<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, 1999 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)
3300 Highway #7,Suite 904
Concord, Ontario Canada L4K 4M3
- ---------------------------------- ----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (905) 760-9701
----------------------
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, 2000, 30,358,739 shares of the registrant's common stock, par
value $1.00 per share, were outstanding.
1
<PAGE>
TABLE OF CONTENTS
PART I
Page
Introductory note regarding forward-looking information 3
ITEM 1 - Financial Statements and Supplementary Data
Consolidated Statements of Operations 4
Consolidated Balance Sheets 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II
ITEM 1 - Legal Proceedings 25
ITEM 4 - Submission of Matters to a Vote of Security Holders 25
ITEM 6 - Exhibits and Reports on Form 8-K 25
OTHER
Signatures 28
2
<PAGE>
INTRODUCTORY NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain matters discussed herein, including comments about the growth in gross
profit dollars and after sale compensation, the transition toward nationally
branded product, the roll out of new concept stores and other strategic
initiatives, the level of corporate expenses, and the introduction of new
products are forward-looking statements about the business, financial condition
and prospects of InterTAN, Inc. (the "Company" or "InterTAN"). 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, developing and maintaining alliances with strategic
vendors, inventory risks due to shifts in market conditions, dependence on
manufacturers' product development, the regulatory and trade environment, real
estate market fluctuations and the availability of suitable store locations,
certain aspects of Year 2000 compliance 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.
3
<PAGE>
ITEM 1 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statements Of Operations (Unaudited)
InterTAN, Inc.
- --------------------------------------------------------------------------------
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31 December 31
----------------------------------- -----------------------------------
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales and operating revenues........... $169,167 $198,379 $277,170 $320,223
Other income............................... 54 50 149 129
--------------- --------------- --------------- ---------------
169,221 198,429 277,319 320,352
--------------- --------------- --------------- ---------------
Operating costs and expenses:
Cost of products sold................... 98,983 112,633 162,723 181,509
Selling, general and administrative
expenses.............................. 46,348 60,307 81,555 108,154
Depreciation and amortization........... 1,520 1,830 2,891 3,620
Initial costs of disposition of
United Kingdom subsidiary............. - 376 - 376
--------------- --------------- --------------- ---------------
146,851 175,146 247,169 293,659
--------------- --------------- --------------- ---------------
Operating income........................... 22,370 23,283 30,150 26,693
Foreign currency transaction
(gains) losses........................ 114 (43) 165 (455)
Interest income............................ (328) (253) (813) (538)
Interest expense........................... 145 1,886 285 3,284
--------------- --------------- --------------- ---------------
Income before income taxes................. 22,439 21,693 30,513 24,402
Provision for income taxes................. 10,079 7,929 13,766 10,933
--------------- --------------- --------------- ---------------
Net income................................. $ 12,360 $ 13,764 $ 16,747 $ 13,469
=============== =============== =============== ===============
Basic net income per
average common share.................. $0.41 $0.72 $0.56 $0.71
Diluted net income per
average common share.................. $0.39 $0.51 $0.54 $0.53
Average common shares outstanding.......... 30,107 19,124 29,982 18,954
Average common shares outstanding
assuming dilution..................... 31,317 29,192 31,169 29,055
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
4
<PAGE>
Consolidated Balance Sheets (Unaudited)
InterTAN, Inc.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
(In thousands, except share data)
December 31 June 30 December 31
1999 1999 1998
-----------------------------------------------------
<S> <C> <C> <C>
Assets
Current Assets:
Cash and short-term investments $ 69,323 $ 47,403 $ 48,817
Accounts receivable, less allowance for doubtful
accounts 21,484 9,841 16,370
Inventories 125,511 111,934 158,779
Other current assets 3,590 3,567 8,426
Deferred income taxes 1,253 1,247 365
---------------------------------------------------
Total current assets 221,161 173,992 232,757
Property and equipment, less accumulated
depreciation and amortization
22,130 20,123 26,253
Other assets 271 276 551
Deferred income taxes 4,002 3,924 -
---------------------------------------------------
Total Assets $ 247,564 $ 198,315 $ 259,561
===================================================
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term bank borrowings $ - $ - $ 11,617
Accounts payable 35,376 15,883 33,987
Accrued expenses 27,596 17,369 40,838
Income taxes payable 35,705 39,286 21,889
Deferred service contract revenue - current portion 5,218 4,488 3,967
---------------------------------------------------
Total current liabilities 103,895 77,026 112,298
9% convertible subordinated debentures - - 36,894
Deferred service contract revenue - non-current
portion 4,861 4,008 3,625
Other liabilities 6,881 6,521 7,088
---------------------------------------------------
115,637 87,555 159,905
---------------------------------------------------
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, 30,231,619, 29,782,803 and
19,273,460 issued 30,231 29,783 19,274
Additional paid-in capital 143,994 141,126 110,966
Retained earnings (deficit) (18,148) (34,895) 3,221
Accumulated other comprehensive loss (24,079) (25,254) (33,805)
Common stock in treasury, at cost, 4,611,
0 and 0 shares, respectively (71) - -
-----------------------------------------------------
Total stockholders' equity 131,927 110,760 99,656
-----------------------------------------------------
Commitments and contingent liabilities
(see Notes 5 and 8)
Total Liabilities and Stockholders' Equity $ 247,564 $ 198,315 $ 259,561
=====================================================
The accompanying notes are an integral part of these consolidated financial statements
</TABLE>
5
<PAGE>
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
InterTAN, Inc.
- ------------------------------------------------------------------------------------------------------
(In thousands) Six months ended
December 31
-----------------------------------
1999 1998
-----------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 16,747 $ 13,469
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 2,891 3,620
Foreign currency transaction gains, unrealized - (326)
Other 1,140 1,086
Cash provided by (used in) current assets and liabilities:
Accounts receivable (11,216) (8,133)
Inventories (12,446) (13,643)
Other current assets (173) (2,257)
Accounts payable 18,816 10,289
Accrued expenses 11,343 10,688
Income taxes payable (4,188) 1,805
-----------------------------------
Net cash provided by operating activities 22,914 16,598
-----------------------------------
Cash flows from investing activities:
Additions to property and equipment (4,819) (4,440)
Proceeds from sales of property and equipment 38 73
Other investing activities 410 1,373
-----------------------------------
Net cash used in investing activities (4,371) (2,994)
-----------------------------------
Cash flows from financing activities:
Changes in short-term bank borrowings, net - 2,512
Proceeds from issuance of common stock to
employee plans 942 916
Proceeds from exercise of stock options 1,310 -
-----------------------------------
Net cash provided by financing activities 2,252 3,428
-----------------------------------
Effect of exchange rate changes on cash 1,125 (1,026)
-----------------------------------
Net increase in cash and short-term investments 21,920 16,006
Cash and short-term investments, beginning of period 47,403 32,811
-----------------------------------
Cash and short-term investments, end of period $ 69,323 $ 48,817
===================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
6
<PAGE>
Notes to Consolidated Financial Statements
Note 1 Basis of Financial Statements
The accompanying unaudited financial statements have been prepared in accordance
with Rule 10-01 of Regulation S-X, "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 InterTAN, Inc.'s ("InterTAN" or the
"Company") Annual Report on Form 10-K for the fiscal year ended June 30, 1999,
and, in the opinion of the Company, include all adjustments necessary for a fair
presentation of the Company's financial position as of December 31, 1999 and
1998 and the results of its operations for the three and six months ended
December 31, 1999 and 1998 and its cash flows for the six months ended December
31, 1999 and 1998. Such adjustments are of a normal and recurring nature.
Operating results for the three and six months ended December 31, 1999 are not
necessarily indicative of the results that can be expected for the fiscal year
ended June 30, 2000. 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, 1999.
Note 2 Sale of United Kingdom Subsidiary
In January, 1999, the Company completed the sale of 100% of the stock of its
United Kingdom subsidiary InterTAN U.K. Ltd., recognizing an aggregate loss of
$35,088,000. InterTAN U.K. Ltd.'s results of operations through December 31,
1998 are included in the accompanying Consolidated Financial Statements.
Below is a summary of net sales and operating revenues, operating income and net
income for the three and six months ended December 31, 1999 and 1998,
respectively:
(In thousands)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31 December 31
1999 1998 1999 1998
------------ -------------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales and
operating revenues $ - $63,716 $ - $97,141
Operating income $ - $ 5,393 $ - $ 2,989
Net income $ - $ 4,724 $ - $ 2,071
</TABLE>
Note 3 Stock Split
On November 29, 1999, the Company's board of directors declared a three-for-two
stock split of InterTAN's common stock for stockholders of record at the close
of business on December 16, 1999, payable on January 13, 2000. This resulted in
the issuance of 10,075,447 of common stock, including 1,537 shares held in
treasury. A corresponding decrease of $10,075,447 was made to additional
7
<PAGE>
paid-in-capital. Payments aggregating approximately $45,000 were also made in
satisfaction of 2,639 fractional shares. This amount was also charged to
additional paid-in capital. All references made to the number of shares of
common stock issued or outstanding, per share prices and basic and diluted net
income per common share amounts in the consolidated financial statements and the
accompanying notes have been adjusted to reflect the split on a retroactive
basis. Previously awarded stock options, restrictive stock awards and certain
other agreements payable in the Company's common stock have been adjusted or
amended to reflect the split.
Note 4 Net Income per average Common Share
Basic earnings per share ("EPS") is calculated by dividing the net income or
loss for a period by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution which would occur
if securities or other contracts to issue common stock were exercised or
converted.
Basic and diluted net income per average common share and a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation is set out below:
8
<PAGE>
<TABLE>
<CAPTION>
(In thousands, except Three months ended
for per
share data)
December 31, 1999 December 31, 1998
------------------------------------------------------- --------------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
-------------- -------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $12,360 $13,764
============== =============
Basic EPS
Income available to
common stockholders $12,360 30,107 $0.41 $13,764 19,124 $0.72
============== ==============
Effect of Dilutive
Securities
9% convertible debentures - - 978(1) 10,055
Stock options - 1,210 - 13
-------------- -------------- ------------- --------------
Diluted EPS
Income available to
common
stockholders including
assumed conversions $12,360 31,317 $0.39 $14,742 29,192 $0.51
============== ============== ============== ============= ============== ==============
(In thousands, except Six months ended
for per
share data)
December 31, 1999 December 31, 1998
------------------------------------------------------- ----------------------------------------------
Income Shares Per Share Income Shares Per Share Amount
(Numerator) (Denominator) Amount (Numerator) (Denominator)
-------------- -------------- ------------- ------------- ---------------- ---------------
Net Income $16,747 $13,469
============== =============
Basic EPS
Income available to
common stockholders $16,747 29,982 $0.56 $13,469 18,954 $0.71
============= ===============
Effect of Dilutive
Securities
9% convertible debentures - - 1,863(1) 10,091(2)
Stock options - 1,187 - 10
-------------- -------------- ------------- ----------------
Diluted EPS
Income available to
common
stockholders including
assumed conversions $16,747 31,169 $0.54 $15,332 29,055(2) $0.53(2)
============== ============== ============= ============= ================ ===============
</TABLE>
(1) The adjustments relating to the 9% convertible debentures include interest
expense, and amortization of financing costs.
(2) The adjustment to the average number of shares outstanding for purposes of
computing diluted net income per average common share and the computed diluted
net income per average common share for the six-month period ended December 31,
1998 has been restated to correct an error in the share adjustment. The share
adjustment (in thousands) as originally reported was 5,028. The diluted net
income per average common share and the average common shares outstanding
assuming dilution (in thousands) as originally reported for the six months ended
December 31, 1998 were $0.64 and 23,988, respectively.
During the three and six-month periods ended December 31, 1998, the Company's
potentially dilutive instruments included its 9% convertible subordinated
debentures (the "Debentures"). Under the terms of their issuance, the Debentures
were convertible into common stock at the rate of approximately Cdn $5.61 per
share, equivalent to approximately 10,055,000 shares in the aggregate at
December 31, 1998. During the fourth quarter of fiscal year 1999, the Company
served notice of redemption on all remaining Debenture holders and all such
Debenture holders
9
<PAGE>
exercised their right of conversion. Also, at December 31, 1999 and 1998, the
Company's directors and employees held options to purchase 1,870,358 and
1,936,500 common shares, respectively, at prices ranging from $2.3333 to $14.75
and $2.3333 to $5.4583, respectively. During the three months ended December 31,
1999, all of such options were considered in calculating diluted EPS. However,
based on the price of the Company's common stock at the time, only 30,000 of
such options were considered in calculating diluted EPS for the three months
ended December 31, 1998. The dilutive effect of these options in future periods
will depend on the average price of the Company's common stock during such
periods.
Note 5 Comprehensive Income
Comprehensive income is defined as the change in equity (net assets) of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. For the Company, comprehensive income
includes net income and the net change in foreign currency translation effects.
The comprehensive income for the three months ended December 31, 1999 and 1998
was $14,030,000 and $14,210,000, respectively. For the six months ended
December 31, 1999 and 1998, the comprehensive income was $17,922,000 and
$11,878,000, respectively.
Note 6 Income Taxes
The provisions for domestic and foreign income taxes for the three-month periods
ended December 31, 1999 and 1998 were $10,079,000 and $7,929,000, respectively.
For the six-month period ended December 31, 1999, an income tax provision of
$13,766,000 was recorded, compared with $10,933,000 in the first six months of
the prior year. The Company's income tax expense primarily represents Canadian
and Australian income tax on the profits earned by its subsidiaries in those
countries. No tax was currently payable in the United Kingdom for either the
three or six-month periods ended December 31, 1998, nor had any benefit been
recognized for the accumulated losses in that country.
An audit of the 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 a portion of the tax in dispute.
The tax levied by Revenue Canada in reassessing those years was offset by
refunds arising from the carryback 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 $12,000,000. 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. It is not practical for management to make any reasonable
determination of when this remaining outstanding Canadian tax issue will
ultimately be resolved. An audit of the Company's Canadian subsidiary's income
tax returns by Revenue Canada for the 1995 - 1996 taxation years is in process.
Audits of the Company's United States income tax returns for the 1990-1994 years
by the Internal Revenue Service (the "IRS") have been in process for some time.
The Company has recently been advised that the IRS alleges that the Company owes
additional taxes in respect of those years. The issues involved relate
primarily to the Company's former operations in continental Europe and the
United Kingdom. The Company disagrees with the IRS's position on these issues
and believes it has meritorious arguments in its defense and is in the process
of
10
<PAGE>
vigorously defending its position. Management believes that it has a provision
recorded sufficient to pay any liability resulting from the issues in dispute;
however, the amount ultimately paid could differ from management's estimate.
Note 7 Bank Debt
In November, 1999, the Company replaced its previous revolving credit facility
with a new facility with Bank of America Canada (the "Revolving Credit
Facility"). The Revolving Credit Facility is denominated in Canadian dollars in
an amount not to exceed C$67,000,000 (approximately $46,400,000 at December 31,
1999 rates of exchange). The amount of credit actually available at any
particular time is dependent on a variety of factors including the level of
eligible inventories and accounts receivable of InterTAN Canada. The amount of
available credit is then reduced by the amount of trade accounts payable then
outstanding as well as certain other reserves. The interest rate under the
facility is the Canadian prime rate, London Inter Bank Offered Rate plus 1.5% or
Bankers Acceptance Rate plus 1.5%, as elected by the Company at the time of
borrowing. Letters of credit are charged at the rate of 1.5% per annum. In
addition, a standby fee is payable on the unused portion of the credit facility.
The amount of this fee is subject to certain thresholds, and ranges from 0.375%
to 0.50% of the unused credit line. The Revolving Credit Facility is
collateralized by a first priority lien over all of the assets of InterTAN
Canada and is guaranteed by InterTAN, Inc. Borrowings under the Revolving Credit
Facility by InterTAN Canada Ltd. may be directed to InterTAN, Inc. Subject to
certain financial covenants, the payment of dividends and the repurchase of
common stock by the Company is permitted. There were no loans outstanding
against the facility at December 31, 1999. Approximately $31,040,000 was
available for use at December 31, 1999.
Note 8 Non-employee Stock Options
In June, 1999, the Company proposed a plan which would grant additional options
to purchase common stock to each non-employee director (such options are
collectively referred to as "the 1999 Director Plan"). This plan received
shareholder approval at the Company's annual meeting of stockholders on November
9, 1999. Under the 1999 Director Plan, each non-employee director was granted
an option to purchase 30,000 shares of the Company's common stock at an exercise
price of $10.50 per share. Options granted under this plan will be exercisable
on a cumulative basis equal to one fourth per year on the date fixed for the
Company's annual meeting of stockholders, commencing with the 1999 meeting.
Under this plan, the Company will recognize aggregate compensation expense of
$910,000 of which approximately $256,000 was recognized during the second
quarter of fiscal year 2000. The balance will be amortized ratably over the
remainder of the vesting period.
Note 9 Commitments and Contingencies
In connection with the sale of its United Kingdom subsidiary, the Company has
indemnified the purchaser for certain contingencies primarily relating to real
estate matters associated with store leases and working capital adjustments. In
addition, the Company remains contingently liable as guarantor of certain leases
of the United Kingdom subsidiary. At the time of the sale, the lease obligation
assumed by the purchaser and guaranteed by the Company was approximately
$32,000,000 and the average remaining life of such leases was approximately 6
years. If the purchaser were to default on the lease obligations, management
believes the Company could reduce the exposure through assignment, subletting
and other means. The Company has obtained an indemnity from the purchaser for
approximately $13,000,000 which is
11
<PAGE>
management's best estimate of the Company's potential exposure under these
guarantees. The amount of this indemnity declines over time as the Company's
risk diminishes. Apart from this matter and the issues discussed in Note 5,
there are no material pending proceedings or claims, other than routine matters
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.
Note 10 Segment Reporting
The Company is managed along geographic lines. All references in these notes to
"Canada", "Australia", "United Kingdom" and "Corporate Headquarters" refer to
the Company's reportable segments, unless otherwise noted. The Company's United
Kingdom subsidiary was sold in the third quarter of fiscal year 1999.
Transactions between segments are not common and are not material to the segment
information. The table below summarizes net sales and operating revenues,
operating income and identifiable assets for the Company's segments.
Consolidated operating income is reconciled to the Company's income before
income taxes (in thousands):
Net Sales and Operating Revenues and
Operating Income by Segment:
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31 December 31
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales and operating
revenues
Canada $131,236 $102,585 $210,858 $168,507
Australia 37,931 32,078 66,312 54,575
United Kingdom(1) - 63,716 - 97,141
------------ ------------ ------------ ------------
$169,167 $198,379 $277,170 $320,223
============ ============ ============ ============
Operating Income
Canada $ 20,589 $ 16,109 $ 28,193 $ 22,410
Australia 3,514 3,324 4,806 4,328
United Kingdom(1) - 5,393 - 2,989
------------- ------------- ------------- ---------
24,103 24,826 32,999 29,727
General
corporate expenses 1,733 1,543 2,849 3,034
------------- ------------- ------------- ---------
Operating income 22,370 23,283 30,150 26,693
Foreign currency
transaction (gains) losses 114 (43) 165 (455)
Interest Income (328) (253) (813) (538)
Interest Expense 145 1,886 285 3,284
------------- ------------- ------------- ---------
$22,439 $ 21,693 $ 30,513 $ 24,402
============= ============= ============= =========
<CAPTION>
Identifiable Assets by Segment
December 31 June 30 December 31
1999 1999 1998
<S> <C> <C> <C>
Canada $177,928 $136,703 $125,068
Australia 59,052 53,787 51,933
United
Kingdom(1) - - 79,554
Corporate 10,584 7,825 3,006
------------- ------------- -------------
$247,564 $198,315 $259,561
============= ============= =============
</TABLE>
(1) The Company's United Kingdom subsidiary was sold during the third quarter of
fiscal year 1999.
12
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
InterTAN is engaged in the sale of consumer electronics products primarily
through company-operated retail stores and dealer outlets in Canada and
Australia. The Company's retail operations are conducted through two wholly-
owned subsidiaries: InterTAN Australia Ltd., which operates in Australia under
the trade names "Tandy" and "Tandy Electronics"; and InterTAN Canada Ltd., which
operates in Canada under the trade name "RadioShack". The Company previously
also had retail and dealer outlets in the United Kingdom. These operations were
conducted through a wholly owned subsidiary, InterTAN U.K. Limited, which
operated under the "Tandy" name. Effective January, 1999, the Company's
subsidiary in the United Kingdom was sold. All of these trade names are used
under license from Tandy Corporation ("Tandy"). In addition, the Company has
entered into an agreement in Canada with Rogers Cantel Inc. ("Cantel") to
operate telecommunications stores on its behalf, currently trading under the
banner Rogers AT&T (the "Rogers AT&T stores"). At December 31, 1999, 50 Rogers
AT&T stores were in operation.
As indicated above, in January 1999, the Company sold its United Kingdom
subsidiary. The table below, reflects the results of the Company's operations
for the three and six-month periods ended December 31, 1999 compared with the
reported results of operations for the same period a year ago as well as those
same results of operations, adjusted to remove the results of the United Kingdom
subsidiary:
13
<PAGE>
<TABLE>
<CAPTION>
InterTAN, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - In thousands)
Three months ended Six months ended
December 31 December 31
1999 1998 1999 1998
As As As As
Reported Adjusted Reported Adjusted
---------------- ------------- ------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net sales and operating $169,167 $198,379 $134,663 $277,170 $320,223 $223,082
revenues
Other income 54 50 34 149 129 98
---------------- --------------- ----------- -------------- --------------- ---------------
169,221 198,429 134,697 277,319 320,352 223,180
Operating costs and
expenses:
Cost of products sold 98,983 112,633 74,855 162,723 181,509 124,431
Selling, general and
administrative expenses 46,348 60,307 40,587 81,555 108,154 72,281
Depreciation and
amortization 1,520 1,830 1,365 2,891 3,620 2,764
Initial costs of
disposition of
United Kingdom subsidiary - 376 - - 376 -
---------------- ---------------- ---------- -------------- --------------- ---------------
146,851 175,146 116,807 247,169 293,659 199,476
---------------- ---------------- ---------- -------------- --------------- ---------------
Operating income 22,370 23,283 17,890 30,150 26,693 23,704
Foreign currency
transaction (gains)
losses 114 (43 (65) 165 (455) (446)
Interest income (328) (253 (184) (813) (538) (427)
Interest expense 145 1,886 1,170 285 3,284 2,246
---------------- ---------------- ---------- -------------- --------------- ---------------
Income before income taxes 22,439 21,693 16,969 30,513 24,402 22,331
Provision for income taxes 10,079 7,929 7,929 13,766 10,933 10,933
---------------- ---------------- ---------- -------------- --------------- ---------------
Net income $ 12,360 $ 13,764 $ 9,040 $ 16,747 $ 13,469 $ 11,398
================ ================ ========== ============== =============== ===============
Basic net income per
average common share $0.41 $0.72 $0.47 $0.56 $0.71 $0.60
Diluted net income per
average common share $0.39 $0.51 $0.34 $0.54 $0.53 $0.46
</TABLE>
Foreign Exchange Effects
Profit and loss accounts, including sales, are translated from local currency
values to U.S. dollars at monthly average exchange rates. During the second
quarter of fiscal year 2000, the U.S. dollar was weaker against the Canadian and
Australian dollars relative to the comparable values during the second quarter
of the prior year. As a result, the same local currency amounts translate into
more U.S. dollars as compared with the prior year. For example, if local
currency sales in Australia in the second quarter of fiscal year 2000 were the
same as those in the second quarter of the prior year, the current fiscal year
income statement would reflect an 3.3% increase in sales when reported in U.S.
dollars.
The following table outlines, for the three-month period ending December 31,
1999, the percentage change in the weighted average exchange rates of the
currencies of Canada and Australia as compared to the same three-month period in
the prior year:
14
<PAGE>
___________________________________
Canada 4.8%
Australia 3.3%
___________________________________
Sales Outlets
The geographic distribution of the Company's sales outlets is summarized in the
following table:
<TABLE>
<CAPTION>
Dec 31 Sept 30 June 30 Mar 31 Dec 31
1999 1999 1999 1999 1998
Canada
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Company-operated 459 (1) 450 (1) 450 (1) 449 (1) 452 (1)
Dealer 343 338 330 332 332
- -------------------------------------------------------------------------------------------
802 788 780 781 784
- -------------------------------------------------------------------------------------------
Australia
Company-operated 222 222 222 225 222
Dealer 124 124 124 126 125
- -------------------------------------------------------------------------------------------
346 346 346 351 347
- -------------------------------------------------------------------------------------------
United Kingdom (2)
Company-operated - - - - 269
Dealer - - - - 108
- -------------------------------------------------------------------------------------------
- - - - 377
- -------------------------------------------------------------------------------------------
Total
Company-operated 681 672 672 674 943
Dealer 467 462 454 458 565
- -------------------------------------------------------------------------------------------
1,148 1,134 1,126 1,132 1,508
- -------------------------------------------------------------------------------------------
</TABLE>
(1) At December 31, 1999, September 30, 1999, June 30, 1999, March 31, 1999 and
December 31, 1998 the Company operated 50, 45, 45, 45 and 46 stores,
respectively, on behalf of Rogers AT&T. Also at the same dates the company
operated 3, 1, 1, 7 and 7 store-in-store formats in certain locations of
the Hudson's Bay Company. Since all of these locations are not company-
owned, they are not included in the above table.
(2) The Company's subsidiary in the United Kingdom was sold during the third
quarter of fiscal year 1999.
15
<PAGE>
Net Sales and Operating Revenues
While net sales and operating revenues ("sales") declined in U.S. dollars during
the second quarter of fiscal year 2000 by $29,212,000 over the same period a
year ago, this reduction was more than attributable to the sale of the Company's
former subsidiary in the United Kingdom. When the sales of that entity are
removed from the prior-year period, the combined sales of the Canadian and
Australian segments showed an increase of $34,504,000 or 25.6%. This sales
comparison was affected by foreign currency fluctuations. The increase,
measured at the same exchange rates, was 20.3%.
The table which follows shows, by geographic segment, the percentage changes in
net sales for the quarter and six months ended December 31, 1999, compared to
the corresponding period in the prior year. Changes are presented in both U.S.
dollars and local currencies to show the effects of exchange rate fluctuations.
The change in comparative - stores sales, measured at the same exchange rates,
is also shown:
Net Sales
---------
Percentage Increase (Decrease)
------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, 1999 December 31, 1999
Local Comparative Local Comparative
Currency US$ Store Currency US$ Store
--------- ------------ ----------- ------------ ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Canada 22.1 % 27.9 % 17.5 % 20.7 % 25.1 % 17.3 %
Australia 14.5 % 18.2 % 11.2 % 15.3 % 21.5 % 11.8 %
------------------------------- ---------------------------
Combined 20.3 % 25.6 % 15.9 % 19.3 % 24.2 % 15.8 %
=============================== ===========================
Including United
Kingdom /1/ (16.5) % (14.7) % 15.9 % (15.1)% (13.4)% 15.8 %
=============================== ===========================
</TABLE>
/1/ The Company's United Kingdom subsidiary was sold during the
third quarter of fiscal year 1999.
As has been the case for several quarters, consumers continue to demand products
displaying the latest in technological advances, and, in particular, digital
products. This consumer demand was reflected in the sales performance in both
of InterTAN's countries and was particularly evident in cellular, computers and
related accessories, and, in Canada, direct-to-home satellite.
Sales in Canada for the three-month period ending December 31, 1999 increased by
22.1% in local currency over the same quarter a year ago, with comparable-store
sales increasing by 17.5% during the same period. A strong performance by the
dealer division accounted for the majority of the difference in these two
results. The direct-to-home satellite market continues to provide significant
revenue growth opportunities in Canada, as the Company's stores have become a
destination of choice for those products. Better value for the consumer and
strong promotion by the carriers helped drive a sales gain of over 190% in this
important product category, with unit sales three times the level achieved in
the same quarter last year. Wireless/PCS was also a significant component of
the strong Canadian sales performance, with sales in that category increasing by
38% over the prior year quarter. Importantly, handset sales exceeded the level
necessary to earn a substantial volume rebate from the Company's cellular
16
<PAGE>
partner, Rogers AT&T. The expansion of the Company's Panasonic Wall store-in-
store concept from 20 to 200 stores was completed during the quarter and was a
major factor in building sales in the audio/video and personal electronics
categories. The Company and Panasonic have recently announced that this concept
will be further expanded to an additional 200 stores for a total of 400 stores
during the latter part of fiscal year 2000 and early part of fiscal year 2001.
Double-digit sales gains were also achieved in Canada in telephones and
computers and related accessories.
Sales of computers and related accessories continue to be an important factor in
sales growth in Australia, with sales in that category increasing during the
three-month period ending December 31, 1999 by almost 50% over the same quarter
last year. Sales in the cellular category increased by 26% over the prior year
quarter, adding further momentum to overall sales growth during the second
fiscal quarter. The sales performance in this category benefited from strong
promotional activity in conjunction with the Company's wireless partner in
Australia, Cable and Wireless Optus, and from the phase out of the analog
system. Sales of prepaid models and related airtime models were particularly
strong. Going forward, management believes that new spectrum allocation of GSM
frequencies, a new CDMA network combined with the increased utilization of short
messaging services and rate plans will present opportunities for continued
growth in the cellular category. The audio/video category also performed well,
with a sales increase of almost 20% over the same quarter last year. This
product category benefited from the addition of new products to the range
including DVD, TV/VCR combos and an assortment of Kodak products. Management
also believes that there are further opportunities for future growth in
Australia, as many of the new initiatives, concepts and strategic alliances that
have been key factors in driving growth in Canada are only in their earliest
stages of roll out in Australia.
Gross Profit
Gross profit for the second quarter of fiscal year 2000 declined by $15,562,000
from the same quarter last year. This reduction was more than attributable to
the sale of the United Kingdom subsidiary, as the Canadian and Australian
segments combined to produce an increase in gross profit, measured in U.S.
dollars of $10,369,000, or 17.3%. Measured at the same exchange rates, gross
profit increased by 12.4%.
The following analysis summarizes the components of the change in gross profit
from the comparable prior year quarter (in thousands):
- -------------------------------------------------------------------------------
Higher sales in Canada and Australia $12,684
Lower gross margin percentage in Canada and Australia ( 4,941)
Foreign currency rate effects 2,632
- -------------------------------------------------------------------------------
10,375
Effect of sale of United Kingdom subsidiary (25,937)
- -------------------------------------------------------------------------------
Reduction in gross profit $(15,562)
- -------------------------------------------------------------------------------
17
<PAGE>
The following table illustrates gross profit as a percentage of sales, by
segment area, for the three and six-month periods ended December 31, 1999 and
1998:
<TABLE>
<CAPTION>
Three months ended Six months ended December 31
December 31
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Canada 41.2% 43.8% 40.9% 43.7%
Australia 42.7% 46.3% 42.5% 46.0%
- -----------------------------------------------------------------------------------------------------
Combined 41.5% 44.4% 41.3% 44.2%
United Kingdom 1 - 40.7% - 41.2%
- -----------------------------------------------------------------------------------------------------
Consolidated 41.5% 43.2% 41.3% 43.3%
=====================================================================================================
</TABLE>
(1) The Company's United Kingdom subsidiary was sold during the third quarter of
fiscal year 1999.
There were a variety of factors that contributed to the reduction in the gross
margin percentages in Canada and Australia.
In Canada, the reduction was more than explained by a shift in the sales mix of
10 percentage points away from higher margin private label products towards
lower margin national brands. The significant sales gains in direct-to-home
satellite, wireless/PCS and computers continues to be a major factor in this
trend. Additionally, sales of certain seasonable items, including toys, fell
short of expectations. The effects of this product mix related margin reduction
in Canada were partially offset by an increase in the cellular volume rebate and
an increase in the level of residual income from direct-to-home satellite and
cellular.
A shift in the sales mix towards national brands was also a factor in the
reduction in the gross margin percentage in Australia. The fact that the two
largest sales gains came from cellular and computers was a significant component
contributing to a 3 percentage point swing in that mix. In additional, the
cellular margin declined during the quarter. Management believes that the last
analog subscribers to convert to digital were not heavy users and opted to
convert to low-cost prepaid models and purchased airtime cards, all at lower
than traditional margins. Clearance activity, reflecting an orderly transition
to the successful Canadian product mix, also contributed to the margin decline
in Australia.
Management expects many of these factors to continue and, therefore, expects
margins will continue to come under pressure, at least through the end of the
current fiscal year. This is particularly true in Australia. In Canada,
management expects this trend to mitigate. In addition, management believes
that "after activation compensation", including residuals and sales-based volume
rebates, will continue to be important contributors to help offset some of the
gross margin decline. Management anticipates that residuals will increase by
25% to 30% per annum for the next two to three fiscal years. While management
will continue to pursue opportunities for volume rebates from its cellular
partners and other strategic vendors, there can be no assurance that such
arrangements will continue or, if continued, that targeted sales levels will be
achieved.
Selling, General and Administrative Expenses
The following table provides a breakdown of selling, general and administrative
expense ("SG&A") by major category (in thousands):
18
<PAGE>
<TABLE>
<CAPTION>
Selling, General and Administrative Expenses
---------------------------------------------
(In thousands, except percents)
Three Months Ended Six Months Ended
December 31 December 31
1999 1998 1999 1998
---------------------------------------- -----------------------------------------
Amount Pct. Amount Pct. Amount Pct. Amount Pct.
---------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising $ 6,936 4.1 $ 8,339 4.2 $ 11,247 4.1 $ 13,369 4.2
Rent 7,041 4.2 10,145 5.1 13,219 4.8 19,653 6.1
Payroll 20,557 12.2 25,934 13.1 36,178 13.1 46,017 14.4
Taxes
(other than
income taxes) 3,128 1.8 4,946 2.5 5,412 2.0 8,929 2.8
Telephone &
utilities 1,086 0.6 1,602 0.8 2,158 0.8 3,136 1.0
Other 7,600 4.5 9,341 4.7 13,341 4.6 17,050 5.3
----------------------------------------- -------------------------------------------
Total $ 46,348 27.4 $60,307 30.4 $ 81,555 29.4 $108,15433.8
========================================= ===========================================
</TABLE>
The reduction in SG&A expense during second quarter of fiscal year 2000 is more
than explained by the sale of the United Kingdom subsidiary, which had the
effect of reducing SG&A expense by $19,720,000. SG&A expense in Canada,
Australia and at Corporate Headquarters increased by $5,761,000. This
comparison is influenced by the effect of stronger currencies in both Canada and
Australia. Measured at the same exchange rates, SG&A expense in these three
segments increased by $4,071,000 or 10%. This compares to combined increases of
20.3% and 12.4% in sales and gross profit, respectively, all measured at the
same exchange rates.
The following is a breakdown of the same-exchange-rate increase in SG&A expense
in Canada, Australia and the Corporate Headquarters during the second quarter of
fiscal year 2000 over the same quarter in the prior year (in thousands):
Payroll $1,618
Advertising 601
Rent 740
Taxes (other than income taxes) 190
Telephone and utilities 69
Other 659
$ 3,877
Corporate expenses 194
------
$4,071
======
Payroll increased in both Canada and Australia in support of higher sales.
Advertising expense increased in both countries, as the Company enhanced its
promotional activities to generate greater revenues. The increase in gross
advertising spending was actually higher than indicated, as much of the increase
was funded by vendors. Rent increased in both Canada and Australia,
19
<PAGE>
both as a consequence of new store openings/relocations and regular rent
reviews. Corporate expenses increased primarily as a result of a number of
special charges, including costs associated with the recently approved stock
option plan for non-employee directors, the renewal of the shareholder rights
plan and previously-announced performance-based restricted stock awards to
certain senior members of management.
The reduction in SG&A expense as a percentage of sales during both the three and
six-month periods ended December 31, 1999 was attributable both to the rate of
sales growth and, to a lesser extent, the sale of the Company's United Kingdom
subsidiary. The following table illustrates SG&A as a percentage of sales, by
geographic segment area:
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31 December 31
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Canada 24.6% 27.1% 26.5% 29.1%
Australia 32.6% 35.1% 34.4% 37.2%
- -----------------------------------------------------------------------------------------------------
Combined 27.4% 30.1% 29.4% 32.4%
United Kingdom (1) - 30.9% - 36.9%
- -----------------------------------------------------------------------------------------------------
Consolidated 27.4% 30.4% 29.4% 33.8%
=====================================================================================================
</TABLE>
(1) The Company's United Kingdom subsidiary was sold during the third quarter of
fiscal year 1999.
Interest income and expense
Interest income increased during the three months ended December 31, 1999 by
$75,000 over the same quarter last year, reflecting the Company's stronger cash
position. During the same two periods, interest expense declined by $1,741,000.
Interest expense during the current quarter consisted entirely of amortization
of loan origination fees and standby charges, as the Company had no borrowings
during the quarter. This reduction in interest expense over the prior-year
quarter was attributable to the conversion of the Company's 9% subordinated
convertible debentures (the "Debentures") during the fourth quarter of fiscal
year 1999. The sale of the United Kingdom subsidiary was also a factor as it
continuously required cash infusions to fund its operations. For the same
reasons, management expects that reductions in interest expense will continue
over at least the next quarter.
Provision for Income Taxes
The provision for income taxes increased during the second quarter of fiscal
year 2000 by $2,150,000 over the same period a year ago, reflecting higher
profits in both the Canadian and Australian subsidiaries. The effective rate of
tax for the quarter was 44.9% compared with 36% for the same quarter last year.
This results from the fact that the profits of the former United Kingdom
subsidiary a year ago did not attract any income tax because of the loss
carryforward position of that company. When those profits are eliminated from
the prior period base, an effective rate of 46.7% is indicated. The reduction
from this level to the current year rate results from the elimination of
interest on the Debentures, for which no tax benefit was recognized.
20
<PAGE>
Financial Condition
-------------------
Most balance sheet accounts are translated from their values in local currency
to U.S. dollars at the respective month end rates. The table below outlines the
percentage change, to December 31, 1999, in exchange rates as measured against
the U.S. dollar:
Foreign Exchange Rate Fluctuations
----------------------------------
% Increase % Increase (Decrease)
from December 31, 1998 from June 30, 1999
---------------------- ----------------------
Canada 6.0 2.0
Australia 7.1 (1.7)
Inventories
The reduction in inventories at December 31, 1999 from December 31, 1998 is more
than attributable to the sale of the United Kingdom subsidiary. During the same
period, measured at the same exchange rates, inventories in Canada and Australia
increased by approximately 8%, significantly less than the quarter-on-quarter
increases in sales and gross profit dollars. The increase in inventories from
June 30, 1999 to December 31, 1999 is in support of higher sales in both Canada
and Australia, including the effects of an expanded product assortment.
Accounts Receivable
The increase in accounts receivable at December 31, 1999 over December 31, 1998
is primarily attributable to increases in sales generally and, in particular,
sales of cellular, direct-to-home satellite and similar products involving
activation income and volume rebates from vendors. The effects of these
increases were partially offset by the impact of the sale of the United Kingdom
subsidiary. The increase from June 30, 1999 results from higher sales, the
granting of extended credit terms to dealers to finance purchases for the
Christmas selling season and the large volume of cellular and home satellite
sales over the holiday period.
Income Taxes Payable
The increase in income taxes payable from December 31, 1998 to December 31, 1999
results from increased profits in both the Canadian and Australian subsidiaries,
as well as a special provision recorded during the third quarter of fiscal year
1999 relating to the settlement of a dispute with the Canadian tax authorities
regarding the 1990 to 1993 taxation years. While the amount in dispute has been
agreed and a settlement agreement has been executed, the Company has not yet
been reassessed and, accordingly, this amount has not been paid. Management
estimates that payment relating to these issues, approximately $14,000,000 will
be made in the fourth quarter of fiscal year 2000.
The Company's remaining dispute with the Canadian tax authorities relates to the
1987 to 1989 taxation years. See Note 5 to the Company's Consolidated Financial
Statements, which is incorporated herein by reference. The Company believes it
has meritorious arguments in support of its position on the underlying issues
relating to this matter and, accordingly, no additional provision has been
recorded, pending the outcome of the appeal process. Depending on the ultimate
outcome of this matter, the Company could have an additional liability of $0 to
$12,000,000. It is not possible for management to make any reasonable
determination of when
21
<PAGE>
any of these issues will ultimately be resolved. An audit of the Company's
Canadian subsidiary's income tax returns by Revenue Canada for the 1995 to 1996
taxation years is in process.
Audits of the Company's United States income tax returns for the 1990-1994 years
by the Internal Revenue Service (the "IRS") have been in process for some time.
The Company has recently been advised that the IRS alleges that the Company owes
additional taxes in respect of those years. The issues involved relate
primarily to the Company's former operations in continental Europe and the
United Kingdom. The Company strongly disagrees with the IRS's position on these
issues and believes it has meritorious arguments in its defense and is in the
process of vigorously defending its position. Management believes that it has a
provision recorded sufficient to pay any liability resulting from the issues in
dispute; however, the amount ultimately paid could differ from management's
estimate.
Liquidity and Capital Resources
-------------------------------
Cash flows from operating activities during the six-month period ended December
31, 1999 generated $22,914,000 in cash, compared with $16,598,000 in cash during
the comparable period last year. This change was due in part to an increase in
net income, adjusted for non-cash items, during the first six months of fiscal
year 2000 of $2,929,000 compared to the first six months of fiscal year 1999.
The increase in cash flows from operating activities during the first six months
of fiscal year 2000 was also positively affected by changes in working capital
which increased cash flow by $3,387,000 over the comparable prior year period.
Cash flow from investing activities consumed $4,371,000 and $2,994,000 in cash
during the six months ended December 31, 1999, and 1998 respectively, primarily
as a result of routine additions to property and equipment.
During the six-month period ended December 31, 1999, cash flow from financing
activities in the form of proceeds from the issuance of stock to employee plans
and from the exercise of stock options, in the aggregate generated $2,252,000 in
cash. In the comparable prior-year period, financing activities generated
$3,428,000 in cash, primarily attributable to short-term borrowings to finance
the operations of the United Kingdom subsidiary and from the issuance of stock
to employee plans.
The Company's principal sources of liquidity during fiscal year 2000 will be its
cash and short-term investments, its cash flow from operations and its banking
facilities.
In November, 1999, the Company replaced is previous revolving credit facility
with a new facility with Bank of America Canada (the "Revolving Credit
Facility"). The Revolving Credit Facility is denominated in Canadian dollars in
an amount not to exceed C$67,000,000 (approximately $46,400,000 at December 31,
1999 rates of exchange). The amount of credit actually available at any
particular time is dependent on a variety of factors including the level of
eligible inventories and accounts receivable of InterTAN Canada. The amount of
available credit is then reduced by the amount of trade accounts payable then
outstanding as well as certain other reserves. The interest rate under the
facility is the Canadian prime rate, London Inter Bank Offered Rate plus 1.5% or
Bankers Acceptance Rate plus 1.5%, as elected by the Company at the time of
borrowing. Letters of credit are charged at the rate of 1.5% per annum. In
addition, a standby fee is payable on the unused portion of the credit facility.
The amount of this fee is subject to certain thresholds, and ranges from 0.375%
to 0.50% of the unused credit line. The Revolving Credit Facility is
collateralized by a first priority lien over all of the assets of
22
<PAGE>
InterTAN Canada and is guaranteed by InterTAN, Inc. Borrowings under the
Revolving Credit Facility by InterTAN Canada Ltd. may be directed to InterTAN,
Inc. Subject to certain financial covenants, the payment of dividends and the
repurchase of common stock by the Company is permitted.
The Revolving Credit 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, 1999, there were no borrowings against the Revolving
Credit Facility and $745,000 was committed in support of letters of credit.
There was $31,040,000 of credit available for use at December 31, 1999. The
Company's Merchandise Agreement with Tandy permits the Company to support
purchase orders with a surety bond or bonds as well as letters of credit. The
Company has entered into an agreement with a major insurer to provide surety
bond coverage (the "Bond") in an amount not to exceed $18,000,000. Use of the
Bond gives the Company greater flexibility in placing orders with Far East
suppliers by releasing a portion of the credit available under the Revolving
Credit Facility for other purposes.
The Company's Australian subsidiaries, InterTAN Australia Ltd. and Technotron
Sales Corp. Pty, Ltd., have 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 ($7,872,000 at December 31, 1999 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 ($3,280,000 at December 31, 1999 exchange rates)
may be used in support of short-term borrowings. At December 31, 1999, there
were no borrowings outstanding against the Australian Facility, nor was any
amount committed in support of letters of credit.
The Company's primary uses of liquidity during the remainder of fiscal year 2000
will include the funding of capital expenditures, possible payments in
settlement of tax reassessments and the purchase of the Company's common stock
pursuant to the recently announced share repurchase program. The Company
anticipates that capital additions during the remainder of fiscal year 2000 will
approximate $9,000,000, mainly related to store expansion, remodeling and
upgrading. In addition, management expects to receive additional income tax
reassessments of approximately $14,000,000 during fiscal year 2000 relating to
the settlement of its dispute with Revenue Canada in respect of the 1990-1993
taxation years. See "Income Taxes". The timing of further payments, if any,
flowing from other outstanding tax issues cannot be reasonably determine at this
time. In November, 1999, the Company announced a program to repurchase up to
1,500,000 shares of its common stock. The first purchase occurred during
February, 2000. Further purchase will likely occur during the remainder of
fiscal year 2000 as conditions warrant. It is not practical for management to
reasonably estimate the cash required to fund this program during the balance of
fiscal year 2000.
Management believes that the Company's cash and short-term investments on hand
and its cash flow from operations combined with the Revolving Credit Facility,
the Australian Facility and the Bond will provide the Company with sufficient
liquidity to meet its capital expenditure requirements, to fund any income tax
reassessments and to fund its share repurchase program.
23
<PAGE>
Year 2000 Issues
----------------
The Company's critical systems include the following:
o Its store operating systems;
o Its so-called "back-end" merchandising and inventory systems, including
purchasing, receiving and warehousing, perpetual inventories and store
replenishment; and,
o Its primary accounting systems, including general ledger, accounts
receivable, accounts payable and payroll.
The Company employed a variety of internal and external resources to assess and
make changes necessitated by Year 2000 issues to its many different systems and
equipment. Many of these changes were contemplated in any event as upgrades or
replacement of outdated systems and hardware.
Necessary modifications and testing was competed to all critical systems in both
Canada and Australia prior to the year 2000. Contingency plans are in place to
address the possible failure of critical systems as well as many other systems
which, although not critical, nevertheless play an important role in the
Company's day to day business. In developing these plans, an attempt was made
to balance potential risk against contingent remedial cost. To date the Company
has experienced only a few minor systems issues and these were resolved with
little or no disruption to the business. There have been no supply chain
interruptions and the Company's stores, warehouse and central units have been
fully operational.
The Company has reviewed its obligations, if any, arising from the sale of
warranted product which may prove not to be Year 2000 compliant in one or more
aspects. While it is not possible at this time to reasonably estimate the range
of loss, if any, which could arise from such obligation, management does not
believe that issues involving non-compliant warranted product will be material.
Such issues, if any, will be dealt with on an individual basis.
The Company's current projection is that Year 2000 compliance costs will not
exceed $1,500,000.
In management's opinion, the Company took adequate action to address Year 2000
issues and does not expect the financial impact of the Year 2000 issue to be
material to the Company's consolidated financial position, results of operations
or cash flows.
24
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
The various matters discussed in Notes 6 and 9 to the Company's
Consolidated Financial Statements on page 10 and 11 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 9,
1999, the following persons were re-elected to the Board of Directors:
Clark A. Johnson
James T. Nichols
In such connection, Messrs. Johnson, and Nichols received 14,889,555,
14,888,713 votes, respectively, "For" election and 677,873 and 678,715
votes, respectively, were withheld.
In addition, stockholders voted on a proposal to approve a
recommendation that the Company enter into a Non-Employee Director Non-
Qualified Stock Option Agreement with each non-employee director. Such
proposal was approved with 14,212,994 votes cast in favor, 1,276,727
votes cast against and 77,707 votes abstaining.
In total, 15,567,428 shares were authorized to vote on both issues.
<TABLE>
<CAPTION>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits Required by Item 601 of Regulation S-K:
<S> <C>
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).
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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) Rights Agreement between InterTAN, Inc. and Bank
Boston, NA (filed as Exhibit 4 to the company's
Form 8-A filed on September 17, 1999 and incorporated
herein by reference)
*10(a) Amended & Restated Merchandise Agreement by and
among InterTAN, Inc., InterTAN Canada Ltd.,
InterTAN Australia Ltd., Technotron Sales Corp.
Pty. Limited, Tandy Corporation and A&A
International, Inc. dated as of January 25, 1999.
*10(b) Amended and Restated License Agreement between Tandy
Corporation and InterTAN Canada Ltd. dated as
of January 25, 1999.
*10(c) Amended and Restated License Agreement between Tandy
Corporation and InterTAN Australia Ltd.
dated as of January 25, 1999.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
*10(d) Form of Agreement that evidences the InterTAN,
Inc. Plan for 1999 Non-Employee Director
Non-Qualified Stock Options.
*10(e) Fourth Amendment to Loan Agreement between InterTAN
Canada Ltd., Bank of America Canada,
Bankboston Retail Finance Inc. and Congress Financial
Corporation dated as of July 31, 1999.
*10(f) Fifth Amendment to Loan Agreement between InterTAN Canada
Ltd., Bank of America Canada, Bankboston
Retail Finance Inc. and Congress Financial Corporation dated
as of October 1, 1999.
*10(g) Assignment and Assumption Agreement between Bank of America
Canada, Bankboston Retail Finance Inc.
and InterTAN Canada Ltd. dated October 28, 1999.
*10(h) Assignment and Assumption Agreement between Bank of America
Canada, Congress Financial Corporation
and InterTAN Canada Ltd. dated October 28, 1999.
*27 Article 5, Financial Data Schedule.
</TABLE>
- ------------------------------
* Filed herewith
b) Reports on Form 8-K:
A report on Form 8-K was filed on December 6, 1999 to report that on
November 29, 1999 the Board of Directors authorized a three for two split
of the Company's common stock and a share repurchase plan under which up
to 1,500,000 shares of the Company's common stock (after the three for
two split) could be repurchased.
27
<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 11, 2000 By: /s/ James G. Gingerich
-----------------------------------
James G. Gingerich
Executive Vice-President and
Chief Financial Officer
(Authorized Officer)
By: /s/ Douglas C. Saunders
-----------------------------------
Douglas C. Saunders
Vice President and Corporate Controller
(Principal Accounting Officer)
28
<PAGE>
Index to Exhibits
InterTAN, Inc. Form 10-Q
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
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).
4(a) Articles Fifth and Tenth of the Restated Certificate of Incorporation
(included in Exhibit 3(a)).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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) Rights Agreement between InterTAN, Inc. and Bank Boston, NA (filed as
Exhibit 4 to the company's Form 8-A filed on September 17, 1999 and
incorporated herein by reference)
*10(a) Amended & Restated Merchandise Agreement by and among InterTAN,
Inc., InterTAN Canada Ltd., InterTAN Australia Ltd., Technotron Sales
Corp. Pty. Limited, Tandy Corporation and A&A International, Inc. dated
as of January 25, 1999.
*10(b) Amended and Restated License Agreement between Tandy Corporation
and InterTAN Canada Ltd. dated as of January 25, 1999.
*10(c) Amended and Restated License Agreement between Tandy Corporation
and InterTAN Australia Ltd. dated as of January 25, 1999.
*10(d) Form of Agreement that evidences the InterTAN, Inc. Plan for 1999 Non-
Employee Director Non-Qualified Stock Options.
*10(e) Fourth Amendment to Loan Agreement between InterTAN Canada Ltd.,
Bank of America Canada, Bankboston Retail Finance Inc. and Congress
Financial Corporation dated as of July 31, 1999.
*10(f) Fifth Amendment to Loan Agreement between InterTAN Canada Ltd.,
Bank of America Canada, Bankboston Retail Finance Inc. and Congress
Financial Corporation dated as of October 1, 1999.
*10(g) Assignment and Assumption Agreement between Bank of America
Canada, Bankboston Retail Finance Inc. and InterTAN Canada Ltd. dated
October 28, 1999.
*10(h) Assignment and Assumption Agreement between Bank of America
Canada, Congress Financial Corporation and InterTAN Canada Ltd. dated
October 28, 1999.
*27 Article 5, Financial Data Schedule.
</TABLE>
- -----------------
* Filed herewith
<PAGE>
EXHIBIT 10(a)
AMENDED & RESTATED
MERCHANDISE AGREEMENT
BY AND AMONG
INTERTAN, INC., INTERTAN CANADA LTD.,
INTERTAN AUSTRALIA LTD., TECHNOTRON SALES CORP. PTY. LIMITED,
AND
TANDY CORPORATION
AND A&A INTERNATIONAL, INC.
THIS AMENDED AND RESTATED MERCHANDISE AGREEMENT ("Merchandise Agreement" or
"Agreement") is made and entered into by and among InterTAN, Inc. ("ITI"), a
corporation organized under the laws of the State of Delaware and having its
principal offices at Concord, Ontario, Canada; InterTAN Canada Ltd. ("ITC"), a
corporation organized under the laws of Alberta, Canada and having its principal
offices at Barrie, Ontario, Canada; InterTAN Australia Ltd. ("ITA"), a
corporation organized under the laws of New South Wales ("N.S.W."), Australia
and having its principal offices at Mount Druitt, N.S.W., Australia; Technotron
Sales Corp. Pty. Limited ("Technotron"), a corporation organized under the laws
of N.S.W., Australia, having its principal offices at Mount Druitt, N.S.W.,
Australia; (ITI, ITC, ITA and Technotron and their respective current or future
subsidiaries being collectively referred to herein as the "ITI-GROUP"); and
Tandy Corporation (Tandy Corporation and its subsidiaries being herein referred
to as "TANDY"), a corporation organized under the laws of the State of Delaware
and having its principal offices at Fort Worth, Texas, and A&A International,
Inc. ("A&A"), a corporation organized under
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<PAGE>
the laws of the State of Nevada and having its principal office at Fort Worth,
Texas and being a wholly-owned subsidiary of Tandy.
W I T N E S S E T H:
WHEREAS, ITI is the parent corporation of all of the other members of the
ITI-GROUP, through direct or indirect stock ownership; and
WHEREAS, the parties desire to enter into this Merchandise Agreement which
states the agreements of the parties with respect to the purchase of merchandise
by the ITI-GROUP from and through TANDY and A&A and the designation of A&A as
the exclusive agent and exporter in the Far East (as herein defined)of products
for the members of the ITI-GROUP; and
WHEREAS, in order to enable the ITI-GROUP to act as a single business
enterprise to obtain the benefits of this Merchandise Agreement, each member of
the ITI-GROUP desires to guarantee to TANDY and A&A the obligations of each of
the other members of the ITI-GROUP for any and all of their respective payment
obligations under this Merchandise Agreement as well as the indemnity
obligations of each under the terms of that certain Distribution Agreement dated
as of September 30, 1986, as amended;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties
hereto agree as follows:
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<PAGE>
ARTICLE I
MERCHANDISE
1.1 Purchase of Merchandise. Any member of the ITI-GROUP may purchase
-----------------------
through A&A merchandise bearing trademarks owned or licensed by TANDY and sold
in its United States company-owned Radio Shack stores carrying a full line of
merchandise, including new and replacement models, which merchandise is
manufactured in the Far East and included in the then-current Radio Shack U.S.
catalog or, if TANDY ceases publication of such Radio Shack U.S. catalogs,
merchandise regularly sold in TANDY's full line company-owned Radio Shack
stores, in either case at merchandise prices to be negotiated. Any other
merchandise not manufactured in the Far East and not included in the then-
current Radio Shack U.S. catalog or not regularly sold in TANDY's full line
company-owned Radio Shack stores may be purchased by members of the ITI-GROUP
through A&A or TANDY only on mutual agreement between A&A or TANDY and any such
member. Members of the ITI-GROUP shall have no right to purchase through TANDY
or A&A any item of merchandise offered for sale by TANDY in any of its retail
stores other than in TANDY's company-owned United States Radio Shack stores
offering a full line of Tandy/Radio Shack merchandise.
1.2 Designation of A&A as Exclusive Export Agent. Each member of the ITI-
--------------------------------------------
GROUP hereby appoints A&A as its exclusive agent and exporter of products
obtained in the Far East, (including
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<PAGE>
Japan, Korea, Taiwan, China, Hong Kong, Singapore, Philippines, Asia, Malaysia,
Thailand, Indonesia and Macao) and imported into Canada and Australia for those
items of merchandise which A&A is obliged to source or agrees to source for the
ITI-GROUP pursuant to paragraph 1.1.
1.3 Ordering of Merchandise by Members of the ITI-GROUP.
---------------------------------------------------
Definition: "Same SKU Merchandise" as used hereafter means ITI-Group-ordered
- -----------
merchandise which bears the same SKU designation as that ordered by A&A for sale
in Tandy's Radio Shack stores in the United States and is the same product
(allowing for differences in packaging and instructions) as that sold in the
Tandy-owned Radio Shack stores in the United States. Once a product is
identified as "Same SKU Merchandise" it shall remain "Same SKU Merchandise" for
so long as it is sold in Tandy-owned RadioShack stores in the United States,
even if either party changes its SKU number. Neither party may change an SKU
number of a product identified as Same SKU Merchandise without the consent of
the other party, which will not be unreasonably withheld.
(a) When ordering merchandise from vendors in countries in the Far
East other than Korea, each ITI-Group member shall send to A&A, at the
applicable A&A offices in the Far East, confirmation booking telexes, e-
mail or other electronic transmissions, as specified by A&A, ("Bookings")
followed thereafter by purchase orders ("P.O.s"), and when ordering
merchandise from vendors in Korea, each ITI-Group member shall
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<PAGE>
send to the A&A office designated by A&A Bookings followed thereafter by
P.O.s on A&A's form of P.O., which Bookings shall specify in each case (1)
the vendor, (2) the quantity and price of the merchandise ordered, (3) the
purchaser/consignee and (4) A&A as payor or accountee. Upon receipt of such
P.O.s, A&A, subject to Section 1.10(a)(ii) hereof, shall provide notice of
such Bookings to the vendors named therein on behalf of, and as agent for
the applicable ITI-Group member.
(b) In consideration of A&A performing its obligations under Section
1.3(a) hereof, each ITI-Group member shall open and maintain a letter of
credit (L/C) for the benefit of A&A in such amounts and on such terms as
provided for herein, with banks acceptable to A&A. Each L/C shall (i) be
irrevocable in form, (ii) valid until the shipment date (such shipment date
being the later of the estimated shipment date and the scheduled shipment
date of any Open Order) furthest away in time of any Open Order covered by
such L/C, (iii) specify the applicable ITI-Group member as the applicant of
the L/C, (iv) specify A&A International, Inc., 100 Throckmorton Street,
Suite 1200, Fort Worth, Texas 76102, U.S.A. as the beneficiary, (v) provide
for payment to A&A in United States dollars, and (vi) provide for payment
to A&A upon the delivery of an original letter or telecopy thereof signed
by the President, any Vice President or the Controller of A&A (or any other
employee of A&A to whom such responsibility has been delegated in writing),
which letter or
-5-
<PAGE>
telecopy shall provide (1) the L/C number, (2) the U.S. dollar amount being
drawn and (3) a certification that the drawing is in respect of an F.O.B.
shipment of consumer electronic goods made pursuant to a P.O. issued by a
member of the ITI-Group.
(c) Twice every calendar month A&A shall deliver, by telecopy, e-mail
or telex, a notice to the ITI-Group concerning L/C coverage on Open Orders
(the "L/C Notice") ("Open Orders" being Bookings placed or confirmed by A&A
with vendors for merchandise not yet shipped) instructing the ITI-Group to
cause the issuing bank of the L/C to adjust such L/C by the amount provided
for in the L/C Notice. In addition, in the months of April, June and July,
A&A shall deliver by telecopy, e-mail or telex an additional notice to the
ITI-Group member to cause the issuing bank of each L/C to adjust such L/C
as of the first day of May, July and August, as the case may be, by the
additional amount, if any, reflecting the ten percent (10%) increase of L/C
coverage of Open Orders in each of such months over the previous month as
required pursuant to subsections 1. 3 (e) (ii) , (iii) and (iv) hereof.
(d) The L/C Notice shall specify (i) the aggregate U.S. dollar amount
of all Open Orders issued by and relating to the ITI-Group (or member, as
the case may be) as of the date of such notice and as reflected in A&A's
records; (ii) the percentage applicable to (i) above as set out in
subsection (e) below; and (iii) the U.S. dollar amount by which the L/C
intended to cover
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<PAGE>
Open Orders shall be adjusted and the aggregate U.S. dollar amount of the
L/C after giving effect to such adjustment; provided, however, that in the
-------- -------
case of Open Orders for products intended for sale in Canada and Australia
and placed after May 15, 1996, the L/C Notice shall specify instead of the
above, the following: (i) the aggregate U.S. dollar amount of all Open
Orders issued by and relating to ITC, or ITA, as appropriate, less the
aggregate U.S. dollar amount of Same SKU Merchandise as of the date of such
notice and as reflected in A&A's records; (ii) the percentage applicable to
(i) above as set out in subsection (e) below; (iii) the aggregate U.S.
dollar amount of Same SKU Merchandise on Open Orders issued by and relating
to ITC, or ITA, as appropriate, as of the date of such notice and as
reflected in A&A's records; (iv) the percentage applicable to (iii) above
as set out in subsection (e) below; and (v) the U.S. dollar amount by which
each L/C intended to cover Open Orders shall be adjusted and the aggregate
U.S. dollar amount of each L/C after giving effect to such adjustment.
(e) The percentage of the aggregate U.S. dollar amount of Open Orders
specified in the L/C Notice to be covered by the L/C maintained by the
ITI-Group (or member, as the case may be) with respect to such Open Orders
shall be in the following amounts for the following periods:
(i) December 1 through April 30: 60% of the aggregate U.S. dollar
Amount of the Open Orders covered by the
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<PAGE>
applicable L/C as specified in the L/C Notice;
(ii) May 1 through June 30: 70% of the aggregate U.S. dollar
amount of the Open Orders covered by the applicable L/C as specified
in the L/C Notice;
(iii) July 1 through July 31: 80% of the aggregate U.S. dollar
amount of the Open Orders covered by the applicable L/C as specified
in the L/C Notice;
(iv) August 1 through August 31: 90% of the aggregate U.S. dollar
amount of the Open Orders covered by the applicable L/C as specified
in the L/C Notice;
(v) September 1 through September 30: 80% of the aggregate U.S.
dollar amount of the Open Orders covered by the applicable L/C as
specified in the L/C Notice; and
(vi) October 1 through November 30: 70% of the aggregate U.S.
dollar amount of the Open Orders covered by the applicable L/C as
specified in the L/C Notice.
and provided further, that, in the case of Open Orders for
--- -------- -------
products intended for sale in Canada and Australia and placed after
May 15, 1996, the percentage of the aggregate U.S. dollar amount of
Open Orders specified in each L/C Notice to be covered by ITC, or ITA,
as appropriate, with respect to such Open Orders shall be adjusted as
follows for Same SKU Merchandise:
(x) Aggregate U.S. dollar amount of Open Orders less the
aggregate U.S. dollar amount of Same SKU Merchandise, the
resulting amount then multiplied by the applicable percentage
-8-
<PAGE>
stated in Section 1.3(e)(i), (ii), (iii), (iv), (v) and (vi)
above AND
---
(y) The aggregate U.S. dollar amount of Same SKU
Merchandise, multiplied by 60%, the result of which shall be
multiplied by the applicable percentage stated in Section
1.3(e)(i), (ii), (iii), (iv), (v), and (vi) above.
(f) Within ten (10) business days of receipt of an L/C Notice (a
business day being a day in which commercial banks are open for
business in the United States) the ITI-Group (or member as the case
may be), shall have caused such issuing bank to have (i) adjusted such
L/C by the amount specified in the L/C Notice and (ii) sent to TANDY
and A&A, or A&A's advising bank, by telecopy or telex, confirmation of
the adjustment to such L/C by the amount specified in the L/C Notice.
(g) With respect to any payment to be made to A&A for merchandise
shipped under an Open Order, at the time of shipment A&A shall be
entitled to draw on the L/C covering such Open Order the U.S. dollar
amount of such shipment in accordance with the terms and conditions of
the L/C, provided, however, that in the event that any Cash Deficiency
Payments (as defined in Section 1.10(a) hereof) have been deposited by
the ITI-Group (or member, as the case may be) with A&A as provided in
Section 1.10(a) hereof, the amount of lower payment shall be effected
first, by set-off by A&A from the amount of such Cash Deficiency
Payments and second, by a drawing by A&A under the applicable L/C for
the
-9-
<PAGE>
balance of such payment not set-off by the Cash Deficiency Payments.
(h) The ITI-Group covenants and agrees with TANDY and A&A that so
long as this Agreement is in effect and L/Cs are required to be issued
as provided for herein, the ITI-Group (or member, as the case may be)
shall deliver monthly to TANDY and A&A a statement with respect to the
ITI-Group setting forth as of the date of such statement (i) the
maximum principal amount (in U.S. dollars and the denominated
currencies) of all credit facilities provided by such banks in
connection with which the ITI-Group (or member, as the case may be)
may request an L/C to be issued (the "Credit Facilities"), (ii) the
amounts (in U.S. dollars and the denominated currencies of the
applicable Credit Facilities) of all borrowing notices or requests for
credit delivered to any L/C issuing bank by the ITI-Group (or member,
as the case may be) to the extent not reflected in (iii) below, (iii)
the aggregate principal amount in U.S. dollars of outstanding
indebtedness owed by the ITI-Group (or member, as the case may be),
under the Credit Facilities, (iv) the scheduled due date for repayment
of such outstanding amounts, (v) the aggregate amount of all cash
balances of the ITI-Group (or member, as the case may be), and (vi)
such other information relating to the Credit Facilities and the L/Cs
as may be reasonably requested by TANDY or A&A.
-10-
<PAGE>
(i) As an alternative procedure to that stated in Section 1.3(a)
through (h) above, the parties agree that the ITI-Group (or member, as
the case may be) may post one or more standby letters of credit
("SL/C's") on terms acceptable to A&A, in an amount or amounts
acceptable to A&A at banks acceptable to A&A. The ITI-Group shall
notify A&A in writing of their intent to use this alternative
procedure at least 60 days prior to implementation of this alternative
procedure. Each SL/C shall (i) be irrevocable in form, (ii) valid for
a full calendar year, (iii) specify the ITI-Group (or member, as the
case may be) as the accountee (applicant), (iv) specify A&A
International, Inc., 100 Throckmorton Street, Suite 1200, Fort Worth,
Texas 76102, U.S.A. as the beneficiary, (v) provide for payment to A&A
in United States dollars, and (vi) provide for payment to A&A upon the
delivery of an original letter, or telecopy or facsimile transmission
thereof signed by the President, any Vice President or the Controller
of A&A (or any other employee of A&A to whom such responsibility has
been delegated in writing), which letter shall provide (1) the SL/C
number (if any), and (2) the amount, in U.S. dollars, that the
ITI-Group (or member, as the case may be) has failed to pay and which
is past due. The ITI-Group hereby agrees and the banks shall agree,
that no affidavit or sworn certification shall be required from A&A in
order for A&A to draw on the SL/C. The ITI-Group agrees to pay A&A all
amounts due within five (5) days from the date of the payment request,
and
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<PAGE>
agrees that upon its failure to do so, A&A shall be entitled to
immediately present the letter described above to the bank and draw
upon the SL/C for payment. Further, if for any reason A&A is unable to
draw upon the SL/C for payment, A&A may declare the ITI-Group in
default of this Agreement, terminate same, and enforce its rights
hereunder.
(j) (i) The parties agree that the ITI-Group, as an alternative
or conjunctive procedure to that stated in Section 1.3(b) through (i)
above, may from time to time post one or more Surety Bonds
(individually a "Surety Bond" and collectively, the "Surety Bonds") in
form and substance acceptable to A&A in an amount or amounts
acceptable to A&A and with a surety or sureties acceptable to A&A. The
Surety Bond(s) may be posted as either partial or complete fulfillment
of the security required hereunder, up to the penal amount of the
Surety Bond(s). In the event the amounts due and owing under this
Agreement, for which an L/C would have been otherwise required,
exceeds the penal sum of the Surety Bond(s), the ITI-Group shall
arrange for L/C's (as per Section 1.3(b) through (i) above) or Cash
Deposits to secure payments as required under this Agreement. Each
Surety Bond posted by the ITI-Group shall contain such terms and
conditions as deemed mutually acceptable to A&A, the ITI-Group, and
the issuer of the Surety Bond. Notwithstanding anything herein to the
contrary, no Surety Bond shall be deemed acceptable to A&A until such
time as A&A has, in writing, acknowledged and accepted such
-12-
<PAGE>
Surety Bond. If, for any reason, A&A is unable to draw upon any Surety
Bond for payment, A&A may declare the ITI-Group in default of this
Agreement and absent a cure by the ITI-Group, may terminate same and
enforce its rights hereunder.
(ii) The ITI-Group agrees that, regarding A&A's right to
receive payment under any Surety Bond, and, as a material
inducement for A&A to enter into this Agreement and to accept a
Surety Bond in lieu of a documentary letter of credit, the
ITI-Group jointly and severally hereby waives any and all claims,
defenses or offsets of any kind that it or any member has or may
have against A&A relating to, or serving as a basis for,
non-payment under any Surety Bond posted under this Agreement.
Without limiting the foregoing, all of the following are hereby
waived and shall not be asserted by the ITI-Group or any member
thereof as a defense, a claim for reimbursement, or a basis for
non- payment under any Surety Bond:
(1) Any claim or defense based upon the ITI-Group's, or
any member's, failure to pay A&A due to force majeure,
laches, impracticability, impossibility, or
unconscionability, material alteration of this Agreement,
extension of time to pay, failure to mitigate by A&A,
improper/inadequate notice of default, usury, or release or
loss of collateral.
(2) Any claim or defense based upon nonconformity of
finished product with the corresponding purchase
-13-
<PAGE>
order or similar documents.
(3) Any claim or defense based upon warranties or
representations, whether express or implied, made by A&A to
the ITI-Group and/or any member thereof under the terms of
this Agreement.
(iii) In the event of a default in payment by any member of
the ITI- Group necessitating a claim to be made under any Surety
Bond, A&A agrees to use commercially reasonable efforts to assist
the ITI-Group (or member, as the case may be) to cancel product
orders placed by the ITI-Group (or member, as the case may be) in
accordance with Section 1.10(c) of this Agreement, as previously
amended.
(iv) Open Orders secured by any Surety Bond posted in the
manner as described in (i) above shall be subject to (1) the same
percentage formula as applicable to L/C postings and (2) the Same
SKU Merchandise formula, each as specified in Section 1.3(e) of
this Agreement. Prior to the posting of any Surety Bond under
this Section 1.3(j), the ITI-Group shall notify A&A in writing as
to the manner in which the full face amount of any Surety Bond
shall be allocated between the members of the ITI-Group. The
ITI-Group shall be entitled to reallocate, from time to time, the
full face amount of any Surety Bond between the ITI-Group
members; provided A&A shall be notified not less than ten (10)
days prior to any such reallocation of the full face amount.
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<PAGE>
1.4 Purchasing Agent's Commission. A&A will perform the export agent
-----------------------------
services described above for the following purchasing agent's commission
described below:
Purchasing Agent's Commission
-----------------------------
Unit Price Unit Price
---------- ----------
Under $1.00 F.O.B. Over $1.00 F.O.B.
------------------- ------------------
Merchandise 6% gross margin 4% gross margin
(excluding parts)
Parts (spare &/or 10% gross margin 10% gross margin
repair parts for
finished goods)
"unit" price = the price per item, or per group of items (if such items are sold
at a single price for a certain number of items), normally charged by a
manufacturer.
"gross profit" = sales price minus unit price
"gross margin" = gross profit of an item divided by the sales price
"sales price" = unit price plus gross profit
X
Formula: -------------- where "X" = gross profit
unit price + X = a and "a" = gross margin desired
FORMULA EXAMPLE 1:
UNIT PRICE = $.50
GROSS MARGIN DESIRED = 6%
( X
---
.5 + X) = 6%
Steps: 1. X = (.5 + X) x .06
2. X = .03 + .06X
3. X - .06X = .03
4. .94X = .03
5. X = .03
---
.94
X (gross profit) = .0319
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<PAGE>
unit price + gross profit = sales price
.5 + .0319 = $.5319
gross margin = .0319 (gross profit)
--------------------
.5319 (sales price) = 6%
The ITI-GROUP will pay to A&A a per-unit purchasing agent's commission of
$.032 on each unit with a unit price of $.50.
Add-on Calculations: unit price x 6.38% = gross profit necessary
for 6% gross margin
unit price x 4.17% = gross profit necessary
for 4% gross margin
unit price x 11.11% = gross profit necessary
for 10% gross margin
ADD-ON CALCULATION EXAMPLE:
$.50 x 6.38% = .0319 gross profit necessary for 6% gross margin
.0319 (gross profit)
--------------------
.5319 (sales price) = 6% gross margin
The ITI-GROUP will pay to A&A a per-unit purchasing agent's commission of
$.032 on each unit with a unit price of $.50
1.5 Purchasing Agent/Exporter Fee. In addition to the purchasing agent's
-----------------------------
commission, A&A shall receive a Purchasing Agent/Exporter Fee ("P/E Fee"). The
P/E Fee shall consist of a minimum annual base fee of U.S.$710,000 from the
ITI-GROUP, subject to increase as provided below. A portion of the minimum
annual base fee will be paid in quarterly installments of 12-1/2% of the minimum
annual base fee. Such quarterly installments shall be due and payable on the
last day of September, December, March and June of each year during the term
hereof. The balance of the
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P/E Fee may be paid by a merchandise credit, as described below, to the extent
purchases through A&A are sufficient. The settlement of the balance will be made
on or before August 31 following the end of each Annual Period ("AP"). An AP is
from July 1 through June 30. "AP Sales" shall be the net sales reported in the
audited, consolidated Annual Report of the ITI-GROUP.
The minimum annual base fee will be increased by an additional sum, if
any, based upon the following calculation (all figures in U.S. dollars):
AP Sales over $400,000,000
--------------------------
$400,000,000 x $710,000
EXAMPLE: AP Sales = $412,000,000
-------
Purchasing Agent/Exporter Fee ("P/E Fee") =
-----------------------------------------
$710,000 + [(12,000,000
-----------
400,000,000) x $710,000] = $731,300
Fees on all purchases made on or before January 24, 1999 shall be
calculated in accordance with the terms and conditions of the merchandise
agreement in effect as of January 24, 1999, adjusted for the portion of the AP
during which it was in effect, and shall take into account purchases made by
InterTAN U.K. Limited prior to its sale and disassociation from the ITI-Group on
January 25, 1999.
1.6 Merchandise Credit. A&A will give the ITI-GROUP a credit up to
------------------
but not exceeding the base fee, in the amount obtained by multiplying one-fourth
of one percent (0.25%) times all purchases of merchandise F.O.B.C. (free on
board plus purchasing agent's commission) made by the ITI-GROUP through A&A
during an Annual Period as reflected on invoices or reports issued
-17-
<PAGE>
by A&A to the ITI-GROUP or any of its members. If the total of the quarterly
installments (as described above) plus the merchandise credit for any Annual
Period is less than the P/E Fee, then on or before August 31 following each such
Annual Period, the ITI-GROUP will pay the deficiency to A&A. If the total of the
quarterly installments (as described above) and the Merchandise Credit for any
Annual Period is in excess of the P/E Fee, then on or before August 31 following
each such Annual Period, A&A will refund the excess, but not in excess of the
total of all quarterly installments paid during such Annual Period.
Formula: P - (I + C) = Amount due or refundable.
Where: P = P/E Fee
I = Quarterly Installments paid toward the minimum
base fee during AP
C = Merchandise Credit earned during AP
(All figures in U.S. Dollars)
Example 1:
----------
Assuming purchases of merchandise F.O.B.C. by the ITI-GROUP through
A&A of $130,000,000 during an Annual Period, the formula would have
the results indicated below:
$731,300-[($88,750x4)+($130,000,000x0.0025)]=$51,300
The ITI-GROUP would pay A&A $51,300 on or before August 31.
Example 2:
----------
Assuming purchase of merchandise F.O.B.C. by the ITI-GROUP through A&A
of $400,000,000 during an Annual Period, the formula would have the
results indicated below:
$731,300-[($88,750x4)+($400,000,000x0.0025)]=($623,700)
A&A would refund to the ITI-GROUP on or before August 31 $500,000
which is the maximum amount of the refund due under this Section 1.6.
Credits on all purchases made on or before January 24, 1999
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<PAGE>
shall be calculated in accordance with the terms and conditions of the
merchandise agreement in effect as of January 24, 1999, adjusted for
the portion of the AP during which it was in effect, and shall take
into account purchases made by InterTAN U.K. Limited prior to its sale
and disassociation from the ITI-Group on January 25, 1999.
1.7 Adjustment for First Annual Period. During the first AP under this
----------------------------------
Merchandise Agreement, the calculations set out in Sections 1.5 and 1.6 above
will be adjusted as follows:
(a) The adjusted AP will be the period from January 25, 1999 through
June 30, 1999.
(b) AP Sales will be the net sales reported in the audited,
consolidated Annual Report of the ITI-GROUP, less the sales for each fiscal
----
quarter reported in the published ITI-GROUP Quarterly Reports for the
periods ending September 30, 1998 and December 31, 1998, plus an adjustment
to be determined by the parties for InterTAN U.K. Limited sales occurring
between January 1, 1999 and January 24, 1999, inclusive.
(c) The minimum annual base fee for purposes of calculating the P/E
Fee for the adjusted AP will be U.S. $355,000. The minimum annual base fee
during the first AP will be increased by an additional sum, if any, based
upon the following calculation (all figures in U.S. dollars):
AP Sales Over $200,000,000
--------------------------
$200,000,000 x 355,000
Example: AP Sales = $225,000,000
-------
(25,000,000
-------------
P/E Fee = $355,000 + [ 200,000,000) x $355,000] = $399,375
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<PAGE>
(d) An installment of $88,750 will be due for each of the two
remaining quarters of the first AP payable on or before March 31, 1999; and
June 30, 1999. The ITI-Group would pay $221,875 on or before August 31,
1999.
(e) The merchandise credit will be obtained by multiplying one-fourth
of one percent (0.25%) times all purchases of merchandise F.O.B.C. made
during the adjusted AP set out in Section 1.7(a) above, not to exceed the
adjusted base fee set out in Section 1.7(c) above.
EXAMPLE:
-------
Assuming purchases of merchandise F.O.B.C. by the ITI-GROUP through
A&A of $110,000,000 during the first AP as adjusted, the formula set out in
Section 1.6 using the first year adjustments would have the results indicated
below:
$399,375-[($88,750 x 2)+($110,000,000 x 0.0025)]=($53,125)
A&A would refund to the ITI-Group $53,125 on or before August 31, 1999.
1.8 Payment Terms. Invoices for commissions, fees and expenses chargeable
-------------
to the ITI-GROUP under this Agreement shall be due and payable within thirty
(30) days of the receipt of invoice or facsimile thereof by the applicable
ITI-GROUP member. In the alternative, A&A, at its option, may bill for
commissions, fees and expenses charged to the ITI-GROUP under this Agreement by
means of a month-end statement which statement shall be due and payable within
fifteen (15) days of the statement date. Anything
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<PAGE>
in this Agreement notwithstanding, P/E Fee installments are due as set out in
Section 1.5 above and, during the first AP, as set out in Section 1.7(d) and the
ITI-GROUP will pay those installments to A&A as set out in paragraphs 1.5 and
1.7 without requirement of an invoice or statement from A&A. If a Surety Bond or
SL/C is used in place of an L/C, the ITI-Group agrees to pay A&A by wire
transfer all amounts due for merchandise in the amount(s) specified in the
applicable Merchandise Payment Request ("MPR") within three (3) business days
from the date of receipt of the applicable MPR by the ITI-Group (or member, as
the case may be), the form of which will be provided by A&A. Notwithstanding the
foregoing, A&A may, in its sole discretion, extend the payment period and adjust
any amount(s) specified in a MPR in order to resolve any inaccuracies or
discrepancies, or to make similar adjustments to the MPR which may be required.
1.9 Interest Charges. Past due amounts owed to A&A hereunder shall accrue
----------------
interest at the prime rate published in the Money Rates section of The Wall
Street Journal on the date the amounts become past due, plus one (1) percentage
point per annum.
1.10 Cash Deficiency Payments; Cancellation of Open Orders; Non-
-----------------------------------------------------------
Acceptance of Bookings.
- -----------------------
(a) (i) If at any time the ITI-Group or any member fails or is unable
to maintain or adjust any L/C for any reason whatsoever, in the form and in
the amounts and during the periods provided for hereunder, the ITI-Group
shall immediately pay into
-21-
<PAGE>
an account designated by A&A in immediately available funds the U.S. dollar
amount equal to the difference between (x) the U.S. dollar amounts of Open
Orders required to be covered at such time by L/Cs as provided for
hereunder and (y) the U.S. dollar amounts of Open Orders actually covered
by L/Cs and Cash Deficiency Payments at such time (such payment being a
"Cash Deficiency Payment").
(ii) Within five (5) business days of receipt of notice by A&A
from the ITI-Group of a repayment obligation under this Section
1.10(a)(ii), A&A shall repay in immediately available funds to the
ITI-Group or its order the U.S. dollar amount equal to the positive
difference between (x) the U.S. dollar amounts of Open Orders actually
covered by L/Cs and Cash Deficiency Payments at any time and (y) the
U.S. dollar amounts of open Orders required to be covered at such time
by L/Cs and Cash Deficiency Payments as provided for hereunder. Such
repayments by A&A shall not include interest and shall be made solely
from and limited to the amounts of Cash Deficiency Payments, if any,
deposited pursuant to Section 1.10(a)(i) hereof.
(b) In the event that the ITI-Group, or any member, fails or is unable
to maintain or adjust any L/C for any reason whatsoever, in the form and in
the amounts and during the periods provided for hereunder and fails to make
any Cash Deficiency Payments for any reason whatsoever, in the amounts
provided for
-22-
<PAGE>
hereunder, then irrespective of whether A&A has declared or waived any
event of default pursuant to Section 2.1 hereof, A&A (i) shall be entitled
in its sole discretion to cancel any Open Order, provided that A&A shall
use its best efforts, to the extent not contrary to its best interests as
determined in its sole discretion, to cancel only Open Orders or amounts of
Open Orders by amounts such that after giving effect thereto the balance of
Open Orders will be covered by L/Cs and Cash Deficiency Payments in the
amounts provided for hereunder; and (ii) shall not be required to initiate
or accept any Booking from the ITI-Group or place or confirm on behalf of
the ITI-Group any Booking with any vendor unless prior to acceptance or
placement or confirmation of such Booking the ITI- Group pays into an
account designated by A&A in immediately available funds the full U.S.
dollar amount of such Booking. Nothing in this subsection (b) shall be
construed as limiting in any way the right of A&A to declare an event of
default pursuant to Section 2.1 hereof.
(c) With respect to cancellation of Open Orders in circumstances other
than in subsection (b) above, (i) in countries other than Korea, the
ITI-Group shall have the sole right to cancel any Open Order and to
negotiate cancellation fees directly with vendors and (ii) in Korea, both
A&A and the ITI-Group shall have the right to cancel any Open Order. A&A,
in its capacity as purchasing agent, will assist (provided such assistance
does not involve the incurrence of any expense on the
-23-
<PAGE>
part of A&A) the ITI-Group in canceling any Open Order in an attempt to
mitigate and minimize the ITI-Group's liability to any vendor.
(d) A&A shall have the option to refuse to act as purchasing
agent/exporter for the ITI-Group with any vendor with respect to which the
ITI- Group has canceled, through A&A or otherwise, an Open Order. In such
circumstances, the ITI-Group may then deal directly with such vendor,
notwithstanding the terms of this Agreement.
1.11 Indemnification.
----------------
(a) Each member of the ITI-Group, jointly and severally, hereby
agrees to indemnify and hold harmless Tandy and A&A and each of their
respective affiliates, directors, officers, employees, agents and
advisors (each, an "Indemnified Party") against (i) all claims,
damages, losses, liabilities, costs, fees (including reasonable
attorney fees), expenses and charges that may be incurred by, or
asserted or awarded against an Indemnified Party, in each case arising
out of or in connection with the cancellation or attempted
cancellation of any Open Order pursuant to Section 1.10 hereof or
otherwise, or any proceeding or litigation or threatened proceeding or
litigation relating thereto; (ii) all costs, fees (including
reasonable attorney fees), expenses and charges, including without
limitation all bank fees and charges, that may be incurred by or
awarded against an Indemnified Party in connection with any drawing
under any
-24-
<PAGE>
L/C, or any proceeding or litigation or threatened proceeding or
litigation relating thereto; and (iii) all costs, damages, losses,
liabilities, fees (including reasonable attorney fees), expenses and
charges that may be incurred by or awarded against an Indemnified
Party, in each case arising out of or in connection with enforcing or
defending the provisions of this Agreement and any subsequent
amendments thereto, whether involving any ITI- Group member or any
third party.
(b) In connection with any claim for indemnification by an
Indemnified Party under subsection (a)(i) hereof arising out of or in
connection with any proceeding or litigation or threatened proceeding
or litigation by a vendor against any Indemnified Party relating in
any way to the cancellation or attempted cancellation of an Open
Order, upon reasonable written notice to Tandy and such Indemnified
Party, the ITI-Group may at its option contest, manage, and defend any
such claim for which it has, or may have, responsibility for payment,
provided that during the pendency of any such proceeding or
--------
litigation, the ITI- Group will reimburse such Indemnified Party
currently on a monthly basis for all reasonable legal and other
expenses incurred by it in defending, or assisting in the defense of,
any such proceeding or litigation notwithstanding the absence of a
judicial or quasi-judicial determination as to the merit of the claim
or as to the propriety and enforceability of the ITI-Group's
responsibility for such claim and expenses.
-25-
<PAGE>
1.12 Fee and Credit Renegotiation. Each of the Purchasing Agent's
-----------------------------
Commission set out in Section 1.4 above, the Purchasing Agent/Exporter Fee set
out in Section 1.5 above, and the Merchandise Credit set out in Section 1.6
above may be renegotiated by the parties at any time upon the request of either
party.
1.12A Term. This Agreement will expire upon the termination of the license
-----
agreement dated as of January 25, 1999 between Tandy and ITC and the license
agreement dated as of January 25, 1999 between Tandy and ITA.
1.13 ITA Contact Employee Cost Sharing.
----------------------------------
(a) The ITI-Group may employ one person to act as a focal point
for operational and planning issues that develop between A&A and the
ITI-Group, including providing A&A with local market analysis and
coordinating product development and marketing between the ITI-Group
and A&A (the "Contact Person"). Tandy agrees to share the reasonable
and necessary costs of the ITI-Group to maintain one ITA employee in
Australia to act as the Contact Person with A&A on the following
basis. If ITA purchases through A&A as purchasing agent the amount of
merchandise specified as a Purchase Level for ITA below for the
corresponding fiscal year indicated below, then Tandy will reimburse
ITA the percentage(s) stated below of the undisputed costs of
maintaining
-26-
<PAGE>
the Contact Person for each fiscal year in which ITA achieves such
Purchase Levels, up to a maximum of U.S. $150,000 in any one fiscal
year for the Contact Person:
(in thousands -- U.S. Dollars)
PURCHASE TANDY'S COST
YEAR LEVEL - ITA SHARING % - ITA
---- ----------- ---------------
FY `97 19,661 50%
FY `98 23,593 50%
FY `99 24,000* 100%
*If ITA purchases from A&A for any FY equal or exceed 24,000, Tandy
will reimburse the ITI-Group 100% of the costs that are not in
dispute, up to a maximum of U.S. $150,000 in any fiscal year.
By August 30 of each year, beginning in 1997, ITI-Group purchases will be
calculated for the most recently completed fiscal year ended June 30 to
determine Tandy's share of costs, if any.
(b) Expatriate Costs. An "expatriate employee" is an employee who
----------------
has worked for A&A, who is hired by ITA and who moves to a country
that is not his or her country of permanent residence to act as the
Contact Person for ITA. Unless otherwise agreed by the parties in
writing at the time of submission of the costs to Tandy for payment,
the reasonable and necessary costs for an expatriate employee
("Expatriate Costs") are agreed to be the following:
1. Salary and related costs of the customary benefit plans
for employees at the same or similar salary level;
2. Automobile allowance;
-27-
<PAGE>
3. Cost of living allowance;
4. Housing allowance;
5. Income tax equalization payments and reasonable tax
return preparation costs; and
6. Initial relocation costs of the original expatriate
employee only.
In no event shall Tandy pay or share in paying Expatriate Costs past the fiscal
year ending June 30, 2002. In no event shall Tandy pay or share in paying
Expatriate Costs in excess of U.S. $150,000 in any fiscal year.
(c) Permanent Resident Costs. The reasonable and necessary costs
------------------------
for a permanent resident employee ("Permanent Resident Costs") are
agreed to be the salary, related employee benefit costs, and initial
relocation costs only, unless otherwise agreed by the parties in
writing. In no event shall Tandy pay or share in paying Permanent
Resident Costs in excess of U.S. $150,000.
(d) Billing and Audit Right. By September 30 of each year, the
-----------------------
ITI-Group shall present detailed billing to Tandy for any costs in
which Tandy is to share for the most recently completed fiscal year.
The billing shall be in U.S. dollars based on the average exchange
rate for the applicable fiscal year and by October 31 of each year
Tandy shall pay any amount not in dispute. Payment shall be due in
U.S. Dollars to InterTAN, Inc. in Concord, Ontario, Canada. The ITI-
Group shall have a fiduciary duty to
-28-
<PAGE>
Tandy to control the costs of the Contact Person so that such costs
are at a level consistent with employees of the ITI- Group at the same
or similar employment levels. Within 30 days after the end of each
quarter, ITA shall submit to Tandy quarterly reports of all
reimbursable costs related to the Contact Person for the quarter and
all purchases for the quarter from A&A. Tandy, at its sole cost, shall
have the right to audit the records of the ITI-Group concerning the
Contact Person, and comparable employees of the ITI-Group at the same
or similar employment levels, upon reasonable notice and during
regular business hours.
ARTICLE II
DEFAULT
2.1 Events of Default.
-----------------
(a) The use of A&A as exclusive agent for the purchase of
merchandise under Article I of this Merchandise Agreement by any and
all members of the ITI- GROUP and all obligations of A&A related
thereto may be terminated by TANDY or A&A upon written notice to ITI
(it being understood and agreed by all parties to this Merchandise
Agreement that neither TANDY nor A&A shall be required to give any
such notice to any other member of the ITI-GROUP and that notice to
ITI constitutes notice to all members of the ITI-GROUP), at its
principle offices at Concord, Ontario, Canada in the event of the
occurrence of any of the following events of default:
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<PAGE>
(i) Any member of the ITI-GROUP:
(A) fails to make any payment to TANDY or A&A, when
due, of any purchasing agent's commission or purchasing
agent/exporter fee, or any other amounts payable to TANDY or
A&A under this Merchandise Agreement; or
(B) fails to perform any other material obligation
under this Merchandise Agreement, including, without
limitation, the guarantee obligations set forth in Article
III hereof; or
(ii) Any member of the ITI-GROUP defaults on any agreement,
including lease agreements, to which any member of the ITI-GROUP
and TANDY are parties or are in privity with third parties; or
(iii) Any license agreement between TANDY, as licensor, and
any member of the ITI-GROUP, as licensee, expires or is
terminated for any reason, or any member of the ITI-GROUP fails
to make payment of any sums of money due to TANDY under any
license agreement; or
-30-
<PAGE>
(iv) There is a "change of control" of ITI, ITC, or ITA as
that phrase is used and defined in the respective license
agreements between TANDY and any member of the ITI-GROUP, which
amended and restated license agreements are being entered into
contemporaneously with this Merchandise Agreement.
(b) The ITI-GROUP, acting collectively by and through ITI, shall
have the right to cure certain events of default as follows:
(i) In the event of the occurrence of an event of default
under Section 2.1(a)(i) above, the ITI-GROUP shall have the right
to cure such event of default within thirty (30) days from and
after the date of written notice by TANDY or A&A of such event of
default; provided, however, that the right to cure any such event
of default shall be limited and shall not exceed a total of three
times during each AP on defaults under 2.1(a)(i)B and payment
defaults on monthly amounts due; or once each AP on payment
defaults on quarterly amounts due;
(ii) In the event of the occurrence of an event of default
under Section 2.1(a)(ii) above, the ITI-GROUP shall have the
right to cure such event of default in accordance with the
provisions, if any, relating to the cure of an event of default
contained in any agreement included within the scope of the
provisions of such Section; and
(iii) In the event of the occurrence of an event of default
under the provisions of Section 2.1(a)(iii) above, the ITI-GROUP
shall have the right to cure such event of default in
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<PAGE>
accordance with the provisions of the respective license
agreements referred to in such Section relating to the cure of an
event of default; provided, however, that the ITI-GROUP shall not
have the right to extend the term of an expired license agreement
between TANDY, as licensor, and any member of the ITI-GROUP, as
licensee, and upon termination or expiration of any such license
agreement this Merchandise Agreement shall terminate and shall be
of no further force or effect.
(c) The ITI-Group shall not have the right to cure an event of
default resulting from a "change of control" as described in Section
2.1(a)(iv) above.
2.2 Acceleration of Payment. Upon written notice to members of the ITI-
-----------------------
GROUP, TANDY or A&A may also declare any and all purchasing agent's commissions
and purchasing agent/exporter fees, as well as any other amounts payable to
TANDY or A&A under this Merchandise Agreement, to be immediately due and payable
upon any of the events of default described in Sections (i) through (v) of
Section 2.1(a) above, subject to the right of the ITI-GROUP to cure certain
specified events of default as provided in Section 2.1(b) above, provided that
TANDY or A&A may not take any action contemplated by this Section 2.2 so long as
the failure of the ITI-GROUP to make payments under Section 2.1(a)(ii)(A) above
is the result of a reasonable dispute pursued in good faith and, with regard to
such dispute, TANDY has received from the ITI-GROUP within five (5) business
days prior to the date payment is due
-32-
<PAGE>
under this Agreement a detailed written notice of the amounts, invoices, and the
basis for dispute, and provided further that all undisputed amounts are paid to
TANDY or A&A in accordance with the terms of this Agreement. The parties shall
make their best, good faith effort to resolve any such dispute within thirty
(30) days after the due date of the statement or invoice which includes the
disputed amounts. Within fifteen (15) days after the due date of the statement
or invoice which includes the disputed amounts, the chief financial officer of
the ITI-GROUP and the chief financial officer of A&A shall attempt to resolve
the matter. In the event the chief financial officers are unable to resolve the
dispute within the initial fifteen (15) day period, the chief executive officer
of the ITI-GROUP and the chief executive officer of Tandy shall discuss the
matter during the fifteen (15) days next following in an attempt to resolve the
dispute. In any event, if the dispute is not resolved within thirty (30) days
after the due date of the statement or invoice which includes the disputed
amount, then A&A shall have the right to terminate, without notice, the right of
the ITI-GROUP to purchase products through A&A and to immediately terminate,
without notice, all purchasing agent services performed by A&A under Sections
1.1 and 1.2 of this Agreement.
2.3 Non-assignment and Termination. The ITI-GROUP acknowledges that its
------------------------------
right to purchase products through TANDY or A&A as provided in Article I of this
Merchandise Agreement, any
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<PAGE>
economic benefits secured by TANDY or A&A from its vendors for members of the
ITI-GROUP under any licensing, software and hardware agreements, and the
agreement of A&A to perform purchasing agent services for members of the
ITI-GROUP as provided in Section 1.2 of this Merchandise Agreement, are
nonassignable, except with the express written consent of TANDY and A&A, which
consent may be withheld by TANDY or A&A in their sole discretion. Further, such
rights and obligations shall terminate automatically, without need for any
action, including notice from TANDY or A&A, in the event any member of the
ITI-GROUP (a) becomes insolvent,
(b) initiates or otherwise becomes the subject of a foreign or
domestic receivership, arrangement, composition, liquidation,
reorganization, bankruptcy, or other insolvency proceeding, or
(c) enters into an arrangement or composition for the benefit of
creditors.
ARTICLE III
GUARANTEE BY EACH MEMBER OF THE ITI-GROUP
3.1 Guarantee. Each of InterTAN, Inc., InterTAN Canada Ltd., InterTAN
---------
Australia Ltd. and Technotron Sales Corp. Pty. Limited (hereinafter "Guarantors"
or each "Guarantor") hereby irrevocably and unconditionally, jointly and
severally, guarantees to TANDY and A&A the due and punctual payments, observance
and
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<PAGE>
performance of all of the obligations, terms, conditions and covenants of each
of the other members of the ITI-GROUP pursuant to this Merchandise Agreement,
including, but without limitation, the payment to TANDY and/or A&A when due of
the purchasing agent's commissions, purchasing agent/exporter fees and any other
amounts payable to TANDY or A&A under this Merchandise Agreement. This Guarantee
is a continuing guarantee and shall be binding upon each Guarantor, its
successors and assigns, and shall inure to the benefit of, and be enforceable
by, TANDY and A&A, their successors, transferees and assigns.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each member of the ITI-GROUP represents and warrants to TANDY and A&A as
follows:
4.1 Due Authority; Enforceability; No Breach. The execution, delivery and
----------------------------------------
performance by it of this Agreement and the consummation of the transactions
contemplated hereby, have been duly authorized by its Board of Directors and by
all other necessary corporate action. This Agreement has been duly executed and
delivered by it and is a legal, valid and binding obligation of it, enforceable
against it. Neither the execution, delivery and performance by it of this
Agreement, nor the consummation by it of the transactions contemplated hereby,
nor the compliance by
-35-
<PAGE>
it with, or fulfillment by it of the terms and provisions hereof will
(i) conflict with or result in a breach or violation of any of
the terms, conditions or provisions of its certificate of
incorporation or bylaws, or applicable corporate organizational
documents; (ii) with or without the giving of notice or lapse of time
or both, conflict with or result in a breach or violation of, or
default under, or permit the acceleration of any obligation under any
provision of any agreement, indenture, mortgage, lien, lease or other
instrument or restriction of any kind to which it is a party or by
which it is otherwise bound or affected; or (iii) violate any
judgment, order, writ, injunction, decree, law, statute, rule or
regulation applicable to it.
ARTICLE V
MISCELLANEOUS
5.1 Severability. In the event that any provision of this Merchandise
------------
Agreement shall be determined to be invalid or prohibited by law, such provision
shall be ineffective to the extent of such invalidity or prohibition without
invalidating the remainder of this Merchandise Agreement.
5.2 Waiver. No failure or delay in exercising any right, power or remedy
------
under any provision of this Merchandise Agreement shall operate as a waiver of
or otherwise shall prejudice any of
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<PAGE>
the rights, powers or remedies of TANDY or A&A. No right, power or remedy herein
conferred upon TANDY or A&A is intended to be exclusive of any other right,
power or remedy, and each and every such right, power or remedy shall be
cumulative of every other right, power or remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise.
5.3 Amendment. This Merchandise Agreement may be amended only by a document
---------
subscribed in writing by all parties hereto.
5.4 Notices. All notices pursuant to this Merchandise Agreement shall be in
-------
writing and shall be deemed given when personally delivered or when mailed by
certified or registered mail, return receipt requested, postage prepaid and
properly addressed, or when sent by legible facsimile transmission (proper
transmission confirmed) properly addressed as follows:
If to any ITI-Group member: InterTAN, Inc.
The Royal Centre
3300 Highway #7
Suite 904
Concord, Ontario L4K 4M3
Attn: General Counsel
Fax: (905)760-9722
If to Tandy or A&A: Tandy Corporation
100 Throckmorton St., Ste. 1800
Fort Worth, Texas 76102
Attn: Mr. Mark C. Hill
Senior Vice President, Corporate
Secretary and General Counsel
Fax: (817)415-2647
5.5 Counterparts. This Merchandise Agreement may be executed in
------------
counterparts, any or all of which shall constitute one and the same document.
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<PAGE>
5.6 Further Assurances. TANDY and A&A each member of the ITI-GROUP agree
------------------
that they will at any time and from time to time, upon request of the other,
execute, acknowledge and deliver all such further instruments and documents and
to do, or cause to be done, all such further acts as may be required to carry
out the purpose and intent of this Merchandise Agreement.
5.7 Merger of Prior Negotiations. All prior negotiations and agreements
----------------------------
between the parties hereto with respect to the subject matter of this
Merchandise Agreement are merged herein.
5.8 Binding effect. This Merchandise Agreement shall be binding on the
--------------
parties hereto and their respective permitted successors and permitted assigns.
5.9 Headings. The article and section headings in this Merchandise
--------
Agreement are for convenience and reference only, and shall not be utilized in
any way to explain, modify, amplify or add to the interpretation, construction
or meaning of this Merchandise Agreement.
ARTICLE VI
GOVERNING LAW AND SUBMISSION TO JURISDICTION
6.1 TEXAS LAW APPLICABLE; SUBMISSION TO JURISDICTION. THIS MERCHANDISE
-------------------------------------------------------------------
AGREEMENT AND ALL AMENDMENTS THERETO, AND ANY AND ALL CLAIMS, DEMANDS OR ACTIONS
- --------------------------------------------------------------------------------
OR IN ANY WAY RELATING THERETO OR INVOLVING ANY DISPUTE BETWEEN OR AMONG ANY OF
- -------------------------------------------------------------------------------
THE PARTIES HERETO,
- ------------------
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<PAGE>
WHETHER ARISING IN CONTRACT OR TORT, AT LAW, IN EQUITY OR STATUTORILY, SHALL BE
- -------------------------------------------------------------------------------
GOVERNED, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
- --------------------------------------------------------------------------------
TEXAS, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CHOICE OF LAWS OF SUCH STATE.
- ------------------------------------------------------------------------------
EACH PARTY HERETO IRREVOCABLY SUBMITS ITSELF TO THE EXCLUSIVE JURISDICTION OF
- -----------------------------------------------------------------------------
THE COURTS OF THE FEDERAL COURTS OF THE UNITED STATES, NORTHERN DISTRICT OF
- ---------------------------------------------------------------------------
TEXAS, FORT WORTH DIVISION, AND TO THE COURTS OF THE STATE OF TEXAS LOCATED IN
- ------------------------------------------------------------------------------
TARRANT COUNTY, TEXAS, AS TO ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
- ------------------------------------------------------------------------
RELATING TO THE MERCHANDISE AGREEMENT, AS IT MAY BE AMENDED FROM TIME TO TIME,
- ------------------------------------------------------------------------------
AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE HAD UPON IT IN
- ---------------------------------------------------------------------
ACCORDANCE WITH THE PROCEDURES, RULES AND LAWS OF TEXAS IN ANY SUCH DISPUTES.
- -----------------------------------------------------------------------------
EACH MEMBER OF THE ITI-GROUP HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
- --------------------------------------------------------------------------
PROCESS ON IT AND IRREVOCABLY APPOINTS CT CORPORATION SYSTEM, 350 N. ST.PAUL
- ----------------------------------------------------------------------------
STREET, DALLAS, TEXAS 75201, AS THE REGISTERED AGENT FOR THE PURPOSE OF
- -----------------------------------------------------------------------
ACCEPTING SERVICE OF PROCESS WITHIN THE STATE OF TEXAS AND AGREES TO OBTAIN A
- -----------------------------------------------------------------------------
LETTER FROM CT CORPORATION SYSTEM ACKNOWLEDGING THE SAME. EACH MEMBER OF THE
- ----------------------------------------------------------------------------
ITI-GROUP ALSO CONSENTS TO SERVICE OF PROCESS BY REGISTERED MAIL DIRECTED TO ITS
- --------------------------------------------------------------------------------
PRINCIPAL OFFICE AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED TEN (10)
- -----------------------------------------------------------------------------
DAYS AFTER THE SAME SHALL HAVE BEEN POSTED.
- ------------------------------------------
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Merchandise Agreement
to be effective as of January 25, 1999.
InterTAN, Inc.
/s/Brian E. Levy
By: Brian E. Levy
Title: President & Chief Executive Officer
InterTAN Canada Ltd.
/s/Brian E. Levy
By: Brian E. Levy
Title: President
InterTAN Australia Ltd.
/s/Brian E. Levy
By: Brian E. Levy
Title: Director
Technotron Sales Corp. Pty. Limited
/s/Brian E. Levy
By: Brian E. Levy
Title: Director
Tandy Corporation
/s/Dwain H. Hughes
By: Dwain H. Hughes
Senior Vice President and
Chief Financial Officer
A&A International, Inc.
/s/David Christopher
By: David Christopher
President
-40-
<PAGE>
EXHIBIT 10(b)
AMENDED AND RESTATED
LICENSE AGREEMENT
(Canada)
Agreement dated to be effective as of the 25th day of January, 1999,
between Tandy Corporation ("Tandy") and InterTAN Canada Ltd. ("ITC").
Tandy is a corporation organized under the laws of the State of Delaware,
having its principal place of business at 100 Throckmorton Street, Suite 1800,
Fort Worth, TX, 76102, hereafter Tandy. ITC is an entity organized under the
laws of the Province of Alberta, having a principal place of business at 279
Bayview Drive, Barrie, Ontario, Canada. ITC is a wholly-owned subsidiary of
InterTAN, Inc. ("ITI").
Tandy has adopted, used, and owns RADIO SHACK as a trade name and service
mark in Canada in connection with the operation of retail store services dealing
primarily in electronic products and computers and distribution of catalogs in
Canada. Tandy also owns those trademarks identified in attached Exhibit 1.
ITC wishes to continue to use RADIO SHACK as a trade name and service mark
for the operation of ITC owned (or managed) or ITC franchised retail stores in
Canada dealing primarily in electronic products and related services including
catalog, mail order and repair services in Canada. ITC also wishes to make or to
have made certain products under certain trademarks identified in Exhibit 1.
Now, therefore, it is agreed as follows:
1. Tandy grants an exclusive nonassignable license to ITC, provided ITC is
duly appointed a registered user if so required by applicable law, to use and to
grant sublicenses to others as herein provided, to use RADIO SHACK as a trade
name and service mark in Canada in connection with the operation of ITC owned or
ITC franchised retail stores dealing primarily in electronic products and
related services including catalog, mail order and repair services rendered in
such stores in Canada, such use being subject to royalties payable in accordance
with paragraph 5 hereof.
2. Tandy grants to ITC a nonexclusive, nonassignable, royalty-free license
under all trademarks owned by Tandy or one of its subsidiaries and used
currently (or formerly) in the United States by Radio Shack, a division of
Tandy, and which are identified in Exhibit 1 attached to this Agreement, for use
in Canada in connection with the advertising and sale of products purchased
through A&A International, Inc., a wholly owned subsidiary of Tandy ("A&A"), and
on (1) those products on which such trademark is used currently (or formerly) in
the United States by Radio Shack which ITC does not purchase through A&A and
which, as of the date hereof, ITC makes or has made for it by anyone other than
Tandy or one of its subsidiaries, all as identified in Exhibit 2 attached to
this Agreement, and which
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<PAGE>
shall be sold only in accordance with the provisions of this Agreement in Canada
or (2) such other products as Tandy may approve (collectively the "Products").
The license granted under this paragraph 2 shall be limited to use of the
trademarks on and advertising of the Products. All flyers, catalogs or other
printed materials used to advertise trademarked products must contain a notice
identifying by name the Tandy trademarks used therein (as identified in Exhibit
1) and must explicitly state that these trademarks are owned by Tandy
Corporation and are used under license. Tandy agrees that it will be sufficient
for such notice to identify Tandy trademarks with an asterisk, together with an
explanatory note that the asterisk identifies a trademark of Tandy which is used
under license.
3. The licenses granted in paragraphs 1 and 2 shall include the right to
grant sublicenses, subject to the terms of this Agreement, only to (a) dealers
for use with dealer programs in Canada and (b) franchisees for use with
franchise programs in Canada, to resell products on which the trademarks are
used. All sublicenses shall conform with the terms of this license and shall be
subject to similar terms and conditions, subject to the last sentence of this
paragraph 3, as the dealer and franchise agreements heretofore in use by Tandy,
as exemplified by the attached Exhibits 3(a) and 3(b). Any provisions in any
agreement pertaining to Tandy not in conformity with Exhibits 3(a) and 3(b), and
any changes to provisions pertaining to Tandy in any previously approved
agreements, must be approved in writing by Tandy prior to their use by ITC. No
sublicense shall be granted unless Tandy's rights to the trademarks and service
marks sublicensed are secured under applicable law, pursuant to appropriate
filings of applications for registrations and the filing and procuring of
appropriate approvals for such use including, but not limited to, registered
user registrations, where applicable. All dealer and franchise agreements
entered into or received after the date hereof shall disclose that Tandy is the
owner of the trade name and service mark being sublicensed, as well as all
trademarks identified in Exhibit 1, and, to the extent ITC can, shall give Tandy
the right to inspect the premises of each dealer, and franchisee to assure the
quality of service and merchandise.
4. a) The initial term of this Agreement shall be from November 3, 1993 to
June 30, 2006. However, beginning July 1, 1997 and continuing annually an
additional year shall be automatically added to the initial term each July 1
thereafter until July 1, 2000 in the manner set out in the example below:
EXAMPLE: Date: Term Extended To:
---- ----------------
July 1, 1997 June 30, 2007
July 1, 1998 June 30, 2008
July 1, 1999 June 30, 2009
July 1, 2000 June 30, 2010
July 1, 2001 June 30, 2010 (Term not
-2-
<PAGE>
extended automatically)
Either party may terminate this Agreement at any time without cause during the
initial term or any extension thereof set out above by providing the other party
five (5) years prior written notice of termination. Such termination shall be
effective on June 30 next following the expiration of five (5) years from the
date appearing on the written notice of termination. Any and all of the
foregoing notwithstanding, this Agreement shall automatically terminate on the
termination of the Amended and Restated Merchandise Agreement between, inter
alia, Tandy and ITC, dated effective as of January 25, 1999. On or before June
30, 2005, the parties agree to discuss further extension of this Agreement,
however, such discussions shall not imply any duty whatsoever on the part of
Tandy to do anything beyond discussing the matter.
(b) Any extensions of the licenses herein granted beyond the terms set
forth in paragraph 4(a) of this Agreement shall be at the sole discretion
of Tandy. It is hereby agreed that any such extensions that are granted by
Tandy will include payment of royalties from ITC to Tandy at a rate which
shall be negotiated and agreed by the parties in good faith prior to any
such extension.
(c) Tandy may permit other uses by ITC of the above-licensed trade
name, service mark and trademark (e.g. use of trade name and service mark
on the Internet), such use being subject to (i) whatever rules,
regulations, procedures, conditions and restrictions as Tandy may impose
upon ITC, and (ii) royalties payable in accordance with paragraph 5 hereof.
5. (a) ITC shall pay to Tandy a royalty on Gross Revenue derived from all
retail stores or other facilities of any kind or nature using or deriving
benefit directly or indirectly from the use of service marks or trade names
licensed under Section 1 hereof. Such royalty shall be calculated, on a
consolidated basis with the other members of the ITI-Group, and paid by ITC, in
U.S. dollars to Tandy in Fort Worth, Texas, U.S.A. concurrently with the
submission of the Royalty and Sales Report specified in Section 5(c) at the
following rates:
(i) On ITI-Group Gross Revenue (excluding income from Services)
derived from sales of product purchased through A&A International,
Inc. ("A&A- sourced Products") the rate shall be determined as
follows:
SCHEDULE OF ROYALTIES FOR A&A-SOURCED PRODUCTS
----------------------------------------------
Percent of ITI-Group Gross Revenue ITI-Group
(excluding income from services) Royalty Percentage
From A&A-sourced Products
46.9% or less 1.00%
47.0% - 51.9% 0.80%
52.0% - 56.9% 0.60%
57.0% - 61.9% 0.45%
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<PAGE>
62% or greater 0.35%
By September 30 of each year ITC and the ITI-Group shall calculate its
consolidated revenue from sales of A&A-sourced Products (excluding income from
services) for the most recently completed fiscal year ended June 30 and its
total Gross Revenue (both excluding income from services and including income
from services) from sales of all products and services for the most recently
completed fiscal year ended June 30. The percentage of Gross Revenue
represented by sales of A&A-sourced Products will be calculated by dividing the
total Gross Revenue from sales of A&A-sourced Products (excluding income from
services) by the total Gross Revenue from sales of all Products. The resulting
percentage of Gross Revenue from A&A-sourced Products will be compared to the
percentages listed in the column entitled "Percent of ITI-Group Gross Revenue
from A&A-sourced Products (excluding income from services)" in the Schedule of
-----------
Royalties for A&A-sourced Products set out above in order to determine the
- ----------------------------------
Royalty Percentage applicable to Gross Revenue from sales of A&A-sourced
Products (excluding income from services) for the then-current fiscal year.
EXAMPLE:
FY 1998 Total Gross Revenue
(excluding income from services) = 100
FY 1998 Gross Revenue (excluding income
from services) from A&A-sourced Products = 50
50 [divided by] 100 = 50% of Gross Revenue of ITI-Group as a whole (excluding
income from services) are from sales of A&A-sourced Products.
If 50% is compared to the first column of the Schedule of Royalties for
-------------------------
A&A-sourced Products, then for FY 1998, the Royalty Percentage is 0.80% on
- --------------------
revenue from A&A-sourced Products (excluding income from services), to be
calculated and paid in accordance with this Section 5(a) and Section 5(c) below.
(ii) On Gross Revenue derived from any and all other sources
(including income from services), the rate shall be 1.00% of such Gross
Revenue.
Except where expressly stated otherwise, "Gross Revenue" as used herein
shall mean all revenue of the ITI-Group derived from the sale or lease of
products, and the rendering of services minus any returns or allowances.
(b) In the event of the sale or distribution at a special price, directly
or indirectly, to itself including without limitation any subsidiary of ITC, or
to any person, firm, or corporation related in any manner to ITC or its
officers, directors, or major stockholders, ITC shall pay a royalty with respect
to such sales or distribution based upon the price generally charged to a third
party by ITC in an arm's length transaction. It is hereby expressly understood,
however, that in
-4-
<PAGE>
the event any products are sold by ITC to a subsidiary or division of ITC, or to
another member of the ITI-Group, for the purpose of resale by such subsidiary,
division, or ITI-Group company, then in that event the sale between ITC and such
subsidiary, division or
ITI-Group company, shall not be included in the calculation of Gross Revenue.
(c) On or before the 30th day following the close of each calendar
quarter during the term of this Agreement, ITC and the ITI-Group shall
furnish to Tandy a complete and accurate report, certified to be accurate
by an officer of ITI. Such report shall show ITI-Group consolidated figures
on the following: gross sales, itemized discounts and allowances deducted
from gross sales price, and returns of all products and services sold
during the preceding calendar quarter (all in U.S. dollars calculated using
the average exchange rate for such quarter) for each of Sections 5.a)(i)
and 5.a)(ii). Each such report is to be accompanied by payment in full by
ITC of its portion of the amount of royalties due. Receipt or acceptance by
Tandy of any report furnished pursuant to this Agreement, or of any sums
paid hereunder shall not preclude Tandy from questioning the correctness
thereof at any time. In the event that any inconsistencies or mistakes are
discovered in such reports or payments, they shall be rectified immediately
and the appropriate payment made by ITC or refunded to ITC by Tandy, as the
case may be, within 30 days of discovery.
(d) ITC shall keep, maintain and preserve in ITC's principal place of
business for at least two (2) years following termination or expiration of
the term of this Agreement, or any renewals hereof, complete and accurate
records of accounts including without limitation invoices, production and
receiving records, correspondence, banking and financial and other records
pertaining to the various items required to be shown on the reports to be
submitted by ITC. Such records and accounts shall be available for
inspection and/or audit at any time or times during or after the term of
this Agreement during usual business hours and upon reasonable request by
Tandy or its nominees. ITC agrees not to cause or permit any interference
with Tandy or its nominees in the performance of their duties of inspection
and/or audit.
(e) If any such inspection and/or audit shows that the amount of
royalties paid by ITC to Tandy during the time period covered by such
inspection and/or audit is less than the actual royalties that should have
been paid by ITC by more than five percent (5%) of the amount actually paid
to Tandy, then the reasonable cost of such inspection and/or audit shall be
paid for by ITC.
(f) The exercise by Tandy in whole or in part, at any time or times,
of the right to inspect or audit records and accounts, or of any other
right herein granted, or the acceptance by Tandy of any report, or the
receipt or deposit by Tandy of any payment from ITC shall be without
prejudice to any other rights or remedies of Tandy and shall not stop or
prevent Tandy from
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<PAGE>
thereafter disputing the accuracy of any such report or payment.
6. [RESERVED]
7. On termination of the licenses to one or more trade names, trademarks or
service marks granted under paragraphs 1 and 2, ITC shall cease all use of such
trade names, trademarks and service marks so licensed and shall cause all those
in privity with it to similarly terminate such use. ITC shall also sign or have
signed such documents as may be necessary to formally terminate such use, vest
in Tandy all goodwill associated with such trade names, trademarks and service
marks for which use has terminated, and to cancel any registered user
registrations which may then be in effect or to otherwise rectify the applicable
government records to the extent as may be required by law or by Tandy.
8. All products made or services offered for sale under the licenses to one
or more trade names, trademarks or service marks granted under paragraphs 1 or 2
shall be sold by ITC (a) at retail in Canada through retail stores owned,
managed, or franchised by ITC, or through duly appointed dealers for use with
dealer programs, or through franchisees for use with franchise programs, or (b)
in such other manner as permitted by Tandy.
9. (a) The licenses granted hereunder may be terminated by Tandy on written
notice in the event of the occurrence of any of the following events of default:
(i) ITC materially breaches this Agreement or fails to diligently
enforce the obligations of dealers and franchisees under sublicenses and
when permitted by law, after a request by Tandy, terminate such sublicenses
when compliance by dealers and franchisees with their obligations related
thereto is not seasonably made;
(ii) ITC fails to make payments of sums that may become due hereunder,
or under royalty bearing extensions as provided under paragraph 4;
(iii) ITC fails to perform any other obligation under this License
Agreement;
(iv) an event of default occurs under the Amended and Restated
Merchandise Agreement;
(v) any member of the ITI-Group defaults on any agreement, including
lease agreements, to which any member of the ITI-Group and Tandy are
parties or are in privity with third parties; or
(vi) there is a change of control of ITC, ITI or InterTAN Australia
Ltd. ("ITA") (which entities, together with their subsidiaries, comprise
and are referred to collectively herein as the "ITI-Group").
For purposes of this paragraph a "change of control" means:
(A) The acquisition by any person, corporation, partnership, association,
joint stock company, trust, unincorporated organization, or government,
including a political
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<PAGE>
subdivision thereof, (or any combination thereof acting for the purpose of
acquiring, holding, voting, or disposing of equity securities of ITI) of the
beneficial ownership of at least twenty percent (20%) of the then issued and
outstanding shares of capital stock of ITI carrying voting rights in all
circumstances;
(B) The acquisition of ITC or ITA by any person, corporation, partnership,
association, joint stock company, trust, unincorporated organization, or
government, including a political subdivision thereof, (or any combination
thereof acting for the purpose of acquiring, holding, voting, or disposing of
equity securities of ITC or ITA) unless, as the result of such acquisition, not
more than twenty percent (20%) of the then issued and outstanding capital stock
of ITC or ITA carrying voting rights in all circumstances is acquired by persons
other than ITI;
(C) ITI, ITC or ITA merges or amalgamates with one or more other
corporations unless, as a result of such merger or amalgamation, not more than
twenty percent (20%) of the issued and outstanding shares in the capital stock
of the merged or amalgamated corporation carrying voting rights in all
circumstances are held by persons other than ITI or ITI's shareholders as
existing before the merger or amalgamation;
(D) A change in the composition of the Board of Directors of ITI, ITC or
ITA that results in, on any day, a Board of Directors more than fifty percent
(50%) of the members of which (excluding those members elected or appointed to
replace deceased Directors or replacing any Executive Officer of ITI, ITC or ITA
who was a Director on or prior to January 25, 1999) were not members of the
Board of Directors two (2) years prior to such date; or
(E) Substantially all the assets of ITI, ITC or ITA are sold.
(b) ITC shall have the right to cure certain events of default as
follows:
(i) in the event of the occurrence of an event of default under
paragraph 9(a)(i) through 9(a)(iii) above, ITI-Group shall have the
right to cure such event of default within thirty (30) days from and
after the date of written notice by Tandy of such event of default;
provided, however, that the right to cure any such event of default
shall be limited and shall not exceed a total of three times during
each fiscal year on defaults under 9(a)(i) and 9(a)(iii) and payment
defaults under 9(a)(ii) on monthly amounts due; or once each fiscal
year on payment defaults under 9(a)(ii) on quarterly amounts due;
(ii) in the event of the occurrence of an event of default under
the provisions of paragraph 9(a)(iv) above, ITC shall have the right
to cure such event of default in accordance with the provisions of the
Amended and Restated Merchandise Agreement dated effective as of
January 25, 1999 among the members of the ITI-Group, Tandy, and A&A;
(iii) in the event of the occurrence of an event of default under
paragraph 9(a)(v) above, ITC shall have the right to cure such event
of default in accordance with the provisions, if any, relating to the
cure of an event of default contained in
-7-
<PAGE>
any agreement included within the scope of the provisions of such
paragraph.
(c) ITC shall not have the right to cure an event of default resulting
from a "change of control" of ITI, ITC or ITA, as described in paragraph
9(a)(vi) above.
9.1 In the event any entity of the ITI-Group: (a) becomes insolvent, (b)
initiates or otherwise becomes the subject of a bankruptcy or liquidation
proceeding, or (c) enters into an arrangement for the benefit of creditors,
Tandy may, on written notice and at its option, terminate or partially terminate
or make non-exclusive the licenses herein granted.
10. Nothing in the licenses herein granted shall vest in ITC or any party
operating under a sublicense any title or ownership rights in any trade name,
trademark or service mark owned by Tandy, including but not limited to RADIO
SHACK, TANDY and/or TANDY ELECTRONICS, or any goodwill appurtenant thereto.
Except to the extent as may be required by law to register RADIO SHACK as a
trade name used by ITC, ITC expressly agrees not to register in any commercial
register a trade name that includes "Radio Shack" as a part thereof for
operation of its business or the business of a subsidiary or affiliate nor to
permit a dealer, export dealer, or franchisee to do the same without the written
authorization of Tandy. In the event that RADIO SHACK is registered as a trade
name hereunder, ITC shall promptly on termination of the licenses herein granted
or on termination of use of RADIO SHACK as a trade name, whichever is first,
cancel such registration. In the event such registration is not promptly
canceled by ITC hereunder, ITC does hereby give Tandy the full right and
authority and power of attorney to take such steps as may be required to cancel
said registration.
11. ITC agrees to execute such additional documents and agreements as may
be reasonably necessary to maintain in Tandy all rights, title, and interest in
and to all trade names, trademarks and service marks currently owned by Tandy
and licensed hereunder, and further, to execute such additional documents and
filings including but not limited to registered user agreements, applications
and affidavits that are reasonably necessary to effect the terms and purposes of
this license.
12. ITC agrees not to (a) infringe upon any trade name, trademark or
service mark herein licensed; (b) use without the consent of Tandy any trade
name, trademark or service mark that is a colorable imitation of or is likely to
be confused with any trade name, trademark or service mark licensed hereunder;
(c) use or permit the use of any trade name, trademark or service mark licensed
hereunder except in accordance with the terms of this license or as expressly
authorized pursuant to modifications or extensions agreed to in writing by
Tandy; (d) register under the trademark laws or service mark laws of any
government in its own name or the name of a controlled entity or an entity in
privity with it any trademark or service mark licensed hereunder unless so
-8-
<PAGE>
authorized in writing by Tandy; (e) use or permit a controlled company or those
in privity with it to use or register with any governmental agency as part of
the name of an entity, domestic or foreign, any trademark or service mark herein
licensed, (f) commit any act of passing off which is likely to damage Tandy or
to dilute the value of any trade name, trademark, service mark or goodwill of
Tandy and (g) sell products bearing the trademarks herein licensed except for
products obtained from Tandy or its designated and approved sources until duly
appointed as a registered user, if such registration is required by law.
13. As used in this Agreement, the words, trade name, trademark, service
mark and plurals thereof shall have meanings normally attributed to them under
the laws of the United States.
14. ITC agrees that after the termination or expiration of the licenses
herein granted, it will not directly or indirectly own or operate in Canada
retail facilities under, or use or advertise, any trade name, trademark or
service mark which comprises or includes RADIO SHACK, THE SHACK, SHACK, TANDY,
TANDY ELECTRONICS or any other mark used or owned by Tandy or any colorable
imitations thereof without the express written permission of Tandy.
15. ITC agrees that products sold under any trademark licensed hereunder
and all packaging materials therefore shall be of first-class merchantable
quality, manufactured in accordance with first-class quality standards
prevailing in the industry and consistent with those maintained by Tandy in
connection with comparable products. ITC further agrees that all products sold
under any trademark herein licensed shall be made, sold, and advertised in
conformity with all applicable laws, rules, regulations, and insurance
requirements for the country in which such products are made and sold.
16. (a) ITC shall, on reasonable request from Tandy, make available to
Tandy samples of products which are being sold under any trademark licensed
pursuant to this Agreement together with packaging, promotional and advertising
material. Tandy shall have the right to make a reasonable determination that
such products, packaging, promotional and/or the advertising material conform
with standards of quality as herein required. In the event that Tandy determines
that the standards of quality have not been maintained, it shall notify ITC in
writing and ITC shall within 30 days of notification correct the items which do
not conform to the standards of quality, in accordance with the reasonable
requests of Tandy. In the event that the necessary corrections to such
nonconforming items cannot be effected within the 30-day period, ITC shall
refrain from further manufacture, shipping and/or sale of such nonconforming
items until appropriate compliance with this provision can be effected. Failure
to comply with standards of quality as herein set forth shall be deemed a
material breach of this Agreement.
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<PAGE>
(b) i. No less than 60 calendar days prior to production of any
Products to be sold under any trademark licensed pursuant to paragraph 2,
ITC shall submit to Tandy specification sheets on and samples of such
Products together with packaging, promotional and advertising material ITC
intends to use in connection with such Products.
ii. In the event that ITC is planning to source Products with a
unit cost of goods to ITC of less than US$20.00 to be manufactured in
non-Far East countries ("Locally Sourced Products"), then all time
periods specified in Section 16.b)i. shall be decreased to fifteen
(15) calendar days after receipt by Tandy of the material required by
such Section 16.b)i., and, subject to Section 16.a) and for the
purposes of Section 16.b)ii. only, in the absence of Tandy's written
response to ITC within said 15 day period, ITC may proceed with
production of such Locally Sourced Products. Tandy may, but is not
obligated to, authorize ITC to inspect and test Locally Sourced
Products in strict compliance with standards, methods and procedures
provided in writing to ITC by Tandy, and, in that event, ITC will
allow Tandy access to its testing facilities at any time during normal
business hours without notice for the purpose of verifying such
compliance. All of Tandy's travel costs associated with such
verification shall be borne by Tandy. Tandy may in its sole discretion
raise or lower the unit cost of goods figure above at any time on 30
days prior written notice.
iii. In the event that Tandy thereafter determines that any such
Product does not meet the standards of quality required herein or has
a trademark thereon inconsistent with the license granted in paragraph
2, Tandy shall so notify ITC in writing and ITC shall within 30
calendar days of notification correct the standards of quality and/or
affix a trademark in accordance with the reasonable requests of Tandy.
In the event that the necessary corrections to the quality standards
of or the trademark on such Products cannot be effected within the
30-day period, ITC shall refrain from further manufacture of such
Products until appropriate compliance with this provision can be
effected. Failure to comply with standards of quality and trademarks
as herein set forth shall be deemed a material breach of this
Agreement.
iv. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or
mailed by certified or registered mail, return receipt requested, or
by confirmed telecopy, addressed as follows:
If to Tandy:
Tandy Corporation
100 Throckmorton Street, Ste. 1900
Fort Worth, Texas 76102
Attn: Mr. David Christopher
Fax: (817)415-2647
copy to
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Tandy Corporation
100 Throckmorton, Ste. 1900
Fort Worth, Texas 76102
Attn: Mr. Mark C. Hill
Fax: (817)415-2647
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<PAGE>
If to ITC:
InterTAN, Inc.
The Royal Centre
3300 Highway #7
Suite 904
Concord, Ontario L4K 4M3
Attn: General Counsel
Fax: (905)760-9722
(or to such other address as any party shall specify by written notice so
given), and shall be deemed to have been delivered as of the date so personally
delivered, mailed, or telecopied.
(c) Products sold under any trademark licensed pursuant to
paragraph 2 and which are (1) identical (as to form, fit, function,
quality, specifications and trademark affixed) to Products sold in the
United States by Radio Shack and (2) purchased from the same vendor as
Radio Shack - U.S. shall not be subject to the pre-production
submission requirements of paragraph 16(b). Tandy, however, may
ascertain the compliance of such Products with the license terms
herein by invoking the procedures provided and rights conferred in
paragraph 16(a).
17. In addition to complying with laws relating to packaging, ITC shall if
requested by Tandy, imprint on all packaging and/or advertising material a
legend in a form and substance satisfactory to Tandy to the effect that the
trademarks used on the products are licensed and/or are used with the permission
of Tandy.
18. ITC agrees it will not use any licensed trademark, service mark or
trade name in a manner which would be offensive to good taste, or which would
injure the reputation or goodwill of Tandy, or of the products sold by Tandy.
ITC agrees that it will actively use and promote the trade names, trademarks and
service marks during the term of the license thereof, and that it will not
abandon or take action which may be reasonably construed as an abandonment
thereof. ITC agrees that it will not use the Radio Shack trade name or service
mark in conjunction with any other trade name or service mark during the term of
this Agreement. ITC further agrees that for the term hereof it will not sell
products which are to be sold under trademarks licensed hereunder at any ITC-
owned retail store not bearing the Radio Shack trade name.
19. ITC agrees, upon request, to provide Tandy with the names and addresses
of its supplier of products which are to be sold under trademarks licensed
hereunder. ITC agrees to permit Tandy to inspect the premises owned, managed or
operated by ITC and, to the extent ITC can, shall obtain permission from such
licensees whose licenses are granted after the date hereof, and cooperate in
obtaining permission from suppliers, and from sublicensees existing as of the
date hereof, to allow a representative of Tandy to inspect the premises in which
products bearing licensed trade names, trademarks and service marks are
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used and in which products to be sold under trademarks licensed hereunder are
manufactured, stored, or sold by or for ITC, at reasonable times during normal
business hours, for purposes of enabling Tandy to determine whether or not ITC
is meeting acceptable standards of quality.
20. ITC shall not during or subsequent to the term of any license hereunder
contest Tandy's sole and exclusive ownership rights to any trade names,
trademarks and service marks herein licensed, or raise or cause to be raised any
questions or objections to registrations of same or to their validity. All uses
by ITC and sublicensees of the trademarks, service marks and trade names herein
licensed shall enure to the benefit of Tandy.
21. Tandy shall, at its option, file and diligently pursue applications for
registration of those trademarks which are used on products sold in Radio Shack
facilities in the United States in those countries in which ITC resells such
products as are purchased by it from Tandy. Failure to file and prosecute such
applications, however, shall not be deemed a breach of this Agreement but shall
only give rise to permit ITC to file such application and prosecute them in
Tandy's name, if Tandy fails to do so within 60 days of request by ITC. If Tandy
deems it advisable to seek registration or recordal of any trademark or service
mark herein licensed or used by Tandy on products sold by it or under its
authorization to ITC now or at any time during the term of this Agreement, ITC
agrees to supply Tandy with such material as Tandy may reasonably request for
such purposes and to give Tandy its full cooperation in connection therewith. In
the event that ITC, for any reason, obtains a registration for any trademark or
service mark herein licensed, or any part thereof, the same shall be assigned to
Tandy promptly. In the event that a product upon which a mark licensed hereunder
is sold by ITC but not by Tandy in a particular country and such product is not
sold by Tandy in Radio Shack facilities in the United States, it shall be the
responsibility of ITC to register such mark, at its own expense, in the name of
Tandy and to become a Registered User to the extent so required. Tandy, however,
may on written notice assume responsibility for such proceedings. Tandy shall be
kept fully informed of all such proceedings.
22. This Agreement shall not be deemed to constitute a partnership or joint
venture between the parties or any other relation other than that of licensor
and licensee. ITC shall have no authority to create or incur any liability or
obligation binding on Tandy, and Tandy shall have no liability with respect to
the manufacture or sale of products for which marks are herein licensed, their
containers or other packing, promotion, or advertising of their fitness,
quality, workmanship, character, or compliance with applicable law.
23. In the event ITC learns of a third party use of a mark or name that may
infringe upon or otherwise erode or diminish
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<PAGE>
rights herein licensed, ITC shall promptly inform Tandy in writing.
24. Tandy shall have the sole right to take such measures as its counsel
deems reasonable and advisable under the circumstances to police and enforce its
rights to trademarks herein licensed, and Tandy shall have no liability to ITC
by reason of any action or inaction on Tandy's part, whether such action or
inaction results in the inability of ITC to use any trade names, trademarks, or
service marks herein licensed or to prevent others from using the same.
25. Tandy shall have the initial right and responsibility but at ITC's
entire expense to take such measures as its counsel deems reasonable and
advisable under the circumstances to police and enforce its rights in respect to
the trade names and service marks herein licensed, but Tandy shall have no
liability to ITC by reason of any inaction on Tandy's part with respect to such
enforcement. In the event that Tandy requests in writing, ITC shall, at its own
expense, initiate and diligently pursue any third-party use of a trade name or
service mark that, in the written opinion of Tandy's trademark counsel,
infringes rights granted under paragraph 1. In any proceeding initiated by ITC,
Tandy shall have the right to participate actively in the proceeding, at its own
expense. ITC shall reimburse Tandy within 30 days of receipt of an itemized
invoice therefore for all out-of-pocket expenses incurred hereunder.
26. ITC agrees at its own cost and expense to defend and indemnify and save
Tandy or its affiliates, including without limitation its subsidiaries and their
respective stockholders, directors, officers, employees, and agents, harmless
from and against any and all losses, liabilities, claims, suits, actions,
proceedings, judgments, awards, damages, and expense including without
limitation reasonable attorney fees that they or any of them may incur or
suffer, which arise out of or is claimed by a claimant to arise from a state of
facts which would constitute a breach by ITC of any of the terms of this
Agreement. Tandy agrees to notify ITC promptly of any such claim. Tandy may at
its own expense have counsel of its own choice represent it or its affiliates in
such matter. However, if ITC fails to promptly and diligently defend, Tandy or
its affiliate may, but shall have no obligation to, defend or settle the same
without ITC's consent. ITC agrees to pay the cost of defense and/or settlement
including without limitations reasonable counsel fees and judgments, awards, and
settlements incurred by Tandy or its affiliates related thereto. Notwithstanding
the foregoing, Tandy and its affiliates shall have sole control of such
proceedings and settlements at ITC's expense if (1) the same would adversely
affect a trade name, trademark or service mark herein licensed; or (2) an
adverse result would damage the goodwill of Tandy; or (3) ITC fails to provide
Tandy at its request proof satisfactory to Tandy of the financial responsibility
of ITC or of its insurers for any
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<PAGE>
judgment which may be entered or, in the absence of such proof, with a
satisfactory surety bond to assure such payment.
27. ITC agrees to carry product liability insurance for such coverage and
in such amounts and with such insurers as shall be satisfactory to Tandy so long
as it continues to use trade names, trademarks and service marks herein
licensed. ITC agrees to name Tandy and its affiliates as additional insureds
thereunder with provision that the insurer will not cancel such insurance
without giving Tandy 30-days written notice by certified mail of any
cancellation or of any other expiration of such insurance. ITC shall deliver to
Tandy a certificate of its insurer to the foregoing effect upon the execution of
this Agreement and upon any renewal or substitution of coverage.
28. ITC acknowledges that Tandy has no adequate remedy hereunder at law for
use of trade names, trademarks, or service marks in violation of this Agreement,
and that Tandy shall be entitled to injunctive relief therefore.
29. There are no representations or warranties that use of any trade name,
trademark or service mark herein licensed will not infringe upon rights of
others, or that Tandy's rights therein are sufficient to permit the licensed use
herein set forth. Nor is there any representation or warranty by Tandy that the
trademarks, trade names and service marks are duly registered or, if registered,
will be maintained, or that new applications for registration will be filed.
30. These licenses hereunder and this Agreement may be assigned by Tandy
but may not be assigned by ITC, except with the written permission of Tandy.
31. This Agreement is entered into in and under the laws of the State of
Texas, United States of America, and the terms and the conditions shall be
construed thereunder. The parties to this Agreement expressly agree that the
State of Texas shall have jurisdiction and venue in respect to any dispute
arising under this Agreement. Tandy may, at its election, seek to enforce any
provision of this Agreement or seek to negatively or affirmatively enjoin any
other party to this Agreement from doing, or compelling it to do, any act
prohibited or required by this Agreement, by instituting a lawsuit in any venue
in a court of competent jurisdiction within or without the United States of
America where the other parties to this Agreement, or any of them, are "found"
or are "doing business" as those terms are construed and interpreted under the
laws of the State of Texas.
32. Any provision of this Agreement found to be prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the rest of
this Agreement.
33. This Agreement may not be terminated or modified except
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<PAGE>
by written instruments signed by an authorized officer of each party hereto.
34. ITC agrees to pay Tandy all reasonable costs and expenses including,
but not limited to, reasonable attorneys' fees, expenses and court costs
incurred by Tandy in enforcing any provision of this Agreement.
35. Notwithstanding anything herein to the contrary, Tandy may, in its sole
discretion, waive any breach, default, or event of default arising under the
terms of this Agreement. No failure or delay in exercising any right, power or
remedy under any provision of this Agreement shall operate as a waiver of or
otherwise shall prejudice any of the rights, powers or remedies of Tandy. No
right, power or remedy herein conferred upon Tandy is intended to be exclusive
of any other right, power or remedy, and each and every such right, power or
remedy shall be cumulative of every other right, power or remedy given hereunder
or now or hereafter existing at law or in equity or by statute or otherwise.
IN WITNESS WHEREOF the parties hereto have executed this Agreement to be
effective as of the day and year first above written.
TANDY CORPORATION
/s/Dwain H. Hughes
By: Dwain H. Hughes
Title: Senior Vice President and
Chief Financial Officer
INTERTAN CANADA LTD.
/s/Brian E. Levy
By: Brian E. Levy
Title: Director
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<PAGE>
EXHIBIT 10(c)
AMENDED AND RESTATED
LICENSE AGREEMENT
(Australia and New Zealand)
Agreement dated to be effective as of the 25th day of January, 1999, between
Tandy Corporation ("Tandy") and InterTAN Australia Ltd. ("ITA").
Tandy is a corporation organized under the laws of the State of Delaware,
having its principal place of business at 100 Throckmorton Street, Suite 1800,
Fort Worth, TX, 76102. ITA is an entity organized under the laws of the state of
New South Wales, Australia, having a principal place of business at 91 Kurrajong
Avenue, Mt. Druitt, N.S.W. ITA is a wholly-owned subsidiary of InterTAN, Inc.
("ITI").
Tandy has adopted, used, and owns TANDY ELECTRONICS as a trade name and
service mark in Australia and New Zealand in connection with the operation of
retail store services dealing primarily in electronic products and computers and
distribution of catalogs in Australia and New Zealand. Tandy also owns those
trademarks identified in attached Exhibit 1.
ITA wishes to continue to use TANDY ELECTRONICS as a trade name and service
mark for the operation of ITA owned (or managed) or ITA franchised retail stores
in Australia and New Zealand dealing primarily in electronic products and
related services including catalog, mail order and repair services in Australia
and New Zealand. ITA also wishes to make or to have made certain products under
certain trademarks identified in Exhibit 1.
Now, therefore, it is agreed as follows:
1. Tandy grants an exclusive nonassignable license to ITA, provided ITA is
duly appointed a registered user if so required by applicable law, to use, and
to grant sub-licenses to others as herein provided, to use TANDY ELECTRONICS as
a trade name and service mark in Australia and New Zealand in connection with
the operation of ITA owned or ITA franchised retail stores dealing primarily in
electronic products and related services including catalog, mail order and
repair services rendered in such stores in Australia and New Zealand, such use
being subject to royalties payable in accordance with paragraph 5 hereof.
2. Tandy grants to ITA a nonexclusive, nonassignable, royalty-free license
under all trademarks owned by Tandy and used currently (or formerly) in the
United States by Radio Shack, a division of Tandy, and which are identified in
Exhibits 1 (Australia) and 1(a) (New Zealand) attached to this Agreement, for
use in Australia and New Zealand in connection with the advertising and sale of
products purchased through A&A International, Inc., a wholly-owned subsidiary of
Tandy ("A&A"),
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<PAGE>
and on (1) those products on which such trademark is used currently (or
formerly) in the United States by Radio Shack which ITA does not purchase
through A&A and which, as of the date hereof, ITA makes or has made for it by
anyone other than Tandy or one of its subsidiaries, all as identified in Exhibit
2 attached to this Agreement, and which shall be sold only in accordance with
the provisions of this Agreement in Australia and New Zealand or (2) such other
products as Tandy may approve (collectively the "Products"). The license granted
under this paragraph 2 shall be limited to use of the trademarks on and
advertising of the Products. All flyers, catalogs or other printed materials
used to advertise trademarked products must contain a notice identifying by name
the Tandy trademarks used therein (as identified in Exhibits 1 and 1(a)) and
must explicitly state that these trademarks are owned by Tandy Corporation and
are used under license. Tandy agrees that it will be sufficient for such notice
to identify Tandy trademarks with an asterisk, together with an explanatory note
that the asterisk identifies a trademark of Tandy which is used under license.
3. The licenses granted in paragraphs 1 and 2 shall include the right to
grant sublicenses, subject to the terms of this Agreement, only to (a) dealers
for use with dealer programs in Australia and New Zealand, (b) franchisees for
use with franchise programs in Australia and New Zealand, and (c) export
dealers, as the case may be, located in New Zealand, to resell products on which
the trademarks are used. All sublicenses shall conform with the terms of this
license and shall be subject to similar terms and conditions (subject to the
last sentence of this paragraph 3) as the dealer and franchise agreements
heretofore in use by Tandy, as exemplified by the attached Exhibits 3(a) and
3(b). Any provisions in any agreement pertaining to Tandy not in conformity with
Exhibits 3(a) and 3(b), and any changes to provisions pertaining to Tandy in
previously approved agreements must be approved in writing by Tandy prior to
their use by ITA. No sublicense shall be granted unless Tandy's rights to the
trademarks and service marks sublicensed are secured under applicable law,
pursuant to appropriate filings of applications for registrations and the filing
and procuring of appropriate approvals for such use including, but not limited
to, registered user registrations, where applicable. All dealer, export dealer,
and franchise agreements entered into or received after the date hereof shall
disclose that Tandy is the owner of the trade name and service mark being
sublicensed, as well as all trademarks identified in Exhibits 1 and 1(a), and,
to the extent ITA can, shall give Tandy the right to inspect the premises of
each dealer, export dealer, and franchisee to assure the quality of service and
merchandise. At the end of each fiscal quarter, ITA will provide Tandy with a
list of its dealers and export dealers for quality control purposes.
4. (a) The initial term of this Agreement shall be from
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November 3, 1993 to June 30, 2006. However, beginning July 1, 1997 and
continuing annually an additional year shall be automatically added to the
initial term each July 1 thereafter until July 1, 2000 in the manner set out in
the example below:
EXAMPLE: Date: Term Extended To:
---- ----------------
July 1, 1997 June 30, 2007
July 1, 1998 June 30, 2008
July 1, 1999 June 30, 2009
July 1, 2000 June 30, 2010
July 1, 2001 June 30, 2010 (Term not extended
automatically)
Either party may terminate this Agreement at any time without cause during the
initial term or any extension thereof set out above by providing the other party
five (5) years prior written notice of termination. Such termination shall be
effective on June 30 next following the expiration of five (5) years from the
date appearing on the written notice of termination. Any and all of the
foregoing notwithstanding, this Agreement shall automatically terminate on the
termination of the Amended and Restated Merchandise Agreement between, inter
alia, Tandy and ITA, dated effective as of January 25, 1999. On or before June
30, 2005, the parties agree to discuss further extension of this Agreement,
however, such discussions shall not imply any duty whatsoever on the part of
Tandy to do anything beyond discussing the matter.
(b) Any extensions of the licenses herein granted beyond the terms set
forth in paragraph 4(a) of this Agreement shall be at the sole discretion of
Tandy. It is hereby agreed that any such extensions that are granted by Tandy
will include payment of royalties from ITA to Tandy at a rate which shall be
negotiated and agreed by the parties in good faith prior to any such extension.
(c) Tandy may permit other uses by ITA of the above-licensed trade name,
service mark and trademarks (e.g. use of trade name and service mark on the
Internet), such use being subject to (i) whatever rules, regulations,
procedures, conditions and restrictions as Tandy may impose upon ITA, and (ii)
royalties payable in accordance with paragraph 5 hereof.
5. (a) ITA shall pay to Tandy a royalty on Gross Revenue derived from all
retail stores or other facilities of any kind or nature using or deriving
benefit directly or indirectly from the use of service marks or trade names
licensed under Paragraph 1 hereof. Such royalty shall be calculated, on a
consolidated basis with the other members of the ITI-Group, and paid by ITA, in
U.S. dollars to Tandy in Fort Worth, Texas, U.S.A. concurrently with the
submission of the Royalty and Sales Report specified in Section 5(c) at the
following rates:
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(i) On ITI-Group Gross Revenue (excluding income from services)
derived from sales of product purchased through A&A International,
Inc. ("A&A-sourced Products") the rate shall be determined as follows:
Schedule of Royalties for A&A-sourced Products
----------------------------------------------
Percent of ITI-Group Gross Revenue ITI-Group
(excluding income from services) Royalty Percentage
From A&A-sourced Products
46.9% or less 1.00%
47.0% - 51.9% 0.80%
52.0% - 56.9% 0.60%
57.0% - 61.9% 0.45%
62% or greater 0.35%
By September 30 of each year ITA and the ITI-Group shall calculate its
consolidated revenue from sales of A&A-sourced Products (excluding income from
services) for the most recently completed fiscal year ended June 30 and its
total Gross Revenue (both excluding income from services and including income
from services) from sales of all products and services for the most recently
completed fiscal year ended June 30. The percentage of Gross Revenue
represented by sales of A&A-sourced Products will be calculated by dividing the
total Gross Revenue from sales of A&A-sourced Products (excluding income from
services) by the total Gross Revenue from sales of all Products. The resulting
percentage of Gross Revenue from A&A-sourced Products will be compared to the
percentages listed in the column entitled "Percent of ITI-Group Gross Revenue
from A&A-sourced Products (excluding income from services)" in the Schedule of
-----------
Royalties for A&A-sourced Products set out above in order to determine the
- ----------------------------------
Royalty Percentage applicable to Gross Revenue from sales of A&A-sourced
Products (excluding income from services) for the then-current fiscal year.
EXAMPLE:
FY 1998 Total Gross Revenue
(excluding income from services) = 100
FY 1998 Gross Revenue (excluding income from services) from A&A-sourced
Products = 50
50 [divided by] 100 = 50% of Gross Revenue of ITI-Group as a whole (excluding
income from services) are from sales of A&A-sourced Products.
If 50% is compared to the first column of the Schedule of Royalties for A&A-
-----------------------------
sourced Products, then for FY 1998, the Royalty Percentage is 0.80% on revenue
- -----------------
from A&A-sourced Products
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<PAGE>
(excluding income from services), to be calculated and paid in accordance with
this Section 5(a) and Section 5(c) below.
(ii) On Gross Revenue derived from any and all other sources
(including income from services), the rate shall be 1.00% of such
Gross Revenue.
Except where expressly stated otherwise, "Gross Revenue" as used herein
shall mean all revenue of the ITI-Group derived from the sale or lease of
products, and the rendering of services minus any returns or allowances.
(b) In the event of the sale or distribution at a special price, directly
or indirectly, to itself including without limitation any subsidiary of ITA, or
to any person, firm, or corporation related in any manner to ITA or its
officers, directors, or major stockholders, ITA shall pay a royalty with respect
to such sales or distribution based upon the price generally charged to a third
party by ITA in an arm's length transaction. It is hereby expressly understood,
however, that in the event any products are sold by ITA to a subsidiary or
division of ITA, or to another member of the ITI-Group (as hereafter defined),
for the purpose of resale by such subsidiary, division, or ITI-Group company,
then in that event the sale between ITA and such subsidiary or division or
ITI-Group company shall not be included in the calculation of Gross Revenue.
(c) On or before the 30th day following the close of each calendar quarter
during the term of this Agreement, ITA and the ITI-Group shall furnish to Tandy
a complete and accurate report, certified to be accurate by an officer of ITI.
Such report shall show ITI-Group consolidated figures on the following: gross
sales, itemized discounts and allowances deducted from gross sales price, and
returns of all products and services sold during the preceding calendar quarter
(all in U.S. dollars, calculated using the average exchange rate for such
quarter) for each of Sections 5.a)(i) and 5.a)(ii). Each such report is to be
accompanied by payment in full by ITA of its portion of the amount of royalties
due. Receipt or acceptance by Tandy of any report furnished pursuant to this
Agreement, or of any sums paid hereunder shall not preclude Tandy from
questioning the correctness thereof at any time. In the event that any
inconsistencies or mistakes are discovered in such reports or payments, they
shall be rectified immediately and the appropriate payment made by ITA or
refunded to ITA by Tandy, as the case may be, within 30 days of discovery.
(d) ITA shall keep, maintain and preserve in ITA's principal place of
business for at least seven (7) years following termination or expiration of the
term of this Agreement, or any renewals hereof, complete and accurate records of
accounts including without limitation invoices, production and receiving
records, correspondence, banking and financial and other records
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<PAGE>
pertaining to the various items required to be shown on the reports to be
submitted by ITA. Such records and accounts shall be available for inspection
and/or audit at any time or times during or after the term of this Agreement
during usual business hours and upon reasonable request by Tandy or its
nominees. ITA agrees not to cause or permit any interference with Tandy or its
nominees in the performance of their duties of inspection and/or audit.
(e) If any such inspection and/or audit shows that the amount of royalties
paid by ITA to Tandy during the time period covered by such inspection and/or
audit is less than the actual royalties that should have been paid by ITA by
more than five percent (5%) of the amount actually paid to Tandy, then the
reasonable cost of such inspection and/or audit shall be paid for by ITA.
(f) The exercise by Tandy in whole or in part, at any time or times, of the
right to inspect or audit records and accounts, or of any other right herein
granted, or the acceptance by Tandy of any report, or the receipt or deposit by
Tandy of any payment from ITA shall be without prejudice to any other rights or
remedies of Tandy and shall not stop or prevent Tandy from thereafter disputing
the accuracy of any such report or payment.
6. [RESERVED]
7. On termination of the licenses to one or more trade names, trademarks or
service marks granted under paragraphs 1 and 2, ITA shall cease all use of such
trade names, trademarks and service marks so licensed and shall cause all those
in privity with it to similarly terminate such use. ITA shall also sign or have
signed such documents as may be necessary to formally terminate such use, vest
in Tandy all goodwill associated with such trade names, trademarks and service
marks for which use has terminated, and to cancel any registered user
registrations which may then be in effect or to otherwise rectify the applicable
government records to the extent as may be required by law or by Tandy.
8. All products made or services offered for sale under the licenses to one
or more trade names, trademarks or service marks granted under paragraphs 1 or 2
shall be sold by ITA (a) at retail in Australia and New Zealand through retail
stores owned, managed, or franchised by ITA, or through duly appointed dealers
for use with dealer programs, or through franchisees for use with franchise
programs, (b) through export dealers, as the case may be, in New Zealand, or (c)
in such other manner as permitted by Tandy.
9. (a) The licenses granted hereunder may be terminated by Tandy on written
notice in the event of the occurrence of any of the following events of default:
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(i) ITA materially breaches this Agreement or fails to diligently
enforce the obligations of dealers and franchisees under sublicenses
and when permitted by law, after a request by Tandy, terminate such
sublicenses when compliance by dealers and franchisees with their
obligations related thereto is not seasonably made;
(ii) ITA fails to make payments of sums that may become due
hereunder, or under royalty bearing extensions as provided under
paragraph 4;
(iii) ITA fails to perform any other obligation under this
License Agreement;
(iv) an event of default occurs under the Amended and Restated
Merchandise Agreement;
(v) any member of the ITI-Group defaults on any agreement,
including lease agreements, to which any member of the ITI-Group and
Tandy are parties or are in privity with third parties; or
(vi) there is a change of control of ITA, ITI, or InterTAN Canada
Ltd. ("ITC") (which entities, together with their subsidiaries,
comprise and are referred to collectively herein as, the "ITI-Group").
For purposes of this paragraph a "change of control" means:
(A) The acquisition by any person, corporation, partnership, association,
joint stock company, trust, unincorporated organization, or government,
including a political subdivision thereof, (or any combination thereof acting
for the purpose of acquiring, holding, voting, or disposing of equity securities
of ITI) of the beneficial ownership of at least twenty percent (20%) of the then
issued and outstanding shares of capital stock of ITI carrying voting rights in
all circumstances;
(B) The acquisition of ITA or ITC by any person, corporation, partnership,
association, joint stock company, trust, unincorporated organization, or
government, including a political subdivision thereof, (or any combination
thereof acting for the purpose of acquiring, holding, voting, or disposing of
equity securities of ITA or ITC) unless, as the result of such acquisition, not
more than twenty percent (20%) of the then issued and outstanding capital stock
of ITA or ITC carrying voting rights in all circumstances is acquired by persons
other than ITI;
(C) ITA, ITC or ITI merges or amalgamates with one or more other
corporations unless, as a result of such merger or amalgamation, not more than
twenty percent (20%) of the issued and outstanding shares in the capital stock
of the merged or amalgamated corporation carrying voting rights in all
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circumstances are held by persons other than ITI or ITI's shareholders as
existing before the merger or amalgamation;
(D) A change in the composition of the Board of Directors of ITI, ITA or
ITC that results in, on any day, a Board of Directors more than fifty percent
(50%) of the members of which (excluding those members elected or appointed to
replace deceased Directors or replacing any Executive Officer of ITI, ITA or ITC
who was a Director on or prior to January 25, 1999) were not members of the
Board of Directors two (2) years prior to such date; or
(E) Substantially all the assets of ITI, ITA or ITC are sold.
(b) ITA shall have the right to cure certain events of default as
follows:
(i) in the event of the occurrence of an event of default under
paragraph 9(a)(i) through 9(a)(iii) above, ITI-Group shall have the
right to cure such event of default within thirty (30) days from and
after the date of written notice by Tandy of such event of default;
provided, however, that the right to cure any such event of default
shall be limited and shall not exceed a total of three times during
each fiscal year on defaults under 9(a)(i) and 9(a)(iii) and payment
defaults under 9(a)(ii) on monthly amounts due; or once each fiscal
year on payment defaults under 9(a)(ii) on quarterly amounts due;
(ii) in the event of the occurrence of an event of default under
the provisions of paragraph 9(a)(iv) above, ITA shall have the right
to cure such event of default in accordance with the provisions of the
Amended and Restated Merchandise Agreement dated effective as of
January 25, 1999) among the members of the ITI-Group, Tandy, and A&A;
(iii) in the event of the occurrence of an event of default under
paragraph 9(a)(v) above, ITA shall have the right to cure such event
of default in accordance with the provisions, if any, relating to the
cure of an event of default contained in any agreement included within
the scope of the provisions of such paragraph.
(c) ITA shall not have the right to cure an event of default resulting
from a "change of control" of ITI, ITA or ITC, as described in paragraph
9(a)(vi) above.
9.1 In the event any entity of the ITI-Group: (a) becomes insolvent, (b)
initiates or otherwise becomes the subject of a bankruptcy or liquidation
proceeding, or (c) enters into an arrangement for the benefit of creditors,
Tandy may, on written notice and at its option, terminate or partially terminate
or make non-exclusive the licenses herein granted.
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<PAGE>
10. Nothing in the licenses herein granted shall vest in ITA or any party
operating under a sublicense any title or ownership rights in any trade name,
trademark or service mark owned by Tandy, including but not limited to RADIO
SHACK, TANDY and/or TANDY ELECTRONICS, or any goodwill appurtenant thereto.
Except to the extent as may be required by law to register "TANDY ELECTRONICS"
as a trade name used by ITA, ITA expressly agrees not to register in any
commercial register a trade name that includes "TANDY ELECTRONICS" as a part
thereof for operation of its business or the business of a subsidiary or
affiliate nor to permit a dealer, export dealer, or franchisee to do the same
without the written authorization of Tandy. In the event that "TANDY
ELECTRONICS" is registered as a trade name hereunder, ITA shall promptly on
termination of the licenses herein granted or on termination of use of "TANDY
ELECTRONICS" as a trade name, whichever is first, cancel such registration. In
the event such registration is not promptly canceled by ITA hereunder, ITA does
hereby give Tandy the full right and authority and power of attorney to take
such steps as may be required to cancel said registration.
11. ITA agrees to execute such additional documents and agreements as may
be reasonably necessary to maintain in Tandy all rights, title, and interest in
and to all trade names, trademarks and service marks currently owned by Tandy
and licensed hereunder, and further, to execute such additional documents and
filings including but not limited to registered user agreements, applications
and affidavits that are reasonably necessary to effect the terms and purposes of
this license.
12. ITA agrees not to (a) infringe upon any trade name, trademark or
service mark herein licensed; (b) use without the consent of Tandy any trade
name, trademark or service mark that is a colorable imitation of or is likely to
be confused with any trade name, trademark or service mark licensed hereunder;
(c) use or permit the use of any trade name, trademark or service mark licensed
hereunder except in accordance with the terms of this license or as expressly
authorized pursuant to modifications or extensions agreed to in writing by
Tandy; (d) register under the trademark laws or service mark laws of any
government in its own name or the name of a controlled entity or an entity in
privity with it any trademark or service mark licensed hereunder unless so
authorized in writing by Tandy; (e) use or permit a subsidiary or those in
privity with it to use or register with any governmental agency as part of the
name of an entity, domestic or foreign, any trademark or service mark herein
licensed, (f) commit any act of passing off which is likely to damage Tandy or
to dilute the value of any trade name, trademark, service mark or goodwill of
Tandy and (g) sell products bearing the trademarks herein licensed except for
products obtained from Tandy or its designated and approved sources until duly
appointed as a registered user, if such registration is required by law.
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13. As used in this Agreement, the words, trade name, trademark, service
mark and plurals thereof shall have meanings normally attributed to them under
the laws of the United States.
14. ITA agrees that after the termination or expiration of the licenses
herein granted, it will not directly or indirectly own or operate in Australia
and New Zealand retail facilities under, or use or advertise, any trade name,
trademark or service mark which comprises or includes RADIO SHACK, THE SHACK,
SHACK, TANDY, TANDY ELECTRONICS or any other mark used or owned by Tandy or any
colorable imitations thereof without the express written permission of Tandy.
15. ITA agrees that products sold under any trademark licensed hereunder
and all packaging materials therefore shall be of first-class merchantable
quality, manufactured in accordance with first-class quality standards
prevailing in the industry and consistent with those maintained by Tandy in
connection with comparable products. ITA further agrees that all products sold
under any trademark herein licensed shall be made, sold, and advertised in
conformity with all applicable laws, rules, regulations, and insurance
requirements for the country in which such products are made and sold.
16. (a) ITA shall, on reasonable request from Tandy, make available to
Tandy samples of products which are being sold under any trademark licensed
pursuant to this Agreement together with packaging, promotional and advertising
material. Tandy shall have the right to make a reasonable determination that
such products, packaging, promotional and/or the advertising material conform
with standards of quality as herein required. In the event that Tandy determines
that the standards of quality have not been maintained, it shall notify ITA in
writing and ITA shall within 30 days of notification correct the items which do
not conform to the standards of quality in accordance with the reasonable
requests of Tandy. In the event that the necessary corrections to such
nonconforming items cannot be effected within the 30-day period, ITA shall
refrain from further manufacture, shipping and/or sale of such nonconforming
items until appropriate compliance with this provision can be effected. Failure
to comply with standards of quality as herein set forth shall be deemed a
material breach of this Agreement.
(b) i. No less than 60 calendar days prior to production of any
Products to be sold under any trademark licensed pursuant to paragraph 2, ITA
shall submit to Tandy specification sheets on and samples of such Products
together with packaging, promotional and advertising material ITA intends to use
in connection with such Products.
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<PAGE>
ii. In the event that ITA is planning to source Products with a
unit cost of goods to ITA of less than US$20.00 to be manufactured in
non-Far-East countries ("Locally Sourced Products"), then all time
periods specified in Section 16.b)i. shall be decreased to fifteen
(15) calendar days after receipt by Tandy of the materials required by
such Section 16.b)i., and, subject to Section 16.a) and for the
purposes of this Section 16.b)ii. only, in the absence of Tandy's
written response to ITA within said 15 day period, ITA may proceed
with production of such locally sourced Products. Tandy may, but is
not obligated to, authorize ITA to inspect and test locally sourced
Products in strict compliance with standards, methods and procedures
provided in writing to ITA by Tandy, and, in that event, ITA will
allow Tandy access to its testing facilities at any time during normal
business hours without notice for the purpose of verifying such
compliance. All of Tandy's travel costs associated with such
verification shall be borne by Tandy. Tandy may in its sole discretion
raise or lower the unit cost of goods figure above at any time on 30
days prior written notice.
iii. In the event that Tandy thereafter determines that any such
Product does not meet the standards of quality required herein or has
a trademark thereon inconsistent with the license granted in paragraph
2, Tandy shall so notify ITA in writing and ITA shall within 30
calendar days of notification correct the standards of quality and/or
affix a trademark in accordance with the reasonable requests of Tandy.
In the event that the necessary corrections to the quality standards
of or the trademark on such Products cannot be effected within the
30-day period, ITA shall refrain from further manufacture of such
products until appropriate compliance with this provision can be
effected. Failure to comply with standards of quality and trademarks
as herein set forth shall be deemed a material breach of this
Agreement.
iv. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or
mailed by certified or registered mail, return receipt requested, or
by confirmed telecopy, addressed as follows:
If to Tandy:
Tandy Corporation
100 Throckmorton Street, Ste. 1900
Fort Worth, Texas 76102
Attn: Mr. David Christopher
Fax: (817)415-2647
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<PAGE>
copy to
Tandy Corporation
100 Throckmorton Street, Ste. 1900
Fort Worth, Texas 76102
Attn: Mr. Mark C. Hill
Fax: (817)415-2647
If to ITA:
InterTAN, Inc.
The Royal Centre
3300 Highway #7
Suite 904
Concord, Ontario L4K 4M3
Attn: General Counsel
Fax: (905)760-9722
(or to such other address as any party shall specify by written notice so
given), and shall be deemed to have been delivered as of the date so personally
delivered, mailed, or telecopied.
(c) Products sold under any trademark licensed pursuant to
paragraph 2 and which are (1) identical (as to form, fit, function,
quality, specifications and trademark affixed) to Products sold in the
United States by Radio Shack and (2) purchased from the same vendor as
Radio Shack - U.S. shall not be subject to the pre-production
submission requirements of paragraph 16(b). Tandy, however, may
ascertain the compliance of such Products with the license terms
herein by invoking the procedures provided and rights conferred in
paragraph 16(a).
17. In addition to complying with laws relating to packaging, ITA shall,
imprint on all packaging and/or advertising material a legend in a form and
substance satisfactory to Tandy to the effect that the trademarks used on the
products are licensed and/or are used with the permission of Tandy.
18. ITA agrees it will not use any licensed trademark, service mark or
trade name in a manner which would be offensive to good taste, or which would
injure the reputation or goodwill of Tandy, or of the products sold by Tandy.
ITA agrees that it will actively use and promote the trade names, trademarks and
service marks during the term of the license thereof, and that it will not
abandon or take action which may be reasonably construed as an abandonment
thereof. ITA agrees that it will not use the TANDY ELECTRONICS trade name or
service mark in conjunction with any other trade name or service mark during the
term of this Agreement. ITA further agrees that for the term hereof it will not
sell products which are to be sold under trademarks licensed hereunder at any
ITA-owned retail store not bearing the TANDY ELECTRONICS trade name.
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<PAGE>
19. ITA agrees, upon request by Tandy, to provide it with the names and
addresses of its supplier of products which are to be sold under trademarks
licensed hereunder. ITA agrees to permit Tandy to inspect the premises owned,
managed, or and operated by ITA and, to the extent ITA can, shall obtain
permission from such licensees whose licenses are granted after the date hereof,
and cooperate in obtaining permission from suppliers, and from sublicensees
existing as of the date hereof, to allow a representative of Tandy to inspect
the premises in which products bearing licensed trade names, trademarks and
service marks are used and in which products to be sold under trademarks
licensed hereunder are manufactured, stored, or sold by or for ITA, at
reasonable times during normal business hours, for purposes of enabling Tandy to
determine whether or not ITA is meeting acceptable standards of quality.
20. ITA shall not during or subsequent to the term of any license hereunder
contest Tandy's sole and exclusive ownership rights to any trade names,
trademarks and service marks herein licensed, or raise or cause to be raised any
questions or objections to registrations of same or to their validity. All uses
by ITA and sublicensees of the trademarks, service marks and trade names herein
licensed shall enure to the benefit of Tandy.
21. Tandy shall, at its option, file and diligently pursue applications for
registration of those trademarks which are used on products sold in Radio Shack
facilities in the United States in those countries in which ITA resells such
products as are purchased by it from Tandy. Failure to file and prosecute such
applications, however, shall not be deemed a breach of this Agreement but shall
only give rise to permit ITA to file such application and prosecute them in
Tandy's name, if Tandy fails to do so within 60 days of request by ITA. If Tandy
deems it advisable to seek registration or recordal of any trademark or service
mark herein licensed or used by Tandy on products sold by it or under its
authorization to ITA now or at any time during the term of this Agreement, ITA
agrees to supply Tandy with such material as Tandy may reasonably request for
such purposes and to give Tandy its full cooperation in connection therewith. In
the event that ITA, for any reason, obtains a registration for any trademark or
service mark herein licensed, or any part thereof, the same shall be assigned to
Tandy promptly. In the event that a product upon which a mark licensed hereunder
is sold by ITA but not by Tandy in a particular country and such product is not
sold by Tandy in Radio Shack facilities in the United States, it shall be the
responsibility of ITA to register such mark, at its own expense, in the name of
Tandy and to become a Registered User to the extent so required. Tandy, however,
may on written notice assume responsibility for such proceedings. Tandy shall be
kept fully informed of all such proceedings. For purposes of prosecuting such
applications, ITA shall be deemed to be acting as agent of Tandy.
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<PAGE>
22. This Agreement shall not be deemed to constitute a partnership or joint
venture between the parties or any other relation other than that of licensor
and licensee. ITA shall have no authority to create or incur any liability or
obligation binding on Tandy, and unless prohibited by law Tandy shall have no
liability with respect to the manufacture or sale of products for which marks
are herein licensed, their containers or other packing, promotion, or
advertising of their fitness, quality, workmanship, character, or compliance
with applicable law.
23. In the event ITA learns of a third party use of a mark or name that may
infringe upon or otherwise erode or diminish rights herein licensed, ITA shall
promptly inform Tandy in writing.
24. Tandy shall have the sole right to take such measures as its counsel
deems reasonable and advisable under the circumstances to police and enforce its
rights to trademarks herein licensed, and Tandy shall have no liability to ITA
by reason of any action or inaction on Tandy's part, whether such action or
inaction results in the inability of ITA to use any trade names, trademarks, or
service marks herein licensed or to prevent others from using the same.
25. Tandy shall have the initial right and responsibility but at ITA's
entire expense to take such measures as its counsel deems reasonable and
advisable under the circumstances to police and enforce its rights in respect to
the trade names and service marks herein licensed, but Tandy shall have no
liability to ITA by reason of any inaction on Tandy's part with respect to such
enforcement. In the event that Tandy requests in writing, ITA shall, at its own
expense, initiate and diligently pursue any third-party use of a trade name or
service mark that, in the written opinion of Tandy's trademark counsel,
infringes rights granted under paragraph 1. In any proceeding initiated by ITA,
Tandy shall have the right to participate actively in the proceeding, at its own
expense. ITA shall reimburse Tandy within 30 days of receipt of an itemized
invoice therefore for all out-of-pocket expenses incurred hereunder.
26. ITA agrees at its own cost and expense to defend and indemnify and save
Tandy or its affiliates, including without limitation its subsidiaries and their
respective stockholders, directors, officers, employees, and agents, harmless
from and against any and all losses, liabilities, claims, suits, actions,
proceedings, judgments, awards, damages, and expense including without
limitation reasonable attorney fees that they or any of them may incur or
suffer, which arise out of or is claimed by a claimant to arise from a state of
facts which would constitute a breach by ITA of any of the terms of this
Agreement. Tandy agrees to notify ITA promptly of any such claim. Tandy may at
its own expense have counsel of its own choice represent it or its
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affiliates in such matter. However, if ITA fails to promptly and diligently
defend, Tandy or its affiliate may, but shall have no obligation to, defend or
settle the same without ITA's consent. ITA agrees to pay the cost of defense
and/or settlement including without limitations reasonable counsel fees and
judgments, awards, and settlements incurred by Tandy or its affiliates related
thereto. Notwithstanding the foregoing, Tandy and its affiliates shall have sole
control of such proceedings and settlements at ITA's expense if (1) the same
would adversely affect a trade name, trademark or service mark herein licensed;
or (2) an adverse result would damage the goodwill of Tandy; or (3) ITA fails to
provide Tandy at its request proof satisfactory to Tandy of the financial
responsibility of ITA or of its insurers for any judgment which may be entered
or, in the absence of such proof, with a satisfactory surety bond to assure such
payment.
27. ITA agrees to carry product liability insurance for such coverage and
in such amounts and with such insurers as shall be satisfactory to Tandy so long
as it continues to use trade names, trademarks and service marks herein
licensed. ITA agrees to name Tandy and its affiliates as additional insureds
thereunder with provision that the insurer will not cancel such insurance
without giving Tandy 30-days written notice by certified mail of any
cancellation or of any other expiration of such insurance. ITA shall deliver to
Tandy a certificate of its insurer to the foregoing effect upon the execution of
this Agreement and upon any renewal or substitution of coverage.
28. ITA acknowledges that Tandy has no adequate remedy hereunder at law for
use of trade names, trademarks, or service marks in violation of this Agreement,
and that Tandy shall be entitled to injunctive relief therefore.
29. There are no representations or warranties that use of any trade name,
trademark or service mark herein licensed will not infringe upon rights of
others, or that Tandy's rights therein are sufficient to permit the licensed use
herein set forth. Nor is there any representation or warranty by Tandy that the
trademarks, trade names and service marks are duly registered or, if registered,
I will be maintained, or that new applications for registration will be filed.
30. These licenses hereunder and this Agreement may be assigned by Tandy
but may not be assigned by ITA, except with the written permission of Tandy.
31. This Agreement is entered into in and under the laws of the State of
Texas, United States of America, and the terms and the conditions shall be
construed thereunder. The parties to this Agreement expressly agree that the
State of Texas shall have jurisdiction and venue in respect to any dispute
arising under this Agreement. Tandy may, at its election, seek to enforce any
provision of this Agreement or seek to negatively or affirmatively
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enjoin any other party to this Agreement from doing, or compelling it to do, any
act prohibited or required by this Agreement, by instituting a lawsuit in any
venue in a court of competent jurisdiction within or without the United States
of America where the other parties to this Agreement, or any of them, are
"found" or are "doing business" as those terms are construed and interpreted
under the laws of the State of Texas.
32. Any provision of this Agreement found to be prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the rest of
this Agreement.
33. This Agreement may not be varied or modified except by written
instruments signed by an authorized officer of each party hereto.
34. ITA agrees to pay Tandy all reasonable costs and expenses including,
but not limited to, reasonable attorneys' fees, expenses and court costs
incurred by Tandy in enforcing any provision of this Agreement.
35. Notwithstanding anything herein to the contrary, Tandy may, in its sole
discretion, waive any breach, default, or event of default arising under the
terms of this Agreement. No failure or delay in exercising any right, power or
remedy under any provision of this Agreement shall operate as a waiver of or
otherwise shall prejudice any of the rights, powers or remedies of Tandy. No
right, power or remedy herein conferred upon Tandy is intended to be exclusive
of any other right, power or remedy, and each and every such right, power or
remedy shall be cumulative of every other right, power or remedy given hereunder
or now or hereafter existing at law or in equity or by statute or otherwise.
IN WITNESS WHEREOF the parties hereto have executed this Agreement
to be effective as of the day and year first above written.
TANDY CORPORATION
/s/Dwain H. Hughes
By: Dwain H. Hughes
Title: Senior Vice President and
Chief Financial Officer
INTERTAN AUSTRALIA LTD.
/s/Brian E. Levy
By: Brian E. Levy
Title: President
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EXHIBIT 10(d)
InterTAN, Inc.
NON-EMPLOYEE DIRECTOR
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Employee Director Non-Qualified Stock Option Agreement, made as of
the 7th day of June, 1999 by and between InterTAN, Inc., a Delaware corporation
(the "Company"), and ___________________, a director of the Company
("Director");
W I T N E S S E T H:
- - - - - - - - - -
Whereas, subject to and upon the terms and conditions of this Agreement,
the Board of Directors of the Company has determined that it is desirable to
grant an option to Director, who currently serves as a director of the Company
but is not an employee of the Company or any of its affiliates;
Now, Therefore, for good and valuable consideration, it is agreed as
follows:
1. Grant of Option; Vesting. The Company hereby grants to Director the
option to purchase, as hereinafter set forth, 20,000 shares of common stock of
the Company at the exercise price of $15.75 per share. Except as otherwise
expressly provided in this Agreement, the option will vest and become
exercisable in four equal components of 5,000 shares on each of the following
dates: (i) the date of the general meeting of the Company's stockholders next
following the date of this Agreement that is held in calendar year 1999,
provided Director is still a director of the Company on such date; (ii) the
date of the annual general meeting of the Company's stockholders in calendar
year 2000, provided Director is still a director of the Company on such date;
(iii) the date of the annual general meeting of the Company's stockholders in
calendar year 2001, provided Director is still a director of the Company on such
date; and (iv) the date of the annual general meeting of the Company's
stockholders in calendar year 2002, provided Director is still a director of the
Company on such date. The grant of the option is subject to and contingent upon
the approval of the stockholders of the Company at the Stockholders' Meeting.
2. Option Period and Terms of Exercise of Option. The option will become
exercisable on the respective dates of vesting as set forth in paragraph 1 and,
except as provided in paragraph 10, will terminate on the first to occur of (i)
ten years from the date of this Agreement June 7, 2009; (ii) the date on which
Director's service as a director of the Company terminates for any reason; or
(iii) to the extent any portion of this option has not theretofore vested, the
effective date of the final interpretation of APB No. 25 related to Financial
Accounting Standard 123 of the Financial Accounting Standards Board if the
general effect thereof would be to require the Company to take an earnings
charge based on the fair value of the unvested portion of such option on the
applicable vesting dates; provided that if said directorship terminates less
than ten years from the date hereof for any reason other than Director's death,
then Director (or a
<PAGE>
permitted transferee referred to in paragraph 9) may exercise the option, to the
extent Director was vested and entitled to exercise the option on the date of
termination of the directorship, at any time within one year after such
termination but not after the expiration of the ten-year period; and provided
further that if said directorship terminates less than ten years from the date
hereof by reason of Director's death, then any unvested portion of the option
shall become immediately and fully vested and exercisable and the executor or
administrator of the estate of Director or any person who has acquired the
option directly from Director by bequest or inheritance (or a permitted
transferee referred to in paragraph 9) may exercise the option at any time
within one year after such death, but not after the expiration of the ten- year
period.
3. Requirement of Directorship. Except as provided in paragraph 2 hereof,
the option and the rights evidenced hereby may not be exercised unless Director
is at the time of exercise serving as a director of the Company.
4. Exercise of Option. The option may be exercised by written notice signed
by Director (or if the option has been transferred pursuant to paragraph 9, a
permitted transferee) and delivered to the Chairman of the Board of the Company
or sent by registered or certified mail, postage prepaid, addressed to the
Company (for the attention of its Chairman of the Board) at its corporate office
at 3300 Highway 7, Suite 904, Concord, Ontario L4K 4M3. Such notice shall state
the number of shares as to which the option is exercised and shall be
accompanied by the full amount of the exercise price for such shares. The
exercise price may be paid in cash or, in whole or in part, by the surrender of
issued and outstanding shares of common stock of the Company which shall be
credited against the exercise price at the Fair Market Value of the shares
surrendered on the date immediately prior to the date of exercise of the option.
Any such notice shall be deemed given on the date on which the same was
deposited in the mail, addressed and sent in accordance with this paragraph.
Promptly after demand by the Company, Director shall pay to the Company an
amount equal to applicable withholding taxes, if any, due in connection with the
exercise of the option. For purposes of this paragraph, the term "Fair Market
Value" shall mean, with respect to the common stock of the Company, the closing
price of the common stock on the New York Stock Exchange or such other
securities exchange or automated quotation system on which the common stock of
the Company is then listed, whichever is applicable, as published in The Wall
Street Journal on the date in question.
5. Cashless Exercise. Payment of the exercise price of the option also may
be made by delivery to the Company or its designated agent (in the manner
provided in paragraph 4 above) of an executed irrevocable option exercise form
together with irrevocable instructions to a broker-dealer to sell or margin a
sufficient portion of the shares with respect to which the option is exercised
and deliver the sale or margin loan proceeds directly to the Company to pay the
exercise price and applicable withholding taxes, if any, due in connection with
such cashless exercise.
<PAGE>
6. Delivery of Certificates Upon Exercise of Options. Delivery of a
certificate or certificates representing the purchased shares shall be made
promptly after receipt of notice of exercise and payment of the purchase price
(if other than a cashless exercise) and the amount of any withholding taxes to
the Company, if required; provided, however, that the Company shall have such
time as is necessary to qualify or register such shares under any applicable law
or governmental rule or regulation or list such shares on any securities
exchange or automated quotation system on which the common stock of the Company
is then listed. If the Company so elects, its obligation to deliver shares of
common stock upon the exercise of the option shall be conditioned upon its
receipt from the person exercising the option of an executed investment letter,
in form and content satisfactory to the Company and its legal counsel,
evidencing the investment intent of such person and such other matters as the
Company may reasonably require. In addition, if the Company so elects, the
certificate or certificates representing the shares of common stock issued upon
exercise of the option shall bear a legend in substantially the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS
SUCH SHARES ARE FIRST REGISTERED THEREUNDER OR UNLESS THE COMPANY RECEIVES
A WRITTEN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE ACCEPTABLE TO
THE COMPANY, TO THE EFFECT THAT REGISTRATION THEREUNDER IS NOT REQUIRED.
7. Adjustments Upon Change in Common Stock. In the event that before delivery
by the Company of all the shares in respect of which the option is granted, the
Company shall have effected a split of the common stock or a dividend payable in
common stock, or the outstanding common stock of the Company shall have been
combined into a smaller number of shares, the shares still subject to the option
shall be increased or decreased to reflect proportionately the increase or
decrease in the number of shares outstanding, and the exercise price per share
shall be decreased or increased so that the aggregate exercise price for all the
then optioned shares shall remain the same as immediately prior to such split,
dividend or combination. In the event of a reclassification of the common stock
not covered by the foregoing, or in the event of a liquidation, separation or
reorganization, including a merger, consolidation or sale of assets, it is
agreed that the Board of Directors of the Company shall make such adjustments,
if any, as it may deem appropriate in the number of shares, exercise price and
kind of shares still subject to the option.
<PAGE>
8. Change in Control. Anything herein to the contrary notwithstanding, the
option shall vest in full upon the occurrence of a "Change in Control." For
purposes of this Agreement, Change in Control means, with respect to the
Company, any of the following:
(i) any event affecting the Company that would be required to be
reported by a reporting company as a change in control pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
(ii) any "person" (as such term is used in Section 13(d) of the
Exchange Act) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than 50% of either
the then outstanding shares of common stock of the Company or the
combined voting power of the then outstanding securities of the
Company;
(iii) at any time during any 24-month period, the individuals who
were serving on the Board of Directors of the Company at the
beginning of such period or who were nominated for election or
elected to such Board during such period by a vote at least two-
thirds of such individuals still in office shall cease to
constitute a majority of such Board;
(iv) any merger or consolidation of the Company with any other
corporation or any sale of all or substantially all of the assets
of the Company, other than a merger, consolidation or sale that
results in the voting securities of the Company outstanding
immediately prior thereto continuing to represent more than 50%
of the combined voting power of the voting securities of the
Company or the surviving entity or any parent thereof outstanding
immediately thereafter; or
(v) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company.
9. Transferability. The option shall be exercisable only by Director or by a
person or entity to which Director is permitted to transfer the option in
accordance with this paragraph 9. The option may be transferred by Director
only as follows:
(i) by will or the laws of descent and distribution upon the death of
Director;
(ii) by gift or a domestic relations order to a "family member" of
Director, as such term is defined in the instructions to Form S-8
under the Securities
<PAGE>
Act of 1933, as amended, including without limitation trusts in
which family members of Director have more than 50% of the
beneficial interest, foundations in which such family members
control the management of assets, and any other entity in which
such family members or Director own more than 50% of the voting
interests; or
(iii) to an entity in which more than 50% of the voting interests are
owned by Director or Director's family members in exchange for an
interest or interests in that entity.
Each permitted transferee will execute an agreement satisfactory to the Company
agreeing to be bound by the terms and provisions of this Agreement; provided,
however, that the vesting and exercisability of the option and the term of the
option shall be determined by reference to Director's performance of director
services for the Company. Any attempted sale, transfer, pledge, exchange,
hypothecation or other disposition of the option not specifically permitted by
this Agreement shall be null and void and without effect.
10. Termination of Directorship on Account of Certain Acts. Anything herein to
the contrary notwithstanding, in the event of the termination of Director's
service as a director of the Company on account of fraud, dishonesty or other
acts detrimental to the interests of the Company or a subsidiary, the option
shall automatically terminate and be null and void as of the date of such
termination.
11. Amendment. This Agreement may be amended, and the terms hereof may be
waived, to the extent permitted by applicable law and regulations in effect from
time to time, only by a written instrument signed by the Company and Director
or, in the case of a waiver, by the party waiving compliance.
<PAGE>
12. Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the law of the State of Delaware.
In Witness Whereof, the parties hereto have executed this Agreement to be
effective as of the date first above written.
InterTAN, Inc.
By: ____________________________
Brian E. Levy,
President and Chief Executive Officer
____________________________
Director
<PAGE>
EXHIBIT 10(e)
INTERTAN CANADA LTD.
INTERTAN, INC.
FOURTH AMENDMENT TO LOAN AGREEMENT
The Fourth Amendment to Loan Agreement (this "Amendment") is dated as
of July 31, 1999 and entered into by and among, inter alia, InterTAN Canada
Ltd., as Canadian Borrower, InterTAN, Inc., as the Parent, the financial
institutions listed on the signature pages hereof (the "Lenders"), and Bank of
America Canada, a Canadian chartered bank, as agent for the Lenders (the
"Agent"), and is made with reference to that certain Loan Agreement dated as of
December 22, 1997 (as amended and in effect the "Loan Agreement"), by and among
the Borrower, the Lenders and the Agent, as amended by the Rectification and
Amendment No. 1 dated as of February 24, 1998, the Second Amendment to Loan
Agreement dated as of January, 1999 and the Third Amendment to Loan Agreement
dated as of April 12, 1999. Capitalized terms used herein without definition
shall have the same meanings herein as set forth in the Loan Agreement.
RECITALS
In consideration of the mutual covenants and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Agent, the Lenders and the Parent and the Borrower have agreed
as follows:
Section 1 CONSENTS
1.1 The Lenders hereby consent for all purposes of the Loan Agreement
to the Borrower's subscription for shares in the Australian Affiliate for an
aggregate subscription price of Cdn.$10,363,412, the proceeds of which will be
contemporaneously utilized (a) by the Australian Affiliate to repay
Cdn.$10,363,412 of indebtedness to the Parent and (b) by the Parent to repay
Cdn.$10,363,412 of indebtedness to the Canadian Borrower, provided, however,
-------- -------
that the foregoing shall not be construed as a consent to any other payments or
Distributions by the Borrower.
Section 2. CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective only upon each of the Borrower
and the Parent delivering to the Agent (for the Lenders) two originally executed
copies of this Agreement (the date of satisfaction of such condition being
referred to herein as the "Fourth Amendment Effective Date").
---------------------------------
<PAGE>
Section 3. BORROWERS' AND PARENT'S REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Amendment and to
amend the Loan Agreement in the manner provided herein, each of the Borrower and
Parent represents and warrants to the Agent and each Lender that the following
statements are true, correct and complete:
A. Authorization, Validity, and Enforceability of this Amendment.
The Borrower or the Parent, as applicable, has the corporate power and authority
to execute and deliver this Amendment and to perform the Loan Agreement as
amended by this Amendment (the "Amended Agreement"). The Borrower or the
-------------------
Parent, as applicable, has taken all necessary corporate action (including,
without limitation, obtaining approval of its stockholders if necessary) to
authorize its execution and delivery of this Amendment and the performance of
the Amended Agreement. This Amendment has been duly executed and delivered by
the Borrower or the Parent, as applicable, and this Amendment and the Amended
Agreement constitute the legal, valid and binding obligations of the Borrower or
the Parent, as applicable, enforceable against it in accordance with their
respective terms without defence, setoff or counterclaim. The Borrower's or the
Parent's, as applicable, execution and delivery of this Amendment and the
performance by the Borrower or the Parent, as applicable, of the Amended
Agreement do not and will not conflict with, or constitute a violation or breach
of, or constitute a default under, or result in the creation or imposition of
any Lien upon the property of the Borrower or the Parent, as applicable, or any
of its Subsidiaries by reason of the terms of (a) any contract, mortgage, Lien,
lease, agreement, indenture, or instrument to which the Borrower or the Parent,
as applicable, is a party or which is binding on it, (b) any Requirement of Law
applicable to the Borrower or the Parent, as applicable, or any of its
Subsidiaries, or (c) the certificate or articles of incorporation or
amalgamation or bylaws of the Borrower or the Parent, as applicable, or any of
its Subsidiaries.
B. Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or other person is necessary or required in connection
with the execution, delivery or performance by, or enforcement against, the
Borrower or the Parent, as applicable, or any of its Subsidiaries of this
Amendment or the Amended Agreement except for such as have been obtained or made
and filings required in order to perfect the Agent's security interests.
C. Incorporation of Representations and Warranties From Loan
Agreement. The representations and warranties contained in Section 8 of the
Loan Agreement except to the extent applicable to the U.K. Borrower or the U.K.
Collateral (and, in the case of Section 8.10, except as herein provided and
consented to) are and will be true, correct and complete in all material
respects on and as of the Fourth Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date or incorporate by
reference information disclosed or contained in the Exhibits to the Loan
Agreement, in which case they were true, correct and complete in all material
respects on and as of such earlier date.
<PAGE>
-3-
D. Absence of Default. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event or an Event of Default.
Section 4. MISCELLANEOUS
A. Reference to and Effect on the Loan Agreement and the Other Loan
Documents.
(1) On and after the Fourth Amendment Effective Date, each
reference in the Loan Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Loan
Agreement, and each reference in the other Loan Documents to the "Loan
Agreement", "thereunder", "thereof" or words of like import referring
to the Loan Agreement shall mean and be a reference to the Amended
Agreement.
(2) Except as specifically amended by this Amendment, the Loan
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(3) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of
any provision of, or operate as a waiver of any right, power or remedy
of the Agent or any Lender under, the Loan Agreement or any of the
other Loan Documents.
B. Fees and Expenses. The Borrower acknowledges that all costs, fees
and expenses as described in Section 16.9 of the Loan Agreement incurred by the
------------
Agent and its counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of the Borrower.
C. Captions. The captions contained in this Amendment are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge or restrict any provision.
D. Governing Law. THIS AMENDMENT SHALL BE INTERPRETED AND THE RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF
THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN.
E. Counterparts; Effectiveness. This Amendment may be executed in
any number of counterparts, and by the Agent, each Lender, the Parent and the
Borrower in separate counterparts, each of which shall be an original, but all
of which shall together constitute one and the same amendment; signature pages
may be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This
<PAGE>
-4-
Amendment (other than the provisions of Section 1 hereof, the effectiveness of
which is governed by Section 2 hereof) shall become effective upon the execution
of a counterpart hereof by the Borrower, the Parent, the Agent and the Lenders
and receipt by the Borrower and the Agent of written or telephonic notification
of such execution and authorization of delivery thereof.
<PAGE>
-5-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
INTERTAN CANADA LTD. BANKBOSTON RETAIL FINANCE INC.
By: /s/ James G. Gingerich By: /s/ Francis D. O'Conner
Name: James G. Gingerich Name: Francis D. O'Conner
Title: Vice President Title: Director
INTERTAN, INC. CONGRESS FINANCIAL CORPORATION
By: /s/ Vicky Geist
By: /s/ James G. Gingerich Name: Vicky Geist
Name: James G. Gingerich Title: Assistant Vice President
Title: Executive Vice President & CFO
BANK OF AMERICA CANADA,
as Agent and as Canadian Lender
By: /s/ Robert Kizell
Name: Robert Kizell
Title: Vice-President
<PAGE>
EXHIBIT 10(f)
INTERTAN CANADA LTD.
INTERTAN, INC.
FIFTH AMENDMENT TO LOAN AGREEMENT
The Fifth Amendment to Loan Agreement (this "Amendment") is dated as
of October 1, 1999 and entered into by and among, inter alia, InterTAN Canada
Ltd., as Canadian Borrower, InterTAN, Inc., as the Parent, the financial
institutions listed on the signature pages hereof (the "Lenders"), and Bank of
America Canada, a Canadian chartered bank, as agent for the Lenders (the
"Agent"), and is made with reference to that certain Loan Agreement dated as of
December 22, 1997 (as amended and in effect the "Loan Agreement"), by and among
the Borrower, the Lenders and the Agent, as amended by the Rectification and
Amendment No. 1 dated as of February 24, 1998, the Second Amendment to Loan
Agreement dated as of January, 1999, the Third Amendment to Loan Agreement dated
as of April 12, 1999 and the Fourth Amendment to Loan Agreement dated as of July
31, 1999. Capitalized terms used herein without definition shall have the same
meanings herein as set forth in the Loan Agreement.
Section 1 AMENDMENTS
1.1 The first preamble to the Loan Agreement is amended by deleting
the reference to "U.S.$50,000,000 (or the Equivalent Amount thereof in Cdn.$)"
and substituting "Cdn. $67,000,000" therefor.
1.2 Section 1.1 of the Loan Agreement is amended as follows:
(a) The definition of "BA Rate Margin" is deleted and the
--------------
following is substituted therefor:
" "BA Rate Margin" means one and one half percent (1 1/2%)
--------------
per annum.".
(b) The definition of "Base Rate Margin" is deleted and the
----------------
following is substituted therefor:
" "Base Rate Margin" means zero percent (0%) per annum.".
----------------
(c) The definition of "BAUK" is deleted and the following is
----
substituted therefor:
" "BAUK" means Bank of America National Association and its
----
successors and assigns.".
(d) The definition of "Canadian Availability" is amended by
---------------------
deleting the phrase "(the foregoing amount calculated by
deducting (b) from (a)
<PAGE>
being hereinafter referred to as the "Canadian Borrowing
------------------
Base"), less (c)" and substituting the following:
----
"plus (c) up to sixty percent (60%) of the appraised (on a
----
basis and with appraisers's satisfactory to the Agent and
Lenders) "as is" market value of Real Estate of the Canadian
Borrower, provided, however, that this amount will only be
-------- -------
available to the extent that there are, and in a maximum
amount not exceeding, outstanding and unreimbursed Permitted
Parent Loans and further, provided, that the addition of
------- --------
availability against the Real Estate can never result in the
Maximum Revolving Credit Line being exceeded (the foregoing
amount calculated by deducting (b) from (a) and then adding
(c) being hereinafter referred to as the "Canadian Borrowing
------------------
Base"), less (d)".
---- ----
(e) The definition of "Dilution Reserve" is amended by deleting
----------------
the phrase "five percent (5%) of the Net Amount of Eligible
Canadian Accounts or the Net Amount of Eligible U.K.
Accounts, as applicable" and substituting "zero percent
(0%)" therefor.
(f) The definition of "LIBOR Rate Margin" is deleted and the
-----------------
following is substituted therefor:
" "LIBOR Rate Margin" means one and one half percent
-----------------
(1 1/2%) per annum.".
(g) The definition of "Material Agreements" is amended to delete
-------------------
everything after the semicolon in the sixth line.
(h) The definition of "Maximum Canadian Revolving Credit Line"
--------------------------------------
is deleted and the following substituted therefor:
""Maximum Canadian Revolving Credit Line" means
--------------------------------------
Cdn.$67,000,000.".
(i) The definition of "Prime Rate Margin" is deleted and the
-----------------
following is substituted therefor:
" "Prime Rate Margin" means zero percent (0%) per annum.".
-----------------
(j) The definition of "Real Estate" is amended to delete
-----------
everything after "279 Bayview Drive, Barrie, Ontario, L4M
4W5".
(k) The definition of "Total Commitments" is deleted and the
-----------------
following substituted therefor:
<PAGE>
-3-
" "Total Commitments" means the aggregate of the Lenders'
-----------------
Commitments from time to time and which shall be, initially,
Cdn.$67,000,000.".
(l) the definition of "Tangible Net Worth" is amended by
------------------
deleting paragraph (b) thereof and substituting therefor the
following:
"(b) an amount equal to the lesser of Cdn.$30,000,000 and
the amount of outstanding and unreimbursed Permitted Parent
Loans,",
by deleting the references in paragraph (c) to "the Closing
Date" and substituting therefor "July 1, 1999", and by
adding the following sentence at the end thereof:
"Notwithstanding the foregoing, the foregoing amount may
in the sole discretion of the Lenders be adjusted for non-
cash adjustments after September 30, 1999.".
(m) The following definition is added (in correct alphabetical
placement):
" "Permitted Parent Loans" means demand loans and/or
----------------------
Distributions made by the Canadian Borrower to the Parent on
or after September 30, 1999 which may be used by the Parent
for such purposes as it shall see fit (including stock buy
backs and/or dividends) provided that:
-------- ----
(a) no such loan or Distribution shall be made or permitted
to be outstanding and unrepaid or unreimbursed if an
Event has occurred and is continuing or if an Event
could reasonably be expected to occur in consequence
thereof; and
(b) all loans (if any) shall be on a demand basis and
evidenced by promissory notes (in form and substance
satisfactory to the Agent) duly endorsed in favour of
and delivered to the Agent.".
1.3 Section 2.1(a) of the Loan Agreement is amended by deleting the
reference to "$50,000,000" and substituting "Cdn.$67,000,000" therefor.
1.4 Section 2.1(b) of the Loan Agreement is, for greater certainty,
amended by deleting the reference to "$25,000,000" and substituting "$nil"
therefor.
<PAGE>
-4-
1.5 Section 2.3 of the Loan Agreement is amended by deleting the
reference to "$25,000,000" and substituting "Cdn.$20,000,000" therefore and by
deleting the reference to "$15,000,000" and substituting "$nil" therefor.
1.6 Section 2.4(b) of the Loan Agreement is amended, for greater
certainty, by deleting the references to "$7,500,000" and "$750,000" and
substituting "$nil" therefor.
1.7 Section 3.6 of the Loan Agreement is amended by deleting the
reference to "$10,000" and substituting "U.S. $7,500" therefor.
1.8 Section 4.9 of the Loan Agreement is amended by deleting
everything after the phrase "in respect of any payments to it" in the second to
last line.
1.9 Section 9.8 of the Loan Agreement is amended to add the following
at the end of the first full paragraph:
"and (C) the Borrower may make and shall be permitted to have
outstanding, and the Parent shall be entitled to make repayments
or reimbursements of, the Permitted Parent Loans",
and the reference to "clauses (A) or (B)" is deleted and "clauses (A), (B) or
(C)" is substituted therefor.
1.10 Section 9.22 is deleted and the following is substituted
therefor:
"9.22 Minimum Availability. The sum of (a) Canadian
--------------------
Availability plus, (b) between January 1 and April 30, up to
----
Cdn.$10,000,000 to the extent of cash of the Borrower on hand,
shall be not less than Cdn.$25,000,000 at any time when any loans
are outstanding or there are any unreimbursed/unrepaid
Distributions to the Parent which in either case are Permitted
Parent Loans.".
1.11 Section 9.23 is amended by deleting the reference to
"U.S.$96,000,000" and substituting "Cdn.$116,000,000" therefor.
1.12 Section 14.15 of the Loan Agreement is deleted and "Deliberately
Left Blank" is substituted therefor.
1.13 Section 15.3 of the Loan Agreement is amended by deleting the
reference to "25,000,000" and substituting "Cdn.$10,000,000" therefor.
Section 2. CONDITIONS TO EFFECTIVENESS
<PAGE>
-5-
This Amendment shall become effective as of October 1, 1999 (the
"Fifth Amendment Effective Date") but only upon each of the Borrower and the
- -------------------------------
Parent delivering to the Agent (for the Lenders) two originally executed copies
of each of the following:
(a) this Agreement;
(b) a certified resolution of each of the Borrower's and the Parent's
directors authorizing its entering into and performance of this
Agreement;
(c) certified copies of the articles and by-laws of the Borrower and
Parent, as currently in effect; and
(d) a certificate of the Borrower as to the truth and accuracy of all
representations and warranties in Section 3 hereof.
Section 3. BORROWERS' AND PARENT'S REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Amendment and to
amend the Loan Agreement in the manner provided herein, each of the Borrower and
Parent represents and warrants to the Agent and each Lender that the following
statements are true, correct and complete:
A. Authorization, Validity, and Enforceability of this Amendment.
The Borrower or the Parent, as applicable, has the corporate power and authority
to execute and deliver this Amendment and to perform the Loan Agreement as
amended by this Amendment (the "Amended Agreement"). The Borrower or the
-------------------
Parent, as applicable, has taken all necessary corporate action (including,
without limitation, obtaining approval of its stockholders if necessary) to
authorize its execution and delivery of this Amendment and the performance of
the Amended Agreement. This Amendment has been duly executed and delivered by
the Borrower or the Parent, as applicable, and this Amendment and the Amended
Agreement constitute the legal, valid and binding obligations of the Borrower or
the Parent, as applicable, enforceable against it in accordance with their
respective terms without defence, setoff or counterclaim. The Borrower's or the
Parent's, as applicable, execution and delivery of this Amendment and the
performance by the Borrower or the Parent, as applicable, of the Amended
Agreement do not and will not conflict with, or constitute a violation or breach
of, or constitute a default under, or result in the creation or imposition of
any Lien upon the property of the Borrower or the Parent, as applicable, or any
of its Subsidiaries by reason of the terms of (a) any contract, mortgage, Lien,
lease, agreement, indenture, or instrument to which the Borrower or the Parent,
as applicable, is a party or which is binding on it, (b) any Requirement of Law
applicable to the Borrower or the Parent, as applicable, or any of its
Subsidiaries, or (c) the certificate or articles of incorporation or
amalgamation or bylaws of the Borrower or the Parent, as applicable, or any of
its Subsidiaries.
<PAGE>
-6-
B. Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or other person is necessary or required in connection
with the execution, delivery or performance by, or enforcement against, the
Borrower or the Parent, as applicable, or any of its Subsidiaries of this
Amendment or the Amended Agreement except for such as have been obtained or made
and filings required in order to perfect the Agent's security interests.
C. Incorporation of Representations and Warranties From Loan
Agreement. The representations and warranties contained in Section 8 of the
Loan Agreement except to the extent applicable to the U.K. Borrower or the U.K.
Collateral (and, in the case of Section 8.10, except as herein provided and
consented to) are and will be true, correct and complete in all material
respects on and as of the Fifth Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date or incorporate by
reference information disclosed or contained in the Exhibits to the Loan
Agreement, in which case they were true, correct and complete in all material
respects on and as of such earlier date.
D. Absence of Default. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event or an Event of Default.
Section 4. MISCELLANEOUS
A. Reference to and Effect on the Loan Agreement and the Other Loan
Documents.
(1) On and after the Fifth Amendment Effective Date, each
reference in the Loan Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Loan
Agreement, and each reference in the other Loan Documents to the "Loan
Agreement", "thereunder", "thereof" or words of like import referring
to the Loan Agreement shall mean and be a reference to the Amended
Agreement.
(2) Except as specifically amended by this Amendment, the Loan
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(3) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of
any provision of, or operate as a waiver of any right, power or remedy
of the Agent or any Lender under, the Loan Agreement or any of the
other Loan Documents.
<PAGE>
-7-
B. Fees and Expenses. The Borrower agrees to pay to the Agent and
Lender an amendment fee in the amount of U.S.$10,000 for entering into this
Amendment. The Borrower further agrees to pay and indemnify and save harmless
BACAN for and in respect of all fees paid or payable in connection with
assignments by Congress Financial Corporation and/or BankBoston Retail Finance
Inc. to BACAN of its and/or their Participations in the Canadian Revolving
Credit Facility, it being acknowledged by the Borrower that Congress Financial
Corporation and BankBoston Retail Finance Inc. will, as a condition of assigning
their interests, charge a fee equivalent in amount to the fee provided for in
Section 12 of the Loan Agreement upon a termination and repayment by the
Borrower of the Canadian Revolving Credit Facility plus U.S.$6,667 (in the
----
aggregate for both of them) relating to the prior termination of the U.K.
Revolving Credit Facility. The Agent is authorized and directed to collect the
foregoing fees by debiting the Borrower's account(s). The Borrower acknowledges
that all costs, fees and expenses as described in Section 16.9 of the Loan
------------
Agreement incurred by the Agent and its counsel with respect to this Amendment
and the documents and transactions contemplated hereby shall be for the account
of the Borrower.
C. Captions. The captions contained in this Amendment are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge or restrict any provision.
D. Governing Law. THIS AMENDMENT SHALL BE INTERPRETED AND THE RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF
THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN.
E. Counterparts; Effectiveness. This Amendment may be executed in
any number of counterparts, and by the Agent, each Lender, the Parent and the
Borrower in separate counterparts, each of which shall be an original, but all
of which shall together constitute one and the same amendment; signature pages
may be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Amendment (other than the provisions of Section 1 hereof, the
effectiveness of which is governed by Section 2 hereof) shall become effective
upon the execution of a counterpart hereof by the Borrower, the Parent, the
Agent and the Lenders and receipt by the Borrower and the Agent of written or
telephonic notification of such execution and authorization of delivery thereof.
<PAGE>
-8-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
INTERTAN CANADA LTD.
By: /s/ James G. Gingerich
Name: James G. Gingerich
Title: Vice President
INTERTAN, INC.
By: /s/ James G. Gingerich
Name: James G. Gingerich
Title: Executive Vice President & CFO
BANK OF AMERICA CANADA,
as Agent and as the Lender
By: /s/ Robert Kizell
Name: Robert Kizell
Title: Vice-President
<PAGE>
EXHIBIT 10(g)
ASSIGNMENT AND ASSUMPTION AGREEMENT
------------------------------------
This ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Assignment and
Assumption") is to be effectuated by the completion and execution of the
Assignment Execution Form attached hereto. A copy of the terms of the Assignment
and Assumption does not need to be physically attached to the Assignment
Execution Form, but rather these terms are incorporated therein by reference.
Terms defined in the Assignment Execution Form (or in the Loan Agreement
described therein) are used herein as therein defined.
The Assignor and the Assignee agree as follows:
1. Assignment; Effect of Certain Dates.
-----------------------------------
For value received, without recourse, representation or warranty
(except as expressly set forth herein or in the Loan Agreement) the Assignor
sells and assigns to the Assignee, and the Assignee purchases and assumes from
the Assignor, all of the Assignor's right, title and interest in and to, and all
of the Assignor's obligations with respect to, the applicable Assigned Shares
under the Loan Agreement. The Agent shall confirm by telecopy to the Assignor
and the Assignee that the Agent has received a fully completed Assignment
Execution Form signed by the Assignor and the Assignee on the date that the
Agent sends such confirmations, which shall in no event be later than October
29, 1999 (the "Contract Date"), the obligations of the Assignor and the Assignee
hereunder shall be irrevocable as between themselves. Upon its receipt of a
fully completed Assignment Execution Form signed by the Assignor and the
Assignee, the Agent will send a copy of such Assignment Execution Form to the
Canadian Borrower. No (i) failure of any party to settle on the Settlement Date
any amount owed hereunder, (ii) dispute respecting settlement, or (iii)
bankruptcy, insolvency or other condition whatsoever respecting any Person shall
in any way impair, reduce or otherwise affect the transfer of the Assigned
Shares to the Assignee, and the release of the Assignor, as contemplated by this
Assignment and Assumption.
2. Rights and Obligations of Assignee;
Release of Assignor.
-----------------------------------
(a) From and after the Settlement Date, the Assignee shall be entitled to
all rights, powers and privileges of the Assignor and shall perform
all of the duties and obligations of the Assignor under the Loan
Agreement and the other Loan Documents, to the extent of the Assigned
Shares, including without limitation (i) the right to receive all
payments in respect of the Assigned Shares which are unpaid on the
Settlement Date or become payable from and after the Settlement Date,
whether on account of principal, interest, fees, indemnities,
increased costs, additional amounts or otherwise, (ii) the right to
vote and to instruct the Agent under the Loan Agreement to the extent
of the Assigned Shares, (iii) the right to set off and to appropriate
and apply deposits of the Canadian Borrower as set forth in the Loan
Agreement or any other Loan Document, (iv) the right to receive
notices, requests, demands and other communications from the Agent
and/or any
<PAGE>
-2-
other party required to give notices, requests, demands or other
communications, (v) the obligation to fund all payments required to be
made by a Lender holding an Assigned Share, and (vi) the obligation to
provide to the Agent any withholding tax forms and other information
prescribed by the applicable taxation authority certifying as to the
Assignee's status for purposes of determining exemption from
withholding taxes with respect to all payments to be made to the
Assignee under the Loan Agreement or such other documents as are
necessary to indicate that all such payments are subject to such rates
at a rate reduced by an applicable tax treaty. From and after the
Settlement Date, the Assignor shall be released from all duties and
obligations under the Loan Agreement and all other Loan Documents to
the extent of the Assigned Shares.
(b) From and after the Settlement Date, Assignee shall be deemed a
"Lender" and a "Canadian Lender" for all purposes in connection with
the Loan Agreement and the other Loan Documents, as such term is
defined in the Loan Agreement, and, subject to further adjustments,
reductions, sales and assignments as provided for or contemplated in
the Loan Agreement, (i) the "Commitment" of Assignee for all purposes
under the Loan Agreement and the other Loan Documents shall be
U.S.$50,000,000 under the Canadian Revolving Credit Facility, and (ii)
the "Participation" of Assignee thereunder shall be equal to 100%,
respectively. Notwithstanding anything to the contrary contained
herein or in the Assignment Execution Form, the assignment provided
for herein shall be effective as of October ______, 1999 , which shall
be deemed the "Settlement Date", as such term is used herein. The
term "Assigned Shares", as used herein and in the Assignment Execution
Form, shall mean the aggregate of the Commitments of Assignor
assigned, as set forth in Section 4 of the Assignment Execution Form.
2. Representations and Warranties of Assignor.
------------------------------------------
The Assignor (a) represents and warrants that it is the legal and
beneficial owner of its Assigned Share, and that such Assigned Share is free and
clear of any adverse claim or encumbrances; and (b) except for the
representations and warranties in subclause (a) above and in Section 4 below and
herein makes no representation or warranty and assumes no responsibility
whatsoever regarding the assignment affected hereby, including, without
limitation, with respect to any statements, warranties or representations made
in or in connection with the Loan Agreement or any other Loan Document or the
execution, legality, validity, enforceability, sufficiency or value of the Loan
Agreement or any other Loan Document, or the financial condition of each of the
Canadian Borrower, the Parent, the other Creditors, or any other Person, or the
performance or observance by each of the Canadian Borrower, the Parent, the
other Creditors or any other Party of any of its obligations under the Loan
Agreement or any other Loan Document.
3. Mutual Representations and Warranties.
-------------------------------------
<PAGE>
-3-
The Assignor and the Assignee severally represents and warrants to the
other of them as of the Contract Date and the Settlement Date as follows:
(a) it is duly organized and validly existing and has full power and
authority, and has taken or will take all action necessary, to execute
and deliver the Assignment Execution Form and to fulfil its
obligations under, and to consummate the transactions contemplated by,
this Assignment and Assumption;
(b) the making and performance by it of this Assignment and Assumption
does not and will not violate any law or regulation of the
jurisdiction of its incorporation or any other law or regulation
applicable to it;
(c) the Assignment Execution Form has been duly executed and delivered by
it and constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms, except as limited by (i)
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and (ii) general equitable principles; and
(d) all approvals, authorizations or other actions by, or filings with,
any Governmental Authority, if any, necessary for the validity or
enforceability of its obligations under this Assignment and Assumption
have been obtained or taken, as the case may be.
4. Representations and Warranties of Assignee.
------------------------------------------
The Assignee (i) confirms that it has received a copy of the Loan
Agreement and each of the other Loan Documents, which have in each case been
requested by it, together with copies of any financial statements requested by
it, and that it has, independently and without reliance on the Assignor, the
Agent or any other Person and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Assignment and Assumption; (ii) agrees that it will, independently and without
reliance upon the Assignor, the Agent or any other Person and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Agreement and any other Loan Documents; (iii) represents that it is eligible to
become an assignee of the Assigned Shares pursuant to the terms, if any, of the
Loan Agreement which limit assignees to persons having specified characteristics
or falling within certain classes; and (iv) appoints the Agent to act in the
capacity set forth in the Loan Agreement.
5. Single Net Payment.
------------------
Unless the Assignor and Assignee agree otherwise, on the Settlement
Date a single, net, final payment shall be made, which shall be in an amount
mutually agreed upon by the
<PAGE>
-4-
Assignor and the Assignee, taking into account the then outstanding principal
amount, if any, of the Assigned Shares, any fees payable to or by the Assignee,
and all accrued fees, interest and other amounts payable under the Loan
Agreement or any related documents.
6. Governing Law.
-------------
This assignment and assumption shall be governed by, and shall be
construed and enforced in accordance with, the laws of the Province of Ontario,
without regard to principles of conflicts of laws.
7. Counterparts; Amendments; Binding Effect.
----------------------------------------
The Assignment Execution Form may be executed in any number of
counterparts and by different parties in separate counterparts, each of which
when so executed and delivered shall be deemed to be an original, but all such
counterparts together shall constitute one and the same agreement. The terms
hereof may not be amended or modified except in writing executed by the Assignor
and the Assignee. Any change in the Settlement Date to an earlier date than that
specified on the Assignment Execution Form shall require the consent of the
Agent. The terms hereof shall bind and inure to the benefit of and be
enforceable by the parties executing (or deemed to have consented to) the
Assignment Execution Form and their respective successors and permitted assigns.
8 Effectiveness of Notices.
------------------------
Notices required to be given and other documents required to be
delivered pursuant to the terms hereof shall be deemed given or delivered when
actually received unless sent by facsimile transmission, in which case such
notice or other document shall be deemed given or delivered when sent (as
established by sender's facsimile transmission machine printout or similar
mechanical record).
9 Quebec Addendum.
---------------
Addendum 1 to Exhibit "O" is hereby incorporated herein.
<PAGE>
ASSIGNMENT EXECUTION FORM
-------------------------
This Assignment Execution Form incorporates by reference all of the
terms and conditions of the Assignment and Assumption Agreement which is
attached hereto. By executing this Assignment Execution Form, and pursuant to
the terms of such Assignment and Assumption Agreement, the Assignor sells and
assigns to the Assignee, and the Assignee purchases and assumes from the
Assignor, in each case without recourse, representation or warranty (except as
set forth in the Assignment and Assumption Agreement), all of the Assignor's
right, title and interest in and to, and all of the Assignor's obligations with
respect to, the Assigned Shares (as calculated herein), and the Assignor are
released from such obligations.
1 Loan Agreement:
Title: Loan Agreement dated as of December 22, 1997
among InterTAN Canada Ltd., as Canadian
Borrower, InterTAN U.K. Limited, as U.K.
Borrower, InterTAN, Inc., as a guarantor,
Bank of America Canada, as Agent and Lender
and Bank of America N.T. & S.A. (London,
England Branch Office), as a U.K. Lender, as
amended by Rectification and Amendment No. 1
dated February 24, 1998, Second Amendment to
Loan Agreement dated as of January, 1999,
Third Amendment to Loan Agreement dated as
of April 12, 1999 and Fourth Amendment to
Loan Agreement dated as of July 31, 1999.
Date: December 22, 1997
Name of Borrower(s): InterTAN Canada Ltd.
Name of Agent: Bank of America Canada
2 Name of Assignor: BankBoston Retail Finance Inc.
(The Agent must enter the date of delivery to it of this Assignment
Execution Form, executed by Assignor and Assignee, and MUST INITIAL AND
RETURN A COPY OF THIS PAGE TO Assignor.)
3 Name of Assignee: Bank of America Canada
4 Assigned Shares:
<PAGE>
(a) Total Loan Agreement Commitment for All U.S.: $50,000,000
Lenders as of Contract Date
- --------------------------------------------------------------------------------
(b) Assigned Share of Assignor U.S.: $16,666,666.66
- --------------------------------------------------------------------------------
(c) Percentage Amount of Assigned Share of 33%
Assignor of Total Commitments
- --------------------------------------------------------------------------------
(d) Total Loans Outstanding for All Lenders as U.S.: $nil
of Contract Date (exclusive of Letters of
Credit)
- --------------------------------------------------------------------------------
(e) Outstanding Amount of Assigned Loans U.S.: $nil
- --------------------------------------------------------------------------------
5 Sales Price of Assigned Shares: See Schedule I (Schedule I may be omitted
when form is sent to the Agent).
Consent to/Acknowledged by as of October 28, 1999.
BANK OF AMERICA CANADA (Assignor)
BANKBOSTON RETAIL FINANCE INC.
By: /s/Robert Kizell By: /s/Michael L. Pizette
Name: Robert Kizell Name: Michael L. Pizette
Title: Vice-President Title: Managing Director
(Assignee)
BANK OF AMERICA CANADA
By: /s/Robert Kizell
Name: Robert Kizell
Title: Vice-President
The undersigned hereby intervene in the foregoing Assignment and Assumption
Agreement and unconditionally acquiesces in the assignment referred to therein
and agrees to pay the "Termination Fee" referred to in Schedule I.
INTERTAN CANADA LTD.
By: /s/James G. Gingerich
Name: James G. Gingerich
Title: Vice President
<PAGE>
-3-
Schedule I
Attached to Assignment
Execution Form executed
by BankBoston Retail Finance Inc., as Assignor
and Bank of America Canada, as Assignee
Principal Amount to be paid for Assigned Shares U.S.: $0
Canadian Unused Line Fee U.S.: $
L/C Fee U.S.: $
Termination Fee (to be paid by Canadian Borrower) U.S.: $
Net Payment due by Assignee U.S.: $
<PAGE>
EXHIBIT 10(h)
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
This ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Assignment and
Assumption") is to be effectuated by the completion and execution of the
Assignment Execution Form attached hereto. A copy of the terms of the Assignment
and Assumption does not need to be physically attached to the Assignment
Execution Form, but rather these terms are incorporated therein by reference.
Terms defined in the Assignment Execution Form (or in the Loan Agreement
described therein) are used herein as therein defined.
The Assignor and the Assignee agree as follows:
1. Assignment; Effect of Certain Dates.
-----------------------------------
For value received, without recourse, representation or warranty
(except as expressly set forth herein or in the Loan Agreement) the Assignor
sells and assigns to the Assignee, and the Assignee purchases and assumes from
the Assignor, all of the Assignor's right, title and interest in and to, and all
of the Assignor's obligations with respect to, the applicable Assigned Shares
under the Loan Agreement. The Agent shall confirm by telecopy to the Assignor
and the Assignee that the Agent has received a fully completed Assignment
Execution Form signed by the Assignor and the Assignee on the date that the
Agent sends such confirmations, which shall in no event be later than October
29, 1999 (the "Contract Date"), the obligations of the Assignor and the Assignee
hereunder shall be irrevocable as between themselves. Upon its receipt of a
fully completed Assignment Execution Form signed by the Assignor and the
Assignee, the Agent will send a copy of such Assignment Execution Form to the
Canadian Borrower. No (i) failure of any party to settle on the Settlement Date
any amount owed hereunder, (ii) dispute respecting settlement, or (iii)
bankruptcy, insolvency or other condition whatsoever respecting any Person shall
in any way impair, reduce or otherwise affect the transfer of the Assigned
Shares to the Assignee, and the release of the Assignor, as contemplated by this
Assignment and Assumption.
2. Rights and Obligations of Assignee;
Release of Assignor.
-----------------------------------
(a) From and after the Settlement Date, the Assignee shall be entitled to
all rights, powers and privileges of the Assignor and shall perform
all of the duties and obligations of the Assignor under the Loan
Agreement and the other Loan Documents, to the extent of the Assigned
Shares, including without limitation (i) the right to receive all
payments in respect of the Assigned Shares which are unpaid on the
Settlement Date or become payable from and after the Settlement Date,
whether on account of principal, interest, fees, indemnities,
increased costs, additional amounts or otherwise, (ii) the right to
vote and to instruct the Agent under the Loan Agreement to the extent
of the Assigned Shares, (iii) the right to set off and to appropriate
and apply deposits of the Canadian Borrower as set forth in the Loan
Agreement or any other Loan Document, (iv) the right to receive
notices, requests, demands and other communications from the Agent
and/or any
<PAGE>
-2-
other party required to give notices, requests, demands or other
communications, (v) the obligation to fund all payments required to be
made by a Lender holding an Assigned Share, and (vi) the obligation to
provide to the Agent any withholding tax forms and other information
prescribed by the applicable taxation authority certifying as to the
Assignee's status for purposes of determining exemption from
withholding taxes with respect to all payments to be made to the
Assignee under the Loan Agreement or such other documents as are
necessary to indicate that all such payments are subject to such rates
at a rate reduced by an applicable tax treaty. From and after the
Settlement Date, the Assignor shall be released from all duties and
obligations under the Loan Agreement and all other Loan Documents to
the extent of the Assigned Shares.
(b) From and after the Settlement Date, Assignee shall be deemed a
"Lender" and a "Canadian Lender" for all purposes in connection with
the Loan Agreement and the other Loan Documents, as such term is
defined in the Loan Agreement, and, subject to further adjustments,
reductions, sales and assignments as provided for or contemplated in
the Loan Agreement, (i) the "Commitment" of Assignee for all purposes
under the Loan Agreement and the other Loan Documents shall be
U.S.$50,000,000 under the Canadian Revolving Credit Facility, and (ii)
the "Participation" of Assignee thereunder shall be equal to 100%,
respectively. Notwithstanding anything to the contrary contained
herein or in the Assignment Execution Form, the assignment provided
for herein shall be effective as of October ______, 1999 , which shall
be deemed the "Settlement Date", as such term is used herein. The
term "Assigned Shares", as used herein and in the Assignment Execution
Form, shall mean the aggregate of the Commitments of Assignor
assigned, as set forth in Section 4 of the Assignment Execution Form.
2. Representations and Warranties of Assignor.
------------------------------------------
The Assignor (a) represents and warrants that it is the legal and
beneficial owner of its Assigned Share, and that such Assigned Share is free and
clear of any adverse claim or encumbrances; and (b) except for the
representations and warranties in subclause (a) above and in Section 4 below and
herein makes no representation or warranty and assumes no responsibility
whatsoever regarding the assignment affected hereby, including, without
limitation, with respect to any statements, warranties or representations made
in or in connection with the Loan Agreement or any other Loan Document or the
execution, legality, validity, enforceability, sufficiency or value of the Loan
Agreement or any other Loan Document, or the financial condition of each of the
Canadian Borrower, the Parent, the other Creditors, or any other Person, or the
performance or observance by each of the Canadian Borrower, the Parent, the
other Creditors or any other Party of any of its obligations under the Loan
Agreement or any other Loan Document.
3. Mutual Representations and Warranties.
-------------------------------------
<PAGE>
-3-
The Assignor and the Assignee severally represents and warrants to the
other of them as of the Contract Date and the Settlement Date as follows:
(a) it is duly organized and validly existing and has full power and
authority, and has taken or will take all action necessary, to execute
and deliver the Assignment Execution Form and to fulfil its
obligations under, and to consummate the transactions contemplated by,
this Assignment and Assumption;
(b) the making and performance by it of this Assignment and Assumption
does not and will not violate any law or regulation of the
jurisdiction of its incorporation or any other law or regulation
applicable to it;
(c) the Assignment Execution Form has been duly executed and delivered by
it and constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms, except as limited by (i)
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and (ii) general equitable principles; and
(d) all approvals, authorizations or other actions by, or filings with,
any Governmental Authority, if any, necessary for the validity or
enforceability of its obligations under this Assignment and Assumption
have been obtained or taken, as the case may be.
4. Representations and Warranties of Assignee.
------------------------------------------
The Assignee (i) confirms that it has received a copy of the Loan
Agreement and each of the other Loan Documents, which have in each case been
requested by it, together with copies of any financial statements requested by
it, and that it has, independently and without reliance on the Assignor, the
Agent or any other Person and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Assignment and Assumption; (ii) agrees that it will, independently and without
reliance upon the Assignor, the Agent or any other Person and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Agreement and any other Loan Documents; (iii) represents that it is eligible to
become an assignee of the Assigned Shares pursuant to the terms, if any, of the
Loan Agreement which limit assignees to persons having specified characteristics
or falling within certain classes; and (iv) appoints the Agent to act in the
capacity set forth in the Loan Agreement.
5. Single Net Payment.
------------------
Unless the Assignor and Assignee agree otherwise, on the Settlement
Date a single, net, final payment shall be made, which shall be in an amount
mutually agreed upon by the
<PAGE>
-4-
Assignor and the Assignee, taking into account the then outstanding principal
amount, if any, of the Assigned Shares, any fees payable to or by the Assignee,
and all accrued fees, interest and other amounts payable under the Loan
Agreement or any related documents.
6. Governing Law.
-------------
This assignment and assumption shall be governed by, and shall be
construed and enforced in accordance with, the laws of the Province of Ontario,
without regard to principles of conflicts of laws.
7. Counterparts; Amendments; Binding Effect.
----------------------------------------
The Assignment Execution Form may be executed in any number of
counterparts and by different parties in separate counterparts, each of which
when so executed and delivered shall be deemed to be an original, but all such
counterparts together shall constitute one and the same agreement. The terms
hereof may not be amended or modified except in writing executed by the Assignor
and the Assignee. Any change in the Settlement Date to an earlier date than that
specified on the Assignment Execution Form shall require the consent of the
Agent. The terms hereof shall bind and inure to the benefit of and be
enforceable by the parties executing (or deemed to have consented to) the
Assignment Execution Form and their respective successors and permitted assigns.
8 Effectiveness of Notices.
------------------------
Notices required to be given and other documents required to be
delivered pursuant to the terms hereof shall be deemed given or delivered when
actually received unless sent by facsimile transmission, in which case such
notice or other document shall be deemed given or delivered when sent (as
established by sender's facsimile transmission machine printout or similar
mechanical record).
9 Quebec Addendum.
---------------
Addendum 1 to Exhibit "O" is hereby incorporated herein.
<PAGE>
ASSIGNMENT EXECUTION FORM
-------------------------
This Assignment Execution Form incorporates by reference all of the
terms and conditions of the Assignment and Assumption Agreement which is
attached hereto. By executing this Assignment Execution Form, and pursuant to
the terms of such Assignment and Assumption Agreement, the Assignor sells and
assigns to the Assignee, and the Assignee purchases and assumes from the
Assignor, in each case without recourse, representation or warranty (except as
set forth in the Assignment and Assumption Agreement), all of the Assignor's
right, title and interest in and to, and all of the Assignor's obligations with
respect to, the Assigned Shares (as calculated herein), and the Assignor are
released from such obligations.
1 Loan Agreement:
Title: Loan Agreement dated as of December 22, 1997
among InterTAN Canada Ltd., as Canadian
Borrower, Inter TAN U.K. Limited, as U.K.
Borrower, InterTAN, Inc., as a guarantor, Bank
of America Canada, as Agent and Lender and
Bank of America N.T. & S.A. (London, England
Branch Office), as a U.K. Lender, as amended
by Rectification and Amendment No. 1 dated
February 24, 1998, Second Amendment to Loan
Agreement dated as of January, 1999, Third
Amendment to Loan Agreement dated as of April
12, 1999 and Fourth Amendment to Loan
Agreement dated as of July 31, 1999.
Date: December 22, 1997
Name of Borrower(s): InterTAN Canada Ltd.
Name of Agent: Bank of America Canada
2 Name of Assignor: Congress Financial Corporation
(The Agent must enter the date of delivery to it of this Assignment
Execution Form, executed by Assignor and Assignee, and MUST INITIAL AND
RETURN A COPY OF THIS PAGE TO Assignor.)
3 Name of Assignee: Bank of America Canada
4 Assigned Shares:
<PAGE>
(a) Total Loan Agreement Commitment for All U.S.: $50,000,000
Lenders as of Contract Date
- --------------------------------------------------------------------------------
(b) Assigned Share of Assignor U.S.: $16,666,666.66
- --------------------------------------------------------------------------------
(c) Percentage Amount of Assigned Share of 33%
Assignor of Total Commitments
- --------------------------------------------------------------------------------
(d) Total Loans Outstanding for All Lenders as U.S.: $nil
of Contract Date (exclusive of Letters of
Credit)
- --------------------------------------------------------------------------------
(e) Outstanding Amount of Assigned Loans U.S.: $nil
- --------------------------------------------------------------------------------
5 Sales Price of Assigned Shares: See Schedule I (Schedule I may be omitted
when form is sent to the Agent).
Consent to/Acknowledged by as of October 28, 1999.
BANK OF AMERICA CANADA Assignor)
CONGRESS FINANCIAL CORPORATION
By: /s/Robert Kizell By: /s/ Vicky Geist
Name: Robert Kizell Name: Vicky Geist
Title: Vice-President Title: Vice President
(Assignee)
BANK OF AMERICA CANADA
By: /s/Robert Kizell
Name: Robert Kizell
Title: Vice-President
The undersigned hereby intervene in the foregoing Assignment and Assumption
Agreement and unconditionally acquiesces in the assignment referred to therein
and agrees to pay the "Termination Fee" referred to in Schedule I.
INTERTAN CANADA LTD.
By: /s/James G. Gingerich
Name: James G. Gingerich
Title: Vice President
<PAGE>
-3-
Schedule I
Attached to Assignment
Execution Form executed
by Congress Financial Corporation, as Assignor
and Bank of America Canada, as Assignee
Principal Amount to be paid for Assigned Shares U.S.: $0
Canadian Unused Line Fee U.S.: $
L/C Fee U.S.: $
Termination Fee (to be paid by Canadian Borrower) U.S.: $
Net Payment due by Assignee U.S.: $
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 69,323
<SECURITIES> 0
<RECEIVABLES> 21,484
<ALLOWANCES> 0
<INVENTORY> 125,511
<CURRENT-ASSETS> 221,161
<PP&E> 22,130
<DEPRECIATION> 0
<TOTAL-ASSETS> 247,564
<CURRENT-LIABILITIES> 103,895
<BONDS> 0
0
0
<COMMON> 30,231
<OTHER-SE> 101,696
<TOTAL-LIABILITY-AND-EQUITY> 247,564
<SALES> 169,167
<TOTAL-REVENUES> 169,221
<CGS> 98,983
<TOTAL-COSTS> 98,983
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (183)
<INCOME-PRETAX> 22,439
<INCOME-TAX> 10,079
<INCOME-CONTINUING> 12,360
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,360
<EPS-BASIC> 0.41
<EPS-DILUTED> 0.39
</TABLE>
