<PAGE>
- --------------------------------------------------------------------------------
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, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-8186
DAIN RAUSCHER CORPORATION
(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 RAUSCHER PLAZA, 60 SOUTH SIXTH STREET
MINNEAPOLIS, MINNESOTA 55402-4422
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 371-2711
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, 1999, the Company had 12,428,390 shares of
common stock outstanding.
- --------------------------------------------------------------------------------
<PAGE>
DAIN RAUSCHER CORPORATION
REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. FINANCIAL INFORMATION:
ITEM 1. Financial Statements
Consolidated Balance Sheet............................... 1
Consolidated Statement of Operations..................... 2
Consolidated Statement of Cash Flows..................... 3
Notes to Consolidated Financial Statements............... 4
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 5
II. OTHER INFORMATION:
ITEM 1. Legal Proceedings........................................ 14
ITEM 4. Submission of Matters to a Vote of Security Holders...... 15
ITEM 6. Exhibits and Reports on Form 8-K......................... 16
Signatures............................................... 17
Index of Exhibits........................................ 18
Exhibits................................................. 19
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DAIN RAUSCHER CORPORATION
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------- -------------
(UNAUDITED)
<S> <C> <C>
Assets:
Cash and cash equivalents................................................ $ 42,490 $ 47,273
Receivable from customers................................................ 1,441,263 1,172,398
Receivable from brokers and dealers...................................... 326,545 288,207
Securities purchased under agreements to resell.......................... 167,305 237,662
Trading securities owned, at market...................................... 461,073 379,901
Equipment and leasehold improvements, at cost, net of depreciation....... 48,652 48,271
Other receivables........................................................ 130,213 83,957
Deferred income taxes.................................................... 47,140 48,219
Goodwill, net of amortization............................................ 117,150 121,580
Other assets............................................................. 28,587 39,019
------------ ------------
$ 2,810,418 $ 2,466,487
============ ============
Liabilities and Shareholders' Equity:
Liabilities:
Short-term borrowings.................................................... $ 213,623 $ 127,415
Customer drafts payable.................................................. 68,618 109,396
Payable to customers..................................................... 554,552 585,848
Payable to brokers and dealers........................................... 973,674 690,459
Securities sold under repurchase agreements.............................. 101,317 38,354
Trading securities sold, but not yet purchased, at market................ 176,388 240,825
Accrued compensation..................................................... 134,417 139,703
Other accrued expenses................................................... 115,786 92,209
Subordinated and other debt.............................................. 112,180 112,505
------------ ------------
2,450,555 2,136,714
------------ ------------
Shareholders' equity:
Common stock............................................................. 1,598 1,580
Additional paid-in capital............................................... 116,932 112,142
Retained earnings........................................................ 264,403 230,421
Treasury stock, at cost.................................................. (23,070) (14,370)
------------ ------------
359,863 329,773
------------ ------------
$ 2,810,418 $ 2,466,487
============ ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
DAIN RAUSCHER CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- --------------------------------
1999 1998 1999 1998
------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Revenue:
Commissions................................... $ 84,103 $ 75,797 $ 167,369 $ 148,721
Investment banking and underwriting........... 59,448 38,986 92,883 61,215
Principal transactions........................ 40,062 32,833 82,550 69,628
Interest...................................... 34,715 33,767 65,575 65,564
Asset management.............................. 18,341 15,532 35,293 28,862
Correspondent clearing........................ 5,851 4,428 11,729 8,894
Gain on sale of investment.................... - - 15,378 -
Other......................................... 9,086 7,139 16,864 13,612
-------------- ------------- -------------- -------------
Total revenue................................. 251,606 208,482 487,641 396,496
Interest expense................................. (19,051) (20,466) (35,104) (36,033)
-------------- ------------- -------------- -------------
Net revenue...................................... 232,555 188,016 452,537 360,463
-------------- ------------- -------------- -------------
Operating expenses:
Compensation and benefits..................... 149,974 120,169 280,882 231,129
Communications................................ 12,700 12,145 24,846 24,332
Occupancy and equipment rental................ 15,114 11,774 28,339 23,293
Travel and promotional........................ 9,376 8,233 18,429 15,446
Floor brokerage and clearing fees............. 3,400 2,876 6,850 5,703
Other......................................... 14,932 14,331 29,987 25,235
Acquisition-related expense................... - - - 20,000
-------------- ------------- -------------- -------------
Total operating expenses......................... 205,496 169,528 389,333 345,138
-------------- ------------- -------------- -------------
Income before income taxes....................... 27,059 18,488 63,204 15,325
Income taxes.................................. (10,147) (6,656) (23,702) (5,517)
-------------- ------------- -------------- -------------
Net income....................................... $ 16,912 $ 11,832 $ 39,502 $ 9,808
============== ============= ============== =============
Earnings per share:
Basic......................................... $ 1.37 $ 0.96 $ 3.18 $ .79
============== ============= ============== =============
Diluted....................................... $ 1.26 $ 0.90 $ 2.96 $ .74
============== ============= ============== =============
Dividends per share.............................. $ .22 $ .22 $ .44 $ .44
============== ============= ============== =============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
DAIN RAUSCHER CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income .............................................................. $ 39,502 $ 9,808
Adjustments to reconcile income to cash provided
by operating activities:
Depreciation and amortization...................................... 12,014 8,427
Deferred income taxes.............................................. 1,079 1,463
Other non-cash items............................................... 7,366 4,573
Net payable to brokers and dealers................................. 244,877 108,808
Securities purchased under agreements to resell.................... 70,357 (123,872)
Net trading securities owned and trading
securities sold, but not yet purchased.......................... (145,609) 144,314
Short-term borrowings and drafts payable
of securities companies......................................... 45,430 110,564
Net receivable from customers...................................... (300,161) (109,054)
Other receivables.................................................. (46,256) (9,301)
Securities sold under repurchase agreements........................ 62,963 (36,496)
Accrued compensation............................................... (5,286) (33,980)
Accounts payable and other accrued liabilities..................... 23,428 (31,648)
Other.............................................................. (7,426) 27,446
------------ ------------
Cash provided by operating activities....................................... 2,278 71,052
------------ ------------
Cash flows from financing activities:
Proceeds from:
Issuance of common stock.............................................. 1,422 1,049
Subordinated and other debt........................................... - 80,000
Payments for:
Purchase of common stock.............................................. (9,790) -
Dividends on common stock............................................. (5,477) (5,440)
Subordinated and other debt........................................... (5,000) (15,641)
Revolving credit agreement, net....................................... - (30,000)
------------ ------------
Cash provided (used) by financing activities................................ (18,845) 29,968
------------ ------------
Cash flows from investing activities:
Proceeds from:
Gain on sale of investment securities................................. 15,378 -
Investment dividends and sales of nonmarketable securities............ - 1,707
Payments for:
Equipment, leasehold improvements and other........................... (3,594) (10,966)
Acquisition, net of cash acquired..................................... - (95,588)
------------ ------------
Cash provided (used) by financing activities................................ 11,784 (104,847)
------------ ------------
Decrease in cash and cash equivalents....................................... (4,783) (3,827)
Cash and cash equivalents:
At beginning of period................................................ 47,273 35,909
------------ ------------
At end of period...................................................... $ 42,490 $ 32,082
============ ============
</TABLE>
Income tax payments totaled $19,049,000 and $3,112,000 and interest payments
totaled $33,261,000 and $31,577,000 during the six months ended June 30, 1999
and 1998, respectively. During the six months ended June 30, 1998, the Company
had non-cash financing activity of $21,657,000 representing subordinated
debentures issued as a portion of the consideration paid for an acquisition.
Also for the six months ended June 30, 1999 and 1998, respectively, the Company
had net non-cash financing activity of $4,747,000 and $4,149,000 associated with
the crediting of common stock to deferred compensation plan participants.
See notes to consolidated financial statements.
5
<PAGE>
DAIN RAUSCHER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
We have prepared the accompanying unaudited interim consolidated
financial statements in accordance with the instructions for Form 10-Q. These
instructions do not require including all the information and footnotes found in
complete financial statements prepared in accordance with generally accepted
accounting principles. These interim financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in our Annual Report on Form 10-K for the year ended December 31, 1998.
We believe we have included all adjustments necessary for a fair presentation of
these interim financial statements. We have made only normal, recurring
adjustments. However, financial results for the six-months ended June 30, 1999,
are not necessarily indicative of future results.
We have reclassified certain prior year amounts in the financial
statements to conform with our 1999 presentation.
B. ACQUISITION
On March 31, 1998, our broker-dealer subsidiary, Dain Rauscher
Incorporated ("DRI"), acquired Wessels, Arnold, & Henderson, LLC ("WAH"), a
privately held investment banking and institutional equity sales and trading
firm based in Minneapolis. The transaction was accounted for as a purchase and,
accordingly, the revenue and operating results of WAH are only included in the
consolidated statement of operations since April 1, 1998.
We paid $120 million of cash and issued five-year, zero coupon,
subordinated debentures with a June 30, 1999 discounted value of $21.1 million
($27 million face amount) to acquire WAH. Goodwill of approximately $118 million
is recorded and is amortized over an estimated life of 25 years. The
amortization of goodwill is deductible for tax purposes.
C. MERGER AND RESTRUCTURING CHARGES
As part of our acquisition of WAH, we recorded a charge of $20 million
($12.8 million after tax) in the first quarter of 1998. This charge included $16
million for severance in the elimination of approximately 150 jobs at DRI, $2.5
million for facilities consolidation, and the remaining $1.5 million for other
integration costs. By March 31, 1999, all amounts related to the WAH acquisition
had been charged against this reserve, which was adequate to cover all expenses.
D. SHORT-TERM BORROWINGS
On May 31, 1999, we entered into a new $67 million committed, revolving
credit agreement, which replaced an existing $50 million committed, revolving
credit agreement originally dated March 20, 1998. Our new agreement expires May
31, 2000 and contains two further one-year renewal options. Loans under this
agreement are unsecured and bear interest at a floating rate of LIBOR plus 61
basis points. No amounts were outstanding under this facility at June 30, 1999.
Under the terms of this credit agreement, we must comply with covenants
regarding net worth, regulatory net capital and limitations on indebtedness,
among others.
E. SUBORDINATED AND OTHER DEBT
On March 31, 1998, DRI entered into an $80 million subordinated term
loan agreement with a group of banks in connection with the acquisition of WAH.
Proceeds from this loan qualify as regulatory capital. Term loans under this
agreement are unsecured, and consist of advances bearing interest generally at
either the current LIBOR plus 160 basis points, or the lead bank's published
Reference Rate, at our discretion. Under the agreement DRI will make quarterly
payments of $5.0 million. These payments began on April 1, 1999, and the final
payment is due on December 31, 2002. DRI must also comply with covenants in the
agreement regarding net worth and regulatory net capital. During the 1999 second
quarter we entered into an interest rate swap agreement for this subordinated
debt. This interest rate swap allows us to pay a fixed rate of 6.895% on our
subordinated loan, rather than the variable LIBOR denominated rate of the
original debt agreement.
F. SEGMENT INFORMATION
See Item 2 "Management's Discussion and Analysis" for a discussion of
our results by business line.
6
<PAGE>
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 our Annual Report on Form 10-K for the year ended
December 31, 1998.
SUMMARY
Following is a consolidated summary of our operating income and results
of operations for the three and six months ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- -------------------------------
1999 1998 1999 1998
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Revenue.......................................... $ 251,606 $ 208,482 $ 472,263 $ 396,496
Interest expense................................. (19,051) (20,466) (35,104) (36,033)
-------------- ------------- -------------- -------------
Net revenue...................................... 232,555 188,016 437,159 360,463
Operating expenses excluding interest and
acquisition-related charge.................... 205,496 169,528 389,333 325,138
-------------- ------------- -------------- -------------
Operating income before taxes.................... 27,059 18,488 47,826 35,325
Income tax expense from operations............... (10,147) (6,656) (17,935) (12,717)
-------------- ------------- -------------- --------------
Net operating income............................. 16,912 11,832 29,981 22,608
Gain on sale of investment (net of tax).......... - - 9,611 -
Acquisition-related charge (net of tax).......... - - - (12,800)
-------------- ------------- --------------- --------------
Net income....................................... $ 16,912 $ 11,832 $ 39,502 $ 9,808
============== ============= ============== =============
EARNINGS PER SHARE:
From net operating income:
Basic......................................... $ 1.37 $ 0.96 $ 2.40 $ 1.83
Diluted....................................... 1.26 0.90 2.24 1.72
Net:
Basic......................................... $ 1.37 $ 0.96 $ 3.18 $ 0.79
Diluted....................................... 1.26 0.90 2.96 0.74
</TABLE>
Consolidated earnings for the six months ended June 30, 1999 include a
$15.4 million pre-tax gain on the sale of an equity investment, which increased
net earnings per diluted share by $0.72. Consolidated 1998 six-month results
include a $20 million merger-related charge we recorded in conjunction with the
acquisition of WAH. This charge covered severance, facilities consolidation and
other expenses related to the merger.
RESULTS OF OPERATIONS BY TRANSACTION TYPE
Commission revenue increased $8.3 million (11%) in the 1999 second
quarter over the prior year quarter and $18.6 million (13%) during the first six
months of 1999 versus the same period in 1998. Strong sales of listed securities
during the first half of 1999 continued to drive increases in commission
revenue. The continued strength of securities markets (particularly as measured
by NASDAQ and NYSE indices) amid the positive performance of the U.S. economy
has pushed securities prices and trading volumes higher in 1999. These price and
volume increases, which result in higher commissions on a greater number of
securities transactions, were the most important factors in increasing our
commission revenue for the three and six months ended June 30, 1999 over the
same periods in 1998. Stronger sales of insurance and annuity products in the
first half of 1999 versus the prior year also contributed to the increase in
commission revenue from the prior year.
7
<PAGE>
Investment banking and underwriting revenue rose more than 50%, in both
the second quarter and first half of 1999, compared to the same periods a year
ago. A $20.5 million (52%) increase in the 1999 second quarter versus the 1998
second quarter, and a $31.7 million (51%) increase year to date in 1999 versus
the first six months of 1998. Robust equity capital markets activity,
particularly from initial and secondary offerings in the technology sector,
drove these strong revenue increases.
Revenue from principal transactions increased $7.2 million (22%) in the
1999 second quarter versus the same period in 1998, and $12.9 million (19%) in
the first six months of 1999 versus the first six months of 1998. Higher sales
and trading of over-the-counter equity securities, as well as higher revenue
from sales of mortgage-backed securities and municipal and government bonds
resulted in higher revenues for the first six months of the year. Fixed income
trading revenue, affected by the impact of Fed activities late in June and
general uncertainty in the U.S. capital markets, declined in the second quarter
of 1999. First quarter 1999 trading results offset some of the effect of this
decline for the full six-month period.
Correspondent clearing revenue rose 32% ($1.4 million) in the 1999
second quarter versus the 1998 second quarter and 32% ($2.8 million) for the
first half of 1999 versus 1998. Favorable market conditions and strong investor
activity resulted in increased customer transactions in the current year.
Net interest income increased $2.4 million (18%) in the second quarter
of 1999 from the 1998 quarter. Interest income increased slightly quarter over
quarter with an increase in margin loan balances (related to favorable market
conditions and low interest rates). Interest expense declined quarter over
quarter as we incurred less interest expense on certain repurchase agreements
used to finance our securities inventories in the 1999 quarter. Net interest
income for the first six months of 1999 versus 1998 was essentially unchanged.
Average margin spreads (the difference between the rate our customers pay us on
margin loans and our average borrowing cost) were not significantly different in
the first half of 1999 versus the same period in 1998.
Asset management revenue increased $2.8 million (18%) in the 1999
second quarter over the prior year quarter and $6.4 million (22%) for the first
six months of 1999 versus the first six months of 1998. Assets under management
at Insight Investment Management Inc. ("Insight"), our money management
subsidiary, increased 11% as of June 30, 1999 versus June 30, 1998, although
some of this increase was driven by rising market valuations of assets already
under management. Assets under management in other managed account programs at
DRI also increased during the first six months of 1999.
Other revenue increased $1.9 million (27%) in the 1999 second quarter
over the 1998 quarter, and $3.1 million (23%) in the first half of 1999 versus
the first half of 1998. This revenue growth was primarily due to increases in
various retail customer product and service fees. Year to date 1999 results also
include a nonrecurring gain of $15.4 million resulting from our sale of an
equity investment in the first quarter of the year.
During the 1999 second quarter, compensation and benefits increased
$29.8 million (25%) from the prior year quarter. Compensation and benefits also
increased $49.8 million (22%) in the first half of the year over the same period
in 1998. These increases in compensation and benefits were directly related to
net operating revenue increases in the same periods of 24% and 21%, receptively.
Compensation as a percent of net operating revenue was essentially unchanged at
64% in the 1999 second quarter versus 63% in 1998's second quarter, and 64% of
operating revenue for the first six months of 1999 versus 64% during the same
period a year ago.
Operating expenses, other than compensation and benefits, increased in
the 1999 second quarter by $6.1 million (12%) from the 1998 quarter. During the
1999 second quarter we closed or consolidated three retail offices, resulting in
$2.5 million of office-closing expenses. The remaining expense increases,
particularly for travel and promotional expenses, were directly due to increases
in business activity and revenue for the period. For the first six months of
1999 operating expenses increased $14.4 million (15%) from the 1998 period,
excluding the impact of the $20 million (pre-tax) WAH acquisition-related
charge. Expenses for the first six months of 1999 versus 1998 are not directly
comparable as the impact of the WAH merger, including amortization expense on
goodwill from the WAH acquisition, are only included for three months of 1998.
8
<PAGE>
RESULTS OF OPERATIONS BY BUSINESS LINE
Our business includes three major segments: Private Client Group, which
includes securities sales to individual investors, correspondent clearing, and
asset management for individual investors; Equity Capital Markets, which
includes investment banking and underwriting and equity sales and trading; and
Fixed Income Capital Markets, which includes fixed income securities trading,
sales, underwriting, and advisory services. All corporate expenses, and
miscellaneous revenues and expenses, which are not allocated to individual
business lines, are included below in "Corporate".
<TABLE>
<CAPTION>
(Dollars in thousands) THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- -------------------------------
1999 1998 1999 1998
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
NET REVENUE
Private Client Group.......................... $ 149,182 $ 133,981 $ 292,101 $ 263,640
Equity Capital Markets........................ 58,610 26,395 92,025 42,986
Fixed Income Capital Markets.................. 22,154 24,714 47,169 45,749
Corporate:
Staff and other............................ 2,609 2,926 5,864 8,088
Gain on sale of investment................. - - 15,378 -
-------------- ------------- -------------- -------------
TOTAL................................. $ 232,555 $ 188,016 $ 452,537 $ 360,463
============== ============= ============== =============
<CAPTION>
(Dollars in thousands) THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- -------------------------------
1999 1998 1999 1998
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
PRE-TAX INCOME (LOSS)
Private Client Group.......................... $ 17,638 $ 14,148 $ 32,847 $ 27,841
Equity Capital Markets........................ 10,076 (280) 11,244 (2,427)
Fixed Income Capital Markets.................. (1,144) 2,267 953 3,264
Corporate:
Staff and other............................ 489 2,353 2,782 6,647
Acquisition related charge................. - - - (20,000)
Gain on sale of investment................. - - 15,378 -
-------------- ------------- -------------- -------------
TOTAL................................. $ 27,059 $ 18,488 $ 63,204 $ 15,325
============== ============= ============== =============
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- -------------------------------
1999 1998 1999 1998
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
PRE-TAX MARGIN ON NET REVENUE
Private Client Group.......................... 12% 11% 11% 11%
Equity Capital Markets........................ 17 n/m 12 n/m
Fixed Income Capital Markets.................. n/m 9 2 7
Corporate..................................... 19 81 48 82
-------------- ------------- -------------- -------------
TOTAL................................. 12% 10% 14% 4%
</TABLE>
PRIVATE CLIENT GROUP: Private Client Group ("PCG") generates revenue
primarily from commissions earned by investment executives on individual
(retail) investor activity. Additional sources of revenue include asset
management fees paid to the group by Insight from the Great Hall money market
funds, and fees paid by customers for us to manage or arrange the management of
their portfolios. PCG also earns interest from customers who have borrowed funds
to purchase securities (margin accounts). Revenue generated from correspondent
(or trade) clearing is also included in PCG. Correspondent clearing fees are
paid to us by outside (introducing) brokers to act as their representative with
financial exchanges, to clear and settle their clients' transactions, and to
extend credit to their clients to purchase securities (margin accounts).
9
<PAGE>
PCG's increased commission revenue in the second quarter and first half
of 1999 resulted from higher sales of listed securities and annuity and other
insurance products. Commission revenue increased directly in line with both
trade volumes and securities prices on the NASDAQ, NYSE and other exchanges.
Correspondent clearing contributed to the revenue increase in 1999 as favorable
market conditions drove increases in customer transaction volumes. Asset
management fees also were higher in the second quarter and first half of 1999,
resulting mainly from higher levels of assets under administration in both Great
Hall Funds and in other fee-based managed account programs. Assets under
administration also increased partly as a result of rising market valuations of
assets already under management. Assets under administration totaled $63 billion
as of June 30, 1999 versus $57 billion at December 31, 1998.
PCG pretax income increased 25% in the second quarter of 1999 versus
the same period in 1998, and 18% for the first six months of 1999 versus the
first six months of 1998. Despite $2.5 million of expenses related to closing
two retail offices and consolidating another in the second quarter of 1999,
margins remained stable, as other operating expenses declined in the second
quarter from 1998 levels. These operating expense reductions resulted from
PCG not incurring the transitional and other integration expenses incurred in
1998 related to the combination of broker-dealer operations. PCG's
compensation and benefits ratio decreased slightly as a percent of net
revenue to 44.3% in second quarter 1999 compared with 45.0% in 1998's first
quarter. Compensation and benefits as a percent of net revenue also declined
on a year-to-date basis in 1999 to 44.2% versus 45.1% in 1998. PCG incurred
certain transitional compensation expenses related to the combination of our
two broker-dealers in 1998, which expired at the end of that year.
Compensation and benefits in 1999 do not include these one-time costs.
EQUITY CAPITAL MARKETS: Equity Capital Markets ("ECM") revenue comes
from several sources: trading fees from purchasing registered securities and
selling them to customers or institutions through our institutional sales force
or our Private Client Group; underwriting fees, which may include valuations,
private placements, initial public offerings ("IPOs"); and merger and
acquisition ("M&A") or other advisory fees. ECM revenue also includes fees from
our syndicate activities, which involve participating with other securities
firms in underwriting securities offerings, IPO's, and other registered
securities. All of these various fees are included in investment banking and
underwriting fees on our consolidated statement of operations. ECM also
makes-a-market (trades) and provides research coverage in certain
over-the-counter and listed securities. These activities allow ECM to develop
expertise in selected market sectors both to increase investment banking
opportunities and to provide services to our institutional and retail customers.
ECM trading gains and losses are included in principal transactions on our
consolidated statement of operations. Commissions earned from transactions on
newly issued securities sold through our Private Client Group are included in
PCG's business line revenue.
ECM's revenue rose strongly in both the second quarter and first half
of 1999. Investment banking revenue more then doubled in the first six months of
1999 versus the same period a year ago. This revenue increase was led by strong
underwriting activity, with ECM completing 45 public equity transactions in the
first half of 1999. While activity in the technology sector continued to be
strong in 1999's second quarter (as it had been in the 1999 first quarter), ECM
also completed underwriting transactions in the energy, consumer, healthcare and
financial services sectors. M&A and private placement revenue increased in the
second quarter of 1999 over 1998, with 8 transactions completed in the 1999
quarter, including a $7.5 million fee from one transaction. Institutional equity
sales and syndicate business were also up sharply in 1999 over the prior year
for both the second quarter and the year to date periods.
ECM pretax income and margin improved significantly as compensation and
benefits declined as a percent of ECM's significantly higher revenue in the
quarter and year to date periods. Compensation and benefits was 67.7% of revenue
in the second quarter of 1999 versus 69.6% in 1998's first quarter, despite an
increase in the number of employees in 1999. Year to date 1999 compensation and
benefits as a percent of revenue was 67.5% in 1999 versus 71.4% in 1998.
Although promotional and travel expenses increased in the first half of 1999
versus the same period in 1998, this increase was directly related to the
increase in investment banking activity and revenue.
10
<PAGE>
FIXED INCOME: Fixed Income Capital Market's ("FICM") revenue comes from
municipal fixed income underwriting fees, as well as taxable and tax-exempt
fixed income securities sales and trading. FICM underwriting fees come from
purchasing the tax-exempt fixed income securities of municipalities, counties,
cities, school districts and other community development organizations. These
securities are then resold, primarily to our individual and institutional
customers. FICM also generates revenue from acting as a financial advisor to
state and local governments and other community development organizations
reviewing financing options or preparing for bond issues. These fees are all
included in investment banking and underwriting fees on our consolidated
statement of operations. FICM also makes-a-market in certain fixed income
securities, primarily to offer these securities to our individual and
institutional customers. This trading income is included as part of principal
transaction revenue on our consolidated statement of operations. FICM earns
interest from the fixed income securities purchased or held in inventory, as
well as from entering into reverse repurchase transactions. FICM also pays
interest on the short-term bank borrowings and repurchase agreements used to
finance trading inventories as well as securities sold short to hedge inventory
positions.
FICM's 3% net revenue increase for the current year to date over 1998
was driven primarily by increases in taxable and municipal fixed income
securities sales as we increased our taxable securities sales force in the first
half of 1999 over 1998 levels. During the second quarter of 1999, trading
results for taxable and municipal, fixed income securities declined sharply from
the prior year quarter. Market uncertainty over interest rates and unsuccessful
hedging strategies on certain fixed income securities (designed to mitigate
market uncertainty) contributed to the negative trading results. Municipal
securities advisory and underwriting revenue continued to decline in the second
quarter of 1999 (as they had in the first quarter) from the same periods a year
ago as FICM completed fewer transactions during 1999. Overall the market for
municipal securities issuances continued to be soft. Retail sales of fixed
income securities (other than municipal equities) also declined in the second
quarter of 1999, as given favorable equity market conditions and interest rate
uncertainties individual investors tended to favor stocks over bonds. These
factors contributed to a net revenue decline in the second quarter of 1999 of
10% from the same period a year ago.
FICM's margins were significantly eroded by the downturn in trading
revenue in the second quarter of 1999. Compensation and benefits as a percent of
net revenue also increased in the quarter and year to date periods as a result
of the trading revenue decline. Compensation and benefits as a percent of net
revenue rose to 67.9% in the quarter versus 61.4% in the first quarter of 1998.
For the first half of 1999, compensation and benefits as a percent of revenue
also rose, to 64.9% versus 61.0% in 1998. Operating expenses rose modestly in
the first half of the year as we increased our sales force, the number of fixed
income offices, and made other investments in building our infrastructure. These
expense increases also contributed to the margin decline in the first half of
the year.
NONRECURRING ITEMS: The 1999 nonrecurring gain of $15.4 million
represents profit on the sale of an equity investment. In the first quarter of
1998 we expensed $20 million, pre-tax, in merger costs related to the WAH
acquisition.
CORPORATE: Corporate revenue consists primarily of asset management
fees generated by Insight, and net interest that is not allocated to a specific
business line. Insight manages the Great Hall money market funds and certain
institutional fixed income managed accounts. Great Hall asset management fees
increased in 1999 as assets under management at Insight rose strongly in the
first half of the year. Corporate revenue may also include the proceeds from
periodic sales of investment securities we hold.
Corporate expense includes goodwill amortization, professional fees,
and any other non-allocated expenses. Amortization of WAH goodwill represents a
significant portion of the increase in 1999 corporate expense from the same
period in 1998, as 1999 year-to date Corporate expense includes a full six
months of amortization versus only three months in 1998.
LIQUIDITY AND CAPITAL RESOURCES
On May 31, 1999, we entered into a new $67 million committed, revolving
credit agreement, replacing a $50 million committed, revolving credit agreement
originally dated March 20, 1998. This new agreement expires May 31, 2000 and
contains two further one-year renewal options. Loans under this agreement are
unsecured and bear interest at a floating rate of LIBOR plus 61 basis points. No
amounts were outstanding under this facility at June 30, 1999. Under the terms
of this credit agreement, we must comply with covenants regarding net worth,
regulatory net capital and indebtedness, among others.
11
<PAGE>
As described in Note L of the Consolidated Financial Statements of our
1998 Annual Report on Form 10-K, DRI must comply with certain regulations of the
SEC and New York Stock Exchange, Inc. measuring capitalization and liquidity.
DRI continues to operate above minimum net capital standards of 5 percent of
aggregate debit items. At June 30, 1999, net capital was $130.5 million, 8.1
percent of aggregate debit balances and $50.0 million in excess of the 5-percent
requirement.
During each of the 1999 first and second quarters, we declared and paid
a regular quarterly dividend on our common stock of $.22 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.
On March 31, 1998, DRI entered into an $80 million subordinated term
loan agreement with a group of banks in connection with the acquisition of WAH.
See Note D for further discussion of this subordinated loan agreement. During
the 1999 second quarter we entered into an interest rate swap agreement for this
$80 million subordinated debt. This interest rate swap allows us to pay a fixed
rate on our subordinated loan, rather than the variable LIBOR denominated rate
of the original debt agreement. On March 31, 1998, we also issued $27 million
(face amount) in 5-year zero coupon subordinated debentures related to the
acquisition of WAH. See Note B for further discussion of these debentures.
MARKET RISK
The types of transactions in which we participate and the types of
inventory we hold remain essentially unchanged since year-end 1998. See the
Market Risk discussion of Item 7 (Management's Discussion and Analysis) of our
Annual Report on Form 10-K for the year ended December 31, 1998 for a further
discussion of this issue.
YEAR 2000 ISSUE AND TECHNOLOGY
The technological problems, which may occur upon reaching the Year 2000,
have been widely discussed in the electronic and print media, as well as among
government and securities industry officials. Since the early 1990s, we have
taken steps to assess and implement upgrade plans, and test our hardware and
software systems for Year 2000 compliance. In 1993, we consolidated the
back-office operations of our subsidiary broker-dealers (Dain Bosworth and
Rauscher Pierce Refsnes). With that consolidation, we upgraded or replaced the
bulk of our mission-critical mainframe data processing systems. While we
performed these upgrade and replacement projects primarily for competitive
reasons, these systems were also made Year 2000-compliant at that time.
Our Year 2000 Task Force, assembled in 1998, is headed by our Chief
Financial Officer and our Chief Information Officer. The Task Force analyzes our
internal information technology ("IT") and non-IT systems, including critical
connections to and outsourced systems supplied by vendors, for Year 2000
readiness. The Task Force also identifies and prioritizes our critical
third-party relationships, including those with securities exchanges, vendors,
clients, and transaction counterparties; and communicates with them about their
plans and progress in addressing the Year 2000 problem. We have consulted with
the Securities Industry Association ("SIA") and other industry participants to
formulate our Year 2000 program. Our activities follow a comprehensive Year 2000
project plan (the "Year 2000 Plan"), which covers our mission-critical IT and
non-IT systems and third-party interfaces. The Year 2000 Plan includes steps for
inventory, assessment, remediation and testing, along with a detailed schedule
for completing each of the segments.
Substantially all of our mission-critical internal mainframe systems
have been assessed, modified to achieve Year 2000 compliance, tested,
implemented and run in daily production. We have upgraded and tested our
external interfaces as each service provider informed us that the external
interface was ready for testing. We identified approximately 300
mission-critical mainframe interfaces (with 80 third-parties) and have
determined they are either Year 2000-compliant or not affected by Year 2000
sensitivity. Interfaces were evaluated through internal testing and also during
industry-wide testing in March and April of this year.
Identifying whether significant Year 2000 problems exist in placing,
settling and clearing orders and trades was a key objective of this March and
April 1999 testing coordinated by the SIA. In announcing the results of the
industry-wide testing, the SIA stated that "virtually all of the simulated
trades entered over the six test weekends were processed free of Y2K bugs." Our
internal evaluation of our own performance during the testing was consistent
with these results and showed that we experienced no Y2K-related errors. Testing
of other (non-trading) mainframe systems was completed by July 31,
12
<PAGE>
1999. While there can be no assurance, we believe that our internal systems
will not experience significant disruption in connection with the Year 2000,
and that all critical testing and remediation will be completed by August 31,
1999.
The assessment and remediation of our server systems, local and wide
area network systems, voice systems and facilities is substantially complete.
Further testing of these systems, however, will continue throughout the
remainder of 1999.
As of June 30, 1999 we have spent approximately $1.4 million on Year
2000-related planning, testing and upgrades or replacements. Such costs have not
had, and are not expected to have, a material effect on our consolidated
financial statements. We anticipate spending approximately $2.1 million on Year
2000-related testing during all of 1999. We believe that we will be able to fund
any such future costs from operations.
Our business is highly dependent on communications, trading, information
and data processing systems. Although we have outsourced some communications,
quotations and trading systems services, we maintain our own order-routing and
back-office processing system. We have in place tested disaster recovery
systems. However, if our internal systems, vendors, other information providers,
the securities exchanges, clearing agencies and other securities firms or
financial institutions with which we transact business, experience any
significant disruption in connection with the Year 2000, the disruption could
affect our ability to conduct business and may have a material adverse effect on
our financial results. We have developed and documented contingency plans to
provide for continuity of processing under various scenarios. We continue to
update these plans based on the results of our systems testing and upgrades.
Readers are cautioned that forward-looking statements contained in the
section "Year 2000 Issue" should be read in conjunction with our disclosures
under the heading: "Forward Looking Statements" which appears below.
FORWARD-LOOKING STATEMENTS
This document contains certain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act") which reflect our current views regarding future events and financial
performance. The words "believe," "expect," "anticipate," "intends," "estimate,"
"forecast," "project," "should," and similar expressions are used to identify
these "forward-looking statements". We desire to take advantage of the "safe
harbor" provisions of the Reform Act. We wish to caution investors and potential
investors that any forward-looking statements made by us or on our behalf are
subject to uncertainties and other factors that could cause actual results to
differ materially from those statements. These factors include, among others,
(a) the volatile nature of the securities industry; (b) rapidly growing
competition posed by other broker-dealers, including discount brokerages and
online trading firms; (c) dependence on and competition for experienced
personnel; (d) successful implementation and execution of our long-term
strategies; (e) dependence on highly sophisticated and expensive systems and
technology, including systems maintained and operated by third-parties over
which we have no control; (f) dependence on external sources to finance
day-to-day operations; (g) use of interest-rate sensitive derivative securities
and other hedging instruments; (h) federal and state regulatory and legislative
changes, including any changes affecting net capital requirements; and (i)
adverse findings in existing litigation, increases in class actions,
governmental agency enforcement proceedings, and other litigation-related risks.
This is not an exhaustive list of factors that could have an adverse impact on
our financial performance; other factors which are not identified here or known
to us currently may prove to be important and may adversely affect our results
of operations. It is also not possible for our management to predict or assess
the impact each factor will have on our business or the extent to which any
factor, or a combination of factors, may cause results to differ materially from
those contained in any forward-looking statements. You should also not place
undue reliance on these forward-looking statements as they relate only to our
views as of the date the statements are made. We undertake no obligation to
publicly update or revise any forward-looking statements, even if new
information, future events, or other conditions occur.
We herein incorporate by reference Exhibit 99 of our Annual
Report on Form 10-K for the year ended December 31, 1998.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are defendants in various pending actions, suits and proceedings
before courts, arbitrators and governmental agencies. Certain of these actions
claim substantial damages and, if determined adversely, could have a material
adverse effect on our consolidated financial condition or results of operations.
A list of certain of such actions is included in Item 3 of our Annual Report on
Form 10-K for the year ended December 31, 1998, and they are described in more
detail in Item 8, Note I to the Consolidated Financial Statements included in
such Annual Report. The following description of recent developments in
connection with certain of these matters should be read in conjunction with such
description.
MIDWEST LIFE INSURANCE COMPANY LITIGATION
DIXON V. THE MIDWEST LIFE INSURANCE COMPANY V. INTERRA FINANCIAL
INCORPORATED, ET AL. - The Court dismissed the claims for breach of fiduciary
duty and conspiracy to breach fiduciary duty in June 1999. The motion to
dismiss the RICO claim is pending.
STATE OF ARIZONA SEC PROCEEDING ("YIELD-BURNING")
SEC V. RAUSCHER PIERCE REFSNES, INC., ET AL. - DRI is attempting to resolve
this action in a manner that also would involve the resolution of allegations
of "yield-burning" relating to a substantial number of other negotiated,
tax-exempt, advance refunding municipal bond transactions in which RPR and
DBI participated, generally as either financial advisor or underwriter,
between 1990 and 1994. These refunding transactions ranged in par amount from
approximately $200,000 to $180 million.
14
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the regular Annual Meeting of Stockholders of the Company held on
April 27, 1999, the stockholders elected ten directors and ratified the
appointment of KPMG LLP 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 10,916,901 413,151
J. E. Attwell 10,923,445 406,607
S. S. Boren 10,860,152 469,900
F. G. Fitz-Gerald 10,891,220 438,832
W. F. Mondale 10,801,280 528,772
C. A. Rundell, Jr. 10,906,646 423,406
R. L. Ryan 10,997,573 332,479
A. R. Schulze, Jr. 10,943,785 386,267
I. Weiser 10,839,723 490,329
K. J. Wessels 10,909,700 420,352
</TABLE>
<TABLE>
<CAPTION>
For Against Abstain
--- ------- --------
<S> <C> <C> <C>
Ratification of Appointment of Auditors 11,183,373 107,828 38,851
</TABLE>
15
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
ITEM NO. ITEM METHOD OF FILING
-------- ---- ----------------
<C> <S> <S>
4.6 Credit Agreement among Dain Rauscher Corporation, Filed herewith
U.S. Bank National Association, Norwest Bank of Minnesota
National Association, The Bank of New York, and Credit
Lyonnais New York Branch dated May 31, 1999.
11 Computation of Earnings Per Share. Filed herewith.
27 Financial Data Schedule. Filed herewith.
</TABLE>
(b) Reports on Form 8-K
One Report on Form 8-K was filed during the quarter ended June 30, 1999.
(1) Item reported:
Exhibit 99.1 Press release announcing registrant's settlement of
litigation.
16
<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.
DAIN RAUSCHER CORPORATION
Registrant
Date: August 12, 1999 By David J. Parrin
------------------------ --------------------------------
David J. Parrin
Senior Vice President
and Controller
(Principal Accounting Officer)
17
<PAGE>
DAIN RAUSCHER CORPORATION
INDEX OF EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1999
(a) Exhibits
<TABLE>
<CAPTION>
ITEM NO. ITEM METHOD OF FILING
-------- ---- ----------------
<C> <S> <S>
4.6 Credit Agreement among Dain Rauscher Corporation, Filed herewith
U.S. Bank National Association, Norwest Bank of Minnesota
National Association, The Bank of New York, and Credit
Lyonnais New York Branch dated May 31, 1999.
11 Computation of Earnings Per Share. Filed herewith.
27 Financial Data Schedule. Filed herewith.
</TABLE>
18
<PAGE>
_______________________________________________________________________________
_______________________________________________________________________________
CREDIT AGREEMENT
Dated as of May 31, 1999
Among
DAIN RAUSCHER CORPORATION,
U.S. BANK NATIONAL ASSOCIATION,
as a Bank and as Agent,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
THE BANK OF NEW YORK
and
CREDIT LYONNAIS NEW YORK BRANCH,
as Co-Agents
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.1 THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) REVOLVING LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) SWING LINE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(c) TERM LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.2 ADVANCE OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.3 BORROWING PROCEDURES. . . . . . . . . . . . . . . . . . . . . . . . 12
(a) REQUEST BY BORROWER. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) FUNDING OF AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.4 CONTINUATION OR CONVERSION OF LOANS . . . . . . . . . . . . . . . . 13
Section 2.5 THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) REVOLVING NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) SWING LINE NOTE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) TERM NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.6 FUNDING LOSSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.7 REFUNDING OF SWING LINE LOANS . . . . . . . . . . . . . . . . . . . 15
Section 2.8 LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.9 EXTENSION OF THE TERMINATION DATE . . . . . . . . . . . . . . . . . 21
Section 2.10 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE III INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.1 INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) EURODOLLAR ADVANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) FEDERAL FUNDS RATE ADVANCES. . . . . . . . . . . . . . . . . . . . . . . 23
(c) INTEREST AFTER MATURITY. . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.2 FACILITY FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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. . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.3 OPTIONAL REDUCTION OR TERMINATION OF COMMITMENTS. . . . . . . . . . 25
Section 4.4 PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.5 PRORATION OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V ADDITIONAL PROVISIONS RELATING TO LOANS AND LETTERS OF CREDIT . . . . . 26
Section 5.1 INCREASED COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.2 DEPOSITS UNAVAILABLE OR INTEREST RATE UNASCERTAINABLE OR
INADEQUATE; IMPRACTICABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.3 CHANGES IN LAW RENDERING EURODOLLAR ADVANCES UNLAWFUL . . . . . . . 27
Section 5.4 CAPITAL ADEQUACY. . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.5 DISCRETION OF THE BANKS AS TO MANNER OF FUNDING . . . . . . . . . . 29
Section 5.6 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.1 CONDITIONS OF INITIAL LOAN OR INITIAL LETTERS OF CREDIT . . . . . . 30
Section 6.2 CONDITIONS PRECEDENT TO ALL LOANS AND ALL LETTERS OF CREDIT . . . . 31
ARTICLE VII REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 31
Section 7.1 ORGANIZATION, STANDING, ETC.. . . . . . . . . . . . . . . . . . . . 31
Section 7.2 AUTHORIZATION AND VALIDITY. . . . . . . . . . . . . . . . . . . . . 31
Section 7.3 NO CONFLICT; NO DEFAULT . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.4 GOVERNMENT CONSENT. . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.5 FINANCIAL STATEMENTS AND CONDITION. . . . . . . . . . . . . . . . . 32
Section 7.6 LITIGATION AND CONTINGENT LIABILITIES . . . . . . . . . . . . . . . 32
Section 7.7 COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.8 ENVIRONMENTAL, HEALTH AND SAFETY LAWS . . . . . . . . . . . . . . . 32
Section 7.9 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.10 MARGIN REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.11 OWNERSHIP OF PROPERTY; LIENS . . . . . . . . . . . . . . . . . . . 33
Section 7.12 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.13 TRADEMARKS, PATENTS. . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.14 INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.15 PUBLIC UTILITY HOLDING COMPANY ACT . . . . . . . . . . . . . . . . 34
Section 7.16 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.17 REGISTERED BROKER-DEALER; MEMBERSHIP . . . . . . . . . . . . . . . 34
Section 7.18 ASSESSMENTS BY THE SECURITIES INVESTOR PROTECTION CORPORATION . . 34
Section 7.19 YEAR 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VIII AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.1 FINANCIAL STATEMENTS AND REPORTS. . . . . . . . . . . . . . . . . . 35
Section 8.2 CORPORATE EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.3 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.4 PAYMENT OF TAXES AND CLAIMS . . . . . . . . . . . . . . . . . . . . 37
Section 8.5 INSPECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.6 MAINTENANCE OF PROPERTIES . . . . . . . . . . . . . . . . . . . . . 37
Section 8.7 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.8 COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.9 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.10 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
Section 8.11 GENERAL NET CAPITAL REQUIREMENT. . . . . . . . . . . . . . . . . . 38
ARTICLE IX NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.1 MERGER AND CONSOLIDATION. . . . . . . . . . . . . . . . . . . . . . 38
Section 9.2 SALE OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.3 PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.4 CHANGE IN NATURE OF BUSINESS. . . . . . . . . . . . . . . . . . . . 39
Section 9.5 OWNERSHIP OF STOCK IN MATERIAL SUBSIDIARIES . . . . . . . . . . . . 39
Section 9.6 OTHER AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.7 RESTRICTED PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.8 INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.9 INDEBTEDNESS AND CONTINGENT LIABILITIES . . . . . . . . . . . . . . 40
Section 9.10 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.11 TRANSACTIONS WITH RELATED PARTIES. . . . . . . . . . . . . . . . . 42
Section 9.12 FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.13 MINIMUM CONSOLIDATED NET WORTH . . . . . . . . . . . . . . . . . . 42
Section 9.14 MINIMUM NET CAPITAL REQUIRED FOR DAIN RAUSCHER INCORPORATED. . . . 42
Section 9.15 WAH SUBORDINATED DEBENTURES. . . . . . . . . . . . . . . . . . . . 42
ARTICLE X EVENTS OF DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . . . . 43
Section 10.1 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 10.2 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.3 LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.4 OFFSET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE XI THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.1 APPOINTMENT AND GRANT OF AUTHORITY . . . . . . . . . . . . . . . . 46
Section 11.2 NON RELIANCE ON AGENT. . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.3 RESPONSIBILITY OF THE AGENT AND OTHER MATTERS. . . . . . . . . . . 47
Section 11.4 ACTION ON INSTRUCTIONS . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.5 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.6 U.S. BANK AND AFFILIATES . . . . . . . . . . . . . . . . . . . . . 48
Section 11.7 NOTICE TO HOLDER OF NOTES. . . . . . . . . . . . . . . . . . . . . 48
Section 11.8 SUCCESSOR AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 12.1 NO WAIVER AND AMENDMENT. . . . . . . . . . . . . . . . . . . . . . 49
Section 12.2 AMENDMENTS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 12.3 ASSIGNMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(a) ASSIGNMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(b) EFFECTIVENESS OF ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . 50
(c) TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(d) INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(e) FEDERAL RESERVE BANK . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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<TABLE>
<S> <C>
Section 12.4 COSTS, EXPENSES AND TAXES; INDEMNIFICATION . . . . . . . . . . . . 51
Section 12.5 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.6 SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.7 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.8 SUBSIDIARY REFERENCES. . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.9 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.10 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.11 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.12 CONFIDENTIALITY OF INFORMATION. . . . . . . . . . . . . . . . . . 53
Section 12.13 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.14 CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . 53
Section 12.15 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . 54
Section 12.16 SURVIVAL OF CERTAIN PROVISIONS OF THIS AGREEMENT. . . . . . . . . 54
</TABLE>
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of May 31, 1999, is by and among DAIN
RAUSCHER CORPORATION, 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 U.S. 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 $67,000,000, 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": U.S. 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 Standard & Poors and Moody's, has a rating of less than BBB-
by Standard & Poors and has a rating of less than Baa3 by
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Moody's, (C) if rated only by Standard & Poors, has a rating of less than
BBB- by Standard & Poors, or (D) if rated only by Moody's, has a rating of
less than Baa3 by Moody's, and (ii) forty-five one-hundredths of one percent
(.45%) at all times when the Borrower's senior debt (A) if rated by Standard
& Poors and Moody's, has a rating of BBB- or better by Standard & Poors or
has a rating of Baa3 or better by Moody's, (B) if rated only by Standard &
Poors, has a rating of BBB- or better by Standard & Poors, or (C) if rated
only by Moody's, has a rating of Baa3 or better by Moody's.
"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 Standard & Poors or by Moody's,
(B) if rated by Standard & Poors and Moody's, has a rating of less than BBB-
by Standard & Poors and has a rating of less than Baa3 by Moody's, (C) if
rated only by Standard & Poors, has a rating of less than BBB- by Standard &
Poors, or (D) if rated only by Moody's, has a rating of less than Baa3 by
Moody's, and (ii) ten one-hundredths of one percent (.10%) at all times when
the Borrower's senior debt (A) if rated by Standard & Poors and Moody's, has
a rating of BBB- or better by Standard & Poors or has a rating of Baa3 or
better by Moody's, (B) if rated only by Standard & Poors, has a rating of
BBB- or better by Standard & Poors, or (C) if rated only by Moody's, has a
rating of Baa3 or better by Moody's.
"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 Standard & Poors or by Moody's,
(B) if rated by Standard & Poors and Moody's, has a rating of less than BBB-
by Standard & Poors and has a rating of less than Baa3 by Moody's, (C) if
rated only by Standard & Poors, has a rating of less than BBB- by Standard &
Poors, or (D) if rated only by Moody's, has a rating of less than Baa3 by
Moody's, and (ii) seventy one-hundredths of one percent (.70%) at all times
when the Borrower's senior debt (A) if rated by Standard & Poors and Moody's,
has a rating of BBB- or better by Standard & Poors or has a rating of Baa3 or
better by Moody's, (B) if rated only by Standard & Poors, has a rating of
BBB- or better by Standard & Poors, or (C) if rated only by Moody's, has a
rating of Baa3 or better by Moody's.
"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 Standard & Poors or by Moody's,
(B) if rated by Standard & Poors and Moody's, has a rating of less than BBB-
by Standard & Poors and has a rating of less than Baa3 by Moody's, (C) if
rated only by Standard & Poors, has a rating of less than BBB- by Standard &
Poors, or (D) if rated only by Moody's, has a rating of less than Baa3 by
Moody's, and (ii) fifty-two one-hundredths of one percent (.52%) at all times
when the Borrower's senior debt (A) if rated by Standard & Poors and Moody's,
has a rating of BBB- or better by Standard & Poors or has a rating of Baa3 or
better by Moody's, (B) if rated only by Standard & Poors, has a rating of
BBB- or better by Standard & Poors, or (C) if rated only by Moody's, has a
rating of Baa3 or better by Moody's.
"ASSIGNEE": As defined in SECTION 12.3(a).
"ASSIGNMENT": As defined in SECTION 12.3(a).
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"ASSIGNMENT AND ASSUMPTION AGREEMENT": As defined in SECTION 12.3(a).
"BONY": The Bank of New York, its successors and assigns.
"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.
"CREDIT LYONNAIS": Credit Lyonnais New York Branch, its successors
and assigns.
"DAIN RAUSCHER INCORPORATED": Dain Rauscher Incorporated, a Minnesota
corporation.
"DAIN RAUSCHER INCORPORATED CREDIT AGREEMENT": The Credit Agreement
dated as of March 31, 1998, by and among the Agent, U.S. Bank, Norwest, BONY,
The Chase Manhattan Bank and Dain Rauscher Incorporated pursuant to which
U.S. Bank, Norwest, BONY and The Chase Manhattan Bank loaned $80,000,000 to
Dain Rauscher Incorporated, as the same may be amended, modified,
supplemented, restated or replaced from time to time.
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<PAGE>
"DAIN RAUSCHER LENDING SERVICES": Dain Rauscher Lending Services,
Inc., a Minnesota 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
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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 interest
rate per annum determined by U.S. Bank to be equal to the average rate for
overnight federal funds transactions with members of the Federal Reserve
System, arranged by federal funds brokers, applicable to federal funds
transactions on that date.
"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.
"GAAP": Generally accepted accounting principles as applied in the
preparation of the audited financial statements of Interra Financial
Incorporated (now Dain Rauscher Corporation), Dain Bosworth Incorporated,
Rauscher Pierce Refsnes, Inc. and Interra Clearing Services Inc. (Dain
Bosworth Incorporated, Rauscher Pierce Refsnes, Inc. and Interra Clearing
Services Inc. are now merged into Dain Rauscher Incorporated) 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
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others; (e) all repurchase transactions and all swap transactions which are
included as liabilities or obligations under GAAP; 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.
"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
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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 it shall be a Subsidiary of the Borrower,
Dain Rauscher Incorporated; 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" as defined in
Rule 15c3-1.
"NORWEST": Norwest Bank Minnesota, National Association, its
successors and assigns.
"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).
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"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.
"REFERENCE RATE": The rate of interest from time to time publicly
announced by U.S. Bank as its "reference rate." U.S. 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 T, U AND X": Regulations 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 66-2/3%, or if the Commitments have been
terminated, those Banks whose share of the outstanding principal of the Loans
constitutes at least 66-2/3% 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.
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"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 240.15c3-1), 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 240.15c3-3), 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": U.S. 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) March 17, 2000, or such later
date to which the Termination Date is extended pursuant to the provisions of
SECTION 2.9, (b) the date on
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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).
"U.S. BANK": U.S. Bank National Association, its successors and
assigns, in its individual capacity and not as Agent hereunder.
"WAH": Collectively, Wessels, Arnold & Henderson Group, L.L.C., a
Delaware limited liability company, and Wessels, Arnold & Henderson, L.L.C.,
a Delaware limited liability company.
"WAH ACQUISITION": The acquisition and merger of WAH into Dain
Rauscher Incorporated, with Dain Rauscher Incorporated as the surviving
corporation, pursuant to the terms and conditions of the WAH Acquisition
Agreement.
"WAH ACQUISITION AGREEMENT": The Agreement and Plan of Merger dated
as of February 8, 1998, among Dain Rauscher Corporation, Dain Rauscher
Incorporated and WAH.
"WAH SUBORDINATED DEBENTURES": The subordinated debentures issued by
the Borrower to the members of WAH in the aggregate principal amount of
$30,000,000, with the entire principal balance of such subordinated
debentures being due and payable on March 31, 2003.
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
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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) REVOLVING LOANS. 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
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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) for the Term Loans, at any time during the forty-five day
period commencing no earlier than 60 days prior to the Termination
Date an ending no later than 15 days prior to the Termination
Date.
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.
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(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
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(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.
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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
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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
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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
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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
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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
willful 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.
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(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
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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
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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 two (2) 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
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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
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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 of this
Agreement 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
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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",
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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;
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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,
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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" dated July
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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.
Section 5.6 TAXES. All payments made by the Borrower to the Agent or
any Bank (herein any "Payee") under or in connection with this Agreement or
the Notes shall be made without any setoff or other counterclaim, and shall
be free and clear of and without deduction for or on account of any present
or future taxes now or hereafter imposed by any governmental or other
authority, except to the extent that any such deduction or withholding is
compelled by law. As used herein, the term "Taxes" shall include all income,
excise and other taxes of whatever nature (other than taxes generally
assessed on the overall net income of a Payee by the government or other
authority of the country, state or political subdivision in which such Payee
is incorporated or in which the office through which such Payee is acting is
located) as well as all levies, imposts, duties, charges, or fees of whatever
nature. "Taxes" shall not include, however, any foreign withholding taxes or
similar deductions imposed solely as a result of a Bank's election to fund an
Advance through a foreign office of such Bank. If the Borrower is compelled
by law to make any deductions or withholdings on account of any Taxes
(including any foreign withholding) it will:
(a) pay to the relevant authorities the full amount required to be so
withheld or deducted;
(b) pay such additional amounts (including, without limitation, any
penalties, interest or expenses) as may be necessary in order that the
net amount received by the Payee after such deductions or withholdings
(including any required deduction or withholding on such additional
amounts) shall equal the amount the Payee would have received had no such
deductions or withholdings been made; and
(c) promptly forward to the Agent (for delivery to the appropriate
Payee) an official receipt or other documentation satisfactory to the
Agent evidencing such payment to such authorities.
The amount that the Borrower shall be required to pay to any Payee pursuant
to the foregoing clause (b) shall be reduced, to the extent permitted by
applicable law, by the amount of any offsetting tax benefit which such Payee
receives as the result of the Borrower's payment to the relevant authorities
as reasonably determined by such Payee; PROVIDED, HOWEVER, that if such Payee
shall subsequently determine that it has lost the
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benefit of all or a portion of such tax benefit, the Borrower shall promptly
remit to such Payee the amount certified by such Payee to be the amount
necessary to restore such Payee to the position it would have been in if no
payment had been made pursuant to this sentence. If any Taxes otherwise
payable by the Borrower pursuant to the foregoing are directly asserted
against a Payee, such Payee may pay such taxes and the Borrower promptly
shall reimburse such Payee to the full extent otherwise required under this
SECTION 5.6. The obligations of the Borrower under this SECTION 5.6 shall
survive any termination of this Agreement.
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
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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
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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 as of December 31, 1998 and of Dain
Rauscher Incorporated as of December 31, 1998, 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 foregoing entities 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 foregoing entities 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
December 31, 1998, 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
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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 ERISA. 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 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
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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.
Section 7.19 YEAR 2000. Borrower has reviewed and assessed the
business operations and computer systems and applications of the Borrower and
its Subsidiaries to address the "year 2000 problem" (that is, that computer
applications and equipment used by Borrower and its Subsidiaries, directly or
indirectly through third parties, may be unable to properly perform
date-sensitive functions before, during and after January 1, 2000). Borrower
reasonably believes that the year 2000 problem will not result in an Adverse
Event. Borrower agrees that this representation will be true and correct on
and shall be deemed made by Borrower on each date Borrower requests any
advance under this Agreement or delivers any information to the Banks.
Borrower will promptly deliver to the Banks such information relating to this
representation as the Banks request from time to time.
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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 and Dain Rauscher Incorporated and the unaudited financial
statements of Dain Rauscher 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 auditors
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, controller 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, controller 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
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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
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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
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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 ERISA. 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:
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(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.
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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 Rauscher Incorporated,
including, without limitation, a subordinated revolving loan from the
Borrower to Dain Rauscher Incorporated in the principal amount of
$20,000,000 which is subject to a "subordination agreement" as defined in
Rule 15c3-1;
(b) Investments by the Borrower or Dain Rauscher Incorporated in
Subsidiaries other than Dain Rauscher Incorporated in an aggregate amount
not to exceed at any time eight percent (8%) of the Borrower's
Consolidated Net Worth;
(c) Investments made after March 20, 1998 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 March 20, 1998 shall not exceed an aggregate amount of
$100,000,000 and (ii) any Person whose assets or stock are so acquired
shall be engaged in a business which is permitted for the Borrower or its
Subsidiaries under SECTION 9.4 of this Agreement. The investments made
by the Borrower to acquire WAH pursuant to the WAH Acquisition Agreement
shall be excluded for purposes of determining the Borrower's compliance
with this SECTION 9.8(c).
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
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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) Guarantees by the Borrower of Indebtedness for borrowed money of
Dain Rauscher Lending Services in an aggregate amount not to exceed at
any time $50,000,000; PROVIDED, HOWEVER, that such guarantees shall be
permitted only for so long as the Borrower and Dain Rauscher Lending
Services are in compliance with each of the following requirements:
(A) the credit facilities under which Dain Rauscher 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 Dain Rauscher Lending Services may borrow under such credit
facilities shall not exceed at any time an aggregate amount of
$50,000,000, (C) all of such guaranteed Indebtedness shall be secured by
Dain Rauscher Lending Services' pledge of the underlying loans made by
Dain Rauscher Lending Services to its customers, including the stock
pledged by customers of Dain Rauscher Lending Services to Dain Rauscher
Lending Services, and (D) all loans made by Dain Rauscher 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%;;
(d) The WAH Subordinated Debentures;
(e) Indebtedness (other than Indebtedness permitted under SECTION
9.9(a)) in an aggregate amount not to exceed at any time $150,000,000
(the Borrower's guarantees of Indebtedness for borrowed money of Dain
Rauscher Lending Services permitted under SECTION 9.9(c) above and the
WAH Subordinated Debentures shall be included as Indebtedness for
purposes of determining the Borrower's compliance with the $150,000,000
requirement of this SECTION 9.9(e).
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
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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)
$280,000,000 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 March 31, 2000.
Section 9.14 MINIMUM NET CAPITAL REQUIRED FOR DAIN RAUSCHER
INCORPORATED. The Borrower will not permit the Net Capital of Dain Rauscher
Incorporated at any time to be less than the greater of (i) $70,000,000, or
(ii) seven percent (7%) of the Aggregate Debit Items of Dain Rauscher
Incorporated.
Section 9.15 WAH SUBORDINATED DEBENTURES. Except as currently
provided in the WAH Subordinated Debentures, the Borrower will not prepay the
WAH Subordinated Debentures and will not amend, alter or otherwise change in
any way any of the provisions of the WAH Subordinated Debentures.
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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 other than SECTION 9.14, or
(ii) shall fail to comply with SECTION 9.14 hereof and such failure shall
continue unremedied until the earlier to occur of (A) five (5) Business
Days after the date on which either the principal financial officer or
the principal accounting officer of the Borrower becomes aware of such
failure, or (B) twenty-one (21) calendar days after the date on which the
Borrower failed to be in compliance with SECTION 9.14;
(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;
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(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
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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; or
(o) A Default, Event of Acceleration or Event of Default (each as
defined therein) shall occur under the Dain Rauscher Incorporated Credit
Agreement.
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
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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.
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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
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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 U.S. BANK AND AFFILIATES. With respect to U.S. Bank's
Commitment and any Loans by U.S. Bank under this Agreement and any Note and
any interest of U.S. Bank in any Note, U.S. 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. U.S. 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 U.S. 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 Borrower shall have the right to appoint a
successor Agent from among the Banks, subject to such selected Bank being
willing to accept such appointment; provided, however, if a Default or Event
of Default shall exist such successor Agent shall be selected solely by the
Required Banks and such successor Agent need not be approved by the Borrower.
If no successor Agent shall have been appointed in accordance with the
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preceding sentence 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 and such successor Agent need not be approved by the Borrower.
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 (including the rate of
interest) on, the Notes or any fees or other amounts payable hereunder;
(c) change the requirement that payments of principal of, and interest
on, the Revolving Notes or Term Notes, as applicable, be made pro rata to
the Banks on the basis of the outstanding principal amount of the
Revolving Loans or Term Loans, as applicable;
(d) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder;
(e) change the definition of Required Banks or amend this SECTION
12.2;
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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
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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; INDEMNIFICATION. 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 defend, protect,
indemnify,
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and hold harmless the Agent and each and all of the Banks, each of their
respective affiliates and each of the respective officers, directors,
employees and agents of each of the foregoing (each an "Indemnified Person"
and collectively, the "Indemnified Persons") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever, including, without limitation, the fees and disbursements of
counsel to such Indemnified Persons, in any manner relating to or arising out
of or in connection with the making of loans under this Agreement or under
the Dain Rauscher Incorporated Credit Agreement, this Agreement, the Dain
Rauscher Incorporated Credit Agreement or the WAH Acquisition; provided,
however, that the Borrower shall have no obligation to an Indemnified Person
with respect to any of the foregoing to the extent resulting from the gross
negligence or willful misconduct of such Indemnified Person or arising solely
from claims between one such Indemnified Person and another such Indemnified
Person.
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.
-52-
<PAGE>
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 12.13 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 12.14 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
-53-
<PAGE>
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 12.15 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.
Section 12.16 SURVIVAL OF CERTAIN PROVISIONS OF THIS AGREEMENT. In
consideration of the Agent and the Banks entering into this Agreement and the
Agent, U.S. Bank, Norwest, BONY and The Chase Manhattan Bank entering into
the Dain Rauscher Incorporated Credit Agreement, and making the loans and
other credit accommodations available thereunder, the Borrower hereby
irrevocably agrees as follows: (i) the Borrower's covenant under SECTION 9.8
of this Agreement shall survive until the last to occur of (a) the payment in
full of all obligations of the Borrower to the Agent and/or the Banks under
this Agreement, (b) the termination of the Commitment of the Banks to make
loans and to issue letters of credit for the account of the Borrower under
this Agreement, and (c) the payment in full of all obligations of Dain
Rauscher Incorporated to the Agent, U.S. Bank, Norwest, BONY and The Chase
Manhattan Bank under the Dain Rauscher Incorporated Credit Agreement, and
(ii) the Borrower's covenants and obligations under SECTION 12.4 of this
Agreement shall survive forever notwithstanding the repayment in full of all
obligations of the Borrower to the Agent and/or or the Banks under this
Agreement, the termination of the Commitment of the Banks to make loans and
to issue letters of credit for the account of the Borrower under this
Agreement and the payment in full of all obligations of Dain Rauscher
Incorporated to the Agent, U.S. Bank, Norwest, BONY and/or The Chase
Manhattan Bank under the Dain Rauscher Incorporated Credit Agreement. The
Borrower specifically acknowledges and agrees that the Borrower's violation
of its covenants under SECTION 9.8 of this Agreement will harm the Agent and
the Banks to such an extent that monetary damages alone would be an
inadequate remedy. Therefore, in the event of any violation by the Borrower
of its covenants under SECTION 9.8 of this Agreement, the Agent and the Banks
(in addition to all other remedies which the Agent and/or the Banks may have
by law or agreement) shall be entitled to a temporary restraining order,
injunction and other equitable relief (without posting any bond or other
security) restraining the Borrower from committing or continuing such
violation. If any provision or application of this SECTION 12.16 is held
unlawful or unenforceable in any respect, this SECTION 12.16 shall be revised
or applied in a manner that renders it lawful and enforceable to the fullest
extent possible.
-54-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above.
DAIN RAUSCHER CORPORATION
By
----------------------------------------------
Title
-------------------------------------
Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402-4422
Attention: Daniel Marcotte
Fax: (612) 371-7951
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE>
Commitment: U.S. BANK NATIONAL ASSOCIATION,
$17,420,000 as Agent and a Bank
Percentage: 26%
By
----------------------------------------------
Title
-------------------------------------
601 2nd Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Vice President, Financial Services
Division
Fax: (612) 973-0832
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE>
Commitment: NORWEST BANK MINNESOTA,
$17,420,000 NATIONAL ASSOCIATION
Percentage: 26%
By
----------------------------------------------
Title
-------------------------------------
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0105
Attention: Vice President, Financial
Institutions Division
Fax: (612) 667-7251
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE>
Commitment: THE BANK OF NEW YORK
$14,740,000
Percentage: 22% By
----------------------------------------------
Title
-------------------------------------
One Wall Street
First Floor
New York, New York 10286
Attention: Joe Ciacciarelli
Fax: (212) 809-9375
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE>
Commitment: CREDIT LYONNAIS, NEW YORK BRANCH
$17,420,000
Percentage: 26% By
----------------------------------------------
Title
-------------------------------------
1301 Avenue of the Americas
Credit Lyonnais Building
New York, New York 10019
Attention: Ira Stein
Fax: (212) 261-3401
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
Exhibit Contents
<S> <C>
A-1 Form of Revolving Note
A-2 Form of Swing Line Note
A-3 Form of Term Note
B Litigation (Section 7.6)
C Contingent Liabilities (Section 7.6)
D Existing Liens (Sections 7.11 and 9.10)
E Subsidiaries Directly Owned by Borrower (Section 7.16)
F Form of Compliance Certificate
G Form of Request for Extension of Termination Date
H Form of Response for Request for Extension of Termination Date
</TABLE>
Date
<PAGE>
EXHIBIT A-1 TO
CREDIT AGREEMENT
REVOLVING NOTE
$[Commitment] Minneapolis, Minnesota
May 31, 1999
FOR VALUE RECEIVED, the undersigned, DAIN RAUSCHER CORPORATION, a
Delaware corporation (the "Borrower"), promises to pay to the order of [BANK]
(the "Bank"), on the Termination Date, or other due date or dates determined
under the Credit Agreement hereinafter referred to, the principal sum of
_______________________________ __________________________________ AND 00/100
DOLLARS ($[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 U.S. 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 U.S. 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.
A-1-1
<PAGE>
This Note is made under and governed by the internal laws of the State
of Minnesota.
DAIN RAUSCHER CORPORATION
By
-----------------------------------------
Title
--------------------------------
A-1-2
<PAGE>
EXHIBIT A-2 TO
CREDIT AGREEMENT
SWING LINE NOTE
$5,000,000 Minneapolis, Minnesota
May 31, 1999
FOR VALUE RECEIVED, the undersigned, DAIN RAUSCHER CORPORATION, a
Delaware corporation (the "Borrower"), promises to pay to the order of U.S.
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 U.S. 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 U.S. 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.
A-2-1
<PAGE>
This Note is made under and governed by the internal laws of the State
of Minnesota.
DAIN RAUSCHER CORPORATION
By
-----------------------------------------
Title
--------------------------------
A-2-2
<PAGE>
EXHIBIT A-3 TO
CREDIT AGREEMENT
TERM NOTE
$[Amount of Term Loan] Minneapolis, Minnesota
______________, ____
FOR VALUE RECEIVED, the undersigned, DAIN RAUSCHER CORPORATION, a
Delaware corporation (the "Borrower"), promises to pay to the order of [BANK]
(the "Bank"), on _______________, ____, or other due date or dates determined
under the Credit Agreement hereinafter referred to, the principal sum of
_______________________________ __________________________________ AND 00/100
DOLLARS ($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 U.S. 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 dated as of
May 31, 1999 (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 U.S. 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.
A-3-1
<PAGE>
This Note is made under and governed by the internal laws of the State
of Minnesota.
DAIN RAUSCHER CORPORATION
By
-----------------------------------------
Title
--------------------------------
A-3-2
<PAGE>
EXHIBIT B TO
CREDIT AGREEMENT
LITIGATION (SECTION 7.6)
[To be prepared by Borrower]
B-1
<PAGE>
EXHIBIT C TO
CREDIT AGREEMENT
CONTINGENT LIABILITIES (SECTION 7.6)
None
C-1
<PAGE>
EXHIBIT D TO
CREDIT AGREEMENT
EXISTING LIENS (SECTIONS 7.11 AND 9.10)
None
D-1
<PAGE>
EXHIBIT E TO
CREDIT AGREEMENT
SUBSIDIARIES DIRECTLY OWNED BY BORROWER (SECTION 7.16)
[To be prepared by Borrower]
E-1
<PAGE>
EXHIBIT F TO
CREDIT AGREEMENT
FORM OF COMPLIANCE CERTIFICATE
In accordance with SECTION 8.1 of the Credit Agreement dated as of May
31, 1999 (the "Credit Agreement"), among Dain Rauscher Corporation (the
"Borrower"), the Banks (as defined in the Credit Agreement) and U.S. Bank
National Association, as Agent, attached are the financial statements of
________________________ ________________________________________________ as
of and for the month and year-to-date period ended _______________, ____ (the
"Current Financials").
I certify that the Current Financials have been 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) of the Credit
Agreement.
Defaults and Events of Default (check one):
/ / I have no knowledge of the occurrence of any Default or Event of
Default under the Credit Agreement which has not previously been
reported to the Bank and remedied.
/ / Attached is a detailed description of all Defaults and Events of
Default of which I have knowledge and which have not previously been
reported to the Banks and remedied.
For the date and periods covered by the Current Financials, the Borrower
is in compliance with the covenants set forth in SECTIONS 9.8(b), 9.8(c),
9.9(c), 9.9(d), 9.13 AND 9.14 of the Credit Agreement, except as indicated
below. The calculations made to determine compliance are as follows:
<TABLE>
<CAPTION>
Covenant Actual Requirement
- -------- ------ -----------
<S> <C> <C>
9.8(b)
9.8(c)
9.9(c)
9.9(d)
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C> <C>
9.13
9.14
</TABLE>
DAIN RAUSCHER CORPORATION
By
-----------------------------------------
Title
--------------------------------
Dated
-----------------,-----
F-2
<PAGE>
EXHIBIT G TO
CREDIT AGREEMENT
FORM OF REQUEST FOR EXTENSION OF TERMINATION DATE
_______________, ____
U.S. Bank National Association, as Agent
601 2nd Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Vice President, Financial Services Division
Re: DAIN RAUSCHER CORPORATION
Dear Madam or Sir:
We refer to SECTION 2.9 of the Credit Agreement dated as of May 31, 1999
among Dain Rauscher Corporation, the Banks (as defined in the Credit
Agreement) and U.S. Bank National Association, as Agent, and hereby request
that the Banks extend the Termination Date (as defined in the Credit
Agreement) for an additional 364 days.
Very truly yours,
DAIN RAUSCHER CORPORATION
By
-----------------------------------------
Title
--------------------------------
G-1
<PAGE>
EXHIBIT H TO
CREDIT AGREEMENT
FORM OF RESPONSE TO REQUEST FOR EXTENSION OF TERMINATION DATE
_______________, ____
U.S. Bank National Association, as Agent
601 2nd Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Vice President, Financial Services Division
Re: DAIN RAUSCHER CORPORATION
Dear Madam or Sir:
We refer to the Credit Agreement dated as of May 31, 1999 (the "Credit
Agreement") among Dain Rauscher Corporation (the "Borrower"), the Banks (as
defined in the Credit Agreement") and U.S. Bank National Association, as
Agent, and the request of the Borrower delivered to the Agent that the Banks
extend the Commitment Termination Date (as defined in the Credit Agreement)
for an additional 364 days. [We hereby consent to such request] or
[We hereby deny such request.]
Very truly yours,
[NAME OF BANK]
By
-----------------------------------------
Title
--------------------------------
H-1
<PAGE>
EXHIBIT 11
DAIN RAUSCHER CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED, IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- --------------------------
1999 1998 1999 1998
--------------------------- --------------------------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Net income.......................................... $ 16,912 $ 11,832 $ 39,502 $ 9,808
---------- ------------ ---------- ----------
---------- ------------ ---------- ----------
Weighted average common shares outstanding.......... 12,381 12,386 12,429 12,351
---------- ------------ ---------- ----------
---------- ------------ ---------- ----------
Basic earnings per share............................... $ 1.37 $ 0.96 $ 3.18 $ 0.79
---------- ------------ ---------- ----------
---------- ------------ ---------- ----------
EARNINGS PER SHARE ASSUMING DILUTION:
Net income.......................................... $ 16,912 $ 11,832 $ 39,502 $ 9,808
---------- ------------ ---------- ----------
---------- ------------ ---------- ----------
Weighted average number of common and dilutive
potential common shares outstanding:
Weighted average common shares outstanding.......... 12,381 12,386 12,429 12,351
Dilutive effect of stock options (net of tax
benefits)........................................ 451 518 375 557
Shares credited to deferred compensation
plan participants................................ 594 295 547 274
---------- ------------ ---------- ----------
Weighted average number of common and dilutive
potential common shares outstanding.............. 13,426 13,199 13,351 13,182
---------- ------------ ---------- ----------
---------- ------------ ---------- ----------
Diluted earnings per share............................. $ 1.26 $ 0.90 $ 2.96 $ 0.74
---------- ------------ ---------- ----------
---------- ------------ ---------- ----------
</TABLE>
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 42,490
<SECURITIES> 167,305<F1>
<RECEIVABLES> 1,898,021<F2>
<ALLOWANCES> 0
<INVENTORY> 461,073
<CURRENT-ASSETS> 2,568,889
<PP&E> 48,652<F3>
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,810,418
<CURRENT-LIABILITIES> 2,338,375
<BONDS> 112,180<F4>
0
0
<COMMON> 1,598
<OTHER-SE> 358,265
<TOTAL-LIABILITY-AND-EQUITY> 2,810,415
<SALES> 0
<TOTAL-REVENUES> 487,641
<CGS> 0
<TOTAL-COSTS> 389,333
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,104
<INCOME-PRETAX> 63,204
<INCOME-TAX> 23,702
<INCOME-CONTINUING> 39,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,502
<EPS-BASIC> 3.18<F5>
<EPS-DILUTED> 2.96<F5>
<FN>
<F1>SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
<F2>NET OF ALLOWANCES
<F3>NET OF DEPRECIATION
<F4>SUBORDINATED AND OTHER LONG TERM DEBT
<F5>BASIC AND DILUTED AS PRESCRIBED BY SFAS 128
</FN>
</TABLE>
