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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 MAY 12, 1996
/ / 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)
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<S> <C>
DELAWARE 33-0572969
(State or other jurisdiction (I.R.S. Employer
of Identification
incorporation or No.)
organization)
</TABLE>
999 LAKE DRIVE
ISSAQUAH, WASHINGTON 98027
(Address of principal executive office)
(206) 313-8100
(Registrant's telephone number, including area code)
------------------------
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 196,092,290 common shares, par value $.01, outstanding at
May 31, 1996.
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<PAGE>
PRICE/COSTCO, INC.
AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I -- FINANCIAL INFORMATION
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PAGE
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ITEM 1 -- FINANCIAL STATEMENTS............................................................................. 3
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
PART II -- OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS................................................................................ 7
ITEM 2 -- CHANGES IN SECURITIES............................................................................ 8
ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES.................................................................. 8
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................................. 8
ITEM 5 -- OTHER INFORMATION................................................................................ 8
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K................................................................. 8
Exhibit (10.1) $140 Million Credit Agreement among Price Costco Nova Scotia Company
and Certain Commercial Lending Institutions
Exhibit (27) Financial Data Schedule
Exhibit (28) Report of Independent Public Accountants.................................................... 15
</TABLE>
2
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Price/Costco, Inc.'s (the "Company" or "PriceCostco") unaudited condensed
consolidated balance sheet as of May 12, 1996, and the condensed consolidated
balance sheet as of September 3, 1995, unaudited condensed consolidated
statements of operations for the 12- and 36-week periods ended May 12, 1996, and
May 7, 1995, and unaudited condensed consolidated statements of cash flows for
the 36-week periods then ended are included elsewhere herein. Also, included
elsewhere herein are notes to the unaudited condensed consolidated financial
statements and the results of the limited review performed by Arthur Andersen
LLP, independent public accountants.
The Company reports on a 52/53-week fiscal year, consisting of 13 four-week
periods and ending on the Sunday nearest the end of August. Fiscal 1996 is a
52-week year with period 13 ending on September 1, 1996. 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
It is suggested that this management discussion be read in conjunction with
the management discussion included in the Company's fiscal 1995 annual report on
Form 10-K previously filed with the Securities and Exchange Commission.
COMPARISON OF THE 12 WEEKS ENDED MAY 12, 1996 AND MAY 7, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Net income for the third quarter of fiscal 1996 increased 27% to $41,274, or
$.21 per share (fully diluted), from $32,615, or $.17 per share (fully diluted),
during the third quarter of fiscal 1995.
Net sales increased 11% to $4,236,207 during the third quarter of fiscal
1996 from $3,824,841 during the third quarter of fiscal 1995. This increase was
due to opening a net of 16 new warehouses (24 opened, 8 closed) since the end of
the third quarter of fiscal 1995 and an increase in comparable warehouse sales.
Comparable sales, that is sales in warehouses open for at least a year,
increased 5 percent during the third quarter of fiscal 1996, compared to the
third quarter of fiscal 1995, reflecting new marketing and merchandising
efforts, including the rollout of fresh foods and various ancillary businesses
to certain existing locations. Changes in prices of merchandise did not
materially contribute to sales increases.
Membership fees and other revenue increased 5% to $75,281 or 1.78% of net
sales in the third quarter of fiscal 1996 from $71,397 or 1.87% of net sales in
the third quarter of fiscal 1995. Membership fees include new membership
sign-ups at the 16 warehouses opened since the end of the third quarter of
fiscal 1995.
Gross margin (defined as net sales minus merchandise costs) increased 17% to
$406,284 or 9.59% of net sales in the third quarter of fiscal 1996 from
$348,517, or 9.11% of net sales in the third quarter of fiscal 1995. The 48
basis point increase in gross margin as a percentage of net sales reflects the
Company's greater purchasing power, expanded use of its depot facilities,
improved fresh foods margins, and increased sales penetration of certain higher
gross margin ancillary businesses. The gross margin figures reflect accounting
for merchandise costs on the last-in, first-out (LIFO) method. The third quarter
of fiscal 1996 and 1995 each included a $2,500 LIFO provision.
Selling, general and administrative expenses as a percent of net sales
totaled 9.05% during the third quarter of fiscal 1996 compared to 9.03% during
the third quarter of fiscal 1995. Such expenses as a percent of sales at the
Company's core warehouse operations showed year-over-year improvement, which was
offset by higher expenses associated with international expansion and certain
ancillary businesses.
Preopening expenses totaled $4,738 or 0.11% of net sales during the third
quarter of fiscal 1996 compared to $3,332 or 0.09% of net sales during the third
quarter of fiscal 1995. Four new locations
3
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were opened in the third quarter of fiscal 1996, compared to two new locations
during last year's third quarter. The increase in preopening expenses was also
due to an increased level of spending on remodels, including expanded fresh
foods and ancillary operations at existing warehouses.
In the third quarter of fiscal 1996 the Company recorded a pre-tax provision
for warehouse closing costs of $6,000, or $.02 per share on an after-tax basis
(fully diluted). The provision includes estimated closing costs for five
warehouses closed in the third quarter of fiscal 1996 as well as closing costs
associated with warehouses which were relocated to new facilities. There were no
warehouse closing costs in the third quarter of the prior fiscal year; however,
the Company recorded a pre-tax provision for warehouse closing costs of $7,500
or $.02 per share on an after-tax basis (fully diluted) in the fourth quarter of
fiscal 1995, primarily reflecting estimated closing costs for certain warehouses
which were relocated to new facilities, and the closing of a regional office.
Interest expense totaled $19,194 in the third quarter of fiscal 1996
compared to $16,747 in the third quarter of fiscal 1995. The increase in
interest expense is primarily related to the issuance in June 1995 of $300,000
of 7 1/8% Senior Notes. Interest income and other totaled $2,007 in the third
quarter of fiscal 1996 compared to $1,068 in the third quarter of fiscal 1995,
primarily due to improved earnings in the Mexico joint venture.
The effective income tax rate on earnings in the third quarter of fiscal
1996 was 41.25% compared to a 41.4% effective tax rate in the third quarter of
fiscal 1995.
COMPARISON OF THE 36 WEEKS ENDED MAY 12, 1996 AND MAY 7, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Income from continuing operations for the first thirty-six weeks of fiscal
year 1996 increased 11% to $162,253, or $0.80 per share (fully diluted), from
$145,913, or $0.70 per share (fully diluted), during the first thirty-six weeks
of fiscal 1995. The 14% earnings per share increase reflects the increase in
income from continuing operations as well as the reduction of 23.2 million
outstanding shares of PriceCostco Common Stock beginning on December 20, 1994,
following the completion of the spin-off of Price Enterprises. Net operating
results for the first thirty-six weeks of fiscal 1995 include a non-cash charge
of $83,363, or $.37 per share, reflecting the loss on disposal of discontinued
operations in the spin-off of Price Enterprises. Including this non-cash charge,
net income for the first thirty-six weeks of fiscal 1995 was $62,550 or $.33 per
share compared to net income of $162,253, or $.80 per share for the first
thirty-six weeks of fiscal 1996.
Net sales increased 9% to $13,138,139 during the first 36 weeks of fiscal
1996 from $11,998,719 during the first 36 weeks of fiscal 1995. This increase
was due to opening a net of 16 new warehouses (24 opened; 8 closed, including 2
replacement warehouses) since the end of the third quarter of fiscal 1995 and an
increase in comparable warehouse sales. Comparable sales, that is sales in
warehouses open for at least a year, increased 5 percent during the first 36
weeks of fiscal 1996 compared to the first 36 weeks of fiscal 1995, reflecting
new marketing and merchandising efforts, including the rollout of fresh foods
and various ancillary businesses to certain existing locations. Changes in
prices of merchandise did not materially contribute to sales increases.
Membership fees and other revenue increased 5% to $245,608 or 1.87% of net
sales in the first 36 weeks of fiscal 1996 from $234,764 or 1.96% of net sales
in the first 36 weeks of fiscal 1995. Membership fees include new membership
sign-ups at the 16 warehouses opened since the end of the third quarter of
fiscal 1995.
Gross margin (defined as net sales minus merchandise costs) increased 13% to
$1,267,108 or 9.64% of net sales in the first 36 weeks of fiscal 1996 from
$1,123,157, or 9.36% of net sales in the first 36 weeks of fiscal 1995. The 28
basis point increase in gross margin as a percentage of net sales reflects
strong first half physical inventory results and good control over
post-holiday-season markdowns, as well as greater purchasing power, expanded use
of the Company's depot facilities, improved fresh
4
<PAGE>
foods margins, and increased sales penetration of certain higher gross margin
ancillary businesses. The gross margin figures reflect accounting for
merchandise costs on the last-in, first-out (LIFO) method. The first 36 weeks of
fiscal 1996 and 1995 each include a $7,500 LIFO provision.
Selling, general and administrative expenses as a percent of net sales
totaled 8.84% during the first 36 weeks of fiscal 1996 compared to 8.78% during
the first 36 weeks of fiscal 1995. Such expenses as a percent of sales at the
Company's core warehouse operations showed year-over-year improvement, which was
offset by higher expenses associated with international expansion and certain
ancillary businesses.
Preopening expenses totaled $20,158 or 0.15% of net sales during the first
36 weeks of fiscal 1996 compared to $13,774 or 0.11% of net sales during the
first 36 weeks of fiscal 1995. The increase in preopening expenses is primarily
due to increased remodeling activity, including expanded fresh foods and
ancillary operations at existing warehouses, as well as increased expenses
related to new warehouse openings.
The Company recorded a pre-tax provision for warehouse closing costs of
$6,000, or $.02 per share on an after-tax basis (fully diluted). The provision
includes estimated closing costs for five warehouses closed outright in the
third quarter of fiscal 1996 as well as closing costs associated with warehouses
which were relocated to new facilities. There were no warehouse closing costs in
the first 36 weeks of the prior fiscal year; however, the Company recorded a
pre-tax provision for warehouse closing costs of $7,500 or $.02 per share on an
after-tax basis (fully diluted) in the fourth quarter of fiscal 1995, primarily
reflecting estimated closing costs for certain warehouses which were relocated
to new facilities, and the closing of a regional office.
Interest expense totaled $54,466 in the first 36 weeks of fiscal 1996
compared to $44,366 in the first 36 weeks of fiscal 1995. The increase in
interest expense is primarily related to the issuance in June 1995 of $300,000
of 7 1/8% Senior Notes. Interest income and other totaled $5,385 in the first 36
weeks of fiscal 1996 compared to $2,445 in the first 36 weeks of fiscal 1995,
with the increase primarily due to improvement in the Mexico joint venture
operation.
The effective income tax rate on earnings in the first 36 weeks of both
fiscal 1996 and 1995 was 41.25%.
LIQUIDITY AND CAPITAL RESOURCES
(DOLLARS IN THOUSANDS)
EXPANSION PLANS
PriceCostco's primary capital requirements are for financing the expansion
of its United States and Canadian operations and its international ventures
(presently Mexico, the United Kingdom and Taiwan). While there can be no
assurance that current expectations will be realized and plans are subject to
change upon further review, during fiscal 1996 management's intention is to
spend approximately $450,000 to $550,000 for its United States and Canadian
operations and approximately $50,000 to $75,000 for its international ventures.
Capital expenditures are primarily for real estate, construction, remodeling and
equipment for warehouses and related operations. A total of approximately
$360,000 has been spent during the first 36 weeks of fiscal 1996.
Expansion plans for the United States and Canada during fiscal 1996 are to
open 20 to 23 warehouse clubs, less the relocation of two to three warehouses to
larger and better-located facilities and the outright closing of six to seven
locations. Through the end of the first 36 weeks, the Company has opened 16
warehouses -- five in the United States (including the relocation of its San
Leandro, California warehouse), ten in Canada and one in the United Kingdom --
and closed six warehouses -- in Concord, Colton, Hayward, and Rohnert Park,
California; North Haven, Connecticut; and Portsmouth, New Hampshire.
5
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The Company continues the remodeling and expansion of fresh foods and
ancillary operations, and of the total $450,000 to $550,000 capital expenditures
planned for operations in the U.S. and Canada, the Company expects to spend
approximately $120,000 to $130,000 on these efforts during fiscal 1996. The
Company expects that annual spending on remodeling activities will be reduced
during fiscal 1997, as much of the current remodel activities will have been
completed.
Expansion will be financed with a combination of cash and cash equivalents,
which totaled $80,531 at May 12, 1996; net cash provided by operating
activities; short-term borrowings under revolving credit facilities and/or
commercial paper facilities; and other financing sources as required.
BANK LINES OF CREDIT AND COMMERCIAL PAPER PROGRAMS
The Company has a domestic multiple option loan facility with a group of 12
banks which provides for borrowings up to $500,000 or standby support for a
$500,000 commercial paper program. Of this amount, $250,000 expires on January
27, 1997, and $250,000 expires on January 30, 2001. The interest rate on bank
borrowings is based on LIBOR or rates bid at auction by the participating banks.
At May 12, 1996, $11,000 was outstanding under the commercial paper program and
no amount was outstanding under the loan facility.
In addition, the Company's wholly-owned Eastern Canada subsidiary has a
$102,000 commercial paper program supported by a bank credit facility with three
Canadian banks, of which $61,000 will expire in March 1997 and $41,000 will
expire in March 1999. The interest rate on bank borrowings is based on the prime
rate or the "Bankers' Acceptance" rate. At May 12, 1996, $83,000 was outstanding
under the Canadian commercial paper program.
In April 1996, the Company borrowed $140,000 from a group of banks under a
five-year unsecured term loan. Interest only is payable quarterly at rates based
on LIBOR. Proceeds of the loan were used to retire $40,000 outstanding under the
Canadian commercial paper program and $100,000 outstanding under the U.S.
commercial paper program.
The Company also has separate letter of credit facilities (for commercial
and standby letters of credit) totaling approximately $187,000. The outstanding
commitments under these facilities at May 12, 1996 totaled approximately
$88,000, including approximately $42,000 in standby letters of credit for
workers' compensation requirements.
DEBT AND EQUITY OFFERINGS
On February 21, 1996, the Company filed with the Securities and Exchange
Commission a shelf registration statement relating to $500,000 of senior debt
securities. The registration statement was declared effective on February 29,
1996. As part of that filing, the Company announced its intention to offer
$300,000 of senior notes to refinance existing indebtedness. The Company has
deferred issuance of these notes due to unfavorable interest rate market
conditions.
On May 23, 1996, the Company filed a registration statement with the
Securities and Exchange Commission in connection with an underwritten public
offering of 19,500,000 shares of Common Stock. All of the 19,500,000 shares
being offered are being sold by a selling stockholder, Fourcar B.V., an indirect
subsidiary of Carrefour S.A. Fourcar B.V. has granted the underwriters an option
to purchase up to an additional 1,691,301 shares of Common Stock to cover
over-allotments, if any. After the offering, and assuming the full exercise of
the over-allotment option, Fourcar B.V. will no longer own any shares of Common
Stock of PriceCostco. The Company will not receive any proceeds from the shares
being offered by the selling stockholder.
In a May 23, 1996 news release, Carrefour indicated that: "Carrefour wishes
to focus on the development of its hypermarket concept on a worldwide basis.
This transaction will allow each company to forge their own local partnerships,
without conflicts of interest." PriceCostco and Carrefour have begun to overlap
one another in certain countries, including Mexico, Korea and Taiwan.
6
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Daniel Bernard, Chief Executive Officer of Carrefour, is also a director of
PriceCostco. Mr. Bernard intends to resign from PriceCostco's Board of Directors
upon Fourcar's sale of its PriceCostco common stock.
FINANCIAL POSITION AND CASH FLOWS
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 other current liabilities, the resulting amount
typically approaches the current assets needed to operate the business. Working
capital (current assets in excess of current liabilities) totaled $77,243 at May
12, 1996 compared to working capital of $9,381 at September 3, 1995.
Net cash provided by operating activities totaled $239,804 in the first 36
weeks of fiscal 1996 compared to $61,461 in the first 36 weeks of fiscal 1995.
The increase in net cash from operating activities is a result of increased net
income from continuing operations, higher depreciation and amortization expense,
an approximate $50,000 reduction in net merchandise inventories (merchandise
inventories less supplier accounts payable) and an increase in accrued and other
current liabilities in the first 36 weeks of fiscal 1996 compared to the first
36 weeks of fiscal 1995.
Net cash used in investing activities totaled $369,396 in the first 36 weeks
of fiscal 1996 compared to $314,117 in the first 36 weeks of fiscal 1995. The
investing activities primarily related to additions to property and equipment
for new and remodeled warehouses of $354,469 and $308,089 in the first 36 weeks
of fiscal 1996 and 1995 respectively. The Company opened 16 new warehouses in
the first 36 weeks of both fiscal 1996 and 1995; however, 11 of the fiscal 1995
openings were in the first quarter, of which a significant portion of their
costs were incurred in the fourth quarter of fiscal 1994. Only four of the
fiscal 1996 openings occurred in the first quarter.
Net cash provided by financing activities totaled $164,291 in the first 36
weeks of fiscal 1996 compared to $261,353 in the first 36 weeks of fiscal 1995.
In both periods, the Company utilized its bank lines and commercial paper
programs to finance operations and expansion plans. Net proceeds from short-term
and long-term borrowings totaled $160,588 in the first 36 weeks of fiscal 1996
compared to $263,458 in the first 36 weeks of fiscal 1995.
The Company's balance sheet as of May 12, 1996, reflects a $323,174 or 7%
increase in total assets since September 3, 1995. The increase is primarily due
to a net increase in property and equipment principally related to the Company's
remodeling and expansion program.
PART II -- OTHER INFORMATION
(DOLLARS IN THOUSANDS)
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 (the "Court"). 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 Complaint alleged violation of certain state and
federal laws during the time period prior to Price's earnings release for the
second quarter of fiscal year 1992. 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 filed an Appeal in the Ninth
Circuit Court of Appeals. In an opinion dated November 20, 1995, the Ninth
Circuit reversed and remanded the lawsuit. In April 1996, the United States
Supreme Court denied the Company's petition for review of
7
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the Ninth Circuit's decision. The Company believes that this lawsuit is without
merit and is vigorously defending the lawsuit. The Company does not believe that
the ultimate outcome of such litigation will have a material adverse effect on
the Company's financial position or results of operations.
On December 19, 1994, a Complaint was filed against PriceCostco in an action
entitled SNYDER V. PRICE/COSTCO, INC. ET. AL., Case No. C94-1874Z, United States
District Court, Western District of Washington. On January 4, 1995, a Complaint
was filed against PriceCostco in an action entitled BALSAM V. PRICE/COSTCO, INC.
ET. AL., Case No. C95-0009Z, United States District Court, Western District of
Washington. The Snyder and Balsam Cases were subsequently consolidated and on
March 15, 1995, plaintiffs' counsel filed a First Amended And Consolidated Class
Action And Derivative Complaint. On November 9, 1995, plaintiffs' counsel filed
a Second Amended And Consolidated Class Action And Derivative Complaint. The
Second Amended Complaint alleges violation of certain state and federal laws
arising from the spin-off and Exchange Transaction and the merger between Price
and Costco. The Company believes that this lawsuit is without merit and is
vigorously defending against this lawsuit. The Company does not believe that the
ultimate outcome of such litigation will have a material adverse effect on the
Company's financial position or results of operations.
In May 1996, PriceCostco reached an agreement in principle with the
Environmental Protection Agency and the U.S. Department of Justice to settle an
enforcement action under the federal Clean Air Act. The action is based on
claims that PriceCostco failed to maintain required documentation related to its
sale of freon products. Under the terms of the proposed settlement, PriceCostco
will agree to pay a civil penalty of $232 and to comply with federal regulations
relating to the sale of ozone-depleting substances.
The Company is involved from time to time in claims, proceedings and
litigation arising from its business and property ownership. The Company does
not believe that any such claim, proceeding or litigation, either alone or in
the aggregate, will have a material adverse effect on the Company's financial
position or results of operations.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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:
(10.1) $140 Million Credit Agreement among PriceCostco Nova Scotia
Company and Certain Commercial Lending Institutions
(27) Financial Data Schedule
(28) Report of Independent Public Accountants
(b) No reports on Form 8-K were filed for the 12 weeks ended May 12, 1996.
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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
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Date: June 5, 1996 /s/ James D. Sinegal
---------------------------------------------
James D. Sinegal
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Date: June 5, 1996 /s/ Richard A. Galanti
---------------------------------------------
Richard A. Galanti
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
</TABLE>
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PRICE/COSTCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 3,
1995
MAY 12, -------------
1996
-------------
(UNAUDITED)
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CURRENT ASSETS
Cash and cash equivalents......................................................... $ 80,531 $ 45,688
Receivables, net.................................................................. 136,690 146,665
Merchandise inventories........................................................... 1,497,564 1,422,272
Other current assets.............................................................. 83,534 87,694
------------- -------------
Total current assets............................................................ 1,798,319 1,702,319
------------- -------------
PROPERTY AND EQUIPMENT
Land, land rights, and land improvements.......................................... 1,245,916 1,143,860
Buildings and leasehold improvements.............................................. 1,380,596 1,215,706
Equipment and fixtures............................................................ 682,950 624,398
Construction in progress.......................................................... 69,410 78,071
------------- -------------
3,378,872 3,062,035
Less accumulated depreciation and amortization.................................... (610,389) (526,442)
------------- -------------
Net property and equipment...................................................... 2,768,483 2,535,593
------------- -------------
OTHER ASSETS........................................................................ 193,791 199,507
------------- -------------
$ 4,760,593 $ 4,437,419
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank checks outstanding, less cash on deposit..................................... $ 3,785 $ 12,721
Short-term borrowings............................................................. 93,523 75,725
Accounts payable.................................................................. 1,190,536 1,233,128
Accrued salaries and benefits..................................................... 239,226 205,236
Accrued sales and other taxes..................................................... 90,260 91,843
Other current liabilities......................................................... 103,746 74,285
------------- -------------
Total current liabilities....................................................... 1,721,076 1,692,938
LONG-TERM DEBT...................................................................... 1,232,457 1,094,615
DEFERRED INCOME TAXES AND OTHER LIABILITIES......................................... 68,398 68,284
------------- -------------
Total liabilities............................................................... 3,021,931 2,855,837
------------- -------------
MINORITY INTERESTS.................................................................. 60,280 50,838
------------- -------------
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; 195,865,000 and
195,164,000 shares issued and outstanding........................................ 1,959 1,952
Additional paid-in capital........................................................ 311,943 303,989
Accumulated foreign currency translation.......................................... (74,864) (52,289)
Retained earnings................................................................. 1,439,344 1,277,092
------------- -------------
Total stockholders' equity...................................................... 1,678,382 1,530,744
------------- -------------
$ 4,760,593 $ 4,437,419
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
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PRICE/COSTCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
12 WEEKS ENDED 36 WEEKS ENDED
---------------------------- ------------------------------
MAY 12, 1996 MAY 7, 1995 MAY 12, 1996 MAY 7, 1995
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUE
Net sales........................................ $ 4,236,207 $ 3,824,841 $ 13,138,139 $ 11,998,719
Membership fees and other........................ 75,281 71,397 245,608 234,764
------------- ------------- -------------- --------------
Total revenue.................................. 4,311,488 3,896,238 13,383,747 12,233,483
OPERATING EXPENSES
Merchandise costs................................ 3,829,923 3,476,324 11,871,031 10,875,562
Selling, general and administrative.............. 383,387 345,246 1,161,303 1,053,855
Preopening expenses.............................. 4,738 3,332 20,158 13,774
Provision for estimated warehouse closing
costs........................................... 6,000 -- 6,000 --
------------- ------------- -------------- --------------
Operating income............................... 87,440 71,336 325,255 290,292
OTHER INCOME (EXPENSE)
Interest expense................................. (19,194) (16,747) (54,466) (44,366)
Interest income and other........................ 2,007 1,068 5,385 2,445
------------- ------------- -------------- --------------
INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION
FOR INCOME TAXES.................................. 70,253 55,657 276,174 248,371
Provision for income taxes....................... 28,979 23,042 113,921 102,458
------------- ------------- -------------- --------------
INCOME FROM CONTINUING OPERATIONS.................. 41,274 32,615 162,253 145,913
DISCONTINUED OPERATIONS:
Loss on disposal................................. -- -- -- (83,363)
------------- ------------- -------------- --------------
NET INCOME......................................... $ 41,274 $ 32,615 $ 162,253 $ 62,550
------------- ------------- -------------- --------------
------------- ------------- -------------- --------------
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
-- FULLY DILUTED:
Continuing operations:........................... $ 0.21 $ 0.17 $ 0.80 $ 0.70
Discontinued operations:
Loss on disposal............................... -- -- -- (0.37)
------------- ------------- -------------- --------------
Net income....................................... $ 0.21 $ 0.17 $ 0.80 $ 0.33
------------- ------------- -------------- --------------
------------- ------------- -------------- --------------
Shares used in calculation (000's)............... 218,336 196,078 218,145 226,834
------------- ------------- -------------- --------------
------------- ------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
PRICE/COSTCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
36 WEEKS ENDED
--------------------------
MAY 12, 1996 MAY 7, 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................................................... $ 162,253 $ 62,550
------------ ------------
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization..................................................... 109,714 94,973
Loss on disposal of discontinued operations....................................... -- 83,363
Increase in merchandise inventories............................................... (79,758) (217,088)
Increase (decrease) in accounts payable........................................... (37,876) 49,743
Other............................................................................. 85,471 (12,080)
------------ ------------
Total adjustments............................................................... 77,551 (1,089)
------------ ------------
Net cash provided by operating activities........................................... 239,804 61,461
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment................................................. (354,469) (308,089)
Proceeds from the sale of property and equipment.................................... 3,363 5,563
Investment in unconsolidated joint ventures......................................... (5,000) (5,610)
Decrease in short-term investments and restricted cash.............................. -- 9,268
Other............................................................................... (13,290) (15,249)
------------ ------------
Net cash used in investing activities............................................. (369,396) (314,117)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from short-term borrowings............................................. 21,335 263,458
Decrease in bank checks outstanding, less cash on deposit........................... (11,670) (2,291)
Net proceeds from long-term borrowings.............................................. 139,253 --
Payments on long-term debt and notes payable........................................ (2,100) (1,470)
Proceeds from minority interests, net............................................... 9,512 --
Exercise of stock options, including income tax benefit............................. 7,961 1,656
------------ ------------
Net cash provided by financing activities......................................... 164,291 261,353
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH............................................... 144 1,174
------------ ------------
Increase in cash and cash equivalents............................................... 34,843 9,871
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........................................ 45,688 53,638
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................................ $ 80,531 $ 63,509
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amounts capitalized)............................................. $ 39,134 $ 33,862
Income taxes...................................................................... 111,201 94,775
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
PRICE/COSTCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
NOTE (1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The unaudited consolidated financial statements include the accounts of
Price/Costco, Inc., a Delaware corporation, and its subsidiaries ("PriceCostco"
or the "Company"). PriceCostco is a holding company which operates primarily
through its major subsidiaries, The Price Company and subsidiaries ("Price"),
and Costco Wholesale Corporation and subsidiaries ("Costco"). Price and Costco
primarily operate cash and carry membership warehouses.
The accompanying unaudited 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 fiscal year ended September 3, 1995.
BUSINESS
The Company historically operated in two reporting business segments: a cash
and carry merchandising operation and a non-club real estate operation. In July
1994 the Company discontinued its non-club real estate operations through a
spin-off of Price Enterprises, Inc., completed in December, 1994.
FISCAL YEARS
The Company reports on a 52/53-week fiscal year, ending on the Sunday
nearest the end of August. Fiscal 1996 is a 52-week fiscal year, with the first,
second and third quarters consisting of 12 weeks each and the fourth quarter,
ending September 1, 1996, consisting 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 the first-in,
first-out (FIFO) method for foreign merchandise inventories. If the FIFO method
had been used merchandise inventory would have been $23,650 and $16,150 higher
at May 12, 1996 and September 3, 1995, 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 fiscal quarters.
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
calculation for the 12- and 36-week periods ended May 12, 1996 and May 7, 1995,
reflects the reduction of approximately 23.2 million PriceCostco shares tendered
in exchange for an equivalent number of Price Enterprises, Inc. shares as of
December 20, 1994. The calculation also eliminates interest expense, net of
income taxes, on the 5 1/2% convertible subordinated debentures (primary and
fully diluted, and excluding the third quarter of fiscal 1995), and the 6 3/4%
convertible subordinated debentures (fully diluted only and excluding the third
quarter of fiscal 1995).
13
<PAGE>
PRICE/COSTCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
NOTE (2) -- DEBT
BANK LINES OF CREDIT AND COMMERCIAL PAPER PROGRAMS
The Company has a domestic multiple option loan facility with a group of 12
banks which provides for borrowings up to $500,000 or standby support for a
$500,000 commercial paper program. Of this amount, $250,000 expires on January
27, 1997, and $250,000 expires on January 30, 2001. The interest rate on bank
borrowings is based on LIBOR or rates bid at auction by the participating banks.
At May 12, 1996, $11,000 was outstanding under the commercial paper program and
no amount was outstanding under the loan facility.
In addition, the Company's wholly-owned Eastern Canada subsidiary has a
$102,000 commercial paper program supported by a bank credit facility with three
Canadian banks, of which $61,000 will expire in March 1997 and $41,000 will
expire in March 1999. The interest rate on bank borrowings is based on the prime
rate or the "Bankers' Acceptance" rate. At May 12, 1996, $83,000 was outstanding
under the Canadian commercial paper program.
In April 1996, the Company borrowed $140,000 from a group of banks under a
five-year unsecured term loan. Interest only is payable quarterly at rates based
on LIBOR. Proceeds of the loan were used to retire $40,000 outstanding under the
Canadian commercial paper program and $100,000 outstanding under the U.S.
commercial paper program.
The Company also has separate letter of credit facilities (for commercial
and standby letters of credit) totaling approximately $187,000. The outstanding
commitments under these facilities at May 12, 1996 totaled approximately
$88,000, including approximately $42,000 in standby letters of credit for
workers' compensation requirements.
On February 21, 1996, the Company filed with the Securities and Exchange
Commission a shelf registration statement relating to $500,000 of senior debt
securities. The registration statement was declared effective on February 29,
1996. As part of that filing, the Company announced its intention to offer
$300,000 of senior notes to refinance existing indebtedness. The Company has
deferred issuance of these notes due to unfavorable interest rate market
conditions.
NOTE (3) -- INCOME TAXES
The following is a reconciliation of the federal statutory income tax rate
to the effective income tax rate for income from continuing operations:
<TABLE>
<CAPTION>
36 WEEKS ENDED 36 WEEKS ENDED
MAY 12, 1996 MAY 7, 1995
---------------------- ----------------------
<S> <C> <C> <C> <C>
Federal statutory income tax rate........................... $ 96,661 35.00% $ 86,930 35.00%
State, foreign and other income taxes, net.................. 17,260 6.25% 15,528 6.25%
----------- --------- ----------- ---------
$ 113,921 41.25% $ 102,458 41.25%
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</TABLE>
NOTE (4) -- COMMITMENTS AND CONTINGENCIES
The Company is involved from time to time in claims, proceedings and
litigation arising from its business and property ownership. The Company does
not believe that any such claim, proceeding or litigation, either alone or in
the aggregate, will have a material adverse effect on the Company's financial
position or results of operations. See Legal Proceedings at page 7 for
outstanding legal matters.
14
<PAGE>
PRICE/COSTCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
NOTE (5) -- SUBSEQUENT EVENT
On May 23, 1996, the Company filed a registration statement with the
Securities and Exchange Commission in connection with an underwritten public
offering of 19,500,000 shares of Common Stock. All of the 19,500,000 shares
being offered are being sold by a selling stockholder, Fourcar B.V., an indirect
subsidiary of Carrefour S.A. Fourcar B.V. has granted the underwriters an option
to purchase up to an additional 1,691,301 shares of Common Stock to cover
over-allotments, if any. After the offering, and assuming the full exercise of
the over-allotment option, Fourcar B.V. will no longer own any shares of Common
Stock of PriceCostco. The Company will not receive any proceeds from the shares
being offered by the selling stockholder.
In a May 23, 1996 news release, Carrefour indicated that: "Carrefour wishes
to focus on the development of its hypermarket concept on a worldwide basis.
This transaction will allow each company to forge their own local partnerships,
without conflicts of interest." PriceCostco and Carrefour have begun to overlap
one another in certain countries, including Mexico, Korea and Taiwan. Daniel
Bernard, Chief Executive Officer of Carrefour, is also a director of
PriceCostco. Mr. Bernard intends to resign from PriceCostco's Board of Directors
upon Fourcar's sale of its PriceCostco common stock.
15
<PAGE>
U.S. $140,000,000
CREDIT AGREEMENT,
dated as of April 11, 1996,
among
PRICE COSTCO NOVA SCOTIA COMPANY,
as the Borrower,
and
CERTAIN COMMERCIAL LENDING INSTITUTIONS,
as the Lenders,
and
CANADIAN IMPERIAL BANK OF COMMERCE,
as the Agent for the Lenders.
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of April 11, 1996, among PRICE COSTCO NOVA
SCOTIA COMPANY, a Nova Scotia unlimited company (the "BORROWER"), the various
financial institutions as are or may become parties hereto (collectively, the
"LENDERS"), and CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC"), as agent (the
"AGENT") for the Lenders,
W I T N E S S E T H:
WHEREAS, the Borrower is engaged in the business of providing financing for
various Affiliates of Price/Costco, Inc.; and
WHEREAS, the Borrower desires to obtain Commitments from the Lenders
pursuant to which Loans, in a maximum aggregate principal amount not to exceed
$140,000,000, will be made to the Borrower in a single Borrowing on or before
April 11, 1996; and
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth (including ARTICLE V), to extend such
Commitments and make such Loans to the Borrower; and
WHEREAS, the proceeds of such Loans will be used for general corporate
purposes of the Borrower;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. DEFINED TERMS. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"AFFILIATE" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing
general partners; or
<PAGE>
(b) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
"AGENT" is defined in the PREAMBLE and includes each other Person as shall
have subsequently been appointed as the successor Agent pursuant to SECTION 9.4.
"AGREEMENT" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"ALTERNATE BASE RATE" means, on any date and with respect to all Base Rate
Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest most recently established by CIBC at its
Domestic Office as its reference rate for Dollar loans; and
(b) the Federal Funds Rate most recently determined by CIBC plus
.50%.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by CIBC in connection with extensions of credit. Changes in
the rate of interest on that portion of any Loans maintained as Base Rate Loans
will take effect simultaneously with each change in the Alternate Base Rate.
The Agent will give notice promptly to the Borrower and the Lenders of changes
in the Alternate Base Rate.
"ASSIGNEE LENDER" is defined in SECTION 10.10.1.
"AUTHORIZED OFFICER" means, relative to any Obligor, those of its officers
whose signatures and incumbency shall have been certified to the Agent and the
Lenders pursuant to SECTION 5.1.1.
"BASE RATE LOAN" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"BORROWER" is defined in the PREAMBLE.
"BORROWING" means the Loans of the same type and, in the case of LIBO Rate
Loans, having the same Interest Period made by all Lenders on the same Business
Day and pursuant to the same Borrowing Request in accordance with SECTION 2.1.
-2-
<PAGE>
"BORROWING REQUEST" means a loan request and certificate duly executed by
an Authorized Officer of the Borrower, substantially in the form of EXHIBIT B
hereto.
"BUSINESS DAY" means
(a) any day which is neither a Saturday or Sunday nor a legal holiday
on which banks are authorized or required to be closed in New York, New
York; and
(b) relative to the making, continuing, prepaying or repaying of any
LIBO Rate Loans, any day on which dealings in Dollars are carried on in the
London interbank market.
"CAPITAL EXPENDITURES" means, for any period, the sum of
(a) the aggregate amount of all expenditures of the Borrower for
fixed or capital assets made during such period which, in accordance with
GAAP, would be classified as capital expenditures; and
(b) the aggregate amount of all Capitalized Lease Liabilities
incurred during such period.
"CAPITALIZED LEASE LIABILITIES" means all monetary obligations of the
Borrower under any leasing or similar arrangement which, in accordance with
GAAP, would be classified as capitalized leases, and, for purposes of this
Agreement and each other Loan Document, the amount of such obligations shall be
the capitalized amount thereof, determined in accordance with GAAP, and the
stated maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"CASH EQUIVALENT INVESTMENT" means, at any time:
(a) any evidence of the Indebtedness, maturing not more than one year
after such time, issued or guaranteed by the United States Government;
(b) commercial paper, maturing not more than nine months from the
date of issue, which is issued by
(i) a corporation (other than an Affiliate of any Obligor)
organized under the laws of any state of the United States or of the
District of Columbia and rated A-l by Standard & Poor's Ratings Group
or P-l by Moody's Investors Service, Inc., or
-3-
<PAGE>
(ii) any Lender (or its holding company);
(c) any certificate of deposit or bankers acceptance, maturing not
more than one year after such time, which is issued by either
(i) a commercial banking institution that is a member of the
Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $500,000,000, or
(ii) any Lender; or
(d) any repurchase agreement entered into with any Lender (or other
commercial banking institution of the stature referred to in CLAUSE (c)(i))
which
(i) is secured by a fully perfected security interest in any
obligation of the type described in any of CLAUSES (a) through (c);
and
(ii) has a market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation of
such Lender (or other commercial banking institution) thereunder.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"CHANGE IN CONTROL" means
(a) the acquisition by any Person or group of Persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as
amended) of 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
Price/Costco, Inc.; or
(b) individuals who have become directors of Price/Costco, Inc.
within any two (2) year period (other than by reelection to a successive
term) constituting a majority of the board of directors of Price/Costco,
Inc.; or
(c) the failure of The Price Company to own, free and clear of all
Liens or other encumbrances, at least 100% of
-4-
<PAGE>
the outstanding shares of voting stock of the Borrower on a fully diluted
basis; or
(d) the failure of Price/Costco, Inc. to own, free and clear of all
Liens or other encumbrances, at least 100% of the outstanding shares of
voting stock of The Price Company on a fully diluted basis.
"CIBC" is defined in the PREAMBLE.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"COMMITMENT" means, relative to any Lender, such Lender's obligation to
make Loans pursuant to SECTION 2.1.1.
"COMMITMENT AMOUNT" means, on any date, $140,000,000, as such amount may be
reduced from time to time pursuant to SECTION 2.2.
"COMMITMENT TERMINATION DATE" means the earliest of
(a) April 11, 2001; and
(b) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in clause (a) or (b), the Commitments
shall terminate automatically and without any further action.
"COMMITMENT TERMINATION EVENT" means
(a) the occurrence of any Default described in CLAUSES (a) through
(d) of SECTION 8.1.9 with respect to the Borrower; or
(b) the occurrence and continuance of any other Event of Default and
either
(i) the declaration of the Loans to be due and payable pursuant
to SECTION 8.3, or
(ii) in the absence of such declaration, the giving of notice by
the Agent, acting at the direction of the Required Lenders, to the
Borrower that the Commitments have been terminated.
"CONTINGENT LIABILITY" means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect
-5-
<PAGE>
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor
against loss) the indebtedness, obligation or any other liability of any other
Person (other than by endorsements of instruments in the course of collection),
or guarantees the payment of dividends or other distributions upon the shares of
any other Person. The amount of any Person's obligation under any Contingent
Liability shall (subject to any limitation set forth therein) be deemed to be
the outstanding principal amount (or maximum principal amount, if larger) of the
debt, obligation or other liability guaranteed thereby.
"CONTINUATION/CONVERSION NOTICE" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of EXHIBIT C hereto.
"CONTROLLED GROUP" means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Borrower, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
"DEFAULT" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached hereto as
SCHEDULE I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Agent and the Required
Lenders.
"DOLLAR" and the sign "$" mean lawful money of the United States.
"DOMESTIC OFFICE" means, relative to any Lender, the office of such Lender
designated as such below its signature hereto or designated in the Lender
Assignment Agreement or such other office of a Lender (or any successor or
assign of such Lender) within the United States as may be designated from time
to time by notice from such Lender, as the case may be, to each other Person
party hereto.
"EFFECTIVE DATE" means the date this Agreement becomes effective pursuant
to SECTION 10.7.
"ENVIRONMENTAL LAWS" means all applicable federal, state or local statutes,
laws, ordinances, codes, rules, regulations and guidelines (including consent
decrees and administrative orders)
-6-
<PAGE>
relating to public health and safety and protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
"EVENT OF DEFAULT" is defined in SECTION 8.1.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to
(a) 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
(b) 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 CIBC from three federal funds brokers of recognized standing
selected by it.
"FEE LETTER" means that certain confidential letter dated March 11, 1996
among CIBC and Price/Costco, Inc.
"FISCAL QUARTER" means any quarter of a Fiscal Year.
"FISCAL YEAR" means any 52/53 week period ending on the Sunday nearest
August 31st; references to a Fiscal Year with a number corresponding to any
calendar year (E.G. the "1995 Fiscal Year") refer to the Fiscal Year ending on
the Sunday nearest August 31st occurring during such calendar year.
"F.R.S. BOARD" means the Board of Governors of the Federal Reserve System
or any successor thereto.
"GAAP" is defined in SECTION 1.4.
"GUARANTORS" means Price/Costco, Inc.; Costco Wholesale Corporation; and
The Price Company.
"GUARANTEES" means the Guaranty Agreements executed and delivered pursuant
to SECTION 5.1.3, substantially in the form of EXHIBIT H hereto, as amended,
supplemented, restated or otherwise modified from time to time.
-7-
<PAGE>
"HAZARDOUS MATERIAL" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource Conservation
and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within the meaning of any other applicable
federal, state or local law, regulation, ordinance or requirement
(including consent decrees and administrative orders) relating to or
imposing liability or standards of conduct concerning any hazardous, toxic
or dangerous waste, substance or material, all as amended or hereafter
amended.
"HEDGING OBLIGATIONS" means, with respect to any Person, all liabilities of
such Person under interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements, and all other agreements or arrangements
designed to protect such Person against fluctuations in interest rates or
currency exchange rates.
"HEREIN", "HEREOF", "HERETO", "HEREUNDER" and similar terms contained in
this Agreement or any other Loan Document refer to this Agreement or such other
Loan Document, as the case may be, as a whole and not to any particular Section,
paragraph or provision of this Agreement or such other Loan Document.
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of any Obligor, any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification of any item in
such financial statement and which, as a condition to its removal, would
require an adjustment to such item the effect of which would be to cause
such Obligor to be in default of any of its obligation under any Loan
Document.
"INCLUDING" means including without limiting the generality of any
description preceding such term.
-8-
<PAGE>
"INDEBTEDNESS" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases which have
been or should be, in accordance with GAAP, recorded as Capitalized Lease
Liabilities;
(d) all other items which, in accordance with GAAP, would be included
as liabilities on the liability side of the balance sheet of such Person as
of the date at which Indebtedness is to be determined;
(e) net liabilities of such Person under all Hedging Obligations;
(f) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase price of
property or services, and indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse; and
(g) all Contingent Liabilities of such Person in respect of any of
the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer.
"INDEMNIFIED LIABILITIES" is defined in SECTION 10.3.
"INDEMNIFIED PARTIES" is defined in SECTION 10.3.
"INTEREST PERIOD" means, relative to any LIBO Rate Loans, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to SECTION 2.3 or 2.4
and shall end on (but exclude) the day which numerically corresponds to such
date one, two, three or six months thereafter (or, if such month has no
-9-
<PAGE>
numerically corresponding day, on the last Business Day of such month), as the
Borrower may select in its relevant notice pursuant to SECTION 2.2 or 2.3;
PROVIDED, HOWEVER, that
(a) the Borrower shall not be permitted to select Interest Periods to
be in effect at any one time which have expiration dates occurring on more
than five different dates;
(b) Interest Periods commencing on the same date for Loans comprising
part of the same Borrowing shall be of the same duration;
(c) if such Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall end on the next following
Business Day (unless, if such Interest Period applies to LIBO Rate Loans,
such next following Business Day is the first Business Day of a calendar
month, in which case such Interest Period shall end on the Business Day
next preceding such numerically corresponding day); and
(d) no Interest Period may end later than the Stated Maturity Date.
"INVESTMENT" means, relative to any Person,
(a) any loan or advance made by such Person to any other Person
(excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business);
(b) any Contingent Liability of such Person; and
(c) any ownership or similar interest held by such Person in any
other Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property.
"LENDER ASSIGNMENT AGREEMENT" means a Lender Assignment Agreement
substantially in the form of EXHIBIT D hereto.
"LENDERS" is defined in the PREAMBLE.
"LIBO RATE" is defined in SECTION 3.2.1.
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"LIBO RATE LOAN" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO RATE (RESERVE ADJUSTED)" is defined in SECTION 3.2.1.
"LIBOR OFFICE" means, relative to any Lender, the office of such Lender
designated as such below its signature hereto or designated in the Lender
Assignment Agreement or such other office of a Lender as designated from time to
time by notice from such Lender to the Borrower and the Agent, whether or not
outside the United States, which shall be making or maintaining LIBO Rate Loans
of such Lender hereunder.
"LIBOR RESERVE PERCENTAGE" is defined in SECTION 3.2.1.
"LIEN" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"LOAN" is defined in SECTION 2.1.1.
"LOAN DOCUMENT" means this Agreement, the Notes, the Guarantees and each
other relevant agreement, document or instrument delivered in connection with
this Agreement and the other Loan Documents.
"MARGIN" means, in the case of a LIBO Rate Loan, a per annum interest rate
determined in accordance with the following table:
Price/Costco, Inc.'s
Credit Rating Margin (Per Annum)
------------- ------------------
Level 1 18.5 basis points (.001850)
Level 2 20.0 basis points (.002000)
Level 3 22.5 basis points (.002250)
Level 4 25.0 basis points (.002500)
Level 5 30.0 basis points (.003000)
"NOTE" means a promissory note of the Borrower payable to any Lender, in
the form of EXHIBIT A hereto (as such promissory note may be amended, endorsed
or otherwise modified from time to time), evidencing the aggregate Indebtedness
of the Borrower to such Lender resulting from outstanding Loans, and also means
all other promissory notes accepted from time to time in substitution therefor
or renewal thereof.
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"OBLIGATIONS" means all obligations (monetary or otherwise) of the Borrower
and each other Obligor arising under or in connection with this Agreement, the
Notes and each other Loan Document.
"OBLIGOR" means the Borrower or any other Person (other than the Agent or
any Lender) obligated under any Loan Document.
"ORGANIC DOCUMENT" means, relative to any Obligor, as applicable, its
certificate of incorporation, its articles of incorporation, its by-laws, its
memorandum of association, articles of association and all shareholder
agreements, voting trusts and similar arrangements applicable to any of its
authorized shares of capital stock.
"PARTICIPANT" is defined in SECTION 10.10.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means a "pension plan", as such term is defined in section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer
plan as defined in section 4001(a)(3) of ERISA), and to which the Borrower or
any corporation, trade or business that is, along with the Borrower, a member of
a Controlled Group, may have liability, including any liability by reason of
having been a substantial employer within the meaning of section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under section 4069 of ERISA.
"PERCENTAGE" means, relative to any Lender, the percentage set forth
opposite its signature hereto or set forth in the Lender Assignment Agreement,
as such percentage may be adjusted from time to time pursuant to Lender
Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and
delivered pursuant to SECTION 10.10.
"PERSON" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
"PLAN" means any Pension Plan or Welfare Plan.
"PRICE/COSTCO, INC.'S CREDIT RATING" means a level of credit determined in
accordance with the following standards: Price/Costco, Inc.'s Credit Rating
shall be "Level 1" if Price/Costco, Inc. has either (a) an S&P Rating of A or
better or (b) a Moody's Rating of A2 or better. Price/Costco, Inc.'s Credit
Rating shall be "Level 2" if Price/Costco, Inc. does not
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meet the standards for a "Level 1" rating set forth above and has either (a) an
S&P Rating of A- or better or (b) a Moody's Rating of A3 or better.
Price/Costco, Inc.'s Credit Rating shall be "Level 3" if Price/Costco, Inc. 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 better or (b) a Moody's Rating of Baa1
or better. Price/Costco, Inc.'s Credit Rating shall be "Level 4" if
Price/Costco, Inc. 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
better or (b) a Moody's Rating of Baa2 or better. If Price/Costco, Inc. 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, then
Price/Costco, Inc.'s Credit Rating shall be "Level 5". If a difference of more
than one rating level exists, the rating which falls between the two shall
apply. As used herein, "S&P Rating" means the implied senior unsecured debt
rating given from time to time to Costco Wholesale Corporation and The Price
Company (collectively, the "Rated Guarantors") by Standard & Poor's Ratings
Group ("S&P"). In the event that S&P does not expressly publish an implied
senior unsecured debt rating for Price/Costco, Inc., the "S&P Rating" shall be
deemed to be that rating which is one level higher than (i) the level of the S&P
subordinated debt ratings of the Rated Guarantors if the Rated Guarantors have
the same rating or (ii) in the event that the Rated Guarantors have different
subordinated debt ratings, the level of the lower of such ratings. As used
herein, "Moody's Rating" means the senior unsecured debt rating given from time
to time to Price/Costco, Inc. by Moody's Investor Service, Inc ("Moody's"). In
the event that Moody's does not expressly publish an implied senior unsecured
debt rating for Price/Costco, Inc., then "Moody's Rating" shall be deemed to be
that rating which is one level higher than (i) the level of the Moody's
subordinated debt ratings of the Rated Guarantors if the Rated Guarantors have
the same rating or (ii) in the event that the Rated Guarantors have different
subordinated debt ratings, the level of the lower of such ratings. For example,
if there is no implied senior unsecured debt rating for Price/Costco, Inc. from
S&P and if the Rated Guarantors each have an S&P subordinated debt rating of
BBB, then the S&P rating would be BBB+. As a further example, if there is no
implied senior unsecured debt rating for Price/Costco, Inc. from Moody's and if
one Rated Guarantor has a Moody's subordinated debt rating of Baa1 and one Rated
Guarantor has a Moody's subordinated debt rating of Baa2, then the Moody's
Rating would be Baa1. The Lenders acknowledge that as of the date of this
Agreement, Price/Costco's Credit Rating is at Level 2.
Changes in Price/Costco, Inc.'s Credit Rating shall take effect (i) in the case
of Margin, at the beginning of the following
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Interest Period, and (ii) in the case of facility fee rate, as of the date of
public announcement by either S&P or Moody's.
"QUARTERLY PAYMENT DATE" means the last day of each March, June, September,
and December or, if any such day is not a Business Day, the next succeeding
Business Day.
"RELEASE" means a "release", as such term is defined in CERCLA.
"REQUIRED LENDERS" means, at any time, any Lenders holding at least 60% of
the then aggregate outstanding principal amount of the Notes then held by the
Lenders, or, if no such principal amount is then outstanding, any Lenders having
at least 60% of the Commitments.
"RESOURCE CONSERVATION AND RECOVERY ACT" means the Resource Conservation
and Recovery Act, 42 U.S.C. Section 690, ET SEQ., as in effect from time to
time.
"STATED MATURITY DATE" means April 11, 2001.
"SUBORDINATED DEBT" means all unsecured Indebtedness of the Borrower for
money borrowed which is subordinated, upon terms satisfactory to the Agent and
the Required Lenders, in right of payment to the payment in full in cash of all
Obligations.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
partnership, limited liability company or other business entity of which more
than 50% of the total voting power (irrespective of whether at the time any
other class or classes of voting interests shall or might have voting power upon
the occurrence of any contingency) is at the time directly or indirectly owned
by such Person, by such Person and one or more other Subsidiaries of such
Person, or by one or more other Subsidiaries of such Person and (ii) any general
partnership in which such Person is a general partner.
"TAXES" is defined in SECTION 4.6.
"TYPE" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UNITED STATES" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"WELFARE PLAN" means a "welfare plan", as such term is defined in section
3(1) of ERISA.
SECTION 1.2. USE OF DEFINED TERMS. Unless otherwise defined or the
context otherwise requires, terms for which
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meanings are provided in this Agreement shall have such meanings when used in
the Disclosure Schedule and in each Note, Borrowing Request,
Continuation/Conversion Notice, Loan Document, notice and other communication
delivered from time to time in connection with this Agreement or any other Loan
Document.
SECTION 1.3. CROSS-REFERENCES. Unless otherwise specified, references in
this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause of
such Article, Section or definition.
SECTION 1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS. Unless otherwise
specified, all accounting terms used herein or in any other Loan Document shall
be interpreted, all accounting determinations and computations hereunder or
thereunder shall be made, and all financial statements required to be delivered
hereunder or thereunder shall be prepared in accordance with, those generally
accepted accounting principles ("GAAP") applied in the preparation of the
financial statements referred to in SECTION 6.5.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION 2.1. COMMITMENTS. On the terms and subject to the conditions of
this Agreement (including ARTICLE V), each Lender severally agrees to make Loans
pursuant to the Commitments described in this SECTION 2.1.
SECTION 2.1.1. COMMITMENT OF EACH LENDER. On a single Business Day
occurring prior to April 11, 1996, each Lender will make Loans (relative to such
Lender, and of any type, its "LOANS") to the Borrower equal to such Lender's
Percentage of the aggregate amount of the Borrowing requested by the Borrower to
be made on such day. The commitment of each Lender described in this SECTION
2.1.1 is herein referred to as its "COMMITMENT". There shall be only one
Borrowing of Loans under this Agreement. No amounts paid or prepaid with
respect to any Loans may be reborrowed.
SECTION 2.1.2. LENDERS NOT PERMITTED OR REQUIRED TO MAKE LOANS. No Lender
shall be permitted or required to make any Loan if, after giving effect thereto,
the aggregate original principal amount of all Loans
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(a) of all Lenders would exceed the Commitment Amount, or
(b) of such Lender would exceed such Lender's Percentage of the
Commitment Amount.
SECTION 2.2. BORROWING PROCEDURE. By delivering a Borrowing Request to
the Agent on or before 12:00, noon, New York time, on a Business Day prior to
April 11, 1996, the Borrower may irrevocably request that a Borrowing of Base
Rate Loans be made in a minimum amount of $5,000,000 and an integral multiple of
$1,000,000. By delivering a Borrowing Request to the Agent on or before 10:30
a.m., New York time, on a Business Day prior to April 9, 1996, the Borrower may
irrevocably request, on not less than three Business Days' notice, that a
Borrowing of LIBO Rate Loans be made in a minimum amount of $5,000,000 and an
integral multiple of $1,000,000. On the terms and subject to the conditions of
this Agreement, the Borrowing shall be comprised of the type of Loans, and shall
be made on the Business Day, specified in such Borrowing Request. On or before
1:00 p.m., New York time, in the case of Base Rate Loans, or 11:30 a.m., New
York time, in the case of LIBO Rate Loans, on such Business Day each Lender
shall deposit with the Agent same day funds in an amount equal to such Lender's
Percentage of the requested Borrowing. Such deposit will be made to an account
which the Agent shall specify by notice to the Lenders. To the extent funds are
received from the Lenders, the Agent shall make such funds available to the
Borrower by wire transfer to the accounts the Borrower shall have specified in
its Borrowing Request. No Lender's obligation to make any Loan shall be
affected by any other Lender's failure to make any Loan.
SECTION 2.3. CONTINUATION AND CONVERSION ELECTIONS. By delivering a
Continuation/Conversion Notice to the Agent on or before 10:30 a.m., New York
time, on a Business Day, the Borrower may from time to time irrevocably elect,
on not less than three nor more than five Business Days' notice that all, or any
portion in an aggregate minimum amount of $5,000,000 and an integral multiple of
$1,000,000, of any Loans be, in the case of Base Rate Loans, converted into LIBO
Rate Loans or, in the case of LIBO Rate Loans, be converted into a Base Rate
Loan or continued as a LIBO Rate Loan (in the absence of delivery of a
Continuation/ Conversion Notice with respect to any LIBO Rate Loan at least
three Business Days before the last day of the then current Interest Period with
respect thereto, such LIBO Rate Loan shall, on such last day, automatically
convert to a LIBO Rate Loan having an Interest Period of one month, unless such
LIBO Rate Loan at such time has an Interest Period of one month due to a prior
automatic conversion, in which case such LIBO Rate Loan shall, on such last day,
automatically convert to a Base Rate Loan); PROVIDED, HOWEVER, that (i) each
such conversion or
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continuation shall be prorated among the applicable outstanding Loans of all
Lenders, and (ii) no portion of the outstanding principal amount of any Loans
may be continued as, or be converted into, LIBO Rate Loans when any Default has
occurred and is continuing.
SECTION 2.4. FUNDING. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing one
of its branches or Affiliates (or an international banking facility created by
such Lender) which is subject to the tax laws of the United States (and which
would not cause the representation of such Lender in the last paragraph of
Section 4.6 to be incorrect) to make or maintain such LIBO Rate Loan; PROVIDED,
HOWEVER, that such LIBO Rate Loan shall nonetheless be deemed to have been made
and to be held by such Lender, and the obligation of the Borrower to repay such
LIBO Rate Loan shall nevertheless be to such Lender for the account of such
foreign branch, Affiliate or international banking facility. In addition, the
Borrower hereby consents and agrees that, for purposes of any determination to
be made for purposes of SECTIONS 4.1, 4.2, 4.3 or 4.4, it shall be conclusively
assumed that each Lender elected to fund all LIBO Rate Loans by purchasing, as
the case may be, Dollar certificates of deposit in the U.S. or Dollar deposits
in its LIBOR Office's interbank eurodollar market.
SECTION 2.5. NOTES. Each Lender's Loans under its Commitment shall be
evidenced by a Note payable to the order of such Lender in a maximum principal
amount equal to such Lender's Percentage of the original Commitment Amount. The
Borrower hereby irrevocably authorizes each Lender to make (or cause to be made)
appropriate notations on the grid attached to such Lender's Note (or on any
continuation of such grid), which notations, if made, shall evidence, INTER
ALIA, the date of, the outstanding principal of, and the interest rate and
Interest Period applicable to the Loans evidenced thereby. Such notations shall
be presumed correct; PROVIDED, HOWEVER, that the failure of any Lender to make
any such notations shall not limit or otherwise affect any Obligations of the
Borrower or any other Obligor.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. REPAYMENTS AND PREPAYMENTS. The Borrower shall repay in full
the unpaid principal amount of each Loan upon the Stated Maturity Date therefor.
Prior thereto, the Borrower
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the
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outstanding principal amount of any Loans; PROVIDED, HOWEVER, that
(i) any such prepayment shall be made PRO RATA among Loans of
the same type and, if applicable, having the same Interest Period of
all Lenders;
(ii) no such prepayment of any LIBO Rate Loan may be made on any
day other than the last day of the Interest Period for such Loan;
(iii) all such voluntary prepayments shall require at least
three but no more than five Business Days' prior written notice to the
Agent;
(iv) all such voluntary partial prepayments shall be in an
aggregate minimum amount of $1,000,000 and an integral multiple of
$500,000; and
(b) shall, immediately upon any acceleration of the Stated Maturity
Date of any Loans pursuant to SECTION 8.2 or SECTION 8.3, repay all Loans,
unless, pursuant to SECTION 8.3, only a portion of all Loans is so
accelerated.
Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by SECTION 4.4.
SECTION 3.2. INTEREST PROVISIONS. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this SECTION 3.2.
SECTION 3.2.1. RATES. Pursuant to an appropriately delivered Borrowing
Request or Continuation/Conversion Notice, the Borrower may elect that Loans
comprising a Borrowing accrue interest at a rate per annum:
(a) on that portion maintained from time to time as a Base Rate Loan,
equal to the sum of the Alternate Base Rate from time to time in effect;
and
(b) on that portion maintained as a LIBO Rate Loan, during each
Interest Period applicable thereto, equal to the LIBO Rate (Reserve
adjusted) for such Interest Period plus the Margin.
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The "LIBO RATE (RESERVE ADJUSTED)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) determined pursuant to the following formula:
LIBO Rate = LIBO RATE
-------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be determined by the Agent on the basis of the LIBOR Reserve
Percentage in effect on, and the applicable rates furnished to and received by
the Agent from CIBC, two Business Days before the first day of such Interest
Period.
"LIBO RATE" means, relative to any Interest Period for LIBO Rate Loans, the
rate of interest equal to the average (rounded upwards, if necessary, to the
nearest 1/16 of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to CIBC's LIBOR Office in the eurodollar
interbank market as at or about 10:00 a.m. New York time two Business Days prior
to the beginning of such Interest Period for delivery on the first day of such
Interest Period, and in an amount approximately equal to the amount of CIBC's
LIBO Rate Loan and for a period approximately equal to such Interest Period.
"LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period for LIBO
Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum
aggregate reserve requirements (including all basic, emergency, supplemental,
marginal and other reserves and taking into account any transitional adjustments
or other scheduled changes in reserve requirements) specified under regulations
issued from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of and including "Eurocurrency Liabilities", as currently
defined in Regulation D of the F.R.S. Board, having a term approximately equal
or comparable to such Interest Period.
All LIBO Rate Loans shall bear interest from and including the first day of
the applicable Interest Period to (but not including) the last day of such
Interest Period at the interest rate determined as applicable to such LIBO Rate
Loan.
SECTION 3.2.2. POST-MATURITY RATES. After the date any principal amount
of any Loan is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise), or after any other monetary Obligation of the
Borrower shall have become due and payable, the Borrower shall pay, but only to
the extent permitted by law, interest (after as well as before judgment) on
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such amounts at a rate per annum equal to the Alternate Base Rate plus a margin
of 2%.
SECTION 3.2.3. PAYMENT DATES. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in part, of
principal outstanding on such Loan;
(c) with respect to Base Rate Loans, on each Quarterly Payment Date
occurring after the Effective Date;
(d) with respect to LIBO Rate Loans, the last day of each applicable
Interest Period (and, if such Interest Period shall exceed 90 days, on the
90th day of such Interest Period);
(e) with respect to any Base Rate Loans converted into LIBO Rate Loans
on a day when interest would not otherwise have been payable pursuant to
CLAUSE (c), on the date of such conversion; and
(f) on that portion of any Loans the Stated Maturity Date of which is
accelerated pursuant to SECTION 8.2 or SECTION 8.3, immediately upon such
acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
SECTION 3.3. FACILITY FEES. The Borrower agrees to pay to the Agent for
the account of each Lender, for the period commencing on the Effective Date and
continuing through the final Commitment Termination Date, a facility fee equal
to the Facility Fee Rate on such Lender's Percentage of the Loans. Such
facility fees shall be payable by the Borrower in arrears on each Quarterly
Payment Date, commencing with the first such day following the Effective Date,
and on the Commitment Termination Date. As used herein the "Facility Fee Rate"
shall be determined in accordance with the following table:
Price/Costco, Inc.'s
Credit Rating Facility Fee Rate (Per Annum)
------------- -----------------------------
Level 1 9.0 basis points (.000900)
Level 2 10.0 basis points (.001000)
Level 3 10.0 basis points (.001000)
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Level 4 12.5 basis points (.001250)
Level 5 17.5 basis points (.001750)
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO RATE LENDING UNLAWFUL. If any Lender shall determine
(which determination shall, upon notice thereof to the Borrower and the Lenders,
be conclusive and binding on the Borrower) that the introduction of or any
change in or in the interpretation of any law makes it unlawful, or any central
bank or other governmental authority asserts that it is unlawful, for such
Lender to make, continue or maintain any Loan as, or to convert any Loan into, a
LIBO Rate Loan, the obligations of all Lenders to make, continue, maintain or
convert any such Loans shall, upon such determination, forthwith be suspended
until such Lender shall notify the Agent that the circumstances causing such
suspension no longer exist, and all LIBO Rate Loans shall automatically convert
into Base Rate Loans at the end of the then current Interest Periods with
respect thereto or sooner, if required by such law or assertion.
SECTION 4.2. DEPOSITS UNAVAILABLE. If the Agent shall have determined
that
(a) Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to CIBC in its relevant market; or
(b) by reason of circumstances affecting CIBC's relevant market,
adequate means do not exist for ascertaining the interest rate applicable
hereunder to LIBO Rate Loans,
then, upon notice from the Agent to the Borrower and the Lenders, the
obligations of all Lenders under SECTION 2.2 and SECTION 2.3 to make or continue
any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be
suspended until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
SECTION 4.3. INCREASED LIBO RATE LOAN COSTS, ETC. The Borrower agrees to
reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
making, continuing or maintaining (or of its obligation to make, continue or
maintain) any Loans as, or of converting (or of its obligation to convert) any
Loans into, LIBO Rate Loans. Such Lender shall promptly
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notify the Agent and the Borrower in writing of the occurrence of any such
event, such notice to state, in reasonable detail, the reasons therefor and the
additional amount required fully to compensate such Lender for such increased
cost or reduced amount. Such additional amounts shall be payable by the
Borrower directly to such Lender within five days of its receipt of such notice,
and such notice shall be presumed correct.
SECTION 4.4. FUNDING LOSSES. In the event any Lender shall incur any loss
or expense (including any loss or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such Lender to make,
continue or maintain any portion of the principal amount of any Loan as, or to
convert any portion of the principal amount of any Loan into, a LIBO Rate Loan)
as a result of
(a) any conversion or repayment or prepayment of the principal amount
of any LIBO Rate Loans on a date other than the scheduled last day of the
Interest Period applicable thereto, whether pursuant to SECTION 3.1 or
otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance with the
Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, LIBO Rate
Loans in accordance with the Continuation/ Conversion Notice therefor,
then, upon the written notice of such Lender to the Borrower (with a copy to the
Agent), the Borrower shall, within five days of its receipt thereof, pay
directly to such Lender such amount as will (in the reasonable determination of
such Lender) reimburse such Lender for such loss or expense. Such written
notice (which shall include calculations in reasonable detail) shall be presumed
correct.
SECTION 4.5. INCREASED CAPITAL COSTS. If any change in,
or the introduction, adoption, effectiveness, interpretation, reinterpretation
or phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person controlling
such Lender, and such Lender determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's capital as a
consequence of its Commitment or the Loans made by such Lender is reduced to a
level below that which such Lender or such controlling Person could have
achieved but for the occurrence of any such circumstance, then, in any such case
upon notice from time to time by such
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Lender to the Borrower, the Borrower shall immediately pay directly to such
Lender additional amounts sufficient to compensate such Lender or such
controlling Person for such reduction in rate of return. A statement of such
Lender as to any such additional amount or amounts (including calculations
thereof in reasonable detail) shall be presumed correct. In determining such
amount, such Lender may use any method of averaging and attribution that it (in
its sole and absolute discretion) shall deem applicable.
SECTION 4.6. TAXES. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income,
excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing authority, but
excluding franchise taxes and taxes imposed on or measured by any Lender's
overall net income or gross receipts (such non-excluded items being called
"TAXES"). In the event that any withholding or deduction from any payment to be
made by the Borrower hereunder is required in respect of any Taxes pursuant to
any applicable law, rule or regulation, then the Borrower will
(a) pay directly to the relevant authority the full amount required to
be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(c) pay to the Agent for the account of the Lenders such additional
amount or amounts as is necessary to ensure that the net amount actually
received by each Lender will equal the full amount such Lender would have
received had no such withholding or deduction been required.
Without limitation of the foregoing, if any taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing authority,
including franchise taxes and taxes imposed on or measured by any Lender's
overall net income or gross receipts (other than a change in the rate of tax
based solely on the overall net or gross income of such Lender) ("Further
Taxes") are directly or indirectly asserted against the Agent or any Lender with
respect to any payment received by the Agent or such Lender under Section 4.6(a)
or (c) or this sentence, the Agent or such Lender may pay such Further Taxes and
the Borrower will promptly pay to the Agent or such Lender, at the time interest
is paid, such additional amounts (including any penalties, interest or expenses)
that the respective Lender or Agent specifies as necessary to preserve the
after-tax yield that the Agent or
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Lender would have received if such Taxes or Further Taxes had not been imposed.
If the Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Agent, for the account of the respective
Lenders, the required receipts or other required documentary evidence, the
Borrower shall indemnify the Lenders for any incremental Taxes, interest or
penalties that may become payable by any Lender as a result of any such failure.
For purposes of this SECTION 4.6, a distribution hereunder by the Agent or any
Lender to or for the account of any Lender shall be deemed a payment by the
Borrower.
Each Lender represents and warrants that it is subject to the tax laws of
the United States, including but not limited to the fact that the interest
income derived from this Agreement is effectively connected with its United
States trade or business. Each Lender agrees to provide internal revenue
service forms reasonably requested by the Borrower in connection with the
foregoing. The Borrower will not be obligated to pay any amounts pursuant to
this Section 4.6 (and no Guarantor will be obligated to pay any amounts pursuant
to any corresponding provision in any Guarantee) to the extent such amounts are
incurred as a result of the representation contained in the first sentence of
this paragraph not being true and correct at any time during the term of this
Agreement.
SECTION 4.7. PAYMENTS, COMPUTATIONS, ETC. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Notes or
any other Loan Document shall be made by the Borrower to the Agent for the PRO
RATA account of the Lenders entitled to receive such payment. All such payments
required to be made to the Agent shall be made, without setoff, deduction or
counterclaim, not later than 1:00 p.m., New York time, on the date due, in same
day or immediately available funds, to such account as the Agent shall specify
from time to time by notice to the Borrower. Funds received after that time
shall be deemed to have been received by the Agent on the next succeeding
Business Day. The Agent shall promptly remit in same day funds to each Lender
its share, if any, of such payments received by the Agent for the account of
such Lender. All interest and fees shall be computed on the basis of the actual
number of days (including the first day but excluding the last day) occurring
during the period for which such interest or fee is payable over a year
comprised of 360 days (or, in the case of interest on a Base Rate Loan, 365 days
or, if appropriate, 366 days). Whenever any payment to be made shall otherwise
be due on a day which is not a Business Day, such payment shall (except as
otherwise required by CLAUSE (c) of the definition of the term "INTEREST PERIOD"
with respect to LIBO Rate Loans) be made on the next succeeding Business Day and
such extension of time shall be
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included in computing interest and fees, if any, in connection with such
payment.
SECTION 4.8. SHARING OF PAYMENTS. If any Lender shall obtain any payment
or other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan (other than pursuant to the terms of SECTIONS
4.3, 4.4 and 4.5) in excess of its PRO RATA share of payments then or therewith
obtained by all Lenders, such Lender shall purchase from the other Lenders such
participations in Loans made by them as shall be necessary to cause such
purchasing Lender to share the excess payment or other recovery ratably with
each of them; PROVIDED, HOWEVER, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Lender,
the purchase shall be rescinded and each Lender which has sold a participation
to the purchasing Lender shall repay to the purchasing Lender the purchase price
to the ratable extent of such recovery together with an amount equal to such
selling Lender's ratable share (according to the proportion of
(a) the amount of such selling Lender's required repayment to the
purchasing Lender
TO
(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section may,
to the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to SECTION 4.9) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or other similar
law, any Lender receives a secured claim in lieu of a setoff to which this
Section applies, such Lender shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Lenders entitled under this Section to share in the benefits of any
recovery on such secured claim.
SECTION 4.9. SETOFF. Each Lender shall, upon the occurrence of any
Default described in CLAUSES (a) through (d) of SECTION 8.1.9 or, with the
consent of the Required Lenders, upon the occurrence of any other Event of
Default, have the right to appropriate and apply to the payment of the
Obligations owing to it (whether or not then due), and (as security for such
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Obligations) the Borrower hereby grants to each Lender a continuing security
interest in, any and all balances, credits, deposits, accounts or moneys of the
Borrower then or thereafter maintained with such Lender; PROVIDED, HOWEVER, that
any such appropriation and application shall be subject to the provisions of
SECTION 4.8. Each Lender agrees promptly to notify the Borrower and the Agent
after any such setoff and application made by such Lender; PROVIDED, HOWEVER,
that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of each Lender under this Section are in
addition to other rights and remedies (including other rights of setoff under
applicable law or otherwise) which such Lender may have.
SECTION 4.10. USE OF PROCEEDS. The Borrower shall apply the proceeds of
each Borrowing in accordance with the FOURTH RECITAL; without limiting the
foregoing, no proceeds of any Loan will be used to acquire or carry any equity
security of a class which is registered pursuant to Section 12 of the Securities
Exchange Act of 1934 or any "margin stock", as defined in F.R.S. Board
Regulation U.
ARTICLE V
CONDITIONS TO BORROWING
SECTION 5.1. CONDITIONS TO BORROWING. The obligations of the Lenders to
fund the Borrowing shall be subject to the prior or concurrent satisfaction of
each of the conditions precedent set forth in this SECTION 5.1.
SECTION 5.1.1. RESOLUTIONS, ETC. The Agent shall have received from each
Obligor a certificate, dated the date of the initial Borrowing, of its Secretary
or Assistant Secretary as to
(a) resolutions of its Board of Directors then in full force and
effect authorizing the execution, delivery and performance of this
Agreement, the Notes and each other Loan Document to be executed by it; and
(b) the incumbency and signatures of those of its officers authorized
to act with respect to this Agreement, the Notes and each other Loan
Document executed by it,
upon which certificate each Lender may conclusively rely until it shall have
received a further certificate of the Secretary of such Obligor canceling or
amending such prior certificate.
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SECTION 5.1.2. DELIVERY OF NOTES. The Agent shall have received, for the
account of each Lender, its Note duly executed and delivered by the Borrower.
SECTION 5.1.3. GUARANTEES. The Agent shall have received the Guarantees,
dated the date hereof, duly executed by each of the Guarantors.
SECTION 5.1.4. OPINIONS OF COUNSEL. The Agent shall have received
opinions, dated the date of the initial Borrowing and addressed to the Agent and
all Lenders, from
(a) Foster, Pepper & Shefelman, counsel to the Obligors, substantially
in the form of EXHIBIT E hereto;
(b) Stewart McKelvey Stirling Scales, special Canadian counsel to the
Obligors, substantially in the form of EXHIBIT F hereto;
(c) Osler Hoskin & Harcourt, special Canadian tax counsel to the
Obligors, substantially in the form of EXHIBIT G hereto.
SECTION 5.1.5. CLOSING FEES, EXPENSES, ETC. The Agent shall have received
for its own account all fees, costs and expenses due and payable pursuant to
SECTIONS 19 and 20 of The Price Company Guaranty Agreement dated concurrently
herewith, if then invoiced.
SECTION 5.1.6. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Both before
and after giving effect to the Borrowing, the following statements shall be true
and correct
(a) the representations and warranties set forth in ARTICLE VI
(excluding, however, those contained in SECTION 6.7) shall be true and
correct with the same effect as if then made (unless stated to relate
solely to an early date, in which case such representations and warranties
shall be true and correct as of such earlier date);
(b) except as disclosed by the Borrower to the Agent and the Lenders
pursuant to SECTION 6.7
(i) no labor controversy, litigation, arbitration
or governmental investigation or proceeding shall be pending or, to
the knowledge of the Borrower, threatened against the Borrower which
might materially adversely affect the Borrower's business, operations,
assets, revenues, properties or prospects or which purports to affect
the legality,
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validity or enforceability of this Agreement, the Notes or any other
Loan Document; and
(ii) no development shall have occurred in any
labor controversy, litigation, arbitration or governmental
investigation or proceeding disclosed pursuant to SECTION 6.7 which
might materially adversely affect the consolidated businesses,
operations, assets, revenues, properties or prospects of the Borrower;
and
(c) no Default shall have then occurred and be continuing, and neither
the Borrower nor any other Obligor is in material violation of any law or
governmental regulation or court order or decree.
SECTION 5.1.7. BORROWING REQUEST. The Agent shall have received a
Borrowing Request for such Borrowing. Each of the delivery of a Borrowing
Request and the acceptance by the Borrower of the proceeds of such Borrowing
shall constitute a representation and warranty by the Borrower that on the date
of such Borrowing (both immediately before and after giving effect to such
Borrowing and the application of the proceeds thereof) the statements made in
SECTION 5.1.6 are true and correct.
SECTION 5.1.8. SATISFACTORY LEGAL FORM. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any other Obligors
shall be satisfactory in form and substance to the Agent and its counsel.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agent to enter into this Agreement
and to make Loans hereunder, the Borrower represents and warrants unto the Agent
and each Lender as set forth in this ARTICLE VI.
SECTION 6.1. ORGANIZATION, ETC. The Borrower is an entity validly
organized and existing and in good standing under the laws of the jurisdiction
of its formation, is duly qualified to do business and is in good standing as a
foreign entity in each jurisdiction where the nature of its business requires
such qualification, and has full power and authority and holds all requisite
governmental licenses, permits and other approvals to enter into and perform its
Obligations under this Agreement, the Notes and each other Loan Document to
which it is a party and to own and hold under lease its property and to conduct
its business substantially as currently conducted by it.
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SECTION 6.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution,
delivery and performance by the Borrower of this Agreement, the Notes and each
other Loan Document executed or to be executed by it, and the execution,
delivery and performance by each other Obligor of each Loan Document executed or
to be executed by it, are within the Borrower's and each such Obligor's
corporate powers, have been duly authorized by all necessary corporate action,
and do not
(a) contravene the Borrower's or any such Obligor's Organic Documents;
(b) contravene any contractual restriction, law or governmental
regulation or court decree or order binding on or affecting the Borrower or
any such Obligor; or
(c) result in, or require the creation or imposition of, any Lien on
any of any Obligor's properties.
SECTION 6.3. GOVERNMENT APPROVAL, REGULATION, ETC. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by the Borrower or any other Obligor of this Agreement,
the Notes or any other Loan Document to which it is a party. The Borrower is
not an "investment company" within the meaning of the Investment Company Act of
1940, as amended, or a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
SECTION 6.4. VALIDITY, ETC. This Agreement constitutes, and the Notes and
each other Loan Document executed by the Borrower will, on the due execution and
delivery thereof, constitute, the legal, valid and binding obligations of the
Borrower enforceable in accordance with their respective terms; and each Loan
Document executed pursuant hereto by each other Obligor will, on the due
execution and delivery thereof by such Obligor, be the legal, valid and binding
obligation of such Obligor enforceable in accordance with its terms.
SECTION 6.5. FINANCIAL INFORMATION. The balance sheet of the Borrower as
at the Effective Date, a copy of which has been furnished to the Agent and each
Lender, has been prepared in accordance with GAAP consistently applied, and
presents fairly the financial condition of the Borrower as at the date thereof.
SECTION 6.6. NO MATERIAL ADVERSE CHANGE. Since the date of the financial
statements described in SECTION 6.5, there has been no material adverse change
in the financial condition,
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operations, assets, business, properties or prospects of the Borrower.
SECTION 6.7. LITIGATION, LABOR CONTROVERSIES, ETC. There is no pending
or, to the knowledge of the Borrower, threatened litigation, action, proceeding,
or labor controversy affecting the Borrower, or any of its respective
properties, businesses, assets or revenues, which may materially adversely
affect the financial condition, operations, assets, business, properties or
prospects of the Borrower or which purports to affect the legality, validity or
enforceability of this Agreement, the Notes or any other Loan Document, except
as disclosed in ITEM 6.7 ("Litigation") of the Disclosure Schedule.
SECTION 6.8. SUBSIDIARIES. The Borrower has no Subsidiaries.
SECTION 6.9. OWNERSHIP OF PROPERTIES. The Borrower owns good and
marketable title to all of its properties and assets, real and personal,
tangible and intangible, of any nature whatsoever (including patents,
trademarks, trade names, service marks and copyrights), free and clear of all
Liens, charges or claims (including infringement claims with respect to patents,
trademarks, copyrights and the like) except as permitted pursuant to SECTION
7.2.3.
SECTION 6.10. TAXES. The Borrower has filed all tax returns and reports
required by law to have been filed by it and has paid all taxes and governmental
charges thereby shown to be owing, except any such taxes or charges which are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on its
books.
SECTION 6.11. ENVIRONMENTAL WARRANTIES. Except as set forth in ITEM 6.11
("Environmental Matters") of the Disclosure Schedule:
(a) all facilities and property (including underlying groundwater)
owned or leased by the Borrower have been, and continue to be, owned or
leased by the Borrower in material compliance with all Environmental Laws;
(b) there have been no past, and there are no pending or threatened
(i) claims, complaints, notices or requests for information
received by the Borrower with respect to any alleged violation of any
Environmental Law, or
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(ii) complaints, notices or inquiries to the Borrower regarding
potential liability under any Environmental Law;
(c) there have been no Releases of Hazardous Materials at, on or
under any property now or previously owned or leased by the Borrower that,
singly or in the aggregate, have, or may reasonably be expected to have, a
material adverse effect on the financial condition, operations, assets,
business, properties or prospects of the Borrower;
(d) the Borrower has been issued and are in material compliance with
all permits, certificates, approvals, licenses and other authorizations
relating to environmental matters and necessary or desirable for their
businesses;
(e) no property now or previously owned or leased by the Borrower is
listed or proposed for listing (with respect to owned property only) on the
National Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list of sites requiring investigation or clean-up;
(f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any property now or
previously owned or leased by the Borrower that, singly or in the
aggregate, have, or may reasonably be expected to have, a material adverse
effect on the financial condition, operations, assets, business, properties
or prospects of the Borrower;
(g) the Borrower has not directly transported or directly arranged
for the transportation of any Hazardous Material to any location which is
listed or proposed for listing on the National Priorities List pursuant to
CERCLA, on the CERCLIS or on any similar state list or which is the subject
of federal, state or local enforcement actions or other investigations
which may lead to material claims against the Borrower thereof for any
remedial work, damage to natural resources or personal injury, including
claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable asbestos
present at any property now or previously owned or leased by the Borrower
that, singly or in the aggregate, have, or may reasonably be expected to
have, a material adverse effect on the financial condition, operations,
assets, business, properties or prospects of the Borrower; and
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(i) no conditions exist at, on or under any property now or
previously owned or leased by the Borrower which, with the passage of time,
or the giving of notice or both, would give rise to liability under any
Environmental Law.
SECTION 6.12. REGULATIONS G, U AND X. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock, and no proceeds of any Loans will be used for a purpose which violates,
or would be inconsistent with, F.R.S. Board Regulation G, U or X. Terms for
which meanings are provided in F.R.S. Board Regulation G, U or X or any
regulations substituted therefor, as from time to time in effect, are used in
this Section with such meanings.
SECTION 6.13. ACCURACY OF INFORMATION. All factual information heretofore
or contemporaneously furnished by or on behalf of the Borrower in writing to the
Agent or any Lender for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all other such factual information
hereafter furnished by or on behalf of the Borrower to the Agent or any Lender
will be, true and accurate in every material respect on the date as of which
such information is dated or certified and as of the date of execution and
delivery of this Agreement by the Agent and such Lender, and such information is
not, or shall not be, as the case may be, incomplete by omitting to state any
material fact necessary to make such information not misleading.
ARTICLE VII
COVENANTS
SECTION 7.1. AFFIRMATIVE COVENANTS. The Borrower agrees with the Agent
and each Lender that, until all Commitments have terminated and all Obligations
have been paid and performed in full, the Borrower will perform the obligations
set forth in this SECTION 7.1.
SECTION 7.1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The Borrower
will furnish, or will cause to be furnished, to each Lender and the Agent copies
of the following financial statements, reports, notices and information:
(a) as soon as possible and in any event within three days after the
occurrence of each Default, a statement of the chief financial Authorized
Officer of the Borrower setting forth details of such Default and the
action which the Borrower has taken and proposes to take with respect
thereto; and
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(b) as soon as possible and in any event within three days after
(x) the occurrence of any adverse development with respect to any
litigation, action, proceeding, or labor controversy described in SECTION
6.7 or (y) the commencement of any labor controversy, litigation, action,
proceeding of the type described in SECTION 6.7, notice thereof and copies
of all documentation relating thereto.
SECTION 7.1.2. COMPLIANCE WITH LAWS, ETC. The Borrower will comply in all
material respects with all applicable laws, rules, regulations and orders, such
compliance to include (without limitation):
(a) the maintenance and preservation of its corporate existence and
qualification as a foreign corporation in each jurisdiction necessary to
make the representation set forth in Section 6.1 true and correct; and
(b) the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books.
SECTION 7.1.3. BOOKS AND RECORDS. The Borrower will keep reasonable books
and records which accurately reflect all of its business affairs and
transactions and permit the Agent and each Lender or any of their respective
representatives, at reasonable times and intervals, to visit all of its offices,
to discuss its financial matters with its officers and independent public
accountant (and the Borrower hereby authorizes such independent public
accountant to discuss the Borrower's financial matters with each Lender or its
representatives whether or not any representative of the Borrower is present)
and to examine (and, at the expense of the Borrower, photocopy extracts from)
any of its books or other corporate records, other than any such information
reasonably believed by the Borrower to be confidential. The Borrower shall pay
any fees of such independent public accountant incurred in connection with the
Agent's or any Lender's exercise of its rights pursuant to this Section.
SECTION 7.2. NEGATIVE COVENANTS. The Borrower agrees with the Agent and
each Lender that, until all Commitments have terminated and all Obligations have
been paid and performed in full, the Borrower will perform the obligations set
forth in this SECTION 7.2.
SECTION 7.2.1. BUSINESS ACTIVITIES. The Borrower will not engage in any
business activity, except those described in the
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FIRST RECITAL and such activities as may be incidental or related thereto.
SECTION 7.2.2. INDEBTEDNESS. The Borrower will not create, incur, assume
or suffer to exist or otherwise become or be liable in respect of any
Indebtedness, other than (i) Indebtedness in respect of the Loans and other
Obligations and (ii) Indebtedness to Affiliates.
SECTION 7.2.3. LIENS. The Borrower will not create, incur, assume or
suffer to exist any Lien upon any of its property, revenues or assets, whether
now owned or hereafter acquired, except:
(a) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without penalty or
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside
on its books;
(b) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not overdue
or being diligently contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP shall have been set
aside on its books;
(c) Liens incurred in the ordinary course of business in connection
with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds; and
(d) judgment Liens in existence less than 15 days after the entry
thereof or with respect to which execution has been stayed or the payment
of which is covered in full (subject to a customary deductible) by
insurance maintained with responsible insurance companies.
SECTION 7.2.4. INVESTMENTS. The Borrower will not make, incur, assume or
suffer to exist any Investment in any other Person, except:
(a) Cash Equivalent Investments; PROVIDED, HOWEVER, that any
Investment which when made complies with the requirements of the definition
of the term "CASH EQUIVALENT INVESTMENT" may continue to be held
notwithstanding that
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such Investment if made thereafter would not comply with such requirements;
and
(b) Investments by the Borrower in any Affiliate of Price/Costco, Inc.
(i) by way of loans or advances maturing on or prior to the Stated Maturity
Date or (ii) by way of equity investments.
SECTION 7.2.5. RESTRICTED PAYMENTS, ETC. On and at all times after the
Effective Date:
(a) the Borrower will not declare, pay or make any dividend or
distribution (in cash, property or obligations) on any shares of any class
of capital stock (now or hereafter outstanding) of the Borrower or on any
warrants, options or other rights with respect to any shares of any class
of capital stock (now or hereafter outstanding) of the Borrower (other than
dividends or distributions payable in its common stock or warrants to
purchase its common stock or splitups or reclassifications of its stock
into additional or other shares of its common stock) or apply any of its
funds, property or assets to the purchase, redemption, sinking fund or
other retirement of, or agree to purchase or redeem, any shares of any
class of capital stock (now or hereafter outstanding) of the Borrower, or
warrants, options or other rights with respect to any shares of any class
of capital stock (now or hereafter outstanding) of the Borrower; and
(b) the Borrower will not make any deposit for any of the foregoing
purposes.
SECTION 7.2.6. CAPITAL EXPENDITURES, ETC. The Borrower will not make or
commit to make any Capital Expenditures.
SECTION 7.2.7. CONSOLIDATION, MERGER, ETC. The Borrower will not
liquidate or dissolve, consolidate with, or merge into or with, any other
corporation, or purchase or otherwise acquire all or substantially all of the
assets of any Person (or of any division thereof).
SECTION 7.2.8. ASSET DISPOSITIONS, ETC. Except as permitted by Section
7.2.4, the Borrower will not sell, transfer, lease, contribute or otherwise
convey, or grant options, warrants or other rights with respect to, all or any
substantial part of its assets to any Person.
SECTION 7.2.9. NEGATIVE PLEDGES, RESTRICTIVE AGREEMENTS, ETC. The
Borrower will not enter into any agreement (excluding this Agreement or any
other Loan Document) prohibiting the creation or assumption of any Lien upon its
properties, revenues
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or assets, whether now owned or hereafter acquired, or the ability of the
Borrower or any other Obligor to amend or otherwise modify this Agreement or any
other Loan Document.
SECTION 7.2.10. CREATION OF SUBSIDIARIES. The Borrower will not create any
new Subsidiary.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. LISTING OF EVENTS OF DEFAULT. Each of the following events
or occurrences described in this SECTION 8.1 shall constitute an "EVENT OF
DEFAULT".
SECTION 8.1.1. NON-PAYMENT OF OBLIGATIONS. The Borrower shall default in
the payment or prepayment when due of any principal of or interest on any Loan,
or the Borrower or any Obligor shall default (and such default shall continue
unremedied for a period of five days) in the payment when due of any facility
fee or of any other Obligation.
SECTION 8.1.2. BREACH OF WARRANTY. Any representation or warranty of the
Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate furnished
by or on behalf of the Borrower or any other Obligor to the Agent or any Lender
for the purposes of or in connection with this Agreement or any such other Loan
Document (including any certificates delivered pursuant to ARTICLE V) is or
shall be incorrect when made in any material respect.
SECTION 8.1.3. NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS. The
Borrower shall default in the due performance and observance of any of its
obligations under SECTION 7.2 (other than SECTION 7.2.3) or SECTION 7.1.1(A).
SECTION 8.1.4. NON-PERFORMANCE OF OTHER COVENANTS AND OBLIGATIONS. Any
Obligor shall default in the due performance and observance of any other
agreement contained herein or in any other Loan Document executed by it, and
such default shall continue unremedied for a period of 30 days after notice
thereof shall have been given to the Borrower by the Agent or any Lender.
SECTION 8.1.5. DEFAULT ON OTHER INDEBTEDNESS. A default shall occur in
the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness for borrowed money (other than
Indebtedness described in SECTION 8.1.1) of the Borrower or any other Obligor,
or a default shall occur in the performance or observance of
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any obligation or condition with respect to such Indebtedness if the effect of
such default is to accelerate the maturity of any such Indebtedness or such
default shall continue unremedied for any applicable period of time sufficient
to permit the holder or holders of such Indebtedness, or any trustee or agent
for such holders, to cause such Indebtedness to become due and payable prior to
its expressed maturity.
SECTION 8.1.6. JUDGMENTS. Any judgment or order for the payment of money
in excess of $30,000,000 shall be rendered against the Borrower or any other
Obligor and either
(a) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order; or
(b) there shall be any period of 30 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect.
SECTION 8.1.7. PENSION PLANS. Any of the following events shall occur
with respect to any Pension Plan
(a) the institution of any steps by the Borrower, any member of its
Controlled Group or any other Person to terminate a Pension Plan if, as a
result of such termination, the Borrower or any such member could be
required to make a contribution to such Pension Plan, or could reasonably
expect to incur a liability or obligation to such Pension Plan, in excess
of $500,000; or
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA.
SECTION 8.1.8. CHANGE IN CONTROL. Any Change in Control shall occur.
SECTION 8.1.9. BANKRUPTCY, INSOLVENCY, ETC. The Borrower or any other
Obligor shall
(a) become insolvent or generally fail to pay, or admit in writing its
inability or unwillingness to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for the Borrower or any
other Obligor or any property of any thereof, or make a general assignment
for the benefit of creditors;
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(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Borrower or any other Obligor or
for a substantial part of the property of any thereof, and such trustee,
receiver, sequestrator or other custodian shall not be discharged within 60
days, provided that the Borrower and each other Obligor hereby expressly
authorizes the Agent and each Lender to appear in any court conducting any
relevant proceeding during such 60-day period to preserve, protect and
defend their rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Borrower or any other Obligor, and, if any
such case or proceeding is not commenced by the Borrower or such other
Obligor, such case or proceeding shall be consented to or acquiesced in by
the Borrower or such other Obligor or shall result in the entry of an order
for relief or shall remain for 60 days undismissed, provided that the
Borrower and each other Obligor hereby expressly authorizes the Agent and
each Lender to appear in any court conducting any such case or proceeding
during such 60-day period to preserve, protect and defend their rights
under the Loan Documents; or
(e) take any corporate action authorizing, or in furtherance of, any
of the foregoing, other than those resolutions dated March 28, 1996, copies
of which have been furnished to the Agent and the Lenders.
SECTION 8.1.10. IMPAIRMENT OF SECURITY, ETC. Any Loan Document shall
(except in accordance with its terms), in whole or in part, terminate, cease to
be effective or cease to be the legally valid, binding and enforceable
obligation of any Obligor party thereto; the Borrower, any other Obligor or any
other party shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability.
SECTION 8.2. ACTION IF BANKRUPTCY. If any Event of Default described in
CLAUSES (a) through (d) of SECTION 8.1.9 shall occur with respect to the
Borrower or any other Obligor, the Commitments (if not theretofore terminated)
shall automatically terminate and the outstanding principal amount of all
outstanding Loans and all other Obligations shall automatically be and become
immediately due and payable, without notice or demand.
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SECTION 8.3. ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default
(other than any Event of Default described in CLAUSES (a) through (d) of SECTION
8.1.9 with respect to the Borrower or any other Obligor) shall occur for any
reason, whether voluntary or involuntary, and be continuing, the Agent, upon the
direction of the Required Lenders, shall by notice to the Borrower declare all
or any portion of the outstanding principal amount of the Loans and other
Obligations to be due and payable and/or the Commitments (if not theretofore
terminated) to be terminated, whereupon the full unpaid amount of such Loans and
other Obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand or presentment,
and/or, as the case may be, the Commitments shall terminate.
ARTICLE IX
THE AGENT
SECTION 9.1. ACTIONS. Each Lender hereby appoints CIBC as its Agent under
and for purposes of this Agreement, the Notes and each other Loan Document.
Each Lender authorizes the Agent to act on behalf of such Lender under this
Agreement, the Notes and each other Loan Document and, in the absence of other
written instructions from the Required Lenders received from time to time by the
Agent (with respect to which the Agent agrees that it will comply, except as
otherwise provided in this Section or as otherwise advised by counsel), to
exercise such powers hereunder and thereunder as are specifically delegated to
or required of the Agent by the terms hereof and thereof, together with such
powers as may be reasonably incidental thereto. Each Lender hereby indemnifies
(which indemnity shall survive any termination of this Agreement) the Agent, PRO
RATA according to such Lender's Percentage, from and against any and all
liabilities, obligations, losses, damages, claims, costs or expenses of any kind
or nature whatsoever which may at any time be imposed on, incurred by, or
asserted against, the Agent in any way relating to or arising out of this
Agreement, the Notes and any other Loan Document, including reasonable
attorneys' fees, and as to which the Agent is not reimbursed by the Borrower;
PROVIDED, HOWEVER, that no Lender shall be liable for the payment of any portion
of such liabilities, obligations, losses, damages, claims, costs or expenses
which are determined by a court of competent jurisdiction in a final proceeding
to have resulted solely from the Agent's gross negligence or wilful misconduct.
The Agent shall not be required to take any action hereunder, under the Notes or
under any other Loan Document, or to prosecute or defend any suit in respect of
this Agreement, the Notes or any other Loan Document, unless it is indemnified
hereunder to its satisfaction. If any indemnity in favor of the Agent shall be
or
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become, in the Agent's determination, inadequate, the Agent may call for
additional indemnification from the Lenders and cease to do the acts indemnified
against hereunder until such additional indemnity is given.
SECTION 9.2. FUNDING RELIANCE, ETC. Unless the Agent shall have been
notified by telephone, confirmed in writing, by any Lender by 5:00 p.m., New
York time, on the day prior to a Borrowing that such Lender will not make
available the amount which would constitute its Percentage of such Borrowing on
the date specified therefor, the Agent may assume that such Lender has made such
amount available to the Agent and, in reliance upon such assumption, make
available to the Borrower a corresponding amount. If and to the extent that
such Lender shall not have made such amount available to the Agent, such Lender
and the Borrower severally agree to repay the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
the Agent made such amount available to the Borrower to the date such amount is
repaid to the Agent, at the Federal Funds Rate.
SECTION 9.3. EXCULPATION. Neither the Agent nor any of its directors,
officers, employees or agents shall be liable to any Lender for any action taken
or omitted to be taken by it under this Agreement or any other Loan Document, or
in connection herewith or therewith, except for its own wilful misconduct or
gross negligence, nor responsible for any recitals or warranties herein or
therein, nor for the effectiveness, enforceability, validity or due execution of
this Agreement or any other Loan Document, nor to make any inquiry respecting
the performance by the Borrower of its obligations hereunder or under any other
Loan Document. Any such inquiry which may be made by the Agent shall not
obligate it to make any further inquiry or to take any action. The Agent shall
be entitled to rely upon advice of counsel concerning legal matters and upon any
notice, consent, certificate, statement or writing which the Agent believes to
be genuine and to have been presented by a proper Person.
SECTION 9.4. SUCCESSOR. The Agent may resign as such at any time upon at
least 30 days' prior notice to the Borrower and all Lenders. If the Agent at
any time shall resign, the Required Lenders may appoint another Lender as a
successor Agent which shall thereupon become the Agent hereunder. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the retiring Agent's giving
notice of resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent, which shall be one of the Lenders or a commercial
banking institution organized under the laws of the U.S. (or any State thereof)
or a U.S. branch or agency of a commercial banking institution, and having a
combined capital and surplus of at
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least $500,000,000. Upon the acceptance of any appointment as Agent hereunder
by a successor Agent, such successor Agent shall be entitled to receive from the
retiring Agent such documents of transfer and assignment as such successor Agent
may reasonably request, and shall thereupon succeed to and become vested with
all rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation hereunder as the Agent, the
provisions of
(a) this ARTICLE IX shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was the Agent under this Agreement;
and
(b) SECTION 20 of The Price Company Guaranty Agreement dated
concurrently herewith and SECTION 10.4 shall continue to inure to its
benefit.
SECTION 9.5. LOANS BY CIBC. CIBC shall have the same rights and powers
with respect to (x) the Loans made by it or any of its Affiliates, and (y) the
Notes held by it or any of its Affiliates as any other Lender and may exercise
the same as if it were not the Agent. CIBC and its Affiliates may accept
deposits from, lend money to, and generally engage in any kind of business with
the Borrower or Affiliate of the Borrower as if CIBC were not the Agent
hereunder.
SECTION 9.6. CREDIT DECISIONS. Each Lender acknowledges that it has,
independently of the Agent and each other Lender, and based on such Lender's
review of the financial information of the Borrower, this Agreement, the other
Loan Documents (the terms and provisions of which being satisfactory to such
Lender) and such other documents, information and investigations as such Lender
has deemed appropriate, made its own credit decision to extend its Commitment.
Each Lender also acknowledges that it will, independently of the Agent and each
other Lender, and based on such other documents, information and investigations
as it shall deem appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time any rights and
privileges available to it under this Agreement or any other Loan Document.
SECTION 9.7. COPIES, ETC. The Agent shall give prompt notice to each
Lender of each notice or request required or permitted to be given to the Agent
by the Borrower pursuant to the terms of this Agreement (unless concurrently
delivered to the Lenders by the Borrower). The Agent will distribute to each
Lender each document or instrument received for its account and copies of all
other communications received by the Agent from the Borrower for distribution to
the Lenders by the Agent in accordance with the terms of this Agreement.
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ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. WAIVERS, AMENDMENTS, ETC. The provisions of this Agreement
and of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented to
by the Borrower and the Required Lenders; PROVIDED, HOWEVER, that no such
amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular action be
taken by all the Lenders or by the Required Lenders shall be effective
unless consented to by each Lender;
(b) modify this SECTION 10.1, change the definition of "REQUIRED
LENDERS", terminate any Guarantees, increase the Commitment Amount or the
Percentage of any Lender, reduce any fees described in ARTICLE III, or
extend the Commitment Termination Date shall be made without the consent of
each Lender;
(c) extend the due date for, or reduce the amount of, any scheduled
repayment or prepayment of principal of or interest on any Loan (or reduce
the principal amount of or rate of interest on any Loan) shall be made
without the consent of the holder of that Note evidencing such Loan; or
(d) affect adversely the interests, rights or obligations of the Agent
QUA the Agent shall be made without consent of the Agent.
No failure or delay on the part of the Agent, any Lender or the holder of any
Note in exercising any power or right under this Agreement or any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice to or demand on
the Borrower in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by the Agent, any Lender or the
holder of any Note under this Agreement or any other Loan Document shall, except
as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 10.2. NOTICES. All notices and other communications provided to
any party hereto under this Agreement
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or any other Loan Document shall be in writing or by facsimile and addressed,
delivered or transmitted to such party at its address or facsimile number set
forth below its signature hereto or set forth in the Lender Assignment Agreement
or at such other address or facsimile number as may be designated by such party
in a notice to the other parties. Any notice, if mailed and properly addressed
with postage prepaid or if properly addressed and sent by pre-paid courier
service, shall be deemed given when received; any notice, if transmitted by
facsimile, shall be deemed given when transmitted.
SECTION 10.3. INDEMNIFICATION. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Borrower hereby indemnifies, exonerates and holds the Agent and each Lender
and each of their respective officers, directors, employees and agents
(collectively, the "INDEMNIFIED PARTIES") free and harmless from and against any
and all actions, causes of action, suits, losses, costs, liabilities and
damages, and expenses incurred in connection therewith (irrespective of whether
any such Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys' fees and disbursements
(collectively, the "INDEMNIFIED LIABILITIES"), incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loan;
(b) the entering into and performance of this Agreement and any other
Loan Document by any of the Indemnified Parties (including any action
brought by or on behalf of the Borrower as the result of any determination
by the Required Lenders pursuant to ARTICLE V not to fund the Borrowing);
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower of all or any portion
of the stock or assets of any Person, whether or not the Agent or such
Lender is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the Release by the Borrower of any
Hazardous Material; or
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or
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releases from, any real property owned or operated by the Borrower thereof
of any Hazardous Material (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any
Environmental Law), regardless of whether caused by, or within the control
of, the Borrower,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party (i) by reason of the relevant Indemnified Party's
gross negligence or wilful misconduct or (ii) solely in connection with disputes
by and among the Agent and the Lenders (or any assignees or participants
thereof) or among the Lenders (or any assignees or participants thereof). If
and to the extent that the foregoing undertaking may be unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
SECTION 10.4. SURVIVAL. The obligations of the Borrower under SECTIONS
4.3, 4.4, 4.5, 4.6, and 10.4, the obligations of The Price Company under Section
20 of The Price Company Guaranty Agreement dated concurrently herewith, and the
obligations of the Lenders under SECTION 9.1, shall in each case survive any
termination of this Agreement, the payment in full of all Obligations and the
termination of all Commitments. The representations and warranties made by each
Obligor in this Agreement and in each other Loan Document shall survive the
execution and delivery of this Agreement and each such other Loan Document.
SECTION 10.5. SEVERABILITY. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
SECTION 10.6. HEADINGS. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
SECTION 10.7. EXECUTION IN COUNTERPARTS, EFFECTIVENESS, ETC. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be executed by the Borrower and the Agent and be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
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This Agreement shall become effective when counterparts hereof executed on
behalf of the Borrower and each Lender (or notice thereof satisfactory to the
Agent) shall have been received by the Agent and notice thereof shall have been
given by the Agent to the Borrower and each Lender.
SECTION 10.8. GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES
AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement, the
Notes and the other Loan Documents (including the Fee Letter) constitute the
entire understanding among the parties hereto with respect to the subject matter
hereof and supersede any prior agreements, written or oral, with respect
thereto.
SECTION 10.9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED, HOWEVER, that:
(a) the Borrower may not assign or transfer its rights or obligations
hereunder without the prior written consent of the Agent and all Lenders;
and
(b) the rights of sale, assignment and transfer of the Lenders are
subject to SECTION 10.10.
Notwithstanding the foregoing, the Borrower may assign its rights and
obligations hereunder to The Price Company, provided that the Guarantees remain
in full force and effect and the Agent and the Lenders receive reaffirmations to
such effect and such other documents as they may reasonably require in
connection with any such assignment.
SECTION 10.10. SALE AND TRANSFER OF LOANS AND NOTE; PARTICIPATIONS IN LOANS
AND NOTE. Each Lender may assign, or sell participations in, its Loans and
Commitment to one or more other Persons in accordance with this SECTION 10.10.
SECTION 10.10.1. ASSIGNMENTS. Any Lender,
(a) with the written consents of the Borrower and the Agent (which
consents shall not be unreasonably delayed or withheld and which consent,
in the case of the Borrower, shall be deemed to have been given in the
absence of a written notice delivered by the Borrower to the Agent, on or
before the fifth Business Day after receipt by the Borrower of such
Lender's request for consent, stating, in reasonable detail, the reasons
why the Borrower proposes to withhold such consent) may at any time assign
and delegate to one or more commercial banks or other financial
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institutions which are subject to the tax laws of the United States,
including but not limited to the fact that the interest income derived from
this Agreement shall be effectively connected with such assignee's United
States trade or business; and
(b) with notice to the Borrower and the Agent, but without the consent
of the Borrower or the Agent, may assign and delegate to any of its
Affiliates or to any other Lender which is subject to the tax laws of the
United States, including but not limited to the fact that the interest
income derived from this Agreement shall be effectively connected with such
assignee's United States trade or business
(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "ASSIGNEE LENDER"), all or any fraction of such Lender's total Loans and
Commitment (which assignment and delegation shall be of a constant, and not a
varying, percentage of all the assigning Lender's Loans and Commitment) in a
minimum aggregate amount of $5,000,000; PROVIDED, HOWEVER, that, the Borrower,
each other Obligor and the Agent shall be entitled to continue to deal solely
and directly with such Lender in connection with the interests so assigned and
delegated to an Assignee Lender until
(c) written notice of such assignment and delegation, together with
payment instructions, addresses and related information with respect to
such Assignee Lender, shall have been given to the Borrower and the Agent
by such Lender and such Assignee Lender;
(d) such Assignee Lender shall have executed and delivered to the
Borrower and the Agent a Lender Assignment Agreement, accepted by the
Agent; and
(e) the processing fees described below shall have been paid.
From and after the date that the Agent accepts such Lender Assignment Agreement,
(x) the Assignee Lender thereunder shall be deemed automatically to have become
a party hereto and to the extent that rights and obligations hereunder have been
assigned and delegated to such Assignee Lender in connection with such Lender
Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and under the other Loan Documents, and (y) the assignor Lender, to
the extent that rights and obligations hereunder have been assigned and
delegated by it in connection with such Lender Assignment Agreement, shall be
released from its obligations hereunder and under the other Loan
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Documents. Within five Business Days after its receipt of notice that the Agent
has received an executed Lender Assignment Agreement, the Borrower shall execute
and deliver to the Agent (for delivery to the relevant Assignee Lender) a new
Note evidencing such Assignee Lender's assigned Loans and Commitment and, if the
assignor Lender has retained Loans and its Commitment hereunder, a replacement
Note in the principal amount of the Loans and Commitment retained by the
assignor Lender hereunder (such Note to be in exchange for, but not in payment
of, that Note then held by such assignor Lender). Each such Note shall be dated
the date of the predecessor Note. The assignor Lender shall mark the
predecessor Note "exchanged" and deliver it to the Borrower. Accrued interest
on that part of the predecessor Note evidenced by the new Note, and accrued
fees, shall be paid as provided in the Lender Assignment Agreement. Accrued
interest on that part of the predecessor Note evidenced by the replacement Note
shall be paid to the assignor Lender. Accrued interest and accrued fees shall
be paid at the same time or times provided in the predecessor Note and in this
Agreement. Such assignor Lender or such Assignee Lender must also pay a
processing fee to the Agent upon delivery of any Lender Assignment Agreement in
the amount of $3,000. Any attempted assignment and delegation not made in
accordance with this SECTION 10.10.1 shall be null and void. Nothing in this
SECTION 10.10.1 shall prevent or prohibit any Lender from pledging its rights
(but not its obligations to make Loans) under this Agreement and/or its Loans
and/or its Notes hereunder to a Federal Reserve Bank in support of borrowings
made by such Lender from such Federal Reserve Bank.
SECTION 10.10.2. PARTICIPATIONS. Any Lender may at any time sell to one or
more commercial banks or other Persons which are subject to the tax laws of the
United States, including but not limited to the fact that the interest income
derived from this Agreement shall be effectively connected with such Person's
United States trade or business (each of such commercial banks and other Persons
being herein called a "PARTICIPANT") participating interests in any of the
Loans, Commitment, or other interests of such Lender hereunder; PROVIDED,
HOWEVER, that
(a) no participation contemplated in this SECTION 10.10 shall relieve
such Lender from its Commitment or its other obligations hereunder or under
any other Loan Document;
(b) such Lender shall remain solely responsible for the performance of
its Commitment and such other obligations;
(c) the Borrower and each other Obligor and the Agent shall continue
to deal solely and directly with such Lender
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in connection with such Lender's rights and obligations under this
Agreement and each of the other Loan Documents;
(d) no Participant, unless such Participant is an Affiliate of such
Lender, or is itself a Lender, shall be entitled to require such Lender to
take or refrain from taking any action hereunder or under any other Loan
Document, except that such Lender may agree with any Participant that such
Lender will not, without such Participant's consent, take any actions of
the type described in CLAUSE (b) or (c) of SECTION 10.1; and
(e) the Borrower shall not be required to pay any amount under SECTION
4.6 that is greater than the amount which it would have been required to
pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
SECTIONS 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, and 10.4, shall be considered a Lender.
SECTION 10.11. OTHER TRANSACTIONS. Nothing contained herein shall
preclude the Agent or any other Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Affiliates in which the Borrower or such
Affiliate is not restricted hereby from engaging with any other Person.
SECTION 10.12. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE
LENDERS OR THE BORROWER MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE
OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE
BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS
-48-
<PAGE>
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE
BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 10.13. WAIVER OF JURY TRIAL. THE AGENT, THE LENDERS AND THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS OR THE BORROWER. THE
BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH
SUCH OTHER LOAN DOCUMENT.
-49-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
PRICE COSTCO NOVA SCOTIA COMPANY
By _____________________________________
Title:
Address: ______________________________
______________________________
Facsimile No.: _________________________
Attention: _____________________________
_____________________________
CANADIAN IMPERIAL BANK OF COMMERCE,
as the Agent
By _____________________________________
Title:
Address: 425 Lexington Avenue
New York, New York 10017
Facsimile No.: (212) 856-3799
Attention: Syndications Department
-50-
<PAGE>
PERCENTAGE LENDERS
CIBC INC.
28.5715% ($40,000,000.00)
By _____________________________
Title:
Notice Address:
425 Lexington Avenue
New York, New York 10017
Attention: Syndications Department
Facsimile No.: (212) 856-3799
with a copy to:
CIBC Inc.
350 South Grand Avenue, 26th Floor
Los Angeles, California 90071
Attention: Mr. Ray Mendoza
Facsimile No.: (213) 346-0157
Domestic
Office: 425 Lexington Avenue
New York, New York 10017
Facsimile No.: (212) 856-3799
Attention: _____________________
________________________________
LIBOR
Office: 425 Lexington Avenue
New York, New York 10017
Facsimile No.: (212) 856-3799
Attention: ______________________
_________________________________
-51-
<PAGE>
11.9050% (16,667,000.00) BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By ______________________________
Title:
Notice Address:
Credit Products #3838
555 California Street, 41st Floor
San Francisco, CA 94104
Attention: Maria Vickroy-Peralta
Facsimile No.: (415) 622-4585
Domestic
Office: Bank of America NT&SA
1850 Gateway Blvd.
4th Floor
Concord, CA 94520
Facsimile No.: (510) 603-7242
Attention: Jill Wilson
Account Administrator
LIBOR
Office: Bank of America NT&SA
1850 Gateway Blvd.
4th Floor
Concord, CA 94520
Facsimile No.: (510) 603-7242
Attention: Jill Wilson
Account Administrator
-52-
<PAGE>
23.8095% ($33,333,333.33) MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By ______________________________
Title:
Notice Address:
22/60 Wall Street
New York, NY 10260-0060
Attention: Robert Osieski
Facsimile No.: (212) 648-5014
Domestic
Office: J.P. Morgan Services Inc.
500 Stanton Christiana
Road
Newark, DE 19713 2107
Facsimile No.: (302) 634-1092
Attention: Loan Department
LIBOR
Office: J.P. Morgan Services Inc.
Euro-Loan Servicing Unit
500 Stanton Christiana
Road
Newark, DE 19713 2107
Facsimile No.: (302) 634-1092
-53-
<PAGE>
11.9045% ($16,666,333.34) BANK OF AMERICA NW, N.A.
doing business as SeaFirst Bank
By _____________________________
Title:
Notice Address:
SeaFirst Bank
N.W. National Division
701 5th Ave., Floor 12
Seattle, WA 98104
Attention: Hendrikus T. Knottnerus
Facsimile No.: (206) 358-3113
Domestic
Office: Bank of America NW, N.A.
d/b/a SeaFirst Bank
Northwest National Div.
701 Fifth Avenue,
Floor 12
Seatlle, WA 98104
Facsimile No.: (206) 358-3113
Attention: Alice Kraus Stakke
Operations Officer
LIBOR
Office: Bank of America NW, N.A.
d/b/a SeaFirst Bank
Northwest National Div.
701 Fifth Avenue,
Floor 12
Seatlle, WA 98104
Facsimile No.: (206) 358-3113
Attention: Alice Kraus Stakke
Operations Officer
-54-
<PAGE>
23.8095% ($33,333,333.33) NATIONSBANK OF TEXAS, N.A.
By ______________________________
Title:
Domestic
Office: _________________________
_________________________
Facsimile No.: ___________________
Attention: _______________________
LIBOR
Office:___________________________
Facsimile No.:____________________
Attention: ______________________
----
100%
----
-55-
<PAGE>
SCHEDULE I
DISCLOSURE SCHEDULE
ITEM 6.7 LITIGATION.
DESCRIPTION OF PROCEEDING ACTION OR CLAIM SOUGHT
NONE.
ITEM 6.11 ENVIRONMENTAL MATTERS.
NONE.
<PAGE>
EXHIBIT A
NOTE
$________________________ _______________, 19_____
FOR VALUE RECEIVED, the undersigned, PRICE COSTCO NOVA SCOTIA COMPANY, a
Canadian unlimited liability company (the "BORROWER"), promises to pay to the
order of _______________________ (the "LENDER") the principal sum of
_____________________DOLLARS ($____________) or, if less, the aggregate unpaid
principal amount of all Loans shown on the schedule attached hereto (and any
continuation thereof) made by the Lender pursuant to that certain Credit
Agreement, dated as of April___, 1996 (together with all amendments and other
modifications, if any, from time to time thereafter made thereto, the "CREDIT
AGREEMENT"), among the Borrower, CANADIAN IMPERIAL BANK OF COMMERCE, as Agent,
the various financial institutions (including the Lender) as are, or may from
time to time become, parties thereto, payable as set forth in the Credit
Agreement, with a final payment (in the amount necessary to pay in full this
Note) due and payable on April 11, 2001.
The Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in same day or immediately available funds to the
account designated by the Agent pursuant to the Credit Agreement.
This Note is a Note referred to in, and evidences Indebtedness incurred
under, the Credit Agreement, to which reference is made (i) for a statement of
the terms and conditions on which the Borrower is permitted and required to make
prepayments and repayments of principal of the Indebtedness evidenced by this
Note and on which such Indebtedness may be declared to be immediately due and
payable, and (ii) for restrictions relating to the transfer or assignment of
this Note. Unless otherwise defined, terms used herein have the meanings
provided in the Credit Agreement.
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
<PAGE>
THIS NOTE SHALL BE DEEMED TO BE MADE UNDER AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK.
PRICE COSTCO NOVA SCOTIA COMPANY
By: ________________________________
Title:
-2-
<PAGE>
<TABLE>
<CAPTION>
LOANS AND PRINCIPAL PAYMENTS
- - - --------------------------------------------------------------------------------------------------
Amount of Loan Amount of Unpaid Principal
Made Principal Repaid Balance
--------------
- - - ------------------------------------- Nota-
Interest tion
Base LIBO Period (if Base LIBO Base LIBO Made
Date Rate Rate applicable Rate Rate Rate Rate Total By
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT B
BORROWING REQUEST
[Name of Agent]
[Address]
Attention: [Name]
[Title]
PRICE COSTCO NOVA SCOTIA COMPANY
Gentlemen and Ladies:
This Borrowing Request is delivered to you pursuant to Section 2.3 of the
Credit Agreement, dated as of April __, 1996 (together with all amendments, if
any, from time to time made thereto, the "CREDIT AGREEMENT"), among PRICE COSTCO
NOVA SCOTIA COMPANY, a Canadian unlimited liability company (the
"BORROWER"), certain financial institutions and CANADIAN IMPERIAL BANK OF
COMMERCE (the "AGENT"). Unless otherwise defined herein or the context
otherwise requires, terms used herein have the meanings provided in the Credit
Agreement.
The Borrower hereby requests that a Loan be made in the aggregate principal
amount of $ ___________ on _________, 19 ___ as a [LIBO Rate Loan having an
Interest Period of _______ months] [Base Rate Loan].
The Borrower hereby acknowledges that, pursuant to SECTION 5.1.7 of the
Credit Agreement, each of the delivery of this Borrowing Request and the
acceptance by the Borrower of the proceeds of the Loans requested hereby
constitute a representation and warranty by the Borrower that, on the date of
such Loans, and before and after giving effect thereto and to the application of
the proceeds therefrom, all statements set forth in SECTION 5.1.6 are true and
correct in all material respects.
The Borrower agrees that if prior to the time of the Borrowing requested
hereby any matter certified to herein by it will not be true and correct at such
time as if then made, it will immediately so notify the Agent. Except to the
extent, if any, that prior to the time of the Borrowing requested hereby the
Agent shall receive written notice to the contrary from the Borrower, each
matter certified to herein shall be deemed once again to be certified as true
and correct at the date of such Borrowing as if then made.
<PAGE>
Please wire transfer the proceeds of the Borrowing to the accounts of the
following persons at the financial institutions indicated respectively:
Person to be Paid
Amount to be ------------------------ Name, Address, Etc.
Transferred Name Account No. of Transferee Lender
- - - ------------ ------------------------ ---------------------------
$__________ ___________ ____________ ____________________________
____________________________
Attention:__________________
$__________ ___________ ____________ ____________________________
____________________________
Attention:__________________
Balance of The Borrower ____________ ____________________________
such proceeds ____________________________
Attention:__________________
The Borrower has caused this Borrowing Request to be executed and
delivered, and the certification and warranties contained herein to be made, by
its duly Authorized Officer this ____ day of __________, 19___.
PRICE COSTCO NOVA SCOTIA COMPANY
By: __________________________________
Title:
-2-
<PAGE>
EXHIBIT C
CONTINUATION/CONVERSION NOTICE
[Name of Agent]
[Address]
Attention: [Name]
[Title]
PRICE COSTCO NOVA SCOTIA COMPANY
Gentlemen and Ladies:
This Continuation/Conversion Notice is delivered to you pursuant to Section
2.3 of the Credit Agreement, dated as of April __, 1996 (together with all
amendments, if any, from time to time made thereto, the "CREDIT AGREEMENT"),
among PRICE COSTCO NOVA SCOTIA COMPANY, a Canadian unlimited liability company
(the "BORROWER"), certain financial institutions and CANADIAN IMPERIAL BANK OF
COMMERCE (the "AGENT"). Unless otherwise defined herein or the context
otherwise requires, terms used herein have the meanings provided in the Credit
Agreement.
The Borrower hereby requests that on __________________ , 19_____,
(1) $ ______________ of the presently outstanding principal amount of
the Loans originally made on______________ , 19___ [and $_________ of the
presently outstanding principal amount of the Loans originally made on
__________, 19 ____],
(2) and all presently being maintained as *[Base Rate Loans] [LIBO
Rate Loans],
(3) be [converted into] [continued as],
(4) ** [LIBO Rate Loans having an Interest Period of ________ months]
[Base Rate Loans].
________________________________
* Select appropriate interest rate option.
** Insert appropriate interest rate option.
<PAGE>
The Borrower hereby:
(a) certifies and warrants that no Default has occurred and is
continuing; and
(b) agrees that if prior to the time of such continuation or
conversion any matter certified to herein by it will not be true and
correct at such time as if then made, it will immediately so notify the
Agent.
Except to the extent, if any, that prior to the time of the continuation or
conversion requested hereby the Agent shall receive written notice to the
contrary from the Borrower, each matter certified to herein shall be deemed to
be certified at the date of such continuation or conversion as if then made.
The Borrower has caused this Continuation/Conversion Notice to be executed
and delivered, and the certification and warranties contained herein to be made,
by its Authorized Officer this ____ day of ______________, 19____.
PRICE COSTCO NOVA SCOTIA COMPANY
By: ______________________________
Title:
-2-
<PAGE>
EXHIBIT D
LENDER ASSIGNMENT AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement is made and entered into as of
___________ by and between ____________ (the "Assignor") and ____________ (the
"Assignee").
R E C I T A L S
A. The Assignor, certain other lenders (together with any prior
assignees, the "Lenders"), and Canadian Imperial Bank of Commerce (the "Agent")
are parties to that certain Credit Agreement dated as of April 11, 1996 (the
"Credit Agreement") with Price Costco Nova Scotia Company, a Nova Scotia
unlimited company (the "Borrower"). Pursuant to the Credit Agreement, the
Lenders have agreed to extend credit to the Borrower under the Commitment in an
aggregate principal amount of $140,000,000. The amount of the Assignor's
Commitment is specified in Item 1 of Schedule 1 hereto. The outstanding
principal amount of the Assignor's Loans made to the Borrower pursuant to the
Assignor's Commitment is specified in Item 2 of Schedule 1 hereto. All
capitalized terms not otherwise defined herein are used herein as defined in the
Credit Agreement.
B. The Assignor wishes to sell and assign to the Assignee, and the
Assignee wishes to purchase and assume from the Assignor, (i) the portion of the
Assignor's Commitment specified in Item 3 of Schedule I hereto which is
equivalent to the percentage specified in Item 4 of Schedule 1 of the Commitment
(the "Assigned Commitments"), and (ii) the portion of the Assignor's Loans
specified in Item 5 of Schedule 1 hereto (the "Assigned Loans").
The parties agree as follows:
1. ASSIGNMENT. Subject to the terms and conditions set forth herein and
in the Credit Agreement, the Assignor hereby sells and assigns to the Assignee,
and the Assignee purchases and assumes from the Assignor, on the date set forth
above (the "Assignment Date") (a) all right, title and interest of the Assignor
to the Assigned Loans and (b) all obligations of the Assignor under the Credit
Agreement with respect to the Assigned Commitments. As full consideration for
the sale of the Assigned Loans and the Assigned Commitments, the Assignee shall
pay to the Assignor on the Assignment Date the principal amount of the Assigned
Loans (the "Purchase Price").
<PAGE>
2. REPRESENTATION AND WARRANTIES. Each of the Assignor and the Assignee
represents and warrants to the other that (a) it has full power and legal right
to execute and deliver this Agreement and to perform the provisions of this
Agreement; (b) the execution, delivery and performance of this Agreement have
been authorized by all action, corporate or otherwise, and do not violate any
provisions of its charter or by-laws or any contractual obligations or
requirement of law binding on it; and (c) this Agreement constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms.
3. CONDITION PRECEDENT. The obligations of the Assignor and the Assignee
hereunder shall be subject to the fulfillment of the condition that the Assignor
shall have (a) received payment in full of the Purchase Price, and (b) complied
with the other applicable provisions of Section 10.10 of the Credit Agreement.
4. NOTICE OF ASSIGNMENT. The Assignor agrees to give notice of the
assignment and assumption of the Assigned Loans and the Assigned Commitments
to the Agent and the Borrower and hereby instructs the Agent and the Borrower
to make all payments with respect to the Assigned Loans and the Assigned
Commitments directly to the Assignee at the lending offices specified in Item
6 on Schedule 1 hereto; provided, however, that the Borrower and the Agent
shall be entitled to continue to deal solely and directly with the Assignor
in connection with the interests so assigned until (a) the Agent and the
Borrower shall have received notice of the assignment and the Agent shall
have received the processing and recordation fee required to be paid pursuant
to Section 10.10 of the Credit Agreement, and (b) the Assignor shall have
delivered to the Borrower any Notes that shall be subject to such assignment.
From and after the date (the "Effective Date") on which the Agent shall
notify the Borrower and the Assignor that (a) and (b) shall have occurred and
all consents (if any) required shall have been given, the Assignee shall be
deemed to be a party to the Credit Agreement and, to the extent that rights
and obligations thereunder shall have been assigned to Assignee as provided
in such notice of assignment to the Agent, shall have the rights and
obligations of a Lender under the Credit Agreement. After the Effective Date,
(i) all interest and fees accrued from and after the Assignment Date and all
principal and other amounts paid on or after the Assignment Date, in each
case that would otherwise be payable to the Assignor in respect of the
Assigned Loans and the Assigned Commitments shall be paid to the Assignee
(collectively, the "Assignee Payments"), and (ii) if the Assignor receives
any payment on account of the Assignee Payments, the Assignor shall promptly
deliver such payment to the Assignee. After the Effective Date, (i) all
interest and fees accrued prior to the Assignment Date and all principal and
other amounts paid prior to the Assignment Date, in each case that would be
payable to the Assignor in respect of the Assigned Loans
-2-
<PAGE>
and the Assigned Commitments (collectively, the "Assignor Payments") shall be
paid to the Assignor, and (ii) if the Assignee receives any payment on
account of the Assignor Payments, the Assignee shall promptly deliver such
payment to the Assignor. The Assignee agrees to deliver to the Borrower and
the Agent such Internal Revenue Service forms as may be required to establish
that the Assignee is entitled to receive payments under the Credit Agreement
without deduction or withholding of tax.
5. INDEPENDENT INVESTIGATION. The Assignee acknowledges that it is
purchasing the Assigned Loans and the Assigned Commitments from the Assignor
totally without recourse and, except as provided in Section 2 hereof, without
representation or warranty. The Assignee further acknowledges that it has made
its own independent investigation and credit evaluation of the Borrower in
connection with its purchase of the Assigned Loans and the Assigned Commitments.
Except for the representations or warranties set forth in Section 2, the
Assignee acknowledges that it is not relying on any representation or warranty
of the Assignor, expressed or implied, including without limitation, any
representation or warranty relating to the legality, validity, genuineness,
enforceability, collectability, interest rate, repayment schedule or accrual
status of the Assigned Loans or the Assigned Commitments, the legality,
validity, genuineness or enforceability of the Credit Agreement, the related
Notes, or any other Loan Document referred to in or delivered pursuant to the
Credit Agreement, or financial condition or creditworthiness of the Borrower.
The Assignor has not and will not be acting as either the representative, agent
or trustee of the Assignee with respect to matters arising out of or relating to
the Credit Agreement or this Agreement. From and after the Effective Date,
except as set forth in paragraph 4 above, the Assignor shall have no rights or
obligations with respect to the Assigned Loans or the Assigned Commitments.
6. METHOD OF PAYMENT. All payments to be made by either party hereunder
shall be in funds available at the place of payment on the same day and shall be
made by wire transfer to the account designated by the party to receive payment.
7. INTEGRATION. This Agreement shall supersede any prior agreement or
understanding between the parties (other than the Credit Agreement) as to the
subject matter hereof.
8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and shall be
binding upon both parties, their successors and assigns.
-3-
<PAGE>
9. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with the laws of, the State of New York.
ASSIGNOR
By: __________________________
Title: _______________________
ASSIGNEE
By: __________________________
Title: _______________________
-4-
<PAGE>
SCHEDULE 1
TO
ASSIGNMENT AND ACCEPTANCE AGREEMENT
relating to the
Credit Agreement among
Price Costco Nova Scotia Company,
the signatory Banks thereto,
and
Canadian Imperial Bank of Commerce, as Agent,
dated as of April 11, 1996
Item 1. Assignor's Commitment:
Item 2. Assignor's Loans:
Item 3. Amount of Assigned Commitments:
Item 4. Percentage of Commitment Assigned:
Item 5. Amount of Assigned Loans:
Item 6. Lending offices of Assignee and Address for Notices pursuant to
Section 10.2 of the Credit Agreement
-5-
<PAGE>
Domestic Office for LIBOR Office for Address for
Base Rate Loans LIBO Rate Loans Notices
- - - ------------------- -------------------- ------------------
Attention: Attention: Attention:
Telephone: Telephone: Telephone:
Telecopier: Telecopier: Telecopier:
-6-
<PAGE>
NOTES TO SCHEDULE 1
1. Insert the dollar amounts of Assignor's Commitment prior to
assignment.
2. Insert the outstanding principal amounts of the Assignor's Loans prior
to assignment, showing a breakdown by type.
3. Insert the dollar amounts of the Assignor's Commitment being assigned.
4. Insert the percentage of the Assignor's Commitment being assigned as
to the aggregate Commitment of all Lenders.
5. Insert the outstanding principal amount of the Assignor's Loans being
assigned to Assignee. Description of the type of Loans should be consistent
with Item 2.
6. Insert the name and address of the applicable lending offices and the
office for purposes of receiving notices of the Assignee.
-7-
<PAGE>
EXHIBIT E
[Opinion of Counsel to the Borrower]
<PAGE>
EXHIBIT F
[Opinion of Special Canadian Counsel to the Borrower]
<PAGE>
EXHIBIT G
[Opinion of Special Canadian Tax Counsel to the Borrower]
<PAGE>
EXHIBIT H
[Guarantees]
<PAGE>
TABLE OF CONTENTS
PAGE
I DEFINITIONS AND ACCOUNTING TERMS. . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . 14
1.3. Cross-References . . . . . . . . . . . . . . . . . . . . . . . . 15
1.4. Accounting and Financial Determinations. . . . . . . . . . . . . 15
II COMMITMENTS, BORROWING PROCEDURES AND NOTES . . . . . . . . . . . . . . . 15
2.1. Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1.1. Commitment of Each Lender. . . . . . . . . . . . . . . . . . . . 15
2.1.2. Lenders Not Permitted or Required To Make Loans. . . . . . . . . 15
2.3. Continuation and Conversion Elections. . . . . . . . . . . . . . 16
2.4. Funding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.5. Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES. . . . . . . . . . . . . . . . 17
3.1. Repayments and Prepayments . . . . . . . . . . . . . . . . . . . 17
3.2. Interest Provisions. . . . . . . . . . . . . . . . . . . . . . . 18
3.2.1. Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2.2. Post-Maturity Rates. . . . . . . . . . . . . . . . . . . . . . . 19
3.2.3. Payment Dates. . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.3. Facility Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 20
IV CERTAIN LIBO RATE AND OTHER PROVISIONS. . . . . . . . . . . . . . . . . . 21
4.1. LIBO Rate Lending Unlawful . . . . . . . . . . . . . . . . . . . 21
4.2. Deposits Unavailable . . . . . . . . . . . . . . . . . . . . . . 21
4.3. Increased LIBO Rate Loan Costs, etc. . . . . . . . . . . . . . . 21
4.4. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.5. Increased Capital Costs. . . . . . . . . . . . . . . . . . . . . 22
4.6. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.7. Payments, Computations, etc. . . . . . . . . . . . . . . . . . . 24
4.8. Sharing of Payments. . . . . . . . . . . . . . . . . . . . . . . 24
4.9. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.10. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 26
V CONDITIONS TO BORROWING . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1. Conditions to Borrowing . . . . . . . . . . . . . . . . . . . . 26
5.1.1. Resolutions, etc . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1.2. Delivery of Notes. . . . . . . . . . . . . . . . . . . . . . . . 26
5.1.3. Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1.4. Opinions of Counsel. . . . . . . . . . . . . . . . . . . . . . . 27
5.1.5. Closing Fees, Expenses, etc. . . . . . . . . . . . . . . . . . . 27
5.1.6. Compliance with Warranties, No Default, etc. . . . . . . . . . . 27
5.1.7. Borrowing Request. . . . . . . . . . . . . . . . . . . . . . . . 28
5.1.8. Satisfactory Legal Form. . . . . . . . . . . . . . . . . . . . . 28
-i-
<PAGE>
VI REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 28
6.1. Organization, etc. . . . . . . . . . . . . . . . . . . . . . . . 28
6.2. Due Authorization, Non-Contravention, etc. . . . . . . . . . . . 28
6.3. Government Approval, Regulation, etc . . . . . . . . . . . . . . 29
6.4. Validity, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5. Financial Information. . . . . . . . . . . . . . . . . . . . . . 29
6.6. No Material Adverse Change . . . . . . . . . . . . . . . . . . . 29
6.7. Litigation, Labor Controversies, etc . . . . . . . . . . . . . . 29
6.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.9. Ownership of Properties. . . . . . . . . . . . . . . . . . . . . 30
6.10. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.11. Environmental Warranties . . . . . . . . . . . . . . . . . . . . 30
6.12. Regulations G, U and X . . . . . . . . . . . . . . . . . . . . . 31
6.13. Accuracy of Information. . . . . . . . . . . . . . . . . . . . . 32
VII COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . 32
7.1.1. Financial Information, Reports, Notices, etc . . . . . . . . . . 32
7.1.2. Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . 33
7.1.3. Books and Records. . . . . . . . . . . . . . . . . . . . . . . . 33
7.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . 33
7.2.1. Business Activities. . . . . . . . . . . . . . . . . . . . . . . 33
7.2.2. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.2.3. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2.4. Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2.5. Restricted Payments, etc . . . . . . . . . . . . . . . . . . . . 34
7.2.6. Capital Expenditures, etc. . . . . . . . . . . . . . . . . . . . 35
7.2.7. Consolidation, Merger, etc . . . . . . . . . . . . . . . . . . . 35
7.2.8. Asset Dispositions, etc. . . . . . . . . . . . . . . . . . . . . 35
7.2.9. Negative Pledges, Restrictive Agreements, etc. . . . . . . . . . 35
7.2.10. Creation of Subsidiaries . . . . . . . . . . . . . . . . . . . . 35
VIII EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.1. Listing of Events of Default . . . . . . . . . . . . . . . . . . 36
8.1.1. Non-Payment of Obligations . . . . . . . . . . . . . . . . . . . 36
8.1.2. Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . 36
8.1.3. Non-Performance of Certain Covenants and Obligations . . . . . . 36
8.1.4. Non-Performance of Other Covenants and Obligations . . . . . . . 36
8.1.5. Default on Other Indebtedness. . . . . . . . . . . . . . . . . . 36
8.1.6. Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.1.7. Pension Plans. . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.1.8. Change in Control. . . . . . . . . . . . . . . . . . . . . . . . 37
8.1.9. Bankruptcy, Insolvency, etc. . . . . . . . . . . . . . . . . . . 37
8.1.10. Impairment of Security, etc. . . . . . . . . . . . . . . . . . . 38
8.2. Action if Bankruptcy . . . . . . . . . . . . . . . . . . . . . . 38
8.3. Action if Other Event of Default . . . . . . . . . . . . . . . . 38
<PAGE>
IX THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.1. Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.2. Funding Reliance, etc. . . . . . . . . . . . . . . . . . . . . . 39
9.3. Exculpation. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.4. Successor. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.5. Loans by CIBC. . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.6. Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . 41
9.7. Copies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
X MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . 41
10.1. Waivers, Amendments, etc . . . . . . . . . . . . . . . . . . . . 41
10.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 43
10.4. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.5. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.6. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.7. Execution in Counterparts, Effectiveness, etc. . . . . . . . . . 44
10.8. Governing Law; Entire Agreement. . . . . . . . . . . . . . . . . 45
10.9. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 45
10.10. Sale and Transfer of Loans and Note;
Participations in Loans and Note . . . . . . . . . . . . . . 45
10.10.1. Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.10.2. Participations . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.11. Other Transactions . . . . . . . . . . . . . . . . . . . . . . . 48
10.12. Forum Selection and Consent to Jurisdiction. . . . . . . . . . . 48
10.13. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . 49
EXHIBIT A FORM OF NOTE
EXHIBIT B FORM OF BORROWING REQUEST
EXHIBIT C FORM OF CONTINUATION/CONVERSION NOTICE
EXHIBIT D FORM OF LENDER ASSIGNMENT AGREEMENT
EXHIBIT E FORM OF OPINION OF COUNSEL TO THE OBLIGORS
EXHIBIT F FORM OF OPINION OF SPECIAL CANADIAN COUNSEL TO THE OBLIGORS
EXHIBIT G FORM OF OPINION OF SPECIAL CANADIAN TAX COUNSEL TO THE OBLIGORS
EXHIBIT H FORM OF GUARANTEES
-iii-
<PAGE>
NOTE
$40,000,000.00 April 11, 1996
FOR VALUE RECEIVED, the undersigned, PRICE COSTCO NOVA SCOTIA COMPANY, a
Nova Scotia unlimited company (the "BORROWER"), promises to pay to the order of
CIBC INC. (the "LENDER") the principal sum of FORTY MILLION DOLLARS
($40,000,000.00) or, if less, the aggregate unpaid principal amount of all Loans
shown on the schedule attached hereto (and any continuation thereof) made by the
Lender pursuant to that certain Credit Agreement, dated as of April 11, 1996
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "CREDIT AGREEMENT"), among the Borrower, CANADIAN
IMPERIAL BANK OF COMMERCE, as Agent, the various financial institutions
(including the Lender) as are, or may from time to time become, parties thereto,
payable as set forth in the Credit Agreement, with a final payment (in the
amount necessary to pay in full this Note) due and payable on April 11, 2001.
The Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in same day or immediately available funds to the
account designated by the Agent pursuant to the Credit Agreement.
This Note is a Note referred to in, and evidences Indebtedness incurred
under, the Credit Agreement, to which reference is made (i) for a statement of
the terms and conditions on which the Borrower is permitted and required to make
prepayments and repayments of principal of the Indebtedness evidenced by this
Note and on which such Indebtedness may be declared to be immediately due and
payable, and (ii) for restrictions relating to the transfer or assignment of
this Note. Unless otherwise defined, terms used herein have the meanings
provided in the Credit Agreement.
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
<PAGE>
THIS NOTE SHALL BE DEEMED TO BE MADE UNDER AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK.
PRICE COSTCO NOVA SCOTIA COMPANY
By:
-----------------------------
Title:
-2-
<PAGE>
LOANS AND PRINCIPAL PAYMENTS
- - - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount of Loan Amount of Unpaid Principal
Made Principal Repaid Balance
-------------- ------------------------------------- Nota-
Interest tion
Base LIBO Period (if Base LIBO Base LIBO Made
Date Rate Rate applicable Rate Rate Rate Rate Total By
- - - ----------------------------------------------------------------------------------------------------
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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</TABLE>
<PAGE>
NOTE
$16,666,333.34 April 11, 1996
FOR VALUE RECEIVED, the undersigned, PRICE COSTCO NOVA SCOTIA COMPANY, a
Nova Scotia unlimited company (the "BORROWER"), promises to pay to the order of
BANK OF AMERICA NW, N.A., doing business as SeaFirst Bank (the "LENDER") the
principal sum of SIXTEEN MILLION SIX HUNDRED SIXTY SIX THOUSAND THREE HUNDRED
THIRTY THREE DOLLARS AND THIRTY FOUR CENTS ($16,666,333.34) or, if less, the
aggregate unpaid principal amount of all Loans shown on the schedule attached
hereto (and any continuation thereof) made by the Lender pursuant to that
certain Credit Agreement, dated as of April 11, 1996 (together with all
amendments and other modifications, if any, from time to time thereafter made
thereto, the "CREDIT AGREEMENT"), among the Borrower, CANADIAN IMPERIAL BANK OF
COMMERCE, as Agent, the various financial institutions (including the Lender) as
are, or may from time to time become, parties thereto, payable as set forth in
the Credit Agreement, with a final payment (in the amount necessary to pay in
full this Note) due and payable on April 11, 2001.
The Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in same day or immediately available funds to the
account designated by the Agent pursuant to the Credit Agreement.
This Note is a Note referred to in, and evidences Indebtedness incurred
under, the Credit Agreement, to which reference is made (i) for a statement of
the terms and conditions on which the Borrower is permitted and required to make
prepayments and repayments of principal of the Indebtedness evidenced by this
Note and on which such Indebtedness may be declared to be immediately due and
payable, and (ii) for restrictions relating to the transfer or assignment of
this Note. Unless otherwise defined, terms used herein have the meanings
provided in the Credit Agreement.
<PAGE>
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE SHALL BE DEEMED TO BE MADE UNDER AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK.
PRICE COSTCO NOVA SCOTIA COMPANY
By:
-----------------------------
Title:
<PAGE>
LOANS AND PRINCIPAL PAYMENTS
- - - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount of Loan Amount of Unpaid Principal
Made Principal Repaid Balance
-------------- ------------------------------------- Nota
Interest tion
Base LIBO Period (if Base LIBO Base LIBO Made
Date Rate Rate applicable Rate Rate Rate Rate Total By
- - - ----------------------------------------------------------------------------------------------------
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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</TABLE>
<PAGE>
NOTE
$16,667,000.00 April 11, 1996
FOR VALUE RECEIVED, the undersigned, PRICE COSTCO NOVA SCOTIA COMPANY, a
Nova Scotia unlimited company (the "BORROWER"), promises to pay to the order of
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "LENDER") the
principal sum of SIXTEEN MILLION SIX HUNDRED SIXTY SEVEN THOUSAND DOLLARS
($16,667,000.00) or, if less, the aggregate unpaid principal amount of all Loans
shown on the schedule attached hereto (and any continuation thereof) made by the
Lender pursuant to that certain Credit Agreement, dated as of April 11, 1996
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "CREDIT AGREEMENT"), among the Borrower, CANADIAN
IMPERIAL BANK OF COMMERCE, as Agent, the various financial institutions
(including the Lender) as are, or may from time to time become, parties thereto,
payable as set forth in the Credit Agreement, with a final payment (in the
amount necessary to pay in full this Note) due and payable on April 11, 2001.
The Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in same day or immediately available funds to the
account designated by the Agent pursuant to the Credit Agreement.
This Note is a Note referred to in, and evidences Indebtedness incurred
under, the Credit Agreement, to which reference is made (i) for a statement of
the terms and conditions on which the Borrower is permitted and required to make
prepayments and repayments of principal of the Indebtedness evidenced by this
Note and on which such Indebtedness may be declared to be immediately due and
payable, and (ii) for restrictions relating to the transfer or assignment of
this Note. Unless otherwise defined, terms used herein have the meanings
provided in the Credit Agreement.
<PAGE>
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE SHALL BE DEEMED TO BE MADE UNDER AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK.
PRICE COSTCO NOVA SCOTIA COMPANY
By:
-----------------------------
Title:
-2-
<PAGE>
LOANS AND PRINCIPAL PAYMENTS
- - - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount of Loan Amount of Unpaid Principal
Made Principal Repaid Balance
-------------- ------------------------------------- Nota
Interest tion
Base LIBO Period (if Base LIBO Base LIBO Made
Date Rate Rate applicable) Rate Rate Rate Rate Total By
- - - ----------------------------------------------------------------------------------------------------
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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</TABLE>
<PAGE>
NOTE
$33,333,333.33 April 11, 1996
FOR VALUE RECEIVED, the undersigned, PRICE COSTCO NOVA SCOTIA COMPANY, a
Nova Scotia unlimited company (the "BORROWER"), promises to pay to the order of
MORGAN GUARANTY TRUST COMPANY OF NEW YORK (the "LENDER") the principal sum of
THIRTY THREE MILLION THREE HUNDRED THIRTY THREE THOUSAND THREE HUNDRED THIRTY
THREE DOLLARS AND THIRTY THREE CENTS ($33,333,333.33) or, if less, the aggregate
unpaid principal amount of all Loans shown on the schedule attached hereto (and
any continuation thereof) made by the Lender pursuant to that certain Credit
Agreement, dated as of April 11, 1996 (together with all amendments and other
modifications, if any, from time to time thereafter made thereto, the "CREDIT
AGREEMENT"), among the Borrower, CANADIAN IMPERIAL BANK OF COMMERCE, as Agent,
the various financial institutions (including the Lender) as are, or may from
time to time become, parties thereto, payable as set forth in the Credit
Agreement, with a final payment (in the amount necessary to pay in full this
Note) due and payable on April 11, 2001.
The Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in same day or immediately available funds to the
account designated by the Agent pursuant to the Credit Agreement.
This Note is a Note referred to in, and evidences Indebtedness incurred
under, the Credit Agreement, to which reference is made (i) for a statement of
the terms and conditions on which the Borrower is permitted and required to make
prepayments and repayments of principal of the Indebtedness evidenced by this
Note and on which such Indebtedness may be declared to be immediately due and
payable, and (ii) for restrictions relating to the transfer or assignment of
this Note. Unless otherwise defined, terms used herein have the meanings
provided in the Credit Agreement.
<PAGE>
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE SHALL BE DEEMED TO BE MADE UNDER AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK.
PRICE COSTCO NOVA SCOTIA COMPANY
By:
-----------------------------
Title:
-2-
<PAGE>
LOANS AND PRINCIPAL PAYMENTS
- - - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount of Loan Amount of Unpaid Principal
Made Principal Repaid Balance
-------------- ------------------------------------- Nota
Interest tion
Base LIBO Period (if Base LIBO Base LIBO Made
Date Rate Rate applicable) Rate Rate Rate Rate Total By
- - - ----------------------------------------------------------------------------------------------------
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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</TABLE>
<PAGE>
NOTE
$33,333,333.33 April 11, 1996
FOR VALUE RECEIVED, the undersigned, PRICE COSTCO NOVA SCOTIA COMPANY, a
Nova Scotia unlimited company (the "BORROWER"), promises to pay to the order of
NATIONSBANK OF TEXAS, N.A. (the "LENDER") the principal sum of THIRTY THREE
MILLION THREE HUNDRED THIRTY THREE THOUSAND THREE HUNDRED THIRTY THREE DOLLARS
AND THIRTY THREE CENTS ($33,333,333.33) or, if less, the aggregate unpaid
principal amount of all Loans shown on the schedule attached hereto (and any
continuation thereof) made by the Lender pursuant to that certain Credit
Agreement, dated as of April 11, 1996 (together with all amendments and other
modifications, if any, from time to time thereafter made thereto, the "CREDIT
AGREEMENT"), among the Borrower, CANADIAN IMPERIAL BANK OF COMMERCE, as Agent,
the various financial institutions (including the Lender) as are, or may from
time to time become, parties thereto, payable as set forth in the Credit
Agreement, with a final payment (in the amount necessary to pay in full this
Note) due and payable on April 11, 2001.
The Borrower also promises to pay interest on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money of
the United States of America in same day or immediately available funds to the
account designated by the Agent pursuant to the Credit Agreement.
This Note is a Note referred to in, and evidences Indebtedness incurred
under, the Credit Agreement, to which reference is made (i) for a statement of
the terms and conditions on which the Borrower is permitted and required to make
prepayments and repayments of principal of the Indebtedness evidenced by this
Note and on which such Indebtedness may be declared to be immediately due and
payable, and (ii) for restrictions relating to the transfer or assignment of
this Note. Unless otherwise defined, terms used herein have the meanings
provided in the Credit Agreement.
<PAGE>
All parties hereto, whether as makers, endorsers, or otherwise, severally
waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE SHALL BE DEEMED TO BE MADE UNDER AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK.
PRICE COSTCO NOVA SCOTIA COMPANY
By:
-----------------------------
Title:
-2-
<PAGE>
LOANS AND PRINCIPAL PAYMENTS
<TABLE>
<CAPTION>
LOANS AND PRINCIPAL PAYMENTS
- - - --------------------------------------------------------------------------------------------------
Amount of Loan Amount of Unpaid Principal
Made Principal Repaid Balance
-------------- ------------------------------------- Nota
Interest tion
Base LIBO Period (if Base LIBO Base LIBO Made
Date Rate Rate applicable Rate Rate Rate Rate Total By
- - - ----------------------------------------------------------------------------------------------------
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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</TABLE>
<PAGE>
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT is made as of the 11th day of April, 1996 by THE
PRICE COMPANY ("Guarantor") in favor of CIBC INC., BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, BANK
OF AMERICA NW, N.A. (doing business as SeaFirst Bank) AND NATIONSBANK OF TEXAS,
N.A. (collectively the "Lenders") and CANADIAN IMPERIAL BANK OF COMMERCE as
administrative agent for the Lenders (together with any successor agent, the
"Agent").
R E C I T A L S
A. The Lenders and the Agent have entered into a Credit Agreement dated
as of the date hereof with PRICE COSTCO NOVA SCOTIA COMPANY, a Nova Scotia
unlimited company ("Borrower"), pursuant to which the Lenders have committed to
make loans in an aggregate principal amount not to exceed at any one time One
Hundred Forty Million Dollars ($140,000,000). Such Credit Agreement as the same
may be amended from time to time hereafter is referred to herein as the "Credit
Agreement." Capitalized terms not otherwise defined herein shall have the
meanings given in the Credit Agreement.
B. Pursuant to the terms of the Credit Agreement, the execution and
delivery of this Guaranty is a material condition precedent to the Lenders'
obligations to make the Loans to Borrower thereunder.
C. The proceeds of the Loans to be made by the Lenders pursuant to the
Credit Agreement will result in material economic benefit to the Guarantor.
D. The obligations of the Guarantor are intended to constitute senior
debt of the Guarantor for all purposes, including, without limitation, for
application of the terms of: (1) that certain Indenture between The Price
Company as obligor and First Interstate Bank of California as trustee dated
February 19, 1987 and those certain Convertible Subordinated Debentures issued
thereunder; (2) that certain Indenture between The Price Company as obligor and
First Interstate Bank, Ltd. as trustee dated March 7, 1991 and those certain
Convertible Subordinated Debentures issued thereunder; and (3) that certain
Indenture between Costco Wholesale Corporation as obligor and First Trust
National Association as trustee dated May 15, 1992 and those certain Convertible
Subordinated Debentures issued thereunder.
NOW THEREFORE, in consideration of the Loans to be extended by the Lenders
to the Borrower, and for other good and valuable
1
<PAGE>
consideration receipt of which Guarantor hereby acknowledges, Guarantor agrees
as follows:
AGREEMENT
1. GUARANTEED OBLIGATIONS. The Guarantor absolutely and
unconditionally guarantees payment to the Lenders and Agent when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) of
all indebtedness, liabilities and obligations whatsoever of the Borrower owing
to any Lender or the Agent and arising pursuant to or in connection with the
Credit Agreement, any other Loan Document or the transactions contemplated
thereby, whether presently existing or hereafter arising (collectively, the
"Obligations"), without set-off, counterclaim, recoupment or deduction of any
amounts owing or alleged to be owing by Lenders (or Agent) to Borrower. Without
limiting the foregoing, Guarantor specifically guarantees payment of any
judgment entered against the Borrower and any damages that may be awarded in any
action brought against the Borrower by the Agent or any Lender on a claim or
cause of action arising pursuant to or in connection with the Credit Agreement,
any other Loan Document, or the transactions contemplated thereby. This
Guaranty is a guaranty of payment and not merely of collection.
2. GUARANTOR'S CONSENT. The Guarantor hereby consents to all terms
and conditions of agreements heretofore or hereafter made between the Agent, the
Lenders (or any of them) and the Borrower (including without limitation the
Credit Agreement and other Loan Documents) and further consents that the Agent
or any Lender may without further consent or disclosure and without affecting or
releasing the obligations of Guarantor hereunder: (a) surrender, exchange,
release, assign, or sell any collateral or waive, release, assign, sell, or
subordinate any security interest, in whole or in part; (b) waive or delay the
exercise of any rights or remedies of the Agent or any Lender against the
Borrower; (c) waive or delay the exercise of any rights or remedies of the Agent
or any Lender against any surety or guarantor (including, without limitation,
rights or remedies of the Agent and the Lenders against the Guarantor under this
Guaranty); (d) waive or delay the exercise of any rights or remedies of the
Agent or the Lenders in respect of any collateral or security interest now or
hereafter held; (e) release any surety or guarantor; (f) renew, extend, waive or
modify the terms of any Obligation or the obligations of any surety or
guarantor, or any instrument or agreement evidencing the same; (g) renew,
extend, waive or modify the terms of any deed of trust, mortgage, pledge,
assignment, security agreement or other security document (h) apply payments
received from Borrower or from any collateral, to any indebtedness, liability,
or obligations of Borrower whether or not an Obligation hereunder; (i) apply
payments
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received from any surety or guarantor (including Guarantor) or from any
collateral pledged by such surety or guarantor, to any indebtedness, liability,
or obligation of such surety or guarantor whether or not related to the
Obligations; and (j) realize on any security interest, judicially or
nonjudicially, with or without preservation of a deficiency judgment.
3. GUARANTOR'S WAIVER. The Guarantor waives any action on
delinquency in respect of the obligations or any part thereof, including any
right to require the Agent or any Lender to sue Borrower or any guarantor or
surety obligated with respect to the Obligations or any part thereof, or
otherwise to enforce payment thereof against any collateral securing the
Obligations or the obligations of any guarantor of surety or any part thereof.
Guarantor further waives notice of (a) the Agent's or any Lender's acceptance of
this Guaranty or its intention to act or its actions in reliance hereon; (b) the
present existence or future incurring of any Obligations or any terms or amounts
thereof or any change therein; (c) any default by the Borrower or any surety or
guarantor; (d) the obtaining of any guaranty or surety agreement (in addition to
this Guaranty); (e) the obtaining of any pledge, assignment or other security
for any Obligations; (f) the release of any surety or guarantor; (g) the release
of any collateral; (h) any change in Borrower's business or financial condition;
(i) any renewal, extension or modification of the terms of any Obligation or of
the obligations or liabilities of any surety or guarantor or any instruments or
agreements evidencing the same; (j) any acts or omissions of the Agent or any
Lender consented to in Section 2 hereof; and (k) any other demands or notices
whatsoever with respect to the Obligations or this Guaranty. The Guarantor
further waives notice of presentment, demand, protest, notice of nonpayment and
notice of protest in relation to any instrument or agreement evidencing any
Obligation.
4. GUARANTOR'S KNOWLEDGE OF BORROWER'S ECONOMIC CONDITION.
Guarantor represents and warrants to the Agent and the Lenders that it has
reviewed such documents and other information as it has deemed appropriate in
order to permit it to be fully apprised of Borrower's financial condition and
operations and has, in entering into this Guaranty made its own credit analysis
independently and without reliance upon any information communicated to it by
the Agent or any Lender. Guarantor covenants for the benefit of the Agent and
the Lenders to remain apprised of all material economic or other developments
relating to or affecting the Borrower, its property or its business. Without
limiting the foregoing Guarantor agrees to enter into such agreements and
arrangements with Borrower as may be necessary to ensure its receipt of notice
of such material changes and of periodic financial statements. Guarantor
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expressly waives any requirement that the Agent or any Lender advise, disclose,
discuss or deliver notice to Guarantor regarding Borrower's financial condition
or operations or with respect to any default by Borrower in its performance of
the Obligations whether or not knowledge of such condition, operations or
default is or reasonably could be in the possession of Guarantor and whether or
not such knowledge is in the possession of the Agent or any Lender before or
after the extension of any credit giving rise to Obligations by the Borrower.
5. UNCONDITIONAL GUARANTY. The obligations of the Guarantor under
this Guaranty are absolute and unconditional without regard to the obligations
of any other party or person. The obligations of the Guarantor hereunder shall
not be in any way be limited or affected by any circumstance whatsoever
including, without limitation, (a) any act or omission of the Agent or any
Lender consented to in Section 2 hereof; (b) the failure to receive any notice,
demand, presentment or protest waived in Sections 3 and 4 hereof; (c) any
failure by the Borrower or any other guarantor or surety to perform or comply
with the obligations or the terms of any instrument or agreement relating
thereto; (d) any change in the name, purpose, capital stock or constitution of
the Borrower or any other guarantor or surety; (e) any irregularity, defect or
unauthorized action by Agent, any Lender, Borrower or any other guarantor or
surety or any of their respective officers, directors or other agents in
executing and delivering any instrument or agreements relating to the
Obligations or in carrying out or attempting to carry out the terms of any such
agreements; (f) any insolvency, bankruptcy, reorganization or similar proceeding
by or against Borrower, Agent, any Lender, Guarantor or any other surety or
guarantor; (g) any setoff, counterclaim, recoupment, deduction, defense or other
right which Guarantor may have against Agent, any Lender, Borrower or any other
person for any reason whatsoever whether related to the obligations or
otherwise; or (h) any other circumstance which might constitute a legal or
equitable discharge or defense, in whole or in part, of a surety or guarantor.
Guarantor hereby waives all defenses of a surety to which it may be entitled by
statute or otherwise.
6. CONTINUING GUARANTY. This guaranty shall be a continuing one and
shall be binding upon the Guarantor regardless of how long before or after the
date hereof any Obligation was or is incurred. Credit may be granted or
continued from time to time by Agent or any Lender to Borrower without notice to
or authorization from the Guarantor regardless of Borrower's then-existing
financial or other condition. Notwithstanding the foregoing, however, after
full and final payment of each Loan made pursuant to the Credit Agreement and
the other Loan Documents and the full performance of all other obligations of
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the Borrower thereunder and the expiration of the Commitment of each Lender, the
Guarantor's obligations hereunder shall terminate and this Guaranty shall be of
no further force and effect PROVIDED, HOWEVER, the Guarantor agrees that this
Guaranty shall continue to be effective or shall be reinstated as the case may
be if at any time any payment to Agent or any Lender of any of the Obligations
is rescinded or must be restored or returned by the Agent or Lender upon the
insolvency, bankruptcy or reorganization of Borrower, all as though such payment
had not been made. In the event this Guaranty is preceded or followed by any
other agreement of suretyship or guaranty by the Guarantor or others, all shall
be deemed to be cumulative, and the obligations of the Guarantor hereunder shall
be in addition to those stated in any other suretyship or guaranty agreement.
7. WAIVER OF SUBROGATION. Guarantor hereby irrevocably waives all
claims it has or may acquire against Borrower in respect of the Obligations,
including rights of exoneration, reimbursement and subrogation. Guarantor
agrees to indemnify Lender, and hold it harmless from and against all loss and
expense, including legal fees, suffered or incurred by Lender as a result of
claims to avoid any payment received by Lender from Borrower, or for its account
or from collateral, with respect to the Obligations of Borrower guarantied
herein.
8. EXPENSES; DEFAULT INTEREST. Guarantor agrees to pay all expenses
of Agent and the Lenders in connection with the execution and delivery of this
Guaranty and its enforcement, including, without limitation, fees and expenses
of counsel (including allocated fees and expenses of in-house counsel) and other
costs of collection. If Guarantor shall fail to pay any amount when due
hereunder, such amount shall bear interest from the due date until paid at a
rate per annum equal to two percentage points (2%) above the Alternate Base Rate
(changing as the Alternate Base Rate changes).
9. NO RELIANCE. Guarantor acknowledges that Agent and Lenders
intend to obtain other guarantees to secure the repayment of the Obligations.
Guarantor represents and warrants to Agent and Lenders, however, that in making
this Guaranty it is not relying upon the Agent's or Lenders' obtaining any
guaranty agreement (other than this Guaranty) to secure repayment of the
Obligations. Guarantor specifically acknowledges that the Agent's and Lenders'
obtaining any such guaranty agreement is not a condition to the enforcement of
this Guaranty. If Agent and Lenders should simultaneously or hereafter elect to
attempt to take additional guaranty agreements or collateral to secure repayment
of the Obligation and if their efforts to do so should fail in any respect
including, without limitation, a determination that the agreement purporting to
provide such additional guaranty or security interest is invalid or
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unenforceable for any reason, this Guaranty shall, nonetheless, remain in full
force and effect.
10. REMEDIES. No delay in making demand on the Guarantor for
satisfaction of the obligations of the Guarantor hereunder shall prejudice the
Agent's or Lenders' rights to enforce such satisfaction. All of Agent's and
Lenders' rights and remedies shall be cumulative, and any failure of the Agent
or any Lender to exercise any right hereunder shall not be construed as a waiver
of the right to exercise the same or any other right at any time and from time
to time hereafter. In the event the Agent or any Lender in its sole discretion
elects to give notice of any action with respect to the sale of collateral, if
any, securing the Obligations or any part thereof, Guarantor agrees that ten
(10) days prior written notice shall be deemed reasonable notice of any matters
contained in such notice.
11. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and
warrants to the Agent and each Lender as follows:
(a) The Guarantor and its Subsidiaries are corporations duly
incorporated, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation. The Guarantor and its 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 consolidated
business, operations or financial condition of the Guarantor and its
Subsidiaries. The 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 this Guaranty and the
other Loan Documents to which it is a party.
(b) The execution, delivery and performance by the Guarantor of
this Guaranty and the other Loan Documents to which it is a party have been duly
authorized by all necessary corporate action of the Guarantor, do not require
any shareholder approval or the approval or consent of any trustee or the
holders of any Indebtedness of the 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 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 Guarantor or any of its Subsidiaries is a party or by which the
Guarantor, any of its Subsidiaries or any of their respective properties may be
bound or affected.
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(c) No Government Approval or filing or registration with any
Governmental Authority is required for the making and performance by the
Guarantor of this Guaranty or the other Loan Documents to which it is a party or
in connection with any of the transactions contemplated hereby or thereby,
except such as have been heretofore obtained and are in full force and effect
(certified copies thereof having been delivered to the Agent).
(d) This Guaranty has been duly executed and delivered by the
Guarantor and constitutes the legal, valid and binding obligations of the
Guarantor enforceable against the Guarantor in accordance with its terms.
(e) There are no actions, proceedings, investigations, or claims
against or affecting the Guarantor or any of its Subsidiaries now pending before
any court, arbitrator or Governmental Authority (nor to the knowledge of the
Guarantor has any thereof been threatened nor does any basis exist therefor)
which if determined adversely to the Guarantor or any of its subsidiaries would
be likely to have a material adverse effect on the business, operations or
consolidated financial condition of the Guarantor and its Subsidiaries or on the
ability of the Guarantor to perform its obligations under this Guaranty and the
other Loan Documents to which it is a party, except as reflected in the
financial statements or reports referred to in Section 11(h) of the
Price/Costco, Inc. Guaranty Agreement dated concurrently herewith or otherwise
set forth in item 6.7 of the Disclosure Schedule to the Credit Agreement.
(f) (i) The fair value of the property of the Guarantor is
greater than the amount of the Guarantor's liabilities (including disputed,
contingent and unliquidated liabilities) as such value is established and
liabilities evaluated for purposes of Section 101(31) of the Bankruptcy Code
and, in addition, for purposes of any state's applicable fraudulent transfer
acts; (ii) the present fair saleable value of the property of the Guarantor is
not less than the amount that will be required to pay the probable liability of
the Guarantor on its debts as they become absolute and matured; (iii) the
Guarantor is able to realize upon its property and pay its debts and other
liabilities (including disputed, contingent and unliquidated liabilities) as
they mature in the normal course of business; (iv) the Guarantor does not intend
to, and does not believe that it will, incur debts or liabilities beyond its
ability to pay as such debts and liabilities mature; and (v) the Guarantor is
not engaged in business or a transaction, and is not about to engage in business
or a transaction, for which the Guarantor's property would constitute
unreasonably small capital.
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12. GOVERNING LAW. This Guaranty shall be governed by and construed
in accordance with the internal laws of the State of New York.
13. CONSENT TO JURISDICTION, WAIVER OF IMMUNITIES. The Guarantor
hereby irrevocably submits to the jurisdiction of any State or federal court
sitting in New York, New York, in any action or proceeding brought to enforce or
otherwise arising out of or relating to this Guaranty 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 Guarantor 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 herein shall impair the right of the Agent or any Lender to bring any
action or proceeding against the Guarantor or its property in the courts of any
other jurisdiction and Guarantor irrevocably submits to the nonexclusive
jurisdiction of the appropriate courts sitting in any place where property of
the Guarantor is located.
14. WAIVER OF JURY TRIAL. The Guarantor waives any right to a trial
by jury in any action or proceeding to enforce or defend any rights under or
relating to this Guaranty or any amendment, instrument, document or agreement
delivered or which may in the future be delivered in connection herewith or
arising from any relationship existing in connection with this Guaranty, the
Credit Agreement or any other Loan Document, and agrees that (a) any such action
or proceeding shall be tried before a court and not before a jury and (b) any
beneficiary hereof may file an original counterpart or copy of this Guaranty
with any court as written evidence of the consent of the Guarantor to the waiver
of its right to a trial by jury.
15. ASSIGNMENT. This Guaranty shall inure to the benefit of Agent
and Lenders and their respective successors and assigns, including without
limitation any holder of a Note. The Agent and any Lender may assign any or all
of the Obligations (to the extent permitted in the Credit Agreement) and such
assignment shall be deemed to include a corresponding assignment of all or a
corresponding part of this Guaranty. The assignee of any or all of Agent's or
any Lender's interest herein shall have the same rights and benefits against the
Guarantor and otherwise under this Guaranty (including the right of setoff) as
if such assignee were the assignor. This Agreement shall be binding upon the
Guarantor and Guarantor may not assign or otherwise transfer all or any part of
its rights or obligations hereunder without the prior written consent of Agent
and Lenders, and any such
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assignment or transfer purported to be made without such consent shall be
ineffective.
16. SEVERABILITY. Any provision of the Guaranty 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 Guarantor waives any provision of law which
renders any provision hereof prohibited or unenforceable in any respect.
17. LIMITATION OF LIABILITY. Notwithstanding anything else herein to
the contrary, if the Guarantor's obligations hereunder are subject to avoidance
by a trustee or debtor-in-possession in any bankruptcy proceedings under
11 U.S.C. Section 548(a)(ii) or 11 U.S.C. Section 544(b) or any comparable
provisions or subject to avoidance by any creditor under applicable state
fraudulent transfer acts then, in such event, the Guarantor's obligations
hereunder shall be reduced to the maximum amount which would not be subject to
such avoidance.
18. TAXES. All payments by the Guarantor hereunder shall be made free
and clear of and without deduction for any present or future income, excise,
stamp or franchise taxes and other taxes, fees, duties, withholdings or other
charges of any nature whatsoever imposed by any taxing authority, but excluding
franchise taxes and taxes imposed on or measured by any Lender's overall net
income or gross receipts (such non-excluded items being called "TAXES"). In the
event that any withholding or deduction from any payment to be made by the
Guarantor hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then the Guarantor will
a. pay directly to the relevant authority the full amount required to
be so withheld or deducted;
b. promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
c. pay to the Agent for the account of the Lenders such additional
amount or amounts as is necessary to ensure that the net amount actually
received by each Lender will equal the full amount such Lender would have
received had no such withholding or deduction been required.
Moreover, if any present or future taxes, fees, duties, withholdings or other
charges of any nature whatsoever imposed by any taxing authority, including
franchise taxes and taxes imposed
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on or measured by any Lender's overall net income or gross receipts (other than
a change in the rate of tax based solely on the overall net or gross income of
such Lender) ("Further Taxes") are directly or indirectly asserted against the
Agent or any Lender with respect to any payment received by the Agent or such
Lender hereunder, the Agent or such Lender may pay such Further Taxes and the
Guarantor will promptly pay to the Agent or such Lender, at the time interest is
paid, such additional amounts (including any penalties, interest or expenses)
that the respective Lender or Agent specifies as necessary to preserve the
after-tax yield that the Agent or Lender would have received if such Taxes or
Further Taxes had not been imposed.
If the Guarantor fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Agent, for the account of the respective
Lenders, the required receipts or other required documentary evidence, the
Guarantor shall indemnify the Lenders for any incremental Taxes, interest or
penalties that may become payable by any Lender as a result of any such failure.
For purposes of this SECTION 18, a distribution hereunder by the Agent or any
Lender to or for the account of any Lender shall be deemed a payment by the
Guarantor.
19. AGENT'S FEES. The Guarantor agrees to pay to the Agent for its
own account fees in such amounts and at such times as are specified in the Fee
Letter.
20. PAYMENT OF COSTS AND EXPENSES. The Guarantor agrees to pay on
demand all expenses of the Agent (including the fees and out-of-pocket expenses
of counsel to the Agent and of local counsel, if any, who may be retained by
counsel to the Agent) in connection with
a. the negotiation, preparation, execution and delivery of the Credit
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to the Credit Agreement or any other Loan Document as may
from time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated; and
b. the preparation and review of the form of any document or
instrument relevant to the Credit Agreement or any other Loan Document.
The Guarantor further agrees to pay, and to save the Agent and the Lenders
harmless from all liability for, any stamp or other taxes which may be payable
in connection with the execution or delivery of the Credit Agreement, the
borrowings hereunder, or the issuance of the Notes or any other Loan Documents.
The
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Guarantor also agrees to reimburse the Agent and each Lender upon demand for all
reasonable out-of-pocket expenses (including attorneys' fees and legal expenses)
incurred by the Agent or such Lender in connection with (x) the negotiation of
any restructuring or "work-out", whether or not consummated, of any Obligations
and (y) the enforcement of any Obligations.
The Guarantor acknowledges and agrees that each Participant, for purposes of
this Section 20, shall be considered a Lender.
IN WITNESS WHEREOF the Guarantor has caused its duly authorized officers to
execute and deliver this Guaranty as of the date first above written.
GUARANTOR:
THE PRICE COMPANY
By _____________________________________________
Its ______________________________________
<PAGE>
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT is made as of the 11th day of April, 1996 by
PRICE/COSTCO, INC. ("Guarantor") in favor of CIBC INC., BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, BANK
OF AMERICA NW, N.A., (doing business as SeaFirst Bank) AND NATIONSBANK OF TEXAS,
N.A. (collectively the "Lenders") and CANADIAN IMPERIAL BANK OF COMMERCE as
administrative agent for the Lenders (together with any successor agent, the
"Agent").
R E C I T A L S
A. The Lenders and the Agent have entered into a Credit Agreement dated
as of the date hereof with PRICE COSTCO NOVA SCOTIA COMPANY, a Nova Scotia
unlimited company ("Borrower"), pursuant to which the Lenders have committed to
make loans in an aggregate principal amount not to exceed at any one time One
Hundred Forty Million Dollars ($140,000,000). Such Credit Agreement as the same
may be amended from time to time hereafter is referred to herein as the "Credit
Agreement." Capitalized terms not otherwise defined herein shall have the
meanings given in the Credit Agreement.
B. Pursuant to the terms of the Credit Agreement, the execution and
delivery of this Guaranty is a material condition precedent to the Lenders'
obligations to make the Loans to Borrower thereunder.
C. The proceeds of the Loans to be made by the Lenders pursuant to the
Credit Agreement will result in material economic benefit to the Guarantor.
D. The obligations of the Guarantor are intended to constitute senior
debt of the Guarantor for all purposes, including, without limitation, for
application of the terms of: (1) that certain Indenture between The Price
Company as obligor and First Interstate Bank of California as trustee dated
February 19, 1987 and those certain Convertible Subordinated Debentures issued
thereunder; (2) that certain Indenture between The Price Company as obligor and
First Interstate Bank, Ltd. as trustee dated March 7, 1991 and those certain
Convertible Subordinated Debentures issued thereunder; and (3) that certain
Indenture between Costco Wholesale Corporation as obligor and First Trust
National Association as trustee dated May 15, 1992 and those certain Convertible
Subordinated Debentures issued thereunder.
NOW THEREFORE, in consideration of the Loans to be extended by the Lenders
to the Borrower, and for other good and valuable
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consideration receipt of which Guarantor hereby acknowledges, Guarantor agrees
as follows:
AGREEMENT
1. GUARANTEED OBLIGATIONS. The Guarantor absolutely and
unconditionally guarantees payment to the Lenders and Agent when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) of
all indebtedness, liabilities and obligations whatsoever of the Borrower owing
to any Lender or the Agent and arising pursuant to or in connection with the
Credit Agreement, any other Loan Document or the transactions contemplated
thereby, whether presently existing or hereafter arising (collectively, the
"Obligations"), without set-off, counterclaim, recoupment or deduction of any
amounts owing or alleged to be owing by Lenders (or Agent) to Borrower. Without
limiting the foregoing, Guarantor specifically guarantees payment of any
judgment entered against the Borrower and any damages that may be awarded in any
action brought against the Borrower by the Agent or any Lender on a claim or
cause of action arising pursuant to or in connection with the Credit Agreement,
any other Loan Document, or the transactions contemplated thereby. This
Guaranty is a guaranty of payment and not merely of collection.
2. GUARANTOR'S CONSENT. The Guarantor hereby consents to all terms
and conditions of agreements heretofore or hereafter made between the Agent, the
Lenders (or any of them) and the Borrower (including without limitation the
Credit Agreement and other Loan Documents) and further consents that the Agent
or any Lender may without further consent or disclosure and without affecting or
releasing the obligations of Guarantor hereunder: (a) surrender, exchange,
release, assign, or sell any collateral or waive, release, assign, sell, or
subordinate any security interest, in whole or in part; (b) waive or delay the
exercise of any rights or remedies of the Agent or any Lender against the
Borrower; (c) waive or delay the exercise of any rights or remedies of the Agent
or any Lender against any surety or guarantor (including, without limitation,
rights or remedies of the Agent and the Lenders against the Guarantor under this
Guaranty); (d) waive or delay the exercise of any rights or remedies of the
Agent or the Lenders in respect of any collateral or security interest now or
hereafter held; (e) release any surety or guarantor; (f) renew, extend, waive or
modify the terms of any Obligation or the obligations of any surety or
guarantor, or any instrument or agreement evidencing the same; (g) renew,
extend, waive or modify the terms of any deed of trust, mortgage, pledge,
assignment, security agreement or other security document (h) apply payments
received from Borrower or from any collateral, to any indebtedness, liability,
or obligations of Borrower whether or not an Obligation hereunder; (i) apply
payments
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received from any surety or guarantor (including Guarantor) or from any
collateral pledged by such surety or guarantor, to any indebtedness, liability,
or obligation of such surety or guarantor whether or not related to the
Obligations; and (j) realize on any security interest, judicially or
nonjudicially, with or without preservation of a deficiency judgment.
3. GUARANTOR'S WAIVER. The Guarantor waives any action on
delinquency in respect of the obligations or any part thereof, including any
right to require the Agent or any Lender to sue Borrower or any guarantor or
surety obligated with respect to the Obligations or any part thereof, or
otherwise to enforce payment thereof against any collateral securing the
Obligations or the obligations of any guarantor of surety or any part thereof.
Guarantor further waives notice of (a) the Agent's or any Lender's acceptance of
this Guaranty or its intention to act or its actions in reliance hereon; (b) the
present existence or future incurring of any Obligations or any terms or amounts
thereof or any change therein; (c) any default by the Borrower or any surety or
guarantor; (d) the obtaining of any guaranty or surety agreement (in addition to
this Guaranty); (e) the obtaining of any pledge, assignment or other security
for any Obligations; (f) the release of any surety or guarantor; (g) the release
of any collateral; (h) any change in Borrower's business or financial condition;
(i) any renewal, extension or modification of the terms of any Obligation or of
the obligations or liabilities of any surety or guarantor or any instruments or
agreements evidencing the same; (j) any acts or omissions of the Agent or any
Lender consented to in Section 2 hereof; and (k) any other demands or notices
whatsoever with respect to the Obligations or this Guaranty. The Guarantor
further waives notice of presentment, demand, protest, notice of nonpayment and
notice of protest in relation to any instrument or agreement evidencing any
Obligation.
4. GUARANTOR'S KNOWLEDGE OF BORROWER'S ECONOMIC CONDITION.
Guarantor represents and warrants to the Agent and the Lenders that it has
reviewed such documents and other information as it has deemed appropriate in
order to permit it to be fully apprised of Borrower's financial condition and
operations and has, in entering into this Guaranty made its own credit analysis
independently and without reliance upon any information communicated to it by
the Agent or any Lender. Guarantor covenants for the benefit of the Agent and
the Lenders to remain apprised of all material economic or other developments
relating to or affecting the Borrower, its property or its business. Without
limiting the foregoing Guarantor agrees to enter into such agreements and
arrangements with Borrower as may be necessary to ensure its receipt of notice
of such material changes and of periodic financial statements. Guarantor
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expressly waives any requirement that the Agent or any Lender advise, disclose,
discuss or deliver notice to Guarantor regarding Borrower's financial condition
or operations or with respect to any default by Borrower in its performance of
the Obligations whether or not knowledge of such condition, operations or
default is or reasonably could be in the possession of Guarantor and whether or
not such knowledge is in the possession of the Agent or any Lender before or
after the extension of any credit giving rise to Obligations by the Borrower.
5. UNCONDITIONAL GUARANTY. The obligations of the Guarantor under
this Guaranty are absolute and unconditional without regard to the obligations
of any other party or person. The obligations of the Guarantor hereunder shall
not be in any way be limited or affected by any circumstance whatsoever
including, without limitation, (a) any act or omission of the Agent or any
Lender consented to in Section 2 hereof; (b) the failure to receive any notice,
demand, presentment or protest waived in Sections 3 and 4 hereof; (c) any
failure by the Borrower or any other guarantor or surety to perform or comply
with the obligations or the terms of any instrument or agreement relating
thereto; (d) any change in the name, purpose, capital stock or constitution of
the Borrower or any other guarantor or surety; (e) any irregularity, defect or
unauthorized action by Agent, any Lender, Borrower or any other guarantor or
surety or any of their respective officers, directors or other agents in
executing and delivering any instrument or agreements relating to the
Obligations or in carrying out or attempting to carry out the terms of any such
agreements; (f) any insolvency, bankruptcy, reorganization or similar proceeding
by or against Borrower, Agent, any Lender, Guarantor or any other surety or
guarantor; (g) any setoff, counterclaim, recoupment, deduction, defense or other
right which Guarantor may have against Agent, any Lender, Borrower or any other
person for any reason whatsoever whether related to the obligations or
otherwise; or (h) any other circumstance which might constitute a legal or
equitable discharge or defense, in whole or in part, of a surety or guarantor.
Guarantor hereby waives all defenses of a surety to which it may be entitled by
statute or otherwise.
6. CONTINUING GUARANTY. This guaranty shall be a continuing one and
shall be binding upon the Guarantor regardless of how long before or after the
date hereof any Obligation was or is incurred. Credit may be granted or
continued from time to time by Agent or any Lender to Borrower without notice to
or authorization from the Guarantor regardless of Borrower's then-existing
financial or other condition. Notwithstanding the foregoing, however, after
full and final payment of each Loan made pursuant to the Credit Agreement and
the other Loan Documents and the full performance of all other obligations of
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the Borrower thereunder and the expiration of the Commitment of each Lender, the
Guarantor's obligations hereunder shall terminate and this Guaranty shall be of
no further force and effect PROVIDED, HOWEVER, the Guarantor agrees that this
Guaranty shall continue to be effective or shall be reinstated as the case may
be if at any time any payment to Agent or any Lender of any of the Obligations
is rescinded or must be restored or returned by the Agent or Lender upon the
insolvency, bankruptcy or reorganization of Borrower, all as though such payment
had not been made. In the event this Guaranty is preceded or followed by any
other agreement of suretyship or guaranty by the Guarantor or others, all shall
be deemed to be cumulative, and the obligations of the Guarantor hereunder shall
be in addition to those stated in any other suretyship or guaranty agreement.
7. WAIVER OF SUBROGATION. Guarantor hereby irrevocably waives all
claims it has or may acquire against Borrower in respect of the Obligations,
including rights of exoneration, reimbursement and subrogation. Guarantor
agrees to indemnify Lender, and hold it harmless from and against all loss and
expense, including legal fees, suffered or incurred by Lender as a result of
claims to avoid any payment received by Lender from Borrower, or for its account
or from collateral, with respect to the Obligations of Borrower guarantied
herein.
8. EXPENSES; DEFAULT INTEREST. Guarantor agrees to pay all expenses
of Agent and the Lenders in connection with the execution and delivery of this
Guaranty and its enforcement, including, without limitation, fees and expenses
of counsel (including allocated fees and expenses of in-house counsel) and other
costs of collection. If Guarantor shall fail to pay any amount when due
hereunder, such amount shall bear interest from the due date until paid at a
rate per annum equal to two percentage points (2%) above the Alternate Base Rate
(changing as the Alternate Base Rate changes).
9. NO RELIANCE. Guarantor acknowledges that Agent and Lenders
intend to obtain other guarantees to secure the repayment of the Obligations.
Guarantor represents and warrants to Agent and Lenders, however, that in making
this Guaranty it is not relying upon the Agent's or Lenders' obtaining any
guaranty agreement (other than this Guaranty) to secure repayment of the
Obligations. Guarantor specifically acknowledges that the Agent's and Lenders'
obtaining any such guaranty agreement is not a condition to the enforcement of
this Guaranty. If Agent and Lenders should simultaneously or hereafter elect to
attempt to take additional guaranty agreements or collateral to secure repayment
of the Obligation and if their efforts to do so should fail in any respect
including, without limitation, a determination that the agreement purporting to
provide such additional guaranty or security interest is invalid or
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unenforceable for any reason, this Guaranty shall, nonetheless, remain in full
force and effect.
10. REMEDIES. No delay in making demand on the Guarantor for
satisfaction of the obligations of the Guarantor hereunder shall prejudice the
Agent's or Lenders' rights to enforce such satisfaction. All of Agent's and
Lenders' rights and remedies shall be cumulative, and any failure of the Agent
or any Lender to exercise any right hereunder shall not be construed as a waiver
of the right to exercise the same or any other right at any time and from time
to time hereafter. In the event the Agent or any Lender in its sole discretion
elects to give notice of any action with respect to the sale of collateral, if
any, securing the Obligations or any part thereof, Guarantor agrees that ten
(10) days prior written notice shall be deemed reasonable notice of any matters
contained in such notice.
11. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and
warrants to the Agent and each Lender as follows:
(a) The Guarantor and its Subsidiaries are corporations duly
incorporated, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation. The Guarantor and its 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 consolidated
business, operations or financial condition of the Guarantor and its
Subsidiaries. The 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 this Guaranty and the
other Loan Documents to which it is a party.
(b) The execution, delivery and performance by the Guarantor of
this Guaranty and the other Loan Documents to which it is a party have been duly
authorized by all necessary corporate action of the Guarantor, do not require
any shareholder approval or the approval or consent of any trustee or the
holders of any Indebtedness of the 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 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 Guarantor or any of its Subsidiaries is a party or by which the
Guarantor, any of its Subsidiaries or any of their respective properties may be
bound or affected.
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(c) No Government Approval or filing or registration with any
Governmental Authority is required for the making and performance by the
Guarantor of this Guaranty or the other Loan Documents to which it is a party or
in connection with any of the transactions contemplated hereby or thereby,
except such as have been heretofore obtained and are in full force and effect
(certified copies thereof having been delivered to the Agent).
(d) This Guaranty has been duly executed and delivered by the
Guarantor and constitutes the legal, valid and binding obligations of the
Guarantor enforceable against the Guarantor in accordance with its terms.
(e) There are no actions, proceedings, investigations, or claims
against or affecting the Guarantor or any of its Subsidiaries now pending before
any court, arbitrator or Governmental Authority (nor to the knowledge of the
Guarantor has any thereof been threatened nor does any basis exist therefor)
which if determined adversely to the Guarantor or any of its subsidiaries would
be likely to have a material adverse effect on the business, operations or
consolidated financial condition of the Guarantor and its Subsidiaries or on the
ability of the Guarantor to perform its obligations under this Guaranty and the
other Loan Documents to which it is a party, except as reflected in the
financial statements or reports referred to in Section 11(h) hereof or otherwise
set forth in item 6.7 of the Disclosure Schedule to the Credit Agreement.
(f) (i) The fair value of the property of the Guarantor is
greater than the amount of the Guarantor's liabilities (including disputed,
contingent and unliquidated liabilities) as such value is established and
liabilities evaluated for purposes of Section 101(31) of the Bankruptcy Code
and, in addition, for purposes of any state's applicable fraudulent transfer
acts; (ii) the present fair saleable value of the property of the Guarantor is
not less than the amount that will be required to pay the probable liability of
the Guarantor on its debts as they become absolute and matured; (iii) the
Guarantor is able to realize upon its property and pay its debts and other
liabilities (including disputed, contingent and unliquidated liabilities) as
they mature in the normal course of business; (iv) the Guarantor does not intend
to, and does not believe that it will, incur debts or liabilities beyond its
ability to pay as such debts and liabilities mature; and (v) the Guarantor is
not engaged in business or a transaction, and is not about to engage in business
or a transaction, for which the Guarantor's property would constitute
unreasonably small capital.
(g) During the twelve-consecutive-month period prior to the date
of the execution and delivery of the Credit
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Agreement and prior to the date of any Borrowing thereunder, no steps have been
taken to terminate any Pension Plan, and no contribution failure has occurred
with respect to any Pension Plan sufficient to give rise to a Lien under section
302(f) of ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which might result in the incurrence by Guarantor or
any member of the Controlled Group of any material liability, fine or penalty.
Neither Guarantor nor any member of the Controlled Group has any contingent
liability with respect to any post-retirement benefit under a Welfare Plan,
other than liability for continuation coverage described in Part 6 of Title I of
ERISA.
(h) The Guarantor heretofore has furnished to each Lender and
the Agent a copy of the Price/Costco, Inc. Annual Report containing, INTER ALIA,
the consolidated balance sheets of the Guarantor and its Subsidiaries as at
August 28, 1994 and September 3, 1995 and the related statements of operations,
statements of shareholders' equity and statements of cash flow for each of the
two years in the period ended September 3, 1995, all as certified by independent
certified public accountants selected by the Guarantor and approved by the
Price/Costco Agent. Such consolidated balance sheets are materially accurate
and complete and present fairly the respective financial positions of the
Guarantor on a consolidated basis as at the respective dates thereof. Such
statements of operations, statements of shareholders' equity and statements of
cash flow are materially accurate and complete and present fairly the results of
the operations of the Guarantor on a consolidated basis for the respective
periods indicated. The Guarantor has also furnished to each Lender and the
Agent a copy of the Form 10-Q containing the unaudited consolidated financial
statements of the Guarantor as at and for the twenty four weeks ended February
18, 1996, which is materially accurate and complete and presents fairly the
financial position at the date thereof and results of operations for the period
covered thereby of the Guarantor, subject only to year-end audit adjustments.
The consolidated financial statements of the Guarantor referred to above were
prepared in conformity with generally accepted accounting principles ordinarily
applied in the United States in the preparation of audited financial statements
of corporations organized in the United States.
(i) Since the date of the financial statements of the Guarantor
and its Subsidiaries described in Section 11(h) hereof, there has been no
material adverse change in the consolidated financial condition, operations, or
business of the Guarantor or Costco Wholesale Corporation or The Price Company.
12. THE GUARANTOR'S COVENANTS. The Guarantor covenants to the
Lenders and the Agent that it will comply with
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all of the covenants and provisions set forth in Sections 5.10, 5.13, 5.14 and
5.15 of the Extended Revolving Credit Agreement made as of January 31, 1994
among the Guarantor, the banks named therein (the "Price/Costco Banks") and the
agent named therein (the "Price/Costco Agent"), as in effect on the date hereof
through the Fifth Amendment (the "Price/Costco Credit Agreement"), PROVIDED that
a copy of all notices and documents required to be delivered to any of the
Price/Costco Banks or the Price/Costco Agent pursuant to the applicable sections
of the Price/Costco Credit Agreement shall be delivered to the Lenders and the
Agent at the same time and in the same manner as such notices and documents are
required to be delivered to the Price/Costco Banks or the Price/Costco Agent, as
applicable. All of the covenants and provisions set forth in Sections 5.10,
5.13, 5.14 and 5.15 of the Price/Costco Credit Agreement, with the definitions
of the defined terms used therein, are hereby incorporated herein by reference
as fully as if set forth herein at length, with each reference to the
Price/Costco Banks or any of them, being deemed to refer to the Lenders and each
reference to the Price/Costco Agent, being deemed to refer to the Agent for
purposes of such incorporation. The obligations of the Guarantor under this
SECTION 12 shall not be affected by any amendment or modification of the terms
of the Price/Costco Credit Agreement, by any payment on or discharge of the
Indebtedness outstanding under the Price/Costco Credit Agreement, by any
termination of the Price/Costco Credit Agreement, or by any approval, consent,
opinion, or waiver given pursuant to the Price/Costco Credit Agreement unless
agreed to in writing by the Agent and the Required Lenders.
13. GOVERNING LAW. This Guaranty shall be governed by and construed
in accordance with the internal laws of the State of New York.
14. CONSENT TO JURISDICTION, WAIVER OF IMMUNITIES. The Guarantor
hereby irrevocably submits to the jurisdiction of any State or federal court
sitting in New York, New York, in any action or proceeding brought to enforce or
otherwise arising out of or relating to this Guaranty 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 Guarantor 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 herein shall impair the right of the Agent or any Lender to bring any
action or proceeding against the Guarantor or its property in the courts of any
other jurisdiction and Guarantor irrevocably submits to the nonexclusive
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jurisdiction of the appropriate courts sitting in any place where property of
the Guarantor is located.
15. WAIVER OF JURY TRIAL. The Guarantor waives any right to a trial
by jury in any action or proceeding to enforce or defend any rights under or
relating to this Guaranty or any amendment, instrument, document or agreement
delivered or which may in the future be delivered in connection herewith or
arising from any relationship existing in connection with this Guaranty, the
Credit Agreement or any other Loan Document, and agrees that (a) any such action
or proceeding shall be tried before a court and not before a jury and (b) any
beneficiary hereof may file an original counterpart or copy of this Guaranty
with any court as written evidence of the consent of the Guarantor to the waiver
of its right to a trial by jury.
16. ASSIGNMENT. This Guaranty shall inure to the benefit of Agent
and Lenders and their respective successors and assigns, including without
limitation any holder of a Note. The Agent and any Lender may assign any or all
of the Obligations (to the extent permitted in the Credit Agreement) and such
assignment shall be deemed to include a corresponding assignment of all or a
corresponding part of this Guaranty. The assignee of any or all of Agent's or
any Lender's interest herein shall have the same rights and benefits against the
Guarantor and otherwise under this Guaranty (including the right of setoff) as
if such assignee were the assignor. This Agreement shall be binding upon the
Guarantor and Guarantor may not assign or otherwise transfer all or any part of
its rights or obligations hereunder without the prior written consent of Agent
and Lenders, and any such assignment or transfer purported to be made without
such consent shall be ineffective.
17. SEVERABILITY. Any provision of the Guaranty 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 Guarantor waives any provision of law which
renders any provision hereof prohibited or unenforceable in any respect.
18. LIMITATION OF LIABILITY. Notwithstanding anything else herein to
the contrary, if the Guarantor's obligations hereunder are subject to avoidance
by a trustee or debtor-in-possession in any bankruptcy proceedings under
11 U.S.C. Section 548(a)(ii) or 11 U.S.C. Section 544(b) or any comparable
provisions or subject to avoidance by any creditor under applicable state
fraudulent transfer acts then, in such event, the Guarantor's
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obligations hereunder shall be reduced to the maximum amount which would not be
subject to such avoidance.
19. TAXES. All payments by the Guarantor hereunder shall be made free
and clear of and without deduction for any present or future income, excise,
stamp or franchise taxes and other taxes, fees, duties, withholdings or other
charges of any nature whatsoever imposed by any taxing authority, but excluding
franchise taxes and taxes imposed on or measured by any Lender's overall net
income or gross receipts (such non-excluded items being called "TAXES"). In the
event that any withholding or deduction from any payment to be made by the
Guarantor hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then the Guarantor will
a. pay directly to the relevant authority the full amount required to
be so withheld or deducted;
b. promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
c. pay to the Agent for the account of the Lenders such additional
amount or amounts as is necessary to ensure that the net amount actually
received by each Lender will equal the full amount such Lender would have
received had no such withholding or deduction been required.
Moreover, if any present or future taxes, fees, duties, withholdings or other
charges of any nature whatsoever imposed by any taxing authority, including
franchise taxes and taxes imposed on or measured by any Lender's overall net
income or gross receipts (other than a change in the rate of tax based solely on
the overall net or gross income of such Lender) ("Further Taxes") are directly
or indirectly asserted against the Agent or any Lender with respect to any
payment received by the Agent or such Lender hereunder, the Agent or such Lender
may pay such Further Taxes and the Guarantor will promptly pay to the Agent or
such Lender, at the time interest is paid, such additional amounts (including
any penalties, interest or expenses) that the respective Lender or Agent
specifies as necessary to preserve the after-tax yield that the Agent or Lender
would have received if such Taxes or Further Taxes had not been imposed.
If the Guarantor fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Agent, for the account of the respective
Lenders, the required receipts or other required documentary evidence, the
Guarantor shall indemnify the Lenders for any incremental Taxes, interest or
penalties that may become payable by any Lender as a result of any such failure.
For purposes of this SECTION 19, a distribution
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hereunder by the Agent or any Lender to or for the account of any Lender shall
be deemed a payment by the Guarantor.
IN WITNESS WHEREOF the Guarantor has caused its duly authorized officers to
execute and deliver this Guaranty as of the date first above written.
GUARANTOR:
PRICE/COSTCO, INC.
By __________________________________________
Its ____________________________________
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GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT is made as of the 11th day of April, 1996 by COSTCO
WHOLESALE CORPORATION ("Guarantor") in favor of CIBC INC., BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, BANK OF AMERICA NW, N.A. (doing business as SeaFirst Bank) AND NATIONSBANK
OF TEXAS, N.A. (collectively the "Lenders") and CANADIAN IMPERIAL BANK OF
COMMERCE as administrative agent for the Lenders (together with any successor
agent, the "Agent").
R E C I T A L S
A. The Lenders and the Agent have entered into a Credit Agreement dated
as of the date hereof with PRICE COSTCO NOVA SCOTIA COMPANY, a Nova Scotia
unlimited company ("Borrower"), pursuant to which the Lenders have committed to
make loans in an aggregate principal amount not to exceed at any one time One
Hundred Forty Million Dollars ($140,000,000). Such Credit Agreement as the same
may be amended from time to time hereafter is referred to herein as the "Credit
Agreement." Capitalized terms not otherwise defined herein shall have the
meanings given in the Credit Agreement.
B. Pursuant to the terms of the Credit Agreement, the execution and
delivery of this Guaranty is a material condition precedent to the Lenders'
obligations to make the Loans to Borrower thereunder.
C. The proceeds of the Loans to be made by the Lenders pursuant to the
Credit Agreement will result in material economic benefit to the Guarantor.
D. The obligations of the Guarantor are intended to constitute senior
debt of the Guarantor for all purposes, including, without limitation, for
application of the terms of: (1) that certain Indenture between The Price
Company as obligor and First Interstate Bank of California as trustee dated
February 19, 1987 and those certain Convertible Subordinated Debentures issued
thereunder; (2) that certain Indenture between The Price Company as obligor and
First Interstate Bank, Ltd. as trustee dated March 7, 1991 and those certain
Convertible Subordinated Debentures issued thereunder; and (3) that certain
Indenture between Costco Wholesale Corporation as obligor and First Trust
National Association as trustee dated May 15, 1992 and those certain Convertible
Subordinated Debentures issued thereunder.
NOW THEREFORE, in consideration of the Loans to be extended by the Lenders
to the Borrower, and for other good and valuable
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consideration receipt of which Guarantor hereby acknowledges, Guarantor agrees
as follows:
AGREEMENT
1. GUARANTEED OBLIGATIONS. The Guarantor absolutely and
unconditionally guarantees payment to the Lenders and Agent when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) of
all indebtedness, liabilities and obligations whatsoever of the Borrower owing
to any Lender or the Agent and arising pursuant to or in connection with the
Credit Agreement, any other Loan Document or the transactions contemplated
thereby, whether presently existing or hereafter arising (collectively, the
"Obligations"), without set-off, counterclaim, recoupment or deduction of any
amounts owing or alleged to be owing by Lenders (or Agent) to Borrower. Without
limiting the foregoing, Guarantor specifically guarantees payment of any
judgment entered against the Borrower and any damages that may be awarded in any
action brought against the Borrower by the Agent or any Lender on a claim or
cause of action arising pursuant to or in connection with the Credit Agreement,
any other Loan Document, or the transactions contemplated thereby. This
Guaranty is a guaranty of payment and not merely of collection.
2. GUARANTOR'S CONSENT. The Guarantor hereby consents to all terms
and conditions of agreements heretofore or hereafter made between the Agent, the
Lenders (or any of them) and the Borrower (including without limitation the
Credit Agreement and other Loan Documents) and further consents that the Agent
or any Lender may without further consent or disclosure and without affecting or
releasing the obligations of Guarantor hereunder: (a) surrender, exchange,
release, assign, or sell any collateral or waive, release, assign, sell, or
subordinate any security interest, in whole or in part; (b) waive or delay the
exercise of any rights or remedies of the Agent or any Lender against the
Borrower; (c) waive or delay the exercise of any rights or remedies of the Agent
or any Lender against any surety or guarantor (including, without limitation,
rights or remedies of the Agent and the Lenders against the Guarantor under this
Guaranty); (d) waive or delay the exercise of any rights or remedies of the
Agent or the Lenders in respect of any collateral or security interest now or
hereafter held; (e) release any surety or guarantor; (f) renew, extend, waive or
modify the terms of any Obligation or the obligations of any surety or
guarantor, or any instrument or agreement evidencing the same; (g) renew,
extend, waive or modify the terms of any deed of trust, mortgage, pledge,
assignment, security agreement or other security document (h) apply payments
received from Borrower or from any collateral, to any indebtedness, liability,
or obligations of Borrower whether or not an Obligation hereunder; (i) apply
payments
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received from any surety or guarantor (including Guarantor) or from any
collateral pledged by such surety or guarantor, to any indebtedness, liability,
or obligation of such surety or guarantor whether or not related to the
Obligations; and (j) realize on any security interest, judicially or
nonjudicially, with or without preservation of a deficiency judgment.
3. GUARANTOR'S WAIVER. The Guarantor waives any action on
delinquency in respect of the obligations or any part thereof, including any
right to require the Agent or any Lender to sue Borrower or any guarantor or
surety obligated with respect to the Obligations or any part thereof, or
otherwise to enforce payment thereof against any collateral securing the
Obligations or the obligations of any guarantor of surety or any part thereof.
Guarantor further waives notice of (a) the Agent's or any Lender's acceptance of
this Guaranty or its intention to act or its actions in reliance hereon; (b) the
present existence or future incurring of any Obligations or any terms or amounts
thereof or any change therein; (c) any default by the Borrower or any surety or
guarantor; (d) the obtaining of any guaranty or surety agreement (in addition to
this Guaranty); (e) the obtaining of any pledge, assignment or other security
for any Obligations; (f) the release of any surety or guarantor; (g) the release
of any collateral; (h) any change in Borrower's business or financial condition;
(i) any renewal, extension or modification of the terms of any Obligation or of
the obligations or liabilities of any surety or guarantor or any instruments or
agreements evidencing the same; (j) any acts or omissions of the Agent or any
Lender consented to in Section 2 hereof; and (k) any other demands or notices
whatsoever with respect to the Obligations or this Guaranty. The Guarantor
further waives notice of presentment, demand, protest, notice of nonpayment and
notice of protest in relation to any instrument or agreement evidencing any
Obligation.
4. GUARANTOR'S KNOWLEDGE OF BORROWER'S ECONOMIC CONDITION.
Guarantor represents and warrants to the Agent and the Lenders that it has
reviewed such documents and other information as it has deemed appropriate in
order to permit it to be fully apprised of Borrower's financial condition and
operations and has, in entering into this Guaranty made its own credit analysis
independently and without reliance upon any information communicated to it by
the Agent or any Lender. Guarantor covenants for the benefit of the Agent and
the Lenders to remain apprised of all material economic or other developments
relating to or affecting the Borrower, its property or its business. Without
limiting the foregoing Guarantor agrees to enter into such agreements and
arrangements with Borrower as may be necessary to ensure its receipt of notice
of such material changes and of periodic financial statements. Guarantor
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expressly waives any requirement that the Agent or any Lender advise, disclose,
discuss or deliver notice to Guarantor regarding Borrower's financial condition
or operations or with respect to any default by Borrower in its performance of
the Obligations whether or not knowledge of such condition, operations or
default is or reasonably could be in the possession of Guarantor and whether or
not such knowledge is in the possession of the Agent or any Lender before or
after the extension of any credit giving rise to Obligations by the Borrower.
5. UNCONDITIONAL GUARANTY. The obligations of the Guarantor under
this Guaranty are absolute and unconditional without regard to the obligations
of any other party or person. The obligations of the Guarantor hereunder shall
not be in any way be limited or affected by any circumstance whatsoever
including, without limitation, (a) any act or omission of the Agent or any
Lender consented to in Section 2 hereof; (b) the failure to receive any notice,
demand, presentment or protest waived in Sections 3 and 4 hereof; (c) any
failure by the Borrower or any other guarantor or surety to perform or comply
with the obligations or the terms of any instrument or agreement relating
thereto; (d) any change in the name, purpose, capital stock or constitution of
the Borrower or any other guarantor or surety; (e) any irregularity, defect or
unauthorized action by Agent, any Lender, Borrower or any other guarantor or
surety or any of their respective officers, directors or other agents in
executing and delivering any instrument or agreements relating to the
Obligations or in carrying out or attempting to carry out the terms of any such
agreements; (f) any insolvency, bankruptcy, reorganization or similar proceeding
by or against Borrower, Agent, any Lender, Guarantor or any other surety or
guarantor; (g) any setoff, counterclaim, recoupment, deduction, defense or other
right which Guarantor may have against Agent, any Lender, Borrower or any other
person for any reason whatsoever whether related to the obligations or
otherwise; or (h) any other circumstance which might constitute a legal or
equitable discharge or defense, in whole or in part, of a surety or guarantor.
Guarantor hereby waives all defenses of a surety to which it may be entitled by
statute or otherwise.
6. CONTINUING GUARANTY. This guaranty shall be a continuing one and
shall be binding upon the Guarantor regardless of how long before or after the
date hereof any Obligation was or is incurred. Credit may be granted or
continued from time to time by Agent or any Lender to Borrower without notice to
or authorization from the Guarantor regardless of Borrower's then-existing
financial or other condition. Notwithstanding the foregoing, however, after
full and final payment of each Loan made pursuant to the Credit Agreement and
the other Loan Documents and the full performance of all other obligations of
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the Borrower thereunder and the expiration of the Commitment of each Lender, the
Guarantor's obligations hereunder shall terminate and this Guaranty shall be of
no further force and effect PROVIDED, HOWEVER, the Guarantor agrees that this
Guaranty shall continue to be effective or shall be reinstated as the case may
be if at any time any payment to Agent or any Lender of any of the Obligations
is rescinded or must be restored or returned by the Agent or Lender upon the
insolvency, bankruptcy or reorganization of Borrower, all as though such payment
had not been made. In the event this Guaranty is preceded or followed by any
other agreement of suretyship or guaranty by the Guarantor or others, all shall
be deemed to be cumulative, and the obligations of the Guarantor hereunder shall
be in addition to those stated in any other suretyship or guaranty agreement.
7. WAIVER OF SUBROGATION. Guarantor hereby irrevocably waives all
claims it has or may acquire against Borrower in respect of the Obligations,
including rights of exoneration, reimbursement and subrogation. Guarantor
agrees to indemnify Lender, and hold it harmless from and against all loss and
expense, including legal fees, suffered or incurred by Lender as a result of
claims to avoid any payment received by Lender from Borrower, or for its account
or from collateral, with respect to the Obligations of Borrower guarantied
herein.
8. EXPENSES; DEFAULT INTEREST. Guarantor agrees to pay all expenses
of Agent and the Lenders in connection with the execution and delivery of this
Guaranty and its enforcement, including, without limitation, fees and expenses
of counsel (including allocated fees and expenses of in-house counsel) and other
costs of collection. If Guarantor shall fail to pay any amount when due
hereunder, such amount shall bear interest from the due date until paid at a
rate per annum equal to two percentage points (2%) above the Alternate Base Rate
(changing as the Alternate Base Rate changes).
9. NO RELIANCE. Guarantor acknowledges that Agent and Lenders
intend to obtain other guarantees to secure the repayment of the Obligations.
Guarantor represents and warrants to Agent and Lenders, however, that in making
this Guaranty it is not relying upon the Agent's or Lenders' obtaining any
guaranty agreement (other than this Guaranty) to secure repayment of the
Obligations. Guarantor specifically acknowledges that the Agent's and Lenders'
obtaining any such guaranty agreement is not a condition to the enforcement of
this Guaranty. If Agent and Lenders should simultaneously or hereafter elect to
attempt to take additional guaranty agreements or collateral to secure repayment
of the Obligation and if their efforts to do so should fail in any respect
including, without limitation, a determination that the agreement purporting to
provide such additional guaranty or security interest is invalid or
5
<PAGE>
unenforceable for any reason, this Guaranty shall, nonetheless, remain in full
force and effect.
10. REMEDIES. No delay in making demand on the Guarantor for
satisfaction of the obligations of the Guarantor hereunder shall prejudice the
Agent's or Lenders' rights to enforce such satisfaction. All of Agent's and
Lenders' rights and remedies shall be cumulative, and any failure of the Agent
or any Lender to exercise any right hereunder shall not be construed as a waiver
of the right to exercise the same or any other right at any time and from time
to time hereafter. In the event the Agent or any Lender in its sole discretion
elects to give notice of any action with respect to the sale of collateral, if
any, securing the Obligations or any part thereof, Guarantor agrees that ten
(10) days prior written notice shall be deemed reasonable notice of any matters
contained in such notice.
11. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and
warrants to the Agent and each Lender as follows:
(a) The Guarantor and its Subsidiaries are corporations duly
incorporated, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation. The Guarantor and its 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 consolidated
business, operations or financial condition of the Guarantor and its
Subsidiaries. The 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 this Guaranty and the
other Loan Documents to which it is a party.
(b) The execution, delivery and performance by the Guarantor of
this Guaranty and the other Loan Documents to which it is a party have been duly
authorized by all necessary corporate action of the Guarantor, do not require
any shareholder approval or the approval or consent of any trustee or the
holders of any Indebtedness of the 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 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 Guarantor or any of its Subsidiaries is a party or by which the
Guarantor, any of its Subsidiaries or any of their respective properties may be
bound or affected.
6
<PAGE>
(c) No Government Approval or filing or registration with any
Governmental Authority is required for the making and performance by the
Guarantor of this Guaranty or the other Loan Documents to which it is a party or
in connection with any of the transactions contemplated hereby or thereby,
except such as have been heretofore obtained and are in full force and effect
(certified copies thereof having been delivered to the Agent).
(d) This Guaranty has been duly executed and delivered by the
Guarantor and constitutes the legal, valid and binding obligations of the
Guarantor enforceable against the Guarantor in accordance with its terms.
(e) There are no actions, proceedings, investigations, or claims
against or affecting the Guarantor or any of its Subsidiaries now pending before
any court, arbitrator or Governmental Authority (nor to the knowledge of the
Guarantor has any thereof been threatened nor does any basis exist therefor)
which if determined adversely to the Guarantor or any of its subsidiaries would
be likely to have a material adverse effect on the business, operations or
consolidated financial condition of the Guarantor and its Subsidiaries or on the
ability of the Guarantor to perform its obligations under this Guaranty and the
other Loan Documents to which it is a party, except as reflected in the
financial statements or reports referred to in Section 11(h) of the
Price/Costco, Inc. Guaranty Agreement dated concurrently herewith or otherwise
set forth in item 6.7 of the Disclosure Schedule to the Credit Agreement.
(f) (i) The fair value of the property of the Guarantor is
greater than the amount of the Guarantor's liabilities (including disputed,
contingent and unliquidated liabilities) as such value is established and
liabilities evaluated for purposes of Section 101(31) of the Bankruptcy Code
and, in addition, for purposes of any state's applicable fraudulent transfer
acts; (ii) the present fair saleable value of the property of the Guarantor is
not less than the amount that will be required to pay the probable liability of
the Guarantor on its debts as they become absolute and matured; (iii) the
Guarantor is able to realize upon its property and pay its debts and other
liabilities (including disputed, contingent and unliquidated liabilities) as
they mature in the normal course of business; (iv) the Guarantor does not intend
to, and does not believe that it will, incur debts or liabilities beyond its
ability to pay as such debts and liabilities mature; and (v) the Guarantor is
not engaged in business or a transaction, and is not about to engage in business
or a transaction, for which the Guarantor's property would constitute
unreasonably small capital.
7
<PAGE>
12. GOVERNING LAW. This Guaranty shall be governed by and construed
in accordance with the internal laws of the State of New York.
13. CONSENT TO JURISDICTION, WAIVER OF IMMUNITIES. The Guarantor
hereby irrevocably submits to the jurisdiction of any State or federal court
sitting in New York, New York, in any action or proceeding brought to enforce or
otherwise arising out of or relating to this Guaranty 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 Guarantor 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 herein shall impair the right of the Agent or any Lender to bring any
action or proceeding against the Guarantor or its property in the courts of any
other jurisdiction and Guarantor irrevocably submits to the nonexclusive
jurisdiction of the appropriate courts sitting in any place where property of
the Guarantor is located.
14. WAIVER OF JURY TRIAL. The Guarantor waives any right to a trial
by jury in any action or proceeding to enforce or defend any rights under or
relating to this Guaranty or any amendment, instrument, document or agreement
delivered or which may in the future be delivered in connection herewith or
arising from any relationship existing in connection with this Guaranty, the
Credit Agreement or any other Loan Document, and agrees that (a) any such action
or proceeding shall be tried before a court and not before a jury and (b) any
beneficiary hereof may file an original counterpart or copy of this Guaranty
with any court as written evidence of the consent of the Guarantor to the waiver
of its right to a trial by jury.
15. ASSIGNMENT. This Guaranty shall inure to the benefit of Agent
and Lenders and their respective successors and assigns, including without
limitation any holder of a Note. The Agent and any Lender may assign any or all
of the Obligations (to the extent permitted in the Credit Agreement) and such
assignment shall be deemed to include a corresponding assignment of all or a
corresponding part of this Guaranty. The assignee of any or all of Agent's or
any Lender's interest herein shall have the same rights and benefits against the
Guarantor and otherwise under this Guaranty (including the right of setoff) as
if such assignee were the assignor. This Agreement shall be binding upon the
Guarantor and Guarantor may not assign or otherwise transfer all or any part of
its rights or obligations hereunder without the prior written consent of Agent
and Lenders, and any such
8
<PAGE>
assignment or transfer purported to be made without such consent shall be
ineffective.
16. SEVERABILITY. Any provision of the Guaranty 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 Guarantor waives any provision of law which
renders any provision hereof prohibited or unenforceable in any respect.
17. LIMITATION OF LIABILITY. Notwithstanding anything else herein to
the contrary, if the Guarantor's obligations hereunder are subject to avoidance
by a trustee or debtor-in-possession in any bankruptcy proceedings under 11
U.S.C. Section 548(a)(ii) or 11 U.S.C. Section 544(b) or any comparable
provisions or subject to avoidance by any creditor under applicable state
fraudulent transfer acts then, in such event, the Guarantor's obligations
hereunder shall be reduced to the maximum amount which would not be subject to
such avoidance.
18. TAXES. All payments by the Guarantor hereunder shall be made free
and clear of and without deduction for any present or future income, excise,
stamp or franchise taxes and other taxes, fees, duties, withholdings or other
charges of any nature whatsoever imposed by any taxing authority, but excluding
franchise taxes and taxes imposed on or measured by any Lender's overall net
income or gross receipts (such non-excluded items being called "TAXES"). In the
event that any withholding or deduction from any payment to be made by the
Guarantor hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then the Guarantor will
a. pay directly to the relevant authority the full amount required to
be so withheld or deducted;
b. promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
c. pay to the Agent for the account of the Lenders such additional
amount or amounts as is necessary to ensure that the net amount actually
received by each Lender will equal the full amount such Lender would have
received had no such withholding or deduction been required.
Moreover, if any present or future taxes, fees, duties, withholdings or other
charges of any nature whatsoever imposed by any taxing authority, including
franchise taxes and taxes imposed
9
<PAGE>
on or measured by any Lender's overall net income or gross receipts (other than
a change in the rate of tax based solely on the overall net or gross income of
such Lender) ("Further Taxes") are directly or indirectly asserted against the
Agent or any Lender with respect to any payment received by the Agent or such
Lender hereunder, the Agent or such Lender may pay such Further Taxes and the
Guarantor will promptly pay to the Agent or such Lender, at the time interest is
paid, such additional amounts (including any penalties, interest or expenses)
that the respective Lender or Agent specifies as necessary to preserve the
after-tax yield that the Agent or Lender would have received if such Taxes or
Further Taxes had not been imposed.
If the Guarantor fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Agent, for the account of the respective
Lenders, the required receipts or other required documentary evidence, the
Guarantor shall indemnify the Lenders for any incremental Taxes, interest or
penalties that may become payable by any Lender as a result of any such failure.
For purposes of this SECTION 18, a distribution hereunder by the Agent or any
Lender to or for the account of any Lender shall be deemed a payment by the
Guarantor.
IN WITNESS WHEREOF the Guarantor has caused its duly authorized officers to
execute and deliver this Guaranty as of the date first above written.
GUARANTOR:
COSTCO WHOLESALE CORPORATION
By
------------------------------------------------
Its
------------------------------------------
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-01-1996
<PERIOD-START> SEP-04-1995
<PERIOD-END> MAY-12-1996
<CASH> 80,531
<SECURITIES> 0
<RECEIVABLES> 140,004
<ALLOWANCES> 3,314
<INVENTORY> 1,497,564
<CURRENT-ASSETS> 1,798,319
<PP&E> 3,378,872
<DEPRECIATION> 610,389
<TOTAL-ASSETS> 4,760,593
<CURRENT-LIABILITIES> 1,721,076
<BONDS> 1,232,457
0
0
<COMMON> 313,902
<OTHER-SE> 1,364,480
<TOTAL-LIABILITY-AND-EQUITY> 4,760,593
<SALES> 13,138,139
<TOTAL-REVENUES> 13,383,747
<CGS> 11,871,031
<TOTAL-COSTS> 13,058,492
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,466
<INCOME-PRETAX> 276,174
<INCOME-TAX> 113,921
<INCOME-CONTINUING> 162,253
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 162,253
<EPS-PRIMARY> .81
<EPS-DILUTED> .80
</TABLE>
<PAGE>
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 May12, 1996,
and the related condensed consolidated statements of operations for the 12-week
and 36-week periods ended May12, 1996 and May7, 1995, and condensed consolidated
statements of cash flows for the 36-week periods then ended. 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 procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted 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 LLP
Seattle, Washington
June 4, 1996
16
