SECOND AMENDMENT TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this
"Second Amendment"), dated as of October 29, 1997 is entered into among
PETsMART, INC., a Delaware corporation (the "Company"), the banks listed on the
signature pages hereof (the "Lenders") and NATIONSBANK OF TEXAS, N.A., as
Administrative Lender (in said capacity, the "Administrative Lender").
BACKGROUND
A. The Company, the Lenders and the Administrative Lender heretofore
entered into that certain Third Amended and Restated Credit Agreement, dated as
of April 18, 1997, as amended by that certain First Amendment to Third Amended
and Restated Credit Agreement dated as of August 6, 1997 (as amended, the
"Credit Agreement"). The terms defined in the Credit Agreement and not
otherwise defined herein shall be used herein as defined in the Credit
Agreement.
B. The Company, the Lenders and the Administrative Lender desire to amend
the Credit Agreement.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the Company, the
Lenders and the Administrative Lender covenant and agree as follows:
1. AMENDMENTS.
(a) The following definitions are added to SECTION 1.1 of the Credit
Agreement in proper alphabetical order:
"CAPITALIZATION" means Total Debt plus Stockholder's Equity.
"CONVERTIBLE SUBORDINATED NOTES" means convertible
subordinated notes to be issued by the Company pursuant to the
terms of the prospectus which is attached hereto as Exhibit F,
which Exhibit F is incorporated herein by reference, for the
purpose of describing such notes, with only such amendments,
modifications, or waivers that are acceptable to Majority
Lenders.
"DEBT RATIO" means, as of any date of determination, for the
Company and its Subsidiaries, on a consolidated basis, the ratio
of
(a) Total Debt as of the date of determination plus (i) the sum of
lease expense pursuant to Operating Leases (such lease expense to be
in an amount equal to the product of lease expense pursuant to
Operating Leases for the four fiscal quarters immediately preceding
the date of determination multiplied by eight) minus (ii) cash and
Cash Equivalents in aggregate amount in excess of $50,000,000 to
(b) EBITDA for the four fiscal quarters immediately preceding the date
of determination plus lease expense pursuant to Operating Leases for
the four fiscal quarters immediately preceding the date of
determination.
"STOCKHOLDER'S EQUITY" means stockholder's equity of the
Company and its Subsidiaries as from time to time stated and
described in the consolidated financial statements and
consolidated balance sheets provided to the Lenders by the
Company and prepared under GAAP.
"WORKING CAPITAL" means (a) the sum of the Company's cash
and Cash Equivalents of the Company and its Subsidiaries (1) IN
EXCESS OF $50,000,000, plus (b) the sum of trade receivables and
inventory minus trade payables of the Company and its
Subsidiaries.
(b) Section 2.3(a) of the Credit Agreement is hereby amended to read
as follows:
"(a) COMMITMENT FEE. Subject to Section 10.9 hereof, the Company
agrees to pay to the Administrative Lender, for the ratable account of
the Lenders, a commitment fee (which shall be payable quarterly in
arrears on each Quarterly Date and on the Maturity Date) based on the
daily average unused portion of the Commitment (subject to
Section 10.9 hereof, computed on the basis of a year of 360-day year
for the actual number of days elapsed) at the following per annum
percentages, applicable in the following situations:
Applicability Percentage
--------------- ----------
(A) If the Fixed Charges Coverage Ratio is greater 0.200%
than or equal to 2.00 to 1
(B) If the Fixed Charges Coverage Ratio is less than 0.300%
2.00 to 1 but is equal to or greater than 1.75
to 1
(C) If the Fixed Charges Coverage Ratio is less than 0.350%
1.75 to 1 but is equal to or greater than 1.50
to 1
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(D) If the Fixed Charges Coverage Ratio is less than 0.375%
1.50 to 1 but is greater than or equal to 1.25
to 1
(E) If the Fixed Charges Coverage Ratio is less than 0.400%
1.25 to 1
For purposes of calculation of the commitment fee, Letters of Credit
outstanding from time to time will reduce the unused portion of the
Commitment. The commitment fee shall be subject to reduction or
increase, as applicable and as set forth above, on a quarterly basis
according to the performance of the Company as tested by the Fixed
Charges Coverage Ratio. Any such increase or decrease in such fee
shall be effective on the fifth day following the date of receipt by
the Administrative Lender of the financial statements required
pursuant to Section 6.14(a) or 6.14(b) hereof, as appropriate. If
such financial statements are not received by the fifth day following
the date required, the commitment fee shall be determined as if the
Fixed Charges Coverage Ratio is less than 1.25 to 1 until such time as
such financial statements are received. From and including
October 29, 1997 to the date of the initial adjustment of the
commitment fee to be made as provided above, the percentage shall be
0.375%."
(c) The definition of "APPLICABLE MARGIN" set forth in Section 1.1 of
the Credit Agreement is hereby amended to read as follows:
"APPLICABLE MARGIN' shall mean the following per annum
percentages, applicable in the following situations:
Applicability LIBOR Margin
------------- -----------
(i) If the Fixed Charges Coverage Ratio is equal 0.500%
to or greater than 2.00 to 1
(ii) If the Fixed Charges Coverage Ratio is 0.750%
less than 2.00 to 1 but is equal to or
greater than 1.75 to 1
(iii) If the Fixed Charges Coverage Ratio is 0.875%
less than 1.75 to 1 but is equal to or
greater than 1.50 to 1
(iv) If the Fixed Charges Coverage Ratio is 1.125%
less than 1.50 to 1 but is greater than
or equal to 1.25 to 1
(v) If the Fixed Charges Coverage Ratio is less 1.500%
than 1.25 to 1
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The Applicable Margin payable by the Company on the Advances
outstanding hereunder shall be subject to reduction or increase, as
applicable and as set forth in the table above, on a quarterly basis
according to the Fixed Charges Coverage Ratio; PROVIDED, that each
adjustment in the Applicable Margin shall be effective as of the fifth
day following the date of receipt by the Administrative Lender of the
financial statements required pursuant to Section 6.14(a) or 6.14(b)
hereof, as appropriate. If financial statements of the Company (and
corresponding Quarterly Compliance Certificate setting forth the Fixed
Charges Coverage Ratio) are not received by the Administrative Lender
by the fifth day following the date required pursuant to
Section 6.14(a) or 6.14(b) hereof, as appropriate, the Applicable
Margin shall be determined as if the Fixed Charges Coverage Ratio is
less than 1.25 to 1 until such time as such financial statements and
Quarterly Compliance Certificate are received. The Applicable Margin
from and including October 29, 1997 to the date of the initial
adjustment to be made therein as provided above shall be 1.125%. If,
on or at any time after April 29, 1998, the Company has a rating of BB
or better from S&P or Ba2 or better from Xxxxx'x, and the Fixed Charge
Coverage Ratio is less than 2.00 to 1 but equal to or greater than
1.25 to 1, then the LIBOR Margin then in effect shall be reduced by
subtracting 0.125 therefrom. Any decrease or increase in the LIBOR
Margins based on a change in the Company's rating by S&P or Xxxxx'x
shall be effective as of the fifth day following any such change in
the rating which requires a change in the LIBOR Margin used to
calculate the Applicable Margin."
(d) Section 6.2 of the Credit Agreement is amended by the addition of
the following prior to the period at the end of Section 6.2:
", (j) Indebtedness of Foreign Subsidiaries not in excess of
$25,000,000 in the aggregate, (k) Indebtedness in respect of the
Convertible Subordinated Notes; and (l) subordinated debt issued
at all times under terms acceptable to Majority Lenders, provided
that (i) no Default or Event of Default exists immediately prior
to or after incurring such Indebtedness, and (ii) the Company is
in compliance with all covenants under this Agreement on an
actual and a pro forma basis"
(e) Section 6.7(g) of the Credit Agreement is hereby amended to read
as follows:
"(g)(i) Investments in Foreign Subsidiaries which have not
executed a Subsidiary Guaranty not to exceed $40,000,000 in
aggregate amount (excluding Investments in Foreign Subsidiaries
shown on SCHEDULE IV hereto) provided that (A) no Default or
Event of Default shall have occurred or be continuing or would
occur after giving effect thereto and (B) the Administrative
Lender has been granted a first priority
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security interest in 65% of the capital stock of such Foreign
Subsidiary pursuant to a Pledge Agreement, and"
(f) Section 6.1(b) of the Credit Agreement is hereby amended to read
as follows:
"(b) FIXED CHARGES COVERAGE RATIO. The Fixed Charges Coverage
Ratio shall not be less than (i) 1.20 to 1 at the end of any fiscal
quarter of the Company through fiscal year 1998, (ii) 1.25 to 1 at the
end of any fiscal quarter of the Company thereafter through the end of
the fiscal year 1999, (iii) 1.35 to 1 at the end of any fiscal quarter
of the Company thereafter through the end of fiscal year 2000, and
(iv) 1.40 to 1 at the end of any fiscal quarter of the Company
thereafter."
(g) Section 6.1(e) of the Credit Agreement is hereby amended to read
as follows:
"(e) DEBT RATIO. The Debt Ratio shall not be more than (i)
6.75 to 1 at the end of any fiscal quarter of the Company through
fiscal year 1998, and (ii) 6.0 to 1 at the end of any fiscal
quarter of the Company thereafter."
(h) The Quarterly Compliance Certificate is hereby amended to be in
the form of EXHIBIT "A" to this Second Amendment.
(i) Section 6.1(c) of the Credit Agreement is hereby deleted in its
entirety and replaced with the following:
"(c) TOTAL DEBT TO CAPITALIZATION. The ratio of Total Debt
to Capitalization shall at no time be greater than .50 to 1."
(j) Section 6.1(d) of the Credit Agreement is hereby amended to read
as follows:
"CAPITAL EXPENDITURES. Capital Expenditures (excluding any
Capital Expenditures in respect of any (i) Capital Leases and
(ii) Acquisitions, permitted pursuant to Section 6.8 hereof) paid or
incurred during any fiscal year of the Company set forth below shall
not exceed the amount set forth below:
Fiscal Year ending 1/31/98 $75,000,000
any Fiscal Year ending thereafter $85,000,000"
(k) Section 6.5(a) of the Credit Agreement is amended in its entirety
to read as follows:
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"(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise wind up; or sell, lease, abandon, assign, or
otherwise dispose of all or any part of its assets, properties or
business, except (i) immaterial sales or dispositions of assets in the
ordinary course of business, including dispositions of obsolete or
useless assets, (ii) disposition of assets, including capital stock,
of the Company or any Subsidiary, provided that (A) the aggregate
value of the assets disposed of from October 29, 1997, through the
date of any such disposition, including the value of assets to be
disposed of by such disposition, shall not exceed, as of the date of
such disposition, 10% of the consolidated value of the assets of the
Company and the Subsidiaries calculated as the greater of book value
and fair market value of such consolidated assets, (B) the disposition
of such assets does not result in the release or disposition of
collateral or guaranties securing the Company's obligations hereunder,
and (C) 100% of the proceeds of such disposition shall be applied to
prepay Advances hereunder, (iii) sale-leaseback transactions in which
the consideration received is at least equal to the fair market value
of the asset sold or (iv) the Company's Xxxxx warehouse and
underperforming or replacement stores listed on Schedule 6.5 hereto
and related inventory and inventory and fixtures related to the
discontinuance of Discovery Centers and 3 Dog Bakeries.
Notwithstanding the foregoing, a wholly owned Subsidiary of the
Company may be dissolved or liquidated, so long as such Subsidiary
owns no assets and conducts no business; or"
(l) Section 10.2(a) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(a) If to the Company:
PETsMART, Inc.
00000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Financial Officer
with a copy to:
Xxxxxx Godward L.L.P.
5 Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx"
(m) A new Subsection 6.1(f) is hereby added to Section 6.1 of the
Credit Agreement and shall read as follows:
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"(f) BORROWING BASE. Notwithstanding any of the terms of
this Agreement, until the Company has achieved a Fixed Charges
Coverage Ratio in excess of 1.40 to 1 for two consecutive fiscal
quarters after the conclusion of the third fiscal quarter of
1997, no Advance shall be made to the Company and the Company
shall not request any Advance hereunder to the extent that such
Advance would cause (i) the sum of (A) Advances hereunder, plus
(B) Reimbursement Obligations, plus (C) outstanding Advances
under the Amended and Restated Credit Agreement dated as of
April 18, 1997 among Arizona Funding Corporation and certain
lenders, including Administrative Lender, to exceed (ii) 50% of
Working Capital."
(n) The Credit Agreement is hereby amended by adding the prospectus
attached to this Second Amendment as Exhibit B as a new Exhibit F.
(o) Section 4.2 of the Credit Agreement is hereby amended by
replacing the reference to "Section 2.2(a)" therein with "Section 2.2".
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, Company represents and warrants that, as of the
date hereof and after giving effect to the amendments contemplated by the
foregoing Section 1 and the issuance of the Convertible Subordinated Notes:
(a) the representations and warranties contained in the Credit
Agreement are true and correct on and as of the date hereof as made on and
as of such date;
(b) no event has occurred and is continuing which constitutes a
Default or an Event of Default;
(c) The Company has full power and authority to execute and deliver
this Second Amendment, and this Second Amendment and the Credit Agreement,
as amended hereby, constitute the legal, valid and binding obligations of
the Company, enforceable in accordance with their respective terms, except
as enforceability may be limited by applicable debtor relief laws and by
general principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law) and except as rights to indemnity may
be limited by federal or state securities laws; and
(d) no authorization, approval, consent, or other action by, notice
to, or filing with, any governmental authority or other Person (other than
the Board of Directors of the Company) is required for the execution,
delivery or performance by Company of this Second Amendment.
3. CONDITIONS OF EFFECTIVENESS. This Second Amendment shall be effective
as of the date first above written, subject to the following:
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(a) The Administrative Lender shall have received counterparts of
this Second Amendment executed by the Lenders comprising the Majority
Lenders;
(b) The Administrative Lender shall have received counterparts of
this Second Amendment executed by the Company and acknowledged by each
Guarantor (as hereinafter defined);
(c) The Administrative Lender shall have received a certified
corporate resolution of the Board of Directors of the Company authorizing
the execution, delivery and performance of this Second Amendment;
(d) Prior to December 1, 1997, the Company shall have issued
Convertible Subordinated Notes in the aggregate amount of at least
$150,000,000;
(e) The Administrative Lender shall have received, in form and
substance satisfactory to the Administrative Lender and its counsel, such
other documents, certificates and instruments as the Administrative Lender
shall require; and
(f) The Administrative Lender shall have received for the account of
each Lender a consent fee in an amount equal to the product of (i) 0.05
multiplied by (ii) such Lender's portion of the Commitment.
4. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this Second Amendment, each reference
in the Credit Agreement to "this Agreement", "hereunder", or words of like
import shall mean and be a reference to the Credit Agreement, as affected
and amended hereby.
(b) The Credit Agreement, as amended by the amendments referred to
above, shall remain in full force and effect and is hereby ratified and
confirmed.
5. COSTS, EXPENSES AND TAXES. The Company agrees to pay on demand all
costs and expenses of the Administrative Lender in connection with the
preparation, reproduction, execution and delivery of this Second Amendment and
the other instruments and documents to be delivered hereunder (including the
reasonable fees and out-of-pocket expenses of counsel for the Administrative
Lender with respect thereto).
6. GUARANTOR'S ACKNOWLEDGMENT. By signing below, each Subsidiary
executing a Subsidiary Guaranty (a "Guarantor") (a) acknowledges, consents and
agrees to the execution, delivery and performance by Borrowers of this Second
Amendment, (b) acknowledges and agrees that its obligations in respect of its
Guaranty are not released, diminished, waived, modified, impaired or affected in
any manner by this Second Amendment or any of the provisions contemplated
herein, (c) ratifies and confirms its obligations under its Guaranty, and
- 8 -
(d) acknowledges and agrees that it has no claims or offsets against, or
defenses or counterclaims to, its Guaranty.
7. EXECUTION IN COUNTERPARTS. This Second Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which when taken together shall constitute but one and
the same instrument.
8. GOVERNING LAW; BINDING EFFECT. This Second Amendment shall be
governed by and construed in accordance with the laws of the State of Texas and
shall be binding upon the Company and each Lender and their respective
successors and assigns.
9. HEADINGS. Section headings in this Second Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Second Amendment for any other purpose.
10. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS SECOND
AMENDMENT, AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
- 9 -
IN WITNESS WHEREOF, this Second Amendment is executed as of the date first
set forth above.
COMPANY: PETsMART, INC.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------------
Name: XXXXX X. XXXXXXXX
-----------------------------------
Title: CFO
----------------------------------
ADMINISTRATIVE LENDER: NATIONSBANK OF TEXAS, N.A., as Administrative
Lender
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------------
Name: XXXXX X. XXXXXXX
----------------------------------
Title: SENIOR VICE PRESIDENT
---------------------------------
ISSUING BANK: NATIONSBANK OF TEXAS, N.A., as Issuing Bank
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------------
Name: XXXXX X. XXXXXXX
----------------------------------
Title: SENIOR VICE PRESIDENT
---------------------------------
LENDERS: NATIONSBANK OF TEXAS, N.A.,
Individually
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------------
Name: XXXXX X. XXXXXXX
----------------------------------
Title: SENIOR VICE PRESIDENT
---------------------------------
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XXXXX FARGO BANK, N.A.
By: /s/ Xxxxx X. Xxx
----------------------------------------
Name: XXXXX X. XXX
----------------------------------
Title: Vice President
----------------------------------
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------------
Name: XXXXXX X. XXXXXX
----------------------------------
Title: Assistant Vice President
---------------------------------
NORWEST BANK COLORADO, N.A.
By: /s/ Xxxxx X. Xxxxx
---------------------------------------
Name: Xxxxx X. Xxxxx
----------------------------------
Title:
---------------------------------
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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ABN AMRO BANK N.V., LOS ANGELES INTERNATIONAL
BRANCH
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Name: XXXXX X. XXXXXXX
---------------------------------
Title: VICE PRESIDENT/DIRECTOR
--------------------------------
By: /s/ Xxxx X. Xxxxxx
--------------------------------------
Name: XXXX X. XXXXXX
---------------------------------
Title: GROUP VICE PRESIDENT
--------------------------------
THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS
ANGELES AGENCY
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------
Name: XXXXXXX X. XXXXXXXX
---------------------------------
Title: SVP & Sr. MGR
--------------------------------
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By: /s/ T. Xxxxxx Xxxxxxx XX
-------------------------------------
Name: T. Xxxxxx Xxxxxxx XX
--------------------------------
Title: Deputy General Manager
-------------------------------
By: /s/ Xxxxx Read
-------------------------------------
Name: Bryan Read
--------------------------------
Title: Vice President
-------------------------------
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U.S. BANK NATIONAL ASSOCIATION
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: XXXXX X. XXXXXXX
--------------------------------
Title: VICE PRESIDENT
--------------------------------
CORESTATES BANK, N.A.
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxx
--------------------------------
Title: AVP
-------------------------------
FLEET NATIONAL BANK
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name: XXXXXX X. XXXXXXX
--------------------------------
Title: VICE PRESIDENT
-------------------------------
THE SUMITOMO BANK OF CALIFORNIA
By: /s/ Xxxxxxx Xxx Xxxxxxxxxx
-------------------------------------
Name: XXXXXXX XXX XXXXXXXXXX
--------------------------------
Title: VICE PRESIDENT
--------------------------------
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THE BANK OF NOVA SCOTIA
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: Xxxx Xxxxx
--------------------------------
Title: Sr.: Relationship Manager
----------------------------------
THE SAKURA BANK, LIMITED
By: /s/ Xxxxx Xxxx
-----------------------------------------
Name: Xxxxx Xxxx
------------------------------------
Title: Senior Vice President &
-----------------------------------
Assistant General Manager
CREDIT LYONNAIS LOS ANGELES BRANCH
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxx
-----------------------------------
Title: Vice President and Manager
----------------------------------
THE DAI-ICHI KANGYO BANK, LTD., LOS ANGELES
AGENCY
By: /s/ Xxxxxxxxx Xxxxxxxxx
--------------------------------------
Name: XXXXXXXXX XXXXXXXXX
---------------------------------
Title: SR. VICE PRESIDENT &
--------------------------------
JOINT GENERAL MANAGER
- 14 -
BANK OF MONTREAL
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ACKNOWLEDGED AND AGREED TO:
THE WEISHEIMER COMPANIES, INC.
By: /s/ C. Xxxxxx Xxxxxx
----------------------------------
Name: C. Xxxxxx Xxxxxx
---------------------------
Title: SVP
---------------------------
PETSTUFF, INC.
By: /s/ C. Xxxxxx Xxxxxx
---------------------------------
Name: C. Xxxxxx Xxxxxx
---------------------------
Title: SVP
---------------------------
SPORTING DOG SPECIALTIES, INC.
By: /s/ C. Xxxxxx Xxxxxx
----------------------------------
Name: C. Xxxxxx Xxxxxx
---------------------------
Title: SVP
---------------------------
- 15 -
THE PET FOOD GIANT, INC.
By: /s/ C. Xxxxxx Xxxxxx
----------------------------------
Name: C. Xxxxxx Xxxxxx
-----------------------------
Title: E.V.P.
----------------------------
PETSTUFF CANADA (USA) HOLDINGS, INC.
By: /s/ C. Xxxxxx Xxxxxx
----------------------------------
Name: C. Xxxxxx Xxxxxx
-----------------------------
Title: E.V.P.
----------------------------
PETSTUFF NOVA SCOTIA, INC.
By: /s/ C. Xxxxxx Xxxxxx
----------------------------------
Name: C. Xxxxxx Xxxxxx
-----------------------------
Title: E.V.P.
----------------------------
STATE LINE TACK, INC.
By: /s/ C. Xxxxxx Xxxxxx
----------------------------------
Name: C. Xxxxxx Xxxxxx
-----------------------------
Title: E.V.P.
---------------------------
PETSMART VETERINARY SERVICES INC.
By: /s/ C. Xxxxxx Xxxxxx
----------------------------------
Name: C. Xxxxxx Xxxxxx
-----------------------------
Title: E.V.P.
----------------------------
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PACIFIC COAST DISTRIBUTING, INC.
By: /s/ C. Xxxxxx Xxxxxx
----------------------------------
Name: C. Xxxxxx Xxxxxx
-----------------------------
Title: SVP
----------------------------
STATE LINE TACK OF TEXAS, INC.
By: /s/ C. Xxxxxx Xxxxxx
----------------------------------
Name: C. Xxxxxx Xxxxxx
-----------------------------
Title: EVP
----------------------------
NATIONAL BRIDLE SHOP, INC.
By: /s/ C. Xxxxxx Xxxxxx
----------------------------------
Name: C. Xxxxxx Xxxxxx
-----------------------------
Title: EVP
----------------------------
SPAT PRODUCTIONS, INC.
By: /s/ C. Xxxxxx Xxxxxx
----------------------------------
Name: C. Xxxxxx Xxxxxx
-----------------------------
Title: EVP
----------------------------
3003300 NOVA SCOTIA COMPANY
By: /s/ C. Xxxxxx Xxxxxx
----------------------------------
Name: C. Xxxxxx Xxxxxx
-----------------------------
Title: EVP
----------------------------
- 17 -
EXHIBIT A
QUARTERLY COMPLIANCE CERTIFICATE
To: NationsBank of Texas, N.A as Administrative Lender for the Lenders
parties to the Credit Agreement
From: PETsMART, Inc.
Date: ___________________, 19____
Re: Third Amended and Restated Credit Agreement, dated as of April 18,
1997 ("Credit Agreement"), among PETsMART, Inc. ("Company"), the
Lenders parties thereto, and NationsBank of Texas, N.A., as a Lender
and as Administrative Lender
This Quarterly Compliance Certificate is delivered pursuant to
Section 6.13(e) of the Credit Agreement. All capitalized terms used herein and
defined in the Credit Agreement shall be used herein as so defined. For
purposes hereof, section references herein relate to sections of the Credit
Agreement, and bracketed amounts or ratios refer to the maximum or minimum
amounts or ratios required under the relevant sections of the Credit Agreement.
1. COVENANT CALCULATIONS. Demonstration of compliance with certain
covenants contained in Article VI of the Credit Agreement.
A. SECTION 6.1(b). Fixed Charges Coverage Ratio
(determined for the four fiscal quarters
ending on the date of calculation).
1. Minimum Ratio at each fiscal quarter
during the periods indicated below:
Up to and including the last fiscal 1.20 to 1
quarter of fiscal year 1998
During fiscal year 1999 1.25 to 1
During fiscal year 2000 1.35 to 1
Each fiscal quarter thereafter 1.40 to 1
2. Actual Fixed Charge Coverage Ratio:
a. EBITDA
(i) Net profit before Taxes $ ___________
(ii) One-time charges to operating $ ___________
income with respect to costs
related to Pooling Acquisitions
not to exceed, together with
Acquisition Consideration
(other than capital stock of
the Company) and Capital
Expenditures paid or incurred
with such Acquisitions, during
each fiscal year, 15% of
Tangible Net Worth
(iii) One-time operating and $ ___________
restructuring charge for
fiscal quarter ending
August 3, 1997 (not to
exceed $65,000,000)
(iv) Depreciation and amortization $ ___________
expense
(v) Non-cash items deducted in the $ ___________
calculation of net operating
income
(vi) Interest expense (including $ ___________
interest expense pursuant to
Capital Leases and net of
interest and other investment
income)
(vii) Net extraordinary losses $ ___________
included in the
calculation of net
operating income
(viii) Net extraordinary gains $ ___________
included in the
calculation of net
operating income
(ix) EBITDA $_________
[(i) + (ii) + (iii) + (iv) +
(v) + (vi) + (vii) - (viii)]
b. Lease payments payable pursuant to $ ___________
Operating Leases
- 2 -
c. All principal, interest, and other $ __________
amounts payable with respect to
Total Debt
d. Actual Fixed Charge Coverage Ratio ___ to 1
[(a) + (b)/(b) + (c)]
B. SECTION 6.1(c). Total Debt to Capitalization
Ratio.
1. Maximum Total Debt to Capitalization .50 to 1
Ratio:
2. Actual Total Debt to Capitalization
Ratio:
a. Total Debt (from E.2.(i)(e)) $_________
b. Stockholders Equity $_________
c. Actual Total Debt to Capitalization ____ to 1
Ratio [(a)/(b) + (a)]
C. SECTION 6.1(d). Maximum Capital Expenditures.
1. Maximum Capital Expenditures (excluding
Capital Expenditures related to Capital
Leases and Acquisitions permitted
pursuant to Section 6.8) during each
fiscal year below:
Fiscal Year
-----------
Ending 1/31/98 $75,000,000
Ending 1/31/99 $85,000,000
Ending 1/31/00 $85,000,000
Ending 1/31/01 $85,000,000
2. Actual Capital Expenditures paid or $___________
incurred during fiscal year
D. SECTION 6.1(e). Debt Ratio.
1. Maximum Debt Ratio
Through January 31, 1999 6.75 to 1
After January 31, 1999 6.0 to 1
2. Actual Debt Ratio
(a) Total Debt
(i) Total Debt
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(A) All principal and interest $ _________
owing under the Loan
Papers
(B) All Indebtedness evidenced $ _________
by a promissory note,
bond, debenture or
otherwise representing
borrowed money
(C) All Capital Leases $ _________
(D) All Contingent Liabilities $ _________
(excluding those arising
under leases with Arizona
Funding Corporation, Pet
Stores Funding
Corporation, Pet Stores
Trust 1995-1, Pet Stores
Trust 1996-1 and Pet
Stores Trust 1997-1)
(E) Total Debt $___________
[(A) + (B) + (C) + (D)]
(b) Lease expense pursuant to Operating $ _________
Leases (equal to the product of such
lease expense for the four fiscal
quarters immediately preceding the
date of determination multiplied by
eight)
(c) Cash and Cash Equivalents in excess $ _________
of $50,000,000
(d) EBITDA (from B.2.a. above) $ _________
(e) Lease expense pursuant to Operating $ _________
Leases for the four fiscal quarters
immediately preceding the date of
determination
(f) Actual Debt Ratio $___________
[(a) + (b) - (c)/(d) + (e)]
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E. SECTION 6.1(f). Borrowing Base.
(a) Total Advances $ _________
(b) Total Reimbursement Obligations $ _________
(c) Total Advances under Amended And Restated
Credit Agreement dated April 18, 1997, as
amended, among Arizona Funding
Corporation and Administrative Lender and
certain other lenders $ _________
(d) Total Advances (for availability)
[(a) + (b) + (c)] may not exceed (j) $ _________
(e) Cash and Cash Equivalents in excess of $ _________
$50,000,000
(f) Trade Receivables $ _________
(g) Inventory $ _________
(h) Trade Payables $ _________
(i) Borrowing Base
[(e) + (f)+(g) - (h)] $ _________
(j) Availability
(i) x .50 $ _________
F. SECTION 6.2(i), 6.7(d) AND 6.7(e). Other
Indebtedness, Working Capital Advances to
Veterinarians, and Loans and Guaranties of
Officers to exercise stock options and pay
minimum tax obligations
1. Maximum aggregate principal amount of $25,000,000
other Indebtedness permitted
2. Actual principal amount of other $__________
Indebtedness outstanding
(a) Indebtedness (including Contingent $ _________
Liabilities)
(b) Working Capital Advances to $ _________
Veterinarians
(c) Loans to, or guaranties of $ _________
obligations of, obligations of
officers of the Company
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(d) Actual Other Indebtedness $___________
[(a) + (b) + (c)]
G. SECTION 6.2(j)
(a) Indebtedness of Foreign Subsidiaries
(i) Permitted $25,000,000
(ii) Actual $__________
H. SECTION 6.7(g) AND 6.8(b). Investments in
Foreign Subsidiaries which have not executed a
Subsidiary Guaranty (excluding Investments in
Foreign Subsidiaries shown on SCHEDULE IV) and
Acquisitions of Foreign Subsidiaries which do
not execute a Subsidiary Guaranty
1. Maximum Investments in, and Acquisitions $40,000,000
of, Foreign Subsidiaries that have not
executed Subsidiary Guaranties
2. Actual:
(a) Investments in Foreign Subsidiaries $___________
that have not executed a Subsidiary
Guaranty
(b) Acquisitions of Foreign Subsidiaries $___________
that have not executed Subsidiary
Guaranties
(c) [(a) + (b)] $___________
I. SECTION 6.8(a). Acquisitions and Capital
Expenditures Permitted.
1. Maximum: 15% of Tangible Net Worth $___________
2. Actual:
(a) Acquisition Consideration (excluding $___________
capital stock of Company but
including costs associated with
Pooling Acquisitions) during fiscal
year
(b) Capital Expenditures related to $___________
Acquisitions during fiscal year
(c) [(a) + (b)] $___________
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3. COMPLIANCE CERTIFICATE. The undersigned hereby certifies to you as
follows:
(a) I am, and at all times mentioned herein have been, the duly
elected qualified and acting chief financial officer of Company.
(b) I have reviewed the provisions of the Credit Agreement and the
other Loan Papers, and a review of the activities of Company
during the period from __________, 19__ to _______________, 19__
(the "Reporting Period") has been made under my supervision with
a view toward determining whether, during the Reporting Period,
Company has kept, observed, performed and fulfilled all its
obligations under the Credit Agreement and such Loan Papers.
(c) The representations and warranties made in the Loan Papers are
true and correct in all material respects as of the date hereof
as though made at and as of the date hereof, except for such
representations and warranties which relate to a particular date,
and no Default or Event of Default has occurred or is continuing
or is imminent.
This Quarterly Compliance Certificate is executed and delivered on the
_______ day of _____________________, 19__
PETsMART, INC.
By:
----------------------------------------
Name:
----------------------------------
Title:
----------------------------------
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