<PAGE>
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended December 31,1996 or
----------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
Commission file number 1-10062
-------
InterTAN, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2130875
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
201 Main Street, Suite 1805
Fort Worth, Texas 76102
- ------------------------------- ---------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (817) 348-9701
---------------------------
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
--- ---
At January 31, 1997, 11,497,775 shares of the registrant's common stock, par
value $1.00 per share, were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
The Registrant's financial statements at and for the quarter ended December 31,
1996, providing the information required by Rule 10-01 of Regulation S-X, are
included herewith as Exhibit A.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information required by Item 303 of Regulation S-K is included herewith as
Exhibit B.
2
<PAGE>
EXHIBIT A - FINANCIAL STATEMENTS AT AND FOR THE QUARTER
ENDED DECEMBER 31, 1996.
3
<PAGE>
Consolidated Statements of Operations
InterTAN, Inc.
- --------------------------------------------------------------------------------
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
---------------------------- -----------------------------
1996 1995 1996 1995
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net sales and operating revenues........................ $190,934 $181,411 $303,221 $295,083
Other income............................................ 115 298 256 501
-------------------------------------------------------------
191,049 181,709 303,477 295,584
-------------------------------------------------------------
Operating costs and expenses:
Cost of products sold................................. 108,976 103,788 170,533 167,251
Selling, general and administrative expenses.......... 64,895 59,667 115,742 107,914
Depreciation and amortization......................... 2,379 1,981 4,596 3,813
-------------------------------------------------------------
176,250 165,436 290,871 278,978
-------------------------------------------------------------
Operating income........................................ 14,799 16,273 12,606 16,606
Foreign currency transaction gains...................... (731) (44) (926) (192)
Interest expense, net................................... 1,908 1,909 3,505 3,647
-------------------------------------------------------------
Income before income taxes.............................. 13,622 14,408 10,027 13,151
Provision for income taxes.............................. 4,145 4,071 5,157 5,019
-------------------------------------------------------------
Net income.............................................. $ 9,477 $ 10,337 $ 4,870 $ 8,132
=============================================================
Primary net income per average common share............. $ 0.83 $ 0.93 $ 0.43 $ 0.75
Fully diluted net income per
average common share.................................. $ 0.57 $ 0.58 $ 0.37 $ 0.52
Average common shares outstanding....................... 11,366 11,148 11,298 10,801
Average common shares outstanding
assuming full dilution................................ 18,111 17,893 18,043 17,676
</TABLE>
The comments in Management's Discussion and Analysis of Financial Condition and
Results of Operations are an integral part of these statements.
4
<PAGE>
Consolidated Balance Sheets
InterTAN, Inc.
- --------------------------------------------------------------------------------
(In thousands, except share amounts)
<TABLE>
<CAPTION>
December 31 June 30 December 31
1996 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
Assets
Current Assets:
Cash and short-term investments................................... $ 53,302 $ 34,096 $ 48,493
Accounts receivable, less allowance for doubtful accounts......... 14,721 9,422 15,333
Inventories....................................................... 185,292 162,207 165,384
Other current assets.............................................. 7,550 7,628 7,066
Deferred income taxes............................................. 1,459 3,831 2,985
-----------------------------------------------
Total current assets......................................... 262,324 217,184 239,261
Property and equipment, less accumulated depreciation
and amortization.................................................. 40,899 39,129 38,382
Other assets........................................................ 2,767 2,928 3,951
Deferred income taxes............................................... - 2,392 4,939
-----------------------------------------------
$305,990 $261,633 $286,533
===============================================
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term bank borrowings........................................ $ 2,569 $ 975 $ -
Current maturities of notes payable to Tandy Corporation.......... 6,958 6,958 17,071
Accounts payable.................................................. 44,943 24,082 21,415
Accounts payable to Tandy Corporation............................. 593 894 363
Accrued expenses.................................................. 40,854 25,833 34,461
Income taxes payable.............................................. 12,402 12,971 13,478
-----------------------------------------------
Total current liabilities.................................... 108,319 71,713 86,788
Long-term notes payable to Tandy Corporation,
less current maturities........................................ 19,745 23,070 26,394
9% convertible subordinated debentures.............................. 41,456 41,660 40,822
Other liabilities................................................... 6,329 5,678 5,393
-----------------------------------------------
175,849 142,121 159,397
-----------------------------------------------
Stockholders' Equity:
Preferred stock, no par value, 1,000,000 shares
authorized, none issued or outstanding....................... - - -
Common stock, $1 par value, 40,000,000 shares
authorized, 11,429,187, 11,172,506 and 10,875,007
shares issued and outstanding................................ 11,429 11,173 10,875
Additional paid-in capital........................................ 112,959 111,678 111,173
Retained earnings................................................. 24,002 19,132 29,505
Foreign currency translation effects.............................. (18,249) (22,471) (24,417)
-----------------------------------------------
Total stockholders' equity................................... 130,141 119,512 127,136
-----------------------------------------------
Commitments and contingent liabilities..............................
$305,990 $261,633 $286,533
===============================================
</TABLE>
The comments in Management's Discussion and Analysis of Financial Condition and
Results of Operations are an integral part of these statements.
5
<PAGE>
Consolidated Statements of Cash Flows
InterTAN, Inc.
- --------------------------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31 December 31
-----------------------------------------------
1996 1995 1996 1995
-----------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income................................................................. $ 9,477 $10,337 $ 4,870 $ 8,132
Adjustments to reconcile net income to cash
provided by ( used in) operating activities:
Depreciation and amortization....................................... 2,379 1,981 4,596 3,813
Deferred income taxes............................................... 3,954 4,700 4,773 5,583
Foreign currency transaction (gains) losses, unrealized............. (773) 10 (855) (267)
Other............................................................... 742 912 1,336 1,146
Cash provided by (used for) current assets and liabilities:
Accounts receivable................................................. 552 (408) (4,929) (6,691)
Inventories......................................................... 2,568 7,067 (17,351) (18,533)
Other current assets................................................ 1,131 1,803 307 2,079
Accounts payable.................................................... 11,029 1,601 18,587 7,503
Accounts payable to Tandy Corporation............................... (821) 180 (316) (74)
Accrued expenses.................................................... 15,702 11,461 14,703 9,147
Income taxes payable................................................ (644) (483) (505) (506)
-----------------------------------------------
Net cash provided by operating activities........................... 45,296 39,161 25,216 11,332
-----------------------------------------------
Cash flows from investing activities:
Additions to property and equipment........................................ (3,569) (4,283) (5,736) (7,325)
Proceeds from sales of property and equipment.............................. 13 41 54 186
Other investing activities................................................. 523 69 769 720
-----------------------------------------------
Net cash used in investing activities................................ (3,033) (4,173) (4,913) (6,419)
-----------------------------------------------
Cash flows from financing activities:
Changes in short-term bank borrowings, net................................ (6,976) - 1,407 -
Proceeds from issuance of common stock to employee plans................... 412 372 885 891
Proceeds from exercise of stock options.................................... - 23 - 760
Principal repayments on long-term borrowings............................... - - (3,487) (3,479)
-----------------------------------------------
Net cash provided by (used in) financing activities.................. (6,564) 395 (1,195) (1,828)
-----------------------------------------------
Effect of exchange rate changes on cash..................................... 121 (282) 98 148
-----------------------------------------------
Net increase in cash and short-term investments............................. 35,820 35,101 19,206 3,233
Cash and short-term investments, beginning of period........................ 17,482 13,392 34,096 45,260
-----------------------------------------------
Cash and short-term investments, end of period.............................. $ 53,302 $ 48,493 $ 53,302 $ 48,493
===============================================
</TABLE>
The comments in Management's Discussion and Analysis of Financial Condition and
Results of Operations are an integral part of these statements.
6
<PAGE>
Consolidated Statements of Stockholders' Equity
InterTAN, Inc.
- ---------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Foreign
Currency Total
Common Stock Additional Retained Translation Stockholders'
Shares Amount Paid-in Capital Earnings Effects Equity
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1996....... 11,173 $11,173 $111,678 $19,132 ($22,471) $119,512
Net foreign currency
translation adjustments....... - - - - 4,222 4,222
Issuance of common stock
to employee plans............. 256 256 1,281 - - 1,537
Net income..................... - - - 4,870 - 4,870
--------------------------------------------------------------------------
Balance at December 31, 1996... 11,429 $11,429 $112,959 $24,002 ($18,249) $130,141
==========================================================================
</TABLE>
The comments in Management's Discussion and Analysis of Financial Condition and
Results of Operations are an integral part of these statements.
7
<PAGE>
EXHIBIT B - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTORY NOTE REGARDING FORWARD LOOKING INFORMATION
-------------------------------------------------------
With the exception of historical information, the matters discussed herein are
forward-looking statements about the business, financial condition and prospects
of InterTAN, Inc. (the "Company"). The actual results of the Company could
differ materially from those indicated by the forward looking statements because
of various risks and uncertainties including, but not limited to, international
economic conditions, interest and foreign exchange rate fluctuations, various
tax issues, including possible reassessments, changes in product demand,
competitive products and pricing, availability of products, inventory risks due
to shifts in market conditions, dependence on manufacturers' product
development, the regulatory and trade environment, real estate market
fluctuations and other risks indicated in the Company's previous filings with
the Securities and Exchange Commission. These risks and uncertainties are
beyond the ability of the Company to control, and in many cases the Company
cannot predict the risks and uncertainties that could cause its actual results
to differ materially from those indicated by the forward looking statements.
RESULTS OF OPERATIONS
---------------------
The Company is a retailer of consumer electronics products with locations in
Canada, Australia and the United Kingdom. The number of company-operated stores
and dealers at December 31, 1996 and 1995 is presented in the table below:
<TABLE>
<CAPTION>
SALES OUTLETS
THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------------ ------------------------------
ENDING OPENED CLOSED ENDING OPENED CLOSED
<S> <C> <C> <C> <C> <C> <C>
CANADA
Company-operated 455* 2 1 450 5 -
Dealers 426 20 4 422 7 11
------------------------------ ------------------------------
881 22 5 872 12 11
============================== ==============================
AUSTRALIA
Company-operated 213 3 - 208 5 -
Dealers 210 6 2 212 4 55
------------------------------ ------------------------------
423 9 2 420 9 55
============================== ==============================
UNITED KINGDOM
Company-operated 351 6 1 347 8 -
Dealers 175 3 1 165 2 1
------------------------------ ------------------------------
526 9 2 512 10 1
============================== ==============================
TOTAL
Company-operated 1,019 11 2 1,005 18 -
Dealers 811 29 7 799 13 67
------------------------------ ------------------------------
1,830 40 9 1,804 31 67
============================== ==============================
</TABLE>
*In addition, the Company operated 46 stores on behalf of Rogers Cantel, Inc.
8
<PAGE>
OPERATING INCOME
The Company's operating income (loss) for each geographic segment for the three
and six-month periods ended December 31, 1996 and 1995 is presented in the
following table (in thousands):
OPERATING INCOME
----------------
<TABLE>
<CAPTION>
UNITED CORPORATE
CANADA AUSTRALIA KINGDOM EXPENSES TOTAL
------- --------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Three Months Ended
December 31, 1996 $10,297 $2,778 $ 2,749 $(1,025) $14,799
Three Months Ended
December 31, 1995 $10,696 $2,219 $ 4,573 $(1,215) $16,273
Six Months Ended
December 31, 1996 $13,037 $3,367 $(1,749) $(2,049) $12,606
Six Months Ended
December 31, 1995 $15,737 $2,217 $ 927 $(2,275) $16,606
</TABLE>
Foreign exchange fluctuations contributed positively to consolidated operating
income for both the three and six month periods ended December 31, 1996. If the
effect of these fluctuations were eliminated, the reduction in consolidated
operating income over the corresponding periods in the prior year would have
increased by $623,000 and $610,000 respectively.
NET SALES
Net sales for the quarter ended December 31, 1996 were $190,934,000, an increase
of 5.2% over the sales for the same quarter in the prior year of $181,411,000.
When the impact of fluctuations in the value of the US dollar in relation to the
currencies of the countries in which the Company operates is removed, the sales
increase, in constant dollars, is reduced to 1.8%. Comparative store sales
decreased by 0.3% over the same quarter in the prior year. Year to date, sales
have increased by 2.8% and 0.6% in US dollars and local currency, respectively.
Comparative store sales for the six months ended December 31, 1996 have
decreased 1.1% over the same period a year ago.
The table which follows shows by country the percentage changes in net sales for
the quarter and six months ended December 31, 1996 compared to the corresponding
periods in the prior year. Changes are presented in both US dollars and local
currencies to illustrate the effects of exchange rate fluctuations. The change
in comparative store sales, measured in constant dollars, is also shown:
9
<PAGE>
NET SALES
---------
PERCENTAGE INCREASE (DECREASE)
------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 DECEMBER 31, 1996
LOCAL COMPARATIVE LOCAL COMPARATIVE
US$ CURRENCY STORE US$ CURRENCY STORE
-------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Canada 5.5 % 5.0 % 1.6 % (0.6)% (0.5)% (2.8)%
Australia 12.8 % 5.8 % 3.7 % 14.7 % 7.7 % 5.1 %
United Kingdom 1.4 % (4.3)% (4.6)% 1.8 % (1.7)% (2.1)%
</TABLE>
The Company was able to enjoy a sales gain in Canada during the Christmas
quarter, primarily as a result of increased sales of toys, batteries and
antennas as well as an increase in computer sales following the addition of a
new supplier with an attractively priced entry level product. This gain was
achieved despite another difficult Christmas season for consumer electronics
retailers in Canada. Overall, sales performance in Canada was influenced by a
reduced level of cellular sales, especially early in the quarter. In addition,
unforeseen difficulties in finding suitable locations at acceptable rent levels
resulted in the new Company-operated Cantel stores being rolled out at a slower
rate than was originally anticipated. Consequently, total cellular revenue,
including revenue from the new Cantel stores, did not meet management's
expectations. Management continues to be optimistic that the Cantel program
will result in a positive contribution as the stores mature.
In Australia, gains were experienced in a broad range of categories including
computers, batteries, CD players, telephones and telephone accessories.
Management believes that the Company's new television advertising program
contributed to overall sales performance in Australia. However the benefit of
these gains was partially offset by weak cellular sales. In Australia, the
analog phone is being gradually phased out and will not be supported by the
government operated cellular network beyond the turn of the century. Cellular
sales have been difficult as the market moves toward the technically superior,
but higher priced, digital system. Management anticipates that soft cellular
sales may continue to affect the overall sales performance in Australia until
the digital system receives wider consumer acceptance.
In the United Kingdom, sales gains were experienced in the battery, TV/video and
toy categories. The sales performance was also heavily influenced by the
computer category. It was during the Christmas quarter that the Company's new
alliance with the German manufacturer, Vobis Microcomputer AG ("Vobis") was
rolled out. Under this arrangement, Vobis will become the Company's exclusive
source of computers and related products in the U.K. and the Company will be
able to offer the latest in computer technology to its customers at affordable
prices with minimal inventory risk. While the number of computers sold
increased significantly over the same quarter last year, the Vobis program was
not fully operational in time for its intended benefits to be realized. As a
result, Vobis sales fell short of the targets management had set. In addition,
as computer revenue under this program is reported on a commission
rather
10
<PAGE>
than a sale basis, revenues from the sale of computers were actually down over
a year ago. The effect of lower computer revenue was partially offset by the
positive benefits of the Company's new communications centers. These new
centers prominently feature, in an attractive display format, a broad range of
communications products and accessories including not only cellular products but
also pagers, traditional telephones, CB radios and scanners as well as product
accessories. These centers were successfully introduced, with sales of regular
and cellular phones as well as pagers all increasing over last year. Management
anticipates that both the communications centers and the Vobis program will have
positive operating benefits in the remainder of fiscal year 1997.
GROSS MARGIN AND COST OF PRODUCTS SOLD
The gross margin percentage increased to 42.9% in the second quarter of fiscal
1997 from 42.8% a year ago, an increase of 10 basis points. The most significant
improvement was in Australia, where margins strengthened by 1.8 percentage
points over the same quarter last year. In the United Kingdom, margins
increased by 80 basis points, while in Canada margins declined by 1.0 percentage
point. Year to date, the gross margin percentage is fifty basis points ahead of
the prior year.
A higher gross margin percentage, increased sales and foreign exchange rate
effects all combined to produce an increase in gross margin dollars for the
quarter of $4,334,000:
<TABLE>
<CAPTION>
<S> <C>
Increase in margin percentage $ 264,000
Increase in sales 1,434,000
Foreign exchange rate effects 2,636,000
----------
$4,334,000
==========
</TABLE>
In Canada, the major factors contributing to the decline in margin for the
quarter were the increase in the amount of lower margin computer products in the
sales mix and the impact of selected price reductions designed to drive sales.
In Australia, a variety of factors contributed to the increase in margins. The
effect of the Company's strategy of shifting the sales mix towards more
profitable categories and expanding the range within those categories,
importantly parts and accessories, more than offset the impact of increased
sales of lower margin computer products and the decline in the number of
cellular phone activations. Cellular air time residuals, reflecting cumulative
activations, are becoming an important contributor to margins, as are the sale
of extended warranty contracts.
In the U.K., the commissions from the sale of Vobis computers helped to lift
margins, as did the activation income from the increase in the sale of cellular
products. In addition, certain of the Company's new initiatives also made
contributions to the improvement in the margin percentage. The positive effect
of these factors was partially offset by the impact of selective price
reductions necessary to encourage sales.
11
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Total selling, general and administrative expenses ("SG&A expenses") for the
three months ended December 31, 1996 were $64,895,000 compared to $59,667,000 in
the second quarter of the prior year, an increase of $5,228,000 or 8.8%. Year to
date, SG&A expenses have increased from $107,914,000 for the six months ended
December 31, 1995 to $115,742,000 in the current period, an increase of
$7,828,000 or 7.3%. Foreign currency rate fluctuations accounted for $1,964,000
and $2,123,000 of the increase for the quarter and year to date, respectively.
When these foreign currency effects are eliminated, SG&A expenses for the
quarter and year to date increased, at constant exchange rates by 5.5% and 5.3%,
respectively.
The following table provides a breakdown of SG&A expenses by major category for
the three and six month periods ended December 31, 1996 (percentages shown are
as a rate to sales):
<TABLE>
<CAPTION>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------
(In thousands, except percents)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
1996 1995 1996 1995
-------------------------------- --------------------------------
AMOUNT PCT. AMOUNT PCT. AMOUNT PCT. AMOUNT PCT.
-------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising $10,397 5.4 $ 9,628 5.3 $ 16,856 5.6 $ 15,360 5.2
Rent 11,329 5.9 10,469 5.8 21,803 7.2 20,480 6.9
Payroll 26,340 13.8 23,962 13.2 46,959 15.5 43,623 14.8
Taxes
(other than
income taxes) 5,148 2.7 4,480 2.5 9,378 3.1 8,709 3.0
Telephone &
Utilities 1,946 1.0 1,644 0.9 3,720 1.2 3,406 1.2
Other 9,735 5.2 9,484 5.2 17,026 5.6 16,336 5.5
-------------------------------- --------------------------------
Total $64,895 34.0 $59,667 32.9 $115,742 38.2 $107,914 36.6
================================ ================================
</TABLE>
Higher investments in advertising, rent and human resources continue to account
for a large part of the increase in real SG&A spending. Another contributing
factor was the scheduled increase in the royalty payable to Tandy Corporation.
Management has already taken action to control SG&A spending, which,
consequently, was well within planned levels for the quarter. In addition,
actual SG&A expenses for the quarter included unplanned severance costs as
management continues to reevaluate its staffing requirements. The effect of the
resulting reduction in head count should have a positive effect on SG&A
performance in future periods. A sales performance which fell short of
expectations was the major factor contributing to the increase in the SG&A
percentage.
12
<PAGE>
Management's stated objective for fiscal year 1997 was to achieve a one
percentage point increase in operating margin as a rate to sales (i.e., the
gross margin percentage, net of the change in the SG&A percentage). While the
gross margin percentage for the quarter was increased by 10 basis points, the
effect of this improvement was more than offset by the increase in the SG&A
percentage. In future quarters, management will continue its focus on this issue
and will take further action to keep SG&A growth more closely aligned with
realized sales gains. However, as a result of performance year to date,
management believes it is unlikely that the operating margin objective will be
achieved for the fiscal year.
NET INTEREST EXPENSE
Net interest expense of $1,908,000 for the three months ended December 31, 1996
was comparable with the corresponding amount reported during the same quarter
last year. Net interest expense for the six months ended December 31, 1996 of
$3,505,000 was $142,000 lower than in the same period last fiscal year.
PROVISION FOR INCOME TAXES
An income tax provision of $4,145,000 was recorded during the quarter, primarily
relating to the profits of the Canadian subsidiary. In the second quarter of
fiscal year 1996, a net tax provision of $4,071,000 was recorded. For the six
months ended December 31, 1996, income tax expense of $5,157,000 was recorded
compared to $5,019,000 in the first six months of the prior year.
NET INCOME PER AVERAGE COMMON SHARE
Primary and fully diluted net income per average common share were $0.83 and
$0.57, respectively, for the three-month period ended December 31, 1996, as
compared to $0.93 and $0.58 for the same quarter in the prior year. For the
six-month period ended December 31, 1996, primary and fully diluted net income
per average common share were $0.43 and $0.37, respectively, compared to $0.75
and $0.52, respectively, for the same period a year ago.
In each of the three and six-month periods ended December 31, 1996 and December
31, 1995, the difference between primary and fully diluted net income per
average common share was due primarily to the Company's 9% convertible
subordinated debentures (the "Debentures"), which are convertible into 6,745,346
common shares. The Company has outstanding warrants exercisable for 1,449,007
common shares at an exercise price of $6.618 per share. Also, at December 31,
1996 and December 31, 1995, directors and employees of the Company and its
subsidiaries held options to purchase 810,000 and 603,332 shares, respectively,
at prices ranging from $5.31 to $8.1875 per share. The outstanding warrants and
options were also considered in determining primary and fully diluted net income
per average common share. The dilutive effect of these various instruments will
likely continue in future periods, and exchange rate impacts on the Debentures
could increase or decrease their dilutive effects.
13
<PAGE>
FINANCIAL CONDITION
-------------------
Most balance sheet accounts are translated from their values in local currency
to US dollars at the respective month end rates. The table below outlines the
percentage change, to December 31, 1996, in exchange rates as measured against
the US dollar:
FOREIGN EXCHANGE RATE FLUCTUATIONS
----------------------------------
<TABLE>
<CAPTION>
% INCREASE % INCREASE
(DECREASE) (DECREASE)
FROM DECEMBER 31, 1995 FROM JUNE 30, 1996
---------------------- ------------------
<S> <C> <C>
Canada (0.4) (0.5)
Australia 6.9 0.9
United Kingdom 10.3 10.3
</TABLE>
ACCOUNTS RECEIVABLE
Accounts receivable have increased from $9,422,000 at June 30, 1996 to
$14,721,000 at December 31, 1996, reflecting seasonal increases for Christmas
sales to dealers. At December 31, 1996, accounts receivable were $612,000 lower
than at December 31, 1995.
INVENTORIES
Inventories have increased from $162,207,000 at June 30, 1996 to
$185,292,000 at December 31, 1996. Although increases were experienced in all
three countries, most of the inventory increase was attributable to the United
Kingdom. Inventories at December 31, 1995 were $165,384,000, resulting in a
year on year increase of $19,908,000. Approximately one-third of this increase
is attributable to stronger foreign currencies. The remainder is more than
attributable to the United Kingdom subsidiary where higher inventory levels have
resulted from the implementation of the Company's merchandising strategy, which
places greater emphasis on private label products, as these products require
larger order sizes and longer order lead time. The impact of this strategy was
similarly experienced in Canada and Australia a year ago. Also contributing to
the increase in the United Kingdom's inventory was a lower than expected level
of sales during the second quarter. Management believes that the Company's
inventory, in all three countries, is of good quality and will be sold through
in the ordinary course of business, without the need for significant mark downs.
CURRENT MATURITIES OF NOTES PAYABLE TO TANDY CORPORATION
Current maturities of notes payable to Tandy have decreased from $17,071,000 at
December 31, 1995 to $6,958,000 at December 31, 1996 and June 30, 1996. This
decrease results from the scheduled repayment of the Series B Note to Trans
World Electronics, Inc. ("Trans World"), a
14
<PAGE>
subsidiary of Tandy Corporation, in the principal amount of $10,113,000. The
balances of $6,958,000 at December 31, 1996 and June 30, 1996, represent the
amount of the Series A Note payable to Trans World over the next twelve months.
ACCOUNTS PAYABLE
The level of accounts payable has increased from $24,082,000 and $21,415,000 at
June 30, 1996 and December 31, 1995, respectively, to $44,943,000 at December
31, 1996. These increases in accounts payable result primarily from an increase
in the level of inventories, deferred payment terms with suppliers and from
foreign currency rate effects.
ACCRUED EXPENSES
Accrued expenses have increased from $25,833,000 at June 30, 1996 and
$34,461,000 at December 31, 1995 to $40,854,000 at December 31, 1996. These
increases result from a variety of timing differences, including the payment of
compensation, advertising costs and property and sales taxes. The increase in
the sale of extended warranties has also lead to an increase in deferred service
contract income.
INCOME TAXES PAYABLE
Income taxes payable were $12,402,000 at December 31, 1996 compared to balances
at June 30, 1996 and December 31, 1995 of $12,971,000 and $13,478,000,
respectively.
An audit of the Canadian income tax returns of the Canadian subsidiary for the
1987 to 1989 taxation years was completed during fiscal year 1994, resulting in
additional tax being levied against the Canadian subsidiary. The Company has
appealed these reassessments and, pending the outcome of these matters, the
Company, by Canadian law, was required to pay one-half of the tax in dispute.
The tax levied by Revenue Canada in reassessing those years was offset by
refunds arising from the carry-back of losses incurred in subsequent years.
Depending on the ultimate resolution of these issues, the Company could
potentially have an additional liability in the range of $0 to $10,700,000. The
Company believes it has meritorious arguments in defense of the issues raised by
Revenue Canada and it is in the process of vigorously defending its position. It
is management's determination that no additional provision need be recorded for
these reassessments. In order for the Company to succeed in appealing certain
aspects of these reassessments, it must succeed in defending the possible
reassessments discussed in the immediately following paragraph.
The Company was advised in August 1995 that Revenue Canada intended to extend
the scope of its 1987 to 1989 reassessments to raise certain issues flowing from
the spin-off of the Company from Tandy Corporation in fiscal year 1987.
Management disagrees with Revenue Canada's views on these issues and will
vigorously defend the Company's position should Revenue Canada pursue these
issues. Management believes it has meritorious arguments supporting its stance
and, accordingly, no additional provision has been recorded for these possible
reassessments. Tax reassessments related to these issues, if successfully
pursued, could
15
<PAGE>
potentially range from $14,000,000 to $20,000,000. As required by Canadian law,
the Company would likely be required to post a deposit of one-half of the tax in
dispute, including interest, in order to appeal any reassessment.
An audit of the Canadian income tax returns of the Canadian subsidiary for the
1990 to 1993 taxation years was commenced during the 1995 fiscal year. The
Company has been advised that Revenue Canada is challenging certain interest
deductions relating to the Canadian subsidiary's former operations in
continental Europe and is proposing to tax certain foreign exchange gains
related to such operations. Management estimates that the possible range of
loss should Revenue Canada ultimately prevail in these matters, after all
appeals have been unsuccessfully pursued by the Company, could range from
$18,000,000 to $25,000,000. Assuming Revenue Canada pursues these issues, in
order for the Company to proceed with such appeals, the Company would likely be
required to post a deposit equal to one-half of the 1990-1993 tax in dispute,
together with interest, which management estimates should not exceed $9,000,000.
Notwithstanding that the Company is still in discussions with Revenue Canada
regarding these issues, Revenue Canada was required to issue a protective
reassessment for one of the years because the time period during which such
reassessment could legally be issued was about to expire. The amount of the
reassessment, including interest, is approximately $13,800,000. This amount
relates to the 1992 taxation year only and is reflected in the range described
immediately above. The Company intends to appeal this reassessment and, as
indicated above, may be required to post a deposit equal to one-half of the
reassessment, pending the outcome of such appeal. Management believes it has
meritorious arguments in support of the deductibility of such interest and in
support of its treatment of the foreign exchange gains and is prepared to
vigorously defend its position should the Canadian tax authorities proceed with
such a challenge following the conclusion of discussions with the Company and
its advisors. Accordingly, it is management's assessment that no provision need
be recorded for these possible claims.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Operating activities generated $45,296,000 in cash during the three months ended
December 31, 1996 compared to $39,161,000 in the second quarter of the prior
year, an increase of $6,135,000. Increases in the level of accounts payable
during the quarter preserved $9,428,000 more cash than in the prior year. The
seasonal build-up of accrued expenses preserved $15,702,000 in cash during the
quarter compared to $11,461,000 in the second quarter of fiscal year 1996, an
increase of $4,241,000. The positive effects of these two factors were partially
offset by reductions in the rate of inventory liquidation and in net income,
adjusted to reconcile net income to cash. In the three months ended December 31,
1996, a reduction in inventories generated $2,568,000 in cash compared to
$7,067,000 in the same period last year, a decrease of $4,499,000. Net income,
adjusted to reconcile net income to cash, generated $2,141,000 in cash less than
last year, falling from $17,940,000 for the three months ended December 31, 1995
to $15,799,000 in the second quarter of the current fiscal year. For similar
reasons, cash generated from operating activities also increased for the six
months ended December 31, 1996, rising by $13,884,000 from $11,332,000 in the
first six months of the prior year to $25,216,000 during the six months ended
December 31, 1996.
16
<PAGE>
Cash flow from investing activities consumed $3,033,000 during the current
quarter compared with $4,173,000 a year ago. This decrease is primarily
attributable to a planned reduction in capital spending over the second quarter
of fiscal year 1996. For the same reason, year to date, investing activities
have consumed $4,913,000 in cash compared to $6,419,000 in the prior year.
During the second quarter of fiscal year 1997, financing activities consumed
$6,564,000 in cash, primarily as a result of the repayment of short-term bank
borrowings, partially offset by cash generated from the issuance of common
stock to employee plans. During the second quarter of fiscal year 1996,
financing activities had generated $395,000 in cash from the issuance of common
stock to employee plans and the exercise of stock options by employees. For the
six months ended December 31, 1996, financing activities consumed $1,195,000 in
cash, as the effect of the repayment of principal on long-term borrowings was
partially offset by funds generated by an increase in the level of short-term
bank borrowings and proceeds from the issuance of common stock to employee
plans. Repayment of principal on long-term borrowings, partially offset by
funds generated from the issuance of stock to employee plans and the exercise of
stock options by employees, had resulted in financing activities consuming
$1,828,000 in cash during the first six months of the prior year.
The Company's principal sources of liquidity during fiscal year 1997 are its
cash and short-term investments, its cash flow from operations and its banking
facilities.
On May 6, 1994, InterTAN Canada Ltd., InterTAN, Inc., and InterTAN U.K. Limited
entered into a one-year credit agreement ("Syndicated Loan Agreement") with a
syndicate of banks. This agreement established a one year revolving facility in
an amount which is determined using an inventory level calculation not to exceed
Cdn$60,000,000 ($43,782,000 at December 31, 1996 exchange rates). This
agreement has been renewed and now extends through mid-August, 1997. The
Company intends to request a further extension of the facility prior to August,
1997 and reasonably believes that the banking syndicate will agree to such
renewal; however, there can be no guarantee of such renewal. This facility is
used primarily to provide letters of credit in support of purchase orders and,
from time to time, to finance inventory purchases. At December 31, 1996, there
were borrowings against the credit facility aggregating $2,569,000.
In September 1996, the Company's Australian subsidiaries, InterTAN Australia
Ltd. and Technotron Sales Corp. Pty. Ltd., entered into a credit agreement with
an Australian bank (the "Australian Facility"). This agreement established a
credit facility in the amount of A$12,000,000 ($9,536,000 at December 31, 1996
exchange rates). The Australian Facility has no fixed term and may be
terminated at any time upon five days prior written notice by the lender. All
or any part of the facility may be used to provide letters of credit in support
of purchase orders. A maximum amount of A$5,000,000 ($3,974,000 at December 31,
1996 exchange rates) may be used in support of short-term borrowings. Interest
is charged on such borrowings at the Australian Indicator Lending Rate plus 1.25
percentage points. At December 31, 1996, there were no borrowings outstanding
against the Australian Facility.
17
<PAGE>
In addition to the credit facilities described above, the Company's principal
sources of outside financing have been the Series A Note payable to Trans World
and the Debentures.
Both the Series A Note and the Syndicated Loan Agreement preclude the Company
from paying dividends on its common stock. Accordingly, any such payment would
require the refinancing of any amounts outstanding under these loan agreements
or the consent of the Company's banking syndicate and Trans World; there can be
no assurance that either event would occur. In addition, the Series A Note and
the Syndicated Loan Agreement contain covenants which require the Company to
maintain tangible net worth at a specified minimum level and which limit the
level of debt due both to Tandy as well as other parties, annual capital
spending and lease commitments and require the Company to maintain debt to
equity and working capital ratios at agreed levels. These loan agreements also
require the Company to meet certain interest coverage ratios. At December 31,
1996, the Company was in compliance with these requirements, except that the
Company did not satisfy the cash interest coverage ratio under the Syndicated
Loan Agreement. However, each member of the bank syndicate has waived such non-
compliance and agreed to modify the covenant for the third and fourth quarters
of fiscal year 1997. Management expects that the Company will meet these
requirements, as modified, during the remainder of fiscal year 1997.
The Company's primary uses of liquidity in fiscal year 1997 will include the
funding of capital expenditures and the servicing of debt. The Company
anticipates that capital expenditures will approximate $6,245,000 during the
remainder of fiscal year 1997, mainly related to store expansion, remodeling and
upgrading. The Company's debt servicing requirements in the balance of fiscal
year 1997 are estimated to be $6,600,000 and include principal payments on the
Series A Note of $3,479,000 as well as interest on the Series A Note and the
Debentures. In addition, as previously described, the Company believes that it
may be required to post additional tax deposits with Revenue Canada in order to
appeal existing, and, possibly, additional reassessments of tax. See "Income
Taxes Payable."
Management believes that the Company's cash and short-term investments on hand
and its cash flow from operations coupled with the Syndicated Loan Agreement
and the Australian Facility will provide the Company with sufficient
liquidity to meet its planned requirements through fiscal year 1997,
provided the amount of any additional tax deposits were not at the upper end of
the ranges described above under "Income Taxes Payable." If this were the case,
the Company would be required to seek additional sources of liquidity.
Management is currently in the process of studying additional funding
alternatives. However, there can be no assurance that additional funding would
be available, if required.
CONTINGENCIES
-------------
Claims have been made by a former employee for damages for wrongful dismissal
totaling approximately $880,000. The Company is vigorously defending this
action. The Company believes that the possible range of loss in these matters
is less than the amount claimed by this former employee, and the Company has
recorded a provision representing its best estimate of any liability which may
ultimately arise from these matters.
18
<PAGE>
In the fourth quarter of fiscal year 1993, the Company recorded a pre-tax charge
of $77,400,000 in connection with the Company's plan to close its continental
European retail operations. The shutdown process is now substantially complete.
Management believes that the remaining provision is adequate to provide for the
Company's remaining obligations in Europe, including claims brought against the
Company by former employees, dealers and franchisees.
Apart from these matters and those described under "Income Taxes Payable", there
are no material pending legal proceedings or claims, other than routine
litigation incidental to the Company's business, to which the Company or any of
its subsidiaries is a party, or to which any of its property is subject.
BASIS OF FINANCIAL STATEMENTS
-----------------------------
The accompanying unaudited financial statements have been prepared in accordance
with Rule 10-01 of Regulation SX, "Interim Financial Statements", and do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statements. The financial statements have been
prepared in conformity with accounting principles and practices (including
consolidation practices) as reflected in the Company's Annual Report on Form 10-
K for the fiscal year ended June 30, 1996, and, in the opinion of the Company,
include all adjustments necessary for fair presentation of the Company's
financial position as of December 31, 1996 and 1995 and the results of its
operations and its cash flow for the three and six months ended December 31,
1996 and 1995. Such adjustments are of a normal and recurring nature. Operating
results for the three and six months ended December 31, 1996 are not necessarily
indicative of the results that can be expected for the fiscal year ended June
30, 1997. For further information, refer to the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form 10-
K for the fiscal year ended June 30, 1996.
19
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
The various matters discussed under the heading "Contingencies" on
page 18 of this Form 10-Q are incorporated herein by reference.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on November 12,
1996, the following persons were elected to the Board of Directors:
James T. Nichols
Clark A. Johnson
In such connection, Messrs. Nichols and Johnson received 8,663,700 and
8,668,854 votes, respectively, "For" election and 43,065 and 37,911
votes, respectively, were withheld. In total, 11,312,427 shares were
authorized to vote.
In addition, stockholders voted on a proposal to approve the InterTAN,
Inc. 1996 Stock Option Plan. Such proposal was approved with 4,875,105
votes cast in favor of approval, 805,845 votes cast against and
143,875 votes abstaining.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits Required by Item 601 of Regulation S-K:
Exhibit No. Description
3(a) Restated Certificate of Incorporation (Filed as
Exhibit 3(a) to InterTAN's Registration Statement
on Form 10 and incorporated herein by reference).
3(a)(i) Certificate of Amendment of Restated Certificate of
Incorporation (Filed as Exhibit 3(a)(i) to
InterTAN's Annual Report on Form 10-K for fiscal
year ended June 30, 1995 and incorporated herein by
reference).
3(a)(ii) Certificate of Designation, Preferences and Rights
of Series A Junior Participating Preferred Stock
(Filed as Exhibit 3(a)(i) to InterTAN's
Registration Statement on Form 10 and incorporated
herein by reference).
20
<PAGE>
Exhibit No. Description
3(b) Bylaws (Filed on Exhibit 3(b) to InterTAN's
Registration Statement on Form 10 and incorporated
herein by reference).
3(b)(i) Amendments to Bylaws through August 3, 1990 (Filed
as Exhibit 3(b)(i) to InterTAN's Annual Report on
Form 10-K for fiscal year ended June 30, 1990 and
incorporated herein by reference).
3(b)(ii) Amendments to Bylaws through May 15, 1995 (Filed as
Exhibit 3(b)(ii) to InterTAN's Annual Report on
Form 10-K for fiscal year ended June 30, 1995 and
incorporated herein by reference).
3(b)(iii) Amended and Restated Bylaws (filed as Exhibit
3(b)(iii) to InterTAN's Annual Report on Form 10-K
for fiscal year ended June 30, 1996 and
incorporated herein by reference).
4(a) Articles Fifth and Tenth of the Restated
Certificate of Incorporation (included in Exhibit
3(a)).
4(b) Amended and Restated Rights Agreement between
InterTAN Inc. and The First National Bank of Boston
(Filed as Exhibit 4(b) to InterTAN's report on Form
8-K dated September 25, 1989 and incorporated
herein by reference).
4(c) Trust Indenture securing the issue of 9%
Convertible Subordinated Debentures due August 30,
2000 (Filed as Exhibit 4(c) to InterTAN's Annual
Report on Form 10-K for fiscal year ended June 30,
1993 and incorporated herein by reference).
21
<PAGE>
Exhibit No. Description
4(d) Warrant Agreement dated August 5, 1993 between
InterTAN, Inc. and Trans World Electronics, Inc.
(filed as Exhibit 10(h) to InterTAN's Annual Report
on Form 10-K for fiscal year ended June 30, 1993,
and incorporated herein by reference).
*11 Statement of Computation of Earnings Per Share
*27 Article 5, Financial Data Schedule
*99 Form of Multi-Option Switch Facility Agreement
between InterTAN Australia Ltd. and Westpac Banking
Corporation.
- --------------------
* Filed herewith
b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
December 31, 1996.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
InterTAN, Inc.
(Registrant)
Date: February 13, 1997 By: /s/James T. Nichols
------------------------------------------
James T. Nichols
President and Chief Executive Officer
(Authorized Officer)
By: /s/Douglas C. Saunders
------------------------------------------
Douglas C. Saunders
Vice President and Corporate Controller
(Principal Accounting Officer)
23
<PAGE>
INTERTAN, INC.
FORM 10-Q
INDEX TO EXHIBITS
Exhibit No. Description
3(a) Restated Certificate of Incorporation (Filed as
Exhibit 3(a) to InterTAN's Registration Statement
on Form 10 and incorporated herein by reference).
3(a)(i) Certificate of Amendment of Restated Certificate of
Incorporation (Filed as Exhibit 3(a)(i) to
InterTAN's Annual Report on Form 10-K for fiscal
year ended June 30, 1995 and incorporated herein by
reference).
3(a)(ii) Certificate of Designation, Preferences and Rights
of Series A Junior Participating Preferred Stock
(Filed as Exhibit 3(a)(i) to InterTAN's
Registration Statement on Form 10 and incorporated
herein by reference).
3(b) Bylaws (Filed on Exhibit 3(b) to InterTAN's
Registration Statement on Form 10 and incorporated
herein by reference).
3(b)(i) Amendments to Bylaws through August 3, 1990 (Filed
as Exhibit 3(b)(i) to InterTAN's Annual Report on
Form 10-K for fiscal year ended June 30, 1990 and
incorporated herein by reference).
3(b)(ii) Amendments to Bylaws through May 15, 1995 (Filed as
Exhibit 3(b)(ii) to InterTAN's Annual Report on
Form 10-K for fiscal year ended June 30, 1995 and
incorporated herein by reference).
3(b)(iii) Amended and Restated Bylaws (filed as Exhibit
3(b)(iii) to InterTAN's Annual Report on Form 10-K
for fiscal year ended June 30, 1996 and
incorporated herein by reference).
<PAGE>
Exhibit No. Description
4(a) Articles Fifth and Tenth of the Restated
Certificate of Incorporation (included in Exhibit
3(a)).
4(b) Amended and Restated Rights Agreement between
InterTAN Inc. and The First National Bank of Boston
(Filed as Exhibit 4(b) to InterTAN's report on Form
8-K dated September 25, 1989 and incorporated
herein by reference).
4(c) Trust Indenture securing the issue of 9%
Convertible Subordinated Debentures due August 30,
2000 (Filed as Exhibit 4(c) to InterTAN's Annual
Report on Form 10-K for fiscal year ended June 30,
1993 and incorporated herein by reference).
4(d) Warrant Agreement dated August 5, 1993 between
InterTAN, Inc. and Trans World Electronics, Inc.
(filed as Exhibit 10(h) to InterTAN's Annual Report
on Form 10-K for fiscal year ended June 30, 1993,
and incorporated herein by reference).
*11 Statement of Computation of Earnings Per Share
*27 Article 5, Financial Data Schedule
*99 Form of Multi-Option Switch Facility Agreement
between InterTAN Australia Ltd. and Westpac Banking
Corporation.
- --------------------
* Filed herewith
<PAGE>
Exhibit 11
INTERTAN, INC.
Statement of Computation of Earnings Per Share
- --------------------------------------------------------------------------------
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months ended Six Months ended
------------------- -------------------
December 31 December 31
1996 1995 1996 1995
------------------- -------------------
<S> <C> <C> <C> <C>
Primary Earnings Per Share
Net income.................................................................. $ 9,477 $10,337 $ 4,870 $ 8,132
=================== ===================
Weighted average number of common shares outstanding........................ 11,366 10,827 11,298 10,640
Weighted average number of common shares issuable under
warrants and stock option plans, net of assumed treasury stock
repurchases at average market prices.................................. (a) 321 (a) 161
------------------- -------------------
Weighted average number of common and common equivalent
shares outstanding....................................................... 11,366 11,148 11,298 10,801
=================== ===================
Primary net income per average common share $ 0.83 $ 0.93 $ 0.43 $ 0.75
=================== ===================
Fully Diluted Earnings Per Share
Reconciliation of net income per statements to amounts used in
computation of fully diluted net income per average common share:
Net income, as reported..................................................... $ 9,477 $10,337 $ 4,870 $ 8,132
Adjustments for assumed conversion of the 9% convertible
subordinated debentures:
Add interest on the debentures.............................................. 945 950 1,891 1,941
Add amortization expense on the debentures.................................. 86 90 171 181
Less foreign exchange gain recognized on interest payable
on convertible debentures................................................ 7 - 4 -
Less foreign exchange transaction gain recognized
on the debentures........................................................ (256) (699) (205) (276)
Less income tax effect on the debentures.................................... - (354) - (721)
------------------- -------------------
Net income, as adjusted..................................................... $10,259 $10,324 $ 6,731 $ 9,257
=================== ===================
Reconciliation of weighted average number of shares outstanding to
amount used in computation of fully diluted net income per average
common share:
Weighted average number of shares outstanding............................... 11,366 10,827 11,298 10,640
Adjustments for assumed conversion of 9% convertible subordinated
debentures to common stock as of the date of issuance,
November 26, 1993........................................................ 6,745 6,745 6,745 6,745
Adjustments for assumed exercise of warrants and stock options,
net of assumed treasury stock repurchases at period end prices.......... (a) 321 (a) 161
Adjustment for converted debentures......................................... - - - 130
------------------- -------------------
Weighted average number of common and common equivalent shares
outstanding, as adjusted................................................. 18,111 17,893 18,043 17,676
=================== ===================
Fully diluted net income per average common share........................... $ 0.57 $ 0.58 $ 0.37 $ 0.52
=================== ===================
</TABLE>
(a) These items are anti-dilutive and thus are omitted from the calculation.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 53,302
<SECURITIES> 0
<RECEIVABLES> 14,721
<ALLOWANCES> 0
<INVENTORY> 185,292
<CURRENT-ASSETS> 262,324
<PP&E> 40,899
<DEPRECIATION> 0
<TOTAL-ASSETS> 305,990
<CURRENT-LIABILITIES> 108,319
<BONDS> 61,201
0
0
<COMMON> 11,429
<OTHER-SE> 118,712
<TOTAL-LIABILITY-AND-EQUITY> 305,990
<SALES> 303,221
<TOTAL-REVENUES> 303,477
<CGS> 170,533
<TOTAL-COSTS> 170,533
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,505
<INCOME-PRETAX> 10,027
<INCOME-TAX> 5,157
<INCOME-CONTINUING> 4,870
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,870
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.37
</TABLE>
<PAGE>
EXHIBIT 99
----------
FORM OF
MULTI-OPTION SWITCH FACILITY AGREEMENT
AGREEMENT DATED _____________ 1996
BETWEEN INTERTAN AUSTRALIA LTD ACN 002 511 944 OF 91 Kurrajong Avenue, Mt
Druitt, New South Wales ('BORROWER')
AND WESTPAC BANKING CORPORATION ARBN 007 457 141 OF 60 Martin Place,
Sydney, New South Wales ('BANK')
INTERPRETATION
1.1 DEFINITIONS
In this document:
'Account' means an account of the Borrower with the Bank including, but
not limited to the overdraft Account.
'AUTHORISATION' Includes:
(a) any consent, authorisation, registration, filing, lodgement,
agreement, notarisation, certificate, permission, licence, approval,
authority or exemption from, by or with a Public Authority; or
(b) in relation to anything which will be fully or partly prohibited or
restricted by law if a Public Authority intervenes or acts in any
way within a specified period after lodgement, filing, registration
or notification, the expiry of such period without that intervention
or action.
'AUTHORISED OFFICER' in respect of the Borrower, means any person, or any
person holding any position, from time to time nominated as an Authorised
Officer by notice to the Bank, the notice to be accompanied by certified
copies of signatures of all new persons appointed.
'BILL' Means a Bill of Exchange' as defined in the Bills of Exhange Act
1909 which:
(a) is, or is to be, accepted by the Bank under this document; or
(b) is taken to be accepted by the Bank under this document (whether or
not it physically exists).
'BILL LIMIT' means at any time, the lesser of:
(a) the Switch Sub-limit at that time less the Overdraft Limit at that
time; and
<PAGE>
(b) the amount last nominated by the Borrower to the Bank as the amount
of the Bill Limit.
'BUSINESS DAY' means a day on which banks in Sydney are open for the types
of banking business undertaken in this document.
'COLLATERAL SECURITY' means a Guarantee, Security Interest or negotiable
instrument held or given, whether before or after this document is
executed, as security for or otherwise in connection with the Secured
Money.
'DEBTOR' means a person any of whose present or future, actual or
contingent indebtedness or liabilities to the Bank is or are supported or
secured by a present or future Guarantee or Security Interest given or
entered into by the Borrower.
'DISCOUNT' when used as a verb means purchase or, at the option of the
Bank, sell as agent for the Borrower.
'DRAWDOWN DATE' means any date on which Financial Accommodation is
provided or is to be provided under this document.
'ENVIRONMENT' includes the natural physical surroundings of mankind
(whether affecting individuals or groupings of individuals).
'ENVIRONMENTAL LAW' means a provision or law which provision or law
relates to an aspect of the Environment or to occupational health or
safety.
'ESTABLISHMENT FEE' means a fee of $17,500.
'FINANCIAL ACCOMMODATION' means any financial accommodation or form of
financial accommodation including, but not limited to:
(a) an advance, loan, forbearance or payment;
(b) discounting, drawing, accepting, endorsing or becoming in any other
way liable under a Bill, cheque, promissory note, warrant or other
negotiable instrument at the request of, on behalf of or for the
benefit of another party;
(c) giving or allowing credit;
(d) giving or incurring liability or paying money under a Guarantee; and
(e) providing financial accommodation by way of:
(i) entering into or performing a Lease;
(ii) purchasing, or giving value for a right or asset; or
(iii) creating, assuming or undertaking a liability.
<PAGE>
'FINANCIAL INDEBTEDNESS' means any indebtedness, whether present or
future, secured or unsecured, or actual or contingent arising under, in
relation to, or as a result of any Financial Accommodation but does not
include the deferred purchase price for any goods or services where the
goods or services are obtained on normal commercial terms in the ordinary
course of trading and the deferral is for less than 90 days.
'GUARANTEE' means a guarantee, indemnity, letter of credit, letter of
comfort or any other obligation (whatever it is called and whatever its
nature) by which a person is responsible for another person's obligation
or debt.
'ILR' means the rate of interest determined by the Bank from time to time
to apply to overdrafts, usually published in major Australian metropolitan
newspapers as its Indicator Lending Rate. Any change in that rate
becoming effective as at the date specified in the publication or, if no
such day is specified, the day on which such change is first published.
'INTERTAN Debt' mean all money, debts and liabilities of the Borrower to
InterTAN Inc, whether actual or contingent.
'INTERTAN Inc.' means InterTAN Inc. of 201 Main Street, Suite 1805, Fort
Worth, Texas 76102, United States Of America.
'ISSUANCE FEE' means 0.325% calculated on the face value of a Ltter of
Credit.
'ITI GROUP' means the Borrower, InterTAN Inc, InterTAN Canada Ltd (An
Alberta corporation) and InterTAN UK Limited (a corporation organised
under the laws of England and Wales) and each of their related bodies
corporate (as defined in the Corporations Law).
'ITI GROUP DOCUMENT' means any deed, agreement or arrangement of any kind
between any member of the ITI Group and Tandy Corporation, whether or not
any other person is a party to that deed, agreement or arrangement
including (without limitation) the License Agreement.
'LEASE' means an agreement or arrangement under which property is or may
be used, occupied, retained, operated or managed by a person for
consideration (of whatever form) payable or provided by that person or a
relative or associated entity of that person including, but not limited
to, a lease, licence, charter, hire purchase or hiring arrangement.
'LETTER OF CREDIT means a documentary letter of credit in the form agreed
by the Borrower and the Bank, issued under the Switch Facility.
'LICENSE AGREEMENT' means the license agreement dated 4 November 1993
between Tandy Corporation and the Borrower (as amended from time to time).
'MANAGER' means an employee of the Bank whose title or acting title
includes the word Manager.
'MARGIN' means:
<PAGE>
(a) in respect of the Overdraft Account, 1.25% per annum calculated on
the daily debit balance of the Overdraft Account from time to time;
and
(b) in respect of Bills accepted by the Bank under the Switch Facility,
1.75% per annum calculated on the face amount and term of each Bill,
or such other amount determined by the Bank following a review under
clause 2.4.
'MATERIAL ADVERSE EFFECT' means a material adverse effect on the ability
of the Borrower to perform its obligations under a Relevant Agreement.
'OVERDRAFT ACCOUNT' means the account of the Borrower, No.032371 511826
with the bank in which overdraft Financial Accommodation is made available
to the borrower under the Switch Facility.
'OVERDRAFT LIMIT' means, at any time, the lesser of:
(a) Switch Sub-limit at that time; or
(b) the amount last nominated by the Borrower to the Bank as the
Overdraft Limit.
'PERMITTED SECURITY INTEREST' means:
(a) the Tandy Security;
(b) a Security Interest which the Bank has consented to. It does not
include a Security Interest which the Bank has consented to on one
or more conditions if those conditions are not complied with; and
(c) a lien or charge on any property of the Borrower arising by
operation of law in the ordinary course of the Borrower's ordinary
business. It does not include a lien or charge which secures overdue
debts, except where those debts are being contested in good faith.
'PRINCIPAL AMOUNT OUTSTANDING' at any given time means references to the
sum of:
(a) the aggregate face amount of outstanding Bills under the Switch
Facility;
(b) the debit balance in the Overdraft Account; and
(c) the amount of all unpresented cheques drawn on the Overdraft
Account; and
(d) the aggregate face value of all unexpired Letters of Credit,
at that time.
'PUBLIC AUTHORITY' means the Crown, a government, a minister of a
government, a government department, a statutory corporation, or a semi-
government or judicial entity.
<PAGE>
'QUARTER' means each of the three month periods ending 31 March, 30 June,
30 September and 31 December each year.
'RELATED PARTY' means a person providing collateral security.
'RELEVANT AGREEMENT' means:
(a) this document; and
(b) a Collateral Security; and
(c) an agreement between:
(i) the Bank and the Borrower; or
(ii) the Bank and a Debtor; or
(iii) the Bank and any combination of the Borrower and one or more
Debtors; and
(d) a document (including a letter):
(i) containing terms on which the Secured Money remains
outstanding; or
(ii) that the Borrower and the Bank agree is a Relevant Agreement;
and
(e) the Transaction Securities; and
(f) any indemnity from the Borrower or any other person in relation to a
Letter of Credit.
'ROLLOVER DATE' for any Bills means the date on which the Bills mature or
the date of cancellation in its entirety of the Switch Facility Limit.
'SECURED MONEY' means all money that the Borrower is liable to pay to the
Bank at or after the date of this document on any account and in any way
whatever, and whether:
(a) the Borrower is liable alone or together with another person; or
(b) the Borrower is liable as principal debtor, surety, partner,
trustee, beneficiary or otherwise; or
(c) the relevant liability:
(i) is actual or contingent, ascertained or unascertained, fixed
or fluctuating;
(ii) is in respect of principal, interest, Guarantee obligations,
purchase obligations, fees or damages; or
<PAGE>
(iii) is in dollars, another currency or a combination of
currencies,
or is of any other character.
'SECURITY INTEREST' means a mortgage, pledge, lien, charge, preferential
right, trust arrangement, agreement or other arrangement given or created
as security.
'SWITCH FACILITY' means the commercial bill, overdraft and letter of
credit switch facility agreed to be provided under this document to the
Borrower, the particular provisions of which are set out in clause 4.
'SWITCH FACILITY LIMIT' means $12,000,000 as reduced or cancelled under
this document, or such other amount as may be agreed in writing between
the Borrower and the Bank.
'SWITCH SUB-LIMIT' means, until the Switch Facility has been repaid in
full:
(a) $1,000,000 during each January, February and March; or
(b) $5,000,000 for each month other than those referred to in paragraph
(a) above.
'TANDY CORPORATION' means Tandy Corporation of 1900 One Tandy Center, Fort
Worth, Texas, 76102, United States Of America.
'TANDY SECURITY' means a Security Interest granted by the Borrower in
favour of Tandy Corporation (including as agent or trustee for Trans World
Electronics, Inc and A&A International Inc).
'TAX' includes any tax, levy, charge, rate, duty, compulsory loan or
withholding (and associated penalty or interest) imposed or withheld by a
Public Authority.
'TECHNOTRON' means Technotron Sales Corp Pty Ltd ACN 001 260 902.
'TRANSACTION SECURITIES' means all or any of the:
(a) floating charge by the Borrower in favour of the Bank over all its
assets and undertaking now or in the future wherever situated;
(b) floating charge by Technotron in favour of the Bank over all its
assets and undertaking now or in the future wherever situated;
(c) interlocking guarantee by the Borrower and Technotron in favour of
the Bank.
'10Q REPORT' means a report in relation to InteRTAN Inc. which complies
with Sections 13 and 15(d) of the US Securities Exchange Act of 1934 or
any equivalent provisions as amended from time to time, filed by InterTAN
Inc. with the US Securities and Exchange Commission.
<PAGE>
1.2 INTERPRETATION
In this document, unless the contrary intention appears:
(a) references to any legislation or to any provision of any legislation
include any modification or re-enactment of, or any provision
substituted for, and all statutory instruments issued under, that
legislation or provision;
(b) the single includes the plural and vice versa;
(c) words importing natural persons includes bodies corporate and vice
versa;
(d) words implying any gender include all genders;
(e) references to clauses and Schedules are references to clauses and
Schedules of this document;
(f) a reference to any document or agreement (including this document)
includes that document or agreement as amended, novated, supplemented
or replaced;
(g) a reference to a party to this document or any other document or
agreement includes that party's successors or permitted assigns;
(h) any reference to `$', `A$' or `AUD' is a reference to Australian
currency;
(i) where a payment by the Borrower falls due on a day which is not a
Business Day it will be made on the preceding Business Day and
interest will be adjusted accordingly;
(j) where any action to be taken or obligation fulfilled, other than a
payment, falls on a day which is not a Business Day the action will be
taken or the obligation fulfilled (as the case may be) on the next
subsequent Business Day;
(k) if this document binds two or more persons, it binds them severally
and jointly; and
(l) when 2 or more persons are named in this document as the Borrower, the
expression 'the Borrower' is a reference to each of them severally as
well as to any 2 or greater number of them jointly.
1.3 HEADINGS
In this document headings are for convenience only and do not affect
interpretation.
1.4 OUTSTANDING BILL OR UNEXPIRED LETTER OF CREDIT
(a) A reference to an outstanding Bill is to a Bill which has been
accepted and discounted under this document for which the Borrower has
not paid the face amount or provided cash cover under this document
(whether or not that Bill has matured, been presented
<PAGE>
for payment or been paid on presentation by the Bank). A Bill that is
rolled is on its Rollover Date deemed to continue and remain an
outstanding Bill.
(b) A reference to an unexpired Letter of Credit is to a Letter of Credit
which has not expired (or which has expired but a draft has been drawn
or payment made under it) and for which the Borrower has not provided
cash cover under this document or reimbursement in full.
2. LIMIT
2.1 LIMIT
Subject to this document, the Bank agrees to provide Financial
Accommodation under the Switch Facility PROVIDED THAT:
(a) the Principal Amount Outstanding does not and would not at any time
after any proposed Financial Accommodation is provided exceed the
Switch Facility Limit; and
(b) each drawing under the Switch Facility is used wholly or predominantly
for purposes connected to the business of the Borrower.
2.2 REDUCTION OR CANCELLATION OF SWITCH FACILITY LIMIT
(a) The Borrower may from time to time on giving 30 days irrevocable
notice to the Bank, reduce or cancel the Switch Facility Limit in
whole or in part (if in part, in a minimum amount of $100,000, and a
whole multiple of $100,000 or such other amount as the Bank may agree
to) by an amount not exceeding the excess of the Switch Facility Limit
at that time over the Principal Amount Outstanding.
(b) A reduction or cancellation of the Switch Facility Limit under clause
2.2(a) will not be able to be reversed unless the Bank otherwise
agrees, on terms and conditions determined by the Bank at that time.
(c) The Bank will not have any obligations under this document, and the
Switch Facility Limit will automatically be cancelled (unless the Bank
otherwise agrees), unless the first drawdown under this document is
made on or before the day which is 6 weeks after the date of this
document.
2.3 REPAYMENT
Subject to all necessary payments being made under clauses 4.11, 6 and 12.4
as applicable in respect of the Switch Facility, the Borrower may on the
Rollover Date for a Bill, pay to the Bank an amount equal to the face value
of the Bill (other than by drawing further Bills accepted or discounted by
the Bank) in reduction of the Principal Amount Outstanding.
<PAGE>
2.4 REVIEWS
(a) The Bank will conduct an internal review of:
(i) the audited financial statements of the Borrower and Technotron
for each year ended 30 June on or about 31 January of the
following year; and
(ii) each 10Q Report on or about the end of the Quarter following the
Quarter to which the 10Q Report Relates.
(b) In addition to the scheduled review set out in paragraph (a) the Bank
may conduct an internal review in relation to the financial condition
of the Borrower and the Switch Facility at any time.
(c) After conducting a review under paragraphs (a) or (b), the Bank may by
notice in writing to the Borrower, to be effective 30 days after the
date of that notice, change any of the conditions applying to the
Switch Facility including, but not limited to, the Issuance Fee or the
Margin.
(d) The Borrower may during the 30 day period referred to in paragraph (c)
by notice to the Bank terminate the Switch Facility. Any such
termination will be irrevocable and must be accompanied by a payment
of the whole of the Principal Amount Outstanding together with all
outstanding costs charges fees and expenses due by the Borrower under
this document. If the Borrower terminates the Switch Facility under
this clause:
(i) the Switch Facility Limit is immediately reduced to zero;
(ii) the Borrower must not draw any part of the Switch Facility. This
includes, but is not limited to, drawing any cheque on the
Overdraft Account; and
(iii) amounts paid on account of unmatured Bills or outstanding
Letters of Credit will be applied by the Bank in accordance with
clause 4.17; and
(iv) the overdraft facilities fee referred to in clause 6(e) shall
accrue only to the date of repayment of the Principal Amount
Outstanding; and
(v) any new fee or charge imposed by the Bank pursuant to its notice
under paragraph (c) above, will not apply except to the extent
that money remains outstanding on the expiry of the 30 day
notice period referred to in paragraph (c).
3. CONDITIONS PRECEDENT
The obligation of the Bank to provide and continue to provide any
Financial Accommodation under this document is subject to the conditions
precedent that the Bank receives in form and substance satisfactory to it
the following or is satisfied (as the case may be):
<PAGE>
(a) a certified copy of the Memorandum and Articles of Association of the
Borrower and Technotron;
(b) a Statutory Declaration, in the form set out in Schedule 3, made by a
director or the secretary of the Borrower and a Statutory
Declaration, in the form set out in Schedule 4, made by a director or
the secretary of Technotron, in relation to the execution of the
Transaction Securities to which it is a party;
(c) each of the Transaction Securities properly executed and, subject to
stamping, in registrable form, where applicable and all relevant
discharges required by the Bank to ensure that, subject to the Inter-
creditor Deed between the Bank, Tandy Corporation, the Borrower and
Technotron, it has a first charge over all the assets and undertaking
of the Borrower and Technotron;
(d) statement of awareness by InterTAN Inc in relation to the Switch
Facility and the Transaction Securities;
(e) all relevant insurance policies and certificates of currency for the
Borrower and Technotron as required by the Bank and with an insurer
acceptable to the Bank with the Bank's interests noted as chargee;
(f) all fees payable to the Bank under this document before the relevant
Drawdown Date in respect of any account or the Switch Facility
including, but not limited to, the Establishment Fee;
(g) any document ancillary to this document or the Transaction Securities
which the Bank reasonably requests and any other information that the
Bank reasonably requests about the Borrower, Technotron or any
property subject to a Transaction Security;
(h) the representations and warranties by the Borrower in this document
are true as at the date of each Drawdown Date as though they had been
made at that date in respect of the facts and circumstances then
subsisting; and
(i) a letter by the Borrower to the Bank nominating the amount of the
Bill Limit and the Overdraft Limit (which must not, in aggregate,
exceed the Switch Sub- Limit),
provided that the documents and evidence referred to in paragraphs (a)-(e)
inclusive need only be provided before the first Drawdown Date.
4. SWITCH FACILITY
4.1 OVERDRAFT
(a) Subject to this document and to satisfaction of the conditions
precedent specified in clause 3, the Bank agrees to provide
accommodation by way of overdraft to the Borrower by allocating the
Overdraft Limit to the Overdraft Account.
<PAGE>
(b) The Borrower must not make any drawing on, or draw any cheque on, the
Overdraft Account which would, when the drawing is made or the cheque
presented (as the case may be) cause:
(i) the Principal Amount Outstanding at that time to exceed the
Switch Facility Limit; or
(ii) the debit balance of the Overdraft Account to exceed the
Overdraft Limit.
The Bank is not obliged to pay any cheque drawn in breach of this clause.
Unless the Bank otherwise agrees in writing, if the Debit Balance of the
Overdraft Account exceeds the Overdraft Limit, the Borrower must
immediately pay an amount equal to the amount of the excess to the credit
of the Overdraft Account.
4.2 INTEREST
Interest will accrue on a daily basis on the amount of debt from time to
time in the Overdraft Account at a rate equal to the aggregate of ILR from
time to time and the Margin at that time for the Overdraft Account.
4.3 PAYMENT OF INTEREST
Interest on the Overdraft Account may be debited by the Bank to the
Overdraft Account monthly in arrears on the last Business Day of each
month, and interest so debited will itself carry interest at the rate
specified in clause 4.2.
4.4 AVAILABILITY OF BILLS
Subject to the terms of this document and to satisfaction of the
conditions precedent specified in clause 3, the Bank agrees to accept and
discount Bills to a maximum face value at any time of the Bill Limit
provided that when the Bill is accepted this does not cause the Principal
Amount Outstanding at that time to exceed the Switch Facility Limit.
4.5 DRAWDOWN NOTICE
No later than 10.00am two Business Days (or such later time agreed to by
the Bank) prior to the proposed Drawdown Date (which must be a Business
Day), the Borrower may deliver to the Bank at the address of the Bank set
out in clause 12.7, a letter substantially in the form of Schedule 1. The
contents of that letter will constitute the Borrower's standing
instructions in relation to that tranche of Bills for the term of the
Switch Facility, subject to any variation the Borrower may wish to make in
accordance with clause 4.6.
4.6 VARIATIONS
Any variation requested by the Borrower may only take effect on a Rollover
Date and must be requested by written notice not less than two Business
Days before that Rollover Date by delivery to the Bank at the address of
the Bank set out in clause 12.7, a letter substantially in the form of
Schedule 2.
<PAGE>
4.7 EXECUTION OF BILLS
Without limitation, a letter from the Borrower and any Bill drawn under
this clause 4 will bind the Borrower if it is apparently signed:
(a) by 2 Authorised Officers of the Borrower, or
(b) in the manner specified by or under the mandate or authority of the
Borrower given by the Borrower to the Bank from time to time in
respect of an Account.
4.8 PHYSICAL BILLS
If the Bank requests that physical Bills be prepared or the Bank prepares
physical bills under clause 4.10 each Bill must:
(a) be in a form acceptable to the Bank;
(b) have a minimum face amount of $20,000 and to the extent practicable
have the face amount set out below opposite the relevant total amount
of Bills to be accepted or discounted on the relevant date:
<TABLE>
<CAPTION>
AMOUNT OF DRAWING FACE AMOUNT
---------------------------------------
<S> <C> <C>
less than $2,000,000 $100,000
---------------------------------------
$2,000,000 to $5,000,000 $500,000
---------------------------------------
</TABLE>
or any other amount specified by the Bank;
(c) be expressed to be drawn by the Borrower and signed by or on
behalf of the Borrower;
(d) be payable at the Bank's office set out in clause 12.7 or notified
by the Bank from time to time to the Borrower;
(e) have the name of the payee left blank;
(f) be stamped by the Borrower with any applicable stamp duty; and
(g) have a tenor of 30, 60, 90 or 180 days or another tenor agreed by the
Bank.
If the Bank requests that physical Bills be prepared by the Borrower, the
Borrower must deliver the Bills (prepared in accordance with this clause)
to the Bank at the address of the Bank set out in clause 12.7 not later
than two Business Days before the day on which the Borrower wishes the
Bank to accept and discount Bills.
<PAGE>
4.9 DISCOUNT
Whenever the Bank discounts Bills drawn under this clause it will do so at
the Bank's discount rate applicable at that time for similar bills of
exchange of similar amount and term plus the Margin in respect of Bills at
that time; and
The Bank will on each date on which it discounts Bills under the Switch
Facility pay to the Borrower, or at the direction of the Borrower to any
other person, an amount equal to the aggregate face amount of the Bills
discounted by it less the aggregate of:
. the discount amount (including the Margin) determined by the Bank in
respect of each Bill; and
. any applicable stamp duty (including financial institutions duty) or
Taxes payable by the Bank on or in respect of each Bill and any
payment, receipt or crediting of an Account; and
. any other amount owing and currently payable but unpaid by the
Borrower to the Bank under this document.
4.10 AUTHORITY
(a) For valuable consideration, the Borrower irrevocably authorises the
Bank at any time to prepare, sign as drawer (by any two Managers),
complete, perfect and deliver Bills on behalf of the Borrower in
accordance with this document and to alter any non-complying Bills
delivered if either:
(i) the Borrower fails to deliver or prepare Bills in accordance
with this document; or
(ii) the Borrower requests the Bank to do so in a letter under clause
4.5.
(b) Only the Bank may request that physical Bills be brought into
existence. The Borrower acknowledges that ordinarily the Bank will
not physically prepare Bills but that it will be taken for all
purposes to have prepared, accepted and discounted Bills drawn by the
Borrower and otherwise complying with this document in accordance
with the Borrower's requests under this clause 4. Each Relevant
Agreement will apply as if:
(i) the Bank had prepared, completed, perfected, accepted and
discounted those Bills; and
(ii) the Borrower had signed (as drawer) and delivered those Bills,
all in accordance with the Bills of Exchange Act 1909.
<PAGE>
4.11 PRIMARY LIABILITY
(a) As between the Bank and the Borrower, the Borrower is primarily
liable in respect of all Bills drawn under this clause. Accordingly:
(i) the liability of the Borrower with respect to any Bill will
not be or be taken to have been discharged because the Bank
becomes the holder of that Bill before, on or after its
maturity. Nothing in this clause requires the Borrower to pay
the face value of the Bill more than once ;
(ii) subject to clause 4.11(c), not later than 11am (local time at
the address of the Bank set out in clause 12.7 or in such
other place as may be notified by the Bank to the Borrower) on
the maturity date for each Bill, the Borrower will pay to the
Bank an amount equal to the face amount of that Bill; and
(iii) the Borrower will pay to the Bank on demand all amounts paid
by the Bank on or in relation to each Bill accepted by the
Bank or in relation to which the Bank has otherwise incurred
liability.
(b) The Borrower irrevocably authorises the Bank on the maturity of any
Bill to debit the face amount of that Bill to any Account, whether or
not it is presented for payment.
(c) If on any day on which Bills mature the Bank discounts any other
Bills, only the net amount as between:
(i) the amount payable by the Borrower to the Bank under paragraph
(a); and
(ii) the net discounted proceeds, after deducting the amount of the
Bank's fees and any stamp or other duty payable on or in
respect of those Bills, payable by the Bank to the Borrower on
that day,
need be paid.
(d) If for any reason the Borrower fails to comply with its obligations
under this clause 4.11 in respect of any Bill, the Bank may at its
absolute discretion advance to the Borrower an amount not exceeding
the shortfall (to be applied in satisfaction of the Borrower's
obligations). That amount will be taken to have been provided by the
Bank as a loan :
(i) which is repayable on demand by the Bank and may be debited to
any Account or, if the Borrower does not have an account with
the Bank, any account established by the Bank for that
purpose, immediately; and
(ii) on which the Borrower will pay interest in accordance with
clause 7 as if the loan were due immediately.
<PAGE>
4.12 INDEMNITY
On demand, the Borrower will indemnify the Bank against any loss, cost,
charge, liability or expense the Bank (or any officer or employee of the
Bank) may sustain or incur as a direct or indirect consequence of:
(a) a Bill requested in a letter under clause 4.5 not being discounted
in accordance with this document for any reason excluding default by
the Bank; or
(b) the Bank accepting any Bill or otherwise incurring any liability on
or in relation to any Bill; or
(c) the Bank or any Manager acting on behalf of the Borrower under
clause 4.10.
Without limitation this indemnity will cover any amount determined by the
Bank to be incurred by reason of the liquidation or re-employment of
deposits or other funds acquired or contracted for by the Bank to
discount any Bill or to fund or maintain any amount (including loss of
margin) and by reason of the termination or reversing of any agreement or
arrangement entered into by the Bank to fix, hedge or limit its effective
cost of funding or maintaining any accommodation under this document or
any amount.
4.13 AVAILABILITY OF LETTERS OF CREDIT
Subject to the terms of this document and to satisfaction of the
conditions precedent specified in clause 3, the Bank agrees to issue
Letters of Credit to a maximum face value at any time of:
(a) the Switch Facility Limit; less
(b) the aggregate amount at that time of the Bill Limit and the
Overdraft Limit.
4.14 DRAWDOWN NOTICE FOR LETTER OF CREDIT
No later than 10.00am two Business Days (or such later time agreed to by
the Bank) prior to the proposed Drawdown Date (which must be a Business
Day), the Borrower may deliver to the Bank's International Business
Centre a letter or other document containing the information and terms
required by the Bank for the drawing of a Letter of Credit.
4.15 ISSUE OF CREDITS
Subject to the terms of this document, and subject to the execution by
the Borrower of any further letter of credit documentation (including but
not limited to an indemnity and pledge) as required by the Bank at that
time, the Bank will on the Drawdown Date specified in a letter referred
to in clause 4.14 issue a Letter of Credit for the period nominated by
the Borrower which is acceptable to the Bank and to the beneficiary
nominated by the Borrower.
<PAGE>
4.16 INDEMNITY
(a) (DISBURSEMENTS): the Borrower indemnifies the Bank against, and will
pay on demand by the Bank, all amounts required to be disbursed by
the Bank under any Letter of Credit.
(b) (GENERAL INDEMNITY): The Borrower indemnifies the Bank against, and
will pay on demand by the Bank, all loss, liabilities, damage, costs,
charges and expenses suffered or incurred by the Bank in relation to
or arising out of any claim made or purported to be made under any
Letter of Credit or anything done by any person who is or claims to
be entitled to the benefit of any Letter of Credit, except any
payment under a letter of credit made otherwise than in conformity
with the Letter of Credit.
4.17 CASH COVER
(a) If at any time:
(i) the Borrower is required to pay the Principal Amount
Outstanding, or
(ii) the Switch Facility is terminated or the Switch Facility Limit
is cancelled or reduced to an amount less than the Principal
Amount Outstanding at that time,
the Borrower must immediately pay to the Bank the face amount of
all, or the requisite amount, of the outstanding Bills or Letters of
Credit notwithstanding that they have not matured or that conforming
documents have not been presented under the relevant Letters of
Credit.
(b) The Bank will, after satisfying any actual liabilities of the
Borrower to the Bank, apply any remaining amount paid to the Bank
under paragraph (a) (being the 'CASH COVER AMOUNT'):
(i) in payment of any amount payable under any Bill or Letter of
Credit when it becomes due and the obligation of the Borrower
under clause 4.11 and 4.16(a) is reduced accordingly; and
(ii) in or towards satisfaction of any sum at any time payable by
the Borrower to the Bank under or in relation to this
document.
(c) The Cash Cover Amount will accrue and be credited with interest at
the Bank's normal rate for like deposits as determined by it.
(d) The Cash Cover Amount is only repayable by the Bank, on demand by
the Borrower, to the extent that on any day the Bank determines that
it exceeds the amount which the Borrower is or may become actually
or contingently liable to pay to the Bank under a Relevant
Agreement, including the aggregate face amount of outstanding Bills
and Letters of Credit.
<PAGE>
5. SWITCHING
Subject to this document, the Borrower may switch all or any part of the
Principal Amount Outstanding under the Switch Facility:
(a) from Bills to Letters of Credit and/or overdraft Financial
Accommodation on the Rollover Date for the Bills; and
(b) from overdraft Financial Accommodation to Letters of Credit and/or
Bills at any time;
PROVIDED THAT:
(c) the Borrower gives at least two Business Days notice prior to the
Business Day on which the switch is required;
(d) if the switch requires the alteration of the Bill Limit or the
Overdraft Limit (or both), the Borrower provides a letter to the Bank
nominating the amended amount of the Bill Facility Limit and the
Overdraft Limit (which must not in aggregate exceed the Switch Sub-
Limit); and
(e) the switch will not cause the Bill Limit or the Overdraft Limit to be
exceeded or cause a breach of this document; and
(f) any switch from Bills to overdraft occurs on a Rollover Date for
Bills at least equal to the amount to be switched.
6. FEES AND CHARGES
The following fees and charges will apply to the Switch Facility. The
Borrower is liable for the following:
(a) All government charges payable in relation to this facility including
stamp duty, Financial Institutions Duty, Debits Tax and other taxes
and duties on this document and on payments and receipts under it.
(b) The balance of the Establishment Fee payable on execution of this
document, $10,000 of that fee having been paid before execution.
(c) The Issuance Fee for each Letter of Credit payable on issuance of the
Letter of Credit.
(d) Reasonable transmission and confirming fees determined by the Bank as
applicable to a Letter of Credit, payable on demand by the Bank.
(e) Other Bank Fees
. A bill rollover fee of $100 per Rollover Date is applicable to the
Switch Facility. The fee will be payable from the first rollover
after initial drawdown of a Bill. It will be automatically charged to
the Account designated.
<PAGE>
. The Bank's usual cheque account keeping fees will be payable in
relation to the Overdraft Account.
. An overdraft facility fee as determined by the Bank from time to time
generally for overdraft facilities in excess of $100,000. Currently
this fee is $84 for each month, payable quarterly in arrears on the
last Business Day of each Quarter.
. Reasonable fees arising from any request by the Borrower to amend,
extend the terms of or increase amounts under any established Letters
of Credit as determined by the Bank.
. All reasonable costs, charges, fees and expenses of and relating to
the preparation, negotiation, completion, registration and stamping
of this document and the Transaction Securities (including without
limitation the costs of the Bank's solicitors, up to $14,000). These
are payable on demand by the Bank.
. All reasonable costs, charges, fees and expenses of and relating to
any other Relevant Agreements (including without limitation the
reasonable costs of the Bank's solicitors). These are payable on
demand by the Bank.
. Following a default in the performance or observance of a material
obligation of the Borrower, all costs, charges, fees and expenses on
a full indemnity basis of and relating to the enforcement of any
right of the Bank or obligation of the Borrower under any Relevant
Agreement (including without limitation the costs of the Bank's
solicitors). These are payable on demand by the Bank.
(f) General Points on Fees:
. If the Switch Facility does not proceed due to cancellation of the
approval or due to withdrawal by the Borrower, the Borrower will be
responsible for payment of any legal costs and disbursements incurred
by the Bank up to that time.
. The Bank may charge additional fees in the future. Additional fees
will only be charged in accordance with Bank policy and where those
additional fees are applicable to facilities of the type provided
under this document in the normal course of the Bank's business.
. If, after acceptance of the terms and conditions, the Borrower
decides not to proceed with the Switch Facility, part of the
establishment fee will be refunded to the Borrower. The funds
retained will be used to compensate the Bank for work completed in
progressing the loan to the point of acceptance by the Borrower and
towards payment of the legal costs and disbursements referred to
above.
. A further establishment fee may be payable in the future should the
Switch Facility Limit be increased.
(g) The Bank may Debit the Overdraft Account with any of the fees
referred to in this clause.
<PAGE>
7. INTEREST ON ARREARS
For so long as money payable by the Borrower under this document remains
unpaid after the due date, the Borrower will pay interest on the relevant
amount from the date it becomes due and payable to and including the date
of payment.
That interest is to be calculated on a daily basis at the rate which is
the aggregate of:
. 1% per annum;
. the ILR; and
. any relevant Margin,
and will be payable on demand, which may be made at any time and from time
to time as the Bank sees fit.
8. VARIATION
The Bank may vary the ILR at any time by publication of the variation in
major Australian metropolitan newspapers. The new rate becoming effective
as at the date specified in the publication or, if no such date is
specified, the date on which such change is first published.
9. UNDERTAKINGS
The Borrower agrees with the Bank that until the Switch Facility has been
repaid in full it will (or will procure that the following will be done),
unless the Bank consents otherwise:
(a) keep and maintain proper records and books of account and will
permit the Bank, its Managers and persons authorised by any of them
to have access at all reasonable times to, and take copies of or
extracts from those records and books and to all other documents
relating to its business;
(b) notify, and on request promptly give details to the Bank as soon
as it becomes aware of:
(i) all litigation, arbitration or similar proceedings to which
it is a party where a claim is made against the Borrower for
a sum exceeding A$100,000;
(ii) any change in its Authorised Officers, giving specimen
signatures of any new Authorised Officer appointed and, where
requested by the Bank, evidence satisfactory to the Bank of
the authority of each new Authorised Officer; or
(iii) any of the representations and warranties made by it becoming
untrue in any material respect;
<PAGE>
(c) not sell or otherwise dispose of, or create any Security Interest
(other than a Permitted Security Interest) in the land known as 91
Kurrajong Ave, Mt Druitt, New South Wales;
(d) comply with all applicable Authorisations and laws (including, but
not limited to, Environmental Laws and laws relating to foreign
investment, acquisitions and takeovers) where non-compliance is
reasonably likely to have a Material Adverse Effect, and obtain,
maintain and renew all material Authorisations necessary for:
(i) the conduct of its business; and
(ii) the acquisition and retention of any property the subject of
a Security Interest;
(e) promptly inform the Bank upon the occurrence of any, or any series
of, events or circumstances reasonably likely to adversely affect
its ability to comply with its material obligations under this
document, any other Relevant Agreement or the License Agreement, or
to affect materially its financial condition or the value of any
Security Interest provided to the Bank for the Secured Money;
(f) promptly give to the Bank copies of any notice, order or
correspondence from or with a Public Authority relating to the
conduct of its business which is material to the Bank's interest;
(g) do all things necessary to maintain its corporate existence in good
standing and without the Bank's consent (not to be withheld
unreasonably) will not transfer its jurisdiction of incorporation
or enter into any merger or consolidation;
(h) notify the Bank of any change to any of its directors or the
termination or resignation of any person that is involved in the
executive management of its business within 7 Business Days of such
change;
(i) (i) pay when due all Taxes payable by it other than Taxes which
are being contested in good faith except where a failure to
pay such Taxes may have a material adverse effect on it or
its ability to perform any of its financial or other
obligations under any Relevant Agreement, any ITI Group
Document or any other document or agreement which is material
to the security of the Bank; and
(ii) pay such contested Taxes after the final determination or
settlement of such contest;
(j) furnish to the Bank:
(i) as soon as practicable (and in any event not later than 110
days after the close of each of its financial years), copies
of its audited balance sheet and profit and loss account for
that financial year;
<PAGE>
(ii) as soon as practicable (and in any event not later than 110 days
after the close of each of the financial years of InterTAN Inc)
audited consolidated financial statements of InterTAN Inc (or
any other company which is the ultimate holding company of the
Borrower) and its subsidiaries for that financial year;
(iii) as soon as practicable (and in any event not later than 65 days
after the end of each Quarter) copies of unaudited management
accounts for the Borrower and Technotron for that Quarter
incorporating at least a comparison of actual results to budget
over the period;
(iv) as soon as practicable (and in any event not later than 65 days
after the end of each Quarter) copies of the 10Q Reports for
that Quarter; and
(v) on request, any financial or other information in relation to
its business as the Bank may reasonably request;
(k) ensure that each balance sheet, profit and loss account, management
account and any other financial report furnished to the Bank under
paragraph (k):
(i) is prepared in accordance with accounting principles and
practices are prepared consistently applied except to the extent
disclosed in those accounts; and
(ii) gives a true and fair view of the financial state of affairs of
the relevant entity and the result of its operations, as at the
date, and for the period ending on the date, to which those
accounts are prepared;
(l) maintain procedures which are in the reasonable opinion of the Bank
adequate to monitor its compliance with applicable Environmental Laws
and Authorisations;
(m) not pay a dividend to its shareholders out of any profit earned by it
without the prior written consent of the Bank;
(n) at all times, duly and punctually pay all rents, rates, Taxes
(including land tax), duties, charges, outgoings and assessments of
any Public Authority, any time charged or chargeable or payable on or
in respect of any property of the Borrower;
(o) maintain and protect its property and keep it in good repair and in
good working order and condition;
(p) promptly inform the Bank:
(i) on the occurrence of any, or any series of, events or
circumstances reasonably likely to adversely affect its ability
to comply with any of its material obligations under an ITI
Group Document; and
<PAGE>
(ii) of any notice, demand or requirement by InterTAN Inc for the
repayment of all or part of the InterTAN Debt where the amount
of the repayment will reduce the balance of the InterTAN Debt
below A$25,000,000;
(q) comply in all material respects with the terms of the License
Agreement;
(r) not terminate the License Agreement or take any action or omit to do
anything which may cause the termination of the License Agreement
prior to the expiry of its current term which ends on 30 June 2010;
(s) not without the prior written consent of the Bank:
(i) voluntarily repay all or any part of the InterTAN Debt;
(ii) set-off all or any part of the InterTAN Debt against any
indebtedness of InterTAN Inc to the Borrower; or
(iii) merge or combine any accounts with InterTAN Inc., so as to
directly or indirectly reduce at any time the InterTAN Debt
below A$25,000,000 or such lesser amount as is agreed between
the Borrower and the Bank;
(t) make all efforts and do all things to ensure that there is no change
to the current shareholding of the Borrower;
(u) not, without the prior written consent of the Bank, sell or dispose of
any shares it
holds in any subsidiary.
10. REPRESENTATIONS AND WARRANTIES
10.1 GENERAL REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Bank that:
(a) the Borrower has the status of a corporation validly existing under
the laws of the place of its incorporation;
(b) the Borrower has the corporate power to enter into and perform its
obligations under the Relevant Agreements to which it is expressed to
be a party, to carry out the transactions contemplated by those
documents and to carry on its business as now conducted or
contemplated;
(c) the Borrower has taken all necessary corporate action to authorise its
entry into and its performance of the Relevant Agreements to which it
is expressed to be a party and to carry out the transactions
contemplated by those documents;
(d) each Relevant Agreement to which it is expressed to be a party is,
subject to stamping and registration, a valid and binding obligation
enforceable in accordance with its terms;
<PAGE>
(e) neither the execution and performance by it of the Relevant Agreements
to which it is expressed to be a party nor any transaction
contemplated under them will violate in any material respect any
provision of:
(i) any law or treaty or any judgment, ruling, order or decree of
any Public Authority binding on it;
(ii) if a corporation, its memorandum or articles of association or
other constituent documents; or
(iii) any other document or agreement which is presently binding on it
or its assets;
and, except as may be provided by the Relevant Agreements, and will not
presently result in:
(iv) the creation or imposition of any Security Interest on any of
its assets; or
(v) the acceleration or cancellation of any obligation with respect
to any Financial Indebtedness, or anything which constitutes (or
which, with the giving of notice or lapse of time would
constitute) an event of default, cancellation event, prepayment
event or similar event (whatever called) under any agreement
relating to Financial Indebtedness;
(f) no litigation, arbitration, Tax claim, dispute or administrative
proceeding against or involving it or InterTAN Inc. (other than those
disclosed to and acknowledged by the Bank) is presently current or
pending or, to its knowledge, threatened, which is likely to have a
material adverse effect on it or its ability to perform its financial
or other obligations under any Relevant Agreement;
(g) (i) it is not in default under any document or agreement binding on
it or its assets which relates to Financial Indebtedness or is
material; and
(ii) nothing has occurred which is or would, with the giving of
notice and/or the lapse of time, constitute an event of default,
cancellation, prepayment event or similar event (whatever
called) under any such document or agreement, where that is
reasonably likely to have a Material Adverse Effect;
(h) all material information provided by it to the Bank in relation to the
Relevant Agreements was true and accurate in all material respects as
at the date when the information was provided and remains so at the
date of this document and there are no facts or circumstances which
have not been disclosed to the Bank and which, if disclosed, might
reasonably be expected to adversely affect the decision of a person
considering whether to provide the Switch Facility to the Borrower;
(i) all Authorisations, if any, required in relation to the execution,
delivery or performance by it, and the validity and enforceability, of
the Relevant Agreements to which it is expressed to be a party and the
transactions contemplated by those documents have been obtained or
effected and are in full force and effect;
<PAGE>
(j) it has complied with all laws (including without limitation any
Environmental Law) and Authorisations binding on it where non-
compliance is reasonably likely to have a Material Adverse Effect;
(k) the License Agreement is enforceable against Tandy Corporation and in
full force and effect and the Borrower is not aware of any matter or
circumstance which will or is likely to result in the termination or
suspension of the Borrower's rights under the License Agreement.
10.2 REPRESENTATIONS AND WARRANTIES REPEATED
(a) Subject to paragraph (b), the Borrower makes each of the warranties in
clause 10.1 and represents that they will be correct and complied with
in all material respects on each day on which the Bank provides
financial accommodation under the Switch Facility as if repeated then
by reference to the then existing circumstances.
(b) The representations and warranties in clause 10.1 apply unless the
Borrower makes a contrary written statement to the Bank in the seven
days before (and on each occasion) they are repeated.
10.3 ACKNOWLEDGEMENT
The Borrower acknowledges that the Bank has entered into this document in
reliance on the representations and warranties in clause 10.1.
11. TERMINATION OF SWITCH FACILITY
11.1 FACILITIES ON DEMAND
At any time, the Bank may by notice to the Borrower:
(a) terminate the Switch Facility and declare all moneys owing (whether
actually or contingently) under the Switch Facility to be due and
payable; and/or
(b) cancel the Switch Facility Limit (in which event the Bank has no
further obligation to provide any Financial Accommodation to the
Borrower under the Switch Facility); and/or
(c) without notice to any Borrower or to any other person exercise any
rights it has under the general law or any Security Interest
including, but not limited to, the Transaction Securities.
11.2 OBLIGATIONS ON TERMINATION
If the Bank terminates the Switch Facility:
<PAGE>
(a) the Borrower must pay to the Bank within five Business Days of notice
under clause 11.1 the Principal Amount Outstanding and all accrued
interest and fees and all other moneys owing under the Switch Facility
including, but not limited to:
(i) an amount equal to the face amount of all outstanding Bills
under the Switch Facility (even if the maturity date or Rollover
Date of those Bills has not occurred); and
(ii) the debit balance in the Overdraft Account and the aggregate
amount of all unpresented cheques drawn on the Overdraft
Account; and
(iii) the aggregate face value of all unexpired Letters of Credit; and
(b) the Switch Facility Limit is immediately reduced to zero; and
(c) the Borrower must not draw any part of the Switch Facility. This
includes, but is not limited to, drawing any cheque on the Overdraft
Account.
12. MISCELLANEOUS CONDITIONS
12.1 SET-OFF
The Borrower authorises the Bank (but without obligation on the part of the
Bank) to apply any credit balance in any currency (whether or not matured)
in any of its accounts with any branch of the Bank in or towards
satisfaction of any sum at any time due and payable by it to the Bank under
or in relation to this document or a Relevant Agreement to which it is a
party. The Bank may effect such currency exchanges as are appropriate to
implement set-off.
12.2 SEVERABILITY OF PROVISIONS
Any provision of this document which is prohibited or unenforceable in any
jurisdiction shall, as to the jurisdiction, be ineffective to the extent of
the prohibition or unenforceability but that shall not invalidate the
remaining provisions of this document or affect the provision in any other
jurisdiction.
12.3 MORATORIUM LEGISLATION
To the full extent permitted by law all legislation which at any time
directly or indirectly:
(a) lessens or otherwise varies or affects in favour of the Borrower any
obligation under this document; or
(b) delays or otherwise prevents or prejudicially affects the exercise by
the Bank of any right, power or remedy conferred by this document,
is negatived and excluded from this document.
<PAGE>
12.4 INDEMNITY
(a) The Borrower unconditionally indemnifies the Bank and each officer of
the Bank against any loss, foregone profit and expense the Bank or any
officer may sustain or incur as a consequence of:
(i) the receipt of any amount paid on a date other than the due
date; or
(ii) a drawing of the Switch Facility requested by the Borrower not
being provided for any reason (excluding default by the Bank).
(b) Where the Bank has provided Financial Accommodation to or at the
request of the Borrower at a fixed discount rate ('RELEVANT
ACCOMMODATION'), THE INDEMNITY IN PARAGRAPH (A) INCLUDES LOSS,
FOREGONE PROFIT AND EXPENSE INCURRED OR SUFFERED:
(i) in connection with the Bank:
(A) changing, rearranging or ending any financial arrangements
entered into by it in connection with the Relevant
Accommodation (even if the financial arrangements were
entered into for a large pool of funds); or
(B) redeploying or reinvesting the money paid or repaid to the
Bank; and
(ii) because the Bank has lost the benefit of the agreement that the
Relevant Accommodation should be at a fixed rate or outstanding
for a fixed time or both. In this case, the amount of the loss,
foregone profit and expense is to be determined by comparison
with an available replacement loan at the time of the payment or
repayment.
12.5 INCREASED COSTS
Whenever the Bank determines that it is affected by:
(a) any:
(i) change in; or
(ii) any change in the interpretation or application by any Public
Authority or authority of,
any law, official directive or request (including, without
limitation, with respect to taxation (other than a change in the
rate of tax on the overall net income of the Bank), reserve,
liquidity, capital adequacy, special deposit or similar
requirements),
and as a result:
<PAGE>
(b) the costs of the Bank of making, funding or maintaining the Switch
Facility is in any way increased;
(c) any amount paid or payable to or received or receivable by the Bank or
the effective return to the Bank under or in respect of the Switch
Facility is in any way reduced;
(d) the Bank's return on capital which is or becomes directly or
indirectly allocated to the Switch Facility is in any way reduced; or
(e) in so far as such law, official directive or request relates to or
affects the Switch Facility, its overall return on capital is in any
way reduced,
(including, without limitation, by reason of the Bank being restricted in
its capacity to enter other transactions, or being required to make a
payment or foregoing or earning reduced interest or other return on any
capital or any amount calculated by reference in any way to, or allocating
capital to, the amount of the Switch Facility or to any other amount paid
or payable or received or receivable under this document) then:
(f) once the Bank has determined how and to what extent it is affected, it
shall promptly notify the Borrower; and
(g) the Borrower shall pay the Bank the amount certified by a Manager
which shall compensate the Bank for such increased cost, reduction,
payment or foregone interest or other return at the times and on the
basis agreed between the Bank and the Borrower and failing such
agreement at the end of each quarter of the Borrower's financial year.
This clause applies with respect to official directives or requests
whether or not having the force of law and, if not having the force of
law, the observance of which is in accordance with the practice of
responsible bankers in Australia.
12.6 CERTIFICATE AS TO AMOUNT OF SECURED MONEY
A certificate signed by a Manager will be conclusive against the Borrower,
in the absence of manifest error:
(a) as to the amount of Secured Money stated in the certificate;
(b) that a document specified in that certificate is a Relevant Agreement;
and
(c) that the Bank is of the opinion stated in the certificate.
12.7 NOTICES
All notices, requests, demands, consents, approvals, agreements or other
communications by the parties under this document:
<PAGE>
(a) must be in writing;
(b) may be signed in the case of the Bank by a Manager or any other
person authorised by the Bank and in the case of the Borrower by an
Authorised Officer;
(c) will be taken to be duly given or made:
(i) in the case of delivery, when delivered to or left at, the
address of the recipient noted below;
(ii) in the case of delivery by post, on the day on which it would
be delivered in the ordinary course of post;
(iii) in the case of facsimile, on receipt of a report of
satisfactory transmission by the sender; or
(iv) in the case of telex, on receipt by the sender of the answer-
back code of the recipient at the end of the transmission; and
(d) Will be addressed to the address of the recipient shown below or to
such other address as it may have notified the sender in respect of
this document:
(i) Borrower: Financial Controller
InterTAN Australia Ltd
91 Kurrajong Avenue
MOUNT DRUITT NSW 2770
Facsimile: (02) 675 1488
with a copy to:
InterTAN, Inc.
201 Main Street
Suite 1805
FORT WORTH TEXAS USA
Facsimile: (817) 332 3071
Attention: Director of Treasury
(ii) Bank: Commercial Manager
Parramatta Commercial Centre
Westpac Banking Corporation
Level 7
34 Charles Street
PARRAMATTA NSW 2150
Facsimile: (02) 635 7096.
Any such communications may also be given or made in any manner permitted
by law.
<PAGE>
12.8 ASSIGNMENT
On delivery of reasonably timely notice to the Borrower, the Bank may
assign or transfer all or any of its rights under this document and any
other Relevant Agreement. The Borrower may not assign or transfer all or
any of its rights or obligations under this document or any other Relevant
Agreement without the prior written consent of the Bank.
12.9 GOVERNING LAW AND JURISDICTION
This document is governed by the laws of New South Wales. The Borrower
submits to the non-exclusive jurisdiction of courts exercising
jurisdiction in New South Wales.
12.10 REINSTATEMENT OF OBLIGATIONS
If all or any part of any amount paid by the Borrower to the Bank under
this document is required to be surrendered, released or repaid by the
Bank for any reason whatever, then the Bank shall be entitled to all
rights it would have had if such sum had never been paid by the Borrower.
12.11 MANNER OF PAYMENT
All payments to be made under this document must be made:
(a) to, or as directed by, the Bank at the place or into the account from
time to time notified by the Bank to the Borrower;
(b) in immediately available funds; and
(c) free of any set-off or counterclaim.
12.12 WHOLE OF AGREEMENT
This document forms the whole of the agreement between the Borrower and
the Bank in connection with the Switch Facility and replaces all prior
correspondence, discussions and negotiations.
12.13 COUNTERPARTS
This agreement may be executed in any number of counterparts. All
counterparts together will be taken to constitute one instrument.
<PAGE>
EXECUTED as an agreement.
THE COMMON SEAL of INTERTAN )
AUSTRALIA LTD is affixed in
accordance with articles of association )
in the presence of
)
)
........................................ .....................................
Secretary/Director Director
........................................ .....................................
Name of secretary/director(print) Name of director (print)
SIGNED on behalf of WESTPAC ) WESTPAC BANKING CORPORATION by
BANKING CORPORATION by its attorney who states that at
........................................ ) the time of executing this
its duly constituted attorney who is instrument the attorney has no
personally known to me ) notice of the revocation of the power
of attorney registered in the office
) of the Registrar General No. Book
under the authority of which the
) attorney has executed this
instrument
)
)
)
........................................ .....................................
<PAGE>
SCHEDULE 1
LETTER REQUESTING DRAWING OF FACILITY
Westpac Banking Corporation ...................19.....
I/We refer to the MULTI-OPTION SWITCH FACILITY AGREEMENT dated
........................................ 19..... between us and the Bank (the
'AGREEMENT').
Unless the context requires otherwise, definitions in the Agreement apply in
this letter.
Unless Bills of the requisite face amount and tenor are duly prepared, drawn and
endorsed by me/us and delivered to the Bank following a request from the Bank to
do so, I/We request the Bank to prepare, complete, draw, sign, perfect and
deliver on my/our behalf Bills details of which appear below. I/We acknowledge
that, unless the Bank specifically requests that Bills be physically prepared
and drawn, the Bank need not do so, but will be taken to have done so.
I/We request the Bank to do the following on the drawdown date specified below
and on each Rollover Date during the term of the Switch Facility:
(a) in accordance with the Agreement, accept the Bills in an aggregate face
amount as detailed below;
(b) insert the name of the payee on the Bills and otherwise complete the
Bills;
(c) discount the Bills and credit the proceeds to my/our Account [ ];
and
(d) debit to this Account or to any other Account, or deduct from the proceeds
referred to in (c) above, any bill rollover fee and any costs incurred in
relation to any amount payable under clauses 4 and 6 of the Agreement and
any stamp or other duty payable (whether by me/us or the Bank) on or in
respect of the Bills or any of the transactions described in (c) above.
DETAILS
Amount: ................ Drawdown Date: ...........
[ONLY APPLICABLE WHERE VARIABLE TENORS PERMITTED:
Tenor: .........................days (must be 30 to 180 days-only to be
completed if different tenors are available under the Agreement)]
Yours faithfully
...........................................
for and on behalf of InterTAN Australia Ltd
...........................................
for and on behalf of InterTAN Australia Ltd
<PAGE>
SCHEDULE 2
VARIATION LETTER
Westpac Banking Corporation .....................19.....
RE: COMMERCIAL BILL LINE $ DUE / / .
We refer to the MULTI-OPTION SWITCH FACILITY AGREEMENT dated............19.....
between us and the Bank (the 'AGREEMENT')
Unless the context requires otherwise, definitions in the Agreement apply in
this letter.
I/We also refer to my/our letter containing my/our standing instructions in
relation to Bills drawn under the Switch Facility for the term of the Switch
Facility delivered to the Bank on or after the date of the Agreement.
I/We now request the following variation(s) to take effect as and from the next
Rollover Date (this letter must be received by the Bank not less than 2 Business
Days before the Rollover Date).
VARIATIONS
. [ONLY APPLICABLE WHERE VARIABLE TENORS PERMITTED: New
tenor:...................(must be 30 to 180 days - subject to
acceptance by the Bank)]
. New amount:..................
. NOTE: MAY NOT VARY IN THE CASE OF A FIXED RATE LINE UNLESS THE
BANK AGREES.
Yours faithfully
...........................................
for and on behalf of InterTAN Australia Ltd
...........................................
for and on behalf of InterTAN Australia Ltd
<PAGE>
SCHEDULE 3
STATUTORY DECLARATION
I,
of
in the State of New South Wales, solemnly and sincerely declare:
1. I am a [director/secretary] of InterTAN Australia Ltd ('COMPANY') and am
authorised to make this declaration on behalf of the Company.
2. At duly constituted meeting(s) of the directors of the Company,
resolutions were duly passed to:
(a) authorise the Company to obtain financial accommodation from Westpac
Banking Corporation ('LENDER') on the terms set out in:
(i) the Multi-Option Switch Facility Agreement between the Lender
and the Company prepared by or on behalf of the Lender
('FACILITY AGREEMENT'); and
(ii) the Letter of Offer from the Bank to the Company dated 6 May
1996;
(b) authorise the Company, in accordance with the Facility Agreement, to
grant in favour of the Lender a charge over all its assets and
undertaking (`SECURITY') to secure all money that the Company is
liable to pay to the Lender on any account including all liabilities
of the Company to the Lender under the facilities referred to in the
Facility Agreement;
(c) authorise the Company to grant in favour of the Lender a guarantee
and indemnity (`GUARANTEE') to secure all money that Technotron
Sales Corp Pty Ltd ACN 001 260 902 is liable to pay to the Lender on
any account.
(d) authorise each of the persons set out in paragraph 3 below severally
to prepare, complete, sign, draw and deliver letters, notices and
bills of exchange on behalf of the Company for the purposes of the
Facility Agreement and to be Authorised Officers for the purpose of
the Facility Agreement.
3. The following signatures are those normally used by those signatories
whose names appear adjacent:
NAME SIGNATURE
................................. .................................
................................. .................................
................................. .................................
<PAGE>
4. At that meeting prior to the above resolutions being passed all directors
that were interested in the granting of the Security and the Guarantee
disclosed their respective interest prior to execution of the Security and
the Guarantee.
5. At that meeting, the directors considered the issue of benefit to the
Company as a result of the giving of the Guarantee and the Security. The
directors were unanimously of the view that the giving of the Guarantee
did result in a satisfactory benefit to the Company which justified that
Company giving the Guarantee.
6. The Company:
(a) is solvent and there are reasonable grounds to expect that, on
drawing the facilities referred to in the Facility Agreement and
execution of the Facility Agreement, the Security and the Guarantee,
the Company will continue to be able to pay all its debts as and
when they become due and payable; and
(b) has not had any liquidator, receiver, receiver and manager,
administrator or similar person (`EXTERNAL ADMINISTRATOR') appointed
to it or any of its assets and not withdrawn.
7. To the best of my current actual knowledge, information and belief, after
having made due enquiry for the purpose of making this declaration, there
is no action pending against the Company, or any meeting called, for the
appointment of an External Administrator to the Company or any of its
assets. I am not aware of any existing circumstances which might lead to
the appointment of an External Administrator to the Company or any of its
assets.
8. To the best of my current actual knowledge, information and belief, after
having made due enquiry for the purpose of making this declaration, no
meeting has been called to consider a resolution, no resolution has been
passed, no application is pending and no order has been made for the
winding up or administration of the Company.
9. To the best of my current actual knowledge, information and belief, after
having made due enquiry for the purpose of making this declaration, no
fact or circumstances exist which could be the basis for a claim in excess
of $100,000 being made by any person against the Company as a result
(whether direct or indirect) of a breach of an authorisation.
10. There is no charge over any of the assets or undertaking of the Company
the subject of the Security other than the Security and the Tandy
Security.
11. The Company is not a `child entity' of a public company within the meaning
of Part 3.2A or the Corporations Law.
12. The copy of the Memorandum and Articles of Association annexed and marked
'A' is a true and complete copy of the Memorandum and Articles of
Association of the Company as at the date of this declaration.
13. I acknowledge that the Lender is relying on the correctness of the above
representations and statements and that it is on the basis of those
representations and statements that the Lender has agreed to provide the
accommodation to the Company.
<PAGE>
AND I MAKE this solemn declaration conscientiously believing the same to be
true, and by virtue of the provisions of the Oaths Act 1900.
SUBSCRIBED and DECLARED at )
this day )
of 19 before me ) ...............................
................................
Justice of the Peace/Solicitor
<PAGE>
SCHEDULE 4
STATUTORY DECLARATION
I,
of
in the State of New South Wales, solemnly and sincerely declare:
I am a [director/secretary] of Technotron Sales Corp Pty Ltd ('COMPANY')
and am authorised to make this declaration on behalf of the Company.
At duly constituted meeting(s) of the directors of the Company, resolutions were
duly passed to:
(a) authorise the Company to obtain financial accommodation from Westpac
Banking Corporation ('LENDER') on the terms set out in the Letter of
Offer from the Bank to the Company dated 6 May 1996 (`LETTER OF
OFFER');
(b) authorise the Company, in accordance with the Facility Agreement, to
grant in favour of the Lender a charge over all its assets and
undertaking (`SECURITY') to secure all money that the Company is
liable to pay to the Lender on any account including all liabilities
of the Company to the Lender under the facilities referred to in the
letter of offer; and
(c) authorise the Company to grant in favour of the Lender a guarantee
and indemnity (`GUARANTEE') to secure all money that InterTAN
Australia Ltd ACN 002 511 944 is liable to pay to the Lender on any
account.
3. At that meeting prior to the above resolutions being passed all directors
that were interested in the granting of the Security and the Guarantee
disclosed their respective interest prior to execution of the Security and
the Guarantee.
4. At that meeting, the directors considered the issue of benefit to the
Company as a result of the giving of the Guarantee and the Security. The
directors were unanimously of the view that the giving of the Guarantee
did result in a satisfactory benefit to the Company which justified that
Company giving the Guarantee.
6. The Company:
(a) is solvent and there are reasonable grounds to expect that, on
drawing the facilities referred to in the Letter of Offer and
execution of the Security and the Guarantee, the Company will
continue to be able to pay all its debts as and when they become due
and payable; and
(b) has not had any liquidator, receiver, receiver and manager,
administrator or similar person (`EXTERNAL ADMINISTRATOR') appointed
to it or any of its assets and not withdrawn.
<PAGE>
7. To the best of my current actual knowledge, information and belief, after
having made due enquiry for the purpose of making this declaration, there
is no action pending against the Company, or any meeting called, for the
appointment of an External Administrator to the Company or an of its
assets. I am not aware of any existing circumstances which might lead to
the appointment of an External Administrator to the Company or any of its
assets.
8. To the best of my current actual knowledge, information and belief, after
having made due enquiry for the purpose of making this declaration, no
meeting has been called to consider a resolution, no resolution has been
passed, no application is pending and no order has been made for the
winding up or administration of the Company.
9. To the best of my current actual knowledge, information and belief, after
having made due enquiry for the purpose of making this declaration, no
fact or circumstance exists which could be the basis for a claim in excess
of $100,000 being made by any person against the Company as a result
(whether direct or indirect) of a breach of an authorisation.
10. There is no charge over any of the assets or undertaking of the Company
the subject of the Security other than the Security.
11. The Company is not a `child entity' of a public company within the meaning
of Part 3.2A or the Corporations Law.
12. The copy of the Memorandum and Articles of Association annexed and marked
'A' is a true and complete copy of the Memorandum and Articles of
Association of the Company as at the date of this declaration.
13. I acknowledge that the Lender is relying on the correctness of the above
representations and statements and that it is on the basis of those
representations and statements that the Lender has agreed to provide the
accommodation to the Company.
AND I MAKE this solemn declaration conscientiously believing the same to be
true, and by virtue of the provisions of the Oaths Act 1900.
SUBSCRIBED and DECLARED at )
this day )
of 19 before me ) ............................
.................................
Justice of the Peace/Solicitor
