SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- --- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1997
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
- --- OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8186
Interra Financial Incorporated
(Exact name of registrant as specified in its charter)
DELAWARE 41-1228350
(State or other jurisdiction (IRS Employer
of incorporation of organization) Identification
Number)
Dain Bosworth Plaza, 60 South Sixth Street
Minneapolis, Minnesota 55402-4422
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 371-7750
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
As of July 31, 1997, the Company had 12,293,369 shares of
common stock outstanding.
<PAGE>
INTERRA FINANCIAL AND SUBSIDIARIES
REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
Page
----
I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets.................... 1
Consolidated Statements of Operations.......... 2
Consolidated Statements of Cash Flows.......... 3
Notes to Consolidated Financial Statements..... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 6
II. OTHER INFORMATION:
Item 1. Legal Proceedings.............................. 9
Item 4. Submission of Matters to a Vote of
Security Holders............................... 11
Item 6. Exhibits and Reports on Form 8-K............... 12
Signatures..................................... 13
Index of Exhibits.............................. 14
Exhibits....................................... 15
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
INTERRA FINANCIAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
June 30, December 31,
1997 1996
------------------------
(Unaudited)
<S> <C> <C>
Assets:
Cash and cash equivalents............... $26,776 $34,387
Cash and short-term investments
segregated for regulatory purposes..... - 15,000
Receivable from customers............... 967,999 1,035,847
Receivable from brokers and dealers..... 327,475 202,040
Securities purchased under agreements
to resell.............................. 231,867 81,631
Trading securities owned, at market..... 508,422 288,824
Equipment, leasehold improvements and
buildings, at cost, net .............. 36,278 32,946
Other receivables....................... 69,055 75,685
Deferred income taxes................... 42,026 39,704
Other assets............................ 19,352 21,361
--------- ---------
$2,229,250 $1,827,425
========= =========
Liabilities and Shareholders' Equity:
Liabilities:
Short-term borrowings................... $206,655 $25,000
Drafts payable.......................... 68,840 69,989
Payable to customers.................... 672,337 869,641
Payable to brokers and dealers.......... 451,557 229,852
Securities sold under repurchase
agreements............................. 109,563 57,967
Trading securities sold, but not yet
purchased, at market................... 220,930 58,805
Accrued compensation.................... 80,719 119,244
Other accrued expenses and accounts
payable................................ 94,819 93,751
Subordinated and other debt............. 21,812 27,290
--------- ---------
1,927,232 1,551,539
--------- ---------
Shareholders' equity:
Common stock............................ 1,536 1,522
Additional paid-in capital.............. 84,955 81,316
Retained earnings....................... 215,527 193,048
--------- ---------
302,018 275,886
--------- ---------
$2,229,250 $1,827,425
========= =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
INTERRA FINANCIAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per-share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1997 1996 1997 1996
------------------ -----------------
<S> <C> <C> <C> <C>
Revenues:
Commissions............... $63,060 $58,325 $126,687 $113,185
Principal transactions.... 34,490 42,449 76,514 88,927
Investment banking and
underwriting............ 23,202 23,876 49,070 50,018
Interest.................. 26,475 26,026 55,209 52,956
Asset management.......... 10,609 8,476 21,109 16,580
Correspondent clearing.... 4,585 4,678 9,647 8,507
Other..................... 6,083 3,746 10,340 8,182
------- ------- ------- -------
Total revenues............ 168,504 167,576 348,576 338,355
Interest expense.......... 12,373) (13,733) (26,483) (28,478)
------- ------- ------- -------
Net revenues.............. 156,131 153,843 322,093 309,877
------- ------- ------- -------
Expenses Excluding Interest:
Compensation and benefits. 96,449 95,751 197,933 192,863
Communications............ 11,328 10,781 22,637 20,865
Occupancy and equipment... 10,276 8,739 20,039 17,328
Travel and promotional.... 7,475 6,596 14,052 11,392
Floor brokerage and
clearing fees............ 2,790 2,837 5,717 5,304
Other..................... 10,314 9,185 19,827 18,882
------- ------- ------- -------
Total expenses excluding
interest................. 138,632 133,889 280,205 266,634
------- ------- ------- -------
Earnings:
Earnings before income
taxes.................... 17,499 19,954 41,888 43,243
Income tax expense........ (6,362) (6,926) (14,996) (15,135)
------- ------- ------- -------
Net earnings.............. $11,137 $13,028 $26,892 $28,108
======= ======= ======= =======
Earnings per common and
common equivalent share:
Primary................... $ 0.85 $ 1.03 $ 2,05 $ 2.23
======= ======= ======= =======
Fully diluted............. $ 0.85 $ 1.03 $ 2.04 $ 2.21
======= ======= ======= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
INTERRA FINANCIAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<CAPTION>
Six Months Ended June 30,
1997 1996
-------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings............................ $26,892 $28,108
Adjustments to reconcile earnings to
cash provided (used) by operating
activities:
Depreciation and amortization.......... 5,581 4,585
Deferred income taxes.................. (2,322) (802)
Other non-cash items................... 5,190 4,276
Cash and short-term investments
segregated for regulatory purposes..... 15,000 74,000
Net payable to brokers and dealers..... 96,270 50,348
Securities purchased under agreements
to resell............................. (150,236) (64,570)
Net trading securities owned and
trading securities sold, but not yet
purchased............................. (57,473) 137,438
Short-term borrowings and drafts
payable of securities companies....... 155,506 (5,338)
Net receivable from/payable to
customers............................. (129,456) (107,133)
Securities sold under repurchase
agreements............................ 51,596 (69,245)
Accrued compensation................... (38,525) (14,830)
Other.................................. 8,095 (9,701)
------- -------
Cash provided (used) by operating
activities............................. (13,882) 27,136
------- -------
Cash flows from financing activities:
Proceeds from:
Revolving credit agreement, net....... 25,000 -
Issuance of common stock.............. 1,480 947
Payments for:
Subordinated and other debt........... (6,784) (7,607)
Dividends on common stock............. (4,413) (3,148)
------- -------
Cash provided (used) by financing
activities............................. 15,283 (9,808)
------- -------
Cash flows from investing activities:
Payments for equipment, leasehold
improvements and other................ (9,012) (5,767)
------- -------
Increase/(decrease) in cash and cash
equivalents............................ (7,611) 11,561
Cash and cash equivalents:
At beginning of period................. 34,387 26,167
------- -------
At end of period....................... $26,776 $37,728
======= =======
<FN>
Income tax payments totaled $24,068,000 and $21,228,000 and
interest payments totaled $26,238,000 and $26,202,000 during the
six months ended June 30, 1997 and 1996, respectively.
During the six months ended June 30, 1997 and 1996, respectively,
the Company had non-cash financing activity of $2,173,000 and
$1,559,000 associated with the crediting of common stock to
deferred compensation plan participants.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
INTERRA FINANCIAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Condensed Consolidated Financial Statements
The accompanying unaudited interim consolidated financial
statements have been prepared in accordance with the instructions
for Form 10-Q and do not include all the information and
footnotes required by generally accepted accounting principles
for complete financial statements and should be read in
conjunction with the consolidated financial statements and
related notes included in the Company's Annual Report on Form 10-
K for the year ended December 31, 1996. In the opinion of
management, all adjustments necessary for a fair presentation of
such interim consolidated financial statements have been
included. All such adjustments are of a normal recurring nature.
The results of operations for the three-month period ended June
30, 1997, are not necessarily indicative of results for
subsequent periods.
Certain prior year amounts in the financial statements have
been reclassified to conform to the 1997 presentation.
B. Trading Activities and Financial Instruments with Off-Balance-
Sheet Risk
Dain Bosworth and Rauscher Pierce Refsnes are dealers in
corporate, tax-exempt and governmental fixed income securities
and corporate equity securities and may recognize profits or
losses on transactions in, or fluctuations in the value of, such
securities held in inventory. Internal guidelines intended to
limit the size and risk of inventories maintained have been
established and are periodically reviewed. These inventories are
positioned primarily for distribution to Dain Bosworth's and
Rauscher Pierce Refsnes' individual and institutional clients in
order to meet those clients' needs.
Dain Bosworth and Rauscher Pierce Refsnes sell securities not
yet purchased (short sales) for their own accounts primarily to
hedge their fixed income trading inventories. The establishment
of short positions exposes the Company to off-balance-sheet
market risk in the event prices increase, as the Company may be
obligated to acquire the securities at prevailing market prices.
The Company periodically hedges its fixed income trading
inventories with financial futures or interest-rate option
contracts. The Company may also trade treasury option contracts
for its own account. Such option and financial futures contracts
expose the Company to off-balance-sheet market risk in the event
that the changes in interest rates do not closely correlate with
the change in the inventory price. Transactions in futures
contracts are conducted through regulated exchanges which
guarantee performance of counterparties and are settled in cash
on a daily basis, thereby minimizing credit risk. Maintaining
futures contracts typically requires the Company to deposit cash
or securities with an exchange or other financial intermediary as
security for its obligations. Additional cash or securities may
be required to be deposited thereafter due to fluctuations in the
market value of the futures contract. In writing option
contracts, the Company receives a premium from the purchaser in
exchange for incurring an obligation to purchase or sell
securities upon exercise of the option. These obligations may
require the Company to purchase securities at prices higher than
prevailing market prices or sell securities at prices below
prevailing market prices in order to fulfill its obligations
under the contracts. The Company does not enter into foreign
currency contracts or, other than as described, other derivative
financial instruments with off-balance-sheet risk. Derivative
financial instruments held or issued are immaterial to the
consolidated financial statements. The Company's exposure to
credit risk is represented by the fair value of trading
securities owned.
In the normal course of business the Company's activities
involve the execution, settlement and financing of various
securities transactions. These activities may expose the Company
to off-balance-sheet credit and market risks in the event the
customer or counterparty is unable to fulfill its contractual
obligations. Such risks may be increased by volatile trading
markets.
In the normal course of business Dain Bosworth and Rauscher
Pierce Refsnes enter into when-issued underwriting and purchase
commitments. Transactions relating to such commitments open at
year end and subsequently settled had no material effect on the
consolidated financial statements.
The Company seeks to control the risks associated with its
customer activities by requiring customers to maintain margin
collateral in compliance with various regulatory and internal
guidelines. The Company monitors required margin levels daily
and, pursuant to such guidelines, requires customers to deposit
additional collateral or to reduce positions when necessary.
Market declines could, however, reduce the value of collateral
below the amount loaned, plus accrued interest, before the
collateral could be sold.
A portion of the Company's customer activity involves the sale
of securities not yet purchased (short sales) and the writing of
option contracts. Such transactions may require the Company to
purchase or sell financial instruments at prevailing market
prices in order to fulfill the customer's obligations in the
event the customer fails to perform.
The Company lends money subject to reverse repurchase
agreements. All positions are collateralized, primarily with U.S.
government or U.S. government agency securities. The Company
generally takes physical possession of securities purchased under
agreements to resell. Such transactions may expose the Company to
risk in the event such borrowers do not repay the loans and the
value of collateral held is less than that of the underlying
receivable. These agreements provide the Company with the right
to maintain the relationship between market value of the
collateral and the receivable.
The Company may pledge firm or customer margin securities for
bank loans, repurchase agreements, securities loaned or to
satisfy margin deposits of clearing organizations. All
repurchase agreements are collateralized by cash or securities
delivered by the Company. In the event the counterparty is
unable to return such securities pledged, the Company may be
exposed to the risks of acquiring the securities at prevailing
market prices or holding collateral possessing a market value
less than that of the related pledged securities. The Company
seeks to control these risks by monitoring the market value of
securities pledged and requiring adjustments of collateral levels
where necessary.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with Item 7
(Management's Discussion and Analysis) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
Summary
Consolidated net earnings declined $1.9 million or 15 percent
during the 1997 second quarter compared with the second quarter
of 1996 and declined $1.2 million or 4 percent during the 1997
first half compared with the same period of the previous year.
Net revenues increased slightly, up 1 percent and 4 percent,
respectively, over the second quarter and first half of 1996.
Second quarter net revenues declined 6 percent from the record
levels of the 1997 first quarter as the Federal Reserve Board's
March 1997 increase in short-term interest rates negatively
impacted the prices and volumes of securities traded of and
issued by corporations with small to medium-sized market
capitalizations, the predominant type of corporate securities
which Dain Bosworth and Rauscher Pierce Refsnes underwrite, trade
and sell. This event negatively impacted the underwriting and
trading results of the Company's Equity Capital Markets
businesses. During the quarter, however, prices and volumes of
listed securities, which typically are issued by larger
capitalized corporations, as well as mutual funds, increased over
both first quarter 1997 levels and 1996 first half levels and,
accordingly, assisted the Company's commission-generating Private
Client and Institutional Equity Sales Groups to post improved
results in the second quarter and first half of 1997 versus the
comparable periods of 1996.
Results of Operations:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
Unaudited, in thousands) 1997 1996 1997 1996
------------------ -----------------
<S> <C> <C> <C> <C>
Net Revenues:
Dain Bosworth Incorporated $101,494 $ 98,193 $211,030 $201,505
Rauscher Pierce Refsnes,
Inc. 45,799 48,141 93,602 94,310
Corporate, other and
eliminations 8,838 7,509 17,461 14,062
------- ------- ------- -------
$156,131 $153,843 $322,093 $309,877
======= ======= ======= =======
Earnings (Loss) before
income taxes:
Dain Bosworth Incorporated $11,166 $13,250 $27,958 $30,409
Rauscher Pierce Refsnes,
Inc. 4,751 6,856 9,972 11,469
Corporate, other and
eliminations 1,582 (152) 3,958 1,365
------- ------- ------- -------
$17,499 $19,954 $41,888 $43,243
======= ======= ======= =======
</TABLE>
Commission revenues increased $4.7 million or 8 percent from
the 1996 second quarter and $13.5 million or 12 percent from the
1996 first half as a result of increased sales of mutual funds,
listed securities and insurance and annuity products to
individual and institutional investors. The quarterly commission
revenue increases were partially offset by decreases in sales of
over-the-counter equity securities sold on an agency basis.
Contributing also to the commission revenue increase were
increases of approximately 20 percent in the New York Stock
Exchange's average daily trading volumes as well as general
increases in securities prices for the quarter and year-to-date
periods versus the comparable periods of 1996.
Revenues from principal transactions declined $8.0 million or
19 percent from the 1996 second quarter due to lower volumes,
prices and spreads earned in trading over-the-counter equity
securities, which became less popular investments for individuals
and institutions beginning with the Federal Reserve Board's
increase in short-term interest rates beginning in March 1997.
Partially offsetting these second quarter decreases were
increases in tax-exempt and taxable fixed income sales and
trading. For the 1997 first half, revenues from principal
transactions declined $12.4 million or 14 percent due to similar
declines in revenues from over-the-counter equity securities and
declines in sales and trading of taxable fixed income securities,
which were partially offset by increases in revenues from sales
and trading of tax-exempt fixed income securities.
Investment banking and underwriting revenues declined $0.7
million or 3 percent during the second quarter and $1.0 million
or 2 percent for the year-to-date period. For the quarter, the
revenue decline was primarily attributable to a reduction in
underwriting transactions for corporate clients and declines in
syndicate participations of corporate securities offerings. For
the year-to-date period, the decline is primarily the result of
lower municipal underwriting activity and lower levels of
syndicate participations partially offset by the first quarter
increase in corporate underwriting transactions.
Net interest income increased $1.8 million and $4.2 million,
respectively, or 17 percent each, for the quarter and year-to-
date period. The increases were primarily due to 21-percent and
22-percent increases in average margin loan balances,
respectively. The margin loan increases were due principally to
the transfer of several large customer accounts from competitors
during the 1996 third quarter. The resulting increase in net
interest income was partially offset by the effects of 48-
percent and 41-percent declines, respectively, in customer credit
balances versus the comparable periods of 1996, along with the
corresponding decline in short-term investments segregated for
regulatory purposes precipitated by the 1996 second half transfer
of approximately $340 million of customer credit balances to
Company-sponsored money market funds. The transfers occurred as
a result of the Company offering new cash management products to
certain segments of its customers.
Asset management revenues increased $2.1 million or 25 percent
for the quarter and $4.5 million or 27 percent for the first half
due to increases in volumes of assets in fee-based, managed
account programs at Dain Bosworth and Rauscher Pierce Refsnes
and, to a lesser degree, increases of approximately 30 percent in
assets under management at Interra Advisory.
In the 1997 second quarter, correspondent clearing revenues
approximated those of the prior year quarter and increased $1.1
million or 27 percent in the 1997 first half versus 1996 first
half. The year-to-date increase is principally the result of
increased correspondent trade volumes resulting from favorable
market conditions and growth in the size of such correspondents.
Compensation and benefits expense increased $.7 million or 1
percent during the 1997 second quarter and $5.1 million or 3
percent during the 1997 first half versus the comparable periods
of 1996. The increase for both periods is primarily the result
of increased commissions paid to revenue-producing employees
generating higher levels of operating revenues plus the effects
of 4-percent and 5-percent increases in the average number of
employees for the quarter and year-to-date, respectively, and
general salary increases. The majority of such increases were
offset by reduced levels of incentive compensation expense due to
lower levels of profitability.
Expenses other than compensation and benefits increased $4.0
million or 11 percent and $8.5 million or 12 percent over the
1996 second quarter and first half, respectively, due chiefly to
: (1) travel and promotional costs associated with the generation
of new business; (2) volume-driven increases in communications
market-data and clearing services; (3) increased occupancy and
equipment costs associated with office expansions and office
operating costs, including real estate taxes, and equipment
upgrades; and (4) costs associated with systems upgrades and
conversions.
Effect of Recent Accounting Standards
In June 1996 the Financial Accounting Standards Board (FASB)
issued Statement No. 125 (SFAS 125), "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of
Liabilities." Subsequently the FASB issued Statement No. 127
(SFAS 127), which deferred the effective date of certain
provisions of SFAS 125 until 1998. The Company intends to adopt
the applicable provisions of SFAS 125 when required in 1998 and
does not expect the adoption to have a material effect on its
consolidated financial statements.
In February 1997 the FASB issued Statement No. 128 (SFAS
128), "Earnings Per Share." The Company intends to adopt SFAS
128 when required in the fourth quarter of 1997 and does not
expect the adoption to have a material effect on reported
earnings per share amounts.
In June 1997 the FASB issued Statement No. 130 (SFAS 130),
"Reporting Comprehensive Income." The Company intends to adopt
SFAS 130 when required in 1998 and does not expect the adoption
to have a material effect on its reported income.
LIQUIDITY AND CAPITAL RESOURCES
On April 30, 1997, the Company's Board of Directors adopted a
Shareholder Rights Plan ("the Plan"). Under the Plan, the Board
declared a dividend of one preferred share purchase right
("Right") for each outstanding share of common stock of the
Company. The dividend was payable to the shareholders of record
as of May 12, 1997. The Rights are attached to and automatically
trade with the outstanding shares of the Company's common stock
until they are distributed and become exercisable under the terms
of the Plan.
On April 30, 1997, the Company's Board of Directors also
approved the filing of a universal "shelf registration" statement
with the Securities and Exchange Commission. It would permit the
Company to sell at its discretion up to $200 million in secured
or unsecured debt, or equity securities. Management intends to
file the shelf registration statement in the third quarter of
1997. The Company may use the proceeds for acquisition financing,
subsidiary financing, or other corporate purposes.
The Company has no current plans to issue any "shelf" securities.
On June 27, 1997, the Company entered into a $50 million
committed, unsecured revolving credit facility to replace the $15
million facility that expired on June 30, 1997. The new facility
expires on June 25, 1998 and may be extended for up to three
additional one-year periods.
As described in Note J of the Consolidated Financial Statements
of the Company's 1996 Annual Report on Form 10-K, Interra
Clearing Services, Dain Bosworth and Rauscher Pierce Refsnes must
comply with certain regulations of the Securities and Exchange
Commission and New York Stock Exchange, Inc. measuring
capitalization and liquidity. All three broker-dealers continue
to operate above minimum net capital standards. At June 30,
1997, net capital was $77.1 million at Interra Clearing, which
was 7.3 percent of aggregate debit balances and $24.5 million in
excess of the 5-percent requirement. At June 30, 1997, Dain
Bosworth and Rauscher Pierce Refsnes had net capital of $40.1
million and $23.3 million, respectively, in excess of their
minimum requirements.
During the 1997 first quarter, the Company increased its
regular quarterly dividend on its common stock to $.18 per share,
an increase of $.03 per share over the previous rate of $.15 per
share. The determination of the amount of future cash dividends,
if any, to be declared and paid will depend on the Company's
future financial condition, earnings and available funds.
In August 1996 the Company's Board of Directors approved a
100,000 share extension of its previously completed common stock
repurchase plan. Purchases of the common stock may be made from
time to time at prevailing prices in the open market, by block
purchases, or in privately negotiated transactions. The
repurchased shares will be used for the Company's employee stock
incentive and other benefit plans, or for other corporate
purposes. Through July 31, 1997, no shares had been repurchased
pursuant to this extension.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and/or its subsidiaries are defendants in various
civil actions and arbitrations incidental to their businesses
involving alleged violations of federal and state securities laws
and other laws. Some of these actions involve claims for
substantial damages. A detailed description of certain of such
actions is included in Item 3 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1996. The following
description of recent developments relating to pending and
threatened legal proceedings should be read in conjunction with
such Item 3.
Midwest Life Insurance Litigation
Colorado action - On July 3, 1997, a Colorado jury returned
a verdict awarding 12 plaintiffs damages of $4.75 million,
including $1.3 million in compensatory damages, $1.65
million in emotional distress damages and $1.8 million in
punitive damages, for breach of fiduciary duty, negligent
performance of an assumed duty to monitor and advise as to
the safety of their Midwest Life annuity contracts,
negligent misrepresentation, deceit based on fraudulent
misrepresentation and fraudulent concealment. In addition,
the court entered judgment for prejudgment interest of
approximately $1.5 million.
The 12 plaintiffs in this initial trial were Midwest Life
policyholders selected by plaintiffs' counsel to have their
cases tried first from the 232 individual plaintiffs in the
Colorado action. In Colorado, unlike other states, there was
not guaranty association coverage in place at the time
Midwest Life became insolvent. As a result of Dain
Bosworth's lobbying efforts, such coverage was adopted in
1994 and each of the plaintiffs was reimbursed for his or
her losses up to $100,000 plus accrued interest by the
Colorado guaranty association. In addition, plaintiffs and
the guaranty association between them received approximately
$.30 for each $1.00 of loss in liquidation payments from the
liquidator of Midwest Life's estate.
The Company and Dain Bosworth have filed post-trial motions
seeking to have the judgment in favor of these plaintiffs
set aside and, if necessary, will appeal. The Company
believes that the Court erred by, among other things,
withholding key evidence from the jury, including evidence
concerning Dain Bosworth's efforts to obtain guaranty
association coverage for plaintiffs' losses and evidence
concerning the reimbursements plaintiffs received for their
losses. The Company is seeking to have the judgment set
aside and, if necessary, will appeal on this and other
grounds.
Washington and Iowa actions - Trials are currently
scheduled to begin in the actions brought by the guaranty
associations in Washington and Iowa in early October and
early December 1997, respectively.
New Claim Filed by MWL Liquidator - In June 1997 an
eleventh complaint, captioned John A. Dixon, Jr., as
Commissioner of Insurance Ad Hoc, for the State of Louisiana
v. The Midwest Life Insurance Company/Midwest Life Insurance
Company, In Liquidation vs. Interra Financial, Inc., Dain
Bosworth Incorporated, and the Central National Life
Insurance Company of Omaha, was brought in the Nineteenth
Judicial District Court of the State of Louisiana. The case
has since been removed to the United States District Court
for the Middle District of Louisiana. In this action, the
liquidator of the Midwest Life estate alleges RICO
violations, breach of fiduciary duty, and conspiracy to
breach fiduciary duty and is seeking to recover in excess of
$59 million in compensatory damages, treble damages,
interest, costs, attorney's fees and other relief. The
plaintiff challenges certain coinsurance transactions
entered into by Midwest Life and Central National Life
Insurance Company beginning in 1980. By Louisiana statute,
the compensatory damages sought in this case would in large
part be distributed to the insurance guaranty associations
and individual policyholders who are plaintiffs or real
parties in interest in the ten actions previously described
in Item 3 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
The Company and Dain Bosworth believe that they have
substantial and meritorious defenses available in the above
action and in all of the actions relating to the Midwest
Life insolvency and they are defending themselves vigorously
in such actions.
Orange County Related Claims
Threatened SEC Proceeding - The Securities and Exchange
Commission (the "SEC") has authorized an action against
Rauscher Pierce Refsnes and one current and one former
employee, for alleged violation of certain antifraud
provisions under the Securities Act of 1933 and the
Securities Exchange Act of 1934 in connection with an
additional 12 taxable one-year note offerings for an
aggregate of $580 million and one pooled Tax Revenue
Anticipation Note offering for $300 million. The offerings
were made by certain school districts and cities during 1993
and 1994 and the proceeds were invested in the Orange County
Investment Pool. Rauscher Pierce Refsnes acted either as
underwriter or financial advisor in connection with each of
these transactions. The SEC has indicated that it intends
to file this action in the United States District Court for
the Central District of California and to seek injunctive
and other ancillary relief. Rauscher Pierce Refsnes is
engaged in discussions with the SEC in an effort to
resolve this matter on satisfactory terms prior to or in
lieu of the filing of a federal complaint. If an action is
brought, Rauscher Pierce Refsnes believes that it has
substantial and meritorious defenses available and intends
to defend this threatened action vigorously.
State of Arizona Refunding Transaction -- Threatened SEC
Proceeding
The SEC also has authorized an action against Rauscher
Pierce Refsnes and a former employee for alleged violation
of certain antifraud provisions under the Securities Act of
1933, the Securities Exchange Act of 1934 and the Investment
Advisors Act of 1940 in connection with a $130 million
refunding issue by the State of Arizona in 1992, on which
Rauscher Pierce Refsnes served as financial advisor.
Rauscher Pierce Refsnes purchased government securities and
sold them to the escrow trustee in the transaction. The SEC
has indicated that it intends to file this action in a
United States District Court and to seek injunctive and
other ancillary relief. Rauscher Pierce Refsnes is engaged
in discussions with the SEC in an effort to resolve
this matter on satisfactory terms prior to or in lieu of the
filing of a federal complaint. If an action is brought,
Rauscher Pierce Refsnes believes that it has substantial and
meritorious defenses available and intends to defend itself
vigorously in this threatened action.
While the outcome of any litigation is uncertain, management,
based in part upon consultation with legal counsel as to certain
of the actions pending against the Company and/or its
subsidiaries, believes that the resolution of all matters pending
against the Company and its subsidiaries will not have a material
adverse effect on the consolidated financial condition or results
of operations of the Company as set forth in the consolidated
financial statements contained herein.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the regular Annual Meeting of Stockholders of the Company
held on April 30, 1997, the stockholders elected ten directors
and ratified the appointment of KPMG Peat Marwick L.L.P. as the
registrant's independent auditors.
Voting results of each of those items were as follows:
Election of Directors:
<TABLE>
<CAPTION>
For Withheld
---------- --------
<S> <C> <C>
J. C. Appel 10,471,354 227,418
J. E. Attwell 10,472,491 226,281
S. S. Boren 9,701,754 997,018
F. G. Fitz-Gerald 10,475,384 223,388
W. Johnstone 10,475,329 223,443
W. F. Mondale 10,465,732 233,040
C. A. Rundell, Jr. 10,474,299 224,473
R. L. Ryan 10,475,369 223,403
A. R. Schulze, Jr. 10,473,454 225,318
I. Weiser 10,474,401 224,371
</TABLE>
<TABLE>
<CAPTION>
For Against Abstain
---------- ------- -------
<S> <C> <C> <C>
Ratification of Appointment
of Auditors 10,553,859 107,099 37,814
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Item No. Item Method of Filing
4.1 Credit Agreement dated June 27, 1997. Filed herewith.
4.2 Rights Agreement Dated April 30, 1997. Incorporated by
reference to
the Company's
Registration
Statement on
Form 8-A dated
May 1, 1997.
11 Computation of Net Earnings Per Share. Filed herewith.
27 Financial Data Schedule. Filed herewith.
(b) Reports on Form 8-K
One report on Form 8-K was filed during the quarter ended June
30, 1997.
Items Reported:
Item 5 - Other Events (Announcement of Adoption and Description
of Shareholder Rights Plan Dated April 30, 1997).
Date of Report - April 30, 1997.
Financial Statements Filed - None.
<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.
INTERRA FINANCIAL INCORPORATED
Registrant
Date: August 13, 1997 By: Louis C. Fornetti
----------------------
Louis C. Fornetti
Executive Vice President
and Chief Financial
Officer
(Principal Financial
Officer)
By: Daniel J. Reuss
----------------------
Daniel J. Reuss
Senior Vice President,
Corporate Controller
and Treasurer
(Principal Accounting
Officer)
<PAGE>
INTERRA FINANCIAL AND SUBSIDIARIES
INDEX OF EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1997
(a) Exhibits
Item No. Item Method of Filing
- -------- ------------------------------------- ----------------
4.1 Credit Agreement dated June 27, 1997. Filed herewith.
4.2 Rights Agreement Dated April 30, 1997. Incorporated by
reference to
the Company's
Registration
Statement on
Form 8-A dated
May 1, 1997.
11 Computation of Net Earnings Per Share. Filed herewith.
27 Financial Data Schedule. Filed herewith.
(b) Reports on Form 8-K
One report on Form 8-K was filed during the quarter ended June
30, 1997.
Items Reported:
Item 5 - Other Events (Announcement of Adoption and Description
of Shareholder Rights Plan Dated April 30, 1997).
Date of Report - April 30, 1997.
Financial Statements Filed - None.
Exhibit 4.1
CREDIT AGREEMENT
Dated as of June 27, 1997
Among
INTERRA FINANCIAL INCORPORATED,
FIRST BANK NATIONAL ASSOCIATION,
as a Bank and as Agent,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION and
THE CHASE MANHATTAN BANK, as Banks and as Co-Agents
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS.....................1
Section 1.1 Defined Terms.....................................1
Section 1.2 Accounting Terms and Calculations................10
Section 1.3 Computation of Time Periods......................10
Section 1.4 Other Definitional Terms.........................10
ARTICLE II TERMS OF LENDING...................................10
Section 2.1 The Loans........................................10
(a) Revolving Loans.........................................10
(b) Swing Line Loans........................................10
(c) Term Loans..............................................11
Section 2.2 Advance Options..................................11
Section 2.3 Borrowing Procedures.............................11
(a) Request by Borrower.....................................11
(b) Funding of Agent........................................12
Section 2.4 Continuation or Conversion of Loans..............13
Section 2.5 The Notes........................................13
(a) Revolving Notes.........................................13
(b) Swing Line Note.........................................14
(c) Term Notes..............................................14
Section 2.6 Funding Losses...................................14
Section 2.7 Refunding of Swing Line Loans....................15
Section 2.8 Letters of Credit................................16
Section 2.9 Extension of the Termination Date................21
Section 2.10 Use of Proceeds.................................22
ARTICLE III INTEREST AND FEES.................................22
Section 3.1 Interest.........................................22
(a) Eurodollar Advances.....................................22
(b) Federal Funds Rate Advances.............................23
(c) Interest After Maturity.................................23
Section 3.2 Facility Fees....................................23
Section 3.3 Computation......................................24
Section 3.4 Payment Dates....................................24
ARTICLE IV PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION OF
THE CREDIT AND SETOFF..........................................24
Section 4.1 Repayment........................................24
Section 4.2 Optional Prepayments.............................24
Section 4.3 Optional Reduction or Termination of Commitments.24
Section 4.4 Payments.........................................25
Section 4.5 Proration of Payments............................25
ARTICLE V ADDITIONAL PROVISIONS RELATING TO LOANS AND LETTERS OF
CREDIT.........................................................25
Section 5.1 Increased Costs..................................25
Section 5.2 Deposits Unavailable or Interest Rate
Unascertainable or Inadequate; Impracticability...............26
Section 5.3 Changes in Law Rendering Eurodollar Advances
Unlawful......................................................27
Section 5.4 Capital Adequacy.................................27
Section 5.5 Discretion of the Banks as to Manner of Funding..28
ARTICLE VI CONDITIONS PRECEDENT...............................28
Section 6.1 Conditions of Initial Loan or Initial Letters of
Credit........................................................28
Section 6.2 Conditions Precedent to all Loans and all Letters
of Credit.....................................................29
ARTICLE VII REPRESENTATIONS AND WARRANTIES....................30
Section 7.1 Organization, Standing, Etc......................30
Section 7.2 Authorization and Validity.......................30
Section 7.3 No Conflict; No Default..........................30
Section 7.4 Government Consent...............................30
Section 7.5 Financial Statements and Condition...............31
Section 7.6 Litigation and Contingent Liabilities............31
Section 7.7 Compliance.......................................31
Section 7.8 Environmental, Health and Safety Laws............31
Section 7.9 ERISA............................................31
Section 7.10 Margin Regulations..............................32
Section 7.11 Ownership of Property; Liens....................32
Section 7.12 Taxes...........................................32
Section 7.13 Trademarks, Patents.............................32
Section 7.14 Investment Company Act..........................32
Section 7.15 Public Utility Holding Company Act..............33
Section 7.16 Subsidiaries....................................33
Section 7.17 Registered Broker-Dealer; Membership............33
Section 7.18 Assessments by the Securities Investor Protection
Corporation...................................................33
ARTICLE VIII AFFIRMATIVE COVENANTS.............................33
Section 8.1 Financial Statements and Reports.................33
Section 8.2 Corporate Existence..............................35
Section 8.3 Insurance........................................35
Section 8.4 Payment of Taxes and Claims......................35
Section 8.5 Inspection.......................................36
Section 8.6 Maintenance of Properties........................36
Section 8.7 Books and Records................................36
Section 8.8 Compliance.......................................36
Section 8.9 ERISA............................................36
Section 8.10 Environmental Matters...........................36
Section 8.11 General Net Capital Requirement.................37
ARTICLE IX NEGATIVE COVENANTS.................................37
Section 9.1 Merger and Consolidation.........................37
Section 9.2 Sale of Assets...................................37
Section 9.3 Plans............................................37
Section 9.4 Change in Nature of Business.....................37
Section 9.5 Ownership of Stock in Material Subsidiaries......38
Section 9.6 Other Agreements.................................38
Section 9.7 Restricted Payments..............................38
Section 9.8 Investments......................................38
Section 9.9 Indebtedness and Contingent Liabilities..........39
Section 9.10 Liens...........................................40
Section 9.11 Transactions with Related Parties...............40
Section 9.12 Fiscal Year.....................................41
Section 9.13 Minimum Consolidated Net Worth..................41
Section 9.14 Minimum Net Capital Required for Interra Clearing
Services, Dain Bosworth and Rauscher Pierce Refsnes...........41
ARTICLE X EVENTS OF DEFAULT AND REMEDIES......................41
Section 10.1 Events of Default...............................41
Section 10.2 Remedies........................................43
Section 10.3 Letters of Credit...............................44
Section 10.4 Offset..........................................44
ARTICLE XI THE AGENT..........................................44
Section 11.1 Appointment and Grant of Authority..............44
Section 11.2 Non Reliance on Agent...........................45
Section 11.3 Responsibility of the Agent and Other Matters...45
Section 11.4 Action on Instructions..........................46
Section 11.5 Indemnification.................................46
Section 11.6 First Bank and Affiliates.......................46
Section 11.7 Notice to Holder of Notes.......................47
Section 11.8 Successor Agent.................................47
ARTICLE XII MISCELLANEOUS.....................................47
Section 12.1 No Waiver and Amendment.........................47
Section 12.2 Amendments, Etc.................................47
Section 12.3 Assignments.....................................48
(a) Assignments.............................................48
(b) Effectiveness of Assignments............................48
(c) Tax Matters.............................................49
(d) Information.............................................49
(e) Federal Reserve Bank....................................49
Section 12.4 Costs, Expenses and Taxes.......................49
Section 12.5 Notices.........................................50
Section 12.6 Successors......................................50
Section 12.7 Severability....................................50
Section 12.8 Subsidiary References...........................50
Section 12.9 Captions........................................50
Section 12.10 Entire Agreement...............................51
Section 12.11 Counterparts...................................51
Section 12.12 Confidentiality of Information.................51
Section 12.13 Governing Law..................................51
Section 12.14 Consent to Jurisdiction........................51
Section 12.15 Waiver of Jury Trial...........................52
.End Table C.
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, DATED AS OF JUNE 27, 1997, IS BY AND
AMONG INTERRA FINANCIAL INCORPORATED, A DELAWARE CORPORATION (THE
"BORROWER"), THE BANKS OR FINANCIAL INSTITUTIONS LISTED ON THE
SIGNATURE PAGES HEREOF OR WHICH HEREAFTER BECOME PARTIES HERETO
BY MEANS OF ASSIGNMENT AND ASSUMPTION AS HEREINAFTER DESCRIBED
(INDIVIDUALLY REFERRED TO AS A "BANK" OR COLLECTIVELY AS THE
"BANKS"), AND FIRST BANK NATIONAL ASSOCIATION, A NATIONAL BANKING
ASSOCIATION, AS AGENT FOR THE BANKS (IN SUCH CAPACITY, THE
"AGENT").
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. In addition to the terms
defined elsewhere in this Agreement, the following terms shall
have the following respective meanings (and such meanings shall
be equally applicable to both the singular and plural form of the
terms defined, as the context may require):
"Advance": The portion of the outstanding Loans bearing
interest at an identical rate for an identical Interest Period,
provided that all Federal Funds Rate Advances shall be deemed a
single Advance. An Advance may be a "Eurodollar Advance" or
"Federal Funds Rate Advance" (each, a "type" of Advance).
"Adverse Event": The occurrence of any event that could have
material adverse effect on the business, operations, property,
assets or condition (financial or otherwise) of the Borrower and
the Subsidiaries as a consolidated enterprise or on the ability
of the Borrower or any other party obligated thereunder to
perform its obligations under the Loan Documents.
"Aggregate Commitment": The aggregate of the Commitments of
the Banks, being initially $50,000,000, as the same may be
reduced from time to time pursuant to Section 4.3.
"Aggregate Debit Items": With respect to any Person at any
time, the aggregate debit items of such Person at such time as
computed in accordance with the Formula for Determination of
Reserve Requirements for Brokers and Dealers, Exhibit A to Rule
15c3-3.
"Agent": First Bank National Association, as agent for the
Banks hereunder and each successor, as provided in Section 11.8,
who shall act as Agent.
"Agreement": This Credit Agreement, as it may be amended,
modified, supplemented, restated or replaced from time to time.
"Applicable Eurodollar Rate Margin": A percentage equal to
(i) sixty-one one-hundredths of one percent (.61%) at all times
when the Borrower's senior debt (A) is not rated by Moody's or by
Standard & Poors, (B) if rated by Moody's and Standard & Poors,
has a rating of less than BBB- by Moody's and has a rating of
less than Baa3 by Standard & Poors, (C) if rated only by Moody's,
has a rating of less than BBB- by Moody's, or (D) if rated only
by Standard & Poors, has a rating of less than Baa3 by Standard &
Poors, and (ii) forty-five one-hundredths of one percent (.45%)
at all times when the Borrower's senior debt (A) if rated by
Moody's and Standard & Poors, has a rating of BBB- or better by
Moody's or has a rating of Baa3 or better by Standard & Poors,
(B) if rated only by Moody's, has a rating of BBB- or better by
Moody's, or (C) if rated only by Standard & Poors, has a rating
of Baa3 or better by Standard & Poors.
"Applicable Facility Fee Percentage": A percentage equal to
(i) fourteen one-hundredths of one percent (.14%) at all times
when the Borrower's senior debt (A) is not rated by Moody's or by
Standard & Poors, (B) if rated by Moody's and Standard & Poors,
has a rating of less than BBB- by Moody's and has a rating of
less than Baa3 by Standard & Poors, (C) if rated only by Moody's,
has a rating of less than BBB- by Moody's, or (D) if rated only
by Standard & Poors, has a rating of less than Baa3 by Standard &
Poors, and (ii) ten one-hundredths of one percent (.10%) at all
times when the Borrower's senior debt (A) if rated by Moody's and
Standard & Poors, has a rating of BBB- or better by Moody's or
has a rating of Baa3 or better by Standard & Poors, (B) if rated
only by Moody's, has a rating of BBB- or better by Moody's, or
(C) if rated only by Standard & Poors, has a rating of Baa3 or
better by Standard & Poors.
"Applicable Federal Funds Rate Margin": A percentage equal to
(i) eighty-five one-hundredths of one percent (.85%) at all times
when the Borrower's senior debt (A) is not rated by Moody's or by
Standard & Poors, (B) if rated by Moody's and Standard & Poors,
has a rating of less than BBB- by Moody's and has a rating of
less than Baa3 by Standard & Poors, (C) if rated only by Moody's,
has a rating of less than BBB- by Moody's, or (D) if rated only
by Standard & Poors, has a rating of less than Baa3 by Standard &
Poors, and (ii) seventy one-hundredths of one percent (.70%) at
all times when the Borrower's senior debt (A) if rated by Moody's
and Standard & Poors, has a rating of BBB- or better by Moody's
or has a rating of Baa3 or better by Standard & Poors, (B) if
rated only by Moody's, has a rating of BBB- or better by Moody's,
or (C) if rated only by Standard & Poors, has a rating of Baa3 or
better by Standard & Poors.
"Applicable Letter of Credit Margin": A percentage equal to
(i) sixty-eight one-hundredths of one percent (.68%) at all times
when the Borrower's senior debt (A) is not rated by Moody's or by
Standard & Poors, (B) if rated by Moody's and Standard & Poors,
has a rating of less than BBB- by Moody's and has a rating of
less than Baa3 by Standard & Poors, (C) if rated only by Moody's,
has a rating of less than BBB- by Moody's, or (D) if rated only
by Standard & Poors, has a rating of less than Baa3 by Standard &
Poors, and (ii) fifty-two one-hundredths of one percent (.52%) at
all times when the Borrower's senior debt (A) if rated by Moody's
and Standard & Poors, has a rating of BBB- or better by Moody's
or has a rating of Baa3 or better by Standard & Poors, (B) if
rated only by Moody's, has a rating of BBB- or better by Moody's,
or (C) if rated only by Standard & Poors, has a rating of Baa3 or
better by Standard & Poors.
"Assignee": As defined in Section 12.3(a).
"Assignment": As defined in Section 12.3(a).
"Assignment and Assumption Agreement": As defined in
Section 12.3(a).
"Business Day": Any day (other than a Saturday, Sunday or
legal holiday in the State of Minnesota or the State of New York)
on which national banks are permitted to be open in Minneapolis,
Minnesota, and national banks and state member banks are
permitted to be open in New York, New York, and, with respect to
Eurodollar Advances, a day on which dealings in Dollars may be
carried on by the Agent in the London interbank market.
"Capitalized Lease": Any lease which is or should be
capitalized on the books of the lessee in accordance with GAAP.
"Code": The Internal Revenue Code of 1986, as amended, or any
successor statute, together with regulations thereunder.
"Commitment": In the case of each Bank, the amount set forth
opposite such Bank's signature on the signature page of this
Agreement (or in the relevant Assignment and Assumption Agreement
for such Bank), as the same may be reduced from time to time
pursuant to Section 4.3 , or, as the context may require, the
agreement of each Bank to make Loans to the Borrower and to
participate in Swing Line Loans made to the Borrower and Letters
of Credit issued for the account of the Borrower up to such
amount, subject to the terms and conditions of this Agreement.
"Compliance Certificate": A certificate in the form of
Exhibit F, duly completed and signed by the treasurer or the
chief financial officer of the Borrower.
"Consolidated Net Income": The Borrower's consolidated net
income as determined in accordance with GAAP.
"Consolidated Net Worth": As of any date of determination, the
sum of the amounts set forth on the consolidated balance sheet of
the Borrower as the sum of the common stocks, preferred stock,
additional paid-in capital and retained earnings of the Borrower
(excluding treasury stock) as determined in accordance with GAAP.
"Dain Bosworth": Dain Bosworth Incorporated, a Delaware
corporation.
"Default": Any event which, with the giving of notice to the
Borrower or lapse of time, or both, would constitute an Event of
Default.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended, and any successor statute, together with regulations
thereunder.
"ERISA Affiliate": Any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower
is a member and which is treated as a single employer under
Section 414 of the Code.
"Eurodollar Advance": An Advance designated as such in a notice
of borrowing under Section 2.3 or a notice of continuation or
conversion under Section 2.4.
"Eurodollar Interbank Rate": The average offered rate for
deposits in United States Dollars (rounded upwards, if necessary,
to the nearest 1/16 of 1%) for delivery of such deposits on the
first day of an Interest Period of a Eurodollar Advance, for the
number of days comprised therein (except in the case of a one (1)
week or two (2) week Interest Period, such rate shall be
determined on the basis of the number of days comprised in a one
(1) month Interest Period), which appears on the Reuters Screen
LIBO Page as of 11:00 a.m., Minneapolis time (or such other time
as of which such rate appears) on the Business Day that is two
Business Days preceding the first day of the Interest Period
(except in the case of a one (1) week Interest Period, such rate
shall be determined on the Business Day which is the first
Business Day of the Interest Period) or the rate for such
deposits determined by the Agent at such time based on such other
published service of general application as shall be selected by
the Agent for such purpose; provided, that in the event that the
Reuters Screen LIBO Page and such other published services of
general application are unavailable, the Agent may determine the
rate based on rates offered to the Agent for deposits in United
States Dollars (rounded upwards, if necessary, to the nearest
1/16 of 1%) in the interbank eurodollar market at such time for
delivery on the first day of the Interest Period for the number
of days comprised therein. "Reuters Screen LIBO Page" means the
display designated as page "LIBO" on the Reuter Monitor Money
Rates Service (or such other page as may replace the LIBO Page on
that service for the purpose of displaying London interbank
offered rates of major banks for United States Dollar deposits).
"Eurodollar Rate (Reserve Adjusted)": A rate per annum (rounded
upward, if necessary, to the nearest 1/16th of 1%) calculated for
the Interest Period of a Eurodollar Advance in accordance with
the following formula:
ERRA = Eurodollar Interbank Rate
-------------------------
1.00 - ERR
In such formula, "ERR" means "Eurodollar Reserve Rate" and "ERRA"
means "Eurodollar Rate (Reserve Adjusted)", in each instance
determined by the Agent for the applicable Interest Period. The
Agent's determination of all such rates for any Interest Period
shall be conclusive in the absence of manifest error.
"Eurodollar Reserve Rate": A percentage equal to the daily
average during such Interest Period of the aggregate maximum
reserve requirements (including all basic, supplemental, marginal
and other reserves), as specified under Regulation D of the
Federal Reserve Board, or any other applicable regulation that
prescribes reserve requirements applicable to Eurocurrency
liabilities (as presently defined in Regulation D) or applicable
to extensions of credit by the Agent the rate of interest on
which is determined with regard to rates applicable to
Eurocurrency liabilities. Without limiting the generality of the
foregoing, the Eurocurrency Reserve Requirement shall reflect any
reserves required to be maintained by the Agent against (i) any
category of liabilities that includes deposits by reference to
which the Eurodollar Interbank Rate is to be determined, or (ii)
any category of extensions of credit or other assets that
includes Eurodollar Advances.
"Event of Default": Any event described in Section 10.1.
"Facility Fees": As defined in Section 3.2.
"Federal Funds Rate": For any date of determination, the
weighted average of the rates on overnight Federal Funds
transactions, with members of the Federal Reserve System only,
arranged by Federal Funds brokers applicable to Federal Funds
transactions on that date. The Federal Funds Rate shall be
determined by the Agent on the basis of reports by Federal Funds
brokers to, and published daily by, the Federal Reserve Bank of
New York in the Composite Closing Quotations for U.S. Government
Securities. If such publication is unavailable or the Federal
Funds Rate is not set forth therein, the Federal Funds Rate shall
be determined on the basis of any other source reasonably
selected by the Agent. In the case of any day which is not a
Business Day, the Federal Funds Rate shall be the rate applicable
to Federal Funds transactions on the next preceding Business Day
for which the Federal Funds Rate is reported.
"Federal Funds Rate Advance": An Advance designated as such in
a notice of borrowing under Section 2.3 or a notice of
continuation or conversion under Section 2.4.
"Federal Reserve Board": The Board of Governors of the Federal
Reserve System or an successor thereto.
"First Bank": First Bank National Association, in its
individual capacity and not as Agent hereunder.
"GAAP": Generally accepted accounting principles as applied in
the preparation of the audited financial statements of the
Borrower, Dain Bosworth, Rauscher Pierce Refsnes and Interra
Clearing Services referred to in Section 7.5.
"Indebtedness": Without duplication, all obligations,
contingent or otherwise, which in accordance with GAAP should be
classified upon the obligor's balance sheet as liabilities, but
in any event including the following (whether or not they should
be classified as liabilities upon such balance sheet): (a)
obligations secured by any mortgage, pledge, security interest,
lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the obligation secured
thereby shall have been assumed and whether or not the obligation
secured is the obligation of the owner or another party; (b) any
obligation for the deferred purchase price of any property or
services, except Trade Accounts Payable, (c) any obligation as
lessee under any Capitalized Lease; (d) all guaranties,
endorsements and other contingent obligations in respect to
Indebtedness of others; and (f) undertakings or agreements to
reimburse or indemnify issuers of letters of credit.
"Interest Period" Either (a) for any Eurodollar Advance, the
period commencing on the borrowing date of such Eurodollar
Advance or the date a Federal Funds Rate Advance is converted
into such Eurodollar Advance, or the last day of the preceding
Interest Period for such Eurodollar Advance, as the case may be,
and ending on the numerically corresponding day one (1) week, two
(2) weeks, one (1) month, two (2) months, three (3) months or six
(6) months thereafter, as selected by the Borrower pursuant to
Section 2.3 or Section 2.4; provided, that:
(i) any Interest Period which would otherwise end on a day
which is not a Business Day shall end on the next succeeding
Business Day unless such next succeeding Business Day falls
in another calendar month, in which case such Interest
Period shall end on the next preceding Business Day;
(ii) any Interest Period of one (1), two (2), three (3) or six
(6) months which 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 shall extend beyond the Termination
Date.
"Interra Clearing Services": Interra Clearing Services, Inc.,
a Minnesota corporation.
"Interra Lending Services": Interra Lending Services, Inc., a
Minnesota corporation.
"Lien": Any security interest, mortgage, pledge, lien,
hypothecation, judgment lien or similar legal process, charge,
encumbrance, title retention agreement or analogous instrument or
device (including, without limitation, the interest of the
lessors under Capitalized Leases and the interest of a vendor
under any conditional sale or other title retention agreement).
"Letters of Credit": As defined in Section 2.8(a).
"Letter of Credit Agreements": As defined in Section
2.8(c)(ix).
"Letter of Credit Participation Amount": As defined in
Section 2.8(a).
"Letter of Credit Obligations": The aggregate amount of all
possible drawings under all Letters of Credit plus all amounts
drawn under any Letter of Credit and not reimbursed by the
Borrower under the applicable Letter of Credit Agreement.
"Loans": The Revolving Loans and the Swing Line Loans or the
Term Loans, as the case may be.
"Loan Documents": This Agreement, the Notes, each Letter of
Credit Agreement and each other instrument, document, guaranty,
security agreement, mortgage, or other agreement executed and
delivered by the Borrower or any guarantor or party granting
security interests in connection with this Agreement, the Loans
or the Letter of Credit Obligations or any collateral for the
Loans or the Letter of Credit Obligations.
"Material Subsidiary":
(a) For so long as they shall be Subsidiaries of the
Borrower, Dain Bosworth, Rauscher Pierce Refsnes and Interra
Clearing Services; and
(b) For any fiscal year of the Borrower, any other
Subsidiary of the Borrower (i) which contributed (or, in the
case of any Subsidiary acquired during such fiscal year,
would have contributed, if acquired, at the beginning of the
preceding fiscal year) more than 10% of the revenues of
Borrower and its Subsidiaries on a consolidated basis during
the preceding fiscal year or (ii) which had (or, in the case
of any Subsidiary acquired during such fiscal year, would
have had, if acquired on the last day of the preceding
fiscal year) aggregate assets in excess of 10% of the assets
of Borrower and its Subsidiaries on a consolidated basis at
the close of the preceding fiscal year.
"Moody's": Moody's Investors Services.
"Net Capital": Net Capital shall mean "net capital" computed
in accordance with Rule 15c3-1.
"Notes": The Revolving Notes and the Swing Line Note or the
Term Notes, as the case may be.
"Payment Date": Each of the following: (a) with respect to
each Eurodollar Advance, the last day of each Interest Period
and, if such Interest Period is in excess of three (3) months, on
the last day of each three (3) month period occurring after the
commencement of such Interest Period prior to the last day of
such Interest Period; (b) with respect to each Federal Funds Rate
Advance and for any fees including, without limitation, Facility
Fees, the last day of each calendar month, (c) unless the Banks
shall have made the Term Loans to repay the Revolving Loans in
accordance with the provisions of Section 2.1(c), the Termination
Date; and (d) if the Banks shall have made the Terms Loans to
repay the Revolving Loans in accordance with the provisions of
Section 2.1(c), the Term Loan Maturity Date.
"PBGC": The Pension Benefit Guaranty Corporation, established
pursuant to Subtitle A of Title IV of ERISA, and any successor
thereto or to the functions thereof.
"Percentage": As to any Bank, the percentage set forth
opposite such Bank's signature on the signature page of this
Agreement (or in the relevant Assignment and Assumption Agreement
for such Bank) (i.e., the proportion, expressed as a percentage,
that such Bank's Commitment bears to the Aggregate Commitment).
"Person": Any natural person, corporation, partnership, joint
venture, firm, association, trust, unincorporated organization,
government or governmental agency or political subdivision or any
other entity, whether acting in an individual, fiduciary or other
capacity.
"Plan": An employee benefit plan or other plan, maintained for
employees of the Borrower or of any ERISA Affiliate, and subject
to Title IV of ERISA or Section 412 of the Code.
"Rauscher Pierce Refsnes": Rauscher Pierce Refsnes, Inc., a
Delaware corporation.
"Reference Rate": The rate of interest from time to time
publicly announced by First Bank as its "reference rate." First
Bank may lend to its customers at rates that are at, above or
below the Reference Rate. For purposes of determining any
interest rate which is based on the Reference Rate, such interest
rate shall change on the effective date of any change in the
Reference Rate.
"Related Party": Any Person (other than a Subsidiary): (a)
which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with,
the Borrower, or (b) 5% or more of the equity interest of which
is beneficially owned or held by the Borrower or a Subsidiary.
The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Refunded Swing Line Loans": As defined in Section 2.7(a).
"Regulations G, T, U and X": Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System.
"Reportable Event": A reportable event as defined in Section
4043 of ERISA and the regulations issued under such Section, with
respect to a Plan, excluding, however, such events as to which
the PBGC by regulation has waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event, provided that a failure to meet the
minimum funding standard of Section 412 of the Code and Section
302 of ERISA shall be a reportable event regardless of the
issuance of any such waivers in accordance with Section 412(d) of
the Code.
"Required Banks": Those Banks whose total Percentage of the
Commitments equals or exceeds 51%, or if the Commitments have
been terminated, those Banks whose share of the outstanding
principal of the Loans constitutes at least 51% of the aggregate
outstanding principal of all Loans.
"Revolving Loans": The Loans described in Section 2.1(a).
"Revolving Notes": The promissory notes of the Borrower
described in Section 2.5(a), substantially in the form of Exhibit
A-1, as such promissory notes may be amended, modified or
supplemented from time to time, and such term shall include any
substitutions for, or renewals of, such promissory notes.
"Rule 15c3-1": Rule 15c3-1 of the General Rules and
Regulations as promulgated by the Securities and Exchange
Commission under the Securities and Exchange Act of 1934, as
amended (17 CFR 2240.15c3-1), as such Rule may be amended from
time to time, or any rule or regulation which replaces Rule 15c3-
1.
"Rule 15c3-3": Rule 15c3-3 of the General Rules and
Regulations as promulgated by the Securities and Exchange
Commission under the Securities and Exchange Act of 1934, as
amended (17 CFR 2240.15c3-3), as such Rule may be amended from
time to time, or any rule or regulation which replaces Rule 15c3-
3.
"Subsidiary": Any Person of which or in which the Borrower and
its other Subsidiaries own directly or indirectly 50% or more of:
(a) the combined voting power of all classes of stock having
general voting power under ordinary circumstances to elect a
majority of the board of directors of such Person, if it is a
corporation, (b) the capital interest or profit interest of such
Person, if it is a partnership, joint venture, limited liability
company or similar entity, or (c) the beneficial interest of such
Person, if it is a trust, association or other unincorporated
organization.
"Standard & Poors": Standard & Poors Corporation.
"Swing Line Commitment": $5,000,000, or, as the context may
require, the agreement of the Swing Line Bank to make the Swing
Line Loans to the Borrower subject to the terms and conditions of
this Agreement.
"Swing Line Bank": First Bank.
"Swing Line Loans": The Loans described in Section 2.1(b).
"Swing Line Note": The promissory note of the Borrower
described in Section 2.5(b), substantially in the form of Exhibit
A-2, as such promissory note may be amended, modified or
supplemented from time to time, and such term shall include any
substitutions for, or renewals of, such promissory note.
"Swing Line Participation Amount": As defined in Section
2.7(b).
"Term Loans": The Loans described in Section 2.1(c).
"Term Notes": The promissory notes of the Borrower described
in Section 2.5(c), substantially in the form of Exhibit A-3, as
such promissory notes may be amended, modified or supplemented
from time to time, and such term shall include any substitutions
for, or renewals of, such promissory notes.
"Term Loan Maturity Date": The second (2nd) anniversary of the
date on which the Banks make the Term Loans to the Borrower under
Section 2.1(c).
"Termination Date": The earliest of (a) June 25,1998, or such
later date to which the Termination Date is extended pursuant to
the provisions of Section 2.9, (b) the date on which the
Commitments are terminated pursuant to Section 10.2 hereof or (c)
the date on which the Commitments are reduced to zero pursuant to
Section 4.3 hereof.
"Trade Accounts Payable": The trade accounts payable of any
Person with a maturity of not greater than 90 days incurred in
the ordinary course of such Person's business.
"Unrefunded Swing Line Loans": As defined in Section 2.7(b).
Section 1.2 Accounting Terms
and Calculations. Except as may be expressly provided to the
contrary herein, all accounting terms used herein shall be
interpreted and all accounting determinations hereunder
(including, without limitation, determination of compliance with
financial ratios and restrictions in Articles VIII and IX hereof)
shall be made in accordance with GAAP consistently applied. Any
reference to "consolidated" financial terms shall be deemed to
refer to those financial terms as applied to the Borrower and its
Subsidiaries in accordance with GAAP.
Section 1.3 Computation of
Time Periods. In this Agreement, in the computation of a period
of time from a specified date to a later specified date, unless
otherwise stated the word "from" means "from and including" and
the word "to" or "until" each means "to but excluding."
Section 1.4 Other Definitional
Terms. The words "hereof", "herein" and "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. References to Sections, Exhibits, schedules and like
references are to this Agreement unless otherwise expressly
provided.
ARTICLE II TERMS OF LENDING
Section 2.1 The Loans.
(a) RevolvingLoans. Subject to
the terms and conditions of this Agreement and in reliance
upon the warranties of the Borrower in this Agreement, each
Bank agrees, severally and not jointly, to make revolving
loans (each, a "Revolving Loan" and, collectively, the
"Revolving Loans") to the Borrower from time to time from
the date hereof until the Termination Date, during which
period the Borrower may repay and reborrow in accordance
with the provisions hereof, provided, that (i) the aggregate
unpaid principal amount of such Bank's Revolving Loans, such
Bank's Letter of Credit Participation Amount and such Bank's
Swing Line Participation Amount at any one time shall not
exceed its Commitment, and (ii) the aggregate unpaid
principal amount of all outstanding Loans and all Letter of
Credit Obligations shall not at any time exceed the
Aggregate Commitment. The Revolving Loans shall be made by
the Banks on a pro rata basis, calculated for each Bank
based on its Percentage.
(b) Swing Line Loans. Subject to
the terms and conditions of this Agreement and in reliance
upon the warranties of the Borrower in this Agreement, the
Swing Line Bank agrees to make revolving loans (each a
"Swing Line Loan" and, collectively, the "Swing Line Loans")
to the Borrower from time to time from the date hereof until
the Termination Date, during which period the Borrower may
repay and reborrow in accordance with the provisions hereof,
provided, that the aggregate unpaid principal amount of the
Swing Line Loans at any one time outstanding shall not
exceed the Swing Line Commitment. The Borrower acknowledges
that the Swing Line Bank contemplates that a Swing Line Loan
will not be outstanding for more than six (6) consecutive
Business Days, and in no event shall a Swing Line Loan be
outstanding for more than ten (10) consecutive calendar
days.
(c) Term Loans. Provided that no
Default or Event of Default shall have occurred and be
continuing and subject to the other terms and conditions of
this Agreement and in reliance upon the warranties of the
Borrower in this Agreement, each Bank agrees, severally and
not jointly, to make a single term loan (each a "Term Loan"
and, collectively, the "Term Loans") to the Borrower, on the
Termination Date, in an amount equal to the then outstanding
principal balance of the Revolving Loans made by such Bank
to the Borrower. The proceeds of each Bank's Term Loan
shall be simultaneously applied by such Bank to the
repayment of such Bank's Revolving Note, whereupon such
Bank's Revolving Note shall be returned to the Borrower
marked "Replaced by Term Note" and the Commitment of such
Bank shall be automatically terminated. The Borrower shall
deliver to each Bank its respective Term Note, appropriately
completed and properly executed on behalf of the Borrower,
prior to the funding of the Term Loans.
Section 2.2 Advance Options.
The Revolving Loans and the Term Loans shall consist of
Eurodollar Advances and Federal Funds Rate Advances, as shall be
selected by the Borrower, except as otherwise provided herein.
The Swing Line Loans shall be Federal Funds Rate Advances, and
may not be converted into Eurodollar Advances. Any combination
of types of Advances may be outstanding at the same time, except
that the total number of outstanding Eurodollar Advances shall
not exceed three (3) at any one time. Each Eurodollar Advance
shall be in a minimum amount of $1,000,000 or in an integral
multiple of $500,000 above such amount. Each Federal Funds Rate
Advance shall be in an amount that is an integral multiple of
$500,000. Federal Funds Rate Advances shall not be outstanding
for more than ten (10) consecutive calendar days.
Section 2.3 Borrowing Procedures.
(a) Request by Borrower. Any request by the Borrower for a
Loan shall be in writing, or
by telephone promptly confirmed in writing, and must be
given so as to be received by the Agent not later than:
(i) 10:00 a.m., Minneapolis time, on the date of any
requested Revolving Loans that shall be comprised of
Federal Funds Rate Advances;
(ii) 10:00 a.m., Minneapolis time, on the date of any
requested Revolving Loans that shall be, or shall
include, a Eurodollar Advance having an Interest Period
of one (1) week;
(iii) 10:00 a.m., Minneapolis time, two (2) Business
days prior to the date of any requested Revolving Loans
that shall be, or shall include, a Eurodollar Advance
having an Interest Period of two (2) weeks or longer;
(iv) 2:00 p.m., Minneapolis time, on the date of any
requested Swing Line Loan; or
(v) at any time during the period from May 1 through
June 15 prior to the Termination Date for the Term
Loans.
Each request for a Loan shall specify (1) the borrowing date
(which shall be a Business Day), (2) the amount of such Loan
and if Revolving Loans or Term Loans, the type or types of
Advances comprising such Loans, and (3) if such Revolving
Loans or Term Loans shall include Eurodollar Advances, the
initial Interest Periods for such Eurodollar Advances.
(b) Funding of Agent. The Agent
shall promptly notify each other Bank of the receipt of such
request, the matters specified therein, and of such Bank's
Percentage of the requested Loans. On the date of the
requested Revolving Loans, each Bank shall provide its share
of the requested Loans to the Agent in immediately available
funds not later than 1:00 p.m., Minneapolis time. On the
date of any requested Swing Line Loans, the Swing Line Bank
shall provide the requested Swing Line Loan to the Agent in
immediately available funds not later than 4:00 p.m.,
Minneapolis time. Unless the Agent determines that any
applicable condition specified in Article VI has not been
satisfied, the Agent will make the requested Loans available
to the Borrower at the Agent's principal office in
Minneapolis, Minnesota in immediately available funds not
later than 5:00 p.m. (Minneapolis time) on the lending date
so requested. If the Agent has made a Loan to the Borrower
on behalf of a Bank but has not received the amount of such
Loan from such Bank by the time herein required, such Bank
shall pay interest to the Agent on the amount so advanced at
the Federal Funds Rate from the date of such Loan to the
date funds are received by the Agent from such Bank, such
interest to be payable with such remittance from such Bank
of the principal amount of such Loan (provided, however,
that the Agent shall not make any Loan on behalf of a Bank
if the Agent has received prior notice from such Bank that
it will not make such Loan). If the Agent does not receive
payment from such Bank by the next Business Day after the
date of any Loan, the Agent shall be entitled to recover
such Loan, with interest thereon at the rate then applicable
to such Loan, on demand, from the Borrower, without
prejudice to the Agent's and the Borrower's rights against
such Bank. If such Bank pays the Agent the amount herein
required with interest at the overnight Federal Funds Rate
before the Agent has recovered from the Borrower, such Bank
shall be entitled to the interest payable by the Borrower
with respect to the Loan in question accruing from the date
the Agent made such Loan.
Section 2.4 Continuation or
Conversion of Loans. The Borrower may elect to (i) continue any
outstanding Eurodollar Advance from one Interest Period into a
subsequent Interest Period to begin on the last day of the
earlier Interest Period, or (ii) convert any outstanding Advance
into another type of Advance (on the last day of an Interest
Period only, in the instance of a Eurodollar Advance), by giving
the Agent notice in writing, or by telephone promptly confirmed
in writing, given so as to be received by the Agent not later
than:
(a) 10:00 a.m., Minneapolis time, on the date of the
requested continuation or conversion, if the continuing or
converted Advance shall be a Federal Funds Rate Advance;
(b) 10:00 a.m., Minneapolis time, on the date of the
requested continuation or conversion, if the continuing or
converted Advance shall be a Eurodollar Advance having an
Interest Period of one (1) week; or
(c) 10:00 a.m., Minneapolis time, two (2) Business days
prior to the date of the requested continuation or
conversion, if the continuing or converted Advance shall be
a Eurodollar Advance having an Interest Period of two (2)
weeks or longer.
Each notice of continuation or conversion of an Advance shall
specify (i) the effective date of the continuation or conversion
date (which shall be a Business Day), (ii) the amount and the
type or types of Advances following such continuation or
conversion (subject to the limitation on amount set forth in
Section 2.2), and (iii) for continuation as, or conversion into,
Eurodollar Advances, the Interest Periods for such Advances.
Absent timely notice of continuation or conversion, each
Eurodollar Advance shall automatically convert into a Federal
Funds Rate Advance on the last day of an applicable Interest
Period, unless paid in full on such last day. No Advance shall
be continued as, or converted into, a Eurodollar Advance if a
Default or Event of Default shall exist or if the shortest
Interest Period for such Advance may not transpire prior to the
Termination Date in the case of a Revolving Loan or the Term Loan
Maturity Date in the case of a Term Loan.
Section 2.5 The Notes. The Loans shall be evidenced by the
following Notes:
(a) Revolving Notes. The
Revolving Loans of each Bank shall be evidenced by a
promissory note of the Borrower (each a "Revolving Note" and
collectively for all Banks, the "Revolving Notes"),
substantially in the form of Exhibit A-1 hereto, in the
amount of such Bank's Commitment originally in effect and
dated as of the date of this Agreement (or dated as of the
relevant date of the Assignment and Assumption Agreement for
such Bank). Each Bank shall enter in its respective records
the amount of each Revolving Loan, the rate or rates of
interest borne by its Revolving Loans and the payments made
on the Revolving Loans, and such records shall be deemed
conclusive evidence of the subject matter thereof, absent
manifest error.
(b) Swing Line Note. The Swing
Line Loans of the Swing Line Bank shall be evidenced by a
promissory note of the Borrower (the "Swing Line Note "),
substantially in the form of Exhibit A-2 hereto, in the
amount of the Swing Line Commitment. The Swing Line Bank
shall enter in its records the amount of each Swing Line
Loan and the payments made on the Swing Line Loans, and such
records shall be deemed conclusive evidence of the subject
matter thereof, absent manifest error.
(c) Term Notes. The Term Loan of
each Bank shall be evidenced by a promissory note of the
Borrower (each a "Term Note" and, collectively for all
Banks, the "Term Notes"), substantially in the form of
Exhibit A-3 hereto, in the amount of such Bank's outstanding
Revolving Advances immediately prior to making the Term Loan
and dated as of the Termination Date. Each Bank shall enter
in its respective records the amount of its Term Loan, the
rate or rates of interest borne by its Term Loan and the
payments made on its Term Loan, and such records shall be
deemed conclusive evidence of the subject matters thereof,
absent manifest error.
Section 2.6 Funding Losses.
The Borrower will indemnify each Bank upon demand against any
loss or expense which such Bank may sustain or incur (including,
without limitation, any loss or expense sustained or incurred in
obtaining, liquidating or employing deposits or other funds
acquired to effect, fund, or maintain any Advance) as a
consequence of (i) any failure of the Borrower to make any
payment when due of any amount due hereunder or under any Note,
(ii) any failure of the Borrower to borrow, continue or convert
an Advance on a date specified therefor in a notice thereof, or
(iii) any payment (including, without limitation, any payment
pursuant to Section 4.2, 4.3 or 10.2), prepayment or conversion
of any Eurodollar Advance on a date other than the last day of
the Interest Period for such Advance. Determinations by each
Bank for purposes of this Section 2.6 of the amount required to
indemnify such Bank shall be conclusive in the absence of
manifest error. Without limiting the effect of the foregoing,
each Bank's loss under clause (ii) or (iii) above with respect to
a Eurodollar Advance shall include an amount equal to the excess,
if any, of (a) the amount of interest that otherwise would have
accrued on the principal amount so paid, so prepaid, so not
borrowed, so not converted or so not continued for the period
from the date of such payment or such failure to borrow, convert
or continue to the last day of then current Interest Period for
such Eurodollar Advance (or, in the case of a failure to borrow,
convert or continue, the Interest Period for such Eurodollar
Advance that would have commenced on the date specified for such
borrowing, conversion on continuation) at the applicable rate of
interest (or the rate of interest which would have been
applicable) for such Eurodollar Advance provided herein over (b)
the amount of interest that otherwise would have accrued on such
principal amount at a rate per annum equal to the interest
component of the amount such Bank would have bid in the London
interbank market for dollar deposits of leading banks in amounts
comparable to such principal amount and with maturities
comparable to such Interest Period (as reasonably determined by
such Bank).
Section 2.7 Refunding of Swing Line Loans.
(a) The Swing Line Bank, at any time and from time to time
in its sole and absolute discretion may, on behalf of the
Borrower (which hereby irrevocably directs the Swing Line
Bank to act on its behalf), upon notice given by the Swing
Line Bank no later than 10:00 a.m., Minneapolis time, on the
relevant refunding date, request each Bank to make, and each
Bank hereby agrees to make, a Revolving Loan (which shall be
a Federal Funds Rate Advance), in an amount equal to such
Bank's Percentage of the aggregate amount of the Swing Line
Loans (the "Refunded Swing Line Loans") outstanding on the
date of such notice, to refund such Swing Line Loans. Each
Bank shall make the amount of such Revolving Loan available
to the Agent in immediately available funds, no later than
1:00 p.m., Minneapolis time, on the date of such notice.
The proceeds of such Revolving Loans shall be distributed by
the Agent to the Swing Line Bank and immediately applied by
the Swing Line Bank to repay the Refunded Swing Line Loans.
(b) If, for any reason, Revolving Loans may not be (as
determined by the Agent in its sole discretion), or are not,
made pursuant to Section 2.7(a) to repay Swing Line Loans,
then, effective on the date such Revolving Loans would
otherwise have been made, each Bank severally,
unconditionally and irrevocably agrees that it shall
purchase a participating interest in such Swing Line Loans
("Unrefunded Swing Line Loans") in an amount equal to the
amount of Revolving Loans which would otherwise have been
made by such Bank pursuant to Section 2.7(a). Each Bank
will immediately transfer to the Agent, in immediately
available funds, the amount of its participation (the "Swing
Line Participation Amount"), and the proceeds of such
participation shall be distributed by the Agent to the Swing
Line Bank in such amount as will reduce the amount of the
participating interest retained by the Swing Line Bank in
its Swing Line Loans.
(c) Whenever, at any time after the Swing Line Bank has
received from any Bank such Bank's Swing Line Participation
Amount, the Swing Line Bank receives any payment on account
of the Swing Line Loans, the Swing Line Bank will distribute
to such Bank its Swing Line Participation Amount
(appropriately adjusted, in the case of interest payments,
to reflect the period of time during which such Bank's
participating interest was outstanding and funded and, in
the case of principal and interest payments, to reflect such
Bank's pro rata portion of such payment if such payment is
not sufficient to pay the principal of and interest on all
Swing Line Loans then due); provided, however, that in the
event that such payment received by the Swing Line Bank is
required to be returned, such Bank will return to the Swing
Line Bank any portion thereof previously distributed to it
by the Swing Line Bank.
(d) Each Bank's obligation to make the Revolving Loans
referred to in Section 2.7(a) and to purchase participating
interests pursuant to Section 2.7(b) shall be absolute and
unconditional and shall not be affected by any circumstance,
including, without limitation, (i) any setoff, counterclaim,
recoupment, defense or other right which such Bank or the
Borrower may have against the Swing Line Bank, the Borrower
or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of a Default or an Event of
Default or the failure to satisfy any of the other
conditions precedent specified in Article VI; (iii) any
adverse change in the condition (financial or otherwise) of
the Borrower; (iv) any breach of this Agreement or any other
Loan Document by the Borrower or any Bank; or (v) any other
circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing. Notwithstanding the
foregoing, a Bank shall not have any obligation to make a
Revolving Loan pursuant to Section 2.7(a) or to purchase a
participating interest in a Swing Line Loan pursuant to
Section 2.7(b) if (A) a Default or an Event of Default shall
have occurred and be continuing at the time such Swing Line
Loan was made or if any other condition precedent set forth
in Section 6.2 was not satisfied at the time such Swing Line
Loan was made and (B) such Bank shall have provided written
notice to the Swing Line Bank, received by the Swing Line
Bank at least one (1) Business Day prior to the date on
which such Swing Line Loan was made, that such Default or
Event of Default has occurred and is continuing or that such
other condition precedent set forth in Section 6.2 is not
capable of being satisfied, and, as a result thereof, that
such Bank will not make Revolving Loans pursuant to
Section 2.7(a) or purchase participating interests in Swing
Line Loans pursuant to Section 2.7(b) while such Default or
Event of Default is continuing or while such other condition
precedent is not capable of being satisfied.
Section 2.8 Letters of Credit.
(a) Letters of Credit. Subject to the terms and conditions
of this Agreement and in reliance upon the warranties of the
Borrower in this Agreement, upon request by the Borrower,
the Agent shall issue letters of credit for the account of
the Borrower (such letters of credit as any of them may be
amended, supplemented, extended or confirmed from time to
time, being herein collectively called the "Letters of
Credit") subject to the following: (i) compliance by the
Borrower with all conditions precedent set forth in
Article VI hereof, (ii) entry by the Borrower into Letter of
Credit Agreements and such other documents deemed
appropriate by the Agent for the issuance of such Letters of
Credit at least three (3) Business Days prior to the date of
any requested Letter of Credit, (iii) satisfaction of the
Agent with the form and substance of each such Letter of
Credit, and (iv) the absence of any statutory or regulatory
change or directive affecting the issuance by the Agent of
letters of credit. Upon the date of the issuance of a
Letter of Credit, the Agent shall be deemed, without further
action by any party hereto, to have sold to each Bank, and
each Bank shall be deemed without further action by any
party hereto, to have purchased from the Agent, a
participation, in its Percentage, in such Letter of Credit
and the related Letter of Credit Obligations (the "Letter of
Credit Participation Amount").
(b) Each Bank's purchase of a participating interest in a
Letter of Credit pursuant to Section 2.8(a) shall be
absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which such
Bank or the Borrower may have against the Agent, the
Borrower or any other Person for any reason whatsoever;
(ii) the occurrence or continuance of a Default or an Event
of Default or the failure to satisfy any of the other
conditions precedent in Article VI; (iii) any adverse change
in the condition (financial or otherwise) of the Borrower;
(iv) any breach of this Agreement or any other Loan Document
by the Borrower or any Bank; (v) the expiry date of any
Letter of Credit occurring after such Bank's Commitment has
terminated or (vi) any other circumstance, happening or
event whatsoever, whether or not similar to any of the
foregoing. Notwithstanding the foregoing, a Bank shall not
have any obligation to purchase a participating interest in
a Letter of Credit pursuant to Section 2.8(a) if (A) a
Default or an Event of Default shall have occurred and be
continuing at the time such Letter of Credit was issued or
if any other condition precedent set forth in Section 6.2
was not satisfied at the time such Letter of Credit was
issued and (B) such Bank shall have provided written notice
to the Agent, received by the Agent at least one (1)
Business Day prior to the date on which such Letter of
Credit was issued, that such Default or Event of Default has
occurred and is continuing or that such other condition
precedent set forth in Section 6.2 is not capable of being
satisfied, and, as a result thereof, that such Bank will not
purchase participating interests in Letters of Credit
pursuant to Section 2.8(a) while such Default or Event of
Default is continuing or while such other condition
precedent is not capable of being satisfied.
(c) Additional Provisions. The following additional
provisions shall apply to each Letter of Credit:
(i) Upon receipt of any request for a Letter of Credit,
the Agent shall notify each Bank of the contents of
such request and of such Bank's Percentage of the
amount of such proposed Letter of Credit.
(ii) Each Letter of Credit shall have an expiry date of
one (1) year or less from the date of issuance of such
Letter of Credit.
(iii) No Letter of Credit may be issued if, after
giving
effect to such Letter of Credit, the Letter of Credit
Obligations shall exceed the Aggregate Commitment minus
the aggregate outstanding principal amount of the
Loans. The Commitment of each Bank shall be deemed to
be utilized for all purposes of this Agreement in an
amount equal to such Bank's Letter of Credit
Participation Amount.
(iv) Upon receipt from the beneficiary of any Letter of
Credit of any demand for payment thereunder, Agent
shall promptly notify the Borrower and each Bank as to
the amount to be paid as a result of such demand and
the payment date. If at any time the Agent shall have
made a payment to a beneficiary of such Letter of
Credit in respect of a drawing or in respect of an
acceptance created in connection with a drawing under
such Letter of Credit, each Bank will pay to Agent
immediately upon demand by the Agent at any time during
the period commencing after such payment until
reimbursement thereof in full by the Borrower, an
amount equal to such Bank's Percentage of such payment,
together with interest on such amount for each day from
the date of demand for such payment (or, if such demand
is made after 2:00 p.m. Minneapolis time on such date,
from the next succeeding Business Day) to the date of
payment by such Bank of such amount at a rate of
interest per annum equal to the Federal Funds Rate for
such period.
(v) The Borrower shall be irrevocably and
unconditionally obligated forthwith to reimburse the
Agent for any amount paid by the Agent upon any drawing
under any Letter of Credit, without presentment,
demand, protest or other formalities of any kind, all
of which are hereby waived. Such reimbursement may,
subject to satisfaction of the conditions in Article VI
hereof and to the available Commitments of the Banks
(after adjustment in the same to reflect the
elimination of the corresponding Letter of Credit
Obligation), be made by the borrowing of Revolving
Loans. The Agent will pay to each Bank such Bank's
Percentage of all amounts received from the Borrower
for application in payment, in whole or in part, of a
Letter of Credit Obligation, but only to the extent
such Bank has made payment to the Agent in respect of
such Letter of Credit pursuant to clause (iv) above.
(vi) The Borrower's obligation to reimburse the Agent
for any amount paid by the Agent upon any drawing under
any Letter of Credit shall be performed strictly in
accordance with the terms of this Agreement and the
applicable Letter of Credit Agreement under any and all
circumstances whatsoever and irrespective of (A) any
lack of validity or enforceability of any Letter of
Credit, any Letter of Credit Agreement or this
Agreement, or any term or provision therein, (B) any
draft or other document presented under a Letter of
Credit proving to be forged, fraudulent or invalid in
any respect or any statement therein being untrue or
inaccurate in any respect, (C) payment by the Agent
under a Letter of Credit against presentation of a
draft or other document that does not comply with the
terms of such Letter of Credit, or (D) any other event
or circumstance whatsoever, whether or not similar to
any of the foregoing, that might, but for the
provisions of this clause (vi), constitute a legal or
equitable discharge of, or provide a right of setoff
against, the Borrower's obligations hereunder. Neither
the Agent nor the Banks shall have any liability or
responsibility by reason of or in connection with the
issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to
in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery
of any draft, notice or other communication under or
relating to any Letter of Credit (including any
document required to make a drawing thereunder), any
error in interpretation of technical terms or any
consequence arising from causes beyond the control of
the Agent; provided that the foregoing shall not be
construed to excuse the Agent from liability to the
Borrower to the extent of any direct damages (as
opposed to consequential damages, claims in respect of
which are hereby waived by the Borrower to the extent
permitted by applicable law) suffered by the Borrower
that are caused by the Agent's failure to exercise care
when determining whether drafts and other documents
presented under a Letter of Credit comply with the
terms thereof. The parties hereto expressly agree
that, in the absence of gross negligence or wilful
misconduct on the part of the Agent (as finally
determined by a court of competent jurisdiction), the
Agent shall be deemed to have exercised care in each
such determination. In furtherance of the foregoing
and without limiting the generality thereof, the
parties hereto expressly agree that, with respect to
documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of
Credit, the Agent may, in its sole discretion, either
accept and make payment upon such documents without
responsibility for further investigation or refuse to
accept and make payment upon such documents if such
documents are not in strict compliance with the terms
of such Letter of Credit.
(vii) The Borrower will pay to Agent a letter of credit
fee with respect to each Letter of Credit equal to an
amount, calculated on the basis of the face amount of
each Letter of Credit, in each case for the period from
and including the date of issuance of such Letter of
Credit to and including the date of expiration or
termination thereof, at a per annum rate equal to the
Applicable Letter of Credit Margin plus $250, such fee
to be due and payable in advance on the date of the
issuance thereof. From each such letter of credit fee
paid by the Borrower, the Agent will retain for its own
account, in consideration of the Agent's fronting such
Letter of Credit, a fee equal to seven one-hundredths
of one percent (.07%) of the face amount of such Letter
of Credit (the "Agent's Letter of Credit Fronting
Fee"). After deducting the Agent's Letter of Credit
Fronting Fee, the Agent will pay to each Bank an amount
equal to the product of such Bank's Percentage times
the remainder of such letter of credit fee (after
taking into account the Agent's retention of the
Agent's Letter of Credit Fronting Fee). The Borrower
agrees to provide written notice to the Agent within
three (3) Business Days of the Borrower's senior debt
becoming rated by Moody's or by Standard & Poors or,
once the Borrower's senior debt has become so rated, of
any change in the rating of the Borrower's senior debt
by Moody's or by Standard & Poors. Any reduction in
the Applicable Letter of Credit Margin shall become
effective with respect to all Letters of Credit issued
after the Borrower has provided three (3) Business
Day's prior written notice to the Agent of the rating
or change in rating of the Borrower's senior debt which
entitles the Borrower to a reduction in the Applicable
Letter of Credit Margin. Any increase in the
Applicable Letter of Credit Margin shall become
effective with respect to all Letters of Credit issued
after the earlier to occur of (i) the date which is
three (3) Business Days after the date on which the
Agent becomes aware of a rating change in the
Borrower's senior debt which subjects the Borrower to
an increase in the Applicable Letter of Credit Margin,
or (ii) the date which is three (3) Business Days after
the Borrower has notified the Agent in writing of the
rating change in the Borrower's senior debt which
subjects the Borrower to an increase in the Applicable
Letter of Credit Margin.
(viii)In addition to the letter of credit fee described
in clause (vii) above, the Borrower agrees to pay to
the Agent for the Account of Agent, on written demand
of the Agent from time to time, the administrative fees
charged by the Agent in the ordinary course of business
in connection with the honoring of drafts under Letters
of Credit and all other activity with respect to
Letters of Credit at the then-current rates of the
Agent. All fees under clause (vii) above and under
this clause (viii) shall be computed on the basis of a
year of 360 days and paid for the actual number of days
elapsed.
(ix) The issuance by the Agent of each Letter of
Credit shall, in addition to the other conditions
precedent specified in this Agreement, be subject to
the condition precedent that the Borrower shall have
executed and delivered such applications and other
instruments and agreements relating to such Letter of
Credit as the Agent shall have reasonably requested
(the "Letter of Credit Agreements"). In the event of a
conflict between the terms of this Agreement and the
terms of any Letter of Credit Agreement (including the
charging of any fees other than normal and customary
reimbursable expenses), the terms hereof shall control.
(d) Indemnification: Release. Borrower hereby indemnifies
and holds harmless the Agent and each Bank from and against
any and all claims and damages, losses, liabilities, costs
or expenses which the Agent or such Bank may incur (or which
may be claimed against the Agent or such Bank by any Person
whatsoever), regardless of whether caused in whole or in
part by the negligence of any of the indemnified parties, in
connection with the execution and delivery of any Letter of
Credit or transfer of or payment or failure to pay under any
Letter of Credit; provided that the Borrower shall not be
required to indemnify any party seeking indemnification for
any claims, damages, losses, liabilities, costs or expenses
to the extent, but only to the extent, caused by (i) the
willful misconduct or gross negligence of the party seeking
indemnification, or (ii) by the failure by the party seeking
indemnification to pay under any Letter of Credit after the
presentation to it of a request required to be paid under
applicable law.
(e) Borrower's Ability to Obtain Letters of Credit outside
of this Agreement. Nothing in this Section 2.8 is intended
to limit the ability of the Borrower to obtain letters of
credit outside of this Agreement from financial institutions
other than the Banks, provided that, after giving effect to
any such letter of credit outside of this Agreement, the
Borrower shall be in compliance with all provisions of this
Agreement, including, without limitation, Section 9.9.
Section 2.9 Extension of the Termination Date.
(a) The Borrower may, by notice to the Agent in
substantially the form of Exhibit G hereto (a copy of which
notice the Agent shall promptly deliver to each of the
Banks) not less than sixty (60) days and not more than
ninety (90) days prior to the Termination Date then in
effect (the "Current Termination Date"), request that the
Banks extend their respective Commitments for an additional
364 days from the Extension Consent Date (as defined below).
Each Bank, acting in its sole discretion, shall, by notice
to the Agent in substantially the form of Exhibit H hereto
and given no later than the date occurring thirty (30) days
prior to the Current Termination Date (such date, the
"Extension Consent Date"), advise the Agent whether or not
such Bank agrees to such extension; provided that each Bank
that determines not to extend the Current Termination Date
(a "Non-Extending Bank") shall notify the Agent of such fact
promptly after such determination (but in any event no later
than the Extension Consent Date) and any Bank that does not
so advise the Agent on or before the Extension Consent Date
shall be deemed to be a Non-Extending Bank. The election of
any Bank to agree to such extension shall not obligate any
other Bank to so agree. The Borrower shall have the right
to request an extension of the Termination Date pursuant to
this Section 2.9 not more than three (3) times.
(b) The Agent shall notify the Borrower which Banks, if
any, have elected to extend the Current Termination Date not
later than twenty-one (21) days prior to the Current
Termination Date. If (and only if) Banks holding at least
two-thirds (66 2/3%) of the Aggregate Commitment shall have
agreed to extend the Current Termination Date in accordance
with the provisions of Section 2.9(a), then, effective as of
the Current Termination Date, the Termination Date shall be
extended to the date falling 364 days after the Current
Termination Date (provided, if such date is not a Business
Day, then the Termination Date as so extended shall be the
next preceding Business Day). If Banks holding more than
two-thirds (66 2/3%) but less than all of the Aggregate
Commitment shall have elected to extend the Current
Termination Date, the Commitment of each such extending Bank
shall remain unchanged through the new Termination Date and
the Aggregate Commitment shall be reduced to the aggregate
of the Commitments of such extending Banks.
(c) Notwithstanding the foregoing, the extension of the
Termination Date shall not be effective with respect to any
Bank unless:
(i) no Default or Event of Default shall have occurred
and be continuing on each of the date of the notice
requesting such extension, the applicable Extension
Consent Date and the applicable Current Termination
Date;
(ii) each of the representations and warranties of the
Borrower in Article VII hereof shall be true and
correct on and as of each of the date of the notice
requesting such extension, the applicable Extension
Consent Date and the applicable Current Termination
Date with the same force and effect as if made on and
as of each such date (or, if any such representation or
warranty is expressly stated to have been made as of a
specific date, as of such specific date);
(iii) each Non-Extending Bank shall have been paid in
full by the Borrower on or before the Current
Termination Date all amounts owing to such Bank
hereunder and under the other Loan Documents; and
Even if the Termination Date is extended as aforesaid by
certain of the Banks, the Commitment of each Non-Extending
Bank shall terminate on the applicable Current Termination
Date.
(d) If the Borrower shall have requested an extension of
the Current Termination Date pursuant to this Section 2.9,
the Agent shall, simultaneously with the Agent's notice to
the Borrower, notify each Bank as to whether or not the
Current Termination Date shall have been so extended,
specifying the individual Commitments of the respective
Banks and the Aggregate Commitment of the Banks after giving
effect to such extension. If requested by the Agent, the
Borrower and the Banks shall enter into such amendments to
this Agreement as the Agent shall require to evidence any
extension of the Current Termination Date.
Section 2.10 Use of Proceeds.
The proceeds of the Loans and the Letters of Credit shall be used
by the Borrower for its general corporate purposes.
ARTICLE III INTEREST AND FEES
Section 3.1 Interest.
(a) Eurodollar Advances. The
unpaid principal amount of each Eurodollar Advance shall
bear interest prior to maturity at a rate per annum equal to
the Eurodollar Rate (Reserve Adjusted) in effect for each
Interest Period for such Eurodollar Advance plus the
Applicable Eurodollar Margin. The Borrower agrees to
provide written notice to the Agent within three (3)
Business Days of the Borrower's senior debt becoming rated
by Moody's or by Standard & Poors or, once the Borrower's
senior debt has become so rated, of any change in the rating
of the Borrower's senior debt by Moody's or by Standard &
Poors. Any reduction in the Applicable Eurodollar Margin
shall become effective three (3) Business Days after the
Borrower has so notified the Agent in writing of the rating
or change in rating of the Borrower's senior debt which
entitles the Borrower to a reduction in the Applicable
Eurodollar Margin. Any increase in the Applicable
Eurodollar Margin shall become effective on the earlier to
occur of (i) the date which is three (3) Business Days after
the date on which the Agent becomes aware of a rating change
in the Borrower's senior debt which subjects the Borrower to
an increase in the Applicable Eurodollar Margin, or (ii) the
date which is three (3) Business Days after the Borrower has
notified the Agent in writing of the rating change in the
Borrower's senior debt which subjects the Borrower to an
increase in the Applicable Eurodollar Margin.
(b) Federal Funds Rate
Advances. The unpaid principal amount of each Federal Funds
Rate Advance shall bear interest prior to maturity at a rate
per annum equal to the Federal Funds Rate plus the
Applicable Federal Funds Rate Margin. The Borrower agrees
to provide written notice to the Agent within three (3)
Business Days of the Borrower's senior debt becoming rated
by Moody's or by Standard & Poors or, once the Borrower's
senior debt has become so rated, of any change in the rating
of the Borrower's senior debt by Moody's or by Standard &
Poors. Any reduction in the Applicable Federal Funds Rate
Margin shall become effective three (3) Business Days after
the Borrower has so notified the Agent in writing of the
rating or change in rating of the Borrower's senior debt
which entitles the Borrower to a reduction in the Applicable
Federal Funds Rate Margin. Any increase in the Applicable
Federal Funds Rate Margin shall become effective on the
earlier to occur of (i) the date which is three (3) Business
Days after the date on which the Agent becomes aware of a
rating change in the Borrower's senior debt which subjects
the Borrower to an increase in the Applicable Federal Funds
Rate Margin, or (ii) the date which is three (3) Business
Days after the Borrower has notified the Agent in writing of
the rating change in the Borrower's senior debt which
subjects the Borrower to an increase in the Applicable
Federal Funds Rate Margin.
(c) Interest After Maturity.
Any amount of the Loans not paid when due, whether at the
date scheduled therefor or earlier upon acceleration, shall
bear interest until paid in full at a rate per annum equal
to the greater of (i) two percent (2.00%) in excess of the
rate applicable to the unpaid principal amount immediately
before it became due, or (ii) two percent (2.00%) in excess
of the Reference Rate in effect from time to time.
Section 3.2 Facility Fees.
The Borrower shall pay fees (the "Facility Fees") to the Agent
for the account of the Banks in an amount determined by applying
the Applicable Facility Fee Percentage to the amount of the
Aggregate Commitment of the Banks for the period from the date
hereof to the Termination Date. The Borrower agrees to provide
written notice to the Agent within three (3) Business Days of the
Borrower's senior debt becoming rated by Moody's or by Standard &
Poors or, once the Borrower's senior debt has become so rated, of
any change in the rating of the Borrower's senior debt by Moody's
or by Standard & Poors. Any reduction in the Applicable Facility
Fee Percentage shall become effective three (3) Business Days
after the Borrower has so notified the Agent in writing of the
rating or change in rating of the Borrower's senior debt which
entitles the Borrower to a reduction in the Applicable Facility
Fee Percentage. Any increase in the Applicable Facility Fee
Percentage shall become effective on the earlier to occur of (i)
the date which is three (3) Business Days after the date on which
the Agent becomes aware of a rating change in the Borrower's
senior debt which subjects the Borrower to an increase in the
Applicable Facility Fee Percentage, or (ii) the date which is
three (3) Business Days after the Borrower has notified the Agent
in writing of the rating change in the Borrower's senior debt
which subjects the Borrower to an increase in the Applicable
Facility Fee Percentage.
Section 3.3 Computation.
Interest and Facility Fees shall be computed on the basis of
actual days elapsed and a year of 360 days.
Section 3.4 Payment Dates.
Accrued interest under Section 3.1(a) and (b) and Facility Fees
shall be payable on the applicable Payment Dates. Accrued
interest under Section 3.1(c) shall be payable on demand.
ARTICLE IV PAYMENTS, PREPAYMENTS,
REDUCTION OR TERMINATION
OF THE CREDIT AND SETOFF
Section 4.1 Repayment.
Unless the Banks shall have made the Term Loans to repay the
Revolving Loans in accordance with the provisions of
Section 2.1(c), the outstanding principal balance of the
Revolving Loans and of the Swing Line Loans, together with all
accrued and unpaid interest thereon, shall be due and payable on
the Termination Date. The outstanding principal balance of each
Term Loan shall be due and payable in seven (7) equal quarterly
installments sufficient to fully amortize the principal balance
of such Term Loan on the Term Loan Maturity Date, with the first
such quarterly installment commencing on the last day of the
month of September immediately following the making of the Term
Loans, and with subsequent quarterly installments continuing on
the last day of each December, March, June and September
thereafter until the Term Loan Maturity Date, when the remaining
outstanding principal balance of such Term Loan, and all accrued
interest thereon, shall be due and payable.
Section 4.2 Optional
Prepayments. The Borrower may, upon at least one (1) Business
Days' prior written or telephonic notice received by the Bank,
prepay the Loans, in whole or in part, at any time subject to the
provisions of Section 2.6, without any other premium or penalty.
Any such prepayment must be accompanied by accrued and unpaid
interest on the amount prepaid. Each partial prepayment shall be
in an amount of $500,000 or an integral multiple thereof. Any
partial prepayment of the Term Loans shall be applied to the Term
Loans in inverse order of their maturity.
Section 4.3 Optional
Reduction or Termination of Commitments. The Borrower may, at
any time, upon no less than three (3) Business Days prior written
or telephonic notice received by the Agent, reduce the
Commitments of all Banks, such reduction to be in a minimum
amount of $5,000,000 or an integral multiple of $1,000,000 in
excess thereof and to be applied ratably to the Commitments of
the respective Banks. Upon any reduction in the Commitments
pursuant to this Section, the Borrower shall pay to the Agent for
the account of the Banks the amount, if any, by which the
aggregate unpaid principal amount of outstanding Loans plus the
Letter of Credit Obligations exceeds the total Commitments of all
Banks as so reduced. Amounts so paid cannot be reborrowed. The
Borrower may, at any time, upon not less than three (3) Business
Days prior written notice to the Agent, terminate the Commitments
in their entirety. Upon termination of the Commitments pursuant
to this Section, the Borrower shall pay to the Agent for the
account of the Banks the full amount of all outstanding Loans,
all accrued and unpaid interest thereon, all unpaid Facility Fees
accrued to the date of such termination and all other unpaid
obligations of the Borrower to the Banks hereunder. All payments
described in this Section are subject to the provisions of
Section 2.6. Notwithstanding the foregoing, the Commitments may
not be terminated or reduced to an amount below outstanding
Letter of Credit Obligations if Letters of Credit are
outstanding.
Section 4.4 Payments.
Payments and prepayments of principal of, and interest on, the
Notes, the Letter of Credit Obligations and all fees, expenses
and other obligations under the Loan Documents shall be made
without set-off or counterclaim in immediately available funds
not later than 2:00 p.m., Minneapolis time, on the dates due at
the main office of the Agent in Minneapolis, Minnesota. Funds
received on any day after such time shall be deemed to have been
received on the next Business Day. The Agent shall promptly
distribute in like funds to each Bank its Percentage share of
each such payment of principal, interest and Facility Fees.
Subject to the definition of the term "Interest Period", whenever
any payment to be made under this Agreement, the Notes or the
other Loan Documents shall be stated to be due on a day which is
not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be
included in the computation of any interest or fees.
Section 4.5 Proration of
Payments. If any Bank or other holder of a Loan shall obtain any
payment or other recovery (whether voluntary, involuntary, by
application of offset, pursuant to the guaranty hereunder, or
otherwise) on account of principal of, interest on, or fees with
respect to any Loan, or payment of any Letter of Credit
Obligations, in any case in excess of the share of payments and
other recoveries of other Banks or holders, such Bank or other
holder shall purchase from the other Banks or holders, in a
manner to be specified by the Agent, such participations in the
Loans or Letter of Credit Obligations held by such other Banks or
holders as shall be necessary to cause such purchasing Bank or
other holder to share the excess payment or other recovery
ratably with each of such other Banks or holders; provided,
however, that if all or any portion of the excess payment or
other recovery is thereafter recovered from such purchasing Bank
or holder, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest.
ARTICLE V ADDITIONAL PROVISIONS
RELATING TO LOANS
AND LETTERS OF CREDIT
Section 5.1 Increased Costs.
If, as a result of any law, rule, regulation, treaty or
directive, or any change therein or in the interpretation or
administration thereof, or compliance by the Banks with any
request or directive (whether or not having the force of law)
from any court, central bank, governmental authority, agency or
instrumentality, or comparable agency:
(a) any tax, duty or other charge with respect to any Loan,
the Notes, the Letters of Credit or the Commitments is
imposed, modified or deemed applicable, or the basis of
taxation of payments to any Bank of interest or principal of
the Loans or of the Facility Fees (other than taxes imposed
on the overall net income of such Bank by the jurisdiction
in which such Bank has its principal office) is changed;
(b) any reserve, special deposit, special assessment or
similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Bank is imposed,
modified or deemed applicable; or
(c) any other condition affecting this Agreement or the
Commitments is imposed on any Bank or the relevant funding
markets;
and such Bank determines that, by reason thereof, the cost to
such Bank of making or maintaining the Loans, issuing or
participating in the Letters of Credit or extending its
Commitment is increased, or the amount of any sum receivable by
such Bank hereunder or under the Notes in respect of any Loan is
reduced;
then, the Borrower shall pay to such Bank upon demand such
additional amount or amounts as will compensate such Bank (or the
controlling Person in the instance of (c) above) for such
additional costs or reduction (provided that such Bank has not
been compensated for such additional cost or reduction in the
calculation of the Eurodollar Reserve Rate). Simultaneously with
such Bank's demand for any such additional amount, the Bank shall
submit to the Borrower a certificate in reasonable detail of such
Bank setting forth the basis for the determination of such
additional amount payable under this Section 5.1. Determinations
by each Bank for purposes of this Section 5.1 of the additional
amounts required to compensate such Bank shall be conclusive in
the absence of manifest error. In determining such amounts, the
Banks may use any reasonable averaging, attribution and
allocation methods.
Section 5.2 Deposits
Unavailable or Interest Rate Unascertainable or Inadequate;
Impracticability. If the Agent determines (which determination
shall be conclusive and binding on the parties hereto) that:
(a) deposits of the necessary amount for the relevant
Interest Period for any Eurodollar Advance are not available
in the relevant markets or that, by reason of circumstances
affecting such market, adequate and reasonable means do not
exist for ascertaining the Eurodollar Interbank Rate for
such Interest Period;
(b) the Eurodollar Rate (Reserve Adjusted) will not
adequately and fairly reflect the cost to the Banks of
making or funding the Eurodollar Advance for a relevant
Interest Period; or
(c) the making or funding of Eurodollar Advances has become
impracticable as a result of any event occurring after the
date of this Agreement which, in the opinion of the Agent,
materially and adversely affects such Advances or any Bank's
Commitment or the relevant market;
the Agent shall promptly give notice of such determination to the
Borrower, and (i) any notice of a new Eurodollar Advance
previously given by the Borrower and not yet borrowed or
converted shall be deemed to be a notice to make a Federal Funds
Rate Advance, and (ii) the Borrower shall be obligated to either
prepay in full any outstanding Eurodollar Advances, without
premium or penalty on the last day of the current Interest Period
with respect thereto or convert any such Eurodollar Advance to a
Federal Funds Rate Advance on such last day.
Section 5.3 Changes in Law
Rendering Eurodollar Advances Unlawful. If at any time due to
the adoption of any law, rule, regulation, treaty or directive,
or any change therein or in the interpretation or administration
thereof by any court, central bank, governmental authority,
agency or instrumentality, or comparable agency charged with the
interpretation or administration thereof, or for any other reason
arising subsequent to the date of this Agreement, it shall become
unlawful or impossible for any Bank to make or fund any
Eurodollar Advance, the obligation of such Bank to provide such
Advance shall, upon the happening of such event, forthwith be
suspended for the duration of such illegality or impossibility.
If any such event shall make it unlawful or impossible for the
Bank to continue any Eurodollar Advance previously made by it
hereunder, such Bank shall, upon the happening of such event,
notify the Agent and the Borrower thereof in writing, and the
Borrower shall, at the time notified by such Bank, either convert
each such unlawful Advance to a Federal Funds Rate Advance or
repay such Advance in full, together with accrued interest
thereon, subject to the provisions of Section 2.6.
Section 5.4 Capital Adequacy.
The Borrower shall pay directly to each Bank from time to time on
request of such Bank such amounts as such Bank may determine to
be necessary to compensate such Bank (or, without duplication,
the bank holding company of which such Bank is a subsidiary) for
any costs that it determines are attributable to the maintenance
by such Bank (or such bank holding company), pursuant to any law
or regulation or any interpretation, directive or request
(whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) of any court or
governmental or monetary authority (i) following any Regulatory
Change or (ii) implementing at the national level any risk-based
capital guideline or other requirement (whether or not having the
force of law and whether or not the failure to comply therewith
would be unlawful) hereafter issued by any government or
governmental or supervisory authority implementing the Basle
Accord (including, without limitation, the Final Risk-Based
Capital Guidelines of the Board of Governors of the Federal
Reserve System (12 CFR Part 208, Appendix A; 12 CFR Part 225,
Appendix A) and the Final Risk-Based Capital Guidelines of the
Office of the Comptroller of the Currency (12 CFR Part 3,
Appendix A)), of capital in respect of its Commitment, Loans or
participation in Letters of Credit (such compensation to include,
without limitation, an amount equal to any reduction of the rate
of return on assets or equity of such Bank (or such bank holding
company) to a level below that which such Bank (or such bank
holding company) could have achieved but for such law,
regulation, interpretation, directive or request).
Simultaneously with such Bank's request for any such amount, the
Bank shall submit to the Borrower a certificate in reasonable
detail of such Bank setting forth the basis for the determination
of such amount payable under this Section 5.4. Determinations by
each Bank for purposes of this Section 5.4 shall be conclusive in
the absence of manifest error. In determining such amounts, the
Banks may use any reasonable averaging, attribution and
allocation methods. For purposes of this Section 5.4,
"Regulatory Change" shall mean, with respect to any Bank, any
change after the date of this Agreement in Federal, state or
foreign law or regulations (including, without limitation,
Regulation D) or the adoption or making after such date of any
interpretation, directive or request applying to a class of banks
(other than those applying solely to banks formally determined by
the applicable regulator to be in a financially troubled
condition) including such Bank of or under any Federal, state or
foreign law or regulations (whether or not having the force of
law and whether or not failure to comply therewith would be
unlawful) by any court or governmental or monetary authority
charged with the interpretation or administration thereof. For
purposes of this Section 5.4, "Basle Accord" shall mean the
proposals for risk-based capital framework described by the Basle
Committee on Banking Regulations and Supervisory Practices in its
paper entitled "International Convergence of Capital Measurement
and Capital Standards" date July 1988, as amended, modified and
supplemented and in effect from time to time or any replacement
thereof.
Section 5.5 Discretion of the
Banks as to Manner of Funding. Notwithstanding any provision of
this Agreement to the contrary, each Bank shall be entitled to
fund and maintain its funding of all or any part of the Loans in
any manner it elects; it being understood, however, that for
purposes of this Agreement, all determinations hereunder shall be
made as if the Banks had actually funded and maintained each
Eurodollar Advance during the Interest Period for such Advance
through the purchase of deposits having a term corresponding to
such Interest Period and bearing an interest rate equal to the
Eurodollar Interbank Rate for such Interest Period.
ARTICLE VI CONDITIONS PRECEDENT
.Section 6.1 Conditions of
Initial Loan or Initial Letters of Credit. The obligation of the
Banks to make the initial Loan hereunder or of the Agent to issue
the initial Letter of Credit hereunder shall be subject to the
satisfaction of the conditions precedent, in addition to the
applicable conditions precedent set forth in Section 6.2 below,
that the Agent shall have received all of the following, in form
and substance satisfactory to the Agent, each duly executed and
certified or dated the date of the initial Loan or the initial
Letter of Credit, as applicable, or such other date as is
satisfactory to the Agent:
(a) The Revolving Notes and the Swing Line Note executed by
a duly authorized officer (or officers) of the Borrower.
(b) A copy of the corporate resolution of the Borrower
authorizing the execution, delivery and performance of the
Loan Documents, certified by the Secretary or an Assistant
Secretary of the Borrower.
(c) An incumbency certificate showing the names and titles,
and bearing the signatures of, the officers of the Borrower
authorized to execute the Loan Documents and to request
Loans and Letters of Credit hereunder, certified by the
Secretary or an Assistant Secretary of the Borrower.
(d) A copy of the Articles or Certificate of Incorporation
of the Borrower with all amendments thereto, certified by
the appropriate governmental official of the jurisdiction of
its incorporation.
(e) A Certificate of Good Standing for the Borrower in the
jurisdiction of its incorporation, certified by the
appropriate governmental officials.
(f) A copy of the By-Laws of the Borrower with all
amendments thereto, certified by the Secretary or an
Assistant Secretary of the Borrower.
(g) An opinion of counsel to the Borrower, addressed to the
Agent and the Banks, in form and content acceptable to the
Agent and its counsel
Section 6.2 Conditions
Precedent to all Loans and all Letters of Credit. The obligation
of the Banks to make any Loan hereunder (including the initial
Loan) and of the Agent to issue any Letter of Credit hereunder
(including the initial Letter of Credit) shall be subject to the
satisfaction of the following conditions precedent (and any
request for a Loan or a Letter of Credit shall be deemed a
representation and warranty by the Borrower that the following
have been satisfied):
(a) Before and after giving effect to such Loan or such
Letter of Credit, as applicable, the representations and
warranties contained in Article VII shall be true and
correct, as though made on the date of such Loan or such
Letter of Credit, as applicable (except to the extent that
any such representation or warranty is expressly stated to
have been made as of a specific date, then such
representation or warranty shall be true and correct as of
such specific date).
(b) Before and after giving effect to such Loan or such
Letter of Credit, as applicable, no Default or Event of
Default shall have occurred and be continuing.
ARTICLE VII REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Banks to enter into this Agreement,
to grant the Commitments and to make Loans and to issue Letters
of Credit hereunder, the Borrower represents and warrants to the
Agent and the Banks:
Section 7.1 Organization,
Standing, Etc. The Borrower and each of its corporate
Subsidiaries are corporations duly incorporated and validly
existing and in good standing under the laws of the jurisdiction
of their respective incorporation and have all requisite
corporate power and authority to carry on their respective
businesses as now conducted and to (in the instance of the
Borrower) enter into the Loan Documents and to perform its
obligations under the Loan Documents. The Borrower and each of
its Subsidiaries are duly qualified and in good standing as a
foreign corporation in each jurisdiction in which the character
of the properties owned, leased or operated by it or the business
conducted by it makes such qualification necessary.
Section 7.2 Authorization and
Validity. The execution, delivery and performance by the
Borrower of the Loan Documents have been duly authorized by all
necessary corporate action by the Borrower, and the Loan
Documents constitute the legal, valid and binding obligations of
the Borrower, enforceable against the Borrower in accordance with
their respective terms, subject to limitations as to
enforceability which might result from bankruptcy, insolvency,
moratorium and other similar laws affecting creditors' rights
generally and subject to limitations on the availability of
equitable remedies.
Section 7.3 No Conflict; No
Default. The execution, delivery and performance by the Borrower
of the Loan Documents will not (a) violate any provision of any
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 Borrower, (b) violate or contravene any
provisions of the Articles (or Certificate) of Incorporation or
by-laws of the Borrower, or (c) result in a breach of or
constitute a default under any indenture, loan or credit
agreement or any other agreement, lease or instrument to which
the Borrower is a party or by which it or any of its properties
may be bound or result in the creation of any Lien on any asset
of the Borrower or any Subsidiary. Neither the Borrower nor any
Subsidiary is in default under or in violation of any such law,
statute, rule or regulation, order, writ, judgment, injunction,
decree, determination or award or any such indenture, loan or
credit agreement or other agreement, lease or instrument in any
case in which the consequences of such default or violation could
constitute an Adverse Event. No Default or Event of Default has
occurred and is continuing.
Section 7.4 Government
Consent. 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 Borrower to authorize, or is required
in connection with the execution, delivery and performance of, or
the legality, validity, binding effect or enforceability of, the
Loan Documents.
Section 7.5 Financial
Statements and Condition. The audited financial statements of
the Borrower, Dain Bosworth, Rauscher Pierce Refsnes and Interra
Clearing Services as at December 31, 1996 and the unaudited
consolidated and consolidating balance sheets and income
statements of the Borrower and its Subsidiaries as at March 31,
1997, as heretofore furnished to the Banks, have been prepared in
accordance with GAAP on a consistent basis and fairly present the
financial condition of the Borrower, Dain Bosworth, Rauscher
Pierce Refsnes and Interra Clearing Services and their respective
Subsidiaries as at such dates and the results of their operations
and changes in financial position for the respective periods then
ended. As of the dates of such financial statements, none of the
Borrower, Dain Bosworth, Rauscher Pierce Refsnes, Interra
Clearing Services or any other Subsidiary had any material
obligation, contingent liability, liability for taxes or
long-term lease obligation which is not reflected in such
financial statements or in the notes thereto. Since March 31,
1997, no Adverse Event has occurred.
Section 7.6 Litigation and
Contingent Liabilities. Except as described in Exhibit B, there
are no actions, suits or proceedings pending or, to the knowledge
of the Borrower, threatened against or affecting the Borrower or
any Subsidiary or any of their properties before any court or
arbitrator, or by any governmental agency or instrumentality
which, if determined adversely to the Borrower or such
Subsidiary, could constitute an Adverse Event. Except as
described in Exhibit C, neither the Borrower nor any Subsidiary
has any contingent liabilities which are material to the Borrower
and the Subsidiaries as a consolidated enterprise.
Section 7.7 Compliance. The
Borrower and its Subsidiaries are in compliance with all statutes
and governmental rules and regulations applicable to them, except
where failure to be in compliance, individually or in the
aggregate, could not reasonably be expected to result in an
Adverse Event.
Section 7.8 Environmental,
Health and Safety Laws. There does not exist any violation by
the Borrower or any Subsidiary of any applicable federal, state
or local law, rule or regulation or order of any government,
governmental department, board, agency or other instrumentality
relating to environmental, pollution, health or safety matters
which will or threatens to impose a material liability on the
Borrower or a Subsidiary or which would require a material
expenditure by the Borrower or such Subsidiary to cure. Neither
the Borrower nor any Subsidiary has received any notice to the
effect that any part of its operations or properties is not in
material compliance with any such law, rule, regulation or order
or notice that it or its property is the subject of any
governmental investigation evaluating whether any remedial action
is needed to respond to any release of any toxic or hazardous
waste or substance into the environment, the consequences of
which non-compliance or remedial action could constitute an
Adverse Event.
Section 7.9 Each Plan
complies with all material applicable requirements of ERISA and
the Code and with all material applicable rulings and regulations
issued under the provisions of ERISA and the Code setting forth
those requirements. No Reportable Event, other than a Reportable
Event for which the reporting requirements have been waived by
regulations of the PBGC, has occurred and is continuing with
respect to any Plan. All of the minimum funding standards
applicable to such Plans have been satisfied and there exists no
event or condition which would permit the institution of
proceedings to terminate any Plan under Section 4042 of ERISA.
The current value of the Plans' benefits guaranteed under Title
IV or ERISA does not exceed the current value of the Plans'
assets allocable to such benefits.
Section 7.10 Margin
Regulations. Certain of the Material Subsidiaries of the
Borrower are broker-dealers subject to Regulation T. The
Material Subsidiaries of the Borrower which are subject to
Regulation T maintain procedures and internal controls reasonably
adapted to insure that such Material Subsidiaries do not extend
or maintain credit to or for their respective customers other
than in accordance with the provisions of Regulation T. Neither
the making of any Loan hereunder, nor the use of the proceeds
thereof, will violate the provisions of Regulation G, T, U or X.
Section 7.11 Ownership of
Property; Liens. Each of the Borrower and the Subsidiaries has
good and marketable title to its real properties and good and
sufficient title to its other properties, including all
properties and assets referred to as owned by the Borrower and
its Subsidiaries in the audited financial statement of the
Borrower referred to in Section 7.5 (other than property disposed
of since the date of such financial statement in the ordinary
course of business). None of the properties, revenues or assets
of the Borrower is subject to a Lien, except for (a) Liens
disclosed in the financial statements referred to in Section 7.5,
(b) Liens listed on Exhibit D, or (c) Liens allowed under Section
9.10.
Section 7.12 Taxes. Each of the
Borrower and the Subsidiaries has filed all federal, state and
local tax returns required to be filed and has paid or made
provision for the payment of all taxes due and payable pursuant
to such returns and pursuant to any assessments made against it
or any of its property and all other taxes, fees and other
charges imposed on it or any of its property by any governmental
authority (other than taxes, fees or charges the amount or
validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of the
Borrower). No tax Liens have been filed and no material claims
are being asserted with respect to any such taxes, fees or
charges. The charges, accruals and reserves on the books of the
Borrower in respect of taxes and other governmental charges are
adequate.
Section 7.13 Trademarks,
Patents. Each of the Borrower and the Subsidiaries possesses or
has the right to use all of the patents, trademarks, trade names,
service marks and copyrights, and applications therefor, and all
technology, know-how, processes, methods and designs used in or
necessary for the conduct of its business, without known conflict
with the rights of others.
Section 7.14 Investment
Company Act. Neither the Borrower nor any Subsidiary is an
"investment company" or a company "controlled" by an investment
company within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.15 Public Utility
Holding Company Act. Neither the Borrower nor any Subsidiary is
a "holding company" or a "subsidiary company" of a holding
company or an "affiliate" of a holding company or of a subsidiary
company of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 7.16 Subsidiaries.
Exhibit E sets forth as of the date of this Agreement a list of
all Subsidiaries which are directly owned by the Borrower and
which are currently operating and the number and percentage of
the shares of each class of capital stock owned beneficially or
of record by the Borrower therein, and the jurisdiction of
incorporation of each such Subsidiary.
Section 7.17 Registered
Broker-Dealer; Membership. Each Subsidiary engaged in the
business of a securities broker-dealer is duly registered with
the Securities and Exchange Commission as a broker-dealer and is
a member in good standing of the National Association of
Securities Dealers, Inc. and of the New York Stock Exchange,
Inc.
Section 7.18 Assessments by
the Securities Investor Protection Corporation. Each Subsidiary
engaged in the business of a securities broker-dealer is not in
arrears with respect to any assessment made upon it by the
Securities Investor Protection Corporation.
ARTICLE VIII AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until the
Commitments are terminated or expire and the Loans, the Letter of
Credit Obligations and all other liabilities of the Borrower to
the Banks and/or the Agent hereunder and under the other Loan
Documents have been paid in full, the Borrower agrees that:
Section 8.1 Financial
Statements and Reports. The Borrower will furnish to the Banks:
(a) As soon as available and in any event within 90 days
after the end of each fiscal year of the Borrower, the
annual audit reports of the Borrower, Dain Bosworth,
Rauscher Pierce Refsnes, Interra Clearing Services and the
unaudited financial statements of Interra Lending Services
prepared on a consolidated basis and in conformity with
GAAP, consisting of at least statements of income, cash flow
and stockholders' equity, and a consolidated balance sheet
as at the end of such year, setting forth in each case in
comparative form corresponding figures from the previous
annual audit, certified without qualification by certified
public independent auditiors of recognized standing selected
by the Borrower and acceptable to the Agent.
(b) Together with the audited financial statements required
under Section 8.1(a), a statement by the firm of certified
public independent auditors performing such audit stating
that it has reviewed this Agreement and that in performing
its examination nothing came to its attention that caused it
to believe that any Default or Event of Default exists in
respect of the Borrower's covenants set forth in
Sections 9.8, 9.9, 9.13 or 9.14, or, if such Default or
Event of Default exists, describing its nature.
(c) As soon as available and in any event within 45 days
after the end of each fiscal quarter of each fiscal year of
the Borrower, copies of the unaudited consolidated and
consolidating balance sheets and income statements of the
Borrower and its Subsidiaries prepared in accordance with
GAAP applied on a basis consistent with the accounting
practices applied in the annual audit reports referred to in
Section 8.1(a), signed by the Borrower's treasurer or chief
financial officer, for such quarter and for the period from
the beginning of such fiscal year to the end of such
quarter.
(d) Together with the financial statements furnished by the
Borrower under Sections 8.1(a) and 8.1(c), a Compliance
Certificate signed by the treasurer or the chief financial
officer of the Borrower demonstrating in reasonable detail
compliance (or noncompliance, as the case may be) with each
of the financial ratios and restrictions contained in
Article IX and stating that as at the date of each such
financial statement there did not exist any Default or Event
of Default or, if such Default or Event of Default existed,
specifying the nature and period of existence thereof and
what action the Borrower proposes to take with respect
thereto.
(e) Immediately upon becoming aware of any Default or Event
of Default, a notice describing the nature thereof and what
action the Borrower proposes to take with respect thereto.
(f) Immediately upon becoming aware of the occurrence, with
respect to any Plan, of any Reportable Event (other than a
Reportable Event for which the reporting requirements have
been waived by PBGC regulations) or any "prohibited
transaction" (as defined in Section 4975 of the Code), a
notice specifying the nature thereof and what action the
Borrower proposes to take with respect thereto, and, when
received, copies of any notice from PBGC of intention to
terminate or have a trustee appointed for any Plan.
(g) As soon as available and in any event within 15 days
after mailing or filing thereof, copies of all financial
statements, reports and proxy statements mailed to the
Borrower's shareholders.
(h) As soon as available and in any event within 15 days
after filing thereof, copies of all quarterly FOCUS reports,
proposed subordination filings and notices of all material
violations of rules and regulations of the Securities and
Exchange Commission or any material securities exchange
which the Borrower or any Subsidiary shall file with the
Securities and Exchange Commission or any material
securities exchange;
(i) Immediately upon becoming aware of the occurrence
thereof, notice of the suspension or expulsion of any
Subsidiary from membership in the New York Stock Exchange,
Inc. or from membership in the National Association of
Securities Dealers, Inc.;
(j) Immediately upon becoming aware of the occurrence
thereof, notice of the institution of any litigation,
arbitration or governmental proceeding which could result in
an Adverse Event, notice of any development in any pending
litigation, arbitration or governmental proceeding which
could result in an Adverse Event and notice of the rendering
of a judgment or decision in any litigation, arbitration or
governmental proceeding which could result in an Adverse
Event, and, in any such circumstance, the steps being taken
by the Person affected by such circumstance.
(k) Immediately upon becoming aware of the occurrence
thereof, notice of any violation as to any environmental
matter by the Borrower or any Subsidiary and of the
commencement of any judicial or administrative proceeding
relating to health, safety or environmental matters (i) in
which an adverse determination or result could result in the
revocation of or have a material adverse effect on any
operating permits, air emission permits, water discharge
permits, hazardous waste permits or other permits held by
the Borrower or any Subsidiary which are material to the
operations of the Borrower or such Subsidiary, or (ii) which
will or threatens to impose a material liability on the
Borrower or such Subsidiary to any Person or which will
require a material expenditure by the Borrower or such
Subsidiary to cure any alleged problem or violation.
(l) From time to time, such other information regarding the
business, operation and financial condition of the Borrower
and the Subsidiaries as any Bank may reasonably request.
Section 8.2 Corporate
Existence. The Borrower will, and will cause each Subsidiary to,
maintain its corporate existence in good standing under the laws
of its jurisdiction of incorporation and its qualification to
transact business in each jurisdiction in which the character of
the properties owned, leased or operated by it or the business
conducted by it makes such qualification necessary.
Section 8.3 Insurance. The
Borrower will, and will cause each Subsidiary to, maintain with
financially sound and reputable insurance companies such
insurance as may be required by law and such other insurance in
such amounts and against such hazards as is customary in the case
of reputable corporations engaged in the same or similar business
and similarly situated.
Section 8.4 Payment of Taxes
and Claims. The Borrower will, and will cause each Subsidiary
to, file all tax returns and reports which are required by law to
be filed by it and pay before they become delinquent all taxes,
assessments and governmental charges and levies imposed upon it
or its property and all claims or demands of any kind (including,
without limitation, those of suppliers, mechanics, carriers,
warehouses, landlords and other like Persons) which, if unpaid,
might result in the creation of a Lien upon its property;
provided that the foregoing items need not be paid if they are
being contested in good faith by appropriate proceedings, and as
long as the Borrower's or such Subsidiary's title to its property
is not materially adversely affected, its use of such property in
the ordinary course of its business is not materially interfered
with and adequate reserves with respect thereto have been set
aside on the Borrower's or such Subsidiary's books in accordance
with GAAP.
Section 8.5 Inspection. The
Borrower will, and will cause each Subsidiary to, permit any
Person designated by any Bank to visit and inspect any of its
properties, corporate books and financial records, to examine and
to make copies of its books of accounts and other financial
records, and to discuss the affairs, finances and accounts of the
Borrower and the Subsidiaries with, and to be advised as to the
same by, its officers at such reasonable times and intervals as
such Bank may designate.
Section 8.6 Maintenance of
Properties. The Borrower will, and will cause each Subsidiary
to, maintain its properties used or useful in the conduct of its
business in good condition, repair and working order, and
supplied with all necessary equipment, and make all necessary
repairs, renewals, replacements, betterments and improvements
thereto, all as may be necessary so that the business carried on
in connection therewith may be properly and advantageously
conducted at all times.
Section 8.7 Books and
Records. The Borrower will, and will cause each Subsidiary to,
keep adequate and proper records and books of account in which
full and correct entries will be made of its dealings, business
and affairs.
Section 8.8 Compliance. The
Borrower will, and will cause each Subsidiary to, comply in all
respects with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be
subject, except where failure to be in compliance, individually
or in the aggregate, could not reasonably be expected to result
in an Adverse Event.
Section 8.9 The Borrower
will, and will cause each Subsidiary to, maintain each Plan in
compliance with all material applicable requirements of ERISA and
of the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and of the Code.
Section 8.10 Environmental
Matters. The Borrower will, and will cause each Subsidiary to,
observe and comply with all laws, rules, regulations and orders
of any government or government agency relating to health,
safety, pollution, hazardous materials or other environmental
matters to the extent non-compliance could result in a material
liability or otherwise constitute or result in an Adverse Event.
Section 8.11 General Net
Capital Requirement. The Borrower will cause each Subsidiary
subject to Rule 15c3-1 to at all times maintain its Net Capital
as required by Rule 15c3-1.
ARTICLE IX NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the
Commitments are terminated or expire and the Loans, the Letter of
Credit Obligations and all other liabilities of the Borrower to
the Banks and/or the Agent hereunder and under the other Loan
Documents have been paid in full, the Borrower agrees that:
Section 9.1 Merger and
Consolidation. The Borrower will not, and will not permit any
Subsidiary to, merge or consolidate or enter into any analogous
reorganization or transaction with any Person; provided, however,
that the restrictions contained in this Section 9.1 shall not
apply to or prevent the following so long as no Event of Default
exists:
(a) any wholly-owned Subsidiary may be merged with or
liquidated into the Borrower (if the Borrower is the
surviving corporation) or any other wholly-owned Subsidiary
of the Borrower; and
(b) the acquisition of all or substantially all of the
assets or stock of any Person to the extent permitted by
Section 9.8(g).
Section 9.2 Sale of Assets.
The Borrower will not, and will not permit any Material
Subsidiary to, sell, transfer, lease or otherwise convey all or
any substantial part of its assets other than in the ordinary
course of business and except for sales or other transfers by a
wholly-owned Subsidiary to the Borrower or another wholly-owned
Subsidiary of the Borrower.
Section 9.3 Plans. The Borrower
will not, and will not permit any Material Subsidiary to, permit
any condition to exist in connection with any Plan which might
constitute grounds for the PBGC to institute proceedings to have
such Plan terminated or a trustee appointed to administer such
Plan, permit any Plan to terminate under any circumstances which
would cause the lien provided for in Section 4068 of ERISA to
attach to any property, revenue or asset of the Borrower or any
Material Subsidiary or permit the underfunded amount of Plan
benefits guaranteed under Title IV of ERISA to exceed $5,000,000.
Section 9.4 Change in Nature
of Business. The Borrower will not, and will not permit any
Subsidiary to, conduct any business other than the business of
the Borrower or of such Subsidiary carried on as of the date
hereof and such other businesses which are related to the broker-
dealer, investment banking and related financial services
activities of the Borrower or such Subsidiary.
Section 9.5 Ownership of
Stock in Material Subsidiaries. The Borrower will not, and will
not permit any Material Subsidiary to, take any action which
would result in a decrease in the Borrower's ownership interest
in any Material Subsidiary (including, without limitation,
decrease in the percentage of the shares of any class of stock in
a Material Subsidiary).
Section 9.6 Other Agreements.
The Borrower will not, and will not permit any Material
Subsidiary to, enter into any agreement, bond, note or other
instrument with or for the benefit of any Person other than the
Banks which would: (a) contain a covenant generally prohibiting
the Borrower or such Material Subsidiary from granting Liens to
the Banks; provided, however, nothing in this Section 9.6(a)
shall prohibit any Material Subsidiary from granting Liens in
specific assets to other Persons and from agreeing not to grant
Liens in such specific assets to the Banks; (b) be violated or
breached by the Borrower's performance of its obligations under
the Loan Documents; or (c) prohibit or otherwise limit in any way
or to any extent the ability of any Subsidiary to declare or pay
dividends to the Borrower.
Section 9.7 Restricted
Payments. The Borrower will not, and will not permit any
Subsidiary to, either: (a) purchase or redeem or otherwise
acquire for value any shares of the Borrower's or any
Subsidiary's stock, declare or pay any dividends thereon (other
than stock dividends and dividends payable solely to the
Borrower), make any distribution on, or payment on account of the
purchase, redemption, defeasance or other acquisition or
retirement for value of, any shares of the Borrower's or any
Subsidiary's stock or set aside any funds for any such purpose
(other than payment to, or on account of or for the benefit of,
the Borrower only) if a Default or Event of Default has occurred
and is continuing or if, after giving effect to any such
purchases, redemption, acquisition, dividend, distribution or
payment, a Default or an Event of Default would have occurred and
be continuing; or (b) directly or indirectly make any payment on,
or redeem, repurchase, defease, or make any sinking fund payment
on account of, or any other provision for, or otherwise pay,
acquire or retire for value, any Indebtedness of the Borrower or
any Subsidiary that is subordinated in right of payment to the
Loans (whether pursuant to its terms or by operation of law),
except for regularly-scheduled payments of interest and principal
(which shall not include payments contingently required upon
occurrence of a change of control or other event) that are not
otherwise prohibited hereunder or under the document or agreement
stating the terms of such subordination.
Section 9.8 Investments. The
Borrower will not make, and the Borrower will not permit to
exist, any direct or indirect investment (whether by means of
equity, debt or otherwise) by the Borrower in any other Person,
except:
(a) Investments by the Borrower in Dain Bosworth, Rauscher
Pierce Refsnes and Interra Clearing Services;
(b) Investments by the Borrower, Dain Bosworth, Rauscher
Pierce Refsnes or Interra Clearing Services in Subsidiaries
other than Dain Bosworth, Rauscher Pierce Refsnes and
Interra Clearing Services in an aggregate amount not to
exceed at any time eight percent (8%) of the Borrower's
Consolidated Net Worth;
(c) Investments made after the date of this Agreement to
acquire all or substantially all of the assets or stock of
other Persons, provided that (i) the sum of all cash
consideration paid, the current market value (as of the date
of such Investment) of all property given and all
Indebtedness incurred and assumed in connection with all
such investments made after the date of this Agreement shall
not exceed an aggregate amount of $100,000,000 and (ii) any
Person whose assets or stock are so acquired shall be
engaged solely in a business carried on by the Borrower or a
Subsidiary of the Borrower on the date of this Agreement.
Section 9.9 Indebtedness and
Contingent Liabilities. The Borrower will not incur, create,
issue, assume or suffer to exist any Indebtedness or agree to
maintain the net worth of or working capital of, or provide funds
to, satisfy any other financial covenants applicable to, any
other Person, except:
(a) Indebtedness under this Agreement and the other Loan
Documents;
(b) Current liabilities of the Borrower, other than for
borrowed money, incurred in the ordinary course of business;
(c) Indebtedness (other than Indebtedness permitted under
Sections 9.9(a), 9.9(d) and 9.9(e)) in an aggregate amount
not to exceed at any time $50,000,000; provided, however,
that the sum of the Borrower's Indebtedness permitted under
this Section 9.9(c) and the Borrower's guarantees permitted
under Section 9.9(d) below shall not exceed at any time an
aggregate amount of $125,000,000;
(d) Guarantees by the Borrower of Indebtedness for borrowed
money of Interra Lending Services in an aggregate amount not
to exceed at any time $100,000,000; provided, however, that
(i) such guarantees shall be permitted only for so long as
the Borrower and Interra Lending Services are in compliance
with each of the following requirements: (A) the credit
facilities under which Interra Lending Services has incurred
such guaranteed Indebtedness are made available by one or
more of the Banks, (B) the aggregate amount of such
guaranteed Indebtedness which Interra Lending Services may
borrow under such credit facilities shall not exceed at any
time an aggregate amount of $100,000,000, (C) all of such
guaranteed Indebtedness shall be secured by Interra Lending
Services' pledge of the underlying loans made by Interra
Lending Services to its customers, including the stock
pledged by customers of Interra Lending Services to Interra
Lending Services, (D) if the stock pledged by the customers
of Interra Lending Services to Interra Lending Services are
subject to Rule 144/Rule 145 restrictions, such pledged
stock meets Rule 144/Rule 145 requirements for saleability
and are not subject to a lockup or other restrictions; and
(E) all loans made by Interra Lending Services to its
customers meet the following maximum loan to market value
collateral requirements with respect to the stock pledged by
such customers: (1) with respect to each loan at the time
such loan is made, the ratio of the loan amount to the
market value of the pledged stock is not more than 50% and
(2) with respect to each loan at all times after the time
such loan is made, the ratio of the loan amount to the
market value of the pledged stock value is not more than
65%; and (ii) the sum of the Borrower's guarantees of
Indebtedness for borrowed money of Interra Lending Services
permitted under this Section 9.9(d) and the Borrower's
Indebtedness permitted under Section 9.9(c) above shall not
exceed at any time the aggregate amount of $125,000,000;
(e) Guaranties by the Borrower of existing subordinated
loans to Dain Bosworth and Rauscher Pierce Refsnes in the
aggregate amount of $15,083,324 as of the date of this
Agreement and maturing on October 1, 1998; provided,
however, that this exception shall not apply to any
extension or renewal of such loans or to any increase in the
principal amounts thereof.
Section 9.10 Liens. The Borrower
will not create, incur, assume or suffer to exist any Lien with
respect to any of its property, revenues or assets now owned or
hereafter arising or acquired, except:
(a) Liens in connection with the acquisition of property
after the date hereof by way of purchase money mortgage,
conditional sale or other title retention agreement,
Capitalized Lease or other deferred payment contract, and
attaching only to the property being acquired if the
Indebtedness secured thereby does not exceed 100% of the
fair market value of such property at the time of
acquisition thereof;
(b) Liens existing on the date of this Agreement and
disclosed on Exhibit D hereto;
(c) Deposits or pledges to secure payment of workers'
compensation, unemployment insurance, old age pensions or
other social security obligations, in the ordinary course of
business of the Borrower or a Subsidiary;
(d) Liens for taxes, fees, assessments and governmental
charges not delinquent or to the extent that payments
therefor shall not at the time be required to be made in
accordance with the provisions of Section 8.4; and
(e) Deposits to secure the performance of bids, trade
contracts, leases, statutory obligations and other
obligations of a like nature incurred in the ordinary course
of business.
Section 9.11 Transactions with
Related Parties. The Borrower will not, and will not permit any
Subsidiary to, enter into or be a party to any transaction or
arrangement, including, without limitation, the purchase, sale,
lease or exchange of property or the rendering of any service,
with any Related Party, except in the ordinary course of and
pursuant to the reasonable requirements of the Borrower's or the
applicable Subsidiary's business and upon fair and reasonable
terms no less favorable to the Borrower or such Subsidiary than
would obtain in a comparable arm's-length transaction with a
Person not a Related Party.
Section 9.12 Fiscal Year. The
Borrower will not change the ending date of its fiscal year from
December 31.
Section 9.13 Minimum
Consolidated Net Worth. The Borrower will not permit its
Consolidated Net Worth at any time to be less than the sum of (i)
$250,000,000 plus (ii) thirty percent (30%) of the sum of the
Consolidated Net Income of the Borrower (with any consolidated
net loss during any fiscal quarter counting as zero) for each
fiscal quarter of the Borrower commencing with the fiscal quarter
of the Borrower ending June 30, 1997.
Section 9.14 Minimum Net
Capital Required for Interra Clearing Services, Dain Bosworth and
Rauscher Pierce Refsnes. The Borrower will not permit the Net
Capital of Interra Clearing Services, Dain Bosworth or Rauscher
Pierce Refsnes at any time to be less than the following amounts:
(i) with respect to Interra Clearing Services, the greater of (A)
$50,000,000 or (B) six percent (6%) of the Aggregate Debit Items
of Interra Clearing Services, (ii) with respect to Dain Bosworth,
$10,000,000, (iii) with respect to Rauscher Pierce Refsnes,
$10,000,000.
ARTICLE X EVENTS OF DEFAULT AND
REMEDIES
Section 10.1 Events of
Default. The occurrence of any one or more of the following
events shall constitute an Event of Default:
(a) The Borrower shall fail to make when due, whether by
acceleration or otherwise, any payment of principal on any
of the Notes, any Letter of Credit Obligation or any fee or
other amount required to be made to the Banks pursuant to
the Loan Documents;
(b) Any representation or warranty made or deemed to have
been made by or on behalf of the Borrower or any Subsidiary
by any of the Loan Documents or by or on behalf of the
Borrower or any Subsidiary in any certificate, statement,
report or other writing furnished by or on behalf of the
Borrower to the Banks pursuant to the Loan Documents shall
prove to have been false or misleading in any material
respect on the date as of which the facts set forth are
stated or certified or deemed to have been stated or
certified;
(c) The Borrower shall fail to comply with Section 8.2 or
Section 8.11 hereof or any Section of Article IX hereof;
(d) The Borrower shall fail to comply with any agreement,
covenant, condition, provision or term contained in the Loan
Documents (and such failure shall not constitute an Event of
Default under any of the other provisions of this Section
10.1) and such failure to comply shall continue for 30
calendar days after notice thereof to the Borrower;
(e) The Borrower or any Subsidiary shall become insolvent
or shall generally not pay its debts as they mature or shall
apply for, shall consent to, or shall acquiesce in the
appointment of a custodian, trustee or receiver of the
Borrower or such Subsidiary or for a substantial part of the
property thereof or, in the absence of such application,
consent or acquiescence, a custodian, trustee or receiver
shall be appointed for the Borrower or a Subsidiary or for a
substantial part of the property thereof and shall not be
discharged within 30 days;
(f) Any bankruptcy, reorganization, debt arrangement or
other proceedings under any bankruptcy or insolvency law
shall be instituted by or against the Borrower or a
Subsidiary;
(g) Any dissolution or liquidation proceeding shall be
instituted by or against the Borrower or a Material
Subsidiary, or the Borrower or any Material Subsidiary shall
take any corporate action to approve institution of, or
acquiescence in, such a proceeding;
(h) A judgment or judgments for the payment of money in
excess of the sum of $10,000,000 in the aggregate shall be
rendered against the Borrower and/or its Subsidiaries and
the Borrower or such Subsidiary shall not discharge the same
or provide for its discharge in accordance with its terms,
or procure a stay of execution thereof, prior to any
execution on such judgments by such judgment creditor,
within 30 days from the date of entry thereof, and within
said period of 30 days, or such longer period during which
execution of such judgment shall be stayed, appeal therefrom
and cause the execution thereof to be stayed during such
appeal;
(i) The institution by the Borrower or any ERISA Affiliate
of steps to terminate any Plan if in order to effectuate
such termination, the Borrower or any ERISA Affiliate would
be required to make a contribution to such Plan or would
incur a liability or obligation to such Plan in excess of
$5,000,000, or the institution by the PBGC of steps to
terminate any Plan;
(j) Indebtedness of the Borrower (other than Indebtedness
under this Agreement) and/or a Subsidiary in an aggregate
amount of $5,000,000 or more shall be accelerated, or the
Borrower and/or a Subsidiary shall fail to pay any such
Indebtedness in an aggregate amount of $5,000,000 or more
when due (or, in case any such Indebtedness is payable on
demand, when demanded), or any event shall occur or
condition shall exist and shall continue for more than the
period of grace, if any, applicable thereto and shall have
the effect of causing, or permitting (any required notice
having been given and grace period having expired) the
holder of any such Indebtedness in an aggregate amount of
$5,000,000 or more or any trustee or other Person acting on
behalf of such holder to cause, such Indebtedness in an
aggregate amount of $5,000,000 or more to become due prior
to its stated maturity or to realize upon any collateral
given as security therefor; or
(k) The New York Stock Exchange, Inc., any other national
securities exchange of which a Material Subsidiary is a
member or on which such Material Subsidiary has qualified
for privileges or the National Association of Securities
Dealers, Inc. shall make a decision or enter an order that
(i) suspends such Material Subsidiary, or (ii) revokes such
Material Subsidiary's membership or privileges, or
(iii) takes any other action which will materially adversely
affect the operations of such Material Subsidiary; or
(l) The Securities and Exchange Commission shall enter an
order that (i) suspends or revokes the registration of any
Material Subsidiary as a broker or as a dealer or both,
(ii) suspends any Material Subsidiary as a member of a
national securities association or national securities
exchange, (iii) expels any Material Subsidiary as a member
of a national securities association or a national
securities exchange, or (iv) takes any other action which
will materially adversely affect the operations of any
Material Subsidiary; or
(m) The Securities Investor Protection Corporation shall
make an application for a decree adjudicating that customers
of any Subsidiary are in need of protection under the
Securities Investor Protection Act of 1970; or
(n) Any Person, or group of Persons acting in concert,
shall own or shall have acquired more than thirty percent
(30%) of the shares of any voting class of stock of the
Borrower.
Section 10.2 Remedies. If (a)
any Event of Default described in Sections 10.1(e), (f) or (g)
shall occur with respect to the Borrower, the Commitments shall
automatically terminate and the outstanding unpaid principal
balance of the Notes, the accrued interest thereon and all other
obligations of the Borrower to the Banks and the Agent under the
Loan Documents shall automatically become immediately due and
payable; or (b) any other Event of Default shall occur and be
continuing, then the Agent may take any or all of the following
actions (and shall take any or all of the following actions on
direction of the Required Banks): (i) declare the Commitments
terminated, whereupon the Commitments shall terminate, (ii)
declare that the outstanding unpaid principal balance of the
Notes, the accrued and unpaid interest thereon and all other
obligations of the Borrower to the Banks and the Agent under the
Loan Documents to be forthwith due and payable, whereupon the
Notes, all accrued and unpaid interest thereon and all such
obligations shall immediately become due and payable, in each
case without demand or notice of any kind, all of which are
hereby expressly waived, anything in this Agreement, the Notes or
the other Loan Documents to the contrary notwithstanding, (iii)
exercise all rights and remedies under the Loan Documents and
under any other instrument, document or agreement between the
Borrower and the Agent or the Banks, and (iv) enforce all rights
and remedies available under any applicable law.
Section 10.3 Letters of
Credit. In addition to the foregoing remedies, if any Event of
Default described in Section 10.1(e), (f) or (g) shall have
occurred, or if any other Event of Default shall have occurred
and the Agent shall have declared that the principal balance of
the Notes is due and payable, the Borrower shall pay to the Agent
an amount equal to all Letter of Credit Obligations. Such
payment shall be in immediately available funds or in similar
cash collateral acceptable to the Agent and shall be pledged to
the Agent for the ratable benefit of the Banks. Such amount
shall be held by the Agent in a cash collateral account until the
outstanding Letters of Credit are terminated without payment or
are paid and the Letter of Credit Obligations with respect
thereto are payable. In the event the Borrower defaults in the
payment of any Letter of Credit Obligations, the proceeds of the
cash collateral account shall be applied to the payment thereof.
The Borrower acknowledges and agrees that the Banks would not
have an adequate remedy at law for failure by the Borrower to pay
immediately to the Agent the amount provided under this Section,
and that the Agent shall, on behalf of the Banks, have the right
to require the Borrower to perform specifically such undertaking
whether or not any of the Letter of Credit Obligations are due
and payable. Upon the failure of the Borrower to make any
payment required under this Section, the Agent, on behalf of the
Banks, may proceed to use all remedies available at law or equity
to enforce the obligation of the Borrower to pay or reimburse the
Agent. The balance of any payment due under this Section shall
bear interest payable on demand until paid in full at a per annum
rate equal to the Reference Rate plus three percent (3.00%).
Section 10.4 Offset. In
addition to the remedies set forth in Sections 10.2 and 10.3,
upon the occurrence of any Event of Default or at any time
thereafter while such Event of Default continues, each Bank or
any other holder of any Note may offset any and all balances,
credits, deposits (general or special, time or demand,
provisional or final), accounts or monies of the Borrower then or
thereafter with such Bank or such other holder, or any
obligations of such Bank or such other holder of the Note,
against the Indebtedness then owed by the Borrower to such Bank.
ARTICLE XI THE AGENT
Section 11.1 Appointment and
Grant of Authority. Each Bank hereby appoints the Agent, and the
Agent hereby agrees to act, as agent under this Agreement. The
Agent shall have and may exercise such powers under this
Agreement as are specifically delegated to the Agent by the terms
hereof, together with such other powers as are reasonably
incidental thereto. Each Bank hereby authorizes, consents to,
and directs the Borrower to deal with the Agent as the true and
lawful agent of such Bank to the extent set forth herein.
Section 11.2 Non Reliance on
Agent. Each Bank agrees that it has, independently and without
reliance on the Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower and decision to enter into
this Agreement and that it will, independently and without
reliance upon the Agent, and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking
action under this Agreement. The Agent shall not be required to
keep informed as to the performance or observance by the Borrower
of this Agreement and the Loan Documents or to inspect the
properties or books of the Borrower. Except for notices, reports
and other documents and information expressly required to be
furnished to the Banks by the Agent hereunder, the Agent shall
not have any duty or responsibility to provide any Bank with any
credit or other information concerning the affairs, financial
condition or business of the Borrower (or any of its related
companies) which may come into the Agent's possession.
Section 11.3 Responsibility of the Agent and Other Matters.
(a) The Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and those
duties and liabilities shall be subject to the limitations
and qualifications set forth in this Section. The duties of
the Agent shall be mechanical and administrative in nature.
(b) Neither the Agent nor any of its directors, officers or
employees shall be liable for any action taken or omitted
(whether or not such action taken or omitted is within or
without the Agent's responsibilities and duties expressly
set forth in this Agreement) under or in connection with
this Agreement, or any other instrument or document in
connection herewith, except for gross negligence or willful
misconduct. Without limiting the foregoing, neither the
Agent nor any of its directors, officers or employees shall
be responsible for, or have any duty to examine:
(i) the genuineness, execution, validity,
effectiveness, enforceability, value or sufficiency of
(a) this Agreement, the Notes or the other Loan
Documents, or (b) any document or instrument furnished
pursuant to or in connection with this Agreement, the
Notes or the other Loan Documents,
(ii) the collectibility of any amounts owed by the
Borrower,
(iii) any recitals or statements or representations or
warranties in connection with this Agreement, the Notes
or the other Loan Documents,
(iv) any failure of any party to this Agreement to
receive any communication sent, or
(v) the assets, liabilities, financial condition,
results of operations, business or creditworthiness of
the Borrower.
(c) The Agent shall be entitled to act, and shall be fully
protected in acting upon, any communication in whatever form
believed by the Agent in good faith to be genuine and
correct and to have been signed or sent or made by a proper
Person. The Agent may consult counsel and shall be entitled
to act, and shall be fully protected in any action taken in
good faith, in accordance with advice given by counsel. The
Agent may employ agents and attorneys-in-fact and shall not
be liable for the default or misconduct of any such agents
or attorneys-in-fact selected by the Agent with reasonable
care. The Agent shall not be bound to ascertain or inquire
as to the performance or observance of any of the terms,
provisions or conditions of this Agreement, the Notes or the
other Loan Documents on the Borrower's part.
Section 11.4 Action on
Instructions. The Agent shall be entitled to act or refrain from
acting, and in all cases shall be fully protected in acting or
refraining from acting under this Agreement, the Notes or the
other Loan Documents or any other instrument or document in
connection herewith or therewith in accordance with instructions
in writing from (i) the Required Banks except for instructions
which under the express provisions hereof must be received by the
Agent from all the Banks, and (ii) in the case of such
instructions which under the express provisions hereof must be
received by the Agent from all of the Banks, from all of the
Banks.
Section 11.5 Indemnification.
To the extent the Borrower does not reimburse and save the Agent
harmless according to the terms hereof for and from all costs,
expenses and disbursements in connection herewith or with the
other Loan Documents, such costs, expenses and disbursements to
the extent reasonable shall be borne by the Banks ratably in
accordance with their Percentages and the Banks hereby agree on
such basis (a) to reimburse the Agent for all such reasonable
costs, expenses and disbursements on request of the Agent and (b)
to indemnify and save harmless the Agent against and from any and
all losses, obligations, penalties, actions, judgments and suits
and other reasonable costs, expenses and disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent, other than as a consequence of actual
gross negligence or willful misconduct on the part of the Agent,
arising out of or in connection with this Agreement, the Notes or
the other Loan Documents or any instrument or document in
connection herewith or therewith, or any request of the Banks,
including without limitation the reasonable costs, expenses and
disbursements in connection with defending itself against any
claim or liability, or answering any subpoena, related to the
exercise or performance of any of its powers or duties under this
Agreement, the Notes or the other Loan Documents or the taking of
or refraining from taking any action under or in connection with
this Agreement, the Notes or the other Loan Documents.
Section 11.6 First Bank and
Affiliates. With respect to First Bank's Commitment and any
Loans by First Bank under this Agreement and any Note and any
interest of First Bank in any Note, First Bank shall have the
same rights, powers and duties under this Agreement and any such
Note as any other Bank and may exercise the same as though it
were not the Agent. First Bank and its affiliates may accept
deposits from, lend money to, and generally engage, and continue
to engage, in any kind of business with the Borrower as if First
Bank were not the Agent.
Section 11.7 Notice to Holder
of Notes. The Agent may deem and treat the payees of the Notes
as the owners thereof for all purposes unless the Agent shall
have given its consent to the assignment thereof in accordance
with the provisions of Section 12.3. Any request, authority or
consent of any holder of any Note shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Note.
Section 11.8 Successor Agent.
The Agent may resign at any time by giving at least 30 days
written notice thereof to the Banks and the Borrower. Upon any
such resignation, the Required Banks shall have the right to
appoint a successor Agent. If no successor Agent shall have been
appointed by the Required Banks and shall have accepted such
appointment within 30 days after the retiring Agent's giving
notice of resignation, then the retiring Agent may, but shall not
be required to, on behalf of the Banks, appoint a successor
Agent.
ARTICLE XII MISCELLANEOUS
Section 12.1 No Waiver and
Amendment. No failure on the part of the Agent, the Banks or the
holders of the Notes to exercise and no delay in exercising any
power or right hereunder or under any other Loan Document shall
operate as a waiver thereof; nor shall any single or partial
exercise of any power or right preclude any other or further
exercise thereof or the exercise of any other power or right.
The remedies herein and in any other instrument, document or
agreement delivered or to be delivered to the Agent and/or the
Banks hereunder or in connection herewith are cumulative and not
exclusive of any remedies provided by law. No notice to or
demand on the Borrower not required hereunder or under the other
Loan Documents shall in any event entitle the Borrower to any
other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of the Agent,
the Banks or the holders of the Notes to any other or further
action in any circumstances without notice or demand.
Section 12.2 Amendments, Etc.
No amendment or waiver of any provision of this Agreement, nor
consent to any departure by the Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed
by the Borrower and the Agent upon direction of the Required
Banks and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent
shall, unless agreed to by the Agent and all of the Banks:
(a) increase the amounts of or extend the terms of the
Commitments or subject the Banks to any additional
obligations;
(b) reduce the principal of, or interest on, the Notes or
any fees or other amounts payable hereunder;
(c) postpone any date fixed for any payment of principal
of, or interest on, the Notes or any fees or other amounts
payable hereunder;
(d) change the definition of Required Banks or amend this
Section 12.2;
provided, further that amendments, waivers or consents affecting
the rights of the Agent shall also require the consent of the
Agent.
Section 12.3 Assignments.
(a) Assignments. Each Bank shall
have the right, subject to the further provisions of this
Sections 12.3, to sell or assign all or any part of its
Commitments, Loans, Letter of Credit Obligations, Notes, and
other rights and obligations under this Agreement and the
other Loan Documents (such transfer, an "Assignment") to any
commercial lender, other financial institution or other
entity (an "Assignee"). Upon such Assignment becoming
effective as provided in Section 12.3(b), the assigning Bank
shall be relieved from the portion of its Commitment, its
Swing Line Participation Amount, its Letter of Credit
Participation Amount, its obligations to indemnify the Agent
and its other obligations hereunder to the extent assumed
and undertaken by the Assignee, and to such extent the
Assignee shall have assumed such portion of the assigning
Bank's Commitment, its Swing Line Participation Amount, its
Letter of Credit Participation Amount and such other
obligations hereunder and the Assignee shall have the rights
of a "Bank" hereunder. Notwithstanding the foregoing,
unless otherwise consented to by the Borrower and the Agent,
each Assignment shall be in an amount not less than (i) the
entire amount of the assigning Bank's Commitment and related
rights and obligations, or (ii) $10,000,000 of the assigning
Bank's Commitment and related rights and obligations
hereunder, or an integral multiple of $1,000,000 if above
such amount. Each Assignment shall be documented by an
agreement among the assigning Bank, the Assignee, the Agent,
and so long as no Default or Event of Default exists, the
Borrower (an "Assignment and Assumption Agreement") in form
and substance satisfactory to the Agent.
(b) Effectiveness of
Assignments. An Assignment shall become effective hereunder
when all of the following conditions precedent shall have
occurred: (i) the Agent shall have given its written consent
to such Assignment evidenced by the Agent's execution of the
applicable Assignment and Assumption Agreement, (ii) so long
as no Default or Event of Default exists, the Borrower shall
have given its written consent to such Assignment evidenced
by the Borrower's execution of the applicable Assignment and
Assumption Agreement, unless the Assignee is already a Bank
under this Agreement in which case no consent is required
from the Borrower, (iii) either the assigning Bank or the
Assignee shall have paid a processing fee of $3,500 to the
Agent for the Agent's own account, (iv) the Assignee shall
have submitted to the Agent the Assignment and Assumption
Agreement, in which the Assignee shall have agreed in
writing to have irrevocably assumed and undertaken the
transferred portion of the assigning Bank's obligations
hereunder (including, without limitation, the transferred
portion of the Swing Line Participation Amount, the Letter
of Credit Participation Amount and the obligations to
indemnify the Agent hereunder), with a copy for the
Borrower, and shall have provided to the Agent information
the Agent shall have reasonably requested to make payments
to the Assignee, and (v) the assigning Bank, the Assignee
and the Agent shall have agreed upon a date upon which the
Assignment shall become effective. Upon the Assignment
becoming effective, (A) the Agent and the Borrower shall
make appropriate arrangements so that new Notes are issued
to the assigning Bank and the Assignee; and (B) the Agent
shall forward all payments of interest, principal, fees and
other amounts that would have been made to the assigning
Bank, in proportion to the percentage of the assigning
Bank's rights transferred, to the Assignee.
(c) Tax Matters. No Bank shall be
permitted to enter into any Assignment with any Assignee who
is not a United States Person unless such Assignee
represents and warrants to such Bank that, as at the date of
such Assignment, it is entitled to receive interest payments
without withholding or deduction of any taxes and such
Assignee executes and delivers to such Bank on or before the
date of execution and delivery of documentation of such
Assignment, a United States Internal Revenue Service Form
1001 or 4224, or any successor to either of such forms, as
appropriate, properly completed an claiming complete
exemption from withholding and deduction of all Federal
Income Taxes. A "United States Person" means any citizen,
national or resident of the United States, any corporation
or other entity created or organized in or under the laws of
the United States or any political subdivision hereof or any
estate or trust, in each case that is not subject to
withholding of United States Federal income taxes or other
taxes on payment of interest, principal of fees hereunder.
(d) Information. Each Bank may
provide to any Assignee or to any prospective Assignee
copies of all Loan Documents and any and all financial
information in such Bank's possession concerning the
Borrowers and its Subsidiaries which has been delivered to
such Bank by or on behalf of the Borrower pursuant to this
Agreement or which has been delivered to such Bank by or on
behalf of the Borrower in connection with such Bank's credit
evaluation of the Borrower prior to entering into this
Agreement.
(e) Federal Reserve Bank.
Nothing herein stated shall limit the right of any Bank to
assign any of its interest herein, in any Note and in the
other Loan Documents to a Federal Reserve Bank.
Section 12.4 Costs, Expenses
and Taxes. The Borrower agrees, whether or not any Loan is made
hereunder or any Letter of Credit is issued hereunder, to pay on
demand the following out-of-pocket costs and expenses incurred in
connection with the following matters: (i) all out-of-pocket
costs and expenses of the Agent (including the reasonable fees
and expenses of outside counsel to the Agent) in connection with
the preparation, execution and delivery of the Loan Documents and
the preparation, negotiation and execution of any and all
amendments to each thereof and (ii) all out-of-pocket costs and
expenses of the Agent and each of the Banks in connection with
the enforcement of the Loan Documents. The Borrower agrees to
pay, and save the Banks harmless from all liability for, any
stamp or other taxes which may be payable with respect to the
execution or delivery of the Loan Documents. The Borrower agrees
to indemnify and hold the Banks harmless from any loss or expense
which may arise or be created by the acceptance of telephonic or
other instructions for making Loans or disbursing the proceeds
thereof or issuing Letters of Credit, except to the extent any
such loss or expense arises solely from the gross negligence or
willful misconduct of the Banks. The obligations of the Borrower
under this Section 12.4 shall survive any termination of this
Agreement.
Section 12.5 Notices. Except
when telephonic notice is expressly authorized by this Agreement,
any notice or other communication to any party in connection with
this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight
courier or United States mail (postage prepaid) addressed to such
party at the address specified on the signature page hereof, or
at such other address as such party shall have specified to the
other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered,
from the date of sending thereof if sent by telegram, telex or
facsimile transmission, from the first (1st) Business Day after
the date of sending if sent by overnight courier, or from four
(4) days after the date of mailing if mailed; provided, however,
that any notice to the Agent under Article II hereof shall be
deemed to have been given only when received by the Agent.
Section 12.6 Successors. This
Agreement shall be binding upon the Borrower, the Banks and the
Agent and their respective successors and assigns, and shall
inure to the benefit of the Borrower, the Banks and the Agent and
the successors and assigns of the Banks. The Borrower shall not
assign its rights or duties hereunder without the written consent
of the Banks.
Section 12.7 Severability.
Any provision of the Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 12.8 Subsidiary
References. The provisions of this Agreement relating to
Subsidiaries shall apply only during such times as the Borrower
has one or more Subsidiaries.
Section 12.9 Captions. The
captions or headings herein and any table of contents hereto are
for convenience only and in no way define, limit or describe the
scope or intent of any provision of this Agreement.
Section 12.10 Entire Agreement.
The Loan Documents embody the entire agreement and understanding
between the Borrower, the Banks and the Agent with respect to the
subject matter hereof and thereof. This Agreement supersedes all
prior agreements and understandings relating to the subject
matter hereof.
Section 12.11 Counterparts.
This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this
Agreement by signing any such counterpart.
Section 12.12 Confidentiality
of Information. The Agent and each Bank shall use reasonable
efforts to assure that information about the Borrower and its
Subsidiaries and their operations, affairs and financial
condition, not generally disclosed to the public or to trade and
other creditors, which is furnished to the Agent or such Bank
pursuant to the provisions hereof is used only for the purposes
of this Agreement and any other relationship between any Bank and
the Borrower and shall not be divulged to any Person other than
the Banks, their affiliates and their respective officers,
directors, employees and agents, except: (a) to their attorneys
and accountants, (b) in connection with the enforcement of the
rights of the Banks hereunder and under the other Loan Documents
or otherwise in connection with applicable litigation, (c) in
connection with assignments and the solicitation of prospective
assignees referred to in Section 12.3, provided that the
disclosing Bank complies with Section 9.6(d) and (d) as may
otherwise be required or requested by any regulatory authority
having jurisdiction over any Bank or by any applicable law, rule,
regulation or judicial process, in the opinion of such Bank's
counsel, such opinion concerning the making of such disclosure to
be binding on the parties hereto. No Bank shall incur any
liability to the Borrower by reason of any disclosure expressly
permitted by this Section 12.12.
Section 12.12 Governing Law.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT,
THE NOTES AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO
CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL
LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.
Section 12.13 Consent to
Jurisdiction. AT THE OPTION OF THE BANKS, THIS AGREEMENT AND THE
NOTES MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE
COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE
BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT
AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN
ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY
THIS AGREEMENT, THE BANKS AT THEIR OPTION SHALL BE ENTITLED TO
HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES
ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER
APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.
Section 12.14 Waiver of Jury
Trial. THE BORROWER WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER
THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
(b) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above.
INTERRA FINANCIAL INCORPORATED
By Daniel J. Reuss
----------------------------
Daniel J. Reuss
Title Senior Vice President
Dain Bosworth Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402-4422
Attention: Daniel J. Reuss
Fax: (612) 371-7951
Commitment: FIRST BANK NATIONAL ASSOCIATION,
$17,000,000 as Agent and a Bank
Percentage: 34%
By Jose A. Peris
--------------------------
Jose A. Peris
Title Senior vice President
601 2nd Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Vice President,
Financial Services Division
Fax: (612) 973-0832
Commitment: NORWEST BANK MINNESOTA,
$16,500,000 NATIONAL ASSOCIATION
Percentage: 33%
By Edward J. Meyer, Jr.
----------------------------
Edward J. Meyer, Jr.
Title Vice President
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0105
Attention: Vice President,
Financial Institutions Division
Fax: (612) 667-7251
Commitment: THE CHASE MANHATTAN BANK
$16,500,000
Percentage: 33% By Joseph Manogue
-------------------------
Joseph Manogue
Title Vice President
Broker-Dealer Division
21st Floor
One Chase Manhattan Plaza
New York, New York 10081
Attention: Joe Manogue
Fax: (212) 552-5287
EXHIBIT A-1 TO
CREDIT AGREEMENT
REVOLVING NOTE
$[Commitment] Minneapolis, Minnesota
June 27, 1997
FOR VALUE RECEIVED, the undersigned, INTERRA FINANCIAL
INCORPORATED, a Delaware corporation (the "Borrower"), promises
to pay to the order of [BANK] (the "Bank"), on the Termination
Date, or other due date or dates determined under the Credit
Agreement hereinafter referred to, the principal sum of
_______________________________
__________________________________ AND 00/100 DOLLARS
($[Commitment]), or if less, the then aggregate unpaid principal
amount of the Revolving Loans (as such term is defined in the
Credit Agreement) as may be borrowed by the Borrower from the
Bank under the Credit Agreement. All Revolving Loans and all
payments of principal shall be recorded by the holder in its
records which records shall be conclusive evidence of the subject
matter thereof, absent manifest error.
The Borrower further promises to pay to the order of the Bank
interest on the aggregate unpaid principal amount hereof from
time to time outstanding from the date hereof until paid in full
at the rates per annum which shall be determined in accordance
with the provisions of the Credit Agreement. Accrued interest
shall be payable on the dates specified in the Credit Agreement.
All payments of principal and interest under this Note shall be
made in lawful money of the United States of America in
immediately available funds at the office of First Bank National
Association, at 601 2nd Ave. S., Minneapolis, Minnesota 55402-
4302, or at such other place as may be designated by the Agent to
the Borrower in writing.
This Note is a Revolving Note referred to in, and evidences
Revolving Loans incurred by the Borrower to the Bank under, a
Credit Agreement of even date herewith (herein, as it may be
restated, amended, modified or supplemented from time to time,
called the "Credit Agreement") among the Borrower, the Banks, as
defined therein (including the Bank) and First Bank National
Association, as Agent, to which Credit Agreement reference is
made for a statement of the terms and provisions thereof,
including those under which the Borrower is permitted and
required to make prepayments and repayments of principal of such
indebtedness and under which such indebtedness may be declared to
be immediately due and payable.
All parties hereto, whether as makers, endorsers or otherwise,
severally waive presentment, demand, protest and notice of
dishonor in connection with this Note.
This Note is made under and governed by the internal laws of
the State of Minnesota.
INTERRA FINANCIAL INCORPORATED
By_________________________________
Title________________________
EXHIBIT A-2 TO
CREDIT AGREEMENT
SWING LINE NOTE
$5,000,000 Minneapolis, Minnesota
June 27, 1997
FOR VALUE RECEIVED, the undersigned, INTERRA FINANCIAL
INCORPORATED, a Delaware corporation (the "Borrower"), promises
to pay to the order of FIRST BANK NATIONAL ASSOCIATION (the
"Bank"), on the Termination Date, or other due date or dates
determined under the Credit Agreement hereinafter referred to,
the principal sum of FIVE MILLION AND 00/100 DOLLARS
($5,000,000), or if less, the then aggregate unpaid principal
amount of the Swing Line Loans (as such term is defined in the
Credit Agreement) as may be borrowed by the Borrower from the
Bank under the Credit Agreement. All Swing Line Loans and all
payments of principal shall be recorded by the holder in its
records which records shall be conclusive evidence of the subject
matter thereof, absent manifest error.
The Borrower further promises to pay to the order of the Bank
interest on the aggregate unpaid principal amount hereof from
time to time outstanding from the date hereof until paid in full
at the rates per annum which shall be determined in accordance
with the provisions of the Credit Agreement. Accrued interest
shall be payable on the dates specified in the Credit Agreement.
All payments of principal and interest under this Note shall be
made in lawful money of the United States of America in
immediately available funds at the office of First Bank National
Association, at 601 2nd Ave. S., Minneapolis, Minnesota 55402-
4302, or at such other place as may be designated by the Agent to
the Borrower in writing.
This Note is the Swing Line Note referred to in, and evidences
the Swing Line Loans incurred by the Borrower to the Bank under,
a Credit Agreement of even date herewith (herein, as it may be
restated, amended, modified or supplemented from time to time,
called the "Credit Agreement") among the Borrower, the Banks, as
defined therein (including the Bank) and First Bank National
Association, as Agent, to which Credit Agreement reference is
made for a statement of the terms and provisions thereof,
including those under which the Borrower is permitted and
required to make prepayments and repayments of principal of such
indebtedness and under which such indebtedness may be declared to
be immediately due and payable.
All parties hereto, whether as makers, endorsers or otherwise,
severally waive presentment, demand, protest and notice of
dishonor in connection with this Note.
This Note is made under and governed by the internal laws of
the State of Minnesota.
INTERRA FINANCIAL INCORPORATED
By_________________________________
Title________________________
EXHIBIT A-3 TO
CREDIT AGREEMENT
TERM NOTE
$[Amount of Term Loan] Minneapolis, Minnesota
June 27, 1997
FOR VALUE RECEIVED, the undersigned, INTERRA FINANCIAL
INCORPORATED, a Delaware corporation (the "Borrower"), promises
to pay to the order of [BANK] (the "Bank"), on _______________,
____, or other due date or dates determined under the Credit
Agreement hereinafter referred to, the principal sum of
_______________________________
__________________________________ AND 00/100 DOLLARS ($Term Loan
Amount). All payments of principal under this Note shall be
recorded by the holder in its records which records shall be
conclusive evidence of the subject matter thereof, absent
manifest error.
The principal balance hereof shall be payable in seven (7)
equal quarterly installments of $____________ each, commencing on
the last day of _______________, ____, and continuing on the last
day of each December, March, June and September thereafter until
_______________, _____ (the "Term Loan Maturity Date"), when the
entire remaining principal balance hereof shall be due and
payable.
The Borrower further promises to pay to the order of the Bank
interest on the aggregate unpaid principal amount hereof from
time to time outstanding from the date hereof until paid in full
at the rates per annum which shall be determined in accordance
with the provisions of the Credit Agreement. Accrued interest
shall be payable on the dates specified in the Credit Agreement.
All payments of principal and interest under this Note shall be
made in lawful money of the United States of America in
immediately available funds at the office of First Bank National
Association, at 601 2nd Ave. S., Minneapolis, Minnesota 55402-
4302, or at such other place as may be designated by the Agent to
the Borrower in writing.
This Note is a Term Note referred to in, and evidences the Term
Loan incurred by the Borrower to the Bank under, a Credit
Agreement of even date herewith (herein, as it may be restated,
amended, modified or supplemented from time to time, called the
"Credit Agreement") among the Borrower, the Banks, as defined
therein (including the Bank) and First Bank National Association,
as Agent, to which Credit Agreement reference is made for a
statement of the terms and provisions thereof, including those
under which the Borrower is permitted and required to make
prepayments and repayments of principal of such indebtedness and
under which such indebtedness may be declared to be immediately
due and payable.
All parties hereto, whether as makers, endorsers or otherwise,
severally waive presentment, demand, protest and notice of
dishonor in connection with this Note.
This Note is made under and governed by the internal laws of
the State of Minnesota.
INTERRA FINANCIAL INCORPORATED
By_________________________________
Title________________________
EXHIBIT 11
<TABLE>
INTERRA FINANCIAL AND SUBSIDIARIES
COMPUTATION OF NET EARNINGS PER SHARE
(Unaudited, in thousands, except per-share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1997 1996 1997 1996
------------------ -----------------
<S> <C> <C> <C> <C>
Primary earnings per
share:
Net earnings.............. $11,137 $13,028 $26,892 $28,108
====== ====== ====== ======
Average number of common
and common equivalent
shares outstanding:
Average common shares
outstanding.............. 12,273 12,125 12,242 12,103
Stock options............. 676 436 704 419
Shares credited to
deferred compensation
plan participants........ 209 59 190 59
------ ------ ------ ------
13,158 12,620 13,136 12,581
====== ====== ====== ======
Primary earnings per
share.................... $0.85 $1.03 $2.05 $2.23
====== ====== ====== ======
Earnings per share assuming
full dilution:
Net earnings.............. $11,137 $13,028 $26,892 $28,108
====== ====== ====== ======
Average number of common
and common equivalent
shares outstanding:
Average common shares
outstanding.............. 12,273 12,125 12,242 12,103
Stock options............. 696 520 720 531
Shares credited to
deferred compensation
plan participants........ 209 59 190 59
------ ------ ------ ------
13,178 12,704 13,152 12,693
====== ====== ====== ======
Fully diluted earnings
per share................ $0.85 $1.03 $2.04 $2.21
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from Interra
Financial Incorporated's June 30, 1997, Form 10-Q and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 26,776
<RECEIVABLES> 1,364,529
<SECURITIES-RESALE> 231,867
<SECURITIES-BORROWED> 0<F1>
<INSTRUMENTS-OWNED> 508,422
<PP&E> 36,278
<TOTAL-ASSETS> 2,229,250
<SHORT-TERM> 206,655
<PAYABLES> 1,287,553
<REPOS-SOLD> 109,563
<SECURITIES-LOANED> 0<F2>
<INSTRUMENTS-SOLD> 220,930
<LONG-TERM> 21,812
1,536
0
<COMMON> 0
<OTHER-SE> 300,482
<TOTAL-LIABILITY-AND-EQUITY> 2,229,250
<TRADING-REVENUE> 76,514
<INTEREST-DIVIDENDS> 55,209
<COMMISSIONS> 126,687
<INVESTMENT-BANKING-REVENUES> 49,070
<FEE-REVENUE> 21,109<F3>
<INTEREST-EXPENSE> 26,483
<COMPENSATION> 197,933
<INCOME-PRETAX> 41,888
<INCOME-PRE-EXTRAORDINARY> 26,892
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,892
<EPS-PRIMARY> 2.05
<EPS-DILUTED> 2.04
<FN>
<F1>Included in receivables.
<F2>Included in payables.
<F3>Includes fees from Asset Management only.
</FN>
</TABLE>
