UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For quarterly period ending September 30, 1999
-----------------------------------------------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________________ to ______________________
Commission file number: 1-7945
------------------------
DELUXE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0216800
- ----------------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3680 Victoria St., N. St. Paul, Minnesota 55126-2966
- ----------------------------------------- ---------------------------------
(Address of principal executive offices) (Zip Code)
(651) 483-7111
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
The number of shares outstanding of registrant's common stock, par value $1.00
per share, at November 5, 1999 was 73,402,534.
1
<PAGE>
ITEM I. FINANCIAL STATEMENTS PART I. FINANCIAL INFORMATION
DELUXE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
September 30, 1999 December 31,
(Unaudited) 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 74,501 $ 268,934
Marketable securities 38,864 41,133
Trade accounts receivable 138,373 145,079
Inventories:
Raw material 2,051 2,619
Semi-finished goods 6,101 7,401
Finished goods 1,290 1,981
Supplies 15,582 17,400
Deferred advertising 11,981 7,939
Deferred income taxes 56,819 56,554
Prepaid expenses and other current assets 73,357 62,961
----------- -----------
Total current assets 418,919 612,001
----------- -----------
LONG-TERM INVESTMENTS 41,938 45,208
PROPERTY, PLANT, AND EQUIPMENT
Land and land improvements 41,566 46,826
Buildings and building improvements 168,602 209,416
Machinery and equipment 521,436 507,680
----------- -----------
Total 731,604 763,922
Less accumulated depreciation 415,219 423,845
----------- -----------
Property, plant, and equipment - net 316,385 340,077
INTANGIBLES
Cost in excess of net assets acquired - net 80,240 42,836
Internal use software - net 137,563 116,734
Other intangible assets - net 14,868 14,663
----------- -----------
Total intangibles 232,671 174,233
----------- -----------
TOTAL ASSETS $ 1,009,913 $ 1,171,519
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 57,425 $ 53,555
Accrued liabilities:
Wages, including vacation pay 51,321 60,540
Employee profit sharing and pension 26,484 41,762
Accrued income taxes 65,787 33,075
Accrued rebates 29,593 34,712
Accrued contract/relationship losses 13,013 14,697
Other 129,539 185,022
Long-term debt due within one year 2,900 7,332
----------- -----------
Total current liabilities 376,062 430,695
----------- -----------
LONG-TERM DEBT 119,856 106,321
DEFERRED INCOME TAXES 24,797 27,519
OTHER LONG-TERM LIABILITIES 9,312 419
SHAREHOLDERS' EQUITY
Common shares - $1 par value (authorized 500,000,000 shares; issued: 1999 - 75,390 80,481
75,389,569 shares; 1998 - 80,480,526 shares)
Additional paid-in capital 6,822
Retained earnings 405,631 519,742
Unearned compensation (92) (238)
Accumulated other comprehensive income (1,043) (242)
----------- -----------
Shareholders' equity 479,886 606,565
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,009,913 $ 1,171,519
=========== ===========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
2
<PAGE>
DELUXE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Dollars in Thousands, Except per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
QUARTERS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 417,114 $ 469,770 $ 1,239,033 $ 1,433,531
OPERATING EXPENSES
Cost of sales 182,718 259,188 541,901 702,371
Selling, general and administrative 161,031 210,898 468,608 591,933
----------- ----------- ----------- -----------
Total 343,749 470,086 1,010,509 1,294,304
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS 73,365 (316) 228,524 139,227
OTHER INCOME (EXPENSE)
Other income 6,483 5,433 10,606 13,626
Interest expense (2,164) (2,135) (5,623) (6,293)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 77,684 2,982 233,507 146,560
PROVISION FOR INCOME TAXES 28,627 3,097 88,638 60,849
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 49,057 $ (115) $ 144,869 $ 85,711
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE - Basic $ 0.65 $ 0.00 $ 1.86 $ 1.06
NET INCOME PER COMMON SHARE - Diluted $ 0.65 $ 0.00 $ 1.85 $ 1.06
CASH DIVIDENDS PER COMMON SHARE $ 0.37 $ 0.37 $ 1.11 $ 1.11
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
3
<PAGE>
DELUXE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 144,869 $ 85,711
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 41,026 43,263
Asset impairment charge 925 26,252
Amortization of intangibles 20,785 18,385
Stock purchase discount 3,640 4,514
Net gain on sales of businesses (3,383)
Changes in assets and liabilities, net of effects from
acquisitions and sales of businesses:
Trade accounts receivable 10,321 (9,958)
Inventories 2,559 240
Accounts payable 2,757 (2,901)
Other assets and liabilities (67,948) 15,936
--------- ---------
Net cash provided by operating activities 158,934 178,059
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of marketable securities with maturities of more than 3 months 19,763 12,198
Purchases of marketable securities with maturities of more than 3 months (17,915) (21,374)
Purchases of capital assets (78,722) (88,496)
Payments for acquisitions, net of cash acquired (35,666)
Net proceeds from sales of businesses, net of cash sold 23,809 12,319
Proceeds from sales of capital assets 50,824 20,500
Loans to others (32,500)
Other 2,636 349
--------- ---------
Net cash used in investing activities (67,771) (64,504)
CASH FLOWS FROM FINANCING ACTIVITIES
Net payments on short-term debt (1,394)
Proceeds from long-term debt 2,770
Payments on long-term debt (9,554) (5,210)
Payments to retire common stock (216,745) (60,260)
Proceeds from issuing stock under employee plans 25,712 20,634
Cash dividends paid to shareholders (86,385) (89,939)
--------- ---------
Net cash used in financing activities (285,596) (134,775)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (194,433) (21,220)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 268,934 171,438
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 74,501 $ 150,218
========= =========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
4
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of September 30, 1999, the
consolidated statements of income for the quarters and nine months ended
September 30, 1999 and 1998, and the consolidated statements of cash flows for
the nine months ended September 30, 1999 and 1998 are unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of such
financial statements are included. Other than those discussed in the notes
below, such adjustments consist only of normal recurring items. Interim results
are not necessarily indicative of results for a full year. The consolidated
financial statements and notes are presented in accordance with instructions for
Form 10-Q, and do not contain certain information included in the Company's
consolidated annual financial statements and notes. The consolidated financial
statements and notes appearing in this Report should be read in conjunction with
the Company's consolidated audited financial statements and related notes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998 (as amended by Amendment No. 1 filed on Form 10-K/A, the "1998
10-K/A").
2. As of September 30, 1999, the Company had uncommitted bank lines of
credit of $115 million available at variable interest rates. The average amount
drawn on these lines during the first nine months of 1999 was $1.5 million at a
weighted average interest rate of 5.12%. As of September 30, 1999, no amounts
were outstanding under these lines of credit. No amounts were drawn on these
lines during 1998 and there was no outstanding balance at December 31, 1998. The
Company also had committed lines of credit of $650 million available for
borrowing and as support for commercial paper. As of September 30, 1999 and
December 31, 1998, the Company had no commercial paper outstanding and no
indebtedness outstanding under its committed lines of credit. Additionally, the
Company had a shelf registration in place to issue up to $300 million in
medium-term notes. Such notes could be used for general corporate purposes,
including working capital, capital expenditures, possible acquisitions and
repayment or repurchase of outstanding indebtedness and other securities of the
Company. As of September 30, 1999 and December 31, 1998, no such notes were
issued or outstanding.
3. The Company's total comprehensive income for the quarters ended
September 30, 1999 and 1998 was $49.6 million and $.1 million, respectively.
Total comprehensive income for the first nine months of 1999 and 1998 was $144.1
million and $86.2 million, respectively. The Company's total comprehensive
income consists of net income, unrealized holding gains and losses on securities
and foreign currency translation adjustments.
4. The following table reflects the calculation of basic and diluted
earnings per share (dollars and shares outstanding in thousands, except per
share amounts).
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Quarters Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income per share-basic:
Net income (loss) $ 49,057 $ (115) $144,869 $ 85,711
Weighted average shares outstanding 75,588 80,498 77,835 80,721
Net income per share-basic $ 0.65 $ 0.00 $ 1.86 $ 1.06
======================================================================================================================
Net income per share-diluted:
Net income (loss) $ 49,057 $ (115) $144,869 $ 85,711
- ----------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 75,588 80,498 77,835 80,721
Dilutive impact of options 398 316 176
Shares contingently issuable 27 19 10
- ----------------------------------------------------------------------------------------------------------------------
Weighted average shares and potential
dilutive shares outstanding 76,013 80,498 78,170 80,907
- ----------------------------------------------------------------------------------------------------------------------
Net income per share-diluted $ 0.65 $ 0.00 $ 1.85 $ 1.06
======================================================================================================================
</TABLE>
5
<PAGE>
5. During 1997, a judgment was entered against Deluxe Electronic Payment
Systems, Inc. (DEPS) in the U.S. District Court for the Western District of
Pennsylvania. The case was brought against DEPS by Mellon Bank (Mellon) in
connection with a potential bid to provide electronic benefit transfer services
for the Southern Alliance of States. In September 1997, the Company recorded a
pretax charge of $40 million to reserve for this judgment and other related
costs. In the third quarter of 1998, Mellon's motion for prejudgment interest
was denied by the District Court and the Company reversed $4.2 million of the
$40 million liability. At December 31, 1998, the remaining liability of $34.4
million was classified as other accrued liabilities in the consolidated balance
sheet.
In January 1999, the Company's appeal of this judgment was denied by the Third
Circuit Court of Appeals and the Company paid $32.2 million to Mellon in
February 1999. The portion of the reserve remaining after the payment of this
judgement ($2.1 million) was reversed in the first quarter of 1999 and is
reflected in other income in the consolidated statement of income for the nine
months ended September 30, 1999. The Company's petition for a further review of
this judgment was denied by the United States Supreme Court in June 1999.
6. In February 1999, the Company acquired all of the outstanding shares of
eFunds Corporation of Tustin, California (eFunds Tustin) for $13 million. eFunds
provides electronic check conversion and electronic funds transfer solutions for
financial services companies and retailers. This acquisition was accounted for
under the purchase method of accounting. Accordingly, the consolidated financial
statements of the Company include the results of this business subsequent to its
acquisition date. This business is included in the Deluxe Payment Protection
Systems segment in footnote 12 below. The purchase price was allocated to the
assets acquired and liabilities assumed based on their fair values on the date
of purchase. The total cost in excess of net assets acquired of $15.7 million is
reflected as goodwill and is being amortized over 10 years. The effect of this
acquisition was not material to the operations or financial position of the
Company.
7. In April 1999, the Company acquired the remaining 50% ownership
interest in HCL-Deluxe, N.V., the joint venture which the Company entered into
with HCL Corporation of India in 1996, for $23.4 million. This company provides
information technology development and support services and business process
outsourcing services to financial services companies and to the Company's
businesses. This acquisition was accounted for under the purchase method of
accounting. Accordingly, the consolidated financial statements of the Company
include the results of this business subsequent to its acquisition date. This
business comprises the iDLX Technology Partners segment in footnote 12 below.
The purchase price was allocated to the assets acquired and liabilities assumed
based on their fair values on the date of purchase. The total cost in excess of
net assets acquired of $24.9 million is reflected as goodwill and is being
amortized over 15 years. The effect of this acquisition was not material to the
operations or financial position of the Company.
8. In September 1999, the Company entered into a $42.5 million
sale-leaseback transaction whereby the Company sold five existing facilities in
Shoreview, Minnesota and leased back three of these facilities for periods
ranging from five to 10 years. Of the related leases, two are being accounted
for as operating leases and one is a capital lease. An asset of $11.6 million
was recorded for the capital lease and is reflected as buildings and building
improvements in the September 30, 1999 consolidated balance sheet.
The minimum lease payments required under these three leases over the next five
years and thereafter are as follows (in thousands):
Year ending December 31:
1999 $ 949
2000 3,796
2001 3,796
2002 3,827
2003 3,921
2004 3,409
Thereafter 9,329
-------
Total minimum lease payments $29,027
-------
The result of this sale was a $17.1 million gain, of which $10.6 million was
deferred and is being amortized over the lease terms. $9.1 million of the
deferred gain is reflected as other long-term liabilities in the September 30,
1999 consolidated balance sheet. The Company provided short-term financing for
$32.5 million of the proceeds from
6
<PAGE>
this sale. This amount is reflected as prepaid expenses and other current assets
in the September 30, 1999 consolidated balance sheet and is reflected as loans
to others in the consolidated statement of cash flows for the nine months ended
September 30, 1999. This loan is due in April 2000.
9. The Company's consolidated balance sheets reflect restructuring
accruals of $25.3 million and $45.7 million as of September 30, 1999 and
December 31, 1998, respectively, for employee severance costs, and $3.4 million
and $6.8 million as of September 30, 1999 and December 31, 1998, respectively,
for estimated losses on asset dispositions.
During the third quarter of 1998, the Company recorded pretax restructuring
charges of $39.5 million. The restructuring charges included costs associated
with the Company's initiative to reduce its selling, general and administrative
expenses (SG&A), the outsourcing of production of the Deluxe Direct Response
segment's direct mail products, as well as the closing of four additional
financial institution check printing plants. The Company anticipated eliminating
800 SG&A positions within sales and marketing, finance and accounting, human
resources, and information services. Discontinuing production of direct mail
products was expected to result in the elimination of 60 positions. The four
financial institution check printing plant closures were expected to occur in
1999 and early 2000, affecting approximately 870 employees. The restructuring
charges consisted of employee severance costs of $31.2 million and $8.3 million
for expected losses on the disposition of assets. Expenses of $10.9 million were
included in cost of sales, $21.1 million in SG&A expense and $7.5 million in
other expense in the consolidated statements of income for the quarter and nine
months ended September 30, 1998.
During the second quarter of 1999, restructuring accruals of $4.2 million were
reversed. This amount related to the Company's initiatives to reduce its
selling, general and administrative expenses (SG&A) and to discontinue
production of direct mail products. The excess accrual amount occurred when the
Company determined that it was able to use in its ongoing operations a greater
portion of the assets used in the production of direct mail products than
originally anticipated, as well as changes in the SG&A reduction plans due to a
recently announced plan to reorganize the Company into four operating units. As
noted below, this reorganization plan could, however, lead to subsequent
restructuring charges in later periods. Additionally, the Company recorded a
restructuring accrual of $.8 million for employee severance and $.8 million for
estimated losses on asset dispositions related to the planned closing of one
collections office and planned employee reductions in another collections office
within the Deluxe Payment Protection Systems segment. This accrual reversal and
the new restructuring accrual are reflected as cost of sales of $.9 million, a
reduction of $1.2 million in SG&A, and other income of $2.3 million in the
consolidated income statement for the nine months ended September 30, 1999.
The status of the severance portion of the Company's restructuring accruals as
of September 30, 1999 is as follows (dollars in millions):
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Check Printing Plant SG&A Initiative & Collection Center
Closings Direct Mail Production Closing/Reduction Total
----------------------------------------------------------------------------------
No. of No. of No. of No. of
employees employees employees employees
affected Amount affected Amount affected Amount affected Amount
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Original accrual 4,970 $68.0 860 $21.2 70 $ 0.8 5,900 $90.0
Severance paid (3,400) (55.8) (280) (5.9) (70) (0.6) (3,750) (62.3)
Adjustments to
accrual (160) (2.4) (160) (2.4)
----------------------------------------------------------------------------------
Balance,
September 30, 1999 1,570 $12.2 420 $12.9 0 $ 0.2 1,990 $25.3
----------------------------------------------------------------------------------
</TABLE>
The majority of the remaining severance costs are expected to be paid in 1999
and 2000 with cash generated from the Company's operations. Severance payments
for a portion of the reserve for check printing plant closings are expected to
be delayed from the prior estimated 1999 closing dates to the last half of 2000
due to a planned slow-down in the roll-out of the
7
<PAGE>
Company's new order processing and customer service system. This slow-down is
due to the fact that financial institutions do not want to implement the system
in late 1999 or early 2000 due to the efforts they are expending on year 2000
issues. As a result, the last conversions are now currently scheduled for
October 2000.
The status of the estimated loss on asset dispositions portion of the Company's
restructuring accruals as of September 30, 1999 is as follows (dollars in
millions):
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Check Printing Plant SG&A Initiative & Collection Center
Closings Direct Mail Production Closing/Reductions Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Original accrual $15.0 $ 5.2 $ 0.8 $21.0
Losses realized (11.8) (3.4) (0.6) (15.8)
Adjustments to accrual (1.8) (1.8)
------------------------------------------------------------------------
Balance, September
30, 1999 $ 3.2 $ 0.0 $ 0.2 $ 3.4
------------------------------------------------------------------------
</TABLE>
The check printing plant closures are expected to be completed in October 2000.
The collection center closing and reductions were substantially completed in the
third quarter of 1999.
10. Asset impairment charges of $.4 million and $26.3 million were recorded
in the third quarters of 1999 and 1998, respectively, to write-down the carrying
value of long-lived assets of the Deluxe Government Services segment. Total
asset impairment charges of $.9 million have been recorded during the first nine
months of 1999 on the assets of this segment. The assets consist of
point-of-sale equipment, internal-use software and capitalized installation
costs utilized in the electronic benefits transfer (EBT) activities of this
segment. During the third quarter of 1998, management concluded that the
operating losses incurred by this business would continue. This is primarily due
to the fact that the variable costs associated with supporting benefit recipient
activity are higher than originally anticipated and actual transaction volumes
are below original expectations. In calculating the impairment charge, the
Company determined that the assets utilized by this business have no fair market
value. The point-of-sale equipment was purchased via capital leases. The lease
buy-out prices for this equipment plus the deinstallation costs exceed the
amount equipment resellers are willing to pay for the equipment. The utility of
the internal-use software is limited to its use in supporting the EBT business,
and the installation costs could not be resold. Thus, the long-lived assets of
this business were reduced to a carrying value of $0. These impairment charges
are reflected in cost of sales in the consolidated statements of income (loss)
for the quarters and nine months ended September 30, 1999 and 1998.
11. During the third quarter of 1998, the Company recorded a charge of
$14.7 million to reserve for expected future losses on existing long-term
contracts and relationships of the Deluxe Government Services segment. This
charge is reflected in cost of sales in the consolidated statements of income
(loss) for the quarter and nine months ended September 30, 1998. This segment
provides electronic benefits transfer services to state governments and online
medical eligibility verification services to the State of New York. Due to a
continuing strong economy, record low unemployment and welfare reform, the
actual transaction volumes and expected future revenues of this business are
well below original expectations. Additionally, actual and expected future
telecommunications, installation, help desk and other costs are significantly
higher than originally anticipated, resulting in expected future losses on the
existing electronic benefits transfer contracts and relationships of this
business. This charge was calculated in accordance with the Company's policy on
long-term service contracts as stated in the Company's 1998 10-K/A. During the
third quarter of 1999, $.3 million of contract losses were applied against the
reserve.
The Company has recently been notified that the prime contractor for a number of
states and state coalitions for which the Company provides switching services
does not intend to renew its switching agreement with the Company. The Company
is currently negotiating with the contractor regarding the timing and cost of
this transition and the subsequent conversion of the switching services to a
third party. The Company will adjust the charge described above when the results
of these negotiations are reasonably estimable, but it is possible that the loss
of this agreement and revenue stream will require the Company to record an
additional accrual.
8
<PAGE>
12. The Company has organized its business units into seven operating
segments based on the nature of the products and services offered by each:
Deluxe Paper Payment Systems; Deluxe Payment Protection Systems; Deluxe
Electronic Payment Systems; Deluxe Government Services; iDLX Technology
Partners; Deluxe Direct Response; and Deluxe Direct. Deluxe Paper Payment
Systems provides check printing services to financial services companies and
markets checks and business forms directly to households and small businesses.
Deluxe Payment Protection Systems provides payment protection, electronic check
conversion, collection and risk management services to financial institutions
and retailers. Deluxe Electronic Payment Systems provides electronic funds
transfer processing and software services to the financial and retail
industries. Deluxe Government Services provides electronic benefits transfer
services to state governments and online medical eligibility verification
services to the State of New York. iDLX Technology Partners provides information
technology development and support services and business process outsourcing
services to financial services companies and to the Company's businesses. Deluxe
Direct Response, which was sold in 1998, provided direct marketing, customer
database management, and related services to the financial industry and other
businesses. Deluxe Direct, which was sold in 1998, primarily sold greeting
cards, stationery, and specialty paper products through direct mail. Most
segments operate primarily in the United States. Deluxe Electronic Payment
Systems and iDLX Technology Partners also have international operations.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies as presented in the Company's notes
to the consolidated annual financial statements included in the 1998 10-K/A. In
evaluating segment performance, management focuses on income from operations.
This measurement excludes special charges (e.g., certain restructuring charges,
asset impairment charges, charges for legal proceedings, etc.), interest
expense, investment income, income tax expense and other non-operating items,
such as gains or losses from asset disposals. Corporate expenses are generally
allocated to the segments as a fixed percentage of segment revenues. This
allocation includes expenses for various support functions such as human
resources, information services and finance and includes depreciation and
amortization expense related to corporate assets. The corresponding corporate
asset balances are not allocated to the segments. Generally, intersegment sales
are based on current market pricing. Segment information for the quarters and
nine months ended September 30, 1999 and 1998 is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Deluxe Deluxe Deluxe
Paper Payment Electronic Deluxe iDLX Deluxe
QUARTER ENDED Payment Protection Payment Government Technology Direct Deluxe Total
SEPTEMBER 30, 1999 Systems Systems Systems Services Partners Response Direct Segments
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales from $ 311,519 $ 54,851 $ 34,486 $ 13,167 $ 3,091 $ 417,114
external customers
Intersegment sales 163 371 2,852 3,386
Operating income
(loss) 76,069 (1,860) 2,752 1,303 (3,064) 75,200
Segment assets 399,121 133,055 138,658 16,997 34,360 722,191
Depreciation and
Amortization
expense 10,926 1,674 3,296 617 16,513
Capital purchases 11,300 5,999 2,591 228 1,255 21,373
- -----------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Deluxe Deluxe Deluxe
Paper Payment Electronic Deluxe iDLX Deluxe
QUARTER ENDED Payment Protection Payment Government Technology Direct Deluxe Total
SEPTEMBER 30, 1998 Systems Systems Systems Services Partners Response Direct Segments
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales from $ 316,200 $ 54,463 $ 32,366 $ 10,952 $ 12,121 $ 43,668 $469,770
external customers
Intersegment sales 391 523 119 1,033
Operating income
(loss) excluding
special charges 75,632 7,500 1,113 (2,506) (3,177) (1,524) 77,038
Special charges 11,099 623 1,381 41,180 2,513 56,796
Operating income
(loss) including
special charges 64,533 6,877 (268) (43,686) (5,690) (1,524) 20,242
Segment assets 407,810 104,992 119,467 21,140 39,172 114,734 807,315
Depreciation and
amortization
expense 9,425 2,696 3,259 1,624 17,004
Capital purchases 15,259 2,655 3,860 50 139 540 22,503
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Deluxe Deluxe Deluxe
Paper Payment Electronic Deluxe iDLX Deluxe
NINE MONTHS ENDED Payment Protection Payment Government Technology Direct Deluxe Total
SEPTEMBER 30, 1999 Systems Systems Systems Services Partners Response Direct Segments
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales from $ 927,403 $ 173,768 $ 97,105 $ 36,360 $ 4,397 $1,239,033
external customers
Intersegment sales 446 602 3,804 4,852
Operating income 228,274 6,558 5,636 1,560 (4,058) 237,970
(loss)
Segment assets 399,121 133,055 138,658 16,997 34,360 722,191
Depreciation and
amortization
expense 30,306 6,876 10,321 814 48,317
Capital purchases 36,244 13,408 9,557 417 1,608 61,234
- -----------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Deluxe Deluxe Deluxe
Paper Payment Electronic Deluxe iDLX Deluxe
NINE MONTHS ENDED Payment Protection Payment Government Technology Direct Deluxe Total
SEPTEMBER 30, 1998 Systems Systems Systems Services Partners Response Direct Segments
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales from $ 959,256 $161,451 $ 95,127 $ 30,939 $ 35,008 $151,750 $1,433,531
external customers
Intersegment sales 1,996 1,121 1,050 614 4,781
Operating income
(loss) excluding
special charges 231,957 23,110 (1,463) (7,430) (15,353) (5,672) 225,149
Special charges 11,099 623 1,381 41,180 2,513 56,796
Operating income (loss)
including special charges 220,858 22,487 (2,844) (48,610) (17,866) (5,672) 168,353
Segment assets 407,810 104,992 119,467 21,140 39,172 114,734 807,315
Depreciation and
amortization
expense 27,591 6,996 9,795 4,225 2,213 50,820
Capital purchases 37,335 9,361 11,284 299 829 1,130 60,238
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Segment information reconciles to consolidated amounts as follows (dollars in
thousands):
<TABLE>
<CAPTION>
QUARTERS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
- --------------------------------------------------------------------------------------------------------
OPERATING INCOME 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total segment operating income including special
charges $ 75,200 $ 20,242 $ 237,970 $ 168,353
Elimination of intersegment profits 40 (84)
Unallocated corporate expenses (1,835) (20,598) (9,446) (29,042)
- --------------------------------------------------------------------------------------------------------
Total consolidated operating income (loss)
including special charges $ 73,365 $ (316) $ 228,524 $ 139,227
- --------------------------------------------------------------------------------------------------------
</TABLE>
1999 unallocated corporate expenses consist of charges for certain corporate
liabilities which are not allocated to the segments. 1998 unallocated corporate
expenses consist primarily of corporate special charges.
SEPTEMBER 30,
- --------------------------------------------------------
TOTAL ASSETS 1999 1998
- --------------------------------------------------------
Total segment assets $ 722,191 $ 807,315
Unallocated corporate assets 287,722 310,977
- --------------------------------------------------------
Total consolidated assets $1,009,913 $1,118,292
- --------------------------------------------------------
Unallocated corporate assets consist primarily of cash, investments, and fixed
assets and intangibles utilized by the corporate support functions.
11
<PAGE>
<TABLE>
<CAPTION>
QUARTERS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
- ----------------------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION EXPENSE 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total segment depreciation and amortization $16,513 $17,004 $48,317 $50,820
expense
Depreciation and amortization of unallocated
corporate assets 4,675 5,004 13,494 10,828
- ----------------------------------------------------------------------------------------------------
Total consolidated depreciation and
amortization expense $21,188 $22,008 $61,811 $61,648
- ----------------------------------------------------------------------------------------------------
</TABLE>
QUARTERS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
- --------------------------------------------------------------------------------
CAPITAL PURCHASES 1999 1998 1999 1998
- --------------------------------------------------------------------------------
Total segment capital purchases $21,373 $22,503 $61,234 $60,238
Corporate capital purchases 5,757 5,876 17,488 28,258
- --------------------------------------------------------------------------------
Total consolidated capital purchases $27,130 $28,379 $78,722 $88,496
- --------------------------------------------------------------------------------
1999 corporate capital purchases consist primarily of a new human resources
information system and various other information system enhancements. 1998
corporate capital purchases consist primarily of SAP financial software
implementation and various other information system enhancements.
Revenues are attributed to geographic areas based on the location of the assets
producing the revenues. The Company's operations by geographic area are as
follows (in thousands):
<TABLE>
<CAPTION>
NET SALES FROM EXTERNAL CUSTOMERS LONG-LIVED ASSETS
QUARTERS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
- ---------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
United SUnited States $ 411,997 $ 463,724 $1,223,630 $1,412,096 $ 310,790 $ 391,863
Foreign countries 5,117 6,046 15,403 21,435 5,595 3,823
- ---------------------------------------------------------------------------------------------------------
Total consolidated $ 417,114 $ 469,770 $1,239,033 $1,433,531 $ 316,385 $ 395,686
- ---------------------------------------------------------------------------------------------------------
</TABLE>
13. In April 1999, the Company announced that it will be selling National
Revenue Corporation, its collections business which is included in the Deluxe
Payment Protection Systems segment. This business contributed net sales of $28.2
million and $30.6 million for the quarters ended September 30, 1999 and 1998,
respectively, and net sales of $94.5 million and $91.3 million for the nine
months ended September 30, 1999 and 1998, respectively. The sale is currently
expected to be completed in 1999 or early 2000.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Company Profile
The Company has organized its business units into seven operating segments based
on the nature of the products and services offered by each: Deluxe Paper Payment
Systems; Deluxe Payment Protection Systems; Deluxe Electronic Payment Systems;
Deluxe Government Services; iDLX Technology Partners; Deluxe Direct Response;
and Deluxe Direct. Deluxe Paper Payment Systems provides check printing services
to financial services companies and markets checks and business forms directly
to households and small businesses. Deluxe Payment Protection Systems provides
payment protection, collection, electronic check conversion and risk management
services to financial institutions and retailers. Deluxe Electronic Payment
Systems provides electronic funds transfer processing and software services to
the financial and retail industries. Deluxe Government Services provides
electronic benefits transfer services to state governments and online medical
eligibility verification services to the State of
12
<PAGE>
New York. iDLX Technology Partners provides information technology development
and support services and business process outsourcing services to financial
services companies and to the Company's businesses. Deluxe Direct Response,
which was sold in 1998, provided direct marketing, customer database management,
and related services to the financial industry and other businesses. Deluxe
Direct, which was sold in 1998, primarily sold greeting cards, stationery, and
specialty paper products through direct mail. Most segments operate primarily in
the United States. Deluxe Electronic Payment Systems and iDLX Technology
Partners also have international operations.
Results of Operations - Quarter and Nine Months Ended September 30, 1999
Compared to the Quarter and Nine Months Ended September 30, 1998
NET SALES - Net sales were $417.1 million for the third quarter of 1999, down
11.2% from the third quarter of 1998 when sales were $469.8 million. Net sales
were $1,239.0 million for the first nine months of 1999, down 13.6% from the
first nine months of 1998 when sales were $1,433.5 million. These decreases are
primarily due to discontinuing production of direct mail products and the sale
of the remaining businesses in the Deluxe Direct Response and Deluxe Direct
segments in 1998. These segments contributed net sales of $55.8 million and
$186.8 million in the third quarter and first nine months of 1998, respectively.
Deluxe Paper Payment Systems net sales decreased 1.5% to $311.5 million in the
third quarter of 1999, as compared to $316.2 million in the third quarter of
1998. Sales for this segment decreased 3.5% to $927.4 million in the first nine
months of 1999, as compared to $961.3 million in the first nine months of 1998.
These decreases were primarily due to lower volume in the financial institution
check printing business due to lost customers. The loss of business was due to
competitive pricing requirements that fell below the Company's revenue and
profitability per unit targets. This volume decrease was partially offset by
increased volume for both the direct check printing business and the business
forms business and increased revenue per unit for all businesses. Deluxe
Electronic Payment Systems net sales increased 6.0% to $34.9 million in the
third quarter of 1999, as compared to $32.9 million in the third quarter of
1998. Nine month sales for this segment increased 1.6% in 1999 to $97.7 million
from $96.2 million during the same period last year. Increased volume in
processing related revenues was partially offset by decreased software sales due
to customer reluctance to make significant software changes prior to the turn of
the century. Third quarter net sales for Deluxe Payment Protection Systems were
flat compared to the third quarter of 1998 ($55.0 million in 1999 versus $54.9
million in 1998). Increased volume and revenue per inquiry for the Company's
authorization businesses was offset by decreased volume for the Company's
collections business. Nine month sales for this segment increased 7.2% from
$162.6 million in 1998 to $174.2 million in 1999. This increase was due to
increased volume, higher revenue per inquiry and price increases within the
authorization businesses, as well as increased volume within the collections
business. Net sales for the Deluxe Government Services segment increased 20.2%,
or $2.2 million, to $13.2 million in the third quarter of 1999 and increased
17.5%, or $5.4 million, to $36.4 million in the first nine months of 1999. These
increases were due to the roll out of additional states during the latter half
of 1998 and the first nine months of 1999, increased transaction volume, and
price increases on contract extensions and rebids. iDLX Technology Partners net
sales to external customers of $3.1 million and $4.4 million in the third
quarter and first nine months of 1999, respectively, represents an increase over
1998, as this segment was acquired in the second quarter of 1999.
GROSS MARGIN - Gross margin for the Company was 56.2% in the third quarter of
1999 compared to 44.8% in the third quarter of 1998. Gross margin for the
Company was 56.3% for the first nine months of 1999 compared to 51.0% for the
first nine months of 1998. 1998 cost of sales for the third quarter and first
nine months includes restructuring charges of $10.9 million relating to
discontinuing production of direct mail products and the planned closure of four
additional financial institution check printing plants. Additionally, a charge
of $41.0 million was recorded for asset impairments and accrued
contract/relationship losses relating to the Deluxe Government Services segment.
With these charges excluded, the Company's gross margin was 55.8% and 54.6% for
the third quarter and first nine months of 1998, respectively. The improvement
from 1998 is partially due to discontinuing production of direct mail products
and the sale of the remaining businesses within the Deluxe Direct Response and
Deluxe Direct segments, which contributed gross margins of 27.5% and 51.4%,
respectively, during the first nine months of 1998. Deluxe Paper Payment Systems
gross margin increased to 64.4% in the third quarter of 1999 from 64.0% in the
third quarter of 1998, and increased to 64.0% for the first nine months of 1999
from 62.1% for the first nine months of 1998. These increases were due to cost
reductions realized from financial institution check printing plant closings,
process improvements within all businesses, and the loss of lower margin
customers within the financial institution check printing business. Gross margin
for Deluxe Government Services increased to 20.2% in the third quarter of 1999
from a negative 6.7% in the third quarter of 1998 and increased to 14.5% in the
first nine months of 1999 from a negative 7.4% in the first nine months of 1998.
These increases are due to the application of loss contract accounting, for
which a reserve was recorded in the third quarter of 1998 (see Note 11 to the
Notes to Consolidated Financial
13
<PAGE>
Statements), as well as to lower depreciation and amortization expense due to
the asset impairment charges recorded in the third quarter of 1998 (see Note 10
to the Notes to Consolidated Financial Statements). Gross margin for Deluxe
Electronic Payment Systems increased to 33.1% in the third quarter of 1999 from
30.5% in the third quarter of 1998, and increased to 29.6% for the first nine
months of 1999 from 27.9% for the first nine months of 1998, due primarily to
the increased sales volume. Deluxe Payment Protection Systems gross margin
decreased to 36.9% in the third quarter of 1999 from 42.9% in the third quarter
of 1998, and decreased to 40.0% for the first nine months of 1999 from 45.6% for
the first nine months of 1998. These decreases were primarily due to the product
mix within the collections business. iDLX Technology Partners, which was
acquired in the second quarter of 1999, contributed gross margins of 24.3% and
22.8% in the third quarter and first nine months of 1999, respectively.
SELLING, GENERAL AND ADMINSTRATIVE EXPENSE (SG&A) - SG&A decreased $49.9
million, or 23.6%, from the third quarter of 1998 and $123.3 million, or 20.8%,
from the first nine months of 1998. 1998 SG&A includes restructuring charges
relating to the Company's initiative to reduce its SG&A expenses and the planned
closing of four additional financial institution check printing plants. With
these charges excluded, SG&A decreased $27.8 million, or 14.7%, from the third
quarter of 1998 and $101.3 million, or 17.8%, from the first nine months of
1998. The decrease is primarily due to discontinuing production of direct mail
products and the sale of the remaining businesses within the Deluxe Direct
Response and Deluxe Direct segments in 1998. These businesses had $32.1 million
and $110.8 million of SG&A in the third quarter and the first nine months of
1998, respectively. Deluxe Paper Payment Systems SG&A decreased 1.7% from the
third quarter of 1998 and was flat versus the first nine months of 1998. This
reflects a decrease within the financial institution check printing business
resulting from consolidation efforts and reductions in the number of employees.
This decrease is offset by increased marketing expenses for the direct mail
check business due to an increased emphasis on new customer acquisition. Deluxe
Electronic Payment Systems' SG&A decreased 2.2% from the third quarter of 1998
and 16.0% from the first nine months of 1998 due primarily to initiatives
designed to lower SG&A, as well as reductions in Corporate support SG&A
expenses, which results in lower expenses allocated to the segments. SG&A for
Deluxe Government Services decreased 23.7% from the third quarter of 1998 and
27.8% from the first nine months of 1998 due to the fact that Corporate support
expenses were not allocated to this segment in 1999. SG&A for Deluxe Payment
Protection Systems increased 38.4% from the third quarter of 1998 and 23.8% from
the first nine months of 1998 due primarily to costs incurred in conjunction
with the Company's development of its Debit Bureau(SM)capabilities.
OTHER INCOME - Other income increased $1.0 million from the third quarter of
1998 due primarily to restructuring charges recorded in 1998 relating to
discontinuing production of direct mail products and the planned closing of four
additional financial institution check printing plants. These charges were
partially offset by the reversal of a portion of the reserve for 1997 legal
proceedings (see note 5 to the Notes to Consolidated Financial Statements) and a
gain on the sale of the Company's card services business. Other income decreased
$2.4 million from the first nine months of 1998 due primarily to losses on the
disposition of assets in 1999.
INCOME TAX EXPENSE - The Company's effective tax rate decreased to 38.0% for the
first nine months of 1999 from 41.5% for the comparable period in 1998 due
primarily to decreased state tax expense as a result of various tax reduction
initiatives undertaken by the Company.
NET INCOME (LOSS) - Net income for the third quarter of 1999 increased to $49.1
million, compared to a net loss of $.1 million for the third quarter of 1998.
Net income for the first nine months of 1999 increased to $144.9 million,
compared to net income of $85.7 million for the first nine months of 1998. The
increase is due to the restructuring charges, asset impairment charges and
accrued losses on long-term service contracts and relationships which were
recorded in 1998 and which are discussed above and in the Notes to Consolidated
Financial Statements. Excluding these charges and their related tax impacts,
1999 net income increased $2.6 million, or 5.6%, from the third quarter of 1998,
and increased $12.6 million, or 9.5%, from the first nine months of 1998. The
increase is due to the improvement in the Company's operating margin from 14.9%
in the first nine months of 1998 to 18.4% in the first nine months of 1999. This
improvement results from the better performance from ongoing operations which is
more specifically discussed above, as well as from the sale of the businesses
within the Deluxe Direct Response and Deluxe Direct segments in 1998.
14
<PAGE>
Financial Condition - Liquidity
Cash provided by operations was $158.9 million for the first nine months of
1999, compared with $178.1 million for the first nine months of 1998. The
decrease is due to a payment of $32.2 million in February 1999 for a judgement
against one of the Company's subsidiaries (see Note 5 to Notes to Consolidated
Financial Statements). This decrease was partially offset by decreased accounts
receivable due to decreased sales and an increase in Automated Clearing House
(ACH) processing of cash receipts within the Deluxe Paper Payment Systems
segment. Cash from operations represents the Company's primary source of working
capital for financing capital expenditures and paying cash dividends.
The Company's working capital on September 30, 1999 was $42.9 million compared
to $181.3 million on December 31, 1998. The Company's current ratio on September
30, 1999 was 1.1 to 1, compared to 1.4 to 1 on December 31, 1998. The decrease
is due primarily to the use of cash during the first nine months of 1999 to
repurchase stock of the Company and to complete two acquisitions (see Notes 6
and 7 to Notes to Consolidated Financial Statements).
Financial Condition - Capital Resources
Purchases of capital assets totaled $78.7 million for the first nine months of
1999 compared to $88.5 million during the comparable period one year ago. As of
September 30, 1999, the Company had uncommitted bank lines of credit of $115
million available at variable interest rates. The average amount drawn on these
lines during the first nine months of 1999 was $1.5 million at a weighted
average interest rate of 5.12%. As of September 30, 1999, there were no amounts
outstanding under these lines of credit. No amounts were drawn on these lines
during 1998 and there was no outstanding balance at December 31, 1998. The
Company also had committed lines of credit of $650 million available for
borrowing and as support for commercial paper. As of September 30, 1999 and
December 31, 1998, the Company had no commercial paper outstanding and no
indebtedness outstanding under its committed lines of credit. Additionally, the
Company had a shelf registration in place to issue up to $300 million in
medium-term notes. Such notes could be used for general corporate purposes,
including working capital, capital expenditures, possible acquisitions and
repayment or repurchase of outstanding indebtedness and other securities of the
Company. As of September 30, 1999 and December 31, 1998, no such notes were
issued or outstanding.
Year 2000 Readiness Disclosure
GENERAL APPROACH AND STATE OF READINESS - In 1996, the Company initiated a
program to prepare its computer systems, applications and embedded chip
equipment for the year 2000 and to evaluate the readiness of its third-party
suppliers and customers for the millennium date change. The year 2000 issue
affects the Company and most of the other companies and governmental agencies in
the world. Historically, certain computer programs were written using two digits
rather than four to define the applicable year. As a result, some programs may
recognize a date which uses the two digits "00" as 1900 rather than the year
2000, which among other things may cause them to generate erroneous data, lose
data elements and possibly fail.
The Company is using a multiphase approach in conducting its year 2000
remediation efforts. These phases are: assessment; analysis and formulation of
remediation strategy; solution implementation; testing; and certification using
internally developed criteria. The Company has divided its internal readiness
review between "mission critical" systems and equipment and its other assets.
The project is organized around nine types of computerized assets: internally
developed applications; product-to-market software and systems; third-party
purchased software; data centers; networks; environmental systems; purchased
hardware (including embedded chip and desktop equipment); third-party
assessment; and external interfaces. During 1997, the Company assessed and
prioritized all affected areas, defined appropriate resolution strategies and
began execution of those strategies. The compliance strategies include
renovation, replacement and retirement of systems and equipment.
As of September 30, 1999, overall project remediation was 100% complete for the
Company's domestic operations, including mission critical areas and all areas
regulated by the Federal Financial Institution Examination Council (FFIEC). The
international operations of iDLX are completing their remediation efforts and
should be certified as year 2000 compliant in November. Also during 1999, the
project focus shifted toward ongoing post-certification review and contingency
plan completion. As of September 30, 1999, contingency plan development across
all computerized asset categories and Deluxe
15
<PAGE>
business units was approximately 90% complete. In June 1999, contingency
planning was 100% complete for all areas within the Company regulated by the
FFIEC.
As part of its year 2000 review, the Company also assessed the readiness of the
embedded chip equipment in its domestic facilities. This assessment included all
plant manufacturing equipment, HVAC systems, building security systems, personal
computers and other office equipment such as printers, faxes and copy machines.
The most frequent method of achieving compliance in this area is replacing
non-compliant systems and equipment. This effort was completed in June 1999.
Another area of focus for the Company is the year 2000 readiness of its
significant suppliers and customers, both from the standpoint of technology and
product and service provision. These external organizations were contacted and
they have provided responses to year 2000 assessment requests. Site visits were
made and action plans were developed as appropriate, based on the importance of
the organizations to the Company's ability to provide products and services.
This category was completed in March 1999 and will be monitored going forward
until the year 2000.
COSTS - The Company expects to incur project expenses of approximately $28.4
million over the life of its year 2000 project, consisting of both internal
staff costs and external consulting expenses, with $24.5 million having been
incurred through September 30, 1999. Funds for the initiative are provided from
a separate budget of $28.4 million for the remediation of all affected systems.
The Company's SAP software implementation costs and other capital expenditures
associated with replacing or improving affected systems are not included in
these cost estimates. The Company has not deferred any material information
technology project as a result of this initiative.
RISK AND CONTINGENCY - Because of the nature of the Company's business, the year
2000 issue would, if unaddressed, pose a material business risk for the Company.
Business operations may be at risk, as would customer information interfaces and
the provision of products and services. The risk is increased by the potential
for the Company to fall out of compliance with policies set by the FFIEC, the
National Credit Union Agency and other federal and regional regulatory bodies.
The Company believes that with the completed modifications to existing systems
and the replacement or retirement of other systems, the year 2000 compliance
issue has been resolved in a timely manner and will not pose significant
operational problems for the Company. In addition to the modifications,
replacements and retirements, the Company has developed risk mitigation
processes and is creating contingency plans in an effort to limit the inherent
risk of the year 2000 issue. Manual fall-back processes and procedures are being
identified and put in place, particularly in cases where vendor equipment or
services begin to demonstrate the potential to be unavailable. The Company is
also preparing plans to deploy internal teams to repair problems as they arise
when the next century begins. Ongoing audit reviews are currently in progress
and are scheduled to continue into 2000 to ensure that compliance control
processes continue to be used. In addition, the Company is enhancing its
existing business resumption plans.
Outlook
In 1999, the Company will continue its efforts to reduce costs and improve
profitability by continuing with its plans to close financial institution check
printing plants and complete the implementation of a new order processing and
customer service system and post-press production process improvements.
Additionally, the Company will continue with it plans to reduce SG&A expenses.
At the same time, the Company will continue with major infrastructure
improvements and expects to complete its year 2000 readiness project in a timely
manner.
In April 1999, the Company announced the creation of a new business unit,
eFunds. This business unit will be comprised of eFunds Corporation (f/k/a Deluxe
Electronic Payment Systems, Inc.), Debit Bureau (SM), Chex Systems, Inc., Deluxe
Payment Protection Systems, Inc. and eFunds Tustin, which was acquired in
February 1999, under a single management group. The Company believes that
combining these businesses into a single integrated unit will provide
opportunities for revenue and profit growth in excess of what would have been
generated had they continued to operate independently. The Company also
announced that it plans to reduce its Corporate support group and will be moving
some Corporate resources into the Company's operating units in order to enable
them to operate more independently. The implementation of this initiative could
lead to a restructuring charge in future periods. The transition to this new
business model is expected to be completed by January 1, 2000. In addition, the
Company has stated that it will be selling National Revenue Corporation, the
Company's collection business, as it does not fit into the Company's new
business model.
16
<PAGE>
In April 1999, the Company's Board of Directors authorized the repurchase of up
to 10 million shares of the Company's Common Stock. Through September 30, 1999,
the Company purchased 4.7 million of the 10 million shares. Market conditions
permitting and depending on the amount of cash available to the Company for this
purpose and its other investment opportunities, additional share repurchases
could occur in the fourth quarter of 1999.
The Company has recently been notified that the prime contractor for a number of
states and state coalitions for which the Company's Deluxe Government Services
business provides switching services does not intend to renew its switching
agreement with the Company. The Company is currently negotiating with the
contractor regarding the timing and cost of this transition and the subsequent
conversion of the switching services to a third party. The Company will adjust
the charge described in Note 11 to the Notes to Consolidated Financial
Statements when the results of these negotiations are reasonably estimable, but
it is possible that the loss of this agreement and revenue stream will require
the Company to record an additional accrual.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
As of September 30, 1999, the Company had an investment portfolio of fixed
income securities, excluding those classified as cash and cash equivalents, of
$38.9 million. These securities, like all fixed income instruments, are subject
to interest rate risk and will decline in value if market interest rates
increase. However, the Company has the ability to hold its fixed income
investments until maturity and therefore would not expect to recognize an
adverse impact on net income or cash flows in such an event.
The Company operates internationally, and so it is subject to potentially
adverse movements in foreign currency rate changes. The Company does not enter
into foreign exchange forward contracts to reduce its exposure to foreign
currency rate changes on intercompany foreign currency denominated balance sheet
positions. Historically, the effect of movements in the exchange rates have not
been material to the consolidated operating results of the Company.
PART II - OTHER INFORMATION
Item 5. Other Information
RISK FACTORS AND CAUTIONARY STATEMENTS.
When used in this Quarterly Report on Form 10-Q and in future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases and in oral statements made by the Company's representatives, the words
or phrases "should result," "are expected to," "targeted," "will continue,"
"will approximate," "is anticipated," "estimate," "project" or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are necessarily subject to certain risks and uncertainties, including
those discussed below, that could cause actual results to differ materially from
the Company's historical experience and its present expectations or projections.
Caution should be taken not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. The factors listed below could
affect the Company's financial performance and could cause the Company's actual
results for future periods to differ from any opinions or statements expressed
with respect thereto. Such differences could be material and adverse.
The Company will not undertake and specifically declines any obligation to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances occurring after
the date of such statements or to reflect the occurrence of anticipated or
unanticipated events. This discussion supersedes the discussion in Item 5 of the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.
Earnings Estimates; Cost Reductions. From time to time, representatives of the
Company may make predictions or forecasts regarding the Company's future
results, including estimated earnings or earnings from operations. Any forecast,
including the Company's current statements that it expects to achieve a minimum
of 11 percent annual growth in earnings in 1999 and 2000, report record
operating earnings in 1999 and that it has a target of generating cumulative
EBITDA (earnings before interest, income taxes, depreciation and amortization)
in excess of $2.3 billion over the next five years, regarding the Company's
future performance reflects various assumptions. These assumptions are subject
to significant uncertainties, and,
17
<PAGE>
as a matter of course, many of them will prove to be incorrect. Further, the
achievement of any forecast depends on numerous factors (including those
described in this discussion), many of which are beyond the Company's control.
In addition, it is not expected that the earnings growth projected for 1999 and
2000 will be representative of results that may be achieved in subsequent years.
As a result, there can be no assurance that the Company's performance will be
consistent with any management forecasts or that the variation from such
forecasts will not be material and adverse. Investors are cautioned not to base
their entire analysis of the Company's business and prospects upon isolated
predictions, but instead are encouraged to utilize the entire available mix of
historical and forward-looking information made available by the Company, and
other information affecting the Company and its products, when evaluating the
Company's prospective results of operations.
In addition, representatives of the Company may occasionally comment on the
perceived reasonableness of published reports by independent analysts regarding
the Company's projected future performance. Such comments should not be
interpreted as an endorsement or adoption of any given estimate or range of
estimates or the assumptions and methodologies upon which such estimates are
based. Generally speaking the Company does not make public its own internal
projections, budgets or estimates. Undue reliance should not be placed on any
comments regarding the conformity, or lack thereof, of any independent estimates
with the Company's own present expectations regarding its future results of
operations. The methodologies employed by the Company in arriving at its own
internal projections and the approaches taken by independent analysts in making
their estimates are likely different in many significant respects. Although the
Company may presently perceive a given estimate to be reasonable, changes in the
Company's business, market conditions or the general economic climate may have
varying effects on the results obtained through the use of differing analyses
and assumptions. The Company expressly disclaims any continuing responsibility
to advise analysts or the public markets of its view regarding the current
accuracy of the published estimates of outside analysts. Persons relying on such
estimates should pursue their own independent investigation and analysis of
their accuracy and the reasonableness of the assumptions on which they are
based.
Recent Strategic Initiatives. The Company has recently announced the creation of
eFunds, a new business unit comprised of eFunds Corporation (f/k/a Deluxe
Electronic Payment Systems, Inc.), Debit Bureau(SM), Chex Systems, Inc., Deluxe
Payment Protection Systems, Inc. and eFunds Tustin. It is hoped that combining
these businesses into a single business unit will increase their opportunities
for revenue and profit growth. The Company has also announced an intention to
transfer certain resources and responsibilities from its corporate group to its
operating units in an effort to enable them to more efficiently respond to
market opportunities and conditions. The precise benefits, if any, that may
result from these initiatives cannot presently be quantified. Further,
accomplishing the goals of the reorganization is dependent upon identifying and
developing new products and services, some or all of which may be directed at
markets not now served by the Company. The successful execution of this strategy
is also dependant upon identifying and retaining personnel and third parties
with the expertise needed to develop and implement the Company's strategic
initiatives. Portions of the initiative may also involve identifying and
reaching agreements with strategic alliance partners and acquisition targets.
Unexpected delays are common in endeavors of this type and can arise from a
variety of sources, many of which will likely have been unanticipated. The
likelihood that the reorganization will achieve its goal of incrementally
increasing the revenues and profits of the businesses included in the eFunds
business unit must be considered in light of the problems, expenses,
complications and delays frequently encountered in connection with the
development and execution of new business initiatives and the competitive,
rapidly changing environment in which eFunds will operate. As a result, although
the Company has set annual revenue growth targets for its eFunds business unit
at 20 percent for the years 2000 and 2001, and hopes to achieve higher levels of
growth in subsequent years, there can be no assurance that these targets will in
fact be achieved. In addition, the implementation of these initiatives could
lead to a restructuring charge in an amount that, although not yet quantified,
may be material.
iDLX Technology Partners. There can be no assurance that the services proposed
to be offered by the Company's iDLX Technology Partners (iDLX) business unit
will achieve market acceptance in either the United States or India. To date,
the operations of iDLX have not been profitable. In addition, the Company has
only limited operational experience in India. The successful development of iDLX
is subject to all of the risks inherent in the establishment of a new business
enterprise, including the absence of an extended operating history, reliance on
key personnel, a need to attract and retain qualified employees in a highly
competitive labor market, a competitive environment characterized by numerous
well-established and well-capitalized competitors and the risk that the
reputation of the business could be more adversely affected by any
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customer service issues or problems than would be the case with a more
established firm. Further, in developing iDLX, the Company faces additional
complexities arising from the maintenance of certain of its functions in India.
In addition to the normal complications that arise in connection with the
management of remote locations, operations in foreign countries are subject to
numerous potential obstacles including, among other things, cultural
differences, political unrest, export controls, governmental interference or
regulation (both domestic and foreign), currency fluctuations, personnel issues
and varying competitive conditions. There can be no assurance that one or more
of these factors, or additional causes or influences, many of which are likely
to have been unanticipated and beyond the ability of the Company to control,
will not operate to inhibit the success of iDLX. As a result, there can be no
assurance that this business unit will achieve its announced 1999 and 2000
revenue targets of $25 million and $50 million, respectively (excluding
intercompany sales), or that this unit will ever generate significant revenues
or profits or provide an adequate return on the Company's investment.
Debit Bureau(SM). The Company has announced its intention to offer decision
support tools and information to retailers and financial institutions that offer
or accept direct debit-based products, such as checking accounts, ATM cards,
debit cards and Internet payments. To date, this effort has primarily been
directed towards the creation of the supporting data warehouse and research
regarding the utility and value of the data available to the Company for use in
this area. There can be no assurance that the Company's Debit Bureau(SM)
initiative will result in the introduction of a significant number of new
products or services or that any new products or services introduced by the
Company will generate revenues in material amounts. In any event, the continued
development of Debit Bureau(SM) is expected to require a significant level of
investment by the Company.
IDDA Initiative. The Company has recently announced a initiative to develop an
Internet demand deposit account opening product. This product is not yet fully
operational. Unanticipated delays and expenses are common in these types of
product development efforts and there can be no assurance that the Company's
planned development schedule will be achieved. Further, even if the product is
successfully developed, there can be no assurance that the system will achieve
widespread market acceptance or generate incremental revenues in material
accounts. In addition, even if the product is successfully completed,
technological change occurs at a rapid pace in the Internet applications area,
and there can be no assurance that competing products or systems will not be
introduced that will narrow or limit the market for the Company's system or
render it obsolete.
Share Repurchase Program. In April 1999, the Board of Directors of the Company
authorized the repurchase of up to 10,000,000 shares of the Company's Common
Stock. Through September 30, 1999, the Company has purchased 4.7 million of the
shares included in this authorization. The completion of this program is,
however, dependant upon market conditions, including the availability of a
sufficient number of shares at prices determined by management of the Company to
be reasonable, the amount of cash available to the Company for this purpose and
the Company's other investment opportunities. Accordingly, if appropriate
conditions or circumstances do not prevail during the planned repurchase period,
the Company will not purchase the entire allotment of shares authorized by the
Board.
Timing and Amount of Anticipated Cost Reductions. With regard to the results of
the Company's ongoing cost reduction efforts (including the Company's current
review of its SG&A expense levels), there can be no assurance that the projected
annual cost savings will be fully realized or will be achieved within the time
periods expected. The implementation of the printing plant closures upon which
some of the anticipated savings depend is, in large part, dependent upon the
successful development of the software needed to streamline the check ordering
process and redistribute the resultant order flow among the Company's remaining
printing plants and the implementation schedules of the Company's customers. The
Company has previously experienced unanticipated delays in the planned roll-out
of its on-line ordering system and Year 2000 moratoriums by the Company's
customers have delayed the Company's original plant closing schedule. There can
be no assurances that additional sources of delays will not be encountered. Any
such event could adversely affect the planned consolidation of the Company's
printing facilities and the achievement of the expected productivity
improvements and delay the realization or reduce the amount of the anticipated
expense reductions.
In addition, the achievement of the targeted level of cost savings is dependent
upon the successful execution of a variety of other cost reduction strategies
throughout the Company's operations. These additional efforts include the
consolidation of the Company's purchasing process and certain administrative and
sales support organizations, headcount reductions and other efforts. The optimum
means of realizing many of these strategies is being evaluated by the Company in
view of the Company's recent efforts to transfer certain resources and
responsibilities from its corporate group to its operating units. The
19
<PAGE>
goodwill amortization associated with the Company's recent acquisitions of
eFunds Tustin and the remaining 50 percent ownership interest in its joint
venture with HCL Corporation of India, as well as any future acquisitions, may
also act to offset some of the benefits sought to be achieved through this
program. Unexpected delays, complicating factors and other hindrances are common
in the implementation of these types of endeavors and can arise from a variety
of sources, some of which are likely to have been unanticipated. The Company may
also incur additional charges against its earnings in connection with future
programs. A failure to timely achieve one or more of the Company's primary cost
reduction objectives could materially reduce the benefit to the Company of its
cost savings programs and strategies or substantially delay the full realization
of their expected benefits.
Further, there can be no assurance that increased expenses attributable to other
areas of the Company's operations or to increases in raw material, labor,
equipment or other costs will not offset some or all of the savings expected to
be achieved through the cost reduction efforts. Competitive pressures and other
market factors may also require the Company to share the benefit of some or all
of any savings with its customers or otherwise adversely affect the prices it
receives or the market for its products. As a result, even if the expected cost
reductions are fully achieved in a timely manner, such reductions are not likely
to be fully reflected by commensurate gains in the Company's net income, cash
position, dividend rate or the price of its Common Stock.
Other Dispositions and Acquisitions. In connection with its ongoing
restructuring and growth initiatives, the Company may also consider divesting or
discontinuing the operations of various business units and assets and the
Company may undertake one or more significant acquisitions. Any such divestiture
or discontinuance could result in write offs by the Company, some or all of
which could be significant. In addition, a significant acquisition could result
in future earnings dilution for the Company's shareholders. Acquisitions
accounted for as a purchase transaction could also adversely affect the
Company's reported future earnings due to the amortization of the goodwill and
other intangibles associated with the purchase.
The Company has announced its intention to divest National Revenue Corporation,
the Company's collection business. This sale is currently expected to be
completed in the fourth quarter of 1999 or early 2000. Delays and unforeseen
difficulties are, however, common in transactions of this type and so there can
be no assurance that this sale schedule can be achieved.
Competition. Although the Company believes it is the leading check printer in
the United States, it faces considerable competition from other smaller
companies in both its traditional sales channel to financial institutions and
from direct mail sellers of checks. From time to time, one or more of these
competitors reduce the prices of their products in an attempt to gain volume.
The corresponding pricing pressure placed on the Company has resulted in reduced
profit margins for the Company's check printing business in the past and similar
pressures can reasonably be expected in the future. The Company has also
experienced some loss of business due to its refusal to meet competitive prices
that fell below the Company's revenue and profitability per unit targets. The
timing and amount of reduced revenues and profits that may result from these
competitive pressures is not ascertainable.
Check printing is, and is expected to continue to be, an essential part of the
Company's business and the principal source of its operating income for at least
the next several years. A wide variety of alternative payment delivery systems,
including credit cards, debit cards, smart cards, ATM machines, direct deposit,
electronic and other bill paying services, home banking applications and
Internet-based payment services, are in various stages of maturity or
development and additional systems will likely be introduced. The Company
believes that there will continue to be a substantial market for checks for the
foreseeable future, although a reduction in the volume of checks used by
consumers is expected. The rate and the extent to which alternative payment
methods will achieve consumer acceptance and replace checks cannot, however, be
predicted with certainty. A surge in the popularity of any of these alternative
payment methods could have a material, adverse effect on the demand for the
Company's primary products and its account verification and payment protection
services. Although the Company believes that its recent acquisition of eFunds
Tustin may contribute to the continued viability of the paper check as a payment
mechanism by accelerating processing times and reducing processing costs, there
can be no assurance that the check conversion technology developed by this new
subsidiary and its competitors will achieve widespread acceptance or have a
measurable impact on the sales volume of the Company's principal products.
20
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The introduction of the alternative payment methodologies described above has
also resulted in an increased interest by third parties in transaction
processing, authorization and verification, as well as other methods of
effecting electronic payments, as a source of revenue. This increased interest
level has led to increased competition for the Company's transaction processing
and authorization businesses. The payment processing industry is characterized
by continuously evolving technology and intense competition. Many participants
in the industry have substantially greater capital resources and research and
development capabilities than the Company. There can be no assurance that the
Company's competitors and potential competitors will not succeed in developing
and marketing technologies, services or products that are more accepted in the
marketplace than those offered or envisioned by the Company. Such a development
could result in the loss of significant customers by the Company's eFunds
business unit, render the Company's technology and proposed products obsolete or
noncompetitive or otherwise materially hinder the achievement of the growth
targets established for this business unit. Initiatives that may be undertaken
by the Company in connection with Internet commerce-based activities would be
particularly susceptible to these types of competitive risks and the rapid
development and deployment of Internet technologies, products and services may
present unanticipated competitive risks to the Company's current business that
may be material and adverse.
Effect of Financial Institution Consolidation. Recent consolidation within the
banking industry has resulted in increased competition and consequent pressure
on check prices. This concentration greatly increases the importance to the
Company of retaining its major customers and attracting significant additional
customers in an increasingly competitive environment. Although the Company
devotes considerable efforts towards the development of a competitively priced,
high quality suite of products for the financial services industry, there can be
no assurance that significant customers will not be lost or that any such loss
can be counterbalanced through the addition of new customers or by expanded
sales to the Company's remaining customers.
Revised Analytic Approach. The Company has announced that it is applying a new
methodology for evaluating the Company's projected return on various forms of
investment. The use of this methodology represents a revised analytic approach
by the Company and the long-term benefits to be derived therefrom cannot
presently be precisely determined.
Raw Material, Postage Costs and Delivery Costs. Increases in the price of paper
and the cost of postage can adversely affect the profitability of the Company's
printing and mail order businesses. Events such as the 1997 UPS strike can also
adversely impact the Company's margins by imposing higher delivery costs.
Competitive pressures and overall trends in the marketplace may have the effect
of inhibiting the Company's ability to reflect increased costs of production or
delivery in the prices of its products.
Limited Source of Supply. The Company's check printing business utilizes a paper
printing plate material that is available from only a limited number of sources.
The Company believes it has a reliable source of supply for this material and
that it maintains an inventory sufficient to avoid any production disruptions in
the event of an interruption of its supply. In the event, however, that the
Company's current supplier becomes unwilling or unable to supply the required
printing plate material at an acceptable price and the Company is unable to
locate a suitable alternative source within a reasonable time frame, the Company
would be forced to convert its facilities to an alternative printing process.
Any such conversion would require the unanticipated investment of significant
sums and there can be no assurance that the conversion could be accomplished
without production delays.
Year 2000 Readiness Disclosure. In 1996, the Company initiated a company-wide
program to prepare its computer systems, applications and embedded chip
equipment for the year 2000 and to evaluate the readiness of its third-party
suppliers/customers for the millennium date change. Although the Company
presently believes that with the planned modifications to existing systems and
the replacement or retirement of other systems, the year 2000 compliance issue
will be resolved in a timely manner and will not pose significant operational
problems for the Company, there can be no absolute assurances in this regard.
The Company's business operations, as well as its ability to provide products
and services to its customers without undue delay or interruption, could be at
risk in the event unanticipated year 2000 issues arise. In addition, there can
be no absolute assurances that unanticipated expenses related to the Company's
ongoing year 2000 compliance efforts will not be incurred. The Company has
communicated with its key suppliers and customers to determine their year 2000
readiness and the extent to which the Company is vulnerable to any third party
year 2000 issues. There can be no guarantee, however, that the systems of other
companies on which the Company's systems rely will be converted in a timely
manner or in a manner that is compatible with the Company's systems. A failure
by such a company to convert their systems
21
<PAGE>
in a timely manner or a conversion that renders such systems incompatible with
those of the Company could have a material adverse effect on the Company and
there can be no assurance that any contingency plans developed by the Company
will adequately mitigate the effects of any third party noncompliance. In
addition, it is unrealistic to assume that the Company could remain unaffected
if the year 2000 issue results in a widespread economic downturn. It is also
possible that the Company's insurance carriers could assert that its existing
liability insurance programs do not cover liabilities arising out of any
operational problems associated with the advent of the year 2000.
Further, although the Company's operations in India are not material to its
business taken as a whole, it is reasonable to expect that disruptions caused by
Year 2000 issues are more likely to occur in nations with a less well developed
technology infrastructure. The Company believes it has developed appropriate
contingency plans and remedial procedures for its Indian operations in the event
of Year 2000 problems, but these plans and procedures could prove unsuccessful
in the event of widespread or long-term disruptions caused by the millennium
date change. In such an event, the Company would be required to develop
long-term business resumption plans and procedures for its Indian operations and
would likely incur expenditures that are not presently anticipated.
NEW 14a-4 NOTICE DEADLINE
Under the Company's amended Bylaws, the Company's Board of Directors may exclude
proposals (including director nominations) from consideration at its annual
shareholder's meeting if such proposals are not submitted on or before a date
(the "Notice Date") at least 120 days prior to the date the Company's proxy
statement was released to shareholders in connection with the previous year's
annual meeting of shareholders. In addition, the proxies solicited by the
Company's Board of Directors may confer discretionary authority upon the persons
named therein to vote upon any matter submitted for consideration at any regular
meeting of shareholders (without discussion of the matter in the Company's proxy
statement) if the Company does not receive proper notice of such mater prior to
the Notice Date. The Notice Date applicable to the Company's 2000 annual meeting
of shareholders is December 3, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
Exhibit No. Description Method of Filing
----------- ----------- ----------------
3.1 Articles of Incorporation *
(incorporated by reference to Exhibit
3(A) to the Company's Annual Report on
Form 10-K for the year ended December
31, 1990)
3.2 Bylaws (as amended August 5, 1999) Filed herewith
4.1 Amended and Restated Rights Agreement, *
dated as of January 31, 1997, by and
between the Company and Norwest Bank
Minnesota, National Association, as
Rights Agent, which includes as
Exhibit A thereto, the form of Rights
Certificate (incorporated by reference
to Exhibit 4.1 to the Company's
Amendment No. 1 on Form 8-A/A-1 (File
No. 001-07945) filed with the
Securities and Exchange Commission
(the "Commission") on February 7,
1997).
22
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4.2 Indenture, relating to up to *
$150,000,000 of debt securities
(incorporated by reference to Exhibit
4.1 to the Company's Registration
Statement on Form S-3 (33-32279) filed
with the Commission on November 24,
1989).
4.3 Amended and Restated Credit Agreement, *
dated as of July 8, 1997, among the
Company, Bank of America National
Trust and Savings Association, as
agent, and the other financial
institutions party thereto related to
a $150,000,000 committed line of
credit (incorporated by reference to
Exhibit 4.3 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1997).
4.4 Credit Agreement, dated as of August Filed herewith
30, 1999, among the Company, Bank of
America, N.A., as the sole and
exclusive administrative agent, and
the other financial institutions party
thereto related to a $500,000,000
revolving credit agreement.
12.3 Computation of Ratio of Earnings to Filed herewith
Fixed Charges
27.3 Financial Data Schedule Filed herewith
----------------------
*Incorporated by reference
(b) The registrant did not, and was not required to, file any reports on
form 8-K during the quarter for which this report was filed.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DELUXE CORPORATION
(Registrant)
Date November 12, 1999 /s/ J. A. Blanchard III
------------------------------------
J.A. Blanchard III, President
and Chief Executive Officer
(Principal Executive Officer)
Date November 12, 1999 /s/ Thomas W. VanHimbergen
------------------------------------
Thomas W. VanHimbergen
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
24
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description Page Number
----------- ----------- -----------
3.2 Bylaws (as amended August 5, 1999)
4.4 Credit Agreement, dated as of August 30,
1999, among the Company, Bank of America,
N.A., as the sole and exclusive
administrative agent, and the other
financial institutions party thereto
related to a $500,000,000 revolving credit
agreement.
12.3 Computation of Ratio of Earnings to Fixed
Charges
27.3 Financial Data Schedule
25
Exhibit 3.2
BYLAWS
OF
DELUXE CORPORATION
(AS AMENDED AUGUST 5, 1999)
ARTICLE I
OFFICES, CORPORATE SEAL
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in the
State of Minnesota shall be as set forth in the articles of incorporation as
amended from time to time (the "articles of incorporation") or the most recent
resolution of the board of directors of the corporation (the "board of
directors") filed with the secretary of state of Minnesota changing the
registered office.
SECTION 2. SEAL. The corporation shall not have a corporate seal.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. REGULAR MEETINGS OF SHAREHOLDERS.
(a) Regular meetings of the shareholders of the corporation shall be held on
such date and at such time and place as the board of directors shall designate.
(b) At a regular meeting of shareholders, the shareholders of the corporation,
voting as provided in the articles of incorporation and these bylaws, shall
elect a board of directors and shall transact such other business as may
properly come before them.
(c) At any regular meeting of shareholders, a person may be a candidate for
election to the board of directors only if such person is nominated (i) by the
board of directors, (ii) by any nominating committee or person appointed by the
board of directors and authorized to make nominations for election to the board
of directors, or (iii) by a shareholder, who complies with the procedures set
forth in this paragraph. To properly nominate a candidate, a shareholder shall
give written notice of such nomination to the chief executive officer or
secretary of the corporation not later than the date (the "Notice Date")
specified by Rule 14a-8 (as amended from time to time and any successor rule or
regulation, "Rule 14a-8") promulgated under the Securities Exchange Act of 1934
(as amended from time to time, the "Exchange Act") as the last date for receipt
by the
<PAGE>
corporation of shareholder proposals; shall attend the meeting with the
candidate whom the shareholder wishes to nominate; and shall propose the
candidate's nomination for election to the board of directors at the meeting.
The notice by a shareholder shall set forth as to each person whom the
shareholder recommends for nomination (v) the name, age, business address and
residence address of the person; (w) the principal occupation or employment of
the person; (x) the number of shares of stock of the corporation owned by the
person; (y) the written and acknowledged statement of the person that such
person is willing to serve as a director of the corporation; and (z) any other
information relating to the person that would be required to be disclosed in a
solicitation of proxies for election of directors pursuant to Regulation 14A (as
amended from time to time) under the Exchange Act had the election of the person
been solicited by or behalf of the board of directors of the corporation.
(d) To be properly brought before a regular meeting of shareholders, business
must be (i) directed to be brought before the meeting by the board of directors
or (ii) proposed to be considered at the meeting by a shareholder by giving
written notice of the proposal containing the information required by Rule 14a-8
to the chief executive officer or secretary of the corporation not later than
the Notice Date and shall be presented at the meeting by the proposing
shareholder.
(e) The proxies solicited by the corporation's board of directors may confer
discretionary authority upon the persons named therein to vote on any matter
submitted for consideration at any regular meeting of shareholders (i) if the
corporation does not receive proper notice of such matter on or before the
Notice Date or (ii) as otherwise permitted by applicable laws, rules and
regulations, including, without limitation, the Exchange Act and rules and
regulations promulgated thereunder.
(f) No business shall be conducted at a regular meeting of shareholders of the
corporation except business brought before the meeting in accordance with the
procedures set forth in this Section; provided, however, that once business has
been properly brought before the meeting in accordance with such procedures,
nothing in this Section shall be deemed to preclude discussion by any
shareholder of any such business. If the introduction of any business at a
regular meeting of shareholders does not comply with the procedures specified in
this Section, the chair of the meeting shall declare that such business is not
properly before the meeting and shall not be considered at the meeting.
SECTION 2. QUORUM AT REGULAR MEETINGS OF SHAREHOLDERS. The holders of a majority
of shares outstanding, entitled to vote for the election of directors at a
regular meeting of shareholders, represented either in person or by proxy, shall
constitute a quorum for the transaction of business.
SECTION 3. SPECIAL MEETINGS OF SHAREHOLDERS. Special meetings of the
shareholders of the corporation may be called and held as provided in the
Minnesota Business Corporation Act (as amended from time to time, the "MBCA").
<PAGE>
SECTION 4. ADJOURNED MEETINGS. Regardless of whether a quorum shall be present
at a meeting of the shareholders of the corporation, the meeting may be
adjourned from time to time for up to 120 days after the date fixed for the
original meeting without notice other than announcement at the time of
adjournment of the date, time and place of the adjourned meeting.
SECTION 5. VOTING. At each meeting of the shareholders of the corporation, every
shareholder having the right to vote shall be entitled to vote either in person
or by proxy. Unless otherwise provided by the MBCA or the articles of
incorporation, each shareholder shall have one vote for each share having voting
power registered in such shareholder's name on the books of the corporation as
of the record date. Jointly owned shares may be voted by any joint owner unless
the corporation receives written notice from any one of them denying the
authority of that person to vote such shares. Except as otherwise required by
the MBCA, the articles of incorporation or these bylaws, all questions properly
before a meeting of shareholders shall be decided by a vote of the number of the
greater of (i) a majority of the shares entitled to vote on the question and
represented at the meeting at the time of the vote, or (ii) a majority of the
minimum number of shares entitled to vote that would constitute a quorum for the
transaction of business at the meeting.
SECTION 6. RECORD DATE. The board of directors may fix a date, not less than 20
days nor more than 60 days preceding the date of any meeting of the shareholders
of the corporation, as a record date for the determination of the shareholders
entitled to notice of, and to vote at, such meeting, notwithstanding any
transfer of shares on the books of the corporation after any record date so
fixed. If the board of directors fails to fix a record date for determination of
the shareholders entitled to notice of, and to vote at, any meeting of
shareholders, the record date shall be the 30th day preceding the date of such
meeting. Unless the board of directors sets another time on the record date for
the determination of the shareholders of record, such determination shall be
made as of the close of business on the record date.
SECTION 7. NOTICE. There shall be mailed to each shareholder, shown on the books
of the corporation to be a holder of record of voting shares, at his or her
address as shown on the books of the corporation, a notice setting out the date,
time and place of each regular and special meeting. Notice of each meeting of
the shareholders of the corporation shall be mailed at least seven days and not
more than 60 days prior thereto except as otherwise provided by the MBCA. Every
notice of any special meeting of the shareholders of the corporation called
pursuant to Section 3 hereof shall state the purpose or purposes for which the
meeting has been called and shall otherwise conform to the requirements of the
MBCA.
SECTION 8. WAIVER OF NOTICE. Notice of any regular or special meeting of the
shareholders of the corporation may be waived by any shareholder either before,
at or after such meeting orally or in a writing signed by such shareholder or a
representative entitled to vote the shares of such shareholder. A shareholder,
by attending any meeting of shareholders, shall be deemed to have waived notice
of such meeting, except where the
<PAGE>
shareholder objects at the beginning of the meeting to the transaction of
business because the meeting is not lawfully called or convened, or objects
before a vote on an item of business because the item may not lawfully be
considered at that meeting and does not participate in the consideration of the
item at that meeting.
SECTION 9. CONDUCT OF MEETING. The chairman of the board of directors, or if
there shall be none or in his or her absence, the vice chairman of the board of
directors, or if there be none or in his or her absence, the highest ranking
officer of the corporation, determined in accordance with Article IV among a
group consisting of the chief executive officer, president and the vice
presidents, who is present at the meeting, shall call to order and act as the
chair of any meeting of the shareholders of the corporation. The secretary of
the corporation shall serve as the secretary of the meeting or, if there shall
be none or in his or her absence, the secretary of the meeting shall be such
person as the chair of the meeting appoints. The chair of the meeting shall have
the right and authority to prescribe such rules, regulations and procedures and
to take or refrain from taking such actions as, in the judgment of the chair of
the meeting, are appropriate for the conduct of the meeting. To the extent not
prohibited by the MBCA, such rules, regulations and procedures may include,
without limitation, establishment of (i) an agenda or order of business for the
meeting, (ii) the method by which business may be proposed and procedures for
determining whether business has been properly (or not properly) introduced
before the meeting, (iii) procedures for casting and the form of ballots to be
used by shareholders in attendance at the meeting and the procedures to be
followed for counting shareholder votes, (iv) rules, regulations and procedures
for maintaining order at the meeting and the safety of those present, (v)
limitations on attendance at or participation in the meeting to shareholders of
record of the corporation, their duly authorized proxies or such other persons
as the chair of the meeting shall determine, (vi) restrictions on entry to the
meeting after the time fixed for commencement thereof and (vii) limitations on
the time allotted to questions or comments by participants. Any proposed
business properly before the meeting shall be deemed to be on the agenda. Unless
and to the extent otherwise determined by the chair of the meeting, it shall not
be necessary to follow Robert's Rules of Order or any other rules of
parliamentary procedure at the meeting of shareholders. Following completion of
the business of the meeting as determined by the chair of the meeting, the chair
of the meeting shall have the exclusive authority to adjourn the meeting.
ARTICLE III
DIRECTORS
SECTION 1. RESPONSIBILITIES AND TERM. The business and affairs of the
corporation shall be managed by or under the direction of the board of
directors. The number of directors shall be determined in accordance with the
articles of incorporation. The term of each director shall continue until the
next succeeding regular meeting of the shareholders of the corporation, and
until his successor is elected and qualified.
<PAGE>
SECTION 2. QUORUM AND VACANCIES. A majority of the board of directors shall
constitute a quorum for the transaction of business; provided, that if any
vacancies exist by reason of death, resignation, or otherwise, a majority of the
remaining directors shall constitute a quorum for the filling of such vacancies.
SECTION 3. VOTING. Except where otherwise required by the MBCA, the articles of
incorporation or these bylaws, the board of directors shall take action by
affirmative vote of the greater of (i) a majority of the directors present at a
duly held meeting at the time the action is taken or (ii) a majority of the
minimum number of directors that would constitute a quorum for the transaction
of business at the meeting of directors.
SECTION 4. MEETINGS OF THE BOARD OF DIRECTORS. Meetings of the board of
directors may be held from time to time within or without the state of
Minnesota.
SECTION 5. NOTICE. Meetings of the board of directors shall be held on such
dates and at such times and places as the board of directors may establish and
may be called by the chairman or vice chairman of the board of directors or the
chief executive officer by giving at least twenty-four hours notice of the
meeting, if the meeting is to be held at the registered office of the
corporation or by telephone conference conducted as permitted by the MBCA or at
least five days notice if the meeting is to be held elsewhere, or by any other
director by giving at least five days notice of the meeting. Notice of each
meeting shall specify the date, time and place thereof and shall be given to
each director by mail, telephone, facsimile message or in person. Notice shall
not be required if the date, time and place of a meeting of the board of
directors has been set by resolution of the board of directors or otherwise
announced at a previous meeting of the board of directors or if the meeting is
an adjourned meeting of the board of directors if the date, time and place of
the adjourned meeting was announced at the meeting at which adjournment is
taken.
SECTION 6. WAIVER OF NOTICE. Notice of any meeting of the board of directors may
be waived by any director either before, at, or after such meeting orally or in
a writing signed by such director. A director, by attending any meeting of the
board of directors, shall be deemed to have waived notice of such meeting,
except where the director objects at the beginning of the meeting to the
transaction of business because the meeting is not lawfully called or convened
and does not participate thereafter in the meeting.
SECTION 7. WRITTEN CONSENT OR OPPOSITION. A director may give advance written
consent or opposition to a proposal to be acted on at a meeting of the board of
directors. If such director is not present at the meeting, such written consent
or opposition to a proposal does not constitute presence for purposes of
determining the existence of a quorum, but such written consent or opposition
shall be counted as a vote in favor of or against the proposal and shall be
entered in the minutes or other record of action at the meeting, if the proposal
acted on at the meeting is substantially the same or has substantially the same
effect as the proposal to which the director has consented or objected.
<PAGE>
SECTION 8. COMPENSATION. Directors who are not employees of the corporation
shall receive such compensation as shall be set from time to time by the chief
executive officer, subject to the power of the board of directors or a committee
thereof to change or terminate any such compensation. The chief executive
officer shall also determine whether directors shall receive their expenses, if
any, of attendance at meetings of the board of directors or any committee
thereof and procedures for the reimbursement of such expenses, subject to the
power of the board of directors or a committee thereof to change or terminate
any such reimbursements or procedures. Nothing herein contained shall be
construed to preclude any director from serving the corporation in any other
capacity and receiving proper compensation therefor.
SECTION 9. STOCK OWNERSHIP. Directors shall be shareholders of the corporation.
SECTION 10. EXECUTIVE COMMITTEE. The board of directors may, by unanimous
affirmative action of all of the directors, designate two or more of their
number to constitute an executive committee, which, to the extent determined by
unanimous affirmative action of all of the directors, shall have and exercise
the authority of the board of directors in the management of the business of the
corporation subject to such limitations and procedures as may be established by
the board of directors in connection with any such action; provided, however,
that the board of directors shall not delegate to such committee any power to
amend the bylaws, declare dividends, fill vacancies on the board of directors or
on the executive committee, or elect or remove officers of the corporation. Any
such executive committee may meet at stated times or on notice given by any of
their own number, however, it may act only during the interval between meetings
of the board of directors. Vacancies in the membership of the executive
committee shall be filled by the board of directors at a regular meeting or at a
special meeting called for that purpose.
ARTICLE IV
OFFICERS
SECTION 1. CORPORATE OFFICERS. The officers of the corporation shall consist of
a chief executive officer and a chief financial officer elected by the board of
directors and, if elected by the board of directors, a president, secretary, one
or more assistant secretaries, a treasurer and one or more assistant treasurers.
The board of directors may also elect and designate as an officer of the
corporation one or more vice presidents and such other officers and agents as
the board of directors may from time to time determine. The chairman or vice
chairman of the board of directors, if elected, may be designated by the board
of directors as an officer of the corporation. Any number of offices may be held
by the same person.
SECTION 2. CHAIRMAN OF THE BOARD OF DIRECTORS. The chairman of the board
directors, if one is elected, shall preside at all meetings of the shareholders
and directors and shall have such other duties as may be prescribed from time to
time by the board of directors.
<PAGE>
SECTION 3. VICE-CHAIRMAN OF THE BOARD OF DIRECTORS. The vice-chairman of the
board of directors, if one is elected, shall have such duties as may be
prescribed from time to time by the board of directors. In the absence of the
chairman of the board of directors, or if one is not elected, the vice-chairman
of the board of directors shall preside at meetings of the shareholders and
directors.
SECTION 4. CHIEF EXECUTIVE OFFICER. The chief executive officer of the
corporation shall have general active management of the business and affairs of
the corporation. In the absence of the chairman and the vice chairman of the
board of directors, or if none shall be elected, the chief executive officer
shall preside at all meetings of the shareholders and directors. The chief
executive officer shall see that all orders and resolutions of the board of
directors are carried into effect. The chief executive officer may execute and
deliver, in the name of the corporation, any deeds, mortgages, bonds, contracts
or other instruments pertaining to the business of the corporation unless the
authority to execute and deliver is required by the MBCA to be exercised by
another person or is expressly delegated by the articles of incorporation, these
bylaws or by the board of directors to some other officer or agent of the
corporation. In the absence of the secretary and assistant secretary, or if none
shall be elected, the chief executive officer shall maintain records of and,
whenever necessary, certify all proceedings of the board of directors and the
shareholders. The chief executive officer shall have such other duties as may,
from time to time, be prescribed by the board of directors. The powers and
duties specified herein may be modified or limited at any time by the board of
directors.
SECTION 5. PRESIDENT. The president, if one is elected, shall have such power
and duties regarding the management and daily conduct of the business of the
corporation as shall be determined by the board of directors, and, unless
otherwise provided by the board of directors, such power and duties of the chief
executive officer as may be delegated to the president by the chief executive
officer. Unless otherwise provided by the board of directors, in the absence of
the chairman and vice chairman of the board of directors and the chief executive
officer, or if none shall be elected, the president shall preside at all
meetings of the shareholders and directors. In the absence of the chief
executive officer, the president shall succeed to the chief executive officer's
powers and duties unless otherwise directed by the chief executive officer or
the board of directors.
SECTION 6. CHIEF FINANCIAL OFFICER. The chief financial officer shall (i) keep
accurate financial records for the corporation; (ii) deposit all moneys, drafts
and checks in the name of, and to the credit of, the corporation in such banks
and depositories as the board of directors shall, from time to time, designate
or otherwise authorize; (iii) have the power to endorse, for deposit, all notes,
checks and drafts received by the corporation; (iv) disburse the funds of the
corporation, making or causing to be made proper vouchers therefor; (v) render
to the chief executive officer and the board of directors, whenever requested,
an account of all of his or her transactions as chief financial officer and of
the financial condition of the corporation, and (vi) perform such other duties
as may, from time to time, be prescribed by the board of directors or by the
chief executive officer.
<PAGE>
The powers and duties specified herein may be modified or limited at any time by
the board of directors.
SECTION 7. VICE PRESIDENTS. Each vice president shall have such powers and
duties as may be prescribed by the board of directors and, unless otherwise
provided by the board of directors, such power and duties of the chief executive
officer or president as may be delegated from time to time to each vice
president by the chief executive officer or president, as the case may be. In
the event of the absence of the president, the vice presidents shall succeed to
the duties and powers of such office in the order in which they are elected, as
appears from the minutes of the meeting or meetings at which such elections
shall have taken place, unless otherwise provided by the board of directors,
chief executive officer or president.
SECTION 8. SECRETARY. The secretary, if one shall be elected by the board of
directors, shall be secretary of and shall attend all meetings of the
shareholders and board of directors. The secretary shall act as clerk thereof
and shall record all proceedings of such meetings in the minute book of the
corporation and, whenever necessary, certify all proceedings of the board of
directors and the shareholders. The secretary shall give proper notices of
meetings of shareholders and directors. The secretary shall, with the chairman
of the board of directors, president or any vice president, sign or cause to be
signed by facsimile signature all certificates for shares of the corporation and
shall have such other powers and shall perform such other duties as may be
prescribed from time to time by the board of directors.
SECTION 9. TREASURER. The treasurer, if one shall be elected by the board of
directors, shall have such powers and duties as may be prescribed by the board
of directors and, unless otherwise provided by the board of directors, such
power and duties of the chief financial officer as may be delegated from time to
time to the treasurer by the chief financial officer. In the absence of the
chief financial officer, the treasurer shall succeed to the duties and powers of
the chief financial officer unless otherwise directed by the board of directors,
chief executive officer or chief financial officer.
SECTION 10. ASSISTANT SECRETARY AND ASSISTANT TREASURER. Any assistant secretary
or assistant treasurer, who may from time to time be elected by the board of
directors, may perform the duties of the secretary or of the treasurer, as the
case may be, under the supervision and subject to the control of the secretary
or of the treasurer, respectively. Unless otherwise provided by the board of
directors, the chief executive officer or the secretary, in the event of the
absence of the secretary, an assistant secretary shall have the powers and
perform the duties of the office of secretary. If there shall be more than one
assistant secretary, the assistant secretary appearing as first elected in the
minutes of the meeting at which such elections shall have taken place shall
exercise such powers and have such duties. Unless otherwise provided by the
board of directors, the chief executive officer or the treasurer, in the event
of the absence of the treasurer, an assistant treasurer shall have the powers
and perform the duties of the office of treasurer. If there shall be more than
one assistant treasurer, the assistant treasurer appearing as first elected in
the minutes of the meeting or meetings at which such elections shall have taken
place,
<PAGE>
shall exercise such powers and have such duties. Each assistant secretary and
each assistant treasurer shall also have such powers and duties of the secretary
or the treasurer as the secretary or the treasurer respectively may delegate to
such assistant and shall also have such other powers and perform such other
duties as may be prescribed from time to time by the board of directors.
SECTION 11. VACANCY. If there shall occur a vacancy in the office of chief
executive officer or chief financial officer, such vacancy shall be filled by
the board of directors as expeditiously as practicable. If there shall occur a
vacancy in the position of chairman or vice chairman of the board of directors
or, subject to the foregoing, in any other office of the corporation by reason
of death, resignation, or otherwise, such vacancy may, but need not, be filled
by the board of directors.
SECTION 12. REMOVAL, REPLACEMENT AND REASSIGNMENT. The board of directors may at
any time and for any reason, with or without cause (i) remove or replace the
chairman or vice chairman of the board of directors, whether or not such action
results in a vacancy in the chairmanship or vice chairmanship of the board of
directors , provided that such action shall in no event terminate the
directorship of such person unless such action is effective in accordance with
the MBCA to remove such person as a director; (ii) remove, replace or reassign
the incumbent chief executive officer or chief financial officer, provided that
if such action results in a vacancy in such office, the board of directors shall
act to fill that vacancy as provided in Section 11 hereof; (iii) remove, replace
or reassign the incumbent in any other office of the corporation whether or not
such action results in a vacancy in any such office; and (iv) reduce, add to,
reassign or otherwise change the powers and duties specifically conferred upon
any officer of the corporation by these bylaws or by any action of the board of
directors, or any officer acting by authority conferred by these bylaws or
action of the board of directors or otherwise. Any officer of the corporation to
whom such authority shall have been delegated by the board of directors and,
unless otherwise provided by the board of directors, the chief executive
officer, may at any time and for any reason, with or without cause, remove,
replace or reassign the incumbent in any office of the corporation other than
the chairman and vice chairman of the board of directors, the chief executive
officer, the president and the chief financial officer.
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. INDEMNIFICATION. The corporation shall indemnify all officers and
directors of the corporation for such expenses and liabilities, in such manner,
under such circumstances and to the fullest extent permitted by the MBCA. Unless
otherwise approved by the board of directors, the corporation shall not
indemnify any officer or director of the corporation who is not otherwise
entitled to indemnification pursuant to the prior sentence of this Section.
<PAGE>
ARTICLE VI
AMENDMENT OF BYLAWS
SECTION 1. AMENDMENTS. Except as otherwise provided by the MBCA, these bylaws
may be amended in whole or in part by a vote of a two-thirds majority of all of
the directors. Such authority of the board of directors is subject to the power
of the shareholders, exercisable in the manner provided in the MBCA, to adopt,
amend, or repeal bylaws adopted, amended, or repealed by the board of directors.
EXHIBIT 4.4
================================================================================
CREDIT AGREEMENT
DATED AS OF AUGUST 30, 1999
AMONG
DELUXE CORPORATION,
BANK OF AMERICA, N.A.,
AS SOLE AND EXCLUSIVE ADMINISTRATIVE AGENT,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BANC OF AMERICA SECURITIES, LLC
SOLE LEAD ARRANGER
AND
SOLE BOOK MANAGER
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION PAGE
ARTICLE I DEFINITIONS..........................................................1
1.01 Certain Defined Terms........................................1
1.02 Other Interpretive Provisions...............................13
1.03 Accounting Principles.......................................14
ARTICLE II THE CREDITS........................................................14
2.01 The Revolving Credit........................................14
2.02 Loan Accounts; Bid Loan Notes...............................14
2.03 Procedure for Committed Borrowing...........................15
2.04 Conversion and Continuation Elections for Committed
Borrowings..................................................16
2.05 Bid Borrowings..............................................17
2.06 Procedure for Bid Borrowings................................17
2.07 Voluntary Termination or Reduction of Commitments...........21
2.08 Optional Prepayments........................................21
2.09 Extension of Revolving Termination Date.....................21
2.10 Repayment...................................................22
2.11 Interest....................................................22
2.12 Fees........................................................23
2.13 Computation of Fees and Interest............................24
2.14 Payments by the Company.....................................24
2.15 Payments by the Banks to the Agent..........................25
2.16 Sharing of Payments, Etc....................................25
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY............................26
3.01 Taxes.......................................................26
3.02 Illegality..................................................28
3.03 Increased Costs and Reduction of Return.....................29
3.04 Funding Losses..............................................30
3.05 Inability to Determine Rates................................31
3.06 Reserves on Offshore Rate Committed Loans...................31
3.07 Certificates of Banks.......................................31
3.08 Substitution of Banks.......................................31
3.09 Survival....................................................32
ARTICLE IV CONDITIONS PRECEDENT...............................................32
4.01 Conditions of Initial Loans.................................32
4.02 Conditions to All Borrowings................................33
ARTICLE V REPRESENTATIONS AND WARRANTIES......................................33
5.01 Corporate Existence and Power...............................33
5.02 Corporate Authorization; No Contravention...................34
5.03 Governmental Authorization..................................34
5.04 Binding Effect..............................................34
5.05 Litigation..................................................34
<PAGE>
5.06 No Default..................................................35
5.07 ERISA Compliance............................................35
5.08 Use of Proceeds; Margin Regulations.........................36
5.09 Title to Properties.........................................36
5.10 Taxes.......................................................36
5.11 Financial Condition.........................................36
5.12 Environmental Matters.......................................37
5.13 Regulated Entities..........................................37
5.14 No Burdensome Restrictions..................................37
5.15 Copyrights, Patents, Trademarks and Licenses, etc...........37
5.16 Subsidiaries................................................37
5.17 Insurance...................................................37
5.18 Year 2000...................................................37
5.19 Full Disclosure.............................................38
ARTICLE VI AFFIRMATIVE COVENANTS..............................................38
6.01 Financial Statements........................................38
6.02 Certificates; Other Information.............................39
6.03 Notices.....................................................39
6.04 Preservation of Corporate Existence, Etc....................40
6.05 Maintenance of Property.....................................40
6.06 Insurance...................................................41
6.07 Payment of Obligations......................................41
6.08 Compliance with Laws........................................41
6.09 Compliance with ERISA.......................................41
6.10 Inspection of Property and Books and Records................41
6.11 Environmental Laws..........................................42
6.12 Use of Proceeds.............................................42
ARTICLE VII NEGATIVE COVENANTS................................................42
7.01 Limitation on Liens.........................................42
7.02 Disposition of Assets.......................................44
7.03 Consolidations and Mergers..................................44
7.04 Transactions with Affiliates................................44
7.05 Use of Proceeds.............................................44
7.06 Restricted Payments.........................................45
7.07 ERISA.......................................................45
7.08 Change in Business..........................................45
7.09 Accounting Changes..........................................45
7.10 Interest Coverage...........................................45
7.11 Leverage....................................................46
7.12 Subsidiary Indebtedness.....................................46
ARTICLE VIII EVENTS OF DEFAULT................................................46
8.01 Event of Default............................................46
8.02 Remedies....................................................48
8.03 Rights Not Exclusive........................................48
iii.
<PAGE>
ARTICLE IX THE AGENT..........................................................49
9.01 Appointment and Authorization...............................49
9.02 Delegation of Duties........................................49
9.03 Liability of Agent..........................................49
9.04 Reliance by Agent...........................................49
9.05 Notice of Default...........................................50
9.06 Credit Decision.............................................50
9.07 Indemnification.............................................51
9.08 Agent in Individual Capacity................................51
9.09 Successor Agent.............................................51
9.10 Withholding Tax.............................................51
ARTICLE X MISCELLANEOUS.......................................................52
10.01 Amendments and Waivers......................................52
10.02 Notices.....................................................53
10.03 No Waiver; Cumulative Remedies..............................53
10.04 Costs and Expenses..........................................54
10.05 Indemnity...................................................54
10.06 Payments Set Aside..........................................55
10.07 Successors and Assigns......................................55
10.08 Assignments, Participations, etc............................55
10.09 Set-off.....................................................58
10.10 Notification of Addresses, Lending Offices, Etc.............58
10.11 Counterparts................................................58
10.12 Severability................................................58
10.13 No Third Parties Benefited..................................58
10.14 Governing Law and Jurisdiction..............................58
10.15 Waiver of Jury Trial........................................59
10.16 Entire Agreement............................................59
ANNEX I Pricing Grid
SCHEDULES
Schedule 2.01 List of Commitments and Pro Rata Shares
Schedule 5.05 Litigation Schedule
Schedule 5.12 Environmental Schedule
Schedule 5.16 List of Subsidiaries and Material Equity Investments
Schedule 7.01 Existing Liens
Schedule 10.02 Offshore and Domestic Lending Offices, Addresses for Notices
EXHIBITS
Exhibit A Form of Compliance Certificate
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Notice of Conversion/Continuation
Exhibit D Form of Invitation for Competitive Bids
Exhibit E Form of Competitive Bid Request
iv.
<PAGE>
Exhibit F Form of Competitive Bid
Exhibit G Form of Bid Loan Note
Exhibit H Form of Opinion of Counsel to the Company
Exhibit I Form of Assignment and Acceptance
v.
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of August 30, 1999, among
DELUXE CORPORATION, a Minnesota corporation (the "Company"), the several
financial institutions from time to time party to this Agreement (collectively,
the "Banks"; individually, a "Bank"), and BANK OF AMERICA, N.A., as
administrative agent for the Banks.
WHEREAS, the Banks have agreed to make available to the Company a
revolving credit facility upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the following
meanings:
"Absolute Rate" has the meaning specified in subsection
2.06(c).
"Absolute Rate Auction" means a solicitation of
Competitive Bids setting forth Absolute Rates pursuant to Section
2.06.
"Absolute Rate Bid Loan" means a Bid Loan that bears
interest at a rate determined with reference to the Absolute Rate.
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or
indirectly, in (a) the acquisition of all or substantially all of
the assets of a Person, or of any material part of the business and
operations or division of a Person, (b) the acquisition of in excess
of 50% of the capital stock, partnership interests or equity of any
Person, or otherwise causing any Person to become a Subsidiary, or
(c) a merger or consolidation or any other combination with another
Person (other than a Person that is a Subsidiary) provided that the
Company or a Subsidiary is the surviving entity.
"Affiliate" means, as to any Person, any other Person
which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. A Person shall be
deemed to control another Person if the controlling Person
possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of the other Person,
whether through the ownership of voting securities, by contract, or
otherwise.
"Agent" means BofA in its capacity as administrative
agent for the Banks hereunder, and any successor agent arising under
Section 9.09.
"Agent-Related Persons" means BofA in its capacity as
administrative agent and any successor agent arising under Section
9.09, together with their respective Affiliates
1.
<PAGE>
(including, in the case of BofA, the Arranger), and the officers,
directors, employees, agents and attorneys-in-fact of such Persons
and Affiliates.
"Agent's Payment Office" means the address for payments
set forth on Schedule 10.02 hereto in relation to the Agent, or such
other address as the Agent may from time to time specify.
"Agreement" means this Credit Agreement.
"Applicable Margin" means (i) with respect to Base Rate
Committed Loans, the amount set forth opposite the indicated Level
Status below the heading "Committed Loan Base Rate Spread" and (ii)
with respect to Offshore Rate Committed Loans, the amount set forth
opposite the indicated Level Status below the heading "Committed
Loan LIBO Rate Spread," in the pricing grid set forth on Annex I.
The Applicable Margin shall automatically change in respect of all
Committed Loans then outstanding or as to which a Notice of
Borrowing has been delivered as of the date of any public
announcement by S&P or Moody's resulting in a change of Level
Status.
"Arranger" means Banc of America Securities LLC.
"Assignee" has the meaning specified in subsection
10.08(a).
"Assignment and Acceptance" has the meaning specified in
Section 10.08(a).
"Attorney Costs" means and includes all reasonable fees
and disbursements of any law firm or other external counsel, the
reasonable allocated cost of internal legal services and all
reasonable disbursements of internal counsel.
"Bank" has the meaning specified in the introductory
clause hereto.
"Bankruptcy Code" means the Federal Bankruptcy Reform
Act of 1978 (11 U.S.C. ss.101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.50%
per annum above the latest Federal Funds Rate; and (b) the rate of
interest in effect for such day as publicly announced from time to
time by BofA as its "reference rate." The "reference rate" is a rate
set by BofA based upon various factors including BofA's costs and
desired return, general economic conditions and other factors, and
is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate. Any change in the
reference rate announced by BofA shall take effect at the opening of
business on the day specified in the public announcement of such
change.
"Base Rate Committed Loan" means a Committed Loan that
bears interest based on the Base Rate.
"Bid Borrowing" means a Borrowing hereunder consisting
of one or more Bid Loans made to the Company on the same day by one
or more Banks.
2.
<PAGE>
"Bid Loan" means a Loan by a Bank to the Company under
Section 2.05, which may be a LIBOR Bid Loan or an Absolute Rate Bid
Loan.
"Bid Loan Lender" means, in respect of any Bid Loan, the
Bank making such Bid Loan to the Company.
"Bid Loan Note" has the meaning specified in Section
2.02.
"BofA" means Bank of America, N.A., a national banking
association, or any successor by merger thereto.
"Borrowing" means a borrowing hereunder consisting of
Loans of the same Type (in the case of Committed Loans) made to the
Company on the same day by one or more of the Banks under Article
II, and may be a Committed Borrowing or a Bid Borrowing and, other
than in the case of Base Rate Committed Loans, having the same
Interest Period.
"Borrowing Date" means any date on which a Borrowing
occurs under Section 2.03.
"Business Day" means any day other than a Saturday,
Sunday or other day on which commercial banks in New York City or
San Francisco are authorized or required by law to close and, if the
applicable Business Day relates to any Offshore Rate Loan, means
such a day on which dealings are carried on in the applicable
offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline,
request or directive of any central bank or other Governmental
Authority, or any other law, rule or regulation, whether or not
having the force of law, in each case, regarding capital adequacy of
any bank or of any corporation controlling a bank.
"Closing Date" means the date on which all conditions
precedent set forth in Section 4.01 are satisfied or waived by all
Banks (or, in the case of subsection 4.01(e), waived by the Person
entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Commitment", as to each Bank, has the meaning specified
in Section 2.01.
"Committed Borrowing" means a Borrowing hereunder
consisting of Committed Loans made on the same day by the Banks
ratably according to their respective Pro Rata Shares and, in the
case of Offshore Rate Committed Loans, having the same Interest
Periods.
"Committed Loan" means a Loan by a Bank to the Company
under Section 2.01, and may be an Offshore Rate Committed Loan or a
Base Rate Committed Loan (each, a "Type" of Committed Loan).
3.
<PAGE>
"Competitive Bid" means an offer by a Bank to make a Bid
Loan in accordance with subsection 2.06(c).
"Competitive Bid Request" has the meaning specified in
subsection 2.06(a).
"Compliance Certificate" means a certificate
substantially in the form of Exhibit A.
"Contingent Obligation" means, as applied to any Person,
any material direct or indirect liability of that Person with
respect to any Indebtedness, lease, dividend, Surety Instrument or
other obligation (the "primary obligations") of another Person (the
"primary obligor"), including any obligation of that Person, whether
or not contingent, (a) to purchase, repurchase or otherwise acquire
such primary obligations or any property constituting direct or
indirect security therefor, or (b) to advance or provide funds (i)
for the payment or discharge of any such primary obligation, or (ii)
to maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency or any balance
sheet item, level of income or financial condition of the primary
obligor, or (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of
such primary obligation, or (d) otherwise to assure or hold harmless
the holder of any such primary obligation against loss in respect
thereof; in each case (a), (b), (c) or (d), including arrangements
wherein the rights and remedies of the holder of the primary
obligation are limited to repossession or sale of certain property
of such Person. The amount of any Contingent Obligation shall be
deemed equal to the lesser of (x) the stated or determinable amount
of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or if indeterminable, the
maximum reasonably anticipated liability in respect thereof, or (y)
any limitation of such Contingent Obligation contained in the
instrument or agreement creating such Contingent Obligation.
"Contractual Obligation" means, as to any Person, any
provision either of any security issued by such Person or of any
agreement, undertaking, contract, indenture, mortgage, deed of trust
or other instrument, document or agreement to which such Person is a
party or by which it or any of its property is bound and which in
either case is material to such Person.
"Conversion/Continuation Date" means any date on which,
under Section 2.04, the Company (a) converts Committed Loans of one
Type to another Type, or (b) continues Committed Loans of the same
Type, but with a new Interest Period, in the case of Committed Loans
having Interest Periods expiring on such date.
"Default" means any event or circumstance which, with
the giving of notice, the lapse of time, or both, would (if not
cured or otherwise remedied during such time) constitute an Event of
Default.
"Dollars", "dollars" and "$" each mean lawful money of
the United States.
"Eligible Assignee" means (i) a commercial bank
organized under the laws of the United States, or any state thereof,
and having a combined capital and surplus of at least $500,000,000;
(ii) a commercial bank organized under the laws of any other country
4.
<PAGE>
which is a member of the Organization for Economic Cooperation and
Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus of at least
$500,000,000, provided that such bank is acting through a branch or
agency located in the United States; or (iii) a Person that is
primarily engaged in the business of commercial banking and that is
(A) a Subsidiary of a Bank, (B) a Subsidiary of a Person of which a
Bank is a Subsidiary, or (C) a Person of which a Bank is a
Subsidiary; provided that any such bank or Person shall also have
senior unsecured long-term debt ratings which are rated at least A-
(or the equivalent) as publicly announced by S&P or A3 (or the
equivalent) as publicly announced by Moody's.
"Environmental Claims" means all claims, however
asserted, by any Governmental Authority or other Person alleging
potential liability or responsibility for violation of any
Environmental Law, or for release or injury to the environment.
"Environmental Laws" means all federal, state or local
laws, statutes, common law duties, rules, regulations, ordinances
and codes, together with all administrative orders, directed duties,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental,
health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security
Act of 1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether
or not incorporated) under common control with the Company within
the meaning of Section 414(b) or (c) of the Code (and Sections
414(m) and (o) of the Code for purposes of provisions relating to
Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect
to a Pension Plan; (b) a withdrawal by the Company or any ERISA
Affiliate from a Pension Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer (as
defined in Section 4001(a)(2) of ERISA) or a cessation of operations
which is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Company or any
ERISA Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization; (d) the filing of a notice
of intent to terminate, the treatment of a Plan amendment as a
termination under Section 4041 or 4041A of ERISA of, or the
commencement of proceedings by the PBGC to terminate, a Pension Plan
or Multiemployer Plan; (e) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon
the Company or any ERISA Affiliate.
"Event of Default" means any of the events or
circumstances specified in Section 8.01.
5.
<PAGE>
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and regulations promulgated thereunder.
"Federal Funds Rate" means, for any day, the rate set
forth in the weekly statistical release designated as H.15(519), or
any successor publication, published by the Federal Reserve Bank of
New York (including any such successor, "H.15(519)") on the
preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day
will be the arithmetic mean as determined by the Agent of the rates
for the last transaction in overnight Federal funds arranged prior
to 9:00 a.m. (New York City time) on that day by each of three
leading brokers of Federal funds transactions in New York City
selected by the Agent.
"Fee Letter" has the meaning specified in subsection
2.12(a).
"FRB" means the Board of Governors of the Federal
Reserve System, and any Governmental Authority succeeding to any of
its principal functions.
"Funded Debt" means as of the date of any determination
all outstanding Indebtedness of the Company and its consolidated
Subsidiaries which matures more than one (1) year after the
incurrence thereof or is extendable, renewable or refundable, at the
option of the obligor, to a date more than one (1) year after the
incurrence thereof.
"GAAP" means generally accepted accounting principles
set forth from time to time in the opinions and pronouncements of
the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with similar
functions of comparable stature and authority within the U.S.
accounting profession).
"Governmental Authority" means any nation or government,
any state or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
governmental regulatory authority or agency such as the FDIC, FRB,
IRS or SEC.
"Indebtedness" of any Person means, without duplication,
(a) all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary
course of business on ordinary terms); (c) all non-contingent
reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property,
assets or businesses; (e) all recourse indebtedness created or
arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to
property acquired by the Person; and (f) all obligations with
respect to capital leases; provided, however, that the term
"Indebtedness" shall not include non-recourse obligations or
indebtedness of any kind; and provided further, however, that the
term "Indebtedness" shall not include any
6.
<PAGE>
such obligations or indebtedness owing by the Company or any
Subsidiary to the Company or any Subsidiary.
"Indemnified Liabilities" has the meaning specified in
Section 10.05.
"Indemnified Person" has the meaning specified in
Section 10.05.
"Independent Auditor" has the meaning specified in
subsection 6.01(a).
"Insolvency Proceeding" means with respect to a Person
(a) any case, action or proceeding before any court or other
Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or
relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors
generally, or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors; in each case
undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"Interest Payment Date" means, as to any Loan other than
a Base Rate Committed Loan, the last day of each Interest Period
applicable to such Loan and, as to any Base Rate Committed Loan, the
last Business Day of each calendar quarter, provided, however, that
(a) if any Interest Period for an Offshore Rate Committed Loan
exceeds three months, the date that falls three months after the
beginning of such Interest Period and after each Interest Payment
Date thereafter is also an Interest Payment Date, and (b) as to any
Bid Loan, such intervening dates prior to the maturity thereof as
may be specified by the Company and agreed to by the applicable Bid
Loan Lender in the applicable Competitive Bid shall also be Interest
Payment Dates.
"Interest Period" means, (a) as to any Offshore Rate
Committed Loan, the period commencing on the Business Day such Loan
is disbursed, or on the Conversion/Continuation Date on which the
Loan is converted into or continued as an Offshore Rate Committed
Loan, and ending on the date one, two, three or six months
thereafter, as selected by the Company in its Notice of Borrowing or
Notice of Conversion/Continuation, as the case may be; (b) as to any
LIBOR Bid Loan, the period commencing on the Business Day such Loan
is disbursed and ending on the date one, two, three, six, nine or
twelve months thereafter as selected by the Company in the
applicable Competitive Bid Request and agreed to by the applicable
Bid Loan Lender(s); and (c) as to any Absolute Rate Bid Loan, a
period of not less than 7 days and not more than 364 days as
selected by the Company in the applicable Competitive Bid Request
and agreed to by the applicable Bid Loan Lender(s);
provided that:
(i) if any Interest Period would otherwise
end on a day that is not a Business Day, that Interest
Period shall be extended to the following Business Day
unless, in the case of an Offshore Rate Loan, the result
of such extension would be to carry such Interest Period
into another calendar month, in which event such
Interest Period shall end on the preceding Business Day;
7.
<PAGE>
(ii) any Interest Period pertaining to an
Offshore Rate Loan that begins on the last Business Day
of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such
Interest Period; and
(iii) no Interest Period for any Loan shall
extend beyond the Revolving Termination Date.
"Invitation for Competitive Bids" means a solicitation
for Competitive Bids, substantially in the form of Exhibit D.
"IRS" means the Internal Revenue Service, and any
Governmental Authority succeeding to any of its principal functions
under the Code.
"Lending Office" means, as to any Bank, the office or
offices of such Bank specified as its "Lending Office" or "Domestic
Lending Office" or "Offshore Lending Office", as the case may be, on
Schedule 10.02, or such other office or offices as such Bank may
from time to time notify the Company and the Agent.
"Level I Status" has the meaning specified in Annex I.
"Level II Status" has the meaning specified in Annex I.
"Level III Status" has the meaning specified in Annex I.
"Level IV Status" has the meaning specified in Annex I.
"Level V Status" has the meaning specified in Annex I.
"Level VI Status" has the meaning specified in Annex I.
"Level VII Status" has the meaning specified in Annex I.
"Level Status" means Level I Status, Level II Status,
Level III Status, Level IV Status, Level V Status, Level VI Status
or Level VII Status (as such terms are defined in Annex I), as
applicable at any time.
"LIBO Rate" for any Interest Period, with respect to
each LIBOR Bid Loan in any Bid Borrowing or each Offshore Rate
Committed Loan comprising part of the same Committed Borrowing,
means:
(i) the rate of interest per annum
determined by the Agent to be the rate of interest per
annum appearing on Dow Jones Page 3750 (as defined
below) for Dollar deposits in the approximate amount of,
with respect to each LIBOR Bid Loan in the applicable
Bid Borrowing, such LIBOR Bid Loan to be borrowed in
such Bid Borrowing, or, in the case of Offshore Rate
Committed Loans, the Offshore Rate Committed Loan to be
made, continued or converted by BofA, and having a
maturity comparable to such Interest Period, at
approximately 11:00 a.m.
8.
<PAGE>
(London time) two Business Days prior to the
commencement of such Interest Period, subject to clause
(ii) below; or
(ii) if for any reason the rate is not
available as provided in the preceding clause (i) of
this definition, the "LIBO Rate" instead means the rate
of interest per annum determined by the Agent to be the
arithmetic mean (rounded upward to the nearest 1/100th
of 1%) of the rates of interest per annum notified to
the Agent by BofA as the rate of interest at which
Dollar deposits in the approximate amount of, in the
case of LIBOR Bid Loans and with respect to each LIBOR
Bid Loan in the applicable Bid Borrowing, such LIBOR Bid
Loan to be borrowed in such Bid Borrowing, or, in the
case of Offshore Rate Committed Loans, the Offshore Rate
Committed Loan to be made, continued or converted by
BofA, and having a maturity comparable to such Interest
Period, would be offered by BofA to major banks in the
London interbank market at their request at
approximately 11:00 a.m. (London time) two Business Days
prior to the commencement of such Interest Period. As
used in this definition, "Dow Jones Page 3750" means the
display designated as "3750" on the Dow Jones Market
Service (also known as the Telerate Service) or any
replacement page thereof or successor thereto.
"LIBOR Auction" means a solicitation of Competitive Bids
setting forth a LIBOR Bid Margin pursuant to Section 2.06.
"LIBOR Bid Loan" means any Bid Loan that bears interest
at a rate based upon the LIBO Rate.
"LIBOR Bid Margin" has the meaning specified in
subsection 2.06(c)(ii)(C).
"Lien" means any security interest, mortgage, deed of
trust, pledge, hypothecation, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement
of any kind or nature whatsoever in respect of any property
(including those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest of
a lessor under a capital lease, any financing lease having
substantially the same economic effect as any of the foregoing, or
the filing of any financing statement signed by and naming the owner
of the asset to which such lien relates as debtor, under the Uniform
Commercial Code or any comparable law), but not including the
interest of a lessor under an operating lease.
"Loan" means an extension of credit by a Bank to the
Company under Article II, and may be a Committed Loan or a Bid Loan.
"Loan Documents" means this Agreement, any Notes, the
Fee Letter and all other documents delivered to the Agent or any
Bank in connection herewith.
"Majority Banks" means (a) at any time prior to the
Revolving Termination Date, Banks then holding at least 51% of the
Commitments, and (b) otherwise, Banks then holding at least 51% of
the then aggregate unpaid principal amount of the Loans.
9.
<PAGE>
"Margin Stock" means "margin stock" as such term is
defined in Regulation T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse
change in, or a material adverse effect upon, the financial
condition of the Company and its Subsidiaries taken as a whole; or
(b) a material adverse effect upon the legality, validity, binding
effect or enforceability against the Company of this Agreement or
the Notes.
"Material Subsidiary" means, at any time, any Subsidiary
having at such time either (i) total (gross) revenues for the
preceding four fiscal quarter period in excess of 20% of total
(gross) revenues of the Company and its consolidated Subsidiaries
for such period or (ii) total assets, as of the last day of the
preceding fiscal quarter, having a net book value in excess of 20%
of the total assets of the Company and its consolidated Subsidiaries
as of such day, in each case, based upon the Company's most recent
annual or quarterly financial statements delivered to the Agent
under Section 6.01.
"Moody's" means Moody's Investors Service, a division of
Dun & Bradstreet Corporation.
"Multiemployer Plan" means a "multiemployer plan",
within the meaning of Section 4001(a)(3) of ERISA, to which the
Company or any ERISA Affiliate makes, is making, or is obligated to
make contributions or, during the preceding three calendar years,
has made, or been obligated to make, contributions.
"Notes" means the Bid Loan Notes.
"Notice of Borrowing" means a notice in substantially
the form of Exhibit B.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit C.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under this Agreement and
the Notes, owing by the Company to any Bank, the Agent, or any
Indemnified Person, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become
due, now existing or hereafter arising.
"Offshore Rate Committed Loan" means any Committed Loan
that bears interest based on the LIBO Rate.
"Offshore Rate Loan" means any LIBOR Bid Loan or any
Offshore Rate Committed Loan.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any
certificate of determination or instrument relating to the rights of
preferred shareholders of such corporation, any shareholder rights
agreement, and all applicable resolutions of the board of directors
(or any committee thereof) of such corporation.
10.
<PAGE>
"Other Taxes" means any present or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Documents.
"Participant" has the meaning specified in subsection
10.08(d).
"PBGC" means the Pension Benefit Guaranty Corporation,
or any Governmental Authority succeeding to any of its principal
functions under ERISA.
"Pension Plan" means a pension plan (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA which the
Company sponsors, maintains, or to which it makes, is making, or is
obligated to make contributions, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five (5)
plan years.
"Permitted Liens" has the meaning specified in Section
7.01.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in
Section 3(3) of ERISA) which the Company sponsors or maintains or to
which the Company makes, is making, or is obligated to make
contributions and includes any Pension Plan.
"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
combined Commitments of all Banks (or, if all Commitments have been
terminated, the aggregate principal amount of such Bank's Loans
divided by the aggregate principal amount of the Loans then held by
all Banks). The initial Pro Rata Share of each Bank is set forth
opposite such Bank's name in Schedule 2.01 under the heading "Pro
Rata Share.".
"Replacement Bank" has the meaning specified in Section
3.08.
"Reportable Event" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than
any such event for which the 30-day notice requirement under ERISA
has been waived in regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination
of an arbitrator or of a Governmental Authority, in each case
applicable to or binding upon the Person or any of its property or
to which the Person or any of its property is subject.
"Responsible Officer" means any of the following
officers of the Company: the chief executive officer, the chief
operating officer, the president, the chief financial officer, the
treasurer, the assistant treasurer, or any other officer of the
Company having similar authority and responsibility to any of the
foregoing.
11.
<PAGE>
"Revolving Termination Date" means the earlier to occur
of:
(a) August 28, 2000, as such date may be
extended in accordance with Section 2.09; and
(b) the date on which the Commitments
terminate in accordance with Section 2.07 or 8.02 of
this Agreement.
"S&P" means Standard & Poor's Ratings Services, a
division of McGraw-Hill Companies, Inc.
"SEC" means the Securities and Exchange Commission, or
any Governmental Authority succeeding to any of its principal
functions.
"Subsidiary" of a Person means any corporation,
association, partnership, limited liability company, joint venture
or other business entity of which more than 60% of the voting stock,
membership interests or other equity interests (in the case of
Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the
Person, or a combination thereof. Unless the context otherwise
clearly requires, references herein to a "Subsidiary" refer to a
Subsidiary of the Company.
"Surety Instruments" means all letters of credit
(including standby and commercial), banker's acceptances, bank
guaranties, shipside bonds, surety bonds and similar instruments.
"Taxes" means any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each
Bank and the Agent, such taxes (including income taxes or franchise
taxes) as are imposed on or measured by each Bank's net income by
the jurisdiction (or any political subdivision thereof) under the
laws of which such Bank or the Agent, as the case may be, is
organized or maintains a lending office; provided, however, that
"Taxes" shall be limited to taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto,
which are imposed by any Governmental Authority in the United States
unless the Company makes any payments hereunder with funds derived
from sources outside the United States.
"Total Capitalization" means, as of any date of
determination, the sum of (i) Funded Debt, and (ii) the sum of the
amounts set forth on the consolidated balance sheet of the Company
and its consolidated Subsidiaries as shareholders' equity as
determined in accordance with GAAP.
"Type" has the meaning specified in the definition of
"Committed Loan."
"Unfunded Pension Liability" means the excess of a
Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over
the current value of that Plan's assets, determined in accordance
with the assumptions used for funding the Pension Plan pursuant to
Section 412 of the Code for the applicable plan year.
12.
<PAGE>
"United States" and "U.S." each means the United States
of America.
"Wholly-Owned Subsidiary" means any corporation in which
(other than directors' qualifying shares or similar nominal shares
required by law) 100% of the capital stock of each class having
ordinary voting power, and 100% of the capital stock of every other
class, in each case, at the time as of which any determination is
being made, is owned, beneficially and of record, by the Company, or
by one or more of the other Wholly-Owned Subsidiaries, or both.
"Year 2000 Problem" has the meaning specified in Section
5.18.
1.02 Other Interpretive Provisions.
(a) Defined Terms. Unless otherwise specified herein or therein, all
terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto. The meaning of
defined terms shall be equally applicable to the singular and plural forms of
the defined terms. Terms (including uncapitalized terms) not otherwise defined
herein and that are defined in the UCC shall have the meanings therein
described.
(b) The Agreement. The words "hereof", "herein", "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
subsection, section, schedule and exhibit references are to this Agreement
unless otherwise specified.
(c) Certain Common Terms.
(i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures,
notices and other writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(d) Performance; Time. Whenever any performance obligation hereunder
shall be stated to be due or required to be satisfied on a day other than a
Business Day, such performance shall be made or satisfied on the next succeeding
Business Day. In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"; the words "to"
and "until" each mean "to but excluding", and the word "through" means "to and
including." If any provision of this Agreement refers to any action taken or to
be taken by any Person, or which such Person is prohibited from taking, such
provision shall be interpreted to encompass any and all reasonable means, direct
or indirect, of taking, or not taking, such action.
(e) Contracts. Unless otherwise expressly provided herein,
references to agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document.
13.
<PAGE>
(f) Laws. References to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting the statute or regulation.
(g) Captions. The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(h) Independence of Provisions. The parties acknowledge that this
Agreement and other Loan Documents may use several different limitations, tests
or measurements to regulate the same or similar matters, and that such
limitations, tests and measurements are cumulative and must each be performed,
except as expressly stated to the contrary in this Agreement.
1.03 Accounting Principles.
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.01 The Revolving Credit. Each Bank severally agrees, on the terms
and conditions set forth herein, to make Committed Loans to the Company from
time to time on any Business Day during the period from the Closing Date to the
Revolving Termination Date, in an aggregate amount not to exceed at any time
outstanding the amount set forth on Schedule 2.01 (such amount as the same may
be reduced under Section 2.07, Section 2.09 or changed as a result of one or
more assignments under Section 10.08, the Bank's "Commitment"); provided,
however, that, the aggregate principal amount of all outstanding Committed
Loans, together with the aggregate principal amount of all Bid Loans
outstanding, shall not at any time exceed the combined Commitments. Within the
limits of each Bank's Commitment, and subject to the other terms and conditions
hereof, the Company may borrow under this Section 2.01, prepay under Section
2.08 and reborrow under this Section 2.01.
2.02 Loan Accounts; Bid Loan Notes.
(a) The Committed Loans made by each Bank shall be evidenced by one
or more loan accounts or records maintained by such Bank in the ordinary course
of business. The loan accounts or records maintained by the Agent and each Bank
shall be prima facie evidence of the amount of the Loans made by the Banks to
the Company and the interest and payments thereon. Any failure so to record or
any error in doing so shall not, however, limit or otherwise affect the
obligation of the Company hereunder to pay any amount owing with respect to the
Loans.
14.
<PAGE>
(b) The Bid Loans made by any Bank shall be evidenced by a
promissory note executed by the Company (a "Bid Loan Note") (each such Note to
be substantially in the form of Exhibit G). Each Bank shall endorse on the
schedule annexed to its Note the date, amount and maturity of each Bid Loan made
by it and the amount of each payment of principal made by the Company with
respect thereto. Each such Bank is irrevocably authorized by the Company to
endorse its Note and each Bank's record shall be prima facie evidence of the
amount of each such Loan; provided, however, that the failure of a Bank to make,
or an error in making, a notation thereon with respect to any Bid Loan shall not
limit or otherwise affect the obligations of the Company hereunder or under any
such Note to such Bank.
2.03 Procedure for Committed Borrowing.
(a) Each Committed Borrowing shall be made upon the Company's
irrevocable written notice delivered to the Agent in the form of a Notice of
Borrowing (which notice must be received by the Agent (i) prior to 9:00 a.m.
(San Francisco time) three Business Days prior to the requested Borrowing Date,
in the case of Offshore Rate Committed Loans; and (ii) prior to 9:30 a.m. (San
Francisco time) on the requested Borrowing Date, in the case of Base Rate
Committed Loans, specifying:
(A) the amount of the Committed Borrowing, which shall
be in an aggregate minimum amount of $5,000,000 or any multiple of
$1,000,000 in excess thereof;
(B) the requested Borrowing Date, which shall be a
Business Day;
(C) the Type of Committed Loans comprising the Committed
Borrowing; and
(D) if the Committed Loans consist of Offshore Rate
Committed Loans, the duration of the Interest Period applicable to
such Committed Loans included in such notice. If the Notice of
Borrowing fails to specify the duration of the Interest Period for
any Committed Borrowing comprised of Offshore Rate Committed Loans,
such Interest Period shall be one month.
(b) The Agent will promptly notify each Bank of its receipt of any
Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that
Committed Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of each
Committed Borrowing available to the Agent for the account of the Company at the
Agent's Payment Office by 11:00 a.m. (San Francisco time) on the Borrowing Date
requested by the Company in funds immediately available to the Agent. Any such
amount which is received later than 11:00 a.m. (San Francisco time) shall be
deemed to have been received on the immediately succeeding Business Day. The
proceeds of each such Committed Borrowing will then be made available to the
Company by the Agent at such office by crediting the account of the Company on
the books of BofA for the aggregate of the amounts made available to the Agent
by the Banks and in like funds as received by the Agent, or if requested by the
Company, by wire transfer in accordance with written instructions provided to
the Agent by the Company of such funds as received by the
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Agent, unless on the date of the Committed Borrowing all or any portion of the
proceeds thereof shall then be required to be applied to the repayment of any
outstanding Loans, in which case such proceeds or portion thereof shall be
applied to the payment of such Loans.
(d) After giving effect to any Committed Borrowing, there may not be
more than eight (8) different Interest Periods in effect in respect of all
Committed Loans and Bid Loans together then outstanding.
2.04 Conversion and Continuation Elections for Committed Borrowings.
(a) The Company may, upon irrevocable written notice to the Agent in
accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the case of Base
Rate Committed Loans, or as of the last day of the applicable
Interest Period, in the case of Offshore Rate Committed Loans, to
convert any such Committed Borrowings (or any part thereof in an
amount not less than $5,000,000, or that is in an integral multiple
of $1,000,000 in excess thereof) into Committed Borrowings of the
other Type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Committed Borrowings having
Interest Periods expiring on such day (or any part thereof in an
amount not less than $5,000,000, or that is in an integral multiple
of $1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate Committed
Loans in respect of any Committed Borrowing is reduced, by payment, prepayment,
or conversion of part thereof to be less than $1,000,000, such Offshore Rate
Committed Loans shall automatically convert into Base Rate Committed Loans, and
on and after such date the right of the Company to continue such Committed Loans
as, and convert such Committed Loans into, Offshore Rate Committed Loans shall
terminate.
(b) The Company shall deliver a Notice of Conversion/ Continuation
to be received by the Agent not later than (i) 9:00 a.m. (San Francisco time) at
least three Business Days in advance of the Conversion/Continuation Date, if the
Committed Borrowings are to be converted into or continued as Offshore Rate
Committed Loans; and (ii) 9:30 a.m. (San Francisco time) on the
Conversion/Continuation Date, if the Loans are to be converted into Base Rate
Committed Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Committed Loans to be
converted or continued;
(C) the Type of Committed Loans resulting from the
proposed conversion or continuation; and
(D) other than in the case of conversions into Base Rate
Committed Loans, the duration of the requested Interest Period.
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(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Committed Loans, the Company has failed to select timely a new
Interest Period to be applicable to such Loans in accordance with Section
2.04(b), or if any Event of Default then exists, the Company shall be deemed to
have elected to convert such Offshore Rate Committed Loans into Base Rate
Committed Loans effective as of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of a
Notice of Conversion/ Continuation, or, if no timely notice is provided by the
Company, the Agent will promptly notify each Bank of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Committed Loans
with respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise agree, during the existence
of an Event of Default, the Company may not elect to have a Committed Loan made
as, converted into or continued as, an Offshore Rate Committed Loan.
(f) Unless otherwise agreed to by the Agent, after giving effect to
any conversion or continuation of Committed Loans, there may not be more than
eight (8) different Interest Periods in effect in respect of all Committed Loans
and Bid Loans together then outstanding.
2.05 Bid Borrowings. In addition to Committed Borrowings, each Bank
severally agrees that the Company may, as set forth in Section 2.06, from time
to time request the Banks prior to the Revolving Termination Date to submit
offers to make Bid Loans to the Company; provided, however, that the Banks may,
but shall have no obligation to, submit such offers and the Company may, but
shall have no obligation to, accept any such offers; and provided, further, that
at no time shall (a) the outstanding aggregate principal amount of all Bid Loans
made by all Banks, plus the outstanding aggregate principal amount of all
Committed Loans made by all Banks exceed the combined Commitments; or (b) the
number of Interest Periods for Bid Loans then outstanding plus the number of
Interest Periods for Committed Loans then outstanding exceed eight (8) unless
agreed by the Agent.
2.06 Procedure for Bid Borrowings. The Company may, as set forth in
this Section, request the Agent to solicit offers from all the Banks to make Bid
Loans.
(a) When the Company wishes to request the Banks to submit offers to
make Bid Loans hereunder, it shall transmit to the Agent by telephone call
followed promptly by facsimile transmission a notice in substantially the form
of Exhibit E (a "Competitive Bid Request") so as to be received no later than
8:30 a.m. (San Francisco time) (x) four Business Days prior to the date of a
proposed Bid Borrowing in the case of a LIBOR Auction, or (y) one Business Day
prior to the date of a proposed Bid Borrowing in the case of an Absolute Rate
Auction, specifying:
(i) the date of such Bid Borrowing, which shall be a
Business Day;
(ii) the aggregate amount of such Bid Borrowing, which
shall be a minimum amount of $5,000,000 or in multiples of
$1,000,000 in excess thereof;
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(iii) whether the Competitive Bids requested are to be
for LIBOR Bid Loans or Absolute Rate Bid Loans or both; and
(iv) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of "Interest
Period" herein.
Subject to subsection 2.06(c), the Company may not request Competitive Bids for
more than three Interest Periods in a single Competitive Bid Request and may not
request Competitive Bids more than once in any period of five Business Days.
(b) Upon receipt of a Competitive Bid Request, the Agent will
promptly send to the Banks by facsimile transmission an Invitation for
Competitive Bids, which shall constitute an invitation by the Company to each
Bank to submit Competitive Bids offering to make the Bid Loans to which such
Competitive Bid Request relates in accordance with this Section 2.06.
(c) (i) Each Bank may at its discretion submit a
Competitive Bid containing an offer or offers to make Bid Loans in
response to any Invitation for Competitive Bids. Each Competitive
Bid must comply with the requirements of this subsection 2.06(c) and
must be submitted to the Agent by facsimile transmission at its
offices specified in or pursuant to Section 10.02 not later than (1)
6:30 a.m. (San Francisco time) three Business Days prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (2)
6:30 a.m. (San Francisco time) on the proposed date of Borrowing, in
the case of an Absolute Rate Auction; provided that Competitive Bids
by BofA (or any Affiliate of BofA) may only be submitted if BofA or
such Affiliate notifies the Company of the terms of the offer or
offers contained therein not later than (A) 6:15 a.m. (San Francisco
time) three Business Days prior to the proposed date of Borrowing,
in the case of a LIBOR Auction or (B) 6:15 a.m. (San Francisco time)
on the proposed date of Borrowing, in the case of an Absolute Rate
Auction.
(ii) Each Competitive Bid shall be in substantially the
form of Exhibit F, specifying therein:
(A) the proposed date of Borrowing;
(B) the principal amount of each Bid Loan
for which such Competitive Bid is being made, which
principal amount (x) may be equal to, greater than or
less than the Commitment of the quoting Bank, (y) must
be $5,000,000 or in multiples of $1,000,000 in excess
thereof, and (z) may not exceed the principal amount of
Bid Loans for which Competitive Bids were requested;
(C) in case the Company elects a LIBOR
Auction, the margin above or below the LIBO Rate (the
"LIBOR Bid Margin") offered for each such Bid Loan,
expressed in multiples of 1/1000th of one basis point to
be added to or subtracted from the applicable LIBO Rate
and the Interest Period applicable thereto;
(D) in case the Company elects an Absolute
Rate Auction, the rate of interest per annum expressed
in multiples of 1/1000th of one basis point
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(the "Absolute Rate") offered for each such Bid Loan and
the Interest Period applicable thereto; and
(E) the identity of the quoting Bank.
(F) a Competitive Bid may contain up to
three separate offers by the quoting Bank with respect
to each Interest Period specified in the related
Invitation for Competitive Bids.
(iii) Any Competitive Bid shall be disregarded if it:
(A) is not substantially in conformity with
Exhibit F or does not specify all of the information
required by subsection (c)(ii) of this Section;
(B) contains qualifying, conditional or
similar language;
(C) proposes terms other than or in addition
to those set forth in the applicable Invitation for
Competitive Bids; or
(D) arrives after the time set forth in
subsection (c)(i).
(d) Promptly on receipt and not later than 7:00 a.m. (San Francisco
time) three Business Days prior to the proposed date of Borrowing, in the case
of a LIBOR Auction, or 7:00 a.m. (San Francisco time) on the proposed date of
Borrowing, in the case of an Absolute Rate Auction, the Agent will notify the
Company of the terms (i) of any Competitive Bid submitted by a Bank that is in
accordance with subsection 2.06(c), and (ii) of any Competitive Bid that amends,
modifies or is otherwise inconsistent with a previous Competitive Bid submitted
by such Bank with respect to the same Competitive Bid Request. Notwithstanding
the foregoing, any such subsequent Competitive Bid shall be disregarded by the
Agent unless such subsequent Competitive Bid is submitted solely to correct a
manifest error in such former Competitive Bid and only if received within the
times set forth in subsection 2.06(c). The Agent's notice to the Company shall
specify (1) the aggregate principal amount of Bid Loans for which offers have
been received for each Interest Period specified in the related Competitive Bid
Request; (2) the respective principal amounts and LIBOR Bid Margins or Absolute
Rates, as the case may be, so offered; and (3) any other information regarding
such Competitive Bid reasonably requested by the Company. Subject only to the
provisions of Sections 3.02, 3.05 and 4.02 hereof and the provisions of this
subsection (d), any Competitive Bid shall be irrevocable except with the written
consent of the Agent given on the written instructions of the Company.
(e) Not later than 7:45 a.m. (San Francisco time) three Business
Days prior to the proposed date of Borrowing, in the case of a LIBOR Auction, or
7:45 a.m. (San Francisco time) on the proposed date of Borrowing, in the case of
an Absolute Rate Auction, the Company shall notify the Agent, in writing and in
a form reasonably acceptable to the Agent, of its acceptance or non-acceptance
of the offers received by it pursuant to subsection 2.06(c) or notified to it
pursuant to subsection 2.06(d). The Company shall be under no obligation to
accept any offer and may choose to accept or reject some or all offers. In the
case of acceptance, such notice shall specify the aggregate principal amount of
offers for each Interest Period that is accepted. The Company may accept any
Competitive Bid in whole or in part; provided that:
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(i) the aggregate principal amount of each Bid Borrowing
may not exceed the applicable amount set forth in the related
Competitive Bid Request;
(ii) the principal amount of each Bid Borrowing must be
$5,000,000 or in any multiple of $1,000,000 in excess thereof;
(iii) acceptance of offers may only be made on the basis
of ascending LIBOR Bid Margins or Absolute Rates within each
Interest Period, as the case may be; and
(iv) the Company may not accept any offer that is
described in subsection 2.06(c)(iii) or that otherwise fails to
comply with the requirements of this Agreement.
(f) If offers are made by two or more Banks with the same LIBOR Bid
Margins or Absolute Rates, as the case may be, for a greater aggregate principal
amount than the amount in respect of which such offers are accepted for the
related Interest Period, the principal amount of Bid Loans in respect of which
such offers are accepted shall be allocated by the Agent among such Banks (in
such multiples, not less than $1,000,000, as the Agent may deem appropriate) as
nearly as practicable in proportion to the aggregate principal amounts of such
offers. Determination by the Agent of the amounts of Bid Loans shall be
conclusive in the absence of manifest error.
(g) (i) The Agent will promptly notify each Bank having
submitted a Competitive Bid if its offer has been accepted and, if
its offer has been accepted, of the amount of the Bid Loan or Bid
Loans to be made by it on the date of the Bid Borrowing.
(ii) Each Bank, which has received notice pursuant to
subsection 2.06(g)(i) that its Competitive Bid has been accepted,
shall make the amounts of such Bid Loans available to the Agent for
the account of the Company at the Agent's Payment Office, by 11:00
a.m. (San Francisco time) in the case of Absolute Rate Bid Loans,
and by 11:00 a.m. (San Francisco time) in the case of LIBOR Bid
Loans, on such date of Bid Borrowing, in funds immediately available
to the Agent for the account of the Company at the Agent's Payment
Office.
(iii) Promptly following each Bid Borrowing, the Agent
shall notify each Bank of the ranges of bids submitted and the
highest and lowest bids accepted for each Interest Period requested
by the Company and the aggregate amount borrowed pursuant to such
Bid Borrowing.
(h) If, on or prior to the proposed date of Borrowing, the
Commitments have not been terminated and if, on such proposed date of Borrowing
all applicable conditions to funding referenced in Sections 3.02, 3.05 and 4.02
hereof are satisfied, the Bank or Banks whose offers the Company has accepted
will fund each Bid Loan so accepted. Nothing in this Section 2.06 shall be
construed as a right of first offer in favor of the Banks or to otherwise limit
the ability of the Company to request and accept credit facilities from any
Person (including any of the Banks), provided that such credit facilities are
not prohibited by this Agreement.
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2.07 Voluntary Termination or Reduction of Commitments. The Company
may, upon not less than three Business Days' prior notice to the Agent,
terminate the Commitments, or permanently reduce the Commitments by an aggregate
minimum amount of $5,000,000 or any multiple of $1,000,000 in excess thereof;
unless, after giving effect thereto and to any payments or prepayments of
Committed Loans made on the effective date thereof, the then-outstanding
principal amount of the Loans would exceed the amount of the combined
Commitments then in effect. The Agent shall promptly notify the Banks of any
such termination or reduction. Once reduced in accordance with this Section, the
Commitments may not be increased. Any reduction of the Commitments shall be
applied to each Bank according to its Pro Rata Share. All accrued commitment
fees to, but not including the effective date of any reduction or termination of
Commitments, shall be paid on the effective date of such reduction or
termination.
2.08 Optional Prepayments.
(a) Subject to Section 3.04, the Company may, at any time or from
time to time, upon not less than three Business Days' irrevocable notice to the
Agent, in the case of Offshore Rate Committed Loans, or upon not less than one
Business Day's irrevocable notice to the Agent, in the case of Base Rate
Committed Loans, ratably prepay such Loans in whole or in part, in minimum
amounts of $5,000,000 or any multiple of $1,000,000 in excess thereof. Such
notice of prepayment shall specify the date and amount of such prepayment and
the Type(s) of Committed Loans to be prepaid. The Agent will promptly notify
each Bank of its receipt of any such notice, and of such Bank's Pro Rata Share
of such prepayment. If such notice is given by the Company, the Company shall
make such prepayment and the payment amount specified in such notice shall be
due and payable on the date specified therein, together with accrued interest
thereon to each such date on the amount prepaid and any amounts required
pursuant to Section 3.04; provided that if the Company shall fail to make any
such payment on the date specified therein, such failure shall not constitute an
Event of Default hereunder, and if the Committed Loan is a Base Rate Committed
Loan such Loan shall continue as if such prepayment notice had not been given,
and if the Committed Loan is an Offshore Rate Committed Loan such Loan shall be
automatically converted to a Base Rate Committed Loan as of the date specified
in such notice.
(b) Bid Loans may not be voluntarily prepaid.
2.09 Extension of Revolving Termination Date. Provided that no
Default or Event of Default exists as of the date of the Request, the Company
may, by irrevocable written notice ("Request") to the Agent and each Bank
delivered no earlier than 60 days and no later than 30 days before the
then-applicable Revolving Termination Date, request the Banks to extend the
Revolving Termination Date to the date that is 364 days after the then-current
Revolving Termination Date. Each Bank shall, no later than 20 days after the
date of such Request, give written notice to the Agent stating whether such Bank
agrees to extend the Revolving Termination Date, in its sole discretion. If the
Agent receives such agreement by such date from each of the Banks, provided
there exists no Default or Event of Default on the then-current Revolving
Termination Date, the Revolving Termination Date shall be extended for 364 days
and the Agent shall promptly notify the Bank and the Company of such extension.
If any Bank fails to respond to the Request within the time specified above, it
shall be deemed to have declined the Request. If less than all the Banks shall
agree to such extension, the extension contemplated in this Section may
nonetheless occur with respect to the consenting Banks,
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provided that any such extension shall be conditioned upon an agreement to such
extension by Banks with at least 80% of the aggregate Commitments. The Agent
shall notify the Company and each of the Banks as to which Banks have agreed to
such extension and as to the new Revolving Termination Date as a result thereof,
or that such extension shall not occur, as the case may be. In the event that
the Revolving Termination Date is extended by some but not all of the Banks, on
the existing Revolving Termination Date for any Bank not extending (each a
"Non-Continuing Bank"), the Company shall repay all Loans of such Non-Continuing
Bank, together with all accrued and unpaid interest thereon, and all fees and
other amounts (including amounts arising under Section 3.04(d)) owing to such
Non-Continuing Bank, and upon such payment each such Non-Continuing Bank shall
cease to constitute a Bank hereunder, except with respect to the indemnification
provisions of this Agreement, which shall survive as to such Non-Continuing
Bank.
2.10 Repayment. The Company shall repay to the Banks on the
Revolving Termination Date the aggregate principal amount of Loans outstanding
on such date. The Company shall repay each Offshore Rate Committed Loan and each
Bid Loan on the last day of the relevant Interest Period.
2.11 Interest.
(a) Each Committed Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate per annum
equal to the LIBO Rate or the Base Rate, as the case may be (and subject to the
Company's right to convert to other Types of Loans under Section 2.04), plus the
Applicable Margin. Each Bid Loan shall bear interest on the outstanding
principal amount thereof from the relevant Borrowing Date at a rate per annum
equal to the LIBO Rate plus (or minus) the LIBOR Bid Margin, or at the Absolute
Rate, as the case may be.
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any prepayment of
Committed Loans (except in the case of a Base Rate Committed Loan, as to which
such interest shall be paid on the next Interest Payment Date) under Section
2.08 for the portion of the Loans so prepaid and upon payment (including
prepayment) in full thereof.
(c) Notwithstanding subsection (a) of this Section, after
acceleration or the occurrence and continuation of an Event of Default under
Section 8.01(a) or (c), or commencing five (5) days after the occurrence and
continuation of any other Event of Default, the Company shall pay interest
(after as well as before entry of judgment thereon to the extent permitted by
law) on the principal amount of all outstanding Obligations, at a rate per annum
which is determined by adding 2% per annum to the Applicable Margin then in
effect for such Loans and, in the case of Obligations not subject to an
Applicable Margin, at a rate per annum equal to the Base Rate plus 2%; provided,
however, that, on and after the expiration of any Interest Period applicable to
any Offshore Rate Loan outstanding on the date of occurrence of such Event of
Default or acceleration, the principal amount of such Loan shall, after the
expiration of such Interest Period and during the continuation of such Event of
Default or after acceleration, bear interest at a rate per annum equal to the
Base Rate plus 2%. Interest payable under this subsection 2.11(c) shall be
payable on demand by the Majority Banks or the applicable Bid Loan Bank, as the
case may be.
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(d) Anything herein to the contrary notwithstanding, the obligations
of the Company to any Bank hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by such Bank would be contrary to the provisions of
any law applicable to such Bank limiting the highest rate of interest that may
be lawfully contracted for, charged or received by such Bank, and in such event
the Company shall pay such Bank interest at the highest rate permitted by
applicable law.
2.12 Fees.
(a) Arrangement, Agency Fees. The Company shall pay an arrangement
fee to Bank of America, N.A. for its own or any affiliate's account, and shall
pay agency (including bid agency) fees and other sums to the Agent for the
Agent's own account, as required by the letter agreement ("Fee Letter") between
the Company, the Arranger and the Agent dated June 16, 1999.
(b) Facility Fees. The Company shall pay to the Agent for the
account of each Bank a facility fee on the entire portion of such Bank's
Commitment (whether utilized or unutilized), computed on a quarterly basis in
arrears on the last Business Day of each calendar quarter, equal to (i) 0.070%
per annum if Level I Status exists, (ii) 0.075% per annum if Level II Status
exists, (iii) 0.080% per annum if Level III Status exists, (iv) 0.100% per annum
if Level IV Status exists, (v) 0.125% per annum if Level V Status exists, (vi)
0.150% per annum if Level VI Status exists, and (vii) 0.200% if Level VII Status
exists. Such facility fee shall accrue from the Closing Date to the Revolving
Termination Date and shall be due and payable quarterly in arrears on the last
Business Day of each calendar quarter commencing on September 30, 1999 through
the Revolving Termination Date, with the final payment to be made on the
Revolving Termination Date; provided that, in connection with any reduction or
termination of Commitments under Section 2.07, the accrued facility fee
calculated for the period ending on such date shall also be paid on the date of
such reduction or termination, with the following quarterly payment being
calculated on the basis of the period from such reduction or termination date to
such quarterly payment date. The facility fees provided in this subsection shall
accrue at all times after the above-mentioned commencement date, including at
any time during which one or more conditions in Article IV are not met.
(c) Utilization Fee. The Company shall pay to the Agent for the
account of each Bank a utilization fee on the actual outstanding Loan balance
for all days on which the aggregate outstanding Loans exceed 33.0% of the
aggregate Commitments balance of the Banks, equal to a rate per annum of 0.10%.
Such utilization fee shall be computed on a quarterly basis in arrears on the
last Business Day of each calendar quarter during which aggregate outstanding
loans exceed 33.0% of the aggregate Commitments, shall accrue for all such days
from the Closing Date to the Revolving Termination Date, and shall be payable in
arrears on the last Business Day of each such quarter commencing on the last
Business Day of the fiscal quarter following the Closing Date through the
Revolving Termination Date, with the final payment, if applicable, to be made on
the Revolving Termination Date.
(d) Upfront Fee. The Company shall pay to the Agent on the Closing
Date a non-refundable upfront participation fee in the amount of 0.03% to be
allocated by the Agent among the Banks based upon each Bank's participation in
this facility.
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2.13 Computation of Fees and Interest.
(a) All computations of facility fees under Section 2.12 (b) and
interest for Base Rate Committed Loans when the Base Rate is determined by
BofA's "reference rate" shall be made on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed. All other computations of interest
shall be made on the basis of a 360-day year and actual days elapsed (which
results in more interest being paid than if computed on the basis of a 365-day
year). Interest and fees shall accrue during each period during which interest
or such fees are computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be
conclusive and binding on the Company and the Banks in the absence of manifest
error. The Agent will, at the request of the Company or any Bank, deliver to the
Company or the Bank, as the case may be, a statement showing the quotations used
by the Agent in determining any interest rate.
(c) The Agent will, with reasonable promptness, notify the Company
and the Banks of each determination of the LIBO Rate; provided that any failure
to do so shall not relieve the Company of any liability hereunder or provide the
basis for any Event of Default or any claim against the Agent. Any change in the
interest rate payable on the Offshore Rate Committed Loans or in the facility
fees payable under Section 2.12(b) resulting from a change in the Company's
senior unsecured long-term debt ratings shall become effective and shall apply
to any such Loans then outstanding or to such fees as of the opening of business
on the day on which such change in the Company's debt ratings becomes effective.
The Agent will with reasonable promptness notify the Company and the Banks of
the effective date and the amount of each such change, provided that any failure
to do so shall not relieve the Company of any liability hereunder or provide the
basis for any Event of Default or any claim against the Agent.
2.14 Payments by the Company.
(a) All payments to be made by the Company shall be made without
set-off, recoupment or counterclaim. Except as otherwise expressly provided
herein, all payments by the Company shall be made to the Agent for the account
of the Banks at the Agent's Payment Office, and shall be made in dollars and in
immediately available funds, no later than 12:00 noon (San Francisco time) on
the date specified herein. The Agent will promptly distribute to each Bank its
Pro Rata Share (or other applicable share as expressly provided herein) of such
payment in like funds as received. Any payment received by the Agent later than
12:00 noon (San Francisco time) shall be deemed to have been received on the
following Business Day and any applicable interest or fee shall continue to
accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior to the
date on which any payment is due to the Banks that the Company will not make
such payment in full as and when required, the Agent may assume that the Company
has made such payment in full to the Agent on such date in immediately available
funds and the Agent may (but shall not be so
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required), in reliance upon such assumption, distribute to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent the
Company has not made such payment in full to the Agent, each Bank shall repay to
the Agent on demand such amount distributed to such Bank, together with interest
thereon at the Federal Funds Rate for each day from the date such amount is
distributed to such Bank until the date repaid.
2.15 Payments by the Banks to the Agent.
(a) Unless the Agent receives notice from a Bank on or prior to the
Closing Date or, with respect to any Borrowing after the Closing Date, prior to
11:00 a.m. (San Francisco time) on the date of such Borrowing, that such Bank
will not make available as and when required hereunder to the Agent for the
account of the Company the amount of that Bank's Loan comprising a Borrowing,
the Agent may assume that each Bank has made such amount available to the Agent
in immediately available funds on the Borrowing Date and the Agent may (but
shall not be so required), in reliance upon such assumption, make available to
the Company on such date a corresponding amount. If and to the extent any Bank
shall not have made its full amount available to the Agent in immediately
available funds and the Agent in such circumstances has made available to the
Company such amount, that Bank shall on the Business Day following such
Borrowing Date make such amount available to the Agent, together with interest
at the Federal Funds Rate for each day during such period. A notice of the Agent
submitted to any Bank with respect to amounts owing under this subsection (a)
shall be conclusive, absent manifest error. If such amount is so made available,
such payment to the Agent shall constitute such Bank's Loan on the date of
Borrowing for all purposes of this Agreement. If such amount is not made
available to the Agent on the Business Day following the Borrowing Date, the
Agent will notify the Company of such failure to fund and, upon demand by the
Agent, the Company shall pay such amount to the Agent for the Agent's account,
together with interest thereon for each day elapsed since the date of such
Borrowing, at a rate per annum equal to the interest rate applicable at the time
to the Loans comprising such Borrowing.
(b) The failure of any Bank to make any Committed Loan on any
Borrowing Date shall not relieve any other Bank of any obligation hereunder to
make a Committed Loan on such Borrowing Date, but no Bank shall be responsible
for the failure of any other Bank to make the Committed Loan to be made by such
other Bank on any Borrowing Date.
2.16 Sharing of Payments, Etc. If, other than as expressly provided
in Section 3.08 or 10.08 hereof, any Bank shall obtain on account of the
Committed Loans made by it any payment (whether voluntary, involuntary, through
the exercise of any right of set-off, or otherwise) in excess of its Pro Rata
Share, such Bank shall immediately (a) notify the Agent of such fact, and (b)
purchase from the other Banks such participations in the Committed Loans made by
them as shall be necessary to cause such purchasing Bank to share the excess
payment pro rata with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from the purchasing Bank,
such purchase shall to that extent be rescinded and each other Bank shall repay
to the purchasing Bank the purchase price paid therefor, together with an amount
equal to such paying Bank's ratable share (according to the proportion of (i)
the amount of such paying Bank's required repayment to (ii) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Company agrees that any Bank so purchasing a participation from another Bank
may, to the fullest extent permitted by law, exercise all its rights
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of payment (including the right of set-off, but subject to Section 10.09) with
respect to such participation as fully as if such Bank were the direct creditor
of the Company in the amount of such participation. The Agent will keep records
(which shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section and will in each case notify the
Banks following any such purchases or repayments. Any Bank having outstanding
both Committed Loans and Bid Loans at any time a right of set-off is exercised
by such Bank shall apply the proceeds of such set-off first to such Bank's
Committed Loans, until its Committed Loans are reduced to zero, and thereafter
to its Bid Loans.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes.
(a) Subject to subsection 3.01(f), any and all payments by the
Company to each Bank or the Agent under this Agreement and any other Loan
Document shall be made free and clear of, and without deduction or withholding
for, any Taxes. In addition, the Company shall pay all Other Taxes.
(b) Subject to subsection 3.01(f), the Company agrees to indemnify
and hold harmless each Bank and the Agent for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section) paid by the Bank or the Agent and any liability
(including penalties, interest, additions to tax and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within 30
days after the date the Bank or the Agent makes written demand therefor. If the
Company in good faith determines that any such Taxes or Other Taxes for which
indemnification has been sought hereunder are not due or owing or otherwise
correctly assessed, the Bank or Agent at the request of the Company, or the
Company at the election of the Bank or Agent following any such request, in
either case at the expense of the Company, shall by appropriate means file for a
refund or otherwise contest the payment of such Taxes or Other Taxes, provided
that any such filing or contest does not result in any penalty, lien or other
liability to the Bank or Agent for which the Company has not provided a
satisfactory undertaking to indemnify and hold the Bank or Agent harmless. The
Bank and the Agent agree to provide reasonable cooperation to the Company in
connection with any such filing or contest, at the Company's expense and, if the
Company has paid any such Tax or Other Tax or compensated the Bank or Agent with
respect thereto, any refund thereof shall belong and be remitted to the Company.
(c) If the Company shall be required by law to deduct or withhold
any Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Bank or the Agent, then, subject to subsection 3.01(f):
(i) the sum payable shall be increased as necessary so
that after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums
payable under this Section) such Bank or the Agent, as the case may
be, receives an amount equal to the sum it would have received had
no such deductions or withholdings been made;
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(ii) the Company shall make such deductions and
withholdings;
(iii) the Company shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the Company shall also pay to each Bank or the
Agent for the account of such Bank, at the time interest is paid,
all additional amounts which the respective Bank specifies as
necessary to preserve the after-tax yield the Bank would have
received if such Taxes or Other Taxes had not been imposed.
(d) Within 30 days after the date of any payment by the Company of
Taxes or Other Taxes, the Company shall furnish the Agent the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to the Agent.
(e) Each Bank which is a foreign person (i.e., a person other than a
United States person for United States Federal income tax purposes) agrees that:
(i) it shall, no later than the Closing Date (or, in the
case of a Bank which becomes a party hereto pursuant to Section
10.08 after the Closing Date, the date upon which the Bank becomes a
party hereto) deliver to the Company through the Agent two accurate
and complete signed originals of Internal Revenue Service Form 4224
or any successor thereto ("Form 4224"), or two accurate and complete
signed originals of Internal Revenue Service Form 1001 or any
successor thereto ("Form 1001"), as appropriate, in each case
indicating that the Bank is on the date of delivery thereof entitled
to receive payments of principal, interest and fees under this
Agreement free from withholding of United States Federal income tax;
(ii) if at any time the Bank makes any changes
necessitating a new Form 4224 or Form 1001, it shall with reasonable
promptness deliver to the Company through the Agent in replacement
for, or in addition to, the forms previously delivered by it
hereunder, two accurate and complete signed originals of Form 4224;
or two accurate and complete signed originals of Form 1001, as
appropriate, in each case indicating that the Bank is on the date of
delivery thereof entitled to receive payments of principal, interest
and fees under this Agreement free from withholding of United States
Federal income tax;
(iii) it shall, before or promptly after the occurrence
of any event (including the passing of time) requiring a change in
or renewal of the most recent Form 4224 or Form 1001 previously
delivered by such Bank, deliver to the Company through the Agent two
accurate and complete original signed copies of Form 4224 or Form
1001 in replacement for the forms previously delivered by the Bank;
and
(iv) it shall, promptly upon the Company's or the
Agent's reasonable request to that effect, deliver to the Company or
the Agent (as the case may be) such other forms or similar
documentation as may be required from time to time by any applicable
law, treaty, rule or regulation in order to establish such Bank's
tax status for withholding purposes.
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(f) The Company will not be required to indemnify, hold harmless or
pay any additional amounts in respect of United States Federal income tax
pursuant to subsection 3.01(c) to any Bank for the account of any Lending Office
of such Bank:
(i) if the obligation to indemnify, hold harmless or pay
such additional amounts would not have arisen but for a failure by
such Bank to comply with its obligations (if any) under subsection
3.01(e) in respect of such Lending Office;
(ii) if such Bank shall have delivered to the Company a
Form 4224 in respect of such Lending Office pursuant to subsection
3.01(e), and such Bank shall not at any time be entitled to
exemption from deduction or withholding of United States Federal
income tax in respect of payments by the Company hereunder for the
account of such Lending Office for any reason other than a change in
United States law or regulations or in the official interpretation
of such law or regulations by any governmental authority charged
with the interpretation or administration thereof (whether or not
having the force of law) after the date of delivery of such Form
4224; or
(iii) if the Bank shall have delivered to the Company a
Form 1001 in respect of such Lending Office pursuant to subsection
3.01(e), and such Bank shall not at any time be entitled to
exemption from deduction or withholding of United States Federal
income tax in respect of payments by the Company hereunder for the
account of such Lending Office for any reason other than a change in
United States law or regulations or any applicable tax treaty or
regulations or in the official interpretation of any such law,
treaty or regulations by any governmental authority charged with the
interpretation or administration thereof (whether or not having the
force of law) after the date of delivery of such Form 1001.
(g) If the Company is required to pay additional amounts to any Bank
or the Agent pursuant to subsection (c) of this Section, then such Bank shall
use reasonable efforts (consistent with legal and regulatory restrictions) to
change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Company which may thereafter accrue, if such change in
the judgment of such Bank is not otherwise disadvantageous to such Bank.
(h) Each Bank agrees to promptly notify the Company of the first
written assessment of any Taxes payable by the Company hereunder which is
received by such Bank, provided that failure to give such notice shall not in
any way prejudice the Bank's rights under Section 3.01 hereof. The Company shall
not be obligated to pay any Taxes under Section 3.01 which are assessed against
any Bank if the statute of limitations applicable thereto (as same may be
extended from time to time by agreement between such Bank and the relevant
Governmental Authority) has lapsed. Additionally, the Company shall not be
obligated to pay any penalties, interest, additions to tax or expenses with
respect to any final assessment of Taxes against any Bank (i) unless such Bank
shall have first notified the Company in writing of such final assessment, and
(ii) which are attributable to periods exceeding 90 days prior to the date of
receipt by the Company of such notice.
3.02 Illegality.
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(a) If any Bank determines that the introduction of any Requirement
of Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or any central
bank or other Governmental Authority has asserted that it is unlawful, for any
Bank or its applicable Lending Office to make Offshore Rate Loans, then, on
notice thereof by the Bank to the Company through the Agent, any obligation of
that Bank to make additional Offshore Rate Loans (including in respect of any
LIBOR Bid Loan as to which the Company has accepted such Bank's Competitive Bid,
but as to which the Borrowing Date has not arrived) shall be suspended until the
Bank notifies the Agent and the Company that the circumstances giving rise to
such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain any
Offshore Rate Loan, the Company shall, upon its receipt of notice of such fact
and demand from such Bank (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 3.04, either on the last day
of the Interest Period thereof, if the Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Bank may not
lawfully continue to maintain such Offshore Rate Loan. If the Company is
required to so prepay any Offshore Rate Committed Loan, then concurrently with
such prepayment, the Company shall borrow from the affected Bank, and the
affected Bank shall lend to the Company, in the amount of such repayment, a Base
Rate Committed Loan.
(c) If the obligation of any Bank to make or maintain Offshore Rate
Committed Loans has been so terminated or suspended, the Company may elect, by
giving notice to the Bank through the Agent that all Loans which would otherwise
be made by the Bank as Offshore Rate Committed Loans shall be instead Base Rate
Committed Loans.
(d) Before giving any notice to the Agent under this Section, the
affected Bank shall designate a different Lending Office with respect to its
Offshore Rate Loans if such designation will avoid the need for giving such
notice or making such demand and will not, in the judgment of the Bank, be
illegal or otherwise disadvantageous to the Bank in such Bank's reasonable
judgment.
3.03 Increased Costs and Reduction of Return.
(a) If any Bank determines that, due to either (i) the introduction
of or any change in or in the interpretation of any law or regulation after the
Closing Date or (ii) the compliance by that Bank with any guideline or request
from any central bank or other Governmental Authority (whether or not having the
force of law) after the Closing Date, there shall be any increase in the cost to
such Bank of agreeing to make or making, funding or maintaining any Offshore
Rate Loans, then the Company shall be liable for, and shall from time to time,
upon demand (with a copy of such demand to be sent to the Agent), pay to the
Agent for the account of such Bank, additional amounts as are sufficient to
compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the introduction
after the Closing Date of any Capital Adequacy Regulation , (ii) any change
after the Closing Date in any Capital Adequacy Regulation, (iii) any change
after the Closing Date in the interpretation or administration of any Capital
Adequacy Regulation by any central bank or other Governmental
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Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Bank (or its Lending Office) or any corporation controlling
the Bank with any change in any Capital Adequacy Regulation after the Closing
Date, affects the amount of capital required to be maintained by the Bank or any
corporation controlling the Bank and (taking into consideration such Bank's or
such corporation's policies with respect to capital adequacy and such Bank's
desired return on capital) determines that the amount of such capital is
increased as a consequence of its Commitment, loans, credits or obligations
under this Agreement, then, upon demand of such Bank to the Company through the
Agent, the Company shall pay to the Bank, from time to time as specified by the
Bank, additional amounts sufficient to compensate the Bank for such increase.
(c) The Company shall not be obligated to pay any amounts under
subsection 3.03(a) or (b) to any Bank (i) unless such Bank shall have first
notified the Company in writing that it intends to seek compensation from the
Company pursuant to such subsection, and (ii) which are attributable to periods
exceeding 90 days prior to the date of receipt by the Company of such notice.
3.04 Funding Losses. The Company shall reimburse each Bank and hold
each Bank harmless from any direct loss or expense (but excluding any
consequential loss or expense) which the Bank may sustain or incur as a
consequence of:
(a) the failure of the Company to make on a timely basis any payment
required hereunder of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow a Bid Loan after the Agent
has notified a Bank pursuant to subsection 2.06(g)(i) that its Competitive Bid
has been accepted by the Company, or the failure of the Company to borrow,
continue or convert a Committed Loan after the Company has given (or is deemed
to have given) a Notice of Borrowing or a Notice of Conversion/Continuation;
(c) the failure of the Company to make any prepayment of any
Committed Loan in accordance with any notice delivered under Section 2.08;
(d) the prepayment (including pursuant to Sections 2.08 or 2.09) or
payment after acceleration thereof following an Event of Default of any Offshore
Rate Loan or Absolute Rate Bid Loan on a day that is not the last day of the
relevant Interest Period; or
(e) the automatic conversion under the proviso contained in Section
2.04(a) or under the proviso contained in Section 2.08 of any Offshore Rate
Committed Loan to a Base Rate Committed Loan on a day that is not the last day
of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained. For purposes of
calculating amounts payable by the Company to the Banks under this Section and
under subsection 3.03(a), each Offshore Rate Committed Loan made by a Bank (and
each related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at the LIBO Rate by a matching deposit
or other borrowing in the interbank eurodollar market for a comparable amount
and for a comparable period, whether or not such Offshore Rate Committed Loan is
in fact so funded.
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3.05 Inability to Determine Rates. If the LIBO Rate applicable
pursuant to subsection 2.11(a) for any requested Interest Period with respect to
a proposed Offshore Rate Loan does not adequately and fairly reflect the cost to
the Banks of funding such Loan, the Agent will promptly so notify the Company
and each Bank. Thereafter, the obligation of the Banks to make additional
Offshore Rate Loans hereunder shall be suspended until the Agent upon the
instruction of the Majority Banks revokes such notice in writing. Upon receipt
of such notice, the Company without cost or expense may revoke any Notice of
Borrowing or Notice of Conversion/Continuation then submitted by it. If the
Company does not revoke such Notice, the Banks shall make, convert or continue
the Committed Loans, as proposed by the Company, in the amount specified in the
applicable notice submitted by the Company, but such Committed Loans shall be
made, converted or continued as Base Rate Committed Loans instead of Offshore
Rate Committed Loans.
3.06 Reserves on Offshore Rate Committed Loans. The Company shall
pay to each Bank, as long as such Bank shall be required under regulations of
the FRB to maintain reserves with respect to liabilities or assets consisting of
or including Eurocurrency funds or deposits (currently known as "Eurocurrency
liabilities"), additional interest on the unpaid principal amount of each
Offshore Rate Committed Loan equal to the actual costs of such reserves
allocated to such Committed Loan by the Bank (as reasonably determined by the
Bank), payable on each date on which interest is payable on such Committed Loan,
provided the Company shall have received at least 30 days' prior written notice
(with a copy to the Agent) of such additional interest from the Bank. If a Bank
fails to give notice 30 days prior to the relevant Interest Payment Date, such
additional interest shall be payable 30 days from receipt of such notice.
3.07 Certificates of Banks. Any Bank claiming reimbursement or
compensation under this Article III shall deliver to the Company (with a copy to
the Agent) a certificate setting forth in reasonable detail the amount payable
to the Bank hereunder and such certificate shall be conclusive and binding on
the Company in the absence of manifest error unless the Company shall have
notified such Bank of its objection to such certificate (with a copy to the
Agent) within 30 days of the Company's receipt of such claim.
3.08 Substitution of Banks. Upon the receipt by the Company from any
Bank (an "Affected Bank") of a claim for compensation under Section 3.01, 3.02
or 3.03, the Company may: (i) request the Affected Bank to use its reasonable
efforts to obtain a replacement bank or financial institution satisfactory to
the Company and the Agent and meeting the qualifications of an Eligible Assignee
to acquire and assume all or a ratable part of all of such Affected Bank's
Committed Loans and Commitment (a "Replacement Bank"); (ii) request one or more
of the other Banks to acquire and assume all or part of such Affected Bank's
Committed Loans and Commitment (but no other Bank shall be required to do so);
or (iii) designate a Replacement Bank. Any such designation of a Replacement
Bank under clause (i) or (iii) shall be subject to the prior written consent of
the Agent (which consent shall not be unreasonably withheld). Any transfer
arising under this Section 3.08 shall comply with the requirements of Section
10.08 and on the date of transfer the Affected Bank shall be entitled to all
sums payable to it hereunder on such date including, outstanding principal,
accrued interest and fees, and other sums (including amounts payable under
Section 3.04(d)) arising under the provisions of this Agreement with reference
to such Committed Loans.
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3.09 Survival. The agreements and obligations of the Company in this
Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions of Initial Loans. The obligation of each Bank to
make its initial Committed Loan hereunder, and to receive through the Agent the
initial Competitive Bid Request, is subject to and shall become effective when
the Agent shall have received on or before the Closing Date and no later than
August 31, 1999 all of the following, in form and substance satisfactory to the
Agent and each Bank, and in sufficient copies for each Bank:
(a) Credit Agreement; Notes. This Agreement (and a Bid Loan Note for
each Bank) properly executed;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of directors
of the Company authorizing the transactions contemplated hereby,
certified as of the Closing Date by the Secretary, Assistant
Secretary or other appropriate officer of the Company; and
(ii) A certificate of the Secretary, Assistant Secretary
or other appropriate officer of the Company certifying the names and
true signatures of the officers of the Company authorized to
execute, deliver and perform, this Agreement, and all other Loan
Documents to be delivered by it hereunder;
(c) Organization Documents; Good Standing. Each of the following
documents:
(i) the articles or certificate of incorporation and the
bylaws of the Company as in effect on the Closing Date, certified by
the Secretary, Assistant Secretary or other appropriate officer of
the Company as of the Closing Date; and
(ii) a good standing certificate dated within five (5)
days of the Closing Date for the Company from the Secretary of State
(or similar, applicable Governmental Authority) of its state of
incorporation;
(d) Legal Opinions. An opinion of John H. LeFevre, General Counsel
to the Company and addressed to the Agent and the Banks, substantially in the
form of Exhibit H;
(e) Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Closing Date, including any such costs, fees and expenses arising under
or referenced in Section 2.12;
(f) Certificate. A certificate signed on behalf of the Company by
the Company's chief executive officer, chief financial officer or treasurer,
dated as of the Closing Date, stating that:
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(i) the representations and warranties contained in
Article V are true and correct on and as of such date, as though
made on and as of such date;
(ii) no Default or Event of Default exists or would
result from the initial Borrowing; and
(iii) there has occurred since December 31, 1998, no
event or circumstance that has resulted or would reasonably be
expected to result in a material change in the business, assets,
liabilities (actual or contingent), operations, condition (financial
or otherwise) or prospects of the Borrower and its Subsidiaries
taken as a whole.
(g) Other Documents. Such other approvals, opinions, documents or
materials as the Agent or any Bank may reasonably request.
4.02 Conditions to All Borrowings. The obligation of each Bank to
make any Committed Loan to be made by it, or any Bid Loan as to which the
Company has accepted the relevant Competitive Bid (including its initial Loan),
or to continue or convert any Committed Loan under Section 2.04 is subject to
the satisfaction of the following conditions precedent on the relevant Borrowing
Date or Conversion/Continuation Date:
(a) Notice of Borrowing or Conversion/Continuation. As to any
Committed Loan, the Agent shall have received (with, in the case of the initial
Loan only, a copy for each Bank) a Notice of Borrowing or a Notice of
Conversion/Continuation, as applicable;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article V shall be true and correct on and as
of such Borrowing Date or Conversion/Continuation Date with the same effect as
if made on and as of such Borrowing Date or Conversion/Continuation Date (except
to the extent such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct as of such earlier date); and
(c) No Existing Default. No Default or Event of Default shall exist
or shall result from such Borrowing or continuation or conversion.
Each Notice of Borrowing and Notice of Conversion/Continuation and Competitive
Bid Request submitted by the Company hereunder shall constitute a representation
and warranty by the Company hereunder, as of the date of each such notice or
request and as of each Borrowing Date or Conversion/Continuation Date, as
applicable, that the conditions in Section 4.02 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Bank that:
5.01 Corporate Existence and Power. The Company and each of its
Material Subsidiaries:
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(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its business
(except where the failure to have any such governmental license, authorization,
consent or approval would not reasonably be expected to have a Material Adverse
Effect) and as to the Company only, to execute, deliver, and perform its
obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation and is licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification or license except when the failure to so qualify or be so licensed
or in good standing would preclude it from enforcing its rights with respect to
any of its assets or expose it to any liability, which in either case would
reasonably be expected to have a Material Adverse Effect; and
(d) is in all material respects in compliance with the Requirements
of Law except to the extent that the failure to do so would not reasonably be
expected to have a Material Adverse Effect.
5.02 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company of this Agreement and each other Loan
Document to which the Company is party, have been duly authorized by all
necessary corporate action, and do not and will not:
(a) contravene the terms of any of the Company's Organization
Documents;
(b) conflict with or result in any breach or contravention of, or
the creation of any Lien under, any document evidencing any Contractual
Obligation to which the Company is a party or any order, injunction, writ or
decree of any Governmental Authority to which the Company or its property is
subject except where such conflict, breach, contravention or Lien would not
reasonably be expected to have a Material Adverse Effect; or
(c) violate any Requirement of Law.
5.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company of
the Agreement or any other Loan Document.
5.04 Binding Effect. This Agreement and each other Loan Document to
which the Company is a party constitute the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
5.05 Litigation. Except as specifically disclosed in Schedule 5.05,
there are no actions, suits, proceedings, claims or disputes pending, or to the
best knowledge of the Company,
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threatened or contemplated, at law, in equity, in arbitration or before any
Governmental Authority, against the Company, or its Subsidiaries or any of their
respective properties which:
(a) purport to affect or pertain to this Agreement or any other Loan
Document, or any of the transactions contemplated hereby or thereby; or
(b) would reasonably be expected to have a Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery or performance of this Agreement or any other
Loan Document, or directing that the transactions provided for herein or therein
not be consummated as herein or therein provided.
5.06 No Default. At the Closing Date and at the time of any
Borrowing, no Default or Event of Default exists or would result from the
incurring of any Obligations by the Company. As of the Closing Date, neither the
Company nor any Subsidiary is in default under or with respect to any
Contractual Obligation in any respect which, individually or together with all
such defaults, would reasonably be expected to have a Material Adverse Effect,
or that would, if such default had occurred after the Closing Date, create an
Event of Default under subsection 8.01(e).
5.07 ERISA Compliance. Except as specifically disclosed in Schedule
5.07:
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law except
where non-compliance would not reasonably be expected to result in a Material
Adverse Effect. Each Plan which is intended to qualify under Section 401(a) of
the Code has received a favorable determination letter from the IRS or, if
otherwise, the failure to apply for or receive a favorable determination letter
would not reasonably be expected to have a Material Adverse Effect. To the best
knowledge of the Company, nothing has occurred which would cause the loss of
qualification the effect of which would reasonably be expected to result in a
Material Adverse Effect. The Company and each ERISA Affiliate has made all
required contributions to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan when
the failure to make such contribution or when such application or extension
would reasonably be expected to result in a Material Adverse Effect.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or would reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or would reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
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notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
neither the Company nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA that, in the case of any of
clauses (i) through (v), would reasonably be expected to result in a Material
Adverse Effect.
5.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans
are to be used solely for the purposes set forth in and permitted by Section
6.12 and Section 7.05. Neither the Company nor any Subsidiary is generally
engaged in the business of purchasing or selling Margin Stock or extending
credit for the purpose of purchasing or carrying Margin Stock.
5.09 Title to Properties. The Company and each Subsidiary have good
record and marketable title in fee simple to, or to their knowledge valid
leasehold interests in, all real property necessary for the ordinary conduct of
their respective businesses, except for such defects in title as would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. As of the Closing Date, the property of the Company and its
Subsidiaries is subject to no Liens, other than Permitted Liens.
5.10 Taxes. The Company and its Subsidiaries have filed all Federal
and other material tax returns and reports required to be filed, and have paid
all Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP or where failure to file such return or to pay any such tax
would not reasonably be expected to have a Material Adverse Effect. There is no
proposed tax assessment against the Company or any Subsidiary that would, if
made, have a Material Adverse Effect.
5.11 Financial Condition.
(a) The audited consolidated financial statements of the Company and
its Subsidiaries dated December 31, 1998, and the unaudited consolidated
financial statements dated March 31, 1999, and the related consolidated
statements of income or operations, balance sheet and cash flows for the fiscal
year or the fiscal quarter, respectively, ended on that date:
(i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise
expressly noted therein, subject to ordinary, good faith year end
audit adjustments in the case of such unaudited statements;
(ii) fairly present the financial condition of the
Company and its Subsidiaries as of the date thereof and results of
operations for the period covered thereby; and
(iii) show all material Indebtedness and other
liabilities, direct or contingent, of the Company and its
consolidated Subsidiaries as of the date thereof, including
liabilities for taxes, material commitments and Contingent
Obligations except for Indebtedness and other liabilities, the
existence of which would not have a Material Adverse Effect.
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(b) Since December 31, 1998, there has been no Material Adverse
Effect.
5.12 Environmental Matters. The Company conducts in the ordinary
course of business a review of the effect of existing Environmental Laws and
existing Environmental Claims on its business, operations and properties, and as
a result thereof the Company has reasonably concluded that, except as
specifically disclosed in Schedule 5.12, such Environmental Laws and
Environmental Claims would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
5.13 Regulated Entities. None of the Company, any Person controlling
the Company, or any Subsidiary, is an "Investment Company" within the meaning of
the Investment Company Act of 1940. The Company is not subject to any other
Federal or state statute or regulation limiting its ability to incur
Indebtedness.
5.14 No Burdensome Restrictions. Neither the Company nor any
Subsidiary is a party to or bound by any Contractual Obligation, or subject to
any restriction in any Organization Document, or any Requirement of Law, which
would reasonably be expected to have a Material Adverse Effect.
5.15 Copyrights, Patents, Trademarks and Licenses, etc. Except as
disclosed in Schedule 5.15, the Company or its Subsidiaries own or are licensed
or otherwise have the right to use all of the patents, trademarks, service
marks, trade names, copyrights, contractual franchises, authorizations and other
rights that are reasonably necessary for the operation of their respective
businesses, without conflict with the rights of any other Person except where
the failure to own, be licensed to or otherwise have the right to use the same
would not have a Material Adverse Effect. To the best knowledge of the Company,
no material slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by the Company or any Subsidiary infringes upon any rights held by any
other Person where any such infringement would reasonably be expected to have a
Material Adverse Effect. Except as specifically disclosed in Schedule 5.05, no
claim or litigation regarding any of the foregoing is pending or to the
knowledge of the Company threatened, which would reasonably be expected to have
a Material Adverse Effect.
5.16 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
5.16 hereto and has no material equity investments in any other corporation or
entity other than those specifically disclosed in part (b) of Schedule 5.16.
5.17 Insurance. The properties of the Company and its Subsidiaries
are insured with financially sound and reputable insurance or reinsurance
companies, in such amounts, with such deductibles and covering such risks as are
believed by the Company to be adequate in the exercise of its reasonable
business judgment.
5.18 Year 2000. The Company and its Subsidiaries have developed and
budgeted for a comprehensive program to address the "Year 2000 Problem" (that
is, the inability of computers, as well as embedded microchips in non-computing
devices, to perform properly date-sensitive functions with respect to certain
dates prior to and after December 31, 1999). The Company and its Subsidiaries
have implemented that program substantially in accordance with its timetable
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and budget and they will substantially avoid the Year 2000 Problem as to all
computers, as well as to embedded microchips in non-computing devices, except
where failure to avoid the Year 2000 problem would be reasonably expected not to
have a Material Adverse Effect The Company and its Subsidiaries have developed
feasible contingency plans adequately to ensure uninterrupted and unimpaired
business operations in the event of failure of their own or a third party's
systems or equipment due to a Year 2000 Problem, including those of vendors,
customers and suppliers, as well as a general failure of or interruption in its
communications and delivery infrastructure, except where such failure,
interruption or impairment would reasonably be expected not to have a Material
Adverse Effect.
5.19 Full Disclosure. None of the representations or warranties made
by the Company in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, financial report or statements or certificate furnished by or on behalf
of the Company in connection with the Loan Documents, contains any untrue
statement of a material fact or omits any material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation (other than indemnification) shall remain unpaid or
unsatisfied, unless the Majority Banks waive compliance in writing:
6.01 Financial Statements. The Company shall deliver to the Agent,
in form and detail reasonably satisfactory to the Agent, with sufficient copies
for each Bank:
(a) as soon as available, but not later than the date which is the
earlier of (x) 120 days after the end of each fiscal year or (y) five (5)
Business Days after the delivery of the following financial statements to the
SEC, a copy of the audited consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of Deloitte &
Touche or another nationally-recognized independent public accounting firm
("Independent Auditor") which report shall state that such consolidated
financial statements present fairly, in all material respects, the financial
position for the periods indicated in conformity with GAAP. Such opinion shall
not be qualified or limited because of a restricted or limited examination by
the Independent Auditor of any material portion of the Company's or any
Subsidiary's records; and
(b) as soon as available, but not later than 60 days after the end
of each of the first three fiscal quarters of each fiscal year, a copy of the
unaudited consolidated balance sheet of the Company and its consolidated
Subsidiaries as of the end of such quarter and the related consolidated
statements of income and cash flows for the period commencing on the first day
and ending on the last day of such quarter, and certified on behalf of the
Company by a Responsible Officer as fairly presenting, in all material respects
and in accordance with GAAP
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(subject to ordinary, good faith year-end audit adjustments), the financial
position and the results of operations of the Company and its consolidated
Subsidiaries.
6.02 Certificates; Other Information. The Company shall furnish to
the Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsections 6.01(a) and (b), a Compliance Certificate executed by
a Responsible Officer on behalf of the Company which certifies that no Default
or Event of Default has occurred and is continuing (except as described
therein);
(b) promptly, copies of all financial statements and reports that
the Company sends to its shareholders, and copies of all financial statements
and regular, periodical or special reports (including Forms 10K, 10Q and 8K)
that the Company or any Subsidiary may make to, or file with, the SEC; and
(c) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the Agent, at
the request of any Bank, may from time to time reasonably request and which
relates to the ability of the Company to perform under this Agreement.
6.03 Notices. Upon obtaining knowledge of any event described below,
the Company shall promptly notify the Agent and each Bank:
(a) of the occurrence of any Default or Event of Default;
(b) of any of the following matters of which a Responsible Officer
obtains knowledge that would result in a Material Adverse Effect: (i) breach or
non-performance of, or any default under, a Contractual Obligation of the
Company or any Subsidiary; (ii) any dispute, litigation, investigation,
proceeding or suspension between the Company or any Subsidiary and any
Governmental Authority; or (iii) the commencement of, or any material
development in, any litigation or proceeding affecting the Company or any
Subsidiary, including pursuant to any applicable Environmental Laws;
(c) of the occurrence of any of the following events affecting the
Company or any ERISA Affiliate which would reasonably be expected to result in a
Material Adverse Effect (but in no event more than 10 days after a Responsible
Officer obtains knowledge of such event), and deliver to the Agent and each Bank
a copy of any notice with respect to such event that is filed with a
Governmental Authority and any notice delivered by a Governmental Authority to
the Company or any ERISA Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code by the
Company or any ERISA Affiliate; or
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(iv) the adoption of any amendment to a Plan subject to
Section 412 of the Code, if such amendment results in a material
increase in contributions or Unfunded Pension Liability;
(d) of any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated Subsidiaries which
would reasonably be expected to materially affect the Company's consolidated
financial reports; and
(e) of any change in the Company's senior unsecured long-term debt
ratings as publicly announced by either S&P or Moody's including placement of
such ratings on watch status, provided that any failure by the Company to give
notice of such change shall not affect the Company's payment obligations
hereunder and such failure shall not constitute an Event of Default.
Each notice under this Section shall be accompanied by a written statement by a
Responsible Officer setting forth details of the occurrence referred to therein,
and stating what action the Company or any affected Subsidiary proposes to take
with respect thereto and at what time. Each notice under subsection 6.03(a)
shall describe with particularity any and all provisions of this Agreement or
other Loan Document (if any) that have been breached or violated.
6.04 Preservation of Corporate Existence, Etc. The Company shall,
and shall cause each Material Subsidiary to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation;
(b) to the extent practicable, using reasonable efforts, preserve
and maintain in full force and effect all governmental rights, privileges,
qualifications, permits, licenses and franchises necessary or desirable in the
normal conduct of its business except (x) when the non-preservation and
non-maintenance of such rights, privileges, qualifications, permits, licenses or
franchises would reasonably be expected not to have a Material Adverse Effect or
(y) in connection with transactions permitted by Section 7.03 and sales of
assets permitted by Section 7.02;
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill except when in the reasonable
judgment of the Company it is not economical to do so or where the failure to do
so would not reasonably be expected to have a Material Adverse Effect; and
(d) to the extent practicable, using reasonable efforts, preserve or
renew all of its registered patents, trademarks, trade names and service marks,
except when non-preservation or non-renewal of such patents, trademarks, trade
names or service marks would reasonably be expected not to have a Material
Adverse Effect.
6.05 Maintenance of Property. The Company shall maintain, and shall
cause each Subsidiary to maintain, and preserve all its property which is used
or useful in its business in good working order and condition, ordinary wear and
tear and casualty loss excepted and make all necessary repairs thereto and
renewals and replacements thereof except when in the reasonable judgment of the
Company it is not economical to do so or where the failure to do so
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would not reasonably be expected to have a Material Adverse Effect. The Company
and each Subsidiary shall use the standard of care typical in the industry in
the operation and maintenance of its facilities.
6.06 Insurance. The Company shall maintain, and shall cause each
Material Subsidiary to maintain, with financially sound and reputable insurers
or independent reinsurers, insurance with respect to its properties and business
against loss or damage of the kinds and in the amounts determined by the Company
to be necessary or desirable in the exercise of its reasonable business
judgment.
6.07 Payment of Obligations. The Company shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by the Company or such Subsidiary or unless the
failure to pay or discharge would not have a Material Adverse Effect;
(b) all lawful claims which, if unpaid, would by law become a Lien
upon its property except when the failure to pay or discharge would not have a
Material Adverse Effect; and
(c) all Indebtedness, as and when due and payable (except for such
Indebtedness which is contested by the Company or any Subsidiary in good faith
or where the failure to pay or discharge would not reasonably be expected to
result in a Material Adverse Effect), but subject to any subordination
provisions contained in any instrument or agreement evidencing such
Indebtedness.
6.08 Compliance with Laws. The Company shall comply, and shall cause
each Subsidiary to comply, in all material respects with all Requirements of Law
of any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist or where
the failure to comply would not have a Material Adverse Effect.
6.09 Compliance with ERISA. The Company shall, and shall cause each
of its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law except where non-compliance would not reasonably be expected to result
in a Material Adverse Effect; and (b) make all required contributions to any
Plan subject to Section 412 of the Code except where failure to make any
contribution would not reasonably be expected to result in a Material Adverse
Effect.
6.10 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each Material Subsidiary to maintain proper books of
record and account, in which full, true and correct entries in conformity with
GAAP consistently applied shall be made of all financial transactions and
matters involving the assets and business of the Company and such Subsidiary.
Subject to reasonable safeguards to protect confidential information, the
Company shall permit, and shall cause each Material Subsidiary to permit,
representatives and independent
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contractors of the Agent to visit and inspect any of their respective
properties, to examine their respective corporate, financial and operating
records, and make copies thereof or abstracts therefrom, and with respect to the
Company but not its Subsidiaries to discuss their respective affairs, finances
and accounts with the Company's directors, senior officers, and independent
public accountants, all at such reasonable times during normal business hours
and as often as may be reasonably desired, upon reasonable advance notice to the
Company; provided, however, when an Event of Default exists the Agent or any
Bank may do any of the foregoing at the expense of the Company at any time
during normal business hours and without advance notice.
6.11 Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws except where the failure to comply would
not have a Material Adverse Effect.
6.12 Use of Proceeds. The Company shall use the proceeds of the
Loans for general corporate purposes including Acquisitions not in contravention
of any Requirement of Law or any provision of this Agreement.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation (other than indemnification) shall remain unpaid or
unsatisfied, unless the Majority Banks waive compliance in writing:
7.01 Limitation on Liens. The Company shall not, and shall not
suffer or permit any Subsidiary to, directly or indirectly, make, create, incur,
assume or suffer to exist any Lien upon or with respect to any part of its
property, whether now owned or hereafter acquired, other than the following
("Permitted Liens"):
(a) any Lien existing on property of the Company or any Subsidiary
on the Closing Date and set forth in Schedule 7.01 or shown as a liability on
the Company's consolidated financial statements as of March 31, 1999 securing
Indebtedness outstanding on such date, provided that the aggregate amount of all
such Indebtedness secured by all such Liens does not exceed $10,000,000;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that non-payment thereof is permitted by Section 6.07, provided that no notice
of lien has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which are not delinquent or remain payable without penalty or which
are being contested in good faith and by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the property
subject thereto;
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(e) Liens consisting of pledges or deposits required in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other social security legislation;
(f) Liens on the property of the Company or any of its Subsidiaries
securing (i) the non-delinquent performance of bids, trade contracts (other than
for borrowed money), leases, statutory obligations, (ii) contingent obligations
on surety and appeal bonds, and (iii) other non-delinquent obligations of a like
nature; in each case, incurred in the ordinary course of business, provided all
such Liens in the aggregate would not (even if enforced) cause a Material
Adverse Effect;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its Subsidiaries;
(h) Liens on assets of corporations which become Subsidiaries after
the date of this Agreement, provided, however, that such Liens existed at the
time the respective corporations became Subsidiaries;
(i) purchase money security interests on any property acquired or
held by the Company or its Subsidiaries in the ordinary course of business,
securing Indebtedness incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such property; provided that (i) any such Lien
attaches to such property concurrently with or within 20 days after the
acquisition thereof, (ii) such Lien attaches solely to the property so acquired
in such transaction, and (iii) the principal amount of the Indebtedness secured
thereby does not exceed 100% of the cost of such property;
(j) Liens securing obligations in respect of capital leases on
assets subject to such leases;
(k) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the FRB, and (ii) such deposit account is not intended by the Company or any
Subsidiary to provide collateral to the depository institution except in either
case when such deposit accounts are established or required in the ordinary
course of business and would not have a Material Adverse Effect; and
(l) Notwithstanding the provisions of subsections 7.01(a) through
(k), there shall be permitted Liens on property (including Liens which would
otherwise be in violation of such subsections), provided that the sum of the
aggregate Indebtedness of the Company and its Subsidiaries secured by all Liens
permitted under this subsection (l), excluding the Liens permitted under
subsections (a) through (k), shall not exceed an amount equal to 15% of the
Company's total consolidated assets as shown on its consolidated balance sheet
for its most recent prior fiscal quarter.
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7.02 Disposition of Assets. Except as otherwise permitted by any
other provision of this Agreement, the Company shall not, and shall not suffer
or permit any Material Subsidiary to, directly or indirectly, sell, assign,
lease, convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) dispositions on reasonable commercial terms and for fair value
or which would not have a Material Adverse Effect, provided that dispositions of
the stock of any Material Subsidiary shall not be permitted under this
subsection (b);
(c) dispositions of property between the Company and any
consolidated Subsidiary or among consolidated Subsidiaries; and
(d) other dispositions of property during the term of this Agreement
(excluding dispositions permitted under subsections 7.02(a) through (c)) whose
net book value in the aggregate shall not exceed 25% of the Company's total
consolidated assets as shown on its consolidated balance sheet for its most
recent prior fiscal quarter.
7.03 Consolidations and Mergers. The Company shall not, and shall
not suffer or permit any Material Subsidiary to, merge, consolidate with or
into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to or in favor of any Person,
except:
(a) any Person may merge with the Company, provided that the Company
shall be the continuing or surviving corporation;
(b) any Subsidiary may merge with the Company, provided that the
Company shall be the continuing or surviving corporation, or with any one or
more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation; and
(c) the Company or any Subsidiary may convey, transfer, lease or
otherwise dispose of all or substantially all of its assets (upon voluntary
liquidation or otherwise), to the Company or another Wholly-Owned Subsidiary, as
the case may be.
7.04 Transactions with Affiliates. The Company shall not, and shall
not suffer or permit any Subsidiary to, enter into any transaction with any
Affiliate (other than a Wholly-Owned Subsidiary) of the Company, except
transactions (a) entered into in good faith and (b) upon commercially reasonable
terms and taking into consideration the totality of circumstances pertaining to
such transaction as determined by the Company.
7.05 Use of Proceeds. The Company shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, in a manner which violates any applicable Requirement of Law and
which would have a Material Adverse Effect (provided that this Section 7.05
shall not be deemed to permit the use of Loan proceeds in violation of any
Requirement of Law applicable to any Bank). Notwithstanding the foregoing, at
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no time shall more than 25% of the value (as determined by a method deemed
reasonable for purposes of applicable regulations relating to Margin Stock) of
the Company's assets consist of Margin Stock, unless the Company has taken all
necessary action so that in the event that more than 25% of the Company's assets
consist of Margin Stock there shall occur no violation of any Requirement of Law
applicable to it or any Bank.
7.06 Restricted Payments. The Company shall not, and shall not
suffer or permit any Subsidiary (other than a Wholly-Owned Subsidiary) to,
declare or make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities on account of any shares of
any class of its capital stock, or purchase, redeem or otherwise acquire for
value any shares of its capital stock or any warrants, rights or options to
acquire such shares, now or hereafter outstanding; except that the Company or
any non-Wholly-Owned Subsidiary may:
(a) declare and make dividend payments or other distributions
payable solely in its common stock;
(b) purchase, redeem or otherwise acquire shares of its common stock
or warrants or options to acquire any such shares with the proceeds received
from the substantially concurrent issue of new shares of its common stock; and
(c) declare or pay cash dividends to its stockholders and purchase,
redeem or otherwise acquire shares of its capital stock or warrants, rights or
options to acquire any such shares for cash provided, that, before and
immediately after giving effect to such proposed action, no Default or Event of
Default exists or would exist.
7.07 ERISA. The Company shall not, and shall not suffer or permit
any of its ERISA Affiliates to: (a) engage in a prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or would reasonably be expected to result in a Material Adverse
Effect; or (b) engage in a transaction that could be subject to Section 4069 or
4212(c) of ERISA and which would reasonably be expected to result in a Material
Adverse Effect.
7.08 Change in Business. The Company shall not, and shall not suffer
or permit any Subsidiary to, engage in any business that would substantially
change the general nature of the business conducted by the Company and its
consolidated Subsidiaries on the Closing Date.
7.09 Accounting Changes. The Company shall not, and shall not suffer
or permit any Material Subsidiary to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change the
fiscal year of the Company or of any such Subsidiary, if such change would
reasonably be expected to result in a Material Adverse Effect.
7.10 Interest Coverage. The Company shall not permit as of the last
day of any fiscal quarter (commencing with the period ending March 31, 1999), on
a consolidated basis, the ratio of (i) Earnings Before Interest and Taxes to
(ii) Interest Expense, to be less than 2.5 to 1.0. For purposes of this section,
"Earnings Before Interest and Taxes" means as at the end of any fiscal quarter
of the Company for the period of four consecutive fiscal quarters ended as at
such date, the sum of (a) the consolidated net income (or net loss) of the
Company and its Subsidiaries for such period as determined in accordance with
GAAP, plus (b) all amounts treated as interest expense for such period to the
extent included in the determination of such consolidated net
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income (or loss); plus (c) all taxes accrued for such period on or measured by
income to the extent included in the determination of such consolidated net
income (or loss); provided, however, that consolidated net income (or loss)
shall be computed for the purposes of this definition without giving effect to
extraordinary losses or extraordinary gains for such period; and "Interest
Expense" means as at the end of any fiscal quarter of the Company for the period
of four consecutive fiscal quarters ended as at such date, all amounts treated
as interest expense for such period to the extent included in the determination
of the Company's consolidated net income (or net loss) for such period as
determined in accordance with GAAP.
7.11 Leverage. The Company shall not permit as of the last day of
any fiscal quarter (commencing with the period ending March 31, 1999), on a
consolidated basis, the ratio of (i) Funded Debt to (ii) Total Capitalization,
to be greater than 0.60 to 1.0.
7.12 Subsidiary Indebtedness. The Company shall not permit as of the
last day of any fiscal quarter (commencing with the period ending March 31,
1999), the aggregate Indebtedness of its consolidated Subsidiaries to exceed 25%
of shareholders' equity as set forth on the consolidated balance sheet of the
Company and its consolidated Subsidiaries as determined in accordance with GAAP
and as reflected in its most recent annual or quarterly financial statements
delivered to the Agent under Section 6.01. For purposes of this Section 7.12,
the term "Indebtedness" shall be deemed to exclude Indebtedness of a Person
which becomes a Subsidiary after the date hereof, provided that such excluded
Indebtedness existed at the time such Person became a Subsidiary and was not
created in anticipation thereof.
ARTICLE VIII
EVENTS OF DEFAULT
8.01 Event of Default. Any of the following shall constitute an
"Event of Default":
(a) Non-Payment. The Company fails to pay, (i) when and as required
to be paid herein, any amount of principal of any Loan, or (ii) within two (2)
Business Days following written notice to the Company given by the Agent or any
Bank after the same becomes due, any interest, fee or any other amount payable
hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty by
the Company or any Subsidiary made or deemed made herein, in any other Loan
Document, or which is contained in any certificate, document or financial or
other statement by the Company, any Subsidiary, or any Responsible Officer,
furnished at any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the date made or
deemed made; or
(c) Specific Defaults. The Company fails to perform or observe any
term, covenant or agreement contained in any of Sections 6.03(a), 6.12, 7.02,
7.03, 7.04, 7.05, 7.06, 7.09, 7.10, 7.11 or 7.12; or
(d) Other Defaults. The Company fails to perform or observe (i)
Section 6.01(a) hereunder and such default shall continue unremedied for a
period of 5 days after the earlier of (A) the date upon which a Responsible
Officer knew of such failure or (B) the date upon which written notice thereof
is given to the Company by the Agent or any Bank; or (ii) any
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other term or covenant contained in the Agreement or any other Loan Document,
and such default shall continue unremedied for a period of 30 days after the
earlier of (A) the date upon which a Responsible Officer knew of such failure or
(B) the date upon which written notice thereof is given to the Company by the
Agent or any Bank; or
(e) Cross-Default. (i) The Company or any Subsidiary fails to
perform or observe any condition or covenant, or any other event shall occur or
condition shall exist, under any agreement or instrument relating to any
Indebtedness having an aggregate principal amount (including undrawn committed
or available amounts and including amounts owing to all creditors under any
combined or syndicated credit arrangement) of more than $50,000,000, and such
failure continues after the applicable grace or notice period, if any, specified
in the relevant document on the date of such failure, if the effect of such
failure, event or condition is to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity; or (ii) if there shall occur any
default or event of default, however denominated, under any cross default
provision under any agreement or instrument relating to any such Indebtedness of
more than $50,000,000; or
(f) Insolvency; Voluntary Proceedings. The Company or any Material
Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Material Subsidiary,
or any writ, judgment, warrant of attachment, execution or similar process, is
issued or levied against a substantial part of the Company's or any such
Subsidiary's properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, stayed, vacated or fully bonded within 60 days
after commencement, filing, issuance or levy; (ii) the Company or any Material
Subsidiary admits the material allegations of a petition against it in any
Insolvency Proceeding, or an order for relief (or similar order under non-U.S.
law involving a material portion of the Company's or such Subsidiary's total
assets) is ordered in any Insolvency Proceeding involving the Company or any
such Subsidiary; or (iii) the Company or any Material Subsidiary acquiesces in
the appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person for itself
or a substantial portion of its property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a Pension
Plan or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of the Company under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $50,000,000;
(ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans
at any time exceeds $50,000,000; or (iii) the Company or any ERISA Affiliate
shall fail to pay when due, after the expiration of any applicable grace period,
any installment payment with respect to its withdrawal liability under Section
4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$50,000,000 and, in the case of any of clauses (i) through (iii), such liability
or failure to pay shall not have been vacated,
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discharged, stayed, appealed or paid within ten (10) Business Days after such
liability or payment obligation arises; or
(i) Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, non-interlocutory decrees or arbitration awards is
entered against the Company or any Material Subsidiary involving in the
aggregate a liability (to the extent not covered by independent third-party
insurance as to which the insurer does not dispute coverage) as to any single or
related series of transactions, incidents or conditions, of $50,000,000 or more,
and the same shall not have been vacated, discharged, stayed or appealed within
the applicable period for appeal from the date of entry thereof or paid within
ten (10) Business Days after the same becomes non-appealable; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or
decree is entered against the Company or any Subsidiary which does or would
reasonably be expected to have a Material Adverse Effect; or
(k) Change of Control. There occurs any Change of Control. For
purposes of this Section 8.01(k), (i) a "Change of Control" shall occur if any
person or group of persons becomes the beneficial owner of 25% or more of the
voting power of the Company for a period of 30 days or more; and (ii) the term
"person" shall have the meaning set forth in Section 13(d) of the Exchange Act
and the term "beneficial owner" shall have the meaning set forth in Rule 13d-3
promulgated under the Exchange Act.
8.02 Remedies. If any Event of Default occurs, the Agent shall, at
the request of, or may, with the consent of, the Majority Banks,
(a) declare the obligation of each Bank to make any Loans to be
terminated, whereupon such obligation and such Commitment shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or applicable
law;
provided, however, that upon the occurrence of any event specified in subsection
(f) or (g) of Section 8.01 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans shall automatically terminate and the unpaid principal amount of
all outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Agent or any
Bank without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Company.
8.03 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents (whether now existing or hereafter arising) are
cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by law or in equity.
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ARTICLE IX
THE AGENT
9.01 Appointment and Authorization. Each Bank hereby irrevocably
appoints, designates and authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
9.02 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
9.03 Liability of Agent. None of the Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Company or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Bank to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
9.04 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Company), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Majority Banks (or all the Banks if specifically
required hereunder) as it deems appropriate and, if it so requests, it shall
first be indemnified to
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its satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the Majority Banks (or all the Banks if specifically
required hereunder) and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 4.01, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent on or prior to the Closing Date by the
Agent to such Bank for consent, approval, acceptance or satisfaction, or
required thereunder to be consented to or approved by or acceptable or
satisfactory to the Bank.
9.05 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Agent for the account of the Banks, unless the Agent shall
have received written notice from a Bank or the Company referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". The Agent will notify the Banks of its receipt
of any such notice. The Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Majority Banks in
accordance with Article VIII; provided, however, that unless and until the Agent
has received any such request, the Agent 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 it shall deem advisable or in the best interest
of the Banks.
9.06 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company. Except for notices,
reports and other documents expressly herein required to be furnished to the
Banks by the Agent, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company which may come into the possession of any of the
Agent-Related Persons.
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9.07 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from and against any
and all Indemnified Liabilities; provided, however, that no Bank shall be liable
for the payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank shall reimburse the
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that the Agent is not reimbursed for such expenses by or on behalf
of the Company. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of the Agent.
9.08 Agent in Individual Capacity. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent hereunder and
without notice to or consent of the Banks. The Banks acknowledge that, pursuant
to such activities, BofA or its Affiliates may receive information regarding the
Company or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such Subsidiary) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BofA shall have the same rights
and powers under this Agreement as any other Bank and may exercise the same as
though it were not the Agent, and the terms "Bank" and "Banks" include BofA in
its individual capacity.
9.09 Successor Agent. The Agent may, and at the request of the
Company (so long as no Default or Event of Default exists at the time of such
request) or the Majority Banks shall, resign as Agent upon 30 days' notice to
the Banks. If the Agent resigns under this Agreement, the Company shall appoint
from among the Banks a successor agent for the Banks (unless an Event of Default
then exists in which case the Majority Banks shall appoint the successor agent).
If no successor agent is appointed prior to the effective date of the
resignation of the Agent, the Agent may appoint, after consulting with the Banks
and the Company, a successor agent from among the Banks. Upon the acceptance of
its appointment as successor agent hereunder, such successor agent shall succeed
to all the rights, powers and duties of the retiring Agent and the term "Agent"
shall mean such successor agent and the retiring Agent's appointment, powers and
duties as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article IX and Sections 10.04 and
10.05 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under this Agreement. If no successor agent has
accepted appointment as Agent by the date which is 30 days following a retiring
Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Banks shall perform all of the
duties of the Agent hereunder until such time, if any, as the Company or the
Majority Banks appoint a successor agent as provided for above.
9.10 Withholding Tax.
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(a) If any Bank claims exemption from withholding tax under a United
States tax treaty by providing IRS Form 1001 and such Bank sells, assigns,
grants a participation in, or otherwise transfers all or part of the Obligations
of the Company to such Bank, such Bank agrees to notify the Agent of the
percentage amount in which it is no longer the beneficial owner of Obligations
of the Company to such Bank. To the extent of such percentage amount, the Agent
will treat such Bank's IRS Form 1001 as no longer valid.
(b) Subject to the requirements of this Agreement, if any Bank
claiming exemption from United States withholding tax by filing IRS Form 4224
with the Agent sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of the Company to such Bank, such Bank agrees to
undertake sole responsibility for complying with the withholding tax
requirements imposed by Sections 1441 and 1442 of the Code.
(c) If the IRS or any other Governmental Authority of the United
States or any other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered, was not properly executed, or because such
Bank failed to notify the Agent of a change in circumstances which rendered the
exemption from withholding tax ineffective, or for any other reason) such Bank
shall indemnify the Agent fully for all amounts paid, directly or indirectly, by
the Agent as tax or otherwise, including penalties and interest, and including
any taxes imposed by any jurisdiction on the amounts payable to the Agent under
this subsection, together with all costs and expenses (including Attorney
Costs). The obligation of the Banks under this subsection shall survive the
payment of all Obligations and the resignation or replacement of the Agent.
ARTICLE X
MISCELLANEOUS
10.01 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by the Company therefrom, shall be effective unless the
same shall be in writing and signed by the Majority Banks (or by the Agent at
the written request of the Majority Banks) and the Company and acknowledged by
the Agent, and then any such waiver and consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in writing and
signed by all the Banks and the Company and acknowledged by the Agent, do any of
the following:
(a) increase or extend the Commitment of any Bank (or reinstate any
Commitment terminated pursuant to subsection 8.02(a));
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, facility fees or other
material amounts due to the Banks (or any of them) hereunder or under any other
Loan Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or (subject to clause (ii) below) any facility fees or other
amounts payable hereunder or under any other Loan Document;
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(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Banks or any of
them to take any action hereunder; or
(e) amend this Section, or Section 2.14, or any provision herein
providing for consent or other action by all Banks;
and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Majority Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document, and (ii) the Fee Letter may be amended, or
rights or privileges thereunder waived, in a writing executed by the parties
thereto.
10.02 Notices.
(a) All notices, requests and other communications shall be in
writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by facsimile (i)
shall be immediately confirmed by a telephone call to the recipient at the
number specified on Schedule 10.02, and (ii) shall be followed promptly by
delivery of a hard copy original thereof) and mailed, faxed or delivered, to the
address or facsimile number specified for notices on Schedule 10.02; or, as
directed to the Company or the Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Company and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the fifth Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II or IX shall not be effective until actually
received by the Agent.
(c) Any agreement of the Agent and the Banks herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Company. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the Company
to give such notice and, absent gross negligence or willful misconduct, the
Agent and the Banks shall not have any liability to the Company or other Person
on account of any action taken or not taken by the Agent or the Banks in
reliance upon such telephonic or facsimile notice. The obligation of the Company
to repay the Loans shall not be affected in any way or to any extent by any
failure by the Agent and the Banks to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Agent and the Banks of a
confirmation which is at variance with the terms understood by the Agent and the
Banks to be contained in the telephonic or facsimile notice.
10.03 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right,
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remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege.
10.04 Costs and Expenses. The Company shall:
(a) pay or reimburse the Agent within five Business Days after
demand for all reasonable costs and expenses incurred by the Agent in connection
with the development, preparation, negotiation and closing of this Agreement and
the Loan Documents and any other documents prepared in connection therewith
(whether or not closing occurs), and the administration of, and any amendment,
supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any such other documents,
including reasonable Attorney Costs incurred by the Agent with respect thereto;
and
(b) pay or reimburse the Agent, the Arranger and each Bank within
five Business Days after demand for all reasonable costs and expenses (including
Attorney Costs) incurred by them in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this Agreement or
any other Loan Document during the existence of an Event of Default or after
acceleration of the Loans (including in connection with any "workout" or
restructuring regarding the Loans, and including in any Insolvency Proceeding or
appellate proceeding).
10.05 Indemnity. Whether or not the transactions contemplated hereby
are consummated, the Company shall indemnify and hold the Agent-Related Persons,
and each Bank and each of its respective officers, directors, employees,
counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses and disbursements
(including reasonable Attorney Costs) of any kind or nature whatsoever which may
at any time (including at any time following repayment of the Loans and the
termination, resignation or replacement of the Agent or replacement of any Bank)
result from an action, suit, proceeding or claim asserted against any such
Indemnified Person by any Person not entitled to indemnification under this
section in any way relating to or arising out of this Agreement or any document
contemplated by or referred to herein, or the transactions contemplated hereby,
or any action taken or omitted by any such Person under or in connection with
any of the foregoing, including with respect to any investigation, litigation or
proceeding (including any Insolvency Proceeding or appellate proceeding) related
to or arising out of this Agreement or the Loans or the use of the proceeds
thereof, whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the "Indemnified Liabilities"); provided, however, that
the Company shall not be liable to any Indemnified Person for any portion of
such Indemnified Liabilities resulting from such Indemnified Person's gross
negligence or willful misconduct. In the event this indemnity is unenforceable
as a matter of law as to a particular matter or consequence referred to herein,
it shall be enforceable to the full extent permitted by law. Promptly upon
receipt of notice of the making of any claim or the initiation of any action,
suit, or proceeding (together, "Dispute"), the Indemnified Person shall, if a
claim in respect thereof is to be made against the Company hereunder, notify the
Company in writing thereof, provided that any failure to provide such notice
shall not excuse the Company from its obligations under this Section, except to
the extent that such failure to notify shall have materially prejudiced the
Company's position. The Company shall have the right at its expense to control
the defense of any Dispute, provided the Company has delivered prompt notice to
the Indemnified Person expressly agreeing to assume
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the defense thereof and reaffirming its obligation to indemnify and hold
harmless hereunder, with nationally-recognized counsel selected by the Company,
but reasonably satisfactory to the Indemnified Person. In such event, the
Company shall promptly notify the Indemnified Person of any and all material
developments in such Dispute and the Company shall not agree to any settlement
or material stipulation in such Dispute without the prior written consent of the
Indemnified Person (such consent not to be unreasonably withheld).
Notwithstanding the foregoing, if in the reasonable judgment of the Indemnified
Person, there may exist BONA FIDE legal defenses available to it relating to the
Dispute which conflict with those of the Company or another Indemnified Person,
such Indemnified Person shall have the right to select separate counsel, at the
expense of the Company, to assert such legal defenses and otherwise participate
in the legal defense of such Dispute on behalf of such Indemnified Person.
Notwithstanding the foregoing, no Dispute subject to this paragraph shall be
settled without the Company's prior consent, not to be unreasonably withheld;
provided, however, that any Indemnified Person may settle any such Dispute
without the Company's consent if (a) the market reputation of BofA or its
Affiliates, or any Bank or its Affiliates which becomes an Indemnified Person
under this Section 10.05, or the relationship of any of such Persons with their
applicable state or federal regulators, in the judgment of such Persons, is
being or foreseeably will be materially impaired as a result of the continuation
of such Dispute, or (b) such Dispute involves or relates to any allegation of
criminal wrongdoing, or (c) the Company is disputing its obligation to indemnify
under this Section, or (d) the Company has failed to respond to any request for
such consent within 10 days of its receipt of written notice of such proposed
settlement. No Indemnified Person shall have any liability to the Company or any
of its Affiliates for any indirect or consequential damages in connection with
its activities related to this Agreement. The agreements in this Section shall
survive payment of all other Obligations and the termination of the Commitments.
10.06 Payments Set Aside. To the extent that the Company makes a
payment to the Agent or the Banks, or the Agent or the Banks exercise their
right of set-off, and such payment or the proceeds of such set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Insolvency Proceeding or otherwise, then (a)
to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b)
each Bank severally agrees to pay to the Agent upon demand its pro rata share or
other applicable share of any amount so recovered from or repaid by the Agent.
10.07 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Agent and each Bank and no Bank shall assign any of its
rights or obligations hereunder except in accordance with Section 10.08.
10.08 Assignments, Participations, etc.
(a) Any Bank may, with the written consent of the Company at all
times other than during the existence of an Event of Default and the Agent,
which consents shall not be unreasonably withheld, at any time assign and
delegate to one or more Eligible Assignees
55.
<PAGE>
(provided that no written consent of the Company or the Agent shall be required
in connection with any assignment and delegation by a Bank to an Eligible
Assignee that is an Affiliate of such Bank) (each an "Assignee") all, or any
ratable part of all, of the Loans, the Commitment and the other rights and
obligations of such Bank hereunder, in a minimum amount of $15,000,000;
provided, however, that the Company and the Agent may continue to deal solely
and directly with such Bank in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee,
shall have been given to the Company and the Agent by such Bank and the
Assignee; (ii) such Bank and its Assignee shall have delivered to the Company
and the Agent an Assignment and Acceptance in the form of Exhibit I ("Assignment
and Acceptance") and (iii) the assignor Bank or Assignee has paid to the Agent a
processing fee in the amount of $4,000, provided that in the case of a transfer
under Section 3.08, the assignor Bank shall not be obligated to pay such
processing fee.
(b) From and after the date that the Agent notifies the Company and
the assignor Bank that it has received an executed Assignment and Acceptance
which has been consented to by the Agent and by the Company (if required), and
payment of the above-referenced processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, shall have
the rights and obligations of a Bank under the Loan Documents, and (ii) the
assignor Bank shall, to the extent that rights and obligations hereunder and
under the other Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice by the
Agent that it has received an executed Assignment and Acceptance and payment of
the processing fee (and provided that the Agent and the Company consent to such
assignment in accordance with subsection 10.08(a), to the extent required), the
Company shall execute and deliver to the Agent a Bid Loan Note for the Assignee
(if the Assignee was not previously a Bank under this Agreement) and, if the
assignor Bank is not retaining any interest in this Agreement such assignor Bank
shall promptly cancel and return its Bid Loan Note to the Agent for return to
the Company. Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Bank pro tanto.
(d) Any Bank may, with the written consent of the Company at all
times other than during the existence of an Event of Default, which consent
shall not be unreasonably withheld, at any time sell to one or more Eligible
Assignees (a "Participant") participating interests in any Loans, the Commitment
of that Bank and the other interests of that Bank (the "originating Bank")
hereunder and under the other Loan Documents; provided, however, that (i) the
originating Bank's obligations under this Agreement shall remain unchanged, (ii)
the originating Bank shall remain solely responsible for the performance of such
obligations, (iii) the Company and the Agent shall continue to deal solely and
directly with the originating Bank in connection with the originating Bank's
rights and obligations under this Agreement and the other Loan Documents, (iv)
no Bank shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to,
56.
<PAGE>
this Agreement or any other Loan Document, except to the extent such amendment,
consent or waiver would require unanimous consent of the Banks as described in
the first proviso to Section 10.01 and (v) with respect to the sale of
participating interests in any Bid Loan to any Participant, (x) the Company's
consent shall not be required and (y) the Participant need not be an Eligible
Assignee. In the case of any such participation, the Participant shall not have
any rights under this Agreement, or any of the other Loan Documents, and all
amounts payable by the Company hereunder shall be determined as if such Bank had
not sold such participation.
(e) Each Bank agrees to take normal and reasonable precautions and
exercise due care to maintain the confidentiality of all information identified
as "confidential" or "secret" by the Company and provided to it by the Company
or any Subsidiary, or by the Agent on such Company's or Subsidiary's behalf,
under this Agreement or any other Loan Document, and neither it nor any of its
Affiliates shall disseminate such information except on a "need to know" basis
to employees of such Bank or Affiliate, as the case may be, and their respective
representatives or use any such information other than in connection with or in
enforcement of this Agreement and the other Loan Documents; except to the extent
such information (i) was or becomes generally available to the public other than
as a result of disclosure by the Bank, or (ii) was or becomes available on a
non-confidential basis from a source other than the Company, provided that such
source is not bound by a confidentiality agreement with the Company known to the
Bank; provided, however, that any Bank may disclose such information (A) at the
request or pursuant to any requirement of any Governmental Authority to which
the Bank is subject or in connection with an examination of such Bank by any
such authority; (B) pursuant to subpoena or other court process (provided that
such Bank shall promptly notify the Company of any such subpoena or process,
unless it is legally prohibited from doing so, and cooperate with the Company at
the Company's expense in obtaining a suitable order protecting the
confidentiality of such information); (C) when required to do so in accordance
with the provisions of any applicable Requirement of Law; (D) to the extent
reasonably required in connection with any litigation or proceeding to which the
Agent, any Bank or their respective Affiliates may be party provided that such
Bank will promptly notify the Company of any such disclosure and use reasonable
efforts at the Company's expense to obtain a suitable order protecting the
confidentiality of such information; (E) to the extent reasonably required in
connection with the exercise of any remedy hereunder or under any other Loan
Document; (F) to such Bank's independent auditors and other professional
advisors; and (G) to any Affiliate of such Bank, or to any Participant or
Assignee, actual or (provided that there exists no Event of Default, with the
written consent of the Company, ) potential, provided that such Affiliate,
Participant or Assignee agrees in writing to keep such information confidential
to the same extent required of the Banks hereunder.
(f) Notwithstanding any other provision in this Agreement, any Bank
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement and any Note held by it in favor
of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce
such pledge or security interest in any manner permitted under applicable law.
If requested by any such Bank for purposes of this subsection 10.08(f), the
Company shall execute and deliver to such Bank a promissory note evidencing such
Bank's Committed Loans, which promissory note shall be in a form reasonably
satisfactory to the Agent and the Company.
57.
<PAGE>
10.09 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists, each Bank is authorized at any
time and from time to time, without prior notice to the Company, any such notice
being waived by the Company 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 by, and other indebtedness at any time owing by, such
Bank to or for the credit or the account of the Company against any and all
Obligations owing to such Bank, now or hereafter existing, irrespective of
whether or not the Agent or such Bank shall have made demand under this
Agreement or any Loan Document and although such Obligations may be contingent
or unmatured. In the event of any inconsistency between this section and any
agreement governing deposits maintained by the Company with any Bank, this
Section shall control with respect to set-offs affecting this Agreement. Each
Bank agrees promptly to notify the Company and the Agent after any such set-off
and application made by such Bank; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application.
10.10 Notification of Addresses, Lending Offices, Etc. Each Bank
shall notify the Agent in writing of any changes in the address to which notices
to the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
10.11 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
10.12 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
10.13 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Banks, the
Agent and the Agent-Related Persons, and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
10.14 Governing Law and Jurisdiction.
(a) THIS AGREEMENT (AND THE NOTES) SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT
THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE BANKS
CONSENTS,
58.
<PAGE>
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND THE BANKS IRREVOCABLY WAIVES
ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO.
10.15 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT
EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE
BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
10.16 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Banks and the Agent, and supersedes all prior or contemporaneous agreements
and understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof. Each Loan Document was drafted with the joint
participation of the respective parties thereto and shall be construed neither
against nor in favor of any party, but rather in accordance with the fair
meaning thereof.
59.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
DELUXE CORPORATION
By /s/ Morris Goodwin
----------------------------------
Title Treasurer
----------------------------------
BANK OF AMERICA, N.A, as Agent
By /s/ Kenneth J. Beck
----------------------------------
Title Vice President
----------------------------------
BANK OF AMERICA, N.A., as a Bank
By /s/ Kenneth J. Beck
----------------------------------
Title Vice President
----------------------------------
<PAGE>
ABN AMRO BANK N.V.
By /s/ Peter L. Eaton
----------------------------------
Title Group Vice President
----------------------------------
By /s/ John P. Richardson
----------------------------------
Title Vice President
----------------------------------
BANCA DI ROMA - CHICAGO BRANCH
By /s/ Joyce Montgomery
----------------------------------
Title Assistant Vice President
----------------------------------
By /s/ Luca Balestra
----------------------------------
Title Vice President &
Deputy Branch Manager
----------------------------------
THE BANK OF NEW YORK
By /s/ Richard A. Raffetto
----------------------------------
Title Vice President
----------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Thomas F. Jewyl
----------------------------------
Title Vice President
----------------------------------
<PAGE>
FIRSTAR BANK, NATIONAL ASSOCIATION
By /s/ Thomas V. Hill
----------------------------------
Title Vice President
----------------------------------
LLOYDS TSB BANK plc
By /s/ Windsor R. Davies
----------------------------------
Title Director, Corporate Banking USA
----------------------------------
By /s/ David C. Rodway
----------------------------------
Title Assistant Vice President
----------------------------------
THE NORTHERN TRUST COMPANY
By /s/ Lisa W. Taylor
----------------------------------
Title Second Vice President
----------------------------------
SUNTRUST BANK,
CENTRAL FLORIDA, N.A.
By /s/ W. David Wisdom
----------------------------------
Title Vice President
----------------------------------
<PAGE>
UMB BANK, N.A.
By /s/ Robert P. Elbert
----------------------------------
Title Vice President
----------------------------------
WACHOVIA BANK, N.A.
By /s/ Francis W. Josephia
----------------------------------
Title Vice President
----------------------------------
WELLS FARGO BANK, N.A.
By /s/ Chad M. Kortgard
----------------------------------
Title Corporate Banking Officer
----------------------------------
<PAGE>
ANNEX I
ANNEX I
PRICING GRID
------------------ ---------------- ---------------
Committed Loan Committed
LIBO Rate Loan Base Rate
Level Status Spread Spread
------------------ ---------------- ---------------
Level I .23% 0%
------------------ ---------------- ---------------
Level II .275% 0%
------------------ ---------------- ---------------
Level III .37% 0%
------------------ ---------------- ---------------
Level IV .5% 0%
------------------ ---------------- ---------------
Level V .625% 0%
------------------ ---------------- ---------------
Level VI .85% 0%
------------------ ---------------- ---------------
Level VII 1.3% .05%
------------------ ---------------- ---------------
"Level I Status" exists at any date if, at such date the
Company's senior unsecured long-term debt ratings are rated either
A+ or higher (or the equivalent) as publicly announced by S&P or A1
or higher (or the equivalent) as publicly announced by Moody's.
"Level II Status" exists at any date if, at such date
(i) the Company's senior unsecured long-term debt ratings are rated
either A or higher (or the equivalent) as publicly announced by S&P
or A2 or higher (or the equivalent) as publicly announced by Moody's
and (ii) Level I Status does not exist.
"Level III Status" exists at any date if, at such date
(i) the Company's senior unsecured long-term debt ratings are rated
either A- or higher (or the equivalent) as publicly announced by S&P
or A3 or higher (or the equivalent) as publicly announced by Moody's
and (ii) Level I Status and Level II Status do not exist.
"Level IV Status" exists at any date if, at such date
(i) the Company's senior unsecured long-term debt ratings are rated
either BBB+ or higher (or the equivalent) as publicly announced by
S&P or Baa1 or higher (or the equivalent) as publicly announced by
Moody's and (ii) Level I Status, Level II Status and Level III
Status do not exist.
"Level V Status" exists at any date if, at such date (i)
the Company's senior unsecured long-term debt ratings are rated
either BBB or higher (or the equivalent) as publicly announced by
S&P or Baa2 or higher (or the equivalent) as publicly announced by
Moody's and (ii) Level I Status, Level II Status, Level III Status
and Level IV Status do not exist.
"Level VI Status" exists at any date if, at such date
(i) the Company's senior unsecured long-term debt ratings are rated
either BBB- or higher (or the equivalent) as publicly announced by
S&P or Baa3 or higher (or the equivalent) as publicly announced
<PAGE>
by Moody's and (ii) Level I Status, Level II Status, Level III
Status, Level IV Status and Level V Status do not exist.
"Level VII Status" exists at any date if, at such date
(i) the Company's senior unsecured long-term debt ratings and rated
lower than BBB- (or the equivalent) as publicly announced by S&P and
lower than Baa3 as publicly announced by Moody's, or (ii) the
Company's senior unsecured long-term debt is unrated by both S&P and
Moody's.
<PAGE>
EXHIBIT A
FORM OF TRANSMITTAL LETTER/COMPLIANCE CERTIFICATE
DELUXE CORPORATION
Financial Statements Date: ______________
Reference is made to that certain Credit Agreement dated as of
August __, 1999 (as extended, renewed, amended or restated from time to time,
the "Credit Agreement"), among Deluxe Corporation (the "Company"), the several
financial institutions from time to time party thereto (the "Banks") and Bank of
America, N.A., as Agent (in such capacity, the "Agent"). Unless otherwise
defined herein, capitalized terms used herein have the respective meanings
assigned to them in the Credit Agreement.
[USE THE FOLLOWING IF THIS TRANSMITTAL LETTER/CERTIFICATE IS DELIVERED IN
CONNECTION WITH THE FINANCIAL STATEMENTS REQUIRED BY SUBSECTION 6.01(a) OF THE
CREDIT AGREEMENT.]
Transmittal Letter
Pursuant to subsection 6.01(a) of the Credit Agreement, attached
hereto are true copies of the audited consolidated balance sheet of the Company
and its consolidated Subsidiaries as at the end of the fiscal year ended
_______________ and the related consolidated statements of income or operations,
shareholders' equity and cash flows for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, accompanied by the
opinion of the Independent Auditor, which report states that such consolidated
financial statements present fairly, in all material respects, the financial
position for the periods indicated in conformity with GAAP.
Certificate
The undersigned hereby certifies that he/she is a Responsible
Officer as defined in the Credit Agreement and hereby certifies as of the date
hereof on behalf of the Company and its consolidated Subsidiaries that:
1. No Default or Event of Default has occurred and is continuing,
except as described in Attachment 1 hereto.
2. The computations set forth below are true and correct as of
_________________, ____, the last day of the accounting period for which the
aforesaid financial statements were prepared.
3. If the financial statements of the Company being concurrently
delivered were not prepared in accordance with GAAP, Attachment 2 hereto sets
forth any derivations required to conform the relevant data in such financial
statements to the computations set forth below.
A-1
<PAGE>
4. There have been no changes in accounting policies or financial
reporting practices of the Company or any of its Subsidiaries since the date of
the last compliance certificate delivered to you, except as described in
Attachment 3 hereto.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
behalf of the Company (and not personally) as the ____________ of the Company as
of ______________, _______.
DELUXE CORPORATION
By:_____________________________________
Title: _________________________________
[USE THE FOLLOWING PARAGRAPH IF THIS CERTIFICATE IS DELIVERED IN CONNECTION WITH
THE FINANCIAL STATEMENTS REQUIRED BY SUBSECTION 6.01(b) OF THE CREDIT
AGREEMENT.]
Certificate
The undersigned hereby certifies that he/she is a Responsible
Officer as defined in the Credit Agreement and hereby certifies as of the date
hereof on behalf of the Company and its Consolidated Subsidiaries, and that:
1. Pursuant to Section 6.01(b) of the Credit Agreement, attached
hereto are true copies of the unaudited consolidated balance sheet of the
Company and its consolidated Subsidiaries as of the end of the fiscal quarter
ended _________ and the related consolidated statements of income and cash flows
for the period commencing on the first day and ending on the last day of such
quarter, which fairly present in all material respects and in accordance with
GAAP (subject to ordinary, good faith year-end audit adjustments), the financial
position and the results of operations of the Company and its consolidated
Subsidiaries.
2. No Default or Event of Default has occurred and is continuing,
except as described in Attachment 1 hereto.
3. The computations set forth below are true and correct as of
_________________, ____, the last day of the accounting period for which the
aforesaid financial statements were prepared.
4. If the financial statements of the Company being concurrently
delivered were not prepared in accordance with GAAP, Attachment 2 hereto sets
forth any derivations required to conform the relevant data in such financial
statements to the computations set forth below.
5. There have been no changes in accounting policies or financial
reporting practices of the Company or any of its Subsidiaries since the date of
the last compliance certificate delivered to you, except as described in
Attachment 3 hereto.
A-2
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
behalf of the Company (and not personally) as the ____________ of the Company as
of ______________, _______.
DELUXE CORPORATION
By:_____________________________________
Title: _________________________________
A-3
<PAGE>
SCHEDULE 1
to the Compliance Certificate
Dated _______________ / For the fiscal quarter ended ___________.
<TABLE>
<CAPTION>
Actual Required/Permitted
------ ------------------
<S> <C> <C>
I. Section 7.10 - Interest Coverage
Ratio of Earnings Before Interest and Taxes to
Interest Expense under Section 7.10 Not less than 2.50 to 1.00
___________ to 1.00 (measured as of the last day of
any fiscal quarter)
II. Section 7.11 - Leverage
Ratio of Funded Debt to Total Capitalization under Not greater than 0.60 to 1.00
Section 7.11 ___________ to 1.00 (measured as of the last day of
any fiscal quarter)
III. Section 7.12 - Subsidiary Indebtedness
Aggregate Indebtedness of Company's Not greater than 25% of
consolidated Subsidiaries ___________________ shareholders' equity
(measured as of the last day of
any fiscal quarter)
</TABLE>
1
<PAGE>
EXHIBIT B
FORM OF NOTICE OF BORROWING
Date: ______________
To: Bank of America, N.A.,
as Agent
Ladies and Gentlemen:
The undersigned, Deluxe Corporation (the "Company"), refers to the
Credit Agreement, dated as of August __, 1999 (as extended, renewed, amended or
restated from time to time, the "Credit Agreement"), among the Company, the
several financial institutions from time to time party thereto (the "Banks") and
Bank of America, N.A., as Agent (the "Agent"), the terms defined therein being
used herein as therein defined, and hereby gives you notice irrevocably,
pursuant to Section 2.03 of the Credit Agreement, of the Committed Borrowing
specified below:
1. The Business Day of the proposed Committed Borrowing is
_______________.
2. The aggregate amount of the proposed Committed Borrowing is
$_____________________.
3. The Committed Borrowing is to be comprised of $___________ of
[Offshore Rate] [Base Rate] Committed Loans.
4. [If applicable:] The duration of the Interest Period for the
Offshore Rate Committed Loans included in the Committed Borrowing shall be _____
months.
5. As of the date hereof, the current senior credit rating
established or deemed established for the Company by Moody's and S&P is
_________ for Moody's and _________ for S&P.
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the proposed Committed
Borrowing, before and after giving effect thereto and to the application of the
proceeds therefrom:
(a) the representations and warranties of the Company contained in
Article V of the Credit Agreement are true and correct as though made on
and as of such date, except to the extent such representations and
warranties expressly refer to an earlier date, in which case they are true
and correct as of such date;
(b) no Default or Event of Default has occurred and is continuing,
or would result from such proposed Committed Borrowing;
B-1.
<PAGE>
(c) after giving effect to the proposed Committed Borrowing the
aggregate principal amount of all outstanding Committed Loans plus the
aggregate principal amount of all Bid Loans outstanding, does not exceed
the combined Commitments.
DELUXE CORPORATION
By: ____________________________________
Title: _________________________________
B-2.
<PAGE>
EXHIBIT C
FORM OF NOTICE OF CONVERSION/CONTINUATION
Date: _______________
To: Bank of America, N.A.,
as Agent
Ladies and Gentlemen:
The undersigned, Deluxe Corporation (the "Company"), refers to the
Credit Agreement, dated as of August __, 1999 (as extended, renewed, amended or
restated from time to time, the "Credit Agreement"), among the Company, the
several financial institutions from time to time party thereto (the "Banks") and
Bank of America, N.A., as Agent (the "Agent"), the terms defined therein being
used herein as therein defined, and hereby gives you notice irrevocably,
pursuant to Section 2.04 of the Credit Agreement, of the [conversion]
[continuation] of Committed Loans specified below:
1. The Conversion/Continuation Date is ______________.
2. The aggregate amount of the Committed Loans to be [converted]
[continued] is $_______________.
3. The Committed Loans are to be [converted into] [continued as]
[Offshore Rate] [Base Rate] Committed Loans.
4. [If applicable:] The duration of the Interest Period for the
Committed Loans included in the [conversion] [continuation] shall be ____
months.
5. As of the date hereof, the current senior credit rating
established or deemed established for the Company by Moody's and S&P is
_________ for Moody's and _________ for S&P.
The undersigned hereby certifies that the following statements will
be true on and as of the proposed Conversion/Continuation Date, before and after
giving effect thereto and to the application of the proceeds therefrom:
(a) the representations and warranties of the Company contained in
Article V of the Credit Agreement are true and correct as though made on
and as of such date (except to the extent such representations and
warranties relate to an earlier date, in which case they are true and
correct as of such date;
(b) no Default or Event of Default exists or shall result from such
proposed [conversion] [continuation];
C-1.
<PAGE>
(c) after giving effect to the proposed [conversion][continuation],
the aggregate principal amount of all outstanding Committed Loans plus the
aggregate principal amount of all Bid Loans outstanding, does not exceed
the combined Commitments.
DELUXE CORPORATION
By: ____________________________________
Title: _________________________________
C-2.
<PAGE>
EXHIBIT D
FORM OF INVITATION FOR COMPETITIVE BIDS
Via Facsimile
Date: __________________
To the Banks Listed on Annex A Attached Hereto
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of
August __, 1999 (as extended, renewed, amended or restated from time to time,
the "Credit Agreement"), among Deluxe Corporation (the "Company"), the Banks
party thereto and Bank of America, N.A., as Agent for the Banks (the "Agent").
Capitalized terms used herein have the meanings specified in the Credit
Agreement.
Pursuant to subsection 2.06(b) of the Credit Agreement, you are
hereby invited to submit offers to make Bid Loans to the Company based on the
following specifications:
1. Date of Bid Borrowing: _______________;
2. Aggregate amount of Bid Borrowing: $___________________;
3. The Bid Loans shall be: [LIBOR Bid Loans] [Absolute Rate Bid
Loans]; and
4. Interest Period[s] and requested Interest Payment Dates, if any:
[____________________], [________________] and [________________].
All Competitive Bids shall be in the form of Exhibit F to the Credit
Agreement and shall be received by the Agent no later than 6:30 a.m. (San
Francisco time) on ___________, _____; provided that terms of the offer or
offers contained in any Competitive Bid(s) to be submitted by the Agent (or any
Affiliate of the Agent) shall be notified to the Company not later than 6:15
a.m. (San Francisco time) on _____________.(1)
BANK OF AMERICA, N.A., as Agent
By: ____________________________________
Title: _________________________________
- ----------
(1) Insert a date which is three Business Days prior to the date of Borrowing,
in the case of a LIBOR Auction, or on the date of Borrowing, in the case of an
Absolute Rate Auction.
D-1
<PAGE>
ANNEX A
to the Invitation for Competitive Bids
List of Bid Loan Banks
[Bank of America, N.A.,
as a Bank]
Facsimile: (415) 622-____
[Bank]
Facsimile: (___) ___-____
[Bank]
Facsimile: (___) ___-____
[Bank]
Facsimile: (___) ___-____
[Bank]
Facsimile: (___) ___-____
<PAGE>
EXHIBIT E
FORM OF COMPETITIVE BID REQUEST
Date: _______________
To: Bank of America, N.A.,
as Agent
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of August __,
1999 (as extended, renewed, amended or restated from time to time, the "Credit
Agreement"), among Deluxe Corporation (the "Company"), the Banks party thereto,
and Bank of America, N.A., as Agent for the Banks (the "Agent"). Capitalized
terms used herein have the meanings specified in the Credit Agreement.
This is a Competitive Bid Request for Bid Loans pursuant to Section
2.06(a) of the Credit Agreement as follows:
(i) The Business Day of the proposed Bid Borrowing is:
______________.
(ii) The aggregate amount of the proposed Bid Borrowing is:
$___________________.
(iii) The proposed Bid Borrowing to be made pursuant to Section 2.06
shall be comprised of [LIBOR] [Absolute Rate] Bid Loans.
(iv) The Interest Period[s] and Interest Payment Dates, if any, for
the Bid Loans comprised in the Bid Borrowing shall be: _______________,
[_________________] and [___________________].
DELUXE CORPORATION
By: ___________________________________
Title: _________________________________
E-1.
<PAGE>
EXHIBIT F
FORM OF COMPETITIVE BID
Date: _______________
To: Bank of America, N.A.,
as Agent
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of August __1999
(as extended, renewed, amended or restated from time to time, the "Credit
Agreement"), among Deluxe Corporation (the "Company"), the Banks party thereto,
and Bank of America, N.A., as Agent for the Banks (the "Agent"). Capitalized
terms used herein have the meanings specified in the Credit Agreement.
In response to the Invitation for Competitive Bids dated ___________
and in accordance with subsection 2.06(c)(ii) of the Credit Agreement, the
undersigned Bank offers to make [a] Bid Loan[s] thereunder in the following
principal amounts[s], at the following interest rates and for the following
Interest Period[s], with Interest Payment Dates as specified by the Company:
Date of Bid Borrowing: _____________________
Aggregate Maximum Bid Amount: $________________
OFFER 1 (MAXIMUM BID AMOUNT: $________________) Interest Period: ____________
Principal Amount $_______ Principal Amount $_______ Principal Amount $_______
Interest: Interest: Interest:
[Absolute Rate __%]* [Absolute Rate __%]* [Absolute Rate __%]*
or or or
[LIBOR Bid Margin +/-__%]* [LIBOR Bid Margin +/-__%]* [LIBOR Bid Margin +/-__%]*
- ----------
* Interest rate may be quoted to five decimal places.
F-1.
<PAGE>
OFFER 2 (MAXIMUM BID AMOUNT: $________________) Interest Period: ____________
Principal Amount $_______ Principal Amount $_______ Principal Amount $_______
Interest: Interest: Interest:
[Absolute Rate __%] [Absolute Rate __%] [Absolute Rate __%]
or or or
[LIBOR Bid Margin +/-__%]* [LIBOR Bid Margin +/-__%]* [LIBOR Bid Margin +/-__%]*
OFFER 3 (MAXIMUM BID AMOUNT: $________________) Interest Period: ____________
Principal Amount $_______ Principal Amount $_______ Principal Amount $_______
Interest: Interest: Interest:
[Absolute Rate __%]* [Absolute Rate __%]* [Absolute Rate __%]*
or or or
[LIBOR Bid Margin +/-__%]* [LIBOR Bid Margin +/-__%]* [LIBOR Bid Margin +/-__%]*
[NAME OF BANK ]
By: ____________________________________
Title: _________________________________
- ----------
* Interest rate may be quoted to five decimal places.
F-2.
<PAGE>
EXHIBIT G
FORM OF BID LOAN NOTE
Date: August __, 1999
FOR VALUE RECEIVED, the undersigned, Deluxe Corporation, a Minnesota
corporation (the "Company"), hereby promises to pay to the order of
______________________ (the "Bank") at the offices of Bank of America, N.A., as
Administrative Agent for the Banks (the "Agent") the aggregate unpaid principal
amount of all Bid Loans made by the Bank to the Company pursuant to the Credit
Agreement, dated as of August __, 1999 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Company, the Bank, the other financial institutions from time to time party
thereto (the "Banks") and the Agent, on the dates and in the amounts provided in
the Credit Agreement. The Company further promises to pay interest on the unpaid
principal amount of the Bid Loans evidenced hereby from time to time at the
rates and on the dates as agreed upon by the Company and the Bank, and otherwise
as provided in the Credit Agreement.
As provided in the Credit Agreement, the Bank is authorized to
endorse the amount of and the date on which each Bid Loan is made, the maturity
date therefor and each payment of principal with respect thereto on the
schedules annexed hereto and made a part hereof, or on continuations thereof
which shall be attached hereto and made a part hereof; provided that any failure
to endorse such information on such schedule or continuation thereof shall not
in any manner affect any obligation of the Company under the Credit Agreement
and this Promissory Note (this "Note").
This Note is one of the Bid Loan Notes referred to in, and is
entitled to the benefits of, the Credit Agreement, which Credit Agreement, among
other things, contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events.
Terms defined in the Credit Agreement are used herein with their
defined meanings therein unless otherwise defined herein.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.
DELUXE CORPORATION
By: ___________________________________
Title: _________________________________
Address:
3680 Victoria Street North
Shoreview, Minnesota 55126-2966
<PAGE>
SCHEDULE
to Bid Loan Note
[Absolute Rate Bid Loans]
--------- -------------- ------------- ----------------- --------------
DATE LOAN DATE PRINCIPAL
DISBURSED AMOUNT OF LOAN MATURITY DATE PRINCIPAL PAYMENT PAID
--------- -------------- ------------- ----------------- --------------
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G-2.
<PAGE>
SCHEDULE
to Bid Loan Note
[LIBOR Bid Loans]
--------- -------------- ------------- ----------------- --------------
DATE LOAN DATE PRINCIPAL
DISBURSED AMOUNT OF LOAN MATURITY DATE PRINCIPAL PAYMENT PAID
--------- -------------- ------------- ----------------- --------------
--------- -------------- ------------- ----------------- --------------
--------- -------------- ------------- ----------------- --------------
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G-3.
<PAGE>
EXHIBIT H
Form of Opinion of Counsel to the Company
August __, 1999
Bank of America, N.A.,
as Agent
Each of the Banks referred to as the Banks in the
Agreement mentioned below
c/o Bank of America, N.A.
555 California Street, 41st Floor
San Francisco, California 94104
Attn: Matthew Gabel, Vice President
Ladies and Gentlemen:
This opinion is furnished to you in connection with the execution
and delivery of the Credit Agreement dated as of August __, 1999 (the
"Agreement") between Deluxe Corporation, a Minnesota corporation (the "Company")
and Bank of America, N.A. as Agent (the "Agent") for the Banks named on the
signature pages thereto (the "Banks") and such Banks.
The undersigned is Senior Vice President, General Counsel and
Secretary of the Company. In rendering this opinion, I have consulted with other
officers of the Company, outside counsel, and other attorneys within the
Company's Law Department, as I have deemed appropriate for purposes of this
opinion.
This opinion is provided pursuant to Section 4.01(d) of the
Agreement. Capitalized terms not otherwise defined herein have the respective
meanings set forth in the Agreement.
In connection with this opinion, I, or other attorneys within the
Company's Law Department, have reviewed the Agreement, the Notes, the Fee
Letter, the other Loan Documents (collectively, the "Loan Documents"), and such
other documents as I have deemed necessary and appropriate for purposes of this
opinion, including, without limitation, the Amended Articles of Incorporation
and the By-laws (as amended) of the Company. In addition, I, or other attorneys
within the Company's Law Department, have investigated such questions of law
(including where deemed appropriate, consulting with outside counsel) and
reviewed such certificates of government officials and information from officers
and representatives of the Company as I have deemed necessary or appropriate for
the purposes of this opinion.
In rendering the opinions expressed below, I have assumed, with the
Agent's and
H-1.
<PAGE>
each Bank's permission and without verification:
(a) the authenticity of all Loan Documents submitted to me as
originals,
(b) the genuineness of all signatures (other than persons signing on
behalf of the Company),
(c) the legal capacity of natural persons,
(d) the conformity to originals of the Loan Documents submitted to
me as copies,
(e) the due authorization, execution and delivery of the Loan
Documents by the parties thereto other than the Company,
(f) that all conditions precedent to the effectiveness of the Loan
Documents have been satisfied or waived, and
(g) that the Loan Documents constitute the valid, binding and
enforceable obligations of the parties thereto other than the Company.
Based on the foregoing, and subject to the qualifications set forth
below, I am of the opinion that:
1. The Company and each of its Material Subsidiaries, is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and is duly qualified to conduct
business under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, except to the extent that failure to do so would not reasonably
be expected to have a Material Adverse Effect (as defined in the Agreement). The
Company has the requisite corporate power to execute, deliver and perform its
obligations under the Loan Documents.
2. The execution, delivery and performance by the Company of the
Loan Documents to which the Company is a party have been duly authorized by all
requisite corporate action. The Loan Documents have been duly executed and
delivered by the Company and constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms.
3. The execution and delivery by the Company of the Loan Documents
to which the Company is a party, and the performance by the Company of its
obligations thereunder, do not and will not (a) violate any provision of law,
statute, rule or regulation or any order, writ, judgment, injunction, decree,
determination or award of any court, governmental agency or arbitrator presently
in effect having applicability to the Company, (b) violate or be in conflict
with any provision of the Amended Articles of Incorporation or By-laws (as
amended) of the Company, (c) result in breach or constitute a default under any
indenture, loan or credit agreement or any other material agreement, lease or
instrument known to me to which the Company is a party or by which it or any of
its properties may be bound or result in the creation of a Lien thereunder.
H-2.
<PAGE>
4. No order, consent, approval, license, authorization or validation
of, or filing, recording or registration with, or exemption by, any governmental
or public body or authority is required on the part of the Company to authorize,
or is required in connection with the due execution, delivery and performance
of, or the legality, validity or binding effect or enforceability of, the Loan
Documents.
5. Except as disclosed on Schedule 5.05 of the Agreement, there are
no actions, suits or proceedings pending or, to the best of my knowledge,
overtly threatened against or affecting the Company or any of its properties
before any court or arbitrator, or any governmental department, board, agency or
other instrumentality which (i) challenge the legality, validity or
enforceability of the Loan Documents, or (ii) would reasonably be expected to
have a Material Adverse Effect.
6. The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
7. There is no litigation pending or, to the best of my knowledge,
threatened, alleging that any slogan or other advertising device, product,
process, method, substance, part or other material now employed by the Company
or any Subsidiary infringes upon any rights of any other Person which would
reasonably be expected to have a Material Adverse Effect.
8. The making of the Loans contemplated by the Agreement, and the
use of the proceeds thereof as provided in the Agreement, does not violate
Regulations T, U or X of the FRB.
The opinions set forth above are subject to the following
qualifications and exceptions:
(a) I express no opinion as to the laws of any jurisdiction other
than the State of Minnesota and the federal laws of the United
States of America. I call to your attention the fact that the
Loan Documents provide that they are to be governed by the
laws of the State of New York. For purposes of my opinion
concerning the enforceability of the Loan Documents, I have
assumed, with your permission, that the laws of the State of
New York are the same in all material respects as the laws of
the State of Minnesota.
(b) My opinions are subject to the effect of any applicable
statute of limitation, and to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium,
arrangement, fraudulent transfer or other similar law of
general application affecting creditors' rights generally.
(c) My opinions are subject to the effect of general principles of
equity and concepts of materiality, reasonableness, good faith
and fair dealing, and other similar doctrines affecting the
enforceability of agreements generally (regardless of whether
considered in a proceeding in equity or at law).
H-3.
<PAGE>
(d) My opinion with respect to the enforceability of the
provisions of the Agreement is qualified to the extent that
the provision that terms contained therein may not be waived
or modified except in writing may be limited under certain
circumstances.
(e) My opinion with respect to the enforceability of the
provisions of the Agreement is further qualified to the extent
that the availability of specific performance, injunctive
relief and other equitable remedies is subject to the
discretion of the tribunal before which any proceeding
therefor may be brought.
(f) I express no opinion as to the enforceability of the Loan
Documents to the extent they contain:
1) choice of law or forum selection provisions,
2) waivers by the Company of any statutory or
constitutional rights or remedies,
3) grants to the Agent or Banks of powers of attorney,
4) terms purporting to establish evidentiary standards, or
5) terms to the effect that provisions in the Loan
Documents may not be waived or modified except in
writing that may be limited under certain circumstances.
(g) I express no opinion as to (i) the enforceability of
provisions of the Loan Documents to the extent they contain
cumulative remedies which purport to compensate, or would have
the effect of compensating, the party entitled to the benefits
thereof in an amount in excess of the actual loss suffered by
such party, or (ii) the enforceability of the Company's
obligation to pay any default interest rate if the payment of
such interest rate may be construed as unreasonable in
relation to actual damages or grossly disproportionate to
actual damages suffered by the Agent or the Banks as a result
of such default.
(h) I express no opinion concerning the Company's rights in or
title to, or the creation, perfection or priority of any
security interest, pledge, lien, mortgage or other similar
interest in, any real or personal property.
(i) I express no opinion as to compliance or the effect of
noncompliance by the Agent or the Banks or any subsequent
holder of the Notes with any state or federal laws or
regulations applicable to the Agent or the Banks or such
holder in connection with the transactions described in the
Agreement.
(j) My opinion as to the enforceability of the Loan Documents is
subject to
H-4.
<PAGE>
the effect of Minnesota Statutes 290.371, Subd. 4.
(k) My opinions, insofar as they relate to the enforceability of
indemnification provisions, are subject to the effect of
federal and state securities laws and public policy relating
thereto. In addition, certain cases in the Federal District
Courts have called into question the enforceability of private
contractual agreements allocating financial responsibility
under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA") as between parties who
are potentially responsible parties under CERCLA, and the
reasoning in such cases could be utilized by parties
attempting to avoid indemnity liability under both CERCLA and
state environmental statutes which may contain similar
language respecting indemnity agreements. I express no opinion
with respect to the enforceability of any provision of the
Loan Documents which purports to excuse the Agent or Banks
from liability for, or require the Company to indemnify the
Agent or the Banks against, the Agent or the Bank's negligence
or willful misconduct.
(l) My opinion is limited solely to facts and laws existing as of
the date hereof. I disclaim any obligation to update this
opinion letter for events occurring or coming to my attention,
or any changes in the law taking effect, after the date
hereof.
The foregoing opinions are being furnished to you solely for your
benefit and may not be relied upon by, nor may copies be delivered to, any other
person except any Participant or Assignee without my prior written consent. By
your acceptance, you acknowledge that this opinion is given without personal
recourse of any nature to me individually.
Very truly yours,
John H. LeFevre
Senior Vice President,
General Counsel
and Secretary
H-5.
<PAGE>
EXHIBIT I
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance") dated as of _____________ is made between __________________ (the
"Assignor") and ________________ (the "Assignee").
RECITALS
WHEREAS, the Assignor is party to that certain Credit Agreement
dated as of August __, 1999 (as amended, restated, modified, supplemented or
renewed from time to time, the "Credit Agreement"), among Deluxe Corporation
(the "Company"), the several financial institutions from time to time party
thereto (including the Assignor, the "Banks") and Bank of America, N.A., as
agent for the Banks (the "Agent"). Any terms defined in the Credit Agreement and
not defined in this Assignment and Acceptance are used herein as defined in the
Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor has
committed to making Committed Loans to the Company in an aggregate amount not to
exceed $__________ (the "Commitment");
WHEREAS, [the Assignor has made Committed Loans in the aggregate
principal amount of $__________ to the Company consisting of $___________
principal amount of Committed Loans [no Committed Loans are outstanding under
the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part of the]
[all] rights and obligations of the Assignor under the Credit Agreement in
respect of its Commitment, [together with a corresponding portion of each of its
outstanding Committed Loans], in an amount equal to ___% of the Assignor's
Commitment and Committed Loans, on the terms and subject to the conditions set
forth herein, and the Assignee wishes to accept assignment of such rights and to
assume such obligations from the Assignor on such terms and subject to such
conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) ___% (the "Assignee's Percentage
Share") of (A) the Commitment [and the Committed Loans] of the Assignor and (B)
all related rights, benefits, obligations, liabilities and indemnities of the
Assignor under and in connection with the Credit Agreement and the Loan
Documents.
I-1
<PAGE>
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and be obligated to perform all of the obligations
of a Bank under the Credit Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in the
amount set forth in subsection (c) below. The Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Credit Agreement are required to be performed by it as a Bank. It is the
intent of the parties hereto that the Commitment of the Assignor shall, as of
the Effective Date, be reduced by an amount equal to the portion thereof
assigned to the Assignee hereunder, and the Assignor shall relinquish its rights
and be released from its obligations under the Credit Agreement to the extent
such obligations have been assumed by the Assignee; provided, however, that the
Assignor shall not relinquish its rights under Article III or Sections 10.04 and
10.05 of the Credit Agreement to the extent such rights relate to the time prior
to the Effective Date.
(c) After giving effect to the assignment and assumption set
forth herein, on the Effective Date: (i) the Assignee's Commitment will be
$__________ ; and (ii) the principal amount of the Assignee's aggregate
outstanding Committed Loans will be $_______________ .
(d) After giving effect to the assignment and assumption set
forth herein, on the Effective Date: (i) the Assignor's Commitment will be
$__________ ; and (ii) the principal amount of the Assignor's aggregate
outstanding Committed Loans will be $_______________ .
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in immediately available funds an amount equal to $__________,
representing the Assignee's Percentage Share of the principal amount of all
Committed Loans previously made by the Assignor to the Company under the Credit
Agreement and outstanding on the Effective Date.
(b) The [Assignor] [Assignee] further agrees to pay to the
Agent a processing fee in the amount specified in Section 10.08(a) of the Credit
Agreement.
3. Reallocation of Payments. Any interest, fees and other payments
accrued prior to the Effective Date with respect to the Commitment and Committed
Loans of the Assignor shall be for the account of the Assignor. Any interest,
fees and other payments accrued on and after the Effective Date with respect to
the portion of such Commitment and Committed Loans assigned to the Assignee
shall be for the account of the Assignee. Each of the Assignor and the Assignee
agrees that it will hold in trust for the other party any interest, fees and
other amounts which it may receive to which the other party is entitled pursuant
to the preceding sentence and pay to the other party any such amounts which it
may receive promptly upon receipt.
4. Independent Credit Decision. The Assignee: (a) acknowledges that
it has received a copy of the Credit Agreement and the Schedules and Exhibits
thereto, together with copies of the most recent financial statements referred
to in Section 5.11 or Section 6.01 of the Credit Agreement, and such other
documents and information as it has deemed appropriate to make its own credit
and legal analysis and decision to enter into this Assignment and Acceptance;
and
I-2
<PAGE>
(b) agrees that it will, independently and without reliance upon the Assignor,
the Agent, the Arranger, or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit and legal decisions in taking or not taking action under the Credit
Agreement.
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the effective
date for this Assignment and Acceptance shall be ______________ (the "Effective
Date"); provided that the following conditions precedent have been satisfied on
or before the Effective Date:
(i) this Assignment and Acceptance shall be executed and
delivered by the Assignor and the Assignee;
(ii) any consent of the Company and the Agent required
under Section 10.08(a) of the Credit Agreement for the effectiveness
of the assignment hereunder by the Assignor to the Assignee shall
have been duly obtained and shall be in full force and effect as of
the Effective Date;
(iii) the Assignee shall pay to the Assignor all amounts
due to the Assignor under this Assignment and Acceptance;
(iv) the processing fee referred to in Section 2(b)
hereof and in Section 10.08(a) of the Credit Agreement shall have
been paid to the Agent; and
(v) the Assignor and Assignee shall have complied with
the other requirements of Section 10.08 of the Credit Agreement and
with the requirements of Sections 9.10 and 3.01 of the Credit
Agreement (in each case to the extent applicable).
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Company and the Agent for
acknowledgement by the Agent, a Notice of Assignment substantially in the form
attached hereto as Schedule 1.
6. Agent. The Assignee hereby appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Agent by the Banks pursuant to the
terms of the Credit Agreement. [The Assignee shall assume no duties or
obligations held by the Assignor in its capacity as Agent under the Credit
Agreement.] [INCLUDE ONLY IF ASSIGNOR IS AGENT]
7. Withholding Tax. The Assignee agrees to comply with Sections 3.01
and 9.10 of the Credit Agreement (if applicable).
8. Representations and Warranties.
(a) The Assignor represents and warrants that (i) it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any Lien or other adverse claim; (ii) it
is duly organized and existing and it has the full power and authority to take,
and has taken, all action necessary to execute and deliver this Assignment and
I-3
<PAGE>
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than those referred to in Section
5(a)(ii) hereof and any already given or obtained) for its due execution,
delivery and performance of this Assignment and Acceptance, and apart from any
agreements or undertakings or filings required by the Credit Agreement, no
further action by, or notice to, or filing with, any Person is required of it
for such execution, delivery or performance; and (iv) this Assignment and
Acceptance has been duly executed and delivered by it and constitutes the legal,
valid and binding obligation of the Assignor, enforceable against the Assignor
in accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles.
(b) The Assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any other instrument or document furnished pursuant
thereto. The Assignor makes no representation or warranty in connection with,
and assumes no responsibility with respect to, the solvency, financial condition
or statements of the Company, or the performance or observance by the Company,
of any of its respective obligations under the Credit Agreement or any other
instrument or document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance, and to
fulfill its obligations hereunder; (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than those
referred to in Section 5(a)(ii) hereof and any already given or obtained) for
its due execution, delivery and performance of this Assignment and Acceptance;
and apart from any agreements or undertakings or filings required by the Credit
Agreement, no further action by, or notice to, or filing with, any Person is
required of it for such execution, delivery or performance; (iii) this
Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignee, enforceable
against the Assignee in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors' rights and to
general equitable principles; and (iv) it is an Eligible Assignee.
9. Further Assurances.
The Assignor and the Assignee each hereby agrees to execute and
deliver such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Agreement, including the delivery of any notices or other documents to the
Company or the Agent, which may be required in connection with the assignment
and assumption contemplated hereby.
I-4
<PAGE>
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this
Assignment and Acceptance shall be in writing and signed by the parties hereto.
No failure or delay by either party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without
prejudice to any rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any
set-off or counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs
and expenses incurred in connection with the negotiation, preparation, execution
and performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any
number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. THE ASSIGNOR AND
THE ASSIGNEE EACH IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
STATE OR FEDERAL COURT SITTING IN NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS ASSIGNMENT AND ACCEPTANCE AND IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. EACH PARTY TO THIS
ASSIGNMENT AND ACCEPTANCE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT
MAY EFFECTIVELY DO SO, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS ASSIGNMENT AND ACCEPTANCE OR ANY DOCUMENT RELATED HERETO, AND
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, AND ANY RELATED DOCUMENTS AND
AGREEMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY EITHER OF THE PARTIES
AGAINST THE OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS,
OR OTHERWISE. EACH OF THE PARTIES ALSO AGREES THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
I-5
<PAGE>
[OTHER PROVISIONS TO BE ADDED AS MAY BE NEGOTIATED BETWEEN THE ASSIGNOR AND THE
ASSIGNEE, PROVIDED THAT SUCH PROVISIONS ARE NOT INCONSISTENT WITH THE CREDIT
AGREEMENT.]
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By: ____________________________________
Title: _________________________________
[ASSIGNEE]
By: ____________________________________
Title: _________________________________
I-6
<PAGE>
SCHEDULE 1
to the Assignment and Acceptance
NOTICE OF ASSIGNMENT AND ACCEPTANCE
Date: ___________________
Bank of America, N.A.,
as Agent
________________________________________
________________________________________
________________________________________
Attention: ________________
Deluxe Corporation
________________________________________
________________________________________
________________________________________
Attention: ________________
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of August __, 1999 (as
amended, restated, modified, supplemented or renewed from time to time, the
"Credit Agreement") among Deluxe Corporation (the "Company"), the Banks referred
to therein and Bank of America, N.A., as Agent for the Banks (the "Agent").
Terms defined in the Credit Agreement are used herein as therein defined.
1. We hereby give you notice of[, and request the consent of the
Company and the Agent to, the assignment by ________________________ (the
"Assignor") to ____________________ (the "Assignee") of ____% of the right,
title and interest of the Assignor in and to the Credit Agreement (including,
without limitation, ____% of the right, title and interest of the Assignor in
and to the Commitment of the Assignor and all outstanding Committed Loans made
by the Assignor) pursuant to that certain Assignment and Acceptance Agreement,
dated as of ___________ (the "Assignment and Acceptance") between Assignor and
Assignee, a copy of which Assignment and Acceptance is attached hereto. Before
giving effect to such assignment the Assignor's Commitment is $___________ and
the aggregate principal amount of its outstanding Committed Loans is $__________
.
2. The Assignee agrees that, upon receiving the consent of the
Company and the Agent to such assignment and from and after the Effective Date
(as such term is defined in Section 5 of the Assignment and Acceptance), the
Assignee shall be bound by the terms of the Credit Agreement, with respect to
the interest in the Credit Agreement assigned to it as specified
<PAGE>
above, as fully and to the same extent as if the Assignee were the Bank
originally holding such interest in the Credit Agreement.
3. The following administrative details apply to the Assignee:
(A) Lending Office(s):
Assignee name: _____________________________________________________
Address: _____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
Attention: _____________________________________________________
Telephone: (___)________________________________________________
Facsimile: (___)________________________________________________
Assignee name: _____________________________________________________
Address: _____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
Attention: _____________________________________________________
Telephone: (___)________________________________________________
Facsimile: (___)________________________________________________
(B) Notice Address:
Assignee name: _____________________________________________________
Address: _____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
Attention: _____________________________________________________
Telephone: (___)________________________________________________
Facsimile: (___)________________________________________________
(C) Payment Instructions:
Account No.: _____________________________________________________
At: _____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
Reference: _____________________________________________________
Attention: _____________________________________________________
Schedule 1
Page 2
<PAGE>
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment and
Acceptance.
5. This Notice of Assignment and Acceptance may be executed by the
Assignor and the Assignee in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken
together shall constitute one and the same notice and agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Schedule 1
Page 3
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.
Very truly yours,
Adjusted Commitment: [ASSIGNOR]
$_______________________ By: ____________________________________
Title: _________________________________
Adjusted Pro Rata Share:
_______%
Commitment: [ASSIGNEE]
$_______________________] By: ____________________________________
Title: _________________________________
ACKNOWLEDGED this ____ day of
________:
BANK OF AMERICA, N.A.,
as Agent
By: _________________________
Title: ______________________
CONSENTED TO this ____ day of
________:
DELUXE CORPORATION
By: _________________________
Title: ______________________
Schedule 1
Page 4
<PAGE>
SCHEDULE 2.01
CLOSING DATE COMMITMENTS AND PRO RATA SHARES
Bank Commitment Pro Rata Share
---- ---------- --------------
Bank of America, N.A. $ 65,000,000 0.130000000
ABN AMRO Bank N.V. $ 65,000,000 0.130000000
Banca di Roma - Chicago Branch $ 25,000,000 0.050000000
The Bank of New York $ 25,000,000 0.050000000
The First National Bank of Chicago $ 65,000,000 0.130000000
Firstar Bank, National Association $ 25,000,000 0.050000000
Lloyds TSB Bank plc $ 25,000,000 0.050000000
The Northern Trust Company $ 50,000,000 0.100000000
SunTrust Bank, Central Florida, N.A. $ 25,000,000 0.050000000
UMB Bank, N.A. $ 15,000,000 0.030000000
Wachovia Bank, N.A. $ 50,000,000 0.100000000
Wells Fargo Bank, N.A. $ 65,000,000 0.130000000
------------ -----------
TOTAL $500,000,000 1.000000000
<PAGE>
SCHEDULE 5.05
LITIGATION
None.
<PAGE>
SCHEDULE 5.12
ENVIRONMENTAL
None.
2
<PAGE>
SCHEDULE 5.16
SUBSIDIARIES AND MATERIAL EQUITY INVESTMENTS
(a) SUBSIDIARIES
Chex Systems, Inc. (MN - 100%)
Deluxe Analytic Research Technologies, Inc. (MN - 100%)
Deluxe Canada Inc. (Canada-100% In Liquidation)
Deluxe Electronic Payment Systems, Inc. (DE - 100%)
Deluxe Electronic Payment Systems Canada, Inc. (Canada - 100%)
Deluxe Electronic Benefits, Inc. (DE - 100% Inactive)
Deluxe Financial Services, Inc. (MN - 100%)
Deluxe Holdings (Netherlands) BV (Netherlands-100%)
HCL Deluxe NV (Netherlands-50%)
iDLX Technology Partners Private Limited (India-100%)
iDLX Technology Partners, Inc. (DE-100%)
Deluxe Overseas Inc. (MN-100%)
Deluxe Payment Protection Systems, Inc. (DE - 100%)
Direct Checks Unlimited, Inc. (CO - 100%)
DLX Check Printers, Inc. (MN - 100%)
DLX Check Texas, Inc. (MN - 100%)
Deluxe Financial Services Texas L.P.
DLX Holdings LTD (UK-100%)
United Creditors Alliance Intl. Limited (UK-100%)
Deluxe Data International Limited (UK -100%)
Connex Europe SRL (Italy-100% In Liquidation)
eFunds Corporation (CA-100%)
iDLX Corporation (MN-100%)
HCL Deluxe NV (Netherlands-50%)
NRC Holding Corporation (DE - 100%)
United Creditors Alliance Corporation (OH - 100%) National Revenue
Corporation (OH - 100%) National Credit Services Corporation (MO -
100%) National Receivables Corporation (OH-100% Inactive)
1385 E County Road E (MN-100%)
(b) MATERIAL EQUITY INVESTMENTS
Deluxe Mexicana (Mexico - 50%)
3
<PAGE>
SCHEDULE 7.01
EXISTING LIENS
None.
4
<PAGE>
SCHEDULE 10.02
PAYMENT OFFICES; ADDRESSES FOR NOTICES;
LENDING OFFICES
DELUXE CORPORATION:
ADDRESS FOR NOTICES:
3680 Victoria Street North
Shoreview, MN 55126-2966
Attention: Treasurer
Telephone: (651) 483-7355
Facsimile: (651) 787-1566
WITH A COPY TO:
3680 Victoria Street North
Shoreview, MN 55126-2966
Attention: General Counsel
Telephone: (651) 483-7355
Facsimile: (651) 787-2749
BANK OF AMERICA, N.A.,
as Agent
NOTICES FOR BORROWING, CONVERSIONS/CONTINUATIONS, AND PAYMENTS:
Bank of America, N.A.
Mail Code: CA4-706-05-09
Agency Administrative Services #5596
1850 Gateway Boulevard, 5th Floor
Concord, CA 94520
Attention: Marti Monahan
Telephone: (925) 675-8395
Facsimile: (925) 675-8500
OTHER NOTICES:
Bank of America, N.A.
Mail Code: CA5-705-41-89
Diversified Industries #9994
555 California Street, 41st Floor
San Francisco, CA 94104-1502
Attention: Kenneth J. Beck
Telephone: (415) 953-5753
Facsimile: (415) 622-2385
<PAGE>
AGENT'S PAYMENT OFFICE:
Bank of America, N.A.
Mail Code: CA4-706-05-09
1850 Gateway Boulevard, 5th Floor
Concord, CA 94520
Attention: Agency Administrative Services #5596
Account Number: 3750836479
ABA #111000012
Reference: Deluxe Corporation
ABN AMRO BANK N.V.
ADDRESS FOR NOTICES FOR BORROWING, CONVERSIONS/CONTINUATIONS, PAYMENTS:
ABN AMRO BANK N.V.
208 South LaSalle, Suite 1500
Chicago, IL 60604-1003
Attention: Loan Administration
Telephone: (312) 992-5150
Facsimile: (312) 992-5155
ADDRESS FOR NOTICES OTHER THAN BORROWING:
ABN AMRO Bank N.V.
4100 U.S. Bank Place
601 Second Avenue South
Minneapolis, MN 55402
Attention: Peter Eaton
Telephone: (612) 337-9865
Facsimile: (612) 338-8687
BANCA DI ROMA, CHICAGO BRANCH
NOTICES FOR BORROWING, CONVERSIONS/CONTINUATIONS, PAYMENTS:
Banca di Roma - Chicago Branch
225 West Washington, Suite 1200
Chicago, IL 60606
Attention: Enza Geraci
Telephone: (312) 704-2603
Facsimile: (312) 726-3058
<PAGE>
ADDRESS FOR NOTICES OTHER THAN BORROWING:
Banca di Roma - Chicago Branch
225 West Washington, Suite 1200
Chicago, IL 60606
Attention: Joyce Montgomery
Telephone: (312) 704-2648
Facsimile: (312) 726-3058
THE BANK OF NEW YORK
NOTICES FOR BORROWING, CONVERSIONS/CONTINUATIONS, PAYMENTS:
The Bank of New York
One Wall Street, 19th Floor
New York, NY 10286
Attention: Yvonne M. Forbes
Telephone: (212) 635-6691
Facsimile: (212) 635-7926
ADDRESS FOR NOTICES OTHER THAN BORROWING:
The Bank of New York
One Wall Street, 19th Floor
New York, NY 10286
Attention: Richard A. Raffetto
Telephone: (212) 635-8044
Facsimile: (212) 635-1208/09
THE FIRST NATIONAL BANK OF CHICAGO
NOTICES FOR BORROWING, CONVERSIONS/CONTINUATIONS, PAYMENTS:
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
Attention: Tess Siao
Telephone: (312) 732-8705
Facsimile: (312) 732-2715
ADDRESS FOR NOTICES OTHER THAN BORROWING:
The First National Bank of Chicago
One First National Plaza
ILI-0173
Chicago, IL 60670
Attention: J. Garland Smith
Telephone: (312) 732-2735
Facsimile: (312) 732-1117
<PAGE>
FIRSTAR BANK, NATIONAL ASSOCIATION
NOTICES FOR BORROWING, CONVERSIONS/CONTINUATIONS, PAYMENTS:
Firstar Bank, National Association
Mail Location 8160
First Tower
425 Walnut Street, 8th Floor
Cincinnati, OH 45202
Attention: Matthew J. Zeck
Telephone: (513) 632-3002
Facsimile: (513) 632-4716
LLOYDS TSB BANK PLC
NOTICES FOR BORROWING, CONVERSIONS/CONTINUATIONS, PAYMENTS:
Lloyds TSB Bank plc
575 Fifth Avenue, 17th Floor
New York, NY 10017
Attention: Patricia Kilian / Jamie Burger
Telephone: (212) 930-8914 / 8933
Facsimile: (212) 930-5098
ADDRESS FOR NOTICES OTHER THAN BORROWING:
Lloyds TSB Bank plc
575 Fifth Avenue, 17th Floor
New York, NY 10017
Attention: Windsor Davies, Director, Corporate Banking USA
Telephone: (212) 930-8909
Facsimile: (212) 930-5098
THE NORTHERN TRUST COMPANY
NOTICES FOR BORROWING, CONVERSIONS/CONTINUATIONS, PAYMENTS:
The Northern Trust Company
50 S. LaSalle
Chicago, IL 60675
Attention: Linda Honda
Telephone: (312) 444-3532
Facsimile: (312) 630-1566
<PAGE>
ADDRESS FOR NOTICES OTHER THAN BORROWING:
The Northern Trust Company
50 S. LaSalle
Chicago, IL 60675
Attention: Lisa Taylor
Telephone: (312) 444-4196
Facsimile: (312) 444-5055
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
NOTICES FOR BORROWING, CONVERSIONS/CONTINUATIONS, PAYMENTS:
SunTrust Bank, Central Florida, N.A.
200 South Orange Avenue
Orlando, FL 32801
Attention: Joanna Contreras
Telephone: (407) 237-5283
Facsimile: (407) 237-5342
ADDRESS FOR NOTICES OTHER THAN BORROWING:
SunTrust Bank, Central Florida, N.A.
200 South Orange Avenue
Orlando, FL 32801
Attention: Joseph B. Kabourek
Telephone: (407) 237-4284
Facsimile: (407) 237-6894
UMB BANK, N.A.
NOTICES FOR BORROWING, CONVERSIONS/CONTINUATIONS, PAYMENTS:
UMB Bank, N.A.
1010 Grand Boulevard
P.O. Box 419226
Kansas City, MO 61141-6226
Attention: Bev Puglisi
Telephone: (816) 860-3677
Facsimile: (816) 860-3772
ADDRESS FOR NOTICES OTHER THAN BORROWING:
UMB Bank, N.A.
1010 Grand
Second Floor, Commercial Loans
Kansas City, MO 64106
Attention: Robert P. Elbert
<PAGE>
Telephone: (816) 860-7116
Facsimile: (816) 860-7143
WACHOVIA BANK, N.A.
NOTICES FOR BORROWING, CONVERSIONS/CONTINUATIONS, PAYMENTS:
Wachovia Bank, N.A.
191 Peachtree Street, NE
Atlanta, GA 30303
Attention: Viveca Sibley
Telephone: (404) 332-6739
Facsimile: (404) 332-4320
ADDRESS FOR NOTICES OTHER THAN BORROWING:
Wachovia Bank, N.A.
191 Peachtree Street, NE
Atlanta, GA 30303
Attention: Frances W. Josephia
Telephone: (404) 332-4132
Facsimile: (404) 332-6898
WELLS FARGO BANK, N.A.
NOTICES FOR BORROWING, CONVERSIONS/CONTINUATIONS, PAYMENTS:
Wells Fargo Bank, N.A.
201 Third Street, MAC 0187-081
San Francisco, CA 94103
Attention: Ginnie Padgett
Telephone: (415) 477-5374
Facsimile: (415) 512-1943 or (415) 979-0675
ADDRESS FOR NOTICES OTHER THAN BORROWING:
Wells Fargo Bank, N.A.
Sixth & Marquette
3rd Floor
Minneapolis, MN 55479-0085
Attention: Molly Van Metre
Telephone: (612) 667-9147
Facsimile: (612) 667-2276
EXHIBIT 12.3
DELUXE CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Nine Months
Ended Years Ended December 31,
----- ------------------------
September 30, 1999 1998 1997 1996 1995 1994 1993
------------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
- --------
Income from Continuing Operations
before Income Taxes $233,507 $242,915 $115,150 $118,765 $169,319 $246,706 $235,913
Interest expense
(excluding capitalized interest) 5,623 8,273 8,822 10,649 13,099 9,733 10,070
Portion of rent expense under
long-term operating leases
representative of an interest factor 11,052 15,126 13,621 13,467 14,761 13,554 13,259
Amortization of debt expense 126 122 122 121 84 84 84
-------- -------- -------- -------- -------- -------- --------
TOTAL EARNINGS $250,308 $266,436 $137,715 $143,002 $197,262 $270,077 $259,326
Fixed charges
- -------------
Interest Expense
(including capitalized interest) 6,440 9,664 $ 9,742 $ 11,978 $ 14,714 $ 10,492 $ 10,555
Portion of rent expense under
long-term operating leases
representative of an interest factor 11,052 15,126 13,621 13,467 14,761 13,554 13,259
Amortization of debt expense 126 122 122 121 84 84 84
-------- -------- -------- -------- -------- -------- --------
TOTAL FIXED CHARGES $ 17,618 $ 24,912 $ 23,485 $ 25,566 $ 29,559 $ 24,130 $ 23,898
RATIO OF EARNINGS
TO FIXED CHARGES: 14.2 10.7 5.9 5.6 6.7 11.2 10.9
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 74,501
<SECURITIES> 38,864
<RECEIVABLES> 138,373
<ALLOWANCES> 0
<INVENTORY> 9,442
<CURRENT-ASSETS> 418,919
<PP&E> 731,604
<DEPRECIATION> 415,219
<TOTAL-ASSETS> 1,009,913
<CURRENT-LIABILITIES> 376,062
<BONDS> 119,856
0
0
<COMMON> 75,390
<OTHER-SE> 404,496
<TOTAL-LIABILITY-AND-EQUITY> 1,009,913
<SALES> 1,239,033
<TOTAL-REVENUES> 1,239,033
<CGS> 541,901
<TOTAL-COSTS> 1,010,509
<OTHER-EXPENSES> (10,606)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,623
<INCOME-PRETAX> 233,507
<INCOME-TAX> 88,638
<INCOME-CONTINUING> 144,869
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144,869
<EPS-BASIC> 1.86
<EPS-DILUTED> 1.85
</TABLE>
