-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sbh0T3pvYIfQ6CYyfmzFHC2SU1oPwbSDTBR5ZbKpznqHQv5QKHVRaSJne+H1EBiC aFVBUC6jRnL3auHpeTz3uA== 0000950144-97-010584.txt : 19971003 0000950144-97-010584.hdr.sgml : 19971003 ACCESSION NUMBER: 0000950144-97-010584 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19971002 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TECH DATA CORP CENTRAL INDEX KEY: 0000790703 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-COMPUTER & PERIPHERAL EQUIPMENT & SOFTWARE [5045] IRS NUMBER: 591578329 STATE OF INCORPORATION: FL FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-36999 FILM NUMBER: 97689713 BUSINESS ADDRESS: STREET 1: 5350 TECH DATA DR CITY: CLEARWATER STATE: FL ZIP: 34620 BUSINESS PHONE: 8135397429 MAIL ADDRESS: STREET 1: 5350 TECH DATA DRIVE CITY: CLEARWATER STATE: FL ZIP: 34620 S-3 1 TECH DATA CORPORATION FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 2, 1997 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- TECH DATA CORPORATION (Exact name of registrant as specified in its charter) 5350 TECH DATA DRIVE CLEARWATER, FL 33760 (813) 539-7429 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) --------------------- FLORIDA NO. 59-1578329 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number)
--------------------- JEFFERY P. HOWELLS EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER TECH DATA CORPORATION 5350 TECH DATA DRIVE, CLEARWATER, FLORIDA 33760 (813) 539-7429 (Name, address, including zip code, and telephone number, including area code, of agent for service) COPIES TO: FRANK N. FLEISCHER, ESQ. ROBERT H. CRAFT, JR. SCHIFINO & FLEISCHER, P.A. SULLIVAN & CROMWELL ONE TAMPA CITY CENTER SUITE 2700 1701 PENNSYLVANIA AVENUE, N.W. TAMPA, FLORIDA 33602 WASHINGTON, D.C. 20006 (813) 223-1535 (202) 956-7500
--------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALES TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement for the same offering. [ ] ________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective regulation statement for the same offering. [ ] ________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
============================================================================================================================= PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE(3) - ----------------------------------------------------------------------------------------------------------------------------- Common Stock, $.0015 Par Value...... 4,025,000(2) $46.00 $185,150,000 $56,106 =============================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee. (2) Includes 525,000 shares of Common Stock subject to the Underwriters' over-allotment options. (3) Calculated pursuant to Rule 457(c) as of September 30, 1997. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ 2 (EXPLANATORY NOTE) This Registration Statement contains two forms of prospectuses, one for an offering in the United States and one for an international offering outside the United States. The two prospectuses are identical except for separate cover pages and separate "underwriting" sections which are included herein. 3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED OCTOBER 2, 1997 3,500,000 SHARES [TECH DATA LOGO] COMMON STOCK (PAR VALUE $.0015 PER SHARE) --------------------- Of the 3,500,000 shares of Common Stock offered, 2,800,000 shares are being offered hereby in the United States and 700,000 shares are being offered in a concurrent international offering outside the United States. The initial public offering price and the aggregate underwriting discount per share will be identical for both offerings. See "Underwriting." The last reported sale price of the Common Stock, which is quoted under the symbol "TECD," on The Nasdaq National Market on September 30, 1997 was $46.00 per share. See "Price Range of Common Stock." Concurrently with the Offerings, Tech Data Corporation is offering $175,000,000 aggregate principal amount of % Convertible Subordinated Notes due , 2002 by a separate prospectus. The consummation of the Offerings and the Notes Offering are not conditioned upon each other. FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS IN EVALUATING AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY, SEE "RISK FACTORS" BEGINNING ON PAGE 5. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO OFFERING PRICE DISCOUNT(1) COMPANY(2) -------------- ------------ ----------- Per Share............................................... $ $ $ Total(3)................................................ $ $ $
- --------------- (1) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. (2) Before deducting estimated expenses of $325,000 payable by the Company. (3) The Company has granted the Underwriters options for 30 days to purchase up to an additional 525,000 shares at the initial public offering price per share, less the underwriting discount, solely to cover over-allotments. If such options are exercised in full, the total initial public offering price, underwriting discount and proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." -------------------------- The shares offered hereby are offered severally by the U.S. Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that certificates for the shares will be ready for delivery in New York, New York, on or about , 1997. GOLDMAN, SACHS & CO. BEAR, STEARNS & CO. INC. THE ROBINSON-HUMPHREY COMPANY NATIONSBANC MONTGOMERY SECURITIES, INC. --------------------- The date of this Prospectus is , 1997. 4 [GRAPHIC SHOWING APPROXIMATE NUMBER OF THE COMPANY'S SUPPLIERS AND CUSTOMERS.] CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CONVERTIBLE NOTES OR THE COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID IN CONNECTION WITH THE OFFERING. IN ADDITION, CERTAIN UNDERWRITERS (AND SELLING GROUP MEMBERS, IF ANY) ALSO MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET, IN ACCORDANCE WITH RULE 103 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." 2 5 PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial data appearing elsewhere, or incorporated by reference, in this Prospectus. Unless otherwise noted, the information and data in this Prospectus does not give effect to the exercise of the Underwriters' over-allotment options. This Prospectus contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed herein under "Risk Factors." THE COMPANY Tech Data Corporation ("Tech Data" or the "Company") is the world's second largest distributor of microcomputer hardware and software products to value-added resellers ("VARs"), corporate resellers, retailers and direct marketers (collectively with VARs, "resellers"). Tech Data distributes products throughout the United States, Canada, Latin America, Germany, France, Switzerland and Austria. The Company purchases its products directly from more than 900 manufacturers of microcomputer hardware and publishers of software in large quantities, maintains a stocking inventory of more than 45,000 products and sells to an active base of over 70,000 customers. The Company believes its broad assortment of vendors and products meets its customers' need for a cost effective link to such products through a single source. The Company provides its customers with systems, peripherals, networking products and software, which accounted for 25%, 40%, 19% and 16%, respectively, of net sales in the first six months of fiscal 1998. The Company offers products from manufacturers and publishers such as Apple, Bay Networks, Cisco, Compaq, Corel, Creative Labs, Digital Equipment, Epson, Hewlett-Packard, IBM, Intel, Microsoft, Novell, Okidata, Seagate, Symantec, 3Com, Toshiba, Viewsonic and Western Digital. The Company ships products from regionally located distribution centers generally the same day the orders are received. The customers are provided with a high level of service through flexible financing and credit programs, the Company's pre- and post-sale technical support, electronic commerce tools (including on-line order entry, access to product specifications and electronic data interchange ("EDI") services), product configuration services, customized shipping documents, flexible product return policies and customer education programs. The U.S. microcomputer distribution market grew from $17 billion in 1992 to $33 billion in 1996. This growth represents a compound annual rate of 18%, while the overall U.S. microcomputer industry grew at a compound annual rate of 13% during the same period. The Company's U.S. sales grew during this period at a compound annual rate of 45%. The increase in sales was primarily the result of the expansion of the Company's product lines, customer base and market share in North America. In addition, the Company entered the European market in fiscal 1995 through the acquisition of the largest microcomputer distributor in France. In July 1997, Tech Data further enhanced its market position in Europe with the acquisition of Macrotron AG, Germany's third largest microcomputer distributor with operations in Germany, Austria and Switzerland. The Company has also established export sales into Latin America from its U.S. operations and recently established a subsidiary in Brazil to serve that market. The Company increased operating income from $36.0 million in fiscal 1993 to $115.0 million in fiscal 1997 despite intense competition by focusing on achieving operating efficiencies through centralized management, stringent cost controls, efficient handling of product shipments, use of automation and by achieving economies of scale. Net income increased from $19.8 million to $57.0 million over the same period. Management believes that Tech Data's recent increases in sales, operating income and net income are directly attributable to its strategy of making significant capital investments to increase efficiency and maintaining operating cost control. The Company intends to continue to pursue this strategy to take advantage of future growth and consolidation opportunities in the industry. 3 6 THE OFFERINGS The 2,800,000 shares of Common Stock initially being offered in the United States (the "U.S. Offering") and the 700,000 shares of Common Stock concurrently being offered outside the United States (the "International Offering"), collectively are referred to in this Prospectus as the "Offerings." Common Stock to be offered by the Company................3,500,000 shares Common Stock to be outstanding after the Offerings.......47,942,000 shares Use of Proceeds..........................................To reduce indebtedness under revolving credit loans and to finance continued growth. See "Use of Proceeds." Nasdaq National Market Symbol............................TECD CONCURRENT NOTES OFFERING Concurrent with the Offerings, the Company is offering $175,000,000 aggregate principal amount of % Convertible Subordinated Notes due , 2002 (the "Notes," and the offering of such Notes, the "Notes Offering") by a separate prospectus. The consummation of the Offerings and the Notes Offering are not conditioned upon each other. SUMMARY CONSOLIDATED FINANCIAL DATA The following financial data should be read in conjunction with the Company's consolidated financial statements, including the notes thereto. The results of operations for the six months ended July 31, 1997 are not necessarily indicative of results of operations to be expected for the full year.
SIX MONTHS ENDED YEARS ENDED JANUARY 31, JULY 31, ------------------------------------------------------------ ----------------------- 1993 1994 1995 1996 1997 1996 1997 -------- ---------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Net sales....................... $978,862 $1,532,352 $2,418,410 $3,086,620 $4,598,941 $2,048,802 $2,921,966 Operating profit................ 36,014 54,995 71,337 55,604 115,011 47,705 76,511 Net income...................... 19,782 30,213 34,912 21,541 56,973 22,444 39,686 Net income per common share(1).. .63 .83 .91 .56 1.35 .57 .88 OTHER DATA: Ratio of earnings to fixed charges(2).................... 7.30 8.68 4.61 2.57 4.75 3.98 5.32
JULY 31, 1997 -------------------------------------- AS AS ACTUAL ADJUSTED(3) ADJUSTED(4) ---------- ----------- ----------- (IN THOUSANDS) BALANCE SHEET DATA: Working capital............................................. $ 296,115 $ 450,837 $ 621,202 Total assets................................................ 1,655,232 1,655,232 1,659,867 Revolving credit loans...................................... 416,428 261,706 91,341 Long-term debt.............................................. 8,791 8,791 8,791 % Convertible subordinated notes due , 2002.... -- -- 175,000 Shareholders' equity........................................ 490,161 644,883 644,883
- --------------- (1) Amounts have been adjusted to reflect the two-for-one stock split declared on March 21, 1994. (2) The ratio of earnings to fixed charges is computed by dividing earnings before taxes and fixed charges by fixed charges. Fixed charges consist of interest expense and the estimated interest component of rent expense. (3) Adjusted to reflect the sale by the Company of the 3,500,000 shares of Common Stock offered hereby at an assumed offering price of $46.00 per share (after deduction of the underwriting discount and the Company's estimated offering expenses) and the application of the proceeds thereof. See "Use of Proceeds." (4) Adjusted to reflect the sale by the Company of the 3,500,000 shares of Common Stock offered hereby at an assumed offering price of $46.00 per share and $175,000,000 aggregate principal amount of Notes (after deduction of the underwriting discounts and the Company's estimated offering expenses) and the application of the proceeds thereof. See "Use of Proceeds." 4 7 RISK FACTORS In evaluating the Company's business, prospective investors should carefully consider the following factors in addition to the information contained elsewhere in this Prospectus or incorporated by reference herein. COMPETITION The Company operates in a highly competitive environment, both in the United States and internationally. The computer wholesale distribution industry is characterized by intense competition, based primarily on product availability, credit availability, price, speed of delivery, ability to tailor specific solutions to customer needs, quality and depth of product lines and pre-sale and post-sale training, service and support. The Company competes with a variety of regional, national and international wholesale distributors, some of which have greater financial resources than the Company. In addition, the Company faces competition from direct sales by vendors which may be able to offer resellers lower prices than the Company. NARROW PROFIT MARGINS As a result of intense price competition in the industry, the Company has narrow gross profit and operating profit margins. These narrow margins magnify the impact on operating results of variations in sales and operating costs. The Company has partially offset the effects of its low gross profit margins by increasing sales and reducing operating expenses as a percentage of sales; however, there can be no assurance that the Company will maintain or increase sales or further reduce operating expenses as a percentage of sales in the future. Future gross profit margins may be adversely affected by changes in product mix, vendor pricing actions and competitive and economic pressures. RISK OF DECLINES IN INVENTORY VALUE The Company is subject to the risk that the value of its inventory will decline as a result of price reductions by vendors or technological obsolescence. It is the policy of most vendors of microcomputer products to protect distributors, such as the Company, which purchase directly from such vendors, from the loss in value of inventory due to technological change or the vendors' price reductions. Some vendors, however, may be unwilling or unable to pay the Company for products returned to them under purchase agreements. Moreover, industry practices are sometimes not embodied in written agreements and do not protect the Company in all cases from declines in inventory value. No assurance can be given that such practices will continue, that unforeseen new product developments will not adversely affect the Company, or that the Company will be able to successfully manage its existing and future inventories. Some major systems vendors are developing programs which will allow the Company to assemble systems from components provided by the vendors. While the Company has developed the ability to configure computer products, the process of assembling large volumes of systems from components will require new business practices by the Company. It is also uncertain how the vendors will apply policies related to price protection, stock rotation and other protections against the decline in inventory value to components. DEPENDENCE ON INFORMATION SYSTEMS The Company is highly dependent upon its internal computer and telecommunication systems to operate its business. There can be no assurance that the Company's information systems will not fail, that the Company will be able to attract and retain qualified personnel necessary for the operation of such systems, that the Company will be able to expand and improve its information systems, or that the information systems of acquired companies will be sufficient to meet the Company's standards or can be successfully converted into an acceptable information system on a timely and cost-effective basis. Any of such problems could have an adverse effect on the Company's business. 5 8 CUSTOMER CREDIT EXPOSURE The Company sells its products to an active customer base of more than 70,000 value-added resellers, corporate resellers, retailers and direct marketers. A significant portion of such sales is financed by the Company. As a result, the Company's business could be adversely affected in the event of the deterioration of the financial condition of its customers, resulting in the customers' inability to repay the Company. This risk would be increased in the event of a general economic downturn affecting a large number of the Company's customers. MANAGEMENT OF EXPANSION The rapid expansion of the Company's business has required the Company to make significant recent additions in personnel and has significantly increased the Company's working capital requirements. Although the Company has experienced rapid expansion in recent years, such expansion should not be considered indicative of future expansion. Such expansion has resulted in new and increased responsibilities for management personnel and has placed and continues to place a strain upon the Company's management, operating and financial systems and other resources. There can be no assurance that the strain placed upon the Company's management, operating and financial systems and other resources will not have an adverse effect on the Company's business, nor can there be any assurance that the Company will be able to attract or retain sufficient personnel to continue the expansion of its operations. LIQUIDITY AND CAPITAL RESOURCES The Company's business requires substantial capital to finance accounts receivable and product inventory that are not financed by trade creditors. The Company has historically relied upon cash generated from operations, bank credit lines, trade credit from its vendors and proceeds from public offerings of its Common Stock to satisfy its capital needs and finance growth. In order to continue its expansion, the Company will need additional financing, including debt financing. The inability to obtain such sources of capital could have an adverse effect on the Company's business. ACQUISITIONS As part of its growth strategy, the Company pursues the acquisition of companies that either complement or expand its existing business. As a result, the Company regularly evaluates potential acquisition opportunities, which may be material in size and scope. Acquisitions involve a number of risks and uncertainties, including expansion into new geographic markets and business areas, the requirement to understand local business practices, the diversion of management's attention to the assimilation of the operations and personnel of the acquired companies, the possible requirement to upgrade the acquired companies' management information systems to the Company's standards, potential adverse short-term effects on the Company's operating results and the amortization of any acquired intangible assets. FOREIGN CURRENCY EXCHANGE RISKS; EXPOSURE TO FOREIGN MARKETS The Company conducts business in countries outside of the United States which exposes the Company to fluctuations in foreign currency exchange rates. The Company may enter into short-term forward exchange contracts to hedge this risk according to its outlook on future exchange rates; nevertheless, fluctuations in foreign currency exchange rates could have an adverse effect on the Company's business. The Company's international operations are subject to other risks such as the imposition of governmental controls, export license requirements, restrictions on the export of certain technology, political instability, trade restrictions, tariff changes, difficulties in staffing and managing international operations, difficulties in collecting accounts receivable and longer collection periods and the impact of local economic conditions and practices. As the Company continues to expand its international business, its success will be dependent, in part, on its ability to anticipate and effectively manage these and other 6 9 risks. There can be no assurance that these and other factors will not have an adverse effect on the Company's business. PRODUCT SUPPLY SHORTAGES The Company is dependent upon the supply of products available from its vendors. The industry is characterized by periods of severe product shortages due to vendors' difficulty in projecting demand for certain products distributed by the Company. When such product shortages occur, the Company typically receives an allocation of product from the vendor. There can be no assurance that vendors will be able to maintain an adequate supply of products to fulfill all of the Company's customer orders on a timely basis. Failure to obtain adequate product supplies, if available to competitors, could have an adverse effect on the Company's business. VENDOR RELATIONS The loss of certain key vendors could have an adverse effect on the Company's business. In addition, the Company relies on various rebate and cooperative marketing programs offered by its vendors to defray expenses associated with distributing and marketing the vendors' products. A reduction by the Company's vendors in these programs could have an adverse effect on the Company's business. GENERAL ECONOMIC CONDITIONS From time to time the markets in which the Company sells its products experience weak economic conditions that may negatively affect the Company's sales. Although the Company does not consider its business to be highly seasonal, it has experienced seasonally higher sales and earnings in the third and fourth quarters. To the extent that general economic conditions affect the demand for products sold by the Company, such conditions could have an adverse effect on the Company's business. EXPOSURE TO NATURAL DISASTERS The Company's headquarters facilities, certain of its distribution centers as well as certain vendors and customers are located in areas prone to natural disasters such as floods, hurricanes, tornadoes, earthquakes and other adverse weather conditions. The Company's business could be adversely affected should its ability to distribute products be impacted by such an event. LABOR STRIKES The Company's labor force is currently non-union. The Company, however, does business in certain foreign countries where labor disruption is more common than is experienced in the United States. The majority of the freight carriers used by the Company are unionized. A labor strike by one of the Company's freight carriers, one of its vendors, a general strike by civil service employees, or a governmental shutdown could have an adverse effect on the Company's business. VOLATILITY OF COMMON STOCK Because of the foregoing factors, as well as other variables affecting the Company's operating results, past financial performance should not be considered a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. In addition, the Company's participation in a highly dynamic industry often results in significant volatility of the Common Stock price. 7 10 USE OF PROCEEDS Based upon the sale by the Company of the 3,500,000 shares of Common Stock offered at an assumed offering price of $46.00 per share (the last reported sales price of the Common Stock on The Nasdaq National Market on September 30, 1997), less the Company's estimated offering expenses and the estimated underwriting discount, the net proceeds are expected to be approximately $155 million. The net proceeds of the Offerings and the Notes Offering will be used to reduce indebtedness under the Company's revolving credit loans (which includes the $400 million accounts receivable securitization program). As of August 31, 1997, the Company had approximately $476 million outstanding under the available revolving credit loans at a weighted average interest rate of 5.07%. The Company currently maintains total committed revolving credit loans of approximately $980 million, of which $530 million is available in 17 different currencies. See Note 12 of Notes to Consolidated Financial Statements. The receipt of the proceeds of the Offerings will strengthen the Company's balance sheet further and will provide funding for domestic and international growth and possible acquisitions. While the Company regularly reviews acquisition opportunities, no acquisitions are currently pending other than as disclosed elsewhere in this Prospectus with respect to the acquisition of Macrotron AG. CONCURRENT NOTES OFFERING Concurrent with the Offerings, the Company is offering $175 million aggregate principal amount of the Notes by a separate prospectus. The consummation of the Offerings and the Notes Offering are not conditioned upon each other. The net proceeds to the Company from the Notes Offering (after deduction of the underwriting discount and the Company's estimated offering expenses), if consummated, are estimated to be $170 million. The Company will use such proceeds to reduce indebtedness under revolving credit loans. See "Use of Proceeds." 8 11 PRICE RANGE OF COMMON STOCK The Company's Common Stock is traded on The Nasdaq National Market under the symbol "TECD." The following table sets forth the quarterly high and low sale prices for the Common Stock as reported by The Nasdaq National Market.
RANGE OF SALES PRICES ------------------ HIGH LOW ------- ------- FISCAL YEAR 1996 First quarter............................................... $14 1/4 $ 9 5/8 Second quarter.............................................. 15 1/4 8 1/4 Third quarter............................................... 14 3/4 11 1/8 Fourth quarter.............................................. 17 7/8 11 1/4 FISCAL YEAR 1997 First quarter............................................... 19 1/2 13 Second quarter.............................................. 24 3/4 18 1/4 Third quarter............................................... 30 3/8 22 1/8 Fourth quarter.............................................. 36 3/8 21 5/8 FISCAL YEAR 1998 First quarter............................................... 27 1/2 19 3/4 Second quarter.............................................. 39 15/16 22 7/8 Third quarter (through September 30, 1997).................. 51 3/4 36 1/4
On September 30, 1997, the last reported sale price for the Common Stock was $46.00 per share. The Company estimates there are approximately 15,000 beneficial holders of the Company's Common Stock. DIVIDEND POLICY The Company has not paid cash dividends since fiscal 1983. The Board of Directors of the Company does not intend to institute a cash dividend payment policy in the foreseeable future. It is the policy of the Board of Directors to retain earnings to support the growth and expansion of the Company's business. The future payment of dividends, if any, on Common Stock will depend upon the Company's earnings, financial condition and capital requirements. In addition, the payment of dividends is restricted under the terms of the revolving credit loans. 9 12 CAPITALIZATION The following table sets forth the capitalization of the Company at July 31, 1997 and as adjusted as of such date to give effect to: (i) the sale by the Company of the Common Stock; and (ii) the sale by the Company of the Common Stock and the issuance and sale of the Notes pursuant to the concurrent Notes Offering, see "Concurrent Notes Offering." The application of the total net proceeds of approximately $325 million thereof will be used to reduce indebtedness under revolving credit loans. See "Use of Proceeds." This table should be read in conjunction with the Company's consolidated financial statements, including the notes thereto.
JULY 31, 1997 ------------------------------------------ ACTUAL AS ADJUSTED(1) AS ADJUSTED(2) -------- -------------- -------------- (DOLLARS IN THOUSANDS) SHORT-TERM DEBT: Revolving credit loans(3)............................ $416,428 $261,706 $ 91,341 Current portion of long-term debt.................... 207 207 207 -------- -------- -------- Total short-term debt...................... 416,635 261,913 91,548 -------- -------- -------- LONG-TERM DEBT: Mortgage note, interest at 10.25%, monthly installments of $85, balloon payment due 2005...... 8,726 8,726 8,726 Other long-term debt................................. 65 65 65 % Convertible Subordinated Notes due , 2002..... -- -- 175,000 -------- -------- -------- Total long-term debt....................... 8,791 8,791 183,791 -------- -------- -------- SHAREHOLDERS' EQUITY: Preferred stock; par value $.02; 226,500 shares authorized and outstanding......................... 5 5 5 Common stock; par value $.0015; 200,000,000 shares authorized; 43,947,402 issued and outstanding; 47,447,402 issued and outstanding as adjusted(4)... 66 71 71 Additional paid-in capital........................... 241,025 395,742 395,742 Retained earnings.................................... 249,969 249,969 249,969 Cumulative translation adjustment.................... (904) (904) (904) -------- -------- -------- Total shareholders' equity................. 490,161 644,883 644,883 -------- -------- -------- Total capitalization....................... $915,587 $915,587 $920,222 ======== ======== ========
- --------------- (1) As adjusted to give effect to the sale by the Company of the Common Stock at an assumed offering price of $46.00 per share and the application of the proceeds thereof. (2) As adjusted to give effect to the sale by the Company of the Common Stock at an assumed offering price of $46.00 per share and the assumed sale of the Notes pursuant to the concurrent Notes Offering and the application of the proceeds thereof. (3) On August 31, 1997, indebtedness outstanding under the revolving credit loans was approximately $476 million. (4) Does not include 4,383,000 shares subject to stock options outstanding as of July 31, 1997. 10 13 SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data set forth below for each of the five years ended January 31, 1997 are derived from the Company's audited financial statements. The audited financial statements at January 31, 1996 and 1997 and for each of the three years in the period ended January 31, 1997 are included elsewhere in this Prospectus. The data for the six months ended July 31, 1996 and 1997 have been derived from unaudited consolidated financial statements also appearing herein and which, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited interim periods. The operating results for the six months ended July 31, 1997 are not necessarily indicative of the operating results for a full fiscal year. This information should be read in conjunction with the Company's consolidated financial statements, including the notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
SIX MONTHS ENDED YEAR ENDED JANUARY 31, JULY 31, ------------------------------------------------------------ ----------------------- 1993 1994 1995 1996 1997 1996 1997 -------- ---------- ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Net sales................. $978,862 $1,532,352 $2,418,410 $3,086,620 $4,598,941 $2,048,802 $2,921,966 -------- ---------- ---------- ---------- ---------- ---------- ---------- Cost and expenses: Cost of products sold... 885,292 1,397,967 2,219,122 2,867,226 4,277,160 1,905,488 2,722,811 Selling, general and administrative expenses.............. 57,556 79,390 127,951 163,790 206,770 95,609 122,644 -------- ---------- ---------- ---------- ---------- ---------- ---------- 942,848 1,477,357 2,347,073 3,031,016 4,483,930 2,001,097 2,845,455 -------- ---------- ---------- ---------- ---------- ---------- ---------- Operating profit.......... 36,014 54,995 71,337 55,604 115,011 47,705 76,511 Interest expense.......... 3,973 5,008 13,761 20,086 21,522 10,802 12,653 -------- ---------- ---------- ---------- ---------- ---------- ---------- Income before income taxes................... 32,041 49,987 57,576 35,518 93,489 36,903 63,858 Provision for income taxes................... 12,259 19,774 22,664 13,977 36,516 14,459 24,172 -------- ---------- ---------- ---------- ---------- ---------- ---------- Net income................ $ 19,782 $ 30,213 $ 34,912 $ 21,541 $ 56,973 $ 22,444 $ 39,686 ======== ========== ========== ========== ========== ========== ========== Net income per common share(1)................ $ .63 $ .83 $ .91 $ .56 $ 1.35 $ .57 $ .88 ======== ========== ========== ========== ========== ========== ========== Weighted average common shares outstanding(1)... 31,402 36,590 38,258 38,138 42,125 39,231 45,122 ======== ========== ========== ========== ========== ========== ==========
JANUARY 31, ------------------------------------------------------------ JULY 31, 1993 1994 1995 1996 1997 1997 -------- ---------- ---------- ---------- ---------- ------------------------ (IN THOUSANDS) BALANCE SHEET DATA: Working capital........... $ 89,344 $ 165,366 $ 182,802 $ 201,704 $ 351,993 $ 296,115 Total assets.............. 326,885 506,760 784,429 1,043,879 1,545,294 1,655,232 Revolving credit loans.... 89,198 153,105 304,784 283,100 396,391 416,428 Long-term debt............ 9,638 9,467 9,682 9,097 8,896 8,791 Shareholders' equity ..... 115,047 213,326 260,826 285,698 438,381 490,161
- --------------- (1) Amounts have been adjusted to reflect the two-for-one stock split declared on March 21, 1994. 11 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Tech Data is the second largest distributor of microcomputer products in the world. The Company's net sales have increased from $979 million in fiscal 1993 to $4.6 billion in fiscal 1997. The increase in sales is the result of the expansion of the Company's product lines, customer base and market share in North America, as well as the establishment of export sales into Latin America and the acquisition of the largest microcomputer distributor in France in fiscal 1995. The Company has been able to increase operating income during this period despite intense competition by focusing on achieving operating efficiencies through centralized management, stringent cost controls, efficient handling of product shipments, use of automation and by achieving economies of scale. Net income has increased from $19.8 million in fiscal 1993 to $57.0 million in fiscal 1997. Management believes that Tech Data's recent increases in sales and profitability are directly attributable to its significant capital investments and its focus on operating efficiencies. For the periods indicated, the following table sets forth the percentage of certain income statement items to net sales derived from the Company's consolidated statement of income.
PERCENTAGE OF NET SALES ------------------------------------------- SIX MONTHS ENDED YEAR ENDED JANUARY 31, JULY 31, ----------------------- ---------------- 1995 1996 1997 1996 1997 ----- ----- ----- ------ ------ Net sales..................................... 100.0% 100.0% 100.0% 100.0% 100.0% ----- ----- ----- ----- ----- Cost and expenses: Cost of products sold....................... 91.7 92.9 93.0 93.0 93.2 Selling, general and administrative expenses................................. 5.3 5.3 4.5 4.7 4.2 ----- ----- ----- ----- ----- 97.0 98.2 97.5 97.7 97.4 ----- ----- ----- ----- ----- Operating profit.............................. 3.0 1.8 2.5 2.3 2.6 Interest expense.............................. .6 .6 .5 .5 .4 ----- ----- ----- ----- ----- Income before income taxes.................... 2.4 1.2 2.0 1.8 2.2 Provision for income taxes.................... .9 .5 .8 .7 .8 ----- ----- ----- ----- ----- Net income.................................... 1.5% .7% 1.2% 1.1% 1.4% ===== ===== ===== ===== =====
SIX MONTHS ENDED JULY 31, 1996 AND 1997 Net sales increased 42.6% to $2.92 billion in the first six months of fiscal 1998 compared to $2.05 billion in the same period of the prior year. This increase is attributable to the addition of new product lines and the expansion of existing product lines combined with an increase in the Company's market share. In the first half of fiscal 1998, U.S. and international sales grew 44.1% and 32.3%, respectively, compared to the prior year comparable period. International sales represented approximately 12% of fiscal 1998 first half net sales compared to 13% for the first half of fiscal 1997. The cost of products sold as a percentage of net sales increased to 93.2% in the first half of fiscal 1998 from 93.0% in the prior year. This increase is the result of competitive market prices and the Company's strategy of lowering selling prices in order to gain market share and to pass on the benefit of operating efficiencies to its customers. Selling, general and administrative expenses increased 28.3% to $122.6 million in the first half of fiscal 1998 compared to $95.6 million last year, but decreased as a percentage of net sales from 4.7% in the first half of last year to 4.2% in the current year. The decline in selling, general and administrative expenses as a percentage of net sales in the first half of fiscal 1998 is attributable to greater economies of scale realized by the Company in addition to improved operating efficiencies. The dollar value increase 12 15 in selling, general and administrative expenses is primarily the result of an expansion in the number of employees and increases in other administrative expenses needed to support the increased volume of business. As a result of the factors described above, operating profit increased 60.4% to $76.5 million, or 2.6% of net sales, in the first half of fiscal 1998 compared to $47.7 million, or 2.3% of net sales, for the prior year comparable period. Interest expense increased in the first six months of fiscal 1998 due to an increase in the Company's average outstanding indebtedness. As a result of the factors described above, net income increased 76.8% to $39.7 million, or $.88 per share, in the first six months of fiscal 1998 compared to $22.4 million, or $.57 per share, in the prior year comparable period. FISCAL YEARS ENDED JANUARY 31, 1996 AND 1997 Net sales increased 49.0% to $4.6 billion in fiscal 1997 compared to $3.1 billion in the prior year. This increase is attributable to the addition of new product lines and the expansion of existing product lines combined with an increase in the Company's market share. The rate of growth in fiscal year 1997 was also positively affected by a lower growth rate in the prior year as the Company was recovering from the effects of the business interruptions caused by its conversion to a new computer system in December 1994. The Company's U.S. and international sales grew 51% and 36%, respectively, in fiscal 1997 compared to the prior year. The Company's international sales in fiscal 1997 were approximately 13% of consolidated net sales. The cost of products sold as a percentage of net sales increased from 92.9% in fiscal 1996 to 93.0% in fiscal 1997. This increase is a result of competitive market prices and the Company's strategy of lowering selling prices in order to gain market share and to pass on the benefit of operating efficiencies to its customers. Selling, general and administrative expenses increased by 26.2% from $163.8 million in fiscal 1996 to $206.8 million in fiscal 1997, and as a percentage of net sales decreased to 4.5% in fiscal 1997 from 5.3% in the prior year. This decline in selling, general and administrative expenses as a percentage of net sales is attributable to the greater economies of scale that the Company realized during fiscal 1997 in addition to improved operating efficiencies. The dollar value increase in selling, general and administrative expenses is primarily a result of an expansion in the number of employees and increases in other administrative expenses needed to support the increased volume of business. As a result of the factors described above, operating profit in fiscal 1997 increased 106.8% to $115.0 million, or 2.5% of net sales, compared to $55.6 million, or 1.8% of net sales, in fiscal 1996. Interest expense increased due to an increase in the Company's average outstanding indebtedness, partially offset by decreases in short-term interest rates on the Company's floating rate indebtedness. Interest expense was further moderated in fiscal 1997 by the receipt of net proceeds of approximately $83.3 million from the Company's July 1996 Common Stock offering, which proceeds were used to reduce indebtedness. Net income in fiscal 1997 increased 164.5% to $57.0 million, or $1.35 per share, compared to $21.5 million, or $.56 per share, in the prior year. FISCAL YEARS ENDED JANUARY 31, 1995 AND 1996 Net sales increased 27.6% to $3.1 billion in fiscal 1996 compared to $2.4 billion in the prior year. This increase is attributable to the addition of new product lines and the expansion of existing product lines combined with increases in the Company's market share. The rate of growth in fiscal year 1996 was lower than the rate of growth in the prior year as the Company continued to recover from the effects of the business interruptions caused by its computer system conversion in December 1994. The Company's 13 16 international sales in fiscal 1996 were approximately 14% of consolidated net sales compared to 13% in fiscal 1995. The cost of products sold as a percentage of net sales increased from 91.7% in fiscal 1995 to 92.9% in fiscal 1996. This increase was a result of competitive market prices, the Company's strategy of lowering selling prices in order to gain market share and to pass on the benefit of operating efficiencies to its customers, as well as certain freight concessions made with customers in order to ensure timely delivery of products during the first and second quarters of fiscal 1996. Selling, general and administrative expenses increased from $128.0 million in fiscal 1995 to $163.8 million in fiscal 1996, and as a percentage of net sales were 5.3% in fiscal 1996 and fiscal 1995. The dollar value increase in selling, general and administrative expenses was primarily a result of an expansion in the number of employees and increases in other administrative expenses needed to support the increased volume of business, as well as expenses associated with the Company's new computer system. As a result of the factors discussed above, operating profit in fiscal 1996 decreased 22.1% to $55.6 million, or 1.8% of net sales, compared to $71.3 million, or 3.0% of net sales, in fiscal 1995. Interest expense increased due to an increase in the Company's average outstanding indebtedness, combined with increases in short-term interest rates on the Company's floating rate indebtedness. Net income in fiscal 1996 decreased 38.3% to $21.5 million, or $.56 per share, compared to $34.9 million, or $.91 per share, in the prior year. 14 17 QUARTERLY FINANCIAL DATA The following table sets forth certain unaudited data regarding the Company's results of operations for the preceding eight fiscal quarterly periods. Such data is derived from the unaudited interim consolidated financial statements of the Company and, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the information contained therein. Any trends that may be reflected in the following table are not necessarily indicative of the Company's future operations.
QUARTER ENDED -------------------------------------------------------------------------------------------------------- OCTOBER 31, JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 31, APRIL 30, JULY 31, 1995 1996 1996 1996 1996 1997 1997 1997 ----------- ----------- --------- ---------- ----------- ----------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Net sales............ $843,286 $901,038 $985,574 $1,063,228 $1,236,650 $1,313,489 $1,370,146 $1,551,820 Cost and expenses: Cost of products sold............. 784,601 836,658 916,562 988,926 1,150,695 1,220,977 1,274,969 1,447,842 Selling, general and administrative expenses......... 42,179 44,093 46,285 49,324 54,023 57,138 59,484 63,160 Operating profit..... 16,506 20,287 22,727 24,978 31,932 35,374 35,693 40,818 Net income........... 7,042 9,202 10,428 12,016 16,748 17,781 18,222 21,464 Net income per common share.............. .18 .24 .27 .30 .38 .40 .41 .47 PERCENTAGE OF NET SALES: Net sales............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost and expenses: Cost of products sold............. 93.0 92.9 93.0 93.0 93.0 93.0 93.1 93.3 Selling, general and administrative expenses......... 5.0 4.9 4.7 4.6 4.4 4.4 4.3 4.1 Operating profit..... 2.0 2.2 2.3 2.3 2.6 2.7 2.6 2.6 Net income........... 0.8 1.0 1.1 1.1 1.4 1.4 1.3 1.4 NET SALES GROWTH: Year-over-year....... 28.1% 36.5% 55.6% 50.0% 46.6% 45.8% 39.0% 46.0%
LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities of $85.7 million during the first six months of fiscal 1998 was primarily attributable to income from operations of $39.7 million combined with a decrease in inventories and an increase in accounts payable. Net cash used in investing activities of $49.5 million during the first six months of fiscal 1998 was attributable to the payment of $35.4 million related to the acquisition of the common and preferred stock of Macrotron AG (see Note 12 of Notes to Consolidated Financial Statements) combined with the Company's continuing investment of $14.1 million in its management information systems, office facilities and its distribution center facilities. The Company expects to make capital expenditures of approximately $50 million during fiscal 1998 to further expand its management information systems capability, office facilities and distribution centers. Net cash used in financing activities of $34.8 million during the first six months of fiscal 1998 reflects a loan of $60.0 million to Macrotron AG, net of borrowings under its revolving credit loans of $20.0 million and proceeds of $5.3 million from issuance of Common Stock. 15 18 In July 1997, the Company increased its accounts receivable securitization program from $325 million to $400 million and in August 1997 entered into a new $550 million three-year multi-currency revolving credit loan agreement with 20 banks. The Company currently maintains domestic and foreign revolving credit agreements which provide maximum short-term borrowings of approximately $980 million (including local country credit lines), of which $416 million was outstanding at July 31, 1997. The Company believes that the proceeds from the Offerings and the Notes Offering, if consummated, along with cash from operations, available and obtainable bank credit lines and trade credit from its vendors will be sufficient to satisfy its working capital and capital expenditure needs through fiscal 1998. ASSET MANAGEMENT The Company manages its inventories by maintaining sufficient quantities to achieve high order fill rates while attempting to stock only those products in high demand with a rapid turnover rate. Inventory balances fluctuate as the Company adds new product lines and, when appropriate, makes large purchases including cash purchases from manufacturers and publishers when the terms of such purchases are considered advantageous. The Company's contracts with most of its vendors provide price protection and stock rotation privileges to reduce the risk of loss due to manufacturer price reductions and slow moving or obsolete inventory. In the event of a vendor price reduction, the Company generally receives a credit for the impact on products in inventory. In addition, the Company has the right to rotate a certain percentage of purchases, subject to certain limitations. Historically, price protection and stock rotation privileges, as well as the Company's inventory management procedures, have helped to reduce the risk of loss of carrying inventory. The Company attempts to control losses on credit sales by closely monitoring customers' creditworthiness through evaluating detailed information on customer payment history and other relevant information. In addition, the Company participates in a national credit association which exchanges credit information on mutual customers. The Company has credit insurance which insures a percentage of the credit extended by the Company to certain of its larger domestic and international customers against possible loss. Customers who qualify for credit terms are typically granted net 30 day payment terms. The Company also sells product on a prepay or credit card basis or through commercial finance companies. IMPACT OF INFLATION The Company has not been adversely affected by inflation as technological advances and competition within the microcomputer industry have generally caused prices of the products purchased by the Company to decline. Management believes that any price increases could be passed on to its customers, as prices charged by the Company are not set by long-term contracts. RECENT ACCOUNTING PRONOUNCEMENTS In 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"), which is effective for the Company's fiscal year ended January 31, 1997. FAS 123 encourages, but does not require, companies to recognize compensation expense based on the fair value of grants of stock, stock options and other equity investments to employees. Although expense recognition for employee stock-based compensation is not mandatory, FAS 123 requires that companies not adopting must disclose the pro forma effect on net income and earnings per share. The Company will continue to apply prior accounting rules and make pro forma disclosures as required. See Note 6 of Notes to Consolidated Financial Statements for the pro forma effect on net income and earnings per share. 16 19 In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") which is effective for financial statements issued for periods ending after December 15, 1997. SFAS 128 simplifies the previous standards for computing earnings per share and requires the disclosure of basic and diluted earnings per share. For the year ended January 31, 1997 and for the subsequent interim periods reported, the amount reported as net income per common share is not materially different than that which would have been reported for basic and diluted earnings per share in accordance with SFAS 128. 17 20 BUSINESS Tech Data is the world's second largest distributor of microcomputer hardware and software products to value-added resellers, corporate resellers, retailers and direct marketers. Tech Data distributes products throughout the United States, Canada, Latin America, Germany, France, Switzerland and Austria. The Company purchases its products directly from more than 900 manufacturers of microcomputer hardware and publishers of software in large quantities, maintains a stocking inventory of more than 45,000 products and sells to an active base of over 70,000 customers. The Company believes its broad assortment of vendors and products meets its customers' need for a cost effective link to such products through a single source. The Company provides its customers with systems, peripherals, networking products and software, which accounted for 25%, 40%, 19% and 16%, respectively, of net sales in the first six months of fiscal 1998. The Company offers products from manufacturers and publishers such as Apple, Bay Networks, Cisco, Compaq, Corel, Creative Labs, Digital Equipment, Epson, Hewlett-Packard, IBM, Intel, Microsoft, Novell, Okidata, Seagate, Symantec, 3Com, Toshiba, Viewsonic and Western Digital. The Company ships products from regionally located distribution centers generally the same day the orders are received. The customers are provided with a high level of service through flexible financing and credit programs, the Company's pre- and post-sale technical support, electronic commerce tools (including on-line order entry, access to product specifications and electronic data interchange services), product configuration services, customized shipping documents, flexible product return policies and customer education programs. INDUSTRY The wholesale distribution model, like that of the Company, has proven to be well-suited for both manufacturers and publishers of microcomputer products ("vendors") and resellers of those products. The large number and diversity of resellers makes it cost efficient for vendors to rely on wholesale distributors, which can leverage distribution costs across multiple vendors, to outsource a portion of their distribution, credit, marketing and support services. Similarly, due to the large number of vendors and products, resellers often cannot or choose not to establish direct purchasing relationships with vendors. Instead they rely on wholesale distributors, which can leverage purchasing costs across multiple resellers, to satisfy a significant portion of their product procurement and delivery, financing, marketing and technical support needs. The U.S. microcomputer distribution market grew from $17 billion in 1992 to $33 billion in 1996. This growth represents a compound annual rate of 18%, while the overall U.S. microcomputer industry grew at a compound annual rate of 13% during the same period. The Company's U.S. sales grew during this period at a compound annual rate of 45%. The Company believes that the rates of growth of the Company and the wholesale distribution segment of the microcomputer industry have outpaced that of the microcomputer industry as a whole for three principal reasons. First, as a result of the use of open systems and off-the-shelf components, hardware and software products are viewed as commodities. The resulting price competition, coupled with rising selling costs and shorter product life cycles, make it difficult for manufacturers and publishers to efficiently sell directly to resellers and has prompted them to rely on more cost-efficient methods of distribution. Second, resellers have increasingly relied on wholesale distributors such as Tech Data for product availability and flexible financing alternatives rather than stocking large inventories themselves and maintaining credit lines to finance working capital needs. Third, restrictions by certain major manufacturers on sales through wholesale distributors have eased gradually. Since the beginning of 1995, the Company has been able to sell certain of those manufacturers' products under more competitive terms and conditions ("open-sourcing"). Historically, these previously restricted product lines were sold by master resellers, or aggregators (whose business model was similar to wholesale distributors, but focused on relatively few product lines), to a network of franchise dealers. Open-sourcing has virtually eliminated any advantage that these aggregators enjoyed as a result of their exclusive sourcing arrangements. 18 21 A recent trend in wholesale distribution is the expansion of electronic commerce. The increasing utilization of electronic ordering and information delivery systems, including the ability to transact business over the World Wide Web, has had, and is expected to continue to have, a significant impact on the cost efficiency of the wholesale distribution industry. Distributors, such as Tech Data, with the financial and technical resources to develop, implement and operate state-of-the-art management information systems have been able to reduce both their customers' and their own transaction costs through more efficient purchasing and lower selling costs. In addition, a trend has emerged whereby the final assembly of certain products is performed by distributors. In order to compete more effectively and lower their costs, major computer systems manufacturers that rely on the wholesale distribution model have announced their intention to reduce their own inventories and the inventories of their distributors and resellers by implementing a build-to-order manufacturing process. These major manufacturers have also begun to develop programs whereby final assembly will be performed at the distribution level ("channel assembly") as compared to the current build-to-forecast methodology employed by these manufacturers. Tech Data has been selected by Compaq, Hewlett-Packard and IBM to participate in their respective channel assembly programs. The wholesale distribution industry is undergoing significant consolidation as economies of scale and access to financial resources become more critical. Large distributors, like the Company, that have been able to utilize economies of scale to lower costs and pass on the savings to their customers in the form of reduced prices have continued to take market share. BUSINESS STRATEGY Tech Data, as the world's second largest distributor of microcomputer products, believes that its infrastructure and the size of its operations position it to gain share in its current markets as well as to continue to expand into new geographic markets. The Company provides a broad array of products and services for its customers, which allows them to satisfy their needs from a single source. The Company's size and performance have allowed it to make significant investments in personnel, management information systems, distribution centers and other capital resources. To maintain and enhance its leadership position in wholesale distribution, the Company's business strategy includes the following main elements: MAINTAIN LOW COST AND EFFICIENT OPERATIONS. The Company has pursued a strategy of profitable revenue growth by providing its customers with the benefit of operating efficiencies achieved through centralized management and operations, stringent cost controls and automation. The Company strictly regulates selling, general and administrative expenses; utilizes its highly automated order placement and processing systems to efficiently manage inventory and shipments and to reduce transaction costs; and realizes economies of scale in product purchasing, financing and working capital management. The Company has been successful in reducing selling, general and administrative expenses as a percentage of net sales from 5.9% in fiscal 1993 to 4.5% in fiscal 1997 and 4.2% for the first six months of fiscal 1998. LEVERAGE MANAGEMENT INFORMATION SYSTEMS. In order to further improve its operating efficiencies and services to its customers, the Company invested approximately $30 million in a scalable, state-of-the-art computer information system which commenced operations in December 1994. This system, which currently supports the Company's U.S. and Canadian operations and Latin American export operations, allows the Company to improve operating efficiencies and to offer additional services such as expanded electronic commerce capabilities, including electronic data interchange and Tech Data On-Line electronic ordering and information systems. The Company's ordering system will be available on its World Wide Web site in the near future. The Company believes that growth in its electronic commerce capabilities will provide incremental economies of scale and further reduce transaction costs. 19 22 OFFER A BROAD AND BALANCED PRODUCT MIX. The Company offers its customers a broad assortment of leading technology products. Currently, the Company offers more than 45,000 products from more than 900 manufacturers and publishers. By offering a broad product assortment, the Company enables its customers to procure product more efficiently by reducing the number of their direct vendor relationships. The Company is continually broadening its product assortment and has recently expanded its offerings of communication products as a result of the convergence of the computing and telecommunications markets. The Company maintains a balanced product line of systems, peripherals, networking products and software to minimize the effects of fluctuation in supply and demand FOSTER CUSTOMER LOYALTY THROUGH SUPERIOR CUSTOMER SERVICE. Tech Data's sales force provides superior customer service through a dedicated team approach in order to differentiate itself from its competitors and foster customer loyalty. The Company believes its strategy of not competing with its customer base, unlike many of its competitors, also promotes customer loyalty. BROADEN GEOGRAPHIC COVERAGE THROUGH INTERNATIONAL EXPANSION. The Company plans to take advantage of its strong financial position, vendor relationships and distribution expertise to continue to expand its business in the markets it currently serves and additional strategic geographic markets. The Company's expansion strategy focuses on identifying companies with significant market positions and quality management teams in markets where there is developed or emerging demand for microcomputer products. Following expansion into a new market, Tech Data enhances its market share by providing capital, adding new product lines, delivering value-added services and providing operational expertise. The Company's operations have expanded from its North American focus to include Europe with the acquisition in fiscal 1995 of France's largest wholesale microcomputer distributor and the acquisition in July 1997 of a majority interest in Macrotron AG, Germany's third largest wholesale microcomputer distributor. During the current fiscal year, the Company also continued its international expansion through the development of an in-country subsidiary in Brazil, which stocks and distributes products locally. VENDOR RELATIONS The Company's strong financial and industry positions have enabled it to obtain contracts with most leading manufacturers and publishers. The Company purchases products directly from more than 900 manufacturers and publishers, generally on a nonexclusive basis. The Company's vendor agreements are believed to be in the form customarily used by each manufacturer and typically contain provisions which allow termination by either party upon 60 days notice. Generally, the Company's vendor agreements do not require it to sell a specified quantity of products or restrict the Company from selling similar products manufactured by competitors. Consequently, the Company has the flexibility to terminate or curtail sales of one product line in favor of another product line as a result of technological change, pricing considerations, product availability, customer demand and vendor distribution policies. Vendor agreements generally contain stock rotation and price protection provisions which, along with the Company's inventory management policies and practices, reduce the Company's risk of loss due to slow-moving inventory, vendor price reductions, product updates or obsolescence. Under the terms of most of the Company's distribution agreements, vendors will credit the Company for declines in inventory value resulting from the vendors' price reductions if the Company complies with certain conditions. In addition, under most vendor agreements, the Company has the right to return for credit or exchange for other products a portion of those inventory items purchased, within a designated period of time. A vendor who elects to terminate a distribution agreement generally will repurchase from the Company the vendor's products carried in the Company's inventory. While the industry practices discussed above are sometimes not embodied in written agreements and do not protect the Company in all cases from declines in inventory value, management believes that these practices provide a significant level of protection from such declines. See "Risk Factors -- Risk of Declines in Inventory Value." 20 23 Major computer systems manufacturers have begun to re-engineer their manufacturing processes whereby final assembly will also be performed by the Company as compared to the current "build-to-forecast" methodology employed by these manufacturers. Tech Data has been selected by Compaq, Hewlett-Packard and IBM to participate in their respective channel assembly programs. The Company currently performs configuration services at its South Bend, Indiana distribution center which has been ISO 9002 certified and plans to expand its configuration and final assembly service capabilities into its new Fontana, California and Swedesboro, New Jersey distribution centers later this year. In addition to providing manufacturers and publishers with one of the largest bases of resellers in the United States, Canada, Latin America, Germany, France, Switzerland and Austria, the Company also offers manufacturers and publishers the opportunity to participate in a number of special promotions, training programs and marketing services targeted to the needs of its customers. No single vendor accounted for more than 10% of the Company's net sales during fiscal 1997, 1996 or 1995, except sales of Compaq products which accounted for 12% of net sales in fiscal 1997. For the first six months of fiscal 1998, only Compaq and Hewlett-Packard accounted for more than 10% of net sales, representing 14% and 11% of net sales, respectively. CUSTOMERS, PRODUCTS AND SERVICES The Company sells more than 45,000 microcomputer products including systems, peripherals, networking and software purchased directly from manufacturers and publishers in large quantities for sale to an active customer base of more than 70,000 VARs, corporate resellers, retailers and direct marketers. VARs typically do not have the resources to establish a large number of direct purchasing relationships or stock significant product inventories. This market segment is attractive because VARs, which currently constitute approximately 60% of Tech Data's net sales, generally rely on distributors as their principal source of computer products and financing. Corporate resellers, retailers and direct marketers may establish direct relationships with manufacturers and publishers for their more popular products, but utilize distributors as the primary source for other product requirements and the alternative source for products acquired direct. The Company has established the Tech Data Elect Program, which includes cost-plus pricing on certain high volume products, primarily computer systems and printers, and other special terms to target corporate resellers and other resellers that prior to open-sourcing, purchased products from aggregators. Corporate resellers currently constitute approximately 23% of the Company's net sales. Tech Data also has developed special programs to meet the unique needs of retail and direct marketers, which customers currently constitute approximately 17% of the Company's net sales. No single customer accounted for more than 5% of the Company's net sales during fiscal 1997, 1996 or 1995 nor for the first six months of fiscal 1998. The Company pursues a strategy of expanding its product line to offer its customers a broad assortment of products. If demand for certain products sold by the Company exceeds the supply available from the vendors, the Company generally receives an allocation of the products available. Management believes that the Company's ability to compete is not adversely affected by these periodic shortages and the resulting allocations. Tech Data provides customers a high-level of service through flexible customer financing and credit programs, the Company's pre-and post-sale technical support, electronic commerce tools (including on-line order entry, access to product specifications and EDI services), customized shipping documents, product configuration services, flexible product return policies and customer education programs. 21 24 The Company believes that providing its customers with the proper level of credit is essential to sales growth. Tech Data devotes significant resources to proactively review customer credit balances, provide a variety of credit programs and monitor customer credit status. The Company delivers products throughout the United States, Canada, Latin America, Germany, France, Switzerland and Austria from its fourteen distribution centers in Miami, Florida; Atlanta, Georgia; Paulsboro, New Jersey; Ft. Worth, Texas; South Bend, Indiana; Ontario, California; Union City, California; Mississauga, Ontario (Canada); Richmond, British Columbia (Canada); Sao Paulo, Brazil; Munich, Germany; Bobigny (Paris), France; Hunenberg, Switzerland and Vienna, Austria. Locating distribution centers near its customers enables the Company to efficiently deliver products on a timely basis, thereby reducing customers' need to invest in inventory. The Company recently completed the expansion of three of its seven U.S. distribution centers and is in the process of expanding two others. The Company will have a total of 1.8 million square feet of distribution space later this year as compared to the previous capacity of 700,000 square feet. Four of the new U.S. distribution center locations include adjacent land which provide enough space to double the capacity of each of these locations to meet future growth requirements. SALES AND ELECTRONIC COMMERCE Currently, the Company's sales force consists of approximately 60 field sales representatives and 1,065 inside telemarketing sales representatives. Field sales representatives are located in major metropolitan areas. Each field representative is supported by inside telemarketing sales teams covering a designated territory. The Company's team concept provides a stronger personal relationship between representatives of the customers and Tech Data. Territories with no field representation are serviced exclusively by the inside telemarketing sales teams. Customers typically call their inside sales teams on dedicated toll-free numbers to place orders. If the product is in stock and the customer has available credit, customer orders received by 5:00 p.m. local time are generally shipped the same day from the distribution facility nearest the customer. Customers rely upon the Company's electronic ordering and information systems, World Wide Web site, product catalogs and frequent mailings as sources for product information, including prices. The Company's on-line computer system allows the inside sales teams to check for current stocking levels in each of the seven United States distribution centers. Likewise, inside sales teams in Canada, Brazil, Germany, France, Switzerland and Austria can check on stocking levels in their respective distribution centers. Through "Tech Data On-Line," the Company's proprietary electronic on-line system, U.S. customers can gain remote access to the Company's data processing system to check product availability and pricing and to place an order. Certain of the Company's larger customers have available EDI services whereby orders, order acknowledgments, invoices, inventory status reports, customized pricing information and other industry standard EDI transactions are consummated on-line which improves efficiency and timeliness for both the Company and the customers. Customers currently can check product availability and pricing via the Company's World Wide Web site. The Company's ordering system will be available on the World Wide Web site in the near future. During the first six months of fiscal 1998, the Company received orders accounting for approximately 20% of its U.S. net sales and approximately 50% of its total order lines through its electronic ordering systems. The Company provides comprehensive training to its field and inside sales representatives regarding technical characteristics of products and the Company's policies and procedures. Each new domestic sales representative attends a four to six-week course provided in-house by the Company. In addition, the Company's ongoing training program is supplemented by product seminars offered daily by vendors. COMPETITION The Company operates in a market characterized by intense competition. Competition within the industry is based on product availability, credit availability, price, delivery and various services and support provided by the distributor to the customer. The Company believes that it is positioned to 22 25 compete effectively with other distributors in these areas. Major competitors include Ingram Micro, Inc. and Merisel, Inc. in North America; Computer 2000 and CHS Electronics, Inc. in Europe; and a variety of local and regional distributors in all geographic markets in which the Company operates. The only competitor larger than the Company, based on worldwide sales, is Ingram Micro, Inc. The Company also competes with manufacturers and publishers who sell directly to resellers and end-users. The Company nevertheless believes that in the majority of cases, manufacturers and publishers choose to sell products though distributors rather than directly because of the relatively small volume and high selling costs associated with numerous small orders. Management also believes that the Company's prompt delivery of products and efficient handling of returns provide an important competitive advantage over manufacturers' and publishers' efforts to market their products directly. EMPLOYEES On July 31, 1997, the Company had approximately 4,580 full-time employees, which includes approximately 800 employees of Macrotron AG. The Company enjoys excellent relations with its employees, all of whom are non-union. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES The geographic areas in which the Company operates are the United States (including exports to Latin America and the Caribbean), France and Canada. On July 1, 1997, the Company entered into Germany, Austria and Switzerland through the acquisition of a majority interest of the voting stock in Macrotron AG. See Note 10 and Note 12 of Notes to Consolidated Financial Statements regarding the geographical distribution of the Company's net sales, operating income and identifiable assets and the recent acquisition of Macrotron AG. MANAGEMENT The executive officers of the Company, their ages, and their present positions with the Company as of October 1, 1997 are as follows: Steven A. Raymund...................... 41 Chairman of the Board of Directors and Chief Executive Officer Anthony A. Ibarguen.................... 38 President and Chief Operating Officer Jeffery P. Howells..................... 40 Executive Vice President of Finance and Chief Financial Officer Peggy K. Caldwell...................... 52 Senior Vice President of Marketing Timothy J. Curran...................... 45 Senior Vice President of Sales Lawrence W. Hamilton................... 40 Senior Vice President of Human Resources Yuda Saydun............................ 44 Senior Vice President and General Manager -- Latin America Theodore F. Augustine.................. 50 Vice President of Distribution and Logistics Patrick O. Connelly.................... 51 Vice President of Worldwide Credit Services Charles V. Dannewitz................... 42 Vice President of Taxes Arthur W. Singleton.................... 36 Vice President, Treasurer and Secretary Joseph B. Trepani...................... 37 Vice President and Worldwide Controller David R. Vetter........................ 38 Vice President and General Counsel
23 26 EXECUTIVE OFFICERS STEVEN A. RAYMUND, CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER, has been employed by the Company since 1981, serving as Chief Executive Officer since January 1986 and as Chairman of the Board of Directors since April 1991. He has a B.S. Degree in Economics from the University of Oregon and a Masters Degree from the Georgetown University School of Foreign Service. ANTHONY A. IBARGUEN, PRESIDENT AND CHIEF OPERATING OFFICER, joined the Company in September 1996 as President of the Americas and was appointed President and Chief Operating Officer in March 1997. Prior to joining the Company, he was employed by ENTEX Information Services, Inc. from August 1993 to August 1996 as Executive Vice President of Sales and Marketing. From June 1990 to August 1993, he was employed by JWP, Inc. most recently as a Vice President. Mr. Ibarguen holds a B.S. Degree in Marketing from Boston College and a Masters in Business Administration Degree from Harvard University. JEFFERY P. HOWELLS, EXECUTIVE VICE PRESIDENT OF FINANCE AND CHIEF FINANCIAL OFFICER, joined the Company in October 1991 as Vice President of Finance and assumed the responsibilities of Chief Financial Officer in March 1992. In March 1993, he was promoted to Senior Vice President of Finance and Chief Financial Officer and was promoted to Executive Vice President of Finance and Chief Financial Officer in March 1997. From June 1991 through September 1991, he was employed as Vice President of Finance of Inex Vision Systems. From 1979 to May 1991, he was employed by Price Waterhouse, most recently as a Senior Audit Manager. Mr. Howells is a Certified Public Accountant and holds a B.B.A. Degree in Accounting from Stetson University. PEGGY K. CALDWELL, SENIOR VICE PRESIDENT OF MARKETING, joined the Company in May 1992. Prior to joining the Company, she was employed by International Business Machines Corporation for 25 years, most recently serving in a variety of senior management positions in the National Distribution Division. Ms. Caldwell holds a B.S. Degree in Mathematics and Physics from Bucknell University. TIMOTHY J. CURRAN, SENIOR VICE PRESIDENT OF SALES, joined the Company in April 1997. Prior to joining the Company, he was employed by Panasonic Communications and Systems Company (including various other Panasonic affiliates) from 1983 to 1997 serving in a variety of senior management positions. Mr. Curran holds a B.A. Degree in History from the University of Notre Dame and a Ph.D. in International Relations from Columbia University. LAWRENCE W. HAMILTON, SENIOR VICE PRESIDENT OF HUMAN RESOURCES, joined the Company in August 1993 as Vice President of Human Resources and was promoted to Senior Vice President in March 1996. Prior to joining the Company, he was employed by Bristol-Myers Squibb Company from 1985 to August 1993, most recently as Vice President -- Human Resources and Administration of Linvatec Corporation (a division of Bristol-Myers Squibb Company). Mr. Hamilton holds a B.A. Degree in Political Science from Fisk University and a Masters of Public Administration, Labor Policy from the University of Alabama. YUDA SAYDUN, SENIOR VICE PRESIDENT AND GENERAL MANAGER -- LATIN AMERICA, joined the Company in May 1993 as Vice President and General Manager -- Latin America. In March 1997, he was promoted to Senior Vice President and General Manager -- Latin America. Prior to joining the Company, he was employed by American Express Travel Related Services Company, Inc. from 1982 to May 1993, most recently as Division Vice President, Cardmember Marketing. Mr. Saydun holds a B.S. Degree in Political and Diplomatic Sciences from University Libre de Bruxelles and a Masters of Business Administration Degree, Finance/Marketing from U.C.L.A. THEODORE F. AUGUSTINE, VICE PRESIDENT OF DISTRIBUTION AND LOGISTICS, joined the Company in July 1996. Prior to joining the Company he served as President of M-Group Logistics, Inc. from June 1995 to July 1996. From 1989 to June 1995, he was employed by The Eli Witt Company as Executive Vice President and Chief Operations Officer. Mr. Augustine holds a Masters of Business Administration Degree from Loyola College. PATRICK O. CONNELLY, VICE PRESIDENT OF WORLDWIDE CREDIT SERVICES, joined the Company in August 1994. Prior to joining the Company, he was employed by Unisys Corporation for nine years as 24 27 Worldwide Director of Credit. Mr. Connelly holds a B.A. Degree in History and French from the University of Texas at Austin. CHARLES V. DANNEWITZ, VICE PRESIDENT OF TAXES, joined the Company in February 1995. Prior to joining the Company, he was employed by Price Waterhouse for 13 years, most recently as a Tax Partner. Mr. Dannewitz is a Certified Public Accountant and holds a B.S. Degree in Accounting from Illinois Wesleyan University. ARTHUR W. SINGLETON, VICE PRESIDENT, TREASURER AND SECRETARY, joined the Company in January 1990 as Director of Finance and was appointed Treasurer and Secretary in April 1991. In February 1995, he was promoted to Vice President, Treasurer and Secretary. Prior to joining the Company, Mr. Singleton was employed by Price Waterhouse from 1982 to December 1989, most recently as an Audit Manager. Mr. Singleton is a Certified Public Accountant and holds a B.S. Degree in Accounting from Florida State University. JOSEPH B. TREPANI, VICE PRESIDENT AND WORLDWIDE CONTROLLER, joined the Company in March 1990 as Controller and held the position of Director of Operations from October 1991 through January 1995. In February 1995, he was promoted to Vice President and Worldwide Controller. Prior to joining the Company, Mr. Trepani was Vice President of Finance for Action Staffing, Inc. from July 1989 to February 1990. From 1982 to June 1989, he was employed by Price Waterhouse. Mr. Trepani is a Certified Public Accountant and holds a B.S. Degree in Accounting from Florida State University. DAVID R. VETTER, VICE PRESIDENT AND GENERAL COUNSEL, joined the Company in June 1993. Prior to joining the Company, he was employed by the law firm of Robbins, Gaynor & Bronstein, P.A. from 1984 to June 1993, most recently as a partner. Mr. Vetter is a member of the Florida Bar and holds a B.A. Degree in English and Economics from Bucknell University and a J.D. Degree from the University of Florida. CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-U.S. HOLDERS OF COMMON STOCK The following is a general discussion of certain United States federal income and estate tax consequences of the ownership and disposition of Common Stock by a person that, for United States federal income tax purposes, is a non-resident alien individual, a foreign corporation, a foreign partnership or an estate or trust, in each case not subject to United States federal income tax on a net income basis in respect of income or gain from Common Stock (a "non-U.S. holder"). This discussion does not consider the specific facts and circumstances that may be relevant to particular holders and does not address the treatment of non-U.S. holders of Common Stock under the laws of any state, local or foreign taxing jurisdiction. Further, the discussion is based on provisions of the United States Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations thereunder, and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change on a possibly retroactive basis. Each prospective holder is urged to consult a tax advisor with respect to the United States federal tax consequences of acquiring, holding and disposing of Common Stock, as well as any tax consequences that may arise under the laws of any state, local or foreign taxing jurisdiction. DIVIDENDS Dividends paid to a non-U.S. holder of Common Stock will be subject to withholding of United States federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty, unless the dividends are effectively connected with the conduct of a trade or business within the United States (and are attributable to a United States permanent establishment of such holder, if an applicable income tax treaty so requires as a condition for the non-U.S. holder to be subject to United States income tax on a net income basis in respect of such dividends). Such "effectively connected" dividends are subject to tax at rates applicable to United States citizens, resident aliens and domestic United States corporations, and are not generally subject to withholding. Any such effectively connected dividends received by a non-United States corporation may also, under certain circumstances, be subject 25 28 to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. Under current United States Treasury regulations, dividends paid to an address in a foreign country are presumed to be paid to a resident of that country (unless the payor has knowledge to the contrary) for purposes of the withholding discussed above and, under the current interpretation of United States Treasury regulations, for purposes of determining the applicability of tax treaty rate. Under proposed United States Treasury regulations (the "Proposed Regulations"), however, a non-U.S. holder of Common Stock who wishes to claim the benefit of an applicable treaty rate would be required to satisfy applicable certification requirements. In addition, under the Proposed Regulations, in the case of Common Stock held by a foreign partnership, (x) the certification requirement would generally be applied to the partners of the partnership and (y) the partnership would be required to provide certain information, including a United States taxpayer identification number. The Proposed Regulations also provide look-through rules for tiered partnerships. It is not certain whether, or in what form, the Proposed Regulations will be adopted as final regulations. A non-U.S. holder of Common Stock that is eligible for a reduced rate of United States withholding tax pursuant to a tax treaty may obtain a refund of any excess amounts currently withheld by filing an appropriate claim for refund with the United States Internal Revenue Service. GAIN ON DISPOSITION OF COMMON STOCK A non-U.S. holder generally will not be subject to United States federal income tax in respect of gain recognized on disposition of Common Stock except in the following circumstances: (i) the gain is effectively connected with a trade or business conducted by the non-U.S. holder in the United States (and is attributable to a permanent establishment maintained in the United States by such non-U.S. holder if an applicable income tax treaty so requires as a condition for such non-U.S. holder to be subject to United States taxation on a net income basis in respect of gain from the sale or other disposition of the Common Stock); (ii) in the case of a non-U.S. holder who is an individual and holds the Common Stock as a capital asset, such holder is present in the United States for 183 or more days in the taxable year of the sale and certain other conditions exist; or (iii) the Company is or has been a "United States real property holding corporation" for federal income tax purposes and the non-U.S. holder held, directly or indirectly at any time during the five-year period ending on the date of disposition, more than 5% of the Common Stock (and is not eligible for any treaty exemption). Effectively connected gains realized by a corporate non-U.S. Holder may also, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. The Company has not been, is not, and does not anticipate becoming a "United States real property holding corporation" for federal income tax purposes. FEDERAL ESTATE TAXES Common Stock held by a non-U.S. holder at the time of death will be included in such holder's gross estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. INFORMATION REPORTING AND BACKUP WITHHOLDING Under current law, United States information reporting requirements (other than reporting of dividend payments for purposes of the withholding tax noted above) and backup withholding tax generally will not apply to dividends paid to non-U.S. holders that are either subject to the 30% withholding discussed above or that are not so subject because an applicable tax treaty reduces such withholding. Otherwise, backup withholding of United States federal income tax at a rate of 31% may apply to dividends paid with respect to Common Stock to holders that are not "exempt recipients" and that fail to provide certain information (including the holder's United States taxpayer identification number). Generally, unless the payor of dividends has definite knowledge that the payee is a United 26 29 States person, the payor may treat dividend payments to a payee with a foreign address as exempt from information reporting and backup withholding, However, under the Proposed Regulations, dividend payments generally will be subject to information reporting and backup withholding unless applicable certification requirements are satisfied. See the discussion above with respect to the rules applicable to foreign partnerships under the Proposed Regulations. In general, United States information reporting and backup withholding requirements also will not apply to a payment made outside the United States of the proceeds of a sale of Common Stock through an office outside the United States of a non-United States broker. However, United States information reporting (but not backup withholding) requirements will apply to a payment made outside the United States of the proceeds of a sale of Common Stock through an office outside the United States of a broker that is a United States person, that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States, or that is a "controlled foreign corporation" as to the United States, unless the broker has documentary evidence in its records that the holder or beneficial owner is a non-United States person or the holder or beneficial owner otherwise establishes an exemption. Payment of the proceeds of the sale of Common Stock to or through a United States office of a broker is currently subject to both United States backup withholding and information reporting unless the holder certifies its non-United States status under penalties of perjury or otherwise establishes an exemption. A non-United States holder generally may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the United States Internal Revenue Service. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Exchange Act, and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"), all of which may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material also can be obtained at prescribed rates by writing to the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Reports, proxy and information statements and other information concerning the Company can also be inspected at The Nasdaq National Market at 1735 K Street, N.W., Washington, D.C. 20006 or from the Commission's World Wide Web site at http://www.sec.gov. This Prospectus constitutes part of a Registration Statement filed by the Company with the Commission under the Securities Act. This Prospectus omits certain of the information contained in the Registration Statement in accordance with the rules and regulations of the Commission. Reference is hereby made to the Registration Statement and related exhibits for further information with respect to the Company and the Common Stock. Statements contained herein concerning the provisions of any document are not necessarily complete and, in each instance, where a copy of such document has been filed as an exhibit to the Registration Statement or otherwise has been filed with the Commission, reference is made to the copy so filed. Each such statement is qualified in its entirety by such reference. 27 30 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents have been filed by the Company with the Commission pursuant to the Exchange Act, File No. 0-14625, and are incorporated herein by reference: 1. Annual Report on Form 10-K for the fiscal year ended January 31, 1997. 2. Quarterly Report on Form 10-Q for the quarter ended April 30, 1997. 3. Quarterly Report on Form 10-Q for the quarter ended July 31, 1997. 4. Proxy Statement for the Annual Meeting of Shareholders held on June 10, 1997. 5. The Registration Statement on Form 8-A under the Exchange Act as filed with the Commission on May 14, 1986. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Common Stock hereby shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus is delivered, upon the written or oral request of such person, a copy of any and all of the documents incorporated herein by reference (not including the exhibits to such documents, unless such exhibits are specifically incorporated by reference into such documents). Requests for such copies should be directed to Mr. Arthur W. Singleton, Vice President, Treasurer and Secretary of the Company, at Tech Data Corporation, 5350 Tech Data Drive, Clearwater, Florida 37760. VALIDITY OF THE SHARES The validity of the shares offered hereby will be passed upon for the Company by Schifino & Fleischer, P.A., Tampa, Florida, and for the Underwriters by Sullivan & Cromwell, New York, New York. EXPERTS The financial statements as of January 31, 1997 and 1996 and for each of the three years in the period ended January 31, 1997 included in this Prospectus have been so included in reliance on the report of Price Waterhouse LLP, independent certified public accountants, given on the authority of said firm as experts in auditing and accounting. 28 31 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS TABLE OF CONTENTS
PAGE ---- Report of Independent Certified Public Accountants.......... F-2 Consolidated Balance Sheet.................................. F-3 Consolidated Statement of Income............................ F-4 Consolidated Statement of Changes in Shareholders' Equity... F-5 Consolidated Statement of Cash Flows........................ F-6 Notes to Consolidated Financial Statements.................. F-7
F-1 32 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Tech Data Corporation: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of changes in shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Tech Data Corporation and its subsidiaries at January 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended January 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Tampa, Florida March 18, 1997 F-2 33 TECH DATA CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
JANUARY 31, ------------------------ JULY 31, 1996 1997 1997 ---------- ---------- ----------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents........................ $ 1,154 $ 661 $ 2,125 Accounts receivable, less allowance of $22,669, $23,922 and $28,079........................... 445,202 633,579 700,806 Inventories...................................... 465,422 759,974 705,636 Prepaid and other assets......................... 39,010 55,796 43,828 ---------- ---------- ---------- Total current assets..................... 950,788 1,450,010 1,452,395 Property and equipment, net........................ 61,610 65,597 69,999 Investment in and advances to Macrotron AG......... 104,567 Excess of cost over acquired net assets, net....... 6,376 5,922 5,696 Other assets, net.................................. 25,105 23,765 22,575 ---------- ---------- ---------- $1,043,879 $1,545,294 $1,655,232 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Revolving credit loans........................... $ 283,100 $ 396,391 $ 416,428 Current portion of long-term debt................ 519 201 207 Accounts payable................................. 433,374 658,732 696,297 Accrued expenses................................. 32,091 42,693 43,348 ---------- ---------- ---------- Total current liabilities................ 749,084 1,098,017 1,156,280 Long-term debt..................................... 9,097 8,896 8,791 ---------- ---------- ---------- 758,181 1,106,913 1,165,071 ---------- ---------- ---------- Commitments and contingencies (Note 8) Shareholders' equity: Preferred stock, par value $.02; 226,500 shares authorized and issued; liquidation preference $.20 per share................................ 5 5 5 Common stock, par value $.0015; 100,000,000, 100,000,000 and 200,000,000 shares authorized; 37,930,655, 43,291,423 and 43,947,402 issued and outstanding............................... 57 65 66 Additional paid-in capital....................... 130,045 226,577 241,025 Retained earnings................................ 153,310 210,283 249,969 Cumulative translation adjustment................ 2,281 1,451 (904) ---------- ---------- ---------- Total shareholders' equity............... 285,698 438,381 490,161 ---------- ---------- ---------- $1,043,879 $1,545,294 $1,655,232 ========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. F-3 34 TECH DATA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED YEAR ENDED JANUARY 31, JULY 31, ------------------------------------ ----------------------- 1995 1996 1997 1996 1997 ---------- ---------- ---------- ---------- ---------- (UNAUDITED) Net sales...................... $2,418,410 $3,086,620 $4,598,941 $2,048,802 $2,921,966 ---------- ---------- ---------- ---------- ---------- Cost and expenses: Cost of products sold........ 2,219,122 2,867,226 4,277,160 1,905,488 2,722,811 Selling, general and administrative expenses... 127,951 163,790 206,770 95,609 122,644 ---------- ---------- ---------- ---------- ---------- 2,347,073 3,031,016 4,483,930 2,001,097 2,845,455 ---------- ---------- ---------- ---------- ---------- Operating profit............... 71,337 55,604 115,011 47,705 76,511 Interest expense............... 13,761 20,086 21,522 10,802 12,653 ---------- ---------- ---------- ---------- ---------- Income before income taxes..... 57,576 35,518 93,489 36,903 63,858 Provision for income taxes..... 22,664 13,977 36,516 14,459 24,172 ---------- ---------- ---------- ---------- ---------- Net income..................... $ 34,912 $ 21,541 $ 56,973 $ 22,444 $ 39,686 ========== ========== ========== ========== ========== Net income per common share.... $ .91 $ .56 $ 1.35 $ .57 $ .88 ========== ========== ========== ========== ========== Weighted average common shares outstanding.................. 38,258 38,138 42,125 39,231 45,122 ========== ========== ========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. F-4 35 TECH DATA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (IN THOUSANDS)
PREFERRED STOCK COMMON STOCK ADDITIONAL CUMULATIVE TOTAL --------------- --------------- PAID-IN RETAINED TRANSLATION SHAREHOLDERS' SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT EQUITY ------ ------ ------ ------ ---------- -------- ----------- ------------- Balance -- January 31, 1994.... 227 $5 36,547 $54 $126,091 $ 87,176 $-- $213,326 Issuance of common stock in business combination....... 1,144 3 9,681 9,684 Issuance of common stock for stock options exercised and related tax benefit........ 117 1,856 1,856 Net income................... 34,912 34,912 Translation adjustments...... 1,048 1,048 --- -- ------ --- -------- -------- ------- -------- Balance -- January 31, 1995.... 227 5 37,808 57 127,947 131,769 1,048 260,826 Issuance of common stock for stock options exercised and related tax benefit........ 123 2,098 2,098 Net income................... 21,541 21,541 Translation adjustments...... 1,233 1,233 --- -- ------ --- -------- -------- ------- -------- Balance -- January 31, 1996.... 227 5 37,931 57 130,045 153,310 2,281 285,698 Issuance of common stock for stock options exercised and related tax benefit........ 760 1 13,223 13,224 Issuance of common stock net of offering costs.......... 4,600 7 83,309 83,316 Net income................... 56,973 56,973 Translation adjustments...... (830) (830) --- -- ------ --- -------- -------- ------- -------- Balance -- January 31, 1997.... 227 5 43,291 65 226,577 210,283 1,451 438,381 Issuance of common stock in business acquisition (unaudited)................ 407 1 9,198 9,199 Issuance of common stock for stock options exercised and related tax benefit (unaudited)................ 249 5,250 5,250 Net income (unaudited)....... 39,686 39,686 Translation adjustments (unaudited)................ (2,355) (2,355) --- -- ------ --- -------- -------- ------- -------- Balance -- July 31, 1997 (unaudited).................. 227 $5 43,947 $66 $241,025 $249,969 $ (904) $490,161 === == ====== === ======== ======== ======= ========
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. F-5 36 TECH DATA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS)
SIX MONTHS ENDED YEAR ENDED JANUARY 31, JULY 31, --------------------------------------- ------------------------- 1995 1996 1997 1996 1997 ----------- ----------- ----------- ----------- ----------- (UNAUDITED) Cash flows from operating activities: Cash received from customers.................. $ 2,326,613 $ 2,933,831 $ 4,390,916 $ 1,975,983 $ 2,844,302 Cash paid to suppliers and employees.......... (2,382,799) (2,854,653) (4,513,309) (1,983,984) (2,713,420) Interest paid................................. (13,584) (20,276) (21,122) (10,788) (12,967) Income taxes paid............................. (27,974) (11,628) (45,037) (17,064) (32,184) ----------- ----------- ----------- ----------- ----------- Net cash (used in) provided by operating activities............................ (97,744) 47,274 (188,552) (35,853) 85,731 ----------- ----------- ----------- ----------- ----------- Cash flows from investing activities: Acquisition of business, net of cash acquired.................................... (35,368) Expenditures for property and equipment....... (21,351) (23,596) (19,229) (4,663) (12,847) Software development costs.................... (18,696) (2,826) (2,024) (1,029) (1,240) ----------- ----------- ----------- ----------- ----------- Net cash used in investing activities... (40,047) (26,422) (21,253) (5,692) (49,455) ----------- ----------- ----------- ----------- ----------- Cash flows from financing activities: Proceeds from issuance of common stock........ 1,859 2,098 96,540 88,576 5,250 Net borrowings (repayments) from revolving credit loans................................ 136,019 (21,684) 113,291 (47,129) 20,037 Loans to Macrotron AG......................... (60,000) Principal payments on long-term debt.......... (1,058) (608) (519) (259) (99) Proceeds from long-term debt.................. 789 ----------- ----------- ----------- ----------- ----------- Net cash provided by (used in) financing activities............................ 137,609 (20,194) 209,312 41,188 (34,812) ----------- ----------- ----------- ----------- ----------- Net (decrease) increase in cash and cash equivalents........................... (182) 658 (493) (357) 1,464 Cash and cash equivalents at beginning of year.......................................... 678 496 1,154 1,154 661 ----------- ----------- ----------- ----------- ----------- Cash and cash equivalents at end of year........ $ 496 $ 1,154 $ 661 $ 797 $ 2,125 =========== =========== =========== =========== =========== Reconciliation of net income to net cash (used in) provided by operating activities: Net income.................................. $ 34,912 $ 21,541 $ 56,973 $ 22,444 $ 39,686 ----------- ----------- ----------- ----------- ----------- Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization................. 9,110 17,364 20,011 9,515 11,101 Provision for losses on accounts receivable... 17,768 17,433 19,648 9,422 10,437 Loss on disposal of fixed assets.............. 1,237 603 446 Deferred income taxes......................... (1,739) (5,603) (5,051) Changes in assets and liabilities: (Increase) in accounts receivable........... (90,600) (152,789) (208,025) (72,819) (77,664) (Increase) decrease in inventories.......... (132,940) (100,891) (294,552) 25,032 54,338 Decrease (increase) in prepaid and other assets.................................... 2,645 (7,254) (13,962) (309) 9,613 Increase (decrease) in accounts payable..... 62,132 239,161 225,358 (28,043) 37,565 (Decrease) increase in accrued expenses..... (269) 17,709 10,602 (1,095) 655 ----------- ----------- ----------- ----------- ----------- Total adjustments......................... (132,656) 25,733 (245,525) (58,297) 46,045 ----------- ----------- ----------- ----------- ----------- Net cash (used in) provided by operating activities.............................. $ (97,744) $ 47,274 $ (188,552) $ (35,853) $ 85,731 =========== =========== =========== =========== ===========
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. F-6 37 TECH DATA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Tech Data Corporation and its subsidiaries (the "Company"), all of which are wholly-owned. All significant intercompany accounts and transactions have been eliminated in consolidation. METHOD OF ACCOUNTING The Company prepares its financial statements in conformity with generally accepted accounting principles. These principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REVENUE RECOGNITION Sales are recorded upon shipment. The Company allows its customers to return product for exchange or credit subject to certain limitations. Provision for estimated losses on such returns are recorded at the time of sale (see product warranty below). Funds received from vendors for marketing programs and product rebates are accounted for as a reduction of selling, general and administrative expenses or product cost according to the nature of the program. INVENTORIES Inventories (consisting of computer related hardware and software products) are stated at the lower of cost or market, cost being determined on the first-in, first-out (FIFO) method. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is computed over the estimated economic lives using the following methods:
METHOD YEARS --------------- --------- Buildings and improvements.............................. Straight-line 31.5-39 Furniture, fixtures and equipment....................... Accelerated and 3-7 straight-line
Expenditures for renewals and improvements that significantly add to productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to operations when incurred. When assets are sold or retired, the cost of the asset and the related accumulated depreciation are eliminated from the accounts and any gain or loss is recognized at such time. EXCESS OF COST OVER ACQUIRED NET ASSETS The excess of cost over acquired net assets is being amortized on a straight-line basis over 15 years. Amortization expense was $602,000, $646,000 and $682,000 in 1997, 1996 and 1995, respectively. The accumulated amortization of goodwill is approximately $2,264,000 and $1,727,000 at January 31, 1997 and 1996, respectively. In fiscal year 1996, the Company settled a liability related to a previous acquisition and therefore recorded a $3,000,000 reduction in goodwill. The Company evaluates, on a regular basis, whether events and circumstances have occurred that indicate the carrying amount of F-7 38 TECH DATA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) goodwill may warrant revision or may not be recoverable. At January 31, 1997, the net unamortized balance of goodwill is not considered to be impaired. CAPITALIZED DEFERRED SOFTWARE COSTS Deferred software costs are included in other assets and represent internal development costs and payments to vendors for the design, purchase and implementation of the computer software for the Company's operating and financial systems. Such deferred costs are being amortized over three to seven years with amortization expense of $4,611,000, $4,253,000 and $329,000 in 1997, 1996 and 1995, respectively. The accumulated amortization of such costs was $9,193,000 and $4,582,000 at January 31, 1997 and 1996, respectively. PRODUCT WARRANTY The Company does not offer warranty coverage. However, to maintain customer goodwill, the Company facilitates vendor warranty policies by accepting for exchange (with the Company's prior approval) defective products within 60 days of invoicing. Defective products received by the Company are subsequently returned to the vendor for credit or replacement. INCOME TAXES Income taxes are accounted for under the liability method. Deferred taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. FOREIGN CURRENCY TRANSLATION The assets and liabilities of foreign operations are translated at the exchange rates in effect at the balance sheet date, with the related translation gains or losses reported as a separate component of shareholders' equity. The results of foreign operations are translated at the weighted average exchange rates for the year. Gains or losses resulting from foreign currency transactions are included in the statement of income. CONCENTRATION OF CREDIT RISK The Company sells its products to a large base of value-added resellers ("VARs"), corporate resellers and retailers throughout the United States,France,Canada, Latin America and the Caribbean. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company makes provisions for estimated credit losses at the time of sale. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS Financial instruments that are subject to fair value disclosure requirements are carried in the consolidated financial statements at amounts that approximate fair value. NET INCOME PER COMMON SHARE Net income per common share is based on the weighted average number of shares of common stock and common stock equivalents outstanding during each period. Fully diluted and primary earnings per share are the same amounts for each of the periods presented. F-8 39 TECH DATA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CASH MANAGEMENT SYSTEM Under the Company's cash management system, disbursements cleared by the bank are reimbursed on a daily basis from the revolving credit loans. As a result, checks issued but not yet presented to the bank are not considered reductions of cash or accounts payable. Included in accounts payable are $111,826,000 and $69,789,000 at January 31, 1997 and 1996, respectively, for which checks are outstanding. STATEMENT OF CASH FLOWS Short-term investments which have an original maturity of ninety days or less are considered cash equivalents in the statement of cash flows. The effect of changes in foreign exchange rates on cash balances is not material. See Note 9 of Notes to Consolidated Financial Statements regarding the non-cash exchange of common stock in connection with a business combination. FISCAL YEAR The Company and its subsidiaries operate on a fiscal year that ends on January 31, except for the Company's French subsidiary which operates on a fiscal year that ends on December 31. INTERIM FINANCIAL DATA The interim financial data at July 31, 1997 and for the six months ended July 31, 1996 and 1997 are unaudited; however, in the opinion of management, such interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results of the interim periods. NOTE 2 -- PROPERTY AND EQUIPMENT:
JANUARY 31, ------------------- 1996 1997 -------- -------- (IN THOUSANDS) Land........................................................ $ 3,898 $ 3,898 Buildings and improvements.................................. 27,802 29,155 Furniture, fixtures and equipment........................... 58,721 75,982 Construction in progress.................................... 1,778 629 -------- -------- 92,199 109,664 Less -- accumulated depreciation............................ (30,589) (44,067) -------- -------- $ 61,610 $ 65,597 ======== ========
NOTE 3 -- REVOLVING CREDIT LOANS: The Company has an agreement (the "Receivables Securitization Program") with a financial institution that allows the Company to transfer an undivided interest in a designated pool of accounts receivable on an ongoing basis to provide borrowings up to a maximum of $300,000,000 (increased from $250,000,000 in January 1997 and subsequently increased to $325,000,000 in February 1997). As collections reduce accounts receivable balances included in the pool, the Company may transfer interests in new receivables to bring the amount available to be borrowed up to the $300,000,000 maximum. The Company pays interest on advances under the Receivables Securitization Program at a designated commercial paper rate, plus an agreed-upon spread. At January 31, 1997, the Company had a $215,000,000 outstanding balance under this program which is included in the balance sheet caption "Revolving Credit Loans". This agreement expires December 31, 1997. F-9 40 TECH DATA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In May 1996, the Company entered into a new three-year unsecured $290 million multi-currency revolving credit facility replacing its former domestic, French and Canadian credit agreements. The Company and its wholly-owned subsidiaries are able to borrow funds in sixteen major foreign currencies under this agreement. As of January 31, 1997, the Company maintained domestic and foreign revolving credit loan agreements (including the Receivables Securitization Program) with a total of twelve financial institutions which provide for maximum short-term borrowings of approximately $600,000,000 ($625,000,000 as of February 28, 1997). At January 31, 1997, the weighted average interest rate on all short-term borrowings was 5.37%. The Company can fix the interest rate for periods of 30 to 180 days under various interest rate options. The credit agreements contain warranties and covenants that must be complied with on a continuing basis, including the maintenance of certain financial ratios. At January 31, 1997, the Company was in compliance with all such covenants. See Note 12 of Notes to Consolidated Financial Statements. NOTE 4 -- LONG-TERM DEBT:
JANUARY 31, --------------- 1996 1997 ------ ------ (IN THOUSANDS) Mortgage note payable, interest at 10.25%, principal and interest of $85,130 payable monthly, balloon payment due 2005...................................................... $9,005 $8,902 Mortgage note payable funded through Industrial Revenue Bond, interest at 7.3%, principal and interest payable quarterly, through 1999................................... 282 195 Other note payable.......................................... 329 ------ ------ 9,616 9,097 Less -- current maturities.................................. (519) (201) ------ ------ $9,097 $8,896 ====== ======
Principal maturities of long-term debt at January 31, 1997 for the succeeding five fiscal years are as follows: 1998 -- $201,000; 1999 -- $213,000; 2000 -- $162,000; 2001 -- $155,000; 2002 -- $172,000. Mortgage notes payable are secured by property and equipment with an original cost of approximately $12,000,000. The Industrial Revenue Bond contains covenants which require the Company to maintain certain financial ratios with which the Company was in compliance at January 31, 1997. F-10 41 TECH DATA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 5 -- INCOME TAXES (IN THOUSANDS): Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows:
JANUARY 31, ----------------- 1996 1997 ------- ------- Deferred tax liabilities: Accelerated depreciation.................................. $ 4,046 $ 6,863 Deferred revenue.......................................... 3,164 2,811 Other -- net.............................................. 1,378 3,525 ------- ------- Total deferred tax liabilities..................... 8,588 13,199 ------- ------- Deferred tax assets: Accruals not currently deductible......................... 2,947 5,092 Reserves not currently deductible......................... 14,774 21,340 Capitalized inventory costs............................... 1,144 2,220 Other -- net.............................................. 338 213 ------- ------- Total deferred tax assets.......................... 19,203 28,865 ------- ------- Net deferred tax assets (included in prepaid and other assets)................................................... $10,615 $15,666 ======= =======
Significant components of the provision for income taxes are as follows:
YEAR ENDED JANUARY 31, --------------------------- 1995 1996 1997 ------- ------- ------- Current: Federal................................................... $19,670 $15,107 $32,485 State..................................................... 3,748 2,932 5,897 Foreign................................................... 985 1,541 3,185 ------- ------- ------- Total current...................................... 24,403 19,580 41,567 ------- ------- ------- Deferred: Federal................................................... (1,677) (4,656) (3,490) State..................................................... (62) (625) (451) Foreign................................................... (322) (1,110) ------- ------- ------- Total deferred..................................... (1,739) (5,603) (5,051) ------- ------- ------- $22,664 $13,977 $36,516 ======= ======= =======
The reconciliation of income tax attributable to continuing operations computed at the U.S. federal statutory tax rates to income tax expense is as follows:
YEAR ENDED JANUARY 31, ----------------------- 1995 1996 1997 ----- ----- ----- Tax at U.S. statutory rates................................. 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit.............. 4.2 4.2 3.8 Other -- net................................................ .2 .2 .3 ---- ---- ---- 39.4% 39.4% 39.1% ==== ==== ====
F-11 42 TECH DATA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of pretax earnings are as follows:
YEAR ENDED JANUARY 31, --------------------------- 1995 1996 1997 ------- ------- ------- United States........................................... $55,155 $33,164 $88,536 Foreign................................................. 2,421 2,354 4,953 ------- ------- ------- $57,576 $35,518 $93,489 ======= ======= =======
NOTE 6 -- EMPLOYEE BENEFIT PLANS: STOCK COMPENSATION PLANS At January 31, 1997, the Company had four stock-based compensation plans, an employee stock ownership plan and a retirement savings plan, which are described below. The Company applies APB Opinion 25 and related Interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its fixed stock option plans and its stock purchase plan. FIXED STOCK OPTION PLANS In August 1985, the Board of Directors adopted the 1985 Incentive Stock Option Plan (the "1985 Plan"), which covers an aggregate of 1,050,000 shares of common stock. The options were granted to certain officers and key employees at or above fair market value; accordingly, no compensation expense has been recorded with respect to these options. Options are exercisable beginning two years from the date of grant only if the grantee is an employee of the Company at that time. No options may be granted under the 1985 Plan after July 31, 1995. In June 1990, the shareholders approved the 1990 Incentive and Non-Statutory Stock Option Plan (the "1990 Plan") which covers an aggregate of 5,000,000 shares (as amended in June 1994) of common stock. The 1990 Plan provides for the granting of incentive and non-statutory stock options, stock appreciation rights ("SARs") and limited stock appreciation rights ("Limited SARs") at prices determined by the stock option committee, except for incentive stock options which are granted at the fair market value of the stock on the date of grant. Incentive options granted under the 1990 Plan become exercisable over a five year period while the date of exercise of non-statutory options is determined by the stock option committee. As of January 31, 1997, no SARs or Limited SARs had been granted under the 1990 Plan. Options granted under the 1985 Plan and the 1990 Plan expire 10 years from the date of grant, unless a shorter period is specified by the stock option committee. In June 1995, the shareholders approved the 1995 Non-Employee Director's Non-Statutory Stock Option Plan. Under this plan, the Company grants non-employee members of its Board of Directors stock options upon their initial appointment to the board and then annually each year thereafter. Stock options granted to members upon their initial appointment vest and become exercisable at a rate of 20% per year. Annual awards vest and become exercisable one year from the date of grant. The number of shares subject to options under this plan cannot exceed 100,000 and the options expire 10 years from the date of grant. F-12 43 TECH DATA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A summary of the status of the Company's stock option plans is as follows:
JANUARY 31, JANUARY 31, JANUARY 31, 1995 1996 1997 -------------------- --------------------- -------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE --------- -------- ---------- -------- --------- -------- Outstanding at beginning of year... 1,515,956 $11.02 2,644,056 $15.62 3,081,110 $13.31 Granted............... 1,372,500 19.94 1,683,450 12.91 1,112,000 16.27 Exercised............. (116,900) 5.83 (79,800) 8.53 (675,492) 13.11 Canceled.............. (127,500) 15.02 (1,166,596) 18.45 (231,800) 13.72 --------- ---------- --------- Outstanding at year end................. 2,644,056 15.62 3,081,110 13.31 3,285,818 14.31 ========= ========== ========= Options exercisable at year end............ 180,660 494,460 576,862 Available for grant at year end............ 2,351,000 1,785,000 905,000
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------------------- ---------------------------- WEIGHTED AVERAGE NUMBER REMAINING WEIGHTED NUMBER WEIGHTED RANGE OF OUTSTANDING CONTRACTUAL LIFE AVERAGE EXERCISABLE AVERAGE EXERCISE PRICES AT 1/31/97 (YEARS) EXERCISE PRICE AT 1/31/97 EXERCISE PRICE --------------- ----------- ------------------------ -------------- ----------- -------------- $ 1.50-$10.00........ 139,500 4.9 $ 7.38 84,700 $ 6.31 11.00- 15.00........ 2,644,150 8.3 13.23 406,800 13.30 16.00- 30.00........ 502,168 8.2 21.83 85,362 20.19 --------- ------- 3,285,818 8.2 14.31 576,862 13.29 ========= =======
EMPLOYEE STOCK PURCHASE PLAN Under the 1995 Employee Stock Purchase Plan, approved in June 1995, the Company is authorized to issue up to 1,000,000 shares of common stock to eligible employees. Under the terms of the plan, employees can choose to have a fixed dollar amount deducted from their compensation to purchase the Company's common stock and/or elect to purchase shares once per calendar quarter. The purchase price of the stock is 85% of the market value on the exercise date and employees are limited to a maximum purchase of $25,000 fair market value each calendar year. Since plan inception, the Company has sold 88,253 shares. All shares purchased under this plan must be retained for a period of one year. PRO FORMA EFFECT OF STOCK COMPENSATION PLANS Had the compensation cost for the Company's stock option plans and employee stock purchase plan been determined based on the fair value at the grant dates for awards under the plans consistent with the method prescribed by Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", the Company's net income and net income per common share on a pro forma basis would have been (in thousands, except per share data):
YEAR ENDED JANUARY 31, ---------------------- 1996 1997 --------- --------- Net income.................................................. $19,937 $55,059 Net income per common share................................. $ .52 $ 1.31
F-13 44 TECH DATA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The preceding pro forma results were calculated with the use of the Black Scholes option-pricing model. The following assumptions were used for the years ended January 31, 1997 and 1996, respectively: (1) risk-free interest rates of 6.08% and 6.96%; (2) dividend yield of 0.0% and 0.0%; (3) expected lives of 5.08 and 5.08 years; and (4) volatility of 56% and 39%. Results may vary depending on the assumptions applied within the model. STOCK OWNERSHIP AND RETIREMENT SAVINGS PLANS In February 1984, the Company established an employee stock ownership plan (the "ESOP") covering substantially all U.S. employees. The ESOP provides for distribution of vested percentages of the Company's common stock to participants. Such benefit becomes fully vested after seven years of qualified service. The Company also offers its U.S. employees a retirement savings plan pursuant to section 401(k) of the Internal Revenue Code which provides for the Company to match 50% of the first $1,000 of each participant's deferrals annually. Contributions to these plans are made in amounts approved annually by the Board of Directors. Aggregate contributions made by the Company to these plans were $2,090,000, $1,659,000 and $1,268,000 for 1997, 1996 and 1995, respectively. NOTE 7 -- CAPITAL STOCK: Each outstanding share of preferred stock is entitled to one vote on all matters submitted to a vote of shareholders, except for matters involving mergers, the sale of all Company assets, amendments to the Company's charter and exchanges of Company stock for stock of another company which require approval by a majority of each class of capital stock. In such matters, the preferred and common shareholders will each vote as a separate class. In July 1996, the Company completed a public offering of 4,600,000 shares of common stock resulting in net proceeds to the Company of approximately $83,316,000. NOTE 8 -- COMMITMENTS AND CONTINGENCIES: OPERATING LEASES The Company leases distribution facilities and certain equipment under noncancelable operating leases which expire at various dates through 2005. Future minimum lease payments under all such leases for the succeeding five fiscal years are as follows: 1998 -- $9,036,000; 1999 -- $9,502,000; 2000 -- $8,824,000; 2001 -- $8,364,000; 2002 -- $3,795,000 and $4,596,000 thereafter. Rental expense for all operating leases amounted to $10,160,000, $7,547,000 and $6,500,000 in 1997, 1996 and 1995, respectively. NOTE 9 -- ACQUISITIONS: On March 24, 1994 the Company completed the non-cash exchange of 1,144,000 shares of its common stock for all of the outstanding capital stock of Softmart International, S.A. (subsequently named Tech Data France, SNC), a privately-held distributor of microcomputer products based in Paris, France. The acquisition was accounted for as a pooling-of-interests effective February 1, 1994, however, due to the immaterial size of the acquisition in relation to the consolidated financial statements, prior period financial statements were not restated. In connection with the issuance of the 1,144,000 shares of common stock, the Company recorded an adjustment of $9,681,000 to beginning retained earnings. NOTE 10 -- SEGMENT INFORMATION: The Company is engaged in one business segment, the wholesale distribution of microcomputer hardware and software products. The geographic areas in which the Company operates are the United F-14 45 TECH DATA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) States (United States including exports to Latin America and the Caribbean) and International (France and Canada). The geographical distribution of net sales, operating income and identifiable assets are as follows (in thousands):
UNITED STATES INTERNATIONAL ELIMINATIONS CONSOLIDATED ------------- ------------- ------------ ------------ FISCAL YEAR 1995 - ------------------- Net sales to unaffiliated customers.......................... $2,104,637 $313,773 $ -- $2,418,410 ========== ======== ======= ========== Operating income..................... $ 65,349 $ 5,988 $ -- $ 71,337 ========== ======== ======= ========== Identifiable assets.................. $ 677,910 $109,703 $(3,184) $ 784,429 ========== ======== ======= ========== FISCAL YEAR 1996 - ------------------- Net sales to unaffiliated customers.......................... $2,654,750 $431,870 $ -- $3,086,620 ========== ======== ======= ========== Operating income..................... $ 48,419 $ 7,185 $ -- $ 55,604 ========== ======== ======= ========== Identifiable assets.................. $ 868,910 $174,969 $ -- $1,043,879 ========== ======== ======= ========== FISCAL YEAR 1997 - ------------------- Net sales to unaffiliated customers.......................... $4,009,924 $589,017 $ -- $4,598,941 ========== ======== ======= ========== Operating income..................... $ 105,330 $ 9,681 $ -- $ 115,011 ========== ======== ======= ========== Identifiable assets.................. $1,327,156 $218,138 $ -- $1,545,294 ========== ======== ======= ==========
NOTE 11 -- UNAUDITED INTERIM FINANCIAL INFORMATION:
QUARTER ENDED ----------------------------------------------- APRIL 30 JULY 31 OCTOBER 31 JANUARY 31 -------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) FISCAL YEAR 1996 - ------------------- Net sales............................ $633,460 $ 708,836 $ 843,286 $ 901,038 Gross profit......................... 46,216 50,113 58,685 64,380 Net income........................... 1,849 3,448 7,042 9,202 Net income per common share.......... .05 .09 .18 .24
QUARTER ENDED ----------------------------------------------- APRIL 30 JULY 31 OCTOBER 31 JANUARY 31 -------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) FISCAL YEAR 1997 - ------------------- Net sales............................ $985,574 $1,063,228 $1,236,650 $1,313,489 Gross profit......................... 69,012 74,302 85,955 92,512 Net income........................... 10,428 12,016 16,748 17,781 Net income per common share.......... .27 .30 .38 .40
NOTE 12 -- UNAUDITED SUBSEQUENT EVENTS: ACQUISITION On July 1, 1997 the Company acquired approximately 77% of the voting common stock and 7% of the non-voting preferred stock of Macrotron AG ("Mactroton"), a leading publicly held distributor of personal computer products based in Munich, Germany. The initial acquisition was completed through an exchange of approximately $26,000,000 in cash and 406,586 shares of the Company's common stock, F-15 46 TECH DATA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) for a combined total value of $35,000,000. On July 10, 1997, the Company commenced a tender offer for the remaining shares of Macrotron common and preferred stock at a price per share of DM730 and DM600, respectively. As of July 31, 1997, the Company owned or had under option approximately 94% and 18% of Macrotron's common and preferred stock, respectively. The tender offer period ended on September 5, 1997. The cash portion of the initial acquisition and the related tender offer were funded from the Company's revolving credit loan agreements. The acquisition of Macrotron will be accounted for under the purchase method. Consistent with the Company's accounting policy for foreign subsidiaries, Macrotron's operations will be consolidated into the Company's consolidated financial statements on a calendar year basis. Consequently, the Company's fiscal quarter ending October 31, 1997 will include Macrotron's operations for the three month period beginning July 1, 1997 and ending September 30, 1997. The following pro forma unaudited results of operations reflects the effect on the Company's operations, as if the above described acquisition had occurred at the beginning of each of the periods presented below:
SIX MONTHS ENDED JULY 31, ------------------------- 1996 1997 ----------- ----------- Net sales................................................... $2,465,276 $3,489,199 Net income.................................................. $ 22,926 $ 40,759 Net income per common share................................. $ .58 $ .90
The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the Macrotron acquisition been consummated as of the beginning of the periods above, nor are they necessarily indicative of future operating results. REVOLVING CREDIT LOANS In July 1997, the Company increased its accounts receivable securitization program from $325,000,000 to $400,000,000 and on August 28, 1997 entered into a new $550,000,000 three-year multi-currency revolving credit loan agreement with twenty banks. The Company currently maintains domestic and foreign revolving credit agreements which provide maximum short-term borrowings of approximately $980,000,000 (including local country credit lines), of which $416,000,000 was outstanding at July 31, 1997. CAPITAL STOCK At the June 10, 1997 Annual Meeting of Shareholders, a proposal to increase the Company's authorized common stock from 100,000,000 shares to 200,000,000 was approved. F-16 47 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, the Company has agreed to sell to each of the U.S. Underwriters named below, and each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Bear, Stearns & Co. Inc., The Robinson-Humphrey Company, LLC and NationsBanc Montgomery Securities, Inc. are acting as representatives, has severally agreed to purchase from the Company, the respective number of shares of Common Stock set forth opposite its name below:
NUMBER OF SHARES OF UNDERWRITER COMMON STOCK ----------- ------------ Goldman, Sachs & Co......................................... Bear, Stearns & Co. Inc..................................... The Robinson-Humphrey Company, LLC.......................... NationsBanc Montgomery Securities, Inc...................... --------- Total............................................. 2,800,000 =========
Under the terms and conditions of the Underwriting Agreement, the U.S. Underwriters are committed to take and pay for all of the shares offered hereby, if any are taken. The U.S. Underwriters propose to offer the shares of Common Stock in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus and in part to certain securities dealers at such price less a concession of $ per share. The U.S. Underwriters may allow, and such dealers may reallow, a concession in excess of $ to certain brokers and dealers. After the shares of Common Stock are released for sale to the public, the offering price and other selling terms may from time to time be varied by the representatives. The Company has entered into an underwriting agreement (the "International Underwriting Agreement") with the underwriters of the international offering (the "International Underwriters") providing for the concurrent offer and sale of 700,000 shares of Common Stock in an international offering outside the United States. The offering price and aggregate underwriting discounts and commissions per share for the two offerings are identical. The closing of the offering made hereby is a condition to the closing of the international offering, and vice versa. The consummation of the Offerings and the Notes Offering are not conditioned upon each other. The International Underwriters are Goldman Sachs International, Bear, Stearns International Limited, The Robinson-Humphrey Company, LLC and NationsBanc Montgomery Securities, Inc. Pursuant to an Agreement between the U.S. and International Underwriting Syndicates (the "Agreement Between") relating to the two offerings, each of the U.S. Underwriters named herein has agreed that, as a part of the distribution of the shares offered hereby and subject to certain exceptions, it will offer, sell or deliver the shares of Common Stock, directly or indirectly, only in the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction (the "United States") and to U.S. persons, which term shall mean, for purposes of this paragraph: (a) any individual who is a resident of the United States or (b) any corporation, partnership or other entity organized in or under the laws of the United States or any political subdivision thereof and whose office most directly involved with the purchase is located in the United States. Each of the International Underwriters has agreed pursuant to the Agreement Between that, as a part of the distribution of the shares offered as a part of the international offering, and subject to certain exceptions, it will (i) not, directly or indirectly, offer, sell or deliver shares of Common Stock (a) in the United States or to any U.S. persons or (b) to any person who it believes intends to reoffer, resell or deliver the shares in the United States or to any U.S. persons, and (ii) cause any dealer to whom it may sell such shares at any concession to agree to observe a similar restriction. U-1 48 Pursuant to the Agreement Between, sales may be made between the U.S. Underwriters and the International Underwriters of such number of shares of Common Stock as may be mutually agreed. The price of any shares so sold shall be the initial public offering price, less an amount not greater than the selling concession. The Company has granted the U.S. Underwriters an option exercisable for 30 days after the date of this Prospectus to purchase up to an aggregate of 420,000 additional shares of Common Stock solely to cover over-allotments, if any. If the U.S. Underwriters exercise their over-allotment option, the U.S. Underwriters have severally agreed, subject to certain conditions, to purchase approximately the same percentage thereof that the number of shares to be purchased by each of them, as shown in the foregoing table, bears to the 2,800,000 shares of Common Stock offered. The Company has granted the International Underwriters a similar option to purchase up to an aggregate of 105,000 additional shares of Common Stock. The Company has agreed that, during the period beginning from the date of this Prospectus and continuing to and including the date 90 days after the date of this Prospectus, it will not offer, sell, contract to sell or otherwise dispose of any securities of the Company (other than pursuant to employee stock option plans existing, or on the conversion or exchange of convertible or exchangeable securities outstanding, on the date of this Prospectus) which are substantially similar to the shares of the Common Stock or which are convertible or exchangeable into securities which are substantially similar to the shares of the Common Stock without the prior written consent of the representatives, except for the shares of Common Stock offered in connection with the concurrent U.S. and international offerings and the shares of Common Stock issuable upon conversion of the Notes. In connection with the Offerings and the Notes Offering, the Underwriters may purchase and sell the Common Stock and Notes in the open market. These transactions may include over-allotment and stabilizing transactions, "passive" market making (see below) and purchases to cover syndicate short positions created by the Underwriters in connection with the Offerings and the Notes Offering. Stabilizing transactions consist of certain bids or purchases for the purpose of preventing or retarding a decline in the market price of the Common Stock or the Notes; and syndicate short positions involve the sale by the Underwriters of a greater number of shares of Common Stock or Notes than they are required to purchase from the Company in the Offerings or the Notes Offering. The Underwriters also may impose a penalty bid, whereby selling concessions allowed to syndicate members or other broker-dealers in respect of the Common Stock or Notes sold in the Offerings or the Notes Offering for their account may be reclaimed by the syndicate if such Common Stock or Notes are repurchased by the syndicate if such Common Stock or Notes are repurchased by the syndicate in stabilizing or covering transactions. These activities may stabilize, maintain or otherwise affect the market price of the Common Stock or the Notes, which may be higher than the price that might otherwise prevail in the open market; and these activities, if commenced, may be discontinued at any time. These transactions may be effected on the Nasdaq National Market, in the over-the-counter market or otherwise. As permitted by Rule 103 under the Exchange Act, certain Underwriters (and selling group members, if any) that are market makers ("passive market makers") in the Common Stock may make bids for or purchases of the Common Stock in the Nasdaq National Market until such time, if any, when a stabilizing bid for such securities has been made. Rule 103 generally provides that (1) a passive market maker's net daily purchases of the Common Stock may not exceed 30% of its average daily trading volume in such securities for the two full consecutive calendar months (or any 60 consecutive days ending within the 10 days) immediately preceding the filing date of the registration statement of which this Prospectus forms a part, (2) a passive market maker may not effect transactions or display bids for the Common Stock at a price that exceeds the highest independent bid for the Common Stock by persons who are not passive market makers and (3) bids made by passive market makers must be identified as such. An affiliate of NationsBanc Montgomery Securities, Inc. provides certain commercial banking services to the Company. U-2 49 The Company has agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. In addition, the Underwriters have agreed to reimburse the Company for certain expenses associated with the Offerings and the Notes Offering. U-3 50 ========================================================== NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. ------------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary....................... 3 Risk Factors............................. 5 Use of Proceeds.......................... 8 Concurrent Notes Offering................ 8 Price Range of Common Stock.............. 9 Dividend Policy.......................... 9 Capitalization........................... 10 Selected Consolidated Financial Data..... 11 Management's Discussion and Analysis of Financial Condition and Results of Operations............................. 12 Business................................. 18 Management............................... 23 Certain United States Tax Consequences to Non-U.S. Holders of Common Stock....... 25 Available Information.................... 27 Incorporation of Certain Documents by Reference.............................. 28 Validity of the Shares................... 28 Experts.................................. 28 Index to Consolidated Financial Statements............................. F-1 Underwriting............................. U-1
========================================================== ========================================================== 3,500,000 SHARES [TECH DATA LOGO] COMMON STOCK (PAR VALUE $.0015 PER SHARE) ------------------ PROSPECTUS ------------------ GOLDMAN, SACHS & CO. BEAR, STEARNS & CO. INC. THE ROBINSON-HUMPHREY COMPANY NATIONSBANC MONTGOMERY SECURITIES, INC. REPRESENTATIVES OF THE UNDERWRITERS ========================================================== 51 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. [ALTERNATIVE INTERNATIONAL COVER PAGE] SUBJECT TO COMPLETION DATED OCTOBER 2, 1997 3,500,000 SHARES [TECH DATA LOGO] COMMON STOCK (PAR VALUE $.0015 PER SHARE) --------------------- Of the 3,500,000 shares of Common Stock offered, 700,000 shares are being offered hereby in an international offering outside the United States and 2,800,000 shares are being offered in a concurrent United States offering. The initial public offering price and the aggregate underwriting discount per share will be identical for both offerings. See "Underwriting." The last reported sale price of the Common Stock, which is quoted under the symbol "TECD," on The Nasdaq National Market on September 30, 1997 was $46.00 per share. See "Price Range of Common Stock." Concurrently with the Offerings, Tech Data Corporation is offering $175,000,000 aggregate principal amount of its % Convertible Subordinated Notes due , 2002 by a separate prospectus. The consummation of the Offerings and the Notes Offering are not conditioned upon each other. FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS IN EVALUATING AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY, SEE "RISK FACTORS" BEGINNING ON PAGE 5. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO OFFERING PRICE DISCOUNT(1) COMPANY(2) -------------- ------------ ----------- Per Share....................... $ $ $ Total(3)........................ $ $ $
- --------------- (1) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. (2) Before deducting estimated expenses of $325,000 payable by the Company. (3) The Company has granted the Underwriters options for 30 days to purchase up to an additional 525,000 shares at the initial public offering price per share, less the underwriting discount, solely to cover over-allotments. If such options are exercised in full, the total initial public offering price, underwriting discount and proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." --------------------- The shares offered hereby are offered severally by the International Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that certificates for the shares will be ready for delivery in New York, New York, on or about , 1997. GOLDMAN SACHS INTERNATIONAL BEAR, STEARNS INTERNATIONAL LIMITED THE ROBINSON-HUMPHREY COMPANY NATIONSBANC MONTGOMERY SECURITIES, INC. --------------------- The date of this Prospectus is , 1997. 52 [ALTERNATIVE INTERNATIONAL UNDERWRITING PAGES] UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, the Company has agreed to sell to each of the International Underwriters named below, and each of the International Underwriters has severally agreed to purchase from the Company, the respective number of shares of Common Stock set forth opposite its name below:
NUMBER OF SHARES OF UNDERWRITER COMMON STOCK ----------- ------------ Goldman Sachs International................................. Bear, Stearns International Limited......................... The Robinson-Humphrey Company, LLC.......................... NationsBanc Montgomery Securities, Inc...................... ------- Total............................................. 700,000 =======
Under the terms and conditions of the Underwriting Agreement, the International Underwriters are committed to take and pay for all of the shares offered hereby, if any are taken. The International Underwriters propose to offer the shares of Common Stock in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus and in part to certain securities dealers at such price less a concession of $ per share. The International Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain brokers and dealers. After the shares of Common stock are released for sale to the public, the offering price and other selling terms may from time to time be varied by the representatives. The Company has entered into an underwriting agreement (the "U.S. Underwriting Agreement") with the underwriters of the U.S. offering (the "U.S. Underwriters") providing for the concurrent offer and sale of 2,800,000 shares of Common Stock in a U.S. offering in the United States. The offering price and aggregate underwriting discounts and commissions per share for the two offerings are identical. The closing of the offering made hereby is a condition to the closing of the U.S. offering, and vice versa. The consummation of the Offerings and the Notes Offering are not conditioned upon each other. The representatives of the U.S. Underwriters are Goldman, Sachs & Co., Bear, Stearns & Co. Inc., The Robinson-Humphrey Company, LLC and NationsBanc Montgomery Securities, Inc. Pursuant to an Agreement between the U.S. and International Underwriting Syndicates (the "Agreement Between") relating to the two offerings, each of the U.S. Underwriters has agreed that, as a part of the distribution of the shares offered hereby and subject to certain exceptions, it will offer, sell or deliver the shares of Common Stock, directly or indirectly, only in the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction (the "United States") and to U.S. persons, which term shall mean, for purposes of this paragraph: (a) any individual who is a resident of the United States or (b) any corporation, partnership or other entity organized in or under the laws of the United States or any political subdivision thereof and whose office most directly involved with the purchase is located in the United States. Each of the International Underwriters named herein has agreed pursuant to the Agreement Between that, as a part of the distribution of the shares offered as a part of the international offering, and subject to certain exceptions, it will (i) not, directly or indirectly, offer, sell or deliver shares of Common Stock (a) in the United States or to any U.S. persons or (b) to any person who it believes intends to reoffer, resell or deliver the shares in the United States or to any U.S. persons, and (ii) cause any dealer to whom it may sell such shares at any concession to agree to observe a similar restriction. Pursuant to the Agreement Between, sales may be made between the U.S. Underwriters and the International Underwriters of such number of shares of Common Stock as may be mutually agreed. The price of any shares so sold shall be the initial public offering price, less an amount not greater than the selling concession. U-1 53 The Company has granted the International Underwriters an option exercisable for 30 days after the date of this Prospectus to purchase up to an aggregate of 105,000 additional shares of Common Stock solely to cover over-allotments, if any. If the International Underwriters exercise their over-allotment option, the International Underwriters have severally agreed, subject to certain conditions, to purchase approximately the same percentage thereof that the number of shares to be purchased by each of them, as shown in the foregoing table, bears to the 700,000 shares of Common Stock offered. The Company has granted the U.S. Underwriters a similar option to purchase up to an aggregate of 420,000 additional shares of Common Stock. The Company has agreed that, during the period beginning from the date of this Prospectus and continuing to and including the date 90 days after the date of the Prospectus, it will not offer, sell, contract to sell or otherwise dispose of any securities of the Company (other than pursuant to employee stock option plans existing, or on the conversion or exchange of convertible or exchangeable securities outstanding, on the date of this Prospectus) which are substantially similar to the shares of the Common Stock or which are convertible or exchangeable into securities which are substantially similar to the shares of the Common Stock without the prior written consent of the International Underwriters, except for the shares of Common Stock offered in connection with the concurrent U.S. and international offerings and the shares of Common Stock issuable upon conversion of the Notes. Each International Underwriter has also agreed that (a) it has not offered or sold and prior to the date six months after the date of issue of the shares of Common Stock will not offer or sell any shares of Common Stock to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (b) it has complied, and will comply with, all applicable provisions of the Financial Services Act of 1986 of Great Britain with respect to anything done by it in relation to the shares of Common Stock in, from or otherwise involving the United Kingdom, and (c) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issuance of the shares of Common Stock to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 of Great Britain or is a person to whom the document may otherwise lawfully be issued or passed on. Buyers of shares of Common Stock offered hereby may be required to pay stamp taxes and other charges in accordance with the laws and practice of the country of purchase in addition to the initial public offering price. In connection with the Offerings and the Notes Offering, the Underwriters may purchase and sell the Common Stock and the Notes in the open market. These transactions may include over-allotment and stabilizing transactions, "passive" market making (see below) and purchases to cover short positions created by the Underwriters in connection with the Offerings and the Notes Offering. Stabilizing transactions consist of certain bids or purchases for the purpose of preventing or retarding a decline in the market price of the Common Stock or the Notes; and short positions involve the sale by the Underwriters of a greater number of shares of Common Stock or Notes than they are required to purchase from the Company in the Offerings or the Notes Offering. The Underwriters also may impose a penalty bid, whereby selling concessions allowed to syndicate members or other broker-dealers in respect of the Common Stock or Notes sold in the Offerings and the Notes Offering for their account may be reclaimed by the syndicate if such Common Stock or Notes are repurchased by the syndicate in stabilizing or covering transactions. These activities may stabilize, maintain or otherwise affect the market price of the Common Stock or the Notes, which may be higher than the price that might otherwise prevail in the open U-2 54 market; and these activities, if commenced, may be discontinued at any time. These transactions may be effected on The Nasdaq National Market, in the over-the-counter market or otherwise. As permitted by Rule 103 under the Exchange Act, certain Underwriters (and selling group members, if any) that are market makers ("passive market makers") in the Common Stock may make bids for or purchases of the Common Stock in The Nasdaq National Market until such time, if any, when a stabilizing bid for such securities has been made. Rule 103 generally provides that (1) a passive market maker's net daily purchases of the Common Stock may not exceed 30% of its average daily trading volume in such securities of the two full consecutive calendar months (or any 60 consecutive days ending within the 10 days) immediately preceding the filing date of the registration statement of which this Prospectus forms a part, (2) a passive market maker may not effect transactions or display bids for the Common Stock at a price that exceeds the highest independent bid for the Common Stock by persons who are not passive market makers and (3) bids made by passive market makers must be identified as such. An affiliate of NationsBanc Montgomery Securities, Inc. provides certain commercial banking services to the Company. The Company has agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. In addition, the Underwriters have agreed to reimburse the Company for certain expenses associated with the Offerings and the Notes Offering. U-3 55 [ALTERNATIVE INTERNATIONAL BACK COVER PAGE] ========================================================== NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. ------------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary....................... 3 Risk Factors............................. 5 Use of Proceeds.......................... 8 Concurrent Notes Offering................ 8 Price Range of Common Stock.............. 9 Dividend Policy.......................... 9 Capitalization........................... 10 Selected Consolidated Financial Data..... 11 Management's Discussion and Analysis of Financial Condition and Results of Operations............................. 12 Business................................. 18 Management............................... 23 Certain United States Tax Consequences to Non-U.S. Holders of Common Stock....... 25 Available Information.................... 27 Incorporation of Certain Documents by Reference.............................. 28 Validity of the Shares................... 28 Experts.................................. 28 Index to Consolidated Financial Statements............................. F-1 Underwriting............................. U-1
========================================================== ========================================================== 3,500,000 SHARES [TECH DATA LOGO] COMMON STOCK (PAR VALUE $.0015 PER SHARE) ------------------ PROSPECTUS ------------------ GOLDMAN SACHS INTERNATIONAL BEAR, STEARNS INTERNATIONAL LIMITED THE ROBINSON-HUMPHREY COMPANY NATIONSBANC MONTGOMERY SECURITIES, INC. ========================================================== 56 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION SEC Registration Fee........................................ $ 56,106 NASD Filing Fee............................................. 19,015 Printing and Engraving...................................... 100,000 Fees of Transfer Agent...................................... 1,000 Accountants Fees and Expenses............................... 15,000 Legal Fees and Expenses of Registrant's Counsel............. 30,000 Blue Sky Fees and Expenses.................................. 6,000 Miscellaneous............................................... 97,879 -------- Total............................................. $325,000 ========
Except for SEC registration fee and NASD filing fee, the foregoing fees are estimated. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Company's By-Laws include the following provisions: ARTICLE NINE INDEMNIFICATION "9.1 Under the circumstances prescribed in Section 9.3 and 9.4, the Corporation shall indemnify and hold harmless any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (include attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in a manner which he reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that this conduct was unlawful. 9.2 Under the circumstances prescribed in Section 9.3 and 9.4, the Corporation shall indemnify and hold harmless any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation, unless and only II-1 57 to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person if fairly and reasonably entitled to indemnity for such expenses that the court shall deem proper. 9.3 To the extent that a Director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 9.1 and 9.2, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. 9.4 Except as provided in Section 9.3 and except as may be ordered by a court, any indemnification under Sections 9.1 and 9.2 shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 9.1 and 9.2. Such a determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (3) by the affirmative vote of a majority of the shares entitled to vote thereon owned by persons who were not parties to such action, suit or proceeding. 9.5 Expenses, including attorneys' fees, incurred in defending a civil or criminal action, suit, or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit, or proceeding upon a preliminary determination following one of the procedures set forth in Section 9.4 that the Director, officer, employee or agent met the applicable standard of conduct set forth in Section 9.1 or Section 9.2 or as authorized by the Board of Directors in the specific case and, in either event, upon receipt of an undertaking by or on behalf of the Director, officer, employee, or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Section. 9.6 The Corporation shall have the power to make any other or further indemnification of any of its Directors, officers employees, or agents, under any By-Law, agreement, vote of shareholders or disinterested Directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, except an indemnification against gross negligence or willful misconduct. 9.7 The indemnification provided by this Article Nine shall continue as to a person who has ceased to be a Director, employee or agent and shall inure to the benefit of the heirs, executors or administrators of such a person. 9.8 The Corporation may purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against himself and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article Nine. 9.9 If any expenses or other amounts are paid by way of indemnification, otherwise than by court order or action by the shareholder or by an insurance carrier pursuant to insurance maintained by the Corporation, the Corporation shall, no later than the next annual meeting of shareholders unless such a meeting is held within three months from the date of such payment, and, in any event, within 15 months from the date of such payment, deliver personally or send by first class mail to its shareholders of record at the time entitled to vote for the election of Directors a statement specifying the persons paid, the amounts paid, and the nature and status at the time of such payment of the litigation or threatened litigation." II-2 58 Chapter 607 of the General Statutes of the State of Florida permits a corporation to indemnify its officers and directors against certain liabilities and provides for the conditions thereof. Reference is made to the Underwriting Agreement filed as part of Exhibit 1 to this Registration Statement, which contains provisions pursuant to which each Underwriter agrees to indemnify the Company, each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act of 1933, as amended, each director of the Company and each officer of the Company who signs this Registration Statement against losses, liabilities, and reasonable expenses, including attorneys' fees, arising out of claims under the Securities Act of 1933 based upon material misstatements or omissions of material facts in any Preliminary Prospectus, the Prospectus, or this Registration Statement, but only to the extent that such misstatement or omission was made in any Preliminary Prospectus, the Prospectus, or this Registration Statement in reliance upon and in conformity with written information furnished to the Company by the Underwriters expressly for use therein. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Company, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company undertakes, unless in the opinion of its counsel the matter has been settled by controlling precedent, to submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and agrees to be governed by the final adjudication of such issue. ITEM 16. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES (a) The exhibit numbers on the following list correspond to the numbers in the exhibit table required pursuant to Item 601 of Regulation S-K.
EXHIBIT NUMBER DESCRIPTION - -------- ----------- 1-A* -- Form of U.S. Underwriting Agreement. 1-B* -- Form of International Underwriting Agreement. 4-A(1) -- Articles of Incorporation of the Company as amended to April 23, 1986. 4-B(2) -- Articles of Amendment to Articles of Incorporation of the Company filed on August 27, 1987. 4-C(3) -- By-laws of the Company as amended to November 28, 1995. 4-D(4) -- Articles of Amendment to Articles of Incorporation of the Company filed on July 15, 1993. 4-E* -- Articles of Amendment to Articles of Incorporation of the Company filed on June 25, 1997. 5* -- Opinion of Schifino & Fleischer, P.A. 10-TT* -- Amendment Number 2 to Amended and Restated Transfer and Administration Agreement dated July 29, 1997. 10-UU* -- Revolving Credit and Reimbursement Agreement dated August 28, 1997. 23-A* -- Consent of Schifino & Fleischer, P.A., (included in Exhibit 5).
II-3 59
EXHIBIT NUMBER DESCRIPTION - -------- ----------- 23-B* -- Consent of Price Waterhouse LLP. 24* -- Power of Attorney is included on the Signature Page, page II-6.
- --------------- * Filed herewith. (1) Incorporated by reference to the Exhibits included in the Company's Registration Statement on Form S-1, File No. 33-4135. (2) Incorporated by reference to the Exhibits included in the Company's Registration Statement on Form S-1, File No. 33-21997. (3) Incorporated by reference to the Exhibits included in the Company's Form 10-K for the year ended January 31, 1996, File No. 0-14625. (4) Incorporated by reference to the Exhibits included in the Company's Form 10-K for the year ended January 31, 1994, File No. 0-14625. ITEM 17. UNDERTAKINGS The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. II-4 60 (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned registrant hereby undertakes to provide the Underwriters at the closing specified in the underwriting documents, certificates in such denominations and registered in such names are required by the Underwriters to permit prompt deliverY to each purchaser. II-5 61 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Clearwater, State of Florida, on October 1st, 1997. TECH DATA CORPORATION By: /s/ STEVEN A. RAYMUND ------------------------------------ Steven A. Raymund, Chairman of the Board of Directors; Chief Executive Officer POWER OF ATTORNEY Each person whose signature to this Registration Statement appears below hereby appoints Jeffery P. Howells and Arthur W. Singleton, or either of them, as his attorney-in-fact to sign on his behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, and any and all instruments or documents filed as a part of or in connection with this Registration Statement or the amendments thereto, and the attorney-in-fact, or either of them, may make such changes and additions to this Registration Statement as the attorney-in-fact, or either of them, may deem necessary or appropriate. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ STEVEN A. RAYMUND Chairman of the Board of October 1, 1997 - ----------------------------------------------------- Directors; Chief Executive Steven A. Raymund Officer /s/ JEFFERY P. HOWELLS Executive Vice President of October 1, 1997 - ----------------------------------------------------- Finance and Chief Financial Jeffery P. Howells Officer; (principal financial officer) /s/ JOSEPH B. TREPANI Vice President and Worldwide October 1, 1997 - ----------------------------------------------------- Controller; (principal Joseph B. Trepani accounting officer) /s/ CHARLES E. ADAIR Director October 1, 1997 - ----------------------------------------------------- Charles E. Adair /s/ DANIEL M. DOYLE Director October 1, 1997 - ----------------------------------------------------- Daniel M. Doyle
II-6 62
SIGNATURE TITLE DATE --------- ----- ---- /s/ DONALD F. DUNN Director October 1, 1997 - ----------------------------------------------------- Donald F. Dunn /s/ EDWARD C. RAYMUND Director, Chairman Emeritus October 1, 1997 - ----------------------------------------------------- Edward C. Raymund /s/ JOHN Y. WILLIAMS Director October 1, 1997 - ----------------------------------------------------- John Y. Williams
II-7 EX-1.A 2 FORM OF U.S. UNDERWRITING AGREEMENT 1 EXHIBIT 1-A GOLDMAN, SACHS & CO. BEAR, STEARNS & CO. INC. 85 BROAD STREET 245 PARK AVENUE NEW YORK, N.Y. 10004 NEW YORK, N.Y. 10167 THE ROBINSON-HUMPHREY COMPANY, LLC NATIONSBANC MONTGOMERY ATLANTA FINANCIAL CENTER SECURITIES, INC. 3333 PEACHTREE ROAD, N.E. 600 MONTGOMERY STREET ATLANTA, GA 30326 SAN FRANCISCO, CA 94111 TECH DATA CORPORATION COMMON STOCK PAR VALUE $.0015 PER SHARE ---------------------- UNDERWRITING AGREEMENT (U.S. VERSION) ---------------------- , 1997 Goldman, Sachs & Co., Bear, Stearns & Co. Inc., The Robinson-Humphrey Company, LLC NationsBanc Montgomery Securities, Inc. As representatives of the several Underwriters named in Schedule I hereto, c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004. Ladies and Gentlemen: Tech Data Corporation, a Florida corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of 2,800,000 shares (the "Firm Shares") and, at the election of the Underwriters, up to 420,000 additional shares (the "Optional Shares") of Common Stock, par value $.0015 per share ("Stock"), of the Company (the Firm Shares and the Optional Shares that the Underwriters elect to purchase pursuant to Section 2 hereof being collectively called the "Shares"). It is understood and agreed to by all parties that the Company is concurrently entering into an agreement (the "International Underwriting Agreement") providing for the sale by the Company of up to a total of 700,000 shares of Stock (the "International Shares"), including the overallotment option thereunder, through arrangements with certain 2 underwriters outside the United States (the "International Underwriters"), for whom Goldman Sachs International, Bear, Stearns International Limited, the Robinson-Humphrey Company, LLC and NationsBanc Montgomery Securities, Inc. are acting as lead managers. Anything herein or therein to the contrary notwithstanding, the respective closings under this Agreement and the International Agreement are hereby expressly made conditional on one another. The Underwriters hereunder and the International Underwriters are simultaneously entering into an Agreement between U.S. and International Underwriting Syndicates (the "Agreement between Syndicates") which provides, among other things, for the transfer of shares of Stock between the two syndicates. Two forms of prospectus are to be used in connection with the offering and sale of shares of Stock contemplated by the foregoing, one relating to the Shares hereunder and the other relating to the International Shares. The latter form of prospectus will be identical to the former except for certain substitute pages as included in the registration statement and amendments thereto as mentioned below. Except as used in Sections 2, 3, 4, 9 and 11 herein, and except as the context may otherwise require, references hereinafter to the Shares shall include all the shares of Stock which may be sold pursuant to either this Agreement or the International Underwriting Agreement, and references herein to any prospectus whether in preliminary or final form, and whether as amended or supplemented, shall include both the U.S. and the international versions thereof. 1. The Company represents and warrants to, and agrees with, each of the Underwriters that: (a) A registration statement on Form S-3 (File No. 333-....) (the "Initial Registration Statement") in respect of the Shares has been filed with the Securities and Exchange Commission (the "Commission"); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to you, and, excluding exhibits thereto but including all documents incorporated by reference in the prospectus contained therein, to you for each of the other Underwriters, have been declared effective by the Commission in such form; other than a registration statement, if any, increasing the size of the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), which became effective upon filing, no other document with respect to the Initial Registration Statement or document incorporated by reference therein has heretofore been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Securities Act, is hereinafter called a "Preliminary Prospectus"; the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any, including all exhibits thereto and including (i) the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of -2- 3 the Initial Registration Statement at the time it was declared effective and (ii) the documents incorporated by reference in the prospectus contained in the registration statement at the time such part of the registration statement became effective, each as amended at the time such part of the registration statement became effective or such part of the Rule 462(b) Registration Statement, if any became or hereafter becomes effective, are hereinafter collectively called the "Registration Statement"; such final prospectus, in the form first filed pursuant to Rule 424(b) under the Act, is hereinafter called the "Prospectus"; any reference herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of such Preliminary Prospectus or Prospectus, as the case may be; any reference to any amendment or supplement to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include any documents filed after the date of such Preliminary Prospectus or Prospectus, as the case may be, under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by reference in such Preliminary Prospectus or Prospectus, as the case may be; and any reference to any amendment to the Registration Statement shall be deemed to refer to and include any annual report of the Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act after the effective date of the Initial Registration Statement that is incorporated by reference in the Registration Statement); (b) No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein; (c) The documents incorporated by reference in the Prospectus, when they became effective or were filed with the Commission, as the case may be, conformed in all material respects to the requirements of the Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and any further documents so filed and incorporated by reference in the Prospectus or any further amendment or supplement thereto, when such documents become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder and will not contain an untrue statement -3- 4 of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein; (d) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to the Registration Statement and any amendment thereto and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein; (e) Neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements included or incorporated by reference in the Prospectus any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute (other than the strike by employees of United Parcel Service in August 1997) or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any change in the capital stock, short-term debt (other than changes not in excess of $___ in the aggregate) or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Prospectus; (f) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries; -4- 5 (g) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Florida, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, or is subject to no material liability or disability by reason of the failure to be so qualified in any such jurisdiction; and each subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation; (h) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued, and are fully paid and non-assessable and conform to the description of the Stock contained or incorporated by reference in the Prospectus; and all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and (except for directors' qualifying shares) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims; (i) The unissued Shares to be issued and sold by the Company to the Underwriters hereunder and under the International Underwriting Agreement have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein and in the International Underwriting Agreement, will be duly and validly issued and fully paid and non-assessable and will conform to the description of the Stock contained or incorporated by reference in the Prospectus; (j) The issue and sale of the Shares by the Company hereunder and under the International Underwriting Agreement and the compliance by the Company with all of the provisions of this Agreement and the International Underwriting Agreement and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement and the International Underwriting Agreement, except the registration under the Act of the Shares and such consents, approvals, authorizations, -5- 6 registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters and the International Underwriters; (k) Neither the Company nor any of its subsidiaries is in violation of its Certificate of Incorporation or By-laws or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound; (l) The statements set forth or incorporated by reference in the Prospectus under the caption "Description of Capital Stock", insofar as they purport to constitute a summary of the terms of the Stock, and under the caption "Underwriting", insofar as they purport to describe the provisions of this Agreement and the International UnderWriting Agreement referred to therein, are accurate, complete and fair summaries of such documents; (m) Other than as set forth or contemplated in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the current or future consolidated financial position, stockholders' equity or results of operations of the Company and its subsidiaries; and, to the best of the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (n) The Company is not and, after giving effect to the offering and sale of the Shares, will not be an "investment company" or an entity "controlled" by an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"); (o) Neither the Company nor any of its affiliates does business with the government of Cuba or with any person or affiliate located in Cuba within the meaning of Section 517.075, Florida Statutes; and (p) To the best of the Company's knowledge, Price Waterhouse, who have certified certain financial statements of the Company and its subsidiaries, are independent public accountants as required by the Act and the rules and regulations of the Commission thereunder. 2. Subject to the terms and conditions herein set forth, (a) the Company agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at a purchase price per share of $........................, the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto and (b) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Shares as provided below, the Company -6- 7 agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at the purchase price per share set forth in clause (a) of this Section 2, that portion of the number of Optional Shares as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Optional Shares by a fraction, the numerator of which is the maximum number of Optional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Optional Shares that all of the Underwriters are entitled to purchase hereunder. The Company hereby grants to the Underwriters the right to purchase at their election up to ............ Optional Shares, at the purchase price per share set forth in the paragraph above, for the sole purpose of covering overallotments in the sale of the Firm Shares. Any such election to purchase Optional Shares may be exercised only by written notice from you to the Company, given within a period of 30 calendar days after the date of this Agreement, setting forth the aggregate number of Optional Shares to be purchased and the date on which such Optional Shares are to be delivered, as determined by you but in no event earlier than the First Time of Delivery (as defined in Section 4 hereof) or, unless you and the Company otherwise agree in writing, earlier than two or later than ten business days after the date of such notice. 3. Upon the authorization by you of the release of the Firm Shares, the several Underwriters propose to offer the Firm Shares for sale upon the terms and conditions set forth in the Prospectus. 4. (a) The Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and registered in such names as Goldman, Sachs & Co. may request upon at least forty- eight hours' prior notice to the Company, shall be delivered by or on behalf of the Company to Goldman, Sachs & Co., through the facilities of the Depository Trust Company, ("DTC") for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by certified or official bank check or checks, payable to the order of the Company in Federal (same day) funds. The Company will cause the certificates representing the Shares to be made available for checking and packaging at least twenty-four hours prior to the Time of Delivery (as defined below) with respect thereto at the office of DTC or its designated custodian (the "Designated Office"). The time and date of such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City time, on ............., 1997 or such other time and date as Goldman, Sachs & Co. and the Company may agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New York time, on the date specified by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the Underwriters' election to purchase such Optional Shares, or such other time and date as Goldman, Sachs & Co. and the Company may agree upon in writing. Such time and date for delivery of the Firm Shares is herein called the "First Time of Delivery", such time and date for delivery of the Optional Shares, if not the First Time of Delivery, is herein called the -7- 8 "Second Time of Delivery", and each such time and date for delivery is herein called a "Time of Delivery". (b) The documents to be delivered at Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross receipt for the Shares and any additional documents requested by the Underwriters pursuant to Section 7(j) hereof, will be delivered at the offices of Sullivan & Cromwell, 1701 Pennsylvania Avenue, N.W., Washington, D.C. 20006 (the "Closing Location"), and the Shares will be delivered at the Designated Office, all at such Time of Delivery. A meeting will be held at the Closing Location at 2:00 p.m., New York City time, on the New York Business Day next preceding such Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. 5. The Company agrees with each of the Underwriters: (a) To prepare the Prospectus in a form approved by you and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Act; to make no further amendment or any supplement to the Registration Statement or Prospectus prior to the last Time of Delivery which shall be disapproved by you promptly after reasonable notice thereof; to advise you, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish you with copies thereof; to file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Shares; to advise you, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus or suspending any such qualification, promptly to use its reasonable best efforts to obtain the withdrawal of such order; (b) Promptly from time to time to take such action as you may reasonably request to qualify the Shares for offering and sale under the securities laws of such -8- 9 jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (c) Prior to 10:00 a.m., New York City time, on the New York Business Day next succeeding the date of this Agreement and from to time, to furnish the Underwriters with copies of the Prospectus in New York City in such quantities as you may reasonably request, and, if the delivery of a prospectus is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Shares and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such period to amend or supplement the Prospectus or to file under the Exchange Act any document incorporated by reference in the Prospectus in order to comply with the Act or the Exchange Act, to notify you and upon your request to file such document and to prepare and furnish without charge to each Underwriter and to any dealer in securities as many copies as you may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance, and in case any Underwriter is required to deliver a prospectus in connection with sales of any of the Shares at any time nine months or more after the time of issue of the Prospectus, upon your request but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many copies as you may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act; (d) To make generally available to its securityholders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations thereunder (including, at the option of the Company, Rule 158); (e) During the period beginning from the date hereof and continuing to and including the date 90 days after the date of the Prospectus, not to offer, sell, contract to sell or otherwise dispose of, except as provided hereunder and under the International Underwriting Agreement, any securities of the Company that are substantially similar to the Shares, including but not limited to any securities that are convertible into or exchangeable for, or that represent the right to receive, Stock or any such substantially similar securities (other than pursuant to employee stock option plans existing on, or upon the conversion or exchange of convertible or -9- 10 exchangeable securities outstanding as of, the date of this Agreement), without your prior written consent; (f) To furnish to its stockholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders' equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail; (g) During a period of five years from the effective date of the Registration Statement, to furnish to you copies of all reports or other communications (financial or other) furnished to stockholders, and to deliver to you (i) as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as you may from time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Company and its subsidiaries are consolidated in reports furnished to its stockholders generally or to the Commission); (h) To use the net proceeds received by it from the sale of the Shares pursuant to this Agreement and the International Underwriting Agreement in the manner specified in the Prospectus under the caption "Use of Proceeds"; (i) To use its reasonable best efforts to list for quotation the Shares on the National Association of Securities Dealers Automated Quotations National Market System or the New York Stock Exchange (collectively, the "Exchange"); and (j) If the Company elects to rely upon Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the Act. 6. The Company covenants and agrees with the several Underwriters that the Company will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company's counsel and accountants in connection with the registration of the Shares under the Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of printing or producing any Agreement among Underwriters, this Agreement, the International Underwriting Agreement, the Agreement -10- 11 between Syndicates, the Selling Agreement, the Blue Sky Memorandum, closing documents (including compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares; (iii) all expenses in connection with the qualification of the Shares for offering and sale under state securities laws as provided in Section 5(b) hereof, including the fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky survey; (iv) all fees and expenses in connection with listing the Shares on NASDAQ; (v) the filing fees incident to, and the fees and disbursements of counsel for the Underwriters in connection with, securing any required review by the National Association of Securities Dealers, Inc. of the terms of the sale of the Shares; (vi) the cost of preparing stock certificates; (vii) the cost and charges of any transfer agent or registrar; and (viii) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section. It is understood, however, that, except as provided in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, stock transfer taxes on resale of any of the Shares by them, and any advertising expenses connected with any offers they may make. 7. The obligations of the Underwriters hereunder, as to the Shares to be delivered at each Time of Delivery, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company herein are, at and as of such Time of Delivery, true and correct in accordance with their terms, the condition that the Company shall have performed all of its obligations in accordance with their terms hereunder theretofore to be performed, and the following additional conditions: (a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to your reasonable satisfaction (if the Company has elected to rely upon Rule 462(b), the Rule 462(b) Registration Statement shall have become effective by 10:00 p.m., Washington, D.C. time, on the date of this Agreement); (b) Sullivan & Cromwell, counsel for the Underwriters, shall have furnished to you such opinion or opinions (each such opinion in the form attached hereto as Annex II(a)), dated such Time of Delivery, with respect to the incorporation of the Company, the Shares, the Registration Statement and the Prospectus and such other related matters as you may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; (c) Schifino & Fleischer, P.A., counsel for the Company, shall have furnished to you their written opinion (in the form attached as Annex -11- 12 II(b) hereto), dated such Time of Delivery, in form and substance satisfactory to you, to the effect that: (d) [ ], German counsel for the Company, shall have furnished to you their written opinion (in the form attached hereto as Annex II(c)), dated such Time of delivery. (e) [ ], French counsel for the Company, shall have furnished to you their written opinion (in the form attached hereto as Annex II(d)), dated such Time of delivery. (f) [ ], Canadian counsel for the Company, shall have furnished to you their written opinion (in the form attached hereto as Annex II (e)), dated such Time of delivery. (g) [ ], California counsel to the Company, shall have furnished to you their written opinion in the form attached hereto as Annex II (f)), dated such Time of delivery. (h) On the date of the Prospectus at a time prior to the execution of this Agreement, at 9:30 a.m., New York City time, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at each Time of Delivery, Price Waterhouse shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, to the effect set forth in Annex I hereto (the executed copy of the letter delivered prior to the execution of this Agreement is attached as Annex I(a) hereto and a draft of the form of letter to be delivered on the effective date of any post-effective amendment to the Registration Statement and as of each time of delivery is attached as Annex I(b) hereto); (i) (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included or incorporated by reference in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute (other than the strike by employees of United Parcel Service in August 1997) or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus, and (ii) since the respective dates as of which information is given in the Prospectus there shall not have been any change in the capital stock, short-term debt (other than changes not in excess or $___ in the aggregate) or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in Clause (i) or (ii), is in the judgment of the Representatives so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus; (j) On or after the date hereof (i) no downgrading shall have occurred in the rating accorded the Company's debt securities or preferred stock by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities or preferred stock; (k) On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or material -12- 13 limitation in trading in the Company's securities on NASDAQ; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities; or (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event specified in this Clause (iv) in the judgment of the representatives makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus; (l) The Shares to be sold at such Time of Delivery shall have been duly listed for quotation on the Exchange; and (m) The Company shall have furnished or caused to be furnished to you at such Time of Delivery certificates of officers of the Company reasonably satisfactory to you as to the accuracy of the representations and warranties of the Company herein at and as of such Time of Delivery, as to the performance by the Company of all of its obligations hereunder to be performed at or prior to such Time of Delivery, as to the matters set forth in subsections (a) and (i) of this Section and as to such other matters as you may reasonably request. 8. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Goldman, Sachs & Co. expressly for use therein. (b) Each Underwriter will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become -13- 14 subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Underwriter through Goldman, Sachs & Co. expressly for use therein; and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above -14- 15 in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering of the Shares purchased under this Agreement (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters with respect to the Shares purchased under this Agreement, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint. -15- 16 (e) The obligations of the Company under this Section 8 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 8 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and to each person, if any, who controls the Company within the meaning of the Act. 9. (a) If any Underwriter shall default in its obligation to purchase the Shares which it has agreed to purchase hereunder at a Time of Delivery, you may in your discretion arrange for you or another party or other parties to purchase such Shares on the terms contained herein. If within thirty-six hours after such default by any Underwriter you do not arrange for the purchase of such Shares, then the Company shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to you to purchase such Shares on such terms. In the event that, within the respective prescribed periods, you notify the Company that you have so arranged for the purchase of such Shares, or the Company notifies you that it has so arranged for the purchase of such Shares, you or the Company shall have the right to postpone such Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term "Underwriter" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Shares. (b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased does not exceed one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, then the Company shall have the right to require each non-defaulting Underwriter to purchase the number of Shares which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased exceeds one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, or if the Company shall not exercise the -16- 17 right described in subsection (b) above to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to the Second Time of Delivery, the obligations of the Underwriters to purchase and of the Company to sell the Optional Shares) shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company, except for the expenses to be borne by the Company and the Underwriters as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. 10. The respective indemnities, agreements, representations, warranties and other statements of the Company and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Company, or any officer or director or controlling person of the Company, and shall survive delivery of and payment for the Shares. 11. If this Agreement shall be terminated pursuant to Section 9 hereof, the Company shall not then be under any liability to any Underwriter except as provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares are not delivered by or on behalf of the Company as provided herein, the Company will reimburse the Underwriters through you for all out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Shares not so delivered, but the Company shall then be under no further liability to any Underwriter in respect of the Shares not so delivered except as provided in Sections 6 and 8 hereof. 12. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you jointly or by Goldman, Sachs & Co. on behalf of you as the representatives. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to you as the representatives in care of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration Department; and if to the Company shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Secretary; provided, however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters' Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company by you upon request. Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. -17- 18 13. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Company and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company and each person who controls the Company or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. 14. Time shall be of the essence of this Agreement. As used herein, the term "business day" shall mean any day when the Commission's office in Washington, D.C. is open for business. 15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. If the foregoing is in accordance with your understanding, please sign and return to us [SEVEN] counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement between each of the Underwriters and the Company. It is understood that your acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among Underwriters (U.S. Version), the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, Tech Data Corporation By: ------------------------------ Name: Title: Accepted as of the date hereof: Goldman, Sachs & Co. Bear, Stearns & Co. Inc. The Robinson-Humphrey Company, LLC NationsBanc Montgomery Securities, Inc. By: ------------------------------------- (Goldman, Sachs & Co.) -18- On behalf of each of the Underwriters 19
Number of Optional Total Number Shares of Firm to be Purchased if Underwriter Shares to be Maximum Option ----------- Purchased Exercised ------------ ----------------- Goldman, Sachs & Co. . . . . . . . . . . . . . . Bear, Stearns & Co. Inc . . . . . . . . . . . . . The Robinson-Humphrey Company, Inc. . . . . . . . NationsBanc Montgomery Securities, Inc. Total . . . . . . . . . . . . . . . . . . .
-19- 20 ANNEX I FORM OF ANNEX I DESCRIPTION OF COMFORT LETTER FOR REGISTRATION STATEMENTS ON FORMS S-2 AND S-3 Pursuant to Section 7(d) of the Underwriting Agreement, the accountants shall furnish letters to the Underwriters to the effect that: (i) They are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of the Act and the applicable published rules and regulations thereunder; (ii) In their opinion, the financial statements and any supplementary financial information and schedules (and, if applicable, financial forecasts and/or pro forma financial information) examined by them and included or incorporated by reference in the Registration Statement or the Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act or the Exchange Act, as applicable, and the related published rules and regulations thereunder; and, if applicable, they have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the consolidated interim financial statements; (iii) They have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus and/or included in the Company's quarterly report on Form 10-Q incorporated by reference into the Prospectus as indicated in their reports thereon copies of which have been separately furnished to the Representatives (other than the consolidated balance sheets for the first fiscal quarter of 1997 and 1996, respectively); and on the basis of specified procedures including inquiries of officials of the Company who have responsibility for financial and accounting matters regarding whether the unaudited condensed consolidated financial statements referred to in paragraph (vi)(A)(i) below comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations, nothing came to their attention that caused them to believe that the unaudited condensed consolidated financial statements do not comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations; 21 (iv) The unaudited selected financial information with respect to the consolidated results of operations and financial position of the Company for the five most recent fiscal years included in the Prospectus and included or incorporated by reference in Item 6 of the Company's Annual Report on Form 10-K for the most recent fiscal year agrees with the corresponding amounts (after restatement where applicable) in the audited consolidated financial statements for such five fiscal years which were included or incorporated by reference in the Company's Annual Reports on Form 10-K for such fiscal years; (v) On the basis of limited procedures, not constituting an examination in accordance with generally accepted auditing standards, consisting of a reading of the unaudited financial statements and other information referred to below, a reading of the latest available interim financial statements of the Company and its subsidiaries, inspection of the minute books of the Company and its subsidiaries since the date of the latest audited financial statements included or incorporated by reference in the Prospectus, inquiries of officials of the Company and its subsidiaries responsible for financial and accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) (i) the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus and/or included or incorporated by reference in the Company's Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Exchange Act and the related published rules and regulations, or (ii) any material modifications should be made to the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus or included in the Company's Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus, for them to be in conformity with generally accepted accounting principles; (B) any other unaudited income statement data and balance sheet items included in the Prospectus do not agree with the corresponding items in the unaudited consolidated financial statements from which such data and items were derived, and any such unaudited data and items were not determined on a basis substantially consistent with the basis for the corresponding amounts in the audited consolidated financial statements included or incorporated by reference in the Company's Annual Report on Form 10-K for the most recent fiscal year; -2- 22 (C) the unaudited financial statements which were not included in the Prospectus but from which were derived the unaudited condensed financial statements referred to in Clause (A) and any unaudited income statement data and balance sheet items included in the Prospectus and referred to in Clause (B) were not determined on a basis substantially consistent with the basis for the audited financial statements included or incorporated by reference in the Company's Annual Report on Form 10-K for the most recent fiscal year; (D) any unaudited pro forma consolidated condensed financial statements included or incorporated by reference in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the published rules and regulations thereunder or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements; (E) as of a specified date not more than five days prior to the date of such letter, there have been any changes in the consolidated capital stock (other than issuances of capital stock upon exercise of options and stock appreciation rights, upon earn-outs of performance shares and upon conversions of convertible securities, in each case which were outstanding on the date of the latest balance sheet included or incorporated by reference in the Prospectus) or any increase in the consolidated long-term debt of the Company and its subsidiaries, or any decreases in consolidated net current assets or stockholders' equity or other items specified by the Representatives, or any increases in any items specified by the Representatives, in each case as compared with amounts shown in the latest balance sheet included or incorporated by reference in the Prospectus, except in each case for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (F) for the period from the date of the latest financial statements included or incorporated by reference in the Prospectus to the specified date referred to in Clause (E) there were any decreases in net revenues or operating profit or the total or per share amounts of net income or other items specified by the Representatives, or any increases in any items specified by the Representatives, in each case as compared with the comparable period of the preceding year specified by the Representatives, except in each case for increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (vii) In addition to the examination referred to in their report(s) included or incorporated by reference in the Prospectus and the limited procedures, inspection of minute books, inquiries and other procedures referred to in paragraphs (iii) and (vi) above, they have carried out certain specified procedures, not constituting an examination in accordance with generally accepted auditing standards, with respect to certain amounts, percentages and financial information specified by the Representatives which are derived from the general accounting records of the -3- 23 Company and its subsidiaries, which appear in the Prospectus (excluding documents incorporated by reference) or in Part II of, or in exhibits and schedules to, the Registration Statement specified by the Representatives or in documents incorporated by reference in the Prospectus specified by the Representatives, and have compared certain of such amounts, percentages and financial information with the accounting records of the Company and its subsidiaries and have found them to be in agreement. -4- EX-1.B 3 FORM OF INTERNATIONAL UNDERWRITING AGREEMENT 1 EXHIBIT 1-B Tech Data Corporation COMMON STOCK PAR VALUE $.0015 PER SHARE ________________ UNDERWRITING AGREEMENT (INTERNATIONAL VERSION) , 1997 --------------- Goldman Sachs International, Bear, Stearns International Limited The Robinson-Humphrey Company, LLC NationsBanc Montgomery Securities, Inc. As representatives of the several Underwriters named in Schedule I hereto, c/o Goldman Sachs International, Peterborough Court, 133 Fleet Street, London EC4A 2BB, England. Ladies and Gentlemen: Tech Data Corporation, a Florida corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the Underwriters") an aggregate of 700,000 shares (the "Firm Shares") and, at the election of the Underwriters, up to 105,000 additional shares (the "Optional Shares") of Common Stock, par value $.0015 per share (the "Stock") of the Company (the Firm Shares and the Optional Shares which the Underwriters elect to purchase pursuant to Section 2 hereof being collectively called the "Shares"). It is understood and agreed to by all parties that the Company is concurrently entering into an agreement, a copy of which is attached hereto (the "U.S. Underwriting Agreement"), providing for the offering by the Company of up to a total of 3,220,000 shares of Stock (the "U.S. Shares") including the overallotment option thereunder through arrangements with certain underwriters in the United States (the "U.S. Underwriters"), for whom Goldman, Sachs & Co., Bear, Stearns & Co. Inc., The Robinson-Humphrey Company, LLC and NationsBanc Montgomery Securities, Inc. are acting as representatives. Anything herein and therein to the contrary notwithstanding, the respective closings under this Agreement and the U.S. Underwriting Agreement are hereby expressly made conditional on one another. The Underwriters hereunder and the U.S. Underwriters are simultaneously entering into an Agreement between U.S. and International Underwriting Syndicates (the "Agreement between Syndicates") which provides, among other things, for the transfer of shares of Stock between the two syndicates and for consultation by the Lead Managers hereunder with Goldman, Sachs & Co. prior to exercising the rights of the Underwriters under Section 7 2 hereof. Two forms of prospectus are to be used in connection with the offering and sale of shares of Stock contemplated by the foregoing, one relating to the Shares hereunder and the other relating to the U.S. Shares. The latter form of prospectus will be identical to the former except for certain substitute pages as included in the registration statement and amendments thereto as mentioned below. Except as used in Sections 2, 3, 4, 9 and 11 herein, and except as the context may otherwise require, references hereinafter to the Shares shall include all of the shares of Stock which may be sold pursuant to either this Agreement or the U.S. Underwriting Agreement, and references herein to any prospectus whether in preliminary or final form, and whether as amended or supplemented, shall include both of the U.S. and the international versions thereof. In addition, this Agreement incorporates by reference certain provisions from the U.S. Underwriting Agreement (including the related definitions of terms, which are also used elsewhere herein) and, for purposes of applying the same, references (whether in these precise words or their equivalent) in the incorporated provisions to the "Underwriters" shall be to the Underwriters hereunder, to the "Shares" shall be to the Shares hereunder as just defined, to "this Agreement" (meaning therein the U.S. Underwriting Agreement) shall be to this Agreement (except where this Agreement is already referred to or as the context may otherwise require) and to the representatives of the Underwriters or to Goldman, Sachs & Co. shall be to the addressees of this Agreement and to Goldman Sachs International ("GSI"), and, in general, all such provisions and defined terms shall be applied mutatis mutandis as if the incorporated provisions were set forth in full herein having regard to their context in this Agreement as opposed to the U.S. Underwriting Agreement. 1. The Company hereby makes with the Underwriters the same representations, warranties and agreements as are set forth in Section 1 of the U.S. Underwriting Agreement, which Section is incorporated herein by this reference. 2. Subject to the terms and conditions herein set forth, (a) the Company agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at a purchase price per share of $______, the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto and (b) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Shares as provided below, the Company agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at the purchase price per share set forth in clause (a) of this Section 2, that portion of the number of Optional Shares as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Optional Shares by a fraction the numerator of which is the maximum number of Optional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Optional Shares that all of the Underwriters are entitled to purchase hereunder. The Company hereby grants to the Underwriters the right to purchase at their election up to 105,000 Optional Shares, at the purchase price per share set forth in the paragraph above, for the sole purpose of covering overallotments in the sale of the Firm Shares. Any such election to purchase Optional Shares may be exercised only by written notice from you to the Company, given within a period of 30 calendar days after the date of this Agreement, setting forth the aggregate number of Optional Shares to be purchased and the date on which such Optional Shares are to -2- 3 be delivered, as determined by you but in no event earlier than the First Time of Delivery (as defined in Section 4 hereof) or, unless you and the Company otherwise agree in writing, earlier than two or later than ten business days after the date of such notice. 3. Upon the authorization by GSI of the release of the Firm Shares, the several Underwriters propose to offer the Firm Shares for sale upon the terms and conditions set forth in the Prospectus and in the forms of Agreement among Underwriters (International Version) and Selling Agreements, which have been previously submitted to the Company by you. Each Underwriter hereby makes to and with the Company the representations and agreements of such Underwriter as a member of the selling group contained in Sections 3(d) and 3(e) of the form of Selling Agreements. 4. (a) The Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and registered in such names as GSI may request upon at least forty-eight hours' prior notice to the Company shall be delivered by or on behalf of the Company to GSI, through the facilities of the Depository Trust Company ("DTC"), for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by certified or official bank check or checks, payable to the order of the Company in New York Clearing House (next day) funds. The Company will cause the certificates representing the Shares to be made available for checking and packaging at least twenty-four hours prior to the Time of Delivery (as defined below) with respect thereto at the office of DTC or its designated custodian (the "Designated Office"). The time and date of such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City time, on _____________, 1997 or such other time and date as GSI and the Company may agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New York City time, on the date specified by GSI in the written notice given by GSI of the Underwriters' election to purchase such Optional Shares, or such other time and date as GSI and the Company may agree upon in writing. Such time and date for delivery of the Firm Shares is herein called the "First Time of Delivery", such time and date for delivery of the Optional Shares, if not the First Time of Delivery, is herein called the "Second Time of Delivery", and each such time and date for delivery is herein called a "Time of Delivery". (b) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 of the U.S. Underwriting Agreement, including the cross receipt for the Shares and any additional documents requested by the Underwriters pursuant to Section 7(j) of the U.S. Underwriting Agreement hereof, will be delivered at the offices of Sullivan & Cromwell, 1701 Pennsylvania Avenue, N.W., Washington, D.C. 20006 (the "Closing Location"), and the Shares will be delivered at the Designated Office, all at such Time of Delivery. A meeting will be held at the Closing Location at 2:00 p.m., New York City time, on the New York Business Day next preceding such Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. 5. The Company hereby makes to the Underwriters the same agreements as are set forth in Section 5 of the U.S. Underwriting Agreement, which Section is incorporated herein by this reference. -3- 4 6. The Company and the Underwriters hereby agree with respect to certain expenses on the same terms as are set forth in Section 6 of the U.S. Underwriting Agreement, which Section is incorporated herein by this reference. 7. Subject to the provisions of the Agreement between Syndicates, the obligations of the Underwriters hereunder shall be subject, in their discretion, at each Time of Delivery, to the condition that all representations and warranties and other statements of the Company herein are, at and as of such Time of Delivery, true and correct, the condition that the Company shall have performed all of its obligations hereunder theretofore to be performed, and additional conditions identical to those set forth in Section 7 of the U.S. Underwriting Agreement, which Section is incorporated herein by this reference. 8. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by any Underwriter through GSI expressly for use therein. (b) Each Underwriter will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Underwriter through GSI expressly for use therein; and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party -4- 5 shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering of the Shares purchased under this Agreement (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters with respect to the Shares purchased under this Agreement, in each case as set forth in the table on the cover page of the Prospectus relating to such Shares. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect -5- 6 thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint. (e) The obligations of the Company under this Section 8 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 8 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and to each person, if any, who controls the Company within the meaning of the Act. 9. (a) If any Underwriter shall default in its obligation to purchase the Shares which it has agreed to purchase hereunder at a Time of Delivery, you may in your discretion arrange for you or another party or other parties to purchase such Shares on the terms contained herein. If within thirty-six hours after such default by any Underwriter you do not arrange for the purchase of such Shares, then the Company shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to you to purchase such Shares on such terms. In the event that, within the respective prescribed periods, you notify the Company that you have so arranged for the purchase of such Shares, or the Company notifies you that it has so arranged for the purchase of such Shares, you or the Company shall have the right to postpone such Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term "Underwriter" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Shares. (b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased does not exceed one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, then the Company shall have the right to require each non-defaulting Underwriter to purchase the number of shares which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default. -6- 7 (c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased exceeds one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to the Second Time of Delivery, the obligation of the Underwriters to purchase and of the Company to sell the Optional Shares) shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company, except for the expenses to be borne by the Company and the Underwriters as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. 10. The respective indemnities, agreements, representations, warranties and other statements of the Company and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Company, or any officer or director or controlling person of the Company, and shall survive delivery of and payment for the Shares. 11. If this Agreement shall be terminated pursuant to Section 9 hereof, the Company shall not then be under any liability to any Underwriter except as provided in Section 6 and Section 8 hereof, but, if for any other reason any Shares are not delivered by or on behalf of the Company as provided herein, the Company will reimburse the Underwriters through GSI for all out-of-pocket expenses approved in writing by GSI, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Shares not so delivered, but the Company shall then be under no further liability to any Underwriter in respect of the Shares not so delivered except as provided in Sections 6 and 8 hereof. 12. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you jointly or by GSI on behalf of you as the representatives of the Underwriters. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to the Underwriters in care of GSI, Peterborough Court, 133 Fleet Street, London EC4A 2BB, England, Attention: Equity Capital Markets, Telex No. 94012165, facsimile transmission No. (071) 774-1550; and if to the Company shall be delivered or sent by registered mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Secretary; provided, however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters' Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company by GSI upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. -7- 8 13. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Company and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company and each person who controls the Company or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. 14. Time shall be of the essence of this Agreement. 15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA. 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. If the foregoing is in accordance with your understanding, please sign and return to us seven counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement among each of the Underwriters and the Company. It is understood that your acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among Underwriters (International Version), the form of which shall be furnished to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, Tech Data Corporation By: ------------------------------- Name: Title: Accepted as of the date hereof: Goldman Sachs International Bear, Stearns International Limited The Robinson-Montgomery Company, LLC NationsBanc Montgomery Securities, Inc. By: Goldman Sachs International By: ----------------------------------- (Attorney-in-fact) On behalf of each of the Underwriters -8- 9 SCHEDULE I
Total Number Number of Optional of Firm Shares to be Shares to be Purchased if Maximum Underwriter Purchased Option Exercised ----------- ------------ --------------------- Goldman Sachs International . . . . . . . . . . . . . . . . . Bear, Stearns International Limited . . . . . . . . . . . . . The Robinson-Humphrey Company, LLC. . . . . . . . . . . . . . NationsBanc Montgomery Securities, Inc. . . . . . . . . . . . ----------- --------------------- Total . . . . . . . . . . . . . . . . . . . =========== =====================
-9- EX-4.E 4 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION 1 EXHIBIT 4-E ARTICLES OF AMENDMENT TO AMENDED AND RESTATED ARTICLES OF INCORPORATION OF TECH DATA CORPORATION 1. The name of the corporation is Tech Data Corporation (the "Corporation"). 2. Article III of the Articles of Incorporation of the Corporation is amended to read as follows: ARTICLE III AUTHORIZED CAPITAL STOCK The total number of shares of capital stock that the Corporation may issue is 200,226,500, of which 226,500 shares shall be Preferred Stock having a par value of $.02 per share and 200,000,000 shares shall be Common Stock having a par value of $.0015 per share. 3. This Amendment was recommended by the board of directors to the Corporation's shareholders on March 25, 1997. 4. This Amendment was approved by the holders of more than a majority of the Corporation's common stock and the holders of all the shares of Preferred Stock, the only groups of the Corporation's shareholders entitled to vote on the Amendment, and the number of votes in favor of the Amendment was sufficient for approval. IN WITNESS WHEREOF, Tech Data Corporation has caused these Articles of Amendment to be executed on this 18th day of June, 1997. TECH DATA CORPORATION By: /s/ Arthur W. Singleton ------------------------------ Arthur W. Singleton, Secretary EX-5 5 OPINION OF SCHIFINO & FLEISCHER, P.A. 1 EXHIBIT 5 [SCHIFINO & FLEISCHER, P.A. LETTERHEAD] ATTORNEYS AT LAW September 30, 1997 Tech Data Corporation 5350 Tech Data Drive Clearwater, FL 34620 Gentlemen: The following opinion is furnished by us in connection with the proposed issuance and sale by Tech Data Corporation, a Florida corporation (the "Company"), of up to 4,025,000 shares of Common Stock, $.0015 par value, covered by a Registration Statement filed with the Securities and Exchange Commission on Form S-3 (the "Registration Statement"). We have examined and are familiar with the Certificate of Incorporation and By-Laws, and amendments thereto, of the Company and the proceedings of the Board of Directors of the Company in connection with or with respect to the proposed issuance and sale of the securities described herein, and we have likewise examined such other records and documents and have made such examination of law as we have deemed appropriate. Based on such examination and our familiarity with such procedure, it is our opinion that: 1. The Company is a duly incorporated and validly existing corporation in good standing under the laws of the State of Florida with an authorized capital stock of 200,226,500 shares, composed of 226,500 shares of Preferred Stock having a par value of $.02 per share and 200,000,000 shares of Common Stock having a par value of $.0015 per share, of which 44,442,000 shares of Common Stock and 226,500 shares of Preferred Stock have been duly authorized and legally issued and are fully paid and non-assessable. 2. The issue of an additional 4,025,000 shares of Common Stock by the Company has been duly authorized and, at such time as the Registration Statement becomes effective under the Securities Act of 1933, as amended, and when such shares have been issued and sold as contemplated by the Registration Statement and the Underwriting Agreements referred to thereon, such shares will be duly authorized, legally issued, full paid, and non-assessable. 3. There are no restrictions upon the Company's surplus by reason of the excess of the Preferred Stock's liquidation preference over its par value, and no remedies will be available to holders of the Company's capital stock before or after the payment of any dividend that would reduce surplus to an amount less than the amount of such excess. 2 We hereby consent to this opinion being filed as an Exhibit to the Registration Statement and we further consent to the use of our name in the Registration Statement under the capiton "Validity of Shares." Very truly yours, SCHFINO & FLEISCHER, P.A. /s/ FRANK N. FLEISCHER ---------------------- Frank N. Fleischer For the Association EX-10.TT 6 AMD. NO. 2 TO AMENDED TRANSFER & ADMIN. AGREEMENT 1 EXHIBIT 10-TT AMENDMENT NUMBER 2 TO AMENDED AND RESTATED TRANSFER AND ADMINISTRATION AGREEMENT AMENDMENT NUMBER 2 TO AMENDED AND RESTATED TRANSFER AND ADMINISTRATION AGREEMENT (this "Amendment"), dated as of July 29, 1997, among TECH DATA FINANCE, INC., a California corporation, as transferor (the "Transferor"), TECH DATA CORPORATION, a Florida corporation ("Tech Data"), as collection agent and as guarantor (in such capacities respectively, the "Collection Agent" and the "Guarantor"), ENTERPRISE FUNDING CORPORATION, a Delaware corporation (the "Company"), and NATIONSBANK, N.A., a national banking association ("NationsBank"), as agent for the Company and the Bank Investors (in such capacity, the "Agent") and as a Bank Investor, amending that certain Amended and Restated Transfer and Administration Agreement dated as of January 21, 1997 among the Transferor, the Collection Agent, the Guarantor, the Company, the Agent and the Bank Investor, as amended by Amendment Number 1 thereto, dated as of March 3, 1997 (the "Original Agreement" and said agreement as amended by this Amendment, the "Agreement"). WHEREAS, the Transferor has requested that the Company and the Agent agree to an increase in the Facility Limit and the Maximum Net Investment under the Original Agreement; WHEREAS, on the terms and conditions set forth herein, the parties hereto consent to such amendments; and WHEREAS, capitalized terms used herein shall have the meanings assigned to such terms in the Original Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows: SECTION 1. Amendment to Definitions. (a) The definition of "Facility Limit" is hereby amended by deleting the amount "331,500,000" in the text thereof and replacing it with the amount "408,000,000". 2 (b) The definition of "Maximum Net Investment" is hereby amended by deleting the amount "325,000,000" in the text thereof and replacing it with the amount "400,000,000". (c) The definition of "Loss Reserve" is hereby amended by deleting the amount "27,100,000" in the text of the final paragraph thereof and replacing it with the amount "33,000,000". SECTION 2. Conditions Precedent. This Amendment shall not become effective until the Agent shall have received the following: (a) A copy of the Resolutions of the Board of Directors of the Transferor and Tech Data certified by its Secretary approving this Amendment and the other documents to be delivered by the Transferor and Tech Data hereunder; (b) A Certificate of the Secretary of the Transferor and Tech Data certifying (i) the names and signatures of the officers authorized on its behalf to execute this Amendment and any other documents to be delivered by it hereunder (on which Certificates the Company, the Agent and the Bank Investors may conclusively rely until such time as the Agent shall receive from the Transferor and Tech Data a revised Certificate meeting the requirements of this clause (b)(i)) and (ii) a copy of the Transferor's and Tech Data's By-Laws; (c) An opinion of David Vetter, counsel to Tech Data, with respect to certain corporate matters and the enforceability of the Agreement as amended hereby in form and substance acceptable to the Agent; (d) An opinion of Heller, Ehrman, White & McAuliffe, special California counsel to the Transferor, addressing certain corporate matters and the enforceability of the Agreement as amended hereby in form and substance acceptable to the Agent; and (e) A responsible officer's certificate of the Transferor and Tech Data executed by Arthur W. Singleton, Secretary of the Transferor and Tech Data, respectively. SECTION 3. Representations and Warranties. The Transferor hereby makes to the Company, on and as of the date hereof, all of the representations and warranties set forth in Section 3.1 of the Original Agreement. In 2 3 addition, the Collection Agent and the Guarantor hereby make to the Company, on the date hereof, all the representations and warranties set forth in Section 3.3 of the Original Agreement. SECTION 4. Amendment and Waiver. No provision hereof may be amended, waived, supplemented, restated, discharged or terminated without the written consent of the Transferor, the Company, the Agent and the Majority Investors. SECTION 5. Successors and Assigns. This Amendment shall bind, and the benefits hereof shall inure to the parties hereof and their respective successors and permitted assigns; provided, however, the Transferor may not assign any of its rights or delegate any of its duties under this Amendment without the prior written consent of the Company. SECTION 6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE TRANSFEROR HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 7. Severability; Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument. Any provisions of this Amendment which are 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 8. Captions. The captions in this Amendment are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. 3 4 SECTION 9. Ratification. Except as expressly affected by the provisions hereof, the Original Agreement as amended by this Amendment shall remain in full force and effect in accordance with its terms and ratified and confirmed by the parties hereto. On and after the date hereof, each reference in the Original Agreement to "this Agreement", "hereunder", "herein" or words of like import shall mean and be a reference to the Original Agreement as amended by this Amendment. THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK 4 5 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the date first written above. ENTERPRISE FUNDING CORPORATION, as Company By: /s/ Stewart L. Cutler ------------------------------- Name: Stewart L. Cutler Title: Vice President TECH DATA FINANCE, INC., as Transferor By: /s/ Arthur W. Singleton ------------------------------- Name: Arthur W. Singleton Title: Vice President TECH DATA CORPORATION, as Collection Agent and Guarantor By: /s/ Arthur W. Singleton ------------------------------- Name: Arthur W. Singleton Title: Vice President NATIONSBANK, N.A., as Agent and Bank Investor By: /s/ Michelle M. Heath -------------------------------- Name: Michelle M. Heath Title: Senior Vice President EX-10.UU 7 REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT 1 EXHIBIT 10-UU CONFORMED COPY REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT by and among TECH DATA CORPORATION TECH DATA FRANCE, S.N.C., as Multicurrency Facilities Borrowers TECH DATA CANADA INC., as Canadian Facilities Borrower NATIONSBANK, NATIONAL ASSOCIATION, BARNETT BANK, N.A. PINELLAS, BAYERISCHE VEREINSBANK AG, NEW YORK BRANCH CREDIT LYONNAIS ATLANTA AGENCY, DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES, THE FIRST NATIONAL BANK OF CHICAGO, ROYAL BANK OF CANADA, THE BANK OF NOVA SCOTIA, CIBC INC., FIRST UNION NATIONAL BANK, BANQUE NATIONALE DE PARIS, HOUSTON AGENCY, SUNTRUST BANK, TAMPA BAY, NATEXIS BANQUE, THE DAI-ICHI KANGYO BANK, LIMITED, DRESDNER BANK AG, MELLON BANK, N.A., PNC BANK, KENTUCKY, INC., THE SAKURA BANK, LIMITED, SOUTHTRUST BANK, NATIONAL ASSOCIATION, and THE SUMITOMO BANK, LIMITED, as Multicurrency Facilities Lenders CANADIAN IMPERIAL BANK OF COMMERCE and THE BANK OF NOVA SCOTIA, as Canadian Facilities Lenders and 2 NATIONSBANK, NATIONAL ASSOCIATION, as Agent and CANADIAN IMPERIAL BANK OF COMMERCE, as Canadian Agent and BARNETT BANK, N.A., PINELLAS, BAYERISCHE VEREINSBANK AG, CREDIT LYONNAIS ATLANTA AGENCY, DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES, THE FIRST NATIONAL BANK OF CHICAGO, ROYAL BANK OF CANADA, THE BANK OF NOVA SCOTIA, and CIBC INC., as Co-Agents August 28, 1997 3
TABLE OF CONTENTS Page ---- ARTICLE I Definitions and Terms 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.02 Rules of Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE II The Multicurrency Facilities 2.01 Revolving Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 2.02 Payment of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 2.03 Payment of Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 2.04 Competitive Bid Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 2.05 Multicurrency Facilities Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2.06 Pro Rata Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2.07 Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2.08 Increase and Decrease in Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2.09 Conversions and Elections of Subsequent Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . 44 2.10 Unused Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 2.11 Deficiency Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 2.12 Adjustments by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 2.13 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 2.14 Extension of Revolving Credit Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 2.15 Swing Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 2.16 Additional Multicurrency Facilities Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 2.17 One Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 2.18 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 2.19 Acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 2.20 Creation of Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 2.21 Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 2.22 Domestic Letter of Credit Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 2.23 Administrative Fees and Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 ARTICLE III CANADIAN FACILITIES 3.01 Revolving Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 3.02 Payment of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 3.03 Payment of Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 3.04 Evidence of Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
i 4 3.05 Pro Rata Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 3.06 Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 3.07 Increase and Decrease in Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 3.08 Conversions and Elections of Subsequent Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . 63 3.09 Unused Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 3.10 Deficiency Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 3.11 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 3.12 Extension of Revolving Credit Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 3.13 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 3.14 Acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 3.15 Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 3.16 Canadian Letter of Credit Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 3.17 Administrative Fees and Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 3.18 Maximum Rate of Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 3.19 Reset of Canadian Lenders, Portion on Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 ARTICLE IV Yield Protection and Illegality 4.01 Increased Cost and Reduced Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 4.02 Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 4.03 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 4.04 Treatment of Affected Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 4.05 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 4.06 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 4.07 Restricted Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 4.08 Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 ARTICLE V Conditions to Making Loans, Issuing Letters of Credit and Creating Acceptances 5.01 Conditions of Initial Advance and Issuance of Letters of Credit and Creating Acceptances . . . . . . . . . . 79 5.02 Conditions of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 ARTICLE VI Security 6.01 Guaranties and Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 6.02 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 6.03 New Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 ARTICLE VII Representations and Warranties
ii 5 7.01 Representations and Warranties as to Borrowers and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 84 7.02 Representations and Warranties of TDC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 ARTICLE VIII Affirmative Covenants 8.01 Financial Reports, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 8.02 Maintain Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 8.03 Existence, Qualification, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 8.04 Regulations and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 8.05 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 8.06 True Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 8.07 Pay Indebtedness to Lenders and Perform Other Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 92 8.08 Right of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 8.09 Observe all Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 8.10 Covenants Extending to Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 8.11 Officer's Knowledge of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 8.12 Suits or Other Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 8.13 Environmental Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 8.14 Notice of Discharge of Hazardous Material or Environmental Complaint . . . . . . . . . . . . . . . . . . . . 92 8.15 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 8.16 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 8.17 ERISA Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 8.18 Continued Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 8.19 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 8.20 New Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 ARTICLE IX Negative Covenants 9.01 Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 9.02 Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 9.03 Senior Indebtedness to Total Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 9.04 Indebtedness to Total Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 9.05 EBIT to Interest Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 9.06 Lease Expense Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 9.07 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 9.08 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 9.09 Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 9.10 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 9.11 Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 9.12 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 9.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
iii 6 9.14 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 9.15 Rate Hedging Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 9.16 Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 9.17 Transfer and Administration Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 9.18 Lease-Backs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 9.19 Dividends or Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 9.20 Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 ARTICLE X Events of Default and Acceleration 10.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 10.02 Agent to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 10.03 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 10.04 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 10.05 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 10.06 Allocation of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 ARTICLE XI The Agents 11.01 Appointment, Powers, and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 11.02 Reliance by Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 11.03 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 11.04 Rights as Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 11.05 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 11.06 Non-Reliance on Agents and Other Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 11.07 Resignation of an Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 11.08 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 11.09 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 ARTICLE XII Miscellaneous 12.01 Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 12.03 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 12.04 Right of Set-off; Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 12.05 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 12.06 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 12.07 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 12.08 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 12.09 Waivers by Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 12.10 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
iv 7 12.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 12.12 Representation and Warranty of the Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 12.13 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 12.14 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 12.15 Economic and Monetary Union in the European Community . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 12.16 Agreement Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 12.17 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 EXHIBIT A Lenders' Commitments and Applicable Commitment Percentages . . . . . . . . . . . . . . . . . . . . . . . 142 EXHIBIT B FORM OF ASSIGNMENT AND ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 EXHIBIT C Notice of Appointment (or Revocation) of Authorized Representative . . . . . . . . . . . . . . . . . . . 149 EXHIBIT D-1 Borrowing Notice (Multicurrency Loan) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 EXHIBIT D-2 Borrowing Notice (Canadian Loan) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 EXHIBIT D-3 Borrowing Notice (Domestic Acceptance) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 EXHIBIT E-1 Form of Competitive Bid Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 EXHIBIT E-2 Form of Domestic Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 EXHIBIT E-3 Form of Swing Line Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 EXHIBIT F General Acceptance Agreement (Domestic Acceptance) . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 EXHIBIT G-1 Form of Guaranty and Suretyship Agreement (Multicurrency Facilities) . . . . . . . . . . . . . . . . . . 173 EXHIBIT G-2 Form of Guaranty and Suretyship Agreement (Canadian Facilities) . . . . . . . . . . . . . . . . . . . . 182 EXHIBIT H Competitive Bid Quote Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 EXHIBIT I Competitive Bid Quote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192 EXHIBIT J Assumption and Consent Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 EXHIBIT K-1 Opinion of Counsel for Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 EXHIBIT K-2 Opinions of Guarantor's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 EXHIBIT L Form of Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
LIST OF SCHEDULES Schedule 1.1 - Existing Canadian Acceptances Schedule 1.2 - Existing Canadian Letters of Credit Schedule 1.3 - Existing Domestic Acceptances Schedule 1.4 - Existing Domestic Letters of Credit Schedule 1.5 - Alternative Currency Schedule 7.02(a) - Subsidiaries Schedule 7.02(b) - Interest in Persons Schedule 7.02(c) - Additional Indebtedness, Liabilities, etc. Schedule 7.02(d) - Liens and Restrictions Schedule 7.02(g) - Litigation Schedule 9.07 - Existing Indebtedness Schedule 9.20 - Negative Pledges
v 8 REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT THIS REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT, dated as of August 28, 1997 (the "Agreement"), is made by and among: TECH DATA CORPORATION, a corporation organized and existing under the laws of the State of Florida and having its principal place of business located in Clearwater, Florida ("TDC"); and TECH DATA FRANCE, S.N.C., a societe en nom collectif organized under the laws of France with a registered capital of FF 66,867,000, having its registered office at 26 Avenue Henri Barbusse, 93000 Bobigny, registered with the Registry of Commerce and of Companies of Bobigny under Number B 309 910 282 ("TD France" and, together with TDC and any other Subsidiary who shall become authorized to borrow under the Multicurrency Facilities in accordance with Section 2.16 hereof, the "Multicurrency Facilities Borrowers"); and TECH DATA CANADA INC., a corporation organized and existing under the laws of Ontario, Canada, and having its principal place of business 6895 Columbus Road, Mississauga, Ontario L5T 269 ("TD Canada" or "Canadian Facilities Borrower" and, together with the Multicurrency Facilities Borrowers, the "Borrowers"); and NATIONSBANK, NATIONAL ASSOCIATION ("NATIONSBANK"), BARNETT BANK, N.A. PINELLAS, BAYERISCHE VEREINSBANK AG, NEW YORK BRANCH, CREDIT LYONNAIS ATLANTA AGENCY, DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES, THE FIRST NATIONAL BANK OF CHICAGO, ROYAL BANK OF CANADA, THE BANK OF NOVA SCOTIA, CIBC INC., FIRST UNION NATIONAL BANK, BANQUE NATIONALE DE PARIS, HOUSTON AGENCY, SUNTRUST BANK, CENTRAL FLORIDA, N.A., NATEXIS BANQUE, THE DAI-OCHI KANGYO BANK, LIMITED, DRESDNER BANK, AG, MELLON BANK, N.A., PNC BANK, KENTUCKY, INC., THE SAKURA BANK, LIMITED SOUTHTRUST BANK, NATIONAL ASSOCIATION and THE SUMITOMO BANK, LIMITED, the initial lenders under the Multicurrency Facilities, and each other lender which may hereafter execute and deliver an instrument of assignment with respect to the Multicurrency Facilities under this Agreement pursuant to Section 12.01 (hereinafter NationsBank and such other lenders may be referred to individually as a "Multicurrency Facilities Lender" or collectively as the "Multicurrency Facilities Lenders"); and CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC") and THE BANK OF NOVA SCOTIA, the initial lenders under the Canadian Facilities and each other lender which may hereafter execute and deliver an instrument of assignment with respect to the Canadian Facilities under this Agreement pursuant to Section 12.01 (hereinafter CIBC and such other lenders may be referred to individually as a "Canadian Facilities Lender" or collectively as the "Canadian Facilities Lenders"; the Canadian Facilities Lenders and the Multicurrency Facilities Lenders are sometimes referred to collectively as the "Lenders" or individually as a "Lender"); 9 and NATIONSBANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America and having its principal place of business in Tampa, Florida in its capacity as agent for the Lenders (in such capacity, the "Agent"); and CANADIAN IMPERIAL BANK OF COMMERCE in its capacity as agent for the Canadian Facilities Lenders (the "Canadian Agent" and together with the Agent, collectively the "Agents"). W I T N E S S E T H: WHEREAS, the Borrowers, certain multicurrency facilities lenders (the "Existing Multicurrency Facilities Lenders"), certain Canadian facilities lenders (the "Existing Canadian Facilities Lenders" and collectively with the Existing Multicurrency Facilities Lenders, the "Existing Lenders"), the Agent and the Canadian Agent are parties to a Revolving Credit and Reimbursement Agreement dated as of May 23, 1996 (the "Existing Agreement") pursuant to which (a) the Existing Multicurrency Lenders have made available to the Multicurrency Facilities Borrowers a multicurrency revolving credit facility of up to $250,000,000 (including a letter of credit facility with a sublimit of up to $75,000,000, a banker's acceptance facility and a competitive bid facility, and a swing line by NationsBank in favor of TDC with a sublimit of up to $15,000,000), and (b) the Existing Canadian Facilities Lenders have made available to TD Canada a US Dollar or Canadian Dollar revolving credit facility of up to US $40,000,000 (including a letter of credit facility with a sublimit of up to Cdn. $25,000,000, and a banker's acceptance facility) (the facilities described in clauses (a) and (b), together with any other facilities under the Existing Agreement are referred to collectively as the "Prior Facilities"); and WHEREAS, the Borrowers desire to replace the Prior Facilities with the facilities herein provided; and WHEREAS, the Multicurrency Facilities Lenders are willing to make available to the Multicurrency Facilities Borrowers a revolving credit facility of up to $530,000,000 (including a letter of credit facility with a sublimit of up to $125,000,000, a banker's acceptance facility and a competitive bid facility, and a swing line by NationsBank in favor of TDC with a sublimit of up to $25,000,000); and (ii) the Canadian Facilities Lenders are willing to make available to TD Canada a US Dollar or Canadian Dollar revolving credit facility of up to US $20,000,000 (including a letter of credit facility with a sublimit of up to Cdn. $15,000,000, and a banker's acceptance facility), in each case subject to the terms and conditions set forth herein; NOW, THEREFORE, the Borrowers, the Lenders, the Agents and the Co-Agents hereby agree as follows: 2 10 ARTICLE I Definitions and Terms 1.01 Definitions. For the purposes of this Agreement, in addition to the definitions set forth above, the following terms shall have the respective meanings set forth below: "Absolute Rate" shall have the meaning assigned to such term in Section 2.04(c)(ii)(C) hereof; "Absolute Rate Auction" means a solicitation of Competitive Bid Quotes setting forth Absolute Rates pursuant to Section 2.04 hereof; "Absolute Rate Loans" means the Competitive Bid Loans the interest rates on which are determined on the basis of Absolute Rates set at Absolute Rate Auctions; "Acceptance" means a Domestic Acceptance or a Canadian Acceptance, as the case may be; "Acceptance Addition" means that percent per annum set forth below which percent shall be the Acceptance Addition effective as to each Acceptance created next following the date of delivery of the certificate described in Section 8.01(a)(iii) or Section 8.01(b)(iii) (the "Compliance Date") demonstrating that as of the end of such period (i) either the ratio of Consolidated Senior Indebtedness to Consolidated Total Capital is less than or equal to or more than, as the case may be, or (ii) the ratio of Consolidated EBIT to Consolidated Interest Expense is greater than or equal to or less than, as the case may be, the applicable ratio set forth opposite such Acceptance Addition (provided that if such determination shall result in more than one Acceptance Addition, the lower Acceptance Addition shall apply):
Ratios ------ EBIT to Senior Interest Debt to Capital Acceptance Addition -------- --------------- ------------------- (a) Less than 3.0 to 1.00 Less than .60 to 1.00 .55% but equal to or greater than .55 to 1.00 (b) Greater than or equal Less than .55 to 1.00 .45% to 3.0 to 1.00 but but equal to or greater less than 4.0 to 1.00 than .50 to 1.00 (c) Greater than or equal Less than .50 to 1.00 .40% to 4.0 to 1.00 but but equal to or greater less than 5.0 to 1.00 than .45 to 1.00
3 11 (d) Greater than or equal Less than .45 to 1.00 .375% to 5.0 to 1.00
Notwithstanding the foregoing, if the Borrowers shall fail to deliver any such certificate within the applicable period set forth in Section 8.01(a) or (b), as the case may be, then the Acceptance Addition shall be .55% until the appropriate certificate is delivered. From the Closing Date to the first Compliance Date, the Acceptance Addition shall be .375%; "Acceptance Discount Proceeds" means: (i) in the case of a Canadian Acceptance accepted by a Canadian Facilities Lender that is a Schedule I Canadian chartered bank, the discount proceeds received by it upon its sale of such Canadian Acceptance to an arm's length purchaser; and (ii) in the case of a Canadian Acceptance accepted by a Canadian Facilities Lender that is not a Schedule I Canadian chartered bank, the lesser of (a) the discount proceeds received by such Canadian Facilities Lender upon its sale of such Canadian Acceptance to an arm's length purchaser at approximately 10:00 a.m. Toronto time on the drawdown day, or (b) the discount proceeds that would be received by such Canadian Facilities Lender had it sold such Canadian Acceptance based upon the average discount rate for bankers' acceptances appearing on the CDOR screen of Reuters at approximately 10:00 a.m. Toronto time on the drawdown day in Section 3.01, or if such rate is not quoted on the CDOR screen of Reuters at that time, the discount proceeds that would be received by it if it were to sell such Canadian Acceptance at a discount rate equal to the average discount rate expressed as a rate per annum applicable to Acceptances sold at that time by Canadian Facilities Lenders that are Schedule I Canadian chartered banks plus 0.07% per annum; "Advance" means a Canadian Advance or a Domestic Advance, as the case may be; "Advance Date Exchange Rate" means, (i) with respect to a specified Advance or Loan of an Alternative Currency, the Spot Rate of Exchange as of the date two Business Days preceding the date such Advance is originally made, provided that, if such Advance or Loan is Continued for a subsequent Interest Period or Converted pursuant to Section 2.09 the Advance Date Exchange Rate with respect to such Loan shall be the Spot Rate of Exchange two Business Days preceding the effective date of the latest Continuation or Conversion of such Advance or Loan; (ii) with respect to a specified Advance or Loan of an Alternative Currency to TD Canada, the Advance Date Exchange Rate shall be the Spot Rate of Exchange as of the date of the Advance or Loan or as of the date of a 4 12 Continued Interest Period or Conversion; and in either case the Dollar Value of such Advance or Loan shall be adjusted as set forth in Section 2.01(b) or Section 3.01(b), as applicable; provided, further, that in the case of a drawing under a Letter of Credit, the Spot Rate of Exchange shall be as of the date of such drawing; "Alternative Currency" means, (i) with respect to Loans under the Domestic Revolving Credit Facility, those currencies listed on Schedule 1.5 hereto and, with the prior written consent of all Multicurrency Facilities Lenders and the Agent, any other lawful currency other than Dollars which is freely transferable and convertible into Dollars in the United States currency market; provided, however, that an Alternative Currency shall only be available to the Multicurrency Facilities Borrowers if each Multicurrency Facilities Lender shall have access to such Alternative Currency on terms reasonably acceptable to such Multicurrency Facilities Lender and (ii) with respect to Loans under the Canadian Revolving Credit Facility, Canadian Dollars; "Alternative Currency Equivalent Amount" means, with respect to a specified Alternative Currency and a specified Dollar amount, the amount of such Alternative Currency into which such Dollar amount would be converted, based on the applicable Advance Date Exchange Rate; "Alternative Currency Loan" means a Loan made in an Alternative Currency; "Applicable Agent" means, with respect to all matters involving Article II of this Agreement the Agent, and with respect to all matters involving Article III of this Agreement, the Canadian Agent; "Applicable Commitment Percentage" means, (i) for each Multicurrency Facilities Lender, with respect to the Obligations hereunder arising in connection with the Multicurrency Facilities (each a type of "credit exposure"), including its Participations and its obligations hereunder to NationsBank to acquire Participations, a fraction (expressed as a percentage), the numerator of which shall be the then amount of such Multicurrency Facilities Lender's Domestic Revolving Credit Commitment and the denominator of which shall be the Total Domestic Revolving Credit Commitment, which Applicable Commitment Percentage for each Multicurrency Facilities Lender as of the Closing Date is as set forth in Exhibit A attached hereto and incorporated herein by this reference; (ii) for each Canadian Facilities Lender, with respect to the Obligations hereunder arising in connection with the Canadian Facilities (each a type of "credit exposure"), including its Participations and its obligations hereunder to CIBC to acquire Participations, a fraction (expressed as a percentage), the numerator of which shall be the then amount of such Canadian Facilities Lender's Canadian Revolving 5 13 Credit Commitment and the denominator of which shall be the Total Canadian Revolving Credit Commitment, which Applicable Commitment Percentage for each Canadian Facilities Lender as of the Closing Date is as set forth in Exhibit A attached hereto and incorporated herein by this reference; provided that the Applicable Commitment Percentage of each Lender shall be increased or decreased to reflect any assignments to or by such Lender effected in accordance with Section 12.01 hereof; "Applicable Interest Addition" means that percent per annum set forth below in the case of each of a Floating CD Loan, Fixed CD Loan or Eurodollar Rate Loan, which percent shall be the Applicable Interest Addition effective beginning on the first day next following the date of delivery of the certificate described in Section 8.01(a)(iii) or Section 8.01(b)(iii) (the "Compliance Date") demonstrating that as of the end of such period either (i) the ratio of Consolidated Senior Indebtedness to Consolidated Total Capital is less than or equal to or more than, as the case may be, or (ii) the ratio of Consolidated EBIT to Consolidated Interest Expense is greater than or equal to or less than, as the case may be, the applicable ratio set forth opposite such Applicable Interest Addition (provided that if such determination shall result in more than one Applicable Interest Addition, the lower Applicable Interest Addition shall apply):
Ratios Interest Addition ------ ----------------- Floating Fixed Eurodollar EBIT to Interest Senior Debt to Capital CD Loan CD Loan Rate Loan ---------------- ---------------------- ------- ------- --------- (a) Greater than Less than .60 to 1.00 .675% .675% .55% or equal to but equal to or greater 2.0 to 1.00 than .55 to 1.00 but less than 3.0 to 1.00 (b) Greater than Less than .55 to 1.00 .575% .575% .45% or equal to but equal to or greater 3.0 to 1.00 than .50 to 1.00 but less
6 14 than 4.0 to 1.00 (c) Greater than Less than .50 to 1.00 .525% .525% .40% or equal to but equal to or greater 4.0 to 1.00 than .45 to 1.00 but less than 5.0 to 1.00 (d) Greater than Less than .45 to 1.00 .500% .500% .375% or equal to 5.0 to 1.00
Notwithstanding the foregoing, if the Borrowers shall fail to deliver any such certificate within the applicable period set forth in Section 8.01(a) or (b), as the case may be, then the Applicable Interest Addition for any Loan shall be the highest Applicable Interest Addition for such type of Loan set forth above until the appropriate certificate is so delivered. From the Closing Date to the first Compliance Date, the Applicable Margin shall be .500% for CD Loans and .375% for Eurodollar Rate Loans; "Applicable Lending Office" means, for each Lender and for each Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such Lender) designated for such Type of Loan on the signature pages hereof or in an Assignment and Acceptance or such other office of such Lender (or an affiliate of such Lender) as such Lender may from time to time specify to the Agent and the Borrowers by written notice in accordance with the terms hereof as the office by which its Loans of such Type are to be made and maintained. "Applicable Rate" means the Eurodollar Rate applicable to any Alternative Currency; "Applicable Reference Rate" means: (i) for any Fixed CD Loan, in respect of the Interest Period 7 15 specified by the Authorized Representative in the Borrowing Notice for such Fixed CD Loan, the per annum rate of interest (expressed as a percentage and rounded upwards if necessary to the nearest 1/100 of 1%) (which shall be the same for each day of such Interest Period) determined in good faith by the Agent in accordance with the usual procedures for its customers generally (which determination shall be conclusive absent manifest error) to be the average of the secondary market bid rates at approximately 10:00 A.M. Charlotte, North Carolina time on the first day of such Interest Period of at least two dealers of recognized standing in negotiable certificates of deposit for the purchase at face value of negotiable certificates of deposit of major money center banks for delivery on such day in an amount approximately equal to the principal amount of, and for a period comparable to the Interest Period for, such Fixed CD Loan and maturing at the end of such Interest Period, and (ii) for any Floating CD Loan the per annum rate of interest (expressed as a percentage and rounded upwards if necessary to the nearest 1/100 of 1%) determined in good faith by the Agent in accordance with the usual procedures for its customers generally to be the average of the secondary market bid rates at approximately 10:00 A.M. Charlotte, North Carolina time on each day of such Floating CD Loan of at least two dealers of recognized standing in negotiable certificates of deposit for the purchase at face value of negotiable certificates of deposit of major money center banks for delivery on such day in an amount approximately equal to the principal amount of such Floating CD Loan for a period of 90 days, and (iii) for any Eurodollar Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 or other appropriate Telerate Page (or any successor page) as the London interbank offered rate for deposits in Dollars or the Relevant Alternative Currency at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "Eurodollar Rate" shall mean, for any Eurodollar Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars or the Relevant Alternative Currency at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%); 8 16 "Applicable Reserve Requirement" means, at any time, for any CD Loan or any Fixed Rate Loan (other than Competitive Bid Loans) the maximum rate at which reserves (including, without limitation, any marginal, special, supplemental or emergency reserves) are required to be maintained with respect thereto under regulations issued from time to time by the Board or other applicable banking regulator by the member banks of the Federal Reserve System against (i) in the case of CD Loans, non-personal Dollar time deposits in an amount of $100,000 or more, or (ii) in the case of Eurodollar Loans, "Eurocurrency liabilities" (as such term is defined in Regulation D). Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the Eurodollar Rate or any other interest rate of a Fixed Rate Loan is to be determined, or (ii) any category of extensions of credit or other assets which include Eurodollar Loans or any other Fixed Rate Loans. A Fixed Rate Loan shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender. The rate of interest on Fixed Rate Loans shall be adjusted automatically on and as of the effective date of any change in the Applicable Reserve Requirement; "Applicable Unused Fee" means that percent per annum set forth below, which shall be the Applicable Unused Fee effective beginning on the day next following the date of delivery of the certificate described in Section 8.01(a)(iii) or Section 8.01(b)(iii) (the "Compliance Date"), demonstrating that as of the end of such period either (i) the ratio of Consolidated Senior Indebtedness to Consolidated Total Capital is less than or equal to or more than, as the case may be, or (ii) the ratio of Consolidated EBIT to Consolidated Interest Expense is greater than or equal to or less than, as the case may be, the applicable ratio set forth opposite such Applicable Unused Fee (provided that if such determination shall result in more than one Applicable Unused Fee, the lower Applicable Unused Fee shall apply:
Ratios ------ EBIT to Senior Interest Debt to Capital Applicable Unused Fee -------- --------------- --------------------- (a) Greater than Less than .60 to 1.00 .175% or equal to but equal to or greater 2.0 to 1.00 than .55 to 1.00 but less
9 17 than 3.0 to 1.00 (b) Greater than Less than .55 to 1.00 .15% or equal to but equal to or greater 3.0 to 1.00 than .50 to 1.00 but less than 4.0 to 1.00 (c) Greater than Less than .50 to 1.00 .1375% or equal to but equal to or greater 4.0 to 1.00 than .45 to 1.00 but less than 5.0 to 1.00 (d) Greater than Less than .45 to 1.00 .1250% or equal to 5.0 to 1.00
Notwithstanding the foregoing, if the Borrowers shall fail to deliver any such certificate within the applicable period set forth in Section 8.01(a) or (b), as the case may be, then the Applicable Unused Fee shall be .175% until the appropriate certificate is so delivered. From the Closing Date to the first Compliance Date, the Applicable Unused Fee shall be .1250%; "Assessment Rate" means, for any day for any CD Loan, the rate per annum (rounded upward to the nearest 1/100 of 1%) determined in good faith by the Agent in accordance with its usual procedures for its customers generally (which determination shall be conclusive absent manifest error) to be the net annual assessment rate payable by the Agent on such day for insurance by the Federal Deposit Insurance Corporation (or any successor) on Dollar time deposits. The CD Rate shall be adjusted automatically as of the effective date of each change in the Assessment Rate; "Assignment and Acceptance" shall mean an Assignment and Acceptance substantially in the form of Exhibit B (with blanks appropriately filled in) delivered to the 10 18 Agent in connection with an assignment of a Lender's interest under this Agreement pursuant to Section 12.01; "Associated Costs" means a rate per annum equal to the arithmetic mean of the percentage rates applicable to the Applicable Lending Office of the relevant Lender according to the following formula: Associated Costs BY + L(Y-X) + S(Y-Z) per annum = 100 - (B+S) where: B = The percentage of such Lender's eligible liabilities required, on the first day of the Relevant Period, to be held in a non-interest-bearing deposit account with the Bank of England pursuant to the cash ratio requirements of the Bank of England. Y = The interest rate at which British Pound deposits in an amount comparable to the aggregate principal amount of the relevant Loan are offered by such Lender to leading banks in the London interbank market at or about 11:00 a.m. (London time) on the first day of the Relevant Period for a period comparable to the Relevant Period. L = The average percentage of eligible liabilities which the Bank of England, as at the first day of the Relevant Period, requires such Lender to maintain as secured money with members of the London Discount Market Association and/or as secured call money with those money brokers and gilt-edged primary market makers recognized by the Bank of England. X = The rate at which secured British Pound deposits in an amount comparable to the aggregate principal amount of the relevant Loan may be placed by such Lender with members of the London Discount Market Association and/or as secured call money with money brokers and gilt-edged primary market makers at or about 11:00 a.m. (London time) on the first day of the Relevant Period for a period comparable to the Relevant Period. S = The percentage of such Lender's eligible liabilities required on the first day of the relevant Interest Period to be placed as a special deposit with the Bank of England. Z = The percentage interest rate per annum payable by the Bank of England on special deposits or, if lower, Y. (a) For the purposes of this definition: 11 19 (i) "eligible liabilities" and "special deposits" shall have the meanings ascribed to them from time to time by the Bank of England; and (ii) "Relevant Period" means, if the Interest Period with respect to the relevant Loan is three months or less, the duration of such Interest Period or, if such Interest Period is longer than three months, each period of three months and any necessary shorter period in such Interest Period. (b) In the application of the above formula, B, Y, L, X, S and Z will be included in the formula as decimal fractions and not as percentages, e.g. if B = 0.5% and Y = 15%, BY will be calculated as 0.5 x 15 and not as 0.5% x 15%. (c) Associated Costs shall be computed by the applicable Lender on the first day of each Relevant Period, and shall, if necessary, be rounded upward to the nearest 1/10,000 of 1%. If there is more than one Relevant Period comprised in the relevant Interest Period, then the Associated Costs for that Interest Period shall be the weighted average of the amounts so computed for the Relevant Periods comprised in that Interest Period. (d) Calculations will be made on the basis of a year of 365 days. The "Associated Costs" shall be increased by an amount which the applicable Lender shall determine from time to time to be necessary to compensate such Lender for the cost or loss to it of complying with any liquidity, monetary control or prudential requirements of The Bank of England existing from time to time. "Assumption and Consent Agreement" means each Assumption and Consent Agreement described in Section 2.16 hereof executed and delivered in connection with the creation of additional Multicurrency Facilities Borrowers; "Authorized Representative" means (i) in the case of TDC any of the Chairman, Chief Executive Officer, President, Executive Vice President of Finance and Chief Financial Officer or Treasurer of TDC or, with respect to financial matters, the Treasurer or Chief Financial Officer of TDC, (ii) in the case of TD France any of the managing directors represented by their senior executive officers (Chief Executive Officer, President, Executive Vice President or Chief Financial Officer), and (iii) with respect to TD Canada, all of the Authorized Representatives of TDC and the Vice President of Finance and Controller, or any other person expressly designated by the Board of Directors (or the appropriate committee thereof) of TDC as an Authorized Representative for purposes of this Agreement, as set forth from time to time in a certificate in the form attached hereto as Exhibit C; "BA Rate" means with respect to Domestic Acceptances, NationsBank, N.A. Funds Management Bankers Acceptance Funding Rate as established by the Agent from 12 20 time to time for an Acceptance having an Interest Period and in an approximate amount equal to such Acceptance; "Board" means the Board of Governors of the Federal Reserve System (or any successor body); "Borrowing Notice" means the telephonic request of the Authorized Representative of a Borrower to (i) obtain an Advance or to elect a subsequent Interest Period for or Convert a Loan or Loans of any Type hereunder, as the obtaining of such Advance, such election or Conversion of such Loan or Loans shall be otherwise permitted herein or (ii) create an Acceptance, as otherwise permitted hereunder. Any Borrowing Notice shall be binding on and irrevocable by the Borrower, and (a) in the case of a notice for the purposes set forth in (i) hereof, shall be confirmed in writing within three (3) Business Days by the Authorized Representative in the form attached hereto as Exhibit D-1 for Domestic Revolving Loans or Exhibit D-2 for Canadian Loans and (b) in the case of a notice for the purposes set forth in (ii) hereof, shall be confirmed in writing not less than two (2) Business Days prior to the creation of such Acceptance by an Authorized Representative in the form attached hereto as Exhibit D-3 for Domestic Acceptances or Exhibit D-2 for Canadian Acceptances; "British Pound" means the lawful currency of England and Wales; "Business Day" means (i) for all purposes other than as covered by clauses (ii) and (iii) below, any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the States of New York, North Carolina or Florida or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close, (ii) with respect to all notices, determinations, fundings and payments in connection with Canadian Loans, Canadian Letters of Credit and the Canadian Acceptances, any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of Canada and the Province of Ontario, Canada or is a day on which banking institutions located in such Province are authorized or required by law or other governmental action to close and (iii) (A) with respect to all notices, determinations, fundings and payments in connection with any Eurodollar Rate Loan, any day that is a Business Day described in clause (i) above and that is also a day for trading by and between banks in Dollar deposits in the applicable interbank Eurodollar market or in deposits in the applicable Alternative Currency in the United States interbank market, as applicable, and (B) with respect to all notices, determinations, fundings and payments in connection with any Canadian Loans, any day that is a Business Day described in clause (ii) above and that is also a day for trading by and between banks in Canadian Dollar deposits in the applicable interbank Canadian Eurodollar market; "Canadian Acceptance" means a draft which constitutes a blank bill of exchange within the meaning of the Bills of Exchange Act (Canada) drawn by TD Canada on, and accepted by, a Canadian Acceptance Lender and has a maturity 1, 2, 3 or 6 months after 13 21 the date such Acceptances was created and does not extend beyond the Revolving Credit Termination Date, and shall include for purposes of computation of Canadian Acceptance Usage the Existing Canadian Acceptances; "Canadian Acceptance Lender" means a Lender that is a Canadian chartered bank; "Canadian Acceptance Usage" means, as at any date of determination, the aggregate face amount of all completed Canadian Acceptances which have been accepted and discounted and not been repaid by TD Canada whether or not due and whether or not held by CIBC; "Canadian Advance" means a borrowing under the Canadian Revolving Credit Facility consisting of the aggregate principal amount of a Domestic Base Rate Loan, Canadian Prime Rate Loan or a Fixed Rate Loan; "Canadian Dollars" or "Cdn $" means the lawful currency of Canada; "Canadian Facilities" means the revolving credit, letter of credit and acceptance facilities made available by the Canadian Facilities Lenders pursuant to Article III hereof; "Canadian Letter of Credit" means a Letter of Credit issued under the Canadian Letter of Credit Facility, and shall include for purposes of computation of Canadian Letter of Credit Outstandings, the Existing Canadian Letters of Credit and the related reimbursement obligations; "Canadian Letter of Credit Commitment" means an amount not to exceed Cdn $15,000,000; "Canadian Letter of Credit Facility" means the facility described in Article III hereof providing for the issuance by CIBC for the account of TD Canada of Canadian Letters of Credit in an aggregate stated amount at any time outstanding not exceeding the Canadian Letter of Credit Commitment; "Canadian Letter of Credit Outstandings" means all undrawn amounts of Canadian Letters of Credit plus Reimbursement Obligations relating to Canadian Letters of Credit; "Canadian Loans" means loans made by the Canadian Facilities Lenders pursuant to Section 3.01 hereof; "Canadian Prime Rate" means on any day and with respect to all Canadian Prime Rate Loans, the greater of: (i) the variable rate of interest expressed as a percentage per annum 14 22 (calculated on the basis of a year of 365 days) which CIBC publishes as the reference rate of interest in order to determine interest rates it will charge on that day for demand loans in Canadian Dollars to its Canadian customers and which it refers to as its "prime lending rate" or "prime rate"; and (ii) the average yield to maturity expressed as a percentage per annum (calculated on the basis of a year of 365 days) quoted at 10:00 Toronto time on that day on the CDOR page of Reuters for 30 day bankers' acceptances issued by Canadian chartered banks, plus .50% per annum. The Canadian Prime Rate is not necessarily intended to be the lowest rate of interest determined by CIBC in connection with extensions of credit in Canadian Dollars. Changes in the rate of interest on that portion of any Loans maintained as Canadian Prime Rate Loans will take effect simultaneously with each change in the Canadian Prime Rate. The Canadian Agent shall give notice to the Borrower and each Canadian Facilities Lender of the Canadian Prime Rate from time to time quoted by CIBC and such notice shall be conclusive and binding for all purposes absent error; "Canadian Prime Rate Loan" or "Canadian Prime Loan" means a Loan for which the rate of interest is determined by reference to the Canadian Prime Rate; "Canadian Revolving Credit Commitment" means with respect to each Canadian Facilities Lender, the obligation of such Lender to make Loans to TD Canada up to an aggregate principal amount at any one time outstanding equal to the product of the percentage set forth in Exhibit A opposite such Lender's name times the Total Canadian Revolving Credit Commitment as the same may be increased or decreased from time to time pursuant to this Agreement; "Canadian Revolving Credit Facility" means the facility described in Article III hereof providing for Loans to TD Canada by the Canadian Facilities Lenders in the aggregate principal amount of Total Canadian Revolving Credit Commitment less the aggregate amount of Canadian Letter of Credit Outstandings and Canadian Acceptance Usage; "Capital Leases" means all leases which have been or should be capitalized in accordance with Generally Accepted Accounting Principles as in effect from time to time including Statement No. 13 of the Financial Accounting Standards Board and any successor thereof; "CD Loan" means a Loan for which the rate of interest is determined by reference to the CD Rate; "CD Rate" means, for any CD Loan, the rate of interest per annum determined pursuant to the following formula: 15 23 Applicable Reference Rate ------------------------- CD Rate = 1 - Applicable Reserve + Assessment Rate + Applicable Requirement Interest Addition "Change of Control" means, at any time: (A) with respect to TDC: (i) any "person" or "group" (each as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) either (A) becomes the "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of voting stock of TDC (or securities convertible into or exchangeable for such voting stock) representing 30% or more of the combined voting power of all voting stock of TDC (on a fully diluted basis) or (B) otherwise has the ability, directly or indirectly, to elect a majority of the board of directors of TDC; or (ii) during any period of up to 24 consecutive months, commencing on the Closing Date, individuals who at the beginning of such 24-month period were directors of TDC shall cease for any reason (other than the death, disability or retirement) to constitute a majority of the board of directors of TDC; or (iii) any Person or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence on the management or policies of TDC; and (B) with respect to any Significant Subsidiary of TDC: (i) which is or becomes a wholly-owned Significant Subsidiary at or after the Closing Date, such Person ceases for any reason to be a wholly-owned Subsidiary of TDC (or with respect to TD Canada or TD France, ceases to be a Significant Subsidiary); or (ii) which is or becomes a Significant Subsidiary (other than a wholly-owned Significant Subsidiary) of TDC at or after the Closing Date, such Person ceases for any reason to be a Subsidiary of TDC; "Closing Date" means the date as of which this Agreement is executed by the Borrowers, the Lenders and the Agent and on which the conditions set forth in Section 5.01 hereof have been satisfied; 16 24 "Collateral" means, collectively, all property of any Borrower, any Subsidiary or any other Person in which the Agent, the Canadian Agent or any Lender is granted a Lien to secure all or any portion of the Obligations as described in any Security Instrument; "Commercial Letter of Credit" means a documentary letter of credit issued (i) in the case of Domestic Letters of Credit, by NationsBank for the account of the applicable Multicurrency Facilities Borrower or (ii) in the case of Canadian Letters of Credit, by CIBC for the account of TD Canada, to support the acquisition of eligible inventory (x) in the case of Domestic Letters of Credit, of Multicurrency Facilities Borrowers and (y) in the case of Canadian Letters of Credit, of TD Canada which letters of credit are secured by documents; provided that the expiry date of a Commercial Letter of Credit (i) shall not be later than six (6) months subsequent to the date of issuance thereof, (ii) shall not provide for payment subsequent to the thirtieth Business Day preceding the Revolving Credit Termination Date and (iii) shall not provide for time drafts; "Competitive Bid Borrowing" shall have the meaning assigned to such term in Section 2.04(b) hereof; "Competitive Bid Loans" means the Loans provided for by Section 2.04 hereof; "Competitive Bid Notes" means the promissory notes of the Multicurrency Facilities Borrowers executed and delivered to the Multicurrency Facilities Lenders as provided in Section 2.05(c) and Section 2.16 substantially in the form of Exhibit E-1 which shall be delivered to evidence the Competitive Bid Loans; "Competitive Bid Quote" means an offer in accordance with Section 2.04(c) hereof by a Lender to make a Competitive Bid Loan with one single specified interest rate; "Competitive Bid Quote Request" shall have the meaning assigned to such term in Section 2.04(b) hereof; "Consistent Basis" in reference to the application of Generally Accepted Accounting Principles means the accounting principles observed in the period referred to are comparable in all material respects to those applied in the preparation of the audited financial statements of TDC referred to in Section 7.02(c)(i) hereof; "Consolidated Current Assets" means cash and all other assets of TDC and its Subsidiaries which are expected to be realized in cash, sold in the ordinary course of business, or consumed within one year or which would be classified as a current asset, all determined on a consolidated basis in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis; "Consolidated Current Liabilities" means the sum of, without duplication, (a) all 17 25 liabilities of TDC and its Subsidiaries which by their terms are payable within one year (including all Indebtedness payable on demand or maturing not more than one year from the date of computation and the current portion of Indebtedness having a maturity date in excess of one year), (b) all Obligations and (c) all Indebtedness under Section 9.07(vii), all determined on a consolidated basis in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis. "Consolidated EBIT" means, with respect to TDC and its Subsidiaries for the Four-Quarter Period immediately preceding the date of computation thereof, the sum of, without duplication, (i) Consolidated Net Income, plus (ii) Consolidated Interest Expense during such period, (iii) plus taxes paid on income during such period, all determined on a consolidated basis in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis; "Consolidated Funded Indebtedness" means Indebtedness for Money Borrowed of TDC and its Subsidiaries, all determined on a consolidated basis; "Consolidated Interest Expense" means, with respect to any period of computation thereof, the gross interest expense of TDC and its Subsidiaries, including without limitation (i) the amortization of debt discounts, (ii) the amortization of all reserves and fees (including without limitation, dealer and program fees payable under the Transfer and Administration Agreement and fees payable in respect of a Swap Agreement) payable in connection with the incurrence of Indebtedness to the extent included in interest expense and (iii) the portion of any liabilities incurred in connection with Capital Leases allocable to interest expense, all determined on a consolidated basis in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis; "Consolidated Lease Expense" means with respect to TDC and its Subsidiaries for the Four-Quarter Period immediately preceding the date of computation, the gross amount of all lease or rental expense, whether or not characterized as rent, excluding payments in respect of Capital Leases constituting Indebtedness, all determined on a consolidated basis in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis; "Consolidated Net Income" means the gross revenues of TDC and its Subsidiaries less all operating and non-operating expenses of TDC and its Subsidiaries including taxes on income, all determined on a consolidated basis in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis; but excluding as income: (i) gains on the sale, conversion or other disposition of capital assets, (ii) gains on the acquisition, retirement, sale or other disposition of capital stock and other securities of TDC or any Subsidiary, (iii) gains on the collection of proceeds of life insurance policies, (iv) any write-up of any asset, and (v) any other gain or credit of an extraordinary nature as determined in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis; 18 26 "Consolidated Senior Indebtedness" means Consolidated Funded Indebtedness minus Consolidated Subordinated Indebtedness; "Consolidated Shareholders' Equity" means at any time as of which the amount thereof is to be determined, the sum of the following in respect of TDC and its Subsidiaries (determined on a consolidated basis and excluding intercompany items among TDC and its Subsidiaries and any upward adjustment after the Closing Date due to revaluation of assets): (i) the amount of issued and outstanding share capital, plus (ii) the amount of additional paid-in capital and retained income (or, in the case of a deficit, minus the amount of such deficit), plus (iii) the amount of any foreign currency translation adjustment (if positive, or, if negative, minus the amount of such translation adjustment) minus (iv) the absolute value of any treasury stock and the absolute value of any stock subscription receivables, as determined in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis; "Consolidated Subordinated Indebtedness" means Subordinated Indebtedness of TDC and its Subsidiaries, all determined on a consolidated basis; "Consolidated Total Capital" means the sum of Consolidated Shareholders' Equity and Consolidated Funded Indebtedness; "Contingent Obligation" of any Person means all contingent liabilities required (or which, upon the creation or incurring thereof, would be required) to be included in the consolidated financial statements (including footnotes) of such Person in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis, including Statement No. 5 of the Financial Accounting Standards Board, and any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including obligations of such Person however incurred: (1) to purchase such Indebtedness or other obligation or any property or assets constituting security therefor; (2) to advance or supply funds in any manner (i) for the purchase or payment of such Indebtedness or other obligation, or (ii) to maintain a minimum working capital, net worth or other balance sheet condition or any income statement condition of the primary obligor; (3) to grant or convey any lien, security interest, pledge, charge or other encumbrance on any property or assets of such Person to secure payment of such Indebtedness or other obligation; (4) to lease property or to purchase securities or other property or 19 27 services primarily for the purpose of assuring the owner or holder of such Indebtedness or obligation of the ability of the primary obligor to make payment of such Indebtedness or other obligation; or (5) otherwise to assure the owner of the Indebtedness or such obligation of the primary obligor against loss in respect thereof; With respect to Contingent Obligations (such as litigation, guarantees and pension plan liabilities), such liabilities shall be computed at the amount which, in light of all the facts and circumstances existing at the time, represent the amount which can reasonably be expected to become an actual or matured liability; "Continue", "Continuation", "Continuance" and "Continued" shall refer to the continuation pursuant to Section 2.09 or 3.08 hereof of a Fixed Rate Loan of one Type as a Fixed Rate Loan of the same Type from one Interest Period to the next Interest Period; "Convert", "Conversion", and "Converted" shall refer to a conversion pursuant to Section 2.09 or 3.08 or Article IV of one Type of Loan into another Type of Loan; "Convertible Indebtedness" means Indebtedness that is convertible only into common stock of TDC or any Subsidiary; "Convertible Subordinated Indebtedness" means Subordinated Indebtedness that is Convertible Indebtedness; "Cost of Acquisition" means the sum of (i) the market value, as at the date of entering into any agreement to acquire any Person, of the assets and/or the capital stock or warrant or option to be transferred in connection therewith, (ii) any cash or face amount of any debt instrument given as consideration, and (iii) any Indebtedness assumed (or taken subject to) by TDC or its Subsidiaries in connection with such acquisition; "Credit Margin" means, for any day, with respect to any Canadian Acceptance accepted under the Canadian Revolving Commitment the amount set out as the Applicable Interest Addition used for determining the Eurodollar Rate; "Default" means any event or condition which, with the giving or receipt of notice or lapse of time or both, would constitute an Event of Default hereunder; "Defaulted Receivable" means any Receivable which is at the time of transfer to Enterprise pursuant to the Transfer and Administration Agreement either (i) unpaid for 91 days or more from the original due date, (ii) as to which an event of bankruptcy has occurred with respect to the obligor thereunder, (iii) is deemed uncollectible by TDC, or (iv) consistent with TDC's credit and collection policy should be written off as uncollectible; 20 28 "Dollar Equivalent Amount" means, with respect to a specified Alternative Currency amount, the amount of Dollars into which an Alternative Currency amount would be converted, based on the applicable Advance Date Exchange Rate; "Dollar Value" of an Advance or a Loan in an Alternative Currency means the Dollar Equivalent Amount of the principal amount of such Advance or Loan, as recorded in the Agent's records pursuant to Section 2.01(b) and Section 3.01(b); "Dollars" and the symbol "$" means dollars constituting legal tender for the payment of public and private debts in the United States of America; "Domestic Acceptance" means a draft drawn by TDC on, and accepted by, NationsBank, which Acceptance is eligible for discount by Federal Reserve Banks pursuant to paragraph 7 of Section 13 of the Federal Reserve Act (12 U.S.C. Section 372), as amended from time to time and has a maturity date of 30, 60, 90 or 180 days after the date such Acceptance was created and does not extend beyond the Revolving Credit Termination Date, and shall include for purposes of computation of Domestic Acceptance Usage the Existing Domestic Acceptances; "Domestic Acceptance Date" means that date upon which NationsBank creates a Domestic Acceptance pursuant to Article II hereof; "Domestic Acceptance Usage" means, as at any date of determination, the aggregate face amount of all completed Domestic Acceptances which have not been repaid by the Multicurrency Facilities Borrowers whether or not due and whether or not held by NationsBank; "Domestic Advance" means a borrowing under (i) the Domestic Revolving Credit Facility consisting of the aggregate principal amount of a Domestic Base Rate Loan or Fixed Rate Loan, as the case may be and (ii) the Swing Line consisting of Floating CD Loans; "Domestic Base Rate" means, for any day, the rate per annum equal to (A) for Loans in Article II hereof the higher of (i) the Federal Funds Effective Rate for such day plus one-half of one percent (.5%) and (ii) the Domestic Prime Rate for such day. Any change in the Domestic Base Rate resulting from a change in the Domestic Prime Rate or the Federal Funds Effective Rate shall become effective on the effective date of such change in the Domestic Prime Rate or the Federal Funds Effective Rate; and (B) for Canadian Loans in Article III hereof made by Canadian Facilities Lenders a fluctuating rate of interest per annum (expressed on the basis of a year of 365 days) equal to the higher of: (a) the rate of interest most recently established by CIBC as its base 21 29 rate for Dollar loans made in Canada; and (b) the Federal Funds Effective Rate in effect on each day as determined by the Agent plus 1/2 of 1%. The Domestic Base Rate is not necessarily intended to be the lowest rate of interest determined by CIBC in connection with extensions of credit in Dollars. Changes in the rate of interest on that portion of any Canadian Loans maintained as Domestic Base Rate Loans will take effect simultaneously with each change in the Domestic Base Rate. The Canadian Agent will give notice promptly to TD Canada and the Canadian Facilities Lenders of changes in the Domestic Base Rate; "Domestic Base Rate Loan" means a Loan for which the rate of interest is determined by reference to the Domestic Base Rate; "Domestic Borrowers' Account" means a demand deposit account with the Agent, which may be maintained at one or more offices of the Agent, or an agent for the Agent; "Domestic Letter of Credit" means a Letter of Credit issued under the Domestic Letter of Credit Facility, and shall include for purposes of computation of Domestic Letter of Credit Outstandings, the Existing Domestic Letters of Credit and the related reimbursement obligations; "Domestic Letter of Credit Commitment" means an amount not to exceed $125,000,000; "Domestic Letter of Credit Facility" means the facility described in Article II hereof providing for the issuance by NationsBank for the account of the Multicurrency Facilities Borrowers of Letters of Credit in an aggregate stated amount at any time outstanding not exceeding the Domestic Letter of Credit Commitment; "Domestic Letter of Credit Outstandings" means all undrawn amounts of Domestic Letters of Credit plus Reimbursement Obligations relating to Domestic Letters of Credit; "Domestic Loans" means Loans made by the Multicurrency Facilities Lenders pursuant to Sections 2.01, 2.04 and 2.15 hereof; "Domestic Prime Rate" means the per annum rate of interest established from time to time by NationsBank as its prime rate, which rate may not be lowest rate charged by NationsBank to its customers; "Domestic Revolving Credit Commitment" means with respect to each Multicurrency Facilities Lender, the obligation of such Lender to make Loans to the Multicurrency Facilities Borrowers up to an aggregate principal amount at any one time 22 30 outstanding equal to the product of the percentage set forth in Exhibit A opposite such Lender's name times the Total Domestic Revolving Credit Commitment as the same may be increased or decreased from time to time pursuant to this Agreement; "Domestic Revolving Credit Facility" means the facility described in Article II hereof providing for Loans to the Multicurrency Facilities Borrowers by the Multicurrency Facilities Lenders in the aggregate principal amount of the Total Domestic Revolving Credit Commitment less the aggregate amount of outstanding Swing Line Loans, Domestic Letters of Credit Outstandings and Domestic Acceptances Usage; "Domestic Revolving Credit Notes" means the promissory notes of the Multicurrency Facilities Borrowers executed and delivered to the Multicurrency Facilities Lenders as provided in Section 2.05(a) and Section 2.16 hereof in substantially the form attached as Exhibit E-2, with appropriate insertions as to amounts, dates and names of Multicurrency Facilities Lenders, which Domestic Revolving Credit Notes shall be delivered to evidence the Domestic Revolving Loans provided for herein; "Domestic Revolving Loan" means Loans made by the Multicurrency Facilities Lenders to the Multicurrency Facilities Borrowers pursuant to Section 2.01 hereof; "Domestic Subsidiary" means a Subsidiary of TDC which is organized under the laws of the United States, Federal or state, or any territory or instrumentality thereof; "Eligible Assignee" means (i) a Lender; (ii) an affiliate of a Lender; and (iii) any other Person approved by the Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 12.01, the Borrowers, such approval not to be unreasonably withheld or delayed by any Borrower or the Agent and such approval to be deemed given by any Borrower if no objection is received by the assigning Lender and the Agent from such Borrower within two Business Days after notice of such proposed assignment has been provided by the assigning Lender to such Borrower; provided, however, that neither any Borrower nor an affiliate of any Borrower shall qualify as an Eligible Assignee; provided, further, that Borrowers may withhold approval hereunder in their sole discretion if such assignment would give rise to the payment of any additional costs under Article IV; "Enterprise" means Enterprise Funding Corporation, a Delaware corporation; "Environmental Laws" means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other "Superfund" or "Superlien" law or any other federal, or applicable state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time 23 31 hereafter in effect; "ERISA" means, at any date, the Employee Retirement Income Security Act of 1974 and the regulations thereunder, all as the same shall be in effect at such date; "Eurodollar Rate" means, for the Interest Period for any Eurodollar Rate Loan, the rate of interest per annum determined pursuant to the following formula: Eurodollar Applicable Reference Rate Applicable Interest = ---------------------------------- + Rate 1 - Applicable Reserve Requirement Addition "Eurodollar Rate Loan" means a Loan (including a Loan in an Alternative Currency) for which the rate of interest is determined by reference to the Eurodollar Rate; "European Currency Unit" or "ECU" means the lawful currency of the European Community; "Event of Default" means any of the occurrences set forth as such in Section 10.01 hereof and the expiration of any applicable notice or cure period; "Excluded Subsidiary" has the meaning assigned thereto in Section 8.20; "Existing Canadian Acceptances" means acceptances outstanding under the Prior Facilities as of the Closing Date, more particularly described on Schedule 1.1 hereto; "Existing Canadian Letters of Credit" means standby and commercial letters of credit outstanding under the Prior Facilities as of the Closing Date, more particularly described on Schedule 1.2; "Existing Domestic Acceptances" means acceptances outstanding under the Prior Facilities as of the Closing Date, more particularly described on Schedule 1.3 hereto; "Existing Domestic Letters of Credit" means standby and commercial letters of credit outstanding under the Prior Facilities as of the Closing Date, more particularly described on Schedule 1.4; "Federal Funds Effective Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to 24 32 the Agent (in its individual capacity) on such day on such transactions as determined by the Agent; "Fiscal Year" means the 12 month period of TDC ending on January 31 of each calendar year and commencing on February 1 of each calendar year; "Fixed CD Loan" means a CD Loan for which a Multicurrency Facilities Borrower elects an Interest Period of 30, 60, 90 or 180 days pursuant to Section 2.01(b)(iii) hereof; "Fixed Rate Loan" means a Loan which is either a Fixed CD Loan, a Eurodollar Rate Loan or a Competitive Bid Loan; "Floating CD Loan" means a CD Loan other than a Fixed CD Loan; "Floating Rate Loan" means a Loan in Dollars which is a Domestic Base Rate Loan or a Floating CD Loan; "Foreign Benefit Law" means any applicable statute, law, ordinance, code, rule, regulation, order or decree of any foreign nation or any province, state, territory, protectorate or other political subdivision thereof regulating, relating to, or imposing liability or standards of conduct concerning any pension, retirement, healthcare, death, disability or other employee benefit plan; "Foreign Subsidiary" means a Subsidiary organized under the laws of a jurisdiction outside the United States; "Four-Quarter Period" means a period of four full consecutive fiscal quarters of TDC and its Subsidiaries, taken together as one accounting period; "Funding Bank" means any banking institution approved by the Agent located within a country which country's currency constitutes an Alternative Currency and, with respect to Canadian Dollars to be made available to TD Canada under the Canadian Revolving Credit Facility, the Canadian Agent; "General Acceptance Agreement" means the General Acceptance Agreement in the form attached hereto and marked as Exhibit F; "Generally Accepted Accounting Principles" means those principles of accounting set forth in pronouncements of the Financial Accounting Standards Board, the American Institute of Certified Public Accountants or which have other substantial authoritative support and are applicable in the circumstances as of the date of a report, as such principles are from time to time supplemented and amended; 25 33 "German Mark" means the official currency of the Federal Republic of Germany; "Guarantor" means (a) TDC or any Significant Subsidiary, other than an Excluded Subsidiary, or (b) any other Person that is party to a Guaranty; "Guaranty" means, collectively or individually, as the context may require, (i) the unconditional Guaranty and Suretyship Agreement in favor of the Multicurrency Facilities Lenders in substantially the form attached hereto as Exhibit G-1 delivered to the Agent in accordance with Article V hereof or pursuant to Section 8.20 hereof pursuant to which the Significant Subsidiaries (other than TD France or any Excluded Subsidiary) guarantee the payment and performance of all Obligations to the Multicurrency Facilities Lenders as more specifically set forth in such Guaranty, and (ii) the unconditional Guaranty and Suretyship Agreement in favor of the Canadian Facilities Lenders in substantially the form attached hereto as Exhibit G-2 delivered to the Agent in accordance with Article V hereof pursuant to which TDC and its Significant Subsidiaries (other than any Excluded Subsidiary) guarantee the payment and performance of all Obligations to the Canadian Facilities Lenders as more specifically set forth in such Guaranty; "Hazardous Material" means and includes any hazardous, toxic or dangerous waste, substance or material, the generation, handling, storage, disposal, treatment or emission of which is subject to any Environmental Law in effect on any date; "Indebtedness" means with respect to any Person, all Indebtedness for Money Borrowed, all indebtedness of such Person for the acquisition of property, other than purchases of products and merchandise in the ordinary course of business so long as payment therefor is due within one year, indebtedness secured by any Lien on the property of such Person whether or not such indebtedness is assumed, all liability of such Person by way of endorsements (other than for collection or deposit in the ordinary course of business); all Contingent Obligations, including letters of credit and Rate Hedging Obligations; all Capital Leases and other items which in accordance with Generally Accepted Accounting Principles are classified as liabilities on a balance sheet; provided that in no event shall the term Indebtedness include the TDC TROL, capital stock, surplus and retained earnings, minority interest in the common stock of Subsidiaries, lease obligations (other than pursuant to Capital Leases), reserves for deferred income taxes and investment credits, other deferred credits and reserves, and deferred compensation obligations; "Indebtedness for Money Borrowed" means, for any Person, (i) all indebtedness, obligations and liabilities of such Person for money borrowed which are evidenced by bonds, debentures, notes or other similar instruments, (ii) the purchase price of Eligible Receivables (as defined in the Transfer and Administration Agreement) sold pursuant to the Trade Receivables Purchase Facility and (iii) all Capital Leases which have been capitalized in accordance with Generally Accepted Accounting Principles; provided, 26 34 however, the term "Indebtedness for Money Borrowed" shall specifically exclude payroll indebtedness and trade indebtedness incurred in the ordinary course of business (including trade indebtedness through financial intermediaries) provided such trade indebtedness has a maturity of less than one year; "Interest Period" for each Fixed Rate Loan or Acceptance means a period commencing on the date such Fixed Rate Loan is made or Converted or such Acceptance is created and each subsequent period commencing on the last day of the immediately preceding Interest Period for such Fixed Rate Loan or Acceptance, as the case may be, and ending, at the Borrower's option, (A) for any Fixed CD Loan or Acceptance, on the date 30, 60, 90 or 180 days thereafter as notified to the Applicable Agent by the Authorized Representative of such Borrower two (2) Business Days prior to the beginning of such Interest Period and (B) for any Eurodollar Rate Loan, on the date one, two, three or six months thereafter as notified to the Agent by the Authorized Representative of such Borrower three (3) Business Days prior to the beginning of such Interest Period in the case of a Eurodollar Rate Loan and five (5) Business Days prior to the beginning of such Interest Period in the case of a Loan in an Alternative Currency other than Canadian Dollars, French Francs, German Marks, British Pounds and European Currency Units; provided, that, (i) if the Authorized Representative fails to notify the Applicable Agent of the length of an Interest Period for any Fixed CD Loan two (2) Business Days or for any Eurodollar Rate Loan three (3) or five (5) (as the case may be) Business Days, as the case may be, prior to the first day of such Interest Period, the Loan for which such Interest Period was to be determined shall be deemed to be a Domestic Base Rate Loan as of the first day thereof; (ii) if an Interest Period for a Fixed Rate Loan or Acceptance would end on a day which is not a Business Day, such Interest Period shall be extended to the next Business Day (unless in the case of any Eurodollar Rate Loan, such extension would cause the applicable Interest Period to end in the succeeding calendar month, in which case such Interest Period shall end on the next preceding Business Day); (iii) excluding Interest Periods for Acceptances, there shall not be more than (x) twenty (20) Interest Periods in effect on any day in respect of Domestic Loans and (y) four (4) Interest Periods in effect on any day in respect of Canadian Loans; (iv) Interest Periods shall be of such duration as to permit the Borrowers to make the reductions or repayments required by this Agreement; (v) there shall not be in effect at any one time more than an aggregate of four (4) Canadian Acceptances with different maturity dates; 27 35 (vi) the first Interest Period for a Eurodollar Rate Loan shall commence on the day such Canadian Loan is advanced by the Canadian Facilities Lenders and each subsequent Interest Period relative thereto shall commence forthwith upon the expiry of the immediately preceding Interest Period relative thereto; and (vii) if any Interest Period is extended or shortened by the application of clause (vi) above, the following Interest Period shall (without prejudice to the application of clause (vi) above) end on the day on which it would have ended if the immediately preceding Interest Period had not been so extended or shortened. "Inventory" means and includes any and all goods, merchandise and other personal property, including, without limitation, goods in transit, wheresoever located and whether now owned or hereafter acquired by TDC and its Subsidiaries which is or may at any time be held for sale or lease, furnished under any contract of service or held as raw materials, work-in-process, or supplies or materials used or consumed in TDC's or its Subsidiaries' businesses; "LC/Acceptance Account Agreement" means the LC/Acceptance Account Agreement dated as of August 28, 1997 among the Borrowers and the Agent, as amended or modified from time to time; "Lending Office" means, as to each Lender, the Lending Office of such Lender designated on the signature pages hereof or in an Assignment and Acceptance or such other office of such Lender (or of an affiliate of such Lender) as such Lender may from time to time specify to the Authorized Representative and the Agent, in the case of Multicurrency Facilities Lenders, or the Canadian Agent, in the case of Canadian Facilities Lenders, as the office by which its Loans are to be made and maintained; "Letter of Credit" or "Letters of Credit" means a Commercial Letter(s) of Credit or Standby Letter(s) of Credit issued by NationsBank (in the case of Domestic Letters of Credit) and CIBC (in the case of Canadian Letters of Credit), as described in Articles II and III hereof; "Letter of Credit Applications" means, collectively, the applications and agreements from the applicable Borrower to NationsBank (in respect of Domestic Letters of Credit) or CIBC (in respect of Canadian Letters of Credit) executed and delivered from time to time to support the issuance of Letters of Credit; "Lien" means any interest in property securing any obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. For the purposes of this Agreement, TDC and its Subsidiaries shall be deemed to be the owners 28 36 of any property which it or they have acquired or hold subject to a conditional sale agreement, financing lease, or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes; "Loan" or "Loans" means any of the Fixed Rate Loans, Floating Rate Loans or Canadian Prime Loans, as the context may require, made pursuant to Articles II and III hereof; "Loan Documents" means this Agreement, the Notes, the Guaranties, the LC/Acceptance Account Agreement, the Assumption and Consent Agreements, the Letter of Credit Applications, the General Acceptance Agreement for Acceptances, the Security Instruments, drafts and all other instruments and documents heretofore or hereafter executed or delivered to and in favor of any Lenders or the Agents in connection with the Loans, the Letters of Credit or the Acceptances made, issued or created under this Agreement as the same may be amended, modified or supplemented from time to time; "Loan Parties" or "Loan Party" means collectively or individually, as the case may be, the Borrowers and the Significant Subsidiaries; "Multicurrency Facilities" means the revolving credit, competitive bid, swing line, letter of credit and acceptance facilities made available by the Lenders pursuant to Article II hereof; "Multicurrency Facilities Notes" means, collectively, the Domestic Revolving Credit Notes, the Competitive Bid Notes and the Swing Line Note; "Multi-employer Plan" means an employee pension benefit plan covered by Title IV of ERISA and in respect of which TDC or any Subsidiary is an "employer" as described in Section 4001(b) of ERISA, which is also a multi-employer plan as defined in Section 4001(a)(3) of ERISA; "Non-Acceptance Lender" means a Lender that is not a Canadian chartered bank; "Notes" means, collectively, the Multicurrency Facilities Notes and the Obligations herein to the Canadian Facilities Lenders as recorded on the records of the Canadian Agent; "Obligations" means the obligations, liabilities and Indebtedness of TDC and its Subsidiaries with respect to (i) the principal and interest on the Loans as evidenced by the Notes and on the records of the Canadian Agent as to the Obligations herein to the Canadian Facilities Lenders, (ii) the Reimbursement Obligations, (iii) all liabilities of any Borrower to any Lender or an affiliate of a Lender which arise under a Swap Agreement, and (iv) the payment and performance of all other obligations, liabilities and Indebtedness of TDC and its Subsidiaries to the Lenders, the Canadian Agent or the Agent, under this 29 37 Agreement, under any one or more of the other Loan Documents or with respect to the Loans; "Participation" means, with respect to any Multicurrency Facilities Lender (other than NationsBank) or any Canadian Facilities Lender (other than CIBC), as the case may be, the extension of credit represented by the participation of such Lender hereunder in the liability of (i) in the case of Multicurrency Facilities Lenders, NationsBank in respect of each Swing Line Loan made, Domestic Letter of Credit or Domestic Acceptance issued by NationsBank in accordance with the terms hereof and (ii) in the case of Canadian Facilities Lenders, CIBC in respect of each Canadian Letter of Credit or Canadian Acceptance issued by CIBC in accordance with the terms hereof; "Permitted Acquisition" means the acquisition by TDC or a Subsidiary of a controlling equity interest in or all or substantially all of the assets of any Person, which satisfies each of the following: (i) such Person is in the same or similar line or lines of business as that engaged in by TDC and its Subsidiaries; and (ii) no Default or Event of Default occurs or is created or results from such transaction; "Person" means an individual, limited liability company, partnership, corporation, trust, unincorporated organization, association, joint venture or other entity or a government or agency or political subdivision thereof; "Pledge Agreement" or "Pledge Agreements" means, collectively (or individually as the context may indicate), (i) those certain security agreements dated as of the date hereof between TDC or a Subsidiary of TDC and the Agent, and (ii) any additional stock pledge agreement, collateral assignment of partnership interests, or other similar agreement delivered to the Agent pursuant to Section 8.20, as any such agreement or assignment referred to in clause (i) or (ii) may be hereafter amended, supplemented or replaced from time to time; "Principal Office" means the principal office of the Agent at Independence Center, 15th Floor, Charlotte, North Carolina 28255, Attention: Agency Services, or such other office and address as the Agent may from time to time designate; "Property" has the meaning given such term in Section 7.02(o); "Rate Hedging Obligations" means any and all obligations of TDC and its Subsidiaries, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange 30 38 agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts, warrants and those commonly known as interest rate "swap" agreements; and (b) any and all cancellations, buybacks, reversals, terminations or assignments of any of the foregoing; "Regulation D" means Regulation D of the Board as the same may be amended or supplemented from time to time; "Regulatory Change" means any change effective after the Closing Date in United States federal or state laws or regulations (including Regulation D and capital adequacy regulations), Canadian federal or provincial laws or regulations, or other foreign laws or regulations or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks, which includes any of the Lenders, under any United States federal or state, Canadian federal or provincial, or other foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof or compliance by any Lender with any request or directive regarding capital adequacy, including with respect to "highly leveraged transactions," whether or not having the force of law, whether or not failure to comply therewith would be unlawful and whether or not published or proposed prior to the date hereof; "Reimbursement Obligation" shall mean at any time, the obligation of any Borrower with respect to any Letter of Credit or Acceptance to reimburse NationsBank or CIBC, as the case may be, and the Lenders to the extent of their respective Participations (including by the receipt by NationsBank or CIBC of proceeds of Loans pursuant to Articles II or III) for amounts theretofore paid by NationsBank or CIBC pursuant to a drawing under a Letter of Credit or payment of an Acceptance; "Required Lenders" means, as of any date, Lenders on such date having Credit Exposures (as defined below) aggregating more than 50% of the aggregate Credit Exposures of all the Lenders on such date, without distinction or preference as between Canadian Facilities and Multicurrency Facilities. For purposes of the preceding sentence, the amount of the "Credit Exposure" of each Lender shall be equal to the aggregate principal amount of the Loans owing to such Lender plus the sum of the aggregate unutilized amounts of such Lender's Domestic Revolving Credit Commitment and Canadian Revolving Credit Commitment plus the amount of such Lender's Applicable Commitment Percentage of the aggregate undrawn face amount of the outstanding Letters of Credit and unpaid face amount of Acceptances and of the Reimbursement Obligations; provided that, if any Lender shall have failed to pay to NationsBank or CIBC, as applicable, its Applicable Commitment Percentage of any Swing Line Loan, drawing under any Letter of Credit or payment of an Acceptance resulting in an outstanding Reimbursement Obligation, such Lender's Credit Exposure attributable to (i) Swing Line Loans, Domestic Letters of Credit, Domestic Acceptances, Reimbursement Obligations relating to Domestic Letters of Credit and the Domestic Letter of Credit Commitment 31 39 shall be deemed to be held by NationsBank for purposes of this definition, and (ii) Canadian Letters of Credit, Canadian Acceptances, Reimbursement Obligations relating to Canadian Letters of Credit and the Canadian Letter of Credit Commitment shall be deemed to be held by CIBC for purposes of this definition; "Revolving Credit Termination Date" means (i) August 28, 2000 or (ii) such earlier date of termination of Lenders' obligations pursuant to Section 10.01 upon the occurrence of an Event of Default, or (iii) such date as the Borrowers may voluntarily permanently terminate the Multicurrency Facilities and the Canadian Facilities by payment in full of all Obligations (including the discharge of all obligations of NationsBank, CIBC and the other Lenders with respect to Letters of Credit, Acceptances and Participations) or (iv) such later date as the Borrowers, the Agent, the Canadian Agent and the Lenders shall agree in writing pursuant to Section 2.14 hereof with respect to Multicurrency Facilities or Section 3.12 with respect to Canadian Facilities; "Security Instruments" means, collectively, the Pledge Agreements and all other agreements, instruments and other documents, whether existing or hereafter in effect, pursuant to which any Borrower, Guarantor or other Person shall grant or convey to the Agent, the Canadian Agent or the Lenders a Lien in property as security for all or any portion of the Obligations or any Secured Obligations (as defined in any Guaranty), as any such agreements, instruments or documents may be amended, modified or supplemented from time to time; "Significant Subsidiary" means any Subsidiary which has either (i) total assets of more than $10,000,000 or (ii) total revenues of more than $10,000,000 during any Four-Quarter Period; provided, however, in no event shall the sum of total revenues or total assets of Subsidiaries not constituting Significant Subsidiaries exceed in either case $40,000,000 and shall not include (x) any Subsidiary which is a partnership whose sole purpose is holding a single real estate asset, (y) a Subsidiary established to act as a foreign sales corporation under the Internal Revenue Code of 1986, as amended and (z) Tech Data France, Inc. and Tech Data France II, Inc. so long as their only asset is their respective ownership interest in Tech Data France, S.N.C.; "Single Employer Plan" means any employee pension benefit plan covered by Title IV of ERISA and in respect of which TDC or any Subsidiary is an "employer" as described in Section 4001(b) of ERISA, which is not a Multi-employer Plan; "Solvent" means, when used with respect to any Person, that at the time of determination: (i) the fair value of its assets (both at fair valuation and at present fair saleable value on an orderly basis) is in excess of the total amount of its liabilities, including, without limitation, Contingent Obligations; and 32 40 (ii) it is then able and expects to be able to pay its debts as they mature; and (iii) it has capital sufficient to carry on its business as conducted and as proposed to be conducted; "Spot Rate of Exchange" means, (i) in determining the Dollar Equivalent Amount of a specified Alternative Currency amount as of any date, the spot exchange rate determined by the Agent in accordance with its usual procedures for the purchase by the Agent of Dollars with such Alternative Currency at approximately 10:00 A.M., Charlotte, North Carolina time on the Business Day that is two (2) Business Days prior to such date, (ii) in determining the Alternative Currency Equivalent Amount of a specified Dollar amount on any date, the spot exchange rate determined by the Agent in accordance with its usual procedures for the purchase by the Agent of such Alternative Currency with Dollars at approximately 10:00 A.M., Charlotte, North Carolina time on the Business Day that is two (2) Business Days prior to such date and (iii) for all Loans under the Total Canadian Revolving Credit Commitment in determining the Alternative Currency Equivalent Amount of a specified Dollar amount or the Dollar amount when converting from Canadian Dollars, the amount in Dollars or Canadian Dollars, as the case may be, after giving effect to a conversion of a specified amount in Dollars to an Alternative Currency or of Alternative Currency to Dollars, as the case may be, at the rate of exchange quoted as the Bank of Canada noon spot rate on such date; "Standby Letter of Credit" means a letter of credit issued (i) in the case of Domestic Letters of Credit, by NationsBank for the account of the applicable Multicurrency Facilities Borrower and (ii) in the case of Canadian Letters of Credit, by CIBC for the account of TD Canada, in favor of a Person advancing credit or securing an obligation on behalf of the applicable Borrower; provided that the expiry date of a Standby Letter of Credit shall not be later than the thirtieth Business Day preceding the Revolving Credit Termination Date; "Subordinated Indebtedness" means, for any Person, all Indebtedness for Money Borrowed which is subordinated to the Obligations on terms acceptable to the Agent; "Subsidiary" means any Person in which more than 50% of its outstanding voting stock or rights or more than 50% of all equity interest is owned directly or indirectly by TDC and/or by one or more of TDC's Subsidiaries; "Swap Agreement" means one or more agreements with respect to Indebtedness evidenced by the Notes between one or more Borrowers and one or more Lenders, on terms mutually acceptable to such Borrower or Borrowers and such Lender or Lenders, which agreements create Rate Hedging Obligations; "Swing Line" means the revolving line of credit established by NationsBank in 33 41 favor of TDC pursuant to Section 2.15; "Swing Line Loans" means Loans made by NationsBank to TDC pursuant to Section 2.15; "Swing Line Note" means the promissory note of TDC executed and delivered to NationsBank as provided in Section 2.05(b) substantially in the form attached as Exhibit E-3, which shall be delivered to evidence the Swing Line Outstandings; "Swing Line Outstandings" means, as of any date of determination, the aggregate principal Indebtedness of TDC on all Swing Line Loans then outstanding; "Syndicated Loans" shall mean the Domestic Revolving Loans that are not Competitive Bid Loans or Swing Line Loans; "TDC TROL" means the Tax Retention Operating Lease dated April 26, 1996 between TDC and First Security Bank, N.A. (f/n/a First Security Bank of Utah) in its capacity as owner trustee of the TD 1996 Real Estate Trust; "TDF" means Tech Data Finance, Inc., a California corporation, and a wholly-owned Subsidiary of TDC; "Total Canadian Revolving Credit Commitment" means an amount equal to US $20,000,000, as reduced or increased from time to time in accordance with Section 3.07; "Total Canadian Utilization" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Canadian Loans plus (ii) the Canadian Acceptance Usage plus (iii) the Canadian Letter of Credit Outstandings, in each case at the Dollar Value or Dollar Equivalent Amount, as the case may be; "Total Domestic Revolving Credit Commitment" means an amount equal to $530,000,000, as reduced or increased from time to time in accordance with Section 2.08; "Total Domestic Utilization" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Domestic Loans, plus (ii) the Domestic Acceptance Usage, plus (iii) the Domestic Letter of Credit Outstandings, in each case at the Dollar Value or Dollar Equivalent Amount, as the case may be; "Trade Receivable Purchase Facility" means the facility created for the benefit of TDF and TDC pursuant to the Transfer and Administration Agreement; "Transfer and Administration Agreement" means the Amended and Restated Transfer and Administration Agreement dated as of January 21, 1997 among TDC, TDF, the Bank Investors and Enterprise, as amended, modified or supplemented from time to 34 42 time, providing for the purchase of Receivables (as defined in the Transfer and Administration Agreement) of TDF by Enterprise. "Type" means any type of Loan (i.e., a Domestic Base Rate Loan, Fixed CD Loan, Floating CD Loan, Absolute Rate Loan, Canadian Prime Rate Loan or Eurodollar Rate Loan). 1.02 Rules of Interpretation. (a) All accounting terms not specifically defined herein shall have the meanings assigned to such terms and shall be interpreted in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis. (b) Each term defined in Article 1 or 9 of the Florida Uniform Commercial Code shall have the meaning given therein unless otherwise defined herein, except to the extent that the Uniform Commercial Code of another jurisdiction is controlling, in which case such terms shall have the meaning given in the Uniform Commercial Code of the applicable jurisdiction. (c) The headings, subheadings and table of contents used herein or in any other Loan Document are solely for convenience of reference and shall not constitute a part of any such document or affect the meaning, construction or effect of any provision thereof. (d) Except as otherwise expressly provided, references herein to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules are references to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules in or to this Agreement. (e) All definitions set forth herein or in any other Loan Document shall apply to the singular as well as the plural form of such defined term, and all references to the masculine gender shall include reference to the feminine or neuter gender, and vice versa, as the context may require. (f) When used herein or in any other Loan Document, words such as "hereunder", "hereto", "hereof" and "herein" and other words of like import shall, unless the context clearly indicates to the contrary, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof. (g) References to "including" means including without limiting the generality of any description preceding such term, and for purposes hereof the rule of ejusdem generis shall not be applicable to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned. (h) Each of the parties to the Loan Documents and their counsel have reviewed and revised, or requested (or had the opportunity to request) revisions to, the Loan Documents, and any rule of construction that ambiguities are to be resolved against the drafting party shall be inapplicable in the construing and interpretation of the Loan Documents and all exhibits, 35 43 schedules and appendices thereto. (i) Any reference to an officer of any Borrower or any other Person by reference to the title of such officer shall be deemed to refer to each other officer of such Person, however titled, exercising the same or substantially similar functions. (j) All references to any agreement or document as amended, modified or supplemented, or words of similar effect, shall mean such document or agreement, as the case may be, as amended, modified or supplemented from time to time only as and to the extent permitted therein and in the Loan Documents. 36 44 ARTICLE II The Multicurrency Facilities 2.01 Revolving Credit Facility (a) Commitment. Subject to the terms and conditions of this Agreement, each Multicurrency Facilities Lender severally agrees to make Domestic Advances in Dollars or an Alternative Currency (as specified in the respective Borrowing Notice) to the Multicurrency Facilities Borrower requesting such Advance, as the case may be, as specified in the Borrowing Notice, from time to time from the Closing Date until the Revolving Credit Termination Date, on a pro rata basis as to the total borrowing requested by such Multicurrency Facilities Borrower on any day determined by its Applicable Commitment Percentage, up to but not exceeding a Dollar Value equal to the Domestic Revolving Credit Commitment of such Multicurrency Facilities Lender, provided, however, that the Multicurrency Facilities Lenders will not be required and shall have no obligation to make any Domestic Advance (i) so long as a Default or an Event of Default has occurred and is continuing or (ii) if the Agent has accelerated the maturity of the Notes as a result of an Event of Default; provided further, however, that immediately after giving effect to each Domestic Advance, the Total Domestic Utilization shall not exceed the Total Domestic Revolving Credit Commitment. Within such limits, the Multicurrency Facilities Borrowers may borrow, repay and reborrow hereunder, on a Business Day, from the Closing Date until, but (as to borrowings and reborrowings) not including, the Revolving Credit Termination Date; provided, however, that (x) no Fixed Rate Loan shall be made which has an Interest Period that extends beyond the Revolving Credit Termination Date and (y) each Fixed Rate Loan may, subject to the provisions of Section 2.09, be repaid only on the last day of the Interest Period with respect thereto. The Multicurrency Facilities Borrowers agree that if at any time the Total Domestic Utilization shall exceed the Total Domestic Revolving Credit Commitment, the Multicurrency Facilities Borrowers shall immediately reduce the outstanding Domestic Revolving Loans such that, as a result of such reduction, the Total Domestic Revolving Credit Facility shall equal or exceed the Total Domestic Utilization. (b) Amounts, Advances and Rate Selection. (i) Each request for a Domestic Advance of an Alternative Currency under a Borrowing Notice shall constitute such Multicurrency Facilities Borrower's request for a Domestic Revolving Loan of the Dollar Value of the amount of the Alternative Currency specified in such Borrowing Notice and for such Loan to be made available by the Multicurrency Facilities Lenders to such Multicurrency Facilities Borrower in the Alternative Currency Equivalent Amount of such Dollar Value (determined based on the Advance Date Exchange Rate applicable to such Domestic Advance). The principal amount outstanding on any Domestic Loan shall be recorded in the Agent's records in Dollars (in the case of a Domestic Advance of an Alternative Currency as if the Loan had initially been made in Dollars), based on the amount of any Domestic Advance and on the Dollar Value of the initial Advance of an Alternative Currency, as reduced from time to time by the Dollar Equivalent Amount (based on the Advance Date Exchange Rate applicable to such Domestic Advance) of any principal payments with respect to such Domestic Advance. In the event a Fixed Rate Loan 37 45 of an Alternative Currency is Continued, such election to Continue the Fixed Rate Loan shall be treated as a Domestic Advance and the Agent shall notify the applicable Borrower and the Multicurrency Facilities Lenders of the Advance Date Exchange Rate, Interest Period and the Eurodollar Rate for such Continued Fixed Rate Loan. The Lenders shall each be deemed to have made a Domestic Advance to such Multicurrency Facilities Borrower of its Applicable Commitment Percentage of such Loan of an Alternative Currency and the Agent shall apply the Advance Date Exchange Rate for such new Interest Period to such Continued Alternative Currency Equivalent Amount to determine the new Dollar Value of such Fixed Rate Loan and shall adjust its books accordingly. In the event that such adjustment with respect to a Continued Domestic Loan would cause the Total Domestic Utilization to exceed the Total Domestic Revolving Credit Commitment, the Multicurrency Facilities Borrowers shall, immediately on the effective date of such Continuation, repay (a "Rate Adjustment Payment") the portion of such Continued Loan (applying the new Advance Date Exchange Rate) necessary to ensure that the Total Domestic Utilization does not exceed the Total Domestic Revolving Credit Commitment, provided further that the Multicurrency Facilities Borrowers shall not be required to pay any additional compensation pursuant to Section 4.05(a) with respect to a prepayment of a Domestic Loan required by this sentence if such prepayment is made immediately on the effective date of the continuation giving rise to such prepayment. For the purposes of determining the amount of Domestic Loans plus Domestic Letter of Credit Outstandings plus Domestic Acceptance Usage plus Swing Line Outstandings, it is intended by the parties that all Domestic Loans shall be the functional equivalent of Loans made and repaid (based on the applicable Advance Date Exchange Rate for each Advance) in Dollars. It is recognized that one or more Lenders may elect to record Domestic Loans or Domestic Advances in Alternative Currencies. The Agent shall maintain records sufficient to identify at any time, (i) the Advance Date Exchange Rate with respect to each Domestic Advance, and (ii) the portion of the outstanding Domestic Revolving Loans attributable to each Domestic Advance. There shall be no more than eight (8) Domestic Revolving Loans of an Alternative Currency outstanding at any one time. (ii) The Total Domestic Utilization shall not exceed at any time an amount equal to the Total Domestic Revolving Credit Commitment. Each Domestic Revolving Loan and each Conversion under Section 2.09 shall be (A) in the case of Fixed CD or Eurodollar Rate Loans, in an amount not less than $3,000,000 (or as to Eurodollar Rate Loans the equivalent thereof if in an Alternative Currency) and if greater in integral multiples of $1,000,000 (or as to Eurodollar Rate Loans the equivalent thereof if in an Alternative Currency plus accrued interest rounded upward to the nearest $10,000), and (B) in the case of Domestic Base Rate Loans in an amount not less than $1,000,000, and, if greater, an integral multiple of $100,000. (iii) For each Domestic Advance an Authorized Representative shall give the Agent at least (A) three (3) Business Days irrevocable telecopy or telex notice of each Fixed Rate Loan in an Alternative Currency (whether representing an additional borrowing hereunder or the Conversion of borrowing hereunder) prior to 10:30 A.M., Charlotte, North Carolina time, (B) three (3) Business Days irrevocable telecopy or telex notice prior to 10:30 A.M., Charlotte, North Carolina time in the case of Eurodollar Rate Loans in Dollars or two (2) Business Days irrevocable telecopy or telex notice prior to 10:30 A.M. Charlotte, North Carolina time in the 38 46 case of Fixed CD Loans, and, (C) irrevocable telephonic or telefacsimile notice of each Floating Rate Loan representing a borrowing or Conversion hereunder prior to 10:30 A.M. Charlotte, North Carolina time on the day of such proposed Floating Rate Loan. Each such Borrowing Notice, which shall be effective upon receipt by the Agent, shall specify the Type of Loan, whether Dollar or Alternative Currency, amount of the Domestic Loan for which the Domestic Advance is to be made, the date of borrowing and the Interest Period to be used in the computation of interest. The Authorized Representative shall provide the Agent written confirmation of each such telephonic notice on the same day by telefacsimile transmission in the form of a Borrowing Notice in the form attached hereto as Exhibit D-1, in each case with appropriate insertions, but failure to provide such confirmation shall not affect the validity of such telephonic notice. The duration of the initial Interest Period for each Domestic Loan shall be as specified in the initial Borrowing Notice. The Multicurrency Facilities Borrowers shall have the option to elect the duration of subsequent Interest Periods and to Convert the Domestic Loans in accordance with Section 2.09 hereof. If the Agent does not receive a notice of election of duration of an Interest Period or to Convert by the time prescribed hereby and by Section 2.09 hereof, the applicable Multicurrency Facilities Borrower shall be deemed to have elected a Floating Rate Loan bearing interest at the Domestic Base Rate. The Fixed CD Rate may only be elected to apply to Domestic Loans made in Dollars. The Floating CD Rate shall apply only to Swing Line Loans. (iv) Notice of receipt of each Borrowing Notice in respect of Domestic Loans shall be provided by the Agent to each Multicurrency Facilities Lender by telecopy or telex with reasonable promptness, but not later than 12:00 noon, Charlotte, North Carolina time on the same day as Agent's receipt of such notice from the Multicurrency Facilities Borrowers so long as such receipt is prior to 10:30 A.M. At approximately 10:00 A.M. Charlotte, North Carolina time two (2) Business Days preceding the date specified for a Domestic Advance of an Alternative Currency, the Agent shall determine the Advance Date Exchange Rate and the Applicable Rate. Not later than 11:00 A.M. Charlotte, North Carolina time two (2) Business Days preceding the date specified for each Domestic Advance of an Alternative Currency, the Agent shall provide the applicable Multicurrency Facilities Borrower and each Multicurrency Facilities Lender notice by telefacsimile transmission of the Advance Date Exchange Rate applicable to such Domestic Advance, and the applicable Alternative Currency Equivalent Amount of the Domestic Loan or Domestic Loans required to be made by each Multicurrency Facilities Lender on such date, and the Dollar Value of such Domestic Loan or Domestic Loans and the Applicable Rate. (v) In the case of Domestic Advances in Dollars, each Lender shall, pursuant to the terms and conditions of this Agreement, not later than 12:00 noon, Charlotte, North Carolina time on the date specified for such Domestic Advance, make the amount of the Domestic Advance to be made by it on such day available to the Agent by depositing or transferring the proceeds thereof in immediately available funds to the Agent, at the Principal Office. The amount so received by the Agent shall, subject to the terms of this Agreement, be made available to the applicable Multicurrency Facilities Borrower by deposit of the proceeds to an account of such Multicurrency Facilities Borrower maintained at the Principal Office or otherwise as shall be directed in the applicable Borrowing Notice. 39 47 (vi) In the case of Domestic Advances of an Alternative Currency, not later than 9:00 A.M., Charlotte, North Carolina time on the date specified for each Domestic Advance, each Multicurrency Facilities Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make the amount of the Domestic Loan or Domestic Loans to be made by it on such day available to the applicable Multicurrency Facilities Borrower at the Funding Bank, to the account of the Agent with the Funding Bank. The amount so received by the Funding Bank shall, subject to the terms and conditions of the Loan Documents and upon instruction from the Agent to the Funding Bank on the same day but no later than 9:00 A.M. Charlotte, North Carolina time, be made available to the applicable Multicurrency Facilities Borrower by delivery of the Alternative Currency Equivalent Amount to such Multicurrency Facilities Borrower's account with the Funding Bank. (vii) Notwithstanding the foregoing, if a drawing is made under any Domestic Letter of Credit or presentment is made of a Domestic Acceptance prior to the Revolving Credit Termination Date and the applicable Multicurrency Facilities Borrower shall not immediately reimburse NationsBank for the amount of such draw or payment, then notice of such drawing or payment shall be provided promptly by NationsBank to the Agent and the Agent shall provide notice to each Multicurrency Facilities Lender by telephone or telefacsimile. If notice to the Multicurrency Facilities Lenders of a drawing under any Letter of Credit or payment under any Domestic Acceptance is given by the Agent at or before 12:00 noon Charlotte, North Carolina time on any Business Day, the applicable Multicurrency Facilities Borrower shall be deemed to have requested, and each Multicurrency Facilities Lender shall, pursuant to the conditions of this Agreement, make a Domestic Base Rate Loan under the Domestic Revolving Credit Facility in the amount of such Multicurrency Facilities Lender's Applicable Commitment Percentage of such drawing or payment (and in the case of a drawing in an Alternative Currency, a Domestic Base Rate Loan, in an amount equal to such Multicurrency Facilities Lender's Applicable Commitment Percentage of the Dollar Equivalent Amount of such drawing or payment determined on the basis of the Spot Rate of Exchange on the date of drawing under the Letter of Credit) and shall pay such amount to the Agent for the account of NationsBank at the Principal Office in Dollars and in immediately available funds before 2:30 P.M. Charlotte, North Carolina time on the same Business Day. If notice to the Multicurrency Facilities Lenders is given by the Agent after 12:00 noon Charlotte, North Carolina time on any Business Day, the applicable Multicurrency Facilities Borrower shall be deemed to have requested, and each Multicurrency Facilities Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make a Domestic Base Rate Loan under the Domestic Revolving Credit Facility in the amount of such Multicurrency Facilities Lender's Applicable Commitment Percentage of such drawing or payment (and in the case of a drawing in an Alternative Currency, a Domestic Base Rate Loan, in an amount equal to such Multicurrency Facilities Lender's Applicable Commitment Percentage of the Dollar Equivalent Amount of such drawing or payment determined on the basis of the Spot Rate of Exchange on the date of drawing under the Letter of Credit) and shall pay such amount to the Agent for the account of NationsBank at the Principal Office in Dollars and in immediately available funds before 12:00 noon Charlotte, North Carolina time on the next following Business Day. Such Domestic Base Rate Loan shall Continue unless and until the 40 48 applicable Multicurrency Facilities Borrower Converts such Domestic Base Rate Loan in accordance with the terms of Section 2.09 hereof. 2.02 Payment of Interest. (a) The Multicurrency Facilities Borrowers shall pay interest to the Agent for the account of each Multicurrency Facilities Lender on the outstanding and unpaid principal amount of each Domestic Loan made by such Multicurrency Facilities Lender for the period commencing on the date of such Domestic Loan until such Loan shall be due at the then applicable Floating Rate for Floating Rate Loans or applicable Fixed Rate for Fixed Rate Loans, such payments to be made in Dollars with respect to Loans made in Dollars, and at the Applicable Rate in the case of Domestic Loans made in Alternative Currency, such payments to be made in the appropriate Alternative Currency as designated by the Authorized Representative pursuant to Section 2.01 hereof or as otherwise provided herein; provided, however, that if any amount shall not be paid when due (at maturity, by acceleration or otherwise), all amounts outstanding hereunder shall bear interest thereafter (i) in the case of a Fixed Rate Loan, until the end of the Interest Period with respect to such Fixed Rate Loan, at a rate of two percent (2%) above such Fixed Rate and (ii) thereafter, and with respect to Floating Rate Loans, at a rate of interest per annum which shall be two percent (2%) above the Domestic Base Rate or the Floating CD Rate, as applicable, or the maximum rate permitted by applicable law, whichever is lower, from the date such amount was due and payable until the date such amount is paid in full. (b) Interest on each Domestic Loan shall be computed on the basis of a year of 360 days and calculated for the actual number of days elapsed provided that for Alternative Currency Loans for which a 365-day basis is the only market practice available to the Agent for such Loan, interest shall be calculated on the basis of a year of 365-366 days, as the case may be, for the actual days elapsed. Interest on each Domestic Loan shall be paid (a) quarterly in arrears on the last Business Day of each fiscal quarter, commencing October 31, 1997, on each Floating Rate Loan, (b) on the last day of the applicable Interest Period for each Fixed Rate Loan and, if the Interest Period extends for more than three months, at intervals of three months after the first day of the Interest Period and (c) on the Revolving Credit Termination Date. Interest on amounts not paid when due shall be payable on demand. 2.03 Payment of Principal. (a) The principal amount of each Domestic Loan (other than a Competitive Bid Loan) shall be due and payable to the Agent for the benefit of each Multicurrency Facilities Lender in full on the Revolving Credit Termination Date. Competitive Bid Loans shall be due and payable on the last day of the Interest Period for such Loans. The duration of the initial Interest Period for each Domestic Loan that is a Fixed Rate Loan shall be as specified in the initial Borrowing Notice. The Multicurrency Facilities Borrowers shall have the option to elect the duration of subsequent Interest Periods and to Convert the Domestic Loans in accordance with Section 2.09 hereof. If the Agent does not receive a notice of election of duration of an Interest Period or to Convert by the time prescribed by Section 2.09 hereof, the applicable Multicurrency Facilities Borrower shall be deemed to have elected to Convert such Domestic Loan to (or Continue such Domestic Loan as) a Domestic Base Rate Loan until the Multicurrency Facilities Borrower notifies the Agent in accordance with Section 2.09. 41 49 (b) Each payment of principal and payment of interest in respect of Domestic Loans shall be made to the Agent at the Principal Office, for the account of each Multicurrency Facilities Lender's Applicable Lending Office, to be recorded in Dollars as set forth in Section 2.01(b). The repayment of such principal amount in respect of Loans made in an Alternative Currency shall be made in the appropriate Alternate Currency as follows: the portion of the outstanding Domestic Loans attributable to each specified Domestic Advance (or the Continuation or Conversion thereof) (as determined from the Agent's records) shall be repaid in the same Alternative Currency as such Domestic Advance. Each such payment shall be made in immediately available funds before 12:30 P.M. Charlotte, North Carolina time on the date such payment is due. The Agent may, but shall not be obligated to, debit the amount of any such payment which is not made by such time to any ordinary deposit account, if any, of the applicable Multicurrency Facilities Borrower with the Agent. The Multicurrency Facilities Borrowers shall give the Agent prior telephonic notice of any payment of principal, such notice to be given by not later than 11:00 A.M. Charlotte, North Carolina time, on the date of such payment. (c) The Agent shall deem any payment by or on behalf of the Multicurrency Facilities Borrowers hereunder that is not made both (a) in Dollars in the case of Domestic Loans made in Dollars and the required Alternative Currency in the case of Domestic Loans made in Alternative Currencies and in immediately available funds and (b) prior to 12:30 P.M. Charlotte, North Carolina time to be a non-conforming payment. Any such payment shall not be deemed to be received by the Agent until the time such funds become available funds in the required currency. The Agent shall give prompt telephonic notice to the applicable Authorized Representative and each of the Multicurrency Facilities Lenders (confirmed in writing) if any payment is non-conforming. Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding Business Day) at a rate of interest per annum which shall be two percent (2%) above the Domestic Base Rate or the maximum rate permitted by applicable law, whichever is lower, from the date such amount was due and payable until the date such amount is paid in full. (d) In the event that any payment hereunder or under the Multicurrency Facilities Notes becomes due and payable on a day other than a Business Day, then such due date shall be extended to the next succeeding Business Day; provided that interest shall continue to accrue during the period of any such extension. 2.04 Competitive Bid Loans. (a) In addition to borrowings of Syndicated Loans, at any time prior to the Revolving Credit Termination Date the Multicurrency Facilities Borrowers may, as set forth in this Section 2.04, request the Multicurrency Facilities Lenders to make offers to make Competitive Bid Loans to the Multicurrency Facilities Borrowers in Dollars. The Multicurrency Facilities Lenders may, but shall have no obligation to, make such offers and the Multicurrency Facilities Borrowers may, but shall have no obligation to, accept any such offers in the manner set forth in this 42 50 Section 2.04. Competitive Bid Loans shall be Absolute Rate Loans, provided that: (i) the Total Domestic Utilization shall not exceed the Total Domestic Revolving Credit Commitment; (ii) there may be no more than four (4) different Interest Periods for Competitive Bid Loans outstanding at the same time; (iii) the aggregate amount of outstanding Competitive Bid Loans of a Multicurrency Facilities Lender shall not exceed at any time an amount equal to $50,000,000; (iv) no Competitive Bid Loan shall have a maturity date subsequent to the Revolving Credit Termination Date; and (v) the aggregate amount of Competitive Bid Loans outstanding at any time shall not exceed $50,000,000 in the aggregate. (b) When a Multicurrency Facilities Borrower wishes to request offers to make Competitive Bid Loans, it shall give the Agent (which shall promptly notify the Multicurrency Facilities Lenders) notice (a "Competitive Bid Quote Request") to be received no later than 10:00 A.M. on the Business Day next preceding the date of borrowing proposed therein (or such other time and date as such Multicurrency Facilities Borrower and the Agent, with the consent of the Required Lenders, may agree). The Multicurrency Facilities Borrowers may request offers to make Competitive Bid Loans for up to three (3) different Interest Periods in a single notice; provided that the request for each separate Interest Period shall be deemed to be a separate Competitive Bid Quote Request for a separate borrowing (a "Competitive Bid Borrowing") and there shall not be outstanding at any one time more than four (4) Competitive Bid Borrowings. Each such Competitive Bid Quote Request shall be substantially in the form of Exhibit H hereto and shall specify as to each Competitive Bid Borrowing: (i) the proposed date of such borrowing, which shall be a Business Day; (ii) the aggregate amount of such Competitive Bid Borrowing, which shall be at least $5,000,000 (or a larger multiple of $1,000,000) but shall not cause the limits specified in Section 2.04(a) hereof to be violated; (iii) the duration of the Interest Period applicable thereto; and (iv) the date on which the Competitive Bid Quotes are to be submitted if it is before the proposed date of borrowing (the date on which such Competitive Bid Quotes are to be submitted is called the "Quotation Date"). Except as otherwise provided in this Section 2.04(b), no Competitive Bid Quote Request shall be 43 51 given within five (5) Business Days (or such other number of days as the applicable Multicurrency Facilities Borrower and the Agent, with the consent of the Required Lenders, may agree) of any other Competitive Bid Quote Request. (c) (i) Each Multicurrency Facilities Lender may submit one or more Competitive Bid Quotes, each containing an offer to make a Competitive Bid Loan in response to any Competitive Bid Quote Request; provided that, if a Multicurrency Facilities Borrower's request under Section 2.04(b) hereof specified more than one Interest Period, such Multicurrency Facilities Lender may make a single submission containing one or more Competitive Bid Quotes for each such Interest Period. Each Competitive Bid Quote must be submitted to the Agent not later than 10:00 A.M. Charlotte, North Carolina time on the Quotation Date (or such other time and date as the applicable Multicurrency Facilities Borrower and the Agent, with the consent of the Required Lenders, may agree); provided, that any Competitive Bid Quote may be submitted by the Agent (or its Applicable Lending Office) only if the Agent (or such Applicable Lending Office) notifies the Multicurrency Facilities Borrower of the terms of the offer contained therein not later than 9:45 A.M. Charlotte, North Carolina time on the Quotation Date. Subject to Article IV, Article VII and Article X hereof, any Competitive Bid Quote so made shall be irrevocable except with the consent of the Agent given on the instructions of the applicable Multicurrency Facilities Borrower. (ii) Each Competitive Bid Quote shall be substantially in the form of Exhibit I hereto and shall specify: (A) the proposed date of borrowing and the Interest Period therefor; (B) the principal amount of the Competitive Bid Loan for which each such offer is being made, which principal amount shall be at least $5,000,000 (or a larger multiple of $1,000,000); provided that the aggregate principal amount of all Competitive Bid Loans for which a Lender submits Competitive Bid Quotes (x) may not exceed $50,000,000 and (y) may not exceed the principal amount of the Competitive Bid Borrowing for a particular Interest Period for which offers were requested; (C) the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/10,000th of 1%) offered for each such Competitive Bid Loan (the "Absolute Rate"); and (D) the identity of the quoting Lender. Unless otherwise agreed by the Agent and the applicable Multicurrency Facilities Borrower, no Competitive Bid Quote shall contain qualifying, conditional or similar language or propose terms other than or in addition to those set forth in the applicable Competitive Bid Quote Request and, in particular, no Competitive Bid Quote may be conditioned upon acceptance by the applicable Multicurrency Facilities Borrower of all (or some specified minimum) of the principal amount of 44 52 the Competitive Bid Loan for which such Competitive Bid Quote is being made. (d) The Agent shall, as promptly as practicable after the Competitive Bid Quote is submitted (but in any event not later than 10:30 A.M. Charlotte, North Carolina time on the Quotation Date), notify the applicable Multicurrency Facilities Borrower of the terms (i) of any Competitive Bid Quote submitted by a Multicurrency Facilities Lender that is in accordance with Section 2.04(c) hereof and (ii) of any Competitive Bid Quote that amends, modifies or is otherwise inconsistent with a previous Competitive Bid Quote submitted by such Multicurrency Facilities Lender with respect to the same Competitive Bid Quote Request. Any such subsequent Competitive Bid Quote shall be disregarded by the Agent unless such subsequent Competitive Bid Quote is submitted solely to correct a manifest error in such former Competitive Bid Quote. The Agent's notice to the applicable Multicurrency Facilities Borrower shall specify (A) the aggregate principal amount of the Competitive Bid Borrowing for which offers have been received and (B) the respective principal amounts and Absolute Rates so offered by each Multicurrency Facilities Lender (identifying the Multicurrency Facilities Lender that made each Competitive Bid Quote). (e) Not later than 11:00 A.M. Charlotte, North Carolina time on the Quotation Date (or such other time and date as the applicable Multicurrency Facilities Borrower and the Agent, with the consent of the Required Lenders, may agree), the applicable Multicurrency Facilities Borrower shall notify the Agent of its acceptance or nonacceptance of the offers so notified to it pursuant to Section 2.04(d) hereof (and the failure of the applicable Multicurrency Facilities Borrower to give such notice by such time shall constitute nonacceptance) and the Agent shall promptly notify each affected Multicurrency Facilities Lender. In the case of acceptance, such notice shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The applicable Borrower may accept any Competitive Bid Quote in whole or in part (provided that any Competitive Bid Quote accepted in part shall be at least $5,000,000 or a larger multiple of $1,000,000); provided that: (i) the aggregate principal amount of each Competitive Bid Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Quote Request; (ii) the aggregate principal amount of each Competitive Bid Borrowing shall be at least $5,000,000 (or a larger multiple of $1,000,000) but shall not cause the limits specified in Section 2.04(a) hereof to be violated; (iii) acceptance of offers may be made only in ascending order of Absolute Rates, beginning with the lowest rate so offered; and (iv) the Multicurrency Facilities Borrowers may not accept any offer where the Agent has correctly advised the Multicurrency Facilities Borrowers that such offer fails to comply with Section 2.04(c)(ii) hereof or otherwise fails to comply with the requirements of this Agreement (including, without limitation, Section 2.04(a) hereof). 45 53 If offers are made by two or more Multicurrency Facilities Lenders with the same Absolute Rates, for a greater aggregate principal amount than the amount in respect of which offers are accepted for the related Interest Period after the acceptance of all offers, if any, of all lower Absolute Rates offered by any Multicurrency Facilities Lender for such related Interest Period, the principal amount of Competitive Bid Loans in respect of which such offers are accepted shall be allocated by the applicable Multicurrency Facilities Borrower among such Multicurrency Facilities Lenders as nearly as possible (in amounts of at least $5,000,000 or larger multiples of $1,000,000) in proportion to the aggregate principal amount of such offers. Determinations by the applicable Multicurrency Facilities Borrower of the amounts of Competitive Bid Loans and the lowest bid after adjustment as provided in Section 2.04(e)(iii) shall be conclusive in the absence of manifest error. (f) Any Multicurrency Facilities Lender whose offer to make any Competitive Bid Loan has been accepted shall, not later than 1:00 P.M. Charlotte, North Carolina time on the date specified for the making of such Loan, make the amount of such Loan available to the Agent at the Principal Office in Dollars and in immediately available funds, for account of the applicable Multicurrency Facilities Borrower. The amount so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to the applicable Multicurrency Facilities Borrower on such date by depositing the same, in Dollars and in immediately available funds, in an account of the Multicurrency Facilities Borrowers maintained at the Principal Office or otherwise as shall be directed by the applicable Multicurrency Facilities Borrower. 2.05 Multicurrency Facilities Notes. (a) Syndicated Loans made by each Multicurrency Facilities Lender shall be evidenced by the Domestic Revolving Credit Note payable to the order of such Lender in the respective amount of its Applicable Commitment Percentage of the Total Domestic Revolving Credit Commitment, which Domestic Revolving Credit Note shall be dated the Closing Date and shall be duly completed, executed and delivered by the Multicurrency Facilities Borrowers. (b) Swing Line Loans made by NationsBank shall be evidenced by the Swing Line Note payable to the order of NationsBank, which Swing Line Note shall be dated the Closing Date and shall be duly completed, executed and delivered by TDC. (c) Competitive Bid Loans made by each Multicurrency Facilities Lender shall be evidenced by the Competitive Bid Note payable to the order of such Lender in the amount of $50,000,000, which Competitive Bid Note shall be dated the Closing Date and shall be duly completed, executed and delivered by the Multicurrency Facilities Borrowers. 2.06 Pro Rata Payments. Except as otherwise provided herein, (a) each payment on account of the principal of and interest on the Syndicated Loans and the fees described in Section 2.10 hereof shall be made to the Agent for the account of the Lenders pro rata based on their Applicable Commitment Percentages of the Total Domestic Revolving Credit Commitment, (b) all payments to be made by the Multicurrency Facilities Borrowers for the account of each of 46 54 the Multicurrency Facilities Lenders on account of principal, interest and fees shall be made without set-off or counterclaim, and (c) the Agent will promptly distribute payments received to the Multicurrency Facilities Lenders. Notwithstanding the foregoing, in the event any Multicurrency Facilities Lender shall not be able to make a Fixed Rate Loan as provided in Section 4.07, interest shall be allocated to each Multicurrency Facilities Lender according to the interest rate payable to such Multicurrency Facilities Lender. 2.07 Reductions. The Multicurrency Facilities Borrowers shall, by notice from an Authorized Representative, have the right from time to time (but not more frequently than once during each fiscal quarter), upon not less than ten (10) Business Days written notice to the Agent, to reduce the Total Domestic Revolving Credit Commitment. The Agent shall give each Multicurrency Facilities Lender, within one (1) Business Day, telephonic notice (confirmed in writing) of such reduction. Each such reduction shall be in the aggregate amount of $5,000,000 or such greater amount which is in an integral multiple of $1,000,000, and shall permanently reduce the Total Domestic Revolving Credit Commitment. No such reduction shall result in the payment of any Fixed Rate Loan other than on the last day of the Interest Period of such Loan unless such prepayment is accompanied by amounts due, if any, under Section 4.05. Each such reduction of the Total Domestic Revolving Credit Commitment shall be accompanied by payment of the Loans to the extent that the Total Domestic Utilization exceeds the Total Domestic Revolving Credit Commitment, after giving effect to such reduction, together with accrued and unpaid interest on the amounts prepaid. 2.08 Increase and Decrease in Amounts. The amount of the Total Domestic Revolving Credit Commitment which shall be available to the Multicurrency Facilities Borrowers as Domestic Revolving Loans shall be reduced by the aggregate amount of all Domestic Letters of Credit Outstandings, Swing Line Outstandings, Domestic Acceptance Usage and Competitive Bid Loans. 2.09 Conversions and Elections of Subsequent Interest Periods. Provided that no Default or Event of Default shall have occurred and be continuing and subject to the limitations set forth below and in Article IV hereof, the Multicurrency Facilities Borrowers may: (a) upon notice to the Agent on or before 10:30 A.M. Charlotte, North Carolina time on any Business Day Convert all or a part of Fixed Rate Loans (other than Competitive Bid Loans) to Floating Rate Loans under the Domestic Revolving Credit Facility on the last day of the Interest Period for such Fixed Rate Loans; (b) on three (3) or in the case of Conversions into or Continuations of Domestic Loans as Fixed CD Loans two (2)) Business Days' notice to the Agent on or before 10:30 A.M. Charlotte, North Carolina time: (i) elect a subsequent Interest Period for all or a portion of Fixed Rate Loans (other than Competitive Bid Loans) under the Domestic Revolving Credit Facility in Dollars or any Alternate Currency to begin in the same currency on the last day of the 47 55 current Interest Period for such Fixed Rate Loans; (ii) elect that any Fixed Rate Loan in Dollars (other than Competitive Bid Loans) under the Domestic Revolving Credit Facility be Converted on the last day of the Interest Period for any Fixed Rate Loan into another Fixed Rate Loan in Dollars; and (iii) Convert Floating Rate Loans under the Domestic Revolving Credit Facility to Fixed Rate Loans (other than Competitive Bid Loans) on any Business Day. Notice of any such elections or Conversions shall be effected by receipt of an appropriate Borrowing Notice and shall specify the effective date of such election or Conversion and the Interest Period to be applicable to the Domestic Revolving Loan as Continued or Converted. Each election and Conversion pursuant to this Section 2.09 shall be subject to the limitations on Fixed Rate Loans set forth in the definition of "Interest Period" herein and in Section 2.01 and Article IV hereof. All such Continuations or Conversions of Domestic Revolving Loans shall be effected pro rata based on the Applicable Commitment Percentages of the Lenders in respect of the Total Domestic Revolving Credit Commitment. 2.10 Unused Fee. For the period beginning on the Closing Date and ending on the Revolving Credit Termination Date (or such earlier date on which the Multicurrency Facilities have terminated), the Multicurrency Facilities Borrowers agree to pay to the Agent, for the pro rata benefit of the Multicurrency Facilities Lenders based on their Applicable Commitment Percentages of the Total Domestic Revolving Credit Commitment, an unused fee equal to the Applicable Unused Fee times the sum of the daily amount by which the Total Domestic Revolving Credit Commitment exceeds the sum of average daily (i) Domestic Revolving Loans, plus (ii) Domestic Letter of Credit Outstanding, plus (ii) Domestic Acceptance Usage. Swing Line Loans and Competitive Bid Loans shall not be outstanding Loans for purposes of determining such fee. Such payments of fees provided for in this Section 2.10 shall be due in arrears on the last Business Day of each July, October, January and April beginning October 31, 1997 to and on the Revolving Credit Termination Date (or such earlier date on which the Multicurrency Facilities have terminated). Notwithstanding the foregoing, so long as any Multicurrency Facilities Lender fails to make available any portion of its Domestic Revolving Credit Commitment when requested, such Lender shall not be entitled to receive payment of its pro rata share of such fee until such Lender shall make available such portion. Such fee shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. 2.11 Deficiency Advances. No Multicurrency Facilities Lender shall be responsible for any default of any other Multicurrency Facilities Lender in respect to such other Multicurrency Facilities Lender's obligation to make any Domestic Revolving Loan hereunder nor shall the Domestic Revolving Credit Commitment of any Multicurrency Facilities Lender hereunder be increased as a result of such default of any other Multicurrency Facilities Lender. Without limiting the generality of the foregoing, in the event any Multicurrency Facilities Lender shall fail to advance funds to a Multicurrency Facilities Borrower as herein provided, the Agent may in its discretion, but shall not be obligated to, advance under the applicable Domestic 48 56 Revolving Credit Note in its favor as a Multicurrency Facilities Lender all or any portion of such amount or amounts (each, a "deficiency advance") and shall thereafter be entitled to payments of principal of and interest on such deficiency advance in the same manner and at the same interest rate or rates to which such other Multicurrency Facilities Lender would have been entitled had it made such advance under its applicable Domestic Revolving Credit Note; provided that, upon payment to the Agent from such other Multicurrency Facilities Lender of the entire outstanding amount of each such deficiency advance, together with accrued and unpaid interest thereon, from the most recent date or dates interest was paid to the Agent by the applicable Multicurrency Facilities Borrower on each Domestic Revolving Loan comprising the deficiency advance at the interest rate per annum for overnight borrowing by the Agent from the Federal Reserve Bank, then such payment shall be credited against the applicable Domestic Revolving Credit Note of the Agent in full payment of such deficiency advance and the applicable Multicurrency Facilities Borrower shall be deemed to have borrowed the amount of such deficiency advance from such other Multicurrency Facilities Lender as of the most recent date or dates, as the case may be, upon which any payments of interest were made by such Multicurrency Facilities Borrower thereon. 2.12 Adjustments by Agent. Notwithstanding the construction of "pro rata" to mean based on the Applicable Percentage Commitments and any provisions contained herein for the advancement of funds or distribution of payments on a pro rata basis, the Agent may, in its discretion, but shall not be obligated to, adjust downward or upward (but not in excess of any applicable Domestic Revolving Credit Commitment) the principal amount of any Domestic Revolving Loan to be made by any Multicurrency Facilities Lender to the nearest amount which is evenly divisible by $100, and make appropriate related adjustment in the distribution of payments of principal and interest on the Loans. 2.13 Use of Proceeds. The proceeds of the Loans made pursuant to the Domestic Revolving Credit Facility hereunder shall be used by the Multicurrency Facilities Borrowers to repay and terminate the Prior Facilities, to finance capital expenditures and Permitted Acquisitions and for other working capital and general corporate needs of TDC and its Subsidiaries, to the extent permitted under this Agreement. 2.14 Extension of Revolving Credit Termination Date. At the request of the Multicurrency Facilities Borrowers the Lenders may, in their sole discretion, elect to extend the Revolving Credit Termination Date for Multicurrency Facilities then in effect for additional periods of one year. The Multicurrency Facilities Borrowers shall notify the Lenders of their request for such an extension by delivering to the Agent notice of such request signed by an Authorized Representative not more than one hundred and twenty (120) days nor less than sixty (60) days prior to the second anniversary of the Closing Date. If all the Lenders shall elect to so extend both the Multicurrency Facilities and the Canadian Facilities, the Agent shall notify the Multicurrency Facilities Borrowers in writing within sixty (60) days of its receipt of such request for extension of the decision of the Lenders of whether to extend the Revolving Credit Termination Date for Multicurrency Facilities. Failure by the Agent to give such notice shall constitute refusal by the Lenders to extend the Revolving Credit Termination Date for the Multicurrency Facilities. 49 57 2.15 Swing Line. Notwithstanding any other provision of this Agreement to the contrary, in order to administer the Domestic Revolving Credit Facility in an efficient manner and to minimize the transfer of funds between the Agent and the Multicurrency Facilities Lenders, NationsBank shall make available Swing Line Loans to TDC in Dollars prior to the Revolving Credit Termination Date. NationsBank shall not make any Swing Line Loan pursuant hereto (i) if the Borrowers are not in compliance with all the conditions to the making of Loans set forth in this Agreement, (ii) if after giving effect to such Swing Line Loan, the Swing Line Loans outstanding exceed $25,000,000, or (iii) if after giving effect to such Swing Line Loan, the Total Domestic Utilization exceeds the Total Domestic Revolving Credit Commitment. Loans made pursuant to this Section 2.15 shall be limited to Floating CD Loans. (i) TDC may borrow, repay and reborrow under this Section 2.15. Borrowings under the Swing Line may be made in amounts of $250,000 and multiples of $250,000 in excess thereof, upon telephonic (confirmed in writing) or telefacsimile request by an Authorized Representative of TDC made to NationsBank not later than 12:00 noon Charlotte, North Carolina time on the Business Day of the requested borrowing. Each repayment of a Swing Line Loan shall be in integral multiples of $250,000 with a minimum amount of $250,000. (ii) If TDC instructs NationsBank to debit its demand deposit account in an amount of any payment with respect to a Swing Line Loan, or NationsBank otherwise receives repayment after 2:00 P.M. Charlotte, North Carolina time, on a Business Day, such payment shall be deemed received on the next Business Day. TDC shall pay interest on Swing Line Loans quarterly on the last Business Day of each quarter, commencing October 31, 1997 and continuing on the last day of each January, April, July and October thereafter. Interest shall be calculated on the basis of a year of 360 days and calculated for the actual number of days elapsed. (iii) The Multicurrency Facilities Borrowers and each Multicurrency Facilities Lender which is or may become a party hereto acknowledge that all Swing Line Loans are to be made solely by NationsBank to TDC but that such Multicurrency Facilities Lender shall share the risk of loss with respect to such Loans in an amount equal to such Lender's Applicable Commitment Percentage of such Swing Line Loan. Upon demand according to its Applicable Commitment Percentage of such Swing Line Loan, each Multicurrency Facilities Lender shall promptly provide to NationsBank its purchase price therefor in an amount equal to its Participation therein, in which case such Swing Line Loan shall be deemed from and after such date (to the extent TDC has not Converted such loan pursuant to Section 2.09) a Syndicated Loan made in accordance with the Agreement. The obligation of each Lender to so provide its purchase price to NationsBank shall be absolute and unconditional and shall not be affected by the occurrence of an Event of Default or any other occurrence or event. (iv) TDC at its option may request an Advance as a Domestic Revolving Loan 50 58 pursuant to Section 2.01 in an amount sufficient to repay any or all Swing Line Loans on any date (subject to three (3) Business Days prior notice in the case of Eurodollar Loans or (5) Business Days prior notice in the case of Loans in an Alternative Currency) and the Agent shall upon the receipt of such Advance, provide to NationsBank the amount necessary to repay such Swing Line Loan or Loans (which NationsBank shall then apply to such repayment) and credit any balance of the Domestic Revolving Loan in immediately available funds to an account of TDC at the Principal Office or as otherwise directed by TDC. The proceeds of such Advances shall be paid to NationsBank for application to the outstanding Swing Line Loans and the Multicurrency Facilities Lenders shall then be deemed to have made Domestic Revolving Loans in the amount of such Advances. The obligation of NationsBank to fund the Swing Line shall cease upon the earliest of (i) the occurrence of a Default or Event of Default, or (ii) the Revolving Credit Termination Date, or (iii) the date of resignation by NationsBank as Agent; provided that when a Default is no longer continuing NationsBank shall be obligated to provide Swing Line Loans unless payment of the Obligations has been accelerated. 2.16 Additional Multicurrency Facilities Borrowers. Upon the request of the Multicurrency Facilities Borrowers as then constituted hereunder (the "Current Borrowers") and with the consent of the Agent and the Lenders, additional wholly-owned Subsidiaries of TDC may be added as Multicurrency Facilities Borrowers (each, an "Additional Borrower") as herein provided. Not later than twenty (20) days prior to the proposed effective date of such addition, an Authorized Representative of the Current Borrowers shall request the addition of such Additional Borrower by notice in writing to the Agent, which notice shall identify the proposed Additional Borrower and the proposed effective date of such addition, and shall constitute the Current Borrowers' representation and warranty to the Agents and the Lenders that they shall deliver or cause to be delivered, as appropriate, the documents required by this Section 2.16 in connection with such addition. If the Agent and the Lenders shall consent to the addition of such proposed Additional Borrower (which consent shall be indicated by written notice thereof from the Agent to the Multicurrency Facilities Borrowers and the Lenders, and which consent may be subject to additional conditions, including payments of additional fees as may be specified by the Agent in such notice), then such proposed Additional Borrower shall be and become a Multicurrency Facilities Borrower for all purposes of the Loan Documents upon the satisfaction of all of the following conditions: (i) no Default or Event of Default shall exist or be continuing immediately prior to or on giving effect to such addition; (ii) the Additional Borrower and the Current Borrowers shall execute and deliver to the Lenders replacement Domestic Revolving Credit Notes and Competitive Bid Notes executed by each of them; (iii) the Additional Borrower, the Current Borrowers and all Persons who have 51 59 in effect a Guaranty in respect of the Domestic Loans (the "Domestic Credit Parties") shall execute and deliver an Assumption and Consent Agreement in the form attached as Exhibit J hereto; (iv) the Agent shall receive the opinion of counsel to the Domestic Credit Parties acceptable to the Agent addressed to the Agent and the Lenders as to the authorization, execution, delivery and enforceability of the documents described in clauses (ii) and (iii) and as to such other matters as it may request, such opinion to be acceptable in form and content to the Agent and its special counsel; (v) the Additional Borrower shall have furnished to the Agent its certificate appointing an initial Authorized Representative; and (vi) all additional conditions, including the payment of any fees in connection therewith, as may be specified by the Agent, shall have been satisfied. Upon satisfaction of such condition, the Additional Borrower shall thereafter be and become a Multicurrency Facilities Borrower for all purposes of the Loan Documents. 2.17 One Loan. (a) All Domestic Loans and Domestic Advances by the Multicurrency Facilities Lenders to any Multicurrency Facilities Borrower shall constitute the joint and several general obligation of each of the Multicurrency Facilities Borrowers. Each Multicurrency Facilities Borrower shall be jointly and severally liable to the Agent and the Multicurrency Facilities Lenders for all Obligations hereunder in respect of Multicurrency Facilities, regardless of whether such Obligations arise as a result of Domestic Advances to such Borrower, it being stipulated and agreed that Domestic Advances hereunder to any Multicurrency Facilities Borrower inure to the benefit of each of the Multicurrency Facilities Borrowers, and that the Multicurrency Facilities Lenders are relying on the joint and several liability of the Multicurrency Facilities Borrowers in extending credit under the Multicurrency Facilities. (b) Each Multicurrency Facilities Borrower guarantees to the Multicurrency Facilities Lenders the payment in full of all of the Obligations of the other Multicurrency Facilities Borrowers to the Multicurrency Facilities Lenders in respect of Multicurrency Facilities and further guarantees the due performance by each other Multicurrency Facilities Borrower of its respective duties and covenants made in favor of the Agent and the Multicurrency Facilities Lenders hereunder. Each Multicurrency Facilities Borrower agrees that the joint and several liability of the Multicurrency Facilities Borrowers shall not be impaired or affected by any modification, supplement, extension or amendment of any contract or agreement to which the parties thereto may hereafter agree, nor by any modification, release or other alteration of any of the rights of the Agent and the Multicurrency Facilities Lenders with respect to any collateral, nor by any delay, extension of time, renewal, compromise or other indulgence granted by the Agent and the Multicurrency Facilities Lenders with respect to any of the Obligations, nor by any other agreements or arrangements whatever with any other Multicurrency Facilities Borrower, any guarantor or any other Person, each Multicurrency Facilities Borrower hereby waiving all 52 60 notice of any such delay, extension, release, substitution, renewal, compromise or other indulgence, and hereby consenting to be bound thereby as fully and effectually as if it had expressly agreed thereto in advance. The liability of each Multicurrency Facilities Borrower hereunder is direct and unconditional as to all of the Obligations hereunder in respect of the Multicurrency Facilities, and may be enforced without requiring the Agent or the Multicurrency Facilities Lenders first to resort to any other right, remedy or security; no Multicurrency Facilities Borrower shall have any right of subrogation, reimbursement or indemnity whatsoever, nor any right of recourse to security for any of the Obligations in respect of the Multicurrency Facilities, unless and until all of said Obligations have been paid in full. 2.18 Letters of Credit. NationsBank agrees, subject to the terms and conditions of this Agreement, to maintain the Existing Domestic Letters of Credit as Letters of Credit hereunder and upon request of a Multicurrency Facilities Borrower to issue from time to time for the account of such Borrower Domestic Letters of Credit upon delivery to NationsBank of a Letter of Credit Application therefor in form and content acceptable to NationsBank; provided, that the Domestic Letter of Credit Outstandings hereunder shall not exceed the Domestic Letter of Credit Commitment. No Domestic Letter of Credit shall be issued by NationsBank with an expiry date or payment date occurring subsequent to the fifth Business Day preceding the Revolving Credit Termination Date and no Commercial Letter of Credit shall have an expiry date occurring more than six (6) months after the date of its issuance. NationsBank shall not be required to issue any Letter of Credit if Total Domestic Utilization when added to the face amount of any requested Domestic Letter of Credit exceeds the Total Domestic Revolving Credit Commitment. 2.19 Acceptances. NationsBank agrees, subject to the terms and conditions hereof, until the day prior to the Revolving Credit Termination Date, to maintain the Existing Domestic Acceptances as Domestic Acceptances hereunder and, upon the request of a Multicurrency Facilities Borrower, to create, from time to time, Domestic Acceptances for the benefit of such Borrower. NationsBank shall create such Domestic Acceptances by accepting and discounting drafts drawn by such Borrower under and pursuant to this Agreement. NationsBank shall not accept any such drafts unless the resulting Acceptance shall be a Domestic Acceptance as defined in Section 1.01 hereof. Upon accepting a draft NationsBank may discount the resulting Domestic Acceptance at a rate per annum (based on a year of 360 days) equal to the BA Rate. NationsBank shall not be required to create any Domestic Acceptance if the amount payable under such Domestic Acceptance when added to the Total Domestic Utilization exceeds the Total Domestic Revolving Credit Commitment. The face amount of Domestic Acceptances shall be an integral multiple of $500,000 and shall not be less than $1,000,000. The creation date and maturity date of each Domestic Acceptance shall be a Business Day. Notwithstanding the foregoing, NationsBank shall not be obligated to create or discount any Domestic Acceptance as amended from time to time, (i) if creation thereof would cause NationsBank to exceed the maximum amount of outstanding bankers' acceptances permitted by applicable law, or (ii) if, in the reasonable opinion of NationsBank, general conditions in the public market for rediscounting bankers' acceptances render it inadvisable to do so. 2.20 Creation of Acceptance. Any request for creation of a Domestic Acceptance shall 53 61 be made at least two (2) Business Days in advance of the day upon which such Domestic Acceptance is to be created (the "Domestic Acceptance Date"); such request to be in writing and in the form of Borrowing Notice set forth in Exhibit D-3. No Domestic Acceptance shall be created by NationsBank with a maturity date occurring subsequent to the Revolving Credit Termination Date. If NationsBank creates the requested Domestic Acceptance, then on or before 11:00 A.M., Charlotte, North Carolina time on the Domestic Acceptance Date, NationsBank shall notify the applicable Borrower of the BA Rate plus Acceptance Addition at which the Domestic Acceptance will be discounted by NationsBank, and NationsBank shall promptly thereafter accept the draft of such Multicurrency Facilities Borrower for the amount and Interest Period requested. Upon the discounting of each Domestic Acceptance, NationsBank shall credit such Borrower's account with an amount equal to the net proceeds of such discounted Domestic Acceptance. In addition, NationsBank shall promptly remit to the Agent the full amount of the Acceptance Addition and the Agent shall promptly transfer to each Domestic Facilities Lender its Applicable Commitment Percentage of such Acceptance Addition. In order to enable NationsBank to create Domestic Acceptances in the manner specified in this Section 2.20, the Multicurrency Facilities Borrowers agree to promptly upon request furnish to NationsBank a sufficient number of drafts conforming to NationsBank requirements. All drafts shall be manually signed by a properly authorized officer. Each Multicurrency Facilities Borrower will be bound by each draft and Domestic Acceptance bearing the signature of an individual who may no longer be authorized or otherwise holding office of a Multicurrency Facilities Borrower at any time. Each Multicurrency Facilities Borrower agrees to compensate NationsBank for any loss or expense with respect to a draft or Domestic Acceptance dealt with by NationsBank under this Agreement. 2.21 Reimbursement. (a) Each Multicurrency Facilities Borrower hereby unconditionally agrees immediately to pay to NationsBank on demand at the Principal Office (i) all amounts required to pay all drafts drawn or purporting to be drawn under the Domestic Letters of Credit and (ii) the face amount of each draft accepted by NationsBank on the maturity date of such draft, or in the event of an Event of Default or in the event a Domestic Acceptance is determined not to be eligible for discount, and any and all expenses of every kind incurred by NationsBank in connection with the Domestic Letters of Credit and Domestic Acceptances and in any event and without demand to place in the possession of NationsBank (which shall include Domestic Advances under the Domestic Revolving Credit Facility if permitted by Section 2.01(b)(vii) hereof) sufficient funds to pay all debts and liabilities arising under any Domestic Letter of Credit and Domestic Acceptance. The Multicurrency Facilities Borrowers' obligations to pay NationsBank under this Section 2.21, and the right of NationsBank to receive the same, shall be absolute and unconditional and shall not be affected by any circumstance whatsoever. NationsBank may charge any account (other than accounts pledged pursuant to the Transfer and Administration Agreement) that the Borrower or any Multicurrency Facilities Borrower may have with it for any and all amounts NationsBank pays under a Domestic Letter of Credit or Domestic Acceptance; provided that to the extent permitted by Section 2.01(b)(vii), amounts shall be paid pursuant to Domestic Advances under the Domestic Revolving Credit Facility. 54 62 Each Multicurrency Facilities Borrower agrees that NationsBank may, in its sole discretion, accept or pay, as complying with the terms of any Domestic Letter of Credit or Domestic Acceptance, any drafts or other documents otherwise in order which may be signed or issued by an administrator, executor, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, attorney in fact or other legal representative of a party who is authorized under such Domestic Letter of Credit or Domestic Acceptance to draw or issue any drafts or other documents. Each Multicurrency Facilities Borrower agrees to pay NationsBank interest on any amounts not paid when due hereunder at the Domestic Base Rate plus two percent (2%), or such lower rate as may be required by law. (b) In accordance with the provisions of Section 2.01(b)(vii) hereof, NationsBank shall notify the Agent (and shall also notify the applicable Multicurrency Facilities Borrower) of any drawing under any Domestic Letter of Credit or payment of any draft constituting a Domestic Acceptance issued for the account of a Multicurrency Facilities Borrower as promptly as practicable following the receipt by NationsBank of such drawing or draft. (c) Each Multicurrency Facilities Lender (other than NationsBank) shall automatically acquire on the date of issuance thereof, a Participation in the liability of NationsBank in respect of each Domestic Letter of Credit or Domestic Acceptance in an amount equal to such Lender's Applicable Commitment Percentage (determined in respect of the Total Domestic Revolving Credit Commitment) of such liability, and to the extent that any Multicurrency Facilities Borrower is obligated to pay NationsBank under Section 2.21(a), each Lender (other than NationsBank) thereby shall absolutely, unconditionally and irrevocably assume, and shall be unconditionally obligated to pay to NationsBank as hereinafter described, its Applicable Commitment Percentage (determined in respect of the Total Domestic Revolving Credit Commitment) of the liability of NationsBank under such Domestic Letter of Credit or Domestic Acceptance. Prior to the Revolving Credit Termination Date, each Multicurrency Facilities Lender (including NationsBank in its capacity as a Multicurrency Facilities Lender) shall, subject to the terms and conditions of this Article II, make a Domestic Base Rate Loan to the Borrower by paying to the Agent for the account of NationsBank at the Principal Office in Dollars and in immediately available funds, an amount equal to its Applicable Commitment Percentage (determined in respect of the Total Domestic Revolving Credit Commitment) of any drawing under a Domestic Letter of Credit or payment of a Domestic Acceptance, all as described and pursuant to Section 2.01(b)(vii). With respect to drawings under any of the Domestic Letters of Credit or payment of a Domestic Acceptance, each Multicurrency Facilities Lender, upon receipt from the Agent of notice of a drawing in the manner described in Section 2.01(b)(vii), shall promptly pay to the Agent for the account of NationsBank, prior to the applicable time set forth in Section 2.01(b)(vii), its Applicable Commitment Percentage (determined in respect of the Total Domestic Revolving Credit Commitment) of such drawing or payment. Simultaneously with the making of each such payment by a Multicurrency Facilities Lender to NationsBank, such Multicurrency Facilities Lender shall, automatically and without any further action on the part of NationsBank or such Multicurrency Facilities Lender, acquire a Participation in an amount equal to such payment (excluding the portion thereof constituting 55 63 interest accruing before such Multicurrency Facilities Lender made such payment) in the related Reimbursement Obligation of the Borrower. The Reimbursement Obligations of the Multicurrency Facilities Borrowers shall be immediately due and payable whether by Domestic Advances made in accordance with Section 2.01(b)(vii) or otherwise. Each Multicurrency Facilities Lender's obligation to make payment to the Agent for the account of NationsBank pursuant to this Section 2.21, and the right of NationsBank to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and shall be made without any offset, abatement, withholding or reduction whatsoever. If any Multicurrency Facilities Lender is obligated to pay but does not pay amounts to the Agent for the account of NationsBank in full upon such request as required by this Section 2.21(c), such Multicurrency Facilities Lender shall, on demand, pay to the Agent for the account of NationsBank interest on the unpaid amount for each day during the period commencing on the date of notice given to such Lender pursuant to Section 2.01(b)(vii) until such Multicurrency Facilities Lender pays such amount to the Agent for the account of NationsBank in full at the interest rate per annum for overnight borrowing by NationsBank from the Federal Reserve Bank. (d) Promptly following the end of each calendar month, NationsBank shall deliver to the Agent, and the Agent shall deliver to each Multicurrency Facilities Lender, a notice describing the aggregate undrawn amount of all Domestic Letters of Credit and aggregate face amount of all drafts constituting Domestic Acceptances accepted and outstanding at the end of such month. Upon the request of any Multicurrency Facilities Lender from time to time, NationsBank shall deliver to the Agent, and the Agent shall deliver to such Multicurrency Facilities Lender, any other information reasonably requested by such Multicurrency Facilities Lender with respect to each Domestic Letter of Credit and Domestic Acceptance then outstanding. (e) The issuance by NationsBank of each Domestic Letter of Credit and a Domestic Acceptance shall, in addition to the conditions precedent set forth in Section 5.01 hereof, be subject to the conditions that such Domestic Letter of Credit and Domestic Acceptance be in such form, contain such terms and support such transactions or obligations as shall be reasonably satisfactory to NationsBank consistent with the then current practices and procedures of NationsBank with respect to similar letters of credit and acceptances. All Domestic Letters of Credit shall be issued pursuant to and subject to the Uniform Customs and Practice for Documentary Credits, 1993 revision, International Chamber of Commerce Publication No. 500 and all subsequent amendments and revisions thereto. The applicable Multicurrency Facilities Borrower shall have executed and delivered such other instruments and agreements relating to such Domestic Letter of Credit and Domestic Acceptance as NationsBank shall have reasonably requested consistent with such practices and procedures. (f) Without duplication of Section 12.13 hereof, each Multicurrency Facilities Borrower hereby indemnifies and holds harmless NationsBank, each other Multicurrency Facilities Lender and the Agent from and against any and all claims and damages, losses, liabilities, costs or expenses which NationsBank, such other Multicurrency Facilities Lender or the Agent may incur (or which may be claimed against NationsBank, such other Multicurrency 56 64 Facilities Lender or the Agent) by any Person by reason of or in connection with the issuance or transfer of or payment or failure to pay under any Domestic Letter of Credit or Domestic Acceptance; provided that the Multicurrency Facilities Borrowers shall not be required to indemnify NationsBank, any other Multicurrency Facilities Lender or the Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, (i) caused by the willful misconduct or gross negligence of the party to be indemnified, (ii) caused by the failure of NationsBank to pay under any Domestic Letter of Credit or Domestic Acceptance after the presentation to it of a request strictly complying with the terms and conditions of such Domestic Letter of Credit or Domestic Acceptance, unless such payment or reimbursement is prohibited by any governmental authority, law, regulation, court order or decree, or (iii) paid or payable by any Multicurrency Facilities Lender under Sections 2.11 or 12.04(b) hereof. (g) Without limiting Borrowers' rights as set forth in Section 2.21(f) above, the obligation of the Multicurrency Facilities Borrowers to immediately reimburse Agent for drawings made under Domestic Letters of Credit or payment of Domestic Acceptances shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement and such Domestic Letters of Credit or Domestic Acceptances, under all circumstances whatsoever, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of the Domestic Letter of Credit or Domestic Acceptance, the obligation supported by the Domestic Letter of Credit or Domestic Acceptance or any other agreement or instrument relating thereto (collectively, the "Domestic Related Documents"); (ii) any amendment or waiver of or any consent to or departure from all or any of the Domestic Related Documents; (iii) the existence of any claim, setoff, defense or other rights which any Multicurrency Facilities Borrower may have at any time against any beneficiary or any transferee of a Domestic Letter of Credit or Domestic Acceptance (or any persons or entities for whom any such beneficiary or any such transferee may be acting), Agent, Multicurrency Facilities Lenders or any other person or entity, whether in connection with the Loan Documents, the Domestic Related Documents or any unrelated transaction; (iv) any breach of contract or other dispute between any Multicurrency Facilities Borrower and any beneficiary or any transferee of a Domestic Letter of Credit or Domestic Acceptance (or any persons or entities for whom such beneficiary or any such transferee may be acting), Agent, Multicurrency Facilities Lenders or any other person or entity; (v) any draft, statement or any other document presented under the Domestic Letter of Credit or Domestic Acceptance proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; 57 65 (vi) any delay, extension of time, renewal, compromise or other indulgence or modification granted or agreed to by Agent or Multicurrency Facilities Lenders, with or without notice to or approval by any Multicurrency Facilities Borrower in respect of any of a Multicurrency Facilities Borrower's indebtedness under this Agreement; or (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; provided, however, that nothing contained herein shall be deemed to release NationsBank or any other Multicurrency Facilities Lender from any liability for actual loss arising as a result of its gross negligence or willful misconduct. (h) Each Multicurrency Facilities Borrower acknowledges and agrees that the pricing for Domestic Acceptances hereunder is based upon the assumption that such Domestic Acceptances are "eligible" for discount by the Federal Reserve Banks and that the Multicurrency Facilities Lenders are not required to maintain reserves for such Domestic Acceptances under the Regulations of the Federal Reserve System. In the event the Federal Reserve System shall conclude the Domestic Acceptances created hereunder are ineligible or that reserves are required to be maintained in connection therewith, each Multicurrency Facilities Borrower shall and does hereby indemnify and hold the Agent and the Multicurrency Facilities Lenders harmless from, and does hereby agree to, pay all reasonable costs, expenses, legal fees and penalties, as well as all retroactive, current and prospective reserve requirements arising in connection with such Domestic Acceptances. Additionally, each Multicurrency Facilities Borrower acknowledges and agrees that upon the Federal Reserve System reaching such conclusion, NationsBank and the other Multicurrency Facilities Lenders shall have no further obligation to create Domestic Acceptances and that in the event NationsBank and the other Multicurrency Facilities Lenders agree to create further Domestic Acceptances, those created may, at the option of NationsBank and the other Multicurrency Facilities Lenders, be priced at a rate higher than indicated in Section 2.19 in order to compensate NationsBank and the other Multicurrency Facilities Lenders for additional reserve requirements and other transactional costs. Notwithstanding anything to the contrary contained herein or otherwise, the Multicurrency Facilities Borrowers shall have no obligation to indemnify NationsBank and the other Multicurrency Facilities Lenders or to pay any extraordinary costs in connection with Domestic Acceptances which are determined by the Federal Reserve System to be ineligible solely and directly as a result of a mistake or error by NationsBank in performing ministerial functions with respect to the Domestic Acceptances. Additionally, each Multicurrency Facilities Borrower shall be entitled to dispute and contest any determination of ineligibility which gives rise to Multicurrency Facilities Borrowers' indemnification and promise to pay set forth herein, provided, however, the Multicurrency Facilities Borrower shall diligently and expeditiously prosecute such dispute or contest. Each Multicurrency Facilities Borrower acknowledges and agrees that the refusal of the Federal Reserve System to recognize a dispute or contest raised by the Multicurrency Facilities Borrower shall in no way alter, impair, diminish or affect the obligations of the Multicurrency Facilities Borrowers set forth in this Subsection. Should the 58 66 Multicurrency Facilities Borrowers fail promptly to pay for, dispute or contest any determination of ineligibility as herein provided, NationsBank and the other Multicurrency Facilities Lenders shall be entitled to pay, contest or dispute same and all sums expended by NationsBank and the other Multicurrency Facilities Lenders in doing so shall constitute additional Indebtedness of the Multicurrency Facilities Borrowers to the Multicurrency Facilities Lenders and shall bear interest from the date paid until the date repaid at the Domestic Base Rate plus two percent (2%) per annum. 2.22 Domestic Letter of Credit Fee. (a) For the period beginning on the Closing Date and ending on the Revolving Credit Termination Date, the Multicurrency Facilities Borrowers agree to pay to the Agent, for the pro rata benefit of the Multicurrency Facilities Lenders based on their Applicable Commitment Percentages determined in respect of the Total Domestic Revolving Credit Commitment, a fee for such period at a per annum rate equal to the Applicable Interest Addition for Eurodollar Rate Loans on the daily aggregate amount available to be drawn under Standby Letters of Credit and fees for such period at those rates established from time to time by the Agent. (b) For the period beginning on the Closing Date and ending on the Revolving Credit Termination Date, the Multicurrency Facilities Borrowers agree to pay to the Agent for the account of NationsBank as issuer of the Domestic Letter of Credit, a fee for such period at a per annum rate equal to .125% on the daily aggregate amount available to be drawn under Domestic Letters of Credit. (c) Such payments of fees provided for in this Section 2.22 shall be due with respect to each Domestic Letter of Credit quarterly in arrears, the first such payment to be made on the last Business Day of October 1997 and on the last Business Day of each January, April, July and October thereafter. 2.23 Administrative Fees and Reserves. The Multicurrency Facilities Borrowers shall pay to NationsBank administrative and other fees, if any, in connection with the Domestic Letters of Credit and Domestic Acceptances in such amounts and at such times as NationsBank and the Multicurrency Facilities Borrowers shall agree from time to time. In addition, the Multicurrency Facilities Borrowers shall reimburse NationsBank for all costs or reduction in yield occurring by reason of the issuance by NationsBank of the Domestic Letters of Credit. 59 67 ARTICLE III CANADIAN FACILITIES 3.01 Revolving Credit Facility. (a) Commitment. Subject to the terms and conditions of this Agreement, each Canadian Facilities Lender severally agrees to make Canadian Advances in Dollars or Canadian Dollars (as specified in the respective Borrowing Notice) to TD Canada, as specified in the Borrowing Notice, from time to time from the Closing Date until the Revolving Credit Termination Date on a pro rata basis as to the total borrowing requested by TD Canada on any day determined by its Applicable Commitment Percentage up to but not exceeding a Dollar Value equal to the Canadian Revolving Credit Commitment of such Canadian Facilities Lender, provided, however, that the Canadian Facilities Lenders will not be required and shall have no obligation to make any Canadian Advance (i) so long as a Default or an Event of Default has occurred and is continuing or (ii) if the Agent has accelerated the maturity of the Obligations as a result of an Event of Default; provided further, however, that immediately after giving effect to each Advance, the Dollar Value of Total Canadian Utilization shall not exceed the Total Canadian Revolving Credit Commitment. Within such limits, TD Canada may borrow, repay and reborrow hereunder, on a Business Day, from the Closing Date until, but (as to borrowings and reborrowings) not including, the Revolving Credit Termination Date; provided, however, that (x) no Eurodollar Rate Loan or Acceptance shall be made which has an Interest Period or maturity that extends beyond the Revolving Credit Termination Date and (y) each Eurodollar Rate Loan may, subject to the provisions of Section 3.08, be repaid only on the last day of the Interest Period with respect thereto. TD Canada agrees that if at any time the Total Canadian Utilization shall exceed the Total Canadian Revolving Credit Commitment, TD Canada shall immediately reduce the outstanding Canadian Loans such that, as a result of such reduction, the Total Canadian Revolving Credit Commitment shall equal or exceed the Total Canadian Utilization. CIBC agrees to establish in favor of TD Canada an overdraft facility in the amount of U.S. $5,000,000 to be utilized by TD Canada for working capital and general corporate needs of TD Canada. This overdraft facility may be availed by way of Canadian Prime Rate Loans and Domestic Base Rate Loans. Utilizations of this overdraft facility will constitute Canadian Loans and be included in Total Canadian Utilization. (b) Amounts, Advances and Rate Selection. (i) Each request for a Canadian Advance of the Alternative Currency under a Borrowing Notice shall constitute TD Canada's request for a Canadian Loan of the Dollar Value of the amount of the Alternative Currency specified in such Borrowing Notice and for such Canadian Loan to be made available by the Canadian Facilities Lenders to TD Canada in the Alternative Currency Equivalent Amount of such Dollar Value (determined based on the Advance Date Exchange Rate applicable to such Canadian Advance). The principal amount outstanding on any Canadian Loan shall be recorded in the Canadian Agent's records in Dollars (in the case of a Canadian Advance of the Alternative Currency as if 60 68 the Canadian Loan had initially been made in Dollars), based on the amount of any Canadian Advance and on the Dollar Value of the initial Canadian Advance of the Alternative Currency, as reduced from time to time by the Dollar Equivalent Amount (based on the Advance Date Exchange Rate applicable to such Advance) of any principal payments with respect to such Advance. In the event a Eurodollar Rate Loan of the Alternative Currency is Continued such election to Continue the Eurodollar Rate Loan shall be treated as a Canadian Advance and the Canadian Agent shall notify TD Canada and the Canadian Facilities Lenders of the Advance Date Exchange Rate, Interest Period and the Eurodollar Rate for such Continued Eurodollar Rate Loan. The Canadian Facilities Lenders shall each be deemed to have made a Canadian Advance to TD Canada of its Applicable Commitment Percentage of such Canadian Loan of the Alternative Currency and the Canadian Agent shall apply the Advance Date Exchange Rate for such new Interest Period to such Continued Alternative Currency Equivalent Amount to determine the new Dollar Value of such Eurodollar Rate Loan and shall adjust its books accordingly. In the event that such adjustment with respect to a Continued Canadian Loan would cause the total Dollar Value of the outstanding Canadian Loans together with the Canadian Letter of Credit Outstandings and the Canadian Acceptance Usage to exceed the Total Canadian Revolving Credit Commitment, TD Canada shall, immediately on the effective date of such Continuation, repay (a "Rate Adjustment Payment") the portion of such Continued Loan (applying the new Advance Date Exchange Rate) necessary to ensure that the total Dollar Value of the outstanding Canadian Loans together with the Canadian Letter of Credit Outstandings and the Canadian Acceptance Usage does not exceed the Total Canadian Revolving Credit Commitment, provided further that TD Canada shall not be required to pay any additional compensation pursuant to Section 4.05 with respect to a prepayment of a Canadian Loan required by this sentence if such prepayment is made immediately on the effective date of the Continuation giving rise to such prepayment. For the purposes of determining the maximum amount of the outstanding Canadian Loans that may exist hereunder, it is intended by the parties that all Loans shall be the functional equivalent of Loans made and repaid (based on the applicable Advance Date Exchange Rate for each Canadian Advance) in Dollars. It is recognized that Canadian Facilities Lenders may elect to record Canadian Loans or Canadian Advances in Alternative Currencies. The Canadian Agent shall maintain records sufficient to identify at any time, (i) the Advance Date Exchange Rate with respect to each Canadian Advance, and (ii) the portion of the total outstanding Canadian Loans attributable to each Canadian Advance. Total Canadian Utilization by TD Canada shall be permitted to exceed the Total Canadian Revolving Credit Commitment by up to 5% by reason of changes in the Spot Rate of Exchange, calculated by CIBC on a daily basis, however, should the Total Canadian Utilization by TD Canada exceed the Total Canadian Revolving Credit Commitment by an amount equal to or greater than 5% then TD Canada shall either (i) reduce the Canadian Total Utilization upon the next maturity, Continuance or Conversion of a Canadian Acceptance or Eurodollar Rate Loan or maturity of a Canadian Letter of Credit and provide to the Canadian Agent funds in Dollars equal to the amount in excess of the Total Canadian Revolving Credit Commitment, which Funds will be held by the Canadian Agent as security for such excess or (ii) repay Canadian Loans immediately such that, as a result of such repayment, the Total Canadian Revolving Credit Commitment shall equal or exceed the Total Canadian Utilization. 61 69 (ii) The aggregate unpaid amount (including with respect to Loans of the Alternative Currency the total Dollar Value) of the Canadian Loans plus Canadian Letter of Credit Outstandings and Canadian Acceptance Usage shall not exceed at any time an amount equal to the Total Canadian Revolving Credit Commitment. Each Loan and each Conversion under Section 3.01 shall be (A) in the case of Eurodollar Loans, in an amount not less than $1,000,000 and in integral multiples of $500,000 (or the equivalent thereof in the Alternative Currency), and (B) in the case of Canadian Prime Rate Loan or Domestic Base Rate Loan in an amount not less than $500,000, and, if greater, an integral multiple of $100,000 (or the equivalent thereof in the Alternative Currency). (iii) An Authorized Representative of TD Canada shall give the Canadian Agent at least (A) three (3) Business Days irrevocable telecopy or telex notice of each Eurodollar Rate Loan (whether representing an additional borrowing hereunder or the Conversion of borrowing hereunder) or each Canadian Acceptance which the Borrower wants to be accepted prior to 10:30 A.M., Toronto, Canada time and, (B) irrevocable telephonic or telefacsimile notice of each Canadian Prime Rate Loan or Domestic Base Rate Loan representing a borrowing or Conversion hereunder prior to 10:30 A.M. Toronto, Canada time on the day before such proposed Canadian Prime Rate Loan or Domestic Base Rate Loan. Each such Borrowing Notice, which shall be effective upon receipt by the Canadian Agent, shall specify the type of Canadian Loan (Eurodollar Rate, Canadian Prime Rate or Domestic Base Rate), whether Dollar or the Alternative Currency, the amount of the Canadian Loan for which the Canadian Advance is to be made, the date of borrowing and where applicable the Interest Period to be used in the computation of interest. The Authorized Representative shall provide the Canadian Agent written confirmation of each such telephonic notice on the same day by telefacsimile transmission in the form of a Borrowing Notice in the form attached hereto as Exhibit D-2, in each case with appropriate insertions, but failure to provide such confirmation shall not affect the validity of such telephonic notice. The duration of the initial Interest Period for each Canadian Loan shall be as specified in the initial Borrowing Notice. TD Canada shall have the option to elect the duration of subsequent Interest Periods and to Convert the Loans in accordance with Section 3.08 hereof. If the Canadian Agent does not receive a notice of election of duration of an Interest Period or to Convert by the time prescribed hereby and in accordance with Section 3.08 hereof, TD Canada shall be deemed to have elected a Domestic Base Rate Loan in the case of Eurodollar Rate Loans or Canadian Prime Rate Loans for Canadian Acceptances. (iv) Notice of receipt of each Borrowing Notice shall be provided by the Canadian Agent to each Canadian Facilities Lender by telecopy or telex with reasonable promptness, but not later than 12:00 noon, Toronto, Canada time on the same day as the Canadian Agent's receipt of such notice from TD Canada prior to 10:30 A.M., Toronto, Canada time. At approximately 10:00 A.M. Toronto, Ontario time two (2) Business Days preceding the date specified for an Advance of the Alternative Currency, the Canadian Agent shall determine the Advance Date Exchange Rate and the Applicable Rate. Not later than 11:00 A.M. Toronto, Canada time on the date specified for each Advance of the Alternative Currency, the Agent shall provide TD Canada and each Canadian Facilities Lender notice by telefacsimile transmission of the Advance Date Exchange Rate applicable to such Canadian Advance, and the Alternative Currency Equivalent 62 70 Amount of the Canadian Loan or Loans required to be made by each Canadian Facilities Lender on such date, and the Dollar Value of such Loan or Loans and the Applicable Rate. (v) In the case of Canadian Advances in Dollars, each Canadian Facilities Lender shall, pursuant to the terms and conditions of this Agreement, not later than 12:00 noon, Toronto, Canada time on the date specified for such Advance, make the amount of the Canadian Advance to be made by it on such day available to the Canadian Agent by depositing or transferring the proceeds thereof in immediately available funds to the Canadian Agent, at its Funding Bank. The amount so received by the Canadian Agent shall, subject to the terms of this Agreement, be made available to TD Canada by deposit of the proceeds to an account of TD Canada maintained at such Funding Bank or otherwise as shall be directed in the applicable Borrowing Notice. (vi) In the case of Canadian Advances of the Alternative Currency, not later than 11:00 A.M., Toronto, Canada time on the date specified for each Advance, each Canadian Facilities Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make the amount of the Canadian Loan or Loans to be made by it on such day available to TD Canada at the Canadian Agent, to the account of the Canadian Agent. The amount so received by the Canadian Agent shall, subject to the terms and conditions of the Loan Documents on the same day but no later than 12:00 noon Toronto, Canada time, be made available to TD Canada by delivery of the Alternative Currency Equivalent Amount to TD Canada's account with the Canadian Agent. (vii) Notwithstanding the foregoing, if a drawing is made under any Canadian Letter of Credit prior to the Revolving Credit Termination Date and TD Canada shall not immediately reimburse CIBC for the amount of such draw or payment, then notice of such drawing or payment shall be provided promptly by CIBC to the Canadian Agent and the Canadian Agent shall provide notice to each Canadian Facilities Lender by telephone or telefacsimile. If notice to the Canadian Facilities Lenders of a drawing under any Letter of Credit is given by the Canadian Agent at or before 12:00 noon Toronto, Canada time on any Business Day, such drawing shall be converted to Dollars at the Spot Rate of Exchange on the date of drawing under the Canadian Letter of Credit, TD Canada shall be deemed to have requested, and each Canadian Facilities Lender shall, pursuant to the conditions of this Agreement, make a Domestic Base Rate Loan under the Canadian Revolving Credit Facility in the amount of such Canadian Facilities Lender's Applicable Commitment Percentage of such drawing or payment (and in the case of a drawing in the Alternative Currency, a Canadian Prime Rate Loan in an amount equal to such Canadian Facilities Lender's Applicable Commitment Percentage of the Dollar Equivalent Amount of such drawing or payment determined on the basis of the Spot Rate of Exchange on the date of drawing under the Canadian Letter of Credit) and shall pay such amount to the Canadian Agent for the account of CIBC at the Lending Office in Canadian Dollars and in immediately available funds before 2:30 P.M. Toronto, Canada time on the same Business Day. If notice to the Canadian Facilities Lenders is given by the Canadian Agent after 12:00 noon Toronto, Canada time on any Business Day, such drawing shall be converted to Dollars at the Spot Rate of Exchange on the date of drawing under the Canadian Letter of Credit, TD Canada shall be deemed to have requested, and each Canadian Facilities Lender shall, pursuant to the terms and subject to the 63 71 conditions of this Agreement, make a Canadian Prime Rate Loan under the Canadian Revolving Credit Facility in the amount of such Canadian Facilities Lender's Applicable Commitment Percentage of such drawing or payment and shall pay such amount to the Canadian Agent for the account of CIBC at the Principal Office in Dollars and in immediately available funds before 12:00 noon Toronto, Canada time on the next following Business Day. Such Domestic Base Rate Loan shall Continue unless and until TD Canada Converts such Domestic Base Rate Loan in accordance with the terms of Section 3.08 hereof. 3.02 Payment of Interest. (a) TD Canada shall pay interest to the Canadian Agent for the account of each Canadian Facilities Lender on the outstanding and unpaid principal amount of each Canadian Loan made by such Canadian Facilities Lender for the period commencing on the date of such Canadian Facilities Loan until such Canadian Loan shall be due at the then applicable Domestic Base Rate for Domestic Base Rate Loans, the Canadian Prime Rate for Canadian Prime Rate Loans or applicable Eurodollar Rate for Eurodollar Rate Loans, such payments to be made in Dollars or at the Applicable Rate in the case of Canadian Loans made in the Alternative Currency, such payments to be made in the Alternative Currency as designated by the Authorized Representative pursuant to Section 3.01 hereof or as otherwise provided herein; provided, however, that if any amount shall not be paid when due (at maturity, by acceleration or otherwise), all amounts outstanding hereunder shall bear interest thereafter (i) in the case of a Eurodollar Rate Loan, until the end of the Interest Period with respect to such Eurodollar Rate Loan, at a rate of two percent (2%) above such Eurodollar Rate and (ii) thereafter, and with respect to Domestic Base Rate Loans or Canadian Prime Rate Loans, at a rate of interest per annum which shall be two percent (2%) above the Domestic Base Rate or Canadian Prime Rate, as the case may be, or the maximum rate permitted by applicable law, whichever is lower, from the date such amount was due and payable until the date such amount is paid in full. The Canadian Agent's certificate as to each rate of interest payable hereunder shall be prima facie evidence of such rate. (b) Computation of Interest. TD Canada shall pay to the Canadian Agent for the benefit of the Canadian Facilities Lenders interest on each Canadian Loan, which interest shall be calculated on the outstanding principal amount daily for the period: (i) in the case of a Canadian Prime Rate Loan or a Domestic Base Rate Loan, commencing on and including the day on which it is advanced and ending on, but excluding, the day on which it is repaid; or (ii) in the case of a Eurodollar Rate Loan, commencing on and including the first day of the Interest Period relative to such Eurodollar Rate Loan and ending on, but excluding, the last day of such Interest Period, at the rate of interest per annum equal to: 64 72 (i) the Canadian Prime Rate for Canadian Prime Rate Loans, on the basis of a year of 365 days; (ii) the Domestic Base Rate for Domestic Base Rate Loans, on the basis of a year of 365 days; (iii) the Eurodollar Rate for Eurodollar Rate Loans, on the basis of a year of 360 days. For the purposes of this Agreement, whenever interest is calculated on the basis of a year of 360 or 365 days, each rate of interest determined pursuant to such calculation expressed as an annual rate for the purposes of the Interest Act (Canada) is equivalent to such rate as so determined multiplied by the number of days in the calendar year in which the same is to be ascertained and divided by 360 or 365, as appropriate. The parties further agree that for the purposes of the Interest Act (Canada), (i) the principle of deemed reinvestment of interest shall not apply to any interest calculation under this Agreement, and (ii) the rates of interest stipulated in this Agreement are intended to be nominal rates and not effective rates or yields. Interest on each Canadian Loan shall be paid on the last day of the applicable Interest Period for each Eurodollar Rate Loan and, if the Interest Period extends for more than three months, at intervals of three months after the first day of the Interest Period and on the Revolving Credit Termination Date. (c) Accrual and Payment of Interest. Interest on each Canadian Loan shall accrue from day to day but shall not compound and shall be payable: (i) in the case of a Canadian Prime Rate Loan, Domestic Base Rate Loan or any other amount payable hereunder other than in respect of a Eurodollar Rate Loan, monthly in arrears on the first Business Day of each month; or (ii) in the case of a Eurodollar Rate Loan, as set forth in Section 3.02(b). 3.03 Payment of Principal. (a) The principal amount of each Canadian Loan shall be due and payable to the Agent for the benefit of the Canadian Facilities Lenders in full on the Revolving Credit Termination Date. The duration of the initial Interest Period for each Canadian Loan that is a Eurodollar Rate Loan shall be as specified in the initial Borrowing Notice. TD Canada shall have the option to elect the duration of subsequent Interest Periods and to Convert the Loans in accordance with Section 3.08 hereof. If the Canadian Agent does not receive a notice of election of duration of an Interest Period or to Convert by the time prescribed by Section 3.08 hereof, TD Canada shall be deemed to have elected to Convert such Canadian Loan to (or Continue such Canadian Loan as) a Canadian Prime Rate Loan or Domestic Base Rate Loan, as applicable, until TD Canada notifies the Agent in accordance with Section 3.08. (b) Each payment of principal (including any prepayment) shall be made to the 65 73 Canadian Agent at its Applicable Lending Office, for the account of each Canadian Facilities Lender's Applicable Lending Office, to be recorded in Dollars as set forth in Section 3.01(b). The principal amount attributable to each specified Advance of the Alternative Currency (or the Continuation or Conversion thereof) (as determined from the Canadian Agent's records) shall be repaid in the Alternative Currency. Each such payment shall be made in immediately available funds before 12:30 P.M. Toronto, Canada time on the date such payment is due. The Canadian Agent may, but shall not be obligated to, debit the amount of any such payment which is not made by such time to any ordinary deposit account, if any, of TD Canada with the Canadian Agent. TD Canada shall give the Canadian Agent prior telephonic notice of any payment of principal, such notice to be given by not later than 11:00 A.M. Toronto, Canada time, prior to the date of such payment. Each repayment shall be effected in the currency of the outstanding Advance. (c) The Canadian Agent shall deem any payment by or on behalf of TD Canada hereunder that is not made both (a) in Dollars in the case of Eurodollar Rate Loans made in Dollars or Domestic Base Rate Loans and the Alternative Currency in the case of Canadian Loans in the Alternative Currency and in immediately available funds and (b) prior to 12:30 P.M. Toronto, Canada time to be a non-conforming payment. Any such payment shall not be deemed to be received by the Canadian Agent until the time such funds become available funds. The Canadian Agent shall give prompt telephonic notice to the applicable Authorized Representative and each of the Canadian Facilities Lenders (confirmed in writing) if any payment is non-conforming. Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding Business Day) at a rate of interest per annum which shall be two percent (2%) above the Canadian Prime Rate or Domestic Base Rate, as the case may be, or the maximum rate permitted by applicable law, whichever is lower, from the date such amount was due and payable until the date such amount is paid in full. (d) In the event that any payment hereunder or under the Canadian Loans which bear interest at the Domestic Base Rate or Canadian Prime Rate becomes due and payable on a day other than a Business Day, then such due date shall be extended to the next succeeding Business Day; provided that interest shall continue to accrue during the period of any such extension. 3.04 Evidence of Indebtedness. TD Canada hereby authorizes each Canadian Facilities Lender and the Canadian Agent to record, from time to time, in its records, the date and amount of each Canadian Loan; the interest rates payable by TD Canada in respect of each Canadian Loan and any Interest Period applicable thereto; the Canadian Acceptances issued; the dates and amounts of all payments received by such Canadian Facilities Lender on account of principal, interest and fees; and the amount of all the Canadian Loans which remain payable by TD Canada to such Canadian Facilities Lender. All amounts and other information so recorded shall be prima facie evidence thereof. The failure to record, or any error in recording, any such amount or other information shall not limit or impair the obligations of TD Canada hereunder or under any Loan Document. 66 74 3.05 Pro Rata Payments. Except as otherwise provided herein, (a) each payment on account of the principal of and interest on the Loans and the fees described in Section 3.09 hereof shall be made to the Canadian Agent for the account of the Canadian Facilities Lenders pro rata based on their Applicable Commitment Percentages, (b) all payments to be made by TD Canada for the account of each of the Canadian Facilities Lenders on account of principal, interest and fees shall be made without set-off or counterclaim, and (c) the Canadian Agent in all other cases will promptly distribute payments received to the Canadian Facilities Lenders. Notwithstanding the foregoing, in the event any Canadian Facilities Lender shall not be able to make a Eurodollar Rate Loan as provided in Section 3.01, interest shall be allocated to such Canadian Facilities Lender according to the interest rate payable to such Canadian Facilities Lender as set forth in Section 4.04. 3.06 Reductions. TD Canada shall, by notice from an Authorized Representative, have the right from time to time (but not more frequently than once during each fiscal quarter), upon not less than ten (10) Business Days written notice to the Canadian Agent, to reduce the Total Canadian Revolving Credit Commitment. The Canadian Agent shall give each Canadian Facilities Lender, within one (1) Business Day, telephonic notice (confirmed in writing) of such reduction. Each such reduction shall be in the aggregate amount of $5,000,000 or such greater amount which is in an integral multiple of $1,000,000, and shall permanently reduce the Total Canadian Revolving Credit Commitment of the Canadian Facilities Lenders pro rata. No such reduction shall result in the payment of any Eurodollar Rate Loan other than on the last day of the Interest Period of such Canadian Loan unless such prepayment is accompanied by amounts due, if any, under Section 4.05. Each reduction of the Total Canadian Revolving Credit Commitment shall be accompanied by payment of the Canadian Facilities Loans to the extent that the Total Canadian Utilization exceeds the Total Canadian Revolving Credit Commitment, after giving effect to such reduction, together with accrued and unpaid interest on the amounts prepaid. 3.07 Increase and Decrease in Amounts. The amount of the Total Canadian Revolving Credit Commitment which shall be available to TD Canada for Canadian Loans shall be reduced by the aggregate amount of all Canadian Letters of Credit Outstandings and Canadian Acceptance Usage. 3.08 Conversions and Elections of Subsequent Interest Periods. Provided that no Default or Event of Default shall have occurred and be continuing and subject to the limitations set forth below and in Sections 4.01(b), 4.02 and 4.03 hereof, TD Canada may, by delivering the Borrowing Notice set out in Exhibit D-2, request a Conversion or Continuance provided that: (a) the proceeds are used to retire the outstanding Loan; (b) the notice identifies the outstanding Loan to be retired (the "Outstanding Loan"); (c) the Conversion or Continuance would otherwise be a permitted Advance 67 75 hereunder and TD Canada and TDC comply with each provision hereof relative to the obtaining of an Advance; (d) the aggregate principal amount of the Conversion or Continuance is not greater than the Outstanding Loan plus accrued interest in the case of Eurodollar Rate Loans rounded up to the nearest $10,000; (e) no Conversions shall be made from one currency to another without first satisfying the original Obligation in the currency of its denomination; (f) each Conversion or Continuance is made contemporaneously with the retirement of the Outstanding Loan. Notice of any such elections or Conversions shall specify the effective date of such election or Conversion and the Interest Period to be applicable to the Canadian Loan as Continued or Converted. All such Continuations or Conversions of Canadian Loans shall be effected pro rata based on the Applicable Commitment Percentages of the Canadian Facilities Lenders in respect of the Total Canadian Revolving Credit Commitment. 3.09 Unused Fee. For the period beginning on the Closing Date and ending on the Revolving Credit Termination Date (or such earlier date on which the Total Canadian Revolving Credit Commitment has terminated), TD Canada agrees to pay to the Canadian Agent, for the pro rata benefit of the Canadian Facilities Lenders based on their Applicable Commitment Percentages, an unused fee equal to the Applicable Unused Fee times the sum of the daily amount by which the Total Canadian Revolving Credit Commitment exceeds the sum of average daily (i) outstanding Canadian Loans plus (ii) Canadian Letter of Credit Outstandings plus (iii) Canadian Acceptance Usage. Such payments of fees provided for herein shall be due in arrears on the first Business Day of each February, May, August and November beginning November 1, 1997 to and on the Revolving Credit Termination Date (or such earlier date on which the Total Canadian Revolving Credit Commitment has terminated). Notwithstanding the foregoing, so long as any Canadian Facilities Lender fails to make available any portion of its Canadian Revolving Credit Commitment when requested, such Lender shall not be entitled to receive payment of its pro rata share of such fee until such Lender shall make available such portion. Such fee shall be calculated on the basis of a year of 365 days for the actual number of days elapsed. 3.10 Deficiency Advances. No Canadian Facilities Lender shall be responsible for any default of any other Canadian Facilities Lender in respect to such other Canadian Facilities Lender's obligation to make any Canadian Loan hereunder nor shall the Canadian Revolving Credit Commitment of any Canadian Facilities Lender hereunder be increased as a result of such default of any other Canadian Facilities Lender. Without limiting the generality of the foregoing, in the event any Canadian Facilities Lender shall fail to advance funds to TD Canada as herein 68 76 provided, the Canadian Agent may in its discretion, but shall not be obligated to, advance in its favor as a Canadian Facilities Lender all or any portion of such amount or amounts (each, a "deficiency advance") and shall thereafter be entitled to payments of principal of and interest on such deficiency advance in the same manner and at the same interest rate or rates to which such other Canadian Facilities Lender would have been entitled had it made such advance hereunder; provided that, upon payment to the Canadian Agent from such other Canadian Facilities Lender of the entire outstanding amount of each such deficiency advance, together with accrued and unpaid interest thereon, from the most recent date or dates interest was paid to the Canadian Agent by TD Canada on each Canadian Loan comprising the deficiency advance at the interest rate per annum for overnight borrowing by the Canadian Agent, then such payment shall be credited against the applicable Obligation owed to the Canadian Agent in full payment of such deficiency advance and TD Canada shall be deemed to have borrowed the amount of such deficiency advance from such other Canadian Facilities Lender as of the most recent date or dates, as the case may be, upon which any payments of interest were made by TD Canada thereon. 3.11 Use of Proceeds. The proceeds of the Canadian Loans made pursuant to the Canadian Revolving Credit Facility hereunder shall be used by TD Canada to repay existing Indebtedness under the Prior Facilities, to support issuance of Canadian Letters of Credit and Canadian Acceptances, to finance capital expenditures and Permitted Acquisitions and for other working capital and general corporate needs of TD Canada, to the extent permitted under this Agreement. 3.12 Extension of Revolving Credit Termination Date. At the request of TD Canada the Lenders may, in their sole discretion, elect to extend the Revolving Credit Termination Date for Canadian Facilities then in effect for additional periods of one year. TD Canada shall notify the Lenders of its request for such an extension by delivering to the Agent notice of such request signed by an Authorized Representative not more than one hundred and twenty (120) days nor less than sixty (60) days prior to the second anniversary of the Closing Date. If all the Lenders shall elect to so extend, the Agent shall notify TD Canada in writing within sixty (60) days of its receipt of such request for extension of the decision of the Lenders of whether to extend the Revolving Credit Termination Date for Canadian Facilities. Failure by the Agent to give such notice shall constitute refusal by the Lenders to extend the Revolving Credit Termination Date for the Canadian Facilities. 3.13 Letters of Credit. CIBC agrees, subject to the terms and conditions of this Agreement, to maintain the Existing Canadian Letters of Credit as Canadian Letters of Credit hereunder and, upon request of TD Canada, to issue from time to time for the account of the TD Canada Canadian Letters of Credit upon delivery to CIBC of a Letter of Credit Application in form and content acceptable to CIBC; provided, that the Canadian Letter of Credit Outstandings hereunder shall not exceed the Canadian Letter of Credit Commitment. No Canadian Letter of Credit shall be issued by CIBC with an expiry date or payment date occurring subsequent to the thirtieth Business Day preceding the Revolving Credit Termination Date and no Commercial Letter of Credit shall have an expiry date occurring more than six (6) months after the date of its 69 77 issuance. CIBC shall not be required to issue any Canadian Letter of Credit if the Total Canadian Utilization when added to the face amount of any requested Canadian Letter of Credit exceeds the Total Canadian Revolving Credit Commitment. 3.14 Acceptances. (a) Creation of Canadian Acceptances; Existing Canadian Acceptances. Upon receipt of a Borrowing Notice given in accordance with this Agreement and subject to the provisions of this Agreement, each Canadian Facilities Lender severally agrees to accept from time to time such Canadian Dollar bills of exchange as TD Canada shall request within the scope of the Total Canadian Revolving Credit Commitment, provided that: (i) Canadian Acceptances shall be issued on a Business Day specified in the Borrowing Notice; (ii) each Canadian Acceptance shall have a term from 30 to 180 days (excluding days of grace), as designated by TD Canada in the relevant Borrowing Notice, provided that each Canadian Acceptance shall mature on a Business Day and TD Canada shall choose Canadian Acceptances of such duration so as to ensure that TD Canada complies in all respects with its reduction or repayment obligations under this Agreement; and (iii) each Canadian Acceptance shall be in a form acceptable to the Canadian Facilities Lenders acting reasonably. The obligation of the Canadian Facilities Lenders to accept bills of exchange shall be several and not joint, and the failure of any Canadian Facilities Lender to accept any bills of exchange shall not relieve any other Canadian Facilities Lender of its obligation to accept bills of exchange in accordance with the terms hereof, and no Canadian Facilities Lender shall be responsible for the failure by any other Canadian Facilities Lender to accept bills of exchange to be accepted by such other Canadian Facilities Lender. The Canadian Facilities Lenders agree, subject to the terms and conditions hereof, to maintain the Existing Canadian Acceptances as Acceptances hereunder. (b) Notice by Canadian Agent to Canadian Facilities Lenders. The Canadian Agent shall give prompt written notice to the Canadian Facilities Lenders of each Borrowing Notice requesting the issue of Canadian Acceptances and shall notify each Canadian Facilities Lender of the face amount at maturity of each bill of exchange to be accepted by such Canadian Facilities Lender based upon such Canadian Facilities Lender's pro rata share based on its Applicable Commitment Percentage of the face amount of Canadian Acceptances specified in the Borrowing Notice, except that, if the face amount of a Canadian Acceptance would not be Cdn $100,000 or a whole multiple thereof, the face amount may be increased or reduced by the Canadian Facilities Lender in its sole discretion without thereby increasing or reducing the aggregate face amount at maturity of the Canadian Acceptances to be accepted by the Canadian Facilities Lenders as 70 78 specified in the Borrowing Notice. (c) Stamping Fees. Upon tendering any bill of exchange for acceptance by a Canadian Facilities Lender pursuant to the Canadian Revolving Credit Facility, TD Canada shall pay to such Canadian Facilities Lender, a fee equal to the Credit Margin then in effect relating to Canadian Acceptances to be accepted pursuant to the Canadian Revolving Credit Facility, based on the principal amount of such bill of exchange for the duration of its stated term calculated on the basis of the actual number of days in the stated term, commencing on, and including, the date such Canadian Facilities Lender accepts the bill of exchange and ending on, but excluding, its stated payment date. (d) Pre-Signed Acceptances. TD Canada shall deliver to the Canadian Facilities Lenders sufficient pre- signed bills of exchange, in form acceptable to the Canadian Facilities Lenders or such other instrument as may reasonably be required by a Canadian Facilities Lender and acceptable to TD Canada, to enable the Canadian Facilities Lenders to meet requests by TD Canada for Canadian Advances by way of Canadian Acceptances from time to time. The Canadian Facilities Lenders shall not be responsible or liable for their failure to accept a Canadian Acceptance as required hereunder if the cause of such failure is, in whole or in part, due to the failure of TD Canada to provide duly executed and endorsed drafts to the Canadian Facilities Lenders on a timely basis nor shall the Canadian Facilities Lenders be liable for any damage, loss or other claim arising by reason of any loss or improper use of any such instrument except the negligence or willful misconduct of the Canadian Facilities Lenders or their employees. Each of the Canadian Facilities Lenders shall maintain a record with respect to Canadian Acceptances (i) received by it from TD Canada in blank hereunder, (ii) voided by it for any reason, (iii) accepted by it hereunder, and (iv) cancelled at their respective maturities. The Canadian Facilities Lenders further agree to retain such records in the manner and for the statutory periods provided in the various provincial or federal statutes and regulations which apply to the Canadian Facilities Lenders. Such pre-signed bills of exchange shall be blank as to date of issue, date of maturity and amount. With respect to the safekeeping of pre-signed bills of exchange delivered to the Canadian Facilities Lenders by TD Canada, the Canadian Facilities Lenders shall be obligated to exercise only the same degree of care as if such Canadian Acceptances were the property of the Canadian Facilities Lenders and the Canadian Facilities Lenders were keeping them at the place at which they are held. The Canadian Facilities Lenders may complete and accept pre-signed bills of exchange from time to time in accordance with the instructions of TD Canada, provided that the Canadian Facilities Lenders shall not incur any liability whatsoever in respect of instructions carried out by them in the belief that such instructions were properly given by TD Canada. (e) Execution of Acceptances. Bills of exchange of TD Canada to be accepted as Canadian Acceptances hereunder shall be signed by an Authorized Representative of TD Canada. Notwithstanding that any person whose signature appears on any Canadian Acceptance as one of such officers may no longer be an authorized signatory for TD Canada at the date of issuance of a Canadian Acceptance, such signature shall nevertheless be valid and sufficient for all purposes as if such authority had remained in force at the time of such issuance and any such Canadian 71 79 Acceptance so signed shall be binding on TD Canada. (f) Payment of Discount Proceeds. On the date set forth in Section 3.01, each Canadian Facilities Lender will pay to TD Canada the Acceptance Discount Proceeds relating to the Canadian Acceptances accepted by it. The Canadian Facilities Lenders may at any time and from time to time hold, sell, rediscount or otherwise dispose of any or all Canadian Acceptances purchased by them. (g) Discharge of Acceptances. TD Canada agrees that on each date on which a Canadian Acceptance matures (in this Section, a "maturity date"), unless TD Canada is entitled to a Canadian Advance under Section 3.01 or TD Canada has requested and is entitled to a Conversion in the amount of the maturing Canadian Acceptance TD Canada will provide the Canadian Agent for the benefit of the Canadian Facilities Lenders before 10:00 a.m. (Toronto Time) with immediately available funds (in this Section, the "discharge funds") to discharge in full the liabilities of the Canadian Facilities Lenders in respect of such Canadian Acceptance. TD Canada shall not claim any days of grace for the payment at maturity of any Canadian Acceptance. If TD Canada does not in fact provide the Canadian Agent with the discharge funds and is not entitled to an Advance or a Conversion in the amount of the maturing Canadian Acceptance, the Canadian Facilities Lenders may (but shall not be obliged to) make a Canadian Loan to TD Canada, which Canadian Loan TD Canada hereby requests the Canadian Facilities Lenders to make and which, if made, shall be made on a demand basis and shall bear interest at the Canadian Prime Rate as varied from time to time plus 2% per annum. To the extent not inconsistent with the demand nature of this loan, the terms and conditions of this Agreement pertinent to a Canadian Prime Rate Loan outstanding under the Canadian Revolving Credit Facility shall apply to such demand loan. This provision applies whether or not a Canadian Facilities Lender is the holder of the maturing Canadian Acceptance. (h) Acceptances Outstanding Upon Default. If any Canadian Acceptance is outstanding upon the occurrence of an Event of Default, TD Canada shall forthwith upon demand by the Canadian Agent pay to the Canadian Agent for the benefit of the Canadian Facilities Lenders an amount equal to the principal amount of all such Canadian Acceptances such amount to be held by the Canadian Agent for application against the Indebtedness owing by TD Canada to the Canadian Facilities Lenders in respect of such Canadian Acceptances or in respect of any other amount payable under the Canadian Loan Documents. (i) Obligations Unconditional. The obligations of TD Canada with respect to Canadian Acceptances under this Section 3.14 shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of any bill of exchange accepted by the Canadian Facilities Lenders as a Canadian Acceptance; and (ii) the existence of any claim, set off, defense or other right which TD 72 80 Canada may have at any time against the holder of a Canadian Acceptance, or any other Person, whether in connection with this Agreement or otherwise. (j) Non-Acceptance Lenders. Notwithstanding any provision of this Section 3.14 to the contrary, if a Canadian Facilities Lender is a Non-Acceptance Lender and if TD Canada wishes to obtain an Advance by way of Canadian Acceptances, such Canadian Facilities Lender shall, in lieu of accepting Canadian Acceptances, pay to TD Canada on the date in Section 3.01 and on the terms and conditions of this Agreement the same amount of money in Canadian Dollars that it would have paid to TD Canada pursuant to Section 3.14(f) hereof if it had been a Canadian Facilities Lender that is not a Schedule I chartered bank, and such Canadian Non-Acceptance Lender shall be entitled to a stamping fee in respect thereof equal to the amount and at the same time that it would be entitled to receive if it was a Canadian Acceptance Lender. Upon such payment being made to TD Canada by such Canadian Non-Acceptance Lender, it shall for all purposes be deemed to have accepted a Canadian Acceptance hereunder. 3.15 Reimbursement. (a) TD Canada hereby unconditionally agrees immediately to pay to CIBC on demand at its Lending Office all amounts required to pay all drafts drawn or purporting to be drawn under the Canadian Letters of Credit and any and all expenses of every kind incurred by CIBC in connection with the Canadian Letters of Credit and in any event and without demand to place in the possession of CIBC (which shall include Canadian Advances under the Canadian Revolving Credit Facility if permitted by Section 3.01(b)(vii) hereof) sufficient funds to pay all debts and liabilities arising under any Canadian Letter of Credit. TD Canada's obligations to pay CIBC under this Section 3.15, and the right of CIBC to receive the same, shall be absolute and unconditional and shall not be affected by any circumstance whatsoever. CIBC may charge any account TD Canada may have with CIBC for any and all amounts CIBC pays under a Canadian Letter of Credit; provided that to the extent permitted by Section 3.01(b)(vii), amounts shall be paid pursuant to Canadian Advances under the Canadian Revolving Credit Facility. TD Canada agrees that CIBC may, in its sole discretion, accept or pay, as complying with the terms of any Canadian Letter of Credit, any drafts or other documents otherwise in order which may be signed or issued by an administrator, executor, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, attorney in fact or other legal representative of a party who is authorized under such Canadian Letter of Credit to draw or issue any drafts or other documents. TD Canada agrees to pay CIBC interest on any amounts not paid when due hereunder at the Canadian Prime Rate plus two percent (2%), or such lower rate as may be required by law. (b) In accordance with the provisions of Section 3.01(b)(vii) hereof, CIBC shall notify the Canadian Agent (and shall also notify TD Canada) of any drawing under any Canadian Letter of Credit issued for the account of TD Canada as promptly as practicable following the receipt by CIBC of such drawing. (c) Each Canadian Facilities Lender (other than CIBC) shall automatically acquire on the date of issuance thereof, a Participation in the liability of CIBC in respect of each 73 81 Canadian Letter of Credit in an amount equal to such Canadian Facilities Lender's Applicable Commitment Percentage of such liability, and to the extent that TD Canada is obligated to pay CIBC under Section 3.16(a), each Canadian Facilities Lender (other than CIBC) thereby shall absolutely, unconditionally and irrevocably assume, and shall be unconditionally obligated to pay to CIBC as hereinafter described, its Applicable Commitment Percentage (determined in respect of the Total Canadian Revolving Credit Commitment) of the liability of CIBC under such Canadian Letter of Credit. Prior to the Revolving Credit Termination Date, each Canadian Facilities Lender (including CIBC in its capacity as a Canadian Facilities Lender) shall, subject to the terms and conditions of this Article III, make a Canadian Prime Rate Loan to TD Canada by paying to the Canadian Agent for the account of CIBC at the Lending Office in Canadian Dollars and in immediately available funds, an amount equal to its Applicable Commitment Percentage (determined in respect of the Total Canadian Revolving Credit Commitment) of any drawing under a Canadian Letter of Credit, all as described and pursuant to Section 3.01(b)(vii). With respect to drawings under any of the Canadian Letters of Credit, each Canadian Facilities Lender, upon receipt from the Canadian Agent of notice of a drawing in the manner described in Section 3.01(b)(vii), shall promptly pay to the Canadian Agent for the account of CIBC, prior to the applicable time set forth in Section 3.01(b)(vii), its Applicable Commitment Percentage (determined in respect of the Total Canadian Revolving Credit Commitment) of such drawing or payment. Simultaneously with the making of each such payment by a Canadian Facilities Lender to CIBC, such Canadian Facilities Lender shall, automatically and without any further action on the part of CIBC or such Canadian Facilities Lender, acquire a Participation in an amount equal to such payment (excluding the portion thereof constituting interest accruing before such Canadian Facilities Lender made such payment) in the related Reimbursement Obligation of TD Canada. The Reimbursement Obligations of TD Canada shall be immediately due and payable whether by Canadian Advances made in accordance with Section 3.01(b)(vii) or otherwise. Each Canadian Facilities Lender's obligation to make payment to the Canadian Agent for the account of CIBC pursuant to this Section 3.16(c), and the right of CIBC to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and shall be made without any offset, abatement, withholding or reduction whatsoever. If any Canadian Facilities Lender is obligated to pay but does not pay amounts to the Canadian Agent for the account of CIBC in full upon such request as required by this Section 3.16(c), such Canadian Facilities Lender shall, on demand, pay to the Canadian Agent for the account of CIBC interest on the unpaid amount for each day during the period commencing on the date of notice given to such Canadian Facilities Lender pursuant to Section 3.01(b)(vii) until such Canadian Facilities Lender pays such amount to the Agent for the account of CIBC in full at the interest rate per annum for overnight borrowing by CIBC. (d) Promptly following the (i) issuance of each Canadian Letter of Credit and the creation of a Canadian Acceptance, CIBC shall give the Canadian Agent written notice of the terms and conditions thereof and (ii) end of each calendar month, CIBC shall deliver to the Canadian Agent and the Agent, and the Canadian Agent shall deliver to each Canadian Facilities Lender, a notice describing the aggregate undrawn amount of all Canadian Letters of Credit accepted and outstanding at the end of such month. Upon the request of any Canadian Facilities Lender from time to time, CIBC shall deliver to the Canadian Agent, and the Canadian Agent 74 82 shall deliver to such Canadian Facilities Lender, any other information reasonably requested by such Canadian Facilities Lender with respect to each Canadian Letter of Credit then outstanding. (e) The issuance by CIBC of each Canadian Letter of Credit and a Canadian Acceptance shall, in addition to the conditions precedent set forth in Section 5.01 hereof, be subject to the conditions that such Canadian Letter of Credit and Canadian Acceptance be in such form, contain such terms and support such transactions or obligations as shall be reasonably satisfactory to CIBC consistent with the then current practices and procedures of CIBC with respect to similar letters of credit and acceptances. All Canadian Letters of Credit shall be issued pursuant to and subject to the Uniform Customs and Practice for Documentary Credits, 1993 revision, International Chamber of Commerce Publication No. 500 and all subsequent amendments and revisions thereto. TD Canada shall have executed and delivered such other instruments and agreements relating to such Canadian Letter of Credit and Canadian Acceptance as CIBC shall have reasonably requested consistent with such practices and procedures. (f) Without duplication of Section 12.13 hereof, TD Canada hereby indemnifies and holds harmless CIBC, each other Canadian Facilities Lender and the Canadian Agent from and against any and all claims and damages, losses, liabilities, costs or expenses which CIBC, such other Canadian Facilities Lender or the Canadian Agent may incur (or which may be claimed against CIBC, such other Canadian Facilities Lender or the Canadian Agent) by any Person by reason of or in connection with the issuance or transfer of or payment or failure to pay under any Canadian Letter of Credit or Canadian Acceptance; provided that TD Canada shall not be required to indemnify CIBC, any other Canadian Facilities Lender or the Canadian Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, (i) caused by the willful misconduct or gross negligence of the party to be indemnified, (ii) caused by the failure of CIBC to pay under any Canadian Letter of Credit or Canadian Acceptance after the presentation to it of a request strictly complying with the terms and conditions of such Canadian Letter of Credit or Canadian Acceptance, unless such payment is prohibited by any law, regulation, court order or decree, or (iii) paid or payable by any Canadian Facilities Lender under Sections 3.10 or 12.04(b) hereof. (g) Without limiting TD Canada's rights as set forth in Section 3.15(f) above, the obligation of TD Canada to immediately reimburse the Canadian Agent or the Canadian Facilities Lenders for drawings made under Canadian Letters of Credit or payment of Canadian Acceptances shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement and such Canadian Letters of Credit or Canadian Acceptances, under all circumstances whatsoever, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of the Canadian Letter of Credit or Canadian Acceptance, the obligation supported by the Canadian Letter of Credit or Canadian Acceptance or any other agreement or instrument relating thereto (collectively, the "Canadian Related Documents"); 75 83 (ii) any amendment or waiver of or any consent to or departure from all or any of the Canadian Related Documents; (iii) the existence of any claim, setoff, defense or other rights which TD Canada may have at any time against any beneficiary or any transferee of a Canadian Letter of Credit or Canadian Acceptance (or any persons or entities for whom any such beneficiary or any such transferee may be acting), the Canadian Agent, Canadian Facilities Lenders or any other person or entity, whether in connection with the Loan Documents, the Canadian Related Documents or any unrelated transaction; (iv) any breach of contract or other dispute between TD Canada and any beneficiary or any transferee of a Canadian Letter of Credit or Canadian Acceptance (or any persons or entities for whom such beneficiary or any such transferee may be acting), the Canadian Agent, Canadian Facilities Lenders or any other person or entity; (v) any draft, statement or any other document presented under the Canadian Letter of Credit or Canadian Acceptance proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; (vi) any delay, extension of time, renewal, compromise or other indulgence or modification granted or agreed to by the Canadian Agent or Canadian Facilities Lenders, with or without notice to or approval by TD Canada in respect of any of TD Canada's indebtedness under this Agreement; or (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; provided, however, that nothing contained herein shall be deemed to release CIBC or any other Canadian Facilities Lender from any liability for actual loss arising as a result of its gross negligence or willful misconduct. 3.16 Canadian Letter of Credit Fee. (a) For the period beginning on the Closing Date and ending on the Revolving Credit Termination Date, TD Canada agree to pay to the Canadian Agent, for the pro rata benefit of the Canadian Facilities Lenders based on their Applicable Commitment Percentages (determined in respect of the Total Canadian Revolving Credit Commitment), a fee for such period at a per annum rate equal to the Applicable Interest Addition for Eurodollar Rate Loans on the daily aggregate amount available to be drawn under Canadian Standby Letters of Credit and fees for such period at those rates established from time to time by the Canadian Agent and acceptable to Canadian Facilities Lenders for Commercial Letters of Credit. (b) For the period beginning on the Closing Date and ending on the Revolving Credit Termination Date, TD Canada agrees to pay to the Canadian Agent for the account of 76 84 CIBC as issuer of the Canadian Letters of Credit, a fee for such period at a per annum rate equal to .125% on the daily aggregate amount available to be drawn under Canadian Letters of Credit. (c) Such payments of fees provided for in this Section 3.16 shall be due in arrears, the first such payment to be made on the last Business Day of October 1997 and on the last Business Day of each January, April, July and October thereafter. 3.17 Administrative Fees and Reserves. TD Canada shall pay to CIBC administrative and other fees, if any, in connection with the Canadian Letters of Credit in such amounts and at such times as CIBC and TD Canada shall agree from time to time. In addition, TD Canada shall reimburse CIBC for all costs or reduction in yield occurring by reason of the issuance by CIBC of the Canadian Letters of Credit. 3.18 Maximum Rate of Return. Notwithstanding any provision to the contrary contained in this Agreement, in no event shall the aggregate "interest" (as defined in Section 347 of the Criminal Code, Revised Statutes of Canada, 1985, C. 46 as the same may be amended, replaced or re-enacted from time to time) payable under this Agreement exceed the effective annual rate of interest on the "credit advanced" (as defined in that section) under this Agreement lawfully permitted under that section and, if any payment, collection or demand pursuant to this Agreement in respect of "interest" (as defined in that section) is determined to be contrary to the provisions of that section, such payment, collection or demand shall be deemed to have been made by mutual mistake of TD Canada and the Canadian Facilities Lenders and the amount of such payment or collection shall be refunded to TD Canada; for purposes of this Agreement the effective annual rate of interest shall be determined in accordance with generally accepted actuarial practices and principles over the term of the applicable credit advanced on the basis of annual compounding of the lawfully permitted rate of interest and, in the event of dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Canadian Agent will be conclusive for the purposes of such determination. 3.19 Reset of Canadian Lenders, Portion on Default. Upon an Event of Default occurring hereunder, the Canadian Agent shall determine the amount of outstanding Obligations of each of the Canadian Facilities Lenders under the Canadian Facilities based on Applicable Commitment Percentages (determined in respect of the Total Canadian Revolving Credit Commitment). If at such time any Canadian Facilities Lender holds Obligations under the Canadian Facilities in an amount less than its Applicable Commitment Percentage, as the case may be (the "Purchasing Lender"), the Purchasing Lender shall forthwith purchase from each Canadian Facilities Lender which holds Obligations under the Canadian Facilities in excess of its Applicable Commitment Percentage of the Obligations outstanding under the Canadian Facilities, as the case may be (the "Selling Lender") the amount of the Obligations under the Canadian Facilities from each Selling Lender required so that after such purchase and sale, each Canadian Facilities Lender holds Obligations under the Canadian Facilities equal to its Applicable Commitment Percentage of the Total Canadian Revolving Credit Commitment of such Obligations. Each Selling Lender agrees to sell such amount of such Obligations of the Canadian Facilities to the Purchasing Lender. 77 85 ARTICLE IV Yield Protection and Illegality 4.01 Increased Cost and Reduced Return. (a) If, after the date hereof, the adoption of any applicable law, rule, or regulation, or any change in any applicable law, rule, or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such governmental authority, central bank, or comparable agency: (i) shall subject such Lender (or its Applicable Lending Office) to any tax, duty, or other charge with respect to any Fixed Rate Loans, any Note, its obligation to make Fixed Rate Loans, or the issuance or maintenance by NationsBank or CIBC or any other Canadian Facilities Lender of or any other Lender's Participation in any Letter of Credit or Acceptance; or shall change the basis of taxation of any amounts payable to such Lender (or its Applicable Lending Office) under this Agreement or any Note in respect of any Fixed Rate Loans, Letter of Credit, Acceptance or Participation (other than taxes imposed on the overall net income of such Lender by the jurisdiction in which such Lender has its principal office or such Applicable Lending Office); (ii) shall impose, modify, or deem applicable any reserve, special deposit, assessment, compulsory loan, or similar requirement (other than the Applicable Reserve Requirement utilized in the determination of the Eurodollar Rate or the CD Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender (or its Applicable Lending Office), including the Domestic Revolving Credit Commitment or Canadian Revolving Credit Commitment of such Lender hereunder; or (iii) shall impose on such Lender (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting this Agreement or any Note or any of such extensions of credit or liabilities or commitments; and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making, Converting into, Continuing, or maintaining any Fixed Rate Loan or issuing, maintaining, or obtaining or maintaining a Participation in, any Letter of Credit or Acceptance, or to reduce any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or any Note with respect to any Fixed Rate Loan, Letter of Credit, Acceptance, or Participation, then each Borrower shall pay to such Lender on demand such amount or amounts as will compensate such Lender for such increased cost or reduction. If any Lender requests compensation by any Borrower under this Section 4.01(a), the applicable 78 86 Borrower may, by notice to such Lender (with a copy to the Agent), suspend the obligation of such Lender to make or Continue Loans of the Type with respect to which such compensation is requested, or to Convert Loans of any other Type into Loans of such Type, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of Section 4.04 shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested. (b) If, after the date hereof, any Lender shall have determined that the adoption of any applicable law, rule, or regulation regarding capital adequacy or any change therein or in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank, or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender's obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change, request, or directive (taking into consideration its policies with respect to capital adequacy), then from time to time upon demand each Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) Without limiting the foregoing but without duplication for any Associated Costs reimbursed pursuant to Section 4.01(a) or (b), as to any Loan denominated in British Pounds, the Borrowers will pay the Associated Costs. (d) Each Lender shall promptly notify the Borrowers and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming compensation under this Section shall furnish to the Borrowers and the Agent a statement setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. 4.02. Limitation on Types of Loans. If on or prior to the first day of any Interest Period for any Fixed Rate Loan: (a) the Agent determines (which determination shall be conclusive) that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate or CD Rate, as the case may be, for such Interest Period; or (b) the Required Lenders determine (which determination shall be conclusive) and notify the Agent that the Eurodollar Rate or the CD Rate will not adequately and 79 87 fairly reflect the cost to the Lenders of funding Eurodollar Rate Loans or CD Loans, as the case may be, for such Interest Period; then the Agent shall give the Borrowers prompt notice thereof specifying the relevant Type of Loans and the relevant amounts or periods, and so long as such condition remains in effect, the Lenders shall be under no obligation to make additional Loans of such Type, Continue Loans of such Type, or to Convert Loans of any other Type into Loans of such Type and the applicable Borrower shall, on the last day(s) of the then current Interest Period(s) for the outstanding Loans of the affected Type, either prepay such Loans or Convert such Loans into another Type of Loan in accordance with the terms of this Agreement. 4.03. Illegality. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to make, maintain, or fund Eurodollar Rate Loans hereunder, then such Lender shall promptly notify the Borrowers thereof and such Lender's obligation to make or Continue Eurodollar Loans and to Convert other Types of Loans into Eurodollar Rate Loans shall be suspended until such time as such Lender may again make, maintain, and fund Eurodollar Loans (in which case the provisions of Section 4.04 shall be applicable). 4.04. Treatment of Affected Loans. If the obligation of any Lender to make a particular Type of Fixed Rate Loan or to Continue, or to Convert Loans of any other Type into, Loans of a particular Type shall be suspended pursuant to Section 4.01 or 4.03 hereof (Loans of such Type being herein called "Affected Loans" and such Type being herein called the "Affected Type"), such Lender's Affected Loans shall be automatically Converted into Domestic Base Rate Loans on the last day(s) of the then current Interest Period(s) for Affected Loans (or, in the case of a Conversion required by Section 4.03 hereof, on such earlier date as such Lender may specify to the Borrower with a copy to the Agent) and, unless and until such Lender gives notice as provided below that the circumstances specified in Section 4.01 or 4.03 hereof that gave rise to such Conversion no longer exist: (a) to the extent that such Lender's Affected Loans have been so Converted, all payments and prepayments of principal that would otherwise be applied to such Lender's Affected Loans shall be applied instead to its Domestic Base Rate Loans; and (b) all Loans that would otherwise be made or Continued by such Lender as Loans of the Affected Type shall be made or Continued instead as Domestic Base Rate Loans, and all Loans of such Lender that would otherwise be Converted into Loans of the Affected Type shall be Converted instead into (or shall remain as) Domestic Base Rate Loans. If such Lender gives notice to the Borrowers (with a copy to the Agent) that the circumstances specified in Section 4.01 or 4.03 hereof that gave rise to the Conversion of such Lender's Affected Loans pursuant to this Section 4.04 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Loans of the Affected Type 80 88 made by other Lenders are outstanding, such Lender's Domestic Base Rate Loans shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Loans of the Affected Type, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Loans of the Affected Type and by such Lender are held pro rata (as to principal amounts, Types, and Interest Periods) in accordance with their respective Domestic Revolving Credit Commitments or Canadian Revolving Credit Commitments, as applicable. 4.05. Compensation. Upon the request of any Lender, each Borrower shall pay to such Lender such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender) to compensate it for any loss, cost, or expense (including loss of anticipated profits) incurred by it as a result of: (a) any payment, prepayment, or Conversion of a Fixed Rate Loan for any reason (including, without limitation, the acceleration of the Loans pursuant to Section 10.01) on a date other than the last day of the Interest Period for such Loan; or (b) any failure by the Borrower for any reason (including, without limitation, the failure of any condition precedent specified in Article V to be satisfied) to borrow, Convert, Continue, or prepay a Fixed Rate Loan on the date for such borrowing, Conversion, Continuation, or prepayment specified in the relevant notice of borrowing, prepayment, Continuation, or Conversion under this Agreement. 4.06 Taxes. (a) Any and all payments by each Borrower to or for the account of any Lender or any of the Agents hereunder or under any other Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and each of the Agents, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender (or its Applicable Lending Office) or such Agent (as the case may be) is organized or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as "Taxes"). If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable under this Agreement or any other Loan Document to any Lender or any of the Agents, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 4.06) such Lender or such Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions, (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, and (iv) such Borrower shall furnish to the Agent, at its address referred to in Section 12.02, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, each Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Agreement or any other Loan Document or from the 81 89 execution or delivery of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "Other Taxes"). (c) Each Borrower agrees to indemnify each Lender and each of the Agents for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 4.06) paid by such Lender or such Agent (as the case may be) and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto. Each Borrower's obligation under this indemnity shall be conditioned upon: (i) the Lender or Agent immediately notifying Borrower of any claim for indemnity under this Section 4.06(c); and (ii) the Lender or Agent shall not pay, settle or compromise the claim without the prior written consent of Borrower, which shall not be unreasonably withheld or delayed, or if required to avoid imposition of liens. (d) Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by any Borrower or the Agent (but only so long as such Lender remains lawfully able to do so), shall provide the Borrowers and the Agent with (i) Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States, (ii) Internal Revenue Service Form W-8 or W-9, as appropriate, or any successor form prescribed by the Internal Revenue Service, and (iii) any other form or certificate required by any taxing authority (including any certificate required by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying that such Lender is entitled to an exemption from or a reduced rate of tax on payments pursuant to this Agreement or any of the other Loan Documents. (e) For any period with respect to which a Lender has failed to provide the Borrowers and the Agent with the appropriate form pursuant to Section 4.06(d) (unless such failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 4.06(a) or 4.06(b) with respect to Taxes imposed by the United States; provided, however, that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, each Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes. (f) If any Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this Section 4.06, then such Lender will agree to use reasonable efforts to change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Lender, 82 90 is not otherwise disadvantageous to such Lender. (g) Within thirty (30) days after the date of any payment of Taxes, the applicable Borrower shall furnish to the Agent the original or a certified copy of a receipt evidencing such payment. (h) Without prejudice to the survival of any other agreement of any Borrower hereunder, the agreements and obligations of each Borrower contained in this Section 4.06 shall survive the termination of the Commitments and the payment in full of the Obligations. 4.07 Restricted Lender. In the event any Lender seeks additional compensation pursuant to this Article IV or is restricted from making any Fixed Rate Loan under this Agreement, including providing an Alternative Currency which is made available by other Lenders (a "Restricted Lender"), TDC may cause such Restricted Lender to be replaced by a financial institution reasonably acceptable to the Agent which is not similarly restricted and will not seek such additional compensation. Such Restricted Lender agrees to execute and to deliver to the Agent an Assignment and Acceptance as provided in Section 12.01 hereof upon payment of all amounts owed under this Agreement to such Restricted Lender. 4.08 Funding. In the event any Borrower elects to obtain any Loans as Fixed Rate Loans pursuant to Section 2.01 or Section 3.01, or elects to Continue any Fixed Rate Loans or Convert any portion of the principal amount of any Domestic Base Rate Loans, Canadian Prime Rate Loans or Floating CD Loans to Fixed Rate Loans pursuant to Section 2.09 or Section 3.08, each Lender may, if it so elects, fulfill its obligation to make or Continue any portion of the principal amount of any Loan as, or to Convert any portion of the principal amount of any Loan into, a Fixed Rate Loan in accordance with any election made by such Borrower by causing a foreign branch or affiliate of such Lender or an international banking facility created by such Lender to make such Fixed Rate Loan; provided that in such event such Fixed Rate Loan shall be deemed to have been made by such Lender, and the obligation of the Borrower to repay such Fixed Rate Loan shall nevertheless be to such Lender and shall be deemed to be held by such Lender, to the extent of such Fixed Rate Loan, for the account of such foreign branch, affiliate or international banking facility. In addition, the Borrowers hereby consent and agree that, for purposes of any determination to be made for purposes of this Agreement (including Sections 4.01, 4.02, 4.03 and 4.04), it shall be conclusively assumed that each Lender elected to fund all Fixed Rate Loans by purchasing Dollar deposits or deposits in the Alternative Currency in its eurocurrency office's interbank eurocurrency market. 83 91 ARTICLE V Conditions to Making Loans, Issuing Letters of Credit and Creating Acceptances 5.01 Conditions of Initial Advance and Issuance of Letters of Credit and Creating Acceptances. The obligation of the Lenders to make the initial Domestic Advance or Canadian Advance and of NationsBank and CIBC to issue the Letters of Credit and create Acceptances is subject to the following conditions precedent: (a) The Agent shall have received, on the Closing Date in form and substance satisfactory to the Agent and the Lenders the following: (i) executed originals of each of this Agreement and the Notes and the other Loan Documents, together with all schedules and exhibits thereto in form and substance satisfactory to the Agent and the Lenders; (ii) favorable written opinion or opinions of counsel to the Borrowers and each Subsidiary executing a Guaranty or Pledge Agreement dated the Closing Date, addressed to the Agent and the Lenders and satisfactory to Smith Helms Mulliss & Moore, L.L.P., special counsel to the Agent, substantially in the form of Exhibits K-1 and K-2 attached hereto; (iii) resolutions of the board of directors (or of the appropriate committee thereof) of each of the Borrowers certified by its secretary or assistant secretary as of the Closing Date, appointing the initial Authorized Representatives and approving and adopting the Loan Documents to be executed by such Borrower, and authorizing the execution and delivery thereof; specimen signatures of officers of each Borrower executing the Loan Documents, certified by the Secretary or Assistant Secretary of such Borrower; (iv) the charter documents of each of the Borrowers certified as of a recent date by the Secretary of State or comparable official of its jurisdiction of organization; (v) the by-laws of each of the Borrowers certified as of the Closing Date as true and correct by the secretary or assistant secretary of such Borrower; (vi) certificates issued as of a recent date by the Secretary of State or comparable official of the jurisdiction of the formation of each of the Borrowers as to the corporate good standing of such Borrower therein; (vii) appropriate certificates of qualification to do business and of corporate good standing with respect to each of the Borrowers issued as of a recent date by the Secretary of State or comparable official of each jurisdiction in which the failure to be qualified to do business could materially adversely affect the business, operations or 84 92 conditions, financial or otherwise, of such Borrower; (viii) with respect to each Significant Subsidiary executing a Guaranty and each Subsidiary executing a Pledge Agreement, each of the opinions, certificates and documents described in subsections (ii) through (vii) above; (ix) notice(s) of appointment of the initial Authorized Representatives; (x) all fees payable by the Borrowers on the Closing Date to the Agent and the Lenders; (xi) evidence satisfactory to the Agent of the repayment in full and termination of each of the Prior Facilities substantially simultaneously with the making of the initial Domestic Advance and the initial Canadian Advance hereunder, and the agreement to terminate any Liens on assets securing any obligations under any of the Prior Facilities which termination shall be effected with reasonable promptness following the Closing Date; (xii) evidence of the delivery of stock certificates or such other documents, and the taking of such other action, as may be necessary or appropriate under applicable law to perfect the Liens of the Agent (for itself and on behalf of the Lenders) on the Collateral under the Loan Documents; and (xiii) such other documents, instruments, certificates and opinions as the Agent or any Lender may reasonably request on or prior to the Closing Date in connection with the consummation of the transactions contemplated hereby; and (b) In the good faith judgment of the Agent and the Lenders: (i) there shall not have occurred or become known to the Agent or the Lenders any material adverse change in the business, financial condition, operations, properties or prospects of TDC and its Subsidiaries, taken as a whole, since January 31, 1997; (ii) no litigation shall be pending or threatened which would be likely to materially and adversely affect the business, financial condition, operations, properties or prospects of TDC and its Subsidiaries, taken as a whole, or which could reasonably be expected to restrain or enjoin, impose burdensome conditions on, or otherwise materially and adversely (A) affect the ability of any of TDC and its Subsidiaries to fulfill their respective obligations under the Loan Documents, or (B) impair any interests or rights of the Agent or any Lender under the Loan Documents; and (iii) TDC and its Subsidiaries shall have received all approvals, consents and waivers, and shall have made or given all necessary filings and notices as shall be 85 93 required to consummate the transactions contemplated hereby without the occurrence of any default under, conflict with or violation of (A) any applicable law, rule, regulation, order or decree of any governmental authority or arbitral authority or (B) any agreement, document or instrument to which any of TDC or any Subsidiaries is a party or by which any of them or their properties is bound, except for such approvals, consents, waivers, filings and notices the receipt, making or giving of which is not, in the good faith judgment of the Agent and the Lenders, material to the enforcement of any of the Loan Documents, or the financial condition, business or operations of TDC and its Subsidiaries, taken as a whole. 5.02 Conditions of Loans. The obligations of the Lenders to make any Loans, and of NationsBank or CIBC to issue Letters of Credit or create Acceptances hereunder on or subsequent to the Closing Date are subject to the satisfaction of the following conditions: (a) the Agent shall have received a notice of such borrowing or request if required by Section 2.01, 2.04, 2.15, 2.18, 2.19, 3.01, 3.13 or 3.14; (b) the representations and warranties of the Borrowers set forth in Article VII hereof and in each of the other Loan Documents shall be true and correct on and as of the date of such Advance or Loan or issuance of such Letter of Credit or Acceptance, as the case may be, with the same effect as though such representations and warranties had been made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date and except that the financial statements referred to in Section 7.02(c) shall be deemed to be those financial statements most recently delivered to the Agent and the Lenders pursuant to Section 8.01 hereof; (c) in the case of the issuance of a Letter of Credit, Borrower shall have executed and delivered to NationsBank or CIBC, as applicable, a Letter of Credit Application in form and content acceptable to NationsBank or CIBC, as applicable, together with such other instruments and documents as it shall request; provided that the terms and conditions of this Agreement shall control if any conflict should exist between the terms of such Letter of Credit Application and this Agreement; (d) in the case of the creation of a Domestic Acceptance, the Multicurrency Facilities Borrower shall have executed and delivered to NationsBank a General Acceptance Agreement and a draft in form and content acceptable to NationsBank together with such other instruments and documents as NationsBank shall reasonably request; (e) at the time of each such Advance or Loan or issuance of each Letter of Credit or Acceptance, as the case may be, no Default or Event of Default specified in Article X hereof, shall have occurred and be continuing; (f) immediately after giving effect to a Domestic Advance or Domestic Loan, 86 94 a Domestic Acceptance or a Domestic Letter of Credit, the Total Domestic Utilization shall not exceed the Total Domestic Revolving Credit Commitment; (g) immediately after giving effect to a Canadian Advance or Canadian Loan, a Canadian Acceptance or a Canadian Letter of Credit, the Total Canadian Utilization shall not exceed the Total Canadian Revolving Credit Commitment; (h) immediately after giving effect to a Swing Line Loan the aggregate Swing Line Outstandings shall not exceed $25,000,000; (i) immediately after giving effect to the issuance of any Domestic Letter of Credit the Domestic Letter of Credit Outstandings shall not exceed $125,000,000; (j) immediately after giving effect to the issuance of any Canadian Letter of Credit, the Canadian Letter of Credit Outstandings shall not exceed $15,000,000; and (k) immediately after giving effect to any Competitive Bid Loan, the aggregate principal amount of outstanding Competitive Bid Loans shall not exceed $50,000,000. Each borrowing of Loans and each issuance of a Letter of Credit and Acceptance shall constitute a representation and warranty by the Borrowers that the conditions set forth in clauses (b) and (e) above have been satisfied as of the date thereof and that as of the date of such Advance or issuance of a Letter of Credit or Acceptance there has not been any material adverse change in the business, operations or financial condition of TDC and its Subsidiaries. 87 95 ARTICLE VI Security 6.01 Guaranties and Pledge Agreement. As support and security for the full and timely payment and performance of all Obligations, the Borrowers shall on or before the Closing Date cause to be delivered to the Agent (i) the unconditional guaranty of payment for the benefit of the Multicurrency Facilities Lenders of all Obligations of the Multicurrency Facilities Borrowers in connection with the Multicurrency Facilities by the Significant Subsidiaries of TDC (other than TD France and the Excluded Subsidiaries), (ii) the unconditional guaranty of payment by TDC and its Significant Subsidiaries (other than TD Canada and the Excluded Subsidiaries) for the benefit of the Canadian Facilities Lenders of all Obligations of TD Canada in connection with the Canadian Facilities, and (iii) the Pledge Agreements signed by TDC, Tech Data Latin America, Inc. and Tech Data Worldwide Partner, Inc.; and on or before the Closing Date shall do or cause to be done all things necessary in the opinion of the Agent and its counsel to grant to the Agent (for itself and on behalf of the Lenders) a duly perfected, first priority Lien in all Collateral, subject to no prior Lien (except as permitted by Section 9.08(v)) or other encumbrance or restriction on transfer. 6.02 Further Assurances. At the request of the Agent, each Subsidiary and TDC will execute by its duly authorized officers, alone or with the Agent, any certificate, instrument, statement or document and will procure any such certificate, instrument, statement or document, or take such other action (and pay all connected costs) which the Agent reasonably deems necessary to create, continue or preserve (a) the guaranty by such Subsidiary or TDC or (b) the Liens on Collateral (and the perfection and priority thereof) of the Agent contemplated hereby and by the other Loan Documents. 6.03 New Subsidiaries. As provided in Section 8.20 hereof, to the extent allowed under this Agreement, if TDC acquires or forms a Significant Subsidiary (a) TDC shall cause such Significant Subsidiary to execute a Guaranty of Obligations as described in Section 6.01 hereof (unless such Subsidiary is an Excluded Subsidiary); and (b) in the case of an Excluded Subsidiary other than TD France, that is directly owned by TDC or any Domestic Subsidiary, TDC shall execute or shall cause any applicable Domestic Subsidiary to execute a Pledge Agreement, granting to the Agent (for itself and for the benefit of the Lenders) a Lien on the lesser of (i) 65% of the total capital stock or ownership interests of such Excluded Subsidiary or (ii) 100% of such stock and ownership interests owned by TDC or any Domestic Subsidiary. 88 96 ARTICLE VII Representations and Warranties 7.01 Representations and Warranties as to Borrowers and Subsidiaries. Each Borrower represents and warrants to and in favor of the Agents and each Lender with respect to itself and to its Subsidiaries (which representations and warranties shall survive the delivery of the documents mentioned herein and the making of Loans and the issuance of Letters of Credit and Acceptances), that: (a) Organization and Authority. (i) It is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation; (ii) it has the corporate power and authority to own its properties and assets and to carry on its business as now being conducted and is qualified to do business in every jurisdiction in which failure so to qualify would have a material adverse effect on the business or operations of TDC or its Subsidiaries; (iii) it has the corporate power and authority to execute and perform this Agreement, and to borrow hereunder (in the case of a Borrower), and to execute and deliver each of the other Loan Documents to which it is a party; (iv) each Subsidiary executing a Guaranty or Pledge Agreement has the power and authority to execute, deliver and perform the Guaranty or Pledge Agreement to which it is a party; and (v) when executed and delivered, each of the Loan Documents to which such Borrower or any Subsidiary is a party will be valid and binding obligations of the Borrower or such Subsidiary signatory thereto, enforceable against the Borrower or such Subsidiary signatory thereto, in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity which may limit the availability of equitable remedies (whether in a proceeding at law or in equity); (b) Loan Documents. The execution, delivery and performance by each Borrower and each Subsidiary of each of the Loan Documents to which it is a party: (i) have been duly authorized by all requisite corporate action (including any required shareholder approval) of such Borrower or its Subsidiaries, as the case may be, required for the lawful execution, delivery and performance thereof; 89 97 (ii) do not violate any provisions of (1) applicable law, (2) any order of any court or other agency of government binding on the Borrower or its Subsidiaries or its or their properties, (3) the charter documents or by-laws of the Borrower or its Subsidiaries or (4) any provisions of any indenture, agreement or other instrument to which the Borrower or any of its Subsidiaries is a party, or by which the properties or assets of the Borrower or its Subsidiaries are bound; (iii) will not be in conflict with, result in a breach of or constitute an event of default, or an event which, with notice or lapse of time, or both, would constitute an event of default, under any indenture, agreement or other instrument to which the Borrower or any of its Subsidiaries is a party; and (iv) will not result in the creation or imposition of any Lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Borrower or any Subsidiary. (c) Solvency. Each Borrower and each of its Subsidiaries are Solvent after giving effect to the transactions contemplated by this Agreement and the other Loan Documents. 7.02 Representations and Warranties of TDC. TDC represents and warrants with respect to itself and its Subsidiaries (which representations and warranties shall survive the delivery of the documents mentioned herein and the making of Loans and the issuance of Letters of Credit and Acceptances) that: (a) Subsidiaries and Stockholders. It has no Subsidiaries other than those Persons listed as Subsidiaries in Schedule 7.02(a) hereto; Schedule 7.02(a) to this Agreement states as of the date hereof the authorized and issued capitalization of each Subsidiary, the number of shares of each class of capital stock issued and outstanding of each such Subsidiary and the number and percentage of outstanding shares of each such class of capital stock owned by TDC or by any such Subsidiary; the outstanding shares of each such Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable; and TDC and each such Subsidiary owns beneficially and of record all the shares it is listed as owning in Schedule 7.02(a), free and clear of any Lien, except for the Lien created by the Security Instruments. (b) Ownership Interests. It does not own any interest in any Person other than the Persons listed in Schedule 7.02(a) and Schedule 7.02(b) hereto; (c) Financial Condition. (i) TDC has heretofore furnished to each Lender an audited unqualified consolidated balance sheet of TDC and its Subsidiaries as at January 90 98 31, 1997 and the notes thereto and the related consolidated statements of income, cash flow and changes in stockholders' equity for the Fiscal Year then ended as examined and certified by Price Waterhouse L.L.P. Except as set forth therein, such financial statements (including the notes thereto) present fairly the financial condition of TDC and the Subsidiaries as of the end of such Fiscal Year and results of their operations and the changes in their stockholders' equity for the Fiscal Year then ended, all in conformity with Generally Accepted Accounting Principles applied on a Consistent Basis. Except as disclosed therein or otherwise described or referred to in Schedule 7.02(c), neither TDC nor any Subsidiary has, as of the date hereof, any known and material direct liability; (ii) since January 31, 1997, there has been no material adverse change in the condition, financial or otherwise, of TDC and its Subsidiaries or in the businesses, properties and operations of TDC and its Subsidiaries, in each case, considered as a whole, nor have such businesses or properties, taken as a whole, been materially adversely affected as a result of any fire, explosion, earthquake, accident, strike, lockout, combination of workers, flood, embargo or act of God; and (iii) except as set forth in Schedule 7.02(c) hereto, TDC and its Subsidiaries have not incurred, other than in the ordinary course of business, any material indebtedness, liabilities, obligations or commitments, contingent or otherwise which remain outstanding or unsatisfied; (d) Title to Properties. TDC and its Subsidiaries have title to all their respective real and personal properties subject to no transfer restrictions, liens, mortgages, pledges, security interests, encumbrances or charges of any kind, except for (i) the transfer restrictions and liens described in Schedule 7.02(d) attached hereto, and (ii) liens permitted under Section 9.08 hereof; (e) Taxes. TDC and its Subsidiaries have filed or caused to be filed all federal, state and local tax returns which are required to be filed by them and except for taxes and assessments being contested in good faith and against which satisfactory reserves have been established, have paid or caused to be paid all taxes as shown on said returns or on any assessment received by them, to the extent that such taxes have become due; (f) Other Agreements. Neither TDC nor any Subsidiary is (i) a party to any judgment, order, decree or any agreement or instrument or subject to restrictions materially adversely affecting the business, properties or assets, operation or condition (financial or otherwise) of TDC and the Subsidiaries, taken as a whole; or 91 99 (ii) in default in the performance, observance or fulfillment of any of the material obligations, covenants or conditions contained in any agreement or instrument to which TDC or any Subsidiary is a party, which default has, or if not remedied within any applicable grace period could have, a material adverse effect on the business, operations or condition, financial or otherwise, of TDC and the Subsidiaries taken as a whole; (g) Litigation. Except as set forth in Schedule 7.02(g) hereto, there is no action, suit or proceeding at law or in equity or by or before any governmental instrumentality or agency or arbitral body pending, or, to the best knowledge of TDC, threatened by or against TDC or any Subsidiary or affecting TDC or any Subsidiary or any properties or rights of TDC or any Subsidiary, which, if, determined adversely to TDC or such Subsidiary, would materially adversely affect the financial condition, business or operations of TDC and the Subsidiaries taken as a whole; (h) Margin Stock. Neither TDC nor any Subsidiary owns any "margin stock" as such term is defined in Regulation U, as amended (12 C.F.R. Part 221), of the Board. The proceeds of the borrowings made pursuant to Sections 2.01, 2.04, 2.15 and 3.01 hereof, the Letters of Credit and the Acceptances will be used by TDC and the other Borrowers only for the purposes set forth in Section 2.13 and Section 3.11 hereof. None of such proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry margin stock or for any other purpose which might constitute any of the Loans under this Agreement a "purpose credit" within the meaning of said Regulation U or Regulation X (12 C.F.R. Part 224) of the Board. Neither TDC nor any agent acting in its behalf has taken or will take any action which might cause this Agreement or any of the documents or instruments delivered pursuant hereto to violate any regulation of the Board or to violate the Securities Exchange Act of 1934 or any state securities laws, in each case as in effect on the date hereof; (i) Investment Company. Neither TDC nor any Subsidiary is an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended (15 U.S.C. Section 80a-1, et seq.). The application of the proceeds of the Loans, the Letters of Credit and the Acceptances and repayment thereof by TDC and the other Borrowers and the performance by TDC and the other Borrowers of the transactions contemplated by this Agreement will not violate any provision of said Act, or any rule, regulation or order issued by the Securities and Exchange Commission thereunder, in each case as in effect on the date hereof; (j) Patents, Etc. TDC and its Subsidiaries own or have the right to use, under valid license agreements or otherwise, all material patents, licenses, franchises, trademarks, trademark rights, trade names, trade name rights, copyrights and know how necessary to the conduct of their businesses as now conducted, without known material 92 100 conflict with any patent, license, franchise, trademark, trade secrets and confidential commercial or proprietary information, trade name, copyright, rights to trade secrets or other proprietary rights of any other Person; (k) No Untrue Statement. Neither this Agreement nor any other Loan Document or certificate or document executed and delivered by or on behalf of TDC or any Subsidiary in accordance with Section 5.01 hereof contains any misrepresentation or untrue statement of material fact or omits to state a material fact necessary, in light of the circumstance under which it was made, in order to make any such representation or statement contained therein not misleading in any material respect; (l) No Consents, Etc. Neither the respective businesses or properties of TDC or any Subsidiary, nor any relationship between TDC or any Subsidiary and any other Person, nor any circumstance in connection with the execution, delivery and performance of the Loan Documents and the transactions contemplated hereby is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any governmental or other authority or any other Person on the part of TDC or any Subsidiary as a condition to the execution, delivery and performance of, or consummation of the transactions contemplated by, this Agreement or the other Loan Documents or if so, such consent, approval, authorization, filing, registration or qualification has been obtained or effected, as the case may be; (m) ERISA. (i) None of the employee benefit plans maintained at any time by TDC or any Subsidiary or the trusts created thereunder has engaged in a prohibited transaction which could subject any such employee benefit plan or trust to a material tax or penalty on prohibited transactions imposed under Internal Revenue Code Section 4975 or ERISA or under any Foreign Benefit Law; (ii) None of the employee benefit plans maintained at any time by TDC or any Subsidiary which are employee pension benefit plans and which are subject to Title IV of ERISA or any Foreign Benefit Law or the trusts created thereunder has been terminated so as to result in a material liability of TDC or any Subsidiary under ERISA or any other Person exercising similar duties and functions under any Foreign Benefit Law nor has any such employee benefit plan of TDC incurred any liability to the Pension Benefit Guaranty Corporation established pursuant to ERISA, other than for required insurance premiums which have been paid; neither TDC nor any Subsidiary has withdrawn from or caused a partial withdrawal to occur with respect to any Multi-employer Plan; TDC and its Subsidiaries have made or provided for all contributions to all such employee pension benefit plans which they maintain and which are required as of the end of the most recent fiscal year under each such plan; neither TDC nor any Subsidiary has incurred any accumulated funding deficiency with respect to any such plan, 93 101 whether or not waived; nor has there been any reportable event, or other event or condition, which presents a material risk of termination of any such employee benefit plan by such Pension Benefit Guaranty Corporation or other Person exercising similar duties and functions under any Foreign Benefit Law; (iii) The present value of all vested accrued benefits under the employee pension benefit plans which are subject to Title IV of ERISA or any Foreign Benefit Law, maintained by TDC or any Subsidiary, did not, as of the most recent valuation date for each such plan, exceed the then current value of the assets of such employee benefit plans allocable to such benefits; (iv) The consummation of the Loans and the issuance of the Letters of Credit and Acceptances provided for in Article II and Article III will not involve any prohibited transaction under ERISA or violate any Foreign Benefit Law; (v) To the best of TDC's knowledge, each employee pension benefit plan subject to Title IV of ERISA or other Foreign Benefit Law, maintained by TDC or any Subsidiary, has been administered in accordance with its terms and is in compliance in all material respects with all applicable requirements of ERISA and other applicable laws, regulations and rules and any applicable Foreign Benefit Law; (vi) There has been no withdrawal liability incurred with respect to any Multi-employer Plan to which TDC or any Subsidiary is or was a contributor; (vii) As used in this Agreement, the terms "employee benefit plan," "employee pension benefit plan," "accumulated funding deficiency," "reportable event," and "accrued benefits" shall have the respective meanings assigned to them in ERISA, and the term "prohibited transaction" shall have the meaning assigned to it in Internal Revenue Code Section 4975 and ERISA; and (viii) Neither TDC nor any Subsidiary has any liability, contingent or otherwise, under any plan or program or the equivalent for unfunded post-retirement benefits, including pension, medical and death benefits, which liability would have a material adverse effect on the financial condition of TDC and its Subsidiaries taken as a whole; (n) No Default. As of the date hereof, there does not exist any Default or Event of Default hereunder; (o) Hazardous Materials. Neither TDC nor any Subsidiary nor, to the best of TDC's knowledge, any previous owner or operator of any real property currently owned or operated by TDC or any Subsidiary (collectively, the "Property") or any other Person, has generated, stored, or disposed of any Hazardous Material on any portion of the Property, or transferred any Hazardous Material from the Property to any other location, 94 102 giving rise to any liability of TDC or any Subsidiary which would have a materially adverse effect on TDC and the Subsidiaries taken as a whole. TDC and each Subsidiary are in compliance with all applicable Environmental Laws and neither TDC nor any Subsidiary has been notified of any action, suit, proceeding or investigation which calls into question compliance by TDC or any Subsidiary with any Environmental Laws or which seeks to suspend, revoke or terminate any license, permit or approval necessary for the generation, handling, storage, treatment or disposal of any Hazardous Material. 95 103 ARTICLE VIII Affirmative Covenants Until the Obligations have been paid and satisfied in full and this Agreement has been terminated in accordance with the terms hereof, unless the Required Lenders shall otherwise consent in writing, TDC will and will cause each Subsidiary to: 8.01 Financial Reports, Etc. (a) As soon as practical and in any event within 120 days after the end of each Fiscal Year of TDC, deliver or cause to be delivered to the Agents and each Lender (i) consolidated and consolidating balance sheets of TDC and its Subsidiaries, and the notes thereto, and the related consolidated and consolidating statements of income, cash flow and changes in stockholders' equity and the respective notes thereto for such Fiscal Year, setting forth in each case comparative financial statements for the preceding Fiscal Year, all prepared in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis and containing, with respect to the consolidated financial reports, opinions of Price Waterhouse L.L.P., or other such independent certified public accountants selected by TDC and approved by the Required Lenders, which are unqualified as to the scope of the audit performed and as to the "going concern" status of TDC; (ii) a copy of TDC's Form 10K as filed with the Securities and Exchange Commission; and (iii) a certificate of an Authorized Representative demonstrating compliance with Sections 9.01, 9.02, 9.03, 9.04, 9.05, 9.06, 9.07(iv), (v) and (vi), 9.15, 9.16 and 9.18 of this Agreement, which certificate shall be in the form attached as Exhibit L; (b) as soon as practical and in any event within 60 days after the end of each quarterly period (except the last reporting period of the Fiscal Year), deliver to the Agents and each Lender (i) consolidated and consolidating balance sheets of TDC and its Subsidiaries, as of the end of such reporting period and the related consolidated and consolidating statements of income, cash flow and changes in stockholders' equity for such reporting period and for the period from the beginning of the Fiscal Year through the end of such reporting period, certified by an Authorized Representative as presenting fairly the financial position of TDC and its Subsidiaries as of the end of such reporting period and the results of their operations and the changes in their financial position for such reporting period, in conformity with the standards set forth in Section 7.02(c)(i) with respect to interim financials, (ii) a copy of TDC's Form 10Q for such quarterly period as filed with the Securities and Exchange Commission and (iii) a certificate of an Authorized Representative containing computations for such quarter similar to that required pursuant to Section 8.01(a)(iii); (c) together with each delivery of the financial statements required by Section 8.01(a) hereof, deliver to the Agents and each Lender a letter from TDC's accountants specified in Section 8.01(a) hereof stating that in performing the examination necessary to render an opinion on the financial statements delivered therewith, they obtained no knowledge of any Default or Event of Default by TDC or any Subsidiary in the fulfillment of the terms and provisions of this Agreement insofar as they relate to financial matters (which at the date of such statement remains uncured); and if the accountants have obtained knowledge of such Default or Event of Default, a 96 104 statement specifying the nature and period of existence thereof; (d) promptly upon their becoming available to TDC, TDC shall deliver to the Agents and each Lender, a copy of (i) all regular or special reports or effective registration statements which TDC or any Subsidiary shall file with the Securities and Exchange Commission (or any successor thereto) or any securities exchange, (ii) all reports, proxy statements, financial statements and other information distributed by TDC to its stockholders, bondholders or the financial community in general, and (iii) any reports submitted to TDC or any of its Subsidiaries by independent accountants in connection with any annual, interim or special audit of TDC or any of its Subsidiaries; (e) promptly, from time to time, deliver or cause to be delivered to each Lender such other information regarding TDC's and each Subsidiary's operations, business affairs and financial condition as such Lender may reasonably request, including audited financial statements of any Subsidiary, to the extent such statements exist. The Agents and the Lenders are hereby authorized to deliver a copy of any such financial information delivered hereunder to the Lenders (or any affiliate of any Lender) or to the Agent, to any regulatory authority having jurisdiction over any of the Lenders pursuant to any written request therefor, and to any other Person who shall acquire or consider the acquisition of a participation interest in or assignment of any Loan or the Letters of Credit or Acceptances permitted by this Agreement. 8.02 Maintain Properties. Maintain all properties and other personal property necessary to its operations in good working order and condition and make all needed repairs, replacements and renewals as are necessary to conduct its business in accordance with customary business practices. 8.03 Existence, Qualification, Etc. Do or cause to be done all things necessary to preserve and keep in full force and effect its existence and all material rights and franchises, trade names, trademarks and permits and maintain its license or qualification to do business as a foreign corporation and good standing in each jurisdiction in which its ownership or lease of property or the nature of its business requires such qualification where the failure to maintain such license or qualification would have a material adverse effect on TDC and its Subsidiaries. 8.04 Regulations and Taxes. Comply with or contest in good faith all statutes and governmental regulations and pay all taxes, assessments, governmental charges, claims for labor, supplies, rent and any other obligation which, if unpaid, might become a lien against any of its properties except liabilities being contested in good faith and against which adequate reserves have been established. 8.05 Insurance. Maintain with financially sound and reputable insurers insurance with respect to its properties and business and against such liabilities, casualties and contingencies of such types and in such amounts as is customary in the case of corporations engaged in the same or a similar business or having similar properties similarly situated. 97 105 8.06 True Books. Keep true books of record and account in which full, true and correct entries will be made of all of its dealings and transactions, and set up on its books such reserves as may be required by Generally Accepted Accounting Principles or other accounting principles applicable in the jurisdiction of a Borrower's or Subsidiary's organization or creation with respect to all taxes, assessments, charges, levies and claims and with respect to its business in general, and include such reserves in interim as well as year-end financial statements. 8.07 Pay Indebtedness to Lenders and Perform Other Covenants. (a) Make full and timely payment of the principal of and interest on the Notes and all other Obligations whether now existing or hereafter arising; and (b) duly comply with all the terms and covenants contained in all other instruments and documents given to the Agent or any Lender pursuant to this Agreement. 8.08 Right of Inspection. Permit any Person designated by any Lender, at the Lender's expense, to visit and inspect any of the properties, corporate books and financial reports of TDC and its Subsidiaries, and to discuss its affairs, finances and accounts with its principal officers and independent certified public accountants, all at such reasonable times, at reasonable intervals and with reasonable prior notice. Information received by the Agent and any Lender pursuant to such inspections shall be limited to distribution in the same manner as described in Section 8.01(e) hereof. 8.09 Observe all Laws. Conform to and duly observe all laws, regulations and other valid requirements of any regulatory authority with respect to the conduct of its business, the failure to observe which would have a material adverse effect on its business. 8.10 Covenants Extending to Subsidiaries. Cause each of its Subsidiaries to do with respect to itself, its business and its assets, each of the things required of TDC in Sections 8.02 through 8.09, inclusive. 8.11 Officer's Knowledge of Default. Upon an officer of TDC obtaining knowledge of any Default or Event of Default hereunder or under any other obligation of TDC or any Subsidiary, cause such officer to promptly notify the Agents of the nature thereof, the period of existence thereof, and what action TDC proposes to take with respect thereto. 8.12 Suits or Other Proceedings. Upon an officer of TDC obtaining knowledge of any litigation, dispute or proceedings being instituted or threatened against TDC or its Subsidiaries, or any attachment, levy, execution or other process being instituted against any assets of TDC or its Subsidiaries in an amount greater than $5,000,000 not otherwise covered by insurance, promptly deliver to the Agents written notice thereof stating the nature and status of such litigation, dispute, proceeding, levy, execution or other process. 8.13 Environmental Reports. Promptly provide to the Agents true, accurate and complete copies of any and all documents, including reports, submissions, notices, orders, directives, findings and correspondence made by TDC or any Subsidiary to the United States 98 106 Environmental Protection Agency ("EPA"), the United States Occupational Safety and Health Administration ("OSHA") or to any other federal, state or local authority pursuant to any federal, state or local law, code or ordinance and all rules and regulations promulgated thereunder which require informational submissions concerning environmental, health or safety matters. 8.14 Notice of Discharge of Hazardous Material or Environmental Complaint. Give to the Agents immediate written notice of any complaint, order, directive, claim, citation or notice by any governmental authority or any Person to TDC, any Subsidiary or any successor with respect to (i) air emissions, (ii) spills, releases or discharges to soils or improvements located thereon, surface water, groundwater or the sewer, septic system or waste treatment, storage or disposal systems servicing the Property, (iii) noise emissions, (iv) solid or liquid waste disposal, or (v) the use, generation, storage, transportation or disposal of Hazardous Material. Such notices shall include, among other information, the name of the party who filed the claim, the nature of the claim and the actual or potential amount of the claim. TDC shall, and shall cause its Subsidiaries to, promptly comply with its obligations under law with regard to such matters. However, neither TDC nor any Subsidiary shall not be obligated to give such notice to Agent of discharge or existence of any Hazardous Material which occurs legally in accordance with and pursuant to the terms and conditions of a valid governmental permit, license, certificate or approval therefor. 8.15 Indemnification. The Borrowers hereby jointly and severally agree to defend, indemnify and hold the Agents and Lenders harmless from and against any and all claims, losses, liabilities, damages and expenses (including, without limitation, cleanup costs and reasonable attorneys' fees including those arising by reason of any of the aforesaid or an action against TDC or any Subsidiary under this indemnity) arising directly or indirectly from, out of or by reason of the handling, storage, treatment, emission or disposal of any Hazardous Material by or in respect of TDC or any Subsidiary or property owned or leased by TDC or any Subsidiary. The provisions of this Section 8.15 shall survive repayment of the Obligations, occurrence of the Revolving Credit Termination Date and expiration or termination of this Agreement. This indemnity shall not apply to the extent of damages caused to Agent, Lenders or others by Agent or Lenders. 8.16 Further Assurances. At its cost and expense, upon request of either of the Agents, duly execute and deliver or cause to be duly executed and delivered, to the Agents such further instruments, documents, certificates, and do and cause to be done such further acts that may be reasonably necessary or advisable in the opinion of the Agents to carry out more effectively the provisions and purposes of this Agreement and the other Loan Documents. 8.17 ERISA Requirement. Comply with all material requirements of ERISA, to the extent applicable, and any Foreign Benefit Law applicable to it and furnish to the Agents as soon as possible and in any event (i) within thirty (30) days after TDC or duly appointed administrator of a employee benefit plan knows or has reason to know that any reportable event 99 107 or other event under any Foreign Benefit Law with respect to any employee benefit plan has occurred, written statement of an Authorized Representative describing in reasonable detail such reportable event or other event under any Foreign Benefit Law and any action which TDC proposes to take with respect thereto, together with a copy of the notice of such reportable event given to the PBGC or a statement that said notice will be filed with the annual report to the United States Department of Labor with respect to such plan if such filing has been authorized, (ii) promptly after receipt thereof, a copy of any notice that TDC or any Subsidiary may receive from the PBGC relating to the intention of the PBGC to terminate any employee benefit plan or plans or to appoint a trustee to administer any such plan, and (iii) within 10 days after a filing with the PBGC pursuant to Section 412(n) of the Code of a notice of failure to make a required installment or other payment with respect to a plan, a certificate of an Authorized Representative setting forth details as to such failure and the action that TDC or its Subsidiary proposes to take with respect thereto, together with a copy of such notice given to the PBGC. 8.18 Continued Operations. Continue at all times (i) to maintain the chief executive offices and principal place of business of TDC at 5350 Tech Data Drive, Clearwater, Florida 33760, (ii) to conduct its business and engage principally in the same line or lines of business substantially as heretofore conducted, and (iii) to preserve, protect and maintain free from Liens its material patents, copyrights, licenses, trademarks, trademark rights, trade names, trade name rights, trade secrets and know-how necessary or useful in the conduct of its operations. 8.19 Use of Proceeds. Use the proceeds of the Loans, Letters of Credit and Acceptances solely for the purposes specified in Articles II and III hereof, as applicable. 8.20 New Subsidiaries. (a) Simultaneously with the formation of any Significant Subsidiary or the acquisition of any Significant Subsidiary permitted by the terms of this Agreement or at any time a Subsidiary becomes a Significant Subsidiary, cause to be delivered to the Agent for the benefit of the Lenders each of the following: (i) guaranty agreements of each Significant Subsidiary, each duly executed by such Significant Subsidiary substantially in the form of Exhibit G-1 and Exhibit G-2, provided that a Significant Subsidiary shall not be required to deliver a guaranty agreement in the form of Exhibit G-1 or Exhibit G-2 if such Significant Subsidiary (an "Excluded Subsidiary") is a Foreign Subsidiary; (ii) in the case of an Excluded Subsidiary that is directly owned in whole or in part by TDC or any Domestic Subsidiary, a Pledge Agreement duly executed by such owners and granting to the Agent (for itself and on behalf of the Lenders) a Lien on the lesser of (a) 65% of the total capital stock or ownership interests of such Excluded Subsidiary or (b) 100% of such stock and ownership interests owned by TDC or any Domestic Subsidiaries; (iii) the stock certificates or other documents (duly executed by TDC or the Domestic Subsidiaries) that are required to ensure that the Agent (for itself and on behalf of the Lenders) has a duly perfected first priority Lien on the Collateral described in any Pledge Agreement delivered pursuant to clause (ii) of this Section 8.20, subject to no 100 108 prior Liens (except as permitted by Section 9.08(v)) or encumbrances or restrictions on transfer; (iv) an opinion of counsel to the Borrowers and the Significant Subsidiaries (which may be an employee of TDC) dated as of the date of delivery of the documents provided in the foregoing clauses (i), (ii) and (iii) and addressed to the Agent and the Lenders, in form and substance reasonably acceptable to the Agent and the Lenders (which opinion may include assumptions and qualifications of similar effect to those contained in the opinions of counsel delivered pursuant to Section 5.01(a)(ii) hereof), to the effect that: (A) such Significant Subsidiary is duly organized, validly existing and in good standing in the jurisdiction of its incorporation, has the requisite corporate power and authority to own its properties and conduct its business as then owned and then proposed to be conducted and is duly qualified to transact business and is in good standing as a foreign corporation in each other jurisdiction in which the character of the properties owned or leased, or the business carried on by it, requires such qualification; and (B) the execution, delivery and performance of the documents described in clause (i) and (ii) of this Section 8.20 to which such Significant Subsidiary or its parent is a signatory have been duly authorized by all requisite corporate action (including any required shareholder approval), such documents have been duly executed and delivered and constitute valid and binding obligations of such Significant Subsidiary or its parent, as the case may be, enforceable against such Subsidiary or its parent in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity which may limit the availability of equitable remedies (whether in a proceeding at law or in equity), and the documents delivered pursuant to clause (iii) of this Section 8.20 are sufficient to ensure that the Agent (for itself and the Lenders) has a perfected Lien on the Collateral described in the respective Pledge Agreement, and such Lien secures the Obligations; and (v) current copies of the charter and bylaws of such Significant Subsidiary, minutes of duly called and conducted meetings (or duly effected consent actions) of the Board of Directors (and, if required by such charter, bylaws or by applicable laws, of the shareholders) of such Significant Subsidiary and its parent authorizing the actions and the execution and delivery of documents described in clauses (i), (ii) and (iii) of this Section 8.20 and evidence satisfactory to the Agent (confirmation of the receipt of which will be provided by the Agent to the Lenders) that such Significant Subsidiary is Solvent as of such date and after giving effect to its Guaranty. 101 109 (b) If at any time the sum of the total assets or total revenues of Subsidiaries that have not executed and delivered to the agent a Guaranty exceeds in the aggregate $40,000,000, TDC shall promptly cause there to be delivered to the Agent one or more additional Guaranties of Subsidiaries that do not constitute Significant Subsidiaries in order that after giving effect to such additional Guaranties, the sum of the total assets or total revenues, in either or both cases, of Subsidiaries not having delivered a Guaranty does not exceed in the aggregate $40,000,000. 102 110 ARTICLE IX Negative Covenants Until the Obligations have been paid and satisfied in full and this Agreement has been terminated in accordance with the terms hereof, unless the Required Lenders shall otherwise consent in writing, TDC will not, nor will it permit any Subsidiary to: 9.01 Current Ratio. Permit the ratio of Consolidated Current Assets to Consolidated Current Liabilities to be less than: 1.10 to 1.00 at any time from the Closing Date to January 30, 1999, and 1.20 to 1.00 at any time thereafter. 9.02 Shareholders' Equity. Permit at any time Consolidated Shareholders' Equity to be less than the sum of (a) $411,988,500, plus (b) on a cumulative basis, (with no reduction for net losses during such period) 75% of Consolidated Net Income for each fiscal quarter beginning with the fiscal quarter ended July 31, 1997. In addition, after the date hereof, such minimum level of Consolidated Shareholders' Equity shall be increased by 75% of the net proceeds received by TDC from the sale of any shares of capital stock. 9.03 Senior Indebtedness to Total Capital. Permit the ratio of Consolidated Senior Indebtedness to Consolidated Total Capital to exceed: 0.60 to 1.00 at any time prior to the issuance by TDC or any Subsidiary of any Convertible Indebtedness, and 0.55 to 1.00 at any time on and after the date of issuance of such Convertible Indebtedness. 9.04 Indebtedness to Total Capital. Permit the ratio of Consolidated Funded Indebtedness to the Consolidated Total Capital to exceed .65 to 1.00 at any time. 9.05 EBIT to Interest Expense. Permit the ratio of Consolidated EBIT to Consolidated Interest Expense for the Four-Quarter Period immediately preceding the date of computation to be less than 2.50 to 1.00 at any time. 9.06 Lease Expense Ratio. Permit at any time the ratio of the (i) sum of Consolidated EBIT plus Consolidated Lease Expense for the Four-Quarter Period immediately preceding the date of computation to (ii) the sum of Consolidated Interest Expense plus Consolidated Lease Expense for the Four-Quarter Period immediately preceding the date of computation to be less than 2.00 to 1.00. 9.07 Indebtedness. Incur, create, assume or permit to exist any Indebtedness, howsoever evidenced, except (i) Indebtedness existing as of the date hereof which is set forth in Schedule 9.07 attached hereto; (ii) Indebtedness arising in connection with this Agreement; 103 111 (iii) the endorsement of negotiable instruments for deposit or collection, the guaranty of payment of Borrowers' customers' Indebtedness to commercial finance entities arising solely from the purchase of products by such customers from one or more Borrowers or their Subsidiaries or similar transactions in the ordinary course of business; (iv) Indebtedness incurred to purchase personal property provided such Indebtedness is secured only by the property so acquired and does not exceed the actual cost of such property; provided that the total outstanding amount of all such Indebtedness shall not exceed at any time $25,000,000; (v) Convertible Subordinated Indebtedness not exceeding in the aggregate amount at any time outstanding $300,000,000, so long as after giving effect thereto no Default or Event of Default exists hereunder; (vi) Indebtedness that is not secured by any assets or property of TDC or any Subsidiary and does not exceed the aggregate amount at any time outstanding of $100,000,000, so long as after giving effect thereto no Default or Event of Default exists hereunder; (vii) any obligations arising under the Transfer and Administration Agreement; and (viii) any Indebtedness permitted under Section 9.10(vii). 9.08 Liens. Incur, create or permit to exist any pledge, Lien, charge or other encumbrance of any nature whatsoever with respect to any property or assets now owned or hereafter acquired by any Borrower or any of its Subsidiaries, other than (i) Liens existing as of the date hereof which are set forth in Schedule 7.02(d) attached hereto; (ii) Liens on that equipment acquired with Indebtedness permitted under Section 9.07(iv) hereof; (iii) Liens on receivables arising in connection with the Trade Receivable Purchase Facility; (iv) any unfiled lien of materialmen, mechanics, workmen, warehousemen, carriers, landlords or repairmen; provided that if such a lien shall be perfected and shall not be contested in good faith, it shall be discharged of record immediately by payment, bond or otherwise; (v) tax liens which are being contested in good faith, or which constitute liens 104 112 for taxes the payment of which is not yet required; (vi) easements, restrictions, defects in title, covenants and similar encumbrances in respect of real estate that do not render title thereto uninsurable or detract from or interfere in any material respect with the use of such property subject thereto in connection with the business of the Borrower or any of its Subsidiaries; and (vii) Liens on the Collateral in favor of the Agent (for itself and on behalf of the Lenders) pursuant to the Security Instruments. 9.09 Transfer of Assets. Sell, lease, transfer or otherwise dispose of any item of property or asset except (i) sales, leases, transfers or other dispositions in the ordinary course of business, (ii) sales and dispositions of assets or property which are obsolete, worn out or no longer useful in its business, (iii) sales or transfers of receivables related to the Transfer and Administration Agreement, (iv) the inter-company transfer or sales of receivables, inventory or other assets to Subsidiaries who have guaranteed payment of the Obligations or whose shares have been pledged pursuant to the Pledge Agreement and (v) the sale of certain assets of Macrotron, A.G. having a book value of not in excess of $125,000,000. 9.10 Investments. Purchase, own, invest in or otherwise acquire, directly or indirectly, any stock or other securities, or make or permit to exist any interest whatsoever in any other Person or permit to exist any loans or advances to any Person; provided, TDC and its Subsidiaries may maintain investments or invest in (i) direct obligations of the United States of America or any agency or instrumentality thereof or obligations guaranteed by the United States of America or any agency or instrumentality thereof, provided that such obligations mature within one year from the date of acquisition thereof; (ii) demand deposits, time deposits or certificates of deposit issued by any of the Lenders or certificates of deposit maturing within one year from the date of acquisition issued by a bank or trust company organized under the laws of the United States or any state thereof having capital surplus and undivided profits aggregating at least $400 million and being rated A-3 or better by Standard & Poor's Rating Services or A or better by Moody's Investors Services, Inc.; (iii) commercial paper rated A-1 or better by Standard & Poor's Rating Services or P-1 or better by Moody's Investors Services, Inc. (Commercial Paper Record); (iv) one or more Subsidiaries created or acquired in compliance with the provisions of Section 8.20 hereof; (v) shares of capital stock owned by TDC and each Subsidiary as listed on Schedule 7.02(a); 105 113 (vi) investments existing as of the date hereof which are set forth in Schedule 7.02(b) attached hereto; and (vii) loans by TDC or a wholly-owned Subsidiary of TDC to another Subsidiary of TDC or TDC. 9.11 Merger or Consolidation. (a) Consolidate with or merge into any other Person, or (b) permit any other Person to merge into TDC if after giving effect to the merger of any Person into TDC (i) a Default or Event of Default would exist under this Agreement or (ii) TDC is not the surviving entity. Any Subsidiary of TDC may merge with and into any other entity if the survivor is a Subsidiary of TDC. 9.12 Transactions with Affiliates. Enter into any transaction after the date hereof, including, without limitation, the purchase, sale, leasing or exchange of property, real or personal, or the rendering of any service, with any stockholder, officer or director of TDC or any Subsidiary (other than TDC or another Subsidiary), except (a) that directors, shareholders, officers and employees of TDC and the Subsidiaries may render services to TDC or the Subsidiaries for compensation at the same rates generally paid by corporations engaged in the same or similar businesses for the same or similar services and (b) in the ordinary course of and pursuant to the reasonable requirements of TDC's (or any Subsidiary's) business consistent with past practice of TDC and its Subsidiaries and upon fair and reasonable terms no less favorable to TDC (or any Subsidiary) than would be obtained in a comparable arm's-length transaction with a Person not a stockholder, officer or director. 9.13 ERISA. With respect to all employee pension benefit plans maintained by TDC or any Subsidiary: (i) terminate any of such employee pension benefit plans so as to incur any liability in excess of $500,000 to the Pension Benefit Guaranty Corporation established pursuant to ERISA or to any other Person exercising similar duties and functions under any Foreign Benefit Law; (ii) allow or suffer to exist any prohibited transaction involving any of such employee pension benefit plans or any trust created thereunder which would subject TDC or a Subsidiary to a tax or penalty or other liability (A) on prohibited transactions in excess of $500,000 imposed under Internal Revenue Code Section 4975 or ERISA or (B) under any Foreign Benefit Law; (iii) fail to pay to any such employee pension benefit plan any contribution which it is obligated to pay under the terms of such plan; (iv) allow or suffer to exist any accumulated funding deficiency, whether or not waived, with respect to any such employee pension benefit plan; 106 114 (v) allow or suffer to exist any occurrence of a reportable event or any other event or condition, which presents a material risk of termination by the Pension Benefit Guaranty Corporation of any such employee pension benefit plan that is a Single Employer Plan, which termination could result in any liability (A) to the Pension Benefit Guaranty Corporation or (B) under any Foreign Benefit Law; or (vi) incur any withdrawal liability with respect to any Multi-employer Plan which is not fully funded. 9.14 Fiscal Year. Change TDC's Fiscal Year. 9.15 Rate Hedging Obligations. Incur any Rate Hedging Obligations or enter into any agreements, arrangements, devices or instruments relating to Rate Hedging Obligations, except in regard to (i) Indebtedness evidenced by the Notes, the aggregate amount of such outstanding Rate Hedging Obligation in no event to exceed $550,000,000; (ii) Indebtedness and obligations arising pursuant to the Trade Receivable Purchase Facility, the aggregate amount of such Rate Hedging Obligation not to exceed $500,000,000; (iii) existing Indebtedness to Aetna Life and Casualty Company secured by TDC's headquarters office building, all such Rate Hedging Obligations to be at rates, in form and with counterparties reasonably acceptable to the Agent and (iv) up to $90,000,000 of obligations arising under the TDC TROL. 9.16 Acquisition. Enter into any agreement to acquire all or any part of the assets or equity securities of any Person unless (a) such acquisition constitutes a Permitted Acquisition and (b) the Cost of Acquisition of such assets or equity securities of any Person does not exceed 35% of Consolidated Shareholders' Equity. 9.17 Transfer and Administration Agreement. Amend, modify or change the definition of Eligible Receivables as set forth in the Transfer and Administration Agreement as it exists on the Closing Date. 9.18 Lease-Backs. Enter into any arrangements, directly or indirectly, with any Person whereby any of the Borrowers or its Subsidiaries shall sell or transfer any property, whether now owned or hereafter acquired, used or useful in its business, in connection with the rental or lease of the property so sold or transferred or of other property which the Borrowers or their Subsidiaries intend to use for substantially the same purpose or purposes as the property so sold or transferred except property of the Borrowers and their Subsidiaries having a book value of not to exceed in the aggregate $10,000,000. 9.19 Dividends or Distributions. Declare or pay dividends (other than stock dividends and dividends by Subsidiaries) or make other stockholder distributions or purchases of its capital stock, or make any distribution of capital, cash or property to any stockholders or partners provided, however, that nothing in this Section 9.19 shall limit the right of (i) TDC to purchase shares of its common stock for the purposes of making required contributions to its employee stock option plan so long as the aggregate dollar amount spent for such stock in any Fiscal Year 107 115 does not exceed $5,000,000 or (ii) Macrotron A.G. from paying required dividends on preferred stock of Macrotron A.G. 9.20 Negative Pledge. Except as set forth in Schedule 9.20, enter into any agreement whereby any Borrower or a Subsidiary limits its rights to impose any Lien or encumbrance on any of its assets. 108 116 ARTICLE X Events of Default and Acceleration 10.01 Events of Default. If any one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body), that is to say: (a) if default shall be made in the due and punctual payment of the principal of any Loan or Reimbursement Obligation, when and as the same shall be due and payable whether pursuant to any provision of Article II or Article III hereof, at maturity, by acceleration or otherwise; or (b) if default shall be made in the due and punctual payment of any amount of interest on any Loan or Reimbursement Obligation or of any fees on the date on which the same shall be due and payable; or (c) if default shall be made in the performance or observance of any covenant set forth in Sections 8.07 or 8.11 or Article IX hereof; or (d) if a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in this Agreement or the Notes (other than as described in clause (a), (b) or (c) above) and such default shall continue for 30 or more days after the earlier of receipt of notice of such default by the Authorized Representative from the Agent or any Borrower becomes aware of such default, or if a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in any of the other Loan Documents or in any instrument or document evidencing or creating any obligation, guaranty, lien or security interest in favor of the Agent or Canadian Agent or delivered to any of the Lenders in connection with or pursuant to this Agreement or any of the Obligations (beyond any applicable grace period contained therein), or if any Loan Document ceases to be in full force and effect (other than by reason of any action by the Agent or any Lender), or if without the written consent of the Lenders, this Agreement or any other Loan Document shall be disaffirmed or shall terminate, be terminable or be terminated or become void or unenforceable for any reason whatsoever (other than in accordance with its terms in the absence of default or by reason of any action by the Agents or any Lender); or (e) if a default shall occur, which is not waived, (i) in the payment of any principal, interest or premium with respect to any Indebtedness in an amount in excess of $5,000,000 (other than the Loans and Reimbursement Obligations) of TDC or any Subsidiary or (ii) in the performance, observance or fulfillment of any term or covenant 109 117 contained in any agreement or instrument under or pursuant to which any such Indebtedness may have been issued, created, assumed, guaranteed or secured by TDC or any Subsidiary, and such default shall continue for more than the period of grace, if any, therein specified, or if such default shall permit the holder of any such Indebtedness to accelerate the maturity thereof; or (f) if any representation, warranty or other statement of fact contained herein or in any other Loan Document or in any writing, certificate, report or statement at any time furnished to either of the Agents or any Lender by or on behalf of TDC or any Subsidiary pursuant to or in connection with this Agreement, or otherwise, shall be false or misleading in any material respect when given; or (g) if TDC or any Subsidiary shall be unable to pay its debts generally as they become due; file a petition to take advantage of any insolvency statute; make an assignment for the benefit of its creditors; commence a proceeding for the appointment of a custodian, receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property; file a petition or answer seeking receivership, liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state or similar law of any other country or province thereof; or (h) if a court of competent jurisdiction shall enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of TDC or any Subsidiary or of the whole or any substantial part of its properties, or approve a petition filed against TDC or any Subsidiary seeking receivership, liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state or similar law of any other country or province thereof; or if, under the provisions of any other law for the relief or aid of debtors, a court of competent jurisdiction shall assume custody or control of TDC or any Subsidiary or of the whole or any substantial part of its properties; or if there is commenced against TDC or any Subsidiary any proceeding or petition seeking receivership, liquidation, reorganization, arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state or similar law of any other country or province thereof, which proceeding or petition remains undismissed for a period of 90 days; or if TDC or any Subsidiary takes any action to indicate its consent to or approval of any such proceeding or petition; or (i) if (i) any judgment where the amount not covered by insurance (or the amount as to which the insurer denies liability) is in excess of $5,000,000 is rendered against TDC or any Subsidiary, or (ii) there is any attachment, injunction or execution against any of TDC's or any Subsidiary's properties for any amount in excess of $5,000,000; and such judgment, attachment, injunction or execution remains unpaid, unstayed or undismissed for a period of sixty (60) days; or 110 118 (j) if TDC or any Subsidiary shall, other than in the ordinary course of business (as determined by past practices), suspend all or any part of its operations material to the conduct of the business of TDC and the Subsidiaries, taken as a whole; or (k) if (i) TDC or any Subsidiary shall engage in any prohibited transaction (as described in Section 9.13(ii) hereof) involving any employee pension benefit plan of TDC or any Subsidiary, (ii) any accumulated funding deficiency (as referred to in Section 9.13(iv) hereof), whether or not waived, shall exist with respect to any Single Employer Plan, (iii) a reportable event (as referred to in Section 9.13(v) hereof) (other than a reportable event for which the statutory notice requirement to the Pension Benefit Guaranty Corporation has been waived by regulation) shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed to administer or to terminate, any Single Employer Plan, which reportable event or institution or proceedings is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Single Employer Plan for purposes of Title IV of ERISA, and in the case of such a reportable event, the continuance of such reportable event shall be unremedied for thirty (30) days after notice of such reportable event pursuant to Section 4043(a), (c) or (d) of ERISA is given, as the case may be, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) TDC or any Subsidiary shall withdraw from a Multi-employer Plan for purposes of Title IV of ERISA, and, as a result of any such withdrawal, TDC or any Subsidiary shall incur withdrawal liability to such Multi-employer Plan, or (vi) any other event or condition shall occur or exist; and in each case in clauses (i) through (vi) of this Section 10.01(k), such event or condition, together with all other such events or conditions, if any, could subject TDC or any Subsidiary to any tax, penalty or other liabilities in the aggregate material in relation to the business, operations, property or financial or other condition of TDC and the Subsidiaries, taken as a whole, and in each such case the event or condition is not remedied to the satisfaction of the Required Lenders within ninety (90) days after the earlier of (i) receipt of notice of such event or condition by the Authorized Representative from the Agent or (ii) TDC becomes aware of such event or condition; or (l) if TDC or any Subsidiary shall breach any of the terms or conditions of any agreement under which any Rate Hedging Obligation permitted pursuant to Section 9.15 is created and such breach shall continue beyond any grace period, if any, relating thereto pursuant to the terms of such Obligation; or TDC or any Subsidiary shall disaffirm or seek to disaffirm any such agreement or any of its obligations thereunder; or (m) if a Termination Event (as defined in the Transfer and Administration Agreement) shall occur under the Transfer and Administration Agreement which Termination Event is not cured or waived; (n) if there shall occur any Change of Control of TDC or any Significant Subsidiary; or 111 119 (o) if there shall occur any event of default under the TDC TROL, which is not cured within any grace period; then, and in any such event and at any time thereafter, if such Event of Default or any other Event of Default shall then be continuing, (A) either or both of the following actions may be taken: (i) the Agent, with the consent of the Required Lenders, may, and at the direction of the Required Lenders shall, declare any obligation of the Lenders to make further Loans or issue Letters of Credit or Acceptances terminated, whereupon the obligation of each Lender to make further Loans or issue Letters of Credit or Acceptances, hereunder shall terminate immediately, and (ii) the Agent shall at the direction of the Required Lenders, at their option, declare by notice to the Borrowers any or all of the Obligations to be immediately due and payable, and the same, including all interest accrued thereon and all other obligations of the Borrowers to the Lenders, shall forthwith become immediately due and payable without presentment, demand, protest, notice or other formality of any kind, all of which are hereby expressly waived, anything contained herein or in any instrument evidencing the Obligations to the contrary notwithstanding; provided, however, that notwithstanding the above, if there shall occur an Event of Default under clause (g) or (h) above, then the obligations of the Lenders to extend credit hereunder shall automatically terminate and any and all of the Obligations shall be immediately due and payable without the necessity of any action by the Agent or the Required Lenders or notice by the Agent or the Lenders; and (B) Borrowers shall, upon demand of Agent deposit cash with the Agent in an amount equal to the amount of any Letters of Credit and Acceptances remaining undrawn or unpaid, as collateral security for the repayment of any future drawings or payments under such Letters of Credit and Acceptances, and Borrowers shall forthwith deposit and pay such amounts and such amounts shall be held by Agent pursuant to the terms of the LC/Acceptance Account Agreement; 10.02 Agent to Act. In case any one or more Events of Default shall occur and be continuing, the Agent and the Canadian Agent may, and at the direction of the Required Lenders shall, proceed to protect and enforce their rights or remedies either by suit in equity or by action at law, or both, whether for the specific performance of any covenant, agreement or other provision contained herein or in any other Loan Document, or to enforce the payment of the Obligations or any other legal or equitable right or remedy. 10.03 Cumulative Rights. No right or remedy herein conferred upon the Lenders, Agent or Canadian Agent is intended to be exclusive of any other rights or remedies contained herein or in any other Loan Document, and every such right or remedy shall be cumulative and shall be in addition to every other such right or remedy contained herein and therein or now or hereafter 112 120 existing at law or in equity or by statute, or otherwise. 10.04 No Waiver. No course of dealing between the Borrowers and any Lender or the Agents or any failure or delay on the part of any Lender or Agent in exercising any rights or remedies hereunder shall operate as a waiver of any rights or remedies hereunder and no single or partial exercise of any rights or remedies hereunder shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or of the same right or remedy on a future occasion. 10.05 Default. The Agent and the Lenders shall have no right to accelerate any of the Loans upon the occurrence of any Default which shall not also constitute an Event of Default; provided, however, nothing contained in this sentence shall in any respect impair or adversely affect the right, power and authority of the Agent and the Lenders (i) to take any action expressly required or permitted to be taken under the Loan Documents upon the occurrence of any Default (and including any action or proceeding which the Agent may determine to be necessary or appropriate in furtherance of any such expressly authorized action) and (ii) to take any action provided under the Loan Documents or otherwise available by statute, at law or in equity upon the occurrence of any Default. 10.06 Allocation of Proceeds. If an Event of Default has occurred and is continuing, and the maturity of the Obligations has been accelerated pursuant to Article X hereof, all payments received by the Agent or the Canadian Agent, or both, hereunder in respect of any principal of or interest on the Obligations or any other amounts payable by the Borrowers hereunder shall be applied by the Agent or Canadian Agent in the following order: (i) amounts due to the Agents, the Lenders, NationsBank and CIBC pursuant to Sections 2.10, 2.22, 3.09, 3.17, 8.15, 12.06 and 12.13 hereof; (ii) amounts due to (A) NationsBank pursuant to Section 2.23, (B) CIBC pursuant to Section 3.10, and (C) the Agents pursuant to Section 11.08 hereof; (iii) payments of interest on Loans and Reimbursement Obligations, to be applied for the ratable benefit of the Lenders, without distinction or preference as between Canadian Loans and Domestic Loans and Reimbursement Obligations; (iv) payments of principal on Loans and Reimbursement Obligations, to be applied for the ratable benefit of the Lenders, without distinction or preference as between Canadian Loans and Domestic Loans and Reimbursement Obligations; (v) payment of cash amounts to the Agent for deposit to the account created pursuant to the LC/Acceptance Account Agreement pursuant to Section 10.01(B) hereof; (vi) payment of Obligations owed Lenders pursuant to Swap Agreements on a pro rata basis according to amounts owed; and 113 121 (vii) payments of all other amounts due under this Agreement and the other Loan Documents, if any, to be applied in accordance with each Lender's or Agent's pro rata share of all such amounts. 114 122 ARTICLE XI The Agents 11.01 Appointment, Powers, and Immunities. Each Lender (including NationsBank in its capacity as maker of Swing Line Loans and NationsBank and CIBC in their respective capacities as issuers of the Letters of Credit and Acceptances) hereby irrevocably appoints and authorizes NationsBank to act as the Agent of the Lenders and CIBC to act as Canadian Agent for the Canadian Facilities Lenders under this Agreement and the other Loan Documents with such powers and discretion as are specifically delegated to the Agent and Canadian Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Each of the Agents (which term as used in this sentence and in Section 11.05 and the first sentence of Section 11.06 hereof shall include its affiliates and its own and its affiliates' officers, directors, employees, and agents): (a) shall not have any duties or responsibilities except those expressly set forth in this Agreement and shall not be a trustee or fiduciary for any Lender; (b) shall not be responsible to the Lenders for any recital, statement, representation, or warranty (whether written or oral) made in or in connection with any Loan Document or any certificate or other document referred to or provided for in, or received by any of them under, any Loan Document, or for the value, validity, effectiveness, genuineness, enforceability, or sufficiency of any Loan Document, or any other document referred to or provided for therein or for any failure by any Loan Party or any other Person to perform any of its obligations thereunder; (c) shall not be responsible for or have any duty to ascertain, inquire into, or verify the performance or observance of any covenants or agreements by any Loan Party or the satisfaction of any condition or to inspect the property (including the books and records) of any Loan Party or any of its Subsidiaries or affiliates; (d) shall not be required to initiate or conduct any litigation or collection proceedings under any Loan Document; and (e) shall not be responsible for any action taken or omitted to be taken by it under or in connection with any Loan Document, except for its own gross negligence or willful misconduct. Each of the Agents may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. 11.02. Reliance by Agents. Each of the Agents shall be entitled to rely upon any certification, notice, instrument, writing, or other communication (including, without limitation, any thereof by telephone or telecopy) believed by it to be genuine and correct and to have been signed, sent or made by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel (including counsel for any Loan Party), independent accountants, and other experts selected by such Agent. The Agents may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until the Agent receives and accepts an Assignment and Acceptance executed in accordance with Section 12.01 hereof. As to any matters not expressly provided for by this Agreement, neither of the Agents shall be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding on all of the Lenders; provided, however, that neither of the Agents shall be required to take any action that exposes such Agent 115 123 to personal liability or that is contrary to any Loan Document or applicable law or unless it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking any such action. 11.03. Defaults. The Agents shall not be deemed to have knowledge or notice of the occurrence of a Default or Event of Default unless the Agent has received written notice from a Lender or a Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that the Agent receives such a notice of the occurrence of a Default or Event of Default, the Agent shall give prompt notice thereof to the Lenders. The Agents shall (subject to Section 11.02 hereof) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Required Lenders, provided that, unless and until the Agents shall have received such directions, the Agents may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as they shall deem advisable in the best interest of the Lenders. 11.04. Rights as Lender. With respect to its commitment and the Loans made by it, each of NationsBank (and any successor acting as Agent) and CIBC (and any successor acting as Canadian Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Agent or Canadian Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include each of the Agents in its individual capacity. Each of NationsBank (and any successor acting as Agent) and CIBC (and any successor acting as Canadian Agent) and their respective affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to, make investments in, provide services to, and generally engage in any kind of lending, trust, or other business with any Loan Party or any of its Subsidiaries or affiliates as if it were not acting as Agent or Canadian Agent, and each of NationsBank (and any successor acting as Agent) and CIBC (and any successor acting as Canadian Agent) and their respective affiliates may accept fees and other consideration from any Loan Party or any of its Subsidiaries or affiliates for services in connection with this Agreement or otherwise without having to account for the same to the Lenders. 11.05. Indemnification. The Lenders agree to indemnify the Agents (to the extent not reimbursed under Section 12.13 hereof, but without limiting the obligations of the Borrowers under such Section) on a pro rata basis in accordance with their respective commitment to lend under this Agreement as it relates to the sum of the Total Canadian Credit Commitment and the Total Domestic Revolving Credit Commitment, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees), or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against any of the Agents (including by any Lender) in any way relating to or arising out of any Loan Document or the transactions contemplated thereby or any action taken or omitted by any of the Agents under any Loan Document; provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person to be indemnified. Without limitation of the foregoing, each Lender agrees to reimburse the Agents promptly upon demand for its ratable share of any costs or expenses payable by the Borrowers under Section 12.06, to the extent that the Agents are not promptly reimbursed for 116 124 such costs and expenses by the Borrowers. The agreements contained in this Section shall survive payment in full of the Loans and all other amounts payable under this Agreement. 11.06. Non-Reliance on Agents and Other Lenders. Each Lender agrees that it has, independently and without reliance on either of the Agents or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Loan Parties and their Subsidiaries and decision to enter into this Agreement and that it will, independently and without reliance upon either of the Agents or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under the Loan Documents. Except for notices, reports, and other documents and information expressly required to be furnished to the Lenders by the Agents hereunder, the Agents shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition, or business of any Loan Party or any of its Subsidiaries or affiliates that may come into the possession of either of the Agents or any of its affiliates. 11.07. Resignation of an Agent. Either of the Agents may resign at any time by giving notice thereof to the Lenders and the Borrowers. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent or Canadian Agent, as the case may be, for the Lenders (and so long as no Default or Event of Default exists, a successor acceptable to the Borrower), which, in the case of the Agent, shall be a commercial bank organized or licensed under the laws of the United States or any state thereof, and, in the case of the Canadian Agent, shall be a bank organized under the laws of Canada or a province thereof, in each case having a combined surplus and capital of not less than $500,000,000. If no successor Agent or Canadian Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent's or retiring Canadian Agent's giving of notice of resignation, then the retiring Agent or Canadian Agent may, on behalf of the Lenders, appoint a successor Agent or Canadian Agent which shall be a commercial bank organized under the laws of the United States or any state thereof or Canada or a province thereof, as the case may be. Upon the acceptance of any appointment as Agent or Canadian Agent hereunder by a successor, such successor shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Agent or Canadian Agent, and the retiring Agent or Canadian Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's or retiring Canadian Agent's resignation hereunder as Agent or Canadian Agent, the provisions of this Article XI shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent or Canadian Agent. 11.08 Fees. The Borrowers agree to pay to each of the Agents, for its individual account, an annual Agent's fee pursuant to the terms of fee letters dated as of July 22, 1997 among the Borrowers and the Agents. Such fees shall be paid in quarterly installments in advance on the last day of each October, January, April and July, the first such installment to be paid on the Closing Date. 117 125 11.09 Power of Attorney. Each Lender hereby irrevocably appoints the Agent as its attorney in fact to execute and file such documents (including the granting of one or more powers of attorney to agents in foreign jurisdictions), and take such other actions, on behalf of such Lender as the Agent may deem appropriate in order to create, maintain, perfect or ensure the enforceability or priority of Liens on any Collateral, wheresoever located, securing any of the Obligations. This power-of-attorney is coupled with an interest. 118 126 ARTICLE XII Miscellaneous 12.01 Assignments and Participations. (a) Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Loans, its Notes, its Domestic Revolving Credit Commitment, its Canadian Revolving Credit Commitment and its Participations); provided, however, that (i) each such assignment shall be to an Eligible Assignee; (ii) except in the case of an assignment to another Lender or an assignment of all of a Lender's rights and obligations in the Canadian Facilities or the Multicurrency Facilities, respectively, under this Agreement, any such partial assignment shall include a minimum assignment of at least $5,000,000 of such Lender's Canadian Revolving Credit Commitment (if any) and $10,000,000 of such Lender's Domestic Revolving Credit Commitment; (iii) each such assignment by a Lender shall be of a constant, and not varying, percentage of all of its rights and obligations (including Loans and Participations) under this Agreement with respect to the Canadian Facilities or the Multicurrency Facilities, as applicable, and its Notes; provided that an assignment by NationsBank shall not include any portion of the Swing Line; (iv) the parties to such assignment shall execute and deliver to the Agent for its acceptance an Assignment and Acceptance in the form of Exhibit B hereto, together with any Note subject to such assignment and a processing fee of $3,500; (v) each Canadian Facilities Lender must also be a Multicurrency Facilities Lender after giving effect to any assignment hereunder; and (vi) such assignee shall have an office located in the United States. Upon execution, delivery, and acceptance of such Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Agreement. Upon the consummation of any assignment pursuant to this Section, the assignor, the Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee. If the assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrowers and the Agent certification as to exemption from deduction or withholding of Taxes in accordance with Section 4.06. (b) The Agent shall maintain at its address referred to in Section 12.02 a copy of each 119 127 Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Domestic Revolving Credit Commitment or Canadian Revolving Credit Commitment of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrowers, the Agents and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by any Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (c) Upon its receipt of an Assignment and Acceptance executed by the parties thereto, together with any Note subject to such assignment and payment of the processing fee, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit B hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the parties thereto. (d) Each Lender may sell participations to one or more Persons in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Domestic Revolving Credit Commitment, its Canadian Revolving Credit Commitment, its Loans and Participations); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participant shall be entitled to the benefit of the yield protection provisions contained in Article IV and the right of set-off contained in Section 12.04, (iv) the Borrowers shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and (v) such Lender shall retain the sole right to enforce the obligations of the Borrowers relating to its Loans, its Notes and its Participations and to approve any amendment, modification, or waiver of any provision of this Agreement (other than amendments, modifications, or waivers decreasing the amount of principal of or the rate at which interest is payable or the amount of fees payable on such Loans or Notes or the Reimbursement Obligations, extending any scheduled principal payment date or date fixed for the payment of interest on such Loans or Notes or the Reimbursement Obligations, releasing any Guarantor or all or substantially all of the Collateral, or extending such Lender's Domestic Revolving Credit Commitment or Canadian Revolving Credit Commitment, except as permitted by Section 2.14 or Section 3.12). (e) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time assign and pledge all or any portion of its Loans, its Notes and its interest under the Loan Documents to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (f) Any Lender may furnish any information concerning any Borrower or any of its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants) evaluating the assignment or participation and subject to the confidentiality agreement required by TDC of all Lenders. 120 128 12.02 Notices. Any notice shall be conclusively deemed to have been received by any party hereto and be effective on the day on which delivered to such party (against receipt therefor) at the address set forth below or such other address as such party shall specify to the other parties in writing (or, in the case of telephonic notice or notice by telecopy, telegram or telex (where the receipt of such message is verified by return) expressly provided for hereunder, when received at such telephone, telecopy or telex number as may from time to time be specified in written or verbal notice to the other parties hereto or otherwise received), or if sent prepaid by certified or registered mail return receipt requested on the third Business Day after the day on which mailed, addressed to such party at said address: (a) if to any Borrower: Tech Data Corporation 5350 Tech Data Drive Clearwater, Florida 33760 Attention: Chief Financial Officer Telefacsimile: 813-538-5860 Telephone: 813-538-7825 (b) if to the Authorized Representative: at the address set forth for receipt of notices in the notice of appointment thereof. (c) if to the Agent: NationsBank, National Association 901 Main Street, 67th Floor Dallas, Texas 75202 Attention: Timothy M. O'Connor Telefacsimile: 214-508-0980 Telephone: 214-508-9419 with a copy to: NationsBank, National Association Independence Center Charlotte, North Carolina 28255 Attention: Agency Services Telefacsimile: 704-386-9923 Telephone: 800-788-7125 121 129 (d) if to NationsBank in its capacity as issuer of the Domestic Letters of Credit or Domestic Acceptances: NationsBank, National Association 901 Main Street, 9th Floor Dallas, Texas 75202 Attention: Alan Hanna, Letter of Credit Department Telefacsimile: 214-508-1814 Telephone: 214-508-3606 (e) if to the Canadian Agent: Canadian Imperial Bank of Commerce Head Office Commerce Court West, 7th Floor Toronto Ontario M5L 1A2 Attention: Manager Agent Administration Telefacsimile: 416-980-5151 Telephone: 416-980-4077 (f) If to CIBC in its capacity as issuer of the Canadian Letters of Credit or Canadian Acceptances: Canadian Imperial Bank of Commerce Corporate Client Support Center Commerce Court West, 50th Floor Toronto, Ontario M5L 1A2 Attention: Associate Telefacsimile: 416-980-5855 Telephone: 416-214-8417 (g) if to the Lenders: At the addresses set forth on the signature pages hereof and on the signature page of each Assignment and Acceptance (h) if to any other Subsidiary signatory to a Guaranty, at the address of such Subsidiary provided in such Guaranty. 12.03 No Waiver. No failure or delay on the part of the Agent or any Lender in the exercise of any right, power or privilege hereunder shall operate as a waiver of any such right, power or privilege nor shall any such failure or delay preclude any other or further exercise thereof. The rights and remedies herein provided are cumulative and not exclusive of any rights 122 130 or remedies provided by law. 12.04 Right of Set-off; Adjustments. (a) Upon the occurrence and during the continuance of any Event of Default, each Lender (and each of its affiliates) is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender (or any of its affiliates) to or for the credit or the account of any Borrower (other than for safekeeping or collateral accounts for other Persons) against any and all of the Obligations of such Borrower now or hereafter existing under this Agreement, any other Loan Document and the Notes held by such Lender, irrespective of whether such Lender shall have made any demand under this Agreement, any other Loan Document or such Notes and although such Obligations may be unmatured. Each Lender agrees promptly to notify the Borrower and the Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 12.04(a) are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. (b) If any Lender (a "benefitted Lender") shall at any time receive any payment of all or part of the Loans (excluding Competitive Bid Loans) or Reimbursement Obligations owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans (excluding Competitive Bid Loans) or Reimbursement Obligations owing to it, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loans owing to it, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. Each Borrower agrees that any Lender so purchasing a participation from a Lender pursuant to this Section 12.04(b) may, to the fullest extent permitted by law, exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as if such Person were the direct creditor of such Borrower in the amount of such participation. 12.05 Survival. All covenants, agreements, representations and warranties made herein shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit and Acceptances and the execution and delivery to the Lenders of this Agreement and the Notes and shall continue in full force and effect so long as any of Obligations remain outstanding or any Lender has any commitment hereunder. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party and all covenants, provisions and agreements by or on behalf of the Borrowers which are contained in this Agreement and the Notes shall inure to the benefit of the 123 131 successors and permitted assigns of the Lenders or any of them. No Borrower shall assign any of its rights or obligations hereunder without the consent of all Lenders. 12.06 Expenses. Each Borrower jointly and severally agrees to pay on demand all reasonable and customary out-of-pocket costs and expenses of the Agents in connection with the syndication, preparation, execution, delivery, administration, modification, and amendment of this Agreement, the other Loan Documents, and the other documents to be delivered hereunder, including, without limitation, the reasonable and customary fees and expenses of counsel for the Agents with respect thereto and with respect to advising the Agents as to their rights and responsibilities under the Loan Documents. Each Borrower further agrees jointly and severally to pay on demand all reasonable and customary costs and expenses of the Agents and the Lenders, if any (including, without limitation, reasonable attorneys' fees and expenses), in connection with the enforcement or preservation of rights under this Agreement (whether through negotiations, legal proceedings, or otherwise), any other Loan Documents and any other documents to be delivered hereunder. 12.07 Amendments and Waivers. Any provision of this Agreement or any other Loan Document may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrowers and the Required Lenders (and, if Article XI or the rights or duties of the Agent or the Canadian Agent are affected thereby, by the Agent or Canadian Agent, as applicable); provided that no such amendment or waiver shall, unless signed by all the Lenders, (i) increase the Domestic Revolving Credit Commitments or Canadian Revolving Credit Commitments of any Lenders; (ii) increase the Canadian Letter of Credit Facility or the Domestic Letter of Credit Facility or the maximum amount of Competitive Bid Loans; (iii) reduce the principal of or rate of interest on any Loan or Reimbursement Obligation or any fees or other amounts payable hereunder; (iv) postpone any date fixed for the payment of any scheduled installment of principal of or interest on any Loan or Reimbursement Obligation or any fees or other amounts payable hereunder or for termination of any Domestic Revolving Credit Commitment or Canadian Revolving Credit Commitment; (v) change the percentage of the Domestic Revolving Credit Commitments or Canadian Revolving Credit Commitments or of the unpaid principal amount of the Notes, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Section or any other provision of this Agreement; or (vi) release any Guarantor or all or substantially all of the Collateral; provided, further, that no such amendment or waiver that affects the rights or duties of NationsBank or CIBC as maker of Swing Line Loans, issuer of Letters of Credit or issuer of Acceptances, as applicable, shall be effective unless signed by NationsBank or CIBC, as applicable. Notwithstanding any provision of the other Loan Documents to the contrary, as between the Agent and the Lenders, execution by the Agent shall not be deemed conclusive evidence that the Agent has obtained the written consent of the Required Lenders. No notice to or demand on any Borrower in any case shall entitle such Borrower to any other or further notice or demand in similar or other circumstances, except as otherwise expressly provided herein. No delay or omission on any Lender's or either Agent's part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any Default or Event of Default. 124 132 12.08 Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such fully-executed counterpart. 12.09 WAIVERS BY BORROWERS. IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE LOANS, ANY OF THE NOTES, ANY OF THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT, OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING BETWEEN THE BORROWER AND THE LENDERS OR THE AGENT, (I) EACH BORROWER HEREBY WAIVES THE RIGHT TO INTERPOSE ANY SETOFF, RECOUPMENT, COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION WITH ANY SUCH LITIGATION, IRRESPECTIVE OF THE NATURE OF SUCH SETOFF, RECOUPMENT, COUNTER-CLAIM OR CROSS-CLAIM UNLESS SUCH SETOFF, RECOUPMENT, COUNTER-CLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL, STATE OR PROVINCE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION AND (II) THE BORROWER AND EACH LENDER AND THE AGENTS HEREBY, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, WAIVE TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION. 12.10 Termination. The termination of this Agreement shall not affect any rights of the Borrowers, the Lenders or the Agents or any obligation of any Borrower, the Lenders or either of the Agents, arising prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into or rights created or obligations incurred prior to such termination have been fully disposed of, concluded or liquidated and the Obligations arising prior to or after such termination have been irrevocably paid in full. The rights granted to the Agents for the benefit of the Lenders hereunder and under the other Loan Documents shall continue in full force and effect, notwithstanding the termination of this Agreement, until all of the Obligations have been paid in full after the termination hereof or the Borrowers have furnished the Lenders and the Agent with an indemnification satisfactory to the Agents and each Lender with respect thereto. All representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof until payment in full of the Obligations unless otherwise provided herein. Notwithstanding the foregoing, if after receipt of any payment of all or any part of the Obligations, any Lender is for any reason compelled to surrender such payment to any Person because such payment is determined to be void or voidable as a preference, impermissible setoff, a diversion of trust funds or for any other reason, this Agreement shall continue in full force and the Borrowers shall be liable to, and shall indemnify and hold such Lender harmless for, the amount of such payment surrendered until such Lender shall have been finally and irrevocably paid in full. The provisions of the foregoing sentence shall be and remain effective notwithstanding any contrary action which may have been taken by the Lenders in reliance upon such payment, and any such contrary action so taken shall be without prejudice to the Lenders' rights under this Agreement and shall be deemed to have been conditioned upon such payment having become final and irrevocable. 12.11 Governing Law. 125 133 (A) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN THOSE LOAN DOCUMENTS WHICH EXPRESSLY PROVIDE THAT THEY SHALL BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. NOTWITHSTANDING THE FOREGOING, TO THE EXTENT THAT ANY ACTION, SUIT OR PROCEEDING IS BROUGHT AGAINST TD CANADA WITHIN CANADA, THEN THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN. (B) EACH BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTIES OF PINELLAS OR HILLSBOROUGH, STATE OF FLORIDA, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH BORROWER HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (C) EACH BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER PROVIDED IN SECTION 12.02, ATTENTION GENERAL COUNSEL OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF FLORIDA. (D) NOTHING CONTAINED IN SUBSECTION (A) OR (B) HEREOF SHALL PRECLUDE THE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE ANY BORROWER OR ANY BORROWER'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE 126 134 APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW. 12.12 Representation and Warranty of the Lenders. Each Lender hereby represents that no part of any funds used by such Lender to fund any Loan or other extension of credit to the Borrowers made by it constitutes or will constitute assets allocated to any "separate account" maintained by such Lender. As used herein, the term "separate account" shall have the meaning assigned to such term in Section 3 of ERISA. 12.13 Indemnification. Each Borrower jointly and severally agrees to indemnify and hold harmless each of the Agents and each Lender and NCMI and their respective officers, directors, employees, agents, and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities, costs, and expenses (including, without limitation, reasonable attorneys' fees) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation, or proceeding or preparation of defense in connection therewith): (a) the Loan Documents; (b) any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Loans; or any transaction supported by any Letter of Credit or Acceptance; (c) 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 TDC or any of its Subsidiaries of any Hazardous Material; or (d) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or release from, any real property owned or operated by TDC or any Subsidiary thereof of any Hazardous Material (including any losses, liabilities, damages, costs, expenses or claims asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, TDC or such Subsidiary, except to the extent such claim, damage, loss, liability, cost, or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 12.13 applies, such indemnity shall be 127 135 effective whether or not such investigation, litigation or proceeding is brought by any Borrower, its directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. Each Borrower agrees not to assert any claim against any of the Agents, any Lender, any of their affiliates, or any of their respective directors, officers, employees, attorneys, agents, and advisers, on any theory of liability, for special, indirect, consequential, or punitive damages arising out of or otherwise relating to the Loan Documents, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Loans. Without prejudice to the survival of any other agreement of any Borrower hereunder, the agreements and obligations of each Borrower contained in this Section 12.13 shall survive the payment in full of the Loans and all other amounts payable under this Agreement. 12.14 Judgment Currency. Each Borrower, the Agent and each Lender hereby agree that if, in the event that a judgment is given in relation to any sum due to either Agent or any Lender hereunder, such judgment is given in a currency (the "Judgment Currency") other than that in which such sum was originally denominated (the "Original Currency"), such Borrower agrees to indemnify such Agent or such Lender, as the case may be, to the extent that the amount of the Original Currency which could have been purchased by the Agent in accordance with normal banking procedures on the Business Day following receipt of such sum is less than the sum which could have been so purchased by the Agent had such purchase been made on the day on which such judgment was given or, if such day is not a Business Day, on the Business Day immediately preceding the giving of such judgment, and if the amount so purchased exceeds the amount which could have been so purchased had such purchase been made on the day on which such judgment was given or, if such day is not a Business Day, on the Business Day immediately preceding such judgment, the Agent or the applicable Lender agrees to remit such excess to the Borrowers. The agreements in this Section shall survive payment of all other Obligations. 12.15 Economic and Monetary Union in the European Community. (a) The parties confirm that, except as provided in subsection (b) below of this Section 12.15, the occurrence or non-occurrence of an event associated with economic and monetary union in the European Community will not have the effect of altering any term of, or discharging or excusing performance under, this Agreement, any other Loan Document, any Loan or any transaction contemplated by any of the foregoing, nor give a party the right unilaterally to alter or terminate this Agreement, any other Loan Document, any Loan or any transaction contemplated by any of the foregoing or give rise to an Event of Default or otherwise be the basis for the effective designation of a Revolving Credit Termination Date. "An event associated with economic and monetary union in the European Community" includes, without limitation, each (and any combination) of the following: (i) the introduction of, changeover to or operation of a single or unified 128 136 European currency (whether known as the euro or otherwise); (ii) the fixing of conversion rates between a member state's currency and the new currency or between the currencies of member states; (iii) the substitution of that new currency for the ECU as the unit of account of the European Community; (iv) the introduction of that new currency as lawful currency in a member state; (v) the withdrawal from legal tender of any currency that, before the introduction of the new currency, was lawful currency in one of the member states; or (vi) the disappearance or replacement of a relevant price source for the ECU or the national currency of any member state, or the failure of the agreed sponsor (or a successor sponsor) to publish or display a relevant rate, index, price, page or screen. (b) Any agreement between the parties that amends or overrides the provisions of this Section in respect of any Loan or any other transaction contemplated by this Agreement or any of the Loan Documents will be effective if it is in writing and expressly refers to this Section or to European monetary union or to an event associated with economic and monetary union in the European Community and would otherwise be effective in accordance with Section 12.07. (c) Each Borrower agrees that, notwithstanding anything to the contrary contained in any agreement relating to "an event associated with economic and monetary union in the European Community", upon the occurrence of any such event, the Lenders shall have the right to convert any or all Alternative Currency Loans into Loans denominated in Dollars determined as of such date as may be selected by the Agent in its sole discretion. 12.16 Agreement Controls. In the event that any term of any of the Loan Documents other than this Agreement conflicts with any term of this Agreement, the terms and provisions of this Agreement shall control. 12.17 Severability. If any provision of this Agreement or the other Loan Documents shall be determined to be illegal or invalid as to one or more parties hereto, then such provision shall remain in effect with respect to all parties, if any, as to whom such provision is neither illegal nor invalid, and in any event all other provisions hereof shall remain effective and binding on the parties hereto. 129 137 IN WITNESS WHEREOF, the parties hereto have caused this instrument to be made, executed and delivered by their duly authorized officers as of the day and year first above written. WITNESS: TECH DATA CORPORATION /s/ R. Malloy McKeithen - -------------------------------- /s/ Terry L. Witcher By: /s/ Jeffery P. Howells - -------------------------------- -------------------------- Name: Jeffery P. Howells Title: Executive Vice President of Finance and Chief Financial Officer WITNESS: TECH DATA FRANCE, S.N.C. /s/ R. Malloy McKeithen By: TECH DATA FRANCE, INC., - -------------------------------- Managing Director /s/ Terry L. Witcher - -------------------------------- By: /s/ Jeffery P. Howells ----------------------- Name: Jeffery P. Howells Title: Executive Vice President of Finance and Chief Financial Officer WITNESS: TECH DATA CANADA INC. /s/ R. Malloy McKeithen - -------------------------------- /s/ Terry L. Witcher By: /s/ Jeffery P. Howells - -------------------------------- -------------------------- Name: Jeffery P. Howells Title: Secretary and Chief Financial Officer 130 138 NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Lenders By: /s/ Timothy M. O'Connor -------------------------------- Name: Timothy M. O'Connor Title: Vice President NATIONSBANK, NATIONAL ASSOCIATION By: /s/ Timothy M. O'Connor -------------------------------- Name: Timothy M. O'Connor Title: Vice President Lending Office: NationsBank Plaza 901 Main Street, 67th Floor Dallas, Texas 75202 Wire Transfer Instructions: NationsBank, National Association Dallas, Texas ABA# 111000025 Reference Tech Data Corporation Attention: Corporate Credit Support Account No.: 136621-2163 131 139 CIBC INC., as Domestic Facililties Lender By: /s/ William C. Humphries -------------------------------- Name: William C. Humphries Title: as Agent, CIBC Wood Gundy Securities Corp. Domestic Lending Office: Two Paces West 2727 Paces Ferry Road Suite 1200 Atlanta, Georgia 30339 Domestic Wire Transfer Instructions: Morgan Guaranty Trust Company of New York 60 Wall Street New York, New York 10260 ABA #021-000-238 For Account of: CIBC Atlanta A/C #630-00-480 Reference: Tech Data CANADIAN IMPERIAL BANK OF COMMERCE, as Canadian Agent By: /s/ M. Warren Lobo -------------------------------- Name: M. Warren Lobo Title: Associate CANADIAN IMPERIAL BANK OF COMMERCE, as Canadian Facilities Lender By: /s/ Mauro Spagnolo -------------------------------- Name: Mauro Spagnolo Title: Director Lending Office: Corporate Client Support Center Commerce Court West, 50th Floor Toronto, Ontario M5L 1A2 Wire Transfer Instruction: Corporate Client Support Centre Canadian Imperial Bank of Commerce Transit #00002 Swiftcode-CIBCCATT CCSC Suspense 132 140 Account Number: Cdn$ 09-55515 US$ 05-42016 Attention Jennie Harris 133 141 BARNETT BANK, N.A., Co-Agent By: /s/ Michael S. Crowe ------------------------------- Name: Michael S. Crowe Title: Senior Vice President Lending Office: 200 Central Avenue Suite 1800 St. Petersburg, Florida 33701 Wire Transfer Instructions: Barnett Bank, N.A. Jacksonville, Florida 32256 ABA #063000047 Account #01396-10231 Attention: Commercial Loan Operations Reference: Tech Data Corporation 134 142 BAYERISCHE VEREINSBANK AG, NEW YORK BRANCH By: /s/ Pamela T. Gillons /s/ Sylvia K. Cheng --------------------------------------- Name: Pamela T. Gillons Sylvia K. Cheng Title: Asst. Treasurer Vice President Lending Office: 335 Madison Avenue, 19th Floor New York, New York York 10017-4679 Wire Transfer Instructions: Bayerische Vereinsbank AG New York, New York ABA #026008 808 Bay Vereins Bk Attention: Loan Servicing Reference: Tech Data Corporation 135 143 CREDIT LYONNAIS ATLANTA AGENCY By: /s/ David M. Cawrse --------------------------------- Name: David M. Cawrse Title: First Vice President & Manager Lending Office: 303 Peachtree Street, N.E. Suite 4400 Atlanta, Georgia 30308 Wire Transfer Instructions: Credit Lyonnais New York New York, New York 10019 ABA #0260-0807-3 Account #01.24173.0001.00 For further credit to: Credit Lyonnais Atlanta Agency Attention: Loan Servicing Reference: Tech Data Corporation 136 144 DEUTSCHE BANK AG NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By: /s/ Ralf Hoffmann ------------------------------- Name: Ralf Hoffmann Title: Vice President By: /s/ John Augsburger ------------------------------- Name: John Augsburger Title: Vice President Lending Office: 31 West 52nd Street, 24th Floor New York, New York 10019 Wire Transfer Instructions: Deutsche Bank AG New York Branch New York, New York ABA #026-003-780 Attention: Nancy Zorn Reference: Tech Data Corporation 137 145 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Curtis A. Price ----------------------------------- Name: Curtis A. Price Title: First Vice President, as authorized agent Lending Office: One First National Plaza Suite 0324, 10th Floor Chicago, Illinois 60670 Wire Transfer Instructions: The First National Bank of Chicago Chicago, Illinois ABA #071000013 Account #7521-7653 Attention: Bill Laird Reference: Tech Data Corporation 138 146 ROYAL BANK OF CANADA By: /s/ M. A. Cole -------------------------------- Name: M. A. Cole Title: Manager Lending Office: New York Branch Financial Square 32 Old Slip New York, New York 10005-3531 Address for Notices: Royal Bank of Canada, New York Branch Financial Square, 23rd Floor 32 Old Slip New York, New York 10005-3531 For matters related to Domestic Letters of Credit: Attention: Assistant Manager, Standby Lcs Telefacsimile: (212) 428-2301 Telephone: (212) 428-6275 For matters related to Competitive Bid Loans: Attention: Irene Wanamaker Telefacsimile: (212) 428-2310 Telephone: (212) 428-6308 For all other matters: Attention: Manager, Credit Administration Telefacsimile: (212) 428-2372 Telephone: (212) 428-6204 In each case with a copy to: Royal Bank of Canada 600 Wilshire Boulevard, Suite 800 Los Angeles, California 90017 Attention: M.A. Cole Telefacsimile: (213) 955-5350 Telephone: (213) 955-5328 Wire Transfer Instructions: The Chase Manhattan Bank, NY New York, New York ABA #021000021 Account #920-1-033363 For further credit to: Account #218-599-9 Attention: Linda Smith 139 147 Reference: Tech Data 140 148 THE BANK OF NOVA SCOTIA By: /s/ P. Hawes -------------------------------- Name: P. Hawes Title: Compt. Lending Office: 600 Peachtree Street, N.E. Suite 2700 Atlanta, Georgia 30308 Wire Transfer Instructions: The Bank of Nova Scotia, New York Agency New York, New York ABA #02600 2532 Account #0606634 Attention: Atlanta Agency Reference: Tech Data Corporation 141 149 FIRST UNION NATIONAL BANK By: /s/ Michael J. Carlin -------------------------------- Name: Michael J. Carlin Title: Senior Vice President Lending Office: 225 Water Street, 11th Floor Jacksonville, Florida 32202 Wire Transfer Instructions: First Union National Bank Jacksonville, Florida ABA #063000021 Account #145916-2008 Attention: Cindy Petrie Reference: Tech Data Corporation 142 150 BANQUE NATIONALE DE PARIS, HOUSTON AGENCY By: /s/ John L. Stacy --------------------------------- Name: John L. Stacy Title: Vice President Lending Office: 333 Clay Suite 3400 Houston, Texas 77002 Wire Transfer Instructions: BNP New York New York, New York ABA #026007689 Account #141011-001-69 Attention: Loan Operations Reference: Tech Data Corporation 143 151 SUNTRUST BANK, TAMPA BAY By: /s/ Janet P. Sammons ------------------------------ Name: Janet P. Sammons Title: Vice President Lending Office: 300 1st Avenue South St. Petersburg, Florida 33701 Wire Transfer Instructions: SunTrust Bank, Tampa Bay St. Petersburg, Florida ABA #063 106 569 Account #MTS 9656624110 Attention: Peggy Corbet Reference: Tech Data Corporation 144 152 NATEXIS BANQUE (previously BFCE, New York Branch) By: /s/ Pieter J. van Tulder /s/ John Rigo ------------------------------------------ Name: Pieter J. van Tulder John Rigo Title: Vice President and Assistant Manager Vice President Multinational Group Lending Office: 645 Fifth Avenue New York, New York 10022 Wire Transfer Instructions: Chase Manhattan Bank New York, New York ABA #0210-0002-1 Account #544-7-75330 For credit to: Banque Francaise du Commerce Exterieur Attention: Loan Department Reference: Tech Data Corporation 145 153 THE DAI-ICHI KANGYO BANK, LIMITED ATLANTA AGENCY By: /s/ Tatsuji Noguchi ---------------------------------- Name: Tatsuji Noguchi Title: Joint General Manager Lending Office: Marquis Two Tower, Suite 2400 285 Peachtree Center Avenue, N.E. Atlanta, Georgia 30303 Wire Transfer Instructions: The Dai-Ichi Kangyo Bank, Ltd. New York, New York ABA #0260 0430 7 For credit to: DKB-Atlanta Agency Account #H79-740-111250 Reference: Tech Data Corporation 146 154 DRESDNER BANK AG NEW YORK AND GRAND CAYMAN BRANCHES By: /s/ William E. Lambert /s/ Brian Haughney -------------------------------------------- Name: William E. Lambert Brian Haughney Title: Assistant Vice President Assistant Treasurer Lending Office: 75 Wall Street New York, New York 10005-2889 Wire Transfer Instructions: ___________________________________ ____________, ____________ ABA #____________ Account #____________ Attention:____________________________ Reference: Tech Data Corporation 147 155 MELLON BANK, N.A. By: /s/ Clifford A. Smith --------------------------------- Name: Clifford A. Smith Title: Assistant Vice President Lending Office: One Mellon Bank Center Room 4440 Pittsburgh, Pennsylvania 15258 Wire Transfer Instructions: Mellon Bank, N.A. Pittsburgh, Pennsylvania ABA #043000261 Account #990873800 Attention: Jodi Stewart Reference: Tech Data Corporation 148 156 PNC BANK, KENTUCKY, INC. By: /s/ Ralph M. Bowman ---------------------------------- Name: Ralph M. Bowman Title: Vice President Lending Office: 500 W. Jefferson Street Louisville, Kentucky 40202 Wire Transfer Instructions: PNC Bank, Kentucky, Inc. Louisville, Kentucky ABA #083000108 Account #3000991434 Attention: Commercial Loan Operations Reference: Tech Data Corporation 149 157 THE SAKURA BANK, LIMITED ATLANTA AGENCY By: /s/ Hiroyasu Imanishi ------------------------------- Name: Hiroyasu Imanishi Title: V.P. & Senior Manager Lending Office: 245 Peachtree Center Avenue, N.E. Suite 2703 Atlanta, Georgia 30303 Wire Transfer Instructions: Morgan Guaranty Trust Co. of New York New York, New York ABA #021 000 238 Account Name: The Sakura Bank, Ltd., New York Account #631-22-624 In favor of: MTKB, Atlanta, A/C 8000100-1 150 158 SOUTHTRUST BANK, NATIONAL ASSOCIATION By: /s/ Dianne M. Flannery ---------------------------------- Name: Dianne M. Flannery Title: Vice President Lending Office: 420 N. 20th Street Birmingham, Alabama 35203 Wire Transfer Instructions: SouthTrust Bank, National Association St. Petersburg, Florida ABA #062-0000-80 Account $131009 Attention: Joanne Gundling (813) 898-2607 Reference: Tech Data Corporation 151 159 THE SUMITOMO BANK, LIMITED By: /s/ Jeffrey N. Frost ----------------------------------- Name: Jeffrey N. Frost Title: Vice President & Manager Regional Credit (East) By: /s/ Brian M. Smith ----------------------------------- Name: Brian M. Smith Title: Senior Vice President & Regional Manager (East) Lending Office: 100 S. Ashley Drive Suite 1780 Tampa, Florida 33602 Wire Transfer Instructions: Sumitomo Bk Chgl Chicago, Illinois ABA #017001850 Account # Tech Data Attention: Loans Administration 152 160 EXHIBIT A Lenders' Commitments and Applicable Commitment Percentages
Applicable Applicable Total Revolving Applicable Commitment Canadian Commitment Credit Commitment Commitment Domestic Revolving Percentage Revolving Credit Percentage (Domestic Percentage Lender Credit Commitment (Domestic) Commitment (Canadian) and Canadian) (Combined) ----- ----------------- ----------- ----------------- ----------- --------------- ----------- NationsBank, $45,000,000 8.49056604% 0 0% $ 45,000,000 8.18181818% National Association Barnett Bank, N.A. $40,000,000 7.54716981% 0 0% $ 40,000,000 7.27272727% Bayerische $40,000,000 7.54716981% 0 0% $ 40,000,000 7.27272727% Vereinsbank AG New York Branch Credit Lyonnais $40,000,000 7.54716981% 0 0% $ 40,000,000 7.27272727% Atlanta Agency Deutsche Bank $40,000,000 7.54716981% 0 0% $ 40,000,000 7.27272727% The First National $40,000,000 7.54716981% 0 0% $ 40,000,000 7.27272727% Bank of Chicago Royal Bank of $40,000,000 7.54716981% 0 0% $ 40,000,000 7.27272727% Canada The Bank of Nova $30,000,000 5.66037736% $10,000,000 50% $ 40,000,000 7.27272727% Scotia CIBC Inc. $30,000,000 5.66037736% $10,000,000 50% $ 40,000,000 7.27272727% First Union $25,000,000 4.71698113% 0 0% $ 25,000,000 4.54545455% National Bank Banque Nationale $20,000,000 3.77358491% 0 0% $ 20,000,000 3.63636364%
161 de Paris, Houston Agency SunTrust Bank, $20,000,000 3.77358491% 0 0% $ 20,000,000 3.63636364% Tampa Bay Natexis Banque $15,000,000 2.83018868% 0 0% $ 15,000,000 2.72727273% (previously BFCE, New York Branch) The Dai-Ichi Kangyo $15,000,000 2.83018868% 0 0% $ 15,000,000 2.72727273% Bank, Atlanta Agency Dresdner Bank AG $15,000,000 2.83018868% 0 0% $ 15,000,000 2.72727273% New York and Grand Cayman Branches Mellon Bank, N.A. $15,000,000 2.830188.68% 0 0% $ 15,000,000 2.72727273% PNC Bank, Kentucky, $15,000,000 2.83018868% 0 0% $ 15,000,000 2.72727273% Inc. The Sakura Bank, $15,000,000 2.83018868% 0 0% $ 15,000,000 2.72727273% Limited, Atlanta Agency SouthTrust Bank, N.A. $15,000,000 2.83018868% 0 0% $ 15,000,000 2.72727273% The Sumitomo Bank, $15,000,000 2.83018868% 0 0% $ 15,000,000 2.72727273% Limited TOTALS $530,000,000 100% $20,000,000 100% $550,000,000 100%
EX-23.B 8 CONSENT OF PRICE WATERHOUSE LLP 1 EXHIBIT 23(B) CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-3 of our report dated March 18, 1997, relating to the consolidated financial statements of Tech Data Corporation and its subsidiaries, which appears in such Prospectus. We also consent to the incorporation by reference in the Prospectus constituting part of this Registration Statement on Form S-3 of our report dated March 18, 1997, appearing on page 14 of Tech Data Corporation's Annual Report on Form 10-K for the year ended January 31, 1997, and our report relating to the Financial Statement Schedule included under Item 14 of such Form 10-K. We also consent to the references to us under the heading "Experts" in such Prospectus. Price Waterhouse LLP Tampa, Florida October 1, 1997 -----END PRIVACY-ENHANCED MESSAGE-----