<PAGE>
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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 FEBRUARY 13, 1994
/ / 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 0-20355
PRICE/COSTCO, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 33-0572969
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4649 MORENA BOULEVARD 10809 - 120TH AVENUE N.E.
SAN DIEGO, CALIFORNIA 92117 KIRKLAND, WASHINGTON 98033
(Address of principal executive offices)
(619) 581-4600 (206) 803-8100
(Registrant's telephone number, including area code)
</TABLE>
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 217,667,717 common shares, par value $.01, outstanding at
March 25, 1994.
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<PAGE>
PRICE/COSTCO, INC.
INDEX TO FORM 10-Q
PART I -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ITEM 1 -- FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets................................. 10
Condensed Consolidated Statements of Operations....................... 11
Condensed Consolidated Statements of Cash Flows....................... 12
Notes to Condensed Consolidated Financial Statements.................. 13
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..................................... 3
</TABLE>
PART II -- OTHER INFORMATION
<TABLE>
<S> <C>
ITEM 1 -- LEGAL PROCEEDINGS............................................. 7
ITEM 2 -- CHANGES IN SECURITIES......................................... 7
ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES............................... 7
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 7
ITEM 5 -- OTHER INFORMATION............................................. 8
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K.............................. 8
Exhibit (28) -- Independent Public Accountants' Letter................ 18
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Price/Costco, Inc.'s (the "Company" or "Price/Costco") unaudited condensed
consolidated balance sheet as of February 13, 1994, and the audited condensed
consolidated balance sheet as of August 29, 1993 and unaudited condensed
consolidated statements of operations for the 12-and 24-week periods ended
February 13, 1994, and February 14, 1993, and unaudited condensed consolidated
statements of cash flows for the 24-week periods then ended are attached. Also
attached are notes to the unaudited condensed consolidated financial statements
and the results of the limited review performed by Arthur Andersen & Co.,
independent public accountants.
The Company reports on a 52/53-week fiscal year, consisting of 13 four-week
periods and ending on Sunday nearest the end of August. Fiscal 1994 will end on
August 28, 1994. The first, second and third quarters consist of 12 weeks each
and the fourth quarter consists of 16 weeks.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This management discussion should be read in conjunction with the management
discussion included in the Company's fiscal 1993 annual report on Form 10-K
previously filed with the Securities and Exchange Commission.
(A) COMPARISON OF THE 12 WEEKS ENDED FEBRUARY 13, 1994, AND FEBRUARY 14, 1993
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
Net income during the second quarter of fiscal 1994 decreased 10% to
$62,275, or $.28 per share (fully diluted), as compared to $69,029, or $.30 per
share (fully diluted) during the second quarter of fiscal 1993. Included in the
second quarter of fiscal 1993's results was a $6,710 pre-tax gain, or $.02 per
share, related to the sale of non-club property. Included in the second quarter
fiscal 1994 results was a $2,500 pre-tax charge, or $.01 per share related to
costs associated with the January 1994 Los Angeles earthquake in which four
warehouses in the San Fernando Valley suffered damage.
Net sales increased 8% to $4,019,417 during the second quarter of fiscal
1994, from $3,736,234 during the second quarter of fiscal 1993. This increase
was due to sales at the 31 warehouses that were opened since the end of the
second quarter of fiscal 1993, which increases were partially offset by negative
comparable sales at existing locations opened prior to fiscal 1993, and by
discontinued sales from seven warehouses closed during fiscal 1993 and six
warehouses closed in the first half of fiscal 1994.
Comparable sales, sales in warehouses open for at least a year, were a
negative 1% during the second quarter of fiscal 1994. The comparable sales
decrease was attributed to several factors, including the following: the effect
of sales cannibalization by opening additional warehouses in existing markets;
increased competition in many markets; price deflation in certain merchandise
categories; the January 1994 earthquake; extreme winter weather conditons in the
Northeast and Mid-Atlantic states; and a weaker Canadian dollar where the
Company derives approximately 15% of net sales. The negative 1% comparable sales
recorded during the second quarter represents an improvement over the first
quarter of fiscal 1994 when comparable sales were negative 5%.
Membership fees and other revenue increased from $75,125, or 2.01% of net
sales, in the second quarter of fiscal 1993 to $78,245, or 1.95 % of net sales
in the second quarter of fiscal 1994. This increase reflects new membership
sign-ups at the 31 new warehouses opened since the end of the second quarter of
1993, and the effect of membership fee increases in certain markets implemented
in 1993 and 1994. As anticipated, the Company is experiencing a small decline in
membership renewals at existing warehouses attributable to overlapping Price
Club and Costco memberships and offering Price Club and Costco members
reciprocal membership privileges effective November 1, 1993.
Revenue from real estate operations is net of operating expense and includes
the results of income-producing properties as well as gains on sales of
property. Revenue from real estate operations
3
<PAGE>
decreased from $9,981 in the second quarter of fiscal 1993 to $3,700 in the
second quarter of fiscal 1994. The decrease is due to a $6,710 pre-tax gain
recognized on the sale of non-club property in the second quarter of fiscal
1993, for which there was no similar gain in the second quarter of fiscal 1994.
Gross margin (defined as net sales minus merchandise costs) increased from
$358,438, or 9.59% of net sales in the second quarter of fiscal 1993 to
$384,690, or 9.57% of net sales in the second quarter of fiscal 1994. The gross
margin reflects improved buying and distribution techniques of the combined
company and an increased proportion of sales from ancillary businesses (such as
pharmacy, fresh food, one-hour photo, optical and food services) which typically
have higher gross margin characteristics. These positive effects to gross margin
were offset by a lower inventory shrinkage recovery reflected in the second
quarter of FY 1994, as compared to such recovery in the second quarter of fiscal
1993, due to a reduction in the inventory shrinkage provision in the first
quarter of fiscal 1994.
The gross margin figures reflect accounting for merchandise inventories on
the last-in, first-out (LIFO) method. For the second quarter of both fiscal 1994
and 1993 there was a $1,900 LIFO charge to income due to the use of the LIFO
method compared to the first-in, first-out (FIFO) method.
Selling, general and administrative expenses as a percent of net sales
increased from 8.48% during the second quarter of fiscal 1993 to 8.65% during
the second quarter of fiscal 1994, reflecting a combination of comparable unit
sales decreases in warehouses in operation during both fiscal periods and higher
expense ratios at warehouses opened during fiscal 1994 and fiscal 1993 (newer
units generally operate at significantly lower annual sales volumes than mature
units and, therefore, incur higher expense ratios than mature units). Included
in selling, general and administrative expenses is the $2,500 pre-tax charge
related to costs associated with the January 1994 Los Angeles earthquake.
Preopening expenses totaled $4,834 or 0.13% of net sales during the second
quarter of fiscal 1993 and $4,915 or .12% of net sales during the second quarter
of fiscal 1994. During the second quarter of fiscal 1994, the company opened 10
new warehouses. The Company opened 7 new warehouses during the second quarter of
fiscal 1993.
Interest expense totaled $10,963 in the second quarter of fiscal 1993 and
$11,655 in the second quarter of fiscal 1994. In both fiscal quarters interest
expense was incurred as a result of the interest on the three series of
convertible subordinated debentures, as well as interest on borrowings under the
Company's credit facilities.
Interest and other income totaled $4,264 in the second quarter of fiscal
1993 and $3,212 in the second quarter of fiscal 1994. This decrease was
primarily due to lower average balances of cash and short-term investments and
lower interest rates in the second quarter of fiscal 1994.
(B) COMPARISON OF THE 24 WEEKS ENDED FEBRUARY 13, 1994 AND FEBRUARY 14, 1993
Net income during the first half of fiscal 1994 totaled $29,284, or $.13 per
share (fully diluted), compared to $113,357 or $.51 per share (fully diluted)
during last year's first half. This year's income figure includes the merger and
restructuring charge of $120,000 pre-tax ($80,000 after tax), or $.36 per share
(fully diluted), related to combining The Price Company and Costco Wholesale
Corporation. Excluding the merger and restructuring charge, net income during
the first half would have been $109,284, or $.49 per share (fully diluted). In
addition to the Los Angeles earthquake charge included in this year's first half
results is a $4,210 pre-tax gain or $.01 per share related to the sale of
non-club property.
Net sales increased 6% to $7,619,214 during the first half of fiscal 1994,
from $7,158,691 during the first half of fiscal 1993. This increase was due to:
sales at the 31 warehouses that were opened since the end of the first half of
fiscal 1993, which increases were partially offset by negative comparable sales
at existing locations opened prior to fiscal 1993, and by discontinued sales
from seven warehouses closed during fiscal 1993 and six warehouses closed in the
first half of fiscal 1994.
Comparable sales, sales in warehouses open for at least a year, were a
negative 3% during the first half of fiscal 1994. The comparable sales decrease
was attributed to several factors, including the
4
<PAGE>
following: the effect of sales cannibalization by opening additional warehouses
in existing markets; increased competition in most markets; price deflation in
certain merchandise categories; the January 1994 Los Angeles earthquake; extreme
weather conditions in the Northeast and Mid-Atlantic states; and a weaker
Canadian dollar where the Company derives approximately 15% of net sales.
Membership fees and other revenue increased from $155,139, or 2.17% of net
sales, in the first half of fiscal 1993 to $159,575, or 2.09% of net sales in
the first half of fiscal 1994. This increase reflects new membership sign-ups at
the 31 new warehouses opened since the end of the second quarter of 1993, and
the effect of membership fee increases implemented in certain markets in fiscal
1993. As anticipated, the Company is experiencing a decline in membership
renewals at existing warehouses attributable to overlapping memberships and
offering Price and Costco members reciprocal membership privileges effective
November 1, 1993.
Revenue from real estate operations is net of operating expenses and
includes the results of income-producing properties as well as gains on sales of
property. Revenue from real estate operations decreased from $11,754 in the
first half of fiscal 1993 to $10,221 in the second quarter of fiscal 1994. The
decrease is due primarily to a $6,710 pre-tax gain recognized on the sale of
property in the first half of fiscal 1993, compared to $4,210 in the first half
of 1994.
Gross margin (defined as net sales minus merchandise costs) increased from
$663,581, or 9.27% of net sales in the first half of fiscal 1993 to $717,442, or
9.42% of net sales in the first half of fiscal 1994. The gross margin reflects
improved buying and distribution techniques of the combined company and an
increased proportion of sales from ancillary businesses (such as pharmacy, fresh
food, one-hour photo, optical and food services) which typically have higher
gross margin characteristics.
The gross margin figures reflect accounting for merchandise inventory costs
on the last-in, first-out (LIFO) method. For the first half of fiscal 1994 there
was a $3,800 LIFO charge to income due to the use of the LIFO method compared to
the first-in, first-out (FIFO) method. This compares to a $4,100 LIFO charge in
the first half of fiscal 1993.
Selling, general and administrative expenses as a percent of net sales
increased from 8.57% during the first half of fiscal 1993 to 8.79% during the
first half of fiscal 1994, reflecting a combination of comparable unit sales
decreases in warehouses in operation during both fiscal periods and higher
expense ratios at warehouses opened during fiscal 1993 and fiscal 1994 (newer
warehouses generally operate at significantly lower annual sales volumes than
mature units and, therefore, experience higher expense ratios than mature
units). Included in selling general and administrative expenses is the $2,500
pre-tax charge related to costs associated with the January 1994 Los Angeles
earthquake.
Preopening expenses totaled $16,385 or 0.23% of net sales during the first
half of fiscal 1993 and $16,045 or 0.21% of net sales during the first half of
fiscal 1994. During the first half of fiscal 1994, the company opened 21 new
warehouses. The Company opened 27 new warehouses during the first half of fiscal
1993.
Interest expense totaled $20,407 in the first half of fiscal 1993 and
$22,478 in the first half of fiscal 1994. In both fiscal periods interest
expense was incurred as a result of the interest on the three series of
convertible subordinated debentures, as well as interest on borrowings under the
Company's credit facilities.
Interest income and other totaled $8,977 in the first half of fiscal 1993
and $5,923 in the first half of fiscal 1994. This decrease was primarily due to
lower average balances of cash and short-term investments and lower interest
rates in the first half of fiscal 1994.
The $120,000 pre-tax ($80,000 after-tax) provision for merger and
restructuring costs includes approximately $20,000 of direct transaction costs
related to the merger, as well as estimated expenses related to consolidating
and restructuring certain functions, the closing of certain facilities and sale
of related properties, severance and employee payments, write-offs of certain
redundant capitalized costs and certain other costs. Under the
pooling-of-interests accounting method, these estimated costs
5
<PAGE>
are expensed in the quarter in which the merger was consummated (first quarter
of fiscal 1994). The provision for income tax in the first half of fiscal 1994
reflects certain merger-related costs that are not deductible for income tax
purposes.
LIQUIDITY AND CAPITAL RESOURCES
(DOLLARS IN THOUSANDS)
Price/Costco's primary requirement for capital is the financing of the land,
building and equipment costs for new warehouses plus the costs of initial
warehouse operations and working capital requirements; non-club real estate
development, including real estate joint ventures; and international expansion
through investment in foreign subsidiaries and joint ventures.
In the first half of fiscal 1994, cash provided by operations totaled
$69,934. Proceeds generated from property sales were $28,657. These funds,
combined with a $148,625 reduction of cash and cash equivalents and short-term
investments and $80,407 of increased borrowings under revolving credit
agreements were used to finance additions to property and equipment for
warehouse clubs and related operations of $246,956, other investing activities
related primarily to non-club real estate development, and other assets, which
together totaled $89,681, including the purchase from a bank of a $41,000 note
receivable which was previously guaranteed by the Company.
For fiscal 1994, expansion plans for the United States and Canada are to
open approximately 31 new warehouse clubs including the 21 new warehouses opened
in the first half of fiscal 1994. As of March 15, 1994, a total of 22 new
warehouses had been opened in fiscal 1994, less two Texas units closed during
the first quarter, four units in the 2nd quarter and one unit in the third
quarter. The Company opened a warehouse in the United Kingdom on November 30,
1993, with other U.K. locations expected to follow in calendar year 1994. The
Company has continued to develop its interests in Mexico through a joint venture
which operates five Price Clubs in Mexico, two of which were opened subsequent
to August 29, 1993. This joint venture has not had a material effect on the
Company's results of operations to date. Other markets are being assessed,
including Pacific Rim and Latin American countries.
Total planned capital expenditures for fiscal 1994 are approximately
$700,000 to fund warehouse club expansion in the United States and Canada, other
international warehouse club expansion, non-club real estate development, and
other activities such as Quest electronic shopping, business delivery,
processing and packaging operations and alternative methods of distributing
goods and services. The expenditures will be financed with a combination of cash
provided from operations; the use of cash, cash equivalents and short-term
investments, which totaled $210,343 at August 29, 1993 and $61,718 at February
13, 1994; short-term borrowings under revolving credit facilities and/or
commercial paper facilities; issuance of long-term debt; and other financing
sources including the sale of certain real estate investments to third parties,
and proceeds from minority joint venture partners in international subsidiaries,
as required.
The company has recently implemented a domestic multiple option loan
facility with a group of 14 banks which provides for borrowings of up to
$500,000, or for standby support for a commercial paper program. Of this amount,
$250,000 expires on January 30, 1995, and $250,000 expires on January 30, 1998.
The interest rate on bank borrowings is based on LIBOR, the prime or federal
funds rate or rates bid at auction by the participating banks. Notes payable at
February 13, 1994, in the accompanying balance sheet consist primarily of
advances from three of the participating banks under separate uncommitted lines.
Subsequent to February 13, 1994 the Company established a $500,000 commercial
paper program.
In addition, the Company's wholly-owned Canadian subsidiary has a $66,865
line of credit with a group of three Canadian banks of which $37,147 expires on
December 1, 1994 (the short-term portion) and $29,718 expires in various amounts
through December 1, 1997 (the long-term portion). The
6
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interest rate on borrowings is based on the prime rate or the "Bankers'
Acceptance" rate. At February 13, 1994, $22,511 was borrowed under the
short-term portion, and $7,429 was borrowed under the long-term portion.
Due to rapid inventory turnover, the Company's operations provide higher
level of supplier accounts payable than generally encountered in other forms of
retailing. When combined with accrued expenses and other current liabilities,
the resulting amount typically exceeds the current assets needed to operate the
business (e.g., cash, merchandise inventories, receivable and other current
assets). At February 13, 1994, working capital totaled a negative $75,607
compared to a positive $130,717 at August 29, 1993. This decrease is primarily
related to a reduction in cash and cash equivalents of $83,842, a decrease in
short-term investments of $64,783 and an increase in notes payable of $80,407
offset by increases in other working capital accounts of $22,708.
The Company's balance sheet as of February 13, 1994, reflects a $200,513 or
5% increase in total assets since August 29, 1993. This increase is composed
primarily of: (1) increased inventory levels of $118,090, primarily reflecting
the Company's expansion program; and (2) increases in property and equipment,
non-club real estate investments, and other assets totaling $336,637, primarily
related to the Company's fiscal 1994 expansion activities and the purchase of
the $41,000 note receivable; was partially offset by the $148,625 decrease in
cash and cash equivalents and short-term investments used to finance investing
activities. Stockholders' equity increased due primarily to net income of
$29,284 for the twenty-four weeks ended February 13, 1994.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 6, 1992, Price was served with a complaint in an action entitled
FECHT ET AL. V. THE PRICE COMPANY ET AL., Case No. 92-497, United States
District Court, Southern District of California. Subsequently, on April 22,
1992, Price was served with a first amended complaint in the action. The case
was dismissed without prejudice by the Court on September 21, 1992, on the
grounds the plaintiffs had failed to state a sufficient claim against
defendants. Subsequently, plaintiffs filed a Second Amended Complaint which, in
the opinion of the Company's counsel, alleged substantially the same facts as
the prior complaint. The case was dismissed with prejudice by the Court on March
9, 1993, on grounds the plaintiffs had failed to state a sufficient claim
against defendants. Plaintiffs have filed an Appeal in the Ninth Circuit Court
of Appeals. The Company intends to vigorously defend the suit and believes the
ultimate outcome of the litigation will not have a material effect on the
financial statements.
The Company is a party to litigation in the ordinary course of business to
which its property is subject. The Company's management does not believe that
the ultimate resolution of any of these matters will have a material adverse
impact on the financial position of the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
7
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of stockholders was held on January 13, 1994,
and certain matters presented for vote received the required majority approval
and had total for, against, and abstained votes, as follows:
(1) To elect four Class I directors to hold office until the 1997 Annual
Meeting of Stockholders or until their successors are elected and qualified.
<TABLE>
<CAPTION>
W/H AUTHORITY
AND
TOTAL SHARES AGAINST ABSTAINED VOTES/
VOTED/(%) FOR VOTES/(%) VOTES/(%) (%)
-------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C>
Robert E. Price 178,224,717 175,622,553 -- 2,602,164
82.0% 80.8% -- 1.2%
Mitchell G. Lynn 178,224,717 175,623,123 -- 2,601,594
82.0% 80.8% -- 1.2%
James D. Sinegal 178,224,717 175,670,118 -- 2,554,599
82.0% 80.8% -- 1.2%
Jeffrey H. Brotman 178,224,717 175,665,843 -- 2,558,874
82.0% 80.8% -- 1.2%
</TABLE>
(2) To consider and approve indemnity agreements to be entered into
between the Company and each of its directors and certain of its executive
officers.
<TABLE>
<CAPTION>
W/H AUTHORITY AND
TOTAL SHARES AGAINST ABSTAINED
VOTED/(%) FOR VOTES/(%) VOTES/(%) VOTES/(%)
- -------------- -------------- ------------- -----------------
<S> <C> <C> <C>
178,224,717 161,604,552 11,645,850 4,974,315
82.0% 74.3% 5.4% 2.3%
</TABLE>
(3) To consider and ratify the selection of the Company's independent
auditors, Arthur Andersen & Co.
<TABLE>
<CAPTION>
W/H AUTHORITY
TOTAL SHARES AGAINST AND ABSTAINED
VOTED/(%) FOR VOTES/(%) VOTES/(%) VOTES/(%)
- -------------- -------------- ------------- ---------------
<S> <C> <C> <C>
178,224,717 177,423,244 111,214 690,259
82.0% 81.6% .1% .3%
<FN>
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Note: There were 217,347,955 total shares outstanding as of the November 23,
1993 record date.
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein or incorporated by reference:
10(c)(8) Special Severance Agreement
10(z)(14) A $250,000,000 Short-Term Revolving Credit Agreement among
Price/Costco, Inc. and a group of fourteen banks dated January
31, 1994.
10(z)(15) A $250,000,000 Extended Revolving Credit Agreement among
Price/Costco, Inc. and a group of fourteen banks, dated
January 31, 1994.
(28) Independent Public Accountants' Letter
(b) No reports on Form 8-K were filed for the 12 weeks ended February 13,
1994.
8
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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.
PRICE/COSTCO, INC.
REGISTRANT
<TABLE>
<S> <C>
Date: March 30, 1994 /s/ James D. Sinegal
-------------------------------------------------
James D. Sinegal
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Date: March 30, 1994 /s/ Richard A. Galanti
-------------------------------------------------
Richard A. Galanti
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
</TABLE>
9
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PRICE/COSTCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
FEBRUARY AUGUST 29,
13, 1994 1993
---------- ----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents...................................... $ 36,385 $ 120,227
Short-term investments......................................... 25,333 90,116
Receivables, net............................................... 131,457 114,828
Merchandise inventories........................................ 1,109,138 993,729
Other current assets........................................... 57,949 70,134
---------- ----------
Total current assets......................................... 1,360,262 1,389,034
---------- ----------
PROPERTY AND EQUIPMENT
Land, land rights, and land improvements....................... 914,335 906,588
Buildings and leasehold improvements........................... 1,071,678 905,396
Equipment and fixtures......................................... 484,170 433,502
Construction in progress....................................... 42,406 116,346
---------- ----------
2,512,589 2,361,832
Less -- accumulated depreciation and amortization.............. (378,219) (330,150)
---------- ----------
Net property and equipment................................... 2,134,370 2,031,682
---------- ----------
NON-CLUB REAL ESTATE INVESTMENTS, NET............................ 393,929 334,491
OTHER ASSETS..................................................... 252,027 184,868
---------- ----------
$4,140,588 $3,940,075
---------- ----------
---------- ----------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Bank checks outstanding, less cash on deposit.................. $ 21,357 $ 18,361
Notes payable.................................................. 103,500 23,093
Accounts payable............................................... 891,757 872,851
Accrued salaries and benefits.................................. 189,495 178,397
Accrued sales and other taxes.................................. 101,240 77,784
Other current liabilities...................................... 128,520 87,831
---------- ----------
Total current liabilities.................................... 1,435,869 1,258,317
LONG-TERM DEBT................................................... 814,898 812,576
DEFERRED INCOME TAXES AND OTHER LIABILITIES...................... 64,182 72,454
---------- ----------
Total liabilities.............................................. 2,314,949 2,143,347
---------- ----------
COMMITMENTS AND CONTINGENCIES.................................... -- --
STOCKHOLDERS' EQUITY
Preferred stock $.01 par value; 100,000,000 shares authorized;
no shares issued and outstanding.............................. -- --
Common stock $.01 par value; 900,000,000 shares authorized;
217,635,000 and 217,074,000 shares issued and outstanding..... 2,176 2,171
Additional paid-in capital..................................... 577,144 571,268
Accumulated foreign currency translation....................... (38,547) (32,293)
Retained earnings.............................................. 1,284,866 1,255,582
---------- ----------
Total stockholders' equity................................... 1,825,639 1,796,728
---------- ----------
$4,140,588 $3,940,075
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
10
<PAGE>
PRICE/COSTCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
12 WEEKS 12 WEEKS 24 WEEKS 24 WEEKS
ENDED ENDED ENDED ENDED
FEBRUARY 13, FEBRUARY 14, FEBRUARY 13, FEBRUARY 14,
1994 1993 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUE
Net sales............................................ $ 4,019,417 $ 3,736,234 $ 7,619,214 $ 7,158,691
Membership fees and other............................ 78,245 75,125 159,575 155,139
Real estate operations............................... 3,700 9,981 10,221 11,754
------------- ------------- ------------- -------------
Total revenue...................................... 4,101,362 3,821,340 7,789,010 7,325,584
OPERATING EXPENSES
Merchandise costs.................................... 3,634,727 3,377,796 6,901,772 6,495,110
Selling, general and administrative expenses......... 347,726 316,963 669,410 613,731
Preopening expenses.................................. 4,915 4,834 16,045 16,385
------------- ------------- ------------- -------------
Operating income................................... 113,994 121,747 201,783 200,358
OTHER INCOME (EXPENSE)
Interest expense..................................... (11,655) (10,963) (22,478) (20,407)
Interest and other income............................ 3,212 4,264 5,923 8,977
------------- ------------- ------------- -------------
Income before provision for merger and
restructuring expense and income taxes............ 105,551 115,048 185,228 188,928
PROVISION FOR MERGER AND RESTRUCTURING EXPENSE....... -- -- 120,000 --
------------- ------------- ------------- -------------
Income before provision for income taxes........... 105,551 115,048 65,228 188,928
PROVISION FOR INCOME TAXES........................... 43,276 46,019 35,944 75,571
------------- ------------- ------------- -------------
Net income......................................... $ 62,275 $ 69,029 $ 29,284 $ 113,357
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE --
PRIMARY............................................ $ .28 $ .31 $ .13 $ .51
Shares used in calculation (000's)................. 227,253 227,583 219,549 227,603
FULLY DILUTED...................................... $ .28 $ .30 $ .13 $ .51
Shares used in calculation (000's)................. 240,011 240,341 219,549 240,362
</TABLE>
The accompanying notes are an integral part of these statements.
11
<PAGE>
PRICE/COSTCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
24 WEEKS 24 WEEKS
ENDED ENDED
FEBRUARY 13, FEBRUARY 14,
1994 1993
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income....................................................................... $ 29,284 $ 113,357
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.................................................. 56,182 50,517
Increase in merchandise inventories............................................ (118,090) (221,675)
Increase in accounts payable................................................... 28,486 82,002
Other.......................................................................... 74,072 (34,557)
------------ ------------
Total adjustments............................................................ 40,650 (123,713)
------------ ------------
Net cash (used) provided by operating activities............................. 69,934 (10,356)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment.............................................. (246,956) (232,951)
Additions to non-club real estate investments.................................... (28,115) (30,193)
Proceeds from non-club real estate investments and property and equipment........ 28,657 15,956
Decrease in short-term investments and restricted cash........................... 64,783 71,919
Other............................................................................ (61,566) (32,240)
------------ ------------
Net cash used in investing activities........................................ (243,197) (207,509)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to notes payable....................................................... 80,407 25,052
Net proceeds from issuance of long-term debt..................................... 6,931 3,134
Changes in bank checks outstanding, less cash on deposit......................... 3,346 (9,814)
Payments on long-term debt....................................................... (6,698) (350)
Exercise of stock options, including income tax benefit.......................... 5,881 6,517
Other............................................................................ -- (786)
------------ ------------
Net cash provided by financing activities.................................... 89,867 23,753
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH............................................ (446) (7,061)
------------ ------------
Net decrease in cash and cash equivalents.................................... (83,842) (201,173)
------------ ------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR..................................... 120,227 253,992
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF QUARTER........................................ $ 36,385 $ 52,819
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amounts capitalized)............................................ $ 24,165 $ 21,475
Income taxes..................................................................... 48,282 68,314
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Owned property was transferred or invested as follows:
Property and equipment........................................................... $ (50,067) $ 28,315
Non-club real estate investments................................................. 51,522 (25,474)
Other assets..................................................................... (1,455) (2,841)
</TABLE>
The accompanying notes are an integral part of these statements.
12
<PAGE>
PRICE/COSTCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 13, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE (1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements include the
accounts of Price/Costco, Inc. a Delaware corporation, and its subsidiaries
("Price/Costco" or the "Company"). Price/Costco is a holding company which
operates primarily through its major subsidiaries, The Price Company and
subsidiaries ("Price"), and Costco Wholesale Corporation and subsidiaries
("Costco.") As described more fully in Note 2 -- the Transaction, on October 21,
1993, Price and Costco became wholly owned subsidiaries of Price/Costco. These
unaudited consolidated financial statements have been prepared following the
pooling-of-interests method of accounting and reflect the combined financial
position and operating results of Price and Costco for all periods presented.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial reporting and pursuant to the rules and regulations of the
Securities and Exchange Commission. While these statements reflect all normal
recurring adjustments which are, in the opinion of management, necessary for
fair presentation of the results of the interim period, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the financial statements and footnotes thereto included in the Company's annual
report filed on Form 10-K for the year ended August 29, 1993.
BUSINESS
The Company operates in two reporting business segments-cash and carry
merchandising and real estate operations. The Company reports on a 52/53-week
fiscal year, consisting of 13 four-week periods and ending on Sunday nearest the
end of August. Fiscal 1994 will end on August 28, 1994. The first, second and
third quarters consist of 12 weeks each, and the fourth quarter consists of 16
weeks.
MERCHANDISE INVENTORIES
Merchandise inventories are valued at the lower of cost or market as
determined by the retail inventory method, and are stated using the last-in,
first-out (LIFO) method for U.S. merchandise inventories, and first-in,
first-out (FIFO) method for Canadian merchandise inventories. If the FIFO method
had been used merchandise inventory would have been $13,050 and $9,250 higher at
February 13, 1994 and August 29, 1993, respectively.
The Company provides for estimated inventory losses between physical
inventory counts on the basis of a standard percentage of sales. This provision
is adjusted to reflect the actual shrinkage results of the physical inventory
counts which generally occur in the second and fourth quarters of the Company's
fiscal year.
NOTES RECEIVABLE
Notes receivable included in other assets totaled $120,806 at February 13,
1994 and $75,419 at August 29, 1993 and consist primarily of a $41,000 loan to a
hotel company (the Hotel loan) and amounts due from various municipalities,
agencies and developers. On October 15, 1993, the Company purchased and assumed
all of the rights and obligations of the Hotel loan which it had previously
guaranteed. The borrower, a hotel company, had been in violation of its debt
covenants. The note is collateralized by certain hotel property. If the
collateral were deemed worthless, the Company could incur an after-tax loss of
up to $25,000. The Company believes that the likelihood of any material loss
from this note receivable is remote.
13
<PAGE>
PRICE/COSTCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 13, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE (1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common and common equivalent share is based on the weighted
average number of common and common equivalent shares outstanding. The 24-week
period ended February 13, 1994 does not reflect the effect of convertible
debentures, as they were not dilutive for either primary or fully-diluted
purposes. For the quarter ended February 14, 1993 this calculation eliminated
interest expense, net of income taxes, on the 5 1/2% convertible subordinated
debentures (primary and fully diluted) and the 6 3/4% convertible subordinated
debentures (fully diluted only), and includes the additional shares issuable
upon conversion of these debentures.
NOTE (2) -- THE TRANSACTION
On October 21, 1993, the shareholders of both Price and Costco approved an
agreement that provided for the mergers of Price and Costco into Price/Costco
(the Transaction). Pursuant to the Transaction, Price and Costco became
subsidiaries of Price/Costco. Shareholders of Price received 2.13 shares of
Price/Costco common stock for each share of Price common stock and shareholders
of Costco received one share of Price/Costco common stock for each share of
Costco.
The Transaction qualified as a "pooling-of-interests" for accounting and
financial reporting purposes. The pooling-of-interests method of accounting is
intended to present as a single interest two or more common shareholder
interests which were previously independent. Consequently, the historical
financial statements for periods prior to the consummation of the combination
are restated as though the companies had been combined. The restated financial
statements are adjusted to conform the accounting policies of the separate
companies.
All fees and expenses related to the Transaction and to the consolidation
and restructuring of the combined companies have been expensed as required under
the pooling-of-interests accounting method in the unaudited consolidated
statement of operations of Price/Costco for the 12 weeks ended November 21,
1993. Such fees and expenses are approximately $120,000 ($80,000 after tax), of
which approximately $20,000 are direct transaction costs, and the remainder is
the estimated expense related to consolidating and restructuring certain
functions, the closing of certain facilities and sales of related properties,
severance and employee payments, write-offs of certain redundant capitalized
costs and certain other costs. The actual cost of the Transaction could vary
significantly from those estimates.
The calculation of net income per common and common equivalent share for
each period presented prior to the Transaction reflects the issuance of 2.13
shares of Price/Costco Common Stock for each share of Price Common Stock used in
such calculation and one share of Price/Costco Common Stock for each share of
Costco Common Stock used in such calculation without consideration for
fractional shares or dissenting shares of Price or dissenting shares of Costco.
Costco's consolidated financial statements reported income taxes following
the requirements of SFAS No. 109, "Accounting for Income Taxes." Price's
consolidated financial statements reported income taxes following the
requirements of Accounting Principles Board Opinion No. 11, "Accounting for
Income Taxes." To conform Price's accounting practice to SFAS No. 109, an
adjustment was made to increase the deferred tax liability and to reduce
retained earnings as of fiscal 1989 (the year Costco adopted the liability
method of accounting for income taxes) by approximately $20,100.
14
<PAGE>
PRICE/COSTCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 13, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE (2) -- THE TRANSACTION (CONTINUED)
The following summarizes amounts of Price and Costco prior to the
Transaction.
<TABLE>
<CAPTION>
MEMBERSHIP
FEES AND REAL ESTATE
NET SALES OTHER OPERATIONS NET INCOME
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
24 weeks ended February 13, 1994:
Price (8 weeks prior to the Transaction)....... $ 1,092,891 $ 28,525 $ 5,241 $ 13,237
Costco (8 weeks prior to the Transaction)...... 1,204,765 23,818 -- 9,301
Price/Costco (16 weeks after the
Transaction).................................. 5,321,558 107,232 4,980 6,746
------------- ----------- ----------- -----------
Combined..................................... $ 7,619,214 $ 159,575 $ 10,221 $ 29,284
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
24 weeks ended February 14, 1993:
Price.......................................... $ 3,690,938 $ 86,044 $ 11,754 $ 56,605
Costco......................................... 3,467,753 69,095 -- 56,752
------------- ----------- ----------- -----------
Combined..................................... $ 7,158,691 $ 155,139 $ 11,754 $ 113,357
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
</TABLE>
NOTE (3) -- NON-CLUB REAL ESTATE INVESTMENTS
Non-club real estate investments consist of the following components:
<TABLE>
<CAPTION>
FEBRUARY 13, AUGUST 29,
1994 1993
------------ -----------
<S> <C> <C>
Property held for development or lease to others................ $ 399,960 $ 347,274
Less accumulated depreciation................................... 16,591 23,352
------------ -----------
383,369 323,922
Investments in and advances to real estate joint ventures....... 10,560 10,569
------------ -----------
$ 393,929 $ 334,491
------------ -----------
------------ -----------
</TABLE>
Property held for development or lease to others consists of property owned
directly and property owned by real estate joint venture partnerships in which
the Company has a controlling interest. Investments in and advances to real
estate joint ventures relate to real estate partnerships that are less than
majority owned.
Components of real estate operations are as follows:
<TABLE>
<CAPTION>
12 WEEKS 12 WEEKS 24 WEEKS 24 WEEKS
ENDED ENDED ENDED ENDED
FEBRUARY 13, FEBRUARY 14, FEBRUARY 13, FEBRUARY 14,
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Rental and other revenue........................ $ 5,981 $ 5,616 $ 9,802 $ 8,973
Operating expenses.............................. (2,281) (2,345) (3,791) (3,929)
Gains(loss) on sale of non-club real estate
investments.................................... -- 6,710 4,210 6,710
------------ ------------ ------------ ------------
Real estate operations, net..................... $ 3,700 $ 9,981 $ 10,221 $ 11,754
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
15
<PAGE>
PRICE/COSTCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 13, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE (3) -- NON-CLUB REAL ESTATE INVESTMENTS (CONTINUED)
On October 1, 1993, the Company sold a single shopping center and adjacent
Price Club (which is being leased back to the Company) for $28,200. The property
consists of a 117,400 square foot warehouse and 217,700 square foot shopping
center on 36.37 acres of land. The Company recorded a $4,210 pre-tax gain in
connection with this sale. On December 18, 1992, the Company sold a former Price
Club property for $14,350. The property consisted of a 120,800 square foot
warehouse and 11.9 acres of land. The Company recorded a pre-tax gain of $6,710
in connection with this sale.
NOTE (4) -- DEBT
BANK LINES OF CREDIT
The Company has a recently implemented domestic multiple option loan
facility with a group of 14 banks which provides for borrowings of up to
$500,000 or for standby support for a commercial paper program. Of this amount,
$250,000 expires on January 30, 1995, and $250,000 expires on January 30, 1998.
The interest rate on bank borrowings is based on LIBOR, the prime or federal
funds rate or rates bid at auction by the participating banks. Notes payable at
February 13, 1994, in the accompanying balance sheet consist primarily of
advances from three of the participating banks under separate uncommitted lines.
Subsequent to February 13, 1994, the Company established a $500,000 commercial
paper program.
In addition, the Company's wholly-owned Canadian subsidiary has a $66,865
line of credit with a group of three Canadian banks of which $37,147 expires on
December 1, 1994 (the short-term portion) and $29,718 expires in various amounts
through December 1, 1997 (the long-term portion). The interest rate on
borrowings is based on the prime rate or the "Bankers' Acceptance" rate. At
February 13, 1994, $22,511 was borrowed under the short-term portion, and $7,429
was borrowed under the long-term portion.
The Company has separate letter of credit facilities (for commercial and
standby letters of credit), totaling approximately $184,500. The outstanding
commitments under these facilities at February 13, 1994 was approximately
$82,000, including approximately $55,000 in standby letters for workers'
compensation requirements.
LONG-TERM DEBT
On November 4, 1993, notice was given to 6 3/4% convertible debenture
holders advising of their option to redeem the debentures for cash equal to the
principal amount plus accrued interest due to a change of control of Price that
was effective as a result of the merger, and that the holders had until December
6, 1993, to exercise such options. Approximately $2,300 of debentures were
purchased by the Company at their face value pursuant to these rights.
NOTE (5) -- INCOME TAXES
The following is a reconciliation of the federal statutory tax rate to the
effective tax rate for the 24-week periods ended February 13, 1994 and February
14, 1993:
<TABLE>
<CAPTION>
24 WEEKS ENDED 24 WEEKS ENDED
FEBRUARY 13, 1994 FEBRUARY 14, 1993
----------------- -----------------
<S> <C> <C> <C> <C>
Federal statutory tax rate...... $22,830 35.0% $64,235 34.0%
State, foreign and other income
taxes, net..................... 3,914 6.0 11,336 6.0
Nondeductible merger-related
costs.......................... 9,200 14.1 -- --
------- ----- ------- -----
$35,944 55.1% $75,571 40.0%
------- ----- ------- -----
------- ----- ------- -----
</TABLE>
16
<PAGE>
PRICE/COSTCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 13, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE (6) -- STOCK OPTIONS
Under the Company's combined incentive and non-qualified stock option plan
approved by shareholders of Price and Costco on October 21, 1993, a total of
1,257,400 options were granted during the first half of fiscal 1994 at an
exercise price of $19 per share.
NOTE (7) -- COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
On April 6, 1992, Price was served with a complaint in an action entitled
FECHT ET AL. V. THE PRICE COMPANY ET AL., Case No. 92-497, United States
District Court, Southern District of California. Subsequently, on April 22,
1992, Price was served with a first amended complaint in the action. The case
was dismissed without prejudice by the Court on September 21, 1992, on the
grounds the plaintiffs had failed to state a sufficient claim against
defendants. Subsequently, plaintiffs filed a Second Amended Complaint which, in
the opinion of the Company's counsel, alleged substantially the same facts as
the prior complaint. The case was dismissed with prejudice by the Court on March
9, 1993, on grounds the plaintiffs had failed to state a sufficient claim
against defendants. Plaintiffs have filed an Appeal in the Ninth Circuit Court
of Appeals. The Company intends to vigorously defend the suit and believes the
ultimate outcome of the litigation will not have a material effect on the
financial statements.
The Company is party to routine litigation in the normal course of business,
to which its property is subject. The Company's management does not believe that
the ultimate resolution of any of these matters will have a material adverse
impact on the financial position of the Company.
17
<PAGE>
[PRICE COSTCO LETTERHEAD]
EXHIBIT 10(c)(8)
February 2, 1994
Mitchell G. Lynn
Senior Executive Vice President
4649 Morena Boulevard
San Diego, CA 92117
Dear Mitch,
In consideration of your continued employment with The Price Company
("Employer"), and your fulfillment of the obligations set forth in paragraph B
below, Employer agrees as follows:
A. From the date hereof and continuing until January 31, 1995, you elect
to terminate your employment with Employer or your employment is terminated by
Employer for reasons other than for "cause" (that is failure to perform, moral
turpitude, wrong doing or other acts defined as legal cause for termination
under the laws of California) Employer will pay you:
(1) A cash amount equal to one and one half times the sum of:
(a) your salary (at the highest rate paid to you at any time
between the Change of Control and the date of termination of employment); plus
(b) an amount equal to the amount contributed to The Price
Company Retirement Plan on your behalf during the Plan year ending prior to
your termination; plus
(2) In addition, the amount necessary to continue health benefits
under Employer's Health Benefit Plan for you and your dependents for the
maximum time allowed under COBRA, not to exceed 18 months.
(3) At your option after April 22, 1994 in exchange for
cancellation of your outstanding stock options, an amount equal to the net
cash value of all your vested and unexercised stock options.
B. In consideration for the payment set forth in paragraph A above, you
will be required to sign a standard form document (see Exhibit A attached)
agreeing, among other things, (1) to preserve the confidentiality of
information obtained during the course of your employment, and (2) to release
any and all claims you might have against Employer (except workers
compensation claims) arising out of the Employer-employee relationship.
C. This agreement is intended to be binding on Employer, its successors
and assigns.
<PAGE>
D. In the event of any dispute regarding the matters set forth in this
letter, the parties agree to resolve the dispute through binding arbitration
in San Diego under the Commercial Rules of the American Arbitration
Association and any judgment rendered by the Arbitrator may be enforced by a
court of law.
E. The prevailing party in any legal proceeding to enforce this
agreement shall be entitled to be awarded its costs and expenses, including
reasonable legal fees, in such action.
Sincerely,
THE PRICE COMPANY
BY /s/ Robert E. Price
-------------------------------------
Robert E. Price, Chairman
Agreed this 2nd day of Feb, 1994
--- ---
EMPLOYEE
/s/ Mitchell G. Lynn
- -------------------------------------
MITCHELL G. LYNN
<PAGE>
SHORT-TERM
REVOLVING CREDIT AGREEMENT
among
PRICE/COSTCO, INC.
as Borrower
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
J.P. MORGAN DELAWARE
SEATTLE-FIRST NATIONAL BANK
CIBC, INC.
FIRST INTERSTATE BANK OF CALIFORNIA
NATIONSBANK OF TEXAS, N.A.
BANK OF HAWAII
BANQUE NATIONALE DE PARIS
CREDIT SUISSE
FIRST INTERSTATE BANK OF WASHINGTON, N.A.
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
SHAWMUT BANK, N.A.
UNITED STATES NATIONAL BANK OF OREGON
WESTDEUTSCHE LANDESBANK GIROZENTRALE
as Lenders,
and
SEATTLE-FIRST NATIONAL BANK
as Agent for the Lenders
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
as Co-Agents for the Lenders
- --------------------------------------------------------------------------------
January 31, 1994
- --------------------------------------------------------------------------------
$250,000,000
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . 1
Section 1.01 CERTAIN DEFINED TERMS . . . . . . . . . . . . . . . . . 1
Section 1.02 GENERAL PRINCIPLES APPLICABLE TO DEFINITIONS . . . . . . 9
Section 1.03 ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II
THE LOANS . . . . . . . . . . . . . . . 9
Section 2.01 COMMITTED LOANS . . . . . . . . . . . . . . . . . . . . 9
Section 2.02 MANNER OF BORROWING A COMMITTED LOAN . . . . . . . . . . 10
Section 2.03 BID LOANS . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.04 MANNER OF BORROWING A BID LOAN . . . . . . . . . . . . . 11
Section 2.05 REDUCTION OF COMMITMENTS . . . . . . . . . . . . . . . . 16
Section 2.06 REPAYMENT OF PRINCIPAL . . . . . . . . . . . . . . . . . 16
Section 2.07 AGENT'S RIGHT TO FUND . . . . . . . . . . . . . . . . . 16
Section 2.08 INTEREST ON COMMITTED LOANS . . . . . . . . . . . . . . 17
(a) GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . 17
(b) SELECTION OF ALTERNATIVE RATE . . . . . . . . . . . . . . . 17
(c) APPLICABLE DAYS FOR COMPUTATION OF INTEREST . . . . . . . . 19
(d) UNAVAILABLE FIXED RATE . . . . . . . . . . . . . . . . . . . 19
Section 2.09 INTEREST ON BID LOANS . . . . . . . . . . . . . . . . . 20
Section 2.10 COMPENSATION FOR INCREASED COSTS . . . . . . . . . . . . 20
Section 2.11 PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . 22
(a) COMMITTED LOANS . . . . . . . . . . . . . . . . . . . . . . 22
(b) BID LOANS . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.12 NOTES . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.13 MANNER OF PAYMENTS . . . . . . . . . . . . . . . . . . . 23
Section 2.14 FEES . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) FACILITY FEES . . . . . . . . . . . . . . . . . . . . . . . 24
(b) ARRANGEMENT, AGENCY AND BID AGENCY FEES . . . . . . . . . . 24
Section 2.15 SHARING OF PAYMENTS, ETC . . . . . . . . . . . . . . . . 24
Section 2.16 EXTENSION OF MATURITY DATE . . . . . . . . . . . . . . . 25
ARTICLE III
CONDITIONS OF LENDING . . . . . . . . . . . . 25
Section 3.01 NOTICE OF BORROWING, PROMISSORY NOTES, ETC . . . . . . . 25
Section 3.02 GUARANTIES . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.03 CORPORATE AUTHORITY . . . . . . . . . . . . . . . . . . 26
Section 3.04 LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . 26
Section 3.05 DEFAULTS, ETC . . . . . . . . . . . . . . . . . . . . . 26
Section 3.06 CANCELLATION OF EXISTING LINES OF CREDIT . . . . . . . . 26
Section 3.07 OTHER INFORMATION . . . . . . . . . . . . . . . . . . . 26
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 26
Section 4.01 CORPORATE EXISTENCE AND POWER . . . . . . . . . . . . . 26
Section 4.02 BORROWER'S CORPORATE AUTHORIZATION . . . . . . . . . . . 27
Section 4.03 GUARANTORS' CORPORATE AUTHORIZATION . . . . . . . . . . 27
Section 4.04 GOVERNMENT APPROVALS, ETC . . . . . . . . . . . . . . . 27
Section 4.05 BINDING OBLIGATIONS, ETC . . . . . . . . . . . . . . . . 28
Section 4.06 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.07 FINANCIAL CONDITION . . . . . . . . . . . . . . . . . . 28
Section 4.08 TITLE AND LIENS . . . . . . . . . . . . . . . . . . . . 29
Section 4.09 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.10 PARI PASSU RANKING . . . . . . . . . . . . . . . . . . . 30
Section 4.11 LAWS, ORDERS; OTHER AGREEMENTS . . . . . . . . . . . . . 30
Section 4.12 FEDERAL RESERVE REGULATIONS . . . . . . . . . . . . . . 30
Section 4.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.14 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.15 PATENTS, LICENSES, FRANCHISES . . . . . . . . . . . . . 32
Section 4.16 NOT INVESTMENT COMPANY, ETC. . . . . . . . . . . . . . . 32
Section 4.17 REPRESENTATIONS AS A WHOLE . . . . . . . . . . . . . . . 32
ARTICLE V
AFFIRMATIVE COVENANTS . . . . . . . . . . . . 33
Section 5.01 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . 33
Section 5.02 PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.03 PRESERVATION OF CORPORATE EXISTENCE, ETC . . . . . . . . 33
Section 5.04 VISITATION RIGHTS . . . . . . . . . . . . . . . . . . . 33
Section 5.05 KEEPING OF BOOKS AND RECORDS . . . . . . . . . . . . . . 33
Section 5.06 MAINTENANCE OF PROPERTY, ETC. . . . . . . . . . . . . . 34
Section 5.07 COMPLIANCE WITH LAWS, ETC. . . . . . . . . . . . . . . . 34
Section 5.08 OTHER OBLIGATIONS . . . . . . . . . . . . . . . . . . . 34
Section 5.09 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.10 FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 35
Section 5.11 NOTIFICATION . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.12 ADDITIONAL PAYMENTS; ADDITIONAL ACTS . . . . . . . . . . 36
Section 5.13 TANGIBLE NET WORTH . . . . . . . . . . . . . . . . . . . 37
Section 5.14 DEBT TO CAPITALIZATION RATIO . . . . . . . . . . . . . . 37
Section 5.15 FIXED CHARGE COVERAGE . . . . . . . . . . . . . . . . . 37
ARTICLE VI
NEGATIVE COVENANTS . . . . . . . . . . . . . 38
Section 6.01 DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.02 LIQUIDATION, MERGER, SALE OF ASSETS . . . . . . . . . . 38
Section 6.03 GUARANTIES, ETC. . . . . . . . . . . . . . . . . . . . . 39
Section 6.04 LIENS . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.05 INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.06 ACCOUNTING CHANGE . . . . . . . . . . . . . . . . . . . 41
Section 6.07 ERISA COMPLIANCE . . . . . . . . . . . . . . . . . . . . 41
Section 6.08 GUARANTOR INDEBTEDNESS . . . . . . . . . . . . . . . . . 41
ii
<PAGE>
ARTICLE VII
EVENTS OF DEFAULT . . . . . . . . . . . . . 42
Section 7.01 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . 42
(a) LOAN PAYMENT DEFAULT . . . . . . . . . . . . . . . . . . . . 42
(b) OTHER PAYMENT DEFAULT . . . . . . . . . . . . . . . . . . . 42
(c) BREACH OF WARRANTY . . . . . . . . . . . . . . . . . . . . . 42
(d) BREACH OF CERTAIN COVENANTS . . . . . . . . . . . . . . . . 42
(e) BREACH OF OTHER COVENANT . . . . . . . . . . . . . . . . . . 42
(f) CROSS-DEFAULT . . . . . . . . . . . . . . . . . . . . . . . 42
(g) PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . 43
(h) VOLUNTARY BANKRUPTCY, ETC . . . . . . . . . . . . . . . . . 43
(i) INVOLUNTARY BANKRUPTCY, ETC . . . . . . . . . . . . . . . . 43
(j) INSOLVENCY, ETC . . . . . . . . . . . . . . . . . . . . . . 44
(k) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(l) GUARANTIES . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.02 CONSEQUENCES OF DEFAULT . . . . . . . . . . . . . . . . 45
ARTICLE VIII
THE AGENT . . . . . . . . . . . . . . . 45
Section 8.01 AUTHORIZATION AND ACTION . . . . . . . . . . . . . . . . 45
Section 8.02 DUTIES AND OBLIGATIONS . . . . . . . . . . . . . . . . . 46
Section 8.03 DEALINGS BETWEEN AGENT AND BORROWER . . . . . . . . . . 48
Section 8.04 LENDER CREDIT DECISION . . . . . . . . . . . . . . . . . 48
Section 8.05 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . 48
Section 8.06 SUCCESSOR AGENT . . . . . . . . . . . . . . . . . . . . 48
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . 49
Section 9.01 NO WAIVER; REMEDIES CUMULATIVE . . . . . . . . . . . . . 49
Section 9.02 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . 50
Section 9.03 CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . 50
Section 9.04 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.05 ASSIGNMENT AND PARTICIPATIONS . . . . . . . . . . . . . 50
Section 9.06 BORROWER'S INDEMNITY . . . . . . . . . . . . . . . . . . 52
Section 9.07 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.08 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.09 CONDITIONS NOT FULFILLED . . . . . . . . . . . . . . . . 53
Section 9.10 ENTIRE AGREEMENT; AMENDMENT . . . . . . . . . . . . . . 53
Section 9.11 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . 53
Section 9.12 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.13 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . 54
iii
<PAGE>
SCHEDULES*
Schedule 1 Prepayment Calculations
Schedule 2 Existing Guarantor Lines of Credit
Schedule 3 Jurisdictions of Incorporation and Foreign Qualification
Schedule 4 Litigation, Violations of Laws
Schedule 5 Capitalization and Ownership of Subsidiaries
Schedule 6 Notice Addresses
Schedule 7 Permitted Investments
EXHIBITS*
Exhibit A Form of Committed Loan Note
Exhibit B Form of Bid Loan Note
Exhibit C Form of Guaranty
Exhibit D Form of Borrower's Counsel's Legal Opinion
Exhibit E Form of Bid Loan Request
Exhibit F Form of Bid Loan Offer
Exhibit G Form of officer's Certificate
Exhibit H Form of Required Notice of Borrowing
* Purposely omitted.
iv
<PAGE>
SHORT-TERM
REVOLVING CREDIT AGREEMENT
--------------------------
THIS SHORT-TERM REVOLVING CREDIT AGREEMENT ("Agreement") is made as of
January 31, 1994, by and among BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, J.P. MORGAN DELAWARE,
SEATTLE-FIRST NATIONAL BANK, CIBC, INC., FIRST INTERSTATE BANK OF CALIFORNIA,
NATIONSBANK OF TEXAS, N.A., BANK OF HAWAII, BANQUE NATIONALE DE PARIS, CREDIT
SUISSE, FIRST INTERSTATE BANK OF WASHINGTON, N.A., FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, SHAWMUT BANK, N.A., UNITED STATES NATIONAL BANK OF OREGON,
WESTDEUTSCHE LANDESBANK GIROZENTRALE (each individually a "Lender" and
collectively the "Lenders"), SEATTLE-FIRST NATIONAL BANK as administrative agent
for the Lenders (the "Agent"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION and MORGAN GUARANTY TRUST COMPANY OF NEW YORK as co-agents for the
Lenders (each individually a "Co-Agent" and collectively the "Co-Agents") and
PRICE/COSTCO, INC., a Delaware corporation (the "Borrower").
ARTICLE I
DEFINITIONS
-----------
Section 1.01 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms have the following meanings:
"ABSOLUTE RATE" means a rate of interest per annum expressed to the
nearest 1/100th of one percent as set forth in a Bid Loan Offer.
"AGENT" means Seattle-First National Bank and any successor
administrative agent selected pursuant to Section 8.06 hereof.
"APPLICABLE INTEREST PERIOD" means, (i) with respect to any Committed
Loan accruing interest at a LIBOR Rate, the period commencing on the first day
the Borrower elects to have such LIBOR Rate apply to such Loan and ending either
(A) if no Lender has delivered a notice pursuant to Section 2.08(e) hereof, on a
day not less than seven (7) or more than thirty (30) days thereafter; or (B) on
a day one, two, three or six months thereafter, in either case as specified in
the Interest Rate Notice given in respect of such Loan, and (ii) with respect to
any Bid Loan accruing interest at a LIBOR Rate, the period commencing on the
first day the Borrower elects to have such LIBOR Rate apply to such Loan and
ending on a day one, two, three, four, five, six, seven, eight, nine, ten,
eleven or twelve
<PAGE>
months thereafter PROVIDED, HOWEVER, that no Applicable Interest Period may be
selected for either a Committed Loan or a Bid Loan if it extends beyond the
Maturity Date for such Loan.
"APPLICABLE INTEREST RATE" means for each Committed Loan, the Base
Rate or LIBOR Rate as designated by the Borrower in an Interest Rate Notice
given with respect to such Loan (or portion thereof) or as otherwise determined
pursuant to Section 2.08(b).
"BASE RATE" means for any day the greater of (a) the Prime Rate or (b)
the sum of (i) the Federal Funds Rate and (ii) one-half of one (.50) percentage
point per annum.
"BASE RATE LOAN" means a Committed Loan or portion thereof bearing
interest at the Base Rate.
"BID LOANS" mean loans made pursuant to the terms of Sections 2.03 and
2.04.
"BID LOAN NOTES" has the meaning given in Section 2.12.
"BID LOAN OFFER" has the meaning given in Section 2.04(b).
"BID LOAN REQUEST" has the meaning given in Section 2.04(a).
"BORROWER" means Price/Costco, Inc., a Delaware corporation, and any
permitted Successor or assign pursuant to Section 9.05.
"BORROWER'S CREDIT RATING" means a level of credit determined in
accordance with the following standards: Borrower's Credit Rating shall be
"Level 1" if Borrower has either (a) an S&P Rating of A- or better or (b) a
Moody's Rating of A3 or better. Borrower's Credit Rating shall be "Level 2" if
Borrower does not meet the standards for a "Level 1" rating set forth above and
has either (a) an S&P Rating of BBB+ or (b) a Moody's Rating of Baa1.
Borrower's Credit Rating shall be "Level 3" if Borrower does not meet the
standards for a "Level 1" or "Level 2" rating set forth above and has either (a)
an S&P Rating of BBB or (b) a Moody's Rating of Baa2. Borrower's Credit Rating
shall be "Level 4" if Borrower does not meet the standards for a "Level 1",
"Level 2" or "Level 3" rating set forth above and has either (a) an S&P Rating
of BBB- or (b) a Moody's Rating of Baa3. The Borrower does not meet the
standards for "Level 1," "Level 2,", "Level 3," or "Level 4" set forth above or
fails to maintain either an S&P Rating or a Moody's Rating, Borrower's Credit
Rating shall be "Level 5." As used herein, "S&P Rating" means the implied
senior unsecured debt rating given from time to time
2
<PAGE>
to the Borrower by Standard & Poor's Corporation. Notwithstanding the foregoing
to the contrary, until the earlier of (a) the first date on which either
Standard & Poor's Corporation or Moody's Investor Service, Inc. shall establish
an implied senior debt rating for Price/Costco, Inc. or (b) April 30, 1994, the
"Borrower's Credit Rating" shall be "Level 2" for all purposes hereunder. As
used herein, "Moody's Rating" means the senior unsecured debt rating given from
time to time to the Borrower by Moody's Investor Service, Inc.
"BUSINESS DAY" means any day other than Saturday, Sunday or another
day on which banks are authorized or obligated to close in Seattle, Washington,
San Francisco, California, or New York, New York except in the context of the
selection of a LIBOR Loan or the calculation of the LIBOR Rate for any
Applicable Interest Period, in which event "Business Day" means any day other
than Saturday or Sunday on which dealings in foreign currencies and exchange
between banks may be carried on in London, England, San Francisco, California,
New York, New York and Seattle, Washington.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITTED LOANS" has the meaning given in Section 2.01.
"COMMITTED LOAN NOTES" has the meaning given in Section 2.12.
"COMMITMENT" has the meaning given in Section 2.01.
"CONSOLIDATED NET IMCOME" means for any accounting period the net
income of the Borrower and its consolidated Subsidiaries for such period,
determined in accordance with generally accepted United States accounting
principles consistently applied, excluding, however, (A) proceeds of any life
insurance policy, (B) gain or loss arising from any write-up or write-down of
capital assets or from the acquisition or retirement or sale of securities of
the Borrower, (C) any restoration of any contingency reserve to income except to
the extent that provision for such reserve was made out of income accrued after
the close of the fiscal year of the Borrower last ended as of the date of this
Agreement, and (D) special credits or charges.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or either Guarantor, are
treated as a single employer under Section 414(b) or 414(c) of the Code.
3
<PAGE>
"DEFAULT" means any event which but for the passage of time or the
giving of notice or both would be an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EVENT OF DEFAULT" has the meaning given in Section 7.01.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three federal funds brokers of recognized
standing selected by it.
"GOVERNMENT APPROVAL" means an approval, permit, license,
authorization, certificate, or consent of any Governmental Authority.
"GOVERNMENTAL AUTHORITY" means the government of the United States or
any State or any foreign country or any political subdivision of any thereof or
any branch, department, agency, instrumentality, court, tribunal or regulatory
authority which constitutes a part or exercises any sovereign power of any of
the foregoing.
"GUARANTIES" means guaranties to be executed by the Guarantors
substantially in the form of Exhibit C hereto.
"GUARANTORS" means Costco Wholesale Corporation, a Washington
corporation, and The Price Company, a California corporation, and any Successors
thereto.
"INDEBTEDNESS" means for any person (i) all items of indebtedness or
liability (except capital, surplus, deferred credits and reserves, as such)
which would be included in determining total liabilities as shown on the
liability side of a balance sheet as of the date as of which indebtedness is
determined, (ii) indebtedness secured by any Lien, whether or not such
indebtedness shall have been assumed, (iii) any other indebtedness or liability
for borrowed money or for the deferred purchase price of property or services
for which such person is directly or contingently liable as obligor, guarantor,
or otherwise, or in respect of which such person otherwise assures a
4
<PAGE>
creditor against loss, and (iv) any other obligations of such person under
leases which shall have been or should be recorded as capital leases.
"INTEREST RATE NOTICE" shall have the meaning given in Section
2.08(b).
"LENDERS" means Bank of America National Trust and Savings
Association, Morgan Guaranty Trust Company of New York, J.P. Morgan Delaware,
Seattle-First National Bank, CIBC, Inc., First Interstate Bank of California,
NationsBank of Texas, N.A., Bank of Hawaii, Banque Nationale de Paris, Credit
Suisse, First Interstate Bank of Washington, N.A., First Union National Bank of
North Carolina, Shawmut Bank, N.A., United States National Bank of Oregon,
Westdeutsche Landesbank Girozentrale, and any Successors thereto or permitted
assigns thereof.
"LIEN" means, for any person, any security interest, pledge, mortgage,
charge, assignment, hypothecation, encumbrance, attachment, garnishment,
execution or other voluntary or involuntary lien upon or affecting the revenues
of such person or any real or personal property in which such person has or
hereafter acquires any interest, EXCEPT (i) liens for Taxes which are not
delinquent or which remain payable without penalty or the validity or amount of
which is being contested in good faith by appropriate proceedings upon stay of
execution of the enforcement thereof with appropriate reserves having been
established therefore; (ii) liens imposed by law (such as mechanics' liens)
incurred in good faith in the ordinary course of business which are not
delinquent or which remain payable without penalty or the validity or amount of
which is being contested in good faith by appropriate proceedings upon stay of
execution of the enforcement thereof with, in the case of liens on property of
the Borrower or any of its Subsidiaries, provision having been made to the
satisfaction of the Agent for the payment thereof in the event the contest is
determined adversely to the Borrower or such Subsidiary; and (iii) deposits or
pledges under worker's compensation, unemployment insurance, social security or
other similar laws or made to secure the performance of bids, tenders, contracts
(except for repayment of borrowed money), or leases, or to secure statutory
obligations or surety or appeal bonds or to secure indemnity, performance or
other similar bonds given in the ordinary course of business.
"LIBOR LOAN" means any Loan or portion thereof bearing interest at the
LIBOR Rate.
"LIBOR RATE" shall mean, with respect to any LIBOR Loan for any
Applicable Interest Period, an interest rate per annum equal to the sum of
(a) the Margin and (b) the product of (i) the Euro-dollar Rate in effect for
such Applicable Interest Period
5
<PAGE>
and (ii) the Euro-dollar Reserves in effect on the first day of such Applicable
Interest Period. The Euro-dollar Rate will be determined on the basis of the
rates at which deposits in U.S. Dollars are offered by the Reference Banks in
the London interbank market at approximately 11:00 o'clock a.m., London time, on
the day that is two (2) Business Days prior to the first date of the proposed
Applicable Interest Period to prime banks in the London interbank market for the
Applicable Interest Period. The Agent will request the principal London office
of each of the Reference Banks to provide a quotation of its rate. If more than
one such quotation is provided, the Euro-dollar Rate will be the arithmetic mean
of the quotations. If Agent is unable to obtain quotations from either Reference
Bank, the "Euro-dollar Rate" will be determined by reference to that rate which
appears on the Reuters Screen LIBO Page as of 11:00 o'clock a.m., London time,
on the day that is two (2) Business Days prior to the first date of the proposed
Applicable Interest Period. If more than one such rate appears on the Reuters
Screen LIBO Page, the rate will be the arithmetic mean of such rates. As used
herein, the term "Euro-dollar Reserves" means (a) when used in connection with a
Bid Loan, the number one; and (b) when used in connection with a Committed Loan,
a fraction (expressed as a decimal), the numerator of which is the number one
and the denominator of which is the number one minus the aggregate of the
maximum reserve percentages (including, without limitation, any special,
supplemental, marginal or emergency reserves) expressed as a decimal established
by the Board of Governors of the Federal Reserve System or any other banking
authority to which the Lenders are subject for Eurocurrency Liability (as
defined in Regulation D of such Board of Governors). It is agreed that for
purposes hereof, each LIBOR Loan shall be deemed to constitute a Eurocurrency
Liability and to be subject to the reserve requirements of Regulation D, without
benefit of credit or proration, exemptions or offsets which might otherwise be
available to the Lenders from time to time under such Regulation D. In the case
of Committed Loans, Euro-dollar Reserves shall be adjusted automatically on and
as of the effective date of any change in any reserve percentage and shall apply
to Applicable Interest Periods commencing after the effective date of change.
"LOAN DOCUMENTS" means this Revolving Credit Agreement, the Committed
Loan Notes, the Bid Loan Notes, the Guaranties, and all other certificates,
instruments and other documents executed in connection with this Agreement or
the transactions contemplated hereby.
"LOANS" means the Committed Loans and the Bid Loans.
"MAJORITY LENDERS" means at any time Lenders having an aggregate
Percentage Interest of at least sixty percent (60%)
6
<PAGE>
PROVIDED, HOWEVER, that if the Commitments of all Lenders shall have been
terminated and if the Committed Loans together with all accrued interest and
other amounts due in respect thereof shall have been paid in full, "Majority
Lenders" shall mean at any time the holders of Bid Loan Notes who, in the
aggregate, have at least sixty percent (60%) of the then-outstanding principal
balance of the Bid Loans.
"MARGIN" means (a) in the case of a Bid Loan, the per annum interest
rate specified as the "margin" in the related Bid Loan Offer and (b) in the case
of a Committed Loan, a per annum interest rate determined in accordance with the
following table:
<TABLE>
<CAPTION>
Borrower's Credit Rating Margin (expressed per annum)
------------------------ ----------------------------
<S> <C>
Level 1 22.5 basis points (.00225)
Level 2 27.5 basis points (.00275)
Level 3 30.0 basis points (.00300)
Level 4 45.0 basis points (.00450)
Level 5 50.0 basis points (.00500)
</TABLE>
"MATURITY DATE" means January 30, 1995 or such later date as may be
established pursuant to Section 2.16 hereof.
"OFFICER'S CERTIFICATE" means a certificate substantially in the form
of Exhibit G and signed in the name of the Borrower by its Chairman, President,
Executive Vice President and Chief Financial Officer or its Vice President and
Treasurer.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means an "employee pension benefit plan" (as such term
is defined in ERISA) from time to time maintained by the Borrower, either
Guarantor, or a member of the Controlled Group.
"PERCENTAGE INTEREST" has the meaning given in Section 2.01 as the
same may be adjusted pursuant to Section 9.05 from time to time hereafter.
"PLAN" shall mean, at any time, an employee pension benefit plan which
is covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code and is either (a) maintained by the Borrower,
either Guarantor or any member of a Controlled Group for employees of the
Borrower, either Guarantor or any member of such Controlled Group or (b)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
the Borrower, either Guarantor or any member of a Controlled Group is then
making or accruing an
7
<PAGE>
obligation to make contributions or has within the preceding five (5) plan years
made contributions.
"PRIME RATE" means on any day the Agent's publicly announced prime
rate of interest at its principal office (which prime rate is a reference rate
and not necessarily the lowest rate of interest charged by Agent to its prime
customers), changing as such prime rate changes.
"REFERENCE BANKS" means Bank of America National Trust and Savings
Association and Morgan Guaranty Trust Company of New York.
"REQUIRED NOTICE OF BORROWING" means a written request for a Committed
Loan from Borrower substantially in the form attached hereto as Exhibit H
executed by the Borrower's Chairman, President or Executive Vice President and
Chief Financial Officer (or such other person as may be designated in a writing
delivered to the Agent by the Borrower's Senior Vice President and Chief
Financial Officer) delivered to Agent and containing the information set forth
in Section 2.02 which shall be delivered prior to 9:00 A.M. (Seattle, Washington
time) on the requested date of borrowing PROVIDED, HOWEVER, if Borrower shall at
the same time elect to have interest accrue on such Committed Loan at a LIBOR
Rate the Required Notice of Borrowing shall be given prior to 10:00 A.M.
(Seattle, Washington time) on a Business Day at least three (3) Business Days
before the requested date of borrowing. Requests for borrowing received after
the designated hour will be deemed received on the next succeeding Business Day.
"SUBSIDIARY" of any person means any corporation of which a majority
(by number of shares or by number of votes) of any class of outstanding capital
stock normally entitled to vote for the election of one or more directors
(regardless of any contingency which does or may suspend or dilute the voting
rights of such class) is at such time owned directly or indirectly by such
person or by one or more Subsidiaries of such person.
"SUCCESSOR" means, for any corporation or banking association, any
successor by merger or consolidation, or by acquisition of substantially all of
the assets of the predecessor.
"TAX" means for any person any tax, assessment, duty, levy, impost or
other charge imposed by any Governmental Authority on such person or on any
property, revenue, income, or franchise of such person and any interest or
penalty with respect to any of the foregoing.
8
<PAGE>
"TOTAL COMMITMENT" means Two Hundred Fifty Million Dollars
($250,000,000) (less any reductions made pursuant to Sections 2.05 or 7.02).
"UNFUNDED VESTED LIABILITIES" shall mean, with respect to any Plan, at
any time, the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Plan exceeds (b) the fair market value of all
Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of the Borrower, either Guarantor or any member
of the Controlled Group to the PBGC or the Plan under Title IV of ERISA.
Section 1.02 GENERAL PRINCIPLES APPLICABLE TO DEFINITIONS.
Definitions given in Section 1.01 shall be equally applicable to both singular
and plural forms of the terms therein defined and references herein to "he" or
"it" shall be applicable to persons whether masculine, feminine or neuter.
References herein to any document including, but without limitation, this
Agreement shall be deemed a reference to such document as it now exists, and as,
from time to time hereafter, the same may be amended. References herein to a
"person" or "persons" shall be deemed to be references to an individual,
corporation, partnership, trust, unincorporated association, joint venture,
joint-stock company, government (including political subdivisions), Governmental
Authority or agency or any other entity.
Section 1.03 ACCOUNTING TERMS. Except as otherwise provided herein,
accounting terms not specifically defined shall be construed, and all accounting
procedures shall be performed, in accordance with generally accepted United
States accounting principles consistently applied.
ARTICLE II
THE LOANS
---------
Section 2.01 COMMITTED LOANS. Each Lender severally agrees on the terms
and conditions of this Agreement to make loans ("Committed Loans") to the
Borrower from time to time on Business Days during the period beginning on the
date hereof and ending on the Maturity Date in an aggregate principal amount not
exceeding at any one time the lesser of (a) the principal amount set forth
opposite such Lender's name below (such Lender's "Commitment") or (b) the
percentage interest set forth opposite such Lender's name below (such Lender's
"Percentage Interest") of the difference between the (i) Total Commitment and
(ii) the then-outstanding principal balance of the Loans.
9
<PAGE>
<TABLE>
<CAPTION>
Percentage
Lender Interest Commitment
- ------ ---------- -----------
<S> <C> <C>
Bank of America NT&SA 13.00% $ 32,500,000
Morgan Guaranty Trust
Company of New York 7.00% $ 17,500,000
J.P. Morgan Delaware 6.00% $ 15,000,000
Seattle-First National Bank 12.00% $ 30,000,000
CIBC, Inc. 10.00% $ 25,000,000
First Interstate Bank
of California 10.00% $ 25,000,000
NationsBank of Texas, NA 10.00% $ 25,000,000
Bank of Hawaii 4.00% $ 10,000,000
Banque Nationale de Paris 4.00% $ 10,000,000
Credit Suisse 4.00% $ 10,000,000
First Interstate Bank
of Washington, NA 4.00% $ 10,000,000
First Union National Bank
of North Carolina 4.00% $ 10,000,000
Shawmut Bank, NA 4.00% $ 10,000,000
US National Bank of Oregon 4.00% $ 10,000,000
Westdeutsche Landesbank
Girozentrale 4.00% $ 10,000,000
Total 100.00% $250,000,000
</TABLE>
Section 2.02 MANNER OF BORROWING A COMMITTED LOAN. The Borrower shall
give the Agent the Required Notice of Borrowing specifying the date of the
borrowing of any Committed Loan and the amount thereof, which shall be an
integral multiple of One Million Dollars ($1,000,000) and not less than Five
Million Dollars ($5,000,000). Such notice shall be irrevocable and shall be
deemed to constitute a representation and warranty by the Borrower that as of
the date of the notice the statements set forth in Article IV hereof are true
and correct and that no Default or Event of Default has occurred and is
continuing. On receipt of such notice, the Agent shall promptly notify each
Lender by telephone (confirmed immediately by telex, facsimile transmission or
cable), telex, facsimile transmission, or cable of the date of the borrowing.
Each Lender shall before 11:00 A.M. (Seattle, Washington time) on the date of
the borrowing, pay the lesser of (a) such Lender's Percentage Interest of the
aggregate principal amount of the requested borrowing identified in the Required
Notice of Borrowing or (b) the maximum amount such Lender is committed to
advance pursuant to the terms of Section 2.01 hereof in immediately available
funds to the Agent at its Commercial Loan Processing Center, Seattle,
Washington. Upon fulfillment to the Agent's satisfaction of the applicable
conditions set forth in Article III, and after receipt by the Agent of such
funds, the Agent will promptly make such
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immediately available funds available to the Borrower by depositing them to the
ordinary checking account maintained by the Borrower with the Agent.
Section 2.03 BID LOANS. The Borrower may request Bid Loans from time to
time on any Business Day during the period beginning on the date hereof and
ending on the Maturity Date in the manner set forth in Section 2.04 and in
amounts not to exceed the difference between (a) the Total Commitment and (b)
the then-outstanding principal balance of the Loans.
Section 2.04 MANNER OF BORROWING A BID LOAN.
(a) When the Borrower wishes to request offers for Bid Loans, it
shall transmit by telex or facsimile transmission a Bid Loan Request
substantially in the form of Exhibit E hereto ("Bid Loan Request") to be
received by Agent no later than (i) 10:00 a.m. (Seattle, Washington time) at
least four (4) Business Days prior to the borrowing date proposed therein, in
the case of a request for Bid Loan which is to accrue interest at a LIBOR Rate
or (ii) 9:00 a.m. (Seattle, Washington time) at least one (1) Business Day prior
to the borrowing date proposed therein, in the case of a request for a Bid Loan
to accrue interest at an Absolute Rate, specifying in each case:
(A) the proposed borrowing date, which shall be a Business Day, for
the proposed Bid Loan;
(B) the aggregate principal amount of such proposed Bid Loan;
(C) whether the requested Bid Loan is to accrue interest at a LIBOR
Rate or an Absolute Rate; and
(D) in the case of a request for a Bid Loan to accrue interest at the
LIBOR Rate, the Applicable Interest Period and in the case of a
request for a Bid Loan to accrue interest at an Absolute Rate,
the maturity date, which may not be less than fourteen (14) days
or more than three hundred sixty-five (365) days after the
proposed borrowing date and, in any event, may not be after the
Maturity Date.
The Borrower may transmit up to three (3) Bid Loan Requests on a single day.
Except as set forth in the preceding sentence, no Bid Loan Request shall be
given within five (5) Business Days of any other Bid Loan Request. Each Bid
Loan Request shall be in a minimum principal amount of Five Million Dollars
($5,000,000) and in integral multiples of One Million Dollars ($1,000,000). A
Bid Loan Request that does not substantially conform to the terms
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<PAGE>
hereof shall be rejected and the Agent shall promptly notify the Borrower of
such rejection by telex or facsimile transmission. Each Bid Loan Request shall
be deemed to constitute a representation and warranty by the Borrower that as of
the date of such Request the statements set forth in Article IV hereof are true
and correct and that no Default or Event of Default has occurred and is
continuing.
(b) Promptly, and in any event before 2:00 o'clock p.m. (Seattle,
Washington time) on the same Business Day that any conforming Bid Loan Request
is received, the Agent shall send to each of the Lenders by telex or facsimile
transmission a copy of such Bid Loan Request(s), which shall constitute an
invitation by the Borrower to each Lender to submit an irrevocable offer ("Bid
Loan Offer") to make some or all of the requested Bid Loans at a rate of
interest determined by each Lender in its sole discretion.
(c) Each Lender may, in its sole discretion, submit one or more Bid
Loan Offers each containing an offer to make a Bid Loan in response to a Bid
Loan Request. Each Bid Loan Offer must comply with the requirements of this
Section 2.04(c) and must be submitted to the Agent by telex or facsimile
transmission in the case of a Bid Loan Offer for a Loan accruing interest at a
LIBOR Rate not later than 9:00 a.m. (Seattle, Washington time) at least three
(3) Business Days prior to the proposed borrowing date, or in the case of a Bid
Loan Offer for a loan accruing interest at an Absolute Rate, not later than 7:00
a.m. (Seattle, Washington time) on the proposed borrowing date, PROVIDED,
HOWEVER, that if the Agent in its capacity as Lender intends to submit one or
more Bid Loan Offers it may only do so if it notifies the Borrower of the terms
of such offer or offers not later than 8:45 a.m. (Seattle, Washington time) at
least three (3) Business Days prior to the proposed borrowing date for a Loan to
accrue interest at a LIBOR Rate and not later than 6:45 a.m. (Seattle,
Washington time) on the proposed borrowing date for a Loan to accrue interest at
an Absolute Rate. Each Bid Loan Offer shall be in substantially the form of
Exhibit F hereto and shall specify:
(i) the proposed borrowing date, which shall be the same as that
set forth in the corresponding Bid Loan Request,
(ii) the principal amount of the Bid Loan for which each such
offer is being made, which principal amount (A) may be
greater than, less than or equal to the Commitment of the
offering Lender, (B) must be at least Five Million Dollars
($5,000,000) and an integral multiple of One Million Dollars
($1,000,000),
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<PAGE>
and (C) may not exceed the principal amount of the Bid Loan
for which offers were requested in the corresponding Bid
Loan Request,
(iii) in the case of a Bid Loan Offer for a Bid Loan accruing
interest at a LIBOR Rate, the Margin offered for such Bid
Loan (which Margin may be a positive or negative increment),
and in the case of a Bid Loan Offer for a Bid Loan accruing
interest at an Absolute Rate, the Absolute Rate offered for
such Bid Loan,
(iv) the minimum or maximum amount, if any, of the Bid Loan Offer
which may be accepted by the Borrower, and
(v) the identity of the offering Lender.
(d) The Agent shall reject any Bid Loan Offer that:
(i) is not substantially in compliance with the terms of Section
2.04(c);
(ii) contains qualifying, conditional or similar language, other
than any such language contained in Exhibit F hereto;
(iii) proposes terms other than or in addition to those set forth
in the corresponding Bid Loan Request; or
(iv) arrives after the time set forth in Section 2.04(c).
If any Bid Loan Offer is rejected pursuant to this Section 2.04(d), the Agent
shall promptly notify the affected Lender of such rejection by telex or
facsimile transmission.
(e) The Agent shall promptly notify the Borrower of the terms of all
conforming Bid Loan Offers submitted by the Lenders in response to each Bid Loan
Request. (Any Bid Loan Offer received by Agent which conforms with the
requirements of Section 2.04(c) but which is made in respect of a Bid Loan for
which a conforming Bid Loan Offer has already been received from the same Lender
shall be disregarded by the Agent unless such subsequent Bid Loan Offer
specifically states that it is submitted to correct an error in such former Bid
Loan Offer.) The Agent's notice to the Borrower shall specify the aggregate
principal amount of the Bid Loans for which conforming offers
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<PAGE>
have been received and the respective LIBOR Rates or Absolute Rates, as the case
may be.
(f) Not later than 9:30 a.m. (Seattle, Washington time) at least
three (3) Business Days prior to the proposed borrowing date, in the case of a
Bid Loan to accrue interest at a LIBOR Rate, or 7:30 a.m. (Seattle, Washington
time) on the proposed borrowing date, in the case of a Bid Loan to accrue
interest at an Absolute Rate, the Borrower shall notify the Agent of the
aggregate principal amount of the Bid Loan(s) it elects to accept for each
outstanding Bid Loan Request; PROVIDED, HOWEVER, that the aggregate principal
amount of the accepted Bid Loan(s) may not exceed the amount set forth in the
related Bid Loan Request and PROVIDED, FURTHER, that notwithstanding Borrower's
acceptance of a particular principal amount of Bid Loans, the actual aggregate
principal amount of the Bid Loans to be made may be less than the amount
accepted by the Borrower if after giving effect to the terms of subsection
2.04(g) less than all of the accepted principal would be allocated to the
Lenders submitting Bid Loan Offers. The failure by the Borrower to give the
notice herein provided for to the Agent in respect of any Bid Loan Request shall
be deemed to be an election to decline all Bid Loan Offers submitted in respect
of such Request.
(g) In respect of each Bid Loan Request for which Borrower has
notified Agent that it will accept one or more Bid Loan(s) in an aggregate
principal amount, the Agent shall allocate such aggregate principal amount of
the Loan(s) among the Lenders submitting Bid Loan Offers in response to such
Request on the basis of the ascending Margins or Absolute Rates, as the case may
be, as set forth in such Bid Loan Offers up to the maximum principal amounts set
forth therein PROVIDED, HOWEVER, that if such ascending order would result in
any Lender being allocated a Bid Loan in an amount less than the minimum, if
any, specified in such Lender's Bid Loan Offer, the Bid Loan shall be allocated
as if such Lender had never submitted such Bid Loan Offer. If Bid Loan Offers
are received from two or more Lenders designating the same Margin or Absolute
Rate, as the case may be, and if some or all of the Bid Loans would be allocable
to such Lenders pursuant to the terms of the preceding sentence, the Agent shall
allocate the portion of the Bid Loans which is to accrue interest at the
designated LIBOR Rate or Absolute Rate among such Lenders. In making such
allocation the Agent shall exercise its sole discretion but shall be guided by
the following principles:
(i) allocation to the Lenders shall, to the extent possible, be
in integral multiples of One Million Dollars ($1,000,000);
(ii) no Lender shall be allocated a portion of any Bid Loan which
is less than the minimum amount which such Lender
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<PAGE>
has indicated that it is willing to accept in the applicable Bid Loan Offer; and
(iii) to the extent consistent with the foregoing considerations,
the principal amount of the Bid Loans to be allocated among the Lenders, shall
be allocated approximately in proportion to the aggregate principal amount of
each of their respective Bid Loan Offers.
Allocations by the Agent of the amounts of Bid Loans among the Lenders shall be
conclusive and binding in the absence of manifest error. The Agent shall notify
each Lender allocated one or more Bid Loans (or portions thereof) and the
aggregate principal amount so allocated, in the case of a Bid Loan to accrue
interest at a LIBOR Rate prior to 10:00 a.m. (Seattle, Washington time) on the
date the Borrower has notified the Agent of its election to accept such Bid
Loan(s) and in the case of a Bid Loan to accrue interest at the Absolute Rate,
prior to 8:00 a.m. (Seattle, Washington time) on the date the Borrower has
notified the Agent of its election to accept such Bid Loan(s). Promptly
thereafter, Agent shall notify all Lenders of the principal amounts and interest
rates of all such accepted Bid Loans.
(h) If pursuant to Section 2.04(g), any Lender is notified that some
or all of its Bid Loan Offer has been accepted, such Lender shall, before 11:00
a.m. (Seattle, Washington time) on the borrowing date specified in the Bid Loan
Request applicable thereto, make available to the Agent the amount of the Bid
Loan to be made by such Lender, in immediately available funds at the Agent's
Commercial Loan Processing Center, Seattle, Washington. Upon fulfillment to the
Agent's satisfaction of the applicable conditions set forth in Article III and
after receipt by Agent of such funds, the Agent will make such immediately
available funds available to the Borrower by depositing them to the ordinary
checking account maintained by the Borrower with the Agent.
(i) If the Borrower accepts some or all of a Bid Loan Offer pursuant
to this Section 2.04 and thereafter the Borrower declines to take the Loan or a
condition precedent to the making of such Loan is not satisfied or waived,
Borrower shall indemnify the Agent and the affected Lender for all losses and
any costs which the Agent or such Lender may sustain as a consequence thereof
including, without limitation, the cost of redeployment of funds at rates lower
than the cost to the Lender of such funds. A certificate of the Agent or such
Lender setting forth the amount due to it pursuant to this Section 2.04(i) and
the basis for, and calculation of such amount shall be PRIMA FACIE evidence of
the matters set forth therein. Payment of the amount
15
<PAGE>
owed shall be due within fifteen (15) days after the Borrower's receipt of such
certificate.
(j) Nothing in this Section 2.04 shall be construed as a right of
first offer in favor of the Lenders or to otherwise limit the ability of the
Borrower to request and accept credit facilities from any person (including any
of the Lenders), provided that no Default or Event of Default would otherwise
arise or exist as a result of the Borrower executing, delivering or performing
under such other credit facilities.
(k) Each outstanding Bid Loan shall reduce PRO TANTO the available
Total Commitment, but shall not reduce or affect any individual Lender's
available Commitment or Percentage Interest.
Section 2.05 REDUCTION OF COMMITMENTS. Upon not less than five (5)
Business Days' written notice to the Agent, the Borrower may terminate the Total
Commitment, in whole or in part, PROVIDED that each partial reduction of the
Total Commitment shall be in an amount not less than Ten Million Dollars
($10,000,000) and, PROVIDED, FURTHER, that in no event may the Total Commitment
be reduced to an amount less than the sum of the then-outstanding principal
balance of the Loans. Any reduction in the Total Commitment shall be deemed to
be a proportionate reduction in each Lender's Commitment therein such that after
making such reduction, each Lender's Commitment therein will be in an amount
equal to its Percentage Interest of the then-reduced Total Commitment.
Section 2.06 REPAYMENT OF PRINCIPAL. The Borrower shall repay to the
Agent for the account of the Lenders the principal amount of each Committed Loan
on or before the Maturity Date. The Borrower shall repay to the Agent for the
account of each Lender which has made a Bid Loan the principal amount of such
Bid Loan on the maturity date specified by the Borrower in its related Bid Loan
Request.
Section 2.07 AGENT'S RIGHT TO FUND. Unless Agent shall have received
notice from a Lender prior to 12:00 noon (Seattle, Washington time) on the date
of any Loan that such Lender will not make available to Agent such Lender's
Percentage Interest of the requested borrowing in the case of a Committed Loan
or such Lender's Bid Loan, if any, to be made on such date in the case of a Bid
Loan, Agent may assume that such Lender has made such funds available to Agent
on the date of such Loans in accordance with Section 2.02 or Section 2.04 hereof
and Agent may, in reliance upon such assumption, make available to Borrower on
such date a corresponding amount. If and to the extent that such Lender shall
not have so made such portion available to Agent and if Agent shall have
advanced such portion to the Borrower, such
16
<PAGE>
Lender and Borrower severally agree to pay to Agent forthwith on demand such
corresponding amount, together with interest thereon for each day from the date
such amount is made available to Borrower until the date such amount is repaid
to Agent, at (a) in the case of Borrower, for Committed Loans, the Applicable
Interest Rate and for Bid Loans, the rate designated in the applicable Bid Loan
Offer and (b) in the case of such Lender, the Federal Funds Rate. Any such
repayment by Borrower shall be without prejudice to any rights it may have
against the Lender that has failed to make available its funds for any requested
borrowing.
Section 2.08 INTEREST ON COMMITTED LOANS.
(a) GENERAL PROVISIONS. The Borrower agrees to pay to Agent for the
account of each Lender interest on the unpaid principal amount of each Committed
Loan from the date of such Loan until such Loan shall be due and payable at a
per annum rate equal to the Applicable Interest Rate, and, if default shall
occur in the payment when due of any such Loan, from the maturity of that Loan
until it is paid in full at a per annum rate equal to two percentage points (2%)
above the Base Rate (changing as the Base Rate changes). Accrued but unpaid
interest on each Committed Loan accruing interest at a LIBOR Rate shall be paid
on the last day of each Applicable Interest Period, on the date of any principal
payment (to the extent accrued on the principal amount paid), at the Maturity
Date and, additionally, in the case of such a Loan for which the Applicable
Interest Period is six months, on the day that is three months after the
commencement of such Applicable Interest Period. Accrued but unpaid interest on
each Base Rate Loan shall be paid on the last Business Day of each calendar
month commencing on January 31, 1994 and continuing on the last Business Day of
each calendar month thereafter and on the date of any principal payment (to the
extent accrued on the principal amount paid) and at the Maturity Date. Unpaid
interest accruing on amounts in default shall be payable on demand.
(b) SELECTION OF ALTERNATIVE RATE. The Borrower may, subject to the
requirements of this Section 2.08(b), on at least three (3) Business Days' prior
written notice elect to have interest accrue on any Committed Loan or any
portion thereof at a LIBOR Rate for an Applicable Interest Period. Such notice
(herein, an "Interest Rate Notice") shall be deemed delivered on receipt by
Agent except that the Interest Rate Notice received by the Agent after 10:00
a.m., (Seattle, Washington time), on any Business Day, shall be deemed to be
received on the immediately succeeding Business Day. Such Interest Rate Notice
shall identify, subject to the conditions of this Section 2.08(b), the Committed
Loan or portions thereof and the Applicable Interest Period which the Borrower
selects. Any such Interest Rate Notice
17
<PAGE>
shall be irrevocable and shall constitute a representation and warranty by the
Borrower that as of the date of such Interest Rate Notice, the statements set
forth in Article IV are true and correct and that no Event of Default or Default
has occurred and is continuing. On receipt of such Interest Rate Notice, the
Agent shall promptly notify each Lender by telephone (confirmed promptly by
telex or facsimile transmission) of the information set forth in the Interest
Rate Notice. Borrower's right to select a LIBOR Rate to apply to a Committed
Loan or any portion thereof shall be subject to the following conditions: (i)
the aggregate of all Committed Loans or portions thereof to accrue interest at a
particular LIBOR Rate for the same Applicable Interest Period shall be an
integral multiple of One Million Dollars ($1,000,000) and not less than Five
Million Dollars ($5,000,000); (ii) the Borrower shall not have selected more
than six (6) different LIBOR Rates or Applicable Interest Periods to be
applicable to portions of the Committed Loans at any one time; (iii) a LIBOR
Rate may not be selected for any Committed Loan or portion thereof which is
already accruing interest at a LIBOR Rate unless such selection is only to
become effective at the maturity of the Applicable Interest Period then in
effect; (iv) the Agent or any Lender shall not have given notice pursuant to
Section 2.08(d) that the LIBOR Rate is not available and the Agent or any Lender
shall not have given notice pursuant to Section 2.08(e) that the Applicable
Interest Period selected by Borrower in the Interest Rate Notice is not
available; (v) no Default or Event of Default shall have occurred and be
continuing and (vi) if the Borrower elects to have some portion (but less than
all) of the Committed Loans, accrue interest at a designated LIBOR Rate, the
Borrower shall select a portion of each Lender's Committed Loans, to accrue
interest at such rate in proportion to their respective Percentage Interests.
In the absence of an effective request for the application of a LIBOR Rate, the
Committed Loans or remaining portions thereof shall accrue interest at the Base
Rate. Any Interest Rate Notice which specifies a LIBOR Rate but fails to
identify an Applicable Interest Period shall be deemed to be a request for the
designated LIBOR Rate for an Applicable Interest Period of one (1) month. The
Interest Rate Notice may be given with and contained in any Required Notice of
Borrowing. If the Borrower delivers an Interest Rate Notice with any Required
Notice of Borrowing for a Committed Loan and the Borrower thereafter declines to
take such Committed Loan or a condition precedent to the making of such Loan is
not satisfied or waived, Borrower shall indemnify the Agent and each Lender for
all losses and any costs which the Agent or any Lender may sustain as a
consequence thereof including, without limitation, the costs of redeployment of
funds at rates lower than the cost to the Lenders of such funds. A certificate
of the Agent or any Lender setting forth the amount due to it pursuant to this
subparagraph (b) and the basis for, and the calculation of, such amount shall be
PRIMA
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<PAGE>
FACIE evidence of the amount due pursuant to this subparagraph (b). Payment of
the amount owed shall be due within fifteen (15) days after the Borrower's
receipt of such certificate.
(c) APPLICABLE DAYS FOR COMPUTATION OF INTEREST. Computations of
interest for Base Rate Loans shall be made on the basis of a year of three
hundred sixty-five (365) days, and for LIBOR loans, shall be made on the basis
of a year of three hundred sixty (360) days, in each case, for the actual number
of days (including the first day but excluding the last day) occurring in the
period for which such interest is payable.
(d) UNAVAILABLE FIXED RATE. If any Lender determines that for any
reason fair and adequate means do not exist for establishing a particular LIBOR
Rate or that accruing interest on any Committed Loan at a LIBOR Rate by such
Lender has become unlawful, such Lender may give notice of that fact to the
Agent and the Borrower and such determination shall be conclusive and binding
absent manifest error. After such notice has been given and until such Lender
notifies the Borrower and the Agent that the circumstances giving rise to such
notice no longer exist, the LIBOR Rate shall no longer be available in respect
of Committed Loans. Thereafter, any request by the Borrower to have interest
accrue on a Committed Loan at a LIBOR Rate shall be deemed to be a request for
interest to accrue at the Base Rate. If the circumstances giving rise to the
notice described herein no longer exist, the Lender shall notify the Borrower
and Agent in writing of that fact, and the Borrower shall then once again become
entitled to request that such a LIBOR Rate apply to the Committed Loans in
accordance with Section 2.08(b) hereof.
(e) UNAVAILABLE INTEREST PERIODS. Without limiting the terms of
Section 2.08(d), if any Lender determines that for any reason fair and adequate
means do not exist for establishing a particular LIBOR Rate with an Applicable
Interest Period of less than one month or that accruing interest on any
Committed Loan at a LIBOR Rate for an Applicable Interest Period of less than
one month by such Lender has become unlawful or is contrary to any internal
policies (of general application) of such Lender, such Lender may give notice of
that fact to the Agent and the Borrower and such determination shall be
conclusive and binding absent manifest error. After such notice has been given
and until such Lender notifies the Borrower and the Agent that the circumstances
giving rise to such notice no longer exist, the LIBOR Rate shall no longer be
available in respect of Committed Loans for Applicable Interest Periods of less
than one month. Thereafter, any request by the Borrower to have interest accrue
on a Committed Loan at a LIBOR Rate for an Applicable Interest Period of less
than one month shall be deemed to be a request for interest to accrue at the
Base Rate. If the circumstances giving rise to the notice described herein no
longer exist, the Lender
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<PAGE>
shall notify the Borrower and Agent in writing of that fact, and the Borrower
shall then once again become entitled to request that such a LIBOR Rate apply to
the Committed Loans for Applicable Interest Periods of less than one month in
accordance with Section 2.08(b) hereof.
Section 2.09 INTEREST ON BID LOANS. The Borrower shall pay interest on
the unpaid principal amount of each Bid Loan from the borrowing date to the
stated maturity date thereof, at the rate of interest determined pursuant to
Section 2.04 above (calculated on the basis of a 360-day year for the actual
number of days elapsed), payable on the stated maturity date thereof PROVIDED,
HOWEVER, if the stated maturity date is more than three months after the
borrowing date, accrued but unpaid interest shall also be payable in three-month
intervals commencing on the day that is three months after such borrowing date.
If all or a portion of the principal amount of any Bid Loan shall not be paid
when due (whether at the stated maturity, by acceleration or otherwise), such
overdue principal amount shall bear interest from the date on which such payment
was due at a rate per annum which is two percent (2%) above the rate which would
otherwise be applicable to such Bid Loan until such Bid Loan's scheduled
maturity date, and for each day thereafter until paid at a rate per annum which
is two percent (2%) above the Base Rate (changing as such Base Rate changes).
Unpaid interest accruing on amounts in default shall be payable on demand.
Section 2.10 COMPENSATION FOR INCREASED COSTS. In the event that after
the date hereof any change occurs in any applicable law, regulation, guideline,
treaty or directive or interpretation thereof by any authority charged with the
administration or interpretation thereof, or any condition is imposed by any
authority after the date hereof or any change occurs in any condition imposed by
any authority on or prior to the date hereof which:
(a) subjects any Lender to any Tax, or changes the basis of taxation
of any payments to any Lender on account of principal of or interest on any
LIBOR Loan, such Lender's Committed or Bid Loan Note (to the extent such Notes
evidence LIBOR Loans) or other amounts payable with respect to LIBOR Loans
(other than a change in the rate of tax based solely on the overall net or gross
income of such Lender); or
(b) imposes, modifies or determines applicable any reserve, deposit
or similar requirements against any assets held by, deposits with or for the
account of, or loans or commitments by, any office of any Lender in connection
with its LIBOR Loans to the extent the amount of which is in excess of, or was
not applicable at the time of computation of, the amounts provided for in the
definition of LIBOR Rate; or
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<PAGE>
(c) affects the amount of capital required or expected to be
maintained by banks generally or corporations controlling banks and any Lender
determines the amount by which such Lender or any corporation controlling such
Lender is required or expected to maintain or increase its capital is increased
by, or based upon, the existence of this Agreement or of such Lender's Loans or
Commitments hereunder (including any determination by any such authority,
central bank or comparable agency that, for purposes of capital adequacy
requirements, the commitments hereunder do not constitute commitments with an
original maturity date of one year or less);
(d) imposes upon any Lender any other condition with respect to its
LIBOR Loans or its obligation to make LIBOR Loans;
which, as a result thereof, (i) increases the cost to any Lender of making or
maintaining its LIBOR Loans or its Commitments hereunder, or (ii) reduces the
net amount of any payment received by any Lender in respect of its LIBOR Loans
(whether of principal, interest, commitment fees or otherwise), or (iii)
requires any Lender to make any payment on or calculated by reference to the
gross amount of any sum received by it in respect of its LIBOR Loans, in each
case by an amount which any such Lender in its sole judgment deems material,
then and in any such case the Borrower shall pay to the Agent for the account of
such Lender on demand such amount or amounts as will compensate such Lender (on
an after-tax basis) for any increased cost, deduction or payment actually
incurred or made by such Lender. The demand for payment by any Lender shall be
delivered to both the Agent and the Borrower and shall state the subjection or
change which occurred or the reserve or deposit requirements or other conditions
which have been imposed upon such Lender or the request, direction or
requirement with which it has complied, together with the date thereof, the
amount of such cost, reduction or payment and the manner in which such amount
has been calculated. The statement of any Lender as to the additional amounts
payable pursuant to this Section 2.10 shall be PRIMA FACIE evidence of the
amounts payable hereunder.
The protection of this Section 2.10 shall be available to each Lender
regardless of any possible contention of invalidity or inapplicability of the
relevant law, regulation, guideline, treaty, directive, condition or
interpretation thereof. In the event that the Borrower pays any Lender the
amount necessary to compensate such Lender for any charge, deduction or payment
incurred or made by such Lender as provided in this Section 2.10, and such
charge, deduction or payment or any part thereof is subsequently returned to
such Lender as a result of the final determination of the invalidity or
inapplicability of the relevant law, regulation, guideline, treaty, directive or
condition, then such Lender shall remit to the Borrower the
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amount paid by the Borrower which has actually been returned to such Lender
(together with any interest actually paid to Lender on such returned amount),
less such Lender's costs and expenses incurred in connection with such
governmental regulation or any challenge made by such Lender with respect to its
validity or applicability.
Section 2.11 PREPAYMENTS.
(a) COMMITTED LOANS. Base Rate Loans may be repaid at any time
without penalty or premium. If a Committed Loan accruing interest at the LIBOR
Rate is paid prior to the end of the Applicable Interest Period a fee computed
in the manner set out in Schedule 1 shall be assessed and paid at the time of
such payment. Such fee shall apply in all circumstances where such a Loan is
paid prior to the end of the Applicable Interest Period, regardless of whether
such payment is voluntary, mandatory or the result of the Agent's or Lenders'
collection efforts.
(b) BID LOANS. The Borrower may not voluntarily prepay any Bid Loan.
If a Bid Loan is paid prior to its designated maturity in breach of the
Borrower's obligations hereunder or as a result of the Agent's or Lenders'
collection efforts, a fee computed in the manner set out in Schedule 1 shall be
assessed and paid at the time of such prepayment. Payment of such fee is in
addition to any other remedies available to Agent or any Lender in respect of
such or any other breach.
Section 2.12 NOTES. The Committed Loans shall be evidenced by promissory
notes of the Borrower substantially in the form of Exhibit A hereto, with
appropriate insertions, payable to the order of the Lenders, dated as of the
date hereof, and for each Lender in the face amount of such Lender's Commitment
(the "Committed Loan Notes"). The Bid Loans made by each Lender shall be
evidenced by promissory notes of the Borrower, substantially in the form of
Exhibit B hereto, with appropriate insertions, payable to the order of such
Lender, dated as of the date hereof and in the face amount of the Total
Commitment (the "Bid Loan Notes"). Each Lender is hereby authorized to record
the date and amount of Committed Loans it makes and the date and amount of each
payment of principal and interest thereon on a schedule annexed to its Committed
Loan Note or maintained in connection therewith. Each Lender is hereby
authorized to record the date and amount of each Bid Loan made by such Lender,
the maturity date thereof, the date and amount of each payment of principal and
interest thereon and the interest rate with respect thereto on a schedule
annexed to its Bid Loan Note or maintained in connection therewith. Any such
recordation by any Lender shall constitute PRIMA FACIE evidence of the accuracy
of the information so recorded; PROVIDED, HOWEVER, that the failure to make any
such recordation or any error in any such recordation
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shall not affect the obligations of the Borrower hereunder, under the Committed
Loan Notes, or under the Bid Loan Notes.
Section 2.13 MANNER OF PAYMENTS.
(a) All payments and prepayments of principal and interest on any
Loan and all other amounts payable hereunder by the Borrower to the Agent or any
Lender shall be made by paying the same in United States Dollars and in
immediately available funds to the Agent at its Commercial Loan Service Center,
Seattle, Washington not later than 10:00 o'clock A.M., Seattle time, on the date
on which such payment or prepayment shall become due.
(b) The Borrower hereby authorizes the Agent and each Lender, if and
to the extent any payment is not promptly made pursuant to this Agreement or any
other Loan Document, to charge from time to time against any or all of the
accounts of the Borrower with the Agent or such Lender or any affiliate of the
Agent or any Lender any amount due hereunder or under such other Loan Document.
(c) Whenever any payment hereunder or under any other Loan Document
shall be stated to be due or whenever the last day of any interest period would
otherwise occur on a day other than a Business Day, such payment shall be made
and the last day of such interest period shall occur on the next succeeding
Business Day and such extension of time shall in such case be included in the
computation and payment of interest or facility fees, as the case may be, unless
such extension would cause such payment to be made or the last day of such
interest period to occur in the next following calendar month, in which case
such payment shall be due and the last day of such interest period shall occur
on the next preceding Business Day.
(d) Any payment made by the Borrower hereunder shall be applied
FIRST, against fees, expenses and indemnities due hereunder; SECOND, against
interest due on amounts in default on any Committed Loan, if any; THIRD, against
interest due on amounts in default on any Bid Loan, if any; FOURTH, against
interest due on any Committed Loan; FIFTH, against interest due on any Bid Loan
(applied pro rata in proportion to the aggregate interest due on all Bid Loans
if more than one such Bid Loan is outstanding); SIXTH, against Committed Loan
principal amounts in default, if any; SEVENTH, against Bid Loan principal
amounts in default, if any (applied pro rata in proportion to the amounts in
default if more than one such Bid Loan is in default); EIGHTH, against Committed
Loan principal; and NINTH, against Bid Loan principal (applied pro rata in
proportion to the then-outstanding principal balance of all Bid Loans if more
than one such Bid Loan is outstanding).
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Section 2.14 FEES.
(a) FACILITY FEES. At all times prior to the Maturity Date, Borrower
agrees to pay to the Agent for the account of the Lenders in proportion to their
Percentage Interests a facility fee computed daily and equal to the Facility Fee
Rate computed daily on an amount equal to the Total Commitment. The facility
fee shall be payable in arrears at quarterly intervals commencing on March 31,
1994 and payable on the last Business Day of each June, September, December and
March thereafter, except that accrued facility fees shall be payable on the
Maturity Date and on demand after default. Computations of facility fees shall
be made on the basis of a year of three hundred sixty (360) days for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such fees are payable. As used herein the "Facility Fee
Rate" shall be determined in accordance with the following table:
<TABLE>
<CAPTION>
Borrower's Facility Fee Rate
Credit Rating (expressed per annum)
------------- ---------------------
<S> <C>
Level 1 10.0 basis points (.0010)
Level 2 12.5 basis points (.00125)
Level 3 15.0 basis points (.0015)
Level 4 16.25 basis points (.001625)
Level 5 25.0 basis points (.0025)
</TABLE>
(b) ARRANGEMENT, AGENCY AND BID AGENCY FEES. The Borrower shall pay
to the Agent and certain other parties, for their own account, arrangement,
agency and bid agency fees in such amounts and at such times as are set forth in
that certain letter agreement dated December 21, 1993, by and among Agent, the
Borrower, and certain other parties.
Section 2.15 SHARING OF PAYMENTS, ETC. Each borrowing of Committed Loans
from the Lenders under Section 2.01 will be made pro rata in accordance with
each Lender's Percentage Interest. Each payment and prepayment of the Committed
Loans and each payment of interest on the Committed Loans will be made pro rata
to each Lender in accordance with its Percentage Interest. If any Lender shall
obtain any payment in respect of the Borrower's obligations under this
Agreement, the Committed Loan Notes or the Bid Loan Notes (whether voluntary or
involuntary, through the exercise of any right of set-off or otherwise) in
excess of the share which it would have been entitled to receive had such
payment been made to the Agent and applied pursuant to the terms of Section
2.13(d) hereof, such Lender shall forthwith purchase from the other Lenders such
participations in the Loans made by them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them, but if
any of such excess payment is afterward recovered from such purchasing
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Lender, the purchase shall be rescinded and the purchase price restored, without
interest, to the extent of such recovery. Borrower authorizes the purchase of
such participations and agrees that any Lender so purchasing a participation
from another Lender may exercise all its rights to 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 2.16 EXTENSION OF MATURITY DATE. The Borrower may request that
the Lenders extend the Maturity Date for successive periods of three hundred
sixty-four (364) days by notifying the Lenders and the Agent in writing on a day
not more than eighty-nine (89) and not less than sixty (60) days prior to the
then-existing Maturity Date. If all Lenders consent to such an extension, the
Lenders shall so notify the Borrower and the Agent in writing no earlier than
thirty (30) days and no later than twenty (20) days prior to the then-existing
Maturity Date. If all Lenders provide the Borrower and Agent with such a
written notice the Maturity Date shall be extended for three hundred sixty-four
(364) days. If any Lender in its sole discretion does not provide a written
notice evidencing its consent as herein provided, the request for extension
shall be deemed denied by all Lenders.
ARTICLE III
CONDITIONS OF LENDING
---------------------
The obligations of each Lender to deliver its Loan proceeds to the Agent
and the obligation of the Agent to disburse such proceeds to the Borrower are
subject to the fulfillment of the following conditions:
Section 3.01 NOTICE OF BORROWING, PROMISSORY NOTES, ETC. In respect of
any Committed Loan, the Agent shall have received the Required Notice of
Borrowing and the Lenders shall have received their Committed Loan Notes all
duly executed and delivered by the Borrower; and in respect of any Bid Loan, the
Agent shall have received a Bid Loan Request and the Lenders shall have received
their Bid Loan Notes all duly executed and delivered by the Borrower.
Section 3.02 GUARANTIES. The Lenders shall have received the Guaranties
duly executed and delivered by the Guarantors; such Guaranties shall remain in
full force and effect; and neither the Agent nor any Lender shall have received
any notice limiting, terminating or purporting to limit or terminate any
Guaranty or claiming that the effect thereof has been limited or terminated for
any reason.
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Section 3.03 CORPORATE AUTHORITY. The Agent and each Lender shall have
received in form and substance satisfactory to it a certified copy of a
resolution adopted by the Boards of Directors of the Borrower and of each
Guarantor authorizing the execution, delivery and performance of the Loan
Documents together with evidence of the authority and specimen signatures of the
persons who have signed such Loan Documents and such other evidence of corporate
authority as the Agent or any Lender shall reasonably require.
Section 3.04 LEGAL OPINION. The Agent shall have received a written legal
opinion substantially in the form attached hereto as Exhibit D, addressed to the
Agent and the Lenders, of counsel for the Borrower and the Guarantors, who shall
be selected by the Borrower and approved by the Agent.
Section 3.05 DEFAULTS, ETC. At the date of each Loan no Default or Event
of Default shall have occurred and be continuing or will have occurred as a
result of the making of the Loan; and the representations and warranties of the
Borrower in Article IV and of each Guarantor in its Guaranty shall be true on
and as of such date.
Section 3.06 CANCELLATION OF EXISTING LINES OF CREDIT. The existing
credit lines extended to the Guarantors as identified on Schedule 2 hereto shall
have been cancelled and all outstanding advances, all accrued interest, and all
other amounts due under or in respect of such lines shall have been paid in
full.
Section 3.07 OTHER INFORMATION. The Agent and each Lender shall have
received such other statements, opinions, certificates, documents and
information with respect to the matters contemplated by this Agreement as it may
reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants to the Agent and each Lender as
follows:
Section 4.01 CORPORATE EXISTENCE AND POWER. The Borrower, the Guarantors,
and the Borrower's other Subsidiaries are corporations duly incorporated,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation. The Borrower, the Guarantors, and the
Borrower's other Subsidiaries are each duly qualified to do business in each
other jurisdiction where the nature of their respective activities or the
ownership of their respective properties
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requires such qualification, except to the extent that failure to be so
qualified does not have a material adverse effect on the business, operations or
consolidated financial condition of the Borrower or either Guarantor. Schedule
3 to this Agreement accurately sets forth the jurisdictions of incorporation or
organization of the Borrower, each Guarantor and each of the Borrower's other
Subsidiaries and the jurisdictions in which the Borrower, the Guarantors and
each other Subsidiary are qualified to do business as a foreign corporation or
company. The Borrower is the record and beneficial owner of all of the issued
and outstanding shares of capital stock of each Guarantor. The Borrower and
each Guarantor has full corporate power, authority and legal right to carry on
its business as presently conducted, to own and operate its properties and
assets, and to execute, deliver and perform the Loan Documents to which it is a
party.
Section 4.02 BORROWER'S CORPORATE AUTHORIZATION. The execution, delivery
and performance by the Borrower of this Agreement and the other Loan Documents
and any borrowing hereunder or thereunder have been duly authorized by all
necessary corporate action of the Borrower, do not require any shareholder
approval or the approval or consent of any trustee or the holders of any
Indebtedness of the Borrower, except such as have been obtained (certified
copies thereof having been delivered to the Agent), do not contravene any law,
regulation, rule or order binding on it or its Articles of Incorporation or
Bylaws and do not contravene the provisions of or constitute a default under any
indenture, mortgage, contract or other agreement or instrument to which the
Borrower or any Subsidiary is a party or by which the Borrower, any Subsidiary
or any of their respective properties may be bound or affected.
Section 4.03 GUARANTORS' CORPORATE AUTHORIZATION. The execution, delivery
and performance by the Guarantors of their respective Guaranties and the other
Loan Documents to which they are parties have been duly authorized by all
necessary corporate action, do not require any shareholder approval or the
approval or consent of any trustee or the holders of any Indebtedness of either
Guarantor, except such as have been obtained (certified copies thereof having
been delivered to the Agent), do not contravene any law, regulation, rule or
order binding on either of them or their respective Articles of Incorporation or
Bylaws and do not contravene the provisions of or constitute a default under any
indenture, mortgage, contract or other agreement or instrument to which either
Guarantor or any of their respective Subsidiaries is a party or by which either
Guarantor, any such Subsidiary or any of their respective properties may be
bound or affected.
Section 4.04 GOVERNMENT APPROVALS, ETC. No Government Approval or filing
or registration with any Governmental
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Authority is required for the making and performance by the Borrower or either
Guarantor of the Loan Documents or in connection with any of the transactions
contemplated thereby, except such as have been heretofore obtained and are in
full force and effect (certified copies thereof having been delivered to the
Agent).
Section 4.05 BINDING OBLIGAITONS, ETC. This Agreement has been duly
executed and delivered by the Borrower and constitutes, and the other Loan
Documents (other than the Guaranties) when duly executed and delivered will
constitute, the legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms. When duly
executed and delivered, each Guaranty will constitute, the legal, valid and
binding obligations of the applicable Guarantor enforceable against such
Guarantor in accordance with its terms.
Section 4.06 LITIGATION. Except as reflected in the financial statements
referred to in Section 4.07 or otherwise set forth on the annexed Schedule 4,
there are no actions, proceedings, investigations, or claims against or
affecting the Borrower, either Guarantor or any of Borrower's other Subsidiaries
now pending before any court, arbitrator or Governmental Authority (nor to the
knowledge of the Borrower has any thereof been threatened nor does any basis
exist therefor) which if determined adversely to the Borrower, either Guarantor,
or such other Subsidiary would be likely to have a material adverse effect on
(a) the business, operations or consolidated financial condition of the Borrower
or either Guarantor; or (b) on the ability of the Borrower to perform its
obligations under this Agreement and the other Loan Documents; or (c) on the
ability of the Guarantors to perform their obligations under their respective
Guaranties.
Section 4.07 FINANCIAL CONDITION. The consolidated balance sheet of the
Borrower, the Guarantors and the Borrower's other Subsidiaries as at August 29,
1993, and the related statements of income and retained earnings for the period
then ended, copies of which have been furnished to the Agent and each Lender
fairly presents the financial condition of the Borrower, the Guarantors and the
Borrower's other Subsidiaries as at such date, all in accordance with generally
accepted accounting principles consistently applied. The Borrower, the
Guarantors and the Borrower's other Subsidiaries did not have on such date any
contingent liabilities for Taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in the balance sheet and in the related
notes. The consolidated balance sheet of Costco Wholesale Corporation and its
Subsidiaries as at August 29, 1993, and the related statements of income and
retained earnings for the fiscal year
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<PAGE>
then ended, copies of which have been furnished to the Agent and each Lender
fairly present the financial condition of Costco Wholesale Corporation and its
Subsidiaries as at such date and the results of operations of Costco Wholesale
Corporation and its Subsidiaries for the fiscal year then ended, all in
accordance with generally accepted accounting principles consistently applied.
Costco Wholesale Corporation and its Subsidiaries did not have on such date any
contingent liabilities for Taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in the balance sheets and in the notes
to those financial statements. The consolidated balance sheet of The Price
Company and its Subsidiaries as at August 29, 1993, and the related statements
of income and retained earnings for the fiscal year then ended, copies of which
have been furnished to the Agent and each Lender, fairly present the financial
condition of The Price Company and its Subsidiaries as at such date and the
results of operations of The Price Company and its Subsidiaries for the fiscal
year then ended, all in accordance with generally accepted accounting principles
consistently applied. The Price Company and its Subsidiaries did not have on
such date any contingent liabilities for Taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in the balance
sheets and in the notes to those financial statements. Since the dates of such
financial statements of Borrower and each Guarantor, there has been no material
adverse change (other than the merger and restructure charge of One Hundred
Twenty Million Dollars ($120,000,000) taken in the fiscal quarter ending on
November 21, 1993) in the consolidated financial condition, operations, or
business of the Borrower or either Guarantor.
Section 4.08 TITLE AND LIENS. The Borrower, the Guarantors and the
Borrower's other Subsidiaries have good and marketable title to each of the
properties and assets reflected in the balance sheets referred to in Section
4.07 (except such as have been since sold or otherwise disposed of in the
ordinary course of business). No assets or revenues of the Borrower or either
Guarantor are subject to any Lien except as permitted by this Agreement,
disclosed in the balance sheets referred to in Section 4.07, or otherwise
disclosed to the Agent in writing prior to the date of this Agreement. All
properties of the Borrower, the Guarantors, and Borrower's other Subsidiaries
and their respective use thereof comply with applicable zoning and use
restrictions and with applicable laws and regulations relating to health, safety
and the environment, non-compliance with which would have a material adverse
effect on the business, operations, or consolidated financial condition of the
Borrower or either Guarantor. Without limiting the foregoing, the Borrower, the
Guarantors and the Borrower's other Subsidiaries
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are in compliance with all laws and regulations relating to pollution and
environmental control in all jurisdictions in which the Borrower, the Guarantors
and the Borrower's other Subsidiaries are doing business.
Section 4.09 TAXES. The Borrower, the Guarantors, and the Borrower's
other Subsidiaries have filed all tax returns and reports required of them, have
paid all Taxes which are due and payable, and have provided adequate reserves
for payment of any Tax whose payment is being contested. The charges, accruals
and reserves on the books of the Borrower, the Guarantors and the Borrower's
other Subsidiaries in respect of Taxes for all fiscal periods to date are
accurate. There are no questions or disputes between the Borrower, either
Guarantor, or any of Borrower's other Subsidiaries and any Governmental
Authority with respect to any Taxes except as disclosed in the balance sheets
referred to in Section 4.07 or otherwise disclosed to the Agent in writing prior
to the date of this Agreement.
Section 4.10 PARI PASSU RANKING. The obligations of the Borrower to pay
the principal of and interest on any Loan and all other amounts payable
hereunder rank at least PARI PASSU both as to payment and as to security with
all other Indebtedness of the Borrower now existing or hereafter incurred
(except as to security, for Indebtedness secured by Liens permitted pursuant to
Section 6.04).
Section 4.11 LAWS, ORDERS; OTHER AGREEMENTS. Neither the Borrower, either
Guarantor nor any other Subsidiary is in violation of or subject to any
contingent liability on account of any laws, statutes, rules, regulations and
orders of any Governmental Authority, except as set forth in Schedule 4.
Neither the Borrower, either Guarantor nor any other Subsidiary is in material
breach of or default under any agreement to which it is a party or which is
binding on it or any of its assets.
Section 4.12 FEDERAL RESERVE REGULATIONS. Not more than twenty-five
percent (25%) of the value of Borrower's, either Guarantor's, or any of
Borrower's other Subsidiaries' assets consist of margin stock and neither the
Borrower, either Guarantor, nor any of Borrower's other Subsidiaries is 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 Federal Reserve Regulation U), and no part of the proceeds of any
Loan will be used to purchase or carry any such margin stock or to extend credit
to others for the purpose of purchasing or carrying any such margin stock or for
any other purpose that violates the applicable provisions of any Federal Reserve
Regulation. The Borrower will furnish to the Agent on request by the Agent or
any
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Lender a statement conforming with the requirements of Regulation U.
Section 4.13 ERISA.
(a) The present value of all benefits vested under all Pension Plans
did not, as of the most recent valuation date of such Pension Plans, exceed the
value of the assets of the Pension Plans allocable to such vested benefits by an
amount which would represent a potential material liability of the Borrower,
either Guarantor or any of the Borrower's other Subsidiaries or affect
materially the ability of the Borrower or either Guarantor to perform the Loan
Documents to which it is a party.
(b) No Plan or trust created thereunder, or any trustee or
administrator thereof, has engaged in a "prohibited transaction" (as such term
is defined in Section 406 of ERISA or Section 4975 of the Code) which could
subject such Plan or any other Plan, any trust created thereunder, or any
trustee or administrator thereof, or any party dealing with any Plan or any such
trust to the tax or penalty on prohibited transactions imposed by Section 502 of
ERISA or Section 4975 of the Code.
(c) No Pension Plan or trust has been terminated, except in
accordance with the Code, ERISA, and the regulations of the Internal Revenue
Service and the PBGC as applicable to solvent plans in which benefits of
participants are fully protected. No "reportable event" as defined in Section
4043 of ERISA has occurred for which notice has not been waived or for which
alternative notice procedures are permitted.
(d) No Pension Plan or trust created thereunder has incurred any
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA) whether or not waived, since the effective date of ERISA.
(e) The required allocations and contributions to Pension Plans will
not violate Section 415 of the Code.
(f) Neither the Borrower, either Guarantor nor any member of the
Controlled Group has any withdrawal liability to any trust created pursuant to a
multi-employer pension or benefit plan nor would be subject to any such
withdrawal liability in excess of One Million Dollars ($1,000,000) if it
withdrew from any such plan or if its participation therein were otherwise
terminated.
Section 4.14 SUBSIDIARIES. In respect of Borrower's Subsidiaries,
Schedule 5 to this Agreement accurately sets forth as of the date of this
Agreement the authorized capitalization of each such Subsidiary, the number of
shares of each class of
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capital stock issued and outstanding of each Subsidiary, and the number and
percentage of outstanding shares of each such class of capital stock owned by
the Borrower or by any other such Subsidiary. The outstanding shares of each
such Subsidiary have been duly authorized and validly issued and are fully paid
and nonassessable. The Borrower and each such Subsidiary owns beneficially and
of record and has good title to all the shares it is listed as owning on
Schedule 5, free and clear of any Lien.
Section 4.15 PATENTS, LICENSES, FRANCHISES. The Borrower, each Guarantor
and each of Borrower's other Subsidiaries owns or possesses all the patents,
trademarks, service marks, trade names, copyrights, licenses, franchises,
permits and rights with respect to the foregoing necessary to own and operate
its properties and to carry on its business as presently conducted and presently
planned to be conducted without conflict with the rights of others except as
disclosed in writing to the Agent prior to the date of this Agreement and except
to the extent that the failure to own or possess any such property or rights
does not and will not have a material adverse effect on the business, operations
or consolidated financial condition of the Borrower or either Guarantor.
Section 4.16 NOT INVESTMENT COMPANY, ETC. Borrower is not, and after the
application by Borrower of the proceeds of any Loan made hereunder, Borrower
will not be, subject to regulation under the Investment Company Act of 1940, the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code or any federal or state
statute or regulation limiting its ability to incur Indebtedness.
Section 4.17 REPRESENTATIONS AS A WHOLE. This Agreement, the other Loan
Documents, the financial statements referred to in Section 4.07, and all other
instruments, documents, certificates and statements furnished to the Agent or
any Lender by the Borrower and the Guarantors, taken as a whole, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements contained herein or therein not
misleading. The Borrower has disclosed to the Lenders in writing any and all
facts which have a material adverse effect on the business, operations or
consolidated financial condition of the Borrower or either Guarantor, or the
ability of the Borrower and the Guarantors to perform their respective
obligations under the Loan Documents.
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ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
So long as any Lender shall have any Commitment hereunder and, until
payment in full of each Loan, the Committed Loan Notes and the Bid Loan Notes,
and performance of all other obligations of the Borrower under this Agreement
and the other Loan Documents, the Borrower agrees to do all of the following
unless the Agent (with the consent of the Majority Lenders) shall otherwise
consent in writing.
Section 5.01 USE OF PROCEEDS. The Borrower shall use the proceeds of the
Loans for general corporate purposes.
Section 5.02 PAYMENT. The Borrower will pay the principal of and interest
on the Loans in accordance with the terms of this Agreement, the Committed Loan
Notes and the Bid Loan Notes and will pay when due all other amounts payable by
Borrower hereunder and under any other Loan Document.
Section 5.03 PRESERVATION OF CORPORATE EXISTENCE, ETC. Except in
connection with a merger not otherwise prohibited under Section 6.02, the
Borrower will preserve and maintain, and will cause the Guarantors and each of
Borrower's other Subsidiaries to preserve and maintain its corporate existence,
rights, franchises and privileges in the jurisdiction of its formation and will
qualify and remain qualified (and will cause each Guarantor and other Subsidiary
to qualify and remain qualified) as a foreign corporation in each jurisdiction
where such qualification is necessary in view of its business and operations or
the ownership of its properties.
Section 5.04 VISITATION RIGHTS. At any reasonable time, and from time to
time, the Borrower will permit and will cause each Guarantor and each of
Borrower's other Subsidiaries to permit the Agent or any Lender to examine and
make copies of and abstracts from the records and books of account of and to
visit the properties of the Borrower, the Guarantors and such Subsidiaries and
to discuss the affairs, finances and accounts of the Borrower, the Guarantors
and such Subsidiaries with any of their respective officers, directors or
employees.
Section 5.05 KEEPING OF BOOKS AND RECORDS. The Borrower will keep
adequate records and books of account in which complete entries will be made, in
accordance with generally accepted accounting principles consistently applied,
reflecting all financial transactions of the Borrower, the Guarantors or other
Subsidiaries, as the case may be.
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Section 5.06 MAINTENANCE OF PROPERTY, ETC. The Borrower will maintain and
preserve and will cause each Guarantor and each of Borrower's other Subsidiaries
to maintain and preserve all of its properties in good working order and
condition, ordinary wear and tear excepted, and will from time to time make (and
cause each Guarantor and each other Subsidiary to make) all needed repairs,
renewals, or replacements so that the efficiency of such properties shall be
fully maintained and preserved.
Section 5.07 COMPLIANCE WITH LAWS, ETC. The Borrower will comply and will
cause each Guarantor and each of Borrower's other Subsidiaries to comply in all
material respects with all laws, regulations, rules, and orders of Governmental
Authorities, except any thereof whose validity is being contested in good faith
by appropriate proceedings upon stay of execution of the enforcement thereof and
with provision having been made to the satisfaction of the Agent for the payment
of any fines, charges, penalties or other costs in respect thereof in the event
the contest is determined adversely to the Borrower, either Guarantor, or any
other Subsidiary.
Section 5.08 OTHER OBLIGATIONS. The Borrower will pay and discharge and
will cause each Guarantor and each of Borrower's other Subsidiaries to pay and
discharge before the same shall become delinquent all Indebtedness, Taxes, and
other obligations for which the Borrower, either Guarantor or other Subsidiary
is liable or to which its income or property is subject and all claims for labor
and materials or supplies which, if unpaid, might become by law a Lien upon
assets of the Borrower, either Guarantor or any other Subsidiary, except (a) any
thereof whose validity or amount is being contested in good faith by appropriate
proceedings upon stay of execution of the enforcement thereof and with provision
having been made to the satisfaction of the Agent for the payment thereof in the
event the contest is determined adversely to the Borrower, either Guarantor, or
any other Subsidiary; and (b) any trade payables, arising from the purchase of
inventory, which are paid in accordance with industry practice and prior to the
time any collection proceeding is commenced by any vendor.
Section 5.09 INSURANCE. The Borrower will keep in force and will cause
each Guarantor and each of the Borrower's other Subsidiaries to keep in force
upon all of its properties and operations policies of insurance carried with
responsible companies in such amounts and covering all such risks as shall be
customary in the industry and as shall be reasonably satisfactory to the Agent.
From time to time, on request, the Borrower will furnish to the Agent
certificates of insurance or duplicate policies evidencing such coverage.
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Section 5.10 FINANCIAL INFORMATION. The Borrower will deliver to the
Lenders (a) as soon as available and in any event within ninety (90) days after
the end of each fiscal year of the Borrower, the consolidated balance sheet of
the Borrower and its Subsidiaries as of the end of such fiscal year and the
related statements of revenue and expenses, statements of shareholder's equity
and statements of cash flow for such year, accompanied by the audit report
thereof by independent certified public accountants selected by the Borrower and
approved by the Agent (which report shall be prepared in accordance with
generally accepted accounting principles consistently applied and shall not be
qualified by reason of restricted or limited examination of any material portion
of the Borrower's (or any Guarantor's or other Subsidiary's) records and shall
contain no disclaimer of opinion); (b) as soon as available and in any event
within sixty (60) days after the end of each of the first three fiscal quarters
of the Borrower, the unaudited consolidated balance sheet and statement of
revenues and expenses, statement of shareholder's equity and statement of cash
flow of the Borrower and its Subsidiaries as of the end of such fiscal quarter
(including the fiscal year to the end of such fiscal quarter), accompanied by an
Officer's Certificate to the effect that such unaudited balance sheet and
related statements have been prepared in accordance with generally accepted
accounting principles consistently applied and present fairly the consolidated
financial position and results of operations of the Borrower, the Guarantors and
the other Subsidiaries as of the end of and for such fiscal quarter and that
since the fiscal year-end report referred to in clause (a) there has been no
material adverse change in the consolidated financial condition or operations of
the Borrower, the Guarantors and the other Subsidiaries as shown on the balance
sheet as of said date; (c) within sixty (60) days after the close of each of the
first three fiscal quarters of the Borrower and within ninety (90) days after
the close of each of the Borrower's fiscal years, an Officer's Certificate
substantially in the form of the attached Exhibit G stating that as of the close
of such fiscal quarter no Default or Event of Default had occurred and was
continuing; (d) as soon as available and in any event not later than the end of
each fiscal year of the Borrower, its financial projections for the succeeding
fiscal year in form reasonably acceptable to Agent; (e) as soon as available,
all reports sent by Borrower to its shareholders and all quarterly and annual
reports filed by Borrower with the Securities and Exchange Commission and each
other Governmental Authority having jurisdiction over Borrower; and (f) all
other statements, reports and other information as the Agent or any Lender may
reasonably request concerning the financial condition and business affairs of
the Borrower, either Guarantor or any of Borrower's other Subsidiaries.
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Section 5.11 NOTIFICAITON. Promptly after learning thereof, the Borrower
will notify the Lenders of (a) the details of any action, proceeding,
investigation or claim against or affecting the Borrower, either Guarantor or
any of Borrower's other Subsidiaries, instituted before any court, arbitrator or
Governmental Authority or, to the Borrower's knowledge threatened to be
instituted, which, if determined adversely would be likely to have a material
adverse effect on the business, operations or consolidated financial condition
of the Borrower or either Guarantor; (b) any substantial dispute between the
Borrower, either Guarantor or any other Subsidiary and any Governmental
Authority; (c) any labor controversy which has resulted in or, to the Borrower's
knowledge, threatens to result in a strike which would materially affect the
business operations of the Borrower, either Guarantor or any other Subsidiary;
(d) if the Borrower, either Guarantor or any member of the Controlled Group
gives or is required to give notice to the PBGC of any "reportable event" (as
defined in subsections (b)(1), (2), (5) or (6) of Section 4043 of ERISA) with
respect to any Plan (or the Internal Revenue Service gives notice to the PBGC of
any "reportable event" as defined in subsection (c)(2) of Section 4043 of ERISA
and Borrower obtains knowledge thereof) which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, the notice of such reportable event given or required to be
given to the PBGC; (e) any change in the rating assigned to Borrower's senior
unsecured debt by Standard & Poor's Corporation or Moody's Investor Service or
any failure by Borrower to have its senior unsecured debt rated by at least one
such rating agency; and (f) the occurrence of any Default or Event of Default.
Section 5.12 ADDITIONAL PAYMENTS; ADDITIONAL ACTS. From time to time and
upon demand by the Agent, the Borrower will (a) pay or reimburse Agent and the
Lenders for all Taxes imposed on this Agreement and any other Loan Document and
for all expenses including out-of-pocket legal fees and allocated charges of
internal legal counsel incurred in connection with the enforcement by judicial
proceedings or otherwise of any of the rights of the Agent or the Lenders under
this Agreement or any other Loan Document, (b) pay or reimburse Agent for all
expenses, including legal fees, actually incurred by the Agent in connection
with the preparation of this Agreement and the other Loan Documents and the
making of any Loan; (c) obtain and promptly furnish to the Agent evidence of all
such Government Approvals as may be required to enable Borrower and both
Guarantors to comply with their respective obligations under the Loan Documents;
and (d) execute and deliver all such other instruments and perform all such
other acts as the Agent or any Lender may reasonably request to carry out the
transactions contemplated by this Agreement and the other Loan Documents.
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Section 5.13 TANGIBLE NET WORTH. The Borrower (together with the
Guarantors and Borrower's other Subsidiaries) shall maintain at all times on a
consolidated basis a Tangible Net Worth equal to or greater than the sum of (a)
$1,412,000,000 and (b) fifty percent (50%) of the cumulative Consolidated Net
Income of the Borrower for all fiscal quarters ended since November 21, 1993 in
which the Borrower earned Consolidated Net Income greater than zero, and (c) the
amount, if any, by which the shareholders' equity of the Borrower has increased
since November 21, 1993 as a result of the issuance of common stock or the
conversion of debt securities into common stock. As used herein, "Tangible Net
Worth" means the excess of total assets over total liabilities, excluding,
however, from the determination of total assets (i) all assets which should be
classified as intangible assets (such as goodwill, patents, trademarks,
copyrights, franchises, and deferred charges including unamortized debt discount
and research and development costs), (ii) treasury stock, (iii) cash held in a
sinking or other similar fund established for the purpose of redemption or other
retirement of capital stock, (iv) to the extent not already deducted from total
assets, reserves for depreciation, depletion, obsolescence or amortization of
properties and other reserves or appropriations of retained earnings which have
been or should be established in connection with the business conducted by the
relevant corporation, and (v) any revaluation or other write-up in book value of
assets subsequent to the fiscal year of such corporation last ended at the date
of this Agreement.
Section 5.14 DEBT TO CAPITALIZAITON RATIO. The Borrower (together with
the Guarantors and Borrower's other Subsidiaries) shall maintain at all times on
a consolidated basis a ratio of Total Debt to Capitalization which is equal to
or less than 0.5 to 1.0. As used herein, "Total Debt" means all Indebtedness
for borrowed money of the Borrower, the Guarantors and Borrower's other
Subsidiaries (including subordinated and convertible debt and commercial paper)
and all indebtedness or liability for borrowed money or for the deferred
purchase price of property or services for which Borrower, either Guarantor or
any other Subsidiary is contingently or directly liable as obligor, guarantor,
partner, joint venturer or otherwise, or in respect of which Borrower, either
Guarantor or any other Subsidiary otherwise assures a creditor against loss. As
used herein, "Capitalization" means the sum of Total Debt and the Borrower's
shareholders' equity.
Section 5.15 FIXED CHARGE COVERAGE. The Borrower (together with the
Guarantors and Borrower's other Subsidiaries) shall maintain at all times on a
consolidated basis a ratio of Consolidated Net Earnings to Consolidated Fixed
Charges of at least 2.0 to 1.0. As used herein, "Consolidated Net Earnings"
means Consolidated Net Income before charges for interest, Taxes
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and operating lease expense and before the merger and restructure charge of One
Hundred Twenty Million Dollars ($120,000,000) taken in the fiscal quarter ending
on November 21, 1993 for any period of four (4) consecutive fiscal quarters. As
used herein, "Consolidated Fixed Charges" means the sum of (a) obligations
payable during such period of four (4) consecutive fiscal quarters for interest
on Indebtedness and (b) operating lease expense payable during such period. As
used herein, "four (4) consecutive fiscal quarters" shall include fiscal
quarters of the Guarantors ending on or prior to August 29, 1993, and as to such
quarters, Borrower's Consolidated Net Earnings and Consolidated Fixed Charges
shall be deemed to be amounts determined by consolidating the Consolidated Net
Earnings and Consolidated Fixed Charges of each of the Guarantors for such
quarters.
ARTICLE VI
NEGATIVE COVENANTS
------------------
So long as any Lender shall have any Commitment hereunder and until payment
in full of each Loan, the Committed Loan Notes and the Bid Loan Notes and
performance of all other obligations of the Borrower under this Agreement and
the other Loan Documents, the Borrower agrees that it will not do any of the
following unless the Agent (with the consent of the Majority Lenders) shall
otherwise consent in writing.
Section 6.01 DIVIDENDS. The Borrower shall not (a) declare or pay any
dividend (except dividends payable in its capital stock) on any share of any
class of its capital stock nor (b) apply any assets to the purchase, redemption
or other retirement of, or set aside any sum for the payment of any dividends on
or for the purchase, redemption or other retirement of, or make any other
distribution by reduction of capital or otherwise in respect of any shares of
any capital stock of Borrower, if the amount of such dividend or other
distribution, together with all other dividends paid or declared during the same
fiscal year and all other such distributions made during such fiscal year, would
exceed Fifty Percent (50%) of the Consolidated Net Income of the Borrower and
its consolidated Subsidiaries during such fiscal year.
Section 6.02 LIQUIDATION, MERGER, SALE OF ASSETS. The Borrower shall not
and shall not permit either Guarantor or any of Borrower's other Subsidiaries to
merge or to liquidate, dissolve or enter into any consolidation, joint venture,
partnership or other combination nor sell, lease or dispose of all or any
portion of the Borrower's, either Guarantor's or any Subsidiary's assets, EXCEPT
for (a) a merger of such a Subsidiary with the Borrower or another such
Subsidiary, (b) a merger of the
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Borrower or one of its Subsidiaries if the Borrower or such Subsidiary is the
surviving corporation and no Default or Event of Default has occurred and will
occur as a result of the merger, (c) a sale of goods in the ordinary course of
business, (d) a sale, lease or other disposition of assets by a Subsidiary of
the Borrower to the Borrower or to another Subsidiary, (e) any joint venture in
which investment is permitted under Section 6.05, or (f) any other sale, lease
or other disposition of assets by the Borrower or a Subsidiary of the Borrower
if the aggregate net book value of such assets and of all other assets sold,
leased or otherwise disposed of by the Borrower and Subsidiaries during the
immediately preceding twelve (12) month period (excepting sales permitted under
clause (c) or (d) of this Section 6.02) does not exceed five percent (5%) of the
aggregate book value of the assets of the Borrower and its consolidated
Subsidiaries at the close of the fiscal quarter last ended on the date of
calculation.
Section 6.03 GUARANTIES, ETC. The Borrower shall not (and shall not
permit either Guarantor or any of Borrower's other Subsidiaries to) assume,
guaranty, endorse or otherwise become directly or contingently liable for, nor
obligated to purchase, pay or provide funds for payment of, any obligation or
Indebtedness of any other person, except (a) the Guaranties; (b) guaranties of
Borrower's obligations arising under or in connection with that certain Extended
Revolving Credit Agreement executed by and among the Agent, the Borrower, the
Lenders and the Co-Agents as of January 31, 1994; (c) guaranties of any direct
obligations of any of Borrower's Subsidiaries; (d) at all times on or before
March 1, 1994, guaranties of the Borrower's obligations to repay advances under
uncommitted facilities up to an aggregate principal amount at any one time
outstanding of Two Hundred Million Dollars ($200,000,000) provided that no such
advances have a maturity of more than one year and no more than One Hundred
Million Dollars ($100,000,000) of such advances have a maturity beyond March 1,
1994, and provided further, that in no event will the aggregate Indebtedness of
the Borrower and the Guarantors due in respect of advances made under
uncommitted facilities exceed Two Hundred Million Dollars ($200,000,000); (e) at
all times after March 1, 1994, guaranties of the Borrower's obligations to repay
advances under uncommitted facilities up to an aggregate principal amount at any
one time outstanding of One Hundred Million Dollars ($100,000,000) provided that
no such advances have a maturity of more than one year; (f) guaranties of the
Borrower's obligations under commercial paper issued by the Borrower; (g) a
guaranty from the Borrower of indebtedness owing by Atlas Hotels up to a maximum
principal amount of Fifty Million Dollars ($50,000,000) provided that at all
times that such guaranty is effective, all Indebtedness of Atlas Hotels owing to
Borrower, either Guarantor or any of Borrower's other Subsidiaries shall have
been paid in full; (h) guaranties of the
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Borrower's obligations under facilities for the issuance of commercial and
standby letters of credit up to an aggregate facility amount of Three Hundred
Million Dollars ($300,000,000) and (i) in addition to the guaranties permitted
pursuant to subclauses (a) through (h) above, guaranties of obligations on
Indebtedness which in the aggregate for the Borrower, the Guarantors and the
other Subsidiaries does not exceed at any one time the sum of Fifty Million
Dollars ($50,000,000).
Section 6.04 LIENS. The Borrower shall not create, assume or suffer to
exist and shall not permit either Guarantor or any of the Borrower's other
Subsidiaries to create, assume or suffer to exist any Lien on any of the
Borrower's, Guarantors' or other Subsidiary's assets, EXCEPT (a) existing Liens
reflected in the balance sheets referred to in Section 4.07 or otherwise
previously disclosed to the Agent in writing, (b) purchase-money security
interests in inventory which have been perfected under the Uniform Commercial
Code and which secure Indebtedness not exceeding in the aggregate for Borrower,
the Guarantors and all other Subsidiaries, Fifty Million Dollars ($50,000,000)
at any time, (c) purchase-money security interests in new equipment which are
limited to such equipment, (d) Liens on real property which, together with other
such Liens then existing, secure Indebtedness which does not in the aggregate
for Borrower, the Guarantors and all other Subsidiaries exceed One Hundred Fifty
Million Dollars ($150,000,000) at any time, and (e) Liens on inventory owned by
Costco U.K. Ltd. to secure a working capital line of credit in favor of such
Subsidiary not to exceed Twenty Million Dollars ($20,000,000) at any one time
outstanding.
Section 6.05 INVESTMENTS. The Borrower shall not, and shall cause the
Guarantors and Borrower's other Subsidiaries not to, make any loan or advance to
any person or purchase or otherwise acquire the capital stock, shares, voting
trust certificates, bonds, debentures, notes or instruments or other securities
or evidences of indebtedness or obligations of or any interest in or make any
capital contribution to, any person in excess of Twenty Million Dollars
($20,000,000) in any one case or, in the aggregate, at any one time, in an
amount more than five percent (5%) of the aggregate book value of the assets of
the Borrower and its consolidated Subsidiaries at the close of the fiscal
quarter last ended on the date of calculation, except (a) time deposits maturing
within one year at commercial banks organized or licensed to conduct a banking
business under the laws of the United States of America or any state thereof
having capital, surplus and undivided profits of not less than One Hundred
Million Dollars ($100,000,000); (b) marketable general obligations of the United
States or a state thereof or marketable obligations fully guaranteed by the
United States; (c) short-term commercial paper with the highest rating of a
generally recognized rating service; (d) loans or advances by Borrower to
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its Subsidiaries; (e) loans or advances by either Guarantor to its Subsidiaries
and (f) those investments described on Schedule 7.
Section 6.06 ACCOUNTING CHANGE. The Borrower shall maintain a fiscal year
ending on the Sunday closest to the last day in August and shall not make any
significant change in accounting policies or reporting practices other than
changes required by generally accepted accounting principles or otherwise
required by law.
Section 6.07 ERISA COMPLIANCE. Neither Borrower, either Guarantor, nor
any member of the Controlled Group nor any Plan of any of them will (a) engage
in any "prohibited transaction" (as such term is defined in Section 406 of ERISA
or Section 4975 of the Internal Revenue Code; (b) incur any "accumulated
funding deficiency" (as such term is defined in Section 302 of ERISA) whether or
not waived; (c) terminate any Pension Plan in a manner which could result in the
imposition of a Lien on any property of Borrower, either Guarantor or any member
of the Controlled Group pursuant to Section 4068 of ERISA; or (d) violate state
or federal securities laws applicable to any Plan.
Section 6.08 GUARNATOR INDEBTEDNESS. The Borrower shall cause each
Guarantor not to create, incur or become liable for any Indebtedness except (a)
existing Indebtedness reflected on the balance sheets referred to in Section
4.07 (other than Indebtedness incurred under lines of credit identified on the
annexed Schedule 2) together with any renewal or extension of such Indebtedness
or any portion thereof to a date on or before the Maturity Date; (b) current
accounts payable or accrued, incurred by such Guarantor in the ordinary course
of its business; (c) Indebtedness for the deferred purchase price or obligations
under leases of real or personal property used by the Guarantor in its business
but not exceeding at any time for either Guarantor, the sum of Fifty Million
Dollars ($50,000,000); (d) that certain Revolving Line of Credit in the amount
of Fifty Million Canadian Dollars (CDN $50,000,000) and that certain Revolving
Reducing Term Loan in the amount of Forty Million Canadian Dollars (CDN
$40,000,000) each evidenced by that certain Credit Agreement by and among Price
Club Canada Inc. as "Borrower", National Bank of Canada as "Agent" and certain
other parties as "Lenders" dated as of December 2, 1993; (e) Indebtedness
arising under any guaranty not prohibited by Section 6.03; (f) Indebtedness
owing by such Guarantor to the Borrower; and (g) on or before March 1, 1994,
Indebtedness owed in respect of advances under uncommitted facilities up to an
aggregate principal amount at any one time outstanding for both Guarantors of
Two Hundred Million Dollars ($200,000,000) provided that no such advances have a
maturity beyond March 1, 1994, and provided further, that in no event will the
aggregate Indebtedness of the
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Borrower and the Guarantors due in respect of advances made under uncommitted
facilities exceed Two Hundred Million Dollars ($200,000,000).
ARTICLE VII
EVENTS OF DEFAULT
-----------------
Section 7.01 EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default" hereunder.
(a) LOAN PAYMENT DEFAULT. The Borrower shall fail to pay when due
any amount of principal of or interest on any Loan; or
(b) OTHER PAYMENT DEFAULT. The Borrower shall fail to pay any amount
payable by it hereunder or under any Loan Document (other than amounts referred
to in Section 7.01(a)) and such failure shall remain unremedied for ten (10)
days; or
(c) BREACH OF WARRANTY. Any representation or warranty made or
deemed made by the Borrower or either Guarantor under or in connection with this
Agreement, the other Loan Documents, or other statements executed in connection
herewith or therewith shall prove to have been incorrect in any material respect
when made or deemed made; or
(d) BREACH OF CERTAIN COVENANTS. The Borrower shall fail to perform
or observe any covenant set forth in Sections 5.11(f), 5.13, 5.14, 5.15, 6.01,
6.02, 6.03, 6.06, 6.07 or 6.08 hereof; or
(e) BREACH OF OTHER COVENANTS. The Borrower shall fail to perform or
observe any other covenant, obligation or term of this Agreement and such
failure shall remain unremedied for thirty (30) days after written notice
thereof shall have been given to the Borrower by the Agent; or
(f) CROSS-DEFAULT. An "Event of Default" (as such term is defined in
that certain Extended Revolving Credit Agreement executed by and among the
Agent, the Borrower, the Lenders and the Co-Agents as of January 31, 1994) shall
have occurred and be continuing or the Borrower, either Guarantor, or any of
Borrower's other Subsidiaries shall fail (i) to pay when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) any
Indebtedness for
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borrowed monies or any interest or premium thereon and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Indebtedness for borrowed monies, or (ii) to
perform any term or covenant on its part to be performed under any agreement or
instrument relating to any such Indebtedness for borrowed monies and required to
be performed and such failure shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the effect of such failure
to perform is to accelerate or to permit the acceleration of the maturity of
such Indebtedness; or
(g) PREPAYMENT. Any Indebtedness for borrowed monies of the
Borrower, either Guarantor or any of Borrower's other Subsidiaries shall be
declared to be due and payable or required to be prepaid (other than by
regularly scheduled required prepayment) prior to the stated maturity thereof;
or
(h) VOLUNTARY BANKRUPTCY, ETC. The Borrower, either Guarantor or any
of Borrower's other Subsidiaries shall: (i) file a petition seeking relief for
itself under Title 11 of the United States Code, as now constituted or hereafter
amended, or file an answer consenting to, admitting the material allegations of
or otherwise not controverting, or fail timely to controvert a petition filed
against it seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended; or (ii) file such petition or answer with
respect to relief under the provisions of any other now existing or future
applicable bankruptcy, insolvency, or other similar law of the United States of
America or any state thereof or of any other country or jurisdiction providing
for the reorganization, winding-up or liquidation of corporations or an
arrangement, composition, extension or adjustment with creditors; or
(i) INVOLUNTARY BANKRUPTCY, ETC. An order for relief shall be
entered against the Borrower, either Guarantor or any of Borrower's other
Subsidiaries under Title 11 of the United States Code, as now constituted or
hereafter amended, which order is not stayed; or upon the entry of an order,
judgment or decree by operation of law or by a court having jurisdiction in the
premises which is not stayed adjudging the Borrower, either Guarantor, or any of
Borrower's other Subsidiaries a bankrupt or insolvent under, or ordering relief
against it under, or approving as properly filed a petition seeking relief
against it under the provisions of any other now existing or future applicable
bankruptcy, insolvency or other similar law of the United States of America or
any state thereof or of any other country or jurisdiction providing for the
reorganization, winding-up or liquidation of corporations or any arrangement,
composition, extension or adjustment with creditors, or appointing a receiver,
liquidator, assignee, sequestrator, trustee or custodian of the Borrower, either
Guarantor or any other Subsidiary or of any substantial part of its property, or
ordering the reorganization, winding-up or liquidation of its affairs, or upon
the expiration of sixty (60) days after the
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filing of any involuntary petition against the Borrower, either Guarantor's or
any of Borrower's other Subsidiaries seeking any of the relief specified in
Section 7.01(h) or this Section 7.01(i) without the petition being dismissed
prior to that time; or
(j) INSOLVENCY, ETC. The Borrower, either Guarantor or any of
Borrower's other Subsidiaries shall (i) make a general assignment for the
benefit of its creditors or (ii) consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, or custodian of all or
a substantial part of the property of the Borrower, either Guarantor or any
other Subsidiary, or (iii) admit its insolvency or inability to pay its debts
generally as they become due, or (iv) fail generally to pay its debts as they
become due, or (v) take any action (or suffer any action to be taken by its
directors or shareholders) looking to the dissolution or liquidation of the
Borrower, either Guarantor or any of Borrower's other Subsidiaries; or
(k) ERISA. The Borrower, either Guarantor or any member of the
Controlled Group shall fail to pay when due an amount or amounts aggregating in
excess of Five Hundred Thousand Dollars ($500,000) which it shall have become
liable to pay to the PBGC or to a Plan under Section 515 of ERISA or Title IV of
ERISA; or notice of intent to terminate a Plan or Plans (other than a
multi-employer plan, as defined in Section 4001(3) of ERISA), having aggregate
Unfunded Vested Liabilities in excess of Five Hundred Thousand Dollars
($500,000) shall be filed under Title IV of ERISA by the Borrower, either
Guarantor, any member of the Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate any such Plan or Plans; or
(l) GUARANTIES. Either Guarantor shall have notified the Agent or
either Lender to the effect that its Guaranty is no longer in full force and
effect or shall otherwise limit, terminate, or purport to limit or terminate its
Guaranty or claim that the effect thereof has been limited or terminated for any
reason; or
(m) JUDGMENT. A final judgment or order for the payment of money in
excess of Thirty Million Dollars ($30,000,000) or its equivalent in another
currency shall be rendered against the Borrower, either Guarantor or any of
Borrower's other Subsidiaries and such judgment or order shall continue
unsatisfied and in effect for a period of thirty (30) consecutive days; or
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(n) CHANGE OF CONTROL. Any person or group of persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
shall have acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under said Act) of thirty
percent (30%) or more of the outstanding shares of common stock of the Borrower;
or, individuals who have become directors of the Borrower within any two (2)
year period (other than by reelection to a successive term) shall constitute a
majority of the board of directors of the Borrower.
Section 7.02 CONSEQUENCES OF DEFAULT. If any of the Events of Default
described in Section 7.01(h) or Section 7.01(i) shall occur, the Total
Commitment and the Lenders' respective Commitments shall immediately terminate,
the principal of and the interest on the Loans and all other sums payable by
Borrower hereunder and under the Committed Loan Notes and Bid Loan Notes shall
become immediately due and payable all without protest, presentment, notice or
demand, all of which the Borrower expressly waives. If any other Event of
Default shall occur and be continuing, then in any such case and at any time
thereafter so long as any such Event of Default shall be continuing, the Agent
shall at the request, or may with the consent, of the Majority Lenders
immediately terminate the Total Commitment and the Lenders' respective
Commitments and, if Loans shall have been made, the Agent shall at the request,
or may with the consent, of the Majority Lenders declare the principal of and
the interest on the Loans, the Committed Loan Notes and the Bid Loan Notes and
all other sums payable by the Borrower hereunder or thereunder to be immediately
due and payable, whereupon the same shall become immediately due and payable all
without protest, presentment, notice, or demand, all of which the Borrower
expressly waives. If any Lender of a Bid Loan shall suffer an Event of Default
under subsection 7.01(a) due to the Borrower's failure to pay any amount of
principal on or interest of any Bid Loan made by such Lender, such Lender may
send a written request to the Agent to obtain approval of the Majority Lenders
to terminate the Total Commitment and the Lenders' respective Commitments, to
declare the principal of and the interest on the Loans, the Committed Loan Notes
and the Bid Loan Notes and all other sums payable by the Borrower hereunder or
thereunder to become immediately due and payable and, if such approval is not
obtained within ten (10) Business Days after the date such request is received,
the affected Lender may elect to accelerate the Bid Loan in default and may
exercise remedies in respect of such Bid Loan by any and all legal means.
ARTICLE VIII
THE AGENT
---------
Section 8.01 AUTHORIZATION AND ACTION. Each Lender hereby appoints and
authorizes the Agent to take such action as agent on
45
<PAGE>
its behalf and to exercise such powers under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto. The Agent shall have no duties or responsibilities except
those expressly set forth in this Agreement. The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have by reason of
this Agreement a fiduciary relationship in respect of any Lender; and nothing in
this Agreement or the other Loan Documents, expressed or implied, is intended to
or shall be so construed as to impose upon the Agent any obligations in respect
of this Agreement or the other Loan Documents except as expressly set forth
herein. As to any matters not expressly provided for by this Agreement,
including enforcement or collection of the Loans, the Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining) upon the instructions of the Majority Lenders, and such instructions
shall be binding upon all Lenders and any holders of any Committed Loan Note or
Bid Loan Note, PROVIDED that the Agent shall not be required to take any action
which exposes the Agent to personal liability or which is contrary to the Loan
Documents or applicable law and PROVIDED, FURTHER, that without the consent of
all Lenders, the Agent shall not change or modify the Total Commitment, any
Lender's Commitment, the definition of "Majority Lenders", the conditions
precedent set forth in Article III, the timing or rates of interest payments,
the timing or amount of facility fees, the timing or amounts of principal
payments due in respect of Loans, or the terms of the prohibition against any
merger by Borrower or any Subsidiary pursuant to Section 6.02, and PROVIDED,
FURTHER, that the terms of Section 2.07, Section 2.14(b) and this Article VIII
shall not be amended without the prior written consent of the Agent (acting for
its own account). In the absence of instructions from the Majority Lenders, the
Agent shall have authority (but no obligation), in its sole discretion, to take
or not to take any action, unless this Agreement specifically requires the
consent of the Lenders or the consent of the Majority Lenders and any such
action or failure to act shall be binding on all the Lenders and on all holders
of the Committed Loan Notes and Bid Loan Notes. Each Lender and each holder of
any Committed Loan Note or Bid Loan Note shall execute and deliver such
additional instruments, including powers of attorney in favor of the Agent, as
may be necessary or desirable to enable the Agent to exercise its powers
hereunder.
Section 8.02 DUTIES AND OBLIGATIONS.
(a) Neither the Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
any of them under or in connection with this Agreement except for its or their
own gross
46
<PAGE>
negligence or willful misconduct. Without limiting the generality of the
foregoing, the Agent (i) may treat each Lender which is a party hereto as the
party entitled to receive payments hereunder until the Agent receives written
notice of the assignment of such Lender's interest herein signed by such Lender
and made in accordance with the terms hereof and a written agreement of the
assignee that it is bound hereby as it would have been had it been an original
party hereto, in each case in form satisfactory to the Agent; (ii) may consult
with legal counsel (including counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement, the other Loan
Documents or in any instrument or document furnished pursuant hereto or thereto;
(iv) shall not have any duty to ascertain or to inquire as to the performance of
any of the terms, covenants, or conditions of the Loan Documents on the part of
the Borrower or as to the use of the proceeds of any Loan or as to the existence
or possible existence of any Default or Event of Default; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, effectiveness, or value of this Agreement or of any
instrument or document furnished pursuant hereto; and (vi) shall incur no
liability under or in respect to this Agreement by acting upon any oral or
written notice, consent, certificate or other instrument or writing (which may
be by telegram, facsimile transmission, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties or by acting upon any
representation or warranty of the Borrower made or deemed to be made hereunder
or any representation or warranty of a Guarantor made in its Guaranty.
(b) The Agent will account to each Lender for its Percentage Interest
of payments of principal of, interest on and facility fees in respect of the
Committed Loans which are received by the Agent from the Borrower and will
promptly remit to the Lenders entitled thereto all such payments. The Agent
will account to each Lender entitled thereto for payments of principal of and
interest on the Bid Loans which are received by the Agent from the Borrower and
will promptly remit such payments to the Lender or Lenders entitled thereto.
The Agent will transmit to each Lender copies of all documents received from the
Borrower pursuant to the requirements of this Agreement other than documents
which by the terms of this Agreement Borrower is obligated to deliver directly
to Lenders.
(c) Each Lender or its assignee organized outside of the United
States shall furnish to the Agent in a timely fashion such documentation
(including, but not by way of limitation, IRS Forms
47
<PAGE>
Nos. 1001 and 4224) as may be required by applicable law or regulation to
establish such Lender's status for tax withholding purposes.
Section 8.03 DEALIINGS BETWEEN AGENT AND BORROWER. With respect to its
Commitment and the Loans made by it, the Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any other Lender and
may exercise the same as though it were not the Agent, and the term "Lender"
shall unless otherwise expressly indicated include the Agent in its individual
capacity. The Agent may accept deposits from, lend money to, act and generally
engage in any kind of business with the Borrower or either Guarantor and any
person which may do business with the Borrower or either Guarantor, all as if
the Agent were not the Agent hereunder and without any duty to account therefor
to the Lenders.
Section 8.04 LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based upon such 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 Agent 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.
Section 8.05 INDEMNIFICAITON. The Lenders agree to indemnify the Agent
(to the extent not reimbursed by the Borrower) ratably according to their
respective Percentage Interests from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Agent in any way relating to or arising
out of this Agreement or any other Loan Document or any action taken or omitted
by the Agent under this Agreement or any other Loan Document, except any such as
result from the Agent's gross negligence or willful misconduct. Without
limiting the foregoing, each Lender agrees to reimburse the Agent promptly on
demand in proportion to its Percentage Interest for any out-of-pocket expenses,
including legal fees, incurred by the Agent in connection with the
administration or enforcement of or the preservation of any rights under this
Agreement or any other Loan Document (to the extent that the Agent is not
reimbursed for such expenses by the Borrower or the Guarantors).
Section 8.06 SUCCESSOR AGENT. The Agent may give written notice of
resignation at any time to the Lenders and the Borrower and may be removed at
any time with cause by the Majority Lenders. Upon any such notice of
resignation or removal, Bank of
48
<PAGE>
America, National Trust and Savings Association (the "First Co-Agent") shall
upon its written notice of acceptance become the Agent hereunder. If the First
Co-Agent shall not accept its appointment as Agent, or upon any notice of
resignation or removal of the First Co-Agent in accordance with the first
sentence of this Section 8.06, Morgan Guaranty Trust Company of New York (the
"Second Co-Agent") shall upon its written notice of acceptance become the Agent
hereunder. Until such time as it is appointed Agent hereunder and accepts such
appointment, neither Co-Agent shall have any obligation hereunder, fiduciary or
otherwise, as Co-Agent or Agent hereunder. If the Second Co-Agent shall not
accept its appointment as Agent or if the Second Co-Agent shall thereafter
resign or be removed with cause by the Majority Lenders, the Majority Lenders
shall have the right to appoint a Successor Agent. If no successor Agent shall
have been so appointed by the Majority Lenders and shall have accepted such
appointment within thirty (30) days after the Second Co-Agent's giving of notice
of resignation or the Majority Lenders' removal of the Second Co-Agent, then the
Second Co-Agent may on behalf of the Lenders, appoint a successor Agent, which
shall be a bank organized under the laws of the United States or of any state
thereof, or any affiliate of such bank, and having a combined capital and
surplus of at least Five Hundred Million Dollars ($500,000,000). Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under this Agreement.
Until the acceptance by such a successor Agent, the retiring Agent shall
continue as "Agent" hereunder. Notwithstanding any retiring Agent's resignation
or removal hereunder as Agent, the provisions of this Article VIII shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
ARTICLE IX
MISCELLANEOUS
-------------
Section 9.01 NO WAIVER; REMEDIES CUMULATIVE. No failure by the Agent or
any Lender to exercise, and no delay in exercising, any right, power or remedy
under this Agreement or any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or remedy
under this Agreement or any other Loan Document preclude any other or further
exercise thereof or the exercise of any other right, power, or remedy. The
exercise of any right, power, or remedy shall in no event constitute a cure or
waiver of any Event of Default under this Agreement or any other Loan Document
nor prejudice the rights of the Agent or any Lender in the exercise of any right
hereunder or thereunder. The rights and remedies
49
<PAGE>
provided herein and therein are cumulative and not exclusive of any right or
remedy provided by law.
Section 9.02 GOVERNING LAW. This Agreement and the other Loan Documents
shall be governed by and construed in accordance with the laws of the State of
Washington, U.S.A.
Section 9.03 CONSENT TO JURISDICTION. The Borrower hereby irrevocably
submits to the nonexclusive jurisdiction of any state or federal court sitting
in Seattle, King County, Washington, in any action or proceeding brought to
enforce or otherwise arising out of or relating to this Agreement or any other
Loan Document and irrevocably waives to the fullest extent permitted by law any
objection which it may now or hereafter have to the laying of venue in any such
action or proceeding in any such forum, and hereby further irrevocably waives
any claim that any such forum is an inconvenient forum. The Borrower agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in any other jurisdiction by suit on the judgment or in any
other manner provided by law. Nothing in this Section 9.03 shall impair the
right of the Agent or any other Lender or the holder of any Committed Loan Note
or Bid Loan Note to bring any action or proceeding against the Borrower or its
property in the courts of any other jurisdiction, and the Borrower irrevocably
submits to the nonexclusive jurisdiction of the appropriate courts of the
jurisdiction in which the Borrower is incorporated or sitting in any place where
property or an office of the Borrower is located.
Section 9.04 NOTICES. All notices and other communications provided for
in this Agreement shall be in writing or (unless otherwise specified) by telex,
facsimile transmission, telegram or cable and shall be mailed (with first class
postage prepaid) or sent or delivered to each party at the address set forth
under its name on Schedule 6 hereof, or at such other address as shall be
designated by such party in a written notice to each other party. Except as
otherwise specified all notices sent by mail, if duly given, shall be effective
three (3) Business Days after deposit into the mails, all notices sent by a
nationally recognized overnight courier service, if duly given, shall be
effective one (1) Business Day after delivery to such courier service, and all
other notices and communications if duly given or made shall be effective upon
receipt.
Section 9.05 ASSIGNMENT AND PARTICIPATIONS. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
Successors and assigns, PROVIDED that the Borrower may not assign or otherwise
transfer all or any part of its rights or obligations hereunder or under any
other Loan Document without the prior written consent of the Agent and all the
Lenders, and any such assignment or transfer purported to be made without such
consent shall be ineffective. Any Lender may
50
<PAGE>
at any time (a) sell to any entity participation interests in its Bid Loans;
or (b) sell to any Eligible Assignee participation interests in its Committed
Loans and Commitment. Such sales may be made without the consent of the Agent,
any other Lender or the Borrower PROVIDED, HOWEVER, (a) that the selling Lender
shall have provided the Borrower with prior written notice of the sale of any
participation interest in any Committed Loan or in such Lender's Commitment; and
(b) that the selling Lender retains the right to vote as a Lender hereunder in
respect of the interest sold without being bound to obtain the consent of its
participant or to exercise its rights in accordance with instructions received
from its participant (except that the participant's consent can be required for
proposed changes to the timing or amount of principal payments or changes to the
timing, rate or amount of payments of interest or fees). Any Lender may pledge
or assign all or any part of its interest under the Loan Documents for security
purposes to any Federal Reserve Bank. Any Lender may assign or otherwise
transfer to any Eligible Assignee all or any part of its interest under the Loan
Documents (y) without the consent of the Agent, any other Lender, or the
Borrower to any of the assigning Lender's affiliates or to any other Lender; or
(z) with the prior written consent of the Agent and, if no Event of Default
shall have occurred and be continuing, the Borrower, (such consents not to be
unreasonably withheld or delayed) but without the consent of the other Lenders,
to any other person PROVIDED, HOWEVER, that in either case no such assignment
(as distinguished from the sale of a participation) (i) shall be made in an
amount less than Ten Million Dollars ($10,000,000) nor (ii) shall be made if
after giving effect to such assignment the aggregate amount of the Loans and
unused Commitment of the assigning Lender would be less than Ten Million Dollars
($10,000,000) and PROVIDED, FURTHER, that in connection with any assignment (as
distinguished from the sale of a participation) the assigning Lender shall pay
to Agent a fee of Two Thousand Five Hundred Dollars ($2,500) for each proposed
assignee. The assignee of any permitted sale or assignment (including
assignments for security and sales of participations) shall have the same rights
and benefits against the Borrower and otherwise under the Loan Documents
(excepting however, in the case of sales of participations, the right to grant
or withhold consents or otherwise vote in respect thereof) including the right
of setoff, and in the case of any outright assignment (as distinguished from an
assignment for security or the sale of a participation) the same obligations in
respect thereof, as if such assignee were an original Lender. Unless an Event
of Default shall have occurred and be continuing, each Lender agrees that
without the prior written consent of the Borrower (such consent not to be
unreasonably withheld or delayed) it will not disclose to any prospective
participant or assignee any nonpublic financial information concerning the
Borrower, either Guarantor or any other Subsidiary which was furnished to such
Lender pursuant to this Agreement. Except to
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<PAGE>
the extent otherwise required by the context of this Agreement, the word
"Lender" where used in this Agreement shall mean and include any holder of a
Note originally issued to a Lender hereunder, and each such holder shall be
bound by and have the benefits of this Agreement the same as if such holder had
been a signatory hereto. Any outright assignment of a Lender's interest
hereunder to another Lender (other than an assignment of a Bid Loan) made in
conformance with the terms of this Section 9.05 shall result in a corresponding
adjustment to the selling and purchasing Lenders' Percentage Interests. As used
herein, "Eligible Assignee" means (i) a commercial bank organized under the laws
of the United States, or any state thereof, and having a combined capital and
surplus of at least $100,000,000; (ii) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located in the
United States of America; and (iii) a person that is primarily engaged in the
business of commercial banking and that is (A) a Subsidiary of a Lender, (B) a
Subsidiary of a person of which a Lender is a Subsidiary, or (C) a person of
which a Lender is a Subsidiary.
Section 9.06 BORROWER'S INDEMNITY. Whether or not the transactions
contemplated hereby shall be consummated, the Borrower shall pay, indemnify and
hold each Lender, the Agent and each of their respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses or disbursements
(including reasonable attorney's fees and the allocated charges of internal
legal counsel) of any kind or nature whatsoever with respect to any
investigation, litigation or proceeding (including any insolvency proceeding or
appellate proceeding) related to this Agreement or any other Loan Document or
any actual or proposed use of proceeds of the Loans hereunder, whether or not
any Indemnified Person is a party thereto (all of the foregoing, collectively
the "Indemnified Liabilities"); PROVIDED, that the Borrower shall have no
obligation hereunder to any Indemnified Person with respect to Indemnified
Liabilities arising from the negligence or willful misconduct of such
Indemnified Person; and PROVIDED, FURTHER, without limiting Sections 10.12 or
8.05 hereof, this Section 9.06 shall not be construed to require the Borrower to
pay, indemnify, or hold the Indemnified Person harmless for Indemnified
Liabilities arising solely in connection with disputes by and among the Agent,
the Co-Agents, the Lenders, any assignee of any Lender (including any purchaser
of a participation interest in any Loan). All amounts owing under this Section
9.06 shall be paid promptly upon demand. At the election of any Indemnified
Person, the Borrower shall defend such
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<PAGE>
Indemnified Person in respect of any Indemnified Liabilities using legal counsel
satisfactory to such Indemnified Person at the sole cost and expense of the
Borrower.
Section 9.07 SEVERABILITY. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall as
to such jurisdiction be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties waive any
provision of law which renders any provision hereof prohibited or unenforceable
in any respect.
Section 9.08 SURVIVAL. The representations, warranties and indemnities of
the Borrower in favor of the Agent and the Lenders and the representations,
warranties and indemnities of the Lenders in favor of the Agent shall survive
indefinitely and, without limiting the foregoing, shall survive the execution
and delivery of this Agreement and the other Loan Documents, the making of any
Loan, the expiration of the Total Commitment and the repayment of all Loans and
other amounts due hereunder.
Section 9.09 CONDITIONS NOT FULFILLED. If the Commitments are not
borrowed or Bid Loans are not made owing to nonfulfillment of any condition
precedent specified in Article III, no party hereto shall be responsible to any
other party for any damage or loss by reason thereof, except that the Borrower
shall in any event be liable to pay the fees, Taxes, and expenses for which it
is obligated hereunder. If for any other reason the Commitment of any Lender is
not borrowed or a Bid Loan is not made neither the Agent nor any other Lender
shall be responsible to the Borrower for any damage or loss by reason thereof,
nor shall any other Lender or the Borrower be excused from its performance
hereunder.
Section 9.10 ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with
the Exhibits and Schedules hereto and the letter agreement referred to in
Section 2.14(b) hereof, comprise the entire agreement of the parties and may not
be amended or modified except by written agreement of the Borrower and the Agent
executed in conformance with the terms of Section 8.01 hereof. No provision of
this Agreement may be waived except in writing and then only in the specific
instance and for the specific purpose for which given.
Section 9.11 WAIVER OF JURY TRIAL. The parties hereto waive any right to
a trial by jury in any action or proceeding to enforce or defend any rights
under or relating to this Agreement or any other Loan Document, or any
amendment, instrument, document or agreement delivered or which may in the
future be
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delivered in connection herewith or therewith or arising from any relationship
existing in connection with this Agreement or any other Loan Document, and agree
that (a) any such action or proceeding shall be tried before a court and not
before a jury and (b) any party hereto may file an original counterpart or copy
of this Agreement with any court as written evidence of the consent of the
parties hereto to the waiver of their respective rights to a trial by jury.
Section 9.12 HEADINGS. The headings of the various provisions of this
Agreement are for convenience of reference only, do not constitute a part
hereof, and shall not affect the meaning or construction of any provision
hereof.
Section 9.13 COUTNERPARTS. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original, and all of which
taken together shall constitute one and the same Agreement.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers or agents thereunto duly authorized as of
the date first above written.
BORROWER:
PRICE/COSTCO, INC.
By /s/ Richard A. Galanti
-----------------------------------------------
Its Executive Vice President
Chief Financial Officer
---------------------------------------
By /s/ Harold E. Kaplan
-----------------------------------------------
Its Vice President
Treasurer
---------------------------------------
LENDERS:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ Richard J. Bryson
-----------------------------------------------
Its Vice President
---------------------------------------
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By /s/ Diana H. Imhof
-----------------------------------------------
Its Associate
---------------------------------------
J.P. MORGAN DELAWARE
By /s/ Philip s. Detjens
-----------------------------------------------
Its Vice President
---------------------------------------
SEATTLE-FIRST NATIONAL BANK
By Hank Knottnerus
-----------------------------------------------
Its Vice President
---------------------------------------
CIBC, INC.
By /s/ Ray A. Mendoza
-----------------------------------------------
Its Vice President
---------------------------------------
FIRST INTERSTATE BANK OF CALIFORNIA
By /s/ David T. Bruen
-----------------------------------------------
Its Vice President
---------------------------------------
NATIONSBANK OF TEXAS, N.A.
By /s/ William B. Guffy
-----------------------------------------------
Its Vice President
---------------------------------------
BANK OF HAWAII
By /s/ Peter S. Ho
-----------------------------------------------
Its Assistant Vice President
---------------------------------------
BANK NATIONALE DE PARIS
By /s/ Deborah Y. Gohh William J. Letterran
-----------------------------------------------
Its Associate Vice President
---------------------------------------
CREDIT SUISSE
By /s/ David J. Worthington Kevin Mark Fowler
-----------------------------------------------
Its Member of Senior Management Associate
---------------------------------------
FIRST INTERSTATE BANK OF WASHINGTON, N.A.
By /s/ Jo Surbrugg
-----------------------------------------------
Its Vice President
---------------------------------------
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By /s/ Leo G. Leitner
-----------------------------------------------
Its Vice President
---------------------------------------
SHAWMUT BANK, N.A.
By /s/ Sara E. Hartwell
-----------------------------------------------
Its Assistant Vice President
---------------------------------------
UNITED STATES NATIONAL BANK OF OREGON
By /s/ Peter G. Bentley
-----------------------------------------------
Its Vice President
---------------------------------------
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK AND CAYMAN ISLANDS BRANCHES
By /s/ Robert J. Nolan
-----------------------------------------------
Its Associate
---------------------------------------
AGENT:
SEATTLE-FIRST NATIONAL BANK
By /s/ Dora A. Brown
-----------------------------------------------
Its Assistant Vice President
---------------------------------------
CO-AGENTS:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By /s/ Richard J. Cerf
-----------------------------------------------
Its Vice President
---------------------------------------
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By /s/ Diana H. Imhof
-----------------------------------------------
Its Associate
---------------------------------------
<PAGE>
EXTENDED
REVOLVING CREDIT AGREEMENT
among
PRICE/COSTCO, INC.
as Borrower
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
J.P. MORGAN DELAWARE
SEATTLE-FIRST NATIONAL BANK
CIBC, INC.
FIRST INTERSTATE BANK OF CALIFORNIA
NATIONSBANK OF TEXAS, N.A.
BANK OF HAWAII
BANQUE NATIONALE DE PARIS
CREDIT SUISSE
FIRST INTERSTATE BANK OF WASHINGTON, N.A.
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
SHAWMUT BANK, N.A.
UNITED STATES NATIONAL BANK OF OREGON
WESTDEUTSCHE LANDESBANK GIROZENTRALE
as Lenders,
and
SEATTLE-FIRST NATIONAL BANK
as Agent for the Lenders
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
as Co-Agents for the Lenders
- -------------------------------------------------------------------------------
January 31, 1994
- -------------------------------------------------------------------------------
$250,000,000
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . 1
Section 1.01 CERTAIN DEFINED TERMS . . . . . . . . . . . . . . . . . . 1
Section 1.02 GENERAL PRINCIPLES APPLICABLE TO DEFINITIONS. . . . . . . 9
Section 1.03 ACCOUNTING TERMS. . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II
THE LOANS. . . . . . . . . . . . . . . . 9
Section 2.01 COMMITTED LOANS . . . . . . . . . . . . . . . . . . . . . 9
Section 2.02 MANNER OF BORROWING A COMMITTED LOAN. . . . . . . . . . . 10
Section 2.03 BID LOANS . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.04 MANNER OF BORROWING A BID LOAN. . . . . . . . . . . . . . 11
Section 2.05 REDUCTION OF COMMITMENTS. . . . . . . . . . . . . . . . . 16
Section 2.06 REPAYMENT OF PRINCIPAL. . . . . . . . . . . . . . . . . . 16
Section 2.07 AGENT'S RIGHT TO FUND . . . . . . . . . . . . . . . . . . 16
Section 2.08 INTEREST ON COMMITTED LOANS . . . . . . . . . . . . . . . 17
(a) GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 17
(b) SELECTION OF ALTERNATIVE RATE . . . . . . . . . . . . . . . . 17
(c) APPLICABLE DAYS FOR COMPUTATION OF INTEREST . . . . . . . . . 19
(d) UNAVAILABLE FIXED RATE. . . . . . . . . . . . . . . . . . . . 19
Section 2.09 INTEREST ON BID LOANS . . . . . . . . . . . . . . . . . . 20
Section 2.10 COMPENSATION FOR INCREASED COSTS. . . . . . . . . . . . . 20
Section 2.11 PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . 22
(a) COMMITTED LOANS . . . . . . . . . . . . . . . . . . . . . . . 22
(b) BID LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.12 NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.13 MANNER OF PAYMENTS. . . . . . . . . . . . . . . . . . . . 23
Section 2.14 FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) FACILITY FEES . . . . . . . . . . . . . . . . . . . . . . . . 24
(b) ARRANGEMENT, AGENCY AND BID AGENCY FEES . . . . . . . . . . . 24
Section 2.15 SHARING OF PAYMENTS, ETC. . . . . . . . . . . . . . . . . 24
ARTICLE III
CONDITIONS OF LENDING. . . . . . . . . . . . . 25
Section 3.01 NOTICE OF BORROWING, PROMISSORY NOTES, ETC. . . . . . . . 25
Section 3.02 GUARANTIES. . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.03 CORPORATE AUTHORITY . . . . . . . . . . . . . . . . . . . 25
Section 3.04 LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.05 DEFAULTS, ETC . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.06 CANCELLATION OF EXISTING LINES OF CREDIT. . . . . . . . . 26
Section 3.07 OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 26
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . 26
Section 4.01 CORPORATE EXISTENCE AND POWER . . . . . . . . . . . . . . 26
Section 4.02 BORROWER'S CORPORATE AUTHORIZATION. . . . . . . . . . . . 27
Section 4.03 GUARANTORS' CORPORATE AUTHORIZATION . . . . . . . . . . . 27
Section 4.04 GOVERNMENT APPROVALS, ETC . . . . . . . . . . . . . . . . 27
Section 4.05 BINDING OBLIGATIONS, ETC. . . . . . . . . . . . . . . . . 27
Section 4.06 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.07 FINANCIAL CONDITION . . . . . . . . . . . . . . . . . . . 28
Section 4.08 TITLE AND LIENS . . . . . . . . . . . . . . . . . . . . . 29
Section 4.09 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.10 PARI PASSU RANKING. . . . . . . . . . . . . . . . . . . . 30
Section 4.11 LAWS, ORDERS; OTHER AGREEMENTS. . . . . . . . . . . . . . 30
Section 4.12 FEDERAL RESERVE REGULATIONS . . . . . . . . . . . . . . . 30
Section 4.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.14 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.15 PATENTS, LICENSES, FRANCHISES . . . . . . . . . . . . . . 31
Section 4.16 NOT INVESTMENT COMPANY, ETC.. . . . . . . . . . . . . . . 32
Section 4.17 REPRESENTATIONS AS A WHOLE. . . . . . . . . . . . . . . . 32
ARTICLE V
AFFIRMATIVE COVENANTS. . . . . . . . . . . . . 32
Section 5.01 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . 32
Section 5.02 PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.03 PRESERVATION OF CORPORATE EXISTENCE, ETC. . . . . . . . . 33
Section 5.04 VISITATION RIGHTS . . . . . . . . . . . . . . . . . . . . 33
Section 5.05 KEEPING OF BOOKS AND RECORDS. . . . . . . . . . . . . . . 33
Section 5.06 MAINTENANCE OF PROPERTY, ETC. . . . . . . . . . . . . . . 33
Section 5.07 COMPLIANCE WITH LAWS, ETC.. . . . . . . . . . . . . . . . 33
Section 5.08 OTHER OBLIGATIONS . . . . . . . . . . . . . . . . . . . . 34
Section 5.09 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.10 FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 34
Section 5.11 NOTIFICATION. . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.12 ADDITIONAL PAYMENTS; ADDITIONAL ACTS. . . . . . . . . . . 36
Section 5.13 TANGIBLE NET WORTH. . . . . . . . . . . . . . . . . . . . 36
Section 5.14 DEBT TO CAPITALIZATION RATIO. . . . . . . . . . . . . . . 37
Section 5.15 FIXED CHARGE COVERAGE . . . . . . . . . . . . . . . . . . 37
ARTICLE VI
NEGATIVE COVENANTS. . . . . . . . . . . . . . 37
Section 6.01 DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.02 LIQUIDATION, MERGER, SALE OF ASSETS . . . . . . . . . . . 38
Section 6.03 GUARANTIES, ETC.. . . . . . . . . . . . . . . . . . . . . 38
Section 6.04 LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.05 INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.06 ACCOUNTING CHANGE . . . . . . . . . . . . . . . . . . . . 40
Section 6.07 ERISA COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 40
Section 6.08 GUARANTOR INDEBTEDNESS. . . . . . . . . . . . . . . . . . 41
ii
<PAGE>
ARTICLE VII
EVENTS OF DEFAULT. . . . . . . . . . . . . . 41
Section 7.01 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 41
(a) LOAN PAYMENT DEFAULT. . . . . . . . . . . . . . . . . . . . . 41
(b) OTHER PAYMENT DEFAULT . . . . . . . . . . . . . . . . . . . . 41
(c) BREACH OF WARRANTY. . . . . . . . . . . . . . . . . . . . . . 42
(d) BREACH OF CERTAIN COVENANTS . . . . . . . . . . . . . . . . . 42
(e) BREACH OF OTHER COVENANT. . . . . . . . . . . . . . . . . . . 42
(f) CROSS-DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . 42
(g) PREPAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 42
(h) VOLUNTARY BANKRUPTCY, ETC . . . . . . . . . . . . . . . . . . 42
(i) INVOLUNTARY BANKRUPTCY, ETC . . . . . . . . . . . . . . . . . 43
(j) INSOLVENCY, ETC . . . . . . . . . . . . . . . . . . . . . . . 43
(k) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(l) GUARANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.02 CONSEQUENCES OF DEFAULT . . . . . . . . . . . . . . . . . 44
ARTICLE VIII
THE AGENT. . . . . . . . . . . . . . . . 45
Section 8.01 AUTHORIZATION AND ACTION. . . . . . . . . . . . . . . . . 45
Section 8.02 DUTIES AND OBLIGATIONS. . . . . . . . . . . . . . . . . . 46
Section 8.03 DEALINGS BETWEEN AGENT AND BORROWER . . . . . . . . . . . 47
Section 8.04 LENDER CREDIT DECISION. . . . . . . . . . . . . . . . . . 48
Section 8.05 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 48
Section 8.06 SUCCESSOR AGENT . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE IX
MISCELLANEOUS. . . . . . . . . . . . . . . 49
Section 9.01 NO WAIVER; REMEDIES CUMULATIVE. . . . . . . . . . . . . . 49
Section 9.02 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.03 CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . . 49
Section 9.04 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.05 ASSIGNMENT AND PARTICIPATIONS . . . . . . . . . . . . . . 50
Section 9.06 BORROWER'S INDEMNITY. . . . . . . . . . . . . . . . . . . 52
Section 9.07 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . 52
Section 9.08 SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 9.09 CONDITIONS NOT FULFILLED. . . . . . . . . . . . . . . . . 53
Section 9.10 ENTIRE AGREEMENT; AMENDMENT . . . . . . . . . . . . . . . 53
Section 9.11 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . 53
Section 9.12 HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.13 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . 53
iii
<PAGE>
SCHEDULES*
Schedule 1 Prepayment Calculations
Schedule 2 Existing Guarantor Lines of Credit
Schedule 3 Jurisdictions of Incorporation and Foreign Qualification
Schedule 4 Litigation, Violations of Laws
Schedule 5 Capitalization and Ownership of Subsidiaries
Schedule 6 Notice Addresses
Schedule 7 Permitted Investments
EXHIBITS*
Exhibit A Form of Committed Loan Note
Exhibit B Form of Bid Loan Note
Exhibit C Form of Guaranty
Exhibit D Form of Borrower's Counsel's Legal Opinion
Exhibit E Form of Bid Loan Request
Exhibit F Form of Bid Loan Offer
Exhibit G Form of Officer's Certificate
Exhibit H Form of Required Notice of Borrowing
* Purposely omitted.
iv
<PAGE>
EXTENDED
REVOLVING CREDIT AGREEMENT
THIS EXTENDED REVOLVING CREDIT AGREEMENT ("Agreement") is made as of
January 31, 1994, by and among BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, J.P. MORGAN DELAWARE,
SEATTLE-FIRST NATIONAL BANK, CIBC, INC., FIRST INTERSTATE BANK OF CALIFORNIA,
NATIONSBANK OF TEXAS, N.A., BANK OF HAWAII, BANQUE NATIONALE DE PARIS, CREDIT
SUISSE, FIRST INTERSTATE BANK OF WASHINGTON, N.A., FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, SHAWMUT BANK, N.A., UNITED STATES NATIONAL BANK OF OREGON,
WESTDEUTSCHE LANDESBANK GIROZENTRALE (each individually a "Lender" and
collectively the "Lenders"), SEATTLE-FIRST NATIONAL BANK as administrative agent
for the Lenders (the "Agent"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION and MORGAN GUARANTY TRUST COMPANY OF NEW YORK as co-agents for the
Lenders (each individually a "Co-Agent" and collectively the "Co-Agents") and
PRICE/COSTCO INC., a Delaware corporation (the "Borrower").
ARTICLE I
DEFINITIONS
Section 1.01 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms have the following meanings:
"ABSOLUTE RATE" means a rate of interest per annum expressed to the
nearest 1/100th of one percent as set forth in a Bid Loan Offer.
"AGENT" means Seattle-First National Bank and any successor
administrative agent selected pursuant to Section 8.06 hereof.
"APPLICABLE INTEREST PERIOD" means, (i) with respect to any Committed
Loan accruing interest at a LIBOR Rate, the period commencing on the first day
the Borrower elects to have such LIBOR Rate apply to such Loan and ending either
(A) if no Lender has delivered a notice pursuant to Section 2.08(e) hereof, on a
day not less than seven (7) or more than thirty (30) days thereafter; or (B) on
a day one, two, three or six months thereafter, in either case as specified in
the Interest Rate Notice given in respect of such Loan, and (ii) with respect to
any Bid Loan accruing interest at a LIBOR Rate, the period commencing on the
first day the Borrower elects to have such LIBOR Rate apply to such Loan and
ending on a day one, two, three, four, five, six, seven, eight, nine, ten,
eleven or twelve
<PAGE>
months thereafter PROVIDED, HOWEVER, that no Applicable Interest Period may be
selected for either a Committed Loan or a Bid Loan if it extends beyond the
Maturity Date for such Loan.
"APPLICABLE INTEREST RATE" means for each Committed Loan, the Base
Rate or LIBOR Rate as designated by the Borrower in an Interest Rate Notice
given with respect to such Loan (or portion thereof) or as otherwise determined
pursuant to Section 2.08(b).
"BASE RATE" means for any day the greater of (a) the Prime Rate or
(b) the sum of (i) the Federal Funds Rate and (ii) one-half of one (.50)
percentage point per annum.
"BASE RATE LOAN" means a Committed Loan or portion thereof bearing
interest at the Base Rate.
"BID LOANS" mean loans made pursuant to the terms of Sections 2.03 and
2.04.
"BID LOAN NOTES" has the meaning given in Section 2.12.
"BID LOAN OFFER" has the meaning given in Section 2.04(b).
"BID LOAN REQUEST" has the meaning given in Section 2.04(a).
"BORROWER" means Price/Costco, Inc., a Delaware corporation, and any
permitted Successor or assign pursuant to Section 9.05.
"BORROWER'S CREDIT RATING" means a level of credit determined in
accordance with the following standards: Borrower's Credit Rating shall be
"Level 1" if Borrower has either (a) an S&P Rating of A- or better or (b) a
Moody's Rating of A3 or better. Borrower's Credit Rating shall be "Level 2" if
Borrower does not meet the standards for a "Level 1" rating set forth above and
has either (a) an S&P Rating of BBB+ or (b) a Moody's Rating of Baa1.
Borrower's Credit Rating shall be "Level 3" if Borrower does not meet the
standards for a "Level 1" or "Level 2" rating set forth above and has either (a)
an S&P Rating of BBB or (b) a Moody's Rating of Baa2. Borrower's Credit Rating
shall be "Level 4" if Borrower does not meet the standards for a "Level 1",
"Level 2" or "Level 3" rating set forth above and has either (a) an S&P Rating
of BBB- or (b) a Moody's Rating of Baa3. The Borrower does not meet the
standards for "Level 1," "Level 2,", "Level 3," or "Level 4" set forth above or
fails to maintain either an S&P Rating or a Moody's Rating, Borrower's Credit
Rating shall be "Level 5." As used herein, "S&P Rating" means the implied
senior unsecured debt rating given from time to time
2
<PAGE>
to the Borrower by Standard & Poor's Corporation. Notwithstanding the foregoing
to the contrary, until the earlier of (a) the first date on which either
Standard & Poor's Corporation or Moody's Investor Service, Inc. shall establish
an implied senior debt rating for Price/Costco, Inc. or (b) April 30, 1994, the
"Borrower's Credit Rating" shall be "Level 2" for all purposes hereunder. As
used herein, "Moody's Rating" means the senior unsecured debt rating given from
time to time to the Borrower by Moody's Investor Service, Inc.
"BUSINESS DAY" means any day other than Saturday, Sunday or another
day on which banks are authorized or obligated to close in Seattle, Washington,
San Francisco, California, or New York, New York except in the context of the
selection of a LIBOR Loan or the calculation of the LIBOR Rate for any
Applicable Interest Period, in which event "Business Day" means any day other
than Saturday or Sunday on which dealings in foreign currencies and exchange
between banks may be carried on in London, England, San Francisco, California,
New York, New York and Seattle, Washington.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITTED LOANS" has the meaning given in Section 2.01.
"COMMITTED LOAN NOTES" has the meaning given in Section 2.12.
"COMMITMENT" has the meaning given in Section 2.01.
"CONSOLIDATED NET INCOME" means for any accounting period the net
income of the Borrower and its consolidated Subsidiaries for such period,
determined in accordance with generally accepted United States accounting
principles consistently applied, excluding, however, (A) proceeds of any life
insurance policy, (B) gain or loss arising from any write-up or write-down of
capital assets or from the acquisition or retirement or sale of securities of
the Borrower, (C) any restoration of any contingency reserve to income except to
the extent that provision for such reserve was made out of income accrued after
the close of the fiscal year of the Borrower last ended as of the date of this
Agreement, and (D) special credits or charges.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or either Guarantor, are
treated as a single employer under Section 414(b) or 414(c) of the Code.
3
<PAGE>
"DEFAULT" means any event which but for the passage of time or the
giving of notice or both would be an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EVENT OF DEFAULT" has the meaning given in Section 7.01.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three federal funds brokers of recognized
standing selected by it.
"GOVERNMENT APPROVAL" means an approval, permit, license,
authorization, certificate, or consent of any Governmental Authority.
"GOVERNMENTAL AUTHORITY" means the government of the United States or
any State or any foreign country or any political subdivision of any thereof or
any branch, department, agency, instrumentality, court, tribunal or regulatory
authority which constitutes a part or exercises any sovereign power of any of
the foregoing.
"GUARANTIES" means guaranties to be executed by the Guarantors
substantially in the form of Exhibit C hereto.
"GUARANTORS" means Costco Wholesale Corporation, a Washington
corporation, and The Price Company, a California corporation, and any Successors
thereto.
"INDEBTEDNESS" means for any person (i) all items of indebtedness or
liability (except capital, surplus, deferred credits and reserves, as such)
which would be included in determining total liabilities as shown on the
liability side of a balance sheet as of the date as of which indebtedness is
determined, (ii) indebtedness secured by any Lien, whether or not such
indebtedness shall have been assumed, (iii) any other indebtedness or liability
for borrowed money or for the deferred purchase price of property or services
for which such person is directly or contingently liable as obligor, guarantor,
or otherwise, or in respect of which such person otherwise assures a
4
<PAGE>
creditor against loss, and (iv) any other obligations of such person under
leases which shall have been or should be recorded as capital leases.
"INTEREST RATE NOTICE" shall have the meaning given in
Section 2.08(b).
"LENDERS" means Bank of America National Trust and Savings
Association, Morgan Guaranty Trust Company of New York, J.P. Morgan Delaware,
Seattle-First National Bank, CIBC, Inc., First Interstate Bank of California,
NationsBank of Texas. N.A., Bank of Hawaii, Banque Nationale de Paris, Credit
Suisse, First Interstate Bank of Washington, N.A., First Union National Bank of
North Carolina, Shawmut Bank, N.A., United States National Bank of Oregon,
Westdeutsche Landesbank Girozentrale, and any Successors thereto or permitted
assigns thereof.
"LIEN" means, for any person, any security interest, pledge, mortgage,
charge, assignment, hypothecation, encumbrance, attachment, garnishment,
execution or other voluntary or involuntary lien upon or affecting the revenues
of such person or any real or personal property in which such person has or
hereafter acquires any interest, EXCEPT (i) liens for Taxes which are not
delinquent or which remain payable without penalty or the validity or amount of
which is being contested in good faith by appropriate proceedings upon stay of
execution of the enforcement thereof with appropriate reserves having been
established therefore; (ii) liens imposed by law (such as mechanics' liens)
incurred in good faith in the ordinary course of business which are not
delinquent or which remain payable without penalty or the validity or amount of
which is being contested in good faith by appropriate proceedings upon stay of
execution of the enforcement thereof with, in the case of liens on property of
the Borrower or any of its Subsidiaries, provision having been made to the
satisfaction of the Agent for the payment thereof in the event the contest is
determined adversely to the Borrower or such Subsidiary; and (iii) deposits or
pledges under worker's compensation, unemployment insurance, social security or
other similar laws or made to secure the performance of bids, tenders, contracts
(except for repayment of borrowed money), or leases, or to secure statutory
obligations or surety or appeal bonds or to secure indemnity, performance or
other similar bonds given in the ordinary course of business.
"LIBOR LOAN" means any Loan or portion thereof bearing interest at the
LIBOR Rate.
"LIBOR RATE" shall mean, with respect to any LIBOR Loan for any
Applicable Interest Period, an interest rate per annum equal to the sum of
(a) the Margin and (b) the product of (i) the Euro-dollar Rate in effect for
such Applicable Interest Period
5
<PAGE>
and (ii) the Euro-dollar Reserves in effect on the first day of such Applicable
Interest Period. The Euro-dollar Rate will be determined on the basis of the
rates at which deposits in U.S. Dollars are offered by the Reference Banks in
the London interbank market at approximately 11:00 o'clock a.m., London time, on
the day that is two (2) Business Days prior to the first date of the proposed
Applicable Interest Period to prime banks in the London interbank market for the
Applicable Interest Period. The Agent will request the principal London office
of each of the Reference Banks to provide a quotation of its rate. If more than
one such quotation is provided, the Euro-dollar Rate will be the arithmetic mean
of the quotations. If Agent is unable to obtain quotations from either Reference
Bank, the "Euro-dollar Rate" will be determined by reference to that rate which
appears on the Reuters Screen LIBO Page as of 11:00 o'clock a.m., London time,
on the day that is two (2) Business Days prior to the first date of the proposed
Applicable Interest Period. If more than one such rate appears on the Reuters
Screen LIBO Page, the rate will be the arithmetic mean of such rates. As used
herein, the term "Euro-dollar Reserves" means (a) when used in connection with a
Bid Loan, the number one; and (b) when used in connection with a Committed Loan,
a fraction (expressed as a decimal), the numerator of which is the number one
and the denominator of which is the number one minus the aggregate of the
maximum reserve percentages (including, without limitation, any special,
supplemental, marginal or emergency reserves) expressed as a decimal established
by the Board of Governors of the Federal Reserve System or any other banking
authority to which the Lenders are subject for Eurocurrency Liability (as
defined in Regulation D of such Board of Governors). It is agreed that for
purposes hereof, each LIBOR Loan shall be deemed to constitute a Eurocurrency
Liability and to be subject to the reserve requirements of Regulation D, without
benefit of credit or proration, exemptions or offsets which might otherwise be
available to the Lenders from time to time under such Regulation D. In the case
of Committed Loans, Euro-dollar Reserves shall be adjusted automatically on and
as of the effective date of any change in any reserve percentage and shall apply
to Applicable Interest Periods commencing after the effective date of change.
"LOAN DOCUMENTS" means this Revolving Credit Agreement, the Committed
Loan Notes, the Bid Loan Notes, the Guaranties, and all other certificates,
instruments and other documents executed in connection with this Agreement or
the transactions contemplated hereby.
"LOANS" means the Committed Loans and the Bid Loans.
"MAJORITY LENDERS" means at any time Lenders having an aggregate
Percentage Interest of at least sixty percent (60%)
6
<PAGE>
PROVIDED, HOWEVER, that if the Commitments of all Lenders shall have been
terminated and if the Committed Loans together with all accrued interest and
other amounts due in respect thereof shall have been paid in full, "Majority
Lenders" shall mean at any time the holders of Bid Loan Notes who, in the
aggregate, have at least sixty percent (60%) of the then-outstanding principal
balance of the Bid Loans.
"MARGIN" means (a) in the case of a Bid Loan, the per annum interest
rate specified as the "margin" in the related Bid Loan Offer and (b) in the case
of a Committed Loan, a per annum interest rate determined in accordance with the
following table:
<TABLE>
<CAPTION>
Borrower's Credit Rating Margin (expressed per annum)
------------------------ ----------------------------
<S> <C>
Level 1 22.5 basis points (.00225)
Level 2 27.5 basis points (.00275)
Level 3 30.0 basis points (.00300)
Level 4 45.0 basis points (.00450)
Level 5 50.0 basis points (.00500)
</TABLE>
"MATURITY DATE" means January 30, 1998.
"OFFICER'S CERTIFICATE" means a certificate substantially in the form
of Exhibit G and signed in the name of the Borrower by its Chairman, President,
Executive Vice President and Chief Financial Officer or its Vice President and
Treasurer.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means an "employee pension benefit plan" (as such term
is defined in ERISA) from time to time maintained by the Borrower, either
Guarantor, or a member of the Controlled Group.
"PERCENTAGE INTEREST" has the meaning given in Section 2.01 as the
same may be adjusted pursuant to Section 9.05 from time to time hereafter.
"PLAN" shall mean, at any time, an employee pension benefit plan which
is covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code and is either (a) maintained by the Borrower,
either Guarantor or any member of a Controlled Group for employees of the
Borrower, either Guarantor or any member of such Controlled Group or
(b) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
the Borrower, either Guarantor or any member of a Controlled Group is then
making or accruing an
7
<PAGE>
obligation to make contributions or has within the preceding five (5) plan years
made contributions.
"PRIME RATE" means on any day the Agent's publicly announced prime
rate of interest at its principal office (which prime rate is a reference rate
and not necessarily the lowest rate of interest charged by Agent to its prime
customers), changing as such prime rate changes.
"REFERENCE BANKS" means Bank of America National Trust and Savings
Association and Morgan Guaranty Trust Company of New York.
"REQUIRED NOTICE OF BORROWING" means a written request for a Committed
Loan from Borrower substantially in the form attached hereto as Exhibit H
executed by the Borrower's Chairman, President or Executive Vice President and
Chief Financial Officer (or such other person as may be designated in a writing
delivered to the Agent by the Borrower's Senior Vice President and Chief
Financial Officer) delivered to Agent and containing the information set forth
in Section 2.02 which shall be delivered prior to 9:00 A.M. (Seattle, Washington
time) on the requested date of borrowing PROVIDED, HOWEVER, if Borrower shall at
the same time elect to have interest accrue on such Committed Loan at a LIBOR
Rate the Required Notice of Borrowing shall be given prior to 10:00 A.M.
(Seattle, Washington time) on a Business Day at least three (3) Business Days
before the requested date of borrowing. Requests for borrowing received after
the designated hour will be deemed received on the next succeeding Business Day.
"SUBSIDIARY" of any person means any corporation of which a majority
(by number of shares or by number of votes) of any class of outstanding capital
stock normally entitled to vote for the election of one or more directors
(regardless of any contingency which does or may suspend or dilute the voting
rights of such class) is at such time owned directly or indirectly by such
person or by one or more Subsidiaries of such person.
"SUCCESSOR" means, for any corporation or banking association, any
successor by merger or consolidation, or by acquisition of substantially all of
the assets of the predecessor.
"TAX" means for any person any tax, assessment, duty, levy, impost or
other charge imposed by any Governmental Authority on such person or on any
property, revenue, income, or franchise of such person and any interest or
penalty with respect to any of the foregoing.
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<PAGE>
"TOTAL COMMITMENT" means Two Hundred Fifty Million Dollars
($250,000,000) (less any reductions made pursuant to Sections 2.05 or 7.02).
"UNFUNDED VESTED LIABILITIES" shall mean, with respect to any Plan, at
any time, the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Plan exceeds (b) the fair market value of all
Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of the Borrower, either Guarantor or any member
of the Controlled Group to the PBGC or the Plan under Title IV of ERISA.
Section 1.02 GENERAL PRINCIPLES APPLICABLE TO DEFINITIONS. Definitions
given in Section 1.01 shall be equally applicable to both singular and plural
forms of the terms therein defined and references herein to "he" or "it" shall
be applicable to persons whether masculine, feminine or neuter. References
herein to any document including, but without limitation, this Agreement shall
be deemed a reference to such document as it now exists, and as, from time to
time hereafter, the same may be amended. References herein to a "person" or
"persons" shall be deemed to be references to an individual, corporation,
partnership, trust, unincorporated association, joint venture, joint-stock
company, government (including political subdivisions), Governmental Authority
or agency or any other entity.
Section 1.03 ACCOUNTING TERMS. Except as otherwise provided herein,
accounting terms not specifically defined shall be construed, and all accounting
procedures shall be performed, in accordance with generally accepted United
States accounting principles consistently applied.
ARTICLE II
THE LOANS
Section 2.01 COMMITTED LOANS. Each Lender severally agrees on the terms
and conditions of this Agreement to make loans ("Committed Loans") to the
Borrower from time to time on Business Days during the period beginning on the
date hereof and ending on the Maturity Date in an aggregate principal amount not
exceeding at any one time the lesser of (a) the principal amount set forth
opposite such Lender's name below (such Lender's "Commitment") or (b) the
percentage interest set forth opposite such Lender's name below (such Lender's
"Percentage Interest") of the difference between the (i) Total Commitment and
(ii) the then-outstanding principal balance of the Loans.
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<TABLE>
<CAPTION>
Percentage
Lender Interest Commitment
- ------ -------- ------------
<S> <C> <C>
Bank of America NT&SA 13.00% $ 32,500,000
Morgan Guaranty Trust
Company of New York 7.00% $ 17,500,000
J.P. Morgan Delaware 6.00% $ 15,000,000
Seattle-First National Bank 12.00% $ 30,000,000
CIBC, Inc. 10.00% $ 25,000,000
First Interstate Bank
of California 10.00% $ 25,000,000
NationsBank of Texas, NA 10.00% $ 25,000,000
Bank of Hawaii 4.00% $ 10,000,000
Banque Nationale de Paris 4.00% $ 10,000,000
Credit Suisse 4.00% $ 10,000,000
First Interstate Bank
of Washington, NA 4.00% $ 10,000,000
First Union National Bank
of North Carolina 4.00% $ 10,000,000
Shawmut Bank, NA 4.00% $ 10,000,000
US National Bank of Oregon 4.00% $ 10,000,000
Westdeutsche Landesbank
Girozentrale 4.00% $ 10,000,000
Total 100.00% $250,000,000
</TABLE>
Section 2.02 MANNER OF BORROWING A COMMITTED LOAN. The Borrower shall
give the Agent the Required Notice of Borrowing specifying the date of the
borrowing of any Committed Loan and the amount thereof, which shall be an
integral multiple of One Million Dollars ($1,000,000) and not less than Five
Million Dollars ($5,000,000). Such notice shall be irrevocable and shall be
deemed to constitute a representation and warranty by the Borrower that as of
the date of the notice the statements set forth in Article IV hereof are true
and correct and that no Default or Event of Default has occurred and is
continuing. On receipt of such notice, the Agent shall promptly notify each
Lender by telephone (confirmed immediately by telex, facsimile transmission or
cable), telex, facsimile transmission, or cable of the date of the borrowing.
Each Lender shall before 11:00 A.M. (Seattle, Washington time) on the date of
the borrowing, pay the lesser of (a) such Lender's Percentage Interest of the
aggregate principal amount of the requested borrowing identified in the Required
Notice of Borrowing or (b) the maximum amount such Lender is committed to
advance pursuant to the terms of Section 2.01 hereof in immediately available
funds to the Agent at its Commercial Loan Processing Center, Seattle,
Washington. Upon fulfillment to the Agent's satisfaction of the applicable
conditions set forth in Article III, and after receipt by the Agent of such
funds, the Agent will promptly make such
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<PAGE>
immediately available funds available to the Borrower by depositing them to the
ordinary checking account maintained by the Borrower with the Agent.
Section 2.03 BID LOANS. The Borrower may request Bid Loans from time to
time on any Business Day during the period beginning on the date hereof and
ending on the Maturity Date in the manner set forth in Section 2.04 and in
amounts not to exceed the difference between (a) the Total Commitment and
(b) the then-outstanding principal balance of the Loans.
Section 2.04 MANNER OF BORROWING A BID LOAN.
(a) When the Borrower wishes to request offers for Bid Loans, it
shall transmit by telex or facsimile transmission a Bid Loan Request
substantially in the form of Exhibit E hereto ("Bid Loan Request") to be
received by Agent no later than (i) 10:00 a.m. (Seattle, Washington time) at
least four (4) Business Days prior to the borrowing date proposed therein, in
the case of a request for Bid Loan which is to accrue interest at a LIBOR Rate
or (ii) 9:00 a.m. (Seattle, Washington time) at least one (1) Business Day prior
to the borrowing date proposed therein, in the case of a request for a Bid Loan
to accrue interest at an Absolute Rate, specifying in each case:
(A) the proposed borrowing date, which shall be a Business Day, for
the proposed Bid Loan;
(B) the aggregate principal amount of such proposed Bid Loan;
(C) whether the requested Bid Loan is to accrue interest at a LIBOR
Rate or an Absolute Rate; and
(D) in the case of a request for a Bid Loan to accrue interest at the
LIBOR Rate, the Applicable Interest Period and in the case of a
request for a Bid Loan to accrue interest at an Absolute Rate,
the maturity date, which may not be less than fourteen (14) days
or more than three hundred sixty-five (365) days after the
proposed borrowing date and, in any event, may not be after the
Maturity Date.
The Borrower may transmit up to three (3) Bid Loan Requests on a single day.
Except as set forth in the preceding sentence, no Bid Loan Request shall be
given within five (5) Business Days of any other Bid Loan Request. Each Bid
Loan Request shall be in a minimum principal amount of Five Million Dollars
($5,000,000) and in integral multiples of One Million Dollars ($1,000,000). A
Bid Loan Request that does not substantially conform to the terms
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<PAGE>
hereof shall be rejected and the Agent shall promptly notify the Borrower of
such rejection by telex or facsimile transmission. Each Bid Loan Request shall
be deemed to constitute a representation and warranty by the Borrower that as of
the date of such Request the statements set forth in Article IV hereof are true
and correct and that no Default or Event of Default has occurred and is
continuing.
(b) Promptly, and in any event before 2:00 o'clock p.m. (Seattle,
Washington time) on the same Business Day that any conforming Bid Loan Request
is received, the Agent shall send to each of the Lenders by telex or facsimile
transmission a copy of such Bid Loan Request(s), which shall constitute an
invitation by the Borrower to each Lender to submit an irrevocable offer ("Bid
Loan Offer") to make some or all of the requested Bid Loans at a rate of
interest determined by each Lender in its sole discretion.
(c) Each Lender may, in its sole discretion, submit one or more Bid
Loan Offers each containing an offer to make a Bid Loan in response to a Bid
Loan Request. Each Bid Loan Offer must comply with the requirements of this
Section 2.04(c) and must be submitted to the Agent by telex or facsimile
transmission in the case of a Bid Loan Offer for a Loan accruing interest at a
LIBOR Rate not later than 9:00 a.m. (Seattle, Washington time) at least three
(3) Business Days prior to the proposed borrowing date, or in the case of a Bid
Loan Offer for a loan accruing interest at an Absolute Rate, not later than 7:00
a.m. (Seattle, Washington time) on the proposed borrowing date, PROVIDED,
HOWEVER, that if the Agent in its capacity as Lender intends to submit one or
more Bid Loan Offers it may only do so if it notifies the Borrower of the terms
of such offer or offers not later than 8:45 a.m. (Seattle, Washington time) at
least three (3) Business Days prior to the proposed borrowing date for a Loan to
accrue interest at a LIBOR Rate and not later than 6:45 a.m. (Seattle,
Washington time) on the proposed borrowing date for a Loan to accrue interest at
an Absolute Rate. Each Bid Loan Offer shall be in substantially the form of
Exhibit F hereto and shall specify:
(i) the proposed borrowing date, which shall be the same as that
set forth in the corresponding Bid Loan Request,
(ii) the principal amount of the Bid Loan for which each such
offer is being made, which principal amount (A) may be
greater than, less than or equal to the Commitment of the
offering Lender, (B) must be at least Five Million Dollars
($5,000,000) and an integral multiple of One Million Dollars
($1,000,000),
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<PAGE>
and (C) may not exceed the principal amount of the Bid Loan for which offers
were requested in the corresponding Bid Loan Request,
(iii) in the case of a Bid Loan Offer for a Bid Loan accruing
interest at a LIBOR Rate, the Margin offered for such Bid
Loan (which Margin may be a positive or negative increment),
and in the case of a Bid Loan Offer for a Bid Loan accruing
interest at an Absolute Rate, the Absolute Rate offered for
such Bid Loan,
(iv) the minimum or maximum amount, if any, of the Bid Loan Offer
which may be accepted by the Borrower, and
(v) the identity of the offering Lender.
(d) The Agent shall reject any Bid Loan Offer that:
(i) is not substantially in compliance with the terms of
Section 2.04(c);
(ii) contains qualifying, conditional or similar language, other
than any such language contained in Exhibit F hereto;
(iii) proposes terms other than or in addition to those set forth
in the corresponding Bid Loan Request; or
(iv) arrives after the time set forth in Section 2.04(c).
If any Bid Loan Offer is rejected pursuant to this Section 2.04(d), the Agent
shall promptly notify the affected Lender of such rejection by telex or
facsimile transmission.
(e) The Agent shall promptly notify the Borrower of the terms of all
conforming Bid Loan Offers submitted by the Lenders in response to each Bid Loan
Request. (Any Bid Loan Offer received by Agent which conforms with the
requirements of Section 2.04(c) but which is made in respect of a Bid Loan for
which a conforming Bid Loan Offer has already been received from the same Lender
shall be disregarded by the Agent unless such subsequent Bid Loan Offer
specifically states that it is submitted to correct an error in such former Bid
Loan Offer.) The Agent's notice to the Borrower shall specify the aggregate
principal amount of the Bid Loans for which conforming offers
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<PAGE>
have been received and the respective LIBOR Rates or Absolute Rates, as the case
may be.
(f) Not later than 9:30 a.m. (Seattle, Washington time) at least
three (3) Business Days prior to the proposed borrowing date, in the case of a
Bid Loan to accrue interest at a LIBOR Rate, or 7:30 a.m. (Seattle, Washington
time) on the proposed borrowing date, in the case of a Bid Loan to accrue
interest at an Absolute Rate, the Borrower shall notify the Agent of the
aggregate principal amount of the Bid Loan(s) it elects to accept for each
outstanding Bid Loan Request; PROVIDED, HOWEVER, that the aggregate principal
amount of the accepted Bid Loan(s) may not exceed the amount set forth in the
related Bid Loan Request and PROVIDED, FURTHER, that notwithstanding Borrower's
acceptance of a particular principal amount of Bid Loans, the actual aggregate
principal amount of the Bid Loans to be made may be less than the amount
accepted by the Borrower if after giving effect to the terms of subsection
2.04(g) less than all of the accepted principal would be allocated to the
Lenders submitting Bid Loan Offers. The failure by the Borrower to give the
notice herein provided for to the Agent in respect of any Bid Loan Request shall
be deemed to be an election to decline all Bid Loan Offers submitted in respect
of such Request.
(g) In respect of each Bid Loan Request for which Borrower has
notified Agent that it will accept one or more Bid Loan(s) in an aggregate
principal amount, the Agent shall allocate such aggregate principal amount of
the Loan(s) among the Lenders submitting Bid Loan Offers in response to such
Request on the basis of the ascending Margins or Absolute Rates, as the case may
be, as set forth in such Bid Loan Offers up to the maximum principal amounts set
forth therein PROVIDED, HOWEVER, that if such ascending order would result in
any Lender being allocated a Bid Loan in an amount less than the minimum, if
any, specified in such Lender's Bid Loan Offer, the Bid Loan shall be allocated
as if such Lender had never submitted such Bid Loan Offer. If Bid Loan Offers
are received from two or more Lenders designating the same Margin or Absolute
Rate, as the case may be, and if some or all of the Bid Loans would be allocable
to such Lenders pursuant to the terms of the preceding sentence, the Agent shall
allocate the portion of the Bid Loans which is to accrue interest at the
designated LIBOR Rate or Absolute Rate among such Lenders. In making such
allocation the Agent shall exercise its sole discretion but shall be guided by
the following principles:
(i) allocation to the Lenders shall, to the extent possible, be
in integral multiples of One Million Dollars ($1,000,000);
(ii) no Lender shall be allocated a portion of any Bid Loan which
is less than the minimum amount which such Lender
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<PAGE>
has indicated that it is willing to accept in the applicable Bid Loan Offer; and
(iii) to the extent consistent with the foregoing considerations,
the principal amount of the Bid Loans to be allocated among the Lenders, shall
be allocated approximately in proportion to the aggregate principal amount of
each of their respective Bid Loan Offers.
Allocations by the Agent of the amounts of Bid Loans among the Lenders shall be
conclusive and binding in the absence of manifest error. The Agent shall notify
each Lender allocated one or more Bid Loans (or portions thereof) and the
aggregate principal amount so allocated, in the case of a Bid Loan to accrue
interest at a LIBOR Rate prior to 10:00 a.m. (Seattle, Washington time) on the
date the Borrower has notified the Agent of its election to accept such Bid
Loan(s) and in the case of a Bid Loan to accrue interest at the Absolute Rate,
prior to 8:00 a.m. (Seattle, Washington time) on the date the Borrower has
notified the Agent of its election to accept such Bid Loan(s). Promptly
thereafter, Agent shall notify all Lenders of the principal amounts and interest
rates of all such accepted Bid Loans.
(h) If pursuant to Section 2.04(g), any Lender is notified that some
or all of its Bid Loan Offer has been accepted, such Lender shall, before 11:00
a.m. (Seattle, Washington time) on the borrowing date specified in the Bid Loan
Request applicable thereto, make available to the Agent the amount of the Bid
Loan to be made by such Lender, in immediately available funds at the Agent's
Commercial Loan Processing Center, Seattle, Washington. Upon fulfillment to the
Agent's satisfaction of the applicable conditions set forth in Article III and
after receipt by Agent of such funds, the Agent will make such immediately
available funds available to the Borrower by depositing them to the ordinary
checking account maintained by the Borrower with the Agent.
(i) If the Borrower accepts some or all of a Bid Loan Offer pursuant
to this Section 2.04 and thereafter the Borrower declines to take the Loan or a
condition precedent to the making of such Loan is not satisfied or waived,
Borrower shall indemnify the Agent and the affected Lender for all losses and
any costs which the Agent or such Lender may sustain as a consequence thereof
including, without limitation, the cost of redeployment of funds at rates lower
than the cost to the Lender of such funds. A certificate of the Agent or such
Lender setting forth the amount due to it pursuant to this Section 2.04(i) and
the basis for, and calculation of such amount shall be PRIMA FACIE evidence of
the matters set forth therein. Payment of the amount
15
<PAGE>
owed shall be due within fifteen (15) days after the Borrower's receipt of such
certificate.
(j) Nothing in this Section 2.04 shall be construed as a right of
first offer in favor of the Lenders or to otherwise limit the ability of the
Borrower to request and accept credit facilities from any person (including any
of the Lenders), provided that no Default or Event of Default would otherwise
arise or exist as a result of the Borrower executing, delivering or performing
under such other credit facilities.
(k) Each outstanding Bid Loan shall reduce PRO TANTO the available
Total Commitment, but shall not reduce or affect any individual Lender's
available Commitment or Percentage Interest.
Section 2.05 REDUCTION OF COMMITMENTS. Upon not less than five (5)
Business Days' written notice to the Agent, the Borrower may terminate the Total
Commitment, in whole or in part, PROVIDED that each partial reduction of the
Total Commitment shall be in an amount not less than Ten Million Dollars
($10,000,000) and, PROVIDED, FURTHER, that in no event may the Total Commitment
be reduced to an amount less than the sum of the then-outstanding principal
balance of the Loans. Any reduction in the Total Commitment shall be deemed to
be a proportionate reduction in each Lender's Commitment therein such that after
making such reduction, each Lender's Commitment therein will be in an amount
equal to its Percentage Interest of the then-reduced Total Commitment.
Section 2.06 REPAYMENT OF PRINCIPAL. The Borrower shall repay to the
Agent for the account of the Lenders the principal amount of each Committed Loan
on or before the Maturity Date. The Borrower shall repay to the Agent for the
account of each Lender which has made a Bid Loan the principal amount of such
Bid Loan on the maturity date specified by the Borrower in its related Bid Loan
Request.
Section 2.07 AGENT'S RIGHT TO FUND. Unless Agent shall have received
notice from a Lender prior to 12:00 noon (Seattle, Washington time) on the date
of any Loan that such Lender will not make available to Agent such Lender's
Percentage Interest of the requested borrowing in the case of a Committed Loan
or such Lender's Bid Loan, if any, to be made on such date in the case of a Bid
Loan, Agent may assume that such Lender has made such funds available to Agent
on the date of such Loans in accordance with Section 2.02 or Section 2.04 hereof
and Agent may, in reliance upon such assumption, make available to Borrower on
such date a corresponding amount. If and to the extent that such Lender shall
not have so made such portion available to Agent and if Agent shall have
advanced such portion to the Borrower, such
16
<PAGE>
Lender and Borrower severally agree to pay to Agent forthwith on demand such
corresponding amount, together with interest thereon for each day from the date
such amount is made available to Borrower until the date such amount is repaid
to Agent, at (a) in the case of Borrower, for Committed Loans, the Applicable
Interest Rate and for Bid Loans, the rate designated in the applicable Bid Loan
Offer and (b) in the case of such Lender, the Federal Funds Rate. Any such
repayment by Borrower shall be without prejudice to any rights it may have
against the Lender that has failed to make available its funds for any requested
borrowing.
Section 2.08 INTEREST ON COMMITTED LOANS.
(a) GENERAL PROVISIONS. The Borrower agrees to pay to Agent for the
account of each Lender interest on the unpaid principal amount of each Committed
Loan from the date of such Loan until such Loan shall be due and payable at a
per annum rate equal to the Applicable Interest Rate, and, if default shall
occur in the payment when due of any such Loan, from the maturity of that Loan
until it is paid in full at a per annum rate equal to two percentage points (2%)
above the Base Rate (changing as the Base Rate changes). Accrued but unpaid
interest on each Committed Loan accruing interest at a LIBOR Rate shall be paid
on the last day of each Applicable Interest Period, on the date of any principal
payment (to the extent accrued on the principal amount paid), at the Maturity
Date and, additionally, in the case of such a Loan for which the Applicable
Interest Period is six months, on the day that is three months after the
commencement of such Applicable Interest Period. Accrued but unpaid interest on
each Base Rate Loan shall be paid on the last Business Day of each calendar
month commencing on January 31, 1994 and continuing on the last Business Day of
each calendar month thereafter and on the date of any principal payment (to the
extent accrued on the principal amount paid) and at the Maturity Date. Unpaid
interest accruing on amounts in default shall be payable on demand.
(b) SELECTION OF ALTERNATIVE RATE. The Borrower may, subject to the
requirements of this Section 2.08(b), on at least three (3) Business Days' prior
written notice elect to have interest accrue on any Committed Loan or any
portion thereof at a LIBOR Rate for an Applicable Interest Period. Such notice
(herein, an "Interest Rate Notice") shall be deemed delivered on receipt by
Agent except that the Interest Rate Notice received by the Agent after 10:00
a.m., (Seattle, Washington time), on any Business Day, shall be deemed to be
received on the immediately succeeding Business Day. Such Interest Rate Notice
shall identify, subject to the conditions of this Section 2.08(b), the Committed
Loan or portions thereof and the Applicable Interest Period which the Borrower
selects. Any such Interest Rate Notice
17
<PAGE>
shall be irrevocable and shall constitute a representation and warranty by the
Borrower that as of the date of such Interest Rate Notice, the statements set
forth in Article IV are true and correct and that no Event of Default or Default
has occurred and is continuing. On receipt of such Interest Rate Notice, the
Agent shall promptly notify each Lender by telephone (confirmed promptly by
telex or facsimile transmission) of the information set forth in the Interest
Rate Notice. Borrower's right to select a LIBOR Rate to apply to a Committed
Loan or any portion thereof shall be subject to the following conditions:
(i) the aggregate of all Committed Loans or portions thereof to accrue interest
at a particular LIBOR Rate for the same Applicable Interest Period shall be an
integral multiple of One Million Dollars ($1,000,000) and not less than Five
Million Dollars ($5,000,000); (ii) the Borrower shall not have selected more
than six (6) different LIBOR Rates or Applicable Interest Periods to be
applicable to portions of the Committed Loans at any one time; (iii) a LIBOR
Rate may not be selected for any Committed Loan or portion thereof which is
already accruing interest at a LIBOR Rate unless such selection is only to
become effective at the maturity of the Applicable Interest Period then in
effect; (iv) the Agent or any Lender shall not have given notice pursuant to
Section 2.08(d) that the LIBOR Rate is not available and the Agent or any Lender
shall not have given notice pursuant to Section 2.08(e) that the Applicable
Interest Period selected by Borrower in the Interest Rate Notice is not
available; (v) no Default or Event of Default shall have occurred and be
continuing and (vi) if the Borrower elects to have some portion (but less than
all) of the Committed Loans, accrue interest at a designated LIBOR Rate, the
Borrower shall select a portion of each Lender's Committed Loans, to accrue
interest at such rate in proportion to their respective Percentage Interests.
In the absence of an effective request for the application of a LIBOR Rate, the
Committed Loans or remaining portions thereof shall accrue interest at the Base
Rate. Any Interest Rate Notice which specifies a LIBOR Rate but fails to
identify an Applicable Interest Period shall be deemed to be a request for the
designated LIBOR Rate for an Applicable Interest Period of one (1) month. The
Interest Rate Notice may be given with and contained in any Required Notice of
Borrowing. If the Borrower delivers an Interest Rate Notice with any Required
Notice of Borrowing for a Committed Loan and the Borrower thereafter declines to
take such Committed Loan or a condition precedent to the making of such Loan is
not satisfied or waived, Borrower shall indemnify the Agent and each Lender for
all losses and any costs which the Agent or any Lender may sustain as a
consequence thereof including, without limitation, the costs of redeployment of
funds at rates lower than the cost to the Lenders of such funds. A certificate
of the Agent or any Lender setting forth the amount due to it pursuant to this
subparagraph (b) and the basis for, and the calculation of, such amount shall be
PRIMA
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<PAGE>
FACIE evidence of the amount due pursuant to this subparagraph (b). Payment of
the amount owed shall be due within fifteen (15) days after the Borrower's
receipt of such certificate.
(c) APPLICABLE DAYS FOR COMPUTATION OF INTEREST. Computations of
interest for Base Rate Loans shall be made on the basis of a year of three
hundred sixty-five (365) days, and for LIBOR loans, shall be made on the basis
of a year of three hundred sixty (360) days, in each case, for the actual number
of days (including the first day but excluding the last day) occurring in the
period for which such interest is payable.
(d) UNAVAILABLE FIXED RATE. If any Lender determines that for any
reason fair and adequate means do not exist for establishing a particular LIBOR
Rate or that accruing interest on any Committed Loan at a LIBOR Rate by such
Lender has become unlawful, such Lender may give notice of that fact to the
Agent and the Borrower and such determination shall be conclusive and binding
absent manifest error. After such notice has been given and until such Lender
notifies the Borrower and the Agent that the circumstances giving rise to such
notice no longer exist, the LIBOR Rate shall no longer be available in respect
of Committed Loans. Thereafter, any request by the Borrower to have interest
accrue on a Committed Loan at a LIBOR Rate shall be deemed to be a request for
interest to accrue at the Base Rate. If the circumstances giving rise to the
notice described herein no longer exist, the Lender shall notify the Borrower
and Agent in writing of that fact, and the Borrower shall then once again become
entitled to request that such a LIBOR Rate apply to the Committed Loans in
accordance with Section 2.08(b) hereof.
(e) UNAVAILABLE INTEREST PERIODS. Without limiting the terms of
Section 2.08(d), if any Lender determines that for any reason fair and adequate
means do not exist for establishing a particular LIBOR Rate with an Applicable
Interest Period of less than one month or that accruing interest on any
Committed Loan at a LIBOR Rate for an Applicable Interest Period of less than
one month by such Lender has become unlawful or is contrary to any internal
policies (of general application) of such Lender, such Lender may give notice of
that fact to the Agent and the Borrower and such determination shall be
conclusive and binding absent manifest error. After such notice has been given
and until such Lender notifies the Borrower and the Agent that the circumstances
giving rise to such notice no longer exist, the LIBOR Rate shall no longer be
available in respect of Committed Loans for Applicable Interest Periods of less
than one month. Thereafter, any request by the Borrower to have interest accrue
on a Committed Loan at a LIBOR Rate for an Applicable Interest Period of less
than one month shall be deemed to be a request for interest to accrue at the
Base Rate. If the circumstances giving rise to the notice described herein no
longer exist, the Lender
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<PAGE>
shall notify the Borrower and Agent in writing of that fact, and the Borrower
shall then once again become entitled to request that such a LIBOR Rate apply to
the Committed Loans for Applicable Interest Periods of less than one month in
accordance with Section 2.08(b) hereof.
Section 2.09 INTEREST ON BID LOANS. The Borrower shall pay interest on
the unpaid principal amount of each Bid Loan from the borrowing date to the
stated maturity date thereof, at the rate of interest determined pursuant to
Section 2.04 above (calculated on the basis of a 360-day year for the actual
number of days elapsed), payable on the stated maturity date thereof PROVIDED,
HOWEVER, if the stated maturity date is more than three months after the
borrowing date, accrued but unpaid interest shall also be payable in three-month
intervals commencing on the day that is three months after such borrowing date.
If all or a portion of the principal amount of any Bid Loan shall not be paid
when due (whether at the stated maturity, by acceleration or otherwise), such
overdue principal amount shall bear interest from the date on which such payment
was due at a rate per annum which is two percent (2%) above the rate which would
otherwise be applicable to such Bid Loan until such Bid Loan's scheduled
maturity date, and for each day thereafter until paid at a rate per annum which
is two percent (2%) above the Base Rate (changing as such Base Rate changes).
Unpaid interest accruing on amounts in default shall be payable on demand.
Section 2.10 COMPENSATION FOR INCREASED COSTS. In the event that after
the date hereof any change occurs in any applicable law, regulation, guideline,
treaty or directive or interpretation thereof by any authority charged with the
administration or interpretation thereof, or any condition is imposed by any
authority after the date hereof or any change occurs in any condition imposed by
any authority on or prior to the date hereof which:
(a) subjects any Lender to any Tax, or changes the basis of taxation
of any payments to any Lender on account of principal of or interest on any
LIBOR Loan, such Lender's Committed or Bid Loan Note (to the extent such Notes
evidence LIBOR Loans) or other amounts payable with respect to LIBOR Loans
(other than a change in the rate of tax based solely on the overall net or gross
income of such Lender); or
(b) imposes, modifies or determines applicable any reserve, deposit
or similar requirements against any assets held by, deposits with or for the
account of, or loans or commitments by, any office of any Lender in connection
with its LIBOR Loans to the extent the amount of which is in excess of, or was
not applicable at the time of computation of, the amounts provided for in the
definition of LIBOR Rate; or
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(c) affects the amount of capital required or expected to be
maintained by banks generally or corporations controlling banks and any Lender
determines the amount by which such Lender or any corporation controlling such
Lender is required or expected to maintain or increase its capital is increased
by, or based upon, the existence of this Agreement or of such Lender's Loans or
Commitments hereunder;
(d) imposes upon any Lender any other condition with respect to its
LIBOR Loans or its obligation to make LIBOR Loans;
which, as a result thereof, (i) increases the cost to any Lender of making or
maintaining its LIBOR Loans or its Commitments hereunder, or (ii) reduces the
net amount of any payment received by any Lender in respect of its LIBOR Loans
(whether of principal, interest, commitment fees or otherwise), or
(iii) requires any Lender to make any payment on or calculated by reference to
the gross amount of any sum received by it in respect of its LIBOR Loans, in
each case by an amount which any such Lender in its sole judgment deems
material, then and in any such case the Borrower shall pay to the Agent for the
account of such Lender on demand such amount or amounts as will compensate such
Lender (on an after-tax basis) for any increased cost, deduction or payment
actually incurred or made by such Lender. The demand for payment by any Lender
shall be delivered to both the Agent and the Borrower and shall state the
subjection or change which occurred or the reserve or deposit requirements or
other conditions which have been imposed upon such Lender or the request,
direction or requirement with which it has complied, together with the date
thereof, the amount of such cost, reduction or payment and the manner in which
such amount has been calculated. The statement of any Lender as to the
additional amounts payable pursuant to this Section 2.10 shall be PRIMA FACIE
evidence of the amounts payable hereunder.
The protection of this Section 2.10 shall be available to each Lender
regardless of any possible contention of invalidity or inapplicability of the
relevant law, regulation, guideline, treaty, directive, condition or
interpretation thereof. In the event that the Borrower pays any Lender the
amount necessary to compensate such Lender for any charge, deduction or payment
incurred or made by such Lender as provided in this Section 2.10, and such
charge, deduction or payment or any part thereof is subsequently returned to
such Lender as a result of the final determination of the invalidity or
inapplicability of the relevant law, regulation, guideline, treaty, directive or
condition, then such Lender shall remit to the Borrower the amount paid by the
Borrower which has actually been returned to such Lender (together with any
interest actually paid to Lender on such returned amount), less such Lender's
costs and expenses incurred in connection with such governmental regulation or
any
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challenge made by such Lender with respect to its validity or applicability.
Section 2.11 PREPAYMENTS.
(a) COMMITTED LOANS. Base Rate Loans may be repaid at any time
without penalty or premium. If a Committed Loan accruing interest at the LIBOR
Rate is paid prior to the end of the Applicable Interest Period a fee computed
in the manner set out in Schedule 1 shall be assessed and paid at the time of
such payment. Such fee shall apply in all circumstances where such a Loan is
paid prior to the end of the Applicable Interest Period, regardless of whether
such payment is voluntary, mandatory or the result of the Agent's or Lenders'
collection efforts.
(b) BID LOANS. The Borrower may not voluntarily prepay any Bid Loan.
If a Bid Loan is paid prior to its designated maturity in breach of the
Borrower's obligations hereunder or as a result of the Agent's or Lenders'
collection efforts, a fee computed in the manner set out in Schedule 1 shall be
assessed and paid at the time of such prepayment. Payment of such fee is in
addition to any other remedies available to Agent or any Lender in respect of
such or any other breach.
Section 2.12 NOTES. The Committed Loans shall be evidenced by promissory
notes of the Borrower substantially in the form of Exhibit A hereto, with
appropriate insertions, payable to the order of the Lenders, dated as of the
date hereof, and for each Lender in the face amount of such Lender's Commitment
(the "Committed Loan Notes"). The Bid Loans made by each Lender shall be
evidenced by promissory notes of the Borrower, substantially in the form of
Exhibit B hereto, with appropriate insertions, payable to the order of such
Lender, dated as of the date hereof and in the face amount of the Total
Commitment (the "Bid Loan Notes"). Each Lender is hereby authorized to record
the date and amount of Committed Loans it makes and the date and amount of each
payment of principal and interest thereon on a schedule annexed to its Committed
Loan Note or maintained in connection therewith. Each Lender is hereby
authorized to record the date and amount of each Bid Loan made by such Lender,
the maturity date thereof, the date and amount of each payment of principal and
interest thereon and the interest rate with respect thereto on a schedule
annexed to its Bid Loan Note or maintained in connection therewith. Any such
recordation by any Lender shall constitute PRIMA FACIE evidence of the accuracy
of the information so recorded; PROVIDED, HOWEVER, that the failure to make any
such recordation or any error in any such recordation shall not affect the
obligations of the Borrower hereunder, under the Committed Loan Notes, or under
the Bid Loan Notes.
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Section 2.13 MANNER OF PAYMENTS.
(a) All payments and prepayments of principal and interest on any
Loan and all other amounts payable hereunder by the Borrower to the Agent or any
Lender shall be made by paying the same in United States Dollars and in
immediately available funds to the Agent at its Commercial Loan Service Center,
Seattle, Washington not later than 10:00 o'clock A.M., Seattle time, on the date
on which such payment or prepayment shall become due.
(b) The Borrower hereby authorizes the Agent and each Lender, if and
to the extent any payment is not promptly made pursuant to this Agreement or any
other Loan Document, to charge from time to time against any or all of the
accounts of the Borrower with the Agent or such Lender or any affiliate of the
Agent or any Lender any amount due hereunder or under such other Loan Document.
(c) Whenever any payment hereunder or under any other Loan Document
shall be stated to be due or whenever the last day of any interest period would
otherwise occur on a day other than a Business Day, such payment shall be made
and the last day of such interest period shall occur on the next succeeding
Business Day and such extension of time shall in such case be included in the
computation and payment of interest or facility fees, as the case may be, unless
such extension would cause such payment to be made or the last day of such
interest period to occur in the next following calendar month, in which case
such payment shall be due and the last day of such interest period shall occur
on the next preceding Business Day.
(d) Any payment made by the Borrower hereunder shall be applied
FIRST, against fees, expenses and indemnities due hereunder; SECOND, against
interest due on amounts in default on any Committed Loan, if any; THIRD, against
interest due on amounts in default on any Bid Loan, if any; FOURTH, against
interest due on any Committed Loan; FIFTH, against interest due on any Bid Loan
(applied pro rata in proportion to the aggregate interest due on all Bid Loans
if more than one such Bid Loan is outstanding); SIXTH, against Committed Loan
principal amounts in default, if any; SEVENTH, against Bid Loan principal
amounts in default, if any (applied pro rata in proportion to the amounts in
default if more than one such Bid Loan is in default); EIGHTH, against Committed
Loan principal; and NINTH, against Bid Loan principal (applied pro rata in
proportion to the then-outstanding principal balance of all Bid Loans if more
than one such Bid Loan is outstanding).
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Section 2.14 FEES.
(a) FACILITY FEES. At all times prior to the Maturity Date, Borrower
agrees to pay to the Agent for the account of the Lenders in proportion to their
Percentage Interests a facility fee computed daily and equal to the Facility Fee
Rate computed daily on an amount equal to the Total Commitment. The facility
fee shall be payable in arrears at quarterly intervals commencing on March 31,
1994 and payable on the last Business Day of each June, September, December and
March thereafter, except that accrued facility fees shall be payable on the
Maturity Date and on demand after default. Computations of facility fees shall
be made on the basis of a year of three hundred sixty (360) days for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such fees are payable. As used herein the "Facility Fee
Rate" shall be determined in accordance with the following table:
Borrower's Facility Fee Rate
Credit Rating (expressed per annum)
------------- ----------------------
Level 1 12.5 basis points (.00125)
Level 2 17.5 basis points (.00175)
Level 3 20.0 basis points (.0020)
Level 4 25.0 basis points (.0025)
Level 5 37.5 basis points (.00375)
(b) ARRANGEMENT, AGENCY AND BID AGENCY FEES. The Borrower shall pay
to the Agent and certain other parties, for their own account, arrangement,
agency and bid agency fees in such amounts and at such times as are set forth in
that certain letter agreement dated December 21, 1993, by and among Agent, the
Borrower, and certain other parties.
Section 2.15 SHARING OF PAYMENTS, ETC. Each borrowing of Committed Loans
from the Lenders under Section 2.01 will be made pro rata in accordance with
each Lender's Percentage Interest. Each payment and prepayment of the Committed
Loans and each payment of interest on the Committed Loans will be made pro rata
to each Lender in accordance with its Percentage Interest. If any Lender shall
obtain any payment in respect of the Borrower's obligations under this
Agreement, the Committed Loan Notes or the Bid Loan Notes (whether voluntary or
involuntary, through the exercise of any right of set-off or otherwise) in
excess of the share which it would have been entitled to receive had such
payment been made to the Agent and applied pursuant to the terms of Section
2.13(d) hereof, such Lender shall forthwith purchase from the other Lenders such
participations in the Loans made by them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them, but if
any of such excess payment is afterward recovered from such purchasing
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Lender, the purchase shall be rescinded and the purchase price restored, without
interest, to the extent of such recovery. Borrower authorizes the purchase of
such participations and agrees that any Lender so purchasing a participation
from another Lender may exercise all its rights to 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.
ARTICLE III
CONDITIONS OF LENDING
The obligations of each Lender to deliver its Loan proceeds to the Agent
and the obligation of the Agent to disburse such proceeds to the Borrower are
subject to the fulfillment of the following conditions:
Section 3.01 NOTICE OF BORROWING, PROMISSORY NOTES, ETC. In respect of
any Committed Loan, the Agent shall have received the Required Notice of
Borrowing and the Lenders shall have received their Committed Loan Notes all
duly executed and delivered by the Borrower; and in respect of any Bid Loan, the
Agent shall have received a Bid Loan Request and the Lenders shall have received
their Bid Loan Notes all duly executed and delivered by the Borrower.
Section 3.02 GUARANTIES. The Lenders shall have received the Guaranties
duly executed and delivered by the Guarantors; such Guaranties shall remain in
full force and effect; and neither the Agent nor any Lender shall have received
any notice limiting, terminating or purporting to limit or terminate any
Guaranty or claiming that the effect thereof has been limited or terminated for
any reason.
Section 3.03 CORPORATE AUTHORITY. The Agent and each Lender shall have
received in form and substance satisfactory to it a certified copy of a
resolution adopted by the Boards of Directors of the Borrower and of each
Guarantor authorizing the execution, delivery and performance of the Loan
Documents together with evidence of the authority and specimen signatures of the
persons who have signed such Loan Documents and such other evidence of corporate
authority as the Agent or any Lender shall reasonably require.
Section 3.04 LEGAL OPINION. The Agent shall have received a written legal
opinion substantially in the form attached hereto as Exhibit D, addressed to the
Agent and the Lenders, of counsel for the Borrower and the Guarantors, who shall
be selected by the Borrower and approved by the Agent.
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Section 3.05 DEFAULTS, ETC. At the date of each Loan no Default or Event
of Default shall have occurred and be continuing or will have occurred as a
result of the making of the Loan; and the representations and warranties of the
Borrower in Article IV and of each Guarantor in its Guaranty shall be true on
and as of such date.
Section 3.06 CANCELLATION OF EXISTING LINES OF CREDIT. The existing
credit lines extended to the Guarantors as identified on Schedule 2 hereto shall
have been cancelled and all outstanding advances, all accrued interest, and all
other amounts due under or in respect of such lines shall have been paid in
full.
Section 3.07 OTHER INFORMATION. The Agent and each Lender shall have
received such other statements, opinions, certificates, documents and
information with respect to the matters contemplated by this Agreement as it may
reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and each Lender as
follows:
Section 4.01 CORPORATE EXISTENCE AND POWER. The Borrower, the Guarantors,
and the Borrower's other Subsidiaries are corporations duly incorporated,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation. The Borrower, the Guarantors, and the
Borrower's other Subsidiaries are each duly qualified to do business in each
other jurisdiction where the nature of their respective activities or the
ownership of their respective properties requires such qualification, except to
the extent that failure to be so qualified does not have a material adverse
effect on the business, operations or consolidated financial condition of the
Borrower or either Guarantor. Schedule 3 to this Agreement accurately sets
forth the jurisdictions of incorporation or organization of the Borrower, each
Guarantor and each of the Borrower's other Subsidiaries and the jurisdictions in
which the Borrower, the Guarantors and each other Subsidiary are qualified to do
business as a foreign corporation or company. The Borrower is the record and
beneficial owner of all of the issued and outstanding shares of capital stock of
each Guarantor. The Borrower and each Guarantor has full corporate power,
authority and legal right to carry on its business as presently conducted, to
own and operate its properties and assets, and to execute, deliver and perform
the Loan Documents to which it is a party.
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Section 4.02 BORROWER'S CORPORATE AUTHORIZATION. The execution, delivery
and performance by the Borrower of this Agreement and the other Loan Documents
and any borrowing hereunder or thereunder have been duly authorized by all
necessary corporate action of the Borrower, do not require any shareholder
approval or the approval or consent of any trustee or the holders of any
Indebtedness of the Borrower, except such as have been obtained (certified
copies thereof having been delivered to the Agent), do not contravene any law,
regulation, rule or order binding on it or its Articles of Incorporation or
Bylaws and do not contravene the provisions of or constitute a default under any
indenture, mortgage, contract or other agreement or instrument to which the
Borrower or any Subsidiary is a party or by which the Borrower, any Subsidiary
or any of their respective properties may be bound or affected.
Section 4.03 GUARANTORS' CORPORATE AUTHORIZATION. The execution, delivery
and performance by the Guarantors of their respective Guaranties and the other
Loan Documents to which they are parties have been duly authorized by all
necessary corporate action, do not require any shareholder approval or the
approval or consent of any trustee or the holders of any Indebtedness of either
Guarantor, except such as have been obtained (certified copies thereof having
been delivered to the Agent), do not contravene any law, regulation, rule or
order binding on either of them or their respective Articles of Incorporation or
Bylaws and do not contravene the provisions of or constitute a default under any
indenture, mortgage, contract or other agreement or instrument to which either
Guarantor or any of their respective Subsidiaries is a party or by which either
Guarantor, any such Subsidiary or any of their respective properties may be
bound or affected.
Section 4.04 GOVERNMENT APPROVALS, ETC. No Government Approval or filing
or registration with any Governmental Authority is required for the making and
performance by the Borrower or either Guarantor of the Loan Documents or in
connection with any of the transactions contemplated thereby, except such as
have been heretofore obtained and are in full force and effect (certified copies
thereof having been delivered to the Agent).
Section 4.05 BINDING OBLIGATIONS, ETC. This Agreement has been duly
executed and delivered by the Borrower and constitutes, and the other Loan
Documents (other than the Guaranties) when duly executed and delivered will
constitute, the legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms. When duly
executed and delivered, each Guaranty will constitute, the legal, valid and
binding obligations of the applicable Guarantor enforceable against such
Guarantor in accordance with its terms.
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Section 4.06 LITIGATION. Except as reflected in the financial statements
referred to in Section 4.07 or otherwise set forth on the annexed Schedule 4,
there are no actions, proceedings, investigations, or claims against or
affecting the Borrower, either Guarantor or any of Borrower's other Subsidiaries
now pending before any court, arbitrator or Governmental Authority (nor to the
knowledge of the Borrower has any thereof been threatened nor does any basis
exist therefor) which if determined adversely to the Borrower, either Guarantor,
or such other Subsidiary would be likely to have a material adverse effect on
(a) the business, operations or consolidated financial condition of the Borrower
or either Guarantor; or (b) on the ability of the Borrower to perform its
obligations under this Agreement and the other Loan Documents; or (c) on the
ability of the Guarantors to perform their obligations under their respective
Guaranties.
Section 4.07 FINANCIAL CONDITION. The consolidated balance sheet of the
Borrower, the Guarantors and the Borrower's other Subsidiaries as at August 29,
1993, and the related statements of income and retained earnings for the period
then ended, copies of which have been furnished to the Agent and each Lender
fairly presents the financial condition of the Borrower, the Guarantors and the
Borrower's other Subsidiaries as at such date, all in accordance with generally
accepted accounting principles consistently applied. The Borrower, the
Guarantors and the Borrower's other Subsidiaries did not have on such date any
contingent liabilities for Taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in the balance sheet and in the related
notes. The consolidated balance sheet of Costco Wholesale Corporation and its
Subsidiaries as at August 29, 1993, and the related statements of income and
retained earnings for the fiscal year then ended, copies of which have been
furnished to the Agent and each Lender fairly present the financial condition of
Costco Wholesale Corporation and its Subsidiaries as at such date and the
results of operations of Costco Wholesale Corporation and its Subsidiaries for
the fiscal year then ended, all in accordance with generally accepted accounting
principles consistently applied. Costco Wholesale Corporation and its
Subsidiaries did not have on such date any contingent liabilities for Taxes,
unusual forward or long-term commitments or unrealized or anticipated losses
from any unfavorable commitments, except as referred to or reflected or provided
for in the balance sheets and in the notes to those financial statements. The
consolidated balance sheet of The Price Company and its Subsidiaries as at
August 29, 1993, and the related statements of income and retained earnings for
the fiscal year then ended, copies of which have been furnished to the Agent and
each Lender, fairly present the financial condition of The Price Company and its
Subsidiaries
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as at such date and the results of operations of The Price Company and its
Subsidiaries for the fiscal year then ended, all in accordance with generally
accepted accounting principles consistently applied. The Price Company and its
Subsidiaries did not have on such date any contingent liabilities for Taxes,
unusual forward or long-term commitments or unrealized or anticipated losses
from any unfavorable commitments, except as referred to or reflected or provided
for in the balance sheets and in the notes to those financial statements. Since
the dates of such financial statements of Borrower and each Guarantor, there has
been no material adverse change (other than the merger and restructure charge of
One Hundred Twenty Million Dollars ($120,000,000) taken in the fiscal quarter
ending on November 21, 1993) in the consolidated financial condition,
operations, or business of the Borrower or either Guarantor.
Section 4.08 TITLE AND LIENS. The Borrower, the Guarantors and the
Borrower's other Subsidiaries have good and marketable title to each of the
properties and assets reflected in the balance sheets referred to in
Section 4.07 (except such as have been since sold or otherwise disposed of in
the ordinary course of business). No assets or revenues of the Borrower or
either Guarantor are subject to any Lien except as permitted by this Agreement,
disclosed in the balance sheets referred to in Section 4.07, or otherwise
disclosed to the Agent in writing prior to the date of this Agreement. All
properties of the Borrower, the Guarantors, and Borrower's other Subsidiaries
and their respective use thereof comply with applicable zoning and use
restrictions and with applicable laws and regulations relating to health, safety
and the environment, non-compliance with which would have a material adverse
effect on the business, operations, or consolidated financial condition of the
Borrower or either Guarantor. Without limiting the foregoing, the Borrower, the
Guarantors and the Borrower's other Subsidiaries are in compliance with all laws
and regulations relating to pollution and environmental control in all
jurisdictions in which the Borrower, the Guarantors and the Borrower's other
subsidiaries are doing business.
Section 4.09 TAXES. The Borrower, the Guarantors, and the Borrower's
other Subsidiaries have filed all tax returns and reports required of them, have
paid all Taxes which are due and payable, and have provided adequate reserves
for payment of any Tax whose payment is being contested. The charges, accruals
and reserves on the books of the Borrower, the Guarantors and the Borrower's
other Subsidiaries in respect of Taxes for all fiscal periods to date are
accurate. There are no questions or disputes between the Borrower, either
Guarantor, or any of Borrower's other Subsidiaries and any Governmental
Authority with respect to any Taxes except as disclosed in the balance sheets
referred to
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in Section 4.07 or otherwise disclosed to the Agent in writing prior to the date
of this Agreement.
Section 4.10 PARI PASSU RANKING. The obligations of the Borrower to pay
the principal of and interest on any Loan and all other amounts payable
hereunder rank at least PARI PASSU both as to payment and as to security with
all other Indebtedness of the Borrower now existing or hereafter incurred
(except as to security, for Indebtedness secured by Liens permitted pursuant to
Section 6.04).
Section 4.11 LAWS, ORDERS; OTHER AGREEMENTS. Neither the Borrower, either
Guarantor nor any other Subsidiary is in violation of or subject to any
contingent liability on account of any laws, statutes, rules, regulations and
orders of any Governmental Authority, except as set forth in Schedule 4.
Neither the Borrower, either Guarantor nor any other Subsidiary is in material
breach of or default under any agreement to which it is a party or which is
binding on it or any of its assets.
Section 4.12 FEDERAL RESERVE REGULATIONS. Not more than twenty-five
percent (25%) of the value of Borrower's, either Guarantor's, or any of
Borrower's other Subsidiaries' assets consist of margin stock and neither the
Borrower, either Guarantor, nor any of Borrower's other Subsidiaries is 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 Federal Reserve Regulation U), and no part of the proceeds of any
Loan will be used to purchase or carry any such margin stock or to extend credit
to others for the purpose of purchasing or carrying any such margin stock or for
any other purpose that violates the applicable provisions of any Federal Reserve
Regulation. The Borrower will furnish to the Agent on request by the Agent or
any Lender a statement conforming with the requirements of Regulation U.
Section 4.13 ERISA.
(a) The present value of all benefits vested under all Pension Plans
did not, as of the most recent valuation date of such Pension Plans, exceed the
value of the assets of the Pension Plans allocable to such vested benefits by an
amount which would represent a potential material liability of the Borrower,
either Guarantor or any of the Borrower's other Subsidiaries or affect
materially the ability of the Borrower or either Guarantor to perform the Loan
Documents to which it is a party.
(b) No Plan or trust created thereunder, or any trustee or
administrator thereof, has engaged in a "prohibited transaction" (as such term
is defined in Section 406 of ERISA or
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Section 4975 of the Code) which could subject such Plan or any other Plan, any
trust created thereunder, or any trustee or administrator thereof, or any party
dealing with any Plan or any such trust to the tax or penalty on prohibited
transactions imposed by Section 502 of ERISA or Section 4975 of the Code.
(c) No Pension Plan or trust has been terminated, except in
accordance with the Code, ERISA, and the regulations of the Internal Revenue
Service and the PBGC as applicable to solvent plans in which benefits of
participants are fully protected. No "reportable event" as defined in
Section 4043 of ERISA has occurred for which notice has not been waived or for
which alternative notice procedures are permitted.
(d) No Pension Plan or trust created thereunder has incurred any
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA) whether or not waived, since the effective date of ERISA.
(e) The required allocations and contributions to Pension Plans will
not violate Section 415 of the Code.
(f) Neither the Borrower, either Guarantor nor any member of the
Controlled Group has any withdrawal liability to any trust created pursuant to a
multi-employer pension or benefit plan nor would be subject to any such
withdrawal liability in excess of One Million Dollars ($1,000,000) if it
withdrew from any such plan or if its participation therein were otherwise
terminated.
Section 4.14 SUBSIDIARIES. In respect of Borrower's Subsidiaries,
Schedule 5 to this Agreement accurately sets forth as of the date of this
Agreement the authorized capitalization of each such Subsidiary, the number of
shares of each class of capital stock issued and outstanding of each Subsidiary,
and the number and percentage of outstanding shares of each such class of
capital stock owned by the Borrower or by any other such Subsidiary. The
outstanding shares of each such Subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable. The Borrower and each such
Subsidiary owns beneficially and of record and has good title to all the shares
it is listed as owning on Schedule 5, free and clear of any Lien.
Section 4.15 PATENTS, LICENSES, FRANCHISES. The Borrower, each Guarantor
and each of Borrower's other Subsidiaries owns or possesses all the patents,
trademarks, service marks, trade names, copyrights, licenses, franchises,
permits and rights with respect to the foregoing necessary to own and operate
its properties and to carry on its business as presently conducted and presently
planned to be conducted without conflict with the rights of others except as
disclosed in writing to the Agent
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prior to the date of this Agreement and except to the extent that the failure to
own or possess any such property or rights does not and will not have a material
adverse effect on the business, operations or consolidated financial condition
of the Borrower or either Guarantor.
Section 4.16 NOT INVESTMENT COMPANY, ETC. Borrower is not, and after the
application by Borrower of the proceeds of any Loan made hereunder, Borrower
will not be, subject to regulation under the Investment Company Act of 1940, the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code or any federal or state
statute or regulation limiting its ability to incur Indebtedness.
Section 4.17 REPRESENTATIONS AS A WHOLE. This Agreement, the other Loan
Documents, the financial statements referred to in Section 4.07, and all other
instruments, documents, certificates and statements furnished to the Agent or
any Lender by the Borrower and the Guarantors, taken as a whole, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements contained herein or therein not
misleading. The Borrower has disclosed to the Lenders in writing any and all
facts which have a material adverse effect on the business, operations or
consolidated financial condition of the Borrower or either Guarantor, or the
ability of the Borrower and the Guarantors to perform their respective
obligations under the Loan Documents.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder and, until
payment in full of each Loan, the Committed Loan Notes and the Bid Loan Notes,
and performance of all other obligations of the Borrower under this Agreement
and the other Loan Documents, the Borrower agrees to do all of the following
unless the Agent (with the consent of the Majority Lenders) shall otherwise
consent in writing.
Section 5.01 USE OF PROCEEDS. The Borrower shall use the proceeds of the
Loans for general corporate purposes.
Section 5.02 PAYMENT. The Borrower will pay the principal of and interest
on the Loans in accordance with the terms of this Agreement, the Committed Loan
Notes and the Bid Loan Notes and will pay when due all other amounts payable by
Borrower hereunder and under any other Loan Document.
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Section 5.03 PRESERVATION OF CORPORATE EXISTENCE, ETC. Except in
connection with a merger not otherwise prohibited under Section 6.02, the
Borrower will preserve and maintain, and will cause the Guarantors and each of
Borrower's other Subsidiaries to preserve and maintain its corporate existence,
rights, franchises and privileges in the jurisdiction of its formation and will
qualify and remain qualified (and will cause each Guarantor and other Subsidiary
to qualify and remain qualified) as a foreign corporation in each jurisdiction
where such qualification is necessary in view of its business and operations or
the ownership of its properties.
Section 5.04 VISITATION RIGHTS. At any reasonable time, and from time to
time, the Borrower will permit and will cause each Guarantor and each of
Borrower's other Subsidiaries to permit the Agent or any Lender to examine and
make copies of and abstracts from the records and books of account of and to
visit the properties of the Borrower, the Guarantors and such Subsidiaries and
to discuss the affairs, finances and accounts of the Borrower, the Guarantors
and such Subsidiaries with any of their respective officers, directors or
employees.
Section 5.05 KEEPING OF BOOKS AND RECORDS. The Borrower will keep
adequate records and books of account in which complete entries will be made, in
accordance with generally accepted accounting principles consistently applied,
reflecting all financial transactions of the Borrower, the Guarantors or other
Subsidiaries, as the case may be.
Section 5.06 MAINTENANCE OF PROPERTY, ETC. The Borrower will maintain and
preserve and will cause each Guarantor and each of Borrower's other Subsidiaries
to maintain and preserve all of its properties in good working order and
condition, ordinary wear and tear excepted, and will from time to time make (and
cause each Guarantor and each other Subsidiary to make) all needed repairs,
renewals, or replacements so that the efficiency of such properties shall be
fully maintained and preserved.
Section 5.07 COMPLIANCE WITH LAWS, ETC. The Borrower will comply and will
cause each Guarantor and each of Borrower's other Subsidiaries to comply in all
material respects with all laws, regulations, rules, and orders of Governmental
Authorities, except any thereof whose validity is being contested in good faith
by appropriate proceedings upon stay of execution of the enforcement thereof and
with provision having been made to the satisfaction of the Agent for the payment
of any fines, charges, penalties or other costs in respect thereof in the event
the contest is determined adversely to the Borrower, either Guarantor, or any
other Subsidiary.
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Section 5.08 OTHER OBLIGATIONS. The Borrower will pay and discharge and
will cause each Guarantor and each of Borrower's other Subsidiaries to pay and
discharge before the same shall become delinquent all Indebtedness, Taxes, and
other obligations for which the Borrower, either Guarantor or other Subsidiary
is liable or to which its income or property is subject and all claims for labor
and materials or supplies which, if unpaid, might become by law a Lien upon
assets of the Borrower, either Guarantor or any other Subsidiary, except (a) any
thereof whose validity or amount is being contested in good faith by appropriate
proceedings upon stay of execution of the enforcement thereof and with provision
having been made to the satisfaction of the Agent for the payment thereof in the
event the contest is determined adversely to the Borrower, either Guarantor, or
any other Subsidiary; and (b) any trade payables, arising from the purchase of
inventory, which are paid in accordance with industry practice and prior to the
time any collection proceeding is commenced by any vendor.
Section 5.09 INSURANCE. The Borrower will keep in force and will cause
each Guarantor and each of the Borrower's other Subsidiaries to keep in force
upon all of its properties and operations policies of insurance carried with
responsible companies in such amounts and covering all such risks as shall be
customary in the industry and as shall be reasonably satisfactory to the Agent.
From time to time, on request, the Borrower will furnish to the Agent
certificates of insurance or duplicate policies evidencing such coverage.
Section 5.10 FINANCIAL INFORMATION. The Borrower will deliver to the
Lenders (a) as soon as available and in any event within ninety (90) days after
the end of each fiscal year of the Borrower, the consolidated balance sheet of
the Borrower and its Subsidiaries as of the end of such fiscal year and the
related statements of revenue and expenses, statements of shareholder's equity
and statements of cash flow for such year, accompanied by the audit report
thereof by independent certified public accountants selected by the Borrower and
approved by the Agent (which report shall be prepared in accordance with
generally accepted accounting principles consistently applied and shall not be
qualified by reason of restricted or limited examination of any material portion
of the Borrower's (or any Guarantor's or other Subsidiary's) records and shall
contain no disclaimer of opinion); (b) as soon as available and in any event
within sixty (60) days after the end of each of the first three fiscal quarters
of the Borrower, the unaudited consolidated balance sheet and statement of
revenues and expenses, statement of shareholder's equity and statement of cash
flow of the Borrower and its Subsidiaries as of the end of such fiscal quarter
(including the fiscal year to the end of such fiscal quarter), accompanied by an
Officer's Certificate to the effect that such
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unaudited balance sheet and related statements have been prepared in accordance
with generally accepted accounting principles consistently applied and present
fairly the consolidated financial position and results of operations of the
Borrower, the Guarantors and the other Subsidiaries as of the end of and for
such fiscal quarter and that since the fiscal year-end report referred to in
clause (a) there has been no material adverse change in the consolidated
financial condition or operations of the Borrower, the Guarantors and the other
Subsidiaries as shown on the balance sheet as of said date; (c) within sixty
(60) days after the close of each of the first three fiscal quarters of the
Borrower and within ninety (90) days after the close of each of the Borrower's
fiscal years, an Officer's Certificate substantially in the form of the attached
Exhibit G stating that as of the close of such fiscal quarter no Default or
Event of Default had occurred and was continuing; (d) as soon as available and
in any event not later than the end of each fiscal year of the Borrower, its
financial projections for the succeeding fiscal year in form reasonably
acceptable to Agent; (e) as soon as available, all reports sent by Borrower to
its shareholders and all quarterly and annual reports filed by Borrower with the
Securities and Exchange Commission and each other Governmental Authority having
jurisdiction over Borrower; and (f) all other statements, reports and other
information as the Agent or any Lender may reasonably request concerning the
financial condition and business affairs of the Borrower, either Guarantor or
any of Borrower's other Subsidiaries.
Section 5.11 NOTIFICATION. Promptly after learning thereof, the Borrower
will notify the Lenders of (a) the details of any action, proceeding,
investigation or claim against or affecting the Borrower, either Guarantor or
any of Borrower's other Subsidiaries, instituted before any court, arbitrator or
Governmental Authority or, to the Borrower's knowledge threatened to be
instituted, which, if determined adversely would be likely to have a material
adverse effect on the business, operations or consolidated financial condition
of the Borrower or either Guarantor; (b) any substantial dispute between the
Borrower, either Guarantor or any other Subsidiary and any Governmental
Authority; (c) any labor controversy which has resulted in or, to the Borrower's
knowledge, threatens to result in a strike which would materially affect the
business operations of the Borrower, either Guarantor or any other Subsidiary;
(d) if the Borrower, either Guarantor or any member of the Controlled Group
gives or is required to give notice to the PBGC of any "reportable event" (as
defined in subsections (b)(1), (2), (5) or (6) of Section 4043 of ERISA) with
respect to any Plan (or the Internal Revenue Service gives notice to the PBGC of
any "reportable event" as defined in subsection (c)(2) of Section 4043 of ERISA
and Borrower obtains knowledge thereof) which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that
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the plan administrator of any Plan has given or is required to give notice of
any such reportable event, the notice of such reportable event given or required
to be given to the PBGC; (e) any change in the rating assigned to Borrower's
senior unsecured debt by Standard & Poor's Corporation or Moody's Investor
Service or any failure by Borrower to have its senior unsecured debt rated by at
least one such rating agency; and (f) the occurrence of any Default or Event of
Default.
Section 5.12 ADDITIONAL PAYMENTS; ADDITIONAL ACTS. From time to time and
upon demand by the Agent, the Borrower will (a) pay or reimburse Agent and the
Lenders for all Taxes imposed on this Agreement and any other Loan Document and
for all expenses including out-of-pocket legal fees and allocated charges of
internal legal counsel incurred in connection with the enforcement by judicial
proceedings or otherwise of any of the rights of the Agent or the Lenders under
this Agreement or any other Loan Document, (b) pay or reimburse Agent for all
expenses, including legal fees, actually incurred by the Agent in connection
with the preparation of this Agreement and the other Loan Documents and the
making of any Loan; (c) obtain and promptly furnish to the Agent evidence of all
such Government Approvals as may be required to enable Borrower and both
Guarantors to comply with their respective obligations under the Loan Documents;
and (d) execute and deliver all such other instruments and perform all such
other acts as the Agent or any Lender may reasonably request to carry out the
transactions contemplated by this Agreement and the other Loan Documents.
Section 5.13 TANGIBLE NET WORTH. The Borrower (together with the
Guarantors and Borrower's other Subsidiaries) shall maintain at all times on a
consolidated basis a Tangible Net Worth equal to or greater than the sum of
(a) $1,412,000,000 and (b) fifty percent (50%) of the cumulative Consolidated
Net Income of the Borrower for all fiscal quarters ended since November 21, 1993
in which the Borrower earned Consolidated Net Income greater than zero, and
(c) the amount, if any, by which the shareholders' equity of the Borrower has
increased since November 21, 1993 as a result of the issuance of common stock or
the conversion of debt securities into common stock. As used herein, "Tangible
Net Worth" means the excess of total assets over total liabilities, excluding,
however, from the determination of total assets (i) all assets which should be
classified as intangible assets (such as goodwill, patents, trademarks,
copyrights, franchises, and deferred charges including unamortized debt discount
and research and development costs), (ii) treasury stock, (iii) cash held in a
sinking or other similar fund established for the purpose of redemption or other
retirement of capital stock, (iv) to the extent not already deducted from total
assets, reserves for depreciation, depletion, obsolescence or amortization of
properties and other reserves or appropriations
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of retained earnings which have been or should be established in connection with
the business conducted by the relevant corporation, and (v) any revaluation or
other write-up in book value of assets subsequent to the fiscal year of such
corporation last ended at the date of this Agreement.
Section 5.14 Debt to Capitalization Ratio. The Borrower (together with
the Guarantors and Borrower's other Subsidiaries) shall maintain at all times on
a consolidated basis a ratio of Total Debt to Capitalization which is equal to
or less than 0.5 to 1.0. As used herein, "Total Debt" means all Indebtedness
for borrowed money of the Borrower, the Guarantors and Borrower's other
Subsidiaries (including subordinated and convertible debt and commercial paper)
and all indebtedness or liability for borrowed money or for the deferred
purchase price of property or services for which Borrower, either Guarantor or
any other Subsidiary is contingently or directly liable as obligor, guarantor,
partner, joint venturer or otherwise, or in respect of which Borrower, either
Guarantor or any other Subsidiary otherwise assures a creditor against loss. As
used herein, "Capitalization" means the sum of Total Debt and the Borrower's
shareholders' equity.
Section 5.15 Fixed Charge Coverage. The Borrower (together with the
Guarantors and Borrower's other Subsidiaries) shall maintain at all times on a
consolidated basis a ratio of Consolidated Net Earnings to Consolidated Fixed
Charges of at least 2.0 to 1.0. As used herein, "Consolidated Net Earnings"
means Consolidated Net Income before charges for interest, Taxes and operating
lease expense and before the merger and restructure charge of One Hundred Twenty
Million Dollars ($120,000,000) taken in the fiscal quarter ending on November
21, 1993 for any period of four (4) consecutive fiscal quarters. As used
herein, "Consolidated Fixed Charges" means the sum of (a) obligations payable
during such period of four (4) consecutive fiscal quarters for interest on
Indebtedness and (b) operating lease expense payable during such period. As
used herein, "four (4) consecutive fiscal quarters" shall include fiscal
quarters of the Guarantors ending on or prior to August 29, 1993, and as to such
quarters, Borrower's Consolidated Net Earnings and Consolidated Fixed Charges
shall be deemed to be amounts determined by consolidating the Consolidated Net
Earnings and Consolidated Fixed Charges of each of the Guarantors for such
quarters.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder and until payment
in full of each Loan, the Committed Loan Notes
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and the Bid Loan Notes and performance of all other obligations of the Borrower
under this Agreement and the other Loan Documents, the Borrower agrees that it
will not do any of the following unless the Agent (with the consent of the
Majority Lenders) shall otherwise consent in writing.
Section 6.01 DIVIDENDS. The Borrower shall not (a) declare or pay any
dividend (except dividends payable in its capital stock) on any share of any
class of its capital stock nor (b) apply any assets to the purchase, redemption
or other retirement of, or set aside any sum for the payment of any dividends on
or for the purchase, redemption or other retirement of, or make any other
distribution by reduction of capital or otherwise in respect of any shares of
any capital stock of Borrower, if the amount of such dividend or other
distribution, together with all other dividends paid or declared during the same
fiscal year and all other such distributions made during such fiscal year, would
exceed Fifty Percent (50%) of the Consolidated Net Income of the Borrower and
its consolidated Subsidiaries during such fiscal year.
Section 6.02 LIQUIDATION, MERGER, SALE OF ASSETS. The Borrower shall not
and shall not permit either Guarantor or any of Borrower's other Subsidiaries to
merge or to liquidate, dissolve or enter into any consolidation, joint venture,
partnership or other combination nor sell, lease or dispose of all or any
portion of the Borrower's, either Guarantor's or any Subsidiary's assets, EXCEPT
for (a) a merger of such a Subsidiary with the Borrower or another such
Subsidiary, (b) a merger of the Borrower or one of its Subsidiaries if the
Borrower or such Subsidiary is the surviving corporation and no Default or Event
of Default has occurred and will occur as a result of the merger, (c) a sale of
goods in the ordinary course of business, (d) a sale, lease or other disposition
of assets by a Subsidiary of the Borrower to the Borrower or to another
Subsidiary, (e) any joint venture in which investment is permitted under
Section 6.05, or (f) any other sale, lease or other disposition of assets by the
Borrower or a Subsidiary of the Borrower if the aggregate net book value of such
assets and of all other assets sold, leased or otherwise disposed of by the
Borrower and Subsidiaries during the immediately preceding twelve (12) month
period (excepting sales permitted under clause (c) or (d) of this Section 6.02)
does not exceed five percent (5%) of the aggregate book value of the assets of
the Borrower and its consolidated Subsidiaries at the close of the fiscal
quarter last ended on the date of calculation.
Section 6.03 GUARANTIES, ETC. The Borrower shall not (and shall not
permit either Guarantor or any of Borrower's other Subsidiaries to) assume,
guaranty, endorse or otherwise become directly or contingently liable for, nor
obligated to purchase,
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pay or provide funds for payment of, any obligation or Indebtedness of any other
person, except (a) the Guaranties; (b) guaranties of Borrower's obligations
arising under or in connection with that certain Short-Term Revolving Credit
Agreement executed by and among the Agent, the Borrower, the Lenders and the Co-
Agents as of January 31, 1994; (c) guaranties of any direct obligations of any
of Borrower's Subsidiaries; (d) at all times on or before March 1, 1994,
guaranties of the Borrower's obligations to repay advances under uncommitted
facilities up to an aggregate principal amount at any one time outstanding of
Two Hundred Million Dollars ($200,000,000) provided that no such advances have a
maturity of more than one year and no more than One Hundred Million Dollars
($100,000,000) of such advances have a maturity beyond March 1, 1994, and
provided further, that in no event will the aggregate Indebtedness of the
Borrower and the Guarantors due in respect of advances made under uncommitted
facilities exceed Two Hundred Million Dollars ($200,000,000); (e) at all times
after March 1, 1994, guaranties of the Borrower's obligations to repay advances
under uncommitted facilities up to an aggregate principal amount at any one time
outstanding of One Hundred Million Dollars ($100,000,000) provided that no such
advances have a maturity of more than one year; (f) guaranties of the Borrower's
obligations under commercial paper issued by the Borrower; (g) a guaranty from
the Borrower of indebtedness owing by Atlas Hotels up to a maximum principal
amount of Fifty Million Dollars ($50,000,000) provided that at all times that
such guaranty is effective, all Indebtedness of Atlas Hotels owing to Borrower,
either Guarantor or any of Borrower's other Subsidiaries shall have been paid in
full; (h) guaranties of the Borrower's obligations under facilities for the
issuance of commercial and standby letters of credit up to an aggregate facility
amount of Three Hundred Million Dollars ($300,000,000) and (i) in addition to
the guaranties permitted pursuant to subclauses (a) through (h) above,
guaranties of obligations on Indebtedness which in the aggregate for the
Borrower, the Guarantors and the other Subsidiaries does not exceed at any one
time the sum of Fifty Million Dollars ($50,000,000).
Section 6.04 LIENS. The Borrower shall not create, assume or suffer to
exist and shall not permit either Guarantor or any of the Borrower's other
Subsidiaries to create, assume or suffer to exist any Lien on any of the
Borrower's, Guarantors' or other Subsidiary's assets, EXCEPT (a) existing Liens
reflected in the balance sheets referred to in Section 4.07 or otherwise
previously disclosed to the Agent in writing, (b) purchase-money security
interests in inventory which have been perfected under the Uniform Commercial
Code and which secure Indebtedness not exceeding in the aggregate for Borrower,
the Guarantors and all other Subsidiaries, Fifty Million Dollars ($50,000,000)
at any time, (c) purchase-money security interests in new equipment
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which are limited to such equipment, (d) Liens on real property which, together
with other such Liens then existing, secure Indebtedness which does not in the
aggregate for Borrower, the Guarantors and all other Subsidiaries exceed One
Hundred Fifty Million Dollars ($150,000,000) at any time, and (e) Liens on
inventory owned by Costco U.K. Ltd. to secure a working capital line of credit
in favor of such Subsidiary not to exceed Twenty Million Dollars ($20,000,000)
at any one time outstanding.
Section 6.05 INVESTMENTS. The Borrower shall not, and shall cause the
Guarantors and Borrower's other Subsidiaries not to, make any loan or advance to
any person or purchase or otherwise acquire the capital stock, shares, voting
trust certificates, bonds, debentures, notes or instruments or other securities
or evidences of indebtedness or obligations of or any interest in or make any
capital contribution to, any person in excess of Twenty Million Dollars
($20,000,000) in any one case or, in the aggregate, at any one time, in an
amount more than five percent (5%) of the aggregate book value of the assets of
the Borrower and its consolidated Subsidiaries at the close of the fiscal
quarter last ended on the date of calculation, except (a) time deposits maturing
within one year at commercial banks organized or licensed to conduct a banking
business under the laws of the United States of America or any state thereof
having capital, surplus and undivided profits of not less than One Hundred
Million Dollars ($100,000,000); (b) marketable general obligations of the United
States or a state thereof or marketable obligations fully guaranteed by the
United States; (c) short-term commercial paper with the highest rating of a
generally recognized rating service; (d) loans or advances by Borrower to its
Subsidiaries; (e) loans or advances by either Guarantor to its Subsidiaries and
(f) those investments described on Schedule 7.
Section 6.06 ACCOUNTING CHANGE. The Borrower shall maintain a fiscal year
ending on the Sunday closest to the last day in August and shall not make any
significant change in accounting policies or reporting practices other than
changes required by generally accepted accounting principles or otherwise
required by law.
Section 6.07 ERISA COMPLIANCE. Neither Borrower, either Guarantor, nor
any member of the Controlled Group nor any Plan of any of them will (a) engage
in any "prohibited transaction" (as such term is defined in Section 406 of ERISA
or Section 4975 of the Internal Revenue Code; (b) incur any "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA) whether or not
waived; (c) terminate any Pension Plan in a manner which could result in the
imposition of a Lien on any property of Borrower, either Guarantor or any member
of the Controlled Group pursuant to
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Section 4068 of ERISA; or (d) violate state or federal securities laws
applicable to any Plan.
Section 6.08 GUARANTOR Indebtedness. The Borrower shall cause each
Guarantor not to create, incur or become liable for any Indebtedness except
(a) existing Indebtedness reflected on the balance sheets referred to in
Section 4.07 (other than Indebtedness incurred under lines of credit identified
on the annexed Schedule 2) together with any renewal or extension of such
Indebtedness or any portion thereof to a date on or before the Maturity Date;
(b) current accounts payable or accrued, incurred by such Guarantor in the
ordinary course of its business; (c) Indebtedness for the deferred purchase
price or obligations under leases of real or personal property used by the
Guarantor in its business but not exceeding at any time for either Guarantor,
the sum of Fifty Million Dollars ($50,000,000); (d) that certain Revolving Line
of Credit in the amount of Fifty Million Canadian Dollars (CDN $50,000,000) and
that certain Revolving Reducing Term Loan in the amount of Forty Million
Canadian Dollars (CDN $40,000,000) each evidenced by that certain Credit
Agreement by and among Price Club Canada Inc. as "Borrower", National Bank of
Canada as "Agent" and certain other parties as "Lenders" dated as of December 2,
1993; (e) Indebtedness arising under any guaranty not prohibited by Section
6.03; (f) Indebtedness owing by such Guarantor to the Borrower; and (g) on or
before March 1, 1994, Indebtedness owed in respect of advances under uncommitted
facilities up to an aggregate principal amount at any one time outstanding for
both Guarantors of Two Hundred Million Dollars ($200,000,000) provided that no
such advances have a maturity beyond March 1, 1994, and provided further, that
in no event will the aggregate Indebtedness of the Borrower and the Guarantors
due in respect of advances made under uncommitted facilities exceed Two Hundred
Million Dollars ($200,000,000) .
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01 EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default" hereunder.
(a) LOAN PAYMENT DEFAULT. The Borrower shall fail to pay when due
any amount of principal of or interest on any Loan; or
(b) OTHER PAYMENT DEFAULT. The Borrower shall fail to pay any amount
payable by it hereunder or under any Loan Document
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(other than amounts referred to in Section 7.01(a)) and such failure shall
remain unremedied for ten (10) days; or
(c) BREACH OF WARRANTY. Any representation or warranty made or
deemed made by the Borrower or either Guarantor under or in connection with this
Agreement, the other Loan Documents, or other statements executed in connection
herewith or therewith shall prove to have been incorrect in any material respect
when made or deemed made; or
(d) BREACH OF CERTAIN COVENANTS. The Borrower shall fail to perform
or observe any covenant set forth in Sections 5.11(f), 5.13, 5.14, 5.15, 6.01,
6.02, 6.03, 6.06, 6.07 or 6.08 hereof; or
(e) BREACH OF OTHER COVENANTS. The Borrower shall fail to perform or
observe any other covenant, obligation or term of this Agreement and such
failure shall remain unremedied for thirty (30) days after written notice
thereof shall have been given to the Borrower by the Agent; or
(f) CROSS-DEFAULT. An "Event of Default" (as such term is defined in
that certain Short-Term Revolving Credit Agreement executed by and among the
Agent, the Borrower, the Lenders and the Co-Agents as of January 31, 1994) shall
have occurred and be continuing or the Borrower, either Guarantor, or any of
Borrower's other Subsidiaries shall fail (i) to pay when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) any
Indebtedness for borrowed monies or any interest or premium thereon and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Indebtedness for borrowed monies,
or (ii) to perform any term or covenant on its part to be performed under any
agreement or instrument relating to any such Indebtedness for borrowed monies
and required to be performed and such failure shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such failure to perform is to accelerate or to permit the
acceleration of the maturity of such Indebtedness; or
(g) PREPAYMENT. Any Indebtedness for borrowed monies of the
Borrower, either Guarantor or any of Borrower's other Subsidiaries shall be
declared to be due and payable or required to be prepaid (other than by
regularly scheduled required prepayment) prior to the stated maturity thereof;
or
(h) VOLUNTARY BANKRUPTCY, ETC. The Borrower, either Guarantor or any
of Borrower's other Subsidiaries shall: (i) file a petition seeking relief for
itself under Title 11 of the United States Code, as now constituted or hereafter
amended, or file an answer consenting to, admitting the material allegations of
or
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otherwise not controverting, or fail timely to controvert a petition filed
against it seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended; or (ii) file such petition or answer with
respect to relief under the provisions of any other now existing or future
applicable bankruptcy, insolvency, or other similar law of the United States of
America or any state thereof or of any other country or jurisdiction providing
for the reorganization, winding-up or liquidation of corporations or an
arrangement, composition, extension or adjustment with creditors; or
(i) INVOLUNTARY BANKRUPTCY, ETC. An order for relief shall be
entered against the Borrower, either Guarantor or any of Borrower's other
Subsidiaries under Title 11 of the United States Code, as now constituted or
hereafter amended, which order is not stayed; or upon the entry of an order,
judgment or decree by operation of law or by a court having jurisdiction in the
premises which is not stayed adjudging the Borrower, either Guarantor, or any of
Borrower's other Subsidiaries a bankrupt or insolvent under, or ordering relief
against it under, or approving as properly filed a petition seeking relief
against it under the provisions of any other now existing or future applicable
bankruptcy, insolvency or other similar law of the United States of America or
any state thereof or of any other country or jurisdiction providing for the
reorganization, winding-up or liquidation of corporations or any arrangement,
composition, extension or adjustment with creditors, or appointing a receiver,
liquidator, assignee, sequestrator, trustee or custodian of the Borrower, either
Guarantor or any other Subsidiary or of any substantial part of its property, or
ordering the reorganization, winding-up or liquidation of its affairs, or upon
the expiration of sixty (60) days after the filing of any involuntary petition
against the Borrower, either Guarantor's or any of Borrower's other Subsidiaries
seeking any of the relief specified in Section 7.01(h) or this Section 7.01(i)
without the petition being dismissed prior to that time; or
(j) INSOLVENCY, ETC. The Borrower, either Guarantor or any of
Borrower's other Subsidiaries shall (i) make a general assignment for the
benefit of its creditors or (ii) consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, or custodian of all or
a substantial part of the property of the Borrower, either Guarantor or any
other Subsidiary, or (iii) admit its insolvency or inability to pay its debts
generally as they become due, or (iv) fail generally to pay its debts as they
become due, or (v) take any action (or suffer any action to be taken by its
directors or shareholders) looking to the dissolution or liquidation of the
Borrower, either Guarantor or any of Borrower's other Subsidiaries; or
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(k) ERISA. The Borrower, either Guarantor or any member of the
Controlled Group shall fail to pay when due an amount or amounts aggregating in
excess of Five Hundred Thousand Dollars ($500,000) which it shall have become
liable to pay to the PBGC or to a Plan under Section 515 of ERISA or Title IV of
ERISA; or notice of intent to terminate a Plan or Plans (other than a
multi-employer plan, as defined in Section 4001(3) of ERISA), having aggregate
Unfunded Vested Liabilities in excess of Five Hundred Thousand Dollars
($500,000) shall be filed under Title IV of ERISA by the Borrower, either
Guarantor, any member of the Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate any such Plan or Plans; or
(l) GUARANTIES. Either Guarantor shall have notified the Agent or
either Lender to the effect that its Guaranty is no longer in full force and
effect or shall otherwise limit, terminate, or purport to limit or terminate its
Guaranty or claim that the effect thereof has been limited or terminated for any
reason; or
(m) JUDGMENT. A final judgment or order for the payment of money in
excess of Thirty Million Dollars ($30,000,000) or its equivalent in another
currency shall be rendered against the Borrower, either Guarantor or any of
Borrower's other Subsidiaries and such judgment or order shall continue
unsatisfied and in effect for a period of thirty (30) consecutive days; or
(n) CHANGE OF CONTROL. Any person or group of persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
shall have acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under said Act) of thirty
percent (30%) or more of the outstanding shares of common stock of the Borrower;
or, individuals who have become directors of the Borrower within any two (2)
year period (other than by reelection to a successive term) shall constitute a
majority of the board of directors of the Borrower.
Section 7.02 CONSEQUENCES OF DEFAULT. If any of the Events of Default
described in Section 7.01(h) or Section 7.01(i) shall occur, the Total
Commitment and the Lenders' respective Commitments shall immediately terminate,
the principal of and the interest on the Loans and all other sums payable by
Borrower hereunder and under the Committed Loan Notes and Bid Loan Notes shall
become immediately due and payable all without protest, presentment, notice or
demand, all of which the Borrower expressly waives. If any other Event of
Default shall occur and be continuing, then in any such case and at any time
thereafter
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<PAGE>
so long as any such Event of Default shall be continuing, the Agent shall at the
request, or may with the consent, of the Majority Lenders immediately terminate
the Total Commitment and the Lenders' respective Commitments and, if Loans shall
have been made, the Agent shall at the request, or may with the consent, of the
Majority Lenders declare the principal of and the interest on the Loans, the
Committed Loan Notes and the Bid Loan Notes and all other sums payable by the
Borrower hereunder or thereunder to be immediately due and payable, whereupon
the same shall become immediately due and payable all without protest,
presentment, notice, or demand, all of which the Borrower expressly waives. If
any Lender of a Bid Loan shall suffer an Event of Default under
subsection 7.01(a) due to the Borrower's failure to pay any amount of principal
on or interest of any Bid Loan made by such Lender, such Lender may send a
written request to the Agent to obtain approval of the Majority Lenders to
terminate the Total Commitment and the Lenders' respective Commitments, to
declare the principal of and the interest on the Loans, the Committed Loan Notes
and the Bid Loan Notes and all other sums payable by the Borrower hereunder or
thereunder to become immediately due and payable and, if such approval is not
obtained within ten (10) Business Days after the date such request is received,
the affected Lender may elect to accelerate the Bid Loan in default and may
exercise remedies in respect of such Bid Loan by any and all legal means.
ARTICLE VIII
THE AGENT
Section 8.01 AUTHORIZATION AND ACTION. Each Lender hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no duties or responsibilities except those expressly set forth
in this Agreement. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender; and nothing in this Agreement
or the other Loan Documents, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of this
Agreement or the other Loan Documents except as expressly set forth herein. As
to any matters not expressly provided for by this Agreement, including
enforcement or collection of the Loans, the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining)
upon the instructions of the Majority Lenders, and such instructions shall be
binding upon all Lenders and any holders of any
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Committed Loan Note or Bid Loan Note, PROVIDED that the Agent shall not be
required to take any action which exposes the Agent to personal liability or
which is contrary to the Loan Documents or applicable law and PROVIDED, FURTHER,
that without the consent of all Lenders, the Agent shall not change or modify
the Total Commitment, any Lender's Commitment, the definition of "Majority
Lenders", the conditions precedent set forth in Article III, the timing or rates
of interest payments, the timing or amount of facility fees, the timing or
amounts of principal payments due in respect of Loans, or the terms of the
prohibition against any merger by Borrower or any Subsidiary pursuant to
Section 6.02, and PROVIDED, FURTHER, that the terms of Section 2.07, Section
2.14(b) and this Article VIII shall not be amended without the prior written
consent of the Agent (acting for its own account). In the absence of
instructions from the Majority Lenders, the Agent shall have authority (but no
obligation), in its sole discretion, to take or not to take any action, unless
this Agreement specifically requires the consent of the Lenders or the consent
of the Majority Lenders and any such action or failure to act shall be binding
on all the Lenders and on all holders of the Committed Loan Notes and Bid Loan
Notes. Each Lender and each holder of any Committed Loan Note or Bid Loan Note
shall execute and deliver such additional instruments, including powers of
attorney in favor of the Agent, as may be necessary or desirable to enable the
Agent to exercise its powers hereunder.
Section 8.02 DUTIES AND OBLIGATIONS.
(a) Neither the Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
any of them under or in connection with this Agreement except for its or their
own gross negligence or willful misconduct. Without limiting the generality of
the foregoing, the Agent (i) may treat each Lender which is a party hereto as
the party entitled to receive payments hereunder until the Agent receives
written notice of the assignment of such Lender's interest herein signed by such
Lender and made in accordance with the terms hereof and a written agreement of
the assignee that it is bound hereby as it would have been had it been an
original party hereto, in each case in form satisfactory to the Agent; (ii) may
consult with legal counsel (including counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such experts; (iii) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements, warranties
or representations made in or in connection with this Agreement, the other Loan
Documents or in any instrument or document furnished
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pursuant hereto or thereto; (iv) shall not have any duty to ascertain or to
inquire as to the performance of any of the terms, covenants, or conditions of
the Loan Documents on the part of the Borrower or as to the use of the proceeds
of any Loan or as to the existence or possible existence of any Default or Event
of Default; (v) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, effectiveness, or value of this
Agreement or of any instrument or document furnished pursuant hereto; and
(vi) shall incur no liability under or in respect to this Agreement by acting
upon any oral or written notice, consent, certificate or other instrument or
writing (which may be by telegram, facsimile transmission, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties
or by acting upon any representation or warranty of the Borrower made or deemed
to be made hereunder or any representation or warranty of a Guarantor made in
its Guaranty.
(b) The Agent will account to each Lender for its Percentage Interest
of payments of principal of, interest on and facility fees in respect of the
Committed Loans which are received by the Agent from the Borrower and will
promptly remit to the Lenders entitled thereto all such payments. The Agent
will account to each Lender entitled thereto for payments of principal of and
interest on the Bid Loans which are received by the Agent from the Borrower and
will promptly remit such payments to the Lender or Lenders entitled thereto.
The Agent will transmit to each Lender copies of all documents received from the
Borrower pursuant to the requirements of this Agreement other than documents
which by the terms of this Agreement Borrower is obligated to deliver directly
to Lenders.
(c) Each Lender or its assignee organized outside of the United
States shall furnish to the Agent in a timely fashion such documentation
(including, but not by way of limitation, IRS Forms Nos. 1001 and 4224) as may
be required by applicable law or regulation to establish such Lender's status
for tax withholding purposes.
Section 8.03 DEALINGS BETWEEN AGENT AND BORROWER. With respect to its
Commitment and the Loans made by it, the Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any other Lender and
may exercise the same as though it were not the Agent, and the term "Lender"
shall unless otherwise expressly indicated include the Agent in its individual
capacity. The Agent may accept deposits from, lend money to, act and generally
engage in any kind of business with the Borrower or either Guarantor and any
person which may do business with the Borrower or either Guarantor, all as if
the Agent were not the Agent hereunder and without any duty to account therefor
to the Lenders.
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Section 8.04 LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based upon such 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 Agent 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.
Section 8.05 INDEMNIFICATION. The Lenders agree to indemnify the Agent
(to the extent not reimbursed by the Borrower) ratably according to their
respective Percentage Interests from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Agent in any way relating to or arising
out of this Agreement or any other Loan Document or any action taken or omitted
by the Agent under this Agreement or any other Loan Document, except any such as
result from the Agent's gross negligence or willful misconduct. Without
limiting the foregoing, each Lender agrees to reimburse the Agent promptly on
demand in proportion to its Percentage Interest for any out-of-pocket expenses,
including legal fees, incurred by the Agent in connection with the
administration or enforcement of or the preservation of any rights under this
Agreement or any other Loan Document (to the extent that the Agent is not
reimbursed for such expenses by the Borrower or the Guarantors).
Section 8.06 SUCCESSOR AGENT. The Agent may give written notice of
resignation at any time to the Lenders and the Borrower and may be removed at
any time with cause by the Majority Lenders. Upon any such notice of
resignation or removal, Bank of America, National Trust and Savings Association
(the "First Co-Agent") shall upon its written notice of acceptance become the
Agent hereunder. If the First Co-Agent shall not accept its appointment as
Agent, or upon any notice of resignation or removal of the First Co-Agent in
accordance with the first sentence of this Section 8.06, Morgan Guaranty Trust
Company of New York (the "Second Co-Agent") shall upon its written notice of
acceptance become the Agent hereunder. Until such time as it is appointed Agent
hereunder and accepts such appointment, neither Co-Agent shall have any
obligation hereunder, fiduciary or otherwise, as Co-Agent or Agent hereunder.
If the Second Co-Agent shall not accept its appointment as Agent or if the
Second Co-Agent shall thereafter resign or be removed with cause by the Majority
Lenders, the Majority Lenders shall have the right to appoint a Successor Agent.
If no successor Agent shall have been so appointed by the Majority Lenders and
shall have accepted such appointment within thirty (30) days after the Second
Co-Agent's giving of notice of resignation or the Majority Lenders' removal
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of the Second Co-Agent, then the Second Co-Agent may on behalf of the Lenders,
appoint a successor Agent, which shall be a bank organized under the laws of the
United States or of any state thereof, or any affiliate of such bank, and having
a combined capital and surplus of at least Five Hundred Million Dollars
($500,000,000). Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement. Until the acceptance by such a successor Agent, the retiring
Agent shall continue as "Agent" hereunder. Notwithstanding any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Article VIII
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.01 NO WAIVER; REMEDIES CUMULATIVE. No failure by the Agent or
any Lender to exercise, and no delay in exercising, any right, power or remedy
under this Agreement or any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or remedy
under this Agreement or any other Loan Document preclude any other or further
exercise thereof or the exercise of any other right, power, or remedy. The
exercise of any right, power, or remedy shall in no event constitute a cure or
waiver of any Event of Default under this Agreement or any other Loan Document
nor prejudice the rights of the Agent or any Lender in the exercise of any right
hereunder or thereunder. The rights and remedies provided herein and therein
are cumulative and not exclusive of any right or remedy provided by law.
Section 9.02 GOVERNING LAW. This Agreement and the other Loan Documents
shall be governed by and construed in accordance with the laws of the State of
Washington, U.S.A.
Section 9.03 CONSENT TO JURISDICTION. The Borrower hereby irrevocably
submits to the nonexclusive jurisdiction of any state or federal court sitting
in Seattle, King County, Washington, in any action or proceeding brought to
enforce or otherwise arising out of or relating to this Agreement or any other
Loan Document and irrevocably waives to the fullest extent permitted by law any
objection which it may now or hereafter have to the laying of venue in any such
action or proceeding in any such forum, and hereby further irrevocably waives
any claim that any such forum is an inconvenient forum. The Borrower agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in any other jurisdiction by suit on the judgment
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or in any other manner provided by law. Nothing in this Section 9.03 shall
impair the right of the Agent or any other Lender or the holder of any Committed
Loan Note or Bid Loan Note to bring any action or proceeding against the
Borrower or its property in the courts of any other jurisdiction, and the
Borrower irrevocably submits to the nonexclusive jurisdiction of the appropriate
courts of the jurisdiction in which the Borrower is incorporated or sitting in
any place where property or an office of the Borrower is located.
Section 9.04 NOTICES. All notices and other communications provided for
in this Agreement shall be in writing or (unless otherwise specified) by telex,
facsimile transmission, telegram or cable and shall be mailed (with first class
postage prepaid) or sent or delivered to each party at the address set forth
under its name on Schedule 6 hereof, or at such other address as shall be
designated by such party in a written notice to each other party. Except as
otherwise specified all notices sent by mail, if duly given, shall be effective
three (3) Business Days after deposit into the mails, all notices sent by a
nationally recognized overnight courier service, if duly given, shall be
effective one (1) Business Day after delivery to such courier service, and all
other notices and communications if duly given or made shall be effective upon
receipt.
Section 9.05 ASSIGNMENT AND PARTICIPATIONS. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
Successors and assigns, PROVIDED that the Borrower may not assign or otherwise
transfer all or any part of its rights or obligations hereunder or under any
other Loan Document without the prior written consent of the Agent and all the
Lenders, and any such assignment or transfer purported to be made without such
consent shall be ineffective. Any Lender may at any time (a) sell to any entity
participation interests in its Bid Loans; or (b) sell to any Eligible Assignee
participation interests in its Committed Loans and Commitment. Such sales may
be made without the consent of the Agent, any other Lender or the Borrower
PROVIDED, HOWEVER, (a) that the selling Lender shall have provided the Borrower
with prior written notice of the sale of any participation interest in any
Committed Loan or in such Lender's Commitment; and (b) that the selling Lender
retains the right to vote as a Lender hereunder in respect of the interest sold
without being bound to obtain the consent of its participant or to exercise its
rights in accordance with instructions received from its participant (except
that the participant's consent can be required for proposed changes to the
timing or amount of principal payments or changes to the timing, rate or amount
of payments of interest or fees). Any Lender may pledge or assign all or any
part of its interest under the Loan Documents for security purposes to any
Federal Reserve Bank. Any Lender may assign or otherwise transfer to any
Eligible Assignee all or any part of its interest under the Loan Documents (y)
without the consent of the Agent, any other Lender, or the
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Borrower to any of the assigning Lender's affiliates or to any other Lender; or
(z) with the prior written consent of the Agent and, if no Event of Default
shall have occurred and be continuing, the Borrower, (such consents not to be
unreasonably withheld or delayed) but without the consent of the other Lenders,
to any other person PROVIDED, HOWEVER, that in either case no such assignment
(as distinguished from the sale of a participation) (i) shall be made in an
amount less than Ten Million Dollars ($10,000,000) nor (ii) shall be made if
after giving effect to such assignment the aggregate amount of the Loans and
unused Commitment of the assigning Lender would be less than Ten Million Dollars
($10,000,000) and PROVIDED, FURTHER, that in connection with any assignment (as
distinguished from the sale of a participation) the assigning Lender shall pay
to Agent a fee of Two Thousand Five Hundred Dollars ($2,500) for each proposed
assignee. The assignee of any permitted sale or assignment (including
assignments for security and sales of participations) shall have the same rights
and benefits against the Borrower and otherwise under the Loan Documents
(excepting however, in the case of sales of participations, the right to grant
or withhold consents or otherwise vote in respect thereof) including the right
of setoff, and in the case of any outright assignment (as distinguished from an
assignment for security or the sale of a participation) the same obligations in
respect thereof, as if such assignee were an original Lender. Unless an Event
of Default shall have occurred and be continuing, each Lender agrees that
without the prior written consent of the Borrower (such consent not to be
unreasonably withheld or delayed) it will not disclose to any prospective
participant or assignee any nonpublic financial information concerning the
Borrower, either Guarantor or any other Subsidiary which was furnished to such
Lender pursuant to this Agreement. Except to the extent otherwise required by
the context of this Agreement, the word "Lender" where used in this Agreement
shall mean and include any holder of a Note originally issued to a Lender
hereunder, and each such holder shall be bound by and have the benefits of this
Agreement the same as if such holder had been a signatory hereto. Any outright
assignment of a Lender's interest hereunder to another Lender (other than an
assignment of a Bid Loan) made in conformance with the terms of this
Section 9.05 shall result in a corresponding adjustment to the selling and
purchasing Lenders' Percentage Interests. As used herein, "Eligible Assignee"
means (i) a commercial bank organized under the laws of the United States, or
any state thereof, and having a combined capital and surplus of at least
$100,000,000; (ii) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development (the "OECD"), or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000, provided that
such bank is acting through a branch or agency located in the United States of
America; and (iii) a person that is primarily engaged in the business of
commercial banking and that is (A) a Subsidiary of a Lender, (B)
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a Subsidiary of a person of which a Lender is a Subsidiary, or (C) a person of
which a Lender is a Subsidiary.
Section 9.06 BORROWER'S INDEMNITY. Whether or not the transactions
contemplated hereby shall be consummated, the Borrower shall pay, indemnify and
hold each Lender, the Agent and each of their respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses or disbursements
(including reasonable attorney's fees and the allocated charges of internal
legal counsel) of any kind or nature whatsoever with respect to any
investigation, litigation or proceeding (including any insolvency proceeding or
appellate proceeding) related to this Agreement or any other Loan Document or
any actual or proposed use of proceeds of the Loans hereunder, whether or not
any Indemnified Person is a party thereto (all of the foregoing, collectively
the "Indemnified Liabilities"); PROVIDED, that the Borrower shall have no
obligation hereunder to any Indemnified Person with respect to Indemnified
Liabilities arising from the negligence or willful misconduct of such
Indemnified Person; and PROVIDED, FURTHER, without limiting Sections 10.12 or
8.05 hereof, this Section 9.06 shall not be construed to require the Borrower to
pay, indemnify, or hold the Indemnified Person harmless for Indemnified
Liabilities arising solely in connection with disputes by and among the Agent,
the Co-Agents, the Lenders, any assignee of any Lender (including any purchaser
of a participation interest in any Loan). All amounts owing under this
Section 9.06 shall be paid promptly upon demand. At the election of any
Indemnified Person, the Borrower shall defend such Indemnified Person in respect
of any Indemnified Liabilities using legal counsel satisfactory to such
Indemnified Person at the sole cost and expense of the Borrower.
Section 9.07 SEVERABILITY. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall as
to such jurisdiction be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties waive any
provision of law which renders any provision hereof prohibited or unenforceable
in any respect.
Section 9.08 SURVIVAL. The representations, warranties and indemnities of
the Borrower in favor of the Agent and the Lenders and the representations,
warranties and indemnities of the Lenders in favor of the Agent shall survive
indefinitely and, without limiting the foregoing, shall survive the execution
and delivery of this Agreement and the other Loan Documents, the making of any
Loan, the expiration of the Total Commitment and the repayment of all Loans and
other amounts due hereunder.
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Section 9.09 CONDITIONS NOT FULFILLED. If the Commitments are not
borrowed or Bid Loans are not made owing to nonfulfillment of any condition
precedent specified in Article III, no party hereto shall be responsible to any
other party for any damage or loss by reason thereof, except that the Borrower
shall in any event be liable to pay the fees, Taxes, and expenses for which it
is obligated hereunder. If for any other reason the Commitment of any Lender is
not borrowed or a Bid Loan is not made neither the Agent nor any other Lender
shall be responsible to the Borrower for any damage or loss by reason thereof,
nor shall any other Lender or the Borrower be excused from its performance
hereunder.
Section 9.10 ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with
the Exhibits and Schedules hereto and the letter agreement referred to in
Section 2.14(b) hereof, comprise the entire agreement of the parties and may not
be amended or modified except by written agreement of the Borrower and the Agent
executed in conformance with the terms of Section 8.01 hereof. No provision of
this Agreement may be waived except in writing and then only in the specific
instance and for the specific purpose for which given.
Section 9.11 WAIVER OF JURY TRIAL. The parties hereto waive any right to
a trial by jury in any action or proceeding to enforce or defend any rights
under or relating to this Agreement or any other Loan Document, or any
amendment, instrument, document or agreement delivered or which may in the
future be delivered in connection herewith or therewith or arising from any
relationship existing in connection with this Agreement or any other Loan
Document, and agree that (a) any such action or proceeding shall be tried before
a court and not before a jury and (b) any party hereto may file an original
counterpart or copy of this Agreement with any court as written evidence of the
consent of the parties hereto to the waiver of their respective rights to a
trial by jury.
Section 9.12 HEADINGS. The headings of the various provisions of this
Agreement are for convenience of reference only, do not constitute a part
hereof, and shall not affect the meaning or construction of any provision
hereof.
SECTION 9.13 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original, and all of which
taken together shall constitute one and the same Agreement.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
BORROWER:
PRICE/COSTCO, INC.
By /s/ Richard A. Galanti
-----------------------------------------------
Its Executive Vice President
Chief Financial Officer
---------------------------------------
By /s/ Harold E. Kaplan
-----------------------------------------------
Its Vice President
Treasurer
---------------------------------------
LENDERS:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ Richard J. Bryson
-----------------------------------------------
Its Vice President
---------------------------------------
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By /s/ Diana H. Imhof
-----------------------------------------------
Its Associate
---------------------------------------
J.P. MORGAN DELAWARE
By /s/ Philip s. Detjens
-----------------------------------------------
Its Vice President
---------------------------------------
SEATTLE-FIRST NATIONAL BANK
By Hank Knottnerus
-----------------------------------------------
Its Vice President
---------------------------------------
CIBC, INC.
By /s/ Ray A. Mendoza
-----------------------------------------------
Its Vice President
---------------------------------------
FIRST INTERSTATE BANK OF CALIFORNIA
By /s/ David T. Bruen
-----------------------------------------------
Its Vice President
---------------------------------------
NATIONSBANK OF TEXAS, N.A.
By /s/ William B. Guffy
-----------------------------------------------
Its Vice President
---------------------------------------
BANK OF HAWAII
By /s/ Peter S. Ho
-----------------------------------------------
Its Assistant Vice President
---------------------------------------
BANK NATIONALE DE PARIS
By /s/ Deborah Y. Gohh William J. Letterran
-----------------------------------------------
Its Associate Vice President
---------------------------------------
CREDIT SUISSE
By /s/ David J. Worthington Kevin Mark Fowler
-----------------------------------------------
Its Member of Senior Management Associate
---------------------------------------
FIRST INTERSTATE BANK OF WASHINGTON, N.A.
By /s/ Jo Surbrugg
-----------------------------------------------
Its Vice President
---------------------------------------
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By /s/ Leo G. Leitner
-----------------------------------------------
Its Vice President
---------------------------------------
SHAWMUT BANK, N.A.
By /s/ Sara E. Hartwell
-----------------------------------------------
Its Assistant Vice President
---------------------------------------
UNITED STATES NATIONAL BANK OF OREGON
By /s/ Peter G. Bentley
-----------------------------------------------
Its Vice President
---------------------------------------
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK AND CAYMAN ISLANDS BRANCHES
By /s/ Robert J. Nolan
-----------------------------------------------
Its Associate
---------------------------------------
AGENT:
SEATTLE-FIRST NATIONAL BANK
By /s/ Dora A. Brown
-----------------------------------------------
Its Assistant Vice President
---------------------------------------
CO-AGENTS:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By /s/ Richard J. Cerf
-----------------------------------------------
Its Vice President
---------------------------------------
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By /s/ Diana H. Imhof
-----------------------------------------------
Its Associate
---------------------------------------
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EXHIBIT (28)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Price/Costco, Inc:
We have reviewed the accompanying condensed consolidated balance sheets of
Price/Costco, Inc., (a Delaware corporation) and subsidiaries as of February 13,
1994, and the related condensed consolidated statements of operations for the
twelve-week and twenty-four week periods ended February 13, 1994 and February
14, 1993 and the condensed consolidated statements of cash flows for the twenty-
four week periods ended February 13, 1994, and February 14, 1993. These
financial statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to the financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Seattle, Washington
March 21, 1994
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