UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1995 -- Commission File No. 0-2251
-----------------------------------
SCI SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-0583436
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
c/o SCI Systems (Alabama), Inc.
2101 West Clinton Avenue
Huntsville, Alabama 35805
(Address of principal executive offices) (Zip Code)
-----------------------------------------
(302) 998-0592
(Registrant's telephone number, including area code)
-----------------------------------------
Securities registered pursuant to Section
12 (b) of the Act:
None
----------------------------------------
Securities registered pursuant to Section
12 (g) of the Act:
Common Stock, $.10 Par Value
5-5/8% Convertible Subordinated Debentures, due March 1, 2012
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes .X. No ....
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K. [....]
At August 25, 1995, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approxi mately $807,534,000. At August 25,
1995, there were 27,554,696 outstanding shares of the registrant's Common Stock.
Documents Incorporated By Reference
Portions of the registrant's 1995 Annual Report to Shareholders are
incorporated by reference into Parts I and II.
Portions of the registrant's definitive Proxy Statement for its October 27,
1995, Annual Meeting of Shareholders are incorporated by reference into Part
III.
<PAGE>
PART I AND II
DOCUMENTS INCORPORATED BY REFERENCE
The following information required by Parts I and II is incorporated herein
by reference to the Company's 1995 Annual Report to Shareholders, included
herein as Exhibit 13:
Excerpts from
Form 10-K
(contained in the 1995
Annual Annual Report to
Report Shareholders)
Pages Page (s)
PART I.
ITEM 1. Business Inside 1 to 3
Front
Cover and
4 to 8
ITEM 2. Properties 3
ITEM 3. Legal Proceedings 3
ITEM 4. Submission of Matters to a Vote of Security Holders 3
PART II.
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters 3 and 5
ITEM 6. Selected Financial Data 1
ITEM 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 2 to 8 3 to 5
ITEM 8. Consolidated Financial Statements and
Supplementary Data 5 to 13
ITEM 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure Not Applicable
PART III
DOCUMENT INCORPORATED BY REFERENCE
The following information required by Part III is incorporated herein by
reference to the Company's definitive Proxy Statement pursuant to Regulation 14A
for the October 27, 1995 Annual Meeting of Shareholders, filed with The
Securities and Exchange Commission within 120 days after close of the fiscal
year:
Proxy Statement
Page (s)
ITEM 10. Directors and Executive Officers of the Registrant 2, 3 and 5
ITEM 11. Executive Compensation 5 to 7
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management 1 and 2
ITEM 13. Certain Relationships and Related Transactions 9
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Index to exhibits, financial statements and schedules
(1)Financial Statements
The following consolidated financial statements of the registrant are
included in Item 8:
Excerpts from
Form 10-K
(contained in
the 1995
Annual
Report to
Shareholders)
Page (s)
Consolidated Balance Sheets as of June 30, 1995, 1994, and 1993 6
For the years ended June 30, 1995, 1994 and 1993:
Consolidated Statements of Income 7
Consolidated Statements of Shareholders' Equity 7
Consolidated Statements of Cash Flows 8
Notes to Consolidated Financial Statements 9 to 13
Report of Ernst & Young LLP, Independent Auditors 13
(2) Schedules
The following consolidated financial statement schedule of the registrant
is included hereafter:
Schedule II - Valuation and qualifying accounts
All other schedules are omitted as inapplicable or because the required
information is included in the consolidated financial statements
or notes thereto.
(3) Exhibits
Number DESCRIPTION
3.1 Second Restated Certificate of Incorporation, as
amended, (incorporated herein by reference to Exhibit
4.1 to Registration Statement on Form S-8, File No.
2-86230, as amended), and Certificate of Amend ment of
the Second Restated Certificate of Incorporation as
filed with the Secretary of State of Delaware on April
7, 1988, (incorporated by reference to Exhibit 3.1 to
the Registrant's Report on Form 10-K for fiscal year
ended June 30, 1988).
3.2 By-laws of the Registrant, as amended (incorporated herein
by reference to Exhibit 4(e) to Registration Statement on
Form S-3, Registration Statement No. 33-12115, as amended).
4.1 Form of Indenture relating to $75,000,000, 5 5/8% Convertible
Subordinated Debentures due March 1, 2012, (incorporated
herein by reference to Exhibit 4(a) to Registration Statement
on Form S-3, Registration Statement No. 33-12115).
<PAGE>
(3) Exhibits
Number DESCRIPTION
10(a)(1) Credit Agreement dated June 25, 1993, by and
between the Registrant, its Obligated Subsidiaries and
its Lenders. (Incorporated herein by reference to
exhibit of the same number to the Registrant's Annual
Report on Form 10-K for the year ended June 30, 1993.)
(2) Amended and Restated Credit Agreement dated as of
August 3, 1995, by and between the Registrant, its
Obligated Subsidiaries and its Lenders.
(b)(1) Receivable Purchase Agreement dated as of June 30,
1995, Among SCI Technology, Inc., as Seller, SCI
Systems, Inc., as Guarantor, and Receivables Capital
Corporation, as Purchaser, and Bank of America National
Trust and Savings Association, as Administrative Agent.
(c)(1) Directors and Officers Liability Insurance Policies
(d)(1) SCI Systems, Inc. 1994 Stock Option Incentive Plan.
(Management contracts or compensatory plan)
(e)(1) Savings Plan of the SCI Systems, Inc. Employee
Financial Security Program, dated July 1, 1991.
(Management contracts or compensatory plan)
(Incorporated herein by reference to Exhibit 10 (i)(1)
to the Registrant's Report on Form 10-K for the fiscal
year ended June 30, 1994.)
(f)(1) Deferred Compensation Plan of SCI Systems Employee
Financial Security Program, as amended and restated
January 1, 1992. (Management contracts or compensatory
plan) (Incorporated herein by reference to Exhibit 10(
j)(1) to the Registrant's Report on Form 10-K for the
fiscal year ended June 30, 1994.)
(g)(1) Supplemental Retirement Plan of the SCI Systems, Inc.
Employee Financial Security Program, as amended and
restated April 1994. (Management contracts or
compensatory plan) (Incorporated herein by reference to
Exhibit 10 (k)(1) to the Registrant's Report on Form
10-K for the fiscal year ended June 30, 1994.)
11 Computation of primary and fully diluted earnings per
share for the years ended June 30, 1995, 1994 and 1993.
13 1995 Annual Report to Shareholders. Except for the
parts of the SCI Systems, Inc. Annual Report expressly
incorporated into this Form 10-K by reference, the
Annual Report is not to be deemed filed
with the Securities and Exchange Commission.
21 Subsidiaries of Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed by the Registrant for the period
March 27, 1995 through June 30, 1995.
<PAGE>
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands of dollars)
<CAPTION>
Additions Additions
Balance Charged to Charged
Beginning Costs and to Other Deductions Balance End
Description of Year Expenses Accounts (1) of Year
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1995:
Allowance for doubtful accounts $4,267 $1,018 $ 0 $1,018 $4,267
====== ====== ========= ====== ======
Year ended June 30, 1994:
Allowance for doubtful accounts $4,600 $4,192 $ 0 $4,525 $4,267
====== ====== ========= ====== ======
Year ended June 30, 1993:
Allowance for doubtful accounts $4,600 $2,621 $ 0 $2,621 $4,600
====== ====== ========= ====== ======
</TABLE>
(1) Uncollectible accounts written off, net of recoveries
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SCI SYSTEMS, INC.
Date: September 25, 1995
By: Olin B. King /s/
----------------------
Olin B. King
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
DATE SIGNATURE TITLE
September 25, 1995 Olin B. King /s/ Chairman of the Board and
Olin B. King Chief Executive Officer
(Principal Executive Officer)
(Principal Financial and
Accounting Officer)
September 25, 1995 A. Eugene Sapp, Jr /s/ Director, President, and
A. Eugene Sapp, Jr. Chief Operating Officer
(Principal Operating Officer)
September 25, 1995 Howard H. Callaway /s/ Director
Howard H. Callaway
September 25, 1995 William E. Fruhan /s/ Director
William E. Fruhan
September 25, 1995 Joseph C. Moquin /s/ Director
Joseph C. Moquin
September 25, 1995 Wayne Shortridge /s/ Director
Wayne Shortridge
September 25, 1995 G. Robert Tod /s/ Director
G. Robert Tod
September 25, 1995 Jackie M. Ward /s/ Director
Jackie M. Ward
[ EXHIBIT 10 (a) (2)]
$200,000,000 REVOLVING CREDIT FACILITY
$120,000,000 LETTER OF CREDIT FACILITY
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of August 3, 1995
AMONG
SCI SYSTEMS, INC.
and
CITIBANK, N.A., as Agent
and
ABN AMRO BANK N.V., as Co-Agent,
and
BANKS WHICH ARE SIGNATORIES
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
Section 1.01. General 1
Section 1.02. Accounting Terms and Determinations 23
Section 1.03. Other Definitional Terms 23
ARTICLE II LOANS 24
Section 2.01. Commitments; Use of Proceeds 24
Section 2.02. Notes; Repayment of Principal 25
ARTICLE III GENERAL LOAN TERMS 26
Section 3.01. Total Commitment; Amounts; Optional and
Mandatory Reductions; Credit Expiration
Date; Extensions 26
Section 3.01A. Removal and Replacement of Banks 28
Section 3.02. Funding Notices 29
Section 3.03. Disbursement of Funds 30
Section 3.04. Interest 31
Section 3.04A. Effect of Permitted Asset Securitization
Transactions on Calculations of Financial
Covenants and Pricing 33
Section 3.05. Interest Periods for Eurodollar Rate Advances 34
Section 3.06. Fees 35
Section 3.07. Prepayments of Advances 36
Section 3.08. Payments, etc. 37
Section 3.09. Interest Rate Not Ascertainable, etc. 39
Section 3.10. Illegality 39
Section 3.11. Increased Costs 40
Section 3.12. Lending Offices 42
Section 3.13. Funding Losses 42
Section 3.14. Capital Adequacy 42
Section 3.15. Sharing of Payments, etc. 43
ARTICLE IV LETTER OF CREDIT TERMS 43
Section 4.01. Issuance of Letter of Credit 43
Section 4.02. Expiration of Letter of Credit 44
Section 4.03. Reimbursement of Drawings: Series B
Commercial Paper Loans 44
<PAGE>
Section 4.04. Reduction in Stated Amount of Letter
of Credit 46
Section 4.05. Increase in Stated Amount of Letter of Credit 46
Section 4.06. Delivery of Amended or Substitute Letters of
Credit 46
Section 4.07. Change in Costs of Issuing Letter of Credit 47
Section 4.08. Purchase and Sale of Participations in Letter
of Credit 48
Section 4.09. Legal Restrictions on Letter of Credit 49
Section 4.10. Substitute Letter of Credit 49
Section 4.11. Voluntary Reductions Or Increases in Stated
Amount 52
ARTICLE V LETTER OF CREDIT OPERATIONS 53
Section 5.01. Demand and Payment to Depositary 53
Section 5.02. Reimbursements by Commercial Paper Banks 53
Section 5.03. Obligations of Banks are Unconditional 54
Section 5.04. Repayment of Banks following
Reimbursement by the Borrower 54
Section 5.05. Effect of Payment Under Letter of Credit 54
ARTICLE VI COMMERCIAL PAPER OPERATIONS 55
Section 6.01. Borrower's Right to Issue Commercial Paper
Notes 55
Section 6.02. Issuance of Stop Order 55
Section 6.03. Form of Commercial Paper Notes 56
Section 6.04. Certain Limitations on Issuance 56
Section 6.05. Issuance Procedures 57
Section 6.06. Assignment and Security Interest 57
Section 6.07. Perfection and Preservation of Security
Interest 58
Section 6.08. Enforcement of Security Interest 58
Section 6.09. Establishment of Accounts and Payment of
Commercial Paper Notes 59
ARTICLE VII CONDITIONS TO CREDIT EVENTS 60
Section 7.01. Conditions Precedent to Issuance of
Commercial Paper, Issuance of Letter of
Credit and Initial Advance 60
Section 7.02. Conditions to All Credit Events 62
<PAGE>
Section 7.03. Conditions Precedent to Issuance of
Commercial Paper 64
ARTICLE VIII REPRESENTATIONS AND WARRANTIES 65
Section 8.01. Organization, Corporate Powers, etc. 65
Section 8.02. Corporate Authority, etc. 65
Section 8.03. Government Approvals 66
Section 8.04. Margin Regulations and Investment Company
Act 66
Section 8.05. Valid and Binding Obligations 66
Section 8.06. Litigation 67
Section 8.07. Accuracy of Information 67
Section 8.08. Accuracy of Representations and Warranties 67
Section 8.09. ERISA 67
Section 8.10. Exemption from Registration 68
Section 8.11. Taxes 68
Section 8.12. Financial Statements 68
Section 8.13. Solvency 68
Section 8.14. Subordinated Debt 69
Section 8.15. Priority of Liens 69
Section 8.16. Environmental Law Compliance 69
Section 8.17. Liquidation of Certain Subsidiaries 69
ARTICLE IX AFFIRMATIVE COVENANTS 70
Section 9.01. Payment of Taxes, etc. 70
Section 9.02. Preservation of Corporate Existence 70
Section 9.03. Compliance with Laws, etc. 70
Section 9.04. Inspection Rights 70
Section 9.05. Maintenance of Records and Books of
Account. 71
Section 9.06. Maintenance of Approvals, Filings and
Registrations 71
Section 9.07. Reporting Requirements 71
Section 9.08. Indemnification 72
Section 9.09. Securities Laws 73
Section 9.10. Further Assurance 73
Section 9.11. Insurance; Maintenance of Properties 73
Section 9.12. Financial Covenants and Reporting
Requirements of Borrower 74
Section 9.13. Additional Credit Parties 76
Section 9.14. Maintenance of Business 77
<PAGE>
ARTICLE X NEGATIVE COVENANTS 77
Section 10.01. Limitation on Liens 77
Section 10.02. Limitation on Indebtedness 79
Section 10.03. Guaranties and Investments 80
Section 10.03A. Acquisitions and Venture-Type Investments 81
Section 10.04. Sale of Notes or Accounts 82
Section 10.05. Contracts 82
Section 10.06. Leases 83
Section 10.07. Use of Proceeds 83
Section 10.08. Amendment of Depositary Agreement 83
Section 10.09. Offering Circular 83
Section 10.10. ERISA Matters 83
Section 10.11. Restricted Payments 84
Section 10.12. Merger and Consolidation 84
Section 10.13. Affiliate Transactions 84
Section 10.14. Limitation on Issuance and Redemption of
Subordinated Debt 85
Section 10.15. Permitted Asset Securitization Transactions 85
ARTICLE XI EVENTS OF DEFAULT 86
Section 11.01. Events of Default 86
ARTICLE XII INTERCOMPANY LOANS 89
Section 12.01. Requirements for Intercompany Loans 89
ARTICLE XIII BID FACILITY 90
Section 13.01. Bid Facility 90
Section 13.02. Temporary Reduction of Total Commitment 91
ARTICLE XIV THE AGENT AND CO-AGENT 91
Section 14.01. Appointment of Agent and Co-Agent 91
Section 14.02. Nature of Duties of Agent and Co-Agent 91
Section 14.03. Lack of Reliance on the Agent or the
Co-Agent 91
Section 14.04. Certain Rights of the Agent and the Co-Agent 92
Section 14.05. Reliance by Agent and Co-Agent 92
Section 14.06. Indemnification of Agent and Co-Agent 92
Section 14.07. The Agent and Co-Agent in their Individual
<PAGE>
Capacities 93
Section 14.08. Holders of Notes 93
Section 14.09. Successor Agent or Co-Agent. 93
Section 14.10. Security Documents 95
ARTICLE XV MISCELLANEOUS 95
Section 15.01. Immediately Available Funds 95
Section 15.02. Notices 95
Section 15.03. Confidentiality of Information 98
Section 15.04. Assignments and Participations 98
Section 15.05. No Waiver; Remedies Cumulative102
Section 15.06. Payment of Expenses, Etc.102
Section 15.07. Right of Set-off103
Section 15.08. Nature of the Borrower's Obligations104
Section 15.09. Amendments; General104
Section 15.10. Governing Law105
Section 15.11. Counterparts105
Section 15.12. Effectiveness; Survival105
Section 15.13. Severability105
Section 15.14. Independence of Covenants105
Section 15.15. Headings Descriptive; Entire Agreement105
Section 15.16. Termination of Agreement106
Section 15.17. Intercreditor Agreement with Respect to
Interest Rate Contracts106
Section 15.18. Ratification of Intercreditor Agreement.106
Section 15.19. No Novation.106
Section 15.20. Venue; Jurisdiction; Jury Trial Waiver.106
<PAGE>
Annex I - Bank Information
Annex II - Interest Pricing Matrix - Base Rate Loans
Annex III - Interest Pricing Matrix - Eurodollar Rate Loans
Annex IV - Applicable Letter of Credit Rate Matrix
Exhibit A - Form of Amendment No. 1 to Letter of Credit
Exhibit B - Form of Series A Master Note
Exhibit C - Form of Amended and Restated Guaranty Agreement
Exhibit D-1 - Notice of Borrowing
Exhibit D-2 - Borrowing Certificate
Exhibit D-3 - Notice of Conversion/Continuation
Exhibit D-4 - Notice of Requested Change in Stated Amount
Exhibit E-1 - Form of Amended and Restated Assignment of
Intercompany Loans
Exhibit E-2 - Subsidiary Note Form
Exhibit E-3-Form of Hypothec on Movables (Quebec Assignment of Intercompany
Loans) Exhibit F-1 - Form of Amended and Restated Pledge and Security
Agreement Exhibit F-2-Form of Hypothec with Delivery (Quebec Stock Pledge
and Security Agreement Covering Certain Shares of SCI Canada) Exhibit G -
Form of Assignment and Acceptance Agreement Exhibit H - Form of First
Modification of Depositary Agreement Schedule 1.01 - Permitted Exceptions
Schedule 8.01 -Borrower and Subsidiaries and Jurisdictions of Incorporation
Schedule 8.16 - Environmental Disclosures Schedule 10.01(iv) - Liens
Schedule 10.02(vi) - Permitted Indebtedness
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is dated as of August 3, 1995,
and is among SCI SYSTEMS, INC., a Delaware corporation (the "Borrower"),
CITIBANK, N.A. ("Citibank"), ABN AMRO BANK N.V. ("ABN AMRO"), acting
through its Atlanta Agency, and the Banks which are signatories to this
Agreement and any assignees which become Banks as provided herein
(collectively, the "Banks").
STATEMENT OF FACTS
The Borrower, the Agent, the Co-Agent and the Banks entered into a Credit
Agreement, dated as of June 25, 1993, as amended by the First Modification
of Credit Agreement dated as of May 31, 1995 among the Borrower, the Agent,
the Co-Agent and the banks signatory thereto (the "1993 Credit Agreement"),
whereby such Banks agreed to provide certain credit facilities to the
Borrower.
The Borrower has requested certain changes in the terms of the 1993 Credit
Agreement, including, without limitation, an extension of the termination
date of the credit facilities described therein, an increase in the amount
of the revolving credit commitment, the ability to adjust the amount of the
commercial paper letter of credit periodically, based on the Borrower's
anticipated need for issuing commercial paper notes, and certain pricing
changes, and has requested that the 1993 Credit Agreement be amended and
restated in its entirety for the purpose of implementing such changes.
The Banks and the Agent and the Co-Agent are willing to amend and restate
the 1993 Credit Agreement in its entirety on the terms and subject to the
conditions and requirements set forth in this Agreement.
Accordingly, the Borrower, the Banks, Citibank and ABN AMRO hereby agree
that the 1993 Credit Agreement is hereby amended and restated in its
entirety as follows, and hereby agree as follows:
STATEMENT OF TERMS
ARTICLE I
DEFINITIONS
Section 1.01. General. The capitalized terms used in this Agreement shall
have the following meanings, unless otherwise defined herein. A-12 Program:
The full scale engineering, development, production and delivery of
electronic assemblies for the Navy's proposed A-12 Advanced Tactical
Fighter contemplated by the following McDonnell-Douglas purchase orders:
E83006, E83004, E91369, E91324, E02929, E02927 and J00545.
<PAGE>
A-12 Program Financial Statements Adjustments: Any charge, expense,
write-off or reserve change of Borrower arising out of or relating to the
A-12 Program as determined in accordance with GAAP, cumulatively determined
for the periods as applicable, and which arose after March 28, 1993.
ABN AMRO: ABN AMRO Bank N.V. and its successors and assigns.
Accounts Receivable: All rights of any Person to payment for goods sold or
leased or for services rendered, whether or not such rights to payment have
been earned by performance, including, without limitation, all accounts,
contract rights, chattel paper, instruments and documents of any Person
arising from the sale of goods or services by such Person, whether secured
or unsecured, and whether now existing or hereafter created or arising and
including, further, without limitation, federal and state tax refunds due
and owing to such Person relating to taxes previously paid by such Person
less all doubtful accounts receivable owing to such Person, as determined
in accordance with GAAP. For the sole purpose of testing the financial
covenant set forth in Section 9.12(f) hereof, any A-12 Program Financial
Statements Adjustments relating to Accounts Receivable previously
recognized in accordance with GAAP shall be added to the amount of Accounts
Receivable in order to determine the Adjusted Working Capital of the
Borrower and its consolidated Subsidiaries, except as otherwise set forth
in Section 9.12(f) hereof.
Adjusted Tangible Assets: At any date of determination, with respect to any
Person, such Person's Inventory, property, plant and equipment as
determined in accordance with GAAP.
Adjusted Working Capital: At any date of determination, ninety percent
(90%) of the Accounts Receivable of the Borrower and its consolidated
Subsidiaries plus eighty-five percent (85%) of the Inventory of the
Borrower and its consolidated Subsidiaries.
Advance: Any principal amount advanced and remaining Outstanding at any
time under the Loans, which Advance shall be made or Outstanding as a Base
Rate Advance or Eurodollar Rate Advance with respect to the Series A
Revolving Credit Loans or the Series C Commercial Paper Loans or as a Base
Rate Advance with respect to the Series B Commercial Paper Loans.
Affiliate: Of any Person means any other Person directly or indirectly
controlling, controlled by, or under common control with, such Person,
whether through the ownership of voting securities, by contract or
otherwise.
Agent: Citibank, acting as agent in the manner and to the extent described
in this Agreement, or any successor acting as agent pursuant to Article
XIV.
Agreement: This Amended and Restated Credit Agreement as the same from time
to time may be extended, amended, supplemented, waived or modified,
together with all exhibits and schedules attached to this Amended and
Restated Credit Agreement.
<PAGE>
Amount: (i) The amount of Indebtedness secured by any Lien arising from any
Permitted Transaction under Section 10.01, (ii) the amount of Indebtedness
arising from any Permitted Transaction under Section 10.02, or (iii) (a)
the amount of Indebtedness arising from any Permitted Transaction under
Section 10.03 or Section 10.03A, or (b) the amount paid (including deferred
payments) to own, purchase or acquire any stocks, obligations (other than
accounts receivable generated in the ordinary course of business) or
securities of any Person or to acquire any interest in, to make any capital
contributions to, or to acquire any assets of any Person, arising in
connection with any Permitted Transaction under Section 10.03 or Section
10.03A.
Applicable Lending Office: For each Bank, with respect to its Loans, the
Applicable Lending Office as designated for such Loans opposite such Bank's
name on Annex I, attached hereto and made a part hereof by reference, or
such other office of the Bank or of an affiliate of the Bank as the Bank
may from time to time specify in writing to the Borrower and the Agent as
the office at which its Loans of such Type are to be made and maintained.
Applicable Letter of Credit Rate: As defined in Section 3.06(C) hereof.
Applicable Margin: (i) With respect to Base Rate Advances, zero percent
(0%) per annum, and (ii) with respect to Eurodollar Rate Advances, (x)
seven-tenths of one percent (.70%) per annum if the sum of the Outstanding
principal balance of the Loans and the outstanding principal balance of all
loans under the Bid Facility are less than 50% of the Total Revolving
Credit Commitment or (y) three-quarters of one-percent (.75%) if the sum of
the Outstanding principal balance of the Loans and the outstanding
principal balance of all loans under the Bid Facility are greater than or
equal to 50% of the Total Revolving Credit Commitment, each of which is
subject to adjustment as provided in Section 3.04(e).
Asset Securitization Documents: Any agreement, document or instrument
directly relating to or executed by a Credit Party in connection with a
Permitted Asset Securitization Transaction. This Agreement shall not be
considered an Asset Securitization Document.
Assignee Deposit Account: The restricted trust account which may be
established, upon the occurrence of any Event of Default, pursuant to
Section 4.03(e).
Assigning Bank: As defined in Section 15.04(b)(i) hereof.
Assignment and Acceptance Agreement: The Assignment and Acceptance
Agreement to be executed by Banks which assign their interests, assignees
which accept such assignment and become Banks under this Agreement, the
Borrower, and the Agent or the Co-Agent, as the case may be, pursuant to
Section 15.04, substantially in the form attached to this Agreement as
Exhibit G.
Assignment of Intercompany Loans: The Amended and Restated Assignment of
Intercompany Loans from each of the Intercompany Lenders (other than SCI
Canada), substantially in the form of Exhibit E-1, attached hereto, as
amended, restated, supplemented, waived or modified from time to time and,
with respect to SCI Canada, the Quebec Assignment of Intercompany Loans.
<PAGE>
Average Tangible Net Worth: An amount equal to the quotient of (i) the sum
of the consolidated Tangible Net Worth of the Borrower as of the end of
each of the prior four (4) fiscal quarters, divided by (ii) four (4).
Bankruptcy Code: The Bankruptcy Code of 1978, as amended (11 U.S.C.ss.101
et seq.).
Bankruptcy-Remote Subsidiary: Any Subsidiary created by Borrower or any of
Borrower's consolidated Subsidiaries in connection with a Permitted Asset
Securitization Transaction which has customary "bankruptcy remote"
provisions in its charter documents and whose only material creditors are
the purchaser of such Subsidiary's accounts receivable (or undivided
fractional interests in a pool of such accounts receivable) and the Credit
Party which is the originator and seller of the accounts receivable to such
Subsidiary in connection with or to facilitate a Permitted Asset
Securitization Transaction.
Bank's Interest: The interest of a Bank in the Borrower's reimbursement
obligations, as specified in Section 4.08.
Banks: Has the meaning set forth in the heading of this Agreement. Bank
means any one of the Banks.
Base Rate: For any period, the sum of (i) a fluctuating interest rate per
annum as shall be in effect from time to time which rate per annum shall at
all times be equal to the highest of:
(a)The rate of interest announced publicly by Citibank in New York, New
York, from time to time, as Citibank's base rate; or
(b)One-half of one percent (1/2%) per annum above the latest three-week
moving average of secondary market morning offering rates in the United
States for three-month certificates of deposit of major United States money
market banks, such three-week moving average being determined weekly on
each Monday (or, if any such date is not a Business Day, on the next
succeeding Business Day) for the three-week period ending on the previous
Friday by Citibank on the basis of such rates reported by certificate of
deposit dealers to and published by the Federal Reserve Bank of New York,
or if such publication shall be suspended or terminated, on the basis of
quotations for such rates received by Citibank from three New York
certificate of deposit dealers of recognized standing selected by Citibank
in either case adjusted to the nearest one-fourth of one percent (1/4%) or
if there is no nearest one-fourth of one percent (1/4%), to the next higher
one-fourth of one percent (1/4%); or
(c)One-half of one percent (1/2%) per annum above the Federal Funds Rate in
effect from time to time;
plus (ii) the Applicable Margin.
Base Rate Advance: An Advance bearing interest based on the Base Rate.
Base Rate Loan: An Advance made or Outstanding under this Agreement and
bearing interest based on the Base Rate.
<PAGE>
Bid Facility: The right of the Borrower to borrow from time to time and at
any time from any lending institution selected by the Borrower, the sum of
up to an amount equal to fifty percent (50%) of the Revolving Credit
Commitment pursuant to Article XIII of this Agreement.
Borrower: Has the meaning set forth in the heading of this Agreement.
Borrowing: The incurrence from all or any of the Banks of Advances under
this Agreement of one Type concurrently having (in the case of Eurodollar
Rate Advances) the same Interest Period or the continuation or conversion
of an existing Borrowing or Borrowings in whole or in part.
Borrowing Certificate: A Borrowing Certificate in substantially the form
attached hereto as Exhibit D-2.
Business Day: Any day other than a Saturday, a Sunday or a day when banks
are authorized by law to close in New York, New York, or Atlanta, Georgia,
or both, and if the applicable Business Day relates to any Eurodollar Rate
Advance, a day on which dealings in Dollars are carried on in the London
interbank market.
Change in Control: (i) A "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Exchange Act) becoming the "beneficial
owner" (as defined in Rule 13 d-3 under the Exchange Act) of Voting Shares
(as defined below) of the Borrower entitled to exercise more than thirty
percent (30%) of the total voting power of all outstanding Voting Shares of
the Borrower (including any such Voting Shares that are not then
outstanding of which such person or group is deemed the beneficial owner);
or (ii) a change in the board of directors of the Borrower in which the
individuals who constituted the board of directors of the Borrower at the
beginning of the two-year period immediately preceding such change
(together with any other director whose election by the board of directors
of the Borrower or whose nomination for election by the shareholders of the
Borrower was approved by a vote of at least a majority of the directors
then in office either who were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the directors then in office; or
(iii) at any time, (x) the common stock of the Borrower ceases to be
registered under Section 12(b) or 12(g) of the Exchange Act, (y) the common
stock is held of record by fewer than three hundred (300) Persons, or (z)
the common stock of the Borrower is neither reported on the National Market
System of NASDAQ nor listed on a national stock exchange.
Citibank: Citibank, N.A. and its successors and assigns.
Co-Agent: ABN AMRO, acting as co-agent in the manner and to the extent
described in this Agreement, or any successor acting as co-agent pursuant
to Article XIV.
Code: The Internal Revenue Code of 1986, as amended from time to time.
Commercial Paper Account: The Commercial Paper Account established pursuant
to the Depositary Agreement.
<PAGE>
Commercial Paper Bank: Any Bank holding a Series B Master Note and a Series
C Master Note and whose Commercial Paper Commitment has not been terminated
for any reason pursuant to the terms of this Agreement.
Commercial Paper Commitment: At any time for any Bank, the amount of such
Bank's commitment, if any, set forth opposite such Bank's name in the
column headed "Commercial Paper Commitment" on Annex I hereto, as the same
may be amended from time to time.
Commercial Paper Dealer Agreement: Any agreement between the Borrower and a
Dealer with respect to such Dealer's placement or purchase and sale of the
Commercial Paper Notes, as the same may at any time be amended or modified
and in effect.
Commercial Paper Documents: The Commercial Paper Notes, the Letter of
Credit, the Depositary Agreement, and each Commercial Paper Dealer
Agreement, as any of the foregoing may at any time be amended or modified
and in effect.
Commercial Paper Notes: The short-term promissory notes of the Borrower
issued pursuant to the terms and conditions of this Agreement and the
Depositary Agreement, each in the form attached as Exhibit A to the
Depositary Agreement.
Commitment: At any time for any Bank, the aggregate amount of the Revolving
Credit Commitment and Commercial Paper Commitment of such Bank.
Commitment Fee Percentage: (i) one-quarter of one percent (.25%) per annum
if the ratio of Borrower's Total Debt to Total Capital is less than .575:1
as of any date of determination or (ii) one-half of one percent (.50%) per
annum if the ratio of Borrower's Total Debt to Total Capital is greater
than or equal to .575:1 as of any date of determination. The Commitment Fee
Percentage shall be adjusted each fiscal quarter of Borrower based on the
ratio of Total Debt to Total Capital as of the end of such fiscal quarter.
The adjustment to the Commitment Fee Percentage shall be effective as of
the first (1st) Business Day after the last day on which the financial
statements for such fiscal quarter are required to be delivered to the
Agent, the Co-Agent and the Banks pursuant to Section 9.12(a)(i) or
9.12(a)(ii), as appropriate, and shall remain in effect until the next
quarterly determination. From the date hereof until the next quarterly
determination, the applicable Commitment Fee Percentage is one-quarter of
one percent (.25%) per annum.
Confidential Information: As defined in Section 15.03 hereof.
Consistent Basis: Means, in reference to the application of GAAP, that the
accounting principles observed in the period referred to are comparable in
all material respects to those applied in the preceding period, except to
the extent required to reflect a change in GAAP or any other changes
consented to by the Agent, the Co-Agent and the Required Banks.
<PAGE>
Contractual Obligation: Of any Person means any provision of any security
issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of the property owned by
it is bound.
Credit Documents: This Agreement, the Notes, the Guaranty Agreement, the
Assignment of Intercompany Loans, the Depositary Agreement, the Pledge
Agreements, the Subsidiary Notes, the Intercreditor Agreement and any other
documents or Security Documents executed or delivered in connection with
this Agreement by the Credit Parties or any of them.
Credit Event: Each Borrowing of a Series A Revolving Credit Loan, each
Borrowing of a Series C Commercial Paper Loan, each increase in the amount
of the Letter of Credit pursuant to Section 4.05 or Section 4.11, and each
extension of the Credit Expiration Date pursuant to Section 3.01(e).
Credit Expiration Date: Initially August 3, 1998, as it may be extended
from time to time pursuant to Section 3.01(e) and as it may be accelerated
pursuant to Section 11.01; provided, however, that the Credit Expiration
Date for any Bank not agreeing to an extension pursuant to Section 3.01(e)
shall be such Bank's Prior Expiration Date.
Credit Parties: Collectively, the Borrower, each of the Guarantors, the
Intercompany Lenders (other than the Borrower and any Guarantors), the
Persons who execute Pledge Agreements (other than the Borrower and any
Guarantors), and every other Person who from time to time executes a Credit
Document with respect to all or any portion of the Obligations.
Current Assets: With respect to any Person, the aggregate amount of all
assets which would, in accordance with GAAP, be properly classified as
current assets.
Current Liabilities: With respect to any Person, the aggregate amount of
all current obligations which would, in accordance with GAAP, be properly
classified as current liabilities, but in any event shall include all such
obligations except (i) those having a maturity date which is more than (1)
year from the date as of which such computation is being made and (ii) any
portion of the Borrower's Indebtedness under this Agreement and the Notes
or under the Bid Facility which would be classified as a current liability
under GAAP.
Dealers: Bank of America NT & SA, acting as the placement agent through or
by which Commercial Paper Notes are, from time to time, to be sold or
placed pursuant to this Agreement and the Depositary Agreement, or any
other Person or Persons from time to time selected by the Borrower, with
the prior written approval of the Co-Agent, to which or through which
Commercial Paper Notes are, from time to time, to be issued and sold or
placed, as the case may be, pursuant to this Agreement and the Depositary
Agreement.
Debentures of 1987: Indebtedness of the Borrower in the aggregate original
principal amount of $75,000,000 evidenced by the Borrower's 5-5/8%
Convertible Subordinated Debentures due March 1, 2012, issued pursuant to
the Indenture, dated as of March 1, 1987, between the Borrower and Wachovia
Bank of Georgia, N.A. (formerly known as The First National Bank of
Atlanta), as trustee. The Debentures of 1987 are subordinated on
liquidation, on terms and conditions set forth in the Indenture pursuant to
which they were issued.
<PAGE>
Default: An Event of Default, or an event which with the notice or lapse of
time or both stated in Section 11.01 of this Agreement would become an
Event of Default.
Depositary: Chemical Bank, and its successors and assigns under the
Depositary Agreement.
Depositary Account: The Depositary Account established pursuant to the
Depositary Agreement.
Depositary Agreement: The Depositary Agreement, dated as of June 25, 1993,
as amended by the First Modification of Depositary Agreement dated as of
the date hereof, as the same from time to time may further be extended,
amended, supplemented, waived or modified, among the Depositary, the
Borrower and the Co-Agent.
Dollars and "$": Lawful money of the United States of America.
Drawing: Any demand for payment under, and in accordance with the terms of,
the Letter of Credit, made by the Depositary.
EBIT: For any Fiscal Year of the Borrower, an amount equal to the sum for
such Fiscal Year of (i) Net Income plus (ii) provisions for income taxes
plus (iii) Interest Expense, all determined by the Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP; provided,
however, that all cash items of gain or loss for such fiscal period which
are not ordinary by GAAP definition shall be included in the computation of
EBIT and provided, further, that all non-cash items of gain or loss for
such fiscal period which are not ordinary by GAAP definition shall be
excluded from the computation of EBIT.
Eligible Assignee: As defined in Section 15.04(b)(v).
Environmental Laws: All federal, state, local and foreign laws relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or
wastes into the environment (including without limitation ambient air,
surface water, ground water or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes, and any and all regulations,
codes, plans, orders, decrees, judgments, injunctions, notices or demand
letters issued, entered, promulgated or approved thereunder.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
Eurodollar Loan: A Series A Revolving Credit Loan or a Series C Commercial
Paper Loan bearing interest at the Eurodollar Rate.
Eurodollar Rate: With respect to each Interest Period for a Eurodollar Rate
Advance, the rate obtained by: (i) dividing (a) LIBOR for such Interest
Period by (b) a percentage equal to one minus the then average stated
maximum rate (stated as a decimal) of all reserve requirements (including,
without limitation, any marginal,
<PAGE>
emergency, supplemental, special or other reserve) applicable to any member
bank of the Federal Reserve System with respect to Eurocurrency liabilities
as defined in Regulation D of the Board of Governors of the Federal Reserve
System, as now or hereafter in effect (or against any successor category of
liabilities as defined in Regulation D of the Board of Governors of the
Federal Reserve System, as now or hereafter in effect); and (ii) adding the
Applicable Margin to the resulting quotient.
Eurodollar Rate Advance: An Advance made or Outstanding at the Eurodollar
Rate as a portion of the Series A Revolving Credit Loans or the Series C
Commercial Paper Loans.
Event of Default: Any of the Events of Default described in Section 11.01
of this Agreement.
Exchange Act: The Securities Exchange Act of 1934, as amended from time to
time.
Executive Officer: Those officers of the Borrower or any of its
Subsidiaries who are deemed to be "Executive Officers" of the Borrower or
any of its Subsidiaries pursuant to Rule 405 of Regulation C of the
Securities Act or any officer of the Borrower or its Subsidiaries who is a
senior vice president of the Borrower or any of its Subsidiaries or any
other individual performing a similar role as an individual who is a senior
vice president of the Borrower or any Subsidiary on any determination date.
Export-Control Laws: 50 U.S.C.A. ss.ss. 2401 et seq., 22 U.S.C.A. ss.ss.
2751 et seq. and 22 U.S.C.A. ss.ss. 2778 et seq., 22 U.S.C.A. ss. 3201 et
seq., and 42 U.S.C.A. ss.ss. 2131-2140 et seq. each as amended from time to
time and all regulations, orders, decrees, judgments, injunctions and
notices issued, entered, promulgated or approved
thereunder.
Face Amount: When used with reference to Commercial Paper Notes, the
aggregate face amount thereof, in the case of any of such commercial paper
notes issued on a discount basis, and the aggregate principal amount stated
therein plus the amount of all interest accrued or to accrue thereon to its
stated maturity date, in the case of any of such commercial paper notes
issued on an interest-bearing basis.
Federal Funds Rate: For any day, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100th of 1%) equal to the weighted average of
the rates on overnight Federal funds transactions with member banks of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Board of Governors of the Federal Reserve System or the
Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (i) if the day for which such rate is to be determined
is not a Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the immediately preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not
published for any day, the Federal Funds Rate for such day shall be the
average rate charged to the Agent on such day on such transactions.
Fiscal Year: With respect to the Borrower and its Subsidiaries, the four
(4) consecutive fiscal quarter periods ending on or immediately prior to
the date on which any determination is to be made.
<PAGE>
Foreign Subsidiaries: SCI Singapore, SCI Thailand, SCI Alpha Limited, a
corporation organized and existing under the laws of Ireland, SCI Irish
Holdings, a corporation organized and existing under the laws of Ireland,
SCI Ireland Limited, a corporation organized and existing under the laws of
Ireland, Norlite, SCI Canada, SCI Systems de Mexico, S.A. de C.V. (formerly
known as Adelantos De Tecnologia, S.A. de C.V.), a corporation organized
and existing under the laws of Mexico, Dabetan Company Limited, a
corporation organized and existing under the laws of Hong Kong, SCI
Development Limited, a corporation organized and existing under the laws of
England, SCI Malaysia, SCI Holding France, S.A., a corporation organized
under the laws of France, SCI France, S.A., a corporation organized under
the laws of France, and any subsidiary formed or acquired by the Borrower
or any Subsidiary after the date of this Agreement which is organized under
the laws of any country other than the United States, and their respective
successors and assigns.
GAAP: Means those principles of accounting set forth in pronouncements of
the Financial Accounting Standards Board and its predecessors or
pronouncements of the American Institute of Certified Public Accountants or
those principles of accounting which have other substantial authoritative
support and are applicable in the circumstances as of the date of
application, as such principles are from time to time supplemented or
amended.
Guarantors: Collectively, SCI Systems (Alabama), Inc., a corporation
organized and existing under the laws of the State of Alabama, Scimex,
Inc., a corporation organized and existing under the laws of the State of
Alabama, SCI Technology, Interagency, Inc., a corporation organized and
existing under the laws of the State of Delaware, SCI Holdings, Inc.
(formerly known as SCI U.K. Holding, Inc.), a corporation organized and
existing under the laws of the State of Delaware, SCI Foreign Sales, Inc.,
a corporation organized and existing under the laws of the U.S. Virgin
Islands, and Newport, Inc., a corporation organized and existing under the
laws of the State of Georgia, and their respective successors and assigns.
Guaranty: Any contractual obligation, contingent or otherwise, of a Person
with respect to any Indebtedness or other obligation or liability of
another Person, including, without limitation, any such Indebtedness,
obligation or liability directly or indirectly guaranteed, endorsed,
co-made or discounted or sold with recourse by that Person, or in respect
of which that Person is otherwise directly or indirectly liable, including
contractual obligations (contingent or otherwise) arising through any
agreement to purchase, repurchase, or otherwise acquire such Indebtedness,
obligation or liability or any security therefor, or any agreement to
provide funds for the payment or discharge thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or
to maintain solvency, assets, level of income, or other financial
condition, or to make any payment other than for value received. The amount
of any Guaranty shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
guaranty is made or, if not so stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person
is required to perform thereunder) as determined by such Person in good
faith.
Guaranty Agreement: The Amended and Restated Guaranty Agreement executed by
the Guarantors, jointly and severally, in favor of the Agent, the Co-Agent
and the Banks, substantially in the form of Exhibit C, attached hereto, as
amended, restated, supplemented, waived or modified from time to time.
<PAGE>
Indebtedness: Of any Person shall mean, without duplication:
(i) All obligations of such Person which in accordance with GAAP would
be shown on the balance sheet of such Person as a liability
(including, without limitation, obligations for borrowed money and for
the deferred purchase price of property or services, and obligations
evidenced by bonds, debentures, notes or other similar instruments);
(ii) All rental obligations under leases required to be capitalized
under GAAP;
(iii) All Guaranties of such Person (including contingent
reimbursement obligations under undrawn letters of credit); and
(iv) Indebtedness of others secured by any Lien upon property owned by
such Person, whether or not assumed.
Intercompany Lenders: The Borrower and each of its Subsidiaries, acting as
a lender to a Subsidiary of the Borrower for the purpose of making
available proceeds of any Advance or from the issuance of Commercial Paper
Notes.
Intercompany Loan: Indebtedness of any Subsidiary to any Intercompany
Lender arising from use of proceeds of any Advance or from the issuance of
Commercial Paper Notes, whether such Indebtedness is in the form of a
promissory note or other written obligation or is in the form of an
intercompany account payable by the Subsidiary to the Intercompany Lender.
Intercreditor Agreement: The Intercreditor Agreement dated as of December
2, 1994, among the Agent, the Co-Agent, the Banks, C and I (Division)
Holdings and the Bank of Ireland and consented to and acknowledged by the
Borrower and the Subsidiaries, as such Intercreditor Agreement may be
amended or supplemented from time to time.
Interest Expense: For any Fiscal Year of the Borrower, total interest
expense (including, without limitation, interest expense attributable to
capitalized leases in accordance with GAAP) of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with GAAP.
Interest Period: For each Eurodollar Loan, the Interest Period determined
pursuant to Section 3.05.
Interest Rate Contracts: Interest rate cap agreements, interest rate collar
agreements, interest rate swap agreements and other agreements or
arrangements designed to protect against fluctuations in interest rates.
Inventory: With respect to any Person, all goods, merchandise and other
personal property held for sale, and all raw materials, components, work or
goods in process, finished goods, goods in transit and packing and shipping
materials, accretions and accessions thereto, trust receipts and similar
documents covering the
<PAGE>
same products, all whether now owned or hereafter acquired by such Person,
all as determined in accordance with GAAP. For the sole purpose of testing
the financial covenant set forth in Section 9.12(f) hereof, any A- 12
Program Financial Statements Adjustments relating to Inventory previously
recognized in accordance with GAAP shall be added to the amount of
Inventory in order to determine the Adjusted Working Capital of the
Borrower and its consolidated Subsidiaries, except as otherwise set forth
in Section 9.12(f) hereof.
Inventory Loan: Any loan made from time to time to Borrower or any other
Credit Party by a receivables securitization company managed by The Bank of
Tokyo Trust Company in an aggregate amount not to exceed $15,000,000
secured by a Lien on (a) the interest of Borrower or another Credit Party
in the NECTEC Agreement and (b) a Credit Party's Inventory which has been
ordered pursuant to the NECTEC Agreement and pursuant to which the
obligations of Borrower or such other Credit Party to repay the principal
of such loans will become Non-Recourse to Borrower and the other applicable
Credit Parties if such Inventory has resulted in Borrower's or any such
Credit Party's issuance of an invoice to NECTEC.
Letter of Credit: The irrevocable Letter of Credit No. S930136 issued by
ABN AMRO on June 25, 1993 for the benefit of the Depositary as amended by
the Letter of Credit Amendment, as such Letter of Credit may be further
amended or replaced from time to time pursuant to the terms of this
Agreement.
Letter of Credit Amendment: Amendment No. 1 to Letter of Credit No. S930136
issued by ABN AMRO to the Depositary on the date hereof in the form of
Exhibit A attached hereto.
LIBOR: In respect of any Interest Period for any Eurodollar Loan, the
average rate per annum (rounded upward to the nearest one-sixteenth of one
percent (1/16%)) quoted to the Reference Banks by leading banks in the
London interbank market, for Dollar deposits of amounts in immediately
available funds comparable to the principal amount of the Eurodollar Rate
Advance for which LIBOR is being determined and with maturities comparable
to the Interest Period for which LIBOR will apply as of approximately 11:00
a.m. London time on the date which is two (2) Business Days prior to the
first day of such Interest Period.
Lien: Any mortgage, pledge, security interest, encumbrance, lien, judgment
or charge of any kind, including any conditional sale or other title
retention agreement, any lease in the nature thereof and the filing of or
agreement to give any financing statement under the Uniform Commercial
Code, or other law relating to Liens, of any jurisdiction.
Liquidating Subsidiary: Each of SCI U.K., Newmoor Industries and, after the
sale of all or substantially all of its assets and the commencement of
liquidation or dissolution proceedings, Norlite, all as permitted pursuant
to Sections 8.17, 9.02 or 10.12 hereof.
Loan/Purchase Transaction: The three-tranche facility, not to exceed
$50,000,000 in the aggregate, provided to Borrower or any other Credit
Party by a receivables securitization company managed by The Bank of Tokyo
Trust Company, consisting of (i) a revolving facility of up to $50,000,000
for the purchase on a Non-Recourse basis of trade receivables arising from
the sale of computer equipment to NECTEC pursuant to the NECTEC Agreement,
(ii) the Inventory Loan, and (iii) a facility of up to $30,000,000 whereby
a receivables securitization company managed by The Bank of Tokyo Trust
Company purchases on a Non-Recourse basis
<PAGE>
the obligations of NECTEC with respect to Inventory which has been ordered
pursuant to the NECTEC Agreement and which is evidenced by an invoice but
which has not resulted in a sales or purchase order.
Loans: The Series A Revolving Credit Loans, the Series B Commercial Paper
Loans and the Series C Commercial Paper Loans, collectively.
Margin Regulations: Regulation G, Regulation T, Regulation U and Regulation
X of the Board of Governors of the Federal Reserve System, as the same may
be in effect from time to time.
Material Subsidiary: SCI Technology, SCI Thailand, SCI Singapore and each
other Subsidiary of Borrower, now existing or hereinafter established or
acquired, that has or acquires Adjusted Tangible Assets equal to or in
excess of ten percent (10%) of the total Adjusted Tangible Assets of the
Borrower on a consolidated basis or any other Subsidiary of the Borrower
that is otherwise material to the operations or business of the Borrower or
any Material Subsidiary.
Minimum Level: The amount, determined at any time, equal to the sum of the
Face Amount of all Commercial Paper Notes then Outstanding.
NECTEC: NEC Technologies, Inc., a Delaware corporation, or any of its
affiliates, and such party's successors and assigns.
NECTEC Agreement: That certain Agreement to be entered into between NECTEC
and Borrower or any other Credit Party with respect to the sale of computer
equipment to NECTEC, as the same may be amended, supplemented or restated
from time to time.
Net Income: As applied to any Person for any fiscal period, the aggregate
amount of net income (or net loss) of such Person, after taxes, for such
period as determined in accordance with GAAP.
Newmoor Industries: Newmoor Industries Limited, formerly known as Cambridge
Computer Limited, a corporation organized under the laws of England.
New York Business Day: Any day other than a Saturday, a Sunday or a day
when banks are authorized by law to close in New York.
Non-Recourse: means (i) that the terms and conditions applicable to the
Receivables Purchase Transaction and the Loan/Purchase Transaction (other
than the Inventory Loan) provide that the recourse of a purchaser of
accounts receivable or any interest therein or any invoice for losses
resulting from an obligor's failure to pay due to credit problems is
limited to such accounts receivable or interests therein or such invoice
(as the case may be), together in each case with any related security, if
any, and, (ii) that the terms and conditions applicable to the Inventory
Loan provide that the recourse of the receivables securitization company
managed by the Bank of Tokyo Trust Company to recover against the Borrower
or any other Credit Party for losses resulting from NECTEC's failure to pay
a related invoice due to credit problems of NECTEC is limited to the
interest of the Borrower or such Credit Party in the collateral for the
Inventory Loan; provided, however,
<PAGE>
that the terms and conditions applicable to the Receivables Purchase
Transaction and the Loan/Purchase Transaction may also provide for
additional bases of non-recourse.
Norlite: Norlite Technology, Inc., a corporation organized and existing
under the laws of Canada, and its successor and assigns.
Notes: The Series A Master Notes, the Series B Master Notes, and the Series
C Master Notes, and any extensions, renewals, modifications or replacements
thereof or therefor.
Notice of Borrowing: The Notice of Borrowing, given pursuant to Section
3.02(a), in substantially the form attached hereto as Exhibit D-1.
Notice of Conversion/Continuation: The Notice of Conversion/Continuation,
given pursuant to Section 3.02(b), in substantially the form attached
hereto as Exhibit D-3.
Notice of Requested Change in Stated Amount: The Notice of Requested Change
in Stated Amount, given pursuant to Section 4.11, in substantially the form
attached hereto as Exhibit D-4.
Obligations: All amounts owing by the Borrower or any Credit Party to the
Agent, the Co-Agent or any Bank pursuant to the terms of this Agreement,
any of the Notes or any other Credit Document or any Interest Rate Contract
of the Borrower or any other Credit Party, including, without limitation,
all Loans (including all principal and interest payments due thereunder),
fees, expenses, indemnification and reimbursement payments, indebtedness,
liabilities and obligations of the Borrower or any Credit Party, direct or
indirect, absolute or contingent, liquidated or unliquidated, now existing
or hereafter arising, together with all renewals, extensions, modifications
or refinancings thereof.
Officer's Certificate: A certificate signed in the name of the Credit Party
to which such certificate is applicable by its Chairman, President,
Treasurer or Chief Financial Officer.
Operating Account: The Operating Account established pursuant to the
Depositary Agreement.
Outstanding: (i) With respect to Commercial Paper Notes, all Commercial
Paper Notes issued and authenticated pursuant to the Depositary Agreement,
less those Commercial Paper Notes (a) which have been paid in full, (b) for
the payment of which a Drawing has been made on the Letter of Credit
pursuant to which funds equal to the Face Amount thereof shall be deposited
in the Commercial Paper Account on the same day, or (C) as to which the
Letter of Credit has expired, and (ii) with respect to Loans, the principal
amount of all Loans made by the Banks pursuant to this Agreement less the
principal amount of Loans which have been paid by the Borrower.
Outstanding Balance: With respect to any Permitted Asset Securitization
Transaction and at any date of determination, the difference between (i)
the lesser of (x) the total facility amount of such Permitted Asset
Securitization Transaction or (y) the maximum dollar amount that could be
paid by a purchaser for a Credit
<PAGE>
Party's accounts receivable (or undivided fractional interest in a pool
thereof) pursuant to such Permitted Asset Securitization Transaction minus
(ii) the remaining dollar amount that could be paid by a purchaser for a
Credit Party's accounts receivable (or undivided interests therein) after
giving effect to purchases by such purchaser pursuant to such Permitted
Asset Securitization Transaction.
Payment Office: The Applicable Lending Office of the Agent or the Co-Agent,
as the case may be, or such other office for payments within the United
States as the Agent or Co-Agent may designate by written notice to the
Borrower.
PBGC: The Pension Benefit Guaranty Corporation, or any successor thereto.
Permitted Asset Securitization Transactions: The Receivables Purchase
Transaction and the Loan/Purchase Transaction.
Permitted Encumbrances:
(a) Liens for taxes and assessments not delinquent or which are being
contested in good faith by appropriate proceedings and against which
adequate reserves have been provided for on the books of the Borrower and
its Subsidiaries in accordance with GAAP;
(b) Worker's, mechanic's and materialmen's liens and similar liens incurred
in the ordinary course of business remaining undischarged or unstayed for
not longer than sixty (60) days following the Borrower's (or its
Subsidiary's) receipt of notice of the attachment thereof;
(c) Attachments remaining undischarged or unstayed for not longer than
sixty (60) days from the making thereof;
(d) Liens in respect of final judgments or awards remaining undischarged or
unstayed for not longer than sixty (60) days from the making thereof;
(e) Liens in respect of pledges or deposits under worker's compensation
laws, unemployment insurance or similar legislation and in respect of
pledges or deposits to secure bids, tenders, contracts (other than
contracts for the payment of money), leases or statutory obligations, or in
connection with surety, appeal and similar bonds incidental to the conduct
of litigation; and
(f)Liens otherwise created or permitted by any Credit Document.
Permitted Exceptions: The filings and registrations for public notice
purposes and approvals, consents and other items listed on Schedule 1.01
attached hereto.
Permitted Subordinated Debentures: Debentures contemplated to be issued
from time to time by the Borrower after the date of this Agreement that (i)
are subordinated in writing to all Obligations of the Borrower and each
Subsidiary, such subordination provisions to be on terms and conditions
satisfactory in all
<PAGE>
respects to the Agent and the Co-Agent and (ii) are permitted to be issued
pursuant to Section 10.14(a) hereto, but such term shall specifically
exclude the Debentures of 1987.
Permitted Transaction: Any action by the Borrower or any of its
Subsidiaries which (i) would be prohibited by Section 10.01, Section 10.02,
Section 10.03, or Section 10.03A of this Agreement but for Section
10.01(viii) (in the case of Section 10.01), Section 10.02(x) (in the case
of Section 10.02), Section 10.03(viii) (in the case of Section 10.03) or
Section 10.03A(i) (in the case of Section 10.03A) and (ii) involves,
directly or indirectly, an Amount not in excess of $25,000,000.
Permitted Transaction Amount: An aggregate Amount of Permitted Transactions
entered into during any Fiscal Year of the Borrower which amount does not
exceed twenty percent (20%) of the Borrower's Average Tangible Net Worth,
determined based upon the financial statements furnished by the Borrower
pursuant to Section 9.12(a); provided, however, that such Amount shall not
include any Lien that has been released or any Indebtedness that has been
discharged; and provided further that in calculating the Permitted
Transaction Amount with respect to any single transaction or any series of
related transactions, the respective amount of the Liens, Indebtedness,
Guaranties and Investments arising in connection with such transaction or
series of transactions shall not be double-counted (e.g., if the Borrower
makes an acquisition of assets for a purchase price of $20,000,000, incurs
$20,000,000 of Indebtedness to finance the purchase price and the purchase
price is secured by a Lien on the assets that are the subject of such
acquisition, only $20,000,000 shall be counted against the Permitted
Transaction Amount with respect to that acquisition). During the period of
each fiscal quarter prior to delivery by the Borrower to the Agent pursuant
to this Agreement of financial statements for the previous fiscal quarter,
the Permitted Transaction Amount shall continue to be based on the Average
Tangible Net Worth derived from the previous quarterly financial statements
delivered by the Borrower unless Borrower knows that at the time of
calculating the Permitted Transaction Amount the amount of the Liens,
Indebtedness, Guaranties and Investments arising in connection with the
transaction or series of transactions would exceed the actual Permitted
Transaction Amount (determined on the basis of the actual Average Tangible
Net Worth). With respect to acquisitions, the date of determination for
purposes of calculating the Permitted Transaction Amount shall be the date
of the purchase agreement for such acquisition, and no Permitted
Transaction shall cease to be a Permitted Transaction in the event that the
consolidated Tangible Net Worth of the Borrower decreases in a subsequent
fiscal period. For purposes of this Agreement, the purchase of the contract
manufacturing business assets of Digital Equipment Corporation by SCI
Technology shall be deemed to be a Permitted Transaction for purposes of
calculating the Permitted Transaction Amount.
Person: An individual, partnership, corporation, trust, joint venture,
unincorporated organization, limited liability company, association, or a
government, or agency or political subdivision or instrumentality thereof.
Pledge Agreements: Collectively, (i) the Amended and Restated Stock Pledge
and Security Agreements executed in favor of the Agent, substantially in
the form of Exhibit F-1, attached hereto, providing (except for the
Permitted Exceptions) for the grant of first-priority Liens on the Pledged
Stock (other than the Pledged Stock of SCI Canada); (ii) with respect to
the Pledged Stock of SCI Canada, the Quebec Stock Pledge and Security
Agreement, and (iii) after compliance with the provisions of Section 9.13
with respect to the
<PAGE>
capital stock of a newly formed or acquired Subsidiary, of the Borrower,
the Stock Pledge and Security Agreement with respect to the stock of such
Subsidiary.
Pledged Stock: Collectively, (i) all issued and outstanding shares of each
class of capital stock of each Foreign Subsidiary held by the Borrower or
any Subsidiary (other than a Foreign Subsidiary), up to an amount
constituting sixty-six percent (66%) of all issued and outstanding shares
of each class of any Foreign Subsidiary and (ii) after compliance with the
provisions of Section 9.13 with respect to a newly formed or acquired
Foreign Subsidiary, all issued and outstanding shares of each class of
capital stock of such Foreign Subsidiary held by the Borrower or any
Subsidiary other than a Foreign Subsidiary, up to an amount constituting
sixty-six percent (66%) of all issued and outstanding shares of each class
of such Foreign Subsidiary, or in the case of Class A preference shares of
SCI Canada or Norlite up to an amount not to exceed sixty-six and 61/100
percent (66.61%) of all the issued and outstanding Class A preference
shares of SCI Canada or Norlite (as the case may be), together with all
warrants, stock options and other purchase and conversion rights with
respect to any of the foregoing.
Post-Default Rate: At any time, with respect to any Advance, a per annum
rate equal to the rate otherwise applicable to such Advance plus two
percentage points (2%) which rate shall accrue only during the continuance
of an Event of Default.
Prior Commercial Paper Credit Agreement: The Credit Agreement, dated as of
August 23, 1990, between the Borrower and ABN AMRO.
Prior Expiration Date: As defined in Section 3.01(e) hereof.
Pro Rata Share: When used with reference to any Bank and any described
aggregate or total amount, an amount equal to the result obtained by
multiplying such described aggregate or total amount by a fraction, the
numerator of which shall be the Bank's Revolving Credit Commitment,
Commercial Paper Commitment or Commitment, as applicable, on such date and
the denominator of which shall be the Total Revolving Credit Commitment,
Total Commercial Paper Commitment or Total Commitment, respectively, on
such date.
Quebec Assignment of Intercompany Loans: The Hypothec on Movables dated as
of the date hereof from SCI Canada, substantially in the form of Exhibit
E-3 attached hereto, as amended, restated, supplemented, waived or modified
from time to time.
Quebec Stock Pledge and Security Agreement: The Hypothec with Delivery
dated as of the date hereof executed by Borrower with respect to 66% of the
common shares and a maximum of 66.55% of the preferred shares of SCI
Canada, substantially in the form of Exhibit F-2 attached hereto, as
amended, restated, supplemented, waived or modified from time to time.
Receivables Purchase Transaction: The revolving trade receivable
securitization facility not to exceed $100,000,000 whereby a Person shall
purchase from time to time and on a Non-Recourse basis undivided fractional
interests in a pool of accounts receivable of a Credit Party or Credit
Parties or a Bankruptcy-Remote Subsidiary.
<PAGE>
Recordation Fee: As defined in Section 15.04(b)(vi).
Reference Banks: Citibank, ABN AMRO and Bank of America (Illinois).
Regulatory Change: Any introduction or any change after the date of this
Agreement not officially published in proposed or final form prior to
December 31, 1992, in any United States federal, state or foreign laws,
treaties, guidelines or regulations or the adoption or making after such
date of any interpretations, directives or requests applying to a class of
banks, including any Banks, of or under any United States federal, state,
or foreign laws, treaties, guidelines or regulations (whether or not having
the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
Required Banks: At any time, (i) Banks having, in the aggregate, not less
than sixty-six and two-thirds of one percent (66-2/3%) of the Total
Commitment, except, solely for purposes of Banks consenting to an extension
of the Credit Expiration Date pursuant to Section 3.01(e), Banks having, in
the aggregate, not less than eighty percent (80%) of the Total Commitment
plus (ii) Banks having, in the aggregate, not less than fifty-one percent
(51%) of the Total Revolving Credit Commitment plus (iii) Banks having, in
the aggregate, not less than fifty-one percent (51%) of the Total
Commercial Paper Commitment.
Required Commercial Paper Banks: At any time, Commercial Paper Banks
having, in the aggregate, not less than sixty-six and two-thirds of one
percent (66 2/3%) of the Total Commercial Paper Commitment.
Required Revolving Credit Banks: At any time, Revolving Credit Banks
having, in the aggregate, not less than sixty-six and two-thirds of one
percent (66 2/3%) of the Total Revolving Credit Commitment.
Requirement of Law: For any Person, the articles or certificate of
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation, or determination of
an arbitrator or a court or other governmental authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property may be subject.
Restricted Payments: Has the meaning set forth in Section 10.11 of this
Agreement.
Revolving Credit Bank: Any Bank holding a Series A Master Note and whose
Revolving Credit Commitment has not been terminated for any reason pursuant
to the terms of this Agreement.
Revolving Credit Commitment: At any time for any Bank, the amount of such
Bank's commitment, if any, set forth opposite such Bank's name in the
column headed "Revolving Credit Commitment" on Annex I hereto, as the same
may be amended from time to time.
Rights: Rights to payment for Commercial Paper Notes, as described in
Section 6.06.
SCI Canada: SCI Systems (Canada) Inc., a corporation organized and existing
under the laws of Canada.
<PAGE>
SCI Malaysia: SCI Manufacturing (Malaysia) SDN BHD, a corporation organized
and existing under the laws of Malaysia and its successors and assigns.
SCI Singapore: SCI Manufacturing Singapore Pte. Ltd., a corporation
organized and existing under the laws of the Republic of Singapore and its
successors and assigns.
SCI Technology: SCI Technology, Inc., a corporation organized and existing
under the laws of the State of Alabama and its successors and assigns.
SCI Thailand: SCI Systems (Thailand) Limited, a corporation organized and
existing under the laws of Thailand and its successors and assigns.
SCI U.K.: SCI U.K. Limited, a corporation organized and existing under the
laws of Guernsey.
SEC: The Securities and Exchange Commission or any successor thereto.
Securities Act: The Securities Act of 1933, as amended from time to time.
Security Documents: Collectively, the Guaranty Agreement, the Pledge
Agreements, the Assignment of Intercompany Loans, and each other guaranty
agreement, mortgage, deed of trust, security agreement, pledge agreement,
or other security or collateral document now or hereafter guaranteeing or
securing the Obligations.
Senior Debt: Total Debt minus Subordinated Debt.
Series A Master Notes: Promissory notes issued by the Borrower and payable
to the order of each Revolving Credit Bank evidencing such Bank's Series A
Revolving Credit Loans, as provided herein, in substantially the form
attached as Exhibit B to this Agreement and any extension, renewal,
modification or replacement of any of the foregoing.
Series A Revolving Credit Loans: Loans made from time to time by the
Revolving Credit Banks to the Borrower under Section 2.01.
Series B Commercial Paper Loans: Reimbursement obligations of the Borrower
Outstanding from time to time in respect of payments under the Letter of
Credit, as described in Section 4.03 hereof.
Series B Master Notes: Promissory notes dated June 25, 1993 issued by the
Borrower and payable to the order of each Commercial Paper Bank evidencing
such Bank's Series B Commercial Paper Loans, as provided herein, and any
extension, renewal, modification or replacement of any of the foregoing.
Series C Commercial Paper Loans: Loans made from time to time by the
Commercial Paper Banks to the Borrower under Section 2.01.
<PAGE>
Series C Master Notes: Promissory notes dated June 25, 1993 issued by the
Borrower and payable to the order of each Commercial Paper Bank evidencing
such Bank's Series C Commercial Paper Loans, as provided herein, and any
extension, renewal, modification or replacement of any of the foregoing.
Stated Amount: The amount available for Drawings under the Letter of Credit
at any time, as initially established pursuant to Section 4.01 and
subsequently reduced pursuant to Section 4.04 or Section 4.11 or increased
pursuant to Section 4.05 or Section 4.11.
Stop Order: Any instruction given by the Co-Agent to the Depositary
pursuant to Section 6.02 of this Agreement, which instruction may be
specific with respect to a particular proposed issue of Commercial Paper
Notes or may be general and applicable to all Commercial Paper Notes to be
issued and delivered after receipt of such instruction until revoked or
superseded by further instruction from the Co-Agent and which instruction
may specify that the obligation of the Co-Agent as issuer of the Letter of
Credit to honor demands for payment under the Letter of Credit shall not be
automatically reinstated to the extent of each reimbursement made to the
Co-Agent by, or on behalf of, the Borrower for a payment or disbursement
made under the outstanding Letter of Credit.
Subordinated Debt: (i) The Debentures of 1987, (ii) the Permitted
Subordinated Debentures and (iii) any other Indebtedness of the Borrower or
any Subsidiary of the Borrower which is subordinated in writing to all
Obligations of the Borrower or such Subsidiary on terms and conditions
satisfactory in all respects to the Required Banks and approved in writing
by the Required Banks, including, without limitation, with respect to
interest rates, payment terms, maturities, amortization schedules,
covenants, defaults, remedies and subordination provisions.
Subsidiary and Subsidiaries: Any corporation of which more than fifty
percent (50%) of the shares of the outstanding stock representing the right
to vote for the election of directors or other managing authority are owned
or controlled at the time the determination is made, directly or
indirectly, including through other Subsidiaries, by the Person specified.
Subsidiary Notes: Promissory notes issued by any of the Subsidiaries and
payable to the order of the Borrower or any Subsidiary evidencing any and
all Intercompany Loans made by any payee to the maker, as provided in
Section 12.01 herein, in substantially the form attached as Exhibit E-2 to
this Agreement and any extension, renewal, modification or replacement of
any of the foregoing.
Tangible Net Worth: With respect to the Borrower and its Subsidiaries at a
particular date, an amount equal to (i) the aggregate par value of the
outstanding shares of all classes of stock of the Borrower plus paid-in
capital in excess of the par value of any shares of stock plus retained
earnings, less all amounts carried on the books of the Borrower for
treasury stock, less (ii) the aggregate amount of all items and assets
categorized as intangibles, including, but not limited to, "goodwill", on
the consolidated balance sheet of the Borrower, as determined in accordance
with GAAP.
Taxes: Any present or future taxes, levies, imposts, duties, fees,
assessments, deductions, withholdings or other charges of whatever nature,
including, without limitation, income, gross receipts, excise, property,
<PAGE>
sales, transfer, license, payroll, withholding, social security and
franchise taxes now or hereafter imposed or levied by the United States, or
any state, local or foreign government or by any department, agency or
other political subdivision or taxing authority thereof or therein and all
interest, penalties, additions to tax and similar liabilities with respect
thereto.
Total Capital: As to any Person at a particular date, the sum of (i) all
items which would, in accordance with GAAP, be properly classified on the
balance sheet of such Person as (a) total shareholders' equity plus (b)
long-term deferred income taxes, plus (ii) Total Debt.
Total Commercial Paper Commitment: At any time, the sum of the Commercial
Paper Commitments, which shall initially be $120,000,000 and shall be
subject to reduction pursuant to Section 3.01.
Total Commitment: At any time, the sum of the Commitments of each of the
Banks at such time which shall initially be $320,000,000 and shall be
subject to reduction pursuant to Section 3.01, and may be increased
pursuant to Section 3.01(e).
Total Debt: As to any Person at a particular date, the sum of all items
which would, in accordance with GAAP, be properly classified on such
Person's balance sheet as (i) short-term debt for money borrowed, plus (ii)
current maturities of long-term debt, plus (iii) long-term debt, including,
without limitation, with respect to the Borrower, the Subordinated Debt and
to the extent issued, the Permitted Subordinated Debentures.
Total Revolving Credit Commitment: At any time, the sum of the Revolving
Credit Commitments, which shall initially be $200,000,000 and shall be
subject to reduction pursuant to Section 3.01.
Type: With respect to any Loan, a Base Rate Loan or Eurodollar Loan.
Voting Shares: As to any Person, all outstanding shares of any class or
classes (however designated) of stock of such Person entitled to vote
generally in the election of members of the board of directors of such
Person.
Section 1.02.Accounting Terms and Determinations. Unless otherwise defined
or specified herein, all accounting terms shall be construed herein, all
accounting determinations under this Agreement shall be made, all financial
statements required to be delivered under this Agreement shall be prepared,
and all financial records shall be maintained in accordance with GAAP
provided, however, that for the purposes of making accounting
determinations under Section 9.12(b) through Section 9.12(f) hereof, unless
the Borrower receives the prior written consent of the Required Banks, GAAP
as in effect on the date of this Agreement shall be used in making such
determinations.
Section 1.03.Other Definitional Terms. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole, and not to any particular provision of
this Agreement, and Article, Section, Schedule, Exhibit, Annex and similar
references are to such portions of this Agreement unless otherwise
specified.
<PAGE>
ARTICLE II
LOANS
Section 2.01.Commitments; Use of Proceeds.
(a) Commitments, Generally. (i) Subject to and upon the terms and
conditions set forth in this Agreement, each Revolving Credit Bank
severally agrees, from time to time prior to the Credit Expiration Date, to
make to the Borrower Series A Revolving Credit Loans in an aggregate
principal amount Outstanding at any time not to exceed such Bank's
Revolving Credit Commitment.
(ii) Subject to and upon the terms and conditions set forth in this
Agreement, each Commercial Paper Bank severally agrees, from time to time
prior to the Credit Expiration Date, to make to the Borrower Series B
Commercial Paper Loans or Series C Commercial Paper Loans in an aggregate
principal amount Outstanding at any time not to exceed, when added to such
Commercial Paper Bank's Pro Rata Share of the aggregate Face Amount of
Outstanding Commercial Paper Notes, such Commercial Paper Bank's Commercial
Paper Commitment.
(b) Series A Revolving Credit Loans. (i) Each Series A Revolving Credit
Loan shall, at the option of the Borrower, be made or continued as, or
converted into, part of one or more Borrowings that, unless otherwise
specifically provided in this Agreement, shall consist entirely of Base
Rate Advances or Eurodollar Rate Advances. The aggregate principal amount
of each Borrowing of Series A Revolving Credit Loans shall be not less than
$1,000,000 and shall be in integral multiples of $500,000.
(ii) At no time shall the number of Borrowings for Series A Revolving
Credit Loans and Series C Commercial Paper Loans outstanding under this
Article exceed twelve (12); provided that, for the purpose of determining
the number of Borrowings outstanding and the minimum amount for Borrowings
resulting from conversions or continuations, all Borrowings of Base Rate
Loans shall be considered as one Borrowing and provided further that the
number of Borrowings for Series A Revolving Credit Loans outstanding under
this Article may be increased pursuant to the terms of the letter dated as
of the date hereof from Borrower to Agent.
(iii)The proceeds of Series A Revolving Credit Loans shall be used solely
by the Borrower and the Subsidiaries of the Borrower for general corporate
purposes.
(C) Series B Commercial Paper Loans. (i) Each Series B Commercial Paper
Loan shall be made or continued as part of one or more Borrowings that
shall consist entirely of Base Rate Advances.
(ii) Series B Commercial Paper Loans shall be solely for the purpose of
evidencing the indebtedness of the Borrower to the Commercial Paper Banks
for the obligation of the Borrower to reimburse the Commercial Paper Banks
for payments made by the Co-Agent under the Letter of Credit.
<PAGE>
(d) Series C Commercial Paper Loans. (i) Each Series C Commercial Paper
Loan shall, at the option of the Borrower, be made or continued as, or
converted into, part of one or more Borrowings that, unless otherwise
specifically provided in this Agreement, shall consist entirely of Base
Rate Advances or Eurodollar Advances. The aggregate principal amount of
each Borrowing of Series C Commercial Paper Loans shall be not less than
$5,000,000 or a greater integral multiple of $5,000,000.
(ii)The proceeds of Series C Commercial Paper Loans shall be used solely by
the Borrower and the Subsidiaries of the Borrower for general corporate
purposes, including the repayment of the Series B Commercial Paper Loans.
Section 2.02.Notes; Repayment of Principal.
(a)Series A Master Notes. (i) The Borrower's obligation to pay the
principal of and interest on the Series A Revolving Credit Loans to each
Revolving Credit Bank shall be evidenced by the records of the Agent and
such Bank and by the Series A Master Note payable to such Bank, or the
assignor of such Bank, completed in conformity with this Agreement. Failure
by any Revolving Credit Bank to make any notations on the Series A Master
Note payable to such Bank shall not affect the obligations of the Borrower
under this Agreement or under such Bank's Series A Master Note.
(ii)Subject to the terms of this Agreement, all Outstanding principal
amounts, together with all accrued and unpaid interest, on the Series A
Revolving Credit Loans shall be due and payable in full on the Credit
Expiration Date.
(b)Series B Master Notes. (i) The Borrower's obligation to pay the
principal of and interest on the Series B Commercial Paper Loans to each
Commercial Paper Bank shall be evidenced by the records of the Co-Agent and
such Bank and by the Series B Master Note payable to such Bank, or the
assignor of such Bank, completed in conformity with this Agreement. Failure
by any Commercial Paper Bank to make any notations on the Series B Master
Note payable to such Bank shall not affect the obligations of the Borrower
under this Agreement or under such Bank's Series B Master Note.
(ii)Subject to the terms of this Agreement, all Outstanding principal
amounts under the Series B Commercial Paper Loans shall be due and payable,
together with all accrued and unpaid interest thereon, on the first to
occur of: (i) the Credit Expiration Date; or (ii) thirty (30) days after
the date of the Drawing by reason of which any such Series B Commercial
Paper Loan is initially made or (iii) three Business Days after demand by
the Agent.
(c)Series C Master Notes. (i) The Borrower's obligation to pay the
principal of and interest on the Series C Commercial Paper Loans to each
Commercial Paper Bank shall be evidenced by the records of the Agent and
such Bank and by the Series C Master Note payable to such Bank, or the
assignor of such Bank, completed in conformity with this Agreement. Failure
by any Commercial Paper Bank to make any notations on the Series C Master
Note payable to such Bank shall not affect the obligations of the Borrower
under this Agreement or under such Bank's Series C Master Note.
<PAGE>
(ii)Subject to the terms of this Agreement, all Outstanding principal
amounts, together with all accrued and unpaid interest, on the Series C
Commercial Paper Loans shall be due and payable in full on the Credit
Expiration Date.
ARTICLE III
GENERAL LOAN TERMS
Section 3.01.Total Commitment; Amounts; Optional and Mandatory Reductions;
Credit Expiration Date; Extensions.
(a) The initial Total Commitment shall be equal to $320,000,000. The
initial Total Revolving Credit Commitment shall be equal to $200,000,000.
The initial Total Commercial Paper Commitment shall be
equal to $120,000,000.
(b) Upon at least three (3) Business Days' prior telephonic notice
(promptly confirmed in writing) to the Agent or the Co-Agent, as
appropriate, the Borrower shall have the right, without premium or penalty,
to terminate the unutilized portion of the Total Revolving Credit
Commitment or the Total Commercial Paper Commitment, or both, in whole or
in part, provided that (i) any partial termination pursuant to this Section
shall be in an amount of at least $1,000,000 and in integral multiples of
$1,000,000 in excess of that amount, and (ii) no such reduction shall be
permitted which would require a prepayment that is not permitted by Section
3.07. Notwithstanding anything herein to the contrary, however, (x) the
amount of the Total Revolving Credit Commitment as so reduced shall at no
time be less than the aggregate principal amount of all Outstanding Series
A Revolving Credit Loans, (y) the amount of the Total Commercial Paper
Commitment as so reduced shall at no time be less than the sum of the
aggregate principal amount of all Outstanding Series B Commercial Paper
Loans, the aggregate principal amount of all Outstanding Series C
Commercial Paper Loans and the Face Amount of all Outstanding Commercial
Paper Notes, and (z) the Stated Amount of the Letter of Credit as reduced
pursuant to Section 4.04 shall at no time be less than the Minimum Level.
(c) The Total Revolving Credit Commitment or the Total Commercial Paper
Commitment, or both as the case may be, and the Total Commitment shall be
automatically reduced, effective as of the Prior Expiration Date defined in
paragraph (e) below, by the amount of the Revolving Credit Commitment or
Commercial Paper Commitment, or both, of any Bank which does not consent to
an extension of the Credit Expiration Date and is not replaced, pursuant to
paragraph (e) of this Section, in a case where the Agent, the Co-Agent and
the Required Banks do consent to such an extension from one Credit
Expiration Date to a subsequent Credit Expiration Date.
(d) If at any time the aggregate Outstanding principal amount of Series A
Revolving Credit Loans shall exceed the Amount of the Total Revolving
Credit Commitment, the Borrower shall no later than the next Business Day
following the earlier of receipt of notice from the Agent or actual
knowledge of the Borrower of such excess, prepay Series A Revolving Credit
Loans to the extent necessary to eliminate such excess. If at any time the
aggregate Outstanding (x) principal amount of Series B Commercial Paper
Loans,
<PAGE>
(y) principal amount of Series C Commercial Paper Loans and (z) Face Amount
of Commercial Paper Notes shall exceed the amount of the Total Commercial
Paper Commitment, the Borrower shall no later than the next Business Day
following the earlier of receipt of notice from the Co-Agent, the
Depositary or any Dealer or actual knowledge by the Borrower of such
excess, prepay Series B Commercial Paper Loans or Series C Commercial Paper
Loans, or both to the extent necessary to eliminate such excess and, if
such prepayment does not eliminate such excess, cause to be deposited with
the Co-Agent cash collateral, which cash collateral shall secure the
Borrower's reimbursement obligations for payments to be made under the
Letter of Credit in an amount equal to such excess. The Borrower hereby
grants to Co-Agent, for the benefit of the Commercial Paper Banks, a
security interest in (i) any account established with Co-Agent or any
Affiliate of the Co-Agent to hold the cash collateral described in the
previous sentence and in Section 3.01A(b), (ii) all monies on deposit
therein, together with any interest or earnings thereon and (iii) the
direct and indirect proceeds of any of the foregoing.
(e) The initial Credit Expiration Date shall be August 3, 1998. The
Borrower may, however, request an extension of the initial Credit
Expiration Date by submitting a written request to the Agent no earlier
than May 31, 1997, and no later than June 30, 1997. Upon such request, the
initial Credit Expiration Date may be extended by one additional year upon
written consent of the Required Banks. The Agent will give written notice
to the Borrower, not more than sixty (60) days after receipt of the request
for extension from the Borrower, stating either that (i) the Required Banks
have given their written consent to a new Credit Expiration Date, which
shall be specified in such notice, or (ii) the Required Banks have not
given their consent to the requested extension. Any Credit Expiration Date
subsequent to the initial Credit Expiration Date may be extended by one
additional year by following the same procedure as for extension of the
initial Credit Expiration Date, with the Borrower requesting such extension
no earlier than May 31 and no later than June 30 of each year subsequent to
1997. If an extension of the Credit Expiration Date receives the consent of
the Required Banks, Banks which do not consent to such extension may be
replaced on or before the Credit Expiration Date which is to be extended
(the "Prior Expiration Date"), provided that, in any event, the Commitment
of each non-assigning and non-consenting Bank shall terminate on the Prior
Expiration Date. Any bank proposed to replace any Bank which does not
consent to an extension of the Credit Expiration Date shall be an Eligible
Assignee within the meaning specified in Section 15.04(b)(v), and the Bank
being replaced shall assign its rights and obligations to such Eligible
Assignee in accordance with the provisions of Section 15.04(a) through (e).
Such replacement shall be in all respects satisfactory to the Required
Banks which consented and shall be effected at the sole cost and expense of
the Borrower. None of the Agent, the Co-Agent and the Banks shall incur any
cost or expense (except any reasonable cost or expense which the Borrower
shall promptly reimburse) to effect any such replacement. Notwithstanding
anything herein to the contrary, no Bank which has denied or withheld its
consent to any extension of the Credit Expiration Date shall be bound by
any such extension by the Required Banks and such Bank's Loans shall become
due and payable on the Prior Expiration Date unless such Bank's Loans have
accelerated prior to such date pursuant to Section 11.01 hereof.
Section 3.01A.Removal and Replacement of Banks. (a) In addition to
Borrower's right to terminate any Bank's Commitment pursuant to Section
3.08, 3.11, 3.14, 4.07 and 15.04(h) hereof, the Borrower may, in its
discretion, cause any Bank at any time for any reason to cease to be a
party to this Agreement and all other Credit Documents to which such Bank
is then a party by (i) giving the Agent and Co-Agent, as the case may
<PAGE>
be, and the Bank written notice of the Borrower's election to remove such
Bank, (ii) paying to such Bank all outstanding principal, interest and fees
owing by Borrower to such Bank pursuant to the Credit Documents, and (iii)
paying to such Bank all costs resulting from the prepayment of any Advance;
provided, however, that (a) if the removal of any Bank shall cause the
Total Commitment to be reduced by more than $75,000,000 in the aggregate
when added to any prior reductions of any Commitments pursuant to this
Section 3.01A., then the Borrower may not remove any such Bank unless the
Required Banks shall have given their prior written consent, which consent
shall not be unreasonably withheld, (b) if a Default or an Event of Default
has occurred and is continuing under the Agreement, then the Borrower may
not remove any Bank unless all of the Banks, in their sole discretion,
shall have given their prior written consent and (c) with respect to the
removal of any Commercial Paper Bank, the Borrower shall not remove any
Commercial Paper Bank unless it has complied with Section 3.01A (b) hereof.
(b) Notwithstanding anything herein to the contrary, Borrower shall not
remove any Commercial Paper Bank if after giving effect to such removal the
aggregate Outstanding (i) principal amount of Series B Commercial Paper
Loans, (ii) principal amount of Series C Commercial Paper Loans and (iii)
Face Amount of Commercial Paper Notes shall exceed the amount of the Total
Commercial Paper Commitment unless, immediately prior to such Bank's
removal the Borrower deposits with the Co-Agent cash collateral, which cash
collateral shall secure the Borrower's reimbursement obligations for
payments to be made under the Letter of Credit, in an amount equal to such
excess and Borrower shall not remove any Commercial Paper Bank if after
giving effect to such removal, the Stated Amount of the Letter of Credit as
reduced pursuant to Section 4.04 would be less than the Minimum Level.
(c) The Borrower may, in its discretion, replace any Bank at any time for
any reason. Any new Bank provided by the Borrower shall be an Eligible
Assignee, within the meaning specified in Section 15.04(b)(v). Any Bank
being replaced shall assign its rights and obligations to such Eligible
Assignee in accordance with the provisions of Section 15.04(a) through (e)
(except for the $5,000,000 limitation set forth in Section 15.04(b), and
the obligation to pay a Recordation Fee pursuant to Section 15.04(b)). Any
replacement Bank shall be subject to the prior written consent of the
Required Banks, which consent shall not be unreasonably withheld, and, in
the case of the proposed replacement of a Commercial Paper Bank, the prior
written consent of the Co-Agent. Until any such replacement occurs, the
Borrower shall pay to the Bank being replaced all amounts due to such Bank
under the Credit Documents. The Borrower shall be obligated to pay any
reasonable legal fees or reasonable expenses incurred by the Bank being
replaced in connection with such replacement.
Section 3.02.Funding Notices.
(a) Whenever the Borrower desires to request an Advance hereunder (other
than one resulting from a conversion or continuation pursuant to Section
3.02(b)), it shall give a Notice of Borrowing to the Agent, and with
respect to a Series B Commercial Paper Loan or a Series C Commercial Paper
Loan, a copy of such Notice of Borrowing to the Co-Agent and the
Depositary, prior to noon New York City time at the Agent's or the
Co-Agent's Payment Office, as the case may be, (i) on the requested date of
such Borrowing in the case of Base Rate Advances, and (ii) three (3)
Business Days prior to the requested date of such Advance in the case of
Eurodollar Rate Advances. Notices received after noon New York City time
shall be deemed
<PAGE>
received on the next Business Day. Each Notice of Borrowing shall be
irrevocable and shall specify the aggregate principal amount of the
Advance, the date of Advance (which shall be a Business Day) and whether
the Advance is to consist of a Base Rate Advance or Eurodollar Rate Advance
and (in the case of a Eurodollar Rate Advance) the Interest Period to be
applicable thereto. Each Notice of Borrowing relating to a Series A Loan
shall also include a computation demonstrating that, after giving effect to
the requested Borrowing, the sum of (i) the aggregate principal amount of
all Series A Revolving Credit Loans Outstanding plus (ii) the aggregate
principal amount of all loans outstanding under the Bid Facility
immediately after the making of any requested Series A Revolving Credit
Loan would not exceed the Total Revolving Credit Commitment. Each Notice of
Borrowing relating to a Series B Commercial Paper Loan and Series C
Commercial Paper Loan shall also include a computation demonstrating that,
after giving effect to the requested Borrowing, the sum of (i) the
aggregate principal amount of all Series B Commercial Paper Loans
Outstanding and all Series C Commercial Paper Loans Outstanding immediately
after the making of any requested Series B Commercial Paper Loan or Series
C Commercial Paper Loan, as the case may be, plus (ii) the aggregate Face
Amount of Outstanding Commercial Paper Notes would not exceed the Total
Commercial Paper Commitment.
(b) Whenever the Borrower desires to convert all or a portion of an
Outstanding Advance consisting of a Base Rate Advance or a Eurodollar Rate
Advance into one or more borrowings consisting of Advances of another Type,
or to continue Outstanding a Eurodollar Rate Advance for a new Interest
Period, it shall give a Notice of Conversion/Continuation to the Agent at
least three (3) Business Days prior to the conversion into or continuation
of an Advance as Eurodollar Rate Advance. Such Notice of Conversion/
Continuation shall be given prior to noon New York City time on the date
specified. Each such Notice of Conversion/Continuation shall be irrevocable
and shall specify the aggregate principal amount of the Advances to be
converted or continued, the date of such conversion or continuation,
whether the Advances are being converted into or continued as Eurodollar
Rate Advances and the Interest Period to be applicable thereto. If, upon
the expiration of any Interest Period in respect of any Advance, the
Borrower shall have failed, or pursuant to the following sentence be
unable, to properly deliver the Notice of Conversion/Continuation, the
Borrower shall be deemed to have elected to convert or continue such
Advance to an Advance consisting of Base Rate Advances. So long as any
Default or Event of Default shall have occurred and be continuing no
Advance may be converted into or continued as (upon expiration of the
current Interest Period) a Eurodollar Rate Advance. No conversion of any
Eurodollar Rate Advance shall be permitted except on the last day of the
Interest Period in respect thereof.
(c) Without in any way limiting the Borrower's obligation to confirm in
writing any telephonic notice, the Agent or the Co-Agent, as the case may
be, may act without liability upon the basis of telephonic notice believed
by the Agent or the Co-Agent in good faith to be from the Borrower prior to
receipt of written confirmation. In each such case, the Agent's or the
Co-Agent's record of the terms of such telephonic notice shall, absent
manifest error, be final, conclusive and binding for all purposes.
(d) The Agent or the Co-Agent, as appropriate, shall promptly (and in no
event later than 10:00 a.m. New York City time at least two (2) Business
Days before the date of a requested Eurodollar Rate Advance) give each
Revolving Credit Bank or Commercial Paper Bank, as appropriate, telephonic
notice (confirmed in writing) or written notice by telecopy of the matters
covered by the notices given to the Agent or the Co-Agent pursuant to this
Section.
<PAGE>
Section 3.03.Disbursement of Funds.
(a) No later than 3:00 p.m. New York City time on the date of each Advance
(other than one resulting from a conversion or continuation pursuant to
Section 3.02(b)), each Revolving Credit Bank or Commercial Paper Bank, as
the case may be, will make available its Pro Rata Share of the amount of
such Borrowing in Dollars and in immediately available funds at the Agent's
or Co-Agent's Payment Office, as appropriate. The Agent or the Co-Agent
will make available to the Borrower the aggregate of the amounts (if any)
so made available by the Revolving Credit Banks or Commercial Paper Banks
by wiring such amounts to the account indicated on the Notice of Borrowing
or otherwise making the amount available to the Borrower as specified in
the Notice of Borrowing.
(b) Unless the Agent or the Co-Agent shall have been notified by any
Revolving Credit Bank or Commercial Paper Bank, respectively, prior to the
date of a Borrowing that such Bank does not intend to make available to the
Agent or the Co-Agent such Bank's portion of the Borrowing to be made on
such date, the Agent or the Co-Agent, as the case may be, may assume that
such Bank has made such amount available to the Agent or the Co-Agent, as
the case may be, on such date and the Agent or the Co-Agent, as the case
may be, may make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Agent or the
Co-Agent by such Bank on the date of Borrowing, the Agent or the Co-Agent
shall be entitled to recover such corresponding amount on demand from such
Bank together with interest at the Federal Funds Rate. If such Bank does
not pay such corresponding amount forthwith upon the Agent's or the
Co-Agent's demand therefor, the Agent or the Co-Agent, as the case may be,
shall promptly notify the Borrower, and the Borrower shall immediately pay
such corresponding amount to the Agent or the Co-Agent, as, the case may
be, together with interest at the rate specified for the Borrowing which
includes such amount paid. Such Bank shall pay the Agent, the Co-Agent and
the other Banks for all losses, expenses and liabilities (including,
without limitation, any interest paid by any such Bank to lenders of funds
borrowed by it to make or carry its Eurodollar Rate Advances to the extent
not covered in connection with the re-employment of such funds and
including loss of anticipated profits), which the Agent, the Co-Agent or
any other Bank may sustain by reason of the repayment by the Borrower of
the amount which such Bank failed to make available. Nothing in this
subsection shall be deemed to relieve any Bank from its obligation to
fulfill its Commitment hereunder or to prejudice any rights which the
Agent, the Co-Agent, any other Bank or the Borrower may have against any
Bank as a result of any default by such Bank hereunder.
(c) All Borrowings under this Agreement shall be loaned by the Banks on the
basis of their Pro Rata Share of the Total Revolving Credit Commitment or
the Total Commercial Paper Commitment. No Bank shall be responsible for any
default by any other Bank in its obligations hereunder, and each Bank shall
be obligated to make the Loans provided to be made by it hereunder,
regardless of the failure of any other Bank to fulfill its Commitment
hereunder.
Section 3.04.Interest.
(a) The Borrower agrees to pay interest in respect of all unpaid principal
amounts of the Loans from the respective dates such principal amounts were
advanced to maturity (whether by acceleration, notice of prepayment or
otherwise) at a rate per annum equal to the applicable rate indicated
below:
<PAGE>
(i) For Base Rate Advances, the Base Rate in effect from time to time
(computed pursuant to Section 3.04 (f) hereof); or
(ii) For Eurodollar Rate Advances, the relevant Eurodollar Rate (computed
pursuant to Section 3.04 (f) hereof).
(b) After the occurrence and during the continuation of any Event of
Default, the principal amount of all of the Obligations (and, to the extent
permitted by applicable law, all accrued interest thereon) shall bear
interest at a rate per annum equal to the Post-Default Rate.
(c) Interest on each Advance shall accrue from and including the date of
such Advance to but excluding the date of any repayment thereof; provided,
however, that, if an Advance is repaid on the same day made, one (1) day's
interest shall be paid on such Advance (except in a case where no interest
is payable on a Series B Commercial Paper Loan, as provided in Section
4.03(b)), and provided further that interest shall be payable on Series B
Commercial Paper Loans through and including the date of any repayment
thereof as provided in Section 4.03(b). Interest on all Outstanding Base
Rate Advances shall be payable quarterly in arrears on the last Business
Day of each March, June, September and December, commencing September 29,
1995. Interest on all Outstanding Eurodollar Rate Advances shall be payable
on the last day of each Interest Period applicable thereto, and, in the
case of Eurodollar Rate Advances having an Interest Period in excess of
three (3) months, on each day which occurs every three (3) months after the
initial date of such Interest Period. Interest shall be payable on each
Advance (i) on any conversion of such Advance into an Advance of another
Type, (ii) on prepayment (on the principal amount prepaid), (iii) at
maturity (whether by acceleration, notice of prepayment or otherwise), and
(iv) after maturity, on demand.
(d) The Agent, upon determining the Eurodollar Rate for any Interest
Period, shall promptly notify the Borrower and the other Revolving Credit
Banks and Commercial Paper Banks by telephone (confirmed in writing) or in
writing by telecopy of such determination, and such determination shall,
absent manifest error, be final, conclusive and binding for all purposes.
(e) The Applicable Margin, and the interest due and payable by the Borrower
on the principal amount of the Loans Outstanding hereunder, shall be
subject to reduction or increase, as applicable, as provided in the matrix
set forth on Annex II for Base Rate Loans and in the matrix set forth on
Annex III for Eurodollar Loans, with such reduction or increase based upon
(i) the ratio of Total Debt to Total Capital as of the end of any fiscal
quarter of the Borrower and (ii) the ratio of EBIT to Interest Expense as
of the end of any fiscal quarter of the Borrower. The interest adjustment
provided for in this Section 3.04(e) shall be effective as of the first
(1st) Business Day after the last day on which the financial statements for
such fiscal quarter are required to be delivered to the Agent, the Co-Agent
and the Banks pursuant to Section 9.12(a)(i) or 9.12(a)(ii), as appropriate
and shall remain in effect until the next quarterly determination. From the
date hereof until the next quarterly determination, the Applicable Margin
as adjusted pursuant to this Section 3.04(e) is zero percent (0%) per annum
with respect to Base Rate Advances and seven-tenths of one percent (.70%)
per annum with respect to Eurodollar Rate Advances.
<PAGE>
(f) All computations of interest with respect to Eurodollar Rate Advances
shall be made on the basis of a year of 360 days, and all computations of
interest with respect to Base Rate Advances and fees shall be made on the
basis of a year of 365/366 days for the actual number of days (including
the first day but excluding the last day, except as otherwise provided in
Section 3.04(c) of this Agreement) occurring in the period for which such
interest or fees are payable (to the extent computed on the basis of days
elapsed). Interest on Base Rate Advances shall be calculated based on the
Base Rate, from and including the date of such Advance to but excluding the
date of the repayment or conversion thereof (except as otherwise provided
in Section 3.04(c) of this Agreement). Interest on Eurodollar Rate Advances
shall be calculated as to each Interest Period from and including the first
day thereof to but excluding the last day thereof. Each determination by
the Agent of an interest rate or fee hereunder shall, except for manifest
error, be final, conclusive and binding for all purposes.
Section 3.04A.Effect of Permitted Asset Securitization Transactions on
Calculations of Financial Covenants and Pricing.
Notwithstanding anything herein to the contrary, for purposes of
calculating (i) the financial covenants set forth in Section 9.12(b)
through 9.12(f) hereof, (ii) the Applicable Margin and the interest due and
payable by the Borrower on the principal amount of the Loans Outstanding
herein, and (iii) the Applicable Letter of Credit Rate, the sale of
accounts receivable and interests in such accounts receivable pursuant to
all Permitted Asset Securitization Transactions shall be characterized as
revolving loan transactions secured by such accounts receivable or
interests in such accounts receivable (as the case may be) instead of sales
transactions. (The parties hereto nevertheless acknowledge and agree that
the characterization of such transactions as secured revolving loan
transactions is purely for purposes of facilitating the administration of
the credit facilities implemented under this Agreement and shall neither be
construed, nor operate, to diminish or impair the "true sale" nature of
such transactions for any other purpose.) Accordingly, without limiting the
generality of the foregoing and by way of example only:
(a) The amount of any accounts receivable and reserves with respect to such
accounts receivable which, according to GAAP, as a result of the sale of
such Credit Party's accounts receivable (or interests therein) pursuant to
a Permitted Asset Securitization Transaction, would be removed from the
consolidated and consolidating financial statements of Borrower and its
Subsidiaries required to be delivered to the Agent, the Co-Agent and the
Banks pursuant to Section 9.12(a)(i) and (ii) of this Agreement, shall be
added back to such financial statements;
(b)The Outstanding Balance at any time of a Credit Party by virtue of any
Permitted Asset Securitization Transaction shall be added to the long-term
liabilities of such Credit Party at such time (except that in the event
that the maturity date or termination date of the Asset Securitization
Document for such Permitted Asset Securitization Transaction at any time is
one year or less from the date as of which such computation is made, then
such Outstanding Balance shall be added to the Current Liabilities of such
Credit Party at such time), it being agreed that the Outstanding Balance
shall be treated for purposes of this Agreement and the other Credit
Documents as if it were Senior Debt;
<PAGE>
(c)The difference between (x) the face amount of a Credit Party's accounts
receivable being sold to a purchaser (or the face amount of such
purchaser's fractional undivided interest in a pool of such accounts
receivable) and (y) the amount to be paid by such purchaser for such
accounts receivable (or an interest in such accounts receivable) shall be
treated as interest paid by such Credit Party;
(d)Any amounts paid to a purchaser in respect of a Credit Party's accounts
receivable (or any amounts which are to be applied to repurchase fractional
undivided interests in a pool of such accounts receivable) pursuant to any
Asset Securitization Document shall be treated as the repayment of deemed
debt, with such payments to be allocated as follows: (x) any interest
component of such payment shall be treated as the payment of interest on
the deemed debt; (y) any payment of fees, including servicing fees, shall
be treated as the payment of the interest on the deemed debt, except that
the amount of such "interest" shall be reduced by the amounts paid to a
Credit Party for collecting accounts receivable pursuant to a Permitted
Asset Securitization Transaction; and (z) the balance of such payments
minus the deemed interest component with respect to the purchase of
accounts receivable derived pursuant to Section 3.04A(c) above with respect
to a Permitted Asset Securitization Transaction shall be deemed to be the
repayment of principal; and
(e)It shall be assumed, for purposes of this Section 3.04A, that no
Bankruptcy-Remote Subsidiary exists and that any assets and liabilities
associated with its accounts receivable shall be deemed to be those of the
originator of such accounts receivable, or if different, the immediate
seller of such accounts receivable to such Bankruptcy-Remote Subsidiary.
Section 3.05.Interest Periods for Eurodollar Rate Advances. In connection
with the making or continuation of, or conversion into, a Eurodollar Rate
Advance, the Borrower shall select an interest period (each an "Interest
Period") to be applicable to such Eurodollar Rate Advance, which Interest
Period shall be a one (1), two (2), three (3) or six (6) month period;
provided, however, that:
(i) The initial Interest Period for any Eurodollar Rate Advance shall
commence on the date of such Advance (including the date of any conversion
from an Advance of another Type) and each Interest Period occurring
thereafter in respect of such Advance shall commence on the day on which
the next preceding Interest Period expires;
(ii) If any Interest Period would otherwise expire on a day which is not a
Business Day, such Interest Period shall expire on the next succeeding
Business Day, provided that if any Interest Period in respect of Eurodollar
Rate Advances would otherwise expire on a day which is not a Business Day
but is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding
Business Day;
(iii)Any Interest Period in respect of Eurodollar Rate Advances which
begins on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period shall expire on the last
Business Day of such calendar month;
(iv) No Interest Period shall extend beyond any date on which a reduction
is to be made in the Total Commitment, unless the aggregate principal
amount of the Loans which consist of Base Rate
<PAGE>
Advances, and the Eurodollar Rate Advances that have Interest Periods which
will expire on or before the date of the reduction, is equal to or in
excess of the amount of any reduction to be made;
(v)No Interest Period shall extend beyond the Credit Expiration Date; and
(vi)The Interest Period for a Eurodollar Rate Advance which is converted
pursuant to Section 3.10(b) shall commence on the date of such conversion
and shall expire on the date on which the Interest Periods for the
Eurodollar Rate Advances of the other Banks which were not converted
expires.
Section 3.06.Fees.
(a) The Borrower shall pay to the Agent, for the account of and
distribution to each Revolving Credit Bank in accordance with its Pro Rata
Share, a nonrefundable unused commitment fee for the period beginning on
the date of this Agreement to and including the Credit Expiration Date
computed at a rate equal to the Commitment Fee Percentage then in effect on
the amount by which the Total Revolving Credit Commitment (without
reduction due to temporary reductions of the Total Revolving Credit
Commitment as a result of borrowings under the Bid Facility) exceeds the
aggregate Outstanding principal amount of Series A Revolving Credit Loans.
Such fee shall accrue daily but shall be payable quarterly in arrears on
the last Business Day of each March, June, September and December
(commencing September 29, 1995), and on the Credit Expiration Date and
shall be calculated on the basis of a 360-day year and actual days elapsed.
(b)The Borrower shall pay to the Co-Agent, for the account of and
distribution to each Commercial Paper Bank in accordance with its Pro Rata
Share, a non-refundable unused commitment fee for the period beginning on
the date of this Agreement to and including the Credit Expiration Date
computed at a rate equal to the Commitment Fee Percentage as then in effect
on the amount by which the Total Commercial Paper Commitment exceeds the
Stated Amount as then in effect. Such fee shall accrue daily but shall be
payable quarterly in arrears on the last Business Day of each March, June,
September and December (commencing on September 29, 1995), and on the
Credit Expiration Date and shall be calculated on the basis of a 360-day
year and actual days elapsed.
(c) The Borrower shall pay to the Co-Agent, for the account of and
distribution to each Commercial Paper Bank in accordance with its Pro Rata
Share, a letter of credit fee for the period beginning on the date of this
Agreement to and including the Credit Expiration Date computed at a rate
per annum equal to the applicable rate described on Annex IV (for purposes
of Annex IV, the "Applicable Letter of Credit Rate") multiplied by the
Stated Amount as then in effect, subject to reduction or increase, as
applicable, as provided in the matrix set forth on Annex IV, with such
reduction or increase based upon (i) the ratio of Total Debt to Total
Capital as of the end of any fiscal quarter of the Borrower and (ii) the
ratio of EBIT to Interest Expense as of the end of any fiscal quarter of
the Borrower. The letter of credit fee adjustment provided for in this
Section 3.06 (c) shall be effective as of the first (1st) Business Day
after the last day on which the financial statements for such fiscal
quarter are required to be delivered to the Agent, the Co-Agent and the
Banks pursuant to Section 9.12(a)(i) or 9.12(a)(ii), as appropriate, and
shall remain in effect until the next quarterly determination. Such fee
shall accrue daily but shall be payable quarterly in arrears on the last
day of each March, June, September and December, and on the Credit
Expiration Date. From the
<PAGE>
date hereof until the next quarterly determination, the Applicable Letter
of Credit Rate is six-tenths of one percent (.60%) per annum.
(d) The Borrower shall also pay to the Agent, for the account of the Agent,
an agent's fee in the amount and on those terms and conditions as are set
forth in that certain letter dated the date hereof from Borrower to Agent.
(e) The Borrower shall also pay to the Co-Agent, for the account of the
Co-Agent, (i) a co-agent's fee, and (ii) a fronting fee with respect to the
Letter of Credit, each in the amounts and on those terms and conditions as
are set forth in that certain letter dated the date hereof from Borrower to
Co-Agent.
Section 3.07.Prepayments of Advances.
(a) The Borrower may, at its option, prepay Base Rate Advances at any time
in whole, or from time to time in part, in principal amounts aggregating
$1,000,000 and in integral multiples of $500,000 in excess of that amount,
by paying the principal amount to be prepaid together with interest accrued
and unpaid thereon to the date of prepayment. Eurodollar Rate Advances may
be prepaid, at the Borrower's option, and subject to the payment of funding
losses pursuant to Section 3.13, in whole, or from time to time in part, in
principal amounts aggregating $1,000,000 and in integral multiples of
$500,000 in excess of that amount, by paying the principal amount to be
prepaid together with interest accrued and unpaid thereon to the date of
prepayment. Notwithstanding the foregoing, however, the Borrower may prepay
in an amount which is not an integral multiple of $500,000, if prepayment
in such an amount would be necessary in order for the Borrower to reduce
the Borrower's Obligations Outstanding under this Agreement to effect a
concurrent reduction in the Total Revolving Credit Commitment or the Total
Commercial Paper Commitment pursuant to Section 3.01. Each Bank's Pro Rata
Share of any such optional prepayment shall be applied to prepay the Loans
of such Bank.
(b) The Borrower shall give written notice (or telephone notice confirmed
in writing) to the Agent of any intended prepayment of Base Rate Advances
prior to such prepayment on the same day as such prepayment. The Borrower
shall give written notice (or telephone notice confirmed in writing) to the
Agent of any prepayment of Eurodollar Rate Advances not less than three (3)
Business Days prior to any prepayment of Eurodollar Rate Advances. Such
notice, once given, shall be irrevocable. Upon receipt of any such notice
of prepayment, the Agent shall promptly (and in no event later than noon on
the next Business Day) notify each Bank of the contents of the notice and
of such Bank's Pro Rata Share of such prepayment.
(c) The Borrower may designate (by written notice or by telephone notice
confirmed in writing received by the Agent) the Types of Advances and the
specific Advances which are to be prepaid. The Borrower shall pay any cost
incurred by any Bank as a result of prepayment in connection with any
prepayment not specifically permitted under this Agreement. The Agent shall
apply each prepayment made pursuant to a single Borrowing pro rata among
the Loans comprising such Borrowing. In the absence of a designation by the
Borrower, the Agent shall, subject to the above, apply the prepayment first
to prepay Base Rate Advances and then, after Base Rate Advances have been
paid in full, to prepay Eurodollar Rate Advances
<PAGE>
selected by the Agent, in its sole discretion. All prepayments shall
include payment of accrued interest on the principal amount so prepaid and
shall be applied to the payment of interest before application to
principal.
(d) Other than as set forth above, and in Section 3.13, and as otherwise
set forth in this Agreement, no additional payment, or premium or penalty,
shall be owed or paid by the Borrower with respect to a prepayment.
Section 3.08.Payments, etc.
(a) Except as otherwise specifically provided herein, all payments by the
Borrower to the Agent, the Co-Agent or the Banks under this Agreement, the
Notes and the Depositary Agreement shall be made without defense, set-off
or counterclaim to the Agent not later than 1:00 p.m. New York City time on
the date when due (and, if made after 1:00 p.m. New York City time on such
date, shall be deemed to have been made on the next New York Business Day)
and shall be made in lawful money of the United States of America in
immediately available funds at the Agent's Payment Office.
(b) (i) All such payments will be made free and clear of, and without
deduction or withholding for, any Taxes in respect of this Agreement, the
Notes, the Depositary Agreement, or any payments of principal, interest,
fees or other amounts payable hereunder or thereunder (but excluding except
as provided in paragraph (iii) hereof any Taxes imposed on the overall net
income of any Banks pursuant to the laws of the jurisdiction in which the
principal executive office or Applicable Lending Office of such Bank is
located). If any Taxes are so levied or imposed, the Borrower agrees (a) to
pay the full amount of such Taxes and such additional amounts as may be
necessary so that every net payment of all amounts due hereunder and under
the Notes and the Depositary Agreement from the Borrower, after withholding
or deduction for or on account of any such Taxes (including additional sums
payable under this Section), will not be less than the full amount provided
for herein had no such deduction or withholding been required, (b) to make
such withholding or deduction and (c) to pay the full amount deducted to
the relevant authority in accordance with applicable law. The Borrower will
furnish to the Agent within 30 days after the date the payment of any Taxes
is due pursuant to applicable law certified copies of tax receipts
evidencing such payment by the Borrower. The Borrower will indemnify and
hold harmless each Bank upon written demand for the amount of any Taxes so
levied or imposed and paid by such Bank and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or illegally asserted. A
certificate as to the amount of such payment by such Bank, or by the Agent
on its behalf, absent manifest error, shall be final, conclusive and
binding for all purposes.
(ii) Each Bank that is organized under the laws of any jurisdiction other
than the United States or any State thereof (including the District of
Columbia) agrees to furnish to the Borrower and the Agent, prior to the
time it becomes a Bank hereunder, two copies of either U.S. Internal
Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 or any
successor forms thereto (wherein such Bank claims entitlement to complete
exemption from or reduced rate of U.S. Federal withholding tax on interest
paid by the Borrower hereunder) and to provide to the Borrower and the
Agent a new Form 4224 or Form 1001 or any successor forms thereto if any
previously delivered form is found to be incomplete or incorrect
<PAGE>
in any material respect or upon the obsolescence or any previously
delivered form; provided, however, that no Bank shall be required to
furnish a form under this paragraph (ii) if it is not entitled to claim an
exemption from or a reduced rate of withholding under applicable law. A
Bank that is not entitled to claim an exemption from or a reduced rate of
withholding under applicable law, promptly upon written request of the
Borrower, shall so inform the Borrower in writing.
(iii)The Borrower shall also reimburse each Bank, upon written request of
such Bank, for Taxes imposed on the overall net income of such Bank or its
Applicable Lending Office pursuant to the laws of the jurisdiction in which
the principal executive office or Applicable Lending Office of such Bank is
located as such Bank shall determine are payable by such Bank in respect of
amounts paid by or on behalf of the Borrower to or on behalf of such Bank
pursuant to paragraph (i) hereof.
(iv) If any Taxes referred to in this Section have been levied or imposed
so as to require withholdings or deductions by the Borrower and payment by
the Borrower of additional amounts to any Banks as a result thereof, and so
long as no Event of Default has occurred and is continuing, the Borrower
may, in its discretion, at any time within sixty (60) days after the
receipt of the certificate of such Bank (but subject to Section 3.01A(b)
and 3.01A(c)): (a) (x) terminate such Bank's Revolving Credit Commitment or
Commercial Paper Commitment, or both, and such Bank's entitlement to any
fees accruing after such termination and (y) prepay such Bank's portion of
the Series A Revolving Credit Loans or Series B Commercial Paper Loans and
Series C Commercial Paper Loans (as the case may be), or both (plus all
amounts payable hereunder to compensate such Bank for additional costs,
reduction or payment with respect to the period prior to prepayment),
together with accrued interest on the amount thereof through the date of
such prepayment, or (b) provide a replacement for any such Bank. Upon any
exercise of the rights described in clause (a) above, the Total Revolving
Credit Commitment or the Total Commercial Paper Commitment, or both, and
the Total Commitment shall be automatically and irrevocably reduced by the
amount of the terminated Commitment. Any new bank provided by the Borrower
shall be an Eligible Assignee, within the meaning specified in Section
15.04(b)(v), and the Bank being replaced shall assign its rights and
obligations to such Eligible Assignee in accordance with the provisions of
Section 15.04(a) through (e). Until any such replacement occurs, the
Borrower shall pay all additional amounts required under this Section to
such Bank. The Borrower shall pay all reasonable costs and expenses of
effecting such replacement.
(c)Whenever any payment to be made hereunder or under the Notes shall be
stated to be due on, or any notice or request is required to be made not
later than or on, a day which is not a Business Day, the due date thereof
or deadline therefor shall be extended to the next succeeding Business Day
(except as otherwise provided in Section 3.05(ii)) and, with respect to
payments of principal, interest thereon shall be payable at the applicable
rate during such extension.
Section 3.09.Interest Rate Not Ascertainable, etc. In the event that the
Agent shall have determined (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) that on any date
for determining the Eurodollar Rate for any Interest Period, by reason of
any changes arising after the date of this Agreement affecting the London
interbank market, or the Agent's position in such market, adequate and fair
means do not exist for ascertaining the applicable interest rate on the
basis provided for in the definition of Eurodollar Rate, then, and in any
such event, the Agent shall forthwith give notice (by
<PAGE>
telephone confirmed in writing) to the Borrower of such determination.
Until the Agent notifies the Borrower that the circumstances giving rise to
the suspension described herein no longer exist, the obligations of the
Banks to make or permit portions of the Loans to remain Outstanding as
Eurodollar Rate Advances, beyond any Interest Period already in effect,
shall be suspended, and such affected Advances shall bear the same interest
as Base Rate Advances following the expiration of such Interest Period.
Section 3.10.Illegality.
(a)In the event that any Bank shall have determined (which determination
shall, absent manifest error, be final, conclusive and binding upon all
parties) at any time that the making or continuance of any Eurodollar Rate
Advance has become unlawful by reason of compliance by such Bank in good
faith with any applicable law, governmental rule, regulation, guideline or
order (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful), then, in any such event, such Bank
shall give prompt notice (by telephone confirmed in writing) to the
Borrower and to the Agent of such determination.
(b)Upon the giving of the notice to the Borrower referred to in subsection
(a) above, (i) the Borrower's right to request and such Bank's obligation
to make Eurodollar Rate Advances shall be immediately suspended, and such
Bank shall make the requested Eurodollar Rate Advance as a Base Rate
Advance, which Base Rate Advance shall be considered as part of the
requested borrowing, and (ii) if the affected Eurodollar Rate Advance or
Advances are then Outstanding, the Borrower shall immediately, or if
permitted by applicable law, no later than the date permitted thereby, upon
at least one (1) Business Day's written notice to such Bank and the Agent,
convert each such Advance into an Advance or Advances of a different Type
with an Interest Period ending on the date on which the Interest Period
applicable to the affected Eurodollar Rate Advances expires, provided, if
more than one Bank is affected at any time, then all affected Banks must be
treated the same pursuant to this subsection (b).
Section 3.11.Increased Costs.
(a)If, by reason of (x) any Regulatory Change, or (y) the compliance with
any guideline or request from any central bank or other governmental
authority or quasi-governmental authority exercising control over banks or
financial institutions generally (whether or not having the force of law):
(i)any Bank (or its Applicable Lending Office) shall be subject to any tax,
duty or other charge with respect to its Eurodollar Rate Advances or its
obligation to make Eurodollar Rate Advances, or there shall occur any
change in the basis of taxation of payments to any Bank of the principal of
or interest on its Eurodollar Rate Advances or its obligation to make
Eurodollar Rate Advances (except for changes in the rate of tax on the
overall net income of such Bank or its Applicable Lending Office) imposed
by the jurisdiction in which such Bank's principal executive office or
Applicable Lending Office is located); or
(ii)any reserve (including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System), special deposit or similar
requirement against assets of, deposits with or for the account of, or
credit extended by, any Bank's Applicable Lending Office shall be imposed
or deemed applicable or any other
<PAGE>
condition affecting its Eurodollar Rate Advances or its obligation to make
Eurodollar Rate Advances shall be imposed on any Bank or its Applicable
Lending Office or the London interbank market;
and as a result thereof there shall be any increase in the cost to the Bank
or its Applicable Lending Office of agreeing to make or making, funding or
maintaining Eurodollar Rate Advances (except to the extent already included
in the determination of the Eurodollar Rate for Eurodollar Rate Advances),
or there shall be a reduction in the amount received or receivable by such
Bank or its Applicable Lending Office, then the Borrower shall from time to
time, upon written notice from and demand by such Bank (with a copy of such
notice and demand to the Agent), pay to such Bank for the account of such
Bank, within thirty (30) Business Days after the date specified in such
notice and demand, additional amounts sufficient to indemnify such Bank
against such increased cost. A certificate as to the amount of such
increased cost, setting forth the increased cost in reasonable detail and
submitted to the Borrower and the Agent by such Bank, shall, except for
manifest error, be final, conclusive and binding for all purposes.
(b)If any Bank shall advise the Agent that at any time, because of the
circumstances described in clauses (x) or (y) in Section 3.11(a) or any
other circumstances arising after the date of this Agreement affecting such
Bank or the London interbank market or such Bank's position in such market,
the Eurodollar Rate, as determined by such Bank, will not adequately and
fairly reflect the cost to such Bank of funding its Eurodollar Rate
Advances, then, and in any such event:
(i)The Agent shall forthwith give notice (by telephone confirmed in
writing) to the Borrower, the Co-Agent and to the Banks of such advice;
(ii)The Borrower's right to request and such Bank's obligation to make or
permit portions of the Loans to remain Outstanding as Eurodollar Rate
Advances shall be immediately suspended; and
(iii)Such Bank shall make the requested Advance as a Base Rate Advance,
which shall for all other purposes be considered a part of the Borrowing.
(c)If any Bank demands any additional amount from the Borrower pursuant to
the provisions of this Section, and so long as no Event of Default has
occurred and is then continuing, the Borrower may, in its discretion, at
any time within sixty (60) days after the receipt of the certificate of
such Bank (but subject to Section 3.01A(b) and 3.01A(c): (a) (x) terminate
such Bank's Revolving Credit Commitment or Commercial Paper Commitment, or
both, and such Bank's entitlement to any fees accruing after such
termination and (y) prepay such Bank's portion of the Series A Revolving
Credit Loans or Series B Commercial Paper Loans and Series C Commercial
Paper Loans (as the case may be) (plus all amounts payable hereunder to
compensate such Bank for additional costs, reduction or payment with
respect to the period prior to prepayment), together with accrued interest
on the amount thereof through the date of such prepayment, or (b) provide a
replacement for such Bank. Upon any exercise the rights described in clause
(a) above, the Total Revolving Credit Commitment or the Total Commercial
Paper Commitment, or both, and the Total Commitment shall be automatically
and irrevocably reduced by the amount of the terminated Commitment. Any new
bank provided by the Borrower shall be an Eligible Assignee, within the
meaning specified in Section 15.04(b)(v), and the Bank being replaced shall
assign its rights and obligations to such Eligible Assignee in accordance
<PAGE>
with the provisions of Section 15.04(a) through (e). Until any such
replacement occurs, the Borrower shall pay all additional amounts required
under this Section to such Bank. The Borrower shall pay all reasonable
costs and expenses of effecting such replacement.
Section 3.12.Lending Offices. Each Bank agrees that, if requested by the
Borrower, it will use reasonable efforts (subject to overall policy
considerations of such Bank) to designate an alternate Applicable Lending
Office with respect to any of its Eurodollar Rate Advances affected by the
matters or circumstances described in Sections 3.08(b), 3.09, 3.10, 3.11 or
3.14 to reduce the liability of the Borrower or avoid the results provided
thereunder, so long as such designation is not disadvantageous to such Bank
as reasonably determined by such Bank in its sole discretion, which
determination shall be conclusive and binding on all parties hereto.
Nothing in this Section shall affect or postpone any of the obligations of
any Credit Party or any right of such Bank provided hereunder.
Section 3.13.Funding Losses. The Borrower shall compensate each Bank, upon
its written request (which request shall set forth the basis for requesting
such amounts and which request shall, absent manifest error, be final,
conclusive and binding upon all of the parties hereto), for all losses,
expenses and liabilities (including, without limitation, any interest paid
by such Bank to lenders of funds borrowed by it to make or carry its
Eurodollar Rate Advances to the extent not recovered by such Bank in
connection with the re-employment of such funds, but the amount of such
interest shall not exceed the amount paid by such Bank if and to the extent
it actually borrowed in the London Interbank Market to "match" the affected
Eurodollar Rate Advance or which would have been paid by such Bank assuming
that had it borrowed in the London interbank market to "match" the affected
Eurodollar Rate Advance), which such Bank may sustain: (i) if for any
reason (other than a default by such Bank) a borrowing of, or conversion to
or continuation of, Eurodollar Rate Advances does not occur on the date
specified therefor in a Notice of Borrowing or Notice of
Conversion/Continuation (whether or not withdrawn), (ii) if any repayment
(including prepayments and any conversions pursuant to Section 3.07 and
Section 3.10(b) of any Eurodollar Rate Advances occurs on a date which is
not the last day of an Interest Period applicable thereto, or (iii), if,
for any reason, the Borrower defaults in its obligation to repay Eurodollar
Rate Advances when required by the terms of this Agreement.
Section 3.14.Capital Adequacy.
(a)Without limiting any other provision of this Agreement, in the event
that any Bank shall have determined that any Regulatory Change or
compliance by any Bank with any request or directive regarding capital
adequacy (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) from a central bank or governmental
authority or body having jurisdiction, does or shall have the effect of
reducing the rate of return on such Bank's capital as a consequence of its
obligations hereunder to a level below that which the Bank could have
achieved but for such law, treaty, rule, regulation, guideline or order, or
such change or compliance (taking into consideration the Bank's policies
with respect to capital adequacy) by an amount deemed by the Bank to be
material, then within thirty (30) days after written notice and demand by
the Bank, the Borrower shall from time to time pay to the Bank additional
amounts sufficient to compensate the Bank for such reduction. Each
certificate as to the amount payable under this Section, submitted to the
Credit Party by the Bank, shall, absent manifest error, be final,
conclusive and binding for all purposes.
<PAGE>
(b)If any Bank demands any additional amount from the Borrower pursuant to
the provisions of this Section, and so long as no Default or Event of
Default has occurred and is then continuing, the Borrower may, in its
discretion, at any time within sixty (60) days after the receipt of the
certificate of such Bank (but subject to Section 3.01A(b) and 3.01A(c)):
(a) (x) terminate such Bank's Revolving Credit Commitment or Commercial
Paper Commitment, or both, and such Bank's entitlement to any fees accruing
after such termination and (y) prepay such Bank's portion of the Series A
Revolving Credit Loans or Series B Commercial Paper Loans and Series C
Commercial Paper Loans (as the case may be) (plus all amounts payable
hereunder to compensate such Bank for additional costs, reduction or
payment with respect to the period prior to prepayment), together with
accrued interest on the amount thereof through the date of such prepayment,
or (b) provide a replacement for such Bank. Upon any exercise of either of
the rights described in clause (a) above, the Total Revolving Credit
Commitment or the Total Commercial Paper Commitment, or both, and the Total
Commitment shall be automatically and irrevocably reduced by the amount of
the terminated Commitment. Any new bank provided by the Borrower shall be
an Eligible Assignee, within the meaning specified in Section 15.04(b)(v),
and the Bank being replaced shall assign its rights and obligations to such
Eligible Assignee in accordance with the provisions of Section 15.04(a)
through (e). Until any such replacement occurs, the Borrower shall pay all
additional amounts required under this Section to such Bank. The Borrower
shall pay all reasonable costs and expenses of effecting such replacement.
Section 3.15.Sharing of Payments, etc. If any Bank shall obtain any payment
or reduction (including, without limitation, any amounts received as
adequate protection of a deposit treated as cash collateral under the
Bankruptcy Code) of any Obligation of any Credit Party (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) in
excess of its ratable share of payments or reductions on account of such
Obligations obtained by all the Banks, such Bank shall forthwith (i) notify
each of the other Banks and the Agent of such receipt, and (ii) purchase
from the other Banks such participations in the affected Obligations as
shall be necessary to cause such purchasing Bank to share the excess
payment or reduction, net of costs incurred in connection therewith,
ratably with each of them, provided that if all or any portion of such
excess payment or reduction is thereafter recovered from such purchasing
Bank or additional costs are incurred, the purchase shall be rescinded and
the purchase price restored to the extent of such recovery or such
additional costs, but without interest. The Borrower agrees that any Bank
so purchasing a participation from another Bank pursuant to this Section
may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such participation
as fully as if such Bank were the direct creditor of the Borrower in the
amount of such participation.
ARTICLE IV
LETTER OF CREDIT TERMS
Section 4.01.Issuance of Letter of Credit. The Co-Agent has issued the
Letter of Credit to the Depositary pursuant to the instruction of Borrower.
The Co-Agent shall, subject to the terms and conditions of this Agreement,
issue the Letter of Credit Amendment. When the Letter of Credit Amendment
becomes effective, the Stated Amount shall be $100,000,000. The Letter of
Credit is irrevocable.
<PAGE>
Section 4.02.Expiration of Letter of Credit. The Letter of Credit shall
expire with respect to any Commercial Paper Note at the earlier of (i)
payment of such Commercial Paper Note or (ii) 5:00 p.m., New York City
time, on the fifteenth day after the maturity date of such Commercial Paper
Note (or if such fifteenth day shall not be a New York Business Day, at
5:00 p.m., New York City time, on the first New York Business Day
thereafter). In no event shall the Letter of Credit remain in effect after
5:00 p.m., New York City time, on the Credit Expiration Date (or if such
day shall not be a New York Business Day, on the first New York Business
Day thereafter).
Section 4.03.Reimbursement of Drawings: Series B Commercial Paper Loans.
The Borrower will immediately reimburse the Co-Agent (or cause the Co-Agent
to be reimbursed) for any amount paid by the Co-Agent in honoring a Drawing
under the Letter of Credit.
(a)Such reimbursement by the Borrower shall be made in immediately
available funds and in the manner provided in Section 2(c) of the
Depositary Agreement.
(b)The Borrower's reimbursement obligations shall be deemed to be Series B
Commercial Paper Loans as of the date on which, and in the amount in which,
the Co-Agent makes payment under its Letter of Credit. In the event and to
the extent any amount paid by the Co-Agent in honoring a Drawing under the
Letter of Credit is reimbursed to the Co-Agent by the Borrower prior to
3:00 p.m. New York City time on the date of such payment, no interest shall
be or become payable with respect to such amount. Interest to be paid by
the Borrower shall include interest for the date of repayment if: (i) any
amount paid by the Co-Agent in honoring a Drawing under the Letter of
Credit is not reimbursed to the Co-Agent by the Borrower prior to 3:00 p.m.
New York City time on the day of such payment honoring a Drawing; (ii) such
amount is reimbursed to the Co-Agent by the Borrower prior to 3:00 p.m. New
York City time on the Business Day after the day of such payment; and (iii)
any Commercial Paper Banks fund their Pro Rata Share of such amount
pursuant to Section 5.02 on the Business Day after the day on which the
Drawing was honored.
(c)The Borrower and the Co-Agent agree that reimbursement in full for each
Drawing paid by the Co-Agent under the Letter of Credit is intended to be a
contemporaneous exchange for new value given to the Borrower by the
Co-Agent and the Commercial Paper Banks and that such new value consists of
an increase in the Stated Amount to become available under the Letter of
Credit. The Borrower waives notice from the Co-Agent of any payment of a
Drawing by the Co-Agent under the Letter of Credit and of any demand by the
Co-Agent for any reimbursement for payment of a Drawing.
(d)The Borrower's obligations under this Section to reimburse the Co-Agent
for payments made by the Co-Agent under the Letter of Credit honoring a
Drawing shall be absolute, irrevocable and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Borrower may have or have had against the Co-Agent, any
Commercial Paper Bank, the Depositary or any holder of any of the
Commercial Paper Notes, including, without limitation, any defense based on
the failure of such Drawing to conform to the terms of the Letter of Credit
or any failure of the Borrower to receive all or any part of the proceeds
of the sale of Commercial Paper Notes with respect to which such Drawing
was made, or any non-application or misapplication by the Depositary of the
proceeds of such Drawing or any lack of legality, validity, regularity or
enforceability of the outstanding Letter of Credit, any of the
<PAGE>
Commercial Paper Notes, any of the Commercial Paper Documents or Credit
Documents or the fact that any demand, statement, certificate or other
document presented under the Letter of Credit proves to have been forged,
fraudulent or untrue in any respect or any other circumstance which is
similar to any of the foregoing, and notwithstanding any termination of the
Letter of Credit or reduction of the Stated Amount; provided, however, that
such reimbursement shall not prejudice the Borrower's right to assert a
claim in a separate action or proceeding against the Co-Agent for any
wrongful payment made by the Co-Agent under the outstanding Letter of
Credit as a result of acts or omissions that constitute gross negligence or
willful misconduct on the part of the Co-Agent or any of its officers,
employees or agents.
(e)Upon the occurrence of any Event of Default, an amount equal to the
aggregate Face Amount of all Commercial Paper Notes then Outstanding shall,
at the option of the Co-Agent in its sole discretion, and without demand
upon or notice to the Borrower, be deemed (as between the Co-Agent and the
Borrower) to have been paid by the Co-Agent under the Letter of Credit
(notwithstanding that such amount may not in fact have been so paid), and
the Borrower shall be immediately obligated to reimburse the Co-Agent for
the amount deemed to have been so paid by the Co-Agent. Any amounts so
received by the Co-Agent pursuant to the provisions of the foregoing
sentence shall be deposited to a restricted trust account established at
the Co-Agent's New York Branch or Atlanta Agency or at such other branch of
the Co-Agent as may be designated in writing by the Co-Agent to the
Borrower (the "Assignee Deposit Account"), which amounts, together with any
interest or earnings thereon, shall be held as collateral security for the
repayment of the Obligations. The Borrower hereby grants to the Co-Agent,
for the benefit of the Commercial Paper Banks, a security interest in (i)
the Assignee Deposit Account and (ii) any monies on deposit therein,
together with any interest or earnings thereon and (iii) the direct and
indirect proceeds thereof. The Borrower shall not have any right to
withdraw funds deposited in the Assignee Deposit Account, which right shall
be vested solely in the Co-Agent. Nothing contained in this paragraph shall
relieve the Co-Agent of its obligation to make each payment under the
Letter of Credit out of its own assets, and no funds deposited in the
Assignee Deposit Account pursuant to this paragraph shall be made available
to the Co-Agent for the purpose of any such payment. The funds deposited in
the Assignee Deposit Account pursuant to this paragraph shall be applied to
the Obligations (in such order of application as the Co-Agent shall select
with the consent of the Required Commercial Paper Banks) only after such
time as, and only to the extent that, the Co-Agent shall have in fact paid
funds under the Letter of Credit.
Section 4.04.Reduction in Stated Amount of Letter of Credit. The Stated
Amount of the Letter of Credit shall be reduced by amounts equal to (i) a
pro rata amount of any reduction in the Total Commercial Paper Commitment
effected pursuant to Section 3.01, (ii) the amount of any reduction in the
Stated Amount pursuant to Section 4.11, (iii) the amount of any Series B
Commercial Paper Loans and (iv) the amount of any Series C Commercial Paper
Loans. Any such reduction in the Stated Amount of the Letter of Credit
shall occur concurrently with any such reduction effected pursuant to
Section 3.01 or with the payment of a Drawing; provided, however, that no
such reduction shall have the effect of terminating, reducing or altering
in any respect the terms of the Letter of Credit with respect to Commercial
Paper Notes Outstanding at the time and that no such reduction shall reduce
the amount payable under the Letter of Credit to less than the Minimum
Level.
<PAGE>
Section 4.05.Increase in Stated Amount of Letter of Credit. The Stated
Amount of the Letter of Credit shall be increased by amounts equal to the
amount of (i) any reimbursement to the Co-Agent by the Borrower on the date
of any Drawing, (ii) the amount of any increase in the Stated Amount
pursuant to Section 4.11, (iii) the repayment of any Series B Commercial
Paper Loan (other than any repayment of a Series B Commercial Paper Loan
which would result in an increase pursuant to the preceding clause (i)),
(iv) the repayment of any Series C Commercial Paper Loan and (v) the face
amount of any issued Commercial Paper Notes whose proceeds from the sale of
such Commercial Paper Notes have been assigned to the Co-Agent, such
increase to be effective automatically upon the issuance of such Commercial
Paper Notes; provided, however, that the aggregate amount of any such
increases shall not exceed the amount so reimbursed, repaid or assigned and
the Stated Amount of the Letter of Credit shall not be increased to an
amount exceeding the Stated Amount of the Letter of Credit as then in
effect.
Section 4.06.Delivery of Amended or Substitute Letters of Credit. Upon any
extension of the Credit Expiration Date pursuant to Section 3.01, the
Co-Agent shall deliver to the Depositary, with a copy to the Borrower, an
amendment to the Letter of Credit extending the term of the Letter of
Credit to the Credit Expiration Date as extended. Upon any reduction or
increase in the Stated Amount of the Letter of Credit, the Co-Agent may
issue another Letter of Credit, in substitution for the Letter of Credit
then outstanding, in the Stated Amount as then reduced or increased, as the
case may be; provided, however, upon any voluntary reduction or increase in
the Stated Amount of the Letter of Credit pursuant to Section 4.11, the
Co-Agent shall either issue an amendment to the Letter of Credit reflecting
such increase or decrease or issue another Letter of Credit, in
substitution for the Letter of Credit then outstanding, in the Stated
Amount as then reduced or increased, as the case may be. Any substitute
Letter of Credit shall be issued by a U.S. branch of the Co-Agent in a
Stated Amount equal to the Stated Amount as then reduced or increased, as
the case may be, but otherwise shall contain terms identical to the Letter
of Credit which it replaces, and shall be accompanied with (a) an opinion
of counsel for the Borrower that Drawings thereunder will not constitute
voidable preferences under the Bankruptcy Code in the event of the
bankruptcy of the Borrower, and (b) an opinion of counsel for the Co-Agent
(rendered at the cost and expense of the Borrower, which cost and expense
shall be reasonable) that the substitute Letter of Credit is a legally
valid, binding and enforceable obligation of the Co-Agent and that the
issuance thereof is exempt from registration under the federal securities
laws. The failure of the Co-Agent to deliver any amendment to the Letter of
Credit or any substitute Letter of Credit (other than an amendment to, or
substitution for, the Letter of Credit issued pursuant to Section 4.11
hereof) shall not affect any reduction or increase in the Stated Amount of
the Letter of Credit and such reduction or increase shall occur
automatically, without the issuance of any amendment or any substitute
Letter of Credit. Any reduction or increase in the Stated Amount of the
Letter of Credit pursuant to Section 4.11 hereof shall become effective
only upon the satisfaction of the conditions precedent set forth in Section
4.11 hereof and the issuance of an amendment to, or a substitute for, the
Letter of Credit by the Co-Agent and the consent and agreement to such
amendment or substitute Letter of Credit by the Depositary.
Section 4.07.Change in Costs of Issuing Letter of Credit.
(a)The Borrower agrees that, if after the date hereof: (i) any Regulatory
Change shall subject any Commercial Paper Bank to any additional Taxes as a
result of this Agreement, the Letter of Credit or its Pro Rata Share of
Drawings thereunder, or shall change the basis of taxation resulting in
additional Taxes on
<PAGE>
payments to the Co-Agent or any Commercial Paper Bank of any amounts
payable under Section 4.03 or Section 4.08 (other than any Taxes measured
by or based upon the overall net income of the Bank) or shall impose,
modify or deem applicable any reserve, special deposit or similar
requirement (including, without limitation, any such requirement imposed by
the Board of Governors of the Federal Reserve System or any Person or
Persons performing similar functions with respect to a foreign bank)
against assets of, deposits with or for the account of, or credit extended
by, the Co-Agent or any Commercial Paper Bank or any other condition
(including without limitation, any assessment for deposit insurance under
any applicable laws) regarding this Agreement, the Letter of Credit or any
Commercial Paper Bank's Pro Rata Share of Drawings under the Letter of
Credit or the obligation of the Co-Agent or any Commercial Paper Bank to
make any payment under or with respect to the Letter of Credit, and the
result of the foregoing is to increase the cost to the Co-Agent of issuing
or maintaining the Letter of Credit or making any payment thereunder, or to
any Commercial Paper Bank of purchasing its participation in the Letter of
Credit or agreeing to pay its Pro Rata Share of Drawings under the Letter
of Credit, by an amount deemed to be material by the Co-Agent or such Bank,
then, within thirty (30) days after demand by the Co-Agent or such Bank,
the Borrower shall pay to the Co-Agent or such Bank such additional amount
or amounts as will compensate the Co-Agent or the Commercial Paper Bank for
such increased cost or reduction; or (ii) any Regulatory Change has the
effect of reducing the rate of return on the Co-Agent's or any Commercial
Paper Bank's capital as a consequence of its obligations hereunder with
respect to the Letter of Credit or its Pro Rata Share of Drawings under the
Letter of Credit to a level below that which the Co-Agent or such Bank
could have achieved but for this Agreement, the Letter of Credit and such
Regulatory Change (taking into consideration the Co-Agent's or such Bank's
policies with respect to capital adequacy) by an amount deemed material by
the Co-Agent or such Bank, then from time to time within thirty (30) days
after demand by the Co-Agent or such Bank, the Borrower shall pay to the
Co-Agent or such Bank, as the case may be, such additional amount or
amounts as will compensate the Co-Agent or such Bank for such reduction. A
certificate of the Co-Agent or any such Bank setting forth in reasonable
detail the basis for such claim and the additional amounts to be paid to it
hereunder shall be conclusive absent manifest error. In determining such
amount, the Co-Agent or any such Bank may use reasonable averaging or
attribution methods of a type used in computing such amounts under similar
agreements, if applicable.
(b)If the Co-Agent or any Commercial Paper Bank demands any additional
amount from the Borrower pursuant to the provisions of this Section, and so
long as no Event of Default has occurred and is then continuing, the
Borrower may, in its discretion, at any time within sixty (60) days after
the receipt of the certificate of such Bank (but subject to Section
3.01A(b) and 3.01A(c)), (a)(x) terminate such Bank's Commercial Paper
Commitment and such Bank's entitlement to any fees accruing after such
termination and (y) prepay such Bank's portion of the Series B Commercial
Paper Loans and Series C Commercial Paper Loans (plus all amounts payable
hereunder to compensate such Bank for additional costs, reduction or
payment with respect to the period prior to prepayment), together with
accrued interest on the amount thereof through the date of such prepayment,
or (b) provide a replacement for the Co-Agent or such Bank. Upon any
exercise of either of the rights described in clause (a) above, the Total
Commercial Paper Commitment and the Total Commitment shall be automatically
and irrevocably reduced by the amount of the terminated Commitment. If the
Borrower provides a replacement for the Co-Agent, the Co-Agent shall resign
and be replaced pursuant to the provisions of Section 14.09 and subject,
without limiting the generality of the foregoing, to the provisions of
Section 14.09(c). Any new bank provided by the Borrower shall be an
Eligible
<PAGE>
Assignee, within the meaning specified in Section 15.04(b)(v), and the
Commercial Paper Bank being replaced shall assign its rights and
obligations to such Eligible Assignee in accordance with the provisions of
Section 15.04(a) through (e). Until any such replacement occurs, the
Borrower shall pay all additional amounts required under this Section to
the Co-Agent or such Bank, as the case may be, and the Borrower shall pay
all reasonable costs and expenses of effecting such replacement.
Notwithstanding anything in this Section 4.07 to the contrary, the Borrower
shall only be obligated to compensate a Commercial Paper Bank under this
Section 4.07 for any amount arising or occurring during (a) any time or
period commencing not more than ninety (90) days prior to the date on which
such Bank notifies the Co-Agent and the Borrower that such Bank proposes to
demand such compensation and continuing for so long as such Bank is subject
to such increased costs or until such Bank is replaced in accordance with
this Section 4.07, and (b) any time or period during which, because of the
unannounced retroactive application of any Regulatory Change, such Bank
could not have known that such amount might arise or occur.
Section 4.08.Purchase and Sale of Participations in Letter of Credit. On
the terms and subject to the conditions of this Agreement, each Commercial
Paper Bank hereby purchases from the Co-Agent, and the Co-Agent hereby
sells to each such Bank, an undivided participation in and to the Letter of
Credit and the Obligations of the Borrower with respect to the Letter of
Credit (excluding any obligation of the Borrower to pay fees to the
Co-Agent for its own account as described in Section 3.06(c) hereof), and
under the Depositary Agreement, equal to such Bank's Pro Rata Share;
provided, however, that any interest accruing with respect to any payment
made by the Co-Agent under the outstanding Letter of Credit shall be for
the account of the Co-Agent, and not for the account of any Commercial
Paper Bank, unless and until the Co-Agent shall have received funds for the
account of such Bank in an amount equal to such Bank's Pro Rata Share of
such payment pursuant to Section 5.02 hereof, it being understood and
agreed that any funds received by the Co-Agent after 3:00 p.m., New York
City time, on any day shall for purposes of this proviso be deemed to have
been received on the next succeeding day that the Co-Agent is open at its
Payment Office for the purpose of conducting its banking business. The
Borrower and the Co-Agent acknowledge and agree that, upon payment by a
Commercial Paper Bank of its Pro Rata Share of any payment made by the
Co-Agent under the Letter of Credit honoring a Drawing by the Depositary
thereunder: (i) such Bank will have an undivided ownership interest in the
Borrower's reimbursement obligations with respect thereto, including
interest accruing thereon, in the amount of its Pro Rata Share (a "Bank's
Interest"); (ii) such Bank will be a direct creditor of the Borrower, and
not of the Co-Agent, with respect to its Bank's Interest; (iii) the Bank's
Interest of such Bank will constitute part of the Obligations of the
Borrower to such Bank; and (iv) such Bank may exercise all of its rights of
payment (including the right of set-off) with respect to its Bank's
Interest.
Section 4.09.Legal Restrictions on Letter of Credit. If any restrictions or
limitations are imposed upon or determined or held to be applicable to the
Co-Agent, any Commercial Paper Bank, the Borrower or any other Credit Party
by, under or pursuant to any law or regulation (federal, state, local or
foreign), now or hereafter in effect or by reason or any interpretation
thereof by any court or governmental agency which in the judgment of the
Co-Agent would prevent the Co-Agent from legally incurring liability under
the Letter of Credit, then the Co-Agent shall notify the Borrower, each
Dealer which has theretofore signed and delivered to the Co-Agent an
acknowledgment in the form of Exhibit C to the Depositary Agreement and the
Depositary (and such notice to the Depositary shall constitute, and be in
the form of, a Stop Order) and each
<PAGE>
Commercial Paper Bank as soon as reasonably practicable thereafter,
whereupon the Borrower's right to issue and sell additional Commercial
Paper Notes shall cease (except with respect to the filling of orders for
Commercial Paper Notes placed and accepted before the Dealer accepting any
such order received such notice from the Co-Agent); provided, however, that
no such cessation shall affect the obligations of the Co-Agent under the
Letter of Credit with respect to Commercial Paper Notes otherwise entitled
to the benefits of the outstanding Letter of Credit or the obligations of
any Commercial Paper Bank to the Co-Agent with respect to the obligations
of the Co-Agent to pay any Drawing with respect to any such Commercial
Paper Notes, and provided further that no such cessation shall affect the
right of the Borrower to borrow Series A Revolving Credit Loans on the
terms and conditions provided in this Agreement for borrowing Series A
Revolving Credit Loans.
Section 4.10.Substitute Letter of Credit.
(a)If the ratings of the Commercial Paper Notes referred to in Section
7.03(e) are withdrawn or downgraded as a result of an adverse change in the
credit rating of the issuer of the Letter of Credit, then the Borrower may
cause the Letter of Credit to be replaced prior to the Credit Expiration
Date, provided that the Borrower shall cause to be issued in favor of the
Depositary a substitute Letter of Credit in accordance with the following
terms of this Section 4.10.
(b)At least thirty (30) days prior to a proposed replacement of the Letter
of Credit pursuant to this Section 4.10, the Borrower shall give the
Co-Agent, the Commercial Paper Banks, the Dealers, the Depositary, Moody's
Investor Services, Inc. and Standard & Poor's Corporation written notice
thereof stating (i) that the Borrower proposes to replace the Letter of
Credit as a result of circumstances described in Section 4.10(a), (ii) the
date of the proposed substitution, (iii) the proposed issuer of the
substitute Letter of Credit, (iv) that the initial Stated Amount of the
proposed substitute Letter of Credit is equal to the then Stated Amount of
the then existing Letter of Credit, (v) that the expiration date of the
proposed substitute Letter of Credit is the same as the expiration date of
the then existing Letter of Credit, and (vi) that all other terms of the
proposed substitute Letter of Credit are identical to the then existing
Letter of Credit. Within fifteen (15) days after the date of such notice,
each Commercial Paper Bank shall give written notice to the Borrower,
stating that either such Bank (i) consents to the proposed issuer of the
substitute Letter of Credit, (ii) does not consent to such proposed issuer,
but desires to continue the Commercial Paper Commitment of such Bank to the
Borrower, or (iii) does not consent to such proposed issuer and, if the
proposed replacement of the Letter of Credit occurs, desires to terminate
the Commercial Paper Commitment of such Bank to the Borrower. The
Commercial Paper Banks shall not unreasonably withhold their consent to the
proposed issuer. If the Borrower causes the proposed replacement, then the
Commercial Paper Commitments of the nonconsenting Commercial Paper Banks
shall remain unchanged or shall terminate, as indicated in their notice to
the Borrower. If the Borrower does not cause the proposed replacement, then
the Commercial Paper Commitments of all of the Commercial Paper Banks shall
remain unchanged. The termination of the Commercial Paper Commitment of any
Commercial Paper Bank pursuant to this Section 4.10(b) shall be effective
on the date of the substitution of the substitute Letter of Credit for the
prior Letter of Credit; however, no termination by any Commercial Paper
Bank of its Commercial Paper Commitment pursuant to this Section 4.10(b)
shall relieve any Commercial Paper Bank of its obligations to participate
in accordance with Section 5.02 in any Series B Commercial Paper Loan
deemed to be made with respect to Commercial
<PAGE>
Paper Notes issued, authenticated and delivered by the Depositary, or any
Series A Revolving Credit Loan required to be funded pursuant to Section
3.03 hereof or any Series C Commercial Paper Loan required to be funded
pursuant to Section 3.03 hereof, prior to the date of substitution of the
substitute Letter of Credit for the prior Letter of Credit. Within fifteen
(15) days after receiving such notices from the Commercial Paper Banks, the
Borrower shall give written notice to each of the Commercial Paper Banks,
stating (i) that the Borrower has elected either to cause, or not to cause,
the proposed replacement, and (ii) the resulting Total Commercial Paper
Commitment. The Borrower may replace any Bank that terminates its
Commercial Paper Commitment pursuant to this Section 4.10. Any bank
proposed as a replacement for any Bank which terminates its Commercial
Paper Commitment shall be an Eligible Assignee within the meaning specified
in Section 15.04(b)(v), and the Commercial Paper Bank being replaced shall
assign its rights and obligations to such Eligible Assignee in accordance
with the provisions of Section 15.04(a) through (e). Such replacement shall
be in all respects satisfactory to the Required Banks (calculated by
excluding from the Total Commercial Paper Commitment the Commercial Paper
Commitment of the Bank being replaced) and shall be effected at the sole
cost and expense of the Borrower.
(c)Prior to the proposed date of substitution of the substitute Letter of
Credit for the prior Letter of Credit, the Borrower shall deliver the
following to the Depositary and the Dealers:
(i) an opinion of counsel for the Borrower that Drawings under the
substitute Letter of Credit will not constitute voidable preferences under
the Bankruptcy Code in the event of the bankruptcy of the Borrower;
(ii) an opinion of counsel for the Co-Agent (rendered at the cost and
expense of the Borrower, which cost and expense shall be reasonable) that
the substitute Letter of Credit is a legally valid, binding and enforceable
obligation of the Co-Agent and that the issuance thereof is exempt from
registration under the federal securities laws; and
(iii) written confirmation from each of Moody's Investor Services, Inc. and
Standard & Poor's Corporation that the ratings assigned to the Commercial
Paper Notes following delivery of the substitute Letter of Credit satisfy
the requirements of Section 7.03(e) hereof.
If the foregoing requirements of this Section 4.10(c) are satisfied, then
the Depositary shall accept the substitute Letter of Credit pursuant to the
terms of the Depositary Agreement. Upon replacement of the prior Letter of
Credit with such substitute Letter of Credit, the Borrower shall cause the
Depositary to return the prior Letter of Credit to the Co-Agent for
cancellation and all Drawings to be made thereafter with respect to any
Commercial Paper Notes (including any Commercial Paper Notes Outstanding on
the date of substitution) shall be made by the issuer of the substitute
Letter of Credit in accordance with the terms and conditions hereof.
(d) Effective upon substitution of the substitute Letter of Credit for the
prior Letter of Credit in accordance with this Section 4.10, (i) ABN AMRO
shall be deemed to have assigned to the issuer of the substitute Letter of
Credit its rights and obligations hereunder as a Commercial Paper Bank and
said issuer shall be deemed to have assumed such rights and obligations,
and (ii) ABN AMRO shall be deemed to have
<PAGE>
resigned as the Co-Agent and said issuer (or another bank to be chosen by
the Borrower) shall become the successor Co-Agent hereunder and shall
thereupon succeed to and become vested with all rights, powers, privileges
and duties of the resigning Co-Agent, and the resigning Co-Agent shall be
discharged of its duties and obligations under this Agreement; however, the
provisions of Article XIV hereof which benefit ABN AMRO as the Co-Agent
shall survive such resignation by ABN AMRO with respect to any actions
taken or not taken by ABN AMRO while it was Co-Agent under this Agreement.
Section 4.11.Voluntary Reductions Or Increases in Stated Amount. No earlier
than 30 days prior to the end of a calendar quarter of Borrower and no
later than ten days prior to the end of such calendar quarter, Borrower may
request a reduction or an increase in the Stated Amount by delivering a
Notice of Requested Change in Stated Amount to the Co-Agent and the
Depositary and the Dealer. Subject to the terms and conditions of this
Agreement, the Co-Agent shall issue an amendment to the Letter of Credit or
issue a substitute Letter of Credit reflecting such requested change upon
the satisfaction of the following conditions:
(i) All applicable conditions precedent set forth in Section 7.02 and
Section 7.03 hereof shall have been satisfied;
(ii) Moody's Investor Services, Inc. and Standard and Poor's Corporation
shall have confirmed their ratings of at least "P-1" and "A-1 plus",
respectively, after giving effect to the issuance of the amendment to
Letter of Credit or substitute Letter of Credit by the Co-Agent reflecting
such increase or reduction;
(iii)The Borrower shall have delivered such other documents, agreements or
opinions as may be required by Moody's Investor Services, Inc. or Standard
& Poor's Corporation as a condition to such Person's execution and delivery
of the confirmation described in clause (ii) above; and
(iv)The truth and accuracy of all representations and warranties of
Borrower given in the applicable Notice of Requested Change in Stated
Amount.
The Commercial Paper Banks hereby authorize the Co-Agent to issue from time
to time an amendment to the Letter of Credit or substitute Letter of Credit
in accordance with the terms of this Section 4.11 to evidence each
reduction or increase in the Stated Amount requested by Borrower. Any such
increase or reduction shall become effective on the issuance of such
amendment to the Letter of Credit or substitute Letter of Credit by the
Co-Agent and the acceptance of such amendment or substitute by the
Depositary. Such amendment to the Letter of Credit or substitute Letter of
Credit (as the case may be) shall be issued on the first Business Day of
the calendar quarter next following delivery of such request for reduction
or
<PAGE>
increase (as the case may be) if the conditions described in clauses (i) -
(iv) of this Section shall have been satisfied on or before such first
Business Day of the calendar quarter and shall become effective when the
Depositary has accepted such amendment or substitute Letter of Credit. If
the conditions described in clauses (i) - (iv) of this Section shall not
have been satisfied on or before such first Business Day of the calendar
quarter, then such amendment or substitute Letter of Credit shall be issued
as soon as practicable after such conditions are satisfied and shall become
effective when the Depositary has accepted such amendment to or substitute
for, the Letter of Credit. In no event shall the Stated Amount of the
Letter of Credit be (i) reduced to an amount less than the Minimum Level or
(ii) increased to an amount exceeding the Total Commercial Paper
Commitment. No change in the Stated Amount shall affect the Total
Commercial Paper Commitment as then in effect.
ARTICLE V
LETTER OF CREDIT OPERATIONS
Section 5.01.Demand and Payment to Depositary. The Co-Agent shall, promptly
following its receipt thereof, examine all documents purporting to
represent a Drawing by the Depositary under the Letter of Credit to
ascertain that they appear on their face to be in conformity with the terms
and conditions of the Letter of Credit. If, after examination, the Co-Agent
shall have determined that a Drawing under the Letter of Credit does not
conform to the terms and conditions of the Letter of Credit, the Co-Agent
shall, as soon as reasonably practicable, give notice to the Depositary to
the effect that such Drawing was not in accordance with the terms and
conditions of the Letter of Credit, stating the reasons therefor. The
Depositary may attempt to correct any such non-conforming Drawing if, and
to the extent that, the Depositary is entitled (without regard to the
provisions of this sentence) and able to do so. After determining that a
Drawing under the Letter of Credit conforms to the terms and conditions
thereof, the Co-Agent shall make available to the Depositary, in
immediately available funds (which shall be the Co-Agent's own funds, and
not funds of the Borrower on deposit with the Co-Agent), the amount so
demanded in accordance with the terms of the Letter of Credit. The
Co-Agent's obligation to honor a conforming Drawing under the Letter of
Credit is a separate obligation of the Co-Agent and is independent of the
Borrower's obligations to the Co-Agent with respect to the Letter of Credit
including, without limitation, the Borrower's obligations under Section
4.03.
Section 5.02.Reimbursements by Commercial Paper Banks. In the event that
the Borrower does not pay in full the Series B Commercial Paper Loan
resulting from any payment under the Letter of Credit before 3:00 p.m., New
York City time, on the Business Day on which such payment under the Letter
of Credit was made, the Co-Agent shall prior to 5:00 p.m., New York City
time, on such Business Day send to each Commercial Paper Bank a notice
given by telex, telecopier or telephone (confirmed in writing promptly
thereafter) demanding
<PAGE>
payment from each Commercial Paper Bank of such Bank's Pro Rata Share of
such payment. On receipt of such notice from the Co-Agent, each Commercial
Paper Bank shall forthwith make available to the Co-Agent such Bank's Pro
Rata Share of such payment at the Co-Agent's Payment Office, in immediately
available funds, before 1:00 p.m., New York City time, on the next Business
Day after the day on which such demand by the Co-Agent was made. Each
Commercial Paper Bank shall indemnify and hold harmless the Co-Agent from
and against any and all losses, liabilities (including liabilities for
penalties), actions, suits, judgments, demands, damages, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
resulting from any failure on the part of such Bank to provide, or from any
delay in providing, the Co-Agent with such Bank's Pro Rata Share of the
amount of any payment made by the Co-Agent under the Letter of Credit,
provided, however, that such Bank shall not have any obligation to
indemnify the Co-Agent pursuant to this Section 5.02 if the Co-Agent shall
not have given demand for payment to such Bank as contemplated in this
Agreement.
Section 5.03.Obligations of Banks are Unconditional. The obligation of each
Commercial Paper Bank set forth in Section 5.02 to provide the Co-Agent
with such Bank's Pro Rata Share of the amount of any payment made by the
Co-Agent under the outstanding Letter of Credit shall be absolute,
irrevocable and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which such
Bank may have or have had against the Co-Agent including, without
limitation, any defense based on any failure of the Borrower to receive all
or any part of the proceeds of the sale of Commercial Paper Notes with
respect to which such payment under the Letter of Credit was made or any
non-application or misapplication by the Depositary of the proceeds of such
Drawing or the legality, validity, regularity or enforceability of the
Letter of Credit; provided, however, that a Commercial Paper Bank's
provision of funds to the Co-Agent pursuant to Section 5.02 shall not
prejudice the right of such Bank to assert a claim in a separate action or
proceeding against the Co-Agent for any wrongful payment or disbursement
made by the Co-Agent under the Letter of Credit as a result of acts or
omissions constituting gross negligence or willful misconduct on the part
of the Co-Agent or any of its officers, employees or agents.
Section 5.04.Repayment of Banks following Reimbursement by the Borrower. If
any Commercial Paper Bank shall make a payment to the Co-Agent for such
Bank's Pro Rata Share of a Drawing under the Letter of Credit and the
Co-Agent shall thereafter receive payment of the Series B Commercial Paper
Loan for all or any part of such amount, as provided in Section 4.03, the
Co-Agent shall hold any amounts so received in trust for the Co-Agent and
such Bank, and shall promptly pay to itself and each Commercial Paper Bank
its Pro Rata Share of such amounts. Any interest accrued on the amount
drawn under the Letter of Credit and received by the Co-Agent shall be held
by the Co-Agent in trust for the Co-Agent and those Commercial Paper Banks
who have paid their Pro Rata Shares of such amounts and shall be promptly
distributed to the Co-Agent and such Banks in accordance with Section 4.08.
<PAGE>
Section 5.05.Effect of Payment Under Letter of Credit. Notwithstanding
anything in this Agreement to the contrary, upon any payment made by the
Co-Agent under the Letter of Credit honoring a Drawing made by the
Depositary with respect to any Commercial Paper Note (i) the holder of such
Commercial Paper Note shall not at any time thereafter be entitled to the
benefits of the Letter of Credit for any purpose whatsoever and (ii)
neither the Co-Agent nor any Commercial Paper Bank shall be liable to the
holder of such Commercial Paper Note or to any other Person for or in
respect to any amount so paid for any reason whatsoever including, without
limitation, the failure of such holder to receive, or any delay by such
holder in receiving, all or any part of the amount so paid or disbursed, or
any non-application or misapplication by the Depositary of the proceeds of
such payment or disbursement.
ARTICLE VI
COMMERCIAL PAPER OPERATIONS
Section 6.01.Borrower's Right to Issue Commercial Paper Notes. The Borrower
shall have the right, from time to time after the issuance of the Letter of
Credit, to issue and sell Commercial Paper Notes pursuant to this Agreement
and the Depositary Agreement, so long as neither the Depositary nor any
Dealer has received a Stop Order from the Co-Agent. The proceeds of the
Commercial Paper Notes shall be used by the Borrower and the Subsidiaries
of the Borrower for general corporate purposes, subject to Section 3 of the
Depositary Agreement.
Section 6.02.Issuance of Stop Order. The Co-Agent may issue, and shall at
the request of the Required Commercial Paper Banks issue, a Stop Order to
the Depositary (and promptly deliver copies thereof to the Commercial Paper
Banks and to each Dealer which has theretofore signed and delivered to the
Co-Agent an acknowledgment in the form of Exhibit C to the Depositary
Agreement) instructing the Depositary not to issue or deliver Commercial
Paper Notes, as specified in such Stop Order, if:
(i) An Event of Default has occurred and is continuing;
(ii) The conditions with respect to the issuance of Commercial Paper Notes,
specified in Section 7.02 and Section 7.03, have not been satisfied or have
not been waived with the consent of the Required Commercial Paper Banks;
(iii) A restriction or limitation has been imposed upon or determined or
held to be applicable to the Co-Agent or any Commercial Paper Banks, as
specified in Section 4.09; or
<PAGE>
(iv) The Borrower or the Co-Agent has received notice that the Operating
Account or the Commercial Paper Account, or any funds on deposit in or
otherwise to the credit of such accounts, are or have become subject to any
writ, judgment, warrant of attachment, garnishment, execution or similar
process.
Promptly following the giving of any Stop Order to the Depositary, the
Co-Agent shall give the Borrower notice of the Stop Order, but neither
failure to do so nor delay in doing so shall impair the effect of the Stop
Order; provided, however, that no Stop Order shall (a) prevent the
reinstatement of the Letter of Credit on the date of such Stop Order in an
amount equal to the aggregate Face Amount of Commercial Paper Notes which
are authenticated and delivered by the Depositary either (i) prior to its
receipt of the Stop Order or (II) to fill orders for Commercial Paper Notes
placed and accepted before the Dealer accepting any such order received
notice of the Stop Order, or (b) affect the entitlement of such Commercial
Paper Notes to the benefits of the Letter of Credit.
Section 6.03.Form of Commercial Paper Notes. The Borrower agrees that each
Commercial Paper Note shall (i) be in the form of Exhibit A to the
Depositary Agreement, numbered and completed in accordance with this
Agreement and the Depositary Agreement, (ii) be dated the date of issuance
thereof (which shall be a New York Business Day), (iii) be made payable to
the order of bearer or a payee specified by the Borrower or a Dealer as
provided in the Depositary Agreement, (iv) have a stated maturity date
which shall be a New York Business Day and shall not be later than the
earlier to occur of (a) the 270th day after the date of its issuance, and
(b) the fifteenth day before the Credit Expiration Date of the then
outstanding Letter of Credit, and (v) be issued in discount or
interest-bearing form.
Section 6.04.Certain Limitations on Issuance. The Borrower shall not
request or permit the Depositary to authenticate and deliver any Commercial
Paper Note on any day if, after giving effect to the authentication and
delivery of such Commercial Paper Note, and the crediting to the Operating
Account of the sum of
(i)The anticipated net sales proceeds to be received by the Depositary from
each sale or placement of Commercial Paper Notes as payment for all
Commercial Paper Notes authenticated and delivered by the Depositary on
such day, plus
(ii) Any other funds which, at the time of such authentication, have been
actually received by the Depositary from the Borrower and have been
irrevocably credited to the Operating Account for the purpose of
reimbursing the Co-Agent for payments made by it under the Letter of Credit
on such day, any of the following circumstances would exist:
<PAGE>
(a) Any amount which has theretofore been drawn under the Letter of Credit
would not have been paid to the Co-Agent in full within the time permitted
for payment of Series B Commercial Paper Loans; or
(b) The aggregate Face Amount of Outstanding Commercial Paper Notes
entitled to the benefits of the Letter of Credit plus the aggregate
principal amount of all Series B Commercial Paper Loans then Outstanding
plus the aggregate principal amount of all Series C Commercial Paper Loans
then Outstanding would exceed the amount of the Total Commercial Paper
Commitment; or
(c)The aggregate Face Amount of Outstanding Commercial Paper Notes entitled
to the benefits of the Letter of Credit would exceed the Stated Amount of
the Letter of Credit as then in effect; or
(d)From and after the date that the Borrower sends a Notice of Requested
Change in Stated Amount to the Depositary requesting a reduction in the
Stated Amount of the Letter of Credit (and until the earlier of (a) the
date on which the Borrower withdraws such notice prior to the effective
date of the requested reduction, or (b) the subsequent increase in the
Stated Amount of the Letter of Credit pursuant to Section 4.11 hereof) the
aggregate face amount of Outstanding Commercial Paper Notes entitled to the
benefits of the Letter of Credit would exceed the reduced Stated Amount of
the Letter of Credit requested in such Notice of Requested Change in Stated
Amount, unless such Commercial Paper Note to be issued will mature at or
prior to the end of the calendar quarter in which such Notice of Requested
Change is given.
In addition, the Borrower shall not request or permit the Depositary to
authenticate and deliver any Commercial Paper Notes if the Commercial Paper
Notes to be issued, together with all other Commercial Paper Notes
Outstanding on such date, would result in Commercial Paper Notes in an
aggregate Face Amount in excess of thirty percent (30%) of the Total
Commercial Paper Commitment maturing on any one Business Day.
Section 6.05.Issuance Procedures. All Commercial Paper Notes shall be
delivered and issued against payment therefor in immediately available
funds on the date of issuance, or for such other consideration as may be
permitted by the Depositary Agreement, and otherwise shall be issued and
delivered in accordance with the terms of this Agreement and the Depositary
Agreement.
Section 6.06.Assignment and Security Interest. As security for the prompt
performance by the Borrower and the other Credit Parties when due of their
Obligations, including, without limitation, the payment in full of all
Series B Commercial Paper Loans and all Series C Commercial Paper Loans and
all interest accrued and to accrue thereon, the Borrower hereby assigns to
the Co-Agent, and hereby grants to the Co-Agent a
<PAGE>
continuing security interest in, all of the following, whether now or
hereafter existing or acquired (herein collectively called the "Rights")
for the equal and ratable benefit of the Co-Agent and the Commercial Paper
Banks:
(i)The Borrower's right to payment from each Dealer for Commercial Paper
Notes delivered to such Dealer,
(ii)All other proceeds of the sale or other disposition by the Borrower of
the Commercial Paper Notes, and
(iii) All proceeds of any of the foregoing; provided, however, that funds
from payments made in respect of the Rights shall not be applied to any
Obligations for any payment under the Letter of Credit until such time as,
and only to the extent that, the Co-Agent shall have in fact paid funds or
shall have been deemed to have paid funds under the Letter of Credit; and
provided further, that whenever all Series B Commercial Paper Loans and all
Series C Commercial Paper Loans shall have been paid in full by the
Borrower, any proceeds remaining, at that time, of the sale of Commercial
Paper Notes shall be released from the security interest granted hereunder.
Section 6.07.Perfection and Preservation of Security Interest. The Borrower
agrees to (i) execute such financing statements and other documents (and
pay the cost of filing or recording the same in all public offices deemed
necessary by the Co-Agent) as the Co-Agent shall from time to time
reasonably request to establish and maintain a valid and perfected security
interest in the Rights; (ii) immediately deliver to the Depositary, as
pledgee in possession for the Co-Agent, any note or other instrument or
writing which shall be received by the Borrower and which may at any time
evidence any of the Rights and all proceeds of the sale of Commercial Paper
Notes which may be received by the Borrower (and the parties hereto agree
that, whenever the Depositary shall acquire or hold any such note,
instrument, writing or proceeds, it shall be deemed to do so in its
capacity as a pledgee in possession for the Co-Agent and not as an agent of
the Borrower); and (iii) at its own expense, endeavor to enforce collection
of the Rights, as and when due, including the taking of such action with
respect to such collection as the Co-Agent may reasonably request. Nothing
contained in this Agreement is intended or shall be construed to affect or
impair the continuity of perfection of the Co-Agent's security interest in
the Rights or in any other collateral granted the Borrower to Agent or
Co-Agent hereunder or under any Security Document.
Section 6.08.Enforcement of Security Interest.
(a) If any Event of Default shall have occurred and be continuing, the
Co-Agent shall, in its own discretion or at the direction of the Required
Commercial Paper Banks: (i) at any time enforce collection of any of the
Rights by suit or otherwise and surrender, release or exchange all or any
part of the
<PAGE>
Rights, or compromise or extend or renew for any period any indebtedness
thereunder or evidenced thereby; and (ii) from time to time endorse in the
name of the Borrower any items, howsoever received by the Co-Agent,
representing any of the Rights.
(b) The Co-Agent shall not be liable to the Borrower for failure to
exercise reasonable care in the custody and preservation of any of the
Rights in its possession if it takes such action for that purpose as the
Borrower shall request in writing, but failure of the Co-Agent to comply
with any such request shall not by itself be deemed a failure to exercise
reasonable care, and no failure of the Co-Agent to preserve or protect any
Rights against prior parties, or (except in the case of the Co-Agent's
gross negligence or willful misconduct) to do any act with respect to the
preservation of such Rights not so requested by the Borrower, shall be
deemed a failure to exercise reasonable care in the custody or preservation
of such Rights. In the event that the Borrower shall fail to pay or perform
any of its Obligations, the Co-Agent and the Commercial Paper Banks may
exercise from time to time any rights and remedies available to them under
applicable law, in addition to the rights and remedies granted hereunder.
Section 6.09.Establishment of Accounts and Payment of Commercial Paper
Notes.
(a)The Depositary has established at its banking offices in the City of New
York:
(i) A special purpose trust account to be held in trust by the Depositary
for the benefit of the holder or holders of the Commercial Paper Notes
(such account being called, in this Agreement and in the Depositary
Agreement, the "Commercial Paper Account"), over which the Depositary shall
have the exclusive control and sole right of withdrawal;
(ii) A special purpose trust account for the sole and exclusive benefit of
the Co-Agent (on behalf of the Commercial Paper Banks) (such account being
called, in this Agreement and in the Depositary Agreement, the "Operating
Account"), over which the Depositary shall have exclusive control and sole
right of withdrawal; and
(iii) A demand deposit account for the sole and exclusive benefit of the
Co-Agent as issuer of the Letter of Credit (such account being called, in
the Depositary Agreement, the "Depositary Account"), over which the
Co-Agent shall, except as provided in the Depositary Agreement, have the
sole right of withdrawal.
(b) Proceeds of the sale of Commercial Paper Notes, amounts paid by the
Co-Agent in respect of Drawings by the Depositary under the Letter of
Credit, and all other funds referred to in the Depositary Agreement shall
be deposited in the appropriate accounts, and such accounts shall be
debited and credited
<PAGE>
in the manner and at the times, as provided in the Depositary Agreement.
Neither the Borrower nor any other Credit Party has or shall have any
legal, equitable or beneficial right, title or interest in any of the
accounts except, with respect to the Operating Account, to the extent
specifically set forth in the Depositary Agreement.
(c) From time to time, the Borrower shall deposit or shall cause funds to
be deposited in the Operating Account, either by the deposit of the
proceeds from the sale of Commercial Paper Notes or by deposit of other
funds by the Borrower, in amounts such that immediately after any Drawing
under the Letter of Credit and receipt of proceeds of sale of Commercial
Paper Notes issued on the date of any such Drawing, there will be
sufficient funds for payment in full of all Series B Commercial Paper Loans
and all Series C Commercial Paper Loans within the time permitted for such
payment under this Agreement.
(d) Upon presentation of any Commercial Paper Note for payment in
accordance with the terms of such Commercial Paper Note and the Depositary
Agreement, the Depositary shall pay such Commercial Paper Note, as provided
in the Depositary Agreement, solely out of funds deposited in the
Commercial Paper Account.
ARTICLE VII
CONDITIONS TO CREDIT EVENTS
The obligation of each Bank to make Advances to the Borrower hereunder and
the obligation of the Co-Agent to issue the Letter of Credit Amendment is
subject to the satisfaction of the following conditions:
Section 7.01.Conditions Precedent to Issuance of Commercial Paper, Issuance
of Letter of Credit and Initial Advance. The right of the Borrower to issue
one or more Commercial Paper Notes on the occasion of the initial Credit
Event, the obligation of the Co-Agent to issue the Letter of Credit
Amendment on the occasion of the initial Credit Event, and the obligation
of the Banks to make the initial Advances under this Agreement shall in
each case be subject to the payment in full prior to the time of the (i)
issuance of such Commercial Paper Notes, (ii) issuance of such Letter of
Credit Amendment, or (iii) making of the initial Advance under this
Agreement, as the case may be, of the obligations of the Borrower incurred
under this Agreement prior to such issuance of Commercial Paper Notes or
Letter of Credit Amendment or the making of such Advance (including,
without limitation, the Borrower's obligations to pay fees to the Agent,
the Co-Agent and the Banks and to reimburse reasonable fees and
disbursements of counsel to the Agent and the Co-Agent), and the receipt by
the Agent of the following, in form and substance satisfactory to the Agent
and the Co-Agent:
(a) This Agreement duly completed and executed;
(b) The duly completed and executed Series A Master Notes, Guaranty
Agreement, Assignment of Intercompany Loans and Pledge Agreements
accompanied by (i) all stock certificates representing the Pledged Stock
(except for the Pledged Stock of SCI Holding France, S.A. which is
uncertificated) and (ii) stock powers for those shares duly executed in
blank;
<PAGE>
(c) The duly executed and completed First Modification of Depositary
Agreement dated as of the date hereof among the Borrower, the Depositary
and the Co-Agent substantially in the form of Exhibit H attached hereto;
(d) Duly executed and completed Uniform Commercial Code financing
statements to be filed in such places as the Agent may determine, naming
the Agent as secured party and the Borrower as debtor, describing as
collateral the Rights in which a security interest is granted pursuant to
Section 6.06 and a lien search demonstrating that the security interest of
the Agent in the Rights is a first priority security interest;
(e) The favorable written opinion of Powell, Goldstein, Frazer & Murphy,
general counsel to the Borrower and the other Credit Parties, addressed to
and satisfactory to the Agent, the Co-Agent and the Banks, (i) as to the
matters stated in Sections 8.01 through 8.05 and (after due inquiry, to the
best of such counsel's knowledge) Section 8.06 (provided that as to any
Credit Party organized under laws other than those of any state of the
United States, such matters may be addressed by separate opinions of
foreign counsel qualified to practice law in the country where such Credit
Party may be organized, provided further that Powell, Goldstein, Frazer &
Murphy shall have reviewed and approved each such opinion), (ii) to the
effect that payments of the Commercial Paper Notes from moneys drawn by the
Depositary under the Letter of Credit would not constitute a transfer of
the property of the Borrower avoidable by a trustee or debtor-in-possession
of the bankruptcy estate of the Borrower pursuant to Section 547 of the
Bankruptcy Code in the event that a bankruptcy petition is filed by or
against the Borrower within ninety (90) days after the payment of Letter of
Credit proceeds to the holders of Commercial Paper Notes, and (iii) as to
such other matters as the Agent, the Co-Agent or the Banks may reasonably
require;
(f) The favorable written opinion of Michael Sullivan, General Counsel of
the Borrower, addressed to and satisfactory to the Agent, the Co-Agent and
the Banks and the favorable written opinion of special Alabama counsel to
the Borrower, addressed to and satisfactory to the Agent, the Co-Agent and
the Banks, as to the fact that the transactions to be consummated and
performed by the Agent, the Co-Agent and the Banks pursuant to this
Agreement do not, in and of themselves, require any of the Banks, the Agent
or the Co-Agent to qualify or otherwise register to transact business as a
foreign corporation in the State of Alabama (excluding those Banks which
may already be qualified to transact business as a foreign corporation in
the State of Alabama);
(g) An opinion or opinions of counsel, in form and substance satisfactory
to the Agent and counsel for the Agent, demonstrating that (except for the
Permitted Exceptions) the Lien of the Agent on the Pledged Stock is a
first-priority, perfected Lien;
(h) In the case of the initial Advance under this Agreement, a Borrowing
Certificate appropriately completed and duly executed by the Borrower;
(i) Certificates of the Secretary or Assistant Secretary of each Credit
Party attaching and certifying copies of the resolutions of the respective
Boards of Directors, or Executive Committees thereof, authorizing as
applicable the execution, delivery and performance of the Commercial Paper
Documents and the Credit Documents to which each is a party;
<PAGE>
(j)Certificates of the Secretary or an Assistant Secretary of each Credit
Party certifying (i) the name, title and true signature of each officer of
such entities executing the Commercial Paper Documents and the Credit
Documents to which such Credit Party is a party, (ii) the certificate or
articles of incorporation or other organizational documents of such
entities, and (iii) the bylaws of such entities;
(k)Copies of all documents and instruments, including all consents,
authorizations and filings, required or advisable under any Requirement of
Law or by any Contractual Obligation of any Credit Party (except the
Permitted Exceptions) in connection with the execution, delivery,
performance, validity and enforceability of the Commercial Paper Documents
and the Credit Documents to which such Credit Party is a party, and such
consents, authorizations, filings and orders shall be satisfactory in form
and substance to the Agent and the Co-Agent and all such documents and
instruments shall be in full force and effect and all applicable waiting
periods shall have expired;
(l) The favorable written opinion of Kilpatrick & Cody, special counsel to
the Co-Agent, addressed to the Borrower, the Depositary, Bank of America NT
& SA, Standard & Poor's Corporation and Moody's Investor Services, Inc. as
to the enforceability of the Letter of Credit Amendment;
(m) All corporate proceedings and all other legal matters in connection
with the authorization, legality, validity and enforceability of the
Commercial Paper Documents and the Credit Documents shall be satisfactory
in form and substance to the Agent and the Co-Agent;
(n) Certificates of good standing for each of the Credit Parties in the
jurisdictions set forth on Schedule 8.01;
(o)Payment of all accrued interest and fees due and owing by Borrower under
the 1993 Credit Agreement; and
(p) Such other documents, certificates, opinions (including reliance
letters), approvals or filings as the Agent, the Co-Agent or any Bank or
any of their counsel may reasonably request.
Section 7.02.Conditions to All Credit Events. The right of the Borrower to
issue one or more Commercial Paper Notes on the occasion of any Credit
Event, the obligation of the Co-Agent to issue a Letter of Credit on the
occasion of any Credit Event, and the obligation of the Banks to make
Advances under this Agreement shall in each case be subject to fulfillment
of the following conditions, at or before the time of the issuance of such
Commercial Paper Notes, the issuance of such Letter of Credit, or the
making of such Advances, as the case may be and after giving effect to such
Borrowing and the application of the proceeds therefrom:
(a) There shall exist no Default or Event of Default;
(b) All representations and warranties by the Borrower contained herein
(other than any representations and warranties which are, by their terms,
expressly limited to the date made or given) shall be true and correct in
all material respects, both before and after giving effect to such Credit
Event and to the application of any proceeds of any Advances made on the
date of such Credit Event, with the same effect as though such
representations and warranties had been made on and as of the date of such
Credit Event;
<PAGE>
(c) Since the date of the most recent of the financial statements described
in Section 8.12 or delivered pursuant to Section 9.12, there shall have
been no change which has had or could reasonably be expected to have a
materially adverse effect on the business, property or assets or financial
condition of the Borrower and its Subsidiaries taken as a whole;
(d) There shall be no action, suit or proceeding pending, or to the
knowledge of the Borrower, threatened against the Borrower or any of its
Subsidiaries or any of the properties of the Borrower or any of its
Subsidiaries before any court, arbitrator or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign
(including, without limitation, the SEC, and any regulatory commission of
any jurisdiction) which (i) singly or in the aggregate, reasonably could be
expected to have a materially adverse effect on the business, property or
assets or financial condition of the Borrower and its Subsidiaries taken as
a whole, or (ii) seeks to prohibit or restrict any Credit Party's ownership
or operation of any material portion of its business or assets or to compel
any Credit Party to dispose of or hold separate all or any material portion
of its businesses or assets, which reasonably could be expected to have a
material adverse effect on the business, properties, assets or financial
condition of the Borrower and its Subsidiaries taken as a whole;
(e) Such Credit Event and use of proceeds thereof shall not result in a
violation of any Requirement of Law or any Contractual Obligation
applicable to the Borrower or any Subsidiary of the Borrower;
(f) The Agent or the Co-Agent, as appropriate, shall have received a
Borrowing Certificate for any Loan, duly executed by the Borrower;
(g) If such Credit Event is subsequent to the initial Credit Event, the
Agent and the Co-Agent shall have received such other documents,
certificates, approvals or filings as the Agent and the Co-Agent may have
reasonably requested in connection with such subsequent Credit Event;
(h) If such Credit Event is subsequent to the initial Credit Event, and if
the Credit Event involves adding or removing any Credit Party or Credit
Document or extending the Credit Expiration Date, the Agent shall have
received such opinions (including reliance letters) as the Agent or the
Co-Agent may have reasonably requested in connection with such subsequent
Credit Event; and
(i) If such Credit Event is subsequent to the initial Credit Event, and if
the Borrower has formed or acquired any Subsidiaries since the date of the
most recent Credit Event, the Borrower shall have complied with Section
9.13.
Each request for a Borrowing and the acceptance by the Borrower of the
proceeds thereof shall constitute a representation and warranty by the
Borrower, as of the date of such Borrowing, that the conditions specified
in Sections 7.01 and 7.02 have been satisfied.
Section 7.03.Conditions Precedent to Issuance of Commercial Paper. The
right of the Borrower to issue one or more Commercial Paper Notes on the
occasion of any Credit Event shall be subject to the fulfillment at or
<PAGE>
prior to the time of the issuance of such Commercial Paper Notes of each of
the following conditions in addition to all other conditions set forth in
Section 7.01 and Section 7.02:
(a) The representations and warranties (if any) on the part of the
Depositary and each Dealer contained in each Commercial Paper Document, and
in each certificate, letter or other writing or instrument furnished or
delivered to the Borrower, the Agent, the Co-Agent or any Bank hereto or
thereto or in connection herewith or therewith, shall be true and correct
in all material respects at and as of the date of the issuance of such
Commercial Paper Notes, as though made on and as of such date (except to
the extent that such representations and warranties expressly relate solely
to an earlier date).
(b) No default in the performance or observance of any term, covenant,
condition or agreement on the part of the Depositary or any Dealer to be
performed or observed under any Commercial Paper Document shall have
occurred and be continuing on the date of the issuance of such Commercial
Paper Notes or would result from the issuance of such Commercial Paper
Notes.
(c) Each information statement, commercial paper memorandum or other
offering material to be used in connection with the offering, issuance,
sale or delivery of any Commercial Paper Note shall have been delivered to
the Agent, the Co-Agent and the Banks and, insofar as any such information
statement, commercial paper memorandum or other offering material (i)
describes or pertains to the Agent or the Co-Agent or the transactions
contemplated hereby, it shall have been approved by the Agent and the
Co-Agent or (ii) specifically describes or pertains to any Bank by name, it
shall have been approved by such Bank.
(d) True and complete copies of all comfort letters (if any) and
certifications delivered with respect to information contained in any
information statement, commercial paper memorandum or other offering
material to be used in connection with the offering, issuance, sale or
delivery of any Commercial Paper Note shall have been delivered to the
Co-Agent.
(e) (i) Moody's Investor Services, Inc. shall have rated such Commercial
Paper Notes at least "P-1" (or its then equivalent rating), and Standard &
Poor's Corporation shall have rated such Commercial Paper Notes at least
"A-1 plus" (or its then equivalent rating), (ii) the Co-Agent and each
Dealer shall have received a copy of the rating letter or other document
evidencing each such rating, and (iii) each such rating shall continue in
effect on the date of the issuance of such Commercial Paper Notes.
(f) Such Commercial Paper Notes shall only be issued to the Dealers, or to
Persons with whom the Dealers have placed Commercial Paper Notes, referred
to in the notice dated June 25, 1993 and delivered from Borrower to the
Co-Agent (or such other Dealers or Persons as the Co-Agent shall have
previously approved in writing), and the Co-Agent shall have received a
copy, certified by an appropriate officer of the Borrower, of each
Commercial Paper Dealer Agreement then in effect.
(g) All other conditions and limitations on the issuance of Commercial
Paper Notes specified in this Agreement or in the Depositary Agreement
shall have been satisfied and complied with.
<PAGE>
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants, and covenants and agrees with the
Agent, the Co-Agent and the Banks, that:
Section 8.01.Organization, Corporate Powers, etc. Each of the Borrower and
its Subsidiaries (other than any Liquidating Subsidiary) is a corporation
duly incorporated, validly existing and in good standing under the laws of
the jurisdiction indicated on Schedule 8.01. There exist as of the date of
this Agreement no Subsidiaries of the Borrower other than those identified
on Schedule 8.01 attached hereto. Each of the Borrower and its Subsidiaries
is duly qualified as a foreign corporation and in good standing in each
jurisdiction where the ownership of property or the nature of the business
transacted by it makes such qualification necessary, and in which failure
to so qualify would have a material adverse effect on the business,
properties, assets or financial condition of the Borrower and its
Subsidiaries taken as a whole. The Borrower has and each of its
Subsidiaries has the corporate power to own its respective property and to
carry on its respective business as now being conducted.
Section 8.02.Corporate Authority, etc. The execution, delivery and
performance by each Credit Party of the Credit Documents and the Commercial
Paper Documents to which it is a party have been duly authorized by all
necessary corporate action and do not and will not (i) violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award to which the Credit Party is subject or of
the charter or bylaws of such Credit Party, (ii) result in a material
breach of or constitute a material default under any material Contractual
Obligation to which the Credit Party is a party or by which the Credit
Party or any of its properties is bound, or (iii) result in, or require,
the creation or imposition of any Lien or encumbrance of any nature upon or
with respect to any of the Credit Party's properties (other than Liens in
favor of the Banks), and the Credit Party is not in material default under
any material Requirement of Law, including, without limitation,
Environmental Laws, or material Contractual Obligation.
Section 8.03.Government Approvals. Except for the Permitted Exceptions, no
material authorization, consent, approval, license, exemption of or filing
or registration with any commission, board, bureau, agency or
instrumentality, domestic or foreign, is necessary (other than those which
have already been obtained) to the valid execution, delivery or performance
by any Credit Party of any of the Credit Documents or Commercial Paper
Documents or the issuance or sale by the Borrower of the Commercial Paper
Notes, other than those which have already been obtained.
Section 8.04.Margin Regulations and Investment Company Act. No part of the
proceeds of any Advance will be used for any purpose which violates, or
which would be inconsistent or not in compliance with, the provisions of
the applicable Margin Regulations. Neither the Borrower nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, or any foreign, federal or
local statute or regulation limiting its ability to incur indebtedness for
money borrowed, to guarantee such indebtedness or to pledge any of its
assets to secure such indebtedness, as contemplated by this Agreement or by
any other Credit Document or the Commercial Paper Documents. Neither the
Borrower nor any of its
<PAGE>
Subsidiaries is, or will by virtue of the transactions contemplated hereby
become, an "investment company" or a company "controlled" by an "investment
company" as defined in the Investment Company Act of 1940, as amended.
Section 8.05.Valid and Binding Obligations. This Agreement, the Depositary
Agreement, the Series A Master Notes, the Series B Master Notes, the Series
C Master Notes, the Guaranty Agreement, the Assignment of Intercompany
Loans, the Subsidiary Notes and, except for the Permitted Exceptions, the
Pledge Agreements are, and the Commercial Paper Notes, when executed and
delivered by the Borrower, will constitute, legal, valid and binding
obligations of the applicable Credit Party (or the Borrower, in the case of
Commercial Paper Notes) enforceable against such Credit Party (or the
Borrower, in the case of the Commercial Paper Notes) in accordance with
their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the rights of creditors generally and to
general equitable principles which may limit the right to obtain the remedy
of specific performance of obligations.
Section 8.06.Litigation. As of the date of this Agreement, except as
disclosed on Schedule 8.06, there are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against the
Borrower or any of its Subsidiaries or any of the properties of the
Borrower or any of its Subsidiaries before any court, arbitrator or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign (including, without limitation, the
SEC, and any regulatory commission of any jurisdiction), except actions,
suits or proceedings of the character (i) which are normally incident to
the kind of business conducted by the Borrower or its Subsidiaries, as the
case may be, (ii) for which the Borrower reasonably believes it has
adequate insurance coverage, and (iii) which, if determined adversely to
the Borrower or its Subsidiaries, as the case may be, would, singly or in
the aggregate, not have a material adverse effect on the financial
condition or on the properties or operations of the Borrower and its
Subsidiaries, taken as a whole, or the transactions contemplated by any of
the Credit Documents or the Commercial Paper Documents.
Section 8.07.Accuracy of Information. All information supplied by any
Credit Party to the Agent, the Co-Agent or the Banks relating to the
Borrower or any of its Subsidiaries is true, complete and accurate in all
material respects.
Section 8.08.Accuracy of Representations and Warranties. The
representations and warranties of each Credit Party contained in each other
document delivered in connection with this Agreement are, or when such
document is delivered will be, true and correct in all material respects
when made.
Section 8.09.ERISA. No accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived,
exists with respect to any plan (other than a multiemployer plan). No
liability to the PBGC has been or is expected by the Borrower to be
incurred with respect to any plan (other than a multiemployer plan) by the
Borrower or any of its Subsidiaries which is or would have a material and
adverse affect on the business, property or assets, or financial condition
of the Borrower or any of its Subsidiaries. Neither the Borrower nor any of
its Subsidiaries has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any multiemployer plan
which is or would have a material and adverse affect on the business,
property or assets, or financial condition of the Borrower or any of its
Subsidiaries. The execution and delivery of the Credit Documents or the
Commercial Paper Documents
<PAGE>
will not involve any transaction which is subject to the prohibitions of
section 406 of ERISA or in connection with which a tax could be imposed
pursuant to Section 4975 of the Code. For the purpose of this Section, the
term "plan" shall mean an "employee pension benefit plan" (as defined in
Section 3 of ERISA) which is or has been established or maintained, or to
which contributions are or have been made, by the Borrower or any of its
Subsidiaries or by any trade or business, whether or not incorporated,
which, together with the Borrower or any of its Subsidiaries, is under
common control, as described in Section 414(b) or (c) of the Code; and the
term "multiemployer plan" shall mean any plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA). The
Borrower and any Subsidiary may, however, create or operate one or more
plans, in accordance with the provisions of this Agreement.
Section 8.10.Exemption from Registration. The issuance and sale of the
Commercial Paper Notes is exempt from registration under the Securities
Act.
Section 8.11.Taxes. There have been filed all United States Federal income
tax returns and all other material tax returns with respect to the Borrower
and its Subsidiaries that are required to be filed and there have been paid
all taxes due pursuant to such returns or pursuant to any assessment
received in respect of the Borrower and its Subsidiaries, unless and to the
extent that such taxes are being contested in good faith by appropriate
proceedings. Federal income tax liabilities have been examined and reported
on by the Internal Revenue Service (or closed by applicable statutes) and
satisfied for all fiscal years prior to and including the fiscal year ended
June 30, 1989. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of any taxes or other governmental
charges levied by any taxing authority are, in the opinion of the Borrower,
adequate.
Section 8.12.Financial Statements. In addition to the above representations
and warranties, the Borrower represents and warrants that the balance sheet
as of June 30, 1994 and the related statements of income and retained
earnings and cash flows of Borrower and its Subsidiaries for the fiscal
year then ended (copies of which have been furnished to the Agent and the
Co-Agent and which are included in the annual report of the Borrower to its
shareholders) have been prepared in conformity with GAAP and fairly present
the consolidated financial condition of the Borrower and its Subsidiaries
as of such date and the results of their operations for such year; the
unaudited balance sheet as of March 26, 1995, and the related unaudited
statements of operations, cashflows and reconciliation of shareholders'
equity for the six-month period then ended (copies of which have been
furnished to the Agent and the Co-Agent) have been prepared in conformity
with GAAP and fairly present, subject to year-end-adjustments, the
financial condition of the Borrower and its Subsidiaries as of such date;
and from the date of such unaudited balance sheet, through the date when
this Agreement is executed and delivered by all parties, there has been no
material adverse change in such condition or operations.
Section 8.13.Solvency. After giving effect to the transactions contemplated
by the Credit Documents, (i) the property of the Borrower, the Borrower and
its Subsidiaries taken as a whole, and each Material Subsidiary, at a fair
valuation, will exceed its respective debts, (ii) the capital of the
Borrower, the Borrower and its Subsidiaries taken as a whole, and each
Material Subsidiary will not be unreasonably small to conduct its
respective business, (iii) neither the Borrower nor the Borrower and its
Subsidiaries taken as a whole nor any Material Subsidiary will have
incurred debts, or have intended to incur debts, beyond its respective
ability to
<PAGE>
pay such debts as they mature, and (iv) the present fair salable value of
the assets of the Borrower, the Borrower and its Subsidiaries taken as a
whole, and each Material Subsidiary will be materially greater than the
amount that will be required to pay its respective probable liabilities
(including debts) as they become absolute and matured. For purposes of this
Section, "debt" means liability on a claim, and "claim" means (i) the right
to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured, or (ii) the right to an equitable
remedy for breach of performance if such breach gives rise to a right to
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed,
secured or unsecured.
Section 8.14.Subordinated Debt. The Borrower has made available to the
Banks copies of all agreements and instruments containing the terms of the
Subordinated Debt and the rights of the holders thereof. The Loans
constitute (and will constitute with respect to any Permitted Subordinated
Debentures, to the extent issued pursuant to the terms of this Agreement)
indebtedness which has all rights of "senior debt" as provided in such
subordinated debt agreements and instruments.
Section 8.15.Priority of Liens. Except for Liens in favor of the Agent and
the Co-Agent and the Banks as provided in this Agreement, there are no
other Liens on the Rights and there are no other Liens on the Intercompany
Loans and the Pledged Stock.
Section 8.16.Environmental Law Compliance. Borrower and each of its
Subsidiaries have obtained all material permits, licenses and other
authorizations which are required under Environmental Laws, and Borrower
and each of its Subsidiaries are in compliance in all material respects
with all terms and conditions of such permits, licenses and authorizations
and are also in compliance in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any
applicable Environmental Laws. Except as set forth on Schedule 8.16
attached hereto, neither Borrower nor any of its Subsidiaries is aware of,
or has received notice of, any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans which,
with respect to Borrower or any Subsidiary, may interfere with or prevent
compliance or continued compliance in all material respects with
Environmental Laws, or may give rise to any material common law or legal
liability, or otherwise form the basis of any material claim, action,
demand, suit, proceeding, hearing, study or investigation, based on or
related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge,
release or, threatened release into the environment, of any pollutant,
contaminant, chemical, or industrial, toxic or hazardous substance or
waste, and there is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice or demand proceeding pending or, to the
knowledge of the Borrower, threatened against Borrower or any Subsidiary
relating in any way to Environmental Laws, which, if determined adversely
to any Credit Party, would have a material adverse effect on the financial
condition or operations of the Borrower and its Subsidiaries, taken as a
whole, or the transactions contemplated by any of the Credit Documents or
the Commercial Paper Documents.
Section 8.17.Liquidation of Certain Subsidiaries. Borrower represents and
warrants to the Agent, the Co- Agent and the Banks that (i) Borrower is
currently in the process of liquidating SCI U.K. and Newmoor
<PAGE>
Industries, (ii) such Subsidiaries are no longer active Subsidiaries of the
Borrower and (iii) substantially all of the assets of SCI U.K. have been
transferred to SCI Holdings, Inc. In the event Borrower decides to cause
SCI U.K. or Newmoor Industries or both to become active Subsidiaries,
Borrower shall cause such Subsidiary or Subsidiaries (as the case may be)
to become a Credit Party to this Agreement pursuant to Section 9.13 hereof
promptly after such Subsidiary becomes an active Subsidiary. Borrower shall
not, and shall not permit any Subsidiary to, make any Intercompany Loan to
SCI U.K. or Newmoor Industries unless and until SCI U.K. or Newmoor
Industries (as the case may be) becomes a party to the Credit Agreement.
ARTICLE IX
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with the Agent, the Co-Agent and the
Banks that, unless the Agent, the Co-Agent and the Required Banks shall
otherwise consent in writing, the Borrower will and will cause each Credit
Party to (except, in the case of Section 9.12, the Borrower will):
Section 9.01.Payment of Taxes, etc. Pay and discharge, and cause its
Subsidiaries to pay and discharge, all taxes, assessments, and governmental
charges or levies imposed upon such Credit Party or its Subsidiaries or
upon the income or profits of such Credit Party or its Subsidiaries, or
upon any properties belonging to such Credit Party or its Subsidiaries,
prior to the date on which penalties attach thereto, and all lawful claims,
which if unpaid, might become a Lien upon any properties of such Credit
Party or its Subsidiaries, provided that such Credit Party or its
Subsidiaries shall not be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by appropriate
proceedings and such contest shall operate to stay the material adverse
effect of any such nonpayment and as to which such Credit Party has
established adequate reserves in accordance with GAAP.
Section 9.02.Preservation of Corporate Existence. Subject to Sections 8.17
and 10.12, preserve and maintain its corporate existence in the
jurisdiction of its incorporation, and its rights, franchises and
privileges material to the conduct of its business as now being conducted,
and qualify and remain qualified as a foreign corporation in each
jurisdiction in which such qualification is necessary in view of its
business operations or the ownership of its properties; provided, however,
that any Liquidating Subsidiary may be dissolved following its liquidation
and the winding up of its affairs.
Section 9.03.Compliance with Laws, etc. Comply with, and cause its
Subsidiaries to comply with, the requirements of all applicable laws,
rules, regulations and orders of any governmental authority (including,
without limitation, Export-Control Laws, ERISA and all Environmental Laws),
noncompliance with which would, singly or in the aggregate, materially and
adversely affect the business, credit or financial condition of the
Borrower and its Subsidiaries taken as a whole.
Section 9.04.Inspection Rights. Upon prior notice, at any reasonable time
and from time to time, permit the Agent, the Co-Agent or any Bank or any
agents or representatives thereof to examine and make copies of the records
and books of account related to the transactions contemplated by this
Agreement, to visit the properties of such Credit Party and to discuss the
affairs, finances and accounts of such Credit Party with
<PAGE>
any of its directors or officers or with its chief accounting officer or
its independent certified public accountants.
Section 9.05.Maintenance of Records and Books of Account.
(a) Maintain proper books of record and account in which full, true and
correct entries shall be made of its transactions in accordance with GAAP
applied on a Consistent Basis with those applied in the preparation of the
financial statements described in Section 8.12 hereof.
(b) Set aside on its books from its earnings for each fiscal year all such
proper reserves, including reserves for depreciation, depletion,
obsolescence and amortization of its properties during such fiscal year, as
shall be required in accordance with GAAP applied on a Consistent Basis.
Section 9.06.Maintenance of Approvals, Filings and Registrations. At all
times obtain, maintain, renew and comply with all the terms and conditions
of all consents, licenses, approvals, and authorizations as may be
necessary or appropriate under any applicable law or regulation (except for
the Permitted Exceptions) for the execution, delivery and performance of
the Credit Documents and the Commercial Paper Documents and to make the
Credit Documents and the Commercial Paper Documents legal, valid, binding
and enforceable, subject to bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the rights of creditors generally and to
general equitable principles which may limit the right to obtain the remedy
of specific performance of obligations.
Section 9.07.Reporting Requirements. Furnish to the Agent, the Co-Agent and
(except as set forth in Section 9.07(iii)) each Bank,
(i) Within three (3) Business Days after any Executive Officer of any
Credit Party has notice or knowledge (x) of the occurrence of any Event of
Default or Default or (y) that any of the representations and warranties
contained in Article VIII hereof has ceased to be true and correct in any
material respect, an Officer's Certificate setting forth the details
thereof and the action which the applicable Credit Party proposes to take
with respect thereto; and
(ii) Such other information respecting the business, properties or the
condition or operation of such Credit Party and its Subsidiaries, financial
or otherwise, as the Agent, the Co-Agent or any Bank may from time to time
reasonably request; and
(iii) Immediately upon an Executive Officer becoming aware that the holder
of any evidence of material indebtedness, or material security interest in
the assets, of any Credit Party or any of its Subsidiaries has given notice
or taken any other action with respect to a claimed default or event of
default with respect to such indebtedness or security or event which, with
the giving of notice or passage of time, or both, would constitute a
default with respect to such indebtedness or security, telephonic notice to
the Agent confirmed in writing within two (2) Business Days by an Officer's
Certificate specifying the notice given or action taken by such holder and
the nature of the claimed default or event and what action such Credit
Party or Subsidiary is taking or proposes to take with respect thereto.
<PAGE>
Section 9.08.Indemnification. Pay, and will protect, indemnify and save
harmless the Agent, the Co-Agent and the Banks and, in their capacity as
such, the officers, directors, shareholders, controlling persons,
employees, agents, and servants of the Agent, the Co-Agent or any Bank from
and against all liabilities, losses, claims, damages, penalties, causes of
action, suits, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) or judgments of any nature arising
from (i) the offering and sale of, and payment or nonpayment on, the
Commercial Paper Notes or the issuance of the Letter of Credit, (ii) the
default of any Credit Party or the Depositary in the performance of its
respective agreements, rights or obligations contained in this Agreement,
the Depositary Agreement or any other Credit Document entered into by such
Credit Party or the Depositary in connection herewith or therewith, (iii)
any actual or proposed use of the proceeds of the Loans or the Commercial
Paper Notes or any Credit Party's entering into and performing any Credit
Document or any Commercial Paper Document, (iv) the Agent's, the Co-Agent's
or any Bank's making, holding or administering the Loans, the Letter of
Credit, the Credit Documents or any of the Collateral pledged in connection
with any Credit Document (provided that the right of payment and
indemnification under this clause (iv) shall not apply to any liabilities,
losses, costs and expenses arising out of any successful action by the
Borrower against the Agent, the Co-Agent or any Bank for a breach of its
obligations hereof, but nothing in this proviso shall modify or impair the
Agent's the Co-Agent's or any Bank's rights under Section 15.06 hereof),
(v) allegations of participation or interference by the Agent, the Co-Agent
or any Bank in the management, contractual relations or other affairs of
Borrower (provided that the right of payment and indemnification under this
clause (v) shall not apply to any liabilities, losses, costs and expenses
arising out of any successful action by the Borrower against the Agent,
Co-Agent or Bank for a breach of its obligations hereof, but nothing in
this proviso shall modify or impair the Agent's, the Co-Agent's or any
Bank's rights under Section 15.06 hereof), or (vi) allegations that the
Agent, the Co-Agent or any Bank has joint liability with Borrower for any
reason; provided, that the Borrower will not be liable for such
liabilities, losses, claims, damages, penalties, causes of action, suits,
costs and expenses (including, without limitation, attorneys' fees and
expenses) or judgments of any nature arising from any untrue statement of a
material fact in the material relating to the Agent, the Co-Agent or any
Bank in any offering circular used in the sale of the Commercial Paper
Notes or omission of a material fact relating to the Agent, the Co-Agent or
any Bank required to be stated therein or necessary in order to make the
statements therein relating to the Agent, the Co-Agent or any Bank in the
light of the circumstances under which they were made not misleading if,
but only if, such material was specifically approved in writing by the
Agent, the Co-Agent or such Bank, as the case may be, prior to its
inclusion in such offering circular; and further provided that the Borrower
will not be liable for any such liabilities, losses, claims, damages,
penalties, causes of action, suits, costs and expenses or judgments to the
extent the same are the result of or arise out of the gross negligence or
willful misconduct of the Agent, the Co-Agent or any Bank or any of the
officers, directors, shareholders, controlling persons, employees, agents
and servants (or any of them) of the Agent, the Co-Agent or any Bank. If
any action, suit or proceeding arising from any of the foregoing is brought
against the Agent, the Co-Agent or any Bank or any other person indemnified
pursuant to this Section, the Borrower will, if requested in writing by the
Agent, the Co-Agent or any Bank to do so, at its expense, resist and defend
such action, suit or proceeding or cause the same to be resisted and
defended by counsel designated by the Borrower (which counsel shall be
satisfactory to the Agent, the Co-Agent or Bank(s) involved). Without
limiting the generality of the foregoing, this indemnity shall extend to
any claims asserted against the Agent, the Co-Agent or any of the Banks by
any Person under Export-Control Laws or any Environmental Laws or any
similar laws by reason of Borrower's or any other Person's failure to
comply
<PAGE>
with such laws. The obligations of Borrower under this Section 9.08 shall
survive the payment in full of the Obligations and the termination of this
Agreement.
Section 9.09.Securities Laws. Sell and offer to sell Commercial Paper Notes
only in compliance with the registration provisions of the Securities Act,
or pursuant to an applicable exemption thereunder, and in compliance with
the registration or qualification provisions (or applicable exemptions) of
the securities laws of any state having jurisdiction.
Section 9.10.Further Assurance. As from time to time specified by counsel
for the Agent or the Co-Agent, at the cost and expense of the Borrower,
execute and deliver to the Agent and the Co-Agent all such documents and
instruments and do all such other acts and things as may be reasonably
required to enable the Agent, the Co-Agent and the Banks to exercise,
perfect and enforce the rights of the Agent, the Co-Agent or any Bank under
this Agreement and to realize thereon, record and file and re-record and
re-file all such documents and instruments, at such time or times, in such
manner and at such place or places, all as may be reasonably necessary to
validate, preserve, perfect and protect the rights of the Agent, the
Co-Agent or any Bank under this Agreement or any Credit Document.
Section 9.11.Insurance; Maintenance of Properties. Maintain, and keep, and
cause its Subsidiaries to maintain and keep, its and their respective
properties in good repair, working order and condition, excepting ordinary
wear and tear and any loss, damage or destruction which is fully covered by
proceeds of insurance; and maintain, with financially secure and reputable
insurance companies, and cause its Subsidiaries to maintain, with
financially secure and reputable insurance companies, policies of insurance
on its and their respective properties in such amounts and against such
risks as are customarily maintained by a similar business and will furnish
on the Agent's or Co-Agent's request full information as to the insurance
carried.
Section 9.12.Financial Covenants and Reporting Requirements of Borrower. In
addition to the above covenants, the Borrower hereby covenants and agrees
that it will:
(a) Subject to Section 3.04A hereof, furnish to the Agent, the Co-Agent and
the Banks the following financial information:
(i) As soon as available and in any event within sixty (60) days after the
end of each of the first three quarters of each fiscal year of the
Borrower, copies of such consolidated and consolidating financial
statements as the Borrower may prepare for its own use as at the end of and
for such period, certified by an authorized financial accounting officer of
the Borrower, which certificate shall be in form and substance acceptable
to the Agent and the Co-Agent and shall include the calculations required
to establish the Borrower's compliance with the covenants set forth in this
Section 9.12 as of and for the period ending on the date of such financial
statements.
(ii) As soon as available and in any event within ninety (90) days after
the end of each fiscal year of the Borrower, a copy of the annual audit
report for the Borrower for such year, including therein the consolidated
and consolidating balance sheet of the Borrower and its Subsidiaries as at
the end of such year and the related statements of income and retained
earnings, and with respect to the consolidated
<PAGE>
statements, related statements of cash flows and changes in financial
position of the Borrower and its Subsidiaries for such year, or statements
providing substantially similar information, in each case certified (except
for consolidating statements) by an independent certified public accountant
of recognized national standing and further certified by an authorized
financial accounting officer of Borrower;
(iii) Simultaneously with the delivery of each set of financial statements
referred to in clause (ii) above, (a) a certificate of such accountants
stating that, in making the audit necessary to the certification of such
financial statements, they have obtained no knowledge of any Event of
Default or, if an Event of Default exists, specifying the nature and period
of existence thereof, and (b) an Officer's Certificate, which certificate
shall be in form and substance acceptable to the Agent and the Co-Agent and
shall include the calculations required to establish the Borrower's
compliance with the covenants set forth in this Section 9.12 as of and for
the period ending on the date of such financial statements and certifying
that, to the best of his or her knowledge, no Default of Event has occurred
as at the end of such fiscal period, or, if a Default or Event of Default
exists, a full description thereof and the action the Borrower proposes to
take with respect thereto;
(iv) Simultaneously with the delivery of each set of financial statements
referred to in clause (i) or (ii) above, a certificate from an authorized
financial accounting officer of the Borrower certifying to the total
principal amount outstanding under the Bid Facility as of the date of such
financial statements; and
(v) Promptly upon transmission thereof, copies of all financial statements,
proxy statements, notices and reports as the Borrower shall send to its
public stockholders, and copies of all registration statements and all
reports which the Borrower files with the SEC.
(b) Subject to Section 3.04A hereof, maintain at all times a ratio of
consolidated Current Assets to consolidated Current Liabilities of at least
1.5 to 1.0; provided, however, that the A-12 Program Financial Statements
Adjustments previously recognized in accordance with GAAP shall be added
back into the computation of Current Assets for purposes of this Section
9.12(b) unless the A-12 Program Financial Statements Adjustments equal or
exceed $50,000,000. If the A-12 Program Financial Statements Adjustments
equal or exceed $50,000,000, then all A-12 Program Financial Statements
Adjustments shall not be added back into the computation of Current Assets
in this Section 9.12(b).
(c) Subject to Section 3.04A hereof, maintain at all times a total
consolidated Tangible Net Worth of an amount not less than (x) $270,000,000
plus (y) fifty percent (50%) of the Borrower's consolidated Net Income
(without giving effect to any Net Loss) for each full fiscal year of the
Borrower having elapsed, starting with the fiscal year which commenced July
1, 1994, on a cumulative fiscal year-end basis, with consolidated Net
Income determined on a cumulative basis as of the end of each fiscal year,
plus (z) increases in Tangible Net Worth subsequent to June 30, 1993 that
result solely from the conversion of Subordinated Debt to common stock of
the Borrower or the sale of capital stock of the Borrower; provided,
however, that the A-12 Program Financial Statements Adjustments previously
recognized in accordance with GAAP shall be added back into the computation
of Tangible Net Worth for purposes of this Section 9.12(c) unless the A-12
Program Financial Statements Adjustments equal or exceed $50,000,000. If
the A-12
<PAGE>
Program Financial Statements Adjustments equal or exceed $50,000,000, then
all A-12 Program Financial Statements Adjustments shall not be added back
into the computation of Tangible Net Worth in this Section 9.12(c).
(d) Subject to Section 3.04A hereof, maintain as of and at the end of each
of its fiscal quarters, a ratio of EBIT to Interest Expense of at least
1.25 to 1.0; provided that the ratio required to be maintained in this
Section 9.12(d) shall be subject to Section 9.12(f); provided, however that
any A-12 Program Financial Statements Adjustments which were recognized in
accordance with GAAP during the Fiscal Year ending as of the end of such
fiscal quarter shall be added back into the calculation of the covenant set
forth in this Section 9.12(d), and provided further that the ratio required
to be maintained in this Section 9.12(d) shall be subject to Section
9.12(f).
(e) Subject to Section 3.04A hereof, maintain at all times a ratio of Total
Debt to Total Capital of not more than .70:1.0.
(f) Subject to Section 3.04A hereof, maintain at all times a ratio of
Adjusted Working Capital to Senior Debt of at least 1.75 to 1.0, provided
that if the ratio of EBIT to Interest Expense (calculated in accordance
with Section 9.12(d) above) is less than 1.70 to 1.0, then the Borrower
will maintain a ratio of Adjusted Working Capital to Senior Debt of at
least 2.0 to 1.0. For purposes of this Section 9.12 (f), the A-12 Program
Financial Statements Adjustments previously recognized in accordance with
GAAP shall be added back into the computation of Adjusted Working Capital
unless the A-12 Program Financial Statements Adjustments equal or exceed
$50,000,000. If the A-12 Program Financial Statements Adjustments equal or
exceed $50,000,000, then all A-12 Program Financial Statements Adjustments
shall not be added back into the computation of Adjusted Working Capital in
this Section 9.12(f).
Section 9.13.Additional Credit Parties. Promptly after the formation or
acquisition of any Subsidiary of the Borrower not listed on Schedule 8.01,
the Borrower shall execute and deliver, or cause to be executed and
delivered by the appropriate Subsidiary of the Borrower, in form and
substance satisfactory to the Agent:
(a)If such Subsidiary is a Foreign Subsidiary and if the capital stock of
such Subsidiary is held by the Borrower or a Subsidiary (other than a
Foreign Subsidiary), a Pledge Agreement with respect to the Pledged Stock,
if any, of such Subsidiary, in substantially the same form as Exhibit G
hereto, accompanied by (i) all stock certificates representing such capital
stock and (ii) stock powers for those shares duly executed in blank;
(b)A Guaranty Agreement from any such Subsidiary (except any Foreign
Subsidiary), in substantially the same form as Exhibit D hereto;
(c)An amendment to the Assignment of Intercompany Loans adding such
Subsidiary as an assignor and containing an acknowledgment by such
Subsidiary of the Assignment of Intercompany Loans, in the form of the
acknowledgment attached to Exhibit F-1 hereto; and
<PAGE>
(d)Related documents of the types described in Sections 7.01(e), (f) and
(g) (which opinions need not be favorable as to the matters set forth in
Sections 8.03 and 8.05), in the case of a Foreign Subsidiary whose shares
will constitute Pledged Stock, and Sections 7.01(i), (j), (k) and (p).
Notwithstanding anything herein to the contrary, in the event Borrower
creates a Bankruptcy-Remote Subsidiary in connection with a Permitted Asset
Securitization Transaction, Borrower shall not be required to execute and
deliver, or cause to be executed and delivered, any of the above documents
in connection with the formation of such Subsidiary.
Section 9.14.Maintenance of Business.
(a)The Borrower shall engage, and cause each Subsidiary to engage, in
substantially the same fields of business as the Borrower and its
Subsidiaries are engaged on the date hereof, or in such other businesses as
are desirable in the reasonable judgment of management of the Borrower.
(b)The Borrower shall conduct, and cause each Subsidiary to conduct, its
business in substantially the same manner as the Borrower and its
Subsidiaries conduct their businesses on the date hereof.
ARTICLE X
NEGATIVE COVENANTS
The Borrower covenants and agrees with the Agent, the Co-Agent and the
Banks that, unless the Required Banks shall otherwise consent in writing,
which consent shall not be unreasonably withheld, the Borrower will not,
and will not permit any Subsidiary of the Borrower to, directly or
indirectly:
Section 10.01.Limitation on Liens. Create, assume or suffer to exist any
Lien upon any of its property or assets, whether now owned or hereafter
acquired, except the following Liens are permitted:
(i)Permitted Encumbrances;
(ii)Other Liens incidental to the conduct of its business in the ordinary
course or the ownership of its property and assets in the ordinary course
of its business which were not incurred in connection with the borrowing of
money or the obtaining of advances or credit and which do not in the
aggregate materially detract from the value of its property or assets or
materially impair the use thereof in the operation of its business;
(iii)Any Lien on any general office building or other facility now owned or
hereafter acquired by the Borrower or any Subsidiary, and any Lien on real
property hereafter acquired by the Borrower or any Subsidiary, in each case
including any Lien on any building or any fixtures located on such real
property, and which Liens were (x) created to secure and only secure all or
part of the purchase price of such property on acquisition or to which such
property was subject at the time of such acquisition and which secures only
the unpaid purchase price or (y) created in connection with the refinancing
of the purchase price of such property (so
<PAGE>
long as such Lien only secures the amount permitted pursuant to the
foregoing clause (x)), provided that the total amount secured by any such
Lien on a given parcel of such property (together with any building and
fixtures described above) shall not exceed five percent (5%) of the
Borrower's Average Tangible Net Worth, determined based upon the financial
statements furnished by the Borrower pursuant to Section 9.12(a);
(iv)Any Lien existing on the date hereof which is listed on Schedule
10.01(iv) attached hereto and made a part hereof in the amounts set forth
on Schedule 10.01(iv);
(v)Any Lien renewing, extending, refinancing or refunding any Lien
permitted by this Section, if the original principal amount secured is not
increased and if the Lien is not extended to other property;
(vi)Any Lien created in favor of a customer of the Borrower or any
Subsidiary with respect to specific goods or work-in-process to secure
advances by the customer to the Borrower or any Subsidiary to purchase or
cause the manufacture of the goods or work-in-process securing the
advances, if (a) such Lien shall secure only the amounts used to purchase
or manufacture such goods or work-in-process so purchased or manufactured,
and (b) such Lien shall be limited to the applicable goods or work in
process;
(vii)Any Lien created or assumed by the Borrower or any Subsidiary in
connection with any transaction involving the Borrower or any Subsidiary,
notwithstanding its effect on the covenants set forth in this Article X,
upon receipt of the prior written consent of the Required Banks;
(viii)Any Liens arising from a Permitted Transaction the Amount of which,
together with the Amount of all Permitted Transactions under Sections
10.02(x), 10.03(viii), 10.03A(i), and 10.03A(ii) does not exceed the
Permitted Transaction Amount;
(ix)Liens granted by Borrower or any Credit Party in connection with the
Loan/Purchase Transaction on the rights of Borrower or such Credit Party
under the NECTEC Agreement and Liens granted by any Credit Party in
connection with the Loan/Purchase Transaction on such Credit Party's
Inventory which shall have been ordered pursuant to the NECTEC Agreement;
and
(x)Liens arising in connection with the sale or contribution of accounts
receivable or any interest therein or any invoice from a Credit Party to
another Credit Party, a Bankruptcy-Remote Subsidiary or any other Person in
connection with a Permitted Asset Securitization Transaction and any
financing statement filed under the Uniform Commercial Code (or any filing
made by a Foreign Subsidiary pursuant to applicable foreign law) to
evidence the sale of accounts receivable or any interest therein or any
invoice from a Credit Party to another Credit Party, a Bankruptcy-Remote
Subsidiary or any other purchaser of such accounts receivable or interest
therein or such invoice in connection with a Permitted Asset Securitization
Transaction.
Section 10.02.Limitation on Indebtedness. Create, incur, assume or suffer
to exist any Indebtedness, except the following Indebtedness is permitted:
(i)Indebtedness represented by the Credit Documents, the Debentures of 1987
and, to the extent issued, the Permitted Subordinated Debentures;
<PAGE>
(ii)Indebtedness which is secured by Liens permitted by the provisions of
clauses (i) through (vii) of Section 10.01;
(iii)Indebtedness renewing, extending or refinancing any Indebtedness
permitted by Section 10.01 or Section 10.02(x) hereof, if the original
principal amount of the Indebtedness is not increased;
(iv)Indebtedness represented by letters of credit (irrevocable or
otherwise) or banker's acceptances issued by any financial institution, if
such letters of credit or banker's acceptances are issued solely as
security for performance or payment by the Borrower or any Subsidiary under
any contract which is not prohibited by this Agreement, and which is
entered into in the ordinary course of business, but only to the extent
that the face amount of all such letters of credit and banker's acceptances
outstanding at any time does not exceed an amount equal to ten percent
(10%) of the sum of (a) the Accounts Receivable of the Borrower and its
consolidated Subsidiaries plus (b) the Inventory of the Borrower and its
consolidated Subsidiaries;
(v)Indebtedness permitted by Section 10.03;
(vi)Indebtedness incurred by the Borrower or any of its Subsidiaries as set
forth on Schedule 10.02(vi) hereto;
(vii)Indebtedness incurred or assumed by the Borrower or any of its
Subsidiaries in connection with any transaction permitted hereunder,
notwithstanding its effect on the covenants set forth in this Article X,
upon receipt of the prior written consent of the Required Banks;
(viii)Indebtedness of the Borrower incurred in connection with or resulting
from borrowings made by the Borrower under the Bid Facility;
(ix)Indebtedness of the Borrower or any Subsidiary as a counterparty on
Interest Rate Contracts for notional amounts which shall not exceed, at any
one time fifty percent (50%) of the Total Commitment in the aggregate;
(x)Any Indebtedness arising from a Permitted Transaction the Amount of
which, together with the Amount of all Permitted Transactions under
Sections 10.01(viii), 10.03(viii), 10.03A(i) and 10.03A(ii), does not
exceed the Permitted Transaction Amount; and
(xi)Indebtedness arising from any Permitted Asset Securitization
Transaction.
Section 10.03.Guaranties and Investments. (a) Make or have outstanding any
loan or advance to, or (b) provide a Guaranty for, endorse or otherwise be
or become contingently liable, directly or indirectly, in connection with
the obligations, stock or dividends of, or (c) own, purchase or acquire any
stock, obligations (other than accounts receivable generated in the
ordinary course of business) or securities of, any Person, except that the
Borrower and any Subsidiary may engage in the following:
(i)The acquisition and ownership of stock, obligations or securities
received in settlement of debt (created in the ordinary course of business)
owing to the Borrower or any Subsidiary;
<PAGE>
(ii)The ownership, purchase or acquisition of (a) prime commercial paper,
banker's acceptances and certificates of deposit in United States
commercial banks or enter into repurchase agreements with such banks with
respect to obligations described in this clause (ii), (b) obligations of
reputable issuers located in the United States which obligations have a
short term rating of A-1 or better by Standard & Poor's Corporation or P-1
by Moody's Investors Service, Inc., (c) obligations of the United States
government or any agency thereof, and (d) obligations guaranteed by the
United States government or any agency thereof, in each case such
obligations described in this clause (ii) to be due within one year and one
day from the date of acquisition;
(iii)The endorsement of negotiable instruments for collection or deposit in
the ordinary course of business;
(iv)The engagement, directly or indirectly, in any of the transactions
described in the introductory paragraph of this Section so long as any such
transaction is between or among the Borrower and any of its Subsidiaries in
any amount (except as set forth in Section 12.01 hereof);
(v)Its guarantee, or becoming contingently liable, directly or indirectly,
with respect to any Indebtedness permitted by Section 10.02 or this Section
or its execution of any Guaranty to any Person for the performance and
payment of obligations of any Subsidiary of the Borrower;
(vi)The engagement, directly or indirectly, in any transaction described in
the introductory paragraph of this Section to the extent otherwise
permitted in Section 10.03A;
(vii)The engagement, directly or indirectly, in any transaction described
in the introductory paragraph of this Section which is a transaction
permitted by the prior written consent of the Required Banks;
(viii)The engagement, directly or indirectly, in any Permitted Transaction
described in the introductory paragraph of this Section the Amount of
which, together with the Amount of all Permitted Transactions under
Sections 10.01(viii), 10.02(x), 10.03A(i) and 10.03A(ii), does not exceed
the Permitted Transaction Amount;
(ix)The borrowing of any Inventory Loan by Borrower or any other Credit
Party; and
(x)The guarantee by Borrower of any Credit Party's obligations arising
pursuant to any Permitted Asset Securitization Transaction so long as such
guarantee would not circumvent the Non-Recourse nature of such Credit
Party's obligations; and
(xi)Capital contributions by a Credit Party to another Credit Party or a
Bankruptcy-Remote Subsidiary in connection with a Permitted Asset
Securitization Transaction in an amount not to exceed fifteen percent (15%)
of the accounts receivable transferred to such other Credit Party or
Bankruptcy-Remove Subsidiary.
Section 10.03A.Acquisitions and Venture-Type Investments. Acquire any
stock, obligations (other than accounts receivable generated in the
ordinary course of business) or securities of, or any interest in (whether
pursuant to a stock purchase, a share exchange, a merger or consolidation),
or make any capital
<PAGE>
contribution to or acquire all or any of the assets of, any Person, except
that the Borrower and any Subsidiary may:
(i)Engage in a Permitted Transaction involving the acquisition of any
interest in or acquisition of all or substantially all of the assets of any
Person so long as such acquisition is consistent with the Borrower's
present business operations and, together with the Amount of all Permitted
Transactions under Sections 10.01(viii), 10.02(x) and 10.03(viii), does not
exceed the Permitted Transaction Amount; or
(ii)Engage, directly or indirectly, in any of the transactions described
above in this Section 10.03A for the purpose of making venture capital-type
investments so long as such investments are consistent with the strategic
goals of the Borrower and its Subsidiaries and so long as the aggregate
amount of all such transactions described in this Section 10.03A(ii) made
with respect to the Borrower and its Subsidiaries does not exceed
$5,000,000 during any Fiscal Year of the Borrower; or
(iii)Engage, directly or indirectly, in any of the transactions described
in the introductory paragraph of this Section so long as any such
transaction is between or among the Borrower and any of the Subsidiaries in
any amount, subject to the provisions of Section 10.12.
Section 10.04.Sale of Notes or Accounts. Discount or sell any of its Notes
or accounts receivable (other than Commercial Paper Notes), except that
nothing in this Section shall prohibit the Borrower or any Subsidiary of
the Borrower from (a) issuing its notes with recourse or with buy/back
requirements when such notes are issued in connection with sales in
international commerce and the total amount of contracts and accounts
receivable on which recourse may be had against the Borrower and its
consolidated Subsidiaries shall not exceed the sum of $500,000 at any one
time or (b) selling its accounts receivable (or any interest therein) or
any invoice to another Credit Party or a Bankruptcy-Remote Subsidiary
pursuant to the terms of a Permitted Asset Securitization Transaction. In
addition, Borrower or any of its consolidated Subsidiaries may sell any of
its account receivables or any interest therein or any invoice to any
Person pursuant to, and subject to the terms and conditions of, any
Permitted Asset Securitization Transaction.
Section 10.05.Contracts. Enter into or become a party to:
(i)Any contract for the purchase of materials, supplies or other property
if such contract (or any related document) requires that payment for such
materials, supplies or other property shall be made regardless of whether
delivery of such materials, supplies or other property is ever made or
tendered;
(ii)Any contract to rent or lease (as lessee) any real or personal property
if such contract (or any related document) provides that the obligation to
make payments thereunder is absolute and unconditional under conditions not
customarily found in commercial or financial leases then in general use or
requires that the lessee purchase or otherwise acquire securities or
obligations of the lessor;
(iii)Any contract for the sale or use (as vendor or lessor) of materials,
supplies or other property if such contract (or any related document)
requires that payment for such materials, supplies or other property or the
use
<PAGE>
thereof, shall be subordinated to any indebtedness of the purchaser or user
of such materials, supplies or other property owed or to be owed to any
other Person;
(iv)Any contract providing for a loan or other extension of credit to the
Borrower or any Subsidiary, whether such loan is secured or unsecured,
unless such contract is made in the ordinary course of business or has been
consented to in writing by the Required Banks, or is otherwise permitted
hereunder; or
(v)Any other contract which, in economic effect, is directly or indirectly
a Guaranty which is prohibited under Section 10.03.
Section 10.06.Leases. Permit the aggregate of the annual rentals (to be
paid by the Borrower and its Subsidiaries) stated or reserved in leases for
the rental of any property, whether real, personal or mixed, to exceed at
any time for any fiscal year of the Borrower an amount equal to twenty-five
percent (25%) of the total depreciation charge taken by the Borrower and
its Subsidiaries during the preceding fiscal year of the Borrower, as shown
on the annual financial statements required to be furnished by the Borrower
pursuant to Section 9.12(a). For purposes of this Section, the computation
of such aggregate annual rentals shall include all sums for taxes,
insurance or other obligations customarily paid by the lessor which the
lessee is obligated to pay or for which the lessee is required to reimburse
the lessor. Rentals or other amounts payable pursuant to industrial
development revenue bond type financings shall not be considered as lease
or rental obligations under the terms of this paragraph.
Section 10.07.Use of Proceeds. Use the proceeds of the sale of Commercial
Paper Notes and of the Loans for any purposes other than those described in
the recitals hereto or covenants hereof and the payment of principal,
interest, fees, expenses and other obligations described in or contemplated
by this Agreement.
Section 10.08.Amendment of Depositary Agreement. Agree to any amendment of
the Depositary Agreement, or waive any of its rights thereunder, or fail to
duly perform any of its obligations thereunder (including any obligation to
make required payments thereunder no later than the due date of such
payments and any applicable grace period provided therefor), provided,
however, that Borrower may enter into the First Modification of Depositary
Agreement dated as of the date hereof.
Section 10.09.Offering Circular. Include any material relating to the Agent
or the Co-Agent or specifically relating to any Bank by name in any
offering circular used in the offering or sale of Commercial Paper Notes
unless such material is specifically approved in writing by the Agent, the
Co-Agent or Bank to which such material relates prior to its inclusion in
such offering circular.
Section 10.10.ERISA Matters. Incur or suffer to exist any material
accumulated funding deficiency within the meaning of ERISA or incur any
material liability to the PBGC established under ERISA (or any successor
thereto under ERISA).
Section 10.11.Restricted Payments. Apply any sum to the redemption,
retirement or purchase of any warrant, option or share of its capital stock
or to the payment of any dividend or other distribution, exclusive of
dividends payable in its common stock (collectively, "Restricted
Payments"), if after such
<PAGE>
application shall have been made, the aggregate of the sums so applied
since June 30, 1995 would exceed the sum of (a) $10,000,000 minus (b) one
hundred percent (100%) of any consolidated Net Loss realized by Borrower
for any fiscal year after the year ending June 30, 1992, plus (c) with
respect to Restricted Payments made during any fiscal year, twenty-five
percent (25%) of the consolidated Net Income of the Borrower for the
immediately preceding fiscal year starting July 1, 1992, on a cumulative
fiscal year-end basis, with consolidated Net Income determined on a
cumulative basis as of the end of each fiscal year provided, however, that
so long as no Event of Default has occurred and is continuing or no Default
or Event of Default would be created by the making of such dividend, (i)
the Borrower or any Subsidiary may (a) if such transaction does not result
in the Borrower's having issued any outstanding preferred stock with rights
of redemption at the option of the holder which could exceed an aggregate
amount of $25,000,000, retire any shares of its capital stock in exchange
for additional shares of its capital stock issued subsequent to June 30,
1993, and (b) acquire shares of its capital stock to the extent of the net
cash proceeds received after June 30, 1993 from the issue of additional
shares of capital stock and (ii) any Subsidiary may make a dividend to the
Borrower so long as no Event of Default has occurred and is continuing or
no Default or Event of Default would be created by the making of such
dividend.
Section 10.12.Merger and Consolidation. Merge or consolidate with any other
Person or sell, lease, transfer or otherwise dispose of all or a
substantial part of its assets to any Person, provided that any such
transaction may be entered into, directly or indirectly, between or among
the Borrower and any of its Subsidiaries or between or among such
Subsidiaries if (a) the Borrower is the surviving corporation in any such
permitted transaction involving the Borrower, and (b) a Guarantor does not
(i) merge or consolidate with any other Subsidiary or Subsidiaries so that
the surviving corporation is not a Guarantor, or (ii) in one or more
transactions sell, lease, transfer or otherwise dispose of all or
substantially all of its assets to any other Subsidiary which is not a
Guarantor and provided, further, that Borrower may liquidate SCI U.K. and
Newmoor Industries and may sell all of the capital stock of Norlite or all
or substantially all of the assets of Norlite to any Person, and after such
asset sale, may liquidate and dissolve Norlite. In addition, each of
Borrower and its Consolidated Subsidiaries may sell its accounts receivable
(or any interest therein) or any invoice pursuant to, and subject to the
terms and conditions of, any Permitted Asset Securitization Transaction.
Section 10.13.Affiliate Transactions. Enter into any transaction with any
Affiliate, provided that (a) subject to the terms and conditions of Section
12.01 hereof, the Borrower and its Subsidiaries may enter into transactions
between or among each other and (b) the Borrower may, and may permit any
Subsidiary to enter into any transaction with any Affiliate so long as the
terms are no less favorable to the Borrower or the Subsidiary than if the
relationship of Affiliate did not exist.
Section 10.14.Limitation on Issuance and Redemption of Subordinated Debt.
(a)Issue any Permitted Subordinated Debentures or any other Subordinated
Debt without the express prior written consent of the Agent, the Co-Agent
and the Required Banks; provided, however, that Borrower may issue
Permitted Subordinated Debentures from time to time which in the aggregate
do not exceed $150,000,000 so long as (i) such Permitted Subordinated
Debentures are subordinated in writing to all Obligations of the Borrower
and each Subsidiary, such subordination provisions to be on terms and
conditions
<PAGE>
satisfactory in all respects to the Agent and the Co-Agent and (ii) the
maturity date of such Permitted Subordinated Debentures occurs after the
then current Credit Expiration Date.
(b)Agree to any amendment to or a modification of the terms or conditions
of any indenture, debenture or other instrument evidencing any Subordinated
Debt or to the extent issued, any Permitted Subordinated Debentures, except
in a manner that does not adversely affect the interests of the Agent, the
Co-Agent and the Required Banks.
(c)Redeem, repurchase, defease, consummate an exchange for or otherwise
acquire for consideration any Subordinated Debt, or give irrevocable
written notice to take any such action, except as required by the
indenture, debentures or other instruments evidencing such Subordinated
Debt or to the extent issued, any Permitted Subordinated Debentures;
provided, however, that Borrower may redeem the Debentures of 1987 on or
before November 1, 1995 so long as no Default or Event of Default has
occurred and is continuing and no Default or Event of Default would be
created by such redemption (the Agent, the Co-Agent and the Banks hereby
waiving any Default or Event of Default occurring by reason of the giving
of notice of such redemption by the Borrower prior to the date hereof).
Notwithstanding the foregoing, Borrower may repurchase up to the lesser of
fifty percent (50%) of the then outstanding Permitted Subordinated
Debentures or $50,000,000 of the Permitted Subordinated Debentures provided
that (i) immediately prior to such repurchase and after giving effect to
such repurchase, the ratio of Borrower's Total Debt to Total Capital
(calculated in percentage terms) shall not be more than sixty-five percent
(65%), (ii) prior to and after giving effect to such repurchase, no Default
or Event of Default exists or would be created by such repurchase, (iii)
the repurchase price of the Permitted Subordinated Debentures has been
discounted by at least twenty percent (20%) to par and (iv) no direct
proceeds of the Loans are used to repurchase such Permitted Subordinated
Debentures.
Section 10.15.Permitted Asset Securitization Transactions.
(a)Agree to any amendment to or a modification of the terms or conditions
of any Asset Securitization Document executed in connection with a
Permitted Asset Securitization Transaction that would in any way cause such
transaction to not be on a Non-Recourse basis or cause the total facility
amount of such transaction to exceed $50,000,000 (in the case of the
Loan/Purchase Transaction) or $100,000,000 (in the case of the Receivables
Purchase Transaction).
(b)Repurchase or otherwise acquire for consideration any accounts
receivable sold pursuant to a Permitted Asset Securitization Transaction if
such repurchase or acquisition would circumvent the Non-Recourse nature of
the initial sale of such accounts receivable.
ARTICLE XI
EVENTS OF DEFAULT
<PAGE>
Section 11.01.Events of Default. In case of the happening of any of the
following events (herein sometimes called "Events of Default"):
(a)The principal amount of any Note or any amount payable in respect of any
Commercial Paper Note shall not be paid when due and payable (unless, in
the case of a Commercial Paper Note, such note is not paid when due and
payable as a result of a failure by the Co-Agent to honor its obligations
under the Letter of Credit in accordance with the terms of this Agreement
or the failure of a holder of a Commercial Paper Note to present its
Commercial Paper Note when due) or any interest payable on any Note or any
other amount payable under this Agreement shall not be paid within five (5)
Days after such interest or other amount is due and payable; or
(b)Any representation or warranty made by the Borrower (or any Executive
Officer of the Borrower) contained in Section 8.02, 8.03, 8.04, 8.05, 8.10
or 8.13 of this Agreement shall prove to have been incorrect, incomplete or
misleading when made or deemed made in any material respect; or
(c)The Borrower shall fail to perform or observe any term, obligation,
covenant or agreement contained in Article X or in Section 9.12(a)(i),
Section 9.12(a)(ii) or Section 9.12(a)(iii) or to furnish to the Agent, the
Co-Agent and each Bank pursuant to Section 9.07(i) a certificate required
as a result of knowledge by an Executive Officer of the Borrower of the
occurrence of an Event of Default or Default; or
(d)(i) If the Borrower shall fail to perform or observe any other term,
obligation, covenant or agreement contained herein, on its part to be
performed or observed, in this Agreement (other than in Section 8.02, 8.03,
8.04, 8.05, 8.10, 8.13, Section 9.07(i) or Section 9.12(a)(i), Section
9.12(a)(ii) or Section 9.12(a)(iii) or Article X) and any such failure
remains unremedied, until the first to occur of the date forty-five (45)
days after an Executive Officer of the Borrower first obtains knowledge
thereof or the date thirty (30) days after written notice thereof shall
have been given to the Borrower by the Agent, the Co-Agent or any Bank,
(ii) if any representation or warranty made by the Borrower in this
Agreement (other than in Section 8.02, 8.03, 8.04, 8.05, 8.10 or 8.13), or
by any Credit Party in any certificate, agreement, instrument or statement
contemplated by or made or delivered pursuant to or in connection herewith,
shall prove to have been incorrect, incomplete or misleading when made or
deemed made in any material respect, and any such representation or
warranty continues to be incorrect, incomplete or misleading in any
material respect until the first to occur of the date forty-five (45) days
after an Executive Officer of the Borrower or such Credit Party first
obtains knowledge thereof or the date thirty (30) days after written notice
thereof shall have been given to the Borrower by the Agent or any Bank,
(iii) any Event of Default under (and as defined in) the Pledge Agreements
shall have occurred, or (iv) any Event of Default under (and as defined in)
the Assignment of Intercompany Loans shall have occurred; or
(e)Any Credit Document shall at any time after execution and delivery, for
any reason, cease to be in full force and effect in any material respect
(unless such occurrence is in accordance with its terms or after payment
thereof) or shall be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Credit Party which is a
party thereto or any Credit Party which is a party thereto shall deny that
it has any or further liability or obligation thereunder; or
<PAGE>
(f)Any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied in respect of the Operating Account or
the Commercial Paper Account and such judgment, writ, or similar process
shall not be released, vacated, stayed or fully bonded within thirty (30)
days after its issue or levy; or
(g)The Borrower or any of its Subsidiaries shall make an assignment for the
benefit of creditors, file a petition in bankruptcy, have entered against
or in favor of it an order for relief under the Federal Bankruptcy Code or
similar law of any other jurisdiction, generally fail to pay its debts as
they come due (either as to number or amount), admit in writing its
inability to pay its debts generally as they mature, make a voluntary
assignment for the benefit of creditors, commence any voluntary assignment
for the benefit of creditors, commence any proceeding relating to it under
any reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect, or by any act, indicate its consent to, approval of or acquiescence
in any such proceeding or in the appointment of any receiver of, or trustee
or custodian (as defined in the Federal Bankruptcy Code) for itself, or any
substantial part of its property, or a trustee or a receiver shall be
appointed for the Borrower or any of its Subsidiaries or for a substantial
part of the property of the Borrower or any of its Subsidiaries and such
appointment remains in effect for more than sixty (60) days or the Borrower
or such Subsidiary shall indicate its consent thereto, approval therefor or
acquiescence therein, or a petition under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction (whether now or hereafter in effect) shall be
filed against the Borrower or any Subsidiary and such petition shall not be
dismissed within sixty (60) days after such filing, an order for relief
shall be entered in such proceeding, or the Borrower or such Subsidiary
shall indicate its consent thereto, approval therefor or acquiescence
therein; or
(h)Any Credit Party shall fail to pay when due any Indebtedness (which with
other such Indebtedness is in an aggregate amount which exceeds
$10,000,000) for money borrowed or for the deferred purchase price of
property created, issued, guaranteed, incurred or assumed by such Credit
Party or any other event shall occur (including, but not limited to,
failure to make payments to any sinking fund for payment or redemption of
any Indebtedness) or any condition shall exist in respect of any such
Indebtedness (which with other such Indebtedness is in an aggregate amount
which exceeds $10,000,000) the effect of which failure to pay, event or
condition is to cause such Indebtedness to become due prior to its stated
maturity; or
(i)If a final judgment which, with other outstanding final judgments
against the Borrower or any of its Subsidiaries, exceeds an aggregate of
$5,000,000 shall be rendered against the Borrower or any of its
Subsidiaries and if within sixty (60) days after entry thereof such
judgment shall not have been discharged or execution thereof stayed pending
appeal, or if within sixty (60) days after the expiration of any such stay
such judgment shall not have been discharged; or
(j)A Change in Control shall occur; or
(k)Any event of default, termination event, wind down event or similar
event permitting any Person to terminate its agreement to purchase accounts
receivable under a Permitted Asset Securitization Transaction shall occur
and remain uncured or unwaived; provided, however, that this paragraph
shall not apply to any
<PAGE>
event of default, termination event, wind down event or similar event
occurring (i) in connection with the scheduled termination date therefor,
(ii) due to the failure of the asset pool that is the subject of such
Permitted Asset Securitization Transaction to satisfy any ratio contained
in any applicable Asset Securitization Document relating to the dilution of
or losses or default on, the accounts receivable (or undivided interests
therein) sold pursuant to such Permitted Asset Securitization Transaction,
or (iii) any voluntary termination of any Asset Securitization Document by
Borrower or any other Credit Party or any Bankruptcy-Remote Subsidiary;
then, and in every such event and at any time thereafter during the
continuance of such event, the Agent may, and upon either (x) the written
or telex request of the Required Banks with respect to clauses (i) through
(iv) below or (y) the written or telex request of the Co-Agent with respect
to clauses (i), (iii) or (iv) below, shall, by written notice to the
Borrower, take one or more of the following actions (except that the
remedies described in clauses (iii) and (iv) below shall be mutually
exclusive):
(i)Give notice (which may be telephone notice confirmed in writing) to the
Depositary, and each Dealer which has theretofore signed and delivered to
the Co-Agent an acknowledgment in the form of Exhibit C to the Depositary
Agreement, of the occurrence of an Event of Default, and the date of the
giving of such notice shall become the Credit Expiration Date hereunder and
no further Commercial Paper Notes shall be issued (except with respect to
the filling of orders for Commercial Paper Notes placed and accepted, by
any such Dealer, before such Dealer received such notice) and the
obligations of the Agent, the Co-Agent or any Bank to make Loans and to
increase the amount of the Letter of Credit pursuant to Section 4.05 hereof
shall be terminated (provided, that in the case of Commercial Paper Notes
issued on the same date as notice is given pursuant to this Section, but
prior to the receipt of such notice, or on such date but prior to the
receipt of such notice by the Depositary, for purposes of determining
pursuant to Section 1(d) of the Depositary Agreement whether a Commercial
Paper Note matures later than fifteen (15) days prior to the Credit
Expiration Date in effect at the time of its issuance, such Credit
Expiration Date shall be deemed to be the Credit Expiration Date in effect
at the time of issuance and not the Credit Expiration Date as accelerated
pursuant to this Section);
(ii)Declare the unpaid principal amount and interest under the Notes and
all other amounts payable by the Borrower or any Credit Party hereunder and
under the other Credit Documents to be forthwith due and payable, whereupon
such amounts shall become forthwith due and payable, both as to principal
and interest, without presentment, demand, protest or any other notice of
any kind all of which are hereby expressly waived, anything contained
herein or in the Notes to the contrary notwithstanding;
(iii)Direct the Depositary to make a Drawing under the Letter of Credit in
an amount required to pay in full all Outstanding Commercial Paper Notes
entitled to the benefit of the Letter of Credit upon maturity and require
from the Borrower immediate reimbursement for payments pursuant to such
Drawing; or
(iv)Demand that the Borrower deposit with the Co-Agent cash collateral in
the Assignee Deposit Account pursuant to Section 4.03(e);
<PAGE>
provided, however, that if any Event of Default specified in (g) above
occurs, the acceleration specified in clauses (ii) and (iii) above shall be
deemed to have been made upon the occurrence of such event without notice
from the Agent, the Co-Agent or any Bank.
ARTICLE XII
INTERCOMPANY LOANS
Section 12.01.Requirements for Intercompany Loans. The Borrower shall, and
shall cause each Intercompany Lender to:
(a)Keep books and records of the making of all Intercompany Loans and all
payments on Intercompany Loans and furnish the Agent and the Co-Agent, from
time to time upon request by the Agent or the Co-Agent, with a listing of
all Intercompany Loans then outstanding, the outstanding principal balance
thereof, and the interest rate(s) then applicable, together with, from time
to time, all other information with respect to Intercompany Loans which the
Agent or the Co-Agent may reasonably request.
(b)Prior to the Borrower's making, or permitting any Subsidiary to make,
any Intercompany Loans to any Subsidiary (other than a Subsidiary which has
previously signed the Assignment of Intercompany Loans), such Subsidiary
shall execute and deliver to the Borrower a Subsidiary Note (duly
completed), and the payee shall sign, and the maker shall acknowledge, the
Assignment of Intercompany Loans.
(c)Take such other action as may be necessary or, in the opinion of the
Agent or the Agent's counsel, desirable in order to create or evidence any
Intercompany Loans, such that the Assignment of Intercompany Loans will
effectively assign to the Agent, acting for the Co-Agent and the Banks, the
right to be paid on all Intercompany Loans by the Subsidiaries of the
Borrower which receive the Intercompany Loans, as provided in the
Assignment of Intercompany Loans.
Notwithstanding anything in this Agreement or any other Credit Document to
the contrary, no Intercompany Lender shall make any Intercompany Loan to
SCI Malaysia if, after giving effect to such Loan, the aggregate amount of
all Intercompany Loans outstanding to SCI Malaysia at such time would
exceed U.S. $100,000 unless and until the Agent, the Co-Agent and the Banks
have received an opinion of counsel qualified to practice law in Malaysia
in form and substance satisfactory to the Agent and the Co-Agent. In
addition, no Intercompany Lender may make any Intercompany Loans prohibited
under Section 8.17 hereof.
ARTICLE XIII
BID FACILITY
Section 13.01.Bid Facility. In lieu of Advances, the Borrower may, at any
time and from time to time during the period from the date hereof until the
date occurring thirty (30) days prior to the Credit Expiration Date,
request lending institutions, including the Banks, to submit offers to the
Borrower to lend the Borrower money for such term, in such amounts, at such
interest rates and on such other terms as the Borrower, in
<PAGE>
its sole discretion, may select and as to which any such lending
institutions may agree; provided, however, that (i) any such loans or
borrowings shall be on an unsecured basis, (ii) following the making of any
such loan or borrowing, the aggregate principal amount of all such loans
and borrowings from all such lending institutions then outstanding shall
not exceed the amount equal to fifty percent (50%) of the Total Revolving
Credit Commitment and (iii) after giving effect to such loan or borrowing,
the sum of (x) the aggregate principal amount then outstanding under this
bid facility plus (y) the aggregate principal amount of the Series A
Revolving Credit Loans then Outstanding shall not exceed the Total
Revolving Credit Commitment. The Borrower shall be permitted to borrow,
repay and reborrow under the above procedure subject to the limitations
thereon set forth above.
Section 13.02. Temporary Reduction of Total Commitment. For and during the
period of any loan or borrowing under the Bid Facility, the Total Revolving
Credit Commitment shall automatically be reduced to the extent of the
principal amount of such loan or borrowing outstanding from time to time
under the Bid Facility, and each Bank's Revolving Credit Commitment shall
be reduced by its Pro Rata Share of the reduction in the Total Revolving
Credit Commitment. Upon repayment of any outstanding loan or borrowing
under the Bid Facility, the Total Revolving Credit Commitment shall
automatically be increased and each Bank's Revolving Credit Commitment
shall be increased by its Pro Rata Share of the increase in the Total
Revolving Credit Commitment.
ARTICLE XIV
THE AGENT AND CO-AGENT
Section 14.01.Appointment of Agent and Co-Agent. Each Bank hereby
designates Citibank as Agent and ABN AMRO as Co-Agent, each to act as
herein specified. Each Bank hereby irrevocably authorizes, and each holder
of any Note by the acceptance of a Note shall be deemed irrevocably to
authorize, the Agent and the Co-Agent, as the case may be, to take such
action on its behalf under the provisions of this Agreement, the Notes and
any other Credit Documents referred to and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated
to or required of the Agent or the Co-Agent, as the case may be, by the
terms hereof and thereof and such other powers as are reasonably incidental
thereto. Each of the Agent and the Co-Agent may perform any of its duties
hereunder by or through its agents or employees.
Section 14.02.Nature of Duties of Agent and Co-Agent. Neither the Agent nor
the Co-Agent shall have any duties or responsibilities except those
expressly set forth in this Agreement. Neither the Agent nor any of its
respective officers, directors, employees or agents shall be liable for any
action taken or omitted by any of them as such hereunder or in connection
herewith, unless caused by its or their gross negligence or willful
misconduct. Neither the Co-Agent nor any of its respective officers,
directors, employees or agents shall be liable for any action taken or
omitted by any of them as such hereunder or in connection herewith, unless
caused by it or their gross negligence or willful misconduct. The duties of
the Agent and the Co-Agent shall be mechanical and ministerial in nature;
neither the Agent nor the Co-Agent shall have by reason of this Agreement a
fiduciary relationship in respect of any Bank; and nothing in this
Agreement, express or implied,
<PAGE>
is intended to or shall be so construed as to impose upon the Agent or the
Co-Agent any obligations in respect of this Agreement except as expressly
set forth herein.
Section 14.03.Lack of Reliance on the Agent or the Co-Agent.
(a)Independently and without reliance upon the Agent or the Co-Agent, each
Bank, to the extent it deems appropriate, has made and shall continue to
make (i) its own independent investigation of the financial condition and
affairs of the Borrower and other Credit Parties in connection with the
taking or not taking of any action in connection herewith, and (ii) its own
appraisal of the creditworthiness of the other Credit Parties, and, except
as expressly provided in this Agreement, neither the Agent nor the Co-Agent
shall have any duty or responsibility, either initially or on a continuing
basis, to provide any Bank with any credit or other information with
respect thereto, whether coming into its possession before the making of
any Loans or at any time or times thereafter.
(b)Neither the Agent nor the Co-Agent shall be responsible to any Bank for
any recitals, statements, information, representations or warranties herein
or in any document, certificate or other writing delivered in connection
herewith or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, priority or sufficiency of the Commercial
Paper Documents, the Credit Documents or any other documents contemplated
hereby, or the financial condition of any Credit Party, or be required to
make any inquiry concerning either the performance or observance of any of
the terms, provisions or conditions of the Commercial Paper Documents, the
Credit Documents or any other documents contemplated by this Agreement, or
the financial condition of any Credit Party, or the existence or possible
existence of any Default or Event of Default.
Section 14.04.Certain Rights of the Agent and the Co-Agent. If the Agent or
the Co-Agent shall request instructions from the Required Banks, the
Required Revolving Credit Banks or the Required Commercial Paper Banks, as
the case may be, with respect to any act or action (including the failure
to act) in connection with this Agreement, the Agent or the Co-Agent, as
the case may be, shall be entitled to refrain from such act or taking such
action unless and until the Agent or the Co-Agent shall have received
instructions from the Required Banks, the Required Revolving Credit Banks
or the Required Commercial Paper Banks, as appropriate; and neither the
Agent nor the Co-Agent shall incur liability to any Person by reason of so
refraining. Without limiting the foregoing, no Bank shall have any right of
action whatsoever against the Agent or the Co-Agent as a result of the
Agent or the Co-Agent acting or refraining from acting hereunder in
accordance with the instructions of the Required Banks, the Required
Revolving Credit Banks or the Required Commercial Paper Banks, as
appropriate.
Section 14.05.Reliance by Agent and Co-Agent. The Agent and the Co-Agent
shall each be entitled to rely, and shall be fully protected in relying,
upon any note, writing, resolution, notice, statement, certificate, telex,
teletype or telecopier message, cable gram, radiogram, order or other
documentary, teletransmission or telephone message believed by it to be
genuine and correct and to have been signed, sent or made by the proper
Person. Each of the Agent and the Co-Agent may consult with legal counsel
(including counsel for any Credit Party), independent public accountants
and other experts selected by it and shall not be liable for
<PAGE>
any action taken or omitted to be taken by it in good faith in accordance
with the advice of such counsel, accountants or experts.
Section 14.06.Indemnification of Agent and Co-Agent. To the extent the
Agent or the Co-Agent is not reimbursed and indemnified by the Borrower,
each Bank will reimburse and indemnify the Agent and the Co-Agent, ratably
according to the respective principal amounts of the Loans Outstanding to
each of them (or if no amounts are Outstanding, ratably in accordance with
their respective Commitments), for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including counsel fees and disbursements) or disbursements of any
kind or nature(whatsoever which may be imposed on, incurred by or asserted
against the Agent or the Co-Agent in performing its duties hereunder, in
any way relating to or arising out of this Agreement; provided that no Bank
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's or the Co-Agent's gross negligence
or willful misconduct.
Section 14.07.The Agent and Co-Agent in their Individual Capacities. With
respect to their respective obligation(s) to lend under this Agreement, the
Loans made by each of them and the Notes issued to each of them, each of
the Agent and the Co-Agent shall have the same rights and powers hereunder
as any other Bank or holder of a Note and may exercise the same as though
it were not performing the duties specified herein; and the terms "Banks",
"Required Banks", "Required Revolving Credit Banks", "Required Commercial
Paper Banks", "holders of Notes", or any similar terms shall, unless the
context clearly otherwise indicates, include the Agent and the Co-Agent in
their capacities as lenders under this Credit Agreement. Each of the Agent
and the Co-Agent may accept deposits from, lend money to, and generally
engage in any kind of banking, trust, financial advisory or other business
with the Borrower or any Subsidiary of the Borrower as if it were not
performing the duties specified herein, and may accept fees and other
consideration from the Borrower or any Subsidiary of the Borrower for
services in connection with this Agreement and otherwise without having to
account for the same to the Banks.
Section 14.08.Holders of Notes. The Agent may deem and treat the payee of
any Series A Master Note as the owner thereof (and the Co-Agent may deem
and treat the payee of any Series B Master Note and Series C Master Note as
the owner thereof, respectively) for all purposes hereof unless and until a
written notice of the assignment or transfer thereof shall have been filed
with the Agent or the Co-Agent, as the case may be. Any request, authority
or consent of any Person who, at the time of making such request or giving
such authority or consent, is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Note
or of any Note or Notes issued in exchange therefor.
Section 14.09.Successor Agent or Co-Agent.
(a)Subject to the provisions of Section 14.09(c) below, the Agent or the
Co-Agent may resign at any time by giving written notice thereof to the
Banks and the Borrower and may be removed at any time with or without cause
by the Required Banks. Upon any such resignation or removal, the Required
Banks shall have the right, upon the prior written consent of the Borrower,
which consent shall not be unreasonably withheld or delayed, to appoint a
successor Agent or Co-Agent. If no successor Agent or Co-Agent shall have
been so appointed by the Required Banks, and shall have accepted such
appointment, within thirty (30) days after the
<PAGE>
retiring Agent's or Co-Agent's giving of notice of resignation or the
Required Banks' removal of the retiring Agent or Co-Agent, then, upon the
prior written consent of the Borrower, which consent shall not be
unreasonably withheld or delayed, the retiring Agent or Co-Agent may, on
behalf of the Banks, appoint a successor Agent or Co-Agent, as the case may
be, which shall be a bank which maintains an office in the United States,
or a commercial bank organized under the laws of the United States of
America or any State thereof, or any State thereof, or any Affiliate of
such bank, having (i) a combined capital and surplus of at least
$500,000,000 and (ii) a long term debt rating of at least Baa (or its then
equivalent rating) by Moody's Investors Services, Inc. or at least BBB (or
its then equivalent rating) by Standard & Poor's Corporation; provided,
however, if ABN AMRO resigns or is removed as Co-Agent, the successor Agent
shall be a bank which maintains an office in the United States, or a
commercial bank organized under the laws of the United States of America or
any State hereof or any Affiliate of such bank, having (i) a combined
capital surplus of at least $500,000,000 and (ii) an equivalent or better
credit rating to the credit rating of ABN AMRO.
(b)Notwithstanding anything herein to the contrary, Citibank shall be
permitted to resign as Agent at any time and appoint Citicorp or any
Subsidiary of Citicorp as its successor Agent without the consent of the
Borrower, the Co-Agent or any Bank by notifying the Borrower and the Banks
of its resignation and the appointment of Citicorp or such Subsidiary as
the successor Agent so long as such successor Agent has the authority to
perform the duties of the Agent hereunder.
(c)Upon the acceptance of any appointment as Agent or Co-Agent hereunder by
a successor Agent or Co-Agent (including the appointment of Citicorp or any
Subsidiary of Citicorp as successor Agent pursuant to paragraph (b) above),
such successor Agent or Co-Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent or Co-Agent, as the case may be, and the retiring Agent or Co-Agent
shall be discharged from its duties and obligations under this Agreement.
After any retiring Agent's or Co-Agent's resignation or removal hereunder
as Agent or Co-Agent, the provisions of this Article shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Agent or Co-Agent under this Agreement.
(d)ABN AMRO shall not resign or be removed as Co-Agent at any time while
ABN AMRO is the issuer of the Letter of Credit unless: (i) at the time such
resignation or removal becomes effective, there are no Commercial Paper
Notes Outstanding and at least sixteen (16) days have elapsed since the
maturity of the last Commercial Paper Note to mature; and (ii) ABN AMRO's
Letter of Credit is concurrently terminated and the Borrower, the other
Credit Parties, the Agent, the Co-Agent, the Required Banks and any
successor Co-Agent execute or deliver such amendments of this Agreement and
the other Credit Documents, such substitute Letter of Credit from a bank
other than ABN AMRO, and such other additional documents as the Agent and
the Required Banks may require in order to evidence such resignation or
removal.
Section 14.10.Security Documents.
(a)Each Bank hereby authorizes the Agent to enter into each of the Security
Documents, each in the respective forms attached hereto, and to take all
action contemplated thereby. All rights and remedies under the Security
Documents may be exercised by the Agent for the benefit of the Banks upon
the terms thereof. The Agent may assign its rights and obligations as Agent
under any of the Security Documents to
<PAGE>
any Affiliate of the Agent or to any trustee, which assignee in each such
case shall be entitled to all the rights of the Agent under the applicable
Security Document and all rights hereunder of the Agent with respect to the
applicable Security Document.
(b)In each circumstance where, under any provision of any Security
Document, the Agent shall have the right to grant or withhold any consent,
exercise any remedy, make any determination or direct any action by the
Agent under such Security Document, the Agent shall act in respect of such
consent, exercise of remedies, determination or action, as the case may be,
with the consent of and at the direction of the Required Banks; provided,
however, that no such consent of the Required Banks shall be required with
respect to any consent, determination or other matter that is, in the
Agent's judgment, ministerial or administrative in nature. In each
circumstance where any consent of or direction from the Required Banks is
required, the Agent shall send to the Banks a notice setting forth a
description in reasonable detail of the matter as to which consent or
direction is requested and the Agent's proposed course of action with
respect thereto. In the event the Agent shall not have received a response
from any Bank within five (5) Business Days after the giving of such
notice, such Bank shall be deemed to have agreed to the course of action
proposed by the Agent.
ARTICLE XV
MISCELLANEOUS
Section 15.01.Immediately Available Funds. All payments, prepayments and
other transfers of funds under this Agreement shall be made in funds
immediately available at the place of payment unless otherwise provided in
the Depositary Agreement or the recipient thereof shall otherwise agree.
Section 15.02.Notices. All notices, requests and other communications
hereunder shall be in electronic, telephonic (confirmed in writing) or
written (including telecopier, telex or similar writing) form and shall be
given to the party to whom sent, addressed to it, as set forth below with
respect to the Borrower, the Agent, the Co-Agent or the Depositary, or on
Annex I attached hereto with respect to the Banks, or to such other address
or telephone, telecopier or telex number as such party may hereafter
specify for the purpose by notice to the other parties.
(a)With respect to the Borrower:
SCI Systems, Inc.
c/o SCI Systems (Alabama), Inc.
2101 W. Clinton Avenue
Huntsville, Alabama 35805
Attention: Ron Sibold, Treasurer
Telephone: (205) 882-4131
Telecopier: (205) 882-4466
<PAGE>
with a copy to:
SCI Systems, Inc.
c/o SCI Systems (Alabama), Inc.
2101 W. Clinton Avenue
Huntsville, Alabama 35805
Attention: Michael M. Sullivan, Esq.
Telephone: (205) 882-4603
Telecopier: (205) 882-4466
and with an additional copy to:
Powell, Goldstein, Frazer & Murphy
Suite 1600
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: David M. Armitage, Esq.
Telephone: (404) 572-6675
Telecopier: (404) 572-6999
(b)With respect to the Agent:
Citibank, N.A.
c/o Citicorp North America, Inc.
400 Perimeter Center, N.E.
Suite 600
Atlanta, Georgia 30346
Attention: Darren Diamond, Vice President
Telephone: 404/668-8211
Telecopier: 404/668-8137
with a copy to:
Kilpatrick & Cody
Suite 2800
1100 Peachtree Street
Atlanta, Georgia 30309-4530
Attention: Dennis L. Zakas, Esq.
Telephone: (404) 815-6409
Telecopier: (404) 815-6555
<PAGE>
(c)With respect to the Co-Agent:
ABN AMRO Bank N.V.
Atlanta Agency
One Ravinia Drive, Suite 1200
Atlanta, Georgia 30346
Attention: Bruce W. Swords, Vice President
Telephone: (404) 399-7373
Telecopier: (404) 395-9188
Telex: 6827258
Answerback: ABNBANKATL
with a copy to:
Kilpatrick & Cody
Suite 2800
1100 Peachtree Street
Atlanta, Georgia 30309-4530
Attention: Dennis L. Zakas, Esq.
Telephone: (404) 815-6409
Telecopier: (404) 815-6555
(d)With respect to the Depositary:
Chemical Bank
450 West 33rd Street
New York, New York 10001
Attention: Corporate Trust Administration
(Mr. Greg McFarlane)
Telephone: (212) 946-8575
Telecopy: (212) 946-8602
Each such notice, request or communication shall be effective (i) if given
by telex, telecopy or electronic means, when such communication is
transmitted to the address herein specified and, with respect to telex, the
appropriate answerback is received, (ii) if given by mail, three (3)
Business Days after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (iii) if given by any
other means, when delivered at the address of the party to whom such notice
is being delivered.
Section 15.03.Confidentiality of Information. Pursuant to the negotiation,
preparation and implementation of this Agreement and the Credit Documents,
the Borrower may from time to time furnish to the Agent, the Co-Agent or
any Bank written information which is identified to such Person in writing
when delivered as confidential (the "Confidential Information"). Each such
Person shall use reasonable efforts to apply to any
<PAGE>
Confidential Information such procedures regarding confidentiality as it
applies generally to information of that nature, provided, however, that
any such Person may disclose any Confidential Information or other
documents delivered to such Person, and disclose any other information
disclosed to such Person, by or on behalf of the Borrower or any of its
Subsidiaries in connection with or pursuant to this Agreement to (i) such
Person's directors, officers, employees, agents and professional
consultants, (ii) the Agent, the Co-Agent or any Bank, (iii) any Person to
which such Person offers to sell its Commitment or any part hereof who
agrees in writing prior to the receipt of Confidential Information to
comply with this Section 15.03, (iv) any Person to which such Person sells
or offers to sell a participation in all or any part of its Commitment who
agrees in writing prior to the receipt of Confidential Information to
comply with this Section 15.03, (v) any federal or state regulatory
authority having jurisdiction over such Person, (vi) any other Person to
which such delivery of disclosure may be necessary or appropriate (a) in
compliance with any law, rule, regulation or other applicable to such
Person, (b) in response to any subpoena or other legal process, (c) in
connection with any litigation to which such Person is a party or (d) in
order to protect such Person's rights under this Agreement. In connection
with disclosures by any Person pursuant to clause (vi)(b) or (c) above,
such Person shall use its best efforts to notify the Borrower prior to any
such disclosure unless such notification to Borrower is prohibited by court
order. Notwithstanding the foregoing, any Person who discloses Confidential
Information pursuant to this Section 15.03 shall not be liable to Borrower
for failure to notify Borrower of such disclosure.
Section 15.04.Assignments and Participations.
(a)No Bank may assign all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment, the Loans owing to it, and the Note or Notes held by it) to
another Person without giving fifteen (15) days' prior written notice of
such proposed assignment to the Borrower and the Agent (with respect to
assignments by any Revolving Credit Bank) or the Co-Agent (with respect to
assignments by any Commercial Paper Bank) and without first obtaining the
prior written consent of the Borrower to the proposed assignment, and, with
the respect to an assignment by any Commercial Paper Bank, the prior
written consent of the Co-Agent, and the consent of the Borrower and the
Co-Agent, as applicable, shall not be unreasonably withheld or delayed,
provided, however, that (i) any Bank may assign its rights and obligations
under this Agreement to any Subsidiary or Affiliate of such Bank at any
time without the consent of the Borrower, the Co-Agent or any Bank so long
as such assignee has the authority to fulfill the obligations of such Bank
hereunder, including the authority to lend money to the Borrower pursuant
to the terms of this Agreement, except that the prior written consent of
the Co-Agent must be obtained with respect to assignments by any Commercial
Paper Bank, (ii) Section 15.04(b) shall not apply to such assignment and,
(iii) such assignment shall be evidenced by such assignor's and assignee's
execution of an Assignment and Acceptance Agreement substantially in the
form of Exhibit G attached hereto and no consent of the Borrower, the
Co-Agent or any Bank shall be required except that the prior written
consent of the Co-Agent must be obtained with respect to assignments by any
Commercial Paper Bank. The Borrower's withholding or delay of consent shall
not be unreasonable if (i) the effect of the proposed assignment would be
to increase amounts owed by the Borrower under Section 4.07, Section
3.08(b), Section 3.11 or Section 3.14 or (ii) the proposed assignee is a
lending institution which formerly was (but is not currently) a lender to
the Borrower or any Subsidiary. Notwithstanding the foregoing, the issuer
of the Letter of Credit shall not assign or transfer the Letter of Credit
or any of its obligations thereunder.
<PAGE>
(b)If the Borrower gives its written consent to an assignment, then the
following provisions shall apply to the assignment:
(i)Each such assignment shall be for a fixed percentage of all of the
rights and obligations of the Bank assigning its rights and obligations
under this Agreement (the "Assigning Bank").
(ii)The amount of the Assigning Bank's Commitment (determined as of the
date of the Assignment and Acceptance Agreement with respect to such
assignment) being assigned shall in no event be less than $5,000,000.
(iii)Unless the Assigning Bank's Commitment is reduced to zero by virtue of
the assignment, the unassigned portion of the Assigning Bank's Commitment
shall not be less than $5,000,000 after giving effect to such assignment,
except that, in the case of the Bank serving as Agent or the Co-Agent, such
Bank's Commitment shall not be less than $10,000,000 after giving effect to
such assignment.
(iv)Such assignment will not increase the cost to the Co-Agent (as
determined by the Co-Agent in its sole discretion) of issuing or
maintaining the Letter of Credit or making any payment under the Letter of
Credit.
(v)Such assignment shall be to an Eligible Assignee. For purposes of this
Section, "Eligible Assignee" means (a) any Bank, (b) any commercial bank or
trust company which is an Affiliate of any Bank, or (c) subject to the
prior written consent of the Borrower and the Agent, any other commercial
bank or trust company which at the time it executes an Assignment and
Acceptance Agreement has (i) total assets of at least $5,000,000,000 and
offices in the United States and (ii) a rating of at least Baa (or its then
equivalent rating) by Moody's Investors Services, Inc. or at least BBB (or
its then equivalent rating) by Standard & Poor's Corporation.
(vi)If the Assigning Bank is only assigning all or a part of its Revolving
Credit Commitment, such Assigning Bank shall pay to the Agent a Recordation
Fee (the "Recordation Fee") in the amount of $1,500. If the Assigning Bank
is only assigning all or part of its Commercial Paper Commitment, such
Assigning Bank shall pay to the Co-Agent a Recordation Fee in the amount of
$1,500. If the Assigning Bank is assigning all or part of its Revolving
Credit Commitment and all or part its Commercial Paper Commitment, such
Assigning Bank shall pay a Recordation Fee in the amount of $750 to the
Agent and a Recordation Fee in the amount of $750 to the Co-Agent.
(c)From and after the Effective Date (as defined in the Assignment and
Acceptance Agreement), (i) the assignee shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance Agreement, shall have the rights
and obligations of a Bank hereunder, and (ii) the Assigning Bank shall, to
the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance Agreement, relinquish its rights
and be released from its obligations under this Agreement (and, in the case
of an Assignment and Acceptance Agreement covering all or the remaining
portion of an Assigning Bank's rights and obligations under this Agreement,
such Assigning Bank shall cease to be a party hereto).
<PAGE>
(d)By executing and delivering an Assignment and Acceptance Agreement, the
Assigning Bank and the assignee represent and warrant to each other, the
Borrower, the Agent, the Co-Agent and the other Banks as follows: (i) other
than as provided in such Assignment and Acceptance Agreement, such
Assigning Bank makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished
pursuant hereto; (ii) the Assigning Bank makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Borrower or the other Credit Parties or the performance or
observance by the Borrower or the other Credit Parties of their respective
obligations under this Agreement, any other Credit Document, or any other
instrument or document furnished pursuant hereto; (iii) the assignee has
received a copy of this Agreement, together with copies of such financial
statements and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance Agreement; (iv) such assignee will, independently
and without reliance upon the Agent, the Co-Agent, the Assigning Bank or
any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decision in taking
or not taking action under this Agreement; (v) such assignee is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Agent and the
Co-Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to the Agent and the Co-Agent
by the terms hereof, together with such powers as are incidental thereto;
and (vii) such assignee will perform in accordance with their terms all of
the obligations which by the terms of this Agreement are required to be
performed by it as a Bank, including, but not limited to, the terms of
Section 3.08(b)(ii).
(e)Upon its receipt of an Assignment and Acceptance Agreement executed by
an Assigning Bank and an Eligible Assignee, together with any Note or Notes
subject to such assignment, the Agent shall give prompt notice thereof to
the Borrower. Within five (5) Business Days after its receipt of such
notice, the Borrower (at its own expense for its own costs) shall accept
such Assignment and Acceptance Agreement and shall execute and deliver to
the Agent in exchange for the surrendered Note or Notes a new Note or Notes
to the order of such Eligible Assignee in an amount equal to the Commitment
assumed by such Eligible Assignee pursuant to such Assignment and
Acceptance Agreement and, if the Assigning Bank has retained a Commitment
hereunder, a new Note or Notes to the order of the Assigning Bank in an
amount equal to the Commitment retained by such Assigning Bank hereunder.
Such new Note or Notes shall be in an aggregate principal amount equal to
the aggregate principal amount of such surrendered Note or Notes, shall be
dated the date of the applicable surrendered Note and shall otherwise be in
substantially the form of the related Note or Notes. The Note or Notes
surrendered by the Assigning Bank shall be returned by the Agent to the
Borrower marked "cancelled".
(f)Any Bank may grant participation interests to participants of such
Bank's choosing of all or any portion of such Bank's rights or obligations
under this Agreement and any other Credit Document, but in that event (i)
the Agent, the Co-Agent and the Borrower shall continue to deal solely with
such Bank and such Bank shall be fully responsible for all of its
obligations under this Agreement and the Credit Documents irrespective of
the granting of any such participation interest, (ii) the participant shall
not have any rights under this Agreement, any other Credit Document or any
other document delivered in connection with this Agreement, (iii) the
participant's rights against such Bank with respect to its participation
shall be those set forth in the
<PAGE>
agreement executed by such Bank in favor of the participant, except that no
holder of a participation shall be entitled to require such Bank to take or
omit to take any action under this Agreement other than action directly
affecting the extension of the final maturity of the principal amount of,
or any payment date for interest on, a Loan allocated to such participation
or the reduction in the principal amount of, or the rate of interest
payable on, the Loans, and (iv) the participant shall not be entitled to
receive any greater payment under this Agreement and any other Credit
Document than the Bank which grants the participation would be entitled to
receive. No participant shall have any direct rights against any Credit
Party but shall only have rights deriving from the Bank which granted such
participant's participation interest.
(g)Any Bank may furnish any information concerning the Borrower and its
Subsidiaries in the possession of such Bank from time to time to Eligible
Assignees and participants (including prospective Eligible Assignees and
prospective participants); provided, however, that no Bank shall furnish
any such information with respect to the Borrower or any Subsidiary without
first obtaining an agreement in favor of the Borrower from such Eligible
Assignee, participant, prospective Eligible Assignee or prospective
participant that such party agrees to be bound by the terms of Section
15.03 as if such party were a Bank under this Agreement.
(h)If, as a result of the financial or regulatory condition of any Bank,
the Borrower, and either (i) the Agent or (ii) the Co-Agent reasonably
determines that such Bank's ability to timely perform its funding
obligations hereunder may be or has been impaired, the Borrower and either
(i) the Agent or (ii) the Co-Agent, as appropriate, shall have the right to
require such Bank to assign such Bank's interests in the Loans then
Outstanding together with such Bank's portion of the Total Commitment to
any or all of the other Banks or to an Eligible Assignee which, in any
case, is willing to accept such assignment, in its sole and absolute
discretion, and the identity of which is, in each case, satisfactory to (a)
the Agent or the Co-Agent and (b) the Borrower, in accordance with Section
15.04.
(i)Notwithstanding any other provision set forth in this Agreement which
may be to the contrary, any Bank may at any time create a security interest
in all or any portion of its rights under this Agreement and the other
Credit Documents (including, without limitation the Advances owing to it
and the Note or Notes held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal
Reserve System.
Section 15.05.No Waiver; Remedies Cumulative. No failure or delay on the
part of the Agent or any Bank or any holder of a Note, in exercising any
right or remedy hereunder, and no course of dealing between any Credit
Party and the Agent, the Co-Agent or any Bank or the holder of any Note
shall operate as a waiver thereof, nor shall any single or partial exercise
of any right or remedy under this Agreement or any other Credit Document
preclude any other or further exercise thereof or the exercise of any other
right or remedy hereunder. The rights and remedies herein expressly
provided are cumulative and not exclusive of any rights or remedies which
the Agent, the Co-Agent or any Bank or the holder of any Note would
otherwise have. No notice to or demand on any Credit Party not required
under this Agreement or any other Credit Document in any case shall entitle
any Credit Party to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Agent, the
Co-Agent, any Bank or the holder of any Note to any other or further action
in any circumstances without notice or demand.
<PAGE>
Section 15.06.Payment of Expenses, Etc. The Borrower shall:
(i)Whether or not the transactions hereby contemplated are consummated, pay
all reasonable out-of-pocket costs and expenses of the Agent and the
Co-Agent in the administration (both before and after the execution hereof
and including advice of counsel as to the rights and duties of the Agent,
the Co-Agent and the Banks with respect thereto) of, and in connection with
the preparation, execution and delivery of, preservation of rights under,
enforcement of, and, after a Default, refinancing, renegotiation or
restructuring of, this Agreement, any other Credit Document or any
Commercial Paper Document and instruments referred to therein and any
amendment, waiver or consent relating thereto, including, without
limitation, the reasonable fees and disbursements of counsel (including
local counsel and allocated costs of internal counsel) for the Agent and
the Co-Agent; and
(ii)Pay and hold each Bank harmless from and against any and all present
and future stamp, documentary, and other similar Taxes with respect to any
Credit Document, any collateral described therein, or any payments due
thereunder, and save each Bank harmless from and against any and all
liabilities with respect to or resulting from any delay or omission to pay
such Taxes.
Section 15.07.Right of Set-off. (a) To the fullest extent permitted by law,
upon the occurrence and during the continuance of any Event of Default,
each Bank and any affiliate of any Bank is hereby authorized at any time
and from time to time, without notice to the Borrower (any such notice
being expressly waived by the Borrower), to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Bank to or for
the credit or the account of the Borrower against any of the Obligations of
the Borrower now or hereafter existing under this Agreement or any other
Credit Document, irrespective of whether such Bank shall have made any
demand hereunder or thereunder and although such Obligations may be
unmatured. Notwithstanding the foregoing, each Bank hereby waives during
the pendency of any case under the Bankruptcy Code with respect to the
Borrower any right of set-off and any other right which it may have at law
or otherwise to set-off and apply against any of the Obligations of the
Borrower any balance or amount to the credit of the Borrower in any
deposit, agency, reserve, hold back or other account of any nature
whatsoever maintained by or on behalf of the Borrower with any Bank at any
of its offices, regardless of whether such accounts are general or special
and regardless of whether such accounts are individual or joint; provided,
however, that any such right of set-off shall be reinstated, and each
Bank's waiver thereof shall be of no force or effect, at such time as, in
the opinion of recognized counsel experienced in bankruptcy matters, due to
legislative or judicial developments after the date hereof, the absence of
such waiver will not constitute a basis for the granting of injunctive
relief against payment under the Letter of Credit.
(b)Each Bank agrees promptly to notify the Borrower when any of its
accounts has been set-off and applied after any set-off and application,
provided that the failure to give such notice shall not affect the validity
of such set-off and application. Subject to the provisions of subsection
(a), the rights of each Bank under this Section 15.07 are in addition to
the other rights and remedies (including, without limitation, other rights
of set-off) which each Bank may have.
<PAGE>
(c)Any proceeds received by any Bank or any of its affiliates by the
exercise of its rights pursuant to this Section shall be paid to the Agent
to be applied pursuant to this Agreement or shared with the other Banks
pursuant to Section 3.15.
Section 15.08.Nature of the Borrower's Obligations. This Agreement is a
continuing obligation of the Borrower and shall, until the date upon which
all amounts due and owing to the Agent, the Co-Agent and the Banks
hereunder shall have been paid in full, (i) be binding upon the Borrower,
and its successors and assigns, and (ii) inure to the benefit of and be
enforceable by the Agent, the Co-Agent and the Banks and their respective
successors, transferees and assigns; provided, that the Borrower may not
assign all or any part of this Agreement or its rights or obligations
hereunder without the prior written consent of the Required Banks; and,
provided further, that no such assignment (whether or not consented to by
the Required Banks) shall in itself relieve or release the Borrower from
its obligations hereunder.
Section 15.09.Amendments; General.
(a)This Agreement may be amended, and the Borrower may take any action
herein prohibited, or omit to perform any act herein required to be
performed, only if the Borrower shall first obtain the written consent of
the Required Banks thereto; provided, however, that in the event of (i) any
change in the amount of the Commitment, except as set forth in Article III
hereof, (ii) any change in the terms of repayment of the Loans provided in
Section 2.02 hereof, (iii) any change in principal, interest or fees due
hereunder, (iv) any change in the timing of payments of principal, interest
or fees due hereunder, (v) any waiver of any Default or Event of Default
due to the Borrower's failure to pay any sum due hereunder, (vi) any
amendment of this Section 15.09(a) or Section 10.14, the definition of
Required Banks or any provision hereof which, by its terms, requires the
consent of all of the Banks, any amendment or waiver may be made only by an
instrument in writing signed by each of the Banks, and, in the case of an
amendment, by the Borrower and, provided, further, that any changes in the
Depositary Agreement may be made in writing with only the consent of the
Depositary, the Commercial Paper Banks, the Co-Agent and the Borrower. Any
Default or Event of Default may be waived by written consent of the
Required Banks (or, to the extent required above, all of the Banks) but any
such waiver shall apply only to the specific occasion which is the subject
of such waiver and shall not apply to the occurrence of the same or any
similar event on any future occasion.
(b)Unless otherwise specifically indicated, if any agreement, certificate
or other writing, or any action taken or to be taken, is by the terms of
this Agreement required to be satisfactory to the Agent, the Co-Agent or
any Bank, the determination of such satisfaction shall be made by the
Agent, the Co-Agent or such Bank in its sole and exclusive judgment
exercised in good faith.
(c)Each Bank may make, carry or transfer its pro rata portion of any of the
Loans at, to or for the account of, any of its branch offices or the office
of an Affiliate of such Bank.
Section 15.10.Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the
laws of the State of New York.
<PAGE>
Section 15.11.Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument.
Section 15.12.Effectiveness; Survival.
(a)This Agreement shall become effective on the date on which all of the
parties hereto shall have signed a copy hereof (whether the same or
different copies) and the Agent shall have received the same or a facsimile
transmission thereof.
(b)The obligations under Sections 3.08(b), 3.11, 3.13, 3.14, 4.07 and
15.06, hereof shall survive the payment in full of the Notes and
termination of the Letter of Credit after the Credit Expiration Date. All
representations and warranties made herein, in the certificates, reports,
notices, and other documents delivered pursuant to this Agreement shall
survive the execution and delivery of this Agreement, the other Credit
Documents, the Commercial Paper Documents and such other agreements and
documents, the making of the Loans hereunder, the issuance of the Letter of
Credit hereunder and the execution and delivery of the Notes.
Section 15.13.Severability. In case any provision in or obligation under
this Agreement, the other Credit Documents or the Commercial Paper
Documents shall be invalid, illegal or unenforceable, in whole or in part,
in any jurisdiction, the validity, legality and enforceability of the
remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired
thereby.
Section 15.14.Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by
an exception to, or be otherwise within the limitation of, another
covenant, shall not avoid the occurrence of a Default or an Event of
Default if such action is taken or condition exists.
Section 15.15.Headings Descriptive; Entire Agreement. The headings of the
several sections and subsections of this Agreement are inserted for
convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement. This Agreement, the other
Credit Documents, the Commercial Paper Documents and the agreements and
documents required to be delivered pursuant to the terms of this Agreement
constitute the entire agreement among the parties hereto and thereto
regarding the subject matters hereof and thereof and supersede all prior
agreements, representations and understandings related to such subject
matters, including, without limitation, the 1993 Credit Agreement.
Section 15.16. Termination of Agreement. At such time as (a) the Letter of
Credit is no longer outstanding, (b) the Banks are no longer obligated
under this Agreement to make any further Advances, and (c) all Obligations
of the Credit Parties shall have been paid and satisfied in full, this
Agreement shall terminate and each Bank shall surrender to the Credit Party
the Notes which such Bank then holds, and each Bank, the Agent and the
Co-Agent shall promptly satisfy, or cause to be satisfied, all security
interests granted by any Credit Party under the Credit Documents as
security for any of the Obligations. All indemnity obligations arising
hereunder shall survive the termination of this Agreement.
<PAGE>
Section 15.17.Intercreditor Agreement with Respect to Interest Rate
Contracts. The Agent, the Co-Agent and the Banks shall negotiate in good
faith with the other counterparty(ies) under any Interest Rate Contracts
permitted under Section 10.02(ix) hereof, if such other party(ies) request
that they do so, to reach an intercreditor agreement among the Agent, the
Co-Agent, such other party(ies) and the Banks, providing in effect that the
Agent, the Co-Agent and the Banks, on one hand, and such other party(ies),
on the other hand, will have pari passu security interests and will share,
on an equal basis, their security interests in the Pledged Stock and the
Subsidiary Notes, and that such other party(ies) or the Agent, whichever
then has actual possession of the certificates evidencing the Pledged
Stock, will maintain possession constructively for such other party(ies),
the Co-Agent and the Banks. Any such intercreditor agreement shall be in
form and substance satisfactory to the Agent, the Co-Agent and counsel for
the Agent and the Co-Agent.
Section 15.18.Ratification of Intercreditor Agreement. Each of the
Borrower, the Agent, the Co-Agent and the Banks ratifies such party's
execution and delivery of the Intercreditor Agreement and confirms that the
Intercreditor Agreement is in full force and effect with respect to such
party as of the date hereof.
Section 15.19.No Novation. It is the express intent of the parties hereto
that this Agreement not constitute a novation. The credit facilities
evidenced hereby represent the continuation, renewal and increase of the
credit facilities heretofore evidenced by the 1993 Credit Agreement.
Section 15.20.Venue; Jurisdiction; Jury Trial Waiver.
(a)THE BORROWER HEREBY (1) AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR TO ENFORCE ANY JUDGMENT OBTAINED AGAINST THE
BORROWER IN CONNECTION WITH THIS AGREEMENT MAY BE BROUGHT BY THE AGENT, THE
CO-AGENT OR ANY BANK IN ANY COURT SITTING IN THE STATE OF NEW YORK; (2)
IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY COURT OF
THE STATE OF NEW YORK FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT
OF OR RELATING TO THIS AGREEMENT; (3) AGREES THAT SECTIONS 5- 1401 AND
5-1402 OF THE GENERAL OBLIGATIONS LAWS OF THE STATE OF NEW YORK SHALL APPLY
TO THIS AGREEMENT AND THE CREDIT DOCUMENTS; AND (4) IRREVOCABLY WAIVES ANY
PRESENT OR FUTURE OBJECTION TO VENUE IN ANY SUCH COURT, AND ANY PRESENT OR
FUTURE CLAIM THAT ANY SUCH COURT IS AN INCONVENIENT FORUM, IN CONNECTION
WITH ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT.
(b)TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER, THE AGENT, THE
CO-AGENT AND EACH BANK IRREVOCABLY WAIVE ALL RIGHT OF TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR ANY MATTER ARISING HEREUNDER
OR THEREUNDER.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Agent and the Co-Agent have caused
this Agreement to be duly executed by their duly authorized officers, all
as of the day and year first above written.
SCI SYSTEMS, INC.
By:
Olin B. King, Chairman and
Chief Executive Officer
[SEAL]
CITIBANK, N.A., as Agent
By:
Name:
Title:
ABN AMRO BANK N.V.,
Atlanta Agency, as Co-Agent
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
BANKS:
ABN AMRO BANK N.V., Atlanta Agency
By:
Name:
Title:
By:
Name:
Title:
CITIBANK, N.A.
By:
Name:
Title:
BANK OF AMERICA (ILLINOIS)
By:
Name:
Title:
CIBC INC.
By:
Name:
Title:
<PAGE>
FIRST ALABAMA BANK
By:
Name:
Title:
<PAGE>
MELLON BANK, N.A.
By:
Name:
Title:
<PAGE>
NBD BANK
By:
Name:
Title:
<PAGE>
THE BANK OF TOKYO, LTD., ATLANTA AGENCY
By:
Name:
Title:
THE DEVELOPMENT BANK OF SINGAPORE, LTD.
By:
Name:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED
By:
Name:
Title:
[END OF EXHIBIT 10 (a) (2)]
[EXHIBIT 10 (b) (1)]
RECEIVABLES PURCHASE AGREEMENT
Dated as of June 30, 1995
Among
SCI TECHNOLOGY, INC.
as Seller
SCI SYSTEMS, INC.
as Guarantor
and
RECEIVABLES CAPITAL CORPORATION
as Purchaser
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
as Administrative Agent
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
THE COMMITMENT2
1.01.Commitment2
1.02.Purchase and Reinvestment Limits3
1.03.Making Purchases from Seller3
1.04.Number of Undivided Interests4
1.05.Commitment Termination Date4
1.06.Purchase Termination Date4
1.07.Voluntary Termination of Commitment or
Reduction of Maximum Purchase Limit5
1.08.Limitation of Ownership Interest 5
ARTICLE II
UNDIVIDED INTEREST AND PURCHASER'S SHARE5
2.01.Undivided Interest5
2.02.Required Allocation6
2.03.Purchaser's Investment7
2.04.Net Pool Balance8
2.05.Purchaser's Share9
ARTICLE III
SETTLEMENTS9
3.01.Non-Run Off Settlement Procedures for Collections9
3.02.Run Off Settlement Procedures for
Collections11
3.03.Special Settlement Procedures; Reduction
of Purchaser's Investment, Etc12
3.04.Reporting14
3.05.Payments and Computations, Etc15
3.06.Dividing or Combining Undivided Interests15
3.07.Treatment of Collections and Deemed
Collections16
ARTICLE IV
<PAGE>
FEES AND YIELD PROTECTION16
4.01.Fees16
4.02.Yield Protection16
ARTICLE V
CONDITIONS OF PURCHASES18
5.01.Conditions Precedent to Initial Purchase18
5.02.Conditions Precedent to All Purchases
and Reinvestments20
5.03.Additional Condition Precedent to Purchases21
ARTICLE VI
REPRESENTATIONS AND WARRANTIES21
6.01.Representations and Warranties - Seller21
6.02.Representations and Warranties - Guarantor25
ARTICLE VII
GENERAL COVENANTS28
7.01.Affirmative Covenants28
7.02.Reporting Requirements31
7.03.Negative Covenants33
7.04. Financial Covenants34
ARTICLE VIII
ADMINISTRATION AND COLLECTION35
8.01.Designation of Servicer35
8.02.Duties of Servicer36
8.03.Rights of the Administrative Agent38
8.04.Responsibilities of Seller39
8.05.Further Action Evidencing Purchases40
8.06.Application of Collections41
<PAGE>
ARTICLE IX
SECURITY INTEREST41
9.01.Grant of Security Interest41
9.02.Further Assurances41
9.03.Remedies41
ARTICLE X
TERMINATION EVENTS42
10.01.Termination Events42
10.02.Remedies44
ARTICLE XI
THE ADMINISTRATIVE AGENT45
11.01.Authorization and Action45
11.02.Administrative Agent's Reliance, Etc45
11.03.Administrative Agent and Affiliates46
11.04. Seller's Failure to Perform46
ARTICLE XII
ASSIGNMENT OF PURCHASER'S INTEREST46
12.01.Restrictions on Assignments46 12.02.Rights of Assignee47 12.03.Allocation
of Payments47 12.04.Notice of Assignment48 12.05.Evidence of Assignment;
Endorsement of Certificate48 12.06.Rights of Program Support Provider and
Collateral Trustee48
ARTICLE XIII
INDEMNIFICATION49
13.01.Indemnities by Seller and Guarantor49
ARTICLE XIV
GUARANTEE51
<PAGE>
14.01. Guarantee51
14.02. Maintenance of Ownership53
14.03. Representation and Warranty53
14.04. Subrogation54
ARTICLE XV
MISCELLANEOUS54
15.01.Amendments, Etc54
15.02.Notices, Etc54
15.03.No Waiver; Remedies54
15.04.Binding Effect; Survival55
15.05.Costs, Expenses and Taxes55
15.06.No Proceedings56
15.07.Confidentiality of BofA Information56
15.08.Captions and Cross References59
15.09.Integration59
15.10.Governing Law59
15.11.Waiver Of Jury Trial59
15.12.Consent To Jurisdiction; Waiver Of
Immunities59
15.13.Execution in Counterparts60
15.14.Originators 60
<PAGE>
APPENDICES
APPENDIX A - DEFINITIONSA-1
APPENDIX B - CALCULATION OF DISCOUNT AND RESERVEB-1
SCHEDULE B-1 -Pricing Grid
SCHEDULES
SCHEDULE 2.04(c)Special Concentration Limits
SCHEDULE 6.01(d)Litigation
SCHEDULE 6.01(i)Exceptions to Perfection
SCHEDULE 6.01(k)List of Offices of Seller where Records Are Kept
SCHEDULE 6.01(l) List of Lock-Box Banks
SCHEDULE 6.01(m)-1Forms of Contracts
SCHEDULE 6.01(m)-2Description of Credit and Collection Procedure
EXHIBITS
EXHIBIT 1.03(a)Form of Purchase Notice
EXHIBIT 3.04(a)Form of Periodic Report
EXHIBIT 5.01(a)Form of Certificate of Assignments
EXHIBIT 5.01(i)Form of Lock-Box Agreement
EXHIBIT 5.01(j)-1Form of Opinion of Special Counsel for Seller and Guarantor
<PAGE>
EXHIBIT 5.01(j)-2Form of Opinion and In-House Counsel for Seller and Guarantor
EXHIBIT 5.01(k)Form of Opinion of Counsel for Administrative Agent
EXHIBIT 7.01(j)-1Form of Bankruptcy - Remote Purchase and Sale Agreement
EXHIBIT 7.01(j)-2Form of Bankruptcy Remote/True Sale Opinion
EXHIBIT 12.05Form of Assignment (for assignment to third
party)
RECEIVABLES PURCHASE AGREEMENT
Dated as of June 30, 1995
THIS IS A RECEIVABLES PURCHASE AGREEMENT, among SCI TECHNOLOGY, INC., an Alabama
corporation having its principal office at 2101 West Clinton Avenue, Huntsville,
Alabama 35805, (together with its successors and permitted assigns, "Seller"),
SCI SYSTEMS, INC., a Delaware corporation having its principal office at c/o SCI
Systems (Alabama) Inc., 2101 West Clinton Avenue, Huntsville, Alabama 35805
(together with its successors and permitted assigns, "Guarantor"), RECEIVABLES
CAPITAL CORPORATION, a Delaware corporation having its principal office at World
Financial Center, South Tower, 225 Liberty Street, 8th Floor, New York, New York
10080 (together with its successors and assigns, "Purchaser"), and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association
having its principal office at 555 California Street, 41st Floor, San Francisco,
California 94104 ("BofA"), as administrative agent for the Purchaser (together
with its successors and assigns, in such capacity, the "Administrative Agent").
Unless otherwise indicated, capitalized terms used in this Agreement are defined
in Appendix A.
Background
1.Seller has, and expects to have, Pool Receivables in which Seller intends to
sell one or more undivided interests. Seller has requested Purchaser, and
Purchaser has agreed, subject to the terms and conditions contained in this
Agreement, to purchase such undivided interests, referred to herein as Undivided
Interests, from Seller from time to time during the term of this Agreement.
2.Seller and Purchaser also desire that, subject to the terms and conditions of
this Agreement, certain of the daily Collections in respect of such Undivided
Interests be reinvested in Pool Receivables through the sale by Seller to
Purchaser of additional undivided interests in the Pool Receivables, such daily
reinvestment of Collections to be effected by an automatic daily adjustment to
Purchaser's Undivided Interests, and to be
<PAGE>
intended to permit Purchaser to maintain its Purchaser's Investments fully
invested in uncollected Pool Receivables.
3.Purchaser expects generally to fund its Purchases and Reinvestments through
the issuance of Commercial Paper Notes. Purchaser has entered into Program
Support Agreements providing for the purchase by a Program Support Provider of,
or the making by a Program Support Provider of loans secured by, Undivided
Interests in the event Purchaser hereunder is unable to fund its Purchases or
Reinvestments pursuant to this Agreement by the issuance of Commercial Paper
Notes or otherwise prefers to fund such Purchases or Reinvestments under the
Program Support Agreements rather than by the issuance of Commercial Paper
Notes, or is unable to pay such Commercial Paper Notes at maturity from the
proceeds of collections from Pool Receivables in which it holds Undivided
Interests hereunder. Purchaser has also entered into a Program Support Agreement
with a Program Support Provider providing for the issuance of a letter of credit
to the trustee for the holders of Commercial Paper Notes, and for the making of
loans to the Purchaser, to provide funds for the payment of Commercial Paper
Notes and for the making of Purchases and Reinvestments in the circumstances
described above when funding is not available under certain other Program
Agreements.
4.BofA has been requested, and is willing, to act as the Administrative Agent.
5.It is a condition precedent for Purchaser and the Administrative Agent to
enter into this Agreement that Guarantor guaranty the performance of Seller
hereunder, and Guarantor is willing to guaranty such performance, in each case
upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
THE COMMITMENT
SECTION 1.01.Commitment. On the terms and subject to the conditions set forth in
this Agreement (including Article V):
(a)Purchases. Purchaser shall purchase from Seller Undivided Interests from time
to time during the period from the date hereof to the Purchase Termination Date.
Each such purchase and, as the context may require, the purchase price paid by
Purchaser to Seller in respect thereof (determined pursuant to Section 1.03(b)),
is herein called a "Purchase".
<PAGE>
(b)Reinvestments. Pursuant to Section 3.01, during the period from the date
hereof to the Commitment Termination Date, Purchaser shall permit Servicer to
cause certain of the Collections in respect of the Undivided Interests to be
applied to the purchase of additional undivided interests in the Pool
Receivables, thereby resulting in an appropriate readjustment of such Undivided
Interests. Each such purchase of an additional undivided interest pursuant to
Section 3.01 is herein called a "Reinvestment".
Purchaser's obligation to make such Purchases and Reinvestments is herein called
the "Commitment". Purchases and Reinvestments made hereunder shall be without
recourse with regard to Defaulted Receivables (except as otherwise specifically
provided in Article II of this Agreement in connection with the calculation of
the Undivided Interests).
SECTION 1.02.Purchase and Reinvestment Limits. Under no circumstances shall
Purchaser make any Purchase or Reinvestment to the extent that, after giving
effect to such Purchase or Reinvestment, as the case may be:
(a)Purchase Limit. The Aggregate Purchaser's Investments would exceed an amount
(the "Purchase Limit") equal to $100,000,000, as such amount may be reduced
pursuant to Section 1.07; or
(b)Required Allocations Limit. The Aggregate Required Allocations (as defined in
Section 2.02) would exceed an amount (the "Required Allocations Limit") equal to
100% of the Net Pool Balance (as defined in Section 2.04).
SECTION 1.03.Making Purchases from Seller. (a) Notice of Purchase. Each Purchase
from Seller by Purchaser shall be made on notice from Seller to the
Administrative Agent received by the Administrative Agent not later than 10:00
a.m. (Chicago time) on the Business Day next preceding the date of such proposed
Purchase. Each such notice of a proposed Purchase shall be in substantially the
form attached as Exhibit 1.03(a) and shall specify the desired amount and date
of such Purchase and the desired duration of the initial Yield Period for the
resulting Undivided Interest. The Administrative Agent shall select the duration
of such initial, and each subsequent, Yield Period in its discretion; provided
that it shall use reasonable efforts, taking into account market conditions, to
accommodate Seller's preferences.
(b)Amount of Purchase. The amount of each Purchase shall be equal to the lesser
of (x) the amount proposed by Seller pursuant to Section 1.03(a) and (y) the
maximum amount permitted under Section 1.02.
(c)Funding of Purchase. On the date of each Purchase, Purchaser shall, upon
satisfaction of the applicable conditions set forth in Article V, make available
to the Administrative Agent at its office at 231 South LaSalle Street in
Chicago, Illinois not later than 11:00 a.m. (Chicago time) the amount of its
Purchase (determined pursuant to Section 1.03(b)) in same day funds, and after
receipt by the Administrative Agent of such funds, the Administrative Agent will
make such funds immediately available to Seller at such office.
<PAGE>
SECTION 1.04.Number of Undivided Interests. The number of Undivided Interests
hereunder at any one time, after giving effect to any Purchase, Reinvestment,
division or combination, shall not exceed 15.
SECTION 1.05.Commitment Termination Date. (a) The "Commitment Termination Date"
shall be the earlier to occur of (i) June 30, 1998 (herein, as the same may be
extended, called the "Scheduled Commitment Termination Date"), and (ii) the date
of termination of the Commitment pursuant to Section 1.07 or 10.02.
(b)The then Scheduled Commitment Termination Date may be extended from time to
time for successive periods of one year by written notice of request given by
Seller to the Administrative Agent at least 120 days prior to the then Scheduled
Commitment Termination Date and written notice of acceptance given by the
Administrative Agent to Seller not later than 45 days prior to such Scheduled
Commitment Termination Date. Failure of the Administrative Agent to respond in
such time frame shall be deemed to be a rejection of such request.
SECTION 1.06.Purchase Termination Date. (a) The "Purchase Termination Date"
shall be the earlier to occur of (i) the Commitment Termination Date and (ii)
the date of termination of the Commitment with respect to Purchases pursuant to
subsection (b).
(b)The Commitment shall terminate with respect to Purchases, and Purchaser shall
have no obligation to make any further Purchases hereunder, on the scheduled
date of termination of any Program Support Agreement, it being understood that
no such termination shall affect Purchaser's obligation, subject to the terms
and conditions of this Agreement, to make Reinvestments until the Commitment
Termination Date with respect to Undivided Interests purchased by Purchaser
hereunder prior to such termination.
Purchaser agrees to give Seller at least 30 days' prior written notice of the
termination of the Commitment with respect to Purchases pursuant to this clause
(b), but no failure to give or delay in giving such notice shall prevent or
delay such termination.
SECTION 1.07.Voluntary Termination of Commitment or Reduction of Maximum
Purchase Limit. Seller may, upon at least 30 days' prior written notice to the
Administrative Agent, terminate the Commitment in whole or reduce in part the
unused portion of the Purchase Limit; provided, however, that (a) each partial
reduction shall be in an amount equal to $5,000,000 or an integral multiple
thereof and (b) after giving effect to such reduction, the remaining Purchase
Limit will not be less than $25,000,000.
SECTION 1.08.Limitation of Ownership Interest. Nothing in this Agreement shall
be interpreted as providing Purchaser with an ownership interest in any
Receivables that are not Pool Receivables.
<PAGE>
ARTICLE II
UNDIVIDED INTEREST AND PURCHASER'S SHARE
SECTION 2.01.Undivided Interest. (a) Definition and Computation of Undivided
Interest. For purposes of this Agreement, "Undivided Interest" means, as the
context may require (i) an undivided ownership interest, in a percentage
determined from time to time as provided in clause (ii) below, in (a) all then
outstanding Pool Receivables, (b) all Related Security with respect to such Pool
Receivables, (c) all Collections with respect to, and other proceeds of, such
Pool Receivables and Related Security and (d) all books and records (including,
without limitation, computer disks) related to the foregoing (collectively, the
"Pool"), and (ii) at any time, the quotient, expressed as a percentage, obtained
by dividing the Required Allocation for such Undivided Interest by the Net Pool
Balance. Each Undivided Interest shall be computed as follows:
UI=RA = PI + DF + CR + SFR + DR
NPB NPB
where:
UI=the Undivided Interest at any time;
RA=the Required Allocations of such Undivided Interest at such time, as
determined pursuant to Section 2.02; and
NPB=the Net Pool Balance at such time, as determined pursuant to Section 2.04.
(b)Frequency of Computation of Purchaser's Interest. Each Undivided Interest
shall initially be computed by Servicer as of the opening of business of
Servicer on the date of Purchase of such Undivided Interest from Seller, and
such Undivided Interest shall be recomputed upon receipt of each Periodic
Report. In addition, until such Undivided Interest shall be reduced to zero,
such Undivided Interest shall be deemed to be automatically recomputed as of the
close of business of Servicer on each day (other than a day on which an actual
recomputation is done), and, as so recomputed, shall constitute the percentage
ownership interest in Pool Receivables held by Purchaser on such day. Such
Undivided Interest shall become zero at such time as Purchaser shall have
received the accrued Earned Discount for such Undivided Interest, shall have
recovered the Purchaser's Investment of such Undivided Interest and shall have
received all other amounts payable to Purchaser pursuant to this Agreement in
respect of such Undivided Interest and Servicer shall have received the accrued
Servicer's Fee for such Undivided Interest. Such Undivided Interest shall remain
constant from the time as of which any such computation or recomputation is made
until the time as of which the next such recomputation, if any, shall be made.
<PAGE>
SECTION 2.02.Required Allocation. The "Required Allocation" of an Undivided
Interest at any time means an amount determined as follows:
RA=PI + DF + CR + SFR + DR
where:
RA=the Required Allocation of an Undivided Interest at any time;
PI=the Purchaser's Investment of such Undivided Interest at such time, as
determined pursuant to Section 2.03;
DF=the Discount Factor of such Undivided Interest at such time, as determined
pursuant to Part I of Appendix B;
CR =the Credit Reserve of such Undivided Interest at such time, as determined
pursuant to Part II of Appendix B;
SFR=the Servicer's Fee Reserve of such Undivided Interest at such time, as
determined pursuant to Part IV of Appendix B; and
DR=the Dilution Reserve of such Undivided Interest at such time as determined
pursuant to Part III of Appendix B.
The "related" Undivided Interest with respect to any of the foregoing items
shall mean the Undivided Interest as to which such item is calculated.
SECTION 2.03.Purchaser's Investment. (a) Subject to subsections (b) and (c),
"Purchaser's Investment" of an Undivided Interest at any time means an amount
equal to
(i) the aggregate of the amounts theretofore paid to Seller for the acquisition
of such Undivided Interest (a) by Purchase pursuant to Sections 1.01(a) and 1.03
and (b) by Reinvestments pursuant to Sections 1.01(b) and 3.01, less
(ii) the aggregate amount of Collections (including Deemed Collections)
theretofore received and distributed on account of such Purchaser's Investment
pursuant to Sections 3.01 and 3.02.
(b)Solely for purposes of calculating the Earned Discount (and each component
thereof) with respect to a portion of an Undivided Interest pursuant to the
proviso to the definition of "Earned Discount" in Appendix B:
<PAGE>
(i) "Purchaser's Investment" of any portion of an Undivided Interest owned by a
Program Support Provider (or any permitted assignee thereof) or otherwise funded
by a Funding shall be deemed to be the amount paid to Purchaser by such Program
Support Provider as the purchase price of, or the original principal amount
loaned with respect to, such portion (less any portion of such purchase price or
principal amount allocable to Earned Discount accrued and unpaid at the time of
assignment or Funding), as reduced from time to time by Collections received and
distributed to such Program Support Provider (or such assignee) on account of
such Funding (other than any portion allocable to Earned Discount) pursuant to
Sections 3.01 and 3.02 or by payments by Purchaser to the Program Support
Provider in reimbursement of any Funding (less any amount allocable to such
accrued and unpaid Earned Discount); and
(ii) "Purchaser's Investment" of any other portion of an Undivided Interest
shall mean Purchaser's Investment of such Undivided Interest less the sum of
Purchaser's Investments of all portions of such Undivided Interest described in
clause (i) above, calculated in accordance with such clause (i).
(c)Purchaser's Investment shall not be considered reduced by any distribution of
any portion of Collections if at any time such distribution is rescinded or must
otherwise be returned for any reason.
(d)The "related" Purchaser's Investment with regard to a Yield Period or
Undivided Interest (or portion thereof) means the Purchaser's Investment
calculated with regard to such Yield Period or Undivided Interest (or such
portion), as the case may be.
SECTION 2.04.Net Pool Balance. (a) The "Net Pool Balance" at any time means an
amount equal to
(i) the aggregate Unpaid Balance of the Eligible Receivables in the Receivables
Pool at such time, minus
(ii) the aggregate (for all Obligors) of the amounts by which (x) the Unpaid
Balance of all Pool Receivables of each Obligor exceeds (y) the Concentration
Limit for such Obligor at such time, minus
(iii) the amount, if any, by which the Accounts Payable Amount at such time
exceeds 14% of the aggregate Unpaid Balance of all Eligible Receivables at such
time, minus
(iv) from and after the date the Administrative Agent shall have given notice to
Seller (which notice may be given at any time at the Administrative Agent's
discretion) and from and after the occurrence of a Trigger Event, the Accounts
Payable Amount at such time, to the extent not deducted pursuant to clause (iii)
above.
(b)"Concentration Limit" for any Obligor at any time means, as applicable, (x)
3.0% of the aggregate Unpaid Balance of Eligible Receivables at such time or (y)
the Special Concentration Limit for such Obligor.
(c) "Special Concentration Limit" for (i) (a) any Obligor identified on Schedule
2.04(c), means the applicable percentage set forth on Schedule 2.04(c) and (b)
for any other Obligor identified in writing by the
<PAGE>
Administrative Agent to the Seller as an Obligor for which Special Concentration
Limits shall apply, means at any time, such percentage designated by the
Administrative Agent in written notice delivered to Seller of (ii) the aggregate
Unpaid Balance of all Eligible Receivables at such time; provided that the
Administrative Agent may, at its discretion, reduce any such Special
Concentration Limit upon ten (10) Business Days' prior written notice to Seller;
it being understood and agreed that the Administrative Agent, in so reducing any
Special Concentration Limit for any Obligor, shall be entitled to consider,
among other things, the credit rating of such Obligor and the credit exposure of
Purchaser and any Program Support Provider to such Obligor (and its Affiliates)
arising in connection with this Agreement and other agreements to which
Purchaser is a party.
(d)In the case of any Obligor which, to the actual knowledge of Seller, is an
Affiliate of any other Obligor, the Concentration Limit, the Special
Concentration Limit, if any, and the aggregate Unpaid Balance of Pool
Receivables of such Obligors shall be calculated as if such Obligors were one
Obligor.
SECTION 2.05.Purchaser's Share. With respect to each Undivided Interest,
"Purchaser's Share" of Collections of Pool Receivables received (or deemed
received) by Seller or Servicer on any day means an amount equal to the product
of
(a)the amount of all Collections of Pool Receivables received (or deemed
received) by Seller or Servicer on such day, times:
(b)(i) if such day is not a Run Off Day, such Undivided Interest on such day,
expressed as a decimal, and
(ii) if such day is a Run Off Day, either (a) such Undivided Interest on the day
immediately preceding the first Run Off Day to have occurred during the then
current Run Off Period or (b) if higher, upon the request of the Administrative
Agent, the most recently calculated Undivided Interest;
provided that (i) during the continuance of any Termination Event, the
Purchaser's Share shall be 100% and (ii) after such time as an Undivided
Interest shall equal zero the Purchaser's Share of Collections therefor shall
also equal zero.
ARTICLE III
SETTLEMENTS
SECTION 3.01.Non-Run Off Settlement Procedures for Collections. (a) Daily
Procedure. On each day (other than a Run Off Day) in any Yield Period for any
Undivided Interest, Servicer shall deem an amount equal to Purchaser's Share of
Collections of Pool Receivables received or deemed received on such day to be
received in respect of such Undivided Interest; and
<PAGE>
(i) out of Purchaser's Share of such Collections, hold in trust for the benefit
of Purchaser an amount equal to the related Earned Discount and related
Servicer's Fee accrued through such day and not previously so held for the
benefit of Purchaser,
(ii) apply an amount equal to the remainder of Purchaser's Share of such
Collections (the "Remaining Collections") to reduce the Purchaser's Investment
of such Undivided Interest (it being understood that such amount need not be
physically paid to Purchaser under this clause (ii)), and
(iii) Subject to Section 3.03, after such reduction, (a) apply such Remaining
Collections to the Reinvestment, for the benefit of Purchaser, of additional
undivided interests in Pool Receivables by recomputation of such Undivided
Interest pursuant to Section 2.01 as of the end of such day, thereby increasing
the related Purchaser's Investment, and (b) pay to Seller such Remaining
Collections.
The recomputed Undivided Interest shall constitute the percentage ownership
interest in Pool Receivables on such day held by Purchaser with regard to such
Undivided Interest.
(b)Settlement Date Procedure. On the Settlement Date for each Undivided
Interest, for each day in the related Yield Period of such Settlement Period
that is not a Run Off Day for such Undivided Interest, Servicer shall deposit to
the Administrative Agent's Account the amounts set aside as described in Section
3.01(a)(i) and the amounts, if any, set aside pursuant to Section 3.03(b) or (c)
for payment to the Administrative Agent on such Settlement Date; provided,
however, that until Servicer receives written notice from the Administrative
Agent to the contrary, Servicer may retain amounts which would otherwise be
deposited in respect of Servicer's Fee, in which case no distribution shall be
made in respect of Servicer's Fee under clause (c) below.
(c)Order of Application. Upon receipt by the Administrative Agent of funds
distributed pursuant to subsection (b), the Administrative Agent shall
distribute them (i) to Purchaser in payment of the accrued and unpaid Earned
Discount for such Undivided Interest, (ii) unless retained pursuant to
subsection (b), to Servicer in payment of the accrued and unpaid Servicer's Fee
payable with respect to such Undivided Interest and (iii) in the case of any
amounts set aside pursuant to Section 3.03(b) or (c), to Purchaser in reduction
of the related Purchaser's Investment. If there shall be insufficient funds on
deposit for the Administrative Agent to distribute funds in payment in full of
the amounts referred to in clauses (i) and (ii), the Administrative Agent shall
distribute funds, first, in payment of such Earned Discount, and second, in
payment of such Servicer's Fee.
SECTION 3.02.Run Off Settlement Procedures for Collections. (a) Daily Procedure.
On each Run Off Day occurring in any Yield Period for an Undivided Interest,
Servicer shall set aside and hold in trust for Purchaser Purchaser's Share of
the Collections of Pool Receivables in respect of such Undivided Interest for
such Run Off Day and shall, if requested by the Administrative Agent or if a
Termination Event has occurred
<PAGE>
and is continuing, deposit such Collections within one Business Day of
Servicer's receipt thereof into a bank account acceptable to the Administrative
Agent in which no other funds shall be deposited.
(b)Settlement Date Procedure. On each Settlement Date for each Undivided
Interest, if one or more Run Off Days for such Undivided Interest occurred
during the related Yield Period for the Settlement Period ending on such
Settlement Date for such Undivided Interest, Servicer shall deposit to the
Administrative Agent's Account the amounts set aside pursuant to Section 3.02(a)
during such Settlement Period, but not to exceed the sum of (i) the accrued and
unpaid related Earned Discount, (ii) the Purchaser's Investment of such
Undivided Interest, (iii) the aggregate of other amounts owed hereunder by
Seller to Purchaser or the Administrative Agent in respect of such Undivided
Interest, and (iv) the accrued Servicer's Fee payable with respect to such
Undivided Interest. If no Termination Event or Unmatured Termination Event shall
have occurred and be continuing, any amounts set aside pursuant to clause (a) of
this Section 3.02 and not required to be deposited to the Administrative Agent's
Account pursuant to the next preceding sentence shall be paid to Seller by
Servicer.
(c)Order of Application. Upon receipt of funds deposited to the Administrative
Agent's Account pursuant to Section 3.02(b), the Administrative Agent shall
distribute them (i) to Purchaser or the Administrative Agent (as the case may
be) (a) in payment of the accrued and unpaid Earned Discount for such Undivided
Interest, (b) in reduction of the Purchaser's Investment of such Undivided
Interest and (c) in payment of any other amounts owed by Seller hereunder to
Purchaser or the Administrative Agent, in each case until reduced to zero, and
(ii) to Servicer in payment of the accrued Servicer's Fee payable with respect
to such Undivided Interest, also until reduced to zero. If there shall be
insufficient funds on deposit for the Administrative Agent to distribute funds
in payment in full of the aforementioned amounts, the Administrative Agent shall
distribute funds on deposit, first, in payment of the Earned Discount for such
Undivided Interest, second, in payment of the Servicer's Fee payable with
respect to such Undivided Interest, if any (if Servicer is not Seller or an
Affiliate of Seller), third, in reduction of Purchaser's Investment of such
Undivided Interest, fourth, in payment of other amounts payable to Purchaser or
the Administrative Agent hereunder, and fifth, in payment of the Servicer's Fee
payable with respect to such Undivided Interest (if Servicer is Seller or an
Affiliate of Seller).
SECTION 3.03.Special Settlement Procedures; Reduction of Purchaser's Investment,
Etc. (a) Deemed Collections. If on any day
(i) the Unpaid Balance of any Pool Receivable is
(A)reduced as a result of any defective, rejected or returned merchandise or
services, any cash discount, any credit, pricing adjustment or other adjustment
by Seller or any Affiliate of Seller (other than any adjustment permitted by
Section 8.02(c)(i)),
<PAGE>
(B)reduced or cancelled as a result of a setoff in respect of any claim by the
Obligor thereof against Seller or any other Person (whether such claim arises
out of the same or a related or an unrelated transaction), or as a result of any
dispute, or
(C)reduced on account of the obligation of Seller or any other Person to pay to
the related Obligor any rebate or refund, or to rework any product or service
related to such Receivable; or
(ii) any of the representations or warranties of Seller set forth in Section
6.01(i) or (m) is no longer true with respect to a Pool Receivable,
then, on such day, Seller shall be deemed to have received a Collection of such
Pool Receivable
(I)in the case of clause (i) above, in the amount of such reduction or
cancellation; and
(II)in the case of clause (ii) above, in the amount of the Unpaid Balance of
such Pool Receivable.
(b)Unreinvested Collections. Collections that may not be reinvested by means of
Reinvestments in an Undivided Interest on account of the application of the
Required Allocations Limit or the Purchase Limit pursuant to Section 2.01 shall
be so reinvested as soon as it is possible to do so without violating such
Required Allocations Limit or Purchase Limit, as the case may be. To the extent
and so long as such Collections may not be so reinvested, Servicer shall hold
such Collections in trust for the benefit of Purchaser (and, if requested by the
Administrative Agent or if a Termination Event has occurred and is continuing,
shall deposit in a separate interest-bearing deposit account containing only
such Collections and earnings thereon and no other funds; it being understood
that any interest earned on such funds shall be for the account of Seller and
shall be paid to Seller on the Settlement Date next succeeding the date on which
such interest is credited to such account, so long as no Termination Event has
occurred and is continuing), for payment to the Administrative Agent on the next
following Settlement Date, and the Purchaser's Investment of such Undivided
Interest shall be deemed reduced in the amount to be paid to the Administrative
Agent only when in fact finally so paid.
(c)Seller's Reduction of Purchaser's Investment. If at any time Seller shall
wish to cause the reduction of the Purchaser's Investment of a related Undivided
Interest (but not to commence the liquidation, or reduction to zero, of all
Undivided Interests), Seller may do so as follows:
(i) Seller shall give the Administrative Agent at least five (5) Business Days'
prior written notice thereof (including the amount of such proposed reduction
and the proposed date on which such reduction will commence, which date shall be
a Business Day),
<PAGE>
(ii) on the proposed date of commencement of such reduction and on each day
thereafter, Servicer shall refrain from reinvesting Remaining Collections until
the amount thereof not so reinvested shall equal the desired amount of
reduction, and
(iii) Servicer shall hold such Collections for the benefit of Purchaser, for
payment to the Administrative Agent on the next following Settlement Date, and
the Purchaser's Investment of such Undivided Interest shall be deemed reduced in
the amount to be paid to the Administrative Agent only when in fact finally so
paid;
provided that,
(A)the amount of any such reduction shall be not less than $1,000,000 and shall
be an integral multiple of $100,000, and the Purchaser's Investment of such
Undivided Interest after giving effect to such reduction shall be not less than
$5,000,000 (unless Purchaser's Investment of such Undivided Interest shall
thereby be reduced to zero) and shall be in an integral multiple of $100,000,
(B)if Seller shall commence any voluntary reduction in a Yield Period containing
all or a portion of any Run Off Period, Collections not so reinvested shall be
treated as if collected on the next following Run Off Day,
(C)Seller shall use reasonable efforts to attempt to choose a reduction amount,
and the date of commencement thereof, so that such reduction shall commence and
conclude in the same Yield Period, and
(D)if two or more Undivided Interests shall be outstanding at the time of any
proposed reduction, such proposed reduction shall be applied, unless the
Administrative Agent shall consent otherwise, to the Undivided Interest with the
shortest remaining Yield Period.
(d)Allocations of Obligor's Payments. Except as otherwise required by law or the
underlying Contract, all Collections received from an Obligor of any Pool
Receivable shall be applied to Pool Receivables then outstanding of such Obligor
in the order of the age of such Pool Receivables, starting with the oldest such
Pool Receivable; provided, however, that, if payment is designated by such
Obligor for application to specific Pool Receivables, it shall be applied to
such specified Pool Receivables.
SECTION 3.04.Reporting. (a) On or prior to the fifteenth (15th) day of each
month (or the next Business Day if such fifteenth (15th) day is not a Business
Day), Servicer shall prepare and forward to the Administrative Agent
(i) a Periodic Report relating to all Undivided Interests owned by Purchaser as
of the close of business of Servicer on the next preceding Month End Date,
(ii) if requested by the Administrative Agent, an aggregate listing of aged Pool
Receivables, and
<PAGE>
(iii) a listing of the Unpaid Balance of Eligible Receivables for each Obligor
with Eligible Receivables equal to or greater than 3.0% of the aggregate Unpaid
Balance of Eligible Receivables as of the next preceding Month End Date.
If requested by the Administrative Agent, Servicer shall prepare and forward
Periodic Reports more frequently than once a month, using the most current
information available to Servicer.
(b)On or prior to the Settlement Date of any Settlement Period containing a Run
Off Day, Servicer shall prepare and forward to the Administrative Agent a
Periodic Report as of the close of business of Servicer on the next preceding
Month End Date.
(c)Seller will advise the Administrative Agent and, if Seller is not Servicer,
Servicer of each Run Off Day immediately upon the occurrence thereof.
SECTION 3.05.Payments and Computations, Etc. (a) All amounts to be paid or
deposited by Seller or Servicer hereunder shall be paid or deposited in
accordance with the terms hereof no later than 1:00 p.m. (Chicago time) on the
day when due in lawful money of the United States of America in same day funds
to the Administrative Agent at BofA's office at 231 South LaSalle Street,
Chicago, Illinois, Account #6657093, ABA # 071-000-39, reference RC #1159 for
SCI Systems, Inc. (the "Administrative Agent's Account").
(b)Seller or Servicer, as applicable, shall, to the extent permitted by law, pay
to the Administrative Agent interest on all amounts not paid or deposited when
due hereunder at 2% per annum above the Alternate Reference Rate, payable on
demand, provided, however, that such interest rate shall not at any time exceed
the maximum rate permitted by applicable law. Such interest shall be retained by
the Administrative Agent except to the extent that such failure to make a timely
payment or deposit has continued beyond the date for distribution by the
Administrative Agent of such overdue amount to Purchaser or any other Person
having an interest in such overdue amount, in which case such interest accruing
after such date shall be for the account of, and distributed by the
Administrative Agent, to such Persons ratably in accordance with their
respective interests in such overdue amount.
(c)All computations of interest, Earned Discount, Negative Spread Fee and any
other fees hereunder shall be made on the basis of a year of 360 days for the
actual number of days (including the first day but excluding the last day)
elapsed.
SECTION 3.06.Dividing or Combining Undivided Interests.
(a)Division of Undivided Interests. The Administrative Agent may at any time, as
of the last day of any Yield Period for any then existing Undivided Interest,
divide such existing Undivided Interest on such last day into two or more new
Undivided Interests, each such new Undivided Interest having a Purchaser's
Investment as
<PAGE>
designated in such notice and all such new Undivided Interests collectively
having aggregate Purchaser's Investments equal to the Purchaser's Investment of
such existing Undivided Interest.
(b)Combination of Undivided Interests. The Administrative Agent may at any time,
as of the last day of any Yield Period for two or more existing Undivided
Interests or on or before the date of any proposed Purchase of an Undivided
Interest pursuant to Sections 1.01 and 1.04 by Purchaser, on such last day or
such date of Purchase, as the case may be, combine into one new Undivided
Interest such existing and/or proposed Undivided Interests or any combination
thereof, such new Undivided Interest having a Purchaser's Investment equal to
the aggregate Purchaser's Investments of such Undivided Interests so combined.
(c)Effect of Division or Combination. On and after any division or combination
of Undivided Interests as described above, each of the new Undivided Interests
resulting from such division, or the new Undivided Interest resulting from such
combination, as the case may be, shall be a separate Undivided Interest having a
Purchaser's Investment as set forth above, and shall take the place of such
existing Undivided Interest or Undivided Interests or proposed Undivided
Interest, as the case may be, in each case under and for all purposes of this
Agreement. The Administrative Agent agrees to give Seller prompt notice of each
such division or combination.
SECTION 3.07.Treatment of Collections and Deemed Collections. Seller shall pay
to Servicer all Collections deemed received by Seller pursuant to Section
3.03(a), and Servicer shall hold or distribute such Collections to the same
extent as if such Collections had actually been received on the date of such
delivery to Servicer. If Collections are then being paid to the Administrative
Agent, or lock boxes or accounts directly or indirectly owned or controlled by
the Administrative Agent, Servicer shall forthwith cause such deemed Collections
to be paid to the Administrative Agent or to such lock boxes or accounts, as
applicable. So long as Seller shall hold any Collections or deemed Collections
required to be paid to Servicer or the Administrative Agent, it shall hold such
Collections in trust and separate and apart from its own funds.
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.01.Fees. Seller shall pay to the Administrative Agent, the structuring
agent and Purchaser certain fees on such dates and in such amounts as set forth
in the letter agreement dated as of June 30, 1995 between the Administrative
Agent and Seller (as amended from time to time, the "Fee Letter").
SECTION 4.02.Yield Protection. (a) If (i) Regulation D or (ii) any Regulatory
Change occurring after the date hereof
<PAGE>
(A)shall subject an Affected Party to any tax, duty or other charge with respect
to any Undivided Interest owned by or funded by it, or any obligations or right
to make Purchases or Reinvestments or to provide funding therefor, or shall
change the basis of taxation of payments to the Affected Party of any
Purchaser's Investments or Earned Discount owned by, owed to or funded by it or
any other amounts due under this Agreement in respect of any Undivided Interest
owned by or funded by it or its obligations or rights, if any, to make Purchases
or Reinvestments or to provide funding therefor (except for changes in the rate
of tax on or based upon the overall net income of such Affected Party imposed by
the United States of America and any state, local or foreign jurisdiction in
which such Affected Party is subject to income taxation); or
(B)shall impose, modify or deem applicable any reserve (including, without
limitation, any reserve imposed by the Federal Reserve Board, but excluding any
reserve included in the determination of Earned Discount), special deposit or
similar requirement against assets of any Affected Party, deposits or
obligations with or for the account of any Affected Party or with or for the
account of any Affiliate (or entity deemed by the Federal Reserve Board to be an
Affiliate) of any Affected Party, or credit extended by any Affected Party; or
(C)shall change the amount of capital maintained or required or requested or
directed to be maintained by any Affected Party; or
(D)shall impose any other condition affecting any Undivided Interest owned or
funded by any Affected Party, or its obligations or rights, if any, to make
Purchases or Reinvestments or to provide funding therefor;
and the result of any of the foregoing is or would be
(x)to increase the cost or to impose a cost on (i) an Affected Party funding or
making or maintaining any Purchases or Reinvestments, any purchases,
Reinvestments, or loans or other extensions of credit under any Program Support
Agreement, or any Funding, or any commitment of such Affected Party with respect
to any of the foregoing, or (II) the Administrative Agent for continuing its, or
Seller's, relationship with Purchaser,
(y)to reduce the amount of any sum received or receivable by an Affected Party
under this Agreement or the Certificate of Assignments, or under any Program
Support Agreement with respect thereto, or
(z)in the sole determination of such Affected Party, to materially reduce the
rate of return on the capital of an Affected Party as a consequence of its
obligations hereunder or arising in connection herewith to a level below that
which such Affected Party could otherwise have achieved,
then within thirty (30) thirty days after written demand by such Affected Party
(which demand shall be accompanied by a statement setting forth in reasonable
detail the basis of such demand), Seller shall pay directly to such Affected
Party such additional amount or amounts as will compensate such Affected Party
for such additional or increased cost or such reduction.
<PAGE>
(b)Each Affected Party will promptly notify Seller and the Administrative Agent
of any event of which it has actual knowledge which will entitle such Affected
Party to compensation pursuant to this Section 4.02; provided, however, no
failure to give or delay in giving such notification shall adversely affect the
rights of any Affected Party to such compensation.
(c)In determining any amount provided for or referred to in this Section 4.02,
an Affected Party will use reasonable averaging and attribution methods. Any
Affected Party when making a claim under this Section 4.02 shall submit to
Seller a certificate setting forth such increased cost or reduced return in
reasonable detail, which certificate shall, in the absence of manifest error, be
presumed correct as to the amount thereof.
ARTICLE V
CONDITIONS OF PURCHASES
SECTION 5.01.Conditions Precedent to Initial Purchase. The initial Purchase
hereunder is subject to the condition precedent that the Administrative Agent
shall have received, on or before the date of such Purchase, the following, each
(unless otherwise indicated) dated such date and in form and substance
satisfactory to the Administrative Agent:
(a)A Certificate of Assignments;
(b)A copy of the resolutions of the Board of Directors of Seller approving this
Agreement, the Certificate of Assignments and the other Agreement Documents to
be delivered by it hereunder and the transactions contemplated hereby, certified
on behalf of Seller by Seller's Secretary or Assistant Secretary; a copy of the
resolutions of the Board of Directors of Guarantor approving this Agreement and
the other Agreement Documents to be delivered by it hereunder and the
transactions contemplated hereby, certified on behalf of Guarantor by
Guarantor's Secretary or Assistant Secretary;
(c)Good standing or foreign qualification certificates for Seller issued by the
Secretaries of State of Alabama, California, Colorado, New Hampshire, North
Carolina, Maine and South Dakota; and good standing or foreign qualification
certificates for Guarantor issued by the Secretaries of State of Delaware and
California;
(d)A certificate of the Secretary or Assistant Secretary of each of Seller and
Guarantor certifying on behalf of such Person the names and true signatures of
the officers authorized on its behalf to sign this Agreement and the other
Agreement Documents to be delivered by it hereunder (on which certificate the
Administrative Agent and Purchaser may conclusively rely until such time as the
Administrative Agent shall receive a revised certificate meeting the
requirements of this subsection (d));
<PAGE>
(e)The Articles of Incorporation of Seller and the Certificate of Incorporation
of Guarantor, duly certified by the Secretary of State or similar office of the
State under the laws of which the Seller or Guarantor, as the case may be, was
organized, as of a recent date, together with a copy of the By-laws of Seller
and Guarantor, duly certified on behalf of such Person by the Secretary or an
Assistant Secretary of Seller and Guarantor, respectively;
(f)Acknowledgment copies (or other evidence of filing reasonably satisfactory to
the Administrative Agent), of proper Financing Statements (Form UCC-1), filed on
or prior to the date of the initial Purchase naming Seller as the debtor and
seller of Receivables or an undivided interest therein and Purchaser as the
secured party and purchaser, or other, similar instruments or documents, as may
be necessary or, in the reasonable opinion of the Administrative Agent,
desirable under the UCC or any comparable law of all appropriate jurisdictions
to perfect Purchaser's interests in all Undivided Interests assigned to it or
otherwise created or arising hereunder;
(g)A search report provided in writing to the Administrative Agent listing all
effective Financing Statements filed in the jurisdictions in which filings were
made pursuant to subsection (f) above and in such other jurisdictions that
Administrative Agent shall reasonably request, together with copies of such
financing statements (none of which shall cover the Pool or any part thereof);
(h)executed copies of all releases, if any, necessary to release all security
interests and other rights or interests of any Person in the Pool or any part
thereof previously granted by any Person, together with copies of the relevant
financing statements (Form UCC-3);
(i)Duly executed copies of Lock-Box Agreements with each of the Lock-Box Banks;
(j)A favorable opinion of Powell, Goldstein, Frazer & Murphy, counsel for Seller
and Guarantor, in substantially the form of Exhibit 5.01(j)-1, and a favorable
opinion of Michael M. Sullivan, Esq., in-house counsel for Seller and Guarantor,
in substantially the form of Exhibit 5.01(j)-2;
(k)A favorable opinion of Mayer, Brown & Platt, counsel for the Administrative
Agent, substantially in the form of Exhibit 5.01(k);
(l)Such powers of attorney as the Administrative Agent shall reasonably request
to enable the Administrative Agent to collect all amounts due under any and all
Pool Receivables;
(m)A Periodic Report as of the most recent Month End Date; and
(n)A report from Coopers & Lybrand or other independent certified public
accountants or other auditors acceptable to the Administrative Agent, with
respect to the application of certain procedures to Seller's books and records
relating to the Pool Receivables.
<PAGE>
SECTION 5.02.Conditions Precedent to All Purchases and Reinvestments. Each
Purchase (including the initial Purchase) and each Reinvestment hereunder shall
be subject to the further conditions precedent ("Conditions Precedent") that on
the date of such Purchase or Reinvestment the following statements shall be true
(and Seller by accepting the amount of such Purchase or by receiving the
proceeds of such Reinvestment shall be deemed to have certified that):
(a)The representations and warranties contained in Article VI are correct on and
as of such day as though made on and as of such day and shall be deemed to have
been made on such day,
(b)No event has occurred and is continuing, or would result from such Purchase
or Reinvestment, that constitutes a Termination Event or Unmatured Termination
Event,
(c)After giving effect to each proposed Purchase or Reinvestment, the Aggregate
Purchaser's Investments will not exceed the Purchase Limit and Aggregate
Required Allocations will not exceed the Required Allocations Limit, and
(d)The Commitment Termination Date shall not have occurred;
provided, however, the absence of the occurrence and continuance of an Unmatured
Termination Event shall not be a Condition Precedent to
(i)any Reinvestment being made with the proceeds of Collections that were, on
the same day, applied in reduction of the Aggregate Purchaser's Investments, or
(ii)any other Reinvestment on any day which does not cause the Aggregate
Purchaser's Investments, after giving effect to such Reinvestment (and to any
Reinvestment referred to in clause (i) next above) to exceed the Aggregate
Purchaser's Investments as of the opening of business on such day.
SECTION 5.03.Additional Condition Precedent to Purchases. Each Purchase
(including the initial Purchase) shall be subject to the further condition
precedent that the Purchase Termination Date shall not have occurred.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01.Representations and Warranties - Seller. Seller represents and
warrants as follows:
<PAGE>
(a)Organization, Good Standing and Qualification. It is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified to do business, and is
in good standing, and has obtained all necessary licenses and approvals, in
every jurisdiction where the ownership of property or the nature of its business
requires it to be so qualified or have such licenses and approvals except where
the failure to so qualify or have such licenses and approvals would not have a
Material Adverse Effect.
(b)Power and Authority; Due Authorization. The execution, delivery and
performance by it of this Agreement, the Certificate of Assignments and any
other Agreement Documents to be delivered by it hereunder and thereunder, and
the assignment of Undivided Interests and the other transactions contemplated
hereby and thereby, are within its corporate powers, have been duly authorized
by all necessary corporate action, do not (i) contravene (1) its charter or
by-laws, or (2) any law, rule or regulation or any contractual restriction to
which Seller or its property is subject and, in the case of this clause (2),
which contravention would have a Material Adverse Effect; (ii) result in or
require the creation of any Lien upon or with respect to any of its properties
other than as specifically contemplated by this Agreement; or (iii) violate any
law or any order, rule, or regulation applicable to Seller of any court or of
any federal or state regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over Seller or any of its
properties, which violation would have a Material Adverse Effect; and no
transaction contemplated hereby requires compliance with Article 6 of the
Alabama UCC.
(c)Valid Sale; Binding Obligations. This Agreement constitutes a valid sale,
transfer, and assignment of the Undivided Interests to Purchaser, enforceable
against creditors of, and purchasers from, Seller. This Agreement, the
Certificate of Assignments and each other Agreement Document constitute Seller's
legal, valid and binding obligations enforceable against it in accordance with
their respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally or by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(d)No Proceedings. Except as listed on Schedule 6.01(d), there are no
proceedings or investigations pending or, to the best of its knowledge,
threatened, before any court, regulatory body, administrative agency, or other
tribunal or governmental instrumentality (i) asserting the invalidity of this
Agreement, the Certificate of Assignments or any other Agreement Document to
which Seller is a party, (ii) seeking to prevent the sale and assignment of any
Receivable, Undivided Interest, the issuance of the Certificate of Assignments
or the consummation of any of the other transactions contemplated by this
Agreement, or any other Agreement Document to which Seller is a party, (iii)
seeking any determination or ruling that could reasonably be expected to have a
Material Adverse Effect or (iv) seeking to adversely affect the federal income
tax attributes of the Purchases hereunder or the Certificate of Assignments.
(e)Government Approvals. No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance
<PAGE>
by it of this Agreement, the Certificate of Assignments or any other document or
instrument to be delivered hereunder except for the filing of the Financing
Statements referred to in Article V, all of which, at the time required in
Article V, shall have been duly made and shall be in full force and effect.
(f)Financial Condition. The balance sheet of Seller as at June 30, 1994, and the
related statements of earnings, stockholders' equity and statement of cash flows
of Seller for the fiscal year then ended, and the balance sheet of Seller as at
March 26, 1995, and the related statements of earnings, stockholders' equity and
statement of cash flows of Seller for the nine fiscal months then ended, in each
case certified on behalf of Seller by Seller's chief financial or accounting
officer, copies of which have been furnished to the Administrative Agent, fairly
present the financial condition of Seller as at such dates and the results of
the operations of Seller for the periods ended on such dates, all in accordance
with GAAP consistently applied and since June 30, 1994, there has been no
material adverse change in Seller's financial condition, business, assets,
prospects or operations.
(g)Litigation. No injunction, decree or other decision has been issued or made
by any court, governmental agency or instrumentality thereof in a proceeding to
which Seller is a party that prevents, and, to its knowledge, no threat by any
Person has been made in writing to attempt to obtain any such decision that
would prevent, Seller from conducting a material part of its business
operations.
(h)Margin Regulations. No proceeds of any Purchase will be used to acquire any
security in any transaction which is subject to Sections 13 and 14 of the
Securities Exchange Act of 1934, as amended; and the use of all funds obtained
by Seller under this Agreement will not conflict with or contravene any of
Regulations G, T, U and X promulgated by the Board of Governors of the Federal
Reserve System from time to time.
(i)Quality of Title. Each Pool Receivable, together with the related Contract
and all purchase orders and other agreements related to such Pool Receivable, is
owned by Seller free and clear of any Adverse Claim (other than any Adverse
Claim arising solely as the result of any action taken by Purchaser or by the
Administrative Agent) except as provided herein; if such Pool Receivable was
purchased by Seller from an Originator, Seller acquired such Pool Receivable in
a true sale transaction, which sale is enforceable against all creditors of, and
purchasers from, such Originator, and, except as set forth on Schedule 6.01(i),
Seller took all steps necessary to perfect its ownership interest in such Pool
Receivable against such Originator; when Purchaser makes a Purchase, it shall
have acquired and shall continue to have maintained a valid and perfected
undivided percentage ownership interest to the extent of its Undivided Interest
in each Pool Receivable and in the Related Security and Collections with respect
thereto, free and clear of any Adverse Claim (other than any Adverse Claim
arising solely as the result of any action taken by Purchaser or by the
Administrative Agent); and no effective financing statement or other instrument
similar in effect covering the Pool or any part thereof is on file in any
recording office except such as may be filed (i) in favor of Seller in
accordance with the Contracts, or in accordance with this Agreement with respect
to Pool Receivables purchased by Seller from any Originator, (ii) in favor of
Purchaser or the Administrative Agent in accordance with this Agreement or in
connection with any Adverse Claim arising solely as the result of any action
taken
<PAGE>
by Purchaser or by the Administrative Agent, or (iii) in favor of BofA, as
Collateral Trustee, or any successor in such capacity, as described in Section
11.01.
(j)Accurate Reports. Each Periodic Report (if prepared by Seller, or to the
extent that information contained therein is supplied by Seller), information,
exhibit, financial statement, document, book, record or report furnished at any
time by Seller to the Administrative Agent, Purchaser or any Owner in connection
with this Agreement is accurate in all material respects as of its date or as of
the date so furnished, and no such document contains any material misstatement
of fact or omits to state a material fact or any fact necessary to make the
statements contained therein not materially misleading in light of the
circumstances when made.
(k)Offices. The chief place of business and chief executive office of Seller and
each Originator are located at the address of Seller or the applicable
Originator referred to in Section 15.02, and the offices where Seller keeps all
its books, records and documents evidencing Pool Receivables, the related
Contracts and all purchase orders and other agreements related to such Pool
Receivables are located at the addresses specified in Schedule 6.01(k) (or, in
each case, at such other locations, notified to the Administrative Agent in
accordance with Section 7.01(f), in jurisdictions where all action required by
Section 8.05 has been taken and completed).
(l)Lock-Box Accounts. The names and addresses of all the Lock-Box Banks,
together with the account numbers of the lock-box accounts of Seller at such
Lock-Box Banks, are specified in Schedule 6.01(l) (or have been notified to the
Administrative Agent in accordance with Section 7.03(d)).
(m)Eligible Receivables. Each Receivable included in the Net Pool Balance as an
Eligible Receivable on the date of any Purchase or Reinvestment shall be an
Eligible Receivable on such date.
(n)Compliance With Certain Statutes. Each Purchase of an Undivided Interest from
Seller hereunder, and each Reinvestment of Collections in Pool Receivables made
hereunder, will constitute (a) a "current transaction" within the meaning of
Section 3(a)(3) of the Securities Act of 1933, as amended, and (b) a purchase or
other acquisition of notes, drafts, acceptances, open accounts receivable or
other obligations representing part or all of the sales price of merchandise,
insurance or services within the meaning of Section 3(c)(5) of the Investment
Company Act of 1940, as amended.
(o)No Defaults. Seller is not in default under or with respect to any
contractual obligation or any law or court order in any respect which could
reasonably be expected to have a Material Adverse Effect.
(p)Originators. Each Originator is a Wholly Owned Subsidiary of Seller or
Guarantor.
SECTION 6.02.Representations and Warranties - Guarantor. Guarantor represents
and warrants as follows:
<PAGE>
(a)Organization, Good Standing and Qualification. It is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified to do business, and is
in good standing, and has obtained all necessary licenses and approvals in every
jurisdiction where the nature of its business requires it to be so qualified or
have such licenses and approvals except where the failure to so qualify or have
such licenses and approvals would not have a Material Adverse Effect.
(b)Power and Authority; Due Authorization. The execution, delivery and
performance by it of this Agreement and any other Agreement Documents to be
delivered by it hereunder and thereunder, are within its corporate powers, have
been duly authorized by all necessary corporate action, do not (i) contravene
(1) its charter or by-laws, or (2) any law, rule or regulation or any
contractual restriction to which Guarantor or its property is subject and, in
the case of this clause (2), which contravention would have a Material Adverse
Effect, (ii) do not result in or require the creation of any Lien upon or with
respect to any of its properties other than as specifically contemplated by this
Agreement; or (iii) violate any law or any order, rule, or regulation applicable
to Seller of any court or of any federal or state regulatory body,
administrative agency, or other governmental instrumentality having jurisdiction
over Seller or any of its properties, which violation would have a Material
Adverse Effect; and no transaction contemplated hereby requires compliance with
any bulk sales act or similar law.
(c)Binding Obligations. This Agreement and each other Agreement Document to
which Guarantor is a party constitute its legal, valid and binding obligations
enforceable against it in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally or by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(d)No Proceedings. Except as listed on Schedule 6.01(d), there are no
proceedings or investigations pending or, to the best of its knowledge,
threatened, before any court, regulatory body, administrative agency, or other
tribunal or governmental instrumentality (i) asserting the invalidity of this
Agreement or any other Agreement Document to which Guarantor is a party, (ii)
seeking to prevent the consummation of any of the other transactions
contemplated by this Agreement, or any other Agreement Document to which
Guarantor is a party, or (iii) seeking any determination or ruling that could
reasonably be expected to have a Material Adverse Effect.
(e)Government Approvals. No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by it of this Agreement
or any other document or instrument to be delivered hereunder.
(f)Financial Condition. The consolidated balance sheet of Guarantor and its
consolidated Subsidiaries as at June 30, 1994, and the related statements of
earnings, stockholders' equity and statement of cash flows of Guarantor and its
consolidated Subsidiaries for the fiscal year then ended certified by Ernst &
Young, independent public accountants, and the consolidated balance sheet of
Guarantor and its consolidated
<PAGE>
Subsidiaries as at March 26, 1995, and the related statements of earnings,
stockholders' equity and statement of cash flows of Guarantor and its
consolidated Subsidiaries for the nine fiscal months then ended, certified on
behalf of Guarantor by Guarantor's chief financial or accounting officer, copies
of which have been furnished to the Administrative Agent, fairly present the
consolidated financial condition of Guarantor and its consolidated Subsidiaries
as at such dates and the consolidated results of the operations of Guarantor and
its consolidated Subsidiaries for the periods ended on such dates, all in
accordance with GAAP consistently applied and since June 30, 1994, there has
been no material adverse change in the financial condition, business, assets,
prospects or operations of Guarantor and its consolidated Subsidiaries, taken as
a whole.
(g)Litigation. No injunction, decree or other decision has been issued or made
by any court, governmental agency or instrumentality thereof in a proceeding to
which Guarantor is a party that prevents, and, to its knowledge, no threat by
any Person has been made in writing to attempt to obtain any such decision that
would prevent, Guarantor from conducting a material part of its business
operations.
(h)Accurate Reports. All information, exhibits, financial statements, documents,
books, records or reports furnished at any time by Guarantor to the
Administrative Agent, Purchaser or any Owner in connection with this Agreement
is accurate in all material respects as of its date or as of the date so
furnished, and no such document contains any material misstatement of fact or
omits to state a material fact or any fact necessary to make the statements
contained therein not materially misleading in light of the circumstances when
made.
(i)No Defaults. Guarantor is not in default under or with respect to any
contractual obligation or any law or court order in any respect which could
reasonably be expected to have a Material Adverse Effect.
ARTICLE VII
GENERAL COVENANTS
SECTION 7.01.Affirmative Covenants. From the date hereof until the End Date,
unless the Administrative Agent shall otherwise consent in writing:
(a)Compliance with Laws, Etc. Seller will, and Guarantor will, and will cause
Seller to, comply in all respects with all applicable laws, rules, regulations,
orders and contractual obligations with respect to it, its business and
properties and all Pool Receivables and related Contracts, the noncompliance
with which would, either singly or in the aggregate, have a Material Adverse
Effect.
(b)Conduct of Business and Preservation of Corporate Existence. Seller will, and
Guarantor will, and will cause Seller to, continue to engage in business of
substantially the same general type as now conducted by it, and preserve, renew
and keep in full force and effect its corporate existence and take all action to
<PAGE>
maintain all rights, privileges and franchises material to the conduct of its
business, and comply with all its contractual obligations and all Requirements
of Law, except where such failure would not have a Material Adverse Effect.
(c)Audits. Subject to contractual, statutory, regulatory or other similar
limitations regarding confidential or proprietary information, Seller will, and
Guarantor will, and will cause Seller to, at any time and from time to time
during regular business hours upon at least three (3) Business Days' prior
written notice (unless a Termination Event has occurred and is continuing, in
which case, no such notice shall be required), permit the Administrative Agent,
or its agents or representatives, (i) to examine and make copies of and
abstracts from all books, records and documents (including, without limitation,
computer tapes and disks) in its possession or under its control relating to
Pool Receivables, including, without limitation, the related Contracts, purchase
orders and other agreements, and (ii) to visit the offices and properties of
Seller and Guarantor for the purpose of examining such materials described in
clause (i) next above, and to discuss matters relating to Pool Receivables or
Seller's or Guarantor's performance hereunder with any of the officers or
employees of Seller or Guarantor having knowledge of such matters. Seller and
Guarantor expressly reserve the right to restrict access to any of their
facilities in accordance with reasonably adopted procedures relating to safety
and security. Article XIII notwithstanding, the reasonable costs and expenses
incurred by the Administrative Agent or its agents or representatives in
connection with any such examinations, copies, abstracts, visits or discussions
occurring or made (i) more than twice during any calendar year, (ii) prior to
the occurrence of a Termination Event and (iii) other than in connection with a
change by Seller of its information systems, shall be for the account of
Purchaser. Each Owner of Undivided Interests, by acceptance of the benefits of
such ownership, and the Administrative Agent agree to use their reasonable
efforts to ensure that any information concerning Guarantor and its Subsidiaries
obtained by the Administrative Agent pursuant to this Section 7.01(c) which is
not contained in a report or other document filed by Guarantor or Seller with
the SEC or otherwise available to the public generally or to the Administrative
Agent from a source other than Seller or Guarantor will, to the extent permitted
by law and except as may be required by subpoena, by any agency or other
governmental entity which regulates the Administrative Agent's or any such
Owner's business under federal, state or local law (the "Regulators") or in the
normal course of the business operations of the Administrative Agent or such
Owner, be treated confidentially by the Administrative Agent and each such Owner
and, so long as no Termination Event has occurred and is then continuing
hereunder, will not be distributed or otherwise made available to any Person,
other than the Regulators, any Program Support Provider or potential Program
Support Provider, any rating agency then rating the Commercial Paper Notes and
the employees, authorized agents, Affiliates or representatives of the
Administrative Agent or such Owner, and except as may otherwise be required by
law, unless the Administrative Agent or such Owner, as applicable, shall have
given Guarantor and Seller ten (10) days' prior written notice of such
distribution or other disclosure. In the event that the Administrative Agent or
any such Owner is required by law to disclose any information concerning
Guarantor and its Subsidiaries (or any of them), the Administrative Agent or
such Owner shall provide prompt written notice thereof (to the extent
practicable, prior to disclosure; otherwise promptly after such disclosure) to
Guarantor and Seller so that Guarantor and Seller (or either of them) may seek a
protective order or other appropriate remedy.
<PAGE>
(d)Keeping of Records and Books of Account. Seller will, and Guarantor will
cause Seller to, maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing Pool
Receivables in the event of the destruction of the originals thereof), and keep
and maintain, all documents, books, records and other information reasonably
necessary or advisable for the collection of all Pool Receivables (including,
without limitation, records adequate to permit the daily identification of each
new Pool Receivable and all Collections of and adjustments to each existing Pool
Receivable).
(e)Performance and Compliance with Receivables and Contracts. Seller will, and
Guarantor will cause Seller to, at Seller's expense timely and fully perform and
comply with all provisions, covenants and other promises required to be observed
by it under the Contracts related to the Pool Receivables, all purchase orders
and other agreements related to such Pool Receivables subject, however, to the
right of Seller to dispute or contest its obligations so to perform or comply
with any such provision, covenant or other promise where it reasonably believes
that such performance or compliance is not required or is not in the best
interest of Seller, and such failure to perform or comply would not have a
material adverse effect on the collectability or enforceability of the related
Pool Receivable or Receivables.
(f)Location of Records. Seller will, and Guarantor will cause Seller to, keep
its chief place of business and chief executive office, and the offices where it
keeps its records concerning the Pool Receivables, all related Contracts and all
purchase orders and other agreements related to such Pool Receivables (and all
original documents relating thereto), at the address(es) of Seller referred to
in Section 6.01(k) or, upon thirty (30) days' prior written notice to the
Administrative Agent, at such other locations in jurisdictions where all action
required by Section 8.05 shall have been taken and completed.
(g)Credit and Collection Policies. Seller will, and Guarantor will cause Seller
to, comply in all material respects with its Credit and Collection Procedure and
all other policies and practices of Seller referred to in, or discussed in
connection with, the due diligence report prepared by Coopers & Lybrand on or
prior to the date hereof in regard to each Pool Receivable and the related
Contract and otherwise comply with past business practices in regard to Pool
Receivables.
(h)Collections. Seller will, and Guarantor will cause Seller to, instruct all
Obligors to cause all Collections of Pool Receivables to be deposited directly
with a Lock-Box Bank. If a Trigger Event has occurred and is continuing, Seller
will, and Guarantor will cause Seller to, segregate all payments that do not
constitute Collections from the lock-box accounts into which any Collections are
deposited.
(i)Marking of Records. Seller will, and Guarantor will cause Seller to, at its
expense, mark its master data processing records evidencing Pool Receivables to
the extent reasonably practicable and mark the related Contracts with a legend
evidencing that a Certificate of Assignments related to such Pool Receivables
and related Contracts have been sold to Purchaser in accordance with this
Agreement.
<PAGE>
(j)Bankruptcy Remote Subsidiary. Seller will, and Guarantor will cause Seller
to, promptly (and in any event within 90 days) after the request of the
Administrative Agent, which may be given at any time after the occurrence of a
Trigger Event, (i) form a new, wholly owned, bankruptcy remote Subsidiary, in
form and substance reasonably satisfactory to the Administrative Agent, (ii)
transfer, in a true sale, contribution to capital or combination thereof, all of
its right, title and interest in the Pool to such Subsidiary, pursuant to
documentation substantially in the form of Exhibit 7.01(j)-1 and otherwise
reasonably satisfactory in form and substance to the Administrative Agent, (iii)
cause such Subsidiary to become the seller hereunder pursuant to amendments to
the Agreement Documents reasonably satisfactory to the Administrative Agent and
(iv) deliver to Purchaser and the Administrative Agent an opinion of counsel,
substantially in the form of Exhibit 7.01(j)-2, from counsel reasonably
acceptable to the Administrative Agent.
SECTION 7.02.Reporting Requirements. From the date hereof until the End Date,
unless the Administrative Agent shall otherwise consent in writing:
(a)Quarterly Financial Statements. Guarantor will, furnish to the Administrative
Agent as soon as available and in any event within sixty (60) days after the end
of each of the first three quarters of each fiscal year of Guarantor copies of
such consolidated and consolidating (showing Seller) financial statements as
Guarantor may prepare for its own use for the fiscal quarter then ended,
prepared in conformity with GAAP applied on a Consistent Basis and certified by
the chief financial officer, chief executive officer, treasurer or chief
accounting officer of Guarantor; together with a certificate from such officer
containing a computation of, and showing compliance with, the financial
restrictions contained in Section 7.04.
(b)Annual Financial Statements. Guarantor will furnish to the Administrative
Agent as soon as available and in any event within ninety (90) days after the
end of each fiscal year of Guarantor, copies of both the consolidated and
consolidating (showing Seller) balance sheets as at the end of such fiscal year,
and the related statements of income and retained earnings, and, with respect to
the consolidated statements, related statements of cash flows and changes in
financial position for the fiscal year then ended, or statements providing
substantially similar information, in each case prepared in reasonable detail
and in accordance with GAAP applied on a Consistent Basis and, with respect to
the consolidated statements, certified by nationally recognized public
accountants; together with a certificate from such accountants containing, as
applicable, a computation of the financial restrictions contained in Section
7.04 and a statement that to the best knowledge of such accountants the
restrictions in Section 7.04 have not been violated.
(c)Reports to Holders and Exchanges. Seller will, and Guarantor will, and will
cause Seller to, furnish to the Administrative Agent, in addition to the reports
required by subsections (a) and (b) next above, promptly upon the Administrative
Agent's request, copies of any reports specified in such request which it sends
its public stockholders generally, and any reports or registration statements
that it files with the SEC or any national securities exchange other than
registration statements relating to employee benefit plans and to registrations
of securities for selling security holders.
<PAGE>
(d)ERISA. Seller will, and Guarantor will, and will cause Seller to, furnish to
the Administrative Agent, promptly after the filing or receiving thereof, copies
of all reports and notices with respect to any Reportable Event defined in
Article IV of ERISA which it or any of its Affiliates files under ERISA with the
Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or which it or any of its Affiliates receives from the
Pension Benefit Guaranty Corporation.
(e)Termination Events. Seller will, and Guarantor will, and will cause Seller
to, furnish to the Administrative Agent, as soon as possible and in any event
within three (3) Business Days after any Executive Officer of Guarantor or
Seller has notice or actual knowledge of the occurrence of each Termination
Event and each Unmatured Termination Event, a written statement of an Executive
Officer of Seller or Guarantor, as the case may be, setting forth details of
such event and the action that Seller or Guarantor, as the case may be, proposes
to take with respect thereto.
(f)Litigation. Seller will, and Guarantor will, and will cause Seller to,
furnish to the Administrative Agent as soon as possible and in any event within
five Business Days of Seller's or Guarantor's knowledge thereof, notice of (i)
the commencement of or any development in any litigation, investigation or
proceeding which may exist at any time which could reasonably be expected to
have a Material Adverse Effect and (ii) any material adverse development in
previously disclosed litigation.
(g)Credit and Collection Procedure. Seller will, and Guarantor will cause Seller
to, deliver to the Administrative Agent any proposed material changes in the
Credit and Collection Procedure at least thirty (30) days prior to the
implementation of such changes.
(h)Other. Seller will, and Guarantor will, and will cause Seller to, promptly,
from time to time, furnish to the Administrative Agent such other information,
documents, records or reports respecting the Receivables or the condition or
operations, financial or otherwise, of Seller or Guarantor as the Administrative
Agent may from time to time reasonably request in order to protect the interests
of the Administrative Agent or Purchaser under or as contemplated by this
Agreement.
SECTION 7.03.Negative Covenants. From the date hereof until the End Date,
without the prior written consent of the Administrative Agent:
(a)Sales, Liens, Etc. Seller will not, and Guarantor will not permit Seller to,
except as otherwise provided herein, sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any Lien upon
or with respect to, any Pool Receivable or related Contract or Related Security,
or any interest therein, or any lock-box account to which any Collections of any
Pool Receivable are sent, or any right to receive income from or in respect of
any of the foregoing.
(b)Extension or Amendment of Receivables. Seller will not, and Guarantor will
not permit Seller to, except as otherwise permitted in Section 8.02(c), extend,
amend or otherwise modify the terms of any Pool Receivable,
<PAGE>
or amend, modify or waive any material term or condition of any Contract related
thereto, or any term or condition of any such Contract that relates to
collectability of the related Receivable.
(c)Change in Business or Credit and Collection Procedure. Seller will not, and
Guarantor will not permit Seller to, cease to engage in business of
substantially the same general type now conducted by it, or make any material
change in the Credit and Collection Procedure.
(d)Change in Payment Instructions to Obligors. Seller will not, and Guarantor
will not permit Seller to, add or terminate any bank as a Lock-Box Bank from
those listed in Schedule 6.01(l) or make any change in its instructions to
Obligors regarding payments to be made to Seller or Servicer or payments to be
made to any Lock-Box Bank, unless the Administrative Agent shall have received
notice of such addition, termination or change and duly executed copies of
Lock-Box Agreements with each new Lock-Box Bank.
(e)Deposits to Special Accounts. Seller will not, and Guarantor will not permit
Seller to, deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account cash or cash proceeds other than Collections
of Pool Receivables.
(f)Purchase and Sale Agreement. Seller will not, and Guarantor will not permit
Seller to, amend, waive or terminate the Purchase and Sale Agreement or any
material provision thereof.
SECTION 7.04. Financial Covenants. From the date hereof until the End Date, the
Guarantor will:
(a)maintain as of and at the end of each of its fiscal quarters, a ratio of EBIT
to Interest Expense of at least 0.8 to 1.0; provided that the ratio required to
be maintained in this Section 7.04(a) shall be subject to Section 7.04(c);
provided, however that any A-12 Program Financial Statements Adjustments which
were recognized in accordance with GAAP during the fiscal year ending as of the
end of such fiscal quarter shall be added back into the calculation of the
covenant set forth in this Section 7.04(a), and provided further that the ratio
required to be maintained in this Section 7.04(a) shall be subject to Section
7.04(c).
(b)maintain at all times a ratio of Total Debt to Total Capital (calculated in
percentage terms as at the end of each fiscal quarter, beginning with the
quarter ending March 26, 1995) of not more than eighty percent (80%).
(c)maintain at all times a ratio of Adjusted Working Capital to Senior Debt of
at least 1.75 to 1.0, provided that if the ratio of EBIT to Interest Expense
(calculated in accordance with Section 7.04(a) above) is less than 1.20 to 1.0,
then the Guarantor will maintain a ratio of Adjusted Working Capital to Senior
Debt of at least 2.0 to 1.0. For purposes of this Section 7.04(c), the A-12
Program Financial Statements Adjustments previously recognized in accordance
with GAAP shall be added back into the computation of Adjusted Working Capital
unless the A-12 Program Financial Statements Adjustments equal or exceed
$50,000,000. If the A-12 Program Financial Statements Adjustments equal or
exceed $50,000,000, then all A-12 Program Financial
<PAGE>
Statements Adjustments shall not be added back into the computation of Adjusted
Working Capital in this Section 7.04(c).
The covenants contained in this Section 7.04 shall be calculated in the same
manner as the corresponding covenants contained in the Bank Credit Agreement are
calculated. If the financial covenants set forth in the Bank Credit Agreement
which correspond to the financial covenants set forth in this Section 7.04 are
amended, the Guarantor will promptly provide notice of such event and a copy of
such amendments to the Administrative Agent. If requested by the Administrative
Agent, this Agreement shall be amended to reflect such changes, and the
Guarantor and the Seller hereby agree to promptly execute and deliver such
amendments hereto as the Administrative Agent shall reasonably request to effect
the foregoing.
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01.Designation of Servicer. (a) Seller as Initial Servicer. The
servicing, administering and collection of the Pool Receivables shall be
conducted by the Person designated as Servicer hereunder ("Servicer") from time
to time in accordance with this Section 8.01. Until the Administrative Agent
gives to Seller a Successor Notice (as defined in Section 8.01(b)), Seller is
hereby designated as, and hereby agrees to perform the duties and obligations
of, Servicer pursuant to the terms hereof.
(b)Successor Notice; Servicer Transfer Events. Upon Seller's receipt of a notice
from the Administrative Agent of the Administrative Agent's designation of a new
Servicer (a "Successor Notice"), Seller agrees that it will terminate its
activities as Servicer hereunder in a manner that the Administrative Agent
believes will facilitate the transition of the performance of such activities to
the new Servicer, and the Administrative Agent (or, its designee) shall assume
each and all of Seller's said obligations to service and administer such
Receivables, on the terms and subject to the conditions herein set forth, and
Seller shall use its reasonable efforts to assist the Administrative Agent (or
its designee) in assuming such obligations. From and after the acceptance by a
new Servicer of its appointment as Servicer hereunder, the prior Servicer shall
be released from its obligations as Servicer under this Agreement, other than
its obligations set forth in the previous sentence. The Administrative Agent
agrees not to give Seller a Successor Notice until after the occurrence and
during the continuance of any Termination Event (any such Termination Event or
other event being herein called a "Servicer Transfer Event"), in which case such
Successor Notice may be given at any time in the Administrative Agent's
discretion. If Seller disputes the occurrence of a Servicer Transfer Event,
Seller may take appropriate action to resolve such dispute; provided that Seller
must terminate its activities hereunder as Servicer and allow the newly
designated Servicer to perform such activities on the date provided by the
Administrative Agent as described above, notwithstanding the commencement or
continuation of any proceeding to resolve the aforementioned dispute.
<PAGE>
(c)Subcontracts. Servicer may, with the prior consent of the Administrative
Agent, subcontract with any other Person for servicing, administering or
collecting the Pool Receivables; provided that such Person agrees to conduct
such duties in accordance with the terms of this Agreement; and provided,
further, however, that Servicer shall remain liable for the performance of the
duties and obligations of Servicer pursuant to the terms hereof; and, provided,
further, that the Administrative Agent shall have the right to terminate or to
continue any such subcontract upon the designation of a new Servicer.
SECTION 8.02.Duties of Servicer. (a) Appointment; Duties in General. Each of
Seller, Purchaser and the Administrative Agent hereby appoints as its agent
Servicer, as from time to time designated pursuant to Section 8.01, to enforce
its rights and interests in and under the Pool Receivables, the Related Security
and the Contracts. Servicer shall take or cause to be taken all such actions as
may be necessary or advisable to collect each Pool Receivable from time to time,
all in accordance with applicable laws, rules and regulations, with reasonable
care and diligence, and in accordance with the Credit and Collection Procedure.
(b)Allocation of Collections; Segregation. Servicer shall set aside for the
account of Seller and Purchaser their respective allocable shares of the
Collections of Pool Receivables in accordance with Sections 3.01 and 3.02 but
shall not be required (unless otherwise requested by the Administrative Agent)
to segregate the funds constituting such portions of such Collections, or to
segregate the respective allocable shares of Purchaser and any Program Support
Party, if applicable, prior to the remittance thereof in accordance with such
Sections. If instructed by the Administrative Agent at any time, Servicer shall
segregate and deposit with a bank (which may be BofA) designated by the
Administrative Agent such allocable shares of Collections of Pool Receivables,
set aside for Purchaser, any Program Support Party and any other assignee from
Purchaser of any Undivided Interest, on the first Business Day following receipt
by Servicer of such Collections in immediately available funds.
(c)Modification of Receivables. So long as no Termination Event or Unmatured
Termination Event shall have occurred and be continuing, Seller, while it is
Servicer, may, in accordance with the Credit and Collection Procedure, (i)
extend the maturity or adjust the Unpaid Balance of any Defaulted Receivable as
Seller may reasonably determine to be appropriate to maximize Collections
thereof; provided that, no such extension shall be for more than a total of
thirty (30) days or cause any Defaulted Receivable to be an Eligible Receivable
and, after giving effect to such extension of maturity, the Aggregate Required
Allocations will not exceed the Required Allocations Limit, and (ii) adjust the
Unpaid Balance of any Receivable to reflect the reductions or cancellations
described in Section 3.03(a)(i).
(d)Documents and Records. Seller shall deliver to Servicer, and Servicer shall
hold in trust for Seller and Purchaser in accordance with their respective
interests, all documents, instruments and records (including, without
limitation, computer tapes or disks) that evidence or relate to Pool
Receivables, except for Excluded Data.
<PAGE>
(e)Certain Duties to Seller. Servicer shall, as soon as practicable following
receipt, turn over to Seller (i) that portion of Collections of Pool Receivables
representing its undivided interest therein, less, in the event Seller or an
Affiliate of the Seller is not the Servicer, all reasonable and appropriate
out-of-pocket costs and expenses (excluding overhead and any subservicing costs)
of Servicer of servicing, collecting and administering the Pool Receivables to
the extent not covered by the Servicer's Fee received by it, and (ii) the
Collections of any Receivable that is not a Pool Receivable. Servicer, if other
than Seller or an Affiliate of the Seller, shall, as soon as practicable upon
demand, deliver to Seller all documents, instruments and records in its
possession that evidence or relate to Receivables of Seller other than Pool
Receivables, and copies of documents, instruments and records in its possession
that evidence or relate to Pool Receivables.
(f)Termination. Servicer's authorization under this Agreement shall terminate on
the End Date.
SECTION 8.03.Rights of the Administrative Agent. (a) Notice to Obligors. At any
time following the occurrence and during the continuance of a Termination Event,
the Administrative Agent may notify the Obligors of Pool Receivables, or any of
them, of the ownership of Undivided Interests by Purchaser.
(b)Notice to Lock-Box Banks. At any time following the earliest to occur of (i)
the occurrence of a Termination Event, (ii) any of the Conditions Precedent
shall not be satisfied and the Administrative Agent, by written notice to Seller
and Servicer, shall have requested implementation of the Settlement procedures
set forth in Section 3.02, and (iii) the warranty in Section 6.01(i) shall no
longer be true with respect to a material portion of the Pool Receivables, the
Administrative Agent is hereby authorized to give notice to the Lock-Box Banks,
as provided in the Lock-Box Agreements, of the transfer to the Administrative
Agent of dominion and control over the lock-box accounts to which the Obligors
of Pool Receivables make payments. Seller hereby transfers to the Administrative
Agent, effective when the Administrative Agent shall give notice to the Lock-Box
Banks as provided in the Lock-Box Agreements, the exclusive dominion and control
over such lock-box accounts, and shall take any further action that the
Administrative Agent may reasonably request to effect such transfer. Seller
shall promptly (but in any event within two (2) Business Days) identify any
amounts deposited into any lock-box account that do not constitute Collections.
(c)Rights on Servicer Transfer Event. At any time following the designation of a
Servicer other than Seller pursuant to Section 8.01:
(i) the Administrative Agent may direct the Obligors of Pool Receivables, or any
of them, to pay all amounts payable under any Pool Receivable directly to the
Administrative Agent or its designee.
(ii) Seller shall, at the Administrative Agent's request and at Seller's
expense, give notice of Purchaser's ownership to each said Obligor and direct
that payments be made directly to the Administrative Agent or its designee.
<PAGE>
(iii) Seller shall, at the Administrative Agent's request, (a) assemble all of
the documents, instruments and other records (including, without limitation,
computer programs, tapes and disks), other than the Excluded Data, which
evidence the Pool Receivables, and the related Contracts and Related Security,
or which are otherwise necessary or desirable to collect such Pool Receivables,
and shall make the same available to the Administrative Agent at a place
selected by the Administrative Agent or its designee, and (b) segregate all
cash, checks and other instruments received by it from time to time constituting
Collections of Pool Receivables in a manner acceptable to the Administrative
Agent and shall, promptly upon receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of transfer, to the
Administrative Agent or its designee.
(iv) Each of Seller and Purchaser hereby authorizes the Administrative Agent to
take any and all steps, at any time after the Administrative Agent has given
notice to any Lock-Box Bank pursuant to Section 8.03(b), in Seller's name and on
behalf of Seller and Purchaser which are necessary or desirable, in the
reasonable determination of the Administrative Agent, to collect all amounts due
under any and all Pool Receivables, including, without limitation, endorsing
Seller's name on checks and other instruments representing Collections and
enforcing such Pool Receivables and the related Contracts.
(v) Actions taken by the Administrative Agent pursuant to this Article shall be
subject to the confidentiality provisions of Section 7.01(c).
SECTION 8.04.Responsibilities of Seller. Anything herein to the contrary
notwithstanding:
(a)Seller shall perform all of its obligations under the Contracts related to
the Pool Receivables and under the related purchase orders and other agreements
to the same extent as if Undivided Interests had not been sold hereunder and the
exercise by the Administrative Agent of its rights hereunder shall not relieve
Seller from such obligations.
(b)Neither the Administrative Agent nor Purchaser shall have any obligation or
liability with respect to any Pool Receivables, Contracts related thereto or any
other related purchase orders or other agreements, nor shall any of them be
obligated to perform any of the obligations of Seller thereunder.
(c)Seller hereby grants to Servicer an irrevocable power of attorney, with full
power of substitution, coupled with an interest, to take in the name of Seller
all steps which are necessary or advisable to endorse, negotiate or otherwise
realize on any writing or other right of any kind held or transmitted by Seller
or transmitted or received by Purchaser (whether or not from Seller) in
connection with any Pool Receivable.
SECTION 8.05.Further Action Evidencing Purchases. (a) Seller agrees that from
time to time, at Seller's expense, it will promptly execute and deliver all
further instruments and documents, and take all further action that the
Administrative Agent may reasonably request in order to perfect, protect or more
fully evidence the Purchases hereunder and the resulting Undivided Interests, or
to enable Purchaser or the
<PAGE>
Administrative Agent to exercise or enforce any of their respective rights
hereunder or under the Certificate of Assignments. Without limiting the
generality of the foregoing, Seller will:
(i) upon the request of the Administrative Agent, execute and file such
financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be necessary or
appropriate, to evidence that Undivided Interests have been sold in accordance
with this Agreement;
(ii) upon the request of the Administrative Agent, mark conspicuously each
Contract evidencing each Pool Receivable with a legend, acceptable to the
Administrative Agent, evidencing that Undivided Interests have been sold in
accordance with this Agreement; and
(iii) on or before the date of the initial Purchase, mark its master data
processing records evidencing such Pool Receivables and related Contracts with a
legend, acceptable to the Administrative Agent, evidencing that Undivided
Interests have been sold in accordance with this Agreement.
(b)Seller hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any of the Pool now existing or hereafter arising in
the name of Seller.
(c)Without limiting the generality of subsection (a), Seller will, not earlier
than six (6) months and not later than two (2) months prior to the fifth
anniversary of the date of filing of each of the financing statement referred to
in Section 5.01(f) or any other financing statement filed pursuant to this
Agreement or in connection with any Purchase hereunder, unless the End Date
shall have occurred:
(i) deliver to Purchaser for execution and, upon receipt from Purchaser of such
executed statements, file or cause to be filed appropriate continuation
statements with respect to such financing statements; and
(ii) deliver or cause to be delivered to the Administrative Agent an opinion of
the counsel for Seller referred to in Section 5.01(j) (or other counsel for
Seller reasonably satisfactory to the Administrative Agent), in form and
substance reasonably satisfactory to the Administrative Agent, confirming and
updating the opinion delivered pursuant to Section 5.01(j)-1 with respect to
(and only with respect to) the matters set forth in paragraph no. 7 of Exhibit
5.01(j)-1 subject to customary qualifications, assumptions and exclusions
typically included in such opinions.
SECTION 8.06.Application of Collections. Any payment by an Obligor in respect of
any indebtedness owed by it to Seller shall, except as otherwise specified by
such Obligor or otherwise required by contract or law and unless the
Administrative Agent instructs otherwise, be applied as a Collection of any Pool
Receivable or Receivables of such Obligor to the extent of any amounts then due
and payable thereunder before such payment is applied to any other indebtedness
of such Obligor.
<PAGE>
ARTICLE IX
SECURITY INTEREST
SECTION 9.01.Grant of Security Interest. To secure all obligations of Seller
arising in connection with this Agreement and each other Agreement Document to
which it is a party, whether now or hereafter existing, due or to become due,
direct or indirect, or absolute or contingent, including, without limitation,
all Indemnified Amounts, payments on account of Collections received or deemed
to be received, fees and Earned Discount, in each case pro rata according to the
respective amounts thereof, Seller hereby assigns and grants to Purchaser a
security interest in all of Seller's right, title and interest (including
specifically any undivided interest retained by Seller hereunder) now or
hereafter existing in, to and under all the Pool Receivables, the Related
Security and all Collections with regard thereto, and all proceeds of the
foregoing.
SECTION 9.02.Further Assurances. The provisions of Section 8.05 shall apply to
the security interest granted under Section 9.01 as well as to the Purchases and
all Undivided Interests hereunder.
SECTION 9.03.Remedies. Upon the occurrence and during the continuance of a
Termination Event, Purchaser shall have, with respect to the collateral granted
pursuant to Section 9.01, and in addition to all other rights and remedies
available to Purchaser or the Administrative Agent under this Agreement or other
applicable law, all the rights and remedies of a secured party upon default
under the UCC.
ARTICLE X
TERMINATION EVENTS
SECTION 10.01.Termination Events. If any of the following events ("Termination
Events") shall occur:
(a)(i) Servicer (if Seller or an Affiliate of Seller) shall fail to perform or
observe any term, covenant or agreement hereunder (other than as referred to in
clause (ii) next following) and such failure shall remain unremedied for two (2)
Business Days after notice (which may be by telephone) to Seller if such failure
is the failure to deliver a Periodic Report when due or ten (10) Business Days
after notice (which may be by telephone) to Seller in all other cases or (ii)
Servicer (if Seller or an Affiliate of Seller) or Seller (if not Servicer) shall
fail to make any payment or deposit to be made by it hereunder when due; or
(b)Seller or Guarantor shall fail to perform or observe any term, obligation,
covenant or agreement contained in Section 7.03 or 7.04 or to furnish to the
Administrative Agent, pursuant to Section 7.02(e), a certificate required as a
result of knowledge by an Executive Officer of Seller or Guarantor (as
applicable) of the occurrence of a Termination Event or an Unmatured Termination
Event; or
<PAGE>
(c)(i) If Seller shall fail to perform or observe any other term, obligation,
covenant or agreement contained herein on its part to be performed or observed
(other than in Section 7.03 or 7.04) and any such failure remains unremedied,
until the first to occur of the date forty-five (45) days after an Executive
Officer of Seller or Guarantor first obtains knowledge, or should have, in the
exercise of reasonable diligence, obtained knowledge, thereof or the date thirty
(30) days after written notice thereof shall have been given to Seller by the
Administrative Agent, (ii) if any representation or warranty made by Seller or
Guarantor in this Agreement (other than in Section 6.01(b), 6.01(c), 6.01(e),
6.01(h), 6.02(b), 6.02(c) or 6.02(e)), or in any other Agreement Document to
which it is a party, shall prove to have been incorrect, incomplete or
misleading when made or deemed made in any material respect, and any such
representation or warranty continues to be incorrect, incomplete or misleading
in any material respect until the first to occur of the date forty-five (45)
days after an Executive Officer of Seller or Guarantor first obtains knowledge,
or should have, in the exercise of reasonable diligence, obtained knowledge,
thereof or the date thirty (30) days after written notice thereof shall have
been given to Seller by the Administrative Agent or (iii) any representation or
warranty made by Seller or Guarantor in Section 6.01(b), 6.01(c), 6.01(e),
6.01(h), 6.02(b), 6.02(c) or 6.02(e) shall prove to have been incorrect,
incomplete or misleading when made or deemed made in any material respect; or
(d) (i) An "Event of Default" shall have occurred and be continuing under the
Bank Credit Agreement; or (ii) with respect to any Indebtedness for money
borrowed (other than the notes issued under the Bank Credit Agreement) or for
the deferred purchase price of property created, issued, guaranteed, incurred or
assumed by Seller, Guarantor or any Affiliate thereof which Indebtedness is in
an aggregate principal amount equal to or greater than $10,000,000, Seller,
Guarantor or any Affiliate thereof shall (a) default in the payment of principal
of or interest on any such Indebtedness beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness was
created, or (b) default in the observance or performance of any other agreement
or condition relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition described in either clause (i) or (ii) of this paragraph is a failure
to pay such Indebtedness at maturity or is to cause, or to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, such Indebtedness to become due prior to its stated maturity;
provided, however, that in the event any such default or other condition
described in either clause (i) or (ii) of this paragraph shall have been cured
or waived or any such acceleration rescinded in accordance with the terms
thereof prior to the time that the Administrative Agent has declared the
Commitment Termination Date to have occurred, this Termination Event shall
automatically cease to exist; or
(e)A Change of Control shall occur; or
(f)An Event of Bankruptcy shall have occurred and remained continuing with
respect to Seller or Guarantor; or
<PAGE>
(g)(i) Any litigation (including, without limitation, derivative actions),
arbitration proceedings or governmental proceedings not disclosed in writing by
Seller to the Administrative Agent and Purchaser prior to the date of execution
and delivery of this Agreement is pending against Seller or Guarantor, or (ii)
any material development not so disclosed has occurred in any litigation
(including, without limitation, derivative actions), arbitration proceedings or
governmental proceedings so disclosed, which, in the case of clause (i) or (ii),
in the reasonable opinion of the Administrative Agent, is likely to have a
Material Adverse Effect; or
(h)At any time, the Aggregate Required Allocations shall exceed the Required
Allocations Limit; or
(i)The Default Ratio exceeds 5% or the Delinquency Ratio exceeds 8%; or
(j) The Losses to Liquidations Ratio exceeds 1.5%; or
(k) The Six Month Dilution Ratio exceeds 10%; or
(l)There shall have occurred any event which has a Material Adverse Effect; or
(m)The Internal Revenue Service shall file notice of a lien pursuant to Section
6323 of the Internal Revenue Code with regard to any of the assets of Seller or
Guarantor and such lien shall not have been released within five (5) days, or
the Pension Benefit Guaranty Corporation shall file notice of a lien pursuant to
Section 4068 of the Employee Retirement Income Security Act of 1974 with regard
to any of the assets of Seller or Guarantor and such lien shall not have been
released within five (5) days.
SECTION 10.02.Remedies. (a) Optional Termination. Upon the occurrence of a
Termination Event (other than a Termination Event described in subsection (f) of
Section 10.01), the Administrative Agent shall, at the request, or may with the
consent, of Purchaser, by written notice to Seller declare the Commitment
Termination Date to have occurred, which Commitment Termination Date shall be
the date of such notice.
(b)Automatic Termination. Upon the occurrence of a Termination Event described
in subsection (f) of Section 10.01, the Commitment Termination Date shall be
deemed to have occurred automatically upon the occurrence of such event.
(c)Additional Remedies. Upon any termination of the facility pursuant to this
Section 10.02, the Administrative Agent and Purchaser shall have, in addition to
all other rights and remedies under this Agreement and any other Agreement
Document or otherwise, all other rights and remedies provided under the UCC of
each applicable jurisdiction and other applicable laws, which rights shall be
cumulative. Without limiting the foregoing or the general applicability of
Article XII hereof, (i) the occurrence of a Termination Event shall not deny to
Purchaser any remedy in addition to termination of the Commitment to which
Purchaser may be otherwise appropriately entitled, whether at law or in equity,
and (ii) following the
<PAGE>
occurrence of any Termination Event Purchaser may elect to assign to any Person
any Undivided Interest owned by Purchaser.
ARTICLE XI
THE ADMINISTRATIVE AGENT
SECTION 11.01.Authorization and Action. Purchaser hereby appoints and authorizes
the Administrative Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement as are delegated to the Administrative
Agent by the terms hereof, together with such powers as are reasonably
incidental thereto.
SECTION 11.02.Administrative Agent's Reliance, Etc. Neither the Administrative
Agent nor any of its directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken by it or the Administrative Agent
under or in connection with this Agreement (including, without limitation, the
servicing, administering or collecting Pool Receivables as Servicer pursuant to
Section 8.01), except for its or their own gross negligence or willful
misconduct. Without limiting the generality of the foregoing, the Administrative
Agent: (a) may consult with legal counsel (including counsel for Seller),
independent certified public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (b)
makes no warranty or representation to Purchaser or any other holder of any
interest in Pool Receivables and shall not be responsible to Purchaser or any
such other holder for any statements, warranties or representations made in or
in connection with this Agreement or any other Agreement Document; (c) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement on the part of
Seller or Guarantor or to inspect the property (including the books and records)
of Seller or Guarantor; (d) shall not be responsible to Purchaser or any other
holder of any interest in Pool Receivables for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
the Certificate of Assignments or any other Agreement Document; and (e) shall
incur no liability under or in respect of this Agreement or any other Agreement
Document by acting upon any notice (including notice by telephone), consent,
certificate or other instrument or writing (which may be by facsimile or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 11.03.Administrative Agent and Affiliates. BofA and its Affiliates may
generally engage in any kind of business with Seller, Guarantor or any Obligor,
any of their respective Affiliates and any Person who may do business with or
own securities of Seller, Guarantor or any Obligor or any of their respective
Affiliates, all as if BofA were not the Administrative Agent and without any
duty to account therefor to Purchaser or any other holder of an interest in Pool
Receivables.
<PAGE>
SECTION 11.04. Seller's Failure to Perform. If Seller fails to perform any of
its agreements or obligations under this Agreement within any applicable time or
grace period, the Administrative Agent may (but shall not be required to) itself
perform, or cause performance of, such agreement or obligation, and the expenses
of the Administrative Agent incurred in connection therewith shall be payable by
Seller as provided in Section 13.01, provided, however, that the Administrative
Agent shall not perform Seller's obligations under any Contract, other than
those necessary to service and collect the related Pool Receivables.
ARTICLE XII
ASSIGNMENT OF PURCHASER'S INTEREST
SECTION 12.01.Restrictions on Assignments. (a) Neither Seller nor Purchaser may
assign its rights hereunder or any interest herein without the prior written
consent of the Administrative Agent, and Purchaser may not assign any Undivided
Interest (or portion thereof) to any Person without the prior written consent of
Seller, which consent shall not be unreasonably withheld; provided, however,
that
(i) Purchaser may assign, or grant a security interest in, any Undivided
Interest (or portion thereof) to BofA, any Program Support Provider (or any
successor of any thereof by merger, consolidation or otherwise), any other
commercial paper conduit administered by BofA or any Affiliate thereof, any
Affiliate of BofA or any Program Support Provider (which may then assign any
Undivided Interest (or portion thereof) so assigned or any interest therein to
such party or parties as it may choose); and
(ii) Purchaser may assign and grant a security interest in any interest in, to
and under any Undivided Interest, this Agreement and the other Agreement
Documents to BofA, as Collateral Trustee, and any successor in such capacity, to
secure Purchaser's obligations under or in connection with the Commercial Paper
Notes, any Program Support Agreement, and certain other obligations of Purchaser
incurred in connection with the funding of the Purchases and Reinvestments
hereunder, which assignment and grant of a security interest shall not be
considered an "assignment" for purposes of Section 12.01(b), Section 12.03 or
12.04 or, prior to the enforcement of such security interest, for purposes of
any other provision of this Agreement.
(b)Seller agrees to advise the Administrative Agent within five (5) Business
Days after receipt by Seller of written notice of any proposed assignment by
Purchaser of any Undivided Interest (or portion thereof), not otherwise
permitted under subsection (a), of Seller's consent or non-consent to such
assignment. If Seller does not consent to such assignment, Purchaser may
immediately assign such Undivided Interest (or portion thereof) to BofA, any
Program Support Provider or any Affiliate of BofA or any Program Support
Provider. All of the aforementioned assignments shall be upon such terms and
conditions as Purchaser and the assignee may mutually agree.
<PAGE>
SECTION 12.02.Rights of Assignee. Upon the assignment by Purchaser of any
Undivided Interest (or portion thereof) in accordance with this Article XII, (a)
the assignee receiving such assignment shall have all of the rights, and shall
be deemed to have assumed all of the obligations, of Purchaser hereunder with
respect to such Undivided Interest (or such parties thereof) and (b) all
references to Purchaser in Section 4.02 shall be deemed to apply to such
assignee to the extent of its interest in the related Purchaser's Investment and
the related Collections.
SECTION 12.03.Allocation of Payments. If on any date there are sufficient funds
in the Administrative Agent's account to distribute a portion, but not all, of
the amounts payable pursuant to subsection (c)(i) of either Section 3.01 or
Section 3.02 and, due to any assignment of any Undivided Interest (or portion
thereof), such amounts are payable to more than one Person, then (unless
otherwise agreed between such Persons) (a) if any of such Persons is a Program
Support Provider, as assignee of or holder of a security interest in such
Undivided Interest pursuant to a Program Support Agreement, then the
Administrative Agent shall distribute such funds (i) first to such Program
Support Provider, to the extent of its interest in such Undivided Interest (or
shall hold such funds in trust for such Program Support Provider pending
distribution in accordance with the applicable Program Support Agreement) and
(ii) second to any Program Support Provider, to the extent of its accrued and
unpaid interest in any other Undivided Interest (or shall hold such funds in
trust for such Program Support Provider pending distribution in accordance with
the applicable Program Support Agreement), before distributing any such funds to
any other Person, and (b) in all other cases, the Administrative Agent shall
distribute funds to such Persons pro rata based upon the amounts so payable to
such Persons.
SECTION 12.04.Notice of Assignment. Purchaser shall provide written notice to
Seller of any assignment of any Undivided Interest (or portion thereof) by
Purchaser to any assignee, other than an assignment to a Program Support
Provider pursuant to an applicable Program Support Agreement or to the
Collateral Trustee.
SECTION 12.05.Evidence of Assignment; Endorsement on Certificate. Any assignment
of any Undivided Interest (or portion thereof) to any Person may be evidenced by
an instrument of assignment in the form of Exhibit 12.05 or by such other
instrument(s) or document(s) as may be satisfactory to Purchaser, the
Administrative Agent and the assignee. Purchaser authorizes the Administrative
Agent to, and the Administrative Agent agrees that it shall, endorse the
Certificate of Assignments to reflect any assignments made in accordance with
this Article XII or otherwise.
SECTION 12.06.Rights of Program Support Provider and Collateral Trustee. Seller
hereby agrees that, upon notice to Seller, a Program Support Provider and the
Collateral Trustee referred to in Section 12.01, or either of them, may exercise
all the rights of the Administrative Agent hereunder, in the case of a Program
Support Provider, with respect to Undivided Interests, and Collections with
respect thereto, which have been assigned (or in which a security interest has
been granted) to such Program Support Provider, and in the case of such
Collateral Trustee, with respect to all Undivided Interests (or portions
thereof), and Collections with respect thereto, which are owned by Purchaser
(and not subject to an assignment or security interest in favor of
<PAGE>
such Program Support Provider under a Program Support Agreement), and all other
rights and interests of Purchaser in, to or under this Agreement or any other
Agreement Document. Without limiting the foregoing, upon such notice such
Program Support Provider and such Collateral Trustee, or either of them, may
request Servicer to segregate Purchaser's and Program Support Provider's
allocable shares of Collections from Seller's allocable share, and from each
other's allocable share, in accordance with Section 8.02(a), may give a
Successor Notice pursuant to Section 8.01(a), may give or require the
Administrative Agent to give notice to the Lock-Box Banks as referred to in
Section 8.03(a), and may direct the Obligors of Pool Receivables to make
payments in respect thereof directly to an account designated by them (provided
that such Program Support Provider and such Collateral Trustee together shall
designate a single account for the making of such payments with respect to any
Pool Receivable), in each case, to the same extent as the Administrative Agent
might have done.
ARTICLE XIII
INDEMNIFICATION
SECTION 13.01.Indemnities by Seller and Guarantor. (a) General Indemnity.
Without limiting any other rights which any such Person may have hereunder or
under applicable law, each of Guarantor and the Seller hereby agrees, jointly
and severally, to indemnify each of the Administrative Agent, Purchaser, BASI,
each Program Support Provider, BofA, each of BofA's Affiliates, their respective
successors, transferees, participants and assigns and all officers, directors,
shareholders, controlling persons, employees and agents of any of the foregoing
(each an "Indemnified Party"), forthwith on demand, from and against any and all
damages, losses, claims, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against or incurred
by any of them arising out of or relating to this Agreement, any other Agreement
Document or the ownership or funding of any Undivided Interest or in respect of
any Receivable or any Contract, excluding, however, (a) Indemnified Amounts to
the extent determined by a court of competent jurisdiction to have resulted from
gross negligence or willful misconduct on the part of the Administrative Agent,
Purchaser or such Indemnified Party and (b) recourse (except as otherwise
specifically provided in Article II of this Agreement in connection with the
calculation of Undivided Interests) for Defaulted Receivables. Without limiting
the foregoing, each of Guarantor and the Seller hereby agrees, jointly and
severally, to indemnify each Indemnified Party for Indemnified Amounts arising
out of or relating to:
(i) the transfer by Seller of any interest in any Receivable other than the
transfer of an Undivided Interest to Purchaser pursuant to this Agreement and
the grant of a security interest to Purchaser pursuant to Section 9.01;
(ii) the breach of any representation or warranty made by Seller or Guarantor
(or any of their respective officers) under or in connection with this
Agreement, any other Agreement Document, any Periodic Report or
<PAGE>
any other information or report delivered by Seller or Guarantor pursuant
hereto, which shall have been false or incorrect in any material respect when
made or deemed made;
(iii) the failure by Seller or Guarantor to comply with any applicable law, rule
or regulation with respect to any Pool Receivable or the related Contract, or
the nonconformity of any Pool Receivable or the related Contract with any such
applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in Purchaser an undivided
percentage ownership interest, to the extent of each Undivided Interest owned by
it hereunder, in the Receivables in, or purporting to be in, the Receivables
Pool, free and clear of any Adverse Claim, other than an Adverse Claim arising
solely as a result of an act of Purchaser, any assignee from Purchaser or the
Administrative Agent, whether existing at the time of any Purchase or
Reinvestment of such Undivided Interest or at any time thereafter;
(v) the failure to file, or any delay in filing, Financing Statements or other
similar instruments or documents under the UCC of any applicable jurisdiction or
other applicable laws with respect to any receivables in, or purporting to be
in, the Receivables Pool, whether at the time of any Purchase or Reinvestment or
at any time thereafter;
(vi) any dispute, claim, offset or defense (other than discharge in bankruptcy)
of the Obligor to the payment of any Receivable in, or purporting to be in, the
Receivables Pool (including, without limitation, a defense based on such
Receivable's or the related Contract's not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with its terms),
or any other claim resulting from the sale of the merchandise or services
related to such Receivable or the furnishing or failure to furnish such
merchandise or services;
(vii) any failure of Seller or the Servicer (if Servicer is Seller or an
Affiliate of Seller) to perform its duties or obligations in accordance with the
provisions of Article VIII;
(viii) any breach of warranty or products liability claim arising out of or in
connection with merchandise or services that are the subject of any Pool
Receivable; or
(ix) any tax or governmental fee or charge (but not including taxes upon or
measured by net income), all interest and penalties thereon or with respect
thereto, and all out-of-pocket costs and expenses, including the reasonable fees
and expenses of counsel in defending against the same, which may arise by reason
of the purchase or ownership of any Undivided Interest, or any other interest in
the Pool Receivables or in any goods which secure any such Pool Receivables.
(b)Contest of Tax Claim; After-Tax Basis. If any Indemnified Party shall have
notice of any attempt to impose or collect any tax or governmental fee or charge
for which indemnification will be sought from Seller or Guarantor under Section
13.01(a)(ix), such Indemnified Party shall give prompt notice of such attempt to
<PAGE>
Seller and Seller or Guarantor shall have the right, at its expense, to
participate in any proceedings resisting or objecting to the imposition or
collection of any such tax, governmental fee or charge. Indemnification
hereunder shall be in an amount necessary to make the Indemnified Party whole
after taking into account any tax consequences to the Indemnified Party of the
payment of any of the aforesaid taxes and the receipt of the indemnity provided
hereunder or of any refund of any such tax previously indemnified hereunder,
including the effect of such tax or refund on the amount of tax measured by net
income or profits which is or was payable by the Indemnified Party.
(c)Contribution. If for any reason the indemnification provided above in this
Section 13.01 is unavailable to an Indemnified Party or is insufficient to hold
an Indemnified Party harmless, then each of Seller and Guarantor, jointly and
severally, agrees to contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by such Indemnified Party on the one hand and Seller and Guarantor on the other
hand but also the relative fault of such Indemnified Party as well as any other
relevant equitable considerations.
ARTICLE XIV
GUARANTEE
SECTION 14.01. Guarantee. (a) Guarantor hereby unconditionally and irrevocably
covenants and agrees that it will cause Seller duly and punctually to perform
and observe all of the terms, conditions, covenants, agreements (including,
without limitation, agreements to make payments of Collections or deemed
Collections) and indemnities of Seller under this Agreement and the other
Agreement Documents strictly in accordance with the terms hereof and thereof and
that if for any reason whatsoever Seller shall fail to so perform and observe
such terms, conditions, covenants, agreements and indemnities, Guarantor will
duly and punctually perform and observe the same.
(b)The liabilities and obligations of Guarantor under this Section 14.01 shall
be absolute and unconditional under all circumstances and shall be performed by
Guarantor regardless of (i) whether Purchaser or the Administrative Agent shall
have taken any steps to collect from Seller any of the amounts payable by Seller
to Purchaser or the Administrative Agent under this Agreement or shall otherwise
have exercised any of their rights or remedies under this Agreement or the other
Agreement Documents against Seller or against any Obligor under any of the Pool
Receivables, (ii) the validity, legality or enforceability of this Agreement or
of any other Agreement Documents against Seller, or the disaffirmance of any
thereof in any Event of Bankruptcy relating to Seller, (iii) any law, regulation
or decree now or hereafter in effect which might in any manner affect any of the
terms or provisions of this Agreement or any other Agreement Document or any of
the rights of Purchaser or the Administrative Agent as against Seller or as
against any Obligor under any of such Pool Receivables or which might cause or
permit to be invoked any alteration in time, amount,
<PAGE>
manner of payment or performance of any amount payable by Seller to Purchaser or
the Administrative Agent under this Agreement, (iv) the merger or consolidation
of Seller into or with any corporation or any sale or transfer by Seller or all
or any part of its property, (v) the existence or assertion of any Adverse Claim
with respect to any Pool Receivable, or (vi) any other circumstance whatsoever
(with or without notice to or knowledge of Guarantor) which may or might in any
manner or to any extent vary the risk of Guarantor, or might otherwise
constitute a legal or equitable discharge of a surety or guarantor, it being the
purpose and intent of Guarantor that the liabilities and obligations of
Guarantor under this Section 14.01 shall be absolute and unconditional under any
and all circumstances, and shall not be discharged except by payment and
performance as in this Agreement provided. The guaranty set forth in this
Section 14.01 is a guaranty of payment and performance and not just of
collection.
(c)Without in any way affecting or impairing the liabilities and obligations of
Guarantor under this Section 14.01, Purchaser or the Administrative Agent may at
any time and from time to time in its discretion, without the consent of, or
notice to, Guarantor, and without releasing or affecting Guarantor's liability
hereunder (i) extend or change the time, manner, place or terms of this
Agreement or any other Agreement Document, (ii) settle or compromise any of the
amounts payable by Seller to Purchaser under this Agreement or subordinate the
same to the claims of others, (iii) retain or obtain a lien upon or security
interest in any property to secure any of the obligations hereunder, (iv) retain
or obtain the primary or secondary obligation of any obligor or obligors, in
addition to Guarantor, with respect to any of the obligations due hereunder, or
(v) release or fail to perfect any lien upon or security interest in, or impair,
surrender, release or permit any substitution in exchange for, all or any part
of any property securing any of the obligations under this Agreement, it being
understood that nothing contained in this Section 14.01(c) shall give Purchaser
or the Administrative Agent the right to take any of the foregoing actions if
not permitted by the other provisions of this Agreement, by law or otherwise.
(d)The provisions of this Section 14.01 shall continue to be effective or be
reinstated, as the case may be, if any time payment of any of the amounts
payable by Seller to Purchaser or the Administrative Agent under this Agreement
is rescinded or must otherwise be restored or returned by Purchaser or the
Administrative Agent, as the case may be, upon any Event of Bankruptcy involving
Seller, or otherwise, all as though such payment had not been made. Guarantor
hereby waives (i) notices of the occurrence of any default hereunder (other than
notices expressly required under this Agreement), (ii) any requirement of
diligence or promptness on the part of Purchaser or the Administrative Agent in
making demand, commencing suit or exercising any other right or remedy under
this Agreement, or otherwise, and (iii) any right to require Purchaser or the
Administrative Agent to exercise any right or remedy against Seller or the Pool
Receivables prior to enforcing any of their rights against Guarantor under this
Section 14.01. Guarantor agrees that, in the event of an Event of Bankruptcy
with respect to either Seller or Guarantor, or both, and if such event shall
occur at a time when all of the Indemnified Amounts and other amounts due under
this Agreement may not then be due and payable, Guarantor will pay to Purchaser
forthwith the full amount which would be payable hereunder by Guarantor if all
such Indemnified Amounts and other obligations were then due and payable.
<PAGE>
SECTION 14.02. Maintenance of Ownership. Guarantor covenants and agrees that
until the End Date, Guarantor, or one of its Wholly Owned Subsidiaries, will (a)
maintain, directly or indirectly, ownership of 100% of all of the issued and
outstanding shares of each class of voting capital stock of Seller, free and
clear of all liens and encumbrances and (b) maintain control of the election of
the Board of Directors of Seller.
SECTION 14.03. Representation and Warranty. Guarantor represents and warrants
that it now has, and will continue to have, independent means of obtaining
information concerning Seller's affairs, financial condition and business.
Neither Purchaser nor the Administrative Agent shall have any duty or
responsibility to provide Guarantor with any credit or other information
concerning Seller's affairs, financial condition or business which may come into
Purchaser's or the Administrative Agent's possession.
SECTION 14.04. Subrogation. Guarantor hereby agrees that no payment made by it
or for its account pursuant to this Agreement shall entitle Guarantor by
subrogation, indemnification, contribution, reimbursement or otherwise to any
payment by Seller or from or out of any property of Seller, until after the End
Date and Guarantor shall not exercise any rights or remedies it has or may in
the future have with respect to any of the foregoing until after the End Date.
ARTICLE XV
MISCELLANEOUS
SECTION 15.01.Amendments, Etc. No amendment or waiver of any provision of this
Agreement nor consent to any departure by Seller therefrom shall in any event be
effective unless the same shall be in writing and signed by (a) Seller, the
Administrative Agent and Purchaser (with respect to an amendment) or (b) the
Administrative Agent and Purchaser (with respect to a waiver or consent by any
of them) or Seller (with respect to a waiver or consent by Seller or Guarantor),
as the case may be, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 15.02.Notices, Etc. All notices and other communications provided for
hereunder shall, unless otherwise expressly stated herein, be in writing
(including Telex and facsimile communication) and shall be personally delivered
or sent by certified mail, postage prepaid, or by Telex, or by facsimile, to the
intended party at the address or Telex or facsimile number of such party set
forth under its name on the signature pages hereof or at such other address or
Telex or facsimile number as shall be designated by such party in a written
notice to the other parties hereto. All such notices and communications shall be
effective, (a) if personally delivered, when received, (b) if sent by certified
mail, three Business Days after having been deposited in the mail, postage
prepaid, (c) if sent by overnight courier, one Business Day after having been
given to such courier, (d) if transmitted by Telex, when sent, answerback
confirmed, and (e) if transmitted by facsimile, when sent, receipt confirmed by
telephone or electronic means, except that notices and
<PAGE>
communications pursuant to Article I, Section 2.04(c), Section 8.01(b) and the
definition of "Designated Obligor" shall not be effective until received.
SECTION 15.03.No Waiver; Remedies. No failure on the part of the Administrative
Agent, any Affected Party, any Indemnified Party, Purchaser or any other holder
of any Undivided Interest to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
SECTION 15.04.Binding Effect; Survival. This Agreement shall be binding upon and
inure to the benefit of Seller, and Guarantor, the Administrative Agent,
Purchaser and their respective successors and assigns, and the provisions of
Section 4.02 and Article XIII shall inure to the benefit of the Affected Parties
and the Indemnified Parties, respectively, and their respective successors and
assigns; provided, however, nothing in the foregoing shall be deemed to
authorize any assignment not permitted by Section 12.01. This Agreement shall
create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until the
End Date. The rights and remedies with respect to any breach of any
representation and warranty made by Seller and Guarantor pursuant to Article VI
and the indemnification and payment provisions of Article XIII and Sections
4.02, 14.05, 14.06 and 14.07 shall be continuing and shall survive any
termination of this Agreement. After the End Date, the Administrative Agent
shall, at the request and expense of the Seller, execute and deliver to the
Seller such documents as the Seller shall reasonably request to evidence the
termination of such Undivided Interests, including, without limitation, UCC
termination statements.
SECTION 15.05.Costs, Expenses and Taxes. In addition to its obligations under
Article XIII, Seller and Guarantor, jointly and severally agree to pay on
demand:
(a)all reasonable costs and expenses incurred by the Administrative Agent,
Purchaser, BofA, BASI, each Program Support Provider and their respective
Affiliates in connection with the negotiation, preparation, execution and
delivery, the administration (including periodic auditing) or the enforcement
of, or any actual or claimed breach of, this Agreement, the Certificate of
Assignments and the other Agreement Documents, including, without limitation (i)
the reasonable fees and out-of-pocket expenses of counsel to any of such Persons
incurred in connection with any of the foregoing or in advising such Persons as
to their respective rights and remedies under any of the Agreement Documents,
provided, that Seller and Guarantor shall only be responsible for the fees and
expenses of one counsel for such Persons, unless a conflict of interest or
potential conflict of interest exists among such Persons, and (ii) all
reasonable out-of-pocket expenses (including reasonable fees and expenses of
independent accountants) incurred in connection with any review of Seller's or
Guarantor's books and records either prior to the execution and delivery hereof
or pursuant to the terms hereof; and
<PAGE>
(b)all stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Agreement,
the Certificate of Assignments or the other Agreement Documents, and agrees to
indemnify each Indemnified Party against any liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
SECTION 15.06.No Proceedings. Seller, Guarantor and BofA, individually and as
Administrative Agent, each hereby agrees that it will not institute against
Purchaser, or join any other Person in instituting against Purchaser, any
insolvency proceeding (namely, any proceeding of the type referred to in the
definition of Event of Bankruptcy) so long as any Commercial Paper Notes issued
by Purchaser shall be outstanding or there shall not have elapsed one year plus
one day since the last day on which any such Commercial Paper Notes shall have
been outstanding. The foregoing shall not limit Seller's right to file any claim
in or otherwise take any action with respect to any insolvency proceeding that
was instituted by any Person other than Seller or Guarantor.
SECTION 15.07. Confidentiality of BofA Information. (a) Each party hereto (other
than BofA) acknowledges that BofA regards the structure of the transactions
contemplated by this Agreement, the other Agreement Documents, and by any
Program Support Agreement and the other Program Documents referred to therein,
to be proprietary, and each such party severally agrees that:
(i) unless BofA shall otherwise agree in writing, and except as provided in
subsection (b), such party will not disclose to any other person or entity:
(a) any information furnished to such party by any BofA Information Provider
regarding the asset securitization transaction contemplated hereby,
(b)copies of this Agreement,
(c) any information furnished to such party by any BofA Information Provider
regarding, or copies of, any Program Support Agreement, any of the other Program
Documents referred to therein, or any transaction contemplated thereby,
(d) any information furnished to such party by any BofA Information Provider
regarding the organization or business of Purchaser generally, or
(e) any information regarding BofA which is furnished to such party by any BofA
Information Provider and is designated by BofA to such party in writing or
otherwise as confidential or not otherwise available to the general public
(the information referred to in clauses (a), (b), (c), (d) and
<PAGE>
(e) above, whether furnished by Purchaser, BofA, (including any branch or agency
thereof), any Program Support Provider, any assignee of or participant in any
rights or obligations of Purchaser or any Program Support Provider identified to
Seller and Guarantor by written notice from the assignor or seller of such
participation interest, as the case may be, or any attorney for any of the
foregoing (each a "BofA Information Provider"), is collectively referred to as
the "BofA Information"; provided, however, "BofA Information" shall not include
any information which is or becomes generally available to the general public or
to such party on a nonconfidential basis from a source other than BofA or any
other BofA Information Provider, or which was known to such party on a
nonconfidential basis prior to its disclosure by BofA or any other BofA
Information Provider);
(ii) such party will make the BofA Information available to only such of its
officers, directors, employees and agents, and to officers, directors, employees
and agents of any of its Affiliates, who (a) in the good faith belief of such
party, have a need to know such BofA Information, and (b) are informed by such
party of the confidential nature of the BofA Information and the terms of this
Section 15.07; and
(iii) such party will not use the BofA Information as the basis of a similar
financing with any other party.
(b) Notwithstanding clause (i) of subsection (a), each party may disclose any
BofA Information:
(i) to its independent attorneys, consultants and auditors who (a) in the good
faith belief of such party, have a need to know such BofA Information and (b)
are informed by such party of the confidential nature of the BofA Information
and the terms of this Section 15.07;
(ii) to any other party to this Agreement;
(iii) as may be required in Seller's reasonable judgment, by any municipal,
state, federal or other regulatory body, whether domestic or foreign,
(including, without limitation, the SEC) having or claiming to have jurisdiction
over such party, in order to comply with any law, order, regulation, regulatory
request or ruling applicable to such party (it being understood that in no event
will the Fee Letter be publicly filed without the Administrative Agent's prior
written consent); or
(iv) subject to subsection (c), in the event such party is legally compelled (by
interrogatories, requests for information or copies, subpoena, civil
investigative demand or similar process) to disclose such BofA Information.
(c) In the event that any party hereto (other than BofA) or anyone to whom such
party or its representatives transmits the BofA Information is requested or
becomes legally compelled (by interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process) to disclose
any of the BofA Information other than pursuant to subsections (b)(i) or (ii),
such party will (or will cause its representatives to)
<PAGE>
(i) provide BofA with prompt written notice so that (a) Purchaser,
BofA, or any other BofA Information Provider, at BofA's sole cost and expense,
may seek a protective order or other appropriate remedy, or (b) BofA may, if it
so chooses, agree that such party (or its representatives) may disclose such
BofA Information pursuant to such request or legal compulsion;
(ii) unless BofA agrees that such BofA Information may be disclosed, make
(at BofA's sole cost and expense) a timely objection to the request or
compulsion to provide such BofA Information on the basis that such BofA
Information is confidential and subject to the agreements contained in this
Section 15.07;
(iii) take any action (at BofA's sole cost and expense) as BofA or any
other BofA Information Provider may reasonably request to seek a protective
order or other appropriate remedy, provided that, in connection therewith, such
party shall have first received such assurances as it may reasonably request
that BofA or such other BofA Information Provider shall reimburse such party's
or its representatives' reasonable costs and expenses or provide such other
assistance as such party or its representatives may reasonably require; and
(iv) in the event that such protective order or other remedy is not
obtained, or BofA agrees that such BofA Information may be disclosed, use its
best efforts to furnish only that portion of the BofA Information which such
party reasonably believes is legally required to be furnished, and, provided
such party (or its representative) is reimbursed or assisted as referred to in
clause (iii) above, exercise best efforts to obtain reliable assurance that
confidential treatment will be accorded the BofA Information.
(d) This Section 15.07 shall survive termination of this Agreement for a
period ending on the later of (i) June 30, 1998, or (ii) the End Date.
SECTION 15.08. Captions and Cross References. The various captions (including,
without limitation, the table of contents) in this Agreement are provided solely
for convenience of reference and shall not affect the meaning or interpretation
of any provision of this Agreement. Unless otherwise indicated, references in
this Agreement to any Section, Appendix, Schedule or Exhibit are to such Section
of or Appendix, Schedule or Exhibit to this Agreement, as the case may be, and
references in any Section, subsection, or clause to any subsection, clause or
subclause are to such subsection, clause or subclause of such Section,
subsection or clause.
SECTION 15.09. Integration. This Agreement contains a final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire Agreement among the
parties hereto with respect to the subject matter hereof, superseding all prior
oral or written understandings.
SECTION 15.10. Governing Law. THIS AGREEMENT, INCLUDING THE RIGHTS AND DUTIES OF
THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE EXTENT THAT THE PERFECTION
OF THE INTERESTS OF THE PURCHASER IN THE RECEIVABLES IS GOVERNED BY THE LAWS OF
THE JURISDICTION OTHER THAN THE STATE OF ILLINOIS.
<PAGE>
SECTION 15.11. Waiver Of Jury Trial. SELLER AND GUARANTOR HEREBY EXPRESSLY WAIVE
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS AGREEMENT, THE CERTIFICATE OF ASSIGNMENTS, ANY OTHER
AGREEMENT DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR
WHICH MAY BE IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM
ANY BANKING OR OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT,
THE CERTIFICATE OF ASSIGNMENTS OR ANY OTHER AGREEMENT DOCUMENT AND AGREE THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT A JURY
TRIAL.
SECTION 15.12. Consent To Jurisdiction; Waiver Of Immunities. EACH OF SELLER,
PURCHASER AND GUARANTOR HEREBY ACKNOWLEDGES AND AGREES THAT:
(a)IT IRREVOCABLY (i) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION, FIRST, OF ANY
UNITED STATES FEDERAL COURT, AND SECOND, IF FEDERAL JURISDICTION IS NOT
AVAILABLE, OF ANY ILLINOIS STATE COURT, IN EITHER CASE SITTING IN CHICAGO,
ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, AND (ii) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING.
(b)TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM THE
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID TO EXECUTION, EXECUTION
OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, IT HEREBY IRREVOCABLY
WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER OR IN CONNECTION WITH
THIS AGREEMENT.
SECTION 15.13. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
Agreement.
SECTION 15.14. Originators. Until such time, if ever, that a Purchase and Sale
Agreement with an Originator is executed, delivered and approved by the
Administrative Agent, all references to such Originator, or a purchase from such
Originator, shall be inoperative.
[SIGNATURES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.
RECEIVABLES CAPITAL CORPORATION,
as Purchaser
By
Title
c/o Merrill Lynch Money Markets Inc.
World Financial Center - North Tower
250 Vesey - 10th Floor
New York, New York 10081
Attention: Mr. Thomas Dunstan
Telephone Number: (212) 449-2234
Facsimile Number: (212) 449-1606
And with a copy to the Administrative Agent (except in the case of notice from
the Administrative Agent)
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as the Administrative Agent
By
Vice President
231 South LaSalle Street
Chicago, Illinois 60697
Facsimile No.: (312) 828-7855
Attention: Angela Hutson - Asset
Securitization Group
SCI TECHNOLOGY, INC.,
as Seller and initial Servicer
By
Title
2101 West Clinton Avenue
Huntsville, Alabama 35805
Facsimile No.: (205) 882-4466
Attention: Treasurer
SCI SYSTEMS, INC.
By
Title
c/o SCI Systems (Alabama), Inc.
2101 West Clinton Avenue
Huntsville, Alabama 35805
Facsimile No.: (205) 882-4466
Attention: Corporate Counsel
<PAGE>
APPENDIX A
DEFINITIONS
This is Appendix A to the Receivables Purchase Agreement dated as of June 30,
1995 among SCI Technology, Inc., as Seller, SCI Systems, Inc., as Guarantor,
Receivables Capital Corporation, as Purchaser, and Bank of America National
Trust and Savings Association, as Administrative Agent (as amended, supplemented
or otherwise modified from time to time, this "Agreement"). Each reference in
this Appendix A to any Section, Appendix or Exhibit refers to such Section of or
Appendix or Exhibit to this Agreement.
INDEX
Page No.
A.Defined Terms A-1
B.Other Terms A-22
C.Computations of
Time Periods A-22
A.Defined Terms. As used in this Agreement, unless the context requires a
different meaning, the following terms have the meanings indicated hereinbelow:
"A-12 Program" means the full scale engineering, development, production and
delivery of electronic assemblies for the Navy's proposed A-12 Advanced Tactical
Fighter contemplated by the following McDonnell-Douglas purchase orders: E83006,
E83004, E91369, E91324, E02929, E02927 and J00545.
"A-12 Program Financial Statements Adjustments" means any charge, expense,
write-off or reserve change of Guarantor arising out of or relating to the A-12
Program as determined in accordance with GAAP, cumulatively determined for the
periods as applicable, and which arose after March 28, 1993.
"Accounts Payable Amount" means at any time the aggregate amount owed by Seller
or any Originator to any Obligor at such time.
"Accounts Receivable" means all rights of any Person to payment for goods sold
or leased or for services rendered, whether or not such rights to payment have
been earned by performance,
<PAGE>
including, without limitation, all accounts, contract rights, chattel paper,
instruments and documents of any Person arising from the sale of goods or
services by such Person, whether secured or unsecured, and whether now existing
or hereafter created or arising and including, further, without limitation,
federal and state tax refunds due and owing to such Person relating to taxes
previously paid by such Person less all doubtful accounts receivable owing to
such Person, as determined in accordance with GAAP. For the sole purpose of
testing the financial covenant set forth in Section 7.04(c) hereof, any A-12
Program Financial Statements Adjustments relating to Accounts Receivable
previously recognized in accordance with GAAP shall be added to the amount of
Accounts Receivable in order to determine the Adjusted Working Capital of the
Guarantor and its consolidated Subsidiaries, except as otherwise set forth in
Section 7.04(c) hereof.
"Adjusted Average Maturity" has the meaning set forth in Appendix B.
"Adjusted Working Capital" means at any date of determination, ninety percent
(90%) of the Accounts Receivable of Guarantor and its consolidated Subsidiaries
plus eighty-five percent (85%) of the Inventory of Guarantor and its
consolidated Subsidiaries.
"Administrative Agent" has the meaning set forth in the preamble.
"Administrative Agent's Account" has the meaning set forth in Section 3.05(a).
"Adverse Claim" means a Lien or other right or claim of any Person other than
(a) a potential claim or right (that has not yet been asserted) of a trustee
appointed for an Obligor in connection with any Event of Bankruptcy or (b) an
unfiled lien for taxes accrued but not yet payable.
"Affected Party" means each of Purchaser, each Program Support Provider, any
permitted assignee of Purchaser or a Program Support Provider, any assignee of
any of Purchaser's obligations to a Program Support Provider in respect of any
Funding, or any holder of a participation interest, in the rights and
obligations of any Program Support Provider under any Program Support Agreement
and in respect of any Funding, the Administrative Agent, BankAmerica Corporation
and any holding company of BofA.
"Affiliate" when used with respect to a Person means any other Person
controlling, controlled by, or under common control with, such Person.
"Aggregate Purchaser's Investments" at any time means the sum of the Dollar
amount of all Purchaser's Investments.
"Aggregate Required Allocations" at any time means the sum of all Required
Allocations of all Undivided Interests.
<PAGE>
"Agreement Documents" means this Agreement, the Certificate of Assignments, the
Lock-Box Agreements, the Fee Letter and the other documents to be executed and
delivered in connection herewith.
"Alabama UCC" means the UCC, as in effect from time to time in the State of
Alabama.
"Alternate Reference Rate" has the meaning set forth in Appendix B.
"Arrangement Fee" has the meaning set forth in the Fee Letter.
"Average Maturity" has the meaning set forth in Appendix B .
"Bank Credit Agreement" means that certain Credit Agreement dated as of June 25,
1993, by and among Guarantor, as borrower thereunder, Citibank, N.A., as agent,
ABN AMRO Bank N.V., as co-agent, and the other lenders signatory thereto, as the
same may be amended, supplemented, extended, renewed, restated, refinanced or
replaced from time to time.
"Bank Rate" has the meaning set forth in Appendix B.
"BASI" means BA Securities, Inc.
"BofA" has the meaning set forth in the preamble.
"BofA Information" has the meaning set forth in Section 15.07.
"Business Day" means a day on which both (a) the Administrative Agent at its
office in Chicago, Illinois is open for business and (b) commercial banks in New
York City and Huntsville, Alabama are not authorized or required to be closed
for business.
"Certificate of Assignments" means a certificate of assignment, by Seller to
Purchaser, in the form of Exhibit 5.01(a), evidencing an Undivided Interest
owned by Purchaser or an assignee thereof.
"Change of Control" means (i) that Seller or any Originator ceases to be a
Wholly Owned Subsidiary of Guarantor or (ii) in relation to Guarantor, the
acquisition by any Person or group of Persons (within the meaning of Section 13
or 14 of the Exchange Act), of beneficial ownership (within the meaning of Rule
13d-3 promulgated by the SEC under the Exchange Act) of issued and outstanding
shares of the capital stock of Guarantor entitled (without regard to the
occurrence of any contingency) to vote for the election of members of the board
of directors of Guarantor and having a then present right to exercise 50% or
more of the voting power for the election of members of the board of directors
of Guarantor attached to all such outstanding shares of capital stock of
Guarantor.
<PAGE>
"Collateral Trustee" means BofA, in its capacity as collateral trustee for the
holders of the Commercial Paper Notes and the Program Support Providers, and any
successor to BofA in such capacity.
"Collections" means, with respect to any Receivable, all funds which either (a)
are received by Seller, any Originator or Servicer from or on behalf of the
related Obligors in payment of any amounts owed (including, without limitation,
purchase prices, finance charges, interest and all other charges) in respect of
such Receivable, or applied to such amounts owed by such Obligors (including,
without limitation, insurance payments that Seller, any Originator or Servicer
applies in the ordinary course of its business to amounts owed in respect of
such Receivable and net proceeds of sale or other disposition of repossessed
goods or other collateral or property of the Obligor or any other party directly
or indirectly liable for payment of such Receivable and available to be applied
thereon), or (b) are deemed to have been received, by Seller or any other Person
as a Collection pursuant to Section 3.03.
"Commercial Paper Notes" means short-term promissory notes issued or to be
issued by Purchaser to fund its investments in accounts receivable or other
financial assets.
"Commercial Paper Rate" has the meaning set forth in Appendix B.
"Commitment" has the meaning set forth in Section 1.01.
"Commitment Termination Date" has the meaning set forth in Section 1.05(a).
"Concentration Limit" has the meaning set forth in Section 2.04(b).
"Conditions Precedent" has the meaning set forth in Section 5.02.
"Consistent Basis" means, in reference to the application of GAAP, that the
accounting principles observed in the period referred to are comparable in all
material respects to those applied in the preceding period, except to the extent
required to reflect a change in GAAP or any other changes consented to by the
Administrative Agent.
"Contingent Obligation" as to any Person means any obligation of such Person
guaranteeing or in effect guaranteeing any indebtedness, leases, dividends or
other contractual obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the
<PAGE>
ability of the primary obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the owner of such primary obligation
against loss in respect thereof; provided, however, that the term Contingent
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not state or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good faith.
"Contract" means a contract between Seller and any Person, or an invoice from
Seller to any Person or a purchase order from any Person to Seller, in each case
pursuant to or under which such Person shall be obligated to make payments to
Seller.
"Credit and Collection Procedure" means those credit and collection policies and
practices relating to Contracts and Receivables described in the Coopers &
Lybrand report attached as Schedule 6.01(m)-2, as modified without violating
Section 7.03(c).
"Credit Reserve" with respect to any Undivided Interest at any time means an
amount equal to the greater of (1) the product of (i) the Purchaser's Investment
of such Undivided Interest at such time divided by the Aggregate Purchaser's
Investments at such time times (ii) $5,000,000 and (2) the product of (i) the
Purchaser's Investment of such Undivided Interest at such time, times (ii) the
greatest of (a) 12%, (b) the product of (1) five times (2) the highest Default
Ratio to have occurred for the most recent twelve Month End Dates (or, if less,
for the most recent Month End Dates occurring from the date hereof to the date
of determination) and (c) the product of (1) 2.5 times (2) the highest
Delinquency Ratio to have occurred for the most recent twelve Month End Dates;
it being understood, that until Servicer has reported the Default Ratio using at
least six months of data, clause (b) shall not be applicable.
"Debentures of 1987" means the Indebtedness of Guarantor in the aggregate
original principal amount of $75,000,000 evidenced by the Guarantor's 5-5/8%
Convertible Subordinated Debentures due March 1, 2012, issued pursuant to the
Indenture, dated as of March 1, 1987, between Guarantor and Wachovia Bank of
Georgia, N.A. (formerly known as The First National Bank of Atlanta), as
trustee. The Debentures of 1987 are subordinated on liquidation, on terms and
conditions set forth in the Indenture pursuant to which they were issued.
"Default Ratio" means the ratio (expressed as a percentage) computed as of each
Month End Date by dividing (x) the aggregate Unpaid Balance of all Pool
Receivables that were Defaulted Receivables on each of such Month End Date and
the five (5) immediately preceding Month End Dates by (y) the aggregate Unpaid
Balance of all Pool Receivables on such Month End Dates.
<PAGE>
"Defaulted Receivable" means a Receivable:
(a) as to which any payment, or part thereof, remains unpaid for 120 days (or
150 days if the Obligor thereof is a Governmental Authority) from the invoice
date, other than amounts deemed uncollectible, in Seller's reasonable judgment,
due to billing disputes, contract cancellations and adjustments, which, in each
case, are not related to and do not result from credit problems,
(b) is due from an Obligor with respect to which an Event of Bankruptcy has
occurred and remains continuing,
(c) as to which payments have been extended, or the terms of payment thereof
rewritten, without the Administrative Agent's consent, other than as permitted
in Section 8.02(c), or
(d) which has been or, consistent with the Credit and Collection Procedure,
should be, written off Seller's books as uncollectible.
"Delinquency Ratio" means the ratio (expressed as a percentage) computed as of
each Month End Date by dividing (x) the aggregate Unpaid Balance of all Pool
Receivables that were Delinquent Receivables on each of such Month End Date and
the five (5) immediately preceding Month End Dates by (y) the aggregate Unpaid
Balance of all Pool Receivables on such Month End Dates.
"Delinquent Receivable" means a Receivable as to which any payment, or part
thereof, remains unpaid for 90 days from the invoice date, other than amounts
deemed uncollectible, in Seller's reasonable judgment, due to billing disputes,
contract cancellations for other than credit reasons and adjustments.
"Designated Obligor" means, at any time, all Obligors except Excluded Obligors
and any such Obligor as to which the Administrative Agent has, at least three
(3) Business Days prior to the date of determination, given written notice to
Seller that such Obligor shall not be considered a Designated Obligor.
"Dilution Factors" means any event or condition described in clause (i) of
Section 3.03(a) that would cause any Pool Receivable or portion thereof to be
deemed a Collection.
"Dilution Ratio" means, as of any Month End Date, the quotient (expressed as a
percentage) of (a) the aggregate reduction attributable to Dilution Factors
occurring prior to such day in the Unpaid Balance of Eligible Receivables
originated during the six successive months (or, if less, the months from the
month of this Agreement to the month of the date of determination) ending on
such Month End Date divided by (b) the aggregate amount of Collections for such
period.
"Dilution Reserve" with respect to any Undivided Interest at any time means an
amount equal to the greater of (1) (i) the Purchaser's Investment of such
Undivided Interest at such time, times (ii)
<PAGE>
the greater of (a) 6% and (b) 2 times the highest Dilution Ratio to have
occurred for the most recent twelve Month End Dates (or, if less, the number of
Month End Dates from the first Month End Date to occur after the date hereof to
the last Month End Date to have occurred prior to the date of determination) and
(2) (i) $2,000,000 times (ii) the Purchaser's Investment of such Undivided
Interest divided by the Aggregate Purchaser's Investments.
"Discount Factor" has the meaning set forth in Appendix B.
"Dollars" means dollars in lawful money of the United States of America.
"Domestic CD Rate (Adjusted)" has the meaning set forth in Appendix B.
"Earned Discount" has the meaning set forth in Appendix B.
"EBIT" means for any fiscal year of the Guarantor, an amount equal to the sum
for such fiscal year of (i) Net Income plus (ii) provisions for income taxes
plus (iii) Interest Expense, all determined by Guarantor and its Subsidiaries on
a consolidated basis in accordance with GAAP; provided, however, that all cash
items of gain or loss for such fiscal period which are not ordinary by GAAP
definition shall be included in the computation of EBIT and provided, further,
that all non-cash items of gain or loss for such fiscal period which are not
ordinary by GAAP definition shall be excluded from the computation of EBIT.
"Eligible Contract" means a Contract similar to one of the forms set forth in
Schedule 6.01(m)-1 or in another form approved by Seller in the exercise of its
reasonable business judgment.
"Eligible Receivable" means, at any time, a Receivable:
(a)the Obligor of which is not an Affiliate of Seller and is a Designated
Obligor at the time of the creation of an interest in such Receivable hereunder;
(b)the Obligor of which is located in the United States (or is fully guaranteed
by an Affiliate of the Obligor that is located in the United States pursuant to
a guaranty in substantially the form attached hereto as Exhibit I-1 or such
other form satisfactory in form to the Administrative Agent), or the Obligor is
a foreign Subsidiary of a United States corporation and the Unpaid Balance of
which, when combined with the Unpaid Balance of all other foreign Obligors whose
obligations are not guaranteed by a United States Affiliate, does not exceed 3%
of the Net Pool Balance;
(c)which is not a Defaulted Receivable;
(d)(i) which arose in the ordinary course of Seller's or an Originator's
business from the sale of Seller's or such Originator's merchandise, insurance
or services; provided that, if such Receivable was not originated by Seller, the
Unpaid Balance of such Receivable, when added to the aggregate
<PAGE>
Unpaid Balance of all other Pool Receivables not originated by Seller, does not
exceed (5)% of the aggregate Unpaid Balance of all Eligible Receivables and (ii)
which, according to the Contract related thereto, is required to be paid in full
within thirty (30) days of the original billing date or statement date therefor;
(e) which is an account receivable representing all or part of the sales price
of merchandise, insurance or services within the meaning of Section 3(c)(5) of
the Investment Company Act of 1940, as amended;
(f)which is denominated and payable only in United States dollars;
(g)which arises under an Eligible Contract which has been duly authorized and
which, together with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the Obligor of such
Receivable enforceable against such Obligor, as to all material terms thereof,
in accordance with its terms;
(h)the Obligor of which is not the Obligor of Defaulted Receivables that
represent more than 10% of the aggregate Unpaid Balance of all Receivables of
such Obligor;
(i)which is not subject to any existing dispute, offset, counter-claim or
defense whatsoever, except for Accounts Payable Amounts;
(j)which, together with the Contract related thereto, does not contravene any
laws, rules or regulations applicable thereto (including, without limitation,
laws, rules and regulations relating to truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt collection practices
and privacy) in any material respect and with respect to which no party to the
Contract related thereto is in violation of any such law, rule or regulation in
any material respect;
(k)as to which, at or prior to the time of the initial creation of an interest
in such Receivable through a Purchase, the Administrative Agent has not notified
the Seller that the Administrative Agent (exercising its reasonable credit
judgment) has determined that such Receivable (or the class of Receivables into
which such Receivable falls) is not acceptable for purchase by the Purchaser
hereunder;
(l)no portion of which includes any amounts payable in respect of sales taxes;
(m)which is not a progress billing;
(n)which, (i) if the perfection of Purchaser's undivided ownership interest
therein is governed by the laws of a jurisdiction where the UCC -- Secured
Transactions is in force, constitutes an account as defined in the UCC as in
effect in such jurisdiction, and (ii) if the perfection of Purchaser's undivided
ownership interest therein is governed by the law of any jurisdiction where the
UCC --
<PAGE>
Secured Transactions is not in force, Seller has furnished to the Administrative
Agent such opinions of counsel as have reasonably been requested and/or other
evidence as has reasonably been requested, establishing to the reasonable
satisfaction of the Administrative Agent that Purchaser's undivided ownership
interest and other rights with respect thereto are not significantly less
protected and favorable than such rights under the UCC;
(o)with regard to which the warranty of Seller in Section 6.01(i) is true and
correct;
(p)which arises out of a current transaction, or the proceeds of which have been
or are to be used for current transactions, within the meaning of Section
3(a)(3) of the Securities Act of 1933, as amended;
(q)which (i) satisfies all applicable requirements of the related Credit and
Collection Procedure and (ii) complies with such other criteria and requirements
as the Administrative Agent (exercising its reasonable credit judgment) may from
time to time specify to the Seller; and
(r)if such Receivable was originated by an Originator, which was sold in a true
sale to Seller pursuant to a Purchase and Sale Agreement that has been approved
by the Administrative Agent and with respect to which all conditions precedent
have been met to the satisfaction of the Administrative Agent (including,
without limitation, the delivery of opinions of counsel).
"End Date" means the date after the Commitment Termination Date on which all of
the Undivided Interests have been reduced to zero and all other amounts payable
to Purchaser or the Administrative Agent hereunder have been paid in full.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Rate (Reserve Adjusted)" has the meaning set forth in Appendix B.
"Event of Bankruptcy" shall be deemed to have occurred with respect to a Person
if either:
(a) a case or other proceeding shall be commenced, without the application or
consent of such Person, in any court, seeking the liquidation, reorganization,
debt arrangement, dissolution, winding up, or composition or readjustment of
debts of such Person, the appointment of a trustee, receiver, custodian,
liquidator, assignee, sequestrator or the like for such Person or all or
substantially all of its assets, or any similar action with respect to such
Person under any law relating to bankruptcy, insolvency, reorganization, winding
up or composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of 60 consecutive
days; or an order for relief in respect of such Person shall be entered in an
involuntary case under the federal bankruptcy laws or other similar laws now or
hereafter in effect; or
<PAGE>
(b) such Person shall commence a voluntary case or other proceeding under any
applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution
or other similar law now or hereafter in effect, or shall consent to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) for, such Person or
for any substantial part of its property, or shall make any general assignment
for the benefit of creditors, or shall fail to, or admit in writing its
inability to, pay its debts generally as they become due, or, if a corporation
or similar entity, its board of directors shall vote to implement any of the
foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Data" means any information or data pertaining to an Obligor, the
disclosure of which information and data by Seller, Guarantor or any Affiliate
of either of them (collectively, the "Disclosing Parties") to the Administrative
Agent or Purchaser could violate, in the good faith belief of counsel, any
applicable "fair credit" law, privacy law or any similar statute, rule or
regulation, or any contractual provision binding on any such Disclosing Party.
"Excluded Obligors" means NEC Technologies, Inc, and each Governmental
Authority.
"Executive Officer " means those officers of Guarantor or Seller, as the case
may be, who are deemed to be "Executive Officers" thereof pursuant to Rule 405
of Regulation C of the Exchange Act or any officer of Guarantor or Seller, as
the case may be, who is a senior vice president thereof, or any individual
performing a similar role as any individual who is a senior vice president of
Guarantor or Seller on the date of this Agreement.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System, or any successor thereto or to the functions thereof.
"Fee Letter" has the meaning set forth in Section 4.01.
"Financing Lease(s)" shall mean (a) any lease of property, real or personal, the
then present value of the minimum rental commitment of which should, in
accordance with GAAP, be capitalized on a balance sheet of the lessee, and (b)
any other such lease the obligations under which are capitalized on a
consolidated balance sheet of Seller or Guarantor and its Subsidiaries.
"Financing Statement" means any financing statement that lists the Seller (under
any current name, any previous name or any trade name) as debtor and that is
filed in any jurisdiction in which filings would be appropriate under the UCC or
any comparable law to perfect a security interest in any Receivable, any
Collections with respect thereto, any Related Security or any Contract.
<PAGE>
"Funding" means a drawing under a letter of credit, surety bond or other
instrument issued pursuant to a Program Support Agreement, a drawing on a cash
collateral account funded pursuant to a Program Support Agreement, a purchase,
loan or other extension of credit made by a Program Support Provider to the
Purchaser under a Program Support Agreement, or any other advance or
disbursement of funds from or to the Purchaser or for the Purchaser's account or
for which the Purchaser is obligated to reimburse a Program Support Provider
pursuant to a Program Support Agreement.
"GAAP" means United States generally accepted accounting principles.
"Governmental Authority" means any nation or government (including, without
limitation, the United States government), any state or other political
subdivision thereof and any entity exercising executive, legislative, judicial,
regulatory or administrative function of or pertaining to government.
"Guarantor" has the meaning set forth in the preamble.
"Indebtedness" of a Person, at a particular date, means any of the following at
such date, without duplication, (a) indebtedness of such Person for borrowed
money or evidenced by notes, bonds, debentures or like instruments, (b)
indebtedness of such Person for the deferred purchase price of property or
services, except current accounts payable and accrued expenses arising in the
ordinary course of business, (c) obligations of such Person under any Financing
Lease, (d) indebtedness of such Person arising under acceptance facilities, (e)
unreimbursed draws on letters of credit and (f) Contingent Obligations.
"Indemnified Amounts" has the meaning set forth in Section 13.01.
"Indemnified Party" has the meaning set forth in Section 13.01.
"Interest Expense" means for any fiscal year of Guarantor, total interest
expense (including, without limitation, interest expense attributable to
capitalized leases in accordance with GAAP) of Guarantor and its Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"Inventory" means, with respect to any Person, all goods, merchandise and other
personal property held for sale, and all raw materials, components, work or
goods in process, finished goods, goods in transit and packing and shipping
materials, accretions and accessions thereto, trust receipts and similar
documents covering the same products, all whether now owned or hereafter
acquired by such Person, all as determined in accordance with GAAP. For the sole
purpose of testing the financial covenant set forth in Section 7.04(c) hereof,
any A-12 Program Financial Statements Adjustments relating to Inventory
previously recognized in accordance with GAAP shall be added to the amount of
Inventory in order to determine the Adjusted Working Capital of Guarantor and
its consolidated Subsidiaries, except as otherwise set forth in Section 7.04(c).
<PAGE>
"Lien" means a lien, security interest, charge or encumbrance.
"Liquidations" means all funds described in clause (a) of the definition of
Collections.
"Liquidity Agreement" means the Liquidity Asset Purchase Agreement, dated as of
June 30, 1995, among Purchaser, BofA, as Liquidity Agent, and the Liquidity
Banks, as amended, supplemented or otherwise modified from time to time.
"Liquidity Banks" means the purchasers from time to time parties to the
Liquidity Agreement.
"Lock-Box Agreement" means a letter agreement, in substantially the form of
Exhibit 5.01(i), between Seller and any Lock-Box Bank.
"Lock-Box Bank" means any of the banks holding one or more lock-box accounts for
receiving Collections from Pool Receivables.
"Losses to Liquidations Ratio" means the percentage that (x) the write-offs (net
of recoveries) recognized during the six month period ending on the most recent
Month End Date on all Receivables owned by Seller was of (y) Collections of such
Receivables during such period.
"Material Adverse Effect" means a material adverse effect on:
(i) the financial condition, business, assets, prospects or operations of
Guarantor and its Subsidiaries, taken as a whole;
(ii) the ability of Seller, Servicer or Guarantor to perform its obligations
under this Agreement or the other Agreement Documents to which it is a party;
(iii) the validity, enforceability, status, perfection or priority of
Purchaser's interest in the Pool; or
(iv) the collectability or enforceability of a significant portion of the Pool
Receivables.
"Month End Date" means the last day of each fiscal month.
"Moody's" means Moody's Investors Service, Inc., and any successor thereto.
"Negative Spread Fee" has the meaning set forth in Appendix B.
"Net Income" means, as applied to any Person for any fiscal period, the
aggregate amount of net income (or net loss) of such Person, after taxes, for
such period as determined in accordance with GAAP.
<PAGE>
"Net Pool Balance" has the meaning set forth in Section 2.04(a).
"Non-Use Fee" has the meaning set forth in the Fee Letter.
"Non-Use Fee Rate" has the meaning set forth in the Fee Letter.
"Note Fee" has the meaning set forth in the Fee Letter.
"Obligor" means a Person obligated to make payments with respect to a
Receivable.
"Originators" means SCI Systems (Canada), Inc., a Canadian corporation formed
under the laws of the Province of Quebec, and Adelantos De Tecnologia S.A. de
C.V., a corporation formed under the laws of the Republic of Mexico, and their
successors and permitted assigns.
"Owner" means, for each Undivided Interest upon its purchase, the Purchaser as
the purchaser thereof; provided, however, that, upon any assignment of the
Certificate of Assignments related to any Undivided Interest made in accordance
with Article XII, the assignee thereof shall be the Owner of such Undivided
Interest.
"Periodic Report" means a report in substantially the form of Exhibit 3.04(a).
"Permitted Subordinated Debentures" means debentures contemplated to be issued
from time to time by Guarantor after the date of this Agreement that (i) are
subordinated in writing to all obligations of Guarantor and Seller hereunder,
such subordination provisions to be on terms and conditions reasonably
satisfactory in all respects to the Administrative Agent and (ii) do not exceed
$150,000,000 in the aggregate at any time, but such term shall specifically
exclude the Debentures of 1987.
"Person" means an individual, partnership, corporation (including a business
trust), joint stock company, limited liability company, trust, unincorporated
association, joint venture, government or any agency or political subdivision
thereof or any other entity.
"Pool" has the meaning set forth in Section 2.01.
"Pool Receivable" means a Receivable in the Receivables Pool.
"Program Fee Rate" has the meaning set forth in the Fee Letter.
"Program Support Agreement" means and includes the Liquidity Agreement and any
other agreement hereafter entered into by any Program Support Provider providing
for the issuance of one or more letters of credit for the account of the
Purchaser, the issuance of one or more surety bonds for which the Purchaser is
obligated to reimburse the applicable Program Support Provider
<PAGE>
for any drawings thereunder, the sale by the Purchaser to any Program Support
Provider of Undivided Interests (or portions thereof) and/or the making of loans
and/or other extensions of credit to the Purchaser in connection with the
Purchaser's securitization program, together with any letter of credit, surety
bond or other instrument issued thereunder (but excluding any discretionary
advance facility provided by the Administrative Agent).
"Program Support Provider" means and includes BofA, the Liquidity Banks and any
other or additional Person (other than any customer of the Purchaser) now or
hereafter extending credit or having a commitment to extend credit to or for the
account of the Purchaser or issuing a letter of credit, surety bond or other
instrument to support any obligations arising under or in connection with the
Purchaser's securitization program.
"Purchase" has the meaning set forth in Section 1.01(a).
"Purchase and Sale Agreement" means a Purchase and Sale Agreement between Seller
and an Originator, as it may be amended, supplemented or otherwise modified from
time to time.
"Purchase Limit" has the meaning set forth in Section 1.02(a).
"Purchase Termination Date" has the meaning set forth in Section 1.06.
"Purchaser" has the meaning set forth in the preamble.
"Purchaser Rate" has the meaning set forth in Appendix B.
"Purchaser's Investment" has the meaning set forth in Section 2.03.
"Purchaser's Share" has the meaning set forth in Section 2.05.
"Rate Variance Factor" has the meaning set forth in Appendix B.
"Receivable" means any right to payment from a Person, whether constituting an
account, chattel paper, instrument or general intangible, arising from the sale
by Seller or any Originator of merchandise or services rendered by Seller or
such Originator, as the case may be, and includes the right to payment of any
interest or finance charges and other obligations of such Person with respect
thereto.
"Receivables Pool" means at any time all then outstanding Receivables as to
which the Obligors thereunder are Designated Obligors. If a Receivable is a Pool
Receivable on the day immediately preceding the Commitment Termination Date,
such Receivable shall continue to be considered a Pool Receivable at all times
thereafter.
<PAGE>
"Regulation D" means Regulation D of the Federal Reserve Board, or any other
regulation of the Federal Reserve Board that prescribes reserve requirements
applicable to nonpersonal time deposits or "Eurocurrency Liabilities" as
currently defined in Regulation D, as in effect from time to time.
"Regulatory Change" means, relative to any Affected Party
(a)any change in (or the adoption, implementation, phase-in or commencement of
effectiveness of)
any
(i)United States federal or state law or foreign law applicable to such Affected
Party;
(ii)regulation, interpretation, directive, requirement or request (whether or
not having the force of law) applicable to such Affected Party of (a) any court,
government authority charged with the interpretation or administration of any
law referred to in clause (a)(i) or of (b) any fiscal, monetary or other
authority having jurisdiction over such Affected Party; or
(iii)generally accepted accounting principles or regulatory accounting
principles applicable to such Affected Party and affecting the application to
such Affected Party of any law, regulation, interpretation, directive,
requirement or request referred to in clause (a)(i) or (a)(ii) above; or
(b)any change in the application to such Affected Party of any existing law,
regulation, interpretation, directive, requirement, request or accounting
principles referred to in clause (a)(i), (a)(ii) or (a)(iii) above.
"Reinvestment" has the meaning set forth in Section 1.01(b).
"Related Security" means, with respect to any Pool Receivable: (a) all of
Seller's right, title and interest in, under and to all security agreements or
other agreements that relate to such Pool Receivable; (b) all of Seller's
interest in the merchandise (including returned merchandise), if any, relating
to the sale which gave rise to such Pool Receivable; (c) all other security
interests or liens and property subject thereto from time to time purporting to
secure payment of such Pool Receivable, whether pursuant to the Contract related
to such Pool Receivable or otherwise; (d) all UCC financing statements covering
any collateral securing payment of such Pool Receivable; (e) all guarantees and
other agreements or arrangements of whatever character from time to time
supporting or securing payment of such Pool Receivable whether pursuant to the
Contract related to such Pool Receivable or otherwise; and (f) all of Seller's
rights and claims under the Purchase and Sale Agreement. The interest of
Purchaser in any Related Security is only to the extent of Purchaser's Undivided
interest, as more fully described in the definition of an Undivided Interest.
"Remaining Collections" has the meaning set forth in Section 3.01(a)(ii).
<PAGE>
"Required Allocations" with respect to any Undivided Interest at any time means
the sum of Purchaser's Investment, Discount Factor, Servicer's Fee Reserve,
Credit Reserve and Dilution Reserve
with respect to such Undivided Interest at such time.
"Required Allocations Limit" has the meaning set forth in Section 1.02(b).
"Requirement of Law" for any Person shall mean the Certificate of Incorporation
and By-Laws or other organizational or governing documents of such Person, and
any law, treaty, rule or regulation, or determination of an arbitrator or a
court or other governmental authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
"Run Off Day" for any Undivided Interest means any of (a) each day which occurs
on or after the date designated by the Administrative Agent to Seller to be the
"Run Off Commencement Date" during a time when any of the conditions precedent
set forth in Section 5.02 are not satisfied, (b) each day which occurs on or
after the Termination Date for such Undivided Interest or (c) each day which
occurs on or after the Seller shall have given written notice to the
Administrative Agent that it no longer wishes to sell Undivided Interests in the
Receivables Pool to Purchaser.
"Run Off Discount" has the meaning set forth in Appendix B.
"Run Off Period" means one or more successive Run Off Days.
"Run Off Servicer's Fee" has the meaning set forth in Appendix B.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw Hill, Inc.,
and any successor thereto.
"Scheduled Commitment Termination Date" has the meaning set forth in Section
1.05(a).
"SEC" means the Securities and Exchange Commission.
"Seller" has the meaning set forth in the preamble.
"Servicer" has the meaning set forth in Section 8.01(a).
"Servicer Transfer Event" has the meaning set forth in Section 8.01(b).
"Servicer's Fee" has the meaning set forth in Appendix B.
"Servicer's Fee Reserve" has the meaning set forth in Appendix B.
<PAGE>
"Settlement Date" means the last day of each Settlement Period.
"Settlement Period" for any Undivided Interest means
(a)each period commencing on the first day of each Yield Period for such
Undivided Interest and ending on the last day of such Yield Period; and
(b)on and after the Termination Date for such Undivided Interest, such period
(including, without limitation, a daily period) as shall be selected from time
to time by the Administrative Agent or, in absence of any such selection, each
period of thirty (30) days from the next preceding Settlement Date;
provided, however, that
(i) with respect to any Yield Period of one day (as described in clause (ii) of
the proviso of the definition of "Yield Period"), the related Settlement Period
shall be the first day following such Yield Period;
(ii) any Settlement Period which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day; and
(iii) the last Settlement Period shall end on the End Date.
"Special Concentration Limit" has the meaning set forth in Section 2.04(c).
"Subordinated Debt" means (i) the Debentures of 1987, (ii) the Permitted
Subordinated Debentures and (iii) any other Indebtedness of Guarantor or any
Subsidiary of Guarantor which is subordinated in writing to all obligations of
Guarantor or such Subsidiary on terms and conditions satisfactory in all
respects to the Administrative Agent and approved in writing by the
Administrative Agent (which approval shall not be unreasonably withheld or
delayed) including, without limitation, with respect to interest rates, payment
terms, maturities, amortization schedules, covenants, defaults, remedies and
subordination provisions.
"Subsidiary" of any Person shall mean a corporation or other entity of which
shares of stock or other ownership interests having ordinary voting power (other
than stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, including through other Subsidiaries, by such
Person.
"Successor Notice" has the meaning set forth in Section 8.01(b).
<PAGE>
"Termination Date" for any Undivided Interest means the Commitment Termination
Date.
"Termination Event" has the meaning set forth in Section 10.01.
"Total Capital" means, as to any Person at a particular date, the sum of (i) all
items which would, in accordance with GAAP, be properly classified on the
balance sheet of such Person as (a) total shareholders' equity plus (b)
long-term deferred income taxes, plus (ii) Total Debt.
"Total Debt" means, as to any Person at a particular date, the sum of all items
which would, in accordance with GAAP, be properly classified on such Person's
balance sheet as (i) short-term debt for money borrowed, plus (ii) current
maturities of long-term debt, plus (iii) long-term debt, including, without
limitation, with respect to Guarantor, the Subordinated Debt and to the extent
issued, the Permitted Subordinated Debentures.
"Trigger Event" means that either (i) at the end of any fiscal quarter, the
ratio of EBIT to Interest Expense is less than 3.0 to 1.0 or (ii) the ratio of
Total Debt to Total Capital is more than fifty-five percent (55%).
"UCC" means the Uniform Commercial Code as from time to time in effect in the
applicable jurisdiction or jurisdictions.
"Undivided Interest" has the meaning set forth in Section 2.01.
"Unmatured Termination Event" means any event which, with the giving of notice
or lapse of time, or both, would become a Termination Event.
"Unpaid Balance" of any Receivable means at any time the sum of (x) the unpaid
principal amount thereof, minus (y) any amounts representing any sales or other
similar tax.
"Unused Commitment" means, on any day, the excess of the Purchase Limit for such
day over the Aggregate Purchaser's Investments on such day.
"Wholly Owned Subsidiary" means a Subsidiary all of whose issued and outstanding
capital stock (other than directors' qualifying shares) is owned by Guarantor or
another Wholly Owned Subsidiary.
"Yield Period" means with respect to any Undivided Interest (or portion
thereof):
(a)the period commencing on the date of the initial Purchase of such Undivided
Interest (or such portion) and ending such number of days (not to exceed
seventy-five (75) days) thereafter as the Administrative Agent shall select,
after consultation with the Seller, pursuant to, and in compliance with, Section
1.03 or 3.06; and
<PAGE>
(b)thereafter, each period commencing on the last day of the immediately
preceding Yield Period for such Undivided Interest (or such portion) and ending
such number of days (not to exceed seventy-five (75) days) thereafter as the
Administrative Agent shall select, after consultation with the Seller;
provided, however, that
(i) any such Yield Period (other than a Yield Period consisting of one day)
which would otherwise end on a day that is not a Business Day shall be extended
to the next succeeding Business Day (unless the related Undivided Interest shall
be accruing Earned Discount at a rate determined by reference to the Eurodollar
Rate (Reserve Adjusted), in which case if such succeeding Business Day is in a
different calendar month, such Yield Period shall instead be shortened to the
next preceding Business Day);
(ii) in the case of Yield Periods of one day for any Undivided Interest, (a) the
initial Yield Period shall be the day of the related Purchase; (b) any
subsequently occurring Yield Period which is one day shall, if the immediately
preceding Yield Period is more than one day, be the last day of such immediately
preceding Yield Period, and if the immediately preceding Yield Period is one
day, shall be the next day following such immediately preceding Yield Period,
and (c) any Yield Period for any Undivided Interest which commences before the
Termination Date for such Undivided Interest and would otherwise end on a date
occurring after such Termination Date, such Yield Period shall end on such
Termination Date and the duration of each such Yield Period which commences on
or after the Termination Date for such Undivided Interest shall be of such
duration as shall be selected by the Administrative Agent.
The "related" Yield Period for any Undivided Interest at any time means the
Yield Period pursuant to which Earned Discount is then accruing for such
Undivided Interest.
B. Other Terms. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP as in effect on the date hereof. All terms
used in Article 9 of the UCC in the State of Illinois, and not specifically
defined herein, are used herein as defined in such Article 9.
C. Computation of Time Periods. Unless otherwise stated in this Agreement, in
the computation of a period of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each means "to but excluding".
<PAGE>
APPENDIX B
CALCULATION OF DISCOUNT AND RESERVE
This is Appendix B to the Receivables Purchase Agreement dated as of June 30,
1995 among SCI Technology, Inc., as Seller, SCI Systems, Inc., as Guarantor,
Receivables Capital Corporation, as Purchaser, and Bank of America National
Trust and Savings Association, as Administrative Agent (as amended, supplemented
or otherwise modified from time to time, the "Agreement"). Capitalized terms
used in this Appendix B without definition have the meanings assigned to such
terms in Appendix A to the Agreement. Each reference in this Appendix B to any
Section refers to such Section of the Agreement. Each reference in this Appendix
B to any Part refers to the part of this Appendix B so designated.
INDEX
PART I
DISCOUNT FACTOR
Sub-
Part Term Page No.
A.Discount Factor B-2
B.Earned Discount B-3
C.Negative Spread Fee B-3
D.Run Off Discount B-4
E.Rate Definitions B-4
Alternate Reference Rate B-4
Bank Rate B-5
Bank Rate Spread B-5
Commercial Paper Rate B-5
Domestic CD Rate (Adjusted) B-6
Eurodollar Rate (Reserve Adjusted) B-7
Pricing Grid Margin B-8
Purchaser Rate B-8
F.Rate Variance Factor B-9
<PAGE>
PART II
CREDIT RESERVE
Sub-
Part Term Page No.
A.Credit Reserve B-9
PART III
DILUTION RESERVE
A.Dilution Reserve B-9
PART IV
SERVICER'S FEE RESERVE
A.Servicer's Fee Reserve B-9
B.Servicer's Fee B-10
C.Run Off Servicer's Fee B-10
PART V
ADJUSTED AVERAGE MATURITY
A.Adjusted Average Maturity B-10
B.Average Maturity B-10
PART I
DISCOUNT FACTOR
A. Discount Factor. The "Discount Factor" for a related Undivided Interest at
any time in a Yield Period means an amount determined as follows:
<PAGE>
DF = ED + ROD
where:
DF =the Discount Factor of such Undivided Interest at such time;
ED =Earned Discount of such Undivided Interest accrued and unpaid at such time,
as determined pursuant to Part I.B;
ROD =Run Off Discount of such Undivided Interest at such time, as determined
pursuant to Part I.D.
B. Earned Discount. The "Earned Discount" for any Undivided Interest for each
day in a related Yield Period means an amount determined as follows:
ED =PI x PR x 1/360 + NSF (if any);
provided, however, that if, pursuant to the definition of "Purchaser Rate" in
Part I.E., different Purchaser Rates would apply to different portions of an
Undivided Interest, then Earned Discount shall be calculated separately with
respect to each such portion, and the Earned Discount shall be the sum of the
Earned Discount so calculated for such portions;
where:
ED = Earned Discount of such Undivided Interest (or such portion) accrued on
such day;
PI = the Purchaser's Investment of such Undivided Interest (or such portion) on
such day, as determined pursuant to Section 2.03; and
PR = the Purchaser Rate for such Undivided Interest (or such portion) on such
day, as defined in Part I.E.
NSF =the Negative Spread Fee for such Undivided Interest (or such portion
thereof) on such day, as defined in Part C.
No provision of the Agreement shall require the payment or permit the collection
of Earned Discount in excess of the maximum permitted by applicable law. Earned
Discount for any Undivided Interest shall not be considered paid by any
distribution if at any time such distribution is rescinded or must otherwise be
returned for any reason.
C. Negative Spread Fee. The "Negative Spread Fee" means, for each Undivided
Interest (or portion thereof) for each day in any Yield Period during which any
Run Off Day or Termination Date for such Undivided Interest occurs, the amount,
if any, by which;
<PAGE>
(i) the additional Earned Discount (calculated without taking into account any
Negative Spread Fee) which would have accrued on the reductions of the related
Purchaser's Investment of such Undivided Interest (or such portion) during such
Yield Period (as so computed) if such reductions had remained as Purchaser's
Investment exceeds,
(ii) the income, if any, received by the owner of such Undivided Interest (or
such portion) from such owner's investing the proceeds of such reductions of
Purchaser's Investment.
D. Run Off Discount. The "Run Off Discount" for the related Undivided Interest
at any time means an amount determined as follows:
ROD =PI x (PR + RVF) x AAM
360
where:
ROD =the Run Off Discount for such Undivided Interest at such time;
PI =the Purchaser's Investment of such Undivided Interest at such time;
PR =the Purchaser Rate for such Undivided Interest for a Yield Period deemed to
commence at such time pursuant to Part I.E;
AAM =the Adjusted Average Maturity of the Receivables Pool related to such
Undivided Interest, as determined pursuant to Part V; and
RVF =the Rate Variance Factor deemed to be in effect at such time, as determined
pursuant to Part I.F.
E.Rate Definitions. The "Alternate Reference Rate" means, on any date, a
fluctuating rate of interest per annum equal to the higher of
(a)the rate of interest most recently announced by BofA at its principal office
as its reference rate; and
(b)the Federal Funds Rate (as defined below) most recently determined by BofA
plus 1.0% per annum.
For purposes of this definition, "Federal Funds Rate" means, for any period, a
fluctuating interest rate per annum equal (for each day during such period) to
the rate set forth in the weekly statistical release designated as H.15(519), or
any successor publication, published by the Federal Reserve Bank of New York
(including any such successor, "H.15(519)") on the preceding Business Day
<PAGE>
opposite the caption "Federal Funds (Effective)"; or, if for any relevant day
such rate is not so published on any such preceding Business Day, the rate for
such day will be the arithmetic mean as determined by the Administrative Agent
of the rates for the last transaction in overnight Federal funds arranged prior
to 9:00 a.m. (New York City time) on that day by each of three leading brokers
of Federal funds transactions in New York City selected by the Administrative
Agent.
The Alternate Reference Rate is not necessarily intended to be the lowest rate
of interest determined by BofA in connection with extensions of credit.
"Bank Rate" for any Yield Period for the related Undivided Interest means an
interest rate per annum equal to the sum of (a) the Bank Rate Spread, plus (b)
the Eurodollar Rate (Reserve Adjusted) for such Yield Period; provided, however,
that if (i) it shall become unlawful for the Administrative Agent or any Program
Support Provider to obtain funds in the offshore dollar interbank market in
order to fund any Purchase or to maintain any Undivided Interest, or if such
funds shall not be reasonably available to the Administrative Agent or any
Program Support Provider, or (ii) there shall not be time prior to the
commencement of an applicable Yield Period to determine a Eurodollar Rate in
accordance with its terms, then the "Bank Rate" for any Yield Period for such
Undivided Interest shall be equal to a rate of (x) the Bank Rate Spread, plus
(y) the Domestic CD Rate (Adjusted) for such Yield Period.
"Bank Rate Spread" means (i) 0.50% for the first thirty (30) days that the
related Undivided Interest is funded pursuant to a Program Support Agreement or
by a Funding and (ii) 0.25% plus the Pricing Grid Margin applicable from time to
time thereafter.
"Commercial Paper Rate" for any Yield Period for the related Undivided Interest
means a rate per annum equal to the sum of (i) the rate or, if more than one
rate, the weighted average of the rates, determined by converting to an
interest-bearing equivalent rate per annum the discount rate (or rates) at which
Commercial Paper Notes having a term equal to such Yield Period and to be issued
to fund the Purchase of or to maintain such Undivided Interest by Purchaser
(including, without limitation, Purchaser's Investment and accrued and unpaid
Earned Discount) may be sold by any placement agent or commercial paper dealer
selected by the Administrative Agent, as agreed between each such agent or
dealer and the Administrative Agent, plus (ii) 0.05% per annum, representing the
commissions and charges charged by such placement agent or commercial paper
dealer with respect to such Commercial Paper Notes, expressed as a percentage of
such face amount and converted to an interest-bearing equivalent rate per annum.
"Domestic CD Rate (Adjusted)" means, with respect to any Yield Period, a rate
per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined
pursuant to the following formula:
Domestic CD Rate = Domestic CD Rate + Assessment
(Adjusted) 1-Reserve Rate
Requirement
<PAGE>
where:
"Domestic CD Rate" means, with respect to any Yield Period for any related
Undivided Interest (or portion thereof), a rate of interest equal to the average
of the secondary market morning offering rates in the United States for time
certificates of deposit of major United States money market banks for a period
approximately equal to such Yield Period in an amount substantially equal to the
Purchaser's Investment of the related Undivided Interest (or such portion), as
such offering rate is quoted to the Administrative Agent by the Federal Reserve
Bank of New York during the morning of the first day of such Yield Period;
provided, however, that if the Administrative Agent shall not receive any such
quote by the Federal Reserve Bank of New York by 10:00 a.m., Chicago time, on
the morning of the first day of any Yield Period, then "Domestic CD Rate" shall
mean, with respect to such Yield Period, the rate of interest determined by the
Administrative Agent to be the average (rounded upwards, if necessary, to the
nearest 1/100 of 1%) of the bid rates quoted to the Administrative Agent in the
secondary market at approximately 10:00 a.m., Chicago time (or as soon
thereafter as practicable), on the first day of such Yield Period by two
certificate of deposit dealers in New York or Chicago of recognized standing
selected by the Administrative Agent in its sole discretion for the purchase
from the Administrative Agent at face value of certificates of deposit issued by
the Administrative Agent in an amount approximately equal or comparable to the
amount of the related Purchaser's Investment and having a maturity equal to such
Yield Period.
"Assessment Rate" for any Yield Period means the annual assessment rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) applicable to
the Administrative Agent on its insured deposits, on the Business Day
immediately preceding the first day of such Yield Period, under the Federal
Deposit Insurance Act, determined by annualizing the most recent assessment
levied on the Administrative Agent by the Federal Deposit Insurance Corporation
(together with any successor, the "FDIC") with respect to such deposits after
giving effect to the most recent rebate granted to the Administrative Agent by
the FDIC with respect to deposit insurance as well as the loss to the
Administrative Agent (determined in the good faith judgment of the
Administrative Agent) of the use of such rebate prior to the date a credit is
taken by the Administrative Agent with respect to such rebate. The Assessment
Rate as of the date hereof is zero.
"Reserve Requirement" means, with respect to any Yield Period, a percentage
(expressed as a decimal) equal to the daily average during such Yield Period of
the aggregate reserve requirement (including all basic, supplemental, marginal
and other reserves and taking into account any transitional adjustments or other
scheduled changes in reserve requirements during such period) specified under
Regulation D, as applicable to the class of banks of which the Administrative
Agent is a member, on deposits of the types used as a reference in determining
the Domestic CD Rate and having a maturity approximately equal to such Yield
Period.
<PAGE>
"Eurodollar Rate (Reserve Adjusted)" means, with respect to any Yield Period for
any related Undivided Interest (or portion thereof), a rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) determined pursuant to the
following formula:
Eurodollar Rate = Eurodollar Rate
(Reserve Adjusted) 1-Eurodollar
Reserve Percentage
where:
"Eurodollar Rate" means, with respect to any Yield Period for any related
Undivided Interest (or portion thereof), the rate per annum at which Dollar
deposits in immediately available funds are offered to the Eurodollar Office of
the Administrative Agent two Eurodollar Business Days prior to the beginning of
such period by prime banks in the offshore dollar interbank market at or about
the relevant local time of such Eurodollar Office, for delivery on the first day
of such Yield Period, for the number of days comprised therein and in an amount
equal or comparable to the amount of the related Purchaser's Investment of such
Undivided Interest (or such portion) for such Yield Period.
"Relevant local time" as to any Eurodollar Office shall mean 11:00 a.m., London
time when such Eurodollar Office is located in Europe or the Middle East, or
10:00 a.m., Chicago time, when such Eurodollar Office is located in North
America or the Caribbean.
"Eurodollar Business Day" means a day of the year on which dealings are carried
on in the offshore dollar interbank market of the Administrative Agent's
Eurodollar Office and banks are open for business in the location of the
Administrative Agent's Eurodollar Office and are not required or authorized to
close in New York City.
"Eurodollar Office" shall mean the office of the Administrative Agent located in
the Cayman Islands, Grand Cayman B.W.I. or such other office or offices through
which the Administrative Agent determines the Eurodollar Rate. A Eurodollar
Office of the Administrative Agent may be, at the option of the Administrative
Agent, either a domestic or foreign office.
"Eurodollar Reserve Percentage" means, with respect to any Yield Period, the
reserve percentage (expressed as a decimal and rounded upward to the nearest
1/100th of 1%) equal to the maximum aggregate reserve requirements (including
all basic, emergency, supplemental, marginal and other reserves and taking into
account any transitional adjustments or other scheduled changes in reserve
requirements) specified under regulations issued from time to time by the
Federal Reserve Board and then applicable to assets or liabilities consisting of
and including "Eurocurrency Liabilities", as currently defined in Regulation D
of the Federal Reserve Board, having a term approximately equal or comparable to
such Yield Period.
<PAGE>
"Pricing Grid Margin" at any time means the percentage then applicable as set
forth on the grid attached hereto as Schedule B-1.
"Purchaser Rate" for any Yield Period for any related Undivided Interest (or
portion thereof) means:
(a)in the case of an Undivided Interest (or portion thereof) other than one
referred to in clause (b) or (c) of this definition, the sum of (i) the
Commercial Paper Rate for such Undivided Interest (or such portion) for such
Yield Period plus (ii) the Program Fee Rate;
(b)in the case of an Undivided Interest (or portion thereof) (i) owned by any
Program Support Provider or any other assignee (other than Purchaser), or
otherwise funded pursuant to a Program Support Agreement, or (ii) funded by a
Funding, and funded at a time when a Termination Event has not occurred and is
continuing, the Bank Rate for such Undivided Interest (or such portion) for such
Yield Period; and
(c)in the case of an Undivided Interest (or portion thereof) funded at a time
when a Termination Event has occurred and is continuing, a rate per annum equal
for each day during such Yield Period to the Alternate Reference Rate in effect
on such day plus 2% per annum.
F. Rate Variance Factor. The "Rate Variance Factor" means such percentage per
annum not exceeding 2% as the Administrative Agent may designate from time to
time in its sole discretion.
PART II
CREDIT RESERVE
A.Credit Reserve. The "Credit Reserve" of any Undivided Interest on any day
means an amount determined in accordance with the definition of Credit Reserve
in Appendix A.
PART III
DILUTION RESERVE
A. Dilution Reserve. The "Dilution Reserve" of any Undivided Interest on any day
means an amount determined in accordance with the definition of Dilution Reserve
in Appendix A.
PART IV
SERVICER'S FEE RESERVE
<PAGE>
A. Servicer's Fee Reserve. The "Servicer's Fee Reserve" for the related
Undivided Interest at any time means an amount determined as follows:
SFR =SF + ROSF
where:
SFR =the Servicer's Fee Reserve for such Undivided Interest at any time;
SF =the unpaid Servicer's Fee relating to such Undivided Interest accrued to
such time and unpaid as determined pursuant to Part II.B; and
ROSF =the Run Off Servicer's Fee for such Undivided Interest at such time, as
determined pursuant to Part II.C.
B. Servicer's Fee. The "Servicer's Fee" relating to any Undivided Interest
accrued for any day
means
(i) an amount equal to (x) 0.50% per annum, times (y) the amount of the related
Purchaser's Investment at the close of business on such day, times (z) 1/360; or
(ii) on and after Servicer's reasonable request made at any time when Seller or
any of its Affiliates shall no longer be Servicer, an alternative amount
specified by Servicer not exceeding (x) 110% of Servicer's cost and expenses of
performing its obligations under the Agreement during the Yield Period when such
day occurs, divided by (y) the number of days in such Yield Period.
C. Run Off Servicer's Fee. The "Run Off Servicer's Fee" for any Undivided
Interest at any time means an amount equal to
(x) the related Purchaser's Investment at such time, times
(y) (a) the percentage per annum set forth in clause (i)(x) of the definition of
"Servicer's Fee", or (b) if Servicer's Fee is calculated pursuant to clause (ii)
of such definition, the percentage per annum determined for each day by dividing
the amount of the Servicer's Fee accrued for such day by the related Purchaser's
Investment at the close of business on such day, multiplying the quotient by 360
and expressing the product as a percentage, times
(z) a fraction, the numerator of which is the number of days equal to the then
Adjusted Average Maturity, and the denominator of which is 360 days.
<PAGE>
PART V
ADJUSTED AVERAGE MATURITY
"Adjusted Average Maturity" means, on any day, the product of (i) three (3)
times (ii) the Average Maturity for such day.
"Average Maturity" means, on any day, that time period (expressed in days) equal
to the weighted average maturity of the Pool Receivables as shall be calculated
by Servicer, as set forth in the most recent Periodic Report in accordance with
the provisions thereof. If the Administrative Agent shall disagree with any such
calculation, the Administrative Agent may recalculate the Average Maturity for
such day, which calculation shall, absent manifest error, be binding upon
Servicer, Seller and Purchaser.
<PAGE>
SCHEDULE B-1
PRICING GRID MARGINS
If the ratio of Guarantor's Total Debt to Total Capital as of the end of any
fiscal quarter is within a particular range described in the left column below,
and if Guarantor's ratio of EBIT to Interest Expense as of the end of such
fiscal year is within a particular range described in the top row below, then
the Pricing Grid Margin shall be 1.25%, as adjusted by the amount specified
where such ranges intersect below:
| EBIT to Interest Expense Ratio
|
Total Debt to | >.8:1; >1.25:1;
Total Capital | <1.25;1 <2.5:1 >2.5:1
Ratio |
- ------------------------------------------------------------------------
>.65:1 | +1/2% per annum +1/8% per annum -1/4% per annum
>.45:1; | +3/8% per annum 0% per annum -3/8 per annum
<.65:1 |
<.45:1 | +1/4% per annum -1/8% per annum -1/2% per annum
For example, if Guarantor's ratio of Total Debt to Total Capital as of the end
of one fiscal quarter is .75:1.0 and Guarantor's ratio of EBIT to Interest
Expense as of the end of such quarter is 1.5:1.0, then the Pricing Grid Margin
for the immediately succeeding quarterly computation period will be increased by
1/8% per annum.
<PAGE>
SCHEDULE 2.04(c)
SPECIAL CONCENTRATION LIMITS
Special
Short-Term Concentration
Obligor NameDebt Rating* Limit
Hewlett-Packard
CompanyA1/P1 or better 30%
A2/P2 12%
below A2/P2 3%
Apple Computer, Inc.A2/P2 or better 12%
below A2/P2 3%
IBMA2/P2 or better 12%
below A2/P2 3%
CompaqA2/P2 or better 12%
below A2/P2 3%
*The ratings from each rating agency must be maintained; if the two ratings are
different, the Special Concentration Limit shall be determined by reference to
the lowest rating.
[END OF EXHIBIT 10 (b) (1)]
[EXHIBIT 10 (c) (1)]
SUMMARY OF DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICIES
Primary Coverage:
Carrier: Fidelity and Casualty Insurance Company
Coverage: $5,000,000
Deductibles: None
Policy Number: DNO 002 (5/93)
<PAGE>
Policy period: 8/01/95 to 8/01/96
Secondary Coverage:
Carrier: St Paul Surplus Lines Ins Co
Coverage: $5,000,000
Deductibles: $175,000
Policy Number: 6357
Policy period: 8/01/94 to 8/01/95
[END OF EXHIBIT 10 (c) (1)]
[EXHIBIT 10 (d) (1)]
SCI SYSTEMS, INC.
1994 STOCK OPTION INCENTIVE PLAN
<PAGE>
SCI SYSTEMS, INC.
1994 STOCK OPTION INCENTIVE PLAN
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS 1
SECTION 2 THE STOCK INCENTIVE PLAN 2
2.1 Purpose of the Plan 2
2.2 Stock Subject to the Plan 2
2.3 Administration of the Plan 2
2.4 Eligibility and Limits 3
SECTION 3 TERMS OF STOCK OPTIONS GRANTED TO
EMPLOYEES AND OFFICERS 3
3.1 Terms and Conditions of Options Granted to Employees and Officers 3
(a) Number of Option Shares 3
(b) Stock Option Agreement 3
(c)Type of Option 4
(d) Option Price 4
(e) Option Term 4
(f) Payment 4
(g) Conditions to the Exercise of an Option 5
(h) Termination of Incentive Stock Option 5
(i) Special Provisions for Certain Substitute Options 5
(j) Date of Grant 5
(k)Nonassignability 5
3.2 Treatment of Awards Upon Termination of Employment 6
SECTION 4 TERMS OF STOCK OPTIONS GRANTED TO DIRECTORS 6
4.1Number of Option Shares 6
4.2 Stock Option Agreement 6
4.3Type of Option 6
4.4Option Price 6
<PAGE>
4.5Option Term 6
4.6Payment 7
4.7 Date of Grant 7
4.8Nonassignability 7
4.9Cessation of Board Membership 7
4.10Timing of Directions 7
SECTION 5 RESTRICTIONS ON STOCK 7
SECTION 6 GENERAL PROVISIONS 7
6.1 Withholding. 7
6.2 Changes in Capitalization; Merger; Liquidation. 8
6.3 Cash Awards 9
6.4 Compliance with Code. 9
6.5 Right to Terminate Employment. 9
6.6 Non-alienation of Benefits. 9
6.7Restrictions on Delivery and Sale of Shares; Legends 9
6.8 Termination and Amendment of the Plan. 9
6.9 Stockholder Approval. 10
6.10 Choice of Law. 10
6.11 Effective Date of Plan 10
<PAGE>
SCI SYSTEMS, INC.
1994 STOCK OPTION INCENTIVE PLAN
SECTION DEFINITIONS
Whenever used herein, the masculine pronoun shall be deemed to include the
feminine, and the singular to include the plural, unless the context clearly
indicates otherwise, and the following capitalized words and phrases are used
herein with the meaning thereafter ascribed:
"Board" means the board of directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee appointed by the Board to administer the Plan.
"Company" means SCI Systems, Inc., a Delaware corporation.
"Director Fee" means fees payable for the performance of duties as a director of
the Company, but shall not include meeting or committee fees or expense
reimbursements paid to a director.
"Disposition" means any conveyance, sale, transfer, assignment, pledge
or hypothecation, whether outright or as security, inter vivos or testamentary,
with or without consideration, voluntary or involuntary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Exercise Price" means the price per share of Stock purchasable under any
Option.
"Fair Market Value" with regard to a date means the closing price at which Stock
shall have been sold on the last trading date prior to that date as reported by
the Nasdaq National Market System (or, if applicable, as reported by a national
securities exchange selected by the Committee on which the shares of Stock are
then actively traded) and published in The Wall Street Journal; provided that,
for purposes of granting Options other than incentive stock options, Fair Market
Value of the shares of Stock may be determined by the Committee by reference to
the average market value determined over a period certain or as of specified
dates, to a tender offer price for the shares of Stock (if settlement of an
award is triggered by such an event) or to any other reasonable measure of fair
market value.
"Option" means a non-qualified stock option or an incentive stock option.
<PAGE>
"Over 10% Owner" means an individual who at the time an incentive stock
option is granted owns Stock possessing more than 10% of the total combined
voting power of the Company or one of its Subsidiaries, determined by applying
the attribution rules of Code Section 424(d).
"Participant" means an individual who receives an Option hereunder.
"Plan" means the SCI Systems, Inc. 1994 Stock Option Incentive Plan.
"Stock" means the Company's common stock, $0.10 par value.
"Stock Option Agreement" means an agreement between the Company and a
Participant or other documentation evidencing an award of an Option.
"Subsidiary" means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if, with respect to incentive
stock options, at the time of the granting of the Option, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION THE STOCK INCENTIVE PLAN
Purpose of the Plan. The Plan is intended to (a) provide incentive to
selected employees, officers and directors of the Company and its affiliates to
stimulate their efforts toward the continued success of the Company and to
operate and manage the business in a manner that will provide for the long-term
growth and profitability of the Company; (b) encourage stock ownership by
selected employees, officers and directors by providing them with a means to
acquire a proprietary interest in the Company, acquire shares of Stock, or to
receive compensation which is based upon appreciation in the value of Stock; and
(c) provide a means of obtaining, rewarding and retaining select employees,
officers and directors.
Stock Subject to the Plan. Subject to adjustment in accordance with Section
5.2, 1,300,000 shares of Stock (the "Maximum Plan Shares", of which 302,974
shares are those which were released from reservation under the SCI Systems,
Inc. Non-Qualified Stock Option Plan and the SCI Systems, Inc. Incentive Stock
Option Plan immediately prior to adoption of this Plan), are hereby reserved
exclusively for issuance pursuant to Options. At no time shall the Company have
outstanding Options subject to Section 16 of the Exchange Act and shares of
Stock issued in respect of Options in excess of the Maximum Plan Shares; for
this purpose, the outstanding Options and
<PAGE>
shares of Stock issued in respect of Options shall be computed consistent with
Rule 16b-3(a)(1) as promulgated under the Exchange Act. To the extent permitted
by Rule 16b-3(a)(1) as promulgated under the Exchange Act, the shares of Stock
attributable to the nonvested, unpaid, unexercised, unconverted or otherwise
unsettled portion of any Option that is forfeited or cancelled or expires or
terminates for any reason without becoming vested, paid, exercised, converted or
otherwise settled in full shall again be available for purposes of the Plan.
Administration of the Plan. The Plan shall be administered by the
Committee.
With respect to awards under the Plan to key employees and officers, the
Committee shall be comprised solely of "disinterested persons," as defined in
Rule 16b-3 as promulgated under the Exchange Act, who are then members of the
Board. The Committee shall have full authority in its discretion to determine
the key employees and officers of the Company or its affiliates to whom Options
shall be granted and the terms and provisions of such Options.
Subject to the provisions of the Plan, the Committee shall have full and
conclusive authority to interpret the Plan; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms and
provisions of the respective Stock Option Agreements and to make all other
determinations necessary or advisable for the proper administration of the Plan.
The Committee's determinations under the Plan need not be uniform and may be
made by it selectively among persons who receive, or are eligible to receive,
awards under the Plan (whether or not such persons are similarly situated). The
Committee's decisions shall be final and binding on all Participants.
Eligibility and Limits. Options may be granted only to employees, officers
and directors of the Company, or any affiliate of the Company; provided,
however, that directors who serve on the Committee shall not be eligible to
receive awards under Plan Section 3 that are subject to Section 16 of the
Exchange Act while they are members of the Committee and that an incentive stock
option may only be granted to an employee of the Company or any Subsidiary. In
the case of incentive stock options, the aggregate Fair Market Value (determined
as at the date an incentive stock option is granted) of stock with respect to
which stock options intended to meet the requirements of Code Section 422 become
exercisable for the first time by an individual during any calendar year under
all plans of the Company and its Subsidiaries shall not exceed $100,000;
provided further, that if the limitation is exceeded, the incentive stock
option(s) which cause the limitation to be exceeded shall be treated as
non-qualified stock option(s).
<PAGE>
SECTION TERMS OF STOCK OPTIONS GRANTED TO
EMPLOYEES AND OFFICERS
Terms and Conditions of Options Granted to Employees and Officers. No more
than 1,200,000 shares of Stock shall be available for issuance as Options to
employees and officers under the Plan.
Number of Option Shares. The number of shares of Stock as to which an
Option shall be granted pursuant to this Section 3 shall be determined by the
Committee in its sole discretion, subject to the provisions of Section 2.2 as to
the total number of shares available for grants under the Plan. Notwithstanding
the preceding, to the extent required under Section 162(m) of the Code and the
regulations thereunder for compensation to be treated as qualified
performance-based compensation, the maximum number of shares of Stock with
respect to which Options may be granted during any one year period to any
employee shall not exceed 100,000.
Stock Option Agreement. Each Option granted pursuant to this Section 3
shall either be evidenced by a Stock Option Agreement in such form and
containing such terms, conditions and restrictions as the Committee may
determine to be appropriate. Each Stock Option Agreement shall be subject to the
terms of the Plan and any provisions contained in the Stock Option Agreement
that are inconsistent with the Plan shall be null and void.
Type of Option. At the time any Option is granted pursuant to this Section
3, the Committee shall determine whether the Option is to be an incentive stock
option described in Code Section 422 or a non-qualified stock option, and the
Option shall be clearly identified as to its status as an incentive stock option
or a non-qualified stock option. At the time any incentive stock option granted
under the Plan is exercised, the Company shall be entitled to legend the
certificates representing the shares of Stock purchased pursuant to the Option
to clearly identify them as representing the shares purchased upon the exercise
of an incentive stock option. An incentive stock option may only be granted
within 10 years from the earlier of the date the Plan is adopted or approved by
the Company's stockholders.
Option Price. Subject to adjustment in accordance with Section 6.2 and the
other provisions of this Section 3, the Exercise Price under any Option shall be
as set forth in the applicable Stock Option Agreement. Notwithstanding the
preceding, the Exercise Price under any incentive stock option shall not be less
than the Fair Market Value on the date the Option is granted, and with respect
to each grant of an incentive stock option to a Participant who is an Over 10%
Owner, the Exercise Price shall not be less than 110% of the Fair Market Value
on the date the Option is granted.
<PAGE>
Option Term. Any incentive stock option granted to a Participant who is not
an Over 10% Owner shall not be exercisable after the expiration of 10 years
after the date the Option is granted. Any incentive stock option granted to a
Participant who is an Over 10% Owner shall not be exercisable after the
expiration of five years after the date the Option is granted. The term of any
non-qualified stock option shall be as specified in the applicable Stock Option
Agreement.
Payment. Payment for all shares of Stock purchased pursuant to the exercise
of an Option granted pursuant to this Section 3 shall be made in any form or
manner authorized by the Committee in the Stock Option Agreement, including, but
not limited to, (i) cash, (ii) by delivery to the Company of a number of shares
of Stock which have been owned by the holder for at least six months prior to
the date of exercise having an aggregate Fair Market Value of not less than the
product of the Exercise Price multiplied by the number of shares the Participant
intends to purchase upon exercise of the Option on the date of delivery; (iii)
in a cashless exercise through a broker; or (iv) by having a number of shares of
Stock withheld, the Fair Market Value of which as of the date of exercise is
sufficient to satisfy the Exercise Price. In its discretion, the Committee also
may authorize (at the time an Option is granted or thereafter) Company financing
to assist the Participant as to payment of the Exercise Price on such terms as
may be offered by the Committee in its discretion. Any such financing shall
require the payment by the Participant of interest on the amount financed at a
rate not less than the "applicable federal rate" under the Code. If a Stock
Option Agreement so provides, the Participant may be granted a new Option to
purchase a number of shares of Stock equal to the number of previously owned
shares of Stock tendered in payment for each share of Stock purchased pursuant
to the terms of the Stock Option Agreement. Any such new Option shall be subject
to the terms and conditions of the Stock Option Agreement pursuant to which such
new Option is granted. Payment of the Exercise Price shall be made at the time
that the Option or any part thereof is exercised, and no shares shall be issued
or delivered upon exercise of an Option until full payment has been made by the
Participant. The holder of an Option, as such, shall have none of the rights of
a stockholder.
Conditions to the Exercise of an Option. Each Option granted pursuant to
this Section 3 shall be exercisable by whom, at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee shall
specify in the Stock Option Agreement; provided, however, that subsequent to the
grant of an Option, the Committee, at any time before complete termination of
such Option, may accelerate the time or times at which such Option may be
exercised in whole or in part, and may permit the Participant or any other
designated person to exercise the Option, or any portion thereof, for all or
part of the remaining Option term, notwithstanding any provision of the Stock
Option Agreement to the contrary.
Termination of Incentive Stock Option. With respect to an incentive stock
option, in the event of termination of employment of a Participant for any
reason other than death or
<PAGE>
disability, the Option or portion thereof held by the Participant which is
unexercised shall expire, terminate, and become unexercisable no later than the
expiration of three months after the date of termination of employment;
provided, however, that in the case of a holder whose termination of employment
is due to death or disability, one year shall be substituted for such three
month period. For purposes of this Subsection (h), termination of employment of
the Participant shall not be deemed to have occurred if the Participant is
employed by another corporation (or a parent or subsidiary corporation of such
other corporation) which has assumed the incentive stock option of the
Participant in a transaction to which Code Section 424(a) is applicable.
Special Provisions for Certain Substitute Options. Notwithstanding anything
to the contrary in this Section 3, any Option issued in substitution for an
option previously issued by another entity, which substitution occurs in
connection with a transaction to which Code Section 424(a) is applicable, may
provide for an exercise price computed in accordance with such Code Section and
the regulations thereunder and may contain such other terms and conditions as
the Committee may prescribe to cause such substitute Option to contain as nearly
as possible the same terms and conditions (including the applicable vesting and
termination provisions) as those contained in the previously issued option being
replaced thereby.
Date of Grant. The date an Option is granted pursuant to this Section 3
shall be the date on which the Committee has approved the terms and conditions
of the Option and has determined the recipient of the Option and the number of
shares covered by the Option and has taken all such other action necessary to
complete the grant of the Option.
Nonassignability. Options granted pursuant to this Section 3 shall not be
transferable or assignable except by will or by the laws of descent and
distribution. Such Options shall be exercisable, during the Participant's
lifetime, only by the Participant; or in the event of the death of the
Participant, by the legal representatives of the Participant's estate or if no
legal representative has been appointed, by the successor in interest determined
under the Participant's will.
Treatment of Awards Upon Termination of Employment. Except as otherwise
provided by Plan Section 3.1(h), any award pursuant to this Section 3 to a
Participant who has experienced a termination of employment may be cancelled,
accelerated, paid or continued, as provided in the applicable Stock Option
Agreement, or, in the absence of such provision, as the Committee may determine.
The portion of any award exercisable in the event of continuation or the amount
of any payment due under a continued award may be adjusted by the Committee to
reflect the Participant's period of service from the date of grant through the
date of the Participant's termination of employment or such other factors as the
Committee determines are relevant to its decision to continue the award.
<PAGE>
SECTION TERMS OF STOCK OPTIONS GRANTED TO DIRECTORS
Each individual serving as a non-employee director of the Company as of the
effective date of the Plan may irrevocably direct that all or a portion of his
or her Director Fee for the remainder of the term for which he or she is serving
as a director be allocated to the purchase of Options on his or her behalf. The
direction shall be effective with respect to those Director Fees payable after
the expiration of six months following the Company's receipt of the direction
and must be made with respect to all or a portion (in 25% increments) of each
payment. Options granted under this Section 4 shall be subject to the following
terms and conditions:
Number of Option Shares. A Participant shall be granted an Option to
purchase that number of shares of Stock with an aggregate Fair Market Value
(determined as of the date of grant) equal to four times the amount of the
Director Fee which the Participant allocated to the purchase of Options.
Stock Option Agreement. Each Option shall be evidenced by a Stock Option
Agreement which shall incorporate the terms of the Plan.
Type of Option. Options shall be non-qualified stock options.
Option Price. The Exercise Price for a share of Stock subject to an Option
shall be the Fair Market Value (determined as of the date of grant) of a share
of Stock.
Option Term. Each Option may be exercised for that percentage of shares of
Stock subject to the Option as to which the Option has become vested, reduced by
that number of shares of Stock subject to the Option which have been previously
exercised. The Option shall vest in equal portions on each "Vesting Date,"
provided that the Participant is still a director on the Vesting Date. For
purpose of this Section 4, the term Vesting Date shall mean the date of grant
and each Board meeting at which Director Fees are payable during the remainder
of the director's term, provided that Director Fees are paid on a semi-annual
basis. If Director Fees are no longer payable on a semi-annual basis, then the
term Vesting Date shall mean the date of grant and thereafter any annual meeting
of the Company's shareholders or any six month anniversary of an annual meeting
of the Company's shareholders occuring during the director's term; provided that
the next vesting date is no less than four months from any other vesting date.
Once exercisable, each Option granted hereunder shall remain exercisable until
the tenth anniversary of the date of grant; provided, however, that in the event
of a Participant's death prior to the expiration of any such Option term, the
Option may continue to be exercised by the Participant's legal representative
until the expiration of such Option term.
<PAGE>
Payment. Payment for all shares of Stock purchased pursuant to the exercise
of an Option shall be made (i) in cash, (ii) by delivery to the Company of a
number of shares of Stock which have been owned by the holder for at least six
months prior to the date of exercise having an aggregate Fair Market Value of
not less than the product of the Exercise Price multiplied by the number of
shares the Participant intends to purchase upon exercise of the Option on the
date of delivery; or (iii) in a cashless exercise through a broker. The holder
of an Option, as such, shall have none of the rights of a stockholder.
Date of Grant. An Option shall be granted as of the date on which the
Director Fee is payable for which a direction is applicable.
Nonassignability. Options shall not be transferable or assignable except by
will or by the laws of descent and distribution. Such Options shall be
exercisable, during the Participant's lifetime, only by the Participant; or in
the event of the death of the Participant, by the legal representatives of the
Participant's estate or if no legal representative has been appointed, by the
successor in interest determined under the Participant's will.
Timing of Directions. Each non-employee director shall make a direction
pursuant to this Section 4 no later than 30 days following his or her election,
reelection or appointment to the Board; provided, however, that any non-employee
director who is a member of the Board as of the Plan's effective date shall make
such a direction no later than 30 days following the Plan's effective date.
SECTION RESTRICTIONS ON STOCK
The Participant shall not have the right to make or permit to exist any
Disposition of the shares of Stock issued pursuant to the Plan except as
provided in the Plan or the Stock Option Agreement. Any Disposition of the
shares of Stock issued under the Plan by the Participant not made in accordance
with the Plan or the Stock Option Agreement shall be void. The Company shall not
recognize, or have the duty to recognize, any Disposition not made in accordance
with the Plan and the Stock Option Agreement, and the shares so transferred
shall continue to be bound by the Plan and the Stock Option Agreement.
SECTION GENERAL PROVISIONS
Withholding. The Company shall deduct from all cash distributions under the
Plan any taxes required to be withheld by federal, state or local government.
Whenever the Company proposes or is required to issue or transfer shares of
Stock under the Plan, the Company shall have the right to require the recipient
to remit to the Company an amount sufficient to satisfy any federal, state and
local withholding tax requirements prior to the delivery of any certificate or
certificates for such shares. A Participant may pay the withholding tax in cash,
or, if the Stock Option Agreement provides, a Participant may elect to have the
number of shares of Stock he is to receive reduced by the smallest number of
whole shares of Stock which, when multiplied by the Fair Market Value of the
shares of Stock determined as of the Tax Date (defined below), is sufficient to
satisfy federal, state and local, if any, withholding taxes arising from
exercise of an Option (a "Withholding Election"). A Participant may make a
Withholding Election only if both of the following conditions are met:
The Withholding Election must be made on or prior to the date on which
the amount of tax required to be withheld is determined (the "Tax Date") by
executing and delivering to the Company a properly completed notice of
Withholding Election as prescribed by the Committee; and
<PAGE>
Any Withholding Election made will be irrevocable except on six months
advance written notice delivered to the Company; however, the Committee may in
its sole discretion disapprove and give no effect to the Withholding Election.
Changes in Capitalization; Merger; Liquidation.
The number of shares of Stock reserved for the grant of Options; the number
of shares of Stock reserved for issuance upon the exercise or payment, as
applicable, of each outstanding Option; and the Exercise Price of each
outstanding Option shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Stock resulting from a subdivision or
combination of shares or the payment of a stock dividend in shares of Stock to
holders of outstanding shares of Stock or any other increase or decrease in the
number of shares of Stock outstanding effected without receipt of consideration
by the Company.
In the event of or anticipation of a merger, consolidation or other
reorganization of the Company or tender offer for shares of Stock, the Committee
may make such adjustments with respect to awards and take such other action as
it deems necessary or appropriate to reflect or such merger, consolidation,
reorganization or tender offer, including, without limitation, the substitution
of new awards, the termination or adjustment of outstanding awards, the
acceleration of awards or the removal of restrictions on outstanding awards. Any
adjustment pursuant to this Section 6.2 may provide, in the Committee's
discretion, for the elimination without payment therefor of any fractional
shares that might otherwise become subject to any Option, but shall not
otherwise diminish the then value of the Option.
<PAGE>
The existence of the Plan and the Options granted pursuant to the Plan
shall not affect in any way the right or power of the Company to make or
authorize any adjustment, reclassification, reorganization or other change in
its capital or business structure, any merger or consolidation of the Company,
any issue of debt or equity securities having preferences or priorities as to
the Stock or the rights thereof, the dissolution or liquidation of the Company,
any sale or transfer of all or any part of its business or assets, or any other
corporate act or proceeding.
Cash Awards. The Committee may, at any time and in its discretion, grant to
any holder of an Option the right to receive, at such times and in such amounts
as determined by the Committee in its discretion, a cash amount which is
intended to reimburse such person for all or a portion of the federal, state and
local income taxes imposed upon such person as a consequence of the receipt of
the Option or the exercise of rights thereunder.
Compliance with Code. All incentive stock options to be granted hereunder
are intended to comply with Code Section 422, and all provisions of the Plan and
all incentive stock options granted hereunder shall be construed in such manner
as to effectuate that intent.
Right to Terminate Employment. Nothing in the Plan or in any Option shall
confer upon any Participant the right to continue as an employee, officer or
director of the Company or any of its affiliates or affect the right of the
Company or any of its affiliates to terminate the Participant's employment or
other relationship with the Company at any time.
Non-alienation of Benefits. Other than as specifically provided with regard
to the death of a Participant, no benefit under the Plan shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge; and any attempt to do so shall be void. No such benefit
shall, prior to receipt by the Participant, be in any manner liable for or
subject to the debts, contracts, liabilities, engagements or torts of the
Participant.
Restrictions on Delivery and Sale of Shares; Legends. Each Option is
subject to the condition that if at any time the Committee, in its discretion,
shall determine that the listing, registration or qualification of the shares
covered by such Option upon any securities exchange or under any state or
federal law is necessary or desirable as a condition of or in connection with
the granting of such Option or the purchase or delivery of shares thereunder,
the delivery of any or all shares pursuant to such Option may be withheld unless
and until such listing, registration or qualification shall have been effected.
If a registration statement is not in effect under the Securities Act of 1933 or
any applicable state securities laws with respect to the shares of Stock
purchasable or otherwise deliverable under Options then outstanding, the
Committee may require, as a condition of exercise of any Option or as a
condition to any other delivery of Stock pursuant to an Option, that the
Participant or other recipient of an Option represent, in writing, that the
shares received pursuant to the Option are being acquired for investment and not
with a view to distribution and agree that the shares will not be disposed of
except pursuant to an effective registration statement, unless the Company shall
<PAGE>
have received an opinion of counsel that such disposition is exempt from such
requirement under the Securities Act of 1933 and any applicable state securities
laws. The Company may include on certificates representing shares delivered
pursuant to an Option such legends referring to the foregoing representations or
restrictions or any other applicable restrictions on resale as the Company, in
its discretion, shall deem appropriate.
Termination and Amendment of the Plan. The Board at any time may amend or
terminate the Plan without stockholder approval; provided, however, that the
Board may condition any amendment on the approval of stockholders of the Company
if such approval is necessary or advisable with respect to tax, securities or
other applicable laws. No such termination or amendment without the consent of
the holder of an Option shall adversely affect the rights of the Participant
under such Option.
Stockholder Approval. The Plan shall be submitted to the stockholders of
the Company for their approval within 12 months before or after the adoption of
the Plan by the Board. If such approval is not obtained, any Option granted
hereunder shall be void.
Choice of Law. The laws of the State of Alabama shall govern the Plan, to
the extent not preempted by federal law.
<PAGE>
Effective Date of Plan. The Plan shall become effective as of the date of
its approval by the Board, subject, however, to the approval of the Plan by the
Company's shareholders at their next annual meeting. Options granted hereunder
prior to such shareholder approval shall be conditioned upon such shareholder
approval. Unless such shareholder approval is obtained by the first anniversary
of the Board's approval, this Plan and any Options awarded hereunder shall
become void thereafter.
SCI SYSTEMS, INC.
By:
Title:
ATTEST:
- ---------------------------------
Secretary
[CORPORATE SEAL]
[END OF EXHIBIT 10 (c) (1)]
<TABLE>
EXHIBIT 11 - COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(In thousands of dollars except number of shares and per share amounts)
<CAPTION>
Year Ended:
June 30, June 30, June 30,
1995 1994 1993
<S> <C> <C> <C>
Primary Earnings Per Share
Income from continuing operations $ 45,243 $ 29,936 $ 30,615
Loss from discontinued operations -0- (8,775) (4,056)
--------------------------------------------
Net income 45,243 21,161 26,559
Add back after-tax interest expense for debentures converted N/A N/A 3,394
--------------------------------------------
Adjusted net income used in primary computation $ 45,243 $ 21,161 $ 29,953
============================================
Weighted average number of shares outstanding during period 27,334,551 27,138,945 26,965,660
Applicable number of shares for common stock equivalents (stock options)
outstanding for period, using Treasury
Stock Method based on average market price for period 486,247 564,218 566,648
--------------------------------------------
Weighted average number of shares used in computation 27,820,798 27,703,163 27,532,308
============================================
Primary earnings per share:
From continuing operations $1.63 $1.08 $1.24
From discontinued operations -0- (.32) (.15)
--------------------------------------------
Net income $1.63 $ .76 $1.09
============================================
Fully Diluted Earnings Per Share <F1>
Income from continuing operations $45,243 $30,615
Loss from discontinued operations -0- (4,056)
--------------------------------------------
Net income 45,243 26,559
Add back after-tax interest expense for debentures converted N/A 3,394
Add back after-tax interest expense for outstanding 5 5/8%
convertible subordinated debentures 1,339 1,609
--------------------------------------------
Adjusted net income used in fully diluted computation $46,582 $31,562
============================================
Weighted average number of shares outstanding during period 27,334,551 26,965,660
Applicable number of shares for common stock equivalents (stock options)
outstanding for period, using Treasury
Stock Method based on period ended market price 639,676 602,512
Number of shares to be issued if 5 5/8% convertible
subordinated debentures were converted 1,850,344 1,850,727
--------------------------------------------
Weighted average number of shares used in computation 29,824,571 29,418,899
============================================
Fully diluted earnings per share:
From continuing operations $1.56 $1.21
From discontinued operations -0- (.14)
Net income $1.56 $1.07
<FN>
<F1> The potential conversion of the convertible debentures were anti-dilutive
for this period.
</FN>
</TABLE>
[EXHIBIT 13]
BEGINNING OF 1995 ANNUAL REPORT TO SHAREHOLDERS
(INSIDE FRONT COVER OF 1995 ANNUAL REPORT TO SHAREHOLDERS)
The Company
SCI Systems, Inc., is a diversified, international electronics manufacturer
with multibillion dollar annual sales. It designs, manufactures, markets,
distributes, and services electronic products for the computer, aerospace,
defense, telecommunication, medical, and entertainment industries, as well as
the U.S. Government. SCI, the world's largest electronics contract manufacturer,
operates the largest surface mount technology (SMT) production capacity in the
merchant market. The Company conducts its operational activities through a
Commercial Division and a Government Division. The Commercial Division operates
five geographically organized business units: the Eastern, Central, and Western
Regions in North America and the European and Asian Regions. Serving a
diversified and growing customer base throughout the world, each Region operates
multiple plants which manufacture components, subassemblies, and finished
products primarily for original equipment manufacturers. The Regions also offer
a wide range of design, engineering, purchasing, distribution, and support
services. The Government Division provides data management, instrumentation,
communication, and computer systems and subsystems to the U.S. Government and
its prime contractors and to several foreign governments. Although the Company
derives a majority of its revenues from hardware manufacturing and maintains a
broad technology base, it is primarily a vertically integrated engineering and
manufacturing services provider with dedication to close customer interaction
forming the cornerstone of its activities. The key elements of SCI's operating
philosophy -- quality products, competitive pricing, and customer responsiveness
- -- are a proven foundation for success. These fundamental tenets will continue
to guide the Company as it capitalizes upon the growth opportunities ahead.
- --------------------------------------------------------------------------------
Map of the world showing SCI locations.
- --------------------------------------------------------------------------------
(Page 1 of Annual Report to Shareholders)
<TABLE>
Financial Highlights
Annual Report to Shareholders for the Year Ended June 30, 1995
(Dollars in thousands except for per share data)
No cash dividends were declared in the periods presented.
1991 to 1993 amounts have been restated for 1994's discontinued operations.
(See Part II, Items 7 and 8 of Excerpts from Form 10-K for Fiscal 1995, bound
herein.)
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Sales $ 2,673,783 $ 1,852,478 $ 1,672,115 $ 1,038,454 $ 1,121,807
Income from Continuing Operations 45,243 29,936 30,615 9,061 9,242
Per Common Share (Fully Diluted) 1.56 1.08 1 .21 .43 .44
Net Income 45,243 21,161 26,559 3,82 12,620
Per Common Share (Fully Diluted) 1.56 .76 1.07 .18 .60
Interest Expense 18,400 15,423 16,793 15,479 22,400
Taxes on Income from Continuing Operations 30,418 16,980 12,268 (2,259) (757)
Total Assets 981,292 920,212 780,339 612,962 550,935
Borrowings 162,090 284,283 253,341 224,876 236,226
Cash and Cash Equivalents 10,277 35,822 15,846 38,722 25,529
Working Capital 280,124 395,628 336,516 255,270 253,677
Capital Expenditures 80,316 46,488 84,084 29,822 30,326
Depreciation and Amortization 49,839 48,623 41,303 38,682 36,911
Net Property, Plant, and Equipment 214,025 182,768 184,032 143,687 148,242
Shareholders' Equity 349,776 304,634 277,856 192,349 185,909
Per Common Share 12.75 11.16 10.27 9.17 8.87
New Orders Received 3,574,820 2,074,205 1,922,366 1,150,708 995,283
Order Backlog $ 2,135,836 $ 1,234,800 $ 1,013,073 $ 762,822 $ 650,568
Common Shares Outstanding 27,435,992 27,306,099 27,050,282 20,977,670 20,953,569
Employees 13,185 12,027 10,811 9,512 9,762
Sales ($) Per Employee 212,104 162,228 164,554 107,757 109,680
Manufacturing Plants 20 19 18 17 17
Facility Square Footage 3,021,600 2,834,000 2,745,000 2,678,000 2,572,000
Sales ($) Per Square Foot 913 664 619 396 431
Automated Assembly Lines 169 154 139 109 102
Pin-in-Hole Technology 40 42 38 34 31
Surface Mount Technology 129 112 101 75 71
Asset Turnover Ratio 2.8 2.2 2.4 1.8 1.9
</TABLE>
- --------------------------------------------------------------------------------
Picture with the caption - The European Region's new 80,000 square foot Grenoble
facility was completed and placed in operation during the third quarter.
- --------------------------------------------------------------------------------
Picture with the caption - The Eastern Region acquired this modern, well staffed
311,000 square foot facility in Augusta, Maine during the fourth quarter.
- --------------------------------------------------------------------------------
<PAGE>
(Page 2 of Annual Report to Shareholders)
Executive Letter
To the Shareholders:
The fiscal year ended June 30, 1995, was a vintage one. Sales, incoming orders,
and order backlog all experi enced outstanding growth. Income and earnings
reached record levels. The balance sheet was strengthened by both equity growth
and debt reduction. A major new plant was acquired and two construction projects
were completed. Equipment investment accelerated to support capacity growth.
Internal systems and personnel were upgraded. Customer relationships were
enhanced and expanded. Most importantly, the Company built a solid foundation
for continued growth well into the future.
- ------------------------------------------
|
|Picture of Olin B. King
|
- -------------------------------------------
Revenues. Sales for the year were $2.674 billion, 44% above the $1.852 billion
of fiscal year 1994. First quarter revenues of $618 million grew to $842 million
in the fourth quarter. Each of the four quarters delivered approximately 40%
sales growth over the comparable 1994 quarter. Strong end-user market
conditions, industry trends to increased outsourcing, broader outsourcing scope,
aggressive marketing, and timely availability of infrastructure all contributed
to the rapid revenue expansion. Income. Income from continuing operations, and
net income, in fiscal 1995 were $45.2 million, or $1.56 per fully diluted common
share. In fiscal 1994 income from continuing operations was $29.9 million, or
$1.08 per share, after charges for a plant closing, and net income was $21.2
million, or $.76 per share, after charges for discontinued operations.
(Associated fiscal 1995 growth rates were 51%, 44%, 114%, and 105%,
respectively.) Finished product manufacturing of equipment such as personal
computers characteristically yields lower profit margins than the Company's
traditional subassembly production business. As the year progressed this product
mix element grew more rapidly and thus placed continued pressure on average
margins. Despite that circum stance, operating margins improved incrementally
during each quarter of the year. Higher state and foreign taxes led to a four
percentage point increase in the effective tax rate for the year. Dilution
effects increased as a result of higher income tax rates and a markedly higher
common stock price. Orders and Backlog. New orders received during the year were
a record $3.575 billion, 72% above $2.074 billion in the previous year.
(Incoming orders exceeded one billion dollars in each of the last two quarters.)
Year end order backlog was a record $2.135 billion, 73% above the $1.235 billion
of a year earlier. Although this backlog level is historically high, the Company
has adequate capacity (with regular planned additions) to meet delivery
schedules. Backlog growth came from new customers, increased orders from
existing customers, and the effects of lengthening component lead times,
reflecting overall strength in the equipment markets. SCI's book-to-bill ratio
for the entire year was a remarkable 1.34. Balance Sheet. Asset management, as
measured by asset turnover (the ratio of revenues to total assets), has
continued to receive close management attention. As a result of turnover ratio
improvement from 2.2 to 2.8 during fiscal 1995, only a 7% expansion of the
balance sheet was required to support 44% revenue growth. That achievement was
aided by a product mix shift towards finished products, which produce higher
turnovers to offset their lower margins. Days of sales employed in every asset
category (such as inventory, accounts receivable, real estate, equipment) were
substantially reduced as the year progressed. The ultimate effect was reduced
borrowing, as less working capital was required. Assisted by initiation of the
first phase of a new asset securitization program during the fourth quarter,
total indebtedness was reduced by $122 million during the year and
debt-to-equity ratio was halved from .93 to .46. The Company announced in August
1995 that it called for redemption all of its outstanding 5 5/8% Convertible
Subordinated Debentures, due March 1, 2012. Projected bond conversion will
further enhance balance sheet strength with shareholders' equity forecast to
reach $400 million during the first quarter of fiscal year 1996. Facilities and
Equipment. During the year the Company constructed and occupied a new 80,000
square foot facility in Grenoble, France, to permanently house the operations
previously acquired from Hewlett-Packard. During the fourth quarter a modern and
well equipped 311,000 square foot facility was acquired from Digital Equipment
Corporation in Augusta,
<PAGE>
(Page 3 of Annual Report to Shareholders)
Maine. An 18,000 square foot building addition was recently constructed in
Lacey's Spring, Alabama, and a surplus 150,000 square foot building in
Huntsville, Alabama, was disposed of at year end. Net floor space increased by
only 7% during the year as sales per square foot grew 38%. Seventeen new surface
mount technol ogy assembly lines were acquired during the year to provide an
installed total of 129. Two pin-in-hole technol ogy assembly lines were
consolidated with others for a year end total of forty. New assembly lines for
finished product manufacturing were installed in several plants; approximately
fifty such lines were in service at year end.
- ------------------------------------------
|Picture of A. Eugene Sapp, Jr.
|-------------------------------------------
Internal Systems. SCI continues to place considerable emphasis upon enhancing
its information systems. During fiscal 1995 significant upgrades and expansions
of system hardware and software were implemented at the mainframe, server, and
desktop computer levels. Their companion data communications elements were
similarly upgraded. A variety of new applications are steadily emerging from a
pipeline of system enhancements. Paperless purchasing, broadened electronic mail
functions, customer and supplier electronic data interchange, automated shop
floor data collection, enhanced customer order processing, and improved
statistical process and quality control systems are examples of ongoing focus
areas. Of particular significance is the introduction of powerful simulation
programs as tools for rapid material status analysis at the plant level. This
initiative is expected to improve responsiveness to customers in dynamic market
conditions while aiding inventory reduc tion. Customers. On this page of SCI's
1993 Annual Report to Shareholders was written: "While efforts to enlarge the
customer base will continue, the cultivation of key customer alliances, and
achievement of substantial revenue growth from those accounts, will be among the
Company's objectives without regard to diversification per se." In fiscal year
1995 seven customers each accounted for more than $100 million of the Company's
revenues; in 1992 there were two. SCI's significant customers now total over
170. In fiscal 1995, for the first time, a single customer accounted for more
than $1 billion of annual revenues. Only that customer contributed more than 10%
of sales in 1995. It should be noted that ten SCI plants currently supply
twenty-two divisions of that customer with a very diversified list of products.
Personnel. Employment grew 10% in fiscal year 1995, to 13,185, while supporting
44% revenue growth. Sales per employee grew 31% and exceeded the $200,000
threshold for the first time. Several new officers were elected during the year
to fill the position of Vice President and Plant Manager. Promoted internally
were John McNeil and James H. McElroy. Recruited externally were Bruce R.
Anderson and Joseph J. Cosgrove who previously were with Digital Equipment
Corporation and Michael P. McCaughey who previously was with Ciro Craft, Inc.
Outlook. The "outlook" paragraph of this letter in 1994 remains as valid today
as it was a year ago. It is thus reiterated: "The macro industry trend towards
outsourcing in general continues to develop in SCI's best interest. Additional
trends to finished product outsourcing and increased supplier participation in
engineering and distribution likewise favor SCI. The Company's now proven
capabilities in "lot size of one" custom contract manufacturing are unique and
are expected to lead to significant new programs. Demand for small computers and
new multimedia and interactive systems is expected to continue to provide high
industry unit volume growth, accompanied by unrelenting price emphasis that will
favor low cost producers such as SCI. Although its markets are becoming
increasingly competitive, the Company has a broad customer base, good order
momen tum, a record high backlog, well positioned facilities, modern equipment,
and an excellent staff with which to address market pressures. The Company's
management looks forward with anticipation to capitalizing upon the
opportunities ahead." SCI did well with its opportunities in fiscal 1995 and
will strive for a reprise in 1996.
Olin B. King /s/ A. Eugene Sapp, Jr./s/
Olin B. King A. Eugene Sapp, Jr.
Chairman of the Board and President and
Chief Executive Officer Chief Operating Officer
<PAGE>
(Page 4 of the Annual Report to Shareholders)
Commercial Division
The Commercial Division conducts the Company's nongovernment activities. Its
multinational business is organized into plant groups within five geographical
regions: the Central, Eastern, and Western Regions of North America, the Asian
Region, and the European Region. SCI is the leading international supplier of
full service contract manufacturing to the electronics industry. It is
benefiting from an ongoing shift to outsourcing as original equipment
manufacturers (OEMs) seek solutions to the problems of rapid change in
manufacturing technologies, new product proliferation, short product life
cycles, intense cost pressures, and heightened user reliability and quality
expectations. In response, the Commercial Division performs computer aided
design, component procurement and test, subassembly and finished unit
production, test, distribution, after sales service, and a full range of
engineering support for a sizable number of customers. The Company is expert in
the automation of traditional pin-in-hole (PIH) electronics assembly using
printed circuit boards and leaded components. Although conceptually several
decades old, there remains a significant, continuing market for this technology.
SCI operates a total of forty automated PIH assembly lines in its various
plants. Surface mount technology (SMT) is the assembly technique of growing
preference. It offers smaller size, lower cost, and higher reliability. Barriers
to entry into SMT are high, as it is process sensitive, design critical, and
capital intensive. The Company currently operates 129 automated SMT assembly
lines in eight countries, making SCI one of the top ranked SMT producers in the
world and clearly the leader in the merchant market. The Company remains
committed to the latest manufacturing technologies. Ongoing equipment additions
focus on evolving SMT processes. Capabilities for a range of microelectronic
assembly processes are now operational. An expanded number of production lines
for finished product assembly, burn-in, and test are operational to meet a
growing number of customers' requirements, including rapid direct shipment to
customers. SCI anticipates significant growth, and company-wide deployment, of
these capabilities. Quality improvement programs remain a key focus. All of the
Company's plants are certified to the rigorous quality requirements of the
International Organization for Standardization (ISO 9000).
- --------------------------------------------------------------------------------
Picture with the caption - The fastest growing business area of the Company is
volume production of finished products for direct distribution.
- --------------------------------------------------------------------------------
Central Region
The Central Region operates plants in Huntsville and Arab, Alabama, and
Guadalajara, Mexico. The plants serve customers throughout the Southeastern and
Southwestern U.S. and Latin America. A growing nonregional customer base is
resulting from the attractiveness of Mexico as a low cost manufacturing
alternative and the Region's expanding personal computer final assembly and
distribution capabilities. One Huntsville plant provides electronic assemblies
and a mix of finished products to a diversified customer base. Certification to
FDA standards is important to its success as a supplier of medical devices and
instruments. This plant, the most diversified in the Central Region, also has
active contracts in the computer, telecommunications, and digital television
arenas. Considerable growth in finished product activities has
<PAGE>
resulted from production contracts for video terminals and networked client
computers, patient monitoring equipment, modem products, and digital television
reception units. This plant is also one of SCI's primary technology development
centers and an early production site for advanced processes. A second Huntsville
plant provides a full range of design, engineering, manufacturing, and
distribution services.
Much of SCI's success in the highly competitive personal computer market
(Page 5 of the Annual Report to Shareholders)
place results from this plant's innovative products which are brought to market
in minimum time, custom manufactured in large volumes, and shipped directly to
multiple market channels and end users. Internally developed systems that
process orders electronically, track all manufacturing activities online, and
support direct shipment to distribution have proved important to the rapid
growth of SCI's finished product business. The Arab plant is a leading
high-volume producer of computer electronic assemblies and has become a key
supplier of subassemblies for finished products produced in other plants. The
facility also manufactures and distributes finished products for a major
customer's retail channel and a telecommunications system for a leading
small-package express delivery company. The plant in Guadalajara experienced
substantial growth during the year as demand from both U.S. and Latin American
customers grew. Expansion of the facility there is planned to accommodate a
rising backlog of orders. Increased capital expenditures have significantly
increased the plant's capacity for surface mount electronic assembly. The plant
is benefiting from customer base expansion, adding camera and printer
electronics to a healthy base of computer motherboard and disk controller
products.
Eastern Region
The Eastern Region, with established plants in Graham, North Carolina; Hooksett,
New Hampshire; and Dorval, Quebec, Canada; expanded during the year with the
addition of a plant in Augusta, Maine. The Region serves customers in the
Eastern United States and Canada. During the third quarter the Company announced
an agreement with Digital Equipment Corporation to acquire both their contract
manufacturing business and their manufacturing facility in Augusta, Maine. SCI
also entered into a multi-year agreement to supply Digital with networking
electronics produced at this plant. The acquisition represents a significant
opportunity for SCI to broaden its contract manufacturing business and expand
its relationship with an important customer. The North Carolina facility
continued to focus on manufacturing Local Area Network (LAN) and Wide Area
Network (WAN) interfaces, routers, and bridges and expanded its activities to
include sub-notebook computer assemblies for several of a major customer's
applications. The plant is noted for its process innovations in support of these
products. The facility also added new customers in the office products and
automotive electronics markets. The New Hampshire plant serves the electronics
community of the Boston area as well as others throughout the Northeast. The
markets for communication products, computers and related peripheral devices,
and medical instruments offers significant opportunity for that plant as well as
the Company. Growth potential is strongest with successful emerging companies
which require a responsive and flexible contract manufacturing source. As
regional companies and products mature, the requirement for worldwide capacity
grows. The location and strengths of the New Hampshire plant enable the facility
to provide local coordination with other SCI plants to provide whatever capacity
is required, wherever it is required. The Canadian operation is well positioned
for growth with requirements coming from an expanding number of Canadian
customers and multinationals requiring Canadian content. Significant surface
mount technology capacity has been added and final assembly, packaging, and
distribution activities have been expanded. The product mix has expanded to
include a variety of computer processors and interface devices and several types
of data and voice telecommunications electronics.
(Page 6 of the Annual Report to Shareholders)
Western Region
<PAGE>
The Western Region provides a full range of contract manufacturing services from
plants in San Jose and Watsonville, California; Colorado Springs, Colorado; and
Rapid City, South Dakota. It serves a diversified group of West Coast, Mountain,
and Plains States customers. The San Jose facility benefits from its strategic
location in Silicon Valley. Its diverse customer base is provided a broad range
of services including new product design and introduction support, prototype
assembly and early production, low and high volume production of a range of
assemblies, and finished product manufacturing. The facility often serves as a
sister plant to several other SCI plants as they exchange customer support
functions with each other. The plant's growth, fueled by unprecedented new
customer activity, exceeded original expectations in fiscal 1995. The
Watsonville plant follows a conservative diversification strategy while
retaining its focus upon supporting the growth of a major customer, a large
computer company. The plant provides that customer with requisite capacity,
responsiveness, and flexibility while positioning the operation for gradual
transition from a dedicated "feeder" plant to one of full service, multiple
customer manufacturing. Watsonville, located 50 miles from Silicon Valley, is
well positioned to expand its customer base from the Valley's cluster of high
technology companies. The Colorado Springs plant experienced steady growth
throughout the year and is poised for further expansion. It has established
itself as the largest contract manufacturing service provider to the Rocky
Mountain high technology marketplace and has considerable experience in
producing assemblies for computers, tape drives,
- --------------------------------------------------------------------------------
Pictured with the caption - High volumes of electronic assemblies are tested on
an automated production line in a Southeast Asian facility.
- --------------------------------------------------------------------------------
disk array systems, and optical disk products. The Rapid City plant continues to
build on an excellent record for overall performance and service. The plant has
migrated from primarily supplying electronic assemblies for a single customer's
mass storage devices to manufacturing products which span a wide range of
applications, complexities, volumes, selling prices, and industry segments.
During the year significant growth occurred in the production of complex
mainframe assemblies and personal computer electronics. Customer and product
diversification resulted from the addition of multiple medical and industrial
automation subsystems, as well as electronics for a major customer's high
performance video display units.
Asian Region
The Asian Region operates facilities in the Republic of Singapore and Pathum
Thani Province, a suburb of Bangkok, Thailand. These plants support regional
Asian customers as well as U.S. and European multinationals that prefer Asian
manufacturing sources. Substantial revenue growth and market diversification
were generated by
- --------------------------------------------------------------------------------
Picture with the caption - Automated assembly equipment is loaded with
components for a production run in the Singaporean plant.
- --------------------------------------------------------------------------------
both facilities during fiscal 1995 as the Company retained its leadership as the
largest contract manufacturer in the Region. The Singaporean plant experienced
strong demand from several of its larger multinational computer and peripheral
customers during the year. New products introduced for existing customers
included computer network management devices and printer controllers. Contracts
for substantial volumes of memory modules were received; the plant now has a
manufacturing operation dedicated to that type product. Success in further
diversifying beyond the plant's histori-
<PAGE>
(Page 7 of the Annual Report to Shareholders)
cal strength in disk drive electronics was achieved by adding customers for
medical and tape drive electronics. The plant's process efficiencies and high
yields couple with new technology and equipment additions to promote leading
edge, competitive performance in Singapore's maturing economy. The Thai plant's
recent focus has been on management enhancement, systems implementation, and
capacity expansion in support of continuing rapid growth through numerous new
product introductions. The plant received new contracts from a European network
products company and also expanded its role as a primary producer of control-
- --------------------------------------------------------------------------------
Picture with the caption - Technicians in the Irish plant generate programs for
a surface mount technology assembly line.
- --------------------------------------------------------------------------------
ler electronics for several leading mass storage device companies. Growth there
continues to be stimulated by a very competitive cost structure. While several
years younger, the plant's output is now comparable to that of the Singaporean
plant. Opportunities for Asian volume growth and further product and technology
diversification are evident. While traditional customers are growing, Japanese
manufacturers that have been competitively affected by the strong Yen should
benefit from high quality, lower cost Southeastern Asian manufacturing sources.
These considerations, along with opportunities to serve a concentration of
existing customers' operations in additional regional countries, are the impetus
for a third Asian plant planned for construction on a "green field" basis during
fiscal 1996.
European Region
The European Region operates facilities in Irvine, Scotland; Fermoy, County
Cork, Ireland; and Grenoble, France. These plants serve their respective
in-country customers while collectively supporting large multinationals'
European operations. They also serve an emerging market
- --------------------------------------------------------------------------------
Pictured with the caption - In-circuit test is performed on an analog electronic
assembly for a video monitor in the Scottish plant.
- --------------------------------------------------------------------------------
for contract manufacturing services for local customers throughout Continental
Europe. The Grenoble operation occupied a newly constructed building during
fiscal 1995, approximately one year after the Company acquired Hewlett-Packard's
Grenoble Surface Mount Center. The new facility has installed additional
machinery to meet customer requirements that have exceeded earlier expectations.
The plant is well positioned to support its major customer's European growth and
pursue a customer diversification strategy as European companies increasingly
adopt broader manufacturing outsourcing strategies. The Scottish plant continues
to be a supplier of a wide range of electronic assemblies to the computer
industry. Diversification into mobile and fixed base telecommunications has been
initiated along with memory assemblies and high performance video display
electronics. The Irvine facility plays an increasing role in supporting a number
of the Company's global customers and is well positioned for substantial growth
in the coming year.
The Region operates a design center in the Scottish plant which provides product
development support and engineering services to the European market. The
computer, telecommunication, and automotive sectors are representative of those
that are benefiting from improved product functionality, manufacturability, and
lower cost through the use of the design center's services. The Irish facility
continues to support a number of local and multinational customers with whom the
Company has ongoing or potential multiplant business. The plant is involved in a
number of projects for two of the world's largest telecommunications companies.
The plant now has considerable finished product assembly experience to balance
its capabilities and is well positioned to benefit from the growth of major
companies' established and developing Irish operations.
(Page 8 of the Annual Report to Shareholders)
- --------------------------------------------------------------------------------
Pictured with the caption - SCI's Customer Order Processing System (COPS)
produces bar code labels for tracking each product produced.
- --------------------------------------------------------------------------------
Government Division
The Government Division provides a wide range of high performance systems and
subsystems used by U.S. and foreign governments, defense and aerospace
companies, and others requiring high reliability and ruggedized equipment. Its
primary engineering and manufacturing operations are carried out in facilities
located in Huntsville and Lacey's Spring, Alabama. The Division designs and
manufactures electronic and electromechanical systems and subsystems for launch
vehicle, satellite, aircraft, and surface applications. Primary technology
emphasis includes instrumentation, voice and data communications, and computers.
During the year production continued of voice and communication control systems
for the F-15, F-16, F-18, and AV-8 aircraft; the FAA Rapid Development Voice
System; and the Advanced Airborne Test Instrumentation System. The first cesium
atomic clocks for a new block of Global Positioning System (GPS) satellites were
delivered while the Division continued production of the Government's GPS User
Equipment. Deliv-
- --------------------------------------------------------------------------------
Picture with the caption -The U.S. Army's Enhanced Fiber Optic Guided Missile is
steered to the target with this gunner's console.
- --------------------------------------------------------------------------------
eries of Fiber Optic Terminal Equipment for NASA started during the year.
Production rates were increased for a new family of gas cabinets for
semiconductor manufacturing and for ruggedized electronics for railroad
locomotives. The Advanced Lighting Control System for the C-130H aircraft
completed qualification testing, followed by initial production deliveries. The
ARINC-629 Current Mode Coupler (CMC) and Standard Interface Module (SIM) for the
fly-by-wire Boeing 777 aircraft completed first article testing and moved into
early production. Digital Audio Intercommunications Equipment for the V-22 and
C-130J aircraft completed design and began qualification testing. The Common
Airborne Instrumentation System began prototype production. A number of new
contracts were received during the year. Products include portable worksta-
- --------------------------------------------------------------------------------
Picture with the caption -SCI is developing intercommunications and
communications controls for the V-22 and C-130J aircraft.
- --------------------------------------------------------------------------------
tions for the U.S. Navy; computers for the U.S. Army's Apache Longbow
Helicopter; Non-Volatile Memory Modules for the Japanese FSX Aircraft; Satellite
Communication terminals for tracking in the transportation industry; control
systems for transportation equipment; F-15 aircraft communications equipment for
Israel; Advanced Interface Blanker Units (AIBU) for the MH53J Helicopter;
gunner's consoles, fiber optic bobbins, and local area networks for the U.S.
Army Enhanced Fiber Optic Guided Missile (E-FOGM); solid state power controllers
for the Space Station; and proofing printers for the graphic arts industry.
These programs will result in considerable out year growth of production
volumes. Contract manufacturing expanded in missile electronics and
transportation products. The Division's engineering resources continue to
support a number of Commercial Division customers from which company-wide growth
is expected.
<PAGE>
(Beginning of the Excerpts From Form 10 - K contained in Annual Report to
Shareholders) (Cover Sheet not numbered)
Excerpts From
Form 10-K
SCI Systems, Inc.
Fiscal 1995
Annual Report
to the
United States
Securities and Exchange Commission
(Page 1 of the Excerpts from Form 10-K contained in 1995 Annual Report to
Shareholders)
EXCERPTS FROM FORM 10-K
FOR FISCAL 1995
(Except for the parts of SCI Systems, Inc. Annual Report to Shareholders
expressly incorporated in the Form 10-K by reference, the Annual Report to
Shareholders is not to be deemed filed with the Securities and Exchange
Commission)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[...X...] Annual Report to Shareholders
PURSUANT TO SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1995
-- Commission File No. 0-2251
SCI SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-0583436
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
c/o SCI Systems (Alabama), Inc.
2101 West Clinton Avenue
Huntsville, Alabama 35805
(Address of principal executive offices)
(302) 998-0592
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
None (Title of Class)
Securities registered pursuant to Section
12 (g) of the Act:
Common Stock, $.10 Par Value
5-5/8% Convertible Subordinated Debentures, due March 1, 2012
At August 25, 1995, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $807,534,000. At August 25,
1995, there were 27,554,696 outstanding shares of the registrant's Common Stock.
Documents Incorporated By Reference
Portions of the registrant's 1995 Annual Report to Shareholders to Shareholders
are incorporated by reference into Parts I and II. Portions of the registrant's
definitive Proxy Statement for its October 27, 1995, Annual Meeting of
Shareholders are incorporated by reference into Parts I and III.
PART I
Item 1. Business.
See inside front cover and pages 4 to 8 of the 1995 Annual Report to
Shareholders to Shareholders ("Annual Report to Shareholders"), which are
incorporated herein by reference.
Backlog
At June 30, 1995, the Company's order backlog believed firm was approximately
$2.135 billion, compared with $1.235 billion a year earlier. Backlog growth came
from new customers, increased orders from existing custom ers, and the effects
of lengthening component lead times. As a portion of this backlog is subject to
customer releases, there is some variability as to actual shipment date. Current
indications are that approximately two billion dollars of this backlog will be
shipped during fiscal 1996.
Foreign Sales
U.S. export and foreign sales from continuing operations totaled approximately
$1,187 million in 1995, $778 million in 1994, and $744 million in 1993,
representing 44% of total sales in 1995, 42% of total sales in 1994, and 45% in
1993. The Company believes its operations are such that foreign sales risks are
no greater than those of domestic ones. (See Note J to the Company's 1995
Consolidated Financial Statements, incorporated herein by reference.)
Engineering, Research
and Product Development
The Company devotes considerable resources to design and development activities.
Among other things, the Company believes its future success depends upon its
ability to improve manufacturing processes, internal systems, and products sold
to original equipment manufacturers or the U.S. Government and its prime con
tractors. The Company has an ongoing program to develop innovative and cost
effective new ones. The Company is committed to a continuing program of
manufacturing process, system, and product develop ment. Computer aided design
centers are employed at strategic regional plants in support of domestic and
foreign customers. Much of the Company's design automation emphasis is currently
focused upon surface mount technology and advanced manufacturing processes. New
product development is usually undertaken in support of customer re-
(Page 2 of the Excerpts from Form 10-K contained in 1995 Annual Report to
Shareholders) quirements. (See Note A to the Company's 1995 Consolidated
Financial Statements, incorporated herein by reference.)
<PAGE>
The Company has developed unique internal systems to support manufacturing of
tailored completed products for delivery to customer distribution channels, or
directly to the end user. The Company believes these internal systems to be
important to obtaining future, and maintaining existing, finished product
assembly contracts.
Patents and Licenses
The Company holds a number of patents, but they are not considered significant
to the Company's business. The Company believes that its success depends more
upon the creativity of its personnel than upon patent ownership. Because of
rapid technological change and rate of issuance of new patents, certain of the
Company's products may inadvertently infringe upon patents. If such occurs the
Company believes that, based upon industry practice, necessary licenses could be
obtained under terms not having a material adverse effect; however, there can be
no assurance given to that effect.
Marketing and Customers
A majority of the Company's revenues are derived from direct sales to original
equipment manufacturers and the U.S. Government and its prime contractors.
Marketing is conducted primarily by factory-based personnel in Canada, France,
Ireland, Mexico, Singapore, Thailand, the United Kingdom, and the United States.
The Company advertises its services on a limited scale in industry publications
and participates in various industry trade shows. Although the Company has
several hundred customer accounts, experience has indicated that a significant
percentage of sales are attributed to a limited group of customers in any
particular period. Sales to individual customers that exceeded 10% of annual
consolidated sales for each of the last three fiscal years were: Hewlett-Packard
Company, $1,049 million in 1995 and $436 million in 1994; International Business
Machines Corporation, $326 million in 1994; Conner Peripherals, Inc., $229
million in 1993; and Dell Computer Corporation, $280 million in 1993. The loss
of a major customer, without offsetting orders from other sources, could have a
material adverse effect on the Company. The majority of the Company's accounts
receivable are from customers in the high technology industry. Credit terms are
extended to customers after performing credit evaluations, which continue
throughout a customer's contract period. Letters of credit or other security are
generally requested from customers when the Company believes significant credit
risks or financial exposure may exist.
Competition and Other Factors
The Company competes in the electronic equipment industry, which is populated by
hundreds of competitors, no one of which is dominant. Competition in the
industry is intense and the Company believes this condition will continue. A
number of competitors are larger than the Company and have greater resources,
while a number of competitors are smaller with fewer resources. The Company
could be adversely affected if its competitors introduce superior or
significantly lower priced services or products. The Company not only competes
against domestic concerns, but also competes in international markets. Offshore
concerns are very competitive with respect to labor costs. The Company believes
that its continued success depends upon its ability to remain a low cost
supplier. The Company does not consider its business to be consistently
seasonal, although seasonal demands for its customer's products sold to
consumers may impact quarterly revenues. The Company cannot predict what effects
unsettled economic conditions would have, but believes it would be adversely
affected by economic or industry recession of significant duration. Due to the
competitive nature of its industry, the Company is subject to certain inherent
risks. The Company believes that the ongoing necessity for introduction of new
products and systems, development of new software for such products and systems,
and development of new processes and equipment for competitive manufacturing
subjects it to the risks of development and production problems, market
acceptance, technological obsolescence, and price competition. During the last
three fiscal years, contract manufacturing services accounted for approximately
90% of consolidated revenue. No single product accounted for as much as 10% of
the Company's consolidated revenue during any of the last three fiscal years.
The Company sources its materials on a global basis. Component availability is
periodically subject to constraints, shortages, and abundances. Although no
assurances can be given, the Company believes it can generally obtain adequate
components to maintain most production in periods of shortages, although
shipment delays may
<PAGE>
periodically occur. When shortages and excesses have occurred, the Company has
generally been successful in passing on increased or reduced costs to its
customers. The Company's contracts with the U.S. Government and its prime
contractors are subject to audit and termination at the election of the
Government. On January 7, 1991, the U.S. Government canceled the A-12 Aircraft
program for which the Company was a major subcontractor. (See Note G to the
Company's 1995 Consolidated Financial Statements, incorporated herein by
reference.) The Company believes that its ongoing principal government programs
will continue
(Page 3 of the Excerpts from Form 10-K contained in 1995 Annual Report to
Shareholders)
to be funded, but there can be no assurance to that effect. The termination of a
government related program would not be significant to the Company, as no
current government program accounts for more than 1% of consolidated revenue.
Employees
At June 30, 1995, the Company employed 13,185 persons, of which 6,700 were based
in the United States. Except for two foreign plants, no employees are subject to
a collective bargaining agreement. There have been no work stoppages caused by
employee activities. The Company believes that its employee relations are good.
Ongoing success is believed dependent upon the Company's ability to recruit and
retain skilled professional and technical salaried personnel, for which there is
intense competition, and its ability to recruit, train, and retain skilled and
semiskilled hourly employees at competitive costs.
Item 2. Properties.
Domestically the Company owns, or finances with Industrial Revenue Bonds and
treats as purchases for financial statement purposes, facilities in Alabama,
California, Colorado, Maine, New Hampshire, New York, North Carolina, and South
Dakota, with total area of 2,341,800 square feet. Internationally, the Company
owns facilities in Ireland, France, Mexico, Scotland, Singapore, and Thailand
with total area of 601,000 square feet and leases space in Canada and Hong Kong
with total area of 50,000 square feet. Miscellaneous space amounting to 28,800
square feet is leased in various locations. The Company believes its facilities
are modern, in good repair, and suitable for its operations.
Item 3. Legal Proceedings.
The Company is a party to several lawsuits incidental to its various activities
and incurred in the ordinary course of business. The Company believes that it
has meritorious claims and defenses in each case. After consultation with
counsel, it is the opinion of management that, although there can be no
assurance given, none of the associated claims, when resolved, will have a
material adverse effect upon the financial position of the Company. The Company
is not involved in any material environmental proceedings. (See Note G to the
Company's 1995 Consolidated Financial Statements, incorporated herein by
reference.)
Item 4. Submission of Matters to a Vote of Security Holders. --None
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters.
The Company's Common Stock is traded under the "SCIS" symbol in the NASDAQ
National Market System. At August 25, 1995, there were 2,316 shareholders of
record. See Selected Quarterly Financial Data on page 5, incorporated herein by
reference, for the last two years' quarterly high and low bid stock prices. The
Company has not paid cash dividends on its Common Stock to date. Payment of
dividends is restricted by loan agreements as described in Note B to the
Company's 1995 Consolidated Financial Statements, incorporated herein by
reference.
<PAGE>
Item 6. Selected Financial Data.
See page 1 of the Company's 1995 Annual Report to Shareholders, which is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Fiscal year 1995 was a period of rapid expansion for the Company. Sales,
incoming orders, and order backlog each experienced substantial growth, leading
to record income and earnings. The balance sheet was strengthened by higher
retained earnings and by reduced debt as asset turnover improved.
The 44% sales increase in fiscal year 1995 over the prior year resulted from
strong end user market conditions, industry trends to increased outsourcing, and
the Company's available infrastructure of facilities, equipment, and internal
systems. Domestically, sales increased 37%, while foreign sales increased 57%.
The foreign sales increase was aided by the first full year of the Grenoble,
France, plant's operations and higher demand for the Company's Asian and Mexican
plants' services. Domestic sales growth was aided by the acquisition of Digital
Equipment Corporation's Augusta, Maine, plant in the fourth quarter of the year.
Operating margins increased incrementally throughout fiscal 1995, even though
finished product assembly business substantially increased. Such business,
especially that relating to personal computers, characteristically yields lower
profit margins than the Company's other production business, as the
"distribution content" is much higher. Operating margin for fiscal 1995 was
3.4%, a modest improvement over 3.3% in fiscal year 1994.
Domestic operating margins improved incrementally to 5.4% in fiscal 1995 from
5.3% in fiscal 1994. Foreign operating margins improved incrementally to 0.5% in
fiscal 1995 from near breakeven in fiscal 1994. Fiscal 1995 foreign results were
adversely affected by a $2.2 million exchange loss. (That loss was offset by a
foreign exchange gain in domestic operations of $1.7 million.) Foreign operating
profits were adversely impacted by significant
(Page 4 of the Excerpts from Form 10-K contained in 1995 Annual Report to
Shareholders)
customer and product transitions; costs of a plant's acquisition, conversion,
and physical move; pricing pressures created by intense competition from new
market entrants; and lingering recession in Europe. Indications are that the
impact of each of these factors will be significantly reduced in future periods.
Exchange rate fluctuations during the year had moderate impact on consolidated
profits. The impact of the devaluation of the Mexican Peso was not material, as
the majority of the Company's Mexican transactions are conducted in the U.S.
Dollar. (The U.S. Dollar is the functional currency of a majority of the
Company's foreign operations.)
Fiscal 1995's interest expense declined to 0.7% of sales from 0.8% in fiscal
1994, even though average interest rates increased. This lower level of interest
expense resulted from improved asset management that led to lower borrowing
requirements. Other income increased $1.4 million in fiscal 1995 from that of
the previous fiscal year as a result of increased investment income.
The effective income tax rate increased to 40.2% in fiscal 1995 from 36.2% in
fiscal 1994. State income taxes increased on the average, as a larger percentage
of domestic income was allocable to states with higher tax rates. Foreign income
taxes increased as certain tax holidays expired.
Average asset turnover in fiscal 1995 was 2.8 times compared to 2.2 times in
fiscal 1994. This improvement was aided by a product mix shift towards finished
products, which produce higher asset turnovers to offset lower operating
margins.
See pages 2 to 8 of the Company's 1995 Annual Report to Shareholders to
Shareholders, which is incorporated herein by reference, for further management
discussion and analysis information.
Capital Resources and Liquidity
At June 30, 1995, working capital was $280 million compared with $396 million
at June 30, 1994. The reduced working capital requirement was accomplished
through improved asset turnover ratios. The June 30, 1995, ratio of current
assets to current liabilities (current asset ratio) was 1.6 as compared to 2.2 a
year earlier. The decrease in current ratio resulted from reduced days of sales
employed in current assets. Cash generated as a result of this reduction was
used to reduce long-term debt.
Based on fourth quarter annualized revenue, June 30, 1995, current assets
represented 85 days of sales, as compared to 117 days at June 30, 1994. Six days
($50 million) of that reduction resulted from implementation of an asset
securitization program. (See Note B to the Consolidated Financial Statements,
incorporated herein by reference.)
<PAGE>
June 30, 1995, current liabilities represented fifty-three days of fourth
quarter annualized sales, the same as at the prior year-end.
Available funds at June 30, 1995, approximated $324 million, consisting of $10
million in cash and $314 million in unused credit facilities and commitments. In
August 1995 the Company increased its credit facility by $50 million. (See Note
B to the Company's 1995 Consolidated Financial Statements, incorporated herein
by reference.) Increased average borrowings are anticipated during fiscal 1996
to finance expanded working capital and capital expenditures to support planned
revenue growth. The Company believes that its existing credit lines are
sufficient to finance planned growth and that such facilities could be expanded
if desired.
Fiscal 1996's capital expenditures are currently estimated at $76 million, $20
million more than estimated depreciation.
Inflationary trends are not expected to have a material impact on operations
as relatively high asset turnover and long-term financing minimize the effects
of inflationary conditions.
1994 Results Compared with 1993
Fiscal year 1994 was a period of transition for the Company. New growth
initiatives matured and a strategic acquisition was consummated, with several
activities being discontinued. Significantly higher revenue levels were achieved
by year-end. New customers were developed to replace declining revenues from
several customers losing market share in dynamic markets. By the fourth quarter,
as new customer revenue growth continued and existing customer revenue declines
eased, a new quarterly revenue base was established. Manufacturing capacity was
increased to support unit volume and revenue growth in both traditional and new
product areas.
Additional production lines for finished product assembly were placed in
operation to meet customers' growing requirements, including direct shipment to
their customers. The Company's Mexican plant was expanded to accommodate
customers' increasing demand for its low labor cost.
Fiscal 1994 sales were 11% above those of fiscal 1993. The largest increase
came in the fourth quarter, when sales increased 35% over those of a year
earlier. Geographically, domestic sales increased 24%, while foreign sales
decreased 6%.
Finished product assembly business experienced dynamic growth as new products
were readied for market in minimum time, custom manufactured in volume and
shipped directly to multiple market channels. The fourth quarter acquisition of
Hewlett-Packard Company's Grenoble, France, Surface Mount Center and the
Watsonville, California, plant's first full year of operation also assisted
sales growth.
The Singapore plant was recovering by year-end from softness in demand during
the early part of the year through customer diversification beyond the disk
drive
(Page 5 of the Excerpts from Form 10-K contained in 1995 Annual Report to
Shareholders) industry. European Region plants were affected by economic
recession.
Operating income for fiscal 1994 was 3.3% of sales, down slightly from 3.5% in
fiscal 1993. Fiscal 1994 profit was negatively impacted by operating losses of a
discontinued domestic plant and write-down of certain assets to estimated net
realizable values. Additionally, a $10 million asset write-down occurred because
of a customer's bankruptcy.
Interest expense decreased $1.4 million in fiscal 1994 from that incurred in
the prior year. While borrowings on a year-to-year basis increased, the
Company's quarterly average borrowings were relatively constant. The decrease
primarily resulted from lower effective interest rates.
The effective income tax rate increased to 36.2% in fiscal 1994 compared with
28.6% in fiscal 1993. The rate increase primarily resulted from higher state
income taxes (loss carry-forwards were available in fiscal 1993), higher foreign
income taxes (as certain tax holidays expired), and reduced income tax credits.
The Company adopted plans for discontinuation and disposal of certain business
units during 1994. The estimated disposal loss of $4.5 million reduced earnings
per share by $.16. On August 26, 1994, the Company entered into an agreement for
the sale of Cambridge Computer, Ltd., a substantial part of the discontinued
operations. The discontinued operations represented substantially all of the
Company's proprietary products, as contrasted to the Company's major line of
business (contract manufacturing for OEMs). Prior to fiscal 1994, these
operations' sales were small as their products were still substantially in the
development process. Alabama marketing effort begun in fiscal 1993 accounted for
most of their fiscal 1994 sales increase. As revenues expanded, it became
apparent that the products could not
<PAGE>
be sold with adequate margins, nor would it be prudent for the Company to
continue to fund further development and marketing expenses. The majority of
fiscal 1994 loss from discontinued operations represented the excess cost of
product development and marketing expenses over sales. Previously, the
discontinued operations' pretax losses primarily represented development and
introductory expenses. (See Note F to the Company's 1995 Consolidated Financial
Statements, incorporated herein by reference.)
Exchange rate fluctuations during the year, particularly in the European area,
had a minor impact on revenue and net income.
Average asset turnover in fiscal 1994 was 2.2 times compared to 2.4 times in
fiscal 1993. This small decline correlated to increased accounts receivable and
inventory levels associated with volume growth.
<PAGE>
<TABLE>
Selected Quarterly Financial Data (Unaudited)
Quarterly financial results and stock prices for the last two fiscal years were:
<CAPTION>
1995 1994
-----------------------------------------------------------------------------------------------
(In thousands of dollars Fourth Third Second First Fourth Third Second First
except per share data) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 842,352 $ 591,465 $ 621,545 $ 618,421 $ 584,523 $ 424,092 $ 422,877 $ 420,986
Gross profit 29,690 20,545 21,238 20,357 22,175 4,286 17,748 17,657
Income from continuing operations 14,046 10,943 10,197 10,057 11,072 476 9,214 9,174
Net income (loss) 14,046 10,943 10,197 10,057 11,072 (5,531) 7,771 7,849
Fully diluted earnings per share:
Continuing operations $ .48 $ .39 $ .37 $ .36 $ .40 $ .02 $ .33 $ .33
Discontinued operations -0- -0- -0- -0- -0- (.22) (.05) (.05)
-----------------------------------------------------------------------------------------------
Earnings per share (loss) $ .48 $ .39 $ .37 $ .36 $ .40 $ (.20) $ .28 $ .28
===============================================================================================
Market stock price range:
High $ 26 $ 19 1/2 $ 22 $22 1/4 $ 17 $21 5/8 $19 7/8 $21 3/8
Low 17 1/2 17 16 14 3/4 12 5/8 15 1/4 15 3/8 14 3/8
</TABLE>
Quarterly and annual earnings per share are independently computed using the
estimated effective income tax rate and Common Stock market prices applicable
for that period. Consequently, the sum of quarterly fully diluted earnings per
share for fiscal 1995 does not equal the total for the year, as the increased
effective income tax rate for the year impacted the annualized dilution effect
of Convertible Debentures. Additionally, the substantially higher June 30, 1995,
closing market price for the Company's Common Stock, as compared to the previous
three quarter's closing price, impacted the annualized dilution effect of
outstanding stock options. For the first three quarters of fiscal 1995, the
dilution effect of Convertible Debentures and stock options was less than three
percent.
<PAGE>
<TABLE>
(Page 6 of the Excerpts from Form 10-K contained in 1995 Annual Report to
Shareholders)
Item 8. Financial Statements and Supplementary Data.
Consolidated
Balance Sheets
<CAPTION>
(In thousands of dollars except share data) June 30,
--------------------------------------------
Assets 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 10,277 $ 35,822 $ 15,846
Accounts receivable, less allowances of $4,267 in 1995 and 1994 , and $4,600 in 1993 259,308 247,004 201,919
Inventories 456,107 400,595 338,188
Refundable and deferred federal and foreign income taxes 7,869 7,811 12,369
Assets associated with discontinued operations - Note F -0- 12,504 10,018
Other current assets 11,491 17,749 1,702
- -----------------------------------------------------------------------------------------------------------------------------------
Total Current Assets 745,052 721,485 580,042
- ------------------------------------------------------------------------------------------------------------------------------------
Property, Plant, and Equipment - Note B
Land 16,731 15,115 15,017
Buildings, including construction in process 92,402 83,087 76,903
Equipment 347,845 301,012 267,209
Less accumulated depreciation and amortization (242,953) (216,446) (175,097)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Property, Plant, and Equipment 214,025 182,768 184,032
- ------------------------------------------------------------------------------------------------------------------------------------
Goodwill, less accumulated amortization 2,995 3,682 7,915
Deferred Compensation Assets Held in Trust 5,040 3,548 -0-
Other Noncurrent Assets 14,180 8,729 8,350
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 981,292 $ 920,212 $ 780,339
====================================================================================================================================
Liabilities and Shareholders' Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Current Liabilities
Accounts payable and accrued expenses $ 417,495 $ 292,351 $ 214,773
Accrued payroll and related expenses 22,634 18,997 15,920
Federal, foreign, and state income tax 19,079 6,697 8,735
Accrued liabilities relating to plant and business unit disposals - Note F -0- 1,930 -0-
Current maturities of long-term debt 5,720 5,882 4,098
- -----------------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 464,928 325,857 243,526
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred Income Taxes 509 1,091 3,893
Pension Liability, less current portion of $3,000 in 1995, $1,083 in 1994,
and $1,000 in 1993 4,669 6,681 5,821
Deferred Compensation 5,040 3,548 -0-
Long-term Debt - Note B
Industrial revenue bonds 21,306 23,306 23,742
Long-term notes 96,138 216,202 186,643
Convertible subordinated debentures 38,926 38,893 38,858
- -----------------------------------------------------------------------------------------------------------------------------------
Total Long-term Debt 156,370 278,401 249,243
- ------------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies - Notes B and G
Shareholders' Equity
Preferred Stock, 500,000 shares authorized but unissued -0- -0- -0-
Common Stock, $.10 par value: authorized 50,000,000 shares; issued 27,465,675
shares in 1995; 27,335,782 shares in 1994; and 27,085,282 shares in 1993 2,747 2,734 2,709
Capital in excess of par value 126,123 124,926 122,785
Retained earnings 227,195 181,952 160,791
Currency translation adjustment (5,948) (4,637) (8,027)
Treasury stock, at cost: 29,683 shares in 1995 and 1994, and 35,000 shares in 1993 (341) (341) (402)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 349,776 304,634 277,856
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 981,292 $ 920,212 $ 780,339
====================================================================================================================================
See notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
(Page 7 of the Excerpts from Form 10-K contained in 1995 Annual Report to Shareholders)
Consolidated Statements of Income
<CAPTION>
(In thousands of dollars except per share data) Years ended June 30,
--------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 2,673,783 $ 1,852,478 $ 1,672,115
Costs and expenses - Note F 2,581,953 1,790,612 1,612,850
Goodwill amortization 786 1,158 1,246
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Income 91,044 60,708 58,019
- -----------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (18,400) (15,423) (16,793)
Other income, net 3,017 1,631 1,657
- -----------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations before Income Taxes 75,661 46,916 42,883
Income taxes - Note E 30,418 16,980 12,268
- -----------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 45,243 29,936 30,615
- -----------------------------------------------------------------------------------------------------------------------------------
Discontinued Operations - Note F:
Loss from operations (net of income tax benefit of $1,480 in 1994
and $1,420 in 1993) -0- (4,283) (4,056)
Loss on disposal (net of income tax benefit of $4,358 in 1994) -0- (4,492) -0-
- ----------------------------------------------------------------------------------------------------------------------------------
Loss from Discontinued Operations -0- (8,775) (4,056)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income $ 45,243 $ 21,161 $ 26,559
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Earnings per share - Note C:
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Primary
From continuing operations $ 1.63 $ 1.08 $ 1.24
From discontinued operations -0- (.32) (.15)
$ 1.63 $ .76 $ 1.09
====================================================================================================================================
Fully diluted
From continuing operations $ 1.56 $ 1.08 $ 1.21
From discontinued operations -0- (.32) (.14)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1.56 $ .76 $ 1.07
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
Consolidated Statements of Shareholders' Equity
<CAPTION>
(In thousands of dollars) Years ended June 30,
--------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock
Balance at July 1 $ 2,734 $ 2,709 $ 2,101
Conversion of debt - Note B -0- -0- 590
Stock options exercised 13 25 18
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June $ 2,747 $ 2,734 $ 2,709
====================================================================================================================================
Capital in excess of par value
Balance at July 1 $ 124,926 $ 122,785 $ 53,919
Conversion of debt - Note B -0- -0- 67,576
Stock options exercised 1,197 2,141 1,290
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30 $ 126,123 $ 124,926 $ 122,785
====================================================================================================================================
Retained earnings
Balance at July 1 $ 181,952 $ 160,791 $ 134,232
Net income for the year 45,243 21,161 26,559
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30 $ 227,195 $ 181,952 $ 160,791
====================================================================================================================================
Currency translation adjustment
Balance at July 1 $ (4,637) $ (8,027) $ 2,499
Translation gain (loss) (1,311) 2,508 (11,550)
Deferred income taxes -0- 882 1,024
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30 $ (5,948) $ (4,637) $ (8,027)
====================================================================================================================================
See notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
(Page 8 of the Excerpts from Form 10-K contained in 1995 Annual Report to
Shareholders)
Consolidated Statements of Cash Flows
<CAPTION>
(In thousands of dollars) Years ended June 30,
1995 1994 1993
<S> <C> <C> <C>
Operating Activities
Net Income $ 45,243 $ 21,161 $ 26,559
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 49,839 48,623 41,303
Effect of property, plant, and equipment disposals (176) 465 364
Undistributed equity earnings (2,180) (1,018) (582)
Noncurrent pension expense (2,012) 860 1,848
Unrealized foreign currency exchange (gain) loss (1,557) (406) 1,983
Deferred income taxes (1,228) (7,754) (959)
Other -0- 64 -0-
Changes in current assets and liabilities:
Accounts receivable (10,982) (47,155) (80,627)
Inventories (54,637) (79,694) (61,931)
Refundable income taxes 607 4,894 975
Discontinued and other current assets 19,124 11,054 (22,351)
Accounts payable and accrued expenses 125,992 81,107 51,446
Income taxes 12,380 83 7,215
- ------------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used for) Operating Activities 180,413 32,284 (34,757)
- ------------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Purchase of property, plant, and equipment (80,316) (46,488) (84,084)
Proceeds from sale of property, plant, and equipment 647 400 425
Change in noncurrent assets (3,451) 47 586
- ------------------------------------------------------------------------------------------------------------------------------------
Net Cash (Used for) Investing Activities (83,120) (46,041) (83,073)
- ------------------------------------------------------------------------------------------------------------------------------------
Financing Activities
Net (decrease) increase in commercial paper and short-term financing (84,273) 49,287 27,150
Payments on long-term debt (6,901,801) (2,242,630) (627,162)
Proceeds from long-term debt 6,863,287 2,223,480 696,462
Issuance of common stock 1,210 2,166 1,308
- ------------------------------------------------------------------------------------------------------------------------------------
Net Cash (Used for) Provided by Financing Activities (121,577) 32,303 97,758
- ------------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (1,261) 1,430 (2,804)
- ------------------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (25,545) 19,976 (22,876)
Cash and cash equivalents at beginning of year 35,822 15,846 38,722
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 10,277 $ 35,822 $ 15,846
====================================================================================================================================
Cash equivalents are primarily short-term interest bearing deposits. Interest
paid was $18,131 in 1995, $14,776 in 1994, and $19,723 in 1993. Income taxes
paid were $17,512 in 1995, $14,781 in 1994, and $6,196 in 1993.
See notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
(Page 9 of the Excerpts from Form 10-K contained in 1995 Annual Report to
Shareholders) Notes to Consolidated Financial Statements
Note A - Accounting Policies
Consolidated Financial Statements include accounts of the Company and its
subsidiaries after elimination of material intercompany accounts and
transactions.
Inventories, other than those relating to long-term contracts, are stated at
the lower of cost (principally first-in, first-out method) or market.
Inventories relating to long-term contracts are stated at cost incurred
(including indirect expenses) reduced by costs applicable to sales recognized.
Inventories primarily consist of costs incurred in support of contractual
obligations.
Property, Plant, and Equipment are recorded at cost. The provision for
depreciation and amortization is computed on the straight-line method over the
estimated useful lives of individual assets.
Goodwill is the unamortized excess of cost over underlying net tangible assets
of companies acquired. Goodwill is amortized on a straight-line basis over ten
years. Accumulated amortization at June 30 was $9,026,000 in 1995, $8,239,000 in
1994, and $8,265,000 in 1993.
Deferred income taxes are provided on temporary differences as certain
revenues and expenses are reported in periods which differ from those in which
they are taxed. U.S. income taxes have not been provided on certain
undistributed earnings of foreign subsidiaries aggregating $47 million at June
30, 1995, which are considered to be permanently invested.
Otherwise, $16 million of additional deferred taxes would have been provided.
Costs and expenses principally represent engineering, manufacturing, and other
costs incurred in support of customer contracts.
Research and Development is conducted by the Company under both customer
sponsored and company sponsored programs. Company sponsored programs include
research and development related to government products and services, which are
allocable and recoverable in the same manner as general and administrative
expense under U.S. Government contractual arrangements. Customer sponsored
research and development costs are accounted for as any other program cost.
Total research and development costs incurred by the Company were $30,888,000 in
1995, $30,074,000 in 1994, and $29,575,000 in 1993.
General and administrative expense included in costs and expenses approximated
$16,508,000 in 1995, $15,281,000 in 1994, and $15,360,000 in 1993.
Note B - Long-term Debt
Industrial Revenue Bonds. The Company is obligated by lease or guarantee for
various industrial revenue bonds maturing through the year 2015. $1,000,000 of
the outstanding balance at June 30, 1995, bears a 6.25% fixed rate of interest.
$3,384,000 at June 30, 1994, and $3,485,000 at June 30, 1993, bore interest at
fixed rates ranging between 5.5% and 7.6%. $20,814,000 of the outstanding
balance at June 30, 1995, ($20,900,000 at June 30, 1994, and $20,981,000 at June
30, 1993) bears interest at variable rates between 3.8% and 8.5%. Such
obligations are collateralized by related properties and irrevocable letters of
credit.
Long-term Notes. The Company is obligated under various mortgages and notes
maturing through the year 2004. $547,000 of the outstanding balance at June 30,
1995, ($677,000 balance at June 30, 1994, and $1,667,000 at June 30, 1993) bears
a current fixed interest rate of 3%. $30,458,000 of the outstanding balance at
June 30, 1995, ($32,175,000 at June 30, 1994, and $31,572,000 at June 30, 1993)
bears variable interest rates ranging between 5.6% and 8.5% at June 30, 1995. A
$14,438,000 variable rate note at June 30, 1995, ($16,088,000 at June 30, 1994,
and $13,000,000 at June 30, 1993) was effectively converted to a 7.3% fixed rate
of interest through an interest rate swap. $2,216,000 of the outstanding balance
at June 30, 1995, ($3,050,000 at June 30, 1994, and $3,757,000 at June 30, 1993)
bears a fixed interest rate of 7.9%. $29,895,000 of June 30, 1995's outstanding
balance is collateralized by the related properties. On August 3, 1995, the
Company increased and extended its primary credit facility with a group of large
domestic and international banks. The agreement now includes a revolving credit
element of $200 million (a $50 million increase) and a commercial paper element
of $120 million. The initial renewal date has been extended to August 3, 1998,
from July 15, 1996. Borrowings under the revolving credit line, at the Company's
option, bear interest at a rate based upon either a defined Base Rate or the
London Interbank Offered Rate (LIBOR). The agreement allows the Company to
enhance the marketability of its commercial paper with an irrevocable letter of
credit in order to borrow at rates generally below revolving credit rates.
Conversion privileges are provided in the event of nonsalability of commercial
paper. At
<PAGE>
June 30, 1995, $54,690,000 was outstanding under this agreement compared to
$170,596,000 at June 30, 1994, and $140,975,000 at June 30, 1993. The June 30,
1995, average borrowing rate for $34,790,000 of commercial paper outstanding was
6.1%, for $9,900,000 of revolving credit outstanding was 6.9%, and for
$10,000,000 of bankers acceptances outstanding was 6.5%. Under the credit
agreement the Company must maintain certain financial ratios and meet certain
balance sheet tests. Under the most restrictive provision of the credit
agreement, $54,159,000 of retained earnings are available for the payment of
cash dividends.
A commitment fee of 0.25% is paid under the amended credit agreement on the
unused portion of
(Page 10 of the Excerpts from Form 10-K contained in 1995 Annual Report to
Shareholders)
the revolving credit line. Fees aggregating 0.85% are currently paid on letters
of credit issued in support of commercial paper. No compensating balances are
required under the agreement. Short-term borrowings may be drawn under the
credit agreement. Because of the Company's ability and intent to refinance such
borrowings, total borrowings under the agreement, including commercial paper,
are classified as long-term debt. At June 30, 1995, unused credit facilities and
commitments approximated $314,000,000. An additional $50,000,000 has since been
added to available credit through the August 1995 amendment to the credit
agreement.
During June 1995 the Company entered into an asset securitization agreement
under which up to $100,000,000 of certain accounts receivable can be sold with
limited recourse. As funds are collected, additional eligible receivables may be
sold to bring the outstanding balance to the desired level. At June 30, 1995,
outstanding receivables sold totaled $50,000,000. The Company has interest rate
swap agreements with a major financial institution that effectively converted
approximately $46,000,000 of June 30, 1995, variable rate borrowings to fixed
rates between 6.05% and 7.29%. $15,000,000 of the interest rate swaps expire in
1997, $15,000,000 in 1998, and $16,000,000 in 2003.
Convertible Subordinated Debentures. The Company's $70,000,000 9% Convertible
Subordinated Debentures issued in May 1990 were converted into 5,889,817 shares
of Common Stock in April and May of 1993. $39,474,000 of remaining outstanding 5
5/8% Convertible Subordinated Debentures, due March 1, 2012, were called August
1, 1995, for redemption on September 1, 1995. The Debentures are convertible
into Common Stock at $21.33 per share. It is anticipated that substantially all
of the Debentures will be converted into Common Stock.
Deferred charges of $1,547,000 at June 30, 1995, $2,063,000 at June 30, 1994,
and $1,572,000 at June 30, 1993, were netted against long-term debt.
Debt, Lease, and Rental Payments. Long-term debt maturities for the next five
fiscal years are: $6,002,000 in 1996; $21,102,000 in 1997; $6,897,000 in 1998;
$57,832,000 in 1999; and $4,746,000 in 2000. Rental expense was $2,050,000 in
1995, $1,146,000 in 1994, and $1,610,000 in 1993. Minimum future rental payments
for leased facilities are: $681,000 in 1996; $674,000 in 1997; $558,000 in 1998;
$567,000 in 1999; $577,000 in 2000; thereafter a land lease with an obligation
of $391,000 in the year 2000 will experience an annual 7.6% escalation through
2019.
Note C - Earnings Per Share
Primary earnings per share are based on the weighted average number of common
shares and dilutive common stock equivalents outstanding during each period.
Common stock equivalents consist of stock options whose exercise price is less
than the stipulated market price using the treasury stock method for both
primary and fully diluted earnings per share. For the 1993 computation, net
income has been adjusted for the after-tax interest expense associated with the
debentures converted during the year. The number of shares issued in 1993 upon
conversion of the debentures were treated as though they were outstanding from
July 1, 1992. The fully diluted computations assume the dilutive conversion of
the Company's outstanding convertible debentures, after adding back their
after-tax interest expense. The number of shares used in the computation of
earnings per share were: primary earnings per share - 27,820,798 in 1995,
27,703,163 in 1994, and 27,532,308 in 1993; and fully diluted earnings per share
- - 29,824,571 in 1995 and 29,418,899 in 1993. Assumed conversion of outstanding
convertible debentures was anti-dilutive in 1994's computation.
Note D - Foreign Currency Transactions
Foreign currency exchange net loss included in costs and expenses were
$495,000 in 1995 and $119,000 in 1994, as compared to a net gain of $3,000,000
in 1993.
<PAGE>
<TABLE>
Note E - Income taxes
<CAPTION>
Continuing operations' income tax provision is summarized as follows:
(In thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) from continuing
operations before income taxes:
Domestic $ 72,811 $ 53,307 $ 26,106
Foreign 2,850 (6,391) 16,777
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 75,661 $ 46,916 $ 42,883
====================================================================================================================================
Currently payable:
Domestic $ 32,750 $ 17,940 $ 8,609
Foreign 2,045 3,097 3,389
Deferred:
Domestic (2,636) (2,521) (940)
Foreign (1,741) (2,418) -0-
Adjustment to Goodwill -0- -0- 798
Deferred income taxes allocated
to translation adjustment -0- 882 412
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 30,418 $ 16,980 $ 12,268
====================================================================================================================================
The reconciliation of the provision for income taxes and that based on the U.S.
statutory rate is:
(In thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Income taxes at
U.S. statutory rate $ 26,481 $ 16,421 $ 14,580
Effects of U.S. state income taxes
net of federal benefits 3,575 1,054 -0-
Effects of loss carry-forward 351 (147) 2,286
Effects of foreign operations (657) (3,068) (2,113)
Tax credits -0- -0- (2,581)
Permanent differences 668 2,720 96
- ------------------------------------------------------------------------------------------------------------------------------------
Income taxes $ 30,418 $ 16,980 $ 12,268
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
(Page 11 of the Excerpts from Form 10-K contained in 1995 Annual Report to
Shareholders)
At June 30, 1995, the net deferred tax asset was:
<CAPTION>
Deferred
(In thousands of dollars) Asset
Temporary Difference Amount (Liability)
- -------------------------------------------------------------------------------
<S> <C> <C>
Expenses not currently deductible:
Bad debt provision $ 4,267 $ 1,494
Accrued expenses 17,313 6,060
Provision for discontinued operations (474) (166)
Inventory adjustments 18,772 5,973
Depreciation 1,713 545
Income not currently taxable:
Undistributed foreign earnings (9,337) (2,308)
Long-term contracts (16,454) (5,759)
Other (1,246) (379)
Net operating loss carry-forwards 5,744 814
Valuation allowance:
Beginning of year (238) (78)
Net change for year (5,504) (736)
- -------------------------------------------------------------------------------
$ 14,556 $ 5,460
</TABLE>
Note F - Discontinued Plant and Operations
During March 1994 the Company adopted a plan for disposition through closure
of a domestic plant associated with its government business. Operating income
for fiscal 1994 reflects operating losses and disposal charges associated with
this plant and write-down of certain assets to estimated net realizable values,
aggregating $9,200,000. The plant was closed in August 1994; no additional
material disposal costs, beyond those accrued for, are anticipated.
<PAGE>
The Company also adopted in March 1994 plans for sale of certain business
units. Those units principally manufactured and sold proprietary consumer
products. Those units are accounted for as discontinued operations with their
operations segregated in the accompanying income statements. Post measurement
date operating losses and disposal costs for these operations approximated
amounts previously provided for in fiscal 1994.
<TABLE>
Sales, related losses, and income tax benefits associated with the
discontinued business units for 1994 and 1993 were as follows:
<CAPTION>
(In thousands of dollars) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales $ 49,370 $ 24,985
================================================================================
Loss from operations before income tax benefit $ (5,763) $ (5,476)
Income tax benefit 1,480 1,420
- --------------------------------------------------------------------------------
Loss from operations (4,283) (4,056)
- --------------------------------------------------------------------------------
Loss on disposal before income tax benefit:
Estimated unrecovered costs through disposal date (4,335) -0-
Asset valuation adjustment (4,515) -0-
- --------------------------------------------------------------------------------
(8,850) -0-
Income tax benefit, including recognizable
net operating loss carry-forwards 4,358 -0-
- --------------------------------------------------------------------------------
1994's third quarter loss on disposal (4,492) -0-
- --------------------------------------------------------------------------------
Total loss on discontinued operations $ (8,775) $ (4,056)
================================================================================
On August 26, 1994, the Company sold the assets associated with Cambridge
Computer, Ltd. (a substantial part of the discontinued operations) for
$7,000,000 plus future royalties. Of this amount, $3,080,000 was received at
closing with the remaining amount to be paid over three years. Other noncurrent
assets at June 30, 1995, include $4,392,000 for the accrual of unpaid sales
proceeds and estimated royalties receivable beyond one year. The businesses
associated with the remaining discontinued operations are in the process of
being sold or closed.
Note G - Termination of A-12 Aircraft Program Subcontracts
The Company was a subcontractor for development of certain subsystems for the
U.S. NAVY A-12 Aircraft. The Government, in January 1991, announced termination
(for default) of the A-12 prime contracts. Terminations for convenience were
received for eleven of the Company's A-12 subcontracts, of which the majority
were with McDonnell Aircraft Company (McDonnell). Settlements have been
concluded for all subcontracts terminated for convenience, at the approximate
amounts previously accrued by the Company. In October 1991, McDonnell filed a
sealed suit in Federal Court in St. Louis, Missouri, claiming default on seven
other subcontracts, which have a remaining Company inventory exposure of
approximately $22,000,000. Based upon the advice of special counsel, the Company
believes it has meritorious defenses, although no assurance can be given to that
effect, and is pursuing counterclaims against McDonnell through the courts.
Note H - Fair Value of Financial Instruments
The estimated June 30, 1995, fair values of the financial instruments
represented by cash and cash equivalents, and unexpended equipment funds,
approximated their recorded values. June 30, 1995, outstanding interest rate
swaps had an unrecognized market value of approximately $688,000, based upon a
dealer quotation. Convertible Debentures (called for redemption) had a year-end
market valuation of $46,777,000, based upon their closing NASDAQ price.
Note I - Employee Benefit and Stock Option Plans
Employee Benefit Plans. The Company provides retirement benefits to its domestic
employees who meet certain age and service requirements through three plans: a
defined benefit pension plan, a qualified employee savings plan, and a deferred
compensation plan. Pension plan benefits are computed based upon compensation
earned during the member's career at the Company, or its subsidiaries, and years
of credited service. The Company funds its retirement benefits annually at an
amount that approximates the maximum deductible for income taxes. Company
contributions
(Page 12 of the Excerpts from Form 10-K contained in 1995 Annual Report to
Shareholders)to savings and deferred compensation plans are equal to a
percentage of employees' contributions and are fully funded when the liability
is incurred. The Company's and employees' contributions to the deferred
compensation plan are held in an irrevocable "rabbi trust". The Company also has
a defined contribution pension plan for its European employees who meet certain
requirements.
</TABLE>
<TABLE>
The following table sets forth the defined benefit pension plan's status and the
amounts reflected in the Company's Consolidated Financial Statements at June 30.
<CAPTION>
Defined benefit pension plan's status is as follows: (In thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation (including vested benefits of $12,383 in 1995,
$9,459 in 1994, and $7,107 in 1993 ) (13,785) $ (10,842) $ (9,366)
====================================================================================================================================
Projected benefit obligation for service rendered to date $ (20,548) $ (16,254) $ (14,274)
Plan assets at fair market value 11,454 9,030 8,962
- ------------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets (9,094) (7,224) (5,312)
Unrecognized net obligations existing at transition 435 475 514
Unrecognized prior service cost 329 427 466
Unrecognized net (gain)/loss 631 (1,442) (2,489)
- ------------------------------------------------------------------------------------------------------------------------------------
Accrued pension liability $ (7,699) $ (7,764) $ (6,821)
====================================================================================================================================
Net pension cost included the following components:
Service cost - benefits earned during the period $ 1,964 $ 1,779 $ 1,703
Interest cost on projected benefit obligation 1,328 1,125 977
Actual return on plan assets (1,837) (206) (1,472)
Net amortization and deferral 1,009 (553) 809
- ------------------------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 2,464 $ 2,145 $ 2,017
====================================================================================================================================
Rates used in computing periodic pension costs:
Actual weighted-average discount rate used for computing projected
benefit obligation's present value 8.0% 8.0% 8.0%
Expected long-term rate of return on plan assets 9.0% 9.0% 9.0%
Future compensation increase 5.5% 5.5% 5.5%
====================================================================================================================================
Charges to operations for Company sponsored retirement benefits $ 6,366 $ 4,478 $ 4,103
====================================================================================================================================
At June 30, 1995, domestic pension plan assets were invested 74% in equity based
mutual funds, 20% in corporate bond mutual funds, 4% in the Company's
Convertible Debentures, and 2% in cash and money market funds.
</TABLE>
<PAGE>
<TABLE>
Stock Option Plans. The Company has issued both Incentive and Non-Qualified
Stock Options. Under the current Plan, which combined the previous separate
Incentive and Non-Qualified Stock Option Plans, options are granted at not less
than 100% of market value on date of grant. Outstanding options expire between
September 1996 and September 2005. Information relating to the Company's stock
options follows:
<CAPTION>
(Shares in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Price Range Shares Price Range Shares Price Range
Incentive Stock Options
- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding July 1 97.4 $8.17-9.25 172.7 $8.17-9.25 198.9 $8.17-11.17
Granted -0- -0- -0-
Exercised (16.5) $8.17-9.25 (75.3) $8.17-9.00 (26.2) $9.00-11.17
Canceled -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding June 30 80.9 $8.17-9.25 97.4 $8.17-9.25 172.7 $8.17- 9.25
====================================================================================================================================
Exercisable at June 30 80.9 97.4 172.7
====================================================================================================================================
Non-Qualified Stock Options
- ---------------------------
Outstanding July 1 1,047.6 $ 6.00-21.13 1,015.7 $ 6.00-21.13 1,026.3 $ 6.00 -13.38
Granted 251.7 $15.75-21.38 270.0 $15.00-18.25 225.0 $11.88 -21.13
Exercised (113.3) $ 6.00-18.88 (175.2) $ 6.00-18.25 (156.6) $ 6.00 -12.63
Canceled (41.8) $ 6.00-18.88 (62.9) $ 6.00-18.25 (79.0) $ 6.00 -12.63
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding June 30 1,144.2 $ 6.00-21.38 1,047.6 $ 6.00-21.13 1,015.7 $ 6.00 -21.13
====================================================================================================================================
Exercisable at June 30 721.0 602.6 521.4
====================================================================================================================================
Non-Qualified and Incentive Stock option shares available for additional
granting at June 30 were 1,090,100 in 1995, 305,600 in 1994 and 512,700 in 1993.
</TABLE>
<PAGE>
(Page 13 of the Excerpts from Form 10-K contained in 1995 Annual Report to
Shareholders)
Note J - Geographic Data.
The Company operates principally in the electronic equipment industry, in two
geographic areas: Domestic and Foreign. The following table summarizes the
Company's geographic data. It is based on estimates that do not consider fully
the extent to which the Company's development, manufacturing, engineering,
marketing, and management activities are interrelated. Thus, the data is not
totally indicative of the extent each geographic area contributed to the
Company's consolidated operating results:
<TABLE>
<CAPTION>
(In
thousands of
dollars) Identifiable Assets Sales Operating Income
1995 1994 1993 1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic $558,227 $516,453 $493,337 $1,581,671 $1,155,211 $ 933,556 $85,609 $60,368 $38,852
Foreign 388,516 361,363 256,121 1,092,112 697,267 738,559 5,435 340 19,167
Corporate 34,549 42,396 30,881 N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Consolidated $981,292 $920,212 $780,339 $2,673,783 $1,852,478 $1,672,115 91,044 60,708 58,019
======================================================================================================
Corporate net other expense (15,383) (13,792) 15,136
--------------------------------------------------------------------------
Consolidated income from continuing
operations before income taxes $75,661 $46,916 $42,883
==========================================================================
Intergeographic transfers are not significant. Corporate assets include domestic
cash and cash equivalents, refundable and deferred income taxes, discontinued
operations' assets, and minority investments in and loans to other companies.
Major customer data, including concentration of credit risk, is incorporated by
reference from Part I, Marketing and Customers, of the Company's Form 10-K for
the year ended June 30, 1995. Domestic export sales were approximately
$95,000,000 in 1995, $81,000,000 in 1994, and $5,000,000 in 1993.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
SCI Systems, Inc.
We have audited the accompanying consolidated balance sheets of SCI Systems,
Inc. as of June 30, 1995, 1994 and 1993, and the related consolidated statements
of income, shareholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SCI Systems, Inc.
at June 30, 1995, 1994 and 1993, and the consolidated results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
As discussed in Note G to the consolidated financial statements, the Company
is involved in sealed litigation related to certain subcontracts on the canceled
A-12 Aircraft. The Company believes it has meritorious defenses to claims
against it, although no assurance can be given to that effect, and intends to
vigorously pursue claims against the prime contractor. The ultimate outcome of
this matter cannot presently be determined.
Ernst & Young LLP /s/
Birmingham, Alabama
August 3, 1995
(End of the Excerpts from Form 10-K contained in 1995 Annual Report to
Shareholders)
<PAGE>
(Inside back cover of Annual Report to Shareholders)
Board of Directors
Olin B. King (1)
Chairman of the Board of the
Company
Huntsville, Alabama
Howard H. Callaway (2)(4)
CEO, Crested Butte Mountain
Resort, Inc.
Crested Butte, Colorado
CEO and President
Callaway Gardens Resort, Inc.
Pine Mountain, Georgia
William E. Fruhan (2)(3)
Professor of Business Administration
Harvard University
Cambridge, Massachusetts
Joseph C. Moquin (1)(4)
Retired CEO
Teledyne Brown Engineering
Madison, Alabama
A. Eugene Sapp, Jr. (1)(3)
President of the Company
Huntsville, Alabama
Wayne Shortridge (2)(3)
Partner
Paul, Hastings, Janofsky & Walker
Atlanta, Georgia
G. Robert Tod (2)(4)
President, CML Group, Inc.
Acton, Massachusetts
Jackie M. Ward (3)(4)
Chief Executive Officer
Computer Generation Incorporated
Atlanta, Georgia
Director Emeritus
Thomas H. Lenagh
Financial Advisor
Greenwich, Connecticut
Committees of the Board
(1) Executive Committee
(2) Audit Committee
(3) Investment Committee
(4) Compensation Committee
Officers
Chairman of the Board and
Chief Executive Officer
Olin B. King
President and Chief Operating
Officer
A. Eugene Sapp, Jr.
Senior Vice Presidents
Richard A. Holloway
David F. Jenkins
Jeffrey L. Nesbitt
Peter M. Scheffler
Jerry F. Thomas
Alexander A.C. Wilson
Vice Presidents
Bruce R. Anderson
Charles Barnhart
Patrick R. Barry
C.T. Chua
Joseph J. Cosgrove
James H. Ferry
Francis X. Henry
George J. King
LeRoy H. Mackedanz
Michael P. McCaughey
James H. McElroy
John McNeil
Raymond E. Minter
Michael H. Missios
Leonard L. Mitchum, Jr.
B. William Nelson
Charles N. Parks
P. William Quinn
Francois M. Thionet
Christopher J. White
Secretary and Corporate Counsel
Michael M. Sullivan
Treasurer
Ronald G. Sibold
General Counsel
Powell, Goldstein, Frazer & Murphy
Atlanta, Georgia
Auditors
Ernst & Young LLP
Birmingham, Alabama
Transfer Agent and Registrar
Mellon Securities Trust Company
1-800-756-3353
Security Trading Markets
Common Stock
NASDAQ National Market System
Symbol SCIS
Common Stock Options
Chicago Board Options Exchange
Symbol SSQ
1-800-OPTIONS
Agent Banks
Revolving Credit
Citibank, N.A.
Commercial Paper
ABN AMRO Bank, N.V.
Asset Securitization
Bank of America, N.T. & S.A.
Annual Shareholders' Meeting
Fourth Friday in October
Shareholder Relations
2000 Ringwood Avenue
San Jose, California 95131
(408) 943-9000
Annual Report to Shareholders to the S.E.C.
The Annual Report to Shareholders to the Securities and Exchange Commission on
Form 10-K provides complete exhibits and schedules. Copies will be furnished
upon written request to Shareholder Relations at the address above.
(End of Exhibit 13)
</TABLE>
EXHIBIT 21--SUBSIDIARIES OF REGISTRANT
Listed below are the principal subsidiaries of the Company and the
percentage of voting securities owned by the Company. The Company's other
subsidiaries, taken in the aggregate, would not constitute a significant
subsidiary.
Jurisdiction in which Percentage
Incorporated or Organized of Voting
Securities Owned
SCI Systems (Alabama), Inc. Alabama 100%
SCI Technology, Inc. Alabama 100%
DeltaCom, Inc. Alabama 50%
SCI Foreign Sales, Inc. U.S. Virgin Islands 100%
SCIMEX, Inc. Alabama 100%
SCI Systems de Mexico S.A. Mexico 100%
SCI Holdings, Inc. Delaware 100%
SCI U.K. Limited Guernsey Island 100%
SCI Manufacturing Singapore Pte.Ltd. Singapore 100%
SCI Systems (Thailand) Limited Thailand 100%
SCI Irish Holdings Republic of Ireland 100%
SCI Ireland Limited Republic of Ireland 100%
SCI Alpha Limited Republic of Ireland 100%
SCI Systems (Canada), Inc. Canada 100%
Newport, Inc. Georgia 100%
SCI Holding France, S.A. France 100%
SCI France, S.A. France 100%
Exhibit 23- Consent of Independent Auditor
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of SCI Systems, Inc. of our report dated August 3, 1995, included in the 1995
Annual Report to Shareholders to Shareholders of SCI Systems, Inc.
Our audits also included the financial statement schedule of SCI Systems, Inc.
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
We also consent to the incorporation by reference in (i) the Registration
Statement (Form S-8 No. 2-86230) and related Prospectus pertaining to the
Savings Plan of the SCI Systems, Inc. Employee Financial Security Program;
(ii) the Registration Statement (Form S-8 No. 2-91587) and related
Prospectus pertaining to the Incentive Stock Option Plan of SCI Systems, Inc.;
and, (iii) the Regis-tration Statement (Form S-8 No. 33-11894) and related
Prospectus pertaining to the Non-Qualified Stock Option Plan of SCI Systems,
Inc., of our report dated August 3, 1995, with respect to the consolidated
financial statements and schedule of SCI Systems, Inc. incorporated by reference
in this Annual Report for the year ended June 30, 1995.
Ernst & Young LLP /s/
Birmingham, Alabama
September 25, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1995'S BALANCE SHEET AND THE INCOME STATEMENT FOR THE YEAR THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-1-1994
<PERIOD-END> JUN-30-1995
<CASH> 10,277
<SECURITIES> 0
<RECEIVABLES> 263,575
<ALLOWANCES> 4,267
<INVENTORY> 456,107
<CURRENT-ASSETS> 745,052
<PP&E> 456,978
<DEPRECIATION> 242,953
<TOTAL-ASSETS> 981,292
<CURRENT-LIABILITIES> 464,928
<BONDS> 156,370
<COMMON> 2,747
0
0
<OTHER-SE> 347,029
<TOTAL-LIABILITY-AND-EQUITY> 981,292
<SALES> 2,673,783
<TOTAL-REVENUES> 2,673,783
<CGS> 2,581,953
<TOTAL-COSTS> 2,582,739
<OTHER-EXPENSES> (3,017)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,400
<INCOME-PRETAX> 75,661
<INCOME-TAX> 30,418
<INCOME-CONTINUING> 45,243
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,243
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.56
</TABLE>
