CDW 2012 Annual Report Download - page 71

Table of Contents CDW CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CDW LLC is the borrower under the Revolving Loan. All obligations under the Revolving Loan are guaranteed by Parent and each of
CDW LLC's direct and indirect, 100% owned, domestic subsidiaries. Borrowings under the Revolving Loan are collateralized by a first
priority interest in inventory (excluding inventory collateralized under the inventory floorplan arrangements as described in Note 5),
deposits, and accounts receivable, and a second priority interest in substantially all other assets. The Revolving Loan contains negative
covenants that, among other things, place restrictions and limitations on the ability of Parent and each of CDW LLC's direct and
indirect, 100% owned, domestic subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay
other indebtedness, make distributions or other restricted payments, create liens, make equity or debt investments, make acquisitions,
engage in mergers or consolidations, or engage in certain transactions with affiliates. The Revolving Loan also includes maintenance of
a minimum average daily excess cash availability requirement. Should the Company fall below the minimum average daily excess cash
availability requirement for five consecutive business days, the Company becomes subject to a fixed charge coverage ratio until such
time as the daily excess cash availability requirement is met for 30 consecutive business days.
Senior Secured Term Loan Facility (“Term Loan”)
At December 31, 2012 , the outstanding principal amount of the Term Loan was $1,339.5 million , with $421.3 million of non-
extended
loans due October 10, 2014 and $918.2 million of extended loans due July 15, 2017. The effective weighted-average interest rate on
Term Loan principal amounts outstanding on December 31, 2012 was 3.9% per annum.
Borrowings under the Term Loan bear interest at either (a) the ABR plus a margin; or (b) LIBOR plus a margin. The margin is based on
the Company's senior secured leverage ratio as defined in the amended agreement evidencing the Term Loan. Effective with the March
2011 amendment discussed below, the margins were reduced on extended loans. For ABR borrowings, the applicable margin varies
within a range of 2.50% to 3.00% for non-extended loans and 1.75% to 2.25% for extended loans. For LIBOR borrowings, the
applicable margin varies within a range of 3.50% to 4.00% for non-extended loans and 2.75% to 3.25% for extended loans.
On March 11, 2011, the Company entered into an amendment to the Term Loan, which became effective on March 14, 2011. This
amendment, among other things: (i) reduced the margins with respect to extended loans, (ii) established a LIBOR floor of 1.25%
and an
ABR floor of 2.25% with respect to extended loans, (iii) reset the start date for accumulating restricted payments that count against the
general limit of $25.0 million and (iv) provided a 1% prepayment premium for certain repayments or re-pricings of any extended loans
for the six -month period following the effective date of the amendment. In connection with this amendment, the Company recorded a
loss on extinguishment of long-term debt of $3.2 million in the Company's consolidated statement of operations for the year ended
December 31, 2011. This loss represented a write-off of a portion of the unamortized deferred financing costs related to the Term Loan.
The Term Loan requires the Company to make certain mandatory prepayments of principal amounts under certain circumstances,
including (i) a prepayment in an amount equal to 50% of the Company's excess cash flow for a fiscal year (the percentage rate of which
decreases to 25% when the total net leverage ratio, as defined in the governing agreement, is less than or equal to 5.5 but greater than
4.5 ; and decreases to 0% when the total net leverage ratio is less than or equal to 4.5 ), and (ii) the net cash proceeds from the
incurrence of certain additional indebtedness by the Company or its subsidiaries. Excess cash flow is defined as Adjusted EBITDA,
plus items such as reductions in working capital, less items such as increases in working capital, certain taxes paid in cash, interest that
will be paid in cash, capital expenditures and repayment of long-term indebtedness. A mandatory prepayment of approximately $40.0
million
will be due in 2013 under the excess cash flow provision with respect to the year ended December 31, 2012. The payment is due
within ten business days of filing this report with the SEC. On January 30, 2013, the Company made an optional prepayment of $40.0
million aggregate principal amount. The prepayment was allocated on a pro rata basis between the extended and non-extended loans.
The optional prepayment satisfied the excess cash flow payment requirement. The Company was required to make a mandatory
prepayment of $201.0 million
under the excess cash flow provision with respect to the year ended December 31, 2011. The requirement
was satisfied through $180.0 million of optional prepayments in February 2012 and $21.0 million of mandatory prepayments in March
2012. The prepayments were allocated on a pro rata basis between the extended and non-extended loans. On March 16, 2011, the
Company made a mandatory prepayment of $132.0 million with respect to the year ended December 31, 2010, under the excess cash
flow provision.
CDW LLC is the borrower under the Term Loan. All obligations under the Term Loan are guaranteed by Parent and each of CDW
LLC's direct and indirect, 100% owned, domestic subsidiaries. The Term Loan is collateralized by a
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