the fiscal year beginning
February 4, 1996, any amount not expended in the fiscal year for
which it is permitted above may be carried over for expenditure
in the next following fiscal year (but not in any succeeding
years), (ii) for the fiscal year ending February 3, 1996, there
shall be excluded from Capital Expenditures for such fiscal year
all Capital Expenditures associated with the construction of the
Company's Concord Home Furnishings Store in an amount not to
exceed $6,500,000 in the aggregate, and (iii) there shall be
excluded from the calculation of Capital Expenditures any
acquisitions, to the extent permitted under Section 6.4(b)(i)(y).
6.2 Indebtedness. The Company shall not, and shall
not permit any of its Subsidiaries to, create, incur, assume,
suffer to exist or otherwise become or remain directly or
indirectly liable with respect to, any Indebtedness, other than:
(a) Indebtedness hereunder and under the other
Loan Documents;
(b) Indebtedness outstanding on the Closing Date
and set forth on Schedule 6.2;
(c) Indebtedness with respect to Capital Leases
and other purchase money Indebtedness, in each case incurred to
finance Capital Expenditures permitted under Section 6.1(d), not
in excess of $10,000,000 in the aggregate at any one time
outstanding; provided that, any such Indebtedness shall not
exceed the lesser of the purchase price or the fair market value
of the asset so financed;
(d) Indebtedness owed by Subsidiaries of the
Company to the Company;
(e) Unsecured letters of credit (other than
Letters of Credit issued hereunder) in an aggregate outstanding
face amount not to exceed $10,000,000;
65
<PAGE>
(f) Other unsecured Indebtedness of any
Subsidiary of the Company created, incurred or assessed after the
date hereof not enumerated in clauses (a) through (e) above,
provided that the aggregate outstanding principal amount of such
Indebtedness shall not exceed $10,000,000 at any one time
outstanding, exclusive of any such Indebtedness owed by one or
more Subsidiaries to the Company; and
(g) Other unsecured Indebtedness of the Company
created, incurred or assessed after the date hereof not
enumerated in clauses (a) through (e) above.
6.3 Liens. The Company shall not, and shall not
permit any of its Subsidiaries to, create, incur, assume or
suffer to exist, directly or indirectly, any Lien on any of its
property now owned or hereafter acquired, other than:
(a) Liens existing on the Closing Date and set
forth on Schedule 6.3 hereto;
(b) inchoate Liens for taxes, assessments or
governmental charges not yet due or which are being contested in
good faith by appropriate proceedings diligently conducted and
with respect to which adequate reserves are being maintained in
accordance with GAAP;
(c) Statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and other Liens
imposed by Law (other than any Lien imposed by ERISA or pursuant
to any Environmental Law) created in the ordinary course of
business for amounts not yet due or which are being contested in
good faith by appropriate proceedings diligently conducted and
with respect to which adequate bonds have been posted;
(d) Liens (other than any Lien imposed by ERISA
or pursuant to any Environmental Law) incurred or deposits made
in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security legislation, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and
other similar obligations (exclusive of obligations for the
payment of borrowed money);
(e) Easements, rights-of-way, construction,
operating and reciprocal easement agreements, zoning and similar
restrictions and other similar charges, covenants or encumbrances
not interfering with the ordinary conduct of the business of the
Company or any of its Subsidiaries and which do not detract
materially from the value of the property to which they attach or
66
<PAGE>
impair materially the use thereof by the Company or any of its
Subsidiaries;
(f) Judgment Liens so long as the claims secured
thereby do not exceed $1,000,000 in the aggregate and are being
contested in good faith pursuant to appropriate proceedings; and
(g) Liens created pursuant to Capital Leases and
to secure other purchase-money Indebtedness permitted pursuant to
Section 6.2(c), provided that such Liens are (i) only in respect
of the property or assets subject to, and secure only, the
respective Capital Lease or other purchase-money Indebtedness,
(ii) the Liens are not modified to secure other Indebtedness and
the amount of Indebtedness secured thereby is not increased and
(iii) the principal amount of Indebtedness secured by any such
Lien shall not at any time exceed 100% of the original purchase
price of such property.
6.4 Restriction on Fundamental Changes. (a) The
Company shall not, and shall not permit any of its Subsidiaries
to, enter into any merger or consolidation, or liquidate, wind-up
or dissolve (or suffer any liquidation or dissolution),
discontinue its business or convey, lease, sell, transfer or
otherwise dispose of, in one transaction or series of
transactions, all or any substantial part of its business or
property, whether now or hereafter acquired, except (i) as
otherwise permitted under Section 6.5, and (ii) any Wholly-Owned
Subsidiary of the Company may merge into or convey, sell, lease
or transfer all or substantially all of its assets to, the
Company or any other Wholly-Owned Subsidiary of the Company.
(b) The Company shall not, and shall not permit
any of its Subsidiaries to, (i) acquire by purchase or otherwise
any property or assets of, or stock or other evidence of
beneficial ownership of, any Person, except for (w) purchases of
receivables pursuant to and in accordance with the Receivables
Program Documents, (x) purchases of inventory, equipment,
materials and supplies in the ordinary course of the Company's or
such Subsidiary's business, or (y) acquisitions of assets for use
primarily in retail sales or the stock of a Person whose primary
business is retail sales, but only if (I) after giving effect to
such an acquisition, there is no Default or Event of Default,
including compliance with the covenants set forth in Section 6.1
and (II) the total cost of all such acquisitions in any fiscal
year (including without limitation the assumption of any
liabilities in connection with such acquisitions) shall not
exceed $7,500,000, or (ii) enter into any partnership or joint
venture.
(c) The Company shall not, and shall not permit
any of its Subsidiaries to, amend its certificate or articles of
67
<PAGE>
incorporation or by-laws to the extent such amendment is adverse
to the Banks in any material respect.
6.5 Sale of Assets. The Company shall not, and shall
not permit any of its Subsidiaries to, convey, lease, sell,
transfer or otherwise dispose of (or agree to do so at any future
time) all or any part of its property or assets, except (a) sales
of inventory in the ordinary course of business; (b) sales of
equipment which is uneconomic, obsolete or no longer useful in
its business provided that the aggregate net book value of all
equipment so sold does not exceed $1,000,000 in any fiscal year;
(c) sales of receivables pursuant to and in accordance with the
provisions of the Receivables Program Documents in an aggregate
principal or invested amount not to exceed $150,000,000 at any
one time outstanding; (d) the transfer of the Island Avenue
Distribution Facility pursuant to the condemnation of such
facility by the City of Philadelphia; and (e) sales of other
assets of the Company and its Subsidiaries for fair market value,
provided that the aggregate amount of such sales, determined in
accordance with GAAP, in any fiscal year does not exceed five
percent (5%) of the Company's Consolidated Assets as at the end
of the immediately preceding fiscal year.
6.6 Contingent Obligations. The Company shall not,
and shall not permit any of its Subsidiaries to, create or become
or be liable with respect to any Contingent Obligation, except
Contingent Obligations which are in existence on the Closing Date
and which are set forth on Schedule 6.6.
6.7 Advances, Investments and Loans. The Company
shall not, and shall not permit any of its Subsidiaries to, lend
money or credit or make advances to any Person, or directly or
indirectly purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital
contribution to any Person (each an "Investment"), except that
the following shall be permitted:
(a) accounts receivable owned by the Company and
its Subsidiaries, if created in the ordinary course of the
business of the Company and its Subsidiaries and payable or
dischargeable in accordance with customary trade terms;
(b) loans and advances to the Company by any of
its Subsidiaries which have been subordinated to the obligations
of the Company to the Banks hereunder and under the Notes on
terms and conditions satisfactory to the Administrative Agent;
(c) loans and advances by the Company and its
Subsidiaries to their employees in the ordinary course of its
business not exceeding $100,000 in the aggregate at any one time
outstanding;
68
<PAGE>
(d) investments by the Company in the Receivables
Subsidiary to the extent contemplated in the Receivables Program
Documents as in effect on the Closing Date;
(e) evidences of Indebtedness issued by the
purchaser of assets and received by the Company or any of its
Subsidiaries in connection with asset sales permitted by Section
6.5(d);
(f) extensions of credit to the customers of the
Company or its Subsidiaries in the ordinary course of the
business of the Company or such Subsidiary pursuant to the
Company's credit card programs to enable such customers to
purchase inventory from the Company or such Subsidiary;
(g) the Company and its Subsidiaries may acquire
and hold Cash Equivalents;
(h) Investments permitted under Section 6.4;
(i) Investments by Anfly, Inc. in a money market
account maintained at Wilmington Trust Company or such other
financial institution acceptable to the Administrative Agent in
an aggregate amount not to exceed $2,500,000 at any one time;
provided that the amount in such account may be in an amount up
to $13,000,000 for up to one week on up to four separate
occasions in each fiscal year; and
(j) other Investments by the Company not to
exceed $2,500,000 in any fiscal year of the Company.
6.8 Transactions with Affiliates. The Company shall
not, and shall not permit any of its Subsidiaries to, enter into
any transaction or series of related transactions, whether or not
in the ordinary course of business, with any Affiliate, other
than on terms and conditions substantially as favorable to the
Company or such Subsidiary as would be obtainable at the time in
a comparable arm's-length transaction with a Person other than an
Affiliate.
6.9 Limitation on Voluntary Payments and Modifications
of Certain Documents. The Company shall not, and shall not
permit any of its Subsidiaries to, (a) make any voluntary or
optional payment or prepayment on or redemption or acquisition
for value of (including, without limitation, by way of depositing
with the trustee with respect thereto money or securities before
due for the purpose of paying when due) or exchange of any
Indebtedness other than the Indebtedness hereunder and under the
other Loan Documents, (b) amend, modify or supplement, or permit
the amendment, modification or supplementation of, any provision
of the Receivables Program Documents, the effect of which is to
69
<PAGE>
permit the amount outstanding thereunder to exceed $150,000,000
or (c) resign as servicer under the Receivables Program Documents
unless such resignation occurs in connection with the assignment
of the servicing duties to an Affiliate of the Company.
6.10 Changes in Business. The Company shall not, and
shall not permit any of its Subsidiaries to, enter into any
business which is substantially different from that conducted by
the Company or such Subsidiary, as the case may be, on the
Closing Date.
6.11 Certain Restrictions. The Company shall not, and
shall not permit any of its Subsidiaries or any Person
controlling the Company to, enter into any agreement (other than
the Transaction Documents and agreements evidencing Indebtedness
outstanding on the Closing Date, in each case as in effect on the
Closing Date) which restricts the ability of the Company or any
of its Subsidiaries to (a) enter into amendments, modifications
or waivers of the Loan Documents, (b) sell, transfer or otherwise
dispose of its assets, (c) create, incur, assume or suffer to
exist any Lien upon any of its property, (d) create, incur,
assume, suffer to exist or otherwise become liable with respect
to any Indebtedness, or (e) pay any Dividend, provided that
Capital Leases or agreements governing purchase money
Indebtedness which contain restrictions of the types referred to
in clauses (b) or (c) with respect to the property covered
thereby shall be permitted.
6.12 Sales and Leasebacks. The Company shall not, and
shall not permit any of its Subsidiaries to, become liable,
directly or indirectly, with respect to any lease, whether an
operating lease or a Capital Lease, of any property (whether real
or personal or mixed) whether now owned or hereafter acquired,
(a) which the Company or such Subsidiary has sold or transferred
or is to sell or transfer to any other Person, or (b) which the
Company or such Subsidiary intends to use for substantially the
same purposes as any other property which has been or is to be
sold or transferred by the Company or such Subsidiary to any
other Person in connection with such Lease; provided that the
restrictions of this Section 6.12 shall not apply to any sale and
leaseback transaction that the Company may enter into with the
City of Philadelphia with respect to the Island Avenue
Distribution Facility.
6.13 Plans. The Company shall not, nor shall it
permit any member of its ERISA Controlled Group to, take any
action which would increase the aggregate present value of the
Unfunded Benefit Liabilities under all Plans to an amount in
excess of $5,000,000.
70
<PAGE>
6.14 Limitation on Dispositions of Subsidiary Stock.
The Company shall not, nor shall it permit any of its
Subsidiaries to, directly or indirectly sell, assign, pledge or
otherwise encumber or dispose of, or in the case of the Company,
issue or permit any of its Subsidiaries to issue to any other
Person, any shares of capital stock or other equity securities of
(or warrants, rights or options to acquire shares or other equity
securities of) any of their Subsidiaries except (i) to qualify
directors if and to the extent required by applicable law, (ii)
to the Company or any other wholly-owned Subsidiary and (iii)
sales of equity securities pursuant to the Receivables Program as
in effect on the date hereof.
6.15 Fiscal Year; Fiscal Quarter. The Company shall
not, and shall not permit any of its Subsidiaries to, change its
fiscal year or any of its fiscal quarters.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be
continuing:
(a) Failure to Make Payments. The Company shall
fail to pay any principal of any Note or any Reimbursement
Obligation when due in accordance with the terms thereof or
hereof; or the Company shall fail to pay any interest on any
Note, or any other amount payable hereunder or thereunder
(including without limitation any fees), within five (5) days
after any such interest or other amount becomes due in accordance
with the terms thereof or hereof; or
(b) Breach of Representation and Warranty. Any
representation or warranty made or deemed made by the Company
herein or which is contained in any certificate or financial
statement furnished at any time under or in connection with this
Agreement shall prove to have been incorrect in any material
respect on or as of the date made or deemed made; or
(c) Breach of Covenants.
(i) The Company shall default in the
observance or performance of any agreement contained in Section
5.1(g), 5.5, or Section 6 of this Agreement; or
(ii) The Company shall default in the
observance or performance of any other agreement contained in
this Agreement (other than as provided in paragraphs (a), (b) and
(c)(i) of this Section 7), and such default shall continue
unremedied for a period of 30 days; or
71
<PAGE>
(iii) The Company shall fail to perform or
observe any agreement, covenant or obligation arising under any
provision of the Loan Documents other than this Agreement, which
failure shall continue after the end of the applicable grace
period, if any, provided therein; or
(d) Default Under Other Agreements. The Company
or any Subsidiary thereof shall (i) default in the payment of any
principal of or interest on or any other amount payable on any
Indebtedness (other than under the Loan Documents) or in the
payment of any Contingent Obligation (other than under the Loan
Documents), beyond the period of grace (not to exceed 30 days),
if any, provided in the instrument or agreement under which such
Indebtedness or Contingent Obligation was created and the
aggregate amount of such Indebtedness and/or Contingent
Obligations in respect of which such default or defaults shall
have occurred is at least $5,000,000; or (ii) default in the
observance or performance of any other agreement or condition
relating to any such Indebtedness or Contingent Obligation or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is
to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Contingent Obligation (or
a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice
if required, such Indebtedness to become due and payable prior to
its stated maturity or such Contingent Obligation to become
payable; or
(e) Receivables Program. The occurrence of any
Liquidation Event under the Receivables Program Documents that
causes the Purchase Termination Date to occur (as such terms are
defined in the Receivables Program Documents); or
(f) Change of Control. A Change of Control shall
have occurred; or
(g) Judgments. One or more judgments or decrees
in an aggregate amount of $5,000,000 or more shall be entered by
a court or courts of competent jurisdiction against the Company
and/or its Subsidiaries (other than any judgment as to which, and
only to the extent, a reputable insurance company has
acknowledged coverage of such claim in writing) and (i) any such
judgments or decrees shall not be stayed, discharged, paid,
bonded or vacated within 30 days or (ii) enforcement proceedings
shall be commenced by any creditor on any such judgments or
decrees; or
(h) Environmental Matters. (i) Any Environmental
Claim shall have been asserted against the Company or any of its
72
<PAGE>
Subsidiaries or any Environmental Affiliate thereof which, if
determined adversely, could be reasonably expected to have a
Material Adverse Effect, or (ii) the Company or any of its
Subsidiaries or Environmental Affiliates shall have failed to
obtain any Environmental Approval necessary for the management,
use, control, ownership, or operation of its business, property
or assets or any such Environmental Approval shall be revoked,
terminated, or otherwise cease to be in full force and effect, in
each case, if the existence of such condition could be reasonably
expected to have a Material Adverse Effect; or
(i) Bankruptcy, etc. (i) The Company or any of
its Subsidiaries shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets,
or the Company or any of its Subsidiaries shall make a general
assignment for the benefit of its creditors; or (ii) there shall
be commenced against the Company or any of its Subsidiaries any
case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall be commenced against the Company or any of its
Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets
which results in the entry of an order for any such relief which
shall not have been vacated, discharged, satisfied, or stayed or
bonded pending appeal within 60 days from the entry thereof; or
(iv) the Company or any of its Subsidiaries shall take any action
in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii),
or (iii) above; or (v) the Company or any of its Subsidiaries
shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they generally become
due; or
(j) ERISA. (i) Any Person shall engage in any
"prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) involving any Plan, (ii) any
"accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, shall exist with respect to any
Plan, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a
73
<PAGE>
trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or institution of
proceedings is, in the reasonable opinion of the Required Banks,
likely to result in the termination of such Plan for purposes of
Title IV of ERISA, (iv) any Single Employer Plan shall terminate
for purposes of Title IV of ERISA, or (v) any other event or
condition shall occur or exist in regard to a Plan; and in each
case in clauses (i) through (v) above, such event or condition,
together with all other such events or conditions, if any, could
reasonably be expected to have a Material Adverse Effect; or
(k) Revolver Clean-Up. Between December 15 of
each year and the following May 15 there shall not be a period of
at least thirty (30) consecutive days where there shall be no
Loans outstanding;
then, and in any such event, (A) if such event is an Event of
Default specified in clause (i) or (ii) of paragraph (i) above
with respect to the Company, automatically the Commitments shall
immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this
Agreement (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents
required thereunder) and the Notes shall immediately become due
and payable, and (B) if such event is any other Event of Default,
either or both of the following actions may be taken: (i) with
the consent of the Required Banks, the Administrative Agent may,
or upon the request of the Required Banks, the Administrative
Agent shall, by written notice to the Company declare the
Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and (ii) with such consent of the
Required Banks, the Administrative Agent may, or upon the request
of the Required Banks, the Administrative Agent shall, by written
notice of default to the Company, declare the Loans hereunder
(with accrued interest thereon) and all other amounts owing under
this Agreement (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents
required thereunder) and the Notes to be due and payable
forthwith, whereupon the same shall immediately become due and
payable.
With respect to all Letters of Credit with respect to
which presentment for honor shall not have occurred at the time
of an acceleration pursuant to the preceding paragraph, the
Company shall at such time deposit in a cash collateral account
opened by the Administrative Agent an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of
Credit. The Company hereby grants to the Administrative Agent,
for the benefit of each Issuing Bank, the L/C Participants and
74
<PAGE>
the Banks, a security interest in such cash collateral to secure
all obligations of the Company under this Agreement and the other
Loan Documents. Amounts held in such cash collateral account
shall be applied by the Administrative Agent to the payment of
drafts drawn under such Letters of Credit, and the unused portion
thereof after all such Letters of Credit shall have expired or
been fully drawn upon, if any, shall be applied to repay other
obligations of the Company hereunder and under the Notes. After
all such Letters of Credit shall have expired or been fully drawn
upon, all Reimbursement Obligations shall have been satisfied and
all other obligations of the Company hereunder and under the
Notes shall have been paid in full, the balance, if any, in such
cash collateral accounts shall be returned to the Company. The
Company shall execute and deliver to the Administrative Agent,
for the account of each Issuing Bank and the L/C Participants,
such further documents and instruments as the Administrative
Agent may request to evidence the creation and perfection of the
within security interest in such cash collateral account.
Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind
are hereby expressly waived.
Upon an Event of Default, each of the Company and its
Subsidiaries shall permit any designated representative or
representatives of the Administrative Agent, including, but not
limited to, environmental consultants or other professionals,
upon reasonable notice to Company or its Subsidiaries, to enter
any property owned or operated by the Company or its Subsidiaries
for the purpose of conducting an environmental investigation of
said property. Said investigations may include, but not be
limited to, testing the integrity of underground storage tanks;
taking soil and groundwater borings and samples; testing for the
presence of radon; and collecting samples to test for the
presence of asbestos. The Company shall reimburse Administrative
Agent for all reasonable costs and expenses incurred in
connection with any investigation conducted hereunder.
SECTION 8. THE AGENTS
8.1 Appointment. Each Bank hereby irrevocably
designates and appoints PNC as the Administrative Agent of such
Bank under this Agreement, and each such Bank irrevocably
authorizes PNC, as the Administrative Agent for such Bank, to
take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such
powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the
75
<PAGE>
contrary elsewhere in this Agreement and the other Loan
Documents, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein or
therein, or any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or
the other Loan Documents or otherwise exist against the
Administrative Agent. PNC agrees to act as the Administrative
Agent on behalf of the Banks to the extent provided in this
Agreement and the other Loan Documents.
8.2 Delegation of Duties. The Administrative Agent
may execute any of its duties under this Agreement and the other
Loan Documents by or through agents or attorneys-in-fact and
shall be entitled to engage and pay for the advice and services
of counsel concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible to the Banks for
the negligence or misconduct of any agents or attorneys in-fact
selected by it with reasonable care.
8.3 Exculpatory Provisions. Neither the
Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates shall be (a)
liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement and the
other Loan Documents (except for its or such Person's own gross
negligence or willful misconduct) or (b) responsible in any
manner to any of the Banks for any recitals, statements,
representations or warranties made by the Company or any officer
thereof contained in this Agreement, the other Loan Documents or
in any certificate, report, statement or other document referred
to or provided for in, or received by the Administrative Agent
under or in connection with, this Agreement or the other Loan
Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, the Notes or the
other Loan Documents or for any failure of the Company to perform
its obligations hereunder or thereunder. The Administrative
Agent shall not be under any obligation to any Bank to ascertain
or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or the
other Loan Documents, or to inspect the properties, books or
records of the Company.
8.4 Reliance by Administrative Agent. The
Administrative Agent shall be entitled to rely, and shall be
fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order
or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel
76
<PAGE>
(including, without limitation, counsel to the Company),
independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and
treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer
thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or
refusing to take any action under this Agreement and the other
Loan Documents unless it shall first receive such advice or
concurrence of the Required Banks as it deems appropriate or it
shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action.
The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement, the
Notes and the other Loan Documents in accordance with a request
of the Required Banks, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the
Banks and all future holders of the Notes.
8.5 Notice of Default. The Administrative Agent shall
not be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default hereunder unless the
Administrative Agent has received notice from a Bank or the
Company referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives
such a notice, the Administrative Agent shall give notice thereof
to the Banks. The Administrative Agent shall take such action
with respect to such Default or Event of Default as shall be
reasonably directed by the Required Banks; provided that unless
and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Banks.
8.6 Non-Reliance on Administrative Agent and Other
Banks. Each Bank expressly acknowledges that neither the
Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of
the affairs of the Company, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any
Bank. Each Bank represents to the Administrative Agent that it
has, independently and without reliance upon the Administrative
Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Company
77
<PAGE>
and made its own decision to make its Loans hereunder, issue or
participate in Letters of Credit hereunder and enter into this
Agreement and the other Loan Documents. Each Bank also
represents that it will, independently and without reliance upon
the Administrative 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 analysis, appraisals and
decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigation as it
deems necessary to inform itself as to the business, operations,
property, financial and other condition and creditworthiness of
the Company. Except for notices, reports and other documents
expressly required to be furnished to the Banks by the
Administrative Agent hereunder, the Administrative Agent shall
not have any duty or responsibility to provide any Bank with any
credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or
creditworthiness of the Company which may come into the
possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
8.7 Indemnification. The Banks agree to indemnify the
Administrative Agent in its capacity as such (to the extent not
reimbursed by the Company and without limiting the obligation, if
any, of the Company to do so), ratably according to their
respective Commitment Percentages, from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation,
at any time following the payment of the Notes) be imposed on,
incurred by or asserted against the Administrative Agent in any
way relating to or arising out of this Agreement, the other Loan
Documents, or any documents contemplated by or referred to herein
or therein or the transactions contemplated hereby or thereby or
any action taken or omitted by the Administrative Agent under or
in connection with any of the foregoing; provided that no Bank
shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting
solely from the Administrative Agent's gross negligence or
willful misconduct. The agreements in this Section 8.7 shall
survive the payment of the Notes and all other amounts payable
hereunder.
8.8 Administrative Agent in Its Individual Capacity.
The Administrative Agent and its Affiliates may make loans to,
accept deposits from and generally engage in any kind of business
with the Company as though the Administrative Agent were not the
Administrative Agent hereunder. With respect to its Loans made
or renewed by it and any Note issued to it and with respect to
any Letter of Credit issued or participated in by it, the
78
<PAGE>
Administrative Agent shall have the same rights and powers under
this Agreement as any Bank and may exercise the same as though it
were not the Administrative Agent, and the terms "Bank" and
"Banks" shall include the Administrative Agent in its individual
capacity.
8.9 Successor Administrative Agent. The
Administrative Agent may resign as Administrative Agent upon 30
days' written notice to the Banks and the Company. If the
Administrative Agent shall resign as Administrative Agent under
this Agreement, then the Required Banks shall appoint from among
the Banks a successor agent for the Banks, which appointment
shall be subject to the approval of the Company (which approval
shall not be unreasonably withheld), whereupon such successor
agent shall succeed to the rights, powers and duties of the
Administrative Agent, and the term "Administrative Agent" shall
mean such successor agent effective upon its appointment, and the
former Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative
Agent or any of the parties to this Agreement or any holders of
the Notes. After any retiring Administrative Agent's resignation
as Administrative Agent, the provisions of this Section 8.9 shall
inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this
Agreement.
8.10 Beneficiaries. Except as expressly provided
herein, the provisions of this Section 8 are solely for the
benefit of the Administrative Agent and the Banks, and the
Company shall not have any rights to rely on or enforce any of
the provisions hereof. In performing its functions and duties
under this Agreement the Administrative Agent shall act solely as
agent of the Banks and does not assume and shall not be deemed to
have assumed any obligation toward or relationship of agency or
trust with or for the Company.
8.11 Co-Agents. The Co-Agents, in such capacities,
shall have no duties or responsibilities under this Agreement or
the other Loan Documents, and shall, in such capacities, have no
liability to any Bank for any actions taken in connection with
the Loan Documents.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement,
any Note, nor any terms hereof of thereof may be amended,
supplemented or modified except in accordance with the provisions
of this subsection. With the written consent of the Required
Banks, the Administrative Agent and the Company may, from time to
79
<PAGE>
time, enter into written amendments, supplements or modifications
hereto and to the Notes for the purpose of adding any provisions
to this Agreement, the Notes or the other Loan Documents or
changing in any manner the rights of the Banks or of the Company
hereunder or thereunder or waiving, on such terms and conditions
as the Administrative Agent may specify in such instrument, any
of the requirements of this Agreement, the Notes or the other
Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such
amendment, supplement or modification shall directly or
indirectly (a) reduce the amount or extend the maturity of any
Note or any installment thereof, or reduce the rate or extend the
time of payment of interest thereon, or reduce any fee payable to
any Bank hereunder (including the Issuing Banks) or extend the
time for payment of the same, or change the amount of any Bank's
Commitment, or amend, modify or waive any provision of this
Section or reduce the percentage specified in the definition of
Required Banks, or consent to the assignment or transfer by the
Company of any of its rights and obligations under this
Agreement, the Notes and the other Loan Documents, in each case
without the written consent of all the Banks, or (b) amend,
modify or waive any provision of Section 8 without the written
consent of the then Administrative Agent. Any such waiver and
any such amendment, supplement or modification shall apply
equally to each of the Banks and shall be binding upon the
Company, the Banks, the Administrative Agent, the Co-Agents and
all future holders of the Notes. In the case of any waiver, the
Company, the Banks and the Agents shall be restored to their
former position and rights hereunder and under the outstanding
Notes, and any Default or Event of Default waived shall be deemed
to be cured and not continuing; but no such waiver shall extend
to any subsequent or other Default or Event of Default, or impair
any right consequent thereon.
9.2 Notices. All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in
writing (including by telecopy, telegraph or telex), and, unless
otherwise expressly provided herein, shall be deemed to have been
duly given or made when delivered by hand, or three days after
being deposited in the mail, postage prepaid, or, in the case of
telecopy notice, when received during normal business hours, or,
in the case of telegraphic notice, when delivered to the
telegraph company, or, in the case of telex notice, when sent,
answerback received, addressed as follows in the case of the
Company and the Administrative Agent, and as set forth in
Schedule I in the case of the other parties hereto, or to such
other address as may be hereafter notified by the respective
parties hereto and any future holders of the Notes:
80
<PAGE>
The Company: Strawbridge & Clothier
801 Market Street
Philadelphia, PA 19107
Attention: Steven L. Strawbridge
Telecopy: (215) 629-6833
The Administrative
Agent: PNC Bank, National Association
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19110
Attention: H. Todd Dissinger
Telecopy: (215) 585-6037
with a copy to: PNC Bank, National Association
Multibank Loan Administration
19th Floor
One PNC Plaza
Pittsburgh, Pennsylvania 15265
Attention: Arlene Ohler
Telecopy: 412-762-8672;
provided that any notice, request or demand to or upon the
Administrative Agent or the Banks pursuant to Sections 2.2, 2.3,
2.7, 2.18, 2.19 and 2.26 shall not be effective until received.
9.3 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the
Administrative Agent or any Bank, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
9.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any
document, certificate or statement delivered pursuant hereto or
in connection herewith shall survive the execution and delivery
of this Agreement and the Notes.
9.5 Payment of Expenses and Taxes. The Company agrees
(a) to pay or reimburse the Administrative Agent for all its
reasonable out-of-pocket costs and expenses incurred in
connection with the development, negotiation, preparation,
execution, delivery and syndication of, and any actual or
proposed amendment, supplement, modification or consent to, this
Agreement, the Notes and the other Loan Documents and any other
documents executed and delivered in connection herewith or
therewith, and the consummation of the transactions contemplated
81
<PAGE>
hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Administrative Agent and
the fees and expenses for title and lien searches, (b) to pay or
reimburse each Bank and the Administrative Agent for all its
reasonable out-of-pocket costs and expenses incurred in
connection with the preservation of rights under, or enforcement
of any rights under, this Agreement, the Notes, the other Loan
Documents and any other documents entered into in connection
herewith or therewith, including, without limitation, reasonable
fees and disbursements of counsel to each of the Administrative
Agent and the Banks, and (c) to pay, indemnify, and hold each
Bank and the Administrative Agent harmless from, any and all
recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, excise
and other taxes, if any (other than Taxes expressly excluded from
the definition of Taxes in Section 2.22 and Taxes for which the
Company has no liability under Section 2.22(c)) which may be
payable or determined to be payable in connection with the
execution and delivery of, or consummation of any of the
transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of,
this Agreement, the Notes, the other Loan Documents and any such
other documents, and (d) to pay, indemnify, and hold each Bank
and the Administrative Agent harmless from and against any and
all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this
Agreement, the Notes, the other Loan Documents and any such other
documents (all the foregoing, collectively, the "indemnified
liabilities"), provided, that the Company shall have no
obligation hereunder to the Administrative Agent or any Bank with
respect to indemnified liabilities arising from the gross
negligence or willful misconduct of the Administrative Agent or
any such Bank. The agreements in this Section shall survive
repayment of the Notes and all other amounts payable hereunder.
9.6 Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and permitted
assigns of such party; and all covenants, promises and agreements
by or on behalf of the Company, the Administrative Agent or the
Banks that are contained in this Agreement shall bind and inure
to the benefit of their respective successors and assigns. The
Company may not assign or transfer any of its rights or
obligations under this Agreement or the other Loan Documents
without the prior written consent of each Bank.
(b) Each Bank may, in accordance with applicable
law, sell to any Bank or Affiliate thereof and, with the consent
of the Company (which consent shall not be unreasonably withheld)
82
<PAGE>
and the Administrative Agent, to one or more banks or other
financial institutions (each, a "Purchasing Bank") all or any
part of its interests, rights and obligations under this
Agreement, the Notes and the other Loan Documents (including all
or a portion of its Commitment and the Loans at the time owing to
it and the Notes held by it); provided, however, that (i) so long
as the Commitments are then in effect, such assignment shall be
in an amount not less than $5,000,000 (or such lesser amount as
the Company and the Administrative Agent shall agree in their
sole discretion), (ii) the parties to each such assignment shall
execute and deliver to the Administrative Agent and the Company
for acceptance and recording by the Administrative Agent in the
Register an Assignment and Acceptance, together with the Note or
Notes subject to such assignment and a processing and recordation
fee of $2,000 and (iii) each such assignment of Committed Loans
or all or any portion of a Bank's Commitment shall be of a
constant percentage of the assigning Bank's Commitment and
Committed Loans then outstanding and (iv) no Competitive Loans
may be assigned unless the Commitment shall have expired or been
terminated. Upon acceptance and recording pursuant to paragraph
(e) of this subsection 9.6, from and after the effective date
specified in an Assignment and Acceptance, which effective date
shall be at least five Business Days after the execution thereof,
(A) such Purchasing Bank shall be a party hereto and, to the
extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Bank under this
Agreement and (B) the assigning Bank thereunder shall, to the
extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Bank's rights and
obligations under this Agreement and the other Loan Documents,
such Bank shall cease to be a party hereto but shall continue to
be entitled to the benefits of Sections 2.21, 2.22 and 2.23 (to
the extent that such Bank's entitlement to such benefits arose
out of such Bank's position as a Bank prior to the applicable
assignment), as well as to any Facility Fees accrued for its
account and not yet paid). Such Assignment and Acceptance shall
be deemed to amend this Agreement to the extent, and only to the
extent, necessary to reflect the addition of such Purchasing Bank
and the resulting amounts and percentages held by the Banks
arising from the purchase by such Purchasing Bank of all or a
portion of the rights and obligations of such assigning Bank
under this Agreement, the Notes and the other Loan Documents.
Notwithstanding any provision of this Section 9.6, the consent of
the Company shall not be required for any assignment which occurs
at any time when any Default or Event of Default shall have
occurred and be continuing.
(c) By executing and delivering an Assignment and
Acceptance, the assigning Bank thereunder and the Purchasing Bank
83
<PAGE>
thereunder shall be deemed to confirm to and agree with each
other and the other parties hereto as follows: (i) such
assigning Bank warrants that it is the legal and beneficial owner
of the interest being assigned thereby, free and clear of any
adverse claim and that its Commitment, and the outstanding
balances of its Loans, in each case without giving effect to
assignments thereof which have not become effective, are as set
forth in such Assignment and Acceptance, (ii) except as set forth
in (i) above, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in
connection with this Agreement or the other Loan Documents, or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, the other Loan Documents
or any other instrument or document furnished pursuant hereto or
thereto, or the financial condition of the Company or any
Subsidiary thereof or the performance or observance by the
Company or any Subsidiary thereof of any of its obligations under
this Agreement or the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto;
(iii) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; (iv)
such Purchasing Bank confirms that it has received a copy of this
Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 5.1 and such other
documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such
Assignment and Acceptance; (v) such Purchasing Bank will
independently and without reliance upon the Administrative Agent,
such assigning Bank 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
action under this Agreement and the other Loan Documents; (vi)
such Purchasing Bank appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as
are delegated to the Administrative Agent by the terms hereof or
thereof, together with such powers as are reasonably incidental
thereto; and (vii) such Purchasing Bank agrees that it will
perform in accordance with their terms all the obligations which
by the terms of this Agreement and the other Loan Documents are
required to be performed by it as a Bank including, if it is
organized under the laws of a jurisdiction outside the United
States, its obligation pursuant to Section 2.22 to deliver the
forms prescribed by the Internal Revenue Service of the United
States certifying as to the Purchasing Bank's exemption from
United States withholding taxes with respect to all payments to
be made to the Purchasing Bank under this Agreement.
(d) The Administrative Agent shall maintain at
its offices in Philadelphia or Pittsburgh, Pennsylvania, a copy
84
<PAGE>
of each Assignment and Acceptance and the names and addresses of
the Banks, and the Commitment of, and principal amount of the
Loans owing to, each Bank pursuant to the terms hereof from time
to time (the "Register"). The entries in the Register shall be
conclusive in the absence of manifest error and the Company, the
Administrative Agent and the Banks may treat each Person whose
name is recorded in the Register pursuant to the terms hereof as
a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Company and any
Bank at any reasonable time and from time to time upon reasonable
prior notice.
(e) Upon its receipt of a duly completed
Assignment and Acceptance executed by an assigning Bank and a
Purchasing Bank (and in the case of a Purchasing Bank that is not
then a Bank or an Affiliate thereof, by the Company and the
Administrative Agent) together with the Note or Notes subject to
such assignment and the processing and recordation fee referred
to in paragraph (b) above, the Administrative Agent shall
promptly (i) accept such Assignment and Acceptance, (ii) record
the information contained therein in the Register and (iii) give
notice thereof to the Banks. Within five Business Days after
receipt of written notice, the Company, at its own expense, shall
execute and deliver to the Administrative Agent, in exchange for
the surrender of the original Notes held by the assigning Bank
(A) a new Committed Note to the order of such Purchasing Bank in
an amount equal to the Commitment assumed, (B) a new Competitive
Note to the order of such Purchasing Bank in an amount equal to
the Total Commitment then in effect and (C) if the assigning Bank
has retained a Commitment, a new Committed Note to the order of
such assignor in an amount equal to the Commitment retained by
it. Such new Committed Notes shall be in an aggregate principal
amount equal to the aggregate principal amount of such
surrendered Committed Note(s); such new Notes shall be dated the
date of the surrendered Notes which they replace and shall
otherwise be in substantially the form of Exhibits B-1 and B-2,
respectively. Canceled Notes shall be promptly returned to the
Company.
(f) Each Bank may without the consent of the
Company or the Administrative Agent (except to the extent
provided below) sell participations to one or more banks or other
entities (each a "Participant") in any Loan owing to such Bank,
any Note held by such Bank, any Commitment of such Bank or any
other interest of such Bank hereunder and under the other Loan
Documents, provided, however, that (i) such Bank's obligations
under this Agreement to the other parties to this Agreement shall
remain unchanged, (ii) such Bank shall remain solely responsible
to the other parties hereto for the performance of such
obligations, (iii) such Bank shall remain the holder of any such
Note for all purposes under this Agreement and the other Loan
85
<PAGE>
Documents, (iv) the Company, the Banks and the Administrative
Agent shall continue to deal solely and directly with such Bank
in connection with such Bank's rights and obligations under this
Agreement and the other Loan Documents, (v) in any proceeding
under the Bankruptcy Code such Bank shall be, to the extent
permitted by law, the sole representative with respect to the
obligations held in the name of such Bank, whether for its own
account or for the account of any Participant, (vi) such Bank
shall retain the sole right to approve, without the consent of
any Participant, any amendment, modification or waiver of any
provision of this Agreement or the Note or Notes held by such
Bank or any other Loan Document, other than any such amendment,
modification or waiver with respect to any Loan or Commitment in
which such Participant has an interest and which is described in
subsection 9.1(a) hereof.
(g) If amounts outstanding under this Agreement
and the Notes are due or unpaid, or shall have been declared or
shall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts owing
under this Agreement and any Note to the same extent as if the
amount of its participating interest were owing directly to it as
a Bank under this Agreement or any Note, provided that in
purchasing such participation such Participant shall be deemed to
have agreed to share with the Banks the proceeds thereof as
provided in Section 9.8. The Company also agrees that each
Participant shall be entitled to the benefits of Sections 2.21,
2.22, 2.23 and 9.5 with respect to its participation in the
Commitments and the Loans outstanding from time to time;
provided, that no Participant shall be entitled to receive any
greater amount pursuant to such Sections than the assigning Bank
would have been entitled to receive in respect of the amount of
the participation transferred by such assigning Bank to such
Participant had no such transfer occurred.
(h) If any Participant is organized under the
laws of any jurisdiction other than the United States or any
state thereof, the assigning Bank, concurrently with the sale of
a participating interest to such Participant, shall cause such
Participant (i) to represent to the assigning Bank (for the
benefit of the assigning Bank, the other Banks, the
Administrative Agent and the Company) that under applicable law
and treaties no taxes will be required to be withheld by the
Administrative Agent, the Company or the assigning Bank with
respect to any payments to be made to such Participant in respect
of its participation in the Loans and (ii) to agree (for the
benefit of the assigning Bank, the other Banks, the
Administrative Agent and the Company) that it will deliver the
tax forms and other documents required to be delivered pursuant
to Section 2.22 and comply from time to time with all applicable
86
<PAGE>
U.S. laws and regulations with respect to withholding tax
exemptions.
(i) Any Bank may at any time assign all or any
portion of its rights under this Agreement and the Notes issued
to it to a Federal Reserve Bank; provided that no such assignment
shall release a Bank from any of its obligations hereunder.
9.7 Confidentiality; Disclosure of Information.
Unless otherwise consented to by the Company in writing, each of
the Banks and the Administrative Agent agrees (on behalf of
itself and each of its affiliates, directors, officers, employees
and representatives) to use reasonable precautions to keep
confidential, in accordance with its customary procedures for
handling confidential information of the same nature and in
accordance with safe and sound banking practices, any non-public
information supplied to it by the Company pursuant to this
Agreement; provided that nothing herein shall limit the
disclosure of any such information (a) to the extent required by
statute, rule, regulation or judicial process, (b) to counsel for
any Bank or the Administrative Agent, (c) to bank examiners,
auditors or accountants, (d) to the Administrative Agent or any
other Bank, (e) in connection with any litigation to which any
one or more of the Banks or the Administrative Agent is a party
and (f) to any Participant or Purchasing Bank (or prospective
Participant or Purchasing Bank) so long as such Participant or
Purchasing Bank (or prospective Participant or Purchasing Bank)
agrees in writing to comply with the requirements of this
section.
9.8 Adjustments; Set-off. (a) If any Bank (a
"benefitted Bank") shall at any time receive any payment of all
or part of its Loans or the Reimbursement Obligations owing to
it, or interest thereon, or receive any collateral in respect
thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in
subsection 7(i), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Bank, if any,
in respect of such other Bank's Loans or the Reimbursement
Obligations owing to it, or interest thereon, such benefitted
Bank shall purchase for cash from the other Banks such portion of
each such other Bank's Loan, or shall provide such other Banks
with the benefits of any such collateral, or the proceeds
thereof, as shall be necessary to cause such benefitted Bank to
share the excess payment or benefits of such collateral or
proceeds ratably with each of the Banks; provided, however, that
if all or any portion of such excess payment or benefits is
thereafter recovered from such benefitted Bank, such purchase
shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest. The
Company agrees that each Bank so purchasing a portion of another
87
<PAGE>
Bank's Loan may exercise all rights of payment (including,
without limitation, rights of set-off) with respect to such
portion as fully as if such Bank were the direct holder of such
portion.
(b) In addition to any rights and remedies, of
the Banks provided by law, upon the occurrence and during the
continuance of an Event of Default, each Bank shall have the
right, without prior notice to the Company, any such notice being
expressly waived by the Company to the extent permitted by
applicable law, upon any amount becoming due and payable by the
Company hereunder or under the Notes (whether at the stated
maturity, by acceleration or otherwise) to set-off and
appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in
any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute
or contingent, matured or unmatured, at any time held or owing by
such Bank to or for the credit or the account of the Company.
Each Bank agrees promptly to notify the Company and the
Administrative Agent in writing after any such set-off and
application made by such Bank, provided that the failure to give
such notice shall not affect the validity of such set-off and
application.
9.9 Counterparts. This Agreement may be executed by
one or more of the parties to this Agreement on any number of
separate counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all
the parties shall be lodged with the Company and each of the
Banks.
9.10 Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
9.11 Integration. This Agreement represents the
agreement of the Company, the Agents and the Banks with respect
to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Agents or any
Bank relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
9.12 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT
88
<PAGE>
AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA.
9.13 Submission To Jurisdiction; Waivers. The Company
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any
legal action or proceeding relating to this Agreement or the
Notes, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the
Courts of the Commonwealth of Pennsylvania, the courts of the
United States of America for the Eastern District of
Pennsylvania, and appellate courts from any thereof;
(b) consents that any such action or proceeding
may be brought in such courts and waives any objection that it
may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or
claim the same;
(c) agrees that service of process in any such
action or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form
of mail), postage prepaid, to the Company at its address set
forth in Section 9.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;
and
(d) agrees that nothing herein shall affect the
right to effect service of process in any other manner permitted
by law or shall limit the right to sue in any other jurisdiction.
9.14 Acknowledgements. The Company hereby
acknowledges that:
(a) it has been advised by counsel in the
negotiation, execution, delivery of this Agreement, the Notes and
the other Loan Documents;
(b) neither the Administrative Agent, the
Co-Agents nor any Bank has any fiduciary relationship to the
Company solely by reason of or arising from this Agreement, and
the relationship hereunder between Administrative Agent, the
Co-Agents and the Banks, on one hand, and the Company, on the
other hand, is solely that of debtor and creditor; and
(c) no joint venture exists among the Banks or
among the Company and the Banks.
89
<PAGE>
9.15 Limitation of Liability. No claim may be made by
the Company, any Subsidiary thereof or any other Person against
the Administrative Agent, the Co-Agents, any Bank, or the
Affiliates, directors, officers, employees, attorneys or agent of
any of them for any special, indirect, consequential or punitive
damages in respect of any claim for breach of contract or any
other theory of liability arising out of or related to the
transactions contemplated by this Agreement, the other Loan
Documents or any other transactions (including the other
Transactions), or any act, omission or event occurring in
connection therewith; and each of the Company and its
Subsidiaries hereby waives, releases and agrees not to sue upon
any claim for any such damages, whether or not accrued and
whether or not known or suspected to exist in its favor.
90
<PAGE>
9.16 WAIVERS OF JURY TRIAL. THE COMPANY, THE
ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES AND FOR ANY
MANDATORY COUNTERCLAIM THEREIN.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in Philadelphia,
Pennsylvania by their proper and duly authorized officers as of
the day and year first above written.
STRAWBRIDGE & CLOTHIER
By /s/ Steven L. Strawbridge
-----------------------------------------
Title: Vice President,
Secretary, Treasurer
PNC BANK, NATIONAL ASSOCIATION,
as Administrative Agent and
as a Bank
By /s/ H. Todd Dissinger
-----------------------------------------
Title: Vice President
CORESTATES BANK, N.A.,
as Co-Agent and as a Bank
By /s/ James A. Bennett
-----------------------------------------
Title: Senior Vice President
FIRST FIDELITY BANK, N.A.,
as Co-Agent and as a Bank
By /s/ Wynelle Farlow
-----------------------------------------
Title: Vice President
S-1
<PAGE>
MELLON BANK, N.A.
By /s/ Donald G. Cassidy, Jr.
-----------------------------------------
Title: First Vice President
S-2
Exhibit 10.7.1
WAIVER AND FIRST AMENDMENT
THIS WAIVER AND FIRST AMENDMENT, dated as of
December 20, 1995, is made by and among STRAWBRIDGE & CLOTHIER
(the "Company"), the several banks and other financial
institutions parties to the Credit Agreement (as hereinafter
defined) (the "Banks"), PNC BANK, NATIONAL ASSOCIATION, as
administrative agent (in such capacity, the "Administrative
Agent"), and CORESTATES BANK, N.A. and FIRST FIDELITY BANK, N.A.,
as co-agents (each, in such capacity, a "Co-Agent" and together,
the "Co-Agents").
BACKGROUND
A. Reference is made to the Credit Agreement, dated
as of November 21, 1995, among the Company, the Banks, the
Administrative Agent and the Co-Agents (the "Credit Agreement").
Capitalized terms used herein and not otherwise defined herein
shall have the meanings provided in the Credit Agreement.
B. The Company has requested that the Banks waive and
amend certain provisions of the Credit Agreement, and the Banks
have agreed to waive and amend such provisions on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and
for other consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Amendments to Credit Agreement. The Credit
Agreement is hereby amended as provided below in this paragraph 1
and all references in the Credit Agreement to "this Agreement"
shall be deemed to refer to the Credit Agreement as amended
hereby.
(a) Amendment to Section 6.1(a) (Leverage Ratio).
Section 6.1(a) of the Credit Agreement is hereby amended by
deleting such Section in its entirety and inserting in lieu
thereof the following:
"(a) Leverage Ratio. The Company shall not
permit the Leverage Ratio as of any date occurring
on and after December 20, 1995, to exceed .50:1.0.
<PAGE>
(b) Amendment to Section 6.1(d) (Capital
Expenditures). Section 6.1(d) of the Credit Agreement is hereby
amended by deleting the number "$17,500,000" the one time it
appears therein and inserting in lieu thereof the number
"$15,000,000".
(c) Amendment to Section 6.4 (Restrictions on
Fundamental Changes). Section 6.4(b) of the Credit Agreement is
hereby amended by deleting the number "$7,500,000" the one time
it appears therein and inserting in lieu thereof the following:
"(A) for fiscal year 1996, -$0- and (B) for each fiscal year
thereafter, $7,500,000".
2. Waiver of Provisions of Section 6.1(b) (Fixed
Charge Coverage Ratio). Compliance by the Company with the
provisions of Section 6.1(b) of the Credit Agreement is hereby
waived for the Company's fourth fiscal quarter of 1995 and the
first fiscal quarter of 1996.
3. Representations and Warranties. The Company
hereby represents and warrants that:
(a) There exists no Default or Event of Default
under the Credit Agreement as amended hereby;
(b) The representations and warranties made in
the Credit Agreement are true and correct in all material
respects as of the date hereof, except as set forth in Exhibit A
attached hereto; and
(c) The execution and delivery of this Waiver and
First Amendment by and on behalf of the Company has been duly
authorized by all requisite action on behalf of the Company and
this Waiver and First Amendment constitutes the legal, valid and
binding obligation of the Company, enforceable in accordance with
its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at
law).
4. Additional Requirements. The effectiveness of
this Waiver and First Amendment is subject to the following
conditions precedent:
(a) The Administrative Agent shall have received
counterparts of this Waiver and First Amendment, duly executed by
the Company and the Required Banks;
2
<PAGE>
(b) The Company shall pay to the Administrative
Agent (i) for the ratable benefit of the Banks in accordance with
their respective Commitment Percentages, a non-refundable fee in
the amount of $187,500 and (ii) for the account of the
Administrative Agent, such additional agency fees as the Company
and the Administrative Agent shall agree.
5. Limited Effect. Except as expressly amended by
this Waiver and First Amendment, the Credit Agreement shall
continue to be, and shall remain, unaltered and in full force and
effect in accordance with its terms, and any waivers contained
herein shall be limited precisely as drafted and shall not
constitute a waiver of (a) any other terms or provisions of the
Credit Agreement or any other Loan Document, (b) any Default or
Event of Default or (c) any other rights or remedies of the
Banks. This Waiver and First Amendment shall not be deemed to
operate as a future waiver or modification of the provisions of
Section 6.1(b), or a waiver or modification of any other term,
condition or covenant of the Credit Agreement.
6. Release and Indemnity. Recognizing and in
consideration of the Administrative Agent's, the Co-Agents' and
the Banks' agreement to the amendments and waivers set forth
herein, the Company hereby waives and releases the Administrative
Agent, the Co-Agents and the Banks and their officers, attorneys,
agents, and employees from any liability, suit, damage, claim,
loss or expense of any kind or nature whatsoever and howsoever
arising that the Company ever had or now has against any of them
arising out of or relating to the Administrative Agent's, the
Co-Agents' or the Banks' acts or omissions with respect to this
Waiver and First Amendment, the Credit Agreement, the other Loan
Documents or any other matters described or referred to herein or
therein. The Company further hereby agrees to indemnify and hold
the Administrative Agent, the Co-Agents and the Banks and their
officers, attorneys, agents and employees harmless from any loss,
damage, judgment, liability or expense (including counsel fees)
suffered by or rendered against the Administrative Agent, the Co-
Agents or the Banks or any of them on account of anything arising
out of this Waiver and First Amendment, the Credit Agreement, the
other Loan Documents or any other document delivered pursuant
thereto up to and including the date hereof, provided, that the
Company shall have no obligation hereunder to the Administrative
Agent, the Co-Agents or any Bank with respect to indemnified
liabilities arising from the gross negligence or willful
misconduct of the Administrative Agent, the Co-Agents or any such
Bank.
3
<PAGE>
7. Miscellaneous.
(a) Expenses. The Company agrees to pay all of
the Administrative Agent's reasonable out-of-pocket expenses
incurred in connection with the preparation of this Waiver and
First Amendment including, without limitation, the reasonable
fees and expenses of counsel.
(b) Governing Law. This Waiver and First
Amendment shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
(c) Successor; Assigns. The terms and provisions
of this Waiver and First Amendment shall be binding upon and
shall inure to the benefit of the Company, the Administrative
Agent, the Co-Agents and the Banks and their respective
successors and assigns.
(d) Counterparts. This Waiver and First
Amendment may be executed in one or more counterparts, each of
which shall be deemed to be an original, and all of which shall
constitute one and the same instrument.
(e) Headings. The headings of any paragraph of
this Waiver and First Amendment are for convenience only and
shall not be used to interpret any provision hereof.
(f) Modifications. No modification hereof or any
agreement referred to herein shall be binding or enforceable
unless in writing and signed on behalf of the party against whom
enforcement is sought.
IN WITNESS WHEREOF, the parties hereto have caused this
Waiver and First Amendment to be duly executed and delivered by
their proper and duly authorized officers as of the day and year
first above written.
STRAWBRIDGE & CLOTHIER
By: /s/ Steven L. Strawbridge
-----------------------------------
Title: Vice President
4
<PAGE>
PNC BANK, NATIONAL ASSOCIATION,
as Administrative Agent and
as a Bank
By: /s/ H. Todd Dissinger
-----------------------------------
Title: Vice President
CORESTATES BANK, N.A.,
as Co-Agent and as a Bank
By: /s/ Carol A. Williams
-----------------------------------
Title: Senior Vice President
FIRST FIDELITY BANK, N.A.,
as Co-Agent and as a Bank
By: /s/ Wynelle Farlow
-----------------------------------
Title: Vice President
MELLON BANK, N.A.
By: /s/ Laurie G. Dunn
-----------------------------------
Title: Vice President
5
<PAGE>
Exhibit A
Exceptions to Bringdown of Representations and Warranties
---------------------------------------------------------
Due to the inclement weather and the continuing sluggish retail
environment, the Company has lowered its expectations for
operating results in the fourth quarter of fiscal 1995.
6
EXHIBIT 11 -- STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
YEAR ENDED
-------------------------------------------
February 3, January 28, January 29,
1996 1995 1994
-------------------------------------------
(in thousands, except per share data)
PRIMARY
Average shares outstanding 10,531 10,411 10,316
Net effect of dilutive stock
options -- based on the
treasury stock method using
average market price 0 15 8
-------------------------------------------
TOTAL 10,531 10,426 10,324
===========================================
Net (loss) earnings ($8,787) $20,032 $17,727
Less: preferred stock dividends 1 8 17
-------------------------------------------
TOTAL ($8,788) $20,024 $17,710
===========================================
Per share amount ($0.83) $1.92 $1.71
===========================================
FULLY DILUTED
Average shares outstanding 10,531 10,411 10,316
Net effect of dilutive stock
options -- based on the
treasury stock method using
the year-end market price,
if higher than average
market price 0 15 9
-------------------------------------------
TOTAL 10,531 10,426 10,325
===========================================
Net (loss) earnings ($8,787) $20,032 $17,727
Less: preferred stock dividends 1 8 17
-------------------------------------------
TOTAL ($8,788) $20,024 $17,710
===========================================
Per share amount ($0.83) $1.92 $1.71
===========================================
(1) This calculation is submitted in accordance with the requirements of
Regulation S-K although not required by APB Opinion No. 15 because it
results in dilution of less than 3%.
Exhibit 13
STRAWBRIDGE & CLOTHIER
PORTIONS OF THE
1995 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
1
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS
OF OPERATIONS
(in thousands, except share and per share data)
- ------------------------------------------------------------------------------
Year Ended
----------------------------------------
FEBRUARY 3 January 28 January 29
1996 1995 1994
---------- ---------- ----------
(53 weeks) (52 weeks) (52 weeks)
<S> <C> <C> <C>
Net sales ........................... $ 980,598 $1,003,524 $ 984,615
Other income, net of other deductions 6,238 3,265 2,412
---------- ---------- ----------
986,836 1,006,789 987,027
Deduct:
Cost of sales, including occupancy
and buying costs ................. 746,473 745,251 733,901
Selling and administrative expenses,
net of finance charges ........... 189,207 172,029 171,835
Depreciation ...................... 31,300 29,587 28,829
Interest .......................... 18,964 19,551 20,909
Provision for doubtful accounts ... 14,177 10,281 4,724
---------- ---------- ----------
1,000,121 976,699 960,198
---------- ---------- ----------
(Loss) earnings before income
taxes (benefit) ................... (13,285) 30,090 26,829
Income taxes (benefit) .............. (4,498) 10,058 9,102
---------- ---------- ----------
Net (loss) earnings ................. $ (8,787) $ 20,032 $ 17,727
========== ========== ==========
(Loss) earnings per share ........... $(.83) $1.92 $1.71
========== ========== ==========
Average shares outstanding .......... 10,531,149 10,426,277 10,324,048
See accompanying notes.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
- ------------------------------------------------------------------------------
FEBRUARY 3 January 28
1996 1995
---------- ----------
Assets
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents ............................. $ 14,253 $ 1,575
Accounts receivable .............................. 45,058 167,487
Allowance for doubtful accounts ................ (1,940) (5,544)
-------- --------
43,118 161,943
Merchandise inventories .......................... 154,009 143,790
Deferred income taxes ............................ 3,365 3,975
Income taxes recoverable ......................... 5,653 -0-
Prepaid expenses and other ....................... 9,534 7,427
-------- --------
TOTAL CURRENT ASSETS ............................. 229,932 318,710
PROPERTY, FIXTURES AND EQUIPMENT --
on the basis of cost
Land ............................................. 20,311 20,311
Buildings and improvements ....................... 388,740 352,411
Store fixtures, furniture and equipment .......... 258,093 238,136
Allowance for depreciation (deduction) ........... (342,052) (315,105)
-------- --------
325,092 295,753
Construction in progress ......................... 4,300 12,408
-------- --------
329,392 308,161
OTHER ASSETS ..................................... 16,490 12,921
-------- --------
$575,814 $639,792
======== ========
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Notes payable to banks ........................... $ -0- $ 6,500
Accounts payable ................................. 63,494 59,500
Accrued expenses ................................. 30,153 24,665
Federal, state and local taxes ................... 3,116 15,357
Dividends payable ................................ -0- 2,798
Long-term debt and capital lease obligations
due within one year ............................ 13,637 8,426
-------- --------
TOTAL CURRENT LIABILITIES ........................ 110,400 117,246
LONG-TERM DEBT -- due after one year ............. 129,358 161,442
CAPITAL LEASE OBLIGATIONS -- due after one year .. 35,739 40,848
ACCRUED RETIREMENT COSTS ......................... 48,518 51,105
OTHER LIABILITIES ................................ 6,740 6,799
SERIES PREFERRED STOCK -- no par value:
authorized -- 2,000,000 shares; none issued .... -0- -0-
SHAREHOLDERS' EQUITY
Series A Common Stock -- par value $1 a share:
authorized -- 20,000,000 shares; issued and
outstanding 1995 -- 7,473,841 shares, 1994 --
7,291,482 shares ............................... 7,474 7,291
Series B Common Stock -- par value $1 a share,
convertible: authorized -- 20,000,000 shares;
issued and outstanding 1995 -- 3,139,699 shares,
1994 -- 3,170,343 shares 3,140 3,170
Capital in addition to par value of shares ....... 170,859 168,222
Retained earnings ................................ 63,586 83,669
-------- --------
TOTAL SHAREHOLDERS' EQUITY ....................... 245,059 262,352
-------- --------
$575,814 $639,792
======== ========
See accompanying notes.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in thousands)
- ------------------------------------------------------------------------------
Year Ended
----------------------------------------
FEBRUARY 3 January 28 January 29
1996 1995 1994
---------- ---------- ----------
(53 weeks) (52 weeks) (52 weeks)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) earnings .................. $ (8,787) $ 20,032 $ 17,727
Adjustments to reconcile net (loss)
earnings to cash flows from
operating activities:
Depreciation ..................... 31,300 29,587 28,829
Deferred income taxes (benefit)... (407) (5,377) 502
Pension curtailment gain ......... (6,556) -0- -0-
Sale of accounts receivable ...... 95,000 50,000 -0-
Changes in:
Accounts receivable ............ 23,825 (11,510) (21,016)
Merchandise inventories ........ (10,219) (658) 1,829
Accounts payable and accrued
expenses ..................... 9,482 3,303 (965)
Federal, state and local taxes.. (17,895) 4,154 514
Other .......................... 6,090 3,481 4,240
-------- -------- --------
TOTAL ................................ 121,833 93,012 31,660
-------- -------- --------
NET CASH USED FOR INVESTING ACTIVITIES
Acquisition of property, fixtures and
equipment .......................... (48,692) (37,970) (22,076)
Changes in other assets .............. (3,764) (5,917) (879)
-------- -------- --------
TOTAL ................................ (52,456) (43,887) (22,955)
-------- -------- --------
NET CASH USED FOR FINANCING ACTIVITIES
Long-term borrowings.................. -0- 5,000 49,255
Payment of long-term debt and capital
lease obligations .................. (37,320) (11,147) (66,718)
Change in short-term notes payable ... (6,500) (37,000) 16,000
Proceeds from stock transactions ..... 1,213 1,094 1,226
Cash dividends ....................... (14,092) (8,357) (10,980)
-------- -------- --------
TOTAL ................................ (56,699) (50,410) (11,217)
-------- -------- --------
CHANGE IN CASH AND EQUIVALENTS ....... 12,678 (1,285) (2,512)
Cash and equivalents at beginning
of year ............................ 1,575 2,860 5,372
-------- -------- --------
CASH AND EQUIVALENTS AT END OF YEAR .. $ 14,253 $ 1,575 $ 2,860
======== ======== ========
See accompanying notes.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
(in thousands, except per share data)
- ------------------------------------------------------------------------------
CAPITAL
IN
SERIES SERIES ADDITION TREASURY
A B TO PAR STOCK
COMMON COMMON VALUE OF RETAINED (DEDUC-
STOCK STOCK SHARES EARNINGS TION) TOTAL
------ ------ -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 30, 1993..$6,761 $3,196 $157,591 $ 75,291 $-0- $242,839
Net earnings .............. 17,727 17,727
Cash dividends -- common
(per share:
$1.09 Series A;
$.99 Series B)........... (10,963) (10,963)
Cash dividends --
preferred ................ (17) (17)
Stock dividend (three
percent) ................. 203 96 6,947 (7,246) -0-
Exercise of stock options,
employee stock purchases,
and contribution to
Retirement Savings Plan... 127 3 2,486 18 2,634
Conversions ............... 60 (60) -0-
Treasury stock purchases... (18) (18)
------ ------ -------- -------- ---- --------
Balance, January 29, 1994.. 7,151 3,235 167,024 74,792 -0- 252,202
Net earnings .............. 20,032 20,032
Cash dividends -- common
(per share:
$1.10 Series A;
$1.00 Series B).......... (11,147) (11,147)
Cash dividends --
preferred ................ (8) (8)
Employee stock purchases .. 75 1,198 1,273
Conversions ............... 65 (65) -0-
------ ------ -------- -------- ---- --------
Balance, January 28, 1995.. 7,291 3,170 168,222 83,669 -0- 262,352
Net loss .................. (8,787) (8,787)
Cash dividends -- common
(per share:
$1.10 Series A;
$1.00 Series B).......... (11,295) (11,295)
Cash dividends --
preferred ................ (1) (1)
Exercise of stock options,
employee stock purchases,
and contribution to
Retirement Savings Plan... 153 2,637 2,790
Conversions ............... 30 (30) -0-
------ ------ -------- -------- ---- --------
Balance, February 3, 1996..$7,474 $3,140 $170,859 $ 63,586 $-0- $245,059
====== ====== ======== ======== ==== ========
See accompanying notes.
</TABLE>
5
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
The Company operates 40 retail stores, including department and
self-service stores, which sell general merchandise in Philadelphia and
the surrounding Delaware Valley area of Southeastern Pennsylvania,
Southern New Jersey, and Northern Delaware. The Company grants credit
to customers, substantially all of whom are residents of its trading
area. See Note 9 -- Subsequent Event.
1. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries.
All intercompany transactions have been eliminated.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
Inventories: Merchandise inventories are priced at cost determined on
the last-in, first-out method using internally developed price indices
for most inventories.
Store Preopening Costs: Store preopening costs are charged to expense in
the year incurred and totalled $1,417,000, $28,000 and $0 in 1995, 1994
and 1993, respectively.
Property, Fixtures and Equipment: Property, fixtures and equipment are
recorded at cost, which is depreciated by the straight-line method over
the estimated useful lives of the assets.
Advertising Costs: Advertising costs are expensed as incurred and
totalled $29,292,000, $28,447,000 and $28,455,000 in 1995, 1994 and
1993, respectively.
Cash Equivalents: For purposes of the statement of cash flows, the
Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
Per Share Data: Earnings per share amounts are based on the weighted
average number of shares of common stock and dilutive common stock
equivalents (employee stock options) outstanding during each fiscal
year.
Accounting Standards Pending Adoption: In March 1995, the FASB issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," which requires impairment
losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company will
adopt Statement 121 in the first quarter of fiscal 1996. Due to the
extensive number of estimates that must be made to assess the impact of
adopting Statement 121, the financial statement impact of adoption has not
yet been determined.
In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock Based Compensation," which is effective for the Company's 1996
fiscal year. Statement 123 provides a choice to follow the accounting
provisions of Statement 123 in determining stock based compensation
expense or to continue following the provisions of APB 25, "Accounting
for Stock Issued to Employees." The Company will continue to follow the
accounting provisions of APB 25 in determining compensation expense for
its stock option and employee stock purchase plans and will provide the
pro forma disclosures as required by Statement 123 beginning in fiscal 1996.
Reclassifications: Certain prior-year amounts have been reclassified to
conform with the current presentation.
2. INVENTORIES
If the first-in, first-out method of determining inventory cost had been
used, inventories would have been $33,235,000 and $34,141,000 higher
than reported at February 3, 1996 and January 28, 1995, respectively.
3. ACCOUNTS RECEIVABLE
The Company entered into an agreement in January 1995 under which it
could sell, on a revolving basis, up to $50,000,000 of the Company's
private label credit card accounts receivable. In November 1995, the
Company entered into an agreement that increased the amount of
receivables the Company can sell to $150,000,000. Beginning in November
1996, there is a liquidation period during which the purchaser's
interest in principal cash collections will be used to pay down the
purchaser's investment. The amount of receivables sold was $145,000,000
at February 3, 1996 and $50,000,000 at January 28, 1995. The Company
accounts for these sales under the provisions of FASB Statement No. 77,
"Receivables Sold With Recourse." Under the recourse provisions of the
agreement, the Company is obligated to cover uncollectible receivables
within specified limits. The Company remained contingently liable for
approximately $31,990,000 of the sold receivables at February 3, 1996. The
6
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
- ------------------------------------------------------------------------------
Company established accruals of $7,560,000 at February 3, 1996 and
$1,756,000 at January 28, 1995 to reserve for any such uncollectible
receivables.
4. LONG-TERM DEBT AND SHORT-TERM BORROWINGS
Long-term debt -- due after one year consists of the following (in
thousands):
<TABLE>
<CAPTION>
FEBRUARY 3 January 28
1996 1995
---------- ----------
<S> <C> <C>
6.625% notes due October 15, 2003 ................ $ 49,645 $ 49,612
Series A Senior Notes, maturing equally from
1996 to 2004 with interest at 9.2% ............. 21,819 24,546
Series B Senior Notes, due September 30, 1999
with interest at 9.0% .......................... 20,000 20,000
Mortgage notes payable, at rates ranging from
8.50% to 10%, due in installments,
maturing from 2 to 12 years .................... 12,894 14,557
Senior Note, due October 15, 1997 with
interest at 7.04% .............................. 25,000 25,000
Notes payable to bank under revolving credit
agreement ...................................... -0- 25,000
Senior Notes ..................................... -0- 2,727
-------- --------
$129,358 $161,442
======== ========
</TABLE>
Among other things, certain loan agreements require that the Company
maintain a ratio of current assets to current liabilities of not less
than 1.5.
Certain agreements restrict transactions reducing shareholders' equity
and the amount available for such transactions at February 3, 1996 is
$31,093,000. Fixed assets with a net book value of $31,420,000 are
mortgaged by certain agreements.
The fair value of the Company's long-term debt (including the current
portion thereof) is approximately $132,411,000 at February 3, 1996 while
the carrying amount is $133,748,000. Fair values were estimated using
discounted cash flow analyses, based on the Company's incremental
borrowing rates for similar types of borrowing arrangements. The excess
of recorded amount over fair values results because current rates exceed
contractual borrowing rates on certain loans.
On November 21, 1995, the Company entered into a revolving credit
agreement with a group of banks. Under the terms of the agreement, the
Company may borrow up to $100,000,000 through November 20, 1998, subject
to a thirty-day annual clean-down provision, at various interest rate
options. At February 3, 1996, there were no borrowings outstanding
under the agreement. The Company pays a commitment fee equal to .225%
per annum on the total commitment. The agreement is also subject to
certain restrictions and financial covenants measured on a quarterly
basis. The Company is in compliance with such restrictions and
covenants as of February 3, 1996. Continued compliance is important in
that the Company depends on its credit facility with the bank group, as
well as trade credit from vendors and factors, to meet seasonal
borrowing needs.
The weighted average interest rate on short-term borrowings outstanding
at January 28, 1995 was 6.1%. There were no short-term borrowings
outstanding at February 3, 1996.
There are no compensating balance arrangements in connection with debt
or credit lines.
Maturities of long-term debt for the next five fiscal years are as
follows: 1996 -- $4,390,000; 1997 -- $29,107,000; 1998 -- $4,032,000;
1999 -- $23,959,000; 2000 -- $4,265,000.
Interest paid, net of amounts capitalized, was: 1995 -- $19,428,000;
1994 -- $19,833,000; 1993 -- $21,050,000.
5. RETIREMENT BENEFITS
Defined Benefit Plans: The Company provides pension benefits under a
noncontributory defined benefit pension plan. Effective January 31,
1996, the benefits that were earned by all present participants in the
plan were frozen. Employees who did not meet plan eligibility
requirements prior to January 31, 1996 are not eligible to participate
in the plan. For participants other than officers with at least fifteen
years of eligibility service and whose age and service add up to
seventy, earnings over the next three years will be used in determining
their final benefit. The benefits for all other participants have been
determined as of January 31, 1996, based on current years of service and
salary levels. As a result of these changes, the Company recorded a
one-time, non-cash curtailment gain in fiscal 1995 of $6,556,000, which
is included in other income.
The Company's funding policy is to contribute amounts consistent with
the minimum funding standards of the Employee Retirement Income Security
Act of 1974. Plan assets consist primarily of common equity funds,
stocks and fixed income securities.
7
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
- ------------------------------------------------------------------------------
Net pension cost included the following components (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- -------- -------
<S> <C> <C> <C>
Service cost -- benefits earned
during the period .................. $ 2,256 $ 2,739 $ 2,488
Interest cost on projected benefit
obligation ......................... 7,224 6,856 6,562
Actual (return) loss on plan assets .. (19,783) 420 (10,164)
Net amortization and deferral ........ 13,572 (6,782) 3,601
------- ------- -------
Net pension cost ..................... $ 3,269 $ 3,233 $ 2,487
======= ======= =======
</TABLE>
The expected long-term rate of return on plan assets used in determining
net pension cost was 9%.
The following table sets forth the funded status and amounts recognized
in the Company's consolidated balance sheets for the Strawbridge &
Clothier Employees Retirement Benefit Plan (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested ......................................... $75,973 $61,643
======= =======
Accumulated .................................... $77,668 $63,312
======= =======
Projected ...................................... $79,003 $73,586
Plan assets at fair value......................... 88,020 74,660
------- -------
Plan assets in excess of projected benefit
obligation ..................................... 9,017 1,074
Items not yet recognized:
Net gain ....................................... (8,060) (6,848)
Net obligation at transition ................... 12 337
Prior service cost ............................. 77 2,029
------- -------
Prepaid (accrued) pension cost included in
consolidated balance sheets .................... $ 1,046 $(3,408)
======= =======
</TABLE>
The following assumptions were used in determining the actuarial present
value of the projected benefit obligation:
<TABLE>
<CAPTION>
1995 1994
------- --------
<S> <C> <C>
Weighted average discount rate ................... 7.25% 8.75%
Rate of increase in compensation levels .......... 3.0% 5.5%
</TABLE>
The Company sponsors an unfunded, nonqualified Deferred Compensation
Plan, which provides retirement benefits for certain key executive
officers. The accrued liability for this plan is included in accrued
retirement costs in the accompanying balance sheets. At December 31,
1995, the accumulated benefit obligation for this plan was $10,355,000
and the projected benefit obligation was $10,769,000.
401(k) Plan: The Company has a 401(k) Retirement Savings Plan, under
which employees may defer a portion of their compensation. The Plan was
amended effective February 1, 1996. Prior to February 1, 1996,
contingent upon there having been an increase in the Company's earnings,
as defined under the Plan, for the fiscal year ending within the Plan
year, employee contributions not in excess of 4% of a participant's
compensation were matched by the Company at the rate of $.50 for each
$1.00 contributed. Beginning February 1, 1996, the Company will
contribute an amount equal to 1.5% of each participant's compensation
for each Plan year. In addition, for Plan years beginning on or after
July 1, 1996, the Company will match $.25 for each $1.00 of a
participant's contribution up to 1.5% of a participant's compensation,
and may also make additional discretionary contributions to the Plan.
Matching expense was $630,000, $882,000 and $479,000 for 1995, 1994
and 1993, respectively. All Company matching contributions were
invested in a separate fund comprised of the Company's Series A Common
Stock, 250,000 shares of which have been reserved for use under the
401(k) Plan.
Retiree Health Care Plan: The Company provides certain health care
benefits for eligible retired employees. The retiree health care plan
is noncontributory for retirees who were full-time regular employees of
the Company and retired prior to January 1, 1993. For eligible
employees retiring on or after January 1, 1993, with fifteen years of
service, the plan is contributory with retiree contributions based on
years of service. Cost-sharing features include deductibles and co-
payment provisions. For certain participants, the Plan limits the
amount of future cost increases that will be paid by the Company.
Employees hired on or after January 1, 1993 are not eligible for retiree
health care benefits. The Plan is funded on a pay-as-you-go basis.
The following table presents the status of the Plan and the amounts
recognized in the Company's consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- --------
<S> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees ..................................... $22,065 $23,442
Active plan participants ..................... 4,831 6,927
------- -------
26,896 30,369
Unrecognized net actuarial gain................... 16,511 12,577
Unrecognized prior service cost .................. 242 266
------- -------
Accrued postretirement benefit cost included
in consolidated balance sheets ................. $43,649 $43,212
======= =======
</TABLE>
8
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
- ------------------------------------------------------------------------------
Postretirement benefit expense included the following components (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Service cost ................... $ 398 $ 375 $ 603
Interest cost .................. 2,576 2,310 3,437
Net amortization ............... (887) (736) -0-
------ ------ ------
$2,087 $1,949 $4,040
====== ====== ======
</TABLE>
The following assumptions were used in determining the accumulated
postretirement benefit obligation:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Discount rate ................................. 7.5% 8.75%
</TABLE>
<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
CURRENT FUTURE CURRENT FUTURE
RETIREES RETIREES RETIREES RETIREES
------------------- -------------------
<S> <C> <C> <C> <C>
Health care cost trend rate:
Initial rate ................. 9.5% 8.5% 10.0% 9.0%
Ultimate rate ................ 5.0% 5.0% 6.0% 6.0%
Period to ultimate rate ...... 9 YEARS 7 YEARS 8 years 6 years
</TABLE>
The health care cost trend rate assumption has a significant effect on
the amounts reported. For example, increasing the assumed health care
cost trend rates by one percentage point would increase the accumulated
postretirement benefit obligation as of February 3, 1996 by $2,205,000
and the aggregate of the service and interest cost components of
postretirement benefit expense for 1995 by $234,000.
6. COMMON STOCK
Series A and Series B shares are entitled to one and ten votes per
share, respectively. Series B shares are convertible on a
share-for-share basis into Series A shares. Series A shares are freely
transferable while Series B shares are only transferable to certain
permitted transferees. Series A Common Stock is entitled to cash
dividends at least 10% higher than any cash dividend declared on Series
B Common Stock.
The Company offers Series A Common Stock to employees for purchase
through payroll deductions under its 1991 Employee Stock Purchase Plan.
The purchase price is 85% of the closing market price on the offering
date or the purchase date, whichever is lower. During fiscal 1995, 1994
and 1993, respectively, 76,870, 75,422 and 74,499 shares were issued
under the Plan at average prices of $17.00, $17.00 and $19.23. As of
February 3, 1996, 326,306 shares of Series A Common Stock were available
for use under the Plan.
The Company also has stock option plans which provide for granting to
key employees qualified and nonqualified options to purchase common
stock of the Company. Generally, options are granted for a term of ten
years and become exercisable immediately. During fiscal 1995, 2,044
shares were issued upon exercise of options at an average price of
$19.14. No options were exercised during fiscal 1994. During fiscal
1993, 3,154 shares were issued upon exercise of options at an average
price of $22.46. Options to purchase 365,134 shares of Series A Common
Stock at an average exercise price of $26.79 were outstanding and
exercisable at February 3, 1996. As of February 3, 1996, 66,379 shares
of Series A Common Stock remain available for grant of options. During
1995, options to purchase 198,086 shares of Series A Common Stock and
145,254 shares of Series B Common Stock expired.
Effective in fiscal 1993, the Company established a dividend
reinvestment and stock purchase plan, whereby shareholders may invest
cash dividends and optional cash payments in Series A Common Stock. The
Company has registered 2,060,000 shares for use under the plan, of which
2,025,671 remain available for use at February 3, 1996.
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. The components of deferred tax liabilities and assets are as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Deferred tax liabilities:
Depreciation ...................... $18,078 $20,456
Other -- net ...................... 3,812 2,898
------- -------
21,890 23,354
Deferred tax assets:
Retiree health care obligation .... 14,854 15,158
Accruals and reserves ............. 11,863 12,616
------- -------
26,717 27,774
------- -------
Net deferred tax asset ................ $ 4,827 $ 4,420
======= =======
</TABLE>
Other assets include deferred tax assets of $1,462,000 and $445,000 at
February 3, 1996 and January 28, 1995, respectively.
The components of income tax expense (benefit) are as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- ------
<S> <C> <C> <C>
Current:
Federal ....................... $(4,111) $13,886 $8,299
State ......................... 20 1,549 301
------- ------ ------
(4,091) 15,435 8,600
Deferred:
Federal ....................... (116) (3,927) 146
State ......................... (291) (1,450) 356
------- ------ ------
(407) (5,377) 502
------- ------ ------
$(4,498) $10,058 $9,102
======= ====== ======
</TABLE>
9
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
- ------------------------------------------------------------------------------
A reconciliation of the effective income tax rate with the statutory
federal income tax rate is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal tax rate ................. (34.0)% 35.0% 35.0%
State taxes, net of federal
benefit......................... (1.6) 0.2 1.6
Jobs tax credit .................. (0.8) (1.9) (1.9)
Effect of state statutory tax
rate change .................... 1.1 -0- -0-
Other ............................ 1.4 0.1 (0.8)
---- ---- ----
(33.9)% 33.4% 33.9%
==== ==== ====
</TABLE>
Income taxes paid were as follows: 1995 -- $13,309,000; 1994 -- $11,735,000;
1993 -- $8,587,000.
8. COMMITMENTS
Leases:
Capital lease assets, which are included in property, fixtures and
equipment, are as follows (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 3 January 28
1996 1995
---------- ----------
<S> <C> <C>
Land ........................... $ 2,157 $ 2,157
Buildings ...................... 71,410 65,963
Store fixtures and equipment ... 2,807 2,807
-------- --------
76,374 70,927
Allowance for amortization
(deduction) .................. (35,969) (33,857)
-------- --------
$ 40,405 $ 37,070
======== ========
</TABLE>
Amortization of capital lease assets is included in depreciation
expense.
Future minimum rental commitments as of February 3, 1996, for all
noncancelable leases are as follows (in thousands):
<TABLE>
<CAPTION>
Capital Operating
Fiscal Year Leases Leases*
- ----------- -------- ---------
<S> <C> <C>
1996 ...................... $ 16,083 $ 6,533
1997 ...................... 5,634 5,529
1998 ...................... 5,514 4,626
1999 ...................... 5,342 4,324
2000 ...................... 5,287 4,184
Thereafter ................ 33,000 36,336
-------- -------
Total minimum rental
commitments ............. 70,860 $61,532
=======
Estimated executory costs.. (1,109)
Imputed interest .......... (24,765)
--------
Present value of net
minimum lease payments .. $ 44,986
========
*These amounts have not been reduced by future noncancelable sublease
rentals of $5,222.
</TABLE>
During 1995, the Company incurred a capital lease obligation of
$5,478,000 in connection with a lease agreement for additional space
within an existing distribution facility.
All real estate leases include renewal options for periods ranging from
5 to 100 years. Most of these leases include options to purchase at
specified times. In most instances, the Company pays real estate taxes,
insurance and maintenance costs. There are no guarantees, related
obligations or restrictions in connection with the lease agreements.
Total net rental expense amounted to (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------- ------
<S> <C> <C> <C>
Minimum rentals ...................... $7,318 $ 5,661 $5,861
Contingent rentals, based on sales ... 1,222 1,310 1,288
Sublease rentals ..................... (973) (1,022) (831)
------ ------- ------
$7,567 $ 5,949 $6,318
====== ======= ======
</TABLE>
Other:
Estimated cost to complete construction in progress at February 3, 1996
is approximately $1,245,000.
In fiscal 1995, the City of Philadelphia advised the Company that it
will exercise its eminent domain power to acquire the Company's
Department Store Distribution Center by fiscal 1997. The Company
anticipates that a gain will be recognized as a result of this sale. It
is the Company's intention to replace the Distribution Center by leasing
another warehouse facility.
The Company is obligated to repurchase from a bank on June 1, 1997 or
arrange refinancing of a loan in the amount of $5,760,000 made to the
landlord of a distribution facility that is leased by the Company under
a capital lease.
9. SUBSEQUENT EVENT
On April 4, 1996, the Company announced that its Board of Directors had
approved agreements for the sale of the assets of the Company. The
transactions will consist of the sale of the department store assets in
a tax-free reorganization to The May Department Stores Company ("May")
in exchange for May stock and the assumption of certain liabilities; the
sale of the Clover stores to Kimco Realty Corporation for cash and the
assumption of certain liabilities; and the liquidation of Clover
inventory and fixtures. Following these sales, the Company will be
liquidated and, after provision for liabilities not assumed by the
buyers, the shareholders will receive May stock. Depending on the final
amount of liabilities, the Company's management has estimated that
shareholders will receive approximately four-tenths of a share of May
stock for each share of the Company. The closing price of the May stock
on the New York Stock Exchange was $47-7/8 on April 3, 1996. The
transactions are subject to shareholder approval and antitrust
clearance. The financial statements do not reflect any effects of these
transactions.
10
<PAGE>
STATEMENT OF MANAGEMENT RESPONSIBILITY
- ------------------------------------------------------------------------------
Strawbridge & Clothier management is responsible for the financial
statements and information presented in this Annual Report. The
financial statements have been prepared in conformity with generally
accepted accounting principles and include certain amounts based on
management's best estimates and judgements.
The Company maintains a system of internal accounting controls, which
provides for appropriate division of responsibility and the application
of written policies and procedures. The system is designed to provide
reasonable assurance, at suitable costs, that assets are safeguarded and
that transactions are executed in accordance with appropriate
authorization and are recorded and reported properly. An important
element of the internal control environment is an ongoing internal audit
program.
The financial statements have been audited by Ernst & Young LLP,
independent auditors, whose report appears below. Their audit includes
an evaluation of the internal control structure and selected tests of
transactions and records. Their audit is intended to provide a
reasonable level of assurance that the financial statements are free of
material misstatement.
The Audit Committee of the Board of Directors is responsible for
recommending the independent auditors to be retained for the coming
year, subject to shareholder approval. The Audit Committee meets
periodically with the independent auditors and the internal auditors to
consider the scope and results of their audits and to discuss other
significant matters regarding internal accounting controls and financial
reporting. The independent auditors and the internal auditors have
unrestricted access to the Audit Committee.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- ------------------------------------------------------------------------------
To the Shareholders of
Strawbridge & Clothier
We have audited the accompanying consolidated balance sheets of
Strawbridge & Clothier as of February 3, 1996 and January 28, 1995, and
the related consolidated statements of operations, shareholders' equity,
and cash flows for each of the three fiscal years in the period ended
February 3, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Strawbridge & Clothier at February 3, 1996 and January 28, 1995, and the
consolidated results of its operations and its cash flows for each of
the three fiscal years in the period ended February 3, 1996, in
conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania ERNST & YOUNG LLP
March 22, 1996, except for Note 9,
as to which the date is April 4, 1996
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
OPERATIONS
Sales for fiscal 1995, a 53-week year, were $980,598,000, a decrease
of 2.3% from sales of $1,003,524,000 in fiscal 1994, a 52-week year.
Fiscal 1994 sales had increased 1.9% over fiscal 1993 sales of
$984,615,000. Fiscal 1993 was a 52-week year. Comparable store sales
for fiscal 1995 decreased 4.7% from fiscal 1994. Several factors
combined to produce this disappointing sales result. During the all-
important Christmas selling season, there were three snowstorms, and
during the Easter selling season, there was a fourteen-day public
transit strike in the Company's trading area. The local retailing
climate continued to be highly competitive and consumer confidence was
low. On April 21, 1995, the Company opened its first home furnishings
store in the Concord Mall, on May 8, 1995, the Company opened its new
Brandywine Clover store and on August 7, 1995, the Company opened its
new Clover store at the Gallery in Philadelphia.
The net loss for fiscal 1995 of $8,787,000 compared to net earnings
for fiscal 1994 of $20,032,000 and net earnings for fiscal 1993 of
$17,727,000. The 1995 result can be attributed to the decreased sales
and increased markdowns taken to clear seasonal inventory. Fiscal 1994
earnings increased from fiscal 1993 due to the increase in sales,
continued control of operating expenses and a decrease in interest
expense, partially offset by an increase in the provision for doubtful
accounts and a reduced LIFO benefit.
Other income and deductions was $6,238,000 in fiscal 1995 compared
to $3,265,000 in fiscal 1994 and $2,412,000 in fiscal 1993. Fiscal 1995
included a $6,556,000 gain on the curtailment of the Company's pension
plan and $2,920,000 expense incurred in connection with the attempt to
acquire six John Wanamaker stores.
Cost of sales, including occupancy and buying costs, was 76.1% of
sales in fiscal 1995, compared to 74.3% in 1994 and 74.5% in 1993. Cost
of sales for all three years was negatively impacted by increased
markdowns taken to stimulate sales in the Company's highly competitive
trading area. Occupancy and buying costs increased in 1995 due to the
new stores, but had decreased in 1994 and 1993. The impact of the LIFO
method of accounting for inventories (benefits of $903,000, $39,000 and
$1,239,000 in fiscal 1995, 1994 and 1993, respectively) is reflected in
cost of sales.
Selling and administrative expenses, net of finance charges, were
19.3% of sales in 1995, compared to 17.1% of sales in 1994 and 17.5% of
sales in 1993. The 1995 increase as a percentage of sales reflects the
decrease in sales, preopening and operating expenses for three new
stores, and a reduction in finance charge income due to the sale of
customer accounts receivable as discussed in Note 3 to the financial
statements. This reduction of finance charge income is offset by
comparable interest expense savings resulting from the use of the
proceeds to reduce borrowings. The 1994 result reflects a decrease in
benefits expense due to changes in benefit plans, increased finance
charge income and continued control of operating expenses.
Depreciation expense was 3.2% of sales in 1995 and 2.9% in 1994 and
1993. The increase in 1995 reflects the new stores and the decreased
sales. Interest expense was 1.9% of sales in 1995 and 1994 and 2.1% of
sales in 1993. The provision for doubtful accounts was 1.4% of sales in
1995 compared to 1.0% in 1994 and .5% in 1993. The results in 1995 and
1994 reflect increases in write-offs and increases in the reserve for
doubtful accounts, which resulted from more liberal credit policies
instituted in prior fiscal years to stimulate credit sales and remain
competitive in the credit market. The effective tax rates were 33.9%,
33.4% and 33.9% for fiscal years 1995, 1994 and 1993, respectively. The
1995 result reflects the expiration of the jobs tax credits, offset by a
lower statutory federal rate as a result of reduced pretax earnings.
The decrease in the 1994 rate resulted from decreases in statutory state
income tax rates.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
- ------------------------------------------------------------------------------
FINANCIAL CONDITION AND LIQUIDITY
Cash provided by operating activities for 1995 was $121.8 million
compared to $93.0 million in 1994 and $31.7 million in 1993. Results
for fiscal 1995 and fiscal 1994 include $95.0 million and $50.0 million,
respectively, from the Company's sale of its private label credit card
accounts receivable, as discussed in Note 3 to the financial statements.
Without the effects of the sale of accounts receivable, the 1995 result
decreased due to the reduced earnings.
The Company's capital expenditures were $48.7 million, $38.0 million
and $22.1 million in fiscal 1995, 1994 and 1993, respectively. Capital
expenditures for 1995 included two new Clover stores, the home
furnishings store, renovation of the Center Square and Rising Sun Clover
stores, the renovation of the Concord department store and other smaller
renovation projects. Capital expenditures for 1994 and 1993 were for
various renovation projects.
Cash used for financing activities was $56.7 million, $50.4 million and
$11.2 million in fiscal 1995, 1994 and 1993, respectively. In November
1995, the Company obtained a $150.0 million facility for the sale of the
Company's accounts receivable as well as a $100.0 million revolving credit
facility with a group of banks, with PNC Bank, National Association, as
lead agent. These facilities replaced the Company's existing $50.0 million
receivable facility, its existing $25.0 million revolving credit facility
and previous confirmed bank credit lines. Due to the timing of the
Company's fiscal year end, cash dividends paid reflects five, three and
four regular quarterly common stock cash dividend payments in fiscal 1995,
1994 and 1993, respectively.
On April 4, 1996, the Company announced that its Board of Directors
had approved agreements for the sale of the assets of the Company. The
transactions will consist of the sale of the department store assets in a
tax-free reorganization to The May Department Stores Company ("May")
in exchange for May stock and the assumption of certain liabilities; the
sale of the Clover stores to Kimco Realty Corporation for cash and the
assumption of certain liabilities; and the liquidation of Clover inventory
and fixtures. Following these sales, the Company will be liquidated and,
after provision for liabilities not assumed by the buyers, the shareholders
will receive May stock. The transactions are subject to shareholder approval
and antitrust clearance. Management believes that existing credit facilities
will be sufficient to provide necessary financing until the closing of the
May and Kimco transactions.
- ------------------------------------------------------------------------------
13
<PAGE>
FIVE-YEAR FINANCIAL SUMMARY
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
1995(1) 1994 1993 1992 1991
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net Sales $980,598 $1,003,524 $984,615 $967,794 $967,786
- ------------------------------------------------------------------------
Cost of Sales 746,473 745,251 733,901 718,582 718,927
- ------------------------------------------------------------------------
Interest Expense 18,964 19,551 20,909 21,446 23,048
- ------------------------------------------------------------------------
Earnings (Loss) Before
Income Taxes and
Cumulative Effect
of Accounting
Changes (13,285) 30,090 26,829 27,189 20,714
- ------------------------------------------------------------------------
Income Taxes (Benefit) (4,498) 10,058 9,102 9,169 7,146
- ------------------------------------------------------------------------
Earnings (Loss) Before
Cumulative Effect
of Accounting
Changes (8,787) 20,032 17,727 18,020 13,568
- ------------------------------------------------------------------------
Net Earnings (Loss) (8,787) 20,032 17,727 1,170(3) 13,568
OTHER OPERATING DATA
Depreciation $ 31,300 $ 29,587 $ 28,829 $ 28,322 $ 28,710
- ------------------------------------------------------------------------
Rent 7,567 5,949 6,318 7,419 6,320
- ------------------------------------------------------------------------
Taxes Other Than
Income Taxes 26,011 25,353 25,050 25,164 25,627
DIVIDENDS
Cash Dividends on
Common Stock $ 11,295 $ 11,147 $ 10,963 $ 10,502 $ 10,067
- ------------------------------------------------------------------------
Stock Dividends on
Common Stock -- -- 3% 3% 3%
PER SHARE OF
COMMON STOCK(2)
Earnings (Loss) Before
Cumulative Effect
of Accounting
Changes $ (.83) $ 1.92 $ 1.71 $ 1.76 $ 1.34
- ------------------------------------------------------------------------
Net Earnings (Loss) (.83) 1.92 1.71 .11(3) 1.34
- ------------------------------------------------------------------------
Cash Dividends on
Series A Common
Stock 1.10 1.10 1.09 1.07 1.03
- ------------------------------------------------------------------------
Cash Dividends on
Series B Common
Stock 1.00 1.00 .99 .96 .92
- ------------------------------------------------------------------------
Book Value 23.09 25.08 24.28 23.68 24.66
FINANCIAL DATA
Working Capital $119,532 $ 201,464 $209,581 $212,514 $184,641
- ------------------------------------------------------------------------
Property, Fixtures
& Equipment --
Net 329,392 308,161 300,368 307,158 312,876
- ------------------------------------------------------------------------
Total Assets 575,814 639,792 663,052 653,939 631,987
- ------------------------------------------------------------------------
Long-Term Debt 129,358 161,442 162,254 171,617 156,237
- ------------------------------------------------------------------------
Capital Lease
Obligations 35,739 40,848 43,554 52,030 55,481
- ------------------------------------------------------------------------
Redeemable
Preferred Stock -- 116 296 474 655
- ------------------------------------------------------------------------
Shareholders'
Equity 245,059 262,352 252,202 242,839 250,548
- ------------------------------------------------------------------------
Number of
Common Shares
Outstanding 10,614 10,462 10,386 9,957 9,579
- ------------------------------------------------------------------------
Square Feet of
Store Space 6,007 5,744 5,744 5,744 5,744
</TABLE>
(1) 53-week fiscal year.
(2) Weighted average shares outstanding were: 1995 -- 10,531; 1994 -- 10,426;
1993 -- 10,324; 1992 -- 10,216; 1991 -- 10,099.
(3) Includes cumulative effect adjustments relating to accounting
changes for income taxes ($9,750 benefit; $.95 per share) and retiree
health care benefits ($26,600 charge; $2.60 per share) and reduced cost
of sales of $3,948 as a result of a change in LIFO accounting method,
resulting in an after-tax benefit of $2,606 or $.26 per share.
14
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
(in thousands, except per share data)
- ------------------------------------------------------------------------------
The following is a summary of unaudited quarterly results of operations
for the 1995 and 1994 fiscal years. The fourth quarter consisted of
fourteen weeks in 1995 and thirteen weeks in 1994.
<TABLE>
<CAPTION>
Net Earnings
Net Earnings (Loss) Per
Net Sales Gross Profit (Loss) Common Share
Fiscal ------------------ ---------------- ----------------- ---------------
Quarter 1995 1994 1995 1994 1995 1994 1995 1994
- ------- -------- -------- ------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First ...... $198,625 $208,303 $45,465 $50,233 $(6,064) $ (988) $(0.58) $(0.10)
Second ..... 218,551 222,894 47,081 53,377 (9,079) 244 (0.86) 0.02
Third ...... 225,504 226,559 52,271 58,559 (7,232) 526 (0.68) 0.05
Fourth ..... 337,918 345,768 89,308 96,104 13,588(1) 20,250 1.28(1) 1.93
</TABLE>
(1) Includes a gain on the curtailment of the pension plan of $4,320, or
$.41 per share.
MARKET AND DIVIDEND INFORMATION
- ------------------------------------------------------------------------------
The Company's Series A Common Stock is traded on the over-the-counter
market. There is no trading market for Series B Common Stock but it is
readily convertible at any time into Series A Common Stock on a
share-for-share basis. The number of shareholders of record as of
January 2, 1996 was 5,018 for Series A and 222 for Series B. The
following table indicates the range of high and low price quotations for
the Series A Common Stock by quarter during the last two fiscal years,
as obtained through NASDAQ and the quarterly cash dividends per common
share.
<TABLE>
<CAPTION>
Cash Dividends Per Share
Range of High and Low -----------------------------------
Price Quotations Series A Series B
Fiscal ------------------------------------ ----------------- ---------------
Quarter 1995 1994 1995 1994 1995 1994
- ------- ------------------ ---------------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First ..... $19.00 $22.75 $20.00 $23.50 $0.275 $0.275 $0.25 $0.25
Second .... 18.50 21.50 19.50 21.75 0.275 0.275 0.25 0.25
Third ..... 14.13 19.75 20.75 23.50 0.275 0.275 0.25 0.25
Fourth .... 18.00 25.25 20.75 23.25 0.275 0.275 0.25 0.25
</TABLE>
15
EXHIBIT 21
----------
Subsidiaries of Strawbridge & Clothier
--------------------------------------
Jurisdiction Percentage
Name of Incorporation Ownership
- ---- ---------------- ----------
S&C, Burlington, Inc. Pennsylvania 100%
S&C, Center Square, Inc. Pennsylvania 100%
S&C, Cherry Hill, Inc. Pennsylvania 100%
S&C, Concord, Inc. Delaware 100%
S&C, Echelon, Inc. Pennsylvania 100%
S&C, Filbert St., Inc. Pennsylvania 100%
S&C, Penrose, Inc. Pennsylvania 100%
S&C, Whiteland, Inc. Pennsylvania 100%
S&C Maintenance and Construction, Inc. New Jersey 90%
Anfly, Inc. Delaware 100%
8th & Filbert Parking, Inc. Pennsylvania 100%
S&C, Funding, Inc. Delaware 100%
EXHIBIT 23
----------
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Strawbridge & Clothier of our report dated March 22, 1996, (except
for Note 9, as to which the date is April 4, 1996) included in the 1995
Annual Report to Shareholders of Strawbridge & Clothier.
Our audits also included the financial statement schedule of Strawbridge &
Clothier listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
schedule based on our audits. In our opinion, the financial statement
schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
We consent to the incorporation by reference in Registration Statement No.
2-99396 on Form S-8 dated August 22, 1985, Registration Statement No.
33-37675 on Form S-8 dated November 8, 1990, Registration Statement No. 33-
40928 on Form S-8 dated May 29, 1991, and Registration Statement No.
33-55782 on Form S-3 dated December 15, 1992, and the related Prospectuses
of Strawbridge & Clothier of our report dated March 22, 1996 (except for
Note 9, as to which the date is April 4, 1996), with respect to the
consolidated financial statements incorporated herein by reference and our
report included in the preceding paragraph with respect to the financial
statement schedule included in the 1995 Annual Report (Form 10-K) of
Strawbridge & Clothier.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
May 1, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> FEB-03-1996
<CASH> 14,253
<SECURITIES> 0
<RECEIVABLES> 45,058
<ALLOWANCES> 1,940
<INVENTORY> 154,009
<CURRENT-ASSETS> 229,932
<PP&E> 671,444
<DEPRECIATION> 342,052
<TOTAL-ASSETS> 575,814
<CURRENT-LIABILITIES> 110,400
<BONDS> 165,097
<COMMON> 10,614
0
0
<OTHER-SE> 234,445
<TOTAL-LIABILITY-AND-EQUITY> 575,814
<SALES> 980,598
<TOTAL-REVENUES> 986,836
<CGS> 746,473
<TOTAL-COSTS> 746,473
<OTHER-EXPENSES> 220,507
<LOSS-PROVISION> 14,177
<INTEREST-EXPENSE> 18,964
<INCOME-PRETAX> (13,285)
<INCOME-TAX> (4,498)
<INCOME-CONTINUING> (8,787)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,787)
<EPS-PRIMARY> (0.83)
<EPS-DILUTED> (0.83)
</TABLE>
Exhibit 99
Contact: Mr. F.R. Strawbridge, III - 215-629-6456
Mr. P.S. Strawbridge - 215-629-6607
PRESS RELEASE
from
STRAWBRIDGE & CLOTHIER - For Immediate Release - April 4, 1996
Strawbridge & Clothier announced today that its Board of
Directors had approved agreements for the sale of the assets of
the Company. The transactions will consist of the sale of the
department store assets in a tax free reorganization to The May
Department Stores Company in exchange for May stock and the
assumption of certain liabilities; the sale of the Clover stores
to Kimco Realty Corporation for cash and the assumption of
certain liabilities; and the liquidation of the Clover inventory
and fixtures. Following these sales the Company will be
liquidated and, after provision for liabilities not assumed by
the buyers, the shareholders will receive May stock. Depending
on the final amount of liabilities, it is presently estimated
that shareholders will receive approximately four-tenths of a
share of May stock for each share of the Company. The closing
price of the May stock on the New York Stock Exchange on April 3,
1996 was $47 7/8. The transactions are subject to shareholder
approval and antitrust clearance. It is anticipated that the
Annual Shareholders' Meeting will be held in July and, if
approved, that a substantial partial distribution of May stock
will be made by September.
The Board of Directors also declared a cash dividend of
$0.275 per share on the Series A Common Stock and $0.25 per share
<PAGE>
on the Series B Common Stock payable May 1, 1996 to shareholders
of record on April 15, 1996.
Francis R. Strawbridge, Chairman of the Board and Peter S.
Strawbridge, President said: "Although our preferred alternative
from the outset has been to 'stay the course' and retain the
Company's independence, it has become increasingly apparent that
the economic environment made that objective not viable without
taking substantial steps to reduce expenses to levels that would
change significantly the basic character of the business and
reduce customer service for which we have a long-standing
national reputation. Consequently, the Board believes that this
sale will be in the best interests of our shareholders and
associates."
The May Department Stores Company, a highly respected
national department store group, will retain the "Strawbridge"
name and provide opportunities for our associates and
shareholders.
