------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NUMBER 1-9026
COMPAQ COMPUTER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0011617
(STATE OR OTHER JURISDICTION OF (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)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
---------------------- -----------------
Common Stock, $.01 par value New York Stock Exchange
Debt Securities None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
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 [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant on January 30, 1998 (assuming all officers and directors are
affiliates and based on the last sale price on the New York Stock Exchange as
of such date) was approximately $45 billion.
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of January 30, 1998, was approximately 1.5 billion.
DOCUMENTS INCORPORATED BY REFERENCE
There is incorporated by reference in Part II and Part III of this Annual
Report on Form 10-K certain of the information contained in the registrant's
proxy statement for its annual meeting of stockholders to be held April 23,
1998, which will be filed by the registrant within 120 days after December 31,
1997.
------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Founded in 1982, Compaq Computer Corporation is a worldwide information
technology company and is the largest global supplier of personal computers.
Compaq develops and markets hardware, software, solutions and services,
including industry-leading enterprise computing solutions, fault-tolerant
business-critical solutions, networking and communication products, commercial
desktop and portable products and consumer PCs. Compaq products are sold and
supported in more than 100 countries through a network of authorized Compaq
marketing partners. Compaq markets its products primarily to business, home,
government, and education customers. References to the "Company" mean Compaq
Computer Corporation and its subsidiaries.
Compaq reinforced its position as the largest supplier of personal
computers in the world in 1997. It increased its market share of the
expanding worldwide PC market from approximately 10% to approximately 12% by
focusing its business activities on expanding sales to new customers while
augmenting sales to its existing customer base. In April 1997, Compaq shipped
its 30 millionth PC. Business customers account for the largest portion of
Compaq's sales. Business customers are attracted to Compaq's products for a
variety of reasons, including Compaq's reputation for reliability, price,
product performance and technological excellence, the availability of a wide
variety of application software products, ease of use and connectivity
solutions.
In 1997, Compaq maintained its world leadership position in servers with
an approximate 30% worldwide market share. Over the last few years, Compaq
has expanded its servers to new levels of high-range class functionality,
availability, fault tolerance and manageability for both mainstream and
mission-critical applications.
In addition, as presented more fully below, Compaq became the number one
Windows NT-based workstation vendor in 1997, less than one year after
introducing its first product. Also in 1997, and for the third consecutive
year, Compaq maintained and increased its number one worldwide market share
position in the shipment of branded computer monitors.
In the future, Compaq will continue to integrate hardware and software to
furnish the building blocks of personal and corporate computing while
participating in software and communications markets either directly or
through business alliances. Through this strategy, Compaq expects to become a
leading provider of enterprise-wide solutions for business as well as
information appliances for the home by offering the products and services that
customers need to easily access and manage information. Compaq believes its
key to success is leveraging Compaq's marketing skills, engineering talent,
purchasing power, manufacturing capabilities, distribution strengths and brand
name to bring to market high-quality, cost-competitive products in different
price ranges with features that appeal to a wide variety of customers.
PENDING AND RECENT ACQUISITIONS
On January 26, 1998, Compaq announced the execution of an agreement to
acquire Digital Equipment Corporation ("Digital"). Under the terms of the
transaction, shareholders of Digital will receive $30 in cash and 0.945 shares
of Compaq common stock for each share of Digital common stock. Compaq will
issue approximately 150 million shares of Compaq common stock and $4.8 billion
in cash. This transaction will be accounted for as a purchase. It is subject
to the approval of Digital's shareholders as well as clearance under antitrust
laws and other customary closing conditions, and is expected to be completed
in the second quarter of 1998.
<PAGE>
In August 1997, Compaq merged with Tandem Computers Incorporated
("Tandem") in a stock-for-stock transaction accounted for as a pooling of
interests. Tandem provides its customers with reliable, scaleable,
fault-tolerant enterprise computer systems and client/server solutions. In
connection with the merger, Compaq issued approximately 126 million shares of
Compaq common stock, based upon an exchange ratio of 1.05 shares of Compaq
common stock for each share of Tandem common stock.
In May 1997, Compaq completed a cash tender offer for Microcom, Inc.
("Microcom"), a manufacturer of remote access technologies and solutions, for
$288 million.
COMPAQ PRODUCTS
Compaq's products are available with a broad variety of functions and
features designed to accommodate a wide range of user needs. Compaq operates
through five customer-focused, global product groups: PC Products, Enterprise
Computing, Consumer Products, Communication Products and Tandem Computers, as
well as a worldwide sales, marketing, service and support organization. This
structure allows Compaq to focus on sales, marketing, brand management and
service and support on a global level.
PC Products Group. The PC Products Group accounted for 47% of Compaq
sales in 1997. The Compaq Deskpro was again the world's most popular PC in
1997, while Compaq monitors were the number one leader worldwide.
Compaq also introduced a new broad range of portable computers, including
the Armada 1500 family, a fully-integrated value line, and the Armada 7700
family, with one of the highest performance and most advanced technologies
available.
Demonstrating our ongoing commitment to innovation, Compaq delivered
products in 1997 that used the latest technologies, like the Deskpro 4000N,
one of the first Net PCs on the market, and the Deskpro 4000S, with a new
smaller desktop form factor. Taking a lead in the industry, Compaq introduced
several new technologies, such as Intel's Pentium and Pentium II with MMX
technology, new graphics capabilities, enhanced Intelligent Manageability, a
flat panel monitor and a suite of products and services tailored for the small
and medium business market. As we look to 1998, Compaq plans to continue its
leadership role with products that address new technologies, high performance,
competitive price points, and new markets.
Enterprise Computing Group. The Enterprise Computing Group had sales of
server products, professional workstations and enterprise storage and options
that accounted for 36% of Compaq's sales in 1997 (including Tandem's sales).
Compaq's servers range from the aggressively priced ProSignia 200 to the
high-availability ProLiant 7000 with PCI Hot Plug technology, capable of
powering the most demanding business-critical environments. As evidenced by
our approximately 30% server market share, Compaq's powerful server platforms
deliver industry-leading price performance coupled with partner-based software
solutions to give customers tightly integrated, reliable solutions that reduce
cost, deployment time and risk. Compaq currently is the leading provider of
key NT solutions. In 1997, Compaq became the second largest vendor of
multi-user storage systems and expanded its product offering of enterprise
class storage, backup and options to over 600 models. In addition, the
workstation business, which was launched less than 18 months ago, grew rapidly
by broadening its product line, forging additional partnerships with
application vendors and entering new vertical markets to achieve the number
one share position in the third quarter of 1997 in the Windows NT workstation
market.
<PAGE>
In 1998, the Enterprise Computing Group plans to further strengthen its
leadership in the mainstream server, options, and workstation markets and
aggressively expand platform offerings and presence in the distributed
enterprise market. The new E2000 Platform Architecture will enable powerful,
flexible, and cost-effective solutions to meet today's enterprise needs by
utilizing standards-based components like high availability ProLiant servers,
fibre channel-based storage, and scalable ServerNet Systems Area Networks
(SAN) interconnects.
To provide enterprise customers more complete solutions to their business
problems and to take advantage of the significant growth in shrink-wrapped
enterprise applications, we are broadening our partnerships and developing
better tools and methodologies for delivering value-added solutions and
services to our customers and solutions partners. The integration of Tandem
will further strengthen our solution offerings for the retail,
telecommunication and finance segments, as well as broaden Compaq's Decision
Support Services (DSS) and E-commerce solutions. We will build on our
leadership position in storage by offering our customers new Fibre Channel,
DLT library and Enterprise storage solutions that will allow them to build
highly available, scalable storage networks. In workstations, we expect to
expand our segment solutions as well as introduce new products offering the
latest graphic and high-performance computing technologies.
Consumer Products Group. In 1997, the Consumer Products Group, which
markets computers and related options aimed at the consumer and home office
market, accounted for 16% of Compaq's sales. In 1997, Compaq introduced its
spring lineup of home multimedia PCs that included the Presario 2000 series,
the first series of products in the market to combine leading-edge technology
at prices below $1000. In June, Compaq expanded its consumer line in many
significant ways, incorporating the latest processor technologies with new
low-cost form factors, easy internet access capabilities, DVD-ROM
capabilities, and a creativity imaging center that supports video and digital
image capture, editing and communications. Compaq also expanded its line of
home notebook PCs with the latest processor and screen technologies enhanced
with multimedia applications and consumer-oriented CD playback features,
marketed as DisqPlay. The combination of innovative portables and low cost
high technology desktop products resulted in Compaq's number one worldwide
consumer market share position in the third quarter of 1997.
Tandem Computers. Compaq's merger with California-based Tandem Computers
in August 1997 extended the reach of its enterprise products and solutions
into the mission-critical computing space. Well-known for the reliability and
scalability of its systems, Tandem provides valuable expertise in advanced
clustering technology, service, and support to Compaq. During 1997, Tandem
released its ServerNet technology-based NonStop Himalaya S-series range of
systems, demonstrated the enterprise-class capability of clustered Windows NT
servers with a 2-terabyte decision support system running NonStop Software,
and continued to enhance its telecommunications-focused UNIX system products
and leading wireless applications.
In 1998, Tandem will focus on delivering targeted solutions for key
vertical markets, as well as high-end horizontal solutions in decision support
and electronic commerce, in accordance with the joint strategy developed with
the Enterprise Computing Group.
<PAGE>
Communication Products Group. Compaq has a broad line of local area
network (LAN) and remote access products. The LAN product line consists of
network interface cards, hubs and switches to provide a range of scaleable,
network solutions for small-to-medium businesses and work groups/departments
in large corporations. During 1997, Compaq introduced multiple new LAN
products including enhanced 10/100 Ethernet and Token Ring network interface
cards; an industry first-of-its kind, port-level, auto-sensing, dual-speed,
stackable 10/100 Ethernet hub; and, three cost effective 10 and 10/100
Ethernet switches.
Remote access products include modems, an ISDN router, modem pools and
remote access concentrators. Recently introduced remote access products
include new K56flex protocol modems and a small-office-home-office, ISDN
router with an integrated 8 port Ethernet hub ("network in a box"). Modem
pools and remote access concentrators were added to the portfolio through
Compaq's 1997 acquisition of Microcom. Compaq's remote access solutions scale
from small businesses to large enterprises and telecom service providers.
PRODUCT DEVELOPMENT
Compaq is actively engaged in the design and development of additional
products and enhancements to its existing products. During 1997, 1996 and
1995, Compaq expended $817 million, $695 million and $552 million,
respectively, on research and development. In addition, Compaq spent $208
million and $241 million on in-process research and development in connection
with acquisitions in 1997 and 1995, respectively. Since personal computer
technology develops rapidly, Compaq's continued success is dependent on the
timely introduction of new products with the right price and features. Its
engineering effort focuses on new and emerging technologies as well as design
features that will increase manufacturing efficiency and lower production
costs. In 1997, Compaq focused significant attention on technological
developments for enterprise computing, high-availability and failover
solutions, storage technology, enterprise systems management, integration and
configuration optimization, internet and intranet technologies, as well as
networking and communications products. In the portable area, Compaq focused
on developing leading solutions for high performance desktop replacement
users, including integrated high performance notebooks.
Compaq's product development efforts are centered on aggressively
developing new areas in which Compaq can differentiate its products and add
value, focusing on innovative platform features, the integration of hardware
and software, and new related products and services. Because Compaq's
business now intersects with a number of areas in which other companies have
significantly greater technological, marketing and service expertise, Compaq
has focused on alliances with third parties that have complementary products
and skills as well as acquisitions that target incremental business
opportunities.
MANUFACTURING AND MATERIALS
Compaq's PC manufacturing operations consist of manufacturing finished
products and various circuit boards from components and subassemblies that
Compaq acquires from a wide range of vendors. Certain of Compaq's products are
manufactured by third party original equipment manufacturers.
Compaq is in the process of developing the capacity to build products to
order ("BTO") and configure products to order ("CTO"). This approach entails
manufacturing products upon receipt of a sales order, as opposed to building
to stock or sales forecast. BTO capabilities are employed to maximize
manufacturing efficiencies by producing high volumes of basic product
configurations. CTO permits configuration of units to the particular hardware
and software customization requirements of certain customers. Both BTO and
CTO are designed to generate cost efficiencies relating to just-in-time
manufacturing, inventory management and distribution practices.
<PAGE>
Compaq believes that there is a sufficient number of competent vendors
for most components and subassemblies. A significant number of components,
however, is purchased from single sources due to technology, availability,
price, quality or other considerations. Order lead times and cancellation
requirements vary by supplier and component. Key components and processes
currently obtained from single sources include certain of Compaq's displays,
operating systems, microprocessors, application-specific integrated circuits
and other custom chips and certain processes relating to construction of the
housing for Compaq's computers. In addition, new products introduced by
Compaq often initially utilize custom components obtained from only one source
until Compaq has evaluated whether there is a need for additional suppliers.
Like other participants in the personal computer industry, Compaq
ordinarily acquires materials and components through purchase orders typically
covering Compaq's requirements for periods averaging 90 to 120 days. From time
to time Compaq has experienced significant price increases and limited
availability of certain components that are available from multiple sources.
At times Compaq has been constrained by parts availability in meeting product
orders and future constraints could have an adverse effect on Compaq's
operating results. On occasion, Compaq acquires component inventory in
anticipation of supply constraints. A restoration of component availability
and resulting decline in component pricing more quickly than anticipated could
have an adverse effect on Compaq's operating results.
MARKETING AND DISTRIBUTION
Compaq distributes its products principally through third-party computer
resellers. Compaq's products are sold to large and medium-sized business and
government customers primarily through dealers, value-added resellers and
systems integrators and to small business and home customers principally
through dealers and consumer channels. In response to changing industry
practices and customer preferences, Compaq is continuing its expansion of
distribution establishments. Compaq also sells products directly through its
sales force and directly to small business and home customers through Compaq's
Internet web page at www.compaq.com and its mail order business that feature a
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variety of personal computers, printers and software products.
In 1997, North American sales constituted 55% of Compaq's total sales and
Europe, Middle East and Africa sales constituted 32%. Compaq's North America
Division markets its products in the United States and Canada, while Compaq's
Europe, Middle East and Africa Division, based in Munich, Germany, focuses on
opportunities in Europe as well as in parts of Africa and the Middle East. The
sales of Compaq's Asia/Pacific, Japan, Greater China and Latin America
Divisions, which focus on opportunities in these high growth areas, constitute
the remaining 13% of Compaq's total sales. Compaq's products are now sold by
dealers in more than 100 countries. For further geographic information for
1997, 1996 and 1995, see Management's Discussion and Analysis of Financial
Condition and Results of Operations and Note 9 of the Notes to Consolidated
Financial Statements.
In 1997, Compaq created a leasing company, Compaq Capital Corporation, to
provide financing to facilitate and enhance the sale of Compaq products and
services on a worldwide basis. Compaq Capital has been staffed with
experienced leasing/financing specialists who are moving rapidly to create a
worldwide leasing/financing network through de novo operations and joint
venture relationships with other lessors. On July 10, 1997, Compaq Capital
commenced leasing operations in North America and on October 1, 1997, Compaq
Capital implemented leasing operations in Europe. Additional Compaq Capital
leasing operations are scheduled to be rolled out to the Asia/Pacific and
Latin America regions in 1998. It is anticipated that Compaq Capital's
dedicated leasing/financing operations will provide additional capabilities to
help meet customer needs on a global basis.
<PAGE>
SERVICE AND SUPPORT
Compaq provides support and warranty repair to its customers principally
through full-service computer dealers and independent third-party service
companies. Compaq offers its customers CompaqCare, which includes a number of
customer service and support programs, most notably one- to three-year limited
warranties on PC products and in the U.S., round-the-clock telephone technical
support for Compaq hardware products.
PATENTS, TRADEMARKS, AND LICENSES
Compaq and its subsidiaries held 910 patents, had 139 patents allowed and
awaiting issuance and had 1090 patent applications pending with the United
States Patent and Trademark Office at the close of 1997, as well as related
international patents and patent applications. In addition, Compaq has
registered certain trademarks in the United States and in a number of foreign
countries. While Compaq believes that patent and trademark protection plays an
important part in its business, Compaq relies primarily upon the technological
expertise, innovative talent and marketing abilities of its employees.
Compaq has from time to time entered into cross-licensing agreements with
other companies holding patents to technology used in Compaq's products as
well as with companies using patents to technology held by Compaq. Compaq
holds a license from IBM for all patents issuing on applications filed prior
to July 1, 1993, and has entered into a patent cross-license agreement with
Texas Instruments, Inc., for all patents issuing on applications filed prior
to December 31, 2005. In January 1996, Compaq and Intel Corporation entered
into a ten-year patent cross-license agreement.
SEASONALITY
General economic conditions have an impact on Compaq's business and
financial results. From time to time, the markets in which Compaq sells its
products experience weak economic conditions that may negatively affect sales.
Although Compaq does not consider its business to be highly seasonal, Compaq
in general experiences seasonally higher sales and earnings in the second half
of the year. Should Compaq's retail business expand relative to its other
businesses, Compaq could experience an increase in the seasonality of its
business and financial results could become more dependent on retail business
fluctuations.
CUSTOMERS
One customer accounted for 11% of sales for 1997. During this period, no
other customer of Compaq accounted for 10% or more of sales. In 1997, Compaq's
five largest resellers represented approximately 25% of Compaq's 1997 sales.
BACKLOG
Compaq's resellers typically purchase products on an as-needed basis and
resellers frequently change delivery schedules and order rates depending on
market conditions. Unfilled orders can be, and often are, canceled at will and
without penalties. In Compaq's experience, however, the actual amount of
unfilled orders at any particular time is not a meaningful indication of its
future business prospects since orders rapidly become balanced as soon as
supply begins meeting demand. Forecasting demand for newly introduced
products is complicated by the availability of different product models, which
may include various types of built-in peripherals and software, and the
configuration requirements, such as language localization, in certain markets.
As a result, while overall demand may be in line with Compaq's projections and
manufacturing implementation, local market variations can lead to differences
between expected and actual demand and resulting delays in shipment. Should
Compaq be unable to meet demand for its products on a timely basis, customer
satisfaction and sales could be adversely affected.
<PAGE>
COMPETITION
The computer industry is intensely competitive with many U.S., Japanese
and other international companies vying for market share. The market continues
to be characterized by rapid technological advances in both hardware and
software developments that have substantially increased the capabilities and
applications of information management products and have resulted in the
frequent introduction of new products. The principal elements of competition
are price, product performance, product quality and reliability, service and
support, marketing and distribution capability and corporate reputation. While
Compaq believes that its products compete favorably based on each of these
elements, Compaq could be adversely affected if its competitors introduce
innovative or technologically superior products or offer their products at
significantly lower prices than Compaq. Compaq's results could also be
adversely affected should it be unable to implement effectively its
technological and marketing alliances with other companies, such as Microsoft,
Intel, Novell, Oracle, SAP and Texas Instruments, among others, and to manage
the competitive risks associated with these relationships.
ENVIRONMENTAL LAWS AND REGULATIONS
Compaq recognizes that operating in a manner that is compatible with the
environment is good for its community, employees, customers and business.
Compaq integrates numerous environmental features in the product design and
manufacturing process that reduce the potential environmental impact during
the lifecycle of its products and its products are designed and manufactured
to meet a variety of the world's environmental standards and expectations.
Compaq uses no chlorofluorocarbons (CFCs) in its worldwide manufacturing
operations and undertakes ongoing environmental programs, including waste
reduction, energy conservation, recycling and design for environment. Compaq
maintains a worldwide environmental health and safety audit program. The audit
program includes management system and compliance evaluations. Compliance with
laws enacted for protection of the environment to date has had no material
effect upon Compaq's capital expenditures, earnings or competitive position.
Although Compaq does not anticipate any material adverse effects in the future
based on the nature of its operations and the purpose of environmental laws
and regulations, there can be no assurance that such laws or future laws will
not have a material adverse effect on Compaq.
YEAR 2000 TRANSITION
The media has given much attention to the Year 2000 transition, focusing
primarily on the ability of older, proprietary mainframe and minicomputer
systems and their software to handle the transition. New, open systems like
those sold and used by Compaq also face associated issues. In 1997, Compaq
established a task force to address its PC product and customer concerns, and
a separate task force to address Compaq's internal information systems and
those of its suppliers. A third task force addresses all such issues for
Tandem products.
<PAGE>
Compaq announced a Year 2000 product readiness program for its PC system
products on October 7, 1997. Compaq systems covered by the program sold on or
after that date pass the NSTL YMARK2000 test for Year 2000 hardware readiness.
NSTL, a division of the McGraw Hill Companies, uses a strict definition of
Year 2000 readiness for x86-based PCs. The hardware clock must be compatible
to the Motorola MC146818 real-time clock (RTC) and the BIOS must report the
occurrence of the Year 2000 in real time and recognize leap years, when
appropriate, for the Years 2000 through 2009 inclusive. Compaq implemented
firmware changes to enable its new systems to pass the test. Systems sold by
Compaq prior to October 7, 1997 may require firmware updates to pass the test.
Older systems sold by Compaq may not have upgradeable firmware and thus may
not be able to pass the test. Compaq continues to evaluate testing techniques
for its software and options. Additional information is available on Compaq's
Web site at www.compaq.com/year2000.
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A second Year 2000 product readiness program covers Tandem products. Compaq
defines Year 2000 compliance for Tandem products as "the capability of a
product, when used in accordance with its associated documentation, to
correctly receive, process, and provide date data within and between the 20th
and 21st centuries, provided that all other products (for example, hardware,
software, and firmware) used with the product properly exchange accurate date
data with the product." New Tandem products meet this definition. Older
systems sold by Tandem may not be capable of meeting this definition. Testing
of new and older systems is ongoing. Additional information is available on
Tandem's Web site at www.tandem.com.
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For additional information, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Factors That May Affect Future
Results - Year 2000 Compliance."
EMPLOYEES
At December 31, 1997, Compaq had approximately 32,565 full-time regular
employees and 8,878 temporary and contract workers engaged in manufacturing
operations, engineering, research and development, marketing, sales, service
and administrative activities. Compaq believes that its ability to attract and
retain skilled personnel appropriately is critical to its success.
Accordingly, Compaq has developed competitive human resources policies
consistent with its business plan.
ITEM 2. PROPERTIES
Compaq's principal administrative facilities and a manufacturing facility
are located in Houston, Texas, on the 1,000-acre Compaq Center in Houston.
Tandem's administrative facilities are located in Cupertino, California and a
principal manufacturing site is in Fremont, California. Compaq leases sales
offices in 101 cities in the United States as well as certain administrative
and warehouse facilities. Compaq leases a manufacturing facility in Irving,
Texas, that is used in the manufacture of hubs and high speed switches. In
addition, Compaq leases customer service call centers in Atlanta, Georgia;
Houston, Texas; and Dublin, Ireland. Compaq also owns or leases
administrative and sales offices and manufacturing facilities
internationally and has its principal international manufacturing facilities
in Scotland, Singapore, Brazil, Australia and China.
ITEM 3. LEGAL PROCEEDINGS
Compaq is subject to legal proceedings and claims that arise in the
ordinary course of its business. Management does not believe that the outcome
of any of those matters will have a material adverse effect on Compaq's
financial condition, results of operations or cash flows.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET FOR COMMON STOCK. Compaq's common stock is listed on the New York
Stock Exchange and trades under the symbol CPQ. As of January 30, 1998,
Compaq had approximately 23,000 shareholders of record. The reported high and
low closing stock prices, as reported on the NYSE Composite Transaction Tape,
were as follows:
<TABLE>
<CAPTION>
1997 1996
===========================================
High Low High Low
-------------- --------------
<S> <C> <C> <C> <C>
1st Quarter $17.35 $14.40 $10.60 $ 7.30
2nd Quarter 21.63 14.40 9.95 7.53
3rd Quarter 39.13 20.38 12.95 8.30
4th Quarter 38.63 26.66 17.15 12.88
</TABLE>
DIVIDENDS AND DIRECT STOCK PURCHASE PLAN. Compaq paid its first quarterly
dividend of $ 0.015 per share to shareholders of record on December 31, 1997.
Compaq anticipates that the cash dividend will be paid on a quarterly basis.
Compaq has established a direct stock purchase plan through which stockholders
may reinvest their dividends and invest additional amounts directly in Compaq
common stock. Additional information about the direct stock purchase plan is
available at www.compaq.com/corporate/ir/shareplan.html.
------------------------------------------
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following income statement and balance sheet data have been derived
from consolidated financial statements that have been audited by Price
Waterhouse LLP, independent accounts. The information set forth below is not
necessarily indicative of the results of future operations and should be read
in conjunction with the consolidated financial statements and notes thereto
appearing elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Year ended December 31, In millions except per share amounts 1997 1996 1995 1994 1993
==========================================================================================================
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,584 $20,009 $16,675 $12,605 $8,873
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . 17,833 14,855 12,291 8,885 6,188
-------- ------- ------- ------- ------
6,751 5,154 4,384 3,720 2,685
-------- ------- ------- ------- ------
Selling, general and administrative expense . . . . . . . . . 2,947 2,507 2,186 1,859 1,549
Research and development costs. . . . . . . . . . . . . . . . 817 695 552 458 436
Purchased in-process technology(1). . . . . . . . . . . . . . 208 - 241 - -
Restructuring charge(2) . . . . . . . . . . . . . . . . . . . - 52 - - 270
Merger-related costs. . . . . . . . . . . . . . . . . . . . . 44 - - - -
Other income and expense, net(3). . . . . . . . . . . . . . . (23) 17 79 50 269
-------- ------- ------- ------- ------
3,993 3,271 3,058 2,367 2,524
-------- ------- ------- ------- ------
Income before provision for income taxes. . . . . . . . . . . 2,758 1,883 1,326 1,353 161
Provision for income taxes. . . . . . . . . . . . . . . . . . 903 565 433 365 142
-------- ------- ------- ------- ------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,855 $ 1,318 $ 893 $ 988 $ 19
======== ======= ======= ======= ======
Earnings per common share:(4)(5)
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.23 $ 0.90 $ 0.62 $ 0.70 $ 0.01
======== ======= ======= ======= ======
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.19 $ 0.87 $ 0.60 $ 0.68 $ 0.01
======== ======= ======= ======= ======
Shares used in computing earnings per
common share: (4)(5)
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,505 1,472 1,442 1,405 1,348
======== ======= ======= ======= ======
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . 1,564 1,516 1,492 1,463 1,388
======== ======= ======= ======= ======
FINANCIAL POSITION
Current assets. . . . . . . . . . . . . . . . . . . . . . . . $12,017 $10,089 $ 7,462 $ 6,037 $4,142
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . 14,631 12,331 9,637 7,862 5,752
Current liabilities . . . . . . . . . . . . . . . . . . . . . 5,202 4,741 3,356 2,739 2,098
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . - 300 300 300 -
Stockholders' equity. . . . . . . . . . . . . . . . . . . . . 9,429 7,290 5,757 4,644 3,468
<FN>
(1) Represents a $208 million and a $241 million non-recurring, non-tax-deductible charge for purchased
in-process technology in connection with acquisitions in 1997 and 1995, respectively.
(2) Includes a restructuring charge of $52 million in 1996 and $258 million in 1993 for Tandem.
(3) 1993 amount includes Tandem loss from discontinued operations of $222 million.
(4) All common share and per common share data reflect the five-for-two stock split in July 1997 and the
two-for-one stock split in January 1998.
(5) The Company adopted FAS 128 in 1997. All prior period earnings per common share data have been
restated to conform to the provisions of this statement.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements. Except as specifically indicated, the
forward-looking statements contained in this discussion do not take into
consideration the impact of Compaq's agreement to merge with Digital Equipment
Corporation as described in Item 1, which is subject to the approval of
Digital's shareholders as well as certain regulatory approvals. We expect to
consummate the merger in the second quarter of 1998.
<PAGE>
RESULTS OF OPERATIONS
The following table presents, as a percentage of sales, selected
consolidated financial data for each of the three years in the period ended
December 31.
<TABLE>
<CAPTION>
Year ended December 31, 1997 1996 1995
====================================================================
<S> <C> <C> <C>
Sales. . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0%
Cost of sales. . . . . . . . . . . . . . . . 72.5 74.2 73.7
------ ------ ------
Gross margin . . . . . . . . . . . . . . . . 27.5 25.8 26.3
------ ------ ------
Selling, general and administrative expense. 12.0 12.5 13.1
Research and development costs . . . . . . . 3.3 3.5 3.3
Purchased in-process technology(1) . . . . . 0.9 - 1.4
Restructuring charge(2). . . . . . . . . . . - 0.3 -
Merger-related costs(3). . . . . . . . . . . 0.2 - -
Other income and expense, net. . . . . . . . (0.1) 0.1 0.5
------ ------ ------
16.3 16.4 18.3
------ ------ ------
Income before provision for income taxes . . 11.2% 9.4% 8.0%
====== ====== ======
<FN>
(1) Represents a $208 million and a $241 million non-recurring,
non-tax-deductible charge for purchased in-process technology in connection
with acquisitions in 1997 and 1995, respectively.
(2) Represents a $52 million charge related to restructuring actions taken by
Tandem during 1996.
(3) Represents a $44 million non-recurring, non-tax-deductible charge related
to costs associated with the Tandem merger during 1997.
</TABLE>
SALES
Sales for 1997 increased approximately $4.6 billion or 23% over the prior
year as compared with an increase of $3.3 billion or 20% during 1996. North
American sales, which include Canada, increased 26% during 1997, compared with
an increase of 29% during 1996. International sales, excluding Canada,
represented 45% of total sales in 1997 as compared with 47% in 1996. European
sales increased 21% during 1997 compared to an increase of 10% during 1996.
Other international sales increased 15% during 1997, compared with an increase
of 14% during 1996. Other international markets experienced adverse market
conditions in 1997. In particular, the weakness in the Asian and Japanese
markets resulted in an aggressive pricing environment throughout 1997.
The personal computer industry is highly competitive and marked by
frequent product introductions, continual improvement in product
price/performance characteristics and a large number of competitors.
Approximately 58% of Compaq's CPU sales in 1997 were derived from products
introduced in 1997. These new products have been designed to allow us to
achieve low product costs while maintaining the quality and reliability for
which our products have been known, thereby increasing our ability to compete
on price and value.
The significant increase in sales in 1997 stemmed primarily from an
increase in the number of units sold and an increase in sales of options
associated with CPU products. In 1997, Compaq's worldwide unit sales increased
43% while they increased 23% in 1996. The 1997 increase included a 35%
expansion in unit sales of commercial CPU products, a 62% increase for
consumer CPU products and a 65% increase for enterprise CPU products.
According to third-party estimates, worldwide unit sales of personal computers
increased approximately 15% to 16% in 1997, in contrast to a 16% to 18%
increase in 1996. Competition continues to have a significant impact on
prices of our products, especially those aimed at the consumer market, and
additional pricing actions may occur as we attempt to maintain our competitive
mix of price/performance characteristics. We attempt to mitigate the effect of
any pricing actions through implementation of design-to-cost goals, the
aggressive pursuit of reduced component costs, manufacturing efficiencies and
control of operating expenses.
<PAGE>
GROSS MARGIN
Gross margin as a percentage of sales was 27.5% in 1997, up from 25.8% in
1996. The increase in gross margins primarily resulted from a higher portion
of sales of enterprise products and options, production and logistics cost
savings, and overall asset management improvements. Compaq operates in a
very aggressive pricing environment that will continue to put pressure on
gross margins. Despite this pressure, we expect that the combination of
changes in product mix, continued improvements in logistics and asset
management, reductions in the cost of materials, and higher margins on new
products should allow Compaq to maintain relatively stable gross margin levels
in 1998.
OPERATING EXPENSES
Research and development costs increased 18% in absolute dollars (to $817
million from $695 million) and fell as a percentage of sales (to 3.3% from
3.5%) in 1997 as compared to 1996. In addition, Compaq spent $208 million on
in-process research and development in connection with an acquisition in 1997.
We are committed to continuing a significant research and development program,
and research and development costs are likely to increase in absolute dollars
in 1998.
Selling, general and administrative expense increased 18% in absolute
dollars in 1997 while slightly declining as a percentage of sales. The
decrease as a percentage of sales reflects our ongoing efforts to manage
operating expense growth relative to sales and gross margin levels. The
increase in the amount of expense resulted from domestic and international
selling expense associated with higher unit volumes as well as expense
incurred in connection with the introduction of new products, the entry into
new markets, the expansion of distribution channels and a greater emphasis on
customer service and technical support. We anticipate that in 1998 selling,
general and administrative expense will increase in absolute dollars as Compaq
supports significant new product introductions, expands into new markets and
increases investment in the area of service and support, especially in support
of Compaq's enterprise business.
OTHER ITEMS
In 1997, Compaq had other income of $23 million, compared to other
expense of $17 million and $79 million in 1996 and 1995, respectively. The
difference was primarily due to an increase in interest and dividend income
related to higher combined cash and short-term investment balances, partially
offset by increased interest expense. The translation gains and losses
relating to the financial statements of Compaq's international subsidiaries,
net of offsetting gains and losses associated with hedging activities relating
to the net monetary assets of these subsidiaries, are included in other income
and expense and resulted in net losses of $31 million, $14 million and $33
million in 1997, 1996 and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Compaq's cash, cash equivalents and short-term investments increased to
$6.8 billion at December 31, 1997, from $4.1 billion at December 31, 1996,
primarily due to positive cash flow from operating activities, including
improved management of inventory, accounts receivable and accounts payable.
Accounts receivable decreased to $2.9 billion at December 31, 1997, from $3.7
billion at December 31, 1996, primarily as a result of improved asset
management and the sale of $1.1 billion of accounts receivable at the end of
1997. Inventory levels increased to $1.6 billion from $1.3 billion during that
period, primarily due to increased unit volumes. Inventory turns increased to
12.6 in 1997, from 8.3 in 1996. Cash used in 1997 for the purchase of
property, plant and equipment totaled $729 million. Capital expenditures for
land, buildings and equipment during 1998 are estimated to be $770 million.
Compaq has committed for only a small portion of such amounts and the actual
level of spending will depend on a variety of factors, including general
economic conditions and Compaq's business. Accounts payable increased to $2.8
billion from $2.1 billion and days payable outstanding increased to 54 days
from 40 days at December 31, 1997 and 1996, respectively, due to improved
accounts payable management.
<PAGE>
In addition, in May 1997, Compaq completed a cash tender offer for
substantially all of its outstanding $150 million 6-1/2% Senior Notes Due
March 15, 1999 and $150 million 7-1/4% Senior Notes Due March 15, 2004.
Compaq paid approximately $298 million (excluding accrued interest) for the
tendered notes. Also in May 1997, Compaq completed its cash tender offer for
Microcom for $288 million.
We currently expect 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. On September 22, 1997,
Compaq entered into a five-year $3 billion unsecured revolving credit facility
and a one-year $1 billion unsecured revolving credit facility. In conjunction
with the closing of the new facilities, Compaq retired its two existing
secured revolving credit facilities totaling $1.5 billion. Compaq had no
borrowings outstanding under either of the new facilities at December 31,
1997. Compaq has established a commercial paper program, supported by the
syndicated credit facility, which was unused at December 31, 1997. We believe
that these sources of credit provide sufficient financial flexibility to meet
foreseeable future funding requirements. We continually evaluate the need to
establish other sources of working capital and will pursue those we consider
appropriate based upon Compaq's needs and market conditions.
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. 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.
Competitive Environment. We expect the personal computer market to
continue to expand in 1998 in line with third party research organizations'
forecasts of unit growth in the range of 15% to 16%. We expect the enterprise
market to expand in line with the development of internet and intranet
enterprise applications and the corporate MIS migration from legacy systems to
client/server systems. With the Tandem merger and the anticipated Digital
merger, Compaq confronts a challenge in building its high-end UNIX solutions
product market while continuing to advance the sphere of NT-based solutions to
achieve the lowest cost of ownership and highest computing value for its
customers. Industry competition remains fierce with a large number of
competitors vying for market share. This competition creates an aggressive
pricing environment, which continues to put pressure on Compaq's gross
margins. Although Compaq has programs and products 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.
<PAGE>
Risks of Newly Acquired Businesses. Compaq plans to use strategic
acquisitions and mergers to assist in the growth of its business. During the
third quarter 1997, Compaq completed its merger with Tandem. Tandem's core
competencies have historically centered around providing reliable, scaleable
hardware and software solutions for business critical applications, such as
online transaction processing. With the advent of the internet and expanding
corporate intranets, Compaq believes that computer applications will emerge
that will result in media-rich high volume transactions, causing online
transaction processing to be expanded to include internet transaction
processing. As a result of the Tandem merger, Compaq is engaged in direct
sales of computer systems with software developed to meet customers' specific
needs. The longer-term nature of fulfilling such contracts may expose Compaq
to new risks associated with customized specifications. Compaq believes that
through its Tandem and enterprise products, it is well positioned to provide
computing solutions to meet this demand as well as other needs for enterprise
computing.
Subject to certain regulatory approvals and approval by Digital
shareholders, Compaq will expand its service offerings and enterprise
solutions through the merger with Digital. At that time, Compaq will confront
a number of risks associated with Digital's business. Compaq believes that
the Digital merger will enhance its operating results, but as with any
significant acquisition or merger, Compaq confronts challenges in retaining
key employees, synchronizing product roadmaps and business processes, and
integrating logistics, marketing, product development, and manufacturing
operations to achieve greater efficiencies.
Inventory. In the event of a drop in worldwide demand for computer
products, demand for one or more of Compaq's products is lower than
anticipated, difficulties arise in managing product transitions, or component
pricing movements affect the value of raw material inventory, there could be
an adverse impact on inventory levels, cash, and related profitability.
Third Party Relationships. We work with third parties as suppliers in
arrangements to provide services in areas other than core competencies and
ensure the service and support of our customers, and in strategic alliances to
facilitate product offerings, product development, compatibility, and the
adoption of industry standards. Although we try to achieve strong working
relationships with parties who share our 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 at the speed and volumes required
by Compaq's business, which could lead to delays in product development and
gaps in component supplies. Second, major companies from which we purchase
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. Finally, difficulties in coordinating
activities may lead to gaps in delivery and performance of our products.
Rapid Technology Cycles. We believe the computer industry will continue
to drive rapid technology cycles. In planning product transitions, we evaluate
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 our
volume production, should we be unable to gauge the rate of product
transitions accurately, there could be an adverse impact on inventory levels,
cash, and profitability.
<PAGE>
Product Transitions. In each product cycle, we confront the risk of
delays in production that could impact sales of newer products while we manage
the inventory of older products and facilitate the sale of older inventory
held by resellers. To ease product transitions, we carry out pricing actions
and marketing programs to increase sales in reseller channels. We provide
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 we be unable to sell the inventory of older products
at anticipated prices 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 its 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, cash, and related profitability. In connection with these
efforts, we are moving many of our systems from a legacy environment of
proprietary systems to client-server architectures as well as integrating
systems from newly acquired businesses. Should the transition to new systems
not occur in a smooth and orderly manner, we 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 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,
including Intel, Texas Instruments and Microsoft. Compaq has been negotiating
with IBM and Microsoft for the successors to the current agreements. There
can be no assurance that Compaq will be able to negotiate terms under such
license agreements that offer it competitive market advantages.
Production Forecasts. In managing production, we must forecast customer
demand for our products. Should we underestimate the supplies needed to meet
demand, we could be unable to meet customer demand. Should we overestimate the
supplies needed to meet customer demand, cash and profitability could be
adversely affected. Many of the components used in our products, particularly
microprocessors and memory, experience steep price declines over their product
lives. If we are unable to manage purchases and utilization of such components
efficiently to maintain low inventory levels immediately prior to major price
declines, we could be unable to take immediate advantage of such declines to
lower product costs, which could adversely affect our sales and gross margins.
In addition, should prices for components increase unexpectedly, Compaq's
gross margin could be adversely affected. In 1997, Compaq established a
variety of programs designed to increase its manufacturing, distribution, and
business process efficiencies. The success of these programs depends upon the
implementation of more efficient component supply, manufacturing, and
distribution strategies to increase overall efficiencies, which will lead to
lower prices being offered to its end users.
Credit Risks. Compaq's primary means of distribution remains third-party
resellers. We continually monitor and manage the credit we extend to resellers
and attempt to limit credit risks by broadening distribution channels,
utilizing certain risk transfer arrangements and obtaining security interests.
Our 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, we could experience disruptions in distribution as well
as the loss of the unsecured portion of any outstanding accounts receivable.
Geographic expansion, particularly the expansion of manufacturing operations
in developing countries, such as Brazil and China, and the expansion of sales
into economically volatile areas such as Asia, 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. Compaq continues to
evaluate its business operations in these regions and attempts to take
measures to limit risks in these areas.
<PAGE>
Year 2000 Compliance. Compaq believes the cost of administering its Year
2000 readiness program described above, exclusive of any customer claims, will
not have a material adverse impact on future earnings. Since there is no
uniform definition of Year 2000 "compliance" and since all customer situations
cannot be anticipated, particularly those involving third party products,
Compaq may see an increase in warranty and other claims as a result of the
Year 2000 transition. Such claims, if successful, could have a material
adverse impact on future results. See "Item 1. Business - Year 2000
Transition" for additional information.
Projects to address Compaq's internal information systems currently are
underway, and Compaq is in the process of replacing some of its older systems
with new systems that are able to handle the Year 2000 transition. Compaq
will continue to review internal system requirements and to correct further
issues as they are identified. Although Compaq's evaluation of these systems
is still in process, we believe that the impact of the Year 2000 transition on
its internal systems will not have a material adverse impact on future
results. In addition, Compaq's task force is evaluating the impact of Year
2000 compliance of its suppliers, is asking its suppliers about compliance,
and is establishing Year 2000 compliance requirements for suppliers. Since
the compliance of suppliers depends upon their cooperation, failures remain a
possibility, and could have a material adverse impact on future results.
Tax Rate. Compaq currently has a 30% 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 in
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
anticipated levels, or should Compaq's ability to reinvest these earnings be
reduced, Compaq's effective tax rate would exceed the current estimate. 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 7A 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.
<PAGE>
ITEM 7A. MARKET RISKS
Compaq is exposed to market risks, which include changes in U.S. and
international interest rates as wells as changes in currency exchange rates as
measured against the U.S. dollar and each other. We attempt 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 to estimate the value-at-risk based on
estimates of volatility and correlation of market factors drawn from J.P.
Morgan's RiskMetrics data sets as of December 31, 1997. Our measured
value-at-risk from holding derivative and other financial instruments, using a
95% confidence level and assuming normal market conditions at December 31,
1997, 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. 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.
<PAGE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Index to Consolidated Financial Statements
Financial Statements: Page
----
<S> <C>
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . . . . 20
Consolidated Balance Sheet at December 31, 1997 and 1996 . . . . . . . . . . . . 21
Consolidated Statement of Income for the three years ended December 31, 1997 . . 22
Consolidated Statement of Cash Flows for the three years ended December 31, 1997 23
Consolidated Statement of Stockholders' Equity for the three years ended
December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . 25
Financial Statement Schedules:
For the three years ended December 31, 1997
Schedule II - Valuation and Qualifying Accounts. . . . . . . . . . . . . . 43
</TABLE>
<PAGE>
ITEM 9: DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Compaq Computer Corporation
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Compaq Computer Corporation and its subsidiaries at December 31,
1997 and 1996, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/S/ PRICE WATERHOUSE LLP
- ------------------------
PRICE WATERHOUSE LLP
Houston, Texas
January 21, 1998, except as to Note 11, which is as of January 26, 1998
<PAGE>
<TABLE>
<CAPTION>
COMPAQ COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEET
December 31, In millions, except par value 1997 1996
================================================================================================
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,418 $ 3,008
Short-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 1,073
Accounts receivable, less allowance of $243 and $247. . . . . . . . . . . . . 2,891 3,718
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,570 1,267
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 836
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 187
------- -------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,017 10,089
Property, plant and equipment, less accumulated depreciation . . . . . . . . . 1,985 1,753
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 629 489
------- -------
$14,631 $12,331
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,837 $ 2,098
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 533
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 2,170 2,110
------- -------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 5,202 4,741
------- -------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 300
------- -------
Commitments and contingencies (Note 10)
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 and outstanding:
1,519 million shares at December 31, 1997 and
1,492 million shares at December 31, 1996). . . . . . . . . . . . . . . . . 2,096 1,779
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,333 5,511
------- -------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . 9,429 7,290
------- -------
$14,631 $12,331
======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPAQ COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF INCOME
Year ended December 31, In millions, except per share amounts 1997 1996 1995
=========================================================================================
<S> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,584 $20,009 $16,675
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . 17,833 14,855 12,291
-------- ------- -------
6,751 5,154 4,384
-------- ------- -------
Selling, general and administrative expense . . . . . . . . . 2,947 2,507 2,186
Research and development costs. . . . . . . . . . . . . . . . 817 695 552
Purchased in-process technology . . . . . . . . . . . . . . . 208 - 241
Restructuring charge. . . . . . . . . . . . . . . . . . . . . - 52 -
Merger-related costs. . . . . . . . . . . . . . . . . . . . . 44 - -
Other income and expense, net . . . . . . . . . . . . . . . . (23) 17 79
-------- ------- -------
3,993 3,271 3,058
-------- ------- -------
Income before provision for income taxes. . . . . . . . . . . 2,758 1,883 1,326
Provision for income taxes. . . . . . . . . . . . . . . . . . 903 565 433
-------- ------- -------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,855 $ 1,318 $ 893
======== ======= =======
Earnings per common share:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.23 $ 0.90 $ 0.62
======== ======= =======
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.19 $ 0.87 $ 0.60
======== ======= =======
Shares used in computing earnings per common share:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,505 1,472 1,442
======== ======= =======
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,564 1,516 1,492
======== ======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPAQ COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31, In millions 1997 1996 1995
=========================================================================================
<S> <C> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 1,855 $ 1,318 $ 893
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . 545 483 384
Provision for bad debts. . . . . . . . . . . . . . . . . . 19 160 47
Deferred income taxes. . . . . . . . . . . . . . . . . . . 202 (405) (24)
Purchased in-process technology. . . . . . . . . . . . . . 208 - 241
Restructuring charge . . . . . . . . . . . . . . . . . . . - 52 -
Changes in operating assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . . . . . . 614 (228) (910)
Inventories. . . . . . . . . . . . . . . . . . . . . . . (335) 1,014 (144)
Other current assets . . . . . . . . . . . . . . . . . . 63 34 (9)
Accounts payable . . . . . . . . . . . . . . . . . . . . 756 562 479
Income taxes payable . . . . . . . . . . . . . . . . . . (319) 131 (66)
Other current liabilities. . . . . . . . . . . . . . . . 80 445 142
-------- -------- -------
Net cash provided by operating activities. . . . . . . . . 3,688 3,566 1,033
-------- -------- -------
Cash flows from investing activities:
Purchases of property, plant and equipment, net. . . . . . (729) (484) (565)
Purchases of short-term investments. . . . . . . . . . . . (2,405) (1,401) -
Proceeds from short-term investments . . . . . . . . . . . 3,134 328 -
Acquisition of businesses, net of cash acquired. . . . . . (268) (22) (318)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . (31) (75) (29)
-------- -------- -------
Net cash used in investing activities. . . . . . . . . . . (299) (1,654) (912)
-------- -------- -------
Cash flows from financing activities:
Repayment of long-term debt. . . . . . . . . . . . . . . . (293) - -
Issuance of common stock pursuant to stock option plans. . 188 131 123
Tax benefit associated with stock options. . . . . . . . . 156 91 65
Other, net . . . . . . . . . . . . . . . . . . . . . . . . (37) - -
-------- -------- -------
Net cash provided by financing activities. . . . . . . . . 14 222 188
-------- -------- -------
Effect of exchange rate changes on cash and cash equivalents 7 21 (42)
-------- -------- -------
Net increase in cash and cash equivalents. . . . . . . . . 3,410 2,155 267
Cash and cash equivalents at the beginning of the year . . . 3,008 853 586
-------- -------- -------
Cash and cash equivalents at the end of the year . . . . . . $ 6,418 $ 3,008 $ 853
======== ======== =======
SUPPLEMENTAL CASH FLOW INFORMATION
Year ended December 31, In millions. . . . . . . . . . . . . 1997 1996 1995
=========================================================================================
Interest paid. . . . . . . . . . . . . . . . . . . . . . . . $ 164 $ 106 $ 113
Income taxes paid. . . . . . . . . . . . . . . . . . . . . . $ 804 $ 953 $ 560
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPAQ COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock
------------------------------
Par Value
Number of and Capital Retained
In millions Shares in Excess of Par Earnings Total
==============================================================================================
<S> <C> <C> <C> <C>
Balance, December 31, 1994. . . . . . . . 1,427 $ 1,341 $ 3,303 $4,644
Issuance pursuant to stock option plans . 33 123 - 123
Tax benefit associated with stock options - 65 - 65
Other . . . . . . . . . . . . . . . . . . (2) 14 18 32
Net income. . . . . . . . . . . . . . . . - - 893 893
---------- ------------------ ---------- -------
Balance, December 31, 1995. . . . . . . . 1,458 1,543 4,214 5,757
Issuance pursuant to stock option plans . 34 131 - 131
Tax benefit associated with stock options - 91 - 91
Other . . . . . . . . . . . . . . . . . . - 14 (21) (7)
Net income. . . . . . . . . . . . . . . . - - 1,318 1,318
---------- ------------------ ---------- -------
Balance, December 31, 1996. . . . . . . . 1,492 1,779 5,511 7,290
Issuance pursuant to stock option plans . 30 188 - 188
Tax benefit associated with stock options - 156 - 156
Other . . . . . . . . . . . . . . . . . . (3) (27) (33) (60)
Net income. . . . . . . . . . . . . . . . - - 1,855 1,855
---------- ------------------ ---------- -------
Balance, December 31, 1997. . . . . . . . 1,519 $ 2,096 $ 7,333 $9,429
========== ================== ========== =======
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
DESCRIPTION OF BUSINESS. Founded in 1982, Compaq Computer Corporation is a
worldwide information technology company and is the largest global supplier of
personal computers. Compaq develops and markets hardware, software, solutions
and services, including industry-leading enterprise computing solutions,
fault-tolerant business-critical solutions, networking and communication
products, commercial desktop and portable products and consumer PCs. Compaq
products are sold and supported in more than 100 countries through a network
of authorized Compaq marketing partners. Compaq markets its products primarily
to business, home, government, and education customers. References to the
"Company" mean Compaq and its subsidiaries.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of Compaq and its subsidiaries. All significant intercompany
transactions have been eliminated.
ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, sales
and expenses, and disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS. Cash equivalents primarily
include money market instruments, commercial paper and other investments
having maturities of three months or less at date of acquisition. Short-term
investments include certificate of deposits, commercial paper and other
investments having maturities longer than three months at date of acquisition.
For reporting purposes, such cash equivalents and short-term investments are
stated at cost plus accrued interest which approximates fair value. The total
amount of time deposits outstanding at December 31, 1997 included in cash and
cash equivalents was $707 million.
INVENTORIES. Inventories are stated at the lower of cost or market, cost
being determined on a first-in, first-out basis. Inventories at December 31,
1997 and 1996 were comprised of raw material and work-in progress of $767
million and $634 million, and finished goods of $803 million and $633 million,
respectively.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are stated at
cost. Major renewals and improvements are capitalized; minor replacements,
maintenance and repairs are charged to current operations. Depreciation is
computed by applying the straight-line method over the estimated useful lives
of the related assets, which are 30 years for buildings and range from three
to ten years for machinery and equipment. Leasehold improvements are amortized
over the shorter of the useful life of the improvement or the life of the
related lease.
LONG-LIVED ASSETS. Compaq reviews for the impairment of long-lived assets and
certain identifiable intangibles whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. An
impairment loss would be recognized when estimated future cash flows expected
to result from the use of the asset and its eventual disposition is less than
its carrying amount. Compaq has not identified any such impairment losses.
<PAGE>
SALES RECOGNITION. Compaq recognizes sales at the time products are shipped
to its customers. Provision is made currently for estimated product returns
and price protection which may occur under programs Compaq has with its
customers. Compaq provides for the estimated cost that may be incurred for
post-sales support and product warranties upon shipment. When other
significant obligations remain after products are delivered, revenue is
recognized only after such obligations are fulfilled. Product support and
other revenues are recognized ratably over the contractual period or as the
services are provided.
ADVERTISING COSTS. Advertising costs are charged to operations when incurred.
The cost of direct-response advertising is not significant. Advertising
expenses for 1997, 1996 and 1995 were $223 million, $175 million and $224
million, respectively.
FOREIGN CURRENCY. Compaq's foreign subsidiaries (other than those acquired in
the merger with Tandem Computers Incorporated-Note 2) have the U.S. dollar
designated as their functional currency. Financial statements of these foreign
subsidiaries are translated to U.S. dollars for consolidation purposes using
current rates of exchange for monetary assets and liabilities and historical
rates of exchange for nonmonetary assets and related elements of expense.
Sales and other expense elements are translated at rates that approximate the
rates in effect on the transaction dates. Translation gains and losses are
included in Compaq's consolidated statement of income. The foreign
subsidiaries acquired in the merger with Tandem have designated the local
currency as their functional currency. For these subsidiaries, the assets and
liabilities are translated into U.S. dollars for consolidation purposes at
current exchange rates. Sales and other expense elements are translated at
rates that approximate the rates in effect on the transaction dates. To date
all ongoing adjustments resulting from the process of translating such
subsidiaries' financial statements into U.S. dollars have not been significant
and have been accumulated and recorded within retained earnings.
INCOME TAXES. The provision for income taxes is computed based on the pretax
income included in the Consolidated Statement of Income. The asset and
liability approach is used to recognize deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities.
EARNINGS PER COMMON SHARE. Compaq adopted Statement of Financial Accounting
Standard No. 128 ("FAS 128"), Earnings Per Share beginning with Compaq's
fourth quarter of 1997. All prior period earnings per common share data have
been restated to conform to the provisions of this statement. Basic earnings
per common share is computed using the weighted average number of shares
outstanding. Diluted earnings per common share is computed using the weighted
average number of shares outstanding adjusted for the incremental shares
attributed to outstanding options to purchase common stock. Incremental
shares of 59 million, 44 million and 50 million in 1997, 1996 and 1995
respectively, were used in the calculation of diluted earnings per common
share. Options to purchase 9 million, 28 million and 1 million shares of
common stock in 1997, 1996 and 1995, respectively, were 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 stock.
COMPREHENSIVE INCOME. Compaq adopted Statement of Financial Accounting
Standard No. 130 ("FAS 130"), Comprehensive Income beginning with Compaq's
fourth quarter of 1997. The components of comprehensive income which are
excluded from net income are not significant, individually or in the
aggregate, and therefore no separate statement of comprehensive income has
been presented.
<PAGE>
STOCK-BASED COMPENSATION. Compaq measures compensation expense for its
stock-based employee compensation plans using the intrinsic value method and
has provided in Note 8 pro forma disclosures of the effect on net income and
earnings per share as if the fair value-based method had been applied in
measuring compensation expense.
RECLASSIFICATIONS. Certain prior year amounts have been reclassified to
conform to the 1997 presentation.
NOTE 2. ACQUISITIONS
On August 29, 1997, Compaq merged with Tandem Computers Incorporated
("Tandem") in a stock-for-stock transaction accounted for as a pooling of
interests. Tandem provides its customers with reliable, scaleable,
fault-tolerant enterprise computer systems and client/server solutions. In
connection with the merger, Compaq issued 126 million shares of common stock,
based upon an exchange ratio of 1.05 shares of Compaq common stock for each
share of Tandem common stock. Merger-related costs of $44 million are
reflected in the Consolidated Statement of Income as a result of the
transaction. The financial data included in these financial statements have
been restated to reflect the merger with Tandem. There were no material
transactions between Compaq and Tandem during the periods prior to the merger.
The consolidated financial data for the years ended December 31, 1996 and 1995
includes the results of Tandem for the years ended September 30, 1996 and
1995. For 1997, Tandem's fiscal year end was changed from September 30 to
December 31. As permitted by Securities and Exchange Commission regulations,
Tandem's three-month period ended December 31, 1996 has been omitted from the
Consolidated Statement of Income and recorded as an adjustment to retained
earnings in 1997. Tandem's sales and net income were $436 million and $12
million, respectively, for that period. Tandem also generated a $40 million
increase in cash and cash equivalents during the quarter ended December 31,
1996.
The following information presents certain income statement data of the
separate companies for the periods preceding the acquisition:
<TABLE>
<CAPTION>
Six months ended, Year ended,
------------------
In millions June 30, 1997 1996 1995
==========================================================
<S> <C> <C> <C>
Sales:
Compaq . . . . . . $ 9,817 $18,109 $14,755
Tandem . . . . . . 970 1,900 1,920
------------------ -------- --------
$ 10,787 $20,009 $16,675
------------------ -------- --------
Net Income (Loss):
Compaq . . . . . . $ 601 $ 1,313 $ 789
Tandem . . . . . . 70 (22) 107
Adjustments. . . . - 27 (3)
------------------ -------- --------
$ 671 $ 1,318 $ 893
================== ======== ========
</TABLE>
The consolidated financial results presented above include adjustments to
Tandem's deferred tax valuation allowance related to realization of certain
deferred tax assets as a combined entity with Compaq.
<PAGE>
In May 1997, Compaq completed a tender offer for Microcom, Inc., a
manufacturer of remote access technologies and solutions. The aggregate
purchase price of $288 million consisted of $278 million in cash and the
assumption of certain employee stock options. The transaction was accounted
for as a purchase. Accordingly, the results of operations of the acquired
business and the fair market values of the acquired assets and liabilities
were included in Compaq's financial statements from the date of acquisition.
The aggregate purchase price has been allocated to the assets and liabilities
acquired. The aggregate purchase price included $208 million, representing the
value of in-process technology that had not yet reached technological
feasibility and had no alternative future use. This amount was expensed in
Compaq's Consolidated Statement of Income during 1997. In addition, the
aggregate purchase price included approximately $58 million representing
purchased technology and other identifiable intangibles which are being
amortized over a three year period. Pro forma statements of operations
reflecting the acquisition of Microcom are not shown as they would not differ
materially from reported results.
During 1995, Compaq acquired two companies that develop, manufacture, and
supply fast ethernet hubs, switches and related products, and a small software
company. The aggregate purchase price of $386 million consisted of the
issuance of 1.2 million shares of Compaq common stock, $359 million in cash,
of which $22 million was paid in 1996, and the assumption of certain stock
options. The acquisitions were accounted for as purchases. The aggregate
purchase price included $241 million which represented the value of in-process
technology that had not yet reached technological feasibility and had no
alternative future use. This amount was expensed in Compaq's Consolidated
Statement of Income during 1995. In addition, the aggregate purchase price
included $126 million representing purchased technology, other identifiable
intangibles and goodwill which are being amortized over a three to seven year
period.
NOTE 3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized below:
<TABLE>
<CAPTION>
December 31, In millions 1997 1996
====================================================
<S> <C> <C>
Land . . . . . . . . . . . . . . . . $ 185 $ 212
Buildings and leasehold improvements 1,076 1,002
Machinery and equipment. . . . . . . 2,392 2,010
Construction-in-process and other. . 373 272
------ ------
4,026 3,496
Less accumulated depreciation. . . . 2,041 1,743
------ ------
$1,985 $1,753
====== ======
</TABLE>
Depreciation expense totaled $447 million, $387 million and $326 million in
1997, 1996 and 1995, respectively.
NOTE 4. OTHER CURRENT LIABILITIES
The estimated costs which may be incurred for post-sales support and product
warranties of $450 million and $478 million were included in other current
liabilities at December 31, 1997 and 1996, respectively.
During 1996, Tandem took a restructuring action including a reduction in
headcount, consolidation of facilities and disposal of assets. The
restructuring action resulted in a charge to income of $52 million. No
significant restructuring accruals remain at December 31, 1997.
<PAGE>
NOTE 5. CREDIT AGREEMENTS AND FINANCING ARRANGEMENTS
At December 31, 1996, Compaq had long-term debt consisting of $150 million
6 1/2% Senior Notes Due March 15, 1999 and $150 million 7 1/4% Senior Notes
Due March 15, 2004. In May 1997, Compaq completed a cash tender offer for
substantially all of these outstanding notes. The remaining amount outstanding
is included in other current liabilities.
On September 22, 1997, Compaq entered into a five-year $3 billion unsecured
revolving credit facility and a one-year $1 billion unsecured revolving credit
facility. In conjunction with the closing of the new facilities, Compaq
retired two existing secured revolving credit facilities totaling $1.5
billion. There were no borrowings outstanding under these facilities in 1997
and 1996.
NOTE 6. OTHER INCOME AND EXPENSE
Other income and expense consisted of the following components:
<TABLE>
<CAPTION>
Year ended December 31, In millions 1997 1996 1995
=========================================================================
<S> <C> <C> <C>
Interest and dividend income. . . . . . . . . . . $(266) $(126) $ (71)
Interest (income) expense associated with hedging (4) (3) 18
Other interest expense. . . . . . . . . . . . . . 168 106 94
Currency losses, net. . . . . . . . . . . . . . . 31 14 33
Other, net. . . . . . . . . . . . . . . . . . . . 48 26 5
------ ------ ------
$ (23) $ 17 $ 79
====== ====== ======
</TABLE>
NOTE 7. PROVISION FOR INCOME TAXES
The components of income before provision for income taxes were as follows:
<TABLE>
<CAPTION>
Year ended December 31, In millions 1997 1996 1995
===========================================================
<S> <C> <C> <C>
Domestic. . . . . . . . . . . . . . $1,789 $ 929 $ 504
Foreign . . . . . . . . . . . . . . 969 954 822
------ ------ ------
$2,758 $1,883 $1,326
====== ====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The provision for income taxes charged to operations was as follows:
Year ended December 31, In millions 1997 1996 1995
==========================================================
<S> <C> <C> <C>
Current tax expense
U.S. federal. . . . . . . . . . . $ 430 $ 672 $ 274
State and local . . . . . . . . . 30 34 12
Foreign . . . . . . . . . . . . . 241 238 183
----- ------ ------
Total current . . . . . . . . . 701 944 469
----- ------ ------
Deferred tax expense
U.S. federal. . . . . . . . . . . 194 (332) (8)
State and local . . . . . . . . . 2 (19) (2)
Foreign . . . . . . . . . . . . . 6 (28) (26)
----- ------ ------
Total deferred. . . . . . . . . 202 (379) (36)
----- ------ ------
Total provision . . . . . . . . $ 903 $ 565 $ 433
===== ====== ======
</TABLE>
Total income tax expense for 1997, 1996 and 1995 resulted in effective tax
rates of 33%, 30% and 33%, respectively. The reasons for the differences
between these effective tax rates and the U.S. statutory rate of 35% are as
follows:
<TABLE>
<CAPTION>
Year ended December 31, In millions 1997 1996 1995
======================================================================
<S> <C> <C> <C>
Tax expense at U.S. statutory rate . . . . . . $ 965 $ 659 $ 464
Foreign tax effect, net. . . . . . . . . . . . (88) (105) (73)
Non-deductible purchased in-process technology 73 - 85
Other, net . . . . . . . . . . . . . . . . . . (47) 11 (43)
------ ------ ------
$ 903 $ 565 $ 433
====== ====== ======
</TABLE>
In connection with Compaq's 1997 and 1995 acquisitions, Compaq recorded a $208
million and a $241 million non-recurring, non-tax-deductible charge for
purchased in-process technology, respectively. In connection with the Tandem
merger, Compaq incurred $44 million of non-recurring, non-tax-deductible
merger expenses. These non-taxable charges and expenses resulted in an
increase to the 1997 and 1995 effective tax rate from 30% to 33% and 28% to
33%, respectively.
Compaq benefits from a tax holiday in Singapore which expires in 2001, with a
potential extension to August 2004 if certain cumulative investment levels and
other conditions are met. Compaq has determined that the undistributed
earnings of its Singaporean manufacturing subsidiary would be reinvested
indefinitely. As a result of this determination, no provision for U.S. income
tax is reflected in Compaq's accounts for the earnings of this subsidiary.
These earnings would become subject to U.S. tax if they were actually or
deemed to be remitted to Compaq as dividends or if Compaq should sell its
stock in this subsidiary. Compaq estimates an additional tax provision of
approximately $690 million would be required at such time if the full amount
of these accumulated earnings became subject to U.S. tax.
<PAGE>
Deferred tax assets (liabilities) at December 31, 1997 and 1996 are comprised
of the following:
<TABLE>
<CAPTION>
December 31, In millions 1997 1996
=========================================================================================
<S> <C> <C>
Post sales support and warranty accruals. . . . . . . . . . . . . . . . $ 154 $ 159
Receivable allowances . . . . . . . . . . . . . . . . . . . . . . . . . 353 239
Inventory adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 99 137
Capitalized research and development costs. . . . . . . . . . . . . . . 95 -
Loss carryforwards. . . . . . . . . . . . . . . . . . . . . . . . . . . 50 121
Credit carryforwards. . . . . . . . . . . . . . . . . . . . . . . . . . 119 107
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 282
------- -------
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . 1,056 1,045
------- -------
Difference arising from different tax and financial reporting year ends (254) -
Capitalized software. . . . . . . . . . . . . . . . . . . . . . . . . . (64) (54)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (73) (69)
------- -------
Gross deferred tax liabilities. . . . . . . . . . . . . . . . . . . (391) (123)
------- -------
Deferred tax asset valuation allowance. . . . . . . . . . . . . . . . . (134) (121)
------- -------
$ 531 $ 801
======= =======
</TABLE>
Net operating loss carryforwards will generally expire between 2002 through
2004. Tax credit carryforwards will generally expire between 1998 through
2011.
NOTE 8. STOCKHOLDERS' EQUITY AND EMPLOYEE BENEFIT PLANS
Equity incentive plans - At December 31, 1997, there were 230,765,000 shares
of common stock reserved by the Board of Directors for issuance under Compaq's
employee stock option plans. Options are generally granted at the fair market
value of the common stock at the date of grant and generally vest over four to
five years. Options granted under the plans must be exercised not later than
ten years from the date of grant. Options on 68,415,000, 70,334,000 and
74,010,000 shares were exercisable at December 31, 1997, 1996 and 1995 with a
weighted average exercise price of $6.53, $5.57 and $4.82, respectively.
Compaq has a Stock Option Plan for Non-Employee Directors (the "Director
Plan"). At December 31, 1997, there were 4,887,000 shares of common stock
reserved for issuance under the Director Plan. Pursuant to the terms of the
plan, each non-employee director is entitled to receive options to purchase
common stock upon initial appointment to the Board (initial grants) and upon
subsequent reelection to the Board (annual grants). Initial grants are
exercisable during the period beginning one year after initial appointment to
the Board and ending ten years after the date of grant. Annual grants vest
over two years and are exercisable thereafter until the tenth anniversary of
the date of grant. Both initial grants and annual grants have an exercise
price equal to the fair market value of Compaq's common stock on the date of
grant. Additionally, pursuant to the terms of the Director Plan, non-employee
directors may elect to receive stock options in lieu of all or a portion of
the annual retainer to be earned. Such options are granted at 50% of the price
of Compaq's common stock at the date of grant and are exercisable during the
period beginning one year after the grant date and ending ten years after the
grant date. Options on 2,354,000, 2,714,000 and 2,310,000 shares were
exercisable under the Director Plan at December 31, 1997, 1996 and 1995 with a
weighted average exercise price of $6.36, $4.59 and $3.43, respectively. The
expense resulting from options granted at 50% of the price of Compaq's common
stock at the grant date is charged to operations over the vesting period.
<PAGE>
The following table summarizes activity under the stock option plans for each
of the three years ended
December 31, 1997:
<TABLE>
<CAPTION>
Shares Weighted Average
In Thousands Price Per Share Price Per Share
=============================================================================================
<S> <C> <C> <C>
OPTIONS OUTSTANDING, DECEMBER 31, 1994 166,966 $ 4.71
Options granted . . . . . . . . . . . 36,334 $1.30 - $18.81 9.61
Options lapsed or canceled. . . . . . (7,208) 6.72
Options exercised . . . . . . . . . . (31,796) 0.20 - 18.10 3.51
--------------
OPTIONS OUTSTANDING, DECEMBER 31, 1995 164,296 5.94
Options granted . . . . . . . . . . . 47,406 4.71 - 22.39 14.11
Options lapsed or canceled. . . . . . (15,620) 8.61
Options exercised . . . . . . . . . . (32,720) 0.38 - 13.46 3.50
--------------
OPTIONS OUTSTANDING, DECEMBER 31, 1996 163,362 8.53
Options granted . . . . . . . . . . . 46,184 2.55 - 37.38 27.17
Options lapsed or canceled. . . . . . (9,346) 11.57
Options exercised . . . . . . . . . . (28,770) 0.79 - 25.96 6.26
--------------
OPTIONS OUTSTANDING, DECEMBER 31, 1997 171,430 13.63
==============
</TABLE>
There were 64,117,000, 100,664,000 and 130,760,000 shares available for grant
under the plans at December 31, 1997, 1996 and 1995, respectively.
The following table summarizes significant ranges of outstanding and
exercisable options at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Ranges of Shares Remaining Exercise Shares Exercise
Exercise Prices In thousands Life in Years Price In thousands Price
==================================================================================
<S> <C> <C> <C> <C> <C>
under $5.00. . 42,682 4.2 $ 3.13 39,348 $ 3.02
5.01 to 10.00. 42,588 7.3 8.59 18,599 8.58
10.01 to 15.00 18,880 7.8 12.38 6,897 12.29
15.01 to 20.00 29,202 8.8 15.88 5,575 16.10
20.01 to 25.00 970 8.7 22.01 191 22.32
25.01 to 30.00 27,771 9.9 28.20 99 26.34
over $30.00 . 9,337 9.7 35.96 60 34.23
</TABLE>
Prior to the merger with Compaq, Tandem had an employee stock purchase plan
which entitled employees to purchase Tandem common stock at 85% of fair market
value as of the first or last trading day for each quarterly participating
period. Employees purchased 726,000, 1,352,000 and 920,000 shares as converted
into Compaq's common stock for aggregate proceeds of $9 million, $11 million
and $11 million, respectively in 1997, 1996 and 1995.
The weighted average fair value per share of stock based compensation issued
during 1997, 1996 and 1995 was $9.74, $6.55 and $5.09, respectively. The fair
value was estimated using the Black-Scholes model with the following weighted
average assumptions:
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
=============================================
<S> <C> <C> <C>
Expected life (in years) 4 5 5
Interest rate. . . . . . 6.0% 6.1% 5.8%
Volatility . . . . . . . 33.3% 44.0% 46.4%
Dividend yield . . . . . 0.2% - -
</TABLE>
Stock based compensation costs would have reduced pretax income by $91
million, $48 million and $12 million in 1997, 1996 and 1995 ($59 million, $31
million and $8 million after tax and $.04, $.02 and $.01 per share) if the
fair values of such compensation in that year had been recognized as
compensation expense on a straight-line basis over the vesting period of the
grant. The pro forma effect on net income for 1997, 1996 and 1995 is not
representative of the pro forma effect on net income in future years because
it does not take into consideration pro forma compensation expense related to
grants made prior to 1995.
Investment Plans - Compaq has investment plans available to all domestic
employees and intended to qualify as deferred compensation plans under Section
401(k) of the Internal Revenue Code of 1986. Compaq employees may contribute
to the plan up to 14% of their salary with a yearly maximum not to exceed the
maximum allowable by the Internal Revenue Service. Compaq will match employee
contributions for an amount up to 6% of each employee's base salary. Tandem
employees may contribute up to 18% of their salary with a company match up to
2.5% of the employees' earnings. Contributions are invested at the direction
of the employee in one or more funds or can be directed to purchase common
stock of Compaq at fair market value. Company contributions generally vest
over three years although Company contributions for those employees having
five years of service vest immediately. Company contributions are charged to
expense over their vesting period. Amounts charged to expense were $48
million, $36 million and $30 million in 1997, 1996 and 1995, respectively.
Incentive Compensation Plan - Compaq has an incentive compensation plan for
the majority of its employees. Payments under the plan are based on 6% of net
income from operations, as defined, and are made semiannually. The amount
expensed under the plan was $109 million, $76 million and $59 million in 1997,
1996 and 1995, respectively.
Stock Splits - On July 28, 1997 and January 20, 1998, Compaq effected a
five-for-two and a two-for-one stock split, respectively, both in the form of
a stock dividend. Shareholders of record as of July 14, 1997 and December 31,
1997 received three additional shares of common stock for every two shares
they owned and one additional share of common stock for every share they owned
on those dates, respectively. Share and per share data for all periods
presented herein have been adjusted to give effect to both splits.
Dividends - On October 16, 1997, Compaq announced that the Board of Directors
approved a cash dividend of $0.015 per share of common stock, or $23 million,
to shareholders of record as of December 31, 1997. Compaq also made available
to stockholders a dividend reinvestment plan whereby dividends can be directly
reinvested in Compaq stock.
<PAGE>
Direct Stock Purchase Plan - In 1997, Compaq announced a direct stock purchase
plan whereby investors can purchase stock directly from the Company. Amounts
purchased under this plan in 1997 have not been significant.
NOTE 9. CERTAIN MARKET AND GEOGRAPHICAL DATA
The Company has subsidiaries in various foreign countries that manufacture and
sell the Company's products in their respective geographic areas. Summary
information with respect to the Company's geographic operations in 1997, 1996
and 1995 follows:
<TABLE>
<CAPTION>
United States Other
In millions And Canada Europe Countries Eliminations Consolidated
================================================================================================
<S> <C> <C> <C> <C> <C>
1997
Sales to customers. . . . . $ 13,431 $ 7,850 $ 3,303 $ - $ 24,584
Intercompany transfers. . . 2,017 311 1,856 (4,184) -
-------------- ------- ---------- -------------- --------------
$ 15,448 $ 8,161 $ 5,159 $ (4,184) $ 24,584
============== ======= ========== ============== ==============
Income from operations. . . $ 1,740 $ 771 $ 336 $ 45 $ 2,892
============== ======= ========== ==============
Corporate expenses, net (1) (134)
--------------
Pretax income $ 2,758
==============
Identifiable assets . . . . $ 4,005 $ 2,223 $ 1,556 $ 83 $ 7,867
============== ======= ========== ==============
General corporate assets 6,764
--------------
Total assets $ 14,631
==============
1996
Sales to customers. . . . . $ 10,654 $ 6,480 $ 2,875 $ - $ 20,009
Intercompany transfers. . . 2,467 380 1,674 (4,521) -
-------------- ------- ---------- -------------- --------------
$ 13,121 $ 6,860 $ 4,549 $ (4,521) $ 20,009
============== ======= ========== ============== ==============
Income from operations. . . $ 1,162 $ 396 $ 332 $ 18 $ 1,908
============== ======= ========== ==============
Corporate expenses, net (25)
--------------
Pretax income $ 1,883
==============
Identifiable assets . . . . $ 4,532 $ 2,241 $ 1,570 $ (93) $ 8,250
============== ======= ========== ==============
General corporate assets 4,081
--------------
Total assets $ 12,331
==============
1995
Sales to customers. . . . . $ 8,256 $ 5,890 $ 2,529 $ - $ 16,675
Intercompany transfers. . . 2,009 330 1,681 (4,020) -
-------------- ------- ---------- -------------- --------------
$ 10,265 $ 6,220 $ 4,210 $ (4,020) $ 16,675
============== ======= ========== ============== ==============
Income from operations. . . $ 687 $ 740 $ 295 $ 8 $ 1,730
============== ======= ========== ==============
Corporate expenses, net (1) (404)
--------------
Pretax income $ 1,326
==============
Identifiable assets . . . . $ 4,980 $ 2,215 $ 1,686 $ (97) $ 8,784
============== ======= ========== ==============
General corporate assets 853
--------------
Total assets $ 9,637
==============
<FN>
(1) Includes a $208 million and a $241 million non-recurring, non-tax-deductible charge for
purchased in-process technology in connection with acquisitions in 1997 and 1995, respectively,
and $44 million of non-tax-deductible merger-related costs incurred in 1997.
</TABLE>
<PAGE>
NOTE 10. COMMITMENTS, CONTINGENCIES, FINANCIAL INSTRUMENTS AND FACTORS THAT
MAY AFFECT FUTURE OPERATIONS
Derivative financial instruments and fair value of financial instruments
Compaq utilizes primarily forward contracts and purchased foreign currency
options to reduce its exposure to potentially adverse changes in foreign
currency exchange rates. Compaq does not hold or issue financial instruments
for trading purposes nor does it hold or issue interest rate or leveraged
derivative financial instruments.
Compaq's program to reduce currency exposure associated with the net monetary
assets of Compaq's international subsidiaries using the U.S. dollar as the
functional currency includes agreements to exchange various foreign currencies
for U.S. dollars. At December 31, 1997 and 1996, such agreements to sell
foreign currencies included forward contracts aggregating $1.4 billion and
$1.2 billion, respectively. Generally, gains and losses associated with
currency rate changes on these forward contracts are recorded currently to
income and are reflected in accounts receivable or other current liabilities
in Compaq's balance sheet, while the interest element is recognized over the
life of each contract. The amount recorded in the balance sheet approximates
the fair value of such contracts at December 31, 1997 and 1996. The maturity
dates of the forward contracts which were outstanding at December 31, 1997
extended from two days to six months.
From time to time, Compaq hedges a portion of its anticipated but not firmly
committed sales of its international marketing subsidiaries using purchased
foreign currency options. Realized and unrealized gains and the net premiums
on these options are deferred and recognized as a component of sales in the
same period that the related sales occur. Option contracts aggregating $311
million and $127 million were outstanding at December 31, 1997 and 1996,
respectively, related to the hedge of such sales for a nine-month period. The
unrealized gains deferred on these contracts were not material. In addition,
Compaq frequently utilizes forward contracts to protect Compaq from the
effects of currency fluctuations on anticipated but not firmly committed sales
which are expected to occur within a three-month period. These forward
contracts generally do not extend beyond the end of any quarter or year. Any
gains or losses and the interest element on these forward contracts are
recognized as a component of sales during each quarter.
Compaq may, from time to time, hedge commitments for inventory purchases and
capital expenditures and other items constituting firm commitments. Any gain
or loss, if realized, or cost related to these contracts are recorded as part
of inventory or capital items upon acquisition. At December 31, 1997 and 1996,
forward contracts related to these commitments totaled $100 million and $92
million, respectively.
In the event of a failure to honor one of these forward contracts by one of
the banks with which Compaq has contracted, management believes any loss would
be limited to the exchange rate differential from the time the contract was
made until the time it was compensated. To the extent Compaq has option
contracts outstanding, the amount of any loss resulting from a breach of
contract would be limited to the amount of premiums paid for the options and
the unrealized gain, if any, related to such contracts.
Compaq enters into various other types of financial instruments in the normal
course of business. Fair values for certain financial instruments are based on
quoted market prices. For other financial instruments, fair values are based
on the appropriate pricing models using current market information. The
amounts ultimately realized upon settlement of these financial instruments
will depend on actual market conditions during the remaining life of the
instruments. Fair values of cash and cash equivalents, short-term investments,
accounts receivable, accounts payable and other current liabilities reflected
in the December 31, 1997 and 1996 consolidated balance sheets approximate
carrying value at these dates. The fair value of Compaq's long-term debt at
December 31, 1996, was estimated to approximate the carrying value.
<PAGE>
Concentration of credit risk
Compaq's cash, cash equivalents, short-term investments and accounts
receivable are subject to potential credit risk. Compaq's cash management and
investment policies restrict investments to low risk, highly-liquid securities
and Compaq performs periodic evaluations of the relative credit standing of
the financial institutions with which it deals.
Compaq distributes products primarily through third-party resellers and as a
result, maintains individually significant accounts receivable balances from
various major resellers. If the financial condition and operations of these
resellers deteriorate, Compaq's operating results could be adversely affected.
One customer accounted for 11% of sales for 1997 and 12% of accounts
receivable at December 31, 1997. During this period, no other customer of
Compaq accounted for 10% or more of sales. In 1997, Compaq's five largest
resellers represented approximately 25% of Compaq's 1997 sales. The
receivable balances from Compaq's five largest resellers represented
approximately 32% of accounts receivable at December 31, 1997. Compaq
generally has experienced longer accounts receivable cycles in its emerging
markets, in particular Asia/Pacific and Latin America, when compared to its
U.S. and European markets. In the event that accounts receivable cycles in
these developing markets lengthen further or one or more of Compaq's larger
resellers in these regions fail, Compaq's operating results could be adversely
affected.
Contingencies
Certain of Compaq's resellers finance a portion of their inventories through
third-party finance companies. Under the terms of the financing arrangements,
Compaq may be required, in limited circumstances, to repurchase certain
products from the finance companies. Additionally, Compaq has on occasion
guaranteed a portion of certain resellers' outstanding balances with
third-party finance companies and financial institutions. Guarantees under
these and other arrangements were not significant at December 31, 1997 and
1996, respectively.
Compaq offers lease financing of selected products to its customers.
Sales-type leases are originated by Compaq and either sold on a nonrecourse
basis or used as collateral for borrowings from certain third-party financial
institutions. Generally, Compaq receives all proceeds at the inception of the
lease. The third-party financial institution assumes the credit risk and the
administrative responsibility for the collection of the lease receivables. In
the event of a default by a lessee, the financial institutions' only recourse
is generally limited to the collaterized computer equipment. Compaq may be
required to use its "best efforts" to remarket the computer equipment.
Factors that may affect future operations
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. Compaq's
operating results could be adversely affected should Compaq be unable to
successfully integrate acquired entities, anticipate customer demand
accurately, maintain short design cycles while meeting evolving industry
performance standards, manage its product transitions, inventory levels and
manufacturing processes efficiently, distribute its products quickly in
response to customer demand, differentiate its products from those of its
competitors or compete successfully in the markets for its new products.
<PAGE>
Significant numbers of components are purchased from single sources due to
technology, availability, price, quality or other considerations. Key
components and processes currently obtained from single sources include
certain of Compaq's displays, microprocessors, application specific integrated
circuits and other custom chips, and certain processes relating to
construction of the plastic housing for Compaq's computers. In addition, new
products introduced by Compaq often initially utilize custom components
obtained from only one source until Compaq has evaluated whether there is a
need for additional suppliers. In the event that a supply of a key
single-sourced material process or component were delayed or curtailed,
Compaq's ability to ship the related product in desired quantities and in a
timely manner could be adversely affected. Compaq attempts to mitigate these
risks by working closely with key suppliers on product plans, strategic
inventories and coordinated product introductions.
Litigation
Compaq is subject to legal proceedings and claims which arise in the ordinary
course of its business. Management does not believe that the outcome of any of
those matters will have a material adverse effect on Compaq's consolidated
financial position, operating results or cash flows.
Lease commitments
Compaq leases certain manufacturing and office facilities and equipment under
noncancelable operating leases with terms from one to 30 years. Rent expense
for 1997, 1996 and 1995 was $135 million, $128 million and $123 million,
respectively.
Compaq's minimum rental commitments under noncancelable operating leases at
December 31, 1997 were: $107 million in 1998, $81 million in 1999, $62 million
in 2000, $54 million in 2001, $45 million in 2002 and $236 million thereafter.
NOTE 11. SUBSEQUENT EVENT
On January 26, 1998, Compaq announced the execution of an agreement to acquire
Digital Equipment Corporation. Under the terms of the transaction,
shareholders of Digital will receive $30 in cash and 0.945 shares of Compaq
common stock for each share of Digital stock. Compaq will issue approximately
150 million shares of Compaq common stock and $4.8 billion in cash. This
transaction will be accounted for as a purchase. The transaction is subject to
the approval of Digital's shareholders as well as clearance under antitrust
laws and other customary closing conditions, and is expected to be completed
in the second quarter of 1998.
<PAGE>
SELECTED QUARTERLY UNAUDITED FINANCIAL DATA (NOT COVERED BY REPORT OF
INDEPENDENT ACCOUNTANTS):
The table below sets forth selected unaudited financial information for each
quarter of the last two years.
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
In millions, except per share amounts QUARTER QUARTER QUARTER QUARTER
=============================================================================
<S> <C> <C> <C> <C>
1997
Sales . . . . . . . . . . . . . . . . $ 5,272 $ 5,515 $ 6,474 $ 7,323
Gross margin. . . . . . . . . . . . . 1,417 1,537 1,777 2,020
Net income(1) . . . . . . . . . . . . 414 257 517 667
Earnings per common share(1)(2)(3)
Basic . . . . . . . . . . . . . . . $ 0.28 $ 0.17 $ 0.34 $ 0.44
Diluted . . . . . . . . . . . . . . $ 0.27 $ 0.17 $ 0.33 $ 0.43
1996
Sales . . . . . . . . . . . . . . . . $ 4,626 $ 4,471 $ 4,947 $ 5,965
Gross margin. . . . . . . . . . . . . 1,098 1,155 1,306 1,595
Net income(1) . . . . . . . . . . . . 242 224 365 487
Earnings per common share(1)(2)(3)
Basic . . . . . . . . . . . . . . . $ 0.17 $ 0.16 $ 0.25 $ 0.33
Diluted . . . . . . . . . . . . . . $ 0.16 $ 0.15 $ 0.24 $ 0.32
<FN>
Earnings per common share are computed independently for each of the quarters
presented and therefore may not sum to the totals for the year.
All quarters have been restated to reflect the merger with Tandem.
(1) Includes a $208 million ($0.13 per share) non-recurring,
non-tax-deductible charge for purchased in-process technology in connection
with the Microcom acquisition in the second quarter of 1997, $44 million
($0.03 per share) of expenses related to the Tandem merger in the third
quarter of 1997 and a restructuring charge of $52 million ($0.02 per share)
for Tandem in the second quarter of 1996.
(2) The Company adopted FAS 128 in 1997. All prior period earnings per
common share data have been restated to conform to the provisions of this
statement.
(3) All per common share data reflect the five-for-two stock split in July
1997 and the two-for-one stock split in January 1998.
</TABLE>
PART III
ITEMS 10 TO 13 INCLUSIVE.
These items have been omitted in accordance with the general instructions
to Form 10-K Annual Report. The Registrant will file with the Commission in
March 1998, pursuant to Regulation 14A, a definitive proxy statement that will
involve the election of directors and approval of the 1998 Stock Option Plan.
The information required by these items will be included in such proxy
statement and are incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
1. Financial Statements.
Report of Independent Accountants
Consolidated Balance Sheet at December 31, 1997 and 1996
Consolidated Statement of Income for the three years ended December 31,
1997
Consolidated Statement of Cash Flows for the three years ended December
31, 1997
Consolidated Statement of Stockholders' Equity for the three years ended
December 31, 1997
Notes to Consolidated Financial Statements
Schedule II: Valuation and Qualifying Accounts.
2. Exhibits.
Exhibits identified in parentheses below, on file with the Securities and
Exchange Commission (SEC), are incorporated by reference as exhibits. Except
as indicated, Compaq filed these documents with the SEC.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
3.1 Restated Certificate of Amendment.
3.2 Bylaws (Exhibit No. 3.2 to Form 10-Q for the quarter ended September 30, 1997).
10.1 1982 Stock Option Plan, as amended (Exhibit 10.1 to Form 10-Q for the quarter ended
June 30, 1989 ("1989 Second Quarter Form 10-Q")). *
10.2 1985 Stock Option Plan (Exhibit 10.3 to Form 10-K for the year ended December 31,
1991 ("1991 Form 10-K")). *
10.3 1985 Executive and Key Employees Stock Option Plan, as amended (Exhibit 10.3 to
1989 Second Quarter Form 10-Q). *
10.4 1985 Nonqualified Stock Option Plan, as amended (Exhibit 10.4 to 1989 Second
Quarter Form 10-Q). *
10.5 Forms of Stock Option Agreements relating to Exhibits 10.1 through 10.5 (Exhibit 10.6
to Form 10-K for the year ended December 31, 1987). *
10.6 1989 Equity Incentive Plan, as amended. *
10.7 Form of Stock Option Notice relating to Exhibit 10.6, as amended (Exhibit 10.7 to 1996
Form 10-K). *
10.8 1995 Equity Incentive Plan, as amended. *
10.9 Form of Stock Option Notice relating to Exhibit 10.8, as amended (Exhibit 10.9 to 1996
Form 10-K). *
10.10 Bonus Incentive Plan (Exhibit 10.11 to Form 10-K for the year ended December 31, 1995). *
10.11 Stock Option Plan for Non-Employee Directors, as amended. *
10.12 Forms of Stock Option Notice relating to Exhibit 10.11 (Exhibit 10.9 to 1996 Form 10-K). *
10.13 Employment Agreement dated as of January 1, 1992 between Compaq and Eckhard
Pfeiffer (Exhibit 10.15 to 1991 Form 10-K). *
<PAGE>
10.14 Form of letter agreement between Compaq and its executive officers (Exhibit 10.16 to
1991 Form 10-K). *
10.15 Deferred Compensation and Supplemental Savings Plan (Exhibit 4.1 to Registration
Statement No. 333-42375 on Form S-8). *
10.16 First Amendment to Deferred Compensation and Supplemental Savings Plan (Exhibit
4.2 to Registration Statement No. 333-4275 on Form S-8). *
10.17 Form of employment agreement between Tandem Computers, Incorporated and Roel
Pieper (Exhibit 10.1 to Tandem Computers Incorporated's Form 10-Q for the quarter
ended June 30, 1995). *
10.18 $1,000,000,000 Credit Agreement dated as of September 22, 1997, among Compaq
Computer Corporation, the banks signatory thereto and Bank of America National Trust
and Savings Association, as Administrative Agent.
10.19 $3,000,000,000 Credit Agreement dated as of September 22, 1997, among Compaq
Computer Corporation, the banks signatory thereto and Bank of America National Trust
and Savings Association, as Administrative Agent.
21 Subsidiaries.
23 Consent of Price Waterhouse LLP, independent accountants.
27 Financial Data Schedule (EDGAR version only).
<FN>
* Indicates management contract or compensatory plan or arrangement.
</TABLE>
(b) Reports on Form 8-K.
Current Report on Form 8-K filed January 22, 1997.
Current Report on Form 8-K filed April 10, 1997.
Current Report on Form 8-K filed April 16, 1997.
Current Report on Form 8-K filed May 14, 1997.
Current Report on Form 8-K filed June 24, 1997.
Current Report on Form 8-K filed June 26, 1997.
Current Report on Form 8-K filed July 1, 1997.
Current Report on Form 8-K filed July 11, 1997.
Current Report on Form 8-K filed September 3, 1997.
Current Report on Form 8-K filed October 16, 1997.
Current Report on Form 8-K filed November 21, 1997.
Current Report on Form 8-K filed January 21, 1998.
Current Report on Form 8-K filed January 27, 1998.
Current Report on Form 8-K filed February 11, 1998.
Compaq, the Compaq logo, ProLiant, Deskpro, Armada, Compaq Insight
Manager, LTE, Presario, ProSignia and SmartStart are registered trademarks of
Compaq Computer Corporation. CompaqCare is a registered service mark of Compaq
Computer Corporation. WINDOWS NT is a trademark of Microsoft Corporation.
Other product names mentioned herein may be trademarks or registered
trademarks of their respective companies.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on this 17th day
of February, 1998.
Compaq Computer Corporation
By: /s/ ECKHARD PFEIFFER
-------------------------------
Eckhard Pfeiffer, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------- --------------------------------- -----------------
<S> <C> <C>
President and Director February 17, 1998
/s/ ECKHARD PFEIFFER (principal executive officer)
- ----------------------------
(Eckhard Pfeiffer)
Senior Vice President February 17, 1998
and Chief Financial Officer
/s/ EARL L. MASON (principal financial officer and
- ----------------------------
(Earl L. Mason) principal accounting officer)
Chairman of the February 17, 1998
/s/ BENJAMIN M. ROSEN Board of Directors
- ----------------------------
(Benjamin M. Rosen)
/s/ LAWRENCE T. BABBIO, JR. Director February 17, 1998
- ----------------------------
(Lawrence T. Babbio, Jr.)
/s/ ROBERT TED ENLOE, III Director February 17, 1998
- ----------------------------
(Robert Ted Enloe, III)
/s/ GEORGE H. HEILMEIER Director February 17, 1998
- ----------------------------
(George H. Heilmeier)
/s/ GEORGE E.R. KINNEAR II Director February 17, 1998
- ----------------------------
(George E.R. Kinnear II)
<PAGE>
/s/ PETER N. LARSON Director February 17, 1998
- ----------------------------
(Peter N. Larson)
/s/ KENNETH L. LAY Director February 17, 1998
- ----------------------------
(Kenneth L. Lay)
/s/ THOMAS J. PERKINS Director February 17, 1998
- ----------------------------
(Thomas J. Perkins)
/s/ KENNETH ROMAN Director February 17, 1998
- ----------------------------
(Kenneth Roman)
/s/ LUCILLE S. SALHANY Director February 17, 1998
- ----------------------------
(Lucille S. Salhany)
</TABLE>
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
COMPAQ COMPUTER CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Year ended December 31, In millions 1997 1996 1995
==============================================================
<S> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Balance, beginning of period . . . . . $ 247 $ 118 $ 93
Additions charged to expense . . . . . 19 160 47
Reductions . . . . . . . . . . . . . . (23) (31) (22)
------ ------ ------
Balance, end of period . . . . . . . . $ 243 $ 247 $ 118
====== ====== ======
DEFERRED TAX ASSET VALUATION ALLOWANCE
Balance, beginning of period . . . . . $ 121 $ 119 $ 107
Additions charged to expense . . . . . 43 9 12
Reductions . . . . . . . . . . . . . . (30) (7)
------ ------ ------
Balance, end of period . . . . . . . . $ 134 $ 121 $ 119
====== ====== ======
</TABLE>
RESTATED CERTIFICATE OF INCORPORATION
OF
COMPAQ COMPUTER CORPORATION
Compaq Computer Corporation, a corporation duly organized and existing
under the laws of the State of Delaware (the "Corporation"), does hereby
certify that:
FIRST: The name of the Corporation is Compaq Computer Corporation,
which was originally incorporated as GATEWAY TECHNOLOGY, Inc.
SECOND: The original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on February 16,
1982.
THIRD: This Restated Certificate of Incorporation has been duly
adopted in accordance with Section 245 of the General Corporation Law of the
State of Delaware.
FOURTH: This Restated Certificate of Incorporation of the Corporation
only restates and integrates and does not further amend the provisions of the
Corporation's Certificate of Incorporation as heretofore amended or
supplemented, and there is no discrepancy between those provisions and the
provisions of this Restated Certificate of Incorporation.
FIFTH: The Restated Certificate of Incorporation is hereby
restated to read in its entirety as follows:
Article 1
The name of the corporation is: Compaq Computer Corporation.
Article 2
The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County
of New Castle, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.
Article 3
The purpose for which the Corporation is organized is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
<PAGE>
Article 4
A. Authorized Shares and Classes of Stock:
The total number of shares of stock which the Corporation shall have
authority to issue is 3,010,000,000 shares composed of (i) 3,000,000,000
shares of common stock, par value $.01 per share (Common Stock); and (ii)
10,000,000 shares of preferred stock, par value $.01 per share (Preferred
Stock).
B. Designations, Rights, Preferences and Powers of Preferred Stock:
The designations, rights, preferences and powers in respect of the shares
of Preferred Stock shall be as follows:
1. Shares of Preferred Stock may be issued in one or more series
which may have such voting powers, full or limited, or no voting power as the
Board of Directors may determine.
2. Authority is hereby expressly granted to the Board of Directors to
fix from time to time, by resolution or resolutions providing for the issuance
of any series of Preferred Stock, the designations, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions thereof.
3. Except as otherwise provided in any resolution or resolutions of
the Board of Directors providing for the issue of any particular series of
Preferred Stock, the number of shares of stock of any such series so set forth
in such resolution or resolutions may be increased or decreased (but not below
the number of shares of such series then outstanding) by a resolution or
resolutions adopted by the Board of Directors.
4. Except as otherwise provided in any resolution or resolutions of
the Board of Directors providing for the issue of any particular series of
Preferred Stock, Preferred Stock redeemed or otherwise acquired by the
Corporation shall assume the status of authorized but unissued Preferred Stock
and shall be unclassified as to series and may thereafter, subject to the
provisions of this Article 4 and to any restrictions contained in any
resolution or resolutions of the Board of Directors providing for the issue of
any such series of Preferred Stock, be reissued in the same manner as other
authorized but unissued Preferred Stock.
Article 5
The Board of Directors is authorized to adopt, amend or repeal the bylaws
of the Corporation. Election of directors need not be by written ballot.
Article 6
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing clause shall not
apply to any liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
an improper personal benefit. This Article 6 shall not eliminate or limit the
personal liability of a director for any act or omission occurring prior to
the date this Article 6 becomes effective. If the Delaware General
Corporation Law is hereafter amended to further eliminate or limit the
liability of a director of a corporation, then a director of the Corporation,
in addition to the circumstances set forth herein, shall have no liability as
a director (or such liability shall be limited) to the fullest extent
permitted by the Delaware General Corporation Law as so amended. No repeal or
modification of the foregoing provisions of this Article 6 nor, to the fullest
extent permitted by law, any modification of law, shall adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
IN WITNESS WHEREOF, Compaq Computer Corporation has caused this
Certificate to be signed by Eckhard Pfeiffer, its President and Chief
Executive Officer, this 15th day of December, 1997.
Compaq Computer Corporation
By: /s/ Eckhard Pfeiffer
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Eckhard Pfeiffer, President
and Chief Executive Officer
AMENDED AND RESTATED JANUARY 20, 1998
REFLECTS 5-FOR-2 STOCK SPLIT DATED JULY 14, 1997,
2-FOR-1 STOCK SPLIT DATED JANUARY 20, 1998 AND
MERGERS & ACQUISITIONS THROUGH SEPTEMBER 1, 1997
COMPAQ COMPUTER CORPORATION
1989 EQUITY INCENTIVE PLAN
SECTION 1. Purpose. The purposes of the Compaq Computer Corporation
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1989 Equity Incentive Plan (the "Plan") are to encourage eligible employees of
Compaq Computer Corporation (the "Company") and its Affiliates, to acquire a
proprietary and vested interest in the growth and performance of the Company,
to generate an increased incentive to contribute to the Company's future
success and prosperity, thus enhancing the value of the Company for the
benefit of its stockholders, and to enhance the ability of the Company and its
Affiliates to attract and retain talented and highly competent individuals
upon whom, in large measure, the sustained progress, growth, and profitability
of the Company depend.
SECTION 2. Definitions. As used in the Plan, the following terms shall
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have the meanings set forth below:
(a) "Affiliate" shall mean (i) any Person that directly, or through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Company or (ii) any entity in which the Company has a
significant equity interest, as determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock Award, or any other right, interest, or option relating to
Shares granted pursuant to the provisions of the Plan.
(c) "Award Notice" shall mean any written notice, agreement, or other
instrument or document evidencing any Award granted by the Committee hereunder
signed by the Company and delivered to the Participant.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" shall mean the Human Resources Committee of the Board
of Directors, composed of not less than two directors each of whom is a
Non-Employee Director.
(g) "Common Stock" shall mean the common stock, $.01 par value, of
the Company.
(h) "Company" shall mean Compaq Computer Corporation.
(i) "Employee" shall mean any employee of the Company or of any
Affiliate.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934 as
amended.
(k) "Fair Market Value" shall mean (i) with respect to the Common
Stock, the last sale price of the Common Stock on the date on which such value
is determined, as reported on the consolidated tape of New York Stock Exchange
issues or, if there shall be no trades on such date, on the date nearest
preceding such date; (ii) with respect to any other property, or with respect
to the Common Stock if it is not then listed for trading on the New York Stock
Exchange, the market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee.
(l) "Incentive Stock Option" shall mean an Option granted under Section
6 hereof that is intended to meet the requirements of Section 422A of the Code
or any successor provision thereto.
(m) "Net After-Tax Amount" shall mean the net amount of compensation,
assuming for this purpose only that all vested options are exercised upon such
Change in Control, to be received (or deemed to have been received) by such
optionee in connection with such Change of Control under any Award Agreement
and under any other plan, arrangement or contract of the company to which such
optionee is a party, after giving effect to all income and excise taxes
applicable to such payments.
<PAGE>
(n) "Non-Employee Director" shall have the meaning set forth in Rule
13e-3(b)(3)(i) promulgated by the Securities and Exchange Commission under the
Exchange Act.
(o) "Nonqualified Stock Option" shall mean an Option granted under
Section 6 hereof that is not intended to be an Incentive Stock Option.
(p) "Option" shall mean any r ight granted to a Participant allowing
such Participant to purchase Shares at such price or prices and during such
period or periods as the Committee shall determine.
(q) "Participant" shall mean an Employee who is selected by the
Committee to receive an Award under the Plan.
(r) "Person" shall mean any natural person, corporation, partnership,
association, joint-stock company, trust, unincorpo-rated organization, or
government or political subdivision thereof.
(s) "Restricted Stock" shall mean any share of capital stock of the
Company issued with the restriction that the holder may not sell, transfer,
pledge, or assign such share and with such other restrictions as the
Committee, in its sole discretion, may impose (including, without limitation,
any restriction on the right to vote such shares and the right to receive any
cash dividends), which restrictions may lapse separately or in combination at
such time or times, in installments or otherwise, as the Committee may deem
appropriate.
(t) "Restricted Stock Award" shall mean an Award of Restricted Stock
under Section 8 hereof.
(u) "Shares" shall mean the Common Stock and such other securities of
the Company as the Committee may from time to time determine.
(v) "Stock Appreciation Right" shall mean any right granted to a
Participant pursuant to Section 7 hereof to receive, upon exercise by the
Participant, the excess of (i) the Fair Market Value of one Share on the date
of exercise or, if the Committee shall so determine in the case of any such
right other than one related to any Incentive Stock Option, at any time during
a specified period before the date of exercise over (ii) the grant price
of the right as specified by the Committee, in its sole discretion, on the
date of grant. The grant price of a right granted to an individual subject to
Section 16 of the Exchange Act shall not be less than 50% of the Fair Market
Value of one Share on the date of grant. Any payment by the Company in
respect of such right may be made in cash, Shares, other property, or any
combination thereof, as the Committee, in its sole discretion, shall
determine.
(w) "Tandem" shall mean Tandem Computers Incorporated.
(x) "Tandem Substitute Options" shall mean any Options issued under the
Plan pursuant to that certain Agreement and Plan of Merger dated as of June
22, 1997 among Tandem, the Company and Compaq-Project, Inc.
SECTION 3. Administration. The Plan shall be administered by the
--------------
Committee. The Committee shall have full power and authority, subject to such
orders or resolutions not inconsistent with the provisions of the Plan as may
from time to time be adopted by the Board, to: (i) select the Employees of
the Company and its Affiliates to whom Awards may from time to time be granted
hereunder; (ii) determine the type or types of Awards to be granted to each
Participant hereunder; (iii) determine the number of Shares to be covered by
each Award granted hereunder; (iv) determine the terms and conditions, not
inconsistent with the provisions of the Plan, of any Award granted hereunder;
(v) determine whether, to what extent, and under what circumstances Awards may
be settled in cash, canceled, or suspended; (vi) determine whether, to what
extent, and under what circumstances Shares and other amounts payable with
respect to an Award under this Plan shall be deferred either automatically or
at the election of the Participant; (vii) interpret and administer the Plan
and any instrument or agreement entered into under the Plan; (viii) establish
such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (ix) make any other
determination and take any other action that the Committee deems necessary or
desirable for administration of the Plan. Decisions of the Committee shall be
final, conclusive, and binding upon all persons, including the Company, any
Participant, any stockholder of the Company, and any Employee. A majority of
the members of the Committee may determine its actions and fix the time and
place of its meetings. The Committee may delegate its power and authority
under this Plan to a Chief Executive Officer of the Company who is a director
of the Company with respect to the administration of the Plan for grants to
persons other than executive officers. In the case of such delegation, the
term "Committee" as used in this Plan shall be deemed to refer to the Chief
Executive Officer of the Company.
<PAGE>
SECTION 4. Shares Subject to the Plan.
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(a) Total Number. Subject to adjustment as provided in this Section,
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the total number of Shares available for grant under the Plan shall be
268,333,112 Shares.
(b) Reduction of Shares Available.
--------------------------------
(i) The grant of an Option or Restricted Stock Award will reduce
the Shares available for grant by the number of Shares subject to such Award.
(ii) The grant of Stock Appreciation Rights related to an Option
will reduce the number of Shares available for grant only to the extent that
the number of Stock Appreciation Rights granted exceeds the number of Shares
subject to the related Option.
(iii) The grant of Stock Appreciation Rights not related to an
Option will reduce the number of Shares available for grant by the number of
Stock Appreciation Rights granted.
(iv) Any Shares issued by the Company through the assumption or
substitution of outstanding grants from an acquired company shall not reduce
the Shares available for grants under the Plan.
(c) Increase of Shares Available.
-------------------------------
(i) The lapse, cancellation, or other termination of an Option
that has not been fully exercised shall increase the available Shares by the
number of Shares that have not been issued upon exercise of such Option;
provided that in the event the cancellation of an Option is due to the
exercise of Stock Appreciation Rights related to such Option, the cancellation
of such Option shall only increase the Shares available by the excess, if any,
of the number of Shares subject to such Option over the number of Stock
Appreciation Rights exercised.
(ii) The lapse, cancellation, or other termination of Stock
Appreciation Rights that have not been exercised shall increase the available
Shares by the number of Stock Appreciation Rights so lapsed, canceled, or
terminated; provided that in the event the cancellation of Stock Appreciation
Rights is due to the exercise of an Option related to such Stock Appreciation
Rights, the lapse, cancellation, or termination of such Stock Apprecia-tion
Rights shall only increase the Shares available by the excess, if any, of the
number of Stock Appreciation Rights so lapsed, canceled, or terminated over
the number of Shares for which such Option is exercised.
(iii) Any Restricted Shares forfeited by a Participant shall
increase the available Shares by the number of Shares so forfeited.
(d) Other Adjustments. The total number of shares of Common Stock
------------------
available for Awards under the Plan or which may be allocated to any one
Participant, the number of shares of Common Stock subject to outstanding
Options, the exercise price for such Options, the number of outstanding Stock
Appreciation Rights, the base value of such rights, and the number of
outstanding shares of Restricted Stock shall be appropriately adjusted by the
Committee for any increase or decrease in the number of outstand-ing Shares
resulting from a stock dividend, subdivision, or combination of Shares or
reclassification, as may be necessary to maintain the proportionate interest
of the Award holder. In the event of a merger or consolidation of the Company
or a tender offer for shares of Common Stock, the Committee may make such
adjustments with respect to Awards under the Plan and take such other action
as it deems necessary or appropriate to reflect or in anticipation of such
merger, consolidation, or tender offer including, without limitation, the
substitution of new Awards, the termination or adjustment of outstanding
Awards, the acceleration of Awards, or the removal of restrictions on
outstanding Awards. The payment to the Participant of an amount in cash equal
to the excess, if any, of the Fair Market Value of the number of shares
subject to any Award over the aggregate grant price thereof, in consideration
of the cancellation thereof pursuant to this Section 4(d), shall extinguish
any rights of the Participant in connection with such Award.
SECTION 5. Eligibility. Any Employee (excluding any member of the
-----------
Committee) shall be eligible to be selected as a Participant.
SECTION 6. Stock Options. Options may be granted hereunder to
--------------
Participants either alone or in addition to other Awards granted under the
Plan. The Company shall deliver an Award Notice to each Participant receiving
an Option. Any such Option shall be subject to the following terms and
conditions and to such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee shall deem desirable:
<PAGE>
(a) Option Price. The purchase price per Share purchasable under an
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Option shall be determined by the Committee in its sole discretion and set
forth in the applicable Award Notice; provided that such purchase price shall
not be less than (i) 100% of the Fair Market Value of the Share on the date of
the grant of the Option in the case of any Incentive Stock Option, or (ii) 50%
of such Fair Market Value in the case of any Nonqualified Stock Option granted
to an individual subject to Section 16 of the Exchange Act.
(b) Option Period. The term of each Option shall be fixed by the
--------------
Committee in its sole discretion and set forth in the applicable Award Notice;
provided that no Option shall be exercisable after the expiration of ten years
from the date the Option is granted.
(c) Exercisability. Options shall be exercisable at such time or times
--------------
as determined by the Committee in its sole discretion and set forth in the
applicable Award Notice. An executive officer of the Company may not exercise
an Option for a period of six months from the date of grant.
(d) Method of Exercise. Any Option may be exercised by the Participant
------------------
in whole or in part at such time or times and by such methods as the Committee
may specify. Unless otherwise specified in the applicable grant and Award
Notice, the Participant may make payment in cash or by certified check, bank
draft, or postal or express money order payable to the order of the Company,
or, with the consent of the Board (or the Committee, if established by the
Board), in whole or in part in Common Stock owned by the Optionee, valued at
Fair Market Value.
(e) Incentive Stock Options. In accordance with rules and procedures
------------------------
established by the Committee, the aggregate Fair Market Value (determined as
of the time of grant) of the Shares with respect to which Incentive Stock
Options held by any Participant become exercisable for the first time by such
Participant during any calendar year under the Plan (and under any other
benefit plans of the Company or of any parent or subsidiary corporation of the
Company) shall not exceed $100,000 or, if different, the maximum limitation in
effect at the time of grant under Section 422A of the Code, or any successor
provision, and any regulations promulgated thereunder. The terms of any
Incentive Stock Option granted hereunder shall comply in all respects with the
provisions of Section 422A of the Code, or any successor provision, and any
regulations promulgated thereunder.
(f) Form of Settlement. In its sole discretion, the Committee may
--------------------
provide, at the time of grant, that the Shares to be issued upon an Option's
exercise shall be in the form of Restricted Stock or other similar securities.
(g) Certificates. Upon the Company's determination that an Option has
------------
been validly exercised as to any of the Shares, the Secretary of the Company
shall issue certificates in the Participant's name for such Shares. However,
the Company shall not be liable to the Participant for damages relating to any
delays in issuing the certificates to him, any loss of the certificates,
or any mistakes or errors in the issuance of the certificates or in the
certificates themselves.
SECTION 7. Stock Appreciation Rights. Stock Appreciation Rights may be
-------------------------
granted hereunder to Participants either alone or in addition to other Awards
granted under the Plan and may, but need not, relate to a specific Option
granted under Section 6. The provisions of Stock Appreciation Rights need not
be the same with respect to each recipient. Any Stock Appreciation Right
related to a Nonqualified Stock Option may be granted at the same time such
Option is granted or at any time thereafter before exercise or expiration of
such Option. Any Stock Appreciation Right related to an Incentive Stock
Option must be granted at the same time such Option is granted. In the case
of any Stock Appreciation Right related to any Option, the Stock Appreciation
Right Award or applicable portion thereof shall terminate and no longer be
exercisable upon the termination or exercise of the related Option, except
that a Stock Appreciation Right Award granted with respect to fewer than the
full number of Shares covered by a related Option shall not be reduced until
the number of Shares issued upon exercise or canceled upon termination of the
related Option exceeds the number of shares not covered by the Stock
Appreciation Right Award. Any Option related to any Stock Appreciation Right
shall no longer be exercisable to the extent the related Stock Appreciation
Right has been exer-cised. No Stock Appreciation Right unrelated to any
Option shall be exercisable after the expiration of ten years from the date
such Award is granted. The Committee may impose such conditions or
restrictions on the exercise of any Stock Appreciation Right as it shall deem
appropriate. The Company shall deliver an Award Notice to each Participant
receiving a Stock Appreciation Right.
<PAGE>
SECTION 8. Restricted Stock.
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(a) Issuance. Restricted Stock Awards may be issued hereunder to
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Participants, for no cash consideration or for such nominal consideration as
may be required by applicable law, either alone or in addition to other Awards
granted under the Plan. The provisions of Restricted Stock Awards need not be
the same with respect to each recipient. The Company shall deliver an Award
Notice to each Participant receiving a Restricted Stock Award.
(b) Registration. Any Restricted Stock issued hereunder may be
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evidenced in such manner as the Committee in its sole discretion shall deem
appropriate, including, without limitation, book-entry registration or
issuance of a stock certificate or certificates. In the event any stock
certificate is issued in respect of shares of Restricted Stock awarded under
the Plan, such certificate shall be registered in the name of the
Partici-pant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award. Promptly after the
lapse of restrictions with respect to any shares of Restricted Stock, the
lapse of such restrictions shall be evidenced in such manner as the Committee
shall deem appropriate.
SECTION 9. Termination or Suspension of Employment.
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(a) Nonqualified Stock Options and Stock Appreciation Rights.
--------------------------------------------------------------
(i) If the Participant's employment with the Company or its
Affiliates is terminated for any reason other than death, disability, or
retirement, the Participant's right to exercise any Nonqualified Stock Option
or Stock Appreciation Right shall terminate, and such Op-tion or Stock
Appreciation Right shall expire, on the earlier of (A) the first anniversary
of such termina-tion of employment or (B) the date such Option or Stock
Appreciation Right would have expired had it not been for the termination of
employment. The Participant shall have the right to exercise such Option or
Stock Appreciation Right prior to such expiration to the extent it was
exercisable at the date of such term-ination of employment and shall not have
been exercised.
(ii) If the Participant's employment with the Company or its
Affiliates is terminated by reason of death, disability, or retirement, the
Participant or his successor (if employment is terminated by death) shall have
the right to exercise any Nonqualified Stock Option or Stock Appreciation
Right to the extent it was exercisable at the date of such termination of
employment and shall not have been exercised, but in no event shall such
option be exercisable later than the date the Option would have expired had it
not been for the termination of such employment.
(iii) Notwithstanding the foregoing, the Committee may, in its
discretion, provide (a) that an Option granted to a Participant may terminate
at a date earlier than that set forth above, and (b) that an Option granted to
a Participant not subject to Section 16 of the Exchange Act may terminate at a
date later than that set forth above, provided such date shall not be beyond
the date the Option would have expired had it not been for the termination of
the Participant's employment.
(iv) Any time spent by a Participant in the status of "leave
without pay" shall be disregarded for purposes of determining the extent to
which an Option or any portion thereof has vested.
(b) Incentive Stock Options. Except as otherwise determined by the
-------------------------
Committee at the time of grant, if the Participant's employ-ment with the
Company is terminated for any reason, the Participant shall have the right to
exercise any Incentive Stock Option and any related Stock Appreciation Right
during the 90 days after such termination of employment to the extent it was
exercisable at the date of such termination, but in no event later than the
date the Option would have expired had it not been for the termina-tion of
such employment. If the Participant does not exercise such Option or related
Stock Appreciation Right to the full extent permitted by the preceding
sentence, the remaining exercisable portion of such Option automatically will
be deemed a Nonqualified Stock Option, and such Option and the related Stock
Appreciation Right will be exercisable during the period set forth in Section
9(a) of the Plan, provided that in the event that employment is terminated
because of death or the Participant dies in such 90-day period the Option will
continue to be an Incentive Stock Option to the extent provided by Section 421
or Section 422A of the Code, or any successor provision, and any regulations
promulgated thereunder.
(c) Restricted Stock. Except as otherwise determined by the Committee
----------------
at the time of grant, upon termination of employment for any reason during the
restriction period, all shares of Restricted Stock still subject to
restriction shall be forfeited by the Participant and reacquired by the
Company at the price (if any) paid by the Participant for such Restricted
Stock; provided that in the event of a Participant's retirement, permanent
disability, or death, or in cases of special circumstances, the Committee may,
in its sole discretion, when it finds that a waiver would be in the best
interests of the Company, waive, in whole or in part, any or all remaining
restrictions with respect to such Participant's shares of Restricted Stock.
<PAGE>
(d) Disability and Retirement. The term "disability" means total and
--------------------------
permanent disability. The meaning of the terms "total and permanent
disability" and "retirement" shall be determined by the Committee.
(e) Acceleration of Exercisability. Nothing contained herein shall in
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any way limit the authority of the Committee in its sole discretion to cause
any outstanding Option or Stock Appreciation Right to become immediately
exercisable when it finds that such acceleration would be in the best
interests of the Company.
SECTION 10. Change in Control.
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(a) Immediate Vesting. Notwithstanding any other provision of the Plan
-----------------
to the contrary, upon a Change in Control, as defined below, all outstanding
Awards shall vest, become immediately exercisable or payable, or have all
restrictions lifted as may apply to the type of Award; provided, however, that
unless otherwise determined by the Committee at the time of award or
thereafter, if it is determined that the Net After-Tax Amount to be realized
by any optionee, taking into account the accelerated vesting provided for by
this paragraph 10(a) as well as all other payments to be received by such
optionee in connection with such Change in Control, would be higher if options
did not vest in accordance with the foregoing paragraph 10(a), then, and to
such extent, the options shall not vest. The determination of whether any
such option should not vest shall be made by a nationally recognized
accounting firm selected by the Company, which shall be instructed to consider
that (i) stock options shall be vested in the order in which they were granted
and within each grant in the order in which they would otherwise have vested
and (ii) unless and to the extent any other plan, arrangement or contract of
the Company pursuant to which any such payment is to be received provides to
the contrary, any other payment contingent upon a Change of Control shall be
deemed to have occurred after any acceleration of options. Further, no
outstanding Stock Appreciation Right may be terminated, amended, or suspended
upon or after a Change in Control.
(b) Change in Control. A "Change in Control" shall be deemed to have
------------------
occurred if: (i) any "person" as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under any employee benefit plan of the Company,
or any company owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of Stock of
the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securi-ties of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities; (ii) during any period of two consecutive years (not
including any period prior to the adoption of the Plan), individuals who at
the beginning of such period constitute the Board of Directors, and any new
director (other than a director designated by a person who has entered into an
agree-ment with the Company to effect a transac-tion described in clause (i),
(iii), or (iv) of this Section 10(b)) whose election by the Board of Directors
or nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the two-year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board of Directors; (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corpora-tion, other than a merger or consolidation which would
result in the voting securities of the Company out-standing immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securi-ties of the surviving entity) more than 50% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation;
provided, however, that a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 30% of the combined voting power of the Company's then
outstanding securities shall not constitute a Change in Control of the
Company; or (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or sub-stantially all of the Company's assets.
SECTION 11. Amendments and Termination.
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(a) The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made that would impair the
rights of a Participant under an Award theretofore granted, without the
Participant's consent, or that without the approval of the stockholders would:
(i) except as is provided in Section 4(b) of the Plan, increase the
total number of Shares reserved for the purpose of the Plan; or
<PAGE>
(ii) change the employees or class of employees eligible to participate
in the Plan.
(b) The Committee may amend the terms of any Award theretofore
granted, prospectively or retroactively, but no such amendment shall impair
the rights of any Participant without his consent. The Committee may also
substitute new Awards for previously granted Awards, including without
limitation previously granted Options and Stock Appreciation Rights having
higher option prices.
(c) Employee Status Change to Part-Time. At such time as a full-time
-----------------------------------
employee becomes a part-time employee of the Company, on the next vesting date
following such status change, all Awards previously granted to such employee
will be automatically amended to reflect the vesting of all such Awards to be
reduced by one-half with respect to any portion of the Awards not yet vested.
SECTION 12. General Provisions.
-------------------
(a) Nontransferability. No Award shall be assigned, alienated,
------------------
pledged, attached, sold or otherwise transferred or encumbered by a
Participant, except by will or the laws of descent and distribution, provided,
however, that an Award may be transferable, to the extent set forth in the
applicable Award Notice and in accordance with procedures adopted by the
Committee, (i) if such Award Notice provisions do not disqualify such Award
for exemption under Rule 16b-3 or (ii) if such Award is not intended to
qualify for exemption under such rule.
(b) No Claims. No Employee or Participant shall have any claim to be
----------
granted any Award under the Plan and there is no obligation for uniformity of
treatment of Employees or Participants under the Plan.
(c) Notices. Any notice necessary under this Plan or any Award
-------
hereunder shall be addressed to the Company in care of its Secretary at the
principal executive office of the Company in Houston, Texas and to the
Participant at the address appearing in the personnel records of the Company
for such Participant or to either party at such other address as either party
hereto may hereafter designate in writing to the other. Any such notice shall
be deemed effective upon receipt thereof by the addressee.
(d) Unusual Events. The Committee shall be authorized to make
---------------
adjustments in the terms and conditions of Awards in recog-nition of unusual
or nonrecurring events affecting the Company or its financial statements or
changes in applicable laws, regula-tions, or accounting principles. The
Committee may correct any defect, supply any omission, or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it
shall deem desirable to carry it into effect. In the event the Company shall
assume outstanding employee benefit awards or the right or obligation to make
such future awards in connection with the acquisition of another corporation
or business entity, the Committee may, in its discretion, make such
adjustments in the terms of Awards under the Plan as it shall deem
appropriate.
(e) Compliance Requirements. All certificates for Shares delivered
------------------------
under the Plan pursuant to any Award shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Shares are then listed, and any
applicable federal or state securities law, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions. The Company shall not be required to issue or
deliver any Shares under the Plan prior (i) to the completion of any
registration or qualification of such Shares under any federal or state law,
or under any ruling or regulation of any governmental body or national
securities exchange that the Committee in its sole discretion shall deem to be
necessary or appropriate and (ii) to the Participant's entering into such
written representations, warranties, and agreements as the Company may
reasonably request in order to comply with applicable securities laws or with
this Plan.
(f) Dividends. Subject to the provisions of this Plan, the recipient
---------
of an Award may, if so determined by the Committee at the time of grant, be
entitled to receive, currently or on a deferred basis, interest or dividends,
or interest or dividend equivalents, with respect to the number of shares
covered by the Award, as determined at the time of the Award by the Committee,
in its sole discretion, and the Committee may provide that such amounts (if
any) shall be deemed to have been reinvested in additional Shares or otherwise
reinvested.
(g) No Other Consideration. Except as otherwise required in any
------------------------
applicable grant and Award Notice or by the terms of the Plan, recipients of
Awards under the Plan shall not be required to make any payment or provide
consideration other than the rendering of services.
<PAGE>
(h) Withholding. The Company shall be authorized to withhold from any
-----------
Award granted or payment due under the Plan the amount of withholding taxes
due in respect of an Award or payment hereunder and to take such other action
as may be necessary in the opinion of the Company to satisfy any of its
obligations with respect to the payment of such taxes.
(i) Other Plans. Nothing contained in this Plan shall prevent the
-----------
Board from adopting other or additional compensation arrangements, subject to
stockholder approval, if such approval is required by applicable law, or the
rules of any stock exchange on which the Common Stock is then listed; and such
arrangements may be either generally applicable or applicable only in specific
cases.
(j) Governing Law. The validity, construction, and effect of the Plan
-------------
and any rules and regulations relating to the Plan and any Award hereunder
shall be determined in accordance with the laws of the State of Delaware and
applicable federal law.
(k) Conformity With Law. If any provision of this Plan is or becomes
-------------------
or is deemed invalid, illegal or unenforceable in any jurisdiction, or would
disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended in such
jurisdiction to conform to applicable laws or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan, it shall be stricken and the remainder of the
Plan shall remain in full force and effect.
SECTION 13. Effective Date of Plan. The Plan shall be effective as of
----------------------
January 18, 1989 (the "Effective Date"), subject to approval by the Company's
stockholders within one year thereafter. Awards may be granted at any time
after the Effective Date and prior to termination of the Plan by the Board,
except that no Incentive Stock Option shall be granted pursuant to the Plan
after 10 years from the Effective Date, but any Award theretofore granted may
extend beyond that date. The Plan will expire when no Shares are available
for issuance.
SECTION 14. Tandem Substitute Options. Tandem Substitute Options shall
-------------------------
be governed by the terms of the Plan and the related option conversion notice,
except that, notwithstanding any provision of the Plan or option conversion
notice to the contrary, the terms and conditions set forth on Appendix A
hereto shall govern such options to the extent set forth on such Appendix.
<PAGE>
APPENDIX A FOR TANDEM SUBSTITUTE OPTIONS
----------------------------------------
The term "Options" as used in this Appendix A means Tandem Substitute Options.
Exercisability: Generally, Options may be exercised beginning six months from
the vesting date or, with respect to certain Options, beginning six months
from the original grant date. Optionees are not entitled to exercise Options
if employment with the Company is terminated prior to six months from the
vesting date or, with respect to certain Options, prior to six months from the
original grant date. The original grant date and the vesting date are set
forth on the related option conversion notice.
Vesting: Vesting stops when the optionee's employment with the Company or any
of its Affiliates terminates. The vesting schedule for each Option is as set
forth on the related Option Conversion Notice.
Death: If an optionee dies while an employee of the Company or its
Affiliates, Options become fully vested regardless of length of service and
expire one year after the date of death.
Disability: If an optionee's employment terminates because of permanent
disability, Options (i) become 20% vested, if more than the percentage
actually vested on the termination date and (ii) expire 90 days after the
termination date.
Termination: If employment with the Company or its Affiliates ends for any
reason other than death or permanent disability, Options expire on the 30th
day after the termination date.
Leave of Absence: Vesting during an approved leave of absence is governed by
the applicable leave of absence policy in effect at the time an optionee goes
on leave.
Unvested Shares: Six months after the original grant date (as set forth on
the related option conversion notice), optionees can purchase unvested option
shares. Unvested option shares may not be sold or otherwise transferred until
they become vested. The Company may buy back unvested shares at the price
paid by the optionee for such shares upon optionee's termination from the
Company or its Affiliates (except death). In such event, the Company must
give notice to the optionee within 60 days after the termination date,
provided, however, that upon termination due to permanent disability, the
Company must provide notice within 60 days after the last date upon which the
optionee's option is exercisable. Optionees must deliver the number of shares
requested in such notice to the Company within 60 days after receipt of such
notice, with the stock certificates fully endorsed or accompanied by a duly
executed stock power. Certificates for unvested shares shall contain a legend
referring to the Company's right to repurchase. As the optionee's vesting
percentage increases, the optionee may request, at reasonable intervals, that
the Company exchange those legended certificates for shares which have vested
for certificates for shares without legends. No certificates shall be issued
for partial shares.
Form of Payment: A notice of exercise must include payment of the option
price for the shares being purchased. Payment may be made by: (i) cashier's
check or a money order, (ii) irrevocable directions on a Company approved form
to a securities broker approved by the Company to sell the shares and deliver
all or a portion of the sale proceeds to the Company in payment of the option
price, or (iii) certificates for Common Stock, along with any forms needed to
transfer the shares to the Company. The fair market value of the shares, on
the effective date of the Option exercise will be applied to the Option price.
Transfers: Options cannot be assigned or transferred, except by will or the
laws of descent and distribution.
Individual Provisions: To the extent that an optionee's option agreement with
Tandem provides terms and conditions contrary to those set forth above,
notwithstanding any other provision in the Plan, the option conversion notice
or this Appendix A to the contrary, the terms and conditions of such option
agreement shall govern the related Tandem Substitute Option (except with
respect to the vesting schedule, trading restrictions and notice of exercise,
in which case the terms and conditions contained in the related option
conversion notice shall govern).
<PAGE>
AMENDED AND RESTATED JANUARY 20, 1998
REFLECTS 5-FOR-2 STOCK SPLIT DATED JULY 14, 1997,
2-FOR-1 STOCK SPLIT DATED JANUARY 20, 1998 AND
MERGERS & ACQUISITIONS THROUGH SEPTEMBER 1, 1997
COMPAQ COMPUTER CORPORATION
1995 EQUITY INCENTIVE PLAN
SECTION 1. Purpose. The purposes of the Compaq Computer Corporation 1995
-------
Equity Incentive Plan are to promote the interests of Compaq Computer
Corporation and its stockholders by (i) attracting and retaining exceptional
executive personnel and other key employees of the Company and its Affiliates,
as defined below; (ii) motivating such employees by means of
performance-related incentives to achieve long-range performance goals; and
(iii) enabling such employees to participate in the long-term growth and
financial success of the Company.
SECTION 2. Definitions. As used in the Plan, the following terms shall
-----------
have the meanings set forth below:
"Affiliate" shall mean (i) any entity that, directly or indirectly, is
controlled by the Company and (ii) any entity in which the Company has a
significant equity interest, in either case as determined by the Committee.
"Award" shall mean any Option, Stock Appreciation Right, Restricted Stock
Award, Performance Award or other Stock-Based Award.
"Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall be deemed to have occurred if: (i) any "person" as
such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than
the Company, any trustee or other fiduciary holding securities under any
employee benefit plan of the Company, or any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of Stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities; (ii)
during any period of two consecutive years (not including any period prior to
the adoption of the Plan), individuals who at the beginning of such period
constitute the Board of Directors, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (i), (iii), or (iv) of this paragraph
whose election by the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
the two-year period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
of the Board of Directors; (iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than
a merger or consolidation that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation; provided, however, that a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person acquires more than 30% of the combined
voting power of the Company's then outstanding securities shall not constitute
a Change in Control of the Company; or (iv) the stockholders of the Company
approve a plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets. If any of the events enumerated in clauses (i) through (iv)
occur, the Board shall determine the effective date of the Change in Control
resulting therefrom, for purposes of the Plan.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
<PAGE>
"Committee" shall mean a committee of the Board designated by the Board to
administer the Plan and composed of not less than the minimum number of
persons from time to time required by Rule 16b-3, each of whom, to the extent
necessary to comply with Rule 16b-3 only, is a "Non-Employee Director " within
the meaning of Rule 16b-3. Until otherwise determined by the Board, the Human
Resources Committee designated by the Board shall be the Committee under the
Plan.
"Company" shall mean Compaq Computer Corporation, together with any successor
thereto.
"Employee" shall mean an employee of the Company or of any Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Executive Officer" shall mean, at any time, an individual who is an executive
officer of the Company within the meaning of Exchange Act Rule 3b-7 as
promulgated and interpreted by the SEC under the Exchange Act, or any
successor rule or regulation thereto as in effect from time to time, or who is
an officer of the Company within the meaning of Exchange Act Rule 16a-1(f) as
promulgated and interpreted by the SEC under the Exchange Act, or any
successor rule or regulation thereto as in effect from time to time.
"Fair Market Value" shall mean the fair market value of the property or other
item being valued, as determined by the Committee in its sole discretion.
"Incentive Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is intended to
meet the requirements of Section 422 of the Code or any successor provision
thereto.
"Net After-Tax Amount" shall mean the net amount of compensation, assuming for
this purpose only that all vested Awards and other forms of compensation
subject to vesting upon such Change of Control are exercised upon such Change
in Control, to be received (or deemed to have been received) by such
Participant in connection with such Change of Control under any option
agreement and under any other plan, arrangement or contract of the Company to
which such Participant is a party, after giving effect to all income and
excise taxes applicable to such payments.
"Non-Qualified Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is not intended
to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option
and shall include a Restoration Option.
"Other Stock-Based Award" shall mean any right granted under Section 10 of the
Plan.
"Participant" shall mean any Employee selected by the Committee to receive an
Award under the Plan.
"Performance Award" shall mean any right granted under Section 9 of the Plan.
"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or
political subdivision thereof or other entity.
"Plan" shall mean this Compaq Computer Corporation 1995 Equity Incentive Plan.
"Restoration Option" shall mean an Option granted pursuant to Section 6(e) of
the Plan.
"Restricted Stock" shall mean any Share granted under Section 8 of the Plan.
"Restricted Stock Unit" shall mean any unit granted under Section 8 of the
Plan.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by the SEC
under the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.
<PAGE>
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto and shall include the staff thereof.
"Shares" shall mean shares of the common stock, $.0l par value, of the
Company, or such other securities of the Company as may be designated by the
Committee from time to time.
"Stock Appreciation Right" shall mean any right granted under Section 7 of the
Plan.
"Substitute Awards" shall mean Awards granted in assumption of, or in
substitution for, outstanding awards previously granted by a company acquired
by the Company or with which the Company combines.
"Tandem" shall mean Tandem Computers Incorporated.
SECTION 3. Administration.
--------------
(a) Authority of Committee. The Plan shall be administered by the
------------------------
Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee
by the Plan, the Committee shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of Awards to be
granted to an eligible Employee; (iii) determine the number of Shares to be
covered by, or with respect to which payments, rights, or other matters are to
be calculated in connection with, Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited, or
suspended and the method or methods by which Awards may be settled, exercised,
canceled, forfeited, or suspended; (vi) determine whether, to what extent, and
under what circumstances cash, Shares, other securities, other Awards, other
property, and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the holder thereof or of the
Committee; (vii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (viii) establish, amend,
suspend, or waive such rules and regulations and appoint such agents as it
shall deem appropriate for the proper administration of the Plan; and (ix)
make any other determination and take any other action that the Committee
deems necessary or desirable for the administration of the Plan.
(b) Committee Discretion Binding. Unless otherwise expressly provided in
----------------------------
the Plan, all designations, determinations, interpretations, and other
decisions under or with respect to the Plan or any Award shall be within the
sole discretion of the Committee, may be made at any time and shall be final,
conclusive, and binding upon all Persons, including the Company, any
Affiliate, any Participant, any holder or beneficiary of any Award, any
stockholder and any Employee.
SECTION 4. Shares Available for Awards.
------------------------------
(a) Shares Available. Subject to adjustment as provided in Section 4(b),
----------------
the number of Shares with respect to which Awards may be granted under the
Plan shall be 65,000,000 million. If, after the effective date of the Plan,
any Shares covered by an Award granted under the Plan or by an award granted
under any prior stock award plan of the Company, or to which such an Award or
award relates, are forfeited, or if such an Award or award is settled for cash
or otherwise terminates or is canceled without the delivery of Shares, then
the Shares covered by such Award or award, or to which such Award or award
relates, or the number of Shares otherwise counted against the aggregate
number of Shares with respect to which Awards may be granted, to the extent of
any such settlement, forfeiture, termination or cancellation, shall again
become Shares with respect to which Awards may be granted. In the event that
any Option or other Award granted hereunder or any award granted under any
prior stock award plan of the Company is exercised through the delivery of
Shares or in the event that withholding tax liabilities arising from such
Award or award are satisfied by the withholding of Shares by the Company, the
number of Shares available for Awards under the Plan shall be increased by the
number of Shares so surrendered or withheld. Notwithstanding the foregoing
and subject to adjustment as provided in Section 4(b), no Executive Officer of
the Company may receive Awards under the Plan in any calendar year that relate
to more than 2,500,000 Shares; provided, however, a new employee who begins
service as Chief Executive Officer may receive Awards that relate to up to
5,000,000 Shares in the calendar year in which employment with the Company
begins.
<PAGE>
(b) Adjustments. In the event that the Committee determines that any
-----------
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares
such that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Committee shall, in
such manner as it may deem equitable, adjust any or all of (i) the number of
Shares or other securities of the Company (or number and kind of other
securities or property) with respect to which Awards may be granted, (ii) the
number of Shares or other securities of the Company (or number and kind of
other securities or property) subject to outstanding Awards, and (iii) the
grant or exercise price with respect to any Award, or, if deemed appropriate,
make provision for a cash payment to the holder of an outstanding Award;
provided, in each case, that (A) with respect to Awards of Incentive Stock
Options no such adjustment shall be authorized to the extent that such
authority would cause the Plan to violate Section 422(b)(1) of the Code, as
from time to time amended and (B) with respect to any Award no such adjustment
shall be authorized to the extent that such authority would be inconsistent
with the Plan's meeting the requirements of Section 162(m) of the Code, as
from time to time amended.
(c) Substitute Awards. Any Shares underlying Substitute Awards shall not,
-----------------
except in the case of Shares with respect to which Substitute Awards are
granted to Employees who are officers or directors of the Company for purposes
of Section 16 of the Exchange Act or any successor section thereto, be counted
against the Shares available for Awards under the Plan.
(d) Sources of Shares Deliverable Under Awards. Any Shares delivered
------------------------------------------
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares.
SECTION 5. Eligibility. Any Employee, including any officer or
-----------
employee-director of the Company or any Affiliate, who is not a member of the
Committee, shall be eligible to be designated a Participant.
SECTION 6. Stock Options.
--------------
(a) Grant. Subject to the provisions of the Plan, the Committee shall
-----
have sole and complete authority to determine the Employees to whom Options
shall be granted, the number of Shares to be covered by each Option, the
option price therefor and the conditions and limitations applicable to the
exercise of the Option. The Committee shall have the authority to grant
Incentive Stock Options, or to grant Non-Qualified Stock Options, or to grant
both types of options. In the case of Incentive Stock Options, the terms and
conditions of such grants shall be subject to and comply with such rules as
may be prescribed by Section 422 of the Code, as from time to time amended,
and any regulations implementing such statute.
(b) Exercise Price. Subject to the requirement set forth in Section 6(e)
--------------
the Committee in its sole discretion shall establish the exercise price at the
time each option is granted.
(c) Exercise. Each Option shall be exercisable at such times and subject
--------
to such terms and conditions as the Committee may, in its sole discretion,
specify in the applicable Award Agreement or thereafter. The Committee may
impose such conditions with respect to the exercise of options, including
without limitation, any relating to the application of federal or state
securities laws, as it may deem necessary or advisable. An executive officer
of the Company may not exercise an Option for a period of six months from the
date of grant.
(d) Payment. No Shares shall be delivered pursuant to any exercise of an
-------
Option until payment in full of the option price therefor is received by the
Company. Such payment may be made in cash, or its equivalent, or, if and to
the extent permitted by the Committee, by exchanging Shares owned by the
optionee (which are not the subject of any pledge or other security interest),
or by a combination of the foregoing, provided that the combined value of all
cash and cash equivalents and the Fair Market Value of any such Shares so
tendered to the Company as of the date of such tender is at least equal to
such option price.
<PAGE>
(e) Restoration Options. In the event that any Participant delivers
--------------------
Shares in payment of the exercise price of any Option granted hereunder in
accordance with Section 6(d) or of any option granted under a prior stock
award plan of the Company, or in the event that the withholding tax liability
arising upon exercise of any such Option or option by a Participant is
satisfied through the withholding by the Company of Shares otherwise
deliverable upon exercise of the Option or option, the Committee shall have
the authority to grant or provide for the automatic grant of a Restoration
Option to such Participant. The grant of a Restoration Option shall be
subject to the satisfaction of such conditions or criteria as the Committee in
its sole discretion shall establish from time to time. A Restoration Option
shall entitle the holder thereof to purchase a number of Shares equal to the
number of such Shares so delivered or withheld upon exercise of the original
Option or option. A Restoration Option shall have a per share exercise price
of not less than 100% of the per Share Fair Market Value on the date of grant
of such Restoration Option and such other terms and conditions as the
Committee in its sole discretion shall determine.
SECTION 7. Stock Appreciation Rights.
---------------------------
(a) Grant. Subject to the provisions of the Plan, the Committee shall
------
have sole and complete authority to determine the Employees to whom Stock
Appreciation Rights shall be granted, the number of Shares to be covered by
each Stock Appreciation Right Award, the grant price thereof and the
conditions and limitations applicable to the exercise thereof. Stock
Appreciation Rights may be granted in tandem with another Award, in addition
to another Award, or freestanding and unrelated to another Award. Stock
Appreciation Rights granted in tandem with or in addition to an Award may be
granted either at the same time as the Award or at a later time. Stock
Appreciation Rights shall not be exercisable earlier than six months after
grant, and shall have a grant price as determined by the Committee on the date
of grant.
(b) Exercise and Payment. A Stock Appreciation Right shall entitle the
---------------------
Participant to receive an amount equal to the excess of the Fair Market Value
of a Share on the date of exercise of the Stock Appreciation Right over the
grant price thereof, provided that the Committee may for administrative
convenience determine that, with respect to any Stock Appreciation Right that
is not related to an Incentive Stock Option and that can only be exercised for
cash during limited periods of time in order to satisfy the conditions of Rule
16b-3, the exercise of such Stock Appreciation Right for cash during such
limited period shall be deemed to occur for all purposes hereunder on the day
during such limited period on which the Fair Market Value of the Shares is the
highest. Any such determination by the Committee may be changed by the
Committee from time to time and may govern the exercise of Stock Appreciation
Rights granted prior to such determination as well as Stock Appreciation
Rights thereafter granted. The Committee shall determine whether a Stock
Appreciation Right shall be settled in cash, Shares or a combination of cash
and Shares.
(c) Other Terms and Conditions. Subject to the terms of the Plan and any
--------------------------
applicable Award Agreement, the Committee shall determine, at or after the
grant of a Stock Appreciation Right, the term, methods of exercise, methods
and form of settlement, and any other terms and conditions of any Stock
Appreciation Right. Any such determination by the Committee may be changed by
the Committee from time to time and may govern the exercise of Stock
Appreciation Rights granted or exercised prior to such determination as well
as Stock Appreciation Rights granted or exercised thereafter. The Committee
may impose such conditions or restrictions on the exercise of any Stock
Appreciation Right as it shall deem appropriate.
SECTION 8. Termination or Suspension of Employment. The following
-----------------------------------------
provisions shall apply in the event of the Participant's termination of
employment unless the Committee shall have provided otherwise, either at the
time of the grant of the Award or thereafter.
(a) Nonqualified Stock Options and Stock Appreciation Rights.
--------------------------------------------------------------
(i) Termination of Employment. If the Participant's employment with the
-------------------------
Company or its Affiliates is terminated for any reason other than death,
permanent and total disability, or retirement, the Participant's right to
exercise any Nonqualified Stock Option or Stock Appreciation Right shall
terminate, and such Option or Stock Appreciation Right shall expire, on the
earlier of (A) the first anniversary of such termination of employment or (B)
the date such Option or Stock Appreciation Right would have expired had it not
been for the termination of employment. The Participant shall have the right
to exercise such Option or Stock Appreciation Right prior to such expiration
to the extent it was exercisable at the date of such termination of employment
and shall not have been exercised.
<PAGE>
(ii) Death, Disability or Retirement. If the Participant's employment
-------------------------------
with the Company or its Affiliates is terminated by death, permanent and total
disability, or retirement, the Participant or his successor (if employment is
terminated by death) shall have the right to exercise any Nonqualified Stock
Option or Stock Appreciation Right to the extent it was exercisable at the
date of such termination of employment and shall not have been exercised, but
in no event shall such option be exercisable later than the date the Option
would have expired had it not been for the termination of such employment.
The meaning of the terms "total and permanent disability" and "retirement"
shall be determined by the Committee.
(iii) Acceleration and Extension of Exercisability. Notwithstanding the
--------------------------------------------
foregoing, the Committee may, in its discretion, provide (A) that an Option
granted to a Participant may terminate at a date earlier than that set forth
above, (B) that an Option granted to a Participant not subject to Section 16
of the Exchange Act may terminate at a date later than that set forth above,
provided such date shall not be beyond the date the Option would have expired
had it not been for the termination of the Participant's employment, and (C)
that an Option or Stock Appreciation Right may become immediately exercisable
when it finds that such acceleration would be in the best interests of the
Company.
(b) Incentive Stock Options. Except as otherwise determined by the
------------------------
Committee at the time of grant, if the Participant's employment with the
Company is terminated for any reason, the Participant shall have the right to
exercise any Incentive Stock Option and any related Stock Appreciation Right
during the 90 days after such termination of employment to the extent it was
exercisable at the date of such termination, but in no event later than the
date the option would have expired had it not been for the termination of such
employment. If the Participant does not exercise such Option or related Stock
Appreciation Right to the full extent permitted by the preceding sentence, the
remaining exercisable portion of such Option automatically will be deemed a
Nonqualified Stock Option, and such Option and any related Stock Appreciation
Right will be exercisable during the period set forth in Section 11(a) of the
Plan, provided that in the event that employment is terminated because of
death or the Participant dies in such 90-day period, the option will continue
to be an Incentive Stock Option to the extent provided by Section 421 or
Section 422 of the Code, or any successor provision, and any regulations
promulgated thereunder.
(d) Leave Without Pay. Any time spent by a Participant in the status of
-----------------
"leave without pay" shall be disregarded for purposes of determining the
extent to which any Award or portion thereof has vested or otherwise becomes
exercisable or nonforfeitable.
SECTION 9. Change in Control. Notwithstanding any other provision of the
-----------------
Plan to the contrary, upon a Change in Control all outstanding Awards shall
vest, become immediately exercisable or payable or have all restrictions
lifted as may apply to the type of Award and no outstanding Stock Appreciation
Right may be terminated, amended, or suspended upon or after a Change in
Control; provided, however, that unless otherwise determined by the Committee
at the time of award or thereafter, if it is determined that the Net After-Tax
Amount to be realized by any Participant, taking into account the accelerated
vesting provided for by this Section as well as all other payments to be
received by such Participant in connection with such Change in Control, would
be higher if Awards did not vest in accordance with this Section, then and to
such extent the Awards shall not vest. The determination of whether any such
Award should not vest shall be made by a nationally recognized accounting firm
selected by the Company, which shall be instructed to consider that (i) Awards
and other forms of compensation subject to vesting upon a Change of Control
shall be vested in the order in which they were granted and within each grant
in the order in which they would otherwise have vested and (ii) unless and to
the extent any other plan, arrangement or contract of the Company pursuant to
which any such payment is to be received provides to the contrary, such other
payment shall be deemed to have occurred after any acceleration of Awards or
other forms of compensation subject to vesting upon a Change of Control.
<PAGE>
SECTION 10. Amendment and Termination.
---------------------------
(a) Amendments to the Plan. The Board may amend, alter, suspend,
-------------------------
discontinue, or terminate the Plan or any portion thereof at any time;
provided that no such amendment, alteration, suspension, discontinuation or
termination shall be made without stockholder approval if such approval is
necessary to comply with any tax or regulatory requirement, including for
these purposes any approval requirement that is a prerequisite for exemptive
relief from Section 16(b) of the Exchange Act, for which or with which the
Board deems it necessary or desirable to qualify or comply. Notwithstanding
anything to the contrary herein, the Committee may amend the Plan in such
manner as may be necessary so as to have the Plan conform with local rules and
regulations in any jurisdiction outside the United States.
(b) Amendments to Awards. The Committee may waive any conditions or
---------------------
rights under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, any Award theretofore granted, prospectively or retroactively;
provided that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation, or termination that would adversely affect the
rights of any Participant or any holder or beneficiary of any Award
theretofore granted shall not to that extent be effective without the consent
of the affected Participant, holder, or beneficiary.
(c) Adjustment of Awards Upon the Occurrence of Certain Unusual or
----------------------------------------------------------------------
Nonrecurring Events. The Committee is hereby authorized to make adjustments
- --------------------
in the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4(b) hereof) affecting the Company, any
Affiliate, or the financial statements of the Company or any Affiliate, or of
changes in applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan; provided that no such adjustment shall be
authorized to the extent that such authority would be inconsistent with the
Plan's meeting the requirements of Section 162(m) of the Code, as from time to
time amended.
(d) Cancellation. Any provision of this Plan or any Award Agreement
------------
to the contrary notwithstanding, the Committee may cause any Award granted
hereunder to be canceled in consideration of a cash payment or alternative
Award made to the holder of such canceled Award equal in value to the Fair
Market Value of such canceled Award.
(e) Employee Status Change to Part-Time. At such time as a full-time
-----------------------------------
employee becomes a part-time employee of the Company, on the next vesting date
following such status change, all Awards previously granted to such employee
will be automatically amended to reflect the vesting of all such Awards to be
reduced by one-half with respect to any portion of the Awards not yet vested.
SECTION 14. General Provisions.
-------------------
(a) Nontransferability. No Award shall be assigned, alienated, pledged,
------------------
attached, sold or otherwise transferred or encumbered by a Participant, except
by will or the laws of descent and distribution, provided, however, that an
Award may be transferable, to the extent set forth in the applicable Award
Agreement and in accordance with procedures adopted by the Committee.
(b) No Rights to Awards. No Employee, Participant or other Person shall
-------------------
have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Employees, Participants, or holders or
beneficiaries of Awards. The terms and conditions of Awards need not be the
same with respect to each recipient.
(c) Share Certificates. All certificates for Shares or other securities
------------------
of the Company or any Affiliate delivered under the Plan pursuant to any Award
or the exercise thereof shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the Plan or the
rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares or other securities are
then listed, and any applicable Federal or state laws, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
(d) Delegation. Subject to the terms of the Plan and applicable law, the
----------
Committee may delegate to one or more officers or managers of the Company or
any Affiliate, or to a committee of such officers or managers, the authority,
subject to such terms and limitations as the Committee shall determine, to
grant Awards to, or to cancel, modify or waive rights with respect to, or to
alter, discontinue, suspend, or terminate Awards held by, Employees who are
not officers or directors of the Company for purposes of Section 16 of the
Exchange Act, or any successor section thereto, or who are otherwise not
subject to such Section.
<PAGE>
(e) Withholding. A participant may be required to pay to the Company or
-----------
any Affiliate and the Company or any Affiliate shall have the right and is
hereby authorized to withhold from any Award, from any payment due or transfer
made under any Award or under the Plan or from any compensation or other
amount owing to a Participant the amount (in cash, Shares, other securities,
other Awards or other property) of any applicable withholding taxes in respect
of an Award, its exercise, or any payment or transfer under an Award or under
the Plan and to take such other action as may be necessary in the opinion of
the Company to satisfy all obligations for the payment of such taxes. The
Committee may provide for additional cash payments to holders of Awards to
defray or offset any tax arising from the grant, vesting, exercise, or
payments of any Award.
(f) Award Notice. Each Award hereunder shall be evidenced by an Award
------------
Notice that shall be delivered to the Participant and shall specify the terms
and conditions of the Award and any rules applicable thereto.
(g) No Limit on Other Compensation Arrangements. Nothing contained in the
-------------------------------------------
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other compensation arrangements, which may, but need not, provide for
the grant of options, restricted stock, Shares and other types of Awards
provided for hereunder (subject to stockholder approval if such approval is
required), and such arrangements may be either generally applicable or
applicable only in specific cases.
(h) No Right to Employment. The grant of an Award shall not be construed
----------------------
as giving a Participant the right to be retained in the employ of the Company
or any Affiliate. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment, free from any liability or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any
Award Notice.
(i) No Rights as Stockholder. Subject to the provisions of the applicable
------------------------
Award, no Participant or holder or beneficiary of any Award shall have any
rights as a stockholder with respect to any Shares to be distributed under the
Plan until he or she has become the holder of such Shares.
(j) Governing Law. The validity, construction, and effect of the Plan and
-------------
any rules and regulations relating to the Plan and any Award Notice shall be
determined in accordance with the laws of the State of Delaware.
(k) Severability. If any provision of the Plan or any Award is or becomes
------------
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or
as to any Person or Award, or would disqualify the Plan or any Award under any
law deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to the applicable laws, or if it cannot be construed
or deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, Person or Award and the remainder of the Plan and any
such Award shall remain in full force and effect.
(l) Other Laws. The Committee may refuse to issue or transfer any Shares
----------
or other consideration under an Award if, acting in its sole discretion, it
determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary
in connection with the exercise of such Award shall be promptly refunded to
the relevant Participant, holder, or beneficiary. Without limiting the
generality of the foregoing, no Award granted hereunder shall be construed as
an offer to sell securities of the Company, and no such offer shall be
outstanding, unless and until the Committee in its sole discretion has
determined that any such offer, if made, would be in compliance with all
applicable requirements of the U.S. federal securities laws and any other laws
to which such offer, if made, would be subject.
(m) No Trust or Fund Created. Neither the Plan nor any Award shall create
------------------------
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any
other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(n) No Fractional Shares. No fractional Shares shall be issued or
----------------------
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares or whether such fractional Shares or any
rights thereto shall be canceled, terminated, or otherwise eliminated.
<PAGE>
(o) Headings. Headings are given to the Sections and subsections of the
--------
Plan solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 15. Term of the Plan.
-------------------
(a) Effective Date. The Plan shall be effective as of January 22, 1997,
--------------
subject to approval by the stockholders of the Company within one year
thereafter.
(b) Expiration Date. No Incentive Stock Option shall be granted under the
---------------
Plan after January 22, 1997. Unless otherwise expressly provided in the Plan
or in an applicable Award Notice, any Award granted hereunder may, and the
authority of the Board or the Committee to amend, alter, adjust, suspend,
discontinue, or terminate any such Award or to waive any conditions or rights
under any such Award shall, continue after the authority for grant of new
Awards hereunder has been exhausted.
AMENDED AND RESTATED AS OF JANUARY 20, 1998
TO REFLECT 2-FOR-1 STOCK SPLIT EFFECTED JANUARY 20, 1998
COMPAQ COMPUTER CORPORATION
NONQUALIFIED STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
SECTION 1. Amendment and Restatement. The Compaq Computer Corporation
--------------------------
Nonqualified Stock Option Plan for Non-Employee Directors (the "Plan") amends
and restates in its entirety the Compaq Computer Corporation 1987 Nonqualified
Stock Option Plan for Non-Employee Directors.
SECTION 2. Purpose. The purposes of the Plan are to attract and
--------
retain the services of experienced and knowledgeable non-employee directors,
to encourage eligible directors of Compaq Computer Corporation (the "Company")
to acquire a proprietary and vested interest in the growth and performance of
the Company, and to generate an increased incentive for directors to
contribute to the Company's future success and prosperity, thus enhancing the
value of the Company for the benefit of its stockholders.
SECTION 3. Definitions. As used in the Plan, the following terms shall
------------
have the meanings set forth below:
(a) "Amendment Date" shall mean December 12, 1996, the effective date of
the amendment and restatement of the Plan.
(b) "Annual Retainer" shall mean the amount that an Eligible Director
would be entitled to receive for serving as a director in the year following
an Election Date, but shall not include fees associated with service on any
committee of the Board, any meeting fees, or any fees associated with other
services to be provided to the Company.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Company" shall mean Compaq Computer Corporation.
(f) "Election Date" shall mean with respect to an Option hereunder the
date of the appointment, election, or re-election of the director that
prompted the grant of such Option.
(g) "Eligible Director" shall mean each director of the Company who is
not an employee of the Company or any of the Company's subsidiaries (as
defined in Section 425(f) of the Code).
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" shall mean with respect to the Common Stock (i)
the last sale price of the Common Stock on the date on which such value is
determined, as reported on the consolidated tape of New York Stock Exchange
issues or, if there shall be no trades on such date, on the date nearest
preceding such date; (ii) if the Common Stock is not then listed for trading
on the New York Stock Exchange, the last sale price of the Common Stock
on the date on which such value is determined, as reported on another
recognized securities exchange or on the NASDAQ National Market System if the
Common Stock shall then be listed and traded upon such exchange or system or,
if there shall be no trades on such date, on the date nearest preceding such
date; or (iii) the mean between the bid and asked quotations for such stock on
such date (as reported by a recognized stock quotation service) or, in the
event that there shall be no bid or asked quotations on such date, then upon
the basis of the mean between the bid and asked quotations on the date nearest
preceding such date.
<PAGE>
(j) "Grant Notice" shall mean a written notice evidencing an Option
granted hereunder.
(k) "Option" shall mean any right granted to a Participant allowing such
Participant to purchase Shares at such price or prices and during such period
or periods as set forth under the Plan. All Options shall be nonqualified
options not entitled to special tax treatment under Section 422A of Code.
(l) "Participant" shall mean an Eligible Director who receives an Option
under the Plan.
(m) "Price Percentage" shall mean 50 percent unless adjusted in
accordance with Section 8(e).
(n) "Release Date" shall mean the fifth business day occurring after the
Company's earnings release for the preceding fiscal period. In calculating
the Release Date, the day of an earnings release shall be counted if the
earnings release is made before the opening of trading on the New York Stock
Exchange and shall not be counted if such release is made after the opening of
trading.
(o) "Share Percentage" shall be 50 percent unless adjusted in accordance
with Section 8(e).
(p) "Shares" shall mean shares of the common stock, $.01 par value, of
the Company.
(q) "Window" shall mean a period of time beginning on a Release Date and
ending at the end of the second month of the fiscal quarter in which such
Release Date occurs.
SECTION 4. Administration. The Plan shall be administered by the Board.
---------------
Subject to the terms of the Plan, the Board shall have the power to interpret
the provisions and supervise the administration of the Plan.
SECTION 5. Shares Subject to the Plan.
-------------------------------
(a) Total Number. Subject to adjustment as provided in this Section,
the total number of Shares as to which Options may be granted under the Plan
shall be 7,500,000 Shares. Any Shares issued pursuant to Options hereunder
may consist, in whole or in part, of authorized and unissued shares or
treasury shares.
(b) Reduction of Shares Available.
(i) The grant of an Option will reduce the Shares as to which
Options may be granted by the number of Shares subject to such Option.
(ii) Any Shares issued by the Company through the assumption or
substitution of outstanding grants from an acquired company shall not reduce
the Shares available for grants under the Plan.
(c) Increase of Shares Available. The lapse, cancellation, or other
termination of an Option that has not been fully exercised shall increase the
available Shares by the number of Shares that have not been issued upon
exercise of such Option.
(d) Other Adjustments. The total number and kind of shares available
for Options under the Plan or which may be allocated to any one Participant,
the number and kind of shares of Common Stock subject to outstanding Options,
and the exercise price for such Options shall be appropriately adjusted by the
Board for any increase or decrease in the number of outstanding Shares
resulting from a stock dividend, subdivision, combination of Shares,
reclassification, or other change in corporate structure affecting the Shares
or for any conversion of the Shares into or exchange of the Shares for other
shares as a result of any merger or consolidation (including a sale of assets)
or other recapitalization as may be necessary to maintain the proportionate
interest of the Option holder.
<PAGE>
SECTION 6. Initial Options. Initial Options shall be granted to
-----------------
Eligible Directors as follows:
(a) Initial Grants. Each Eligible Director who is first elected or
appointed to the Board on or after April 25, 1996, shall be granted one Option
to acquire 31,250 Shares. In the event that the Election Date occurs during
the Window, such Option shall be granted on the Election Date with respect to
such Option. In the event that such Eligible Director's election or
appointment does not occur during the Window, then such Option shall be
granted on the next Release Date. Any Eligible Director who is elected or
appointed to the Board as the result of a merger of a subsidiary of the
Company with Tandem Computers Incorporated ("Tandem") will not be eligible for
an initial grant as provided in this Section 6(a). Any options to purchase
common stock of Tandem held by such Eligible Director at the time of the
merger will be converted into options to purchase Compaq Common Stock upon
consummation of the merger. Such converted options shall be assumed under
this Plan and shall be exercisable on the first anniversary date of the grant
date of such options. This conversion to Options under this Plan shall not be
considered an initial grant as provided in this Section 6(a).
(b) Terms and Conditions. Any Option granted under this Section 6
shall be subject to the following terms and conditions:
(i) Option Price. The purchase price per Share purchasable under
an Option granted under Section 6 shall be 100% of the Fair Market Value of a
Share on the date of the grant of the Option.
(ii) Exercisability. An Option granted under Section 6(a) shall
be exercisable on the first anniversary of the Election Date.
SECTION 7. Annual Options. Annual Options shall be granted to Eligible
---------------
Directors as follows:
(a) Reelected Directors. Each Eligible Director who is reelected to the
Board at an annual meeting of the Company's stockholders on or after the
Amendment Date and who has not received a grant under Section 6 during the
period since the most recent previous annual meeting of the Company's
stockholders shall be granted an Option to acquire 25,000 Shares on each
Election Date on which he is reelected.
(b) Chairman of the Board. Each Eligible Director who is elected or
re-elected Chairman of the Board by the Board at its meeting following an
annual meeting of the Company's stockholders on or after the Amendment Date
and who has not received a grant under Section 6 during the period since the
most recent annual meeting of the Company's stockholders shall be granted on
each Election Date on which he is elected or reelected Chairman of the Board
an Option to acquire 6,250 Shares in addition to any applicable Option
granted under Section 7(a).
(c) Terms and Conditions. Any Option granted under this Section 7 shall
be subject to the following terms and conditions:
(i) Option Price. The purchase price per Share purchasable under
an Option shall be 100% of the Fair Market Value of a Share on the date of the
grant of the Option.
(ii) Exercisability. An Option granted under this Section 7 shall
be exercisable (A) with respect to 50% of the Shares thereunder on the first
anniversary of the Election Date related to such Option and (B) with respect
to the remaining 50% of the Shares thereunder on the second anniversary of
such Election Date
SECTION 8. Options in Lieu of Cash Compensation. Options shall be
-------------------------------------
granted to Eligible Directors in lieu of cash compensation as follows:
(a) Election to Receive Option. An option shall be granted
automatically to any Eligible Director who prior to an Election Date on which
such director is re-elected to the Board by the Company's stockholders, files
with the Secretary of the Company an irrevocable election to receive an Option
in lieu of all or a portion of his or her Annual Retainer. On the following
Election Date, each Eligible Director making such a filing under this Section
8(a) shall be granted an Option for the number of Shares determined under
Section 8(b) below.
(b) Option Formula. The number of Option shares granted on an Election
Date to any Eligible Director under this Section 8 shall be equal to the
nearest number of whole shares determined in accordance with the following
formula:
(Elected Portion) (Annual Retainer) = Number of
(Share Percentage) (Fair Market Value) Shares
where Elected Portion refers to the portion of Annual Retainers elected under
Section 8(a) and Fair Market Value refers to the Fair Market Value of a Share
on the date of grant.
<PAGE>
(c) Option Price. The purchase price per Share covered by each Option
granted under this Section 8 shall be the Fair Market Value of a Share on the
date of grant multiplied by the Price Percentage.
(d) Exercisability. An Option granted under this Section 8 shall be
exercisable one year from the date of grant
(e) Adjustment. In the event that any law, ruling, or regulation shall
be proposed, promulgated, or adopted after the Amendment Date that provides
that a higher Option price shall be required so that Options granted under
Section 8 of the Plan will be treated as options for tax purposes, the Share
Percentage and Price Percentage of Options granted hereafter under this
Section 8 shall be automatically adjusted to comply therewith; provided,
however, the sum of the Share Percentage and the Price Percentage shall remain
100 percent.
SECTION 9. General Terms. The following provisions shall apply to any
-------------
Option granted under the Plan.
(a) Option Period. Each Option shall expire ten years from its date of
grant. Each Option shall be subject to termination before its date of
expiration as hereinafter provided.
(b) Termination of Service as Director. If a Participant's service as a
director is terminated for any reason other than death, disability or
retirement due to a mandatory age retirement policy the Participant or his
beneficiary shall have the right to exercise any Option to the extent it was
exercisable at the date of such termination of service and shall not have been
exercised. The right to exercise such Option to the extent set forth herein
shall continue until the expiration of the Option.
(c) Death or Disability. If the Participant's service as a director is
terminated by death or disability, the Participant shall have the right to
exercise a prorated number of the Shares under any Option that is not fully
exercisable prior to such event, such number to be determined by multiplying
(i) the total number of Shares subject to such Option by (ii) a fraction equal
to (A) the total of number of completed months of service since the Election
Date related to such Option divided by (B) the total number of completed
months of service from the Election Date related to such Option until such
Option would have become fully exercisable. The right to exercise such Option
to the extent set forth herein shall continue until the expiration of the
Option.
(d) Mandatory Age Retirement. If the Participant's service as a
Director is terminated as a result of any mandatory age retirement policy of
the Board, Options granted under the Plan shall become immediately exercisable
with respect to 100% of the Shares on the date of such mandatory retirement.
The right to exercise each such Option to the extent set forth herein shall
continue until the expiration of such Option.
(e) Method of Exercise. Any Option may be exercised by the Participant
in whole or in part at such time or times and by such methods as the Board may
specify. The applicable Option Agreement may provide that the Participant may
make payment of the Option price in cash, Shares, or such other consideration
as the Board may specify, or any combination thereof, having a Fair Market
Value on the exercise date equal to the total option price.
SECTION 10. Change in Control.
-------------------
(a) Immediate Vesting. Notwithstanding any other provision of the Plan
to the contrary, upon a Change in Control, as defined below, all outstanding
Options shall vest and become immediately exercisable.
<PAGE>
(b) Change in Control. A "Change in Control" shall be deemed to have
occurred if: (i) any "person" as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under any employee benefit plan of the Company,
or any company owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of Stock of
the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities; (ii) during any period of two consecutive years (not
including any period prior to January 18, 1989), individuals who at the
beginning of such period constitute the Board, and any new director (other
than a director designated by a person who has entered into an agreement with
the Company to effect a transaction described in clause (i), (iii), or (iv) of
this Section 10(b)) whose election by the Board or nomination for election by
the Company's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who either were directors at the beginning
of the two-year period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
of the Board; (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation; provided, however, that a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person acquires more than 30% of the combined
voting power of the Company's then outstanding securities shall not constitute
a Change in Control of the Company; or (iv) the stockholders of the Company
approve a plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets.
SECTION 11. Amendments and Termination.
-----------------------------
(a) Board Authority. The Board may amend, alter, or discontinue the
Plan, but no amendment, alteration, or discontinuation shall be made (i) that
would impair the rights of a Participant under an Option theretofore granted,
without the Participant's consent, or (ii) without the approval of the
stockholders if such approval is necessary to comply with any tax or
regulatory requirement, including for these purposes any approval requirement
which is a prerequisite for exemptive relief from Section 16(b) of the
Exchange Act, or (iii) to Section 6, Section 7 or Section 8 more often than
once every six months.
(b) Prior Stockholder and Participant Approval. Anything herein to the
contrary notwithstanding, in the event that amendments to the Plan are
required in order that the Plan or any other stock-based compensation plan of
the Company comply with the requirements of Rule 16b-3 issued under the
Exchange Act as amended from time to time or any successor rules promulgated
by the Securities and Exchange Commission related to the treatment of benefit
and compensation plans under Section 16 of the Exchange Act, the Board is
authorized to make such amendments without the consent of Participants or the
stockholders of the Company.
SECTION 12. General Provisions.
-------------------
(a) Nontransferability. No Option shall be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by a Participant, except
by will or the laws of descent and distribution, provided, however, that an
Option may be transferable, to the extent set forth in the applicable Grant
Notice or agreement and in accordance with procedures adopted by the Board, if
such provisions do not disqualify such Option for exemption under Rule 16b-3.
(b) Compliance Requirements. All certificates for Shares delivered
under the Plan pursuant to any Option shall be subject to such stock-transfer
orders and other restrictions as the Board may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Shares are then listed, and any applicable
federal or state securities law, and the Board may cause a legend or legends
to be put on any such certificates to make appropriate reference to such
restrictions. The Company shall not be required to issue or deliver any
Shares under the Plan prior to the completion of any registration or
qualification of such Shares under any federal or state law, or
under any ruling or regulation of any governmental body or national securities
exchange that the Board in its sole discretion shall deem to be necessary or
appropriate.
(c) Other Plans. Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required by applicable law or the
rules of any stock exchange on which the Common Stock is then listed; and such
arrangements may be either generally applicable or applicable only in specific
cases.
<PAGE>
(d) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware and applicable federal law.
(e) Conformity With Law. If any provision of this Plan is or becomes or
is deemed invalid, illegal, or unenforceable in any jurisdiction, or would
disqualify the Plan or any Option under any law deemed applicable by the
Board, such provision shall be construed or deemed amended in such
jurisdiction to conform to applicable laws or if it cannot be construed or
deemed amended without, in the determination of the Board, materially altering
the intent of the Plan, it shall be stricken and the remainder of the Plan
shall remain in full force and effect.
SECTION 13. Expiration. The Plan will expire when no Shares are
----------
available for issuance.
EXECUTION COPY
==============================================================================
U.S. $1,000,000,000
REVOLVING CREDIT AGREEMENT
(364-DAY)
DATED AS OF SEPTEMBER 22, 1997
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,
---------------------
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
AS INTERNET AGENT,
-----------------
AND
THE BANKS PARTY HERETO
==============================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
------
<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
3.13 Computation of Fees and Interest. . . . . . . . . . . . . . . . . . 23
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 . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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 . . . . . . . . . . . . . . . . . . . . . . 36
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 . . . . . . . . . . . . . . . . . . . . . . 36
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 . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.04 Maintenance of Insurance. . . . . . . . . . . . . . . . . . . . . . 38
6.05 Corporate Existence Etc.. . . . . . . . . . . . . . . . . . . . . . 39
6.06 Visitation Rights . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VII NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 39
7.01 Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.02 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VIII EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . 40
8.01 Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.02 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.03 Rights Not Exclusive. . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE IX THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.01 Appointment and Authorization . . . . . . . . . . . . . . . . . . . 41
9.02 Delegation of Duties. . . . . . . . . . . . . . . . . . . . . . . . 42
9.03 Liability of Agent. . . . . . . . . . . . . . . . . . . . . . . . . 42
9.04 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.05 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.06 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.07 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.08 Agent in Individual Capacity. . . . . . . . . . . . . . . . . . . . 44
9.09 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.10 Withholding Tax . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.11 Co-Agents; Internet Agents. . . . . . . . . . . . . . . . . . . . . 46
<PAGE>
ARTICLE X MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.01 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . 47
10.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.03 No Waiver: Cumulative Remedies. . . . . . . . . . . . . . . . . . . 48
10.04 Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 48
10.05 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.06 Payments Set Aside. . . . . . . . . . . . . . . . . . . . . . . . . 49
10.07 Binding Effect; Assignments; Participations . . . . . . . . . . . . 49
10.08 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.09 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.10 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.11 Preservation of Certain Matters . . . . . . . . . . . . . . . . . . 53
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. . . . . . . . . . . . . . . . . . . . . . . . 54
10.17 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
<PAGE>
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 Vinson & Elkins L.L.P., Counsel to the
Company
Exhibit E Form of Note
Exhibit F Form of Assignment and Acceptance
<PAGE>
REVOLVING CREDIT AGREEMENT
(364-DAY)
dated as of September 22, 1997
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, and Morgan Guaranty Trust
Company of New York, as Internet agent, 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
------------------------------
<PAGE>
(b) the Assessment Rate for such Interest Period.
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.
---------
<PAGE>
"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.
"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.
<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.
<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."
<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.
<PAGE>
"FDIC" means the Federal Deposit Insurance Corporation, and any Governmental
----
Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the weekly
--------------------
statistical release designated as H.15(519), 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 this date 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 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).
<PAGE>
"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.
-----------
"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
<PAGE>
(iii) no Interest Period for any Loan shall extend beyond the date set
forth in clause (a) of the definition of "Revolving Termination Date".
"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.
----
<PAGE>
"Loan Documents" means this Agreement, the Notes and all other documents
---------------
delivered to the Agent or any Bank in connection herewith.
"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.
--------------
<PAGE>
"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.
"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.
<PAGE>
"Resulting Increased Commitment" has the meaning specified in Section 3.07.
--------------------------------
"Revolving Loan" has the meaning specified in Section 2.01(a).
---------------
"Revolving Termination Date" means the earlier to occur of:
----------------------------
(a) September 21, 1998, 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.
---------------
<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.
<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).
(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).
<PAGE>
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);
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.
<PAGE>
(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.
<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.
<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.
<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
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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:
<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.
<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.
<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 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.
<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
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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
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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 Loans under Section 2.09
for the portion of the 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
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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 average daily amount by which such Bank's
Commitment exceeds the aggregate outstanding principal amount of such Bank's
Revolving Loans, from the date hereof 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 June 29, 1997 among such
Persons.
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.
<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 s hall 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 information 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
(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
<PAGE>
(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.
<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.
<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.
<PAGE>
(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.
(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.
<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.
<PAGE>
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.
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.
<PAGE>
(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).
(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.
<PAGE>
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.
<PAGE>
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;
<PAGE>
(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 Vinson &
-----------
Elkins L.L.P., counsel to the Company, addressed to the Agent and the Banks,
substantially in the form of Exhibit D-2;
------------
(e) 5-Year Credit Agreement. Evidence that all conditions to closing of
-----------------------
the 5-Year Credit Agreement have occurred;
(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;
(g) Termination of Commitments under Existing Credit Agreements.
-----------------------------------------------------------
Evidence that the commitments to lend under the $500,000,000 Revolving Credit
Agreement dated as of October 31, 1995 among the Company, the banks party
thereto, Bank of America National Trust and Savings Association, as
Administrative Agent, NationsBank of Texas, National Association and Citibank,
N.A., as co-agents, as amended and restated by the parties as of October 29,
1996 and under the $1,000,000,000 Revolving Credit Agreement dated as of
October 31, 1995 among the Company, the banks party thereto, Bank of America
National Trust and Savings Association, as Administrative Agent, NationsBank
of Texas, National Association and Citibank, N.A., as co-agents, as amended
and restated by the parties as of October 29, 1996 (collectively, the
"Existing Credit Agreements") have been terminated and that all principal,
----------------------------
interest, fees and other amounts due thereunder (including under Section 3.02
of each Existing Credit Agreement) have been paid or arrangements satisfactory
to the Agent have been made for the payment thereof as of the Closing Date;
and
(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
<PAGE>
(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.
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.
<PAGE>
5.05 Financial Statements. The audited consolidated balance sheet of
--------------------
the Company and its Subsidiaries as of December 31, 1996, 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, 1996) and the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of June 30, 1997 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, 1997), 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, 1996, or the Company's Forms 10-Q for the quarters
ended March 31 and June 30, 1997, 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.
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.
<PAGE>
5.11 Environmental Condition. Except as disclosed in the Company's
-----------------------
Form 10-K Report for the year ended December 31, 1996 or in the Company's Form
10-Q Report for the quarter ended June 30, 1997, 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, 1996, 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:
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;
<PAGE>
(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.
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.
<PAGE>
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.
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%.
<PAGE>
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
(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
<PAGE>
(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.
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.
<PAGE>
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.
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.
<PAGE>
(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.
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.
<PAGE>
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.
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.
<PAGE>
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
(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.
<PAGE>
(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.
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.
<PAGE>
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.
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.
<PAGE>
(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; limited, however, in the
case of the preparation, execution and delivery of the Loan Documents, to the
Attorney Costs of the Agent as more fully provided in that certain letter
agreement between the Company and the Agent dated July 29, 1997; and
<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; Participations. (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).
<PAGE>
(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 Agreement, 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.
<PAGE>
(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.
<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".
<PAGE>
(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."
<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.
<PAGE>
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.
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]
<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.
<TABLE>
<CAPTION>
<S> <C>
Company's Notice Address: COMPAQ COMPUTER CORPORATION
Compaq Computer Corporation
P.O. Box 692000, MS110701
20555 State Highway 24 By: /s/ Ben K. Wells
----------------------------------
Houston, TX 77269-2000 Name: Ben K. Wells
www.compaq.com Title: Assistant 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 and as Internet Agent
By: /s/ Kevin M. McMahon
-----------------------------------
Name: Kevin M. McMahon
Title: Managing Director
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Swingline Bank and
as a Bank
By: /s/ Kevin M. McMahon
-----------------------------------
Name: Kevin M. McMahon
Title: Managing Director
CITIBANK, N.A.,
as Syndication Agent and as a Bank
By: /s/ James M. Walsh
-----------------------------------
Name: James M. Walsh
Title: Attorney-in-fact
<PAGE>
NATIONSBANK OF TEXAS, N.A.,
as Syndication Agent and as a Bank
By: /s/ Timothy M. O'Connor
-----------------------------------
Name: Timothy M. O'Connor
Title: Vice President
THE CHASE MANHATTAN BANK,
as Syndication Agent and as a Bank
By: /s/ David Staples
-----------------------------------
Name: David Staples
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Internet Agent and as a Bank
By: /s/ Jeffrey Hwang
-----------------------------------
Name: Jeffrey Hwang
Title: Vice President
CARIPLO-CASSA DI RISPARMIO
DELLE PROVINCIE LOMBARDE S.P.A.
By: /s/ Anthony F. Giobbi
-----------------------------------
Name: Anthony F. Giobbi
Title: First Vice President
By: /s/ Charles W. Kennedy
-----------------------------------
Name: Charles W. Kennedy
Title: First Vice President
<PAGE>
DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN ISLANDS
BRANCH
By: /s/ Ralf Hoffmann
-----------------------------------
Name: Ralf Hoffmann
Title: Vice President
By: /s/ V. Shannon Sewsankar
-----------------------------------
Name: V. Shannon Sewsankar
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Cory M. Olson
-----------------------------------
Name: Cory M. Olson
Title: Authorized Agent
FLEET NATIONAL BANK
By: /s/ Frank Benesh
-----------------------------------
Name: Frank Benesh
Title: Vice President
ING BANK N.V.
By: /s/ Peter Nabney
-----------------------------------
Name: Peter Nabney
Title: General Manager
By: /s/ Samantha de Foubert
-----------------------------------
Name: Samantha de Foubert
Title: Account Manager
<PAGE>
ROYAL BANK OF CANADA
By: /s/ Brian W. Dixon
-----------------------------------
For: Brian W. Dixon
Title: Senior Manager
BANCA COMMERCIALE ITALIANA,
LOS ANGELES BRANCH
By: /s/ Eduardo Bombieri
-----------------------------------
Name: Eduardo Bombieri
Title: Vice President & Manager
By: /s/ Jack Wityak
-----------------------------------
Name: Jack Wityak
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Mark Marron
-----------------------------------
Name: Mark Marron
Title: Vice President
BARCLAYS BANK PLC, NEW YORK BRANCH
By: /s/ John Giannone
-----------------------------------
Name: John Giannone
Title: Director
<PAGE>
THE FUJI BANK, LIMITED, HOUSTON AGENCY
By: /s/ Kenichi Tatara
-----------------------------------
Name: Kenichi Tatara
Title: Vice President & Manager
NATIONAL AUSTRALIA BANK LIMITED
By: /s/ Justin McCarty, III
-----------------------------------
Name: Justin McCarty, III
Title: Vice President
BANCA DI ROMA, CHICAGO BRANCH
By: /s/ Claudio Perna
-----------------------------------
Name: Claudio Perna
Title: Senior Vice President and Branch
Manager
By: /s/ Luigi Rocchi
-----------------------------------
Name: Luigi Rocchi
Title: Vice President
BANCA MONTE DEI PASCHI DI SIENA, S.P.A.
By: /s/ G. Natalicchi
-----------------------------------
Name: G. Natalicchi
Title: Senior Vice President & General Manager
By: /s/ Brian R. Landy
-----------------------------------
Name: Brian R. Landy
Title: Vice President
<PAGE>
BANCA NAZIONALE DEL LAVORO S.P.A., NEW YORK BRANCH
By: /s/ Giuliano Violetta
-----------------------------------
Name: Giuliano Violetta
Title: First Vice President
By: /s/ Adolph S. Mascari
-----------------------------------
Name: Adolph S. Mascari
Title: Assistant Vice President
BANCA POPOLARE DI MILANO, NEW YORK BRANCH
By: /s/ Anthony Franco
-----------------------------------
Name: Anthony Franco
Title: Executive Vice President and General
Manager
By: /s/ Fulvio Montanri
-----------------------------------
Name: Fulvio Montanri
Title: First Vice President, Corporate Banking
BANCO CENTRAL HISPANO AMERICANO, S.A., NEW YORK BRANCH
By: /s/ Francesco Alcon
-----------------------------------
Name: Francesco Alcon
Title: Executive Vice President & General
Manager
<PAGE>
BANK OF MONTREAL
By: /s/ Bev Blucher
-----------------------------------
Name: Bev Blucher
Title: Senior Vice President
THE BANK OF NEW YORK
By: /s/ Alan Lyster
-----------------------------------
Name: Alan Lyster
Title: Vice President
BANKBOSTON, N.A.
By: /s/ Jay L. Massimo
-----------------------------------
Name: Jay L. Massimo
Title: Vice President
BANQUE NATIONALE DE PARIS, HOUSTON AGENCY
By: /s/ Thierry Bonetto
-----------------------------------
Name: Thierry Bonetto
Title: Deputy General Manager
<PAGE>
BAYERISCHE HYPOTHEKEN-UND WECHSEL-BANK
AKTIENGELSELLSCHAFT, NEW YORK BRANCH
By: /s/ Yoram Dankner
-----------------------------------
Name: Yoram Dankner
Title: Senior Vice President
By: /s/ E.S. Atwell
-----------------------------------
Name: E.S. Atwell
Title: Vice President
CORESTATES BANK, N.A.
By: /s/ Scott Hoffman
-----------------------------------
Name: Scott Hoffman
Title: Vice President
CREDITO ITALIANO
By: /s/ Umberto Seretti /s/ Saiyed A. Abbas
------------------------------------------------------
Name: Umberto Seretti Saiyed A. Abbas
Title: Vice President Assistant Vice President
THE DAI-ICHI KANGYO BANK, LIMITED
By: /s/ Seiji Imai
-----------------------------------
Name: Seiji Imai
Title: Vice President
<PAGE>
DEN DANSKE BANK AKTIESELSKAB, CAYMAN ISLANDS BRANCH
By: /s/ John O'Neill
-----------------------------------
Name: John O'Neill
Title: Vice President
By: /s/ Peter L. Hargraves
-----------------------------------
Name: Peter L. Hargraves
Title: Vice President
DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH
By: /s/ John W. Sweeney
-----------------------------------
Name: John W. Sweeney
Title: Assistant Vice President
By: /s/ Denise M. Rohde
-----------------------------------
Name: Denise M. Rohde
Title: Assistant Treasurer
THE INDUSTRIAL BANK OF JAPAN, LIMITED
NEW YORK BRANCH
By: /s/ Kazutoshi Kuwahara
-----------------------------------
Name: Kazutoshi Kuwahara
Title: Executive Vice President, Houston Office
<PAGE>
ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A.
By: /s/ Robert Wurster
-----------------------------------
Name: Robert Wurster
Title: First Vice President
By: /s/ Glen Binder
-----------------------------------
Name: Glen Binder
Title: Vice President
KREDIET BANK N.V., GRAND CAYMAN BRANCH
By: /s/ Robert Snauffer
-----------------------------------
Name: Robert Snauffer
Title: Vice President
By: /s/ Tod R. Angus
-----------------------------------
Name: Tod R. Angus
Title: Vice President
MARINE MIDLAND BANK
By: /s/ John B Lyons
-----------------------------------
Name: John B Lyons
Title: Senior Vice President
MELLON BANK, N.A.
By: /s/ John M. Kailer
-----------------------------------
Name: John M. Kailer
Title: First Vice President
<PAGE>
NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH
By: /s/ Angela Bozorgmir
-----------------------------------
Name: Angela Bozorgmir
Title: Vice President
NATIONAL WESTMINSTER BANK PLC,
NASSAU BRANCH
By: /s/ Angela Bozorgmir
-----------------------------------
Name: Angela Bozorgmir
Title: Vice President
THE NORTHERN TRUST COMPANY
By: /s/ John E. Burda
-----------------------------------
Name: John E. Burda
Title: Second Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ David J. Egan
-----------------------------------
Name: David J. Egan
Title: Senior Vice President
<PAGE>
THE SANWA BANK, LIMITED
By: /s/ Matthew Patrick
-----------------------------------
Name: Matthew Patrick
Title: Vice President
SKANDINAVISKA ENSKILDA BANKEN AB (PUBL), NEW YORK BRANCH
By: /s/ Benjamin K.B. Young
-----------------------------------
Name: Benjamin K.B. Young
Title: Senior Account Executive
By: /s/ Phillip F. Monternurro, Jr.
-----------------------------------
Name: Phillip F. Monternurro, Jr.
Title: Vice President
SOCIETE GENERALE FINANCE (IRELAND) LIMITED
By: /s/ Ther se Leonard
-----------------------------------
Name: Therese Leonard
Title: Account Manager
By: /s/ Jacinta Conroy
-----------------------------------
Name: Jacinta Conroy
Title: Loans Administrator
<PAGE>
STANDARD CHARTERED BANK
By: /s/ Peter G.R. Dodds
-----------------------------------
Name: Peter G.R. Dodds
Title: Vice President
By: /s/ Kristina McDavid
-----------------------------------
Name: Kristina McDavid
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ Harumitsu Seki
-----------------------------------
Name: Harumitsu Seki
Title: General Manager
THE SUMITOMO TRUST & BANKING CO., LTD., LOS ANGELES AGENCY
By: /s/ Ninoos Y. Benjamin
-----------------------------------
Name: Ninoos Y. Benjamin
Title: Vice President & Manager
SWISS BANK CORPORATION, NEW YORK BRANCH
By: /s/ Gary Riddell
-----------------------------------
Name: Gary Riddell
Title: Director
By: /s/ James J. Diaz
-----------------------------------
Name: James J. Diaz
Title: Director
<PAGE>
TORONTO DOMINION BANK (TEXAS), INC.
By: /s/ Darlene Riedel
-----------------------------------
Name: Darlene Riedel
Title: Vice President
WELLS FARGO BANK, N.A.
By: /s/ Ken Taylor
-----------------------------------
Name: Ken Taylor
Title: Assistant Vice President
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH
By: /s/ Alan S. Bookspan /s/ Thomas Lee
-------------------------------------------------
Name: Alan S. Bookspan Thomas Lee
Title: Vice President Associate
<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 September 22,
1997 (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 $___________.
(iv) The duration of the Interest Period for each CD Loan or Offshore
Loan made as part of the Proposed Borrowing is _______ (days) (months).
- ------------------
* To be included for a Proposed Borrowing comprised of Revolving Loans.
** To be included for a Proposed Borrowing comprised of a Swingline Loan.
<PAGE>
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:
<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 September 22,
1997 (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 *foot3*Select appropriate interest
rate option.[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.
<PAGE>
The Company has caused this Conversion/Continuation Notice to be executed
and delivered this _____ day of _____________, 199__.
COMPAQ COMPUTER CORPORATION
By:
Name:
Title:
<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 September 22, 1997
(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:
<PAGE>
EXHIBIT D-1
-----------
[Date]
To each of the Banks parties to the
$1,000,000,000 Revolving Credit Agreement
dated as of September 22, 1997 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,
and Morgan Guaranty Trust Company of New York,
as Internet agent
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 September 22, 1997 (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, and Morgan Guaranty Trust Company of New York, as Internet
agent. 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 instruments, 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:
<PAGE>
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.
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.
<PAGE>
4. Except as disclosed in the Company's Form 10-K for the year ended
December 31, 1996, or the Company's Forms 10-Q for the quarters ended March 31
and June 30, 1997, 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.
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,
/S/ Linda S. Auwers
---------------------
Linda S. Auwers
Vice President and
Assistant General Counsel
<PAGE>
EXHIBIT D-2
-----------
(713) 758-3516 (713) 615-5381
September 22, 1997
To Each of the Banks Parties to the
$1,000,000,000 Revolving Credit Agreement
dated as of September 22, 1997 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 and Morgan Guaranty
Trust Company of New York, as Internet Agent
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 September 22, 1997 (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,
and Morgan Guaranty Trust Company of New York, as Internet Agent. Except as
otherwise defined herein, terms defined in the Credit Agreement are used
herein as therein defined.
We 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, we have examined:
(1) The Credit Agreement;
(2) The Notes (together with the Credit Agreement, the "Loan
Documents"); and
<PAGE>
(3) Such other materials as we have deemed necessary to render the
opinions provided herein.
We have also made such investigations of law as we have deemed necessary
and relevant as a basis for our opinion. As to various questions of fact
material to our opinion, we 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, we are 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 our 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 G, 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, we 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.
<PAGE>
(c) In rendering the opinions set forth above, we 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 our opinions set forth herein, we 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) We 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.
<PAGE>
(f) In rendering our enforceability opinion with respect to
provisions providing for the appointment of an agent for service of process on
behalf of the Company, we have assumed that such agent will provide timely
notice to the Company of the commencement of legal proceedings.
(g) We 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, we 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
we assume no obligation to update or supplement such opinions to reflect any
fact or circumstance that may hereafter come to our 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 our 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,
/s/ VINSON & ELKINS L.L.P.
-----------------------------
VINSON & ELKINS L.L.P.
<PAGE>
EXHIBIT E
---------
PROMISSORY NOTE
U.S. $__________ Dated: September 22, 1997
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 September 22, 1997 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, and Morgan Guaranty Trust Company of New
York, as Internet agent; 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.
<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:
<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
- ---- ------ ------- --------- --------- --------
<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 September 22, 1997 (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.
---------------------------
<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.
--------------------------
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.
<PAGE>
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.
<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.
<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) 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.]
<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:
Title:
Address:
[Name of Assignee]
By:
Title:
Address:
<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 Management 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
September 22, 1997 (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.
<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.
<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:
<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:
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE 2.01
COMMITMENTS
-----------
Amount of
Name of Bank Commitment %
- --------------------------------------------- ----------------- -------------
<S> <C> <C>
Bank of America National Trust and Savings
Association 62,500,000.00 6.25000000
The Chase Manhattan Bank 62,500,000.00 6.25000000
Citibank, N.A. 62,500,000.00 6.25000000
Nationsbank of Texas, N.A. 62,500,000.00 6.25000000
Morgan Guaranty Trust Company of New York 50,000,000.00 5.00000000
Cariplo - Cassa di Risparmio Delle Provincie
Lombarde S.p.A. 32,500,000.00 3.25000000
Deutsche Bank AG 32,500,000.00 3.25000000
The First National Bank of Chicago 32,500,000.00 3.25000000
Fleet National Bank 32,500,000.00 3.25000000
Ing Bank N.V. 32,500,000.00 3.25000000
Royal Bank of Canada 32,500,000.00 3.25000000
Banca Commerciale Italiana 18,500,000.00 1.85000000
Bank of Tokyo - Mitsubishi Trust Company 18,500,000.00 1.85000000
Barclays Bank PLC 18,500,000.00 1.85000000
The Fuji Bank, Limited 18,500,000.00 1.85000000
National Australia Bank Limited 18,500,000.00 1.85000000
Banca di Roma 12,500,000.00 1.25000000
Banca Monte Dei Paschi di Siena, S.p.A. 12,500,000.00 1.25000000
Banca Nazionale del Lavoro S.p.A. 12,500,000.00 1.25000000
Banca Popolare di Milano 12,500,000.00 1.25000000
Banco Central Hispano Americano, S.A. 12,500,000.00 1.25000000
Bank of Montreal 12,500,000.00 1.25000000
The Bank of New York 12,500,000.00 1.25000000
Bankboston, N.A. 12,500,000.00 1.25000000
Banque Nationale de Paris 12,500,000.00 1.25000000
Bayerische Hypotheken - Und Wechsel - Bank 12,500,000.00 1.25000000
Corestates Bank, N.A. 12,500,000.00 1.25000000
Credito Italiano 12,500,000.00 1.25000000
The Dai-Ichi Kangyo Bank, Limited 12,500,000.00 1.25000000
Den Danske Bank Aktieselskab 12,500,000.00 1.25000000
Dresdner Bank AG 12,500,000.00 1.25000000
The Industrial Bank of Japan, Limited 12,500,000.00 1.25000000
Istituto Bancario San Paolo di Torino S.p.A. 12,500,000.00 1.25000000
<PAGE>
Kredietbank N.V. 12,500,000.00 1.25000000
Marine Midland Bank 12,500,000.00 1.25000000
Mellon Bank, N.A. 12,500,000.00 1.25000000
National Westminster Bank plc 12,500,000.00 1.25000000
The Northern Trust Company 12,500,000.00 1.25000000
PNC Bank, National Association 12,500,000.00 1.25000000
The Sanwa Bank, Limited 12,500,000.00 1.25000000
Skandinaviska Enskilda Banken AB (Publ) 12,500,000.00 1.25000000
Societe Generale Finance (Ireland) Limited 12,500,000.00 1.25000000
Standard Chartered Bank 12,500,000.00 1.25000000
The Sumitomo Bank, Limited 12,500,000.00 1.25000000
The Sumitomo Trust & Banking Co., Ltd. 12,500,000.00 1.25000000
Swiss Bank Corporation 12,500,000.00 1.25000000
Toronto Dominion (Texas), Inc. 12,500,000.00 1.25000000
Wells Fargo Bank, N.A. 12,500,000.00 1.25000000
Westdeutsche Landesbank Girozentrale 12,500,000.00 1.25000000
================= =============
TOTAL $1,000,000,000.00 100.00000000
</TABLE>
<PAGE>
EXECUTION COPY
==============================================================================
U.S. $3,000,000,000
REVOLVING CREDIT AGREEMENT
DATED AS OF SEPTEMBER 22, 1997
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,
----------------------
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
AS INTERNET AGENT,
------------------
AND
THE BANKS PARTY HERETO
==============================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
------
<S> <C>
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Other Interpretive Provisions . . . . . . . . . . . . . . . . . . . 14
1.03 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE II THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.01 Amounts and Terms of Commitments. . . . . . . . . . . . . . . . . . 16
2.02 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.03 Procedure for Revolving Loan Borrowings . . . . . . . . . . . . . . 17
2.04 Conversion and Continuation Elections for Revolving Loan Borrowings 18
2.05 Procedure for Swingline Borrowings. . . . . . . . . . . . . . . . . 19
2.06 Increase and Extension of Commitments . . . . . . . . . . . . . . . 21
2.07 Ratable Reduction or Termination of Commitments . . . . . . . . . . 22
2.08 Non-Ratable Reduction or Termination of Commitments . . . . . . . . 23
2.09 Optional and Mandatory Prepayments. . . . . . . . . . . . . . . . . 23
2.10 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.11 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.12 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.13 Computation of Fees and Interest. . . . . . . . . . . . . . . . . . 25
2.14 Interest Rate Determination and Protection. . . . . . . . . . . . . 26
2.15 Payments by the Company . . . . . . . . . . . . . . . . . . . . . . 27
2.16 Payments by the Banks to the Agent. . . . . . . . . . . . . . . . . 27
2.17 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY . . . . . . . . . . . . . . 28
3.01 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.02 Breakage Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.03 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.04 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.05 Reserves on Offshore Loans. . . . . . . . . . . . . . . . . . . . . 31
3.06 Replacement of Bank; Termination of Bank. . . . . . . . . . . . . . 31
3.07 Reallocation of Commitments in Event of Merger, Etc.. . . . . . . . 33
3.08 Certificates of Banks . . . . . . . . . . . . . . . . . . . . . . . 34
3.09 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IV CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . 34
4.01 Conditions of Initial Loans . . . . . . . . . . . . . . . . . . . . 34
4.02 Conditions to All Borrowings. . . . . . . . . . . . . . . . . . . . 35
<PAGE>
ARTICLE V REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 36
5.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . 36
5.02 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.03 Authorization and Approvals . . . . . . . . . . . . . . . . . . . . 36
5.04 Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . 36
5.05 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 37
5.06 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.07 Regulation U. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.08 Investment Company Act. . . . . . . . . . . . . . . . . . . . . . . 37
5.09 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.10 Holding Company . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.11 Environmental Condition . . . . . . . . . . . . . . . . . . . . . . 37
5.12 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VI AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 38
6.01 Compliance with Laws Etc. . . . . . . . . . . . . . . . . . . . . . 38
6.02 Reporting Requirements. . . . . . . . . . . . . . . . . . . . . . . 38
6.03 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.04 Maintenance of Insurance. . . . . . . . . . . . . . . . . . . . . . 40
6.05 Corporate Existence Etc.. . . . . . . . . . . . . . . . . . . . . . 40
6.06 Visitation Rights . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VII NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 40
7.01 Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.02 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VIII EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . 41
8.01 Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.02 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.03 Rights Not Exclusive. . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.01 Appointment and Authorization . . . . . . . . . . . . . . . . . . . 43
9.02 Delegation of Duties. . . . . . . . . . . . . . . . . . . . . . . . 43
9.03 Liability of Agent. . . . . . . . . . . . . . . . . . . . . . . . . 43
9.04 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.05 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.06 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.07 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.08 Agent in Individual Capacity. . . . . . . . . . . . . . . . . . . . 45
9.09 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.10 Withholding Tax . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.11 Co-Agents; Internet Agents. . . . . . . . . . . . . . . . . . . . . 47
<PAGE>
ARTICLE X MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.01 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . 48
10.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.03 No Waiver: Cumulative Remedies. . . . . . . . . . . . . . . . . . . 49
10.04 Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 49
10.05 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.06 Payments Set Aside. . . . . . . . . . . . . . . . . . . . . . . . . 50
10.07 Binding Effect; Assignments; Participations . . . . . . . . . . . . 50
10.08 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.15 Governing Law; Jurisdiction . . . . . . . . . . . . . . . . . . . . 55
10.16 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . 55
10.17 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
<PAGE>
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 Vinson & Elkins L.L.P., Counsel to the
Company
Exhibit E Form of Note
Exhibit F Form of Assignment and Acceptance
<PAGE>
REVOLVING CREDIT AGREEMENT
dated as of September 22, 1997
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, and Morgan Guaranty Trust
Company of New York, as Internet agent, 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.
<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 Sec-tion 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.
---------
<PAGE>
"Applicable Fee Amount" means, for any date, the per annum percentage
-----------------------
amount set forth below based on the Applicable Rating on such date:
<TABLE>
<CAPTION>
Applicable
Rating Fee Percentage
- ------------------ ---------------
<S> <C>
A+/A1 (or higher). 0.0600%
A/A2 . . . . . . . 0.0650%
A-/A3. . . . . . . 0.0725%
BBB+/Baa1. . . . . 0.0800%
BBB/Baa2 . . . . . 0.1000%
BBB-/Baa3. . . . . 0.1500%
BB+/Ba1. . . . . . 0.1750%
(or lower, or no
Applicable Rating)
</TABLE>
"Applicable Margin" means, on any date and with respect to each CD Loan or
------------------
Offshore Loan outstanding on such date, the applicable margin (on a per annum
basis) set forth below based on the Applicable Rating on such date:
<TABLE>
<CAPTION>
Applicable . . . . CD Offshore
Rating . . . . . . Loans Loans
- ------------------ ------- ---------
<S> <C> <C>
A+/A1 (or higher). 0.1900% 0.1900%
A/A2 . . . . . . . 0.2000% 0.2000%
A-/A3. . . . . . . 0.2300% 0.2300%
BBB+/Baa1. . . . . 0.2500% 0.2500%
BBB/Baa2 . . . . . 0.3250% 0.3250%
BBB-/Baa3. . . . . 0.4000% 0.4000%
BB+/Ba1. . . . . . 0.6000% 0.6000%
(or lower, or no
Applicable Rating)
</TABLE>
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 364-Day 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 364-Day 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 364-Day Credit Agreement, as applicable), the Applicable Margin in respect
of CD Loans and Offshore Loans hereunder shall be increased by an additional
0.100 percent per annum.
"Applicable Rating" means the most favorable ratings issued from time to
------------------
time by S&P or Moody's as applicable to the Company's senior unsecured
long-term debt; provided that (a) if the most favorable ratings established by
--------
such rating agencies indicate two different pricing levels, the level
corresponding to the more favorable of such ratings shall apply, (b) if only
one such rating agency shall provide a rating as to the Company's senior
unsecured long-term debt, the pricing level shall be determined based upon
such rating, and (c) if the ratings system of either of S&P or Moody's shall
change prior to the date all Obligations have been paid and the Commitments
cancelled, the Company, Agent and Banks shall negotiate in good faith to amend
this Agreement promptly to reflect such changed system.
<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 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.
<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
-----------------------------
"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.
<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."
<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.
<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.
"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.
-----------
"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.
<PAGE>
"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".
"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.
<PAGE>
"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.
<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.
"Person" means an individual, partnership, corporation, limited liability
------
company, business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
<PAGE>
"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).
---------------
"Revolving Termination Date" means the earlier to occur of:
----------------------------
(a) September 22, 2002, as such date may be extended pursuant to
Section 2.06; and
<PAGE>
(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 subordinate in right of payment to the Loans made by the Banks
hereunder and under the 364-Day 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 "Revolving Termination
Date."
"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.
---------------
"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).
---------------
<PAGE>
"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.
"364-Day Credit Agreement" means that U.S.$1,000,000,000 Revolving Credit
--------------------------
Agreement dated as of this date 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.
"364-Day Credit Agreement Termination Date" means the date upon which the
---------------------------------------------
Agent has received evidence, in form and substance satisfactory to the Agent,
that the commitments of the lenders under the 364-Day Credit Agreement have
been duly cancelled or terminated and that all principal, interest, fees,
expenses and other amounts outstanding thereunder have been paid in full.
"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."
<PAGE>
(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.
(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.
<PAGE>
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 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).
(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 364-Day Credit Agreement Termination 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.
<PAGE>
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);
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.
<PAGE>
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.
(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.
<PAGE>
(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.
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.
<PAGE>
(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.
(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.
<PAGE>
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 Commitmentsunder 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 $3,400,000,000 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 $400,000,000 plus the aggregate amount (but not greater
than $100,000,000) 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:
(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
<PAGE>
(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 four years and 30 days nor more than four years and
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 one year 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 one-year 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.
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.
<PAGE>
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 $100,000,000 plus
the aggregate amount (but not greater than $100,000,000) 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.
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 prepaid.
<PAGE>
(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.
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 Loans under Section 2.09
for the portion of the 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.
<PAGE>
2.12 Fees. The Company agrees to pay to the Agent for the account of
----
each Bank a commitment fee on the average daily amount by which such Bank's
Commitment exceeds the aggregate outstanding principal amount of such Bank's
Revolving Loans, from the date hereof 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 June 29, 1997 among such
Persons.
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.
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
(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.
<PAGE>
(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.
<PAGE>
(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.
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.
<PAGE>
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.
<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.
<PAGE>
(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.
(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.
<PAGE>
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.
(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.
<PAGE>
(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.
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.
<PAGE>
(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).
<PAGE>
(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.
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.
<PAGE>
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;
<PAGE>
(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 Vinson &
-----------
Elkins L.L.P., counsel to the Company, addressed to the Agent and the Banks,
substantially in the form of Exhibit D-2;
------------
(e) 364-Day Credit Agreement. Evidence that all conditions to closing of
------------------------
the 364-Day Credit Agreement have occurred;
(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;
(g) Termination of Commitments under Existing Credit Agreements.
-----------------------------------------------------------
Evidence that the commitments to lend under the $500,000,000 Revolving Credit
Agreement dated as of October 31, 1995 among the Company, the banks party
thereto, Bank of America National Trust and Savings Association, as
Administrative Agent, NationsBank of Texas, National Association and Citibank,
N.A., as co-agents, as amended and restated by the parties as of October 29,
1996 and under the $1,000,000,000 Revolving Credit Agreement dated as of
October 31, 1995 among the Company, the banks party thereto, Bank of America
National Trust and Savings Association, as Administrative Agent, NationsBank
of Texas, National Association and Citibank, N.A., as co-agents, as amended
and restated by the parties as of October 29, 1996 (collectively, the
"Existing Credit Agreements") have been terminated and that all principal,
----------------------------
interest, fees and other amounts due thereunder (including under Section 3.02
of each Existing Credit Agreement) have been paid or arrangements satisfactory
to the Agent have been made for the payment thereof as of the Closing Date;
and
(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:
<PAGE>
(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.
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.
<PAGE>
5.05 Financial Statements. The audited consolidated balance sheet of
--------------------
the Company and its Subsidiaries as of December 31, 1996, 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, 1996) and the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of June 30, 1997 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, 1997), 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, 1996, or the Company's Forms 10-Q for the quarters
ended March 31 and June 30, 1997, 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.
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.
<PAGE>
5.11 Environmental Condition. Except as disclosed in the Company's
-----------------------
Form 10-K Report for the year ended December 31, 1996 or in the Company's Form
10-Q Report for the quarter ended June 30, 1997 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, 1996, 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:
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;
<PAGE>
(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) no later than five Business Days after the date of promulgation
thereof by such rating agency, notice of any change in the Applicable Rating
by S&P or Moody's that would change the Applicable Margin or Applicable Fee
Amount;
(f) 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;
(g) 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
(h) 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.
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.
<PAGE>
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.
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%.
<PAGE>
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(f),
6.02(g), 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
(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 364-Day 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
<PAGE>
(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.
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.
<PAGE>
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" in this Agreement and in any other Loan Document 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 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.
<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.
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.
<PAGE>
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.
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.
<PAGE>
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
(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.
<PAGE>
(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 eduction. 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.
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.
<PAGE>
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.
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.
<PAGE>
(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; limited, however, in the
case of the preparation, execution and delivery of the Loan Documents, to the
Attorney Costs of the Agent as more fully provided in that certain letter
agreement between the Company and the Agent dated July 29, 1997; and
(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).
<PAGE>
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; Participations. (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).
<PAGE>
(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 Agreement, 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.
<PAGE>
(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.
<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".
(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.
<PAGE>
(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."
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.
<PAGE>
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.
<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]
<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.
<TABLE>
<CAPTION>
<S> <C>
Company's Notice Address: COMPAQ COMPUTER CORPORATION
Compaq Computer Corporation
P.O. Box 692000, MS110701
20555 State Highway 24 By: /s/ Ben K. Wells
----------------------------------
Houston, TX 77269-2000 Name: Ben K. Wells
www.compaq.com Title: Assistant 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 and as Internet Agent
By: /s/ Kevin M. McMahon
-----------------------------------
Name: Kevin M. McMahon
Title: Managing Director
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Swingline Bank and
as a Bank
By: /s/ Kevin M. McMahon
-----------------------------------
Name: Kevin M. McMahon
Title: Managing Director
CITIBANK, N.A.,
as Syndication Agent and as a Bank
By: /s/ James M. Walsh
-----------------------------------
Name: James M. Walsh
Title: Attorney-in-fact
<PAGE>
NATIONSBANK OF TEXAS, N.A.,
as Syndication Agent and as a Bank
By: /s/ Timothy M. O'Connor
-----------------------------------
Name: Timothy M. O'Connor
Title: Vice President
THE CHASE MANHATTAN BANK,
as Syndication Agent and as a Bank
By: /s/ David Staples
-----------------------------------
Name: David Staples
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Internet Agent and as a Bank
By: /s/ Jeffrey Hwang
-----------------------------------
Name: Jeffrey Hwang
Title: Vice President
CARIPLO-CASSA DI RISPARMIO
DELLE PROVINCIE LOMBARDE S.P.A.
By: /s/ Anthony F. Giobbi
-----------------------------------
Name: Anthony F. Giobbi
Title: First Vice President
By: /s/ Charles W. Kennedy
-----------------------------------
Name: Charles W. Kennedy
Title: First Vice President
<PAGE>
DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN ISLANDS
BRANCH
By: /s/ Ralf Hoffmann
-----------------------------------
Name: Ralf Hoffmann
Title: Vice President
By: /s/ V. Shannon Sewsankar
-----------------------------------
Name: V. Shannon Sewsankar
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Cory M. Olson
-----------------------------------
Name: Cory M. Olson
Title: Authorized Agent
FLEET NATIONAL BANK
By: /s/ Frank Benesh
-----------------------------------
Name: Frank Benesh
Title: Vice President
ING BANK N.V.
By: /s/ Peter Nabney
-----------------------------------
Name: Peter Nabney
Title: General Manager
By: /s/ Samantha de Foubert
-----------------------------------
Name: Samantha de Foubert
Title: Account Manager
<PAGE>
ROYAL BANK OF CANADA
By: /s/ Brian W. Dixon
-----------------------------------
For: Brian W. Dixon
Title: Senior Manager
BANCA COMMERCIALE ITALIANA,
LOS ANGELES BRANCH
By: /s/ Eduardo Bombieri
-----------------------------------
Name: Eduardo Bombieri
Title: Vice President & Manager
By: /s/ Jack Wityak
-----------------------------------
Name: Jack Wityak
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Mark Marron
-----------------------------------
Name: Mark Marron
Title: Vice President
BARCLAYS BANK PLC, NEW YORK BRANCH
By: /s/ John Giannone
-----------------------------------
Name: John Giannone
Title: Director
<PAGE>
THE FUJI BANK, LIMITED, HOUSTON AGENCY
By: /s/ Kenichi Tatara
-----------------------------------
Name: Kenichi Tatara
Title: Vice President & Manager
NATIONAL AUSTRALIA BANK LIMITED
By: /s/ Justin McCarty, III
-----------------------------------
Name: Justin McCarty, III
Title: Vice President
BANCA DI ROMA, CHICAGO BRANCH
By: /s/ Claudio Perna
-----------------------------------
Name: Claudio Perna
Title: Senior Vice President and Branch
Manager
By: /s/ Luigi Rocchi
-----------------------------------
Name: Luigi Rocchi
Title: Vice President
BANCA MONTE DEI PASCHI DI SIENA, S.P.A.
By: /s/ G. Natalicchi
-----------------------------------
Name: G. Natalicchi
Title: Senior Vice President & General Manager
By: /s/ Brian R. Landy
-----------------------------------
Name: Brian R. Landy
Title: Vice President
<PAGE>
BANCA NAZIONALE DEL LAVORO S.P.A., NEW YORK BRANCH
By: /s/ Giuliano Violetta
-----------------------------------
Name: Giuliano Violetta
Title: First Vice President
By: /s/ Adolph S. Mascari
-----------------------------------
Name: Adolph S. Mascari
Title: Assistant Vice President
BANCA POPOLARE DI MILANO, NEW YORK BRANCH
By: /s/ Anthony Franco
-----------------------------------
Name: Anthony Franco
Title: Executive Vice President and General
Manager
By: /s/ Fulvio Montanri
-----------------------------------
Name: Fulvio Montanri
Title: First Vice President, Corporate Banking
BANCO CENTRAL HISPANO AMERICANO, S.A., NEW YORK BRANCH
By: /s/ Francesco Alcon
-----------------------------------
Name: Francesco Alcon
Title: Executive Vice President & General
Manager
<PAGE>
BANK OF MONTREAL
By: /s/ Bev Blucher
-----------------------------------
Name: Bev Blucher
Title: Senior Vice President
THE BANK OF NEW YORK
By: /s/ Alan Lyster
-----------------------------------
Name: Alan Lyster
Title: Vice President
BANKBOSTON, N.A.
By: /s/ Jay L. Massimo
-----------------------------------
Name: Jay L. Massimo
Title: Vice President
BANQUE NATIONALE DE PARIS, HOUSTON AGENCY
By: /s/ Thierry Bonetto
-----------------------------------
Name: Thierry Bonetto
Title: Deputy General Manager
<PAGE>
BAYERISCHE HYPOTHEKEN-UND WECHSEL-BANK
AKTIENGELSELLSCHAFT, NEW YORK BRANCH
By: /s/ Yoram Dankner
-----------------------------------
Name: Yoram Dankner
Title: Senior Vice President
By: /s/ E.S. Atwell
-----------------------------------
Name: E.S. Atwell
Title: Vice President
CORESTATES BANK, N.A.
By: /s/ Scott Hoffman
-----------------------------------
Name: Scott Hoffman
Title: Vice President
CREDITO ITALIANO
By: /s/ Umberto Seretti /s/ Saiyed A. Abbas
------------------------------------------------------
Name: Umberto Seretti Saiyed A. Abbas
Title: Vice President Assistant Vice President
THE DAI-ICHI KANGYO BANK, LIMITED
By: /s/ Seiji Imai
-----------------------------------
Name: Seiji Imai
Title: Vice President
<PAGE>
DEN DANSKE BANK AKTIESELSKAB, CAYMAN ISLANDS BRANCH
By: /s/ John O'Neill
-----------------------------------
Name: John O'Neill
Title: Vice President
By: /s/ Peter L. Hargraves
-----------------------------------
Name: Peter L. Hargraves
Title: Vice President
DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH
By: /s/ John W. Sweeney
-----------------------------------
Name: John W. Sweeney
Title: Assistant Vice President
By: /s/ Denise M. Rohde
-----------------------------------
Name: Denise M. Rohde
Title: Assistant Treasurer
THE INDUSTRIAL BANK OF JAPAN, LIMITED
NEW YORK BRANCH
By: /s/ Kazutoshi Kuwahara
-----------------------------------
Name: Kazutoshi Kuwahara
Title: Executive Vice President, Houston Office
<PAGE>
ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A.
By: /s/ Robert Wurster
-----------------------------------
Name: Robert Wurster
Title: First Vice President
By: /s/ Glen Binder
-----------------------------------
Name: Glen Binder
Title: Vice President
KREDIET BANK N.V., GRAND CAYMAN BRANCH
By: /s/ Robert Snauffer
-----------------------------------
Name: Robert Snauffer
Title: Vice President
By: /s/ Tod R. Angus
-----------------------------------
Name: Tod R. Angus
Title: Vice President
MARINE MIDLAND BANK
By: /s/ John B Lyons
-----------------------------------
Name: John B Lyons
Title: Senior Vice President
MELLON BANK, N.A.
By: /s/ John M. Kailer
-----------------------------------
Name: John M. Kailer
Title: First Vice President
<PAGE>
NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH
By: /s/ Angela Bozorgmir
-----------------------------------
Name: Angela Bozorgmir
Title: Vice President
NATIONAL WESTMINSTER BANK PLC,
NASSAU BRANCH
By: /s/ Angela Bozorgmir
-----------------------------------
Name: Angela Bozorgmir
Title: Vice President
THE NORTHERN TRUST COMPANY
By: /s/ John E. Burda
-----------------------------------
Name: John E. Burda
Title: Second Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ David J. Egan
-----------------------------------
Name: David J. Egan
Title: Senior Vice President
<PAGE>
THE SANWA BANK, LIMITED
By: /s/ Matthew Patrick
-----------------------------------
Name: Matthew Patrick
Title: Vice President
SKANDINAVISKA ENSKILDA BANKEN AB (PUBL), NEW YORK BRANCH
By: /s/ Benjamin K.B. Young
-----------------------------------
Name: Benjamin K.B. Young
Title: Senior Account Executive
By: /s/ Phillip F. Monternurro, Jr.
-----------------------------------
Name: Phillip F. Monternurro, Jr.
Title: Vice President
SOCIETE GENERALE FINANCE (IRELAND) LIMITED
By: /s/ Ther se Leonard
-----------------------------------
Name: Therese Leonard
Title: Account Manager
By: /s/ Jacinta Conroy
-----------------------------------
Name: Jacinta Conroy
Title: Loans Administrator
<PAGE>
STANDARD CHARTERED BANK
By: /s/ Peter G.R. Dodds
-----------------------------------
Name: Peter G.R. Dodds
Title: Vice President
By: /s/ Kristina McDavid
-----------------------------------
Name: Kristina McDavid
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ Harumitsu Seki
-----------------------------------
Name: Harumitsu Seki
Title: General Manager
THE SUMITOMO TRUST & BANKING CO., LTD., LOS ANGELES AGENCY
By: /s/ Ninoos Y. Benjamin
-----------------------------------
Name: Ninoos Y. Benjamin
Title: Vice President & Manager
SWISS BANK CORPORATION, NEW YORK BRANCH
By: /s/ Gary Riddell
-----------------------------------
Name: Gary Riddell
Title: Director
By: /s/ James J. Diaz
-----------------------------------
Name: James J. Diaz
Title: Director
<PAGE>
TORONTO DOMINION BANK (TEXAS), INC.
By: /s/ Darlene Riedel
-----------------------------------
Name: Darlene Riedel
Title: Vice President
WELLS FARGO BANK, N.A.
By: /s/ Ken Taylor
-----------------------------------
Name: Ken Taylor
Title: Assistant Vice President
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH
By: /s/ Alan S. Bookspan /s/ Thomas Lee
-------------------------------------------------
Name: Alan S. Bookspan Thomas Lee
Title: Vice President Associate
<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 $3,000,000,000 Revolving Credit Agreement, dated as of September 22,
1997 (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].]
- ------------------
* To be included for a Proposed Borrowing comprised of Revolving Loans.
** To be included for a Proposed Borrowing comprised of a Swingline Loan.
(iii) The [aggregate] amount of the Proposed Borrowing is $___________.
(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:
<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 $3,000,000,000 Revolving Credit Agreement, dated as of September 22,
1997 (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 _____________, _____,
(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],
- ------------------
* Select appropriate interest rate option.
<PAGE>
(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].
The Company has caused this Conversion/Continuation Notice to be executed
and delivered this _____ day of _____________, _____.
COMPAQ COMPUTER CORPORATION
By:
Name:
Title:
- ------------------
** Unless otherwise agreed, a Revolving Loan cannot be 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) during the
existence of a Default or Event of Default.
<PAGE>
EXHIBIT C
---------
COMPLIANCE CERTIFICATE
This Compliance Certificate is delivered pursuant to Section 6.02 of the
$3,000,000,000 Revolving Credit Agreement dated as of September 22, 1997
(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 adminis-trative 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 ______________, _____.
COMPAQ COMPUTER CORPORATION
By:
Name:
Title:
<PAGE>
EXHIBIT D-1
-----------
[Date]
To each of the Banks parties to the
$3,000,000,000 Revolving Credit Agreement
dated as of September 22, 1997 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, and Morgan Guaranty
Trust Company of New York, as Internet agent
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
$3,000,000,000 Revolving Credit Agreement dated as of September 22, 1997 (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, and Morgan Guaranty Trust Company of New York, as Internet
agent. 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.
<PAGE>
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.
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, 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, 1996, or the Company's Forms 10-Q for the quarters ended March 31
and June 30, 1997, 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.
<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,
/S/ Linda S. Auwers
---------------------
Linda S. Auwers
Vice President and
Assistant General Counsel
<PAGE>
EXHIBIT D-2
-----------
(713) 758-3516 (713) 615-5381
September 22, 1997
To Each of the Banks Parties to the
$3,000,000,000 Revolving Credit Agreement
dated as of September 22, 1997 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 and Morgan Guaranty
Trust Company of New York, as Internet Agent
Re: Compaq Computer Corporation Revolving Credit Agreement
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 4.01(d) of the
$3,000,000,000 Revolving Credit Agreement, dated as of September 22, 1997 (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,
and Morgan Guaranty Trust Company of New York, as Internet Agent. Except as
otherwise defined herein, terms defined in the Credit Agreement are used
herein as therein defined.
We 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, we have examined:
(1) The Credit Agreement;
(2) The Notes (together with the Credit Agreement, the "Loan
Documents"); and
<PAGE>
(3) Such other materials as we have deemed necessary to render the
opinions provided herein.
We have also made such investigations of law as we have deemed necessary
and relevant as a basis for our opinion. As to various questions of fact
material to our opinion, we 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, we are 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 our 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 G, 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, we 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.
<PAGE>
(c) In rendering the opinions set forth above, we 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 our opinions set forth herein, we 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) We 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.
<PAGE>
(f) In rendering our enforceability opinion with respect to
provisions providing for the appointment of an agent for service of process on
behalf of the Company, we have assumed that such agent will provide timely
notice to the Company of the commencement of legal proceedings.
(g) We 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, we 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
we assume no obligation to update or supplement such opinions to reflect any
fact or circumstance that may hereafter come to our 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 our 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,
/s/ VINSON & ELKINS L.L.P.
-----------------------------
VINSON & ELKINS L.L.P.
<PAGE>
EXHIBIT E
---------
PROMISSORY NOTE
U.S. $__________ Dated: September 22, 1997
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 $3,000,000,000 Revolving Credit Agreement
dated as of September 22, 1997, 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, and Morgan Guaranty Trust Company of New York, as Internet agent; 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.
<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:
<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
- ---- ------ ------- --------- --------- --------
<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 $3,000,000,000 Revolving Credit
Agreement dated as of September 22, 1997 (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.
---------------------------
<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.
--------------------------
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.
<PAGE>
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.
<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.
<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.
<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.]
<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.
<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:
Title:
Address:
[Name of Assignee]
By:
Title:
Address:
<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 Management 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 $3,000,000,000 Revolving Credit Agreement, dated as of
September 22, 1997 (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.
<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.
<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:
<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:
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE 2.01
-------------
COMMITMENTS
-----------
Amount of
Name of Bank Commitment %
- ------------------------------------------------------------- ----------------- -------------
<S> <C> <C>
Bank of America National Trust and Savings Association 187,500,000.00 6.25000000
The Chase Manhattan Bank 187,500,000.00 6.25000000
Citibank, N.A. 187,500,000.00 6.25000000
Nationsbank of Texas, N.A. 187,500,000.00 6.25000000
Morgan Guaranty Trust Company of New York 150,000,000.00 5.00000000
Cariplo - Cassa di Risparmio Delle Provincie Lombarde S.p.A. 97,500,000.00 3.25000000
Deutsche Bank AG 97,500,000.00 3.25000000
The First National Bank of Chicago 97,500,000.00 3.25000000
Fleet National Bank 97,500,000.00 3.25000000
Ing Bank N.V. 97,500,000.00 3.25000000
Royal Bank of Canada 97,500,000.00 3.25000000
Banca Commerciale Italiana 55,500,000.00 1.85000000
Bank of Tokyo - Mitsubishi Trust Company 55,500,000.00 1.85000000
Barclays Bank PLC 55,500,000.00 1.85000000
The Fuji Bank, Limited 55,500,000.00 1.85000000
National Australia Bank Limited 55,500,000.00 1.85000000
Banca di Roma 37,500,000.00 1.25000000
Banca Monte Dei Paschi di Siena, S.p.A. 37,500,000.00 1.25000000
Banca Nazionale del Lavoro S.p.A. 37,500,000.00 1.25000000
Banca Popolare di Milano 37,500,000.00 1.25000000
Banco Central Hispano Americano, S.A. 37,500,000.00 1.25000000
Bank of Montreal 37,500,000.00 1.25000000
The Bank of New York 37,500,000.00 1.25000000
Bankboston, N.A. 37,500,000.00 1.25000000
Banque Nationale de Paris 37,500,000.00 1.25000000
Bayerische Hypotheken - Und Wechsel - Bank 37,500,000.00 1.25000000
Corestates Bank, N.A. 37,500,000.00 1.25000000
Credito Italiano 37,500,000.00 1.25000000
The Dai-Ichi Kangyo Bank, Limited 37,500,000.00 1.25000000
Den Danske Bank Aktieselskab 37,500,000.00 1.25000000
Dresdner Bank AG 37,500,000.00 1.25000000
The Industrial Bank of Japan, Limited 37,500,000.00 1.25000000
Istituto Bancario San Paolo di Torino S.p.A. 37,500,000.00 1.25000000
<PAGE>
Kredietbank N.V. 37,500,000.00 1.25000000
Marine Midland Bank 37,500,000.00 1.25000000
Mellon Bank, N.A. 37,500,000.00 1.25000000
National Westminster Bank plc 37,500,000.00 1.25000000
The Northern Trust Company 37,500,000.00 1.25000000
PNC Bank, National Association 37,500,000.00 1.25000000
The Sanwa Bank, Limited 37,500,000.00 1.25000000
Skandinaviska Enskilda Banken AB (Publ) 37,500,000.00 1.25000000
Societe Generale Finance (Ireland) Limited 37,500,000.00 1.25000000
Standard Chartered Bank 37,500,000.00 1.25000000
The Sumitomo Bank, Limited 37,500,000.00 1.25000000
The Sumitomo Trust & Banking Co., Ltd. 37,500,000.00 1.25000000
Swiss Bank Corporation 37,500,000.00 1.25000000
Toronto Dominion (Texas), Inc. 37,500,000.00 1.25000000
Wells Fargo Bank, N.A. 37,500,000.00 1.25000000
Westdeutsche Landesbank Girozentrale 37,500,000.00 1.25000000
================= =============
TOTAL $3,000,000,000.00 100.00000000
</TABLE>
<PAGE>
EXHIBIT 21
Subsidiaries:
A/O Tandem Computers
A/O Tandem Computers
ACI Canada EFTS Limited
Atalla Corporation
ATCP Partnership
Automated Monitoring and Control International, Inc.
Bit Jugglers, Inc.
Compaq Asia Pte. Ltd.
Compaq Canada Incorporated/Incorporee
Compaq Capital Corporation
Compaq Cayman Islands, Ltd.
Compaq Computer (Malaysia) Sdn. Bhd.
Compaq Computer (Proprietary) Limited
Compaq Computer (Thailand) Ltd.
Compaq Computer A/S
Compaq Computer AB
Compaq Computer AE
Compaq Computer AG
Compaq Computer Asia Pte. Ltd.
Compaq Computer Asia/Pacific Pte. Ltd.
Compaq Computer Australia Pty. Limited
Compaq Computer B.V.
Compaq Computer Brasil - Industria e Comercio LTDA
Compaq Computer Commercializadora, S. A. DE C. V.
Compaq Computer Corporation
Compaq Computer Customer Services Limited
Compaq Computer de Argentina S.A.
Compaq Computer de Colombia S.A.
Compaq Computer de Mexico, S.A. de C.V.
Compaq Computer de Venezuela, S.A.
Compaq Computer EMEA GmbH
Compaq Computer FZE
Compaq Computer Gesmbh
Compaq Computer GmbH
Compaq Computer GmbH - Russia Representative Office
Compaq Computer Group Limited
Compaq Computer Hong Kong Limited
Compaq Computer Hong Kong Limited - Beijing Representative Office
Compaq Computer Hong Kong Limited - Changdu Representative Office
Compaq Computer Hong Kong Limited - Guangzhou Representative Office
Compaq Computer Hong Kong Limited - Shanghai Representative Office
Compaq Computer Hong Kong Limited - Shenyang Representative Office
Compaq Computer India Private Limited
Compaq Computer Int'l Corp - Compaq Distribution Center Europe - Branch
Compaq Computer International Corporation
Compaq Computer Korea Limited
Compaq Computer Limited
Compaq Computer Ltd.
Compaq Computer Manufacturing Limited
Compaq Computer N.V./S.A.
<PAGE>
Compaq Computer N.V./S.A. - Luxembourg Rep Office
Compaq Computer New Zealand Limited
Compaq Computer Norway AS
Compaq Computer OY
Compaq Computer Portugal, Lda.
Compaq Computer S.A.R.L.
Compaq Computer S.p.A.
Compaq Computer Taiwan Limited
Compaq Computer Technologies (China) Co. Ltd.
Compaq Computer Ticaret A. S.
Compaq Computer Trading Limited Liability Company
Compaq Computer, S.A.
Compaq Computer, Sp.zo.o.
Compaq Computer, spol. s.r.o.
Compaq FSC (Barbados) Inc.
Compaq Holdings B.V.
Compaq Holdings Pte. Ltd.
Compaq Houston Investment Corporation
Compaq Industrial, Comercial, Importadora E Exportadora Ltda.
Compaq Interests, Inc.
Compaq International Corporation
Compaq International Procurement Corporation
Compaq International Procurement Corporation - Taiwan Representative Office
Compaq Kabushiki Kaisha
Compaq Latin Amercia Corporation - Chile Branch
Compaq Latin America Corporation
Compaq Latin America Corporation - Argentina Branch
Compaq Latin America Corporation - Puerto Rico Sales Office
Compaq Latin America Sucursal Del Peru
Compaq Latin America Sucursal Ecuador
Compaq Technologies (Australia) Proprietary Limited
Compaq TSO, Inc.
Compaq Ventures Corporation
Compaq Ventures Corporation - Indonesia Representative Office
Compaq Ventures, Pte. Ltd.
Compaq-Austin, Inc.
Compaq-Dallas, Inc.
Connectivity, Ltd.
CPQ Holdings, Inc.
Divacto B.V.
Eco-Infobase GmbH
Globeset, Inc.
Governmind B.V.
Micro Communications GMBH
Microcom (South Africa) Pty. Ltd.
Microcom (UK) Limited
Microcom Australasia Pty. Limited
Microcom Caribe, Inc.
Microcom E.M.A.
Microcom K.K.
Microcom Systems, Inc.
Microcom, Inc.
MNP Hong Kong Limited
MNP S.A.R.L. - France
MNP Sales B. V.
<PAGE>
Neodyne Consulting Ltd.
Nihon Tandem Rental Co., Ltd.
Nihon Tandem Systems Co., Ltd.
Nihon Tandem Systems K.K.
Nonstop Manufacturing Pty. Ltd.
Phon, LLC
PT Tandem Computers Indonesia
PT Tandem Computers Indonesia
Shanghai Tandem Software Systems Co. Ltd.
Silicon Artists, Inc.
Tandem Chile SA
Tandem Computer GES.m.b.H.
Tandem Computer GES.m.b.H.
Tandem Computer Systems Sdn. Bhd.
Tandem Computer Systems Sdn. Bhd.
Tandem Computers (Norway) A/S
Tandem Computers AG
Tandem Computers (Hong Kong) Limited
Tandem Computers (Hungary) Incorporated
Tandem Computers (Israel) Ltd.
Tandem Computers (Macau) Limited
Tandem Computers A/S
Tandem Computers AB
Tandem Computers Asia Ltd.
Tandem Computers Asia-Pacific Incorporated
Tandem Computers B.V.
Tandem Computers Canada Limited
Tandem Computers Credit Corporation
Tandem Computers De Mexico, S.A. De C.V.
Tandem Computers Del Peru S.A.
Tandem Computers do Brasil Inc. & CIA
Tandem Computers do Brasil Inc.
Tandem Computers Europe Incorporated
Tandem Computers Europe Incorporated - Netherlands Branch
Tandem Computers Europe Incorporated - UK Branch
Tandem Computers Export Corporation
Tandem Computers FSC, Inc.
Tandem Computers GmbH
Tandem Computers Hungaria KKT
Tandem Computers Iberica, S.A.
Tandem Computers Incorporated
Tandem Computers Incorporated - Puerto Rico - Sales Rep. Office
Tandem Computers India Ltd.
Tandem Computers International Incorporated - Malaysia Branch
Tandem Computers International Incorporated - Thailand Branch
Tandem Computers International (Thailand) Ltd.
Tandem Computers International Incorporated
Tandem Computers International Incorporated - Philippines Branch
Tandem Computers Investment Corporation
Tandem Computers Investments do Brasil Inc.
Tandem Computers Italia S.P.A.
Tandem Computers Italia S.P.A.
Tandem Computers Japan, Limited
Tandem Computers Korea Ltd.
Tandem Computers Korea Ltd.
<PAGE>
Tandem Computers Limited
Tandem Computers Limited - Ireland Branch
Tandem Computers Manufacturing, Inc.
Tandem Computers Marketing, Inc.
Tandem Computers Pty. Ltd.
Tandem Computers Pty. Ltd. - New Zealand Branch
Tandem Computers S.A.
Tandem Computers S.A./N.V.
Tandem Computers S.A./N.V.- Luxembourg Branch
Tandem Computers South Asia Ltd.
Tandem Computers SP. Z O.O.
Tandem de Argentina Incorporated
Tandem Employees Emergency Relief Fund, Inc.
Tandem Finland OY
Tandem Laboratories Ltd.
Tandem PRC Incorporated
Tandem PRC Incorporated - Guangzhou Rep. Office
Tandem PRC Incorporated - Shanghai Rep. Office
Tandem PRC Incorporated -Beijing Rep. Office
Tandem South Africa (Pty) Limited
Tandem Taiwan Incorporated
Tandem/Simplicity A, Inc.
Tandem/Simplicity B, Inc.
Twinco A/S
Twinsoft A/S
Twinsoft Asia Pte Ltd.
Twinsoft B.V.
Twinsoft GmbH
Twinsoft Italia Srl
Twinsoft N.V.
Twinsoft S.A.
Twinsoft SA
Twinsoft UK LTD.
Yura Corp.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-40729)
and to the incorporation by reference in the Registration Statements on Form
S-8 (Nos. 333-43595, 333-42375, 333-34743, 333-34699, 333-31265, 33-44115,
33-31819, 33-23504, 33-7499, 2-89925, 33-10106, 33-38044, 33-16987, 33-62603)
of Compaq Computer Corporation of our report dated January 21, 1998, except as
to Note 11, which is as of January 26, 1998, appearing on page 20 of Compaq
Computer Corporation's Annual Report on Form 10-K for the year ended December
31, 1997. We also consent to the references to us under the heading "Selected
Consolidated Financial Data" in the Annual Report on Form 10-K for the year
ended December 31, 1997. However, it should be noted that Price Waterhouse
LLP has not prepared or certified such "Selected Consolidated Financial Data."
/s/ PRICE WATERHOUSE LLP
- ------------------------
PRICE WATERHOUSE LLP
Houston, Texas
February 19, 1998
<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 DECEMBER 31, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 6,418
<SECURITIES> 344
<RECEIVABLES> 2,891
<ALLOWANCES> 243
<INVENTORY> 1,570
<CURRENT-ASSETS> 12,017
<PP&E> 4,026
<DEPRECIATION> 2,041
<TOTAL-ASSETS> 14,631
<CURRENT-LIABILITIES> 5,202
<BONDS> 0
<COMMON> 2,096
0
0
<OTHER-SE> 7,333
<TOTAL-LIABILITY-AND-EQUITY> 14,631
<SALES> 24,584
<TOTAL-REVENUES> 24,584
<CGS> 17,833
<TOTAL-COSTS> 17,833
<OTHER-EXPENSES> 1,069<F1>
<LOSS-PROVISION> 19
<INTEREST-EXPENSE> 164
<INCOME-PRETAX> 2,758
<INCOME-TAX> 903
<INCOME-CONTINUING> 1,855
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,855
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.19
<FN>
<F1> Includes research and development costs, purchased in-process technology and merger-related costs.
</FN>
</TABLE>
