___________________________________________________________________________
UNITED STATES
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, 1993 or
[ ] Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 0-10030
APPLE COMPUTER, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-2404110
---------------------------------------- ------------------------------------
[State or other jurisdiction [I.R.S. Employer Identification No.]
ofincorporation or organization]
20525 Mariani Avenue
Cupertino, California 95014
---------------------------------------- ------------------------------------
[Address of principal executive offices] [Zip Code]
Registrant's telephone number, including area code: (408) 996-1010
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
117,242,991 shares of Common Stock Issued and Outstanding as of
January 21, 1994
___________________________________________________________________________
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
APPLE COMPUTER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
December 31, December 25,
1993 1992
<S> <C> <C>
Net sales $ 2,468,854 $ 2,000,292
Costs and expenses:
Cost of sales 1,876,830 1,189,367
Research and development 152,612 160,282
Selling, general and administrative 374,705 409,858
2,404,147 1,759,507
Operating income 64,707 240,785
Interest and other income (expense), net (163) 19,442
Income before income taxes 64,544 260,227
Provision for income taxes 24,526 98,886
Net income $ 40,018 $ 161,341
Earnings per common and
common equivalent share $ .34 $ 1.33
Cash dividends paid per
common share $ .12 $ .12
Common and common equivalent
shares used in the calculation
of earnings per share 116,956 121,156
</TABLE>
See accompanying notes.
2
<PAGE>
APPLE COMPUTER, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
<TABLE>
<CAPTION>
December 31, September 24,
1993 1993
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 972,388 $ 676,413
Short-term investments 150,387 215,890
Accounts receivable, net of allowance for
doubtful accounts of $87,942 ($83,776 at
September 24, 1993) 1,247,954 1,381,946
Inventories:
Purchased parts 391,118 504,201
Work in process 214,504 284,440
Finished goods 733,015 717,997
1,338,637 1,506,638
Prepaid income taxes 279,198 268,085
Other current assets 219,443 289,383
Total current assets 4,208,007 4,338,355
Property, plant, and equipment:
Land and buildings 411,061 404,688
Machinery and equipment 566,228 578,272
Office furniture and equipment 162,088 167,905
Leasehold improvements 233,745 261,792
1,373,122 1,412,657
Accumulated depreciation and amortization (730,786) (753,111)
Net property, plant, and equipment 642,336 659,546
Other assets 192,097 173,511
$ 5,042,440 $ 5,171,412
</TABLE>
See accompanying notes.
3
<PAGE>
APPLE COMPUTER, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, September24,
1993 1993
(Unaudited)
<S> <C> <C>
Current liabilities:
Notes payable $ 752,257 $ 823,182
Accounts payable 739,599 742,622
Accrued compensation and employee benefits 121,344 144,779
Income taxes payable 2,886 23,658
Accrued marketing and distribution 154,868 174,547
Accrued restructuring costs 251,539 307,932
Other current liabilities 305,668 298,482
Total current liabilities 2,328,161 2,515,202
Deferred income taxes 661,020 629,832
Shareholders' equity:
Common stock, no par value; 320,000,000
shares authorized; 116,495,476 shares
issued and outstanding at December 31, 1993
(116,147,035 shares at September 24, 1993) 211,108 203,613
Retained earnings 1,868,660 1,842,600
Accumulated translation adjustment (26,509) (19,835)
Total shareholders' equity 2,053,259 2,026,378
$ 5,042,440 $ 5,171,412
</TABLE>
See accompanying notes.
4
<PAGE>
APPLE COMPUTER, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
December 31, December 25,
1993 1992
<S> <C> <C>
Cash and cash equivalents, beginning of the
period $ 676,413 $ 498,557
Operations:
Net income 40,018 161,341
Adjustments to reconcile net income to cash
generated by operations:
Depreciation and amortization 42,606 39,401
Net book value of property, plant, and
equipment retirements 6,848 1,026
Changes in assets and liabilities:
Accounts receivable 133,992 (111,553)
Inventories 168,001 (16,516)
Prepaid income taxes (11,113) (13,807)
Other current assets 69,940 (96,343)
Accounts payable (3,023) 40,246
Accrued restructuring costs (56,393) (13,497)
Other current liabilities (54,633) 25,320
Deferred income taxes 31,188 63,189
Cash generated by operations 367,431 78,807
Investments:
Purchase of short-term investments (151,001) (699,949)
Proceeds from short-term investments 216,504 775,468
Purchase of property, plant, and equipment (23,564) (44,289)
Other (33,940) 33,461
Cash generated by investment activities 7,999 64,691
Financing:
Decrease in short-term borrowings (70,925) 6,126
Increases in common stock, net of related
tax benefits and changes in notes
receivable from shareholders 5,428 16,282
Repurchase of common stock -- (65,775)
Cash dividends (13,958) (14,246)
Cash used for financing activities (79,455) (57,613)
Total cash generated 295,975 85,885
Cash and cash equivalents, end of the period $ 972,388 $ 584,442
</TABLE>
See accompanying notes.
5
<PAGE>
APPLE COMPUTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Interim information is unaudited; however, in the opinion of the
Company's management, all adjustments necessary for a fair statement of
interim results have been included. The results for interim periods
are not necessarily indicative of results to be expected for the entire
year. These financial statements and notes should be read in
conjunction with the Company's annual consolidated financial statements
and the notes thereto for the fiscal year ended September 24, 1993,
included in its Annual Report on Form 10-K for the year ended September
24, 1993 (the "1993 Form 10-K").
2. Effective September 25, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 -Accounting for Income Taxes (FAS 109),
which changes the method of accounting for income taxes from the
deferred method to the liability method. This change in accounting
principle has been adopted on a prospective basis, and the financial
statements of prior years have not been restated. The cumulative
effect of the change was not material.
Under FAS 109, deferred income taxes reflect the future income tax
effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and their tax bases.
Prior to 1994, the Company accounted for income taxes under the
provisions of APB Opinion No. 11, which recognized deferred taxes for
the effect of timing differences between pretax accounting income and
taxable income.
At September 25, 1993, the significant components of the Company's
deferred tax assets and liabilities were:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Deferred tax assets:
Accounts receivable and inventory reserves $ 123,158
Accrued liabilities and other reserves 170,632
Basis of capital assets and investments 79,104
Total deferred tax assets 372,894
Deferred tax liabilities:
Unremitted earnings of subsidiaries 707,242
Other 27,399
Total deferred tax liabilities 734,641
Net deferred tax liability $ 361,747
</TABLE>
U.S. income taxes have not been provided on a cumulative total of $211
million of undistributed earnings of the Company's foreign
subsidiaries. It is intended that these earnings will be indefinitely
invested in operations outside of the United States. It is not
practicable to determine the income tax liability that might be
incurred if these earnings were to be distributed. Except for such
indefinitely invested earnings, the Company provides federal and state
income taxes currently on undistributed earnings of foreign
subsidiaries.
The Internal Revenue Service has proposed federal income tax
deficiencies for the years 1984 through 1988, and the Company has made
prepayments thereon. The Company has contested these alleged
deficiencies and is pursuing administrative and judicial remedies.
Management believes that adequate provision has been made for any
adjustments that may result from these tax examinations.
6
<PAGE>
3. In the third quarter of 1993, the Company initiated a plan to
restructure its operations worldwide. In connection with this plan,
the Company recorded a $321 million charge to operating expenses ($199
million, or $1.72 per share, after taxes). The restructuring costs
include $162 million of estimated employee-related expenses and $159
million of estimated facilities, equipment and other expenses
associated with the consolidation, relocation and termination of
operations and employees.
4. Earnings per share is computed using the weighted average number of
common and dilutive common equivalent shares attributable to stock
options outstanding during the period.
5. Certain prior year amounts on the consolidated statements of cash flows
have been reclassified to conform to the current period presentation.
6. The information set forth in Item 1 of Part II hereof is hereby
incorporated by reference.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following information should be read in conjunction with the
consolidated financial statements and notes thereto. All information is
based on Apple's fiscal calendar.
(Tabular information: Dollars in millions, except per share amounts)
Results of Operations
<TABLE>
<CAPTION>
First First
Quarter Quarter
1994 1993 Change
<S> <C> <C> <C>
Net sales $ 2,469 $ 2,000 23.4%
Gross margin $ 592 $ 811 -27.0%
Percentage of net sales 24.0% 40.5%
Operating expenses $ 527 $ 570 -7.5%
Percentage of net sales 21.4% 28.5%
Net income $ 40 $ 161 -75.2%
Earnings per share $ 0.34 $ 1.33 -74.4%
</TABLE>
Net sales for the first quarter of 1994 increased by 23.4% over the
comparable period of 1993. Total Macintosh(R) computer unit sales increased
40% in the first quarter of 1994 over the comparable period of 1993. This
unit sales growth principally resulted from strong sales of the Company's
newer product offerings within the LC, Performa(TM) and Quadra(R) families of
desktop personal computers and within the PowerBook(TM) family of notebook-
sized personal computers. This unit growth was partially offset by
declining unit sales of certain of the Company's more established products
and older product offerings. The average aggregate revenue per Macintosh
computer unit declined 12% in the first quarter of 1994 over the comparable
period of 1993, primarily as a result of pricing actions undertaken by the
Company in response to continuing industrywide pricing pressures and high
levels of inventory. Going forward, the Company anticipates continued
industrywide competitive pricing and promotional actions.
International net sales grew 24% and domestic net sales grew 23% in the
first quarter of 1994 over the comparable period of 1993. The increase in
international net sales primarily reflected strong net sales growth in the
Pacific region. Despite generally weak economic conditions and competitive
pressures in various European countries, net sales grew moderately in
Europe. International net sales represented 45% of total net sales for the
first quarter of 1994, unchanged from the corresponding period of 1993.
The Company has historically experienced increased net sales in its first
quarter, compared with other quarters in its fiscal year, due to demand for
and calendar year-end buying of some of its products. The Company does
not, however, consider its business to be highly seasonal.
It is anticipated that a significant portion of the Company's future
revenues will come from new products, especially personal computers based
on the Power PC family of Reduced Instruction Set Computing (RISC)
microprocessors. However, there can be no assurance that these new
products will receive favorable market acceptance, and the Company cannot
determine the ultimate effect these products will have on its sales or
results of operations. See "Factors That May Affect Future Results and
Financial Condition."
In general, the Company's resellers typically purchase products on an as-
needed basis due to the Company's distribution strategy, which is
designed to expedite the filling of orders. Resellers frequently change
delivery schedules and order rates depending on changing market
conditions. Unfilled orders ("backlog"), which are not necessarily
legally binding, can be, and often are, canceled at will. The Company's
backlog decreased to approximately $302 million at January 19, 1994, from
approximately $663 million at November 19, 1993, as the Company's higher
inventory levels provided greater product availability to meet reseller
orders and delivery schedules.
8
<PAGE>
In the Company's experience, the actual amount of product backlog at any
particular time is not a meaningful indication of its future business
prospects. Because of the foregoing, as well as other factors affecting
the Company's backlog, backlog should not be considered a reliable
indicator of the Company's future revenue or financial performance.
Gross Margin
Gross margin declined both in amount and as a percentage of net sales
during the first quarter of 1994 from the comparable period of 1993. The
decline in gross margin as a percentage of net sales was primarily a result
of pricing and promotional actions undertaken by the Company in response to
industrywide pricing pressures (including the increasing price competition
that the Company is experiencing in the Japanese market) and high levels of
inventory. Gross margin was also adversely affected by increases in
inventory valuation reserves associated with the high levels of inventory,
increased costs associated with providing customers a wider variety of
product configuration options, and a seasonal shift of product mix towards
lower margin products.
Gross margin was affected somewhat adversely by changes in foreign currency
exchange rates as a result of a stronger U.S. dollar relative to certain
foreign currencies during the first quarter of 1994 compared with the
corresponding period of 1993. The Company's operating strategy and pricing
take into account changes in exchange rates over time; however, the
Company's results of operations can be significantly affected in the short
term by fluctuations in foreign currency exchange rates.
The Company anticipates that gross margins will remain under pressure and
below historic levels worldwide due to a variety of factors, including
continued industrywide pricing pressures, increased competition and
compressed product cycles. The Company's gross margins could also be
adversely affected by inventory valuation reserves that could result if
anticipated unit sales growth projections for new and current product
offerings are not realized.
<TABLE>
<CAPTION>
Research and Development First First
Quarter Quarter
1994 1993 Change
<S> <C> <C> <C>
Research and development $ 153 $ 160 -4.8%
Percentage of net sales 6.2% 8.0%
</TABLE>
Research and development expenditures decreased both in amount and as a
percentage of net sales in the first quarter of 1994 when compared with the
corresponding period of 1993. This decrease reflects the results of the
Company's restructuring actions aimed at reducing costs, including more
focused product development expenditures.
The Company believes that continued investments in research and development
are critical to its future growth and competitive position in the
marketplace and are directly related to continued, timely development of
new and enhanced products. However, in light of the Company's expectation
of continued pressure on gross margin, the Company anticipates that
research and development expenditures will decrease in amount as the
Company maintains its efforts to manage operating expense growth relative
to gross margin levels during 1994.
<TABLE>
<CAPTION>
First First
Quarter Quarter
Selling, General and 1994 1993 Change
Administrative
<S> <C> <C> <C>
Selling, general and $ 375 $ 410 -8.6%
administrative
Percentage of net sales 15.2% 20.5%
</TABLE>
Selling, general and administrative expenses decreased in amount and as a
percentage of net sales in the first
9
<PAGE>
quarter of 1994 when compared with the corresponding period of 1993. This
decrease was primarily a result of the Company's ongoing efforts to manage
operating expense growth relative to gross margin levels, and also due to
an increase in the level of net sales.
The Company will continue to face the challenge of managing selling,
general and administrative expenses relative to gross margin levels,
particularly in light of the Company's expectation of continued pressure on
gross margin, and continued weak economic conditions worldwide. The
Company's objective is to continue to reduce selling, general and
administrative expenses as a percentage of net sales during 1994.
<TABLE>
<CAPTION>
Interest and Other Income First First
(Expense), Net Quarter Quarter
1994 1993 Change
<S> <C> <C> <C>
Interest and other income
(expense), net $ 0 $ 19 -100.0%
</TABLE>
The Company derived other income from sources such as interest earned on
cash and portfolio balances, gains on the sale of certain venture capital
investments, and gains on interest rate and foreign exchange hedging
activities. Interest and other income (expense), net, decreased in the
first quarter of 1994 when compared with the same period in 1993. This
decrease is primarily due to a non-recurring gain on the sale of certain of
the Company's venture capital investments in the first quarter of 1993, an
increase in interest expense due to higher commercial paper borrowing
levels, and a decrease in interest income due to lower interest rates and
lower cash balances.
<TABLE>
<CAPTION>
Provision for Income Taxes First First
Quarter Quarter
1994 1993 Change
<S> <C> <C> <C>
Provision for income taxes $ 25 $ 99 -75.2%
Effective tax rate 38% 38%
</TABLE>
The information contained in Note 2 of the Notes to Consolidated Financial
Statements (Unaudited) in Part I, Item 1 of this Quarterly Report on Form
10-Q is incorporated by reference into this discussion.
Factors That May Affect Future Results and Financial Condition
During the first half of calendar year 1994, the Company plans to introduce
its first Macintosh computers based on a new PowerPC family of RISC
microprocessors. Accordingly, the Company's results of operations and
financial condition could be adversely affected if it is unable to
successfully transition its line of Macintosh personal computers and
servers from the Motorola 68000 series of microprocessors to the PowerPC
microprocessor. The success of this transition will depend on the
Company's ability to continue the sales momentum of products based on the
Motorola 68000 series of microprocessors through the introduction of the
PowerPC-based products, to successfully manage inventory levels of both
product lines simultaneously, to gain market acceptance of the new PowerPC-
based products, and to coordinate the timely development and distribution
of new versions of commonly-used software products specifically designed
for the PowerPC-based products.
The Company's future operating results and financial condition may also be
affected by a number of other factors, including the Company's ability to:
increase market share in its personal computer business while successfully
expanding its new businesses and product offerings into other markets;
broaden industry acceptance of the Newton personal digital assistant
(PDA) product, including effectively licensing Newton technology and
marketing the related products and services; realize the anticipated
10
<PAGE>
cost-reduction benefits associated with its restructuring plan initiated
in the third quarter of 1993; develop, manufacture, and sell its products
profitably; reduce existing inventory levels; and manage future
inventory levels effectively. The Company's future operating results
and financial condition may also be affected by uncertainties relative to
global economic conditions; the strength of its distribution channels;
industry factors; and the availability and cost of components.
The personal computer industry is highly volatile and continues to be
characterized by dynamic customer demand patterns, rapid technological
advances, frequent introduction of new products and product enhancements,
and industrywide competition resulting in aggressive pricing practices and
downward pressure on gross margins. The Company's operating results and
financial condition could be adversely affected should the Company be
unable to: accurately anticipate customer demand; introduce new products on
a timely basis; manage lead times required to obtain components in order to
be more responsive to short-term shifts in customer demand patterns; offer
customers competitive technologies while effectively managing the impact on
inventory levels and the potential for customer confusion created by
product proliferation; effectively manage the impact on the Company of
industrywide pricing pressures; or effectively implement and manage the
competitive risk associated with certain of the Company's collaboration
agreements with other companies, such as the agreements with International
Business Machines Corporation (IBM). The Company's results of operations
and financial condition could also be adversely affected by inventory
valuation reserves that could result if anticipated unit sales growth
projections for new and current product offerings are not realized.
A large portion of the Company's revenues in recent years has come from its
international operations. As a result, the Company's operating results and
financial condition could be significantly affected by international
factors, such as changes in foreign currency exchange rates or weak
economic conditions in foreign markets in which the Company distributes its
products. The Company's operating strategy and pricing take into account
changes in exchange rates over time; however, the Company's results of
operations can be significantly affected in the short term by fluctuations
in foreign currency exchange rates.
During the first quarter of 1994, the Company introduced several products
that extend its entry-level, midrange and notebook computer offerings. In
addition, the Company introduced several new or enhanced peripheral
products. The success of these new products is dependent on a number of
factors, including market acceptance, the Company's ability to manage the
risks associated with product transitions, and the Company's ability to
reduce existing inventory levels and manage future inventory levels in line
with anticipated product demand and to manufacture the products in
appropriate quantities to meet anticipated demand. Accordingly, the
Company cannot determine the ultimate effect that these new products will
have on its sales or results of operations.
The Company's products include certain components, such as microprocessors
manufactured by Motorola Inc. and monochrome active-matrix displays
manufactured by Hosiden Corporation, that are currently available only from
single sources. Any availability limitations, interruptions in supplies,
or price increases of these and other components could adversely affect the
Company's business and financial results.
The majority of the Company's research and development activities, its
corporate headquarters, and other critical business operations are located
near major earthquake faults. The Company's operating results and financial
condition could be materially adversely affected in the event of a major
earthquake.
A number of uncertainties also exist regarding the marketing and
distribution of the Company's products. The Company's primary means of
distribution is through third-party computer resellers and various
education and consumer channels. Although the Company has in place certain
policies to limit concentrations of credit risk, business and financial
results could be adversely affected in the event that the generally weak
financial condition of third-party computer resellers worsens. In
addition, the Company is continuing its expansion into new distribution
channels, such as mass-merchandise stores (such as Sears and Wal-Mart),
consumer electronics outlets, and computer superstores, in response to
changing industry practices and customer preferences. At this time, the
Company cannot determine the ultimate effect of these or other future
distribution expansion efforts on its future operating results.
11
<PAGE>
Because of the foregoing factors, as well as other factors affecting the
Company's operating results and financial condition, past financial
performance should not be considered to be a reliable indicator of future
performance, and investors should not use historical trends to anticipate
results or trends in future periods. In addition, the Company's
participation in a highly dynamic industry often results in significant
volatility of the Company's common stock price.
<TABLE>
<CAPTION>
Liquidity and Capital Resources
First Quarter First Quarter
1994 1993
<S> <C> <C>
Cash generated by operations $ 367 $ 79
Cash used for investment
activities, excluding short-
term investments $ 58 $ 11
Cash used for financing
activities $ 79 $ 58
</TABLE>
The Company's financial position with respect to cash, cash equivalents and
short-term investments, net of short-term borrowings increased to $371
million at December 31, 1993 from $69 million at September 24, 1993.
Working capital increased to approximately $1.9 billion at December 31,
1993, from $1.8 billion at September 24, 1993.
Operations generated net cash of $367 million during the first quarter of
1994, compared with $400 million used during the fourth quarter of 1993.
This improvement was due primarily to decreases in inventory levels and
accounts receivable. Accounts receivable decreased by $134 million as a
result of improved collection activity. Continued improvement in cash flow
from operations for the remainder of 1994 will depend principally on the
Company's ability to improve profit levels and the Company's continued
aggressive management of working capital, particularly in the area of
inventory management as the Company introduces its Power PC-based personal
computers.
The Company's inventory levels increased sequentially each quarter during
fiscal 1993 from approximately $580 million at the end of fiscal 1992 to
approximately $1.51 billion at the end of fiscal 1993 in support of its
expanded product line and distribution channels and anticipated higher
sales volumes. These higher levels of inventory, in turn, resulted in
increased levels of short-term borrowings. As of the end of the first
quarter of fiscal 1994, inventory levels had declined by approximately $168
million and short-term borrowings had declined by $71 million from the
fiscal 1993 year-end levels, primarily as a result of improved inventory
management and increased sales resulting from pricing and promotional
actions. The Company has also identified additional measures to improve
management of working capital, including the implementation of long-term
financing arrangements, and long-term measures designed to improve
inventory management, such as increased emphasis on designing-in
commonality of parts among products, increased use of manufacturing-on-
demand based on products orders rather than forecasts, and greater
rationalization of product offerings. Although the Company believes that
these measures will result in improved inventory and working capital
management during 1994, there can be no assurance that these measures will
be successful or that inventory reserves will not be necessary in future
periods.
Net cash used for the purchase of property, plant and equipment totaled
approximately $24 million during the first quarter of 1994 compared with
$47 million during the fourth quarter of 1993. These purchases were
primarily of manufacturing machinery and equipment, and leasehold
improvements. The Company anticipates that capital expenditures in 1994
will be slightly below 1993 expenditures.
Short-term borrowings at December 31, 1993 were approximately $71 million
lower than at September 24, 1993. The Company's aggregate borrowings at
December 31, 1993 were approximately $752 million, comprised of
approximately $527 million short-term borrowings in the U.S. and
approximately $225 million short-term borrowings overseas. Aggregate
borrowings at September 24, 1993 were $823 million.
12
<PAGE>
The Company expects that it will continue to incur short- and long-term
borrowings from time to time to finance U.S. working capital needs and
capital expenditures, because substantially all of the Company's cash, cash
equivalents, and short-term investments is held by foreign subsidiaries,
generally in U.S. dollar-denominated holdings. Amounts held by foreign
subsidiaries would be subject to U.S. income taxation upon repatriation to
the United States; the Company's financial statements fully provide for any
related tax liability on amounts that may be repatriated.
The Company's short-term borrowings are principally under its commercial
paper program. From time to time, the Company also borrows to finance
operations pursuant to short-term uncommitted bid-line arrangements with
commercial banks. During the first quarter of 1994, the Company entered
into a $500 million unsecured revolving credit facility with a syndicate of
banks to support its commercial paper program. No borrowings have been
made under this facility. In addition, Apple Japan, Inc., a wholly owned
subsidiary of the Company, incurred short-term yen-denominated borrowings
aggregating the U.S. dollar equivalent of approximately $225 million from
several Japanese banks.
On May 5, 1993, the Company filed an omnibus shelf registration statement
with the Securities and Exchange Commission for the registration of debt
and other securities for an aggregate offering amount of $500 million. On
January 24, 1994, the Company commenced marketing its first take-down under
this shelf registration statement in the aggregate principal amount of $300
million. The Company believes that the shelf registration provides it with
additional financing flexibility to meet future funding requirements and to
take advantage of attractive market conditions.
In January 1994, a wholly owned subsidiary of the Company exercised its
option to purchase for $51.9 million the remaining partnership interest in
the Cupertino Gateway Partners partnership, a general partnership, which
owns the Company's campus-type office facilities located in Cupertino,
California (the "Campus"). As a result of this purchase, the Company's
wholly owned subsidiary now owns 100% of the right, title and interest in
the Campus. This transaction will be reflected in the Company's financial
statements for the second quarter of 1994.
The Internal Revenue Service has proposed federal income tax deficiencies
for the years 1984 through 1988, which the Company is contesting. The
Company believes the resolution of any tax liability for these proposed tax
deficiencies will occur over the course of the next several years.
Although payment of any assessment is not required until the end of such
process, the Company elected to make a prepayment in April 1991 for the
years 1984 through 1986, and a prepayment in May 1993 for the years 1987
through 1988.
The Company believes that its balances of cash, cash equivalents, and short-
term investments, together with funds generated from operations and short-
and long-term borrowing capabilities, will be sufficient to meet its
operating cash requirements in the foreseeable future.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to pages 34 through 36 of the Company's 1993 Form 10-K
under the heading "Litigation," for a discussion of certain litigation
involving Microsoft Corporation and Hewlett-Packard Company; Securities
Litigation; 1993 Derivative Litigation; and litigation involving a
complaint filed by Jerome Lemelson; and litigation involving a complaint
filed by Richard B. Grant.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit
Number Description
10.1 Credit Agreement between the Registrant and certain
lenders dated as of December 9, 1993.
b) Reports on Form 8-K
None.
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
APPLE COMPUTER, INC.
(Registrant)
DATE: January 25, 1994 BY /s/ Joseph A. Graziano
Joseph A. Graziano
Executive Vice President and
Chief Financial Officer
15
<PAGE>
APPLE COMPUTER, INC.
INDEX TO EXHIBITS
Exhibit Description Page Number
Index
10.1 Credit Agreement between the 17
Registrant and certain lenders dated
as of December 9, 1993.
16
<PAGE>
(Exhibit 10.1)
U.S. $500,000,000
CREDIT AGREEMENT
Dated as of December 9, 1993
APPLE COMPUTER, INC.
as Borrower
and
THE LENDERS NAMED HEREIN
as Lenders
and
CITICORP USA, INC.
as Documentation Agent,
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
as Administrative Agent
and
NATIONSBANK OF TEXAS, N.A., as Co-Agent
17
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms 1
SECTION 1.02 Computation of Time Periods 10
SECTION 1.03 Accounting Terms 10
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01 Syndicated Advances 10
SECTION 2.02 Making the Syndicated Advances 10
SECTION 2.03 Auction Advances 12
SECTION 2.04 Fees 16
SECTION 2.05 Reduction of the Commitments 17
SECTION 2.06 Repayment of Syndicated Advances 17
SECTION 2.07 Interest on Syndicated Advances 17
SECTION 2.08 Notes 17
SECTION 2.09 Interest Rate Determination 17
SECTION 2.10 Sharing of Payments, Etc. 18
SECTION 2.11 Prepayments of Advances 18
SECTION 2.12 Increased Costs 19
SECTION 2.13 Illegality 20
SECTION 2.14 Payments and Computations 20
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01 Condition Precedent to Initial Advances 21
SECTION 3.02 Conditions Precedent to Each Borrowing 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the
Borrower 23
SECTION 4.02 Representation and Warranty of the
Borrower at Closing 25
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01 Affirmative Covenants 26
SECTION 5.02 Negative Covenants 30
18
<PAGE>
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01 Events of Default 34
ARTICLE VII
THE AGENT
SECTION 7.01 Authorization and Action 37
SECTION 7.02 Delegation of Duties. 37
SECTION 7.03 Agent's Reliance, Etc. 37
SECTION 7.04 Notice of Default 38
SECTION 7.05 Lender Credit Decision 38
SECTION 7.06 Indemnification 38
SECTION 7.07 Agent in Individual Capacity 39
SECTION 7.08 Successor Agent 39
SECTION 7.09 The Agent 40
SECTION 7.10 Withholding Tax 40
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Amendments, Etc. 41
SECTION 8.02 Notices, Payments, Etc. 42
SECTION 8.03 No Waiver; Remedies 43
SECTION 8.04 Costs, Expenses and Taxes 43
SECTION 8.05 Right of Set-off 44
SECTION 8.06 Binding Effect 45
SECTION 8.07 Successors and Assigns 45
SECTION 8.08 Governing Law 46
SECTION 8.09 Headings 47
SECTION 8.10 Execution in Counterparts 47
SECTION 8.11 Confidentiality 47
SECTION 8.12 Waiver of Jury Trial 47
SECTION 8.13 Entire Agreement 48
SECTION 8.14 Severability 48
SCHEDULE I
EXHIBIT A-1 FORM OF SYNDICATED NOTE
EXHIBIT A-2 FORM OF AUCTION NOTE
EXHIBIT B-1 NOTICE OF SYNDICATED BORROWING
EXHIBIT B-2 NOTICE OF AUCTION BORROWING
EXHIBIT C OPINION OF BORROWER'S COUNSEL
EXHIBIT D COMPLIANCE CERTIFICATE
EXHIBIT E EXISTING LIENS
EXHIBIT F SUBSIDIARIES
19
<PAGE>
CREDIT AGREEMENT
Dated as of December 9, 1993
APPLE COMPUTER, INC., a California corporation (the "Borrower"),
the Lenders listed on the signature pages hereof, CITICORP USA, INC., a
Delaware corporation ("Citicorp"), as documentation agent (in such
capacity, the "Documentation Agent") for the Lenders hereunder, BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BofA") as administrative
agent (in such capacity, the "Administrative Agent") for the lenders
hereunder, and NATIONSBANK OF TEXAS, N.A. ("NationsBank") as Co-Agent,
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms
defined):
"Absolute Rate Auction Borrowings" means Auction Borrowings
bearing interest at a fixed interest rate per annum.
"Advance" means a Syndicated Advance or an Auction Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by, or is under common
control with such Person or is a director or officer of such Person.
"Agent" means, unless the context otherwise clearly requires, the
Administrative Agent and the Documentation Agent, collectively, and their
successors in such capacity, or, where the context so clearly requires, the
Administrative Agent or the Documentation Agent, individually, and their
respective successors in such capacity.
"Alternate Base Rate" means, for any period (including a period
consisting of a single day), a fluctuating interest rate per annum as shall
be in effect from time to time and determined by the Administrative Agent,
which rate per annum shall at all times be equal to the highest of:
(a) the rate of interest in effect for such day as publicly announced
from time to time by BofA in San Francisco, California, as its "reference
rate" (it is a rate set by BofA based upon various factors including BofA's
costs and desired return, general economic conditions and other factors,
and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate); or
20
<PAGE>
(b) 1/2 of one percent per annum above the latest three-week moving
average of secondary market morning offering rates in the United States for
three-month certificates of deposit of major United States money market
banks, such three-week moving average being determined by the
Administrative Agent weekly on each Monday (or, if any such date is not a
Business Day, on the next succeeding Business Day) for the three-week
period ending on the previous Friday on the basis of such rates reported by
certificate of deposit dealers to and published by the Federal Reserve Bank
of New York or, if such publication shall be suspended or terminated, on
the basis of quotations for such rates received by the Administrative Agent
from three New York certificate of deposit dealers of recognized standing
selected by the Administrative Agent, in either case adjusted to the
nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent,
to the next higher 1/4 of one percent; or
(c) 1/2 of one percent per annum above the most recent Federal Funds
Rate.
"Alternate Base Rate Advance" means a Syndicated Advance which
bears interest as provided in Section 2.07(a).
"Applicable Lending Office" means, with respect to each Lender,
such Lender's Domestic Lending Office in the case of an Alternate Base Rate
Advance, and such Lender's Eurodollar Lending Office in the case of a
Eurodollar Rate Advance and, in the case of an Auction Advance, the office
of such Lender as notified by such Lender to the Administrative Agent as
its Applicable Lending Office with respect to such Auction Advance.
"Auction Advance" means an advance by a Lender to the Borrower as
part of an Auction Borrowing resulting from the auction bidding procedure
described in Section 2.03.
"Auction Borrowing" means a borrowing consisting of Auction
Advances made on the same date by each of the Lenders whose offer to make
one or more Auction Advances as part of such borrowing has been accepted by
the Borrower under the auction bidding procedure described in Section 2.03.
"Auction Note" means a promissory note of the Borrower payable to
the order of any Lender, in substantially the form of Exhibit A-2 hereto,
evidencing the indebtedness of the Borrower to such Lender resulting from
the Auction Advances made by such Lender.
"Auction Reduction" has the meaning specified in Section 2.01.
"Borrowing" means a Syndicated Borrowing or an Auction Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City or San Francisco,
California and, if the applicable Business Day relates to any Eurodollar
Rate Advances, such a day on which dealings are carried on in the London,
England interbank market.
"Capitalization" means, on any date of determination, the sum of
consolidated Debt plus Tangible Net Worth on such date.
"Change of Control Event" means the occurrence of the following:
any Person, or a group of related Persons, shall acquire beneficial
ownership in excess of 40% of the outstanding Voting Stock of the Borrower.
21
<PAGE>
"Citibank" means Citibank, N.A., a national banking association.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" has the meaning specified in Section 2.01.
"Debt" of any Person means, without duplication, the sum of
(i) indebtedness for borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) obligations to pay
the deferred purchase price of property or services (excluding ordinary
trade payables incurred in the ordinary course of business),
(iv) obligations as lessee under leases which shall have been or should be,
in accordance with generally accepted accounting principles, recorded as
capital leases, (v) all obligations of such Person to purchase securities
(or other property) which arise out of or in connection with the sale of
the same or substantially similar securities or property, (vi) all non-
contingent obligations of such Person to reimburse any bank or other Person
in respect of amounts actually paid under a letter of credit or similar
instrument, (vii) all indebtedness or obligations of others secured by a
lien on any asset of such Person, whether or not such indebtedness or
obligations are assumed by such Person (to the extent of the value of the
asset), (viii) obligations under direct or indirect guaranties in respect
of, and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in
clauses (i) through (vii) above, and (ix) liabilities in respect of
unfunded vested benefits under plans covered by Title IV of ERISA.
"Default" means any event which, with the passage of time or the
giving of notice or both, would (if not cured within any applicable cure
period) constitute an Event of Default.
"Domestic Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule I hereto, or such other office of such Lender as such
Lender may from time to time specify to the Borrower and the Agent.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, licenses, agreements or other governmental restrictions
relating to the environment, or to emissions, discharges or releases of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes into the environment,
including, without limitation, ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, petroleum or petroleum products, chemicals or industrial,
toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means any Person who for purposes of Title IV
of ERISA is a member of the Borrower's controlled group, or under common
control with the Borrower, within the meaning of Section 414 of the Code,
and the regulations promulgated and rulings issued thereunder.
22
<PAGE>
"ERISA Termination Event" means (i) a Reportable Event described
in Section 4043 of ERISA and the regulations promulgated thereunder (other
than a Reportable Event not subject to the provision for thirty (30) day
notice to the Pension Benefit Guaranty Corporation under such regulations),
or (ii) the withdrawal of the Borrower or any Subsidiary from a Plan during
a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to
terminate a Plan or the treatment of a Plan amendment as a termination
under Section 4041 of ERISA or (iv) the institution of proceedings to
terminate a Plan by the Pension Benefit Guaranty Corporation under
Section 4042 of ERISA, or (v) any other event or condition which would
constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term
in Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto, (or, if no such office is
specified, its Domestic Lending Office), or such other office of such
Lender as such Lender may from time to time specify to the Borrower and the
Agent.
"Eurodollar Margin" means, on any day, with respect to any
Eurodollar Rate Advance made or outstanding on such day, an interest rate
per annum equal at all times to (i) .22% for each day during a Level I
Period on which the aggregate amount of Advances outstanding hereunder does
not exceed 50% of the aggregate amount of the Commitments and .345% for
each day during a Level I Period on which the aggregate amount of Advances
outstanding hereunder exceeds 50% of the aggregate amount of the
Commitments; (ii) .25% for each day during a Level II Period on which the
aggregate amount of Advances outstanding hereunder does not exceed 50% of
the aggregate amount of the Commitments and .375% for each day during a
Level II Period on which the aggregate amount of Advances outstanding
hereunder exceeds 50% of the aggregate amount of the Commitments;
(iii) .35% for each day during a Level III Period on which the aggregate
amount of Advances outstanding hereunder does not exceed 50% of the
aggregate amount of the Commitments and .475% for each day during a
Level III Period on which the aggregate amount of Advances outstanding
hereunder exceeds 50% of the aggregate amount of the Commitments; and (iv)
.375 for each day during a Level IV Period on which the aggregate amount of
Advances outstanding hereunder does not exceed 50% of the aggregate amount
of the Commitments and .50% for each day during a Level IV Period on which
the aggregate amount of Advances outstanding hereunder exceeds 50% of the
aggregate amount of the Commitments.
"Eurodollar Rate" means, for the Interest Period for each
Eurodollar Rate Advance comprising part of the same Syndicated Borrowing,
an interest rate per annum determined by the Administrative Agent equal to
the arithmetic mean (rounded upward to the nearest whole multiple of 1/16
of 1% per annum, if such average is not such a multiple) of the rates per
annum obtained by dividing (a) the rate per annum notified to the
Administrative Agent at which deposits in U.S. dollars are offered by the
principal office of each of the Eurodollar Reference Banks in London,
England to prime banks in the London interbank market at 11:00 A.M. (London
time) two Business Days before the first day of such Interest Period in an
amount substantially equal to the respective Eurodollar Reference Bank's
(or its Affiliate's) Eurodollar Rate Advance comprising part of such
Syndicated Borrowing and for a period equal to such Interest Period, by
(b) a percentage equal to 100% minus the Eurodollar Rate Reserve
23
<PAGE>
Percentage (as defined below) for such Interest Period. The "Eurodollar
Rate Reserve Percentage" for the Interest Period for each Eurodollar Rate
Advance comprising part of the same Syndicated Borrowing means the reserve
percentage applicable two Business Days before the first day of such
Interest Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) for determining
the maximum reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement) for a member
bank of the Federal Reserve System in New York City with deposits exceeding
One Billion Dollars with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other category
of liabilities which includes deposits by reference to which the interest
rate on Eurodollar Rate Advances is determined) having a term comparable to
such Interest Period.
"Eurodollar Rate Advance" means a Syndicated Advance which bears
interest as provided in Section 2.07(b).
"Eurodollar Reference Banks" means the principal London offices
of Citibank, BofA and NationsBank and each such other bank as may be
approved pursuant to Section 8.07(d).
"Events of Default" has the meaning specified in Section 6.01.
"Federal Funds Rate" means, for any period, the rate per annum
set forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Board (including
any such successor, "H.15(519)") for such day opposite the caption "Federal
Funds (Effective)". If on any relevant day such rate is not yet published
in H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for
U.S. Government Securities, or any successor publication, published by the
Federal Reserve Bank of New York (including any such successor, the
"Composite 3:30 p.m. Quotation") for such day under the caption "Federal
Funds Effective Rate". If on any relevant day the appropriate rate for
such previous day is not yet published in either H.15(519) or the Composite
3:30 p.m. Quotations, the rate for such day will be the arithmetic mean as
determined by the Administrative Agent of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Administrative Agent.
"Indemnified Persons" has the meaning specified in Section 7.06.
"Interest Period" means, for each Syndicated Advance comprising
part of the same Syndicated Borrowing, the period commencing on the date of
such Syndicated Advance and ending on the last day of the period selected
by the Borrower pursuant to the provisions below. The duration of each
such Interest Period shall be (a) 30, 60 or 90 days in the case of an
Alternate Base Rate Advance, and (b) 1, 2, 3 or 6 months in the case of a
Eurodollar Rate Advance, in each case as the Borrower may, upon notice
received by the Administrative Agent in accordance with Section 2.02,
select; provided, however, that:
(i) the Borrower may not select any Interest Period which
ends after the Termination Date;
(ii) Interest Periods commencing on the same date for
Syndicated Advances comprising part of the same Syndicated
Borrowing shall be of the same duration;
24
<PAGE>
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day
of such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, in the case of any Interest
Period for a Eurodollar Rate Advance, that if such extension
would cause the last day of such Interest Period to occur in the
next following calendar month, the last day of such Interest
Period shall occur on the next preceding Business Day; and
(iv) at any time, the sum of the number of Auction
Borrowings which remain outstanding plus the number of Interest
Periods then in effect shall not exceed fifteen (15).
"Lenders" means the lenders listed on the signature pages hereof
and each assignee that shall become a party hereto pursuant to
Section 8.07.
"Level I Period" means a period of time, which may consist of a
single day, during which the commercial paper of the Borrower is rated:
(i) A-1+ by S&P and (ii) P-1 by Moody's.
"Level II Period" means a period of time, which may consist of a
single day, during which the commercial paper of the Borrower is rated:
(i) A-1 by S&P and (ii) P-1 by Moody's.
"Level III Period" means a period of time, which may consist of a
single day, during which the commercial paper of the Borrower is rated at
least: (i) A-2 by S&P and (ii) P-2 by Moody's.
"Level IV Period" means a period of time, which may consist of a
single day, during which the commercial paper of the Borrower is either (i)
rated lower than A-2 by S&P or rated lower than P-2 by Moody's, or (ii)
unrated by either S&P or Moody's for whatever reason, including
discontinuation of the Borrower's commercial paper program.
"LIBOR Auction Borrowings" means Auction Borrowings bearing
interest at a fluctuating interest rate per annum based on the Eurodollar
Rate.
"Majority Lenders" means at any time (i) Lenders holding at least
51% of the then aggregate unpaid principal amount of the Syndicated
Advances then outstanding, or (ii) if no portion of any Syndicated Advances
is then outstanding, then (A) if the Commitments have not been terminated,
Lenders having at least 51% of the Commitments, or (B) if the Commitments
have been terminated, Lenders holding at least 51% of the then aggregate
unpaid principal amount of the Auction Advances.
"Material Debt" has the meaning specified in Section 6.01(e).
"Moody's" means Moody's Investors Service, Inc., or its
successors.
"Note" means a Syndicated Note or an Auction Note.
"Notice of Syndicated Borrowing" has the meaning specified in
Section 2.02(a).
"Notice of Auction Borrowing" has the meaning specified in
Section 2.03(a).
"Person" means an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
25
<PAGE>
"Plan" means at any time an employee pension benefit plan which
is covered under Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (i) maintained by the
Borrower or any Subsidiary for employees of the Borrower or any Subsidiary
or (ii) maintained pursuant to a collective bargaining agreement or any
other arrangement under which more than one employer makes contributions
and to which the Borrower or any Subsidiary is then making or accruing an
obligation to make contributions or has within the preceding five plan
years made contributions.
"S&P" means Standard and Poor's Ratings Group, or its successors.
"Subsidiary" means any corporation of which the Borrower and/or
its other Subsidiaries own, directly or indirectly, such number of
outstanding shares as have more than 50% of the ordinary voting power for
the election of directors; provided, however, that neither Kaleida Labs,
Inc. ("Kaleida") nor Taligent, Inc. ("Taligent") shall be deemed to be a
Subsidiary hereunder unless the Borrower and/or its other Subsidiaries
shall own, directly or indirectly, such number of outstanding shares as
have at least 66-2/3% of the ordinary voting power for the election of
directors of Kaleida or Taligent, as the case may be; provided, further,
that so long as any corporation has total assets of less than $100,000 and
annual gross revenues of less than $1,000,000, such corporation shall not
be deemed to be a Subsidiary for purposes of this Agreement; and provided,
further, that the Foundation for the Advancement of Computer-Aided
Education shall not be deemed to be a Subsidiary hereunder so long as it
retains its not-for-profit status and continues to engage in the same or
similar activities as it is engaged in as of the date hereof.
"Syndicated Advance" means an advance by a Lender to the Borrower
as part of a Syndicated Borrowing and refers to an Alternate Base Rate
Advance or a Eurodollar Rate Advance, each of which shall be a "Type" of
Syndicated Advance.
"Syndicated Borrowing" means a borrowing consisting of
simultaneous Syndicated Advances of the same Type made by each of the
Lenders pursuant to Section 2.01.
"Syndicated Note" means a promissory note of the Borrower payable
to the order of any Lender, in substantially the form of Exhibit A-1
hereto, evidencing the aggregate indebtedness of the Borrower to such
Lender resulting from the Syndicated Advances made by such Lender.
"Tangible Net Worth" means, on any date of determination, the
excess of consolidated total assets of the Borrower and its Subsidiaries
over consolidated total liabilities of the Borrower and its Subsidiaries,
such consolidated total assets and consolidated total liabilities each to
be determined in accordance with generally accepted accounting principles
consistent with those applied in the preparation of the audited financial
statements referred to in Section 4.01(e), excluding, however, from the
determination of total assets (i) goodwill, organizational expenses,
research and development expenses, trademarks, trade names, copyrights,
patents, patent applications, licenses and rights in any thereof, and other
intangible items, (ii) all prepaid expenses, deferred charges or
unamortized debt discount and expense (other than prepaid income taxes),
(iii) all reserves carried and not deducted from assets, (iv) treasury
stock and capital stock, obligations or other securities of, or capital
contributions to, or investments in, any Subsidiary, (v) securities which
are not readily marketable, (vi) cash held in a sinking or other analogous
fund established for the purpose of redemption, retirement or prepayment of
capital stock or Debt, (vii) any write-up in the book value of any asset
resulting from a revaluation thereof subsequent to September 25, 1992, and
(viii) any items not included in clauses (i) through
26
<PAGE>
(vii) above which are treated as intangibles in conformity with generally
accepted accounting principles (other than prepaid income taxes).
"Termination Date" means December 8, 1994 or the earlier date of
termination in whole of the Commitments pursuant to Section 2.05 or 6.01.
"Type" has the meaning specified in the definition of the term
"Syndicated Advance".
"Voting Stock" of any Person means any shares of stock of such
Person whose holders are entitled under ordinary circumstances to vote for
the election of directors of such Person (irrespective of whether at the
time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
SECTION 1.02. Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the
preparation of the financial statements referred to in Section 4.01(e).
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. Syndicated Advances. Each Lender severally
agrees, on the terms and conditions hereinafter set forth, to make
Syndicated Advances to the Borrower from time to time on any Business Day
during the period from the date hereof until the Termination Date in an
aggregate amount not to exceed at any time the amount set forth opposite
such Lender's name on the signature pages hereof as such amount may be
reduced pursuant to Section 2.05 or Section 8.07(b) (such Lender's
"Commitment"), provided that the aggregate amount of the Commitments of the
Lenders shall be deemed used from time to time to the extent of the
aggregate amount of the Auction Advances then outstanding and such deemed
use of the aggregate amount of the Commitments shall be applied to the
Lenders ratably according to their respective Commitments (such deemed use
of the aggregate amount of the Commitments being an "Auction Reduction").
Each Syndicated Borrowing shall be in an aggregate amount not less than
$25,000,000, or an integral multiple of $1,000,000 in excess thereof, and
shall consist of Syndicated Advances of the same Type made on the same day
by the Lenders ratably according to their respective Commitments. Within
the limits of each Lender's Commitment, the Borrower may from time to time
borrow, prepay pursuant to Section 2.11(b) and reborrow under this
Section 2.01. Notwithstanding anything to the contrary contained herein, at
no time shall the sum of the number of Auction Borrowings which remain
outstanding plus the number of Interest Periods then in effect exceed
fifteen (15).
SECTION 2.02. Making the Syndicated Advances.
(a) Each Syndicated Borrowing shall be made on notice, given not later than
8:00 A.M. (San Francisco time) on (y) the date of a proposed Syndicated
Borrowing comprised of Alternate Base Rate Advances, and (z) the third
Business Day prior to the date of a proposed Syndicated Borrowing comprised
of Eurodollar Rate Advances, by the Borrower to the Administrative Agent,
27
<PAGE>
which shall give to each Lender prompt notice thereof (and in any event not
later than the same day) by facsimile, telex or cable. Each such notice by
the Borrower of a Syndicated Borrowing (a "Notice of Syndicated Borrowing")
shall be by facsimile, telex or cable, confirmed immediately in writing, in
substantially the form of Exhibit B-1 hereto, specifying therein the
(i) requested date of such Syndicated Borrowing, which shall be a Business
Day, (ii) requested Type of Syndicated Advances comprising such Syndicated
Borrowing, (iii) requested aggregate amount of such Syndicated Borrowing,
(iv) requested Interest Period for each such Syndicated Advance, and (v)
the Borrower's commercial paper ratings issued by S&P and Moody's in effect
on the date of such request. Each Lender shall, before 11:00 A.M. (San
Francisco time) on the date of such Syndicated Borrowing, make available
for the account of its Applicable Lending Office to the Administrative
Agent at its address referred to in Section 8.02(b), in same day funds,
such Lender's ratable portion of such Syndicated Borrowing. After the
Administrative Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the Administrative Agent
will make such funds available to the Borrower at an account of the
Borrower designated from time to time in writing by the Borrower and agreed
to by the Administrative Agent.
(b) Each Notice of Syndicated Borrowing shall be irrevocable and
binding on the Borrower. In the case of any Syndicated Borrowing which the
related Notice of Syndicated Borrowing specifies is to be comprised of
Eurodollar Rate Advances, the Borrower shall indemnify each Lender against
any loss, cost or expense incurred by such Lender as a result of any
failure to fulfill on or before the date specified in such Notice of
Syndicated Borrowing for such Syndicated Borrowing the applicable
conditions set forth in Article III, including, without limitation, any
loss (including loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund the Syndicated Advance to be made by such
Lender as part of such Syndicated Borrowing when such Syndicated Advance,
as a result of such failure, is not made on such date.
(c) Unless the Administrative Agent shall have received notice
from a Lender prior to the date of any Syndicated Borrowing that such
Lender will not make available to the Administrative Agent such Lender's
ratable portion of such Syndicated Borrowing, the Administrative Agent may
assume that such Lender has made such portion available to the
Administrative Agent on the date of such Syndicated Borrowing in accordance
with subsection (a) of this Section 2.02 and the Administrative Agent may,
in reliance upon such assumption, but without any obligation to do so, make
available to the Borrower on such date a corresponding amount. If and to
the extent that such Lender shall not have so made such ratable portion
available to the Administrative Agent, such Lender and the Borrower
severally agree to repay to the Administrative Agent forthwith on demand
such corresponding amount together with interest thereon, for each day from
the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, the interest rate applicable at the time to Syndicated Advances
comprising such Syndicated Borrowing and (ii) in the case of such Lender,
the Federal Funds Rate. If such Lender shall repay to the Administrative
Agent such corresponding amount, such amount so repaid shall constitute
such Lender's Syndicated Advance as part of such Syndicated Borrowing for
purposes of this Agreement, and the interest payable thereon shall be
allocated such that the Administrative Agent shall receive (from a
combination of the sum, if any, paid to the Administrative Agent by such
Lender pursuant to clause (ii) of the preceding sentence and any interest
payment made by the Borrower) an amount equal to interest on such
Syndicated Advance at the interest rate applicable thereto from the date
the corresponding amount was made available by the Administrative Agent to
the Borrower as contemplated by this Section
28
<PAGE>
2.02(c) to and including the date such amount is repaid to the
Administrative Agent by such Lender, and such Lender shall receive the
balance of the interest payments made by the Borrower with respect to such
Advance in accordance with the provisions of this Agreement.
(d) The failure of any Lender to make the Syndicated Advance to
be made by it as part of any Syndicated Borrowing shall not relieve any
other Lender of its obligation, if any, hereunder to make its Syndicated
Advance on the date of such Syndicated Borrowing, but no Lender shall be
responsible for the failure of any other Lender to make the Syndicated
Advance to be made by such other Lender on the date of any Syndicated
Borrowing.
SECTION 2.03. Auction Advances. (a) Each Lender severally
agrees that the Borrower may request that Auction Borrowings be made under
this Section 2.03 from time to time on any Business Day during the period
from the date hereof until the date occurring 10 days prior to the
Termination Date in the case of Absolute Rate Auction Borrowings and 35
days prior to the Termination Date in the case of LIBOR Auction Borrowings,
in the manner set forth below; provided that, following the making of each
Auction Borrowing, the aggregate amount of the Advances then outstanding
shall not exceed the aggregate amount of the Commitments of the Lenders
(computed without regard to any Auction Reduction); provided, further,
that, notwithstanding anything to the contrary contained herein, at no time
shall the sum of the number of Auction Borrowings which remain outstanding
plus the number of Interest Periods then in effect exceed fifteen (15).
(i) The Borrower may request an Auction Borrowing under this
Section 2.03 by delivering to the Administrative Agent, by facsimile,
telex or cable, confirmed immediately in writing, a notice of an
Auction Borrowing (a "Notice of Auction Borrowing"), in substantially
the form of Exhibit B-2 hereto, specifying the date (which shall be a
Business Day) and aggregate amount of the proposed Auction Borrowing,
the maturity date for repayment of each Auction Advance to be made as
part of such Auction Borrowing (which maturity date (x) in the case of
Absolute Rate Auction Borrowings may not be earlier than the date
occurring 7 days after the date of such Auction Borrowing or later
than 180 days after the date of such Auction Borrowing or the
Termination Date, whichever occurs first, or (y) in the case of LIBOR
Auction Borrowings shall be 1, 2, 3, 4, 5 or 6 months, but in no event
shall be later than the Termination Date), whether the proposed
Auction Borrowing is to be an Absolute Rate Auction Borrowing or a
LIBOR Auction Borrowing, the interest payment date or dates relating
thereto, the Borrower's commercial paper ratings from S&P and Moody's
in effect on the date of such proposed Auction Borrowing and any other
terms to be applicable to such Auction Borrowing, not later than
8:00 A.M. (San Francisco time) (A) at least one Business Day prior to
the date of the proposed Auction Borrowing, in the case of Absolute
Rate Auction Borrowings, and (B) at least four Business Days prior to
the date of the proposed Auction Borrowing, in the case of LIBOR
Auction Borrowings. The Administrative Agent shall in turn promptly
notify each Lender of each request for an Auction Borrowing received
by it from the Borrower by sending such Lender a copy of the related
Notice of Auction Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects to do
so, irrevocably offer to make one or more Auction Advances to the
Borrower as part of such proposed Auction Borrowing at a rate or rates
of interest specified by such Lender in its sole discretion, by
notifying the Administrative Agent (which shall give prompt notice
thereof to the Borrower) before 6:45 A.M. (San Francisco time) (A) on
the date of such proposed Auction Borrowing, in the case of a Notice
of Auction Borrowing delivered pursuant to clause (A) of
29
<PAGE>
paragraph (i) above and (B) three Business Days before the date of
such proposed Auction Borrowing, in the case of a Notice of Auction
Borrowing delivered pursuant to clause (B) of paragraph (i) above, of
the amount of each Auction Advance which such Lender would be willing
to make as part of such proposed Auction Borrowing (which amounts may,
subject to the first proviso to the first sentence of this
Section 2.03(a), exceed such Lender's Commitment), the rate or rates
of interest therefor and such Lender's Applicable Lending Office with
respect to such Auction Advance; provided that if the Administrative
Agent in its capacity as a Lender shall, in its sole discretion, elect
to make any such offer, it shall notify the Borrower of such offer
before 6:15 A.M. (San Francisco time) on the date on which notice of
such election is to be given to the Administrative Agent by the other
Lenders. Any notice of bid submitted by a Lender shall be disregarded
if it (x) contains qualifying, conditional or similar language, (y)
proposes terms other than or in addition to those set forth in the
applicable Notice of Auction Borrowing, or (z) arrives after the time
set forth in this paragraph (ii).
(iii) The Borrower shall, in turn, (A) before 8:00 A.M. (San
Francisco time) on the date of such proposed Auction Borrowing, in the
case of a Notice of Auction Borrowing delivered pursuant to clause (A)
of paragraph (i) above and (B) before 9:00 A.M. (San Francisco time)
three Business Days before the date of such proposed Auction
Borrowing, in the case of a Notice of Auction Borrowing delivered
pursuant to clause (B) of paragraph (i) above, either
(x) cancel such Auction Borrowing by giving the
Administrative Agent notice to that effect, or
(y) accept one or more of the offers made by any Lender or
Lenders pursuant to paragraph (ii) above, in its sole discretion,
by giving notice to the Administrative Agent of the amount of
each Auction Advance to be made by each Lender as part of such
Auction Borrowing, and reject any remaining offers made by
Lenders pursuant to paragraph (ii) above by giving the
Administrative Agent notice to that effect; provided that
acceptance of offers may only be made on the basis of ascending
interest rates specified by the Lenders pursuant to
paragraph (ii) above.
(iv) If the Borrower notifies the Administrative Agent that such
Auction Borrowing is canceled pursuant to paragraph (iii)(x) above,
the Administrative Agent shall give prompt notice thereof to the
Lenders and such Auction Borrowing shall not be made.
(v) If offers are made by two or more Lenders with the same
specified rate of interest for a greater aggregate principal amount
than the amount in respect of which offers are accepted for any
Auction Borrowing, the principal amount of Auction Advances in respect
of which such offers are accepted shall be allocated by the
Administrative Agent among such Lenders as nearly as possible (in such
multiples of $1,000,000 as the Administrative Agent may deem
appropriate) in proportion to the aggregate principal amount of such
offers. Determinations by the Administrative Agent of the amounts of
Auction Advances shall be conclusive in the absence of manifest error.
(vi) If the Borrower accepts one or more of the offers made by
any Lender or Lenders pursuant to paragraph (iii)(y) above, the
Administrative Agent shall in turn promptly notify (A) each Lender
that has made an offer as described in paragraph (ii) above, of the
date and aggregate amount of such Auction Borrowing and whether or not
30
<PAGE>
any offer or offers made by such Lender pursuant to paragraph (ii)
above have been accepted by the Borrower, and (B) each Lender that is
to make an Auction Advance as part of such Auction Borrowing, of the
amount of each Auction Advance to be made by such Lender as part of
such Auction Borrowing. Each Lender that is to make an Auction
Advance as part of such Auction Borrowing shall, before 9:00 A.M. (San
Francisco time) on the date of such Auction Borrowing specified in the
notice received from the Administrative Agent pursuant to clause (A)
of the preceding sentence, make available for the account of its
Applicable Lending Office to the Administrative Agent at its address
referred to in Section 8.02(b) such Lender's portion of such Auction
Borrowing, in same day funds. Upon satisfaction of the applicable
conditions set forth in Article III and after receipt by the
Administrative Agent of such funds, the Administrative Agent will make
such funds available to the Borrower at an account of the Borrower
designated from time to time in writing by the Borrower and agreed to
by the Administrative Agent. Promptly after each Auction Borrowing
the Administrative Agent will notify each Lender of the amount of the
Auction Borrowing, the consequent Auction Reduction and the dates upon
which such Auction Reduction commenced and will terminate.
(b) Each Auction Borrowing shall be in an aggregate amount not
less than $25,000,000, or an integral multiple of $1,000,000 in excess
thereof, and, following the making of each Auction Borrowing, the Borrower
shall be in compliance with the limitation set forth in the first proviso
to the first sentence of subsection (a) above.
(c) Within the limits and on the conditions set forth in this
Section 2.03, the Borrower may from time to time borrow under this
Section 2.03, repay or prepay pursuant to subsection (d) below, and
reborrow under this Section 2.03, provided that an Auction Borrowing shall
not be made within two Business Days of the date of any other Auction
Borrowing.
(d) The Borrower shall repay to the Administrative Agent for the
account of each Lender which has made an Auction Advance, or each other
holder of an Auction Note, on the maturity date of each Auction Advance
(such maturity date being that specified by the Borrower for repayment of
such Auction Advance in the related Notice of Auction Borrowing delivered
pursuant to subsection (a)(i) above), the then unpaid principal amount of
such Auction Advance. The Borrower shall have no right to prepay any
principal amount of any Auction Advance unless, and then only on the terms,
specified by the Borrower for such Auction Advance in the related Notice of
Auction Borrowing delivered pursuant to subsection (a)(i) above, and
provided that the Borrower shall be obligated to reimburse each Lender
whose Auction Advance has been prepaid by the Borrower in respect thereof
pursuant to Section 8.04(b).
(e) The Borrower shall pay interest on the unpaid principal
amount of each Auction Advance from the date of such Auction Advance to the
date the principal amount of such Auction Advance is repaid in full, at the
rate of interest for such Auction Advance specified by the Lender making
such Auction Advance in its notice with respect thereto delivered pursuant
to subsection (a)(ii) above, payable on the maturity date specified by the
Borrower for such Auction Advance and on each other interest payment date
or dates specified by the Borrower for such Auction Advance in the related
Notice of Auction Borrowing delivered pursuant to subsection (a)(i) above;
provided, however, that if the maturity date of the Auction Advances
comprising an Auction Borrowing is more than three months after the date of
such Auction Borrowing, then interest shall be payable on each day which
occurs at intervals of three months after the date of such Auction
Borrowing; provided, further, that any amount of principal which
31
<PAGE>
is not paid when due (whether at stated maturity, by acceleration or
otherwise) shall bear interest, from the date on which such amount is due
until such amount is paid in full, payable on demand, at a rate per annum
equal at all times (i) from such due date to the applicable maturity date,
to 2% per annum above the interest rate otherwise payable with respect to
such Auction Advance hereunder, and (ii) from and after the applicable
maturity date, to 2% per annum above the Alternate Base Rate in effect from
time to time.
SECTION 2.04. Fees. (a) Facility Fee. The Borrower agrees to pay to
the Administrative Agent, for the account of each Lender, a facility fee on
the daily average amount of such Lender's Commitment (including both the
portion thereof that is used and the portion thereof that is unused) from
the date hereof in the case of each Lender listed on the signature pages
hereof and from the effective date of the assignment in accordance with
Section 8.07 hereof pursuant to which such Lender became a Lender in the
case of each other Lender until the Termination Date, payable on the last
day of each March, June, September and December during the term of such
Lender's Commitment, commencing December 31, 1993, and on the Termination
Date, at the rate of (w) .08% per annum during each Level I Period, (x)
.10% per annum during each Level II Period, (y) .125% during each Level III
Period, and (z) .25% per annum during each Level IV Period.
(b) Agents' Fees. The Borrower agrees to pay the following fees:
(i) to Citicorp for Citicorp's own account a fee in respect of its role
hereunder and in connection with the arrangement hereof in an amount and at
the times set forth in the letter agreement between the Borrower and
Citicorp dated as of October 8, 1993, as the same may be amended, modified,
supplemented or replaced from time to time by the mutual agreement of the
Borrower and Citicorp; (ii) to BofA for BofA's own account a fee in respect
of its role hereunder and in connection with the arrangement hereof in an
amount and at the times set forth in the letter agreement between the
Borrower and BofA dated as of October 14, 1993, as the same may be amended,
modified, supplemented or replaced from time to time by the mutual
agreement of the Borrower and BofA; and (iii) to the Administrative Agent
for its own account an auction fee of $2500 in respect of and at the time
of each Notice of Auction Borrowing delivered to the Administrative Agent.
SECTION 2.05. Reduction of the Commitments. The Borrower shall have
the right, upon at least three Business Days' irrevocable notice to the
Administrative Agent, to terminate in whole or reduce ratably in part the
unused portions of the respective Commitments of the Lenders, provided that
the aggregate amount of the Commitments of the Lenders shall not be reduced
to an amount which is less than the aggregate principal amount of the
Auction Advances then outstanding and provided, further, that each partial
reduction shall be in the aggregate amount of $25,000,000 or an integral
multiple of $1,000,000 in excess thereof.
SECTION 2.06. Repayment of Syndicated Advances. The Borrower shall
repay the principal amount of each Syndicated Advance made by each Lender
on the last day of the Interest Period for such Syndicated Advance or the
Termination Date, whichever occurs first.
SECTION 2.07. Interest on Syndicated Advances. The Borrower shall
pay interest on the unpaid principal amount of each Syndicated Advance made
by each Lender from the date of such Syndicated Advance until such
principal amount shall be paid in full, at the following rates per annum
and at the following times: (a) if such Syndicated Advance is an Alternate
Base Rate Advance, a rate per annum equal at all times to the Alternate
Base Rate in effect from time to time, payable quarterly on the last day of
each March, June, September, and December and on
32
<PAGE>
the date such Alternate Base Rate Advance shall be paid in full; and (b) if
such Syndicated Advance is a Eurodollar Rate Advance, a rate per annum
equal at all times during the Interest Period for such Syndicated Advance
to the sum of the Eurodollar Rate for such Interest Period plus the
applicable Eurodollar Margin, payable on the last day of such Interest
Period and, if such Interest Period is longer than three (3) months, at
intervals of three (3) months after the first day thereof; provided that
any amount of principal or interest which is not paid when due (whether at
stated maturity, by acceleration or otherwise) shall bear interest, from
the date on which such amount is due until such amount is paid in full,
payable on demand, at a rate per annum equal at all times to 2% per annum
above the Alternate Base Rate in effect from time to time.
SECTION 2.08. Notes. The obligation of the Borrower to repay the
Syndicated Advances made to the Borrower by each Lender hereunder shall be
further evidenced by a Syndicated Note in favor of such Lender in the form
and substance of Exhibit A-1 attached hereto. The obligation of the
Borrower to repay the Auction Advances made to the Borrower by any Lender
shall be evidenced by an Auction Note in favor of such Lender in the form
and substance of Exhibit A-2 attached hereto.
SECTION 2.09. Interest Rate Determination. (a) The Administrative
Agent shall give prompt notice to the Borrower and the Lenders of the
applicable interest rate determined by the Administrative Agent for
purposes of Section 2.07; provided, however, that any failure by the
Administrative Agent to provide such notice shall not affect any obligation
of the Borrower or the Lenders hereunder.
(b) If the Majority Lenders shall, at least one Business Day
before the date of any requested Syndicated Borrowing comprised of
Eurodollar Rate Advances, notify the Administrative Agent that the
Eurodollar Rate for Eurodollar Rate Advances comprising such Syndicated
Borrowing will not adequately reflect the cost to such Majority Lenders of
making, funding or maintaining their respective Eurodollar Rate Advances
for such Syndicated Borrowing, the Administrative Agent shall forthwith so
notify the Borrower and the Lenders, whereupon the right of the Borrower to
select Eurodollar Rate Advances for such Syndicated Borrowing or any
subsequent Syndicated Borrowing shall be suspended until the Administrative
Agent shall notify the Borrower and the Lenders that the circumstances
causing such suspension no longer exist, and each Syndicated Advance
comprising such Syndicated Borrowing shall be an Alternate Base Rate
Advance.
SECTION 2.10. Sharing of Payments, Etc. If any Lender shall obtain
any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of the Syndicated Advances made
by it (other than pursuant to Section 2.12) in excess of its ratable share
of payments on account of the Syndicated Advances obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the Syndicated Advances made by them as shall be
necessary to cause such purchasing Lender to share the excess payment
ratably with each of them, provided, however, that if all or any portion of
such excess payment is thereafter recovered from such purchasing Lender,
such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such
recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to
33
<PAGE>
this Section 2.10 may, to the fullest extent permitted by law, exercise all
its rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
SECTION 2.11. Prepayments of Advances. (a) The Borrower shall have
no right to prepay any principal amount of any Advances other than as
provided in subsection (b) and subsection (c) below.
(b) The Borrower may, upon at least two Business Days'
irrevocable notice, or in the case of Syndicated Borrowings comprised of
Alternate Base Rate Advances notice given not later than one Business Day
prior to the proposed date of prepayment, to the Administrative Agent
stating the proposed date and aggregate principal amount of the prepayment,
and if such notice is given the Borrower shall, prepay the outstanding
principal amounts of the Syndicated Advances comprising part of the same
Syndicated Borrowing in whole or ratably in part, together with accrued
interest to the date of such prepayment on the principal amount prepaid;
provided, however, that (x) each partial prepayment shall be in an
aggregate principal amount not less than $25,000,000 or an integral
multiple of $1,000,000 in excess thereof, and (y) in the case of any such
prepayment of a Eurodollar Rate Advance, the Borrower shall be obligated to
reimburse the Lenders in respect thereof pursuant to Section 8.04(b).
(c) Except as provided in Section 2.03(d), the Borrower shall have no
right to prepay any principal amount of any Auction Advance.
SECTION 2.12. Increased Costs. (a) If, after the date hereof, due to
either (i) the introduction of or any change (other than any change by way
of imposition or increase of reserve requirements, in the case of
Eurodollar Rate Advances, included in the Eurodollar Rate Reserve
Percentage) in or in the interpretation of any law or regulation or
(ii) the compliance with any guideline or request from any central bank or
other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender (or to any commercial
bank Affiliate of any non-bank Lender) of agreeing to make or making,
funding or maintaining Eurodollar Rate Advances, then the Borrower shall
from time to time, upon demand by such Lender (with a copy of such demand
to the Administrative Agent), pay to the Administrative Agent for the
account of such Lender additional amounts sufficient to compensate such
Lender or Affiliate for such increased cost. A certificate as to the
amount of such increased cost, submitted to the Borrower and the
Administrative Agent by such Lender, shall be conclusive and binding for
all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects the
amount of capital to be maintained by such Lender or any corporation
controlling such Lender or any commercial bank Affiliate of any non-bank
Lender and that the amount of such capital is increased by or based upon
the existence of such Lender's commitment to lend hereunder and other
commitments of this type, then, upon demand by such Lender (with a copy of
such demand to the Administrative Agent), the Borrower shall immediately
pay to the Administrative Agent for the account of such Lender, from time
to time as specified by such Lender, additional amounts sufficient to
compensate such Lender or such corporation or Affiliate in the light of
such circumstances, to the extent that such Lender reasonably determines
such increase in capital is allocable to the existence of such Lender's
commitment to lend hereunder. A certificate as to such amounts submitted
to the Borrower and
34
<PAGE>
the Administrative Agent by such Lender shall be conclusive and binding for
all purposes, absent manifest error.
SECTION 2.13. Illegality. Notwithstanding any other provision of
this Agreement, if any Lender shall notify the Administrative Agent that
the introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar Rate
Advances or to fund or maintain Eurodollar Rate Advances hereunder, (i) the
obligation of the Lenders to make Eurodollar Rate Advances shall be
suspended until the Administrative Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer exist and
(ii) the Borrower shall forthwith prepay in full all Eurodollar Rate
Advances of all Lenders then outstanding, together with interest accrued
thereon.
SECTION 2.14. Payments and Computations. (a) The Borrower shall make
each payment hereunder and under the Notes not later than 10:00 A.M. (San
Francisco time) on the day when due in U.S. dollars to the Administrative
Agent at its address referred to in Section 8.02(b) in same day funds. The
Administrative Agent will promptly thereafter cause to be distributed like
funds relating to the payment of principal or interest or fees ratably
(other than amounts payable pursuant to Section 2.03 or 2.12) to the
Lenders for the account of their respective Applicable Lending Offices, and
like funds relating to the payment of any other amount payable to any
Lender to such Lender for the account of its Applicable Lending Office, in
each case to be applied in accordance with the terms of this Agreement.
Upon its acceptance of an assignment pursuant to Section 8.07, from and
after the effective date specified in such assignment, the Administrative
Agent shall make all payments hereunder and under the Notes in respect of
the interest assigned thereby to the Lender assignee thereunder, and the
parties to such assignment shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between
themselves.
(b) All computations of interest and of fees shall be made by
the Administrative Agent on the basis of a year of 360 days, in each case
for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such interest or fees are
payable. Each determination by the Administrative Agent of an interest
rate or fee amount hereunder shall be conclusive and binding for all
purposes, absent manifest error.
(c) Whenever any payment hereunder and under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall
in such case be included in the computation of payment of interest or fees,
as the case may be; provided, however, if such extension would cause
payment of interest on or principal of Eurodollar Rate Advances to be made
in the next following calendar month, such payment shall be made on the
next preceding Business Day.
(d) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the
Lenders hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent
may, in reliance upon such assumption, cause to be distributed to each
Lender on such due date an amount equal to the amount then due such Lender.
If and to the extent that the Borrower shall not have so made such payment
in full to the Administrative Agent, each Lender shall repay to the
Administrative Agent forthwith on demand such amount distributed to such
Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Administrative Agent, at the Federal Funds Rate.
35
<PAGE>
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Condition Precedent to Initial Advances. The obligation
of each Lender to make its initial ;Advance is subject to the condition
precedent that the Documentation Agent shall have received on or before the
day of the initial Borrowing the following, each dated such day, in form
and substance satisfactory to the Documentation Agent and (except for the
Notes) in sufficient copies for each Lender:
(a)The Notes payable to the order of the Lenders, respectively,
executed by the Borrower;
(b)This Agreement executed by the Borrower, the Agent and each of the
Lenders;
(c)Certified copies of the resolutions of the Board of Directors of
the Borrower approving this Agreement and the Notes and of all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement and the Notes;
(d)A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying the names and true signatures of the officers of
the Borrower authorized to sign this Agreement and the Notes and the
other documents to be delivered hereunder;
(e)A favorable opinion of counsel for the Borrower, substantially in
the form attached hereto as Exhibit C and covering such other matters
as any Lender through the Agent may reasonably request; and
(f) A favorable opinion of Steefel, Levitt & Weiss, special counsel
to the Documentation Agent and the Lenders.
SECTION 3.02. Conditions Precedent to Each Borrowing. The
obligation of each Lender to make an Advance ;on the occasion of each
Borrowing (including the initial Syndicated Borrowing) and the
obligation of each Lender which is to make an Auction Advance on the
occasion of an Auction Borrowing, shall be subject to the further
conditions precedent that (i) the Administrative Agent shall have
received from the Documentation Agent copies of the Notes and
originals of each of the other items to be submitted to the
Documentation Agent pursuant to Section 3.01, together with
confirmation that the foregoing are in form and substance satisfactory
to the Documentation Agent, (ii) the Administrative Agent shall have
received the written confirmatory Notice of Syndicated Borrowing or
Notice of Auction Borrowing, as the case may be, with respect thereto,
and (iii) on the date of such Borrowing (a) the following statements
shall be true (and each of the giving of the applicable Notice of
Syndicated Borrowing or Notice of Auction Borrowing, as the case may
be, and the acceptance by the Borrower of the proceeds of such
Borrowing shall constitute a representation and warranty by the
Borrower that on the date of such Borrowing such statements are true):
(1)The representations and warranties contained in Section 4.01 (and,
in the case of an Auction Borrowing, the representation and warranty
set forth in Section 4.02) are correct on and as of the date of such
Borrowing, before and after giving effect to such Borrowing and to the
application of the proceeds therefrom, as though made on and as of
such date;
36
<PAGE>
(2)No Default or Event of Default has occurred and is continuing, or
would result from such Borrowing or from the application of the
proceeds therefrom;
(3)No event has occurred and no circumstance exists as a result of
which the information concerning the Borrower that has been provided
to the Agent and each Lender by the Borrower in connection herewith
would include an untrue statement of a material fact or omit to state
any material fact or any fact necessary to make the statements
contained therein, in the light of the circumstances under which and
as of the date on which they were made, not misleading; and
(4)The aggregate amount of such Borrowing and all other Borrowings to
be made on the same day hereunder is within the aggregate amount of
the unused Commitments of the Lenders; and (b) the Administrative
Agent shall have received such other approvals, opinions or documents
as any Lender through the Administrative Agent may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the ;Borrower. The
Borrower represents and warrants as follows:;
(a)The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. Each Subsidiary
is duly organized and validly existing under the laws of the jurisdiction
in which it is incorporated and is in good standing under the laws of such
jurisdiction except where the failure to so be in good standing (i) is due
to a filing omission or other technical noncompliance which can be remedied
in a short period of time (and in any event within fifteen (15) days)
without incurring any substantial cost, (ii) is remedied as soon as
possible and in any event within fifteen (15) days after the Borrower has
knowledge of any such failure, or (iii) such failure will not have a
material adverse effect on the business, condition (financial or other),
assets, properties, operations or prospects of the Borrower or the Borrower
and its Subsidiaries taken as a whole. The Borrower and each Subsidiary
has the corporate power to own its respective property and to carry on its
respective business as now being conducted.
(b)The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action, and do not
contravene (i) the Borrower's charter or by-laws, or (ii) any law, rule,
regulation or contractual restriction binding on or affecting the Borrower,
or constitute a default under any judgment, decree, order or award of any
court or agency of government or any arbitrator, or any indenture,
agreement or any other instrument to which the Borrower is a party, and do
not and will not result in the creation or imposition of any lien on any
asset of the Borrower or any of its Subsidiaries.
(c)No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Borrower of this
Agreement or the Notes.
37
<PAGE>
(d)This Agreement is, and the Notes when delivered hereunder will be,
legal, valid and binding obligations of the Borrower enforceable against
the Borrower in accordance with their respective terms.
(e)The audited consolidated balance sheet of the Borrower and its
Subsidiaries as at September 25, 1992, and the unaudited consolidated
balance sheet of the Borrower and its Subsidiaries as at June 25, 1993, and
the related audited or unaudited (as the case may be) statements of income
and stockholders' equity of the Borrower and its Subsidiaries for the
respective fiscal periods then ended, copies of which have been furnished
to each Lender, fairly present the financial condition of the Borrower and
its Subsidiaries as of such respective dates and the results of the
operations of the Borrower and its Subsidiaries for the periods ended on
such respective dates, all in accordance with generally accepted accounting
principles consistently applied.
(f)Except as disclosed to the Documentation Agent and the Lenders in that
certain letter dated December 6, 1993, there is no pending or, to the
knowledge of the Borrower, threatened action or proceeding affecting the
Borrower or any of its Subsidiaries before any court, governmental agency
or arbitrator, which (i) is more likely than not to be adversely determined
and such adverse determination is reasonably likely to have a material
adverse effect on the financial condition or operations of the Borrower or
any Subsidiary, or (ii) purports to affect the legality, validity or
enforceability of this Agreement or any Note.
(g)The Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve
System), and no proceeds of any Advance will be used to purchase or carry
any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
(h)The Borrower and each of its Subsidiaries has met its minimum funding
requirements under ERISA with respect to all of its Plans and has not
incurred any material liability to the Pension Benefit Guaranty Corporation
under ERISA in connection with any such Plan. No ERISA Termination Event
has occurred and is continuing with respect to any Plan.
(i)The Borrower is not an "investment company" or a company "controlled"
by an "investment company", within the meaning of the Investment Company
Act of 1940, as amended.
(j)The Borrower and its Subsidiaries, to the best of their knowledge, own
or have obtained the right to use all patents, trademarks, service-marks,
trade names, copyrights, licenses and other rights, free from burdensome
restrictions, or could obtain the same on terms and conditions not
materially adverse to the Borrower and its Subsidiaries and their
operations taken as a whole, that are necessary for the operation of their
respective businesses as presently conducted and for the operation of
businesses described to the Lenders in writing as proposed to be conducted.
(k)The Borrower has and each of its Subsidiaries has filed all Federal,
State and other tax returns which, to the best knowledge of the Borrower,
are required to be filed, and each has paid all taxes as shown on such
returns and on all assessments received by it to the extent that such
38
<PAGE>
taxes have become due, except such taxes as are being contested in good
faith by appropriate proceedings and for which adequate reserves have been
established in accordance with generally accepted accounting principles.
(l)No information, exhibit or report furnished by the Borrower to the
Agent or Lender in connection with the negotiation of this Agreement or the
Notes or pursuant to the terms of this Agreement or the Notes contains any
material misstatement of fact or omits to state a material fact or any fact
necessary to make the statements therein not misleading.
(m)Listed on Exhibit F attached hereto are all of the Subsidiaries of the
Borrower as of the date of this Agreement. All of the issued and
outstanding shares of the capital stock of each Subsidiary owned by the
Borrower or any Subsidiary are duly issued and outstanding, fully paid and
non-assessable and are free and clear of any lien, change or encumbrance.
(n)In the ordinary course of its business, the Borrower conducts an
ongoing review of the effect of Environmental Laws on the business,
operations and properties of the Borrower and its Subsidiaries, in the
course of which it identifies and evaluates associated liabilities and
costs (including, without limitation, any capital or operating expenditures
required for clean-up or closure of its properties, any capital or
operating expenditures required to achieve or maintain compliance with
environmental protection standards imposed by law or as a condition of any
license, permit or contract, any related constraints on operating
activities, including any periodic or permanent shutdown of any facility or
reduction in the level of or change in the nature of operations conducted
thereat and any actual or potential liabilities to third parties, including
employees, and any related costs and expenses). On the basis of this
review, the Borrower has reasonably concluded that Environmental Laws are
not likely to have a material adverse effect on the business, financial
condition, results of operations or prospects of the Borrower or the
Borrower and its Subsidiaries considered as a whole.
SECTION 4.02 Representation and Warranty of the Borrower at Closing.
The Borrower represents and warrants as of the date hereof that, except as
disclosed to the Documentation Agent and the Lenders in that certain letter
dated December 6, 1993, since September 25, 1992, there has been no
material and adverse change in the business, operations, properties or
condition (financial or otherwise) of the Borrower or the Borrower and its
Subsidiaries taken as a whole.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any amount payable
hereunder or under any Note shall remain unpaid or any Lender shall have
any Commitment hereunder, the Borrower shall, unless the Majority Lenders
shall otherwise consent in writing:
(a)Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries
to comply, in all material respects with all applicable laws, rules,
regulations and orders of any governmental authority, including, without
limitation, ERISA, the noncompliance with which would materially adversely
affect the business, condition (financial or other), assets, properties,
operations or prospects of the Borrower or the Borrower and its
Subsidiaries taken as a whole.
(b)Payment of Taxes and Claims. Pay, and cause each of its Subsidiaries
to pay, all taxes,
39
<PAGE>
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its franchises, business,
income or profits before any penalty accrues thereon or immediately upon
any determination that any interest is due thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have
or may become a lien upon any of its properties or assets; provided that
any such tax, assessment, charge or claim may be contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if
such accrual or other appropriate provision, if any, as shall be required
by generally accepted accounting principles shall have been made therefor.
(c)Maintenance of Properties; Insurance; Books and Records. Maintain or
cause to be maintained, and cause each of its Subsidiaries to maintain or
cause to be maintained: (i) in good repair, working order and condition all
tangible properties material to the continued conduct of the business of
the Borrower and its Subsidiaries, taken as a whole, and from time to time
make or cause to be made all necessary repairs, renewals and replacements
thereof; (ii) with financially sound and reputable insurers, insurance with
respect to its tangible properties and its business and the tangible
properties and the business of its Subsidiaries against loss or damage of
the kinds customarily insured against by corporations of established
reputation engaged in the same or similar business and similarly situated,
of such types and in such amounts as are customarily carried under similar
circumstances by such other corporations ("Industry Standards"), provided
that the Borrower and its Subsidiaries may self insure to the extent, and
only to the extent, consistent with Industry Standards; and (iii) proper
books of record and account in accordance with generally accepted
accounting principles consistently applied.
(d)Corporate Existence, etc. At all times preserve and keep in full
force and effect its corporate existence, and rights and franchises
material to its business, and those of each of its Subsidiaries, except as
otherwise specifically permitted by Sections 5.02(b), 5.02(d) and 5.02(e),
and qualify, and cause each of its Subsidiaries to qualify, to do business
in any jurisdiction where the failure to do so would have a material
adverse effect on the business, condition (financial or other), assets,
properties, operations or prospects of the Borrower or the Borrower and its
Subsidiaries taken as a whole, provided that the corporate existence of any
Subsidiary may be terminated if, in the good faith judgment of the
Borrower, such termination is in the best interests of the Borrower and is
not disadvantageous to the Lenders.
(e)Reporting Requirements. Furnish to the Lenders, with a copy to the
Administrative Agent:
(i)as soon as available and in any event within 45 days after the end
of each of the first three fiscal quarters of each fiscal year of the
Borrower, the unaudited consolidated balance sheet of the Borrower and
its consolidated Subsidiaries as of the end of such quarter and
consolidated unaudited statements of income, stockholders' equity and
cash flow of the Borrower and its consolidated Subsidiaries for the
period commencing at the end of the previous fiscal year and ending
with the end of such quarter, setting forth in comparative form
figures for the corresponding period in the preceding fiscal year, in
the case of such statements of income, stockholders' equity and cash
flow, and figures for the preceding fiscal year in the case of such
balance sheet, all in reasonable detail, in accordance with generally
accepted accounting principles consistently applied, and certified in
a manner acceptable to the Majority Lenders by a duly authorized
officer of the Borrower (subject to normal year-end adjustments);
(ii)as soon as available and in any event within 90 days after the end
of each fiscal year of
40
<PAGE>
the Borrower, the consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as of the end of such fiscal year and
consolidated statements of income, stockholders' equity and cash flow
of the Borrower and its consolidated Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the
end of such fiscal year, setting forth in comparative form figures for
the preceding fiscal year, all in reasonable detail, in accordance
with generally accepted accounting principles consistently applied,
and certified in a manner acceptable to the Majority Lenders by
independent public accountants of recognized national standing
reasonably acceptable to the Majority Lenders;
(iii) together with the financial statements furnished in accordance
with subdivision (i) and (ii) of this Section 5.01(e), a certificate
in the form of Exhibit D attached hereto of a duly authorized officer
of the Borrower (a) representing and warranting that no Event of
Default or Default has occurred and is continuing (or, if such an
Event of Default or Default has occurred, stating the nature thereof
and the action which the Borrower proposes to take with respect
thereto), (b) setting forth a schedule containing the calculations
performed to determine Borrower's compliance with Section 5.01(h) and
Section 5.01(i), (c) stating that the representations and warranties
contained in Section 4.01 are true and correct on and as of the date
of such certificate as though made on and as of such date; provided
that the Borrower may, if no Advance is outstanding and no other
amount payable hereunder or under the Notes is then unpaid, elect not
to submit the statement otherwise required pursuant to the foregoing
clause (c) so long as such statement is made at least once each
calendar year, and (d) setting forth the Borrower's commercial paper
ratings from S&P and Moody's in effect on the date of such financial
statements;
(iv)as soon as possible and in any event within five days after the
occurrence of each Event of Default, a statement of a duly authorized
officer of the Borrower setting forth details of such Event of Default
and the action which the Borrower has taken and proposes to take with
respect thereto;
(v)promptly after the sending or filing thereof, copies of all such
financial statements, proxy statements, notices and reports which the
Borrower or any Subsidiary sends to its public stockholders, and
copies of all reports and registration statements (without exhibits)
which the Borrower or any Subsidiary files with the Securities and
Exchange Commission (or any governmental body or agency succeeding to
the functions of the Securities and Exchange Commission) or any
national securities exchange;
(vi) as soon as practicable and in any event (a) within 30 days after
the Borrower or any ERISA Affiliate knows or has reason to know that
any ERISA Termination Event described in clause (i) of the definition
of ERISA Termination Event with respect to any Plan has occurred and
(b) within 10 days after the Borrower or any ERISA Affiliate knows or
has reason to know that any other ERISA Termination Event with respect
to any Plan has occurred, a statement of a duly authorized officer of
the Borrower describing such ERISA Termination Event and the action,
if any, which the Borrower or such ERISA Affiliate proposes to take
with respect thereto;
(vii) promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or governmental authority or
instrumentality affecting the Borrower or
41
<PAGE>
any of its Subsidiaries of the type described in Section 4.01(f), and
promptly after any material adverse development or change in the
status of any such continuing action, suit or proceeding, notice of
such development or change;
(viii) promptly after the occurrence thereof, notice of any violation
of any Environmental Law that is reported or reportable by the
Borrower or any of its Subsidiaries to any federal, state or local
environmental agency that could be reasonably expected to have a
material adverse effect on the business, conditions, properties or
operations of the Borrower or the Borrower and its Subsidiaries taken
as a whole;
(ix) promptly upon the Borrower's obtaining knowledge thereof, notice
of (A) any withdrawal or change in the commercial paper rating of the
Borrower assigned by S&P or Moody's, together with an explanation of
the reasons therefor, and (B) any announcement by S&P or Moody's that
the Borrower's commercial paper rating is "under review" or that any
such rating has been placed on a "watch list" or that any similar
action has been taken by S&P or Moody's; and
(x) such other information respecting the condition or operations,
financial or otherwise, of the Borrower or any of its Subsidiaries as
any Lender through the Agent may from time to time reasonably request.
(f) Visitation Rights. At any reasonable time during normal business
hours and from time to time, upon reasonable notice, permit the Agent or
any Lender or any agents or representatives thereof, to examine and make
copies of and abstracts from the records and books of account of, and visit
the properties of, the Borrower and the Subsidiaries, and to discuss the
business, finances and accounts of the Borrower and the Subsidiaries with
any of their respective officers or directors; provided that during the
course of any visit to the properties of the Borrower and the Subsidiaries,
the Agent and the Lenders and their respective agents and representatives
shall observe any customary and established safety and security procedures
of the Borrower or the relevant Subsidiary, as the case may be, which are
generally applicable for like visits.
(g)Use of Proceeds. The proceeds of all Advances shall be used for
general corporate purposes, including, without limitation, the retirement
of Debt. Notwithstanding any other term or provision set forth in this
Agreement, no portion of any Advance may be used to (i) initiate or
participate in the acquisition of a controlling interest in the Voting
Stock or assets of any corporation unless such acquisition is made with the
consent of such corporation and does not otherwise violate the terms and
provisions of this Agreement, or (ii) defend against any such acquisition
initiated against the Borrower by any Person.
(h) Tangible Net Worth. Maintain at all times Tangible Net Worth at
least equal to One Billion Five Hundred Million Dollars ($1,500,000,000).
(i)Debt to Capitalization. Maintain at all times a ratio of consolidated
Debt to Capitalization of not more than .50 to 1.00.
SECTION 5.02. Negative Covenants. So long as any amount payable
hereunder or under any Note shall remain unpaid or any Lender shall have
any Commitment hereunder, the Borrower shall not, without the written
consent of the Majority Lenders:
(a)Liens. (i) Create, assume or suffer to exist, or permit any
Subsidiary to create, assume or
42
<PAGE>
suffer to exist, any lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement, upon any of its
property or assets, whether now owned or hereafter acquired, except
(A) liens for taxes not yet due or which are being actively contested
in good faith by appropriate proceedings,
(B) other liens incidental to the conduct of its business or the
ownership of its property and assets which were not incurred in
connection with the borrowing of money or the obtaining of advances of
credit, and which do not in the aggregate materially detract from the
value of its property or assets or materially impair the use of such
property or assets in the operation of its business,
(C) liens existing on the property or assets of the Borrower or any
Subsidiary on the date of this Agreement and set forth on Exhibit E,
(D) liens on property or assets of a Subsidiary to secure obligations
of such Subsidiary to the Borrower or a wholly-owned Subsidiary,
(E) any lien created to secure the purchase price or cost of
construction, or to secure Debt incurred to pay the purchase price or
cost of construction, of any real property acquired by the Borrower or
any Subsidiary after the date hereof or any improvements to real
property constructed by or for the account of the Borrower or any
Subsidiary after the date hereof, provided that (1) any such lien
shall be confined solely to the item or items of property so acquired
or constructed (and any theretofore unimproved real property on which
such improvements are located), and (2) any such lien shall be created
concurrently with or within twelve months following the acquisition of
such property or the completion of construction of improvements
thereon,
(F) liens existing on property including the proceeds thereof and
accessions thereto acquired by the Borrower or any Subsidiary
(including liens on assets of any corporation at the time it becomes a
Subsidiary, unless such lien was created in contemplation of such
corporation becoming a Subsidiary),
(G) liens which constitute rights of set-off of a customary nature or
bankers' liens with respect to amounts on deposit, whether arising by
operation of law or by contract, in connection with arrangements
entered into with banks in the ordinary course of business, including
rights of set-off created pursuant to or by virtue of this Agreement
and the Notes,
(H) liens on any of its notes or accounts receivable except for liens
on its notes or accounts receivable in an amount (calculated in each
case based on the face amount thereof) which, when added to the face
amount of notes or accounts receivable sold by the Borrower as
permitted under Section 5.02(f), does not exceed, in the aggregate, an
amount equal to $300,000,000; provided, however, if the aggregate face
amount of the notes and accounts receivable so sold does not exceed
$300,000,000 but such amount so sold plus the aggregate face amount of
such notes and accounts receivable so encumbered by liens does exceed
$300,000,000, no Event of Default shall occur hereunder provided the
Borrower simultaneously therewith makes or causes to be made effective
provision whereby the indebtedness evidenced by this Agreement and the
Notes will be secured by such liens
43
<PAGE>
(pursuant to documentation in form and substance reasonably
satisfactory to the Majority Lenders) equally and ratably with any and
all Debt thereby secured so long as such other Debt shall be so
secured, and
(I) any lien renewing, extending, or refunding any lien permitted
under clauses (A) through (H), inclusive, of this Section 5.02(a),
provided that the principal amount secured is not increased and that
such lien is not extended to other property (other than pursuant to
its original terms).
(ii) Notwithstanding the provisions contained in subdivision (i) of this
Section 5.02(a), in addition to the permitted liens described in clause (E)
of Section 5.02(a) above, the Borrower or any of its Subsidiaries may
create, assume or suffer to exist liens on any real property now owned or
hereafter acquired by the Borrower or such Subsidiary if, after giving
effect thereto, the total amount of Debt secured by such liens permitted
pursuant to this subdivision (ii) of this Section 5.02(a) does not exceed
an amount equal to $200,000,000; provided, however, if the total amount of
Debt secured by such liens exceeds $200,000,000, no Event of Default shall
occur hereunder provided the Borrower simultaneously therewith makes or
causes to be made effective provision whereby the indebtedness evidenced by
this Agreement and the Notes will be secured by such liens (pursuant to
documentation in form and substance reasonably satisfactory to the Majority
Lenders) equally and ratably with any and all other Debt thereby secured so
long as such other Debt shall be so secured.
(b)Merger and Consolidation. Merge into or consolidate with or into a
corporation, or permit any Subsidiary to do so, except that (i) any
Subsidiary may merge or consolidate with any other Subsidiary and any
Subsidiary may merge into the Borrower, and (ii) the Borrower may merge or
consolidate with any other corporation provided that (A) either (1) the
Borrower shall be the continuing or surviving corporation, or (2) the
successor corporation shall be a solvent corporation organized under the
laws of any State of the United States of America with a senior unsecured
long term debt rating from S & P of at least BBB+ and from Moody's of at
least Baa1, and such corporation shall expressly assume in writing all of
the obligations of the Borrower under this Agreement and under the Notes,
including all covenants herein and therein contained, which assumption
shall not otherwise violate any term, condition or provision of this
Agreement or the Notes, and such successor shall be substituted for the
Borrower with the same effect as if it had been named herein as a party
hereto, and (B) immediately after giving effect to such merger or
consolidation, no Default or Event of Default shall have occurred;
provided, however, that no Default or Event of Default hereunder shall
occur as a result of the noncompliance by any Subsidiary with the
provisions of this Section 5.02(b), Section 5.02(c), Section 5.02(d) or
Section 5.02(e) so long as (x) the aggregate total assets of all
Subsidiaries which have at any time failed to comply with one or more of
the foregoing sections does not exceed the lesser of $200,000,000 or 4% of
the consolidated total assets of the Borrower and its Subsidiaries, and (y)
the aggregate annual gross revenues of all such Subsidiaries which have so
failed to comply does not exceed 5% of the consolidated gross revenues of
the Borrower and its Subsidiaries for the most recent period of twelve
consecutive months.
(c)Change in Nature of Business. Subject to the proviso to
Section 5.02(b), make, or permit any Subsidiary to make, any material
change in the nature of its business as carried on at the date hereof.
(d)Maintenance of Ownership of Subsidiaries. Subject to the proviso to
Section 5.02(b), sell
44
<PAGE>
or otherwise dispose of any shares of capital stock of any Subsidiary or
permit any Subsidiary to issue, sell or otherwise dispose of any shares of
its capital stock or the capital stock of any other Subsidiary, except
(i) to the Borrower or another Subsidiary;
(ii) that all shares of stock and Debt of any Subsidiary at
the time owned by or owed to the Borrower or any Subsidiary may
be sold as an entirety for a cash consideration which represents
the fair value (as determined in good faith by the Borrower) at
the time of sale of the shares of stock and Debt so sold,
provided that, at the time of such sale, such Subsidiary shall
not own, directly or indirectly, (a) any shares of stock or Debt
of any other Subsidiary (unless all of the shares of stock and
Debt of such other Subsidiary owned, directly or indirectly, by
the Borrower or any Subsidiary are simultaneously being sold as
permitted by this Section 5.02(d)), or (b) any Debt of the
Borrower; and
(iii) shares of stock of any Subsidiary may be sold if,
after giving effect to such sale, such Subsidiary shall continue
to be a Subsidiary.
(e)Sales, Etc. of Assets. Subject to the proviso to Section 5.02(b),
sell, lease, transfer or otherwise dispose of, or permit any Subsidiary to
sell, lease, transfer or otherwise dispose of, all or substantially all of
its assets (in a single transaction or series of related transactions),
other than in the ordinary course of business, except that:
(i) any Subsidiary may sell, lease, transfer or otherwise
dispose of any of its assets to the Borrower or to another
Subsidiary;
(ii) any Subsidiary may sell or otherwise dispose of all or
substantially all of its assets as an entirety for a cash
consideration which represents the fair value (as determined in
good faith by the Borrower) at the time of sale of such assets;
and
(iii) the Borrower may sell or dispose of all or
substantially all of its assets to any other corporation,
provided that (A) the acquiring corporation, following such
acquisition, shall be a solvent corporation organized under the
laws of any State of the United States of America with a senior
unsecured long term debt rating from S & P of at least BBB+ and
from Moody's of at least Baa1, and such acquiring corporation
shall expressly assume in writing all of the obligations of the
Borrower under this Agreement and under the Notes, including all
covenants herein and therein contained, which assumption shall
not otherwise violate any term, condition or provision of this
Agreement or the Notes, and such acquiring corporation shall
succeed to and be substituted for the Borrower with the same
effect as if it had been named herein as a party hereto,
provided, however, that no such sale shall release the Borrower
from any of its obligations and liabilities under this Agreement
or under the Notes unless such sale is followed by the complete
liquidation of the Borrower and substantially all the assets of
the Borrower are distributed in such liquidation as soon as
reasonably possible (but not more than fifteen days) following
such sale, and (B) immediately after giving effect to such sale
or disposition, no Default or Event of Default shall have
occurred.
(f)Sale of Receivables. Sell with recourse, or discount or otherwise
sell for less than the face
45
<PAGE>
value thereof, or sell with or without recourse for consideration other
than cash, or permit any Subsidiary to sell with recourse, or discount or
otherwise sell for less than the face value thereof, or sell with or
without recourse for consideration other than cash, any of its notes or
accounts receivable; provided, that the foregoing restrictions shall not
apply to any sale of notes or accounts receivable if, on and as of the date
of such sale and after giving effect thereto, the aggregate face amount of
all the notes or accounts receivable so sold after the date hereof, plus
the face amount of notes and accounts receivable subject to liens permitted
pursuant to clause (H) of Section 5.02(a)(i) as of such date of sale, does
not exceed $300,000,000; provided, however, if the aggregate face amount of
the notes and accounts receivable so sold does not exceed $300,000,000, but
such amount so sold plus the aggregate face amount of such notes and
accounts receivable so encumbered by liens does exceed $300,000,000, no
Event of Default shall occur hereunder provided the Borrower simultaneously
therewith makes or causes to be made effective provision whereby the
indebtedness evidenced by this Agreement and the Notes will be secured by
such liens (pursuant to documentation in form and substance reasonably
satisfactory to the Majority Lenders) equally and ratably with any and all
Debt thereby secured so long as such other Debt shall be so secured.
Notwithstanding the foregoing provisions of this Section 5.02(f), but
without limiting the provisions of Section 5.02(a)(i)(H), the Borrower and
the Subsidiaries may sell its notes or accounts receivable at a discount on
a non-recourse basis to reflect the fair present value thereof, so long as
such discount shall be at a rate not in excess of the Alternate Base Rate.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a)the Borrower shall fail to pay (i) any principal of any Advance when
the same becomes due and payable, or (ii) any interest on any Advance or
any fees or other amounts payable hereunder within five (5) Business Days
after the date the same becomes due and payable; or
(b)any representation or warranty made by the Borrower herein or by the
Borrower in connection with this Agreement shall prove to have been
incorrect in any material respect when made; or
(c)the Borrower shall fail to perform or observe any term, covenant or
agreement contained in Section 5.01(h) or Section 5.01(i) or Section 5.02;
or
(d)the Borrower shall fail to perform or observe any term, covenant or
agreement contained in this Agreement (other than those covered by the
other clauses of this Section 6.01) on its part to be performed or observed
if the failure to perform or observe such other term, covenant or agreement
shall remain unremedied for 30 days after written notice thereof shall have
been given to the Borrower by the Agent or any Lender; or
(e)(i) the Borrower or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Debt of the Borrower or such
Subsidiary which is outstanding in a principal amount of at least
$10,000,000 ("Material Debt") in the aggregate (but excluding Debt
outstanding hereunder), when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall
46
<PAGE>
continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Material Debt; or any other event
shall occur or condition shall exist under any agreement or instrument
relating to any such Material Debt and shall continue after the applicable
grace period, if any, specified in such agreement or instrument; but only
if the effect of such failure to pay, event or condition is to accelerate
the maturity of such Material Debt; or any such Material Debt shall be
declared by the creditor to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), redeemed,
purchased or defeased, or an offer to prepay, redeem, purchase or defease
such Material Debt shall be required to be made, in each case prior to the
stated maturity thereof; or (ii) any event shall occur or condition shall
exist under any agreement or instrument relating to any Debt of the
Borrower or any of its Subsidiaries outstanding in a principal amount in
excess of $50,000,000 in the aggregate and shall continue after the
applicable grace period, if any, specified in such agreement or instrument,
if the effect of such event or condition is to permit the acceleration by
the creditor of, the maturity of such Debt; or
(f)the Borrower or any of its Subsidiaries shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the
Borrower or any of its Subsidiaries seeking to adjudicate it as bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any
law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of
a receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding
shall remain undismissed or unstayed for a period of thirty (30)
consecutive days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against,
or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur;
or the Borrower or any of its Subsidiaries shall take any corporate action
to authorize any of the actions set forth above in this subsection (f); or
(g)any order, judgment or decree is entered in any proceedings against
the Borrower or any Subsidiary decreeing the dissolution of the Borrower or
such Subsidiary; or
(h)a final judgment or order for the payment of money in an amount which
exceeds $10,000,000 shall be rendered against the Borrower or any of its
Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment, or (ii) there shall be any
period of thirty (30) consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(i)any ERISA Termination Event that the Lenders determine in good faith
might constitute grounds for the termination of any Plan or for the
appointment by the appropriate United States district court of a trustee to
administer any Plan shall have occurred and be continuing thirty (30) days
after written notice to such effect shall have been given to the Borrower
by the Agent, or any Plan shall be terminated, or a trustee shall be
appointed by an appropriate United States district court to administer any
Plan, or the Pension Benefit Guaranty Corporation shall institute
proceedings to terminate any Plan or to appoint a trustee to administer any
Plan; or
(j) a Change of Control Event shall occur;
47
<PAGE>
then, and in any such event, the Administrative Agent (i) shall at the
request, or may with the consent, of the Majority Lenders, by notice to the
Borrower, declare the obligation of each Lender to make Advances to be
terminated, whereupon the same shall forthwith terminate, and (ii) shall at
the request, or may with the consent, of the Majority Lenders, by notice to
the Borrower, declare the Advances, all interest thereon and all other
amounts payable under this Agreement to be forthwith due and payable,
whereupon the Advances, all such interest and all such amounts shall become
and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that if an Event of Default specified in
Section 6.01(f) shall occur, then, (A) the obligation of each Lender to
make Advances shall automatically be terminated, and (B) the Advances, all
such interest and all such amounts shall automatically become and be due
and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement as are delegated to the Agent by
the terms hereof, together with such powers as are reasonably incidental
thereto. As to any matters not expressly provided for by this Agreement
(including, without limitation, enforcement or collection of the amounts
payable hereunder and under the Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or
to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Lenders, and
such instructions shall be binding upon all Lenders and all holders of
Notes; provided, however, that the Agent shall not be required to take any
action which exposes the Agent to personal liability or which is contrary
to this Agreement or applicable law. The Agent agrees to give to each
Lender prompt notice of each notice given to it by the Borrower pursuant to
the terms of this Agreement.
SECTION 7.02. Delegation of Duties. The Agent may execute any of its
duties under this Agreement by or through agents, employees or attorneys-in-
fact and shall be entitled to advice of counsel concerning all matters
pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects
with reasonable care.
SECTION 7.03. Agent's Reliance, Etc. Neither the Agent nor any of
its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the
Agent: (i) may treat the payee of any Note as the holder thereof until the
Agent receives and accepts an assignment entered into by the Lender which
is the payee of such Note, as assignor, and an assignee, as provided in
Section 8.07; (ii) may consult with legal counsel (including counsel for
the Borrower), independent public accountants and other experts selected by
it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants
or experts; (iii) makes no warranty or representation to any Lender and
shall not be responsible to any Lender for any statements, warranties or
representations (whether written or oral) made in or in connection with
this Agreement; (iv) shall not have any
48
<PAGE>
duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of this Agreement on the part of the
Borrower or to inspect the property (including the books and records) of
the Borrower; (v) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished
pursuant hereto; and (vi) shall incur no liability under or in respect of
this Agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopier, telegram, cable or
telex) believed by it to be genuine and signed or sent by the proper party
or parties.
SECTION 7.04. Notice of Default. Neither Agent shall be deemed to
have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal,
interest and fees required to be paid to such Agent, unless such Agent
shall have received written notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating
that such notice is a "notice of default". In the event that either Agent
receives such notice, such Agent shall give notice thereof to the Lenders.
The Administrative Agent shall take such action with respect to such
Default or Event of Default as shall be requested by the Majority Lenders
in accordance with Section 6.01; provided, however, that unless and until
the Administrative Agent shall have received any such request, the
Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default or Event
of Default as it shall deem advisable or in the best interest of the
Lenders (but not including the actions reserved for the Majority Lenders in
said Section 6.01).
SECTION 7.05. Lender Credit Decision. Each Lender acknowledges that
it has, independently and without reliance upon the Agent or any other
Lender and based on the financial statements referred to in Section 4.01(e)
and such other documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance
upon the Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement.
Except for notices, reports and other documents expressly herein required
to be furnished to the Lenders by the Agent, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of the Borrower which may
come into the possession of the Agent.
SECTION 7.06. Indemnification. The Lenders agree to indemnify each
Agent and their respective Affiliates, officers, directors, employees,
agents and attorneys-in-fact ("Indemnified Persons") (to the extent not
reimbursed by the Borrower), ratably according to the respective principal
amounts outstanding under the Syndicated Notes then held by each of them
(or if no Syndicated Advances are at the time outstanding or if any
Syndicated Notes are held by Persons which are not Lenders, ratably
according to the respective amounts of their Commitments), from and against
any and all claims, liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
the Indemnified Persons or any of them in any way relating to or arising
out of this Agreement or any action taken or omitted by the Indemnified
Persons or any of them under this Agreement, provided that no Lender shall
be liable for any portion of such claims, liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the gross negligence or willful misconduct of
an Indemnified Person. Without limitation of the foregoing, each Lender
agrees to
49
<PAGE>
reimburse the Agent promptly upon demand for its ratable share of any
reasonable out-of-pocket expenses (including counsel fees) and allocated
costs of internal counsel incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment
or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities
under, this Agreement, to the extent that the Agent is not reimbursed for
such expenses by the Borrower.
SECTION 7.07. Agent in Individual Capacity. BofA and Citicorp and
their respective Affiliates may make loans to, issue letters of credit for
the account of, accept deposits from, acquire equity interests in, and
generally engage in any kind of banking, trust, financial advisory or other
business with the Borrower and its Subsidiaries and Affiliates, as though
BofA and Citicorp respectively were not the Agent hereunder, and without
notice to or consent of the Lenders. With respect to their respective
Advances, BofA and Citicorp shall have the same rights and powers under
this Agreement as any other Lender and may exercise the same as though they
were not the Agent.
SECTION 7.08. Successor Agent. The Agent may, and at the request of
the Majority Lenders shall, resign as Agent at any time by giving written
notice thereof to the Lenders and the Borrower. Upon any such resignation,
the Majority Lenders shall have the right to appoint a successor Agent. If
no successor Agent shall have been so appointed by the Majority Lenders,
and shall have accepted such appointment, within thirty (30) days after the
retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent which shall be a
commercial bank organized under the laws of the United States of America or
of any State thereof and having a combined capital and surplus of at least
$300,000,000 or an Affiliate thereof. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall
be discharged from its duties and obligations as Agent under this
Agreement. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article VII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
SECTION 7.09. The Agent. Neither Agent shall be liable for any cost,
expense (including, without limitation, counsel fees and disbursements),
claim, demand, action, loss or liability that the other Agent may suffer or
incur in connection with this Agreement or any action taken or omitted by
such other Agent hereunder; provided, however, that the provisions of this
Section 7.09 shall not affect the obligation of each Lender (including,
without limitation, each Agent in its capacity as a Lender hereunder) to
indemnify each Agent pursuant to Section 7.06 hereof.
SECTION 7.10. Withholding Tax.
(a) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the Code and such Lender claims exemption from
United States withholding tax under Section 1441 or 1442 of the Code, such
Lender agrees with and in favor of the Administrative Agent, to deliver to
the Administrative Agent: (i) if such Lender claims an exemption from, or
a reduction of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the payment of any interest in the
first calendar year and before the payment of any interest in each third
succeeding calendar year during which interest may be paid under this
Agreement; (ii) if such Lender claims that interest paid under
50
<PAGE>
this Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form 4224 before
the payment of any interest is due in the first taxable year of such Lender
and in each succeeding taxable year of such Lender during which interest
may be paid under this Agreement, and IRS Form W-9; and (iii) such other
form or forms as may be required under the Code or other laws of the United
States as a condition to exemption from, or reduction of, United States
withholding tax. Such Lender agrees to promptly notify the Administrative
Agent of any change in circumstances which would modify or render invalid
any claimed exemption or reduction. In addition in the event any Lender
claims exemption from, or reduction of, withholding tax under a United
States tax treaty by providing IRS Form 1001 and such Lender sells,
assigns, grants a participation in, or otherwise transfers all or part of
the obligations of the Borrower to such Lender under this Agreement, such
Lender agrees to notify the Administrative Agent of the percentage amount
in which it is no longer the beneficial owner of obligations of the
Borrower to such Lender under this Agreement. To the extent of such
percentage amount, the Administrative Agent will treat such Lender's IRS
Form 1001 as no longer valid. In the event any Lender claiming exemption
from United States withholding tax by filing IRS Form 4224 with the
Administrative Agent sells, assigns, grants a participation in, or
otherwise transfers all or part of the obligations of the Borrower to such
Lender under this Agreement, such Lender agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed
by Sections 1441 and 1442 of the Code.
(b) If any Lender is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any interest
payment to such Lender an amount equivalent to the applicable withholding
tax after taking into account such reduction. If the forms or other
documentation required by subsection (a) are not delivered to the
Administrative Agent, then the Administrative Agent may withhold from any
interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.
(c) If the IRS or any other governmental authority of the United
States or other jurisdiction asserts a claim that the Administrative Agent
did not properly withhold tax from amounts paid to or for the account of
any Lender (because the appropriate form was not delivered was not properly
executed, or because such Lender failed to notify the Administrative Agent
of a change in circumstances which rendered the exemption from, or
reduction of, withholding tax ineffective, or for any other reason) such
Lender shall indemnify the Administrative Agent fully for all amounts paid,
directly or indirectly by the Administrative Agent as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Administrative Agent under this
Section 7.10, together with all costs and expenses (including attorney's
fees and costs). The obligation of the Lenders in this subsection shall
survive the payment of all obligations hereunder and the resignation or
replacement of the Administrative Agent.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Notes, nor consent to any departure by
the Borrower therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Majority Lenders, and
51
<PAGE>
then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however,
that no amendment, waiver or consent shall, unless in writing and signed
by all the Lenders, do any of the following: (a) amend or waive any of the
conditions specified in Section 3.01, (b) increase or extend the
Commitments of the Lenders or subject the Lenders to any additional
obligations, (c) reduce the principal of, or rate of interest specified on,
the Advances or any fees or other amounts payable hereunder, (d) postpone
any date fixed for any payment of principal of, or interest on, the
Advances or any fees or other amounts payable hereunder, (e) change the
percentage of the Commitments or the number of Lenders which shall be
required for the Lenders or any of them to take any action hereunder, or
(f) amend this Section 8.01; and provided, further, that no amendment,
waiver or consent shall, unless in writing and signed by the Administrative
Agent or the Documentation Agent, as the case may be, in addition to the
Lenders required above to take such action, affect the rights or duties of
such Agent under this Agreement.
SECTION 8.02. Notices, Payments, Etc. (a) All notices and other
communications provided for hereunder shall be in writing (including
facsimile, telegraphic, telex or cable communication) and mailed, faxed,
telegraphed, telexed, cabled or delivered, if to the Borrower, at its
address at 20330 Stevens Creek Blvd., Mail Stop 36-TR, Cupertino,
California 95014, Attention: Assistant Treasurer, fax number: (408) 974-
0648, with a copy to the attention of the General Counsel at 20525 Mariani
Avenue, Mail Stop 38-I, Cupertino, California 95014, fax number: (408) 253-
7457; if to any Lender, at its Domestic Lending Office specified opposite
its name on Schedule I hereto; if to any other Person who becomes a Lender
after the date hereof, at its Domestic Lending Office specified in the
assignment in accordance with Section 8.07 hereof pursuant to which it
became a Lender; if to the Documentation Agent, at its address c/o Citicorp
North America, Inc. at Citicorp Center, One Sansome Street, Suite 2710, San
Francisco, California 94104, Attention: J. Kevin Nater; and if to the
Administrative Agent, at its address at 1455 Market Street, 12th Floor, San
Francisco, California 94103, Attention: Global Agency #5596; or, as to the
Borrower or either Agent, at such other address as shall be designated by
such party in a written notice to the other parties and, as to each other
party, at such other address as shall be designated by such party in a
written notice to the Borrower and the Administrative Agent. All such
notices and communications shall, (i) when telecopied, telegraphed, telexed
or cabled, be effective when telecopied, delivered to the telegraph
company, confirmed by telex answerback or delivered to the cable company,
respectively, and (ii) when mailed, be effective on the third Business Day
after the date deposited in the mails, except that notices and
communications to the Administrative Agent pursuant to Article II or to
either Agent pursuant to Article VII shall not be effective until received
by the relevant Agent.
(b) All payments made or funds delivered to the Administrative Agent
hereunder shall be made or delivered to the Administrative Agent as
follows: Bank of America N.T. & S.A. (ABA 121-000-358-S.F.), Attn: Global
Agency #5596, 1850 Gateway Boulevard, Concord, California 94520, for credit
to account No. 12337-14219, Ref: Apple Computer, or at such other address
as the Administrative Agent may designate from time to time in a written
notice to the other parties.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any
Lender or the Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided
by law.
52
<PAGE>
SECTION 8.04. Costs, Expenses and Taxes; Indemnification. (a) The
Borrower agrees to pay on demand all reasonable costs and expenses incurred
by the Agent in connection with the preparation, execution, delivery,
administration, modification and amendment of this Agreement, the Notes and
the other documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for
the Documentation Agent with respect thereto and with respect to advising
the Agent as to its rights and responsibilities under this Agreement. The
Borrower further agrees to pay on demand all reasonable costs and expenses,
if any (including, without limitation, reasonable counsel fees and
expenses, specifically including reasonable allocated costs of in-house
counsel), incurred by the Agent and the Lenders in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise)
of this Agreement, the Notes and the other documents to be delivered
hereunder, including, without limitation, reasonable counsel fees and
expenses in connection with the enforcement of rights under this
Section 8.04(a). In addition, the Borrower shall pay any and all stamp and
other taxes payable or determined to be payable in connection with the
execution and delivery of this Agreement, the Notes and the other documents
to be delivered hereunder, and agrees to save the Agent and each Lender
harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes.
(b) If any payment of principal of any Eurodollar Rate Advance
or Auction Advance is made other than on the last day of the Interest
Period for such Syndicated Advance or the applicable maturity date for such
Auction Advance, as the case may be, as a result of a payment pursuant to
Section 2.13 or acceleration of the maturity of the Advances pursuant to
Section 6.01 or for any other reason, the Borrower shall, upon demand by
any Lender (with a copy of such demand to the Agent), pay to the
Administrative Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or expenses which
it may reasonably incur as a result of such payment, including, without
limitation, any loss (including loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by any Lender to fund or maintain such Advance.
(c) The Borrower agrees to indemnify and hold harmless the Agent
and each Lender and each of their Affiliates and their respective officers,
directors, employees, agents and advisors (each, an "Indemnified Party")
from and against any and all claims, damages, losses, liabilities,
obligations, penalties, actions, judgments, suits, costs, disbursements and
expenses (including, without limitation, reasonable fees and expenses of
counsel and allocated costs of internal counsel) that may be incurred by or
asserted against any Indemnified Party, in each case arising out of or in
connection with or by reason of, or in connection with the preparation for
a defense of, any investigation, litigation, proceeding or settlement
arising out of, related to or in connection with (i) the Advances, the
Borrowings or the Commitments, (ii) the use of funds advanced under this
Agreement, (iii) the failure of the Borrower or any of its Subsidiaries to
comply fully with any and all Environmental Laws applicable to it, or (iv)
any acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or substantially all the
assets of any Person (including, without limitation, the Borrower), whether
or not an Indemnified Party is a party thereto and whether or not the
transactions contemplated hereby are consummated, except to the extent such
claims, damages, losses, liabilities, obligations, penalties, actions,
judgments, suits, costs, disbursements and expenses are found in a final
non-appealable judgment by a court or competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the Indemnified
Party.
53
<PAGE>
(d) Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 8.04 shall survive the termination of this
Agreement, the termination of the Commitments and the payment in full of
the Notes.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during
the continuance of any Event of Default and (ii) the making of the request
or the granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Advances and all other amounts payable
under this Agreement to be forthwith due and payable pursuant to the
provisions of Section 6.01, each Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time
owing by such Lender to or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower now or hereafter
existing under this Agreement and any Note held by such Lender, whether or
not such Lender shall have made any demand under this Agreement or such
Note and although such obligations may be unmatured. Each Lender agrees
promptly to notify the Borrower after any such set-off and application made
by such Lender, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of each
Lender under this Section 8.05 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which such Lender
may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Documentation
Agent and the Documentation Agent shall have been notified by the
Administrative Agent and each Lender that each has executed it, and
thereafter this Agreement shall be binding upon and inure to the benefit of
the Borrower, the Agent and each Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its
rights hereunder or any interest herein without the prior written consent
of the Lenders.
SECTION 8.07. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement.
(b) (i) Each Lender may assign to one or more commercial banks or
Affiliates of any Lender all or a ratable portion of all of its rights
and obligations under this Agreement (including, without limitation,
all or a ratable portion of its Commitment and the Advances owing to
it and the Notes held by it); provided, however, that (A) each such
assignment shall be of a constant, and not a varying, percentage of
all rights and obligations under this Agreement (other than any
Auction Advances or Auction Notes), (B) the amount of the Commitment
of the assigning Lender being assigned pursuant to each such
assignment shall in no event be less than the lesser of $5,000,000 or
the remaining Commitment of the assignor Lender, (C) each such
assignment shall be to an assignee consented to by the Borrower and
the Administrative Agent, which consents shall not be unreasonably
withheld; provided, however, that such consents shall not be required
with respect to any such assignment by any Lender to an Affiliate of
such Lender, and (D) the parties to each such assignment shall execute
and deliver to the Administrative Agent any Note or Notes subject to
such assignment and the assigning Lender shall pay or cause to be paid
to the Administrative Agent a processing and recordation fee of
$2,500. From and after the effective date of any such assignment, (1)
the Assignee thereunder shall be a
54
<PAGE>
party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such assignment, have the rights
and obligations of a Lender hereunder, and (2) the Lender assignor
thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such assignment, relinquish its
rights and be released from its obligations under this Agreement (and,
in the case of an assignment covering all or the remaining portion of
an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).
(ii) A Lender may at any time grant participations to one or more
banks or other entities in or to all or any part of its rights and
obligations under this Agreement or any Borrowings hereunder without
the consent of the Borrower or the Administrative Agent, and to the
extent of any such participation (unless otherwise stated therein and
except as provided below) the purchaser of such participation shall,
to the fullest extent permitted by law, have the same rights and
benefits hereunder and under such Borrowings as it would have if it
were such Lender hereunder; provided, however, that the Borrower and
the Administrative Agent shall be entitled to continue to deal solely
with the granting Lender regarding notices, payments, payment
instructions and any other matters arising pursuant to this Agreement.
Any agreement pursuant to which any Lender may grant such a
participating interest shall provide that such Lender shall retain the
sole right and responsibility to enforce the obligations of the
Borrower hereunder, including, without limitation, the right to
approve any amendment, modification or waiver of any provision of this
Agreement; provided that such participation agreement may provide that
such Lender will not agree to any modification, amendment or waiver of
this Agreement described in clause (a), (b), (c) or (d) of Section
8.01 without the consent of the participant. Each Lender agrees to
notify the Borrower and the Administrative Agent of the amount of each
participation which grants to the participant a participating interest
in such Lender's Commitment to the Termination Date and the identity
of each such participant.
(c) The Administrative Agent and the Borrower may, for all
purposes of this Agreement, treat any Lender as the holder of any Note
drawn to its order (and owner of the Loans evidenced thereby) until written
notice of assignment, participation or other transfer shall have been
received by them.
(d) If any Eurodollar Reference Bank or its Lender Affiliate
assigns its Notes to an unaffiliated institution, the Administrative Agent
shall, in consultation with the Borrower and with the consent of the
Majority Lenders, appoint another bank to act as a Eurodollar Reference
Bank hereunder, and pending such appointment, the Eurodollar Rate shall be
determined on the basis of the remaining Eurodollar Reference Bank(s).
(e) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion
of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any
Federal Reserve Bank in accordance with Regulation A of the Board of
Governors of the Federal Reserve System.
SECTION 8.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
WITHOUT REFERENCE TO THE CHOICE OF LAW RULES OF THAT STATE.
55
<PAGE>
SECTION 8.09. Headings. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
SECTION 8.10. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the
same agreement.
SECTION 8.11. Confidentiality. In accordance with normal procedures
regarding proprietary information supplied by customers, each of the
Lenders agrees to keep confidential, and to cause its employees, agents and
representatives to keep confidential, information relating to the Borrower
or any Subsidiary received pursuant to or in connection with this Credit
Agreement and the transactions contemplated hereby and identified as
"confidential" or "secret" or the like, provided that nothing herein shall
be construed to prevent the Agent or any Lender from disclosing such
information (i) upon the order of any court or administrative agency,
(ii) upon the request or demand of any regulatory agency or authority
having jurisdiction over the Agent or such Lender, (iii) which has been
publicly disclosed, (iv) which has been lawfully obtained by any Agent or
any of the Lenders from a Person other than the Borrower or any Subsidiary,
the Agent or any other Lender, or (v) to any participant in or assignee of,
or prospective participant in or assignee of, all or any part of the rights
and obligations of such Agent or such Lender under this Agreement or any
Advances hereunder or to any independent auditor or other professional
advisor of the Agent or such Lender (provided that such participant or
assignee, or prospective participant or assignee, or such auditor or
professional advisor agrees to comply with the same confidentiality
requirements as set forth in this Section 8.11, or such other
confidentiality requirements as shall be reasonably approved by the
Borrower). If the Agent or any Lender shall disclose such information
pursuant to clause (i) or clause (ii) of the preceding sentence, such Agent
or Lender shall endeavor to give the Borrower prompt notice of such
disclosure, but it is expressly agreed and understood that they shall not
be liable for failing to do so.
SECTION 8.12. Waiver of Jury Trial. EACH OF THE BORROWER, THE
LENDERS AND THE AGENT, TO THE EXTENT IT MAY LEGALLY DO SO, HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF
ACTION OR PROCEEDINGS ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT,
THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE. EACH OF THE BORROWER, THE LENDERS
AND THE AGENT, TO THE EXTENT IT MAY LEGALLY DO SO, HEREBY AGREES THAT ANY
SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION OR PROCEEDING SHALL BE DECIDED
BY A COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 8.12 WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTIES TO WAIVER OF ITS RIGHT
TO TRIAL BY JURY.
SECTION 8.13. Entire Agreement. This Agreement, and the other
documents, instruments and agreements referred to herein or otherwise
executed by the parties pursuant hereto or in connection herewith set forth
the entire understanding among the Borrower, the Lenders and the Agent.
Any and all previous representations, warranties, agreements and
understandings between or among the parties regarding the subject matter of
this Agreement, whether written or oral, are superseded by this Agreement.
56
<PAGE>
SECTION 8.14. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
57
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of
the date first above written.
APPLE COMPUTER, INC.
By:
Title:
CITICORP USA, INC., as
Documentation Agent
By:
Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as
Administrative Agent
By:
Vice President
NATIONSBANK OF TEXAS, N.A., as
Co-Agent
By:
Vice President
Commitment:
$32,500,000 CITICORP USA, INC., as Lender
By:
Vice President
58
<PAGE>
$32,500,000 BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Lender
By:
Vice President:
$30,000,000 NATIONSBANK OF TEXAS, N.A., as Lender
By:
Vice President:
$25,000,000 ABN AMRO BANK N.V. SAN FRANCISCO
INTERNATIONAL BRANCH
By:
Vice President
By:
Vice President:
$25,000,000 DEUTSCHE BANK AG, LOS ANGELES BRANCH AND
CAYMAN ISLANDS BRANCH
By:
Corporate Finance Director
By:
Its:__________________________
$25,000,000 SWISS BANK CORPORATION, SAN FRANCISCO BRANCH
By:
Director
By:
Associate Director
59
<PAGE>
$25,000,000 TORONTO DOMINION (TEXAS), INC.
By:
Manager -Credit
$20,000,000 THE FIRST NATIONAL BANK OF BOSTON
By:
Director
$20,000,000 BARCLAYS BANK PLC
By:
Associate Director
By: ______________________________
Director
$20,000,000 CIBC INC.
By:
Managing Director
$20,000,000 CREDIT SUISSE
By:
Member of Senior Management
By:
Member of Senior Management
$20,000,000 THE FUJI BANK LIMITED, SAN FRANCISCO AGENCY
By:
General Manager
60
<PAGE>
$20,000,000 THE INDUSTRIAL BANK OF JAPAN, LTD.,
SAN FRANCISCO AGENCY
By:
Title:
$20,000,000 THE LONG TERM CREDIT BANK OF JAPAN, LIMITED,
LOS ANGELES AGENCY
By:
Title:
$20,000,000 THE SAKURA BANK, LIMITED,
SAN FRANCISCO AGENCY
By:
General Manager
$20,000,000 THE SANWA BANK, LIMITED,
LOS ANGELES BRANCH
By:
First Vice President and Manager
$20,000,000 THE SUMITOMO BANK, LIMITED
SAN FRANCISCO BRANCH
By:
General Manager
By:
Assistant Vice President
$17,500,000 THE BANK OF NOVA SCOTIA
By:
Representative
61
<PAGE>
$17,500,000 BANQUE NATIONALE DE PARIS
By:
Vice President
By:
Title:
$17,500,000 THE CHASE MANHATTAN BANK, N.A.
By:
Managing Director
$17,500,000 CREDIT LYONNAIS LOS ANGELES BRANCH
By:
Title:
CREDIT LYONNAIS CAYMAN ISLANDS BRANCH
By: ______________________________
Title:
$17,500,000 ISTITUTO BANCARIO SAN PAOLO DI TORINO, SpA
By:
Title:
By:
Title:
$17,500,000 NBD BANK, N.A.
By:
Vice President
___________________________
$500,000,000
62
<PAGE>
SCHEDULE I
CITICORP USA, INC.
Domestic Lending Office and Eurodollar Lending Office:
399 Park Avenue
New York, New York 10043
Contact:
Telephone:
Facsimile:
Telex:
Answerback:
Address for Notices:
399 Park Avenue
New York, New York 10043
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
Domestic Lending Office and Eurodollar Lending Office:
1850 Gateway Blvd.
Concord, CA 94520
Contact: Jennifer Chin-Williams
Account No.: 12331-83980
Telephone: (510) 675-7329
Facsimile: (510) 675-7531
Telex:
Answerback:
Address for Notices:
555 California Street, 41st Floor
San Francisco, CA 94104
Attn: Peter Tomei, Vice President
Phone: (415) 622-4581
Facsimile: (415) 622-4585
NATIONSBANK OF TEXAS, N.A.
Domestic Lending Office and Eurodollar Lending Office:
P.O. Box 831000
TX1-492-67-01
Dallas, Texas 75283-1000
Contact: Kay Hibbs
Telephone: (214) 508-3089
Facsimile: (214) 508-0944
Telex:
Answerback:
Address for Notices:
P.O. Box 831000
TX1-492-67-01
Dallas, Texas 75283-1000
63
<PAGE>
ABN AMRO BANK N.A.
SAN FRANCISCO INTERNATIONAL BRANCH
Domestic Lending Office and Eurodollar Lending Office:
555 California Street, Suite 2750
San Francisco, California 94104
Contact: Gloria Lee
Money Market/Loan Specialist
Telephone: (415) 984-3720
Facsimile: (415) 362-3524
Telex: 278137
Answerback: ABNSF UR
Address for Notices:
555 California Street, Suite 2750
San Francisco, California 94104
DEUTSCHE BANK AG,
LOS ANGELES BRANCH AND CAYMAN ISLANDS BRANCH
Domestic Lending Office and Eurodollar Lending Office:
550 South Hope Street, Suite 1850
Los Angeles, CA 90071
Contact: Anne Norwood
Loan Administrator
Telephone: (213) 627-8200
Facsimile: (213) 627-9779
Telex: WU 194409
Answerback: Deutbk Lsa
Address for Notices:
550 South Hope Street, Suite 1850
Los Angeles, CA 90071
SWISS BANK CORPORATION,
SAN FRANCISCO BRANCH
Domestic Lending Office and Eurodollar Lending Office:
101 California Street, Suite 1700
San Francisco, CA 94111
Contact: William B. Walzar
Assoc. Dir. Accounting
Telephone: (415) 774-3329
Facsimile: (415) 956-3882
Telex: 278 032
Answerback: swbsf ur
Address for Notices:
101 California Street, Suite 1700
San Francisco, CA 94111
64
<PAGE>
TORONTO DOMINION (TEXAS), INC.
Domestic Lending Office and Eurodollar Lending Office:
909 Fannin, Suite 1700
Houston, Texas 77010
Contact: Diane Bailey
Manager Credit Admin.
Telephone: (713) 653-8250
Facsimile: (713) 951-9921
Telex:
Answerback:
Address for Notices:
909 Fannin, Suite 1700
Houston, Texas 77010
THE FIRST NATIONAL BANK OF BOSTON
Domestic Lending Office and Eurodollar Lending Office:
2 Morrisey Blvd.
Dorchester, MA 02110
Mail Stop: 05-02-00B
Contact: Carmen Feliciano
Loan Admin.
Telephone: (617) 929-5438
Facsimile: (617) 929-6912
Telex:
Answerback:
Address for Notices:
2 Morrisey Blvd.
Dorchester, MA 02110
BARCLAYS BANK PLC
Domestic Lending Office and Eurodollar Lending Office:
Client Services Unit
222 Broadway
New York, New York 10038
Contact: Barbara Pankow
Telephone: (212) 412-5037
Facsimile: (212) 412-5002
Telex:
Answerback:
Address for Notices:
Client Services Unit
222 Broadway
New York, New York 10038
65
<PAGE>
CIBC INC.
Domestic Lending Office and Eurodollar Lending Office:
2727 Paces Ferry Road, Suite 1200
Atlanta, GA 30339
Contact: Mary Ann Stathis
Senior Associate
Telephone: (404) 319-4831
Facsimile: (404) 319-4950
Telex: 542413
Answerback: CANBANK ATL
Address for Notices:
2727 Paces Ferry Road, Suite 1200
Atlanta, GA 30339
CREDIT SUISSE
Domestic Lending Office and Eurodollar Lending Office:
800 Wilshire Blvd., 8th Floor
Los Angeles, CA 90017
Contact: Rita Asa
Telephone: (213) 955-8284
Facsimile: (213) 955-8245
Telex: 67227
Answerback: CREDSUIS
Address for Notices:
800 Wilshire Blvd., 8th Floor
Los Angeles, CA 90017
THE FUJI BANK LIMITED,
SAN FRANCISCO AGENCY
Domestic Lending Office and Eurodollar Lending Office:
601 California Street, Suite 500
San Francisco, CA 94108
Contact: Candi Eng
Telephone: (415) 362-4740
Facsimile: (415) 362-4613
Telex: 176087
Answerback: FUJIBK SFO
Address for Notices:
601 California Street, Suite 500
San Francisco, CA 94108
66
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LTD.
Domestic Lending Office and Eurodollar Lending Office:
555 California Street, Suite 1610
San Francisco, CA 94104
Contact: Jeanette O'Donnell
Telephone: (415) 693-1831
Facsimile: (415) 982-1917
Telex: 49608738
Answerback: IBJ SFO
Address for Notices:
555 California Street, Suite 1610
San Francisco, CA 94104
THE LONG TERM CREDIT BANK OF JAPAN, LIMITED
LOS ANGELES AGENCY
Domestic Lending Office and Eurodollar Lending Office:
444 So. Flower Street, Suite 3700
Los Angeles, CA 90071
Contact: Diane Huynh
Assistant Manager
Telephone: (213) 689-6245
Facsimile: (213) 627-8566
Telex: 67-3558
Answerback:
Address for Notices:
444 So. Flower Street, Suite 3700
Los Angeles, CA 90071
THE SAKURA BANK, LIMITED,
SAN FRANCISCO AGENCY
Domestic Lending Office and Eurodollar Lending Office:
345 California Street, Suite 1100
San Francisco, CA 94104
Contact: Kazuko Thomas
Assistant Vice President
Telephone: (415) 765-0891
Facsimile: (415) 765-0860
Telex: 49608258
Answerback: MITKBK SF
Address for Notices:
345 California Street, Suite 1100
San Francisco, CA 94104
67
<PAGE>
THE SANWA BANK, LIMITED
Domestic Lending Office and Eurodollar Lending Office:
601 S. Figueroa Street, W5-4
Los Angeles, CA 90017
Contact: Washington Boza
Assistant Vice President
Telephone: (213) 896-7434
Facsimile: (213) 896-7475
Telex: 823038
Answerback:
Address for Notices:
601 S. Figueroa Street, W5-4
Los Angeles, CA 90017
THE SUMITOMO BANK, LIMITED
Domestic Lending Office and Eurodollar Lending Office:
555 California Street, Suite 3350
San Francisco, CA 94104
Contact: Hiroko Kraus
Administrative Assistant
Telephone: (415) 616-3000
Facsimile: (415) 397-1475
Telex: 496-10340
Answerback: SUMIT SF
Address for Notices:
555 California Street, Suite 3350
San Francisco, CA 94104
THE BANK OF NOVA SCOTIA
Domestic Lending Office and Eurodollar Lending Office:
101 California Street, 48th Floor
San Francisco, CA 94111
Contact: Norman O. Campbell
Assistant Agent
Telephone: (415) 986-1100
Facsimile: (415) 397-0791
Telex: 00340602
Answerback: SCOTIABANK
Address for Notices:
101 California Street, 48th Floor
San Francisco, CA 94111
68
<PAGE>
BANQUE NATIONALE DE PARIS
Domestic Lending Office and Eurodollar Lending Office:
180 Montgomery Street, 2nd Floor
San Francisco, CA 94104
Contact: Don Hart
Vice President and Treasurer
Telephone: (415) 956-2511
Facsimile: (415) 989-9041
Telex: RCA 278900
Answerback: BNPS UR
Address for Notices:
180 Montgomery Street, 2nd Floor
San Francisco, CA 94104
THE CHASE MANHATTAN BANK, N.A.
Domestic Lending Office and Eurodollar Lending Office:
1 Chase Manhattan Plaza
New York, New York 10081
Contact: Freddy Luscher
Assistant Treasurer
Telephone: (212) 552-3327
Facsimile: (212) 552-6731
Telex:
Answerback:
Address for Notices:
1 Chase Manhattan Plaza
New York, New York 10081
CREDIT LYONNAIS LOS ANGELES BRANCH
AND CAYMAN ISLANDS BRANCH
Domestic Lending Office and Eurodollar Lending Office:
515 So. Flower Street, 22nd Floor
Los Angeles, CA 90071
Contact: Pierre Bury
Assistant Treasurer
Telephone: (213) 362-5953
Facsimile: (213) 623-3437
Telex: 6831990
Answerback: CREDLAU W
Address for Notices:
515 So. Flower Street, 22nd Floor
Los Angeles, CA 90071
69
<PAGE>
ISTITUTO BANCARIO SAN PAOLO DI TORINO, SPA
Domestic Lending Office and Eurodollar Lending Office:
444 So. Flower, 45th Floor
Los Angeles, CA 90071
Contact: Jean Chang
Assistant Vice President
Telephone: (213) 489-3100
Facsimile: (213) 622-2514
Telex: 4720338 SPACL
Answerback:
Address for Notices:
444 So. Flower, 45th Floor
Los Angeles, CA 90071
NBD BANK, N.A.
Domestic Lending Office and Eurodollar Lending Office:
611 Woodward Avenue
Detroit, MI 48226
Contact: Kristi Williams
Administrative Assistant
Telephone: (313) 225-3991
Facsimile: (313) 225-2649
Telex:
Answerback:
Address for Notices:
611 Woodward Avenue
Detroit, MI 48226
70
<PAGE>
EXHIBIT A-l
FORM OF SYNDICATED NOTE
U.S. $___________ Dated: _______, 19__
FOR VALUE RECEIVED, the undersigned, APPLE COMPUTER, INC., a
California corporation (the " Borrower"), HEREBY PROMISES TO PAY to the
order of _______________________ (the "Lender") for the account of its
Applicable Lending Office (as defined in the Credit Agreement referred to
below) the principal amount of each Syndicated Advance (as defined in the
Credit Agreement) made by the Lender to the Borrower pursuant to the Credit
Agreement on the last day of the Interest Period (as defined in the Credit
Agreement) for such Syndicated Advance and otherwise in accordance with the
provisions of the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal
amount of each Syndicated Advance from the date of such Syndicated Advance
until such principal amount is paid in full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Bank of America National Trust and Savings
Association, as Administrative Agent, at its offices at
_____________________________________________________________ in same day
funds, or at such other address or account as the Administrative Agent may
designate from time to time in a written notice to the Borrower. Each
Syndicated Advance made by the Lender to the Borrower pursuant to the
Credit Agreement, and all payments made on account of principal thereof,
shall be recorded by the Lender and, prior to any transfer hereof, endorsed
on the grid attached hereto which is part of this Promissory Note; provided
that the failure of the Lender to make any such recordation or endorsement
shall not affect the obligations of the Borrower hereunder or under the
Credit Agreement.
This Promissory Note is one of the Syndicated Notes referred to
in, and is entitled to the benefits of, the Credit Agreement dated as of
__________________, 1993 (the "Credit Agreement"), among the Borrower, the
Lender and certain other lenders parties thereto, and Citicorp USA, Inc.
and Bank of America National Trust and Savings Association, as Agent for
the Lender and such other lenders. The Credit Agreement, among other
things, (i) provides for the making of the Syndicated Advances by the
Lender to the Borrower from time to time in an aggregate amount not to
exceed at any time outstanding the U.S. dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such
Syndicated Advance being further evidenced by this Promissory Note, and
(ii) contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising,
any rights hereunder on the part of the holder hereof shall operate as a
waiver of such rights.
71
<PAGE>
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REFERENCE TO
THE CHOICE OF LAW RULES OF THAT STATE.
APPLE COMPUTER, INC.,
a California corporation
By:
Name:
Title:
72
<PAGE>
SYNDICATED NOTE GRID
73
<PAGE>
EXHIBIT A-2
FORM OF AUCTION NOTE
Dated: _________, 19__
FOR VALUE RECEIVED, the undersigned, APPLE COMPUTER, INC., a
California corporation (the "Borrower"), HEREBY PROMISES TO PAY to the
order of _______________ (the "Lender") for the account of its Applicable
Lending Office (as defined in the Credit Agreement referred to below), the
principal amount of each Auction Advance (as defined in the Credit
Agreement) made by the Lender to the Borrower pursuant to the Credit
Agreement on the maturity date of such Auction Advance as is specified in
the related Notice of Auction Borrowing (as defined in the Credit
Agreement) delivered by the Borrower pursuant to Section 2.03(a)(i) of the
Credit Agreement.
The Borrower promises to pay interest on the unpaid principal
amount of each Auction Advance from the date of such Advance until such
principal amount is paid in full, at such interest rates and payable at
such times as are specified pursuant to the provisions of Section 2.03
thereof.
Both principal and interest are payable in lawful money of the
United States of America to Bank of America National Trust and Savings
Association, as Administrative Agent, at its offices at
__________________________________________________________, in same day
funds, or at such other address or account as the Administrative Agent may
designate from time to time in a written notice to the Borrower. Each
Auction Advance made by the Lender to the Borrower pursuant to the Credit
Agreement, and all payments made on account of the principal hereof shall
be recorded by the Lender and, prior to any transfer hereof, endorsed on
the grid attached hereto which is part of this Promissory Note; provided
that the failure of the Lender to make any such recordation or endorsement
shall not affect the obligations of the Borrower hereunder or under the
Credit Agreement.
This Promissory Note is one of the Auction Notes referred to in,
and is entitled to the benefits of, the Credit Agreement dated as of
_______________, 1993 (the "Credit Agreement"), among the Borrower, the
Lender and certain other lenders parties thereto, and Citicorp USA, Inc.
and Bank of America National Trust and Savings Association, as Agent for
the Lender and such other lenders. The Credit Agreement, among other
things, (i) provides for the making of Auction Advances by the Lender, in
its sole discretion, to the Borrower from time to time pursuant to the
provisions of the Credit Agreement, the indebtedness of the Borrower
resulting from each such Auction Advance being further evidenced by this
Promissory Note, and (ii) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events. The Borrower
shall have no right to prepay any principal amount hereof except upon the
terms and conditions specified pursuant to the Credit Agreement.
74
<PAGE>
The Borrower hereby waives presentment, demand, protest and notice of any
kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of
such rights.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REFERENCE TO
THE CHOICE OF LAW RULES OF THAT STATE.
APPLE COMPUTER, INC.,
a California corporation
By:
Name:
Title:
75
<PAGE>
AUCTION NOTE GRID
76
<PAGE>
EXHIBIT B-1
NOTICE OF SYNDICATED BORROWING
Bank of America National Trust and Savings
Association, as Administrative Agent
for the Lenders parties
to the Credit Agreement
referred to below
____________________________
____________________________ [Date]
____________________________
Attention: _____________________
Gentlemen:
The undersigned, Apple Computer, Inc., refers to the Credit
Agreement, dated as of December 9, 1993 (the "Credit Agreement", the terms
defined therein being used herein as therein defined), among the
undersigned, certain Lenders parties thereto and Citicorp USA, Inc. and
Bank of America National Trust and Savings Association as Agent for said
Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.02
of the Credit Agreement that the undersigned hereby requests a
Syndicated Borrowing under the Credit Agreement, and in that connection
sets forth below the information relating to such Syndicated Borrowing (the
"Proposed Syndicated Borrowing") as required by Section 2.02(a) of the
Credit Agreement:
(i) the Business Day of the Proposed Syndicated Borrowing is
__________, 19__;
(ii) the Type of Syndicated Advances comprising the Proposed
Syndicated Borrowing is [Alternate Base Rate Advances] [Eurodollar Rate
Advances];
(iii) the aggregate amount of the Proposed Syndicated Borrowing
is $_______________;
(iv) the Interest Period for each Syndicated Advance made as part
of the Proposed Syndicated Borrowing is [____ days] [____ month[s]]; and
(v) the undersigned's commercial paper ratings in effect on the
date hereof are: S&P ____________ and Moody's _______________.
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Syndicated Borrowing:
(A) the representations and warranties contained in Section 4.01
are correct, before and after giving effect to the Proposed Syndicated
Borrowing and to the application of the proceeds therefrom, as though
made on and as of such date;
77
<PAGE>
(B) no Default or Event of Default has occurred and is
continuing, or would result from such Proposed Syndicated Borrowing or
from the application of the proceeds therefrom;
(C) no event has occurred and no circumstance exists as a result
of which the information concerning the undersigned that has been
provided to the Agent and each Lender by the undersigned in connection
with the Credit Agreement would include an untrue statement of a
material fact or omit to state any material fact or any fact necessary
to make the statements contained therein, in the light of the
circumstances under which and as of the date on which they were made,
not misleading; and
(D) the aggregate amount of the Proposed Syndicated Borrowing
and all other Borrowings to be made on the same day under the Credit
Agreement is within the aggregate amount of the unused Commitments of
the Lenders.
Very truly yours,
APPLE COMPUTER, INC.
By:
Title:
78
<PAGE>
EXHIBIT B-2
NOTICE OF AUCTION BORROWING
Bank of America National Trust and
Savings Association, as Administrative Agent
for the Lenders parties
to the Credit Agreement
referred to below
____________________________
____________________________ [Date]
____________________________
Attention: _______________________
Gentlemen:
The undersigned, Apple Computer, Inc., refers to the Credit
Agreement, dated December 9, 1993 (the "Credit Agreement", the terms
defined therein being used herein as therein defined), among the
undersigned, certain Lenders parties thereto and Citicorp USA, Inc. and
Bank of America National Trust and Savings Association as Agent for said
Lenders, and hereby gives you notice pursuant to Section 2.03 of the Credit
Agreement that the undersigned hereby requests an Auction Borrowing under
the Credit Agreement, and in that connection sets forth the terms on which
such Auction Borrowing (the "Proposed Auction Borrowing") is requested to
be made:
(A) Date of Auction Borrowing
(B) Amount of Auction Borrowing
(C) Maturity Date
(D) Interest Rate Basis
(E) Interest Payment Date(s)
(F) Commercial Paper Ratings S&P: Moody's:
(G) Absolute Rate Auction Borrowing
or LIBOR Auction Borrowing
(H) _______________________
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Auction Borrowing:
(a) the representations and warranties contained in Section 4.01
are correct, before and after giving effect to the Proposed
Auction Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date;
(b) no Default or Event of Default has occurred and is
continuing, or would result from the Proposed Auction Borrowing or
from the application of the proceeds therefrom;
(c) no event has occurred and no circumstance exists as a result
of which the information concerning the undersigned that has been
provided to the Agent and each Lender by the undersigned in connection
with the Credit Agreement would include an untrue statement of a
material fact or omit to state any material fact or any fact necessary
to make the statements contained therein, in the light of the
circumstances under which and as of the date on which they were made,
not misleading; and
79
<PAGE>
(d) the aggregate amount of the Proposed Auction Borrowing and
all other Borrowings to be made on the same day under the Credit
Agreement is within the aggregate amount of the unused Commitments of
the Lenders.
The undersigned hereby confirms that the Proposed Auction
Borrowing is to be made available to it in accordance with
Section 2.03(a)(vi) of the Credit Agreement.
Very truly yours,
APPLE COMPUTER, INC.
By:
Title:
80
<PAGE>
EXHIBIT C
[Opinion of Borrower's Counsel]
81
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
Bank of America National Trust and
Savings Association, as Administrative Agent
for the Lenders parties
to the Credit Agreement
referred to below
__________________________
__________________________
__________________________
Attention: _______________________
Gentlemen:
I, the undersigned, the _________________________ of Apple
Computer, Inc., do hereby certify, represent and warrant that:
1. This Certificate is furnished pursuant to Section 5.01(e)(iii) of
that certain Credit Agreement dated as of ________________, 1993 (the
"Credit Agreement", the terms defined therein being used herein as therein
defined) among Apple Computer, Inc. (the "Borrower"), certain Lenders
parties thereto and Citicorp USA, Inc. and Bank of America National Trust
and Savings Association, as Agent for such Lenders.
2. Schedule 1 attached hereto sets forth financial data and
computations evidencing the Borrower's compliance with Section 5.01(h) and
Section 5.01(i) of the Credit Agreement, all of which data and computations
are complete, true and correct.
3. No Default or Event of Default under the Credit Agreement has
occurred and is continuing.
4. As of the date of the financial statements accompanying this
certificate, the Borrower's commercial paper ratings from Standard & Poor's
Ratings Group ("S&P") and Moody's Investors Service, Inc. ("Moody's") are
as follows: S&P:_____, Moody's:_____.
5. The representations and warranties set forth in Section 4.01 of
the Credit Agreement are true and correct as of the date hereof as though
made on and as of the date hereof.
Executed this ____ day of _____________, 19__.
Name:
Title:
82
<PAGE>
Schedule 1
To
Compliance Certificate
For the _________ Ended ____________, 19__
SECTION 5.01(h): Tangible Net Worth ($Millions)
A. Consolidated total assets: $
B. Consolidated total liabilities: $
C. Intangibles and other
eliminations (if any): $
D. Consolidated Tangible Net Worth
(A -B -C): $
E. Minimum Consolidated Tangible Net Worth $
Section 5.01(i): Debt to Capitalization
A. Consolidated Debt: $
B. Consolidated Tangible Net Worth: $
C. Capitalization (A + B): $
D. Debt to Capitalization Ratio (A divided by C): .__ to 1.00
E. Maximum Debt to Capitalization Ratio: .50 to 1.00
83
<PAGE>
EXHIBIT E
Existing Liens
Beneficiary Amount Creditor Type of
Obligation
Apple Computer, Inc. $30,715,000 Citibank Continuing
Guaranty
Apple Computer, Inc. $47,370,000 Bank of Continuing
America Guaranty
84
<PAGE>
EXHIBIT F
ACI Real Properties, Inc.
Apple Canada Inc.
Apple Computer (Accessories) Limited
Apple Computer (Sales) Limited
Apple Computer (South Africa Foundation) Ltd.
Apple Computer (UK) Limited
Apple Computer AB
Apple Computer Asia, Inc.
Apple Computer Australia Pty. Ltd.
Apple Computer B.V.
Apple Computer Espana, S.A.
Apple Computer Europe, Inc.
Apple Computer France S.A.R.L.
Apple Computer Gesellschaft m.b.H.
Apple Computer GmbH
Apple Computer Limited
Apple Computer Mexico, S.A. de C.V.
Apple Computer Pacific, Inc.
Apple Computer S.A.
Apple Computer S.p.A.
Apple Japan, Inc.
Apple Operations & Technologies Japan, Inc.
Apple Singapore Ptd Ltd
Claris Corporation
Claris International, Inc.
Claris Ireland
FinanceTech, Inc.
Orion Network Systems, Inc.
85
<PAGE>
