PROGRAM AGREEMENT AMENDMENT
PROGRAM AGREEMENT AMENDMENT dated as of March 4, 1997 (this
"Amendment") among GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation ("GE Capital"), MONTGOMERY WARD & CO., INCORPORATED, an Illinois
corporation ("MW"), and LECHMERE, INC., a Massachusetts corporation
("Lechmere").
R E C I T A L S
WHEREAS, MW and GE Capital have heretofore entered into a Program
Agreement dated October 12, 1989, as amended (the "Program Agreement"; terms
defined therein being used herein as so defined); and
WHEREAS, GE Capital and MW desire to amend the Program Agreement in
certain respects (including, but not limited to, adding Lechmere, a wholly
owned subsidiary of MW, as a party thereto); and
WHEREAS, MW and Lechmere each acquire Inventory for resale to its
customers from certain manufacturers and distributors; and
WHEREAS, MW and Lechmere have requested GE Capital to provide funds to
each of MW and Lechmere to pay to such manufacturers and distributors
supplying Inventory to MW and/or Lechmere; and
WHEREAS, GE Capital is willing to make such payments for MW and
Lechmere in the amounts and under the terms and subject to the conditions set
forth in the Program Agreement as amended by this Amendment; and
WHEREAS, in connection with this Amendment, Montgomery Ward Holding
Corp., the direct parent of MW ("Holding"), will agree to amend its
certificate of incorporation to create and issue to GE Capital shares of its
Series C Preferred Stock having a liquidation value of $21,120,000, and MW
will agree to amend its articles of incorporation to create and issue to
Holding preferred stock with substantially identical forms of such Series C
Preferred Stock of Holding and with an equivalent liquidation value;
NOW, THEREFORE, the parties hereto, in consideration of the terms,
covenants, provisions and conditions hereinafter set forth, hereby agree as
follows:
1. Section 1 of the Program Agreement is hereby amended by (i)
inserting "or Lechmere's" after the word "MW" on the first line of this
Section, (ii) deleting the reference to "One Hundred Million Dollars
($100,000,000.00)" in the first paragraph of this Section and replacing it
with the words "Three Hundred Fifty Million Dollars ($350,000,000.00)", (iii)
inserting the words "or Lechmere" after each other reference to "MW" in this
Section and (iv) adding the following at the end thereof:
"MW and Lechmere shall, from time to time, make payments to
vendors (the "Vendor Payable Extension Program") in amounts equal
to the invoice price (net of applicable discount) for inventory
acquired by MW or Lechmere by checks written against an account
maintained for such purpose at The First National Bank of Boston
("FNBB"), or such other account as may be approved by GE Capital
(the "FNBB Account"). MW and Lechmere will send GE Capital a
report indicating the total amount of the same day's cleared checks
before 11:00 a.m. of each day. Upon the request of MW or Lechmere,
GE Capital will wire same day funds into the FNBB Account in an
amount equal to the prior day's Vendor Payments (the "Daily FNBB
Funding"). GE Capital will provide MW and Lechmere an invoice equal
to the amount of the previous day's Daily FNBB Funding (the "Vendor
Payable Invoices"). The aggregate amount of outstanding payments
and other amounts payable in connection with the Vendor Payable
Extension Program, at any given time, shall not exceed One Hundred
Fifty Million Dollars ($150,000,000).
Notwithstanding anything contained herein to the contrary, (i)
the maximum aggregate amount of outstanding payments and other
amounts payable to GE Capital hereunder, at any time, shall not
exceed $500,000,000 and (ii) in no event shall the aggregate amount
of outstanding payments and other amounts payable to GE Capital
pursuant to the Vendor Payable Extension Program exceed the amount
set forth below for the time periods indicated:
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Maximum
Amount Outstanding Period
$100,000,000 date hereof through
March 14, 1997
150,000,000 March 15, 1997 and thereafter
GE Capital shall not be obligated to make any payments pursuant to
the Vendor Payable Extension Program if MW has the ability to
borrow any amounts under the Long Term Credit Agreement among MW,
various banks, and The First National Bank of Chicago, The Bank of
Nova Scotia, The Bank of New York, and Bank of America National
Trust and Savings Association, as agents, or the Short Term Credit
Agreement among MW, various banks, and The First National Bank of
Chicago, The Bank of Nova Scotia, The Bank of New York, and Bank of
America National Trust and Savings Association, as agents, each
dated as of September 15, 1994 and as amended on March 19, 1996,
September 6, 1996 and as of December 23, 1996 (collectively, the
"Bank Facility") or under its existing inventory financing facility
with Deutsche Financial Services Corporation ("DFS") pursuant to
the Program Agreement, dated as of October 7, 1996, among DFS, MW
and Lechmere (the "Inventory Financing Facility"), to the extent
that MW or Lechmere have outstanding invoices payable thereunder.
MW hereby covenants and agrees that it will not make any optional
prepayment of principal under the Bank Facility or the Inventory
Financing Facility, if the aggregate amount of outstanding Payments
and other amounts payable to GE Capital hereunder exceed
$350,000,000 (a "Prohibited Payment"). The making of any such
Prohibited Payment shall constitute an Event of Default and shall
have the consequences set forth in Section 7(b) of this Agreement.
GE Capital's agreement to provide funds to MW and Lechmere under
this Agreement pursuant to the Vendor Payable Extension Program
shall terminate on the first to occur of (i) March 4, 1998, (ii) an
occurrence and continuation of an Event of Default pursuant to
Section 7(a)(6) of this Agreement or (iii) upon notice by GE
Capital, the occurrence and continuation of an Event of Default
pursuant to any other subsection of Section 7(a) of this
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Agreement. Upon any termination of GE Capital's obligations under
this Agreement due to the occurrence and continuance of an Event of
Default pursuant to Section 7(a)(6) of this Agreement, all of
MW's and Lechmere's obligations under this Agreement shall be
immediately due and payable and upon any termination due to the
occurrence and continuation of an Event of Default under any other
subsection of Section 7(a) of this Agreement, GE Capital may
immediately, by written notice to MW and Lechmere, declare all of
MW's and Lechmere's obligations under this Agreement to be
immediately due and payable."
2. Section 2 of the Program Agreement is hereby amended by (i) adding
the words "and Lechmere" after each reference to "MW" in this Section and (ii)
adding the following to the end thereof:
"MW and Lechmere shall each reimburse GE Capital in full the
amount funded by it on their respective behalfs as set forth in
each Vendor Payable Invoice no later than 45 days after the date of
such Vendor Payable Invoice together with interest on such amount
from the date of funding until paid in full at the GE Capital
Charge Rate as in effect from time to time. "GE Capital Charge
Rate" means the per annum GE Capital money cost as reported in the
internal financial reports of GE Capital's Appliance/Electronics
Financing Group plus four hundred twenty-five (425) basis points."
3. Section 3 of the Program Agreement is hereby amended by inserting
after the second word of subsection (i) the words "purchased by MW" and by
adding the following to the end thereof:
"Lechmere represents and warrants to GE Capital that:
(a) Lechmere is a corporation duly organized, validly existing
and in good standing under the laws of the State of Massachusetts;
(b) Lechmere is duly authorized to enter into this Agreement,
has taken all necessary corporate action to authorize the execution
and
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consummation of this Agreement, and shall furnish GE Capital with
satisfactory evidence of same upon request. This Agreement is a
legal, valid and binding obligation of Lechmere enforceable against
Lechmere in accordance with its terms except as such enforceability
may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally;
(c) The execution, delivery and performance of this Agreement
do not constitute a breach of any provisions contained in
Lechmere's Articles of Organization or Bylaws;
(d) The execution, delivery or performance of this Agreement is
not in contravention of any applicable provision of law,
governmental rule or regulation and does not require the consent or
approval of any governmental entity or authority or any other
person which has not been obtained;
(e) The execution, delivery or performance of this Agreement is
not in contravention of any order binding upon Lechmere, or any
agreement, indenture or other instrument, including, without
limitation, any loan agreement to which Lechmere is a party or
by which Lechmere or its property is or may be bound, and will not
result in a breach or termination thereof, constitute a default
thereunder, or accelerate any performance required thereby or
result in the creation or imposition of a lien on any of its
properties;
(f) No litigation which might impair the enforceability of this
Agreement or Lechmere's ability to perform its obligations
hereunder ("Material Litigation") is pending or, to Lechmere's
knowledge, threatened against Lechmere;
(g) The Inventory of Lechmere is not covered by or subject to,
in whole or in part, (1) any effective security agreement or
equivalent security or lien instrument, or (2) any financing
statement or continuation statement on file or of record in any
public office, except for the security agreement and financing
statement in favor of MW;
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(h) Lechmere's principal place of business is located at
Montgomery Ward Plaza, Chicago, Illinois 60671."
4. Section 5 of the Program Agreement is hereby amended by deleting
subsection (i) and by adding the following to the end thereof:
"Lechmere covenants and agrees that, for so long as it
shall have any obligation to GE Capital hereunder, it shall:
(a) Not grant a security interest in, or otherwise
create a lien on, any Inventory with respect to which GE
Capital is to make or makes a Payment to a Lechmere Vendor
without giving GE Capital 45 days prior written notice thereof;
(b) Not change its principal place of business without
giving GE Capital 30 days' prior written notice thereof;
(c) Permit a GE Capital employee or employees designated
by GE Capital to work on Lechmere's premises in Lechmere's
accounts payable operation to administer the program as to
Lechmere and to allow such employee or employees access to all
Lechmere's books and records necessary to perform this function."
5. Section 6 of the Program Agreement is hereby amended by inserting
the words "and Lechmere" after each reference to "MW" in this Section.
6. Section 7 of the Program Agreement is hereby amended by (i)
inserting the words "or Lechmere" after each reference to "MW" in subsection
(a)(1), (a)(2), (a)(3), (a)(4), (a)(6), (a)(7) and (a)(8), (ii) by inserting
the words "or Lechmere's" after each reference to "MW's" in subsection
(a)(4), (iii) inserting the words "and Lechmere" after each reference to "MW"
and inserting the words "or Lechmere's" after the reference to "MW's" in
subsection (b), and (iv) deleting subsection (a)(5) in its entirety and
replacing it with the following:
(5) The Interim Consumer Credit Card Agreement, dated as
of April 1, 1996, as amended, restated and renamed The Bank Credit Card
Program
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Agreement, among Monogram Credit Card Bank of Georgia and MW or
the Account Purchase Agreement dated as of June 24, 1988, as amended and
restated and renamed the Account Related Agreement, dated as of April 1,
1996, between Montgomery Ward Credit Corporation and MW (i) shall fail to
remain in full force and effect, or (ii) any "MW Default" (as defined in
such agreements) shall occur thereunder or (iii) MW shall give notice of
termination or take any action to terminate any of such agreements.
7. Section 8 of the Program Agreement is hereby amended by (i)
inserting the words "and Lechmere" after each reference to "MW" and (ii)
inserting the words "or Lechmere's" after each reference to "MW's".
8. Section 9 of the Program Amendment is hereby amended by (i)
inserting the words "and Lechmere" after each reference to "MW", (ii) inserting
the words "and Lechmere's" after each reference to "MW's", (iii) deleting the
first two words of the second sentence of the third paragraph of subsection
9(a) and by inserting in its place "MW and Lechmere will jointly and
severally" and (iv) deleting the first two words of the last sentence of
subsection 9(b) and by inserting in its place "MW and Lechmere will jointly
and severally".
9. Section 10 of the Program Agreement is renumbered as Section 12 and
new Sections 10 and 11 are hereby added as follows:
"10. LECHMERE AND MW LIABILITY. (a) By becoming a party to this
Agreement, Lechmere shall be responsible only for reimbursement
obligations or other obligations hereunder arising out of commitments or
Payments made with respect to Lechmere's invoices or deduction against
Payments made or claims asserted on behalf of Lechmere against Lechmere's
Vendors, or payments made by GE Capital in connection with Lechmere's
participation in the Vendor Payable Extension Program, but not for
reimbursement obligations or other obligations hereunder arising out of
commitments or Payments made with respect to MW's invoices or deductions
made or claims asserted on behalf of MW against MW's Vendors or any other
obligations of MW under this Agreement. MW shall
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be responsibe for all its obligations under this Agreement.
(b) MW and Lechmere agree to jointly and severally
indemnify and hold GE Capital harmless from and against any and
all third party suits, actions, proceedings, claims, damages,
losses, liabilities and expenses (including, without limitation,
reasonable attorneys' fees and disbursements, including those
incurred upon any appeal) which may be instituted or asserted
against or incurred by GE Capital as the result of its having
entered into this Agreement or made Payments hereunder or any
payments pursuant to the Vendor Payable Extension Program;
provided, however, that MW and Lechmere shall not be liable for
such indemnification to GE Capital to the extent that any such
suit, action, proceeding, claim, damage, loss, liability or
expense results from GE Capital's gross negligence or willful
misconduct.
11. GUARANTEE.
11.1 MW GUARANTEE. MW hereby unconditionally and
irrevocably guarantees (the "Guarantee") to GE Capital the due and
punctual payment and performance of all current and future
liabilities and obligations of Lechmere arising under this
Agreement, including, without limitation, the reimbursement
obligations of Lechmere arising out of commitments or Payments for
the benefit of Lechmere hereunder, including payments pursuant to
the Vendor Payable Extension Program, together with all costs and
expenses incurred by GE Capital for which Lechmere is responsible
hereunder or incurred by GE Capital in connection with the
enforcement of this Guarantee. The obligations of MW under this
Guarantee shall be unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect
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of any obligation of Lechmere under this Agreement by operation of
law or otherwise;
(b) any modification or amendment of or supplement to this
Agreement if such modification, amendment or supplement is signed
by an officer of MW;
(c) any modification, amendment, waiver, release,
non-perfection or invalidity of any direct or indirect security,
or of any guarantee or other liability of any third party, for
any obligation of Lechmere under this Agreement;
(d) any change in the corporate existence, structure or
ownership of, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting Lechmere, its assets or any
resulting release or discharge of any obligation of
Lechmere hereunder;
(e) the existence of any claim, set-off or other rights which
MW may have at any time against Lechmere, whether or not arising in
connection with this Agreement, or against GE Capital arising under
this Agreement; provided, however, that nothing herein shall
prevent the assertion of any such claim by seperate suit or
compulsory counterclaim;
(f) any invalidity or unenforceability of any liability or
obligation of or relating to Lechmere for any reason under this
Agreement, or any provision of applicable law or regulation
purporting to prohibit the payment or performance by Lechmere of
any liability or obligation under this Agreement; or
(g) any other act or omission to act or delay of any kind by
Lechmere, GE Capital or any other circumstance whatsoever that
might, but for the provisions of this paragraph, constitute
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a legal (excluding any statute of limitations defense) or
equitable discharge of the obligations of MW under this
Guarantee.
MW's obligations under this Guarantee shall remain in full force and
effect until all liabilities and obligations of Lechmere under this
Agreement shall have been irrevocably paid and performed in full.
If at any time the payment of any amount by Lechmere under this
Agreement is rescinded or must be otherwise restored or returned
upon the insolvency, bankruptcy or reorganization of Lechmere or
otherwise, MW's obligations under this Guarantee with respect to
such payment shall be reinstated at such time as though such
payment had become due but had not been made at such time.
11.2. WAIVERS. With respect to the Guarantee, MW irrevocably
waives acceptance hereof, presentment, demand, protest and any
notice not provided for herein, as well as any requirement that at
any time any action be taken by any person against Lechmere or its
successors or assigns. Furthermore, MW irrevocably and absolutely
waives any and all rights of subrogation, contribution,
indemnification, recourse, reimbursement and any similar rights
against Lechmere arising as a result of any payment made by MW
hereunder for the account of Lechmere, whether such rights arise
under any express or implied contract or by operation of law, until
Lechmere's obligations hereunder have been irrevocably paid and
discharged in full. If acceleration or the time for payment of any
amount payable by Lechmere under this Agreement is stayed upon the
insolvency, bankruptcy or reorganization of Lechmere, all such
amounts otherwise payable or subject to acceleration under the
terms of this Agreement shall nonetheless be payable by MW hereunder
forthwith on demand by GE Capital."
10. Section 12 of the Program Agreement is hereby amended by inserting
the words "and Lechmere" after each reference to "MW". Subsection (c) of
Section 12 of the Program Agreement is hereby deleted and replaced with the
following:
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"(c) Notices give under this Agreement shall be deemed
made and received: (a) three Business Days after depositing
same in the U.S. Mail, postage paid, addressed to the party to whom
such notice is directed at the address set forth below or at such
other address as such party may by written notice received by the
other parties hereto designates as its address for such purpose or
(b) if sooner, the next Business Day following facsimile
transmission to the party to whom such notice is directed at the
number set forth below or at such other number as such party may by
written notice received by the other parties hereto designates as
its number for such purpose. The addresses and the facsimile
transmission numbers for notices hereunder are as follows:
If to GE Capital:
General Electric Capital Corporation
7595 Centurion Parkway
Jacksonville, FL 32256
Attention: Director of Inventory Financing
FAX No. (800) 723-1590
With a copy to:
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06904
Attention: Vice President and General Manager,
Retailer Financial Services
FAX No. (203) 357-4135
and if to MW:
Montgomery Ward & Co., Incorporated
844 N. Larrabee, 5-3
Chicago, Illinois 60671
Attention: Treasurer
FAX No. (312) 467-7421
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with a copy to:
Montgomery Ward & Co., Incorporated
535 W. Chicago Avenue, 24-S
Chicago, Illinois 60671
Attention: Secretary
FAX No. (312) 467-7898
and if to Lechmere:
Lechmere, Inc.
c/o Montgomery Ward & Co., Incorporated
844 N. Larrabee, 5-3
Chicago, Illinois 60671
Attention: Treasurer
FAX No. (312) 467-7421
with a copy to:
Lechmere, Inc.
c/o Montgomery Ward & Co., Incorporated
535 W. Chicago Avenue, 24-S
Chicago, Illinois 60671
Attention: Secretary
FAX No. (312) 467-7898
11. In each place in the Program Agreement when the words "and
Lechmere", "or Lechmere" or "Lechmere's" have been inserted, all words in
the singular that follow such insertion shall include the plural and all
words in the plural that follow such insertion shall include the singular.
12. Supplement No. 1 to the Program Agreement is hereby amended by
inserting the words "and Lechmere" after the first reference to "MW" in such
supplement and the words "or Lechmere" after each subsequent reference to
"MW". In addition, the second paragraph of Supplement No. 1 to the Program
Agreement is hereby deleted and replaced with the following:
"Commencing as of March 1, 1997 in consideration of the
payments made from time to time by GE Capital for MW and/or
Lechmere under the Agreement for certain invoices covering
inventory acquired by MW and/or Lechmere from Vendors (other than
pursuant to the Vendor Payable Extension Program, as to which the
provisions of this Supplement No. 1 shall not be applicable), MW
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and Lechmere each agree to make reimbursement in full of each such
Invoice paid by GE Capital on its behalf no later than 120 days
from the earlier of (i) the shipping date of the Inventory covered
by such Invoice or (ii) the date of such Invoice, or such other
date as may be agreed upon by GE Capital and MW or Lechmere, as the
case may be. Notwithstanding the foregoing, MW or Lechmere may
delay any such reimbursement payment for up to 90 days beyond the
due date with respect to any particular Invoice, but not beyond 180
days from the date of such Invoice. GE Capital may terminate this
90-day extension right as to future Invoices at any time upon 30
days' prior written notice to MW and Lechmere. If for any reason
any reimbursement is received by GE Capital later than the
applicable due date, MW and Lechmere, as the case may be, each
agree to pay to GE Capital interest on such outstanding amount from
such due date until paid in full at the GE Capital Charge Rate as
in effect from time to time."
13. MW and Lechmere hereby jointly and severally represent and warrant
to GE Capital as follows:
(a) No Event of Default or event which with the giving of notice
or the lapse of time, or both, would constitute an Event of Default has
occurred and is continuing.
(b) The execution, delivery and performance by MW and Lechmere of
this Amendment have been duly authorized by all necessary or proper
corporate action and do not require the consent or approval of any person
which has not been obtained.
(c) This Amendment has been duly executed and delivered by MW and
Lechmere and each of this Amendment and the Program Agreement as amended
hereby constitutes a legal, valid and binding obligation of MW and Lechmere,
enforceable against them in accordance with its terms.
MW further represents and warrants to GE Capital that each of the
representations and warranties of MW contained in subsections 3(a), (c), (d),
(e), (g), (i) and (j) is true and correct as of the date hereof, with all
references therein to the Agreement being deemed to refer to the Agreement as
amended hereby.
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14. That certain letter agreement dated February 14, 1997 between GE
Capital and MW relating to the Program Agreement (the "Letter Agreement") is
deemed terminated and the commitment amount under Section 1 of the Agreement
is reinstated at $350,000,000; provided, however, that MW's payment
obligation under the Letter Agreement shall remain in full force and effect
and that any amounts funded by GE Capital pursuant to the Letter Agreement
prior to the date hereof shall be deemed outstanding for purposes of
calculating the maximum amount outstanding under Section 1 of the Program
Agreement (as amended hereby).
15. MW agrees to pay on demand all costs and expenses of GE Capital in
connection with the preparation, execution and delivery of this Amendment and
the Letter Agreement, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for GE Capital with respect thereto.
16. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed to be an original and all of which
taken together shall constitute but one and the same instrument.
17. This Amendment shall be governed by, construed and enforced in
accordance with the laws of the State of New York, without regard to the
principles thereof regarding conflict of laws.
18. Except as amended hereby, the Program Agreement shall remain in
full force and effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed as of the date first above written.
GENERAL ELECTRIC CAPITAL CORPORATION
By:
---------------------------------
Name:
Title:
MONTGOMERY WARD & CO., INCORPORATED
By:
---------------------------------
Name:
Title:
LECHMERE, INC.
By:
---------------------------------
Name:
Title:
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