<PAGE> 1
================================================================================
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 SEPTEMBER 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 of (IRS Employer Identification Number)
incorporation of organization)
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 October 31, 1999, the Company had 12,484,418 shares of
common stock outstanding.
================================================================================
<PAGE> 2
DAIN RAUSCHER CORPORATION
REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet......................................................... 3
Consolidated Statement of Operations............................................... 4
Consolidated Statement of Cash Flows............................................... 5
Notes to Consolidated Financial Statements......................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................ 8
II. OTHER INFORMATION:
Item 1. Legal Proceedings.................................................................. 16
Item 6. Exhibits and Reports on Form 8-K................................................... 17
Signatures......................................................................... 18
Index of Exhibits.................................................................. 19
Exhibits........................................................................... 20
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DAIN RAUSCHER CORPORATION
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -------------
(UNAUDITED)
<S> <C> <C>
Assets:
Cash and cash equivalents................................................ $ 37,822 $ 47,273
Receivable from customers................................................ 1,324,932 1,172,398
Receivable from brokers and dealers...................................... 295,085 288,207
Securities purchased under agreements to resell.......................... 115,621 237,662
Trading securities owned, at market...................................... 343,651 379,901
Equipment and leasehold improvements, at cost, net of depreciation....... 48,690 48,271
Other receivables........................................................ 119,228 83,957
Deferred income taxes.................................................... 46,840 48,219
Goodwill, net of amortization............................................ 115,817 121,580
Other assets............................................................. 28,626 39,019
------------ ------------
$ 2,476,312 $ 2,466,487
============ ============
Liabilities and Shareholders' Equity:
Liabilities:
Short-term borrowings.................................................... $ 80,909 $ 127,415
Customer drafts payable.................................................. 53,154 109,396
Payable to customers..................................................... 529,102 585,848
Payable to brokers and dealers........................................... 857,054 690,459
Securities sold under repurchase agreements.............................. 58,627 38,354
Trading securities sold, but not yet purchased, at market................ 125,592 240,825
Accrued compensation..................................................... 172,895 139,703
Other accrued expenses................................................... 117,609 92,209
Subordinated and other debt.............................................. 107,704 112,505
------------ ------------
2,102,646 2,136,714
------------ ------------
Shareholders' equity:
Common stock............................................................. 1,608 1,580
Additional paid-in capital............................................... 118,251 112,142
Retained earnings........................................................ 276,961 230,421
Treasury stock, at cost.................................................. (23,154) (14,370)
------------ ------------
373,666 329,773
------------ ------------
$ 2,476,312 $ 2,466,487
============ ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
DAIN RAUSCHER CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------- --------------------------------
1999 1998 1999 1998
--------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Revenue:
Commissions................................... $ 75,499 $ 75,414 $ 242,868 $ 224,135
Investment banking and underwriting........... 56,837 28,385 149,720 89,600
Principal transactions........................ 42,329 36,139 124,879 105,767
Interest...................................... 33,553 33,546 99,128 99,110
Asset management.............................. 20,147 16,349 55,440 45,211
Correspondent clearing........................ 4,966 4,298 16,695 13,192
Gain on sale of investment.................... - - 15,378 -
Other......................................... 9,799 6,631 26,663 20,243
-------------- ------------- -------------- -------------
Total revenue................................. 243,130 200,762 730,771 597,258
Interest expense................................. (18,253) (19,935) (53,357) (55,968)
-------------- ------------- -------------- -------------
Net revenue...................................... 224,877 180,827 677,414 541,290
-------------- ------------- -------------- -------------
Operating expenses:
Compensation and benefits..................... 144,005 120,180 424,887 351,309
Occupancy and equipment rental................ 14,605 12,669 42,944 35,962
Communications................................ 12,558 12,248 37,404 36,580
Travel and promotional........................ 8,830 9,956 27,259 25,402
Floor brokerage and clearing fees............. 3,153 3,658 10,003 9,361
Other......................................... 17,219 16,637 47,205 41,872
Acquisition-related expense................... - - - 20,000
-------------- ------------- -------------- -------------
Total operating expenses......................... 200,370 175,348 589,702 520,486
-------------- ------------- -------------- -------------
Income before income taxes....................... 24,507 5,479 87,712 20,804
Income taxes.................................. (9,190) (1,972) (32,892) (7,489)
-------------- ------------- -------------- -------------
Net income....................................... $ 15,317 $ 3,507 $ 54,820 $ 13,315
============== ============= ============== =============
Earnings per share:
Basic......................................... $ 1.23 $ 0.28 $ 4.41 $ 1.08
============== ============= ============== =============
Diluted....................................... $ 1.13 $ 0.27 $ 4.09 $ 1.01
============== ============= ============== =============
Dividends per share.............................. $ .22 $ .22 $ .66 $ .66
============== ============= ============== =============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
DAIN RAUSCHER CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income .............................................................. $ 54,820 $ 13,315
Adjustments to reconcile income to cash provided
by operating activities:
Depreciation and amortization...................................... 18,372 13,658
Deferred income taxes.............................................. 1,379 1,773
Other non-cash items............................................... 11,990 8,025
Net payable to brokers and dealers................................. 159,716 78,634
Securities purchased under agreements to resell.................... 122,041 (199,291)
Net trading securities owned and trading
securities sold, but not yet purchased.......................... (78,983) 201,026
Short-term borrowings and drafts payable
of securities companies......................................... (102,748) (14,215)
Net receivable from customers...................................... (209,280) (30,716)
Other receivables.................................................. (35,271) (6,282)
Securities sold under repurchase agreements........................ 20,273 46,913
Accrued compensation............................................... 33,192 (14,935)
Accounts payable and other accrued liabilities..................... 21,610 (27,080)
Other.............................................................. (15,177) 44,234
------------ ------------
Cash provided by operating activities....................................... 1,934 107,059
------------ ------------
Cash flows from financing activities:
Proceeds from:
Issuance of common stock for exercise of stock options................ 1,766 2,257
Subordinated and other debt........................................... - 80,000
Payments for:
Subordinated and other debt........................................... (10,000) (15,641)
Purchase of common stock.............................................. (9,790) -
Dividends on common stock............................................. (8,219) (8,172)
Revolving credit agreement, net....................................... - (50,000)
------------ ------------
Cash provided (used) by financing activities................................ (26,243) 8,444
------------ ------------
Cash flows from investing activities:
Proceeds from:
Gain on sale of investment securities................................. 15,378 -
Investment dividends and sales of nonmarketable securities............ - 1,967
Payments for:
Equipment, leasehold improvements and other........................... (520) (15,495)
Acquisition, net of cash acquired..................................... - (95,588)
------------ ------------
Cash provided (used) by investing activities................................ 14,858 (109,116)
------------ ------------
Decrease in cash and cash equivalents....................................... (9,451) 6,387
Cash and cash equivalents:
At beginning of period................................................ 47,273 35,909
------------ ------------
At end of period...................................................... $ 37,822 $ 42,296
============ ============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
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 three and nine-month periods
ended September 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 September 30, 1999 discounted value of $21.1
million ($27 million face amount) to acquire WAH. Goodwill of approximately $118
million was recorded and is being 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 $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
March 17, 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 September
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 November 3, 1999, we entered into a new $50 million five-year term
loan agreement with a group of banks. This loan is unsecured and bears an
interest rate of LIBOR plus 175 basis points, and is repayable in 12 equal
quarterly installments beginning January 2002. There are no restrictions on our
use of the loan proceeds.
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.
6
<PAGE> 7
DRI must also comply with covenants in the agreement including those 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 under the original debt
agreement.
F. SEGMENT INFORMATION
See Item 2 "Management's Discussion and Analysis" for a discussion of
our results by business line.
G. SUPPLEMENTARY CASH FLOW STATEMENT INFORMATION
Income tax payments totaled $27,429,000 and $3,649,000 during the nine
months ended September 30, 1999 and 1998, respectively. Interest payments
totaled $53,132,000 and $50,862,000 during the same respective nine-month
periods.
During the nine months ended September 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 nine months
ended September 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.
7
<PAGE> 8
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 nine months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------- --------------------------------
1999 1998 1999 1998
--------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Revenue.......................................... $ 243,130 $ 200,762 $ 715,393 $ 597,258
Interest expense................................. (18,253) (19,935) (53,357) (55,968)
-------------- ------------- -------------- -------------
Net revenue...................................... 224,877 180,827 662,036 541,290
Operating expenses excluding interest and
acquisition-related charge.................... 200,370 175,348 589,702 500,486
-------------- ------------- -------------- -------------
Operating income before taxes.................... 24,507 5,479 72,334 40,804
Income tax expense from operations............... (9,190) (1,972) (27,125) (14,689)
-------------- ------------- -------------- -------------
Net operating income............................. 15,317 3,507 45,209 26,115
Gain on sale of investment (net of tax).......... - - 9,611 -
Acquisition-related charge (net of tax).......... - - - (12,800)
-------------- ------------- --------------- -------------
Net income....................................... $ 15,317 $ 3,507 $ 54,820 $ 13,315
============== ============= ============== =============
Earnings per share:
From net operating income:
Basic......................................... $ 1.23 $ 0.28 $ 3.64 $ 2.11
Diluted....................................... 1.13 0.27 3.37 1.98
Net:
Basic......................................... $ 1.23 $ 0.28 $ 4.41 $ 1.08
Diluted....................................... 1.13 0.27 4.09 1.01
</TABLE>
Consolidated earnings for the nine months ended September 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 nine-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 $18.7 million (8%) in the first nine months
of 1999 over the prior year, although commission revenue was essentially flat
for the third quarter as compared to 1998's third quarter. During the first half
of 1999, the securities markets (particularly as measured by NASDAQ and NYSE
indices) rose strongly, pushing securities prices and trading volumes higher.
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 during the first half of the year. The
securities markets were significantly more volatile, however, in the third
quarter, with the markets losing some of the first half gains. This volatility,
which kept some investors out of the market, was a significant factor in the
lack of commission revenue growth in 1999's third quarter versus 1998 and slowed
growth on a year-to-date basis. Sales of insurance and annuity products also
were strong and contributed to increases in commission revenue for the year.
8
<PAGE> 9
Investment banking and underwriting revenue rose more than 100% ($28.4
million) in third quarter 1999 and 67% ($60.1 million) in the first nine months
of 1999, compared with the same periods a year ago. Increased equity
underwriting activity caused an increase in underwriting receivables included in
other receivables on the Consolidated Balance Sheet. Initial and secondary
public equity offerings, particularly in the technology sector, drove these
strong revenue increases. Advisory fees from mergers and acquisitions in the
current year quarter were essentially flat to the prior year period. Municipal
advisory fees were down for both the third quarter and year-to-date periods and
the market for new issues continued to be soft in 1999, versus a record year for
municipal financing transactions in 1998.
Revenue from principal transactions increased $6.2 million (17%) in
third quarter 1999 versus the same period in 1998 and $19.1 million (18%) in the
first nine months of 1999 versus the first nine months of 1998. Higher sales and
trading of over-the-counter equity securities, as well as higher revenue from
sales of fixed income securities pushed revenue increases for the quarter.
Higher sales of mortgage-backed securities and municipal and government bonds
contributed to increased revenue for the first nine months of the year,
particularly during the first half. Fixed income trading revenue, particularly
for taxable securities, was up for both the third quarter and the year-to-date
over the same periods in 1998
Correspondent clearing revenue rose 16% ($.7 million) in third quarter
1999 versus 1998 and 27% ($3.5 million) for the first nine months of 1999 versus
1998. Strong investor activity in the equity market for 1999 drove this increase
in the current year.
Net interest income increased $1.7 million (12%) in the third quarter of
1999 from 1998 and $2.6 million (6%) year-to-date. Interest revenue for both the
1999 third quarter and year-to-date was unchanged from the prior year periods.
Interest expense declined in 1999's third quarter and nine-month period from the
same periods in 1998, as we shifted to lower cost funding sources resulting in
lower interest expense. Average margin spreads (the difference between the rate
our customers pay us on margin loans and our average borrowing cost) were not
significantly different at September 30, 1999 from September 30, 1998.
Asset management revenue increased $3.8 million (23%) in the 1999 third
quarter over the prior year quarter and $10.2 million (23%) for the first nine
months of 1999 versus the first nine months of 1998. Rising market valuations of
assets already under management caused some of this increase, although we did
accumulate new assets under management throughout 1999.
Other revenue increased $3.2 million (48%) in the 1999 third quarter
over the 1998-quarter and $6.4 million (32%) in the first nine months of 1999
versus the same period in 1998. Increases in various retail customer product and
service fees were responsible for much of this increase. Year-to-date 1999
results include a nonrecurring gain of $15.4 million resulting from our sale of
an equity investment in the first quarter of the year.
Compensation as a percent of net revenue declined to 64.0% in the 1999
third quarter from 66.5% in 1998's third quarter, and on a year-to-date basis to
64.2% in 1999 versus 64.9% during the corresponding period a year ago.
Operating expenses increased 2% in third quarter 1999 from 1998. For the
first nine months of 1999 operating expenses increased $15.6 million (10%) from
the 1998 period, excluding the impact of the $20 million (pre-tax) WAH
acquisition-related charge. In the 1999 second quarter and third quarters we
closed or consolidated four retail offices, resulting in $3.1 million in closing
expenses, $.6 million of which was expensed in the third quarter. Travel and
promotional expenses rose in 1999 from 1998 as investment banking activity rose
significantly. Most other operating expenses were flat to the prior year,
however, 1999's year-to-date period includes a full nine months of amortization
expense on goodwill from the WAH acquisition, versus six months for 1998.
9
<PAGE> 10
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 revenue and expenses, which are not allocated to individual
business lines, are included in "Corporate."
<TABLE>
<CAPTION>
(In thousands) THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1999 1998 1999 1998
--------------------------------- --------------------------------
<S> <C> <C> <C> <C>
NET REVENUE
Private Client Group.......................... $ 139,935 $ 130,725 $ 432,036 $ 394,365
Equity Capital Markets........................ 52,820 21,221 144,845 64,207
Fixed Income Capital Markets.................. 26,926 26,035 74,095 71,784
Corporate:
Staff and other............................ 5,196 2,846 11,060 10,934
Gain on sale of investment................. - - 15,378 -
-------------- ------------- -------------- -------------
TOTAL................................. $ 224,877 $ 180,827 $ 677,414 $ 541,290
============== ============= ============== =============
(In thousands)
PRE-TAX INCOME (LOSS)
Private Client Group.......................... $ 13,650 $ 10,810 $ 46,498 $ 38,651
Equity Capital Markets........................ 6,319 (8,087) 17,563 (10,514)
Fixed Income Capital Markets.................. 2,071 2,843 3,025 6,107
Corporate:
Staff and other............................ 2,467 (87) 5,248 6,560
Gain on sale of investment................. - - 15,378 -
Acquisition related charge................. - - - (20,000)
-------------- ------------- -------------- -------------
TOTAL................................. $ 24,507 $ 5,479 $ 87,712 $ 20,804
============== ============= ============== =============
PRE-TAX MARGIN ON NET REVENUE
Private Client Group.......................... 10% 8% 11% 10%
Equity Capital Markets........................ 12 n/m 12 n/m
Fixed Income Capital Markets.................. 8 11 4 9
Corporate..................................... n/m n/m n/m n/m
-------------- ------------- -------------- -------------
TOTAL................................. 11% 3% 13% 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 Investment Management Inc.
("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).
10
<PAGE> 11
PCG's increased commission revenue in the first nine months of 1999
over the same period in 1998 resulted from higher sales of listed securities and
annuity and other insurance products. Commission revenue increased during the
first half of the year in line with both trade volumes and securities prices on
the NASDAQ, NYSE and other exchanges. However, in the third quarter as
securities markets turned more volatile, commission revenue on listed securities
declined slightly from third quarter 1998 levels. Sales of insurance and annuity
products and fixed income securities were strong in the third quarter, though,
resulting in increased net revenue for the period. Correspondent clearing also
contributed to the revenue increase in 1999 as favorable market conditions in
the first half of the year drove increases in customer transaction volumes.
PCG's asset management fees were higher in the third quarter and first nine
months of 1999 than in the prior year periods, resulting mainly from higher
levels of assets under administration in fee-based managed account programs.
Rising market valuations of existing assets caused the majority of the increase,
and although assets under administration totaled $61 billion at September 30,
1999, up from $57 billion at December 31, 1998. However, this was down from $63
billion at June 30, 1999, primarily as a result of declining market valuations
in the third quarter.
PCG pretax income increased 26% in the third quarter of 1999 versus the
same period in 1998, and 20% for the first nine months of 1999 versus the first
nine months of 1998. Margins improved in both the 1999 third quarter and
year-to-date periods over the prior year, despite $.6 million in closing
expenses for one retail office in the third quarter and $2.5 million of expenses
related to closing two retail offices and consolidating another in the second
quarter of 1999, as other operating expenses remained stable or declined
slightly versus 1998 levels. PCG's compensation and benefits ratio decreased as
a percent of net revenue to 57.0% in third quarter 1999 compared with 59.7% in
1998's third quarter. Compensation and benefits as a percent of net revenue also
declined on a year-to-date basis in 1999 to 57.8% versus 59.1% in 1998. PCG
incurred certain transitional compensation expenses from agreements related to
the combination of our two broker-dealers in 1998. These agreements expired at
the end of 1998.
EQUITY CAPITAL MARKETS: Equity Capital Markets ("ECM") revenue comes
from several sources: trading fees from purchasing registered securities and
selling them to customers through our Private Client Group or institutions
through our institutional sales force; underwriting fees, which may include
valuations, private placements, and initial public offerings ("IPOs"), and
merger and acquisition ("M&A") and 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 revenue on our consolidated statement of operations.
ECM also makes-a-market (trades) and provides research coverage in certain
over-the-counter and listed securities. 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 significantly during 1999. Investment banking
revenue almost quadrupled in the first nine months of 1999 versus the same
period a year ago. Strong underwriting activity, with 74 public equity
transactions completed during the first nine months of 1999, accounted for much
of the increased revenue. While the technology sector was the strongest area
during the year, ECM also completed underwriting transactions in its energy,
consumer, healthcare and financial services sectors. M&A and private placement
revenue remained strong in 1999, with 8 transactions completed in the 1999 third
quarter. Year-to-date 1999 M&A advisory fees included a $7.5 million fee from
one transaction in the second quarter. Institutional equity sales and syndicate
business also improved in 1999 over the prior year for both the third quarter
and the year-to-date periods.
ECM's pretax income and margin improved considerably 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 67.3% of revenue
in the third quarter of 1999 versus 94.7% in 1998's third quarter. Year-to-date
1999 compensation and benefits as a percent of revenue was 67.4% in 1999 versus
79.1% in 1998. Although promotional and travel expenses increased year-to-date
in 1999 versus 1998, this increase was directly related to the rise in
investment banking activities.
11
<PAGE> 12
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 revenue on our consolidated
statement of operations. FICM also trades 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 1999 third quarter and
year-to-date over the same periods in 1998 resulted primarily from higher
taxable fixed income securities sales, following hiring in our taxable
securities sales force in early 1999. Trading results for taxable and tax-exempt
fixed income securities rebounded in the third quarter of 1999 from the first
half of the year, also increasing for the year-to-date period from 1998's first
nine months. Favorable 1999 third quarter trading results were due partly to
less interest rate uncertainty than existed in the first half of the year, lower
inventory levels of some fixed income securities, and improved hedging
strategies in the quarter. Municipal securities advisory and underwriting
revenue, however, is experiencing a softer market for new issue development in
1999 versus 1998. Retail sales of fixed income securities grew slightly in the
third quarter of 1999, after declining earlier in the year, as equity markets
turned volatile, resulting in equity investments losing favor to fixed income
investments among some investors during the period. Retail sales, though, were
still below 1998 nine-month levels for the 1999 nine-month period.
FICM's margins declined significantly for both the 1999 third quarter
and year-to-date from the same periods in 1998. Operating expenses rose modestly
during 1999 as we increased our sales force and the number of fixed income
offices. Compensation and benefits as a percent of net revenue increased only
slightly in the quarter, but rose for the year-to-date partly as a result of
hiring, but also due to lower underwriting and retail sales revenue.
Compensation and benefits as a percent of net revenue was 62.3% in 1999's third
quarter versus 62.1% in the 1998 quarter, but rose to 64.0% year-to-date 1999
versus 61.8% for the first nine months of 1998.
NONRECURRING ITEMS: The 1999 nonrecurring gain of $15.4 million
represents profit on the sale of an equity investment. This investment was made
in connection with our correspondent clearing business, and was not an equity
investment made by our venture capital funds. 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 (less the portion paid to PCG), 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 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 nine
months of amortization versus only six months in 1998.
LIQUIDITY AND CAPITAL RESOURCES
On November 3, 1999, we entered into a new $50 million five-year term
loan agreement with a group of banks. This loan is unsecured and bears an
interest rate of LIBOR plus 175 basis points. This loan is repayable in 12 equal
quarterly installments beginning in January 2002. There are no restrictions on
the use of these proceeds and we have the right to transfer these funds as
capital to DRI.
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 March 17, 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 September 30, 1999.
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<PAGE> 13
Under the terms of both of the agreements described above, we must comply
with covenants regarding net worth, regulatory net capital and indebtedness,
among others.
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 September 30, 1999, net capital was $147.1 million, or
10.4 percent of aggregate debit balances and $76 million in excess of the
5-percent requirement.
Under existing authorizations from our Board of Directors we repurchased
$9.8 million (291,500 shares) of our stock during the first quarter of 1999. No
shares were repurchased in 1999's second and third quarters.
During each of the first three quarters of 1999, 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 our 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 on page 6 for further discussion of this subordinated loan agreement.
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 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.
In 1998 we formed our Year 2000 Task Force, which was headed by our
Chief Financial Officer and our Chief Information Officer. The Task Force
analyzed 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 identified and prioritized our
critical third-party relationships, including those with securities exchanges,
vendors, clients, and transaction counterparties; and communicated with them
about their plans and progress in addressing the Year 2000 problem. We consulted
with the Securities Industry Association ("SIA") and other industry participants
to formulate our Year 2000 program. Our activities followed a comprehensive Year
2000 project plan (the "Year 2000 Plan"), which covered our mission-critical IT
and non-IT systems and third-party interfaces. The Year 2000 Plan included steps
for inventory, assessment, remediation and testing, along with a detailed
schedule for completing each of the segments.
Other than routine maintenance and ongoing testing, both internal and
external, Year 2000 system work is, in all material respects, completed.
Upgrades or replacements of hardware, system and application software, and
interfaces, both internal and external, have been completed, tested, and run in
daily production. We identified approximately 300 mission-critical mainframe
interfaces (with 80 third-parties) and have determined they are either Year
2000-compliant or not affected
13
<PAGE> 14
by Year 2000 sensitivity. Interfaces were evaluated through internal testing and
also during industry-wide testing in March and April of this year. This industry
testing was coordinated by the SIA.
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. 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. While there can be no assurance, we
believe that our internal systems will not experience significant disruption in
connection with the Year 2000.
The focus of Year 2000 work has not turned to end-of year activities. We
have formed our Y2K Control Center group, also headed by our Chief Financial
Officer and our Chief Information Officer. This group, which meets on a regular
periodic basis, is responsible for collecting and communicating business
readiness (or problem) information, making and communicating critical business
decisions, coordination (and rehearsal) of contingency plan activities, and
providing a central point for communications (internal, public sector,
regulators, and self-regulatory organizations).
As of September 30, 1999 we have spent approximately $1.6 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
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.
14
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We herein incorporate by reference Exhibit 99 of our Annual Report on
Form 10-K for the year ended December 31, 1998.
15
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See our report on Form 10-Q filed for the quarter ended June 30, 1999 for
information on material legal matters.
16
<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
ITEM NO. ITEM METHOD OF FILING
-------- ---- ----------------
<S> <C> <C>
4.7 Credit Agreement among Dain Rauscher Corporation, Filed herewith
U.S. Bank National Association, and Wells Fargo Bank,
National Association dated November 3, 1999.
11 Computation of Earnings Per Share. Filed herewith.
27 Financial Data Schedule. Filed herewith.
</TABLE>
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter ended September 30,
1999.
17
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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: November 12, 1999 By David J. Parrin
-------------------------------- ----------------------------------
David J. Parrin
Senior Vice President
and Controller
(Principal Accounting Officer)
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<PAGE> 19
DAIN RAUSCHER CORPORATION
INDEX OF EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1999
(a) Exhibits
<TABLE>
<CAPTION>
ITEM NO. ITEM METHOD OF FILING
-------- ---- ----------------
<S> <C> <C>
4.7 Credit Agreement among Dain Rauscher Corporation, Filed herewith
U.S. Bank National Association, and Wells Fargo Bank,
National Association, dated November 3, 1999.
11 Computation of Earnings Per Share. Filed herewith.
27 Financial Data Schedule. Filed herewith.
</TABLE>
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EXHIBIT 4.7
================================================================================
CREDIT AGREEMENT
Dated as of November 2, 1999
Among
DAIN RAUSCHER CORPORATION,
U.S. BANK NATIONAL ASSOCIATION,
as a Bank and as Agent,
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as a Bank and as Co-Agent
================================================================================
<PAGE> 2
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.................................................................8
Section 1.3 Computation of Time Periods.......................................................................8
Section 1.4 Other Definitional Terms..........................................................................8
ARTICLE II TERMS OF LENDING.....................................................................................9
Section 2.1 The Term Loans....................................................................................9
Section 2.2 Advance Options...................................................................................9
Section 2.3 Borrowing Procedures..............................................................................9
(a) Request by Borrower....................................................................................9
(b) Funding of Agent.......................................................................................9
Section 2.4 Continuation or Conversion of Loans...............................................................9
Section 2.5 The Term Notes...................................................................................10
Section 2.6 Funding Losses...................................................................................10
Section 2.7 Use of Proceeds..................................................................................11
Section 2.8 Fees.............................................................................................11
ARTICLE III INTEREST AND FEES...................................................................................11
Section 3.1 Interest.........................................................................................11
(a) Eurodollar Advances...................................................................................11
(b) Reference Rate Advances...............................................................................11
(c) Interest After Maturity...............................................................................11
Section 3.2 Computation......................................................................................11
Section 3.3 Payment Dates....................................................................................12
ARTICLE IV PAYMENTS, PREPAYMENTS AND SETOFF....................................................................12
Section 4.1 Repayment of Term Loans..........................................................................12
Section 4.2 Optional Prepayments.............................................................................12
Section 4.3 Payments.........................................................................................12
Section 4.4 Proration of Payments............................................................................12
ARTICLE V ADDITIONAL PROVISIONS RELATING TO TERM LOANS........................................................13
Section 5.1 Increased Costs..................................................................................13
Section 5.2 Deposits Unavailable or Interest Rate Unascertainable or Inadequate; Impracticability............14
Section 5.3 Changes in Law Rendering Eurodollar Advances Unlawful............................................14
Section 5.4 Capital Adequacy.................................................................................14
Section 5.5 Discretion of the Banks as to Manner of Funding..................................................15
Section 5.6 Taxes............................................................................................16
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VI CONDITIONS PRECEDENT.................................................................................17
Section 6.1 Conditions Precedent of the Term Loans............................................................17
Section 6.2 Additional Conditions Precedent to the Term Loans.................................................17
ARTICLE VII REPRESENTATIONS AND WARRANTIES.......................................................................18
Section 7.1 Organization, Standing, Etc.......................................................................18
Section 7.2 Authorization and Validity........................................................................18
Section 7.3 No Conflict; No Default...........................................................................18
Section 7.4 Government Consent................................................................................19
Section 7.5 Financial Statements and Condition................................................................19
Section 7.6 Litigation and Contingent Liabilities.............................................................19
Section 7.7 Compliance........................................................................................19
Section 7.8 Environmental, Health and Safety Laws.............................................................19
Section 7.9 ERISA.............................................................................................20
Section 7.10 Margin Regulations...............................................................................20
Section 7.11 Ownership of Property; Liens.....................................................................20
Section 7.12 Taxes............................................................................................20
Section 7.13 Trademarks, Patents..............................................................................21
Section 7.14 Investment Company Act...........................................................................21
Section 7.15 Public Utility Holding Company Act...............................................................21
Section 7.16 Subsidiaries.....................................................................................21
Section 7.17 Registered Broker-Dealer; Membership.............................................................21
Section 7.18 Assessments by the Securities Investor Protection Corporation...................................21
Section 7.19 Year 2000.......................................................................................21
ARTICLE VIII AFFIRMATIVE COVENANTS................................................................................22
Section 8.1 Financial Statements and Reports..................................................................22
Section 8.2 Corporate Existence...............................................................................24
Section 8.3 Insurance.........................................................................................24
Section 8.4 Payment of Taxes and Claims.......................................................................24
Section 8.5 Inspection........................................................................................24
Section 8.6 Maintenance of Properties.........................................................................24
Section 8.7 Books and Records.................................................................................25
Section 8.8 Compliance........................................................................................25
Section 8.9 ERISA.............................................................................................25
Section 8.10 Environmental Matters............................................................................25
Section 8.11 General Net Capital Requirement..................................................................25
Section 8.12 Agent's Fees.....................................................................................25
ARTICLE IX NEGATIVE COVENANTS...................................................................................25
Section 9.1 Merger and Consolidation..........................................................................25
Section 9.2 Sale of Assets....................................................................................26
Section 9.3 Plans.............................................................................................26
Section 9.4 Change in Nature of Business......................................................................26
Section 9.5 Ownership of Stock in Material Subsidiaries.......................................................26
</TABLE>
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<TABLE>
<S> <C>
Section 9.6 Other Agreements..................................................................................26
Section 9.7 Restricted Payments...............................................................................27
Section 9.8 Investments.......................................................................................27
Section 9.9 Indebtedness and Contingent Liabilities...........................................................28
Section 9.10 Liens............................................................................................29
Section 9.11 Transactions with Related Parties................................................................29
Section 9.12 Fiscal Year......................................................................................29
Section 9.13 Minimum Consolidated Net Worth...................................................................29
Section 9.14 Minimum Net Capital Required for Dain Rauscher Incorporated......................................30
Section 9.15 WAH Subordinated Debentures......................................................................30
ARTICLE X EVENTS OF DEFAULT AND REMEDIES.......................................................................30
Section 10.1 Events of Default................................................................................30
Section 10.2 Remedies.........................................................................................32
Section 10.3 Offset...........................................................................................32
ARTICLE XI THE AGENT............................................................................................33
Section 11.1 Appointment and Grant of Authority...............................................................33
Section 11.2 Non Reliance on Agent............................................................................33
Section 11.3 Responsibility of the Agent and Other Matters....................................................33
Section 11.4 Action on Instructions...........................................................................34
Section 11.5 Indemnification..................................................................................35
Section 11.6 U.S. Bank and Affiliates.........................................................................35
Section 11.7 Notice to Holder of Term Notes...................................................................35
Section 11.8 Successor Agent..................................................................................35
ARTICLE XII MISCELLANEOUS........................................................................................36
Section 12.1 No Waiver and Amendment..........................................................................36
Section 12.2 Amendments, Etc..................................................................................36
Section 12.3 Assignments......................................................................................37
(a) Assignments............................................................................................37
(b) Effectiveness of Assignments...........................................................................37
(c) Tax Matters............................................................................................38
(d) Information............................................................................................38
(e) Federal Reserve Bank...................................................................................38
Section 12.4 Costs, Expenses and Taxes; Indemnification.......................................................38
Section 12.5 Notices..........................................................................................39
Section 12.6 Successors.......................................................................................39
Section 12.7 Severability.....................................................................................39
Section 12.8 Subsidiary References............................................................................39
Section 12.9 Captions.........................................................................................39
Section 12.10 Entire Agreement................................................................................40
Section 12.11 Counterparts....................................................................................40
Section 12.12 Confidentiality of Information..................................................................40
Section 12.13 Governing Law...................................................................................40
</TABLE>
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<TABLE>
<S> <C>
Section 12.14 Consent to Jurisdiction.........................................................................40
Section 12.15 Waiver of Jury Trial............................................................................41
Section 12.16 Survival of Certain Provisions of this Agreement................................................41
</TABLE>
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of November 2, 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 Term Loans bearing interest
at an identical rate for an identical Interest Period, provided that all
Reference Rate Advances shall be deemed a single Advance. An Advance may be a
"Eurodollar Advance" or "Reference Rate Advance" (each, a "type" of Advance).
"Adverse Event": The occurrence of any event that could have a 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 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.
"Agent's Fee Letter": That certain letter agreement dated September 3,
1999, between the Borrower and the Agent relating to fees payable to the Agent
in connection with the Term Loans, as the same may be amended, modified,
supplemented, restated or replaced from time to time.
"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 one and
three-fourths of one percent (1.75%).
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"Assignee": As defined in Section 12.3(a).
"Assignment": As defined in Section 12.3(a).
"Assignment and Assumption Agreement": As defined in Section 12.3(a).
"BONY": The Bank of New York, its successors and assigns.
"Borrower's Revolving Credit Agreement": The Credit Agreement dated as
of May 31, 1999, by and among the Agent, U.S. Bank, Norwest, BONY, Credit
Lyonnais and the Borrower, pursuant to which U.S. Bank, Norwest, BONY and Credit
Lyonnais have made revolving loans to the Borrower, as the same may be amended,
modified, supplemented, restated or replaced from time to time.
"Business Day": Any day (other than a Saturday, Sunday or legal holiday
in the State of Minnesota or State of California) on which national banks are
permitted to be open in Minneapolis, Minnesota, and San Francisco, California
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.
"Closing Date": The date on which each of the conditions precedent set
forth in Sections 6.1 and 6.2 of this Agreement have been satisfied.
"Code": The Internal Revenue Code of 1986, as amended, or any successor
statute, together with regulations thereunder.
"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, Wells Fargo (as
assignee of
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<PAGE> 8
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.
"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, 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 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 Reuters 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.
"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 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 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.
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"Interest Period": For any Eurodollar Advance, the period commencing on
the borrowing date of such Eurodollar Advance or the date a Reference 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) 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 Maturity 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).
"Loan Documents": This Agreement, the Term Notes and each other
instrument, document, guaranty, security agreement, mortgage, or other agreement
executed and delivered by the Borrower or any guarantor or party granting
security interests in connection with this Agreement, the Term Loans or any
collateral for the Term Loans.
"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.
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"Maturity Date": The earliest of (a) October 30, 2004, or (b) the date
on which the Term Loans are declared due and payable pursuant to Section 10.2
hereof.
"Net Capital": Net Capital shall mean "net capital" as defined in Rule
15c3-1.
"Norwest": Norwest Bank Minnesota, National Association, its successors
and assigns.
"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 Reference Rate
Advance and for any fees, the last day of each calendar month; and (c) the
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 the amount of such Bank's Term Loan bears to the
aggregate amount of the Term Loans of all Banks).
"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.
"Reference 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.
"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) 10% 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
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policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"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": At least two (2) Banks whose total Percentage of the
outstanding principal of the Term Loans constitutes at least 66-2/3% of the
aggregate outstanding principal of all the Term Loans.
"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 ss.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 ss.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.
"Term Loans": The Term Loans described in Section 2.1.
"Term Notes": The promissory notes of the Borrower described in Section
2.5, substantially in the form of Exhibit A, 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 Amount": 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).
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"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.
"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.
"Wells Fargo": Wells Fargo Bank, National Association, its successors
and assigns.
Section 1.2 Accounting Terms and Calculations. Except as may be
expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder (including,
without limitation, determination of compliance with financial ratios and
restrictions in Articles VIII and IX hereof) shall be made in accordance with
GAAP consistently applied. Any reference to "consolidated" financial terms shall
be deemed to refer to those financial terms as applied to the Borrower and its
Subsidiaries in accordance with GAAP.
Section 1.3 Computation of Time Periods. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
unless otherwise stated the word "from" means "from and including" and the word
"to" or "until" each means "to but excluding."
Section 1.4 Other Definitional Terms. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References to Sections, Exhibits, schedules and like references are
to this Agreement unless otherwise expressly provided.
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ARTICLE II TERMS OF LENDING
Section 2.1 The Term 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 a single term loan (each a
"Term Loan" and, collectively, the "Term Loans") to the Borrower, on the Closing
Date, in an amount equal to such Bank's Term Loan Amount.
Section 2.2 Advance Options. The Term Loans shall consist of Eurodollar
Advances and Reference Rate Advances, as shall be selected by the Borrower,
except as otherwise provided herein. 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. Each Reference Rate Advance
shall be in a minimum amount of $500,000.
Section 2.3 Borrowing Procedures.
(a) Request by Borrower. The request by the Borrower for the Loans
shall be in writing and must be given so as to be received by the Agent
not later than two (2) Business days prior to the anticipated Closing
Date. The request for the Term Loans shall specify (1) the type or
types of Advances comprising the Term Loans, and (2) if the Term Loans
shall include Eurodollar Advances, the initial Interest Periods for
such Eurodollar Advances.
(b) Funding of Agent. The Agent shall promptly notify each Bank of
the receipt of such request and the matters specified therein. On the
Closing Date, each Bank shall provide its requested Term Loan to the
Agent in immediately available funds not later than 1:00 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 Term 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
Closing Date.
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 Reference Rate Advance; or
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(b) 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.
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 Reference 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 Maturity Date.
Section 2.5 The 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-1 hereto, in the amount of such Bank's Term Loan Amount and dated as
of the Closing 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 matter thereof, absent manifest error.
Section 2.6 Funding Losses. The Borrower will indemnify each Bank upon
demand against any loss or expense which such Bank may sustain or incur
(including, without limitation, any loss or expense sustained or incurred in
obtaining, liquidating or employing deposits or other funds acquired to effect,
fund, or maintain any Advance) as a consequence of (i) any failure of the
Borrower to make any payment when due of any amount due hereunder or under any
Term 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
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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 Use of Proceeds. The proceeds of the Term Loans shall be
used by the Borrower for its general corporate purposes, including, without
limitation, capital contributions from the Borrower to Dain Rauscher
Incorporated.
Section 2.8 Fees. The Borrower agrees to pay to the Agent, for the pro
rata account of each Bank, on the Closing Date, a non-refundable origination fee
equal to four-tenths of one percent (.40%) of the amount of the Term Loan to be
made available to the Borrower by such Bank on the Closing Date. In addition,
the Borrower agrees to pay to the Agent, for the account of the Agent, such
other fees as are specified in the fee letter between the Agent and the Borrower
related to the Term Loans.
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 Rate Margin.
(b) Reference Rate Advances. The unpaid principal amount of each
Reference Rate Advance shall bear interest prior to maturity at a rate
per annum equal to the Reference Rate.
(c) Interest After Maturity. Any amount of the Term 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 Computation. Interest shall be computed on the basis of
actual days elapsed and a year of 360 days.
Section 3.3 Payment Dates. Accrued interest under Section 3.1(a) and
(b) shall be payable on the applicable Payment Dates. Accrued interest under
Section 3.1(c) shall be payable on demand.
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ARTICLE IV PAYMENTS, PREPAYMENTS AND SETOFF
Section 4.1 Repayment of Term Loans. The outstanding principal balance
of the Term Loans shall be due and payable in twelve (12) equal quarterly
installments of $4,166,666.67 each, with the first such quarterly installment
commencing on January 31, 2002, and with subsequent quarterly installments
continuing on the last day of each April, July, October and January thereafter
until the Maturity Date, when the remaining outstanding principal balance of
Term Loans, 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 Agent,
prepay the Term 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 Payments. Payments and prepayments of principal of, and
interest on, the Term Loans 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 and interest. Subject to the
definition of the term "Interest Period", whenever any payment to be made under
this Agreement, the Term 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 4.4 Proration of Payments. If any Bank or other holder of a
Term 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
Term Loan, 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 Term Loans 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.
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ARTICLE V ADDITIONAL PROVISIONS RELATING TO TERM LOANS
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 the Term Loans
or the Term Notes is imposed, modified or deemed applicable, or the
basis of taxation of payments to any Bank of interest or principal of
the Term Loans (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 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 Term Loans is increased, or the amount of any sum
receivable by such Bank hereunder or under the Term Notes in respect of any Term
Loan is reduced;
then, the Borrower shall pay to such Bank upon demand such additional amount or
amounts as will compensate such Bank (or the controlling Person in the instance
of (c) above) for such additional costs or reduction (provided that such Bank
has not been compensated for such additional cost or reduction in the
calculation of the Eurodollar Reserve Rate). Simultaneously with such Bank's
demand for any such additional amount, the Bank shall submit to the Borrower a
certificate in reasonable detail of such Bank setting forth the basis for the
determination of such additional amount payable under this Section 5.1.
Determinations by each Bank for purposes of this Section 5.1 of the additional
amounts required to compensate such Bank shall be conclusive in the absence of
manifest error. In determining such amounts, the Banks may use any reasonable
averaging, attribution and allocation methods.
Section 5.2 Deposits Unavailable or Interest Rate Unascertainable or
Inadequate; Impracticability. If the Agent determines (which determination shall
be conclusive and binding on the parties hereto) that:
(a) deposits of the necessary amount for the relevant Interest
Period for any Eurodollar Advance are not available in the relevant
markets or that, by reason of circumstances affecting such market,
adequate and reasonable means do not exist for ascertaining the
Eurodollar Interbank Rate for such Interest Period;
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(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 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 Reference
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 Reference Rate Advance on such last day.
Section 5.3 Changes in Law Rendering Eurodollar Advances Unlawful. If
at any time due to the adoption of any law, rule, regulation, treaty or
directive, or any change therein or in the interpretation or administration
thereof by any court, central bank, governmental authority, agency or
instrumentality, or comparable agency charged with the interpretation or
administration thereof, or for any other reason arising subsequent to the date
of this Agreement, it shall become unlawful or impossible for any Bank to make
or fund any Eurodollar Advance, the obligation of such Bank to provide such
Advance shall, upon the happening of such event, forthwith be suspended for the
duration of such illegality or impossibility. If any such event shall make it
unlawful or impossible for the Bank to continue any Eurodollar Advance
previously made by it hereunder, such Bank shall, upon the happening of such
event, notify the Agent and the Borrower thereof in writing, and the Borrower
shall, at the time notified by such Bank, either convert each such unlawful
Advance to a Reference 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
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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 Term Loans (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 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 Term
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
Term 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
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<PAGE> 21
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 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 Precedent of the Term Loans. The obligation of
the Banks to make the Term Loans 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 as of the Closing Date or such other date as is
satisfactory to the Agent:
(a) The Term Notes executed by a duly authorized officer (or officers)
of the Borrower.
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<PAGE> 22
(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 Term Loans 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.
(h) The Agent shall have received from the Borrower all fees that
the Borrower is required to pay to the Agent on the Closing Date under
the terms of the Agent's Fee Letter.
Section 6.2 Additional Conditions Precedent to the Term Loans. The
obligation of the Banks to make the Term Loans hereunder shall be subject to the
satisfaction of the following conditions precedent (and any request for the Term
Loans shall be deemed a representation and warranty by the Borrower that the
following have been satisfied):
(a) Before and after giving effect to the Term Loans, the
representations and warranties contained in Article VII shall be true
and correct.
(b) Before and after giving effect to the Term Loans, 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 and to
make the Term Loans 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
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<PAGE> 23
under the laws of the jurisdiction of their respective incorporation and have
all requisite corporate power and authority to carry on their respective
businesses as now conducted and to (in the instance of the Borrower) enter into
the Loan Documents and to perform its obligations under the Loan Documents. The
Borrower and each of its Subsidiaries are duly qualified and in good standing as
a foreign corporation in each jurisdiction in which the character of the
properties owned, leased or operated by it or the business conducted by it makes
such qualification necessary.
Section 7.2 Authorization and Validity. The execution, delivery and
performance by the Borrower of the Loan Documents have been duly authorized by
all necessary corporate action by the Borrower, and the Loan Documents
constitute the legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their respective terms, subject to
limitations as to enforceability which might result from bankruptcy, insolvency,
moratorium and other similar laws affecting creditors' rights generally and
subject to limitations on the availability of equitable remedies.
Section 7.3 No Conflict; No Default. The execution, delivery and
performance by the Borrower of the Loan Documents will not (a) violate any
provision of any law, statute, rule or regulation or any order, writ, judgment,
injunction, decree, determination or award of any court, governmental agency or
arbitrator presently in effect having applicability to the Borrower, (b) violate
or contravene any provisions of the Articles (or Certificate) of Incorporation
or by-laws of the Borrower, or (c) result in a breach of or constitute a default
under any indenture, loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it or any of its
properties may be bound or result in the creation of any Lien on any asset of
the Borrower or any Subsidiary. Neither the Borrower nor any Subsidiary is in
default under or in violation of any such law, statute, rule or regulation,
order, writ, judgment, injunction, decree, determination or award or any such
indenture, loan or credit agreement or other agreement, lease or instrument in
any case in which the consequences of such default or violation could constitute
an Adverse Event. No Default or Event of Default has occurred and is continuing.
Section 7.4 Government Consent. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority is required on the
part of the Borrower to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, the Loan Documents.
Section 7.5 Financial Statements and Condition. The audited financial
statements of the Borrower 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
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<PAGE> 24
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 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
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<PAGE> 25
Regulation T. Neither the making of any Term 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 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.
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<PAGE> 26
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.
ARTICLE VIII AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until the Term Loans 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
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<PAGE> 27
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 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;
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<PAGE> 28
(i) Immediately upon becoming aware of the occurrence thereof,
notice of the suspension or expulsion of any Subsidiary from membership
in the New York Stock Exchange, Inc. or from membership in the National
Association of Securities Dealers, Inc.;
(j) Immediately upon becoming aware of the occurrence thereof,
notice of the institution of any litigation, arbitration or
governmental proceeding which could result in an Adverse Event, notice
of any development in any pending litigation, arbitration or
governmental proceeding which could result in an Adverse Event and
notice of the rendering of a judgment or decision in any litigation,
arbitration or governmental proceeding which could result in an Adverse
Event, and, in any such circumstance, the steps being taken by the
Person affected by such circumstance.
(k) Immediately upon becoming aware of the occurrence thereof,
notice of any violation as to any environmental matter by the Borrower
or any Subsidiary and of the commencement of any judicial or
administrative proceeding relating to health, safety or environmental
matters (i) in which an adverse determination or result could result in
the revocation of or have a material adverse effect on any operating
permits, air emission permits, water discharge permits, hazardous waste
permits or other permits held by the Borrower or any Subsidiary which
are material to the operations of the Borrower or such Subsidiary, or
(ii) which will or threatens to impose a material liability on the
Borrower or such Subsidiary to any Person or which will require a
material expenditure by the Borrower or such Subsidiary to cure any
alleged problem or violation.
(l) From time to time, such other information regarding the
business, operation and financial condition of the Borrower and the
Subsidiaries as any Bank may reasonably request.
Section 8.2 Corporate Existence. The Borrower will, and will cause each
Subsidiary to, maintain its corporate existence in good standing under the laws
of its jurisdiction of incorporation and its qualification to transact business
in each jurisdiction in which the character of the properties owned, leased or
operated by it or the business conducted by it makes such qualification
necessary.
Section 8.3 Insurance. The Borrower will, and will cause each
Subsidiary to, maintain with financially sound and reputable insurance companies
such insurance as may be required by law and such other insurance in such
amounts and against such hazards as is customary in the case of reputable
corporations engaged in the same or similar business and similarly situated.
Section 8.4 Payment of Taxes and Claims. The Borrower will, and will
cause each Subsidiary to, file all tax returns and reports which are required by
law to be filed by it and pay before they become delinquent all taxes,
assessments and governmental charges and
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<PAGE> 29
levies imposed upon it or its property and all claims or demands of any kind
(including, without limitation, those of suppliers, mechanics, carriers,
warehouses, landlords and other like Persons) which, if unpaid, might result in
the creation of a Lien upon its property; provided that the foregoing items need
not be paid if they are being contested in good faith by appropriate
proceedings, and as long as the Borrower's or such Subsidiary's title to its
property is not materially adversely affected, its use of such property in the
ordinary course of its business is not materially interfered with and adequate
reserves with respect thereto have been set aside on the Borrower's or such
Subsidiary's books in accordance with GAAP.
Section 8.5 Inspection. The Borrower will, and will cause each
Subsidiary to, permit any Person designated by any Bank to visit and inspect any
of its properties, corporate books and financial records, to examine and to make
copies of its books of accounts and other financial records, and to discuss the
affairs, finances and accounts of the Borrower and the Subsidiaries with, and to
be advised as to the same by, its officers at such reasonable times and
intervals as such Bank may designate.
Section 8.6 Maintenance of Properties. The Borrower will, and will
cause each Subsidiary to, maintain its properties used or useful in the conduct
of its business in good condition, repair and working order, and supplied with
all necessary equipment, and make all necessary repairs, renewals, replacements,
betterments and improvements thereto, all as may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
Section 8.7 Books and Records. The Borrower will, and will cause each
Subsidiary to, keep adequate and proper records and books of account in which
full and correct entries will be made of its dealings, business and affairs.
Section 8.8 Compliance. The Borrower will, and will cause each
Subsidiary to, comply in all respects with all laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may be subject,
except where failure to be in compliance, individually or in the aggregate,
could not reasonably be expected to result in an Adverse Event.
Section 8.9 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.
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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.
Section 8.12 Agent's Fees. The Borrower shall pay the fees to the Agent
in accordance with the terms of the Agent's Fee Letter.
ARTICLE IX NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Term Loans and
all other liabilities of the Borrower to the Banks and/or the Agent hereunder
and under the other Loan Documents have been paid in full, the Borrower agrees
that:
Section 9.1 Merger and Consolidation. The Borrower will not, and will
not permit any Subsidiary to, merge or consolidate or enter into any analogous
reorganization or transaction with any Person; provided, however, that the
restrictions contained in this Section 9.1 shall not apply to or prevent the
following so long as no Event of Default exists:
(a) any wholly-owned Subsidiary may be merged with or liquidated
into the Borrower (if the Borrower is the surviving corporation) or any
other wholly-owned Subsidiary of the Borrower; and
(b) the acquisition of all or substantially all of the assets or
stock of any Person to the extent permitted by Section 9.8(c).
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
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related to the broker-dealer, investment banking and related financial services
activities of the Borrower or such Subsidiary.
Section 9.5 Ownership of Stock in Material Subsidiaries. The Borrower
will not, and will not permit any Material Subsidiary to, take any action which
would result in a decrease in the Borrower's ownership interest in any Material
Subsidiary (including, without limitation, decrease in the percentage of the
shares of any class of stock in a Material Subsidiary).
Section 9.6 Other Agreements. The Borrower will not, and will not
permit any Material Subsidiary to, enter into any agreement, bond, note or other
instrument with or for the benefit of any Person other than the Banks which
would: (a) contain a covenant generally prohibiting the Borrower or such
Material Subsidiary from granting Liens to the Banks; provided, however, nothing
in this Section 9.6(a) shall prohibit any Material Subsidiary from granting
Liens in specific assets to other Persons and from agreeing not to grant Liens
in such specific assets to the Banks; (b) be violated or breached by the
Borrower's performance of its obligations under the Loan Documents; or (c)
prohibit or otherwise limit in any way or to any extent the ability of any
Subsidiary to declare or pay dividends to the Borrower.
Section 9.7 Restricted Payments. The Borrower will not, and will not
permit any Subsidiary to, either: (a) purchase or redeem or otherwise acquire
for value any shares of the Borrower's or any Subsidiary's stock, declare or pay
any dividends thereon (other than stock dividends and dividends payable solely
to the Borrower), make any distribution on, or payment on account of the
purchase, redemption, defeasance or other acquisition or retirement for value
of, any shares of the Borrower's or any Subsidiary's stock or set aside any
funds for any such purpose (other than payment to, or on account of or for the
benefit of, the Borrower only) if a Default or Event of Default has occurred and
is continuing or if, after giving effect to any such purchases, redemption,
acquisition, dividend, distribution or payment, a Default or an Event of Default
would have occurred and be continuing; or (b) directly or indirectly make any
payment on, or redeem, repurchase, defease, or make any sinking fund payment on
account of, or any other provision for, or otherwise pay, acquire or retire for
value, any Indebtedness of the Borrower or any Subsidiary that is subordinated
in right of payment to the Term 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
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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 fifteen percent (15%) 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 worth of or working capital of, or provide funds to, satisfy
any other financial covenants applicable to, any other Person, except:
(a) Indebtedness under the Borrower's Revolving Credit Agreement;
(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
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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 Indebtedness under this Agreement and the other Loan
Documents, 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 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
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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.
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 Term
Notes 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
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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;
(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
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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;
(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;
(l) The Securities and Exchange Commission shall enter an order
that (i) suspends or revokes the registration of any Material
Subsidiary as a broker or as a dealer or both, (ii) suspends any
Material Subsidiary as a member of a national securities association or
national securities exchange, (iii) expels any Material Subsidiary as a
member of a national securities association or a national securities
exchange, or (iv) takes any other action which will materially
adversely affect the operations of any Material Subsidiary;
(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;
(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;
(o) A Default, Event of Acceleration or Event of Default (each as
defined therein) shall occur under the Dain Rauscher Incorporated
Credit Agreement; or
(p) An Event of Default (as defined therein) shall occur under the
Borrower's Revolving 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
outstanding unpaid principal balance of the Term 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
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or all of the following actions on direction of the Required Banks): (i) declare
that the outstanding unpaid principal balance of the Term 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 Term 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 Term Notes or the other Loan Documents to the contrary
notwithstanding, (ii) 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 (iii) enforce all rights and remedies available
under any applicable law.
Section 10.3 Offset. In addition to the remedies set forth in Section
10.2, 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 Term
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 Term Note, against the Indebtedness then owed
by the Borrower to such Bank.
ARTICLE XI THE AGENT
Section 11.1 Appointment and Grant of Authority. Each Bank hereby
appoints the Agent, and the Agent hereby agrees to act, as agent under this
Agreement. The Agent shall have and may exercise such powers under this
Agreement as are specifically delegated to the Agent by the terms hereof,
together with such other powers as are reasonably incidental thereto. Each Bank
hereby authorizes, consents to, and directs the Borrower to deal with the Agent
as the true and lawful agent of such Bank to the extent set forth herein.
Section 11.2 Non Reliance on Agent. Each Bank agrees that it has,
independently and without reliance on the Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis of the Borrower and decision to enter into this Agreement and that it
will, independently and without reliance upon the Agent, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under this
Agreement. The Agent shall not be required to keep informed as to the
performance or observance by the Borrower of this Agreement and the Loan
Documents or to inspect the properties or books of the Borrower. Except for
notices, reports and other documents and information expressly required to be
furnished to the Banks by the Agent hereunder, the Agent shall not have any duty
or responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any
of its related companies) which may come into the Agent's possession.
Section 11.3 Responsibility of the Agent and Other Matters.
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(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 Term Notes or the other Loan Documents, or (b) any
document or instrument furnished pursuant to or in connection
with this Agreement, the Term 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 Term 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 Term Notes or
the other Loan Documents on the Borrower's part.
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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 Term Notes or the other Loan
Documents or any other instrument or document in connection herewith or
therewith in accordance with instructions in writing from (i) the Required Banks
except for instructions which under the express provisions hereof must be
received by the Agent from all the Banks, and (ii) in the case of such
instructions which under the express provisions hereof must be received by the
Agent from all of the Banks, from all of the Banks.
Section 11.5 Indemnification. To the extent the Borrower does not
reimburse and save the Agent harmless according to the terms hereof for and from
all costs, expenses and disbursements in connection herewith or with the other
Loan Documents, such costs, expenses and disbursements to the extent reasonable
shall be borne by the Banks ratably in accordance with their Percentages and the
Banks hereby agree on such basis (a) to reimburse the Agent for all such
reasonable costs, expenses and disbursements on request of the Agent and (b) to
indemnify and save harmless the Agent against and from any and all losses,
obligations, penalties, actions, judgments and suits and other reasonable costs,
expenses and disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Agent, other than as a consequence of
actual gross negligence or willful misconduct on the part of the Agent, arising
out of or in connection with this Agreement, the Term 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 Term Notes or the other
Loan Documents or the taking of or refraining from taking any action under or in
connection with this Agreement, the Term Notes or the other Loan Documents.
Section 11.6 U.S. Bank and Affiliates. With respect to U.S. Bank's
Term Loans under this Agreement and any Term Note and any interest of U.S. Bank
in any Term Note, U.S. Bank shall have the same rights, powers and duties under
this Agreement and any such Term 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 Term Notes. The Agent may deem and
treat the payees of the Term 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 Term Note shall be conclusive and binding on any subsequent
holder, transferee or assignee of such Term 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
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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 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 Term 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 Term 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 Term Loans or
subject the Banks to any additional obligations;
(b) reduce the principal of, or interest (including the rate of
interest) on, the Term Notes or any fees or other amounts payable
hereunder;
(c) change the requirement that payments of principal of, and interest
on, the Term Notes be made pro rata to the Banks on the basis of the
outstanding principal amount of the Term Loans;
(d) postpone any date fixed for any payment of principal of, or
interest on, the Term Notes or any fees or other amounts payable
hereunder;
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(e) change the definition of Required Banks or amend this Section 12.2;
provided, further that amendments, waivers or consents affecting the rights of
the Agent shall also require the consent of the Agent.
Section 12.3 Assignments.
(a) Assignments. Each Bank shall have the right, subject to the further
provisions of this Sections 12.3, to sell or assign all or any part of
its Term Loan, Term Note, 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 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 obligations to indemnify the Agent 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
Term Loan and related rights and obligations, or (ii) $10,000,000 of
the assigning Bank's Term Loan 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
obligations to indemnify the Agent hereunder), with a copy for the
Borrower, and shall have provided to the Agent information the Agent
shall have reasonably requested to make payments to the Assignee, and
(v) the assigning Bank, the Assignee and the Agent shall have agreed
upon a date upon which the Assignment shall become effective. Upon the
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Assignment becoming effective, (A) the Agent and the Borrower shall
make appropriate arrangements so that new Term Notes are issued to the
assigning Bank and the Assignee; and (B) upon receipt, 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 Borrower
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 Term 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 Term Loan is made 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, and hold
harmless the Agent and each and all of the Banks, each of their respective
affiliates and each of the
-37-
<PAGE> 43
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, under the
Borrower's Revolving Credit Agreement or under 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.
-38-
<PAGE> 44
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 12.3 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 TERM 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 TERM NOTES MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA
STATE COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE BORROWER
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT
THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES
ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT,
THE BANKS AT THEIR OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE
OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
-39-
<PAGE> 45
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 TERM 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, Wells Fargo (as assignee of 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, and (B) the payment in full of all obligations of Dain
Rauscher Incorporated to the Agent, U.S. Bank, Wells Fargo (as assignee of
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 and the payment in full of all obligations of Dain
Rauscher Incorporated to the Agent, U.S. Bank, Wells Fargo (as assignee of
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.
-40-
<PAGE> 46
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: David J. Parrin
Fax: (612) 371-2960
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 47
Term Loan Amount: U.S. BANK NATIONAL ASSOCIATION,
$30,000,000 as Agent and a Bank
Percentage: 60%
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> 48
Term Loan Amount: WELLS FARGO BANK, NATIONAL
$20,000,000 ASSOCIATION, as Co-Agent and as a Bank
Percentage: 40%
By_______________________________________
Title__________________________________
And
By_______________________________________
Title__________________________________
Seventh Floor, Norwest Center
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0105
Attention: Vice President, Financial
Institutions
Fax: (612) 667-7251
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 49
EXHIBITS
Exhibit Contents
A 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
<PAGE> 50
EXHIBIT A TO
CREDIT AGREEMENT
TERM NOTE
$[Amount of Term Loan] Minneapolis, Minnesota
November 2, 1999
FOR VALUE RECEIVED, the undersigned, DAIN RAUSCHER CORPORATION, a
Delaware corporation (the "Borrower"), promises to pay to the order of [BANK]
(the "Bank"), on October 30, 2004, or other due date or dates determined under
the Credit Agreement hereinafter referred to, the principal sum of
__________________________________________________________________ AND 00/100
DOLLARS ($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 twelve (12) equal
quarterly installments of $____________ each, commencing on the last day of
January, 2002, and continuing on the last day of each April, July, October and
January thereafter until October 30, 2004 (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
November 2, 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-1
<PAGE> 51
This Note is made under and governed by the internal laws of the State
of Minnesota.
DAIN RAUSCHER CORPORATION
By___________________________________________
Title______________________________________
A-2
<PAGE> 52
EXHIBIT B TO
CREDIT AGREEMENT
Litigation (Section 7.6)
[To be prepared by Borrower]
B-1
<PAGE> 53
EXHIBIT C TO
CREDIT AGREEMENT
Contingent Liabilities (Section 7.6)
None
C-1
<PAGE> 54
EXHIBIT D TO
CREDIT AGREEMENT
Existing Liens (Sections 7.11 and 9.10)
None
D-1
<PAGE> 55
EXHIBIT E TO
CREDIT AGREEMENT
Subsidiaries Directly Owned by Borrower (Section 7.16)
[To be prepared by Borrower]
E-1
<PAGE> 56
EXHIBIT F TO
CREDIT AGREEMENT
Form of Compliance Certificate
In accordance with Section 8.1 of the Credit Agreement dated as of
November 2, 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:
Covenant Actual Requirement
9.8(b)
9.8(c)
9.9(c)
9.9(d)
H-1
<PAGE> 57
9.13
9.14
DAIN RAUSCHER CORPORATION
By______________________________________
Title_________________________________
Dated: ____________________, ____
-2-
<PAGE> 1
EXHIBIT 11
DAIN RAUSCHER CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED, IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Net income............................................... $ 15,317 $ 3,507 $ 54,820 $ 13,315
========== ============ ========== ==========
Weighted average common shares outstanding............... 12,448 12,433 12,435 12,379
========== ============ ========== ==========
Basic earnings per share.................................... $ 1.23 $ 0.28 $ 4.41 $ 1.08
========== ============ ========== ==========
EARNINGS PER SHARE ASSUMING DILUTION:
Net income............................................... $ 15,317 $ 3,507 $ 54,820 $ 13,315
========== ============ ========== ==========
Weighted average number of common and dilutive
potential common shares outstanding:
Weighted average common shares outstanding.......... 12,448 12,433 12,435 12,379
Dilutive effect of stock options (net of tax benefits)... 494 434 411 514
Shares credited to deferred compensation
plan participants..................................... 600 308 559 285
---------- ------------ ---------- ----------
Weighted average number of common and dilutive
potential common shares outstanding................... 13,542 13,175 13,405 13,178
========== ============ ========== ==========
Diluted earnings per share.................................. $ 1.13 $ 0.27 $ 4.09 $ 1.01
========== ============ ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 37,822
<SECURITIES> 0
<RECEIVABLES> 1,020,017
<ALLOWANCES> 0
<INVENTORY> 343,651
<CURRENT-ASSETS> 2,285,029
<PP&E> 86,384
<DEPRECIATION> (37,694)
<TOTAL-ASSETS> 2,476,312
<CURRENT-LIABILITIES> 1,994,942
<BONDS> 107,704
0
0
<COMMON> 1,608
<OTHER-SE> 372,058
<TOTAL-LIABILITY-AND-EQUITY> 2,476,312
<SALES> 0
<TOTAL-REVENUES> 730,771
<CGS> 0
<TOTAL-COSTS> 589,702
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (53,357)
<INCOME-PRETAX> 87,712
<INCOME-TAX> (32,892)
<INCOME-CONTINUING> 54,820
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,820
<EPS-BASIC> 4.41
<EPS-DILUTED> 4.09
</TABLE>
