-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FdNgDYHlRzeBXjLVAkGsOb7aOceEkwY/AhNKn2DX/Q6qB5V6daFBgPIb/xZaS18v phX1qouzH7We61qFQ0nkuw== 0000950131-96-005684.txt : 19961113 0000950131-96-005684.hdr.sgml : 19961113 ACCESSION NUMBER: 0000950131-96-005684 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960928 FILED AS OF DATE: 19961112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONTGOMERY WARD HOLDING CORP CENTRAL INDEX KEY: 0000836974 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 363571585 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17540 FILM NUMBER: 96659911 BUSINESS ADDRESS: STREET 1: ONE MONTGOMERY WARD PLZ CITY: CHICAGO STATE: IL ZIP: 60671 BUSINESS PHONE: 3124672000 10-Q 1 FORM 10Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 ____________ FORM 10-Q (MARK ONE) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 28, 1996 OR __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-17540 MONTGOMERY WARD HOLDING CORP. (Exact Name Of Registrant As Specified In Its Charter) DELAWARE 36-3571585 (State Of Incorporation) (I.R.S. Employer Identification No.) Montgomery Ward Plaza, Chicago, Illinois 60671 (Address Of Principal Executive Offices) (Zip Code) Registrant's Telephone Number Including Area Code: 312/467-2000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- ----- As of October 26, 1996 the Registrant had 18,695,859 shares of Class A Common Stock and 25,000,000 shares of Class B Common Stock of the Registrant outstanding. PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements INDEX
Page Montgomery Ward Holding Corp. Consolidated Statement of Income........................... 2 Consolidated Balance Sheet................................. 4 Consolidated Statement of Cash Flows....................... 5 Notes to Consolidated Financial Statements................. 7
1 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the 13-Week Periods Ended September 28, September 30, 1996 1995 (Millions, except per share amounts) Revenues Net sales, including leased and licensed department sales........... $1,376 $1,562 Direct response marketing revenues, including insurance................. 191 142 ------ ------ Total Revenues................... 1,567 1,704 ------ ------ Costs and Expenses Cost of goods sold, including net occupancy and buying expense.......... 1,096 1,240 Operating, selling, general and administrative expenses, including benefits and losses of direct response operations............................ 501 435 Interest expense....................... 28 24 ------ ------ Total Costs and Expenses........... 1,625 1,699 ------ ------ (Loss)/Income Before Taxes.............. (58) 5 Income Tax (Benefit)/Expense............ (23) 2 ------ ------ Net (Loss)/Income....................... (35) 3 Preferred Stock Dividend Requirements... 3 1 ------ ------ Net (Loss)/Income Applicable to Common Shareholders.................... $ (38) $ 2 ====== ====== Net (Loss)/Income per Common Share Class A................................ $(.95) $.05 Class B................................ $(.82) $.04
See notes to consolidated financial statements. 2 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the 39-Week Periods Ended September 28, September 30, 1996 1995 (Millions, except per share amounts) Revenues Net sales, including leased and licensed department sales............. $3,984 $4,439 Direct response marketing revenues, including insurance................. 553 407 ------------- ------------- Total Revenues................... 4,537 4,846 ------------- ------------- Costs and Expenses Cost of goods sold, including net occupancy and buying expense.......... 3,233 3,528 Operating, selling, general and administrative expenses, including benefits and losses of direct response operations............ 1,349 1,237 Interest expense........................ 75 67 ------------- ------------- Total Costs and Expenses......... 4,657 4,832 ------------- ------------- (Loss)/Income Before Taxes................ (120) 14 Income Tax (Benefit)/Expense.............. (48) 4 ------------- ------------- Net (Loss)/Income......................... (72) 10 Preferred Stock Dividend Requirements..... 9 3 ------------- ------------- Net (Loss)/Income Applicable to Common Shareholders..................... $ (81) $ 7 ============= ============= Net (Loss)/Income per Common Share Class A................................. $(1.99) $ .17 Class B................................. $(1.73) $ .14 Cash dividends per Common Share........... $ - $ -
See notes to consolidated financial statements. 3 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED BALANCE SHEETS
September 28, December 30, 1996 1995 (Unaudited) ASSETS (Millions) Cash and cash equivalents.................... $ 42 $ 37 Short-term investments....................... 3 1 Investments of insurance operations.......... 311 345 ------ ------ Total Cash and Investments.............. 356 383 Trade and other accounts receivable.......... 243 166 Accounts and notes receivable from affiliates.................................. 32 22 ------ ------ Total Receivables....................... 275 188 Merchandise inventories...................... 1,762 1,770 Prepaid pension cost......................... 337 335 Prepaid federal income taxes................. 48 - Properties, plants and equipment, net of accumulated depreciation and amortization............................... 1,319 1,366 Direct response and insurance acquisition costs.......................... 579 395 Other assets................................. 541 447 ------ ------ Total Assets............................ $5,217 $4,884 ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY Short-term debt.............................. $ 819 $ 160 Trade accounts payable....................... 1,507 1,804 Federal income taxes payable................. - 6 Accrued liabilities and other obligations................................. 1,158 1,195 Insurance policy claim reserves.............. 237 236 Long-term debt............................... 495 423 Obligations under capital leases............. 62 66 Deferred income taxes........................ 165 119 ------ ------ Total Liabilities....................... 4,443 4,009 Commitments and Contingent Liabilities Redeemable Preferred Stock................... 175 175 Shareholders' Equity Common stock............................... 1 1 Capital in excess of par value............. 49 45 Retained earnings.......................... 677 758 Unrealized gain on marketable securities............................... 6 10 Less: Treasury stock, at cost............. (134) (114) ------ ------ Total Shareholders' Equity.............. 599 700 ------ ------ Total Liabilities and Shareholders' Equity..................................... $5,217 $4,884 ====== ======
See notes to consolidated financial statements. 4 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
For the 39-Week Periods Ended September 28, September 30, (Millions) 1996 1995 Cash flows from operating activities: Net (Loss) Income..................................... $ (72) $ 10 Adjustments to reconcile net (loss) income to net cash provided by (used for) operating activities: Depreciation and amortization....................... 93 89 Amortization of Goodwill............................ 7 4 Amortization of Direct response and insurance costs.................................... 147 103 Deferred income taxes............................... (5) (5) Gain on sale of assets.............................. (3) (10) ----- ----- Net (loss) income adjusted for non-cash expenses.. 167 191 ----- ----- Changes in operating assets and liabilities: (Increase) decrease in: Trade and other accounts receivable................. (52) (24) Accounts and notes receivable from affiliates....... (10) (14) Merchandise inventories............................. 8 (169) Prepaid pension cost................................ (3) (5) Federal income taxes receivable, net................ (48) Direct response insurance acquisition costs......... (208) (140) Other assets........................................ (21) (47) Increase (decrease) in: Trade accounts payable.............................. (300) (233) Federal income taxes payable, net................... (6) (10) Accrued liabilities and other obligations........... (120) (159) Insurance policy claim reserves..................... 1 2 ----- ----- Net cash used for operations...................... (592) (608) ----- ----- Cash flows from investing activities: Investment in ValueVision International, Inc.......... -- (8) Investment in Merchant Partners....................... (7) -- Acquisition of Amoco Enterprises...................... (100) -- Purchase of short-term investments.................... (19) (14) Purchase of investments of insurance operations....... (495) (465) Sale of short-term investments........................ 31 14 Sale of investments of insurance operations........... 521 443 Capital expenditures.................................. (55) (90) Disposition of properties, plants and equipment, net.. 12 24 ----- ----- Net cash used for investing activities............ $(112) $ (96) ----- -----
See notes to consolidated financial statements. 5 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
For the 39-Week Periods Ended September 28, September 30, (Millions) 1996 1995 Cash flows from financing activities: Net proceeds from short-term borrowings.................... $ 635 $526 Proceeds from issuance of long-term debt................... 102 205 Payments of Montgomery Ward long-term debt................. (6) (6) Payments of obligations under capital leases............... (5) (5) Proceeds from issuance of Common Stock..................... 3 4 Cash dividends paid........................................ (6) (3) Purchase of treasury stock, at cost........................ (14) (7) ----- ---- Net cash provided by financing activities................. 709 714 ----- ---- Increase (decrease) in cash and cash equivalents............ 5 10 Cash and cash equivalents at beginning of period............ 37 33 ----- ---- Cash and cash equivalents at end of period.................. $ 42 $ 43 ===== ==== Supplemental disclosure of cash flow information Cash paid during the period for: Income taxes.............................................. $ 2 $ 22 Interest.................................................. $ 81 61 Non-cash financing activity: Notes issued for purchase of Treasury stock................ $ 6 $ -- Non-cash investing activity: Change in unrealized gain on marketable equity securities.. $ (4) $ 8
See notes to consolidated financial statements. 6 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) 1. Accounting Policies Basis of Presentation The Consolidated Balance Sheet as of September 28, 1996 and the Consolidated Statements of Income for the thirteen- and thirty-nine weeks ended September 28, 1996 and September 30, 1995, and the Consolidated Statement of Cash Flow for the thirty-nine weeks then ended are unaudited. The interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The interim financial statements should be read in the context of the financial statements and notes thereto filed with the Securities and Exchange Commission in MW Holding's 1995 Annual Report on Form 10-K. Capitalized terms not otherwise defined herein have the meaning ascribed to such terms in the 1995 Annual Report on Form 10-K. Certain prior period amounts have been reclassified to be comparable with the current period presentation. Accounting for Long-Lived Assets Effective December 31, 1995, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The provisions require a review of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an impairment loss has occurred based on expected undiscounted future cash flows, the loss will be recognized in the income statement and certain disclosures will be made regarding the impairment. There was no financial impact from the adoption of this statement on the financial statements for the thirty-nine weeks ended September 28, 1996. 2. Net (Loss)/Earnings Per Common Share Net (Loss)/Earnings per common share is computed as follows:
For the 13-Week Periods Ended September 28, 1996 September 30, 1995 Class A Class B Class A Class B Net (Loss) Earnings applicable to Common Shareholders............ $(18) $(21) $1 $1 Weighted average number of common shares outstanding............. 19,230,539 25,000,000 20,919,243 25,000,000 Net (Loss) Earnings per share...... $(.95) $(.82) $.05 $.04
7 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) 2. Net (Loss)/Earnings Per Common Share (continued)
For the 39-Week Periods Ended September 28, 1996 September 30, 1995 Class A Class B Class A Class B Net (Loss)/Earnings applicable to Common Shareholders............. $(38) $(43) $3 $4 Weighted average number of common shares outstanding....... 19,269,681 25,000,000 19,915,677 25,000,000 Net (Loss)/Earnings per share...... $(1.99) $(1.73) $.17 $.14
3. Insurance Benefits and Losses Operating, selling, general and administrative expenses include insurance benefits and losses related to direct response marketing operations of $43 and $28 for the 13-week periods ended September 28, 1996 and September 30, 1995, respectively, and $115 and $83 for the 39-week periods then ended. The increases of $15 and $32, respectively, are due primarily to the costs of the Amoco Motor Club. 4. Preferred Stock On January 31, 1996, GE Capital exercised the exchange option contained in the MW Senior Preferred Stock subscription agreement which allowed an exchange of the MW Senior Preferred Stock for senior preferred stock of the Company with substantially the same terms. On March 28, 1996, the Company's Certificate of Incorporation was amended to authorize the issuance of a new series of senior preferred stock (New Senior Preferred Stock). On March 29, 1996, the Company issued all of the 1,750 shares of New Senior Preferred Stock to GE Capital in exchange for the 1,750 shares of MW Senior Preferred Stock held by GE Capital. Dividends on the New Senior Preferred Stock are payable quarterly at an annual rate of $7,010 per share. The Company is required to redeem the New Senior Preferred Stock on June 30, 2002, with the option of redeeming all or any portion prior to June 30, 2002. 8 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) 5. Acquisition of Amoco Enterprises, Inc. On December 31, 1995, Montgomery Ward acquired all of the outstanding capital stock of Amoco Enterprises, Inc. (Enterprises), operator of the Amoco Motor Club and a wholly-owned subsidiary of Amoco Oil Holding Company. The purchase price was $100. The acquisition was financed through the use of the majority of the proceeds generated from the issuance of the MW Senior Preferred Stock. On January 2, 1996, Montgomery Ward's wholly-owned subsidiary, Signature, purchased Enterprises from Montgomery Ward for $100. The acquisition was accounted for as a purchase. The purchase price has been allocated to Enterprises' net assets based upon preliminary results of asset valuations and liability and contingency assessments. Actual adjustments may differ based on the results of further evaluations of the fair value of the acquired assets and liabilities. Any differences between preliminary and actual adjustments are not expected to have a material impact on the Consolidated Financial Statements. The preliminary allocation is summarized as follows:
Accounts receivable........ $ 25 Federal income tax receivable................ 1 Properties, plant & equipment................. 3 Direct response and insurance acquisition costs.................... 126 Goodwill................... 67 Other assets............... 4 Trade accounts payable..... (3) Accrued liabilities and other obligations......... (76) Deferred income taxes...... (47) ---- $100 ====
6. Commitments and Contingent Liabilities MW Holding, Montgomery Ward and its subsidiaries are engaged in various litigation and have a number of unresolved claims. While the amounts claimed are substantial and the ultimate liability with respect to such litigation and claims cannot be determined at this time, management is of the opinion that such liability, to the extent not provided for through insurance or otherwise, is not likely to have a material impact on the financial condition and the results of operations of the Company. 9 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) 7. Customer Credit Agreement A. Effective April 1, 1996, Montgomery Ward entered into interim agreements with GE Capital and its wholly-owned subsidiaries Montgomery Ward Credit Corporation ("Montgomery Ward Credit") and Monogram Credit Card Bank of Georgia ("Monogram") reflecting a prior memorandum of understanding with GE Capital pursuant to which Monogram is extending credit to retail customers of Montgomery Ward under open-ended revolving credit plans on a non recourse basis. In the Montgomery Ward memorandum of understanding, interim agreements provide for the sharing of certain additional revenues generated by increases in interest rates and late fee charges to customers with the extension of credit to the customers made directly by Monogram. Certain of these additional revenues will be applied to reduce the obligations of Montgomery Ward for prior losses incurred under the original Account Purchase Agreement with Montgomery Ward Credit and Montgomery Ward's obligation to pay Credit losses in excess of 3.9% of the average receivable balance up to 5%, and 50% of the losses in excess of 5% up to 8%, incurred by Monogram and Montgomery Ward Credit under the new agreements. Except as noted above, the new agreements together generally impose obligations upon and provide benefits to Montgomery Ward and GE Capital and its subsidiaries, Montgomery Ward Credit and Monogram similar to the prior arrangements under the Account Purchase Agreement. The interim agreement provided that if definitive agreements are not entered into by July 31, 1996 by Montgomery Ward, Monogram, Montgomery Ward Credit and GE Capital permanently implementing the changes contemplated by the memorandum of understanding and interim agreements for the Montgomery Ward credit customers, Montgomery Ward credit transactions will revert to the original Account Purchase Agreement. The date for entering into the definitive agreements was amended to November 30, 1996 by the parties. B. Effective March 13, 1996, Lechmere, Inc., a subsidiary of Montgomery Ward, entered into interim agreements with GE Capital and its wholly-owned subsidiaries Montgomery Ward Credit and Monogram reflecting a prior memorandum of understanding with GE Capital pursuant to which Monogram is extending credit to retail customers of Lechmere under open-end revolving credit plans on a non-recourse basis. 10 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) 7. Customer Credit Agreement (continued) The Lechmere memorandum of understanding and interim agreements provide for a guaranteed Monogram Bank/GE Capital annual return on its equity of 17.50%. For any shortfalls, an annual payment would be made by Lechmere. Any return above 17.50% will be shared equally by Lechmere and Monogram/GE Capital. For any annual credit losses over 4.25% and less than 8% of the average receivable balance, Lechmere is responsible for 50% of said losses. It is envisioned that a similar relationship will be established for Montgomery Ward's "Electric Ave. & More" credit card customer receivables. The original agreement provided that if definitive agreements were not executed by August 31, 1996, the Lechmere interim agreements would expire. The date for entering into the definitive agreements has been amended to December 31, 1996 by the parties. C. Pursuant to an agreement dated April 3, 1996, Montgomery Ward and Lechmere agreed to sell to Montgomery Ward Credit receivables from certain commercial customers of Montgomery Ward and Lechmere. 8. Related Party Transactions A. Montgomery Ward Direct L.P. (MW Direct) The Company was a partner in a joint venture, MW Direct, formed through a partnership in 1991 between subsidiaries of Montgomery Ward and subsidiaries of Fingerhut Companies, Inc., a Minneapolis, Minnesota specialty-based catalog merchandiser. In June of 1996, the subsidiaries of Fingerhut Companies withdrew from the partnership. Immediately prior to the withdrawal, the Fingerhut Partners contributed to the capital of MW Direct cash and all claims that the Fingerhut subsidiaries had against MW Direct. In July of 1996, the Company and ValueVision International, Inc. (ValueVision) a Minneapolis, Minnesota based television home shopping enterprise entered into an agreement where ValueVision acquired the assets and assumed certain liabilities of MW Direct concurrent with the restructuring of the marketing agreement between Montgomery Ward and ValueVision as discussed below B. ValueVision International, Inc. (ValueVision) In July of 1996, ValueVision and Montgomery Ward & Co., entered into an agreement for the expansion and restructuring of their ongoing marketing agreement as well as ValueVision's acquisition of the assets and assumption of substantially all liabilities of Montgomery Ward Direct, L.P. 11 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) 8. Related Party Transactions (continued) B. ValueVision International, Inc. (ValueVision) (continued) ValueVision's sales promotion rights will be expanded beyond the current television home shopping arena to include the full use of the Montgomery Ward name, servicemark, and 10 million-plus active credit card file for direct mail catalogs and ancillary promotions. The new agreement also extends to the use of the Lechmere servicemark and customer file, acquired by Montgomery Ward in 1994 when it purchased the New England-based electronics and appliance retailer. ValueVision issued to Montgomery Ward vested warrants (Class P Warrants) to purchase 2.97 million shares of ValueVision common stock at an exercise price of $0.01 per share. The new warrants replaced 18.0 million unvested warrants (Class C-O Warrants) from an earlier grant of 25.0 million ValueVision warrants exercisable at prices ranging from $7.00-$17.00 per share. Concurrent with this agreement, ValueVision issued to Merchant Partners L.P. (Merchant Partners) vested Class P warrants to purchase 199,100 shares of ValueVision common stock at an exercise price of $0.01 per share. Montgomery Ward is a limited partner in Merchant Partners. Montgomery Ward recognized a pretax gain of $8 from the exchange of the Class C-O invested warrants and the exchange of Montgomery Ward Direct assets and liabilities. The gain was included in Operating, selling, general and administrative expense. In September of 1996, Montgomery Ward and ValueVision exchanged warrants to purchase ValueVision common stock. Montgomery Ward exchanged 6.0 million of vested warrants (Class A-B Warrants) from the earlier grant of 25.0 million warrants which were exercisable at prices ranging from $6.50 to $6.75. In return for these warrants, ValueVision exchanged vested warrants (Class P Warrants) to purchase 2.2 million shares of ValueVision common stock at an exercisable price of $0.01 per share. Montgomery Ward recognized a pretax gain of $7 from this transaction which is included in Operating, selling, general and administrative expense. The earlier warrant program had been subject to certain vesting conditions and termination rights which do not apply to the replacement grant. Under the new agreements, Montgomery Ward's potential ownership of ValueVision, on a fully diluted basis, following the exercise of all warrants would be 12.95%. Montgomery Ward will account for ValueVision on the Equity Method effective with the agreement commencing on July 28, 1996. No material gains or losses were recognized in the third quarter from this equity investment. 12 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) 8. Related Party Transactions (continued) B. ValueVision International, Inc. (continued) Effective with the agreement, consolidation of the Montgomery Ward Direct business in ValueVision's operations commenced on July 28, 1996. C. Merchant Partners L.P. In September of 1996, Montgomery Ward made a capital contribution to Merchant Partners which consisted of vested warrants (Class P Warrants) to purchase 1.33 million of ValueVision common stock at an exercise price of $.01 per share. These Class P warrants were from those acquired pursuant to the agreement above which exchanged the unvested Class C-O warrants for vested Class P warrants. The value of the capital contribution recorded as an investment in Merchant Partners was $10. Montgomery Ward is a limited partner in Merchant Partners. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of results of operations for MW Holding compares the third quarter of 1996 to the third quarter of 1995, as well as the first nine months of 1996 to the first nine months of 1995. All dollar amounts referred to in this discussion are in millions, and all income and expense items are shown before income taxes, unless specifically stated otherwise. MW Holding's business is seasonal, with one-third of the sales traditionally occurring in the fourth quarter; accordingly, the results of operations for the quarter and the first nine months are not necessarily indicative of the results for the entire year. 13 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Results of Operations (continued) Third Quarter 1996 Compared with Third Quarter 1995 Consolidated total revenues (net sales and direct response marketing revenues, including insurance) were $1,567 in 1996 compared with $1,704 in 1995, a decrease of $137 or 8%. Net sales were $1,376 in 1996 compared with $1,562 in 1995, a decrease of $186 or 12%. Montgomery Ward store sales for the quarter decreased 12% in softlines (Apparel, Jewelry and Domestics), and 13% in hardlines (Electronics, Appliances, Furniture and Automotive). Comparable sales for Montgomery Ward and Lechmere decreased 14% for the quarter and comparable store sales decreased 17%. Sales were negatively impacted by competitive conditions and the Company's decision to reduce and redeploy inventory in concert with its strategic direction. The Company plans to grow its retail business with narrowed and lower inventory levels in merchandise lines that provide sale and gross margin opportunities. The current transition period is negatively impacted by significant liquidation sales that result in lower retail prices and reduction of new merchandise receipts during the transition period. In Hardlines, the Company is working with its major brand relationships (including Sony, Bose, GE, Maytag, La-Z-Boy, Goodyear and Sealy) to emphasize "Exclusive Values" which are offered at pre-emptive prices by leveraging the Company's volume buying in key categories and items. In Apparel, the assortment is shifting to a focus on casual, lifestyle categories with universal appeal -- denim, active wear, team sports wear (college and professional) and topical (featuring Disney and Warner Bros. characters). These focus categories will competitively position the company in the niche between discounters and department stores and expand the Company's customer base due to their appeal across consumer demographics. The brand assortment in apparel is being strengthened with the addition of Bum, Champion, and Converse to supplement the Company's dominant market share in Lee, Bugle Boy and BIKE. To make way for the new strategies in Hardlines and Apparel, the Company is reducing certain lines of merchandise such as exiting suit separates in Apparel and narrowing the number of computers to be carried in Hardlines at Montgomery Ward. These efforts are estimated to have resulted in $36 of incremental markdowns in the Third Quarter. Similar efforts are planned during the Fourth Quarter when the Company has the most customer traffic in its stores. The Company has also planned for additional staffing to accommodate customers and replenish the sales floor during this peak selling period. 14 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Results of Operations (continued) Third Quarter 1996 Compared with Third Quarter 1995 (continued) Credit sales during the Third Quarter in 1996 were 59% of total sales compared to 62% in 1995. The Company's New Account Acquisition program resulted in new card holder additions exceeding the prior year during September and reversed the decline in new accounts experienced since the fourth quarter of 1995. The Third Quarter increase in new accounts is on plan with management's goal of achieving a 15% increase in new accounts for full year 1996. The Company invested $26 in capital expenditures in the Third Quarter, including the opening of six new "Home Image" by Lechmere stores and one new full-line store by Montgomery Ward. "Home Image" is the Company's new retailing concept which leverages its market share and brand dominance in home oriented goods. Home Image has lifestyle merchandising presentations which integrate home furnishings, electronics, home office products and appliances in room settings to provide ease of shopping and generate add-on purchases and higher overall margin. The stores combine the strongest competitive elements of the Company's Electric Avenue & More, Home Ideas and Lechmere concepts to maximize sales potential, and they are located in middle markets where the Company can capitalize on its buying and expense leverage versus smaller regional competitors. Direct response marketing revenues were $191 in 1996 compared with $142 in 1995, an increase of $49 or 35%; $28 of the increase was primarily due to the Amoco Motor Club acquisition (see Note 5 to Consolidated Financial Statements) with the remaining increase of $21 due to increases in club membership levels combined with price increases especially in credit card registration, home protection, dental and dining. Gross margin (net sales, less cost of goods sold) dollars were $280, 20% of net sales, a decrease of $42 or 13%. The decrease was due to a decrease in gross margin rate of $20 and sales volume of $50 offset by a decrease in other expense of $28. The decrease in gross margin rate was due to competitive pressures and liquidation efforts designed to narrow merchandise assortments and dispose of inactive inventory in concert with its strategic direction. 15 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Results of Operations (continued) Third Quarter 1996 Compared with Third Quarter 1995 (continued) Operating, selling, general and administrative expenses increased $66, due to increased operating and other administrative expenses of Montgomery Ward and Lechmere of $22, and by the increased payroll and other administrative expenses of Signature of $44, with $22 due to the Amoco acquisition and $22 due to Signature's continued growth of business. As was discussed in Note 8 of the financial statements, "Related Party Transactions," a gain of $15 was included in selling, general and administrative expense as a result of the exchange of unvested warrants (Class C-O) pursuant to the restructuring of the agreement between Montgomery Ward and ValueVision International, Inc. and the exchange of vested warrants (Class A-B) for new warrants (Class P). The net loss for the Third Quarter 1996 was $35 compared to net income of $3 for the Third Quarter 1995. 16 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Results of Operations (continued) First Nine Months of 1996 Compared with First Nine Months of 1995 Consolidated total revenues were $4,537 compared with $4,846 in 1995, a decrease of $309 or 6%. Net sales decreased $455 or 10%. Comparable store sales decreased 12%. Montgomery Ward store sales for the nine months decreased 10% in apparel, jewelry and domestics and 8% in hardlines. Direct response marketing revenues increased $146 or 36%; $81 of the increase was primarily due to the Amoco acquisition and $65 was due to increases in club, insurance and other revenues. Gross margin dollars (net sales, less cost of goods sold) were $751, 19% of net sales, a decrease of $160 due to decreases in gross margin rate of $74 and sales volume of $119 offset by a decrease in other expense of $33. Continued competitive pressures and inventory liquidation efforts contributed to the decrease in gross margin rate for the nine months. Operating, selling, general and administrative expenses increased $112 from the prior year. Signature's expense increased $138, primarily due to an increase of $67 in 1996 benefits and expenses of the Amoco Motor Club and due to Signature's continued growth of business. Montgomery Ward and Lechmere's expenses decreased $26 from the prior year which included the impact from new store openings. As was discussed in Note 8 of the financial statements, "Related Parties Transactions," a gain of $15 was included in selling, general and administrative expense as a result of the exchange of unvested (Class C-O) warrants pursuant to the restructuring of the agreement between Montgomery Ward and ValueVision International, Inc. and the exchange of vested warrants (Class A-B) for new warrants (Class P). Net interest expense increased $8 from the prior year due to increased borrowings (as more fully discussed in the Discussion of Financial Condition), and higher average borrowing rates related to long-term borrowings placed in 1995 to extend the maturity and fix the interest rate on a significant portion of the Company's debt. Net loss for the nine months was $72 versus net income of $10 in 1995. 17 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Discussion of Financial Condition Montgomery Ward is the only direct subsidiary of MW Holding and, therefore, Montgomery Ward and its subsidiaries are MW Holding's sole source of funds. Montgomery Ward entered into a Long Term Credit Agreement (Long Term Agreement) dated as of September 15, 1994 with various banks and agents named therein, which expires September 6, 2000, providing a revolving facility in the principal amount of $603. As of September 28, 1996, $603 was outstanding under the Long Term Agreement. On September 6, 1996, the Short Term Credit Agreement (Short Term Agreement) dated as of September 15, 1994 among Montgomery Ward and various banks and agents named therein, which was extended to August 29, 1997 and was further amended to increase the principal amount of this revolving loan facility from $297 million to $436. On October 24, 1996, this facility was further increased from $436 to $456. As of September 28, 1996, $145 was outstanding under the Short Term Agreement. Montgomery Ward also entered into a Credit Agreement (Seasonal Credit Agreement) dated as of October 4, 1996 with various lenders, including GE Capital. The Seasonal Credit Agreement expires March 1, 1997 and provides a revolving loan facility in the principal amount of $165. The purpose of this facility is to provide back-up liquidity as the Company reduces its inventory levels during the Fourth Quarter. Unless the lenders otherwise agree, Loans may be made under this facility only after the commitments under the Short Term Agreement and the Long Term Agreement are fully used. Under the Seasonal Credit Agreement, Montgomery Ward may select among several interest rate options which are based on market rates. A commitment fee is payable based upon the unused commitment. The recent amendments to the Long Term Agreement and the Short Term Agreement and the Seasonal Credit Agreement have added an earnings to fixed charges test to the debt to total capitalization, minimum equity and dividend and distributions financial tests contained in these Agreements. On September 28, 1996, Montgomery Ward borrowed $45 under short-term uncommitted lines of credit, which the company periodically uses at seasonal working capital peaks to diversify its borrowings. Montgomery Ward has entered into interest rate exchange and cap agreements with various banks to offset the market risk associated with an increase in interest rates under both the Long Term and Short Term Agreement. The aggregate notional principal amounts under the interest rate exchange agreement is $175 in 1996. Under the terms of the interest rate exchange agreements, Montgomery Ward pays the banks a weighted average fixed rate of 7.4% multiplied by the notional principal amount in 1996 and will receive the one-month daily average London Interbank Offered (LIBO) rate multiplied by the notional principal amount. 18 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Discussion of Financial Condition (continued) The average aggregate notional principal amount under the various cap agreements is $158 in 1996. Under the terms of the cap agreements, Montgomery Ward receives payments from the banks when the one-month daily average LIBO rate exceeds the 6.0% cap strike rate in 1996. Such payments will equal the amount determined by multiplying the notional principal amount by the excess of the percentage rate, if any, of the one-month daily average LIBO rate over the cap strike rate. The interest rate exchange and cap agreements increased the effective borrowing rate under the Agreements by .80% for the 39-week period ended September 28, 1996. Montgomery Ward is exposed to credit risk in the event of nonperformance by the other parties to the interest rate exchange and cap agreements; however, Montgomery Ward anticipates full performance by the counterparties. Signature Financial/Marketing, Inc. (Signature), a wholly owned subsidiary of Montgomery Ward, borrowed $102 under a Credit Agreement (Signature Credit Agreement) dated as of September 27, 1996 between Signature and various lenders. The proceeds were used to repay the inter-company loan from Montgomery Ward to Signature arising from Signature's acquisition of the Amoco Motor Club on December 31, 1995. The Signature Credit Agreement expires on March 1, 1997 and is expected to be refinanced on a long-term basis at that time. On October 24, 1996, Montgomery Ward prepaid a $25 term loan which had been outstanding under the Term Loan Agreement dated September 29, 1995. Net cash used in the Company's operating activities totaled $592 for the first nine months of 1996 compared to $608 for the same period in 1995. Net cash provided by financing activities totaled $709 for the first nine months of 1996, compared to $714 for the same period in 1995. Capital expenditures during the first nine months of 1996 of $55 were primarily related to expenditures for the opening of one full-line store and six Home Image stores in August. Capital expenditures for the comparable 1995 period were $90. The decrease in capital expenditures from the prior year was due to a reduction in new stores of $13, major remodels and conversions of $15, and corporate and store capital programs of $7. 19 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Millions of dollars, except per share amounts) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Discussion of Financial Condition (continued) Future cash needs are expected to be provided by ongoing operations, the arrangements with Monogram Bank/GE Capital and Montgomery Ward Credit pertaining to the extension of credit to the Company's customers, the disposition of capital assets and borrowings under the revolving loan facilities and uncommitted lines. While cash flow remains positive, the liquidation of inventories has a negative earnings impact. The Company is currently evaluating the impact of the numerous activities of its financing facilities, including the various financial tests, and the related future financing needs. 20 PART II - OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. Information included in this Report on Form 10-Q relating to sales and earnings expectations constitutes forward-looking statements that involve a number of risks and uncertainties. From time to time, information provided by the Company or statements made by its employees may contain other forward- looking statements. Factors that could cause actual results to differ materially from the forward-looking statements include but are not limited to: general economic conditions including inflation, consumer debt levels, trade restrictions and interest rate fluctuations; competitive factors including pricing pressures, technological developments and products offered by competitors; inventory risks due to changes in market demand or the Company's business strategies; and changes in effective tax rates. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 10.(i)(H)(3) Amendment to the Long Term Credit Agreement dated as of September 15, 1994 among Montgomery Ward & Co., Incorporated, various banks, The First National Bank of Chicago, as Documentary Agent, The Bank of Nova Scotia, as Administrative Agent, The Bank of New York, as Negotiated Loan Agent, and Bank of America National Trust and Savings Association, as Advisory Agent, which became effective September 6, 1996. 21 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (continued) (a) Exhibits. (continued) 10.(i)(I)(3) Amendment dated September 6, 1996 to the Short Term Credit Agreement dated as of September 15, 1994 among Montgomery Ward & Co., Incorporated, various banks, The First National Bank of Chicago, as Documentary Agent, The Bank of Nova Scotia, as Administrative Agent, The Bank of New York, as Negotiated Loan Agent, and Bank of America National Trust and Savings Association, as Advisory Agent. 10.(i)(I)(4) Confirmation of New Bank executed by The Industrial Bank of Japan, Limited, Chicago Branch and The Bank of Nova Scotia, as Administrative Agent, pursuant to Section 2.6(c) of the Short Term Credit Agreement dated as of September 15, 1994 among Montgomery Ward & Co., Incorporated, various Banks, The First National Bank of Chicago, as Documentary Agent, The Bank of Nova Scotia, as Administrative Agent, The Bank of New York, as Negotiated Loan Agent, and Bank of America National Trust and Savings Association, as Advisory Agent, as amended and extended, and (b) a letter dated October 24, 1996 from The Bank of Nova Scotia, as Administrative Agent, to the Banks and other Agents who are parties to said Short Term Credit Agreement transmitting an attached revised Schedule 1 to such Agreement. 10.(i)(K)(2) Amendment dated September 27, 1996 to the Term Loan Agreement dated as of September 29, 1995 between Montgomery Ward & Co., Incorporated and The Industrial Bank of Japan, Limited, Chicago Branch. 10.(i)(L) Credit Agreement dated as of September 27, 1996 among Signature Financial/Marketing, Inc., The Bank of New York and The Bank of Nova Scotia. 10.(i)(M) Credit Agreement dated October 4, 1996 among Montgomery Ward & Co., Incorporated, various Lenders, The Bank of Nova Scotia, as Administrative Agent, and The Bank of New York, as Documentation Agent. 27. Financial Data Schedule. (b) Reports on Form 8-K. None. 22 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. REGISTRANT MONTGOMERY WARD HOLDING CORP. BY JOHN L. WORKMAN NAME AND TITLE John L. Workman, Executive Vice President and Chief Financial Officer DATE: November 12, 1996 23 EX-10.(I)(H)(3) 2 AMENDMENT TO LONG TERM AGREEMT DTD 9/16/96 EXHIBIT 10.(i)(H)(3) To the Banks parties to the Long Term Credit Agreement referred to below Re: Amendment to the Long Term Credit Agreement dated September 15, 1994 among Montgomery Ward & Co., Incorporated (the "Company"), various Banks named therein, The First National Bank of Chicago, as Documentary Agent, The Bank of Nova Scotia, as Administrative Agent, The Bank of New York, as Negotiated Loan Agent, and Bank of America National Trust and Savings Association, as Advisory Agent, as amended (the "Long Term Credit Agreement") Gentlemen: The Company hereby requests that you agree to the following amendments to the Long Term Credit Agreement: 1. The definition of "Ratio Period" contained in Section l.l of the Long Term ----------- Credit Agreement is hereby deleted and the following definition of such term is substituted therefor: "Ratio Period" means the four (4) consecutive Fiscal Quarters ------------ ending as of the date as of which the Ratio of Earnings to Fixed Charges is being determined. 2. Section 6.2 of the Long Term Credit Agreement is hereby amended by ----------- replacing the figure "0.125%" in such Section 6.2 with "0.25%". ----------- 3. Clause (a) of Section 6.5 of the Long Term Credit Agreement is hereby ---------- ----------- amended by replacing the figure "0.0675%" in such clause (a) with "0.10%". ---------- 4. Section 11.4 of the Long Term Credit Agreement is hereby amended by adding ------------ the following proviso at the end of the section: "; provided, however, in the case of the Fiscal -1- Quarters ending September 28, 1996, March 29, 1997 and June 28, 1997, "65%" shall be substituted for "60%" in clause (i) above." ---------- 5. Clause (v) of Section 11.6 of the Long Term Credit Agreement is hereby ---------- ------------ amended by adding the following proviso at the end of clause (v): ---------- "; provided, however, in the case where the most recently ended fiscal quarter for the Company was one of the Fiscal Quarters ended September 28, 1996, March 29, 1997 or June 28, 1997, "65%" shall be substituted for "60%" in clause (a) above;" ---------- 6. Section 11 of the Long Term Credit Agreement is hereby amended by adding ---------- the following Section 11.20 thereto: ------------- "11.20. Ratio of Earnings to Fixed Charges. Not permit the ---------------------------------- Ratio of Earnings to Fixed Charges determined as of the last day of each Fiscal Quarter to be less than 1.10:1." 7. Clause (e) of Section 13.l of the Long Term Credit Agreement is hereby ---------- ------------ amended by substituting "11.6 and 11.20" for " 11.6" therein. ---- ----- ---- 8. Line (e) of Section 3 of the officers certificate to be delivered by the --------- Company pursuant to Section 11.1(c) of the Long Term Credit Agreement for --------------- the fiscal quarters of the Company ending September 28, 1996, March 29, 1997 and June 28, 1997 will be revised to indicate "65%" rather than "60%" as an acceptable percentage of "Debt" to "Total Capitalization" for such fiscal quarter. Except as hereinabove expressly provided, all the terms and provisions of the Long Term Credit Agreement shall remain in full force and effect and all references therein and in any related documents to the Long Term Credit Agreement shall henceforth refer to the Long Term Credit Agreement as amended by this amendment. This amendment shall be deemed incorporated into, and a part of, the Long Term Credit Agreement. This amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This amendment shall be governed by and construed in accordance with the laws of the State of Illinois. This amendment may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such -2- counterparts shall together constitute but one and the same agreement. This Amendment shall be effective when executed by the "Required Banks" (as defined in the "Long Term Credit Agreement). If you are in agreement with the foregoing amendment to the Long Term Credit Agreement, please indicate your accord in the place provided for your acceptance and forward the executed amendment to The First National Bank of Chicago, One First National Plaza, Chicago, Illinois 60670, Attention: Karen F. Kizer, Senior Vice President. I shall also appreciate your telecopying me at (312)467-7421 a signed copy of this letter amendment. MONTGOMERY WARD & CO., INCORPORATED By /s/ Douglas V. Gathany --------------------------------- Douglas V. Gathany, Treasurer Accepted and Agreed to the foregoing Amendment THE FIRST NATIONAL BANK OF CHICAGO, in its individual capacity and in its capacity as Documentary Agent By: /s/ Karen F. Kizer ----------------------------- Name: Karen F. Kizer Title: Senior Vice President THE BANK OF NEW YORK, in its individual capacity and in its capacity as Negotiated Loan Agent By: /s/ Michael Flannery ----------------------------- Name: Michael Flannery Title: Vice President -3- THE BANK OF NOVA SCOTIA, in its individual capacity and in its capacity as Administrative Agent By: /s/ F.C.H. Ashby ----------------------------- Name: F.C.H. Ashby Title: Senior Manager Loan Operations BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, in its individual capacity and in its capacity as Advisory Agent By: /s/ Sandra S. Ober ----------------------------- Name: Sandra S. Ober Title: Vice President CIBC INC. By: /s/ Durc A. Savini ----------------------------- Name: Durc A. Savini Title: Authorized Signatory NATIONSBANK, N.A. By: /s/ Mary Carol Daly ----------------------------- Name: Mary Carol Daly Title: Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By: /s/ Richard E. Stahl ----------------------------- Name: Richard E. Stahl Title: Senior Vice President & Joint General Manager CREDIT LYONNAIS CHICAGO BRANCH By: /s/ Mary Ann Klemm ----------------------------- Name: Mary Ann Klemm Title: Vice President -4- CREDIT LYONNAIS CAYMAN ISLAND BRANCH By:____________________________ Name: Title: BANCA COMMERCIALE ITALIANA, CHICAGO BRANCH By: /s/ Diana R. Lamb ----------------------------- Name: Diana R. Lamb Title: Vice President By: /s/ Matthew V. Trujillo ----------------------------- Name: Matthew V. Trujillo Title: Assistant Vice President THE DAI-ICHI KANGYO BANK, LTD., CHICAGO BRANCH By: /s/ Seiichiro Ino ----------------------------- Name: Seiichiro Ino Title: Vice President THE BANK OF TOKYO-MITSUBISHI, LTD., CHICAGO BRANCH By: /s/ Noboru Kobayashi ----------------------------- Name: Noboru Kobayashi Title: Deputy General Manager THE NORTHERN TRUST COMPANY By: /s/ Sidney R. Dillard ----------------------------- Name: Sidney R. Dillard Title: Vice President -5- THE SAKURA BANK, LTD. By: /s/ Shunji Sakurai ----------------------------- Name: Shunji Sakurai Title: Joint General Manager THE SANWA BANK, LIMITED, CHICAGO BRANCH By:_____________________________ Name: Title: SWISS BANK CORPORATION By: /s/ Thomas Eggenschwiler ----------------------------- Name: Thomas Eggenschwiler Title: Executive Director Credit Risk Management By: /s/ Nancy Russell ----------------------------- Name: Nancy Russell Title: UNITED STATES NATIONAL BANK OF OREGON By: /s/ Tom Lee ----------------------------- Name: Tom Lee Title: Vice President UNION BANK By: /s/ Richard A. Sutter ----------------------------- Name: Richard A. Sutter Title: Vice President -6- ABN AMRO BANK N.V. By: /s/ David C. Sagers ----------------------------- Name: David C. Sagers Title: Vice President By: /s/ Laurie D. Flom ----------------------------- Name: Laurie D. Flom Title: FIRST BANK NATIONAL ASSOCIATION By: /s/ Christopher H. Patton ----------------------------- Name: Christopher H. Patton Title: Commercial Banking Officer THE FIRST NATIONAL BANK OF BOSTON By: /s/ Bethann R. Halligan ----------------------------- Name: Bethann R. Halligan Title: Managing Director THE FUJI BANK, LIMITED By:_____________________________ Name: Title: PNC BANK, NATIONAL ASSOCIATION By: /s/ Karen C. Brogan ----------------------------- Name: Karen C. Brogan Title: Commercial Banking Officer THE YASUDA TRUST AND BANKING CO., LTD. By: /s/ Joseph C. Meek ----------------------------- Name: Joseph C. Meek Title: Deputy General Manager -7- THE FIRST NATIONAL BANK OF MARYLAND By: /s/ Andrew W. Fish ----------------------------- Name: Andrew W. Fish Title: Vice President ISTITUTO BANCARIO SAN PAOLO DI TORINO, S.P.A. By: /s/ K. Douglas Knapp ---------------------- Name: K. Douglas Knapp Title: Vice President By: /s/ Ettore Viazzo ------------------- Name: Ettore Viazzo Title: Vice President KREDIETBANK N.V. By:_____________________________ Name: Title: By:_____________________________ Name: Title: UNION BANK OF SWITZERLAND - NEW YORK BRANCH By: /s/ Daniel R. Strickford -------------------------- Name: Daniel R. Strickford Title: Assistant Vice President By: /s/ James P. Kelleher ---------------------- Name: James P. Kelleher Title: Assistant Vice President WELLS FARGO BANK, N.A. By: /s/ Peter G. Olson ----------------------------- Name: Peter G. Olson Title: Senior Vice President -8- BANCA DI ROMA, S.P.A. By:_____________________________ Name: Title: By:_____________________________ Name: Title: COMERICA BANK By: /s/ Harve C. Light ----------------------------- Name: Harve C. Light Title: Asistant Vice President BANK OF AMERICA ILLINOIS By: /s/ Sandra S. Ober ----------------------------- Name: Sandra S. Ober Title: Vice President -9- EX-10.(I)(I)(3) 3 AMENDMT DTD 9/16/96 TO SHORT TERM AGREEMT EXHIBIT 10.(i)(I)(3) AMENDMENT TO SHORT TERM CREDIT AGREEMENT THIS AMENDMENT (the "Amendment") dated as of September 6, 1996, is made and entered into among MONTGOMERY WARD & CO., INCORPORATED (the "Company") and the banks listed on the signature pages hereof (herein, together with their respective successors and assigned, collectively called the "Banks" and individually called a "Bank"). WHEREAS the Banks are parties to that certain Short Term Credit Agreement dated as of September 15, 1994 among Montgomery Ward & Co., Incorporated, various banks named therein, The First National Bank of Chicago, as Documentary Agent, The Bank of Nova Scotia, as Administrative Agent, The Bank of New York, as Negotiated Loan Agent, and Bank of America National Trust and Savings Association, as Advisory Agent, as amended and extended (the "Short Term Credit Agreement"); and WHEREAS the Company and the Banks desire to amend the Short Term Credit Agreement in certain respects; and WHEREAS certain banks which have not heretofore been parties to the Short Term Credit Agreement (the "New Banks") may desire to become parties to the Short Term Credit Agreement, as hereby amended; and WHEREAS some of the Banks (the "Step-up Banks") desire or may desire to increase their respective Commitments under the Short Term Credit Agreement, as hereby amended; THEREFORE, IT IS MUTUALLY AGREED AMONG THE COMPANY AND THE BANKS AS FOLLOWS: 1. Section 1.1 of the Short Term Credit Agreement is hereby amended by ----------- adding the following definitions thereto: "Combined Aggregate Commitment" means, at any time, the sum of the ----------------------------- Aggregate Commitment plus the "Aggregate Commitment" (as defined in and determined under the Long Term Credit Agreement). "Combined Commitment" means, at any time, for each Bank the sum of the ------------------- Commitment of such Bank under this Agreement plus the "Commitment" (as defined in the Long Term Credit Agreement), if any, of such Bank under the Long Term Credit Agreement. "Combined Principal Amount Outstanding" means, as of the close of business ------------------------------------- on any day, the sum of the aggregate principal amount of all Loans outstanding under this Agreement plus the aggregate principal amount of all "Loans" (as defined in the Long Term Credit Agreement) outstanding under the Long Term Credit Agreement. "Incremental Borrowing Amount" shall mean, with respect to each ---------------------------- Supplemental Fee Period, the amount, if any, by which the average daily Combined Principal Amount Outstanding for such Supplemental Fee Period exceeds $600,000,000. "Supplemental Fee Payment Period" refers to the following periods: the 25- ------------------------------- day period ended September 30, 1996; the calendar quarters ended December 31, 1996, March 31, 1997 and June 30, 1997; and the 59-day period ended August 28, 1997. "Supplemental Fee Period Allocation" shall mean for each Supplemental Fee ---------------------------------- Period, the number of days in such Supplemental Fee Period divided by 365. "Supplemental Fee Period" refers to the 25-day period beginning September ----------------------- 6, 1996 and ending September 30, 1996 and each calendar month thereafter until July 31, 1997 and the 28-day period ending August 28, 1997. "Supplemental Fee Share" means, with respect to any Bank, a fraction the ---------------------- numerator of which is the Combined Commitment of such Bank and the denominator of which is the Combined Aggregate Commitment. 2. The definitions of "Aggregate Commitment", "Ratio Period" and "Termination Date" contained in Section l.l of the Short Term Credit Agreement ----------- are hereby deleted and the following definitions of such terms are substituted therefor: "Aggregate Commitment" means $435,650,000 or such other amount as may be -------------------- specified or determined from time to time pursuant to Sections 2.6 or 2.7. ------------ --- "Ratio Period" means the four (4) consecutive Fiscal Quarters ending as of ------------ the date as of which the Ratio of Earnings to Fixed Charges is being determined. "Termination Date" means, with respect to each Bank, the earlier to occur ---------------- of (i) the later of (a) August 29, 1997 or (b) the date to which the Commitment of such Bank has been extended pursuant to Section 2.7, or (ii) such other date ----------- on which the Commitments of all Banks shall terminate pursuant to Section 5 or --------- -2- 13.2 or be reduced to zero pursuant to Section 2.6 and, in any case such day is - ---- ----------- not a Business Day, the next preceding Business Day. 3. Section 2.6 of the Short Term Credit Agreement is amended so that (i) ----------- the caption thereof shall read "Voluntary Termination, Reduction or Increase of ----------------------------------------------- the Commitments" and (ii) a new Section 2.6(c) is added as follows: - --------------- -------------- "(c) Increase in the Aggregate Commitment. The Company may at any time, ------------------------------------ upon 5 day's notice to the Agents, propose that the Aggregate Commitment be increased (the amount of such increase being a "Commitment Increase"), through the increase of the Commitments of one or more of the Banks (each such Bank that is willing to increase its Commitment hereunder being a "Step-up Bank") and/or by the addition of one or more other banks specified by the Company (each a "New Bank") as banks and as parties to this Agreement, such Commitment Increase to be effective as at a date specified by the Company (a "Commitment Increase Date") in such notice; provided, however, that: -------- ------- (i) such notice of Commitment Increase shall specify as to each Step- Up Bank and/or New Bank, the amount of the Commitment of such Bank after giving effect to such Commitment Increase; (ii) it shall be in each Bank's sole discretion whether to increase its Commitment hereunder in connection with the proposed Commitment Increase; (iii) the Company may not propose more than three Commitment Increases; (iv) the minimum proposed Commitment Increase per notice of Commitment Increase shall be $10,000,000; (v) the minimum Commitment of each New Bank that becomes a party to this Agreement pursuant to this Section 2.6 shall be at least equal to ----------- $3,000,000; (vi) in no event shall the Aggregate Commitment at any time exceed $597,000,000; (vii) No Commitment Increase shall be permitted at any time after the Company shall have reduced or terminated any Commitment pursuant to Section ------- 2.6(a) or 2.6(b); and ------ ------ (viii) no Event of Default or Unmatured Event of Default shall have occurred and be continuing on such Increase Date. -3- Promptly upon its receipt of a notice of Commitment Increase, the Documentary Agent shall notify the Banks thereof. In the event that by 10:00 A.M. on the applicable Commitment Increase Date, the Documentary Agent shall have received to the satisfaction of the Documentary Agent each of the following (the "Commitment Increase Closing Items"): (x) from each Step-Up Bank and/or New Bank, as applicable, a duly executed confirmation of Step-Up Commitment and/or New Bank Commitment, such confirmation to be substantially in the form of Exhibit N-1 or N-2, as ----------- --- applicable, and to be completed to reflect the amount of the Commitment of such Bank as specified in the Company's notice of Commitment Increase, and (y) for each Step-up Bank and/or New Bank, as applicable, the items provided for in paragraph 17(b) through 17(h) of the Amendment dated as of --------------- September 6, 1996 hereto including, the Notes and applicable fees provided for therein (it being understood that for purposes of this Section 2.6(c), -------------- each reference in paragraph 17(b) of such Amendment to "Amendment" shall be --------------- deemed to refer to such "Commitment Increase", each reference therein to "paragraph 17(b)" shall be deemed to refer to Section 2.6(c) hereof, and -------------- each reference therein to "Amendment Effective Date" shall refer to "Commitment Increase Date") then the Commitment Increase specified by the Company in its notice of Commitment Increase shall become effective on such Commitment Increase Date, whereupon each New Bank (if any) shall automatically become a party to this Agreement, be bound by the provisions hereof and be included in the definition of "Bank" and "Banks" hereunder. Upon the effectiveness of such Commitment Increase, the Documentary Agent shall promptly notify the other Agents, the Banks (including any New Banks) and the Company of the occurrence of such Commitment Increase, and the Administrative Agent shall promptly distribute a revised Schedule I giving effect to such Commitment Increase. In the event that by 10:00 A.M. on the applicable Commitment Increase Date the Documentary Agent shall not have received each of the Commitment Increase Closing Items, or the Company by notice to the Documentary Agent prior to the applicable Increase Date shall have withdrawn its notice of Commitment Increase, then the Company's notice of Commitment Increase shall be deemed not to have been made, whereupon any Commitment Increase Closing Items delivered to the Documentary Agent in respect thereof shall be deemed to be of no effect and all the rights and obligations of the parties shall continue as if no such notice had been given." -4- 4. Section 6.2 of the Short Term Credit Agreement is hereby amended ----------- by replacing the figure "0.125%" in such Section 6.2 with "0.25%". ----------- 5. Section 6.5 of the Short Term Credit Agreement is hereby amended ----------- by replacing the figure "0.0675%" in such Section 6.5 with "0.10%". ----------- 6. Section 6 of the Short Term Credit Agreement is hereby amended by --------- adding the following Section 6.10 thereto: ------------ "6.10. Supplemental Fees. In the event the average daily Combined ----------------- Principal Amount Outstanding for any Supplemental Fee Period exceeds $600,000,000, the Company shall pay to the Administrative Agent for the account of each Bank within 15 days after the close of the respective Supplemental Fee Payment Period (and on August 29, 1997 with respect to the last two Supplemental Fee Periods) a supplemental fee computed at the rate specified in the next sentence on the product obtained by multiplying the Incremental Borrowing Amount for such Supplemental Fee Period by such Bank's Supplemental Fee Share. The rate to be applied in computing the supplemental fee for a Supplemental Fee Period shall be based upon the size of the Incremental Borrowing Amount for such Supplemental Fee Period: if the Incremental Borrowing Amount does not exceed $150,000,000, the applicable rate is 0.25% times the respective Supplemental Fee Period Allocation; if the Incremental Borrowing Amount does not exceed $300,000,000 but exceeds $150,000,000, the applicable rate is 0.50% times the respective Supplemental Fee Period Allocation; if the Incremental Borrowing Amount does not exceed $450,000,000 but exceeds $300,000,000, the applicable rate is 0.75% times the respective Supplemental Fee Period Allocation; and if the Incremental Borrowing Amount exceeds $450,000,000, the applicable rate is l% times the respective Supplemental Fee Period Allocation." 7. Section 11.4 of the Short Term Credit Agreement is hereby amended ------------ by adding the following proviso at the end of the section: "; provided, however, in the case of the Fiscal Quarters ending September 28, 1996, March 29, 1997 and June 28, 1997, "65%" shall be substituted for "60%" in clause ------ (i) above." --- 8. Clause (v) of Section 11.6 of the Short Term Credit Agreement is ---------- ------------ hereby amended by adding the following proviso at the end of clause (v): ---------- -5- "; provided, however, in the case where the most recently ended fiscal quarter for the Company was one of the Fiscal Quarters ended September 28, 1996, March 29, 1997 or June 28, 1997, "65%" shall be substituted for "60%" in clause (a) above; ---------- 9. Section 11 of the Short Term Credit Agreement is hereby amended by ---------- adding the following Section 11.20 thereto: ------------- "11.20. Ratio of Earnings to Fixed Charges. Not permit the Ratio of ---------------------------------- Earnings to Fixed Charges determined as of the last day of each Fiscal Quarter to be less than 1.10:1." 10. Clause (a) of Section 13.l of the Short Term Credit Agreement is ---------- ------------ hereby amended by substituting ", 6.7 or 6.10" for "or 6.7" therein. --- ---- --- 11. Clause (e) of Section 13.l of the Short Term Credit Agreement is ---------- ------------ hereby amended by substituting "11.6 and 11.20" for " 11.6" therein. ---- ----- ---- 12. Schedule I to the Short Term Credit Agreement is hereby deleted and Schedule I attached hereto is substituted therefor. 13. Schedule VIII to the Short Term Credit Agreement is hereby amended to add the following thereto: "Combined Aggregate Commitment" - used in the definition of ------------------------------ Supplemental Fee Share. "Combined Commitment" - used in the definition of Supplemental Fee Share. ------------------- "Combined Principal Amount Outstanding" - used in the definition of ------------------------------------- Incremental Borrowing Amount and Section 6.10. ------------ "Incremental Borrowing Amount" - used in Section 6.10. ---------------------------- ------------ "Supplemental Fee Period" - used in the definition of Incremental ----------------------- Borrowing Amount and Section 6.10. ------------ "Supplemental Fee Share" - used in Section 6.10. ---------------------- ------------ 14. Line (e) of Section 3 of the officers certificate to be delivered by the Company pursuant to Section 11.1(c) of the Short Term Credit Agreement --------------- for the Fiscal Quarters ending September 28, 1996, March 29, 1997 and June 28, 1997 will be -6- revised to indicate "65%" rather than "60%" as an acceptable percentage of Debt to Total Capitalization for such Fiscal Quarter. 15.A Section 15.1(a)(iv) (page 78) of the Short Term Credit Agreement is amended by inserting "2.6 or" immediately prior to "2.7" and by adding --- --- Section 15.1(d) as follows: "(d) The consent of all Banks shall be required for - --------------- any increase in the Aggregate Commitment above $597,000,000." 15.B The Credit Agreement is further amended by adding Exhibits N-1 ------------ and N-2 in the form attached hereto. --- 16. By its signature hereto, each Bank confirms that pursuant to Section 2.7 of the Short Term Credit Agreement and the Extension Request of the - ----------- Company dated July 8, 1996, such Bank has consented (and hereby reaffirms its consent) to an extension of the Termination Date to August 29, 1997. 17. This Amendment shall become effective on such date (the "Amendment Effective Date") on which, the Documentary Agent shall have received all of the following, each duly executed and dated the Amendment Effective Date or such other date satisfactory to the Documentary Agent, in form and substance reasonably satisfactory to the Documentary Agent: (a) Amendment. Counterparts of this Amendment whether on the same or --------- different counterparts, executed by the Company, the Required Banks (it being understood that the calculation of Required Banks shall be based solely on the Commitments of the Banks existing immediately prior to the effectiveness of this Amendment), and the Step-up Banks (or in the case of any Bank as to which an executed counterpart shall not have been so received, telegraphic, telefax, telex or other written confirmation of execution of a counterpart hereof by such Bank); (b) Notes. (i) For each New Bank, (if any) one Revolving Note, one ----- Negotiated Note and one Swing Note of the Company, (ii) for each Step- up Bank, one Revolving Note, one Negotiated Note and one Swing Note of the Company to replace the Revolving Note, Negotiated Note and Swing Note held by such Bank, and (iii) for each other Bank, a Negotiated Note to replace the Negotiated Note held by such Bank; (The Notes delivered to the Documentary Agent pursuant to this paragraph 17(b) --------------- shall be in a maximum principal amount reflecting the respective Commitments of the Banks under the Short Term Credit Agreement as hereby amended, except for the Negotiated Notes which shall be in a maximum principal amount reflecting the Aggregate -7- Commitment of the Banks under the Short Term Credit Agreement as hereby amended); (c) Certified Resolutions. A certificate of the Secretary or an --------------------- Assistant Secretary of the Company certifying resolutions of the Company's Board of Directors authorizing this Amendment and the Notes provided for in paragraph 17(b) hereof; --------------- (d) Incumbency Certificate. A certificate of the Secretary or an ---------------------- Assistant Secretary of the Company certifying the names of the officer or officers of the Company authorized to sign this Amendment and the Notes referred to in paragraph 17(b) hereof together with a sample of the true --------------- signature of each such officer; (e) Opinion of Counsel for the Company. A letter from Altheimer & ---------------------------------- Gray, counsel for the Company, addressed to the Agents and the Banks, reaffirming, as of the Amendment Effective Date, paragraphs 1, 2 and 3 of its opinion (it being understood that references to the Short Term Credit Agreement and Notes in such paragraphs shall be deemed to reference the Short Term Credit Agreement as amended by this Amendment and shall be deemed to include the Notes delivered pursuant to paragraph 17(b) hereof) --------------- previously delivered to the Documentary Agent pursuant to Section ------- 12.1(a)(vi) of the Short Term Credit Agreement; ----------- (f) Officer's Certificate. A certificate signed by an Authorized --------------------- Officer on behalf of the Company certifying that as of the Amendment Effective Date (i) no Event of Default or Unmatured Event of Default has occurred and is continuing, and (ii) the Company's representations and warranties contained in Sections 10.1, 10.2, 10.3, 10.4(a), 10.7, 10.10, ------------- ---- ---- ------- ---- ----- 10.11, 10.12, 10.15, and 10.18 of the Short Term Credit Agreement, are true ----- ----- ----- ----- and correct with the same effect as though made on the Amendment Effective Date (it being understood that references to the Short Term Credit Agreement and Notes in such Sections shall be deemed to reference the Short Term Credit Agreement as amended by this Amendment and shall be deemed to include the Notes delivered pursuant to paragraph 17(b) hereof); --------------- (g) Step-up Fee. Evidence of payment from the Company to the ----------- Administrative Agent, for the account of each of the Step-up Banks, of a non-refundable step-up fee equal to (i) in the case of Group I Step-up Banks (as hereinafter defined), 0.20% of the amount of each such Group I Step-up Bank's Commitment after giving effect to this Amendment, and (ii) in the case of the other Step-up Banks, 0.20% of the amount of -8- each such Step-up Bank's increase in its respective Commitment as a result of this Amendment. For the purposes of this clause (h), "Group I Step-up ---------- Bank" means any Step-up Bank that has increased its respective Commitment pursuant to this Amendment in such a manner that after giving effect to this Amendment its respective Commitment divided by the Aggregate Commitment equals or exceeds its respective Commitment (before giving effect to this Amendment) divided by $297,000,000. (Upon the effectiveness of this Amendment, the Administrative Agent shall promptly remit to each Step-up Bank its ratable share of such fee;) and (h) New Bank Fee. Evidence of payment from the Company to the ------------ Administrative Agent, for the benefit of each of the New Banks (if any), of a non-refundable new bank fee equal to 0.20% of the amount of each New Bank's Commitment after giving effect to this Amendment. (Upon the effectiveness of this Amendment, the Administrative Agent shall promptly remit to each New Bank its share of such fee.) 18. Except as otherwise herein specifically defined, all the capitalized terms contained herein shall have the meaning ascribed to such terms in the Short Term Credit Agreement. 19. Except as hereinabove expressly provided, all the terms and provisions of the Short Term Credit Agreement shall remain in full force and effect and all references therein and in any related documents to the Short Term Credit Agreement shall henceforth refer to the Short Term Credit Agreement as amended by this Amendment. This Amendment shall be deemed incorporated into, and a part of, the Short Term Credit Agreement. 20. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 21. This Amendment shall be governed by and construed in accordance with the laws of the State of Illinois. 22. This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same agreement. -9- Delivered at Chicago, Illinois as of the day, month and year first above written. MONTGOMERY WARD & CO., INCORPORATED By: /s/ Douglas V. Gathany --------------------------------- Name: Douglas V. Gathany Title: Treasurer ACCEPTED AND APPROVED: THE FIRST NATIONAL BANK OF CHICAGO, in its individual capacity and in its capacity as Documentary Agent By: /s/ Karen F. Kizer ----------------------------- Name: Karen F. Kizer Title: Senior Vice President THE BANK OF NEW YORK, in its individual capacity and in its capacity as Negotiated Loan Agent By: /s/ Michael Flannery ----------------------------- Name: Michael Flannery Title: Vice President THE BANK OF NOVA SCOTIA, in its individual capacity and in its capacity as Administrative Agent By: /s/ F.C.H. Ashby ----------------------------- Name: F.C.H. Ashby Title: Senior Manager Loan Operations -10- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, in its individual capacity and in its capacity as Advisory Agent By: /s/ Sandra S. Ober ----------------------------- Name: Sandra S. Ober Title: Vice President CIBC INC. By: /s/ Durc A. Savini ----------------------------- Name: Durc A. Savini Title: Authorized Signatory NATIONSBANK, N.A. By: /s/ Mary Carol Daly ----------------------------- Name: Mary Carol Daly Title: Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By: /s/ Richard E. Stahl ----------------------------- Name: Richard E. Stahl Title: Senior Vice President & Joint General Manager CREDIT LYONNAIS CHICAGO BRANCH By: /s/ Mary Ann Klemm ----------------------------- Name: Mary Ann Klemm Title: Vice President -11- BANCA COMMERCIALE ITALIANA, CHICAGO BRANCH By: /s/ Diana R. Lamb ----------------------------- Name: Diana R. Lamb Title: Vice President By: /s/ Matthew V. Trujillo ----------------------------- Name: Matthew V. Trujillo Title: Assistant Vice President THE DAI-ICHI KANGYO BANK, LTD., CHICAGO BRANCH By: /s/ Seiichiro Ino ----------------------------- Name: Seiichiro Ino Title: Vice President THE BANK OF TOKYO-MITSUBISHI, LTD., CHICAGO BRANCH By: /s/ Noboru Kobayashi ----------------------------- Name: Noburo Kobayashi Title: Deputy General Manager THE NORTHERN TRUST COMPANY By: /s/ Sidney R. Dillard ----------------------------- Name: Sidney R. Dillard Title: Vice President THE SAKURA BANK, LTD. By: /s/ Shunji Sakurai ----------------------------- Name: Shunji Sakurai Title: Joint General Manager -12- SWISS BANK CORPORATION By: /s/ Thomas Eggenschwiler ---------------------------- Name: Thomas Eggenschwiler Title: Executive Director Credit Risk Management By: /s/ Nancy Russell ----------------------------- Name: Nancy Russell Title: SBC Director UNION BANK By: /s/ Richard A. Sutter ----------------------------- Name: Richard A. Sutter Title: Vice President ABN AMRO BANK N.V. By: /s/ David C. Sagers ----------------------------- Name: David C. Sagers Title: Vice President By: /s/ Laurie D. Flom ----------------------------- Name: Laurie D. Flom Title: Vice President FIRST BANK NATIONAL ASSOCIATION By: /s/ Christopher H. Patton ----------------------------- Name: Christopher H. Patton Title: Commercial Banking Officer THE FIRST NATIONAL BANK OF BOSTON By: /s/ Bethann R. Halligan ----------------------------- Name: Bethann R. Halligan Title: Managing Director -13- PNC BANK, NATIONAL ASSOCIATION By: /s/ Karen C. Brogan ----------------------------- Name: Karen C. Brogan Title: Commercial Banking Officer THE YASUDA TRUST AND BANKING CO., LTD. By: /s/ Joseph C. Meek ----------------------------- Name: Joseph C. Meek Title: Deputy General Manager THE FIRST NATIONAL BANK OF MARYLAND By: /s/ Andrew W. Fish ----------------------------- Name: Andrew W. Fish Title: Vice President ISTITUTO BANCARIO SAN PAOLO DI TORINO, S.P.A. By: /s/ K. Douglas Knapp ---------------------- Name: K. Douglas Knapp Title: Vice President By: /s/ Ettore Viazzo ------------------ Name: Ettore Viazzo Title: Vice President UNION BANK OF SWITZERLAND - NEW YORK BRANCH By: /s/ Daniel R. Strickford ------------------------- Name: Daniel R. Strickford Title: Assistant Vice President By: /s/ James P. Kelleher ---------------------- Name: James P. Kelleher Title: Assistant Vice President WELLS FARGO BANK, N.A. By: /s/ Peter G. Olson ----------------------------- Name: Peter G. Olson Title: Senior Vice President -14- COMERICA BANK By: /s/ Harve C. Light ----------------------------- Name: Harve C. Light Title: Assistant Vice President BANK OF AMERICA ILLINOIS By: /s/ Sandra S. Ober ----------------------------- Name: Sandra S. Ober Title: Vice President -15- Attachments: Schedule I: Banks, Commitments and Termination Dates Exhibit N-1: Form of Confirmation of New Bank Exhibit N-2: Form of Confirmation of Step-Up Bank -16- SCHEDULE I BANKS, COMMITMENTS AND TERMINATION DATES ---------------------------------------- (Sections 1.1, 2.6, 2.7 and 15.4)
TERMINATION BANK NAME COMMITMENT DATE - --------- ---------- ----------- The Bank of New York $60,000,000 August 29, 1997 The Bank of Nova Scotia 60,000,000 August 29, 1997 NationsBank, N.A. 39,800,000 August 29, 1997 The First National Bank of 33,000,000 August 29, 1997 Chicago Bank of America Illinois/1/ 24,750,000 August 29, 1997 CIBC Inc. 19,800,000 August 29, 1997 The Northern Trust Company 18,250,000 August 29, 1997 The Long-Term Credit Bank of 18,150,000 August 29, 1997 Japan, Ltd. The First National Bank of 16,600,000 August 29, 1997 Boston Credit Lyonnais Chicago Branch 16,500,000 August 29, 1997 Union Bank of Switzerland, 14,950,000 August 29, 1997 New York Branch ABN AMRO Bank N.V. 13,200,000 August 29, 1997 Banca Commerciale Italiana, 9,900,000 August 29, 1997 Chicago Branch The Dai-Ichi Kangyo Bank, Ltd., 9,900,000 August 29, 1997 Chicago Branch The Bank of Tokyo Mitsubishi, 9,900,000 August 29, 1997 Ltd., Chicago Branch
- ---------- /1/To be considered as a single Bank for purposes of the Step-up Fee. -17-
TERMINATION BANK NAME COMMITMENT DATE - --------- ---------- ----------- Bank of America National Trust 8,250,000 August 29, 1997 and Savings Association/*/ The Sakura Bank, Ltd. 8,250,000 August 29, 1997 Swiss Bank Corporation 8,250,000 August 29, 1997 Union Bank of California, N.A. 8,250,000 August 29, 1997 First Bank National Association 6,600,000 August 29, 1997 PNC Bank, National Association 6,600,000 August 29, 1997 The Yasuda Trust and Banking 6,600,000 August 29, 1997 Co., Ltd. The First National Bank of 4,950,000 August 29, 1997 Maryland Istituto Bancario San Paolo di 4,950,000 August 29, 1997 Torino, S.P.A. Wells Fargo Bank, N.A. 4,950,000 August 29, 1997 Comerica Bank 3,300,000 August 29, 1997 ------------ $435,650,000
-18- EXHIBIT N-1 FORM OF CONFIRMATION OF NEW BANK -------------------------------- Section 2.6(c) Reference is made to the Short Term Credit Agreement, dated as of September 15, 1994 (herein, as heretofore amended, modified or supplemented, called the "Credit Agreement"), among Montgomery Ward & Co., Incorporated, an Illinois corporation (the "Company"), and the Banks and Agents parties thereto. Terms used but not otherwise defined herein are used herein as defined in the Credit Agreement. 1. As of October 24, 1996 (the "Increase Commitment Date"), pursuant and subject to the provisions of Section 2.6(c) of the Credit Agreement, The -------------- Industrial Bank of Japan, Limited, Chicago Branch (the "New Bank") hereby becomes a party to and a Bank under the Credit Agreement with a Commitment equal to $20,050,000. 2. The New Bank acknowledges and agrees that: (a) neither any Agent nor any other Bank makes any representation or warranty or assumes any responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other instrument or document furnished pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto, (b) neither any Agent nor any other Bank makes any representation or warranty or assumes any responsibility with respect to the financial condition or creditworthiness of the Company or the performance or observance by the Company of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto, (c) the New Bank (i) has made and will continue to make such inquiries and has taken and will continue to take such care on its own behalf as would have been the case had it made Loans directly to the Company without the intervention of any Agent or any other Person, and (ii) has made and will continue to make its own credit analysis and decisions relating to the Credit Agreement independently and without reliance upon any Agent or any other Person, and based on such documents and information as it has deemed appropriate. 3. If the New Bank is a Non-United States Person, it hereby agrees to deliver to the Applicable Agent a written representation and warranty substantially similar to that contained in Section 8.4(b) of the Credit -------------- Agreement. N-1-1 This Confirmation shall be governed by, and construed in accordance with, the laws of the State of Illinois without regard to conflict of laws principles. The Industrial Bank of Japan, Ltd. Chicago Branch By: /s/ Hiroki Yamada --------------------------- Name: Hiroki Yamada ------------------- Copies of all notices, etc, should be sent to: Attention: Tim Avendt ------------------------------ Telephone: (312) 855-8499 ------------------------------ Telecopy: (312) 855-8200 ------------------------------ Telex: 285381 ------------------------------ (IBJ CGO) ------------------------------ Base Rate Loan Funding Office: The Industrial Bank of Japan, Ltd. ----------------------------------------- 227 West Monroe Street ----------------------------------------- Suite 2600 ----------------------------------------- Chicago, IL 60606 ----------------------------------------- Eurodollar Loan Funding Office: The Industrial Bank of Japan, Ltd. ----------------------------------------- 227 West Monroe Street ----------------------------------------- Suite 2600 ----------------------------------------- Chicago, IL 60606 ----------------------------------------- Accepted this 23rd day of October, 1996. The Bank of Nova Scotia, as Applicable Agent By: /s/ A.S. Norsworthy ------------------------ Name: A.S. Norsworthy ----------------- N-1-2 EXHIBIT N-2 FORM OF CONFIRMATION OF STEP-UP BANK ------------------------------------ Section 2.6(c) Reference is made to the Short Term Credit Agreement, dated as of September 15, 1994 (herein, as heretofore amended, modified or supplemented, called the "Credit Agreement"), among Montgomery Ward & Co., Incorporated, an Illinois corporation (the "Company"), and the Banks and Agents parties thereto. Terms used but not otherwise defined herein are used herein as defined in the Credit Agreement. As of _______ 19__ (the "Increase Commitment Date"), pursuant and subject to the provisions of Section 2.6(c) of the Credit Agreement, ___________ -------------- (the "Step-up Bank") increases its Commitment from $______ to $______. This Confirmation shall be governed by, and construed in accordance with, the laws of the State of Illinois without regard to conflict of laws principles. [NAME OF ____________ STEP-UP BANK] By:___________________________ Title:___________________ Copies of all notices, etc, should be sent to: Attention:____________________ Telephone:____________________ Telecopy: ____________________ Telex: ____________________ Base Rate Loan Funding Office: ------------------------------ ------------------------------ ------------------------------ N-2-1 Eurodollar Loan Funding Office: ------------------------------ ------------------------------ ------------------------------ Accepted this __ day of ____________, 19__. [NAME OF APPLICABLE AGENT], as Applicable Agent By:________________________ Title:________________ N-2-2 EX-10.(I)(I)(4) 4 CONFIRM OF NEW BANK EXECUTED BY IND. BK OF JAPAN EXHIBIT 10.(i)(I)(4) CONFIRMATION OF NEW BANK ------------------------ Section 2.6(c) Reference is made to the Short Term Credit Agreement, dated as of September 15, 1994 (herein, as heretofore amended, modified or supplemented, called the "Credit Agreement"), among Montgomery Ward & Co., Incorporated, an Illinois corporation (the "Company"), and the Banks and Agents parties thereto. Terms used but not otherwise defined herein are used herein as defined in the Credit Agreement. 1. As of October 24, 1996 (the "Increase Commitment Date"), pursuant and subject to the provisions of Section 2.6(c) of the Credit Agreement, The -------------- Industrial Bank of Japan, Limited, Chicago Branch (the "New Bank") hereby becomes a party to and a Bank under the Credit Agreement with a Commitment equal to $20,050,000. 2. The New Bank acknowledges and agrees that: a. neither any Agent nor any other Bank makes any representation or warranty or assumes any responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other instrument or document furnished pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto, b. neither any Agent nor any other Bank makes any representation or warranty or assumes any responsibility with respect to the financial condition or creditworthiness of the Company or the performance or observance by the Company of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto, c. the New Bank (i) has made and will continue to make such inquiries and has taken and will continue to take such care on its own behalf as would have been the case had it made Loans directly to the Company without the intervention of any Agent or any other Person, and (ii) has made and will continue to make its own credit analysis and decisions relating to the Credit Agreement independently and without reliance upon any Agent or any other Person, and based on such documents and information as it has deemed appropriate. 3. If the New Bank is a Non-United States Person, it hereby agrees to deliver to the Applicable Agent a written representation and warranty substantially similar to that contained in Section 8.4(b) of the Credit -------------- Agreement. -1- This Confirmation shall be governed by, and construed in accordance with, the laws of the State of Illinois without regard to conflict of laws principles. The Industrial Bank of Japan, Ltd. Chicago Branch By: /s/ Hiroki Yamada --------------------------- Name: Hiroki Yamada ------------------- Copies of all notices, etc, should be sent to: Attention: Tim Avendt -------------------- Telephone: (312) 855-8499 -------------------- Telecopy: (312) 855-8200 -------------------- Telex: 285381 (IBJ CGO) -------------------- Base Rate Loan Funding Office: The Industrial Bank of Japan, Ltd. ----------------------------------- 227 West Monroe Street ----------------------------------- Suite 2600 ----------------------------------- Chicago, IL 60606 ----------------------------------- Eurodollar Loan Funding Office: The Industrial Bank of Japan, Ltd. ----------------------------------- 227 West Monroe Street ----------------------------------- Suite 2600 ----------------------------------- Chicago, IL 60606 ----------------------------------- Accepted this 23rd day of October, 1996. The Bank of Nova Scotia, as Applicable Agent By: /s/ A.S. Norsworthy ------------------------ Name: A.S. Norsworthy ----------------- -2- October 24, 1996 To: Montgomery Ward & Co., Incorporated and each of the Banks and Agents party to the Short Term Credit Agreement dated as of September 15, 1994 (the "Credit Agreement") among Montgomery Ward & Co., Incorporated and the various Banks and Agents named therein Re: Montgomery Ward & Co., Incorporated ----------------------------------- This letter is to serve as notice that effective as of today, pursuant to Section 2.6(c) of the above noted Credit Agreement, the Industrial Bank of Japan, Limited, Chicago Branch is a "New Bank" under the Credit Agreement with a Commitment of $20,050,000. Accordingly, as reflected on the attached revised Schedule I to the Credit Agreement, the Combined Commitment has been increased from $435,650,000 to $455,700,000. Sincerely, The Bank of Nova Scotia, as Administrative Agent /s/ A.S. Norsworthy ------------------- By: A.S. Norsworthy -1- SCHEDULE I BANKS, COMMITMENTS AND TERMINATION DATES ---------------------------------------- (Sections 1.1, 2.6, 2.7 and 15.4)
TERMINATION BANK NAME COMMITMENT DATE - --------- ---------- ---------- The Bank of New York $ 60,000,000 August 29, 1997 The Bank of Nova Scotia 60,000,000 August 29, 1997 NationsBank, N.A. 39,800,000 August 29, 1997 The First National Bank of Chicago 33,000,000 August 29, 1997 Bank of America Illinois/1/ 24,750,000 August 29, 1997 The Industrial Bank of Japan, Limited, 20,050,000 August 29, 1997 Chicago Branch CIBC Inc. 19,800,000 August 29, 1997 The Northern Trust Company 18,250,000 August 29, 1997 The Long-Term Credit Bank of Japan, Ltd. 18,150,000 August 29, 1997 The First National Bank of Boston 16,600,000 August 29, 1997 Credit Lyonnais Chicago Branch 16,500,000 August 29, 1997 Union Bank of Switzerland, 14,950,000 August 29, 1997 New York Branch ABN AMRO Bank N.V. 13,200,000 August 29, 1997 Banca Commerciale Italiana, Chicago 9,900,000 August 29, 1997 Branch The Dai-Ichi Kangyo Bank, Ltd., Chicago 9,900,000 August 29, 1997 Branch The Bank of Tokyo Mitsubishi, Ltd., 9,900,000 August 29, 1997 Chicago Branch Bank of America National Trust and 8,250,000 August 29, 1997 Savings Association/*/ The Sakura Bank, Ltd. 8,250,000 August 29, 1997
- ------------------------ /1/To be considered as a single Bank for purposes of the Step-up Fee. -2-
TERMINATION BANK NAME COMMITMENT DATE - --------- ---------- ---------- Swiss Bank Corporation 8,250,000 August 29, 1997 Union Bank of California, N.A. 8,250,000 August 29, 1997 First Bank National Association 6,600,000 August 29, 1997 PNC Bank, National Association 6,600,000 August 29, 1997 The Yasuda Trust and Banking Co., Ltd. 6,600,000 August 29, 1997 The First National Bank of Maryland 4,950,000 August 29, 1997 Istituto Bancario San Paolo di Torino, 4,950,000 August 29, 1997 S.P.A. Wells Fargo Bank, N.A. 4,950,000 August 29, 1997 Comerica Bank 3,300,000 August 29, 1997 ------------ $455,700,000
EX-10.(I)(K)(2) 5 AMENDMT DATED 9/27/96 TO TERM LOAN AGREEMT EXHIBIT 10.(i)(K)(2) September 27, 1996 The Industrial Bank of Japan Limited, Chicago Branch 227 West Monroe Street Suite 2600 Chicago, IL 60606 Re: Amendment to Term Loan Agreement dated as of September 29, 1995 between Montgomery Ward & Co., Incorporated (the "Company") and the Industrial Bank of Japan, Limited, Chicago Branch (the "Bank"), as amended (the "Term Loan Agreement") Gentlemen: The Company hereby requests that you agree to the following amendments (the "Amendments") to the Term Loan Agreement: 1. The definition of "Ratio Period" contained in Section 1.1 of ----------- the Term Loan Agreement is hereby deleted and the following definition of such term is substituted therefor: "Ratio Period" means the four (4) consecutive ------------ Fiscal Quarters ending as of the date as of which the Ratio of Earnings to Fixed Charges is being determined. 2. Section 6.2 of the Term Loan Agreement is hereby amended by ----------- replacing the figure "0.125%" in such Section 6.2 with ----------- "0.25%". 3. Section 11.4 of the Term Loan Agreement is amended by adding ------------ the following proviso at the end of the section: "; provided, however, in the case of the Fiscal Quarters ending September 28, 1996, March 29, 1997 and June 28, 1997, "65%" shall be substituted for "60%" in clause (i) above." ---------- 4. Clause (v) of Section 11.6 of the Term Loan Agreement is ---------- ------------ amended by adding the following proviso at the end of clause ------ (v): --- "; provided, however, in the case where the most recently ended fiscal quarter for the Company was one of the Fiscal Quarters ended September 28, 1996, March 29, 1997 or June 28, 1997, "65%" shall be substituted for "60%" in clause (a) above;" ---------- 5. Section 11 of the Term Loan Agreement is hereby amended by ---------- adding the following Section 11.20 thereto: ------------- "11.20. Ratio of Earnings to Fixed Charges. Not ---------------------------------- permit the Ratio of Earnings to Fixed Charges determined as of the last day of each Fiscal Quarter to be less than 1.10:1." 6. Clause (e) of Section 13.l of the Term Loan Agreement is ---------- ------------ hereby amended by substituting "11.6 and 11.20" for "ll.6" ---- ----- ---- therein. 7. Line (e) of Section 3 of Annex B to the form of officer --------- ------- certificate to be delivered by the Company pursuant to Section 11.1(c) of the Term Loan Agreement for the fiscal --------------- quarters of the Company ending September 28, 1996, March 29, 1997 and June 28, 1997 will be revised to indicate "65%" rather than "60%" as an acceptable percentage of "Debt" to "Total Capitalization" for such fiscal quarter. Except as hereinabove specifically provided, all the terms of the Term Loan Agreement shall remain in full force and effect and all references therein and in any related documents to the Term Loan Agreement shall (subject to the immediately succeeding paragraph) henceforth refer to the Term Loan Agreement as amended by this amendment. This amendment shall be deemed incorporated into, and a part of, the Term Loan Agreement. Anything to the contrary herein notwithstanding, the Amendments shall be retroactively ineffective to the date hereof unless, on or prior to October 3l, l996, the Company shall have prepaid the Loan (as defined in the Term Loan Agreement) in its entirety, together with all accrued and unpaid interest thereon to the date of prepayment. The Bank agrees that concurrently with such prepayment, upon the Company's request, the Bank will become a "Bank" under and for purposes of the Short Term Credit Agreement dated as of September l5, l994, as amended (the "Credit Agreement"), with a Commitment (as defined in the Credit Agreement) of $25,000,000, subject to the terms and conditions of the Credit Agreement relating to lenders joining the facilities thereunder. This amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This amendment shall be governed by and construed in accordance with the internal laws of the State of Illinois. -2- If you are in agreement with the foregoing, please indicate your accord in the place provided for your acceptance on the duplicate original of this letter amendment and return the same to me. I shall also appreciate your telecopying me at (312) 467-7421 a signed copy of this letter amendment. MONTGOMERY WARD & CO., INCORPORATED By /s/Douglas V. Gathany --------------------------------- Douglas V. Gathany, Treasurer Accepted and Agreed: THE INDUSTRIAL BANK OF JAPAN, LIMITED, CHICAGO BRANCH By /s/Hiroaki Nakamura ----------------------------- Title: Joint General Manager ------------------------- Hiroaki Nakamura -3- EX-10.(I)(L) 6 CREDIT AGMT. DTD. 9-27-96 EXHIBIT 10.(i)(L) ================================================================================ CREDIT AGREEMENT DATED AS OF SEPTEMBER 27, 1996 AMONG SIGNATURE FINANCIAL/MARKETING, INC., THE BANK OF NEW YORK AND THE BANK OF NOVA SCOTIA ================================================================================ TABLE OF CONTENTS Section Page ARTICLE I DEFINITIONS........................................ 1 1.1 Certain Defined Terms.................................. 1 1.2 Other Interpretive Provisions.......................... 13 1.3 Accounting Principles.................................. 14 ARTICLE II THE CREDITS....................................... 15 2.1 Amounts and Terms...................................... 15 2.2 Notes.................................................. 15 2.3 Procedure for Borrowing................................ 15 2.4 Conversion and Continuation Elections.................. 15 2.5 Optional Prepayments................................... 16 2.6 Repayment.............................................. 17 2.7 Interest Rates......................................... 17 2.8 Computation of Interest................................ 18 2.9 Payments by the Borrower............................... 18 2.10 Sharing of Payments, Etc.............................. 18 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY.......... 19 3.1 Taxes.................................................. 19 3.2 Illegality............................................. 20 3.3 Increased Costs and Reduction of Return................ 21 3.4 Funding Losses......................................... 21 3.5 Inability to Determine Rates........................... 22 3.6 Survival............................................... 22 ARTICLE IV CONDITIONS PRECEDENT.............................. 22 4.1 Conditions To Initial Borrowing........................ 22 (a) Credit Agreement................................. 22 (b) Notes............................................ 22 (c) Guaranty......................................... 23 (d) Resolutions; Incumbency.......................... 23 (e) Organization Documents; Good Standing............ 23 (f) Legal Opinion.................................... 23 (g) Payment of Existing Signature Note............... 23 (h) Certificate...................................... 23 (i) Fees............................................. 23 (j) Other Documents.................................. 24 4.2 Further Conditions to Borrowing........................ 24 (a) Notice of Borrowing or Conversion/Continuation... 24 (b) Continuation of Representations and Warranties... 24 (c) No Existing Default.............................. 24 ARTICLE V REPRESENTATIONS AND WARRANTIES..................... 24 5.1 Corporate Existence and Power.......................... 24 5.2 Corporate Authorization; No Contravention.............. 25 5.3 Governmental Authorization............................. 25 5.4 Binding Effect......................................... 25 -i- Section Page 5.5 Litigation............................................. 26 5.6 No Default............................................. 26 5.7 ERISA Compliance....................................... 26 5.8 Use of Proceeds; Margin Regulations.................... 27 5.9 Title to Properties.................................... 27 5.10 Taxes................................................. 27 5.11 Financial Condition................................... 28 5.12 Environmental Matters................................. 28 5.13 Regulated Entities.................................... 28 5.14 No Burdensome Restrictions............................ 29 5.15 Copyrights, Patents, Trademarks and Licenses, etc..... 29 5.16 Subsidiaries.......................................... 29 5.17 Insurance............................................. 29 5.18 Full Disclosure....................................... 29 ARTICLE VI AFFIRMATIVE COVENANTS............................. 30 6.1 Financial Statements................................... 30 6.2 Certificates; Other Information........................ 31 6.3 Notices................................................ 31 6.4 Preservation of Corporate Existence, Etc............... 32 6.5 Maintenance of Property................................ 33 6.6 Insurance.............................................. 33 6.7 Payment of Obligations................................. 33 6.8 Compliance with Laws................................... 34 6.9 Compliance with ERISA.................................. 34 6.10 Inspection of Property and Books and Records.......... 34 6.11 Environmental Laws.................................... 34 6.12 Use of Proceeds....................................... 34 6.13 Guaranties............................................ 34 ARTICLE VII NEGATIVE COVENANTS............................... 35 7.1 Limitation on Liens.................................... 35 7.2 Disposition of Assets.................................. 36 7.3 Consolidations and Mergers............................. 37 7.4 Loans and Investments.................................. 37 7.5 Limitation on Indebtedness............................. 38 7.6 Transactions with Affiliates........................... 39 7.7 Use of Proceeds........................................ 39 7.8 Contingent Obligations................................. 39 7.9 Lease Obligations...................................... 39 7.10 ERISA................................................. 40 7.11 Change in Business.................................... 40 7.12 Accounting Changes.................................... 40 ARTICLE VIII EVENTS OF DEFAULT............................... 40 8.1 Event of Default....................................... 40 (a) Non-Payment...................................... 40 (b) Representation or Warranty....................... 40 -ii- Section Page (c) Specific Defaults................................ 41 (d) Other Defaults................................... 41 (e) Cross-Default.................................... 41 (f) Insolvency; Voluntary Proceedings................ 41 (g) Involuntary Proceedings.......................... 42 (h) ERISA............................................ 42 (i) Monetary Judgments............................... 42 (j) Non-Monetary Judgments........................... 42 (k) Change of Control................................ 43 (l) Guarantor Defaults............................... 43 (m) MW Credit Agreement Event of Default............. 43 (n) Minimum Net Worth................................ 43 (o) Impairment....................................... 43 8.2 Remedies............................................... 43 8.3 Rights Not Exclusive................................... 44 ARTICLE IX MISCELLANEOUS..................................... 44 9.1 Amendments and Waivers................................. 44 9.2 Notices................................................ 44 9.3 No Waiver; Cumulative Remedies......................... 45 9.4 Costs and Expenses..................................... 45 9.5 Borrower Indemnification............................... 45 9.6 Payments Set Aside..................................... 46 9.7 Successors and Assigns................................. 46 9.8 Participations, etc.................................... 46 9.9 Confidentiality........................................ 47 9.10 Set-off............................................... 48 9.11 Automatic Debits of Fees.............................. 48 9.12 Notification of Addresses, Lending Offices, Etc....... 48 9.13 Counterparts.......................................... 48 9.14 Severability.......................................... 49 9.15 No Third Parties Benefited............................ 49 9.16 Governing Law and Jurisdiction........................ 49 9.17 Waiver of Jury Trial.................................. 49 9.18 Entire Agreement...................................... 50 -iii- SCHEDULES Schedule 1.1 Guarantor Subsidiaries Schedule 2.1 Commitments Schedule 5.5 Litigation Schedule 5.7 ERISA Schedule 5.11 Permitted Liabilities Schedule 5.12 Environmental Matters Schedule 5.16 Subsidiaries and Minority Interests Schedule 5.17 Insurance Matters Schedule 7.1 Permitted Liens Schedule 7.4 Investments Schedule 7.5 Permitted Indebtedness Schedule 7.8 Contingent Obligations Schedule 9.2 Lending Offices; Addresses for Notices EXHIBITS Exhibit A Form of Notice of Borrowing Exhibit B Form of Notice of Conversion/Continuation Exhibit C Form of Compliance Certificate Exhibit D Form of Legal Opinion of Borrower's Counsel Exhibit E Form of Promissory Note Exhibit F-1 Form of MW Guaranty Exhibit F-2 Form of Insurance Subsidiary Guaranty Exhibit F-3 Form of Non-Insurance Subsidiary Guaranty -iv- CREDIT AGREEMENT ---------------- This CREDIT AGREEMENT is entered into as of September 27, 1996 among Signature Financial/Marketing, Inc., a Delaware corporation (the "Borrower") -------- and The Bank of New York ("BNY") and The Bank of Nova Scotia ("BNS" and together --- --- with BNY, the "Banks). ----- WHEREAS, the Banks have agreed to make available to the Borrower a credit facility upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: ARTICLE I DEFINITIONS ----------- 1.1 Certain Defined Terms. The following terms have the following --------------------- meanings: "Affiliate" means, as to any Person, any other Person which, directly --------- or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise. "Agreement" means this Credit Agreement, as amended or modified from --------- time to time. "Attorney Costs" means and includes all fees and disbursements of any -------------- law firm or other external counsel, the allocated cost of internal legal services and all disbursements of internal counsel. "Banks" has the meaning specified in the introductory clause hereto. ----- "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 --------------- U.S.C. (S)101, et seq.) as amended from time to time. ------- -1- "Base Rate" means, for any day, the higher of: (a) 0.50% per annum --------- above the latest Federal Funds Rate; and (b) the rate of interest in effect for such day as publicly announced from time to time by the Reference Bank as its "reference rate." (The "reference rate" is a rate set by the Reference Bank based upon various factors including the Reference Bank's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) Any change in the reference rate announced by the Reference Bank shall take effect at the opening of business on the day specified in the public announcement of such change. The Reference Bank shall notify the Banks and the Borrower of the "reference rate" and any change therein. "Base Rate Loan" means a Loan that bears interest based on the Base -------------- Rate. "Borrowing" means the borrowing hereunder consisting of Loans of the --------- same Type made to the Borrower on the same day by the Banks under Article II, and, other than in the case of Base Rate Loans, having the same Interest Period. "Borrowing Date" means the date on which the Borrowing occurs under -------------- Section 2.3. ----------- "Business Day" means any day, other than a Saturday, Sunday or other ------------ day on which commercial banks in New York City or Chicago are authorized or required by law to close, which is a day on which dealings are carried on in the London interbank market. "Capital Adequacy Regulation" means any guideline, request or --------------------------- directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. "Change of Control" shall be deemed to have occurred at such time as: ----------------- (i) General Electric Capital Corporation ceases to own on a fully-diluted basis the percentage of each class of the capital stock of MW which is owned by it on the Closing Date on a fully-diluted basis, (ii) MW ceases to own 100% of the capital stock of the Borrower on a fully-diluted basis or (iii) the Borrower ceases to own, directly or indirectly, 100% of the capital stock of any Subsidiary of the Borrower on a fully-diluted basis. -2- "Closing Date" means the date on which all conditions precedent set ------------ forth in Section 4.1 are satisfied or waived by the Banks. ----------- "Code" means the Internal Revenue Code of 1986 as amended from time to ---- time, and regulations promulgated thereunder. "Commitment", as to each Bank, has the meaning specified in Section ---------- ------- 2.1. --- "Compliance Certificate" means a certificate substantially in the form ---------------------- of Exhibit C. --------- "Contingent Obligation" means, as to any Person, any direct or --------------------- indirect liability of that Person, whether or not contingent, with or without recourse, (a) with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of another Person (the "primary obligor"), including any obligation of that Person (i) to purchase, repurchase or otherwise acquire such primary obligations or any security therefor, (ii) to advance or provide funds for the payment or discharge of any such primary obligation, or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety Instrument ------------------- issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or payments; (c) to purchase any materials, supplies or other property from, or to obtain the services of, another Person if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other property, or for such services, shall be made regardless of whether delivery of such materials, supplies or other property is ever made or tendered, or such services are ever performed or tendered, or (d) in respect of any Swap Contract. The amount of any Contingent Obligation shall, in the case of Guaranty Obligations, be deemed equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof, and in the case of other Contingent Obligations, shall be equal to the maximum reasonably -3- anticipated liability in respect thereof. Notwithstanding the foregoing, Contingent Obligations shall not include any obligations of a Subsidiary of the Borrower where the primary obligor is a customer of such Subsidiary and such obligation is incurred in the ordinary course of business. "Contractual Obligation" means, as to any Person, any provision of any ---------------------- security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. "Conversion/Continuation Date" means any date on which, under Section ---------------------------- ------- 2.4, the Borrower (a) converts Loans of one Type to another Type, or (b) --- continues as Loans of the same Type, but with a new Interest Period, Loans having Interest Periods expiring on such date. "Default" means any event or circumstance which, with the giving of ------- notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. "Designated Leases" means that certain Purchase and Master Lease ----------------- Agreement, dated as of January 13, 1995 among certain lessors referred to therein, MW, Lechmere, Inc. and Credit Lyonnais, Chicago Branch and that certain Purchase and Master Lease Agreement, dated as of March 15, 1995 among certain lessors referred to therein, MW, Lechmere, Inc. and Sumitomo Bank Leasing and Finance, Inc., each as amended or modified. "Dollars", "dollars" and "$" each mean lawful money of the United ------- ------- - States. "Environmental Claims" means all claims, however asserted, by any -------------------- Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment. "Environmental Laws" means all federal, state or local laws, statutes, ------------------ common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety and land use matters. "ERISA" means the Employee Retirement Income Security Act of 1974, and ----- regulations promulgated thereunder. -4- "ERISA Affiliate" means any trade or business (whether or not --------------- incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). "ERISA Event" means (a) a Reportable Event with respect to a Pension ----------- Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate. "Eurodollar Reserve Percentage" has the meaning specified in the ----------------------------- definition of "LIBO Rate". "Event of Default" means any of the events or circumstances specified ---------------- in Section 8.1. ----------- "Exchange Act" means the Securities and Exchange Act of 1934, as ------------ amended from time to time, and regulations promulgated thereunder. "Existing Signature Note" means the Promissory Note dated January 2, ----------------------- 1996 of the Borrower payable to the order of MW in the principal amount of $101,886,491.23 on or before June 30, 2002. "FDIC" means the Federal Deposit Insurance Corporation, and any ---- Governmental Authority succeeding to any of its principal functions. "Federal Funds Rate" means, for any day, the rate set forth in the ------------------ weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such -5- successor, "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Reference Bank of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Banks. "FRB" means the Board of Governors of the Federal Reserve System, and --- any Governmental Authority succeeding to any of its principal functions. "GAAP" means generally accepted accounting principles set forth from ---- time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the Closing Date. "Governmental Authority" means any nation or government, any state or ---------------------- other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Guarantors" means MW and each Subsidiary of the Borrower listed on ---------- Schedule 1.1 hereto. ------------ "Guaranty" means the guaranty executed by the Guarantors in -------- substantially the form of Exhibit F-1, F-2, or F-3. ----------- --- --- "Guaranty Obligation" has the meaning specified in the definition of ------------------- "Contingent Obligation." "Indebtedness" of any Person means, without duplication, (a) all ------------ indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business on ordinary terms); (c) all obligations with respect to Surety Instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, -6- including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (f) all obligations with respect to capital leases; (g) all net obligations with respect to Swap Contracts; (h) all indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and (i) all Guaranty Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above. "Indemnified Liabilities" has the meaning specified in Section 9.5. ----------------------- ----------- "Indemnified Person" has the meaning specified in Section 9.5. ------------------ ----------- "Independent Auditor" has the meaning specified in subsection 6.1(a). ------------------- ----------------- "Insolvency Proceeding" means (a) any case, action or proceeding --------------------- before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, rehabilitation, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code. "Interest Payment Date" means, as to any LIBO Rate Loan, the last day --------------------- of each Interest Period applicable to such Loan and, as to any Base Rate Loan, the last Business Day of each calendar quarter and each date such Loan is converted into another Type of Loan, provided, however, that if any -------- ------- Interest Period for a LIBO Rate Loan exceeds three months, the date that falls three months after the beginning of such Interest Period and after each Interest Payment Date thereafter is also an Interest Payment Date. -7- "Interest Period" means, as to any LIBO Rate Loan, the period --------------- commencing on the date of such Loan or on the Conversion/Continuation Date on which the Loan is converted into or continued as a LIBO Rate Loan, and ending on the date one, two, or three months thereafter as selected by the Borrower; provided that: -------- (a) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (b) 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 the calendar month at the end of such Interest Period; and (c) no Interest Period for any Loan shall extend beyond the Maturity Date. "IRS" means the Internal Revenue Service, and any Governmental --- Authority succeeding to any of its principal functions under the Code. "Lending Office" means, as to any Bank, the office or offices of such -------------- Bank specified as its "Lending Office" or "Domestic Lending Office" or "LIBO Lending Office", as the case may be, on Schedule 9.2, or such other ------------ office or offices as such Bank may from time to time notify the Borrower. "LIBO Rate" means, for any Interest Period, with respect to LIBO Rate --------- Loans comprising part of the same Loan, the rate of interest per annum (rounded upward to the next 1/16th of 1%) determined by the Reference Bank as follows: LIBO Rate = LIBO ------------------------------------ 1.00 - Eurodollar Reserve Percentage Where, "Eurodollar Reserve Percentage" means for any day for any ----------------------------- Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not -8- applicable to any Bank) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"); and "LIBO" means the rate of interest per annum determined by the ---- Reference Bank to be the arithmetic mean (rounded upward to the next 1/16th of 1%) of the rates of interest per annum at which deposits in Dollars in the approximate amount of the amount of the Loan to continued as, or converted into, a LIBO Rate Loan and having a maturity comparable to such Interest Period are offered to the Reference Bank in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period. The LIBO Rate shall be adjusted automatically as to all LIBO Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage. "LIBO Rate Loan" means a Loan that bears interest based on the LIBO -------------- Rate. "Lien" means any security interest, mortgage, deed of trust, pledge, ---- hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of any property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the Uniform Commercial Code or any comparable law) and any contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under an operating lease. "Loan" means an extension of credit (whether the initial Borrowing or ---- a continuation/conversion thereof) by a Bank to the Borrower and may be a Base Rate Loan or a LIBO Rate Loan (each, a "Type" of Loan). ---- "Loan Documents" means this Agreement, the Guaranties, the Notes, any -------------- fee letter and all other documents delivered to the Banks in connection herewith. -9- "Margin Stock" means "margin stock" as such term is defined in ------------ Regulation G, T, U or X of the FRB. "Material Adverse Effect" means (a) a material adverse change in, or a ----------------------- material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of the Borrower or the Borrower and its Subsidiaries taken as a whole or MW and its Subsidiaries taken as a whole; (b) a material impairment of the ability of the Borrower or any Guarantor to perform under any Loan Document and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Borrower or any Guarantor of any Loan Document. "Maturity Date" means the earlier to occur of: (a) March 1, 1997; ------------- and (b) the date on which the Obligations are due and payable in accordance with the provisions of this Agreement. "Multiemployer Plan" means a "multiemployer plan", within the meaning ------------------ of Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes, is making, or is obligated to make contributions or, during the preceding three calendar years, has made, or been obligated to make, contributions. "MW" means Montgomery Ward & Co., Incorporated. -- "MW Credit Agreement" shall mean either or both of the Long Term ------------------- Credit Agreement and/or the Short Term Credit Agreement, each dated as of September 15, 1994, among MW, various banks, and various agents, as amended to and including September 6, 1996, and with the consent of the Banks, as further amended or modified from time to time; provided, that any increase -------- ---- in the aggregate commitments thereunder which is provided for therein shall not be deemed an amendment or modification. "Note" means any promissory note executed by the Borrower in favor of ---- a Bank pursuant to Section 2.2, in substantially the form of Exhibit E. ----------- --------- "Notice of Conversion/Continuation" means a notice in substantially --------------------------------- the form of Exhibit B. --------- "Obligations" means all advances, debts, liabilities, obligations, ----------- covenants and duties arising under any Loan Document owing by the Borrower or any Guarantor to any Bank or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or -10- contingent, due or to become due, now existing or hereafter arising. "Organization Documents" means, for any corporation, the certificate ---------------------- or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation. "Other Taxes" means any present or future stamp or documentary taxes ----------- or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents. "Participant" is defined in Section 9.8. ----------- ----------- "PBGC" means the Pension Benefit Guaranty Corporation, or any ---- Governmental Authority succeeding to any of its principal functions under ERISA. "Pension Plan" means a pension plan (as defined in Section 3(2) of ------------ ERISA but not including any Multiemployer Plan) subject to Title IV of ERISA which the Borrower sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five (5) plan years. "Permitted Liens" has the meaning specified in Section 7.1. --------------- ----------- "Person" means an individual, partnership, corporation, business ------ trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority. "Plan" means an employee benefit plan (as defined in Section 3(3) of ---- ERISA) for its employees, consultants or former employees which the Borrower sponsors or maintains or to which the Borrower makes, is making, or is obligated to make contributions with respect to its employees, consultants or former employees and includes any Pension Plan. "Pro Rata Share" means, as to any Bank at any time, the percentage -------------- equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Bank's Commitment divided by the combined Commitments of all Banks. -11- "Reference Bank" means BNY. -------------- "Reportable Event" means, any of the events set forth in Section ---------------- 4043(b) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC. "Requirement of Law" means, as to any Person, any law (statutory or ------------------ common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. "Responsible Officer" means the chief executive officer, chief ------------------- financial office or the president of the Borrower or any Guarantor, or any other officer having substantially the same authority and responsibility; or the chief executive officer, the chief financial officer, the senior vice president (finance) or the treasurer of MW, or any other officer having substantially the same authority and responsibility. "SAP" means, as to any Subsidiary of the Borrower which is an --- insurance company, the statutory accounting practices prescribed or permitted by the insurance department of the state in which such Subsidiary is domiciled. "SEC" means the Securities and Exchange Commission, or any --- Governmental Authority succeeding to any of its principal functions. "Subsidiary" of a Person means any corporation, association, ---------- partnership, joint venture or other business entity of which more than 50% of the voting stock or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of the Borrower. "Surety Instruments" means all letters of credit (including standby ------------------ and commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments. "Swap Contract" means any agreement (including any master agreement ------------- and any agreement, whether or not in writing, relating to any single transaction) that is an -12- interest rate swap agreement, basis swap, forward rate agreement, commodity swap, commodity option, equity or equity index swap or option, bond option, interest rate option, forward foreign exchange agreement, rate cap, collar or floor agreement, currency swap agreement, cross-currency rate swap agreement, swaption, currency option or any other, similar agreement (including any option to enter into any of the foregoing). "Taxes" means any and all present or future taxes, levies, imposts, ----- deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank, such taxes (including income taxes or franchise taxes) as are imposed on or measured by each Bank's net income by the jurisdiction (or any political subdivision thereof) under the laws of which such Bank is organized or maintains a lending office. "Type" has the meaning specified in the definition of "Loan." ---- "Unfunded Pension Liability" means the excess of a Plan's benefit -------------------------- liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. "United States" and "U.S." each means the United States of America. ------------- ---- "Wholly-Owned Subsidiary" means any corporation, association, ----------------------- partnership, joint venture or other business entity of which (other than directors' qualifying shares required by law) 100% of the voting stock or other equity interest of each class having ordinary voting power, and 100% of the voting stock or other equity interest of every other class, in each case, at the time as of which any determination is being made, is owned, beneficially and of record, by the Borrower, or by one or more of the other Wholly-Owned Subsidiaries, or both. 1.2 Other Interpretive Provisions. (a) The meanings of defined terms are ----------------------------- equally applicable to the singular and plural forms of the defined terms. (b) The words "hereof", "herein", "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. -13- (c) (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. (ii) The term "including" is not limiting and means "including without limitation." (iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including." (d) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. (e) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (f) This Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. (g) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Banks and the Borrower and are the products of all parties. Accordingly, they shall not be construed against the Banks merely because of the Banks' involvement in their preparation. 1.3 Accounting Principles. (a) Unless the context otherwise clearly --------------------- requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. (b) References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Borrower. -14- ARTICLE II THE CREDITS ----------- 2.1 Amounts and Terms. Each Bank severally agrees, on the terms and ----------------- conditions set forth herein, to make a single Loan to the Borrower on the Closing Date in an aggregate amount not to exceed such Banks' Pro Rata Share of $101,886,491 (the Bank's "Commitment"). Amounts borrowed which are repaid or ---------- prepaid by the Borrower may not be reborrowed. 2.2 Notes. The Loan made by each Bank shall be evidenced by a Note. Each ----- Bank shall endorse on the schedules annexed to its Note the date and amount of each payment of interest and principal made by the Borrower with respect thereto. Each Bank is irrevocably authorized by the Borrower to endorse its Note and each Bank's record shall be conclusive absent manifest error; provided, -------- however, that the failure of a Bank to make, or an error in making, a notation - ------- thereon with respect to any Borrowing or repayment shall not limit or otherwise affect the obligations of the Borrower hereunder or under any such Note to such Bank. 2.3 Procedure for Borrowing. The Borrowing shall be made upon the ----------------------- Borrower's irrevocable written notice delivered to the Banks in the form of a Notice of Borrowing (which notice must be received by the Administrative prior to 3:00 p.m. (New York City time) on the Closing Date, specifying (a) the amount of the Borrowing, which shall be in an aggregate minimum amount necessary, together with other amounts provided by the Borrower, to repay in full all of the obligations of the Borrower under the Existing Signature Note; and (b) the requested Borrowing Date, which shall be a Business Day. On the Borrowing Date, each Bank will make the amount of its Pro Rata Share of the Borrowing available to the Borrower by wire transfer in accordance with written instructions provided to such Bank by the Borrower. 2.4 Conversion and Continuation Elections. (a) The Borrower may, upon ------------------------------------- irrevocable written notice to the Banks in accordance with subsection 2.4(b): ----------------- (i) elect, as of any Business Day, in the case of its Base Rate Loans, or as of the last day of the applicable Interest Period, in the case of its LIBO Rate Loans, to convert any such Loans into Loans of any other Type; or (ii) elect, as of the last day of the applicable Interest Period, to continue any of its Loans having Interest Periods expiring on such day; provided, that if at any time the aggregate amount of LIBO Rate Loans is - -------- reduced, by payment, prepayment, or conversion of part thereof to be less than $5,000,000, such LIBO Rate Loans shall -15- automatically convert into Base Rate Loans, and on and after such date the right of the Borrower to continue such Loans as, and convert such Loans into, LIBO Rate Loans shall terminate. (b) The Borrower shall deliver a Notice of Conversion/Continuation to be received by the Banks not later than 9:00 a.m. (New York City time) at least (i) three Business Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into or continued as LIBO Rate Loans; and (iii) one Business Day in advance of the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Loans, specifying: (A) the proposed Conversion/Continuation Date; (B) the aggregate amount of Loans to be converted or continued; (C) the Type of Loans resulting from the proposed conversion or continuation; and (D) other than in the case of conversions into Base Rate Loans, the duration of the requested Interest Period. (c) If upon the expiration of any Interest Period applicable to LIBO Rate Loans, the Borrower has failed to select timely a new Interest Period to be applicable to such LIBO Rate Loans, or if any Default or Event of Default then exists, the Borrower shall be deemed to have elected to convert such LIBO Rate Loans into Base Rate Loans effective as of the expiration date of such Interest Period. (d) All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Loans with respect to which the notice was given held by each Bank. (e) Unless the Banks otherwise agree, during the existence of a Default or Event of Default, the Borrower may not elect to have a Loan converted into or continued as a LIBO Rate Loan. (f) After giving effect to any conversion or continuation of Loans, there may not be more than two different Interest Periods in effect. 2.5 Optional Prepayments. Subject to Section 3.4, the Borrower may without -------------------- ----------- any other premium or penalty, at any time or from time to time, ratably prepay Loans in whole or in part, in minimum amounts of $10,000,000 or any multiple of $1,000,000 in -16- excess thereof (or, if less, the remaining principal amount thereof). The Borrower shall deliver a notice of prepayment in accordance with Section 9.2 to ----------- be received by the Banks not later than 9:00 a.m. (New York time) (i) at least three Business Days in advance of the prepayment date if the Loans to be prepaid are LIBO Rate Loans, and (ii) at least one Business Day in advance of the prepayment date if the Loans to be prepaid are Base Rate Loans. Such notice of prepayment shall specify the date and amount of such prepayment and whether such prepayment is of Base Rate Loans, LIBO Rate Loans, or any combination thereof. Such notice shall not thereafter be revocable by the Borrower. The Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 3.4. - ----------- 2.6 Repayment. The Borrower shall repay to the Banks on the Maturity Date --------- the aggregate amount of all Obligations outstanding on such date. 2.7 Interest Rates. (a) With respect to each Loan, the Borrower hereby -------------- promises to pay interest on the unpaid principal amount thereof for the period commencing on the date of such Loan until such Loan is paid in full, as follows: (i) While such Loan is a Base Rate Loan, at a rate per annum equal to the Base Rate from time to time in effect; and (ii) While such Loan is a LIBO Rate Loan, for each Interest Period, at a rate per annum equal to the LIBO Rate applicable to such Interest Period, plus 1.5% per annum. (b) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Loans under Section 2.5 or 2.6 for the portion of the Loans so prepaid and upon ----------- --- payment (including prepayment) in full thereof and, during the existence of any Event of Default, interest shall be paid on demand of the Banks. (c) Notwithstanding subsection (a) of this Section, while any Event of Default exists or after acceleration, the Borrower shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all outstanding Loans, at a rate per annum which is determined by adding 2% per annum to the rate otherwise in effect hereunder for such Loans; provided, however, that, on and after the expiration of any Interest -------- ------- Period applicable to any LIBO Rate Loan outstanding on the date of occurrence of such Event of Default or acceleration, the principal amount of such Loan shall, -17- during the continuation of such Event of Default or after acceleration, bear interest at a rate per annum equal to the Base Rate plus 2%. (d) Anything herein to the contrary notwithstanding, the obligations of the Borrower to any Bank hereunder shall be subject to the limitation that payments of interest shall not be required for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by such Bank would be contrary to the provisions of any law applicable to such Bank limiting the highest rate of interest that may be lawfully contracted for, charged or received by such Bank, and in such event the Borrower shall pay such Bank interest at the highest rate permitted by applicable law. 2.8 Computation of Interest. (a) All computations of interest for Base ----------------------- Rate Loans to the extent based on the "reference rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360- day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. (b) Each determination of an interest rate by the Banks shall be conclusive and binding on the Borrower in the absence of manifest error. 2.9 Payments by the Borrower. ------------------------ (a) All payments to be made by the Borrower shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments shall be made by the Borrower directly to each Bank at its Lending Office. All payments by the Borrower to the Banks shall be ratable according to each Bank's Pro Rata Share. Any payment received by a Bank later than 3:00 p.m. New York time shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue. (b) Subject to the provisions set forth in the definition of "Interest Period" herein, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. 2.10 Sharing of Payments, Etc. If, other than as expressly provided ------------------------- elsewhere herein, any Bank shall obtain on account of -18- the Loan made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Pro Rata Share of the Obligations, such Bank shall immediately purchase from the other Bank such participations in the Loan made by them as shall be necessary to cause such purchasing Bank to share the excess payment pro rata with each of them. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY -------------------------------------- 3.1 Taxes. (a) Any and all payments by the Borrower to any Bank under ----- this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for any Taxes. In addition, the Borrower shall pay all Other Taxes. (b) The Borrower agrees to indemnify and hold harmless each Bank for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section) paid by the Bank and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days after the date the Bank makes written demand therefor. (c) If the Borrower shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Bank, then: (i) the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) such Bank receives an amount equal to the sum it would have received had no such deductions or withholdings been made; (ii) the Borrower shall make such deductions and withholdings; (iii) the Borrower shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and (iv) the Borrower shall also pay to each Bank for the account of such Bank, at the time interest is paid, all additional amounts which the Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such Taxes or Other Taxes had not been imposed. -19- (d) Within 30 days after the date of any payment by the Borrower of Taxes or Other Taxes, the Borrower shall furnish the Banks the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Banks. (e) If the Borrower is required to pay additional amounts to any Bank pursuant to subsection (c) of this Section, then such Bank shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its lending office so as to eliminate any such additional payment by the Borrower which may thereafter accrue, if such change in the judgment of such Bank is not otherwise disadvantageous to such Bank. 3.2 Illegality. (a) If any Bank determines that the introduction of any ---------- Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Bank or its applicable lending office to make LIBO Rate Loans, then, on notice thereof by the Bank to the Borrower, any obligation of that Bank to make LIBO Rate Loans shall be suspended until the Bank notifies the Borrower that the circumstances giving rise to such determination no longer exist. (b) If a Bank determines that it is unlawful to maintain any LIBO Rate Loan, the Borrower shall, upon receipt by the Borrower of notice of such fact and demand from such Bank, prepay in full such LIBO Rate Loans of that Bank then outstanding, together with interest accrued thereon and amounts required under Section 3.4, either on the last day of the Interest Period thereof, if the Bank - ----------- may lawfully continue to maintain such LIBO Rate Loans to such day, or immediately, if the Bank may not lawfully continue to maintain such LIBO Rate Loan. If the Borrower is required to so prepay any LIBO Rate Loan, then concurrently with such prepayment, the Borrower shall borrow from the affected Bank, in the amount of such repayment, a Base Rate Loan. (c) If the obligation of any Bank to make or maintain LIBO Rate Loans has been so terminated or suspended, the Borrower may elect, by giving notice to the Bank that all Loans which would otherwise be made by the Bank as LIBO Rate Loans shall be instead Base Rate Loans. (d) Before giving any notice under this Section, the affected Bank shall designate a different lending office with respect to its LIBO Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Bank, be illegal or otherwise disadvantageous to the Bank. -20- 3.3 Increased Costs and Reduction of Return. (a) If any Bank determines ---------------------------------------- that, due to either (i) the introduction of or any change (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the LIBO Rate or in respect of the assessment rate payable by any Bank to the FDIC for insuring U.S. deposits) in or in the interpretation of any law or regulation or (ii) the compliance by that Bank with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining any LIBO Rate Loans, then the Borrower shall be liable for, and shall from time to time, upon demand, pay to such Bank, additional amounts as are sufficient to compensate such Bank for such increased costs. (b) If any Bank shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by the Bank (or its lending office) or any corporation controlling the Bank with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy and such Bank's desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitment, loans, credits or obligations under this Agreement, then, upon demand of such Bank to the Borrower, the Borrower shall pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank for such increase. 3.4 Funding Losses. The Borrower shall reimburse each Bank and hold each -------------- Bank harmless from any loss or expense which the Bank may sustain or incur as a consequence of: (a) the failure of the Borrower to make on a timely basis any payment of principal of any LIBO Rate Loan; (b) the failure of the Borrower to continue or convert a Loan after the Borrower has given (or is deemed to have given) a Notice of Conversion/ Continuation; (c) the failure of the Borrower to make any prepayment in accordance with any notice delivered under Section 2.5; ----------- (d) the prepayment (including pursuant to Section 2.6) or other ----------- payment (including after acceleration thereof) of a LIBO -21- Rate Loan on a day that is not the last day of the relevant Interest Period; or (e) the automatic conversion under Section 2.4 of any LIBO Rate Loan ----------- to a Base Rate Loan on a day that is not the last day of the relevant Interest Period; including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its LIBO Rate Loans. 3.5 Inability to Determine Rates. If Banks determine that for any ---------------------------- reason adequate and reasonable means do not exist for determining the LIBO Rate for any requested Interest Period with respect to a proposed LIBO Rate Loan, or that the LIBO Rate applicable pursuant to subsection 2.6(a) for any requested ----------------- Interest Period with respect to a proposed LIBO Rate Loan does not adequately and fairly reflect the cost to any Bank of funding such Loan, the Banks will promptly so notify the Borrower. Thereafter, the obligation of the Banks to make or maintain LIBO Rate Loans hereunder shall be suspended until the Banks revoke such notice in writing. Upon receipt of such notice, the Borrower may revoke any Notice of Conversion/Continuation then submitted by it. If the Borrower does not revoke such Notice, the Banks shall convert or continue the Loans, as proposed by the Borrower, in the amount specified in the applicable notice submitted by the Borrower, but such Loans shall be made, converted or continued as Base Rate Loans instead of LIBO Rate Loans. 3.6 Survival. The agreements and obligations of the Borrower in this -------- Article III shall survive the payment of all other Obligations. - ----------- ARTICLE IV CONDITIONS PRECEDENT -------------------- 4.1 Conditions To Initial Borrowing. The obligation of each Bank to fund ------------------------------- the Borrowing hereunder is, in addition to the conditions set forth in Section ------- 4.2, subject to the condition that the Banks have received each of the - --- following, in form and substance satisfactory to each Bank, and in sufficient copies for each Bank: (a) Credit Agreement. This Agreement executed by each party thereto; ---------------- (b) Notes. The Notes executed by the Borrower; ------ -22- (c) Guaranty. The Guaranties executed by MW and the other Guarantors; -------- (d) Resolutions; Incumbency. ----------------------- (i) Copies of the resolutions of the board of directors of each of the Borrower and MW authorizing the transactions contemplated hereby, certified as of the Closing Date by the Secretary or an Assistant Secretary of the Borrower or MW; and (ii) A certificate of the Secretary or Assistant Secretary of each of the Borrower and MW certifying the names and true signatures of the officers of the Borrower or MW authorized to execute, deliver and perform, as applicable, this Agreement, and all other Loan Documents to be delivered by it hereunder; (e) Organization Documents; Good Standing. Each of the following ------------------------------------- documents: (i) the articles or certificate of incorporation and the bylaws of the Borrower and MW as in effect on the Closing Date, certified by the Secretary or Assistant Secretary of the Borrower or MW, as the case may be, as of the Closing Date; and (ii) a good standing certificate for the Borrower from the Secretary of State (or similar, applicable Governmental Authority) of its jurisdiction of incorporation, dated as of a recent date; (f) Legal Opinion. An opinion or opinions of counsel to the Borrower ------------- and MW and addressed to the Banks, substantially in the form of Exhibit D; --------- (g) Payment of Existing Signature Note. Evidence of payment by the ---------------------------------- Borrower of all of the indebtedness under the Existing Signature Note; (h) Certificate. A certificate signed by a Responsible Officer, dated ----------- as of the Closing Date, stating that: (i) the representations and warranties contained in Article V --------- are true and correct on and as of such date, as though made on and as of such date; and (ii) no Default or Event of Default then exists or would result from the Borrowing; (i) Fees Evidence of payment of all fees required by any fee letter; ---- and -23- (j) Other Documents. Such other approvals, opinions, documents or --------------- materials as the Banks may request. 4.2 Further Conditions to Borrowing. The obligation of each Bank to make ------------------------------- its Loan or to continue or convert any Loan under Section 2.4 is subject to the ----------- satisfaction of the following conditions precedent on the Borrowing Date or the relevant Conversion/Continuation Date: (a) Notice of Borrowing or Conversion/Continuation. The Banks shall ---------------------------------------------- have received a Notice of Borrowing or a Notice of Conversion/Continuation, as applicable; (b) Continuation of Representations and Warranties. The ---------------------------------------------- representations and warranties in Article V shall be true and correct on and as --------- of such Borrowing Date or Conversion/ Continuation Date with the same effect as if made on and as of such Borrowing Date or Conversion/Continuation Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date); and (c) No Existing Default. No Default or Event of Default shall exist ------------------- or shall result from such Borrowing or continuation or conversion. Each Notice of Borrowing and Notice of Conversion/Continuation submitted by the Borrower hereunder shall constitute a representation and warranty by the Borrower hereunder, as of the date of each such notice and as of each Borrowing Date or Conversion/Continuation Date, as applicable, that the conditions in this Section 4.2 are satisfied. - ----------- ARTICLE V REPRESENTATIONS AND WARRANTIES ------------------------------ The Borrower represents and warrants to each Bank that: 5.1 Corporate Existence and Power. The Borrower and each of its ----------------------------- Subsidiaries: (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) has (or, as to the Guaranties by Subsidiaries, will have within fifteen (15) days after the Closing Date) the power and authority and all governmental licenses, authorizations, consents and approvals to own its assets, carry -24- on its business and to execute, deliver, and perform its obligations under the Loan Documents; (c) is duly qualified as a foreign corporation and is licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification or license; and (d) is in compliance with all Requirements of Law; except, in each case referred to in clause (c) or clause (d), to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. 5.2 Corporate Authorization; No Contravention. The execution, delivery ----------------------------------------- and performance by the Borrower and each Guarantor of this Agreement and each other Loan Document to which the Borrower or such Guarantor is party, have been (or, as to the Guaranties by Subsidiaries, will be within fifteen (15) days after the Closing Date) duly authorized by all necessary corporate action, and do not and/or will not: (a) contravene the terms of any of the Borrower's or such Guarantor's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Contractual Obligation to which the Borrower or such Guarantor is a party or any order, injunction, writ or decree of any Governmental Authority to which the Borrower or such Guarantor or their property is subject; or (c) violate any Requirement of Law. 5.3 Governmental Authorization. Except as contemplated in Section 6.13, -------------------------- ------------ no approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Borrower or any Guarantor of the Agreement or any other Loan Document. 5.4 Binding Effect. This Agreement and each other Loan Document to which -------------- the Borrower or any Guarantor is a party constitute (or, as to the Guaranties by Subsidiaries, will constitute within fifteen (15) days after the Closing Date) the legal, valid and binding obligations of the Borrower or such Guarantor to the extent it is a party thereto, enforceable against the Borrower or such Guarantor in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the -25- enforcement of creditors' rights generally or by equitable principles relating to enforceability. 5.5 Litigation. Except as specifically disclosed in Schedule 5.5, there ---------- ------------ are no actions, suits, proceedings, claims or disputes pending, or to the best knowledge of the Borrower, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Borrower or its Subsidiaries or any of their respective properties which: (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby or thereby; or (b) if determined adversely to the Borrower or its Subsidiaries, would reasonably be expected to have a Material Adverse Effect. No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. 5.6 No Default. No Default or Event of Default exists or would result ---------- from the incurring of any Obligations by the Borrower. As of the Closing Date, neither the Borrower nor any Subsidiary is in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such defaults, could reasonably be expected to have a Material Adverse Effect, or that would, if such default had occurred after the Closing Date, create an Event of Default under subsection 9.1(e). ----------------- 5.7 ERISA Compliance. Except as specifically disclosed in Schedule 5.7: ---------------- ------------ (a) Each Plan and to the knowledge of Borrower, each Multiemployer Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law, except to the extent noncompliance could not reasonably be expected to result in a Material Adverse Effect. Each Plan and to the knowledge of Borrower, each Multiemployer Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS and to the best knowledge of the Borrower, nothing has occurred which would cause the loss of such qualification. The Borrower and each ERISA Affiliate has made all required contributions to any Plan and each Multiemployer Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code -26- has been made with respect to any Plan and to the best of Borrower's knowledge Multiemployer Plan. (b) There are no pending or, to the best knowledge of Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan and to the best of Borrower's knowledge Multiemployer Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan and to the knowledge of Borrower, each Multiemployer Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. (c) (i) Except for any event which would not reasonably be expected to result in a Material Adverse Effect, no ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan or Multiemployer Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA. 5.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans are to ----------------------------------- be used solely for the purposes set forth in and permitted by Section 6.12 and ------------ Section 7.7. Neither the Borrower nor any Subsidiary is generally engaged in - ----------- the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock. 5.9 Title to Properties. The Borrower and each Subsidiary have good ------------------- record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of their respective businesses, except for such defects in title as could not, individually or in the aggregate, have a Material Adverse Effect. As of the Closing Date, the property of the Borrower and its Subsidiaries is subject to no Liens, other than Permitted Liens. 5.10 Taxes. The Borrower and its Subsidiaries have filed all Federal and ----- other material tax returns and reports required to be filed, and have paid all Federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise -27- due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Borrower or any Subsidiary that would, if made, have a Material Adverse Effect. 5.11 Financial Condition. (a) The audited consolidated financial ------------------- statements of the Borrower and its Subsidiaries dated December 31, 1995, and the related consolidated statements of income or operations, shareholders' equity and cash flows for the fiscal year ended on that date: (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and results of operations for the period covered thereby; and (iii) except as specifically disclosed in Schedule 5.11 or as ------------- otherwise incurred in the ordinary course of business by the Subsidiaries of the Borrower that are insurance companies, show all material indebtedness and other liabilities, direct or contingent, of the Borrower and its consolidated Subsidiaries as of the Closing Date, including liabilities for taxes, material commitments and Contingent Obligations. (b) Since December 31, 1995, there has been no Material Adverse Effect. 5.12 Environmental Matters. The Borrower conducts in the ordinary course --------------------- of business a review of the effect of existing Environmental Laws and existing Environmental Claims on its business, operations and properties, and as a result thereof the Borrower has reasonably concluded that, except as specifically disclosed in Schedule 5.12, such Environmental Laws and Environmental Claims ------------- could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.13 Regulated Entities. None of the Borrower, any Person controlling the ------------------ Borrower, or any Subsidiary (other than Signature Investment Advisors, Inc.) is an "Investment Company" within the meaning of the Investment Company Act of 1940. The Borrower is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation (other than applicable insurance regulations) limiting its ability to incur Indebtedness. -28- 5.14 No Burdensome Restrictions. Neither the Borrower nor any Subsidiary -------------------------- is a party to or bound by any Contractual Obligation, or subject to any restriction in any Organization Document, or any Requirement of Law, which could reasonably be expected to have a Material Adverse Effect. 5.15 Copyrights, Patents, Trademarks and Licenses, etc. The Borrower or ------------------------------------------------- its Subsidiaries own or are licensed or otherwise have the right to use all of the patents, trademarks, service marks, trade names, copyrights, contractual franchises, authorizations and other rights that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person. To the best knowledge of the Borrower, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Borrower or any Subsidiary infringes upon any rights held by any other Person. Except as specifically disclosed in Schedule 5.5, no claim or litigation regarding any of ------------ the foregoing is pending or threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Borrower, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect. 5.16 Subsidiaries. The Borrower has no Subsidiaries other than those ------------ specifically disclosed in part (a) of Schedule 5.16 hereto and has no equity ------------- investments in any other corporation or entity other than those specifically disclosed in part (b) of Schedule 5.16 except for investments in the ordinary ------------- course of business by any Subsidiary of the Borrower. 5.17 Insurance. Except as specifically disclosed in Schedule 5.17, the --------- ------------- properties of the Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or such Subsidiary operates. 5.18 Full Disclosure. None of the representations or warranties made by --------------- the Borrower or any Subsidiary in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement or certificate furnished by or on behalf of the Borrower or any Subsidiary in connection with the Loan Documents (including the offering and disclosure materials delivered by or on behalf of the Borrower to the Banks prior to the Closing Date), contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the -29- circumstances under which they are made, not misleading as of the time when made or delivered. ARTICLE VI AFFIRMATIVE COVENANTS --------------------- So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Banks waive compliance in writing: 6.1 Financial Statements. The Borrower shall deliver to each Bank, in -------------------- form and detail satisfactory to such Bank: (a) as soon as available, but not later than ninety days after the end of each fiscal year, a copy of the audited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income or operations, shareholders' equity and cash flows for such year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the opinion of Arthur Andersen LLP or another nationally-recognized independent public accounting firm ("Independent Auditor") which report shall state that such consolidated - --------------------- financial statements present fairly the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years. Such opinion shall not be qualified or limited because of a restricted or limited examination by the Independent Auditor of any material portion of the Borrower's or any Subsidiary's records and shall be delivered to such Bank pursuant to a reliance agreement between the Banks and such Independent Auditor in form and substance satisfactory to the Banks; (b) as soon as available, but not later than forty-five days after the end of each of the first three fiscal quarters of each fiscal year, a copy of the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and the related consolidated statements of income, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such quarter, and certified by a Responsible Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good faith year-end audit adjustments), the financial position and the results of operations of the Borrower and the Subsidiaries; (c) As soon as available, but in any event within 30 days prior to the beginning of each fiscal year of the Borrower, a copy of the plan and forecast (including a projected closing consolidated balance sheet, income statement and funds flow statements) of the Borrower for each month of such fiscal year; -30- (d) As soon as possible, but in any event within ninety (90) days after the end of each fiscal year of each of the Subsidiaries of the Borrower which is an insurance company, a copy of the annual statement of such Subsidiary for such fiscal year prepared in accordance with SAP and accompanied by the certification of a Responsible Officer that such financial statement presents fairly, in accordance with SAP, the financial position of such Subsidiary for the period then ended; and (e) As soon as possible, but in any event within sixty (60) days after the end of each of the first three fiscal quarters of each fiscal year of each of the Subsidiaries of the Borrower which is an insurance company, a copy of the quarterly statement of such Subsidiary for such fiscal quarter, all prepared in accordance with SAP and accompanied by the certification of a Responsible Officer that all such financial statements present fairly in accordance with SAP the financial position of such Subsidiary for the periods then ended. 6.2 Certificates; Other Information. The Borrower shall furnish to each ------------------------------- Bank: (a) concurrently with the delivery of the financial statements referred to in subsection 6.1(a), a certificate of the Independent Auditor ----------------- stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default as to accounting matters, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsections 6.1(a) and (b), a Compliance Certificate executed by ------------------ --- a Responsible Officer; (c) promptly, copies of all financial statements and reports that MW sends to its shareholders, and copies of all financial statements and regular, periodical or special reports (including Forms 10K, 10Q and 8K) that MW or the Borrower may make to, or file with, the SEC; (d) promptly, such additional information regarding the business, financial or corporate affairs of the Borrower or any Subsidiary as any Bank may from time to time request; and (e) concurrently with the declaration of any dividends or distributions or the agreement to make any advances by the Borrower to MW, a notice of the amount and proposed date of any dividend, distribution or advance. 6.3 Notices. The Borrower shall promptly notify each Bank: ------- (a) of the occurrence of any Default or Event of Default, and of the occurrence or existence of any event or -31- circumstance that foreseeably will become a Default or Event of Default; (b) of any matter that has resulted or may result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of the Borrower or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between the Borrower or any Subsidiary and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Borrower or any Subsidiary, including pursuant to any applicable Environmental Laws; (c) of the occurrence of any of the following events affecting the Borrower or any ERISA Affiliate (but in no event more than 10 days after such event), and deliver to each Bank a copy of any notice with respect to such event that is filed with a Governmental Authority and any notice delivered by a Governmental Authority to the Borrower or any ERISA Affiliate with respect to such event: (i) an ERISA Event which would result in a material liability to Borrower; (ii) a material increase in the Unfunded Pension Liability of any Pension Plan; (iii) the adoption of, or the commencement of contributions to, any Plan subject to Section 412 of the Code by the Borrower or any ERISA Affiliate; or (iv) the adoption of any amendment to a Plan subject to Section 412 of the Code, if such amendment results in a material increase in contributions or Unfunded Pension Liability. (d) of any material change in accounting policies or financial reporting practices by the Borrower or any of its consolidated Subsidiaries. Each notice under this Section shall be accompanied by a written statement by a Responsible Officer setting forth details of the occurrence referred to therein, and stating what action the Borrower or any affected Subsidiary proposes to take with respect thereto and at what time. Each notice under subsection 6.3(a) shall describe with particularity any and all clauses or ----------------- provisions of this Agreement or other Loan Document that have been (or foreseeably will be) breached or violated. 6.4 Preservation of Corporate Existence, Etc. The Borrower shall, and ---------------------------------------- shall cause each Subsidiary to: -32- (a) preserve and maintain in full force and effect its corporate existence and good standing under the laws of its state or jurisdiction of incorporation; (b) preserve and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business except in connection with transactions permitted by Section 7.3 and sales of assets permitted by Section ----------- ------- 7.2; - --- (c) use reasonable efforts, in the ordinary course of business, to preserve its business organization and goodwill; and (d) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect. 6.5 Maintenance of Property. The Borrower shall maintain, and shall cause ----------------------- each Subsidiary to maintain, and preserve all its property which is used or useful in its business in good working order and condition, ordinary wear and tear excepted, except as permitted by Section 7.2. The Borrower and each ----------- Subsidiary shall use the standard of care typical in the industry in the operation and maintenance of its facilities. 6.6 Insurance. The Borrower shall maintain, and shall cause each --------- Subsidiary to maintain, with financially sound and reputable independent insurers, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons. 6.7 Payment of Obligations. The Borrower shall, and shall cause each ---------------------- Subsidiary to, pay and discharge as the same shall become due and payable, all of their respective obligations and liabilities, including: (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property; and -33- (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness. 6.8 Compliance with Laws. The Borrower shall comply, and shall cause each -------------------- Subsidiary to comply, in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act), except such as may be contested in good faith or as to which a bona fide dispute may exist. 6.9 Compliance with ERISA. The Borrower shall, and shall cause each of --------------------- its ERISA Affiliates to: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Plan subject to Section 412 of the Code. 6.10 Inspection of Property and Books and Records. The Borrower shall -------------------------------------------- maintain and shall cause each Subsidiary to maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Borrower and such Subsidiary. The Borrower shall permit, and shall cause each Subsidiary to permit, representatives and independent contractors of any Bank to visit and inspect any of their respective properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers, and independent public accountants, all at the expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, when an Event of Default exists any Bank may do any -------- ------- of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice. 6.11 Environmental Laws. The Borrower shall, and shall cause each ------------------ Subsidiary to, conduct its operations and keep and maintain its property in compliance with all Environmental Laws. 6.12 Use of Proceeds. The proceeds of the Existing Signature Note were --------------- used by the Borrower to acquire Amoco Enterprises, Inc., Amoco Motor Club, Inc. and Amoco Enterprises Canada, Limited. Concurrently with the Borrowing hereunder, the Borrower shall use the proceeds of the Loans to repay the Existing Signature Note. 6.13 Guaranties. Within fifteen days of the Closing Date, the Borrower ---------- shall cause each Guarantor to deliver to the Banks -34- (a) a certificate of the Secretary or Assistant Secretary of each Guarantor, as to (i) copies of the resolutions of its board of directors authorizing its Guaranty, (ii) the names and true signatures of its officers authorized to execute, deliver and perform its Guaranty, and (iii) its articles or certificate of incorporation and bylaws, and (b) an opinion of counsel acceptable to the Banks as to the due authorization, execution, delivery and validity of the Guaranties (such opinion to be in form and substance satisfactory to the Banks). ARTICLE VII NEGATIVE COVENANTS ------------------ So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Banks waive compliance in writing: 7.1 Limitation on Liens. The Borrower shall not, and shall not suffer or ------------------- permit any Subsidiary to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its property, whether now owned or hereafter acquired, other than the following ("Permitted --------- Liens"): - ----- (a) any Lien existing on property of the Borrower or any Subsidiary on the Closing Date and set forth in Schedule 7.1 securing Indebtedness outstanding ------------ on such date; (b) any Lien created under any Loan Document; (c) Liens for taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty, or to the extent that non-payment thereof is permitted by Section 6.7, provided that no notice of ----------- lien has been filed or recorded under the Code; (d) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens arising in the ordinary course of business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto; (e) Liens (other than any Lien imposed by ERISA) consisting of pledges or deposits required in the ordinary course of business in connection with workers' compensation, unemployment insurance and other social security legislation; (f) Liens on the property of the Borrower or its Subsidiary securing (i) the non-delinquent performance of bids, -35- trade contracts (other than for borrowed money), leases, statutory obligations, (ii) contingent obligations on surety and appeal bonds, and (iii) other non- delinquent obligations of a like nature; in each case, incurred in the ordinary course of business; (g) Liens consisting of judgment or judicial attachment liens, provided that the enforcement of such Liens is effectively stayed and all such liens in the aggregate at any time outstanding for the Borrower and its Subsidiaries do not exceed $500,000; (h) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the businesses of the Borrower and its Subsidiaries; (i) Liens securing obligations in respect of capital leases on assets subject to such leases, provided that such capital leases are otherwise permitted hereunder; (j) Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided, that (i) such deposit account is not a -------- ---- dedicated cash collateral account and is not subject to restrictions against access by the Borrower or any Subsidiary in excess of those set forth by regulations promulgated by the FRB, and (ii) such deposit account is not intended by the Borrower or any Subsidiary to provide collateral to the depository institution; (k) deposits by the Subsidiaries of the Borrower which are required by applicable regulation or in the ordinary course of business; and (l) Liens arising in the ordinary course of business for sums being contested in good faith and by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP, or for sums not due, and in either case not involving any deposits or advances for borrowed money or the deferred purchase price of property or services. 7.2 Disposition of Assets. The Borrower shall not, and shall not suffer --------------------- or permit any Subsidiary to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions) any property (including accounts and notes receivable, with or without recourse) or enter into any agreement to do any of the foregoing, except: -36- (a) dispositions of inventory, or used, worn-out or surplus equipment, all in the ordinary course of business; (b) the sale of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment, or the proceeds of such sale are reasonably promptly applied to the purchase price of such replacement equipment; (c) dispositions not otherwise permitted hereunder which are made for fair market value; provided, that (i) after giving effect to any such -------- disposition, no Default or Event of Default would exist, (ii) the aggregate sales price from such disposition shall be paid in cash, (iii) the assets which are subject of such disposition do not include accounts or notes receivable and (iv) the aggregate value of all assets so sold by the Borrower and its Subsidiaries, together, shall not exceed in any fiscal year $5,000,000 (except that in fiscal year 1996, the aggregate value of all such assets can be in excess of $5,000,000 but shall not exceed $10,000,000); (d) dispositions of investments permitted by Section 7.4(d); and -------------- (e) sales by the Borrower of accounts receivable pursuant to the Retail Credit Program Agreement or MWCC Receivables Purchase Agreement (each as defined in the MW Credit Agreement). 7.3 Consolidations and Mergers. The Borrower shall not, and shall not -------------------------- suffer or permit any Subsidiary to, merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except: (a) any Guarantor may merge with the Borrower; provided, that the -------- Borrower shall be the continuing or surviving corporation, or with any one or more Guarantors; and further provided, that if any transaction shall be between -------- a Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be the continuing or surviving corporation; and (b) any Subsidiary may sell all or substantially all of its assets (upon voluntary liquidation or otherwise), to the Borrower or another Wholly- Owned Subsidiary. 7.4 Loans and Investments. The Borrower shall not purchase or acquire, or --------------------- suffer or permit any Subsidiary to purchase or acquire, or make any commitment therefor, any capital stock, equity interest, or any obligations or other securities of, or -37- any interest in, any Person, or make or commit to make any Acquisitions, or make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in, any Person including any Affiliate of the Borrower, except for: (a) investments in cash equivalents and short term marketable securities; (b) extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business; (c) extensions of credit and investments by the Borrower or any Subsidiary of the Borrower to any of the Guarantors which are not insurance companies or by any Guarantor to another Guarantor which are not insurance companies; (d) extensions of credit and investments in the ordinary course of business by Subsidiaries of the Borrower; (e) advances to MW; (f) investments set forth on Schedule 7.4; ------------ (g) other investments not exceeding $2,000,000 in the aggregate; (h) intercompany advances among the Borrower and its Subsidiaries for administrative and operational services being provided by the Borrower or one of its Subsidiaries; and (i) investments and extensions of credit by the Borrower to any Subsidiary of the Borrower which is not either (i) an insurance company or (ii) a Guarantor, in an aggregate amount not exceeding $20,000,000. 7.5 Limitation on Indebtedness. The Borrower shall not, and shall not -------------------------- suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement; (b) Indebtedness consisting of Contingent Obligations permitted pursuant to Section 7.8; ----------- (c) Indebtedness existing on the Closing Date and set forth in Schedule 7.5; - ------------ (d) Indebtedness incurred in connection with leases permitted pursuant to Section 7.9; and ----------- -38- (e) Indebtedness permitted by subsection 7.4(c). ----------------- 7.6 Transactions with Affiliates. The Borrower shall not, and shall not ---------------------------- suffer or permit any Subsidiary to, enter into any transaction with any Affiliate (other than a Wholly-Owned Subsidiary of the Borrower and Scrip Plus, Inc.), except upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than would be obtained in a comparable arm's-length transaction with a Person not an Affiliate of the Borrower or such Subsidiary. 7.7 Use of Proceeds. The Borrower shall not, and shall not suffer or --------------- permit any Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Borrower or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act. 7.8 Contingent Obligations. The Borrower shall not, and shall not suffer ---------------------- or permit any Subsidiary to, create, incur, assume or suffer to exist any Contingent Obligations except: (a) endorsements for collection or deposit in the ordinary course of business; (b) Swap Contracts entered into in the ordinary course of business as bona fide hedging transactions; (c) Contingent Obligations of the Borrower and its Subsidiaries listed in Schedule 7.8; ------------ (d) the Guaranties; and (e) Contingent Obligations incurred in the ordinary course of business by Subsidiaries that are insurance companies. 7.9 Lease Obligations. The Borrower shall not, and shall not suffer or ----------------- permit any Subsidiary to, create or suffer to exist any obligations for the payment of rent for any property under lease or agreement to lease, except for: (a) leases of the Borrower and of Subsidiaries in existence on the Closing Date and any renewal, extension or refinancing thereof; (b) operating leases entered into by the Borrower or any Subsidiary after the Closing Date in the ordinary course of business; and -39- (c) capital leases other than those permitted under clause (a) of this Section, entered into by the Borrower or any Subsidiary after the Closing Date to finance the acquisition of equipment; provided, that the aggregate net -------- present value of all future rental payments for all such capital leases shall not exceed in any fiscal year $10,000,000; 7.10 ERISA. The Borrower shall not, and shall not suffer or permit any of ----- its ERISA Affiliates to: (a) engage in a prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or could reasonably expected to result in liability of the Borrower in an aggregate amount in excess of $500,000; or (b) engage in a transaction that could be subject to Section 4069 or 4212(c) of ERISA. 7.11 Change in Business. The Borrower shall not, and shall not suffer or ------------------ permit any Subsidiary to, engage in any material line of business substantially different from those lines of business carried on by the Borrower and its Subsidiaries on the date hereof. 7.12 Accounting Changes. The Borrower shall not, and shall not suffer or ------------------ permit any Subsidiary to, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the fiscal year of the Borrower or of any Subsidiary. ARTICLE VIII EVENTS OF DEFAULT ----------------- 8.1 Event of Default. Any of the following shall constitute an "Event of ---------------- -------- Default": - ------- (a) Non-Payment. The Borrower fails to pay, (i) when and as required ----------- to be paid herein, any amount of principal of any Loan, or (ii) within two Business Days after the same becomes due, any interest, fee or any other amount payable hereunder or under any other Loan Document; or (b) Representation or Warranty. Any representation or warranty by the -------------------------- Borrower or any Subsidiary made or deemed made herein, in any other Loan Document, or which is contained in any certificate, document or financial or other statement by the Borrower, any Subsidiary, or any Responsible Officer, furnished at any time under this Agreement, or in or under any other Loan Document, is incorrect in any material respect on or as of the date made or deemed made; or -40- (c) Specific Defaults. The Borrower fails to perform or observe any ----------------- term, covenant or agreement contained in any of Section 6.1, 6.2, 6.3, 6.9 or ----------- --- --- --- 6.13 or in Article VII; or - ---- ----------- (d) Other Defaults. The Borrower fails to perform or observe any -------------- other term or covenant contained in this Agreement or any other Loan Document, and such default shall continue unremedied for a period of 20 days after the earlier of (i) the date upon which a Responsible Officer knew or reasonably should have known of such failure or (ii) the date upon which written notice thereof is given to the Borrower by any Bank; or (e) Cross-Default. (i) MW, any of its Subsidiaries, the Borrower or ------------- any Subsidiary of the Borrower (A) fails to make any payment in respect of any Indebtedness or Contingent Obligation (other than in respect of Swap Contracts) or lease obligations under the Designated Leases, having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $5,000,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure; or (B) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness or Contingent Obligation or lease obligation under the Designated Leases, and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness or Contingent Obligation or lease obligation under the Designated Leases to be declared to be due and payable prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an early termination date resulting from (1) any event of default under such Swap Contract as to which MW, any Subsidiary of MW, the Borrower or any Subsidiary is the defaulting party or (2) any termination event as to which MW, any Subsidiary of MW, the Borrower or any Subsidiary is an affected party, and, in either event, the swap termination value owed by MW, any Subsidiary of MW, the Borrower or such Subsidiary as a result thereof is greater than $5,000,000; or (f) Insolvency; Voluntary Proceedings. MW or the Borrower or any --------------------------------- Subsidiary of MW (i) ceases or fails to be solvent, or generally fails to pay, or admits in writing its -41- inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in the ordinary course; (iii) commences any Insolvency Proceeding with respect to itself; or (iv) takes any action to effectuate or authorize any of the foregoing; or (g) Involuntary Proceedings. (i) Any involuntary Insolvency ----------------------- Proceeding is commenced or filed against MW or the Borrower or any Subsidiary of MW, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of MW's or the Borrower's or any MW Subsidiary's properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) MW or the Borrower or any Subsidiary of MW admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) MW or the Borrower or any Subsidiary of MW acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business; or (h) ERISA. (i) An ERISA Event shall occur with respect to a Pension ----- Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $500,000; (ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans at any time exceeds $500,000; or (iii) the Borrower or any ERISA Affiliate shall fail to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $500,000; or (i) Monetary Judgments. One or more non-interlocutory judgments, non- ------------------ interlocutory orders, decrees or arbitration awards is entered against the Borrower or any Subsidiary involving in the aggregate a liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) as to any single or related series of transactions, incidents or conditions, of $500,000 or more, and the same shall remain unsatisfied, unvacated and unstayed pending appeal for a period of 10 days after the entry thereof; or (j) Non-Monetary Judgments. Any non-monetary judgment, order or ---------------------- decree is entered against the Borrower or any Subsidiary which does or would reasonably be expected to have a -42- Material Adverse Effect, and there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (k) Change of Control. There occurs any Change of Control; or ----------------- (l) Guarantor Defaults. Any Guarantor fails in any material respect ------------------ to perform or observe any term, covenant or agreement in its Guaranty; or the Guaranty of any Guarantor is for any reason partially (including with respect to future advances) or wholly revoked or invalidated, or otherwise ceases to be in full force and effect, or any Guarantor or any other Person contests in any manner the validity or enforceability thereof or denies that it has any further liability or obligation thereunder; or any event described at subsections (f) or (g) of this Section occurs with respect to any Guarantor; or (m) MW Credit Agreement Event of Default. Any Event of Default (as ------------------------------------ defined in the MW Credit Agreement) shall occur; or (n) Minimum Net Worth. The net worth of the Borrower and its ----------------- Subsidiaries (calculated on a consolidated basis in accordance with GAAP) is less than $450,000,000 at any time; or (o) Impairment. The Banks in good faith believe that the prospect of ---------- payment of all or any part of the Obligations evidenced by the Notes is impaired. 8.2 Remedies. If any Event of Default occurs, the Banks may, -------- (a) declare the Commitment of each Bank to be terminated, whereupon such Commitments shall be terminated; (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; and (c) exercise all rights and remedies available to the Banks under the Loan Documents or applicable law; provided, however, that upon the occurrence of any event specified in subsection - -------- ------- (f) or (g) of Section 8.1 (in the case of clause (i) of subsection (g) upon the ----------- expiration of the 60-day period mentioned therein), the obligation of each Bank to make its Loan shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other -43- amounts as aforesaid shall automatically become due and payable without further act of any Bank. 8.3 Rights Not Exclusive. The rights provided for in this Agreement and -------------------- the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. ARTICLE IX MISCELLANEOUS ------------- 9.1 Amendments and Waivers. No amendment or waiver of any provision of ---------------------- this Agreement or any other Loan Document, and no consent with respect to any departure by the Borrower therefrom, shall be effective unless the same shall be in writing and signed by the Banks and the Borrower and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 9.2 Notices. (a) All notices, requests and other communications shall be ------- in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by the Borrower by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on Schedule 9.2, and (ii) shall be followed ------------ promptly by delivery of a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified for notices on Schedule -------- 9.2; or, as directed to the Borrower, to such other address as shall be - --- designated by such party in a written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Borrower and each Bank. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery; except that notices pursuant to Article II or IX shall not be effective until actually ---------- -- received by each Bank. (c) Any agreement of the Banks herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Borrower. The Banks shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Borrower to give such notice and the Banks shall not have any liability to the Borrower or other -44- Person on account of any action taken or not taken by the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Borrower to repay the Loans shall not be affected in any way or to any extent by any failure by the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Banks of a confirmation which is at variance with the terms understood by the Banks to be contained in the telephonic or facsimile notice. 9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay ------------------------------ in exercising, on the part of 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. 9.4 Costs and Expenses. The Borrower shall: ------------------ (a) whether or not the transactions contemplated hereby are consummated, pay or reimburse within five Business Days after demand (subject to subsection 4.1(g)) for all costs and expenses incurred by each Bank in - ----------------- connection with the development, preparation, delivery, administration and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including reasonable Attorney Costs incurred by such Bank with respect thereto; and (b) pay or reimburse each Bank within five Business Days after demand for all costs and expenses (including Attorney Costs) incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Loan Document during the existence of an Event of Default or after acceleration of the Loans (including in connection with any restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding). 9.5 Borrower Indemnification. Whether or not the transactions ------------------------ contemplated hereby are consummated, the Borrower shall indemnify and hold each Bank and each of its respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and against ------------------ any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document -45- contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided, that the ----------------------- -------- Borrower shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities resulting solely from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations. 9.6 Payments Set Aside. To the extent that the Borrower makes a payment ------------------ to the Banks, or the Banks exercise their right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Bank in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred. 9.7 Successors and Assigns. The provisions of this Agreement shall be ---------------------- binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Bank. 9.8 Participations, etc. (a) Any Bank may at any time sell to one or -------------------- more commercial banks or other Persons not Affiliates of the Borrower (a "Participant") participating interests in any Loans, the Commitment of that Bank - ------------ and the other interests of that Bank (the "originating Bank") hereunder and under the other Loan Documents; provided, however, that (i) the originating -------- ------- Bank's obligations under this Agreement shall remain unchanged, (ii) the originating Bank shall remain solely responsible for the performance of such obligations, (iii) the Borrower shall continue to deal solely and directly with the originating Bank in connection with the originating Bank's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would postpone or delay -46- any date fixed for payment of principal, interest, fees or other amounts hereunder or reduce the principal of or rate of interest specified herein. In the case of any such participation, the Participant shall not have any rights under this Agreement, or any of the other Loan Documents, and all amounts payable by the Borrower hereunder shall be determined as if such Bank had not sold such participation; except that, if amounts outstanding under this Agreement are due and 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 to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement. (b) Notwithstanding any other provision in this Agreement, any Bank may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and the Note held by it in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR (S)203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. 9.9 Confidentiality. Each Bank agrees to take and to cause its Affiliates --------------- to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" or "secret" by the Borrower and provided to it by the Borrower or any Subsidiary under this Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement and the other Loan Documents or in connection with other business now or hereafter existing or contemplated with the Borrower or any Subsidiary; except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by a Bank, or (ii) was or becomes available on a non-confidential basis from a source other than the Borrower or any Subsidiary; provided, that such source is not bound by a -------- confidentiality agreement with the Borrower known to the Bank; provided, -------- however, that any Bank may disclose such information (A) at the request or - ------- pursuant to any requirement of any Governmental Authority to which the Bank is subject or in connection with an examination of such Bank by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law; (D) to the extent reasonably required in connection with any litigation or proceeding to which any Bank or their respective Affiliates may be party; (E) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; (F) to such Bank's independent auditors and other professional advisors; (G) -47- to any Participant, actual or potential, provided that such Person agrees in writing to keep such information confidential to the same extent required of the Banks hereunder; (H) as to any Bank or its Affiliate, as expressly permitted under the terms of any other document or agreement regarding confidentiality to which the Borrower or any Subsidiary is party or is deemed party with such Bank or such Affiliate; and (I) to its Affiliates. 9.10 Set-off. In addition to any rights and remedies of the Banks ------- provided by law, if an Event of Default exists or the Loans have been accelerated, each Bank is authorized at any time and from time to time, without prior notice to the Borrower, any such notice being waived by the Borrower 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 by, and other indebtedness at any time owing by, such Bank to or for the credit or the account of the Borrower against any and all Obligations owing to such Bank, now or hereafter existing, irrespective of whether or not such Bank shall have made demand under this Agreement or any Loan Document and although such Obligations may be contingent or unmatured. Each Bank agrees promptly to notify the Borrower after any such set-off and application made by such Bank; provided, -------- however, that the failure to give such notice shall not affect the validity of - ------- such set-off and application. 9.11 Automatic Debits of Fees. With respect to any fee, or any other cost ------------------------ or expense (including Attorney Costs) due and payable to any Bank under the Loan Documents, the Borrower hereby irrevocably authorizes such Bank to debit any deposit account of the Borrower with such Bank in an amount such that the aggregate amount debited from all such deposit accounts does not exceed such fee or other cost or expense. If there are insufficient funds in such deposit accounts to cover the amount of the fee or other cost or expense then due, such debits will be reversed (in whole or in part, in such Bank's sole discretion) and such amount not debited shall be deemed to be unpaid. No such debit under this Section shall be deemed a set-off. 9.12 Notification of Addresses, Lending Offices, Etc. Each Bank shall ------------------------------------------------ notify the Borrower in writing of any changes in the address to which notices to such Bank should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Borrower shall reasonably request. 9.13 Counterparts. This Agreement may be executed in any number of ------------ separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. -48- 9.14 Severability. The illegality or unenforceability of any provision of ------------ this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 9.15 No Third Parties Benefited. This Agreement is made and entered into -------------------------- for the sole protection and legal benefit of the Borrower, the Banks, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. 9.16 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND OTHER LOAN ------------------------------ DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS; PROVIDED THAT THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE -------------------- BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE BORROWER AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW. 9.17 Waiver of Jury Trial. THE BORROWER AND THE BANKS EACH WAIVE THEIR -------------------- RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTICIPANT, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER AND THE BANKS EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 9.18 Entire Agreement. This Agreement, together with the other Loan ---------------- Documents, embodies the entire agreement and understanding among the Borrower and the Banks, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof. -49- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in Chicago, Illinois by their proper and duly authorized officers as of the day and year first above written. SIGNATURE FINANCIAL/MARKETING, INC. By: ______________________ Title: ___________________ THE BANK OF NEW YORK By: /s/ ------------------------- Title: ______________________ THE BANK OF NOVA SCOTIA By: /s/ ------------------------- Title: ______________________ -50- EX-10.(I)(M) 7 CREDIT AGREEMT DATED 10/4/96 EXHIBIT 10.(i)(M) ================================================================================ CREDIT AGREEMENT dated as of October 4, 1996 among MONTGOMERY WARD & CO., INCORPORATED, VARIOUS LENDERS, THE BANK OF NOVA SCOTIA, ------------------------ as Administrative Agent and THE BANK OF NEW YORK, as Documentation Agent ================================================================================ TABLE OF CONTENTS Page ---- SECTION 1 CERTAIN DEFINITIONS................................ 1 1.1 Definitions......................................... 1 1.2 Groups and Types of Loans........................... 11 SECTION 2 LOANS.............................................. 11 2.1 Commitment to Make Loans............................ 11 2.2 Loan Limits......................................... 12 2.3 Borrowing Procedure................................. 12 2.4 Repayment........................................... 12 2.5 Notes............................................... 12 2.6 Voluntary Termination or Reduction of the Commitments......................................... 12 2.7 Prepayment.......................................... 13 SECTION 3 [Reserved].......................................... 13 SECTION 4 [Reserved].......................................... 13 SECTION 5 TERMINATION OF COMMITMENTS UPON A CHANGE OF CONTROL.......................................... 13 SECTION 6 INTEREST AND FEES................................... 13 6.1 Interest Rates...................................... 13 6.2 [Reserved].......................................... 14 6.3 Interest Payment Dates.............................. 14 6.4 Setting and Notice of Loan Rates.................... 14 6.5 Commitment Fee...................................... 15 6.6 [Reserved] 6.7 Agents' Fees........................................ 15 6.8 Computation of Interest and Fees.................... 15 SECTION 7 LOAN PROCEDURES; CONVERSIONS AND CONTINUATIONS...... 15 7.1 Procedure for Loans................................. 15 7.2 Conversion and Continuation Procedures.............. 17 SECTION 8 MAKING AND SHARING OF PAYMENTS AND PREPAYMENTS; SETOFF; TAXES; RECORDKEEPING........................ 18 8.1 Making of Payments.................................. 18 8.2 Sharing of Payments................................. 18 8.3 Setoff.............................................. 19 8.4 Taxes............................................... 19 i Page ---- SECTION 9 CHANGE OF CIRCUMSTANCES............................. 21 9.1 Reserve and Capital Adequacy Costs.................. 21 9.2 Increased Costs..................................... 22 9.3 Basis for Determining Interest Rate Inadequate or Unfair.............................................. 24 9.4 Changes in Law Rendering Certain Loans Unlawful..... 25 9.5 Funding Losses...................................... 25 9.6 Discretion of Lenders as to Manner of Funding....... 25 9.7 Conclusiveness of Statements; Survival of Provisions.......................................... 26 SECTION 10 REPRESENTATIONS................................... 26 10.1 Organization, etc................................. 26 10.2 Authorization; No Conflict........................ 26 10.3 Validity and Binding Nature....................... 27 10.4 Financial Statements.............................. 27 10.5 Litigation and Contingent Liabilities............. 27 10.6 Title to Property................................. 27 10.7 Liens............................................. 28 10.8 Subsidiaries...................................... 28 10.9 Plans and Welfare Plans........................... 28 10.10 Investment Company Act............................ 28 10.11 Public Utility Holding Company Act................ 28 10.12 Regulations G, U and X............................ 28 10.13 Labor Controversies............................... 28 10.14 Tax Status........................................ 29 10.15 No Default........................................ 29 10.16 Compliance with Applicable Laws................... 29 10.17 Licenses, etc..................................... 30 10.18 Purpose........................................... 30 SECTION 11 COVENANTS......................................... 30 SECTION 12 CONDITIONS..........................................30 12.1 Effectiveness of Agreement......................... 30 12.2 Conditions to Loans................................ 32 SECTION 13 EVENTS OF DEFAULT AND THEIR EFFECT................. 33 13.1 Events of Default.................................. 33 13.2 Effect of Event of Default......................... 36 SECTION 14 THE AGENTS......................................... 37 14.1 Authorization...................................... 37 14.2 Indemnification.................................... 37 14.3 Action on Instructions of the Required Lenders..... 37 ii Page ---- 14.4 Payments........................................... 38 14.5 Exculpation........................................ 39 14.6 Credit Investigation............................... 40 14.7 Agents and Affiliates.............................. 40 14.8 Resignation and Removal............................ 40 SECTION 15 GENERAL............................................ 41 15.1 Waiver; Amendments................................. 41 15.2 Notices............................................ 42 15.3 Computations....................................... 42 15.4 Participations; Assignments; Replacement of Lenders............................................ 43 15.5 Costs, Expenses and Taxes.......................... 47 15.6 Indemnification.................................... 47 15.7 Regulation U....................................... 48 15.8 Captions........................................... 48 15.9 Governing Law; Severability........................ 48 15.10 Waiver of Jury Trial............................... 48 15.11 Counterparts; Effectiveness........................ 49 15.12 Supersession....................................... 49 15.13 Successors and Assigns............................. 49 iii SCHEDULES and EXHIBITS SCHEDULES - --------- SCHEDULE I Lenders and Commitments (Sections 1.1 ------------ and 15.4) ---- SCHEDULE II Litigation (Section 10.5) ------------ SCHEDULE III Liens (Section 10.7) ------------ SCHEDULE IV Subsidiaries and Restricted Subsidiaries (Section 10.8) ------------ SCHEDULE V Post-Retirement Welfare Plan Benefits (Section 10.9) ------------ EXHIBITS FORM OF - -------- ------- EXHIBIT A Note (Section 2.5) ----------- EXHIBIT B Loan Request (Section 7.1) ----------- EXHIBIT C Opinion of Counsel for the Company (Section 12.1) ------------ EXHIBIT D Certificate as to Satisfaction of Conditions (Section 12.1) ------------ EXHIBIT E Assignment and Acceptance (Section ------- 15.4(b)) ------- iv CREDIT AGREEMENT ---------------- THIS CREDIT AGREEMENT (this "Agreement"), dated as of October 4, 1996, is among MONTGOMERY WARD & CO., INCORPORATED, an Illinois corporation (herein, together with its successors and permitted assigns, called the "Company"), the lenders listed on the signature pages hereof (herein, together with their respective successors and assigns, collectively called the "Lenders" and individually called a "Lender"), THE BANK OF NOVA SCOTIA, as administrative agent for the Lenders (herein, in such capacity, together with its successors and assigns in such capacity, called the "Administrative Agent"), THE BANK OF NEW YORK, as documentation agent for the Lenders (herein, in such capacity, together with its successors and assigns in such capacity, called the "Documentation Agent") (the Administrative Agent and the Documentation Agent are herein collectively called the "Agents" and individually called an "Agent"). WHEREAS, the Company wishes to be able to borrow funds from the Lenders from time to time on a revolving basis; and WHEREAS, subject to the terms and conditions set forth herein, the Lenders are willing to make loans to the Company; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto agree as follows: SECTION 1 CERTAIN DEFINITIONS. 1.1 Definitions. When used herein the following terms have the ----------- following respective meanings: "Administrative Agent" - see Preamble. -------------------- "Affiliate" means with respect to any Person, any other Person --------- directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. A Person shall be deemed to control another Person if such first Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through ownership of voting securities, by contract or otherwise. "Agent(s)" - see Preamble. -------- "Agent Parties" - see Section 14.2. ------------- ------------ 1 "Aggregate Commitment" means $165,000,000 or such lesser amount as the -------------------- Company may specify from time to time pursuant to Section 2.6. ----------- "Agreement" - see Preamble. --------- "Assignee(s)" - see Section 15.4(b). ----------- --------------- "Assignment" - see Section 15.4(b). ---------- --------------- "Authorized Officer" means the President, the Chief Executive Officer, ------------------ the Chief Financial Officer, the Treasurer or any Assistant Treasurer of the Company. "Base Rate" means at any time and from time to time the higher of (i) --------- the rate per annum then most recently publicly announced or established by the Lender which is acting as the Administrative Agent as its "reference rate" or "prime rate" (or such Lender's equivalent thereof) at its Funding Office for Base Rate Loans, or (ii) the Federal Funds Rate plus 1/2 of 1% per annum. "Base Rate Loan" means any Loan which bears interest by reference to -------------- the Base Rate. "Business Day" means (i) any day of the year other than a Saturday, a ------------ Sunday or other day on which banks in Chicago, Atlanta or New York City are authorized or required by law to close, and (ii) if the applicable Business Day relates to the determination of a Eurodollar Rate or to the funding or payment of a Eurodollar Loan, a day on which dealings are carried on in the London interbank eurodollar market. "Change" - see Section 9.1(b). ------ -------------- "Change of Control" means any event by which GE Capital ceases to own ----------------- on a fully-diluted basis the percentage of each class of the capital stock of the Company which is owned by it on the Effective Date on a fully-diluted basis. "Class A Common Stock" is used as defined in the Short Term Credit -------------------- Agreement. "Code" means the Internal Revenue Code of 1986, as amended. ---- "Commitment" means, for each Lender, such Lender's Commitment to make ---------- Loans on the terms and subject to the conditions of this Agreement, the maximum amount of such Commitment being the amount opposite such Lender's name on Schedule I as the same may be revised pursuant to - ---------- 2 Section 2.6; and "Commitments" means, collectively, the Commitments of all of - ----------- ----------- the Lenders to make Loans on the terms and subject to the conditions of this Agreement. "Company" - see Preamble. ------- "Consolidated Shareholder's Equity" is used as defined --------------------------------- in the Short Term Credit Agreement. "Continue," "Continuation" and "Continued" refer to continuations of -------- ------------ --------- Loans pursuant to Section 7.2. ----------- "Conversion Notice" - see Section 7.2(a). ----------------- -------------- "Convert", "Conversion" and "Converted" refer to conversions of Loans ------- ---------- --------- pursuant to Section 7.2. ----------- "Debt-Like Preferred Stock" is used as defined in the Short Term ------------------------- Credit Agreement. "Documentation Agent" - see Preamble. ------------------- "Dollar(s)" and the sign "$" mean lawful money of the United States of --------- - America. "Effective Date" - see Section 12.1. -------------- ------------ "Equalization Amount" - see Section 8.4(c). ------------------- -------------- "ERISA" is used as defined in the Short Term Credit Agreement. ----- "ERISA Affiliate" is used as defined in the Short Term Credit --------------- Agreement. "Eurocurrency Reserve Percentage" means, with respect to any day, a ------------------------------- percentage (expressed as a decimal) equal to the percentage in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any marginal reserve requirement) applicable to "Eurocurrency liabilities" pursuant to Regulation D or any other then applicable regulation of said Board of Governors which prescribes reserve requirements applicable to "Eurocurrency liabilities" as presently defined in Regulation D. "Eurodollar Loan" means any Loan which bears interest at a rate --------------- determined by reference to the Eurodollar Rate. "Eurodollar Rate" means, with respect to any Interest Period, and --------------- subject to Section 6.4(b), the rate per -------------- 3 annum equal to the arithmetic mean (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the respective rates per annum notified to the Administrative Agent by the Reference Lenders (or any thereof) prior to 9:30 a.m., Chicago time, on the second Business Day prior to the commencement of such Interest Period as the rate at which Dollar deposits are offered by the principal London office of each such Reference Lender to prime banks in the London interbank eurodollar market as at or about 11:00 a.m., London time, for delivery for same day value on the first day of such Interest Period, for the number of days comprised therein and in an amount approximately equal to the amount of such Reference Lender's Eurodollar Loan for such Interest Period. "Eurodollar Rate (Reserve Adjusted)" means, with respect to any ---------------------------------- Interest Period, 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-Eurocurrency Reserve Percentage "Event of Default" means any of the events described in Section 13.1. ---------------- ------------ "Existing Credit Agreements" means collectively (i) the Long-term -------------------------- Credit Agreement, dated September 15, 1994, as amended through September 6, 1996 (and with the consent of the Required Lenders, as further amended or modified from time to time), among the Company, various lenders from time to time party thereto and certain agents listed on the signature pages thereof (the "Long Term Credit Agreement"), (ii) the Short Term Credit Agreement, dated September 15, 1994, as amended through September 6, 1996 (and, with the consent of the Required Lenders, as further amended and modified from time to time provided, -------- that any increase in the aggregate commitments thereunder which is provided for - ---- therein shall not be deemed an amendment or modification) among the Company, various lenders from time to time party thereto and certain agents listed on the signature pages thereof (the "Short Term Credit Agreement"). "Existing Signature Credit Agreement" means the Credit Agreement dated ----------------------------------- as of September 27, 1996 among Signature Financial/Marketing, Inc., The Bank of New York, and The Bank of Nova Scotia as amended or modified from time to time. "Federal Funds Rate" means, for any day, the rate set forth in the ------------------ weekly statistical release designated as H.15(519), or any successor publication, published by the 4 Board of Governors of the Federal Reserve System (including any such successor, "H.15(519)") for that day opposite the caption "Federal Funds (Effective)". If on any relevant day such rate is not yet published in H.15(519), the rate for that day will be the rate set forth in the daily statistical release designated as the Composite 3:30 P.M. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 P.M. Quotations") for that day under the caption "Federal Funds Effective Rate". If on any relevant day the appropriate rate for such day is not yet published in either H.15(519) or the Composite 3:30 P.M. Quotations, the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m., New York time, on that day by each of three leading brokers of Federal funds transactions in New York City, selected by the Administrative Agent. "Finance Obligation(s)" means with respect to any Person, as of the --------------------- date of determination thereof, (i) any and all of such Person's Indebtedness for Borrowed Money, (ii) any and all of such Person's actual or contingent reimbursement obligations with respect to letters of credit issued for such Person's account, (iii) any and all of such Person's actual or contingent obligations with respect to interest swap agreements or currency swap agreements or other hedge agreements relating to fluctuations in interest rates or currencies, (iv) any and all of such Person's liabilities under Title IV of ERISA, and (v) any and all indebtedness or obligations of any of the types described in the preceding clauses (i), (ii), (iii) and (iv) for which such ----------- ---- ----- ---- Person is liable, directly or indirectly, under a Guaranty. "Fiscal Quarter" means a fiscal quarter of any Fiscal Year. -------------- "Fiscal Year" means a fiscal year of the Company which begins on the ----------- Sunday following the Saturday closest to December 31 of any calendar year and ends on the Saturday closest to December 31 of the next succeeding calendar year. "Funding Date" means the date on which any Loan is disbursed or ------------ scheduled to be disbursed. "Funding Office" means with respect to any Eurodollar Loan or Base -------------- Rate Loan by any Lender, the office or Affiliate of such Lender specified for such Type of Loan beneath such Lender's signature hereto or in any relevant Assignment. Any Lender's Funding Office for a particular Loan shall be the office or Affiliate through which such Lender shall fund or shall have funded such Loan. Subject 5 to Section 9.6(b), each Funding Office of each Lender may be changed to another -------------- domestic or foreign office of such Lender or domestic or foreign office of any Affiliate of such Lender upon written notice from such Lender to the Company, the Administrative Agent. "GAAP" means the generally accepted accounting principles applied in ---- the preparation of the audited consolidated financial statements of the Company and its Subsidiaries as at December 30, 1995, with such changes thereto as (a) shall be consistent with the then effective principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors and successors, and (b) shall be concurred in by the independent certified public accounts of recognized national standing certifying any financial statements of the Company and its Subsidiaries. "GE Capital" means General Electric Capital Corporation, together with ---------- its successors and assigns. "GE Capital Parties" means GE Capital, Monogram and MWCC. ------------------ "Group" - see Section 1.2. ----- ----------- "Guaranty" is used as defined in the Short Term Credit Agreement. -------- "Indebtedness for Borrowed Money" is used as defined in the Short ------------------------------- Term Credit Agreement. "Indemnified Liabilities" - see Section 15.6. ----------------------- ------------ "Interest Period" means (i) with respect to any Eurodollar Loan, the --------------- period commencing on such Eurodollar Loan's Funding Date (or on the date such Loan was Converted to or Continued as a Eurodollar Loan) and ending 1, 2 or 3 months thereafter as selected by the Company pursuant to Section 7.1(a) or 7.2, -------------- --- (ii) with respect to any Base Rate Loan, the period commencing on such Base Rate Loan's Funding Date (or on the date such Loan was Converted to or Continued as a Base Rate Loan) and ending on the last Business Day of the next following March, June, September or December, whichever comes first; provided, however, that: -------- ------- (A) if an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day (unless, in the case of a Eurodollar Loan, such next succeeding Business Day would fall in the next succeeding calendar month, in which case such Interest Period shall end on the next preceding Business Day); 6 (B) in the case of an Interest Period for any Eurodollar Loan, if there exists no day numerically corresponding to the day such Loan was made in the month in which the last day of such Interest Period would otherwise fall, such Interest Period shall end on the last Business Day of such month; and (C) no Interest Period for any Loan shall extend beyond the Termination Date. "Lender(s)" - see Preamble. --------- "Lender Parties" - see Section 15.6. -------------- ------------ "Liabilities" means any and all of the Company's obligations to the ----------- Agents and the Lenders, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, which arise out of or in connection with this Agreement, any Note or any document, instrument or agreement executed in connection with any of the foregoing. "Lien" means any mortgage, pledge, lien, security interest or other ---- charge, including the retained security title of a conditional vendor or lessor. "Litigation" means any litigation, proceeding (including without ---------- limitation any governmental proceeding or arbitration proceeding), claim, lawsuit and/or investigation (including, without limitation, any environmental litigation, proceeding, claim, lawsuit and/or investigation) pending or threatened against or involving the Company or any Subsidiary or any of its or their businesses or operations. "Loan(s)" - see Section 2.1. -------- ----------- "Loan Request" - see Section 7.1(a). ------------ -------------- "Long Term Credit Agreement" - see definition of Existing Credit -------------------------- Agreements. "Margin Stock" has the meaning given to such term in Regulations U ------------ and/or X. "Material Litigation" or "Material Litigation Development" means any ------------------- ------------------------------- Litigation or development in any Litigation which could individually or in the aggregate impair the validity or enforceability of or the ability of the Company to perform any of its obligations under this Agreement or the Notes or the Retail Credit Program Agreement, or materially impair the ability of the Company to conduct business substantially as now conducted, or materially and adversely affect the consolidated business, operations, prospects or 7 financial condition of the Company and its Subsidiaries, taken as a whole. "Memorandum of Understanding" means the "Memorandum of Understanding" --------------------------- as defined in that certain letter agreement dated March 19, 1996 among the Company, the lenders and the agents under the Short Term Credit Agreement. "Mobil" - see Section 10.14(c). ----- ---------------- "Monogram" means Monogram Retail Credit Card Bank of Georgia, a -------- subsidiary of GE Capital. "MWCC" means Montgomery Ward Credit Corporation. ---- "Non-United States Person" means a Person who is not (i) a citizen or ------------------------ resident of the United States, (ii) a corporation, partnership or other entity created or organized under the laws of the United States, or (iii) an estate or trust the income of which is subject to United States federal income taxation regardless of its source; and "United States" means the United States of America ------------- (including the States and the District of Columbia). "Note" - see Section 2.5. ---- ----------- "Parent" means Montgomery Ward Holding Corp., a Delaware corporation, ------ together with any Successor to Parent. "Participant(s)" - see Section 15.4(a). -------------- --------------- "Percentage" - as to any Lender means a percentage based on the ratio ---------- that the Commitment of such Lender bears to the Aggregate Commitment. "Person" means an individual or a corporation, partnership, trust, ------ incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "Plan" is used as defined in the Short Term Credit Agreement. ---- "Qualified Purchaser" is used as defined in the Short Term Credit ------------------- Agreement. "Ratio of Earnings to Fixed Charges" is used as defined in the Short ---------------------------------- Term Credit Agreement. "Reference Lender" means The Bank of New York and The Bank of Nova ---------------- Scotia. 8 "Regulation D" means Regulation D of the Board of Governors of the ------------ Federal Reserve System and any successor rule or regulation of similar import as in effect from time to time. "Regulation G" means Regulation G of the Board of Governors of the ------------ Federal Reserve System and any successor rule or regulation of similar import as in effect from time to time. "Regulation U" means Regulation U of the Board of Governors of the ------------ Federal Reserve System and any successor rule or regulation of similar import as in effect from time to time. "Regulation X" means Regulation X of the Board of Governors of the ------------ Federal Reserve System and any successor rule or regulation of similar import as in effect from time to time. "Required Lenders" means at any time Lenders having at least 66-2/3% ---------------- of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 66-2/3% of the aggregate unpaid principal amount of the Loans. "Restricted Subsidiary" means any Subsidiary designated as such by the --------------------- Company's Board of Directors or by an officer of the Company authorized by the Board of Directors to make such designation and which designation shall not thereafter have been cancelled by the Company's Board of Directors or by an officer of the Company authorized by the Board of Directors to effect such cancellation; provided, however, that a Subsidiary may be designated as a -------- ------- Restricted Subsidiary or such designation may be cancelled if and only if immediately after such designation or cancellation, and after giving effect thereto, no Event of Default or Unmatured Event of Default shall have occurred and be continuing. "Retail Credit Program Agreement" means the "Retail Credit Program ------------------------------- Agreement" as defined in that certain letter agreement dated March 19, 1996 among the Company, the lenders and the agents named therein, as such Retail Credit Program Agreement may be amended, modified or supplemented from time to time in a manner which does not result in an Event of Default under Section ------- 13.1(j). - ------- "Risk-Based Capital Guidelines" - see Section 9.1(b). ----------------------------- -------------- "SEC" means the Securities Exchange Commission and any successor --- thereof. "Seller Notes" is used as defined in the Short Term Credit Agreement. ------------ "Short Term Credit Agreement" - see definition of Existing Credit --------------------------- Agreements. 9 "Special Restricted Subsidiary" means any Restricted Subsidiary (i) ----------------------------- with assets that constitute one percent (1%) or less of the total assets of the Company and all Restricted Subsidiaries, (ii) with net income for the most recent Fiscal Year that constitutes one percent (1%) or less of the total net income of the Company and all Restricted Subsidiaries for the most recent Fiscal Year, and (iii) with equity of less than $4,000,000. "Subsidiary" means a corporation of which the Company 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 such corporation's directors. "Successor to Parent" - see Section 13.1(h). ------------------- --------------- "Tax Benefit" - see Section 8.4(c). ----------- -------------- "Taxes" - see Section 8.4(a). ----- -------------- "Termination Date" means, with respect to each Lender, the earlier to ---------------- occur of (i) March 1, 1997, or (ii) such other date on which the Aggregate Commitments shall terminate pursuant to Section 5 or 13.2 or be reduced to zero --------- ---- pursuant to Section 2.6 and, if in any case such day is not a Business Day, the ----------- next preceding Business Day. "Type" - see Section 1.2. ---- ----------- "Unmatured Event of Default" means any event which if it continues -------------------------- uncured will, with lapse of time or notice or lapse of time and notice, constitute an Event of Default. "Welfare Plan" has the meaning assigned to such term by ERISA. ------------ 1.2 Groups and Types of Loans. Loans hereunder are distinguished by ------------------------- "Type" and by "Group". The "Type" of a Loan refers to whether such Loan is a Base Rate Loan or a Eurodollar Loan. A "Group" of Loans consists of Loans of the same Type, with the same Funding Date or Conversion or Continuation date, and having the same Interest Period. SECTION 2 LOANS. 2.1 Commitment to Make Loans. On the terms and subject to the ------------------------ conditions of this Agreement, each of the Lenders, severally and for itself alone, agrees to make revolving loans to the Company (herein collectively called the "Loans" and individually called a "Loan") on a revolving basis from time to time before the Termination Date in amounts equal to such 10 Lender's Percentage of such aggregate amounts as the Company may from time to time request pursuant to Section 7.1, but subject to the limits specified in ----------- Section 2.2. The Loans may be either Eurodollar Loans or Base Rate Loans, as - ----------- selected by the Company pursuant to Section 7.1. ----------- 2.2 Loan Limits. The Loans shall be subject to the following limits: ----------- (a) Each Lender's share of a Group of Loans shall be pro rata according to its Percentage; (b) The aggregate principal amount of all Loans of all Lenders at any one time outstanding shall not exceed the then Aggregate Commitment; and (c) The Company shall not borrow under this Agreement unless all Commitments (as defined in each of the Short Term Credit Agreement and the Long Term Credit Agreement) are then fully used. 2.3 Borrowing Procedure. The Company shall make requests for Loans, ------------------- and each Lender (and, to the extent that the Administrative Agent has received immediately available funds from one or more Lenders, the Administrative Agent) shall fund such requests, pursuant to the procedure set forth in Section 7.1. ----------- 2.4 Repayment. The Company promises to pay to each Lender on the --------- Termination Date the principal amount of all Loans made by such Lender which remain outstanding on such Termination Date. 2.5 Notes. Each Loan shall be evidenced by the Company's promissory ----- note (as amended, modified or supplemented from time to time, and together with any renewals thereof or exchanges or substitutions therefor, collectively called the "Notes" and individually called a "Note") substantially in the form set forth as Exhibit A, with appropriate insertions, each of which shall be dated --------- the Effective Date and made payable to the order of each Lender, respectively. 2.6 Voluntary Termination or Reduction of the Commitments and --------------------------------------------------------- Mandatory Prepayment. - -------------------- (a) Termination. At any time on at least five days' prior ----------- irrevocable notice received by the Administrative Agent (which shall promptly on the same day or on the next Business Day advise each other Agent and each Lender thereof), the Company may terminate concurrently the Commitments of all the Lenders in their entirety upon payment in full (in Dollars and in same day funds) of all outstanding Loans together with all interest accrued thereon and all fees and other obligations (including 11 breakage fees pursuant to Section 9.5) of the Company related thereto. ----------- (b) Reduction. At any time on at least five days' prior irrevocable --------- notice received by the Administrative Agent (which shall promptly on the same day or on the next Business Day advise each other Agent and each Lender thereof), the Company may permanently reduce the Aggregate Commitment (such reduction to be pro rata among the Lenders according to their respective --- ---- Percentages). Concurrently with each such reduction of the Aggregate Commitment, the Company shall make a mandatory prepayment of the Loans such that after giving effect thereto (i) the sum of all outstanding Loans shall not exceed the then reduced amount of the Aggregate Commitment, and (ii) the aggregate principal amount of all Loans of any Lender, shall not exceed the amount of such Lender's Commitment as so reduced. Each prepayment pursuant to this Section 2.6(b) shall be subject to the provisions of Section 8.1. -------------- ----------- 2.7 Mandatory Prepayment. The Company agrees that concurrent with -------------------- any payment of the loans under either of the Existing Credit Agreements (other than a payment which does not reduce the aggregate principal amount of loans outstanding under either of the Existing Credit Agreements), it will make a mandatory prepayment in full of all Loans under this Agreement, it being understood, however, that upon the occurrence and during the continuance of an Event of Default (as defined in each of the Existing Credit Agreements), all Loans under this Agreement shall be paid ratably with the repayment of loans under the Existing Credit Agreements, in each case according to the aggregate principal amount of Loans or loans, as the case may be, then outstanding under this Agreement and under the Existing Credit Agreements. SECTION 3 [Reserved] SECTION 4 [Reserved] SECTION 5 TERMINATION OF COMMITMENTS UPON A CHANGE OF CONTROL If a Change of Control occurs, then upon thirty days' written notice to the Company given not later than 180 days after the date on which written notice of the occurrence of such Change of Control is given to the Lenders pursuant to Section 11.1(h) of the Short Term Credit Agreement as incorporated --------------- herein pursuant to Section 11 following any Change of Control, (i) the Required ---------- Lenders may by notice to the Company terminate the Commitments of all of the Lenders, whereupon all of the Commitments shall terminate immediately, and (ii) the Required Lenders may by 12 notice to the Company declare all Liabilities to be due and payable, whereupon all Liabilities shall become immediately due and payable, all without presentment, demand or further notice of any kind, all of which are hereby waived by the Company. SECTION 6 INTEREST AND FEES. 6.1 Interest Rates. The Company hereby promises to pay interest on -------------- the unpaid principal amount of each Loan for the period commencing on the Funding Date of such Loan until such Loan is paid in full, as follows: (a) if such Loan is a Base Rate Loan, at a rate per annum equal to the Base Rate from time to time in effect; (b) if such Loan is a Eurodollar Loan, at a rate per annum during each Interest Period equal to the Eurodollar Rate applicable to such Interest Period, plus 1.5% per annum; provided, however, that after maturity of any Loan (whether by acceleration or - -------- ------- otherwise), such Loan shall bear interest on the unpaid principal amount thereof at a rate per annum equal to the Base Rate from time to time in effect (but not less than the applicable interest rate in effect at maturity) plus 2% per annum. The Company hereby further promises to pay any additional interest on the unpaid principal amount of each applicable Eurodollar Loan, whether before or after the maturity thereof, as may be required in accordance with Section 9. --------- 6.2 [Reserved] 6.3 Interest Payment Dates. Accrued interest on each Loan shall be ---------------------- payable on the last day of the Interest Period therefor and on each Conversion date related to such Loan. After maturity of any Loan, accrued interest on such Loan shall be payable on demand. 6.4 Setting and Notice of Loan Rates. -------------------------------- (a) The applicable interest rate for each Loan shall be determined by the Administrative Agent and, in the case of Eurodollar Loans, notice thereof shall be given by the Administrative Agent to the Company and each Lender promptly, but in any event on the same day as received. Each determination of the applicable interest rate by the Administrative Agent shall be conclusive and binding upon the parties hereto, in the absence of manifest error. (b) In the case of Eurodollar Loans, each Reference Lender agrees to use its best efforts to notify the 13 Administrative Agent in a timely fashion of its applicable rate after the Administrative Agent's request therefor. If as to any Interest Period any one or more of the Reference Lenders is unable or for any reason fails to notify the Administrative Agent of its applicable rate by 9:30 a.m., Chicago time, two Business Days before the beginning of such Interest Period, then the applicable Eurodollar Rate shall be determined on the basis of the rate or rates of which the Administrative Agent is given notice by the remaining Reference Lender or Lenders by such time. If none of the Reference Lenders notifies the Administrative Agent of such a rate prior to 9:30 a.m., Chicago time, two Business Days before the beginning of such Interest Period, then (i) the Administrative Agent shall promptly notify the other parties thereof and (ii) at the Company's option, the Loan Request or Conversion Notice delivered by the Company with respect to such Interest Period shall be cancelled or, if not cancelled, shall be deemed to have specified a Base Rate Loan. (c) The Administrative Agent shall, upon written request of the Company or any Lender, deliver to the Company or such Lender a statement showing the computations used by the Administrative Agent in determining the interest rate applicable to any Eurodollar Loan. 6.5 Commitment Fee. The Company agrees to pay to the Administrative -------------- Agent for the account of each Lender (pro rata in accordance with its --- ---- Percentage), within fifteen days of the last day of November 1996, and thereafter within fifteen days of the last day of each calendar month until the Termination Date, and on the Termination Date, a Commitment fee computed at the rate of 0.375% per annum on the average daily unused amount of the Aggregate Commitment during the month preceding the date of such payment (commencing, in the case of the first of such periods, on and as of the Effective Date), payable in arrears for the month then ending. 6.6 [Reserved] 6.7 Agents' Fees. The Company agrees promptly to pay to each Agent ------------ such fees as may be agreed from time to time by the Company and such Agent. 6.8 Computation of Interest and Fees. Interest on Eurodollar Loans -------------------------------- shall be computed for the actual number of days elapsed on the basis of a 360- day year. Interest on Base Rate Loans and all fees shall be computed for the actual number of days elapsed on the basis of a 365- or, if applicable, 366-day year. The interest rate applicable to each Base Rate Loan, and after maturity of any other Type of Loan the interest rate applicable to such Loan, shall change simultaneously with each change in the Base Rate without any notice or other action involving the Company. 14 SECTION 7 LOAN PROCEDURES; CONVERSIONS AND CONTINUATIONS. 7.1 Procedure for Loans. ------------------- (a) Loan Requests. The Company shall give the Administrative Agent ------------- irrevocable telephonic notice (promptly confirmed in writing on the same day), not later than 9:30 a.m., Chicago time, of each borrowing of Loans (i) in the case of a Eurodollar Loan, at least three (3) Business Days prior to the Funding Date for such Loans and (ii) in the case of a Base Rate Loan, at least one (1) Business Day prior to the Funding Date for such Loans. The Administrative Agent shall advise each Lender of such notice promptly, but in any event on the same day as received, and, in the case of Eurodollar Loans, request each Reference Lender to notify the Administrative Agent of its applicable rate (as contemplated in the definition of Eurodollar Rate). Each such notice from the Company to the Administrative Agent shall be substantially in the form of Exhibit B ("Loan Request") with appropriate insertions, and shall specify (i) - --------- the Funding Date for the Loans requested, (ii) the aggregate amount of the Loans requested (in an amount permitted under Section 7.1(b)), (iii) whether the -------------- requested Loans shall be Eurodollar Loans or Base Rate Loans, and (iv) in the case of Eurodollar Loans, the Interest Period therefor (subject to the limitations set forth in the definition of Interest Period). (b) Amount and Increments of Loans. Each of the Company's Loan ------------------------------ Requests shall request Loans in a minimum aggregate amount of $5,000,000 or an integral multiple of $1,000,000 over such amount, not to exceed, in the aggregate at any one time outstanding, the limits specified in Section 2.2. ----------- (c) Funding of Loans. ---------------- (i) Not later than 12:00 noon, Chicago time, on each Funding Date for Loans, each Lender shall provide (subject to netting pursuant to Section ------- 7.1(d)) the Administrative Agent at such Agent's Funding Office for Base ------ Rate Loans with immediately available Dollars covering such Lender's Loan and, if the conditions set forth in Section 12 shall have been satisfied ---------- not later than 9:00 a.m., Chicago time, on such date, such Agent shall pay over such funds to the Company on such day. If such conditions have not been satisfied prior to such time, then (A) such Agent shall not pay over such funds to the Company on such day, (B) the Loan Request related to such Loan shall be deemed cancelled in its entirety, (C) the Company shall be liable to each Lender in accordance with Section 9.5, and (D) such Agent ----------- shall return the amount previously provided to such Agent by each Lender on the next following Business Day together with interest on such amount for 15 each day that elapses from and including such Loan's originally scheduled Funding Date to but excluding the day on which such Agent so returns such amount at the Federal Funds Rate for each such day, based upon a year of 360 days. (ii) The Company, notwithstanding its previous delivery of any documents required under Section 12 with respect to a particular Loan, ---------- agrees to notify the Administrative Agent immediately of any failure to satisfy the conditions precedent to the making of any Loan. The Administrative Agent shall be entitled to assume, after it has received each of the documents required under Section 12 with respect to a ---------- particular Loan, that each of the conditions precedent to the making of such Loan have been satisfied absent actual knowledge to the contrary received by such Agent prior to the time of the receipt of such documents. (d) Netting. If any Lender makes a Loan hereunder on a day on which ------- the Company is to repay all or any part of any outstanding Loan, as the case may be, held by such Lender, such Lender shall apply the proceeds of such new Loan to make such repayment and only an amount equal to the positive difference, if any, between the amount being borrowed from such Lender and the amount being repaid to such Lender shall be made available by such Lender to the Administrative Agent as provided in Section 7.1(c). -------------- 7.2 Conversion and Continuation Procedures. -------------------------------------- (a) The Company may (i) Convert all or any part of any Group of outstanding Loans (on a pro rata basis among the Lenders based upon their --- ---- respective Percentage share of such Group) into Loans of a different Type or (ii) Continue on the same basis all or any part of any Group of outstanding Loans as the same Type; provided, that, in any case the Company shall give an -------- ---- irrevocable notice of such Conversion or Continuation (a "Conversion Notice") to the Administrative Agent by 10:00 a.m., Chicago time, on a day which in the case of a Conversion into or a Continuation of Base Rate Loans is at least one (1) Business Day prior to the proposed date of such Conversion or Continuation and, in the case of a Conversion into or a Continuation of Eurodollar Loans, is at least three (3) Business Days prior to such date. Each such Conversion Notice shall be effective upon the Administrative Agent's receipt thereof, shall be in writing (or by telephone promptly confirmed in writing on the same day), shall specify the date and amount of such Conversion or Continuation, the Group of Loans to be so Converted or Continued, the Type of Loans to be Converted into, and the Interest Period(s) to be applicable to such Loans (in the case of Eurodollar Loans). Promptly upon receipt of each Conversion Notice the Administrative Agent shall advise each Lender thereof and, in the case of Conversions into 16 or Continuations of Eurodollar Loans, shall request each Reference Lender to notify such Agent of its applicable rate (as contemplated in the definition of Eurodollar Rate). (b) Each Conversion or Continuation of Loans shall be in an aggregate principal amount of at least $5,000,000 and an integral multiple of $1,000,000 over such amount. If the Company does not deliver a Conversion Notice on or before the day that is three (3) Business Days before the last day of the then current Interest Period with respect to any Loan that is a Eurodollar Loan, such Loan automatically shall be Converted into a Base Rate Loan at the end of its then current Interest Period unless theretofore paid in full. If the Company does not deliver a Conversion Notice on or before the day before the last day of the then current Interest Period with respect to any Loan that is a Base Rate Loan, such Loan automatically shall be Continued as a Base Rate Loan at the end of its then current Interest Period unless theretofore paid in full. SECTION 8 MAKING AND SHARING OF PAYMENTS AND PREPAYMENTS; SETOFF; TAXES; RECORDKEEPING. 8.1 Making of Payments. ------------------ (a) All payments of principal of, or interest on, the Loans, and all payments of Commitment fees, shall be made by the Company to the Administrative Agent in immediately available Dollars for the account of the Lenders or the holders of the applicable Loans, as the case may be pro rata according to the Percentage of each Lender. All such payments shall be made (or initiated, in the case of payments being made by Fedwire) to the Administrative Agent or applicable Lender, as the case may be, at its respective office shown below its signature hereto (or at such other office as may be designated from time to time by the Administrative Agent or such Lender by notice to the other parties), not later than 12:00 noon, Chicago time, on the date due; and funds received after that hour shall be deemed to have been received by the Administrative Agent or applicable Lender, as the case may be, on the next following Business Day. Notwithstanding the foregoing, all payments under Section 9 shall be made by the --------- Company directly to the Persons entitled thereto. (b) Voluntary Loan Prepayments. The Company may voluntarily prepay -------------------------- Loans from time to time in whole or in part, provided that (a) the Company shall give the Administrative Agent (which shall promptly advise each Lender) not less than three (3) Business Days' (in the case of Eurodollar Loans) or one (1) Business Day's (in the case of Base Rate Loans) prior notice thereof, specifying the Loans to be prepaid and the date and amount of prepayment, (b) any prepayment of any Loan shall include accrued interest on the principal amount being paid to the date of prepayment, (c) [Reserved], (d) any prepayment of a 17 Eurodollar Loan shall be subject to the provisions of Section 9.5, and (e) Loans ----------- in the same Group shall be prepaid on a pro rata basis among the Lenders based --- ---- upon their respective Percentage of such Group. 8.2 Sharing of Payments. If any Lender, other holder of a Loan, or ------------------- any Participant or Assignee shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise) on account of principal of, interest on or fees or other amounts hereunder in excess of the share of payments and other recoveries (exclusive of payments or recoveries under Sections 8.4 and 9 such Lender or other Person would have received if such --- - payment or recovery had been in accordance with Section 8.1(a), such Lender or -------------- other Person shall purchase from the other Lenders or Persons, in a manner to be specified by the Administrative Agent, such participations in the Loans, as the case may be, held by them as shall be necessary to cause such purchasing Lender or other Person to share the excess payment or other recovery ratably with each of them in accordance with Section 8.1(a); provided, however, that if all or any -------------- -------- ------- portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender or Person, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. 8.3 Setoff. The Company agrees that each Agent, each Lender (with ------ respect to its Loans and with respect to any participations it purchases pursuant to Section 8.2, with the same effect as if the amount of such ----------- participating interest were owing directly to such Lender) and each holder of a Note shall have all rights of setoff and bankers' lien provided by applicable law and, in addition thereto, the Company agrees that at any time (i) any amount owing by the Company under this Agreement or any Note is then due, directly or indirectly, to any Agent, any Lender or any such holder, or (ii) any Event of Default shall have occurred and be continuing, each Agent, each Lender and each such holder may apply to the payment of such amount any and all balances, credits, deposits, accounts or moneys of the Company then or thereafter with such Agent, such Lender or such holder, it being understood that the aggregate amounts set off shall at no time exceed the Liabilities. 8.4 Taxes. ----- (a) All payments made by the Company to any Agent or any Lender under or in connection with this Agreement and the Notes shall be made without any setoff or counterclaim, and free and clear of and without deduction or withholding for or on account of any present or future Taxes now or hereafter imposed by any governmental or other authority, except to the extent that such deduction or withholding is compelled by law. As used herein, the term "Taxes" shall include all income, excise and other taxes of whatever nature (other than taxes generally 18 assessed on the overall net income of any Agent or any Lender, as the case may be, by the government or other authority of the country in which such Agent or such Lender is incorporated or in which such Lender's Funding Office or the office through which such Agent is acting is located provided that taxes so assessed on any additional amounts payable hereunder shall constitute "Taxes") as well as all levies, imposts, duties, charges or fees of whatever nature. If the Company is compelled by law to make any such deductions or withholdings it will: (i) pay to the relevant authorities the full amount required to be so withheld or deducted; (ii) (except to the extent that such deduction or withholding results from the breach, by the recipient of a payment, of its agreement, if any, contained in Section 8.4(b) or would not be required if such recipient's -------------- representation or warranty contained in Section 8.4(b), if any, were true) -------------- pay such additional amounts (including, without limitation, any penalties, interest or expenses) as may be necessary in order that the net amount received by each Agent and each Lender after such deductions or withholdings (including any required deduction or withholding on such additional amounts) shall equal the amount such payee would have received had no such deductions or withholdings been made; and (iii) promptly forward to the Administrative Agent (for delivery to such payee) an official receipt or other documentation satisfactory to the Administrative Agent and such payee evidencing such payment to such authorities. Moreover, if any Taxes are directly asserted against any Agent or any Lender, such payee may pay such Taxes and the Company (except to the extent that such Taxes result from the breach, by such payee, of its agreement contained in Section 8.4(b), if any, or would not be asserted if such payee's representation - -------------- or warranty contained in Section 8.4(b), if any, were true) promptly shall -------------- reimburse the payee for such Taxes and shall pay such additional amount (including, without limitation, any penalties, interest or expenses in connection therewith) as may be necessary in order that the net amount received by such payee after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such payee would have received had no such Taxes been asserted. For purposes of this Section 8.4, a distribution ----------- hereunder by any Agent to or for the account of any Lender shall be deemed to be a payment by the Company. The Company's agreement under this Section 8.4 shall ----------- survive repayment of the Liabilities, cancellation of the Notes and/or any termination of this Agreement. 19 (b) In consideration of, and as a condition to, the Company's undertakings in Section 8.4(a), each Lender which is a Non-United States Person -------------- agrees (to the extent it is permitted to do so under the laws and any applicable double taxation treaty of the jurisdiction of its incorporation and the jurisdiction in which its Funding Office is located) to execute and deliver to the Administrative Agent for delivery to the Company, before the first scheduled payment date hereunder in each calendar year, either (i) two United States Internal Revenue Service Forms 1001 or (ii) two United States Internal Revenue Service Forms 4224 together with two United States Internal Revenue Service Forms W-9, or any successor forms, as appropriate, properly completed and claiming complete or partial, as the case may be, exemption from withholding and deduction of United States Federal Taxes. Each Lender which is a Non-United States Person represents and warrants to the Company that, at the Effective Date, (x) its Eurodollar Loan and Base Rate Loan Funding Offices are entitled to receive payments of interest hereunder without deduction or withholding for or on account of any Taxes imposed by the United States or any political subdivision thereof and (y) it is permitted to take the actions described in the preceding sentence under the laws and any applicable double taxation treaties of the jurisdictions specified in the preceding sentence. (c) If at any time any Lender by reason of payment by the Company of any Taxes determines in its sole discretion that it has obtained a net credit against, or return or reduction of, any tax (other than the tax to which the payment by the Company relates) payable by it which it would not have enjoyed but for such payment ("Tax Benefit"), such Lender shall thereupon pay to the Company the amount which such Lender shall certify to be the amount that, after payment, will leave such Lender in the same economic position it would have been in had it received no such Tax Benefit ("Equalization Amount"); provided, -------- however, that (i) if such Lender shall subsequently determine that it has lost - ------- the benefit of all or a portion of such Tax Benefit, the Company shall promptly remit to such Lender the amount certified by such Lender to be the amount necessary to restore such Lender to the position it would have been in if no payment had been made pursuant to this Section 8.4(c), (ii) if such Lender shall -------------- be prevented by applicable law from paying the Company all or any portion of the Equalization Amount owing the Company, such payment need not be made, (iii) such Lender shall be under no obligation to utilize any Taxes either as credits or deductions, (iv) the Company shall not be entitled to require such Lender to supply it with details of its tax position and (v) nothing contained herein shall interfere with the right of any Lender to arrange its tax affairs as it sees fit. A certificate submitted by a Lender pursuant to this Section 8.4(c) -------------- shall be conclusive, in the absence of manifest error. 20 SECTION 9 CHANGE OF CIRCUMSTANCES. 9.1 Reserve and Capital Adequacy Costs. ---------------------------------- (a) If Regulation D shall require reserves actually to be maintained in connection with any Eurodollar Loan or any Eurocurrency liabilities with respect thereto of any Lender, regardless of whether such Eurodollar Loan is then outstanding, such Lender may require the Company to pay (and the Company agrees to pay) additional interest on such Eurodollar Loan at a rate per annum equal to the difference between the Eurodollar Rate (Reserve Adjusted) and the Eurodollar Rate for such Eurodollar Loan's Interest Period. Any Lender wishing to require such payment with respect to any such Eurodollar Loan or any Eurocurrency liabilities with respect thereto shall give notice thereof at least three (3) Business Days prior to the last day of such Eurodollar Loan's Interest Period if such Eurodollar Loan is then outstanding or at least one (1) Business Day prior to the commencement of such Interest Period if such Eurodollar Loan is not then outstanding. On the last day of each Interest Period relating to each such Eurodollar Loan of such Lender, the Company shall pay directly to such Lender such additional interest. Once given, each such notice by a Lender shall be deemed automatically to continue in effect and apply to all of such Lender's Eurodollar Loans until such Lender revokes such notice. At such time, if any, as such Lender shall not be required so to maintain reserves, such Lender agrees so to notify the Company. (b) If a Lender reasonably determines that the amount of capital required or expected to be maintained by such Lender, any Funding Office of such Lender or any corporation controlling such Lender attributable to this Agreement, the Loans or its obligation to make Loans hereunder is increased as a result of a Change (as hereinafter defined), then, within 15 days of demand by such Lender (with a copy of such demand to the Administrative Agent), the Company shall pay such Lender the amount which such Lender determines is necessary to compensate it for any reduction in the rate of return on capital to an amount below that which such Lender, such Funding Office or such corporation could have achieved but for such Change and is attributable to this Agreement, the Loans or its obligation to make Loans hereunder. "Change" means (i) any change after the Effective Date in the Risk-Based Capital Guidelines (as hereinafter defined) or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the Effective Date which affects the amount of capital required or expected to be maintained by any Lender or any Funding Office or any corporation controlling any Lender or (iii) any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof or (iv) compliance by any Lender (or any Funding Office or corporation of 21 any Lender) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the Effective Date, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the Effective Date. 9.2 Increased Costs. If (i) Regulation D, or (ii) after the --------------- Effective Date, the adoption of, or any change in, any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any Funding Office of such Lender) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency, whether or not having the force of law, (a) shall subject any Lender (or any Funding Office of such Lender) to any tax, duty or other charge with respect to its Eurodollar Loans, its Notes, or its obligation to make Eurodollar Loans, or shall change the basis of taxation of payments to any Lender (or any Funding Office of such Lender) of the principal of or interest on its Eurodollar Loans owed to it or any other amounts due under this Agreement in respect of its Eurodollar Loans, its Notes, or its obligation to make Eurodollar Loans (except for changes in the rate of tax on the overall net income of such Lender or its Funding Office imposed by the government or other authority of the country in which such Lender is incorporated or in which such Lender's Funding Office is located); or (b) shall impose, modify or deem applicable any reserve (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System, but excluding any reserve included in the determination of interest rates pursuant to Section 6), special deposit, --------- capital adequacy, minimum capital, capital ratio, deposit insurance or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (or any Funding Office of such Lender); or 22 (c) shall impose, modify or deem applicable any capital adequacy or similar requirement on any Lender; or (d) shall impose on any Lender (or any Funding Office of such Lender) any other condition affecting its Eurodollar Loans or its Notes or its obligation to make or maintain Eurodollar Loans; and the result of any of the foregoing is to increase the cost to (or in the case of Regulation D, to impose an additional cost on) such Lender (or any Funding Office of such Lender) of making or maintaining any Eurodollar Loan, or to reduce the amount of any sum received or receivable by such Lender (or such Lender's Funding Office) under this Agreement or under its Notes with respect thereto, or to reduce the rate of return on such Lender's capital to a level below that which such Lender could have achieved but for such adoption or compliance (taking into consideration such Lender's policies with respect to capital adequacy) by an amount which such Lender determines to be material, then within 10 days after demand by such Lender (which demand shall be accompanied by a statement setting forth the basis of such demand), the Company shall pay directly to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or such reduction. Each Lender promptly shall notify the Company and the Administrative Agent of any event of which it has knowledge, occurring after the Effective Date, which will entitle such Lender to compensation pursuant to this Section ------- 9.2 and will designate a different Funding Office if such designation will avoid - --- the need for, or reduce the amount of, such compensation and will not, in such Lender's sole judgment, be otherwise disadvantageous to such Lender. 9.3 Basis for Determining Interest Rate Inadequate or Unfair. If -------------------------------------------------------- with respect to any Interest Period: (a) the Reference Lenders advise the Administrative Agent that deposits in Dollars (in the applicable amounts) are not being offered by the Reference Lenders in the relevant market for such Interest Period, or the Administrative Agent otherwise determines (which determination shall be binding and conclusive on all parties) that, by reason of circumstances affecting the London interbank eurodollar market, adequate and reasonable means do not exist for ascertaining the applicable Eurodollar Rate; or (b) the Required Lenders advise the Administrative Agent, as the case may be, that, as determined by the Administrative Agent or such Lender, the Eurodollar Rate, in the case of Eurodollar Loans, 23 will not adequately and fairly reflect the cost to the Required Lenders (or such Lender) of maintaining or funding Eurodollar Loans for such Interest Period, or that the making or funding of Eurodollar Loans has become impracticable as a result of an event occurring after the Effective Date which in such Required Lenders' (or such Lender's) opinion materially affects such Eurodollar Loans, then so long as such circumstances shall continue: (i) the Administrative Agent - ---- promptly shall notify the Company and the Lenders thereof, (ii) in the case of Eurodollar Loans, no Lender shall be under any obligation to make Eurodollar Loans or to Continue any Loan as, or Convert any Loan to, a Eurodollar Loan. 9.4 Changes in Law Rendering Certain Loans Unlawful. In the event ----------------------------------------------- that any change in (including the adoption of any new) applicable laws or regulations, or in the interpretation of applicable laws or regulations by any governmental or other regulatory body charged with the interpretation or administration thereof, would, in any Lender's opinion, make it unlawful for such Lender to make, maintain or fund Eurodollar Loans, then (a) such Lender shall promptly notify each of the other parties hereto, (b) all Lenders' obligations (if any) to make any Eurodollar Loan made unlawful for such Lender shall, upon the effectiveness of such event, be suspended for the duration of such unlawfulness, and (c) on the last day of the then current Interest Period for each such Eurodollar Loan (or, in any event, if such Lender so requests, on such earlier date as may be required by the relevant law, regulation or interpretation), such Eurodollar Loan shall be repaid in full, together with accrued interest and any amounts payable under Section 9.5. ----------- 9.5 Funding Losses. The Company hereby agrees that upon demand by -------------- any Lender (which demand shall be accompanied by a statement setting forth the basis for the calculations of the amount being claimed) the Company will indemnify such Lender against any net loss or expense which such Lender may sustain or incur (including, without limitation, any net loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain Eurodollar Loans), as reasonably determined by such Lender, as a result of (a) any payment or mandatory or voluntary prepayment (including, without limitation, any payment resulting from an acceleration upon the occurrence of any Event of Default or Change of Control) of any Eurodollar Loan of such Lender on a date other than the last day of such Loan's Interest Period, (b) any Conversion of any Eurodollar Loan on a date other than the last day of such Loan's Interest Period, or (c) any failure of the Company to borrow, Continue or Convert any Loans on the originally scheduled date specified therefor pursuant to this Agreement (including, without limitation, any failure to borrow resulting from any failure to satisfy the conditions precedent to 24 such borrowing). For this purpose, all notices to the Administrative Agent pursuant to this Agreement shall be deemed to be irrevocable. 9.6 Discretion of Lenders as to Manner of Funding. --------------------------------------------- (a) Notwithstanding any other provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit; it being understood, -- ----- ---------- however, that for the purposes of this Agreement all determinations hereunder - ------- shall be made as if such Lender had actually funded and maintained each Eurodollar Loan during the Interest Period for such Loan through the purchase of deposits having a maturity (and in the case of Eurodollar Loans, bearing interest at the Eurodollar Rate) corresponding to such Interest Period. (b) The Company shall not be obligated under this Agreement to make any greater payment to any Lender which changes any Funding Office than such Lender would have been entitled to receive if such Funding Office had not been changed, unless such Funding Office was changed (i) with the Company's prior written consent, (ii) at the Company's request, (iii) to mitigate or avoid the suspension of such Lender's obligations or the requirement of payment of increased costs in the circumstances contemplated by Section 9.1(a), 9.2, 9.3 or -------------- --- --- 9.4, or (iv) at a time when the circumstances giving rise to such greater - --- payment did not exist. 9.7 Conclusiveness of Statements; Survival of Provisions. ---------------------------------------------------- Determinations and statements of any Lender pursuant to Sections 9.1 through 9.6 ------------ --- shall be conclusive absent manifest error, and the provisions of Sections 9.1 ------------ through 9.6 shall survive termination of this Agreement and payment of the --- Notes. SECTION 10 REPRESENTATIONS. To induce the Lenders to enter into this Agreement and to make Loans hereunder, the Company hereby makes the following representations and warranties to the Agents and the Lenders: 10.1 Organization, etc. The Company is a corporation duly organized, ----------------- validly existing and in good standing under the laws of the State of Illinois; each Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the state of its respective incorporation; and each of the Company and each Subsidiary is duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction where, because of the nature of its activities or properties, such qualification is required and the failure so to qualify would have a material adverse effect on the business, 25 credit, operation, financial condition or prospects of the Company and its Restricted Subsidiaries taken as a whole. 10.2 Authorization; No Conflict. The execution, delivery and -------------------------- performance of this Agreement and the Notes, and the borrowings hereunder, (i) are within the Company's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not require any governmental approval which has not been previously obtained (and each such governmental approval that has been previously obtained remains effective), (iv) do not and will not contravene or conflict with any provision of law, or of any judgment, decree or order, or of the Company's charter or by-laws, and (v) do not and will not contravene or conflict with, or cause any Lien to arise under, any provision of any agreement binding upon the Company, any Subsidiary or any of their respective properties. 10.3 Validity and Binding Nature. This Agreement is, and the Notes --------------------------- when duly executed and delivered by the Company will be, legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforcement may be limited by the application of bankruptcy, moratorium, reorganization or other laws affecting the rights of creditors generally or by general principles of equity (whether or not a proceeding is brought in a court of law or equity). 10.4 Financial Statements. -------------------- (a) The Company has furnished to the Lenders true and correct copies of the Company's audited consolidated financial statements as at December 30, 1995, and its unaudited consolidated financial statements as at June 29, 1996. Such financial statements have been prepared in conformity with GAAP (subject to normal year-end audit adjustments in the case of such unaudited consolidated financial statements, and subject to the information set forth in the footnotes to such audited consolidated financial statements), and fairly present the financial condition of the Company and its Subsidiaries as at such dates and the results of their operations for the periods then ended. (b) Since either of the dates of the financial statements referred to in Section 10.4(a), there has been no material adverse change in the business, --------------- credit, operations, financial condition or prospects of the Company and its Subsidiaries taken as a whole. 10.5 Litigation and Contingent Liabilities. No Material Litigation ------------------------------------- is pending or, to the Company's knowledge, threatened against the Company except as set forth in Schedule II or as set forth in the 10-K Report of the Parent for ----------- the fiscal year ended December 30, 1995, or the 10-Q Report of the Parent 26 for the period ended June 29, 1996, all as filed with the SEC. Other than any liability incident to such Material Litigation, neither the Company nor its Subsidiaries have any material contingent liabilities not provided for or disclosed in the financial statements referred to in Section 10.4. ------------ 10.6 Title to Property. The Company and its Subsidiaries own and ----------------- hold, with respect to material real property, good and marketable title, and with respect to other material property, good and valid title, to their respective assets and property reflected in the financial statements referred to in Section 10.4 or acquired since such dates (other than assets and property ------------ sold or disposed of in the ordinary course of business), free and clear of any Lien except those referred to in Section 10.7 or permitted under Section 11.2 ------------ ------------ under the Existing Credit Agreements as incorporated herein pursuant to Section ------- 11. - -- 10.7 Liens. None of the assets of the Company or any Subsidiary is ----- subject to any Lien, except Liens shown in the financial statements referred to in Section 10.4 or in Schedule III or permitted under Section 11. ------------ ------------ ---------- 10.8 Subsidiaries. The Company has no Subsidiaries or Restricted ------------ Subsidiaries, as the case may be, except those listed in Schedule IV. ----------- 10.9 Plans and Welfare Plans. No steps have been instituted to ----------------------- terminate any Plan, no contribution failure has occurred with respect to any Plan sufficient to give rise to a lien under section 302(f) of ERISA, and no Plan has incurred an "accumulated funding deficiency" within the meaning of section 412 of the Code or Part 3 of Title I of ERISA. To the best of the Company's knowledge, no condition exists or event or transaction has occurred in connection with any Plan which is reasonably likely to have a material adverse effect on the business or financial condition of the Company and its ERISA Affiliates taken as a whole. Neither the Company nor any ERISA Affiliate has any material contingent liability with respect to any post-retirement benefit under a Welfare Plan, except for liability for continuation coverage described in Part 6 of Title I of ERISA, and except as listed on Schedule V. ---------- 10.10 Investment Company Act. The Company is neither an "investment ---------------------- company" nor a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 10.11 Public Utility Holding Company Act. Neither the Company nor ---------------------------------- any Subsidiary is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding 27 company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 10.12 Regulations G, U and X. The Company is not engaged ---------------------- principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. None of the Company, the Parent, any Affiliate of either of them or any Person acting on their behalf has taken or will take action to cause the execution, delivery or performance of this Agreement, the Notes, the making of the Loans or the use of proceeds of the Loans to violate Regulation G, U or X of the Board of Governors of the Federal Reserve System. 10.13 Labor Controversies. There are no labor controversies pending ------------------- or threatened against the Company or any of its Subsidiaries which, if adversely determined, would materially and adversely affect the business, credit, operations, financial condition or prospects of the Company and its Subsidiaries, taken as a whole. 10.14 Tax Status. ---------- (a) All tax returns, reports and forms required to be filed with any domestic or foreign taxing authority in connection with any activities or assets of the Company or any Subsidiary have been filed, except where the failure to file any such return, report or form would not have any material adverse effect on the business or financial condition of the Company and its Subsidiaries taken as a whole. (b) All taxes required to be paid with respect to the activities or assets of the Company and its Subsidiaries have been duly paid or provisions deemed appropriate were made by the Parent and/or the Company and its Subsidiaries, on the books and records therefor, except such amounts (i) as are contested in good faith and as to which adequate reserves in accordance with GAAP were provided by the Company in accordance with the best estimates of ultimate liability by the entity responsible therefor or (ii) the non-payment of which would not have a material adverse effect on the business or financial condition of the Company and its Subsidiaries taken as a whole. (c) It is recognized and acknowledged by the Lenders that, from 1976 through June 22, 1988, for federal income tax purposes the Company and its Subsidiaries were members of the affiliated group of which Mobil Corporation ("Mobil"), the Company's ultimate parent corporation during such period, was the common parent, and the income of the Company and its Subsidiaries were included in the consolidated federal income tax returns of Mobil for such period. All filings and payments with respect to such period have been made directly by Mobil, and all refunds with respect thereto have been paid directly to Mobil; and the Company and its Subsidiaries have made and received payments with 28 respect to such taxes under tax sharing agreements with Mobil and/or a Subsidiary thereof. Accordingly, all representations and warranties made in Sections 10.14(a) and 10.14(b) with respect to federal income taxes as they - ----------------- -------- relate to such period are qualified to the best of the Company's general knowledge of Mobil's practices and procedures. To the best of its knowledge, the Company has made all payments which are now due to Mobil under such tax sharing agreements. 10.15 No Default. No event has occurred and no condition exists ---------- which, upon the execution and delivery of this Agreement or upon the funding of any Loan, will constitute an Event of Default or Unmatured Event of Default. 10.16 Compliance with Applicable Laws. To the best of the Company's ------------------------------- knowledge, the Company and its Subsidiaries are in compliance with the requirements of all applicable laws, rules, regulations and orders of all governmental authorities (Federal, state, local or foreign, and including, without limitation, employee benefit, environmental and health and safety laws, rules, regulations and orders), a breach of which would materially and adversely affect the business, credit, operations, financial condition or prospects of the Company and its Subsidiaries taken as a whole. 10.17 Licenses, etc. To the best of the Company's knowledge, neither ------------- the Company nor any of its Subsidiaries has failed to obtain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of its respective properties or to the conduct of its respective business, which violation or failure to obtain might materially and adversely affect the business, credit, operations, financial condition or prospects of the Company and its Subsidiaries taken as a whole. 10.18 Purpose. The purpose of the Loans shall be for working capital ------- purposes of the Company. SECTION 11 COVENANTS. From the Effective Date until the expiration or termination of all of the Lenders' Commitments, and thereafter until payment in full of all Liabilities, the Company agrees that, unless at any time the Required Lenders shall otherwise expressly consent in writing, it will comply with the covenants set forth in Section 11 of each of the Existing Credit Agreements with the same ---------- effect as if such covenants were set forth herein in full it being understood, however, that for purposes hereof (i) any amendment, modification or termination of the Existing Credit Agreements after the Effective Date shall be disregarded, (ii) each reference in Section 11 of either of the Existing Credit Agreements to ---------- "Change of Control", shall be deemed to 29 refer to a Change of Control as defined in this Agreement, (iii) Section ------- 11.2(xii) of each of the Existing Credit Agreements shall be deemed to read as - --------- follows: "Liens in favor of the Agents (or any of them) or the lenders under this Agreement and the Existing Credit Agreements, provided that such Liens shall ratably secure all obligations of the Company in respect of loans under this Agreement and/or the Existing Credit Agreements and in respect of the Company's guaranty of loans under the Existing Signature Credit Agreement", and (iv) each reference in the Existing Credit Agreements to "this Agreement" or "Notes" or "Liabilities" or the like shall be deemed to refer to this Agreement and the Notes and Liabilities under this Agreement, as the case may be. SECTION 12 CONDITIONS. Each Lender's obligation to make its Loans is subject to the following conditions: 12.1 Documents. --------------- (a) On or before October 7, 1996, or such later date as may be agreed to by the Required Lenders (the "Effective Date"), the Administrative Agent shall have received all of the following, each duly executed and dated the Effective Date or such other date satisfactory to the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent and special counsel to the Agents, and each (except for the Notes, of which only the originals shall be signed) in sufficient number of counterparts to provide one for each Lender: (i) Credit Agreement. Counterparts of this Agreement, whether ---------------- on the same or different counterparts, executed by the Company and all of the Lenders (or in the case of any Lender as to which an executed counterpart shall not have been so received, telegraphic, telefax, telex or other written confirmation of execution of a counterpart hereof by such Lender); (ii) Notes. One Note of the Company payable to the order of ----- each Lender; (iii) Resolutions. Certified copies of (i) the articles of ----------- incorporation and by-laws of the Company, (ii) resolutions of the Company's Board of Directors authorizing or ratifying the execution, delivery, performance of and borrowings under, respectively, this Agreement, the Notes, and any other documents provided for herein or therein to be executed by the Company and (iii) all documents evidencing any necessary corporate action, consents and governmental 30 approvals (if any) with respect to this Agreement, the Notes and any other documents provided for herein or therein to be executed by the Company; (iv) Good Standing. Good standing certificate for the Company ------------- issued by the Secretary of State of Illinois; (v) Incumbency and Signatures. A certificate of the Secretary ------------------------- or an Assistant Secretary of the Company certifying the names of the officer or officers thereof authorized to sign this Agreement, the Notes and the other documents provided for in this Agreement, together with a sample of the true signature of each such officer (it being understood that each Agent and each Lender may conclusively rely on each such certificate until formally advised by a like certificate of any changes therein); (vi) Opinion of Counsel for the Company. The opinion of ---------------------------------- Altheimer & Gray, counsel for the Company, addressed to the Agents and the Lenders, substantially in the form of Exhibit C; --------- (vii) Certificate. A certificate signed by an Authorized ----------- Officer on behalf of the Company substantially in the form of Exhibit ------- D to the effect that (i) on the Effective Date no Event of Default or - Unmatured Event of Default has occurred and is continuing or shall result from the making of any Loan on such date, (ii) the Company's representations and warranties contained in Sections 10.1 through ------------- 10.18 are true and correct as of the Effective Date with the same ----- effect as though made on the Effective Date, and (iii) all of the conditions set forth in this Section 12.1 have been satisfied; ------------ (viii) [Reserved] (ix) Other. Such other documents as the Administrative Agent or ----- any Lender may reasonably request. (b) [Reserved] 31 12.2 Conditions to Loans. On and after the Effective Date, each ------------------- Lender's obligation to make Loans (including the initial Loan and each subsequent Loan) or a Continuation or a Conversion is subject, unless waived in writing by the Required Lenders, to the conditions precedent that: (a) no Event of Default or Unmatured Event of Default shall have occurred and be continuing or shall result from the making of such Loan; (b) the Company's representations and warranties contained in Sections 10.1, 10.2, 10.3, 10.4(a), 10.7, 10.10, 10.11, 10.12, 10.15, and ------------- ---- ---- ------- ---- ----- ----- ----- ----- 10.18, shall be true and correct as of the date of such requested Loan, ----- Continuation or Conversion with the same effect as though made on the date of such Loan, Continuation or Conversion; and (c) such Loan shall not exceed the limits specified in Section ------- 2.2(a), (b) or (c). ------ --- --- Each request by the Company for a Loan or for a Continuation or a Conversion as described in this Section 12.2 shall be deemed to automatically constitute a ------------ representation and warranty by the Company to the effect that all of the conditions set forth in this Section 12.2 for the making of such Loan will be ------------ fully and completely satisfied as of the date of, and after giving effect to, the making of such Loan, Continuation or Conversion. SECTION 13 EVENTS OF DEFAULT AND THEIR EFFECT. 13.1 Events of Default. Each of the following shall constitute an ----------------- Event of Default under this Agreement: (a) Non-Payment of Notes and Certain Fees. Default, and continuance ------------------------------------- thereof for three Business Days after notice thereof to the Company by any Agent, any Lender or the holder of any Note, in the payment (including any prepayment under Section 2.7) when due of (i) any principal of or interest ----------- on any Loan or (ii) any amount payable under Section 6.5, 6.6, or 6.7. ----------- --- --- (b) Non-Payment of Certain Other Amounts under this Agreement. --------------------------------------------------------- Default, and continuance thereof for ten Business Days after notice thereof to the Company by any Agent, any Lender or the holder of any Note, in the payment when due of any material amount under this Agreement (and not constituting an Event of Default under clause (a) above). ---------- (c) Non-Payment of Finance Obligations. Default in the payment when ---------------------------------- due (subject to any applicable 32 grace period), whether by acceleration or otherwise, of any Finance Obligation of the Company or any Restricted Subsidiary or default in the performance or observance of any obligation or condition with respect to any such Finance Obligation if (i) the effect of such default is to accelerate the maturity of any such Finance Obligation or cause any such Finance Obligation to be prepaid, purchased or redeemed or (ii) the holder or holders thereof, or any trustee or agent for such holders, (x) causes such Finance Obligation to become due and payable prior to its expressed maturity or to be prepaid, purchased or redeemed or (y) receives any payment (other than any payment which was scheduled to be made prior to the occurrence of such default), guarantee or security or other concession from or on behalf of Parent, the Company or any Restricted Subsidiary or (iii) in case such default is a default in the payment when due, such default has not been remedied within five Business Days after notice thereof to the Company by any Agent, any Lender, the holder of any Note or the holder or holders of such Finance Obligation or any trustee or agents for such holders; provided, however, that no such default under this clause (c) -------- ------- ---------- shall constitute an Event of Default unless the amount of Finance Obligations so affected is at least $5,000,000. (d) Bankruptcy, Insolvency, etc. The occurrence of any of the --------------------------- following events: (i) the Company or any Restricted Subsidiary becomes insolvent or generally fails to pay, or admits in writing its inability or refusal to pay, debts as they become due; or (ii) the Company or any Restricted Subsidiary applies for, consents to, or acquiesces in the appointment of a trustee, receiver or other custodian for the Company or such Restricted Subsidiary or any property thereof, or makes a general assignment for the benefit of creditors; or, (iii) in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for the Company or any Restricted Subsidiary or for a substantial part of the property of any thereof and is not discharged within 60 days; or (iv) any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding (except the voluntary dissolution, not under any bankruptcy or insolvency law, of a Restricted Subsidiary), is commenced in respect of the Company or any Restricted Subsidiary, and if such case or proceeding is not commenced by the Company or such Restricted Subsidiary, it is consented to or acquiesced in by the Company or such Restricted Subsidiary or remains for 60 days 33 undismissed; or (v) the Company or any Restricted Subsidiary takes any corporate action to authorize, or in furtherance of, any of the foregoing; provided that the provisions of this Section 13.1(d) shall not apply to any --------------- Special Restricted Subsidiary to which the foregoing provisions of Section ------- 13.1(d) would otherwise apply, which together with all other Special ------- Restricted Subsidiaries with respect to which an event described in the foregoing provisions of Section 13.1(d) shall have occurred, has assets --------------- which do not exceed one percent (1%) of the total assets of the Company and its Restricted Subsidiaries. (e) Specified Non-Compliance with this Agreement. Failure by the -------------------------------------------- Company to comply with or to perform its obligations under Sections 11.3 ------------- through 11.6 and 11.20 of the Existing Credit Agreements as incorporated ---- ----- herein pursuant to Section 11. ---------- (f) Other Non-Compliance with this Agreement. Failure by the Company ---------------------------------------- to comply with or to perform its obligations under any provision of this Agreement (and not constituting an Event of Default under any of the other provisions of this Section 13.1) and (i) continuance of such failure for 30 ------------ days after notice thereof to the Company by any Agent, any Lender or the holder of any Note specifying such failure if such failure can be cured with diligence within such 30-day period by the Company or can be cured by the payment of money, or (ii) continuance of such failure for 60 days after notice thereof to the Company by an Agent, any Lender or the holder of any Note specifying such failure if such failure cannot with diligence be cured within such 30-day period and cannot be cured by the payment of money. (g) Representations and Warranties. Any representation or warranty ------------------------------ made by the Company herein is breached or contains any statement which is false or misleading in any material respect, or any schedule, certificate or other writing furnished by the Company to any Agent, any Lender or the holder of any Note pursuant to this Agreement contains any material statement which is false or misleading in any material respect on the date as of which the facts therein set forth are (or are deemed to be) stated or certified. (h) Stock Ownership. Until such time as under the provisions of --------------- Section 5 a Change of Control can no longer be deemed to have occurred, --------- Parent or Successor to Parent (except by reason of a merger of the Company into the Parent) shall fail to own, directly or indirectly, 100% of the capital stock (excluding Debt-Like Preferred Stock) of 34 the Company (or any successor to the Company permitted by Section 11.6 of ------------ the Existing Credit Agreements as incorporated herein pursuant to Section ------- 11) free and clear of all Liens. "Successor to Parent" refers to the -- Person into which the Parent shall have been merged or in the case of a consolidation involving the Parent, the Person formed by such consolidation or in the case of the sale of substantially all the assets of the Parent, the Person to whom substantially all of the assets of the Parent shall have been transferred or conveyed; provided, in each case, voting shares of the capital stock of, or voting equity interests in, such Person are converted from or exchanged for Class A Common Stock. (i) Judgments. Final judgment or judgments (after the expiration of --------- all times to appeal therefrom) for the payment of money in excess of $5,000,000 in the aggregate shall be rendered against Company or any of its Restricted Subsidiaries and the same shall not be (i) fully covered by insurance or (ii) vacated, stayed, bonded, paid or discharged for a period of sixty (60) days. (j) Retail Credit Program Agreement. (i) An amendment which ------------------------------- materially adversely affects the Lenders shall be made to the Retail Credit Program Agreement without the prior written consent of the Required Lenders, including, without limitation, any amendment to any provision thereto which secures any Seller Notes (other than as permitted by clause (ii) of this Section 13.1(j)) or provides for the mandatory payment of such Seller Notes on a date earlier than the date on which such Seller Notes are payable as at March 14, 1996 (except as otherwise contemplated in the "Loss Note Section" of the Memorandum of Understanding), or (ii) any of the Seller Notes shall be secured by any property or rights other than the receivables sold or financed under the Retail Credit Program Agreement, and collections and offset rights thereunder, or (iii) the Retail Credit Program Agreement shall fail to remain in full force and effect, or (iv) any default by the Company under the Retail Credit Program Agreement (after the expiration of any applicable grace period) shall occur and be continuing which has not been waived by the GE Capital Parties and which provides the GE Capital Parties thereunder with the right to terminate obligations of the GE Capital Parties to purchase customer receivables thereunder from the Company and to extend credit to the customers of the Company pursuant thereto, or (v) the Company or the GE Capital Parties shall give notice of termination or take any action to terminate thereunder (other than the notice to terminate the Retail Credit Program Agreement at the expiration of the term thereof (or such term as extended pursuant thereto) and other than a 35 termination by the Company pursuant to which a wind down or transition of at least one year is provided). (k) Other Agreements. An Event of Default (as defined in each of the ---------------- Long Term Credit Agreement, the Short Term Credit Agreement or the Existing Signature Credit Agreement) shall occur. 13.2 Effect of Event of Default. If any Event of Default described -------------------------- in Section 13.1(d) shall occur, automatically all of the Commitments (if they --------------- have not theretofore terminated) shall immediately terminate and automatically all Liabilities shall become immediately due and payable, all without presentment, demand or notice of any kind all of which are hereby waived; and, in the case of any other Event of Default, unless such Event of Default shall have been cured, (i) the Administrative Agent may and, upon the written request of the Required Lenders, shall declare all Commitments (if they have not theretofore terminated) to be terminated whereupon all such Commitments (if they have not theretofore terminated) shall immediately terminate, and (ii) the Administrative Agent may and, upon the written request of the Required Lenders, declare all Liabilities to be due and payable, whereupon all such Liabilities shall become immediately due and payable, all without presentment, demand or notice of any kind, all of which are hereby waived. The Administrative Agent shall promptly advise the Company and each Lender of any such declaration, but failure to do so shall not impair the effect of such declaration. Notwithstanding the foregoing, no rescission of a termination of the Commitments shall be made without the written consent of all of the Lenders, and no rescission of any acceleration of any of the Loans shall be made without the written consent of the Lenders holding 100% of the aggregate unpaid principal amount of the Loans so accelerated. SECTION 14 THE AGENTS. 14.1 Authorization. Each Lender and the holder of each Note ------------- authorizes each Agent to act on behalf of such Lender or holder to the extent provided in this Agreement and in any other document or instrument delivered hereunder or in connection herewith, and to take such other action as may be reasonably incidental thereto. Subject to the provisions of Section 14.3, each ------------ Agent, in its capacity as such, will take such action permitted by any agreement delivered in connection with this Agreement as may be requested in writing by the Required Lenders or all Lenders, as appropriate. 14.2 Indemnification. The Lenders severally agree to indemnify each --------------- Agent, in its capacity as such, and each officer, director, employee and agent of each Agent (herein collectively called the "Agent Parties" and individually called an "Agent 36 Party"), ratably according to their respective Commitments to the extent not reimbursed by the Company, from and against any and all actions, causes of action, suits, losses, liabilities, damages, and expenses which may at any time (including without limitation at any time following the payment of any of the Liabilities) be imposed on, incurred by or asserted against such Agent Party in any way relating to or arising out of this Agreement, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by such Agent Party under or in connection with any of the foregoing; provided, that no Lender shall be liable for the payment to -------- such Agent Party of any portion of such actions, causes of action, suits, losses, liabilities, damages, and expenses resulting from such Agent Party's gross negligence or willful misconduct. All obligations provided for in this Section 14.2 shall survive satisfaction of the Liabilities, cancellation of the - ------------ Notes and any termination of this Agreement. 14.3 Action on Instructions of the Required Lenders. As to any ---------------------------------------------- matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), no Agent shall be required to exercise any discretion or take any action, but each Agent shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon the Lenders (including, without limitation, all subsequent holders of the Notes); provided, however, that no Agent shall be -------- ------- required to take any action which exposes such Agent to personal liability or which is contrary to this Agreement or applicable law. The relationship between the Agents and the Lenders is and shall be that of agent and principal only and nothing herein contained shall be construed to constitute any Agent a trustee for any party hereto or any holder of a Note or of a participation therein nor to impose on any Agent duties and obligations other than those expressly provided for herein. 14.4 Payments. -------- (a) The Administrative Agent shall be entitled to assume that each Lender has made the proceeds of each of its Loans available in accordance with this Agreement unless such Lender notifies such Agent prior to 11:30 a.m., Chicago time, on the Funding Date for such Loan that it does not intend to make such Loan, it being understood that no such notice shall relieve such Lender of any of its obligations under this Agreement. If the Administrative Agent makes any payment to the Company on the assumption that a Lender has made the proceeds of its Loan available to the Administrative Agent but has not in fact done so, such Lender shall pay to the Administrative Agent on demand an amount equal to the amount of the Loan which it was obligated to make, together with interest thereon for each day that elapses from and including such Funding Date to the Business Day on which 37 such sums become immediately available to the Administrative Agent, prior to 12:00 noon, Chicago time, at the Federal Funds Rate for each such day, based upon a year of 360 days. (b) Each Agent shall be entitled to assume that the Company has made all payments due hereunder on the due date thereof unless it receives notification prior to any such due date from the Company that the Company does not intend to make any such payment, it being understood that no such notice shall relieve the Company of any of its obligations under this Agreement. If any Agent distributes any payment to a Lender or any Assignee hereunder in the belief that the Company has paid to such Agent the amount thereof but the Company has not in fact paid to such Agent such amount, such Lender or Assignee shall pay to such Agent on demand an amount equal to the amount of the payment made by such Agent to such Lender, together with interest thereon for each day that elapses from and including the date on which such Agent made such payment to but excluding the Business Day on which the amount of such payment is returned to such Agent in immediately available funds prior to 12:00 noon, Chicago time, at the Federal Funds Rate for each such day, based upon a year of 360 days. If the amount of such payment is not returned to such Agent in immediately available funds within five (5) Business Days after such demand for payment was made by such Agent, such Lender or Assignee shall pay to such Agent on demand an amount calculated in the manner specified in the preceding sentence after substituting the term "Base Rate" for the term "Federal Funds Rate". A certificate of the Administrative Agent submitted to any Lender with respect to amounts owing under this Section 14.4(b) shall be conclusive absent manifest --------------- error. (c) Each Agent shall promptly remit to each Lender or other holder its share of all payments received by such Agent for the account of such Lender or holder, such remittance to be in Dollars and in same day funds (or, if different, the kind of funds received by such Agent). Unless expressly provided otherwise in this Agreement, each Agent shall distribute payments to the Lenders on the same day on which such Agent received the corresponding payment from the Company if such payment from the Company was received before 12:00 noon, Chicago time, and on the next Business Day if such payment from the Company was received after 12:00 noon, Chicago time, and if any Agent does not distribute payments to the Lenders on the day when due such Agent shall pay to each Lender entitled to receive payment, on demand by such Lender, interest on the payment due to such Lender for each day that elapses from and including the date on which such payment was due to but excluding the Business Day on which such payment is made to such Lender in immediately available funds prior to 12:00 noon, Chicago time, at the Federal Funds Rate for each such day, based upon a year of 360 days. If the amount of such payment is not made to any Lender in immediately available funds within five (5) Business Days after such payment was due to such Lender, such Agent shall pay to such Lender on demand an 38 amount calculated in the manner specified in the preceding sentence after substituting the term "Base Rate" for the term "Federal Funds Rate". A certificate of any Lender submitted to any Agent with respect to amounts owing under this Section 14.4(c) shall be conclusive absent manifest error. --------------- 14.5 Exculpation. Each Agent shall be entitled to rely upon advice ----------- of counsel concerning legal matters, and upon this Agreement and any Note, security agreement, schedule, certificate, statement, report, notice or other writing which it believes to be genuine or to have been presented by a proper person. No Agent Party shall (i) be responsible for any recitals, representations or warranties contained in, or for the execution, validity, genuineness, effectiveness or enforceability of, this Agreement or any Note, security agreement, schedule, certificate, statement, report, notice or other writing delivered hereunder or in connection herewith, (ii) be responsible for the validity, genuineness, perfection, effectiveness, enforceability, existence, value or enforcement of any collateral security, (iii) be deemed to have knowledge of an Event of Default or Unmatured Event of Default until after having received actual notice thereof from the Company or any Lender, (iv) be under any duty to inquire into or pass upon any of the foregoing matters, or to make any inquiry concerning the performance by the Company or any other obligor of its obligations, or (v) in any event, be liable as such for any action taken or omitted by it or them, except for its or their own gross negligence or willful misconduct. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, any Agent in its individual capacity. 14.6 Credit Investigation. Each Lender acknowledges and shall cause -------------------- each actual or potential Assignee or Participant to acknowledge to such Lender in its assignment or participation agreement with such Lender that (i) it has made and will continue to make such inquiries and has taken and will take such care on its own behalf as would have been the case had it made the Loans directly to the Company without the intervention of any Agent or any other Person, and (ii) it has made and will continue to make its own credit analysis and decisions relating to this Agreement independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it has deemed appropriate. Each Lender agrees and acknowledges and shall cause each actual or potential Assignee or Participant to agree with, and acknowledge to, such Lender in its assignment or participation agreement with such Lender that no Agent or any other Lender makes any representations or warranties about the creditworthiness of the Company or any other party to this Agreement or with respect to the legality, validity, sufficiency or enforceability of this Agreement or any Note or the value of any security therefor. 39 14.7 Agents and Affiliates. Each Agent and each of its successors as --------------------- an Agent shall have the same rights and powers hereunder as any other Lender and may refrain from exercising the same as though it were not an Agent, and each Agent and each such successor and its Affiliates may accept deposits from and generally engage in any kind of business with the Company or any Affiliate thereof as if such Agent and each such successor were not an Agent. 14.8 Resignation and Removal. ----------------------- (a) Any Agent may resign as such at any time upon at least 30 days' prior notice to the Company and the Lenders, and any Agent may be removed as such at any time by vote of the Required Lenders and notice to the retiring Agent and the Company. In the event of any such resignation or removal, the Required Lenders shall as promptly as practicable (but with five (5) Business Days' prior written notice being given to the Company) appoint a successor Agent. If no successor Agent shall have been so appointed, and shall have accepted such appointment within 30 days after either the retiring Agent's giving of notice of resignation or the Required Lenders' vote to remove the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof or under the laws of another country which is doing business in the United States and having a combined capital, surplus and undivided profits of at least $100,000,000. (b) [Reserved] (c) Upon its acceptance of its appointment, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from all further duties and obligations as Agent under this Agreement. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Agreement shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. SECTION 15 GENERAL. 15.1 Waiver; Amendments. No delay on the part of any Agent, any ------------------ Lender or the holder of any Note in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any of them of any right, power or remedy preclude any other or further exercise thereof, or the exercise of any other right, power or remedy. Except as otherwise specifically provided in this Agreement, the concurrence of the Required Lenders shall be required for any amendment, modification or waiver of, or consent with respect to, 40 any provision of this Agreement, the Notes or other documents, instruments or agreements affecting the rights of such Lenders. Any amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Notwithstanding the foregoing: (a) the consent of all Lenders shall be required for any amendment, modification, waiver or consent with respect to the following: (i) any change in the amount or the scheduled timing of the payment of principal or any extension of the maturity thereof, (ii) any reduction in the rate of interest or any change in the timing of the payment of such interest, (iii) any change or reduction in or any waiver of the amount of any fees under Section 6.5 or any change in the timing of the payment of any such fees, ----------- (iv) any extension of such Commitment or any increase in the amount of such Commitment, or (v) any change in the allocation of proceeds or payments among the Lenders; (b) the consent of all Lenders shall be required for any amendment, modification, waiver or consent relating to any of the following items: (i) any change in Section 12.1, or (ii) any change in this Section 15.1, or ------------ ------------ (iii) any change to the definition of Required Lenders or any provision which specifies the requisite level or number of Lenders which are required to amend, modify, waive or consent to any provisions of this Agreement. (c) no provisions of Section 6.7 or Section 14 shall be amended, ----------- ---------- modified or waived without the consent of all Agents. 15.2 Notices. ------- (a) Except as otherwise expressly provided in this Agreement, any notice hereunder to the Company, any Agent, any Lender or other holder shall be in writing. Notices given by telegram, telex, telecopier or personal delivery shall be deemed to have been given and received when sent (and, in the case of telex, the appropriate answerback is received) and notices given by mail shall be deemed to have been given and received three Business Days after the date when sent by registered or certified mail, postage prepaid, and addressed to the Company, such Agent, or such Lender (or other holder) at its address shown below its signature hereto, or at such other address as any such Person may, by written notice received by such other persons, have designated as its address for such purpose. Any Agent, any Lender or the holder of any Note giving any waiver, consent or notice to, or making any request upon, the Company hereunder 41 shall promptly notify each Lender and each other Agent thereof. Notices of Loan Requests made by the Company shall be directed to the persons specified for such purpose for each party on the signature pages hereto or in subsequent writings among the parties. Notices to any Agent in connection with borrowings, payments, Continuations or Conversions shall not be effective until actual receipt by such Agent. (b) Each Agent and each Lender shall be entitled to rely upon all telephonic notices without awaiting receipt of written versions of such notices and the Company shall hold each Agent, and each Lender harmless from, and shall indemnify each Agent and each Lender against, any loss, cost or expense ensuing from any such reliance. 15.3 Computations. ------------ (a) [Reserved] (b) [Reserved] (c) While the Company and GE Capital Parties intend that the sale of receivables to GE Capital Parties by the Company under the Retail Credit Program Agreement be considered sales by the Company and not secured loans to the Company by GE Capital Parties, such transaction may be classified as a loan under Financial Accounting Standards Board Statement No. 77. Irrespective of whether such receivables sale transactions are classified as a sale or a loan under Financial Accounting Standards Board Statement No. 77, such transactions shall be treated as sales without recourse for the purposes of this Agreement and not a secured loan. 15.4 Participations; Assignments; Replacement of Lenders. --------------------------------------------------- (a) Participations. Subject to the provisions of this Section 15.4, -------------- ------------ any Lender may at any time, in the ordinary course of its commercial banking business and in accordance with applicable law, sell to one or more banks or other Persons (collectively, "Participants") participating interests in any Loan owing to such Lender, or any Note held by such Lender. In the event of any such sale to a Participant, upon request by the Company the selling Lender shall give written notice, to the Company stating the Participant's name and address and the amount of the participation purchased, but (i) the Company and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, 42 (ii) all amounts payable by the Company shall be determined as if such Lender had not sold such participation, and (iii) any Participant which is not an Affiliate of the selling Lender shall have no right to require the selling Lender to take or omit to take any action under this Agreement or any Note other than action directly affecting the extension of the stated maturity of any Loan, directly affecting any scheduled installment of principal or any scheduled reduction in the stated amount of, or interest on, any Loan in which such participation was sold, or reducing the principal or stated amount thereof or the rate of interest thereon or fees payable hereunder. Each Lender agrees to incorporate the requirements set forth in the preceding sentence into each participation agreement which such Lender enters into with any Participant. The Company agrees that 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, if its participation agreement with the selling Lender so provides, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement or any Note to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement or any Note; provided that such right of setoff -------- shall be subject to such Participant's obligation to share with the Lenders, and the Lenders agree to share with such Participant, as provided in Section 8.2. ----------- No participation contemplated in this Section 15.4 shall relieve any Lender ------------ either from its Commitment hereunder or from any of its other obligations hereunder and such Lender shall remain solely responsible for the performance thereof. (b) Assignments. Subject to the provisions of this Section 15.4, any ----------- ------------ Lender which is not an Agent may, with the Company's prior written approval (which approval shall not be unreasonably withheld or delayed by the Company, it being understood that upon the occurrence of a Default or an Event of Default the Company shall not have any right to withhold its approval), and any Lender which is an Agent may, without the Company's prior written approval, execute an assignment and acceptance substantially in the form of Exhibit E, with --------- appropriate insertions (herein individually called an "Assignment" and collectively called the "Assignments"), whereby such Lender shall assign, without recourse and without representation or warranty except as specifically set forth in said Assignment, to one or more banks or other entities (herein individually called an "Assignee" and collectively called the "Assignees") all or any part of such Lender's rights and 43 benefits, and delegate all or any part of such Lender's obligations, under this Agreement and its Notes. Upon execution, delivery and acceptance of each Assignment, from and after the effective date specified therein, which effective date shall be at least five (5) Business Days after the execution thereof, the Company, the Agents and the Lenders agree that, to the extent of any such Assignment, (x) the Assignee thereunder shall, in addition to any rights, benefits and obligations hereunder held by it immediately prior to such effective date, have the rights, benefits and obligations of a Lender under this Agreement and the assignor Lender's Notes (including, without limitation, rights and benefits arising out of Section 9) and the same --------- rights of setoff pursuant to Section 8.3 and obligation to share pursuant ----------- to Section 8.2 as it would have if it were a Lender hereunder to the extent ----------- that the same have been assigned and delegated to it pursuant to such Assignment, and (y) the assignor Lender shall, to the extent that rights, benefits and obligations hereunder have been assigned and delegated by it pursuant to such Assignment, relinquish its rights and benefits and be released from its obligations under this Agreement (and, in the case of an Assignment covering all or the remaining portion of an assignor Lender's rights, benefits and obligations under this Agreement, such Lender shall cease to be a party hereto), except that in all cases the assignor Lender shall remain entitled to the rights and benefits arising under Sections 6, 8.4, ---------- --- 9, 15.5 and 15.6 with respect to any period of time prior to the effective - ---- ---- date of any such Assignment, and shall remain liable with respect to any of its obligations arising under Sections 6.9, 8.4(c), 14.2 and 15.5, with ------------ ------ ---- ---- respect to any matters arising prior to the effective date of any such Assignment; provided, that: -------- (i) each Agent and each Lender shall be entitled to continue to deal solely and directly with the assignor Lender in connection with the interests so assigned and delegated to the Assignee until written notice of such Assignment, together with addresses and related information with respect to the Assignee, shall have been given to each Agent and each Lender by the assignor Lender and the Assignee, (ii) if the Assignee is a Non-United States Person, it shall deliver to the Company and the Administrative Agent a written representation and 44 undertaking substantially similar to Section 8.4(b), and -------------- (iii) the Company shall not be required to pay any costs, fees or taxes of any kind or nature with respect to the interest(s) assigned in excess of those payable by the Company in connection with such interest(s) prior to such assignment except for any costs, fees or taxes described in Section 8.4, 9 or 15.6. ----------- - ---- Upon its receipt of an Assignment executed by an assignor Lender and an Assignee, together with the Notes subject to such Assignment, the Administrative Agent shall, if such Assignment has been completed and is in substantially the form of Exhibit E, accept such Assignment and forward a photostatic copy thereof --------- to the Company. Within five (5) Business Days after its receipt of a photostatic copy of such Assignment, the Company shall execute and deliver to the Administrative Agent, to be exchanged for the Notes delivered to the Administrative Agent by the assignor Lender, new Notes payable to the order of the Assignee in an amount equal to the Commitment assumed by it pursuant to such Assignment and, if the assignor Lender has retained a Commitment hereunder, new Notes payable to the order of the assignor Lender in an amount equal to the Commitment retained by it hereunder. Such new Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Notes, shall be dated the effective date of such Assignment, shall be payable to the order of the Assignee or the assignor Lender, shall otherwise be in substantially the form of such surrendered Notes, and shall constitute Notes under this Agreement. Such new Notes shall be in replacement and substitution for, and not in payment of, the Notes delivered to the Administrative Agent by the assignor Lender. The Administrative Agent shall deliver such new Notes to the payee or payees thereof and shall mark the Notes previously held by the assignor Lender as "replaced" and shall deliver the same to the Company. The Administrative Agent shall from time to time distribute a revised Schedule I ---------- giving effect to any Assignments or other modifications hereunder. (c) Federal Reserve. Anything contained in this Agreement to the --------------- contrary notwithstanding, and without the need to comply with any of the formal or procedural requirements set forth in this Agreement, any Lender may at any time and from time to time grant a participation in, assign, deposit or pledge all or any portion of its rights under this Agreement or the Notes to a Federal Reserve Bank; provided, however, no such participation, assignment, deposit or -------- ------- pledge shall relieve such Lender of any of its obligations under this Agreement. (d) Information. Notwithstanding the terms of any previous ----------- confidentiality agreements with respect to the subject matter hereof between the Company and any Lender, from and after 45 the Effective Date any Lender may furnish any information concerning the Parent, the Company and the Subsidiaries which has been furnished to such Lender pursuant hereto to any Assignee, Participant, or potential Assignee or Participant; provided, however, that the recipient of such information shall, -------- ------- prior to being furnished with any such information, agree to maintain the confidentiality of such information. Notwithstanding the foregoing sentence, any Agent, Lender, Assignee, Participant or potential Assignee or Participant shall be permitted to disclose information regarding the Company and its Subsidiaries (i) to any other Agent or Lender, or to any Assignee or Participant, (ii) to any Affiliate, agent or employee that agrees to be bound by this Section 15.4(d), (iii) upon order of any court or administrative agency, --------------- (iv) upon the request or demand of any regulatory agency or authority having jurisdiction over such party, (v) which has been publicly disclosed, (vi) which has been obtained from any Person that is not a party hereto or an Affiliate, agent or employee of any such party, (vii) in connection with the exercise of any remedy hereunder, or (viii) to such Person's certified public accountants and its attorneys. 15.5 Costs, Expenses and Taxes. ------------------------- (a) The Company agrees to pay on demand all fees and out-of-pocket costs and expenses of the Agents, including the fees and out-of-pocket expenses of McDermott, Will & Emery as special counsel to the Agents (and of other counsel, if any, who may be retained by said counsel), in connection with the preparation, execution, delivery, syndication, administration and enforcement of this Agreement, the Notes and all other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith, and any and all waivers, consents, amendments, modifications, replacements or restatements relating to any thereof. Each Lender agrees to reimburse the Administrative Agent for such Lender's pro rata share (based upon its respective --- ---- Commitment) of any reasonable costs or expenses incurred by such Agent on behalf of the Lenders in connection with such administration and enforcement (including reasonable attorneys' fees and legal expenses) not paid by the Company except to the extent that such costs or expenses arise from such Agent's gross negligence or willful misconduct. (b) The Company further agrees (i) to pay on demand all reasonable fees and out-of-pocket expenses (including all attorneys' fees, legal expenses and allocated costs of staff counsel) of each Lender incurred directly in connection with the enforcement of this Agreement, the Notes and all other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith, and any and all amendments, modifications, replacements or restatements relating to any thereof, and (ii) to pay, and to save each Agent and the Lenders harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution and 46 delivery of this Agreement, the borrowings hereunder, or the issuance of the Notes or of any other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith. (c) Except as otherwise provided in the preceding paragraphs (a) and (b), each party shall pay its own expenses in connection with this Agreement. All obligations provided for in this Section 15.5 shall survive repayment of the ------------ Loans, cancellation of the Notes and any termination of this Agreement. 15.6 Indemnification. In consideration of the execution and delivery --------------- of this Agreement by the Agents and the Lenders, the Company hereby agrees to indemnify, exonerate and hold harmless each Lender, each Agent and each officer, director, employee and agent of each Lender and each Agent (herein collectively called the "Lender Parties" and individually called a "Lender Party") from and against any and all actions, causes of action, suits, losses, costs (including, without limitation, all documentary or other stamp taxes or duties), liabilities, damages and expenses (other than expenses covered by Section ------- 15.5(a)) in connection therewith (irrespective of whether such Lender Party is a - ------- party to the action for which indemnification hereunder is sought), including, without limitation, reasonable attorneys' fees (including allocated costs of staff counsel) and disbursements (collectively herein called the "Indemnified Liabilities") incurred by the Lender Parties or any of them as a result of, or arising out of, or relating to any Loan or the use of the proceeds of any Loan except for any such Indemnified Liabilities arising on account of such Lender Party's gross negligence or willful misconduct and, if and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. All obligations provided for in this Section 15.6 shall survive repayment ------------ of the Liabilities, cancellation of the Notes and any termination of this Agreement. 15.7 Regulation U. Each Lender represents that it in good faith is ------------ not relying, either directly or indirectly, upon any Margin Stock as collateral security for the extension or maintenance by it of any credit provided for in this Agreement. 15.8 Captions. Section captions used in this Agreement are for -------- convenience only, and shall not affect the construction of this Agreement. 15.9 Governing Law; Severability. This Agreement and each Note shall --------------------------- be a contract made under and governed by the laws of the State of Illinois without regard to conflict of laws principles. All obligations of the Company and the rights of the Agents, the Lenders and any other holders of the Notes expressed 47 herein or in the Notes shall be in addition to and not in limitation of those provided by applicable law. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. Nothing herein shall require the Company to pay interest in excess of the maximum rate permitted by law. 15.10 Waiver of Jury Trial. Each of the Company, each Agent and each -------------------- Lender waives any right to a trial by jury in any action or proceeding to enforce or defend any rights under this Agreement, any Note or any amendment, instrument, document or agreement delivered or which may in the future be delivered in connection herewith or arising from any banking relationship existing in connection with this Agreement, and agrees that any such action or proceeding shall be tried before a court and not before a jury. 15.11 Counterparts; Effectiveness. This Agreement may be executed in --------------------------- any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same agreement. This Agreement shall become effective as of the Effective Date and the Administrative Agent shall so inform all of the parties hereto. 15.12 Supersession. This Agreement supersedes all prior or ------------ contemporaneous agreements with respect to the subject matter hereof. 15.13 Successors and Assigns. This Agreement shall be binding upon ---------------------- the Company, the Lenders and the Agents and their respective successors and assigns, and shall inure to the benefit of the Company, the Lenders and the Agents and the respective successors and assigns of the Lenders and the Agents, it being understood that subject to Section 11.6 of the Existing Credit ------------ Agreements as incorporated herein pursuant to Section 11, the Company shall not ---------- assign its rights hereunder without the consent of all of the Lenders. * * * 48 Delivered at Chicago, Illinois as of the day, month and year first above written. MONTGOMERY WARD & CO., INCORPORATED By: /s/ Douglas V. Gathany ----------------------------- Name: Douglas V. Gathany Title: Treasurer One Montgomery Ward Plaza 844 North Larrabee Chicago, Illinois 60671 Attention: Treasurer Telephone: (312) 467-7238 Telecopy: (312) 467-7421 Person to whom copies of notices under Section 13.2 ------------ should also be sent: Montgomery Ward & Co., Incorporated One Montgomery Ward Plaza 535 West Chicago Avenue Chicago, Illinois 60671 Attention: Secretary 49 THE BANK OF NOVA SCOTIA, in its individual capacity and in its capacity as Administrative Agent By: /s/ F.C.H. Ashby ------------------------- Name: F.C.H. Ashby ----------------------- Title: Senior Manager Loan Operations ------------------------------ THE BANK OF NOVA SCOTIA Suite 2700 600 Peachtree NE Atlanta, GA 30308 Telephone: (404) 877-1500 Telecopy: (404) 888-8998 Telex: 00542319 Person to whom all Loan Requests should be addressed: George Wong Atlanta Agency Telephone: (404) 877-1500 Telecopy: (404) 888-8998 Telex: 00542319 Base Rate Loan Funding Office: The Bank of Nova Scotia Atlanta Agency Suite 2700 600 Peachtree NE Atlanta, GA 30308 Eurodollar Loan Funding Office: The Bank of Nova Scotia Atlanta Agency Suite 2700 600 Peachtree NE Atlanta, GA 30308 THE BANK OF NEW YORK, in its individual capacity and in its capacity as Documentation Agent By: /s/ Michael Flannery ------------------------ Name: Michael Flannery Title: Vice President THE BANK OF NEW YORK One Wall Street New York, NY 10286 Telephone: (212) 635-7885 Telecopy: (212) 635-1483 Person to whom all Loan Requests should be addressed: Diane Burgess, 8th Floor Telephone: (212) 635-1311 Telecopy: (212) 635-1483 Base Rate Loan Funding Office: The Bank of New York Commercial Loan Servicing Dept. 101 Barclay Street New York, NY 10007 Eurodollar Loan Funding Office: The Bank of New York Euro Dollar/Cayman Funding Area 101 Barclay Street New York, NY 10007 GENERAL ELECTRIC CAPITAL CORPORATION, in its individual capacity By: /s/ Jeffrey Werner ------------------------- Name: Jeffrey Werner ----------------------- Title: Senior Vice President ---------------------- General Electric Capital Corporation 260 Long Ridge Road Stanford, CT 06927 Telephone: (203) 357-4963 Telecopy: (203) 357-4975 Telex: ______________ Person to whom Loan correspondence should be addressed: Jeffrey Werner Telephone: (203) 357-4963 Telecopy: (203) 357-4975 Telex: _________________ Payment Office Bankers Trust New York ABA No. 021001033 For the Acct. of G.E.C.C. #50001677 Ref: Montgomery Ward interest fee or principal Base Rate Loan Funding Office: General Electric Capital Corporation ------------------------------------ Corporate Treasury Dept. ------------------------------- 201 High Ridge Road ------------------------------- Stamford, CT 06927 ------------------------------- Eurodollar Loan Funding Office: General Electric Capital Corporation ------------------------------------ Corporate Treasury Dept. ------------------------------- 201 High Ridge Road ------------------------------- Stamford, CT 06927 ------------------------------- EX-27 8 FINANCIAL DATA SCHEDULE
5 1,000,000 9-MOS DEC-28-1996 SEP-28-1996 42 314 275 0 1,762 0 2,102 783 5,217 0 495 175 0 1 598 5,217 3,984 4,537 3,233 4,657 0 0 75 (120) (48) (72) 0 0 0 (72) (1.99) (1.99)
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