<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 28, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
-------- --------
COMMISSION FILE NUMBER 1-11566
COMPUSA INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2261497
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14951 NORTH DALLAS PARKWAY, DALLAS, TEXAS 75240
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 982-4000
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
--- ---
The registrant had 90,819,756 shares of common stock, $.01 per share par
value, outstanding as of May 5, 1998.
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at March 28, 1998 (unaudited)
and June 28, 1997........................................... 3
Consolidated Income Statements for the thirteen weeks
and thirty-nine weeks ended March 28, 1998 and
March 29, 1997 (unaudited).................................. 4
Consolidated Statements of Cash Flows for the thirty-nine weeks
ended March 28, 1998 and March 29, 1997 (unaudited)......... 5
Notes to Consolidated Financial Statements (unaudited)........... 6
Separate financial statements relating to the Company's subsidiaries are
omitted since all of them are wholly owned and have each guaranteed the
Company's 9 1/2% Senior Subordinated Notes due 2000 on a full, unconditional,
and joint and several basis and the Company does not consider such separate
financial statements to be material to investors.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS........................................ 10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS................................................ 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................. 16
SIGNATURES................................................................. 17
EXHIBIT 11 - COMPUTATIONS OF EARNINGS PER SHARE............................ 18
2
<PAGE>
COMPUSA INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except shares)
<TABLE>
<CAPTION>
MARCH 28, JUNE 28,
1998 1997
-------------- --------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 217,084 $ 209,929
Accounts receivable, net of allowance for doubtful
accounts of $3,567 and $2,883 at March 28, 1998
and June 28, 1997, respectively.......................... 235,661 214,568
Merchandise inventories................................... 624,524 501,426
Prepaid expenses and other................................ 25,396 18,521
-------------- --------------
Total current assets.................................. 1,102,665 944,444
Property and equipment, net.................................. 228,268 170,801
Other assets................................................. 9,777 9,347
-------------- --------------
$1,340,710 $1,124,592
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 639,471 $ 483,548
Accrued liabilities....................................... 111,762 93,794
Current portion of capital lease obligations.............. 1,439 3,139
-------------- --------------
Total current liabilities............................. 752,672 580,481
Capital lease obligations.................................... 1,985 2,458
Senior Subordinated Notes.................................... 110,000 110,000
Deferred income taxes........................................ 2,487 3,686
Commitments and contingencies................................ -- --
Stockholders' equity:
Preferred stock, $.01 per share par value, 10,000 shares
authorized, none issued.................................. -- --
Common stock, $.01 per share par value; 325,000,000
shares authorized, with 93,243,907 shares issued at
March 28, 1998; 200,000,000 shares authorized with
91,763,372 shares issued at June 28, 1997................ 932 918
Paid-in capital........................................... 269,843 262,908
Retained earnings......................................... 249,466 166,502
-------------- --------------
520,241 430,328
Less: Treasury stock, at cost, 1,717,427 shares at March
28, 1998 and 316,627 shares at June 28, 1997............. (46,675) (2,361)
-------------- --------------
Total stockholders' equity 473,566 427,967
-------------- --------------
$1,340,710 $1,124,592
============== ==============
</TABLE>
See accompanying notes.
3
<PAGE>
COMPUSA INC.
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
---------------------------------- ----------------------------------
MARCH 28, MARCH 29, MARCH 28, MARCH 29,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales............................. $1,451,819 $1,272,882 $4,100,356 $3,462,015
Cost of sales and occupancy costs..... 1,246,634 1,089,902 3,504,826 2,975,389
------------- ------------- ------------- -------------
Gross profit....................... 205,185 182,980 595,530 486,626
Operating expenses.................... 134,190 105,466 369,097 298,218
Pre-opening expenses.................. 513 250 5,993 4,727
General and administrative expenses... 27,851 23,320 82,259 65,070
------------- ------------- ------------- -------------
Operating income................... 42,631 53,944 138,181 118,611
Other expense (income):
Interest expense..................... 3,045 3,102 9,141 9,136
Other income, net.................... (1,778) (2,355) (5,862) (5,956)
------------- ------------- ------------- -------------
1,267 747 3,279 3,180
------------- ------------- ------------- -------------
Income before income taxes............ 41,364 53,197 134,902 115,431
Income tax expense.................... 15,926 20,482 51,938 44,442
------------- ------------- ------------- -------------
Net income............................ $ 25,438 $ 32,715 $ 82,964 $ 70,989
============= ============= ============= =============
Basic earnings per share.............. $0.28 $0.36 $0.91 $0.78
============= ============= ============= =============
Diluted earnings per share............ $0.27 $0.35 $0.87 $0.75
============= ============= ============= =============
Weighted average common shares........ 91,518 91,110 91,527 90,665
============= ============= ============= =============
Weighted average common and
common equivalent shares............. 94,692 94,450 95,238 94,576
============= ============= ============= =============
</TABLE>
See accompanying notes.
4
<PAGE>
COMPUSA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
----------------------------
MARCH 28, MARCH 29,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income............................................. $ 82,964 $ 70,989
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 34,695 25,664
Changes in assets and liabilities:
Increase in accounts receivable................. (21,093) (32,334)
Increase in merchandise inventories............. (123,098) (226,214)
Increase in prepaid expenses and other assets... (9,176) (7,606)
Increase in accounts payable and accrued
liabilities.................................... 173,806 274,528
--------- ---------
Net cash provided by operating activities.... 138,098 105,027
Cash flows provided by (used in) investing activities:
Capital expenditures................................... (91,455) (56,603)
Other.................................................. 145 294
--------- ---------
Net cash used in investing activities........ (91,310) (56,309)
Cash flows provided by (used in) financing activities:
Proceeds from issuance of common stock................. 6,949 3,447
Purchase of treasury stock............................. (44,314) --
Sale of treasury stock to benefit plan................. -- 1,233
Payments under capital lease obligations............... (2,268) (3,924)
--------- ---------
Net cash provided by (used in) financing
activities.................................. (39,633) 756
--------- ---------
Net increase in cash and cash equivalents................ 7,155 49,474
Cash and cash equivalents at beginning of period......... 209,929 207,614
--------- ---------
Cash and cash equivalents at end of period............... $ 217,084 $ 257,088
========= =========
</TABLE>
See accompanying notes.
5
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of CompUSA Inc.
and its wholly owned subsidiaries (collectively, the "Company"). All significant
intercompany accounts and transactions have been eliminated. In the opinion of
management, the accompanying unaudited consolidated financial statements contain
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position, results of operations, and cash flows of
the Company for the applicable interim periods. The results of operations for
these periods are not necessarily comparable to, or indicative of, results of
any other interim period or for the fiscal year as a whole.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
interim financial statements. Therefore, these financial statements should be
read in conjunction with the Company's Annual Report on Form 10-K for the fiscal
year ended June 28, 1997.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets, liabilities, revenues, and expenses and the disclosure of
gain and loss contingencies at the date of the consolidated financial
statements. Actual results could differ from those estimates.
2. EQUITY
The Company adopted the provisions of the Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share" in the preparation of the
financial statements included in the Quarterly Report on Form 10-Q for the
thirteen weeks ended December 27, 1997. In accordance with the provisions of
SFAS No. 128, the Company is required to report both "basic" and "diluted"
earnings per share and to restate previously reported earnings per share amounts
to conform to the provisions of SFAS 128. Basic earnings per share has been
computed using the weighted average number of shares of common stock of the
Company ("Common Stock") outstanding for each period presented. The dilutive
effect of stock options and other common stock equivalents is included in the
calculation of diluted earnings per share using the treasury stock method. For
the periods presented, the diluted earnings per share amounts are the same as
the earnings per share amounts previously reported by the Company
In September 1997, the Company's Board of Directors authorized the purchase
of up to $60 million of Common Stock. As of March 28, 1998, the Company had
purchased 1.4 million shares of Common Stock, to be held as treasury stock, for
approximately $44.3 million (approximately $31.59 per share), pursuant to the
September 1997 authorization. In the fourth quarter of fiscal 1998, the Company
purchased an additional 790,000 shares of Common Stock to be held as treasury
stock, for approximately $15.7 million (approximately $19.80 per share) and, as
a result, no additional treasury stock purchases can currently be made by the
Company.
6
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
3. COMMITMENTS AND CONTINGENCIES
On April 23, 1998, a lawsuit, Hoeck v. CompUSA Inc. et al., was filed by a
stockholder of the Company in the United States District Court for the Northern
District of Texas against the Company and certain of its officers, seeking class
action status on behalf of the purchasers of the Company's Common Stock and
related publicly traded options during the class period. The action alleges
various violations of the federal securities laws. Damages have not been
specified. The Company believes the claims are without merit and intends to
vigorously defend against such charges. In addition, the Company is a defendant
from time to time in lawsuits incidental to its business. Based on currently
available information, the Company believes that resolution of all known
contingencies would not have a material adverse impact on the Company's
financial statements. However, there can be no assurances that future costs
would not be material to the results of operations of the Company for a
particular future period. In addition, the Company's estimates of future costs
are subject to change as circumstances change and additional information becomes
available during the course of litigation.
4. SUBSIDIARY GUARANTEES
The Company's 9 1/2% Senior Subordinated Notes due 2000 (the "Senior
Subordinated Notes") are guaranteed on a full, unconditional, and joint and
several basis by all of the Company's direct and indirect subsidiaries, each of
which is wholly owned. The combined summarized information of these subsidiaries
is as follows:
AS OF AND FOR THE
THIRTY-NINE WEEKS ENDED
-----------------------------------
MARCH 28, MARCH 29,
1998 1997
-------------- --------------
(in thousands)
Intercompany receivables................ $ 195,216 $ 46,871
Other current assets.................... 454,756 445,210
Noncurrent assets....................... 190,785 129,585
Intercompany payables................... 17,466 45,756
Other current liabilities............... 275,957 149,169
Long-term debt and liabilities.......... 1,972 2,199
Net sales............................... 2,788,990 2,443,100
Intercompany revenues................... 159,361 153,263
Costs and expenses...................... 2,701,041 2,377,246
Intercompany expenses................... 104,925 107,598
Net income.............................. 87,567 68,584
In the preparation of the Company's consolidated financial statements, all
intercompany accounts were eliminated. There are no restrictions that limit the
ability of the Company's subsidiaries to declare and pay dividends to the
Company.
7
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
5. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
THIRTY-NINE WEEKS ENDED
-----------------------
MARCH 28, MARCH 29,
1998 1997
--------- ---------
(in thousands)
Cash paid during the periods for:
Interest.......................... $ 5,634 $ 5,823
Income taxes...................... 47,784 36,537
Investing activities not affecting
cash are as follows:
Additions to property and
equipment under capital leases... $ 95 $ 648
6. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which is effective for years
beginning after December 15, 1997. SFAS No. 131 establishes standards requiring
public business enterprises to report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. SFAS No. 131
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. SFAS No. 131 is effective for financial
statements for fiscal years beginning after December 15, 1997, and therefore the
Company will adopt the annual disclosure requirements in the preparation of its
Annual Report on Form 10-K for fiscal 1999 while the quarterly disclosure
requirements will be adopted in fiscal 2000. Management has not completed its
review of SFAS No. 131 and has not determined the impact on the Company's
financial statement disclosures.
7. CREDIT AGREEMENT
Effective March 12, 1998, the Company entered into a new three-year
unsecured revolving credit agreement (the "Credit Agreement") with a consortium
of thirteen banks that provides for borrowings and letters of credit up to a
maximum of $300 million, with letters of credit not to exceed $100 million in
the aggregate. The Credit Agreement replaces a previous $150 million unsecured
credit agreement. The funds available under the Credit Agreement may be used for
any corporate purpose, including purchasing or redeeming the Senior Subordinated
Notes in part or in full. At March 28, 1998, the Company had no borrowings
outstanding under the Credit Agreement.
Borrowings under the Credit Agreement bear interest, at the Company's
option, at either a prime rate (8.5% per annum as of March 28, 1998) or a rate
based on the London Interbank Offering Rate (LIBOR) ranging from 5.7% to 5.8% as
of March 28, 1998, plus a specified margin, currently 0.75%. The Company also
pays certain commitment and agent fees. The Company has the annual option to
extend the Credit Agreement for an additional year with the banks' approval.
8
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
7. CREDIT AGREEMENT (CONTINUED)
The Credit Agreement requires that the Company maintain certain financial
ratios and a minimum net worth. The Credit Agreement imposes certain
limitations on indebtedness, liens, and mergers and consolidations. The Credit
Agreement also limits the Company's ability to pay dividends and purchase shares
of Common Stock. As of March 28, 1998, the Company has approximately $75.3
million available to pay dividends and purchase Common Stock pursuant to the
provisions of the Credit Agreement. The Credit Agreement allows the Company to
securitize up to $200 million of certain assets. The indebtedness under the
Credit Agreement is guaranteed on a full, unconditional, and joint and several
basis by all subsidiaries of the Company. However, the Credit Agreement allows
the Company to designate one or more of its subsidiaries to be free from most of
the restrictions under the Credit Agreement so long as no default will exist and
such subsidiaries do not contribute more than 10% of the Company's consolidated
cash flow or hold more than 10% of the Company's consolidated assets.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE
RESULTS
This Quarterly Report on Form 10-Q contains forward-looking statements
about the business, financial condition, and prospects of the Company. The
actual results of the Company could differ materially from those indicated by
the forward-looking statements because of various risks and uncertainties,
including without limitation changes in product demand, the availability of
products, changes in competition, the ability of the Company to open new stores
in accordance with its plans, economic conditions, real estate market
fluctuations, interest rate fluctuations, dependence on manufacturers' product
development, various inventory risks due to changes in market conditions,
changes in tax and other governmental rules and regulations applicable to the
Company, and other risks indicated in the Company's filings with the Securities
and Exchange Commission. The Company's entry into the build-to-order market in
the first quarter of fiscal 1998 with its CompUSA PC(TM) brand personal
computers involves significant additional risks, including without limitation
failure to achieve customer acceptance of the new products and substantial
dependence on third parties for product quality and reliability and timely
fulfillment of customer orders. All of the foregoing risks and uncertainties are
beyond the ability of the Company to control, and in many cases, the Company
cannot predict the risks and uncertainties that could cause its actual results
to differ materially from those indicated by the forward-looking statements.
When used in this Quarterly Report on Form 10-Q, the words "believes,"
"estimates," "plans," "expects," "anticipates," and similar expressions as they
relate to the Company or its management are intended to identify forward-looking
statements.
GENERAL
All references herein to "fiscal 1998" relate to the fifty-two weeks ending
June 27, 1998, and references to "fiscal 1997" relate to the fifty-two weeks
ended June 28, 1997. In addition, all references herein to "third quarter of
fiscal 1998" and "first nine months of fiscal 1998" relate to the thirteen weeks
and thirty-nine weeks, respectively, ended March 28, 1998, and all references to
"third quarter of fiscal 1997" and "first nine months of fiscal 1997" relate to
the thirteen weeks and thirty-nine weeks, respectively, ended March 29, 1997.
The following table sets forth certain operating data for the Company:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
---------------------- -----------------------
MARCH 28, MARCH 29, MARCH 28, MARCH 29,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Stores open at end of period....... 150 123 150 123
Stores opened during the period.... 2 1 21 18
Stores relocated during the period. -- -- 2 --
Average net sales per gross square
foot(1)(2)........................ $343 $372 $1,023 $1,061
Comparable store sales
increase(2)(3).................... 1.2% 5.6% 5.2% 4.6%
</TABLE>
- --------------------
(1) Calculated using net sales divided by gross square footage of the Company's
Computer Superstores(SM) open at the end of the period, weighted by the
number of months open during the period.
(2) Net sales for purposes of the above calculations are comprised of net sales
generated from Computer Superstores, as well as the Company's national
accounts group, but exclude mail order sales.
(3) Comparable store sales are net sales for Computer Superstores open the same
number of months in both the indicated and previous period, including stores
that were relocated or expanded during either period.
10
<PAGE>
The Company believes the opening of additional Computer Superstores in
existing markets has resulted in some reductions in the rate of comparable store
sales growth. CompUSA has opened additional stores in existing markets largely
to increase market penetration and to provide customers with more convenience
and better service. The Company plans to continue its strategy of opening
additional Computer Superstores in existing markets. The resulting diversion of
sales from existing stores may adversely affect the Company's comparable store
sales. However, the Company believes that this strategy should increase its
awareness with local consumers, enhance its competitive position in such markets
and create efficiencies in advertising and management and is, therefore, in the
Company's long-term best interest.
RESULTS OF OPERATIONS
As a result of the expansion of the Company's store base, period-to-period
comparisons of financial results may not be meaningful and the results of
operations for historical periods may not be indicative of the results to be
expected in future periods. In addition, the Company expects that its quarterly
results of operations will fluctuate depending on the timing of the opening of,
and the amount of net sales contributed by, new stores and the timing of costs
associated with the selection, leasing, construction, and opening of new stores,
as well as seasonal factors, product introductions, and changes in product mix.
See "--Quarterly Data and Seasonality." The following table sets forth certain
items expressed as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
---------------------- -----------------------
MARCH 28, MARCH 29, MARCH 28, MARCH 29,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales.......................... 100.0% 100.0% 100.0% 100.0%
Cost of sales and occupancy costs.. 85.9 85.6 85.5 85.9
--------- --------- --------- ---------
Gross profit....................... 14.1 14.4 14.5 14.1
Operating expenses................. 9.2 8.3 9.0 8.6
Pre-opening expenses............... 0.1 0.1 0.1 0.2
General and administrative expenses 1.9 1.8 2.0 1.9
--------- --------- --------- ---------
Operating income................... 2.9 4.2 3.4 3.4
Interest expense and other income,
net............................... 0.1 -- 0.1 0.1
--------- --------- --------- ---------
Income before income taxes......... 2.8 4.2 3.3 3.3
Income tax expense................. 1.0 1.6 1.3 1.2
--------- --------- --------- ---------
Net income......................... 1.8% 2.6% 2.0% 2.1%
========= ========= ========= =========
</TABLE>
THIRD QUARTER ENDED MARCH 28, 1998, COMPARED WITH THE THIRD QUARTER ENDED MARCH
29, 1997
Net sales for the third quarter of fiscal 1998 increased 14.1% to $1.45
billion from $1.27 billion for the third quarter of fiscal 1997. The increase
in net sales was primarily due to the additional sales volume attributable to
the new stores opened subsequent to the third quarter of fiscal 1997 and an
increase in comparable store sales of 1.2%. However, in the third quarter of
fiscal 1998, average net sales per Computer Superstore declined approximately 6%
from the third quarter of fiscal 1997. The Company believes average net sales
per Computer Superstore were negatively impacted by an increase in the
percentage of the Company's stores open for less than two years. In general,
less mature stores generate lower sales than more mature stores. Despite an
increase in the number of personal computer systems sold in the third quarter of
fiscal 1998, the Company believes sales were negatively impacted by, among other
things, declines in average selling prices for certain of the Company's
products, including desktop and notebook computers and monitors, as well as
increased sales of lower-end computer systems. In addition, the Company believes
that sales were negatively impacted in the third quarter of fiscal 1998 by a
softening of demand in the corporate sector.
11
<PAGE>
Gross profit was $205 million, or 14.1% of net sales, in the third quarter
of fiscal 1998, compared with $183 million, or 14.4% of net sales, in the third
quarter of fiscal 1997. Management believes that the decline in gross margin in
the third quarter of fiscal 1998 compared with the third quarter of fiscal 1997
is due, in part, to lower product margins, costs associated with the CompUSA PC
line of build-to-order personal computers, and the deleveraging of occupancy
costs, which are generally fixed in nature. These declines were partially offset
by an increase in the ratio of service revenues to total revenues. Service
revenues typically have higher gross margins than merchandising sales.
Operating expenses were $134 million, or 9.2% of net sales, in the third
quarter of fiscal 1998, compared with $105 million, or 8.3% of net sales, in the
third quarter of fiscal 1997. In the third quarter of fiscal 1998, net
advertising expense and other operating expenses increased as a percentage of
net sales, compared with the third quarter of fiscal 1997. Net advertising
expense increased as a percentage of net sales in the third quarter of fiscal
1998 due to a lower rate of sales growth experienced in the quarter. The
increase in other operating expenses as a percentage of net sales is due
primarily to the deleveraging of facilities expenses, an increase in the ratio
of service revenues to total revenues, and costs associated with the Company's
efforts to expand certain of its businesses. These increases were partially
offset by lower incentive compensation. Facilities expenses are generally fixed
in nature and deleveraged in the third quarter of fiscal 1998 as a result of
lower average net sales per store. The increase in the ratio of service
revenues to total revenues had the effect of increasing operating expenses as a
percentage of net sales because operating expenses are generally higher for
service revenues than for merchandise sales.
Pre-opening expenses consist primarily of personnel expenses incurred prior
to a store's opening and promotional costs associated with the opening. The
Company's policy is to expense all pre-opening expenses in the month of the
store's grand opening. In the third quarter of fiscal 1998, the Company incurred
$513,000 in pre-opening expenses in connection with the opening of two Computer
Superstores, compared with $250,000 in pre-opening expenses incurred in the
third quarter of fiscal 1997 in connection with the opening of one store.
General and administrative expenses of $27.9 million, or 1.9% of net sales,
in the third quarter of fiscal 1998, remained relatively constant as a
percentage of net sales compared with $23.3 million, or 1.8% of net sales, in
the third quarter of fiscal 1997. The increase in general and administrative
expenses as a percentage of net sales was primarily due to the deleveraging of
corporate facilities expenses, which are generally fixed in nature, and costs
associated with the Company's efforts to expand certain of its businesses as
well as to develop new business opportunities. These increases were partially
offset by lower incentive compensation.
Interest expense and other income, net, was $1.3 million in the third
quarter of fiscal 1998 compared with $747,000 in the third quarter of fiscal
1997. The increase in interest expense and other income, net, is primarily due
to lower interest income earned on lower average investment levels in the third
quarter of fiscal 1998. See "--Liquidity and Capital Resources."
The Company's effective tax rate was 38.5% for both the third quarter of
fiscal 1998 and the third quarter of fiscal 1997.
As a result of the above, net income for the third quarter of fiscal 1998
was $25.4 million, or $.27 per diluted share, compared with net income of $32.7
million, or $.35 per diluted share, for the third quarter of fiscal 1997.
NINE MONTHS ENDED MARCH 28, 1998, COMPARED WITH THE NINE MONTHS ENDED MARCH 29,
1997
Net sales for the first nine months of fiscal 1998 increased 18.4% to $4.10
billion from $3.46 billion for the first nine months of fiscal 1997. The
increase in net sales was primarily due to the additional sales volume
attributable to the new stores opened subsequent to the first nine months of
fiscal 1997 and an increase in comparable store sales of 5.2%. However, average
net sales per Computer Superstore for the first nine months of fiscal 1998
declined
12
<PAGE>
approximately 3% from the first nine months of fiscal 1997. The Company believes
that average net sales per Computer Superstore were negatively impacted by an
increase in the percentage of the Company's stores open for less than two years.
In general, less mature stores generate lower sales than more mature stores.
Despite an increase in the number of personal computer systems sold in the first
nine months of fiscal 1998, the Company believes sales were negatively impacted
by, among other things, declines in average selling prices for certain of the
Company's products, including desktop and notebook computers and monitors, as
well as increased sales of lower-end computer systems.
Gross profit was $596 million, or 14.5% of net sales, in the first nine
months of fiscal 1998, compared with $487 million, or 14.1% of net sales, in the
first nine months of fiscal 1997. The increase in gross margin was primarily due
to higher product margin and an increase in the ratio of service revenues to
total revenues. Service revenues typically have higher gross margins than
merchandise sales. The foregoing factors were partially offset by costs
associated with the CompUSA PC line of build-to-order personal computers and the
decline in average net sales per Computer Superstore that resulted in the
deleveraging of occupancy costs, which are generally fixed in nature.
Operating expenses were $369 million, or 9.0% of net sales, in the first
nine months of fiscal 1998, compared with $298 million, or 8.6% of net sales, in
the first nine months of fiscal 1997. In the first nine months of fiscal 1998,
net advertising expense decreased as a percentage of net sales and other
operating expenses increased as a percentage of net sales. The decrease in net
advertising expense as a percentage of net sales resulted primarily from
increased vendor participation. The increase in other operating expenses as a
percentage of net sales is due primarily to the deleveraging of facilities
expenses, an increase in the ratio of service revenues to total revenues, and
costs associated with the Company's efforts to expand certain of its businesses.
These increases were partially offset by lower incentive compensation.
Facilities expenses are generally fixed in nature and deleveraged in the third
quarter of fiscal 1998 as a result of lower average net sales per store. The
increase in the ratio of service revenues to total revenues had the effect of
increasing operating expenses as a percentage of net sales because operating
expenses are generally higher for service revenues than for merchandise sales.
Pre-opening expenses consist primarily of personnel expenses incurred prior
to a store's opening and promotional costs associated with the opening. In the
first nine months of fiscal 1998, the Company incurred $6.0 million in pre-
opening expenses in connection with the opening of 21 Computer Superstores and
the relocation of two stores, compared with $4.7 million in pre-opening expenses
incurred in the first nine months of fiscal 1997 in connection with the opening
of 18 new stores.
General and administrative expenses of $82.3 million, or 2.0% of net sales,
in the first nine months of fiscal 1998, remained relatively constant as a
percentage of net sales compared with $65.1 million, or 1.9% of net sales, for
the first nine months of fiscal 1997. The increase in general and administrative
expenses as a percentage of net sales was primarily due to the deleveraging of
corporate facilities expenses, which are generally fixed in nature, and costs
associated with the Company's efforts to expand certain of its businesses as
well as to develop new business opportunities. These increases were partially
offset by lower incentive compensation.
Interest expense and other income, net, of $3.3 million, or 0.1% of net
sales, in the first nine months of fiscal 1998 remained relatively constant as a
percentage of net sales compared with $3.2 million, or 0.1% of net sales, in the
first nine months of fiscal 1997. See "--Liquidity and Capital Resources."
The Company's effective tax rate was 38.5% for both the first nine months
of fiscal 1998 and the first nine months of fiscal 1997.
As a result of the above, net income for the first nine months of fiscal
1998 was $83.0 million, or $.87 per diluted share, compared with net income of
$71.0 million, or $.75 per diluted share, for the first nine months of fiscal
1997.
13
<PAGE>
QUARTERLY DATA AND SEASONALITY
The Company expects that its quarterly results of operations will fluctuate
depending on the timing of the opening of, and the amount of net sales
contributed by, new stores and the timing of costs associated with the
selection, leasing, construction, and opening of new stores, as well as seasonal
factors, product introductions, and changes in product mix.
Based upon its past operating history, the Company believes that its
business is seasonal. Excluding the effects of new store openings, net sales and
earnings are generally lower during the first and fourth fiscal quarters than in
the second and third fiscal quarters.
LIQUIDITY AND CAPITAL RESOURCES
At March 28, 1998, total assets were $1.34 billion, $1.10 billion of which
were current assets, including $217 million of cash and cash equivalents. Net
cash provided by operating activities for the first nine months of fiscal 1998
was $138 million, compared with net cash provided by operating activities of
$105 million for the first nine months of fiscal 1997.
Approximately three-fourths of the Company's net sales during the third
quarter of both fiscal 1998 and fiscal 1997 were sales for which the Company
received payment at the time of sale either in cash, by check, or by third-party
credit card. The remaining net sales were primarily sales for which the Company
provided credit terms to corporate, government, and education customers.
Merchandise inventories increased to $625 million at March 28, 1998 from
$501 million at June 28, 1997. The increase in merchandise inventories is
primarily attributable to inventories at the 21 Computer Superstores opened in
the first nine months of fiscal 1998 and higher inventories at the Company's
distribution and configuration facilities. On a per store basis, inventory
declined to $4.0 million per store from $4.9 million per store a year ago.
Capital expenditures during the first nine months of fiscal 1998 were $91.5
million, of which $21.7 million were for fiscal 1998 new stores and $19.1
million were for existing stores, compared with $56.6 million of capital
expenditures during the first nine months of fiscal 1997, of which $15.3 million
were for fiscal 1997 new stores and $18.5 million were for existing stores. In
addition to capital expenditures incurred in connection with new stores, the
Company incurred capital expenditures in the first nine months of fiscal 1998
and fiscal 1997 related to improvements in information systems and additions to
property and equipment at the Company's corporate facilities. Excluding the
effects of new store openings, the Company's greatest short-term capital
requirements occur during the second fiscal quarter to support a higher level of
sales in that quarter. During fiscal 1998, the Company plans to open
approximately 32 new Computer Superstores and anticipates total capital
expenditures of approximately $100 to $120 million. The Company believes its
available cash and cash equivalents and vendor and bank financing are sufficient
to satisfy its short-term capital requirements.
The Company has an unsecured $300 million credit agreement (the "Credit
Agreement") with a consortium of banks that expires in March 2001. The Credit
Agreement requires that the Company maintain certain financial ratios and a
minimum net worth and restricts, among other things, the Company's ability to
incur additional indebtedness. However, the Credit Agreement allows the Company
to securitize up to $200 million of certain assets. See Note 7 of Notes to
Consolidated Financial Statements. At March 28, 1998, the Company had no
borrowings outstanding under the Credit Agreement. The Company also finances
certain fixture and equipment acquisitions through equipment lessors. Lease
financing is available from numerous sources and the Company evaluates equipment
leasing as a supplemental source of financing on a continuing basis.
14
<PAGE>
The Company believes that its available cash and cash equivalents, funds
generated by operations, currently available vendor and floor plan financing,
lease financing, and funds available under the Credit Agreement should be
sufficient to finance its continuing operations and expansion plans through the
end of fiscal 1998 and to make all required payments of interest on the Senior
Subordinated Notes. The level of future expansion will be contingent upon the
availability of additional capital.
INFLATION
While inflation has not had, and the Company does not expect it to have, a
material impact upon operating results, there can be no assurances that the
Company's business will not be affected by inflation in the future.
YEAR 2000 ISSUES
The Company has undertaken various initiatives intended to ensure that the
computer equipment and software used by the Company will function properly with
respect to the dates in the Year 2000 and thereafter. Based upon its
assessments to date, the Company believes that certain of the computer equipment
and software it currently uses will require replacement or modification. In
addition, in the ordinary course of replacing computer systems, the Company
attempts to utilize replacement systems that are Year 2000 compliant. Utilizing
both internal and external resources to identify needs for Year 2000
modifications, the Company currently anticipates that the modification and
conversion efforts will be completed in various stages from December 31, 1998 to
June 30, 1999 and that such modifications will be completed prior to any
currently anticipated impact on its systems.
The Company has also initiated communications with its significant
suppliers and customers to determine the extent to which system interfaces with
such entities are vulnerable to Year 2000 issues and whether the products
purchased from or by such entities are Year 2000 compliant.
The Company believes that the costs to modify its systems to be Year 2000
compliant, as well as the currently anticipated costs with respect to Year 2000
issues of third parties, will not exceed $5.0 million, which expenditures will
be funded from operating cash flows. The Company presently believes that the
Year 2000 issue will not pose significant operational problems for the Company.
However, if modifications and conversions are not made as they are identified,
or are not completed timely, there can be no assurance that the Year 2000 issues
will not have a material impact on the Company or adversely affect the Company's
relationships with customers, suppliers, or others. Additionally, there can be
no assurance that the Year 2000 issues of other entities will not have a
material adverse impact on the Company's systems or business.
The costs of the efforts to be expended by the Company and the date on
which the Company believes it will complete the Year 2000 modifications are
based upon management's best estimates, which are derived utilizing numerous
assumptions regarding future events. There can be no assurance that these
estimates will be achieved and actual results could differ materially from those
currently anticipated.
15
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Note 3 of the Notes to Consolidated Financial Statements in Part I, Item 1
is incorporated herein by reference as if fully restated herein. Note 3 contains
forward-looking statements that are subject to the risks and uncertainties
discussed in Item 2 -- "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Cautionary Statement Regarding Risks and
Uncertainties That May Affect Future Results."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
3.1 Restated and Amended Certificate of Incorporation. (1)
3.2 Restated and Amended Bylaws. (2)
10.1 $300,000,000 Amended and Restated Credit Agreement dated March
12, 1998, among the Company, certain lenders and NationsBank of
Texas, N.A., as administrative lender. (3)
11 Computations of Earnings Per Share. (3)
27.1 Financial Data Schedule for the thirty-nine weeks ended
March 28, 1998. (4)
27.2 Restated Financial Data Schedules for the thirty-nine weeks
ended March 29, 1997 and March 23, 1996. (4)
(b) Reports on Form 8-K.
None.
- --------------------
(1) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended December 27, 1997 and
incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 26, 1994 and incorporated
herein by reference.
(3) Filed herewith.
(4) Included with EDGAR version only.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CompUSA Inc.
Date: May 12, 1998 By: /s/ James E. Skinner
-----------------------------------------------------
James E. Skinner
Executive Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer and
Authorized Officer)
17
<PAGE>
================================================================================
$300,000,000
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
CompUSA Inc.
CERTAIN LENDERS
CERTAIN CO-AGENTS
AND
NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE LENDER
March 12, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1
Definitions
-----------
Section 1.1 Defined Terms............................................... 1
Section 1.2 Amendments and Renewals..................................... 19
Section 1.3 Construction................................................ 19
ARTICLE 2
Advances
--------
Section 2.1 The Advances................................................ 20
Section 2.2 Manner of Borrowing and Disbursement........................ 20
Section 2.3 Interest.................................................... 22
Section 2.4 Fees........................................................ 23
Section 2.5 Prepayment.................................................. 24
Section 2.6 Reduction of Commitments.................................... 25
Section 2.7 Non-Receipt of Funds by the Administrative Lender........... 25
Section 2.8 Payment of Principal of Advances............................ 26
Section 2.9 Reimbursement............................................... 26
Section 2.10 Manner of Payment........................................... 27
Section 2.11 LIBOR Lending Offices....................................... 27
Section 2.12 Sharing of Payments......................................... 28
Section 2.13 Calculation of LIBOR Rate................................... 28
Section 2.14 Booking Loans............................................... 28
Section 2.15 Taxes....................................................... 28
Section 2.16 Letters of Credit........................................... 32
Section 2.17 Extension of Maturity Date.................................. 38
ARTICLE 3
Conditions Precedent
--------------------
Section 3.1 Conditions Precedent to Closing, the Initial Advance and
the Initial Letters of Credit............................... 38
Section 3.2 Conditions Precedent to All Advances and Letters of Credit.. 40
<PAGE>
ARTICLE 4
Representations and Warranties
------------------------------
Section 4.1 Representations and Warranties.............................. 41
Section 4.2 Survival of Representations and Warranties, etc............. 48
ARTICLE 5
General Covenants
-----------------
Section 5.1 Preservation of Existence and Similar Matters............... 48
Section 5.2 Business; Compliance with Applicable Law.................... 48
Section 5.3 Maintenance of Properties................................... 48
Section 5.4 Accounting Methods and Financial Records.................... 49
Section 5.5 Insurance................................................... 49
Section 5.6 Payment of Taxes and Claims................................. 49
Section 5.7 Visits and Inspections...................................... 49
Section 5.8 Payment of Indebtedness..................................... 50
Section 5.9 Use of Proceeds............................................. 50
SECTION 5.10 INDEMNITY................................................... 50
Section 5.11 Environmental Law Compliance................................ 51
ARTICLE 6
Information Covenants
---------------------
Section 6.1 Quarterly Financial Statements and Information.............. 53
Section 6.2 Annual Financial Statements and Information;
Certificate of No Default................................... 53
Section 6.3 Compliance Certificate...................................... 53
Section 6.4 Copies of Other Reports and Notices......................... 53
Section 6.5 Notice of Litigation, Default and Other Matters............. 54
Section 6.6 ERISA Reporting Requirements................................ 55
ARTICLE 7
Negative Covenants
------------------
Section 7.1 Indebtedness................................................ 56
Section 7.2 Liens....................................................... 57
Section 7.3 Investments................................................. 57
Section 7.4 Liquidation, Disposition or Acquisition of Assets,
Merger, New Subsidiaries.................................... 58
Section 7.5 Guaranties.................................................. 59
-ii-
<PAGE>
Section 7.6 Restricted Payments......................................... 59
Section 7.7 Affiliate Transactions...................................... 59
Section 7.8 Compliance with ERISA....................................... 60
Section 7.9 Leverage Ratio.............................................. 60
Section 7.10 Fixed Charge Coverage Ratio................................. 60
Section 7.11 Net Worth................................................... 60
Section 7.12 Sale and Leaseback.......................................... 61
Section 7.13 Sale or Discount of Receivables............................. 61
Section 7.14 Amendment and Modification of Subordinated Debt Documents... 61
Section 7.15 Acquisitions................................................ 61
Section 7.16 Unrestricted Subsidiaries................................... 62
ARTICLE 8
Default
-------
Section 8.1 Events of Default........................................... 62
Section 8.2 Remedies.................................................... 65
ARTICLE 9
Changes in Circumstances
------------------------
Section 9.1 LIBOR Basis Determination Inadequate........................ 66
Section 9.2 Illegality.................................................. 66
Section 9.3 Increased Costs............................................. 66
Section 9.4 Effect On Base Rate Advances................................ 68
Section 9.5 Capital Adequacy............................................ 68
Section 9.6 Replacement of Lender....................................... 68
ARTICLE 10
AGREEMENT AMONG LENDERS
-----------------------
Section 10.1 Agreement Among Lenders..................................... 69
Section 10.2 Lender Credit Decision...................................... 71
Section 10.3 Benefits of Article......................................... 71
ARTICLE 11
Miscellaneous
-------------
Section 11.1 Notices..................................................... 72
Section 11.2 Expenses.................................................... 72
Section 11.3 Waivers..................................................... 73
-iii-
<PAGE>
Section 11.4 Determination by the Lenders Conclusive and Binding......... 74
Section 11.5 Set-Off..................................................... 74
Section 11.6 Assignment.................................................. 74
Section 11.7 Counterparts................................................ 76
Section 11.8 Severability................................................ 76
Section 11.9 Interest and Charges........................................ 77
Section 11.10 Headings.................................................... 77
Section 11.11 Amendment and Waiver........................................ 77
Section 11.12 Exception to Covenants...................................... 77
Section 11.13 No Liability of Issuing Bank................................ 78
Section 11.14 Confidentiality Agreement................................... 78
Section 11.15 Co-Agents................................................... 78
SECTION 11.16 GOVERNING LAW............................................... 78
SECTION 11.17 WAIVER OF JURY TRIAL........................................ 79
SECTION 11.18 ENTIRE AGREEMENT............................................ 79
-iv-
<PAGE>
Schedules and Exhibits
- ----------------------
Schedule 1: LIBOR Lending Offices
Schedule 2: Existing Liens
Schedule 3: Existing Litigation and Material Liabilities
Schedule 4: Subsidiaries
Schedule 5: Existing Investments
Schedule 6: Existing Indebtedness
Schedule 7: Consents and Approvals
Schedule 8: Qualification and Good Standing
Schedule 9: Authorization
Schedule 10: Existing Letters of Credit
Schedule 11: Investment Policy
Schedule 12: Existing Store Locations
Exhibit A: Promissory Note
Exhibit B: Subsidiary Guaranty
Exhibit C: Compliance Certificate
Exhibit D: Assignment Agreement
Exhibit E: Confidentiality Agreement
-v-
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
--------------------------------------------
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is
dated as of March 14, 1998, among CompUSA Inc., a Delaware corporation
("Borrower"), the Lenders from time to time party hereto, the co-agents
identified as such on the signature pages hereto ("Co-Agents"), and NATIONSBANK
OF TEXAS, N.A., a national banking association, as administrative agent for the
Lenders.
BACKGROUND
----------
The Borrower, certain of the Lenders, and NationsBank of Texas, N.A., as
Administrative Lender, are parties to that certain Amended and Restated Credit
Agreement, dated as of December 30, 1996 (said Amended and Restated Credit
Agreement, as amended, modified or supplemented, the "Existing Credit
Agreement"; the Existing Credit Agreement being an amendment and replacement of
that certain Credit Agreement, dated as of June 16, 1995, among the Borrower,
the lenders party thereto, and NationsBank of Texas, N.A., as Administrative
Lender, which Credit Agreement was an amendment and replacement of that certain
Credit Agreement, dated as of December 8, 1992, among the Borrower, the lenders
party thereto, and NationsBank of Texas, N.A., as Administrative Lender). The
Borrower has requested that the Lenders amend and restate the Existing Credit
Agreement by making a credit facility available to the Borrower in the maximum
principal amount of $300,000,000. The Lenders have agreed to do so, subject to
the terms and conditions set forth below.
In consideration of the mutual covenants and agreements contained herein,
and other good and valuable consideration hereby acknowledged, the parties
hereto agree that the Existing Credit Agreement is amended and restated in its
entirety as follows:
ARTICLE 1
Definitions
-----------
Section 1.1 Defined Terms. For purposes of this Agreement:
"Accounts" has the meaning assigned to such term in the UCC.
"Acquisition" means any transaction pursuant to which the Borrower or any
of its Subsidiaries, (a) whether by means of a capital contribution or purchase
or other acquisition of stock or other securities or other equity participation
or interest, (i) acquires (or after giving effect to such transaction owns) more
than 50% of the equity interest in any Person pursuant to a solicitation by the
Borrower or such Subsidiary of tenders of equity securities of such Person, or
through one or more negotiated block, market, private or other transactions, or
a combination of any of the foregoing, or (ii) except as permitted by Section
7.3(b) hereof with respect to a newly-formed corporation and Section 7.4(b)
hereof with respect to an existing Subsidiary of the
<PAGE>
Borrower, makes any corporation a Subsidiary of the Borrower or such Subsidiary,
or causes any corporation, other than a Subsidiary of the Borrower or such
Subsidiary, to be merged into the Borrower or such Subsidiary (or agrees to be
merged into any other corporation other than a wholly-owned Subsidiary
(excluding directors' qualifying shares) of the Borrower or such Subsidiary), or
(b) purchases in one transaction or a series of related transactions all or any
part of the business or assets (excluding Inventory only purchases) of any
Person.
"Acquisition Consideration" means the consideration given by the Borrower
or any of its Restricted Subsidiaries for an Acquisition, including but not
limited to the sum of (without duplication) (a) the fair market value of any
cash, property (including capital stock or other equity securities or interests)
or services given, plus (b) consideration paid with proceeds of Indebtedness
permitted pursuant to this Agreement, plus (c) the amount of any Indebtedness
and Operating Leases (calculated to be the product of annual rentals multiplied
by six) assumed, incurred or guaranteed in connection with such Acquisition by
the Borrower or any Restricted Subsidiary which is a Restricted Subsidiary
immediately prior to such Acquisition.
"Adjusted LIBOR Rate" means, for any LIBOR Advance for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100th of 1%) determined by the Administrative Lender to be equal to the
quotient obtained by dividing (a) the LIBOR Rate for such LIBOR Advance for such
Interest Period by (b) 1 minus the Reserve Requirement for such LIBOR Advance
for such Interest Period.
"Administrative Lender" means NationsBank of Texas, N.A., a national
banking association, as administrative agent for Lenders, or such successor
administrative agent appointed pursuant to Section 10.1(b) hereof.
"Advance" means any amount advanced or deemed advanced by the Lenders to
the Borrower pursuant to Article 2 hereof on the occasion of any borrowing,
including without limitation any Refinancing Advance.
"Affiliate" means any Person that, directly or indirectly, through one or
more Subsidiaries, Controls or is Controlled By or Under Common Control with,
the Borrower.
"Agreement" means this Second Amended and Restated Credit Agreement.
"Agreement Date" means the date of this Agreement.
"Applicable Environmental Laws" means applicable laws pertaining to health
or the environment, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended from time
to time, "CERCLA"), the Resource Conservation and Recovery Act of 1976, as
amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act
amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as
amended from time to time, "RCRA"), the Texas Water Code, and the Texas Solid
Waste Disposal Act.
-2-
<PAGE>
"Applicable Law" means (a) in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies or
regulatory agencies applicable to such Person and its properties, including,
without limiting the foregoing, all orders and decrees of all courts and
arbitrators in proceedings or actions to which the Person in question is a
party, and (b) in respect of contracts relating to interest or finance charges
that are made or performed in the State of Texas, "Applicable Law" shall mean
the laws of the United States of America, including without limitation 12 USC
(S)(S) 85 and 86(a), as amended from time to time, and any other statute of the
United States of America now or at any time hereafter prescribing the maximum
rates of interest on loans and extensions of credit, and the laws of the State
of Texas, including, without limitation, Art. 1H, if applicable, and if Art. 1H
is not applicable, Art. 1D, and any other statute of the State of Texas now or
at any time hereafter prescribing maximum rates of interest on loans and
extensions of credit; provided that the parties hereto agree pursuant to Texas
Finance Code Section 346.004 that the provisions of Chapter 346 of the Texas
Finance Code shall not apply to Advances, this Agreement, the Notes or any other
Loan Documents.
"Applicable Margin" means the following per annum percentages, applicable
in the following situations:
LIBOR
Applicability Basis
------------- -----
(a) The Fixed Charge Coverage Ratio is less than 2.25 to 1 1.000
(b) The Fixed Charge Coverage Ratio is greater than or equal to 0.875
2.25 to 1 but less than 3.00 to 1
(c) The Fixed Charge Coverage Ratio is greater than or equal to 0.750
3.00 to 1 but less than 3.75 to 1
(d) The Fixed Charge Coverage Ratio is greater than or equal to 0.625
3.75 to 1 but less than 4.50 to 1
(e) The Fixed Charge Coverage Ratio is greater than or equal to 0.500
4.50 to 1
The Applicable Margin payable by the Borrower on the Advances outstanding
hereunder shall be subject to reduction or increase, as applicable and as set
forth in the table above, on a quarterly basis according to the performance of
the Borrower as tested by using the Fixed Charge Coverage Ratio as of the end of
the most recent Fiscal Quarter (calculated for the twelve Fiscal Periods
preceding the date of determination); provided, that each adjustment in the
Applicable Margin shall be effective with respect to Advances (i) made following
receipt by the Lenders of the financial statements required pursuant to Section
6.1 or 6.2, as applicable, hereof and the Compliance Certificate required
pursuant to Section 6.3 hereof, on the date of making of such Advance and (ii)
outstanding on the date of receipt of the financial statements referred to in
clause (i) immediately preceding, on the date of receipt of such financial
statements. If such financial statements and Compliance Certificate are not
received by the Lenders by the date required, the Applicable Margin shall be
determined as if the Fixed Charge Coverage Ratio is less
-3-
<PAGE>
than 2.25 to 1 until such time as such financial statements and Compliance
Certificate are received. Notwithstanding the above, until such time as the
Lenders have received the financial statements required for the third Fiscal
Quarter of the Borrower's 1998 Fiscal Year and related Compliance Certificate,
the Applicable Margin shall be determined as if the Fixed Charge Coverage Ratio
is greater than or equal to 3.00 to 1 but less than 3.75 to 1.
"Art. 1D" means Article 5069-1D, Title 79, Revised Civil Statutes of Texas,
as amended.
"Art. 1H" means Article 5069-1H, Title 79, Revised Civil Statutes of Texas,
as amended.
"Assignees" means any assignee of a Lender pursuant to an Assignment
Agreement and has the meaning ascribed thereto in Section 11.6 hereof.
"Assignment Agreement" has the meaning ascribed thereto in Section 11.6
hereof.
"Authorized Signatory" means the Chief Executive Officer, Vice President-
Finance or Chief Financial Officer of the Borrower or such other senior
personnel of the Borrower as may be duly authorized and designated in writing by
the Borrower to execute documents, agreements and instruments on behalf of the
Borrower, and to request Advances hereunder.
"Base Rate Advance" means any Advance bearing interest at the Prime Rate
Basis.
"Borrower" means CompUSA Inc., a Delaware corporation.
"Business Day" means a day on which commercial banks are open (a) for the
transaction of business in Dallas, Texas and, (b) with respect to any LIBOR
Advance, for the transaction of international business (including dealings in
U.S. Dollar deposits) in London, England.
"Capitalized Lease Obligations" means that portion of any obligation of the
Borrower or any Subsidiary as lessee under a lease which at the time would be
required to be capitalized on a balance sheet prepared in accordance with GAAP.
"Cash and Cash Equivalents" means with respect to the Borrower and each
Subsidiary (a) cash (which after the occurrence of an Event of Default shall
exclude any cash proceeds of Accounts), and (b) Permitted Investments.
"Change of Control" means the occurrence of any of the following: (a) the
sale, lease or transfer of all or substantially all of the Borrower's assets to
any Person or group (as such term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) other than a Subsidiary that executed a
Subsidiary Guaranty, (b) the adoption of a plan relating to the liquidation or
dissolution of the Borrower, (c) the acquisition by any Person or group (as such
term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) of a direct or indirect majority in interest (more than 50%) of the
voting power of the voting stock of the Borrower by way of merger or
consolidation or otherwise, or (d) the first day on which a majority of the
members of the Board of Directors are not Continuing Directors.
-4-
<PAGE>
"COBRA" has the meaning specified in Section 4.1(l) hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Letter of Credit" means a commercial documentary Letter of
Credit under which the Issuing Bank agrees to make payments for the account of
the Borrower, on behalf of the Borrower or a Subsidiary thereof, in respect of
the obligation of the Borrower or such Subsidiary in connection with the
purchase of goods or services in the ordinary course of business.
"Commitment" means $300,000,000, as reduced from time to time pursuant to
Section 2.6 hereof.
"Commitment Fee" has the meaning specified in Section 2.4(a) hereof.
"Compliance Certificate" means a certificate, signed by an Authorized
Signatory, in substantially the form of Exhibit C hereto, appropriately
completed.
"Confidentiality Agreement" means the Confidentiality Agreement,
substantially in the form of Exhibit E hereto, executed by the Borrower and each
Lender.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Borrower who (a) was a member of such Board of
Directors on the Agreement Date or (b) was nominated for election or elected to
such Board of Directors with the affirmative vote of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Control" or "Controlled By" or "Under Common Control" means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of voting securities, by contract or
otherwise); provided, however, that in any event any Person which beneficially
owns, directly or indirectly, 20% or more (in number of votes) of the securities
or equity interests having ordinary voting power for the election of directors
or other governing body of a Person shall be conclusively presumed to control
such Person.
"Controlled Group" means as of the applicable date, as to any Person not an
individual, all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) which are under common control with
such Person and which, together with such Person, are treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code; provided, however,
that the Subsidiaries of the Borrower shall be deemed to be members of the
Borrower's Controlled Group.
"Debt for Borrowed Money" means all indebtedness, direct or indirect,
whether or not represented by bonds, debentures, notes or other securities, for
the repayment of money borrowed or the deferred purchase price of property or
services, and shall include, without duplication, Securitization Indebtedness.
Debt for Borrowed Money does not include, without limitation, (a) accounts
payable or accrued liabilities incurred in the ordinary course of business,
including
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advances from customers and trade payables financed through floor plan
arrangements, (b) current or deferred income taxes, and (c) provided that any
applicable Restricted Subsidiary has executed a Subsidiary Guaranty, (i)
Indebtedness owed by a Restricted Subsidiary to the Borrower, (ii) Indebtedness
owed by the Borrower to a Restricted Subsidiary, and (iii) Indebtedness owed by
a Subsidiary to a Restricted Subsidiary.
"Debtor Relief Laws" means any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar
debtor relief Laws affecting the rights of creditors generally from time to time
in effect.
"Default" means an Event of Default and/or any of the events specified in
Section 8.1 hereof, regardless of whether there shall have occurred any passage
of time or giving of notice that would be necessary in order to constitute such
event an Event of Default.
"Default Rate" means a simple per annum interest rate equal to (a) with
respect to Base Rate Advances the lesser of (i) the Highest Lawful Rate or (ii)
the Prime Rate plus three percent or (b) with respect to LIBOR Advances, the
lesser of (i) the Highest Lawful Rate or (ii) the LIBOR Basis plus three
percent.
"Determining Lenders" means, on any date of determination, any combination
of the Lenders having at least 51% of the aggregate amount of the Advances then
outstanding; provided, however, that if there are no Advances outstanding
hereunder, "Determining Lenders" shall mean any combination of Lenders whose
Specified Percentages aggregate at least 51%.
"Dividend" means, as to any Person, any declaration or payment of any
dividend (other than a stock dividend) on, or the making of any distribution,
loan, advance or investment to or in any holder of, any shares of capital stock
of such Person (other than salaries and bonuses paid in the ordinary course of
business).
"Dollar" or "$" means the lawful currency of the United States of America.
"EBIT" means, for any period, determined in accordance with GAAP on a
consolidated basis for the Borrower and its Subsidiaries, the sum of (a) Pretax
Net Income (excluding therefrom, to the extent included in determining Pretax
Net Income, any items of extraordinary gain, including net gains on the sale of
assets other than asset sales in the ordinary course of business, and adding
thereto, to the extent included in determining Pretax Net Income, any items of
extraordinary loss, including net losses on the sale of assets other than asset
sales in the ordinary course of business), plus (b) interest expense (including
but not limited to interest expense pursuant to Capitalized Lease Obligations).
"EBITDAR" means, for any period, determined in accordance with GAAP on a
consolidated basis for the Borrower and its Subsidiaries, the sum of (a) EBIT,
plus (b) depreciation and amortization, plus (c) lease expense pursuant to
Operating Leases.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation promulgated thereunder.
"ERISA Event" means, with respect to the Borrower and its Subsidiaries, (a)
a Reportable Event (other than a Reportable Event not subject to the provision
for 30-day notice to the PBGC under regulations issued under Section 4043 of
ERISA), (b) the withdrawal of any such Person or any member of its Controlled
Group from a Plan subject to Title IV of ERISA during a plan year in which it
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate under Section 4041(c) of ERISA, (d)
the institution of proceedings to terminate a Plan by the PBGC, (e) the failure
to make required contributions which could result in the imposition of a lien
under Section 412 of the Code or Section 302 of ERISA, or (f) any other event or
condition which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan or the imposition of any material liability under Title IV
of ERISA other than PBGC premiums due but not delinquent under Section 4007 of
ERISA.
"Event of Default" means any of the events specified in Section 8.1 hereof,
provided that any requirement for notice or lapse of time has been satisfied.
"Existing Credit Agreement" has the meaning set forth in the Background
provision of this Agreement.
"Existing Letters of Credit" means those Letters of Credit outstanding on
the Agreement Date, as described on Schedule 10 hereto.
"Existing Store Locations" means the store locations owned by the Borrower
on the Agreement Date and described on Schedule 12 hereto.
"Federal Funds Rate" means, 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 members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of Dallas on the Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate quoted to the
Administrative Lender on such day on such transactions as determined by
Administrative Lender.
"Fee Letter" has the meaning specified in Section 2.4(c) hereof.
"Fiscal Period" means one of the three fiscal periods in a Fiscal Quarter,
the first period comprised of five weeks and the second and third Fiscal Periods
comprised of four weeks, with each of the weeks in a Fiscal Quarter ending on
the close of business on a Saturday. There are twelve Fiscal Periods in a
Fiscal Year.
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<PAGE>
"Fiscal Quarter" means a thirteen week quarter with the first thirteen week
quarter beginning on the Sunday following the last Saturday in June and ending
on the Saturday of the thirteenth week in such quarter.
"Fiscal Year" means the fiscal year beginning on the Sunday following the
last Saturday in June of each year and ending on the last Saturday in June of
the following year.
"Fixed Charges" means, for any date of calculation, calculated for the
Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP,
the sum of, without duplication, (a) interest expense (including but not limited
to interest expense pursuant to Capitalized Lease Obligations), plus (b) lease
expense under Operating Leases, in each case for the applicable period
immediately preceding the date of calculation.
"Fixed Charge Coverage Ratio" means, for any date of determination (which
shall be as of the last day of each Fiscal Quarter), the ratio of EBITDAR to
Fixed Charges, in each case for the immediately preceding twelve Fiscal Periods.
"GAAP" means generally accepted accounting principles applied on a
consistent basis, set forth in the Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants, or their successors
which are applicable in the circumstances as of the date in question. The
requisite that such principles be applied on a consistent basis shall mean that
the accounting principles observed in a current period are comparable in all
material respects to those applied in a preceding period.
"Guaranty" or "Guaranteed", as applied to an obligation of another Person,
means and includes (a) a guaranty, direct or indirect, in any manner, of any
part or all of such obligation, and (b) an agreement, direct or indirect,
contingent or otherwise, the purpose of which is to insure in any way the
payment or performance (or payment of damages in the event of nonperformance) of
any part or all of such obligation.
"Highest Lawful Rate" means at the particular time in question the maximum
rate of interest which, under Applicable Law, the Lenders are then permitted to
charge on the Obligations. If the maximum rate of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations shall
change after the date hereof, the Highest Lawful Rate shall be automatically
increased or decreased, as the case may be, from time to time as of the
effective time of each change in the Highest Lawful Rate without notice to the
Borrower. For purposes of determining the Highest Lawful Rate under the
Applicable Law of the State of Texas, the applicable rate ceiling shall be (a)
the weekly rate ceiling described in and computed in accordance with the
provisions of Art. 1D.003, or (b) if the parties subsequently contract as
allowed by Applicable Law, the quarterly ceiling or the annualized ceiling
computed pursuant to Art. 1D.008; provided, however, that at any time the weekly
rate ceiling, the quarterly ceiling or the annualized ceiling shall be less than
18% per annum or more than 24% per annum, the provisions of Art. 1D.009(a) or
(b) shall control for purposes of such determination, as applicable.
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<PAGE>
"Indebtedness" means, with respect to any Person, without duplication, (a)
all items, except accounts payable arising in the normal course of business,
which in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet of such Person, (b) all
obligations secured by any Lien other than Permitted Liens on any property or
asset owned by such Person (other than accounts payable arising in the ordinary
course of business), whether or not the obligation secured thereby shall have
been assumed, (c) to the extent not otherwise included, all Capitalized Lease
Obligations, all Guaranties, all reimbursement obligations in respect of letters
of credit, all obligations under interest rate swap agreements or similar hedge
agreements, and all Securitization Indebtedness of such Person, and (d) any
"withdrawal liability" of such Person, as such term is defined under Part I of
Subtitle E of Title IV of ERISA.
"Indemnified Matters" has the meaning ascribed to it in Section 5.10(a)
hereof.
"Indemnitees" has the meaning ascribed to it in Section 5.10(a) hereof.
"Indenture" means that certain Indenture dated as of June 17, 1993 pursuant
to which the Senior Subordinated Notes are issued, as the same may be amended,
supplemented or otherwise modified.
"Intellectual Property" means inventions, designs, patents, patent
applications, trademarks, trademark applications, trade dress, logos and other
sources of business identifiers, service marks, service mark applications, trade
names, trade secrets, formulae, blueprints, registrations, copyrights,
processes, methods, information, data, plans, specifications, designs, drawings,
engineering reports, test reports and processing standards and performance
standards, and all goodwill associated with the foregoing, and all licenses or
other agreements to which the Borrower or any Subsidiary is a party with respect
to any of the foregoing.
"Interest Period" means the period beginning on the day any LIBOR Advance
is made and ending one, two, three or six months thereafter (as the Borrower
shall select); provided, however, that all of the foregoing provisions are
subject to the following:
(i) if any Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall be extended to the next
succeeding Business Day, unless, with respect to a LIBOR Advance or a LIBOR
Bid Rate Advance, the result of such extension would be to extend such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Business Day; and
(ii) any Interest Period with respect to a LIBOR Advance or a LIBOR
Bid Rate Advance that begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last
Business Day of a calendar month.
"Inventory" has the meaning assigned to such term in the UCC.
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"Investment" means any direct or indirect purchase or other acquisition of,
or beneficial interest in, capital stock or other securities or equity interests
of any Person which is not an Acquisition, or any direct or indirect loan,
advance (other than advances to employees for moving and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
capital contribution to, or investment in, any Person which is not an
Acquisition, including without limitation the holding of Indebtedness of another
Person or the purchase of accounts receivable owed by another Person that are
not current assets or do not arise in the ordinary course of business.
"Issuing Bank" means NationsBank of Texas, N.A. in its capacity as issuer
of the Letters of Credit.
"Lender" means each financial institution shown on the signature pages
hereof so long as such financial institution maintains a portion of the
Commitment or is owed any part of the Obligations (including the Administrative
Lender in its individual capacity), and each Assignee that hereafter becomes
party hereto pursuant to Section 11.6 hereof, subject to the limitations set
forth therein.
"L/C Cash Collateral Account" has the meaning specified in Section 2.16(h)
hereof.
"L/C Related Documents" has the meaning specified in Section 2.16(e)
hereof.
"Letters of Credit" has the meaning specified in Section 2.16(a) hereof,
and shall include the Existing Letters of Credit.
"Letter of Credit Agreement" has the meaning specified in Section
2.16(b)(i) hereof.
"Letter of Credit Facility" has the meaning specified in Section 2.16(a)
hereof.
"Leverage Ratio" means, for any date of determination (which shall be as of
the last day of each Fiscal Quarter), the ratio of (a) the sum of (i) Total
Funded Debt as of the date of determination plus (ii) lease expense pursuant to
Operating Leases for the immediately preceding twelve Fiscal Periods (multiplied
by six) to (b) EBITDAR for the immediately preceding twelve Fiscal Periods.
"LIBOR Advance" means an Advance which the Borrower requests to be made as
a LIBOR Advance or which is reborrowed as a LIBOR Advance, in accordance with
the provisions of Section 2.2 hereof.
"LIBOR Basis" means a simple per annum interest rate equal to the lesser of
(a) the Highest Lawful Rate, or (b) the sum of the Adjusted LIBOR Rate plus the
Applicable Margin.
"LIBOR Lending Office" means, with respect to a Lender, the office
designated as its LIBOR Lending Office on Schedule 1 attached hereto, and such
other office of such Lender or any of its affiliates hereafter designated by
notice to the Borrower and the Administrative Lender.
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"LIBOR Rate" means, for any LIBOR Advance for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "LIBOR Rate" shall mean, for any LIBOR Advance for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period; provided, however, if more than
one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates (rounded upwards, if necessary, to the
nearest 1/100 of 1%).
"Lien" means, with respect to any property, any mortgage, lien, pledge,
collateral assignment, hypothecation, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or other
encumbrance of any kind in respect of such property, whether or not choate,
vested or perfected.
"Loan Documents" means this Agreement, the Notes, the Subsidiary Guaranty,
the Fee Letter, and any other document or agreement executed or delivered from
time to time by an officer of the Borrower or any Subsidiary in connection
herewith or as security for the Obligations.
"Material Adverse Effect" means any act or circumstance or event that (a)
causes a Default, (b) materially and adversely affects the business, financial
condition or results of operations of the Borrower and its Restricted
Subsidiaries, taken as a whole, or (c) materially and adversely affects the
validity or enforceability of any Loan Documents.
"Maturity Date" means March 12, 2001, or the earlier date of termination in
whole of the Commitment pursuant to Section 2.6 or 8.2 hereof, or such later
date as established pursuant to Section 2.17 hereof.
"Maximum Amount" means the maximum amount of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations.
"Monthly Date" means the first Business Day of each month during the term
of this Agreement, commencing April 1, 1998.
"Multiemployer Plan" means, as to any Person, at any time, a "multiemployer
plan" within the meaning of Section 4001(a)(3) of ERISA and to which such Person
or any member of its Controlled Group is making, or is obligated to make
contributions or has made, or been obligated to make, contributions.
"NationsBank" means NationsBank of Texas, N.A., a national banking
association, in its capacity as a Lender.
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"Necessary Authorization" means any right, franchise, license, permit,
consent, approval or authorization from, or any filing or registration with, any
governmental or other regulatory authority or any Person necessary or
appropriate to enable the Borrower or any Subsidiary to maintain and operate its
business and properties.
"Negative Pledge" means any agreement, contract or other arrangement
whereby the Borrower or any of its Restricted Subsidiaries is prohibited from,
or would otherwise be in default as a result of, creating, assuming, incurring
or suffering to exist, directly or indirectly, any Lien on any of its assets in
favor of the Administrative Lender for the benefit of the Lenders under this
Agreement.
"Net Cash Proceeds" means, with respect to the issuance of capital stock or
other equity interest of any Person, the amount of cash received by such Person
in connection with such issuance (including cash proceeds of any property
received in consideration of any such issuance) after deducting therefrom the
aggregate, without duplication, of the following amounts to the extent properly
attributable to such transaction: (i) reasonable brokerage commissions, legal
fees, finder's fees, financial advisory fees, fees for solvency opinions,
accounting fees, underwriting fees, investment banking fees and other similar
commissions and fees, and expenses, in each case, to the extent paid or payable
by such Person; (ii) filing, recording or registration fees or charges or
similar fees or charges paid by such Person; and (iii) taxes paid or payable by
such Person or any shareholder, partner or member of such Person to governmental
taxing authorities as a result of such transaction (after taking into account
any available tax credits or deductions and any tax sharing arrangements).
"Net Income" means net profit (or loss) after taxes of the Borrower and its
Subsidiaries, on a consolidated basis, determined in accordance with GAAP.
"Net Worth" means, for the Borrower and its Subsidiaries, on a consolidated
basis, determined in accordance with GAAP, the sum of: (a) capital stock taken
at stated or par value, plus (b) paid in capital plus (c) retained earnings,
less (d) treasury stock.
"Note" means a Promissory Note of Borrower evidencing Advances hereunder,
substantially in the form of Exhibit A hereto, together with any extension,
renewal, or amendment thereof, or substitution therefor.
"Notice of Issuance" has the meaning ascribed to it in Section 2.16(b)
hereof.
"Obligations" means (a) all obligations of any nature (whether matured or
unmatured, fixed or contingent, including the Reimbursement Obligations) of the
Borrower or any Subsidiary to the Lenders under the Loan Documents as they may
be amended from time to time, and (b) all obligations of the Borrower or any
Subsidiary for losses, damages, expenses or any other liabilities of any kind
that any Lender may suffer by reason of a breach by the Borrower or any
Subsidiary of any obligation, covenant or undertaking with respect to any Loan
Document.
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"Operating Lease" means any operating lease, as defined in the Financial
Accounting Standard Board Statement of Financial Accounting Standards No. 13,
dated November, 1976 or otherwise in accordance with GAAP.
"Participant" has the meaning ascribed to it in Section 11.6(c) hereof.
"Participation" has the meaning ascribed to it in Section 11.6(c) hereof.
"Payment Date" means the last day of the Interest Period for any LIBOR
Advance.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Investments" means those investments permitted to be made by the
Borrower and its Subsidiaries as set forth in the Investment Policy of the
Borrower attached hereto as Schedule 11, as such Investment Policy may be
amended with the consent of the Board of Directors of the Borrower after the
Agreement Date but only to the extent that such amendments that change the
quality (and not the maximum permitted amount) of any such investments are
approved in writing by the Determining Lenders, which approval shall not be
unreasonably withheld or delayed.
"Permitted Liens" means, as applied to any Person:
(a) Any Lien in favor of the Administrative Lender for the benefit of the
Lenders to secure the Obligations hereunder;
(b) (i) Liens created by lease agreements or statute, rule or regulation to
secure the payments of rental amounts and other sums not yet due or that are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves shall have been set aside on such Person's books, but
only so long as no foreclosure, restraint, sale or similar proceedings have been
commenced with respect thereto (provided such Liens shall at all times be
confined to the assets located on any such leased premises), (ii) Liens on
leasehold interests created by the lessor in favor of any mortgagee of the
leased premises, and (iii) Liens for taxes, assessments, governmental charges,
levies or claims that are not yet delinquent or are being diligently contested
in good faith by appropriate proceedings and for which adequate reserves shall
have been set aside on such Person's books, but only so long as no foreclosure,
restraint, sale or similar proceedings have been commenced with respect thereto;
(c) Liens of carriers, warehousemen, mechanics, laborers and materialmen
and other similar Liens incurred in the ordinary course of business for sums not
yet due, or sums that are being contested in good faith, if such reserve or
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor;
(d) Liens incurred in the ordinary course of business in connection with
workers' compensation, unemployment insurance or similar legislation;
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(e) Easements, right-of-way, restrictions, title imperfections, leases to
others and other encumbrances on the use of real property which do not interfere
with the ordinary conduct of the business of such Person;
(f) Liens created to secure the cost of acquiring and/or constructing new
store locations or other assets (which includes, but is not limited to,
inventory, equipment and leased equipment) acquired by such Person or created to
secure Indebtedness permitted by Section 7.1(d) hereof, which is incurred solely
for the purpose of financing the acquisition and/or construction of such assets
or which constitutes Capital Leases or Liens secured by Existing Store Locations
which do not exceed the original cost of acquiring and/or constructing such
Existing Store Locations, provided that each such Lien shall at all times be
confined solely to the asset or assets so acquired, constructed or leased (plus
fixtures related thereto and proceeds thereof and insurance with respect
thereto) and such Liens, other than Liens in respect of Existing Store
Locations, were created at the time of acquisition or construction; and Liens
created to secure any refinancings thereof so long as any such Lien remains
solely on the asset or assets acquired, constructed or leased, (plus fixtures
related thereto and proceeds thereof and insurance with respect thereto), and
the amount of Indebtedness related thereto is not increased;
(g) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (i) such Person shall have established adequate reserves for such
judgments or awards, (ii) such judgments or awards shall be fully insured and
the insurer shall not have denied coverage, or (iii) such judgments or awards
shall have been bonded to the satisfaction of the Determining Lenders;
(h) Any Liens which are described on Schedule 2 hereto, and Liens resulting
from the refinancing of the related Indebtedness, provided that the Indebtedness
secured thereby shall not be increased and the Liens shall not cover additional
assets of the Borrower;
(i) Liens against Inventory (but not any proceeds thereof other than
insurance proceeds payable as a result of loss or damage to Inventory) to secure
accounts payable owed in respect of the purchase of such Inventory in the
ordinary course of business to manufacturers, vendors and floor plan financers
of such Inventory, provided that such Liens shall not cover any other assets
other than returns, repossessions, substitutions, replacements, parts, additions
and accessions to and of such Inventory, including all payments with respect to
such Inventory, or any indemnity, warranty or guaranty payable by reason of loss
or damage to or otherwise with respect to such Inventory;
(j) The Trustee's Lien;
(k) Liens against Accounts, or fractional interests therein, and proceeds
thereof, sold or pledged by such Person in a Securitization to secure the
Securitization Indebtedness with respect thereto and security interests on
reserve, payment or other accounts required to be maintained in connection with
any such Securitization;
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(l) Liens to secure performance or payment bonds, performance of bids,
construction, supply of materials or similar contracts, statutory obligations,
and other similar obligations, in each case arising in the ordinary course of
business and not made in connection with borrowed money or the deferred purchase
price of goods or services;
(m) inchoate Liens in respect of pending proceedings or claims; and
(n) bank setoff rights arising by operation of law.
"Person" means an individual, corporation, partnership, limited liability
company, trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Plan" means an employee benefit plan as defined in Section 3(3) of ERISA
(including a Multiemployer Plan) pursuant to which any employees of the
Borrower, its Subsidiaries or any member of their Controlled Group participate.
"Pretax Net Income" means net profit (or loss) before taxes of the Borrower
and its Subsidiaries, on a consolidated basis, determined in accordance with
GAAP.
"Prime Rate" means, at any time, the prime interest rate announced or
published by the Reference Lender from time to time as its reference rate for
the determination of interest rates for loans of varying maturities in United
States dollars to United States residents of varying degrees of creditworthiness
and being quoted at such time by the Reference Lender as its "prime rate;" it
being understood that such rate may not be the lowest rate of interest charged
by the Reference Lender.
"Prime Rate Basis" means, for any day, a per annum interest rate equal to
the higher of (a) the sum of (i) 0.50% plus (ii) the Federal Funds Rate on such
day or (b) the Prime Rate on such day. The Prime Rate Basis shall be adjusted
automatically as of the opening of business on the effective date of each change
in the Prime Rate or Federal Funds Rate, as appropriate, to account for such
change.
"Proposed Lender" has the meaning ascribed to it in Section 9.6 hereof.
"Quarterly Date" means the first Business Day of each January, April, July
and October, beginning April 1, 1998.
"Reimbursement Obligations" means, in respect of any Letter of Credit as at
any date of determination, the sum of (a) the maximum aggregate amount which is
then available to be drawn under such Letter of Credit plus (b) the aggregate
amount of all drawings under such Letter of Credit not theretofore reimbursed by
the Borrower.
"Reference Lender" means NationsBank; provided that if NationsBank's
commitment hereunder shall terminate and it shall have no Advances outstanding
hereunder, NationsBank shall
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cease to be the Reference Lender, and Administrative Lender (after consultation
with Borrower) shall, with notice to Borrower and Lenders, designate another
Lender as the Reference Lender.
"Refinancing Advance" means any LIBOR Advance or Base Rate Advance which is
used to pay the principal amount (or any portion thereof) of a LIBOR Advance at
the end of its Interest Period and any LIBOR Advance which is used to pay the
principal of any Base Rate Advance, provided that, in either event, after giving
effect to such application, does not result in an increase in the aggregate
amount of outstanding Advances.
"Release Date" means the date on which the Notes have been paid, all other
Obligations due and owing have been paid and performed in full, and the
Commitment has been terminated.
"Reportable Event" has the meaning set forth in Section 4043(c) of ERISA.
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the
effect of the foregoing, the Reserve Requirement shall reflect any other
reserves required to be maintained by such member banks with respect to (a) any
category of liabilities which includes deposits by reference to which the
Adjusted LIBOR Rate is to be determined, or (b) any category of extensions of
credit or other assets which include LIBOR Advances. The Adjusted LIBOR Rate
shall be adjusted automatically on and as of the effective date of any change in
the Reserve Requirement.
"Restricted Payments" means, collectively, (i) Dividends, (ii) Treasury
Stock Purchases, (iii) loans to directors, officers and employees of the
Borrower and its Subsidiaries and (iv) any (A) payment or prepayment of
principal, premium or penalty on any Subordinated Debt or any defeasance,
redemption, purchase, repurchase or other acquisition or retirement for value,
in whole or in part, of any Subordinated Debt (including, without limitation,
the setting aside of assets or the deposit of funds therefor) and (B) prepayment
of interest on any Subordinated Debt.
"Restricted Subsidiary" means any Subsidiary of the Borrower other than an
Unrestricted Subsidiary.
"Securitization" means any transaction in which the Accounts of the
Borrower or any Subsidiary, or a fractional interest therein, are sold by the
Borrower or sold or pledged by any Subsidiary.
"Securitization Indebtedness" means, for any date of calculation,
calculated for the Borrower and its Subsidiaries on a consolidated basis
determined in accordance with GAAP, any and all obligations of the Borrower and
its Subsidiaries funded under any Securitization, to the extent that the same
constitute liabilities of the Borrower or any Subsidiary under GAAP or
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would, under GAAP, constitute liabilities of the Borrower or any Subsidiary if
the Securitization were treated as an on balance sheet transaction.
"Senior Debt" means Debt for Borrowed Money of the Borrower and its
Subsidiaries which is not Subordinated Debt.
"Senior Subordinated Notes" means the Borrower's $110,000,000 9-1/2% Senior
Subordinated Notes due 2000.
"Solvent" means, with respect to any Person, that the fair value of the
assets of such Person (both at fair valuation and at present fair saleable
value) is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person
as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and such Person does not
have unreasonably small capital with which to carry on its business. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability discounted to present value
at rates believed to be reasonable by such Person.
"Special Counsel" means the law firm of Donohoe, Jameson & Carroll, P.C.,
or such other legal counsel as the Administrative Lender may select.
"Specified Percentage" means, as to any Lender, the percentage indicated
beside its name on the signature pages hereof, or if applicable, specified in an
amendment to this Agreement or in its most recent Assignment Agreement.
"Standby Letter of Credit" means an irrevocable letter of credit under
which the Issuing Bank agrees to make payments for the account of the Borrower,
on behalf of the Borrower or any Subsidiary thereof in respect of obligations of
the Borrower or such Subsidiary incurred pursuant to contracts made or
performances undertaken or to be undertaken or like matters relating to
contracts to which the Borrower or such Subsidiary is or proposes to become a
party in the ordinary course of the Borrower's or such Subsidiary's business,
including, without limiting the foregoing, for insurance purposes or in respect
of advance payments or as bid or performance bonds or in connection with
industrial revenue bonds or for any other purpose for which a standby letter of
credit might customarily be issued.
"Subordinated Debt" means (i) the Senior Subordinated Notes and (ii) other
Indebtedness of the Borrower or any Subsidiary having maturities and terms, and
which is subordinated to payment of the Obligations in a manner, approved in
writing by the Determining Lenders, with only such changes or amendments as are
approved by the Determining Lenders.
"Subsidiary" of the Borrower means any corporation, partnership, joint
venture or similar entity, trust, estate, association or other unincorporated
organization of which (or in which) 50% or more of:
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(a) the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether
at the time capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any contingency),
(b) the interest in the capital or profits of such partnership, joint
venture or similar entity, or
(c) the beneficial interest of such trust, estate, association or other
unincorporated organization, is at the time directly or indirectly owned by the
Borrower, by the Borrower and one or more of its Subsidiaries or by one or more
of the Borrower's Subsidiaries.
"Subsidiary Guaranty" means the Subsidiary Guaranty, executed by each
Restricted Subsidiary of the Borrower, guarantying payment and performance of
the Obligations, substantially in the form of Exhibit B hereto, as such
agreement may be amended, modified, supplemented or restated from time to time.
"Taxes" has the meaning ascribed thereto in Section 2.15 hereof.
"Total Funded Debt" means, for any date of calculation, calculated for the
Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP,
the sum (without duplication) of (a) all Debt for Borrowed Money, plus (b) all
Capitalized Lease Obligations.
"Treasury Stock Purchase" means, with respect to any Person, any purchase,
redemption, or other acquisition or retirement for value of any shares of
capital stock of such Person.
"Trustee's Lien" means that certain Lien granted pursuant to Section 7.07
of the Indenture.
"UCC" means the Uniform Commercial Code as enacted in the State of Texas,
as amended from time to time.
"Unrestricted Subsidiary" means any Subsidiary designated by the Borrower
as an Unrestricted Subsidiary by written notice to the Administrative Lender;
provided, however, that at the time of such designation and after giving effect
thereto and after giving effect to the concurrent retirement of any Indebtedness
or other transaction, no Default or Event of Default shall have occurred and be
continuing.
"Unused Portion" means an amount equal to the result of (i) the Commitment
minus (ii) the sum of (A) the outstanding Advances plus (B) outstanding
Reimbursement Obligations in respect of the Letters of Credit.
Section 1.2 Amendments and Renewals. Each definition of an agreement in
this Article 1 shall include such agreement as amended to date, and as amended
or renewed from time
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to time in accordance with its terms, but only with the prior written consent of
the Determining Lenders.
Section 1.3 Construction. The terms defined in this Article 1 (except as
otherwise expressly provided in this Agreement) for all purposes shall have the
meanings set forth in Section 1.1 hereof, and the singular shall include the
plural, and vice versa, unless otherwise specifically required by the context.
All accounting terms used in this Agreement which are not otherwise defined
herein shall be construed in accordance with GAAP on a consolidated basis for
the Borrower and its Subsidiaries, unless otherwise expressly stated herein.
ARTICLE 2
Advances
--------
Section 2.1 The Advances. Each Lender severally agrees, upon the terms
and subject to the conditions of this Agreement, to make Advances to the
Borrower from time to time in an aggregate amount not to exceed its Specified
Percentage of the Commitment less its Specified Percentage of the aggregate
amount of all Reimbursement Obligations then outstanding (assuming compliance
with all conditions to drawing) for the purposes set forth in Section 5.9
hereof. Subject to the terms of this Agreement, Advances may be repaid and then
reborrowed. Any Advance shall, at the option of the Borrower as provided in
Section 2.2 hereof (and, in the case of LIBOR Advances, subject to availability
and to the provisions of Article 9 hereof), be made as a Base Rate Advance or a
LIBOR Advance; provided that there shall not be outstanding to any Lender, at
any one time, more than six LIBOR Advances. Notwithstanding any provision in
any Loan Document to the contrary, in no event shall the principal amount of all
outstanding Advances and Reimbursement Obligations exceed the Commitment. On
the Maturity Date unless sooner paid as provided herein, the outstanding
Advances shall be repaid in full.
Section 2.2 Manner of Borrowing and Disbursement.
(a) In the case of Base Rate Advances, the Borrower, through an Authorized
Signatory, shall give the Administrative Lender prior to 11:00 a.m., Dallas,
Texas time, on the date of any proposed Base Rate Advance irrevocable written
notice, or irrevocable telephonic notice followed immediately by written notice
(provided, however, that the Borrower's failure to confirm any telephonic notice
in writing shall not invalidate any notice so given), of its intention to borrow
or reborrow a Base Rate Advance hereunder. Such notice of borrowing shall
specify the requested funding date, which shall be a Business Day, and the
amount of the proposed aggregate Base Rate Advances to be made by Lenders.
(b) In the case of LIBOR Advances, the Borrower, through an Authorized
Signatory, shall give the Administrative Lender at least two Business Days'
irrevocable written notice, or irrevocable telephonic notice followed
immediately by written notice (provided, however, that the Borrower's failure to
confirm any telephonic notice in writing shall not invalidate any notice so
given), of its intention to borrow or reborrow a LIBOR Advance hereunder.
Notice shall be given
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to the Administrative Lender prior to 11:00 a.m., Dallas, Texas time, in order
for such Business Day to count toward the minimum number of Business Days
required. LIBOR Advances shall in all cases be subject to availability and to
Article 9 hereof. For LIBOR Advances, the notice of borrowing shall specify the
requested funding date, which shall be a Business Day, the amount of the
proposed aggregate LIBOR Advances to be made by Lenders and the Interest Period
selected by the Borrower, provided that no such Interest Period shall extend
past the Maturity Date or prohibit or impair the Borrower's ability to comply
with Section 2.8 hereof.
(c) Subject to Section 2.1 hereof, at least two Business Days prior to each
Payment Date for a LIBOR Advance, the Borrower, through an Authorized Signatory,
shall give the Administrative Lender irrevocable written notice, or irrevocable
telephonic notice followed immediately by written notice (provided, however,
that the Borrower's failure to confirm any telephonic notice in writing shall
not invalidate any notice so given), specifying whether all or a portion of such
LIBOR Advance outstanding on such Payment Date (i) is to be repaid and then
reborrowed in whole or in part as a LIBOR Advance, (ii) is to be repaid and then
reborrowed in whole or in part as a Base Rate Advance, or (iii) is to be repaid
and not reborrowed; provided, however, notwithstanding anything in this
Agreement to the contrary, if on any Payment Date a Default shall exist, such
LIBOR Advance may only be repaid or reborrowed as a Base Rate Advance. Upon
such Payment Date, such LIBOR Advance shall, subject to the provisions hereof,
be so repaid and, as applicable, reborrowed.
(d) Subject to Section 2.1 hereof, upon irrevocable prior written notice
prior to 11:00 a.m., Dallas time, on the date of any proposed repayment of all
or a portion of the Base Rate Advances (or two Business Days if the Borrower
wishes to reborrow a LIBOR Advance), through an Authorized Signatory, or
irrevocable telephonic notice followed immediately by written notice (provided,
however, that the Borrower's failure to confirm any telephonic notice in writing
shall not invalidate any notice so given), the Borrower may (i) repay all or a
portion of the Base Rate Advances and (ii) reborrow all or a portion of the
principal amount thereof as one or more LIBOR Advances.
(e) The aggregate amount of Base Rate Advances to be made by the Lenders on
any day shall be in a principal amount which is at least $500,000 and which is
an integral multiple of $100,000; provided, however, that such amount may equal
the unused amount of the Commitment. The aggregate amount of LIBOR Advances
having the same Interest Period and to be made by the Lenders on any day shall
be in a principal amount which is at least $2,000,000 and which is an integral
multiple of $100,000.
(f) The Administrative Lender shall promptly notify the Lenders of each
notice received from the Borrower pursuant to this Section. Failure of the
Borrower to give any notice in accordance with Sections 2.2(c) and (d) hereof
(if with respect to clause (d), such repayment is to be reborrowed as one or
more LIBOR Advances) shall result in a repayment of any such existing Advance on
the applicable Payment Date by a Refinancing Advance which is a Base Rate
Advance. Each Lender shall, not later than noon, Dallas, Texas time, on the
date of any Advance that is not a Refinancing Advance, deliver to the
Administrative Lender, at its address set forth herein, such Lender's Specified
Percentage of such Advance in immediately available funds in
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accordance with the Administrative Lender's instructions. Prior to 2:00 p.m.,
Dallas, Texas time, on the date of any Advance hereunder, the Administrative
Lender shall, subject to satisfaction of the conditions set forth in Article 3
hereof, disburse the amounts made available to the Administrative Lender by the
Lenders by (i) transferring such amounts by wire transfer pursuant to the
Borrower's instructions, or (ii) in the absence of such instructions, crediting
such amounts to the account of the Borrower maintained with the Administrative
Lender. All Advances shall be made by each Lender according to its Specified
Percentage.
Section 2.3 Interest.
(a) On Base Rate Advances.
(i) The Borrower shall pay interest on the unpaid principal amount of
the Base Rate Advances outstanding from time to time, until such Base Rate
Advances are due (whether at maturity, by reason of acceleration, by
scheduled reduction, or otherwise) or repaid at a simple interest rate per
annum equal to the Prime Rate Basis for the Base Rate Advances as in effect
from time to time, provided that interest on the Base Rate Advances shall
not exceed the Maximum Amount. If at any time the Prime Rate Basis would
exceed the Highest Lawful Rate, interest payable on the Base Rate Advances
shall be limited to the Highest Lawful Rate, but the Prime Rate Basis shall
not thereafter be reduced below the Highest Lawful Rate until the total
amount of interest accrued on the Base Rate Advances equals the amount of
interest that would have accrued if the Prime Rate Basis had been in effect
at all times.
(ii) Interest on the Base Rate Advances shall be computed on the basis
of a year of 365 or 366 days, as applicable, for the number of days
actually elapsed, and shall be payable in arrears on each Quarterly Date
and on the Maturity Date.
(b) On LIBOR Advances.
(i) The Borrower shall pay interest on the unpaid principal amount of
each LIBOR Advance, from the date such Advance is made until it is due
(whether at maturity, by reason of acceleration, by scheduled reduction, or
otherwise) or repaid, at a rate per annum equal to the LIBOR Basis for such
Advance. The Administrative Lender, whose determination shall be
controlling in the absence of manifest error, shall determine the LIBOR
Basis on the second Business Day prior to the applicable funding date and
shall notify the Borrower and the Lenders of such LIBOR Basis.
(ii) Subject to Section 11.9 hereof, interest on each LIBOR Advance
shall be computed on the basis of a 360-day year for the actual number of
days elapsed, and shall be payable in arrears on the applicable Payment
Date and on the Maturity Date; provided, however, that if the Interest
Period for such Advance exceeds three months, interest shall also be due
and payable in arrears on each Quarterly Date during such Interest Period.
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(c) Interest if No Notice of Selection of Interest Rate Basis. If the
Borrower fails to give the Administrative Lender timely notice of its selection
of a LIBOR Basis or an Interest Period for a LIBOR Advance, or if for any reason
a determination of a LIBOR Basis for any Advance is not timely concluded due to
the fault of the Borrower, the Prime Rate Basis shall apply to the applicable
Advance.
(d) Interest After an Event of Default. (i) After an Event of Default
(other than an Event of Default specified in Section 8.1(e) or (f) hereof) and
during any continuance thereof, at the option of Determining Lenders, and (ii)
after an Event of Default specified in Section 8.1(e) or (f) hereof and during
any continuance thereof, automatically and without any action by the
Administrative Lender or any Lender, the Obligations shall bear interest at a
rate per annum equal to the Default Rate. Such interest shall be payable on
each Quarterly Date and on the Maturity Date, and shall accrue until the earlier
of (i) waiver or cure (to the satisfaction of the Determining Lenders or all
Lenders, as applicable) of the applicable Event of Default, (ii) agreement by
the Lenders to rescind the charging of interest at the Default Rate, or (iii)
payment in full of the Obligations. The Lenders shall not be required to
accelerate the maturity of the Advances, to exercise any other rights or
remedies under the Loan Documents, or to give notice to the Borrower of the
decision to charge interest at the Default Rate. The Lenders will undertake to
notify the Borrower, after the effective date, of the decision to charge
interest at the Default Rate.
Section 2.4 Fees.
(a) Commitment Fee. Subject to Section 11.9 hereof, the Borrower agrees to
pay to the Administrative Lender, for the ratable account of the Lenders, a
commitment fee on the daily average Unused Portion at the following per annum
percentages, applicable in the following situations:
Applicability Percentage
------------- ----------
(a) The Fixed Charge Coverage Ratio is less than 2.25 0.300
to 1
(b) The Fixed Charge Coverage Ratio is greater than 0.250
or equal to 2.25 to 1 but less than 3.00 to 1
(c) The Fixed Charge Coverage Ratio is greater than 0.200
or equal to 3.00 to 1 but less than 3.75 to 1
(d) The Fixed Charge Coverage Ratio is greater than 0.175
or equal to 3.75 to 1 but less than 4.50 to 1
(e) the Fixed Charge Coverage Ratio is greater than or 0.150
equal to 4.50 to 1
Such fee shall accrue beginning on the Agreement Date and shall be (i) payable
in arrears on each Quarterly Date and on the Maturity Date, fully earned when
due and, subject to Section 11.9 hereof, nonrefundable when paid and (ii)
subject to Section 11.9 hereof, computed on the basis
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of a 360-day year, for the actual number of days elapsed. The commitment fee
shall be subject to reduction or increase, as applicable and as set forth in the
table above, on a quarterly basis according to the performance of the Borrower
as tested by using the Fixed Charge Coverage Ratio as of the end of the most
recent Fiscal Quarter (calculated for the twelve Fiscal Periods preceding the
date of determination). Any such increase or reduction in such fee shall be
effective on the date of receipt by the Lenders of the financial statements
required pursuant to Section 6.1 or 6.2, as applicable, hereof and the
Compliance Certificate required pursuant to Section 6.3 hereof. If such
financial statements and Compliance Certificate are not received by the Lenders
on the date required, the fee payable in respect of the Commitment shall be
determined as if the Fixed Charge Coverage Ratio is less than 2.25 to 1 until
such time as such financial statements and Compliance Certificate are received.
Notwithstanding the above, until such time as the Lenders shall have received
the financial statements required for the third Fiscal Quarter of the Borrower's
1998 Fiscal Year and related Compliance Certificate, the fee payable in respect
of the Commitment shall be determined as if the Fixed Charge Coverage Ratio is
greater than or equal to 3.00 to 1 but less than 3.75 to 1.
(b) Closing Fee. Subject to Section 11.9 hereof, the Borrower agrees to
pay to the Administrative Lender, for the account of each Lender, a closing fee
equal to the product of each Lender's Specified Percentage of the Commitment
multiplied by the following applicable percentage based on the amount of each
Lender's requested portion of the Commitment:
Requested Portion of Commitment Closing Fee
------------------------------- ------------
$30,000,000 or greater 0.125%
Less than $30,000,000 but greater than 0.075%
or equal to $15,000,000
Such fee shall be payable on the Agreement Date, and, subject to Section 11.9
hereof, fully-earned when due and nonrefundable when paid.
(c) Other Fees. Subject to Section 11.9 hereof, the Borrower agrees to pay
to the Administrative Lender, for the account of the Administrative Lender, the
fees provided for in the letter agreement (the "Fee Letter"), dated as of the
Agreement Date, between the Borrower and the Administrative Lender on the dates
and in the amounts specified therein.
Section 2.5 Prepayment.
(a) Voluntary LIBOR Advance Prepayments. Upon two Business Days' prior
telephonic notice (to be promptly followed by written notice) by an Authorized
Signatory to the Administrative Lender, LIBOR Advances may be voluntarily
prepaid but only so long as the Borrower concurrently reimburses the Lenders in
accordance with Section 2.9 hereof. Any notice of prepayment shall be
irrevocable.
(b) Mandatory Prepayment. On or before the date of any reduction of the
Commitment, the Borrower shall prepay applicable outstanding Advances in an
amount necessary
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to reduce the sum of outstanding Advances and Reimbursement Obligations to an
amount less than or equal to the Commitment as so reduced. To the extent
required by the preceding sentence, the Borrower shall first prepay all Base
Rate Advances and shall thereafter prepay LIBOR Advances. To the extent that any
prepayment requires that a LIBOR Advance be repaid on a date other than the last
day of its Interest Period, the Borrower shall reimburse each Lender in
accordance with Section 2.9 hereof. To the extent that outstanding Advances and
Reimbursement Obligations exceed the Commitment after any reduction thereof, the
Borrower shall repay outstanding Advances in an amount equal to any such excess
and all accrued interest attributable to such excess Advances on the date of
such reduction.
(c) Prepayments, Generally. Any voluntary partial prepayment of a Base
Rate Advance shall be in a principal amount which is at least $100,000 and which
is an integral multiple thereof. Any voluntary partial payment of a LIBOR
Advance shall be in a principal amount which is at least $2,000,000 and which is
an integral multiple of $100,000, and to the extent made on a date other than
the last day of its Interest Period, the Borrower shall reimburse each Lender in
accordance with Section 2.9 hereof.
Section 2.6 Reduction of Commitments.
(a) Voluntary Reduction. The Borrower shall have the right, upon not less
than 5 Business Days' notice by an Authorized Signatory to the Administrative
Lender (if telephonic, to be confirmed by telex or in writing on or before the
date of reduction or termination), which shall promptly notify the Lenders, to
terminate or reduce the Commitment, in whole or in part. Each partial reduction
shall be in an aggregate amount which is at least $5,000,000 and which is an
integral multiple of $100,000, and no voluntary reduction in the Commitment
shall cause any LIBOR Advance to be repaid prior to the last day of its Interest
Period unless the Borrower reimburses the Lenders to the extent required
pursuant to Section 2.9 hereof.
(b) Mandatory Reduction. On the Maturity Date, the Commitment shall
automatically be reduced to zero.
(c) General Requirements. Upon any reduction of the Commitment pursuant to
this Section, the Borrower shall immediately make a repayment of applicable
Advances in accordance with Section 2.5(b) hereof. The Borrower shall reimburse
each Lender for any loss or out-of-pocket expense incurred by each Lender in
connection with any such payment, as set forth in Section 2.9 hereof to the
extent applicable. The Borrower shall not have any right to rescind any
termination or reduction. Once reduced, the Commitment may not be increased or
reinstated.
Section 2.7 Non-Receipt of Funds by the Administrative Lender. Unless the
Administrative Lender shall have been notified by a Lender prior to the date of
any proposed Advance (which notice shall be effective upon receipt) that such
Lender does not intend to make the proceeds of such Advance available to the
Administrative Lender, the Administrative Lender may assume that such Lender has
made such proceeds available to the Administrative Lender on such date, and the
Administrative Lender may in reliance upon such assumption (but shall not be
required to) make available to the Borrower a corresponding amount. If such
corresponding
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amount is not in fact made available to the Administrative Lender by such
Lender, the Administrative Lender shall be entitled to recover such amount on
demand from such Lender (or, if such Lender fails to pay such amount forthwith
upon such demand, from the Borrower) together with interest thereon in respect
of each day during the period commencing on the date such amount was available
to the Borrower and ending on (but excluding) the date the Administrative Lender
receives such amount from the Lender, with interest thereon at a per annum rate
equal to the lesser of (i) the Highest Lawful Rate or (ii) the Federal Funds
Rate. No Lender shall be liable for any other Lender's failure to fund an
Advance hereunder.
Section 2.8 Payment of Principal of Advances. The Borrower agrees to pay
the principal amount of the Advances to the Administrative Lender for the
account of the Lenders as follows:
(a) Base Rate Advances. The unpaid principal amount of the Base Rate
Advances shall be due and payable on the Maturity Date.
(b) LIBOR Advances. The principal amount of each LIBOR Advance hereunder
shall be due and payable on its Payment Date, which principal payment may be
made by means of a Refinancing Advance.
(c) Commitment Reduction. On the date of reduction of the Commitment
pursuant to Section 2.6 hereof, including the Maturity Date, the aggregate
amount of the applicable Advances outstanding on such date of reduction in
excess of the Commitment as reduced minus all outstanding Reimbursement
Obligations shall be due and payable, which principal payment may not be made by
means of Refinancing Advances.
(d) Maturity Date. The principal amount of the Advances, all accrued
interest and fees thereon, and all other Obligations related thereto, shall be
due and payable in full on the Maturity Date.
Section 2.9 Reimbursement. Whenever any Lender shall sustain or incur any
losses or reasonable out-of-pocket expenses in connection with (a) failure by
the Borrower to borrow any LIBOR Advance after having given notice of its
intention to borrow in accordance with Section 2.2 hereof (whether by reason of
the Borrower's election not to proceed or the non-fulfillment of any of the
conditions set forth in Article 3 hereof), or (b) any prepayment for any reason
of any LIBOR Advance in whole or in part (including a prepayment pursuant to
Section 9.3(b) hereof), the Borrower agrees to pay to any such Lender, upon its
demand, an amount sufficient to compensate such Lender for all such losses and
out-of-pocket expenses, subject to Section 11.9 hereof. Such Lender's good
faith determination of the amount of such losses or out-of-pocket expenses,
calculated in its usual fashion, absent manifest error, shall be controlling.
Such losses shall include, without limiting the generality of the foregoing,
reasonable expenses incurred by such Lender in connection with the re-employment
of funds prepaid, repaid prior to the end of the applicable Interest Period,
converted and not borrowed, or converted and paid prior to the end of the
applicable Interest Period, as the case may be, but shall not include
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lost profits. Upon request of the Borrower, such Lender shall provide a
certificate setting forth the amount to be paid to it by the Borrower hereunder
and calculations therefor.
Section 2.10 Manner of Payment.
(a) Each payment (including prepayments) by the Borrower of the principal
of or interest on the Advances, fees, and any other amount owed under this
Agreement or any other Loan Document shall be made not later than 12:00 noon
(Dallas, Texas time) on the date specified for payment under this Agreement to
the Administrative Lender at the Administrative Lender's office, in lawful money
of the United States of America constituting immediately available funds.
(b) Subject to the definition of "Interest Period", if any payment under
this Agreement or any other Loan Document shall be specified to be made upon a
day which is not a Business Day, it shall be made on the next succeeding day
which is a Business Day, unless, with respect to a payment due in respect of a
LIBOR Advance, such Business Day falls in another calendar month, in which case
payment shall be made on the preceding Business Day. Any extension or
shortening of time shall in such case be included in computing interest and
fees, if any, in connection with such payment.
(c) The Borrower agrees to pay principal, interest, fees and all other
amounts due under the Loan Documents without deduction for set-off or
counterclaim or any deduction whatsoever.
(d) If some but less than all amounts due from the Borrower are received
by the Administrative Lender, the Administrative Lender shall apply such amounts
in the following order of priority: (i) to the payment of the Administrative
Lender's expenses incurred on behalf of the Lenders then due and payable, if
any; (ii) to the payment of all other fees then due and payable; (iii) to the
payment of interest then due and payable on the Advances; (iv) to the payment of
all other amounts not otherwise referred to in this clause (d) then due and
payable under the Loan Documents; and (v) to the payment of principal then due
and payable on the Advances.
Section 2.11 LIBOR Lending Offices. Each Lender's initial LIBOR Lending
Office is set forth opposite its name in Schedule 1 attached hereto. Each
Lender shall have the right at any time and from time to time to designate a
different office of itself or of any affiliate as such Lender's LIBOR Lending
Office, and to transfer any outstanding LIBOR Advance to such LIBOR Lending
Office. No such designation or transfer shall result in any liability on the
part of the Borrower for increased costs or expenses resulting solely from such
designation or transfer (except any such transfer which is made by a Lender
pursuant to Section 9.2 or 9.3 hereof, or otherwise for the purpose of complying
with Applicable Law). Increased costs for expenses resulting from a change in
law occurring subsequent to any such designation or transfer shall be deemed not
to result solely from such designation or transfer.
Section 2.12 Sharing of Payments. Any Lender obtaining a payment (whether
voluntary or involuntary, due to the exercise of any right of set-off, or
otherwise) on account of its Advances in excess of its Specified Percentage of
all payments made by the Borrower with respect
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to Advances shall purchase from each other Lender such participation in the
Advances made by such other Lender as shall be necessary to cause such
purchasing Lender to share the excess payment pro rata according to Specified
Percentages with each other Lender; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, the purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest. The Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to this
Section, to the fullest extent permitted by law, may exercise all its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Lender were the direct creditor of the Borrower in the amount
of such participation.
Section 2.13 Calculation of LIBOR Rate. The provisions of this Agreement
relating to calculation of the LIBOR Rate are included only for the purpose of
determining the rate of interest or other amounts to be paid hereunder that are
based upon such rate, it being understood that each Lender shall be entitled to
fund and maintain its funding of all or any part of a LIBOR Advance as it sees
fit.
Section 2.14 Booking Loans. Any Lender may make, carry or transfer
Advances at, to or for the account of any of its branch offices or the office of
any affiliate. No such action shall result in any liability on the part of the
Borrower from such action (except any such action which is made by a Lender
pursuant to Section 9.2 or 9.3 hereof, or otherwise for the purpose of complying
with Applicable Law).
Section 2.15 Taxes.
(a) Any and all payments by the Borrower hereunder shall be made, in
accordance with Section 2.10 hereof, free and clear of and without deduction for
any and all present or future taxes, levies, imposts, deductions, charges and
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Lender and the Administrative Lender, taxes imposed on, based upon or
measured by its overall net income, net worth or capital, and franchise taxes,
doing business taxes or minimum taxes imposed on it, (i) by the jurisdiction
under the laws of which such Lender or the Administrative Lender (as the case
may be) is organized and in which it has its applicable lending office or any
political subdivision thereof; (ii) by any other jurisdiction, or any political
subdivision thereof, other than those imposed by reason of (A) an asserted
relation of such jurisdiction to the transactions contemplated by this
Agreement, (B) the activities of the Borrower in such jurisdiction, or (C) the
activities in connection with the transactions contemplated by this Agreement of
a Lender or the Administrative Lender; (iii) if applicable, by reason of failure
by such Lender or the Administrative Lender to comply with the requirements of
paragraph (e) of this Section 2.15; and (iv) which are, in the case of any
Lender, Taxes in the nature of transfer, stamp, recording or documentary taxes
resulting from a transfer (other than as a result of foreclosure) by such
Lender of all or any portion of its interest in this Agreement, the Notes or any
other Loan Documents (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder to any Lender or the Administrative Lender, (x) the
sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to
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additional sums payable under this Section 2.15) such Lender or the
Administrative Lender (as the case may be) receives an amount equal to the sum
it would have received had no such deductions been made, (y) the Borrower shall
make such deductions and (z) the Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
law.
(b) In addition, the Borrower agrees to pay any and all stamp and
documentary taxes and any and all other excise and property taxes, charges and
similar levies (other than Taxes described in clause (iv) of the first sentence
of Section 2.15(a) hereof) that arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender and the Administrative Lender
for the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.15) paid by such Lender or the Administrative Lender (as the case may
be) and all liabilities (including penalties, additions to tax, interest and
reasonable expenses) arising therefrom or with respect thereto whether or not
such Taxes or Other Taxes were correctly or legally asserted (provided that the
Borrower shall be reimbursed for any amounts so paid by the Borrower which may
later be determined to have been incorrectly or illegally asserted and which are
refunded to any Lender), other than penalties, additions to tax, interest and
expenses arising as a result of gross negligence on the part of such Lender or
the Administrative Lender, provided, however, that the Borrower shall have no
obligation to indemnify such Lender or the Administrative Lender unless and
until such Lender or the Administrative Lender shall have delivered to the
Borrower a certificate setting forth in reasonable detail the basis of the
Borrower's obligation to indemnify such Lender or the Administrative Lender
pursuant to this Section 2.15. This indemnification shall be made within 30
days from the date such Lender or the Administrative Lender (as the case may be)
makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Administrative Lender the original or a certified copy of a
receipt evidencing payment thereof. If no Taxes are payable in respect of any
payment hereunder, the Borrower will furnish to the Administrative Lender a
certificate from each appropriate taxing authority, or an opinion of counsel
acceptable to the Administrative Lender, in either case stating that such
payment is exempt from or not subject to Taxes, provided, however, that such
certificate or opinion need only be given if: (i) the Borrower makes any
payment from any account located outside the United States, or (ii) the payment
is made by a payor that is not a United States Person. For purposes of this
Section 2.15 the terms "United States" and "United States Person" shall have the
meanings set forth in Section 7701 of the Code.
(e) Each Lender which is not a United States Person hereby agrees that:
(i) it shall, no later than the Agreement Date (or, in the case of a
Lender which becomes a party hereto pursuant to Section 11.6 hereof after
the Agreement Date, the date
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upon which such Lender becomes a party hereto) deliver to the Borrower
through the Administrative Lender, with a copy to the Administrative
Lender:
(A) if any lending office is located in the United States of
America, two (2) accurate and complete signed originals of
Internal Revenue Service Form 4224 or any successor thereto
("Form 4224"), or
(B) if any lending office is located outside the United States of
America, two (2) accurate and complete signed originals of
Internal Revenue Service Form 1001 or any successor thereto
("Form 1001"),
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of such lending office or lending offices under this Agreement free
from withholding of United States Federal income tax;
(ii) if at any time such Lender changes its lending office or lending
offices or selects an additional lending office it shall, at the same time
or reasonably promptly thereafter but only to the extent the forms
previously delivered by it hereunder are no longer effective, deliver to
the Borrower through the Administrative Lender, with a copy to the
Administrative Lender, in replacement for the forms previously delivered by
it hereunder:
(A) if such changed or additional lending office is located in the
United States of America, two (2) accurate and complete signed
originals of Form 4224; or
(B) otherwise, two (2) accurate and complete signed originals of
Form 1001,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of such changed or additional lending office under this Agreement
free from withholding of United States Federal income tax;
(iii) it shall, before or promptly after the occurrence of any event
(including the passing of time but excluding any event mentioned in clause
(ii) above) requiring a change in the most recent Form 4224 or Form 1001
previously delivered by such Lender and if the delivery of the same be
lawful, deliver to the Borrower through the Administrative Lender with a
copy to the Administrative Lender, two (2) accurate and complete original
signed copies of Form 4224 or Form 1001 in replacement for the forms
previously delivered by such Lender;
(iv) it shall, promptly upon the request of the Borrower to that
effect, deliver to the Borrower such other forms or similar documentation
as may be required from time
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to time by any applicable law, treaty, rule or regulation in order to
establish such Lender's tax status for withholding purposes; and
(v) it shall notify the Borrower within 30 days after any event
(including an amendment to, or a change in any applicable law or regulation
or in the written interpretation thereof by any regulatory authority or any
judicial authority, or by ruling applicable to such Lender of any
governmental authority charged with the interpretation or administration of
any law) shall occur that results in such Lender no longer being capable of
receiving payments without any deduction or withholding of United States
federal income tax.
(f) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.15 shall survive the payment in full of principal and interest
hereunder.
(g) Any Lender claiming any additional amounts payable pursuant to this
Section 2.15 shall use its reasonable best efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
lending office, if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts which may thereafter accrue
and would not, in the reasonable judgment of such Lender, be materially
disadvantageous to such Lender.
(h) Each Lender (and the Administrative Lender with respect to payments to
the Administrative Lender for its own account) agrees that (i) it will take all
reasonable actions by all usual means to maintain all exemptions, if any,
available to it from United States withholding taxes (whether available by
treaty, existing administrative waiver, by virtue of the location of any
Lender's lending office) and (ii) otherwise cooperate with the Borrower to
minimize amounts payable by the Borrower under this Section 2.15; provided,
however, the Lenders and the Administrative Lender shall not be obligated by
reason of this Section 2.15(h) to contest the payment of any Taxes or Other
Taxes or to disclose any information regarding its tax affairs or tax
computations or reorder its tax or other affairs or tax or other planning.
Subject to the foregoing, to the extent the Borrower pays sums pursuant to this
Section 2.15 and the applicable Lender or the Administrative Lender receives a
refund of any or all of such sums, such refund shall be applied to reduce any
amounts then due and owing under this Agreement or, to the extent that no
amounts are due and owing under this Agreement at the time such refunds are
received, the party receiving such refund shall promptly pay over all such
refunded sums to the Borrower, provided that no Default or Event of Default is
in existence at such time.
Section 2.16 Letters of Credit.
(a) The Letter of Credit Facility. The Borrower may request the Issuing
Bank, on the terms and conditions hereinafter set forth, to issue, and the
Issuing Bank shall, if so requested, issue, letters of credit (including the
Existing Letters of Credit, the "Letters of Credit") for the account of the
Borrower or any Subsidiary from time to time on any Business Day from the date
of the initial Advance until the Maturity Date in an aggregate maximum amount
(assuming
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compliance with all conditions to drawing) not to exceed, at any time
outstanding, the lesser of (i) $100,000,000 (the "Letter of Credit Facility") or
(ii) the result of (1) the Commitment minus (2) the aggregate principal amount
of Advances and Reimbursement Obligations then outstanding. No Letter of Credit
shall have an expiration date (including all rights of renewal) later than the
earlier of (i) ten days prior to the Maturity Date or (ii) two years after the
date of issuance thereof. Immediately upon the issuance of each Letter of Credit
(or upon satisfaction of the conditions precedent set forth in Sections 3.1 and
3.2 hereof with respect to the Existing Letters of Credit), the Issuing Bank
shall be deemed to have sold and transferred to each Lender, and each Lender
shall be deemed to have purchased and received from the Issuing Bank, in each
case irrevocably and without any further action by any party, an undivided
interest and participation in such Letter of Credit, each drawing thereunder and
the obligations of the Borrower under this Agreement in respect thereof in an
amount equal to the product of (x) such Lender's Specified Percentage times (y)
the maximum amount available to be drawn under such Letter of Credit (assuming
compliance with all conditions to drawing). Within the limits of the Letter of
Credit Facility, and subject to the limits referred to above, the Borrower may
request the issuance of Letters of Credit under this Section 2.16(a), repay any
Advances resulting from drawings thereunder pursuant to Section 2.16(c) hereof
and request the issuance of additional Letters of Credit under this Section
2.16(a).
(b) Request for Issuance.
(i) Each Letter of Credit shall be issued upon notice, given not later
than 11:00 a.m. (Dallas time) on the third Business Day prior to the date
of the proposed issuance of such Letter of Credit, by the Borrower to the
Issuing Bank. Each Letter of Credit shall be issued upon notice given in
accordance with the terms of any separate agreement between the Borrower
and the Issuing Bank in form and substance reasonably satisfactory to the
Borrower and the Issuing Bank providing for the issuance of Letters of
Credit pursuant to this Agreement and containing terms and conditions not
inconsistent with this Agreement (a "Letter of Credit Agreement"), provided
that if any such terms and conditions are inconsistent with this Agreement,
this Agreement shall control. Each such notice of issuance of a Letter of
Credit from the Borrower (a "Notice of Issuance") shall be by automated
letter of credit procedures of the Issuing Bank, telex, telecopier or
cable, specifying therein, in the case of a Letter of Credit, the requested
(A) date of such issuance (which shall be a Business Day), (B) maximum
amount of such Letter of Credit, (C) expiration date of such Letter of
Credit, (D) name and address of the beneficiary of such Letter of Credit,
(E) form of such Letter of Credit and (F) such other information as shall
be required pursuant to the relevant Letter of Credit Agreement. If
the requested terms of such Letter of Credit are acceptable to the Issuing
Bank in its reasonable discretion, the Issuing Bank will, upon fulfillment
of the applicable conditions set forth in Article 3 hereof, make such
Letter of Credit available to the Borrower at its office referred to in
Section 11.1 hereof or as otherwise agreed with the Borrower in connection
with such issuance.
(ii) The Issuing Bank shall furnish to each Lender after each
Quarterly Date (or each Monthly Date, if requested by any Lender) (A) a
written report summarizing issuance
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and expiration dates of Letters of Credit issued during the preceding
fiscal quarter and drawings during such fiscal quarter under all Letters of
Credit and setting forth each Lender's participation therein and (B) if
requested by any Lender, a copy of each Letter of Credit issued during the
preceding fiscal quarter.
(c) Drawing and Reimbursement. The payment by the Issuing Bank of a draft
drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the Issuing Bank of an Advance, which shall bear
interest at the Prime Rate Basis, in the amount of such draft (but without any
requirement for compliance with the conditions set forth in Article 3 hereof).
In the event that a drawing under any Letter of Credit is not reimbursed by the
Borrower by 11:00 a.m. (Dallas time) on the first Business Day after such
drawing, the Issuing Bank shall promptly notify Administrative Lender and each
Lender. Each Lender shall, on the first Business Day following such
notification, make an Advance (or if as a result of any Debtor Relief Law the
Lenders are prohibited from making an Advance, each Lender shall fund its
participation purchased pursuant to Section 2.16(a) by making such amount
available to the Administrative Lender), which shall bear interest at the Prime
Rate Basis, and shall be used to repay the applicable portion of the Issuing
Bank's Advance with respect to such Letter of Credit, in an amount equal to the
amount of its participation in such drawing for application to reimburse the
Issuing Bank (but without any requirement for compliance with the applicable
conditions set forth in Article 3 hereof) and shall make available to the
Administrative Lender for the account of the Issuing Bank, by deposit at the
Administrative Lender's office, in same day funds, the amount of such Advance
(or such participation). In the event that any Lender fails to make available
to the Administrative Lender for the account of the Issuing Bank the amount of
such Advance (or such participation), the Issuing Bank shall be entitled to
recover such amount on demand from such Lender together with interest thereon at
a rate per annum equal to the lesser of (i) the Highest Lawful Rate or (ii) the
Federal Funds Rate.
(d) Increased Costs. If any change in any law or regulation or in the
interpretation thereof by any court or administrative or governmental authority
charged with the administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit or similar requirement against letters
of credit or guarantees issued by, or assets held by, or deposits in or for the
account of, the Issuing Bank or any Lender or (ii) impose on the Issuing Bank or
any Lender any other condition regarding this Agreement or such Lender or any
Letter of Credit, and the result of any event referred to in the preceding
clause (i) or (ii) shall be to increase the cost to the Issuing Bank of issuing
or maintaining any Letter of Credit or to any Lender of purchasing any
participation therein or making any Advance pursuant to Section 2.16(c) hereof,
then, upon demand by the Issuing Bank or such Lender, the Borrower shall,
subject to Section 11.9 hereof, pay to the Issuing Bank or such Lender, from
time to time as specified by the Issuing Bank or such Lender, additional amounts
that shall be sufficient to compensate the Issuing Bank or such Lender for such
increased cost. A certificate as to the amount of such increased cost,
submitted to the Borrower by the Issuing Bank or such Lender, shall include in
reasonable detail the basis for the demand for additional compensation and shall
be controlling for all purposes, absent manifest error. The obligations of the
Borrower under this Section 2.16(d) shall survive termination of this Agreement.
The Issuing Bank or any Lender claiming any additional compensation under this
Section 2.16(d) shall use reasonable efforts (consistent with legal and
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regulatory restrictions) to reduce or eliminate any such additional compensation
which may thereafter accrue and which efforts would not, in the sole discretion
of the Issuing Bank or such Lender, be otherwise disadvantageous.
(e) Obligations Absolute. The obligations of the Borrower under this
Agreement with respect to any Letter of Credit, any Letter of Credit Agreement
and any other agreement or instrument relating to any Letter of Credit or any
Advance pursuant to Section 2.16(c) hereof shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement, such Letter of Credit Agreement and such other agreement or
instrument under all circumstances, including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of this Agreement, any
other Loan Document, any Letter of Credit Agreement, any Letter of Credit
or any other agreement or instrument relating thereto (collectively, the
"L/C Related Documents");
(ii) (A) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations of the Borrower in respect
of the Letters of Credit or any Advance pursuant to Section 2.16(c) hereof
or (B) any other amendment or waiver of or any consent to departure from
all or any of the L/C Related Documents;
(iii) the existence of any claim, set-off, defense or other right
that the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank, any
Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C Related Documents or any
unrelated transaction;
(iv) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not comply with the terms
of such Letter of Credit, except for any payment made upon the Issuing
Bank's gross negligence or willful misconduct; (vi) any exchange, release
or non-perfection of any collateral, or any release or amendment or waiver
of or consent to departure from any Subsidiary Guaranty or any other
guarantee, for all or any of the Obligations of the Borrower in respect of
the Letters of Credit or any Advance pursuant to Section 2.16(c) hereof; or
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrower or a guarantor, other than the Issuing's Bank
gross negligence or wilful misconduct.
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(f) Compensation for Standby Letters of Credit.
(i) Credit Fee. Subject to Section 11.9 hereof, the Borrower shall
pay to the Administrative Lender for the account of each Lender a fee
(which shall accrue beginning on the Agreement Date and shall be payable
quarterly in arrears on each Quarterly Date and on the Maturity Date) on
the average daily amount available for drawing under all outstanding
Standby Letters of Credit at the following per annum percentages,
applicable in the following situations:
Applicability Percentage
------------- ----------
(a) The Fixed Charge Coverage Ratio is less than 2.25 1.000
to 1
(b) The Fixed Charge Coverage Ratio is greater than 0.875
or equal to 2.25 to 1 but less than 3.00 to 1
(c) The Fixed Charge Coverage Ratio is greater than 0.750
or equal to 3.00 to 1 but less than 3.75 to 1
(d) The Fixed Charge Coverage Ratio is greater than 0.625
or equal to 3.75 to 1 but less than 4.50 to 1
(e) the Fixed Charge Coverage Ratio is greater than or 0.500
equal to 4.50 to 1
The fee payable in respect of the Standby Letters of Credit shall be
subject to reduction or increase, as applicable and as set forth in the
table above, on a quarterly basis according to the performance of the
Borrower as tested by using the Fixed Charge Coverage Ratio as of the end
of the most recent Fiscal Quarter (calculated for the twelve Fiscal Periods
preceding the date of determination). Any such increase or reduction in
such fee shall be effective on the date of receipt by the Lenders of the
financial statements required pursuant to Section 6.1 or 6.2, as
applicable, hereof and the Compliance Certificate required pursuant to
Section 6.3 hereof. If such financial statements and Compliance
Certificate are not received by the date required, the fee payable in
respect of the Letters of Credit shall be determined as if the Fixed Charge
Coverage Ratio is less than 2.25 to 1 until such time as such financial
statements and Compliance Certificate are received. Notwithstanding the
above, until such time as the Lenders shall have received the financial
statements required for the third Fiscal Quarter of the Borrower's 1998
Fiscal Year and related Compliance Certificate, the fee payable in respect
of the Letters of Credit shall be determined as if the Fixed Charge
Coverage Ratio is greater than or equal to 3.00 to 1 but less than 3.75 to
1. Subject to Section 11.9 hereof, such fee shall be computed on the basis
of a 360-day year for the actual number of days elapsed.
(ii) Fronting Fee. Subject to Section 11.9 hereof, the Borrower shall
pay to the Administrative Lender for the account of the Issuing Bank a
fronting fee (which fee shall accrue beginning on the Agreement Date and
shall be payable quarterly in arrears on each
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Quarterly Date and on the Maturity Date) equal to 0.125% per annum of the
average daily amount available for drawing under all outstanding Standby
Letters of Credit, which fronting fee, subject to Section 11.9 hereof,
shall be computed on the basis of a 360-day year for the actual number of
days elapsed.
(g) Compensation for Commercial Letters of Credit.
(i) Credit Fee. Subject to Section 11.9 hereof, the Borrower shall
pay to the Administrative Lender for the pro rata account of each Lender a
credit fee (which shall be payable on the date of issuance of each
Commercial Letter of Credit) equal to 0.25% per annum of the amount of each
such Commercial Letter of Credit.
(ii) Issuance Fee. Subject to Section 11.9 hereof, the Borrower shall
pay to the Administrative Lender for the account of the Issuing Bank an
issuance fee (which shall be payable on the date of issuance of each
Commercial Letter of Credit) in the amount of $250.
(h) L/C Cash Collateral Account.
(i) Upon the occurrence and during the continuance of an Event of
Default and demand by the Administrative Lender pursuant to Section 8.2(c)
hereof (but in the case of an Event of Default pursuant to Section 8.1(e)
or (f) hereof, without any demand or the taking of any other action by the
Administrative Lender or any Lender), the Borrower will promptly pay to the
Administrative Lender in immediately available funds an amount equal to the
maximum amount then available to be drawn under the Letters of Credit then
outstanding. Any amounts so received by the Administrative Lender shall be
deposited by the Administrative Lender in a deposit account maintained by
the Issuing Bank (the "L/C Cash Collateral Account").
(ii) As security for the payment of all Reimbursement Obligations and
for any other Obligations, the Borrower hereby grants, conveys, assigns,
pledges, sets over and transfers to the Administrative Lender (for the
benefit of the Issuing Bank and Lenders), and creates in the Administrative
Lender's favor (for the benefit of the Issuing Bank and Lenders) a Lien in,
all money, instruments and securities at any time held in or acquired in
connection with the L/C Cash Collateral Account, together with all proceeds
thereof. The L/C Cash Collateral Account shall be under the sole dominion
and control of the Administrative Lender and the Borrower shall have no
right to withdraw or to cause the Administrative Lender to withdraw any
funds deposited in the L/C Cash Collateral Account. At any time and from
time to time, upon the Administrative Lender's request, the Borrower
promptly shall execute and deliver any and all such further instruments and
documents, including UCC financing statements, as may be necessary,
appropriate or desirable in the Administrative Lender's judgment to obtain
the full benefits (including perfection and priority) of the security
interest created or intended to be created by this paragraph (ii) and of
the rights and powers herein granted. The Borrower shall not create or
suffer to exist any Lien on any amounts or investments held in the L/C Cash
Collateral
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Account other than the Lien granted under this paragraph (ii) and Liens
arising by operation of Law and not by contract which secure amounts not
yet due and payable.
(iii) The Administrative Lender shall (A) apply any funds in the L/C
Cash Collateral Account on account of Reimbursement Obligations when the
same become due and payable if and to the extent that the Borrower shall
fail directly to pay such Reimbursement Obligations and (B) after the
Maturity Date, apply any proceeds remaining in the L/C Cash Collateral
Account first to pay any unpaid Obligations then outstanding hereunder and
then to refund any remaining amount to the Borrower.
(iv) The Borrower, no more than once in any calendar month, may
direct the Administrative Lender to invest the funds held in the L/C Cash
Collateral Account (so long as the aggregate amount of such funds exceeds
any relevant minimum investment requirement) in (A) direct obligations of
the United States or any agency thereof, or obligations guaranteed by the
United States or any agency thereof and (B) one or more other types of
investments permitted by the Determining Lenders, in each case with such
maturities as the Borrower, with the consent of the Determining Lenders,
may specify, pending application of such funds on account of Reimbursement
Obligations or on account of other Obligations, as the case may be. In the
absence of any such direction from the Borrower, the Administrative Lender
shall invest the funds held in the L/C Cash Collateral Account (so long as
the aggregate amount of such funds exceeds any relevant minimum investment
requirement) in one or more types of investments with the consent of the
Determining Lenders with such maturities as the Borrower, with the consent
of the Determining Lenders, may specify, pending application of such funds
on account of Reimbursement Obligations or on account of other Obligations,
as the case may be. All such investments shall be made in the
Administrative Lender's name for the account of the Lenders, subject to the
ownership interest therein of the Borrower. The Borrower recognizes that
any losses or taxes with respect to such investments shall be borne solely
by the Borrower, and the Borrower agrees to hold the Administrative Lender
and the Lenders harmless from any and all such losses and taxes.
Administrative Lender may liquidate any investment held in the L/C Cash
Collateral Account in order to apply the proceeds of such investment on
account of the Reimbursement Obligations (or on account of any other
Obligation then due and payable, as the case may be) without regard to
whether such investment has matured and without liability for any penalty
or other fee incurred (with respect to which the Borrower hereby agrees to
reimburse the Administrative Lender) as a result of such application.
(v) After the establishment of the L/C Cash Collateral Account
pursuant to Section 2.16(h)(i) hereof, the Borrower shall pay to the
Administrative Lender the fees customarily charged by the Issuing Bank with
respect to the maintenance of accounts similar to the L/C Cash Collateral
Account.
(vi) At such time, if any, that the amount of the L/C Cash Collateral
Account exceeds the aggregate amount of the outstanding Reimbursement
Obligations and any other
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Obligations due and payable, the Administrative Lender shall promptly
distribute to the Borrower funds from the L/C Cash Collateral Account in an
amount equal to such excess.
Section 2.17 Extension of Maturity Date. The Borrower may notify the
Administrative Lender in writing by February 1 of each year while this Agreement
is in effect, commencing February 1, 1999, of its desire to extend the Maturity
Date for an additional 12 months beyond the then present Maturity Date. If such
notice is given by the Borrower, the Administrative Lender, by the immediately
following March 15 of each year while this Agreement is in effect will notify
the Borrower in writing of the Lenders' decision whether to extend the Maturity
Date. Extension of the Maturity Date shall be at the sole option and discretion
of the Lenders, and the decision to extend the Maturity Date shall require the
consent of all Lenders. If either the Borrower or the Administrative Lender
fail to give notice within the time prescribed above, the Maturity Date shall be
the then present Maturity Date. An extension of the Maturity Date pursuant to
this Section 2.17 shall not require any renewal Note or amendment of or
supplement to this Agreement or any other Loan Document unless otherwise
required by the Administrative Lender.
ARTICLE 3
Conditions Precedent
--------------------
Section 3.1 Conditions Precedent to Closing, the Initial Advance and the
Initial Letters of Credit. The obligation of each Lender to sign this Agreement
and to make the initial Advance and the obligation of the Issuing Bank to issue
the initial Letter of Credit are subject to receipt by the Administrative Lender
of each of the following, in form and substance satisfactory to each Lender,
with a copy (except for the Notes) for each Lender:
(a) A loan certificate of the Borrower certifying as to the accuracy of
its representations and warranties in the Loan Documents, certifying that no
Default has occurred, and including a certificate of incumbency with respect to
each Authorized Signatory, and including (i) a copy of the Certificate of
Incorporation of the Borrower, certified to be true, complete and correct by the
secretary of state of its state of incorporation, (ii) a copy of the By-Laws of
the Borrower, as in effect on the Agreement Date, (iii) a copy of the
resolutions of the Board of Directors of the Borrower authorizing it to execute,
deliver and perform this Agreement, the Notes and the other Loan Documents to
which it is a party, and (iv) a copy of a certificate of good standing and a
certificate of existence for its state of incorporation and each state in which
it is qualified to do business;
(b) a certificate of an officer acceptable to the Lenders of each
Subsidiary, certifying as to the incumbency of the officers signing the Loan
Documents to which it is a party, and including (i) a copy of its Certificate of
Incorporation, partnership agreement, trust agreement or other governing
documents, as applicable, certified as true, complete and correct by the
secretary of state of its state of incorporation or creation, (ii) if
applicable, a copy of its By-Laws, as in effect on the Agreement Date, (iii) a
copy of the resolutions or other appropriate authorization
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authorizing it to execute, deliver and perform the Loan Documents to which it is
a party, and (iv) if applicable, a copy of a certificate of good standing and a
certificate of existence for its state of incorporation or creation and each
state in which it is qualified to do business;
(c) a duly executed Note payable to the order of each Lender and in an
amount for each Lender equal to its Specified Percentage of the Commitment,
respectively;
(d) opinion of counsel to the Borrower and each Subsidiary addressed to
the Lenders and in form and substance satisfactory to the Lenders, dated the
Agreement Date, and covering the matters set forth in Sections 4.1(a), (b), (c),
(h), (m), (n) and (p) hereof and such other matters incident to the transactions
contemplated hereby as the Administrative Lender or Special Counsel may
reasonably request;
(e) reimbursement for the Administrative Lender for Special Counsel's
reasonable and customary fees (on an hourly basis) and expenses rendered through
the date hereof;
(f) evidence that all corporate, partnership or trust proceedings of the
Borrower and Subsidiaries taken in connection with the transactions contemplated
by this Agreement and the other Loan Documents shall be reasonably satisfactory
in form and substance to the Lenders and Special Counsel; and the Lenders shall
have received copies of all documents or other evidence which the Administrative
Lender, Special Counsel or any Lender may reasonably request in connection with
such transactions;
(g) any fees required to be paid pursuant to the Fee Letter;
(h) a duly executed and completed Subsidiary Guaranty, dated as of the
Agreement Date;
(i) simultaneously with the making of the initial Advance, executed UCC-3
Termination Statements to be filed in appropriate jurisdictions to terminate all
Liens against assets of the Borrower and its Subsidiaries other than Permitted
Liens;
(j) the fees required to be paid pursuant to Section 2.4(b) hereof;
(k) all amounts owed under the Existing Credit Agreement, whereupon the
Existing Credit Agreement shall automatically terminate and be of no further
force or effect, except that the Existing Letters of Credit shall be deemed to
be Letters of Credit issued pursuant to the Letter of Credit Facility provided
for in this Agreement; and
(l) in form and substance reasonably satisfactory to the Lenders and
Special Counsel, such other documents, instruments and certificates as the
Administrative Lender or any Lender may reasonably require in connection with
the transactions contemplated hereby, including without limitation, a Compliance
Certificate, appropriately completed, the status, organization or authority of
the Borrower or any Subsidiary, the enforceability of the Obligations.
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Section 3.2 Conditions Precedent to All Advances and Letters of Credit.
The obligation of each Lender to make each Advance hereunder and the obligation
of the Issuing Bank to issue each Letter of Credit is subject to fulfillment of
the following conditions immediately prior to or contemporaneously with each
such Advance:
(a) With respect to Advances other than Refinancing Advances and each
issuance of a Letter of Credit, all of the representations and warranties of the
Borrower under this Agreement, which, pursuant to Section 4.2 hereof, are made
at and as of the time of such Advance, shall be true and correct at such time in
all material respects, both before and after giving effect to the application of
the proceeds of the Advance;
(b) The incumbency of the Authorized Signatories shall be as stated in the
certificate of incumbency delivered in the Borrower's loan certificate pursuant
to Section 3.1(a) hereof or as subsequently modified and reflected in a
certificate of incumbency delivered to the Administrative Lender. The Lenders
may, without waiving this condition, consider it fulfilled and a representation
by the Borrower made to such effect if no written notice to the contrary, dated
on or before the date of such Advance, is received by the Administrative Lender
from the Borrower prior to the making of such Advance;
(c) There shall not exist a Default hereunder with respect to (i) Advances
other than Refinancing Advances and (ii) the issuance of each Letter of Credit;
and, with respect to each Advance other than a Refinancing Advance, the
Administrative Lender shall have received written or telephonic certification
thereof by an Authorized Signatory (which certification, if telephonic, shall be
followed promptly by written certification); and
(d) The aggregate Advances and Letters of Credit, after giving effect to
such proposed Advance or Letter of Credit, shall not exceed the maximum
principal amount then permitted to be outstanding hereunder.
ARTICLE 4
Representations and Warranties
------------------------------
Section 4.1 Representations and Warranties. The Borrower hereby
represents and warrants to each Lender as follows:
(a) Organization; Power; Qualification. As of the Agreement Date, the
respective jurisdiction of incorporation or organization and percentage
ownership by the Borrower or another Subsidiary of the Subsidiaries listed on
Schedule 4 are true and correct. Each of the Borrower and its Subsidiaries is a
corporation, partnership, business trust or other legal Person duly organized,
validly existing and in good standing under the laws of its state of
organization. Each of the Borrower and its Subsidiaries has the corporate or
other legal power and authority to own its properties and to carry on its
business as now being and hereafter proposed to be conducted. Each of the
Borrower and its Subsidiaries is duly qualified and in good standing as set
forth in
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Schedule 8 and authorized to do business as set forth in Schedule 9 and no
qualification or authorization is necessary in any other jurisdictions in which
the character of its properties or the nature of its business requires such
qualification or authorization except where the failure to be so qualified or
authorized would not have a Material Adverse Effect.
(b) Authorization. The Borrower has corporate power and has taken all
necessary corporate action to authorize it to borrow hereunder. Each of the
Borrower and its Subsidiaries has corporate or other legal power and has taken
all necessary corporate or other legal action to execute, deliver and perform
the Loan Documents to which it is party in accordance with the terms thereof,
and to consummate the transactions contemplated thereby. Each Loan Document has
been duly executed and delivered by the Borrower or the Subsidiary executing it.
Each of the Loan Documents to which the Borrower and its Subsidiaries are party
is a legal, valid and binding respective obligation of the Borrower or the
Subsidiary, as applicable, enforceable in accordance with its terms, subject, as
to enforcement of remedies, to the following qualifications: (i) equitable
principles generally, and (ii) Debtor Relief Laws (insofar as any such law
relates to the bankruptcy, insolvency or similar event of the Borrower or any
Subsidiary).
(c) Compliance with Other Loan Documents and Contemplated Transactions.
The execution, delivery and performance by the Borrower and its Subsidiaries of
the Loan Documents to which they are respectively a party, and the consummation
of the transactions contemplated thereby, do not and will not (i) require any
consent or approval not already obtained except as shown on Schedule 7, (ii)
violate any Applicable Law, (iii) conflict with, result in a breach of, or
constitute a default under the certificate of incorporation, by-laws,
partnership agreement, trust agreement or other governance document of the
Borrower or any Subsidiary, (iv) conflict with, result in a breach of, or
constitute a default under any Necessary Authorization, indenture, agreement or
other instrument, to which the Borrower or any Subsidiary is a party or by which
they or their respective properties may be bound except as shown on Schedule 7,
or (iv) result in or require the creation or imposition of any Lien upon or with
respect to any property now owned or hereafter acquired by the Borrower or any
Subsidiary, except Permitted Liens.
(d) Business. The Borrower and its Subsidiaries are engaged (i) primarily
in the sale, manufacture, assembly, repair and distribution of computer
hardware, computer accessories and software products, consumer electronic
products, general office business equipment and related telecommunications and
multi-media electronics products and equipment, and other products, training and
services that are related to or complementary to all or any of the foregoing and
(ii) not as a primary line of business, in franchising and operating a finance
company; provided, however, Subsidiaries of the Borrower may engage in
Securitizations permitted by Section 7.4(a)(iii) hereof and activities related
to such Securitizations, provided that any Subsidiary that engages in such
Securitizations shall engage in no other business.
(e) Licenses, etc. All Necessary Authorizations have been duly obtained,
and are in full force and effect without any known conflict with the rights of
others and free from any unduly burdensome restrictions, except such Necessary
Authorizations which in the aggregate would not reasonably be expected to have a
Material Adverse Effect. The Borrower and its Subsidiaries are and will continue
to be in compliance in all material respects with all provisions thereof, except
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such Necessary Authorizations which in the aggregate would not reasonably be
expected to have a Material Adverse Effect. No circumstance exists which might
impair the utility of the Necessary Authorization or the right to renew such
Necessary Authorization the effect of which would have a Material Adverse
Effect. No Necessary Authorization is the subject of any pending or, to the best
of the Borrower's knowledge, threatened challenge, suspension, cancellation or
revocation.
(f) Compliance with Law. The Borrower and its Subsidiaries are in
compliance in all respects with all Applicable Laws, except where the failure to
so comply would not have a Material Adverse Effect, taken as a whole.
(g) Title to Properties. The Borrower and its Restricted Subsidiaries
have good and indefeasible title to, or a valid leasehold interest in, all of
their material assets free of Liens, except Permitted Liens. The Borrower and
its Restricted Subsidiaries have not signed any financing statement or filing,
nor any security agreement authorizing any Person to file any such financing
statement or filing (except relating to Permitted Liens).
(h) Litigation. As of the Agreement Date, except as reflected on Schedule
3 hereto, there is no action, suit or proceeding pending against, or, to the
Borrower's current actual knowledge, threatened against the Borrower, or in any
other manner relating directly and adversely to the Borrower or any of its
Subsidiaries, or any of their properties, in any court or
before any arbitrator of any kind or before or by any governmental body which
could reasonably be expected to result in the payment of $5,000,000 or more by
the Borrower or any of its Subsidiaries (after deducting the amount with respect
to which the Borrower or any Subsidiary is insured). Except as reflected on
Schedule 3 hereto, there is no action, suit or proceeding pending against, or,
to the Borrower's current actual knowledge, threatened against the Borrower, or
in any other manner relating directly and adversely to the Borrower or any of
its Subsidiaries, or any of their properties, in any court or before any
arbitrator of any kind or before or by any governmental body which would
reasonably be expected to have a Material Adverse Effect.
(i) Taxes. All federal, state and other tax returns of the Borrower and
its Subsidiaries required by law to be filed have been duly filed or extensions
have been timely filed, and all federal, state and other taxes, assessments and
other governmental charges or levies upon the Borrower, its Subsidiaries or any
of their properties, income, profits and assets, which are due and payable, have
been paid, unless the same are being diligently contested in good faith by
appropriate proceedings, with adequate reserves established therefor, and no
Lien (other than a Permitted Lien) has attached and no foreclosure, distraint,
sale or similar proceedings have been commenced. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of their
taxes are, in the judgment of the Borrower, adequate.
(j) Financial Statements; Material Liabilities. The Borrower has
furnished or caused to be furnished to the Lenders copies of its June 28, 1997
audited annual financial statements and December 27, 1997 unaudited quarterly
financial statements, which were prepared in good faith and complete in all
material respects and presented fairly in accordance with GAAP on a consolidated
basis the financial position of the Borrower and its Subsidiaries as at such
dates and
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the results of operations for the periods then ended, subject to normal year-end
adjustments in the case of such unaudited quarterly financial statements. As of
the Agreement Date, the Borrower and its Subsidiaries taken as a whole have no
material liabilities, contingent or otherwise, nor material losses, except as
(i) set forth in the June 28, 1997 audited annual financial statements and
December 27, 1997 unaudited quarterly financial statements, and Borrower's Form
10-K and 10-Q for such respective periods, and (ii) shown on Schedule 3 hereto.
(k) No Adverse Change. Since June 28, 1997, there has been no material
adverse change in the business, financial condition or results of operations of
the Borrower and its Restricted Subsidiaries, taken as a whole.
(l) ERISA. None of the Borrower nor any member of its Controlled Group
maintains or contributes to any Plan other than those disclosed to the
Administrative Lender in writing. Each such Plan (other than any Multiemployer
Plan) is in compliance with the applicable provisions of ERISA, the Code, and
any other applicable Federal or state law, rule or regulation, except where the
failure to so comply could not reasonably be expected to have a Material Adverse
Effect. With respect to each Plan (other than any Multiemployer Plan) of the
Borrower and each member of its Controlled Group, all reports required under
ERISA or any other Applicable Law to be filed with any governmental authority,
the failure of which to file could reasonably be expected to have a Material
Adverse Effect, have been duly filed. All such reports are true and correct in
all respects as of the date given, except where any error could not reasonably
be expected to have a Material Adverse Effect. No Plan of the Borrower or any
member of its Controlled Group has been terminated under Section 4041(c) of
ERISA nor has any accumulated funding deficiency (as defined in Section 412(a)
of the Code) been incurred (without regard to any waiver granted under Section
412 of the Code), and no funding waiver from the Internal Revenue Service been
received or requested with respect to any such Plan the result of which could
reasonably be expected to have a Material Adverse Effect. None of the Borrower
or any member of its Controlled Group has failed to make any contribution or pay
any amount due or owing as required under the terms of any such Plan, or by
Section 412 of the Code or Section 302 of ERISA by the due date under Section
412 of the Code and Section 302 of ERISA the result of which could reasonably be
expected to have a Material Adverse Effect. There has been no ERISA Event or any
event requiring disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA with
respect to any Plan or its related trust of the Borrower or any member of its
Controlled Group since the formation of the Borrower which could reasonably be
expected to have a Material Adverse Effect. The present value of the benefit
liabilities, as defined in Title IV of ERISA, of each Plan subject to Title IV
of ERISA (other than a Multiemployer Plan) of the Borrower and each member of
its Controlled Group does not exceed the present value of the assets of each
such Plan as of the most recent valuation date using each such Plan's actuarial
assumptions at such date by an amount which could reasonably be expected to have
a Material Adverse Effect. There are no pending, or to the best of the
Borrower's knowledge threatened, claims, lawsuits or actions (other than routine
claims for benefits in the ordinary course) asserted or instituted against, and
neither the Borrower nor any member of its Controlled Group has knowledge of any
threatened litigation or claims against, the assets of any Plan or its related
trust or against any fiduciary of a Plan with respect to the operation of such
Plan the result of which could reasonably be expected to have a Material Adverse
Effect. None of the Borrower or, to the best of the
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Borrower's knowledge, any member of its Controlled Group, has engaged in any
prohibited transactions, within the meaning of Section 406 of ERISA or Section
4975 of the Code, in connection with any Plan the result of which could
reasonably be expected to have a Material Adverse Effect. None of the Borrower
or any member of its Controlled Group has withdrawn from any Multiemployer Plan,
nor has incurred or reasonably expects to incur (A) any liability under Title IV
of ERISA (other than premiums due under Section 4007 of ERISA to the PBGC), (B)
any withdrawal liability (and no event has occurred which with the giving of
notice under Section 4219 of ERISA would result in such liability) under Section
4201 of ERISA as a result of a complete or partial withdrawal (within the
meaning of Section 4203 or 4205 of ERISA) from a Multiemployer Plan, or (C) any
liability under Section 4062 of ERISA to the PBGC or to a trustee appointed
under Section 4042 of ERISA which, in each such instance or in the aggregate,
could reasonably be expected to have a Material Adverse Effect. None of the
Borrower, any member of its Controlled Group, or any organization to which the
Borrower or any member of its Controlled Group is a successor or parent
corporation within the meaning of ERISA Section 4069(b), has engaged in a
transaction within the meaning of ERISA Section 4069 the result of which could
reasonably be expected to have a Material Adverse Effect. None of the Borrower
or any member of its Controlled Group maintains or has established any Plan
which is a welfare benefit plan within the meaning of Section 3(1) of ERISA and
which provides for continuing benefits or coverage for any participant or any
beneficiary of any participant after such participant's termination of
employment, except as may be required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), which, in each such instance
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect. Each of Borrower and its Controlled Group which maintains a Plan which
is a welfare benefit plan within the meaning of Section 3(1) of ERISA has
complied in all material respects with any applicable notice and continuation
requirements of COBRA and the regulations thereunder, except where the failure
to so comply could not reasonably be expected to have a Material Adverse Effect.
None of the Borrower or any member of its Controlled Group maintains, has
established, or has ever participated in a multiemployer welfare benefit
arrangement within the meaning of Section 3(40)(A) of ERISA.
(m) Compliance with Regulations G, T, U and X. The Borrower is not
engaged principally or as one of its important activities in the business of
extending credit for the purpose of purchasing or carrying any margin stock
within the meaning of Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System, and no part of the proceeds of the Advances will be used
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock. No assets of the Borrower
and its Subsidiaries are margin stock. None of the Borrower and its Subsidiaries
nor any agent acting on their behalf, have taken or will knowingly take any
action which might cause this Agreement or any other Loan Documents to violate
any regulation of the Board of Governors of the Federal Reserve System or to
violate the Securities Exchange Act of 1934, in each case as in effect now or as
the same may hereafter be in effect.
(n) Governmental Regulation. The Borrower and its Subsidiaries are not
required to obtain any Necessary Authorization that has not already been
obtained from, or effect any material filing or registration that has not
already been effected with, any federal, state or local regulatory
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authority in connection with the execution and delivery of this Agreement or any
other Loan Document, or the performance thereof, in accordance with their
respective terms, including any borrowings hereunder.
(o) Absence of Default. The Borrower and its Subsidiaries are in
compliance in all material respects with all of the provisions of their
certificate of incorporation, by-laws, partnership agreement, trust agreement or
other governing document, and no event has occurred or failed to occur, which
has not been remedied or waived, the occurrence or non-occurrence of which
constitutes, or which with the passage of time or giving of notice or both would
constitute, an Event of Default.
(p) Investment Company Act. The Borrower is not required to register
under the provisions of the Investment Company Act of 1940, as amended. Neither
the entering into or performance by the Borrower of this Agreement nor the
issuance of the Notes violates any provision of such act or requires any
consent, approval, or authorization of, or registration with, the Securities and
Exchange Commission or any other governmental or public body of authority
pursuant to any provisions of such act.
(q) Environmental Matters. Neither the Borrower nor any Subsidiary has
any current actual knowledge that any substance deemed hazardous by any
Applicable Environmental Law, has been installed (i) on any real property fee
title to which is now owned by the Borrower or any of its Subsidiaries or (ii)
by Borrower or any of its Subsidiaries on any real property leased by the
Borrower or any of its Subsidiaries, in either case in a manner which does not
comply with Applicable Environmental Laws, the effect of which would reasonably
be expected to result in a Material Adverse Effect. The Borrower and its
Subsidiaries are not in material violation of or subject to any existing,
pending or, to the best of the Borrower's knowledge, threatened investigation or
inquiry by any governmental authority or to any material remedial obligations
under any Applicable Environmental Laws, the effect of which would reasonably be
expected to result in a Material Adverse Effect. The Borrower and its
Subsidiaries have not obtained and are not required to obtain any permits,
licenses or similar authorizations other than certificates of occupancy and
building permits to construct, occupy, operate or use any buildings,
improvements, fixtures, and equipment forming a part of any real property owned
or leased by the Borrower or any Subsidiary by reason of any Applicable
Environmental Laws, the effect of which would reasonably be expected to result
in a Material Adverse Effect. The Borrower and its Subsidiaries undertook, at
the time of acquisition of fee title to any real property, reasonable inquiry
into the previous ownership and uses of such real property consistent with good
commercial or customary practice. The Borrower and its Subsidiaries have taken
reasonable steps to determine, and the Borrower and its Subsidiaries have no
current actual knowledge, that any hazardous substances or solid wastes have
been disposed of or otherwise released (i) on or to the real property fee title
to which is owned by the Borrower or any of its Subsidiaries or (ii) by Borrower
or any of its Subsidiaries on or to any real property leased by Borrower or any
of its Subsidiaries, all within the meaning of the Applicable Environmental
Laws, the effect of which would reasonably be expected to result in a Material
Adverse Effect.
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(r) Certain Fees. No broker's, finder's or other fee or commission will
be payable by the Borrower (other than to the Lenders hereunder) with respect to
the making of the Commitments or the Advances hereunder. The Borrower agrees to
indemnify and hold harmless the Administrative Lender and each Lender from and
against any claims, demand, liability, proceedings, costs or expenses asserted
with respect to or arising in connection with any such fees or commissions.
(s) Necessary Authorizations. No event has occurred which permits (or
with the passage of time would permit) the revocation or termination of any
Necessary Authorization, or which could result in the imposition of any
restriction thereon of such a nature, in either event that would reasonably be
expected to result in a Material Adverse Effect.
(t) Intellectual Property. The Borrower and its Subsidiaries have
collectively obtained, applied for or have the right to use all patents,
trademarks, service marks, trade names, copyrights, licenses and other rights,
free from burdensome restrictions, that the Borrower deems necessary for the
operation of their business as presently conducted and as proposed to be
conducted or except for any failure to obtain, apply for or have the right to
use which would not reasonably be expected to result in a Material Adverse
Effect. Except as disclosed to the Lenders in writing on or prior to the
Agreement Date, nothing has come to the current actual knowledge of the Borrower
or any of its Subsidiaries to the effect that (i) any process, method, part or
other material presently contemplated to be employed by the Borrower or any
Subsidiary may infringe any valid and/or enforceable patent, trademark, service
mark, trade name, copyright and/or license or other right owned by any other
Person, the effect of which would reasonably be expected to result in a Material
Adverse Effect, or (ii) there is pending or overtly threatened any claim or
litigation against or affecting the Borrower or any Subsidiary contesting its
right to sell or use any such process, method, part or other material, which if
determined adversely to the Borrower or any Subsidiary would reasonably be
expected have a Material Adverse Effect.
(u) Disclosure. As of the Agreement Date, neither this Agreement nor any
other document, certificate or statement which has been furnished to any Lender
by or on behalf of the Borrower or any Subsidiary in connection herewith
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statement contained herein and therein not
misleading at the time it was furnished. As of the Agreement Date, there is no
fact known to the Borrower and not known to the public generally that could
reasonably be expected to materially adversely affect the assets or business of
the Borrower and its Subsidiaries, or in the future could reasonably be expected
(so far as the Borrower can now reasonably foresee) to have a Material Adverse
Effect, which has not been set forth in this Agreement or in the documents,
certificates and statements furnished to the Lenders by or on behalf of the
Borrower prior to the date hereof in connection with the transaction
contemplated hereby. All written information furnished after the Agreement Date
by the Borrower and its Subsidiaries to the Administrative Lender and the
Lenders in connection with this Agreement and the other Loan Documents and the
transactions contemplated hereby and thereby will be true and accurate in every
material respect, or, in the case of projections, based on reasonable estimates,
on the date as of which such information is stated or certified.
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(v) Solvency. The Borrower is, and Borrower and its Subsidiaries on a
consolidated basis are, Solvent.
(w) Common Enterprise. The Borrower and its Subsidiaries are engaged in
the businesses set forth in Section 4.1(d) hereof. These operations require
financing on a basis such that the credit supplied can be made available from
time to time to the Borrower and various of the Subsidiaries, as required for
the continued successful operation of the Borrower and its Subsidiaries as a
whole. The Borrower has requested Lenders to make credit available hereunder
primarily for the purposes of financing the operations of the Borrower and its
Subsidiaries. The Borrower and its Subsidiaries expect to derive benefit (and
the boards of directors or other governing body of the Borrower and its
Subsidiaries have determined that the Subsidiaries may reasonably be expected to
derive benefit), directly or indirectly, from the credit extended by Lenders
hereunder, both in their separate capacities and as members of the group
of companies, since the successful operation and condition of the Borrower and
its Subsidiaries is dependent on the continued successful performance of the
functions of the group as a whole.
Section 4.2 Survival of Representations and Warranties, etc. All
representations and warranties made under this Agreement and the other Loan
Documents shall be deemed to be made at and as of the Agreement Date and at and
as of the date of each Advance, and each shall be true and correct when made,
except to the extent (a) previously fulfilled in accordance with the terms
hereof, (b) applicable to a specific date or otherwise subsequently
inapplicable, or (c) previously waived in writing by the Determining Lenders
with respect to any particular factual circumstance. All such representations
and warranties shall survive, and not be waived by, the execution hereof by any
Lender, any investigation or inquiry by any Lender, or by the making of any
Advance under this Agreement.
ARTICLE 5
General Covenants
-----------------
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 5.1 Preservation of Existence and Similar Matters. The Borrower
shall, and shall cause each Subsidiary to:
(a) preserve and maintain, or timely obtain and thereafter preserve and
maintain, its existence, rights, franchises, licenses, authorizations, consents,
privileges and all other Necessary Authorizations from federal, state and local
governmental bodies and any tribunal (regulatory or otherwise), the loss of
which would not reasonably be expected to have a Material Adverse Effect; and
(b) qualify and remain qualified and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or
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authorization, unless the failure to do so would not reasonably be expected to
have a Material Adverse Effect.
Section 5.2 Business; Compliance with Applicable Law. The Borrower and
its Subsidiaries shall (a) engage primarily in the businesses set forth in
Section 4.1(d) hereof, and (b) comply in all material respects with the
requirements of all Applicable Law unless the failure to do so would not
reasonably be expected to have a Material Adverse Effect.
Section 5.3 Maintenance of Properties. The Borrower shall, and shall
cause each Subsidiary to, maintain or cause to be maintained all its properties
(whether owned or held under lease) in reasonably good repair, working order and
condition, taken as a whole, and from time to time make or cause to be made all
appropriate (in the reasonable judgment of the Borrower) repairs, renewals,
replacements, additions, betterments and improvements thereto.
Section 5.4 Accounting Methods and Financial Records. The Borrower
shall, and shall cause each Subsidiary to, maintain a system of accounting
established and administered in accordance with GAAP, keep adequate records and
books of account in which complete entries will be made and all transactions
reflected in accordance with GAAP, and keep accurate and complete records of its
respective assets. The Borrower and each of its Subsidiaries shall maintain a
fiscal year ending on the last Saturday of June.
Section 5.5 Insurance. The Borrower shall, and shall cause each
Subsidiary to, maintain insurance from responsible companies in such amounts and
against such risks as shall be customary and usual in the industry for companies
of similar size and capability.
Section 5.6 Payment of Taxes and Claims. The Borrower shall, and shall
cause each Subsidiary to, pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or its income or properties prior
to the date on which penalties attach thereto, and all lawful material claims
for labor, materials and supplies which, if unpaid, might become a Lien upon any
of its properties; except that no such tax, assessment, charge, levy or claim
need be paid which is being diligently contested in good faith by appropriate
proceedings and for which adequate reserves shall have been set aside on the
appropriate books, but only so long as no Lien (other than a Permitted Lien)
shall attach with respect thereto and no foreclosure, distraint, sale or similar
proceedings shall have been commenced. The Borrower shall, and shall cause each
Subsidiary to, timely file all information returns (or extensions of such filing
deadlines) required by federal, state or local tax authorities.
Section 5.7 Visits and Inspections. The Borrower shall, and shall cause
each Subsidiary to, promptly permit representatives of the Administrative Lender
or any Lender from time to time after notice by the Administrative Lender or any
Lender no later than the previous Business Day to (a) visit and inspect the
properties of the Borrower and any Subsidiary as often as the Administrative
Lender or any Lender shall reasonably deem advisable, (b) audit, inspect and
make extracts from and copies of the Borrower's and each Subsidiary's books and
records, and (c) discuss with the Borrower's and each Subsidiary's directors,
officers, employees and auditors its business, assets, liabilities, financial
positions, results of operations and business prospects;
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provided, however, except as otherwise provided in the last sentence of this
Section 5.7, the Borrower's obligation to reimburse the Administrative Lender or
any Lender for expenses related to such inspections and audits shall not exceed
in the aggregate $10,000 per year. Prior to the occurrence of an Event of
Default, all such visits and inspections shall be conducted during normal
business hours. Following the occurrence and during the continuance of an Event
of Default, (i) such visits and inspections shall be conducted at any time
requested by the Administrative Lender or any Lender without any requirement for
advance notice and (ii) there shall be no limitation on the Borrower's liability
for the payment of reasonable expenses related to inspections and audits
performed by the Administrative Lender or any Lender.
Section 5.8 Payment of Indebtedness. Subject to Section 5.6 hereof, the
Borrower shall, and shall cause each Subsidiary to, pay its Indebtedness when
and as the same becomes due, other than amounts (other than the Obligations)
duly and diligently disputed in good faith.
Section 5.9 Use of Proceeds. The Borrower shall use the proceeds of
Advances for general corporate purposes, including, without limitation, (i)
refinancing all outstanding debt (other than in respect of the Existing Letters
of Credit) under the Existing Credit Agreement, (ii) working capital advances,
(iii) capital expenditures, (iv) acquisitions, (v) funding reimbursements of
letter of credit drawings, and (vi) repurchasing or redeeming the Senior
Subordinated Notes in part or in full.
SECTION 5.10 INDEMNITY.
(a) THE BORROWER AGREES TO DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS
THE ADMINISTRATIVE LENDER, EACH LENDER, EACH OF THEIR RESPECTIVE AFFILIATES, AND
EACH OF THEIR RESPECTIVE (INCLUDING SUCH AFFILIATES) OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS, SHAREHOLDERS AND CONSULTANTS (INCLUDING, WITHOUT
LIMITATION, THOSE RETAINED IN CONNECTION WITH THE SATISFACTION OR ATTEMPTED
SATISFACTION OF ANY OF THE CONDITIONS SET FORTH HEREIN) OF EACH OF THE FOREGOING
(COLLECTIVELY, "INDEMNITEES") FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS,
REASONABLE COSTS, REASONABLE EXPENSES AND REASONABLE DISBURSEMENTS OF ANY KIND
OR NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL FOR SUCH INDEMNITEES IN CONNECTION WITH ANY
INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING, WHETHER OR NOT SUCH
INDEMNITEES SHALL BE DESIGNATED A PARTY THERETO), IMPOSED ON, INCURRED BY, OR
ASSERTED AGAINST SUCH INDEMNITEES (WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL AND
WHETHER BASED ON ANY FEDERAL, STATE, OR LOCAL LAWS AND REGULATIONS, UNDER COMMON
LAW OR AT EQUITABLE CAUSE, OR ON CONTRACT, TORT OR OTHERWISE, ARISING FROM OR
CONNECTED WITH THE PAST, PRESENT OR FUTURE OPERATIONS OF THE BORROWER OR ANY
SUBSIDIARY OR THEIR RESPECTIVE PREDECESSORS IN INTEREST, OR THE PAST, PRESENT OR
FUTURE
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ENVIRONMENTAL CONDITION OF PROPERTY OF THE BORROWER OR ANY SUBSIDIARY), IN ANY
MANNER RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE LOAN DOCUMENTS, OR ANY
ACT, EVENT OR TRANSACTION OR ALLEGED ACT, EVENT OR TRANSACTION RELATING OR
ATTENDANT THERETO, THE MANAGEMENT OF THE ADVANCES, INCLUDING IN CONNECTION WITH,
OR AS A RESULT, IN WHOLE OR IN PART, OF ANY NEGLIGENCE OF ADMINISTRATIVE LENDER
OR ANY LENDER (OTHER THAN THOSE MATTERS RAISED EXCLUSIVELY BY A PARTICIPANT
AGAINST THE ADMINISTRATIVE LENDER OR ANY LENDER AND NOT THE BORROWER), OR THE
USE OR INTENDED USE OF THE PROCEEDS OF THE ADVANCES HEREUNDER, OR IN CONNECTION
WITH ANY INVESTIGATION OF ANY POTENTIAL MATTER COVERED HEREBY, BUT EXCLUDING (i)
ANY CLAIM OR LIABILITY THAT ARISES AS THE RESULT OF THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF ANY INDEMNITEE, AS FINALLY JUDICIALLY DETERMINED BY A
COURT OF COMPETENT JURISDICTION, (ii) MATTERS RAISED BY ONE LENDER AGAINST
ANOTHER LENDER OR BY ANY SHAREHOLDERS OF A LENDER AGAINST A LENDER OR ITS
MANAGEMENT AND (iii) THE BREACH BY ANY LENDER OF ITS OBLIGATIONS UNDER THIS
AGREEMENT, AS FINALLY JUDICIALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION
(COLLECTIVELY, "INDEMNIFIED MATTERS"). TO THE EXTENT THAT ANY INDEMNIFIED MATTER
INVOLVES ONE OR MORE INDEMNITEES, SUCH INDEMNITEES SHALL USE THE SAME LEGAL
COUNSEL UNLESS ANY INDEMNITEE IN ITS REASONABLE DISCRETION DETERMINES THAT
CONFLICTS EXIST OR MAY ARISE IN CONNECTION WITH SUCH REPRESENTATION.
(b) IN ADDITION, THE BORROWER SHALL PERIODICALLY, UPON REQUEST, REIMBURSE
EACH INDEMNITEE FOR ITS REASONABLE LEGAL AND OTHER ACTUAL REASONABLE EXPENSES
(INCLUDING THE REASONABLE COST OF ANY INVESTIGATION AND PREPARATION) INCURRED IN
CONNECTION WITH ANY INDEMNIFIED MATTER. THE REIMBURSEMENT, INDEMNITY AND
CONTRIBUTION OBLIGATIONS UNDER THIS SECTION SHALL BE IN ADDITION TO ANY
LIABILITY WHICH THE BORROWER MAY OTHERWISE HAVE, SHALL EXTEND UPON THE SAME
TERMS AND CONDITIONS TO EACH INDEMNITEE, AND SHALL BE BINDING UPON AND INURE TO
THE BENEFIT OF ANY SUCCESSORS, ASSIGNS, HEIRS AND PERSONAL REPRESENTATIVES OF
THE BORROWER, THE ADMINISTRATIVE LENDER, THE LENDERS AND ALL OTHER INDEMNITEES.
THIS SECTION SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT AND PAYMENT OF THE
OBLIGATIONS.
Section 5.11 Environmental Law Compliance. The use which the Borrower or
any Subsidiary intends to make of any real property which is owned or leased by
it will not result in the disposal or other release of any hazardous substance
or solid waste on or to such real property which is in violation of Applicable
Environmental Laws. As used herein, the terms "hazardous substance" and
"release" as used in this Section shall have the meanings specified in CERCLA
(as defined in the definition of Applicable Environmental Laws), and the terms
"solid waste" and
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"disposal" shall have the meanings specified in RCRA (as defined in the
definition of Applicable Environmental Laws); provided, however, that if CERCLA
or RCRA is amended so as to broaden or lessen the meaning of any term defined
thereby, such broader or lesser meaning shall apply subsequent to the effective
date of such amendment; and provided further, to the extent that any other law
applicable to the Borrower, any Subsidiary or any of their properties
establishes a meaning for "hazardous substance," "release," "solid waste," or
"disposal" which is broader or lesser than that specified in either CERCLA or
RCRA, such broader or lesser meaning shall apply. THE BORROWER AGREES TO
INDEMNIFY AND HOLD THE ADMINISTRATIVE LENDER AND EACH LENDER HARMLESS FROM AND
AGAINST, AND TO REIMBURSE THEM WITH RESPECT TO, ANY AND ALL CLAIMS, DEMANDS,
CAUSES OF ACTION, LOSS, DAMAGE, LIABILITIES, REASONABLE COSTS AND REASONABLE
EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES AND COURTS COSTS) OF ANY KIND OR
CHARACTER, KNOWN OR UNKNOWN, FIXED OR CONTINGENT, ASSERTED AGAINST OR INCURRED
BY ANY OF THEM AT ANY TIME AND FROM TIME TO TIME BY REASON OF OR ARISING OUT OF
(a) THE FAILURE OF THE BORROWER OR ANY SUBSIDIARY TO PERFORM ANY OF THEIR
OBLIGATIONS HEREUNDER REGARDING ASBESTOS OR APPLICABLE ENVIRONMENTAL LAWS, (b)
ANY VIOLATION ON OR BEFORE THE RELEASE DATE OF ANY APPLICABLE ENVIRONMENTAL LAW
IN EFFECT ON OR BEFORE THE RELEASE DATE, AND (c) ANY ACT, OMISSION, EVENT OR
CIRCUMSTANCE EXISTING OR OCCURRING ON OR PRIOR TO THE RELEASE DATE (INCLUDING
WITHOUT LIMITATION THE PRESENCE ON SUCH REAL PROPERTY OR RELEASE FROM SUCH REAL
PROPERTY OF HAZARDOUS SUBSTANCES OR SOLID WASTES DISPOSED OF OR OTHERWISE
RELEASED ON OR PRIOR TO THE RELEASE DATE), RESULTING FROM OR IN CONNECTION WITH
THE OWNERSHIP OF THE REAL PROPERTY, REGARDLESS OF WHETHER THE ACT, OMISSION,
EVENT OR CIRCUMSTANCE CONSTITUTED A VIOLATION OF ANY APPLICABLE ENVIRONMENTAL
LAW AT THE TIME OF ITS EXISTENCE OR OCCURRENCE, INCLUDING IN CONNECTION WITH, OR
AS A RESULT OF, IN WHOLE OR IN PART, OF ANY NEGLIGENCE OF ADMINISTRATIVE LENDER
OR ANY LENDER; PROVIDED THAT, THE BORROWER SHALL NOT BE UNDER ANY OBLIGATION TO
INDEMNIFY THE ADMINISTRATIVE LENDER OR ANY LENDER TO THE EXTENT THAT ANY SUCH
LIABILITY ARISES AS THE RESULT OF THE NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
PERSON, AS FINALLY JUDICIALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION.
THE PROVISIONS OF THIS PARAGRAPH SHALL (i) SURVIVE THE RELEASE DATE AND SHALL
CONTINUE THEREAFTER IN FULL FORCE AND EFFECT AND (ii) CONTROL OVER THE
PROVISIONS OF SECTION 5.10 HEREOF TO THE EXTENT OF ANY CONFLICT RELATED TO
ENVIRONMENTAL MATTERS.
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ARTICLE 6
Information Covenants
---------------------
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled), the Borrower shall furnish or cause to be furnished to
each Lender, subject to such Lender having executed a Confidentiality Agreement:
Section 6.1 Quarterly Financial Statements and Information. Within 45
days after the end of each Fiscal Quarter (except the last Fiscal Quarter) of
each Fiscal Year, a consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such Fiscal Quarter and the related consolidated
statement of operations for such Fiscal Quarter and for the elapsed portion of
the year ended with the last day of such Fiscal Quarter, and a consolidated
statement of cash flows for the elapsed portion of the year ended with the last
day of such Fiscal Quarter, all of which shall be certified by the president or
chief financial officer of the Borrower, to be, in his or her opinion acting
solely in his or her capacity as an officer of the Borrower, complete and
correct in all material respects and to present fairly, in accordance with GAAP,
the financial position and results of operations of the Borrower and its
Subsidiaries as at the end of and for such Fiscal Quarter, and for the elapsed
portion of the year ended with the last day of such Fiscal Quarter, subject only
to normal year-end adjustments.
Section 6.2 Annual Financial Statements and Information; Certificate of
No Default.
(a) Within 90 days after the end of each Fiscal Year, a copy of (i) the
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries, as of the end of the current and prior Fiscal Years and (ii) the
consolidated and consolidating statements of operations and consolidated
statements of stockholders' equity, and consolidated statements of changes in
cash flows as of and through the end of such Fiscal Year, all of which are
prepared in accordance with GAAP, and certified by independent certified public
accountants acceptable to the Lenders, whose opinion shall be in scope and
substance in accordance with generally accepted auditing standards and shall be
unqualified.
(b) As soon as available, but in any event within 90 days following the
end of each Fiscal Year, a copy of the annual consolidated operating budget of
the Borrower and its Subsidiaries for the succeeding Fiscal Year.
Section 6.3 Compliance Certificate. At the time financial statements are
furnished pursuant to Sections 6.1 and 6.2 hereof, the Compliance Certificate,
completed as provided therein.
Section 6.4 Copies of Other Reports and Notices.
(a) Promptly upon their becoming available, a copy of (i) all material
reports or letters submitted to the Borrower or any Subsidiary by accountants in
connection with any annual,
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interim or special audit, including without limitation any report prepared in
connection with the annual audit referred to in Section 6.2 hereof, and, if
requested by the Administrative Lender, any other comment letter submitted to
management in connection with any such audit, (ii) each financial statement,
report, notice or proxy statement sent by the Borrower or any Subsidiary to
stockholders generally, (iii) each regular, periodic or other report and any
registration statement (other than statements on Form S-8) or prospectus (or
material written communication in respect of any thereof, except for those
related to registration statements on Form S-8) filed by the Borrower or any
Subsidiary with any securities exchange, with the Securities and Exchange
Commission or any successor agency, and (iv) all press releases concerning
material financial aspects of the Borrower or any Subsidiary;
(b) Promptly upon becoming aware that (i) the holder(s) of any note(s) or
other evidence of indebtedness or other security of the Borrower or any
Subsidiary in excess of $10,000,000 in the aggregate has given notice or taken
any action with respect to a breach, failure to perform, claimed default or
event of default thereunder, (ii) any party to any Capitalized Lease Obligation
in excess of $10,000,000 or any party to any obligations in respect of Operating
Leases, the termination or default with respect to which could reasonably be
expected to have a Material Adverse Effect, has given notice or taken any action
with respect to a breach, failure to perform, claimed default or event of
default thereunder, (iii) any occurrence or non-occurrence of any event which
constitutes or which with the passage of time or giving of notice or both could
constitute a breach by the Borrower or any Subsidiary under any agreement or
instrument other than this Agreement to which the Borrower or any Subsidiary is
a party or by which any of their properties may be bound, if any such event
could reasonably be expected to have a Material Adverse Effect, or (iv) any
event, circumstance or condition which could reasonably be expected to be
classified as a Material Adverse Effect, a written notice specifying the details
thereof (or the nature of any claimed default or event of default) and what
action is being taken or is proposed to be taken with respect thereto;
(c) Promptly upon receipt thereof, information with respect to and copies
of any notices received from any federal, state or local regulatory agencies or
any tribunal relating to any order, ruling, law, information or policy that
relates to a breach of or noncompliance with any Law, or might result in the
payment of money by the Borrower or any Subsidiary in an amount of $10,000,000
or more in the aggregate, or otherwise have a Material Adverse Effect, or result
in the loss or suspension of any Necessary Authorization; and
(d) From time to time and promptly upon each request, such data,
certificates, reports, statements, documents or further information regarding
the financial position, projections, results of operations or business of the
Borrower and its Subsidiaries, as the Administrative Lender or any Lender may
reasonably request.
Section 6.5 Notice of Litigation, Default and Other Matters. Prompt
notice of the following events after the Borrower has knowledge or notice
thereof:
(a) The commencement of all proceedings and investigations by or before
any governmental body, and all actions and proceedings in any court or before
any arbitrator involving
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claims for damages (including punitive damages) which could reasonably be
expected to result in the payment of $10,000,000 or more by the Borrower or any
of its Subsidiaries (after deducting the amount with respect to which the
Borrower or any Subsidiary is insured), against or in any other way relating
directly to the Borrower, any Subsidiary, or any of their properties or
businesses;
(b) Promptly upon the happening of any condition or event of which the
Borrower has current actual knowledge which constitutes a Default, a written
notice specifying the nature and period of existence thereof and what action is
being taken or is proposed to be taken with respect thereto; and
(c) Any material adverse change with respect to the business, financial
position, results of operations or prospects of the Borrower or any Subsidiary,
other than changes in the ordinary course of business which have not had and are
not likely to have a Material Adverse Effect.
Section 6.6 ERISA Reporting Requirements.
(a) Promptly and in any event (i) within 30 days after the Borrower or any
member of its Controlled Group has current actual knowledge that any ERISA Event
described in clause (a) of the definition of ERISA Event or any event described
in Section 4063(a) of ERISA with respect to any Plan of the Borrower or any
member of its Controlled Group has occurred, and (ii) within 10 days after the
Borrower or any member of its Controlled Group has current actual knowledge that
any other ERISA Event with respect to any Plan of the Borrower or any member of
its Controlled Group has occurred or of the filing of a request for a minimum
funding waiver under Section 412 of the Code with respect to any Plan of the
Borrower or any member of its Controlled Group, a written notice describing such
event and describing what action is being taken or is proposed to be taken with
respect thereto, together with a copy of any notice of such event that is given
to the PBGC;
(b) Promptly and in any event within three Business Days after receipt
thereof by the Borrower or any member of its Controlled Group from the PBGC,
copies of each notice received by the Borrower or any member of its Controlled
Group of the PBGC's intention to terminate any Plan or to have a trustee
appointed to administer any Plan;
(c) Promptly upon the request of the Administrative Lender, copies of each
annual report (including Schedule B thereto, if applicable) with respect to each
Plan of which Borrower or any member of its Controlled Group is the "plan
sponsor";
(d) Promptly, and in any event within 10 Business Days after receipt
thereof, a copy of any correspondence the Borrower or any member of its
Controlled Group receives from the Plan Sponsor (as defined by Section
4001(a)(10) of ERISA) of any Plan concerning potential withdrawal liability
pursuant to Section 4219 or 4202 of ERISA which could reasonably be expected to
have a Material Adverse Effect, and a statement from the chief financial officer
of the Borrower or such member of its Controlled Group setting forth details as
to the events giving rise
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to such potential withdrawal liability and the action which the Borrower or such
member of its Controlled Group is taking or proposes to take with respect
thereto;
(e) Notification within 30 days after any increases in the benefits of any
existing Plan which is not a Multiemployer Plan, or the establishment of any new
Plans, or the commencement of contributions to any Plan to which the Borrower or
any member of its Controlled Group was not previously contributing which could
in any such situations reasonably be expected to have a Material Adverse Effect;
(f) Notification within three Business Days after the Borrower or any
member of its Controlled Group knows that the Borrower or any such member of its
Controlled Group has filed or intends to file a notice of intent to terminate
any Plan under a distress termination within the meaning of Section 4041(c) of
ERISA and a copy of such notice; and
(g) Within three Business Days after receipt of written notice of
commencement thereof, notice of all actions, suits and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting the Borrower or any member of
its Controlled Group with respect to any Plan, except those which, in the
aggregate, if adversely determined could not reasonably be expected to have a
Material Adverse Effect.
ARTICLE 7
Negative Covenants
------------------
So long as any of the Obligations are outstanding and unpaid or any
Commitment is outstanding (whether or not the conditions to borrowing have been
or can be fulfilled):
Section 7.1 Indebtedness. The Borrower shall not, and shall not permit
any Restricted Subsidiary to, create, assume, incur or otherwise become or
remain obligated in respect of, or permit to be outstanding, or suffer to exist
any Indebtedness, except:
(a) Indebtedness under the Loan Documents;
(b) Accounts payable and accrued liabilities incurred in the ordinary
course of business, including but not limited to advances to customers and floor
plan financing arrangements;
(c) Guaranties to the extent permitted under Section 7.5 hereof;
(d) Indebtedness for the purpose of acquiring and/or constructing new
store locations; Indebtedness secured by Existing Store Locations which does not
exceed the original cost of acquiring and/or constructing such Existing Store
Locations; refinancings (but not increases) of such Indebtedness; and
Capitalized Lease Obligations;
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(e) Indebtedness of (i) a Restricted Subsidiary to the Borrower, (ii) a
Restricted Subsidiary to a Restricted Subsidiary or (iii) the Borrower to a
Restricted Subsidiary;
(f) Indebtedness existing on the Agreement Date which is described on
Schedule 6 hereto, including renewals and refinancings (but no increases)
thereof;
(g) Indebtedness in respect of deferred income Taxes, deferred revenues,
commitments, contingencies and reserves, in each case to the extent set forth on
the balance sheet of the Borrower and its Subsidiaries prepared in accordance
with GAAP;
(h) Securitization Indebtedness incurred in respect of Securitizations
permitted pursuant to Section 7.4(a)(iii) hereof and any repurchase obligations
related to such Securitizations;
(i) Indebtedness under the Senior Subordinated Notes and other
Subordinated Debt (whether or not as an immediate refinancing or replacement of
the Senior Subordinated Notes); provided that the aggregate principal amount of
such Indebtedness under this clause (i) shall not exceed $110,000,000
outstanding at any time; and
(j) Indebtedness not otherwise permitted pursuant to clauses (a) through
(i) above, not to exceed $300,000,000 in aggregate principal amount outstanding
at any time; provided, however, that (A) no more than $100,000,000 in aggregate
principal amount of such Indebtedness may be Senior Debt and (B) no more than
$50,000,000 in aggregate principal amount of such Senior Debt shall have an
original maturity date earlier than 180 days after the Maturity Date.
Section 7.2 Liens. The Borrower shall not, and shall not permit any
Restricted Subsidiary to, create, assume, incur, permit or suffer to exist,
directly or indirectly, any Lien on any of its assets, whether now owned or
hereafter acquired, except Permitted Liens. The Borrower shall not, and shall
not permit any Restricted Subsidiary to, become subject to any Negative Pledge
other than a Negative Pledge in respect of Indebtedness permitted by Sections
7.1(b), (d) or (h) hereof; provided that any such permitted Negative Pledge
shall relate only to the assets purchased or acquired or which are the subject
of a Securitization permitted by Section 7.4(a)(iii) hereof.
Section 7.3 Investments. The Borrower shall not, and shall not permit
any Restricted Subsidiary to, make any Investment, except that the Borrower may
purchase or otherwise acquire and own:
(a) Cash and Cash Equivalents;
(b) Investments in, or transfers of any assets to, one or more
Subsidiaries that (i)(A) are or immediately become subject to the provisions
hereof, and (B) are or immediately become party to the Subsidiary Guaranty, (ii)
have been formed for the sole purpose of engaging in a Securitization permitted
by Section 7.4(a)(iii) hereof, or (iii) is an Unrestricted Subsidiary; provided,
however, the aggregate amount of Investments in Unrestricted Subsidiaries
pursuant to this clause (iii) (calculated on a net basis by taking into account
any proceeds received by the
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Borrower or any Restricted Subsidiary on a liquidation or repayment of any such
Investments) shall not exceed, together with other Investments pursuant to
Section 7.3(f) hereof, 15% of Net Worth at any time;
(c) Accounts receivable that arise in the ordinary course of business and
are payable on standard terms;
(d) Investments in existence on the Agreement Date which are described on
Schedule 5 hereto;
(e) Investments in the form of loans to directors, officers and employees
and any Guaranties thereof to the extent permitted pursuant to Sections 7.5 and
7.6 hereof;
(f) Other Investments (calculated on a net basis by taking into account
any proceeds received by the Borrower or any Restricted Subsidiary on a
liquidation or replacement of any such Investment) not to exceed, together with
Investments in Unrestricted Subsidiaries pursuant to Section 7.3(b)(iii) hereof,
15% of Net Worth at any time; and
(g) Investments in residual interests in any Securitization permitted
pursuant to Section 7.4(a)(iii) hereof.
Section 7.4 Liquidation, Disposition or Acquisition of Assets, Merger,
New Subsidiaries. The Borrower shall not, and shall not permit any Restricted
Subsidiary to, at any time:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise wind up; or sell, lease, abandon, transfer or
otherwise dispose of all or any part of its assets, properties or business other
than (i) inventory and other assets sold in the ordinary course of business
(which shall include sales of stores), (ii) transfers of assets from the
Borrower to a Restricted Subsidiary or from a Subsidiary to the Borrower or from
a Subsidiary to a Restricted Subsidiary, (iii) sales or pledges of Accounts or
interests in Accounts pursuant to Securitizations not to exceed $200,000,000 in
aggregate amount outstanding at any time during the term of this Agreement, (iv)
liquidate, sell or otherwise dispose of Investments permitted pursuant to
Section 7.3 hereof, (v) any sale, transfer, discount or other transaction
permitted by Sections 7.12 and 7.13 hereof, and (vi) any other sale, lease,
abandonment, transfer or disposition in any Fiscal Year of assets for full and
fair consideration and which assets do not in aggregate amount exceed 5% of Net
Worth as of the end of the immediately preceding Fiscal Year;
(b) enter into any merger or consolidation (i) unless with respect to a
merger or consolidation, the Borrower shall be the surviving corporation, unless
the merger or consolidation involves a Restricted Subsidiary and the Borrower is
not merging or consolidating with another Person, and either (A) such Restricted
Subsidiary shall be the surviving corporation, (B) the survivor of the merger
becomes a Restricted Subsidiary that becomes a party to the Subsidiary Guaranty,
(C) the entity formed in the consolidation becomes a Restricted Subsidiary that
becomes a party to the Subsidiary Guaranty, or (D) the survivor is, or is
properly designated as, an
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Unrestricted Subsidiary, (ii) if such transaction is being utilized to
circumvent compliance with any term or provision herein and (iii) unless no
Default or Event of Default shall then be in existence or occur as a result of
such transaction; or
(c) create or acquire any Subsidiary, except as permitted by Section
7.3(b) hereof.
Section 7.5 Guaranties. The Borrower shall not, and shall not permit any
Restricted Subsidiary to, at any time make or issue any Guaranty, or assume, be
obligated with respect to, or permit to be outstanding any Guaranty, of any
obligation of any other Person except (a) the Subsidiary Guaranty, (b) the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection, (c) the Guaranty of any Indebtedness permitted by Section
7.1 hereof, and (d) the Guaranty of Indebtedness of directors, officers and
employees of the Borrower and its Subsidiaries during any Fiscal Year not to
exceed, together with the loans to officers and employees permitted pursuant to
Section 7.6 hereof (calculated net of loan repayments) for such Fiscal Year,
$1,000,000 in aggregate amount.
Section 7.6 Restricted Payments. The Borrower shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly declare, pay or make
any Restricted Payments; provided, however, (a) any Restricted Subsidiary may
declare and pay Dividends to the Borrower or another Restricted Subsidiary, (b)
the Borrower may make loans to directors, officers and employees of Borrower and
its Subsidiaries during any Fiscal Year (calculated net of loan repayments),
together with the Guaranty of Indebtedness of directors, officers and employees
permitted pursuant to Section 7.5 hereof during such Fiscal Year, in an
aggregate amount not to exceed $1,000,000, (c) the Borrower may defease, redeem,
repurchase or prepay the Senior Subordinated Notes in part or in full, and (d)
the Borrower may pay Dividends and make Treasury Stock Purchases (net of cash
proceeds received by the Borrower upon the reissuance of any treasury stock) of
its shares of capital stock in an aggregate amount not to exceed the sum of (i)
$50,000,000, plus (ii) 50% of cumulative Net Income for the period from, but not
including, September 27, 1997 through the date of the proposed payment or
purchase (but excluding from the calculation of such cumulative Net Income the
effect, if any, of any Fiscal Quarter (or portion of a Fiscal Quarter not then
ended) of the Borrower for which Net Income was a negative number); provided,
however, the Borrower shall not pay or make any such Restricted Payments set
forth in clause (b), (c) or (d) above unless there shall exist no Default prior
to or after giving effect to any such proposed Restricted Payment.
Section 7.7 Affiliate Transactions. Except (i) for the Subsidiary
Guaranty and (ii) as otherwise expressly permitted herein to the contrary, the
Borrower shall not, and shall not permit any Restricted Subsidiary to, at any
time engage in any transaction with an Affiliate (other than the Borrower or any
Restricted Subsidiary), nor make an assignment or other transfer of any of its
assets or properties to any Affiliate (other than the Borrower or any Restricted
Subsidiary) other than Investments in Unrestricted Subsidiaries permitted to be
made pursuant to Section 7.3(b)(iii) hereof, on terms materially less
advantageous to the Borrower or Restricted Subsidiary than would be the case if
such transaction had been effected with a non-Affiliate (other than advances to
employees in the ordinary course of business). The Borrower shall not, and shall
not permit any Restricted Subsidiary to, in any event incur or suffer to exist
any Indebtedness
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(other than Indebtedness permitted pursuant to Section 7.1(b) or (h) hereof) or
Guaranty (other than a Guaranty of Indebtedness permitted pursuant to Section
7.1(b) or (h) hereof) in favor of any Affiliate (other than the Borrower or any
Restricted Subsidiary), unless such Affiliate shall subordinate the payment and
performance thereof to the Obligations on terms, conditions and documentation
satisfactory to the Determining Lenders. Notwithstanding the foregoing, the
Borrower may loan the proceeds of Advances to Restricted Subsidiaries, so long
as (a) there shall exist no Event of Default prior to or after giving effect to
such proposed loan and (b) entries in the financial records of the Borrower and
the borrowing Subsidiaries are made evidencing such loans and repayments
thereof.
Section 7.8 Compliance with ERISA. The Borrower shall not, and shall not
permit any Subsidiary to, directly or indirectly, or permit any member of its
Controlled Group to directly or indirectly, (a) terminate any Plan the result of
which could reasonably be expected to have a Material Adverse Effect, (b) permit
to exist any ERISA Event, or any other event or condition related to a Plan
subject to Title IV of ERISA the result of either of which could reasonably be
expected to have a Material Adverse Effect, (c) make a complete or partial
withdrawal (within the meaning of Section 4201 of ERISA) from any Multiemployer
Plan the result of which could reasonably be expected to have a Material Adverse
Effect, (d) enter into any new Plan or modify any existing Plan so as to
increase its obligations thereunder except in the ordinary course of business
consistent with past practice, the result of which could reasonably be expected
to have a Material Adverse Effect, or (e) permit the present value of all
benefit liabilities, as defined in Title IV of ERISA, under each Plan of the
Borrower or any member of its Controlled Group that is subject to Title IV of
ERISA (using the actuarial assumptions utilized by each such Plan) to exceed the
fair market value of Plan assets allocable to such benefits, all determined as
of the most recent valuation date for each such Plan, by an amount which could
reasonably be expected to have a Material Adverse Effect.
Section 7.9 Leverage Ratio. The Borrower shall not permit the Leverage
Ratio to exceed 3.00 to 1 at the end of any Fiscal Quarter.
Section 7.10 Fixed Charge Coverage Ratio. The Borrower shall not permit
the Fixed Charge Coverage Ratio to be less than 2.00 to 1 at the end of any
Fiscal Quarter.
Section 7.11 Net Worth. The Borrower shall not permit the Net Worth to be
less than an amount equal to the sum of (a) $384,800,000, plus (b) 50% of
cumulative Net Income for the period from, but not including, September 27, 1997
through the date of calculation (but excluding from the calculation of such
cumulative Net Income the effect, if any, of any fiscal quarter (or portion of a
fiscal quarter not then ended) of the Borrower for which Net Income was a
negative number), plus (c) an amount equal to 75% of the net worth of any Person
that becomes a Subsidiary of the Borrower or is merged into or consolidated with
the Borrower or any Subsidiary of the Borrower or substantially all of the
assets of which are acquired by the Borrower or any Subsidiary of the Borrower
to the extent the purchase price paid therefor is paid in equity securities of
the Borrower or any Subsidiary of the Borrower, plus (d) 75% of the Net Cash
Proceeds (but without duplication) of any offerings of capital stock or other
equity interests of the Borrower or any of its Subsidiaries or pursuant to the
conversion or exchange of any convertible
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Subordinated Debt or redeemable preferred stock into capital stock or other
equity interests of the Borrower or any of its Subsidiaries since September 27,
1997.
Section 7.12 Sale and Leaseback. If a Default or Event of Default shall
occur and be continuing, the Borrower shall not, and shall not permit any
Restricted Subsidiary to, enter into any arrangement whereby it sells or
transfers any of its assets, and thereafter rents or leases such assets.
Section 7.13 Sale or Discount of Receivables. The Borrower shall not,
and shall not permit any Restricted Subsidiary to, directly or indirectly, sell,
with or without recourse, for discount or otherwise, any notes or accounts
receivable other than in respect of Securitizations to the extent permitted
pursuant to Section 7.4(a)(iii) hereof.
Section 7.14 Amendment and Modification of Subordinated Debt Documents.
The Borrower shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, amend, modify, supplement, waive compliance with, or
assent to noncompliance with, any term, provision or condition of any of the
documents governing or evidencing any Subordinated Debt which (i) the
Determining Lenders deem material (including, without limitation, provisions
relating to events of default, acceleration rights, interest rates, maturity
date, redemption price, subordination, payment dates, guaranties, collateral,
covenants and the definitions with respect thereto (including, without
limitation, the definition of "Change of Control")) or (ii) places any further
restrictions on the Borrower or its Restricted Subsidiaries or increases the
obligations of the Borrower or any Restricted Subsidiary thereunder or confers
on the holders thereof any additional rights.
Section 7.15 Acquisitions. The Borrower shall not, and shall not permit
any Restricted Subsidiary to, make any Acquisition; provided, however, if
immediately prior to and after giving effect to the proposed Acquisition there
shall not exist a Default or Event of Default, the Borrower or any Restricted
Subsidiary may make Acquisitions so long as (i) such Acquisition shall not be
opposed by the board of the directors of the Person being acquired, (ii) if the
Acquisition Consideration for such Acquisition is equal to or greater than
$150,000,000, the Administrative Lender shall have received written notice of
such Acquisition at least 15 calendar days prior to the date of consummation of
such Acquisition, together with a Compliance Certificate setting forth the
covenant calculations both immediately prior to and after giving effect to the
proposed Acquisition, (iii) the assets, property or business acquired shall be
within the description contained in Section 4.1(d) hereof, and (iv) if the
Acquisition results in a new Restricted Subsidiary, (A) such Subsidiary shall
execute a Subsidiary Guaranty and (B) the Administrative Lender receives within
five (5) calendar days after the consummation of such Acquisition such board
resolutions, officer's certificates and opinions of counsel as the
Administrative Lender shall reasonably request in connection with such
Acquisition.
Section 7.16 Unrestricted Subsidiaries. The Borrower shall not permit
either the aggregate amount of (a) EBITDAR calculated with respect to all
Unrestricted Subsidiaries only during any period of twelve consecutive Fiscal
Periods to exceed 10% of EBITDAR of the Borrower and all of its Subsidiaries
during any such period of twelve consecutive Fiscal Periods
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or (b) assets of all Unrestricted Subsidiaries as of the end of any Fiscal
Quarter to exceed 10% of the assets of the Borrower and all of its Subsidiaries
as of the end of any such Fiscal Quarter.
ARTICLE 8
Default
-------
Section 8.1 Events of Default. Each of the following shall constitute an
Event of Default, whatever the reason for such event, and whether voluntary,
involuntary, or effected by operation of law or pursuant to any judgment or
order of any court or any order, rule or regulation of any governmental or non-
governmental body:
(a) Any representation or warranty made under any Loan Document shall
prove to have been incorrect or misleading in any material respect when made;
(b) The Borrower shall default in the payment of any (i) principal under
any Note or (ii) interest under any Note or any fees payable hereunder or any
other costs, fees, expenses or other amounts payable hereunder or under the
other Loan Documents, when due, which Default with respect to clause (ii)
immediately preceding only is not cured within three Business Days after notice
(which may be telephonic) from the Administrative Lender thereof;
(c) The Borrower or any Subsidiary shall default in the performance or
observance of any agreement or covenant contained in Section 5.1 or Article 7
hereof;
(d) The Borrower or any Subsidiary shall default in the performance or
observance of any other agreement or covenant contained in this Agreement or any
other Loan Document not specifically referred to elsewhere in this Section 8.1,
and such default shall not be cured within a period of 30 days after notice from
the Administrative Lender thereof;
(e) There shall be entered a decree or order by a court having
jurisdiction in the premises constituting an order for relief in respect of the
Borrower or any Subsidiary under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable Federal or state
bankruptcy law or other similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or similar official of the Borrower
or any Subsidiary, or of any substantial part of their respective properties, or
ordering the winding-up or liquidation of the affairs of the Borrower or any
Subsidiary, and any such decree or order shall continue unstayed and in effect
for a period of 60 consecutive days;
(f) The Borrower or any Subsidiary shall file a petition, answer or
consent seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable Federal or state
bankruptcy law or other similar law, or the Borrower or any Subsidiary shall
consent to the institution of proceedings thereunder or to the filing of any
such petition or to the appointment or taking of possession of a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Borrower or any Subsidiary or of any
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substantial part of their respective properties, or the Borrower or any
Subsidiary shall fail generally to pay its debts as they become due, or the
Borrower or any Subsidiary shall take any action in furtherance of any such
action;
(g) A final judgment or judgments shall be entered by any court against
the Borrower or any Subsidiary for the payment of money which exceeds $5,000,000
in the aggregate, or a warrant of attachment or execution or similar process
shall be issued or levied against property of the Borrower or any Subsidiary
which, together with all other such property of the Borrower and its
Subsidiaries subject to other such process, exceeds in value $5,000,000 in the
aggregate, and if such judgment or award is not insured or, within 30 days after
the entry, issue or levy thereof, such judgment, warrant or process shall not
have been paid or discharged or stayed pending appeal, or if, after the
expiration of any such stay, such judgment, warrant or process shall not have
been paid or discharged;
(h) With respect to any Plan of the Borrower or any member of its
Controlled Group: (i) the Borrower, any such member, or any other party-in-
interest or disqualified person shall engage in transactions which in the
aggregate would reasonably result in a direct or indirect liability to the
Borrower or any member of its Controlled Group in excess of $5,000,000 under
Section 409 or 502 of ERISA or Section 4975 of the Code; (ii) the Borrower or
any member of its Controlled Group shall incur any accumulated funding
deficiency, as defined in Section 412 of the Code, in the aggregate in excess of
$5,000,000, or request a funding waiver from the Internal Revenue Service for
contributions in the aggregate in excess of $5,000,000; (iii) the Borrower or
any member of its Controlled Group shall incur any withdrawal liability in the
aggregate in excess of $5,000,000 as a result of a complete or partial
withdrawal within the meaning of Section 4203 or 4205 of ERISA; (iv) the
Borrower or any member of its Controlled Group shall fail to make a required
contribution by the due date under Section 412 of the Code or Section 302 of
ERISA which would result in the imposition of a lien under Section 412 of the
Code or Section 302 of ERISA; (v) the Borrower, any member of its Controlled
Group or any Plan sponsor shall notify the PBGC of an intent to terminate, or
the PBGC shall institute proceedings to terminate, any Plan subject to Title IV
of ERISA; (vi) a Reportable Event shall occur with respect to a Plan subject to
Title IV of ERISA, and within 15 days after the reporting of such Reportable
Event to the Administrative Lender, the Administrative Lender shall have
reasonably determined and have notified the Borrower in writing that the
Determining Lenders have made a determination that, on the basis of such
Reportable Event, there are reasonable grounds for the termination of such Plan
by the PBGC or for the appointment by the appropriate United States District
Court of a trustee to administer such Plan and as a result thereof an Event of
Default shall have occurred hereunder; (vii) a trustee shall be appointed by a
court of competent jurisdiction to administer any Plan subject to Title IV of
ERISA or the assets thereof; (viii) the benefits of any Plan subject to Title IV
of ERISA shall be increased, or the Borrower or any member of its Controlled
Group shall begin to maintain, or begin to contribute to, any such Plan, without
the prior written consent of the Determining Lenders; or (ix) any ERISA Event
with respect to a Plan subject to Title IV of ERISA shall have occurred, and 30
days thereafter (A) such ERISA Event, other than such event described in clause
(f) of the definition of ERISA Event herein, (if correctable) shall not have
been corrected and (B) the then present value of such Plan's benefit
liabilities, as defined in Title IV of ERISA, shall exceed the then current
value of
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assets accumulated in such Plan; provided, however, that the events listed in
subsections (v) through (ix) shall constitute Events of Default only if, as of
the date thereof or any subsequent date, the amount of liability that the
Borrower or any member of its Controlled Group reasonably is likely to incur in
the aggregate under Section 4062, 4063, 4064, 4219 or 4023 of ERISA or any other
provision of law with respect to all such Plans, computed by the actuary of the
Plan taking into account any applicable rules and regulations of the PBGC at
such time, and based on the actuarial assumptions used by the Plan, resulting
from or otherwise associated with such event exceeds $5,000,000;
(i) Any Loan Document shall be the subject of any proceeding instituted by
any Person other than a Lender (except in connection with any Lender's exercise
of any remedies under the Loan Documents), or there shall exist any litigation
with respect to any Loan Document, or any Person shall challenge in any manner
whatsoever the validity or enforceability of any Loan Document; provided,
however, that during any such time any such circumstance shall be bonded or
stayed in accordance with Applicable Law and to the satisfaction of each Lender,
such circumstance shall not be an Event of Default;
(j) The Borrower or any Subsidiary shall default in the payment of any
Indebtedness or any lease obligations in respect of Operating Leases in an
aggregate amount of $10,000,000 or more beyond any grace period provided with
respect thereto, or any other event or condition shall exist, pursuant to any
agreement or instrument under which such Indebtedness or such lease obligation
is created or evidenced beyond any applicable grace period, if the effect of
such event or condition is to permit or cause the holder of such Indebtedness
(or a trustee on behalf of any such holder) or the obligee in respect of such
lease obligation to (i) cause such Indebtedness or lease obligation to become
due or payable prior to its date of maturity or expiration or (ii) require the
Borrower or any Subsidiary to purchase or redeem such Indebtedness; provided,
however, notwithstanding the above, there shall not occur an Event of Default
under this Section 8.1(k) hereof with respect to lease obligations under
Operating Leases if defaults with respect thereto are being contested in good
faith by appropriate proceedings and adequate reserves, if required by GAAP,
have been established therefor;
(k) Any lease of the Borrower or any Subsidiary shall terminate or cease
to be effective, and the termination or cessation thereof, together with all
other leases, if any, which have been terminated or cease to be effective, could
reasonably be expected to have a Material Adverse Effect; provided, however,
that such termination or cessation of a lease shall not constitute an Event of
Default if another lease reasonably satisfactory to each Lender is
contemporaneously substituted therefor;
(l) Any provision of any Loan Document shall for any reason cease to be
valid and binding on or enforceable against any party to it (other than the
Administrative Lender or any Lender) in all material respects, or any such party
shall so state in writing;
(m) A Change of Control shall have occurred; or
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(n) The Borrower shall fail to give the written notice required to be
delivered to the Administrative Lender pursuant to Section 9.07 of the
Indenture.
Section 8.2 Remedies. If an Event of Default shall have occurred and
shall be continuing:
(a) With the exception of an Event of Default specified in Section 8.1(e)
or (f) hereof, the Administrative Lender shall, upon the direction of the
Determining Lenders, terminate the Commitment and/or declare the principal of
and interest on the Advances and all Obligations and other amounts owed under
the Loan Documents to be forthwith due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything in the Loan Documents to the contrary notwithstanding.
(b) Upon the occurrence of an Event of Default specified in Section 8.1(e)
or (f) hereof, such principal, interest and other amounts shall thereupon and
concurrently therewith become due and payable and the Commitment shall forthwith
terminate, all without any action by the Administrative Lender, any Lender or
any holders of the Notes and without presentment, demand, protest or other
notice of any kind, all of which are expressly waived, anything in the Loan
Documents to the contrary notwithstanding.
(c) If any Letter of Credit shall be then outstanding, the Administrative
Lender may demand upon the Borrower to, and forthwith upon such demand (but in
the case of an Event of Default specified in Section 8.1(e) or (f) hereof,
without any demand or taking of any other action by the Administrative Lender or
any Lender), the Borrower shall, pay to the Administrative Lender in same day
funds at the office of the Administrative Lender in such demand for deposit in
the L/C Cash Collateral Account, an amount equal to the maximum amount available
to be drawn under the Letters of Credit then outstanding.
(d) The Administrative Lender (with the consent or at the direction of the
Determining Lenders) and the Lenders may exercise all of the post-default rights
granted to them under the Loan Documents or under Applicable Law.
(e) The rights and remedies of the Administrative Lender and the Lenders
hereunder shall be cumulative, and not exclusive.
ARTICLE 9
Changes in Circumstances
------------------------
Section 9.1 LIBOR Basis Determination Inadequate. If with respect to
any proposed LIBOR Advance for any Interest Period, any Lender determines that
(i) deposits in Dollars (in the applicable amount) are not being offered to that
Lender in the relevant market for such Interest
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Period or (ii) the LIBOR Basis for such proposed LIBOR Advance does not
adequately cover the cost to such Lender of making and maintaining such proposed
LIBOR Advance for such Interest Period, such Lender shall forthwith give notice
thereof to the Borrower, whereupon until such Lender notifies the Borrower that
the circumstances giving rise to such situation no longer exist, the obligation
of such Lender to make LIBOR Advances shall be suspended.
Section 9.2 Illegality. If any applicable law, rule or regulation,
or any change therein or adoption thereof, or interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its LIBOR Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency, shall make it unlawful or impossible for such Lender (or its LIBOR
Lending Office) to make, maintain or fund its LIBOR Advances, such Lender shall
so notify the Borrower and the Administrative Lender. Before giving any notice
to the Borrower pursuant to this Section, the notifying Lender shall designate a
different LIBOR Lending Office or other lending office if such designation will
avoid the need for giving such notice and will not, in the sole judgment of such
Lender, be materially disadvantageous to such Lender. Upon receipt of such
notice, notwithstanding anything contained in Article 2 hereof, the Borrower
shall repay in full the then outstanding principal amount of each LIBOR Advance
owing to the notifying Lender, together with accrued interest thereon, on either
(a) the last day of the Interest Period applicable to such Advance, if such
Lender may lawfully continue to maintain and fund such Advance to such day, or
(b) immediately, if such Lender may not lawfully continue to fund and maintain
such Advance to such day. Concurrently with repaying each affected LIBOR
Advance owing to such Lender if the Borrower does not terminate this Agreement,
notwithstanding anything contained in Article 2 hereof, the Borrower shall
borrow a Base Rate Advance from such Lender, and such Lender shall make such
Base Rate Advance, in an amount such that the outstanding principal amount of
the Advances owing to such Lender shall equal the outstanding principal amount
of the Advances owing immediately prior to such repayment.
Section 9.3 Increased Costs.
(a) If any applicable law, rule or regulation, or any change in or
adoption of any law, rule or regulation, or any interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof or compliance by any Lender
(or its LIBOR Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or compatible
agency:
(i) shall subject a Lender (or its LIBOR Lending Office) to any Tax
(net of any tax benefit engendered thereby) with respect to its LIBOR
Advances or its obligation to make such Advances, or shall change the basis
of taxation of payments to a Lender (or to its LIBOR Lending Office) of the
principal of or interest on its LIBOR Advances or in respect of any other
amounts due under this Agreement, as the case may be, or its obligation to
make such Advances (except for changes in the rate of tax on the overall
net income, net worth or capital of such Lender and franchise taxes, doing
business taxes or minimum taxes imposed upon such Lender); or
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(ii) shall impose, modify or deem applicable 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, a Lender's
LIBOR Lending Office or shall impose on the Lender (or its LIBOR Lending
Office) or on the London interbank market any other condition affecting its
LIBOR Advances or its obligation to make such Advances;
and the result of any of the foregoing is to increase the cost to a Lender (or
its LIBOR Lending Office) of making or maintaining any LIBOR Advances, or to
reduce the amount of any sum received or receivable by a Lender (or its LIBOR
Lending Office) with respect thereto, by an amount deemed by a Lender to be
material, then, within 15 days after demand by a Lender, the Borrower agrees to
pay to such Lender such additional amount as will compensate such Lender for
such increased costs or reduced amounts, subject to Section 11.9 hereof. The
affected Lender will as soon as practicable notify the Borrower of any event of
which it has knowledge, occurring after the date hereof, which will entitle such
Lender to compensation pursuant to this Section and will designate a different
LIBOR Lending Office or other lending office if such designation will avoid the
need for, or reduce the amount of, such compensation and will not, in the sole
judgment of the affected Lender made in good faith, be disadvantageous to such
Lender. The obligations of the Borrower under this Section 9.3 shall survive
for a period of six months after the Release Date with respect to any increased
cost which occurs as a result of a change in or adoption of any law, rule or
regulation, or interpretation thereof, which has a retroactive effect to a date
prior to the Release Date.
(b) A certificate of any Lender claiming compensation under this Section
and setting forth the additional amounts to be paid to it hereunder and
calculations therefor shall be controlling in the absence of manifest error. In
determining such amount, a Lender may use any reasonable averaging and
attribution methods. If a Lender demands compensation under this Section, the
Borrower may at any time, upon at least five Business Days' prior notice to such
Lender, after reimbursement to such Lender by the Borrower in accordance with
this Section of all costs incurred, prepay in full the then outstanding LIBOR
Advances of such Lender, together with accrued interest thereon to the date of
prepayment, along with any reimbursement required under Section 2.9 hereof.
Concurrently with prepaying such LIBOR Advances, the Borrower shall borrow a
Base Rate Advance from such Lender, and such Lender shall make such Base Rate
Advance, in an amount such that the outstanding principal amount of the
Advances owing to such Lender shall equal the outstanding principal amount of
the Advances owing immediately prior to such prepayment.
Section 9.4 Effect On Base Rate Advances. If notice has been given
pursuant to Section 9.1, 9.2 or 9.3 hereof suspending the obligation of a Lender
to make LIBOR Advances, or requiring LIBOR Advances of a Lender to be repaid or
prepaid, then, unless and until such Lender notifies the Borrower that the
circumstances giving rise to such repayment no longer apply, all Advances which
would otherwise be made by such Lender as LIBOR Advances shall be made instead
as Base Rate Advances.
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Section 9.5 Capital Adequacy. If either (a) the introduction of or any
change in or in the interpretation of any law, rule or regulation or (b)
compliance by a Lender with any law, rule or regulation or any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law) affects or would affect the amount of capital required
or expected to be maintained by a Lender or any corporation controlling such
Lender, and such Lender determines that the amount of such capital is increased
by or based upon the existence of such Lender's commitment or Advances hereunder
and other commitments or advances of such Lender of this type, then, upon demand
by such Lender, subject to Section 11.9 hereof, the Borrower shall immediately
pay to such Lender, from time to time as specified by such Lender, additional
amounts sufficient to compensate such Lender with respect to such circumstances,
to the extent that such Lender reasonably determines in good faith such increase
in capital to be allocable to the existence of such Lender's commitment
hereunder. A certificate as to such amounts submitted to the Borrower by a
Lender hereunder, shall, in the absence of manifest error, be conclusive and
binding for all purposes. The obligations of the Borrower under this Section
9.5 shall survive for a period of six months after the Release Date with respect
to any capital requirements which occur as a result of a change in or adoption
of any law, rule or regulation or interpretation thereof, which has a
retroactive effect to a date prior to the Release Date.
Section 9.6 Replacement of Lender. Notwithstanding anything to the
contrary in this Agreement, if (a) any Lender shall request compensation, or the
Borrower should be required to pay any Lender any additional amounts, pursuant
to Section 2.15 hereof or Article 9 hereof, (b) any Lender shall default in
providing funds as contemplated by Section 2.7 hereof, or (c) any Lender
determines that it is unlawful for it to make LIBOR Advances or is otherwise
unable to make any LIBOR Advance pursuant to Article 9 hereof, and the
Determining Lenders have not make such determination, then, in each such case,
provided that no Event of Default shall then exist and be continuing, during the
120-day period after receipt of such request or notice of any such event, the
Borrower may require that such Lender transfer all of its right, title and
interest under this Agreement and the other Loan Documents, including such
Lender's Note, to any lender identified by the Borrower which otherwise meets
the requirements of an Assignee under Section 11.6 hereof and which is
acceptable to the Administrative Lender (a "Proposed Lender"), if such Proposed
Lender agrees to assume all of the obligations of such Lender for consideration
equal to the outstanding principal amount of and interest on the Advances owed
to such Lender, and such Lender has otherwise been reimbursed for all
Obligations other than principal and interest under this Agreement to the date
of the transfer (including but not limited to all additional compensation which
such Lender is otherwise due pursuant to Section 2.15 hereof or Article 9
hereof). Upon such assignment and assumption, such Proposed Lender shall be a
"Lender" for all purposes hereunder.
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ARTICLE 10
AGREEMENT AMONG LENDERS
-----------------------
Section 10.1 Agreement Among Lenders. The Lenders agree among themselves
that:
(a) Administrative Lender. Each Lender hereby appoints the Administrative
Lender as its nominee in its name and on its behalf, to receive all documents
and items to be furnished hereunder; to act as nominee for and on behalf of all
Lenders under the Loan Documents; to, except as otherwise expressly set forth
herein, take such action as may be requested by the Determining Lenders,
provided that, unless and until the Administrative Lender shall have received
such requests, the Administrative Lender may take such administrative action, or
refrain from taking such administrative action, as it may deem advisable and in
the best interests of the Lenders; to arrange the means whereby the proceeds of
the Advances of the Lenders are to be made available to the Borrower; to
distribute promptly to each Lender information, requests and documents received
from the Borrower, and each payment (in like funds received) with respect to any
of such Lender's Advances, fee or other amount; and to deliver to the Borrower
requests, demands, approvals and consents received from the Lenders.
Administrative Lender agrees to promptly distribute to each Lender, at such
Lender's address set forth below information, requests, documents and payments
received from the Borrower. The Administrative Lender shall have no duties or
responsibilities except those expressly set forth in this Agreement. The duties
of the Administrative Lender are mechanical and administrative in nature and the
Administrative Lender shall have no fiduciary relationship in respect of any
Lender by reason of this Agreement or any other Loan Document.
(b) Replacement of Administrative Lender. Should the Administrative
Lender or any successor Administrative Lender ever cease to be a Lender
hereunder, or should the Administrative Lender or any successor Administrative
Lender ever resign as Administrative Lender (provided that the Administrative
Lender may not resign without the prior written consent of the Borrower), or
should the Administrative Lender or any successor Administrative Lender ever be
removed with cause by the Determining Lenders, then the Lender appointed by the
other Lenders shall forthwith become the Administrative Lender, and the Borrower
and the Lenders shall execute such documents as any Lender may reasonably
request to reflect such change at no cost to the Borrower. Any resignation or
removal of the Administrative Lender or any successor Administrative Lender
shall become effective upon the appointment by the Lenders of a successor
Administrative Lender; provided, however, that if the Lenders fail for any
reason to appoint a successor within 60 days after such removal or resignation,
the Administrative Lender or any successor Administrative Lender (as the case
may be) shall thereafter have no obligation to act as Administrative Lender
hereunder.
(c) Expenses. Each Lender shall pay its pro rata share, based on its
Specified Percentage, of any expenses paid by the Administrative Lender directly
and solely in connection with any of the Loan Documents if Administrative Lender
does not receive reimbursement therefor from other sources within 60 days after
the date incurred, unless payment of such fees is being diligently disputed by
such Lender or the Borrower in good faith. Any amount so paid
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by the Lenders to the Administrative Lender shall be returned by the
Administrative Lender pro rata to each paying Lender to the extent later paid by
the Borrower or any other Person on the Borrower's behalf to the Administrative
Lender.
(d) Delegation of Duties. The Administrative Lender may execute any of
its duties hereunder by or through officers, directors, employees, attorneys or
agents, and shall be entitled to (and shall be protected in relying upon) advice
of counsel concerning all matters pertaining to its duties hereunder.
(e) Reliance by Administrative Lender. The Administrative Lender and its
officers, directors, employees, attorneys and agents shall be entitled to rely
and shall be fully protected in relying on any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telex or teletype
message, statement, order, or other document or conversation reasonably believed
by it or them in good faith to be genuine and correct and to have been signed or
made by the proper Person and, with respect to legal matters, upon opinions of
counsel selected the Administrative Lender. The Administrative Lender may, in
its reasonable judgment, deem and treat the payee of any Note as the owner
thereof for all purposes hereof.
(f) Limitation of Administrative Lender's Liability. Neither the
Administrative Lender nor any of its officers, directors, employees, attorneys
or agents shall be liable for any action taken or omitted to be taken by it or
them hereunder in good faith and believed by it or them to be within the
discretion or power conferred to it or them by the Loan Documents or be
responsible for the consequences of any error of judgment, except for its or
their own gross negligence or wilful misconduct. Except as aforesaid, the
Administrative Lender shall be under no duty to enforce any rights with respect
to any of the Advances, or any security therefor. The Administrative Lender
shall not be compelled to do any act hereunder or to take any action towards the
execution or enforcement of the powers hereby created or to prosecute or defend
any suit in respect hereof, unless indemnified to its satisfaction against loss,
cost, liability and expense. The Administrative Lender shall not be responsible
in any manner to any Lender for the effectiveness, enforceability, genuineness,
validity or due execution of any of the Loan Documents, or for any
representation, warranty, document, certificate, report or statement made herein
or furnished in connection with any Loan Documents, or be under any obligation
to any Lender to ascertain or to inquire as to the performance or observation of
any of the terms, covenants or conditions of any Loan Documents on the part of
the Borrower. TO THE EXTENT NOT REIMBURSED BY THE BORROWER, EACH LENDER HEREBY
SEVERALLY INDEMNIFIES AND HOLDS HARMLESS THE ADMINISTRATIVE LENDER, PRO RATA
ACCORDING TO ITS SPECIFIED PERCENTAGE, FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES AND/OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE
IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY THE ADMINISTRATIVE LENDER IN ITS
CAPACITY AS ADMINISTRATIVE LENDER IN ANY WAY WITH RESPECT TO ANY LOAN DOCUMENTS
OR ANY ACTION TAKEN OR OMITTED BY THE ADMINISTRATIVE LENDER UNDER THE LOAN
DOCUMENTS (INCLUDING ANY NEGLIGENT ACTION OF THE ADMINISTRATIVE LENDER), EXCEPT
TO THE EXTENT THE SAME
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RESULT FROM GROSS NEGLIGENCE OR WILFUL MISCONDUCT BY THE ADMINISTRATIVE LENDER.
(g) Liability Among Lenders. No Lender shall incur any liability (other
than the sharing of expenses and other matters specifically set forth herein and
in the other Loan Documents) to any other Lender, except for acts or omissions
in bad faith.
(h) Rights as Lender. With respect to its commitment hereunder, the
Advances made by it and Note issued to it, the Administrative Lender shall have
the same rights as a Lender and may exercise the same as though it were not the
Administrative Lender, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Lender in its individual
capacity. The Administrative Lender or any Lender may accept deposits from, act
as trustee under indentures of, and generally engage in any kind of business
with, the Borrower and any of its Affiliates, and any Person who may do business
with or own securities of the Borrower or any of its Affiliates, all as if the
Administrative Lender were not the Administrative Lender hereunder and without
any duty to account therefor to the Lenders.
Section 10.2 Lender Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Lender or any
other Lender and based upon the financial statements referred to in Sections
4.1(j), 6.1 and 6.2 hereof, and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Lender or any other Lender and based
upon such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents.
Section 10.3 Benefits of Article. None of the provisions of this Article
shall inure to the benefit of any Person other than Lenders; consequently, no
Person shall be entitled to rely upon, or to raise as a defense, in any manner
whatsoever, the failure of the Administrative Lender or any Lender to comply
with such provisions.
ARTICLE 11
Miscellaneous
-------------
Section 11.1 Notices.
(a) All notices and other communications under this Agreement shall
be in writing (except in those cases where giving notice by telephone is
expressly permitted) and shall be deemed to have been given on the date
personally delivered or sent by telecopy (answerback received), or three days
after deposit in the mail, designated as certified mail, return receipt
requested, postage-prepaid, or one day after being entrusted to a reputable
commercial overnight delivery service, or one day after being delivered to the
telegraph office or sent out by telex
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addressed to the party to which such notice is directed at its address
determined as provided in this Section. All notices and other communications
under this Agreement shall be given to the parties hereto at the following
addresses:
(i) If to the Borrower, at:
CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attn: General Counsel
with a copy to:
Thompson & Knight, P.C.
1700 Pacific Avenue, Suite 3300
Dallas, Texas 75201-4693
Attn: James McKellar, Esq.
(ii) If to the Administrative Lender, at:
NationsBank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Sharon M. Ellis
(iii) If to a Lender, at its address shown below its name on the
signature pages hereof, or if applicable, set forth in its
Assignment Agreement.
(b) Any party hereto may change the address to which notices shall be
directed by giving 10 days' written notice of such change to the other parties.
Section 11.2 Expenses. The Borrower shall promptly pay:
(a) all reasonable out-of-pocket expenses of the Administrative Lender in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents, the transactions contemplated hereunder
and thereunder, and the making of Advances hereunder, including without
limitation the reasonable fees and disbursements of Special Counsel;
(b) all reasonable out-of-pocket expenses and reasonable attorneys' fees
of the Administrative Lender in connection with the administration of the
transactions contemplated in this Agreement and the other Loan Documents and the
preparation, negotiation, execution and delivery of any waiver, amendment or
consent by the Administrative Lender relating to this Agreement or the other
Loan Documents; and
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(c) after the occurrence of an Event of Default, all reasonable costs,
out-of-pocket expenses and attorneys' fees of the Administrative Lender and each
Lender incurred for enforcement, collection, restructuring, refinancing and
"work-out", or otherwise incurred in obtaining performance under the Loan
Documents, which in each case shall include without limitation fees and expenses
of consultants, counsel for the Administrative Lender and any Lender, and
administrative fees for the Administrative Lender. Notwithstanding anything to
the contrary contained herein, (i) prior to the occurrence of an Event of
Default, the Borrower shall have no obligation to pay legal fees or expenses of
any Lender other than the reasonable legal fees and expenses of the
Administrative Lender and (ii) after the occurrence of an Event of Default, to
the extent practicable, the Lenders shall use common legal counsel; provided,
however, in the event that any Lender in its sole discretion determines that a
conflict exists or may exist as a result of such common counsel, such Lender may
obtain separate legal counsel and the Borrower shall be obligated to pay the
reasonable costs and out-of-pocket expenses of such separate counsel.
Section 11.3 Waivers. The rights and remedies of the Lenders under this
Agreement and the other Loan Documents shall be cumulative and not exclusive of
any rights or remedies which they would otherwise have. No failure or delay by
the Administrative Lender or any Lender in exercising any right shall operate as
a waiver of such right. The Lenders expressly reserve the right to require
strict compliance with the terms of this Agreement in connection with any
funding of a request for an Advance. In the event that any Lender decides to
fund an Advance at a time when the Borrower is not in strict compliance with the
terms of this Agreement, such decision by such Lender shall not be deemed to
constitute an undertaking by the Lender to fund any further requests for
Advances or preclude the Lenders from exercising any rights available under the
Loan Documents or at law or equity. Any waiver or indulgence granted by the
Lenders shall not constitute a modification of this Agreement, except to the
extent expressly provided in such waiver or indulgence, or constitute a course
of dealing by the Lenders at variance with the terms of the Agreement such as to
require further notice by the Lenders of the Lenders' intent to require strict
adherence to the terms of the Agreement in the future. Any such actions shall
not in any way affect the ability of the Administrative Lender or the Lenders,
in their discretion, to exercise any rights available to them under this
Agreement or under any other agreement, whether or not the Administrative Lender
or any of the Lenders are a party thereto, relating to the Borrower.
Section 11.4 Determination by the Lenders Conclusive and Binding. Any
calculation or material determination required or expressly permitted to be made
by the Administrative Lender or any Lender under this Agreement shall be made in
its reasonable judgment and in good faith, and shall when made, absent manifest
error, be controlling.
Section 11.5 Set-Off. In addition to any rights now or hereafter granted
under Applicable Law and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender and any subsequent holder of any
Note, and any assignee or participant in any Note is hereby authorized by the
Borrower at any time or from time to time, without notice to the Borrower or any
other Person, any such notice being hereby expressly waived, to set-off,
appropriate and apply any deposits (general or special (except trust and escrow
accounts), time or demand, including without limitation Indebtedness evidenced
by certificates of deposit, in each case whether matured or unmatured) and any
other Indebtedness at any time held or owing by
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such Lender or holder to or for the credit or the account of the Borrower,
against and on account of the Obligations and other liabilities of the Borrower
to such Lender or holder, irrespective of whether or not (a) the Lender or
holder shall have made any demand hereunder, or (b) the Lender or holder shall
have declared the principal of and interest on the Advances and other amounts
due hereunder to be due and payable as permitted by Section 8.2 hereof. Any sums
obtained by any Lender or by any assignee, participant or subsequent holder of
any Note shall be subject to pro rata treatment of all Obligations and other
liabilities hereunder.
Section 11.6 Assignment.
(a) The Borrower may not assign or transfer any of its rights or
obligations hereunder or under the other Loan Documents without the prior
written consent of the Lenders.
(b) No Lender shall be entitled to assign its interest in this Agreement,
its Notes or its Advances, except as hereinafter set forth.
(c) A Lender may at any time sell participations in all or any part of its
Advances (collectively, "Participations") to any banks or other financial
institutions ("Participants"), provided that such Participation shall not confer
on any Person (other than the parties hereto) any right to vote on, approve or
sign amendments or waivers, or any other independent benefit or any legal or
equitable right, remedy or other claim under this Agreement or any other Loan
Documents, other than the right to vote on, approve, or sign amendments or
waivers or consents with respect to items that would result in (i) any increase
in the commitment of any Participant; or (ii)(A) the extension of the date of
maturity of, or (B) the extension of the due date for any payment of principal,
interest or fees respecting, or (C) the reduction of the amount of any
installment of principal or interest on or the change or reduction of any
mandatory reduction required hereunder, or (D) a reduction of the rate of
interest on, the Advances, the Letters of Credit, or the Reimbursement
Obligations; or (iii) the release of security for the Obligations, including
without limitation any guarantee; or (iv) the reduction of any fees payable
hereunder. Notwithstanding the foregoing, any Lender may sell a Participation to
any of its Affiliates which is a bank or financial institution without the
consent of the Borrower, provided that such Participation shall not confer on
any Person (other than the parties hereto) any right to vote on, approve or sign
amendments or waivers, or any other independent benefit or any legal or
equitable right, remedy or other claim under this Agreement or any other Loan
Documents. Notwithstanding the foregoing, the Borrower agrees that the
Participants shall be entitled to the benefits of Article 9 and Section 11.5
hereof as though they were Lenders and the Lenders, subject to the requirements
of the Confidentiality Agreement, may provide copies of all financial
information received from the Borrower to such Participants. To the fullest
extent it may effectively do so under Applicable Law, the Borrower agrees that
any Participant may exercise any and all rights of banker's lien, set-off and
counterclaim with respect to its Participation as fully as if such Participant
were the holder of Advances in the amount of its Participation.
(d) Each Lender may assign to one or more financial institutions organized
under the laws of the United States, or any state thereof, or under the laws of
any other country that is a member of the Organization for Economic Cooperation
and Development, or a political
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subdivision of any such country, which is engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its business
(each, an "Assignee") its rights and obligations under this Agreement and the
other Loan Documents; provided, however, that (i) each such assignment shall be
subject to the prior written consent of the Administrative Lender and Borrower,
which consent shall not be unreasonably withheld (provided, however,
notwithstanding anything herein to the contrary, no consent of the Borrower is
required for any assignment during any time that an Event of Default pursuant to
Section 8.1(b) hereof has occurred and is continuing), (ii) each such assignment
shall be in a minimum amount of $10,000,000 and after giving effect to each such
assignment no Lender's portion of the Commitment shall be less than $10,000,000
unless such Lender shall have sold its entire portion of the Commitment, (iii)
the applicable Lender, Administrative Lender and applicable Assignee shall
execute and deliver to the Administrative Lender an Assignment and Acceptance
Agreement (an "Assignment Agreement") in substantially the form of Exhibit D
hereto, together with the Notes subject to such assignment, (iv) the applicable
Assignee shall have executed and delivered to the Borrower and the
Administrative Lender the Confidentiality Agreement, and (v) and the Assignee
executing the Assignment as the case may be, shall deliver to the Administrative
Lender a processing fee of $3,500. Upon such execution, delivery and acceptance
from and after the effective date specified in each Assignment, which effective
date shall be at least three Business Days after the execution thereof, (A) the
Assignee thereunder shall be party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment, have
the rights and obligations of a Lender hereunder and (B) the applicable Lender
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment, relinquish such rights and be released from such
obligations under this Agreement.
(e) Notwithstanding anything in clause (d) above to the contrary, any
Lender may assign and pledge all or any portion of its Advances and Notes to any
Federal Reserve Bank as collateral security pursuant to Regulation A of F.R.S.
Board and any Operating Circular issued by such Federal Reserve Bank; provided,
however, that no such assignment under this clause (e) shall release the
assignor Lender from its obligations hereunder.
(f) Upon its receipt of an Assignment Agreement executed by a Lender and
an Assignee, and any Note or Notes subject to such assignment, the Borrower
shall, within five Business Days after its receipt of such Assignment Agreement,
at no expense to the Borrower, execute and deliver to the Administrative Lender
in exchange for the surrendered Notes new Notes to the order of such Assignee in
an amount equal to the portion of the Advances and Commitment assigned to it
pursuant to such Assignment Agreement and new Notes to the order of the
Administrative Lender in an amount equal to the portion of the Advances and
Commitment retained by it hereunder. Such new Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Notes, shall be dated the effective date of such Assignment Agreement and shall
otherwise be in substantially the form of Exhibit A hereto.
(g) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 11.6, disclose to
the assignee or Participant or proposed assignee or participant, any information
relating to the Borrower furnished to such
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Lender by or on behalf of the Borrower, provided such Person has executed a
Confidentiality Agreement to the extent required pursuant to the terms thereof.
(h) Except as specifically set forth in this Section 11.6, nothing in this
Agreement or any other Loan Documents, expressed or implied, is intended to or
shall confer on any Person other than the respective parties hereto and thereto
and their successors and assignees permitted hereunder and thereunder any
benefit or any legal or equitable right, remedy or other claim under this
Agreement or any other Loan Documents.
(i) Notwithstanding anything in this Section 11.6 to the contrary, no
Assignee or Participant shall be entitled to receive any greater payment under
Section 2.15 or Section 9.3 hereof than such assigning or participating Lender
would have been entitled to receive with respect to the interest assigned or
participated to such Assignee or Participant.
Section 11.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
Section 11.8 Severability. Any provision of this Agreement which is for
any reason prohibited or found or held invalid or unenforceable by any court or
governmental agency shall be ineffective to the extent of such prohibition or
invalidity or unenforceability without invalidating the remaining provisions
hereof in such jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 11.9 Interest and Charges. It is not the intention of any parties
to this Agreement to make an agreement in violation of the laws of any
applicable jurisdiction relating to usury. Regardless of any provision in any
Loan Documents, no Lender shall ever be entitled to receive, collect or apply,
as interest on the Obligations, any amount in excess of the Maximum Amount. If
any Lender or participant ever receives, collects or applies, as interest, any
such excess, such amount which would be excessive interest shall be deemed a
partial repayment of principal and treated hereunder as such; and if principal
is paid in full, any remaining excess shall be paid to the Borrower. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Maximum Amount, the Borrower and the Lenders shall, to
the maximum extent permitted under Applicable Law, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest, (b)
exclude voluntary prepayments and the effect thereof, and (c) amortize, prorate,
allocate and spread in equal parts, the total amount of interest throughout the
entire contemplated term of the Obligations so that the interest rate is uniform
throughout the entire term of the Obligations; provided, however, that if the
Obligations are paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period of
existence thereof exceeds the Maximum Amount, the Lenders shall refund to the
Borrower the amount of such excess or credit the amount of such excess against
the total principal amount of the Obligations owing, and, in such event, the
Lenders shall not be subject to any penalties provided by any laws for
contracting for, charging or receiving interest in excess of the Maximum Amount.
This Section shall control every other
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provision of all agreements pertaining to the transactions contemplated by or
contained in the Loan Documents.
Section 11.10 Headings. Headings used in this Agreement are for
convenience only and shall not be used in connection with the interpretation of
any provision hereof.
Section 11.11 Amendment and Waiver. The provisions of this Agreement may
not be amended, modified or waived except by the written agreement of the
Borrower and the Determining Lenders; provided, however, that no such amendment,
modification or waiver shall be made (a) without the consent of all Lenders, if
it would (i) increase the Specified Percentage or commitment of any Lender, or
(ii) extend the date of maturity of, extend the due date for any payment of
principal or interest on, reduce the amount of any installment of principal or
interest on, or reduce the rate of interest on, any Advance, the Reimbursement
Obligations or other amount owing under any Loan Documents, or (iii) release any
security for or guaranty of the Obligations (except pursuant to this Agreement),
or (iv) reduce the fees payable hereunder, or (v) revise this Section 11.11, or
(vi) waive the date for payment of any of the Obligations, or (vii) amend the
definition of Determining Lenders; or (b) without the consent of the
Administrative Lender, if it would alter the rights, duties or obligations of
the Administrative Lender. Neither this Agreement nor any term hereof may be
amended orally, nor may any provision hereof be waived orally but only by an
instrument in writing signed by the Administrative Lender and, in the case of an
amendment, by the Borrower.
Section 11.12 Exception to Covenants. Neither the Borrower nor any
Subsidiary shall be deemed to be permitted to take any action or fail to take
any action which is permitted as an exception to any of the covenants contained
herein or which is within the permissible limits of any of the covenants
contained herein if such action or omission would result in the breach of any
other covenant contained herein.
Section 11.13 No Liability of Issuing Bank. The Borrower assumes all
risks of the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. Neither the Issuing
Bank nor any Lender nor any of their respective officers or directors shall be
liable or responsible for: (a) the use that may be made of any Letter of Credit
or any acts or omissions of any beneficiary or transferee in connection
therewith; (b) the validity, sufficiency or genuineness of documents, or of any
endorsement thereon, even if such documents should prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (c) payment by the Issuing
Bank against presentation of documents that do not comply with the terms of a
Letter of Credit, including failure of any documents to bear any reference or
adequate reference to the Letter of Credit, except for any payment made upon the
Issuing Bank's gross negligence or willful misconduct; or (d) any other
circumstances whatsoever in making or failing to make payment under any Letter
of Credit, except that the Borrower shall have a claim against the Issuing Bank,
and the Issuing Bank shall be liable to the Borrower, to the extent of any
direct, but not consequential, damages suffered by the Borrower that the
Borrower proves were caused by (i) the Issuing Bank's willful misconduct or
gross negligence in determining whether documents presented under any Letter of
Credit comply with the terms of the Letter of Credit or (ii) the Issuing Bank's
willful failure to make lawful payment under a Letter of Credit after the
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presentation to it of a draft and certificates strictly complying with the terms
and conditions of the Letter of Credit. In furtherance and not in limitation of
the foregoing, the Issuing Bank may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary.
Section 11.14 Confidentiality Agreement. Each Lender shall,
simultaneously with becoming a party to this Agreement, sign the Confidentiality
Agreement.
Section 11.15 Co-Agents. The Borrower and the Lenders acknowledge that
the Co-Agents have no duties, responsibilities or liabilities in their
capacities as Co-Agents hereunder.
SECTION 11.16 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
TEXAS; PROVIDED, HOWEVER, THAT PURSUANT TO SECTION 346.004 OF THE TEXAS FINANCE
CODE, AS AMENDED, IT IS AGREED THAT THE PROVISIONS OF CHAPTER 346 OF THE TEXAS
FINANCE CODE, AS AMENDED, SHALL NOT APPLY TO THE ADVANCES, THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS. THE LOAN DOCUMENTS ARE PERFORMABLE IN DALLAS, DALLAS
COUNTY, TEXAS, AND BORROWER AND EACH SURETY, GUARANTOR, ENDORSER AND ANY OTHER
PARTY EVER LIABLE FOR PAYMENT OF ANY MONEY PAYABLE WITH RESPECT TO THE LOAN
DOCUMENTS (OTHER THAN THE LENDERS), JOINTLY AND SEVERALLY WAIVE THE RIGHT TO BE
SUED ELSEWHERE. THE BORROWER AND EACH LENDER AGREE THAT THE STATE AND FEDERAL
COURTS OF TEXAS LOCATED IN DALLAS, TEXAS SHALL HAVE NON-EXCLUSIVE JURISDICTION
OVER PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 11.17 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
ADMINISTRATIVE LENDER AND THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY
AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO
ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS
PROVISION IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING INTO THIS AGREEMENT
AND MAKING ANY ADVANCES HEREUNDER.
SECTION 11.18 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
-76-
<PAGE>
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
================================================================================
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
================================================================================
-77-
<PAGE>
IN WITNESS WHEREOF, this Credit Agreement is executed as of the date first
set forth above.
BORROWER: CompUSA Inc.
By: /s/ ROBERT GARY
------------------------------
Name: Robert Gary
Title: Vice President-Finance
-78-
<PAGE>
ADMINISTRATIVE LENDER: NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender
By: /s/ SHARON M. ELLIS
------------------------------
Name: Sharon M. Ellis
Title: Vice President
LENDERS: NATIONSBANK OF TEXAS, N.A.,
as a Lender
Specified Percentage:
11.66666667%
By: /s/ SHARON M. ELLIS
------------------------------
Name: Sharon M. Ellis
Title: Vice President
901 Main Street, 67th Floor
Dallas, Texas 75202
Attn: Sharon M. Ellis
Vice President
-79-
<PAGE>
WELLS FARGO BANK (TEXAS), N.A.,
as a Co-Agent and as a Lender
Specified Percentage:
10.00000000%
By: /s/ MARY JO HOCH
------------------------------
Mary Jo Hoch
Vice President
1445 Ross Avenue, 3rd Floor
Dallas, Texas 75202
Attn: Mary Jo Hoch
Vice President
-80-
<PAGE>
HIBERNIA NATIONAL BANK,
as a Co-Agent and as a Lender
Specified Percentage:
9.66666667%
By: /s/ CHRISTOPHER B. PITRE
-------------------------------
Name: Christopher B. Pitre
--------------------------
Title: Assistant Vice President
-------------------------
313 Carondelet Street
New Orleans, Louisiana 70130
Attn: Christopher Pitre
Assistant Vice President
-81-
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH,
as a Co-Agent and as a Lender
Specified Percentage:
9.66666667%
By: /s/ ROBERT IVOSEVICH
------------------------------
Name: Robert Ivosevich
-------------------------
Title: Senior Vice President
------------------------
1301 Avenue of the Americas
New York, New York 10019
Attn: Ron Finn
with a copy to:
2200 Ross Avenue, Suite 4400 West
Dallas, Texas 75201
Attn: Robert Smith
-82-
<PAGE>
CREDIT SUISSE FIRST BOSTON,
as a Co-Agent and as a Lender
Specified Percentage:
9.66666667%
By: /s/ ROBERT N. FINNEY
------------------------------
Name: Robert N. Finney
-------------------------
Title: Managing Director
------------------------
By: /s/ THOMAS G. MUOIO
------------------------------
Name: Thomas G. Muoio
-------------------------
Title: Vice President
------------------------
Eleven Madison Avenue
New York, New York 10010
Attn: Thomas G. Muoio
Vice President
-83-
<PAGE>
FLEET NATIONAL BANK,
as a Co-Agent and as a Lender
Specified Percentage:
9.66666667%
By: /s/ DEANNE HORN
-------------------------------
Name: Deanne Horn
--------------------------
Title: Assistant Vice President
-------------------------
One Federal Street
Mail Code: MA OF D07I
Boston, Massachusetts 02110
Attn: Tom Bullard
Vice President
-84-
<PAGE>
BANK OF AMERICA NT&SA,
as a Co-Agent and as a Lender
Specified Percentage:
9.66666667%
By: /s/ J. CASEY COSGROVE
-------------------------------
Name: J. Casey Cosgrove
--------------------------
Title: Assistant Vice President
-------------------------
By: /s/ JODY A. PRITCHARD
-------------------------------
Name: Jody A. Pritchard
--------------------------
Title: Vice President
-------------------------
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Casey Cosgrove
Assistant Vice President
-85-
<PAGE>
FIRST UNION NATIONAL BANK
Specified Percentage:
5.00000000%
By: /s/ JORGE GONZALES
------------------------------
Name: Jorge Gonzales
-------------------------
Title: Sr. Vice President
------------------------
One First Union Center
301 South College Street
Charlotte, North Carolina 28288
Attn: David K. Sharp
Associate
-86-
<PAGE>
FIFTH THIRD BANK
Specified Percentage:
5.00000000%
By: /s/ A. K. HAUCK
------------------------------
Name: A. K. Hauck
-------------------------
Title: Vice President
------------------------
38 Fountain Square
Maildrop 109054
Cincinnati, Ohio 45263
Attn: Anne M. Koch
National Account Officer
-87-
<PAGE>
THE BANK OF NOVA SCOTIA
Specified Percentage:
5.00000000%
By: /s/ F.C.H. ASHBY
------------------------------
Name: F.C.H. Ashby
-------------------------
Title: Senior Manager,
------------------------
Loan Operations
------------------------
600 Peachtree Street N.E.,
Suite 2700
Atlanta, Georgia 30308
Attn: F.C.H. Ashby
Senior Manager Loan Ops.
with a copy to:
1100 Louisiana, Suite 3000
Houston, Texas 77002
Attn: Gregory E. George
Relationship Manager
-88-
<PAGE>
CHASE BANK OF TEXAS NATIONAL
ASSOCIATION
Specified Percentage:
5.00000000%
By: /s/ JAMES E. PERRY
------------------------------
Name: James E. Perry
-------------------------
Title: Vice President
------------------------
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
Attn: James Perry
Vice President
-89-
<PAGE>
THE BANK OF NEW YORK
Specified Percentage:
5.00000000%
By: /s/ CHARLOTTE SOHN
------------------------------
Name: Charlotte Sohn
-------------------------
Title: Vice President
------------------------
One Wall Street, 8th Floor
New York, New York 10286
Attn: Charlotte Sohn
Vice President
-90-
<PAGE>
BANK ONE, TEXAS, N.A.
Specified Percentage:
5.00000000%
By: /s/ RICK ROGERS
------------------------------
Name: Rick Rogers
-------------------------
Title:
------------------------
1717 Main Street, 3rd Floor
Dallas, Texas 75201
Attn: Rick Rogers
-91-
<PAGE>
SCHEDULE 1
----------
LIBOR LENDING OFFICES
NATIONSBANK OF TEXAS, N.A.
901 Main Street, 67th Floor
Dallas, Texas 75202
Hibernia National Bank
313 Carondelet Street
New Orleans, Louisiana 70130
First Union National Bank
One First Union Center
301 South College Street
Charlotte, North Carolina 28288
Fifth Third Bank
38 Fountain Square
Maildrop 109054
Cincinnati, Ohio 45263
Wells Fargo Bank (Texas), N.A.
1445 Ross Avenue, 3rd Floor
Dallas, Texas 75202
The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street N.E., Suite 2700
Atlanta, Georgia 30308
Chase Bank of Texas National Association
2200 Ross Avenue, 3rd Floor
Dallas, Texas 75201
<PAGE>
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Credit Suisse First Boston
Eleven Madison Avenue
New York, New York 10010
Fleet National Bank
One Federal Street
Mail Code: MA OF D07I
Boston, Massachusetts 02110
The Bank of New York
One Wall Street, 8th Floor
New York, New York 10286
Bank of America NT&SA
231 South LaSalle Street
Chicago, Illinois 60697
Bank One, Texas, N.A.
1717 Main Street, 3rd Floor
Dallas, Texas 75201
-93-
<PAGE>
SCHEDULE 2
----------
EXISTING LIENS
PROPERTY SUBJECT AMOUNT OF
TO LIEN LIENHOLDER DEBT SECURED MATURITY DATE
------- ---------- ------------ -------------
NONE
<PAGE>
SCHEDULE 3
----------
EXISTING LITIGATION
AND MATERIAL LIABILITIES
In November 1995, James Littau and Frederick Goldberg brought a putative
class action against seven personal computer retailers, including the Borrower,
seeking recovery under the California Business and Professions Code (S)17500 et
seq., the California Business and Professions Code (S)17200 et seq. and the
Consumer Legal Remedies Act, California Civil Code (S) 1750 et seq. The
complaint alleges that the defendants falsely advertised the value of software
bundled with personal computer systems sold by the defendants. Plaintiffs seek
an injunction and unspecified amounts for restitution of the difference between
the value of the bundled software as advertised and the alleged actual value
thereof, compensatory damages, punitive damages and attorneys' fees. Although
mediation/settlement discussions are proceeding under court direction, the
Borrower believes the claims are without merit and intends to contest them
vigorously if acceptable resolution cannot be attained in the
mediation/settlement discussions.
In December 1995, two previously filed putative class actions were
consolidated in a California state court, both of which named the Borrower and,
numerous other manufacturers and retailer-. of computer monitors, alleging that
the defendants had falsely advertised the size of computer monitor screens (the
"Monitor Litigation"). In March 1996, a master consolidated class action
complaint was filed in the Monitor Litigation with the same basic allegations.
Plaintiffs seek an injunction, replacement of the allegedly defective monitors
with substitutes of the advertised size and unspecified amounts for restitution,
compensatory damages, punitive damages and attorneys' fees. Certain defense
motions have been granted, with the effect that only non-California plaintiffs
still have viable causes of action against the defendants. Because none of the
remaining named plaintiffs are California residents, the defendants intend to
file further motions to dispose of the action completely. A proposed settlement
of this litigation was approved by the court on April 13, 1997. Final approval
of the settlement, which has not yet occurred, should resolve the pending
litigation.
In May 1996, Daniel Suib and June Suib filed a lawsuit against certain
defendants, including the lessor of one of the Borrower's stores, alleging
claims of negligence and loss of consortium. Although the Borrower is not a
party to the lawsuit, which seeks $18,000,000 in damages, plaintiffs allege that
the acts complained of took place on premises leased and occupied by the
Borrower. The Borrower may be potentially liable for indemnification of the
lessor under the lease agreement, since the lease contains an indemnification
clause that arguably covers plaintiffs' claims. The Borrower's insurance carrier
is defending the claim against the lessor pursuant to the Borrower's policy of
insurance.
<PAGE>
SCHEDULE 4
----------
SUBSIDIARIES
<TABLE>
<CAPTION>
State of Percentage
Name Incorporation of Ownership Parent
- ---- ------------- ------------ ------
<S> <C> <C> <C>
CompTeam Inc. Delaware corporation 100% CompUSA Inc.
CompUSA Holdings I Inc. Delaware corporation 100% CompUSA Inc.
CompUSA Holdings II Inc. Delaware corporation 100% CompUSA Inc.
PCs Compleat Inc.
(CompUSA Direct) Delaware corporation 100% CompUSA Inc.
CompUSA Management Company Delaware business trust 100% CompUSA Inc.
CompUSA Holdings Company Delaware business trust 100% CompUSA Inc.
CompUSA Stores L.P. Texas limited partnership 1% CompUSA Inc.
(general partner)
99% CompUSA Holdings Company
(limited partner)
</TABLE>
<PAGE>
SCHEDULE 5
----------
EXISTING INVESTMENTS
The Investments made by the Borrower (or any Subsidiary) in connection
with that certain Investment Agreement, dated May 15, 1996, among InfoSource,
Inc., a Florida corporation ("InfoSource"), Blackwell Publishers, Inc., a
Delaware corporation, D. Michael Werner, Thomas W. Warner, the Borrower and
CompUSA Holdings II Inc., a Delaware corporation, which Investments include: a
purchase of 111 shares of the common stock of InfoSource, par value $1.00 per
share ("InfoSource Common Stock"); Warrant #1 issued by InfoSource to purchase
139 shares of InfoSource Common Stock; Warrant #2 to purchase 179 shares of
InfoSource Common Stock; and the Option to purchase all remaining shares of
InfoSource Common Stock; provided, that, this exception shall not include any
amounts that may be paid by the Borrower (or any Subsidiary) in connection with
exercising its rights under the referenced warrants and option. Any payments not
to exceed $3,000,000 by Borrower pursuant to that certain Courseware Supply
Agreement dated May 15, 1996, by and between InfoSource, Inc., and Borrower are
permitted hereunder and shall not be construed as an Investment under Section
7.3(f).
Further, any Investment in InfoSource held by the Borrower (or any
Subsidiary) as a result of exercise of rights under the referenced warrants and
option or as a result of any exchange, substitution or modification of the
existing Investment described in the preceding paragraph or as a result of any
other acquisition of additional Investment in InfoSource shall not be treated as
an existing Investment on this Schedule 5, and shall be treated as an Investment
under Section 7.3(f) only to the extent of the amounts paid in connection with
any such exercise, exchange, substitution, modification or acquisition
(calculated on a net basis by taking into account any proceeds received by the
Borrower or any Restricted Subsidiary on a liquidation or replacement of such
Investment).
<PAGE>
SCHEDULE 6
----------
EXISTING INDEBTEDNESS
NONE
<PAGE>
SCHEDULE 7
----------
CONSENTS AND APPROVALS
NONE
<PAGE>
SCHEDULES 8 AND 9
-----------------
STATUS OF GOOD STANDING AND EXISTENCE/AUTHORITY
COMPUSA INC., A DELAWARE CORPORATION
Alabama Montana
Alaska Nebraska
Arizona New Hampshire
Arkansas New Jersey
California New Mexico
Colorado New York
Connecticut Nevada
Delaware North Carolina
District of Columbia North Dakota
Florida Ohio
Georgia Oklahoma
Hawaii Oregon
Idaho Pennsylvania
Illinois Rhode Island
Indiana South Carolina
Iowa South Dakota
Kansas Tennessee
Kentucky Texas
Louisiana Utah
Maine Vermont
Maryland Virginia
Massachusetts Washington
Michigan West Virginia
Minnesota Wisconsin
Mississippi Wyoming
Missouri
COMPUSA HOLDINGS II INC., A DELAWARE CORPORATION
Delaware
PCS COMPLEAT, INC., A DELAWARE CORPORATION (D/B/A COMPUSA DIRECT)
Delaware
Massachusetts
COMPUSA HOLDINGS I INC., A DELAWARE CORPORATION
Delaware
COMPUSA HOLDINGS COMPANY, A DELAWARE BUSINESS TRUST
Delaware
COMPUSA MANAGEMENT COMPANY, A DELAWARE BUSINESS TRUST
Colorado Georgia
Delaware Maryland
Florida New York
Ohio
COMPUSA STORES L.P., A TEXAS LIMITED PARTNERSHIP
Alabama Missouri
Alaska Montana
Arizona Nebraska
Arkansas New Hampshire
California New Jersey
Colorado New Mexico
Connecticut New York
Delaware Nevada
District of Columbia North Carolina
Florida Ohio
Georgia Oklahoma
Hawaii Oregon
Idaho Pennsylvania
Illinois Rhode Island
Indiana South Carolina
Iowa South Dakota
Kansas Tennessee
Kentucky Texas
Louisiana Utah
Maine Vermont
Maryland Virginia
Massachusetts Washington
Michigan West Virginia
Minnesota Wisconsin
Mississippi Wyoming
COMPTEAM INC., A DELAWARE CORPORATION
Alabama Minnesota
Alaska Mississippi
Arizona Missouri
California New Hampshire
Colorado New Jersey
Connecticut New Mexico
Delaware New York
District of Columbia Nevada
Florida North Carolina
Georgia Ohio
Hawaii Oklahoma
Idaho Oregon
Illinois Pennsylvania
Indiana Rhode Island
Iowa Tennessee
Kansas Texas
Louisiana Utah
Maine Virginia
Maryland Washington
Massachusetts West Virginia
Michigan Wisconsin
<PAGE>
SCHEDULE 10
-----------
EXISTING LETTERS OF CREDIT
NONE
<PAGE>
SCHEDULE 11
-----------
COMPUSA INC.
INVESTMENT POLICY AND GUIDELINES
PURPOSE
- -------
To establish corporate guidelines and responsibilities regarding the investment
of surplus cash balances.
OBJECTIVE
- ---------
To utilize cash not immediately required by operations with the principal
objective of capital preservation and the following secondary objectives:
- maintaining liquidity
- maximizing return
- reducing tax liability
INVESTMENT RESPONSIBILITY
- -------------------------
A. The Chief Financial Officer shall be responsible to:
1. Review and approve the Company's investment policy.
2. Review monthly investment reports for performance and compliance
with the investment policy.
3. Approve all relationships with banks and other financial
institutions established by the Cash Management Manager for the
purpose of conducting the investment program.
B. Vice President of Finance and Planning
1. Review and approve the Company's investment policy.
2. Review weekly investment reports for performance and compliance
with the investment policy.
3. Approve all relationships with banks and other financial
institutions established by the Cash Management Manager for the
purpose of conducting the investment program.
4. Approve control systems and procedures relating to, among other
things, segregation of duties related to the conduct of and
accounting for investment activity.
C. The Cash Management Manager
1. Conduct an investment program in accordance with these guidelines.
Such activity includes, but is not limited to:
- opening accounts with brokers and dealers
- establishing safekeeping accounts or making other arrangements
for the custody of securities.
- preparing such documents as may be necessary to carry out the
investment program.
- reporting periodically on investment transactions and portfolio
holdings.
2. Delegate responsibility and authority as he deems appropriate and
necessary to execute transactions.
3. Review and recommend modifications to the investment guidelines as
conditions warrant, but at least annually, subject to approval by
the Chief Financial Officer and the Vice President of Finance and
Planning.
SAFEKEEPING
- -----------
Securities purchased by the Company will generally be delivered against payment
and held in a custodian, safekeeping account or a brokers segregated account
in order to protect the Company's assets. Repurchase transactions shall only be
entered into pursuant to a written Repurchase Agreement with an approved counter
party, as listed on Exhibit A, and such written Repurchase Agreement and related
confirmation shall identify the underlying security and the arrangements for
custody thereof.
BROKERS/DEALERS
- ---------------
The Company may open and maintain a securities cash account with any nationally
recognized member of the National Association of Securities Dealers that
provides customer insurance through the Securities Industry Protection
Corporation (SIPC), or any approved commercial bank for the purpose of
purchasing and selling securities.
HEDGING
- -------
No hedging is permitted.
POLICY
- ------
Permissable Instruments
- - Treasurer Bills, notes, bonds, or other obligations of the U.S. Government or
agency securities guaranteed by the U.S. Government (excluding farm credits)
and maturing less than one year after the date of purchase.
- - Bankers' Acceptances and Certificates of Deposit which have one of the two
highest ratings obtainable from Moody's Investor Services or Standard & Poor's
Corporation.
- - Repurchase Agreements backed by obligations of the U.S. Government or its
agencies, with an approved counter party.
- - Money Market (mutual or similar) Fund Shares of an approved domestic bank or
financial institution with assets of one billion dollars or more, as listed on
Exhibit A.
- - Commercial Paper rated A1 by Standard & Poor's or P1 by Moody's Investor
Services and/or F-1 by Fitch and issued by U.S. corporations with maturities
not more than 270 days after the date of creation.
- - Eurodollar Deposits (off-shore dollar certificates of deposit).
- - Municipal Notes and Bonds, and tax exempt variable rate demand notes rated
Aaa, Aa, A, A1P1 or MIG-1 by Moody's or Standard & Poor's.*
- - Money market preferred stock rated investment grade or better (BBB) by Moody's
or Standard & Poor's; provided such instruments have not been downgraded
within one year and are not on the Standard & Poor's credit watch with
negative implications.
* or equivalent rating
Constraints
- - Banks and other financial institutions will be limited to those listed in
Exhibit A.
- - Each bank, ranked by assets, must be one of the fifty largest commercial banks
in the United States.
- - Each investment bank or its parent must be rated A or better by Moody's or
Standard & Poor's.
- - Additionally, each institution must be operationally profitable and
financially sound as determined by current financial statements.
- - Financial statements will be evaluated on an annual basis.
- - Must have an active market in the securities.
No derivative securities may be purchased without the prior approval of
the Chief Financial Officer.
Portfolio Diversification
Investment in U.S. Treasury securities are unrestricted.
Investments with issuers rated AAA may not exceed $10 million.
Investments with issuers rated AA may not exceed $7.5 million.
Investments with issuers rated A may not exceed $5 million.
Investments with issuers rated BBB may not exceed $3 million.
Money Market Fund Shares not to exceed $30 million in aggregate amount.
SHORT TERM CASH INVESTMENT
PORTFOLIO GUIDELINES
<TABLE>
<CAPTION>
Instrument Liquidity/Marketability Risk Assessment Suitability For
- ---------- ----------------------- --------------- ---------------
<S> <C> <C> <C>
Commercial Paper Active Secondary Market Creditworthiness of issuer Suitable-if issuer is rated at least
Unsecured promissory note A-1 by Standard & Poor's or P-1 by
Moody's Investor Services and/or F-1
by Fitch.
Fixed Time Deposit Non-negotiable; very short Creditworthiness of bank. Suitable - if maturity is 14 days or
term - overnight to 14 days Unsecured deposit. less and bank is ranked among top
50 U.S. commercial banks and has a
short term debt rating at or better
than the following: Moody's: P-1,
S&P; A1, IBCA; A1.
Corporate Bonds/ Active Secondary Market Credit worthiness of issuer. Suitable-if issuer is U.S.
Medium Term Notes Rated by credit agencies. corporation, bond matures in less
(maturing within one Similar to commercial paper. than 360 days, issuer is AA long
year) rated and has A-1 commercial paper
rating.
Money Market Notes Market Makers provide Risk of failed auction for Suitable-if issuer is rated A-1 for
Secondary Bid Market reset date. Credit worthiness commercial paper or AA or A long
of issuer. term credit rating; market auction
Money Market Preferred Money Makers provide Risk of failed auction for Suitable-MMP's are segregated into
Secondary Bid Market reset of rate each 49 days; these "types"-collateralized,
salability impacted. industrial and utilities. They are
Creditworthiness of issuer. suitable if they are given the
May be collateralized by following ratings or better:
government securities of LOC.
MMP's Moody's S&P
----- ------- ---
Industrial A A
Collateralized AAA AAA
Utilities BBB BBB
Treasury Securities Active Secondary Market Default-free obligation of Suitable-without restriction.
U.S. Treasury.
Federal Agency Active Secondary Market Some (but not all) securities Suitable-if guaranteed by the U.S.
Securities backed by full faith and Government or issued by Federal
credit of U.S. government. agencies limited to Federal Farm
Credit Bank, Federal Home Loan Bank,
and Federal National Mortgage
Association (discount notes only).
Municipal Securities Action Secondary Market Creditworthiness of issuer; Suitable-if rated at or better than
usually rated by credit one of the following ratings by
agency; may be backed by LOC. either Moody's or Standard & Poor's;
Moody's S&P
------- ---
Short-term MIGI/WMIGI SPI
PI AI
Long-term A A
Repurchase Agreement Usually less than 30 days Usually collateralized by Suitable-if maturity less than 30
Treasury securities; may be days and fully collateralized on a
considered secured loan yield basis by Treasury securities
versus actual security or other acceptable money market
purchase. instrument as defined herein.
Bankers Acceptances Active Secondary Market Creditworthiness of accepting All bank investments are limited to
bank, title to goods and the top 50 U.S. commercial banks
creditworthiness of issuer (ranked by assets) and that have
and payor. a short-term debt ratings equal to
or better than the following
ratings:
Moody's S&P IBCA
------- --- ----
P-1 A-1 A-1
Negotiable CD's Active Secondary Market Creditworthiness of issuing Suitable-same requirements as BA's.
bank. Unsecured deposit.
</TABLE>
<PAGE>
SCHEDULE 12
-----------
EXISTING STORE LOCATIONS
<TABLE>
<CAPTION>
=====================================================================================================
STANDARDIZED STORE
INFORMATION
=====================================================================================================
STORE STORE NAME STREET ADDRESS CITY STATE ZIP
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
354 Columbia 6171 Columbia Crossing Circle Columbia MD 21046
364 North Sacramento 1251 Lead Hill Road Roseville CA 95661
373 Braintree 500 Grossman Dr. Braintree MA 02184
381 Vienna 8357 Leesburg Pike Vienna VA 22180
</TABLE>
<PAGE>
EXHIBIT A
PROMISSORY NOTE
---------------
Dallas, Texas $ March 14, 1998
--------------
CompUSA Inc., a Delaware corporation (the "Borrower"), for value received,
promises to pay to the order of _____________________________________________
("Lender"), at the principal office of NationsBank of Texas, N.A., in lawful
money of the United States of America, the principal sum of
_______________________________________ DOLLARS ($_____________), or such lesser
sum as shall be due and payable from time to time hereunder, as hereinafter
provided. All terms used but not defined herein shall have the meanings set
forth in the Credit Agreement described below.
Principal of and interest on the unpaid principal balance of Advances under
this Note from time to time outstanding shall be due and payable as set forth in
the Credit Agreement.
This Note is issued pursuant to and evidences Advances under a Second
Amended and Restated Credit Agreement, dated as of March 14, 1998, among the
Borrower, NationsBank of Texas, N.A., as Administrative Lender, certain Co-
Agents and the lenders parties thereto (as amended, restated, supplemented,
renewed, extended or otherwise modified from time to time, "Credit Agreement"),
to which reference is made for a statement of the rights and obligations of the
Lender and the duties and obligations of the Borrower in relation thereto; but
neither this reference to the Credit Agreement nor any provision thereof shall
affect or impair the absolute and unconditional obligation of the Borrower to
pay the principal sum of and interest on this Note when due.
The Borrower and all endorsers, sureties and guarantors of this Note
(without waiving any notice that any Lender is specifically required to give
pursuant to Section 8.1 of the Credit Agreement) hereby severally waive demand,
presentment for payment, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, notice of acceleration of this Note,
diligence in collecting, the bringing of any suit against any party and any
notice of or defense on account of any extensions, renewals, partial payments or
changes in any manner of or in this Note or in any of its terms, provisions and
covenants, or any releases or substitutions of any security, or any delay,
indulgence or other act of any trustee or any holder hereof, whether before or
after maturity.
THIS NOTE, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT
----------------------
INITIALLED FOR
IDENTIFICATION
<PAGE>
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
CompUSA Inc.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
----------------------
-2- INITIALLED FOR
IDENTIFICATION
<PAGE>
EXHIBIT B
SUBSIDIARY GUARANTY
-------------------
THIS SUBSIDIARY GUARANTY, dated as of March 14, 1998 (this "Guaranty"), is
made by CompUSA Holdings II Inc., a Delaware corporation, PCs Compleat, Inc., a
Delaware corporation, CompUSA Holdings I Inc., a Delaware corporation, CompTeam
Inc., a Delaware corporation, CompUSA Management Company, a Delaware business
trust, CompUSA Stores L.P., a Texas limited partnership, and CompUSA Holdings
Company, a Delaware business trust (the "Guarantors"), of the obligations of
CompUSA Inc., a Delaware corporation ("Company"), under the Credit Agreement
(defined below) among the Company, NationsBank of Texas, N.A. as Administrative
Lender ("Administrative Lender"), and the lenders that are parties to the Credit
Agreement (singly, a "Lender" and collectively, the "Lenders").
BACKGROUND
----------
1. The Company, the Administrative Lender, certain Co-Agents and the
Lenders have entered into a Second Amended and Restated Credit Agreement, dated
as of March 14, 1998 (said Credit Agreement, as it may hereafter be amended or
otherwise modified from time to time, being the "Credit Agreement"). The
capitalized terms not otherwise defined herein have the meanings specified in
the Credit Agreement.
2. Pursuant to the Credit Agreement, the Company may, subject to the terms
of the Credit Agreement and the other Loan Documents, request that the Lenders
make Advances.
3. It is a requirement of Section 7.3(b) of the Credit Agreement that each
Guarantor guarantee repayment of the Obligations upon the terms and conditions
set forth herein.
4. The Board of Directors or regular trustees of either each Guarantor or
its general partner, as appropriate, has determined that the execution,
delivery, and performance of this Guaranty is necessary and convenient to the
conduct, promotion, and attainment of each such Guarantor's business.
5. The Guarantors desire to induce the Lenders to make such Advances,
which may reasonably be expected to benefit, directly or indirectly, each
Guarantor.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Lenders to make Advances under the Credit Agreement, the Guarantors hereby agree
as follows:
1. Guaranty.
(a) Each Guarantor, jointly and severally, hereby unconditionally
guarantees the punctual payment of, and promises to pay, when due, whether
at stated maturity, by mandatory prepayment, by acceleration or otherwise,
all obligations, indebtedness and
<PAGE>
liabilities, and all rearrangements, renewals and extensions of all or any
part thereof, of the Company or any Subsidiary now or hereafter arising
from, by virtue of or pursuant to the Credit Agreement, the Notes, any
other Loan Document, and any and all renewals and extensions thereof, or
any part thereof, or future amendments thereto, whether for principal,
interest (including, without limitation, interest, fees and other charges
that would accrue or become owing both prior to and subsequent to and but
for the commencement of any proceeding against or with respect to the
Company under any chapter of the Bankruptcy Code of 1978, 11 U.S.C. (S)101
et seq. whether or not a claim is allowed for the same in any such
proceeding), premium, fees, commissions, expenses or otherwise (such
obligations being the "Obligation"), and agrees to pay any and all
reasonable expenses (including reasonable counsel fees and expenses)
incurred in enforcement or collection of all or any part thereof, whether
such obligations, indebtedness and liabilities are direct, indirect, fixed,
contingent, joint, several or joint and several, and any rights under this
Guaranty.
(b) Anything contained in this Guaranty to the contrary
notwithstanding, the obligations of each Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the largest amount that
would not render its obligations hereunder subject to avoidance as a
fraudulent transfer or conveyance under Section 548 of Title 11 of the
United States Code or any applicable provisions of comparable state law
(collectively, the "Fraudulent Transfer Laws"), in each case after giving
effect to all other liabilities of such Guarantor, contingent or otherwise,
that are relevant under the Fraudulent Transfer Laws (specifically
excluding, however, any liabilities of such Guarantor in respect of
intercompany indebtedness to the Company or other Affiliates of the Company
to the extent that such indebtedness would be discharged in an amount equal
to the amount paid by such Guarantor hereunder) and after giving effect as
assets to the value (as determined under the applicable provisions of the
Fraudulent Transfer Laws) of any rights to subrogation or contribution of
such Guarantor pursuant to (i) Applicable Law or (ii) any agreement
providing for an equitable allocation among such Guarantor and other
Affiliates of the Company of obligations arising under guaranties by such
parties (such limitation being the "Cap").
2. Guaranty Absolute. The Guarantors guarantee that the Obligation will
be paid strictly in accordance with the terms of the Credit Agreement, the
Notes, and the other Loan Documents, regardless of any Applicable Law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Lender with respect thereto; provided,
however, nothing contained in this Guaranty shall require the Guarantors to make
any payment under this Guaranty in violation of any Applicable Law, regulation
or order now or hereafter in effect. The obligations and liabilities of each
Guarantor hereunder are independent of the obligations of the Company under the
Credit Agreement and any Applicable Law. The liability of each Guarantor under
this Guaranty shall be absolute and unconditional irrespective of:
(a) the taking or accepting of any other security or guaranty for any
or all of the Obligations, including any reduction or termination of any
Commitment;
- 2 -
<PAGE>
(b) any increase, reduction or payment in full at any time or from
time to time of any part of the Obligation;
(c) any lack of validity or enforceability of the Credit Agreement,
the Notes, or any other Loan Document or other agreement or instrument
relating thereto, including but not limited by the unenforceability of all
or any part of the Obligation by reason of the fact that (i) the
Obligation, and/or the interest paid or payable with respect thereto,
exceeds the amount permitted by Applicable Law, (ii) the act of creating
the Obligation, or any part thereof, is ultra vires, (iii) the officers
creating same acted in excess of their authority, or (iv) for any other
reason;
(d) any lack of corporate power of the Company or any other Person at
any time liable for the payment of any or all of the Obligation;
(e) any insolvency, bankruptcy, reorganization, receivership or other
proceeding under any applicable liquidation, conservatorship, bankruptcy,
moratorium, arrangement, receivership, insolvency, reorganization, or
similar laws from time to time in effect affecting the rights of creditors
generally (collectively, "Debtor Relief Laws") involving the Company, any
Guarantor or any other Person obligated on any of the Obligation;
(f) any renewal, compromise, extension, acceleration or other change
in the time, manner or place of payment of, or in any other term of, all or
any of the Obligation; any adjustment, indulgence, forbearance, or
compromise that may be granted or given by any Lender or the Administrative
Lender to the Company, any Guarantor, or any Person at any time liable for
the payment of any or all of the Obligation; or any other modification,
amendment, or waiver of or any consent to departure from the Credit
Agreement, the Notes, or any other Loan Document and other agreement or
instrument relating thereto without notification of any Guarantor (the
right to such notification being herein specifically waived by Guarantors);
(g) any exchange, release, sale, subordination, or non-perfection of
any collateral or Lien therein or any lack of validity or enforceability or
change in priority, destruction, reduction, or loss or impairment of value
of any collateral or Lien therein;
(h) any release or amendment or waiver of or consent to departure from
any other guaranty for all or any of the Obligation;
(i) the failure by any Lender or the Administrative Lender to make any
demand upon or to bring any legal, equitable, or other action against the
Company or any other Person (including without limitation any other
Guarantor), or the failure or delay by any Lender or the Administrative
Lender to, or the manner in which any Lender or the Administrative Lender
shall, proceed to exhaust rights against any direct or indirect security
for the Obligation;
- 3 -
<PAGE>
(j) the existence of any claim, defense, set-off, or other rights
which the Company or any Guarantor may have at any time against the
Company, the Lenders, or any Guarantor, or any other Person, whether in
connection with this Guaranty, the Loan Documents, the transactions
contemplated thereby, or any other transaction;
(k) any failure of any Lender or the Administrative Lender to notify
any Guarantor of any renewal, extension, or assignment of the Obligation or
any part thereof, or the release of any security, or of any other action
taken or refrained from being taken by any Lender or the Administrative
Lender, it being understood that the Lenders and the Administrative Lender
shall not be required to give any Guarantor any notice of any kind under
any circumstances whatsoever with respect to or in connection with the
Obligation;
(l) any payment by the Company to the Lenders or the Administrative
Lender is held to constitute a preference under any Debtor Relief Law or if
for any other reason the Lenders or the Administrative Lender is required
to refund such payment or pay the amount thereof to another Person; or
(m) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Company, any Guarantor, any other
guarantor or other Person liable on the Obligation, including without
limitation any defense by reason of any disability or other defense of the
Company, or the cessation from any cause whatsoever of the liability of the
Company, or any claim that the Guarantors' obligations hereunder exceed or
are more burdensome than those of the Company.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Obligation is rescinded or must
otherwise be returned by any Lender or any other Person upon the insolvency,
bankruptcy or reorganization of the Company, any Guarantor or otherwise, all as
though such payment had not been made.
3. Waiver. To the extent not prohibited by Applicable Law, each
Guarantor hereby waives: (a) promptness, protests, diligence, presentments,
acceptance, performance, demands for performance, notices of nonperformance,
notices of protests, notices of dishonor, notices of acceptance of this Guaranty
and of the existence, creation or incurrence of new or additional indebtedness,
and any of the events described in Section 2 and of any other occurrence or
matter with respect to any of the Obligation, this Guaranty or any of the other
Loan Documents; (b) any requirement that the Administrative Lender or any Lender
protect, secure, perfect, or insure any Lien or security interest or any
property subject thereto or exhaust any right or take any action against the
Company or any other Person or any collateral or pursue any other remedy in the
Administrative Lender's or any Lender's power whatsoever; (c) any right to
assert against the Administrative Lender or any Lender as a counterclaim, set-
off or cross-claim, any counterclaim, set-off or claim which it may now or
hereafter have against the Company or other Person liable on the Obligation; (d)
any right to seek or enforce any remedy or right that the Administrative Lender
or any Lender now has or may hereafter have against the Company (to the extent
permitted by Applicable Law); (e) any right to participate in any collateral or
any right benefiting the Administrative Lender or the Lenders in respect of the
Obligation; and (f) any right by which
- 4 -
<PAGE>
it might be entitled to require suit on an accrued right of action in respect of
any of the Obligation or require suit against the Company or any other Person,
whether arising pursuant to Section 34.02 of the Texas Business and Commerce
Code, as amended, Section 17.001 of the Texas Civil Practice and Remedies Code,
as amended, Rule 31 of the Texas Rules of Civil Procedure, as amended, or
otherwise.
4. Subrogation and Subordination.
(a) Subrogation. Notwithstanding any reference to subrogation contained
herein to the contrary, each Guarantor hereby irrevocably waives any claim or
other rights which it may have or hereafter acquire against the Company that
arise from the existence, payment, performance or enforcement of such
Guarantor's obligations under this Guaranty, including, without limitation, any
right of subrogation, reimbursement, exoneration, contribution, indemnification,
any right to participate in any claim or remedy of any Lender against the
Company or any collateral which any Lender now has or hereafter acquires,
whether or not such claim, remedy or right arises in equity, or under contract,
statutes or common law, including without limitation, the right to take or
receive from the Company, directly or indirectly, in cash or other property or
by set-off or in any other manner, payment or security on account of such claim
or other rights. If any amount shall be paid to any Guarantor in violation of
the preceding sentence and the Obligations shall not have been paid in full,
such amount shall be deemed to have been paid to such Guarantor for the benefit
of, and held in trust for the benefit of, the Lenders, and shall forthwith be
paid to the Administrative Lender to be credited and applied upon the
Obligations, whether matured or unmatured, in accordance with the terms of the
Credit Agreement. Each Guarantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by the Credit
Agreement and that the waiver set forth in this Paragraph 4 is knowingly made in
contemplation of such benefits.
(b) Subordination. All debt and other liabilities of the Borrower and
each Restricted Subsidiary to any Guarantor ("Intercompany Debt") are expressly
subordinate and junior to the Obligation to the extent provided below:
(i) Until the Release Date, each Guarantor agrees that it will not
request, demand, accept, or receive (by set-off or other manner) any
payment amount, credit or reduction of all or any part of the amounts owing
under any Intercompany Debt, except as specifically allowed pursuant to
clause (ii) below;
(ii) Notwithstanding the provisions of clause (i) above, the Borrower
and each Restricted Subsidiary may pay to the Guarantors and the Guarantors
may receive and retain from the Borrower and each Restricted Subsidiary
regularly scheduled payments due and owing under the terms of any
Intercompany Debt, provided that the Borrower's and each Restricted
Subsidiary's right to pay and the Guarantors' right to receive any such
regularly scheduled amount shall automatically and be immediately suspended
and cease (A) upon the occurrence of a Default (as defined in the Credit
Agreement) or (B) if, after taking into account the effect of such payment,
a Default would occur and be continuing. The Guarantors' right to receive
amounts under this clause (ii) (including any amounts
- 5 -
<PAGE>
which theretofore may have been suspended) shall automatically be
reinstated in such time as the Default which was the basis of such
suspension has been cured to the Lenders' satisfaction (provided that no
subsequent Default has occurred) or such earlier date, if any, and the
Administrative Lender gives notice to the Guarantors of reinstatement by
the Determining Lenders, in the Determining Lenders' sole discretion;
(iii) If any Guarantor receives any payment on any Intercompany Debt
in violation of this Guaranty, such Guarantor will hold such payment in
trust for the Lenders and will immediately deliver such payment to the
Administrative Lender;
(iv) Until the Release Date, no Guarantor will demand or accelerate
the maturity of all or any part of any Intercompany Debt, nor collect or
enforce, or attempt to collect or enforce, from the Borrower or any
Restricted Subsidiary all or any part of any Intercompany Debt, whether
through the commencement or joinder of a suit, action or proceeding of any
type (judicial or otherwise) or proceeding under any Debtor Relief Laws
(the "Insolvency Proceeding"), the enforcement of any rights against any
property of the Borrower or any Restricted Subsidiary, or otherwise, except
where any Lender shall request such Guarantor to file a claim in connection
with any such proceeding and except as set forth in clause (v); and
(v) In the event of any Insolvency Proceeding, the Obligation shall
first be paid, discharged and performed in full before any payment or
performance is made upon any Intercompany Debt notwithstanding any other
provisions which may be made in such Insolvency Proceeding. In the event
of any Insolvency Proceeding, each Guarantor will at any time prior to the
Release Date (A) file, at the request of any Lender, any claim, proof of
claim or similar instrument necessary to enforce the Borrower's or any
Restricted Subsidiary's obligation to pay any Intercompany Debt, and (B)
hold in trust for and pay to the Lenders any and all monies, obligations,
property, stock dividends or other assets received in any such proceeding
on account of any Intercompany Debt in order that the Lenders may apply
such monies or the cash proceeds of such other assets to the Obligation.
In the event that any Guarantor fails to take such action upon any Lender's
request, such Lender shall be deemed to have been appointed the attorney-
in-fact for such Guarantor with respect to any Intercompany Debt, and such
Lender may in that capacity (i) demand, sue for, collect and receive any
and all such monies, dividends or other assets, (ii) file any claim, proof
of claim or similar instrument, and (iii) institute such other proceedings
which such Lender, may deem reasonably necessary for the collection of the
Obligation and the enforcement of the terms of this Guaranty. Upon request
of any Lender, each Guarantor will execute and deliver to such Lender such
other and further powers of attorney or other instruments as such Lender
may reasonably request to effect the purposes of this Guaranty. If in any
proceeding to enforce the payment of the Obligation it becomes necessary
that any Guarantor itself prove such claims, such Guarantor shall do so
upon reasonable request by such Lender. In proving these claims, however,
such Guarantor shall act as the collection agent of such Lender and shall
promptly pay any funds so received to such Lender.
- 6 -
<PAGE>
5. Representations and Warranties. Each Guarantor hereby represents and
warrants that all representations and warranties as they apply to such Guarantor
only set forth in Article 4 of the Credit Agreement (each of which is hereby
incorporated by reference) is true and correct.
6. Covenants. Each Guarantor hereby expressly assumes, confirms, and
agrees to perform, observe, and be bound by all conditions and covenants set
forth in the Credit Agreement, to the extent applicable to it, as if it were a
signatory thereto. Each Guarantor further covenants and agrees (a) punctually
and properly to perform all of such Guarantor's covenants and duties under any
other Loan Documents; (b) from time to time promptly to furnish the
Administrative Lender with any information or writings which the Administrative
Lender may request concerning this Guaranty; and (c) promptly to notify the
Administrative Lender of any claim, action, or proceeding affecting this
Guaranty.
7. Amendments, Etc. No amendment or waiver of any provision of this
Guaranty nor consent to any departure by any Guarantor therefrom shall in any
event be effective unless the same shall be in writing and signed by the
Lenders, the Administrative Lender, or the Determining Lenders and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
8. Addresses for Notices. Unless otherwise provided herein, all notices,
requests, consents and demands shall be in writing and shall be delivered by
hand or overnight courier service, mailed or sent by telecopy to the respective
addresses specified herein, or, as to any party, to such other addresses as may
be designated by it in written notice to all other parties. All notices,
requests, consents and demands hereunder shall be deemed to have been given on
the date of receipt if delivered by hand or overnight courier service or sent by
telecopy, or if mailed, effective on the earlier of actual receipt or three (3)
days after being mailed by certified mail, return receipt requested, postage
prepaid, addressed as aforesaid.
9. No Waiver; Remedies. No failure on the part of the Administrative
Lender or any Lender to exercise, and no delay in exercising, any right
hereunder or under any of the Loan Documents shall operate as a waiver thereof;
nor shall any single or partial exercise of any right hereunder or under any of
the Loan Documents preclude any other or further exercise thereof or the
exercise of any other right. Neither the Administrative Lender nor any Lender
shall be required to (a) prosecute collection or seek to enforce or resort to
any remedies against the Company or any other Person liable on any of the
Obligation, (b) join the Company or any other Person liable on any of the
Obligation in any action in which Lender prosecutes collection or seeks to
enforce or resort to any remedies against the Company or other Person liable on
any of the Obligation, or (c) seek to enforce or resort to any remedies with
respect to any Liens granted to (or benefiting, directly or indirectly) the
Administrative Lender or any Lender by the Company or any other Person liable on
any of the Obligation. Neither the Administrative Lender nor any Lender shall
have any obligation to protect, secure or insure any of the Liens or the
properties or interests in properties subject thereto. The remedies herein
provided are cumulative and not exclusive of any remedies provided by Applicable
Law.
- 7 -
<PAGE>
10. Right of Set-off. Upon the occurrence and during the continuance of
any Event of Default, each Lender is hereby authorized at any time and from time
to time, to the fullest extent permitted by Law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Lender to or for the
credit or the account of any Guarantor against any and all of the obligations of
any Guarantor now or hereafter existing under this Guaranty, irrespective of
whether or not such Lender shall have made any demand under this Guaranty. Each
Lender agrees promptly to notify such Guarantor after any such set-off and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender under this
Section 10 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Lender may have.
11. Liens. To the extent not prohibited by Applicable Law, each Guarantor
agrees that the Administrative Lender or any Lender, in its discretion, without
notice or demand and without affecting either the liability of such Guarantor,
the Company or any other Person liable on any of the Obligation under, or the
Liens and security interests created by, this Guaranty, or any security interest
or other Lien, may foreclose any deed of trust or mortgage or similar Lien
covering interests in real or personal property, and the interests in real or
personal property secured thereby, by nonjudicial sale; and such Guarantor
hereby waives any defense to the recovery by the Administrative Lender or any
Lender hereunder against the Company, such Guarantor or any collateral of any
deficiency after a nonjudicial sale and such Guarantor expressly waives any
defense or benefits that may be derived from Chapter 34 of the Texas Business
and Commerce Code, Section 51.003 of the Texas Property Code, or any similar
statute in effect in any other jurisdiction. Without limiting the foregoing,
each Guarantor waives, to the extent not prohibited by Applicable Law, any
defense arising out of any such nonjudicial sale even though such sale operates
to impair or extinguish any right of reimbursement or subrogation or any other
right or remedy of such Guarantor against the Company or any other Person or any
Collateral or any other collateral. Each Guarantor hereby agrees that such
Guarantor shall be liable, subject to the limitations of Section 1 hereof, for
any part of the Obligation remaining unpaid after any foreclosure.
12. Continuing Guaranty; Transfer of Notes. This Guaranty is an
irrevocable continuing guaranty of payment and shall (a) subject to the last
sentence of Section 2, remain in full force and effect until final payment in
full after termination of the Commitments of the Obligation and all other
amounts payable under this Guaranty, (b) be binding upon each Guarantor, its
successors and assigns, and (c) inure to the benefit of and be enforceable by
each Lender and its successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), to the extent permitted by the Credit
Agreement, each Lender may assign or otherwise transfer its rights under the
Credit Agreement, the Notes or any of the Loan Documents or any interest therein
to any other Person, and such other Person shall thereupon become vested with
all the rights or any interest therein, as appropriate, in respect thereof
granted to the Lender herein or otherwise.
13. Information. Each Guarantor acknowledges and agrees that it shall
have the sole responsibility for obtaining from the Company such information
concerning the Company's
- 8 -
<PAGE>
financial condition or business operations as such Guarantor may require, and
that neither the Administrative Lender nor any Lender has any duty at any time
to disclose to any Guarantor any information relating to the business operations
or financial condition of the Company.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA.
WITHOUT EXCLUDING ANY OTHER JURISDICTION, EACH GUARANTOR AGREES THAT THE STATE
AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS, SHALL HAVE JURISDICTION
OVER PROCEEDINGS IN CONNECTION HEREWITH.
15. WAIVER OF JURY TRIAL. EACH GUARANTOR, THE ADMINISTRATIVE LENDER, AND
THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND INTENTIONALLY WAIVE,
TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY
OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS PROVISION
IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING INTO THE CREDIT AGREEMENT.
16. Ratable Benefit. This Guaranty is for the ratable benefit of the
Lenders, each of which shall share any proceeds of this Guaranty pursuant to the
terms of the Credit Agreement.
17. Guarantor Insolvency. Should any Guarantor become insolvent, fail to
pay its debts generally as they become due, voluntarily seek, consent to, or
acquiesce in the benefits of any Debtor Relief Law or become a party to or be
made the subject of any proceeding provided for by any Debtor Relief Law (other
than as a creditor or claimant) that could suspend or otherwise adversely affect
the rights of any Lender granted hereunder, then, the obligations of such
Guarantor under this Guaranty shall be, as between such Guarantor and such
Lender, a fully-matured, due, and payable obligation of such Guarantor to such
Lender (without regard to whether the Company is then in default under the
Credit Agreement or whether any part of the Obligation is then due and owing by
the Company to such Lender), payable in full by such
Guarantor to such Lender upon demand, which shall be the estimated amount owing
in respect of the contingent claim created hereunder.
18. Severability. Any provision of this Guaranty which is for any reason
prohibited or found or held invalid or unenforceable by any court or
governmental agency shall be ineffective to the extent of such prohibition or
invalidity or unenforceability without invalidating the remaining provisions
hereof in such jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.
19. ENTIRE AGREEMENT. THIS GUARANTY, TOGETHER WITH THE OTHER LOAN
DOCUMENTS, REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES
- 9 -
<PAGE>
HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
================================================================================
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
================================================================================
- 10 -
<PAGE>
IN WITNESS WHEREOF, the Guarantors have caused this Guaranty to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
COMPUSA HOLDINGS II INC.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address for all Guarantors:
CompUSA Inc.
14951 North Dallas Parkway
Dallas, Texas 75240
Attention: Mark R. Walker
Senior Vice President and General Counsel
COMPUSA HOLDINGS I INC.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PCs COMPLEAT, INC.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
COMPTEAM INC.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
- 11 -
<PAGE>
COMPUSA MANAGEMENT COMPANY
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
COMPUSA STORES L.P.
By: COMPUSA INC., its general partner
By:
----------------------------------
Name:
-----------------------------
Title:
-----------------------------
COMPUSA HOLDINGS COMPANY
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
- 12 -
<PAGE>
EXHIBIT C
COMPLIANCE CERTIFICATE
----------------------
To: NationsBank of Texas, N.A.
From: CompUSA Inc.
Date: _________________, ______
Re: Second Amended and Restated Credit Agreement, dated as of March 14,
1998 ("Credit Agreement"), among CompUSA Inc. ("Borrower"), certain
Lenders, certain Co-Agents and NationsBank of Texas, N.A. as
administrative lender
This Compliance Certificate is delivered pursuant to Section 6.3 of the
Credit Agreement. All capitalized terms used herein and defined in the Credit
Agreement shall be used herein as so defined. For purposes hereof, section
references herein related to sections of the Credit Agreement, and bracketed
amounts or ratios refer to the maximum or minimum amounts or ratios required
under the relevant sections of the Credit Agreement.
1. Fixed Charge Coverage Ratio (calculated for the 12 Fiscal Periods
preceding the date of determination)
a. EBITDAR
(1) Pretax Net Income (excluding therefrom, $
to the extent of extraordinary gain, -----------
including net gains on the sale of assets
other than asset sales in the ordinary course
of business, and adding thereto, to the extent
included in determining Pretax Net Income, any
items of extraordinary loss, including net
losses on the sale of assets other than asset
sales in the ordinary course of business)
(2) Interest expense (including but not limited to $
interest expense pursuant to Capital Lease -----------
Obligations)
(3) Depreciation $
-----------
(4) Amortization $
-----------
(5) Lease expense pursuant to Operating Leases $
-----------
(6) EBITDAR [(1) + (2) + (3) + (4) + (5)] $
-----------
b. Fixed Charges, calculated for the Borrower and its
Subsidiaries on a consolidated basis
(1) Interest expense (including but not limited to $
interest expense pursuant to Capitalized Lease -----------
Obligations)
(2) Lease expense under Operating Leases $
-----------
<PAGE>
(3) Fixed Charges [(1) + (2)] $
-----------
c. Fixed Charge Coverage Ratio [a to b] to 1
-------
2. Covenant Calculations. [To be completed quarterly] Demonstration
of compliance with certain covenants contained in Article 7 of the Credit
Agreement
a. Section 7.1(i) Indebtedness under the Senior
Subordinated Notes and other Subordinated Debt
(1) Maximum in aggregate principal amount $110,000,000
outstanding at any time
(2) Actual $
-----------
(3) Difference [(1) - (2)] $
-----------
b. Section 7.1(j) Other Indebtedness [not otherwise
permitted pursuant to Section 7.1(a) through (i)]
(1) Maximum in aggregate principal amount $300,000,000
outstanding at any time
(2) Actual $
-----------
(3) Difference [(1) - (2)] $
-----------
c. Section 7.1(j)(A) Senior Debt
(1) Maximum in aggregate principal amount $100,000,000
(2) Actual $
-----------
(3) Difference [(1) - (2)] $
-----------
d. Section 7.1(j)(B) Senior Debt with an original
maturity date earlier than 180 days after the
Maturity Date
(1) Maximum in aggregate principal amount $ 50,000,000
(2) Actual $
-----------
(3) Difference [(1) - (2)] $
-----------
e. Section 7.3(b)(iii) Investments in Unrestricted
Subsidiaries and Section 7.3(f) Other Investments
(1) Net Worth $
-----------
(2) Maximum in aggregate amount at any time (15% of $
Net Worth) -----------
(3) Actual Investments in Unrestricted $
Subsidiaries -----------
-2-
<PAGE>
(4) Actual Other Investments under Section 7.3(f) $
-----------
(5) Total [(3) + (4)] $
-----------
(6) Difference [(2) - (5)] $
-----------
f. Section 7.4(a)(iii) Sales or pledges of Accounts
or interests in Accounts pursuant to Securitizations
(1) Maximum in aggregate amount outstanding at any $200,000,000
time
(2) Actual $
-----------
(3) Difference [(1) - (2)] $
-----------
g. Section 7.4(a)(vi) Any other sale, lease,
abandonment, transfer or disposition in any Fiscal
Year of assets for full and fair consideration
(1) Maximum in aggregate amount: 5% of Net Worth as $
of the immediately preceding Fiscal Year -----------
(2) Actual $
-----------
(3) Difference [(1) - (2)] $
-----------
h. Section 7.5(d) Guaranty of Indebtedness of directors,
officers and employees of Borrower and its Subsidiaries
(1) Maximum during any Fiscal Year in aggregate $ 1,000,000
amount, when combined with the loans to officers
and employees permitted pursuant to Section 7.6
of the Credit Agreement (calculated net of loan
repayment)
(2) Actual $
-----------
(3) Difference [(1) - (2)] $
-----------
i. Section 7.6(b) Loans to directors, officers and
employees of Borrower and its Subsidiaries
(calculated net of loan repayments)
(1) Maximum during any Fiscal Year in aggregate $ 1,000,000
amount, when combined with Guaranty of
Indebtedness of directors, officers and
employees permitted pursuant to Section 7.5
of the Credit Agreement
(2) Actual $
-----------
(3) Difference [(1) - (2)] $
-----------
-3-
<PAGE>
j. Section 7.6(d) Dividends paid and Treasury Stock
Purchases (net of cash proceeds received by the
Borrower upon the reissuance of any treasury stock)
(1) Maximum in aggregate amount
(a) 50% of cumulative Net Income for the $
period from, but not including, -----------
September 27, 1997 through the date
of the proposed payment or purchase
(but excluding from the calculation
of such cumulative Net Income the effect,
if any, of any Fiscal Quarter or portion
of a Fiscal Quarter not then ended for
which Net Income was a negative number)
(b) Maximum [(a) + $50,000,000] $
-----------
(2) Actual (net of Reissuances) $
-----------
(3) Difference [(1) - (2)] $
-----------
k. Section 7.9 Leverage Ratio (for the preceding 12
Fiscal Periods)
(1) Maximum at the end of any Fiscal Quarter 3.00 to 1
(2) Actual
(a) Total Funded Debt as of the date of
determination, calculated for the
Borrower and its Subsidiaries on a
consolidated basis
i) Debt for Borrowed Money $
-----------
ii) Capitalized Lease Obligations $
-----------
iii) Total Funded Debt [i) + ii)] $
-----------
(b) Lease expense pursuant to Operating $
Leases for the immediately preceding -----------
twelve Fiscal Periods (multiplied by 6)
(c) EBITDAR (see 1.a.(6) above) $
-----------
(d) Leverage Ratio [(a) + (b)] to (c) to 1
------
l. Section 7.10 Fixed Charge Coverage Ratio
(calculated for the 12 Fiscal Periods preceding
the date of determination)
(1) Minimum at the end of any Fiscal Quarter 2.00 to 1
(2) Actual (see 1.c. above) to 1
-------
m. Section 7.11 Net Worth
(1) Minimum
-4-
<PAGE>
(a) 50% of cumulative Net Income from, but $
not including September 27, 1997 through -----------
the date of calculation (excluding the
effect, if any, of any fiscal quarter or
portion of fiscal quarter not then ended
for which Net Income was a negative number)
(b) 75% of net worth of Person that becomes a $
Subsidiary of the Borrower or is merged -----------
into or consolidated with the Borrower or
any Subsidiary of the Borrower or
substantially all of the assets of which
are acquired by the Borrower or any
Subsidiary of the Borrower to the extent
the purchase price paid therefor is paid
in equity securities
(c) 75% of Net Cash Proceeds (but without $
duplication) of any offerings of capital -----------
stock or other equity interests of the
Borrower or any of its Subsidiaries or
pursuant to the conversion or exchange
of any convertible Subordinated Debt or
redeemable preferred stock into capital
stock or other equity interests of the
Borrower or any of its Subsidiaries
since September 27, 1997
(d) Minimum Tangible Net Worth [(a) + (b) + $
(c) + $384,800,000] -----------
(2) Actual
(a) Capital stock taken at stated or par $
value -----------
(b) Paid in capital $
-----------
(c) Retained earnings $
-----------
(d) Treasury stock (net of Reissuances) $
-----------
(e) Net Worth [(a) + (b) + (c) - (d)] $
-----------
(3) Difference [(2) - (1)] $
-----------
n. Section 7.16 Unrestricted Subsidiaries
(1) Maximum aggregate amount of EBITDAR of all $
Unrestricted Subsidiaries during any period -----------
of twelve consecutive Fiscal Periods: 10% of
EBITDAR of Borrower and all of its
Subsidiaries during any such period
(2) Actual $
-----------
(3) Difference [(1) - (2)] $
-----------
-5-
<PAGE>
(4) Maximum aggregate amount of assets of all $
Unrestricted Subsidiaries as of the end of -----------
any Fiscal Quarter: 10% of assets of Borrower
and all of its Subsidiaries
(5) Actual $
-----------
(6) Difference [(1) - (2)] $
-----------
3. Compliance Certificate. [To be completed quarterly] The undersigned hereby
certifies to you as follows:
(a) I am the duly elected, qualified and acting _______________________ of
Borrower.
(b) I have reviewed the provisions of the Credit Agreement and the other
Loan Documents, and a review of the activities of Borrower during the
period from ____________, 19___ to ____________, 19___ (the "Reporting
Period") has been made under my supervision with a view toward
determining whether, during the Reporting Period, Borrower has kept,
observed, performed and fulfilled all its obligations under the Credit
Agreement and such Loan Documents.
(c) The representations and warranties made in the Loan Documents are true
and correct in all material respects as of the date hereof as though
made at and as of the date hereof, except for such representations and
warranties which relate to a particular date or which fail to be true
and correct as a result of events or occurrences permitted under the
Loan Documents, and no Default or Event of Default has occurred or is
continuing or is imminent.
This Compliance Certificate is executed and delivered on the _____ day of
_____________, 19___.
------------------------------------
Name:
-------------------------------
Title:
------------------------------
-6-
<PAGE>
EXHIBIT D
ASSIGNMENT AND ACCEPTANCE
Dated _______________, _____
Reference is made to the Second Amended and Restated Credit Agreement dated
as of March 14, 1998 (the "Credit Agreement") among CompUSA Inc., a Delaware
corporation ("Borrower"), NationsBank of Texas, N.A. as Administrative Lender
("Administrative Lender"), certain Co-Agents and the lenders parties thereto.
Terms defined in the Credit Agreement are used herein with the same meaning.
____________________________ ("Assignor") and ________________________
("Assignee") agree as follows:
1. Assignor hereby sells and assigns to Assignee, and Assignee hereby
purchases and assumes from Assignor, a _____% interest in and to all of
Assignor's rights and obligations under the Credit Agreement as of the Effective
Date (as defined below), with respect to such percentage interest in Assignor's
Commitment as in effect on the Effective Date, the principal amount of Advances
owing to Assignor on the Effective Date, and the Promissory Note held by
Assignor, and Assignor's participation in any Letters of Credit and
Reimbursement Obligations outstanding on the Effective Date, subject to the
terms and conditions of this Assignment and Acceptance.
2. Assignor (a) represents and warrants that (i) as of the date hereof
its Specified Percentage of the Commitment (without giving effect to assignments
thereof which have not yet become effective) is $_________ and, as of the date
hereof, the outstanding principal amount of the Advances owing to it (without
giving effect to assignments thereof which have not yet become effective) is
$_______, and (ii) it is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear of any adverse
claim; (b) makes no representation or warranty and assumes no responsibility
with respect to (i) any statements, warranties, or representations made in or in
connection with the Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency, or value of the Credit Agreement or
any other instrument or document furnished pursuant thereto or (ii) the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (c) attaches the
Promissory Note referred to in Paragraph 1 above to exchange such Promissory
Note for new Promissory Notes as follows: a Promissory Note dated
______________, _____, in the principal amount of $__________ payable to the
order of Assignee, and a Promissory Note dated ________________, _____, in the
principal amount of $____________________ payable to the order of Assignor.
3. Assignee (a) confirms that it has received a copy of the Credit
Agreement and the other Loan Documents, together with copies of the financial
statements referred to in Sections 4.1(j), 6.1, 6.2 and 6.3 of the Credit
Agreement and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Assignment and
Acceptance; (b) agrees that it will, independently and without reliance upon the
Administrative Lender, Assignor, or any other Lender, and based on such
documents and
<PAGE>
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement and
the other Loan Documents; (c) appoints and authorizes the Administrative Lender
to take such action as agent on its behalf and to exercise such powers under the
Credit Agreement, the other Loan Documents, and this Assignment and Acceptance
as are delegated to the Administrative Lender by the terms thereof and hereof,
together with such powers as are reasonably incidental thereto and hereto; (d)
agrees that it will perform in accordance with its terms all of the obligations
which by the terms of the Credit Agreement, the other Loan Documents, and this
Assignment and Acceptance are required to be performed by it as a Lender; [and]
(e) specifies the addresses set forth in Schedule I attached hereto as its
address for the receipt of notices and as its initial LIBOR Lender Office,
respectively[; and (f) attaches the forms prescribed by the IRS certifying as to
Assignee's status for purposes of determining exception from United States
withholding taxes with respect to all payments to be made to Assignee under the
Credit Agreement, the other Loan Documents, and this Assignment and Acceptance
or such other documents as are necessary to indicate that all such payments are
subject to such taxes at a rate reduced by an applicable tax treaty]; and (g)
agrees to be bound by the terms of the Confidentiality Agreement.
4. The effective date for this Assignment and Acceptance shall be
___________________, _____ (the "Effective Date").
5. Upon such acceptance as of the Effective Date and upon the remittance
of a $3,500 processing fee to the Administrative Lender, (a) Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and (b)
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released form its obligations under the Credit
Agreement.
6. Upon such acceptance from and after the Effective Date, whenever the
Administrative Lender shall receive a payment, or whenever the Administrative
Lender shall make an application of funds, in respect of any aggregate
outstanding principal amount of the Advances or in respect of any aggregate
amount of interest accrued on the Advances, or in respect of the commitment fee
(other than a payment or an application of funds in respect of any amount due
and owing to any Lender or the Administrative Lender under Sections 2.4(c), 2.9,
5.10, 9.3, 9.5, or 11.2 of the Credit Agreement), the Administrative Lender
shall pay over to each of the Lenders an amount equal to (i) such Lender's Pro
Rata Share (as defined below) of such aggregate amount of principal, (ii) such
Lender's Pro Rata Share of such aggregate amount of interest, and (iii) such
Lender's Pro Rata Share of such aggregate amount of the commitment fee.
The "Pro Rata Share" of any aggregate amount means, with respect to such
Lender, the amount equal to the product obtained by multiplying (i) such
aggregate amount and (ii) a fraction, the numerator of which is such Lender's
Specified Percentage of the Commitment, or after the Advances have been made,
the principal amount of the Advances owing to such Lender and the denominator of
which is the sum of the Commitments of all of the Lenders, or after the Advances
have been made, the aggregate principal amount of the Advances owing to all of
the Lenders.
-2-
<PAGE>
7. In the event that, after the Administrative Lender has paid to any
Lender its Pro Rata Share of any such payment received by the Administrative
Lender or any such application made by the Administrative Lender, such payment
or application is rescinded or must otherwise be returned or must be paid over
by the Administrative Lender for any reason, such Lender shall, upon notice by
the Administrative Lender, forthwith pay back to the Administrative Lender such
Lender's Pro Rata Share of the amount so rescinded or so returned or paid over.
8. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of Texas and the United States of America.
Without excluding any other jurisdiction, Assignee agrees that the courts of
Texas will have jurisdiction over proceedings in connection herewith.
9. Assignee's Specified Percentage shall be _____%.
10. This Assignment and Acceptance may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
[NAME OF ASSIGNOR]
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
[NAME OF ASSIGNEE]
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
-3-
<PAGE>
Accepted this ___ day of ____________, _____
NATIONSBANK OF TEXAS, N.A.,
as Administrative Lender
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
CompUSA Inc.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-4-
<PAGE>
Schedule I
ASSIGNEE'S ADDRESS
------------------
1. Address for Advances and Receipt of Notices
-------------------------------------------
2. Initial LIBOR Lending Office
----------------------------
-5-
<PAGE>
EXHIBIT E
March 12, 1998
PRIVATE AND CONFIDENTIAL
- ------------------------
- ------------------------
- ------------------------
Re: Second Amended and Restated Credit Agreement, dated as of March
12, 1998, among CompUSA Inc., the lenders party thereto, certain
Co-Agents and NationsBank of Texas, N.A. as Administrative Lender
(the "Credit Agreement")
Ladies and Gentlemen:
CompUSA Inc., a Delaware corporation (the "Company"), has received from
NationsBank of Texas, N.A., a national banking association ("NationsBank") and
the other lenders a party thereto ("Lenders"), a credit facility in the maximum
original principal amount of $300 million (the "Credit Facility"). In
connection with your agreement to participate as a Lender in the Credit
Facility, you have received from the Company certain oral and written
information concerning the Company from officers, directors, employees and/or
agents of the Company and pursuant to which transaction you have requested that
the Company or NationsBank undertake to continue to provide to you certain
written information concerning the Company (collectively, the "Information").
In consideration of furnishing you with the Information, the Company requests
that you agree, and you hereby agree to the following:
(1) The Information will be used solely for the purpose of evaluating
the Company's continuing compliance with the terms of, the Credit Facility, and
not for any other purpose whatsoever, and whether or not disclosure is or may be
in any way directly or indirectly detrimental to the Company, you shall use
reasonable precautions, in accordance with customary procedures for handling
confidential information and in accordance with safe and sound banking
practices, to keep the Information confidential, except that you may disclose
the Information or portions thereof (i) to those of your directors, officers and
employees (the persons to whom such disclosure is permissible being collectively
called "Representatives") who need to know such information for the purpose of
evaluating the Company's continuing compliance with the terms of, the Credit
Facility (it being understood that those Representatives will be informed of the
<PAGE>
Page 2
confidential nature of the Information and will agree to be bound by this
Agreement and not to disclose the Information to any other person), (ii) to
other banks or financial institutions that are considering or have agreed to the
purchase of a participation interest in the Credit Facility ("Participating
Financial Institutions"); (iii) to financial institutions or funds engaged in
making, purchasing or otherwise investing in commercial loans that are
considering or have agreed to any assignment of rights and obligations under the
Credit Facility ("Assignees"); (iv) to Federal Reserve Banks that are
considering or have agreed to the assignment or pledge of interests under the
Credit Facility as collateral ("Pledgees"); (v) to your counsel and counsel for
any Participating Financial Institution, Assignee or Pledgee, (vi) to your bank
examiners, auditors, accountants or any governmental agency having regulatory or
supervisory authority over you or any bank examiners, auditors, accountants of
or any governmental agency having regulatory or supervisory authority over any
Participating Financial Institution, Assignee or Pledgee, (vii) to the extent
required by statute, rule or regulation, and (viii) subject to paragraph (2)
below, in connection with any legal or judicial process; provided, however,
Participating Financial Institutions and Assignees must have signed a
confidentiality agreement with the Company substantially in the form attached
hereto as Exhibit "A" prior to the receipt of Information. You agree to be
responsible for any breach of this Agreement by your Representatives.
(2) In the event that you or any of your Representatives are requested
or required (by deposition, interrogatory, request for documents, subpoena,
civil investigative demand or similar process) to disclose any of the
Information, unless specifically prohibited by applicable law or court order,
you shall provide the Company with prompt prior written notice of such request
or requirement so that the Company may seek a protective order or other
appropriate remedy and/or consent in writing to such disclosure. In the event
that such protective order or other remedy is not obtained and the Company has
not consented in writing to such disclosure, and you or your Representatives are
nonetheless, in your reasonable opinion, compelled to disclose Information
concerning the Company to any tribunal or else stand liable for contempt, unless
specifically prohibited by applicable law or court order, you or such
Representative may furnish only that portion of the Information that you
reasonably believe is legally required; provided that you shall exercise your
best efforts to obtain an order or reasonable assurance that confidential
treatment will be accorded such Information. You or such Representative shall
not be liable for the disclosure to such tribunal unless such disclosure was
caused or resulted from a previous disclosure by you or any of your
Representatives not permitted hereunder.
(3) The term "Information" does not include any information that (i) at
the time of disclosure or thereafter is generally available to and known by the
public (other than as a result of a disclosure directly or indirectly by you or
your Representatives), (ii) was available to you on a nonconfidential basis from
a source other than the Company or NationsBank or their advisors, provided that
such source is not and was not bound by a confidentiality agreement with the
Company, (iii) has been independently acquired or developed by you without
violating any of your
<PAGE>
Page 3
obligations under this Agreement, or (iv) at the time of delivery to you, was
not identified by us as being confidential.
(4) Except as disclosed to Participating Financial Institutions,
Assignees or Pledgees, you or your Representatives will maintain the Information
furnished to you on your banking premises and you will keep a record of all
Information furnished to Participating Financial Institutions, Assignees or
Pledgees. If the Company, in its sole discretion, so requests at any time that
you are no longer a lender under the Credit Facility, you promptly will return
to the Company all copies of the Information in your possession or in the
possession of your Representatives, and, except as required to comply with
unless specifically prohibited by applicable law or regulation, internal
retention policies or court order, you will destroy all copies of any analyses,
compilations, studies or other documents prepared by you or for your use
containing or reflecting any Information. Notwithstanding the return,
destruction or retention of any Information, or documents or materials
containing or reflecting any Information, you will continue to be bound by your
obligations of confidentiality and other obligations hereunder.
(5) Without the prior written consent of the Company, you will not, and
will direct your Representatives not to, disclose to any person other than
Participating Financial Institutions, Assignees or Pledgees or those persons
otherwise permitted to receive the Information pursuant to paragraph (1) of this
Agreement that you have requested or received Information from the Company, or
any of the terms of this Agreement or the fact of its existence. The term
"person" as used in this Agreement will be interpreted broadly to include,
without limitation, any corporation, company, partnership or individual.
(5)(A) This Agreement shall terminate five years after the Release Date (as
used in the Credit Agreement).
(6) You agree that the Company shall be entitled to seek equitable
relief, including injunction and specific performance, in the event of any
breach of the provisions of this Agreement, in addition to all other remedies
available to the Company at law or in equity. You further agree to waive any
requirement for the security or posting of any bond in connection with such
remedy. You also hereby irrevocably and unconditionally consent to submit to the
non-exclusive jurisdiction of the courts of the State of Texas and of the United
States of America located in the State of Texas for any actions, suits or
proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby (and you agree not to commence any action, suit or
proceeding relating thereto except in such courts), and further agree that
service of any process, summons, notice of document by U.S. registered mail to
your address set forth above shall be effective service of process for any
action, suit or proceeding brought against you in any such court. You hereby
irrevocably and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
<PAGE>
Page 4
contemplated hereby, in the courts of the State of Texas or the United States of
America located in Dallas County, Texas and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in
any inconvenient forum.
(7) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING CONFLICTS OF LAWS) OF THE
STATE OF TEXAS.
(8) It is further understood and agreed that no failure or delay by the
Company in exercising any right, power or privilege hereunder will operate as a
waiver thereof, nor will any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any right, power or
privilege hereunder.
(9) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, including without
limitation any person acquiring a majority of the outstanding equity securities
of any such party.
If you agree with the foregoing, please sign and return two copies of this
letter, which will constitute our agreement with respect to the subject matter
of this letter.
Very truly yours,
CompUSA Inc.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
CONFIRMED AND AGREED as of the
date and year written above:
- -------------------------------
(Name of Financial Institution)
<PAGE>
Page 5
By:
---------------------------
Name:
----------------------
Title:
---------------------
<PAGE>
EXHIBIT "A"
___________, _____
PRIVATE AND CONFIDENTIAL
- ------------------------
- ------------------------
- ------------------------
- ------------------------
Re: Second Amended and Restated Credit Agreement, dated as of March
14, 1998, among CompUSA Inc., the lenders party thereto
(collectively, the "Lenders"), certain Co-Agents and NationsBank
of Texas, N.A. as Administrative Lender
Ladies and Gentlemen:
CompUSA Inc., a Delaware corporation (the "Company"), has received from the
Lenders, a credit facility in the maximum original principal amount of $300
million (the "Credit Facility"). In connection with your agreement to (i)
purchase, or to consider the purchase of a participation interest in the Credit
Facility (a "Participation Interest"); (ii) receive an assignment of, or to
consider the receipt of an assignment of, rights and obligations under the
Credit Facility (an "Assignment Interest"); or (iii) receive an assignment or
pledge of, or to consider the receipt of an assignment or pledge of, interests
under the Credit Facility as collateral (a "Collateral Interest"), you have
requested that the Company and/or ______________ (the "Selling Lender") provide
to you certain oral and written information concerning the Company from
officers, directors, employees and/or agents of the Company and/or the Selling
Lender and pursuant to which transaction you have requested that the Company or
the Selling Lender undertake to continue to provide to you certain written
information concerning the Company (collectively, the "Information"). In
consideration of furnishing you with the Information the Company requests that
you agree, and you hereby agree to the following:
(1) The Information will be used solely for the purpose of evaluating a
Participation Interest, an Assignment Interest or a Collateral Interest, and of
the Company's continuing compliance with the terms of, the Credit Facility, and
not for any other purpose whatsoever, and whether or not disclosure is or may be
in any way directly or indirectly detrimental to the Company, you shall use
reasonable precautions, in accordance with customary procedures for handling
confidential information and in accordance with safe and sound banking
practices, to
<PAGE>
Page 2
keep the Information confidential, except that you may disclose the Information
or portions thereof (i) to those of your directors, officers and employees (the
persons to whom such disclosure is permissible being collectively called
"Representatives") who need to know such information for the purpose of
evaluating a Participation Interest, an Assignment Interest or a Collateral
Interest, and of the Company's continuing compliance with the terms of, the
Credit Facility (it being understood that those Representatives will be informed
of the confidential nature of the Information and will agree to be bound by this
Agreement and not to disclose the Information to any other person), (ii) to your
counsel, (iii) to your bank examiners, auditors or accountants, (iv) to the
extent required by statute, rule or regulation, and (v) subject to paragraph (2)
below, in connection with any legal or judicial process. You agree to be
responsible for any breach of this Agreement by your Representatives.
(2) In the event that you or any of your Representatives are requested or
required (by deposition, interrogatory, request for documents, subpoena, civil
investigative demand or similar process) to disclose any of the Information,
unless specifically prohibited by applicable law or court order, you shall
provide the Company with prompt prior written notice of such request or
requirement so that the Company may seek a protective order or other appropriate
remedy and/or consent in writing to such disclosure. In the event that such
protective order or other remedy is not obtained and the Company has not
consented in writing to such disclosure, and you or your Representatives are
nonetheless, in your reasonable opinion, compelled to disclose Information
concerning the Company to any tribunal or else stand liable for contempt, unless
specifically prohibited by applicable law or court order, you or such
Representative may furnish only that portion of the Information that you
reasonably believe is legally required; provided that you shall exercise your
best efforts to obtain an order or reasonable assurance that confidential
treatment will be accorded such Information. You or such Representative shall
not be liable for the disclosure to such tribunal unless such disclosure was
caused or resulted from a previous disclosure by you or any of your
Representatives not permitted hereunder.
(3) The term "Information" does not include any information that (i) at the
time of disclosure or thereafter is generally available to and known by the
public (other than as a result of a disclosure directly or indirectly by you or
your Representatives), (ii) was available to you on a nonconfidential basis from
a source other than the Company or the Selling Lender or their advisors,
provided that such source is not and was not bound by a confidentiality
agreement with the Company, (iii) has been independently acquired or developed
by you without violating any of your obligations under this Agreement, or (iv)
at the time of delivery to you, was not identified by us as being confidential.
(4) You will maintain the Information furnished to you on your premises.
If you decide not to acquire a Participation Interest, Assignment Interest or
Collateral Interest or if the Company, in its sole discretion, so requests at
any time that you are no longer a lender under the
<PAGE>
Page 3
Credit Facility, you promptly will return to the Company all copies of the
Information in your possession or in the possession of your Representatives,
and, unless specifically prohibited by applicable law or court order, you will
destroy all copies of any analyses, compilations, studies or other documents
prepared by you or for your use containing or reflecting any Information.
Notwithstanding the return or destruction of any Information, or documents or
materials containing or reflecting any Information, you will continue to be
bound by your obligations of confidentiality and other obligations hereunder.
(5) Without the prior written consent of the Company, you will not, and
will direct your Representatives not to, disclose to any person that you have
requested or received Information from the Company or the Selling Lender, or any
of the terms of this Agreement or the fact of its existence. The term "person"
as used in this Agreement will be interpreted broadly to include, without
limitation, any corporation, company, partnership or individual.
(6) You agree that the Company shall be entitled to such equitable relief,
including injunction and specific performance, in the event of any breach of the
provisions of this Agreement, in addition to all other remedies available to the
Company at law or in equity. You further agree to waive any requirement for the
security or posting of any bond in connection with such remedy. You also hereby
irrevocably and unconditionally consent to submit to the non-exclusive
jurisdiction of the courts of the State of Texas and of the United States of
America located in the State of Texas for any actions, suits or proceedings
arising out of or relating to this Agreement and the transactions contemplated
hereby (and you agree not to commence any action, suit or proceeding relating
thereto except in such courts), and further agree that service of any process,
summons, notice of document by U.S. registered mail to your address set forth
above shall be effective service of process for any action, suit or proceeding
brought against you in any such court. You hereby irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby, in the courts of the State of Texas or the United States of America
located in Dallas County, Texas and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in
any inconvenient forum.
(7) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING CONFLICTS OF LAWS) OF THE
STATE OF TEXAS.
(8) It is further understood and agreed that no failure or delay by the
Company in exercising any right, power or privilege hereunder will operate as a
waiver thereof, nor will any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any right, power or
privilege hereunder.
<PAGE>
Page 4
(9) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, including without
limitation any person acquiring a majority of the outstanding equity securities
of any such party.
If you agree with the foregoing, please sign and return two copies of this
letter, which will constitute our agreement with respect to the subject matter
of this letter.
Very truly yours,
CompUSA Inc.
By:
-----------------------------------------
Its:
----------------------------------------
CONFIRMED AND AGREED as of the
date and year written above:
- --------------------------------
(Name of Financial Institution)
By:
-----------------------------
Its:
-----------------------------
<PAGE>
EXHIBIT 11
COMPUSA INC.
COMPUTATIONS OF EARNINGS PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
--------------------- -----------------------
MARCH 28, MARCH 29, MARCH 28, MARCH 29,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Common shares issued at beginning
of period......................... 92,478 91,384 91,763 90,216
Weighted average number of common
shares issued during the period... 421 94 645 824
Weighted treasury shares during
the period........................ (1,381) (368) (881) (375)
-------- -------- -------- --------
Weighted common shares............. 91,518 91,110 91,527 90,665
Incremental shares related to
assumed exercise of stock options. 3,174 3,340 3,711 3,911
-------- -------- -------- --------
Weighted common and common
equivalent shares................. 94,692 94,450 95,238 94,576
======== ======== ======== ========
Net income......................... $25,438 $32,715 $82,964 $70,989
======== ======== ======== ========
Basic earnings per share........... $ 0.28 $ 0.36 $ 0.91 $ 0.78
======== ======== ======== ========
Diluted earnings per share......... $ 0.27 $ 0.35 $ 0.87 $ 0.75
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS AS OF AND FOR THE THIRTY-NINE WEEKS
ENDED MARCH 28, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> MAR-28-1998
<CASH> 217,084
<SECURITIES> 0
<RECEIVABLES> 239,228
<ALLOWANCES> (3,567)
<INVENTORY> 624,524
<CURRENT-ASSETS> 1,102,665
<PP&E> 357,842
<DEPRECIATION> (129,574)
<TOTAL-ASSETS> 1,340,710
<CURRENT-LIABILITIES> 752,672
<BONDS> 110,000
0
0
<COMMON> 932
<OTHER-SE> 472,634
<TOTAL-LIABILITY-AND-EQUITY> 1,340,710
<SALES> 4,100,356
<TOTAL-REVENUES> 4,100,356
<CGS> 3,504,826
<TOTAL-COSTS> 3,504,826
<OTHER-EXPENSES> 457,349
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,141
<INCOME-PRETAX> 134,902
<INCOME-TAX> 51,938
<INCOME-CONTINUING> 82,964
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,964
<EPS-PRIMARY> 0.91
<EPS-DILUTED> 0.87
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS (A) SUMMARY FINANCIAL INFORMATION AS OF AND FOR THE
THIRTY-NINE WEEKS ENDED MARCH 29, 1997 AND (B) SUMMARY FINANCIAL INFORMATION AS
OF AND FOR THE THIRTY-NINE WEEKS ENDED MARCH 23, 1996.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> JUN-28-1997 JUN-29-1996
<PERIOD-START> JUN-30-1996 JUN-25-1995
<PERIOD-END> MAR-29-1997 MAR-23-1996
<CASH> 257,088 295,887
<SECURITIES> 0 0
<RECEIVABLES> 182,485 142,718
<ALLOWANCES> (2,042) (1,450)
<INVENTORY> 625,055 442,879
<CURRENT-ASSETS> 1,085,308 894,711
<PP&E> 254,817 186,898
<DEPRECIATION> (91,630) (62,444)
<TOTAL-ASSETS> 1,258,133 1,026,567
<CURRENT-LIABILITIES> 737,616 595,263
<BONDS> 110,000 110,000
0 0
0 0
<COMMON> 916 898
<OTHER-SE> 399,925 308,909
<TOTAL-LIABILITY-AND-EQUITY> 1,258,133 1,026,567
<SALES> 3,462,015 2,830,937
<TOTAL-REVENUES> 3,462,015 2,830,937
<CGS> 2,975,389 2,453,104
<TOTAL-COSTS> 2,975,389 2,453,104
<OTHER-EXPENSES> 365,015 294,414
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,136 9,376
<INCOME-PRETAX> 115,431 78,381
<INCOME-TAX> 44,442 30,493
<INCOME-CONTINUING> 70,989 47,888
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 70,989 47,888
<EPS-PRIMARY> 0.78<F1> 0.55<F1>
<EPS-DILUTED> 0.75<F1> 0.53<F1>
<FN>
<F1>The Company adopted the provisions of SFAS No. 128 in the preparation of
the financial statements included in the Quarterly Report on Form 10-Q for the
thirteen weeks ended December 27, 1997. In accordance with the provisions of
SFAS No. 128, the Company has restated previously reported earnings per share
amounts to conform to the provisions of SFAS 128.
</FN>
</TABLE>
