SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
COMMISSION FILE NUMBER 1-9026
COMPAQ COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 76-0011617
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
20555 SH 249, HOUSTON, TEXAS 77070
(281) 370-0670
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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 [ ]
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of September 30, 1998, was approximately 1.7 billion.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
COMPAQ COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------ -------------
(IN MILLIONS)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,408 $ 6,418
Short-term investments 22 344
Accounts receivable, net 5,727 2,891
Inventories 2,123 1,570
Deferred income taxes 1,981 595
Other current assets 509 199
--------- -------
Total current assets 14,770 12,017
Property, plant and equipment, less accumulated depreciation 2,822 1,985
Deferred income taxes 862 -
Intangible and other assets 3,193 629
--------- -------
$ 21,647 $14,631
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,779 $ 2,837
Income taxes payable 210 195
Accrued restructuring costs 1,634 -
Other current liabilities 4,733 2,170
--------- -------
Total current liabilities 10,356 5,202
--------- -------
Postretirement and other postemployment benefits 430 -
--------- -------
Minority interest 422 -
--------- -------
Stockholders' equity:
Preferred stock, $.01 par value
(authorized: 10 million shares; issued: none) - -
Common stock and capital in excess of $.01 par value
(authorized: 3 billion shares; issued:
1,683 million shares at September 30, 1998 and
1,519 million shares at December 31, 1997) 6,881 2,096
Retained earnings 3,766 7,333
Treasury stock (at cost) (208) -
--------- -------
Total stockholders' equity 10,439 9,429
--------- -------
$ 21,647 $14,631
========= =======
</TABLE>
See accompanying notes to consolidated financial data.
2
<PAGE>
<TABLE>
<CAPTION>
COMPAQ COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
NINE MONTHS ENDED QUARTER ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- --------------
1998 1997 1998 1997
----------- -------- ----- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenue:
Products $ 18,227 $ 16,926 $7,280 $6,353
Services 2,083 335 1,511 121
----------- -------- ----- -------
Total revenue 20,310 17,261 8,791 6,474
----------- -------- ----- -------
Cost of sales:
Products 14,576 12,285 5,569 4,608
Services 1,416 245 1,037 89
----------- -------- ----- -------
Total cost of sales 15,992 12,530 6,606 4,697
----------- -------- ----- -------
Selling, general, and administrative expense 3,417 2,097 1,581 788
Research and development costs 924 600 430 213
Purchased in-process technology 3,234 208 - -
Restructuring and asset impairment charges 393 - - -
Merger-related costs - 44 - 44
Other income and expense, net (56) (23) 18 (4)
----------- -------- ----- -------
7,912 2,926 2,029 1,041
----------- -------- ----- -------
Income (loss) before provision for income taxes (3,594) 1,805 156 736
Provision (benefit) for income taxes (93) 617 41 219
----------- -------- ----- -------
Net income (loss) $ (3,501) $ 1,188 $ 115 $ 517
=========== ======== ===== =======
Earnings (loss) per common share:
Basic $ (2.21) $ 0.79 $ 0.07 $ 0.34
=========== ======== ===== =======
Diluted $ (2.21) $ 0.76 $ 0.07 $ 0.33
=========== ======== ===== =======
Shares used in computing earnings (loss) per
common share:
Basic 1,585 1,502 1,675 1,510
=========== ======== ===== =======
Diluted 1,585 1,557 1,737 1,579
=========== ======== ===== =======
</TABLE>
See accompanying notes to consolidated financial data.
3
<PAGE>
<TABLE>
<CAPTION>
COMPAQ COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1998 1997
---------- --------
(IN MILLIONS)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (3,501) $ 1,188
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 557 386
Purchased in-process technology 3,234 208
Restructuring and asset impairment charges 393 -
Changes in operating assets and liabilities, net of
effects of purchased businesses:
Accounts receivable (490) 679
Inventories 724 (721)
Other current assets 95 (32)
Accounts payable 152 920
Income taxes payable (137) 51
Accrued restructuring costs (110) -
Other current liabilities (217) 121
---------- --------
Net cash provided by operating activities 700 2,800
---------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment, net (470) (462)
Proceeds from sales of short-term investments, net 322 (45)
Acquisition of businesses, net of cash acquired (1,413) (268)
Other, net (361) (13)
---------- --------
Net cash used in investing activities (1,922) (788)
---------- --------
Cash flows from financing activities:
Payments to retire debt (788) (299)
Purchase of treasury shares (208) -
Issuance of common stock pursuant to stock option plans 260 124
Dividends paid (71) -
Other, net (1) (46)
---------- --------
Net cash used in financing activities (808) (221)
---------- --------
Effect of exchange rate changes on cash and cash equivalents 20 1
---------- --------
Net (decrease) increase in cash and cash equivalents (2,010) 1,792
Cash and cash equivalents at beginning of period 6,418 3,048
---------- --------
Cash and cash equivalents at end of period $ 4,408 $ 4,840
========== ========
</TABLE>
See accompanying notes to consolidated financial data.
4
<PAGE>
<TABLE>
<CAPTION>
COMPAQ COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(UNAUDITED)
SUPPLEMENTAL CASH FLOW INFORMATION
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1998 1997
---------- -------
(IN MILLIONS)
<S> <C> <C>
Acquisitions (Note 2)
Fair value of:
Assets acquired $ 16,029 $ 362
Liabilities assumed (7,014) (74)
Stock issued (4,284) -
Options issued (249) (10)
---------- -------
Cash paid 4,482 278
Less: cash acquired (3,069) (10)
---------- -------
Net cash paid for acquisitions $ 1,413 $ 268
========== =======
</TABLE>
See accompanying notes to consolidated financial data.
5
<PAGE>
COMPAQ COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL DATA
NOTE 1 - BASIS OF PRESENTATION
- -----------------------------------
The accompanying unaudited consolidated financial data for Compaq Computer
Corporation ("Compaq") as of September 30, 1998 and December 31, 1997 and for
the three and nine-month periods ended September 30, 1998 and 1997 have been
prepared on substantially the same basis as Compaq's annual consolidated
financial statements. In Compaq's opinion, the data reflects all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results for those periods and the financial condition at
those dates. Certain prior year amounts have been reclassified to conform to
current year presentation.
Compaq completed the acquisition of Digital Equipment Corporation
("Digital") during the second quarter of 1998. This acquisition was accounted
for under the purchase method of accounting. The financial information provided
for the three-month and nine-month periods ended September 30, 1997 has been
restated to reflect the acquisition of Tandem Computers Incorporated in August
1997, which was accounted for as a pooling of interests.
NOTE 2 - ACQUISITION OF DIGITAL
- ------------------------------------
On June 11, 1998, Compaq consummated its acquisition of Digital. Digital
was an industry leader in implementing and supporting networked business
solutions in multi-vendor environments based on high performance platforms with
an established global service and support team. The aggregate purchase price of
$9.1 billion consisted of approximately $4.5 billion in cash, the issuance of
approximately 141 million shares of Compaq common stock valued at approximately
$4.3 billion and the issuance of approximately 25 million options to purchase
Compaq common stock valued at approximately $249 million. The cash component of
the purchase price was paid through the use of Compaq's general corporate funds.
The results of operations of Digital and the estimated fair value of the assets
acquired and liabilities assumed are included in Compaq's financial statements
from the date of acquisition.
The purchase price was preliminarily allocated to the assets acquired and
liabilities assumed based on Compaq's estimates of fair value. Compaq is
awaiting additional information related to the fair value of certain assets
acquired and liabilities assumed and the finalization of the Digital-related
restructuring plans. Management does not expect the finalization of these
matters to have a material effect on the purchase price allocation. The fair
value assigned to intangible assets acquired was based on a valuation prepared
by an independent third-party appraisal company and consists of purchased
in-process technology, proven research and development, the installed customer
base and trademarks. The amounts allocated to tangible and intangible assets
acquired less liabilities assumed exceeded the purchase price by approximately
$4.1 billion. This excess value over the purchase price was allocated to reduce
proportionately the values assigned to long-term assets and purchased in-process
technology in determining their ultimate fair values. As a result of the change
in fair values of the long-term assets, the deferred tax liability associated
with these assets was also adjusted.
6
<PAGE>
NOTE 2 - ACQUISITION OF DIGITAL (CONTINUED)
- -------------------------------------------------
The following table shows the amounts allocated to the long-term assets,
the allocation of the excess value over the purchase price and the resulting
assigned values for the assets acquired as of June 11, 1998:
<TABLE>
<CAPTION>
EXCESS VALUE VALUE ASSIGNED
INITIAL OVER PURCHASE TO NET ASSETS
BALANCE SHEET CATEGORY VALUATION PRICE ACQUIRED
----------- --------------- ----------------
<S> <C> <C> <C>
Property, plant and equipment $ 1,465 $ (637) $ 828
Purchased in-process technology 5,722 (2,488) 3,234
Intangible assets:
Proven research and development 1,055 (459) 596
Installed customer base 2,150 (935) 1,215
Trademarks 391 (170) 221
Other assets 662 (288) 374
Deferred tax liability (1,073) 871 (202)
</TABLE>
Management estimates that $3.2 billion of the purchase price represents
purchased in-process technology that has not yet reached technological
feasibility and has no alternative future use. Accordingly, this amount was
immediately expensed in the Consolidated Statement of Income upon consummation
of the acquisition. The value assigned to purchased in-process technology,
based on a valuation prepared by an independent third-party appraisal company,
was determined by identifying research projects in areas for which technological
feasibility has not been established, including UNIX/Open VMS ($1.6 billion), NT
Systems ($800 million), storage ($2.7 billion) and Internet and others ($600
million). The value was determined by estimating the costs to develop the
purchased in-process technology into commercially viable products, estimating
the resulting net cash flows from such projects, and discounting the net cash
flows back to their present value. The discount rate includes a factor that
takes into account the uncertainty surrounding the successful development of the
purchased in-process technology. If these projects are not successfully
developed, future revenue and profitability of Compaq may be adversely affected.
Additionally, the value of other intangible assets acquired may become impaired.
Upon consummation of the Digital acquisition, Compaq also assumed certain
of Digital's defined benefit and defined contribution plans. The Digital
employees who were eligible to participate in the Digital plans at the time of
the acquisition continue to be eligible to participate in these plans. The
benefits generally are based on years of service and compensation during the
employee's career. Pension cost is based on estimated benefit formulas.
Additionally, Compaq assumed the defined benefit postretirement plans that
provide medical and dental benefits for Digital's retirees and their eligible
dependents in the U.S and certain other locations. The majority of Digital's
non-U.S. subsidiaries do not offer postretirement benefits other than pensions
to retirees.
The following table represents unaudited consolidated pro forma information
as if Compaq and Digital had been combined as of the beginning of the periods
presented. The pro forma data is presented for illustrative purposes only and
is not necessarily indicative of the combined financial position or results of
operations of future periods or the results that actually would have occurred
had Compaq and Digital been a combined company during the specified periods.
The pro forma combined results include the effects of the purchase price
allocation on depreciation of property, plant and equipment and amortization
7
<PAGE>
NOTE 2 - ACQUISITION OF DIGITAL (CONTINUED)
- -------------------------------------------------
of intangible assets, adjustments to reflect the reversal of interest income
resulting from the use of cash related to the acquisition of Digital, and
preferred stock dividends paid. The pro forma combined results exclude
acquisition-related charges for purchased in-process technology related to
Digital.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1998 1997
--------- -------
PRO FORMA UNAUDITED
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Revenue:
Products $ 20,830 $22,338
Services 4,757 4,660
--------- -------
Total revenue $ 25,587 $26,998
--------- -------
Net income (loss) $ (421) $ 1,163
========= =======
Earnings (loss) per common share:
Basic $ (0.25) $ 0.71
========= =======
Diluted $ (0.25) $ 0.68
========= =======
Shares used in computing earnings per common share:
Basic 1,670 1,643
========= =======
Diluted 1,670 1,698
========= =======
</TABLE>
The net loss for the nine months ended September 30, 1998, includes $291
million, net of tax, in restructuring and asset impairment charges as described
in Note 3 to the Consolidated Financial Data.
NOTE 3 - RESTRUCTURING AND ASSET IMPAIRMENT CHARGES
- ----------------------------------------------------------
In June 1998, Compaq's management approved restructuring plans, which
included initiatives to integrate the operations of Compaq and Digital,
consolidate duplicative facilities, improve service delivery and reduce
overhead. Total accrued restructuring costs of $1.7 billion were recorded in
the second quarter related to these initiatives, $1.4 billion of which related
to Digital and was recorded as a component of the purchase price allocation and
$286 million of which related to Compaq, which was charged to operations. The
amounts recorded related to Digital are based on management's estimate of those
costs. Management expects the Digital restructuring plans to be finalized by
the end of the year. Areas where management estimates may be revised primarily
relate to Digital employee separation and relocation costs, facility closure
costs and other exit costs. Adjustments to accrued restructuring costs related
to Digital will be recorded as an adjustment to the preliminary purchase price
allocation.
Accrued restructuring costs recorded in June 1998 included $1.1 billion
($999 million for Digital and $132 million for Compaq) representing the cost of
involuntary employee separation benefits related to approximately 19,700
employees worldwide (approximately 14,700 Digital employees and 5,000 Compaq
employees). Employee separation benefits include severance, medical and other
benefits. Employee separations will affect the majority of business functions,
job classes and geographies, with a majority of the reductions occurring in
North America and Europe. The restructuring plans also included costs totaling
$414 million ($272 million related to Digital and $142 million related to
Compaq)
8
<PAGE>
NOTE 3 - RESTRUCTURING AND ASSET IMPAIRMENT CHARGES (CONTINUED)
- -----------------------------------------------------------------------
associated with the closure of 13.2 million square feet of office, distribution
and manufacturing space, principally in North America and Europe.
Other restructuring costs included $99 million related to the relocation of
Digital employees, with the majority of this amount attributable to relocations
occurring in North America and Europe, and $100 million primarily related to
costs of terminating certain Digital contractual obligations. Compaq expects
that most of the restructuring actions related to the plans will be completed by
June 1999.
The accrued restructuring costs and amounts charged against the provision
as of September 30, 1998, were as follows (dollars in millions):
<TABLE>
<CAPTION>
BEGINNING CASH REMAINING
COMPAQ DIGITAL ACCRUAL EXPENDITURES ACCRUAL
-------- ------------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Employee separations $ 132 $ 999 $ 1,131 $ (86) $ 1,045
Facility closure costs 142 272 414 (23) 391
Relocation - 99 99 - 99
Other exit costs 12 88 100 (1) 99
-------- ------------- ---------- ------------ ---------
Total accrued restructuring costs $ 286 $ 1,458 $ 1,744 $ (110) $ 1,634
======== ============= ========== ============ ==========
Number of employee separations
due to restructuring actions 4,603
============
</TABLE>
The total net headcount reduction for the quarter ended September 30, 1998,
including attrition, restructuring and selective hiring, was approximately
5,400.
During the second quarter of 1998, Compaq also recorded a $107 million
charge related to asset impairments. The asset impairments resulted from the
writedown to fair market value, less costs to sell, for assets taken out of
service and held for sale or disposal. The majority of this charge relates to
the impairment of $74 million of intangible assets associated with the
acquisition of a company during 1995 that developed, manufactured, and supplied
fast ethernet hubs, switches and related products. In May 1998, management
decided to close the manufacturing facility and abandon the technologies
acquired through this acquisition and discontinue all related products.
9
<PAGE>
NOTE 4 - CERTAIN BALANCE SHEET COMPONENTS
- -----------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
-------------- ------------
(IN MILLIONS)
<S> <C> <C>
INVENTORIES:
Raw materials and work-in-process $ 936 $ 767
Finished goods 1,187 803
-------------- ------------
$ 2,123 $ 1,570
============== ============
INTANGIBLES AND OTHER ASSETS:
Installed customer base, net $ 1,191 $ -
Proven research and development, net 561 -
Trademarks, net 209 3
Other assets, net 1,232 626
-------------- ------------
$ 3,193 $ 629
============== ============
OTHER CURRENT LIABILITIES:
Salaries, wages and related items $ 656 $ 123
Deferred revenue 908 31
Accrued warranty 678 423
Accrued royalties 198 132
Other accrued liabilities 2,293 1,461
-------------- ------------
$ 4,733 $ 2,170
============== ============
</TABLE>
The estimated lives of installed customer base, proven research and
development, and trademarks are 15 years, 5 years and 5 years, respectively.
NOTE 5 - TENDER OFFER FOR NOTES AND DEBENTURES
- ------------------------------------------------------
In June 1998, Compaq completed a cash tender offer for Digital debt
securities with a fair value of $879 million, including accrued interest.
Compaq paid an aggregate of $799 million (including accrued interest) for the
notes and debentures tendered. The untendered balance of the notes and
debentures is included in other current liabilities.
NOTE 6 - TREASURY STOCK
- ---------------------------
On April 23, 1998, the Board of Directors authorized a systematic stock
repurchase program to acquire up to 100 million shares of Compaq's common stock.
Compaq implemented this program in May 1998. Compaq has repurchased
approximately 6.4 million shares through September 30, 1998, for a cost of
approximately $208 million under this program.
10
<PAGE>
NOTE 7 - OTHER INCOME AND EXPENSE
- ---------------------------------------
Other income and expense consisted of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED QUARTER ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- ----------------
1998 1997 1998 1997
-------- -------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Interest and dividend income $ (226) $ (189) $ (55) $ (63)
Interest (income) expense associated 8 (4) 6 (1)
with hedging
Other interest expense 120 118 45 46
Currency losses, net 19 21 21 9
Minority interest dividend 10 - 9 -
Other, net 13 31 (8) 5
-------- -------- ------- -------
$ (56) $ (23) $ 18 $ (4)
======== ======== ======= =======
</TABLE>
NOTE 8 - COMPREHENSIVE INCOME
- ---------------------------------
Comprehensive income (loss) is comprised of two components: net income and
other comprehensive income. Other comprehensive income refers to revenues,
expenses, gains and losses that under generally accepted accounting principles
are recorded as an element of stockholders' equity and are excluded from net
income. Compaq's other comprehensive income is comprised primarily of foreign
currency translation adjustments from certain subsidiaries. Comprehensive
income for the nine months ended September 30, 1998 and 1997, respectively, is
insignificant and therefore is not disclosed in the balance sheet as a separate
component of stockholders' equity. The components of comprehensive income
(loss) are listed below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED QUARTER ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ------------
1998 1997 1998 1997
---------- ------- ---- ------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net income (loss) $ (3,501) $1,188 $ 115 $ 517
Other comprehensive income (loss) 3 (19) 8 (6)
---------- ------- ---- ------
Comprehensive income (loss) $ (3,498) $1,169 $ 123 $ 511
========== ======= ==== ======
</TABLE>
NOTE 9 - EARNINGS PER COMMON SHARE
- ----------------------------------------
Basic earnings per common share is computed using the weighted average
number of shares outstanding during the period. Diluted earnings per common
share is computed using the weighted average number of shares outstanding
adjusted for the dilutive incremental shares attributed to outstanding options
to purchase common stock. Diluted loss per share is based only on the weighted
average number of shares outstanding during the period. Incremental common
stock equivalent shares of 62 million were used in the calculation of diluted
earnings per common share for the quarter ended September 30, 1998. Incremental
common stock equivalent shares of 61 million were not used in the calculation of
diluted loss per common share in the nine months ended September 30, 1998, since
their inclusion would have been antidilutive due to the net loss for the period.
Incremental common stock equivalent shares of 55 million and 69 million were
used in the calculation of diluted earnings per common share in the nine and
three months ended September 30, 1997, respectively.
Stock options to purchase 13 million shares and 37 million shares of common
stock for the nine-month periods, and 16 million shares and 12 million shares of
common stock for the three-month periods
11
<PAGE>
NOTE 9 - EARNINGS PER COMMON SHARE (CONTINUED)
- -----------------------------------------------------
ended September 30, 1998 and 1997, respectively, were outstanding but not
included in the computation of diluted earnings per common share because the
option exercise price was greater than the average market price of the common
shares, and therefore, the effect would be antidilutive.
NOTE 10 - LITIGATION
- -----------------------
Five class action lawsuits have been filed in the United States District
Court for the Southern District of Texas, Houston Division. The actions are
purported class actions of all persons who purchased Compaq common stock from
July 10, 1997 through March 6, 1998, and the named defendants include the
Company and certain of its current and former officers and directors. The
complaints allege that the defendants violated Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by, among
other things, withholding information and making misleading statements about
channel inventory and factoring of receivables in order to inflate the market
price of Compaq's common stock, and further alleges that certain of the
individual defendants sold Compaq common stock at these inflated prices. A
motion for the appointment of lead counsel and the consolidation of the
purported class action lawsuits is pending. The plaintiffs seek monetary
damages, interest, costs and expenses. Compaq intends to defend the suits
vigorously.
Several purported class action lawsuits were filed against Digital during
1994 alleging violations of the federal securities laws arising from alleged
misrepresentations and omissions in connection with Digital's issuance and sale
of Series A 8-7/8% Cumulative Preferred Stock and Digital's financial results
for the quarter ended April 2, 1994. During 1995, the lawsuits were
consolidated into three cases, which were pending before the United States
District Court for the District of Massachusetts. On August 8, 1995, the
Massachusetts federal court granted the defendants' motion to dismiss all three
cases in their entirety. On May 7, 1996, the United States Court of Appeals for
the First Circuit affirmed in part and reversed in part the dismissal of two of
the cases, and remanded for further proceedings. The parties are proceeding
with discovery.
NOTE 11 - DIGITAL SUMMARIZED UNAUDITED FINANCIAL INFORMATION (DIGITAL
- -----------------------------------------------------------------------------
STAND-ALONE)
- ------------
In March 1994, Digital sold to the public 16 million Depositary shares
under a shelf registration, each representing a one-fourth interest in a share
of the Series A Preferred Stock, par value $1.00 per share. Dividends on the
Series A Preferred Stock accrue at the annual rate of 8-7/8%, or $35.5 million
per year. The Series A Preferred Stock is not convertible into, or exchangeable
for, shares of any other class or classes of stock. The Series A Preferred
Stock is not redeemable prior to April 1, 1999. On or after April 1, 1999,
Compaq, at its option, may redeem shares of the Series A Preferred Stock, for
cash at the redemption price per share of $100 ($25 per depository share), plus
accrued and unpaid dividends. Compaq has guaranteed the dividend payments,
redemption price and liquidation preference of the Digital Series A Preferred
Stock. At September 30, 1998, there were declared and unpaid dividends of $8.9
million. The minority interest of $422 million on the balance sheet represents
the fair value of the Series A Preferred Stock as of the date of the Digital
acquisition.
The summarized unaudited financial information for Digital and its
consolidated subsidiaries on a stand-alone basis is presented below. The
financial information for the period subsequent to the acquisition is based on
the new basis of accounting reflecting the amounts included in the preliminary
purchase price allocation resulting from Compaq's acquisition of Digital (see
Notes 2 and 3), and is presented in accordance with generally accepted
accounting principles. The new basis of accounting adjustments include (i) fair
value adjustments to the historical basis of assets and liabilities acquired,
(ii) the fair value assigned to intangible assets, including purchased
in-process technology and (iii) accrued restructuring charges. Additionally,
the Digital stand-alone financial information includes an allocation of certain
costs incurred by Compaq including (i) costs for administrative functions and
services performed on behalf of Digital by centralized staff groups within
12
<PAGE>
Compaq, and (ii) Compaq's general corporate expenses. The costs of these
functions and services have been allocated to Digital using methods that Compaq
management believes are reasonable. Such allocations are not necessarily
indicative of the costs that would have been incurred if Digital had been a
separate entity.
Although Digital financial information is presented on a stand-alone basis,
the companies are being managed on a consolidated basis. The stand-alone
Digital information does not necessarily reflect the results that Digital would
have realized had the acquisition not occurred and is not necessarily indicative
of the future results of Digital. Separate financial information and other
disclosures concerning Digital are not deemed by management to be meaningful to
holders of the Series A Preferred Stock.
<TABLE>
<CAPTION>
NEW BASIS OLD BASIS
-------------------- -------------------
SEPTEMBER 26, 1998 DECEMBER 27, 1997
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C>
Current assets $ 4,555 $ 6,428
Noncurrent assets 7,634 2,365
Current liabilities 4,636 3,487
Noncurrent liabilities 1,208 1,910
Stockholders' equity 6,345 3,396
QUARTER ENDED QUARTER ENDED
SEPTEMBER 26, 1998 SEPTEMBER 27, 1997
(IN MILLIONS) (IN MILLIONS)
Revenue:
Products $ 1,072 $ 1,582
Services 1,422 1,378
-------------------- -------------------
Total revenue $ 2,494 $ 2,960
Gross margin:
Products $ 308 $ 563
Services 442 428
-------------------- -------------------
Total gross margin $ 750 $ 991
Net income (loss) $ (102) $ 25
==================== ===================
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NEW BASIS OLD BASIS
--------------------- -----------------------------------------
FOR THE PERIOD FROM FOR THE PERIOD FROM
JUNE 12, 1998 DECEMBER 28, 1997 NINE MONTHS
THROUGH THROUGH ENDED
SEPTEMBER 26, 1998 JUNE 11, 1998 SEPTEMBER 27, 1997
--------------------- --------------------- ------------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C>
Revenue:
Products $ 1,821 $ 2,650 $ 5,412
Services 1,717 2,731 4,325
--------------------- --------------------- -------------------
Total revenue $ 3,538 $ 5,381 $ 9,737
Gross margin:
Products $ 603 $ 779 $ 1,953
Services 536 834 1,343
--------------------- --------------------- -------------------
Total gross margin $ 1,139 $ 1,613 $ 3,296
Net income (loss) $ (3,175)(1) $ (13) $ 200
===================== ===================== ===================
<FN>
(1) Net loss includes $3.2 billion for the write-off of purchased in-process
technology resulting from Compaq's acquisition of Digital.
</TABLE>
NOTE 12 - SUBSEQUENT EVENTS - CREDIT FACILITIES
- ------------------------------------------------------
On October 3, 1998, Compaq entered into a one-year $1 billion unsecured
revolving credit facility to replace a similar facility that expired on
September 21, 1998. In addition, Compaq amended its five-year $3 billion
revolving credit facility that expires in September 2002 to incorporate the new
one-year facility. Compaq has not borrowed under either of these facilities.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated interim financial statements.
RESULTS OF OPERATIONS
The following table presents, as a percentage of revenue, certain selected
financial data for the three and nine-month periods ended September 30, 1998 and
1997.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, QUARTER ENDED SEPTEMBER 30,
------------------------------- ---------------------------
1998 1997 1998 1997
----------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Products 89.7% 98.1% 82.8% 98.1%
Services 10.3 1.9 17.2 1.9
Total revenue 100.0 100.0 100.0 100.0
Cost of sales:
Products 80.0 72.6 76.5 72.5
Services 68.0 73.1 68.6 73.6
Total cost of sales 78.7 72.6 75.1 72.6
Gross margin:
Products 20.0 27.4 23.5 27.5
Services 32.0 26.9 31.4 26.4
Total gross margin 21.3 27.4 24.9 27.4
Selling, general and administrative expenses 16.8 12.1 18.0 12.2
Research and development costs 4.5 3.5 4.9 3.3
Purchased in-process technology(1) 15.9 1.2 - -
Restructuring and asset impairment charges(2) 2.0 - - -
Merger-related costs(3) - .3 - .7
Other income and expense, net (0.2) (0.1) 0.2 (0.1)
----------- ------- ------- -------
39.0 17.0 23.1 16.1
----------- ------- ------- -------
Income (loss) before provision for income taxes (17.7)% 10.4% 1.8% 11.3%
=========== ======= ======= =======
<FN>
(1) Represents a $3.2 billion non-recurring, non-tax-deductible charge in the second
quarter of 1998 in connection with the Digital acquisition and a $208 million
non-recurring, non-tax-deductible charge in the second quarter of 1997 in connection
with the Microcom acquisition.
(2) Represent a $393 million charge for restructuring and asset impairments in the
second quarter of 1998 in connection with the Digital acquisition.
(3) Represents a $44 million non-recurring, non-tax-deductible charge in the third
quarter of 1997 related to costs associated with the Tandem merger.
</TABLE>
OVERVIEW
Compaq's completion of recent acquisitions has resulted in an expanded and
enhanced business model, focused on open industry-standard products, leadership
enterprise technology and solutions and a full line of global service offerings.
As one of the top three global information technology companies, Compaq is an
15
<PAGE>
industry leader committed to delivering superior customer value through
standards-based, partner-leveraged computing that features world class services,
support and market-segment focused solutions, particularly in communications,
manufacturing and finance. Compaq is a strategic information technology partner
to customers of all sizes, providing product offerings that range from handheld
computers to powerful failsafe computer servers.
The Company recorded several charges during the second quarter of 1998 in
connection with the June 11, 1998 Digital acquisition and closing of certain
Compaq facilities (see Notes 2 and 3 to Consolidated Financial Data). These
charges, net of related taxes, included $3.2 billion for the write-off of
purchased in-process technology, $291 million for restructuring and asset
impairment charges related to Compaq employee separations and elimination of
certain Compaq facilities, and $139 million for other operating adjustments.
These operating adjustments were primarily for incremental pricing actions on
certain Digital products to integrate them with Compaq products in the
marketplace and the higher cost of sales as a result of fair value adjustments
for acquired Digital products sold since the acquisition date.
The third quarter of 1998 was the first full quarter of operations for the
combined companies of Compaq and Digital. The quarter was largely transitional
as the necessary steps were taken to begin the integration of Digital products,
services and the Digital customer base. Integration efforts include the
consolidation of duplicative facilities, employee separations and relocations,
and integration of the internal information systems of the combined companies.
REVENUES
Total revenue increased $3 billion, or 17.7%, for the nine months ended
September 30, 1998 over the comparable period in 1997, largely driven by the
acquisition of Digital. Partially offsetting this revenue growth were expected
short-term reductions in revenues as a result of the continued transition to the
Optimized Distribution Model, the implementation of a product migration strategy
for Intel-based, Digital-branded personal computers, and the realignment of the
sales and marketing organizations of the newly combined companies throughout the
world. Product revenue for the nine months ended September 30, 1998 increased
$1.3 billion, or 7.7%, from the same period in 1997. Service revenue increased
$1.7 billion for the first nine months of 1998 over the prior year. Total
revenue from North America, including Canada, increased 4% for the nine-month
period ending September 30, 1998, compared to the same period in 1997. European
revenue increased 40% while other international revenue increased 20% for the
first nine months of 1998, compared to the same period in the prior year.
International revenue, excluding Canada, represented 52% of total revenue for
the nine-month period of 1998.
Total revenue increased $2.3 billion, or 35.8%, for the three months ended
September 30, 1998 over the comparable period in 1997. Product revenue for the
three months ended September 30, 1998 increased $927 million, or 14.6%, from the
same period in 1997, while unit sales increased 14.3% year over year for the
third quarter. Service revenue increased $1.4 billion for the third quarter of
1998 over the third quarter of 1997, primarily due to the acquisition of
Digital. Total revenue from North America, including Canada, increased 15% for
the three-month period ending September 30, 1998 compared to the same period in
1997. European revenue increased 73% while other international revenue
increased 47% in the third quarter of 1998, compared to the same period in the
prior year. International revenue, excluding Canada, represented 51% of total
revenue for the quarter ended September 30, 1998.
GROSS MARGIN
Gross margin as a percentage of revenue decreased to 21.3% from 27.4% for
the nine-month period of 1998 and 1997, respectively, and decreased to 24.9% in
the third quarter of 1998 compared to 27.4% in the comparable period of 1997.
Product gross margin as a percentage of product revenue declined to 20.0% from
27.4% for the nine-month period and decreased to 23.5% from 27.5% in the third
quarter of 1998 compared to the same period in 1997. The decrease in
year-to-date product gross margin resulted largely from significant pricing and
promotional actions taken by Compaq in the North American market during the
first and second quarters of 1998 to meet the channel inventory goals of the
16
<PAGE>
Company's Optimized Distribution Model and to respond to competitive pricing
conditions. Service gross margin as a percentage of service revenue increased
to 32.0% from 26.9% for the first nine months of 1998 and 1997, respectively,
and increased to 31.4% from 26.4% in the third quarter of 1998 compared to the
same period in 1997. The increase in service gross margin is primarily
attributable to the acquisition of Digital.
OPERATING EXPENSES
Compaq's selling, general and administrative expense increased to 16.8% of
revenue year-to-date compared with 12.1% for the same period in 1997. Selling,
general and administrative expense increased to 18.0% of revenue in the third
quarter compared with 12.2% in the same period of 1997. The increase in
Compaq's selling, general and administrative expense as a percentage of revenue
is mainly due to the acquisition of Digital and the expected short-term
reductions in revenue described above. Historically, Digital has maintained a
higher cost structure than Compaq. Compaq anticipates that for the remainder of
1998, selling, general and administrative expense will increase in absolute
dollars over the prior year primarily due to the impact of Digital's existing
cost structure. However, Compaq plans to achieve a more competitive cost
structure and reduce expenses going forward through the continued implementation
of its restructuring plans, which include initiatives to integrate the
operations of the combined companies, consolidate duplicative facilities, and
significantly reduce overhead.
Research and development costs increased to 4.5% and 4.9% of revenue for
the nine months and three months ended September 30, 1998, respectively,
compared to 3.5% and 3.3% in the corresponding periods of 1997. The increase in
research and development costs is primarily attributable to the acquisition of
Digital. Compaq is committed to maintaining a significant level of research and
development investment in support of both current operations and the
introduction of leadership technologies and products for the future.
PURCHASED IN-PROCESS TECHNOLOGY
Upon consummation of the Digital acquisition in the second quarter of 1998,
Compaq immediately expensed $3.2 billion representing purchased in-process
technology that had not yet reached technological feasibility and had no
alternative future use (see Note 2 to Consolidated Financial Data). The value
was determined by estimating the costs to develop the purchased in-process
technology into commercially viable products, estimating the resulting net cash
flows from such projects, and discounting the net cash flows back to their
present values. The discount rate includes a factor that takes into account the
uncertainty surrounding the successful development of the purchased in-process
technology.
The resulting net cash flows from such projects are based on Compaq
management's estimates of revenues, cost of sales, research and development
costs, selling, general and administrative costs, and income taxes from such
projects. These estimates are based on the following assumptions:
The estimated revenues project average compounded annual revenue
growth rates of 8% to 39% during 1998-2001, depending on the product
areas. For instance, UNIX/Open VMS compounded annual growth rates are
8% and storage rates are 39%. Estimated total revenues from the
purchased in-process product areas peak in the year 2001 and decline
rapidly in 2002-2005 as other new products are expected to enter the
market. These projections are based on Compaq management's estimates
of market size and growth (that are supported by independent market
data), expected trends in technology (such as new families of products
in the external storage product area) and the nature and expected
timing of new product introductions by Digital and its competitors.
These estimates also include growth related to Compaq utilizing
certain Digital technologies in conjunction with Compaq's products,
Compaq's marketing and distributing the resulting products through
Compaq's resellers and Compaq's enhancing the market's response to
Digital's products by providing incremental financial support and
stability.
17
<PAGE>
The estimated cost of sales as a percentage of revenues is expected to
be lower than Digital's on a stand-alone basis (66% in fiscal 1997),
primarily due to Compaq's expected ability to achieve more favorable
pricing from key component vendors and production efficiencies due to
economies of scale through combined operations. As a result of these
savings, the estimated cost of sales as a percentage of revenues is
expected to decrease by 1% to 6% from Digital's historical percentage,
depending on the product areas.
The combined company is expected to benefit from more favorable
pricing from key component vendors within three to six months and
production efficiencies due to economies of scale within six months to
a year of the closing of the transaction. As a result of these
savings, the estimated costs of sales as a percentage of revenues for
the UNIX/Open VMS and storage markets, the two most significant
product areas of purchased in-process technology, are expected to
decrease up to 6% from Digital's historical percentages.
The estimated selling, general and administrative costs are expected
to more closely approximate Compaq's cost structure (approximately 12%
of revenues in 1997), which is lower than Digital's cost structure
(approximately 24% of revenues in fiscal 1997). Cost savings are
expected to result primarily from the changes related to the
restructuring actions discussed in Note 3 to the Consolidated
Financial Data, as well as savings resulting from the distribution of
Digital's products through Compaq's resellers (i.e., sales of higher
volume products with lower direct selling costs) and efficiencies due
to economies of scale through combined operations (i.e., consolidated
marketing and advertising programs). These cost savings are expected
to be realized primarily in 1999 and thereafter. A significant portion
of these savings is attributable to the restructuring actions, half of
which are expected to occur in 1998 and half in 1999.
Discounting the net cash flows back to their present value is based on the
weighted average cost of capital (WACC). The WACC calculation produces the
average required rate of return of an investment in an operating enterprise,
based on various required rates of return from investments in various areas of
that enterprise. The WACC assumed for Compaq, as a corporate business
enterprise, is 12% to 14%. The discount rate used in discounting the net cash
flows from purchased in-process technology ranged from 22% for UNIX/OpenVMS, NT
Systems and storage to 40% for advanced development projects. This discount
rate is higher than the WACC due to the inherent uncertainties in the estimates
described above including the uncertainty surrounding the successful development
of the purchased in-process technology, the useful life of such technology, the
profitability levels of such technology and the uncertainty of technological
advances that are unknown at this time.
In addition, the value assigned to purchased in-process technology for
Microcom, Inc., which Compaq acquired in June 1997, was determined by
identifying research projects in areas including modems, remote access
technologies and others, for which technological feasibility has not been
established, estimating the costs to develop the purchased in-process technology
into commercially viable products, estimating the resulting cash flows from such
projects, and discounting the net cash flows back to the present value. The
discount rate includes a factor that takes into account the uncertainty
surrounding the successful development of the purchased in-process technology.
If these projects are not successfully developed, the revenue and profitability
of the combined company may be adversely affected in future periods.
Additionally, the value of other intangible assets acquired may become impaired.
Compaq expects to begin to benefit from the purchased in-process technology in
late 1998 and is continuously monitoring its development projects.
18
<PAGE>
RESTRUCTURING AND ASSET IMPAIRMENT CHARGES
In June 1998, Compaq's management approved restructuring plans, which
included initiatives to integrate operations of Compaq and Digital, consolidate
duplicative facilities, improve service delivery and reduce overhead. Total
accrued restructuring costs of $1.7 billion were recorded in the second quarter
related to these initiatives, $1.4 billion of which related to Digital and was
recorded as a component of the purchase price allocation and $286 million of
which related to Compaq which was charged to operations. The amounts recorded
related to Digital are based on management's estimate of those costs.
Management expects the Digital restructuring plans to be finalized by the end of
the year. Areas where management estimates may be revised primarily relate to
Digital employee separation and relocation costs, facility closure costs and
other exit costs. Adjustments to accrued restructuring costs related to Digital
will be recorded as an adjustment to the preliminary purchase price allocation.
Accrued restructuring costs recorded in June 1998 included $1.1 billion
($999 million for Digital and $132 million for Compaq) representing the cost of
involuntary employee separation benefits related to approximately 19,700
employees worldwide (approximately 14,700 Digital employees and 5,000 Compaq
employees). Employee separation benefits include severance, medical and other
benefits. Employee separations will affect the majority of business functions,
job classes and geographies, with a majority of the reductions occurring in
North America and Europe. The restructuring plans also included costs totaling
$414 million (approximately $272 million related to Digital and $142 million
related to Compaq) associated with the closure of 13.2 million square feet of
office, distribution and manufacturing space, principally in North America and
Europe. Other restructuring costs included $99 million related to the
relocation of Digital employees, with the majority of this amount attributable
to relocations in North America and Europe, and $100 million primarily related
to costs of terminating certain Digital contractual obligations. Compaq expects
that most of the restructuring actions related to the plans will be completed by
June 1999.
The accrued restructuring costs and amounts charged against the provision
as of September 30, 1998, were as follows (dollars in millions):
<TABLE>
<CAPTION>
BEGINNING CASH REMAINING
COMPAQ DIGITAL ACCRUAL EXPENDITURES ACCRUAL
-------- ------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Employee separations $ 132 $ 999 $ 1,131 $ (86) $ 1,045
Facility closure costs 142 272 414 (23) 391
Relocation - 99 99 - 99
Other exit costs 12 88 100 (1) 99
-------- ------------- ---------- ------------ ----------
Total accrued restructuring costs $ 286 $ 1,458 $ 1,744 $ (110) $ 1,634
======== ============= ========== ============ ==========
Number of employee separations
due to restructuring actions 4,603
============
</TABLE>
The total net headcount reduction for the quarter ended September 30, 1998,
including attrition, restructuring and selective hiring, was approximately
5,400.
During the second quarter of 1998, Compaq also recorded a $107 million
charge related to asset impairments. The asset impairments resulted from the
writedown to fair market value, less costs to sell, for assets taken out of
service and held for sale or disposal. The majority of this charge relates to
the impairment of $74 million of intangible assets associated with the
acquisition of a company during 1995 that developed, manufactured, and supplied
fast ethernet hubs, switches and related products. In May 1998, management
decided to close the manufacturing facility and abandon the technologies
acquired through this acquisition and discontinue all related products.
Management anticipates that additional asset impairments may result in the
future as restructuring plans are implemented and additional assets are taken
out of service and held for sale or disposal. Additional increases in
depreciation expense may occur as asset lives are adjusted as a result of the
integration process.
19
<PAGE>
Compaq's selling, general and administrative costs are expected to decrease in
the future through the continued implementation of the Company's restructuring
plans.
OTHER ITEMS
Compaq had other income, net, of $56 and $23 million for the nine months
ended September 30, 1998 and 1997 and other expense, net, of $18 million in the
third quarter of 1998 and other income, net, of $4 million in the third quarter
of 1997. This increase for the nine months was primarily due to an increase in
interest and dividend income related to greater cash and short-term investment
balances, partially offset by increased interest expense and the minority
interest dividend paid to Digital preferred shareholders. Other expense, net,
for the third quarter of 1998 relates to higher interest expense associated with
hedging and currency losses recognized during the period, as well as the
inclusion of the minority interest dividend paid to Digital preferred
shareholders, and lower interest income due to the use of cash related to the
Digital acquisition.
LIQUIDITY AND CAPITAL RESOURCES
Compaq's working capital decreased to $4.4 billion at September 30, 1998,
compared to $6.8 billion at December 31, 1997, primarily as a result of the
acquisition of Digital, completion of a tender offer for the Digital notes and
debentures and actions associated with accrued restructuring costs.
Compaq's cash, cash equivalents and short-term investments decreased to
$4.4 billion at September 30, 1998, from $6.8 billion at December 31, 1997,
primarily due to the cash payment made to acquire Digital net of cash received
in the acquisition, and completion of a tender offer for the Digital notes and
debentures. From time to time, Compaq may sell accounts receivables when it is
economically beneficial to do so. Accounts receivable sold in the third quarter
of 1998 were not significant and for the quarter ended December 31, 1997 were
$1.1 billion. Inventory levels increased to $2.1 billion at September 30, 1998,
compared to $1.6 billion at December 31, 1997, primarily due to the acquisition
of Digital partially offset by changes in production planning as a result of
Compaq's transition to the Optimized Distribution Model. For the nine months
ended September 30, 1998, cash expenditures for restructuring activities were
$110 million. Future cash expenditures for currently planned restructuring
activities are estimated to be $1.6 billion.
In May 1998, Compaq implemented a systematic stock repurchase program to
acquire up to 100 million shares of Compaq's common stock. Compaq repurchased
approximately 6.4 million shares through September 30, 1998, for approximately
$208 million. In June 1998, Compaq utilized approximately $4.5 billion in cash
to complete the acquisition of Digital ($1.4 billion net of cash acquired) and
$799 million, including interest, in cash to complete a tender offer for the
Digital notes and debentures. Cash used for the purchase of property, plant and
equipment, net, totaled $470 million for the nine months ended September 30,
1998. Compaq estimates that capital expenditures for land, buildings and
equipment during the remainder of 1998 will be approximately $220 million. In
June 1998, Compaq acquired a ten percent preferred equity position in a business
venture with Time Warner, Advance/Newhouse, MediaOne and Microsoft for
approximately $213 million in cash. The venture will provide Internet services
and intends to accelerate the delivery of broadband services over cable modems
to consumers and small businesses under the Road Runner brand.
Compaq currently expects to fund expenditures for capital requirements as
well as liquidity needs from a combination of available cash balances,
internally generated funds and financing arrangements. Compaq from time to time
may borrow funds for actual or anticipated funding needs or because it is
economically beneficial to borrow funds instead of repatriating funds in the
form of dividends from Compaq's foreign subsidiaries. In addition, on October
3, 1998, Compaq entered into a one-year $1 billion unsecured revolving credit
20
<PAGE>
facility to replace a similar facility that expired on September 21, 1998.
Compaq also has a $3 billion syndicated credit facility that expires in
September 2002, which was unused at September 30, 1998. Compaq has established
a commercial paper program, supported by the syndicated credit facility, which
was unused at September 30, 1998. Compaq believes that these sources of credit
provide sufficient financial flexibility to meet future funding requirements.
Compaq continually evaluates the need to establish other sources of working
capital and will pursue those it considers appropriate based upon Compaq's needs
and market conditions.
Other planned uses of cash include the efforts to develop the purchased
in-process technology related to the Digital and Microcom acquisitions into
commercially viable products. This primarily consists of the completion of all
planning, designing, prototyping, high-volume manufacturing verification and
testing activities that are necessary to establish that a product can be
produced to meet its design specifications, including functions, features and
technical performance requirements. Bringing the purchased in-process
technology to market also includes developing firmware and diagnostic software,
device driver development, and testing the technology for compatibility and
interoperability with commercially viable products. As of the date of
acquisition, the estimated costs to be incurred to develop the Digital-related
purchased in-process technology into commercially viable products total
approximately $3.1 billion in the aggregate through the year 2005: $60 million
in 1998, $510 million in 1999, $660 million in 2000, $630 million in 2001, $520
million in 2002, $400 million in 2003, $210 million in 2004 and $90 million in
2005. In addition, the estimated costs to develop the Microcom purchased
in-process technology into commercially viable products is approximately $500
million from the date of acquisition through the year 2001.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (FAS 133). FAS 133 is effective January 1,
2000 for Compaq. FAS 133 requires that all derivative instruments be recorded
on the balance sheet at fair value. Changes in the fair value of derivatives
are recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. The ineffective portion of all
hedges will be recognized in current-period earnings.
Compaq is in the process of determining the impact that the adoption of FAS
133 will have on its earnings or statement of financial position.
21
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS
Compaq participates in a highly volatile industry that is characterized by
fierce industry-wide competition for market share. Industry participants
confront aggressive pricing practices, continually changing customer demand
patterns, growing competition from well-capitalized high technology and consumer
electronics companies, and rapid technological development carried out in the
midst of legal battles over intellectual property rights and the application of
antitrust laws. In accordance with the provisions of the Private Securities
Litigation Reform Act of 1995, the cautionary statements set forth below discuss
important factors that could cause actual results to differ materially from the
projected results contained in the forward-looking statements in this report.
Market Environment. Compaq expects the personal computer market to expand
in 1998 in line with third party research organizations' forecasts of unit
growth in the range of 15% to 16%, although the growth rate for this market is
expected to decrease in 1999 compared to 1998. The Company expects the
enterprise market to expand with the development of internet and intranet
enterprise applications and the corporate MIS migration from legacy systems to
client/server systems. This expansion represents an opportunity for Compaq's
services business to help enable customers to implement and manage these new
environments. With its acquisition of Tandem Computers Incorporated in the
third quarter of 1997 and the acquisition of Digital Equipment Corporation in
the second quarter of 1998, the Company confronts a challenge in building the
high-end UNIX solutions market while continuing to advance the sphere of
NT-based solutions to achieve the lowest cost of ownership and the highest
computing value for its customers. Although Compaq has programs, products and
services focused on meeting market demand, gaining market share profitably and
maintaining gross margins, Compaq's ability to achieve these goals is subject to
the risks set forth in this discussion.
Competitive Environment. Competition remains fierce in the information
technology industry with a large number of competitors vying for market share.
Competition creates an aggressive pricing environment, which continues to put
pressure on gross margins. A number of personal computer companies sell
directly to end users and, particularly in the U.S., direct sales have increased
as a percentage of the total personal computer market. Compaq has established a
variety of programs designed to increase its manufacturing, distribution, and
business process efficiencies to enable it to compete more effectively in its PC
business. Compaq sells directly to end users in its high-end business and its
service business. The success of its programs to increase its business
efficiencies depends upon Compaq's ability to continue its successful working
relationship with its resellers, to maintain and increase its service business,
to both predict and react quickly to market responses by its competitors, and to
continue the implementation of its Optimized Distribution Model, the goal of
which is to implement more efficient component supply, manufacturing, and
distribution strategies to increase overall efficiencies.
Risks of Newly Acquired Businesses. As a result of Compaq's acquisition of
Digital, it will expand its service offerings and enterprise solutions. This
expansion, however, includes a number of risks associated with Digital's
business. Compaq believes that the Digital acquisition will enhance its
operating results, but as with any significant acquisition or merger, it
confronts challenges in retaining key employees, maintaining key industry
alliances, synchronizing product roadmaps and business processes, and
integrating logistics, marketing, product development, services and
manufacturing operations to achieve greater efficiencies. In June 1998, Compaq
announced that its earnings in the second quarter would be at break even and
that the third quarter would be transitional, focused both on the integration of
Digital businesses and the achievement of synergies. In October 1998, Compaq
stated that the integration of Digital would continue through the fourth
quarter, with Compaq taking necessary actions to achieve additional synergies.
While Compaq intends to increase its service revenue through this acquisition,
there are risks associated with the service business, which include jeopardizing
Compaq's long-term relationships with third party resellers while it provides
services directly to end-user customers, as well as reducing service revenue in
22
<PAGE>
the short term due to the cancellation of Digital's existing service contracts
by Compaq's competitors. Compaq has also made certain estimates in connection
with the value of purchased in-process technology. If these projects are not
successfully developed, its future revenue and profitability may be adversely
affected and the value of other intangibles could be reduced. This risk is more
fully discussed under "Purchased In-Process Technology." Compaq plans to
continue to use strategic acquisitions and mergers to assist in the growth of
its business.
Third Party Relationships. Compaq works with third parties in strategic
alliances to facilitate product offerings, product development, and
compatibility, in various manufacturing, configuring and shipping capacities,
and as suppliers of components and services in non-core competencies. Although
it tries to achieve strong working relationships with parties who share its
industry goals and have adequate resources to fulfill their responsibilities,
these relationships lead to a number of risks. First, these companies may suffer
financial or operational difficulties that affect their performance, which could
lead to delays in product announcements and gaps in component supplies. Second,
major companies from which the Company purchases components or services (such as
Intel, Microsoft, Cisco and IBM) may be competitors in other areas, which could
affect pricing, new product development or future performance. Third,
difficulties in coordinating activities may lead to gaps in delivery and
performance of products. Finally, companies from which Compaq purchases
components may be subject to legal challenges that impede their ability to ship
their products in a timely manner. A number of regulatory authorities are
currently investigating allegations of violations of antitrust laws in the high
technology arena and the U.S. government has filed suit against Microsoft. Any
delays in the development or shipments of new products resulting from such legal
proceedings could delay Compaq's products as well as negatively impact customer
demand stemming from new product generations.
Inventory. In the event of a drop in worldwide demand for computer
products, lower-than-anticipated demand for one or more of Compaq's products,
difficulties in managing product transitions, or component pricing movements,
there could be an adverse impact on inventory levels, cash, and related
profitability.
Rapid Technology Cycles. Compaq believes the computer industry will
continue to drive rapid technology cycles. In planning product transitions, it
evaluates the speed at which customers are likely to switch to newer products.
The contrast between prices of old and new products, which is related to
component costs, is a critical variable in predicting customer decisions to move
to the next generation of products. Because of the lead times associated with
its volume production, should Compaq be unable to gauge the rate of product
transitions accurately, there could be an adverse impact on inventory levels,
cash, and profitability. In addition, as a result of the Tandem and Digital
acquisitions, Compaq is engaged in direct sales of computer systems with
software developed to meet customers' specific needs. The long-term nature of
such contracts exposes Compaq to risks associated with changing customer needs
and expectations.
Product Transitions. In each product cycle, Compaq confronts the risk of
delays in production that could impact sales of newer products while it manages
the inventory of older products and facilitates the sale of older inventory held
by resellers. To ease product transitions, Compaq carries out pricing actions
and marketing programs to increase sales by resellers. It provides currently for
estimated product returns and price protection that may occur under reseller
programs and under floor planning arrangements with third-party finance
companies. Should Compaq be unable to sell the inventory of older products at
anticipated prices, should it not anticipate pricing actions that are necessary,
or if dealers hold higher than expected amounts of inventory subject to price
protection at the time of planned price reductions, there could be a resulting
adverse impact on sales, gross margins, and profitability.
Systems Implementation. Compaq continues to focus on making business and
information management processes more efficient in order to increase customer
satisfaction, improve productivity and lower costs. In the event of a delay in
implementing improvements, there could be an adverse impact on inventory levels,
23
<PAGE>
cash and related profitability. In connection with these efforts, Compaq is
moving many of its systems from a legacy environment of proprietary systems to
client-server architectures as well as integrating systems from newly acquired
businesses. Integrating the systems at Digital and Tandem has further
complicated this process. Should the transition to new systems not occur in a
smooth and orderly manner, Compaq could experience disruptions in operations,
which could have an adverse financial impact.
Technology Standards and Key Licenses. Participants in the computer
industry generally rely on the creation and implementation of technology
standards to win the broadest market acceptance for their products. Compaq must
successfully manage and participate in the development of standards while
continuing to differentiate its products and services in a manner valued by
customers. While industry participants generally accept, and may encourage, the
use of their intellectual property by third parties under license, when
intellectual property owned by competitors or suppliers becomes accepted as an
industry standard, Compaq must obtain a license, purchase components utilizing
such technology from the owners of such technology or their licensees, or
otherwise acquire rights to use such technology, which could result in increased
costs. Compaq has entered into license agreements with key industry
participants. There can be no assurance that it will be able to negotiate terms
that give it a competitive market advantage under the license agreements that
are necessary to operate its business in the future.
Production Forecasts. In managing production, Compaq must forecast
customer demand for its products. Should the Company underestimate the supplies
needed to meet demand, it could be unable to meet customer demand. Should it
overestimate the supplies needed to meet customer demand, cash and profitability
could be adversely affected. Many of the components used in Compaq's products,
particularly microprocessors and memory, experience steep price declines over
their product lives. If the Company is unable to manage purchases and
utilization of such components efficiently to maintain low inventory levels
immediately prior to major price declines, it could be unable to take immediate
advantage of such declines to lower product costs, which could adversely affect
sales and gross margins. Furthermore, should prices for components increase
unexpectedly, Compaq's gross margin could be adversely affected.
Credit Risks. Compaq's primary means of distribution is through third-party
resellers. It continually monitors and manages the credit it extends to
resellers and attempts to limit credit risks by broadening distribution
channels, utilizing certain risk transfer arrangements and obtaining security
interests. Compaq's business could be adversely affected in the event that the
financial condition of third-party computer resellers erodes. Upon the financial
failure of a major reseller, the Company could experience disruptions in
distribution as well as a loss associated with the unsecured portion of any
outstanding accounts receivable. Geographic expansion, particularly
manufacturing operations in developing countries, such as Brazil and China, and
the expansion of sales into economically volatile areas such as Asia Pacific,
Latin America and other emerging markets, subject Compaq to a number of economic
and other risks, such as financial instability among resellers in these regions.
Compaq generally has experienced longer accounts receivable cycles in emerging
markets, in particular Asia Pacific and Latin America, when compared to U.S. and
European markets. In addition, geographic expansion subjects Compaq to
political and financial instability of the countries into which Compaq expands,
including currency devaluation and interest rate fluctuations. The Company
continues to evaluate business operations in these regions and attempt to take
measures to limit risks in these areas.
Year 2000 Compliance. The following disclosure is a Year 2000 readiness
disclosure statement pursuant to the Year 2000 Readiness and Disclosure Act.
Compaq's Year 2000 program is designed to minimize the possibility of
serious Year 2000 interruptions. Possible Year 2000 worst case scenarios
include the interruption of significant parts of Compaq's business as a result
of critical information systems failure or the failure of suppliers,
distributors or customers. Any such interruption may have a material adverse
impact on future results. Since their possibility cannot be eliminated, Compaq
24
<PAGE>
is incorporating Year 2000 concerns into its contingency plans for dealing with
catastrophic events. In addition, Compaq is monitoring the need to develop
contingency plans to remediate information systems scheduled to be replaced by
systems renewal efforts in case delays in the installation schedule for the new
systems make remediation of the older systems necessary.
In 1997, Compaq established a task force to address its personal computer
product and customer concerns, and a separate task force to address its internal
information systems, including technology infrastructure and embedded technology
systems, and the compliance of its suppliers and distributors. In 1998, Compaq
integrated the Tandem and Digital task forces with those of its own so that the
two task forces now address the product and information systems and supplier and
distributor concerns for all three entities.
With respect to product readiness, the compliance definitions of Compaq,
Tandem and Digital remain in effect for most of the respective follow-on
products of each company. See "Item 1. Business - Year 2000 Transition" in
Compaq's Form 10-K for the year ended 1997 for the Compaq and Tandem compliance
definitions. Compaq defines Year 2000 compliance for Digital's products as
"products capable of accurately processing, providing, and/or receiving date
data from, into and between the twentieth and the twenty-first centuries, and
the years 1999 and 2000, including leap year calculations, when used in
accordance with the associated Digital product documentation and provided that
all hardware, firmware and software used in combination with such Digital
products properly exchange accurate date data with the Digital products." Older
systems sold by Digital may not be capable of meeting this definition. The
readiness status of Compaq, Tandem and Digital products is available on the
Compaq Year 2000 Web site at www.compaq.com/year2000. In addition to selling
-----------------------
tested products, Compaq also offers a range of Year 2000 readiness services.
Because there is no uniform definition of Year 2000 "compliance" and because all
customer situations cannot be anticipated, particularly those involving other
vendors' products, Compaq may see a decrease in demand or an increase in
warranty and other claims as a result of the Year 2000 transition. Such events,
should they occur, could have a material adverse impact on future results.
To date, most internal information systems and other infrastructure
areas including communication systems, building security systems and embedded
technologies in areas such as manufacturing processes have been identified,
assessed, and categorized for Year 2000 readiness as Priority 1, 2 and 3,
with 1 being critical, 2 being intermediate and 3 being non-critical. During
the third quarter, the milestones for achieving Year 2000 compliance for
these systems were adjusted to allow for the complexities of the Digital
integration. Priority 1 and Priority 2 items will be Year 2000 compliant by
June 30, 1999, and Priority 3 items are to be ready by December 31, 1999 or
replaced or left undetermined. To date, Compaq has completed remediation on
approximately 20% of the Priority 1 items, and expects to be 90% complete by the
end of March 1999. Specific contingency plans are being made with respect to
any Priority 1 listings, which cannot be tested or determined to be compliant.
Also, key suppliers and distributors have been identified and Compaq is in the
process of communicating with them about their Year 2000 readiness plans and
progress. In each of these areas, various testing and readiness determination
methodologies are being used, based on what is appropriate for each type of
system, supplier or distributor. Specific contingency plans are being made with
respect to any Priority 1 listings that cannot be tested or determined to be
compliant.
Coincident with Year 2000 readiness efforts, Compaq is rapidly integrating
the Digital operations worldwide. This includes rationalization of internal
systems, facilities and other infrastructure. Compaq is also carrying out major
planned enterprise-wide internal system renewal efforts. These planned major
enterprise-wide system renewals have been incorporated into the Year 2000
readiness effort. Installations at several locations have been completed and
are operational. Future installations are scheduled through the end of 1999.
Based on Compaq's ongoing evaluation of internal information and other systems,
the integration of Digital operations, and system renewal roll-out schedules,
Compaq does not anticipate significant business interruption. However, should
25
<PAGE>
business interruption occur, there could be a material adverse impact on future
results. With respect to suppliers and distributors, because Compaq's readiness
depends upon their cooperation in identifying, disclosing and remediating
problems, failures on the part of suppliers and distributors remain a
possibility and could have a material adverse impact on future results.
The costs of the readiness program for products are primarily costs of
existing internal resources largely absorbed within existing engineering
spending levels. These costs were incurred primarily in 1997 and earlier years
and were not broken out from other product engineering costs. No future
material product readiness costs are anticipated. The costs of the readiness
program for internal information and other systems and suppliers and
distributors are a combination of incremental external spending and use of
existing internal resources and expertise. Over the life of the internal
readiness effort, these costs are estimated to be $120 million, of which
approximately one-third has been incurred to date. The costs of implementing
enterprise-wide system renewal efforts are not included in this estimate.
Milestones and implementation dates and the costs of Compaq's Year 2000
readiness program are subject to change based on new circumstances that may
arise or new information becoming available, which change underlying assumptions
or requirements.
Euro Conversion. Effective January 1, 1999, 11 of the 15 member countries
of the European Union have agreed to adopt the euro as their common legal
currency. On that date, the participating countries are scheduled to establish
fixed euro conversion rates between their existing sovereign currencies and the
euro. The euro will then trade on currency exchanges and be available for
non-cash transactions. The participating countries will issue sovereign debt
exclusively in euros, and will redenominate outstanding sovereign debt. At that
time, the authority to direct monetary policy for the participating countries,
including money supply and official interest rates for the euro, will be
exercised by the new European Central Bank.
In 1997, Compaq established a euro task force to address its PC product and
customer concerns, and a separate task force to address Compaq's internal
information systems. Compaq hopes to achieve euro product readiness and enable
internal information systems to conduct electronic transactions in the euro
within or before the first quarter of 1999. The schedule and details of
subsequent phases of internal systems readiness is under review, but will comply
with implementation schedules set by the European Commission. We do not believe
the costs of the overall effort will have a material adverse impact on future
results. However, since all customer situations cannot be anticipated, Compaq
may see a decrease in demand or an increase in warranty and other claims as a
result of the euro implementation. Such events, should they occur, could have a
material adverse impact on future results. Based on Compaq's ongoing evaluation
of internal information systems, integration of Digital operations and system
renewal roll-out schedules, Compaq does not anticipate significant business
interruption. However, should a significant business interruption occur, there
could be a material adverse impact on future results. With respect to
compliance by suppliers and distributors, failures remain a possibility and
could have a material adverse impact on future results.
Milestones and implementation dates and the costs of Compaq's euro
readiness program are subject to change based on new circumstances that may
arise or new information becoming available, which changes underlying
assumptions or requirements.
Tax Rate. Compaq currently has a 26% effective tax rate, before the effect
of non-deductible purchased in-process technology and merger-related costs and
expects this rate will continue at approximately the same level throughout 1998.
Compaq benefits from a tax holiday in Singapore that expires in 2001, with a
potential extension to August 2004 if certain cumulative investment levels and
other conditions are met. Compaq's tax rate is heavily dependent upon the
proportion of earnings that is derived from its Singaporean manufacturing
subsidiary and its ability to reinvest those earnings permanently outside the
U.S. If the earnings of this subsidiary as a percentage of Compaq's total
earnings were to decline significantly from current levels, or should Compaq's
26
<PAGE>
ability to reinvest these earnings be reduced, Compaq's effective tax rate would
increase. In addition, should Compaq's intercompany transfer pricing with
respect to its Singaporean manufacturing subsidiary require significant
adjustment due to audits or regulatory changes, Compaq's overall effective tax
rate could increase.
Currency Fluctuations. Compaq's risks associated with currency
fluctuations are discussed in Item 3 below.
Because of the foregoing factors, as well as other variables affecting
Compaq's operating results, past financial performance should not be considered
a reliable indicator of future performance, and investors should not use
historical trends to anticipate results or trends in future periods.
ITEM 3. MARKET RISKS
Compaq is exposed to market risks, which include changes in U.S. and
international interest rates as well as changes in currency exchange rates as
measured against the U.S. dollar and each other. It attempts to reduce these
risks by utilizing financial instruments, including derivative transactions,
pursuant to company policies.
Compaq uses market valuations and value-at-risk valuation methods to assess
market risk of its financial instruments and derivative portfolios. It uses J.P.
Morgan's RiskMetrics (TM) to estimate the value-at-risk based on estimates of
volatility and correlation of market factors drawn from J.P. Morgan's
RiskMetrics (TM) data sets as of June 30, 1998. Its measured value-at-risk
from holding derivative and other financial instruments, using a 95% confidence
level and assuming normal market conditions at June 30, 1998, was immaterial.
The value of the U.S. dollar affects Compaq's financial results. Changes
in exchange rates may positively or negatively affect Compaq's sales (as
expressed in U.S. dollars), gross margins, operating expenses, and retained
earnings. Compaq engages in hedging programs aimed at limiting in part the
impact of currency fluctuations. Using primarily forward exchange contracts,
Compaq hedges those assets and liabilities that, when remeasured according to
generally accepted accounting principles, impact the income statement. For
certain markets, particularly Latin America, Compaq has determined that ongoing
hedging of non-U.S. dollar net monetary assets is not cost effective and instead
attempts to minimize currency exposure risk through working capital management.
There can be no assurance that such an approach will be successful, especially
in the event of a significant and sudden decline in the value of local
currencies. From time to time, Compaq purchases foreign currency option
contracts as well as short-term forward exchange contracts to protect against
currency exchange risks associated with the anticipated sales of Compaq's
international marketing subsidiaries, with the exception of Latin America and
certain other subsidiaries that reside in countries in which such activity would
not be cost effective or local regulations preclude this type of activity.
These hedging activities provide only limited protection against currency
exchange risks. Factors that could impact the effectiveness of Compaq's hedging
programs include accuracy of sales forecasts, volatility of the currency
markets, and availability of hedging instruments. All currency contracts that
are entered into by Compaq are components of hedging programs and are entered
into for the sole purpose of hedging an existing or anticipated currency
exposure, not for speculation. Although Compaq maintains these programs to
reduce the impact of changes in currency exchange rates, when the U.S. dollar
sustains a strengthening position against currencies in which Compaq sells
products or a weakening exchange rate against currencies in which Compaq incurs
costs, Compaq's sales or costs are adversely affected.
27
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 10 to Consolidated Financial Data.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S> <C>
(a) Exhibit No. Description
$1,000,000,000 Credit Agreement dated as of October 2, 1998, among
10.21 Compaq Computer Corporation, the banks signatory thereto and Bank of America
National Trust and Savings Association, as Administrative Agent.
10.22 Amendment No. 1 to $3,000,000,000 Credit Agreement dated as of October
2, 1998, among Compaq Computer Corporation, the banks signatory thereto and Bank
of America National Trust and Savings Association, as Administrative Agent.
27 EDGAR financial data schedule.
(b) (i) Report on Form 8-K dated July 15, 1998, containing Compaq's news
release dated July 15, 1998, with respect to its earnings release for the second
quarter of 1998.
(ii) Report on Form 8-K/A dated August 14, 1998, amending Compaq's Form 8-K,
dated June 11, 1998, to include pro forma combined financial statements to
reflect the acquisition of Digital Equipment Corporation.
(iii) Report on Form 8-K/A dated August 14, 1998, amending Compaq's Form
8-K, dated June 11, 1998, to amend the pro forma combined financial statements
previously filed that reflected the acquisition of Digital Equipment
Corporation.
(iv) Report on Form 8-K dated October 14, 1998, containing Compaq's news
release dated October 14, 1998, with respect to its earnings release for the
third quarter of 1998.
All other items specified by Part II of this report are inapplicable and accordingly have been omitted.
</TABLE>
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
November 11, 1998 COMPAQ COMPUTER CORPORATION
/s/ Earl L. Mason
-------------------------------------------------
Earl L. Mason, Senior Vice President
and Chief Financial Officer
(as authorized officer and as principal
financial officer)
29
EXHIBIT 10.21
================================================================================
U.S. $1,000,000,000
REVOLVING CREDIT AGREEMENT
(364-DAY)
DATED AS OF OCTOBER 2, 1998
AMONG
COMPAQ COMPUTER CORPORATION,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
AS ADMINISTRATIVE AGENT AND AS INTERNET AGENT,
---------------------------------------------
THE CHASE MANHATTAN BANK,
CITIBANK, N.A.
AND
NATIONSBANK OF TEXAS, N.A.
AS SYNDICATION AGENTS,
---------------------
AND
THE BANKS PARTY HERETO
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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<S> <C>
ARTICLE I DEFINITIONS 1
1.01 Certain Defined Terms 1
1.02 Other Interpretive Provisions 13
1.03 Accounting Principles 14
ARTICLE II THE CREDITS 14
2.01 Amounts and Terms of Commitments 14
2.02 Notes 15
2.03 Procedure for Revolving Loan Borrowings 15
2.04 Conversion and Continuation Elections for Revolving Loan Borrowings 16
2.05 Procedure for Swingline Borrowings 18
2.06 Increase and Extension of Commitments 19
2.07 Ratable Reduction or Termination of Commitments 21
2.08 Non-Ratable Reduction or Termination of Commitments 21
2.09 Optional and Mandatory Prepayments 22
2.10 Repayment 23
2.11 Interest 23
2.12 Fees 23
2.13 Computation of Fees and Interest 24
2.14 Interest Rate Determination and Protection 24
2.15 Payments by the Company 25
2.16 Payments by the Banks to the Agent 26
2.17 Sharing of Payments, Etc. 26
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 27
3.01 Taxes 27
3.02 Breakage Costs 28
3.03 Increased Costs 29
3.04 Illegality 30
3.05 Reserves on Offshore Loans 30
3.06 Replacement of Bank; Termination of Bank 30
3.07 Reallocation of Commitments in Event of Merger, Etc. 32
3.08 Certificates of Banks 33
3.09 Survival 33
ARTICLE IV CONDITIONS PRECEDENT 33
4.01 Conditions of Initial Loans 33
4.02 Conditions to All Borrowings 34
<PAGE>
ARTICLE V REPRESENTATIONS AND WARRANTIES 35
5.01 Corporate Existence 35
5.02 Corporate Power 35
5.03 Authorization and Approvals 35
5.04 Enforceable Obligations 35
5.05 Financial Statements 36
5.06 Litigation 36
5.07 Regulation U 36
5.08 Investment Company Act 36
5.09 ERISA 36
5.10 Holding Company 36
5.11 Environmental Condition 37
5.12 No Material Adverse Change 37
ARTICLE VI AFFIRMATIVE COVENANTS 37
6.01 Compliance with Laws Etc. 37
6.02 Reporting Requirements 37
6.03 Use of Proceeds 39
6.04 Maintenance of Insurance 39
6.05 Corporate Existence Etc. 39
6.06 Visitation Rights 39
ARTICLE VII NEGATIVE COVENANTS 40
7.01 Leverage Ratio 40
7.02 Liens 40
ARTICLE VIII EVENTS OF DEFAULT 40
8.01 Event of Default 40
8.02 Remedies 41
8.03 Rights Not Exclusive 42
ARTICLE IX THE AGENT 42
9.01 Appointment and Authorization 42
9.02 Delegation of Duties 42
9.03 Liability of Agent 42
9.04 Reliance by Agent 43
9.05 Notice of Default 43
9.06 Credit Decision 44
9.07 Indemnification 44
9.08 Agent in Individual Capacity 45
9.09 Successor Agent 45
9.10 Withholding Tax 45
9.11 Co-Agents; Internet Agents 47
ii
<PAGE>
ARTICLE X MISCELLANEOUS 47
10.01 Amendments and Waivers 47
10.02 Notices 48
10.03 No Waiver: Cumulative Remedies 48
10.04 Costs and Expenses 49
10.05 Indemnity 49
10.06 Payments Set Aside 49
10.07 Binding Effect; Assignments; Participations 50
10.08 Set-off 51
10.09 Interest 52
10.10 Confidentiality 53
10.11 Preservation of Certain Matters 54
10.12 Notification of Addresses, Lending Offices Etc. 54
10.13 Counterparts 54
10.14 Severability 54
10.15 Governing Law; Jurisdiction 54
10.16 WAIVER OF JURY TRIAL 55
10.17 ENTIRE AGREEMENT 55
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SCHEDULES
Schedule 2.01 Commitments
Schedule 10.02 Notice Addresses, Payment and Lending Offices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D-1 Form of Opinion of Vice President and Assistant General Counsel of the Company
Exhibit D-2 Form of Opinion of Senior Counsel of the Company
Exhibit E Form of Note
Exhibit F Form of Assignment and Acceptance
</TABLE>
iv
<PAGE>
REVOLVING CREDIT AGREEMENT
(364-DAY)
dated as of October 2, 1998
COMPAQ COMPUTER CORPORATION, a Delaware corporation (the "Company"), the
several financial institutions from time to time party to this Agreement
(collectively, the "Banks", and individually, a "Bank"), Bank of America
National Trust and Savings Association, as administrative agent and as Internet
agent for the Banks, The Chase Manhattan Bank, Citibank, N.A. and NationsBank of
Texas, N.A., as syndication agents, agree as follows.
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the following
-----------------------
meanings:
"Acquiring Entity" has the meaning specified in Section 3.07.
------------------
"Adjusted CD Rate" means, for any Interest Period for each Adjusted CD Rate
-----------------
Revolving Loan comprising part of the same Borrow-ing or an Adjusted CD Rate
Swingline Loan, as the case may be, an interest rate per annum equal to the sum
of:
(a) the rate per annum obtained by dividing (i) the rate of interest
determined by the Agent to be the average (rounded upward to the nearest
whole multiple of 1/100 of 1% per annum, if such average is not such a
multiple) of the consensus bid rate determined by each of the Reference
Banks, in the case of Adjusted CD Rate Revolving Loans, or the Swingline
Bank, in the case of an Adjusted CD Rate Swingline Loan, for the bid rates
per annum, at 9:00 a.m. (Houston time) (or as soon thereafter as
practicable) on the first day of such Interest Period, of New York
certificate of deposit dealers of recognized standing selected by such
Reference Bank or the Swingline Bank, as applicable, for the purchase at
face value of certificates of deposit of such Reference Bank or the
Swingline Bank, as applicable, in an amount substantially equal to such
Reference Bank's Adjusted CD Rate Revolving Loan comprising part of such
Borrowing, in the case of Adjusted CD Rate Revolving Loans, or the Adjusted
CD Rate Swingline Loan, in the case of an Adjusted CD Rate Swingline Loan,
and with a maturity equal to such Interest Period (provided that, if bid
rate quotes from such dealers are not available to any Reference Bank or
the Swingline Bank, as applicable, such Reference Bank or the Swingline
Bank shall notify the Agent of a reasonably equivalent rate determined by
it on the basis of another source or sources selected by it), by (ii) a
percent-age equal to 100% minus the Adjusted CD Rate Reserve Percent-age
for such Interest Period (the "Certificate of Deposit Rate"), plus
---------------------------
(b) the Assessment Rate for such Interest Period.
1
<PAGE>
The Adjusted CD Rate for the Interest Period for each Adjusted CD Rate Revolving
Loan comprising part of the same Borrowing or an Adjusted CD Rate Swingline
Loan, as the case may be, shall be determined by the Agent on the basis of
applicable rates furnished to and received by the Agent as set forth above on
the first day of such Interest Period, subject however, to the provisions of
------- -------
Section 2.14.
"Adjusted CD Rate Revolving Loan" means a Revolving Loan which bears
-----------------------------------
interest at the Adjusted CD Rate plus the Applicable Margin.
"Adjusted CD Rate Reserve Percentage" for any Interest Period for each
-------------------------------------
Adjusted CD Rate Revolving Loan comprising part of the same Borrowing or an
Adjusted CD Rate Swingline Loan, as the case may be, means the reserve
percentage applicable on the first day of such Interest Period under regulations
issued from time to time by the FRB for determin-ing 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 consisting of or including U.S. dollar nonpersonal time deposits in
the United States with a maturity equal to such Interest Period.
"Adjusted CD Rate Swingline Loan" means a Swingline Loan which bears
----------------------------------
interest at the Adjusted CD Rate plus the Applicable Margin.
"Affiliate" means, as to any Person, any other Person which, directly or
---------
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" means BofA in its capacity as administrative agent for the Banks
-----
hereunder, and any successor administrative agent.
"Agent-Related Persons" means BofA and any successor administrative agent
----------------------
arising under Section 9.09, together with their respective Affiliates
(including, in the case of BofA, the Arranger), and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.
"Agent's Payment Office" means the address for payments set forth on
------------------------
Schedule 10.02 or such other address as the Agent may from time to time specify.
- --------------
"Agreement" means this Revolving Credit Agreement.
---------
"Applicable Fee Amount" means, for any date, 0.060 percent per annum.
-----------------------
"Applicable Margin" means, on any date and with respect to each CD Loan or
------------------
Offshore Loan outstanding on such date, 0.230 percent per annum; provided, that
--------
at any time as the aggregate outstanding principal amount of Revolving Loans,
together with the aggregate outstanding principal amount of "Revolving Loans"
under, and as that term is defined in, the 5-Year Credit Agreement, exceeds 50%
of the combined Commitments of all the Banks, together with the combined
"Commitments" of all the lenders under, and as that term is defined in, the
5-Year Credit Agreement (and any time after the termination of commitments to
lend under Section 8.02(a) or under Section 2.09(b), or of the 5-Year Credit
Agreement, as applicable), the Applicable Margin in respect of CD Loans and
Offshore Loans hereunder shall be increased by an additional 0.10 percent per
annum.
2
<PAGE>
"Arranger" means BancAmerica Securities, Inc., a Delaware corporation.
--------
"Assessment Rate" for any Interest Period for each Adjusted CD Rate
----------------
Revolving Loan comprising part of the same Borrowing or an Adjusted CD Rate
Swingline Loan, as the case may be, means the rate determined by the Agent as
equal to the annual assessment rate in effect on the first day of such Interest
Period payable to the FDIC by a member of the Bank Insurance Fund that is
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification within the meaning of 12
C.F.R. 327.3) for insuring time deposits at offices of such member in the United
States; or, in the event that the FDIC shall at any time hereafter cease to
assess time deposits based upon such classifications or successor
classifications, equal to the maximum annual assessment rate in effect on such
day that is payable to the FDIC by commercial banks (whether or not applicable
to any particular Bank) for insuring time deposits at offices of such banks in
the United States.
"Assignment and Acceptance" means an assignment and acceptance agreement
--------------------------
substantially in the form of Exhibit F.
---------
"Attorney Costs" means and includes the reasonable fees and disbursements
---------------
of any law firm or other external counsel and the reasonable allocated cost of
internal counsel.
"Bank" has the meaning specified in the introductory clause hereto.
----
References to the "Banks" shall include references to BofA in its capacity as
the Swingline Bank. For purposes of clarification only, to the extent that BofA
may have any rights or obligations in addition to those of the Banks due to its
status as the Swingline Bank, its status as such will be specifically
referenced.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
----------------
U.S.C. 101, et seq.).
-------
"Base Loan" means any Base Rate Revolving Loan or any Base Rate Swingline
---------
Loan.
"Base Rate" means, for any day, the higher of: (a) 1/2% above the latest
---------
Federal Funds Rate, and (b) the rate of interest in effect for such day as
publicly announced from time to time by the Bank which is the Agent at its
principal office, as its "prime" or "reference" rate (or comparable rate, if
such Bank does not so designate a "prime" or "reference" rate). The prime or
reference rate is a rate set by such Bank based upon various factors including
such Bank's costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate. Any change in the prime or
reference rate announced by such Bank shall take effect at the opening of
business on the day specified in the public announcement of such change.
3
<PAGE>
"Base Rate Revolving Loan" means a Revolving Loan that bears interest based
------------------------
on the Base Rate.
"Base Rate Swingline Loan" means a Swingline Loan which bears interest
--------------------------
based on the Base Rate.
"BofA" means Bank of America National Trust and Savings Association, a
----
national banking association.
"Borrowing" means a borrowing hereunder consisting of (a) Revolving Loans
---------
of the same Type made to the Company on the same day by the Banks, or (b) a
Swingline Loan made to the Company by the Swingline Bank, in each case pursuant
to Article II.
"Borrowing Date" means any date on which a Borrowing occurs under Section
---------------
2.03 or 2.05.
"Business Day" means (i) any day of the year except Saturday, Sunday and
-------------
any day on which banks are required or authorized to close in New York City or
San Francisco and (ii) if the applicable Business Day relates to any Offshore
Loan, any day which is a "Business Day" described in clause (i) and which is
also a day for trading by and between banks in the London interbank Eurodollar
market.
"Certificate of Deposit Rate" has the meaning specified in the definition
----------------------------
of "Adjusted CD Rate."
"CD Lending Office" means, with respect to any Bank, the office of such
------------------
Bank specified as its "CD Lending Office" opposite its name on Schedule 10.02 or
--------------
in the document pursuant to which it became a party hereto as contemplated by
Section 2.06, 3.06(a), 3.07 or 10.07(c) (or, if no such office is specified, its
Domestic Lending Office) or such other office of such Bank as such Bank may from
time to time specify to the Company and the Agent.
"CD Loan" means any Adjusted CD Rate Revolving Loan or any Adjusted CD Rate
-------
Swingline Loan.
"Change in Control" means the direct or indirect acquisition by any person
-----------------
(as such term is used in Section 13(d) and Section 14(d)(2) of the Exchange
Act), or related persons constituting a group (as such term is used in Rule
13d-5 under the Exchange Act), of (a) beneficial ownership of issued and
outstanding shares of voting stock of a corporation or other entity, the result
of which acquisition is that such person or such group possesses in excess of
50% of the combined voting power of all then-issued and outstanding voting stock
of such corporation or other entity, or (b) the power to elect, appoint, or
cause the election or appointment of at least a majority of the members of the
board of directors of such corporation or other entity.
4
<PAGE>
"Closing Date" means the date on which all conditions precedent set forth
------------
in Section 4.01 are satisfied or waived by all Banks.
"Code" means the Internal Revenue Code of 1986, and regulations promulgated
----
thereunder.
"Commitment", as to each Bank, has the meaning specified in Section
----------
2.01(a).
"Commitment Percentage" means, as to any Bank at any time, the percentage
----------------------
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of such Bank's Commitment divided by the combined Commitments of all Banks.
"Company" means Compaq Computer Corporation, a Delaware corporation and
-------
successors thereto.
"Compliance Certificate" means a certificate substantially in the form of
-----------------------
Exhibit C.
- ---------
"Consolidated Net Worth" means at any date the consoli-dated stockholders'
----------------------
equity of the Company and its consolidated Subsidiaries (excluding any
Redeemable Preferred Stock of the Company).
"Consolidated Tangible Net Worth" means at any date Consolidated Net Worth
--------------------------------
less the amount, if any, in excess of $25,000,000 of consolidated "intangible
assets" (as defined below) included in determining Consolidated Net Worth. For
the purposes of this definition, "intangible assets" means the sum of (i) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of assets of a going concern business made within twelve months after
the acquisition of such business) subsequent to December 31, 1996 in the book
value of any asset owned by the Company or a Subsidiary of the Company and (ii)
all unamortized goodwill, patents, trademarks, service marks, trade names,
copy-rights, organization or developmental expenses and other intangible items.
"Conversion/Continuation Date" means any date on which, under Section 2.04,
----------------------------
the Company (a) converts Revolving Loans of one Type to another Type, or (b)
continues as Revolving Loans of the same Type, but with a new Interest Period,
Revolving Loans having Interest Periods expiring on such date.
"Debt" of any Person means, at any date, without duplica-tion, (i)
----
obligations for the repayment of money borrowed which are or should be shown on
a balance sheet as debt in accordance with GAAP, (ii) obligations as lessee
under leases which, in accordance with GAAP, are capital leases, (iii)
non-contingent reimbursement and payment obligations with respect to letters of
credit, bank guaranties or banker's acceptances, and (iv) guaranties of payment
or collection of any obligations described in clauses (i), (ii) and (iii) of
other Persons; provided, that clauses (i), (ii) and (iii) include, in the case
--------
of obligations -of the Company or any Subsidiary, only such obligations as are
or should be shown as debt or capital lease lia-bi-lities on a consolidated
balance sheet in accordance with GAAP; and provided, further, that the liability
-------- -------
of any Person as a general partner of a partner-ship for Debt of such
partnership, if the partnership is not a Subsidiary of such Person, shall not
constitute "Debt."
5
<PAGE>
"Default" means any event or circumstance which, with the giving of notice,
-------
the lapse of time, or both, would (if not cured or otherwise remedied during
such time) constitute an Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of the United States.
------- ------- -
"Domestic Lending Office" means, with respect to any Bank, the office of
-------------------------
such Bank specified as its "Domestic Lending Office" opposite its name on
Schedule 10.02 or in the document pursuant to which it became a party hereto as
- --------------
contemplated by Section 2.06, 3.06(a), 3.07 or 10.07(c) or such other office of
such Bank as such Bank may from time to time specify to the Company and the
Agent.
"Eligible Assignee" means (i) a commercial bank organized under the laws of
-----------------
the United States, or any state thereof, and having a combined capital and
surplus of at least $200,000,000; (ii) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development or a political subdivision of any such country, and
having a combined capital and surplus of at least $200,000,000, provided that,
--------
unless otherwise agreed to by the Agent and the Company, such bank is acting
through a branch or agency located in the United States; and (iii) a Person that
is primarily engaged in the business of commercial banking and that is (A) a
Subsidiary of a Bank, (B) a Subsidiary of a Person of which a Bank is a
Subsidiary, or (C) a Person of which a Bank is a Subsidiary.
"Environment" or "Environmental" has the meanings set forth in the
----------- -------------
Comprehensive Environmental Response, Compensation and Liability Act at 42
U.S.C. 9601(8) (1982).
"Environmental Protection Statute" means any United States local, state or
---------------------------------
federal, or any foreign, law, statute, regulation, order, consent decree or
other agreement or Requirement of Law pertaining to the protection or regulation
of the Environment, including, without limitation, those laws, statutes,
regulations, orders, decrees, agreements and other Requirements of Law relating
to the disposal, cleanup, production, storing, refining, handling, transferring,
processing or transporting of Hazardous Waste, Hazardous Substances or any
pollutant or contaminant, wherever located.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
-----
regulations promulgated thereunder.
"Eurocurrency Liabilities" has the meaning assigned to that term in
-------------------------
Regulation D of the FRB.
"Event of Default" means any of the events or circumstances specified in
----------------
Section 8.01.
"Exchange Act" means the Securities Exchange Act of 1934, and regulations
------------
promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, and any
----
Governmental Authority succeeding to any of its principal functions.
6
<PAGE>
"Federal Funds Rate" means, for any day, the rate set forth in the weekly
-------------------
statistical release designated as H.15(519), published by the FRB on the
preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if
any relevant day such rate is not so published on any such preceding Business
Day, the rate for such day will be the arithmetic mean as determined by the
Agent of the rates for the last transaction in overnight Federal funds arranged
prior to 9:00 a.m. (New York City time) on that day by each of three leading
brokers of Federal funds transactions in New York City selected by the Agent.
"5-Year Credit Agreement" means that U.S.$3,000,000,000 Revolving Credit
------------------------
Agreement dated as of September 22, 1997, among the Company, BofA as
Administrative Agent and the lenders party thereto, and as amended by the First
Amendment to the 5-Year Credit Agreement, under which such lenders have agreed
to extend credit to the Company on a five-year basis.
"FRB" means the Board of Governors of the Federal Reserve System, and any
---
Governmental Authority succeeding to any of its principal functions.
"GAAP" means generally accepted accounting principles set forth from time
----
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.
"Governmental Authority" means any nation or government, any state or other
----------------------
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Hazardous Substance" has the meaning set forth in the Comprehensive
--------------------
Environmental Response, Compensation and Liability Act at 42 U.S.C. 9601(14) and
also includes each other substance considered to be a hazardous substance under
any analogous statute or regulation.
"Hazardous Waste" has the meaning set forth in the Resource Conservation
----------------
and Recovery Act at 42 U.S.C. 6903(5) and also includes each other substance
considered to be a hazardous waste under any analogous statute or regulation
(including 40 C.F.R. 261.3).
"Highest Lawful Rate" means, with respect to each Bank, the maximum
---------------------
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Loans or on other
indebtedness outstanding under this Agreement or the Notes applicable to such
Bank which is presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
"Information" has the meaning specified in Section 10.10.
-----------
7
<PAGE>
"Insolvency Proceeding" means (a) any case, action or proceeding before any
---------------------
court or other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors; undertaken under Federal, state or foreign law, including the
Bankruptcy Code.
"Interest Payment Date" means (a) as to any Revolving Loan other than a
-----------------------
Base Rate Revolving Loan, the last day of each Interest Period applicable to
such Loan, provided, however, that if any Interest Period for (i) an Adjusted CD
-------- -------
Rate Revolving Loan exceeds 90 days, the date that falls 90 days after the
beginning of such Interest Period is also an Interest Payment Date, or (ii) a
LIBOR Revolving Loan exceeds three months, the date that falls three months, six
months or nine months, if any, after the beginning of (and prior to the end of)
such Interest Period is also an Interest Payment Date, (b) as to any Base Rate
Revolving Loan, the last Business Day of each calendar quarter and (c) as to any
Swingline Loan, the last day of the Interest Period applicable to such Loan.
"Interest Period" means (a) as to any Adjusted CD Rate Revolving Loan, the
----------------
period commencing on the Borrowing Date or on the Conversion/Continuation Date
on which a Revolving Loan is converted into or continued as an Adjusted CD Rate
Revolving Loan, and ending on the date 30, 60, 90 or 180 days thereafter, as
selected by the Company in its Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, (b) as to any LIBOR Revolving Loan,
the period commencing on the Borrowing Date or on the Conversion/Continuation
Date on which a Revolving Loan is converted into or continued as a LIBOR
Revolving Loan, and ending on the day which numerically corresponds to such date
one, two, three or six months (and any other period that is 12 months or less
and is available to all of the Banks in the given instance) thereafter (or if
such month has no numerically corresponding day, on the last Business Day of
such month), as selected by the Company in its Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, and (c) as to any Swingline Loan,
the period commencing on the Borrowing Date of such Loan and ending on such
date, not more than 10 days later, as agreed upon by the Company and the
Swingline Bank at the time of the Borrowing of such Loan; provided that:
--------
(i) if any Interest Period pertaining to a CD Loan would otherwise end
on a day that is not a Business Day, that Interest Period shall be extended
to the following Business Day;
(ii) if any Interest Period pertaining to an Offshore Loan would
otherwise end on a day that is not a Business Day, that Interest Period
shall be extended to the following Business Day unless the result of such
extension would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the preceding
Business Day; and
(iii) no Interest Period for any Loan shall extend beyond the date set
forth in clause (a) of the definition of "Revolving Termination Date".
8
<PAGE>
"IRS" means the United States Internal Revenue Service.
---
"Lending Office" means, as to any Bank, the office or offices of the Bank
---------------
specified as its "CD Lending Office" or "Domestic Lending Office" or "LIBOR
Lending Office", as the case may be, on Schedule 10.02, or such other office or
--------------
offices as the Bank may from time to time notify the Company and the Agent.
"LIBO Rate" means, for any Interest Period for each LIBOR Revolving Loan
---------
comprising part of the same Borrowing or a LIBOR Swingline Loan, as the case may
be, an interest rate per annum equal to the average (rounded upward to the
nearest whole multiple of 1/16 of 1% per annum, if such average is not such a
multiple) of the rate per annum at which dollar deposits in immediately
available funds are offered by each of the Reference Banks, in the case of LIBOR
Revolving Loans, or the Swingline Bank, in the case of a LIBOR Swingline Loan,
to leading banks in the London interbank Eurodollar 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 amount of the LIBOR Revolving Loan of such
Reference Bank comprising part of such Borrowing, in the case of LIBOR Revolving
Loans, or the LIBOR Swingline Loan, in the case of a LIBOR Swingline Loan, to be
outstanding during such Interest Period and for a period equal to such Interest
Period. The LIBO Rate for each Interest Period for each LIBOR Revolving Loan
comprising part of the same Borrowing or a LIBOR Swingline Loan, as the case may
be, shall be determined by the Agent on the basis of applicable rates furnished
to and received by the Agent as set forth above two Business Days before the
first day of such Interest Period, subject, however, to the provisions of
------- -------
Section 2.14.
"LIBOR Lending Office" means, with respect to any Bank, the office of such
--------------------
Bank specified as its "LIBOR Lending Office" opposite its name on Schedule 10.02
or in the document pursuant to which it became a party hereto as contemplated by
Section 2.06, 3.06(a), 3.07 or 10.07(c) (or, if no such office is specified, its
Domestic Lending Office) or such other office of such Bank as such Bank may from
time to time specify to the Company and the Agent.
"LIBOR Revolving Loan" means a Revolving Loan which bears interest at the
----------------------
LIBO Rate plus the Applicable Margin.
"LIBOR Swingline Loan" means a Swingline Loan which bears interest at the
----------------------
LIBO Rate plus the Applicable Margin.
"Loan" means an extension of credit, in the form of (a) a Revolving Loan by
----
a Bank to the Company, which may be a Base Rate Revolving Loan, Adjusted CD Rate
Revolving Loan or LIBOR Revolving Loan (each, a "Type" of Revolving Loan), or
----
(b) a Swingline Loan by the Swingline Bank to the Company, which may be a Base
Rate Swingline Loan, Adjusted CD Rate Swingline Loan or LIBOR Swingline Loan
(each, a "Type" of Swingline Loan); in each case pursuant to Article II.
----
"Loan Documents" means this Agreement, the Notes and all other documents
---------------
delivered to the Agent or any Bank in connection herewith.
9
<PAGE>
"Majority Banks" means at any time Banks holding more than 50% of the
---------------
combined Commitments of all the Banks, or, if at such time there are no
Commitments hereunder, Banks holding more than 50% of the then aggregate unpaid
principal amount of the Loans, including the Swingline Loans.
"Margin Stock" means "margin stock" as such term is defined in Regulation
-------------
G, U or X of the FRB.
"Material Adverse Effect" means any event or condition which would have a
-------------------------
material adverse effect on the condition (financial or otherwise), business or
properties of the Company and its Subsidiaries on a consolidated basis.
"Minimum Tranche" means: (a) in respect of Revolving Loans comprising part
----------------
of the same Borrowing, or to be converted or continued under Section 2.04, (i)
in the case of Base Rate Revolving Loans, $5,000,000 or any multiple of
$1,000,000 in excess thereof; and (ii) in the case of Adjusted CD Rate Revolving
Loans and LIBOR Revolving Loans, $10,000,000 or any multiple of $1,000,000 in
excess thereof; and (b) in respect of any Swingline Loan, $1,000,000 or any
multiple of $500,000 in excess thereof, unless otherwise agreed by the Swingline
Bank.
"Moody's" means Moody's Investors Service, Inc. and any successor thereto
-------
that is a nationally recognized rating agency.
"New Affiliate Bank" has the meaning specified in Section 3.06.
------------------
"No Loan Date" means any Business Day on which (a) no principal amount of
------------
any Revolving Loan is outstanding, and (b) no Notice of Borrowing with respect
to Revolving Loans is pending or deemed pending pursuant to Article II.
"Note" has the meaning specified in Section 2.02.
----
"Notice of Borrowing" means a notice in substantially the form of Exhibit
------------------- -------
A.
- -
"Notice of Conversion/Continuation" means a notice in substantially the
----------------------------------
form of Exhibit B.
---------
"Obligations" means all advances, debts, liabilities, obligations,
-----------
covenants and duties arising under any Loan Document, owing by the Company to
any Bank, including the Swingline Bank, the Agent, or any Person required to be
indemnified, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising.
"Offshore Loan" means any LIBOR Revolving Loan or any LIBOR Swingline Loan.
--------------
"Other Taxes" means any present or future stamp or documentary taxes or any
-----------
other excise or property taxes, charges or similar levies which arise from any
payment made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any other Loan Document.
10
<PAGE>
"Person" means an individual, partnership, corporation, limited liability
------
company, business trust, joint stock company, trust, unincorporated association,
joint venture or Governmental Authority.
"Preferred Stock" means, as applied to any corporation, shares of such
----------------
corporation which shall be entitled to preference or priority over any other
shares of such corporation in respect of either the payment of dividends or the
distribution of assets upon liquidation.
"Prescribed Forms" shall mean such duly executed and filed form(s) or
-----------------
statement(s), and in such number of copies, which may, from time to time, be
prescribed by law and which, pursuant to applicable provisions of (a) an income
tax treaty between the United States and the country of residence of the Bank
providing the form(s) or statement(s), (b) the Code, or (c) any applicable rule
or regula-tion under the Code, permit the Company and the Agent to make payments
hereunder for the account of such Bank free of deduction or withholding of
United States income or other similar taxes.
"Redeemable" means, as applied to any Preferred Stock, any Preferred Stock
----------
which (i) the issuer undertakes to redeem at a fixed or determinable date or
dates (other than pursuant to the exercise of an option to redeem by the issuer,
if the failure to exercise such option would not materially adversely affect the
business, consolidated financial position or consolidated results of operations
of the issuer and its subsidiaries taken as a whole), whether by operation of a
sinking fund or otherwise, or upon the occurrence of a condition not solely
within the control of the issuer, or (ii) is redeemable at the option of the
holder.
"Reference Banks" means BofA, NationsBank of Texas, N.A. and Citibank, N.A.
---------------
"Replacement Bank" has the meaning specified in Section 3.06(a).
------------------
"Requirement of Law" means, as to any Person, any law (statutory or
--------------------
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" means the chief executive officer, the president, the
-------------------
chief financial officer or the treasurer of the Company.
"Restricted Subsidiary" means any Subsidiary of the Company which has
----------------------
non-intercompany assets with an aggregate book value exceeding 10% of the
Consolidated Tangible Net Worth of the Company based upon, at the time of
determination, the most recent year-end audited consolidated financial
statements of the Company.
"Resulting Increased Commitment" has the meaning specified in Section 3.07.
------------------------------
"Revolving Loan" has the meaning specified in Section 2.01(a).
----------------
11
<PAGE>
"Revolving Termination Date" means the earlier to occur of:
----------------------------
(a) October 1, 1999, as such date may be extended pursuant to Section
2.06; and
(b) the date on which the commitments of the Banks to make Loans
terminate in whole in accordance with Section 2.07, Section 2.09(b) or
Section 8.02.
"S&P" means Standard & Poor's Rating Group and any successor thereto that
---
is a nationally recognized rating agency.
"SEC" means the Securities and Exchange Commission, or any Governmental
---
Authority succeeding to any of its principal functions.
"Senior Debt Indenture" means that certain indenture dated as of March 1,
---------------------
1994 between the Company and NationsBank of Texas, N.A., as Trustee, without
giving effect to any amendment, modification, termination or cancellation
thereof.
"Specified Transaction," in respect of the Company, means any transaction
----------------------
or related set of transactions, that results, directly or indirectly, in (i) any
sale, lease or exchange of all or substantially all of its property, (ii) the
consolidation of the Company with any other Person (unless the Company is the
surviving entity), or (iii) a merger of the Company with or into any other
Person (unless the Company is the surviving entity), if in connection with such
sale, lease, exchange, consolidation or merger any consent, approval or
authorization of the shareholders of the Company is required under any of the
Company's organizational documents, or any Requirement of Law.
"Subordinated Debt" means any Debt of the Company (i) that expressly
------------------
provides that it is subordinated in right of payment to the Loans made by the
Banks hereunder and under the 5-Year Credit Agreement and (ii) under the terms
of which no payments of principal shall be payable (whether by scheduled
maturity, required prepayment, or otherwise, unless as a result of the
acceleration of such Debt, in accordance with the terms thereof) prior to the
date set forth in clause (a) of the definition of the term "Revolving
Termination Date" in the 5-Year Credit Agreement.
"Subsidiary" of a Person means any corporation, association, partnership,
----------
limited liability company, business trust, joint stock company, joint venture or
other business entity of which more than 50% of the voting stock or other equity
interests (in the case of Persons other than corporations), is owned or
controlled directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a "Subsidiary" refer to a
Subsidiary of the Company.
"Surviving Bank" has the meaning specified in Section 3.07.
--------------
"Swingline Bank" means BofA.
--------------
12
<PAGE>
"Swingline Commitment", as to the Swingline Bank, has the meaning specified
--------------------
in Section 2.01(b).
"Swingline Loan" has the meaning specified in Section 2.01(b).
--------------
"Taxes" means any and all present or future taxes, levies, imposts,
-----
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Bank and the Agent, taxes imposed on its net
income, and franchise taxes imposed on its net income, by the jurisdiction (or
any political subdivision thereof) under the laws of which such Bank or the
Agent, as the case may be, is organized or maintains a lending office.
"Total Capitalization" means, at any time, the sum (without duplication) of
--------------------
(a) Total Senior Debt, (b) the total outstanding principal amount (or the book
carrying amount of such Debt if issued at a discount) of Subordinated Debt of
the Company and its consolidated Subsidiaries, (c) Consolidated Net Worth less
any amount thereof attributable to "minority interests" (as defined below), and
(d) Redeemable Preferred Stock of the Company and its consolidated Subsidiaries.
For the purpose of this definition, "minority interests" means any investment or
interest of the Company in any corporation, partnership or other entity to the
extent that the total amount thereof owned by the Company (directly or
indirectly) constitutes 50% or less of all outstanding interests or investments
in such corporation, partnership or entity.
"Total Senior Debt" means, at any time, the principal amount of all
-------------------
consolidated Debt of the Company and its consolidated Subsidiaries other than
Subordinated Debt.
"Type" has the meaning specified in the definition of "Loan."
----
"United States" and "U.S." each mean the United States of America.
-------------- ----
1.02 Other Interpretive Provisions. (a) The meanings of defined terms are
------------------------------
equally applicable to the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement. Subsection, Section, Article, Schedule and Exhibit references
are to this Agreement unless otherwise specified. The term "documents"
includes any and all instruments, documents, agreements, certificates,
indentures, notices and other writings, however evidenced. The term
"including" is not limiting and means "including without limitation."
(c) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"; the words
"to" and "until" each mean "to but excluding", and the word "through" means
"to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments
shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, (ii)
references to any statute or regulation are to be construed as including
all statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation and (iii)
references to IRS forms, SEC forms, FRB statistical releases or other
forms, reports or documents of any Governmental Authority are to be
construed as including all forms, reports or other documents that
consolidate, amend or replace the forms, reports or documents.
13
<PAGE>
(e) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and the other Loan Documents are the result of
negotiations among the Agent, the Company and the other parties, have been
reviewed by counsel to the Agent, the Company and such other parties, and
are the products of all parties. Accordingly, they shall not be construed
against the Banks or the Agent merely because of the Agent's or Banks'
involvement in their preparation.
1.03 Accounting Principles. (a) Unless the context otherwise clearly
----------------------
requires, all accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.01 Amounts and Terms of Commitments. (a) Each Bank severally agrees,
--------------------------------
on the terms and conditions set forth herein, to make loans (each such loan a
"Revolving Loan") to the Company from time to time on any Business Day during
--------------
the period from the Closing Date to the Revolving Termination Date, in an
aggregate principal amount not to exceed at any time outstanding, together with
such Bank's Commitment Percentage of all Swingline Loans then outstanding, the
amount set forth opposite such Bank's name on Schedule 2.01 (as such Schedule is
-------------
deemed modified pursuant to this Article II or Article III or Section 10.07) (as
such amount may be increased or reduced pursuant to Sections 2.06, 2.07, 2.08,
2.09, 3.06, 3.07 or 8.02, such Bank's "Commitment"); provided, however, that,
---------- -------- -------
after giving effect to any Borrowing of Revolving Loans, the aggregate principal
amount of all outstanding Revolving Loans and Swingline Loans shall not at any
time exceed the combined Commitments of all the Banks. Within the limits of
each Bank's Commitment, and subject to the other terms and conditions hereof,
the Company may borrow under this Section 2.01(a), prepay under Section 2.09(a)
and reborrow under this Section 2.01(a).
14
<PAGE>
(b) The Swingline Bank agrees, on the terms and conditions set forth
herein, to make a portion of the combined Commitments of all the Banks
available to the Company by making swingline loans (each such loan a
"Swingline Loan") to the Company from time to time on any Business Day
---------------
during the period from the Closing Date to the Revolving Termination Date,
in an aggregate principal amount not to exceed at any time outstanding
$50,000,000 (as such amount may be reduced pursuant to Sections 2.07, 2.08,
2.09, 3.06 or 8.02, the Swingline Bank's "Swingline Commitment"),
----------------------
notwithstanding the fact that such Swingline Loans, when aggregated with
the Swingline Bank's outstanding Revolving Loans, may exceed the Swingline
Bank's Commitment; provided, however, that, after giving effect to any
-------- -------
Borrowing of a Swingline Loan, the aggregate principal amount of all
outstanding Revolving Loans and Swingline Loans shall not at any time
exceed the combined Commitments of all the Banks. Within the foregoing
limits, and subject to the other terms and conditions hereof, the Company
may borrow under this Section 2.01(b), prepay under Section 2.09(a) and
reborrow pursuant to this Section 2.01(b).
2.02 Notes. The Loans made by each Bank are evidenced by a note in
-----
substantially the form of Exhibit E ("Note") payable to the order of that Bank,
--------- ----
evidencing the aggregate indebtedness of the Company to such Bank resulting from
the Loans owed to such Bank. Each Bank may endorse on the schedules annexed to
its Notes, the date, amount and maturity of each Loan made by it and the amount
of each payment of principal made by the Company with respect thereto. Each
Bank is irrevocably authorized by the Company to endorse its Notes, and each
Bank's record shall be prima facie evidence of the matters reflected therein;
----- -----
provided, however, that the failure of a Bank to make, or an error in making, a
- -------- -------
notation thereon with respect to any Loan shall not limit or otherwise affect
the obligations of the Company hereunder or under any such Note to such Bank.
2.03 Procedure for Revolving Loan Borrowings. (a) Each Borrowing of
-------------------------------------------
Revolving Loans shall be made upon the Company's irrevocable written notice
delivered to the Agent as described in Section 10.02 in the form of a Notice of
Borrowing prior to 11:00 a.m. (Houston time) (i) one Business Day prior to the
requested Borrowing Date, in the case of Adjusted CD Rate Revolving Loans, (ii)
three Business Days prior to the requested Borrowing Date, in the case of LIBOR
Revolving Loans, and (iii) on the requested Borrowing Date, in the case of Base
Rate Revolving Loans, specifying:
(A) the amount of the Borrowing, which shall be in an aggregate
amount not less than the Minimum Tranche;
(B) the requested Borrowing Date, which shall be a Business Day;
(C) the Type of Revolving Loans comprising the Borrowing;
(D) in the case of Adjusted CD Rate Revolving Loans and LIBOR
Revolving Loans, the duration of the Interest Period applicable to
such Loans included in such notice. If the Notice of Borrowing fails
to specify the duration of the Interest Period for any Borrowing
comprised of Adjusted CD Rate Revolving Loans or LIBOR Revolving
Loans, such Interest Period shall be 90 days (in the case of an
Adjusted CD Rate Revolving Loan) and three months (in the case of a
LIBOR Revolving Loan);
15
<PAGE>
provided, however, that with respect to a Borrowing, if any, to be made on the
- -------- -------
Closing Date, the Notice of Borrowing shall be delivered to the Agent not later
than 11:00 a.m. (Houston time) on the Closing Date and such Borrowing will
consist of Base Rate Revolving Loans only.
(b) Upon receipt of the Notice of Borrowing, the Agent will promptly
notify each Bank thereof and of the amount of such Bank's Commitment
Percentage of such Borrowing.
(c) Each Bank will make the amount of its Commitment Percentage of
such Borrowing available to the Agent for the account of the Company at the
Agent's Payment Office on the Borrowing Date requested by the Company in
immediately available funds by 1:00 p.m. (Houston time) in the case of a
Borrowing comprised of Adjusted CD Rate Revolving Loans or LIBOR Revolving
Loans, and by 1:00 p.m. (Houston time) in the case of a Borrowing comprised
of Base Rate Revolving Loans. The proceeds of all such Loans will then be
made available to the Company by the Agent by wire transfer of immediately
available funds in accordance with written instructions provided to the
Agent by the Company, unless on the date of the Borrowing all or any
portion of the proceeds thereof shall then be required to be applied to the
repayment of any outstanding Swingline Loans pursuant to Section 2.05(f),
in which case such proceeds or portion thereof shall be applied to the
repayment of such Swingline Loans.
(d) After giving effect to any Borrowing of Revolving Loans, there may
not be more than (i) four different Interest Periods in effect in respect
of all Adjusted CD Rate Revolving Loans together then outstanding and (ii)
four different Interest Periods in effect in respect of all LIBOR Revolving
Loans together then outstanding.
2.04 Conversion and Continuation Elections for Revolving Loan
--------------------------------------------------------------
Borrowings. (a) The Company may, upon irrevocable written notice to the Agent
- ----------
under subsection (b) of this Section:
(i) elect, on any Business Day, in the case of Base Rate
Revolving Loans, or on the last day of the applicable Interest Period,
in the case of Adjusted CD Rate Revolving Loans or LIBOR Revolving
Loans, to convert any such Loans (or any part thereof in an amount not
less than the Minimum Tranche) into Revolving Loans of another Type;
or
(ii) elect to renew on the last day of the applicable Interest
Period any Revolving Loans having Interest Periods maturing on such
day (or any part thereof in an amount not less than the Minimum
Tranche);
provided, that if at any time the aggregate amount of Adjusted CD Rate Revolving
- --------
Loans or LIBOR Loans in respect of any Borrowing is reduced, by payment,
prepayment, or conversion of part thereof to be less than the Minimum Tranche,
such Loans shall automatically convert into Base Rate Revolving Loans, and on
and after such date the right of the Company to continue such Loans as, and
convert such Loans into, Adjusted CD Rate Revolving Loans or LIBOR Revolving
Loans shall terminate, except that if and so long as each such Revolving Loan
------
shall be of the same Type and have the same Interest Period as Revolving Loans
comprising another Borrowing or other Borrowings, and the aggregate unpaid
principal amount of all such Loans of all such Borrowings shall equal or exceed
$10,000,000, the Company shall have the right to continue all such Loans as, or
to convert all such Loans into, Revolving Loans of such Type having such
Interest Period.
16
<PAGE>
(b) The Company shall deliver a Notice of Conversion/Continuation to
be received by the Agent not later than 11:00 a.m. (Houston time) at least
(i) one Business Day in advance of the Conversion/Continuation Date, if the
Revolving Loans are to be converted into or continued as Adjusted CD Rate
Revolving Loans; (ii) three Business Days in advance of the
Conversion/Continuation Date, if the Revolving Loans are to be converted
into or continued as LIBOR Revolving Loans; and (iii) on the
Conversion/Continuation Date, if the Revolving Loans are to be converted
into Base Rate Revolving Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Revolving Loans to be converted
or renewed;
(C) the Type of Revolving Loans resulting from the proposed
conversion or continuation; and
(D) other than in the case of conversions into Base Rate
Revolving Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to any
Adjusted CD Rate Revolving Loans or LIBOR Revolving Loans, the Company has
failed to select timely a new Interest Period to be applicable to such
Loans, the Company shall be deemed to have elected to convert such Loans
into Base Rate Revolving Loans.
(d) The Agent will promptly notify each Bank of its receipt of a
Notice of Conversion/Continuation, or, if no timely notice is provided by
the Company under this Section, the Agent will promptly notify each Bank of
the details of any automatic conversion. All conversions and continuations
shall be made ratably according to the respective outstanding principal
amounts of the Revolving Loans held by each Bank with respect to which the
notice was given.
(e) Unless the Majority Banks otherwise agree, during the existence of
a Default or Event of Default, the Company may not elect to have a
Revolving Loan converted into or continued as an Adjusted CD Rate Revolving
Loan or a LIBOR Revolving Loan with an Interest Period exceeding one month
(in the case of a LIBOR Revolving Loan) or 30 days (in the case of an
Adjusted CD Rate Revolving Loan).
(f) After giving effect to any conversion or continuation of Revolving
Loans, there may not be more than (i) four different Interest Periods in
effect in respect of all Adjusted CD Rate Revolving Loans together then
outstanding and (ii) four different Interest Periods in effect in respect
of all LIBOR Revolving Loans together then outstanding.
17
<PAGE>
2.05 Procedure for Swingline Borrowings. (a) Each Borrowing of a
-------------------------------------
Swingline Loan shall be made upon the Company's irrevocable written notice to
the Agent as described in Section 10.02 in the form of a Notice of Borrowing
prior to 11:00 a.m. (Houston time) (i) one Business Day prior to the requested
Borrowing Date, in the case of an Adjusted CD Rate Swingline Loan, (ii) three
Business Days prior to the requested Borrowing Date, in the case of a LIBOR
Swingline Loan, and (iii) on the requested Borrowing Date, in the case of a Base
Rate Swingline Loan, specifying: (i) the amount of such Loan, which shall be an
amount not less than the Minimum Tranche; (ii) the requested Borrowing Date,
which shall be a Business Day, (iii) the duration of the Interest Period
applicable to such Loan, which shall not be more than 10 days, and (iv) if the
product of the amount of such Loan and the number of days in the applicable
Interest Period equals or exceeds $15,000,000, the Type of Swingline Loan. Upon
receipt of the Notice of Borrowing, the Agent will promptly provide the
Swingline Bank with a copy thereof.
(b) If the product of the amount of a requested Swingline Loan and the
number of days in the applicable Interest Period equals or exceeds
$15,000,000, such Loan shall bear interest at the LIBO Rate plus the
Applicable Margin, the Adjusted CD Rate plus the Applicable Margin or the
Base Rate, as selected by the Company pursuant to Section 2.05(a). If the
product of the amount of a requested Swingline Loan and the number of days
in the applicable Interest Period is less than $15,000,000, such Loan shall
bear interest at the Base Rate.
(c) Unless the Swingline Bank has received notice prior to 11:00 a.m.
(Houston time) on the relevant Borrowing Date from the Agent (including at
the request of any Bank) (i) directing the Swingline Bank not to make the
requested Swingline Loan as a result of the limitation set forth in the
proviso set forth in Section 2.01(b), or (ii) that one or more conditions
-------
specified in Article IV are not then satisfied; then, subject to the terms
----
and conditions hereof, the Swingline Bank will, not later than 2:00 p.m.
(Houston time) on the Borrowing Date specified in such Notice of Borrowing,
make the amount of the requested Swingline Loan available to the Company by
wire transfer of immediately available funds in accordance with written
instructions provided to the Agent by the Company. The Swingline Bank
agrees that, if it has received notice described in clause (i) or (ii)
above, it will not make the requested Swingline Loan to the Company.
(d) After giving effect to any Borrowing of a Swingline Loan, there
may not be more than three different Swingline Loans outstanding at any one
time.
(e) The Agent will notify the Banks of any Swingline Loan Borrowing or
repayment thereof promptly after any such Borrowing or repayment.
18
<PAGE>
(f) If (i) any Swingline Loan shall remain outstanding at 11:00 a.m.
(Houston time) on the last day of the Interest Period applicable to such
Loan and by such time on such day the Agent shall have received neither (A)
a Notice of Borrowing delivered pursuant to Section 2.03 requesting that
Revolving Loans be made pursuant to Section 2.01(a) on such day in an
amount at least equal to the principal amount of such Swingline Loan, nor
(B) any other notice indicating the Company's intent to repay such
Swingline Loan with funds obtained from other sources, or (ii) any
Swingline Loans shall remain outstanding during the existence of a Default
or Event of Default and the Swingline Bank shall in its sole discretion
notify the Agent that the Swingline Bank desires that such Swingline Loans
be converted into Revolving Loans; then, the Agent shall be deemed to have
----
received a Notice of Borrowing from the Company pursuant to Section 2.03
requesting that Base Rate Revolving Loans be made pursuant to Section
2.01(a) on such day (in the case of the circumstances described in clause
(i) above) or on the first Business Day subsequent to the date of such
notice from the Swingline Bank (in the case of the circumstances described
in clause (ii) above) in an amount equal to the aggregate amount of such
Swingline Loans, and the procedures set forth in Sections 2.03(b) and
2.03(c) shall be followed in making such Base Rate Revolving Loans;
provided, that such Base Rate Revolving Loans shall be made notwithstanding
--------
the Company's failure to comply with the conditions specified in Section
4.02; and provided, further, that if a Borrowing of Revolving Loans becomes
-------- -------
legally impracticable and if so required by the Swingline Bank at the time
such Revolving Loans are required to be made by the Banks in accordance
with this Section 2.05(f), each Bank agrees that in lieu of making
Revolving Loans as described above, such Bank shall purchase a
participation from the Swingline Bank in the applicable Swingline Loans in
an amount equal to such Bank's Commitment Percentage of the aggregate
principal amount of such Swingline Loans, and the procedures set forth in
Sections 2.03(b) and 2.03(c) shall be followed in connection with the
purchases of such participations. The proceeds of such Base Rate Revolving
Loans shall be applied to repay such Swingline Loans. A copy of each notice
given by the Agent to the Banks pursuant to this Section 2.05(f) with
respect to the making of Revolving Loans or the purchases of
participations, as the case may be, shall be promptly delivered by the
Agent to the Company. Each Bank's obligation in accordance with this
Agreement to make the Revolving Loans or purchase the participations, as
contemplated by this Section 2.05(f), shall be absolute and unconditional
and shall not be affected by any circumstance, including (1) any set-off,
counterclaim, recoupment, defense or other right which such Bank may have
against the Swingline Bank, the Company or any other Person for any reason
whatsoever; (2) the occurrence or continuance of a Default or an Event of
Default; or (3) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
2.06 Increase and Extension of Commitments. (a) The Company shall have
-------------------------------------
the right, without the consent of the Banks but subject to the approval of the
Agent (which approval shall not be unreasonably withheld), to effectuate from
time to time an increase in the total Commitments under this Agreement by adding
to this Agreement one or more Persons that are Eligible Assignees (who shall,
upon completion of the requirements stated in this Section, constitute "Banks"
hereunder), or by allowing one or more Banks to increase their Commitments
hereunder, so that such added and increased Commitments shall equal the increase
in Commitments effectuated pursuant to this Section; provided that (i) no
--------
increase in Commitments pursuant to this Section shall result in the total
Commitments exceeding $1,100,000,000 or shall result in the aggregate amount of
the increases in the Commitments effectuated pursuant to this Section since the
date of this Agreement being in excess of the sum of $100,000,000 plus the
aggregate amount (but not greater than $50,000,000) of all non-ratable
reductions and terminations of Commitments effectuated pursuant to Section 2.08;
(ii) no Bank's Commitment shall be increased without the consent of such Bank;
(iii) there has occurred and is continuing no Default or Event of Default, and
(iv) there has been no ratable reduction of Commitments pursuant to Section
2.07. The Company shall deliver or pay, as applicable, to the Agent each of the
following items with respect to each Eligible Assignee (and each existing Bank
whose Commitment will increase) prior to 11:00 a.m. (Houston time) (A) five
Business Days prior to the requested effective date of such increase in the
Commitments, if such date is a No Loan Date, or (B) ten Business Days prior to
the requested effective date of such increase in the Commitments, if such date
is not a No Loan Date:
19
<PAGE>
(1) a written notice of the Company's intention to increase
the total Commitments pursuant to this Section, which shall
specify each new Eligible Assignee, if any, the changes in
amounts of Commitments that will result, and such other
information as is reasonably requested by the Agent;
(2) a document in form and substance as may be reasonably
required by the Agent-, executed and delivered by each new
Eligible Assignee and each Bank agreeing to increase its
Commitment, pursuant to which it becomes a party hereto or
increases its Commitment, as the case may be, which document, in
the case of a new Eligible Assignee, shall (among other matters)
specify the CD Lending Office, Domestic Lending Office and LIBOR
Lending Office of such new Eligible Assignee;
(3) a Note in the principal amount of the Commit-ment of
each new Eligible Assignee, or a replacement Note in the
principal amount of the increased Commitment of each Bank
agreeing to increase its Commitment, as the case may be, executed
and delivered by the Company, which Note shall be in form and
substance as may be reasonably required by Agent; and
(4) a non-refundable processing fee of $4,000, for the sole
account of the Agent.
Upon receipt of any notice referred to in clause (1) above, the Agent
will promptly notify each Bank thereof. Upon execution and delivery of such
documents and the payment of such fee, such new Eligible Assignee shall
constitute a "Bank" hereunder with a Commitment as specified therein, or
such Bank's Commitment shall increase as specified therein, as the case may
be. The Company agrees to pay to the Banks on demand any and all amounts to
the extent payable pursuant to Section 3.02 as a result of any such
prepayment of Loans occasioned by the foregoing increase in the
Commitments.
(b) Not less than 30 days nor more than 60 days before the then
current Revolving Termination Date, the Company may, by written request
delivered to the Agent, request that the Revolving Termination Date be
extended for a period of 364 days from the then-current Revolving
Termination Date. The Agent shall notify the Banks of any such request.
Such extension shall only be effective upon the approval thereof in writing
by the Agent and all of the Banks (which approval may be given or withheld
in each such Person's sole discretion). If such approval is given, the
Agent will notify the Company and the Banks thereof, and this Agreement
shall be deemed to be amended to reflect such 364-day extension of the
Revolving Termination Date. Each request for an extension of the Revolving
Termination Date under this Section shall contain a certification by a
Responsible Officer that, as of the date of such request and as of the then
current Revolving Termination Date, (i) the representations and warranties
in Article V are and will be true and correct in all material respects on
and as of each such date with the same effect as if made on and as of each
such date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and
correct as of such earlier date), and (ii) no Default or Event of Default
exists or would result from such extension.
20
<PAGE>
2.07 Ratable Reduction or Termination of Commitments. The Company may,
-----------------------------------------------
upon not less than three Business Days' prior notice to the Agent, terminate all
the Commitments, or permanently reduce all the Commitments by an aggregate
minimum amount of $10,000,000 or any multiple of $1,000,000 in excess thereof;
unless, after giving effect thereto and to any prepayments of Loans made on the
- ------
effective date thereof, (i) the then-outstanding principal amount of all
Revolving Loans and Swingline Loans would exceed the amount of the combined
Commitments of all the Banks then in effect, or (ii) the then-outstanding
principal amount of all Swingline Loans would exceed the amount of the Swingline
Commitment then in effect, as adjusted pursuant to the last sentence of this
Section 2.07. Once reduced in accordance with this Section, the Commitments may
not be increased. Any such reduction of the Commitments shall be applied
ratably to each Bank's Commitment according to its Commitment Percentage. At no
time shall the Swingline Commitment exceed the combined Commitments of all the
Banks, and any reduction of the Commitments which reduces the combined
Commitments of all the Banks below the then-current amount of the Swingline
Commitment shall result in an automatic corresponding reduction of the Swingline
Commitment to the amount of the combined Commitments of all the Banks, as so
reduced, without any action on the part of the Swingline Bank.
2.08 Non-Ratable Reduction or Termination of Commitments. The Company shall
---------------------------------------------------
have the right, without the consent of any Bank, but subject to the approval of
the Agent (which consent shall not be unreasonably withheld), to reduce in part
or to terminate in whole the Commitment of one or more Banks non-ratably,
provided that (i) the effective date of any such reduction or termination of
- --------
Commitments shall be a No Loan Date, (ii) after giving effect thereto and to any
prepayments of Swingline Loans made on the effective date thereof, the
then-outstanding principal amount of all Swingline Loans shall not exceed the
amount of the Swingline Commitment then in effect, as adjusted pursuant to the
penultimate sentence of this Section 2.08; (iii) on the effective date of any
such reduction or termination (x) no Default or Event of Default shall have
occurred and be continuing, (y) the senior unsecured long-term debt of the
Company is rated BBB- or better by S&P or Baa3 or better by Moody's, and (z) the
Company shall pay to any Bank whose Commitment is terminated all amounts owed by
the Company to such Bank under this Agreement (including accrued commitment
fees), (iv) the aggregate amount of each non-ratable reduction shall be at least
$5,000,000, and (v) the aggregate amount of all such non-ratable reductions and
terminations of Commitments since the date of this Agreement shall not exceed
the sum of $50,000,000, plus the aggregate amount (but not greater than
$50,000,000) of all increases in Commitments effectuated pursuant to Section
2.06. At no time shall the Swingline Commitment exceed the combined Commitments
of the Banks, and any reduction of the Commitment of one or more Banks
non-ratably which reduces the combined Commitments of the Banks below the
then-current amount of the Swingline Commitment shall result in an automatic
corresponding reduction of the Swingline Commitment to the amount of the
combined Commitments of the Banks, as so reduced, without any action on the part
of the Swingline Bank. The Company shall give the Agent three Business Days'
notice of the Company's intention to reduce or terminate any Commitment pursuant
to this Section.
21
<PAGE>
2.09 Optional and Mandatory Prepayments. (a) Subject to Section 3.02, the
------------------------------------
Company may, at any time or from time to time by irrevocable notice to the
Agent, not later than 11:00 a.m. (Houston time) (i) one Business Day prior to a
prepayment of any CD Loan, (ii) three Business Days prior to a prepayment of any
Offshore Loan, or (iii) on the Business Day of a prepayment of any Base Loan,
ratably prepay Loans in whole or in part, in minimum amounts of $5,000,000 or
any multiple of $1,000,000 in excess thereof. Such notice of prepayment shall
specify the date and amount of such prepayment, whether the Loans to be prepaid
are Revolving Loans or Swingline Loans, the Type(s) of any Loans to be prepaid
and the specific Borrowing or Borrowings pursuant to which such Loans were made.
The Agent will promptly notify each Bank, in the case of the prepayment of
Revolving Loans, or the Swingline Bank, in the case of the prepayment of
Swingline Loans, of its receipt of any such notice, and of such Bank's
Commitment Percentage of such prepayment, as applicable. If such notice is
given by the Company, the Company shall make such prepayment and the payment
amount specified in such notice shall be due and payable on the date specified
therein, together with accrued interest to each such date on the amount of
Offshore Loans prepaid.
(b) Immediately upon the occurrence of any Specified Transaction or at
any time prior to the date that is 180 days after the date of consummation
of such Specified Transaction, the Agent shall at the request of, and may
with the consent of, the Majority Banks, in their sole and absolute
discretion, (i) by notice to the Company pursuant to Section 10.02, declare
the outstanding principal amount of all Loans, together with accrued
interest, amounts payable pursuant to Section 3.02 and all other amounts
outstanding hereunder, to be immediately due and payable, whereupon such
amounts shall immediately be paid by the Company, and (ii) by notice to the
Company pursuant to Section 10.02, declare the obligation of each Bank to
make Loans, including the obligation of the Swingline Bank to make
Swingline Loans, be terminated, whereupon such obligations shall be
terminated immediately.
(c) On the date of any increase in the total Commitments pursuant to
Section 2.06, the Company shall prepay all Revolving Loans outstanding on
such date, together with accrued interest thereon and amounts payable
pursuant to Section 3.02; provided, however, that, notwithstanding the
foregoing sentence, if after giving effect to such an increase in the total
Commitments there are no new Banks hereunder and the Commitment Percentage
of each Bank is unchanged from its Commitment Percentage immediately prior
to such increase, then the Company shall not be required to prepay any
Revolving Loans and related amounts outstanding on such date.
(d) Any mandatory prepayment under subsection (b) or (c) of this
Section shall be made by the Company without presentment, demand, protest
or other notice of any kind, except as provided in subsection (b), all of
which are expressly waived by the Company.
22
<PAGE>
2.10 Repayment. The Company shall repay to the Agent for the account
---------
of each Bank on the Revolving Termination Date the aggregate principal amount of
all Revolving Loans outstanding on such date. The Company shall repay to the
Agent for the account of the Swingline Bank the outstanding principal amount of
each Swingline Loan on the last day of the Interest Period applicable thereto.
2.11 Interest. (a) Each Loan shall bear interest on the outstanding
--------
principal amount thereof from the applicable Borrowing Date until paid at a rate
per annum equal to the Adjusted CD Rate, the LIBO Rate or the Base Rate, as the
case may be (and subject, in the case of Revolving Loans, to the Company's right
to convert to other Types of Revolving Loans under Section 2.04), plus, in the
case of CD Loans and Offshore Loans, the Applicable Margin; provided, however,
-------- -------
that in no event shall the applicable rate payable to any Bank exceed the
Highest Lawful Rate applicable to such Bank.
(b) Interest on each Loan shall be paid to the Agent for the account
of each Bank, in the case of Revolving Loans, or the Swingline Bank, in the
case of Swingline Loans, in arrears on each Interest Payment Date. Interest
shall also be paid on the date of any prepayment of Offshore Loans under
Section 2.09 for the portion of the Offshore Loans so prepaid and upon
payment in full thereof.
(c) Any principal amount of any Loan which is not paid when due
(whether at stated maturity, by acceleration or otherwise) shall bear
interest, to the extent permitted by law, from the date on which such
amount became due until such amount is paid in full, payable on demand, at
a rate per annum equal at all times to the sum of the Base Rate in effect
from time to time plus 1.50% per annum, provided, however, that in no event
-------- -------
shall such rate as to any Bank exceed the Highest Lawful Rate applicable to
such Bank.
2.12 Fees. The Company agrees to pay to the Agent for the account of
----
each Bank a commitment fee on the actual daily amount by which such Bank's
Commitment exceeds the aggregate outstanding principal amount of such Bank's
Revolving Loans, from the Closing Date until the Revolving Termination Date at a
rate per annum equal to the Applicable Fee Amount, payable in arrears on the
last Business Day of each calendar quarter during the term of such Bank's
Commitment, and on the Revolving Termination Date. The Company shall pay to the
Agent for its own account and the account of the Arranger such additional fees
as are set forth in the fee letter dated September 30, 1998.
2.13 Computation of Fees and Interest. All computations of interest for
--------------------------------
Base Rate Revolving Loans and Base Rate Swingline Loans, when the Base Rate is
determined according to clause (b) of the definition of "Base Rate" shall be
made on the basis of a year of 365 or 366 days, as the case may be, and actual
days elapsed. All other computations of fees and interest shall be made on the
basis of a 360-day year and actual days elapsed (but not to exceed as to any
Bank the Highest Lawful Rate applicable to such Bank). Interest and fees shall
accrue during each period during which interest or such fees are computed from
the first day thereof to the last day thereof.
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<PAGE>
2.14 Interest Rate Determination and Protection. (a) Each Reference Bank
--------------------------------------------
and the Swingline Bank, as applicable, agrees to furnish to the Agent timely
information for the purpose of determining each Adjusted CD Rate or LIBO Rate,
as applicable. If any one or more of the Reference Banks shall not furnish such
timely information to the Agent for the purpose of determining any such interest
rate, the Agent shall determine such interest rate on the basis of timely
information furnished by the remaining Reference Banks.
(b) The Agent shall give prompt notice to the Company and the Banks of
the applicable interest rate determined by the Agent for purposes of
Section 2.11(a).
(c) If fewer than two Reference Banks furnish timely informa-tion to
the Agent for determining the LIBO Rate for any LIBOR Revolving Loans or
the Adjusted CD Rate for any Adjusted CD Rate Revolving Loans,
(i) the Agent shall forthwith notify the Company and the Banks
that the interest rate cannot be deter-mined for such LIBOR Revolving
Loans or Adjusted CD Rate Revolving Loans, as the case may be,
(ii) each such Loan will automatically, on the last day of the
then existing Interest Period therefor, convert into a Base Rate
Revolving Loan (or if such Loan is then a Base Rate Revolving Loan,
will continue as a Base Rate Revolving Loan), and
24
<PAGE>
(iii) the obligation of the Banks to make, or to convert
Revolving Loans into or continue Revolving Loans as, Adjusted CD Rate
Revolving Loans or LIBOR Revolving Loans, as the case may be, shall be
suspended until the Agent shall notify the Company and the Banks that
the circumstances causing such suspension no longer exist.
(d) With respect to any Offshore Loan or CD Loan, upon request by the
Company the Agent shall provide to the Company the information furnished by
each Reference Bank or the Swingline Bank, as applicable, to enable the
Agent to determine the LIBOR Rate or the Adjusted CD Rate, as the case may
be, for such Loan.
(e) If, with respect to any Adjusted CD Rate Revolving Loans or LIBOR
Revolving Loans, the Majority Banks notify the Agent that the applicable
interest rate for any Interest Period for such Loans cannot be reasonably
determined or will not adequately reflect the cost to such Majority Banks
of making, funding or maintaining their respective Adjusted CD Rate
Revolving Loans or LIBOR Revolving Loans, as the case may be, for such
Interest Period, the Agent shall forthwith so notify the Company and the
Banks, whereupon
(i) each such Revolving Loan will automatically, on the last day
of the then existing Interest Period therefor, convert into a Base
Rate Revolving Loan (or, if such Revolving Loan is then a Base Rate
Revolving Loan, will continue as a Base Rate Revolving Loan), and
(ii) the obligation of the Banks to make, or to convert Revolving
Loans into or continue Revolving Loans as, Adjusted CD Rate Revolving
Loans or LIBOR Revolving Loans, as the case may be, shall be suspended
until the Agent shall notify the Company and the Banks that the
circumstances causing such suspension no longer exist.
(f) If the Swingline Bank notifies the Agent that the applicable
interest rate for any Interest Period for any Adjusted CD Rate Swingline
Loan or LIBOR Swingline Loan cannot be reasonably determined or will not
adequately reflect the cost to the Swingline Bank of making, funding or
maintaining such Loan, the Agent shall forthwith so notify the Company,
whereupon the obligation of the Swingline Bank to make Adjusted CD Rate
Swingline Loans or LIBOR Swingline Loans, as the case may be, shall be
suspended until the Agent shall notify the Company that the circumstances
causing such suspension no longer exist.
2.15 Payments by the Company. (a) Except as otherwise expressly
--------------------------
provided herein, all payments by the Company shall be made in Dollars to the
Agent for the account of the Banks, in the case of Revolving Loans, or the
Swingline Bank, in the case of Swingline Loans, at the Agent's Payment Office
and shall be made without setoff, recoupment or counterclaim. Such payments
shall be made in immediately available funds no later than 1:00 p.m. (Houston
time) on the date specified herein. The Agent will promptly distribute to each
Bank its Commitment Percentage share (or other applicable share as expressly
provided herein), in the case of Revolving Loans, or to the Swingline Bank, in
the case of Swingline Loans, of such payment in like funds as received. Any
payment received by the Agent later than the time specified above shall be
deemed to have been received on the following Business Day, and any applicable
interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of "Interest
Period" herein, whenever any payment is due on a day other than a Business
Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior to the
date on which any payment is due to the Banks or the Swingline Bank, as the
case may be, that the Company will not make such payment in full as and
when required, the Agent may assume that the Company has made such payment
in full to the Agent on such date in immediately available funds, and the
Agent may (but shall not be so required), in reliance upon such assumption,
distribute to each Bank or the Swingline Bank, as the case may be, on such
due date an amount equal to the amount then due such Bank. If and to the
extent the Company has not made such payment in full to the Agent, each
Bank or the Swingline Bank, as applicable, shall repay to the Agent on
demand such amount distributed to such Bank, together with interest thereon
at the Federal Funds Rate for each day from the date such amount is
distributed to such Bank until the date repaid.
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<PAGE>
2.16 Payments by the Banks to the Agent. (a) Unless the Agent receives
----------------------------------
notice from a Bank on or prior to the Closing Date or, with respect to any
Borrowing after the Closing Date, at least one Business Day prior to the
proposed Borrowing Date, that such Bank will not make available as and when
required hereunder to the Agent for the account of the Company the amount of
that Bank's Commitment Percentage, in the case of a Revolving Loan Borrowing, or
the Swingline Loan, in the case of a Swingline Loan Borrowing, the Agent may
assume that each Bank, in the case of a Revolving Loan Borrowing, or the
Swingline Bank, in the case of a Swingline Borrowing, has made such amount
available to the Agent in immediately available funds on the Borrowing Date and
the Agent may (but shall not be so required), in reliance upon such assumption,
make available to the Company on such date a corresponding amount. If and to
the extent any Bank shall not have made its full amount available to the Agent
in immediately available funds and the Agent in such circumstances has made
available to the Company such amount, that Bank shall on the Business Day
following such Borrowing Date make such amount available to the Agent, together
with interest at the Federal Funds Rate for each day during such period. A
notice of the Agent submitted to any Bank with respect to amounts owing under
this subsection (a) shall be conclusive, absent manifest error. If such amount
is so made available, such payment to the Agent shall constitute such Bank's
Loan on the date of Borrowing for all purposes of this Agreement. If such
amount is not made available to the Agent on the Business Day following the
Borrowing Date, the Agent will notify the Company of such failure to fund and,
upon demand by the Agent, the Company shall pay such amount to the Agent for the
Agent's account, together with interest thereon for each day elapsed since the
date of such Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Loans comprising such Borrowing, in the case of a
Revolving Loan Borrowing, or at the applicable Swingline Rate, in the case of a
Swingline Loan Borrowing.
(b) The failure of any Bank to make any Revolving Loan on any
Borrowing Date shall not relieve any other Bank of any obligation hereunder
to make a Revolving Loan on such Borrowing Date, but no Bank shall be
responsible for the failure of any other Bank to make the Revolving Loan to
be made by such other Bank on any Borrowing Date.
2.17 Sharing of Payments, Etc. If, other than as expressly provided
---------------------------
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
non-pro rata payment (whether voluntary, involuntary, through the exercise of
any right of set-off, or otherwise), such Bank shall immediately (a) notify the
Agent of such fact, and (b) purchase from the other Banks such participations in
the Loans made by them as shall be necessary to cause such purchasing Bank to
share the excess payment with each of them in accordance with their Commitment
Percentages; provided, however, that if all or any portion of such excess
-------- -------
payment is thereafter recovered from the purchasing Bank, such purchase shall to
that extent be rescinded and each other Bank shall repay to the purchasing Bank
the purchase price paid therefor, together with an amount equal to such paying
Bank's Commitment Percentage (according to the proportion of (i) the amount of
such paying Bank's required repayment to (ii) the total amount so recovered from
the purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Company agrees
that any Bank so purchasing a participation from another Bank 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
Bank were the direct creditor of the Company in the amount of such
participation.
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<PAGE>
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes. (a) Any and all payments by the Company to each Bank or
-----
the Agent under this Agreement and any Note shall be made free and clear of, and
without deduction or withholding for, any Taxes. In addition, the Company shall
pay all Other Taxes.
(b) To the fullest extent permitted by applicable law, the Company
agrees to indemnify and hold harmless each Bank and the Agent for the full
amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed
by any jurisdiction on amounts payable under this Section 3.01) paid by
such Bank or the Agent and any liability (including penalties, interest,
additions to tax and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally
asserted. Payment under this indemnification shall be made within 30 days
after the date the Bank or the Agent makes written demand therefor in
accordance with this Section 3.01(b).
(c) If the Company shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable under this
Agreement or any Note to any Bank or the Agent, then: (i) the sum payable
shall be increased as necessary so that after making all required
deductions and withholdings (including deductions and withholdings
applicable to additional sums payable under this Section 3.01) such Bank or
the Agent, as the case may be, receives an amount equal to the sum it would
have received had no such deductions or withholdings been made; (ii) the
Company shall make such deductions and withholdings; and (iii) the Company
shall pay the full amount deducted or withheld to the relevant taxing or
other authority in accordance with applicable law.
(d) Notwithstanding anything to the contrary contained in this
Agreement, each of the Company and the Agent shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or
other similar taxes imposed by the United States of America from interest,
fees or other amounts payable under this Agreement or any Note for the
account of any Bank (without indemnification or the payment by the Company
of increased amounts pursuant to clause (a), (b) or (c) above) other than a
Bank (i) which is a domestic corporation (as defined in Section 7701 of the
Code) for federal income tax purposes or (ii) which has the Prescribed
Forms on file with the Company and the Agent for the applicable year,
provided that if the Company shall so deduct or withhold any such taxes, it
--------
shall provide a statement to the Agent and such Bank, setting forth the
amount of such taxes so deducted or withheld, the applicable rate and any
other information or documentation which such Bank or the Agent may
reasonably request to assist such Bank or the Agent in obtaining any
allowable credits or deductions for the taxes so deducted or withheld in
the jurisdiction or jurisdictions in which such Bank is subject to tax.
(e) Within 30 days after the date of any payment by the Company of
Taxes or Other Taxes, the Company shall furnish the Agent the original or a
certified copy of a receipt (if available) evidencing payment thereof, or
other evidence of payment satisfactory to the Agent.
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<PAGE>
(f) Each Bank shall use reasonable efforts (consistent with its
internal policies and legal and regulatory restrictions) to select a
jurisdiction for its Lending Office or change the jurisdiction of its
Lending Office, as the case may be, so as to avoid the imposition of any
Taxes or Other Taxes or to eliminate any such additional payment by the
Company which may thereafter accrue; provided that no such selection or
--------
change shall be made if, in the sole judgment of such Bank, such selection
or change would be disadvantageous to such Bank.
3.02 Breakage Costs. If (a) any payment of principal of any CD Loan or
--------------
Offshore Loan is made by the Company prior to the last day of an Interest Period
relating to such Loan, or (b) the Company fails to borrow a Borrowing consisting
of a CD Loan or an Offshore Loan on the date for such Borrowing specified in the
Notice of Borrowing (except as permitted by and subject to the provisions of
Sections 2.14(c), (e) and (f) and 3.04), then upon demand by any Bank, the
Company shall pay to the Agent for the account of such Bank any amounts required
to compensate such Bank for any losses, costs or expenses which it may
reasonably incur as a result of such payment, including, without limitation, any
loss (excluding loss of anticipated profits), cost or expense incurred by
reasons of the liquidation or reemployment of deposits or other funds acquired
by such Bank to fund or maintain such Borrowing, but not including any cost of
termination or liquidation of any hedge or related trading position (such as a
rate swap, basis swap, forward rate transaction, interest rate option, cap,
collar or floor transaction, swaption, or any other, similar transaction). For
purposes of calculating amounts payable by the Company to the Banks under this
Section, (i) each Offshore Loan made by a Bank (and each related reserve,
special deposit or similar requirement) shall be conclusively deemed to have
been funded at the LIBO Rate used in determining such Offshore Loan by a
matching deposit or other borrowing in the interbank eurodollar market for a
comparable amount and for a comparable period, whether or not such Offshore Loan
is in fact so funded, and (ii) each CD Loan made by a Bank (and each related
reserve, special deposit or similar requirement) shall be conclusively deemed to
have been funded at the Certificate of Deposit Rate used in determining the
Adjusted CD Rate for such CD Loan by the issuance of its certificate of deposit
in a comparable amount and for a comparable period, whether or not such CD Loan
is in fact so funded.
3.03 Increased Costs. (a) If, due to either: (i) after the date hereof, the
---------------
introduction of or any change (other than any change by way of imposition or
increase of reserve requirements pursuant to Section 3.05) in or in the
interpretation of any law or regulation by a Governmental Authority charged with
the interpretation or administration thereof, or (ii) the compliance with any
guideline enacted after the date hereof or request received after the date
hereof from any Governmental Authority (whether or not having the force of law)
the effect of which is to impose or modify any reserve, special deposit,
insurance assessment, or similar requirement relating to any extensions of
credit or other assets of, or any deposits with or other liabilities of, any
Bank (other than reserves maintained as provided for in Section 3.05), there
shall be any actual increase in the cost to such Bank of agreeing to make or
making, funding or maintaining any CD Loan or Offshore Loan, then the Company
shall from time to time, upon demand by such Bank (with a copy of such demand to
the Agent), pay to the Agent for the account of such Bank additional amounts
sufficient to compensate such Bank for such actual increased cost. Promptly
after any Bank becomes aware of any such introduction, change or proposed
compliance, such Bank shall notify the Company thereof. No Bank shall be
permitted to recover increased costs incurred or accrued more than 90 days prior
to the date such notice is given to the Company, unless such change in law,
regulation, enactment or request giving rise to increased costs hereunder is
retroactive in effect and such Bank gives notice of demand for compensation not
later than 90 days from the date on which such law or regulation is in effect or
such enactment or request occurs.
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<PAGE>
(b) If the Company so notifies the Agent within five Business Days
after any Bank notifies the Company of any increased cost pursuant to the
provisions of Section 3.03(a), the Company shall convert all Revolving
Loans of the Type affected by such increased cost of all Banks then
outstanding into Revolving Loans of another Type in accordance with Section
2.04 and, additionally, reimburse such Bank for such increased cost in
accordance with Section 3.03(a).
(c) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Lending Office) or the corporation controlling such Bank with any request
or directive regarding capital adequacy (whether or not having the force of
law) of any such authority, central bank or comparable agency has the
effect of increasing the amount of capital required or expected to be
maintained as a result of its Commitment hereunder, such Bank shall have
the right to give prompt written notice to the Company with a copy to the
Agent, which notice shall notify the Company of the additional amounts as
shall be required to compensate such Bank for the increased cost to such
Bank as a result of such increase in capital and shall certify that such
costs are generally being charged by such Bank to other similarly situated
borrowers under similar credit facilities and such amounts shall be paid
promptly by the Company. No Bank shall be permitted to recover increased
costs incurred or accrued more than 90 days prior to the date such notice
is given to the Company, unless such adoption, change, request or directive
giving rise to increase in capital is adopted or required retroactively and
such Bank gives notice of demand for compensation not later than 90 days
from the date on which such adoption, change, request or directive occurs.
(d) Each Bank shall use its best efforts (consistent with its internal
policies and legal and regulatory restrictions) to select a jurisdiction
for its Lending Office or change the jurisdiction of its Lending Office, as
the case may be, so as to avoid the imposition of any increased costs under
this Section 3.03 or to eliminate the amount of any such increased cost
which may thereafter accrue; provided that no such selection or change of
--------
the jurisdiction for its Lending Office shall be made if, in the reasonable
judgment of such Bank, such selection or change would be disadvantageous to
such Bank.
3.04 Illegality. Notwithstanding any other provision of this
----------
Agreement, if any Bank shall notify the Agent that, after the date hereof, the
introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any Governmental Authority shall assert
that it is unlawful, for any Bank or its LIBOR Lending Office to make any
Offshore Loans or to continue to fund or maintain any Offshore Loan hereunder,
then, on notice thereof and demand therefor by such Bank to the Company, (i) the
obligation of such Bank to make Offshore Loans and to convert Revolving Loans
into LIBOR Revolving Loans shall be suspended until the Agent shall notify the
Company that the circumstances causing such suspension no longer exist, and (ii)
the Company shall, if permitted by applicable law, convert on the last day of
the applicable Interest Period, and if not so permitted, forthwith convert all
LIBOR Revolving Loans of all Banks then outstanding into Revolving Loans of
another Type in accordance with Section 2.04.
29
<PAGE>
3.05 Reserves on Offshore Loans. If any Bank shall be required under
-----------------------------
regulations of the FRB to maintain reserves with respect to liabilities or
assets consisting of or including Eurocurrency funds or deposits (currently
known as "Eurocurrency liabilities"), and if as a result thereof there is an
increase in the cost to such Bank of agreeing to make or making, funding or
maintaining Offshore Loans, the Company shall from time to time, upon demand by
such Bank (with a copy of such demand to the Agent), pay to the Agent for the
account of such Bank additional amounts, as additional interest hereunder,
sufficient to compensate Bank for such increased cost. Increased costs under
this Section 3.05 shall be payable by the Company on each Interest Payment Date
on such Offshore Loans, provided the Company shall have received at least 15
days' prior written notice (with a copy to the Agent) of such additional
interest from the Bank. If a Bank fails to give notice 15 days prior to the
relevant Interest Payment Date, such additional interest shall be payable 15
days from receipt of such notice. No Bank shall be permitted to recover
additional interest incurred or accrued more than 90 days prior to the date such
notice is given to the Company, unless any such reserve requirement giving rise
to additional interest hereunder is made or announced retroactively and such
Bank gives notice of demand for compensation not later than 90 days from the
date on which such requirement is in effect.
3.06 Replacement of Bank; Termination of Bank. In the event that any Bank
-----------------------------------------
makes a demand for payment pursuant to Sections 3.01 or 3.03, or any Bank has
suspended its funding of Offshore Loans pursuant to Section 3.04, the Company
shall have the right, if no Default or Event of Default then exists, to either
replace such Bank in accordance with subsection (a) of this Section 3.06 or
terminate such Bank's Commitment in accordance with subsection (b) of this
Section 3.06. If any Banks that are not Affiliates as of the Closing Date become
Affiliates after the Closing Date (each such Bank, a "New Affiliate Bank"), the
------------------
Company shall have the right, if no Default or Event of Default then exists, to
either replace each such New Affiliate Bank (other than the New Affiliate Bank
having the largest Commitment) in accordance with subsection (a) of this Section
3.06 or terminate each such New Affiliate Bank (other than the New Affiliate
Bank having the largest Commitment) in accordance with subsection (b) of this
Section 3.06.
(a) If the Company determines to replace a Bank pursuant to this
Section 3.06, the Company shall have the right to replace such Bank with an
entity that is an Eligible Assignee (a "Replacement Bank"); provided that
----------------- ---------
such Replacement Bank, (i) if it is not already a Bank, shall be reasonably
acceptable to the Agent, (ii) shall unconditionally offer in writing (with
a copy to the Agent) to purchase all of such Bank's rights hereunder and
interest in the Loans owing to such Bank and the Note held by such Bank
without recourse at the principal amount of such Note plus interest and
fees accrued thereon to the date of such purchase on a date therein
specified, and (iii) shall, along with the Bank to be replaced, execute and
deliver to the Agent an Assignment and Acceptance pursuant to which such
Replacement Bank becomes a party hereto with a Commitment equal to that of
the Bank being replaced, including, in the case of the replacement of the
Swingline Bank, the Swingline Commitment, which document shall (among other
matters) specify the CD Lending Office, Domestic Lending Office and LIBOR
Lending Office of such Replacement Bank. Upon satisfaction of the
requirements set forth in the first sentence of this Section 3.06(a),
acceptance of such offer to purchase by the Bank to be replaced, payment to
such Bank of the purchase price in immediately available funds, and the
payment by the Company of all requested costs accruing to the date of
purchase which the Company is obligated to pay under Section 3.02 and all
other amounts owed by the Company to such Bank (other than the principal of
and interest on the Loans of such Bank purchased by the Replacement Bank
and interest and fees accrued thereon to the date of purchase), and payment
by the Replacement Bank to the Agent of a non-refundable processing fee of
$4,000, the Replacement Bank shall constitute a "Bank" hereunder with a
Commitment as so specified and the Bank being so replaced shall no longer
constitute a "Bank" hereunder (with the signature pages and Schedule 2.01
being deemed amended to reflect same) and such Bank shall be relieved of
its obligations hereunder. If, however, (x) a Bank accepts such an offer
and such proposed Replacement Bank fails to purchase such rights and
interest on such specified date in accordance with the terms of such offer,
the Company shall continue to be obligated to pay the increased costs or
additional amounts due to such Bank pursuant to Section 3.01, 3.03 or 3.05
(if a demand for repayment of increased costs or additional amounts
pursuant to any of such Sections is the basis for the proposed
replacement), as the case may be, or (y) the Bank proposed to be replaced
fails to accept such purchase offer, the Company (if the basis for the
proposed replacement is a demand for payment of increased costs or
additional amounts pursuant to Sections 3.01, 3.03 or 3.05) shall not be
obligated to pay to such Bank such increased costs or additional amounts to
the extent incurred or accrued from and after the date of such purchase
offer, but in each of the cases set forth in clauses (x) and (y), the
Company shall continue to have the right to terminate such Bank's
Commitment in accordance with Section 3.06(b).
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(b) In the event that the Company determines to terminate a Bank's
Commitment pursuant to this Section 3.06 which, in the case of the
Swingline Bank, includes the Swingline Commitment, the Company shall give
notice to such Bank of the Company's election to terminate (a copy shall be
sent to the Agent), and such termination shall become effective 15 days
thereafter unless such Bank withdraws its request for additional
compensation (with respect to a proposed termination based on a request for
additional compensation) or reinstates its funding of Offshore Loans (with
respect to a proposed termination based on a suspension of funding of
Offshore Loans). On the date of the termination of the Commitment of any
Bank pursuant to this Section 3.06(b), (x) the Company shall deliver notice
of the effectiveness of such termination to such Bank and to the Agent, (y)
the Company shall pay all amounts owed by the Company to such Bank under
this Agreement or under the Note payable to such Bank (including principal
of and interest on the Loans owed to such Bank, accrued commitment fees and
amounts specified in such Bank's notice (if any) delivered pursuant to
Sections 3.01, 3.03 or 3.05 as the case maybe, with respect to the period
prior to such termination) and (z) upon the occurrence of the events set
forth in clauses (x) and (y), such Bank shall cease to be a "Bank"
hereunder for all purposes (except for purposes of the provisions of this
Agreement which by their terms survive the termination of this Agreement)
and such Bank shall be relieved of its obligations hereunder.
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3.07 Reallocation of Commitments in Event of Merger, Etc. If after the
---------------------------------------------------
Closing Date any Bank merges or consolidates with or into one or more other
Banks, the surviving entity of such merger or consolidation (the "Surviving
---------
Bank") shall at the request of the Company, if no Default or Event of Default
then exists, assign all or a portion of its Resulting Increased Commitment (as
defined below) to one or more entities selected by the Company that are Eligible
Assignees (each an "Acquiring Entity"); provided that (i) each Acquiring Entity
----------------
shall unconditionally offer in writing (with a copy to the Agent) to purchase a
portion of the Surviving Bank's Resulting Increased Commitment and the portion
of the Revolving Loans owing to the Surviving Bank and the Note or Notes held by
the Surviving Bank allocable to the amount of the Resulting Increased Commitment
to be acquired; (ii) the portion of the Resulting Increased Commitment of the
Surviving Bank acquired by each Acquiring Entity shall be in integral multiples
of $1,000,000; (iii) the purchase price to be paid by the Acquiring Entity shall
be the outstanding principal amount of the Revolving Loans owed to the Surviving
Bank on the date of purchase (plus interest and fees accrued thereon) that are
allocable to the amount of the Resulting Increased Commitment being acquired;
(iv) each Acquiring Entity, if it is not already a Bank, shall be reasonably
acceptable to the Agent; and (v) if any of the Surviving Bank's Loans must be
prepaid prior to the last day of the Interest Period relating to such Loans, the
Company shall pay amounts payable under Section 3.02 of this Agreement. Each
assignment hereunder shall be accomplished in accordance with, and subject to
the terms and conditions contained in, the third sentence of Section 10.07(c),
and to the extent of any such assignment, the Surviving Bank shall be relieved
of its obligations hereunder with respect to its assigned Commitment. To the
extent that the Surviving Bank's Resulting Increased Commitment is not acquired
by an Acquiring Entity, the Company shall have the right to terminate the
Surviving Bank's Resulting Increased Commitment by notice given to the Agent and
such Bank within 180 days after the effective date of such merger or
consolidation. The termination shall be effective 15 days thereafter, provided
--------
that on the date of termination the Company shall have paid to the Surviving
Bank all amounts owed by the Company to the Surviving Bank allocable to the
amount of the Surviving Bank's Resulting Increased Commitment being terminated
(including principal of the Revolving Loans owed to the Surviving Bank allocable
to the portion of the Resulting Increased Commitment being terminated plus
interest and fees accrued on such portion). The amounts owed by the Company to
the Surviving Bank under this Agreement that are allocable to the amount of the
Resulting Increased Commitment being acquired or terminated pursuant to this
Section 3.07, shall be the product of (a) all amounts owed by the Company to the
Surviving Bank hereunder on the date of acquisition or termination (including
the outstanding principal amount of the Revolving Loans owed to the Surviving
Bank and interest and fees accrued thereon), and (b) a fraction having as it
numerator the amount of the Resulting Increased Commitment being acquired or
terminated and having as its denominator the total amount of the Surviving
Bank's Commitment without giving effect to such acquisition or termination. For
the purposes of this Section 3.07, "Resulting Increased Commitment" shall mean
------------------------------
(a) the total combined Commitment of the Surviving Bank immediately following a
merger or consolidation contemplated by this Section 3.07, minus (b) the amount
of the largest Commitment (immediately prior to such merger or consolidation) of
any Bank that was a party to such merger or consolidation, excluding the
Swingline Commitment in the event the Swingline Bank is a Surviving Bank.
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3.08 Certificates of Banks. Any Bank claiming reimbursement or compensation
---------------------
under this Article III shall, as part of each notice and demand for payment
required under this Article III, deliver to the Company (with a copy to the
Agent) a certificate setting forth in reasonable detail the amount and basis of
the reimbursement or compensation payable to the Bank hereunder, certifying that
such Bank is generally charging such reimbursement or compensation to other
similarly situated borrowers under similar credit facilities, and such
certificate shall be conclusive and binding on the Company in the absence of
manifest error; provided that the determination of such amount shall be made in
- -------- good faith in a manner generally consistent with such Bank's standard
practices.
3.09 Survival. The agreements and obligations of the Company in this
--------
Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions of Initial Loans. The obligation of each Bank to make
----------------------------
its initial Loan hereunder, including the obligation of the Swingline Bank to
make its initial Swingline Loan, is subject to the condition that the Agent have
received on or before the Closing Date all of the following, in form and
substance satisfactory to the Agent and each Bank:
(a) Credit Agreement and Notes. This Agreement and the Notes executed
--------------------------
by each party thereto;
(b) Resolutions; Incumbency. (i) Copies of the resolutions of the
------------------------
board of directors of the Company authorizing the transactions contemplated
hereby, certified as of the Closing Date by the Secretary or an Assistant
Secretary of the Company; and (ii) a certificate of the Secretary or Vice
President of the Company certifying the names and true signatures of the
officers of the Company authorized to execute and deliver each Loan
Document to be executed by the Company;
(c) Organization Documents: Good Standing. Each of the following
----------------------------------------
documents: (i) the articles or certificate of incorporation and the bylaws
of the Company as in effect on the Closing Date, certified by the Secretary
or Assistant Secretary of the Company as of the Closing Date; and (ii) a
good standing certificate for the Company from the Secretary of State (or
similar, applicable Governmental Authority) of its state of incorporation
and of the State of Texas dated as of a recent date;
(d) Legal Opinions. An opinion of Linda S. Auwers, Vice President and
--------------
Assistant General Counsel of the Company, addressed to the Agent and the
Banks, substantially in the form of Exhibit D-1, and an opinion of
------------
Stephanie A. Lucie, Senior Counsel to the Company, addressed to the Agent
and the Banks, substantially in the form of Exhibit D-2;
------------
(e) First Amendment to the 5-Year Credit Agreement. Evidence that all
----------------------------------------------
conditions to the effectiveness of the First Amendment to the 5-Year Credit
Agreement have occurred;
33
<PAGE>
(f) Officer's Certificate. A certificate signed by a Responsible
----------------------
Officer of the Company, dated as of the Closing Date, stating that
(i) the representations and warranties contained in Article V are
true and correct in all material respects on and as of such date, and
(ii) no Default or Event of Default exists or would result from
the initial Borrowing;
(h) Other Documents. Such other approvals, opinions, documents or
----------------
materials as the Agent or any Bank may reasonably request.
4.02 Conditions to All Borrowings. The obligation of each Bank to make
----------------------------
any Loan, including the obligation of the Swingline Bank to make any Swingline
Loan, is subject to the satisfaction of the following conditions precedent on
the relevant Borrowing Date:
(a) Notice of Borrowing. The Agent shall have received a Notice of
--------------------
Borrowing;
(b) Continuation of Representations and Warranties. The
--------------------------------------------------------
representations and warranties in Article V shall be true and correct in
all material respects on and as of such Borrowing Date with the same effect
as if made on and as of such Borrowing Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which
case they shall be true and correct in all material respects as of such
earlier date); and
(c) No Existing Default. No Default or Event of Default shall exist or
-------------------
shall result from such Borrowing.
Each Notice of Borrowing submitted by the Company hereunder, and each making of
a Borrowing by the Company, shall constitute a representation and warranty by
the Company hereunder, as of the date of each such notice or request and as of
each Borrowing Date, that the conditions in Section 4.02 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Bank that:
5.01 Corporate Existence. The Company and each of its Restricted
--------------------
Subsidiaries are duly incorporated or otherwise formed, validly existing and (if
applicable) in good standing in each case under the laws of its jurisdiction of
incorporation or formation and have all requisite power and all authority as a
corporation, partnership or other form of business organization, governmental
licenses, authorizations, certificates, consents and approvals required to carry
on their respective businesses as now conducted in all material respects.
34
<PAGE>
5.02 Corporate Power. The execution, delivery and performance by the
----------------
Company of the Loan Documents and the consummation of the transactions
contemplated by such Loan Documents are within the Company's corporate powers,
have been duly authorized by all necessary corporate action, and do not
contravene (a) the Company's charter or bylaws or (b) any law or regulation
applicable to the Company, or (c) any material ("material" for the purposes of
this representation meaning creating a liability of $50,000,000 or more)
agreement binding on the Company, or, to its knowledge, any other agreement
binding on the Company.
5.03 Authorization and Approvals. No authorization or approval or other
----------------------------
action by, and no notice to or filing with, any Governmental Authority is
required for the due execution, delivery and performance by the Company of the
Loan Documents or the consummation of the transactions contemplated by such Loan
Documents.
5.04 Enforceable Obligations. This Agreement has been duly executed and
------------------------
delivered by the Company. This Agreement is, and, when executed and delivered in
accordance with this Agreement, each Note will be, the legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally, and by general principles of equity.
5.05 Financial Statements. The audited consolidated balance sheet of the
---------------------
Company and its Subsidiaries as of December 31, 1997, and the related audited
consolidated statements of income and cash flows for the fiscal year then ended
(as shown on the Company's Form 10-K for the year ended December 31, 1997) and
the unaudited consolidated balance sheet of the Company and its Subsidiaries as
of June 30, 1998 and the related unaudited statements of income and cash flows
for the fiscal quarter then ended (as shown on the Company's Form 10-Q for the
quarter ended June 30, 1998), fairly present the consolidated financial
condition of the Company and its Subsidiaries as of such dates and the
consolidated results of operations of the Company and its Subsidiaries for such
fiscal periods, all in accordance with GAAP except as otherwise expressly noted
therein, subject (in the case of the unaudited balance sheet and income
statement) to changes resulting from normal year-end audit adjustments.
5.06 Litigation. Except as disclosed in the Company's Form 10-K for the
----------
year ended December 31, 1997, or the Company's Forms 10-Q for the quarter ended
June 30, 1998, which were delivered to the Banks prior to the date hereof, or as
further disclosed by the Company to the Banks and the Agent in writing prior to
the date hereof, there is no pending or, to the knowledge of the Company,
threatened action or proceeding affecting the Company or any of its Subsidiaries
before any court, governmental agency or arbitrator, in which there is a
reasonable likelihood of an adverse decision which could materially adversely
affect the consolidated financial condition or operations of the Company and its
Subsidiaries, taken as a whole. There is no pending or, to the knowledge of the
Company, threatened action or proceeding affecting the Company which purports to
affect the legality, validity, binding effect or enforceability of any of the
Loan Documents.
35
<PAGE>
5.07 Regulation U. Following the application of the proceeds of each Loan,
------------
not more than 25% of the value of the assets of the Company which are subject to
any arrangement with the Agent or any Bank (herein or otherwise) whereby the
Company's or any Subsidiary's right or ability to sell, pledge or otherwise
dispose of assets is in any way restricted will be Margin Stock.
5.08 Investment Company Act. Neither the Company nor any of its
-------------------------
Subsidiaries is an "investment company" or a company "controlled" by an --
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
5.09 ERISA. The Company is in compliance with all applicable provisions of
-----
ERISA except where the failure to comply would not have a Material Adverse
Effect.
5.10 Holding Company. Neither the Company nor any of its Subsidiaries is a
---------------
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
5.11 Environmental Condition. Except as disclosed in the Company's Form
------------------------
10-K Report for the year ended December 31, 1997 or in the Company's Form 10-Q
Report for the quarter ended June 30, 1998, or as further disclosed by the
Company to the Banks and the Agent in writing, the aggregate contingent and
non-contingent liabilities of the Company and its Subsidiaries which are
presently known to any Responsible Officer and reasonably expected to arise in
connection with (a) the requirements of Environmental Protection Statutes or (b)
any obligation or liability to any Person in connection with any Environmental
matters, including any release or threatened release of any Hazardous Substance
or Hazardous Waste, do not exceed 10% of the Consolidated Tangible Net Worth of
the Company (excluding such liabilities to the extent covered by insurance if
the insurer has confirmed that such insurance covers such liabilities).
5.12 No Material Adverse Change. Since December 31, 1997, there has been no
--------------------------
material adverse change in the business, consolidated financial position or
consolidated results of operation of the Company and its Subsidiaries taken as a
whole.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, the Swingline Bank
shall have any Swingline Commitment, or any Note shall remain unpaid, the
Company will unless the Majority Banks waive compliance in writing:
36
<PAGE>
6.01 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, including compliance with the requirements of ERISA and Environmental
Protection Statutes and the payment and discharge before delinquency of all
taxes, assessments and governmental charges or levies imposed upon the Company
or any of its Subsidiaries or any property of the Company or any of its
Subsidiaries, in each case to the extent that the failure to comply, pay or
discharge would have a material adverse effect on the Company and its
Subsidiaries taken as a whole; provided that neither the Company nor any
--------
Subsidiary of the Company shall be required to pay any such tax, assessment,
charge or levy or comply with any requirement which is being contested in good
faith and adequately reserved against to the extent required by GAAP.
6.02 Reporting Requirements. Furnish to the Agent and each of the Banks:
----------------------
(a) promptly after the filing or sending thereof and in any event not
later than 115 days after the end of each fiscal year, a copy of the
Company's annual report which it sends to its public security holders and a
copy of the Company's report on Form 10-K which the Company files with the
SEC for such year together with a duly-completed Compliance Certificate;
(b) promptly after the filing thereof, and in any event within 60 days
after the end of each of the first three fiscal quarters during each fiscal
year, the Company's report on Form 10-Q which the Company files with the
SEC for such quarter together with a duly completed Compliance Certificate;
(c) promptly, but in any event within five Business Days after a
Responsible Officer of the Company has obtained knowledge thereof, a notice
of each Default or Event of Default, together with a statement of a
Responsible Officer setting forth the details of such Default or Event of
Default and the actions which the Company has taken and proposes to take
with respect thereto;
(d) promptly after the filing thereof, notice of filing of each of the
reports on Form 8-K and each Schedule 13D (and any amendment thereto), if
any, which the Company files with the SEC, together with a copy of such
filing;
(e) promptly upon any Responsible Officer becoming aware thereof,
notice of any transaction or event that is, or is reasonably anticipated to
result in, a Specified Transaction or a Change in Control as to the
Company;
(f) promptly upon such date becoming reasonably determinable by any
Responsible Officer (but no later than two Business Days after the
effective date of any Specified Transaction or Change in Control), notice
of the effective date of any Specified Transaction or Change in Control as
to the Company; and
(g) such other information respecting the condition or operations,
financial or otherwise, of the Company and its Subsidiaries as any Bank
through the Agent may from time to time reasonably request.
37
<PAGE>
Reports required to be delivered pursuant to subsections (a), (b) and (d) of
this Section 6.02 shall be deemed to have been delivered on the date on which
the Company posts such reports on the Company's website on the Internet at the
website address listed on the signature pages hereof or when such report is
posted on the SEC's website at www.sec.gov.; provided that the Company shall
--------
deliver paper copies of the reports referred to in subsections (a), (b) and (d)
of this Section 6.02 to the Agent or any Bank who requests the Company to
deliver paper copies until written notice to cease delivering paper copies is
given by the Agent or such Bank and provided, further, that in every instance
-------- -------
the Company shall provide paper copies of the Compliance Certificates required
by subsections (a) and (b) and the notice required by subsection (d) of this
Section 6.02 to the Agent and each of the Banks. Except for the Compliance
Certificates referred to in subsections (a) and (b) of this Section 6.02, the
Agent shall have no obligation to request the delivery or to maintain copies of
the reports referred to in subsections (a), (b) or (d) of this Section 6.02 or
to monitor compliance by the Company with any such request for delivery, and
each Bank shall be solely responsible for requesting delivery to it or
maintaining its copies of such reports.
6.03 Use of Proceeds. Use the proceeds of the Loans for general
-----------------
corporate purposes, including to backstop the Company's commercial paper program
and for acquisitions, provided that such acquisitions would not cause a Default
or Event of Default hereunder that is not waived by the Banks pursuant to
Section 10.01 and are undertaken and consummated in accordance with all
applicable Requirements of Law in all material respects.
6.04 Maintenance of Insurance. Maintain, and cause each of its Restricted
------------------------
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as are usually
carried by companies engaged in similar businesses and owning similar properties
in the same general areas in which the Company and its Restricted Subsidiaries
operate, provided that the Company and its Restricted Subsidiaries may
self-insure to the extent and in the manner normal for companies of like size,
type and financial condition. The Company may maintain its Restricted
Subsidiaries' insurance on behalf of them.
6.05 Corporate Existence Etc. Preserve and maintain, and cause each of its
-----------------------
Restricted Subsidiaries to preserve and maintain, its corporate existence,
rights and franchises; provided, however, that no Event of Default shall arise
-------- -------
under this Section 6.05 as a result of any Specified Transaction if any
prepayment required under Section 2.09(b) is timely made, or as a result of the
termination of existence, rights and franchises of any Restricted Subsidiary
pursuant to any merger or consolidation to which such Restricted Subsidiary is a
party, and provided, further, that the Company or any Restricted Subsidiary
-------- -------
shall not be required to preserve any right or franchise if the Company or such
Restricted Subsidiary shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company or such Restricted
Subsidiary, as the case may be, and that the loss thereof is not
disadvanta-geous in any material respect to the Banks.
6.06 Visitation Rights. From time to time and so long as any visit or
------------------
inspection will not unreasonably interfere with the operations of the Company
and its Restricted Subsidiaries, upon reasonable notice, permit the Agent and
any Bank or any agents or representatives thereof to examine the financial
records and books of account of, and visit and inspect the properties of, the
Company and any such Restricted Subsidiary, and to discuss the affairs, finances
and accounts of the Company and any such Restricted Subsidiary with any of their
respective officers or directors.
38
<PAGE>
ARTICLE VII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, the Swingline Bank
shall have any Swingline Commitment, or any Note shall remain unpaid, the
Company will not, unless the Majority Banks waive compliance in writing:
7.01 Leverage Ratio. Permit, as of the last day of any fiscal quarter, its
--------------
ratio of (a) the aggregate outstanding principal amount of Total Senior Debt to
(b) Total Capitalization to be greater than 50%.
7.02 Liens. Fail to perform and observe any term, covenant or agreement
-----
contained in Section 3.7 of the Senior Debt Indenture (as modified for purposes
hereof as set forth in the proviso to the next sentence hereof). For the
purposes of this Section 7.02, Section 3.7 and the definitions of all terms
defined in the Senior Debt Indenture and used in or otherwise applicable to such
Section 3.7 are hereby incorporated in this Agreement by reference as if such
provisions and definitions were set forth in full herein; provided, however,
-------- -------
that solely for the purposes of this Section 7.02 the word "Securities" as used
in the Senior Debt Indenture shall mean the Notes, the phrase "this Section 3.7"
used therein shall mean this Section 7.02, and the word "Issuer" used therein
shall mean the Company.
ARTICLE VIII
EVENTS OF DEFAULT
8.01 Event of Default. Any of the following shall constitute an "Event
---------------- -----
of Default":
- -----------
(a) Non-Payment. The Company fails to pay, (i) any principal on any
-----------
Note when such principal is due and payable, (ii) any interest on any Note
within five days after such interest becomes due and payable, or (iii) the
commitment fee set forth in Section 2.12 within 15 days after such
commitment fee becomes due and payable; or
(b) Representation or Warranty. Any representation or warranty made by
--------------------------
the Company or any Responsible Officer (including representations and
warranties deemed made pursuant to Section 4.02) under or in connection
with any Loan Document is incorrect in any material respect on or as of the
date made or deemed made; or
(c) Specific Defaults. The Company fails to perform or observe any
------------------
term, covenant or agreement contained in any of Sections 6.02(c), 6.02(e),
6.02(f), 7.01 or 7.02; or
(d) Other Defaults. The Company fails to perform or observe any other
--------------
term or covenant contained in this Agreement, and such default shall
continue unremedied for a period of 30 days after written notice thereof is
given to the Company by the Agent at the request of any Bank; or
39
<PAGE>
(e) Cross-Default. The Company or any Restricted Subsidiary (i) fails
-------------
to make any payment of principal of or premium or interest on (A) any Debt
outstanding under the 5-Year Credit Agreement, or (B) any Debt (other than
Debt described in clause (iv) of the definition of Debt) which is
outstanding in the principal amount of at least $100,000,000 in the
aggregate of the Company or such Restricted Subsidiary (as the case may
be), when such payment in respect of Debt described in clause (A) or (B)
becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise), and such failure continues
after the applicable grace or notice period, if any, in effect on the date
of such failure, event or condition in the agreement or instrument relating
to any such Debt; or (ii) fails to perform or observe any other condition
or covenant, or any other event shall occur or condition exist, under any
agreement or instrument relating to any such Debt (other than Debt
described in clause (iv) of the definition of Debt) and such failure
continues after the applicable grace or notice period in effect on the date
of such failure, event or condition, if any, if the effect of such failure,
event or condition is to cause any such Debt to be declared to be due and
payable prior to its stated maturity; or
(f) Insolvency; Voluntary Proceedings. The Company or any Restricted
----------------------------------
Subsidiary (i) generally fails to pay, or admits in writing its inability
to pay, its debts as they become due, subject to applicable grace periods,
if any, whether at stated maturity or otherwise; (ii) commences any
Insolvency Proceeding with respect to itself; or (iii) takes any corporate
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. Any involuntary Insolvency Proceeding is
-----------------------
commenced or filed against the Company or any Restricted Subsidiary, and
such Involuntary Proceeding is not released, vacated or stayed within 60
days after the commencement or filing thereof; or
(h) Judgments. Any judgment or order for the payment of money in
---------
excess of $100,000,000 shall be rendered against the Company and remain
unsatisfied and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there shall
be any period of 60 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) Change in Control. There shall occur a Change in Control of the
------------------
Company.
8.02 Remedies. If any Event of Default shall occur and be continuing,
--------
the Agent shall, at the request of, or may, with the consent of, the Majority
Banks, (a) by notice to the Company, declare the obligation of each Bank to make
Loans, including the obligation of the Swingline Bank to make Swingline Loans,
be terminated, whereupon such obligations shall be terminated; (b) by notice to
the Company, declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document, to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Company; and (c) exercise on behalf of itself
and the Banks all other rights and remedies available to it and the Banks under
the Loan Documents or applicable law; provided, however, that upon the
-------- -------
occurrence of any event specified in subsection (f) or (g) of Section 8.01 (in
the case of subsection (g) upon the expiration of the 60-day period mentioned
therein), the obligation of each Bank to make Loans, including the obligation of
the Swingline Bank to make Swingline Loans, shall automatically terminate and
the unpaid principal amount of all outstanding Loans and all interest and other
amounts as aforesaid shall automatically become due and payable without further
act of the Agent or any Bank.
40
<PAGE>
8.03 Rights Not Exclusive. The rights provided for in this Agreement and
---------------------
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity.
ARTICLE IX
THE AGENT
9.01 Appointment and Authorization. Each Bank hereby irrevocably
-------------------------------
appoints, designates and authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
Without limiting the generality of the foregoing sentence, the use of the term
"agent" or "administrative agent" in this Agreement with reference to the Agent
is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable law. Instead, such
term is used merely as a matter of market custom, and is intended to create or
reflect only an administrative relationship between independent contracting
parties.
9.02 Delegation of Duties. The Agent may execute any of its duties under
---------------------
this Agreement or any other Loan Document 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.
9.03 Liability of Agent. None of the Agent-Related Persons shall (i) be
------------------
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Company or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Bank to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
41
<PAGE>
9.04 Reliance by Agent. (a) The Agent shall be entitled to rely, and shall
-----------------
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Company), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Majority Banks as it deems appropriate and, if it
so requests, it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement or
any other Loan Document in accordance with a request or consent of the Majority
Banks or all of the Banks if required by Section 10.01 and such request and any
action taken or failure to act pursuant thereto shall be binding upon all of the
Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 4.01, each Bank that has executed this Agreement shall
be deemed to have consented to, approved or accepted or to be satisfied
with, each document or other matter either sent by the Agent to such Bank
for consent, approval, acceptance or satisfaction, or required thereunder
to be consented to or approved by or acceptable or satisfactory to the
Bank.
9.05 Notice of Default. The Agent shall not 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 the Agent for the account of the Banks, unless the Agent shall
have received written notice from a Bank or the Company referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". The Agent will notify the Banks of its receipt
of any such notice. The Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Majority Banks in
accordance with Article VIII; provided, however, that unless and until the Agent
-------- -------
has received any such request, the 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 Banks.
42
<PAGE>
9.06 Credit Decision. Each Bank acknowledges that none of the Agent-Related
---------------
Persons has made any representation or warranty to it, and that no act by the
Agent hereinafter taken, including any review of the affairs of the Company and
its Subsidiaries, shall be deemed to constitute any representation or warranty
by any Agent-Related Person to any Bank. Each Bank represents to the Agent that
it has, independently and without reliance upon any Agent-Related Person and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company and
its Subsidiaries, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company. Except for notices,
reports and other documents expressly herein required to be furnished to the
Banks by the Agent, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company which may come into the possession of any of the
Agent-Related Persons.
9.07 Indemnification. Whether or not the transactions contemplated hereby
---------------
are consummated, the Banks shall indemnify upon demand the Agent-Related Persons
(to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from and against any
and all 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
Agent-Related Persons in any way relating to or arising out of the Loan
Documents or any action taken or omitted by an Agent-Related Person, provided,
--------
however, that no Bank shall be liable for the payment to the Agent-Related
- -------
Persons of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from such Person's gross negligence or willful misconduct. IT IS THE INTENTION
OF THE BANKS THAT EACH AGENT-RELATED PERSON SHALL, TO THE EXTENT PROVIDED IN
THIS SECTION 9.07, BE INDEMNIFIED FOR ITS ORDINARY, SOLE OR CONTRIBUTORY
NEGLIGENCE. Without limitation of the foregoing, each Bank shall reimburse the
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) 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,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that the Agent is not reimbursed for such expenses by or on behalf
of the Company. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of the Agent.
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9.08 Agent in Individual Capacity. The Bank serving as Agent and its
------------------------------
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, underwriting or other business with the
Company and its Subsidiaries and Affiliates as though the Bank serving as Agent
were not the Agent hereunder and without notice to or consent of the Banks. The
Banks acknowledge that, pursuant to such activities, the Bank serving as Agent
or its Affiliates may receive information regarding the Company or its
Affiliates (including information that may be subject to confidentiality
obligations in favor of the Company or such Subsidiary) and acknowledge that the
Agent shall be under no obligation to provide such information to them. With
respect to its Loans, the Bank serving as Agent shall have the same rights and
powers under this Agreement as any other Bank and may exercise the same as
though it were not the Agent, and the terms "Bank" and "Banks" include the Bank
serving as Agent in its individual capacity.
9.09 Successor Agent. The Agent may, and at the request of the Majority
----------------
Banks shall, resign as Agent upon 30 days' prior written notice to the Banks and
the Company. If the Agent resigns under this Agreement, the Majority Banks shall
appoint from among the Banks a successor agent for the Banks which successor
agent shall be subject to approval by the Company. If no successor agent is
appointed prior to the effective date of the resignation of the Agent, the Agent
may appoint, after consulting with the Banks and the Company, a successor agent
from among the Banks. Upon the acceptance of its appointment as successor agent
hereunder, such successor agent shall succeed to all the rights, powers and
duties of the retiring Agent and the term "Agent" shall mean such successor
agent and the retiring Agent's appointment, powers and duties as Agent shall be
terminated. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article IX and Sections 3.01, 10.04 and 10.05 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement. If no successor agent has accepted appointment as
Agent by the date which is 30 days following a retiring Agent's notice of
resignation, the retiring Agent's resignation shall nevertheless thereupon
become effective and the Banks shall perform all of the duties of the Agent
hereunder and under any other Loan Document until such time, if any, as the
Majority Banks appoint a successor agent as provided for above. Notwithstanding
the foregoing, however, BofA may not be removed as the Agent at the request of
the Majority Banks unless BofA shall also simultaneously be replaced as
Swingline Bank hereunder pursuant to documentation in form and substance
reasonably satisfactory to BofA.
9.10 Withholding Tax. (a) If any Bank is a foreign corporation, foreign
----------------
partnership or foreign trust within the meaning of the Code and such Bank claims
exemption from, or a reduction of, United States withholding tax under Sections
1441 or 1442 of the Code, such Bank agrees with and in favor of the Agent, to
deliver to the Agent:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, two properly
completed and executed IRS Forms 1001 and W-8 at least 30 days before
the payment of any interest is due in the first calendar year and at
least 30 days before the payment of any interest in each third
succeeding calendar year during which interest may be paid under this
Agreement;
(ii) if such Bank claims that interest paid under this Agreement
is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Bank, two
properly completed and executed copies of IRS Form 4224 at least 30
days before the payment of any interest is due in the first taxable
year of such Bank and in each succeeding taxable year of such Bank
during which interest may be paid under this Agreement; and
44
<PAGE>
(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.
The Agent shall deliver one copy of each such form to the Company.
Such Bank agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Bank claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such
Bank sells, assigns, grants a participation in, or otherwise transfers all
or part of the Obligations of the Company to such Bank, such Bank agrees to
notify the Agent (which in turn shall notify the Company) of the percentage
amount in which it is no longer the beneficial owner of Obligations of the
Company to such Bank. To the extent of such percentage amount, the Agent
(and the Company) will treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax
by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
the Company to such Bank, such Bank agrees to notify the Agent (which in
turn shall notify the Company) of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Company to such Bank. To
the extent of such percentage amount, the Agent (and the Company) will
treat such Bank's Form 4224 as no longer valid.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such
Bank an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required
by subsection (a) of this Section are not delivered to the Agent, then the
Agent may withhold from any interest payment to such Bank not providing
such forms or other documentation an amount equivalent to the applicable
withholding tax (without taking into account such reduction).
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered, was not properly executed,
or because such Bank failed to notify the Agent of a change in
circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Bank shall
indemnify the Agent fully for all amounts paid, directly or indirectly, by
the Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to
the Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Banks under this
subsection shall survive the payment of all Obligations and the resignation
or replacement of the Agent.
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9.11 Co-Agents; Internet Agents. No Bank identified on the facing page or
---------------------------
signature pages of this Agreement solely as a "co-agent," "syndication agent" or
"Internet agent" shall have any right, power, obligation, liability,
responsibility or duty as such under this Agreement other than those applicable
to all Banks. Without limiting the foregoing, no Bank so identified as a
"co-agent," "syndication agent" or "Internet agent" shall have or be deemed to
have any fiduciary relationship with any Bank. Each Bank acknowledges that it
has not relied, and will not rely, on any of the Banks so identified in deciding
to enter into this Agreement or in taking or not taking action hereunder.
ARTICLE X
MISCELLANEOUS
10.01 Amendments and Waivers. No amendment or waiver of any provision
-----------------------
of this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company therefrom, shall be effective unless the same shall be
in writing and signed by the Majority Banks and acknowledged by the Agent, and
then such waiver shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no such waiver,
-------- -------
amendment, or consent shall, except as set forth below, do any of the following:
(a) increase or extend the Commitment of any Bank (except as provided
in Section 2.06) or reinstate any Commitment of any Bank terminated
pursuant to Section 8.02 or Section 2.09(b), unless such waiver, amendment
or consent is in writing and signed by such Bank and acknowledged by the
Agent;
(b) postpone or delay any date fixed for any payment of principal,
interest or fees due to any Bank hereunder or under any Loan Document,
unless such waiver, amendment or consent is in writing and signed by such
Bank and acknowledged by the Agent;
(c) reduce the principal of, or the rate of interest specified herein
on any Revolving Loan made by any Bank, or any fees payable hereunder or
under any other Loan Document to any Bank, unless such waiver, amendment or
consent is in writing and signed by such Bank and acknowledged by the
Agent;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes which is required for the Banks or any
of them to take any action hereunder, unless such waiver, amendment or
consent is in writing and signed by all the Banks and acknowledged by the
Agent; or
(e) amend this Section or any provision herein providing for consent
or other action by all Banks, unless such waiver, amendment or consent is
in writing and signed by all the Banks and acknowledged by the Agent;
and, provided further, that (i) no amendment, waiver or consent shall, unless in
-------- -------
writing and signed by the Agent in addition to the Majority Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document, and (ii) no amendment, waiver or consent
shall, unless in writing and signed by the Swingline Bank in addition to the
Majority Banks or all the Banks, as the case may be, affect the rights or duties
of the Swingline Bank under this Agreement or any other Loan Document.
46
<PAGE>
10.02 Notices. (a) All notices, requests and other communications
-------
shall be in writing (including, unless the context expressly otherwise provides,
by telecopier transmission, provided that any matter transmitted by telecopier
shall be immediately preceded or confirmed by a telephone call to the recipient
at the number specified on Schedule 10.02), and mailed, telecopied or delivered,
--------------
to the address or telecopier number specified for notices on Schedule 10.02; or,
--------------
as directed to the Company or the Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Company and the Agent.
(b) All such notices, requests and communications shall be effective,
if sent by overnight courier, one Business Day after delivery to the
courier company; if sent by telecopier, when received in legible form by
the receiving telecopier equipment; if mailed, upon the fifth Business Day
after the date deposited into the U.S. mail; or if delivered, upon
delivery; provided that (i) notices pursuant to Article II or IX shall not
--------
be effective until actually received by the Agent, and (ii) telecopied
notices received by any party after its normal business hours (or on a day
other than a Business Day) shall be effective on the next Business Day.
(c) Any agreement of the Agent and the Banks herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Company. The Agent and the Banks shall be entitled to rely
on the authority of any Person purporting to be a Person authorized by the
Company to give such notice and the Agent and the Banks shall not have any
liability to the Company or other Person on account of any action taken or
not taken by the Agent or the Banks in reliance upon such telephonic or
facsimile notice. The obligation of the Company to repay the Loans shall
not be affected in any way or to any extent by any failure by the Agent and
the Banks to receive written confirmation of any telephonic or facsimile
notice or the receipt by the Agent and the Banks of a confirmation which is
at variance with the terms understood by the Agent and the Banks to be
contained in the telephonic or facsimile notice.
10.03 No Waiver: Cumulative Remedies. No failure to exercise and no
---------------------------------
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
10.04 Costs and Expenses. The Company shall:
--------------------
(a) whether or not the transactions contemplated hereby are
consummated, pay for all reasonable costs and expenses incurred by the
Agent in connection with the preparation, delivery, administration and
execution of, and any amendment, supplement, waiver or modification to (in
each case, whether or not consummated), this Agreement, any Loan Document
and any other documents prepared in connection herewith or therewith, and
the consummation of the transactions contemplated hereby and thereby; and
47
<PAGE>
(b) pay or reimburse the Agent and each Bank within five Business Days
after demand for all costs and expenses (including reasonable Attorney
Costs) incurred by them in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this Agreement
or any other Loan Document during the existence of an Event of Default or
after acceleration of the Loans (including in connection with any "workout"
or restructuring regarding the Loans, and including in any Insolvency
Proceeding or appellate proceeding).
10.05 Indemnity. The Company agrees, to the fullest extent permitted
---------
by law, to indemnify and hold harmless the Agent--Related Persons, and each Bank
and its respective directors, officers, employees and agents, from and against
any and all claims, damages, liabilities and expenses (including, without
limitation, reasonable Attorney Costs) for which any of them may become liable
or which may be incurred by or asserted against the Agent-Related Persons, or
such Bank or any such director, officer, employee or agent (other than by
another Bank or any successor or assign of another Bank), in each case in
connection with or arising out of or by reason of any investigation, litigation,
or proceeding, whether or not the Agent or such Bank or any such director,
officer, employee or agent is a party thereto, arising out of, related to or in
connection with any Loan Document or any transaction in which any proceeds of
all or any part of the Loans are applied or proposed to be applied, EXPRESSLY
INCLUDING ANY SUCH CLAIM, DAMAGE, LIABILITY OR EXPENSE ARISING OUT OF THE
ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH INDEMNIFIED PERSON (but
excluding any such claim, damage, liability or expense to the extent
attributable to the gross negligence or willful misconduct of, or violation of
any law or regulation by, any such indemnified Person). The undertaking in this
Section shall survive the payment of all Obligations hereunder.
10.06 Payments Set Aside. To the extent that the Company makes a payment to
------------------
the Agent or the Banks, or the Agent or the Banks exercise their right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Insolvency Proceeding or otherwise, then (a)
to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b)
each Bank severally agrees to pay to the Agent upon demand its pro rata or other
applicable share of any amount so recovered from or repaid by the Agent.
10.07 Binding Effect; Assignments; Participa-tions. (a) This Agreement
-----------------------------------------------
shall become effective when it shall have been executed by the Company and the
Agent and when the Agent shall have, as to each Bank, received a copy (including
one transmitted by telecopier) of a signature page hereof executed by such Bank
and thereafter shall be binding upon and inure to the benefit of and be
enforceable by the Company, the Agent and each Bank and their respective
successors and assignees, subject to Section 10.07(e) and except that the
Company shall not have the right to assign its rights or obligations hereunder
or any interest herein without the prior written consent of the Banks (other
than an assignment effectuated by operation of law pursuant to a Specified
Transaction).
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(b) Each Bank may grant participations to one or more commercial banks
or other Persons, in each case in accordance with applicable law, in or to
all or any part of, the Loans owing to, or the Commitment of, such Bank and
the Note held by such Bank subject to Section 10.07(e), and to the extent
of any such participation (unless otherwise stated therein) the purchaser
of such participation shall, to the fullest extent permitted by law, have
the same rights to payment hereunder and under such Loan and Note as it
would have if it were such Bank hereunder, provided that (x) the
--------
originating Bank's obligations under this Agree-ment, including, without
limitation, its commitment to make loans to the Company hereunder, shall
remain unchanged, such Bank shall remain solely responsible for the
performance thereof, such Bank shall remain the holder of any such Note for
all purposes under this Agreement, and the Company, the other Banks and the
Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement;
(y) no such participant shall be entitled to receive any greater payment
pursuant to Sections 3.01, 3.03 and 3.05 than such Bank would have been
entitled to receive with respect to the rights assigned except as a result
of circumstances arising after the date of such participation to the extent
that such circumstances affect other Banks and participants generally; and
(z) no Bank shall grant a participation that conveys to the participant the
right to vote or consent under this Agreement, other than the right to vote
upon or consent to (i) any increase in the amount of such Bank's
Commitment; (ii) any reduction of the principal amount of, or interest to
be paid on, such Bank's Loan or Note; (iii) any reduction of the commitment
fee payable to such Bank; or (iv) any postponement of the due date in
respect of any amounts owed to such Bank under any Loan Document.
(c) In accordance with applicable law, any Bank may assign a portion,
in an amount of at least $10,000,000 of its Commitment (or, if less, the
amount of its total Commitment), together with a ratable portion of its
Loans and other rights and obligations hereunder to an Eligible Assignee,
with the prior written consents of the Agent and (unless there has occurred
and is continuing an Event of Default) the Company, which consents shall
not be unreasonably withheld, subject to Section 10.07(e); provided,
--------
however, that after giving effect to any proposed assignment by a Bank of
-------
its Commitment (other than an assignment of its total Commitment), such
Bank's Commitment shall be at least $25,000,000, unless the Company and the
Agent shall each have agreed to a lesser amount; provided, further, that
-------- -------
neither the Company's nor the Agent's consent shall be required for, and
the minimum amount for assignment shall not apply to, any assignment to an
Eligible Assignee which already is a Bank party to this Agreement. In
connection with the assignment by the Swingline Bank of all of its
Commitment and Loans hereunder, the Swingline Commitment and Swingline
Loans shall be included as part of the assignment transaction. Each such
assigning Bank and Eligible Assignee to which an assignment has been made
pursuant to this Section 10.07(c) shall execute and deliver to the Agent an
Assignment and Acceptance, pursuant to which, in the case of an Eligible
Assignee to which such an assignment has been made which is not already a
Bank, such Eligible Assignee shall become a party to this Agreement,
provided that, in the case of each such assignment, (i) at such time
--------
Schedule 2.01 shall be deemed to be modified to reflect the Commitments of
-------------
such assignee Bank and of the existing Banks, (ii) the Company shall issue
new Notes to such assignee Bank and to the assigning Bank, if applicable,
to reflect the revised Commitments and (iii) the Agent shall receive at the
time of such assignment, from the assigning or assignee Bank, a
non-refundable assignment fee of $4,000. To the extent of any assignment
pursuant to this Section 10.07(c), the assigning Bank shall be relieved of
its obligations hereunder with respect to its assigned Commitment.
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(d) In addition to the assignments and participations permitted under
Section 10.07(b) and (c), any Bank may at any time create a security
interest in, or pledge, all or any portion of its rights under this
Agreement and the Notes held by it in favor of any Federal Reserve Bank in
accordance with Regulation A of the FRB, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
(e) Unless an Event of Default has occurred and is continuing, no
assignments or participations shall result in a Bank (together with its
Affiliates) holding Commitments, or participations therein, in excess of
$200,000,000 without the prior written consent of the Company.
10.08 Set-off. In addition to any rights and remedies of the Banks
-------
provided by law, if an Event of Default exists or the Loans have been
accelerated, to the fullest extent permitted by applicable law each Bank is
authorized at any time and from time to time, without prior notice to the
Company, any such notice being waived by the Company to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Bank to or for the credit or the account
of the Company against any and all Obligations owing to such Bank, now or
hereafter existing, irrespective of whether or not the Agent or such Bank shall
have made demand under this Agreement or any Loan Document and although such
Obligations may be contingent or unmatured. Each Bank agrees promptly to notify
the Company and the Agent after any such set-off and application made by such
Bank; provided, however, that the failure to give such notice shall not affect
-------- -------
the validity of such set-off and application.
10.09 Interest. (a) It is the intention of the parties hereto that the
--------
Agent and each Bank shall conform strictly to usury laws applicable to it, if
any. Accordingly, if the transactions with the Agent or any Bank contemplated
hereby would be usurious under applicable law, if any, then, in that event,
notwithstanding anything to the contrary in this Agreement, the Notes or any
other agreement entered into in connection with this Agreement or the Notes, it
is agreed as follows: (i) the aggregate of all consideration which constitutes
interest under applicable law that is contracted for, taken, reserved, charged
or received by the Agent or such Bank, as the case may be, under this Agreement,
the Notes or under any other agreement entered into in connection with this
Agreement or the Notes shall under no circumstances exceed the maximum amount
allowed by such applicable law and any excess shall be cancelled automatically
and, if theretofore paid, shall be refunded by the Agent or such Bank, as the
case may be, to the Company, and (ii) in the event that the maturity of any Loan
or other obligation payable to the Agent or such Bank, as the case may be, is
accelerated or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to the Agent or
such Bank, as the case may be, may never include more than the maximum amount
allowed by such applicable law and excess interest, if any, to the Agent or such
Bank, as the case may be, provided for in this Agreement or otherwise shall be
cancelled automatically as of the date of such acceleration or prepayment and,
if theretofore paid, shall, at the option of the Agent or such Bank, as the case
may be, be credited by the Agent or such Bank, as the case may be, on the
principal amount of the obligations owed to the Agent or such Bank, as the case
may be, by the Company or refunded by the Agent or such Bank, as the case may
be, to the Company. To the extent that Article 5069-1.04 of the Texas Revised
Civil Statutes is relevant to any Bank for the purposes of determining the
Highest Lawful Rate, such Bank hereby elects to determine the applicable rate
ceiling under such Article by the indicated (weekly) rate ceiling from time to
time in effect, subject to such Bank's right to subsequently change such rate
ceiling in accordance with applicable law. Tex. Rev. Civ. Stat. Ann. art. 5069,
ch. 15 (which regulates certain revolving credit loan accounts and revolving
triparty accounts) shall not apply to this Agreement or the Notes.
50
<PAGE>
(b) In the event that at any time the interest rate applicable to any
Loan made by any Bank would exceed the Highest Lawful Rate, the rate of
interest to accrue on the Loans by such Bank shall be limited to the
Highest Lawful Rate, but shall accrue, to the extent permitted by law, on
the principal amount of the Loans made by such Bank from time to time
outstanding, if any, at the Highest Lawful Rate allowed by applicable law
until the total amount of interest accrued on the Loans made by such Bank
equals the amount of interest which would have accrued if the interest
rates applicable to the Loans pursuant to Article II had at all times been
in effect. In the event that upon the final payment of the Loans made by
any Bank and termination of the Commitment of such Bank, the total amount
of interest paid to such Bank hereunder is less than the total amount of
interest which would have accrued if the interest rates applicable to such
Loans pursuant to Article II had at all times been in effect, then the
Company agrees to pay to such Bank, to the extent permitted by law, an
amount equal to the excess of (a) the lesser of (i) the amount of interest
which would have accrued on such Loans if the Highest Lawful Rate had at
all times been in-effect or (ii) the amount of interest which would have
accrued if the interest rates applicable to such Loans pursuant to Article
II had at all times been in effect over (b) the amount of interest
otherwise accrued on such Loans in accordance with this Agreement.
10.10 Confidentiality. (a) Each Bank and the Agent acknowledge that
---------------
certain confidential and proprietary information of the Company (the
"Information") is a valuable, special, and a unique asset of the Company. Each
Bank and the Agent agree that they will use the care specified below to keep all
Information in confidence, and will not use any Information except as provided
in this Section, or disclose any portion of the Information to any third party
without the prior written consent of the Company except as provided in this
Section. Each Bank and the Agent covenant to use the care specified below to
not disclose such Information on behalf of itself, its officers, directors,
agents, employees, and affiliates. Each Bank and the Agent shall use the same
degree of care to protect the confidentiality of all Information as such Bank or
the Agent, as the case may be, uses to protect its own confidential and
proprietary information (which it does not wish to have published or
disseminated).
(b) Information provided by the Company to any Bank or the Agent,
which the Company in good faith regards as Information hereunder shall be
clearly marked by the Company as "Confidential," "Proprietary," or bear any
other appropriate notice indicating the sensitive nature of the
Information. Any tangible Information not easily markable shall be
transmitted by the Company to such Bank or the Agent under cover of written
letter which clearly identifies the Information and designates it as
confidential "Information". All information conveyed to such Bank or the
Agent orally relating to plans, forecasts, products or other non-public
information shall be deemed confidential "Information".
51
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(c) If any Bank or the Agent is confronted with legal action to
disclose Information received under this Agreement or otherwise makes
disclosures of confidential information under clauses (ii), (iii) or (iv)
of Section 10.10(e) (other than any disclosure to a regulatory authority
pursuant to an examination of the books, records or affairs of such Bank or
Agent), such Bank or the Agent, as the case may be, shall (to the extent
permitted by applicable law) promptly notify the Company.
(d) All Information disclosed or furnished under this Agreement shall
remain the property of the Company. At the Company's request, the
Information in tangible form shall be promptly returned or destroyed,
together with all copies thereof unless such return or destruction is
contrary to law, regulation, legal process, administrative order, or
administrative request having, or deemed to have, the force of law. Upon
request, the appropriate Bank or the Agent, as the case may be, shall
provide written certification of the destruction.
(e) Notwithstanding the foregoing, each Bank and the Agent may
disclose Information (i) as has become generally available to the public,
(ii) as may be required or appropriate in any report, statement or
testimony submitted to any municipal, state or Federal regulatory body
having or claiming to have jurisdiction over such Bank or to the FRB, or
the FDIC or similar organizations (whether in the United States or
elsewhere), (iii) as may be required or appropriate in response to any
summons or subpoena or in connec-tion with any litigation, (iv) in order to
comply with any law, order, regulation or ruling applicable to such Bank,
(v) to any regulatory authority pursuant to an examination of the books,
records or affairs of any Bank or the Agent, (vi) to the prospective
transferee in connection with any contemplated transfer of any of the Notes
or any interest therein by such Bank, provided, that such prospective
--------
transferee executes an agreement with the Company or the transferor
containing provisions substantially identical to those contained in this
Section, (vii) to the extent reasonably required in connection with any
litigation or proceeding to which the Agent, any Bank or their respective
Affiliates may be party, (viii) to such Bank's independent auditors and
other professional advisors, (ix) to the extent reasonably necessary to
disclose in connection with the exercise of any remedy hereunder and under
the Notes, or (x) as to any Bank, as expressly permitted under the terms of
any other document or agreement regarding confidentiality to which the
Company is party or is deemed party with such Bank.
10.11 Preservation of Certain Matters. Notwithstanding any other term
--------------------------------
or provision hereof to the contrary, any entity ceasing to be a "Bank" for
purposes of this Agreement, by virtue of any matter or event contemplated by
Section 2.07, 2.08, 3.06 or 10.07 shall retain any and all rights arising under
Section 10.05, and shall continue to remain responsible to the Agent for all
liabilities under Section 9.07 and Section 9.10 relating to matters occurring
prior to the termination of such entity as a "Bank."
52
<PAGE>
10.12 Notification of Addresses, Lending Offices Etc. Each Bank shall
--------------------------------------------------
notify the Agent in writing of any changes in the address to which notices to
the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
10.13 Counterparts. This Agreement may be executed in any number of
------------
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same agreement.
10.14 Severability. The illegality or unenforceability of any provision of
------------
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
10.15 GOVERNING LAW; JURISDICTION. (A) THIS AGREEMENT AND THE NOTES SHALL
----------------------------
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE
OF NEW YORK; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT
AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT
AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH
--------------------
IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN
SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED
HERETO. THE COMPANY, THE AGENT AND THE BANKS EACH WAIVES PERSONAL SERVICE
OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER
MEANS PERMITTED BY NEW YORK LAW.
10.16 WAIVER OF JURY TRIAL. THE COMPANY, THE BANKS AND THE AGENT EACH
----------------------
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE
BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
53
<PAGE>
10.17 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS, AS
----------------
DEFINED IN THIS AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
54
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
Company's Notice Address: COMPAQ COMPUTER CORPORATION
Compaq Computer Corporation
P.O. Box 692000, MS110701
20555 State Highway 24 By:_________________
Houston, TX 77269-2000 Name: Ben K. Wells
www.compaq.com Title: Vice President and Treasurer
Attn: Richard Harris
Director, Capital Markets
Treasury
[email protected] BANK OF AMERICA NATIONAL TRUST
Tel: (281) 518-6024 AND SAVINGS ASSOCIATION, as Administrative
Fax: (281) 514-7400 Agent, Internet Agent, Swingline Bank and
as a Bank
By:_____________________
Name: Kevin M. McMahon
Title: Managing Director
55
<PAGE>
THE CHASE MANHATTAN BANK,
as Syndication Agent and as a Bank
By:_____________________
Name:
Title:
56
<PAGE>
CITIBANK, N.A.,
as Syndication Agent and as a Bank
By:_____________________
Name:
Title:
57
<PAGE>
NATIONSBANK OF TEXAS, N.A.,
as Syndication Agent and as a Bank
By:_____________________
Name:
Title:
58
<PAGE>
CARIPLO-CASSA DI RISPARMIO
DELLE PROVINCIE LOMBARDE S.P.A.
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
59
<PAGE>
DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN ISLANDS
BRANCH
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
60
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By:_____________________
Name:
Title:
61
<PAGE>
FLEET NATIONAL BANK
By:_____________________
Name:
Title:
62
<PAGE>
ING BANK N.V.
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
63
<PAGE>
ROYAL BANK OF CANADA
By:_____________________
Name:
Title:
64
<PAGE>
BANCA COMMERCIALE ITALIANA,
LOS ANGELES BRANCH
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
65
<PAGE>
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By:_____________________
Name:
Title:
66
<PAGE>
BARCLAYS BANK PLC
By:_____________________
Name:
Title:
67
<PAGE>
THE FUJI BANK, LIMITED,
NEW YORK BRANCH
By:_____________________
Name:
Title:
68
<PAGE>
NATIONAL AUSTRALIA BANK LIMITED
By:_____________________
Name:
Title:
69
<PAGE>
ABN-AMRO BANK N.V.
By:_____________________
Name:
Title:
70
<PAGE>
BANCA DI ROMA, CHICAGO BRANCH
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
71
<PAGE>
BANCA MONTE DEI PASCHI DI SIENA,
S.P.A.
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
72
<PAGE>
BANCA NAZIONALE DEL LAVORO S.P.A.,
NEW YORK BRANCH
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
73
<PAGE>
BANCA POPOLARE DI MILANO,
NEW YORK BRANCH
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
74
<PAGE>
BANCO CENTRAL HISPANO AMERICANO,
S.A., NEW YORK BRANCH
By:_____________________
Name:
Title:
75
<PAGE>
BANK OF IRELAND
By:_____________________
Name:
Title:
76
<PAGE>
BANK OF MONTREAL
By:_____________________
Name:
Title:
77
<PAGE>
THE BANK OF NEW YORK
By:_____________________
Name:
Title:
78
<PAGE>
BANKBOSTON, N.A.
By:_____________________
Name:
Title:
79
<PAGE>
BANQUE NATIONALE DE PARIS, HOUSTON
AGENCY
By:_____________________
Name:
Title:
80
<PAGE>
BAYERISCHE HYPO-UND VEREINSBANK
AKTIENGESELLSCHAFT, NEW YORK BRANCH
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
81
<PAGE>
BAYERISCHE LANDESBANK GIROZENTRALE
By:_____________________
Name:
Title:
82
<PAGE>
CREDITO ITALIANO
By:_____________________
Name:
Title:
83
<PAGE>
DEN DANSKE BANK AKTIESELSKAB, CAYMAN
ISLANDS BRANCH
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
84
<PAGE>
DRESDNER BANK AG, NEW YORK BRANCH
AND GRAND CAYMAN BRANCH
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
85
<PAGE>
FIRST UNION NATIONAL BANK
By:_____________________
Name:
Title:
86
<PAGE>
ISTITUTO BANCARIO SAN PAOLO DI TORINO
S.P.A.
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
87
<PAGE>
MARINE MIDLAND BANK
By:_____________________
Name:
Title:
88
<PAGE>
MELLON BANK, N.A.
By:_____________________
Name:
Title:
89
<PAGE>
NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH
By:_____________________
Name:
Title:
NATIONAL WESTMINSTER BANK PLC,
NASSAU BRANCH
By:_____________________
Name:
Title:
90
<PAGE>
THE NORTHERN TRUST COMPANY
By:_____________________
Name:
Title:
91
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By:_____________________
Name:
Title:
92
<PAGE>
THE SANWA BANK, LIMITED, acting
through its New York Branch
By:_____________________
Name:
Title:
93
<PAGE>
SKANDINAVISKA ENSKILDA BANKEN AB
(PUBL), NEW YORK BRANCH
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
94
<PAGE>
SOCIETE GENERALE FINANCE (IRELAND)
LIMITED
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
95
<PAGE>
STANDARD CHARTERED BANK
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
96
<PAGE>
UBS AG, STAMFORD BRANCH
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
97
<PAGE>
TORONTO DOMINION BANK (TEXAS), INC.
By:_____________________
Name:
Title:
98
<PAGE>
WELLS FARGO BANK, N.A.
By:_____________________
Name:
Title:
99
<PAGE>
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
100
<PAGE>
WESTPAC BANKING CORPORATION
By:_____________________
Name:
Title:
101
<PAGE>
EXHIBIT A
---------
NOTICE OF BORROWING
Bank of America National Trust and
Savings Association, as Administrative Agent
Agency Administrative Services #5596
1850 Gateway Blvd.
Concord, CA 94520-3281
Attn: Compaq AO [Date]
Ladies and Gentlemen:
This Notice of Borrowing is delivered pursuant to Section [2.03] [2.05] of
the $1,000,000,000 Revolving Credit Agreement, dated as of October 2, 1998
(together with all amendments, if any, from time to time made thereto, the
"Credit Agreement"), among Compaq Computer Corporation, a Delaware corporation
(the "Company"), certain Banks parties thereto and Bank of America National
Trust and Savings Association, as administrative agent for such Banks. Unless
otherwise defined herein or the context otherwise requires, terms used herein
have the meanings provided in the Credit Agreement.
The Company hereby irrevocably requests a Borrowing under the Credit
Agreement, and in that connection sets forth below the information relating to
such Borrowing (the "Proposed Borrowing") as required by Section [2.03(a)]
[2.05(a)] of the Credit Agreement:
(i) The Borrowing Date of the Proposed Borrowing is ________________,
199___.
*[(ii) The type of Revolving Loans comprising the Proposed Borrowing
is [Base Rate Revolving Loans] [Adjusted CD Rate Revolving Loans] [LIBOR
Revolving Loans].]
**[(ii) The type of Swingline Loan comprising the Proposed Borrowing
is a [Base Rate Swingline Loan] [Adjusted CD Rate Swingline Loan] [LIBO
Rate Swingline Loan].]
(iii) The [aggregate] amount of the Proposed Borrowing is $_____
______.
_________________________________
*To be included for a Proposed Borrowing comprised of Revolving Loans.
**To be included for a Proposed Borrowing comprised of a Swingline Loan.
A-1
<PAGE>
(iv) The duration of the Interest Period for each CD Loan or Offshore
Loan made as part of the Proposed Borrowing is _______ (days) (months).
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in Article V of the
Credit Agreement are true and correct in all material respects on and as of
such Borrowing Date with the same effect as if made on and as of such
Borrowing Date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they are true and correct
in all material respects as of such earlier date); and
(B) no Default or Event of Default exists or shall result from such
Proposed Borrowing.
Very truly yours,
COMPAQ COMPUTER CORPORATION
By:
Name:
Title:
A-2
<PAGE>
EXHIBIT B
---------
CONVERSION/CONTINUATION NOTICE
Bank of America National Trust and
Savings Association, as Administrative Agent
Agency Administrative Services #5596
1850 Gateway Blvd.
Concord, CA 94520-3281
Attn: Compaq AO [Date]
Ladies and Gentlemen:
This Conversion/Continuation Notice is delivered pursuant to Section 2.04
of the $1,000,000,000 Revolving Credit Agreement, dated as of October 2, 1998
(together with all amendments, if any, from time to time made thereto, the
"Credit Agreement"), among Compaq Computer Corporation, a Delaware corporation
(the "Company"), certain Banks parties thereto and Bank of America National
Trust and Savings Association, as administrative agent for such Banks. Unless
otherwise defined herein or the context otherwise requires, terms used herein
have the meanings provided in the Credit Agreement.
The Company hereby requests that on _________ ____, 199__,
(1) $__________ of the presently outstanding principal amount of
the Revolving Loans originally made on ___________, 199__ [and
$______________ of the presently outstanding principal amount of the
Revolving Loans originally made on __________________, 199__],
(2) all presently being maintained as *[Adjusted CD Rate
Revolving Loans] [Base Rate Revolving Loans] [LIBOR Revolving Loans],
(3) be [converted into] [continued as],
(4) ** [Adjusted CD Rate Revolving Loans having as Interest
Period of ___ days] [LIBOR Revolving Loans having an Interest Period
of ___ months] [Base Rate Revolving Loans].
____________________________
*Select appropriate interest rate option.
**Select appropriate interest rate option.
B-1
<PAGE>
The Company has caused this Conversion/Continuation Notice to be executed
and delivered this _____ day of _____________, 199__.
COMPAQ COMPUTER CORPORATION
By:
Name:
Title:
B-2
<PAGE>
EXHIBIT C
---------
COMPLIANCE CERTIFICATE
This Compliance Certificate is delivered pursuant to Section 6.02 of the
$1,000,000,000 Revolving Credit Agreement dated as of October 2, 1998 (together
with all amendments, if any, from time to time made thereto, the "Credit
Agreement") among Compaq Computer Corporation, a Delaware corporation (the
"Company"), certain Banks parties thereto and Bank of America National Trust and
Savings Association, as administrative agent for such Banks. Unless otherwise
defined herein or the context otherwise requires, terms used herein have the
meanings provided in the Credit Agreement.
The undersigned certifies, represents and warrants as follows:
(a) The Leverage Ratio of the Company as of ______________, 19__ was
_____%.
[Insert calculation in reasonable detail]
(b) There exists on the date of this Compliance Certificate no Default
or Event of Default under the Credit Agreement. EXECUTED AND DELIVERED this
____ day of ______________, 199__.
COMPAQ COMPUTER CORPORATION
By:
Name:
Title:
C-1
<PAGE>
EXHIBIT D-1
-----------
[Date]
To each of the Banks parties to the
$1,000,000,000 Revolving Credit Agreement
dated as of October 2, 1998 among
Compaq Computer Corporation, such Banks,
Bank of America National Trust and Savings
Association, as administrative agent and as Internet agent,
The Chase Manhattan Bank, Citibank, N.A. and
NationsBank of Texas, N.A., as syndication agents
Re: Compaq Computer Corporation Revolving Credit Agreement
-----------------------------------------------------------
Ladies and Gentlemen:
As Vice President and Assistant General Counsel of Compaq Computer
Corporation, a Delaware corporation (the "Company"), I am familiar with the
$1,000,000,000 Revolving Credit Agreement dated as of October 2, 1998 (the
"Credit Agreement") among the Company, the Banks listed on the signature pages
thereof, Bank of America National Trust and Savings Association, as
administrative agent for such Banks (the "Agent") and as Internet agent, The
Chase Manhattan Bank, Citibank, N.A. and NationsBank of Texas, N.A., as
syndication agents. In such capacity, I am also familiar with the Certificate
of Incorporation and Bylaws of the Company and the corporate records of the
Company. This opinion is being furnished to you pursuant to Section 4.01(d) of
the Credit Agreement. Terms used herein but not defined herein shall have the
same meaning ascribed to such terms in the Credit Agreement.
Before rendering this opinion, I (or other attorneys with the Company's
legal department acting under my direction) have examined the Credit Agreement
and the Loan Documents, and have examined and relied upon originals or
photostatic or certified copies of such corporate records, certificates of
officers of the Company and of public officials, and such agreements, documents
and instru-ments, and have made such investigations of law, as I or such other
attorneys have deemed relevant and necessary as the basis for the opinion
hereinafter expressed. In such examination, I or such other attorneys assumed
the genuineness of all signatures (other than signatures of officers of the
Company on the Loan Documents), the authenticity of all documents submitted to
us as originals, and the conformity to original documents of all documents
submitted to us as photostatic or certified copies.
On the basis of the foregoing, I am of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and has all corporate
powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, except to the extent failure
to obtain such licenses, authorizations, consents or approvals would not
materially adversely affect the business, consolidated financial position or
consolidated results of operations of the Company and its Subsidiaries taken as
a whole.
D-1-1
<PAGE>
2. The execution, delivery and performance by the Company- of the Loan
Documents are within the Company's corporate powers, have been duly authorized
by all necessary corporate action on the part of the Company, and do not
contravene, or constitute a default under, (a) the Restated Certificate of
Incorporation or Bylaws of the Company, (b) any contractual restriction
contained in any material (meaning for the purposes of this opinion those
creating a monetary liabi-lity of $50,000,000 or more) indenture, loan or credit
agree-ment, receivables sale or financing agreement, lease financing agreement,
capital lease, mortgage, security agreement, bond or note, or any guaranty of
any of such obligations to which the Company is a party, or, to my knowledge,
any other agreement or instrument to which the Company is a party, or (c) any
judgment, injunction, order or decree known to me to be binding upon the
Company. The execution, delivery and performance by the Company of the Loan
Documents will not result in the creation or imposi-tion of any lien, security
interest or other charge or encumbrance on any asset of the Company. The Credit
Agreement and the Notes have been duly executed and delivered by the Company.
3. No Governmental Approval (as such term is hereinafter defined) is
required to be made or obtained by the Company for the execution, delivery and
performance by the Company of the Loan Documents. As used herein, the term
"Government Approval" means any notice to, filing or registration with, or
consent, authorization, or approval that is, in my experience, normally required
in a transaction of the type evidenced by the Loan Documents and that is to be
made with or rendered by (x) the federal government of the United States or any
agency or instrumentality thereof; (y) the state of Texas or any political
subdivision thereof, but excluding any laws, rules or regulations relating to
(i) pollution or protection of the environment, (ii) zoning, land use, building
or construction, (iii) labor, employee rights and benefits, and occupational
safety and health, and (iv) utility regulation, state and federal securities and
blue sky laws, and any laws, rules or regulations of any county, municipality,
or similar political subdivision or any agency or instrumentality thereof.
4. Except as disclosed in the Company's Form 10-K for the year ended
December 31, 1997, or the Company's Forms 10-Q for the quarter ended June 30,
1998, there is no action, suit or proceeding pending or, to my knowledge,
threatened against the Company or any of its Subsidiaries before any court or
arbitrator or any governmental agency, in which there is a reasonable
possibility of an adverse decision which could materially adversely affect the
consolidated financial condition or operations of the Company and its
Subsidiaries taken as a whole or which in any manner draws into question the
validity of the Credit Agreement or any other Loan Document.
D-1-2
<PAGE>
5. Neither the Company nor any Subsidiary is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
6. Neither the Company nor any Subsidiary is a "holding company", a
"subsidiary company" of a "holding company", an "affiliate" of a "holding
company" or an "affiliate" of a "subsidiary company" of a "holding company", in
each case as such terms are defined in the Public Utility Holding Company Act of
1935, as amended.
The opinions set forth above are subject to the following qualifications:
(a) In rendering the opinions expressed in paragraph 2 above, neither I nor
any other attorney acting under my direction have made any examination of any
accounting or financial matters related to financial covenants contained in
certain documents to which the Company may be subject, and I express no opinion
with respect thereto.
(b) This opinion is limited in all respects to the laws of the State of
Texas and the General Corporation Law of the State of Delaware and Federal law.
(c) In rendering the opinion expressed in paragraph 4 above, I (or the
other attorneys acting under my direction) have only reviewed the files and
records of the Company and its Subsidiaries, and we have consulted with such
senior officers of the Company and its Subsidiaries as we have deemed necessary.
This opinion is solely for the benefit of the Banks, the Agent and their
respective successors, assigns and participants and may not be relied upon in
connection with any other transaction or by any other person.
Very truly yours,
Linda S. Auwers
Vice President and
Assistant General Counsel
D-1-3
<PAGE>
EXHIBIT D-2
-----------
October 2, 1998
To Each of the Banks Parties to the
$1,000,000,000 Revolving Credit Agreement
dated as of October 2, 1998 among
Compaq Computer Corporation, such Banks,
Bank of America National Trust and Savings
Association, as Administrative Agent and as Internet Agent,
The Chase Manhattan Bank, Citibank, N.A.
and NationsBank of Texas, N.A., as
Syndication Agents
Re: Compaq Computer Corporation Revolving Credit Agreement
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 4.01(d) of the
$1,000,000,000 Revolving Credit Agreement, dated as of October 2, 1998 (the
"Credit Agreement"), among Compaq Computer Corporation (the "Company"), the
Banks parties thereto, Bank of America National Trust and Savings Association,
as Administrative Agent and Internet Agent for such Banks, The Chase Manhattan
Bank, Citibank, N.A., and NationsBank of Texas, N.A., as syndication agents.
Except as otherwise defined herein, terms defined in the Credit Agreement are
used herein as therein defined.
I have acted as counsel for the Company in connection with the preparation,
execution, delivery and effectiveness of the Credit Agreement and the other Loan
Documents.
In that connection, I have examined:
(1) The Credit Agreement;
(2) The Notes (together with the Credit Agreement, the "Loan
Documents"); and
D-2-1
<PAGE>
(3) Such other materials as we have deemed necessary to render the
opinions provided herein.
I have also made such investigations of law as I have deemed necessary and
relevant as a basis for my opinion. As to various questions of fact material to
my opinion, I have, with your permission and without independent verification,
relied upon the representations made in the Loan Documents.
Based upon the foregoing, and subject to the qualifications, exceptions,
limitations and assumptions set forth herein, I am of the opinion that:
(i) Under the laws of the State of New York, the Loan Documents constitute
the legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their terms;
(ii) None of the execution or delivery by the Company of the Loan Documents
or the borrowing or repayment by the Company of the loans evidenced by
the Loan Documents contravenes any provision of Applicable Law. For
the purposes of this clause (ii), "Applicable Law" means any law,
rule, or regulation that is, in my experience, normally applicable in
a transaction of the type evidenced by the Loan Documents and that is
enacted or promulgated by (1) the federal government of the United
States or any agency or instrumentality thereof (including, without
limitation, Regulations T, U, and X promulgated by the Board of
Governors of the Federal Reserve System), or (2) the State of New York
or any political subdivision thereof, but excluding any laws, rules,
or regulations of any county, municipality or similar political
subdivision or any agency or instrumentality thereof.
The opinions set forth herein are subject in all respects to the following
qualifications, limitations, exceptions and assumptions:
(a) The opinions set forth above are subject, as to enforceability, to
the effects of any applicable bankruptcy (including, without limitation,
preference and fraudulent conveyance), insolvency, reorganization, moratorium or
similar laws affecting creditor's rights generally. The opinions set forth
above are also subject, as to enforceability, to the effects of general
principles of equity (regardless of whether considered in proceedings in equity
or at law), including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and the possible unavailability of
specific performance or injunctive relief.
(b) In rendering the opinions set forth herein, I have assumed, with
your permission and without independent verification (i) the due authorization,
execution and delivery of the Loan Documents by all parties to such Loan
Documents (other than the Company) and that each such Loan Document is valid,
binding and enforceable against the parties thereto other than the Company, (ii)
the legal capacity of natural persons, (iii) the genuineness of all signatures,
(iv) the authenticity of all documents submitted to us as originals, and (v) the
conformity to original documents of all documents submitted to us as copies.
D-2-2
<PAGE>
(c) In rendering the opinions set forth above, I have, with your
permission and without independent verification, relied upon the opinion of
Linda S. Auwers, Vice President and Assistant General Counsel of the Company,
dated of even date herewith, with respect to the following matters: (i) the due
incorporation, valid existence and good standing of the Company under the laws
of the State of Delaware, (ii) the Company's corporate power and authority to
execute, deliver and perform the Loan Documents, (iii) the Company's having duly
authorized, executed and delivered the Loan Documents, and (iv) the Company's
execution, delivery and performance of the Loan Documents do not and will not
violate or conflict with, result in a breach of, or constitute a default under
(A) the certificate of incorporation or by-laws of the Company, (B) any material
agreement to which the Company is a party or by which the Company or any of its
properties may be bound, or (C) any order applicable to the Company of any
federal or state regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Company or any of its properties
(d) In rendering my opinions set forth herein, I have assumed, with
your permission and without independent verification, that (i) the Company 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;
and (ii) the Company is not a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
(e) I express no opinion with respect to the following provisions to
the extent that the same are contained in the Loan Documents:
(i) provisions purporting to waive notices, objections, demands,
legal defenses, statutes of limitation, rights to trial by jury,
and other benefits and rights that cannot be waived under
applicable law;
(ii) provisions granting one party a power of attorney or authority to
execute documents on behalf of another party; and
(iii)provisions releasing, exculpating or exempting a party from, or
requiring the indemnification of a party for, liability for its
own action or inaction, to the extent that the same are
inconsistent with public policy.
D-2-3
<PAGE>
(f) In rendering my enforceability opinion with respect to provisions
providing for the appointment of an agent for service of process on behalf of
the Company, I have assumed that such agent will provide timely notice to the
Company of the commencement of legal proceedings.
(g) I have not been called upon to, and accordingly do not, express any
opinion as to the various state and federal laws regulating banks or the conduct
of their business that may relate to the Loan Documents or the transactions
contemplated thereby. Without limiting the generality of the foregoing, I
express no opinion as to the effect of the law of any jurisdiction other than
the State of New York wherein the Administrative Agent may be located or where
an enforcement of the Loan Documents may be sought that limits the rates of
interest chargeable or collectible.
(h) The opinions expressed herein are as of the date hereof only, and I
assume no obligation to update or supplement such opinions to reflect any fact
or circumstance that may hereafter come to my attention or any change in law
that may hereafter occur or become effective.
(i) The foregoing opinions and conclusions were given only in respect
of the laws of the State of New York and, to the extent specifically referred to
herein, the Federal laws of the United States of America.
This opinion has been delivered at your request for the purposes
contemplated by the Credit Agreement. Without my prior written consent, this
opinion is not to be utilized or quoted for any other purpose (other than (i) to
participants, prospective Eligible Assignees and prospective participants, (ii)
to governmental authorities having jurisdiction over any Bank or participant,
and (iii) pursuant to legal process) and no one other than you or Eligible
Assignees hereafter becoming parties to the Credit Agreement is entitled to rely
thereon; provided that Linda S. Auwers, Vice President and Assistant General
Counsel of the Company, may rely on this opinion for the purposes of rendering
her opinion in connection with the Loan Documents.
Very truly yours,
Stephanie A. Lucie
Senior Counsel
Corporate Securities and Finance
D-2-4
<PAGE>
EXHIBIT E
---------
PROMISSORY NOTE
U.S. $__________ Dated: October 2, 1998
FOR VALUE RECEIVED, the undersigned, Compaq Computer Corporation, a
Delaware corporation (the "Company"), HEREBY PROMISES TO PAY to the order of
______________________________ (the "Bank") for the account of its applicable
Lending Office (as defined in the Credit Agreement referred to below) on the
Revolving Termination Date (as defined in the Credit Agreement) the principal
sum of __________ U.S. dollars (U.S. $__________) or, if less, the aggregate
unpaid principal amount of the [Revolving] Loans (as defined in the
$1,000,000,000 Revolving Credit Agreement dated as of October 2, 1998 among the
Company, the Bank, certain other lenders parties thereto, Bank of America
National Trust and Savings Association, as administrative agent and as Internet
agent, The Chase Manhattan Bank, Citibank, N.A. and NationsBank of Texas, N.A.,
as syndication agents; such Revolving Credit Agreement, as amended from time to
time being herein referred to as the "Credit Agreement") owing to the Bank
outstanding on the Revolving Termination Date (as defined in the Credit
Agreement) [, together with the principal amount of any outstanding Swingline
Loans (as defined in the Credit Agreement) made by the Bank as Swingline Bank
(as defined in the Credit Agreement)].
The Company promises to pay interest on the unpaid principal amount of each
Loan owing to the Bank from the date of such Loan 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 the Agent's Payment Office (as defined in the Credit
Agreement), in immediately available funds. Each Loan owed to the Bank by the
Company pursuant to the Credit Agreement, and all payments made on account of
principal thereof, shall be recorded by the Bank 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 Bank to make any such recordation or
- -------- endorsement shall not affect the obligations of the Company hereunder
or under the Credit Agreement.
This Promissory Note is one of the Notes referred to in, and is subject to
and is entitled to the benefits of, the Credit Agreement. The Credit Agreement,
among other things, (i) provides for the making of [Revolving] Loans by the Bank
to the Company from time to time in an aggregate amount not to exceed the U.S.
dollar amount first above mentioned [and the making of Swingline Loans by the
Bank as Swingline Bank to the Company from time to time in an aggregate amount
not to exceed the Swingline Commitment (as such terms are defined in the Credit
Agreement)], the indebtedness of the Company resulting from each Loan owing to
the Bank being 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.
E-1
<PAGE>
This Promissory Note shall be governed by, and construed in accordance
with, the internal laws of the State of New York.
COMPAQ COMPUTER CORPORATION
By:
Name:
Title:
E-2
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
Amount of
Amount Principal Unpaid
of Type of Paid or Principal Notation
Date Loan Loan Prepaid Balance Made By
---- ----- ------- ------- ------- -------
E-3
<PAGE>
EXHIBIT F
---------
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
---------------
Acceptance"), dated as of __________, _____, is made between
____________________ (the "Assignor") and ____________________ (the "Assignee").
-------- --------
RECITALS
--------
WHEREAS, the Assignor is party to the $1,000,000,000 Revolving Credit
Agreement dated as of October 2, 1998 (as the same may be extended, renewed,
amended or restated from time to time, the "Credit Agreement"), among COMPAQ
----------------
COMPUTER CORPORATION (the "Company"), the financial institutions from time to
-------
time party thereto (including the Assignor, the "Banks") and BANK OF AMERICA
-----
NATIONAL TRUST AND SAVINGS ASSOCIATION, as administrative agent for the Banks
(in such capacity, the "Agent"). Any terms defined in the Credit Agreement and
-----
not defined in this Assignment and Acceptance are used herein as defined in the
Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor has committed
to making [(i)] Revolving Loans to the Company in an aggregate amount not to
exceed $__________ (the "Commitment") [, and (ii) Swingline Loans to the Company
----------
in an aggregate amount not to exceed $__________ (the "Swingline Commitment")];
--------------------
WHEREAS, [the Assignor has made Revolving Loans in the aggregate principal
amount of $__________ to the Company] [and Swingline Loans in the aggregate
principal amount of $__________ to the Company] [no Revolving Loans [or
Swingline Loans] are outstanding under the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part of the] [all]
rights and obligations of the Assignor under the Credit Agreement in respect of
[(i)] its Commitment in an amount equal to $__________, [together with a ratable
portion of its outstanding Revolving Loans] [and (ii) its Swingline Commitment
in an amount equal to $__________, [together with a ratable portion of its
outstanding Swingline Loans], in an aggregate amount equal to $___________]
(collectively, the "Assigned Amount"), on the terms and subject to the
----------------
conditions set forth herein, and the Assignee wishes to accept assignment of
such rights and to assume such obligations from the Assignor on such terms and
subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
-------------------------
F-1
<PAGE>
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) __% (the "Assignee's Percentage
---------------------
Share") of (A) the Commitment [and the corresponding Revolving Loans,] [and the
- -----
Swingline Commitment [and the corresponding Swingline Loans]] of the Assignor,
and (B) all related rights, benefits, obligations, liabilities and indemnities
of the Assignor under and in connection with the Credit Agreement and the Loan
Documents.
[If appropriate, add paragraph specifying payment to Assignor by Assignee
of outstanding principal of, accrued interest on, and fees with respect to,
Revolving Loans [and Swingline Loans] assigned.]
(b) With effect on and after the Effective Date (as defined herein), the
Assignee shall be a party to the Credit Agreement and succeed to all of the
rights and be obligated to perform all of the obligations of a Bank [and the
Swingline Bank] under the Credit Agreement, including the requirements
concerning confidentiality and the payment of indemnification, with a Commitment
[and the Swingline Commitment] in an [aggregate] amount equal to the Assigned
Amount. The Assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of the Credit Agreement are required
to be performed by it as a Bank [and the Swingline Bank]. It is the intent of
the parties hereto that the Commitment of the Assignor shall, as of the
Effective Date, be reduced pro rata by an amount equal to the Assigned Amount
relating thereto [and the Swingline Commitment shall be entirely assumed by the
Assignee,] and the Assignor shall relinquish its rights (except its rights with
respect to indemnification or compensation arising out of an event occurring
before the Effective Date) and be released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee.
(c) After giving effect to the assignment and assumption set forth herein,
on the Effective Date the Assignee's Commitment will be $__________[, and the
Assignee's Swingline Commitment will be $__________].
(d) After giving effect to the assignment and assumption set forth herein,
on the Effective Date the Assignor's Commitment will be $__________[, and the
Assignor's Swingline Commitment will be $0].
2. Payments.
--------
(a) As consideration for the sale, assignment and transfer contemplated in
Section 1, the Assignee shall pay to the Assignor on the Effective Date in
immediately available funds an amount equal to $__________, representing [the
principal amount of the Swingline Loans and] the Assignee's Percentage Share of
the principal amount of the Revolving Loans of the Assignor.
(b) The [Assignor] [Assignee] further agrees to pay to the Agent a
processing fee in the amount specified in Section 10.07(c) of the Credit
Agreement.
3. Reallocation of Payments.
--------------------------
F-2
<PAGE>
Any interest, fees and other payments accrued to the Effective Date with
respect to the Commitment [and the related Revolving Loans] [, and the Swingline
Commitment [and the Swingline Loans]] shall be for the account of the Assignor.
Any interest, fees and other payments accrued on and after the Effective Date
with respect to the Assigned Amount shall be for the account of the Assignee.
Each of the Assignor and the Assignee agrees that it will hold in trust for the
other party any interest, fees and other amounts which it may receive to which
the other party is entitled pursuant to the preceding sentence and pay to the
other party any such amounts which it may receive promptly upon receipt.
4. Independent Credit Decision.
-----------------------------
The Assignee (a) acknowledges that it has received a copy of the Credit
Agreement and the Schedules and Exhibits thereto, together with copies of the
most recent financial statements referred to in Section 6.02 of the Credit
Agreement, and such other documents and information as it has deemed appropriate
to make its own credit and legal analysis and decision to enter into this
Assignment and Acceptance; and (b) agrees that it will, independently and
without reliance upon the Assignor, the Agent or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit and legal decisions in taking or not taking
action under the Credit Agreement.
5. Effective Date; Notices.
-------------------------
(a) As between the Assignor and the Assignee, the effective date for
this Assignment and Acceptance shall be __________, ____ (the "Effective Date");
--------------
provided, that the following conditions precedent have been satisfied on or
- --------
before the Effective Date:
(i) this Assignment and Acceptance shall be executed and delivered by
the Assignor and the Assignee;
(ii) the consent of the Company and the Agent required for an
effective assignment of the Assigned Amount by the Assignor to the Assignee
under Section 10.07(c) of the Credit Agreement shall have been duly
obtained and shall be in full force and effect as of the Effective Date;
(iii) the Assignee shall pay to the Assignor all amounts due to the
Assignor under this Assignment and Acceptance; and
(iv) the processing fee referred to in Section 2(b) hereof and in
Section 10.07(c) of the Credit Agreement shall have been paid to the Agent.
(b) Promptly following the execution of this Assignment and Acceptance,
the Assignor shall deliver to the Company and the Agent for acknowledgment by
the Agent a Notice of Assignment in the form attached hereto as Schedule 1.
6. Agent.
-----
(a) The Assignee hereby appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement as are delegated to the Agent by the Banks pursuant to the terms of
the Credit Agreement.
F-3
<PAGE>
[(b) The Assignee shall assume no duties or obligations held by the
Assignor in its capacity as Agent under the Credit Agreement.] [INCLUDE ONLY IF
ASSIGNOR IS AGENT]
7. Withholding Tax.
----------------
The Assignee (a) represents and warrants to the Agent and the Company that
under applicable law and treaties no tax will be required to be withheld by the
Assignor with respect to any payments to be made to the Assignee hereunder, (b)
agrees to furnish (if it is organized under the laws of any jurisdiction other
than the United States or any State thereof) to the Agent and the Company prior
to the time that the Agent or the Company is required to make any payment of
principal, interest or fees hereunder, duplicate executed originals of either
U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form
1001 (wherein the Assignee claims entitlement to the benefits of a tax treaty
that provides for a complete exemption from U.S. federal income withholding tax
on all payments hereunder) and agrees to provide new Forms 4224 or 1001 upon the
expiration of any previously delivered form or comparable statements in
accordance with applicable U.S. law and regulations and amendments thereto, duly
executed and completed by the Assignee, and (c) agrees to comply with all
applicable U.S. laws and regulations with regard to such withholding tax
exemption.
8. Representations and Warranties.
--------------------------------
(a) The Assignor represents and warrants that (i) it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any lien, security interest or other adverse
claim; (ii) it is duly organized and existing and it has the full power and
authority to take, and has taken, all action necessary to execute and deliver
this Assignment and Acceptance and any other documents required or permitted to
be executed or delivered by it in connection with this Assignment and Acceptance
and to fulfill its obligations hereunder; (iii) no notices to, or consents,
authorizations or approvals of, any person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance, and apart from any agreements or undertakings or
filings required by the Credit Agreement, no further action by, or notice to, or
filing with, any person is required of it for such execution, delivery or
performance; and (iv) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of the
Assignor, enforceable against the Assignor in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles.
(b) The Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto. The
Assignor makes no representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or statements
of the Company, or the performance or observance by the Company, of any of its
respective obligations under the Credit Agreement or any other instrument or
document furnished in connection therewith.
F-4
<PAGE>
(c) The Assignee represents and warrants that (i) it is duly organized and
existing and it has full power and authority to take, and has taken, all action
necessary to execute and deliver this Assignment and Acceptance and any other
documents required or permitted to be executed or delivered by it in connection
with this Assignment and Acceptance, and to fulfill its obligations hereunder;
(ii) no notices to, or consents, authorizations or approvals of, any person are
required (other than any already given or obtained) for its due execution,
delivery and performance of this Assignment and Acceptance; and apart from any
agreements or undertakings or filings required by the Credit Agreement, no
further action by, or notice to, or filing with, any person is required of it
for such execution, delivery or performance; (iii) this Assignment and
Acceptance has been duly executed and delivered by it and constitutes the legal,
valid and binding obligation of the Assignee, enforceable against the Assignee
in accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles;
and (iv) it is an Eligible Assignee.
9. Further Assurances.
-------------------
The Assignor and the Assignee each hereby agrees to execute and deliver
such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to the Company or the Agent, which may be required in
connection with the assignment and assumption contemplated hereby.
10. Miscellaneous.
-------------
(a) Any amendment or waiver of any provision of this Assignment and
Acceptance shall be in writing and signed by the parties hereto. No failure or
delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any set-off or
counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs and expenses
incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. The Assignor and the Assignee
each irrevocably submits to the non-exclusive jurisdiction of any State or
Federal court sitting in New York over any suit, action or proceeding arising
out of or relating to this Assignment and Acceptance and irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined
in such New York State or Federal court. Each party to this Assignment and
Acceptance hereby irrevocably waives, to the fullest extent it may effectively
do so, the defense of an inconvenient forum to the maintenance of such action or
proceeding.
F-5
<PAGE>
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY RELATED DOCUMENTS AND
AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER
ORAL OR WRITTEN).
[Other provisions to be added as may be negotiated between the Assignor and
the Assignee, provided that such provisions are not inconsistent with the Credit
Agreement.]
F-6
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[Name of Assignor]
By:
Name:
Title:
[Name of Assignee]
By:
Name:
Title:
F-7
<PAGE>
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
-----------------------------------
Date: _______________________
Bank of American National
Trust and Savings Association, as Agent
1850 Gateway Blvd.
Concord, CA 94520-3281
Attention: Agency Administrative Services #5596
Bank of American National
Trust and Savings Association, as Agent
High Technology #3697
555 California Street, 41st Fl.
San Francisco, CA 94104-1502
Attention: Kevin McMahon, Managing Director
Compaq Computer Corporation
_________________________
_________________________
_________________________
Ladies and Gentlemen:
We refer to the $1,000,000,000 Revolving Credit Agreement, dated as of
October 2, 1998 (as the same may be extended, renewed, amended or restated from
time to time, the "Credit Agreement"), among Compaq Computer Corporation (the
----------------
"Company"), the financial institutions party thereto (the "Banks") and Bank of
------ -----
America National Trust and Savings Association, as administrative agent for the
Banks (in such capacity, the "Agent"). Terms defined in the Credit Agreement
-----
are used herein as therein defined.
1. We hereby give you notice of, and request your consent to, the
assignment by _______________ (the "Assignor") to _______________ (the
--------
"Assignee") of _____% of the right, title and interest of the Assignor in and to
--------
the Credit Agreement (including the right, title and interest of the Assignor in
and to the Commitment [and the Swingline Commitment] of the Assignor and all
outstanding Loans made by the Assignor) pursuant to the Assignment and
Acceptance Agreement attached hereto (the "Assignment and Acceptance"). Before
-------------------------
giving effect to such assignment, the Assignor's Commitment is $__________ and
the aggregate amount of its outstanding Loans is $__________[, and the
Assignor's Swingline Commitment is $__________ and the aggregate amount of its
outstanding Swingline Loans is $__________].
2. The Assignee agrees that, upon receiving the consent of the Agent and,
if applicable, the Company, to such assignment, the Assignee will be bound by
the terms of the Credit Agreement as fully and to the same extent as if the
Assignee were the Bank originally holding such interest in the Credit Agreement.
1
SCHEDULE 1 to Exhibit F
<PAGE>
3. The following administrative details apply to the Assignee:
(A) Notice Address:
Assignee name: _____________________________
Address: _____________________________
_____________________________
_____________________________
Attention: _____________________________
Telephone: (___) __________________________
Telecopier: (___) __________________________
Telex (Answerback): ________________________
(B) Payment Instructions:
Account No.: _____________________________
At: _____________________________
_____________________________
_____________________________
Reference: _____________________________
Attention: _____________________________
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment and
Acceptance.
2
SCHEDULE 1 to Exhibit F
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice
of Assignment and Acceptance to be executed by their respective duly authorized
officials, officers or agents as of the date first above written.
Very truly yours,
[Name of Assignor]
By:
Name:
Title:
[Name of Assignee]
By:
Name:
Title:
3
SCHEDULE 1 to Exhibit F
<PAGE>
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
COMPAQ COMPUTER CORPORATION
By:__________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:__________________________
Name:
Title:
4
SCHEDULE 1 to Exhibit F
<PAGE>
SCHEDULE 2.01
-------------
COMMITMENTS
-----------
Amount of
Name of Bank Commitment %
- --------------------------------------------------------------------------------
FINAL SCHEDULE WILL BE AVAILABLE BY CLOSE OF
BUSINESS OCTOBER 2, 1998
==================================
TOTAL $1,000,000,000.00 100.00000000
Schedule 2.01
1
<PAGE>
SCHEDULE 10.02
--------------
ADDRESSES FOR NOTICES
---------------------
PAYMENT AND LENDING OFFICES
---------------------------
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent
- -------------------------------------------------------------
Borrowing Notices:
- ------------------
Bank of America National Trust
and Savings Association
Agency Administrative Services #5596
1850 Gateway Blvd.
Concord, CA 94520-3281
Attention: Compaq AO
Telephone: (510) 675-8432
Facsimile: (510) 675-8500
Agent's Payment Office:
- ------------------------
Bank of America National Trust
and Savings Association
ABA 121-000-358
Attention: PSO #5693
1850 Gateway Blvd.
Concord, CA 94520-3281
for credit to account No.: 12337-15643
All Other Notices:
- --------------------
Bank of America National Trust
and Savings Association
High Technology #3697
555 California Street - 41st Floor
San Francisco, CA 94104
Attention: Kevin McMahon, Managing Director
Telephone: (415) 622-8088
Facsimile: (415) 622-2514
Schedule 10.02
1
<PAGE>
BANK OF AMERICA NATIONAL TRUST
- ----------------------------------
AND SAVINGS ASSOCIATION, as a Bank
- -------------------------
Lending Office:
- ---------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
Customer Service Americas (#5693)
1850 Gateway Blvd.
Concord, CA 94520-3281
Attention: Barbara Devlin
Telephone: (925) 675-7735
Facsimile: (925) 603-7246
Notices (other than Borrowing Notices and
- ----------------------------------------------
Notices of Conversion/Continuation):
- -------------------------------------
Bank of America National Trust
and Savings Association
High Technology #3697
555 California Street - 41st Floor
San Francisco, CA 94104
Attention: Kevin McMahon, Managing Director
Telephone: (415) 622-8088
Facsimile: (415) 622-2514
< Schedule 10.02
2
<PAGE>
THE CHASE MANHATTAN BANK,
- ---------------------------
as a Syndication Agent and as a Bank
Lending Office:
- ---------------
THE CHASE MANHATTAN BANK
Agent Bank Services
One Chase Manhattan Plaza
New York, NY 10081
Attention: Robert Berdecio
Telephone: (212) 552-7436
Facsimile: (212) 552-5700
Credit Matters:
- ---------------
THE CHASE MANHATTAN BANK
270 Park Avenue, 37th Floor
New York, NY 10017
Attention: John Haltmaier
Telephone: (212) 270-0848
Facsimile: (212) 270-4584
Operations/Administration:
- -------------------------
THE CHASE MANHATTAN BANK
One Chase Manhattan Plaza
New York, NY 10081
Attention: Robert Berdecio
Telephone: (212) 552-7436
Facsimile: (212) 552-5700
Schedule 10.02
3
<PAGE>
CITIBANK, N.A.,
- ---------------
as a Syndication Agent and as a Bank
Lending Office:
- ---------------
Citibank, N.A.
399 Park Avenue
8th Floor, Zone 3
New York, NY 10043
Attention: James M. Walsh
Credit Matters:
- ---------------
Citibank, N.A.
399 Park Avenue
8th Floor, Zone 3
New York, NY 10043
Attention: James M. Walsh
Telephone: (212) 559-7538
Facsimile: (212) 593-0054
Operations/Administration:
- -------------------------
Citibank, N.A.
2 Penn's Way, 2nd Floor/Loan Admin. Unit
New Castle, DE 19720
Attention: Sydney A. Chance
Telephone: (302) 894-6076
Facsimile: (302) 894-6120
Schedule 10.02
4
<PAGE>
NATIONSBANK OF TEXAS, N.A.,
- -----------------------------
as a Syndication Agent and as a Bank
Lending Office:
- ---------------
NATIONSBANK OF TEXAS, N.A.
901 Main Street, 14th Floor
Dallas, TX 75202
Attention: James Payne
Telephone: (214) 508-0592
Facsimile: (214) 290-9417
Credit Matters:
- ---------------
NATIONSBANK OF TEXAS, N.A.
901 Main Street, 67th Floor
Dallas, TX 75202
Attention: Timothy M. O'Connor
Telephone: (214) 508-9419
Facsimile: (214) 508-0980
Operations/Administration:
- -------------------------
NATIONSBANK OF TEXAS, N.A.
901 Main Street, 14th Floor
Dallas, TX 75202
Attention: James Payne
Telephone: (214) 508-0592
Facsimile: (214) 290-9417
Schedule 10.02
5
<PAGE>
ABN-AMRO BANK N.V.
- --------------------
Lending Office:
- ---------------
ABN-AMRO BANK N.V.
Attention:
Telephone:
Facsimile:
Credit Matters:
- ---------------
ABN-AMRO BANK N.V.
Attention:
Telephone:
Facsimile:
Operations/Administration:
- -------------------------
ABN-AMRO BANK N.V.
Attention:
Telephone:
Facsimile:
Schedule 10.02
6
<PAGE>
BANCA COMMERCIALE ITALIANA, LOS ANGELES BRANCH
- ---------------------------------------------------
Lending Office:
- ---------------
BANCA COMMERCIALE ITALIANA, LOS ANGELES BRANCH
555 South Flower Street
43rd Floor
Los Angeles, CA 90071
Attention: Jack Wityak
Telephone: (213) 624-0440
Facsimile: (213) 624-0457
Credit Matters:
- ---------------
BANCA COMMERCIALE ITALIANA, LOS ANGELES BRANCH
555 South Flower Street
43rd Floor
Los Angeles, CA 90071
Attention: Jack Wityak
Telephone: (213) 624-0440
Facsimile: (213) 624-0457
Operations/Administration:
- -------------------------
BANCA COMMERCIALE ITALIANA, LOS ANGELES BRANCH
555 South Flower Street
43rd Floor
Los Angeles, CA 90071
Attention: Elias Afram
Telephone: (213) 624-0440
Facsimile: (213) 624-0457
Schedule 10.02
7
<PAGE>
BANCA DI ROMA, CHICAGO BRANCH
- ---------------------------------
Lending Office:
- ---------------
BANCA DI ROMA, CHICAGO BRANCH
225 West Washington Street, Suite 1200
Chicago, IL 60606
Attention: Aurora Pensa
Telephone: (312) 704-2630
Facsimile: (312) 726-3058
Credit Matters:
- ---------------
BANCA DI ROMA, CHICAGO BRANCH
225 West Washington Street, Suite 1200
Chicago, IL 60606
Attention: Aurora Pensa
Telephone: (312) 704-2630
Facsimile: (312) 726-3058
Operations/Administration:
- -------------------------
BANCA DI ROMA, CHICAGO BRANCH
225 West Washington Street, Suite 1200
Chicago, IL 60606
Attention: Vincenza Geraci
Telephone: (312) 704-2603
Facsimile: (312) 726-3058
Schedule 10.02
8
<PAGE>
BANCA MONTE DEI PASCHI DI SIENA, S.p.A.
- ---------------------------------------------
Lending Office:
- ---------------
BANCA MONTE DEI PASCHI DI SIENA, S.p.A.
55 E. 59th Street
New York, New York 10022-1112*foot5Attention: Nicholas Kanaris
Telephone: (212) 891-3600
Facsimile: (212) 891-3661
Credit Matters:
- ---------------
BANCA MONTE DEI PASCHI DI SIENA, S.p.A.
55 E. 59th Street
New York, New York 10022-1112
Attention: Nicholas Kanaris
Telephone: (212) 891-3600
Facsimile: (212) 891-3661
Operations/Administration:
- -------------------------
BANCA MONTE DEI PASCHI DI SIENA, S.p.A.
55 E. 59th Street
New York, New York 10022-1112
Attention: Mei Tam
Telephone: (212) 891-3649
Facsimile: (212) 891-3661
Schedule 10.02
9
<PAGE>
BANCA NAZIONALE DEL LAVORO S.p.A. - NEW YORK BRANCH
- -----------------------------------------------------------
Lending Office:
- ---------------
BANCA NAZIONALE DEL LAVORO S.p.A. - NEW YORK BRANCH
25 West 51st Street
New York, NY 10019
Attention: Adolph S. Mascari
Telephone: (212) 314-0207
Facsimile: (212) 765-2978
Credit Matters:
- ---------------
BANCA NAZIONALE DEL LAVORO S.p.A. - NEW YORK BRANCH
25 West 51st Street
New York, NY 10019
Attention: Adolph S. Mascari
Telephone: (212) 314-0207
Facsimile: (212) 765-2978
Operations/Administration:
- -------------------------
BANCA NAZIONALE DEL LAVORO S.p.A. - NEW YORK BRANCH
25 West 51st Street
New York, NY 10019
Attention: Adolph S. Mascari
Telephone: (212) 314-0207
Facsimile: (212) 765-2978
Schedule 10.02
10
<PAGE>
BANCA POPOLARE DI MILANO, NEW YORK BRANCH
- -----------------------------------------------
Lending Office:
- ---------------
BANCA POPOLARE DI MILANO, NEW YORK BRANCH
375 Park Avenue, 9th Floor
New York, NY 10152
Attention: Fulvio Montanari
Telephone: (212) 546-9414
Facsimile: (212) 838-1077
Credit Matters:
- ---------------
BANCA POPOLARE DI MILANO, NEW YORK BRANCH
375 Park Avenue, 9th Floor
New York, NY 10152
Attention: Fulvio Montanari
Telephone: (212) 546-9414
Facsimile: (212) 838-1077
Operations/Administration:
- -------------------------
BANCA POPOLARE DI MILANO, NEW YORK BRANCH
375 Park Avenue, 9th Floor
New York, NY 10152
Attention: Cheryl Raffaele
Telephone: (212) 546-9429
Facsimile: (212) 838-1077
Schedule 10.02
11
<PAGE>
BANCO CENTRAL HISPANO AMERICANO, S.A., NEW YORK BRANCH
- -------------------------------------------------------------
Lending Office:
- ---------------
BANCO CENTRAL HISPANO AMERICANO, S.A., NEW YORK BRANCH
50 Broadway, 2nd Floor
New York, NY 10004
Attention: Ignacio Ridruejo
Telephone: (212) 361-5142
Facsimile: (212) 361-5149
Credit Matters:
- ---------------
BANCO CENTRAL HISPANO AMERICANO, S.A., NEW YORK BRANCH
50 Broadway, 2nd Floor
New York, NY 10004
Attention: Ignacio Ridruejo
Telephone: (212) 361-5142
Facsimile: (212) 361-5149
Operations/Administration:
- -------------------------
BANCO CENTRAL HISPANO AMERICANO, S.A., NEW YORK BRANCH
50 Broadway, 2nd Floor
New York, NY 10004
Attention: Jesus Lopez
Telephone: (212) 361-5100, ext. 231
Facsimile: (212) 361-5149
Schedule 10.02
12
<PAGE>
BANKBOSTON, N.A.
- -----------------
Lending Office:
- ---------------
BANKBOSTON, N.A.
100 Federal Street
Boston, MA 02110
Attention: Tony Dunn
Telephone: (617) 434-9625
Facsimile: (617) 434-9821
Credit Matters:
- ---------------
BANKBOSTON, N.A.
100 Federal Street
Boston, MA 02110
Attention: Elizabeth Passela, MS:MA BOS 01-08-06
Telephone: (617) 434-5542
Facsimile: (617) 434-0819
Attention: Joseph L. Massimo, MS:MA BOS 01-08-06
Telephone: (617) 434-7824
Facsimile: (617) 434-0819
Operations/Administration:
- -------------------------
BANKBOSTON, N.A.
100 Federal Street
Boston, MA 02110
Attention: Tony Dunn
Telephone: (617) 434-9625
Facsimile: (617) 434-9821
Schedule 10.02
13
<PAGE>
BANK OF IRELAND
- -----------------
Lending Office:
- ---------------
BANK OF IRELAND
Baggot Street
Dublin 2, Ireland
Attention: Ed Meagher, Olivia Carey
Telephone: 353-1-6187470, 353-1-6187471
Facsimile: 353-1-6187490
Credit Matters:
- ---------------
BANK OF IRELAND
Baggot Street
Dublin 2, Ireland
Attention: Fran Collins, Tom Hayes
Telephone: 353-1-6044144, 353-1-6044160
Facsimile: 353-1-6044105
Operations/Administration:
- -------------------------
BANK OF IRELAND
Baggot Street
Dublin 2, Ireland
Attention: Ed Meagher, Olivia Carey
Telephone: 353-1-6187470, 353-1-6187471
Facsimile: 353-1-6187490
Schedule 10.02
14
<PAGE>
- ------
BANK OF MONTREAL
- ------------------
Lending Office:
- ---------------
BANK OF MONTREAL
115 South LaSalle Street, 11th Floor
Chicago, IL 60603
Attention: Betty Rutherford
Telephone: (312) 750-3885
Facsimile: (312) 750-4304
Credit Matters:
- ---------------
BANK OF MONTREAL
601 South Figueroa Street, Suite 4900
Los Angeles, CA 90017
Attention: Kanu Modi
Telephone: (213) 239-0657
Facsimile: (213) 239-0680
Operations/Administration:
- -------------------------
BANK OF MONTREAL
115 South LaSalle Street, 11th Floor
Chicago, IL 60603
Attention: Betty Rutherford
Telephone: (312) 750-3885
Facsimile: (312) 750-4304
Schedule 10.02
15
<PAGE>
THE BANK OF NEW YORK
- ------------------------
Lending Office:
- ---------------
THE BANK OF NEW YORK
One Wall Street
New York, NY 10286
Attention: Helen L. Sarro, Assistant Vice President
Telephone: (212) 635-6898
Facsimile: (212) 635-6434
Credit Matters:
- ---------------
THE BANK OF NEW YORK
One Wall Street
New York, NY 10286
Attention: Helen L. Sarro, Assistant Vice President
Telephone: (212) 635-6898
Facsimile: (212) 635-6434
Operations/Administration:
- -------------------------
THE BANK OF NEW YORK
One Wall Street
New York, NY 10286
Attention: Larry Geter
Telephone: (212) 635-6740
Facsimile: (212) 635-6399
Schedule 10.02
16
<PAGE>
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
- ----------------------------------------------
Lending Office:
- ---------------
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
1251 Avenue of the Americas
New York, NY 10020
Attention: Mark Marron
Telephone: (212) 782-4337
Facsimile: (212) 782-6440
Credit Matters:
- ---------------
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
1251 Avenue of the Americas
New York, NY 10020
Attention: Mark Marron
Telephone: (212) 782-4337
Facsimile: (212) 782-6440
Operations/Administration:
- -------------------------
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
1251 Avenue of the Americas
New York, NY 10020
Attention: Rolando P. Uy
Telephone: (212) 782-5637
Facsimile: (212) 782-5635
Schedule 10.02
17
<PAGE>
BANQUE NATIONALE DE PARIS, HOUSTON AGENCY
- ----------------------------------------------
Lending Office:
- ---------------
BANQUE NATIONALE DE PARIS, HOUSTON AGENCY
333 Clay Street, Suite 3400
Houston, TX 77002
Attention: Thierry Bonetto
Telephone: (713) 951-1221
Facsimile: (713) 659-1414
Credit Matters:
- ---------------
BANQUE NATIONALE DE PARIS, HOUSTON AGENCY
333 Clay Street, Suite 3400
Houston, TX 77002
Attention: Thierry Bonetto
Telephone: (713) 951-1221
Facsimile: (713) 659-1414
Operations/Administration:
- -------------------------
BANQUE NATIONALE DE PARIS, HOUSTON AGENCY
333 Clay Street, Suite 3400
Houston, TX 77002
Attention: Donna Rose
Telephone: (713) 951-1240
Facsimile: (713) 659-1414
Schedule 10.02
18
<PAGE>
BARCLAYS BANK PLC
- -------------------
Lending Office:
- ---------------
BARCLAYS BANK PLC
75 Wall Street, 12th Floor
New York, NY 10265
Attention: Judy Kwong
Telephone: (212) 412-3721
Facsimile: (212) 412-5306/5307/5308
Credit Matters:
- ---------------
BARCLAYS BANK PLC
222 Broadway, 8th Floor
New York, NY 10038
Attention: John Giannone
Telephone: (212) 412-3276
Facsimile: (212) 412-7580
Operations/Administration:
- -------------------------
BARCLAYS BANK PLC
75 Wall Street, 12th Floor
New York, NY 10265
Attention: Judy Kwong
Telephone: (212) 412-3717
Facsimile: (212) 412-5306/5307/5308
Schedule 10.02
19
<PAGE>
BAYERISCHE HYPOTHEKEN - UND VEREINSBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH
- --------------------------------------------------------------------------------
Lending Office:
- ---------------
BAYERISCHE HYPOTHEKEN - UND VEREINSBANK AKTIENGESELLSCHAFT
150 East 42nd Street
New York, NY 10017
Attention: Steve Atwell
Telephone: (212) 672-5458
Facsimile: (212) 672-5530
Credit Matters:
- ---------------
BAYERISCHE HYPOTHEKEN - UND VEREINSBANK AKTIENGESELLSCHAFT
150 East 42nd Street
New York, NY 10017
Attention: Amie McCarthy
Telephone: (212) 672-5384
Facsimile: (212) 672-5529
Operations/Administration:
- -------------------------
BAYERISCHE HYPOTHEKEN - UND VEREINSBANK AKTIENGESELLSCHAFT
NEW YORK BRANCH
150 East 42nd Street
New York, NY 10017
Attention: Warren Leung
Telephone: (212) 672-5360
Facsimile: (212) 672-5506
Schedule 10.02
20
<PAGE>
BAYERISCHE LANDESBANK GIROZENTRALE
- ------------------------------------
Lending Office:
- ---------------
BAYERISCHE LANDESBANK GIROZENTRALE
560 Lexington Avenue
New York, NY 10022-6828
Attention: Patricia Sanchez
Telephone: (212) 310-9810
Facsimile: (212) 310-9930
Credit Matters:
- ---------------
BAYERISCHE LANDESBANK GIROZENTRALE
560 Lexington Avenue
New York, NY 10022-6828
Attention: Sean O'Sullivan, Vice President
Telephone: (212) 310-9913
Facsimile: (212) 310-9868
Operations/Administration:
- -------------------------
BAYERISCHE LANDESBANK GIROZENTRALE
560 Lexington Avenue
New York, NY 10022-6828
Attention: Patricia Sanchez
Telephone: (212) 310-9810
Facsimile: (212) 310-9930
Schedule 10.02
21
<PAGE>
CARIPLO - CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE SpA
- -----------------------------------------------------------------
Lending Office:
- ---------------
CARIPLO - CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE SpA
10 East 53rd Street, 36th Floor
New York, NY 10022
Attention: Anthony Giobbi
Telephone: (212) 527-8737
Facsimile: (212) 527-8777
Credit Matters:
- ---------------
CARIPLO - CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE SpA
10 East 53rd Street, 36th Floor
New York, NY 10022
Attention: Anthony Giobbi
Telephone: (212) 527-8737
Facsimile: (212) 527-8777
Operations/Administration:
- -------------------------
CARIPLO - CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE SpA
10 East 53rd Street, 36th Floor
New York, NY 10022
Attention: Marilena Greene
Telephone: (212) 527-8744
Facsimile: (212) 527-8777
Schedule 10.02
22
<PAGE>
CREDIT AGRICOLE INDOSUEZ.
- ---------------------------
Lending Office:
- ---------------
CREDIT AGRICOLE INDOSUEZ
Attention:
Telephone:
Facsimile:
Credit Matters:
- ---------------
CREDIT AGRICOLE INDOSUEZ
Attention:
Telephone:
Facsimile:
Operations/Administration:
- -------------------------
CREDIT AGRICOLE INDOSUEZ
Attention:
Telephone:
Facsimile:
Schedule 10.02
24
<PAGE>
CREDITO ITALIANO
- -----------------
Lending Office:
- ---------------
CREDITO ITALIANO
375 Park Avenue
New York, NY 10152
Attention: Gianfranco Bisagni
Telephone: (212) 546-9623
Facsimile: (212) 546-9675
Credit Matters:
- ---------------
CREDITO ITALIANO
375 Park Avenue
New York, NY 10152
Attention: Gianfranco Bisagni
Telephone: (212) 546-9623
Facsimile: (212) 546-9675
Operations/Administration:
- -------------------------
CREDITO ITALIANO
375 Park Avenue
New York, NY 10152
Attention: Angie Blanco
Telephone: (212) 546-9616
Facsimile: (212) 826-8623
Schedule 10.02
24
<PAGE>
- ------
DEN DANSKE BANK AKTIESELSKAB,
- --------------------------------
CAYMAN ISLANDS BRANCH
- -----------------------
Lending Office:
- ---------------
DEN DANSKE BANK AKTIESELSKAB, CAYMAN ISLANDS BRANCH
c/o Den Danske Bank, New York Branch
280 Park Avenue, 4th Floor East Building
New York, NY 10017
Attention: Daniel F. Lenzo
Telephone: (212) 984-8466
Facsimile: (212) 599-2493
Credit Matters:
- ---------------
DEN DANSKE BANK AKTIESELSKAB, CAYMAN ISLANDS BRANCH
c/o Den Danske Bank, New York Branch
280 Park Avenue, 4th Floor East Building
New York, NY 10017
Attention: Daniel F. Lenzo
Telephone: (212) 984-8466
Facsimile: (212) 599-2493
Operations/Administration:
- -------------------------
DEN DANSKE BANK AKTIESELSKAB, CAYMAN ISLANDS BRANCH
c/o Den Danske Bank, New York Branch
280 Park Avenue, 4th Floor East Building
New York, NY 10017
Attention: Maria Merante
Telephone: (212) 984-8462
Facsimile: (212) 409-6252
Schedule 10.02
25
<PAGE>
DEUTSCHE BANK AG NEW YORK BRANCH
- -------------------------------------
AND/OR CAYMAN ISLANDS BRANCH
- -------------------------------
Lending Office:
- ---------------
DEUTSCHE BANK AG NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH
31 West 52nd Street
New York, NY 10019
Attention: Stephan Wiedemann
Telephone: (212) 469-8663
Facsimile: (212) 469-8212
Credit Matters:
- ---------------
DEUTSCHE BANK AG NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
31 West 52nd Street
New York, NY 10019
Attention: Stephan Wiedemann
Telephone: (212) 469-8663
Facsimile: (212) 469-8212
Operations/Administration:
- -------------------------
DEUTSCHE BANK AG NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
31 West 52nd Street
New York, NY 10019
Attention: Nancy Zorn
Telephone: (212) 469-4112
Facsimile: (212) 469-4139
Schedule 10.02
26
<PAGE>
DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH
- ------------------------------------------------------------------
Domestic and CD Lending Office:
- ----------------------------------
DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH
75 Wall Street
New York, NY 10005
Attention: Robert Reddington - Credit Department
Telephone: (212) 429-2169
Facsimile: (212) 429-2130
LIBOR Lending Office:
- ----------------------
DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH
c/o Dresdner Bank AG, New York Branch
75 Wall Street
New York, NY 10005
Attention: Robert Reddington - Credit Department
Telephone: (212) 429-2169
Facsimile: (212) 429-2130
Operations/Administration:
- -------------------------
DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH
75 Wall Street
New York, NY 10005
Attention: Lora Lam
Telephone: (212) 429-2288
Facsimile: (212) 429-2130
Schedule 10.02
27
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
- ---------------------------------------
Lending Office:
- ---------------
THE FIRST NATIONAL BANK OF CHICAGO
One First National Plaza
Suite 0324, 10th Floor
Chicago, IL 60670
Attention: Jenny A. Gilpin, VP
Telephone: (312) 732-5867
Facsimile: (312) 732-2991
Credit Matters:
- ---------------
THE FIRST NATIONAL BANK OF CHICAGO
One First National Plaza
Suite 0324, 10th Floor
Chicago, IL 60670
Attention: Jenny A. Gilpin, VP
Telephone: (312) 732-5867
Facsimile: (312) 732-2991
Operations/Administration:
- -------------------------
THE FIRST NATIONAL BANK OF CHICAGO
One First National Plaza
Suite 0634/1-10
Chicago, IL 60670
Attention: Nan Wilson
Telephone: (312) 732-1221
Facsimile: (312) 732-4840
Schedule 10.02
28
<PAGE>
FIRST UNION NATIONAL BANK
- ----------------------------
Lending Office
- ---------------
FIRST UNION NATIONAL BANK
1500 Market Street
Mail Code PA4351
Philadelphia, PA 19101
Attention: Maureen Cheney
Telephone: (215) 973-2280
Facsimile: (215) 786-8448
Credit Matters:
- ---------------
FIRST UNION NATIONAL BANK
301 South College Street, TW-5
Charlotte, N.C. 28288-0745
Attention: Peter Steffen, Senior Vice President
Telephone: (704) 383-9214
Facsimile: (704) 383-7236
Operations/Administration:
- -------------------------
FIRST UNION NATIONAL BANK
1500 Market Street
Mail Code PA 4351
Philadelphia, PA 19101
Attention: Joy Ditre
Telephone: (215) 973-4448
Facsimile: (215) 973-2045
Schedule 10.02
29
<PAGE>
FLEET NATIONAL BANK
- ---------------------
Lending Office:
- ---------------
FLEET NATIONAL BANK
One Federal Street
MA ODFO7A
Boston, MA 02211
Attention: Frank Benesh
Telephone: (617) 346-0617
Facsimile: (617) 346-0568
Credit Matters:
- ---------------
FLEET NATIONAL BANK
One Federal Street
MA ODFO7A
Boston, MA 02211
Attention: Frank Benesh
Telephone: (617) 346-0617
Facsimile: (617) 346-0568
Operations/Administration:
- -------------------------
FLEET NATIONAL BANK
One Federal Street
MA ODFO7A
Boston, MA 02211
Attention: Pauline Kowalczyk
Telephone: (617) 346-0617
Facsimile: (617) 346-0151
Schedule 10.02
30
<PAGE>
THE FUJI BANK, LIMITED, HOUSTON AGENCY
- -------------------------------------------
Lending Office:
- ---------------
THE FUJI BANK, LIMITED
Two World Trade Center
New York, NY 10048-0001
Attention: Noshin Osmam
Telephone: (212) 898-2087
Facsimile: (212) 898-2399
Credit Matters:
- ---------------
THE FUJI BANK, LIMITED
Two World Trade Center
New York, NY 10048-0001
Attention: Noshin Osmam
Telephone: (212) 898-2087
Facsimile: (212) 898-2399
Operations/Administration:
- -------------------------
THE FUJI BANK, LIMITED
Two World Trade Center
79th Floor
New York, NY 10048-0001
Attention: Tina Catapano, AVP
Telephone: (212) 898-2099
Facsimile: (212) 488-8216
Schedule 10.02
31
<PAGE>
ING BANK N.V.
- ---------------
Lending Office:
- ---------------
ING BANK N.V.
49 St. Stephen's Green
Dublin 2
Ireland
Attention: Samantha de Foubert
Telephone: (011) 353-1-662-1911
Facsimile: (011) 353-1-662-1916
Credit Matters:
- ---------------
ING BANK N.V.
49 St. Stephen's Green
Dublin 2
Ireland
Attention: Samantha de Foubert
Telephone: (011) 353-1-662-1911
Facsimile: (011) 353-1-662-1916
Operations/Administration:
- -------------------------
ING BANK N.V.
49 St. Stephen's Green
Dublin 2
Ireland
Attention: Emma Duke
Telephone: (011) 353-1-662-1911
Facsimile: (011) 353-1-662-1916
Schedule 10.02
32
<PAGE>
ISTITUTO BANCARIO SAN PAOLO DI TORINO S.p.A.
- --------------------------------------------------
Lending Office:
- ---------------
ISTITUTO BANCARIO SAN PAOLO DI TORINO S.p.A.
San Paolo Bank
245 Park Avenue
New York, NY 10167
Attention: Glen Binder
Telephone: (212) 692-3016
Facsimile: (212) 692-3178
Credit Matters:
- ---------------
ISTITUTO BANCARIO SAN PAOLO DI TORINO S.p.A.
San Paolo Bank
245 Park Avenue
New York, NY 10167
Attention: Glen Binder
Telephone: (212) 692-3016
Facsimile: (212) 692-3178
Operations/Administration:
- -------------------------
ISTITUTO BANCARIO SAN PAOLO DI TORINO S.p.A.
San Paolo Bank
245 Park Avenue
New York, NY 10167
Attention: Glen Binder
Telephone: (212) 692-3016
Facsimile: (212) 692-3178
Schedule 10.02
33
<PAGE>
MARINE MIDLAND BANK
- ---------------------
Lending Office:
- ---------------
MARINE MIDLAND BANK
140 Broadway, 4th Floor
New York, NY 10005-1196
Attention: William Holland
Telephone: (212) 658-5257
Facsimile: (212) 658-5109
Credit Matters:
- ---------------
Marine Midland Bank
1221 McKinney Street, Suite 2790
Houston, TX 77010
Attention: George Linhart/Lincoln McMahon
Telephone: (713) 759-1202
Facsimile: (713) 759-1403
Operations/Administration:
- -------------------------
MARINE MIDLAND BANK
1 Marine Midland Center
Buffalo, NY 14203
Attention: Patricia Michalek
Telephone: (716) 841-7764
Facsimile: (716) 841-2325
Schedule 10.02
34
<PAGE>
MELLON BANK, N.A.
- -------------------
Lending Office:
- ---------------
MELLON BANK
One Mellon Bank Center
Room 4440
Pittsburgh, PA 15258-0001
Attention: Alexander M. Gordon
Telephone: (412) 234-0026
Facsimile: (412) 234-6735
Credit Matters:
- ---------------
MELLON BANK
One Mellon Bank Center
Room 4440
Pittsburgh, PA 15258-0001
Attention: Alexander M. Gordon
Telephone: (412) 234-0026
Facsimile: (412) 234-6735
Operations/Administration:
- -------------------------
MELLON BANK, N.A.
Three Mellon Bank Center
Room 153-2305
Pittsburgh, PA 15230
Attention: Terpsie Katsafanas
Telephone: (412) 234-4769
Facsimile: (412) 234-6114
Schedule 10.02
35
<PAGE>
NATIONAL AUSTRALIA BANK LIMITED
- ----------------------------------
Lending Office:
- ---------------
NATIONAL AUSTRALIA BANK LIMITED
200 Park Avenue, 34th Floor
New York, NY 10166
Attention: Thomas R. Cronin
Telephone: (212) 916-9624
Facsimile: (212) 983-1969
Credit Matters:
- ---------------
NATIONAL AUSTRALIA BANK LIMITED
200 Park Avenue, 34th Floor
New York, NY 10166
Attention: Thomas R. Cronin
Telephone: (212) 916-9624
Facsimile: (212) 983-1969
Attention: Bill Cerynik
Telephone: (212) 916-9566
Facsimile: (212) 983-1969
Operations/Administration:
- -------------------------
NATIONAL AUSTRALIA BANK LIMITED
200 Park Avenue, 34th Floor
New York, NY 10166
Attention: Joseph T. Hengerle
Telephone: (212) 916-9536
Facsimile: (212) 697-8698
Attention: Tricia Bustos
Telephone: (212) 916-9540
Facsimile: (212) 697-8698
Schedule 10.02
36
<PAGE>
NATIONAL WESTMINSTER BANK PLC/NEW YORK BRANCH
- --------------------------------------------------
NATIONAL WESTMINSTER BANK PLC/NASSAU BRANCH
- -----------------------------------------------
Domestic and CD Lending Office:
- ----------------------------------
NATIONAL WESTMINSTER BANK PLC/NEW YORK BRANCH
175 Water Street, 19th Floor
New York, NY 10038
Attention: Commercial Loans
Telephone: (212) 602-4317
Facsimile: (212) 602-4118
LIBOR Lending Office:
- ----------------------
NATIONAL WESTMINSTER BANK PLC/NASSAU BRANCH
c/o National Westminster Bank PLC, New York Branch
175 Water Street, 19th Floor
New York, NY 10038
Attention: Commercial Loans
Telephone: (212) 602-4317
Facsimile: (212) 602-4118
Credit Matters:
- ---------------
NATIONAL WESTMINSTER BANK PLC
175 Water Street, 19th Floor
New York, NY 10038
Attention: David Rowley
Telephone: (212) 602-5541
Facsimile: (212) 602-4290
Operations/Administration:
- -------------------------
NATIONAL WESTMINSTER BANK PLC
175 Water Street, 19th Floor
New York, NY 10038
Attention: Commercial Loans
Telephone: (212) 602-4317
Facsimile: (212) 602-4118
Schedule 10.02
37
<PAGE>
THE NORTHERN TRUST COMPANY
- -----------------------------
Lending Office:
- ---------------
THE NORTHERN TRUST COMPANY
50 South LaSalle Street
Chicago, IL 60675
Attention: John E. Burda
Telephone: (312) 444-4575
Facsimile: (312) 444-5055
Credit Matters:
- ---------------
THE NORTHERN TRUST COMPANY
50 South LaSalle Street
Chicago, IL 60675
Attention: John E. Burda
Telephone: (312) 444-4575
Facsimile: (312) 444-5055
Operations/Administration:
- -------------------------
THE NORTHERN TRUST COMPANY
50 South LaSalle Street
Chicago, IL 60675
Attention: Linda Honda
Telephone: (312) 444-3532
Facsimile: (312) 630-1566
Schedule 10.02
38
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
- ---------------------------------
Lending Office:
- ---------------
PNC BANK, NATIONAL ASSOCIATION
249 Fifth Avenue
One PNC Plaza, 2nd Floor
Pittsburgh, PA 15222-2707
Attention: David J. Egan
Telephone: (412) 762-5932
Facsimile: (412) 762-6484
Credit Matters:
- ---------------
PNC BANK, NATIONAL ASSOCIATION
249 Fifth Avenue
One PNC Plaza, 2nd Floor
Pittsburgh, PA 15222-2707
Attention: David J. Egan
Telephone: (412) 762-5932
Facsimile: (412) 762-6484
Operations/Administration:
- -------------------------
PNC BANK, NATIONAL ASSOCIATION
249 Fifth Avenue
One PNC Plaza, 6th Floor
Pittsburgh, PA 15222-2707
Attention: Sally Hunter
Telephone: (412) 768-3807
Facsimile: (412) 768-4586
Schedule 10.02
39
<PAGE>
ROYAL BANK OF CANADA
- -----------------------
Lending Office:
- ---------------
ROYAL BANK OF CANADA
One Financial Square, 23rd Floor
New York, NY 10005
Attention: Linda Smith
Telephone: (212) 428-6323
Facsimile: (212) 428-2372
Credit Matters:
- ---------------
ROYAL BANK OF CANADA
600 Wilshire Boulevard, Suite 800
Los Angeles, CA 90017
Attention: Michael A. Cole
Telephone: (213) 955-5328
Facsimile: (213) 955-5350
Operations/Administration:
- -------------------------
ROYAL BANK OF CANADA
One Financial Square, 23rd Floor
New York, NY 10005
Attention: Linda Smith
Telephone: (212) 428-6323
Facsimile: (212) 428-2372
Schedule 10.02
40
<PAGE>
THE SANWA BANK, LIMITED
- --------------------------
Lending Office:
- ---------------
THE SANWA BANK, LIMITED
55 East 52nd Street
New York, NY 10055
Attention: Renko Hara, VP
Telephone: (212) 339-6390
Facsimile: (212) 754-3084
Credit Matters:
- ---------------
THE SANWA BANK LIMITED
55 East 52nd Street
New York, NY 10055
Attention: John T. Feeney
Telephone: (212) 339-6366
Facsimile: (212) 754-1304
Operations/Administration:
- -------------------------
THE SANWA BANK, LIMITED
55 East 52nd Street
New York, NY 10055
Attention: Renko Hara, VP
Telephone: (212) 339-6390
Facsimile: (212) 754-3084
Schedule 10.02
41
<PAGE>
SKANDINAVISKA ENSKILDA BANKEN AB (PUBL),
- --------------------------------------------
NEW YORK BRANCH
- -----------------
Lending Office:
- ---------------
SKANDINAVISKA ENSKILDA BANKEN AB (PUBL),
NEW YORK BRANCH
245 Park Avenue
New York, NY 10167
Attention: Magnus C. Lejdstr m
Telephone: (212) 907-4801
Facsimile: (212) 907-4762
Credit Matters:
- ---------------
SKANDINAVISKA ENSKILDA BANKEN AB (PUBL),
NEW YORK BRANCH
245 Park Avenue
New York, NY 10167
Attention: Magnus C. Lejdstr m
Telephone: (212) 907-4801
Facsimile: (212) 907-4762
Operations/Administration:
- -------------------------
SKANDINAVISKA ENSKILDA BANKEN AB (PUBL),
NEW YORK BRANCH
245 Park Avenue
New York, NY 10167
Attention: Anthony Johnson
Telephone: (212) 907-4761
Facsimile: (212) 370-1709
Schedule 10.02
42
<PAGE>
SOCIETE GENERALE FINANCE (IRELAND) LIMITED
- ----------------------------------------------
Domestic and CD Lending Office:
- ----------------------------------
SOCIETE GENERALE
Southwest Agency
1111 Bagby Street, Suite 2020
Houston, TX 77002
Attention: Thierry Namuroy
Telephone: (713) 759-6316
Facsimile: (713) 650-0824
LIBOR Lending Office:
- ----------------------
SOCIETE GENERALE FINANCE (IRELAND) LIMITED
31-32 Morrison Chambers
32 Nassau Street
Dublin 2, Ireland
Attention: Jacinta Conroy
Telephone: (011) 353-1-670-4255
Facsimile: (011) 353-1-670-4262
Credit Matters:
- ---------------
SOCIETE GENERALE FINANCE (IRELAND) LIMITED
31-32 Morrison Chambers
32 Nassau Street
Dublin 2, Ireland
Attention: Therese Leonard
Telephone: (011) 353-1-670-4255
Facsimile: (011) 353-1-670-4262
Operations/Administration:
- -------------------------
SOCIETE GENERALE FINANCE (IRELAND) LIMITED
31-32 Morrison Chambers
32 Nassau Street
Dublin 2, Ireland
Attention: Jacinta Conroy
Telephone: (011) 353-1-670-4255
Facsimile: (011) 353-1-670-4262
Schedule 10.02
43
<PAGE>
STANDARD CHARTERED BANK
- -------------------------
Lending Office:
- ---------------
STANDARD CHARTERED BANK
7 World Trade Center
New York, NY 10048
Attention: Peter G.R. Dodds
Telephone: (213) 667-0367
Facsimile: (213) 667-0790
Credit Matters:
- ---------------
STANDARD CHARTERED BANK
707 Wilshire Boulevard, W8-33
Los Angeles, CA 90017
Attention: Mary Machado-Schammel
Telephone: (213) 614-4756
Facsimile: (213) 614-5158
Operations/Administration:
- -------------------------
STANDARD CHARTERED BANK
7 World Trade Center
New York, NY 10048
Attention: Yolanda Rodriguez
Telephone: (212) 667-0435
Facsimile: (212) 667-0560
Schedule 10.02
44
<PAGE>
STATE STREET BANK & TRUST CO.
- ----------------------------------
Lending Office:
- ---------------
STATE STREET BANK & TRUST CO.
Attention:
Telephone:
Facsimile:
Credit Matters:
- ---------------
STATE STREET BANK & TRUST CO.
Attention:
Telephone:
Facsimile:
Operations/Administration:
- -------------------------
STATE STREET BANK & TRUST CO.
Attention:
Telephone:
Facsimile:
Schedule 10.02
45
<PAGE>
SWISS BANK CORPORATION, NEW YORK BRANCH
- --------------------------------------------
Lending Office:
- ---------------
UBS AG, STAMFORD BRANCH
677 Washington Blvd
Stamford, CT 06901-3793
Attention: Tom Salzano
Telephone: (203) 719-3842
Facsimile: (203) 719-3180
Credit Matters:
- ---------------
UBS AG, NEW YORK BRANCH
299 Park
New York, NY 10171
Attention: Leo Baltz
Telephone: (212) 821-5372
Facsimile: (212) 821-3914
Operations/Administration:
- -------------------------
UBS AG, STAMFORD BRANCH
677 Washington Blvd
Stamford, CT 06901-3793
Attention: Tom Salzano
Telephone: (203) 719-3842
Facsimile: (203) 719-318o
Schedule 10.02
46
<PAGE>
TORONTO DOMINION BANK (TEXAS), INC.
- ---------------------------------------
Lending Office:
- ---------------
TORONTO DOMINION BANK (TEXAS), INC.
909 Fannin Street, Suite 1700
Houston, TX 77010
Attention: Lynn Chasin, Mgr.
Telephone: (713) 653-8234
Facsimile: (713) 951-9921
Credit Matters:
- ---------------
TORONTO DOMINION BANK (TEXAS), INC.
31 West 52nd Street
New York, NY 10019
Attention: Rose Warren
Telephone: (212) 468-0556
Facsimile: (212) 262-1926
Operations/Administration:
- -------------------------
TORONTO DOMINION BANK (TEXAS), INC.
909 Fannin Street, Suite 1700
Houston, TX 77010
Attention: Lynn Chasin, Mgr.
Telephone: (713) 653-8239
Facsimile: (713) 951-9921
Schedule 10.02
47
<PAGE>
WELLS FARGO BANK, N.A.
- -------------------------
Lending Office:
- ---------------
WELLS FARGO BANK, N.A.
201 Third Street, 8th Floor
MAC 0187-081
San Francisco, CA 94103
Attention: Sue Silver
Telephone: (415) 477-5374
Facsimile: (415) 979-0675
Credit Matters (Primary):
- --------------------------
WELLS FARGO BANK, N.A.
707 Wilshire Boulevard, 16th Floor
MAC 2818-165
Los Angeles, CA 90017
Attention: Edith Lim
Telephone: (213) 614-3903
Facsimile: (213) 614-2305
Operations/Administration:
- -------------------------
WELLS FARGO BANK, N.A.
201 Third Street, 8th Floor
MAC 0187-081
San Francisco, CA 94103
Attention: Sue Silver
Telephone: (415) 477-5374
Facsimile: (415) 979-0675
Schedule 10.02
48
<PAGE>
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
- ---------------------------------------
NEW YORK BRANCH
- -----------------
Lending Office:
- ---------------
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH
1211 Avenue of the Americas
New York, NY 10038
Attention: Danet Diaz
Telephone: (212) 852-6158
Facsimile: (212) 302-7946
Credit Matters:
- ---------------
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH
1211 Avenue of the Americas
New York, NY 10038
Attention: Thomas Lee
Telephone: (212) 852-6204
Facsimile: (212) 852-6148
Operations/Administration:
- -------------------------
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH
1211 Avenue of the Americas
New York, NY 10038
Attention: Danet Diaz
Telephone: (212) 852-6158
Facsimile: (212) 302-7946
Schedule 10.02
49
<PAGE>
WESTPAC BANKING CORP.
- -----------------------
Lending Office:
- ---------------
WESTPAC BANKING CORP.
575 Fifth Avenue
New York, NY 10017
Attention: Susan Wildstein
Telephone: (212)
Facsimile: (212) 551-1998
Credit Matters:
- ---------------
WESTPAC BANKING CORP.
575 Fifth Avenue
New York, NY 10017
Attention: Craig L. Jones, Vice President
Telephone:
Facsimile: (212) 551-1995
Operations/Administration:
- -------------------------
WESTPAC BANKING CORP.
575 Fifth Avenue
New York, NY 10017
Attention: Susan Wildstein
Telephone:
Facsimile: (212) 551-1998
Schedule 10.02
50
<PAGE>
EXHIBIT 10.22
THIS FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Amendment"),
---------
dated as of October 2, 1998 is entered into by and among Compaq Computer
Corporation, a Delaware corporation (the "Company"), the several financial
-------
institutions from time to time party to the Credit Agreement (collectively, the
"Banks"; individually, a "Bank"), Bank of America National Trust and Savings
----- ----
Association, as administrative agent and as Internet agent for the Banks, The
Chase Manhattan Bank, Citibank, N.A. and NationsBank of Texas, N.A., as
syndication agents, and Morgan Guaranty Trust Company of New York, as Internet
agent, agree as follows.
RECITALS
--------
WHEREAS, the Company, the Banks and the Agent are parties to the
U.S.$3,000,000,000.00 Revolving Credit Agreement, dated as of September 22, 1997
(the "Credit Agreement"), pursuant to which the Banks have extended certain
-----------------
credit facilities to the Company;
WHEREAS, the Company, the Banks, and the Agent now hereby wish to amend the
Credit Agreement in certain respects, all as set forth in greater detail below;
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise defined
--------------
shall have the meanings assigned in the Credit Agreement.
2. Amendment to Credit Agreement.
--------------------------------
The defined term "364-Day Credit Agreement" as defined in Section 1.01 of
the Credit Agreement is hereby superseded by the following definition:
"364-Day Credit Agreement" means that U.S.$1,000,000,000.00 Revolving
------------------------
Credit Agreement dated as of October 2, 1998 among the Company, BofA as
Administrative Agent and the lenders party thereto, under which such
lenders have agreed to extend credit to the Company on a 364-day basis.
Section 2.09(a) of the Credit Agreement is hereby amended by restating the
fourth sentence thereof to read in its entirety as follows:
If such notice is given by the Company, the Company shall make such
prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein, together with accrued interest to
each such date on the amount of Offshore Loans prepaid.
Section 2.11(b) of the Credit Agreement is hereby amended by restating the
second sentence thereof to read in its entirety as follows:
<PAGE>
Interest shall also be paid on the date of any prepayment of Offshore
Loans under Section 2.09 for the portion of the Offshore Loans so prepaid
and upon payment in full thereof.
Section 2.12 of the Credit Agreement is hereby amended by deleting the word
"average" and inserting the word "actual" in lieu thereof.
3. Representations and Warranties. The Company hereby represents and
--------------------------------
warrants to the Agent and each of the Banks as follows:
(a) The execution, delivery and performance by the Company of
this Amendment have been duly authorized by all necessary corporate
and other action and do not and will not require any registration
with, consent or approval of, notice to or action by, any Person
(including any Governmental Authority) in order to be effective and
enforceable. The Credit Agreement as amended by this Amendment
constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its respective
terms, without defense, counterclaim or offset.
(b) All representations and warranties of the Company contained
in the Credit Agreement are true and correct as though made on and as
of the date hereof (except to the extent such representations and
warranties specifically relate to an earlier date, in which case they
were true and correct as of such earlier date).
(c) The Company is entering into this Amendment on the basis of
its own investigation and for its own reasons, without reliance upon
the Agent, any Bank or any other person.
(d) No Swingline Loans are outstanding on the Effective Date.
4. Effective Date. This Amendment will become effective as of October 2,
---------------
1998, provided that each of the following has occurred:
--------
(a) The Agent has received from the Company and the Majority
Banks a duly executed original or facsimile of this Amendment; and
(b) All conditions precedent to the first Loan under the 364-Day
Credit Agreement (as defined in Section 2 above) other than the
effectiveness of this Amendment shall have occurred.
2
<PAGE>
5. Swingline Loans. The parties hereto acknowledge that the availability of
---------------
Swingline Loans, which commenced upon the 364-Day Credit Agreement Termination
Date pursuant to Section 2.01(b) of the Credit Agreement without giving effect
to this Amendment, is terminated as upon the Effective Date, and that such
availability shall commence again as provided in such Section 2.01(b) upon the
364-Day Credit Agreement Termination Date pursuant to the Credit Agreement as
hereby amended.
6. Miscellaneous.
-------------
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force
and effect, and all references therein and in the other Loan Documents
to the Credit Agreement shall henceforth refer to the Credit Agreement
as amended by this Amendment. This Amendment shall be deemed
incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit
of the parties to the Credit Agreement and their respective successors
and assigns. No third party beneficiaries are intended in connection
with this Amendment.
(c) This Amendment shall be governed by and construed in
accordance with the law of the State of New York.
(d) This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which, when
taken together, shall be deemed to constitute but one and the same
instrument.
(e) This Amendment, together with the Credit Agreement, contains
the entire and exclusive agreement of the parties hereto with
reference to the matters discussed herein and therein. This Amendment
supersedes all prior drafts and communications with respect thereto.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision
shall be invalidated without affecting the remaining provisions of
this Amendment or the Credit Agreement, respectively.
(g) The Company hereby covenants to pay or to reimburse the
Agent, upon demand, for all costs and expenses (including Attorney
Costs) incurred in connection with the development, preparation,
negotiation, execution and delivery of this Amendment.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Amendment in San Francisco, California as
of the date first above written.
COMPAQ COMPUTER CORPORATION
By:________________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative
Agent and as Internet Agent
By:________________________________
Name:
Title:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Swingline Bank and as a Bank
By:________________________________
Name:
Title:
CITIBANK, N.A.,
as Syndication Agent and as a Bank
By:________________________________
Name:
Title:
4
<PAGE>
NATIONSBANK OF TEXAS, N.A.,
as Syndication Agent and as a Bank
By:________________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
as Syndication Agent and as a Bank
By:________________________________
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Internet
Agent and as a Bank
By:________________________________
Name:
Title:
CARIPLO-CASSA DI RISPARMIO
DELLE PROVINCIE LOMBARDE S.P.A.
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
5
<PAGE>
DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN ISLANDS
BRANCH
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
By:________________________________
Name:
Title:
FLEET NATIONAL BANK
By:________________________________
Name:
Title:
ING BANK N.V.
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
6
<PAGE>
BANCA COMMERCIALE ITALIANA,
LOS ANGELES BRANCH
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By:________________________________
Name:
Title:
BARCLAYS BANK PLC
By:________________________________
Name:
Title:
THE FUJI BANK, LIMITED, NEW YORK
BRANCH
By:________________________________
Name:
Title:
7
<PAGE>
NATIONAL AUSTRALIA BANK
LIMITED
By:________________________________
Name:
Title:
BANCA DI ROMA, CHICAGO BRANCH
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
BANCA MONTE DEI PASCHI DI SIENA,
S.P.A.
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
8
<PAGE>
BANCA NAZIONALE DEL LAVORO
S.P.A., NEW YORK BRANCH
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
BANCA POPOLARE DI MILANO, NEW
YORK BRANCH
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
BANCO CENTRAL HISPANO
AMERICANO, S.A., NEW YORK
BRANCH
By:________________________________
Name:
Title:
BANK OF MONTREAL
By:________________________________
Name:
Title:
9
<PAGE>
THE BANK OF NEW YORK
By:________________________________
Name:
Title:
BANKBOSTON, N.A.
By:________________________________
Name:
Title:
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By:________________________________
Name:
Title:
BAYERISCHE HYPOTHEKEN-UND
VEREINSBANK-BANK
AKTIENGESELLSCHAFT, NEW YORK
BRANCH
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
10
<PAGE>
BAYERISCHE LANDESBANK
GIROZENTRALE
By:________________________________
Name:
Title:
CREDITO ITALIANO
By:________________________________
Name:
Title:
THE DAI-ICHI KANGYO BANK,
LIMITED
By:________________________________
Name:
Title:
DEN DANSKE BANK AKTIESELSKAB,
CAYMAN ISLANDS BRANCH
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
11
<PAGE>
DRESDNER BANK AG, NEW YORK
BRANCH AND GRAND CAYMAN
BRANCH
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
FIRST UNION NATIONAL BANK
By:________________________________
Name:
Title:
ISTITUTO BANCARIO SAN PAOLO DI
TORINO S.P.A.
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
12
<PAGE>
KREDIET BANK N.V., GRAND
CAYMAN BRANCH
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
MARINE MIDLAND BANK
By:________________________________
Name:
Title:
MELLON BANK, N.A.
By:________________________________
Name:
Title:
NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH
By:________________________________
Name:
Title:
13
<PAGE>
NATIONAL WESTMINSTER BANK PLC,
NASSAU BRANCH
By:________________________________
Name:
Title:
THE NORTHERN TRUST COMPANY
By:________________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By:________________________________
Name:
Title:
THE SANWA BANK, LIMITED
By:________________________________
Name:
Title:
SKANDINAVISKA ENSKILDA BANKEN
AB (PUBL), NEW YORK BRANCH
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
14
<PAGE>
SOCIETE GENERALE FINANCE
(IRELAND) LIMITED
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
STANDARD CHARTERED BANK
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED
By:________________________________
Name:
Title:
THE SUMITOMO TRUST & BANKING
CO., LTD., LOS ANGELES AGENCY
By:________________________________
Name:
Title:
15
<PAGE>
UBS AG, STAMFORD BRANCH
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
TORONTO DOMINION BANK (TEXAS),
INC.
By:________________________________
Name:
Title:
WELLS FARGO BANK, N.A.
By:________________________________
Name:
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By:________________________________
Name:
Title:
By:________________________________
Name:
Title:
16
<PAGE>
ROYAL BANK OF CANADA
By:________________________________
Name:
Title:
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COMPAQ
COMPUTER CORPORATION'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF
INCOME FOR THE PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4408
<SECURITIES> 22
<RECEIVABLES> 5727
<ALLOWANCES> 0
<INVENTORY> 2123
<CURRENT-ASSETS> 14770
<PP&E> 2822
<DEPRECIATION> 0
<TOTAL-ASSETS> 21647
<CURRENT-LIABILITIES> 10356
<BONDS> 0
<COMMON> 6881
0
0
<OTHER-SE> 3558
<TOTAL-LIABILITY-AND-EQUITY> 21647
<SALES> 18227
<TOTAL-REVENUES> 20310
<CGS> 14576
<TOTAL-COSTS> 15992
<OTHER-EXPENSES> 7968
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (56)
<INCOME-PRETAX> (3594)
<INCOME-TAX> (93)
<INCOME-CONTINUING> (3501)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3501)
<EPS-PRIMARY> (2.21)
<EPS-DILUTED> (2.21)
</TABLE>
