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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
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 December 31, 1997
OR
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from the transition period from ___________
to ___________
Commission file number: 0-22163
__________________
AMERITRADE HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 47-0642657
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4211 SOUTH 102ND STREET, OMAHA, NEBRASKA
68127
(Address of principal executive offices)
(Zip Code)
(402) 331-7856
(Registrant's telephone number, including area code)
___________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months, and (2) has been subject to such
filing requirements for the past ninety days:
Yes (X) No
As of February 10, 1998 there were 14,517,616 outstanding shares of the
registrant's common stock consisting of 13,153,216 outstanding shares of Class
A Common Stock and 1,364,400 outstanding shares of Class B Common Stock.
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AMERITRADE HOLDING CORPORATION
INDEX
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Page No.
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PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets............................................ 3
Consolidated Statements of Operations.................................. 4
Consolidated Statements of Cash Flows.................................. 5
Notes to Consolidated Financial Statements............................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................... 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............. 9
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits .......................................................... 10
(b) Reports on Form 8-K ............................................... 11
Signatures ............................................................ 12
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. - CONSOLIDATED FINANCIAL STATEMENTS
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 26,
1997 1997
-------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 14,897,840 $ 53,522,447
Cash and Investments Segregated in Compliance with Federal Regulations 308,972,790 319,763,921
Receivable from Brokers, Dealers, and Clearing Organizations 23,584,633 17,823,640
Receivable from Customers and Correspondents - Net of allowance
for doubtful accounts: Dec. 31 1997 - $277,279; Sept. 26, 1997 - $249,949 433,940,746 325,407,147
Income Taxes Receivable 2,545,645 -
Furniture, Equipment and Leasehold Improvements - Net of accumulated
depreciation and amortization: Dec. 31, 1997 - $4,281,424; Sept. 26, 1997
- $3,732,790 10,524,748 8,709,923
Goodwill - net of accumulated amortization 6,249,030 6,346,763
Equity Investments 8,472,147 7,597,972
Other Investment 2,220,049 5,000,000
Deferred Income Taxes 392,077 39,314
Other Assets 17,912,295 13,145,616
------------ ------------
Total assets $829,712,000 $757,356,743
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Payable to Brokers, Dealers and Clearing Organizations $ 2,800,701 $1,404,999
Payable to Customers and Correspondents 750,487,133 666,279,440
Accounts Payable and Accrued Liabilities 17,733,634 19,252,931
Notes Payable 3,000,000 -
Income Taxes Payable - 3,430,279
------------ ------------
Total liabilities 774,021,468 690,367,649
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $1 par value; authorized 3,000,000 shares, none issued - -
Common stock, $0.01 par value:
Class A - 25,000,000 shares authorized; 13,153,423 shares outstanding 131,534 131,534
Class B - 2,000,000 shares authorized; 1,364,400 shares issued
and outstanding 13,644 13,644
------------ ------------
Total common stock 145,178 145,178
Additional paid in capital 23,282,506 23,297,506
Retained earnings 32,297,068 43,546,410
Treasury Stock - at cost (1,180 shares and 0 shares in December and
September respectively (34,220) -
------------ ------------
Total stockholders' equity 55,690,532 66,989,094
------------ ------------
Total liabilities and stockholders' equity $829,712,000 $757,356,743
============ ============
</TABLE>
See notes to consolidated financial statements.
3
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AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED
----------------------------------------
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ --------------------
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REVENUES
Commissions and Clearing Fees $15,775,074 $10,439,302
Interest Revenue 13,109,849 7,007,205
Equity Income from Investments 1,323,054 788,249
Other 1,156,689 806,950
------------ -----------
Total Revenues 31,364,666 19,041,706
Interest Expense 5,688,973 3,690,010
------------ -----------
Net Revenues 25,675,693 15,351,696
EXPENSES EXCLUDING INTEREST
Employee Compensation and Benefits 6,764,708 4,142,424
Commissions and Clearance 975,588 628,552
Communications 3,124,808 1,222,477
Occupancy and Equipment Costs 1,943,683 1,111,870
Advertising 24,941,300 6,630,354
Other 5,421,328 1,680,409
------------ -----------
Total Expenses Excluding Interest 43,171,415 15,416,086
Income Before Provision for
Income Taxes (17,495,722) (64,390)
Provision for Income Taxes Benefit (6,246,380) 10,976
------------ -----------
NET LOSS $(11,249,342) $ (75,366)
============ ===========
Earnings per Common Share $ (0.77) $ (0.01)
============ ===========
Weighted Average Shares Outstanding 14,517,366 12,813,823
</TABLE>
See notes to consolidated financial statements.
4
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AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Month Period Ended
---------------------------------------
December 31, 1997 December 31, 1996
----------------- -------------------
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (11,249,342) $ (75,366)
Adjustments to Reconcile Net Income (Loss) to Net Cash from
Operating Activities:
Depreciation and Amortization 552,229 353,265
Provision for Losses 28,500 12,000
Deferred Income Taxes (352,763) 260,377
Equity Income (Loss) from Investments (1,323,054) (788,249)
Amortization of Goodwill 97,733 90,755
Changes in Operating Assets and Liabilities:
Cash and Investments Segregated in Compliance with
Federal Regulations 10,791,131 (66,409,917)
Brokerage Receivables (114,323,092) (30,085,903)
Income Taxes Receivable (2,545,645) -
Other Assets (4,766,679) (3,257,917)
Brokerage Payables 85,603,395 98,546,219
Accounts Payable and Accrued Liabilities (1,519,297) 2,258,594
Income Taxes Payable (3,430,279) (806,711)
------------- ------------
Net Cash Provided By (Used In) Operating Activities (42,437,163) 97,147
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Furniture, Equipment and Leasehold Improvements (2,367,054) (220,300)
Purchase of Equity and Other Investments (217,790) (97,015)
Distributions Received from Equity Investments 666,669 373,924
Proceeds from Sale of Investment 2,779,951 -
----------- -----------
Net Cash Provided By Investing Activities 861,776 56,609
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable 3,000,000 1,700,000
Principal Payments on Notes Payable - (816,000)
Purchase of Treasury Stock (145,000) -
Issuance of Treasury Stock 95,780 -
----------- -----------
Net Cash Provided By Financing Activities 2,950,780 884,000
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (38,624,607) 1,037,756
Cash and Cash Equivalents at Beginning of Period 53,522,447 15,767,170
----------- -----------
Cash and Cash Equivalents at End of Period $14,897,840 $16,804,926
=========== ===========
Supplemental Cash Flow Information:
Interest Paid $ 5,355,695 $3,296,668
Income Taxes Paid $ 10,223 $1,210,976
</TABLE>
See notes to consolidated financial statements.
5
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AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Ameritrade Holding Corporation and its wholly-owned subsidiaries
(collectively, the "Company"). The Company is a provider of discount
securities brokerage and related financial services, including clearing and
execution services.
These financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC) and, in the
opinion of management, reflect all adjustments, which are all of a normal
recurring nature, necessary to present fairly the financial position,
results of operations and cash flows for the periods presented in conformity
with generally accepted accounting principles. All material intercompany
balances and transactions have been eliminated. These financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's annual report filed on Form 10-K for
the fiscal year ended September 26, 1997. The results of operations for the
three months ended December 31, 1997 are not necessarily indicative of the
results for the entire fiscal year ending September 25, 1998.
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard No. 125 - In June 1996, SFAS No.
125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, was issued. This statement applies a
"financial-components approach" that focuses on control, whereby an entity
recognizes the financial and servicing costs it controls and the liabilities
it has incurred, de-recognizes assets when control has been surrendered, and
de-recognizes liabilities when extinguished. The statement, as amended, is
applicable to transactions occurring after January 1, 1998 for securities
lending and similar transactions.
3. NET CAPITAL
The Company's subsidiaries are subject to the Net Capital Rule under the
Securities Exchange Act of 1934 and are required to maintain a minimum net
capital. Net capital and the related net capital requirement may fluctuate
on a daily basis.
The Company's broker-dealer subsidiaries had net capital, in the aggregate,
of $28,489,335 as of December 31, 1997, which exceeded aggregate minimum net
capital requirements by $18,735,265. Subsidiary net capital in the amount
of $9,754,070 as of December 31, 1997 is not available for transfer to the
Company.
4. NOTES PAYABLE
The Company has also entered into a loan agreement dated as of November 11,
1997 with a bank. Pursuant to this loan agreement, the Company may borrow
up to $10 million on a revolving basis until January 31, 1998. Borrowings
under the revolving loan agreement will bear interest at the rate
designated by the bank as its National Base Rate less 0.5 percent and are
unsecured. This loan agreement was terminated on January 16, 1998. The $3
million note receivable was borrowed under this loan agreement.
The Company entered into a revolving credit agreement with a bank group on
January 16, 1998. The revolving credit agreement permits borrowings up to
$50 million through June 30, 1999 with permissible borrowings declining
$2.5 million quarterly to a $35 million maturity on December 31, 2000. The
revolving credit agreement is collateralized by the common stock of the
Company's subsidiaries, as well as all tangible and intangible assets of
the Parent Company. Borrowings under the revolving credit agreement will
bear interest at Prime Rate less 0.75 percent. The Company will pay a
maintenance fee of 0.25 percent of the unused borrowings through the
maturity date.
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ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations
of the Company should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on Form
10-K for the fiscal year ended September 26, 1997. This discussion contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ materially from those anticipated in these
forward-looking statements.
RESULTS OF OPERATIONS
THREE MONTH PERIODS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
NET REVENUES. Commissions and clearing fees increased 52 percent to $15.8
million in the first quarter of fiscal 1998 from $10.4 million in the first
quarter of fiscal 1997. This increase was primarily attributable to an increase
in the number of securities transactions processed, as average trades per day
increased 134 percent to 10,619 in the first quarter of fiscal 1998 from 4,542
in the first quarter of fiscal 1997. The increase in transaction processing
volume was primarily a result of a significant increase in advertising
expenditures by the Company during the first three months of fiscal 1998. The
increase in transactions processed was partially offset by a decrease in
average commissions and clearing fees per trade of 34 percent to $23 in the
first quarter of fiscal 1998 from $35 in the first quarter of fiscal 1997,
primarily as a result of an increased proportion of trades generated by the
Company's Ameritrade (Inc.) subsidiary which has a lower average commission
than any of the Company's other units.
Net interest revenue (interest revenue less interest expense) increased 124
percent to $7.4 million in the first quarter of fiscal 1998 from $3.3 million
in the first quarter of fiscal 1997. This increase was due primarily to an
increase of 28 percent in average cash and cash equivalents segregated in
compliance with federal regulations, an increase of 117 percent in average
customer and correspondent broker-dealer receivables and an increase of 65
percent in amounts payable to customers and correspondent broker-dealers in
the first quarter of fiscal 1998 from the first quarter of fiscal 1997.
Equity income from the Company's investments increased 63 percent to $1.3
million in the first quarter of fiscal 1998 from $0.8 million in the first
quarter of fiscal 1997. This increase was due to increased net income
generated by the Company's investment in Roundtable Partners, L.L.C.
Other revenues increased 50 percent to $1.2 million in the first quarter of
fiscal 1998 from $0.8 million in the first quarter fiscal 1997 due primarily to
an increase in marketing and service fees.
EXPENSES EXCLUDING INTEREST. Employee compensation and benefits expense
increased 66 percent to $6.8 million in the first quarter of fiscal 1998 from
$4.1 million in the first quarter of fiscal 1997, due primarily to a
corresponding increase in full-time employees during the same period.
Commissions and clearance costs increased 67 percent to $1.0 million in the
first quarter of fiscal 1998 from $0.6 million in the first quarter of fiscal
1997, due primarily to the increase in transaction processing volume.
Communications expense increased 158 percent to $3.1 million in the first
quarter of fiscal 1998 from $1.2 million in the first quarter of fiscal 1997,
primarily as a result of the increase in transaction processing volume and as a
result of postage costs associated with the Company's aggressive advertising
campaign.
Occupancy and equipment costs increased 73 percent to $1.9 million in the
first quarter of fiscal 1998 from $1.1 million in the first quarter of fiscal
1997. The increase was due primarily to the lease of equipment to accommodate
the employment growth during the quarter as well as the lease of over 35,000
square feet of additional office space at the Company's headquarters.
Advertising expenses increased 277 percent to $24.9 million in the first
quarter of fiscal 1998 from $6.6 million in the first quarter of fiscal 1997 as
the Company made a planned major advertising and promotional effort to increase
its customer base. The advertising campaign resulted in 51,000 new customer
accounts in the first quarter of fiscal 1998 as compared to 15,000 accounts
added in the first quarter of fiscal 1997.
Other operating expenses increased 218 percent to $5.4 million in the first
quarter of fiscal 1998 from $1.7 million in the first quarter of fiscal 1997,
primarily as a result of increased confirmation and statement processing costs
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associated with the increase in transaction processing volume, as well as
professional and consulting fees related to technology development and related
to advertising and public relations.
Income tax expense decreased to a $6.2 million credit in the first quarter of
fiscal 1998 from an $11,000 expense in the first quarter of fiscal 1997
consistent with the pretax loss in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its growth primarily through the use of
funds generated from operations. In March 1997, the Company completed an
initial public offering of its common stock, resulting in net proceeds of $22.5
million. Upon completion of the offering, the Company repaid its term and
revolving debt in their entirety, resulting in the use of proceeds of $5.4
million. The Company has also terminated its previously available credit
facility and eliminated the related commitment fee.
OPERATING CASH FLOW
The Company used $42.4 million of cash in operations in the first three months
of fiscal 1998, compared to cash provided by operations of $0.1 million in the
first three months of fiscal 1997. The decrease in the first quarter of fiscal
1998 was attributable to the substantially increased advertising expenditures
during the period.
Cash provided by investing activities was $0.9 million in the first three
months of fiscal 1998, compared to $0.1 million in the first three months of
fiscal 1997. The increased cash generated in the first quarter of fiscal 1998
was primarily a result of the proceeds from the sale of a portion of the
Company's investment in Telescan, Inc. during the period.
Cash provided by financing activities was $3.0 million in the first three
months of fiscal 1998, compared to $0.9 million in the first three months of
fiscal 1997. The increase in fiscal 1998 was attributable to the proceeds from
the note payable to bank.
BANK LOAN AGREEMENTS
The Company entered into a loan agreement with a bank dated as of December 22,
1994 (as amended, the ''Bank Loan Agreement''). Pursuant to the Bank Loan
Agreement, the Company borrowed a term loan of $1.9 million payable in monthly
installments of principal of $79,000 beginning January 31, 1995 until January
31, 1997, and a term loan of $6.0 million payable in monthly installments of
principal of $125,000 beginning August 31, 1995 until July 31, 1999. The loan
was repaid in its entirety in March 1997 with proceeds from the Company's
initial public offering.
The Company has also entered into a loan agreement dated as of November 11,
1997 with a bank. Pursuant to this loan agreement, the Company may borrow up
to $10 million on a revolving basis until January 31, 1998. Borrowings under
the revolving loan agreement will bear interest at the rate designated by the
bank as its National Base Rate less 0.5 percent and are unsecured. This loan
agreement was terminated on January 16, 1998 when the new loan agreement was
put into place. The $3 million note receivable at December 31, 1997 was
borrowed under this loan agreement.
The Company entered into a revolving credit agreement with a bank group on
January 16, 1998. The revolving credit agreement permits borrowings up to $50
million through June 30, 1999 with permissible borrowings declining $2.5
million quarterly to a $35 million maturity on December 31, 2000. The
revolving credit agreement is collateralized by the common stock of the
Company's subsidiaries, as well as all tangible and intangible assets of the
Parent Company. Borrowings under the revolving credit agreement will bear
interest at Prime Rate less 0.75 percent. The Company will pay a maintenance
fee of 0.25 percent of the unused borrowings through the maturity date.
A letter of credit in the amount of $35 million as of September 26, 1997, has
been issued on behalf of AmeriTrade Clearing by a financial institution. The
letter of credit, which is for the benefit of a securities clearinghouse, has
been issued to support margin requirements. AmeriTrade Clearing pays a
maintenance fee of 0.5 percent of the committed amount for the letter of
credit. In addition, the same financial institution may make loans to
AmeriTrade Clearing if requested under a note. AmeriTrade Clearing has pledged
customer securities, the
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amount of which fluctuates from time to time, to secure its obligations
under the letters of credit and the note. As of December 31, 1997, no amounts
were outstanding under the note.
CAPITAL EXPENDITURES
The Company's anticipated capital expenditures for fiscal 1998 approximate
$12.0 million, primarily for the purchase of office, computer and other
operating equipment. The Company anticipates that these expenditures will be
financed by a combination of operating cash flow and the credit facility
discussed above.
ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to the Company prior to its annual report on Form 10-K for the
fiscal year ending September 25, 1998.
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PART II - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
3.1 Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 of the Company's Registration Statement on Form S-1
(Registration No. 333-17495) filed on February 7, 1997)
3.2 Bylaws (incorporated by reference to Exhibit 3.2 of the
Company's Registration Statement on Form S-1 (Registration No.
333-17495) filed on February 7, 1997)
4.1 Form of Certificate for Class A Stock (incorporated by reference
to Exhibit 4.1 of the Company's Registration Statement on Form S-1
(Registration No. 333-17495) filed on February 7, 1997)
10.1 Agreement of Limited Partnership, dated as of February 4, 1993,
of Comprehensive Software Systems Ltd. (incorporated by reference to
Exhibit 10.1 of the Company's Registration Statement on Form S-1
(Registration No. 333-17495) filed on February 7, 1997)
10.2 Amendment to Agreement of Limited Partnership, dated as of
September 1993, of Comprehensive Software Systems Ltd. (incorporated
by reference to Exhibit 10.33 of the Company's Registration
Statement on Form S-1 (Registration No. 333-17495) filed on
February 7, 1997)
10.3 Second Amendment to Agreement of Limited Partnership, dated
as of December 1994, of Comprehensive Software Systems Ltd.
(incorporated by reference to Exhibit 10.34 of the Company's
Registration Statement on Form S-1 (Registration No. 333-17495)
filed on February 7, 1997)
10.4 Third Amendment to Agreement of Limited Partnership, dated as
of December 31, 1995, of Comprehensive Software Systems Ltd.
(incorporated by reference to Exhibit 10.35 of the Company's
Registration Statement on Form S-1 (Registration No. 333-17495)
filed on February 7, 1997)
10.5 Amended and Restated Limited Liability Company Agreement,
dated as of March 6, 1995, of Roundtable Partners (incorporated by
reference to Exhibit 10.2 of the Company's Registration Statement on
Form S-1 (Registration No. 333-17495) filed on February 7, 1997)
10.6 Broker Loan Pledge and Security Agreement, dated as of October
24, 1989, made by AmeriTrade, Inc. in favor of the First National
Bank of Chicago (incorporated by reference to Exhibit 10.18 of the
Company's Registration Statement on Form S-1 (Registration No.
333-17495) filed on February 7, 1997)
10.7 Master Broker Loan Note, dated as of October 24, 1989, made
by AmeriTrade, Inc. in favor of the First National Bank of Chicago
(incorporated by reference to Exhibit 10.19 of the Company's
Registration Statement on Form S-1 (Registration No. 333-17495)
filed on February 7, 1997)
10.8 Lease, dated as of July 14, 1993, between John Joe and
Marlene M. Ricketts and TransTerra Co. (incorporated by reference to
Exhibit 10.20 of the Company's Registration Statement on Form S-1
(Registration No. 333-17495) filed on February 7, 1997)
10.9 Amendment to Lease, dated as of September 27, 1996, between
John Joe and Marlene M. Ricketts and TransTerra Co. (incorporated by
reference to Exhibit 10.21 of the Company's Registration Statement
on Form S-1 (Registration No. 333-17495) filed on February 7, 1997)
10.10 Lease, dated as of October 5, 1995, between A.C. Nielsen
Company and TransTerra Co. (incorporated by reference to Exhibit
10.22 of the Company's Registration Statement on Form S-1
(Registration No. 333-17495) filed on February 7, 1997)
10.11 First Amendment to Lease, dated as of August 23, 1996,
between A.C. Nielsen Company and TransTerra Co. (incorporated by
reference to Exhibit 10.23 of the Company's Registration Statement
on Form S-1 (Registration No. 333-17495) filed on February 7, 1997)
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10.12 Second Amendment to Lease, dated as of October 5, 1997,
between A.C. Nielsen Company and AmeriTrade Holding Corporation
(incorporated by reference to Exhibit 10.12 of the Company's annual
report on Form 10-K filed on December 23, 1997)
10.13 Lease, dated as of March 10, 1996, between New York
Executive Office Network and K. Aufhauser & Company, Inc.
(incorporated by reference to Exhibit 10.24 of the Company's
Registration Statement on Form S-1 (Registration No. 333-17495)
filed on February 7, 1997)
10.14 Lease, dated as of June 20, 1996, between Christ Community
Church and TransTerra Co. (incorporated by reference to Exhibit
10.25 of the Company's Registration Statement on Form S-1
(Registration No. 333-17495) filed on February 7, 1997)
10.15 Employment Contract, dated as of December 3, 1996, between
J. Joe Ricketts and AmeriTrade Holding Corporation (incorporated by
reference to Exhibit 10.26 of the Company's Registration Statement
on Form S-1 (Registration No. 333-17495) filed on February 7, 1997)
10.16 Employment Contract, dated as of December 3, 1996, between
Joseph A. Konen and AmeriTrade Holding Corporation (incorporated by
reference to Exhibit 10.27 of the Company's Registration Statement
on Form S-1 (Registration No. 333-17495) filed on February 7, 1997)
10.17 Employment Contract, dated as of December 3, 1996, between
Robert T. Slezak and AmeriTrade Holding Corporation (incorporated by
reference to Exhibit 10.28 of the Company's Registration Statement
on Form S-1 (Registration No. 333-17495) filed on February 7, 1997)
10.18 Form of Executive Bonus Plan (incorporated by reference to
Exhibit 10.29 of the Company's Registration Statement on Form S-1
(Registration No. 333-17495) filed on February 7, 1997)
10.19 1996 Long-Term Incentive Plan (incorporated by reference to
Exhibit 10.30 of the Company's Registration Statement on Form S-1
(Registration No. 333-17495) filed on February 7, 1997)
10.20 1996 Directors Incentive Plan (incorporated by reference to
Exhibit 10.31 of the Company's Registration Statement on Form S-1
(Registration No. 333-17495) filed on February 7, 1997)
10.21 Loan Agreement, dated as of November 11, 1997 (incorporated
by reference to Exhibit 10.21 of the Company's annual report on Form
10-K filed on December 23, 1997)
10.22 Loan Agreement, dated as of January 16, 1998, made by
Ameritrade Holding Corporation in favor of a bank group
27.1 Financial Data Schedule, EDGAR filing only
(B) REPORTS ON FORM 8-K:
A report on Form 8-K was filed on October 1, 1997 under item 5 thereof
announcing that the Company planned to merge three of its operating
subsidiaries into a single new company. Ceres Securities, K. Aufhauser &
Company, Inc., and eBroker were merged into Ameritrade, (Inc.).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: February 12, 1998
Ameritrade Holding Corporation
(Registrant)
by: /s/ J. Joe Ricketts
------------------------------
J. Joe Ricketts
Director, Chairman and Chief Executive Officer
(Principal Executive Officer)
by: /s/ Robert T. Slezak
------------------------------
Robert T. Slezak
Director, Chief Financial Officer, Vice President and
Treasurer
(Principal Financial and Accounting Officer)
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EXHIBIT 10.22
REVOLVING CREDIT AGREEMENT
AMONG
AMERITRADE HOLDING CORPORATION,
FIRST NATIONAL BANK OF OMAHA,
HARRIS TRUST AND SAVINGS BANK,
LASALLE NATIONAL BANK AND
MERCANTILE BANK OF ST. LOUIS, N.A.
JANUARY 16, 1998
<PAGE> 2
TABLE OF CONTENTS
I. DEFINITIONS...................................................... 1
II. REVOLVING FACILITY.............................................. 6
2.1 Revolving Credit............................................ 7
2.2 Revolving Credit Fees....................................... 7
2.3 Interest on Revolving Credit................................ 7
2.4 Payments.................................................... 7
2.5 Prepayments................................................. 8
2.6 Security.................................................... 8
III. REPRESENTATIONS AND WARRANTIES................................. 8
3.1 Corporate Existence......................................... 8
3.2 Corporate Authority......................................... 8
3.3 Validity of Agreements...................................... 8
3.4 Litigation.................................................. 9
3.5 Governmental Approvals...................................... 9
3.6 Defaults Under Other Documents.............................. 9
3.7 Judgment.................................................... 9
3.8 Compliance with Laws........................................ 9
3.9 Taxes....................................................... 9
3.10 Collateral..................................................10
3.11 Pension Benefits............................................10
3.12 Margin Regulations..........................................10
3.13 Financial Condition.........................................10
IV. COVENANTS........................................................10
4.1 Financial Reports...........................................10
4.2 Corporate Structure and Assets..............................12
4.3 Net Worth...................................................12
4.4 Indebtedness................................................12
4.5 Use of Proceeds.............................................13
4.6 Notice of Default...........................................13
4.7 Distributions...............................................13
4.8 Compliance with Law and Regulations.........................14
4.9 Maintenance of Property; Accounting; Corporate Form; Taxes;
Insurance...................................................14
4.10 Inspection of Properties and Books..........................14
4.11 Guaranties..................................................15
4.12 Collateral..................................................15
4.13 Name; Location..............................................15
<PAGE> 3
4.14 Notice of Change in Ownership or Management.................15
4.15 Subordinated Debt...........................................15
4.16 Capital Expenditures........................................15
4.17 Acquisitions................................................15
4.18 Subsidiaries................................................16
4.19 Minimum Regulatory Net Capital..............................16
4.20 Minimum Core Retail Accounts................................16
4.21 Taxes.......................................................16
4.22 ERISA.......................................................16
4.23 Expenses....................................................17
V. CONDITIONS PRECEDENT..............................................17
5.1 Closing Conditions..........................................17
VI. DEFAULTS AND REMEDIES............................................18
6.1 Events of Default...........................................18
6.2 Remedies....................................................20
VII. INTER-CREDITOR AGREEMENTS......................................20
7.1 FNB-O as Servicer...........................................20
7.2 Application of Payments.....................................21
7.3 Liability of FNB-O..........................................22
7.4 Transfers...................................................22
7.5 Reliance....................................................22
7.6 Relationship of Lenders.....................................23
7.7 New Revolving Lenders.......................................23
7.8 Agenting Fee................................................23
VIII. REIMBURSEMENTS; INDEMNIFICATION...............................23
8.1 Capital Adequacy............................................23
8.2 General Indemnity...........................................24
IX. MISCELLANEOUS...................................................24
9.1 Entire Agreement............................................24
9.2 Governing Law...............................................24
9.3 Notices.....................................................24
9.4 Headings....................................................25
9.5 Counterparts................................................25
9.6 Survival; Successors and Assigns............................25
9.7 Severability................................................25
9.8 Assignment..................................................25
9.9 Consent to Form of Pledge Agreement and Security Agreement..25
<PAGE> 4
EXHIBIT A - Form of Notes
EXHIBIT B - Drawing Certificate
EXHIBIT C - Compliance Certificate
SCHEDULE A - Permitted Existing Encumbrances
<PAGE> 5
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT (the "Agreement") is entered into as of
the 16th day of January, 1998, among AMERITRADE HOLDING CORPORATION, a Delaware
corporation having its principal place of business at 4211 South 102nd Street,
Omaha, Nebraska 68127 (the "Borrower"), FIRST NATIONAL BANK OF OMAHA, a national
banking association having its principal place of business at One First National
Center, Omaha, Nebraska 68102 ("Agent" or "FNB-O"), and HARRIS TRUST AND SAVINGS
BANK, an Illinois banking association having its principal place of business at
111 W. Monroe Street, Chicago, Illinois 60603, LASALLE NATIONAL BANK, a national
banking association located at 801 Grand Street, Suite 3150, Des Moines, Iowa
50309 and MERCANTILE BANK OF ST. LOUIS, N.A., a national banking association
having its principal place of business at One Mercantile Center, 7th and
Washington TRAM 12-3, St. Louis, Missouri 63101.
I. DEFINITIONS
For purposes of this Agreement, the following definitions shall apply:
Advance: Any advance of funds to the Borrower by the Revolving Lenders
or any of them under the revolving credit facility provided in
this Agreement.
Agreement: This Revolving Credit Agreement dated as of January 16, 1998,
among the Borrower and the Revolving Lenders, as amended or
restated from time to time.
AmeriTrade
Clearing: AmeriTrade Clearing, Inc., a Nebraska corporation, and wholly-
owned subsidiary of the Borrower.
Annualized
Modified
Cash Flow: The (i) product of (a) 4 times (b) the sum, for the
three months preceding the date of determination of the
Borrower's consolidated net income (loss) before taxes, and
plus or minus any non-ordinary non-cash charges or credits to
earnings for each month in such quarter, plus (ii) advertising
expenditures in each month in excess of $667,000.
Base Rate: The floating per annum interest rate published from time to
time as the "Prime Rate" (the base rate on corporate loans
posted by at least 75% of the nation's 30 largest
<PAGE> 6
banks) in the Midwest Edition of the Wall Street Journal on
the date that the interest is billed, or if no rate is
published on such date, on the last preceding date when such
rate was published.
Borrower: AmeriTrade Holding Corporation, a Delaware corporation having
its principal place of business at 4211 South 102nd Street,
Omaha, Nebraska 68127.
Business
Day: Any day other than a Saturday, Sunday or a legal holiday on
which banks in the State of Nebraska, Illinois or Missouri are
not open for business.
Change of
Control: (a) At any time when any of the equity securities of the
Borrower shall be registered under Section 12 of the
Securities Exchange Act of 1934 as amended from time to time
(the "Exchange Act"), (i) any person, entity or "group"
(within the meaning of Section 13(d)(3) of the Exchange Act)
(other than any person which is a management employee, or any
such "group" which consists entirely of management employees,
of the Borrower) being or becoming the beneficial owner,
directly or indirectly, of voting stock of the Borrower in an
amount sufficient to elect a majority of the members of the
Borrower's board of directors, or (ii) a majority of the
members of the Borrower's board of directors (the "Board")
consisting of persons other than Continuing Directors (as
hereinafter defined); and (b) at any other time, the voting
stock of the Borrower being owned beneficially, directly or
indirectly, by any person, entity or group other than
employees of the Borrower or its Subsidiaries. As used herein,
the term "Continuing Director" means any member of the Board
on the date of this Agreement, and any other member of the
Board who shall be recommended or elected to succeed a
Continuing Director by a majority of Continuing Directors who
are the members of the Board.
Collateral: All personal property of the Borrower described in the
Security Agreement and the Pledge Agreement, whether now owned
or hereafter acquired, including, without limitation:
(a) all of the Borrower's stock in any
present or future subsidiary, including without
limitation, AmeriTrade Clearing, Inc., AmeriTrade,
Inc., and Accutrade, Inc.; and
(b) all of the Borrower's accounts, accounts
receivable, chattel paper, documents, instruments and
other securities, goods, inventory, equipment,
furniture and fixtures, general intangibles, contract
rights, computer, data processing, hardware and
software licenses, books and records; and
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(c) all proceeds and products of the
foregoing.
Commitment: As to each Revolving Lender, such Revolving Lender's pro rata
percentage or maximum dollar amount of the commitments set
forth in Section 2.1 of this Agreement.
Core Retail
Accounts: Open accounts of AmeriTrade, Inc. and Accutrade, Inc. which
have a currently valid account number, are eligible for online
trading, and are reported publically on a quarterly basis.
Default Rate: The Revolving Credit Rate as defined herein plus 3.0%.
Event of
Default: Any of the events set forth in Section 6.1 of this Agreement.
FNB-O: First National Bank of Omaha, a national banking association
having its principal place of business at One First National
Center, Omaha, Nebraska 68102, and its successors and assigns.
Indebtedness: All loans and other obligations of the Borrower for borrowed
money, without duplication, (including, without limitation,
the indebtedness due to the Revolving Lenders) regardless of
the maturity thereof, but excluding capital leases incurred in
the ordinary course of business and excluding net payables to
customers and broker-dealers in the ordinary course of
business.
Net Operating
Profit After
Taxes: For any period, the net earning (or loss) after taxes of
Borrower and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period and determined in
conformity with generally accepted accounting principles;
provided that there shall be excluded (i) the income (or loss)
of any entity accrued prior to the date it becomes a
Subsidiary of Borrower or is merged into or consolidated with
Borrower and (ii) any extraordinary gains or losses for such
period determined in accordance with generally accepted
accounting principles.
Net Worth: The Borrower's consolidated net worth as determined in
accordance with generally accepted accounting principles.
Notes: (i) The revolving credit notes, substantially in the form of
Exhibit A attached to this Agreement, and such additional
similar notes as may be issued to certain additional
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<PAGE> 8
Revolving Lenders, and all extensions, renewals, and
substitutions of or for the foregoing.
Operative
Documents: This Agreement, the Notes, the Pledge Agreement, the Security
Agreement, the financing statements regarding the Collateral
and the documents and certificates delivered pursuant to
Section 5.1.
Permitted
Liens: (i) Liens existing on the date of this Agreement as shown on
Schedule A; (ii) Liens for taxes, assessments, governmental
charges or claims which are not yet delinquent or which are
being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and if a reserve
or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made therefor; (iii)
statutory Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other like
Liens arising in the ordinary course of business and with
respect to amounts not yet delinquent or being contested in
good faith by appropriate proceedings, and if a reserve or
other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor; (iv) Liens
(other than any Lien imposed by the Employee Retirement Income
Security Act of 1974, as amended) incurred or deposits made in
the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security; (v) Liens incurred or deposits made to secure the
performance of tenders, bids, leases, statutory obligations,
surety and appeal bonds, government contracts, performance and
return-of-money bonds and other obligations of a like nature
incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (vi)
easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the
business of the Borrower or any of its Subsidiaries incurred
in the ordinary course of business; (vii) Liens securing
reimbursement obligations with respect to documentary letters
of credit which encumber documents and other property relating
to such letters of credit and the products and proceeds
thereof; (viii) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods;
(ix) judgment and attachment Liens not giving rise to a
Default or an Event of Default; (x) leases or subleases
granted to others not interfering in any material respect with
the business of the Borrower or any of its Subsidiaries; (xi)
customary Liens securing indebtedness under interest rate
protection agreements and foreign currency hedging
arrangements; (xii) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual or
warranty requirements of the Borrower; (xiii) any interest or
title of a lessor in the property subject to any capital lease
obligation or operating lease
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<PAGE> 9
entered into by the Borrower in the ordinary course of
business provided that the incurrence of any related
indebtedness is permitted by this Agreement; (xiv) Liens of
banks in funds on deposit with such banks; and (xv)
extensions, renewals or regranting of any Liens referred to in
clauses (i) through (xiv) above.
Pledge
Agreement: The Stock Pledge Agreement dated as of the date hereof,
between the Borrower and FNB-O, as agent for the Revolving
Lenders, as amended or restated from time to time.
Principal
Loan
Amount: The aggregate principal amount of all unpaid Advances made
under the Notes outstanding at any time.
Quarterly
Compliance
Certificate: The certificate delivered to the Revolving Lenders by the
Borrower pursuant to Section 4.1(e).
Regulatory
Net Capital The amount of net capital required for AmeriTrade
Clearing under Section 15(c)(3) of the Securities Exchange Act
of 1934 and Regulations promulgated thereunder in effect as of
October 31, 1997.
Requisite
Revolving
Lenders Except where a higher percentage is required pursuant to the
express terms of this Agreement, including without limitation
Section 7.1, Revolving Lenders owning two-thirds (2/3) by
amount of the Principal Loan Amount outstanding or, if no
Principal Loan Amount is outstanding, Revolving Lenders
representing two-thirds (2/3) of the Commitments in effect at
such time.
Revolving
Credit Rate: The per annum interest rate equal to the Base Rate minus 3/4
of 1%.
Revolving
Lenders: FNB-O, Harris Trust and Savings Bank, Mercantile Bank of St.
Louis, N.A., LaSalle National Bank, and such additional
Revolving Lenders as may be added as Revolving Lenders under
Section 2.1 hereto from time to time in accordance with
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<PAGE> 10
this Agreement, as such Revolving Lenders may be modified by
assignments permitted under Section 7.4 from time to time.
Security
Agreement: The Security Agreement dated as of this date between the
Borrower and FNB-O as agent for the Revolving Lenders, as
amended from time to time.
Subsidiary: Any corporation business association, partnership, joint
venture, limited liability company or other business entity in
which the Borrower, or one or more of its Subsidiaries, or the
Borrower and one or more of its Subsidiaries has more than 50%
of the equity ownership thereof, or any other entity which,
pursuant to GAAP, would be considered a subsidiary of the
Borrower or any one or more of its Subsidiaries.
Termination
Date: December 31, 2000, or such later date as is approved in
writing by the Revolving Lenders.
All accounting terms not otherwise defined herein shall have the meaning
ordinarily applied under generally accepted accounting principles from time to
time in effect.
II. REVOLVING FACILITY
2.1 Revolving Credit.
Until December 30, 2000, the Revolving Lenders severally agree
to advance funds for general corporate purposes not to exceed the
amount shown below (the "Base Revolving Credit Facility") to the
Borrower on a revolving credit basis. Such Advances shall be made on a
pro rata basis by the Revolving Lenders, based on the following maximum
advance limits and applicable percentages for each Revolving Lender:
(i) as to FNB-O, $16,000,000 (32%); (ii) as to Harris Trust and Savings
Bank, $12,000,000 (24%); (iii) as to Mercantile Bank of St. Louis N.A.,
$12,000,000 (24%); and (iv) as to LaSalle National Bank, $10,000,000
(20%); provided, however, that each Revolving Lender's Commitment is
several and not joint or joint and several. The Base Revolving Credit
Facility shall be as follows:
Closing until June 30, 1999 $50,000,000
July 1, 1999 - September 30, 1999 $47,500,000
October 1, 1999 - December 31, 1999 $45,000,000
January 1, 2000 - March 31, 2000 $42,500,000
April 1, 2000 - June 30, 2000 $40,000,000
July 1, 2000 - September 30, 2000 $37,500,000
October 1, 2000-December 31, 2000 $35,000,000
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<PAGE> 11
The Borrower shall not be entitled to any Advance hereunder if, after the making
of such Advance, the Principal Loan Amount would exceed the least of (w) the
then current Base Revolving Credit Facility, or (x) one and one-half (1 1/2)
times the Borrower's Annualized Modified Cash Flow, or (y) 2/3 of the Regulatory
Net Capital of AmeriTrade Clearing, or (z) the number of Core Retail Accounts
times $200, determined in each case after giving effect to the requested
Advance. Nor shall the Borrower be entitled to any further Advances hereunder
after the occurrence and during the continuation of any Event of Default or any
event which with the passage of time or the giving of notice or both would
constitute an Event of Default, or if the Borrower's representations and
warranties cease to be true and correct at the time of the requested Advance.
Advances shall be made, on the terms and conditions of this Agreement, upon the
Borrower's request. Requests shall be made by 12:00 noon Omaha time on the
Business Day prior to the requested date of the Advance. Requests shall be made
by presentation to FNB-O of a drawing certificate in the form of Exhibit B. The
Borrower's obligation to make payments of principal and interest on the
foregoing revolving credit indebtedness shall be further evidenced by the Notes.
2.2 Revolving Credit Fees.
(a) The Borrower shall pay to the Revolving Lenders a
commitment fee equal to 1/4 of 1% of the average unused facility,
payable quarterly in arrears. Such fee shall be paid to the Agent and
based on the average unused portion of the revolving credit commitment
during the applicable quarter.
(b) The Borrower shall also pay a closing fee of $125,000
payable in four equal quarterly installments of $31,250. Such closing
fee shall be earned at closing and shall be non-refundable.
FNB-O shall distribute to each Revolving Lender its pro rata share of such fees
based on the maximum advance limits set forth above.
2.3 Interest on Revolving Credit. Interest shall accrue on the
Principal Loan Amount outstanding from time to time at a variable rate per annum
equal to the Base Rate minus 3/4 of 1%. Such rate shall fluctuate daily based on
changes in the Base Rate on such date. The Base Rate minus 3/4 of 1% per annum
is referred to herein as the "Revolving Credit Rate." All interest under the
Notes shall accrue based on a year of 360 days, and for actual days elapsed.
Interest shall be due no later than the tenth day of each month. Notwithstanding
anything to the contrary elsewhere herein, after an Event of Default has
occurred and is continuing, interest shall accrue on the entire outstanding
balance of principal and interest on all indebtedness hereunder at a fluctuating
rate per annum equal to the Default Rate.
2.4 Payments. On or prior to the end of each calendar quarter the
Borrower shall repay the amount, if any, outstanding on the Notes which in the
aggregate exceeds the amount of the Base Revolving Credit Facility to be in
place on the next succeeding Business Day following such
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<PAGE> 12
calendar quarter. The balance of the loan on December 31, 2000, if any, shall be
due on the Termination Date. All obligations of the Borrower under the Notes and
under the other Operative Documents shall be payable in immediately available
funds in lawful money of the United States of America at the principal office of
FNB-O in Omaha, Nebraska or at such other address as may be designated by FNB-O
in writing. In the event that a payment day is not a Business Day, the payment
shall be due on the next succeeding Business Day.
2.5 Prepayments. The Borrower may at any time prepay the Principal Loan
Amount, in whole or in part, outstanding under the Notes if the Borrower has
given the Agent at least one (1) Business Day's prior written notice of its
intention to make such prepayment. Any such prepayment may be made without
penalty. All such prepayments shall be made pro rata among the Revolving Lenders
based on their respective pro rata share of the amounts outstanding on the
Notes. No such prepayment shall reduce the Base Revolving Credit Facility.
2.6 Security. All obligations of the Borrower hereunder and under the
Operative Documents, including, without limitation, the Borrower's obligations
to make payments of principal and interest on the Notes shall be secured by a
first security interest in the Collateral, as more specifically described in the
Security Agreement and the Pledge Agreement.
III. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that as of the date hereof and as
of the date of each and every request for an Advance hereunder, the following
are and shall be true and correct:
3.1 Corporate Existence. It and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and duly qualified and in good standing in all states
where it is doing business except where the failure to be so qualified would not
have a material adverse effect on it and its Subsidiaries taken as a whole, and
it has full corporate power and authority to own and operate its properties and
to carry on its business.
3.2 Corporate Authority. It has full corporate power, authority and
legal right to execute, deliver and perform the Operative Documents to which it
is a party, and all other instruments and agreements contemplated hereby and
thereby, and to perform its obligations hereunder and thereunder; and such
actions have been duly authorized by all necessary corporate action, and are not
in conflict with any applicable law or regulation, or any order, judgment or
decree of any court or other governmental agency or instrumentality or its
articles of incorporation or bylaws, or with any provisions of any indenture,
contract or agreement to which it or any of its Subsidiaries is a party or by
which it or any of its Subsidiaries or any of its or their property may be
bound.
3.3 Validity of Agreements. The Borrower's Operative Documents have
been duly authorized, executed and delivered and constitute its legal, valid and
binding agreements,
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<PAGE> 13
enforceable against the Borrower in accordance with their respective terms
(except to the extent that enforcement thereof may be limited by any applicable
bankruptcy, reorganization, moratorium or similar laws now or hereafter in
effect, or by principles of equity).
3.4 Litigation. Neither the Borrower nor any Subsidiary is a party to
any pending lawsuit or proceeding before or by any court or governmental body or
agency, which, if adversely determined, is likely to have a material adverse
effect on the Borrower's ability to perform its obligations under its Operative
Documents or a Subsidiary's ability to pay dividends to the Borrower; nor is the
Borrower aware of any threatened lawsuit or proceeding, to which it or any
Subsidiary may become a party or of any investigation of any Court or
governmental body or agency into its affairs, which if instituted would have a
material adverse effect upon the Borrower's ability to perform its obligations
under its Operative Documents or a Subsidiary's ability to pay dividends to the
Borrower.
3.5 Governmental Approvals. The execution, delivery and performance by
the Borrower of the Operative Documents do not require the consent or approval
of, the giving of notice to, the registration with, or the taking of any other
action in respect of, any federal, state or other governmental authority or
agency other than as contemplated herein and therein.
3.6 Defaults Under Other Documents. Neither the Borrower nor any
Subsidiary is in default or in violation (nor has any event occurred which, with
notice or lapse of time or both, would constitute a default or violation) under
any document or any agreement or instrument to which it may be a party or under
which it or any of its properties may be bound, the result of which would have a
material adverse effect upon the Borrower's ability to perform its obligations
under its Operative Documents or a Subsidiary's ability to pay dividends to the
Borrower.
3.7 Judgments. There are no outstanding or unpaid judgments (which are
not adequately bonded) of the Borrower or any Subsidiary which would have a
material adverse effect upon the Borrower's ability to perform its obligations
under its Operative Documents or a Subsidiary's ability to pay dividends to the
Borrower.
3.8 Compliance with Laws. Neither the Borrower nor any Subsidiary is in
violation of any laws, regulations or judicial or governmental decrees in any
respect which would have any material adverse effect upon the validity or
enforceability of any of the terms of the Borrower's Operative Documents or
which would have a material adverse effect upon the Borrower's ability to
perform its obligations under its Operative Documents or a Subsidiary's ability
to pay dividends to the Borrower.
3.9 Taxes. All tax returns of the Borrower and its Subsidiaries for
material taxes required to be filed have been filed or extensions permitted by
law have been obtained; all taxes of the Borrower and its Subsidiaries of a
material nature and which are due and payable as reflected on such returns have
been paid, other than taxes which are due but for which only a nominal late
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<PAGE> 14
payment penalty is payable and for which the taxing authority is not yet
entitled to enforce its remedies for payment thereof and other than taxes being
contested in good faith and with respect to which adequate reserves have been
established; and no material amounts of taxes of the Borrower and its
Subsidiaries not reflected on such returns are payable.
3.10 Collateral. The Borrower has good title to the Collateral and the
Collateral is free from all liens, encumbrances or security interests, except
for Permitted Liens and except as disclosed on Section 3.10 of Schedule A
attached hereto. The Borrower's principal place of business, chief executive
office, and the principal place where it keeps its records concerning the
Collateral is 4211 South 102nd Street, Omaha, Nebraska 68127.
3.11 Pension Benefits. Neither the Borrower nor any Subsidiary
maintains a "Plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or each such entity is in compliance
with the minimum funding requirements with respect to any such "Plan" maintained
by it to the extent applicable, and it has not incurred any material liability
to the Pension Benefit Guaranty Corporation ("PBGC") or otherwise under ERISA in
connection with any such Plan.
3.12 Margin Regulations. No part of the proceeds of any Advance
hereunder shall be used for any purpose that violates, or which is inconsistent
with, the provisions of Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System of the United States.
3.13 Financial Condition. The financial condition of the Borrower and
its Subsidiaries is fairly presented in the most recent financial statement
which has been provided to the Agent and such financial statement does not
contain any untrue statements of a material fact or omit to state any material
fact necessary to make the statement therein not misleading in light of the
circumstances under which it was made. No material adverse change has occurred
since the date of such financial statement.
IV. COVENANTS
The Borrower hereby covenants that:
4.1 Financial Reports.
(a) Within thirty (30) days after the end of each month, the
Borrower, at its sole expense, shall furnish the Agent a consolidated
balance sheet, a statement of earnings of the Borrower and its
consolidated Subsidiaries, and a statement of cash flows of the
Borrower and its consolidated Subsidiaries, and such financial
statements on a consolidating basis as to the Borrower, all such
financial statements to be prepared in accordance with generally
accepted accounting principles consistently applied and certified as
completed and correct,
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<PAGE> 15
subject to normal changes resulting from year-end audit adjustments, by
the chief financial officer of the Borrower.
(b) Within ninety (90) days after the close of the Borrower's
fiscal year, the Borrower, at its sole expense, shall furnish the
Agent: (i) a consolidated balance sheet, a statement of earnings of the
Borrower and its consolidated Subsidiaries and a statement of cash
flows of the Borrower and its consolidated Subsidiaries, certified by
Deloitte & Touche LLP, or other independent certified public
accountants reasonably acceptable to the Requisite Revolving Lenders,
that such financial reports fairly present the financial condition of
the Borrower and its consolidated Subsidiaries and have been prepared
in accordance with generally accepted accounting principles
consistently applied; and (ii) a certificate from such accountants
certifying that in making the requisite audit for certification of the
Borrower's financial statements, the auditors either (1) have obtained
no knowledge, and are not otherwise aware of, any condition or event
which constitutes an Event of Default or which with the passage of time
or the giving of notice would constitute an Event of Default under this
Agreement; or (2) have discovered such condition or event, as
specifically set forth in such certificate, which constitutes an Event
of Default or which with the passage of time or the giving of notice
would constitute an Event of Default under such sections. The auditors
shall not be liable to the Revolving Lenders by reason of the auditors'
failure to obtain knowledge of such event or condition in the ordinary
course of their audit unless such failure is the result of negligence
or willful misconduct in the performance of the audit.
(c) Within thirty (30) days after submission to the Securities
and Exchange Commission, the Borrower shall provide to the Agent copies
of its Forms 10K and 10Q, as submitted to the Securities and Exchange
Commission during the term of this Agreement.
(d) Within thirty (30) days after the end of each month, the
Borrower shall provide to the Agent the FOCUS report of AmeriTrade
Clearing for such month.
(e) Within thirty (30) days after the end of each quarter, the
Borrower, at its expense, shall furnish the Agent a certificate of the
chief financial officer of the Borrower in the form of Exhibit C,
setting forth such information (including detailed calculations)
sufficient to verify the conclusions of such officer after due inquiry
and review, that:
(i) The Borrower and each Subsidiary, either (y) is
in compliance with the requirements set forth in this
Agreement or (z) is NOT in compliance with the foregoing for
reasons specifically set forth therein; and
(ii) The chief financial officer of the Borrower has
reviewed or caused to be reviewed all of the terms of the
Operative Documents of the Borrower and that such review
either (y) has NOT disclosed the existence of any condition or
event which constitutes an event of default or any condition
or event which with the passage of
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time or the giving of notice would constitute an event of
default under the Operative Documents or (z) has disclosed the
existence of a condition or event which constitutes an event
of default, or a condition or event which with the passage of
time or the giving of notice would constitute an event of
default, under the aforesaid instrument or instruments and the
specific condition or event is specifically set forth.
(f) The Borrower shall provide the Agent with such other
financial reports and statements as the Revolving Lenders may
reasonably request.
4.2 Corporate Structure and Assets. The Borrower shall not merge or
consolidate with any other corporation or entity unless the Borrower shall be
the surviving entity. The Borrower shall not sell any assets, other than in the
ordinary course of business, in an aggregate amount greater than one million
dollars ($1,000,000), except (a) items that are obsolete or no longer necessary
for operation of the business, and (b) the Borrower's investment in Telescan,
Inc. The Revolving Lenders shall be entitled to receive as a prepayment on the
Notes the proceeds of any sale of assets of the Borrower which are prohibited by
the preceding sentence. Notwithstanding the foregoing prepayment requirements,
any such prohibited sale shall remain a violation of this Agreement. In
addition, the Borrower shall not engage in any business materially different
from that in which it is presently engaged and businesses reasonably related
thereto without the prior written consent of the Requisite Revolving Lenders,
which consent shall not be unreasonably withheld. The foregoing restrictions on
mergers and consolidations shall not apply if: (i) in the case of a merger, the
Borrower is the surviving entity and expressly reaffirms its obligations
hereunder; (ii) in the case of a consolidation, the resulting corporation
expressly assumes the obligations of the Borrower hereunder; (iii) the surviving
or resulting corporation is organized under the laws of the United States or a
jurisdiction thereof; (iv) after giving effect to such merger or consolidation,
the surviving or resulting corporation will be engaged in substantially the same
lines of business as are now engaged in by the Borrower and its Subsidiaries and
businesses reasonably related thereto; and (v) immediately after giving effect
to such merger or consolidation, no Event of Default will exist hereunder.
4.3 Net Worth. The Borrower shall maintain a minimum Net Worth during
the term of this Agreement of at least the amounts set forth hereunder:
On or After Date Shown Minimum Net Worth
---------------------- -----------------
Closing $50,000,000
12/31/98 $67,500,000
12/31/99 $85,000,000
4.4 Indebtedness. The Borrower shall not have any Indebtedness other
than as incurred under this Agreement, and shall not at any time permit the sum
of its total Indebtedness to exceed three (3) times Annualized Modified Cash
Flow, as tested at the end of the immediately preceding quarter based on the
Annualized Modified Cash Flow for such quarter.
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4.5 Use of Proceeds. No part of the proceeds of the Advances shall be
used for any purpose that violates, or which is inconsistent with, the
provisions of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System of the United States.
4.6 Notice of Default. The Borrower shall give to the Agent written
notification (promptly after the Borrower becomes aware thereof) of the
existence or occurrence of:
(a) any fact or event which results, or which with notice or
the passage of time, or both, would result in an Event of Default
hereunder;
(b) any proceedings instituted by or against the Borrower or
any Subsidiary in any federal, state or local court or before any
governmental body or agency, or before any arbitration board, or any
such proceedings threatened against the Borrower or any Subsidiary by
any governmental agency, or any change in law or regulation applicable
to the Borrower or one or more of its Subsidiaries, which event alone
or in the aggregate is, in the Borrower's reasonable judgment, likely
to have a material adverse effect upon the Borrower's ability to
perform its obligations under its Operative Documents;
(c) any default or event of default involving the payment of
money under any agreement or instrument which is material to the
Borrower or any Subsidiary to which such entity is a party or by which
it or any of its property may be bound, and which default or event of
default would have a material adverse effect upon the Borrower's
ability to perform its obligations under its Operative Documents;
(d) the commencement of any proceeding under the Federal
Bankruptcy Code or similar law affecting creditor's rights by or
against the Borrower or any Subsidiary; and
(e) pending or threatened litigation exists against the
Borrower or any Subsidiary with a prayer for damages in excess of
$500,000 or for any other relief which, if adversely determined, is
likely to have an adverse effect upon the Borrower's ability to perform
its obligations under its Operative Documents.
4.7 Distributions.
(a) The Borrower shall not declare any dividends or make any
cash distribution in respect of any shares of its capital stock or
warrants of its capital stock, without the prior written consent of the
Requisite Revolving Lenders; provided, however, that the Borrower may
declare stock dividends.
(b) The Borrower shall not purchase, redeem, or otherwise
retire any shares of its capital stock or warrants of its capital stock
other than open market purchases not to exceed
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2% of outstanding shares in any year to have stock available for
compensation plans; provided, however, that the amount of such
purchases is not to exceed $1 million per year.
(c) Neither the Borrower nor any Subsidiary will enter into
any agreements limiting a Subsidiary's ability to make dividends to the
Borrower which are more restrictive than the net capital rule
promulgated under Section 15(c) of the Securities Exchange Act of 1934
in effect on October 28, 1997; provided, however, that the granting by
AmeriTrade Clearing to the First National Bank of Chicago of a security
interest pursuant to the Broker-Loan Pledge and Security Agreement
dated October 24, 1989 shall not in and of itself be deemed a violation
of this Subsection 4.7(c).
4.8 Compliance with Law and Regulations. The Borrower and each
Subsidiary shall comply in all material respects with all applicable federal and
state laws and regulations except when the failure to so comply would not have a
material adverse effect on the Borrower's business.
4.9 Maintenance of Property; Accounting; Corporate Form; Taxes;
Insurance.
(a) The Borrower and each Subsidiary shall maintain its
property in good condition in all material respects, ordinary wear and
tear excepted.
(b) The Borrower and each Subsidiary shall keep true books of
record and accounts in which full and correct entries shall be made of
all its business transactions, all in accordance with generally
accepted accounting principles consistently applied.
(c) The Borrower and each Subsidiary shall do or cause to be
done all things necessary to preserve and keep in full force and effect
its corporate form of existence as is necessary for the continuation of
its business in substantially the same form, except where such failure
to do so with respect to any Subsidiary would not have a material
adverse effect on the ability of the Borrower to perform its
obligations under the Operative Documents.
(d) The Borrower and each Subsidiary shall pay all taxes,
assessments and governmental charges or levies imposed upon it or its
property; provided, however, that the Borrower or any Subsidiary shall
not be required to pay any of the foregoing taxes which are being
diligently contested in good faith by appropriate legal proceedings and
with respect to which adequate reserves have been established.
4.10 Inspection of Properties and Books. The Borrower shall recognize
and honor the right of the Revolving Lenders, upon reasonable advance notice to
an officer of the Borrower, to visit and inspect, during normal business hours,
any of the properties of, to examine the books, accounts, and other records of,
and to take extracts therefrom and to discuss the affairs, finances, loans and
accounts of, and to be advised as to the same by the officers of, the Borrower
at all such times, in such detail and through such agents and representatives as
the Revolving Lenders may reasonably desire.
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4.11 Guaranties. Neither the Borrower nor any Subsidiary shall guaranty
or become responsible for the indebtedness of any other person or entity in
excess of an aggregate amount outstanding at any time of $250,000.
4.12 Collateral. The Borrower shall not incur or permit to exist any
mortgage, pledge, lien, security interest or other encumbrance on the
Collateral, other than Permitted Liens and except as otherwise permitted in the
Security Agreement or the Pledge Agreement.
4.13 Name; Location. The Borrower shall give the Agent thirty (30) days
notice prior to changing its name, identity or corporate structure, moving its
principal place of business, chief executive office or the place where it keeps
its records concerning the Collateral.
4.14 Notice of Change in Ownership or Management. During the term of
this Agreement, the Borrower shall give the Revolving Lenders notice of the
occurrence of any of the following described events, which notice shall be given
as soon as the Borrower obtains notice or knowledge thereof:
(a) any change, directly or indirectly, in the existing
controlling interest in the Borrower; or
(b) a change in any of the three (3) officer/directors.
4.15 Subordinated Debt. The Borrower shall not, and shall not permit
any Subsidiary to, incur any subordinated debt or issue any preferred stock or
warrants for preferred stock except upon the prior written consent of the
Requisite Revolving Lenders. The Borrower shall not amend its articles of
incorporation or any other documents or agreements relating to the issuance of
subordinated debt, preferred stock or warrants for preferred stock without the
prior written consent of the Requisite Revolving Lenders.
4.16 Capital Expenditures. The Borrower shall not incur in any fiscal
year capital expenditures, determined in accordance with generally accepted
accounting principles, of more than $15,000,000; provided however that any
portion of such $15,000,000 which is not expended for capital expenditures may
be rolled over and added to the capital expenditures permitted for the next
fiscal year.
4.17 Acquisitions. The Borrower shall not, and shall not permit any
Subsidiaries to, acquire any stock or any equity interest in, or warrants
therefor or securities convertible into the same, or a substantial portion of
the assets of, or debentures of, or other investments in another entity without
the prior written consent of the Requisite Revolving Lenders; provided, however,
that (i) the Borrower shall be permitted to make in any twelve-month period such
acquisitions and investments in an amount not to exceed Two Million Five Hundred
Thousand Dollars ($2,500,000) in the aggregate without the consent of the
Requisite Revolving Lenders; and (ii) the Borrower and
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each Subsidiary shall be permitted to make investments in short term marketable
securities in the normal course of its cash management activities; and (iii)
Ameritrade Clearing shall be permitted to hold short term equity positions in
the normal course of its securities clearing business. Notwithstanding the
foregoing, the Borrower shall not be permitted to act as a market maker or to
conduct trading activities; and no Subsidiary shall be permitted to conduct
trading activities for its own account or to act as a market maker.
4.18 Subsidiaries. The Borrower shall give prompt written notice to the
Revolving Lenders of the Borrower's intent to acquire, or the Borrower's
acquisition of, any Subsidiary. Prior to the creation or acquisition of such
Subsidiary, the Borrower shall cause a first security interest in the Borrower's
equity interest in such Subsidiary to be perfected in favor of FNB-O, as agent
for the Revolving Lenders.
4.19 Minimum Regulatory Net Capital. AmeriTrade Clearing will have
Regulatory Net Capital at all times in compliance with law but in no event less
than 5% of aggregate debit items.
4.20 Minimum Core Retail Accounts. The Borrower will have at least the
number of Core Retail Accounts on the dates set forth below:
Date Minimum Core Retail Accounts
---- ----------------------------
Closing 125,000
3/31/98 175,000
6/30/98 215,000
9/30/98 255,000
12/31/98 290,000
4.21 Taxes. The Borrower shall, and shall cause its Subsidiaries to,
pay all taxes imposed upon them before any penalties or interest accrue thereon;
provided, however, that no such taxes need be paid for so long as they are being
diligently contested in good faith by appropriate proceeding and with respect to
which adequate reserves in accordance with GAAP have been established.
4.22 ERISA. The Borrower shall not, and shall not permit any of its
Subsidiaries to:
(a) (i) engage in any transaction in connection with which the
Borrower or any Subsidiary could be subject to either a criminal or
civil penalty under section 501 or 502(i) of ERISA or a tax imposed by
section 4975 of the Internal Revenue Code of 1986 as amended from time
to time, (ii) fail to make full payment when due of all amounts which
would be deductible by the Borrower or a Subsidiary and which, under
the provisions of any Plan, applicable law or applicable collective
bargaining agreement, the Borrower or any Subsidiary is required to pay
as contributions thereto, or (iii) permit to exist any accumulated
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funding deficiency, whether or not waived, with respect to any Plan,
if, in the case of any of subdivision (i), (ii) or (iii) above, such
penalty or tax, or the failure to make such payment, or the existence
of such deficiency, as the case may be, could have a material adverse
effect on (a) the Borrower's or its Subsidiaries' abilities to conduct
their business, (b) a Subsidiary's ability to pay dividends to the
Borrower, or (c) the Borrower's ability to perform its obligations
under the Operative Documents; or
(b) permit the aggregate complete or partial withdrawal
liability under Title IV of ERISA which is due and unpaid with respect
to all Multiemployer Plans incurred by the Borrower or one or more of
its Subsidiaries to exceed $500,000.
4.23 Expenses. The Borrower shall, immediately upon demand by the
Agent, reimburse the Agent for all reasonable and documented costs and expenses,
including reasonable and documented fees and expenses of counsel to the Agent,
incurred by the Agent in connection with the transaction contemplated by the
Operative Documents after the closing, including without limitation, any waiver,
amendment or enforcement thereof. After the occurrence of an Event of Default,
the Borrower shall, immediately upon demand, reimburse each Revolving Lender for
all reasonable and documented costs and expenses, including reasonable and
documented fees and expenses of counsel to such Revolving Lender, incurred by
such Revolving Lender in connection with enforcing such Revolving Lender's
rights under the Operative Documents.
V. CONDITIONS PRECEDENT
5.1 Closing Conditions. Any and all obligations of the Revolving
Lenders to make their initial advances hereunder are subject to satisfaction of
the following conditions precedent:
(a) FNB-O, as agent, shall have received an opinion of counsel
to the Borrower covering such matters as the Revolving Lenders may
request (including, without limitation, corporate existence and good
standing, corporate authority, due authorization, execution and
delivery of the Operative Documents, the legal, valid, binding and
enforceable nature of the Operative Documents, and the perfection and
priority of the security interest in the Collateral granted to the
Revolving Lenders), such opinion to be satisfactory in form and
substance to counsel to FNB-O;
(b) FNB-O, as agent, shall have received such certificates and
documents as the Revolving Lenders may reasonably request from the
Borrower, including articles of incorporation and bylaws, certificates
regarding good standing, incumbency, copies of other corporate
documents, and appropriate authorizing resolutions;
(c) the Operative Documents shall have been duly authorized
and executed and shall be in full force and effect, and such UCC
financing statements shall have been executed and
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filed in such offices as may be appropriate to perfect the security
interest of FNB-O, as agent for the Revolving Lenders, in the
Collateral;
(d) the Borrower shall have delivered to FNB-O as agent the
certificates covered by the Pledge Agreement and the applicable stock
powers endorsed in blank; and
(e) the Borrower shall have paid the reasonable and documented
fees and expenses of counsel to the Agent in connection with the
preparation, negotiation and execution of the Operative Documents in an
amount not to exceed $10,000.
VI. DEFAULTS AND REMEDIES
6.1 Events of Default. Any of the following shall be deemed an event of
default under this Agreement (an "Event of Default"):
(a) Any payment of principal required by any of the Operative
Documents shall not be paid within three (3) Business Days after the
date on which such payment was invoiced or due.
(b) Any payment of interest or other fees due hereunder or
under any of the Operative Documents shall not be paid within three (3)
Business Days after the date on which such payment was invoiced or due.
(c) Any representation or warranty of the Borrower under any
of the Operative Documents, or any financial reports or statements or
certificates submitted pursuant to this Agreement, shall prove to have
been false in any material respect when made.
(d) A failure of the Borrower or any Subsidiary to comply with
any requirement or restriction applicable to such entity and contained
in Sections 4.2, 4.3, 4.4, 4.5, 4.7, 4.11, 4.12, 4.15, 4.16, 4.17,
4.19, 4.20, 4.21, or 4.22 of this Agreement.
(e) A failure of the Borrower or any Subsidiary to comply with
any requirement or restriction contained in any provision of the
Operative Documents not otherwise specified in this Article VI, which
failure remains unremedied for thirty (30) days following knowledge or
receipt of notice as to such failure from any source.
(f) The occurrence of a default or a breach of any of the
obligations of the Borrower or any Subsidiary (other than obligations
of such Subsidiary to the Borrower) under any note, loan agreement,
preferred stock, subordinated debt instrument or agreement, or any
other agreement evidencing an obligation to repay borrowed money when
the aggregate amount of indebtedness thereby affected (1) exceeds
$500,000 or (2) if such default or breach has
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been declared, such loan agreement, preferred stock, subordinated debt
instrument or agreement, exceeds $100,000.
(g) The entry of a final judgment that exceeds $500,000
against the Borrower or any Subsidiary for the payment of money, which
is not covered by insurance, and the expiration of thirty (30) days
from the date of such entry during which the judgment is not discharged
in full or stayed.
(h) The occurrence of any one or more of the following:
(1) The Borrower or any Subsidiary shall file a
voluntary petition in bankruptcy or an order for relief shall
be entered in a bankruptcy case as to such entity or shall
file any petition or answer seeking or acquiescing in any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief for itself under
any present or future federal, state or other statute, law or
regulation relating to bankruptcy, insolvency or other relief
for debtors; or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of such
entity or of all or any part of its property, or of any or all
of the royalties, revenues, rents, issues or profits thereof,
or shall make any general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its
debts or shall generally not pay its debts as they become due;
or
(2) A court of competent jurisdiction shall enter an
order, judgment or decree approving a petition filed against
the Borrower or any Subsidiary seeking any reorganization,
dissolution or similar relief under any present or future
federal, state or other statute, law or regulation relating to
bankruptcy, insolvency or other relief for debtors, and such
order, judgment or decree shall remain unvacated and unstayed
for an aggregate of sixty (60) days (whether or not
consecutive) from the first date of entry thereof; or any
trustee, receiver or liquidator of the Borrower or any
Subsidiary or of all or any part of its property, or of any or
all of the royalties, revenues, rents, issues or profits
thereof, shall be appointed without the consent or
acquiescence of such entity and such appointments shall remain
unvacated and unstayed for an aggregate of sixty (60) days
(whether or not consecutive); or
(3) A writ of execution or attachment or any similar
process shall be issued or levied against all or any part of
or interest in the Collateral, or any judgment involving
monetary damages shall be entered against the Borrower or any
Subsidiary which shall become a lien on the Collateral or any
portion thereof or interest therein and such execution,
attachment or similar process or judgment is not released,
bonded, satisfied, vacated or stayed within thirty (30) days
after its entry or levy.
(i) A Change of Control shall occur.
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<PAGE> 24
(j) Any adverse regulatory action has been taken against the
Borrower or one or more of its Subsidiaries which will materially
adversely affect (a) the Borrower's or its Subsidiaries' abilities to
conduct their business, (b) a Subsidiary's ability to pay dividends to
the Borrower, or (c) the Borrower's ability to perform its obligations
under this Agreement or any of the Operative Documents.
(k) Any litigation has been filed against the Borrower or one
or more of its Subsidiaries which, if determined adversely, will
materially adversely affect (a) the Borrower's or its Subsidiaries'
abilities to conduct their business, (b) a Subsidiary's ability to pay
dividends to the Borrower, or (c) the Borrower's ability to perform its
obligations under this Agreement or any of the Operative Documents.
6.2 Remedies. If an Event of Default occurs and is continuing, upon the
election of the Revolving Lenders holding two-thirds of the then outstanding
aggregate total Indebtedness of the Borrower to the Revolving Lenders, the
entire unpaid principal amount under the Notes, together with interest accrued
thereon, shall become immediately due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived, the
Commitments of the Revolving Lenders hereunder shall terminate, and the
Revolving Lenders may exercise their rights under the other Operative Documents
or the Notes, including, without limitation, under the Security Agreement and
the Pledge Agreement. Upon the occurrence of an Event of Default described in
Section 6.1(h)(1) or (2) hereof, acceleration under this Section 6.2 shall occur
automatically without the election, declaration, notice or other act on the part
of any of the Revolving Lenders. In addition, the Revolving Lenders shall have
such other remedies as are available at law and in equity. Remedies under this
Agreement, the Operative Documents, and the Notes are cumulative. Any waiver
must be in writing by the Revolving Lenders and no waiver shall constitute a
waiver as to any other occurrence which constitutes an Event of Default or as to
any party not specifically included in such written waiver.
VII. INTER-CREDITOR AGREEMENTS
7.1 FNB-O as Servicer. FNB-O will act as sole servicer of the loans
evidenced by the Notes. For purposes of this Article VII, the term Event of
Default means any Event of Default hereunder. FNB-O will enforce, administer and
otherwise deal with the loans made by the Revolving Lenders in accordance with
safe and prudent banking standards employed by FNB-O in the case of the loan
made by FNB-O. Without limiting the generality of the foregoing, FNB-O will, on
its own behalf and on behalf of the Revolving Lenders: (i) maintain originals of
the Operative Documents (excluding the Notes); (ii) receive requests for
Advances from the Borrower, promptly transmit the same to the Revolving Lenders
and make such Advances on behalf of the Revolving Lenders (provided that FNB-O
is assured of reimbursement therefor by the other Revolving Lenders for their
pro rata shares); (iii) receive payments and prepayments from the Borrower and
apply such payments as provided in Section 7.2; (iv) receive notices from the
Borrower and send copies thereof
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to the Revolving Lenders if FNB-O has reasonable cause to believe that such
Revolving Lenders have not received such notice from another source; and (v)
advise the Revolving Lenders of the occurrence of any Event of Default which
FNB-O obtains actual knowledge of. The Revolving Lenders agree not to attempt to
take any action against the Borrower under the Operative Documents or the Notes,
or with respect to the indebtedness evidenced thereby without FNB-O's consent
unless holders of two-thirds of the then outstanding aggregate total
Indebtedness of the Borrower to the Revolving Lenders (including under the Notes
and any similar indebtedness) shall have requested FNB-O to take specific action
against the Borrower and FNB-O shall have failed to do so within a reasonable
period after receipt of such request. All actions, consents, waivers and
approvals by the Revolving Lenders shall be deemed taken or given and amendments
hereto deemed agreed to if the holders of more than two-thirds of the
outstanding aggregate total Indebtedness of the Borrower to the Revolving
Lenders shall have indicated their consent thereto. Notwithstanding the
foregoing, unanimous approval of the applicable Revolving Lenders under the
respective Notes shall be required for: (i) any reduction or compromise of the
principal loan amount of such Notes, the amount or rate of interest accrued or
accruing thereon or the fees due hereunder; and (ii) extension of the date of
any scheduled payment; and unanimous consent of all the Revolving Lenders shall
be required for (iii) permitting the sale of or releasing the security interest
of the Revolving Lenders in (x) any stock held in Subsidiaries or (y) other
Collateral which comprises more than ten percent (10%) of net book value of
fixed assets of the Borrower; and (iv) any amendment of Sections 7.1 or 7.2
hereof. A Revolving Lender's commitment hereunder may not be increased without
the consent of such Revolving Lender, it being understood, however, that
increases in the total revolving credit facility hereunder may be made with the
consent of the holders of more than two-thirds of the outstanding aggregate
total outstanding obligation of the Borrower to the Revolving Lenders, so long
as such increase does not result in the increase of any non-consenting Revolving
Lender's commitment hereunder.
7.2 Application of Payments. Until the earlier of the occurrence of an
Event of Default, payments or prepayments made by the Borrower may be applied to
the indebtedness designated by the Borrower or otherwise applied as follows:
(a) first, to pay interest to date on the Notes and fees due
to the Revolving Lenders;
(b) second, pro rata to the Revolving Lenders, such pro rata
share to be determined as set forth below in subsection (bb) of this
Section 7.2.
After the occurrence of an Event of Default, payments or prepayments on the
Notes received by FNB-O or any of the Revolving Lenders and funds realized upon
the disposition of any of the Collateral shall be applied as follows:
(aa) first, to reimburse FNB-O for any reasonable and
documented costs, expenses, and disbursements (including reasonable and
documented attorneys' fees) which may be
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incurred or made by FNB-O: (i) in connection with its servicing
obligations; (ii) in the process of collecting such payments or funds;
or (iii) as advances made by FNB-O to protect the Collateral (provided,
however, that FNB-O shall have no obligation to make such protective
advances); and
(bb) second, pari passu among the Revolving Lenders, based on
their respective pro rata shares of the funds to be applied. Each
Revolving Lender's pro rata share shall be equal to a fraction, (x) the
numerator of which shall be the total principal loan amount then
outstanding which is owing to each such Revolving Lender under its
Notes, and (y) the denominator of which shall be the total Principal
Loan Amount then outstanding which is owing to the Revolving Lenders
under all Notes.
Except as specifically provided in this Section 7.2, FNB-O shall have no
obligation to repay or prepay any amount due from the Borrower to any of the
other Revolving Lenders nor shall FNB-O have any obligation to purchase all or a
part of any Note hereunder or any Advance made by any Revolving Lenders, nor
shall the Revolving Lenders have any recourse whatsoever against FNB-O with
respect to any failure of the Borrower to repay the indebtedness referenced
herein.
7.3 Liability of FNB-O. FNB-O shall not be liable to the Revolving
Lenders for any error of judgment or for any action taken or omitted to be taken
by it hereunder, except for gross negligence or willful misconduct. Without
limiting the generality of the foregoing, FNB-O, except as expressly set forth
herein, (a) may consult with legal counsel, independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (b) makes no representation or warranty with
respect to, and shall not be responsible for, the accuracy, completeness,
execution, legality, validity, legal effect or enforceability of this Revolving
Credit Agreement, the Notes, or the other Operative Documents, or the value or
sufficiency of any Collateral given by the Borrower or the priority of the
Revolving Lenders' security interest therein or the financial condition of the
Borrower; and (c) shall not be responsible for the performance or observance of
any of the terms, covenants or conditions of the Operative Documents on the part
of the Borrower and shall not have any duty to inspect the property (including,
without limitation, the books and records) of the Borrower.
7.4 Transfers. No Revolving Lender shall subdivide or transfer its
respective Notes (except to a Federal Reserve Bank) without first giving ten
(10) days prior written notice to and obtaining the prior written consent (which
consent shall not be unreasonably withheld) of FNB-O and the Borrower. No
Revolving Lender may grant a participation in any Advance hereunder without the
prior written consent of FNB-O (which consent shall not be unreasonably
withheld).
7.5 Reliance. The Revolving Lenders acknowledge that they have been
advised that none of the Notes nor any interest therein or related thereto has
been (i) registered under the Securities Act of 1933, as amended, nor (ii)
insured by the Federal Deposit Insurance Corporation. The Revolving
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Lenders acknowledge that they have received from the Borrower all financial
information and other data relevant to their decision to extend credit to the
Borrower and that they have independently approved the credit quality of the
Borrower.
7.6 Relationship of Lenders. The Revolving Lenders intend for the
relationships created by this Agreement to be construed as concurrent direct
loans from each Revolving Lender respectively to the Borrower. Nothing herein
shall be construed as a loan from any Revolving Lender to FNB-O or as creating a
partnership or joint venture relationship among them.
7.7 New Revolving Lenders. In the event that new Revolving Lenders are
added to this Agreement, such Revolving Lenders shall be required to agree to
the inter-creditor provisions of this Article VII.
7.8 Agenting Fee. The Borrower will pay to FNB-O an annual agenting fee
equal to $25,000, payable quarterly on or before the last day of such quarter in
equal installments of $6,250.
VIII. REIMBURSEMENTS; INDEMNIFICATION
8.1 Capital Adequacy. If, after the date hereof, the adoption or
implementation of any applicable law, rule or regulation regarding capital
adequacy (including, without limitation, any law, rule or regulation
implementing the Basle Accord), or any change therein, or any change in the
interpretation or administration thereof by any central bank or other
governmental authority charged with the interpretation or administration
thereof, or compliance by a Revolving Lender (or its parent) with any guideline,
request or directive regarding capital adequacy (whether or not having the force
of law) of any such central bank or other governmental authority (including,
without limitation, any guideline or other requirement implementing the Basle
Accord), has or would have the effect of reducing the rate of return on such
Revolving Lender's capital as a consequence of its obligations hereunder or the
transactions contemplated hereby to a level below that which such Revolving
Lender could have achieved but for such adoption, implementation, change or
compliance (taking into consideration such Revolving Lender's policies with
respect to capital adequacy) by an amount deemed by such Revolving Lender to be
material, then such Revolving Lender shall provide to the Borrower notice of
such matter, and from time to time thereafter within ten (10) Business Days
after demand by such Revolving Lender, the Borrower shall pay to such Revolving
Lender such additional amount or amounts as will compensate such Revolving
Lender for such reduction which is incurred by such Revolving Lender after the
date of such Revolving Lender's notice to the Borrower under this Section 8.1.
Notwithstanding the preceding sentence, upon Borrower's receipt of such notice
from such Revolving Lender, Borrower may provide to such Revolving Lender its
notice of prepayment in accordance with Section 2.5 hereof. A certificate of
such Revolving Lender claiming compensation under this Section and setting forth
the additional amount or amounts to be paid to it hereunder shall be conclusive,
provided that the determination thereof is made on a reasonable basis. In
determining such amount or amounts, such Revolving Lender may use any
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<PAGE> 28
reasonable averaging and attribution methods. Upon receipt of a notice from a
Revolving Lender under this section, the Borrower, upon ten (10) days prior
written notice to the Agent, may replace such Revolving Lender with a new
Revolving Lender that would not require a payment under this section, which
replacement Revolving Lender shall purchase the rights and assume the
obligations of the replaced Revolving Lender under this Agreement and the other
Operative Documents for a price equal to the outstanding principal and accrued
but unpaid interest on the Note issued to such replaced Revolving Lender, plus
the amount of other fees (including without limitation the commitment fee
payable in accordance with Section 2.2 (a) of this Agreement), such fees to be
pro rated through the purchase and assumption date; provided, however, that such
replacement Revolving Lender must be acceptable to the Agent.
8.2 General Indemnity. The Borrower shall indemnify each Revolving
Lender and its directors, officers, employees and agents from and against any
and all losses, claims, liabilities, damages, reasonable and documented
attorneys' fees and disbursements, and other reasonable and documented costs and
expenses which the indemnified party may at any time sustain or incur in
connection with the Borrower's use of loan proceeds; provided that the
indemnified party shall not have any right to be indemnified for its own gross
negligence or willful misconduct. All indemnities and all provisions relative to
reimbursement to the Revolving Lenders of amounts sufficient to compensate the
Revolving Lenders for changes in capital adequacy requirements, including, but
not limited to, Section 8.1 hereof, shall survive the termination of this
Agreement and the payment of the Notes.
IX. MISCELLANEOUS
9.1 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, except
as specified by Section 7.1, may not be effectively amended, changed, modified
or altered, except in writing executed by the Borrower and the Requisite
Revolving Lenders.
9.2 Governing Law. The Operative Documents shall be governed by and
construed pursuant to the laws of the State of Nebraska.
9.3 Notices. Until changed by written notice from one party hereto to
the other, all communications under the Operative Documents shall be in writing
and shall be hand delivered or mailed by registered mail to the parties, and
shall be deemed given when mailed, as follows:
If to the Borrower:
AMERITRADE HOLDING CORPORATION
4211 South 102nd Street
Omaha, Nebraska 68127
Attention: Robert T. Slezak, Chief Financial Officer
-24-
<PAGE> 29
If to the Agent:
FIRST NATIONAL BANK OF OMAHA
One First National Center
Omaha, Nebraska 68102
Attention: Mr. James P. Bonham
If to the Revolving Lenders, at their respective addresses
listed herein.
9.4 Headings. The captions and headings herein are for convenience only
and in no way define or limit the scope or intent of any provisions or sections
of this Agreement.
9.5 Counterparts. This Agreement may be executed in several
counterparts and such counterparts together shall constitute one and the same
instrument.
9.6 Survival; Successors and Assigns. The covenants, agreements,
representations and warranties made herein, and in the certificates delivered
pursuant hereto, shall survive the execution and delivery to the Revolving
Lenders of this Agreement and shall continue in full force and effect so long as
any Note or any obligation to the Revolving Lenders under any of the Operative
Documents (other than contingent obligations that, by their terms, survive the
termination hereof) is outstanding and unpaid or any Commitment remains in
effect. Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party, and all covenants, promises and agreements by or on behalf of the
Borrower which are contained in this Agreement shall bind the successors and
assigns of the Borrower and shall inure to the benefit of the successors and
assigns of the Revolving Lenders.
9.7 Severability. 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.
9.8 Assignment. The Borrower may not assign its rights or obligations
hereunder and any assignment in contravention of the terms hereof shall be void.
9.9 Consent to Form of Pledge Agreement and Security Agreement. The
parties hereto expressly approve the form of the Pledge Agreement and the
Security Agreement.
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<PAGE> 30
IN WITNESS WHEREOF, the Borrower and the Revolving Lenders have caused
this Revolving Credit Agreement to be executed by their duly authorized
corporate officers as of the day and year first above written.
AMERITRADE HOLDING CORPORATION
By: /s/ R.T. Slezak
----------------------------
Title: VP & CFO
----------------------
FIRST NATIONAL BANK OF OMAHA
By: /s/ J.P. Bonham
----------------------------
Title: Vice President
------------------------
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
/s/ RTS
-----------
Borrower
<PAGE> 31
HARRIS TRUST AND SAVINGS BANK
By: /s/ Gary R. Shafer
---------------------------
Title: Vice President
-----------------------
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
/s/ RTS
----------
Borrower
<PAGE> 32
LASALLE NATIONAL BANK
By: /s/ Aimee W. Daniels
---------------------------
Title: First Vice President
---------------------
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
/s/ RTS
----------
Borrower
<PAGE> 33
MERCANTILE BANK OF ST. LOUIS, N.A.
By: /s/ James P. Walker
------------------------------
Title: Senior VP
--------------------------
NOTICE: A credit agreement must be in writing to be enforceable under Nebraska
law. To protect you and us from any misunderstandings or disappointments, any
contract, promise, undertaking, or offer to forebear repayment of money or to
make any other financial accommodation in connection with this loan of money or
grant or extension of credit, or any amendment of, cancellation of, waiver of,
or substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension of
credit, must be in writing to be effective.
INITIALED:
/s/ RTS
-----------
Borrower
<PAGE> 34
SECURITY AGREEMENT
This SECURITY AGREEMENT is between AMERITRADE HOLDING CORPORATION, a
Delaware corporation having its principal place of business at 4211 South 102nd
Street, Omaha, Nebraska 68127 ("Borrower"), and FIRST NATIONAL BANK OF OMAHA, a
national banking association having its principal place of business at One First
National Center, Omaha, Nebraska 68102 ("Secured Party") as agent for itself and
HARRIS TRUST AND SAVINGS BANK,, LASALLE NATIONAL BANK, and MERCANTILE BANK OF
ST. LOUIS, N.A., the Revolving Lenders under the Revolving Credit Agreement
dated as of the date hereof (the "Revolving Lenders") who agree as follows:
1. Grant of Security Interest. Borrower hereby grants to Secured Party
a security interest in the Collateral.
2. Collateral. The Collateral to which this Security Agreement refers
is described on Exhibit A.
3. Obligations Secured. The security interest granted herein is given
to secure all present and future obligations of Borrower: (i) under the
Revolving Credit Agreement of even date herewith (the "Revolving Credit
Agreement") between Borrower, the Secured Party and other Revolving Lenders
referred to therein (ii) under those certain promissory notes from Borrower to
the Revolving Lenders of even date herewith (the "Notes"); (iii) to reimburse
the Secured Party and the Revolving Lenders, if applicable, for all reasonable
and documented sums, if any, advanced to protect the Collateral; and (iv) to
reimburse Secured Party and the Revolving Lenders, if applicable, for all
reasonable and documented costs and expenses incurred in collection of the
foregoing, including, without limitation, costs of repossession and sale and
reasonable and documented attorneys' fees. All capitalized terms not defined in
this Security Agreement shall have their respective meanings set forth in the
Revolving Credit Agreement.
4. Representations and Warranties. Borrower represents and warrants:
(a) Possession and Ownership. The Collateral is or will be in
Borrower's possession and Borrower has or will acquire absolute title
thereto (subject to Permitted Liens) and will defend the Collateral
against the claims and demands of all persons other than Secured Party.
Borrower has full right and power to grant the security interest herein
to Secured Party.
(b) Liens and Encumbrances. No financing statement covering
the Collateral or other filing evidencing any lien or encumbrance on
the Collateral is on file in any public office and there is no lien,
security interest or encumbrance on the Collateral except for the
<PAGE> 35
security interest held by Secured Party pursuant to this Security
Agreement, Permitted Liens and for those security interests described
on Exhibit B.
(c) Truth of Representations. All information, statements,
representations, and warranties made by Borrower herein and in any
financial or credit statement, application for credit, or any other
writing executed prior to or substantially contemporaneously herewith
are true, accurate and complete in all material respects.
(d) Location. Borrower has its chief executive office,
principal place of business and place where it keeps it records
concerning the Collateral at 4211 South 102nd Street, Omaha, Nebraska
68127.
(e) Authority. Borrower has full authority to enter into this
Security Agreement and in so doing is not violating any law,
regulation, or agreement with third parties. This Security Agreement
has been duly and validly authorized by all necessary corporate action
on the part of the Borrower.
5. Covenants. Borrower covenants and agrees:
(a) Liens and Encumbrances. Except as otherwise expressly
allowed by the Revolving Credit Agreement, Borrower shall keep the
Collateral free and clear of liens, encumbrances, security interests,
and other claims of third parties and will, at Borrower's expense,
defend the Collateral against the claims and demands of all third
parties. Borrower shall promptly pay and discharge any indebtedness
owing to any third party who, by reason of said indebtedness, could
obtain or become entitled to a lien or encumbrance on the Collateral,
other than such indebtedness being contested in good faith and with
respect to which adequate reserves have been established.
(b) Taxes. Borrower shall promptly pay and discharge any and
all taxes, levies and other impositions made upon the Collateral which
may give rise to liens upon the Collateral if unpaid or which are
imposed upon the creation, perfection or continuance of the security
interest provided for herein, other than taxes being contested in good
faith and with respect to which adequate reserves have been
established.
(c) Insurance. All risk of loss of, damage to or destruction
of the Collateral shall at all times be on Borrower. Borrower shall
procure and maintain, at its own expense, insurance covering the
Collateral (other than the Pledged Stock and Stock Rights described in
the Pledge Agreement) against risks under policies and with companies
acceptable to the Secured Party, for the duration of this Security
Agreement.
(d) Records. Borrower shall keep accurate and complete records
pertaining to the Collateral and pertaining to Borrower's business and
financial condition, and shall allow
2
<PAGE> 36
the Secured Party to inspect the same from time to time during normal
business hours upon reasonable advance notice and shall submit such
periodic reports relating to the same to the Secured Party from time to
time as the Secured Party may reasonably request.
(e) Notice to the Secured Party. Borrower shall promptly
notify the Secured Party of any loss or damage to the Collateral, any
impairment of the value thereof, any claim made thereto by any third
party, or any adverse change in Borrower's financial condition which
may affect its prospect to pay or perform its obligations to the
Secured Party.
(f) Location. Borrower will not move the Collateral or any
documents or records representing the Collateral, Borrower's chief
executive office, principal place of business or place where it keeps
its records concerning the Collateral from the location specified above
without first obtaining the written consent of the Secured Party and
shall not permit any Collateral to be located in any state in which a
financing statement covering the Collateral is required to be, but has
not in fact been, filed in order to perfect the security interest
granted herein. Borrower shall not change its name without giving the
Secured Party at least thirty (30) days' prior notice thereof.
(g) Other Documents. Borrower shall execute such further
documents as may be requested by the Secured Party to obtain and
perfect a security interest in the Collateral, including without
limitation, Uniform Commercial Code Financing Statements and amendments
thereto. A carbon, photographic or other reproduction of this Security
Agreement or of any financing statement signed by Borrower shall have
the same force and effect as the original for all purposes of a
financing statement.
6. Rights and Remedies of the Secured Party. The Secured Party shall
have all of the rights and remedies provided at law and in equity and in the
Uniform Commercial Code and in addition thereto and without limitation thereon
shall have the following rights which may be exercised singularly or
concurrently:
(a) Inspection. The Secured Party may at any time during
normal business hours, with reasonable advance notice, enter upon
Borrower's premises or any other place where the Collateral or any
documents and records representing the Collateral are located to
inspect and examine the same and, if Borrower is in default, to take
possession thereof.
(b) Performance by the Secured Party. If Borrower fails to
perform any of its obligations hereunder, the Secured Party may, at its
sole discretion, pay or perform such obligations for Borrower's account
and may add any cost or expense thereof to the obligations secured
hereby.
3
<PAGE> 37
(c) Acceleration. Upon default, the Secured Party may, without
demand or notice to Borrower, accelerate all of the obligations secured
hereby and proceed to enforce payment of the same with or without first
resorting against the Collateral.
(d) Proceed Against Collateral. Upon default, the Secured
Party may: require Borrower to make the Collateral available to the
Secured Party at a place reasonably convenient to the parties; take
possession of the Collateral, proceeding without judicial process or by
judicial process (without a prior hearing or notice thereof which
Borrower hereby expressly waives) and sell, retain or otherwise dispose
of the Collateral in full or partial satisfaction of the obligations
secured hereby.
(e) Power of Attorney. Borrower hereby irrevocably appoints
(which appointment is coupled with an interest) the Secured Party as
Borrower's true and lawful attorney, with full power of substitution,
without notice to Borrower and at such time or times after the
occurrence and during the continuance of an Event of Default as the
Secured Party in its sole discretion may determine to: (i) create,
prepare, complete, execute, deliver and file such documents,
instruments, financing statements and other agreements and writings as
may be deemed appropriate by the Secured Party to facilitate the intent
of this Security Agreement; (ii) notify account debtors and others with
obligations to Borrower to make payment of their obligations to the
Secured Party; (iii) demand, enforce and receive payment of any
accounts or obligations owing to Borrower, by legal proceedings or
otherwise; and (iv) settle, adjust, compromise, release, renew or
extend any account or obligation owing to Borrower.
(f) Deficiency. Upon default, and after any disposition of the
Collateral, the Secured Party may sue Borrower for any deficiency
remaining.
7. Obligations of the Secured Party. The Secured Party has no
obligations to Borrower hereunder except those expressly required herein. Except
as expressly provided in the Revolving Credit Agreement, the Secured Party has
not agreed to make any further advance or loan of any kind to Borrower. The
Secured Party's duty of care with respect to the Collateral in its possession
shall be deemed fulfilled if the Secured Party exercises reasonable care in
physically safekeeping the Collateral or, in the case of Collateral in the
possession of a bailee or third party, exercises reasonable care in the
selection of the bailee or third party. The Secured Party need not otherwise
preserve, protect, insure or care for the Collateral. The Secured Party need not
preserve rights Borrower may have against prior parties, realize on the
Collateral in any particular manner or order, or apply proceeds of the
Collateral in any particular order of application.
8. Miscellaneous.
(a) No Waiver. No delay or failure on the part of the Secured
Party in the exercise of any right or remedy hereunder shall operate as
a waiver thereof and no single or
4
<PAGE> 38
partial exercise by the Secured Party of any right or remedy shall
preclude other or further exercise thereof or the exercise of any other
right or remedy.
(b) Amendment and Termination. This Security Agreement may be
amended only by an explicit written agreement signed by Borrower and
the Secured Party. Upon the payment in full of all obligations referred
to in paragraph 3 hereof (other than contingent obligations that, by
their terms, survive termination of the Revolving Credit Agreement) and
the expiration of the commitments of the Revolving Lenders to make
Advances, the security interest granted thereby shall terminate and all
rights to the Collateral shall revert to the Borrower. Upon any such
termination, the Secured Party will execute and deliver to the Borrower
such releases and documents as the Borrower shall reasonably request to
reflect such termination.
(c) Choice of Law. This Security Agreement and the rights and
obligations of the parties hereto shall be governed by and construed in
accordance with the laws of the State of Nebraska.
(d) Binding Agreement. This Security Agreement shall be
binding upon the parties hereto and their heirs, successors, personal
representatives and permitted assigns.
(e) Assignment. This Security Agreement may be assigned by the
Secured Party only.
(f) Captions. Captions and headings herein are for convenience
only and in no way define, limit or describe the scope or intent of any
provision or section of the Security Agreement.
(g) Severability. If any provision of this Security 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 Security Agreement.
(h) Notices. All notices to be given shall be deemed
sufficiently given if delivered or mailed by registered or certified
mail postage prepaid if to Borrower at 4211 South 102nd Street, Omaha,
Nebraska 68127, Attention: Robert T. Slezak, Chief Financial Officer;
and if to the Secured Party at One First National Center, Omaha,
Nebraska 68102, Attention: James P. Bonham; or such other address as
the parties may designate in writing from time to time. Borrower shall
promptly notify the Secured Party of any changes in Borrower's address.
5
<PAGE> 39
IN WITNESS WHEREOF, the undersigned have executed this Security
Agreement as of this 16th day of January, 1998.
AMERITRADE HOLDING CORPORATION
By /s/ R.T. Slezak
-------------------------------------
Title VP & CFO
----------------------------------
FIRST NATIONAL BANK OF OMAHA,
as Agent for itself and other Revolving
Lenders
By /s/ J. P. Bonham
-------------------------------------
Title Vice President
----------------------------------
6
<PAGE> 40
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (the "Stock Pledge Agreement") is made as
of January 16, 1998, by and between FIRST NATIONAL BANK OF OMAHA, a national
banking association having its principal place of business in Omaha, Nebraska as
agent ("FNB-O" or the "Agent") for itself and HARRIS TRUST AND SAVINGS BANK,
LASALLE NATIONAL BANK and MERCANTILE BANK OF ST. LOUIS, N.A. the revolving
lenders (the "Revolving Lenders") under the Revolving Credit Agreement dated as
of the date hereof (the "Agreement") and AMERITRADE HOLDING CORPORATION (the
"Borrower").
W I T N E S S E T H:
WHEREAS, the Revolving Lenders and the Borrower are parties to the
Revolving Credit Agreement dated as of the date hereof;
WHEREAS, the Borrower owns 100% of the stock of its Subsidiaries,
including without limitation, AmeriTrade Clearing, Inc. ("Ameritrade Clearing"),
AmeriTrade, Inc., and Accutrade, Inc.; and
WHEREAS, in order to induce the Revolving Lenders to make the loan to
the Borrower and in order to secure the Borrower's obligations due to the
Revolving Lenders under the Revolving Credit Agreement and under the Notes given
in connection therewith, the Borrower desires to enter into this Stock Pledge
Agreement;
NOW, THEREFORE, as additional consideration for the loan to the
Borrower, the Borrower and the Revolving Lenders hereby agree as follows:
I. DEFINITIONS
Section 1.1 Definitions. For purposes hereof, the following definitions
shall apply:
"Collateral" means the Pledged Stock and the Stock Rights, including
the proceeds of each.
"Event of Default" means an event described in Section 5.
"Lien" means any security interest, mortgage, pledge, lien,
encumbrance, title retention agreement, or lessor's interest, in, of or on any
of the Collateral.
<PAGE> 41
"Obligations" means any and all existing and future indebtedness,
obligations and liability in connection with the Revolving Credit Agreement,
direct or indirect, absolute or contingent (including all renewals, extensions
and modifications thereof and all attorneys' fees incurred by the Agent or the
Revolving Lenders in connection with the collection or enforcement thereof), of
the Borrower to the Agent and the Revolving Lenders.
"Permitted Encumbrance" means any and all encumbrances existing as of
this date which are listed on Schedule B attached hereto.
"Pledged Stock" means the pledged stock of the Borrower's Subsidiaries
as listed in Schedule A attached hereto, as amended from time to time, and all
additional stock issued to the Borrower in connection with any Subsidiary.
"Section" means a numbered section of this Stock Pledge Agreement,
unless another document is specifically referenced.
"Stock Rights" means any stock, any dividend or other distribution and
any other right or property which the Borrower shall receive or shall become
entitled to receive for any reason whatsoever with respect to, in substitution
for or in exchange for any shares of the Pledged Stock and any stock, any right
to receive stock and any right to receive earnings, in which the Borrower now
has or hereafter acquires any right, in connection with the Pledged Stock.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms. All capitalized terms not
defined in this Stock Pledge Agreement shall have the meanings ascribed to them
in the Agreement.
II. SECURITY INTEREST
Section 2.1 Grant of Security Interest. The Borrower hereby grants to
the Agent for the benefit of the Revolving Lenders a security interest in the
Pledged Stock and all related Stock Rights to secure payment and performance of
the Obligations, including, without limitation, payment of the Notes. The
Pledged Stock shall be delivered to the Agent for the Revolving Lenders together
with appropriate stock powers duly executed in blank.
III. REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties. The Borrower represents and
warrants to the Agent and the Revolving Lenders that each share of the Pledged
Stock has been duly and validly issued, is fully paid and non-assessable and is
owned by the Borrower free and clear of any Lien, other than the security
interest created by this Stock Pledge Agreement and Permitted Encumbrances as
defined herein.
-2-
<PAGE> 42
IV. COVENANTS
Section 4.1 Affirmative Covenants. From the date of this Stock Pledge
Agreement, and thereafter until this Stock Pledge Agreement is terminated
pursuant to Section 7.15, the Borrower shall:
(a) Delivery of Certain Items. Deliver to the Agent any stock
certificate or instrument evidencing or constituting Collateral,
including subsequent shares of stock (including stock dividends) of any
Subsidiary issued to the Borrower.
(b) Taxes. Pay when due all taxes, assessments and
governmental charges and levies upon the Collateral, except those being
contested in good faith by appropriate proceedings and with respect to
which no Lien exists.
(c) Financing Statements and Other Actions. Execute and
deliver to the Agent all stock powers, financing statements and other
documents and do such other things from time to time requested by the
Agent or the Revolving Lenders in order to maintain a first perfected
security interest in the Collateral in favor of the Agent for the
Revolving Lenders and to effect a transfer of the Collateral, or any
part thereof.
(d) Reports. Furnish to the Agent such reports relating to the
Collateral as the Agent or Revolving Lenders may from time to time
request.
Section 4.2 Negative Covenants. From the date of this Stock Pledge
Agreement, and thereafter until this Stock Pledge Agreement is terminated
pursuant to section 7.15, the Borrower shall not:
(a) Liens. Create, incur, or suffer to exist, any Lien on the
Collateral except the security interest created by this Stock Pledge
Agreement and Permitted Encumbrances as defined herein and Permitted
Liens as defined in the Revolving Credit Agreement.
(b) Disposition of Collateral. Sell or otherwise dispose of
all or any part of the Collateral, except as permitted in writing by
the Requisite Revolving Lenders.
(c) Changes in Capital Structure of Issuers. (i) Permit or
suffer any issuer of Collateral to dissolve, liquidate, retire any of
its capital stock, reduce its capital or merge or consolidate with any
other entity, or (ii) vote any of the Collateral in favor of any of the
foregoing, except as otherwise permitted in writing by the Requisite
Revolving Lenders.
(d) Issuance of Additional Stock. (i) Permit or suffer the
issuer of any of the Pledged Stock to authorize or issue any additional
stock, any right to receive stock or any right to receive earnings, or
(ii) vote any of the Collateral in favor of any of the foregoing,
except as otherwise permitted in writing by the Revolving Lenders.
<PAGE> 43
V. DEFAULTS AND REMEDIES
Section 5.1 Events of Default. The occurrence of any one or more Events
of Default under the Revolving Credit Agreement or the failure of the Borrower
to fulfill its obligations under this Stock Pledge Agreement shall constitute an
Event of Default hereunder.
Section 5.2. Acceleration and Remedies. If any Event of Default occurs
and is continuing, and upon the expiration of any applicable cure period, if
any, upon the election of the Revolving Lenders holding two-thirds of the then
outstanding aggregate total Indebtedness of the Borrower to the Revolving
Lenders, the Obligations, including accrued interest, shall immediately become
due and payable without presentment, demand, protest or notice of any kind, all
of which are hereby expressly waived, and the Agent, or if the Agent refuses to
act upon the direction of Revolving Lenders holding 2/3 of the Principal Loan
Amount then outstanding (or, if there is no Principal Loan Amount outstanding,
upon the direction of Revolving Lenders representing 2/3 of the Commitments in
effect at such time), the Revolving Lenders may (i) exercise all rights set
forth in Sections 7.2, 7.3 and 7.4, and (ii) may exercise any or all of the
rights and remedies provided (x) in this Stock Pledge Agreement, (y) in the
Nebraska Uniform Commercial Code to a secured party when a debtor is in default
under a security agreement and (z) by any other applicable law. Upon the
occurrence of an Event of Default described in Section 6.1(h)(1) or (2) of the
Agreement, acceleration under this Section 5.2 shall occur automatically without
the election, declaration, notice or other act on the part of any of the
Revolving Lenders.
VI. WAIVERS, AMENDMENTS AND REMEDIES
Section 6.1 Waivers, Amendments and Remedies. No delay or omission of
the Agent or Revolving Lenders to exercise any right or remedy granted under
this Stock Pledge Agreement shall impair such right or remedy or be construed to
be a waiver of any Event of Default or an acquiescence therein, and any single
or partial exercise of any such right or remedy shall not preclude other or
further exercise thereof or the exercise of any other right or remedy, and no
waiver, amendment or other variation of the terms, conditions or provisions of
this Stock Pledge Agreement whatsoever shall be valid unless in writing signed
by the Agent, and then only to the extent in such writing specifically set
forth. All rights and remedies contained in this Stock Pledge Agreement or by
law afforded shall be cumulative and all shall be available to the Agent and the
Revolving Lenders until the Obligations have been paid and performed in full.
VII. GENERAL PROVISIONS
Section 7.1 Dividends. Unless an Event of Default occurs and is
continuing, any dividends permitted under the Loan Agreement and payable in
connection with the Pledged Stock may be payable to the Borrower.
Section 7.2 Special Collateral Account. Subject to the provisions of
Section 7.1, all cash received by the Agent or the Revolving Lenders, if any,
with respect to the Collateral shall
-4-
<PAGE> 44
be deposited in a special collateral account with the Agent for the Revolving
Lenders and shall be held by the Agent as security for the Obligations. The
Borrower shall have no control whatsoever over said special collateral account.
The Agent may, but is not required to, at any time and from time to time, in its
sole discretion, apply any part of the credit balance in said special collateral
account to the payment of the Obligations, in accordance with the Agreement,
whether or not the Obligations shall be then due.
Section 7.3 Registration of Pledged Stock. At the option of the Agent,
any registerable Collateral may at any time after the occurrence of an Event of
Default and upon the expiration of any applicable cure period, if any, be
registered in the name of FNB-O or its nominee as agent for the Revolving
Lenders.
Section 7.4 Exercise of Rights in Pledged Stock. After an Event of
Default occurs and is continuing, and upon the expiration of any applicable cure
period, if any, the Agent or its nominee as agent for the Revolving Lenders may
at any time and from time to time, without notice, exercise all voting and
corporate rights relating to the Collateral, including, without limitation,
exchange, subscription or any other rights, privileges, or options pertaining to
any shares of the Pledged Stock and the Stock Rights as if it were the absolute
owner thereof. At all other times, the Borrower may exercise such rights.
Section 7.5 Notice of Disposition of Pledged Stock. Notice of the time
and place of any public sale or the time after which any private sale or other
disposition of all or any part of the Collateral may be made shall be reasonable
if sent to the Borrower, addressed as set forth in Article VIII, at least ten
days prior to any such public sale or the time after which any such private sale
or other disposition may be made.
Section 7.6 Terms of Disposition. The Borrower agrees that the private
sale or other private disposition of Collateral consisting of securities shall
be commercially reasonable notwithstanding the possibility that a substantially
higher price might be realized if such sale or other disposition were public and
deferred until after registration under the Securities Act of 1933, as amended,
or compliance with any other applicable securities laws.
Section 7.7 Possession of Collateral; Disclaimer. Beyond the exercise
of reasonable care to assure the safe custody of the Collateral in the physical
possession of the Agent pursuant hereto, neither the Agent nor the Revolving
Lenders shall have any duty or liability to collect any sums due in respect
thereof or to protect, preserve or exercise any rights pertaining thereto, and
the Agent and each Revolving Lender shall be relieved of all responsibility for
the Collateral upon surrendering it to the Borrower. No course of dealing
between the Borrower and the Agent or the Revolving Lenders, nor any failure to
exercise nor any delay in exercising, on the part of the Agent or the Revolving
Lenders, any right, power or privilege hereunder or with respect to the
Obligations shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided and provided in all other
-5-
<PAGE> 45
agreements, instruments and documents delivered, or to be delivered, pursuant to
or in connection with or to evidence any of the Obligations are cumulative and
are in addition to, and not exclusive of, any rights and remedies of a secured
party under the Nebraska Uniform Commercial Code. The provisions of this Stock
Pledge Agreement are severable and if any clause or provision thereof shall be
held invalid or unenforceable in whole or in part, then such invalidity or
unenforceability shall attach only to such clause or provision, or part thereof,
and shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision in this Stock Pledge Agreement or
any jurisdiction.
Section 7.8 Specific Performance of Certain Covenants. The Borrower
acknowledges and agrees that a breach of any of the covenants contained in
Sections 4.1(a), 4.1(d) or 4.2, will cause irreparable injury to the Revolving
Lenders, that the Revolving Lenders have no adequate remedy at law in respect of
such breaches and therefore agrees, without limiting the right of the Revolving
Lenders to seek and obtain specific performance of other obligations of the
Borrower contained in this Stock Pledge Agreement, that the covenants of the
Borrower contained in the Sections referred to in this Section 7.8 shall be
specifically enforceable against the Borrower.
Section 7.9 Definition of Certain Terms. Terms defined in the Nebraska
Uniform Commercial Code which are not otherwise defined in this Stock Pledge
Agreement are used in this Stock Pledge Agreement as defined in the Nebraska
Uniform Commercial Code as in effect on the date hereof.
Section 7.10 Benefit of Agreement. The terms and provisions of this
Stock Pledge Agreement shall be binding upon and inure to the benefit of the
Borrower, the Agent and the Revolving Lenders and their respective successors
and assignees, except that the Borrower shall not have the right to assign its
rights nor delegate its duties under this Stock Pledge Agreement, without the
prior written consent of the Revolving Lenders.
Section 7.11 Survival of Representations. All representations and
warranties of the Borrower contained in this Stock Pledge Agreement shall
survive the execution and delivery of this Stock Pledge Agreement.
Section 7.12 Taxes and Expenses. The Borrower will upon demand pay to
the Agent (i) any taxes (excluding income taxes) payable or ruled payable by
federal or state authority in respect of this Stock Pledge Agreement, together
with interest and penalties, if any, and (ii) all reasonable expenses, including
the reasonable and documented fees and expenses of counsel for the Agent and the
Revolving Lenders (which may be employees of the Agent or another Revolving
Lender) and of any experts and agents that the Revolving Lenders may incur in
connection with (a) the administration of this Stock Pledge Agreement, (b) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Stock, (c) the exercise or enforcement of
any of the rights of the Revolving Lenders hereunder, or (d) the failure of the
Borrower to perform or observe any of the provisions hereof or of the Revolving
Credit Agreement.
-6-
<PAGE> 46
Section 7.13 Choice of Law. This Stock Pledge Agreement shall be
construed in accordance with the laws of the State of Nebraska.
Section 7.14 Headings. The title of and section headings in this Stock
Pledge Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the terms and provisions of this Stock Pledge
Agreement.
Section 7.15 Termination. This Stock Pledge Agreement shall continue in
effect (notwithstanding the fact that from time to time there may be no
Obligations outstanding) until the Borrower has received written notice from the
Revolving Lenders electing to terminate this Stock Pledge Agreement or the
Revolving Credit Agreement is terminated and there are no Obligations
outstanding (other than contingent obligations which, by their terms, survive
termination of the Revolving Credit Agreement). Upon such termination, the Agent
shall promptly return to Borrower all certificates and documents in its
possession representing Collateral hereunder and execute and deliver to Borrower
such releases and documents as Borrower shall reasonably request to evidence
such termination.
Section 7.16 Counterparts. This Stock Pledge Agreement may be executed
in several counterparts and such counterparts together shall constitute one and
the same instrument.
VIII. NOTICES
Section 8.1 Sending Notices. Any notice required or permitted to be
given under this Stock Pledge Agreement may be, and shall be deemed, given and
sent when deposited in the United States mail, postage prepaid, or by telegraph
or telex when delivered to the appropriate office for transmission, charges
prepaid, addressed:
To the Borrower:
AMERITRADE HOLDING CORPORATION
4211 South 102nd Street
Omaha, Nebraska 68127
Attention: Robert T. Slezak, Chief Financial Officer
To the Agent and the Revolving Lenders:
FIRST NATIONAL BANK OF OMAHA
One First National Center
Omaha, Nebraska 68102
Attention: James P. Bonham
-7-
<PAGE> 47
IX. WAIVERS
Section 9.1 Waivers. By execution of this Stock Pledge Agreement, the
Borrower intends that the Collateral shall be absolutely and unconditionally
available to secure the prompt payment when due of all Obligations, irrespective
of the unenforceability, illegality or invalidity of such obligations or the
unenforceability, illegality, invalidity or insufficiency of any security
therefor, together with all reasonable and documented costs, expenses and
attorneys' fees incurred by the Revolving Lenders in connection with any Event
of Default.
It shall not be necessary to procure the consent of the Borrower or to
give any notice in reference to: (i) any settlement, renewal, extension,
modification, release, waiver, discharge or variation of terms of any of the
obligations of the Borrower, any other guarantor or any other interested person,
by operation of law or otherwise; (ii) any acceptance of partial payments from
the Borrower; (iii) any impairment, release, collection or liquidation of any
collateral for the Obligations; (iv) any acceptance of new or additional
documents, instruments or agreements in satisfaction or substitution of the
Obligations; (v) any failure to file, record or register any security document,
to preserve or protect the collateral obtained thereby, or to perfect the
security interest therein; or (vi) any other failure of the Agent or the
Revolving Lenders to exercise or enforce any of their rights against the
Borrower.
The Borrower hereby expressly waives and dispenses with notice of
acceptance of this Stock Pledge Agreement, notices of non-payment, default,
non-performance or protest, notice of the amount of indebtedness outstanding at
any time, presentments, protests, demands, prosecution of collection,
foreclosure and possessory remedies, all exemption and homestead laws, and all
setoffs and counterclaims.
If a claim is made upon the Agent or the Revolving Lenders for
repayment or recovery of any amount(s) or other value received by the Agent or
the Revolving Lenders, from any source, in payment of or on account of the
Obligations and the Agent or the Revolving Lenders pay or otherwise become
liable for such claim by reason of any judgment, decree or order or by reason of
any compromise or settlement of such claim, this Stock Pledge Agreement shall
remain in full force and effect to the same extent as if such amount has never
been received by the Agent or the Revolving Lenders, notwithstanding any
termination hereof or the cancellation of any note or other agreement evidencing
the Obligations.
The Borrower by its signature below, does hereby waive for purposes of
the security interest granted by this Stock Pledge Agreement (including, without
limitation, for purposes of any necessary enforcement thereof) any transfer
restrictions set forth within the Borrower's Articles of Incorporation.
-8-
<PAGE> 48
IN WITNESS WHEREOF, the Borrower and the Agent have executed this Stock
Pledge Agreement as of the date first above written.
AMERITRADE HOLDING CORPORATION
By /s/ R. T. Slezak
-------------------------------------
Title VP & CFO
-----------------------------------
FIRST NATIONAL BANK OF OMAHA, as Agent
for itself and other Revolving Lenders
By /s/ J.P. Bonham
-------------------------------------
Title Vice President
-----------------------------------
-9-
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN THE FORM 10Q AS OF DEC. 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-25-1998
<PERIOD-START> SEP-29-1997
<PERIOD-END> DEC-31-1997
<CASH> 323,870,630
<RECEIVABLES> 457,525,379
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 21,162,312
<INSTRUMENTS-OWNED> 0
<PP&E> 10,524,748
<TOTAL-ASSETS> 829,712,000
<SHORT-TERM> 0
<PAYABLES> 753,287,834
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
0
0
<COMMON> 145,178
<OTHER-SE> 55,545,354
<TOTAL-LIABILITY-AND-EQUITY> 829,712,000
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 13,109,849
<COMMISSIONS> 15,775,074
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 1,156,689
<INTEREST-EXPENSE> 5,688,973
<COMPENSATION> 6,764,708
<INCOME-PRETAX> (17,495,722)
<INCOME-PRE-EXTRAORDINARY> (17,495,722)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,249,342)
<EPS-PRIMARY> (.77)
<EPS-DILUTED> (.77)
</TABLE>
