<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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
- ----------------------
1-10471
CRAFTMADE INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2057054
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
650 South Royal Lane, Suite 100 Coppell, Texas 75019
- ---------------------------------------------- --------
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (972) 393-3800
--------------
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 .
--- ---
6,976,361 shares of Common Stock were outstanding as of November 12, 1999.
<PAGE> 2
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
Index to Quarterly Report on Form 10-Q
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Income for the three
months ended September 30, 1999 and 1998.
Condensed Consolidated Balance Sheets as of September 30, 1999
and June 30, 1999.
Condensed Consolidated Statement of Changes in Stockholders'
Equity for the three months ended September 30, 1999.
Condensed Consolidated Statements of Cash Flows for the three
months ended September 30, 1999 and 1998.
Notes to Condensed Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Item 3. Quantitative and qualitative disclosures about market risk
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE> 3
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-----------------------------
September 30, September 30,
1999 1998
------------- -------------
(In thousands except per share data)
<S> <C> <C>
Net Sales $ 21,654 $ 23,492
Cost of goods sold 13,549 15,016
-------- --------
Gross profit 8,105 8,476
-------- --------
Selling, general and
administrative expenses 4,765 3,994
Interest expense, net 338 408
Depreciation and amortization 211 202
-------- --------
Total Expenses 5,314 4,604
-------- --------
Income before income taxes
and minority interest 2,791 3,872
Provision for income taxes 885 1,410
-------- --------
Income before minority interest 1,906 2,462
Minority interest (344) (266)
-------- --------
Net income $ 1,562 $ 2,196
======== ========
Basic and diluted
earnings per common share $ .22 $ .29
======== ========
Cash dividends declared
per common share $ .02 $ .02
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 4
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30,
1999 June 30,
(Unaudited) 1999
------------- --------
(In thousands)
<S> <C> <C>
Current assets:
Cash $ 1,706 $ 1,563
Accounts receivable - trade,
net of allowance 12,221 14,586
Inventory 14,367 13,779
Prepaid expenses and other
current assets 1,704 1,507
------- -------
Total current assets 29,998 31,435
------- -------
Property and equipment, net 9,616 9,691
------- -------
Other assets:
Goodwill, net 5,447 5,543
Other assets 41 48
------- -------
Total other assets 5,488 5,591
------- -------
$45,102 $46,717
======= =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 5
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30,
1999 June 30,
(Unaudited) 1999
------------- --------
(In thousands)
<S> <C> <C>
Current liabilities:
Note payable, facility-
current portion $ 805 $ 788
Revolving line of credit 14,950 11,950
Accounts payable - trade and
commissions 2,180 4,518
Income taxes payable 1,131 446
Other accrued liabilities 413 426
-------- --------
Total current liabilities 19,479 18,128
-------- --------
Note payable, facility -
long term portion 4,470 4,677
Other liabilities 83 83
Minority interest 353 466
-------- --------
Total liabilities 24,385 23,354
-------- --------
Stockholders' equity:
Series A cumulative, convertible,
callable preferred stock, $1.00
par value, 2,000,000 shares
authorized; 32,000 shares issued 32 32
Common stock, $.01 par value,
15,000,000 shares authorized,
9,316,535 shares issued 93 93
Additional paid-in capital 12,453 12,453
Retained earnings 20,469 19,046
-------- --------
33,047 31,624
Less: treasury stock, 2,340,177
and 1,917,677 common shares at
cost as of September 30, 1999 and
June 30, 1999, respectively
and 32,000 preferred shares
at cost (12,330) (8,261)
-------- --------
Total stockholders' equity 20,717 23,363
-------- --------
$ 45,102 $ 46,717
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 6
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
VOTING COMMON STOCK SERIES A ADDITIONAL TREASURY STOCK
------------------- PREFERRED PAID-IN RETAINED -----------------
SHARES AMOUNT STOCK CAPITAL EARNINGS SHARES AMOUNT TOTAL
------- -------- --------- ---------- -------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(In thousands)
Balance as of June 30, 1999 9,317 $ 93 $ 32 $ 12,453 $ 19,046 1,950 $ (8,261) $ 23,363
Stock Repurchase 422 (4,069) (4,069)
Net Income for the three months
ended September 30, 1999 1,562 1,562
Cash Dividends (139) (139)
----- -------- -------- -------- -------- ----- -------- --------
Balance as of September 30, 1999 9,317 $ 93 $ 32 $ 12,453 $ 20,469 2,372 $(12,330) $ 20,717
===== ======== ======== ======== ======== ===== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 7
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------
September 30, September 30,
1999 1998
------------ -------------
(In thousands)
<S> <C> <C>
Net cash provided by operating
activities: $ 2,040 $ 3,225
------- -------
Cash flows from investing activities:
TSI acquisition -- (2,041)
Net additions to equipment (39) (36)
------- -------
Net cash used for investing activities (39) (2,077)
------- -------
Cash flows from financing activities:
Net proceeds from
Revolving lines of credit 3,000 1,729
Principal payments for note payable (193) (156)
Treasury stock purchases (4,069) --
Cash dividends (139) (100)
Distributions to minority interest (457) (341)
------- -------
Net cash provided by (used for)
financing activities (1,858) 1,132
------- -------
Net increase in cash 143 2,280
Cash at beginning of period 1,563 925
------- -------
Cash at end of period $ 1,706 $ 3,205
======= =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 8
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Non-cash disclosure:
On July 1, 1998, the Company acquired the assets and assumed certain liabilities
of Trade Source International, Inc. In connection with the acquisition, cash was
paid as follows (in thousands):
<TABLE>
<S> <C>
Fair value of assets acquired
(including goodwill) $ 19,269
Liabilities assumed ( 8,269)
Stock issued ( 7,379)
--------
Cash paid 3,621
Less: cash acquired (1,580)
--------
Net cash paid for acquisition $ 2,041
========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF CRAFTMADE INTERNATIONAL, INC.
AND SUBSIDIARIES
SEPTEMBER 30, 1999
(Unaudited)
Note 1 - BASIS OF PREPARATION AND PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
and include all adjustments which are, in the opinion of management, necessary
for a fair presentation. The condensed consolidated financial statements include
the accounts of the Company and its subsidiaries. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The Company believes that the
disclosures are adequate to make the information presented not misleading;
however, it is suggested that these financial statements be read in conjunction
with the financial statements and the notes thereto which are incorporated by
reference in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1999. The financial data for the interim periods may not necessarily be
indicative of results to be expected for the year.
Certain amounts for the three months ended September 30, 1998 have been
reclassified to conform with the current quarter presentation.
Note 2 - TREASURY STOCK PURCHASES
On March 17, 1999, the Company's Board of Directors authorized the Company's
management to repurchase up to 200,000 shares of the Company's outstanding
stock. During the first quarter of fiscal 2000 the Company repurchased the
remaining 22,500 shares at an aggregate cost of $208,000 under this plan.
On August 13, 1999, the Company's Board of Directors authorized the Company's
management to repurchase an additional 400,000 shares of the Company's
outstanding common stock. At September 30, 1999, the Company had repurchased
400,000 shares at an aggregate cost of $3,861,000 related to this plan.
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF CRAFTMADE INTERNATIONAL, INC.
AND SUBSIDIARIES
SEPTEMBER 30, 1999
(Unaudited)
Note 3 - EARNINGS PER SHARE
The following is a reconciliation of the numerator and denominator used in the
basic and diluted EPS calculations:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
September 30, September 30,
1999 1998
------------ ------------
(In thousands, except per share data)
<S> <C> <C>
Basic and diluted EPS:
Numerator: Net income $ 1,562 $2,196
======== ======
Basic denominator: Common
shares outstanding 7,250 7,545
======== ======
Basic EPS $ .22 $ .29
======== ======
Diluted denominator: Common
shares outstanding 7,250 7,545
Options -- 15
-------- ------
Total shares 7,250 7,560
======== ======
Diluted EPS $ .22 $ .29
======== ======
</TABLE>
Note 4 - DERIVATIVE FINANCIAL INSTRUMENTS
During the first quarter of fiscal 2000, the Company entered into an interest
rate swap agreement, with a maturity of December 26, 2003, to manage its
exposure to interest rate movements by effectively converting its long-term
facility debt from fixed to variable rates. The notional amount of the interest
rate swap subject to variable rates as of September 30, 1999 was $5,275,000,
which decreases as payments are made on the long-term debt. Under this
agreement, the Company has contracted to pay a variable rate
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF CRAFTMADE INTERNATIONAL, INC.
AND SUBSIDIARIES
SEPTEMBER 30, 1999
(Unaudited)
Note 4 - DERIVATIVE FINANCIAL INSTRUMENTS (con't)
equal to LIBOR plus 2.43% (7.81% at September 30, 1999) and receive a fixed rate
of 8.125%. This agreement is accounted for as a hedge of fixed rate debt and
interest rate differentials paid or received under this agreement will be
recognized as adjustments to interest expense. Gains or losses on terminated
swaps will be recognized over the remaining life of the underlying obligation as
an adjustment to interest expense. The fair value of the swap agreement
approximated ($43,835) at September 30, 1999. This amount approximates the
present value of the difference between estimated future variable-rate payments
and fixed-rate receipts. This amount has not been recognized in the Condensed
Consolidated Financial Statements, since it is accounted for as a hedge and the
Company has no present intention of terminating the swap prior to the maturity
date of the debt.
Note 5 - SEGMENT INFORMATION
The Company has two operating segments: Craftmade and TSI. The Craftmade segment
primarily derives it revenue from home furnishings including ceiling fans, light
kits, bathstrip lighting and lamps offered primarily through lighting showrooms.
The TSI segment derives its revenue from outdoor lighting and fan accessories
marketed solely to mass merchandisers.
The accounting policies of the segments are the same as those described in Note
2 - Summary of Significant Accounting Policies to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1999. The Company evaluates the
performance of its segments and allocates resources to them based on their
operating profit and loss and cash flows.
<PAGE> 12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF CRAFTMADE INTERNATIONAL, INC.
AND SUBSIDIARIES
SEPTEMBER 30, 1999
(Unaudited)
Note 5 - SEGMENT INFORMATION (con't)
The following table presents information about the reportable segments (in
thousands):
<TABLE>
<CAPTION>
Craftmade TSI Total
--------- ------- -------
<S> <C> <C> <C>
For the three months ended
September 30, 1999:
Net sales from external customers $13,303 $ 8,351 $21,654
Operating profit 2,348 781 $ 3,129
For the three months ended September 30, 1998:
Net sales from external customers $12,219 $11,273 $23,492
Operating profit 2,560 1,720 $ 4,280
</TABLE>
<PAGE> 13
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Cautionary Statement
With the exception of historical information, the matters discussed under
"Results of Operations" and "Liquidity and Capital Resources" contain
forward-looking statements. There are certain important factors which could
cause results to differ materially than those anticipated by some of the
forward-looking statements. Some of these important factors include, among other
things, changes from anticipated levels of sales, whether due to future national
or regional economic and competitive conditions, changes in relationships with
customers, TSI's dependence on select mass merchandisers, customer acceptance of
existing and new products, pricing pressures due to excess capacity, raw
material cost increases, changes in tax or interest rates, unfavorable economic
and political developments in Asia, the location of the Company's primary
vendors, declining conditions in the home construction industry,resolution of
the Year 2000 issue, inability to realize deferred tax assets, and other
uncertainties, all of which are difficult to predict and many of which are
beyond the control the Company.
Results of Operations
Net sales decreased $1,838,000, to $21,654,000 for the three month period ended
September 30, 1999 from $23,492,000 for the same three month period last year.
Net sales from Craftmade increased $1,084,000, to $13,303,000 for the three
months ended September 30, 1999 from $12,219,000 for the same three month period
last year. This 8.9% increase was primarily the result of the success of several
recently-introduced fan styles, the growing acceptance of its outdoor lighting
product line and the strength of the housing market. The Company's management
anticipates that Craftmade will continue to benefit from its marketing strategy
of dynamic expansion of its product lines with unique, innovatively-designed
products and the selective cross-marketing of TSI's outdoor lighting line to
Craftmade's customer base. This increase was offset by a $2,922,000 decrease in
TSI's net sales, to $8,351,000 for the three months ended September 30, 1999
from $11,273,000 for the same three month period last year. This decrease was
primarily attributable to one of TSI's customers reducing their level of
purchasing during the first quarter of fiscal 1999 while they continued to sell
through previously purchased inventory. The Company's management anticipates
that this customer's purchasing will strengthen as new products are introduced
over the next three quarters.
Gross profit for the three months ended September 30 decreased to $8,105,000, or
37.4% of net sales, in 1999 from $8,476,000, or 36.1% of net sales, in 1998.
This decrease in gross profit was
<PAGE> 14
primarily the result of the decrease in TSI's net sales and a slight decrease in
TSI's gross profit margin, to 26.7% in 1999 from 28.3% in 1998. The decrease in
TSI's gross profit margin was the result of an increase in direct shipment
sales, which carry lower margins than domestic shipments. The Company's
management anticipates that gross profit margins for TSI will remain at current
levels for this fiscal year. TSI's gross profit decrease was partially offset by
a $585,000 increase in Craftmade's gross profit, to $5,874,000, or 44.2% of net
sales, in 1999 from $5,289,000, or 43.3% of net sales, in 1998. Craftmade's
increase in gross profit margin is attributable to the continued success of
Craftmade's higher-margin, proprietary products. The Company's management
anticipates that Craftmade's gross profit margins will stabilize at current
levels provided that it continues to benefit from the increasing demand for its
proprietary products.
Total selling, general and administrative expenses increased to $4,765,000, or
22.0% of net sales, for the three months ended September 30, 1999 from
$3,994,000, or 17.0% of net sales, for the same three month period last year.
This increase was primarily the result of a $782,000 increase in selling,
general and administrative expenses of Craftmade, to $3,430,000, or 25.8% of net
sales, in 1999 from $2,648,000, or 21.7% of net sales, in 1998. Craftmade's
increased selling, general and administrative expenses are primarily
attributable to increased freight expense associated with higher rates imposed
by its carriers. The Company has also increased its labor force to meet the
demands of higher sales and the acquisition of TSI. These increases have
contributed to the increase in absolute dollar value of selling, general and
administrative expenses as well as a percentage of net sales. In addition,
commissions and certain other costs directly correlated to Craftmade's sales
have increased accordingly. The Company's management anticipates that, for the
near term, selling, general and administrative expenses for Craftmade will
approximate the current level. Selling, general and administrative expenses for
TSI decreased $11,000, to $1,335,000, or 16.0% of net sales, in 1999 from
$1,346,000, or 11.9% of net sales, in 1998. This increase in percentage was
primarily the result of decreased sales. Lower selling, general and
administrative expenses as a percentage of sales were achieved by TSI due to
sales from direct shipments from vendor facilities. The Company's management
anticipates that new product introductions will increase TSI's sales, and thus
selling, general and administrative expenses as a percentage of sales will be
lower than the current level.
Net interest expense decreased $70,000 to $338,000 for the three months ended
September 30, 1999 from $408,000 for the same three month period last year. This
decrease was primarily the result of a more favorable borrowing rate and lower
interest on the facility note which is being reduced by prepayments. This
decrease was partially offset by $3,000,000 in additional borrowings under the
Company's line of credit during the quarter ended September 30, 1999. The
Company's management intends to pursue a strategy of debt reduction as excess
cash flow is available.
<PAGE> 15
Minority interest of $344,000 and $266,000 for the three months ended September
30, 1999 and 1998, respectively, represented the 50% ownership of PHI by a
non-company owned shareholder. The non-company owned shareholder interest has
been accounted for as minority interest. TSI is able to exert control over the
operations of PHI by virtue of having a majority of the Board of Directors.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash increased $143,000, from $1,563,000 at June 30, 1999 to
$1,706,000 at September 30, 1999. The Company's operating activities provided
cash of $2,040,000, primarily attributable to the Company's net income from
operations.
The $39,000 of cash used for investing activities related to the purchase of
general warehouse, office and computer equipment.
The $1,858,000 of cash used for financing activities was primarily the result of
(i) the repurchase of 422,500 shares of the Company's common stock pursuant to
the Company's stock repurchase plans, at an aggregate cost of $4,069,000, (ii)
distributions to PHI's minority interest shareholder of $457,000, (iii)
principal payments of $193,000 on the notes payable, and (iv) cash dividends of
$139,000. These amounts were partially offset by the net advance of $3,000,000
under the Company's lines of credit. It is management's intention to repurchase
its common stock from time to time under Board approved plans as long as the
Company's common stock continues to present an attractive investment for the
Company.
At September 30, 1999, subject to continued compliance with certain covenants
and restrictions, the Company had $14,000,000 available on its line of credit of
which $13,000,000 had been utilized. In addition, PHI had $3,000,000 available
on its line of credit, of which $1,950,000 had been utilized. The Company's
management believes that its current lines of credit, combined with cash flows
from operations, are adequate to fund the Company's current operating needs,
make annual payments approximating $1,400,000 under the facility note payable,
fund anticipated capital expenditures, fund possible future stock repurchase
plans, as well as fund its projected growth over the next twelve months. In
addition, it is management's intention to utilize excess cash flow to reduce
outstanding indebtedness.
At September 30, 1999, $5,275,000 remained outstanding under the twelve year
note payable for the Company's 378,000 square foot operating facility. The
Company's management believes that this facility will be sufficient for its
purposes for the foreseeable future.
<PAGE> 16
During the first quarter of fiscal 2000, the Company entered into a letter
agreement with Chase Bank of Texas, N.A., pursuant to which the Company
conducted a fixed-to-floating interest rate swap. See Note 4 - Derivative
Financial Instruments in the Notes to Condensed Consolidated Financial
Statements and Item 3 - Quantitative and Qualitative Disclosures about Market
Risk. The Company does not believe that this transaction will have a material
effect on its financial condition.
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
00 as the year 1900 rather than the year 2000. The Year 2000 Issue potentially
not only impacts information technology systems such as traditional computer
systems, but also non-information technology systems containing microcontrollers
or other embedded technology, such as elevators and other equipment and
machinery. The Year 2000 Issue could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities. As a result, the Year 2000 Issue could
have a material adverse impact on the Company's business and its customers in
ways that cannot be fully determined at this time.
State of Readiness and Costs. The Company's analysis of the Year 2000 Issue
encompasses four phases: assessment, renovation, testing and implementation. The
assessment phase involves an investigation of the Company's systems for
potential Year 2000 Issues. The renovation phase involves the modification of
the Company's current systems, and the testing phase involves the validation of
these modifications. The implementation phase involves the ultimate use of the
converted systems by the Company.
The Company has assessed all systems that could potentially be affected by the
Year 2000 Issue, including facility systems, telephone hardware and software,
out-sourced services, suppliers and customers. The Company has upgraded, as
needed, and tested all systems for Year 2000 compliance, at a cost of $12,000.
In addition to the current assessment of its systems, the Company is working
with its key suppliers, vendors, customers and other third parties with which it
has a material relationship to assist such parties in achieving compliance with
respect to the Year 2000 Issue in those systems affecting the Company's
operations. Although the Company believes that such persons are working
diligently to properly address the Year 2000 Issue, the Company cannot guarantee
that these third parties will convert their systems in a timely manner, or that
a failure to convert by another company or a conversion that is incompatible
with the Company's systems would not have a material adverse effect on the
Company. The Company's management believes that, although the nature of business
of Craftmade's primary vendor limits its exposure to the Year 2000
<PAGE> 17
Issue, the distribution channels utilized by that vendor could present risk as
it relates to the Year 2000 Issue.
Risks and Contingency Plans. The Company has created a contingency plan in the
event that the Company's efforts to address the Year 2000 issues are not
successful. Should the Company's Year 2000 efforts be unsuccessful, the Company
is not currently able to estimate the effects on its results of operations,
liquidity and financial condition.
<PAGE> 18
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information set forth below constitutes a "forward looking statement." See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Cautionary Statement."
As a result of the terms of the Company's note payable on its operating
facility, the Company is subject to market risk associated with adverse changes
in interest rates. In an effort to reduce this market risk, the Company entered
into an interest rate swap agreement (the "Swap Agreement") with Chase Bank of
Texas, National Association ("Chase") during the first quarter of fiscal 2000.
The Swap Agreement is held by the Company for non-trading purposes and is
accounted for by the Company as a hedging instrument, with any realized gains or
losses recorded as adjustments to interest expense.
The Swap Agreement is based on a notional principle amount of indebtedness equal
to the balance of the facility note payable(the "Notional Amount"), which
totaled $5,275,000 on September 30, 1999. During the term of the Swap Agreement,
the Company receives a fixed rate of interest (8.125%) from Chase on such
Notional Amount in consideration of its obligation to pay a floating rate of
interest on such Notional Amount. The floating rate of interest is based on the
regularly published London Interbank Offered Rate ("LIBOR"). The Swap Agreement
matures on December 26, 2003.
Although the Company entered into the Swap Agreement to reduce its exposure to
changes in interest rates, a sharp rise in interest rates could materially
adversely affect the financial condition and results of operations of the
Company. Under the Swap Agreement, for each one percent (1%) incremental
increase in LIBOR, the Company's annualized interest expense would increase by
approximately $52,750. Consequently, an increase in LIBOR of five percent (5%)
would result in an estimated annualized increase of interest expense for the
Company of approximately $263,750.
<PAGE> 19
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
not applicable
Item 2. Changes in Securities
not applicable
Item 3. Defaults Upon Senior Securities
not applicable
Item 4. Submission of Matters to a Vote of Security
Holders
not applicable
Item 5. Other Information
not applicable
Item 6. Exhibits and Reports of Form 8-K
a). Exhibits
3.1 Certificate of Incorporation of the
Company, filed as Exhibit 3(a)(2) to the
Company's Post Effective Amendment No. 1
to Form S-18 (File No. 33-33594-FW) and
incorporated by reference therein.
3.2 Certificate of Amendment of Certificate of
Incorporation of the Company, dated March
24, 1992 and filed as Exhibit 4.2 to the
Company's Form S-8 (File No. 333-44337)
and incorporated by reference therein.
3.3 Amended and Restated Bylaws of the
Company, filed as Exhibit 3(b)(2) to the
Company's Post Effective Amendment No. 1
to Form S-18 (File No. 33-33594-FW) and
incorporated by reference therein.
4.1 Specimen Common Stock Certificate, filed
as Exhibit 4.4 to the Company's
Registration
<PAGE> 20
Statement on Form S-3 (File No. 333-70823)
and incorporated by reference therein.
10.1 Earnest Money contract and Design/Build
Agreement dated May 8, 1995, between MEPC
Quorum Properties II, Inc. and Craftmade
International, Inc. (including exhibits),
previously filed as an exhibit in Form
10-Q for the quarter ended December 31,
1995, and herein incorporated by
reference.
10.2 Assignment of Rents and Leases dated
December 21, 1995, between Craftmade
International, Inc. and Allianz Life
Insurance Company of North America
(including exhibits), previously filed as
an exhibit in Form 10-Q for the quarter
ended December 31, 1995, and herein
incorporated by reference.
10.3 Deed of Trust, Mortgage and Security
Agreement made by Craftmade International,
Inc., dated December 21, 1995, to Patrick
M. Arnold, as trustee for the benefit of
Allianz Life Insurance Company of North
America (including exhibits), previously
filed as an exhibit in Form 10-Q for the
quarter ended December 31, 1995, and
herein incorporated by reference.
10.4 Second Amended and Restated Credit
Agreement dated November 14, 1995, among
Craftmade International, Inc., Nations
Bank of Texas, N.A., as Agent and the
Lenders defined therein (including
exhibits), previously filed as an exhibit
in Form 10-Q for the quarter ended
December 31, 1995, and herein incorporated
by reference.
10.5 Lease Agreement dated November 30, 1995,
between Craftmade International, Inc. and
TSI Prime, Inc., previously filed as an
exhibit in Form 10-Q for the quarter ended
December 31, 1995, and herein incorporated
by reference.
10.6 Revolving credit facility with Texas
Commerce Bank, previously filed as an
exhibit in Form 10-K for the year ended
June 30, 1996, and herein incorporated by
reference.
10.7 Agreement and Plan of Merger, dated as of
July 1, 1998, by and among Craftmade
<PAGE> 21
International, Inc., Trade Source
International, Inc., a Delaware
corporation, Neall and Leslie Humphrey,
John DeBlois, the Wiley Family Trust,
James Bezzerides, the Bezzco Inc. Employee
Retirement Trust and Trade Source
International, Inc., a California
corporation, filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K filed
July 15, 1998 (File No. 33-33594-FW) and
herein incorporated by reference.
10.8 Voting Agreement, dated July 1, 1998, by
and among James R. Ridings, Neall Humphrey
and John DeBlois, filed as Exhibit 2.1 to
the Company's Current Report on Form 8-K
filed July 15, 1998 (File No. 33-33594-FW)
and herein incorporated by reference.
10.9 Third Amendment to Credit Agreement, dated
July 1, 1998, by and among Craftmade
International, Inc., a Delaware
corporation, Trade Source International,
Inc., a Delaware corporation, Chase Bank
of Texas, National Association (formerly
named Texas Commerce Bank, National
Association) and Frost National Bank
(formerly named Overton Bank and Trust),
filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K filed July 15,
1998 (File No. 33-33594-FW) and herein
incorporated by reference.
10.10 Consent to Merger by Chase Bank of Texas,
National Association and Frost National
Bank, filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K filed
July 15, 1998 (File No. 33-33594-FW) and
herein incorporated by reference.
10.11 Employment Agreement, dated July 1, 1998,
by and among Craftmade International,
Inc., Trade Source International, Inc., a
Delaware corporation, and Neall Humphrey,
filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K filed July 15,
1998 (File No. 33-33594-FW) and herein
incorporated by reference.
10.12 Employment Agreement, dated July 1, 1998,
by and among Craftmade International,
Inc., Trade Source International, Inc., a
Delaware corporation, and Leslie Humphrey,
filed as Exhibit 2.1 to the Company's
Current Report
<PAGE> 22
on Form 8-K filed July 15, 1998 (File No.
33-33594-FW) and herein incorporated by
reference.
10.13 Employment Agreement, dated July 1, 1998,
by and among Craftmade International,
Inc., Trade Source International, Inc., a
Delaware corporation, and John DeBlois,
filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K filed July 15,
1998 (File No. 33-33594-FW) and herein
incorporated by reference.
10.14 Registration Rights Agreement, dated July
1, 1998, by and among Craftmade
International, Inc., Neall and Leslie
Humphrey and John DeBlois, filed as
Exhibit 2.1 to the Company's Current
Report on Form 8-K filed July 15, 1998
(File No. 33-33594-FW) and herein
incorporated by reference.
10.15 ISDA Master Agreement and Schedule, dated
June 17, 1999, by and among Chase Bank of
Texas, National Association, Craftmade
International, Inc., Durocraft
International, Inc. and Trade Source
International, Inc.
10.16 Confirmation under ISDA Master Agreement,
dated July 23, 1999, from Chase Bank of
Texas, National Association to Craftmade
International, Inc.
27.1 Financial Data Schedule.
b). Reports on Form 8-K
On July 9, 1999, the Company filed a Form 8-K,
reporting the adoption of a Stockholder Rights Plan.
<PAGE> 23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRAFTMADE INTERNATIONAL, INC.
-----------------------------
(Registrant)
Date November 12, 1999 /s/ James R. Ridings
------------------------- ----------------------------------
JAMES R. RIDINGS
President and Chief
Executive Officer
/s/ Kathleen B. Oher
----------------------------------
KATHLEEN B. OHER
Chief Financial Officer
<PAGE> 24
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
-------- -----------
<S> <C>
3.1 Certificate of Incorporation of the
Company, filed as Exhibit 3(a)(2) to the
Company's Post Effective Amendment No. 1
to Form S-18 (File No. 33-33594-FW) and
incorporated by reference therein.
3.2 Certificate of Amendment of Certificate of
Incorporation of the Company, dated March
24, 1992 and filed as Exhibit 4.2 to the
Company's Form S-8 (File No. 333-44337)
and incorporated by reference therein.
3.3 Amended and Restated Bylaws of the
Company, filed as Exhibit 3(b)(2) to the
Company's Post Effective Amendment No. 1
to Form S-18 (File No. 33-33594-FW) and
incorporated by reference therein.
4.1 Specimen Common Stock Certificate, filed
as Exhibit 4.4 to the Company's
Registration Statement on Form S-3
(File No. 333-70823) and incorporated by
reference therein.
10.1 Earnest Money contract and Design/Build
Agreement dated May 8, 1995, between MEPC
Quorum Properties II, Inc. and Craftmade
International, Inc. (including exhibits),
previously filed as an exhibit in Form
10-Q for the quarter ended December 31,
1995, and herein incorporated by
reference.
10.2 Assignment of Rents and Leases dated
December 21, 1995, between Craftmade
International, Inc. and Allianz Life
Insurance Company of North America
(including exhibits), previously filed as
an exhibit in Form 10-Q for the quarter
ended December 31, 1995, and herein
incorporated by reference.
10.3 Deed of Trust, Mortgage and Security
Agreement made by Craftmade International,
Inc., dated December 21, 1995, to Patrick
M. Arnold, as trustee for the benefit of
Allianz Life Insurance Company of North
America (including exhibits), previously
filed as an exhibit in Form 10-Q for the
quarter ended December 31, 1995, and
herein incorporated by reference.
10.4 Second Amended and Restated Credit
Agreement dated November 14, 1995, among
Craftmade International, Inc., Nations
Bank of Texas, N.A., as Agent and the
</TABLE>
<PAGE> 25
<TABLE>
<S> <C>
Lenders defined therein (including
exhibits), previously filed as an exhibit
in Form 10-Q for the quarter ended
December 31, 1995, and herein incorporated
by reference.
10.5 Lease Agreement dated November 30, 1995,
between Craftmade International, Inc. and
TSI Prime, Inc., previously filed as an
exhibit in Form 10-Q for the quarter ended
December 31, 1995, and herein incorporated
by reference.
10.6 Revolving credit facility with Texas
Commerce Bank, previously filed as an
exhibit in Form 10-K for the year ended
June 30, 1996, and herein incorporated by
reference.
10.7 Agreement and Plan of Merger, dated as of
July 1, 1998, by and among Craftmade
International, Inc., Trade Source
International, Inc., a Delaware
corporation, Neall and Leslie Humphrey,
John DeBlois, the Wiley Family Trust,
James Bezzerides, the Bezzco Inc. Employee
Retirement Trust and Trade Source
International, Inc., a California
corporation, filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K filed
July 15, 1998 (File No. 33-33594-FW) and
herein incorporated by reference.
10.8 Voting Agreement, dated July 1, 1998, by
and among James R. Ridings, Neall Humphrey
and John DeBlois, filed as Exhibit 2.1 to
the Company's Current Report on Form 8-K
filed July 15, 1998 (File No. 33-33594-FW)
and herein incorporated by reference.
10.9 Third Amendment to Credit Agreement, dated
July 1, 1998, by and among Craftmade
International, Inc., a Delaware
corporation, Trade Source International,
Inc., a Delaware corporation, Chase Bank
of Texas, National Association (formerly
named Texas Commerce Bank, National
Association) and Frost National Bank
(formerly named Overton Bank and Trust),
filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K filed July 15,
1998 (File No. 33-33594-FW) and herein
incorporated by reference.
10.10 Consent to Merger by Chase Bank of Texas,
National Association and Frost National
Bank, filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K filed
July 15, 1998 (File No. 33-33594-FW) and
herein incorporated by reference.
10.11 Employment Agreement, dated July 1, 1998,
by and among Craftmade International,
Inc., Trade Source
</TABLE>
<PAGE> 26
<TABLE>
<S> <C>
International, Inc., a Delaware
corporation, and Neall Humphrey, filed as
Exhibit 2.1 to the Company's Current
Report on Form 8-K filed July 15, 1998
(File No. 33-33594-FW) and herein
incorporated by reference.
10.12 Employment Agreement, dated July 1, 1998,
by and among Craftmade International,
Inc., Trade Source International, Inc., a
Delaware corporation, and Leslie Humphrey,
filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K filed July 15,
1998 (File No. 33-33594-FW) and herein
incorporated by reference.
10.13 Employment Agreement, dated July 1, 1998,
by and among Craftmade International,
Inc., Trade Source International, Inc., a
Delaware corporation, and John DeBlois,
filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K filed July 15,
1998 (File No. 33-33594-FW) and herein
incorporated by reference.
10.14 Registration Rights Agreement, dated July
1, 1998, by and among Craftmade
International, Inc., Neall and Leslie
Humphrey and John DeBlois, filed as
Exhibit 2.1 to the Company's Current
Report on Form 8-K filed July 15, 1998
(File No. 33-33594-FW) and herein
incorporated by reference.
10.15 ISDA Master Agreement and Schedule, dated
June 17, 1999, by and among Chase Bank of
Texas, National Association, Craftmade
International, Inc., Durocraft
International, Inc. and Trade Source
International, Inc.
10.16 Confirmation under ISDA Master Agreement,
dated July 23, 1999, from Chase Bank of
Texas, National Association to Craftmade
International, Inc.
27.1 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10.15
(MULTICURRENCY--CROSS BORDER)
ISDA(R)
INTERNATIONAL SWAP DEALERS ASSOCIATION, INC.
MASTER AGREEMENT
dated as June 17, 1999
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION and CRAFTMADE INTERNATIONAL, INC.,
DUROCRAFT INTERNATIONAL, INC. and TRADE SOURCE INTERNATIONAL, INC., as joint and
several obligors have entered and/or anticipate entering into one or more
transactions (each a "Transaction") that are or will be governed by this Master
Agreement, which includes the schedule (the "Schedule"), and the documents and
other confirming evidence (each a "Confirmation") exchanged between the parties
confirming those Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will
have the meanings therein specified for the purpose of this Master
Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions
of the Schedule and the other provisions of this Master Agreement, the
Schedule will prevail. In the event of any inconsistency between the
provisions of any Confirmation and this Master Agreement (including the
Schedule), such Confirmation will prevail for the purpose of the
relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single
agreement between the parties (collectively referred to as this
"Agreement"), and the parties would not otherwise enter into any
Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the
relevant Confirmation or otherwise pursuant to this Agreement, in
freely transferable funds and in the manner customary for payments in
the required currency. Where settlement is by delivery (that is, other
than by payment), such delivery will be made for receipt on the due
date in the manner customary for the relevant obligation unless
otherwise specified in the relevant Confirmation or elsewhere in this
Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event
of Default with respect to the other party has occurred and is
continuing, (2) the condition precedent that no Early Termination Date
in respect of the relevant Transaction has occurred or been effectively
designated and (3) each other applicable condition precedent specified
in this Agreement.
Copyright(C) 1992 by International Swap Dealers Association, Inc.
<PAGE> 2
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five
Local Business Days prior to the scheduled date for the payment or
delivery to which such change applies unless such other party gives
timely notice of a reasonable objection to such change.
(c) NETTING: If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to. apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS-UP. ALL payments under this Agreement will be made without
any deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified
by the practice of any relevant governmental revenue authority, then in
effect. If a party is so required to deduct or withhold, then that
party ("X") will:--
(1) promptly notify the other party ("Y") of such
requirement;
(2) pay to the relevant authorities the full amount
required to be deducted or withheld (including the
full amount required to be deducted or withheld from
any additional amount paid by X to Y under this
Section 2(d)) promptly upon the earlier of
determining that such deduction or withholding is
required or receiving notice that such amount has
been assessed against Y;
(3) promptly forward to Y an official receipt (or a
certified copy), or other documentation reasonably
acceptable to Y, evidencing such payment to such
authorities, and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in
addition to the payment to which Y is otherwise
entitled under this Agreement, such additional amount
as is necessary to ensure that the net amount
actually received by Y (free and clear of
Indemnifiable Taxes, whether assessed against X or Y)
will equal the full amount Y would have received had
no such deduction or withholding been required.
However, X will not be required to pay any additional
amount to Y to the extent that it would not be
required to be paid but for:--
(A) the failure by Y to comply with
or perform any agreement contained
in Section 4(a)(i), 4(a)(iii) or
4(d); or
(B) the failure of a representation
made by Y pursuant to Section 3(f)
to be accurate and true unless such
failure would not have occurred but
for (i) any action taken by a taxing
authority, or brought in a court of
competent jurisdiction, on or after
the date on which a Transaction is
entered into (regardless of whether
such action is taken or brought with
respect to a party to this
Agreement) or (ii) a Change in Tax
Law.
2 ISDA(R) 1992
<PAGE> 3
(ii) LIABILITY. If:--
(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to
make any deduction or withholding in respect of which X would
not be required to pay an additional amount to Y under Section
2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly
against X,
then, except to the extent Y has satisfied or then satisfies the liability
resulting from such Tax, Y will promptly pay to X the amount of such liability
(including any related liability for interest, but including any related
liability for penalties only if Y has failed to comply with or perform any
agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant
Transaction, a party that defaults in the performance of any payment
obligation will, to the extent permitted by law and subject to Section
6(c), be required to pay interest (before as well as after judgment) on
the overdue amount to the other party on demand in the same currency as
such overdue amount, for the period from (and including) the original
due date for payment to (but excluding) the date of actual payment, at
the Default Rate. Such interest will be calculated on the basis of
daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in
respect of the relevant Transaction, a party defaults in the
performance of any obligation required to be settled by delivery, it
will compensate the other party on demand if and to the extent provided
for in the relevant Confirmation or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to
perform its obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and has taken
all necessary action to authorise such execution, delivery and
performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and
performance do not violate or conflict with any law applicable to it,
any provision of its constitutional documents, any order or judgment of
any court or other agency of government applicable to it or any of its
assets or any contractual restriction binding on or affecting it or any
of its assets;
(iv) CONSENTS. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with; and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal,
valid and binding obligations enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganisation,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
3 ISDA(R) 1992
<PAGE> 4
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has
occurred and is continuing and no such event or circumstance would
occur as a result of its entering into or performing its obligations
under this Agreement or any Credit Support Document to which it is a
party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or
proceeding at law or in equity or before any court, tribunal,
governmental body, agency or official of any arbitrator that is likely
to affect the legality, validity or enforceability against it of this
Agreement or any Credit Support Document to which it is a party or its
ability to perform its obligations under this Agreement or such Credit
Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is
identified for the purpose of this Section 3(d) in the Schedule is, as
of the date of the information, true, accurate and complete in every
material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(e) is accurate
and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the
Schedule as being made by it for the purpose of this Section 3(f) is
accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or,
in certain cases under subparagraph (iii) below, to such government or
taxing authority as the other party reasonably directs--
(i) any forms, documents or certificates relating to taxation specified
in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation;
and
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order to
allow such other party or its Credit Support Provider to make a payment
under this Agreement or any applicable Credit Support Document without
any deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of
such demand), with any such form or document to be accurate and
completed in a manner reasonably satisfactory to such other party and
to be executed and to be delivered with any reasonably required
certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain
in full force and effect all consents of any governmental or other
authority that are required to be obtained by it with respect to this
Agreement or any Credit Support Document to which it is a party and
will use all reasonable efforts to obtain any that may become necessary
in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to
comply would materially impair its ability to perform its obligations
under this Agreement or any Credit Support Document to which it is a
party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation
made by it under Section 3(f) to be accurate and true promptly upon
learning of such failure.
(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance
of this Agreement by a jurisdiction in which it is incorporated.
4 ISDA(R) 1992
<PAGE> 5
organised, managed and controlled, or considered to have its seat, or in which a
branch or office through which it is acting for the purpose of this Agreement is
located ("Stamp Tax Jurisdiction") and will indemnify the other party against
any Stamp Tax levied or imposed upon the other party or in respect of the other
party's execution or performance of this Agreement by any such Stamp Tax
Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any
Specified Entity of such party of any of the following events
constitutes an event of default (an "Event of Default") with respect to
such party:--
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or
2(e) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is
given to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to make
any payment under this Agreement or delivery under Section 2(a)(i) or
2(e) or to give notice of a Termination Event or any agreement or
obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied
with or performed by the party in accordance with this Agreement if
such failure is not remedied on or before the thirtieth day after
notice of such failure is given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of
such party to comply with or perform any agreement or
obligation to be complied with or performed by it in
accordance with any Credit Support Document if such failure is
continuing after any applicable grace period his elapsed.
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of
this Agreement (in either case other than in accordance with
its terms) prior to the satisfaction of all obligations of
such party under each Transaction to which such Credit Support
Document relates without the written consent of the other
party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made
or repeated by the party or any Credit Support Provider of such party
in this Agreement or any Credit Support Document proves to have been
incorrect or misleading in any material respect when made or repeated
or deemed to have been made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and after giving effect to
any applicable notice requirement or grace period, there occurs a
liquidation of, an acceleration of obligations under, or an early
termination of, that Specified Transaction; (2) defaults, after giving
effect to any applicable notice requirement or grace period, in making
any payment or delivery due on the last payment, delivery or exchange
date of, or any payment on early termination of, a Specified
Transaction (or such default continues for at least three Local
Business Days if there is no applicable notice requirement or grace
period) or (3) disaffirms, disclaims, repudiates or rejects, in whole
or in part, a Specified Transaction (or such action is taken by any
person or entity appointed or empowered to operate it or act on its
behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default
event of default or other similar condition or event (however
5 ISDA(R) 1992
<PAGE> 6
described) in respect of such party, any Credit Support Provider of such party
or any applicable Specified Entity of such party under one or more agreements or
instruments relating to Specified Indebtedness of any of them (individually or
collectively) in an aggregate amount of not less than the applicable Threshold
Amount as specified in the Schedule) which has resulted in such Specified
Indebtedness becoming, or becoming capable at such time of being declared, due
and payable under such agreements or instruments, before it would otherwise have
been due and payable or (2) a default by such party, such Credit Support
Provider or such Specified Entity (individually or collectively) in making one
or more payments on the due date thereof in an aggregate amount of not less than
the applicable Threshold Amount under such agreements or instruments (after
giving effect to any applicable notice requirement or grace period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has instituted
against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors'
rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or
petition instituted or presented against it, such proceeding
or petition (A) results in a judgment of insolvency or
bankruptcy or the entry of an order for relief or the making
of an order for its winding-up or liquidation or (B) is not
dismissed, discharged, stayed or restrained in each case
within 30 days of the institution or presentation thereof; (5)
has a resolution passed for its winding-up, official
management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or becomes
subject to the appointment of an administrator, provisional
liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its
assets; (7) has a secured party take possession of all or
substantially all its assets or has a distress, execution,
attachment, sequestration or other legal process levied,
enforced or sued on or against all or substantially all its
assets and such secured party maintains possession, or any
such process is not dismissed, discharged, stayed or
restrained, in each case within 30 days thereafter; (8) causes
or is subject to any event with respect to it which, under the
applicable laws of any jurisdiction, has an analogous effect
to any of the events specified in clauses (1) to (7)
(inclusive); or (9) takes any action in furtherance of, of
indicating its consent to, approval of, or acquiescence in,
any of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer:--
(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party or such Credit
Support Provider under this Agreement or any Credit Support
Document to which it or its predecessor was a party by
operation of law or pursuant to an agreement reasonably
satisfactory to the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by
such resulting, surviving or transferee entity of its
obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any
Specified Entity of such party of any event specified below constitutes
an Illegality if the event is specified in (i) below, a Tax Event if
the event is specified in (ii) below or a Tax Event Upon Merger if the
event is specified in (iii) below, and, if specified to be applicable,
a Credit Event
6 ISDA(R) 1992
<PAGE> 7
Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:--
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is
entered into, or due to the promulgation of, or any change in,
the interpretation by any court, tribunal or regulatory
authority with competent jurisdiction of any applicable law
after such date, it becomes unlawful (other than as a result
of a breach by the party of Section 4(b)) for such party
(which will be the Affected Party):--
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in
respect of such Transaction or to comply with any other
material provision of this Agreement relating to such
Transaction; or
(2) to perform, or for any Credit Support Provider of such
party to perform, any contingent or other obligation which the
party (or such Credit Support Provider) has under any Credit
Support Document relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing authority,
or brought in a court of competent jurisdiction, on or after
the date on which a Transaction is entered into (regardless of
whether such action is taken or brought with respect to a
party to this Agreement) or (y) a Change in Tax Law, the party
(which will be the Affected Party) will, or there is a
substantial likelihood that it will, on the next succeeding
Scheduled Payment Date (1) be required to pay to the other
party an additional amount in respect of an Indemnifiable Tax
under Section 2(d)(i)(4) (except in respect of interest under
Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from
which an amount is required to be deducted or withheld for or
on account of a Tax (except in respect of interest under
Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is
required to be paid in respect of such Tax under Section
2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or
(B)).
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be
required to pay an additional amount in respect of an
Indemnifiable Tax under Section 2(d)(i)(4) (except in respect
of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2)
receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect
of which the other party is not required to pay an additional
amount (other than by reason of Section 2(d)(i)(4)(A) or (B)),
in either case as a result of a party consolidating or
amalgamating with, or merging with or into, or transferring
all or substantially all its assets to, another entity (which
will be the Affected Party) where such action does not
constitute an event described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity of
X consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and
such action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting, surviving or
transferee entity is materially weaker than that of X, such Credit
Support Provider or such Specified Entity, as the case may be,
immediately prior to such action (and, in such event, X or its
successor or transferee, as appropriate, will be the Affected Party);
or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event"
is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also
constitutes an Illegality, it will be treated as an Illegality and will
not constitute an Event of Default.
7 ISDA(R) 1992
<PAGE> 8
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event
of Default with respect to a party (the "Defaulting Party") has
occurred and is then continuing, the other party (the "Non-defaulting
Party") may, by not more than 20 days notice to the Defaulting Party
specifying the relevant Event of Default, designate a day not earlier
than the day such notice is effective as an Early Termination Date in
respect of all outstanding Transactions. If, however. "Automatic Early
Termination" is specified in the Schedule as applying to a party, then
an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party
of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6)
or, to the extent analogous thereto, (8), and as of the time
immediately preceding the institution of the relevant proceeding or the
presentation of the relevant petition upon the occurrence with respect
to such party of an Event of Default specified in Section 5(a)(vii)(4)
or, to the extent analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as
the other party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is
the Affected Party, the Affected Party will, as a condition to its
right to designate an Early Termination Date under Section 6(b)(iv),
use all reasonable efforts (which will not require such party to incur
a loss, excluding immaterial, incidental expenses) to transfer within
20 days after it gives notice under Section 6(b)(i) all its rights and
obligations under this Agreement in respect of the Affected
Transactions to another of its Offices or Affiliates so that such
Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days
after the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be
subject to and conditional upon the prior written consent of the other
party, which consent will not be withheld if such other party's
policies in effect at such time would permit it to enter into
transactions with the transferee on the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1)
or a Tax Event occurs and there are two Affected Parties, each party
will use all reasonable efforts to reach agreement within 30 days after
notice thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iv) RIGHT TO TERMINATE. If:--
(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected
with respect to all Affected Transactions within 30 days after
an Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event
Upon Merger or an Additional Termination Event occurs, or a
Tax Event Upon Merger occurs and the Burdened Party is not the
Affected Party,
either party in the case of an Illegality, the Burdened Party in the case of a
Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an
Additional Termination Event if there is more than one Affected Party, or the
party which is not the Affected Party in the case of a Credit Event Upon Merger
or an Additional Termination Event if there is only one Affected Party may, by
not more than 20 days notice to the other party and provided that the relevant
Termination Event is then
8 ISDA(R) 1992
<PAGE> 9
continuing, designate a day not earlier than the day such
notice is effective As an Early Termination Date in respect of
all Affected Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date. each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving
details of the relevant account to which any amount payable to it is to
be paid. In the absence of written confirmation from the source of a
quotation obtained in determining a Market Quotation, the records of
the party obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day
that notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event
of Default) and on the day which is two Local Business Days after the
day on which notice of the amount payable is effective (in the case of
an Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well
as after judgment) in the Termination Currency, from (and including)
the relevant Early Termination Date to (but excluding) the date such
amount is paid, at the Applicable Rate. Such interest will be
calculated on the basis of daily compounding and the actual number of
days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the
Schedule of a payment measure, either "Market Quotation" or "Loss", and
a payment method, either the "First Method" or the "Second Method". If
the parties fail to designate a payment measure or payment method in
the Schedule, it will be deemed that "Market Quotation" or the "Second
Method", as the case may be, shall apply. The amount, if any, payable
in respect of an Early Termination Date and determined pursuant to this
Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from
an Event of Default:--
(1) FIRST METHOD AND MARKET QUOTATION. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A)
the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated
Transactions and the Termination Currency Equivalent of the
Unpaid Amounts owing to the Non-defaulting Party over (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to
the Defaulting Party.
(2) FIRST METHOD AND LOSS. If the First Method and Loss apply,
the Defaulting Party will pay to the Non-defaulting Party, if
a positive number, the Non-defaulting Party's Loss in respect
of this Agreement.
(3) SECOND METHOD AND MARKET QUOTATION. If the Second Method
and Market Quotation apply, an amount will be payable equal to
(A) the sum of the Settlement Amount (determined by the
9 ISDA(R) 1992
<PAGE> 10
Non-defaulting Party) in respect of the Terminated
Transactions and the Termination Currency Equivalent of the
Unpaid Amounts owing to the Non-defaulting Party less (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to
the Defaulting Party. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party: if
it is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(4) SECOND METHOD AND LOSS. If the Second Method and Loss
apply, an amount will be payable equal to the Non-defaulting
Party's Loss in respect of this Agreement. If that amount is a
positive number, the Defaulting Party will pay it to the
Non-defaulting Party: if it is a negative number, the
Non-defaulting Party will pay the absolute value of that
amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:--
(1) ONE AFFECTED PARTY. If there is one Affected Party,
the amount payable will be determined in accordance
with Section 6(c)(i)(3), if Market Quotation applies,
or Section 6(e)(i)(4), if Loss applies, except that,
in either case, references to the Defaulting Party
and to the Non-defaulting Party will be deemed to be
references to the Affected Party and the party which
is not the Affected Party, respectively, and, if Loss
applies and fewer than all the Transactions are being
terminated, Loss shall be calculated in respect of
all Terminated Transactions.
(2) TWO AFFECTED PARTIES. If there are two Affected
Parties:
(A) if Market Quotation applies, each party will
determine a Settlement Amount in respect of the
Terminated Transactions, and an amount will be
payable equal to (I) the sum of (a) one-half of the
difference between the Settlement Amount of the party
with the higher Settlement Amount ("X") and the
Settlement Amount of the party with the lower
Settlement Amount ("Y") and (b) the Termination
Currency Equivalent of the Unpaid Amounts owing to X
less (II) the Termination Currency Equivalent of the
Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its
Loss in respect of this Agreement (or, if fewer than
all the Transactions are being terminated, in respect
of all Terminated Transactions) and an amount will be
payable equal to one-half of the difference between
the Loss of the party with the higher Loss ("X") and
the Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X;
if it is a negative number, X will pay the absolute value of that
amount to Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies
in respect of a party, the amount determined under this Section 6(e)
will be subject to such adjustments as are appropriate and permitted by
law to reflect any payments or deliveries made by one party to the
other under this Agreement (and retained by such other party) during
the period from the relevant Early Termination Date to the date for
payment determined under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies
an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the
loss of bargain and the loss of protection against future risks and
except as otherwise provided in this Agreement neither party will be
entitled to recover any additional damages as a consequence of such
losses.
10 ISDA(R) 1992
<PAGE> 11
7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that: --
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer
of all or substantially all its assets to, another entity (but without
prejudice to any other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for
that payment (the "Contractual Currency"). To the extent permitted by
applicable law, any obligation to make payments under this Agreement in
the Contractual Currency will not be discharged or satisfied by any
tender in any currency other than the Contractual Currency, except to
the extent such tender results in the actual receipt by the party to
which payment is owed, acting in a reasonable manner and in good faith
in converting the currency so tendered into the Contractual Currency,
of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the
Contractual Currency so received falls short of the amount in the
Contractual Currency payable in respect of this Agreement, the party
required to make the payment will, to the extent permitted by
applicable law, immediately pay such additional amount in the
Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so
received exceeds the amount in the Contractual Currency payable in
respect of this Agreement, the party receiving the payment will refund
promptly the amount of such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment
or order expressed in a currency other than the Contractual Currency is
rendered (i) for the payment of any amount owing in respect of this
Agreement, (ii) for the payment of any amount relating to any early
termination in respect of this Agreement or (iii) in respect of a
judgment or order of another court for the payment of any amount
described in (i) or (ii) above, the party seeking recovery, after
recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the
Contractual Currency received by such party as a consequence of sums
paid in such other currency and will refund promptly to the other party
any excess of the Contractual Currency received by such party as a
consequence of sums paid in such other currency if such shortfall or
such excess arises or results from any variation between the rate of
exchange at which the Contractual Currency is converted into the
currency of the judgment or order for the purposes of such judgment or
order and the rate of exchange at which such party is able, acting in a
reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency
with the amount of the currency of the judgment or order actually
received by such party. The term "rate of exchange" includes, without
limitation, any premiums and costs of exchange payable in connection
with the purchase of or conversion into the Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the
other obligations in this Agreement, will be enforceable as separate
and independent causes of action, will apply notwithstanding any
indulgence granted by the party to which any payment is owed and will
not be affected by judgment being obtained or claim or proof being made
for any other sums payable in respect of this Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a
loss had an actual exchange or purchase been made.
11 ISDA(R) 1992
<PAGE> 12
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and
supersedes all oral communication and prior writings with respect
thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing
evidenced by a facsimile transmission) and executed by each of the
parties or confirmed by an exchange of telexes or electronic messages
on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will
survive the termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are
cumulative and not exclusive of any rights, powers, remedies and
privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of
each Transaction from the moment they agree to those terms (whether
orally or otherwise). A Confirmation shall be entered into as soon as
practicable and may be executed and delivered in counterparts
(including by facsimile transmission) or be created by an exchange of
telexes or by an exchange of electronic messages on an electronic
messaging system, which in each case will be sufficient for all
purposes to evidence a binding supplement to this Agreement. The
parties will specify therein or through another effective means that
any such counterpart, telex or electronic message constitutes a
Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power
or privilege in respect of this Agreement will not be presumed to
operate as a waiver, and a single or partial exercise of any right,
power or privilege will not be presumed to preclude any subsequent or
further exercise, of that right, power or privilege or the exercise of
any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken
into consideration in interpreting this Agreement.
10. OFFICES; MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party
that enters into a Transaction through an Office other than its head or
home office represents to the other party that, notwithstanding the
place of booking office or jurisdiction of incorporation or
organisation of such party, the obligations of such party are the same
as if it had entered into the Transaction through its head or home
office. This representation will be deemed to be repeated by such party
on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the
prior written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office
through which it makes and receives payments or deliveries with respect
to a Transaction will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document
12 ISDA(R) 1992
<PAGE> 13
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a
notice or other communication under Section 5 or 6 may not be given by
facsimile transmission or electronic messaging system) to the address
or number or in accordance with the electronic messaging system details
provided (see the Schedule) and will be deemed effective as
indicated:--
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received:
(iii) if sent by facsimile transmission, on the date that transmission
is received by a responsible employee of the recipient in legible form
(it being agreed that the burden of proving receipt will be on the
sender and will not be met by a transmission report generated by the
sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system
details at which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating
to this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to the
non-exclusive jurisdiction of the courts of the State of New York and
the United States District Court located in the Borough of Manhattan in
New York City, if this Agreement is expressed to be governed by the
laws of the State of New York; and
(ii) waives any objection which it may have at any time to the laying
of venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such Proceedings,
that such court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent
(if any) specified opposite its name in the Schedule to receive, for it
and on its behalf, service of process in any Proceedings. If for any
13 ISDA(R) 1992
<PAGE> 14
reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest
extent permitted by applicable law, with respect to itself and its
revenues and assets (irrespective of their use or intended use), all
immunity on the grounds of sovereignty or other similar grounds from
(i) suit, (ii) jurisdiction of any court, (iii) relief by way of
injunction, order for specific performance or for recovery of property,
(iv) attachment of its assets (whether before or after judgment) and
(v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in
the courts of any jurisdiction and irrevocably agrees, to the extent
permitted by applicable law, that it will not claim any such immunity
in any Proceedings.
14. DEFINITIONS
As used in this Agreement:--
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means:
(a) in respect of obligations payable or deliverable (or which would have
been but for Section 2(a)(iii)) by a Defaulting Party, the Default
Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of
either party from and after the date (determined in accordance with
Section 6(d)(ii)) on which that amount is payable, the Default Rate:
(c) in respect of all other obligations payable or deliverable (or which
would have been but for Section 2(a)(iii)) by a Non-defaulting Party,
the Non-default Rate; and
(d) in all other cases, the Termination Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any Law) that occurs on or after the date on which the
relevant Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
14 ISDA(R) 1992
<PAGE> 15
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"LAWFUL" and "UNLAWFUL" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have
15 ISDA(R) 1992
<PAGE> 16
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been required (assuming satisfaction
of each applicable condition precedent) after that Early Termination Date is to
be included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as of
the same day and time (without regard to different time zones) on or as soon as
reasonably practicable after the relevant Early Termination Date. The day and
time as of which those quotations are to be obtained will be selected in good
faith by the party obliged to make a determination under Section 6(e), and, if
each party is so obliged, after consultation with the other. If more than three
quotations are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and lowest
values. If exactly three such quotations are provided, the Market Quotation will
be the quotation remaining after disregarding the highest and lowest quotations.
For this purpose, if more than one quotation has the same highest value or
lowest value. then one of such quotations shall be disregarded. If fewer than
three quotations are provided, it will be deemed that the Market Quotation in
respect of such Terminated Transaction or group of Terminated Transactions
cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"OFFICE" means a branch or office of a party, which may be such party's head or
home office.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of
Terminated Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference
to any Unpaid Amounts) for each Terminated Transaction or group of
Terminated Transactions for which a Market Quotation cannot be
determined or would not (in the reasonable belief of the party making
the determination) produce a commercially reasonable result.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
16 ISDA(R) 1992
<PAGE> 17
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION CURRENCY" has the meaning specified in the Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market
17 ISDA(R) 1992
<PAGE> 18
value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION CRAFTMADE INTERNATIONAL, INC.
(Name of Party) (Name of Party)
By: /s/ STEVE SHIPLEY By: /s/ JAMES R. RIDINGS
----------------------- -----------------------------
Name: Steve Shipley Name:
Title: Vice President Title:
Date: Date:
DUROCRAFT INTERNATIONAL, INC.
By: /s/ JAMES R. RIDINGS
-----------------------------
Name:
Title:
Date:
TRADE SOURCE INTERNATIONAL, INC.
By: /s/ JAMES R. RIDINGS
-----------------------------
Name:
Title
Date:
18 ISDA(R) 1992
<PAGE> 19
(MULTICURRENCY-CROSS BORDER)
EXECUTION COPY
SCHEDULE TO THE MASTER AGREEMENT
DATED AS OF JUNE 17, 1999 BETWEEN
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION ("PARTY A")
AND
CRAFTMADE INTERNATIONAL, INC., DUROCRAFT INTERNATIONAL, INC. AND
TRADE SOURCE INTERNATIONAL, INC., AS JOINT AND SEVERAL OBLIGORS
(COLLECTIVELY, "PARTY B")
PART 1: TERMINATION PROVISIONS AND CERTAIN OTHER MATTERS
(a) "SPECIFIED ENTITY" means, in relation to Party A, for the purpose
of:
SECTION 5(a)(v), none;
SECTION 5(a)(vi), none;
SECTION 5(a)(vii), none; and
SECTION 5(b)(iv), none;
and, in relation to Party B, for the purpose of:
SECTION 5(a)(v), any Affiliate of Party B;
SECTION 5(a)(vi), none;
SECTION 5(a)(vii), C/D/R Incorporated; and
SECTION 5(b)(iv), none.
(b) "SPECIFIED TRANSACTION" will have the meaning specified in Section
14.
(c) The "CROSS-DEFAULT" provisions of Section 5(a)(vi) will not apply
to Party A. The "CROSS-DEFAULT" provisions of Section 5(a)(vi) will apply to
Party B. In connection therewith, "SPECIFIED INDEBTEDNESS" will have the meaning
specified in Section 14, and "THRESHOLD AMOUNT" means USD$100,000.
<PAGE> 20
(d) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) will
not apply to Party A. The "CREDIT EVENT UPON MERGER" provisions of Section
5(b)(iv) will apply to Party B.
(e) The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) will
not apply to Party A or Party B.
(f) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e):
(i) Loss will apply.
(ii) The Second Method will apply.
(g) "TERMINATION CURRENCY" means United States Dollars.
(h) ADDITIONAL TERMINATION EVENT. It shall constitute an Additional
Termination Event under this Agreement if at any time the Credit Agreement (as
defined in Part 5(j) hereof) shall be terminated. For purposes of this
Additional Termination Event, Party B shall be the Affected Party.
PART 2: TAX REPRESENTATIONS
Not applicable.
PART 3: AGREEMENT TO DELIVER DOCUMENTS
For the purpose of Sections 4(a)(i) and (iii) of this Agreement, each party
agrees to deliver the following documents, as applicable:
(a) Tax forms, documents or certificates to be delivered are: none.
<PAGE> 21
(b) Other documents to be delivered are:
<TABLE>
<CAPTION>
PARTY REQUIRED FORM/ DATE BY COVERED BY
TO DELIVER DOCUMENT/ WHICH TO BE SECTION 3(d)
DOCUMENT CERTIFICATE DELIVERED REPRESENTATION
-------- ----------- --------- --------------
<S> <C> <C> <C>
Party B Opinion of counsel satisfactory Upon execution and delivery No
to Party A substantially in the of this Agreement
form of Exhibit I hereto
Party B Certified copies of all Upon execution and delivery Yes
corporate authorizations and any of this Agreement
other documents with respect to
the execution, delivery and
performance of this Agreement
Party B Certificate of authority and Upon execution and delivery Yes
specimen signatures of of this Agreement and
individuals executing this thereafter upon request of
Agreement and Confirmations Party A
</TABLE>
PART 4: MISCELLANEOUS
(a) ADDRESS FOR NOTICES. For the purpose of Section 12(a) of this
Agreement:
Address for notice or communications to Party A:
Any notice shall be delivered to the address or facsimile or telex number
specified below:
<PAGE> 22
Chase Bank of Texas, National Association
Attention: Derivatives Desk
707 Travis
Houston, Texas 77002
Facsimile No.: (713) 216-6977
Address for notice or communications to Party B:
Craftmade International, Inc.
Durocraft International, Inc.
Trade Source International, Inc.
Attention: Ken Cancienne
650 S. Royal Lane, Suite 100
Coppell, Texas 75019
Facsimile No.: (972) 304-3754
(b) PROCESS AGENT. For the purpose of Section 13(c):
Party A appoints as its Process Agent: Not applicable.
Party B appoints as its Process Agent: Not applicable.
(c) OFFICES. The provisions of Section 10(a) will apply to this
Agreement.
(d) MULTIBRANCH PARTY. For the purpose of Section 10 of this Agreement:
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent is Party A, unless
otherwise specified in a Confirmation in relation to the relevant Transaction.
(f) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document:
with respect to Party B, the Craftmade Security Agreement, Durocraft Security
Agreement, Trade Source Security Agreement and Stock Pledge Agreement delivered
pursuant to the Credit Agreement shall each constitute a Credit Support Document
hereunder.
(g) CREDIT SUPPORT PROVIDER. Credit Support Provider means, in relation
to either party, not applicable.
(h) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT REFERENCE TO CHOICE OF
LAW DOCTRINE).
<PAGE> 23
(i) NETTING OF PAYMENTS. Subparagraph (ii) of Section 2(c) will not
apply to any Transaction unless specified in the relevant Confirmation.
(j) "AFFILIATE" will have the meaning specified in Section 14 of this
Agreement.
PART 5: OTHER PROVISIONS
(a) SET-OFF. Any amount (the "Early Termination Amount") payable to one
party (the "Payee") by the other party (the "Payer") under Section 6(e), in
circumstances where there is a Defaulting Party or one Affected Party in the
case where a Termination Event under Section 5(b)(iv) has occurred, will, at the
option of the party ("X") other than the Defaulting Party or the Affected Party
(and without prior notice to the Defaulting Party or the Affected Party), be
reduced by its set-off against any amount(s) (the "Other Agreement Amount")
payable (whether at such time or in the future or upon the occurrence of a
contingency) by the Payee to the Payer (irrespective of the currency, place of
payment or booking office of the obligation) under any other agreement(s)
between the Payee and the Payer or instrument(s) or undertaking(s) issued or
executed by one party to, or in favor of, the other party (and the Other
Agreement Amount will be discharged promptly and in all respects to the extent
it is so set-off). X will give notice to the other party of any set-off effected
under this section.
For this purpose, either the Early Termination Amount or the Other Agreement
Amount (or the relevant portion of such amounts) may be converted by X into the
currency in which the other is denominated at the rate of exchange at which such
party would be able, acting in a reasonable manner and in good faith, to
purchase the relevant amount of such currency.
If an obligation is unascertained, X may in good faith estimate that obligation
and set-off in respect of the estimate, subject to the relevant party accounting
to the other when the obligation is ascertained.
Nothing in this section shall be effective to create a charge or other security
interest. This section shall be without prejudice and in addition to any right
of set-off, combination of accounts, lien or other right to which any party is
at any time otherwise entitled (whether by operation of law, contract or
otherwise).
(b) EXCHANGE OF CONFIRMATIONS. For each Transaction entered into
hereunder, Party A shall promptly send to Party B a Confirmation via facsimile
transmission. Party B agrees to respond to such Confirmation within 10 Business
Days, either confirming agreement thereto or requesting a correction of any
error(s) contained therein. Failure by Party B to respond within such period
shall not affect the validity or enforceability of such Transaction and shall be
deemed to be an affirmation of the terms contained in such Confirmation, absent
manifest error. The parties agree that any such exchange of facsimile
transmissions shall constitute a Confirmation for all purposes hereunder.
<PAGE> 24
(c) RELATIONSHIP BETWEEN PARTIES. The following representation shall be
added as a new Section 3(g) of this Agreement:
"(g) RELATIONSHIP BETWEEN PARTIES. Each party will be deemed to
represent to the other party on the date on which it enters into a Transaction
that (absent a written agreement between the parties that expressly imposes
affirmative obligations to the contrary for that Transaction):
(i) NON-RELIANCE. It is acting for its own account, and it has
made its own independent decisions to enter into that Transaction and
as to whether that Transaction is appropriate or proper for it based
upon its own judgment and upon advice from such advisers as it has
deemed necessary. It is not relying on any communication (written or
oral) of the other party as investment advice or as a recommendation to
enter into that Transaction; it being understood that information and
explanations related to the terms and conditions of a Transaction shall
not be considered investment advice or a recommendation to enter into
that Transaction. No communication (written or oral) received from the
other party shall be deemed to be an assurance or guarantee as to the
expected results of that Transaction.
(ii) ASSESSMENT AND UNDERSTANDING. It is capable of assessing
the merits of and understanding (on its own behalf or through
independent professional advice), and understands and accepts, the
terms, conditions and risks of that Transaction. It is also capable of
assuming, and assumes, the risks of that Transaction.
(iii) STATUS OF PARTIES. The other party is not acting as a
fiduciary for or an adviser to it in respect of that Transaction."
(d) WAIVER OF RIGHT TO TRIAL BY JURY. Each party recognizes that, in
matters related to this Agreement or any Transaction, either party may be
entitled to a trial in which matters of fact are determined by a jury (as
opposed to a trial in which such matters are determined by a judge). By
execution of this Agreement, each party will give up its respective rights to
trial by jury, and each party has carefully considered the consequences of
signing this Agreement and has consulted with its respective attorneys. Each
party acknowledges that this waiver is entered into to avoid delays, minimize
trial expense, and streamline the legal proceedings in order to accomplish a
quick resolution of claims arising under or in conjunction with this Agreement
or any Transaction. TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, EACH PARTY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION ARISING UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY TRANSACTION HEREUNDER.
(e) FURTHER REPRESENTATIONS. Each party represents to the other party
(which representation will be deemed to be repeated on each date on which a
Transaction is entered into) that it is an "eligible swap participant" as such
term is defined in Part 35 of Chapter I of Title 17 of
<PAGE> 25
the Code of Federal Regulations, promulgated by the Commodity Futures Trading
Commission, entitled "Exemption of Swap Agreements".
(f) JURISDICTION. Section 13(b) of this Agreement is hereby restated as
follows:
(b) JURISDICTION. WITH RESPECT TO ANY CLAIM ARISING OUT OF
THIS AGREEMENT, (A) EACH PARTY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND THE UNITED STATES DISTRICT
COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS; AND (B) EACH PARTY IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT BROUGHT
IN ANY SUCH COURT, IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM,
AND IRREVOCABLY WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH CLAIM, SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE
JURISDICTION OVER SUCH PARTY.
(g) TELEPHONIC RECORDING. Each party (i) consents to the recording of
the telephone conversations of trading and marketing personnel of the parties
and their Affiliates in connection with this Agreement or any potential
Transaction and (ii) agrees to obtain any necessary consent of, and give notice
of such recording to, such personnel of it and its Affiliates.
(h) USURY NOT INTENDED; SAVINGS PROVISIONS. Notwithstanding any
provision to the contrary contained in this Agreement, it is expressly provided
that in no case or event shall the aggregate of any amounts accrued or paid
pursuant to this Agreement which under applicable laws are or may be deemed to
constitute interest ever exceed the maximum nonusurious interest rate permitted
by applicable Texas or federal laws, whichever permit the higher rate. In this
connection, Party A and Party B stipulate and agree that it is their common and
overriding intent to contract in strict compliance with applicable usury laws.
In furtherance thereof, none of the terms of this Agreement shall ever be
construed to create a contract to pay, as consideration for the use, forbearance
or detention of money, interest at a rate in excess of the maximum rate
permitted by applicable laws. Neither party shall ever be liable for interest in
excess of the maximum rate permitted by applicable laws. If, for any reason
whatsoever, such interest paid or received during the full term of the
applicable indebtedness produces a rate which exceeds the maximum rate permitted
by applicable laws, the receiving party shall credit against the principal of
such indebtedness (or, if such indebtedness shall have been paid in full, shall
refund to the payor of such interest) such portion of said interest as shall be
necessary to cause the interest paid to produce a rate equal to the maximum rate
permitted by applicable laws. All sums paid or agreed to be paid for the use,
forbearance or detention of money shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread in equal parts throughout the
full term of the applicable indebtedness, so that the interest rate is uniform
throughout the full term of such indebtedness. The
<PAGE> 26
provisions of this paragraph shall control all agreements, whether now or
hereafter existing and whether written or oral, between Party A and Party B.
(i) ENTIRE AGREEMENT.
THIS WRITTEN MASTER AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(j) "CREDIT AGREEMENT" means the Credit Agreement, dated as of May 30,
1996, among each of the entities comprising Party B, the Lenders parties thereto
and Party A, as Agent, as amended, supplemented or otherwise modified from time
to time; provided that if the obligations under the Credit Agreement are paid in
full, the Credit Agreement is otherwise terminated or cancelled, or Party A
shall for any reason cease to remain a party thereto, Credit Agreement means the
Credit Agreement as it existed immediately prior to such event. Capitalized
terms defined therein and not otherwise defined herein shall have the meanings
assigned in the Credit Agreement.
(k) FURTHER AGREEMENTS OF PARTY B. Party B agrees with Party A that
Party B will comply with each of the covenants set forth in Articles 7, 8 and 9
of the Credit Agreement.
(l) ADDITIONAL EVENT OF DEFAULT. With respect to Party B, it shall
constitute an Event of Default under this Agreement if there shall occur any
Event of Default under the Credit Agreement.
(m) FURTHER REPRESENTATION OF PARTY B. Party B represents and warrants
to Party A (which representation will be deemed to be repeated by Party B on
each date on which a Transaction is entered into) that each of the
representations and warranties made by Party B in Article 6 of the Credit
Agreement is true and correct and no Event of Default under the Credit Agreement
has occurred and is continuing.
(n) JOINT AND SEVERAL. This Agreement is the joint and several
agreement of each of the entities comprising Party B, and the obligations and
liabilities arising under this Agreement are the joint and several obligations
and liabilities of each of the entities comprising Party B. Not in limitation of
the immediately preceding sentence, (i) each of the entities comprising Party B
makes the representations set forth in Section 3 of this Agreement to Party A,
(ii) each of the entities comprising Party B makes the agreements set forth in
Section 4 of this Agreement and undertakes joint and several liability with the
other entities comprising Party B for the performance of such agreements, (iii)
an Event of Default or Termination Event shall be deemed to occur with respect
to Party B if it occurs with respect to any of the entities comprising Party B
and (iv) the submission set forth in Section 13(a) of this Agreement, the
waivers set forth in Section 13(b) and (d) of this Agreement and the consent set
forth in Section 13(c) of this Agreement are applicable to each of the entities
comprising Party B.
<PAGE> 27
Each of the entities comprising Party B executes this Agreement as a
primary obligor, not as surety. Party A shall not be bound to exhaust its
recourse or to take any action against any one of such entities before being
entitled to performance under this Agreement from each of the other entities,
but rather Party A may make such demands and take such actions as it deems
advisable and may apply money received from any such entity upon such part of
the obligations arising under this Agreement as Party A may think best.
Each of the entities comprising Party B hereby waives notice of failure
by any other of such entities to pay when due any amount payable by an other of
such entities under this Agreement. Each of the entities comprising Party B
consents to and waives notice of (a) extension or renewal of any obligation
arising under this Agreement, (b) amendment or termination or waiver of any
provision of this Agreement as between Party A and any other of the entities
comprising Party B, and (c) release of any of the other entities comprising
Party B or cancellation of its obligations under the Agreement.
Until full and final payment to Party A of all amounts due to it under
this Agreement, each of the entities comprising Party B (a) agrees not to
exercise any right it may acquire against any of the other entities comprising
Party B (whether by subrogation, reimbursement, contribution, or otherwise) as a
result of payments made to Party A under this Agreement, (b) assigns to Party A
all such rights such entity may have in any bankruptcy, receivership, or
insolvency proceedings commenced by or against any of the other entities
comprising Party B or
<PAGE> 28
its property, and (c) appoints Party A attorney-in-fact for it to appear in any
such proceeding, file claims, receive payments, and to do any other act which it
could do personally in connection with such rights.
ACCEPTED AND AGREED:
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By:/s/ Steve Shipley
------------------------------
Name: Steve Shipley
Title: Vice President
CRAFTMADE INTERNATIONAL, INC.
By: /s/ James R. Ridings
------------------------------
Name:
Title:
DUROCRAFT INTERNATIONAL, INC.
By: /s/ James R. Ridings
------------------------------
Name:
Title:
TRADE SOURCE INTERNATIONAL,
INC.
By: /s/ James R. Ridings
------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.16
[CHASE LETTERHEAD]
Dated as of July 23, 1999
Craftmade International, Inc.
650 S. Royal Lane, Suite 100
Coppell, Texas 75019
Attn: Jim Ridings and Ken Cancienne
Re: SWAP TRANSACTION (OUR REFERENCE NO. 1296)
Ladies and Gentlemen:
The purpose of this letter agreement is to set forth the terms and conditions of
the Swap Transaction entered into between us on the Trade Date below (the "Swap
Transaction"). It constitutes a "Confirmation" as referred to in the Master
Agreement described below.
The definitions and provisions contained in the 1991 ISDA Definitions as
supplemented by the 1998 Supplement (the "Definitions") as published by the
International Swaps and Derivatives Association, Inc., are incorporated into
this Confirmation. In the event of any inconsistency between those definitions
and provisions and this Confirmation, this Confirmation will govern. Each party
represents and warrants to the other that (i) it is duly authorized to enter
into this Swap Transaction and to perform its obligations hereunder and (ii) the
person executing this Confirmation is duly authorized to execute and deliver it.
1. This Confirmation supplements, forms part of, and is subject to, the Master
Agreement dated as of June 17, 1999, as amended and supplemented from time
to time (the "Agreement"), between you and us. All provisions contained in
the Agreement shall govern this Confirmation except as expressly modified
below.
2. The terms of the Swap Transaction to which this Confirmation relates are as
follows:
<TABLE>
<S> <C>
Notional Amount: See attached Schedule
Trade Date: July 23, 1999
Effective Date: July 26, 1999
Termination Date: December 26, 2003, subject to adjustment in
accordance with the Modified Following
Business Day Convention.
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
FIXED AMOUNTS
Fixed Rate Payer: Chase Bank of Texas, National Association
("CBT")
Fixed Rate Payer Payment Dates: Each 26th day of each month of each year,
commencing August 26, 1999 to and including
the Termination Date, subject to adjustment
in accordance with the Modified Following
Business Day Convention.
Fixed Rate: 8.125 percent
Fixed Rate Day Count Fraction: Actual/360
FLOATING AMOUNTS
Floating Rate Payer: Craftmade International, Inc.
("Counterparty")
Floating Rate Payer Payment Dates: Same as the Fixed Rate Payer Payment Dates
Floating Rate for Initial
Calculation Period: 7.60625 percent (LIBOR 5.17625 percent plus
2.43 percent spread)
Floating Rate Option: USD-LIBOR-BBA
Spread: 2.43 percent
Designated Maturity: One month
Floating Rate Day Count Fraction: Actual/360
Reset Dates: The first day of each Calculation Period
Compounding: Inapplicable
Business Days: New York Business Days and London Business
Days
Calculation Agent: CBT
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
Payments to CBT: Chase Bank of Texas - Houston ABA No.
113-000-609 Capital Markets Dept. - Rate
Swaps CR Acct. No. 00100381608 Attn: Tony
Reyes
Payments to Counterparty: (Please advise)
Governing Law: The laws of the State of Texas
</TABLE>
Each party has entered into this Swap Transaction solely in reliance on its own
judgment. Neither party has any fiduciary obligation to the other party relating
to this Swap Transaction. In addition, neither party has held itself out as
advising, or has held out any of its employees or agents as having the authority
to advise, the other party as to whether or not the other party should enter
into this Swap Transaction, any subsequent actions relating to this Swap
Transaction or any other matters relating to this Swap Transaction. Neither
party shall have any responsibility or liability whatsoever in respect of any
advice of this nature given, or views expressed, by it or any of such persons to
the other party relating to this Swap Transaction, whether or not such advice is
given or such views are expressed at the request of the other party.
THE AGREEMENT AND THIS WRITTEN CONFIRMATION REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES
Please confirm that the foregoing correctly sets forth the terms and conditions
of our agreement by responding within five (5) Business Days by returning via
facsimile an executed copy of this Confirmation to the attention of JIM SHIELDS
(facsimile no. (713) 216-4919; telephone no. (713) 216-5482.)
3
<PAGE> 4
Chase Bank of Texas is pleased to have concluded this transaction with you.
Very truly yours,
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
By: /s/ Steve Shipley
---------------------------
Steve Shipley
Vice President
Accepted and confirmed as
of the date first written:
CRAFTMADE INTERNATIONAL, LTD.
By: /s/ James R. Ridings
-------------------------------
Name: James R. Ridings
Title: CEO
4
<PAGE> 5
CRAFTMADE INTERNATIONAL, LTD.
AMORTIZATION SCHEDULE/SWAP #1284
<TABLE>
<CAPTION>
Calculation Period CALCULATION NOTIONAL AMOUNT
Start date Period End Date ---------------
---------- ---------------
<S> <C> <C>
7/26/99 8/26/99 $5,401,693
8/26/99 9/27/99 $5,337,987
9/27/99 10/26/99 $5,273,850
10/26/99 11/26/99 $5,209,278
11/26/99 12/27/99 $5,144,269
12/27/99 1/26/00 $5,078,820
1/26/00 2/28/00 $4,512,928
2/28/00 3/27/00 $4,443,204
3/27/00 4/26/00 $4,373,009
4/26/00 5/26/00 $4,302,337
5/26/00 6/26/00 $4,231,188
6/26/00 7/26/00 $4,159,557
7/26/00 8/28/00 $4,087,440
8/28/00 9/26/00 $4,014,836
9/26/00 10/26/00 $3,941,739
10/26/00 11/27/00 $3,868,148
11/27/00 12/26/00 $3,794,059
12/26/00 1/26/01 $3,719,468
1/26/01 2/26/01 $3,344,372
2/26/01 3/26/01 $3,266,736
3/26/01 4/26/01 $3,188,574
4/26/01 5/29/01 $3,109,884
5/29/01 6/26/01 $3,030,660
6/26/01 7/26/01 $2,950,900
7/26/01 8/27/01 $2,870,600
8/27/01 9/26/01 $2,789,757
9/26/01 10/26/01 $2,708,366
10/26/01 11/26/01 $2,626,424
11/26/01 12/26/01 $2,543,927
12/26/01 1/28/02 $2,460,871
1/28/02 2/26/02 $2,177,253
2/26/02 3/26/02 $2,091,715
3/26/02 4/26/02 $2,005,598
4/26/02 5/28/02 $1,918,897
5/28/02 6/26/02 $1,831,610
6/26/02 7/26/02 $1,743,731
7/26/02 8/26/02 $1,655,258
8/26/02 9/26/02 $1,566,185
9/26/02 10/28/02 $1,476,510
10/28/02 11/26/02 $1,386,227
11/26/02 12/26/02 $1,295,333
12/26/02 1/27/03 $1,203,823
1/27/03 2/26/03 $1,011,694
2/26/03 3/26/03 $ 918,264
</TABLE>
5
<PAGE> 6
<TABLE>
<S> <C> <C>
3/26/03 4/28/03 $824,202
4/28/03 5/27/03 $729,502
5/27/03 6/26/03 $634,162
6/26/03 7/28/03 $538,175
7/28/03 8/26/03 $441,539
8/26/03 9/26/03 $344,249
9/26/03 10/27/03 $246,300
10/27/03 11/26/03 $147,687
11/26/03 12/26/03 $ 48,407
</TABLE>
6
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,706
<SECURITIES> 0
<RECEIVABLES> 12,221
<ALLOWANCES> 0
<INVENTORY> 14,367
<CURRENT-ASSETS> 29,998
<PP&E> 9,616
<DEPRECIATION> 0
<TOTAL-ASSETS> 45,102
<CURRENT-LIABILITIES> 19,479
<BONDS> 4,470
0
32
<COMMON> 93
<OTHER-SE> 20,592
<TOTAL-LIABILITY-AND-EQUITY> 45,102
<SALES> 21,654
<TOTAL-REVENUES> 21,654
<CGS> 13,549
<TOTAL-COSTS> 13,549
<OTHER-EXPENSES> 4,976
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 338
<INCOME-PRETAX> 2,791
<INCOME-TAX> 885
<INCOME-CONTINUING> 1,562
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,562
<EPS-BASIC> .22
<EPS-DILUTED> .22
</TABLE>
