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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 2, 1996
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[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 0-6365
APOGEE ENTERPRISES, INC.
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(Exact name of registrant as specified in its charter)
Minnesota 41-0919654
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(State or other jurisdiction of IRS Employer Identification Number
incorporation or organization)
7900 Xerxes Avenue South - Suite 1800
Minneapolis, Minnesota 55431
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 835-1874
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.33-1/3 Par Value
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Title of Class
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 .
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The aggregate market value of voting stock held by non-affiliates of the
registrant on March 31, 1996 was $275,304,192. The number of shares outstanding
of the Registrant's Common Stock at March 31, 1996 was 13,528,942.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the Proxy Statement for
the Annual Meeting of Shareholders to be held June 18, 1996.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K .
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APOGEE ENTERPRISES, INC.
FORM 10-K
TABLE OF CONTENTS
For the year ended March 2, 1996
<TABLE>
<CAPTION>
Description Page
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<S> <C> <C>
PART I
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Item 1. Business 3
Item 2. Properties 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote
of Security Holders 8
Executive Officers of the Registrant 8
PART II
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Item 5. Market for the Registrant's
Common Equity and Related
Stockholder Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 12
Item 8. Financial Statements and
Supplementary Data 17
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 18
PART III
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Item 10. Directors and Executive Officers
of the Registrant 18
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain
Beneficial Owners and Management 18
Item 13. Certain Relationships and
Related Transactions 18
PART IV
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Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K 18
Index of Financial Statements and Schedules F-1
</TABLE>
2
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PART I
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ITEM 1. BUSINESS
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The Company
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Apogee Enterprises, Inc. is a holding company incorporated under the laws of
the State of Minnesota in 1949. The Company, through its operating subsidiaries,
is primarily engaged in the fabrication, distribution and installation of value-
added glass products and window and curtainwall systems. Almost two-thirds of
the Company's revenues are generated from the nonresidential construction market
with the other one-third is coming from operations serving the auto glass
market. Three business segments comprise Apogee's operations: Building Products
& Services (BPS) serves certain sectors of the commercial and institutional,
detention and security building markets. Glass Technologies (GT) serves the
construction and imaging and display markets. Automotive Glass (AG) serves the
automotive glass replacement market. Financial information about the Company's
segments can be found at Note 17 to the consolidated financial statements of
Apogee Enterprises, Inc. contained in a separate section of this report. See
"Index of Financial Statements and Schedules"
Unless the context otherwise requires, the terms "Company" and "Apogee" as used
herein refer to Apogee Enterprises, Inc. and its subsidiaries.
Building Products & Services
- ----------------------------
The Company's Building Products & Services segment operates principally in the
design, engineering and installation of custom and standard curtainwall and
window systems for commercial, institutional as well as specialized and
detention and security building products and services. BPS operating units
include our detention and security companies (Norment and affiliates), our full
service glazing units, our global new construction curtainwall contractor
(Harmon Contract) and our metal fabricating and finishing businesses (Wausau
Architectural Products).
BPS's detention and security units design, manufacture and install complex
windows, doors and monitoring systems, for high-security buildings such as
prisons, jails, convenience stores, hospitals, schools and other governmental
facilities. BPS competes in the detention and security market through its
Norment operating unit which is a leader in the design, manufacture and
installation of institutional and governmental security and detention systems.
BPS also includes Airteq, which assembles pneumatic locks used in Norment's and
other detention and security systems.
BPS also has seven Harmon full service operations located around the country.
These centers offer complete replacement or glazing services for commercial and
other buildings. In addition, the full service units offer 24-hour replacement
service for storm or vandalism damage. In-house engineering capabilities allow
the units to duplicate the original design or create a completely new appearance
for renovated buildings.
BPS's Harmon Contract unit is one of the world's largest designers and
installers of curtainwall and window systems for nonresidential construction. It
has six offices throughout the United States as well as five in Europe and Asia.
BPS acquired a majority interest in Harmon Europe S.A., in fiscal 1994, a French
company engaged in both the manufacture and installation of curtainwall. This
office, in addition to the other European and Asian offices, has given the
division a stronger presence in overseas markets. All of the offices typically
design, assemble and install a building's exterior skin. The enclosure usually
consists of a metal framing system which is glazed (filled) with glass in the
vision areas and opaque glass or panels in the non-vision (spandrel) areas.
Panels are usually made from aluminum, precast concrete or natural stone. The
segment procures its materials from a number of independent fabricators,
including the BPS's architectural metals units and Glass Technology's
architectural glass unit. Harmon Contract also serves as a stone subcontractor,
setting stone on both the exterior and interior of buildings.
BPS is subject to normal subcontractor's risks, including material and wage
increases, construction and transportation work stoppages and contractor credit
worthiness. In addition, office vacancy rates, tax laws concerning real estate
and interest rates are important factors which affect nonresidential
construction markets. Reduced competition on larger projects, custom designing
capability and a trend toward the use of more sophisticated materials for energy
conservation and design flexibility have helped BPS increase its market share
over the past several years.
The Wausau Architectural Products units of BPS designs and manufactures high-
quality, thermally-efficient aluminum window and curtainwall systems under the
"Wausau Metals and Milco" trade names. These products meet high standards of
wind load capacity and resistance to air and moisture seepage. Wausau's aluminum
window frame designs are
3
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engineered to be thermally efficient, utilizing high-strength polyurethane to
limit the transfer of heat or cold through the window frame. Products are
marketed through a nationwide network of distributors and a direct sales staff.
Sales are made to building contractors, including Harmon Contract, for new
construction and to building owners for retrofitting older buildings. Wausau
Metals maintains design and product engineering staffs to prepare aluminum
window and curtainwall system designs to fit customers' needs and to originate
new product designs. Wausau Metals occasionally joins Harmon Contract in
pursuing certain projects, as many architects and general contractors prefer to
work with an experienced curtainwall subcontractor and manufacturer team.
Operating under the "Linetec" name, the architectural products unit also has
two metal coating facilities which provide anodized and fluoropolymer coatings
to metal. Anodizing is the electrolytic process of putting a protective, often
colored, oxide film on light metal, typically aluminum. Fluoropolymer coatings
are high quality paints which are sometimes preferred over anodizing because of
the wide color selection. Coatings are applied to window and curtainwall
components for the Company, as well as other companies' architectural and
industrial aluminum products.
Glass Technologies
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The businesses of our Glass Technologies segment add value to ordinary glass
through fabrication of high-technology coatings products which provide strength,
energy efficiency in high-rise structures and optical clarity for mirrors, glare
filter screens and picture frame glass. The operating units in this segment
include Viracon our architectural glass unit, Tru Vue, our picture framing glass
unit and our two coating units, Marcon Coatings (Marcon) and Viratec Thin Films
(Viratec), which were 50%-owned joint ventures through fiscal 1996.
Viracon, our architectural glass unit, fabricates finished glass products and
provides glass coating services, primarily under the "Viracon" and "Marcon
Coatings" names. These operating units purchase flat, unprocessed glass in bulk
quantities from which a variety of glass products are fabricated, including
insulated and laminated architectural glass; security glass and laminated
industrial glass.
Laminated glass consists of two or more pieces of glass fused with a plastic
interlayer and is used primarily for strength and safety in skylights and in
security applications. Sales of laminated safety glass products have increased
with the adoption of federal and state safety glazing standards. Insulating
glass, comprised of two or more pieces of glass separated by a sealed air space,
is used in architectural and residential applications for thermal control.
The Viracon unit is able to fabricate all types of architectural glass
(insulating, laminated and combinations of both) at its Owatonna, Minnesota
complex. Combined with the adjacent Marcon glass coating capabilities, the
segment is able to provide a full range of products from a central location. It
markets its products nationally and overseas to glass distributors, glazing
contractors (including Harmon Contract) and industrial glass fabricators. A
substantial portion of its glass products is delivered to customers by Viracon's
fleet of company-owned trucks, providing "backhaul" capability for its raw
materials, thereby reducing shipping time, transportation costs and breakage
expense.
Marcon provides glass coating services to Viracon, as well as outside
customers. Marcon's reflective and low-emissivity coatings reduce energy costs
and provide innovative design features for window and curtainwall systems. Low-
emissivity coatings are an invisible, metallic film deposited on glass which
selectively limits the transfer of heat through the glass. Low-emissivity coated
glass represents a fast-growing segment of both residential and nonresidential
glass markets.
Viratec develops advanced, optical-display and imaging coatings for glass and
other surfaces. These products are used in aftermarket anti-glare computer
screens, high-quality optical components and high performance mirror products
for the imaging industry. Viratec markets optical display and imaging products
to both domestic and overseas customers. These customers provide further
assembly, marketing and distribution to end users. Through fiscal 1996, the
Company accounted for its investment in Marcon and Viratec using the equity
method. Information about the Company's ownership and investment in Marcon and
Viratec is further described in Note 10 to the consolidated financial statements
of Apogee Enterprises, Inc. contained in a separate section of this report. See
"Index of Financial Statements and Schedules"
Tru Vue is one of the largest domestic manufacturers of picture framing glass.
Tru Vue provides its customers with a full array of picture framing glass
products, including clear, reflection control, which diminishes reflection, and
conservation glass, which blocks ultraviolet rays. Tru Vue is also a
manufacturer of conservation picture framing matboard, which complements the
unit's glass product offerings. The products are distributed primarily through
independent distributors which, in turn, supply local picture framing markets.
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Automotive Glass
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The Automotive Glass (AG) segment is engaged in the automotive replacement
glass business through its Harmon Glass service centers (retail), Glass Depot
wholesale distribution centers (wholesale) and Curvlite fabrication center.
Harmon Glass operates automotive glass service centers in 36 states. The
centers replace and repair auto glass on the premises and also provide mobile
installation service. Primary customers include insurance companies (on behalf
of their insured clients), fleet owners and car owners. The service centers also
carry limited inventories of flat glass, which are sold at retail for such
purposes as home window repair and table tops. Some automotive accessories are
also sold and installed at certain service centers. Quality service is
emphasized in all service centers. The Company believes Harmon Glass is the
third-largest auto glass retailer in the United States. The unit also operates a
centralized service for handling auto glass claims under the name "National Call
Center" (Center). The Center, on behalf of its insurance company and fleet
customers, handles replacement glass claims made by policyholders or fleet
owners. Calls are placed through a toll-free number to the Center located in
Orlando, Florida. Customer service agents arrange for the prompt replacement or
repair of auto glass by either a Harmon Glass service center or an affiliated
shop member of the Center's network and begins the process of filing the claim
electronically with the applicable insurance company. The Center subcontracts
for replacement and repair services with over 3,300 auto glass stores
nationwide. The unit seeks to maximize the electronic exchange of information,
which reduces claim costs and eliminates errors. This type of service is a fast-
growing segment for the segment.
The auto glass distribution centers, known as "Glass Depot", supply the Harmon
Glass service centers with auto and flat glass and related products, as well as
selling wholesale to other glass installers. Due to the variety of makes and
models of automobiles, automotive glass service centers typically stock only
windshields for the most popular models. As a result, there is a demand for
distributors to maintain inventories of automotive glass and to provide prompt
delivery. The Glass Depot distribution centers maintain a broad selection of
automotive glass. Purchases of fabricated automotive glass are made from several
primary glass manufacturers and fabricators, including the segment's Curvlite
unit.
Curvlite fabricates replacement windshields for foreign and domestic
automobiles and laminated glass parts for the transportation industry. It
fabricates approximately 800 types of replacement windshields which are marketed
nationally to distributors and glass shops, including the Glass Depot
distribution centers. Curvlite seeks to offer a broad selection of windshields
by promptly adding new windshields as new models are introduced.
In fiscal 1996, the AG segment acquired or opened 7 new distribution centers
and 8 service centers, bringing its year-end total to 60 and 264 respectively.
The segment continues to evaluate opportunities to expand both its retail and
wholesale auto glass segments, while closely monitoring existing units'
profitability.
Under a franchise agreement with Midas International Corporation, the segment
operates eight Midas Muffler locations in Minnesota, South Dakota, North Dakota
and Wisconsin.
Competition
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All segments of the Company's business are fairly mature and are highly
competitive. The curtainwall subcontractor business is primarily price
competitive, although Harmon Contract's reputation for quality engineering and
service is an important factor in receiving invitations to bid on large complex
projects. The Wausau Architectural Products group competes against several major
aluminum window manufacturers. Wausau Metals primarily serves the custom portion
of this market in which the primary competitive factors are product quality,
reliable service and the ability to provide technical engineering and design
services. The Glass Technologies segment competes with several large integrated
glass manufacturers and numerous smaller specialty fabricators. Product pricing
and service are the primary competitive factors in this market. The Auto Glass
units compete with other auto glass shops, glass distributor warehouses, car
dealers, body shops and fabrication facilities on the basis of pricing and
customer service. Its competition consists of national and regional chains as
well as significant local competition.
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Markets
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BPS serves the domestic and international nonresidential construction market,
which tends to be cyclical and has been on a slow recovery, both in terms of
dollars and square feet of new contract awards. This market was hard hit due to
the overbuilding in past years, tax law changes, tightening credit standards,
business restructurings and other factors. The resulting contraction in demand
for building materials and construction services has intensified competition,
squeezed profit margins and contributed to some business failures in the market
sectors served by the Company. In response to these circumstances, BPS has
consolidated manufacturing facilities, closed offices and reduced personnel and
discretionary expenses. It has also redirected its marketing focus to sectors
with relative strength, including remodeling, institutional (including detention
and security) and international markets.
GT services the architectural glass, computer, optical imaging and picture
framing glass markets in which coated glass is becoming the industry standard.
These markets are very competitive, highly responsive to new products and can be
price sensitive. GT is believed to possess the world's largest coating capacity
for glass and to be a leading global fabricator of high-performance
architectural glass. Its one location capabilities allows the segment to meet
customer needs and react quickly to market demands while improving margins and
developing new products.
AG services the automotive glass aftermarket which is influenced by a variety of
factors, including new car sales, gasoline prices, speed limits, road
conditions, the economy, weather and average number of miles driven. A
transformation of the industry's pricing structure has intensified competition.
In recent years, major purchasers of auto glass, such as insurance companies,
have increasingly requested volume pricing and awarded regions to glass
providers at significant discounts from historical levels. As a result, margins
have narrowed at the retail level and, to a lesser extent, at wholesale and
manufacturing levels.
Sources and Availability of Raw Materials
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None of the Company's operating units are significantly dependent upon any one
supplier. The Company believes a majority of its raw materials (bulk flat glass,
aluminum extrusions, automotive glass and related materials) are available from
a variety of domestic sources.
Trademarks and Patents
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The Company has several nationally recognized trademarks and trade names which
it believes have significant value in the marketing of its products. Harmon
Glass(R), Harmon Contract(R), Norment(R), Airteq(R), Viratec(R), Tru Vue(R), The
Glass Depot(R), and Linetec(R) are registered trademarks of the Company. Viratec
Thin Films has obtained several patents pertaining to its glass coating methods.
However, no single patent is considered to be materially important to the
Company.
Foreign Operations and Export Sales
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BPS has sales offices in Europe and Asia. Sales for those offices were
approximately $114,305,000, $66,580,000 and $65,021,000 for the years ended
March 2, 1996, February 25, 1995 and February 26, 1994, respectively. Operating
losses for 1996, 1995 and 1994, were $1,983,000, $6,575,000 and $887,000,
respectively. At March 2, 1996, February 25, 1995 and February 26, 1994, the
identifiable assets of foreign operations totaled $58,753,000, $41,880,000 and
$31,786,000, respectively. At March 2, 1996, the backlog of work for European
and Asian projects was $133 million. In addition, during the years ended March
2, 1996, February 25, 1995 and February 26, 1994, the Company's export sales,
principally from GT operations, amounted to approximately $38,348,000,
$30,241,000 and $27,643,000, respectively.
Employees
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The Company employed 6,163 persons at March 2, 1996, of whom 1,225 were
represented by labor unions. The Company is a party to 88 collective bargaining
agreements with several different unions. Fifty-two (52) of the collective
bargaining agreements will expire during fiscal 1997. The number of collective
bargaining agreements to which the Company is a party will vary with the number
of cities with active nonresidential construction contracts. The Company
considers its employee relations to be very good and has not recently
experienced any significant loss of work days due to strike.
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Backlog
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The backlog of orders is significant in the Company's construction-related BPS
segment. At March 2, 1996, the Company's total backlog of orders considered to
be firm was $405,000,000, compared with $366,000,000 at February 25, 1995.
Approximately $73,000,000 is not expected to be reflected as revenue in fiscal
1997.
ITEM 2. PROPERTIES
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The following table lists, by division, the Company's major facilities, the
general use of the facility and whether it is owned or leased by the Company.
<TABLE>
<CAPTION>
Facility Location Owned/Leased Function
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<S> <C> <C> <C>
Building Products & Services
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Harmon Contract headquarters Minneapolis, MN Leased Administrative
Norment Montgomery, AL Owned Mfg./Admin.
Harmon CFEM -- Sitraco Pinon, France Owned Mfg.
Harmon CFEM -- Facalu Epernon, France Owned Mfg.
Wausau Metals Wausau, WI Owned Mfg./Admin.
Wausau Metals - Plant II Wausau, WI Owned Mfg.
Linetec (Painting) Wausau, WI Owned Mfg./Admin.
Linetec (Anodizing) Wausau, WI Owned Mfg.
Glass Technologies
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Viracon Owatonna, MN Owned Mfg./Admin.
Tru Vue Chicago, IL Owned Mfg./Admin.
Marcon Coatings, Inc. (1) Owatonna, MN Owned Mfg./Admin.
Viratec Thin Films (1) Faribault, MN Owned Mfg./Admin.
Automotive Glass
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Curvlite Owatonna, MN Owned Mfg./Admin.
Harmon Glass and Glass
Depot headquarters Minneapolis, MN Leased Administrative
National Call Center Orlando, FL Owned Administrative
Other
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Apogee Corporate Office Minneapolis, MN Leased Administrative
</TABLE>
(1) 50% owned joint ventures through fiscal 1996.
The Building Products & Services segment 12 sales offices, 7 glazing service
centers and 8 fabrication facilities generally located in major metropolitan
areas in the United States, Europe and Asia, virtually all of which are leased.
The Glass Technologies segment has four fabrication facilities located in the
Midwest.
The Automotive Glass segment has 324 retail service and distribution centers
located nationally and eight Midas Muffler franchises located in the Midwest,
the majority of which are leased.
The Curvlite plant, a Wausau Metals facility, the Linetec paint facility, an
addition to one of the Wausau Metals plants and the National Call Center
administrative center were constructed with the use of proceeds from industrial
revenue bonds issued by those cities. These properties are considered owned,
since at the end of the bond term, title reverts to the Company.
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ITEM 3. LEGAL PROCEEDINGS
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Apogee has been party to joint venture agreements with a 50% partner, Marvin
Lumber & Cedar Company (JV partner), forming Marcon Coatings, Inc. and its
subsidiary, Viratec Thin Films, Inc. (Marcon/Viratec). Marcon/Viratec operates
glass coating facilities. Our 50% ownership investment in Marcon/Viratec was
accounted for using the equity method.
In November 1995, the JV Partner commenced litigation in the Third Judicial
District Court of Rice County pursuant to Minn. Stat. (S)302A.751 against Apogee
alleging claims for damages and seeking to have the Court order Apogee to sell
its 50% interest in the joint venture to the JV Partner. Apogee filed
counterclaims seeking to have the JV Partner's 50% interest sold to Apogee, and
in March 1996, the Court ordered the JV Partner to sell the share of stock
representing its 50% interest in Marcon/Viratec to Apogee upon payment by Apogee
of fair value for these shares as determined by the Court. The JV Partner's
rights and status as shareholder and directors were terminated as of the
effective date of the order and the fair value for the share is to be determined
by the Court after further proceedings. The Court has not yet scheduled a trial
or hearing to determine fair value.
At a hearing on April 23, 1996, the Court ordered Apogee to post a bond or
letter of credit in the amount of $50 million, or to pay the JV Partner $25
million and agree to set aside an additional $25 million, as security for the
ultimate payment of the purchase price for the JV Partner's shares. The amount
of such a bond or other means is intended as security and is not intended to
reflect the Court's view on what is fair value for the shares. The JV Partner's
claims against Apogee for damages are still pending and the Court also is
considering a motion brought by the JV Partner to add a claim for punitive
damages.
In addition to the above matter, Apogee is party to various legal proceedings
incidental to our normal operating activities. In particular, like others in the
construction industry, our construction business, is routinely involved in
various disputes and claims arising out of construction projects, sometimes
involving significant monetary damages. Although it is impossible to predict the
outcome of such proceedings, we believe, based on facts currently available to
us, that none of such claims will result in losses that would have a material
adverse effect on our financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
EXECUTIVE OFFICERS OF THE REGISTRANT
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<TABLE>
<CAPTION>
NAME AGE POSITION
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<S> <C> <C>
Donald W. Goldfus 62 Chairman of the Board of Directors,
Chief Executive Officer and President
Richard Gould 56 Senior Vice President
James L. Martineau 55 Vice President
Terry L. Hall 42 Vice President Finance and
Chief Financial Officer
William G. Gardner 50 Treasurer and Secretary
</TABLE>
Executive officers are elected annually by the Board of Directors and serve for
a one-year period. With the exception of Richard Gould, who has an employment
contract with the Company that covers the period through 2000, no other officers
have employment contracts with the Company. None of the executive officers or
directors of the Company are related.
All of the above named executive officers have been employees of the Company
for more than the last five years with the exception of Mr. Gould who joined the
Company in May 1994 and Mr. Hall who joined the Company in April 1995. Prior to
joining the Company, Mr. Gould was president of Gould Associates, a strategic
management consulting firm to a wide
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range of companies. Prior to joining the Company, Mr. Hall was Chief Financial
Officer of Tyco International from 1993 to 1995 and Vice President and Treasurer
of United Airlines from 1990 to 1993.
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
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MATTERS
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Apogee common stock is traded in the National Market System of the NASDAQ over-
the-counter market, under the ticker symbol APOG. Stock price quotations are
printed daily in major newspapers. During the fiscal year ended March 2, 1996,
the average trading volume of Apogee common stock was 887,870 shares per month,
according to NASDAQ.
As of March 31, 1996, there were 13,528,942 shares of common stock outstanding,
of which about 7.0 percent were owned by officers and directors of Apogee. At
that date, there were approximately 2,039 shareholders of record and 3,270
shareholders for whom securities firms acted as nominees.
The following chart shows the quarterly range and year-end close of the
company's common stock over the past five fiscal years.
<TABLE>
<CAPTION>
QUARTER QUARTER QUARTER QUARTER YEAR
I II III IV END
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<S> <C> <C> <C> <C> <C>
1992 12 3/4-18 12 3/4-14 1/2 10 3/4-14 3/8 9 1/2-14 12 1/4
1993 10 1/4-12 3/4 8 1/4-10 3/4 9 3/4-12 1/4 9 3/4-12 1/4 11 5/8
1994 10 1/4-12 1/2 11 1/2-14 1/4 11 1/4-14 1/2 13 1/2-17 3/4 14 1/2
1995 11 1/2-15 1/4 11 3/4-15 3/4 14 3/4-18 1/4 14 3/4-18 1/2 17 1/4
1996 16 1/2-18 14 1/2-18 1/4 14 1/4-15 3/4 13 -19 3/4 19 5/8
</TABLE>
It is Apogee's policy to pay quarterly cash dividends in May, August, November
and February. Cash dividends have been paid each quarter since 1974 and have
been increased each year since then. The chart below shows quarterly cash
dividends per share for the past five years.
<TABLE>
<CAPTION>
QUARTER QUARTER QUARTER QUARTER
I II III IV YEAR
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992 0.065 0.065 0.065 0.065 0.260
1993 0.065 0.065 0.070 0.070 0.270
1994 0.070 0.070 0.075 0.075 0.290
1995 0.075 0.075 0.080 0.080 0.310
1996 0.080 0.080 0.085 0.085 0.330
</TABLE>
9
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ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The following information should be read in conjunction with Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Item 8 - Financial Statements and Supplementary Data.
<TABLE>
<CAPTION>
1996 1995 1994* 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $ 871,147 756,549 688,233 572,450 596,281
Gross profit $ 118,523 105,889 83,895 78,201 101,580
Operating income $ 32,457 24,262 7,058 6,369 19,249
Net earnings $ 17,835 13,050 3,833 4,514 8,505
Earnings per share $ 1.31 0.97 0.29 0.34 0.63
Effective tax rate - % 36.9 40.2 60.9 42.3 39.6
OPERATING RATIOS
Gross margin - % 13.6 14.0 12.2 13.7 17.0
Operating margin - % 3.7 3.2 1.0 1.1 3.2
Net margin - % 2.0 1.7 0.6 0.8 1.4
Return on
Average shareholders' equity - % 13.5 10.9 3.4 4.0 7.6
Average invested capital - % 7.6 6.7 2.4 3.0 5.7
Average total assets - % 4.8 3.9 1.4 1.8 3.4
FUNDS FLOW DATA
Cash flow before changes in
operating assets and liabilities $ 31,514 27,192 20,470 19,187 31,256
Depreciation and amortization $ 16,528 15,131 15,724 15,110 16,305
Capital expenditures $ 22,615 24,957 14,046 9,166 12,974
Dividends $ 4,453 4,155 3,841 3,584 3,505
YEAR-END DATA
Total assets $ 386,136 361,928 306,188 251,456 249,509
Current assets $ 258,559 256,820 221,286 169,029 166,376
Current liabilities $ 142,477 135,719 140,846 99,787 101,011
Working capital $ 116,081 121,101 80,440 69,242 65,365
Current ratio 1.8 1.9 1.6 1.7 1.6
Long-term debt $ 79,102 80,566 35,688 28,419 25,267
% of invested capital 32.5 35.6 21.6 18.7 17
Shareholders' equity $ 138,921 124,629 114,063 112,335 113,781
% of invested capital 57.0 55.1 69.0 74.1 76.6
Backlog $ 404,737 363,751 405,223 322,323 231,949
INVESTMENT INFORMATION
Dividends per share $ 0.330 0.310 0.290 0.270 0.260
Book value per share $ 10.28 9.27 8.57 8.53 8.45
Price range during year:
High $ 19 3/4 18 1/2 17 3/4 12 3/4 18
Low $ 13 11 1/2 10 1/4 8 1/4 9 1/2
Close $ 19 5/8 17 1/4 14 1/2 11 5/8 12 1/4
Price/earnings ratio at year-end 15 18 50 34 19
Dividend yield at year-end - % 1.7 1.9 2 2.3 2.1
Shares outstanding 13,517,000 13,443,000 13,312,000 13,177,000 13,461,000
Average monthly trading volume 887,870 806,506 259,450 322,147 693,029
</TABLE>
* Fiscal 1994 figures reflect the cumulative effect of a change in accounting
for income taxes, which increased net earnings by $525,000, or 4 cents per
share.
10
<PAGE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987** 1986**
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $ 599,525 589,657 433,740 312,051 279,097 249,570
Gross profit $ 100,097 93,718 72,214 57,350 48,300 42,189
Operating income $ 33,267 32,033 24,134 20,211 17,867 17,383
Net earnings $ 17,017 14,095 13,421 11,615 8,523 8,233
Earnings per share $ 1.25 1.04 1.00 0.87 0.64 0.62
Effective tax rate - % 37.1 37.1 38.2 41.8 46.6 47.5
OPERATING RATIOS
Gross margin - % 16.7 15.9 16.6 18.4 17.3 16.9
Operating margin - % 5.5 5.4 5.6 6.5 6.4 7.0
Net margin - % 2.8 2.4 3.1 3.7 3.1 3.3
Return on
Average shareholders' equity - % 17.8 15.7 17.2 17.3 14.5 15.9
Average invested capital - % 11.4 9.8 11.4 13.2 11.2 11.9
Average total assets - % 6.9 6.2 7.6 9.0 7.8 8.5
FUNDS FLOW DATA
Cash flow before changes in
operating assets and liabilities $ 34,284 31,030 23,145 18,167 13,200 17,227
Depreciation and amortization $ 13,309 12,141 8,987 6,586 4,339 3,601
Capital expenditures $ 12,798 16,985 23,680 11,311 15,773 7,905
Dividends $ 3,248 2,693 2,140 1,807 1,516 1,342
YEAR-END DATA
Total assets $ 250,343 244,103 207,686 143,487 115,738 102,580
Current assets $ 162,676 154,845 126,881 86,026 68,250 71,823
Current liabilities $ 102,492 94,948 68,921 47,652 36,199 30,253
Working capital $ 60,184 59,897 57,960 38,374 32,051 41,570
Current ratio 1.6 1.6 1.8 1.8 1.9 2.3
Long-term debt $ 29,398 41,366 46,277 17,899 12,136 14,196
% of invested capital 19.9 27.7 33.3 18.7 15.3 19.6
Shareholders' equity $ 109,050 95,754 83,871 72,062 62,561 55,381
% of invested capital 73.8 64.2 60.4 75.2 78.7 76.6
Backlog $ 245,000 299,810 333,240 228,532 124,161 108,195
INVESTMENT INFORMATION
Dividends per share $ 0.240 0.200 0.160 0.135 0.112 0.101
Book value per share $ 8.09 7.11 6.25 5.40 4.68 4.17
Price range during year:
High $ 20 1/8 18 3/4 14 1/4 12 1/4 15 1/8 10 3/4
Low $ 13 1/4 13 10 7 1/2 7 5/8 6 1/8
Close $ 18 14 3/4 13 5/8 11 10 3/8 10 13/32
Price/earnings ratio at year-end 14 14 14 13 16 17
Dividend yield at year-end - % 1.3 1.4 1.2 1.2 1.1 1.0
Shares outstanding 13,477,000 13,467,000 13,414,000 13,349,000 13,362,000 13,268,000
Average monthly trading volume 606,341 861,486 720,041 633,493 880,458 473,599
</TABLE>
** The per share data for fiscal 1987 and 1986 has been adjusted for the fiscal
1987 stock dividend.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
FINANCIAL GOALS
Prior to fiscal year 1992, a significant portion of Apogee's operating income
was generated by units serving the nonresidential construction market.
Specifically, when office building construction activity dropped precipitously
in the early 1990's, Apogee's history of steadily growing sales and earnings
came to an abrupt halt. In an effort to return to historical earnings growth, we
have reexamined the manner in which we direct assets and how we operate our
businesses. The results of these efforts have been to begin to reallocate our
capital to our more profitable businesses, to set higher return requirements for
capital investments, to reduce working capital levels and to raise productivity
of our enterprises.
A year ago we stated that our primary goal was to exceed the record earnings
achieved in fiscal 1991. We were able to fulfill that goal in fiscal 1996. Going
forward, assuming reasonably stable competitive and economic conditions, it is
our goal to increase earnings per share at a compounded annual rate of 15% or
greater.
In support of the above goal, we have now divided our businesses into three
segments that reflect how we view our company while providing a clearer picture
of our operations. Our new segmentation is defined as: Building Products &
Services (BPS), Glass Technologies (GT) and Auto Glass (AG). Our commitment to
the efforts described above is further outlined in the following segment
analysis.
PERFORMANCE
FISCAL 1996 COMPARED TO FISCAL 1995
The following table illustrates the relationship between various components of
operations, stated as a percent of net sales, for the three years ended March 2,
1996.
<TABLE>
<CAPTION>
Percent of Net Sales
===================================
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net sales......................................... 100.0 100.0 100.0
Cost of sales..................................... 86.4 86.0 87.8
Gross profit.................................... 13.6 14.0 12.2
Selling, general and administrative expenses...... 9.9 10.8 10.4
Provision for business restructuring and.......... - - 0.8
asset valuation
Operating income................................ 3.7 3.2 1.0
Interest and other expense, net................... 0.7 0.5 0.4
Earnings before income taxes and other items... 3.1 2.7 0.6
Income taxes...................................... 1.1 1.1 0.4
Equity in net earnings of affiliated companies.... (0.1) (0.1) (0.3)
Minority interest................................. (0.1) - 0.1
Net earnings before cumulative effect of
change in accounting for income taxes........ 2.0 1.7 0.5
Cumulative effect of change in accounting
for income taxes............................. - - 0.1
Net earnings................................... 2.0 1.7 0.6
</TABLE>
Consolidated net sales grew 15% to $871 million in fiscal 1996 as all three
segments reported double-digit gains. Our GT segment benefitted from improved
volume and firm pricing for its fabricated architectural glass products while
our AG segment experienced higher unit volumes at a greater number of locations.
AG's sales improvement was somewhat dampened by the continuation of industry
pricing pressure. Apogee's BPS segment's sales grew mainly due to higher
12
<PAGE>
overseas building activity. Approximately 2% of the consolidated net sales came
from an additional week in the 53-week fiscal 1996 compared to a 52-week fiscal
1995.
Overall, cost of sales, as a percent of sales, grew slightly as productivity
gains at GT were offset by narrowing margins at our AG segment.
Selling, general and administrative expenses (SG&A) grew 5%, reflecting
increased information systems and marketing costs at our AG segment as it worked
to expand market coverage and develop new services to meet customers' needs.
However, SG&A costs fell sharply as a percentage of sales, due to strong sales
gains and cost cutting measures undertaken by all of our operating segments.
Net interest expense rose 38% due to a combination of higher interest rates and
higher borrowing levels in the first half of the year necessitated by our
working capital needs.
Our effective tax rate dropped to 36.9% from 40.2% in fiscal 1995. The decrease
was primarily due to the tax benefits related to higher export sales levels and
a decrease in our deferred tax asset valuation allowance.
Equity in net earnings of affiliates dropped slightly as pricing for certain
coated products became more competitive in the latter half of the year, and
continuing development costs at Viratec Thin Films offset solid earnings from
its main product line. Minority interest rose due to a larger loss at Harmon
Europe S.A., our 70%-owned French unit.
Consolidated net earnings advanced 37% in fiscal 1996 to $17.8 million or $1.31
a share, from $13.1 million, or $0.97 a share, a year ago. Return on
shareholders' equity rose to 13.5% from 10.9% a year earlier.
SEGMENT ANALYSIS
The following information provides a more detailed look at each of our three
segments. For a concise five year look at each segment, see "Index of Financial
Statements and Schedules" Note 17 Business Segment Information.
BUILDING PRODUCTS & SERVICES (BPS) made substantial progress in fiscal 1996.
Revenues grew 16%, primarily due to progress on the Kuala Lumpur City Centre
project in Malaysia and higher European revenues. The segment's operating loss
fell from prior year's $6.1 million to $2.1 million. Harmon Contract, BPS's
domestic and international curtainwall construction unit reduced its loss
approximately 60% while the segment's Wausau Architectural Products group
reported modest operating income compared to a loss a year earlier, and 17%
revenue growth. Both units' improvements were achieved through overhead and
operating cost reductions and by newly implemented monitoring systems which
allow money-saving decisions to be made earlier in a project's completion cycle.
BPS believes the new project management systems and cost saving efforts will
allow it to make further improvements in profitability.
The segment's full service glazing group had another solid year generating
strong revenues and healthy operating income. BPS's detention and security unit
reported lower revenues, but produced a small profit, though notably less than a
year ago. However, the unit's year-end backlog was up 53% over a year ago.
In July 1995, BPS sold the Nanik Window Coverings group for $17.6 million. A
$4.2 million gain on the sale was included under the caption, "Other expense,
net" in the Consolidated Results of Operations. In fiscal 1996, the window
coverings group contributed 3% of segment sales and a small operating profit
compared to 7% of sales and a $1.4 million operating profit in fiscal 1995.
Apogee ended the fiscal year with a $405 million backlog, up 11% from $364
million at the end of fiscal 1995. BPS's backlog is almost 98% of the total.
Based upon analysis of its backlog, BPS anticipates nominal sales growth in
fiscal 1997 due to the increased selectivity of projects taken over the past
year. However, better margins are expected as the segment completes its
remaining older, lower-margin projects and progresses further with healthier
margin projects. Approximately $73 million of the February 1996 backlog will not
be reflected as revenue in fiscal 1997.
GLASS TECHNOLOGIES (GT) includes Viracon, our architectural glass fabricator,
and Tru Vue, our picture framing glass manufacturer, both previously part of
BPS. Marcon Coatings (Marcon), which applies coatings to architectural and
13
<PAGE>
residential building glass, and Viratec Thin Films (Viratec), which applies
optical-grade coatings to glass and other substrates, are also part of GT.
Through fiscal 1996, Apogee's equity in Marcon's and Viratec's net earnings was
included in the Consolidated Results of Operations under the caption "Equity in
net earnings of affiliated companies."
GT had outstanding results in fiscal 1996, increasing revenues and operating
income by 24% and 57%, respectively. Both operations experienced strong demand
for products and benefitted from firmer pricing environments. While the segment
contributed just 17% of consolidated revenues, it provided 51% of consolidated
operating income.
Much of the segment's success was due to our Viracon operation, which ran at
near or full capacity for most of the year. In fiscal 1996, Viracon grew
revenues and operating income by 27% and 67%, respectively. Additional capacity
is planned to be on-line in summer 1996. Viracon's cost structure, along with
the expansion, will allow the unit to begin to penetrate the mid-performance
architectural glass market, a market which is approximately two times the size
of the high-performance architectural glass market, a market Viracon
traditionally serves. Tru Vue had similar results, increasing revenue and
earnings by 12% and 27%, respectively. The unit was able to achieve the growth
through efforts to streamline operations and integrate the two-year old matboard
acquisition.
Both Marcon and Viratec increased revenues over the prior year. Marcon had a
decline in operating income, as start-up expenses related to a new coater
negatively affected earnings. Viratec was able to grow operating income despite
pricing pressures for its flat glass operations and developmental costs related
to the CaRT line. At March 2, 1996, Viratec's backlog of $8 million was down 43%
from the prior year-end.
In November 1995, Apogee's 50% joint venture partner (JV Partner) in
Marcon/Viratec commenced litigation against us, alleging claims for damages and
seeking to have the Court order Apogee to sell its 50% interest to the JV
Partner. Apogee filed counterclaims seeking to have the JV Partner's 50%
interest sold to Apogee, and in March 1996, the Court ordered the JV Partner to
sell the shares of stock representing its 50% interest in Marcon/Viratec to
Apogee upon payment by Apogee of fair value for those shares as determined by
the Court. The JV Partner's rights and status as shareholder and directors were
terminated as of the effective date of the order and the fair value for the
shares is to be determined by the Court after further proceedings. The Court has
not yet scheduled a trial or hearing to determine fair value.
At a hearing on April 23, 1996, the Court ordered Apogee to post a bond or
letter of credit in the amount of $50 million, or to pay the JV Partner $25
million and agree to set aside an additional $25 million, as security for the
ultimate payment of the purchase price for the JV Partner's shares. The amount
of such a bond or other means is intended as security and is not intended to
reflect the Court's view on what is the fair value for the shares. The JV
Partner's claims against Apogee for damages are still pending and the Court also
is considering a motion brought by the JV Partner to add a claim for punitive
damages.
Apogee anticipates GT will report sales and earnings gains in fiscal 1997
through expanded production capacity and streamlined operations for Viracon and
Tru Vue. The Company believes full control of Marcon and Viratec will allow
Apogee more strategic and operating flexibility.
AUTO GLASS (AG) had mixed results in fiscal 1996. The segment grew sales 10%
during the year despite pricing pressures and lower unit movement in the auto
glass industry. Operating income declined 5% due to lower margins and expenses
related to investment in improved information systems and marketing programs.
AG, which operates retail stores under the Harmon Glass (Harmon) name and
distribution centers under the Glass Depot name, possesses the third-largest
share in the auto glass repair and replacement industry.
The segment increased market penetration in fiscal 1996 as Harmon grew by 8
retail locations while Glass Depot added 7 distribution centers. At March 2,
1996, AG had 264 Harmon retail glass stores, 60 Glass Depot locations and 8
Midas Muffler franchises in 36 states.
Insurance companies increasingly rely on auto glass vendors with information
systems to expedite claims processing and other administrative efforts related
to auto glass replacement and repair. This outsourcing allowed insurance
companies to improve customer satisfaction and lower costs. The segment's
significant investment in information systems provides Harmon the means to offer
comprehensive claims processing and management services to these customers on a
nationwide basis. Harmon was able to use this competitive edge to gain market
share in fiscal 1996. This market share gain is
14
<PAGE>
reflected in Harmon's 7.5% jump in retail same-store sales as contrasted with a
10% drop in overall industry unit movement.
Curvlite, AG's auto glass fabricator, reported increased sales and unit volume
in a declining sales price market. However, weaker pricing and costs related to
setting up its new product and delivery systems negatively affected operating
income. Through the unit's National Distribution Center, a mega-distribution
center offering other manufacturers' products as well as its own for both
domestic and foreign vehicles, Curvlite was able to offer a more complete
product line to its customers. Another new program was AutoGlass Express, a
delivery system which allows Curvlite to fill customer's orders on an individual
basis more completely and faster than many of its competitors. The unit believes
the two new initiatives will give it a competitive edge and help to gain market
share.
AG anticipates sales growth to continue as it starts to leverage its information
and delivery systems in fiscal 1997. Even with higher sales, it is difficult to
project if operating earnings will improve as the full costs of the information
systems begin to be realized in fiscal 1997 and industry pricing pressures
continue.
FISCAL 1995 COMPARED TO FISCAL 1994
Consolidated net sales rose 10% to $757 million in fiscal 1995, primarily due to
strong replacement auto glass markets, robust demand for architectural glass
products, and higher detention and security contracting revenues. Our gross
margin increased nearly two percentage points as pricing improved slightly for
replacement auto glass and architectural glass products. Productivity gains
outpaced moderate increases in wages and benefits, including lower medical plan
costs. In addition, the margin gains reflected operating improvements by our
nonresidential construction and architectural products operations, despite the
continuation of depressed margins for those units' markets.
As a percentage of net sales, selling, general and administrative expenses
(SG&A) crept slightly higher, but grew substantially in absolute dollars. The
majority of the increase resulted from expenditures by our auto glass retail and
wholesale businesses for the development of improved information systems to
better meet customer needs, as well as for expanded marketing programs related
to windshield repair.
Net interest expense rose 51%, due to the combination of higher interest rates
and increased borrowing levels required to meet working capital and capital
investment needs.
Our effective income tax rate fell substantially, from 60.9% in fiscal 1994, to
40.2% in 1995, as increased domestic earnings were taxed at essentially the
statutory rate. The fiscal 1994 rate was unusually high due to an increase in
our deferred tax asset valuation.
Equity in net earnings of affiliated companies dropped 67%, to $0.8 million, in
fiscal 1995. New product and process development costs at Viratec Thin Films
substantially offset strong earnings of the unit's anti-glare screen business.
Minority interest differed from a year ago as Harmon Europe S.A. reported a loss
in fiscal 1995 compared to net earnings in the prior year.
Fiscal 1995 consolidated net earnings grew 240%, to $13.1 million, or $.97 per
share, up from $3.8 million or 29 cents per share a year ago, which included the
$525,000, or 4 cents per share, cumulative effect of the change in accounting
for income taxes reported in fiscal 1994. Return on average shareholders' equity
grew to 10.9%, up from 3.4% a year earlier.
At February 25, 1995, our consolidated backlog was $364 million, down 10% from
$405 million twelve months earlier. Decreases in our domestic and Asian
construction backlogs exceeded the combined increases in other areas. While our
backlog declined, it was expected that recently recorded orders would provide
margin improvement. At February 25, 1995, approximately $84 million of the
February 1995 backlog was not expected to be reflected as revenue in fiscal
1996.
BUILDING PRODUCTS & SERVICES (BPS) increased revenues 6% in fiscal 1995, to $400
million, and reported a $6.1 million operating loss, a $16.4 million reduction
from its loss a year earlier. Within the segment, 24% revenue growth was
achieved at the detention and security unit, largely due to fast-track projects
entered into early in the year. Harmon Contract reported a 2% decline in
domestic revenues, but slashed its operating loss by 85%. With a lower cost
structure and improved project management, Harmon worked through much of its
narrow-margin backlog, obtained in the intensely competitive pricing environment
of 1991-1993.
15
<PAGE>
Harmon Contract's overseas operations recorded flat revenues compared to a year
ago, with higher Asian revenues offset by less activity in Europe. Operating
results suffered from low-margin projects and overhead growth related to brisk
bidding activity in both Europe and Asia. The segment's architectural products
group also rebounded sharply. Sales grew 9%, with firmer pricing, beefed-up
engineering and better factory utilization, nearly eliminating the prior year's
significant operating loss.
Overall, BPS made progress in controlling its costs, with a $2 million reduction
in SG&A expenses, the result of restructuring measures taken in fiscal 1994, as
well as ongoing cost control measures.
GLASS TECHNOLOGIES (GT) had a 19% gain in revenues and a 32% increase in
operating income year over year. High demand and firmer pricing for Viracon's
architectural glass products boosted its sales 22%, which led to margin gains
and strong profit growth for the unit. Viracon ran at near capacity for most of
the year as demand for its products remained strong. GT's picture framing
products unit recorded steady sales gains and solid earnings, although behind
historical levels.
Marcon Coatings reported healthy sales and earnings growth, as that unit
benefitted from rapidly growing Viracon sales. Viratec reported an 8% gain in
revenues, while pre-tax earnings were down 74% from last year. Demand for
Viratec's coated glass for anti-glare computer screens remained strong,
especially in overseas markets, as the European Community adopted stricter
safety regulations for limiting computer emissions. Viratec invested heavily in
research and development costs during fiscal 1995 to begin limited direct-
coating of cathode ray tubes (CRTs), accounting for the reduction in bottom-line
results. At February 25, 1995, Viratec's backlog stood at $14.5 million, up 11%
from a year earlier.
AUTO GLASS (AG) segment achieved net sales of $249 million, up 12% over a year
ago, while reporting operating income of $19.1 million, modestly ahead of fiscal
1994's strong performance. High demand for replacement auto glass, along with
share gains in selected markets, helped to boost revenues. Price increases early
in the year were somewhat eroded by volume discounts to major customers. Despite
the sales increase, operating income for the segment was flat with the prior
year, as costs to expand marketing programs and develop state-of-the-art
information systems offset gross profit gains.
Both Harmon Glass (retail) and Glass Depot (wholesale) advanced same-location
sales by 7%, reflecting overall market growth. The higher volume contributed to
gross margin growth, but higher SG&A costs limited the units' operating income
gain to 4%. Viracon/Curvlite maintained high factory utilization throughout the
year, producing record sales and strong earnings. Windshield unit shipments grew
8%. Also, Curvlite invested in equipment to expand capacity and lower production
costs.
During the year, the AG segment acquired or started up 33 retail stores and nine
wholesale depots, including a chain of 13 retail stores and one warehouse in the
Washington, D.C. area, acquired in January, 1995. This acquisition gave AG a
significant position in that attractive East Coast market. The group closed
seven retail and one distribution locations during the year, to end the year
with 256 retail stores, 53 wholesale depots and 7 Midas Muffler locations.
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL CONDITION Major balance sheet items as a percentage of total assets
at March 2, 1996 and February 25, 1995 are presented below:
<TABLE>
<CAPTION>
Percent of Total Assets
1996 1995
---- ----
<S> <C> <C>
Current assets........... 67 71
Current liabilities...... 37 37
Long-term debt........... 20 22
Other liabilities........ 7 5
Shareholders' equity..... 36 34
</TABLE>
Net receivables decreased 4% due in part to strong efforts by all segments to
keep accounts current and reduce working capital. The sale of our window
coverings group also reduced both receivables and inventories by almost $5
million each. Inventories and costs in excess of billings grew by approximately
$3 million and $7 million, respectively. The increases
16
<PAGE>
occurred with rising production levels and changes in contract billing
agreements, which extended billing cycles for the nonresidential construction
units.
Total long-term and short-term debt stood at $84.4 million at March 2, 1996,
down $8.8 million from a year earlier. The Company made working capital
reduction one of its priorities in fiscal 1996 as can be evidenced by the
reduction in debt. In May 1996, Apogee expanded its revolving credit facilities
to $150 million; as a result, $73.4 million of short-term borrowings at March 2,
1996 were classified as long-term debt. For fiscal 1997, we believe our
continued efforts to reduce working capital plus our credit facilities will
enable us to maintain liquidity while achieving improved results.
CAPITAL INVESTMENT New capital investment in fiscal 1996 totaled $29.0 million,
versus $39.6 million and $19.4 million in fiscal 1995 and 1994, respectively.
Expenditures for new property, plant and equipment totaled $22.5 million, and
consisted of information systems, facility additions and manufacturing equipment
additions and upgrades. We also invested $3.8 million to fund AG's acquisition
of retail stores and wholesale depots.
Capital investment for fiscal 1997 is estimated at $30 million. Further
upgrading of information and communication systems and construction of a major
distribution center are the primary components of AG's plan. GT's plans
primarily consist of expenditures for capacity expansion and productivity
improvements and BPS plans include information systems upgrades and productivity
improvements.
SHAREHOLDERS' EQUITY Apogee's book value rose 10% in fiscal 1996 from $9.27 to
$10.28 per share, with outstanding common shares increasing by one percent. Net
earnings less dividends, along with common stock issued in connection with long-
term compensation plans, essentially accounted for the increase. During fiscal
1996, we increased our quarterly dividend by 6%, to 8.5 cents per share, our
21st consecutive year of increase.
IMPACT OF INFLATION Apogee's financial statements are prepared on a historical
cost basis, which does not completely account for the effects of inflation.
However, since the cost of most of our inventories is determined using the last-
in, first-out (LIFO) method of accounting, cost of sales, except for
depreciation expense included therein, generally reflects current costs.
Although year-end prices were essentially unchanged from a year ago, the cost of
glass, one of Apogee's primary raw materials, fluctuated during fiscal 1996
reflecting varying demand from the U.S. construction and auto industries. We
expect the cost of glass to rise moderately in fiscal 1997. Aluminum prices were
volatile during the fiscal year and ended on a slight decline from fiscal 1995
year-end pricing. While our construction and supply contracts are at fixed
prices, the material components are usually based on firm quotes obtained from
suppliers. Labor cost increases, including taxes and fringe benefits, can be
reasonably anticipated. Through new efficiencies and cost containment programs
set up at most operating units, selling, general and administrative expenses
were reduced or held relatively constant during fiscal 1996.
OUTLOOK
We believe that improving market conditions for nonresidential construction,
flat demand for automotive replacement glass and continued strong demand for
architectural glass and coated glass products will allow Apogee to improve
earnings in fiscal 1997. Better project selection and management, continued cost
containment programs and efficiencies, and competitive advantages from
information management technology should contribute to earnings growth.
CAUTIONARY STATEMENT
A number of factors should be considered in conjunction with any discussion of
operations or results by the Company or its representatives, including any
forward-looking discussion, as well as comments contained in press releases,
presentations to securities analysts or investors, or other communications by
the Company. These factors are set forth in Exhibit 99 to this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The information called for by this Item is contained in a separate section of
this report. See "Index of Financial Statements and Schedules".
17
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
--------
ITEMS 10, 11, 12 and 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT;
---------------------------------------------------
EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN
-----------------------------------------------------
BENEFICIAL OWNERS AND MANAGEMENT; AND CERTAIN
---------------------------------------------
RELATIONSHIPS AND RELATED TRANSACTIONS.
--------------------------------------
The information required by these Items, other than the information set forth
above in "Executive Officers of the Registrant," is included on pages 1 to 10 of
the Proxy Statement for the Annual Meeting of Shareholders to be held June 18,
1996, which is incorporated herein by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a) and (d) Financial Statements and Financial Statement Schedules -
The consolidated financial statements and schedules of the Registrant listed
in the accompanying "Index of Financial Statements and Schedules" together with
the report of KPMG Peat Marwick LLP, independent auditors, are filed as part of
this report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 2, 1996.
(c) Exhibits -
The information called for by this Item is contained in a separate
section of this report. See "Exhibit Index".
18
<PAGE>
- SIGNATURES -
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: May 28, 1996
APOGEE ENTERPRISES, INC.
By: /s/ Donald W. Goldfus
---------------------------------------
Donald W. Goldfus
Chairman of the Board of Directors,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ----------------------------------------------------------------------------
Chairman of the Board of
Directors and Chief Executive
/s/ Donald W. Goldfus Officer and President May 28, 1996
- --------------------------- ----------------------------- ------------
Donald W. Goldfus
/s/ Gerald K. Anderson Director May 28, 1996
- --------------------------- ----------------------------- ------------
Gerald K. Anderson
/s/ Laurence J. Niederhofer Director May 28, 1996
- --------------------------- ----------------------------- ------------
Laurence J. Niederhofer
/s/ James L. Martineau Vice President and Director May 28, 1996
- --------------------------- ----------------------------- ------------
James L. Martineau
/s/ D. Eugene Nugent Director May 28, 1996
- --------------------------- ----------------------------- ------------
D. Eugene Nugent
/s/ Richard Gould Senior Vice President May 28, 1996
- --------------------------- ----------------------------- ------------
Richard Gould
/s/ William G. Gardner Treasurer and Secretary May 28, 1996
- --------------------------- ----------------------------- ------------
William G. Gardner
/s/ Terry L. Hall Chief Financial Officer May 28, 1996
- --------------------------- ----------------------------- ------------
Terry L. Hall
19
<PAGE>
APOGEE ENTERPRISES, INC.
FORM 10-K
ITEMS 8, 14(a) AND 14(d)
INDEX OF FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
Financial Statements
<S> <C>
Independent Auditors' Report....................................... F-2
Consolidated Balance Sheets........................................ F-3
Consolidated Results of Operations and Quarterly Data (Unaudited).. F-4
Consolidated Statements of Cash Flows.............................. F-5
Notes to Consolidated Financial Statement.......................... F-6
Financial Statements Schedules
Schedule II -- Valuation and Qualifying Accounts................... F-15
</TABLE>
All other schedules are omitted because they are not required, or because
the required information is included in the consolidated financial
statements or noted thereto.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Apogee Enterprises, Inc.:
We have audited the consolidated financial statements of Apogee
Enterprises, Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule
are the responsibility or the company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Apogee
Enterprises, Inc. and subsidiaries as of March 2, 1996 and February 25, 1995 and
the results of their operations and their cash flows for each of the years in
the three-year period ended March 2, 1996 in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in note 9, the company changed its method of accounting for
income taxes in fiscal 1994 to adopt the provisions of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
April 12, 1996
F-2
<PAGE>
CONSOLIDATED BALANCE SHEETS
APOGEE ENTERPRISES, INC.
<TABLE>
<CAPTION>
March 2, February 25,
(Dollar amounts in thousands) 1996 1995
----------------------------- ---------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents (including restricted
funds of $208 and $885, respectively) $ 7,389 $ 2,894
Receivables, net of allowance for doubtful
accounts 158,368 165,099
Inventories 54,484 54,559
Costs and earnings in excess of billings on
uncompleted contracts 26,276 19,606
Deferred tax assets 6,689 10,384
Other current assets 5,353 4,278
-------- --------
Total current assets $258,559 $256,820
-------- --------
Property, plant and equipment, net 78,485 75,028
Other assets
Marketable securities - insurance subsidiary 12,231 -
Investments in and advances to affiliated
companies 16,433 15,016
Intangible assets, at cost less accumulated
amortization of $8,044 and $8,681, respectively 10,332 8,383
Deferred tax assets 6,970 5,082
Other 3,126 1,599
-------- --------
49,092 30,080
-------- --------
Total assets $386,136 $361,928
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 57,678 $ 53,793
Accrued expenses 52,430 41,168
Billings in excess of costs and earnings on
uncompleted contracts 19,470 17,717
Accrued income taxes 7,634 10,454
Notes payable - 7,065
Current installments of long-term debt 5,265 5,522
-------- --------
Total current liabilities $142,477 $135,719
-------- --------
Long-term debt, less current installments 79,102 80,566
Other long-term liabilities 24,180 19,587
Minority interest 1,456 1,427
Commitments and contingent liabilities (Notes 10, 14 and 15)
Shareholders' equity
Common stock of $.33-1/3 par value;
authorized 50,000,000 shares; issued and
outstanding, 13,517,000 and 13,443,000,
respectively 4,506 4,481
Additional paid-in capital 20,445 19,345
Retained earnings 113,970 100,803
-------- --------
Total shareholders' equity 138,921 124,629
-------- --------
Total liabilities and shareholders' equity $386,136 $361,928
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED RESULTS OF OPERATIONS
APOGEE ENTERPRISES, INC.
Year Ended Year Ended Year Ended
March 2, February 25, February 26,
(Dollar amounts in thousands, except per share data) 1996 1995 1994
- ---------------------------------------------------- ---------- ------------ ------------
<S> <C> <C> <C>
Net sales $871,147 $756,549 $688,233
Cost of sales 752,624 650,660 604,338
-------- -------- --------
Gross profit 118,523 105,889 83,895
Selling, general and administrative expenses 86,066 81,627 71,659
Provision for business restructuring and asset
valuation - - 5,178
-------- -------- --------
Operating income 32,457 24,262 7,058
Interest expense, net 5,697 4,135 2,735
Other expense, net 149 - -
-------- -------- --------
Earnings before income taxes and
other items below 26,611 20,127 4,323
Income taxes 9,820 8,101 2,634
Equity in net earnings of affiliated companies (528) (762) (2,294)
Minority interest (516) (262) 675
-------- -------- --------
Net earnings before cumulative effect of change
in accounting for income taxes 17,835 13,050 3,308
Cumulative effect of change in accounting for income
taxes - - 525
-------- -------- --------
Net earnings $ 17,835 $ 13,050 $ 3,833
======== ======== ========
Earnings per share:
Earnings per share before cumulative effect
of change in accounting for income taxes $ 1.31 $ 0.97 $ 0.25
Cumulative effect of change in accounting for income
taxes - - 0.04
-------- -------- --------
Earnings per share $ 1.31 $ 0.97 $ 0.29
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
QUARTERLY DATA (UNAUDITED)
(Dollar amounts in thousands, except per share data)
NET SALES GROSS PROFIT
<TABLE>
<CAPTION>
Quarter 1996 1995 1994 Quarter 1996 1995 1994
- ------- -------- -------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
First $219,032 $178,927 $148,752 First $ 31,925 $ 25,388 $19,947
Second 222,186 185,971 175,568 Second 31,824 29,240 22,093
Third 215,487 186,253 184,529 Third 28,264 26,204 23,917
Fourth 214,442 205,398 179,384 Fourth 26,510 25,057 17,938
-------- -------- -------- -------- -------- -------
Total $871,147 $756,549 $688,233 Total $118,523 $105,889 $83,895
======== ======== ======== ======== ======== =======
</TABLE>
NET EARNINGS (LOSS) EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
Quarter 1996 1995 1994* Quarter 1996 1995 1994*
- ------- -------- -------- -------- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
First $ 3,481 $ 2,600 $ 1,443 First $0.26 $0.19 $ 0.11
Second 5,646 4,294 2,441 Second 0.41 0.32 0.18
Third 5,172 3,763 2,902 Third 0.38 0.28 0.22
Fourth 3,536 2,393 (2,953) Fourth 0.26 0.18 (0.22)
------- ------- ------- ----- ----- ------
Total $17,835 $13,050 $ 3,833 Total $1.31 $0.97 $ 0.29
======= ======= ======= ===== ===== ======
</TABLE>
*During the first quarter of 1994, Apogee adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. The cumulative
effect of the change in accounting for income taxes increased net earnings by
$525,000, or 4 cents per share, and is included in fiscal 1994 figures.
F-4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Apogee Enterprises, Inc. Year Ended Year Ended Year Ended
(Dollar amounts in thousands) March 2, 1996 February 25, 1995 February 26, 1994
- ----------------------------- ------------- ----------------- ------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 17,835 $ 13,050 $ 3,833
Adjustments to reconcile net earnings to net
cash provided by (used by) operating activities:
Cumulative effect of change in
accounting for income taxes - - (525)
Depreciation and amortization 16,528 15,131 15,724
Provision for losses on accounts receivable 1,983 3,871 2,388
Deferred income tax expense 1,807 (3,486) (2,929)
Provision for business restructuring and
asset valuation - 5,178
Gain on sale of Nanik Window Coverings Group (4,166) - -
Equity in net earnings of affiliated companies (528) (762) (2,294)
Minority interest (516) (262) 675
Other, net (1,429) (296) (1,580)
-------- -------- --------
Cash flow before changes in operating assets and
liabilities 31,514 27,192 20,470
Changes in operating assets and liabilities,
net of effect of acquisitions:
Receivable 2,134 (23,080) (40,205)
Inventories (3,286) (11,356) (6,402)
Cost and earnings in excess of billings on
uncompleted contracts (6,670) (9,846) (3,853)
Other current assets (1,220) 483 351
Accounts payable and accrued expenses 14,494 2,557 17,003
Billings in excess of costs and earnings
on uncompleted contracts 1,753 1,806 (1,529)
Accrued income taxes (2,820) 5,930 (31)
Other long-term liabilities 4,593 5,327 3,299
-------- -------- --------
Net cash provided by (used by)
operating activities 40,492 (987) (10,897)
-------- -------- --------
INVESTING ACTIVITIES
Capital expenditures (22,615) (24,957) (14,046)
Acquisition of businesses, net of cash acquired (3,793) (8,823) (3,154)
Increase in marketable securities (12,231) - -
Investment in and advances to affiliated companies (889) (2,070) 1,527
Proceeds from sale of property, plant and equipment 301 1,004 832
Proceeds from sale of Nanik Window Coverings Group 17,550 - -
Other, net (1,991) 929 (1,340)
-------- -------- --------
Net cash used by investing activities (23,668) (33,917) (16,181)
-------- -------- --------
FINANCING ACTIVITIES
(Decrease) increase in notes payable (7,065) (16,785) 23,850
Payments on long-term debt (5,576) (4,182) (6,851)
Proceeds from issuance of long-term debt 3,855 50,425 14,100
Proceeds from issuance of common stock 1,150 1,671 1,945
Repurchase and retirement of common stock (240) (209) -
Dividends paid (4,453) (4,155) (3,841)
-------- -------- --------
Net cash (used by) provided by financing activities (12,329) 26,974 28,994
-------- -------- --------
Increase (decrease) in cash and cash equivalents 4,495 (7,930) 1,916
Cash and cash equivalents at beginning of year 2,894 10,824 8,908
-------- -------- --------
Cash and cash equivalents at end of year $ 7,389 $ 2,894 $ 10,824
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Apogee Enterprises, Inc.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED DATA
PRINCIPLES OF CONSOLIDATION Our consolidated financial statements include the
accounts of Apogee and all majority-owned subsidiaries. We use the equity
method to account for our 50%-owned joint ventures. Intercompany transactions
have been eliminated. Certain amounts from prior-years' financial statements
have been reclassified to conform with this year's presentation.
CASH AND CASH EQUIVALENTS Investments with an original maturity of three
months or less are included in cash and cash equivalents. Restricted funds
represent collateral required by certain construction contracts' terms.
INVENTORIES Inventories, which consist primarily of purchased glass and
aluminum, are valued at cost, principally by using the last-in, first-out (LIFO)
method, which does not exceed market. If the first-in, first-out (FIFO) method
had been used, our inventories would have been $2,550,000 and $2,700,000 higher
than reported at March 2, 1996 and February 25, 1995, respectively.
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at
cost. Significant improvements and renewals are capitalized. Repairs and
maintenance are charged to expense as incurred. Apogee computes depreciation on
a straight-line basis, based on estimated useful lives of 20 to 40 years for
buildings and 2 to 15 years for equipment.
INTANGIBLE ASSETS AND AMORTIZATION Intangible assets consist principally of
the excess of cost over the fair value of net assets acquired (goodwill) and
non-compete agreements. We review the ongoing value of intangibles annually.
The continuing benefit of such assets is evaluated based upon an assessment of
relevant economic and other criteria, including projections of future results.
Goodwill is amortized on a straight-line basis over periods ranging from 10 to
40 years, except for $923,000, which is not being amortized.
Non-compete agreements related to purchased businesses are amortized
ratably over the term of the agreements. Amortization expense amounted to
$665,000, $288,000 and $2,328,000 in 1996, 1995 and 1994, respectively.
MARKETABLE SECURITIES - INSURANCE SUBSIDIARY We established a wholly owned
insurance subsidiary, Prism Assurance, Inc. (Prism) in 1996 to insure our
workers compensation general liability and automobile liability risks. Prism
invests in fixed maturity investments which we classify as available-for-sale
and are carried at market value as prescribed by Statement of Financial
Accounting Standards No. 115. Reserve requirements are established based on
actuarial projections of ultimate losses. Apogee also has accruals for losses
incurred prior to Prism's formation. Losses estimated to be paid within twelve
months are classified as accrued expenses, while losses expected to be payable
in later periods are included in other long-term liabilities.
REVENUE RECOGNITION We recognize revenue from construction contracts on a
percentage-of-completion basis, measured by the percentage of costs incurred to
date to estimated total costs for each contract. Contract costs include
materials, labor, project management and other direct costs related to contract
performance. We establish provisions for estimated losses, if any, on
uncompleted contracts in the period in which such losses are determined.
Revenue from the sale of products and the related cost of sales are recorded
upon shipment.
INCOME TAXES We account for income taxes as prescribed by Statement of
Financial Accounting Standards No. 109, which requires use of the asset and
liability method. This method recognizes deferred tax assets and liabilities
based upon the future tax consequences of temporary differences between
financial and tax reporting.
EARNINGS PER SHARE Apogee computes earnings per share by dividing net earnings
by the weighted average number of common shares and common share equivalents
outstanding during the year. Our average common shares and common share
equivalents outstanding during 1996, 1995 and 1994 were 13,629,000, 13,501,000
and 13,289,000, respectively.
FOREIGN OPERATIONS The financial statements of foreign operations have been
translated to U.S. dollars, using the rules of Statement of Financial Accounting
Standard No. 52. Balance sheet accounts are stated in U.S. dollars, at
generally the year-end exchange rate. Results of operations are translated at
average exchange rates for the respective period.
We periodically enter into forward currency exchange contracts to manage
specific foreign currency exposures related to foreign construction contracts
and receivables denominated in foreign currencies. As of March 2, 1996 we had
forward contracts maturing in 1997 with a value of approximately $32 million.
Gains and losses on forward contracts related to receivables are recognized
currently, while gains and losses related to construction projects are deferred
and accounted for as part of the related transaction.
ACCOUNTING PERIOD Apogee's fiscal year ends on the Saturday closest to
February 28. Fiscal year 1996 consisted of fifty-three weeks, while 1995 and
1994 were each fifty-two weeks.
F-6
<PAGE>
ACCOUNTING ESTIMATES The preparation of Apogee's consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenue and expenses during the reporting period. Amounts subject to significant
estimates and assumptions include, but are not limited to, insurance reserves
and revenue recognition for construction contracts, including the status of
outstanding disputes and claims. Actual results could differ from those
estimates.
FUTURE CHANGES IN ACCOUNTING PRINCIPLES Apogee believes that neither Statement
of Financial Accounting Standards No. 121, which deals with accounting for
impairment of the value of long-lived assets, nor No. 123, dealing with
accounting for stock-based compensation, will have a material effect on its
consolidated financial statements when they become effective for fiscal year
1997. With regard to No. 123, Apogee has elected to adopt only the disclosure
requirements.
<TABLE>
<CAPTION>
2. RECEIVABLES
(In thousands) 1996 1995
-------------- --------- ---------
<S> <C> <C>
Trade accounts $ 67,839 $ 68,332
Construction contracts 59,014 67,546
Contract retainage 29,519 32,284
Other receivables 8,768 5,595
-------- --------
Total receivables 165,140 173,757
-------- --------
Less allowance for doubtful accounts (6,772) (8,658)
-------- --------
Net receivables $158,368 $165,099
======== ========
</TABLE>
Apogee provides products and services to the commercial and institutional new
construction and remodeling markets, the automotive replacement glass market and
selected consumer markets. We do not believe a concentration of credit risk
exists, due to the diversity of our markets and channels of distribution, and
the geographic location of our customers. Allowances are maintained for
potential credit losses and such losses have been within management's
expectations. The provision for bad debt expense was $1,983,000, $3,817,000 and
$2,388,000 in 1996, 1995 and 1994, respectively.
<TABLE>
<CAPTION>
3. INVENTORIES
(In thousands) 1996 1995
-------------- --------- ---------
<S> <C> <C>
Raw materials $ 10,402 $ 14,802
Work-in process 3,964 3,232
Finished 40,118 36,525
-------- --------
Total inventories $ 54,484 $ 54,559
======== ========
</TABLE>
<TABLE>
<CAPTION>
4. PROPERTY, PLANT AND EQUIPMENT
(In thousands) 1996 1995
-------------- -------- --------
<S> <C> <C>
Land $ 2,392 $ 2,430
Buildings and improvements 50,097 50,332
Machinery and equipment 77,709 74,387
Office equipment and furniture 35,383 30,418
Construction in progress 8,646 4,127
-------- --------
Total property, plant and equipment 174,227 161,694
Less accumulated for depreciation (95,742) (86,666)
-------- --------
Net property, plant and equipment $ 78,485 $ 75,028
======== ========
</TABLE>
Depreciation expense was $15,863,000, $14,903,000 and $13,397,000 in
1996, 1995 and 1994, respectively.
<TABLE>
<CAPTION>
5. ACCRUED EXPENSES
(In thousands) 1996 1995
-------------- -------- --------
<S> <C> <C>
Payroll and related benefits $17,675 $11,493
Insurance 13,983 10,771
Taxes, other than income taxes 7,120 2,182
Pension 3,598 3,319
Interest 530 804
Other 9,524 12,599
------- -------
Total accrued expenses $52,430 $41,168
======= =======
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
6. LONG-TERM DEBT
(In thousands) 1996 1995
-------------- -------- --------
<S> <C> <C>
Promissory note, 9.65%, due in annual
installments through 1998 $ 4,464 $ 8,036
Promissory notes, 7.5%, due in quarterly
installments through 2000 3,975 5,300
Borrowings under revolving credit and
other bank agreements 73,400 70,000
Other 2,528 2,752
------- -------
Total long-term debt 84,367 86,088
Less current installments (5,265) (5,522)
------- -------
Net long-term debt $79,102 $80,566
======= =======
</TABLE>
Long-term debt maturities are as follows:
<TABLE>
<CAPTION>
Fiscal Year (In thousands)
----------- --------------
<S> <C>
1997 $ 5,265
1998 2,601
1999 1,725
2000 1,038
2001 188
Thereafter 73,550
-------
Total $84,367
=======
</TABLE>
The terms of the 9.65% promissory note include certain dividend and debt
level restrictions and requirements to maintain minimum levels of tangible net
worth and certain financial ratios. Retained earnings available for dividends
under the note's terms were approximately $48 million at March 2, 1996.
At March 2, 1996, Apogee had revolving credit agreements with four banks
expiring in 1997. The agreements allow us to borrow up to $70 million at fixed
or floating rates. The agreements require us to maintain minimum levels of
tangible net worth and certain financial ratios. At March 2, 1996, there were no
borrowings outstanding under the committed credit facilities. In May 1996, a
five-year, multi-currency, committed credit facility was obtained in a the
amount of $150 million, replacing the previous credit agreements. The new
agreement requires us to maintain minimum levels of net worth and certain
financial ratios.
We also had access to short-term credit on an uncommitted basis with
several major banks. At March 2, 1996, $73.4 million in bank borrowings were
outstanding under these agreements. We may refinance these short-term
borrowings on a long-term basis under the revolving credit agreements discussed
above. Accordingly, our short-term bank borrowings, which were not expected to
be paid within one year, were classified as long-term debt.
Interest rates on the year-end bank under uncommitted credit facilities,
ranged from 5.89% to 5.95%.
Selected information related to bank borrowings is as follows:
<TABLE>
<CAPTION>
(Dollar amounts in thousands) 1996 1995
- ----------------------------- --------- ---------
<S> <C> <C>
Average daily borrowings during the year $ 84,273 $58,027
Maximum borrowings outstanding during the year $106,650 78,865
Weighted average interest rate during the year 6.7% 5.5%
</TABLE>
In 1996, we entered into an interest rate swap agreement that effectively
converted $20 million of our variable rate borrowings into a fixed rate
obligation. Under this agreement, which expires in fiscal 1999, we receive
payments at variable rates while we make payments at 6.3%. The net interest
paid or received is included in interest expenses.
In 1992, we entered into three interest rate swap agreements that
effectively converted $250 million of our fixed rate, long-term borrowings into
variable rate obligations. During 1993, we sold two of the swap agreements at
net gains. The gains are being recognized as reductions in interest expense
through 1997. The third agreement expired in 1995.
The net book value of property and plant pledged as collateral under
industrial development bonds was $1.2 million at March 2, 1996.
F-8
<PAGE>
7. SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Additional
Shares Common Paid-in Retained
(In thousands) Outstanding Stock Capital Earnings
-------------- ----------- ------ ---------- --------
<S> <C> <C> <C> <C>
Balance at February 27, 1993 13,177 $4,392 $15,845 $ 92,098
Net earnings - - - 3,833
Common stock issued 152 51 1,894 -
Common stock repurchased
or retired (17) (6) (21) (182)
Cash dividends - - - (3,841)
------ ------ ------- --------
Balance at February 26, 1994 13,312 4,437 17,718 91,908
Net earnings - - - 13,050
Common stock issued 131 44 1,627 -
Cash dividends - - - (4,155)
------ ------ ------- --------
Balance at February 25, 1995 13,443 4,481 19,345 100,803
Net earnings - - - 17,835
Common stock issued 88 30 1,120 -
Common stock repurchased or retired (14) (5) (20) (215)
Cash dividends - - - (4,453)
------ ------ ------- --------
Balance at March 2, 1996 13,517 $4,506 $20,445 $113,970
====== ====== ======= ========
</TABLE>
A class of 200,000 shares of junior preferred stock with a par value of
$1.00 is authorized, but unissued.
Apogee has a Shareholders' Rights Plan, under which each share of our
outstanding common stock has an associated preferred share purchase right. The
rights are exercisable only under certain circumstances, including the
acquisition by a person or group of 10% of the outstanding shares of the
Company's common stock. Upon exercise, the rights would allow holders of such
rights to purchase common stock of Apogee or an acquiring company at a
discounted price, which generally would be 50% of the respective stock's current
fair market value.
8. INTEREST AND OTHER EXPENSE, NET
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
-------------- ------- ------- ------
<S> <C> <C> <C>
Interest on debt $ 6,747 $4,381 $3,008
Other interest 273 595 620
------- ------ ------
Total interest expense 7,020 4,976 3,628
Less interest income (1,323) (841) (893)
------- ------ ------
Interest expense, net $ 5,697 $4,135 $2,735
======= ====== ======
</TABLE>
Interest payments were $7,095,000, $4,778,000 and $3,714,000 in 1996, 1995
and 1994, respectively.
Other expense, net, consisted of charges totaling $4.3 million primarily
related to write-off of a minority investment in a research and development
venture and an adjustment to our insurance reserves, offset by the $4.2 million
gain from the sale of the Nanik Window Coverings Group discussed in Note 12.
F-9
<PAGE>
9. INCOME TAXES
Effective February 28, 1993, we adopted the provisions of Statement of
Financial Accounting Standards No. 109. The cumulative effect of this change in
accounting for income taxes is included in the 1994 Consolidated Results of
Operations.
The components of income tax expense (benefit) for each of the last three
fiscal years are as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
-------------- ------ ------- -------
<S> <C> <C> <C>
CURRENT:
Federal $6,559 $ 9,663 $ 3,342
State and local 910 1,608 701
Foreign 544 316 1,520
------ ------- -------
Total current 8,013 11,587 5,563
DEFERRED:
Federal 1,503 (3,233) (2,794)
State and local 304 (653) (485)
Foreign - 400 350
------ ------- -------
Total deferred 1,807 (3,486) (2,929)
------ ------- -------
Total income tax expense $9,820 $ 8,101 $ 2,634
====== ======= =======
</TABLE>
Income tax payments, net of refunds, were $10,878,000, $5,790,000 and
$5,934,000 in 1996, 1995 and 1994, respectively.
The differences between statutory federal tax rates and our consolidated
effective tax rates are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Statutory federal tax rate 35.0% 35.0% 35.0%
State and local income taxes, net
of federal tax benefit 3.0 3.0 3.2
Tax credits (0.5) (1.1) (3.3)
Foreign items with no tax benefit 0.8 2.1 18.6
Valuation allowance (0.6) 1.6 13.9
Other, net (0.8) (0.4) (6.5)
----- ----- -----
Consolidated effective tax rate 36.9% 40.2% 60.9%
===== ===== =====
</TABLE>
Deferred tax assets and deferred tax liabilities at March 2, 1996 and
February 25, 1995 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
-------------- ---------------------- ----------------------
Current Noncurrent Current Noncurrent
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Accounts Receivable $ 2,304 $ - $ 3,478 $ -
Accrued insurance 2,575 8,054 4,123 6,522
Deferred compensation - 3,492 - 3,556
Restructuring reserve - 631 - 1,286
Inventory 1,569 - 2,311 -
Depreciation 226 (4,722) 216 (4,841)
Employee benefit plans (1,434) - (1,218) -
Other 1,449 703 1,474 (88)
------- ------- ------- -------
6,689 8,158 10,384 6,435
Less valuation allowance - (1,188) - (1,353)
------- ------- ------- -------
Deferred tax assets $ 6,689 $ 6,970 $10,384 $ 5,082
======= ======= ======= =======
</TABLE>
Apogee's valuation allowance decreased by $165,000 in 1996 and related
primarily to foreign tax credits. The valuation allowance at March 2, 1996 and
February 25, 1995 reflect amounts for foreign tax credits and capital loss
carryforward.
10. INVESTMENT IN AFFILIATED COMPANIES
Apogee is party to joint venture agreements with a 50% partner (JV
partner), forming Marcon Coatings, Inc. and its subsidiary, Viratec Thin Films,
Inc. (Marcon/Viratec). Marcon/Viratec operates glass coating facilities. Our 50%
ownership investment in Marcon/Viratec is accounted for using the equity method.
In November 1995, the JV Partner commenced litigation against Apogee
alleging claims for damages and seeking to have the Court order Apogee to sell
its 50% interest in the joint venture to the JV Partner. Apogee filed
counterclaims seeking to have the JV
F-10
<PAGE>
Partner's 50% interest sold to Apogee, and in March 1996, the Court ordered the
JV Partner to sell the share of stock representing its 50% interest in
Marcon/Viratec to Apogee upon payment by Apogee of fair value for these shares
as determined by the Court. The JV Partner's rights and status as shareholder
and directors were terminated as of the effective date of the order and the fair
value for the share is to be determined by the Court after further proceedings.
The Court has not yet scheduled a trial or hearing to determine fair value.
At a hearing on April 23, 1996, the Court ordered Apogee to post a bond or
letter of credit in the amount of $50 million, or to pay the JV Partner $25
million, as security for the ultimate payment of the purchase price for the JV
Partner's shares. The amount of such a bond or other means is intended as
security and is not intended to reflect the Court's view on what is fair value
for the shares. The JV Partner's claims against Apogee for damages are still
pending and the Court also is considering a motion brought by the JV Partner to
add a claim for punitive damages.
Apogee and the JV Partner have leased certain glass coating equipment and
made cash advances to Marcon. Our net investment in Marcon/Viratec as of March
2, 1996 and February 25, 1995 was $15,821,000, $14,278,000, respectively. Our
equity in Marcon/Viratec's net earnings is included in the accompanying
Consolidated Results of Operations. Marcon/Viratec's net earnings for 1994
included a $437,000 tax benefit from net operating loss carryforward A summary
of assets, liabilities and results of operations for Marcon/Viratec is presented
below:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
-------------- -------- ------- --------
<S> <C> <C> <C>
Current assets $11,950 $ 8,620 $10,248
Noncurrent assets 23,444 16,716 15,704
Current liabilities 19,098 6,153 7,214
Noncurrent liabilities 8,602 12,673 14,066
Net sales 46,297 38,299 34,497
Gross profit 8,981 9,205 11,717
Net earnings 1,183 1,838 4,566
</TABLE>
11. EMPLOYEE BENEFIT AND STOCK OPTION PLANS
We maintain a qualified defined contribution pension plan that covers
substantially all full-time, non-union employees. Contributions to the plan are
based on a percentage of employees' base earnings. We deposit pension costs with
the trustee annually. All pension costs were fully funded or accrued as of year
end. Contributions to the plan were $3,687,000, $3,394,000 and $3,014,000 in
1996, 1995 and 1994, respectively.
We also maintain a 401(k) Savings Plan, which allows employees to
contribute 1% to 13% of their compensation. Apogee matches 30% of the first 6%
of the employee contributions. Our contributions to the plan were $1,495,000,
$1,242,000 and $1,206,000 in 1996, 1995 and 1994, respectively.
The 1987 Partnership Plan, a plan designed to increase the ownership of
Apogee stock by key employees, allows participants selected by the Compensation
Committee of the Board of Directors to use earned incentive compensation to
purchase Apogee stock. The purchased stock is then matched by an equal award of
restricted stock, which vests over a predetermined period. 1,100,000 common
shares are authorized for issuance under the plan. As of March 2, 1996, 676,000
shares have been issued under the plan. We expensed $666,000, $708,000 and
$478,000 in conjunction with the Partnership Plan in 1996, 1995 and 1994,
respectively.
The 1987 Stock Option Plan provides for the issuance of up to 1,250,000
options to purchase company stock. Options awarded under this plan, either in
the form of incentive stock options or nonstatutory options, are exercisable at
an option price equal to the fair market value at the date of award. Changes in
stock options outstanding for each of the last three fiscal years are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- --------------
<S> <C> <C> <C>
Options outstanding at beginning
of the year 578,000 477,000 481,000
Granted 245,000 168,000 148,000
Exercised (87,000) (25,000) (4,000)
Forfeited (34,000) (42,000) (148,000)
------------ ------------ -------------
Options outstanding at end
of the year 702,000 578,000 477,000
============ ============ =============
Options exercisable at end of year 489,000 212,000 129,000
============ ============ =============
Price range of outstanding options $ 8.95-18.91 $8.95-$18.91 $ 8.95-$18.91
============ ============ =============
Price range of exercised options $10.75-16.25 $8.95-$16.25 $10.75-$12.00
============ ============ =============
</TABLE>
F-11
<PAGE>
12. ACQUISITIONS
In 1996, our Auto Glass segment purchased the assets of 12 retail auto
glass stores and one distribution center in five separate transactions. The
aggregate purchase price of the acquisitions was $3.8 million, including $0.7
million of cost in excess of the fair value of acquired assets. Promissory notes
of $0.5 million were issued in connection with the transactions.
In 1995, our Auto Glass segment purchased the assets of 16 retail auto
glass stores and one distribution center in four separate transactions. The
aggregate purchase price of the acquisitions was $8.8 million, including $4.6
million of cost in excess of the fair value of acquired assets. Promissory notes
of $5.3 million were issued in connection with the transactions.
In 1994, the Glass Technologies segment's Tru Vue unit purchased the assets
of a company serving another sector of the picture framing market. Also in 1994,
the Building Products & Services segment purchased certain assets of CFEM
Facades, a curtainwall company based in France. The purchase price of assets
acquired in 1994 was $3.2 million.
No liabilities were assumed in any of the transactions. All of the above
transactions were accounted for by the purchase method. Accordingly, Apogee's
consolidated financial statements include the net assets and results of
operations from the dates of acquisition.
In 1996, we sold selected assets and liabilities of the Nanik Window
Coverings Group (Nanik) for $17.6 million, realizing a $4.2 million gain
included in "Other expense, net" in the accompanying Consolidated Results of
Operations. Nanik accounted for less than 4% of consolidated net sales in 1996,
1995 and 1994.
13. PROVISION FOR BUSINESS RESTRUCTURING AND ASSET VALUATION
During 1994, we recorded a business restructuring and asset valuation
provision of $5.6 million ($4.5 million after tax) in our Building Products and
Services segment. The charge was principally related to the consolidation or
closing of 10 Harmon Contract offices and facilities, the write-down of certain
assets and the reorganization of the architectural metals operations. The
provision consisted of asset writedowns of $2.5 million and projected cash
outlays of $3.1 million. At March 2, 1996, the remaining reserve for projected
expenditures was less than $100,000.
14. LEASES
As of March 2, 1996, we were obligated under noncancelable operating leases
for buildings and equipment. Certain leases provide for increased rentals based
upon increases in real estate taxes or operating costs. Future minimum rental
payments under noncancelable operating leases are:
<TABLE>
<CAPTION>
Fiscal Year (In thousands)
- -------------------------------- --------------
<S> <C>
1997 $10,619
1998 7,255
1999 5,970
2000 4,365
2001 1,823
Thereafter 1,240
-------
Total minimum payments $31,272
=======
</TABLE>
Total rental expense was $22,155,000, $18,242,000 and $17,129,000 in
1996, 1995 and 1994, respectively.
15. COMMITMENTS AND CONTINGENT LIABILITIES
Apogee has ongoing letters of credit related to risk management programs,
construction contracts and certain industrial development bonds. The total value
of letters of credit under which the company is obligated as of March 2, 1996
was approximately $54,320,000. Apogee has entered into a number of non-compete
agreements. As of March 2, 1996, we were committed to make future payments of
$3,083,000 under such agreements.
In addition to the matter discussed in Note 10, Apogee is party to various
legal proceedings incidental to our normal operating activities. In particular,
like others in the construction industry, our construction business, is
routinely involved in various disputes and claims arising out of construction
projects, sometimes involving significant monetary damages. Although it is
impossible to predict the outcome of such proceedings, we believe, based on
facts currently available to us, that none of such claims will result in losses
that would have a material adverse effect on our financial condition.
F-12
<PAGE>
16. FAIR VALUE DISCLOSURES
Estimated fair values of our financial instruments at March 2, 1996 are as
follows:
<TABLE>
<CAPTION>
Carrying Estimated
(In thousands) Amount Fair Value
-------------- -------- ----------
<S> <C> <C>
Long-term debt including
current installments $84,367 $84,429
Interest rate swap agreement
in a net payable position - $ 397
</TABLE>
Estimated fair value amounts have been determined using available market
information and appropriate valuation methodologies. However, judgment is
required in developing the estimates of fair value. Accordingly, these
estimates are not necessarily indicative of the amounts that could be realized
in a current market exchange.
For cash and cash equivalents, receivables, marketable securities and
accounts payable, carrying value is a reasonable estimate of fair value. The
carrying value of long-term debt that has variable interest rates is a
reasonable estimate of fair value. For long-term debt with fixed interest
rates, fair value is based on discounted projected cash flows using the rate at
which similar borrowings could currently be made. The fair value of interest
rate swaps is the difference between the present value of our future interest
obligation at a fixed rate and the counter party's obligation at a floating
rate.
F-13
<PAGE>
17. BUSINESS SEGMENTS
Sales, operating income, identifiable assets and other related data for our
operations in different business segments, are listed below and are an integral
part of the financial statements. Fiscal 1992 and 1993 segment data are not
covered by the Independent Auditors' Report.
<TABLE>
<CAPTION>
(Dollar amounts 1996 1995 1994 1993 1992
in thousands) Amount % Amount % Amount % Amount % Amount %
- --------------- ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SALES
Building products
& services $462,102 53.0 $399,540 52.8 $377,916 54.9 $312,311 54.6 $347,850 58.3
Glass technologies 150,457 17.3 120,890 16.0 101,166 14.7 83,893 14.7 79,345 13.3
Auto glass 273,133 31.4 248,904 32.9 223,209 32.4 187,642 32.8 177,188 29.7
Intersegment elimination (14,545) (1.7) (12,785) (1.7) (14,058) (2.0) (11,396) (2.0) (8,102) (1.4)
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Net sales $871,147 100.0 $756,549 100.0 $688,233 100.0 $572,450 100.0 $596,281 100.0
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
OPERATING INCOME (LOSS)
Building products
& services $ (2,073) (6.4) $ (6,081) (25.1) $(22,443) (318.0) $ (5,598) (87.9) $ 22,702 117.9
Glass technologies 16,431 50.6 10,475 43.2 7,931 112.4 3,247 51.0 (6,185) (32.1)
Auto glass 18,069 55.7 19,067 78.6 18,961 268.6 8,869 139.3 3,528 18.3
Corporate and other 30 0.1 801 3.3 2,609 37.0 (149) (2.3) (796) (4.1)
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating income 32,457 100.0 24,262 100.0 7,058 100.0 6,369 100.0 19,249 100.0
Interest expense, net (5,697) (4,135) (2,735) (1,794) (970)
Other expense, net (149) - - - -
-------- -------- -------- -------- --------
Earnings before income
taxes and other items $ 26,611 $ 20,127 $ 4,323 $ 4,575 $ 18,279
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Identifiable Assets Capital Expenditures Depreciation & Amortization
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- -------- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Building products
& services $172,019 $182,931 $157,595 $ 5,096 $ 4,429 $ 4,802 $ 6,146 $ 6,443 $ 6,435
Glass technologies 67,606 62,643 46,702 4,171 8,286 3,286 3,700 3,425 3,257
Auto glass 108,342 92,346 74,041 12,954 12,201 5,906 6,522 5,116 5,891
Corporate and other 38,169 24,008 27,850 394 41 52 160 147 141
-------- -------- -------- ------- ------- ------- ------- ------- -------
Total $386,136 $361,928 $306,188 $22,615 $24,957 $14,046 $16,528 $15,131 $15,724
======== ======== ======== ======= ======= ======= ======= ======= =======
</TABLE>
Apogee's Building Products & Services segment has subsidiaries in Europe and
Asia. During 1996, 1995 and 1994, such operations had net sales of $114,305,000,
$66,580,000 and $65,021,000, respectively. Operating losses for 1996, 1995 and
1994 were $1,983,000, $6,575,000 and $887,000, respectively. At March 2, 1996,
February 25, 1995 and February 26, 1994 identifiable assets of the subsidiaries
totaled $58,753,000, $41,880,000 and $31,786,000, respectively. Foreign currency
transaction gains or losses included in net earnings for 1996, 1995 and 1994
were immaterial.
Apogee's export sales are less than 10% of consolidated net sales. No single
customer, including government agencies, accounts for 10% or more of
consolidated net sales. Segment operating income (loss) is net sales less cost
of sales and operating expenses. Operating income does not include provision for
interest expense or income taxes. Corporate and other includes miscellaneous
corporate activity not allocable to business segments.
F-14
<PAGE>
SCHEDULE II
-----------
APOGEE ENTERPRISES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In thousands)
<TABLE>
<CAPTION>
Balance at Charged to Deductions Balance at
beginning costs and from end of
of period expenses reserves (1) period
--------- -------- ------------ --------
<S> <C> <C> <C> <C>
For the year ended
March 2, 1996:
Allowance for
doubtful receivables $8,658 $1,983 $3,869 $6,772
====== ====== ====== ======
For the year ended
February 25, 1995:
Allowance for
doubtful receivables $7,879 $3,817 $3,038 $8,658
====== ====== ======= ======
For the year ended
February 26, 1994:
Allowance for
doubtful receivables $6,339 $2,388 $ 848 $7,879
====== ====== ====== ======
</TABLE>
(1) Net of recoveries
F-15
<PAGE>
EXHIBIT INDEX
Exhibit (3A) Restated Articles of Incorporation
Filed in Registrant's Annual Report on Form 10-K for year
ended February 27, 1988.
Exhibit (3B) Restated By Laws of Apogee Enterprises, Inc., as amended to
date. Filed in Registrant's Annual Report on Form 10-K for
year ended February 29, 1992.
Exhibit (4A) Specimen certificate for shares of common stock of Apogee
Enterprises, Inc. Filed in Registrant's Annual Report on Form
10-K for year ended February 29, 1992.
Exhibit (10A) Deferred Incentive Compensation Plan dated February 27, 1986
between Registrant and certain executive officers. Filed in
Registrant's Annual Report on Form 10-K for year ended
March 1, 1986.
Exhibit (10B) Amended and Restated 1987 Apogee Enterprises, Inc.
Partnership Plan is incorporated by reference to Registrant's
S-8 registration statement (File No. 33-60400)
Exhibit (10C) 1987 Apogee Enterprises, Inc. Stock Option Plan is
incorporated by reference to Registrant's S-8 registration
statement (File No. 33-35944)
Exhibit (10D) Note Agreement dated June 1, 1988 between the registrant and
Teachers Insurance and Annuity Association of America
($25,000,000). Filed in Registrant's Quarterly Report on Form
10-Q for quarter ended August 27, 1988.
Exhibit (10E) Incentive Compensation Agreement between Registrant and
Gerald K. Anderson dated February 23, 1987. Filed with
Registrant's Annual Report on Form 10-K for year ended
March 2, 1991.
Exhibit (10F) Consulting Agreement between Registrant and Gerald K.
Anderson dated March 1, 1989. Filed with Registrant's Annual
Report on Form 10-K for year ended March 2, 1991.
Exhibit (10G) Rights Agreement between Registrant and American Stock
Transfer Co. dated October 19, 1990. Filed with Registrant's
Form 8-A on October 19, 1990.
Exhibit (10H) Consulting Agreement between Registrant and Laurence J.
Niederhofer dated November 1, 1993. Filed with Registrant's
Annual Report on Form 10-K for year ended February 26, 1994.
Exhibit (10I) Employment Agreement between Registrant and Richard Gould
dated May 23, 1994. Filed with Registrant's Annual Report on
Form 10-K for year ended February 25, 1995.
Exhibit (10J) $150 million Multicurrency Credit Agreement between Apogee
Enterprises, Inc. and banks party to the agreement, ABN AMRO
Bank N.V., Administrative Agent and First Bank National
Association, Co-Agent dated April 29, 1996.
Exhibit (11) Statement of Determination of Common Shares and Common Share
Equivalents
Exhibit (21) Subsidiaries of the Registrant
Exhibit (99) Litigation Reform Act of 1995 - Cautionary Statement
<PAGE>
EXHIBIT 10J
===============================================================================
U.S. $150,000,000
MULTICURRENCY CREDIT AGREEMENT
DATED AS OF
APRIL 29, 1996
AMONG
APOGEE ENTERPRISES, INC.,
THE BANKS PARTY HERETO,
ABN AMRO BANK N.V.,
as Administrative Agent
AND
FIRST BANK NATIONAL ASSOCIATION,
as Co-Agent
===============================================================================
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is not part of the Agreement)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. DEFINITIONS; INTERPRETATION............................... 1
Section 1.1. Definitions............................................. 1
Section 1.2. Interpretation.......................................... 10
SECTION 2. THE REVOLVING CREDIT...................................... 10
Section 2.1. The Loan Commitment..................................... 10
Section 2.2. Letters of Credit....................................... 11
Section 2.3. The Bid Loans........................................... 13
Section 2.4. Requests for Bid Loans.................................. 14
(a) Requests and Confirmations.............................. 14
(b) Invitation to Bid....................................... 14
(c) Bids.................................................... 14
Section 2.5. Notice of Bids.......................................... 15
Section 2.6. Acceptance or Rejection of Bids......................... 15
Section 2.7. Notice of Acceptance or Rejection of Bids............... 16
(a) Notice to Banks Making Successful Bids.................. 16
(b) Notice to all Banks..................................... 16
(c) Disbursement of Bid Loans............................... 16
Section 2.8. Telephonic Notice....................................... 17
Section 2.9. Applicable Interest Rates............................... 17
Section 2.10. Minimum Borrowing Amounts............................... 19
Section 2.11. Manner of Borrowing Committed Loans and Designating
Interest Rates Applicable to Committed Loans............ 20
Section 2.12. Interest Periods........................................ 22
Section 2.13. Maturity of Loans....................................... 23
Section 2.14. Prepayments............................................. 23
Section 2.15. Default Rate............................................ 24
Section 2.16. The Notes............................................... 24
Section 2.17. Funding Indemnity....................................... 25
Section 2.18. Commitment Terminations................................. 25
SECTION 3. FEES AND EXTENSIONS....................................... 26
Section 3.1. Fees.................................................... 26
SECTION 4. PLACE AND APPLICATION OF PAYMENTS......................... 27
Section 4.1. Place and Application of Payments....................... 27
SECTION 5. REPRESENTATIONS AND WARRANTIES............................ 28
</TABLE>
-i-
<PAGE>
[CAPTION]
<TABLE>
<S> <C> <C>
Section 5.1. Corporate Organization and Authority................... 28
Section 5.2. Subsidiaries........................................... 28
Section 5.3. Corporate Authority and Validity of Obligations........ 28
Section 5.4. Financial Statements................................... 28
Section 5.5. No Litigation; No Labor Controversies.................. 29
Section 5.6. Taxes.................................................. 29
Section 5.7. Approvals.............................................. 29
Section 5.8. ERISA.................................................. 29
Section 5.9. Government Regulation.................................. 30
Section 5.10. Margin Stock; Use of Proceeds.......................... 30
Section 5.11. Licenses and Authorizations;
Compliance with Laws................................... 30
Section 5.12. Ownership of Property; Liens........................... 31
Section 5.13. No Burdensome Restrictions;
Compliance with Agreements............................. 31
Section 5.14. Full Disclosure........................................ 31
SECTION 6. CONDITIONS PRECEDENT..................................... 31
Section 6.1. Initial Credit Event................................... 31
Section 6.2. All Credit Events...................................... 32
Section 6.3. Determinations Under Section 6.1....................... 33
SECTION 7. COVENANTS................................................ 33
Section 7.1. Corporate Existence; Subsidiaries...................... 33
Section 7.2. Maintenance............................................ 33
Section 7.3. Taxes.................................................. 33
Section 7.4. ERISA.................................................. 34
Section 7.5. Insurance.............................................. 34
Section 7.6. Financial Reports and Other Information................ 34
Section 7.7. Bank Inspection Rights................................. 36
Section 7.8. Conduct of Business.................................... 36
Section 7.9. Liens.................................................. 36
Section 7.10. Use of Proceeds; Regulation U.......................... 38
Section 7.11. Mergers, Consolidations and Sales...................... 38
Section 7.12. Use of Property and Facilities;
Environmental and Health and Safety Laws............... 38
Section 7.13. Investments, Acquisitions, Loans, Advances and
Guaranties............................................. 38
Section 7.14. Restrictions on Indebtedness........................... 40
Section 7.15. Consolidated Net Worth................................. 41
Section 7.16. Leverage Ratio......................................... 41
Section 7.17. Interest Coverage Ratio................................ 41
Section 7.18. Dividends and Other Shareholder Distributions.......... 41
Section 7.19. Transactions with Affiliates........................... 42
Section 7.20. Compliance with Laws................................... 42
SECTION 8. EVENTS OF DEFAULT AND REMEDIES........................... 42
Section 8.1. Events of Default...................................... 42
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
Section 8.2. Non-Bankruptcy Defaults................................. 44
Section 8.3. Bankruptcy Defaults..................................... 44
Section 8.4. Collateral for Undrawn Letters of Credit................ 45
Section 8.5. Expenses................................................ 45
SECTION 9. CHANGE IN CIRCUMSTANCES................................... 45
Section 9.1. Change of Law........................................... 45
Section 9.2. Unavailability of Deposits or Inability to Ascertain,
or Inadequacy of, LIBOR................................. 46
Section 9.3. Increased Cost and Reduced Return....................... 46
Section 9.4. Lending Offices......................................... 48
Section 9.5. Discretion of Bank as to Manner of Funding............. 48
Section 9.6. Substitution of Bank................................... 48
SECTION 10. THE AGENTS............................................... 49
Section 10.1. Appointment and Authorization of
Administrative Agent................................... 49
Section 10.2. Administrative Agent and its Affiliates................ 49
Section 10.3. Action by Administrative Agent......................... 49
Section 10.4. Consultation with Experts.............................. 50
Section 10.5. Liability of Administrative Agent; Credit Decision..... 50
Section 10.6. Indemnity.............................................. 50
Section 10.7. Resignation of Administrative Agent
and Successor Administrative Agent.................... 51
SECTION 11. MISCELLANEOUS............................................. 51
Section 11.1. Withholding Taxes...................................... 51
Section 11.2. No Waiver of Rights.................................... 52
Section 11.3. Non-Business Day....................................... 53
Section 11.4. Documentary Taxes...................................... 53
Section 11.5. Survival of Representations............................ 53
Section 11.6. Survival of Indemnities................................ 53
Section 11.7. Set-Off................................................ 53
Section 11.8. Notices................................................ 54
Section 11.9. Counterparts........................................... 55
Section 11.10. Successors and Assigns................................. 55
Section 11.11. Participants and Note Assignees........................ 55
Section 11.12. Assignment of Commitments by Banks..................... 55
Section 11.13. Amendments............................................. 56
Section 11.14. Headings............................................... 56
Section 11.15. Legal Fees, Other Costs and Indemnification............ 56
Section 11.16. Currency............................................... 57
Section 11.17. Entire Agreement....................................... 57
Section 11.18. Construction........................................... 57
Section 11.19. Governing Law.......................................... 57
Section 11.20. Submission to Jurisdiction; Waiver of Jury Trial....... 58
</TABLE>
Signature................................................................... 59
-iii-
<PAGE>
EXHIBITS
EXHIBIT A - Form of Committed Note
EXHIBIT B - Form of Bid Note
EXHIBIT C - Bid Loan Request Confirmation
EXHIBIT D - Invitation to Bid
EXHIBIT E - Confirmation of Bid
EXHIBIT F - Notice of Acceptance of Bid
EXHIBIT G - Form of Legal Opinion
EXHIBIT H - Compliance Certificate
EXHIBIT I - Form of Letter of Credit Application
SCHEDULES
SCHEDULE 1 Pricing Grid
SCHEDULE 5.2 Schedule of Existing Subsidiaries
SCHEDULE 5.5 Litigation and Labor Controversies
SCHEDULE 7.9 Existing Liens
-iv-
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of April 29, 1996 among Apogee Enterprises,
Inc., a Minnesota corporation (the "Borrower"), the banks from time to time
party hereto (each a "Bank," and collectively the "Banks"), ABN AMRO Bank N.V.
in its capacity as agent for the Banks hereunder (in such capacity, the
"Administrative Agent") and First Bank National Association, in its capacity as
co-agent for the Banks hereunder (in such capacity, the "Co-Agent").
WITNESSETH THAT:
WHEREAS, the Borrower desires to obtain the several commitments of the
Banks to make available a revolving credit for loans and letters of credit (the
"Revolving Credit"), as described herein; and
WHEREAS, the Banks are willing to extend such commitments subject to all of
the terms and conditions hereof and on the basis of the representations and
warranties hereinafter set forth.
NOW, THEREFORE, in consideration of the recitals set forth above and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION.
Section 1.1. Definitions. The following terms when used herein have the
following meanings:
"Account" is defined in Section 8.4(b) hereof.
"Adjusted LIBOR" is defined in Section 2.9(b) hereof.
"Administrative Agent" is defined in the first paragraph of this Agreement
and includes any successor Administrative Agent pursuant to Section 10.7 hereof.
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with their correlative
meanings, "controlled by" and "under common control with") means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies of a Person (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event for purposes of this definition: (i) any Person which owns directly or
indirectly 15% or more of the securities having ordinary voting power for the
election of directors or other governing body of a corporation or 15% or more of
the partnership or other ownership
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interests of any other Person (other than as a limited partner of such other
Person) will be deemed to control such corporation or other Person; and (ii)
each director and executive officer of the Borrower or any Subsidiary shall be
deemed an Affiliate of the Borrower and each Subsidiary.
"Agreement" means this Credit Agreement, including all Exhibits and
Schedules hereto, as it may be amended, supplemented or otherwise modified from
time to time in accordance with the terms hereof.
"Alternative Currency" means French Francs, Pounds Sterling, Deutsche Marks
and Yen.
"Applicable Margin" means, at any time (i) with respect to Base Rate Loans,
the Base Rate Margin and (ii) with respect to Eurocurrency Loans, the
Eurocurrency Margin.
"Applicable Telerate Page" is defined in Section 2.9(b) hereof.
"Application" is defined in Section 2.2(b) hereof.
"Authorized Representative" means those persons shown on the list of
officers provided by the Borrower pursuant to Section 6.1(e) hereof, or on any
updated such list provided by the Borrower to the Agent, or any further or
different officer of the Borrower so named by any Authorized Representative of
the Borrower in a written notice to the Agent.
"Bank" is defined in the first paragraph of this Agreement.
"Base Rate" is defined in Section 2.9(a) hereof.
"Base Rate Loan" means a Committed Loan bearing interest prior to maturity
at a rate specified in Section 2.9(a) hereof.
"Base Rate Margin" means the percentage set forth in Schedule 1 hereto as
the "Base Rate Margin" beside the then applicable Leverage Ratio.
"Bid" is defined in Section 2.4(c) hereof.
"Bid Loan" is defined in Section 2.3 hereof.
"Bid Loan Request" is defined in Section 2.4(a) hereof.
"Bid Loan Request Confirmation" is defined in Section 2.4(a) hereof.
"Bid Note" is defined in Section 2.16(b) hereof.
"Borrower" is defined in the first paragraph of this Agreement.
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"Borrowing" means the total of Loans of a single type advanced, continued
for an additional Interest Period, or converted from a different type into such
type by the Banks on a single date and for a single Interest Period. Borrowings
of Committed Loans are made and maintained ratably from each of the Banks
according to their Percentages. Borrowings of a Bid Loan or Bid Loans are made
by any Bank or Banks in accordance with the procedures set forth in Section 2.3
through 2.8 hereof. A Borrowing is "advanced" on the day Banks advance funds
comprising such Borrowing to the Borrower, is "continued" on the date a new
Interest Period for the same type of Committed Loans commences for such
Borrowing, and is "converted" when such Borrowing is changed from one type of
Committed Loan to the other, all as requested by the Borrower pursuant to
Section 2.11(a).
"Business Day" means any day other than a Saturday or Sunday on which Banks
are not authorized or required to close in Chicago, Illinois and, if the
applicable Business Day relates to the borrowing or payment of a Eurocurrency
Loan or Eurodollar Bid Loan, on which banks are dealing in U.S. Dollar deposits
or the relevant Alternative Currency in the interbank market in London, England
and, if the applicable Business Day relates to the borrowing or payment of a
Eurocurrency Loan or Eurodollar Bid Loan denominated in an Alternative Currency,
on which banks and foreign exchange markets are open for business in the city
where disbursements of or payments on such Loan are to be made.
"Capital Lease" means at any date any lease of Property which, in
accordance with GAAP, would be required to be capitalized on the balance sheet
of the lessee.
"Capitalized Lease Obligations" means, for any Person, the amount of such
Person's liabilities under Capital Leases determined at any date in accordance
with GAAP.
"Change of Control Event" means (i) any Person or two or more Persons
acting in concert shall have acquired beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934), directly or indirectly of securities of the Borrower (or
other securities convertible into such securities) representing 20% or more of
the combined voting power of all securities of the Borrower entitled to vote in
the election of directors or (ii) any Person or two or more Persons acting in
concert shall have acquired by contract or otherwise, or shall have entered into
a contract or arrangement that, upon consummation, will result in its or their
acquisition of control over securities of the Borrower (or other securities
convertible into such securities) representing 20% or more of the combined
voting power of all securities of the Borrower entitled to vote in the election
of directors.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitments" means the Revolving Credit Commitments and the L/C
Commitment.
"Committed Note" is defined in Section 2.16(a) hereof.
"Compliance Certificate" means a certificate in the form of Exhibit H
hereto.
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"Consolidated Net Income" means, for any period, the net income (or net
loss) of the Borrower and its Subsidiaries for such period computed on a
consolidated basis in accordance with GAAP.
"Consolidated Net Worth" means, as of the date of any determination
thereof, the amount reflected as stockholders' equity upon a consolidated
balance sheet of the Borrower and its Subsidiaries.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its Property is bound.
"Controlled Group" means all members of a controlled group of corporations
and all trades and businesses (whether or not incorporated) under common control
that, together with the Borrower or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.
"Credit Documents" means this Agreement, the Notes, the Applications and
the Letters of Credit.
"Credit Event" means the advancing of any Loan, the continuation of or
conversion into a Eurocurrency Loan, or the issuance of, extension of the
expiration date or increase in the amount of, any Letter of Credit.
"Debt" means, for any Person, Indebtedness of such Person of the types
described in clauses (i), (ii), (iii), (v) and (vi) of the definition of such
term but excluding any Indebtedness of such Person consisting of (a) any surety
bond, or any letter of credit or Guaranty serving the same function as a surety
bond, provided, that such surety bond, letter of credit or Guaranty has been
provided to such Person in the ordinary course of such Person's business and
provided, further, that if there has been a demand or drawing made under any
such surety bond, letter of credit or Guaranty, then such surety bond, letter of
credit or Guaranty shall be included as Indebtedness of such Person in an amount
equal to the unreimbursed amount of such demand or the unreimbursed amount of
such drawing and (b) any trade payable incurred in the ordinary course of such
Person's business so long as no note or similar instrument has been executed by
such Person in connection with such trade payable.
"Default" means any event or condition the occurrence of which would, with
the passage of time or the giving of notice, or both, constitute an Event of
Default.
"Deutsche Mark" means the lawful currency of the Federal Republic of
Germany.
"EBIT" means, for any period, Consolidated Net Income for such period plus
all amounts deducted in arriving at such Consolidated Net Income amount for such
period for Interest Expense and for federal, state and local income tax expense.
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"Effective Date" means the date on which the Administrative Agent has
received signed counterpart signature pages of this Agreement from each of the
signatories (or, in the case of a Bank, confirmation that such Bank has executed
such a counterpart and dispatched it for delivery to the Administrative Agent)
and the documents required by Section 6.1 hereof.
"Environmental and Health Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, judgments, permits and other
governmental rules or restrictions relating to human health, safety (including
without limitation occupational safety and health standards), or the environment
or to emissions, discharges or releases of Hazardous Materials into the
environment, including without limitation ambient air, surface water, ground
water or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials or the clean-up or other remediation thereof.
"ERISA" is defined in Section 5.8 hereof.
"Eurocurrency Loan" means a Committed Loan bearing interest prior to
maturity at the rate specified in Section 2.9(b) hereof.
"Eurocurrency Margin" means the percentage set forth in Schedule 1 hereto
as the "Eurocurrency Margin" beside the then applicable Leverage Ratio.
"Eurocurrency Reserve Percentage" is defined in Section 2.9(b) hereof.
"Eurodollar Bid Loan" is defined in Section 2.3 hereof.
"Event of Default" means any of the events or circumstances specified in
Section 8.1 hereof.
"Facility Fee Rate" means the percentage set forth in Schedule 1 hereto as
the "Facility Fee Rate" beside the then applicable Leverage Ratio.
"Federal Funds Rate" means the fluctuating interest rate per annum
described in part (x) of clause (ii) of the definition of Base Rate set forth in
Section 2.9(a) hereof.
"Fee Letter" means that certain letter between the Administrative Agent,
the Issuing Agent and the Borrower dated on or about the date hereof pertaining
to fees to be paid by the Borrower to the Administrative Agent and the Issuing
Agent for their sole account and benefit.
"Financial Letter of Credit" means a Letter of Credit that is not, as
reasonably determined by the Administrative Agent, a Performance Letter of
Credit.
"Financial Letter of Credit Fee Rate" means the percentage set forth in
Schedule 1 hereto as the "Financial Letter of Credit Fee Rate" beside the then
applicable Leverage Ratio.
"Fixed Rate Loan" means Bid Loans and Eurocurrency Loans.
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"French Franc" means the lawful currency of the Republic of France.
"GAAP" means generally accepted accounting principles as in effect in the
United States from time to time, applied by the Borrower and its Subsidiaries on
a basis consistent with the preparation of the Borrower's financial statements
furnished to the Banks as described in Section 5.4 hereof.
"Guaranty" by any Person means all obligations (other than endorsements in
the ordinary course of business of negotiable instruments for deposit or
collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation (including, without limitation,
limited or full recourse obligations in connection with sales of receivables or
any other Property) of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, all obligations
incurred through an agreement, contingent or otherwise, by such Person: (i) to
purchase such Indebtedness or obligation or any Property or assets constituting
security therefor, (ii) to advance or supply funds (x) for the purchase or
payment of such Indebtedness or obligation, or (y) to maintain working capital
or other balance sheet condition, or otherwise to advance or make available
funds for the purchase or payment of such Indebtedness or obligation, or (iii)
to lease property or to purchase Securities or other property or services
primarily for the purpose of assuring the owner of such Indebtedness or
obligation of the ability of the primary obligor to make payment of the
Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purpose of all computations made under this Agreement, the
amount of a Guaranty in respect of any obligation shall be deemed to be equal to
the maximum aggregate amount of such obligation or, if the Guaranty is limited
to less than the full amount of such obligation, the maximum aggregate potential
liability under the terms of the Guaranty.
"Hazardous Material" means any substance or material which is "hazardous"
or "toxic," pursuant to any Environmental and Health Laws, and includes, without
limitation, (a) asbestos, polychlorinated biphenyls, dioxins and petroleum or
its by-products or derivatives (including crude oil or any fraction thereof) and
(b) any other material or substance classified or regulated as "hazardous" or
"toxic" pursuant to any Environmental and Health Law.
"Indebtedness" means and includes, for any Person, all obligations of such
Person, without duplication, which are required by GAAP to be shown as
liabilities on its balance sheet, and in any event shall include all of the
following whether or not so shown as liabilities (i) obligations of such Person
for borrowed money, (ii) obligations of such Person representing the deferred
purchase price of property or services, (iii) obligations of such Person
evidenced by bonds, debentures, notes, acceptances, or other instruments of such
Person or arising out of letters of credit issued for such Person's account,
(iv) obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from Property now or hereafter owned or acquired by such
Person, (v) Capitalized Lease Obligations of such Person and (vi) obligations
for which such Person is obligated pursuant to a Guaranty.
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"Interest Coverage Ratio" means, for any period of four consecutive fiscal
quarters of the Borrower ending with the most recently completed such fiscal
quarter, the ratio of EBIT to Interest Expense for such period.
"Interest Expense" means, for any period, the sum of all interest charges
of the Borrower and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP.
"Interest Period" is defined in Section 2.12 hereof.
"Investments" is defined in Section 7.13.
"Issuing Agent" means ABN AMRO Bank N.V.
"L/C Commitment" means $50,000,000.
"L/C Documents" means the Letters of Credit, any draft or other document
presented in connection with a drawing thereunder, the Applications and this
Agreement.
"L/C Fee Rate" means, at any time (i) with respect to Performance Letters
of Credit, the Performance Letter of Credit Fee Rate and (ii) with respect to
Financial Letters of Credit, the Financial Letter of Credit Fee Rate.
"L/C Obligations" means the aggregate undrawn face amounts of all
outstanding Letters of Credit and all unpaid Reimbursement Obligations.
"Lending Office" is defined in Section 9.4 hereof.
"Letter of Credit" is defined in Section 2.2(a) hereof.
"Leverage Ratio" means the ratio of (a) all Debt of the Borrower and its
Subsidiaries determined on a consolidated basis to (b) the sum of all Debt of
the Borrower and its Subsidiaries determined on a consolidated basis plus
Consolidated Net Worth.
"LIBOR" is defined in Section 2.9(b) hereof.
"Lien" means any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, including, but not limited to,
the security interest or lien arising from a mortgage, encumbrance, pledge,
conditional sale, security agreement or trust receipt, or a lease, consignment
or bailment for security purposes. For the purposes of this definition, a Person
shall be deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement, Capital Lease or other arrangement
pursuant to which title to the Property has been retained by or vested in some
other Person for security purposes, and such retention of title shall constitute
a "Lien."
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"Loan" means and includes Committed Loans and Bid Loans, and each of them
singly, and the term "type" of Loan refers to its status as a Base Rate Loan,
Eurocurrency Loan, Eurodollar Bid Loan or Stated Rate Bid Loan.
"Multiemployer Plan" means a multiemployer plan, as such term is defined in
Section 4001(a)(3) of ERISA, which is maintained (on the date hereof, within the
five years preceding the date hereof, or at any time after the date hereof) for
employees of the Borrower or any member of the Controlled Group.
"Note" means and includes the Committed Notes and the Bid Notes and each
individually, unless the context in which such term is used shall otherwise
require.
"Obligations" means all fees payable hereunder, all obligations of the
Borrower to pay principal or interest on Loans and L/C Obligations, and all
other payment obligations of the Borrower arising under or in relation to any
Credit Document.
"Offer" is defined in Section 2.4(c) hereof.
"Original Dollar Amount" means (i) the amount of any Obligation, if such
Obligation is denominated in U.S. Dollars and, (ii) in relation to any
Obligation denominated in an Alternative Currency, the U.S. Dollar Equivalent of
such Obligation on the day such amount is being computed.
"Participating Interest" is defined in Section 2.2(d) hereof.
"Percentage" means, for each Bank, the percentage of the Revolving Credit
Commitments represented by such Bank's Revolving Credit Commitment or, if the
Revolving Credit Commitments have been terminated, the percentage of the
Revolving Credit Commitments that was represented by such Bank's Revolving
Credit Commitment immediately prior to such termination.
"Performance Letter of Credit" means a Letter of Credit that, as reasonably
determined by the Administrative Agent, assures that the Borrower or a
Subsidiary will fulfill a contractual nonfinancial obligation, that is, an
obligation that does not primarily consist of the payment of money.
"Performance Letter of Credit Fee Rate" means the percentage set forth in
Schedule 1 hereto as the "Performance Letter of Credit Fee Rate" beside the then
applicable Leverage Ratio.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization or any other entity or
organization, including a government or any agency or political subdivision
thereof.
"Plan" means at any time an employee pension benefit plan covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code that is either (i) maintained by a member of the Controlled Group or (ii)
maintained pursuant to a
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collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which a member of the Controlled Group
is then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions, other than a Multiemployer Plan.
"PBGC" is defined in Section 5.8 hereof.
"Pounds Sterling" means the lawful currency of the United Kingdom.
Pricing Date" is defined in Schedule 1 hereto.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, whether now owned or
hereafter acquired.
"Reimbursement Obligation" is defined in Section 2.2(c) hereof.
"Required Banks" means, as of the date of determination thereof, (i) prior
to the termination of the Commitments, Banks holding at least 60% of the
Percentages and (ii) following the termination of the Commitments, Banks holding
at least 60% of the Obligations.
"Revolving Credit Commitment" is defined in Section 2.1 hereof.
"SEC" means the Securities and Exchange Commission.
"Security" has the same meaning as in Section 2(l) of the Securities Act of
1933, as amended.
"Stated Rate Bid Loans" is defined in Section 2.3 hereof.
"Subsidiary" means, as to the Borrower, any corporation or other entity of
which more than fifty percent (50%) of the outstanding stock or comparable
equity interests having ordinary voting power for the election of the Board of
Directors of a corporation or similar governing body in the case of a non-
corporation (irrespective of whether or not, at the time, stock or other equity
interests of any other class or classes of such corporation or other entity
shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned by the Borrower or by
one or more of its Subsidiaries.
"Telerate Service" means the Dow Jones Telerate Service."
"Termination Date" means April 29, 2001.
"Unfunded Vested Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the present value of all vested nonforfeitable
accrued benefits under such Plan exceeds (ii) the fair market value of all Plan
assets allocable to such benefits, all determined as of the then most recent
valuation date for such Plan, but only to the extent that such excess represents
a potential liability of a member of the Controlled Group to the PBGC or the
Plan under Title IV of ERISA.
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"U.S. Dollars" and "$" each means the lawful currency of the United States
of America.
"U.S. Dollar Equivalent" means the amount of U.S. Dollars which would be
realized by converting an Alternative Currency into U.S. Dollars in the spot
market at the exchange rate quoted by ABN AMRO Bank N.V., at approximately 11:00
a.m. (London time) two Business Days prior to the date on which a computation
thereof is required to be made, to major banks in the interbank foreign exchange
market for the purchase of U.S. Dollars for such Alternative Currency.
"Viratec/Marcon Acquisition" means the acquisition by the Borrower of 50%
ownership interests in Viratec Thin Films, Inc. and Marcon Coatings, Inc. from
Marvin Windows, Inc. pursuant to an order of the Rice County, Minnesota State
District Court.
"Voting Stock" of any Person means capital stock of any class or classes or
other equity interests (however designated) having ordinary voting power for the
election of directors or similar governing body of such Person.
"Welfare Plan" means a "welfare plan", as defined in Section 3(1) of ERISA.
"Wholly-Owned" when used in connection with any Subsidiary of the Borrower
means a Subsidiary of which all of the issued and outstanding shares of stock or
other equity interests (other than directors' qualifying shares as required by
law) shall be owned by the Borrower and/or one or more of its Wholly-Owned
Subsidiaries.
"WSA, Inc." means W.S.A., Inc., a Minnesota corporation.
"Yen" means the lawful currency of Japan.
Section 1.2. Interpretation. The foregoing definitions shall be equally
applicable to both the singular and plural forms of the terms defined. All
references to times of day in this Agreement shall be references to Chicago,
Illinois time unless otherwise specifically provided. Where the character or
amount of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, the same shall be done in accordance
with GAAP, to the extent applicable, except where such principles are
inconsistent with the specific provisions of this Agreement.
Section 2. The Revolving Credit.
Section 2.1. The Loan Commitment. Subject to the terms and conditions
hereof, each Bank, by its acceptance hereof, severally agrees to make a loan or
loans (individually a "Committed Loan" and collectively the "Committed Loans")
to the Borrower from time to time on a revolving basis in U.S. Dollars and
Alternative Currencies in an aggregate outstanding Original Dollar Amount up to
the amount of its revolving credit commitment set forth on the applicable
signature page hereof (such amount, as reduced pursuant to Section 2.18 or
changed as a result of one or more assignments under Section 11.12, its
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"Revolving Credit Commitment" and, cumulatively for all the Banks, the
"Revolving Credit Commitments") before the Termination Date, provided that the
sum of the aggregate Original Dollar Amount of Loans (whether Committed Loans or
Bid Loans) and of L/C Obligations at any time outstanding shall not exceed the
Revolving Credit Commitments in effect at such time. Each Borrowing of Committed
Loans shall be made ratably from the Banks in proportion to their respective
Percentages. As provided in Section 2.11(a) hereof, the Borrower may elect that
each Borrowing of Committed Loans denominated in U.S. Dollars be either Base
Rate Loans or Eurocurrency Loans. All Committed Loans denominated in an
Alternative Currency shall be Eurocurrency Loans. Committed Loans may be repaid
and the principal amount thereof reborrowed before the Termination Date, subject
to all the terms and conditions hereof.
Section 2.2. Letters of Credit. (a) General Terms. Subject to the terms
and conditions hereof, as part of the Revolving Credit, the Issuing Agent shall
issue letters of credit denominated in U.S. Dollars (each a "Letter of Credit")
for the Borrower's account in an aggregate undrawn face amount up to the amount
of the L/C Commitment, provided that the aggregate L/C Obligations at any time
outstanding shall not exceed the difference between the Revolving Credit
Commitments in effect at such time and the aggregate Original Dollar Amount of
Loans (whether Committed Loans or Bid Loans) then outstanding. Each Letter of
Credit shall be either a Performance Letter of Credit or a Financial Letter of
Credit. Each Letter of Credit shall be issued by the Issuing Agent, but each
Bank shall be obligated to purchase an undivided percentage participation
interest of such Letter of Credit from the Issuing Agent pursuant to Section
2.2(d) hereof in an amount equal to its Percentage of the amount of each drawing
thereunder and, accordingly, the undrawn face amount of each Letter of Credit
shall constitute usage of the Revolving Credit Commitment of each Bank pro rata
in accordance with each Bank's Percentage.
(b) Applications. At any time before the Termination Date, the Issuing
Agent shall, at the request of the Borrower given at least four (4) Business
Days prior to the requested date of issuance, issue one or more Letters of
Credit, in a form satisfactory to the Issuing Agent, with expiration dates no
later than the earlier of (i) one year from the date of issuance of such Letter
of Credit and (ii) the Termination Date, in an aggregate face amount as set
forth above, upon the receipt of a duly executed application for the relevant
Letter of Credit in the form customarily prescribed by the Issuing Agent for the
type of Letter of Credit requested (each an "Application"). The current form of
Application prescribed by the Issuing Agent is attached hereto as Exhibit I. The
Issuing Agent shall use reasonable efforts to provide the Borrower with any
change in such prescribed form. Notwithstanding anything contained in any
Application to the contrary (i) the Borrower's obligation to pay fees in
connection with each Letter of Credit shall be as exclusively set forth in
Section Three hereof, (ii) the Administrative Agent will not call for the
funding by the Borrower of any amount under a Letter of Credit, or any other
form of collateral security for the Borrower's obligations in connection with
such Letter of Credit, before being presented with a drawing thereunder, and
(iii) if the Issuing Agent is not timely reimbursed for the amount of any
drawing under a Letter of Credit on the date such drawing is paid, the
Borrower's obligation to reimburse the Issuing Agent for the amount of such
drawing shall bear interest (which the Borrower hereby promises to pay on
demand) from and after the date such drawing is paid at a rate per annum equal
to the sum of 2% plus the Base Rate Margin plus the Base Rate from
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time to time in effect. The Issuing Agent will promptly notify the
Administrative Agent, who will then promptly notify the Banks, of each issuance
by it of a Letter of Credit and any amendment or extension of a Letter of
Credit. Without limiting the generality of the foregoing, the Issuing Agent's
obligation to issue, amend or extend the expiration date of a Letter of Credit
is subject to the conditions set forth herein (including the conditions set
forth in Section Six and the other terms of this Section 2.2).
(c) The Reimbursement Obligations. Subject to Section 2.2(b) hereof, the
obligation of the Borrower to reimburse the Issuing Agent for all drawings under
a Letter of Credit (a "Reimbursement Obligation") shall be governed, to the
extent not inconsistent with this Agreement, by the Application related to such
Letter of Credit, except that reimbursement of each drawing shall be made in
immediately available funds at the Administrative Agent's principal office in
Chicago, Illinois by no later than 12:00 Noon (Chicago time) on the date when
such drawing is paid or, if such drawing was paid after 11:30 a.m. (Chicago
time), by the end of such day. If the Borrower does not make any such
reimbursement payment on the date due (whether through a deemed request for a
Base Rate Loan pursuant to Section 2.11(c) or otherwise) and the Banks fund
their participations therein in the manner set forth in Section 2.2(d) below,
then all payments thereafter received by the Administrative Agent in discharge
of any of the relevant Reimbursement Obligations shall be distributed in
accordance with Section 2.2(d) below.
(d) The Participating Interests. Each Bank, by its acceptance hereof,
severally agrees to purchase from the Issuing Agent, and the Issuing Agent
hereby agrees to sell to each Bank, an undivided percentage participating
interest (a "Participating Interest"), to the extent of its Percentage, in each
Letter of Credit issued by, and each Reimbursement Obligation owed to, the
Issuing Agent. Upon any failure by the Borrower to pay any Reimbursement
Obligation on the date required, as set forth in Section 2.2(c) above, or if the
Issuing Agent is required at any time to return to the Borrower or to a trustee,
receiver, liquidator, custodian or other Person any portion of any payment of
any Reimbursement Obligation, each Bank shall, not later than the Business Day
it receives a demand from the Issuing Agent to such effect, if such demand is
received before 1:00 p.m. (Chicago time), or not later than the following
Business Day, if such demand is received after such time, pay to the Issuing
Agent an amount equal to its Percentage of such unpaid or recaptured
Reimbursement Obligation together with interest on such amount accrued from the
date the related payment was made by the Issuing Agent to the date of such
payment by such Bank at a rate per annum equal to (i) from the date the related
payment was made by the Agent to the date two (2) Business Days after payment by
such Bank is due hereunder, the Federal Funds Rate for each such day and (ii)
from the date two (2) Business Days after the date such payment is due from such
Bank to the date such payment is made by such Bank, the Base Rate in effect for
each such day. Each such Bank shall thereafter be entitled to receive its
Percentage of each payment received in respect of the relevant Reimbursement
Obligation and of interest paid thereon, with the Issuing Agent retaining its
Percentage as a Bank hereunder.
The several obligations of the Banks to the Issuing Agent under this
Section 2.2 shall be absolute, irrevocable and unconditional under any and all
circumstances whatsoever and shall not be subject to any set-off, counterclaim
or defense to payment which any Bank may have or have had against the Borrower,
the Agents, the Issuing Agent any other Bank or any other
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Person whatsoever. Without limiting the generality of the foregoing, such
obligations shall not be affected by any Default or Event of Default or by any
reduction or termination of any Commitment of any Bank, and each payment by a
Bank under this Section 2.2 shall be made without any offset, abatement,
withholding or reduction whatsoever. The Issuing Agent and the Administrative
Agent shall be entitled to offset amounts received for the account of a Bank
under the Credit Documents against unpaid amounts due from such Bank to the
Issuing Agent or the Administrative Agent hereunder (whether as fundings of
participations, indemnities or otherwise).
(e) Indemnification. The Banks shall, to the extent of their respective
Percentages, indemnify the Issuing Agent (to the extent not reimbursed by the
Borrower) against any cost, expense (including reasonable counsel fees and
disbursements), claim, demand, action, loss or liability (except such as result
from the Issuing Agent's gross negligence or willful misconduct) that the
Issuing Agent may suffer or incur in connection with any Letter of Credit. The
Issuing Agent shall be entitled to all of the rights and protections afforded
the Administrative Agent under Section 10 hereof (other than Sections 10.1, 10.3
and 10.7). The obligations of the Banks under this Section 2.2(e) and all other
parts of this Section 2.2 shall survive termination of this Agreement and of all
other L/C Documents.
(f) Issuing Agent. Each Bank hereby appoints ABN AMRO Bank N.V. as the
Issuing Agent hereunder and hereby authorizes the Issuing Agent to take such
action as Issuing Agent on its behalf and to exercise such powers under the
Credit Documents as are delegated to the Issuing Agent by the terms thereof,
together with such powers as are reasonably incidental thereto. The
relationship between the Issuing Agent and the Banks is and shall be that of
agent and principal only, and nothing contained in this Agreement or any other
Credit Document shall be construed to constitute the Issuing Agent as a trustee
or fiduciary for any Bank or the Borrower. The term "Bank" as used herein and
in all other Credit Documents, unless the context otherwise clearly requires,
includes the Issuing Agent in its individual capacity as a Bank.
Section 2.3. The Bid Loans. At any time before the Termination Date the
Borrower may request the Banks to offer to make uncommitted loans in U.S.
Dollars (each such loan being hereinafter referred to as a "Bid Loan" and
collectively as the "Bid Loans") in the manner set forth in Sections 2.3 through
2.8 hereof and in amounts such that the aggregate principal amount of all Loans
(whether Committed Loans or Bid Loans) and L/C Obligations at any time
outstanding hereunder shall not exceed the Revolving Credit Commitments then in
effect. The Banks may, but shall have no obligation to, make such offers and
the Borrower may, but shall have no obligation to, accept any such offers in the
manner set forth in Sections 2.3 through 2.8 hereof. Each Bank may offer to
make Bid Loans in any amount (whether greater than, equal to, or less than its
Revolving Credit Commitment), subject to the limitation that the Original Dollar
Amount of all Loans (whether Committed Loans or Bid Loans) and L/C Obligations
outstanding under this Agreement may not at any time exceed the Revolving Credit
Commitments then in effect and subject to the other conditions of this
Agreement. Bid Loans may either bear interest at a stated rate per annum
("Stated Rate Bid Loans") or at a margin (the "Bid Margin") over or under
Adjusted LIBOR ("Eurodollar Bid Loans"); provided that there may be no more than
fifteen different Interest Periods for Fixed Rate Loans outstanding at the same
time.
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Section 2.4. Requests for Bid Loans.
(a) Requests and Confirmations. In order to request a Borrowing of Bid
Loans (a "Bid Loan Request") the Borrower shall give telephonic, telex or
telecopy notice to the Administrative Agent by no later than 11:00 a.m. (Chicago
time) (i) on the date at least four (4) Business Days prior to the date of the
requested Bid Borrowing (the "Borrowing Date") in the case of a request for
Eurodollar Bid Loans or for both Eurodollar Bid Loans and Stated Rate Bid Loans
and (ii) on the date at least one (1) Business Day prior to the Borrowing Date
in the case of a request solely for Stated Rate Bid Loans. Each such request
shall be followed on the same day by a duly completed confirmation (a "Bid Loan
Request Confirmation"), delivered by telecopier or other means of facsimile
communication, substantially in the form of Exhibit C hereto or otherwise
containing the information required by this Section, to be received by the
Administrative Agent no later than 11:30 a.m. (Chicago time). Bid Loan Request
Confirmations that do not conform substantially to the format of Exhibit C may
be rejected by the Administrative Agent, and the Administrative Agent shall give
telephonic notice to the Borrower of such rejection promptly after it determines
(which determination shall be conclusive) that the Bid Loan Request Confirmation
does not substantially conform to the format of Exhibit C. Bid Loan Requests
shall in each case refer to this Agreement and specify (i) the proposed
Borrowing Date (which must be a Business Day), (ii) the aggregate principal
amount thereof (which shall not be less than $5,000,000 and thereafter in
integral multiples of $1,000,000, and (iii) the proposed Interest Period
thereof, which in the case of Stated Rate Bid Loans shall be 7 to 180 days after
the Borrowing Date and in the case of Eurodollar Bid Loans shall be 1, 2, 3 or 6
months after the proposed Borrowing Date, but with no Interest Period to extend
beyond the Termination Date. Interest on Bid Loans shall be payable on the last
day of the applicable Interest Period and at maturity (whether by acceleration
or otherwise), and if the applicable Interest Period is longer than three
months, on each day occurring every three months after the commencement of such
Interest Period. A Bid Loan Request shall not be made within five (5) Business
Days after the date of any previous Bid Loan Request.
(b) Invitation to Bid. Upon receipt by the Administrative Agent of a Bid
Loan Request Confirmation that conforms substantially to the format of Exhibit C
hereto or is otherwise acceptable to the Administrative Agent, the
Administrative Agent shall, by telephone, promptly confirmed by a telecopy or
other form of facsimile communication in the form of Exhibit D hereto, invite
each Bank to bid, on the terms and conditions of this Agreement, to make Bid
Loans pursuant to the Bid Loan Request.
(c) Bids. Each Bank may, in its sole discretion, offer to make a Bid Loan
or Bid Loans (a "Bid") to the Borrower responsive to the Bid Loan Request. Each
Bid by a Bank must be received by the Administrative Agent by telephone not
later than (i) 10:00 a.m. (Chicago time) on the proposed Borrowing Date in the
case of a bid for a Stated Rate Bid Loan and (ii) 10:00 a.m. (Chicago time)
three (3) Business Days prior to the proposed Borrowing Date in the case of a
bid for a Eurodollar Bid Loan, in each instance promptly confirmed in writing by
a duly completed Confirmation of Bid delivered by telecopier or other means of
facsimile communication substantially in the form of Exhibit E hereto, to be
received by the Administrative Agent on the same day; provided, however, that
any Bid made by ABN AMRO Bank N.V. must be made by telephone to the Borrower by
no later than
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fifteen minutes prior to the time that Bids from the other Banks are required to
be received. Each Bid and each Confirmation of Bid shall refer to this Agreement
and specify (i) the principal amount of each Bid Loan that the Bank is willing
to make to the Borrower and the type of Bid Loan (i.e., Stated Rate or
Eurodollar), (ii) the interest rate (which shall be computed on the basis of a
360-day year and actual days elapsed and, in the case of a Eurodollar Bid Loan,
shall be expressed in terms of the Bid Margin to be added to or subtracted from
the Adjusted LIBOR for the Interest Period to be applicable to such Eurodollar
Bid Loan) at which the Bank is prepared to make each Bid Loan, and (iii) the
Interest Period applicable thereto. The Administrative Agent shall reject any
Bid if such Bid (i) does not specify all of the information specified in the
immediately preceding sentence, (ii) contains any qualifying, conditional, or
similar language, (iii) proposes terms other than or in addition to those set
forth in the Bid Loan Request to which it responds, or (iv) is received by the
Administrative Agent later than the times provided for above. Any Bid submitted
by a Bank pursuant to this Section 2.4 shall be irrevocable and shall be
promptly confirmed by a telecopy or other form of facsimile communication in the
form of Exhibit E, provided that in all events the telephone Bid received by the
Administrative Agent shall be binding on the relevant Bank and shall not be
altered, modified, or in any other manner affected by any inconsistent terms
contained in, or terms missing from, the Bank's Confirmation of Bid. Each offer
contained in a Bid to make a Bid Loan in a certain amount, at a certain interest
rate, and for a certain Interest Period is referred to herein as an "Offer".
Section 2.5. Notice of Bids; Advice of Rate. The Administrative Agent
shall give telephonic notice to the Borrower of the number of Bids made, the
terms of the Offers contained in such Bids (including the interest rate(s) and
Interest Period(s) applicable to each Bid, the maximum principal amount bid at
each interest rate for each Interest Period, and the identity of the Bank making
such Bid), such notice to be given by 10:30 a.m. (Chicago time) on (i) the
Borrowing Date in the case of Bid Loan Requests solely for Stated Rate Bid Loans
or (ii) three (3) Business Days prior to the proposed Borrowing Date in the case
of Bid Loan Requests for Eurodollar Bid Loans or for both Stated Rate Bid Loans
and Eurodollar Bid Loans. The Administrative Agent shall send a written summary
of all Bids received by it to the Borrower on the same day. The interest rates
quoted for Eurodollar Bid Loans shall be expressed in terms of the Bid Margin to
be added to or subtracted from LIBOR to be applicable to such Bid Loan.
Section 2.6. Acceptance or Rejection of Bids. The Borrower may in its
sole and absolute discretion, subject only to the provisions of this Section,
irrevocably accept or reject any Offer contained in a Bid. No later than 11:00
a.m. (Chicago time) on the date the Administrative Agent provides the Borrower
with the terms of an Offer pursuant to Section 2.5, the Borrower shall give
telephonic notice to the Administrative Agent of whether and to what extent it
has decided to accept or reject any or all of the Offers contained in the Bids
made in response to the related Bid Loan Request, which notice shall be promptly
confirmed by telecopier or other form of facsimile communication to be received
by the Administrative Agent (i) on the proposed Borrowing Date in the case of
Stated Rate Bid Loans and (ii) three (3) Business Days prior to the proposed
Borrowing Date in the case of Eurodollar Bid Loans; provided, however, that (A)
the Borrower shall accept Offers for any of the maturities specified by the
Borrower in the related Bid Loan Request Confirmation solely on the basis of
ascending interest rates for each such Interest Period, (B) if the
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Borrower declines to borrow, or if it is restricted by any other condition
hereof from borrowing, the maximum principal amount of Bid Loans in respect of
which Offers at a particular interest rate for a particular Interest Period have
been made, then the Borrower shall accept a pro rata portion of each such Offer,
based as nearly as possible on the ratio of the maximum aggregate principal
amounts of Bid Loans for which each such Offer was made by each Bank (provided
that, if the available principal amount of Bid Loans to be so allocated is not
sufficient to enable Bid Loans to be so allocated to each relevant Bank in
integral multiples of $1,000,000, then the Borrower may round allocations up or
down in integral multiples not less than $100,000, (C) the aggregate principal
amount of all Offers accepted by the Borrower shall not exceed the maximum
amount contained in the related Bid Loan Request Confirmation, and (D) no Offer
of a Bid Loan shall be accepted in a principal amount less than $1,000,000 and
thereafter in integral multiples of $500,000 (provided that such Offer may be
rounded up or down as provided for in (B) above). Any telephone notice given by
the Borrower pursuant to this Section shall be irrevocable and shall not be
altered, modified, or in any other manner affected by any inconsistent terms
contained in, or terms missing from, any written confirmation of such notice.
Section 2.7. Notice of Acceptance or Rejection of Bids.
(a) Notice to Banks Making Successful Bids. The Administrative Agent
shall give telephonic notice to each Bank if any of the Offers contained in its
Bid have been accepted (including the amount, the applicable interest rate and
Interest Period for each accepted Offer) no later than 11:30 a.m. (Chicago time)
(i) on the proposed Borrowing Date in the case of Stated Rate Bid Loans and (ii)
three (3) Business Days prior to the proposed Borrowing Date in the case of
Eurodollar Bid Loans, and each successful bidder will thereupon become bound,
subject to Section Six and the other applicable conditions hereof, to make the
Bid Loan(s) in respect of which its Offer has been accepted. As soon as
practicable thereafter the Administrative Agent shall send a Notice of
Acceptance of Bid substantially in the form of Exhibit F hereto to each such
successful bidder; provided, however, that failure to give such notice shall not
affect the obligation of such successful bidder to disburse its Bid Loans as
herein required.
(b) Notice to all Banks. As soon as practicable after each Borrowing Date
for Bid Loans, the Administrative Agent shall notify each Bank (whether or not
its Bid or its Bids were successful) of the aggregate amount of Bid Loans
advanced pursuant to the relevant Bid Loan Request on such Borrowing Date, the
maturities thereof, and the lowest and highest interest rates at which Bid Loans
were made for each maturity.
(c) Disbursement of Bid Loans. Not later than 1:00 p.m. (Chicago time) on
the Borrowing Date for each Borrowing of a Bid Loan(s), each Bank bound to make
a Bid Loan(s) in accordance with Section 2.7(a) shall, subject to Section Six
and the other applicable conditions hereof, make available to the Administrative
Agent the principal amount of each such Bid Loan in immediately available funds
at the Administrative Agent's principal office in Chicago, Illinois. The
Administrative Agent shall promptly thereafter make available to the Borrower
like funds as received from each Bank, at such office of the Administrative
Agent in Chicago, Illinois.
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Section 2.8. Telephonic Notice. Each Bank's telephonic notice to the
Administrative Agent of its Bid pursuant to Section 2.4(c) hereof, and the
Borrower's telephonic acceptance of any Offer contained in a Bid pursuant to
Section 2.6 hereof, shall be irrevocable and binding on such Bank and the
Borrower and shall not be altered, modified, or in any other manner affected by
any inconsistent terms contained in, or missing from, any telecopy or other
confirmation of such telephonic notice. It is understood and agreed by the
parties hereto that the Administrative Agent shall be entitled to act (or to
fail to act) hereunder in reliance on its records of any telephonic notices
provided for herein and that the Administrative Agent shall not incur any
liability to any Person in so doing if its records conflict with any telecopy or
other confirmation of a telephone notice or otherwise, provided that the
Administrative Agent has acted (or failed to act) in good faith. It is further
understood and agreed by the parties hereto that the times of day as set forth
in Section 2.7 are for the convenience of all the parties for providing notices
and that no party shall incur any liability or other responsibility for any
failure to provide such notices within the specified times; provided, however,
that the Administrative Agent shall have no obligation to notify the Borrower of
any Bid received by it later than 10:00 a.m. (Chicago time) (i) on the proposed
Borrowing Date in the case of a Bid for a Stated Rate Bid Loan or (ii) three (3)
Business Days prior to the proposed Borrowing Date in the case of a Bid for a
Eurodollar Bid Loan, and no acceptance by the Borrower of any Offer contained in
such a Bid shall be effective to bind any Bank to make a Bid Loan, nor shall the
Administrative Agent be under any obligation to notify any Person of an
acceptance, if notice of such acceptance is received by the Administrative Agent
later than 11:00 a.m. (Chicago time) (x) on the proposed Borrowing Date in the
case of Stated Rate Bid Loans and (y) three (3) Business Days prior to the
proposed Borrowing Date in the case of Eurodollar Bid Loans.
Section 2.9. Applicable Interest Rates. (a) Base Rate Loans. Each Base
Rate Loan made or maintained by a Bank shall bear interest during each Interest
Period it is outstanding (computed on the basis of a year of 365 or 366 days, as
applicable, and actual days elapsed) on the unpaid principal amount thereof from
the date such Loan is advanced, continued or created by conversion from a
Eurocurrency Loan until maturity (whether by acceleration or otherwise) at a
rate per annum equal to the sum of the Applicable Margin plus the Base Rate from
time to time in effect, payable on the last day of its Interest Period and at
maturity (whether by acceleration or otherwise).
"Base Rate" means for any day the greater of:
(i) the rate of interest announced by ABN AMRO Bank N.V. in the
United States from time to time as its prime rate, or equivalent, for U.S.
Dollar loans as in effect on such day, with any change in the Base Rate
resulting from a change in said prime rate to be effective as of the date
of the relevant change in said prime rate; and
(ii) the sum of (x) the rate published by the Federal Reserve Bank of
New York as the prevailing rate per annum (rounded upwards, if necessary,
to the nearest one hundred-thousandth of a percentage point) at
approximately 10:00 a.m. (New York time) (or as soon thereafter as is
practicable) on such day (or, if such day is not a Business Day, on the
immediately preceding Business Day) for the purchase at face value of
overnight Federal funds in an amount comparable to the principal amount
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owed to ABN AMRO Bank N.V. for which such rate is being determined, plus
(y) 1/2 of 1% (0.50%).
(b) Eurocurrency Loans. Each Eurocurrency Loan made or maintained by a
Bank shall bear interest during each Interest Period it is outstanding (computed
on the basis of a year of 360 days and actual days elapsed) on the unpaid
principal amount thereof from the date such Loan is advanced, continued, or
created by conversion from a Base Rate Loan until maturity (whether by
acceleration or otherwise) at a rate per annum equal to the sum of the
Applicable Margin plus the Adjusted LIBOR applicable for such Interest Period,
payable on the last day of the Interest Period and at maturity (whether by
acceleration or otherwise), and, if the applicable Interest Period is longer
than three months, on each day occurring every three months after the
commencement of such Interest Period. All payments of principal and interest on
a Loan shall be made in the same currency as was advanced by the Bank in
connection with such Loan.
"Adjusted LIBOR" means, for any Borrowing of Eurocurrency Loans or
Eurodollar Bid Loans, as applicable, a rate per annum determined in accordance
with the following formula:
Adjusted LIBOR = LIBOR
-----------------------------------
1 - Eurocurrency Reserve Percentage
"LIBOR" means, for an Interest Period for a Borrowing of Eurocurrency Loans
or Eurodollar Bid Loans, as applicable, (a) the LIBOR Index Rate for such
Interest Period, if such rate is available, or (b) if the LIBOR Index Rate
cannot be determined, the arithmetic average of the rates of interest per annum
(rounded upwards, if necessary, to the nearest one-sixteenth of one percent) at
which deposits in U.S. Dollars or the relevant Alternative Currency, as
appropriate, in immediately available funds are offered to ABN AMRO Bank N.V. at
11:00 a.m. (London, England time) two (2) Business Days before the beginning of
such Interest Period by major banks in the interbank eurocurrency market for
delivery on the first day of and for a period equal to such Interest Period in
an amount equal or comparable to (i) in the case of a Borrowing of Eurocurrency
Loans, the greater of (x) the principal amount of the Eurocurrency Loan
scheduled to be made by ABN AMRO Bank N.V. as part of such Borrowing and (y)
$1,000,000, and (ii) in the case of Eurodollar Bid Loans, the aggregate
principal amount of the Eurodollar Bid Loan requested by the Borrower in the
applicable Bid Loan Request.
"LIBOR Index Rate" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one-sixteenth of one percent)
for deposits in U.S. Dollars or the relevant Alternative Currency, as
appropriate, for delivery on the first day of and for a period equal to such
Interest Period in an amount equal or comparable to (i) in the case of a
Borrowing of Eurocurrency Loans, the greater of (x) the principal amount of the
Eurocurrency Loan scheduled to be made by ABN AMRO Bank N.V. as part of such
Borrowing and (y) $1,000,000 and (ii) in the case of Eurodollar Bid Loans, the
aggregate principal amount of the Eurodollar Bid Loan requested by the Borrower
in the applicable Bid Loan Request, which appears on the Applicable Telerate
Page, as appropriate for such
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currency, as of 11:00 a.m. (London, England time) on the day two (2) Business
Days before the commencement of such Interest Period.
"Applicable Telerate Page" means, with regard to Eurocurrency Loans
denominated in U.S. Dollars and Eurodollar Bid Loans, the display page
designated as "Page 3750" on the Telerate Service and with regard to each other
Alternate Currency, the display page on the Telerate Service as designated by
the Administrative Agent which displays the appropriate British Bankers'
Association Interest Settlement Rates for such Alternative Currency (or such
other page as may replace such pages, as appropriate, on that service or such
other service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Bankers' Association
Interest Settlement Rates for deposits in U.S. Dollars or the Alternative
Currency, as applicable).
"Eurocurrency Reserve Percentage" means, for any Borrowing of Eurocurrency
Loans or Eurodollar Bid Loans, the daily average for the applicable Interest
Period of the maximum rate, expressed as a decimal, at which reserves
(including, without limitation, any supplemental, marginal and emergency
reserves) are imposed during such Interest Period by the Board of Governors of
the Federal Reserve System (or any successor) on "eurocurrency liabilities", as
defined in such Board's Regulation D (or in respect of any other category of
liabilities that includes deposits by reference to which the interest rate on
Eurocurrency Loans or Eurodollar Bid Loans is determined or any category of
extensions of credit or other assets that include loans by non-United States
offices of any Bank to United States residents), subject to any amendments of
such reserve requirement by such Board or its successor, taking into account any
transitional adjustments thereto. For purposes of this definition, the
Eurocurrency Loans and Eurodollar Bid Loans shall be deemed to be "eurocurrency
liabilities" as defined in Regulation D without benefit or credit for any
prorations, exemptions or offsets under Regulation D.
(c) Bid Loans. Bid Loans shall bear interest for the relevant Interest
Period from the date such Loan is advanced until maturity (whether by
acceleration or otherwise) at a rate per annum equal to (i) in the case of
Eurodollar Bid Loans, the sum of Adjusted LIBOR plus the Bid Margin set forth in
the applicable Bid pursuant to which such Eurodollar Bid Loan was made and (ii)
in the case of Stated Rate Bid Loans, the stated rate per annum set forth in the
applicable Bid pursuant to which such Stated Rate Bid Loan was made.
(d) Rate and Currency Determinations. The Administrative Agent shall
determine each interest rate applicable to Obligations and the Original Dollar
Amount of all Obligations, and a determination thereof by the Administrative
Agent shall be conclusive and binding except in the case of manifest error. The
Original Dollar Amount of a Loan denominated in an Alternative Currency shall be
determined or redetermined, as applicable, effective as of the first day of each
Interest Period for such Loan. The Original Dollar Amount of each Letter of
Credit shall be determined or redetermined, as applicable, on the date of
issuance, increase or extension of such Letter of Credit and on the last day of
each calendar quarter.
Section 2.10. Minimum Borrowing Amounts. Each Borrowing of Base Rate
Loans shall be in an amount not less than $1,000,000 and in integral multiples
of $500,000, provided that a Borrowing of Base Rate Loans applied to pay a
Reimbursement Obligation pursuant to
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Section 2.2(c) hereof shall be in an amount equal to such Reimbursement
Obligation. Each Borrowing of Eurocurrency Loans denominated in U.S. Dollars
shall be in an amount not less than $5,000,000 and in integral multiples of
$1,000,000. Each Borrowing of Eurocurrency Loans denominated in an Alternative
Currency shall be in an amount not less than an Original Dollar Amount of
$5,000,000 and in such integral multiple of 100,000 units of the relevant
currency as would have an Original Dollar Amount most closely approximating
$1,000,000 or an integral multiple thereof.
Section 2.11. Manner of Borrowing Committed Loans and Designating Interest
Rates Applicable to Committed Loans. (a) Notice to the Agent. The Borrower
shall give notice to the Administrative Agent by no later than 12:00 Noon
(Chicago time) (i) at least four (4) Business Days before the date on which the
Borrower requests the Banks to advance a Borrowing of Eurocurrency Loans
denominated in an Alternative Currency, (ii) at least three (3) Business Days
before the date on which the Borrower requests the Banks to advance a Borrowing
of Eurocurrency Loans denominated in U.S. Dollars and (iii) on the date the
Borrower requests the Banks to advance a Borrowing of Loans comprised of Base
Rate Loans. The Loans included in each such Borrowing shall bear interest
initially at the type of rate specified in such notice of a new Borrowing.
Thereafter, the Borrower may from time to time elect to change or continue the
type of interest rate borne by each Borrowing of Committed Loans or, subject to
Section 2.10's minimum amount requirement for each outstanding Borrowing, a
portion thereof, as follows: (i) if such Borrowing is of Eurocurrency Loans, on
the last day of the Interest Period applicable thereto, the Borrower may
continue part or all of such Borrowing as Eurocurrency Loans of the same
currency for an Interest Period or Interest Periods specified by the Borrower
or, if such Eurocurrency Loan is denominated in U.S. Dollars, convert part or
all of such Borrowing into Base Rate Loans, (ii) if such Borrowing is of Base
Rate Loans, on any Business Day, the Borrower may convert all or part of such
Borrowing into Eurocurrency Loans denominated in U.S. Dollars for an Interest
Period or Interest Periods specified by the Borrower. The Borrower shall give
all such notices requesting the advance, continuation, or conversion of a
Borrowing of Loans to the Administrative Agent by telephone or telecopy (which
notice shall be irrevocable once given and, if by telephone, shall be promptly
confirmed in writing). Notices of the continuation of a Borrowing of Loans
comprised of Eurocurrency Loans for an additional Interest Period or of the
conversion of part or all of a Borrowing of Eurocurrency Loans denominated in
U.S. Dollars into Base Rate Loans or of Base Rate Loans into Eurocurrency Loans
denominated in U.S. Dollars must be given by no later than 12:00 Noon (Chicago
time) at least three (3) Business Days before the date of the requested
continuation or conversion. All such notices concerning the advance,
continuation, or conversion of a Borrowing of Loans shall specify the date of
the requested advance, continuation or conversion of such Borrowing (which shall
be a Business Day), the amount of the requested Borrowing of Loans to be
advanced, continued, or converted, the type of Loans to comprise such new,
continued or converted Borrowing and, if such Borrowing is to be comprised of
Eurocurrency Loans, the currency and Interest Period applicable thereto. The
Borrower agrees that the Administrative Agent may rely on any such telephonic or
telecopy notice given by any person it in good faith believes is an Authorized
Representative without the necessity of independent investigation, and in the
event any such notice by telephone conflicts with any written confirmation, such
telephonic notice shall govern if the Administrative Agent has acted in reliance
thereon.
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There may be no more than fifteen different Interest Periods for Fixed Rate
Loans in effect at any one time.
Without limiting the Borrower's obligations under any other provision of
this Agreement, upon the occurrence and continuance of an Event of Default, each
Eurocurrency Loan denominated in U.S. Dollars will automatically, on the last
day of the then existing Interest Period therefor, convert into a Base Rate Loan
and (ii) the obligation of the Banks to make or continue, or to convert Loans
into, Eurocurrency Loans shall be suspended.
(b) Notice to the Banks. The Administrative Agent shall give prompt
telephonic or telecopy notice to each Bank of any notice from the Borrower
received pursuant to Section 2.11(a) above. The Administrative Agent shall give
notice to the Borrower and each Bank by like means of the interest rate
applicable to each Borrowing of Eurocurrency Loans and, if such Borrowing is
denominated in an Alternative Currency, shall give notice by such means to the
Borrower and each Bank of the Original Dollar Amount thereof.
(c) Borrower's Failure to Notify. Any outstanding Borrowing of Base Rate
Loans shall automatically be continued for an additional Interest Period on the
last day of its then current Interest Period unless the Borrower has notified
the Administrative Agent within the period required by Section 2.11(a) that it
intends to convert such Borrowing into a Borrowing of Eurocurrency Loans or
notifies the Administrative Agent within the period required by Section 2.14(a)
that it intends to prepay such Borrowing. If the Borrower fails to give notice
pursuant to Section 2.11(a) above of the continuation or conversion of any
outstanding principal amount of a Borrowing of Eurocurrency Loans denominated in
U.S. Dollars before the last day of its then current Interest Period within the
period required by Section 2.11(a) and has not notified the Administrative Agent
within the period required by Section 2.14(a) that it intends to prepay such
Borrowing, such Borrowing shall automatically be converted into a Borrowing of
Base Rate Loans. If the Borrower fails to give notice pursuant to Section
2.11(a) above of the continuation of any outstanding principal amount of a
Borrowing of Eurocurrency Loans denominated in an Alternative Currency before
the last day of its then current Interest Period within the period required by
Section 2.11(a) and has not notified the Administrative Agent within the period
required by Section 2.14(a) that it intends to prepay such Borrowing, such
Borrowing shall automatically (subject to the terms hereof) be continued as a
Borrowing of Eurocurrency Loans in the same Alternative Currency with an
Interest Period of one month, including the application of Section 2.10 and of
the restrictions contained in the definition of Interest Period. In the event
the Borrower fails to give notice pursuant to Section 2.11(a) above of a
Borrowing equal to the amount of a Reimbursement Obligation and has not notified
the Administrative Agent by 11:00 a.m. (Chicago time) on the day such
Reimbursement Obligation becomes due that it intends to repay such Reimbursement
Obligation through funds not borrowed under this Agreement, the Borrower shall
be deemed to have requested a Borrowing of Base Rate Loans on such day in the
amount of the Reimbursement Obligation then due, subject to Section 6 hereof,
which Borrowing shall be applied to pay the Reimbursement Obligation then due.
(d) Disbursement of Committed Loans. Not later than 1:00 p.m. (Chicago
time) on the date of any requested advance of a new Borrowing of Loans comprised
of Eurocurrency Loans or Base Rate Loans, subject to Section 6 hereof, each Bank
shall make available its
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Loan comprising part of such Borrowing in funds immediately available at the
principal office of the Administrative Agent in Chicago, Illinois, except that
if such Borrowing is comprised of Eurocurrency Loans denominated in an
Alternative Currency each Bank shall, subject to Section 2.9(c) and Section 6
hereof, make available its Loan comprising part of such Borrowing at such office
as the Administrative Agent has previously specified in a notice to each Bank,
in such funds as are then customary for the settlement of international
transactions in such currency and no later than such local time as is necessary
for such funds to be received and transferred to the Borrower for same day value
on the date of the Borrowing. The Administrative Agent shall make available to
the Borrower Loans at the Administrative Agent's principal office in Chicago,
Illinois or such other office as the Administrative Agent has previously agreed
in writing to with the Borrower, in each case in the type of funds received by
the Administrative Agent from the Banks.
(e) Administrative Agent Reliance on Bank Funding. Unless the
Administrative Agent shall have been notified by a Bank before the date on which
such Bank is scheduled to make payment to the Administrative Agent of the
proceeds of a Loan (which notice shall be effective upon receipt) that such Bank
does not intend to make such payment, the Administrative Agent may assume that
such Bank has made such payment when due and the Administrative Agent may in
reliance upon such assumption (but shall not be required to) make available to
the Borrower the proceeds of the Loan to be made by such Bank and, if any Bank
has not in fact made such payment to the Administrative Agent, such Bank shall,
on demand, pay to the Administrative Agent the amount made available to the
Borrower attributable to such Bank together with interest thereon in respect of
each day during the period commencing on the date such amount was made available
to the Borrower and ending on (but excluding) the date such Bank pays such
amount to the Administrative Agent at a rate per annum equal to the Federal
Funds Rate or, in the case of a Loan denominated in an Alternative Currency, the
cost to the Administrative Agent of funding the amount it advanced to fund such
Bank's Loan, as determined by the Administrative Agent. If such amount is not
received from such Bank by the Administrative Agent immediately upon demand, the
Borrower will, on demand, repay to the Administrative Agent the proceeds of the
Loan attributable to such Bank with interest thereon at a rate per annum equal
to the interest rate applicable to the relevant Loan.
Section 2.12. Interest Periods. The term "Interest Period" means the period
commencing on the date a Borrowing of Loans is advanced, continued, or created
by conversion and ending: (a) in the case of Base Rate Loans, on the last
Business Day of the calendar quarter in which such Borrowing is advanced,
continued, or created by conversion (or on the last day of the following
calendar quarter if such Loan is advanced, continued or created by conversion on
the last Business Day of a calendar quarter); (b) in the case of Eurodollar Bid
Loans or Eurocurrency Loans, the date selected by the Borrower that is 1, 2, 3,
or 6 months thereafter or (c) in the case of any Stated Rate Bid Loan, the date
selected by the Borrower that is 7-180 days thereafter; provided, however, that:
(a) any Interest Period for a Borrowing of Base Rate Loans that
otherwise would end after the Termination Date shall end on the Termination
Date;
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(b) for any Borrowing of Fixed Rate Loans, the Borrower may not select
an Interest Period that extends beyond the Termination Date;
(c) whenever the last day of any Interest Period would otherwise be a
day that is not a Business Day, the last day of such Interest Period shall
be extended to the next succeeding Business Day, provided that, if such
extension would cause the last day of an Interest Period for a Borrowing of
Eurodollar Bid Loans or Eurocurrency Loans to occur in the following
calendar month, the last day of such Interest Period shall be the
immediately preceding Business Day; and
(d) for purposes of determining an Interest Period for a Borrowing of
Eurodollar Bid Loans or Eurocurrency Loans, a month means a period starting
on one day in a calendar month and ending on the numerically corresponding
day in the next calendar month; provided, however, that if there is no
numerically corresponding day in the month in which such an Interest Period
is to end or if such an Interest Period begins on the last Business Day of
a calendar month, then such Interest Period shall end on the last Business
Day of the calendar month in which such Interest Period is to end.
Section 2.13. Maturity of Loans. Unless an earlier maturity is provided for
hereunder (whether by acceleration or otherwise), each Bid Loan shall mature and
become due and payable by the Borrower on the last day of the Interest Period
applicable thereto and each Base Rate Loan and each Eurocurrency Loan shall
mature and become due and payable by the Borrower on the Termination Date.
Section 2.14. Prepayments. (a) The Borrower may prepay without premium or
penalty and in whole or in part (but, if in part, then: (i) if such Borrowing is
of Base Rate Loans, in an amount not less than $1,000,000 and integral multiples
of $500,000, (ii) if such Borrowing is of Eurocurrency Loans denominated in U.S.
Dollars, in an amount not less than $5,000,000 and integral multiples of
$1,000,000, (iii) if such Borrowing is denominated in an Alternative Currency,
an amount for which the U.S. Dollar Equivalent is not less than $5,000,000 and
integral multiples of 100,000 units of the applicable currency most closely
approximating the U.S. Dollar Equivalent of $1,000,000 and (iv) in an amount
such that the minimum amount required for a Borrowing pursuant to Section 2.10
hereof remains outstanding) any Borrowing of Eurocurrency Loans upon three
Business Days' prior notice to the Administrative Agent or, in the case of a
Borrowing of Base Rate Loans, notice delivered to the Administrative Agent no
later than 10:00 a.m. (Chicago time) on the date of prepayment, such prepayment
to be made by the payment of the principal amount to be prepaid and accrued
interest thereon to the date fixed for prepayment. The Administrative Agent will
promptly advise each Bank of any such prepayment notice it receives from the
Borrower. Any amount paid or prepaid before the Termination Date may, subject to
the terms and conditions of this Agreement, be borrowed, repaid and borrowed
again. Any prepayment of Eurocurrency Loans shall be subject to Section 2.17.
Bid Loans may only be prepaid with the consent of the Bank which made the Bid
Loan being prepaid.
(b) If the aggregate Original Dollar Amount of outstanding Loans and L/C
Obligations shall at any time for any reason exceed the Revolving Credit
Commitments then in
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effect, the Administrative Agent shall notify the Borrower of such circumstance
and the Borrower shall, within three (3) Business Days, pay the amount of such
excess to the Administrative Agent for the ratable benefit of the Banks as a
prepayment of the Loans and, if necessary, a prefunding of Letters of Credit.
Immediately upon determining the need to make any such prepayment the Borrower
shall notify the Administrative Agent of such required prepayment. Each such
prepayment shall be accompanied by a payment of all accrued and unpaid interest
on the Loans prepaid and shall be subject to Section 2.17.
Section 2.15. Default Rate. If any payment of principal on any Loan is not
made when due (whether by acceleration or otherwise), such Loan shall bear
interest (computed on the basis of a year of 360 days and actual days elapsed
or, if based on the Base Rate, on the basis of a year of 365 or 366 days, as
applicable, and the actual number of days elapsed) from the date such payment
was due until paid in full, payable on demand, at a rate per annum equal to:
(a) for any Base Rate Loan, the sum of two percent (2%) plus the
Applicable Margin plus the Base Rate from time to time in effect; and
(b) for any Fixed Rate Loan, the sum of two percent (2%) plus the rate
of interest in effect thereon at the time of such default until the end of
the Interest Period applicable thereto and, thereafter, if such Loan is
denominated in U.S. Dollars, at a rate per annum equal to the sum of two
percent (2%) plus the Base Rate Margin plus the Base Rate from time to time
in effect or, if such Loan is denominated in an Alternative Currency, at a
rate per annum equal to the sum of the Eurocurrency Margin, plus two
percent (2%) plus the rate of interest per annum as determined by the
Administrative Agent (rounded upwards, if necessary, to the nearest whole
multiple of one-sixteenth of one percent (1/16%)) at which overnight or
weekend deposits of the appropriate currency (or, if such amount due
remains unpaid more than three Business Days, then for such other period of
time not longer than six months as the Administrative Agent may elect in
its absolute discretion) for delivery in immediately available and freely
transferable funds would be offered by ABN AMRO Bank N.V. to major banks in
the interbank market upon request of such major banks for the applicable
period as determined above and in an amount comparable to the unpaid
principal amount of any such Loan (or, if ABN AMRO Bank N.V. is not placing
deposits in such currency in the interbank market, then the ABN AMRO Bank
N.V.'s cost of funds in such currency for such period).
Section 2.16. The Notes. (a) All Committed Loans made to the Borrower by a
Bank shall be evidenced by a single promissory note of the Borrower issued to
such Bank in the form of Exhibit A hereto (each a "Committed Note" and
collectively the "Committed Notes"), each such Committed Note to be payable to
the order of the applicable Bank in the amount of its Revolving Credit
Commitment.
(b) All Bid Loans made to the Borrower by a Bank shall be evidenced by a
promissory note of such Borrower in the form of Exhibit B hereto (individually a
"Bid Note" and collectively the "Bid Notes"), payable to the order of the
applicable Bank and otherwise in the form of Exhibit B hereto.
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(c) Each Bank shall record on its books and records or on a schedule to the
appropriate Note the amount of each Loan advanced, continued, or converted by
it, all payments of principal and interest and the principal balance from time
to time outstanding thereon, the type of such Loan, and, for any Fixed Rate
Loan, the Interest Period, the currency in which such Loan is denominated, and
the interest rate applicable thereto. The record thereof, whether shown on such
books and records of a Bank or on a schedule to any Note, shall be prima facie
evidence as to all such matters; provided, however, that the failure of any Bank
to record any of the foregoing or any error in any such record shall not limit
or otherwise affect the obligation of the Borrower to repay all Loans made to it
hereunder together with accrued interest thereon. At the request of any Bank and
upon such Bank tendering to the Borrower the Note to be replaced, the Borrower
shall furnish a new Note to such Bank to replace any outstanding Note, and at
such time the first notation appearing on a schedule on the reverse side of, or
attached to, such Note shall set forth the aggregate unpaid principal amount of
all Loans, if any, then outstanding thereon.
Section 2.17. Funding Indemnity. If any Bank shall incur any loss, cost or
expense (including, without limitation, any loss of profit, and any loss, cost
or expense incurred by reason of the liquidation or re-employment of deposits or
other funds acquired by such Bank to fund or maintain any Fixed Rate Loan or the
relending or reinvesting of such deposits or amounts paid or prepaid to such
Bank) as a result of:
(a) any payment (whether by acceleration or otherwise), prepayment or
conversion of a Fixed Rate Loan on a date other than the last day of its
Interest Period,
(b) any failure (because of a failure to meet the conditions of
Section Six or otherwise) by the Borrower to borrow or continue a Fixed
Rate Loan, or to convert a Base Rate Loan into a Fixed Rate Loan, on the
date specified in a notice given pursuant to Section 2.11(a) or established
pursuant to Section 2.11(c) hereof, or
(c) any acceleration of the maturity of a Fixed Rate Loan as a result
of the occurrence of any Event of Default hereunder,
then, upon the demand of such Bank, the Borrower shall pay to such Bank such
amount as will reimburse such Bank for such loss, cost or expense. If any Bank
makes such a claim for compensation, it shall provide to the Borrower, with a
copy to the Administrative Agent, a certificate executed by an officer of such
Bank setting forth the amount of such loss, cost or expense in reasonable detail
(including an explanation of the basis for and the computation of such loss,
cost or expense) and the amounts shown on such certificate if reasonably
calculated shall be conclusive absent manifest error.
Section 2.18. Commitment Terminations. The Borrower shall have the right at
any time and from time to time, upon five (5) Business Days' prior written
notice to the Administrative Agent, to terminate the Revolving Credit
Commitments without premium or penalty, in whole or in part, any partial
termination to be (i) in an amount not less than $5,000,000 or an integral
multiple thereof, and (ii) allocated ratably among the Banks in
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proportion to their respective Percentages, provided that the Revolving Credit
Commitments may not be reduced to an amount less than the sum of the Original
Dollar Amount of all Loans and all L/C Obligations then outstanding. The
Borrower shall have the right at any time and from time to time, by notice to
the Administrative Agent, to terminate the L/C Commitment without premium or
penalty, in whole or in part, provided that the L/C Commitment may not be
reduced to an amount less than the L/C Obligations outstanding. Any such
termination of the L/C Commitment shall not reduce the Revolving Credit
Commitments unless the Borrower elects to do so in the manner provided in the
preceding sentence. The Administrative Agent shall give prompt notice to each
Bank of any such termination of Commitments. Any termination of Revolving Credit
Commitments or the L/C Commitment pursuant to this Section 2.18 may not be
reinstated.
Section 3. Fees and Extensions.
Section 3.1. Fees.
(a) Facility Fee. For the period from the Effective Date to and including
the Termination Date, the Borrower shall pay to the Administrative Agent for the
ratable account of the Banks in accordance with their Percentages a facility fee
accruing at a rate per annum equal to the Facility Fee Rate on the average daily
amount of the Revolving Credit Commitments (whether used or unused). Such
facility fee is payable in arrears on June 28, 1996, on the last Business Day of
each calendar quarter thereafter and on the Termination Date, unless the
Revolving Credit Commitments are terminated in whole on an earlier date, in
which event the fee for the period to but not including the date of such
termination shall be paid in whole on the date of such termination.
(b) Letter of Credit Fees. (i) The Borrower shall pay to the Administrative
Agent for the account of each Bank letter of credit fees with respect to the
Letters of Credit at a rate per annum equal to (x) in the case of Performance
Letters of Credit, the Performance Letter of Credit Fee Rate on the average
daily undrawn amount of the outstanding Performance Letters of Credit for the
applicable period and (y) in the case of Financial Letters of Credit, the
Financial Letter of Credit Fee Rate on the average daily undrawn amount of the
outstanding Financial Letters of Credit, computed on a quarterly basis in
arrears on the last Business Day of each calendar quarter and on the Termination
Date (or such later date on which all Letters of Credit have been terminated).
(ii) The Borrower shall pay to the Issuing Agent, for the account of such
Issuing Agent, a letter of credit fronting fee for each Letter of Credit issued
by such Issuing Agent at the rate per annum equal to the rate set forth in the
Fee Letter on the average daily undrawn amount of outstanding Letters of Credit,
computed on the last Business Day of each calendar quarter and on the
Termination Date.
(iii) The letter of credit fees payable under Section 3.1(b)(i) and the
fronting fees payable under Section 3.1(b)(ii) shall be due and payable
quarterly in arrears on the last Business Day of each calendar quarter during
which Letters of Credit are outstanding, commencing on the first such quarterly
date to occur after the Effective Date, through the
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Termination Date, with the final payment to be made on the Termination Date,
unless the Revolving Credit Commitments are terminated in whole on an earlier
date, in which event the fee for the period to but not including the date of
such termination shall be paid in whole on the date of such termination.
(iv) The Borrower shall pay to the Issuing Agent from time to time on
demand the normal issuance, presentation, amendment and other processing fees,
and other standard costs and charges, of the Issuing Agent relating to letters
of credit as from time to time in effect.
(c) Other Fees. The Borrower shall pay to the Administrative Agent and the
Issuing Agent, for the sole account of the Administrative Agent or the Issuing
Agent, as applicable, the fees agreed to between the Administrative Agent, the
Issuing Agent and the Borrower in the Fee Letter or as otherwise agreed in
writing between them.
(d) Fee Calculations. All fees payable under this Agreement shall be
payable in U.S. Dollars and shall be computed on the basis of a year of 360
days, for the actual number of days elapsed. All determinations of the amount of
fees owing hereunder (and the components thereof) shall be made by the
Administrative Agent and shall be conclusive absent manifest error.
Section 4. Place and Application of Payments.
Section 4.1. Place and Application of Payments. All payments of principal
of and interest on the Loans and the Reimbursement Obligations, and of all other
amounts payable by the Borrower under this Agreement, shall be made by the
Borrower to the Administrative Agent by no later than 12:00 Noon (Chicago time)
on the due date thereof at the principal office of the Administrative Agent in
Chicago, Illinois (or no later than 12:00 noon local time at such other location
as the Administrative Agent and the Borrower may agree) or, if such payment is
on a Reimbursement Obligation, no later than provided by Section 2.2(c) hereof,
for the benefit of the Person or Persons entitled thereto. All payments of
principal and interest on any Loan advanced by a Bank or reimbursements to the
Issuing Agent for payments made by the Issuing Agent under a Letter of Credit
shall be made in the same currency as was so advanced or paid. Any payments
received after such time shall be deemed to have been received by the
Administrative Agent on the next Business Day. All such payments shall be made
free and clear of, and without deduction for, any set-off, counterclaim, levy or
any other deduction of any kind (i) in U.S. Dollars, in immediately available
funds at the place of payment, or (ii) in the case of amounts payable hereunder
in an Alternative Currency, in such Alternative Currency in such funds then
customary for the settlement of international transactions in such currency. The
Administrative Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal or interest on Committed Loans or
applicable fees ratably to the Banks and like funds relating to the payment of
any other amount payable to any Person to such Person, in each case to be
applied in accordance with the terms of this Agreement.
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Section 5. Representations and Warranties.
The Borrower hereby represents and warrants to each Bank as to itself and,
where the following representations and warranties apply to Subsidiaries, as to
each of its Subsidiaries, as follows:
Section 5.1. Corporate Organization and Authority. The Borrower is duly
organized and existing in good standing under the laws of the State of
Minnesota; has all necessary corporate power to carry on its present business;
and is duly licensed or qualified and, in good standing in each jurisdiction in
which the nature of the business transacted by it or the nature of the Property
owned or leased by it makes such licensing, qualification or good standing
necessary and in which the failure to be so licensed, qualified or in good
standing would materially and adversely affect its business, operations,
Property or financial or other condition.
Section 5.2. Subsidiaries. Schedule 5.2 (as updated from time to time
pursuant to Section 7.1) hereto identifies each Subsidiary, the jurisdiction of
its incorporation, the percentage of issued and outstanding shares of each class
of its capital stock owned by the Borrower and the Subsidiaries and, if such
percentage is not 100% (excluding directors' qualifying shares as required by
law), a description of each class of its authorized capital stock and the number
of shares of each class issued and outstanding. Each Subsidiary is duly
incorporated and existing in good standing as a corporation under the laws of
the jurisdiction of its incorporation, has all necessary corporate power to
carry on its present business, and is duly licensed or qualified and in good
standing in each jurisdiction in which the nature of the business transacted by
it or the nature of the Property owned or leased by it makes such licensing or
qualification necessary and in which the failure to be so licensed or qualified
would have a material adverse effect on the business, operations, Property or
financial or other condition of such Subsidiary. All of the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
outstanding and fully paid and nonassessable. All such shares owned by the
Borrower are owned beneficially, and of record, free of any Lien.
Section 5.3. Corporate Authority and Validity of Obligations. The Borrower
has full right and authority to enter into this Agreement and the other Credit
Documents to which it is a party, to make the borrowings herein provided for, to
issue its Notes in evidence thereof, to apply for the issuance of the Letters of
Credit, and to perform all of its obligations under the Credit Documents to
which it is a party. Each Credit Document to which it is a party has been duly
authorized, executed and delivered by the Borrower and constitutes valid and
binding obligations of the Borrower enforceable in accordance with its terms. No
Credit Document, nor the performance or observance by the Borrower of any of the
matters or things therein provided for, contravenes any provision of law or any
charter or by-law provision of the Borrower or any material Contractual
Obligation of or affecting the Borrower or any of its Properties or results in
or requires the creation or imposition of any Lien on any of the Properties or
revenues of the Borrower.
Section 5.4. Financial Statements; No Material Adverse Change. All
financial statements heretofore delivered to the Banks showing historical
performance of the Borrower for any of the Borrower's fiscal years ending on or
before March 2, 1996, have been
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prepared in accordance with generally accepted accounting principles applied on
a basis consistent, except as otherwise noted therein, with that of the previous
fiscal year, subject, in the case of unaudited financial statements, to year-end
audit adjustments. Each of such financial statements fairly presents on a
consolidated basis the financial condition of the Borrower and its Subsidiaries
as of the dates thereof and the results of operations for the periods covered
thereby. The Borrower and its Subsidiaries have no material contingent
liabilities other than those disclosed in the most recent financial statements
referred to in this Section 5.4 or in comments or footnotes thereto, or in any
report supplementary thereto, heretofore furnished to the Banks. Since March 2,
1996, there has been no material adverse change in the business, operations,
Property or financial or other condition, or business prospects, of the Borrower
and its Subsidiaries taken as a whole.
Section 5.5. No Litigation; No Labor Controversies. (a) Except as set forth
on Schedule 5.5, there is no litigation or governmental proceeding pending, or
to the knowledge of the Borrower, threatened, against the Borrower or any
Subsidiary which, if adversely determined, could (individually or in the
aggregate) reasonably be expected to have a material adverse effect on the
business, operations, Property or financial or other condition of the Borrower
and its Subsidiaries, taken as a whole.
(b) Except as set forth on Schedule 5.5, there are no labor controversies
pending or, to the best knowledge of the Borrower, threatened against the
Borrower or any Subsidiary which could reasonably be expected to have a material
adverse effect on the business, operations, Property or financial or other
condition of the Borrower and its Subsidiaries taken as a whole.
Section 5.6. Taxes. The Borrower and its Subsidiaries have filed all United
States federal tax returns, and all other tax returns, required to be filed and
have paid all taxes due pursuant to such returns or pursuant to any assessment
received by the Borrower or any Subsidiary, except such taxes, if any, as are
being contested in good faith and for which adequate reserves have been
provided. No notices of tax liens have been filed and no claims are being
asserted concerning any such taxes, which liens or claims are material to the
financial condition of the Borrower or the Borrower and its Subsidiaries taken
as a whole. The charges, accruals and reserves on the books of the Borrower and
its Subsidiaries for any taxes or other governmental charges are adequate.
Section 5.7. Approvals. No authorization, consent, license, exemption,
filing or registration with any court or governmental department, agency or
instrumentality, nor any approval or consent of the stockholders of the Borrower
or any Subsidiary or from any other Person, is necessary to the valid execution,
delivery or performance by the Borrower of any Credit Document to which it is a
party.
Section 5.8. ERISA. With respect to each Plan, the Borrower and each other
member of the Controlled Group has fulfilled its obligations under the minimum
funding standards of and is in compliance in all material respects with the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and with
the Code to the extent applicable to it and has not incurred any liability to
the Pension Benefit Guaranty Corporation ("PBGC") or a Plan under Title IV of
ERISA other than a liability to the PBGC for premiums under Section 4007
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of ERISA. Neither the Borrower nor any Subsidiary has any contingent liabilities
for any post-retirement benefits under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
Section 5.9. Government Regulation. Neither the Borrower nor any Subsidiary
is an "investment company" within the meaning of the Investment Company Act of
1940, as amended, or 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 5.10. Margin Stock; Use of Proceeds. Neither the Borrower nor any
Subsidiary is engaged principally, or as one of its primary activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock ("margin stock" to have the same meaning herein as in Regulation U of the
Board of Governors of the Federal Reserve System). The proceeds of the Loans
and Letters of Credit are to be used solely for the purposes set forth in and
permitted by Section 7.10. The Borrower will not use the proceeds of any Loan
or Letter of Credit in a manner that violates any provision of Regulation U or X
of the Board of Governors of the Federal Reserve System.
Section 5.11. Licenses and Authorizations; Compliance with Laws. (a) The
Borrower and each of its Subsidiaries has all necessary licenses, permits and
governmental authorizations to own and operate its Properties and to carry on
its business as currently conducted and contemplated, except to the extent
failure to have the same could not reasonably be expected to have a material
adverse effect on the business, operations, Property or financial or other
condition of the Borrower and its Subsidiaries taken as a whole. The Borrower
and each of its Subsidiaries is in material compliance with all applicable laws,
regulations, ordinances and orders of any governmental or judicial authorities
except for any such law, regulation, ordinance or order which, the failure to
comply therewith, could not reasonably expected to have a material adverse
effect on the business, operations, property or financial or other condition of
the Borrower and its Subsidiaries taken as a whole.
(b) In the ordinary course of its business, the Borrower and its
Subsidiaries have conducted limited Phase I Environmental Site Assessments on
some, but not all, of the Properties and operations of the Borrower and its
Subsidiaries in the course of which the Borrower has identified and evaluated
associated liabilities and costs. On the basis of this review, the Borrower has
reasonably concluded that Environmental and Health Laws are unlikely to have any
material adverse effect on the business, operations, Property or financial or
other condition of the Borrower and its Subsidiaries taken as a whole.
(c) Neither the Borrower nor any Subsidiary has given, nor is it required
to give, nor has it received, any notice, letter, citation, order, warning,
complaint, inquiry, claim or demand to or from any governmental entity or in
connection with any court proceeding which could reasonably have a material
adverse effect on the Property, business or operations of the Borrower and its
Subsidiaries taken as a whole claiming that: (i) the Borrower or any Subsidiary
has violated, or is about to violate, any Environmental and Health Law; (ii)
there has been a release, or there is a threat of release, of Hazardous
Materials from the Borrower's or any Subsidiary's Property, facilities,
equipment or vehicles; (iii) the Borrower or any
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Subsidiary may be or is liable, in whole or in part, for the costs of cleaning
up, remediating or responding to a release of Hazardous Materials; or (iv) any
of the Borrower's or any Subsidiary's property or assets are subject to a Lien
in favor of any governmental entity for any liability, costs or damages, under
any Environmental and Health Law arising from, or costs incurred by such
governmental entity in response to, a release of a Hazardous Materials.
Section 5.12. Ownership of Property; Liens. The Borrower and each
Subsidiary has good title to or valid leasehold interests in all its Property.
None of the Borrower's or any Subsidiary's Property is subject to any Lien,
except as permitted in Section 7.9.
Section 5.13. No Burdensome Restrictions; Compliance with Agreements.
Neither the Borrower nor any Subsidiary is (a) party or subject to any law,
regulation, rule or order that (individually or in the aggregate) materially
adversely affects the business, operations, Property or financial or other
condition of the Borrower or the Borrower and its Subsidiaries taken as a whole
or (b) in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Contractual Obligation to
which it is a party, which default materially adversely affects the business,
operations, Property or financial or other condition of the Borrower and its
Subsidiaries taken as a whole.
Section 5.14. Full Disclosure. All information heretofore furnished by the
Borrower to the Administrative Agent or any Bank for purposes of or in
connection with the Credit Documents or any transaction contemplated thereby is,
and all such information hereafter furnished by the Borrower to the
Administrative Agent or any Bank will be, true and accurate in all material
respects and not misleading on the date as of which such information is stated
or certified.
Section 6. Conditions Precedent.
The obligation of each Bank to advance, continue, or convert any Loan, or
of the Issuing Agent to issue, extend the expiration date (including by not
giving notice of non-renewal) of or increase the amount of any Letter of Credit,
shall be subject to the following conditions precedent:
Section 6.1. Initial Credit Event. Before or concurrently with the initial
Credit Event:
(a) The Administrative Agent shall have received for each Bank the
favorable written opinion of Dorsey & Whitney LLP, counsel to the Borrower
in form and substance satisfactory to the Banks;
(b) The Administrative Agent shall have received for each Bank copies
of (i) the Certificate of Incorporation, together with all amendments, and
a certificate of good standing, for the Borrower, both certified as of a
date not earlier than 20 days prior to the date hereof by the appropriate
governmental officer of the Borrower's jurisdiction of incorporation and
(ii) the Borrower's bylaws (or comparable constituent
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documents) and any amendments thereto, certified in each instance by its
Secretary or an Assistant Secretary;
(c) The Administrative Agent shall have received for each Bank copies
of resolutions of the Borrower's Board of Directors authorizing the
execution and delivery of the Credit Documents and the consummation of the
transactions contemplated thereby together with specimen signatures of the
persons authorized to execute such documents on the Borrower's behalf, all
certified in each instance by its Secretary or Assistant Secretary;
(d) The Administrative Agent shall have received for each Bank such
Bank's duly executed Committed Note and Bid Note of the Borrower dated the
date hereof and otherwise in compliance with the provisions of Section 2.16
hereof;
(e) The Administrative Agent shall have received for each Bank a list
of the Borrower's Authorized Representatives and such other documents as
any Bank may reasonably request;
(f) All legal matters incident to the execution and delivery of the
Credit Documents shall be satisfactory to the Banks;
(g) The Administrative Agent shall have received a certificate by the
chief financial officer or corporate controller of the Borrower, stating
that on the date of such initial Credit Event no Default or Event of
Default has occurred and is continuing; and
(h) The Administrative Agent shall have received a duly executed
Compliance Certificate containing financial information as of the last day
of the most recently completed fiscal year of the Borrower.
Section 6.2. All Credit Events. As of the time of each Credit Event
hereunder:
(a) In the case of a Borrowing, the Administrative Agent shall have
received the notice required by Section 2.4(a) or 2.11, as applicable, and
in the case of the issuance of any Letter of Credit the Issuing Agent shall
have received the notice required by Section 2.2(b) and a duly completed
Application for a Letter of Credit and, in the case of an extension or
increase in the amount of a Letter of Credit, a written request therefor,
in a form acceptable to the Issuing Agent;
(b) Each of the representations and warranties set forth in Section 5
hereof shall be and remain true and correct in all material respects as of
said time, taking into account any amendments to such Section (including
without limitation any amendments to the Schedules referenced therein) made
after the date of this Agreement in accordance with its provisions, except
that if any such representation or warranty relates solely to an earlier
date it need only remain true as of such date;
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(c) No Default or Event of Default shall have occurred and be
continuing or would occur as a result of such Credit Event; and
(d) After giving effect to the Credit Event the aggregate Original
Dollar Amount of all Loans and L/C Obligations shall not exceed the
Revolving Credit Commitments then in effect.
Each request for a Borrowing hereunder and each request for the issuance
of, increase in the amount of, or extension of the expiration date of, a Letter
of Credit shall be deemed to be a representation and warranty by the Borrower on
the date of such Credit Event as to the facts specified in paragraphs (b)-(e) of
this Section 6.2.
Section 6.3. Determinations Under Section 6.1. For purposes of determining
compliance with the conditions specified in Section 6.1, each Bank shall be
deemed to have consented to, approved or accepted or to be satisfied with each
document or other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to the Banks unless an officer of the
Administrative Agent responsible for the transactions contemplated by this
Agreement shall have received notice from such Bank prior to the Effective Date
specifying its objection thereto.
Section 7. Covenants.
The Borrower covenants and agrees that, so long as any Note or any L/C
Obligation is outstanding hereunder, or any Commitment is available to or in use
by the Borrower hereunder, except to the extent compliance in any case is waived
in writing by the Required Banks:
Section 7.1. Corporate Existence; Subsidiaries. The Borrower shall, and
shall cause each of its Subsidiaries to, preserve and maintain its corporate
existence, subject to the provisions of Section 7.11 hereof. As a condition to
establishing or acquiring any Subsidiary, unless the Required Banks otherwise
agree, the Borrower shall deliver an updated Schedule 5.2 to reflect the new
Subsidiary.
Section 7.2. Maintenance. The Borrower will maintain, preserve and keep its
plants, Properties and equipment necessary to the proper conduct of its business
in reasonably good repair, working order and condition and will from time to
time make all reasonably necessary repairs, renewals, replacements, additions
and betterments thereto so that at all times such plants, Properties and
equipment shall be reasonably preserved and maintained, and the Borrower will
cause each of its Subsidiaries to do so in respect of Property owned or used by
it.
Section 7.3. Taxes. The Borrower will duly pay and discharge, and will
cause each of its Subsidiaries duly to pay and discharge, all taxes, rates,
assessments, fees and governmental charges upon or against it or against its
Properties, in each case before the same becomes delinquent and before penalties
accrue thereon, unless and to the extent that the same is being
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contested in good faith by appropriate proceedings and reserves in conformity
with GAAP have been provided therefor on the books of the Borrower.
Section 7.4. ERISA. The Borrower will, and will cause each of its
Subsidiaries to, promptly pay and discharge all obligations and liabilities
arising under ERISA of a character which if unpaid or unperformed might result
in the imposition of a Lien against any of its properties or assets and will
promptly notify the Administrative Agent of (i) the occurrence of any reportable
event (as defined in ERISA) affecting a Plan, other than any such event with
respect to which the PBGC has waived the thirty day notice requirement by
regulation, (ii) receipt of any written notice from PBGC of its intention to
seek termination of any Plan or appointment of a trustee therefor, (iii) its or
any of its Subsidiaries' intention to terminate or withdraw from any Plan or
Multiemployer Plan, to the extent the Borrower would incur a material liability
as a result thereof, and (iv) the occurrence of any event affecting any Plan or
Multiemployer Plan which could result in the incurrence by the Borrower or any
of its Subsidiaries of any material liability, fine or penalty, or any material
increase in the contingent liability of the Borrower or any of its Subsidiaries
under any post-retirement Welfare Plan benefit.
Section 7.5. Insurance. The Borrower will insure, and keep insured, and
will cause each of its Subsidiaries to insure, and keep insured, with good and
responsible insurance companies, all insurable Property owned by it of a
character usually insured by companies similarly situated and operating like
Property. To the extent usually insured (subject to self-insured retentions) by
companies similarly situated and conducting similar businesses, the Borrower
will also insure, and cause each of its Subsidiaries to insure, employers' and
public and product liability risks with good and responsible insurance
companies. The Borrower will upon request of any Bank furnish to such Bank a
summary setting forth the nature and extent of the insurance maintained pursuant
to this Section 7.5.
Section 7.6. Financial Reports and Other Information. (a) The Borrower will
maintain a system of accounting in accordance with GAAP and will furnish to the
Banks and their respective duly authorized representatives such information
respecting the business and financial condition of the Borrower and its
Subsidiaries as any Bank may reasonably request; and without any request, the
Borrower will furnish each of the following to each Bank:
(i) within 90 days after the end of each fiscal year of the Borrower,
a copy of the Borrower's financial statements for such fiscal year,
including the consolidated balance sheet of the Borrower for such year and
the related statement of income and statement of cash flow, as certified by
independent public accountants of recognized national standing selected by
the Borrower in accordance with GAAP with such accountants' unqualified
opinion to the effect that the financial statements have been prepared in
accordance with GAAP and present fairly in all material respects in
accordance with GAAP the consolidated financial position of the Company and
its Subsidiaries as of the close of such fiscal year and the results of
their operations and cash flows for the fiscal year then ended and that an
examination of such accounts in connection with such financial statements
has been made in accordance with generally accepted auditing standards and,
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accordingly, such examination included such tests of the accounting records
and such other auditing procedures as were considered necessary in the
circumstances;
(ii) within 45 days after the end of each of the first three quarterly
fiscal periods of the Borrower, a consolidated unaudited balance sheet of
the Borrower, and the related statement of income and statement of cash
flow, as of the close of such period, all of the foregoing prepared by the
Borrower in reasonable detail in accordance with GAAP and certified by the
Borrower's chief financial officer or corporate controller as fairly
presenting the financial condition as at the dates thereof and the results
of operations for the periods covered thereby, subject to year-end
adjustments;
(iii) promptly after the sending or filing thereof, copies of all
proxy statements, financial statements and reports the Borrower sends to
its shareholders generally, and copies of all other regular, periodic and
special reports and all registration statements the Borrower files with the
SEC or any successor thereto, or with any national securities exchanges.
(b) Each financial statement furnished to the Banks pursuant to subsection
(i) or (ii) of this Section 7.6 shall be accompanied by (A) a written
certificate signed by the Borrower's chief financial officer or corporate
controller to the effect that (i) no Default or Event of Default has occurred
during the period covered by such statements or, if any such Default or Event of
Default has occurred during such period, setting forth a description of such
Default or Event of Default and specifying the action, if any, taken by the
Borrower to remedy the same, (ii) the representations and warranties contained
in Section 5 hereof are true and correct in all material respects as though made
on the date of such certificate (other than those made solely as of an earlier
date, which need only remain true as of such date), taking into account any
amendments to such Section (including without limitation any amendments to the
Schedules referenced therein) made after the date of this Agreement in
accordance with its provisions and except as otherwise described therein, and
(B) a Compliance Certificate in the form of Exhibit H hereto showing the
Borrower's compliance with the covenants set forth in Sections 7.9, 7.11 and
7.13-7.17 hereof.
(c) The Borrower will promptly (and in any event within three Business Days
after an officer of the Borrower has knowledge thereof) give notice to the
Administrative Agent and each Bank:
(i) of the occurrence of any Default or Event of Default;
(ii) of any default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries that could reasonably
be expected to have a material adverse effect on the business, operations,
property or condition, financial or otherwise, of the Borrower and its
Subsidiaries taken as a whole;
(iii) of a material adverse change in the business, operations,
Property or financial or other condition of the Borrower and its
Subsidiaries taken as a whole;
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(iv) of any litigation or governmental proceeding of the type
described in Section 5.5 hereof; and
(v) of any change in the information set forth on the Schedules
hereto.
Section 7.7. Bank Inspection Rights. Upon reasonable notice from any Bank,
the Borrower will, prior to the occurrence and continuance of any Default or
Event of Default, at such Bank's expense and at any time a Default or Event of
Default has occurred and is continuing, at the Borrower's expense, permit such
Bank (and such Persons as any Bank may designate) during normal business hours
to visit and inspect, under the Borrower's guidance, any of the properties of
the Borrower or any of its Subsidiaries, to examine all of their books of
account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers, employees and with their independent public
accountants (and by this provision the Borrower authorizes such accountants to
discuss with the Banks (and such Persons as any Bank may designate) the finances
and affairs of the Borrower and its Subsidiaries) all at such reasonable times
and as often as may be reasonably requested; provided, however, that except upon
the occurrence and during the continuation of any Default or Event of Default,
not more than one such set of visits and inspections may be conducted each
calendar quarter.
Section 7.8. Conduct of Business. Neither the Borrower nor any Subsidiary
will engage in any line of business if, as a result, the general nature of the
business of the Borrower or the Borrower and its Subsidiaries taken as a whole
would be substantially changed from that conducted on the date hereof.
Section 7.9. Liens. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, permit to exist or to be incurred any Lien of
any kind on any Property owned by the Borrower or any Subsidiary; provided,
however, that this Section 7.9 shall not apply to nor operate to prevent:
(a) Liens arising by operation of law in connection with worker's
compensation, unemployment insurance, social security obligations, taxes,
assessments, statutory obligations or other similar charges, good faith
deposits, pledges or Liens in connection with bids, tenders, contracts or
leases to which the Borrower or any Subsidiary is a party (other than
contracts for borrowed money), or other deposits required to be made in the
ordinary course of business; provided that in each case the obligation
secured is not overdue or, if overdue, is being contested in good faith by
appropriate proceedings and for which reserves in conformity with GAAP have
been provided on the books of the Borrower;
(b) mechanics', workmen's, materialmen's, landlords', carriers' or
other similar Liens arising in the ordinary course of business (or deposits
to obtain the release of such Liens) securing obligations not due or, if
due, being contested in good faith by appropriate proceedings and for which
reserves in conformity with GAAP have been provided on the books of the
Borrower;
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(c) Liens for taxes or assessments or other government charges or
levies on the Borrower or any Subsidiary of the Borrower or their
respective Properties, not yet due or delinquent, or which can thereafter
be paid without penalty, or which are being contested in good faith by
appropriate proceedings and for which reserves in conformity with GAAP have
been provided on the books of the Borrower;
(d) Liens arising out of judgments or awards against the Borrower or
any Subsidiary of the Borrower, or in connection with surety or appeal
bonds in connection with bonding such judgments or awards, the time for
appeal from which or petition for rehearing of which shall not have expired
or with respect to which the Borrower or such Subsidiary shall be
prosecuting an appeal or proceeding for review, and with respect to which
it shall have obtained a stay of execution pending such appeal or
proceeding for review; provided that the aggregate amount of liabilities
(including interest and penalties, if any) of the Borrower and its
Subsidiaries secured by such Liens shall not exceed $2,500,000 at any one
time outstanding;
(e) Liens upon any Property acquired by the Borrower or any Subsidiary
of the Borrower to secure any Indebtedness of the Borrower or any
Subsidiary incurred at the time of the acquisition of such Property to
finance the purchase price of such Property, or Liens upon property
resulting from the sale by the Borrower or any Subsidiary of Property and
the leasing of the same or similar property from the purchaser thereof (or
a subsequent purchaser or lessee), provided that any such Lien shall apply
only to the Property that was so acquired or sold and leased back and the
aggregate principal amount of Indebtedness secured by such Liens shall not
exceed $15,000,000 at any time outstanding;
(f) Survey exceptions or encumbrances, easements or reservations, or
rights of others for rights-of-way, utilities and other similar purposes,
or zoning or other restrictions as to the use of real properties which are
necessary for the conduct of the activities of the Borrower and any
Subsidiary of the Borrower or which customarily exist on properties of
corporations engaged in similar activities and similarly situated and which
do not in any event materially impair their use in the operation of the
business of the Borrower or any Subsidiary of the Borrower;
(g) Liens listed on Schedule 7.9 hereto;
(h) Liens securing Indebtedness of a Subsidiary of the Borrower
incurred in connection with the acquisition or construction of Property of
such Subsidiary provided that such Lien is limited to the Property being
financed by such Indebtedness and any revenues of such Subsidiary directly
attributable to such Property and provided further that the Indebtedness
secured by such Lien is non-recourse to the Borrower and its Subsidiaries;
and
(i) Any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Lien referred to in
the foregoing paragraphs (a) through (h), inclusive, provided, however,
that the principal amount of
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Indebtedness secured thereby shall not exceed the principal amount of
Indebtedness so secured at the time of such extension, renewal or
replacement, and that such extension, renewal or replacement shall be
limited to the Property which was subject to the Lien so extended, renewed
or replaced.
Section 7.10. Use of Proceeds; Regulation U. The proceeds of each
Borrowing, and the credit provided by Letters of Credit, will be used by the
Borrower for general corporate purposes. Following application of the proceeds
of each Loan, not more than 25% of the value of the assets (either of the
Borrower only or of the Borrower and its Subsidiaries on a consolidated basis)
subject to the provisions of Section 7.9 hereof will be margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal Reserve
System).
Section 7.11. Mergers, Consolidations and Sales. The Borrower shall not,
nor shall it permit any Subsidiary to, be a party to any merger or
consolidation, or sell, transfer, lease or otherwise dispose of all or any
substantial part of its Property, including any disposition of Property as part
of a sale and leaseback transaction, or in any event sell or discount (with or
without recourse) any of its notes or accounts receivable; provided, however,
that this Section shall not apply to nor operate to prevent (i) the Borrower
being a party to any merger where the Borrower is the surviving Person if, after
giving effect to such merger, no Default or Event of Default would then exist,
(ii) any Subsidiary (a) merging into the Borrower or (b) being a party to any
merger which does not involve the Borrower where such Subsidiary is the
surviving Person if, after giving effect to such merger, no Default or Event of
Default would then exist, (iii) the Viratec/Marcon Acquisition or (iv) the
Borrower or any Subsidiary from selling its inventory in the ordinary course of
its business. The term "substantial" as used herein shall mean an amount in
excess of 5% of the total assets of the Borrower or such Subsidiary (computed
based upon the total assets of the Borrower or such Subsidiary set forth in the
most recently prepared balance sheet) per year. For purposes of this Section
7.11 the Property of the Borrower and its Subsidiaries shall be valued at the
greater of book or fair market value of such Property.
Section 7.12. Use of Property and Facilities; Environmental and Health and
Safety Laws. (a) The Borrower will, and will cause each of its Subsidiaries to,
comply in all material respects with the requirements of all Environmental and
Health Laws applicable to or pertaining to the Properties or business operations
of the Borrower or any Subsidiary of the Borrower. Without limiting the
foregoing, the Borrower will not, and will not permit any Person to, except in
accordance with applicable law, dispose of any Hazardous Material into, onto or
upon any real property owned or operated by the Borrower or any of its
Subsidiaries.
(b) The Borrower will promptly provide the Banks with copies of any notice
or other instrument of the type described in Section 5.11(c) hereof, and in no
event later than five (5) Business Days after an officer of the Borrower
receives such notice or instrument.
Section 7.13. Investments, Acquisitions, Loans, Advances and Guaranties.
The Borrower will not, nor will it permit any Subsidiary to, directly or
indirectly, make, retain or have outstanding any investments (whether through
purchase of stock or obligations or otherwise) in, or loans or advances to, any
other Person, or acquire all or any substantial part
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of the assets or business of any other Person or division thereof, or Guaranty
or become liable as endorser, guarantor, surety or otherwise (such as liability
as a general partner) for any debt, obligation or undertaking of any other
Person, or otherwise agree to provide funds for payment of the obligations of
another, or supply funds thereto or invest therein or otherwise assure a
creditor of another against loss, or apply for or become liable to the issuer of
a letter of credit which supports an obligation of another, or subordinate any
claim or demand it may have to the claim or demand of any other Person
(cumulatively, all of the foregoing, being "Investments"); provided, however,
that the foregoing provisions shall not apply to nor operate to prevent:
(a) investments in direct obligations of the United States of America
or of any agency or instrumentality thereof whose obligations constitute
full faith and credit obligations of the United States of America provided
that any such obligation matures within one year from the date it is
acquired by the Borrower or Subsidiary;
(b) investments in commercial paper rated P-1 by Moody's Investors
Services, Inc. or A-1 by Standard & Poor's Corporation maturing within one
year of its date of issuance;
(c) investments in certificates of deposit issued by any Bank or any
United States commercial bank having capital and surplus of not less than
$200,000,000 maturing within one year from the date of issuance thereof or
in banker's acceptances endorsed by any Bank or other such commercial bank
and maturing within six months of the date of acceptance;
(d) investments in repurchase obligations with a term of not more than
seven (7) days for underlying securities of the types described in
subsection (a) above entered into with any bank meeting the qualifications
specified in subsection (c) above, provided all such agreements require
physical delivery of the securities securing such repurchase agreement,
except those delivered through the Federal Reserve Book Entry System;
(e) investments in money market funds that invest solely, and which
are restricted by their respective charters to invest solely, in
investments of the type described in the immediately preceding subsections
(a), (b), (c) and (d) above;
(f) ownership of stock, obligations or securities received in
settlement of debts (created in the ordinary course of business) owing to
the Borrower or any Subsidiary;
(g) endorsements of negotiable instruments for collection in the
ordinary course of business;
(h) loans and advances to employees in the ordinary course of business
for travel, relocation, and similar purposes;
(i) acquisitions of all or any substantial part of the assets or
business of any other Person or division thereof engaged in a line of
business directly related to that of
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the Borrower, or of a majority of the Voting Stock of such a Person,
provided that such Person is engaged (or promptly after such acquisition
will be engaged) in a line of business directly related to that of the
Borrower, and provided, further, that (i) such Person becomes a Subsidiary
of the Borrower as a result of such acquisition, (ii) no Default or Event
of Default exists or would exist after giving effect to such acquisition,
(iii) the Board of Directors or other governing body of such Person whose
Property, or Voting Stock or other interests in which, are being so
acquired has approved the terms of such acquisition, (iv) such acquisition
does not exceed $40,000,000 in aggregate purchase price;
(j) Investments consisting of performance bonds and letters of credit
and other similar surety devices obtained to support, or in lieu of,
performance bonds, in each case entered into in the ordinary course of its
business;
(k) Investments in Subsidiaries; provided that Investments in WSA,
Inc. made after the date hereof shall be limited to (i) conversion of
obligations of WSA, Inc. to the Borrower in an amount not to exceed
$80,000,000 into equity and subordinated debt, and (ii) loans or advances
to WSA, Inc. in an aggregate amount outstanding at any one time not to
exceed $35,000,000 not subordinated to any other obligations of WSA, Inc.;
(l) other Investments in stock or other securities, provided that the
aggregate amount of any such Investments at any time outstanding does not
exceed $1,000,000; and
(m) the Viratec/Marcon Acquisition.
In determining the amount of investments, acquisitions, loans, advances and
guarantees permitted under this Section 7.14, investments and acquisitions shall
always be taken at the original cost thereof (regardless of any subsequent
appreciation or depreciation therein), loans and advances shall be taken at the
principal amount thereof then remaining unpaid, and guarantees shall be taken at
the amount of obligations guaranteed thereby.
Section 7.14. Restrictions on Indebtedness. The Borrower will not, and will
not permit any of its Subsidiaries to, create, incur, assume, guarantee or be or
remain liable, contingently or otherwise, with respect to any Indebtedness other
than:
(a) Indebtedness of the Borrower which, when in place, will not cause
the Borrower to be in violation of Sections 7.15-7.17 hereof;
(b) Indebtedness of Subsidiaries secured by Liens permitted pursuant
to Sections 7.9(e) and 7.9(h) which, when in place, will not cause the
Borrower to be in violation of such Sections or of Sections 7.15-7.17
hereof; and
(c) (i) Debt of Subsidiaries of the Borrower in an aggregate
outstanding amount at any time not to exceed $2,500,000 (ii) Indebtedness
of Subsidiaries of the Borrower to the Borrower, (iii) Indebtedness of
Subsidiaries of the Borrower
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consisting of any surety bond, or any letter of credit or Guaranty serving
the same function as a surety bond, provided that such Indebtedness shall
be permitted pursuant to this Section 7.14(c)(iii) only (x) with respect to
the portion of such surety bond, letter of credit or Guaranty as to which
no demand or unreimbursed drawing has been made, (y) if such surety bond,
letter of credit or Guaranty has been provided in the ordinary course of
such Subsidiaries' business and (z) if such Indebtedness, when in place,
will not cause the Borrower to be in violation of Sections 7.15 - 7.18
hereof and (iv) Indebtedness of Subsidiaries of the Borrower consisting of
trade payables not evidenced by a note or similar instrument incurred in
the ordinary course of such Person's business, if such Indebtedness, when
in place, will not cause the Borrower to be in violation of Sections 7.15 -
7.18 hereof.
Section 7.15. Consolidated Net Worth. The Borrower will at all times
maintain Consolidated Net Worth of not less than the Minimum Required Amount.
For purposes of this section, the "Minimum Required Amount" shall mean
$111,000,000 and shall increase as of the first day immediately following each
fiscal year of the Borrower ending after the Effective Date, by an amount equal
to 50% of the cumulative positive Consolidated Net Income earned each fiscal
year commencing and completed after February 28, 1996 (but without subtraction
for any negative Consolidated Net Income for any such fiscal year).
Section 7.16. Leverage Ratio. The Borrower will, as of the last day of each
fiscal quarter of the Borrower, maintain a Leverage Ratio of not more than 0.55
to 1.00.
Section 7.17. Interest Coverage Ratio. The Borrower will as of the last day
of each fiscal quarter of the Borrower maintain an Interest Coverage Ratio of
not less than 3.00 to 1.00.
Section 7.18. Dividends and Other Shareholder Distributions. (a) The
Borrower shall only declare or pay any dividends or make a distribution of any
kind (including by redemption or purchase) on its outstanding capital stock, if
no Default or Event of Default exists prior to or would result after giving
effect to such action.
(b) The Borrower shall not permit any Subsidiary to (x) issue a Guaranty or
(y) enter into any agreement or instrument which by its terms restricts the
ability of such Subsidiary to (i) declare or pay dividends or make similar
distributions, except any such agreement or instrument entered into by WSA, Inc.
to obtain performance bonds, letters of credit or other similar surety devices
in the ordinary course of its business, (ii) repay principal of, or pay any
interest on, any Indebtedness owed to the Borrower or any Subsidiary, except for
limitations on the repayment of subordinated indebtedness of WSA, Inc. described
in Section 7.13(k)(i), (iii) make payments of royalties, licensing fees and
similar amounts to the Borrower or any other subsidiary, except any such
agreements or instruments entered into by WSA, Inc. to obtain performance bonds,
letters of credit or other similar surety devices in the ordinary course of its
business, (iv) make loans or advances to the Borrower or any other subsidiary,
except any such agreement or instrument entered into by WSA, Inc. to obtain
performance bonds, letters of credit or other similar surety devices in the
ordinary course of its business or (v) permit the Borrower to engage in
consolidated cash management consistent with its current practices.
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Section 7.19. Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into or be a party to any
material transaction or arrangement (where "material" means material for the
Borrower and its Subsidiaries taken as a whole) with any Affiliate of such
Person (other than the Borrower or any of its Subsidiaries), including without
limitation, the purchase from, sale to or exchange of Property with, any merger
or consolidation with or into, or the rendering of any service by or for, any
Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary than would
obtain in a comparable arm's-length transaction with a Person other than an
Affiliate.
Section 7.20. Compliance with Laws. Without limiting any of the other
covenants of the Borrower in this Section Seven, the Borrower will, and will
cause each of its Subsidiaries to, conduct its business, and otherwise be, in
compliance with all applicable laws, regulations, ordinances and orders of any
governmental or judicial authorities; provided, however, that neither the
Borrower nor any Subsidiary of the Borrower shall be required to comply with any
such law, regulation, ordinance or order if the failure to comply therewith
could not reasonably be expected to have a material adverse effect on the
business, operations, property or financial or other condition of the Borrower
or the Borrower and its Subsidiaries taken as a whole.
Section 8. Events of Default and Remedies.
Section 8.1. Events of Default. Any one or more of the following shall
constitute an Event of Default:
(a) default in the payment when due of the principal amount of any
Loan or of any Reimbursement Obligation or in the payment when due of fees,
interest or of any other Obligation;
(b) default by the Borrower or any Subsidiary in the observance or
performance of any covenant set forth in Section 7.1 (with respect to the
Borrower), 7.6(c), 7.9 through 7.11, or 7.13 through 7.18 hereof;
(c) default by the Borrower or any Subsidiary in the observance or
performance of any provision hereof or of any other Credit Document not
mentioned in (a) or (b) above, which is not remedied within thirty (30)
days after notice thereof shall have been given to the Borrower by the
Agent;
(d) (i) failure to pay when due Indebtedness (x) outstanding under
that certain Note Agreement dated as of June 1, 1988 by and between the
Borrower and Teachers Insurance and Annuity Association of America, as the
same may be amended, restated or modified from time to time (the "Note
Agreement") or (y) in an aggregate principal amount of $5,000,000 or more
of the Borrower or any Subsidiary or (ii) default shall occur under (x) the
Note Agreement or (y) one or more indentures, agreements or other
instruments under which any Indebtedness of the Borrower or any Subsidiary
in
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an aggregate principal amount of $5,000,000 or more may be issued or
created and such default shall continue for a period of time sufficient to
permit the holder or beneficiary of such Indebtedness or a trustee therefor
to cause the acceleration of the maturity of any such Indebtedness or any
mandatory unscheduled prepayment, purchase or funding thereof;
(e) any material representation or warranty made herein or in any
other Credit Document by the Borrower or any Subsidiary, or in any
statement or certificate furnished pursuant hereto or pursuant to any other
Credit Document by the Borrower or any Subsidiary, or in connection with
any Credit Document, proves untrue in any material respect as of the date
of the issuance or making, or deemed making or issuance, thereof;
(f) the Borrower or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the United States
Bankruptcy Code, as amended, or any analogous action is taken under any
other applicable law relating to bankruptcy or insolvency, (ii) fail to
pay, or admit in writing its inability to pay, its debts generally as they
become due, (iii) make an assignment for the benefit of creditors, (iv)
apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for
it or any substantial part of its Property, (v) institute any proceeding
seeking to have entered against it an order for relief under the United
States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to
file an answer or other pleading denying the material allegations of any
such proceeding filed against it, (vi) take any corporate action (such as
the passage by the Borrower's board of directors of a resolution) in
furtherance of any matter described in parts (i)-(v) above, or (vii) fail
to contest in good faith any appointment or proceeding described in Section
8.1(g) hereof;
(g) a custodian, receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Borrower or any Subsidiary or any
substantial part of any of their Property, or a proceeding described in
Section 8.1(f)(v) shall be instituted against the Borrower or any
Subsidiary, and such appointment continues undischarged or such proceeding
continues undismissed or unstayed for a period of sixty (60) days;
(h) the Borrower or any Subsidiary shall fail within thirty (30) days
to pay, bond or otherwise discharge any judgment or order for the payment
of money in excess of $5,000,000, which is not stayed on appeal or
otherwise being appropriately contested in good faith in a manner that
stays execution thereon;
(i) the Borrower or any other member of the Controlled Group shall
fail to pay when due an amount or amounts which it shall have become liable
to pay to the PBGC or to a Plan or a Multiemployer Plan under Title IV of
ERISA in excess of $200,000; or notice of intent to terminate a Plan or
Plans having aggregate Unfunded Vested Liabilities in excess of $200,000
(collectively, a "Material Plan") shall be filed under Title IV of ERISA by
the Borrower or any Subsidiary or any other member of
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the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate or to cause a trustee to be appointed to administer any
Material Plan or a proceeding shall be instituted by a fiduciary of any
Material Plan against the Borrower or any other member of the Controlled
Group to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding
shall not have been dismissed within thirty (30) days thereafter; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be terminated;
(j) the Borrower or any Subsidiary, or any Person acting on behalf of
the Borrower or a Subsidiary, or any governmental authority challenges the
validity of any Credit Document or the Borrower's or a Subsidiary's
obligations thereunder or any Credit Document ceases to be in full force
and effect or is modified other than in accordance with the terms thereof
and hereof;
(k) a Change of Control Event shall have occurred; or
(l) the Obligations shall cease to rank at least pari passu in right
of payment with all other senior unsecured obligations of the Borrower.
Section 8.2. Non-Bankruptcy Defaults. When any Event of Default other
than those described in subsections (f) or (g) of Section 8.1 hereof with
respect to the Borrower has occurred and is continuing, the Administrative Agent
shall, by written notice to the Borrower, if so directed by the Required Banks:
(a) terminate the remaining Commitments and all other obligations of the Banks
hereunder on the date stated in such notice (which may be the date thereof); (b)
declare the principal of and the accrued interest on all outstanding Notes to be
forthwith due and payable and thereupon all outstanding Notes, including both
principal and interest thereon, shall be and become immediately due and payable
together with all other amounts payable under the Credit Documents without
further demand, presentment, protest or notice of any kind; and (c) demand that
the Borrower immediately pay to the Administrative Agent, subject to Section
8.4, the full amount of the L/C Obligations, and the Borrower agrees to
immediately make such payment and acknowledges and agrees that the Banks would
not have an adequate remedy at law for failure by the Borrower to honor any such
demand and that the Administrative Agent, for the benefit of the Banks, shall
have the right to require the Borrower to specifically perform such undertaking
whether or not any drawings or other demands for payment have been made under
any Letter of Credit. The Administrative Agent, after giving notice to the
Borrower pursuant to Section 8.1(c) or this Section 8.2, shall also promptly
send a copy of such notice to the other Banks, but the failure to do so shall
not impair or annul the effect of such notice.
Section 8.3. Bankruptcy Defaults. When any Event of Default described in
subsections (f) or (g) of Section 8.1 hereof has occurred and is continuing with
respect to the Borrower, then all outstanding Notes shall immediately become due
and payable together with all other amounts payable under the Credit Documents
without presentment, demand, protest or notice of any kind, the obligation of
the Banks to extend further credit pursuant to any of the terms hereof shall
immediately terminate and the Borrower shall immediately pay to the
Administrative Agent, subject to Section 8.4, the full amount of the L/C
Obligations, the
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Borrower acknowledging that the Banks would not have an adequate remedy at law
for failure by the Borrower to honor any such demand and that the Banks, and the
Administrative Agent on their behalf, shall have the right to require the
Borrower to specifically perform such undertaking whether or not any draws or
other demands for payment have been made under any of the Letters of Credit.
Section 8.4. Collateral for Undrawn Letters of Credit. (a) If the payment
or prepayment of the amount available for drawing under any or all outstanding
Letters of Credit is required hereunder, the Borrower shall forthwith pay the
amount required to be so prepaid, to be held by the Administrative Agent as
provided in subsection (b) below.
(b) All amounts prepaid pursuant to subsection (a) above shall be held by
the Administrative Agent in a separate collateral account (such account, and the
credit balances, properties and any investments from time to time held therein,
and any substitutions for such account, any certificate of deposit or other
instrument evidencing any of the foregoing and all proceeds of and earnings on
any of the foregoing being collectively called the "Account") as security for,
and for application by the Administrative Agent to, the reimbursement of any
payment under any Letter of Credit then or thereafter made by the Issuing Agent,
and to the payment of the unpaid balance of any Loans and all other Obligations.
The Account shall be held in the name of and subject to the exclusive dominion
and control of the Administrative Agent for the benefit of the Agents, the
Issuing Agent and the Banks. The Administrative Agent shall invest funds held
in the Account from time to time in direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, the United
States of America with a remaining maturity of one year or less, provided that
the Administrative Agent is irrevocably authorized to sell investments held in
the Account when and as required to make payments out of the Account for
application to amounts due and owing from the Borrower to the Agents, the
Issuing Agent or Banks; provided, however, that if (i) the Borrower shall have
made payment of all of the Obligations, (ii) all relevant preference or other
disgorgement periods relating to the receipt of such payments have passed, and
(iii) no Letters of Credit, Commitments, Loans or other Obligations remain
outstanding hereunder, then the Administrative Agent shall repay to the Borrower
any remaining amounts held in the Account.
Section 8.5. Expenses. The Borrower agrees to pay to the Agents, the
Issuing Agent and each Bank, and any other holder of any Note outstanding
hereunder, all costs and expenses incurred or paid by the Agents, the Issuing
Agent or such Bank or any such holder, including attorneys' fees and court
costs, in connection with the enforcement of any of the Credit Documents.
Section 9. Change in Circumstances.
Section 9.1. Change of Law. Notwithstanding any other provisions of this
Agreement or any Note, if at any time after the date hereof any change in
applicable law or regulation or in the interpretation thereof makes it unlawful
for any Bank to make or continue to maintain Eurocurrency Loans or to perform
its obligations as contemplated hereby, such Bank shall promptly give notice
thereof to the Borrower and such Bank's obligations to make or
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maintain Eurocurrency Loans under this Agreement shall terminate until it is no
longer unlawful for such Bank to make or maintain Eurocurrency Loans. To the
extent such change makes it unlawful for such Bank to maintain outstanding
Eurocurrency Loans to the end of the then applicable Interest Period therefor,
the Borrower shall prepay on demand the outstanding principal amount of any such
affected Eurocurrency Loans, together with all interest accrued thereon at a
rate per annum equal to the interest rate applicable to such Loan; provided,
however, that the Borrower may then elect to borrow the principal amount of the
affected Eurocurrency Loans from such Bank by means of Base Rate Loans from such
Bank, which Base Rate Loans shall not be made ratably by the Banks but only from
such affected Bank.
Section 9.2. Unavailability of Deposits or Inability to Ascertain, or
Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period for
any Borrowing of Eurocurrency Loans:
(a) the Administrative Agent determines that deposits in U.S. Dollars
or the applicable Alternative Currency (in the applicable amounts) are not
generally being offered in the eurocurrency interbank market for such
Interest Period, or that by reason of circumstances affecting the interbank
eurocurrency market adequate and reasonable means do not exist for
ascertaining the applicable LIBOR, or
(b) Banks having 50% or more of the aggregate amount of the Revolving
Credit Commitments reasonably determine and so advise the Administrative
Agent that LIBOR will not adequately and fairly reflect the cost to such
Banks or Bank of funding their or its Eurocurrency Loans or Loan for such
Interest Period,
then the Administrative Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Administrative Agent notifies the
Borrower that the circumstances giving rise to such suspension no longer exist,
the obligations of the Banks or of the relevant Bank to make Eurocurrency Loans
in the currency so affected shall be suspended.
Section 9.3. Increased Cost and Reduced Return. (a) If, on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Lending Office) with any request or directive (whether or not having the force
of law but, if not having the force of law, compliance with which is customary
in the relevant jurisdiction) of any such authority, central bank or comparable
agency:
(i) shall subject any Bank (or its Lending Office) to any tax, duty or
other charge with respect to its Fixed Rate Loans, its Notes, its Letter(s)
of Credit, or its participation in any thereof, any Reimbursement
Obligations owed to it or its obligation to make Fixed Rate Loans, issue a
Letter of Credit, or to participate therein, or shall change the basis of
taxation of payments to any Bank (or its Lending Office) of the principal
of or interest on its Fixed Rate Loans, Letter(s) of Credit, or
participations therein or any other amounts due under this Agreement in
respect of its Fixed Rate Loans, Letter(s) of Credit, or participations
therein, any Reimbursement Obligations
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owed to it, or its obligation to make Fixed Rate Loans, issue a Letter of
Credit, or acquire participations therein (except for changes in the rate
of tax on the overall net income or profits of such Bank or its Lending
Office imposed by the jurisdiction in which such Bank or its Lending Office
is incorporated or located in which such Bank's principal executive office
or Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding with respect to any Eurocurrency Loans any such
requirement included in an applicable Eurocurrency Reserve Percentage)
against assets of, deposits with or for the account of, or credit extended
by, any Bank (or its Lending Office) or shall impose on any Bank (or its
Lending Office) or on the interbank market any other condition affecting
its Fixed Rate Loans, its Notes, its Letter(s) of Credit, or its
participation in any thereof, any Reimbursement Obligation owed to it, or
its obligation to make Fixed Rate Loans, to issue a Letter of Credit, or to
participate therein;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Fixed Rate Loan, issuing or
maintaining a Letter of Credit, or participating therein, or to reduce the
amount of any sum received or receivable by such Bank (or its Lending Office)
under this Agreement or under its Notes with respect thereto, by an amount
deemed by such Bank to be material, then, within fifteen (15) days after demand
by such Bank (with a copy to the Administrative Agent), the Borrower shall be
obligated to pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction. Notwithstanding the
foregoing, the Borrower shall not be obligated to pay any such additional
amounts attributable to the period (the "Excluded Period") ending thirty (30)
days prior to the date the Borrower receives from such Bank written notice of
the law, rule, regulation, interpretation, directive or request by reason of
which such additional amounts are payable, except to the extent such additional
amounts accrued during the Excluded Period due to the retroactive application of
such law, order, regulation, directive, change or request, in which case the
limitation set forth in this sentence shall not apply.
(b) If on or after the date hereof, any Bank or the Administrative Agent
shall have determined that the adoption after the Effective Date of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein after the Effective Date (including, without limitation, any revision in
the Final Risk-Based Capital Guidelines of the Board of Governors of the Federal
Reserve System (12 CFR Part 208, Appendix A; 12 CFR Part 225, Appendix A) or of
the Office of the Comptroller of the Currency (12 CFR Part 3, Appendix A), or in
any other applicable capital rules heretofore adopted and issued by any
governmental authority), or any change after the Effective Date in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Lending Office) with any request or
directive regarding capital adequacy made after the Effective Date (whether or
not having the force of law but, if not having the force of law, compliance with
which is customary in the applicable jurisdiction) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of
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return on such Bank's capital, or on the capital of any corporation controlling
such Bank, as a consequence of its obligations hereunder to a level below that
which such Bank could have achieved but for such adoption, change or compliance
(taking into consideration such Bank's policies with respect to capital
adequacy) by an amount deemed by such Bank to be material, then from time to
time, within fifteen (15) days after demand by such Bank (with a copy to the
Administrative Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such reduction.
Notwithstanding the foregoing, the Borrower shall not be obligated to pay any
such additional amounts attributable to the period (the "Excluded Period")
ending thirty (30) days prior to the date the Borrower receives from such Bank
written notice of the law, rule, regulation, interpretation, directive or
request by reason of which such additional amounts are payable, except to the
extent such additional amounts accrued during the Excluded Period due to the
retroactive application of such law, order, regulation, directive, change or
request, in which case the limitation set forth in this sentence shall not
apply.
(c) Each Bank that determines to seek compensation under this Section 9.3
shall notify the Borrower and the Administrative Agent of the circumstances that
entitle the Bank to such compensation pursuant to this Section 9.3 and will
designate a different Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the sole
judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate
of any Bank claiming compensation under this Section 9.3 and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods.
Section 9.4. Lending Offices. Each Bank may, at its option, elect to make
its Loans hereunder at the branch, office or affiliate specified on the
appropriate signature page hereof or in the assignment agreement which any
assignee bank executes pursuant to Section 11.12 hereof (each a "Lending
Office") for each type of Loan available hereunder or at such other of its
branches, offices or affiliates as it may from time to time elect and designate
in a written notice to the Borrower and the Administrative Agent.
Section 9.5. Discretion of Bank as to Manner of Funding. Notwithstanding
any other provision of this Agreement, each Bank shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations under Section 2.17 hereof shall be made as if each Bank had
actually funded and maintained each Eurocurrency Loan and Eurodollar Bid Loan
through the purchase of deposits of U.S. Dollars or the applicable Alternative
Currency in the eurocurrency interbank market having a maturity corresponding to
such Loan's Interest Period and bearing an interest rate equal to LIBOR for such
Interest Period.
Section 9.6. Substitution of Bank. If (i) the obligation of any Bank to
make Eurocurrency Loans has been suspended pursuant to Section 9.1, (ii) any
Bank has demanded compensation or given notice of its intention to demand
compensation under Section 9.3, or (iii) the Borrower is required to pay any
additional amount to any Bank pursuant to Section 11.1, and in any such case the
Required Banks are not in the same situation as such Bank, the Borrower shall
have the right to require such Bank to assign its entire, but not less
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than its entire, Revolving Credit Commitment to another Person or Persons (which
may be one or more of the Banks already party hereto) willing to assume such
Revolving Credit Commitment pursuant to Section 11.12. The recordation fee
referred to in Section 11.12 shall not be applicable to assignments effected
pursuant to this Section 9.6. All Obligations and any other amount owing to such
Bank under the Credit Documents shall be paid in full at the time of any such
assignment.
Section 10. The Agents.
Section 10.1. Appointment and Authorization of Administrative Agent. Each
Bank hereby appoints ABN AMRO Bank N.V. as the Administrative Agent under the
Credit Documents and hereby authorizes the Administrative Agent to take such
action as Administrative Agent on its behalf and to exercise such powers under
the Credit Documents as are delegated to the Administrative Agent by the terms
thereof, together with such powers as are reasonably incidental thereto. The
relationship between the Administrative Agent and the Banks is and shall be that
of agent and principal only, and nothing contained in this Agreement or any
other Credit Document shall be construed to constitute the Administrative Agent
as a trustee of fiduciary for any Bank or the Borrower.
Section 10.2. Administrative Agent and its Affiliates. The Administrative
Agent shall have the same rights and powers under this Agreement and the other
Credit Documents as any other Bank and may exercise or refrain from exercising
the same as though it were not the Administrative Agent, and the Administrative
Agent and its affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the Borrower or any Affiliate of the
Borrower as if it were not the Administrative Agent under the Credit Documents.
Section 10.3. Action by Administrative Agent. If the Administrative Agent
receives from the Borrower a written notice of an Event of Default pursuant to
Section 7.6(c)(i) hereof, the Administrative Agent shall promptly give each of
the Banks written notice thereof. The obligations of the Administrative Agent
under the Credit Documents are only those expressly set forth therein. Without
limiting the generality of the foregoing, the Administrative Agent shall not be
required to take any action hereunder with respect to any Default or Event of
Default, except as expressly provided in Sections 8.2 and 8.5. In no event,
however, shall the Administrative Agent be required to take any action in
violation of applicable law or of any provision of any Credit Document, and the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder or under any other Credit Document unless it shall be
first indemnified to its reasonable satisfaction by the Banks against any and
all costs, expense, and liability which may be incurred by it by reason of
taking or continuing to take any such action. The Administrative Agent shall be
entitled to assume that no Default or Event of Default exists unless notified to
the contrary by a Bank or the Borrower. In all cases in which this Agreement
and the other Credit Documents do not require the Administrative Agent to take
certain actions, the Administrative Agent shall be fully justified in using its
discretion in failing to take or in taking any action hereunder and thereunder.
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Section 10.4. Consultation with Experts. The Administrative Agent may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.
Section 10.5. Liability of Administrative Agent; Credit Decision. Neither
the Administrative Agent nor any of its directors, officers, agents, or
employees shall be liable for any action taken or not taken by it in connection
with the Credit Documents (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its own gross negligence or willful misconduct.
Neither the Administrative Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty or representation made in connection with
this Agreement, any other Credit Document or any Credit Event; (ii) the
performance or observance of any of the covenants or agreements of the Borrower
or any other party contained herein or in any other Credit Document; (iii) the
satisfaction of any condition specified in Section 6 hereof, except receipt of
items required to be delivered to the Administrative Agent; or (iv) the
validity, effectiveness, genuineness, enforceability, perfection, value, worth
or collectibility hereof or of any other Credit Document or of any other
documents or writing furnished in connection with any Credit Document; and the
Administrative Agent makes no representation of any kind or character with
respect to any such matter mentioned in this sentence. The Administrative Agent
may execute any of its duties under any of the Credit Documents by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Banks, the Borrower, or any other Person for the default or misconduct of any
such agents or attorneys-in-fact selected with reasonable care. The
Administrative Agent shall not incur any liability by acting in reliance upon
any notice, consent, certificate, other document or statement (whether written
or oral) believed by it to be genuine or to be sent by the proper party or
parties. In particular and without limiting any of the foregoing, the
Administrative Agent shall have no responsibility for confirming the accuracy of
any Compliance Certificate or other document or instrument received by it under
the Credit Documents. The Administrative Agent may treat the payee of any Note
as the holder thereof until written notice of transfer shall have been filed
with the Administrative Agent signed by such payee in form satisfactory to the
Administrative Agent. Each Bank acknowledges that it has independently and
without reliance on the Administrative Agent or any other Bank, and based upon
such information, investigations and inquiries as it deems appropriate, made its
own credit analysis and decision to extend credit to the Borrower in the manner
set forth in the Credit Documents. It shall be the responsibility of each Bank
to keep itself informed as to the creditworthiness of the Borrower and any other
relevant Person, and the Administrative Agent shall have no liability to any
Bank with respect thereto.
Section 10.6. Indemnity. The Banks shall ratably, in accordance with their
respective Percentages, indemnify and hold the Administrative Agent, and its
directors, officers, employees, agents and representatives harmless from and
against any liabilities, losses, costs or expenses suffered or incurred by it
under any Credit Document or in connection with the transactions contemplated
thereby, regardless of when asserted or arising, except to the extent they are
promptly reimbursed for the same by the Borrower and except to the extent that
any event giving rise to a claim was caused by the gross negligence or willful
misconduct of the
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party seeking to be indemnified. The obligations of the Banks under this Section
10.6 shall survive termination of this Agreement.
Section 10.7. Resignation of Administrative Agent and Successor
Administrative Agent. The Administrative Agent may resign at any time by giving
written notice thereof to the Banks and the Borrower. Upon any such resignation
of the Administrative Agent, the Required Banks shall have the right to appoint
a successor Administrative Agent with the consent of the Borrower. If no
successor Administrative Agent shall have been so appointed by the Required
Banks with the consent of the Borrower, and shall have accepted such
appointment, within thirty (30) days after the retiring Administrative Agent's
giving of notice of resignation, then the retiring Administrative Agent may, on
behalf of the Banks with the consent of the Borrower, appoint a successor
Administrative Agent, which shall be any Bank hereunder or any commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $200,000,000. Upon the
acceptance of its appointment as the Administrative Agent hereunder, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights and duties of the retiring Administrative Agent under the Credit
Documents, and the retiring Administrative Agent shall be discharged from its
duties and obligations thereunder. After any retiring Administrative Agent's
resignation hereunder as Administrative Agent, the provisions of this Section 10
and all protective provisions of the other Credit Documents shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent. If the Co-Agent resigns, it shall not be replaced.
Section 11. Miscellaneous.
Section 11.1. Withholding Taxes. (a) Payments Free of Withholding. Subject
to the obligation of each Bank that is not a United States Person to submit
forms concerning its exemption from United States withholding taxes pursuant to
Section 11.1(b) hereof, each payment by the Borrower under this Agreement or the
other Credit Documents shall be made without withholding for or on account of
any present or future taxes (other than overall net income taxes on the
recipient). If any such withholding is so required, the Borrower shall make the
withholding, pay the amount withheld to the appropriate governmental authority
before penalties attach thereto or interest accrues thereon and forthwith pay
such additional amount as may be necessary to ensure that the net amount
actually received by each Bank and the Administrative Agent free and clear of
such taxes (including such taxes on such additional amount) is equal to the
amount which that Bank or the Administrative Agent (as the case may be) would
have received had such withholding not been made. If the Administrative Agent or
any Bank pays any amount in respect of any such taxes, penalties or interest the
Borrower shall reimburse the Administrative Agent or that Bank for that payment
on demand in the currency in which such payment was made. If the Borrower pays
any such taxes, penalties or interest, it shall deliver official tax receipts
evidencing that payment or certified copies thereof to the Bank or
Administrative Agent on whose account such withholding was made (with a copy to
the Administrative Agent if not the recipient of the original) on or before the
thirtieth day after payment. If any Bank or the Administrative Agent determines
it has received or been granted a credit against or relief or remission for, or
repayment of, any taxes paid or payable by it because of any taxes, penalties or
interest paid by the Borrower
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and evidenced by such a tax receipt, such Bank or Administrative Agent shall, to
the extent it can do so without prejudice to the retention of the amount of such
credit, relief, remission or repayment, pay to the Borrower such amount as such
Bank or Administrative Agent reasonably determines is attributable to such
deduction or withholding and which will leave such Bank or Administrative Agent
(after such payment) in no better or worse position than it would have been in
if the Borrower had not been required to make such deduction or withholding.
Except as provided in Section 11.1(b), nothing in this Agreement shall interfere
with the right of each Bank and the Administrative Agent to arrange its tax
affairs in whatever manner it thinks fit nor oblige any Bank or the
Administrative Agent to disclose any information relating to its tax affairs or
any computations in connection with such taxes.
(b) U.S. Withholding Tax Exemptions. Each Bank that is not a United States
person (as such term is defined in Section 7701(a)(30) of the Code) shall submit
to the Borrower and the Administrative Agent on or before (i) in the case of
Banks party to this Agreement as of the date hereof, the earlier of the date the
initial Borrowing is made hereunder and thirty (30) days after the date hereof,
and (ii) in the case of a Bank that subsequently becomes a party hereto, the
effective date of the applicable assignment or amendment, two duly completed and
signed copies of either Form 1001 (relating to such Bank and entitling it to a
complete exemption from withholding under the Code on all amounts to be received
by such Bank, including fees, pursuant to the Credit Documents and the Loans) or
Form 4224 (relating to all amounts to be received by such Bank, including fees,
pursuant to the Credit Documents and the Loans) of the United States Internal
Revenue Service. Thereafter and from time to time, each Bank shall submit to the
Borrower and the Administrative Agent such additional duly completed and signed
copies of one or the other of such Forms (or such successor forms as shall be
adopted from time to time by the relevant United States taxing authorities) as
may be (i) requested by the Borrower in a written notice, directly or through
the Administrative Agent, to such Bank and (ii) required under then-current
United States law or regulations to avoid or reduce United States withholding
taxes on payments in respect of all amounts to be received by such Bank,
including fees, pursuant to the Credit Documents or the Loans.
(c) Inability of Bank to Submit Forms. If any Bank determines, as a result
of any change in applicable law, regulation or treaty, or in any official
application or interpretation thereof, that it is unable to submit to the
Borrower or Administrative Agent any form or certificate that such Bank is
obligated to submit pursuant to subsection (b) of this Section 11.1. or that
such Bank is required to withdraw or cancel any such form or certificate
previously submitted or any such form or certificate otherwise becomes
ineffective or inaccurate, such Bank shall promptly notify the Borrower and
Administrative Agent of such fact and the Bank shall to that extent not be
obligated to provide any such form or certificate and will be entitled to
withdraw or cancel any affected form or certificate, as applicable.
Section 11.2. No Waiver of Rights. No delay or failure on the part of the
Administrative Agent or any Bank or on the part of the holder or holders of any
Note in the exercise of any power or right under any Credit Document shall
operate as a waiver thereof, nor as an acquiescence in any default, nor shall
any single or partial exercise thereof preclude any other or further exercise of
any other power or right, and the rights and remedies hereunder of the
Administrative Agent, the Banks and the holder or holders of any Notes are
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cumulative to, and not exclusive of, any rights or remedies which any of them
would otherwise have.
Section 11.3. Non-Business Day. Subject to the definition of Interest
Period, if any payment of principal or interest on any Loan or of any other
Obligation shall fall due on a day which is not a Business Day, such payment
shall be due on the following Business Day and interest or fees (as applicable)
at the rate, if any, such Loan or other Obligation bears for the period prior to
maturity shall continue to accrue on such Obligation from the stated due date
thereof to and including the next succeeding Business Day.
Section 11.4. Documentary Taxes. The Borrower agrees that it will pay any
documentary, stamp or similar taxes payable in respect to any Credit Document,
including interest and penalties, in the event any such taxes are assessed,
irrespective of when such assessment is made and whether or not any credit is
then in use or available hereunder.
Section 11.5. Survival of Representations. All representations and
warranties made herein or in certificates given pursuant hereto shall survive
the execution and delivery of this Agreement and the other Credit Documents, and
shall continue in full force and effect with respect to the date as of which
they were made as long as any credit is in use or available hereunder.
Section 11.6. Survival of Indemnities. All indemnities and all other
provisions relative to reimbursement to the Banks of amounts sufficient to
protect the yield of the Banks with respect to the Loans, including, but not
limited to, Section 2.17, Section 9.3 and Section 11.15 hereof, shall survive
the termination of this Agreement and the other Credit Documents and the payment
of the Loans and all other Obligations.
Section 11.7. Set-Off. (a) In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence of any Event of Default, each Bank and each subsequent
holder of any Note is, upon the acceleration of the Obligations pursuant to
Section 8.2 or 8.3 hereof, hereby authorized by the Borrower at any time or from
time to time, without notice to the Borrower or to any other Person in the case
of an Event of Default described in subsection (f) or (g) of Section 8.1 hereof
with respect to the Borrower, any such notice being hereby expressly waived, and
with notice to the Borrower in the case of any other Event of Default, to set
off and to appropriate and to apply any and all deposits (general or special,
including, but not limited to, Indebtedness evidenced by certificates of
deposit, whether matured or unmatured, and in whatever currency denominated) and
any other Indebtedness at any time held or owing by that Bank or that subsequent
holder to or for the credit or the account of the Borrower, whether or not
matured, against and on account of the obligations and liabilities of the
Borrower to that Bank or that subsequent holder under the Credit Documents,
including, but not limited to, all claims of any nature or description arising
out of or connected with the Credit Documents, irrespective of whether or not
(a) that Bank or that subsequent holder shall have made any demand hereunder or
(b) the principal of or the interest on the Loans or Notes and other amounts due
hereunder shall have become due and payable pursuant to Section 8 and although
said obligations and liabilities, or any of them, may be contingent or
unmatured.
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(b) Each Bank agrees with each other Bank a party hereto that if such Bank
shall receive and retain any payment, whether by set-off or application of
deposit balances or otherwise, on any of the Loans or Reimbursement Obligations
in excess of its ratable share of payments on all such obligations then
outstanding to the Banks, then such Bank shall purchase for cash at face value,
but without recourse, ratably from each of the other Banks such amount of the
Loans or Reimbursement Obligations, or participations therein, held by each such
other Banks (or interest therein) as shall be necessary to cause such Bank to
share such excess payment ratably with all the other Banks; provided, however,
that if any such purchase is made by any Bank, and if such excess payment or
part thereof is thereafter recovered from such purchasing Bank, the related
purchases from the other Banks shall be rescinded ratably and the purchase price
restored as to the portion of such excess payment so recovered, but without
interest. For purposes of this Section 11.7(b), amounts owed to or recovered by,
the Administrative Agent in connection with Reimbursement Obligations in which
Banks have been required to fund their participation shall be treated as amounts
owed to or recovered by the Administrative Agent as a Bank hereunder.
Section 11.8. Notices. Except as otherwise specified herein, all notices
under the Credit Documents shall be in writing (including telecopy or other
electronic communication) and shall be given to a party hereunder at its address
or telecopier number set forth below or such other address or telecopier number
as such party may hereafter specify by notice to the Administrative Agent and
the Borrower, given by courier, by United States certified or registered mail,
or by other telecommunication device capable of creating a written record of
such notice and its receipt. Notices under the Credit Documents to the Banks
shall be addressed to their respective addresses, telecopier or telephone
numbers set forth on the signature pages hereof or in the assignment agreement
which any assignee bank executes pursuant to Section 11.12 hereof, and to the
Borrower and to the Administrative Agent to:
If to the Borrower:
Apogee Enterprises, Inc.
7900 Xerxes Avenue South
Suite 1800
Minneapolis, Minnesota 55431-1159
Attention: Mr. Terry L. Hall, Vice President-Finance
Telecopy:
Telephone:
If to the Administrative Agent:
Agency Services
335 Madison Avenue
New York, New York 10017
Attention: Linda Boardman
Telecopy: (212) 682-0364
Telephone: (212) 370-8509
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Each such notice, request or other communication shall be effective (i) if
given by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section 11.8 or on the signature pages hereof and a
confirmation of receipt of such telecopy has been received by the sender, (ii)
if given by courier, when delivered, (iii) if given by mail, three business days
after such communication is deposited in the mail, registered with return
receipt requested, addressed as aforesaid or (iv) if given by any other means,
when delivered at the addresses specified in this Section 11.8; provided that
any notice given pursuant to Section 2 hereof shall be effective only upon
receipt.
Section 11.9. Counterparts. This Agreement may be executed in any number
of counterpart signature pages, and by the different parties on different
counterparts, each of which when executed shall be deemed an original but all
such counterparts taken together shall constitute one and the same instrument.
Section 11.10. Successors and Assigns. This Agreement shall be binding
upon the Borrower and its successors and assigns, and shall inure to the benefit
of each of the Banks and the benefit of their respective successors and assigns,
including any subsequent holder of any Note. The Borrower may not assign any of
its rights or obligations under any Credit Document without the written consent
of all of the Banks.
Section 11.11. Participants and Note Assignees. Each Bank shall have the
right at its own cost to grant participations (to be evidenced by one or more
agreements or certificates of participation) in the Loans made, Revolving Credit
Commitments held and/or participations in Letters of Credit, by such Bank at any
time and from time to time, and to assign its rights under such Loans or the
Note evidencing such Loans to a federal reserve bank; provided that (i) no such
participation or assignment shall relieve any Bank of any of its obligations
under this Agreement, (ii) no such assignee or participant shall have any rights
under this Agreement except as provided in this Section 11.11, and (iii) the
Administrative Agent shall have no obligation or responsibility to such
participant or assignee, except that nothing herein is intended to affect the
rights of a Federal Reserve Bank to enforce the Note assigned. Any party to
which such a participation or assignment has been granted shall have the
benefits of Section 2.17 and Section 9.3, but shall not be entitled to receive
any greater payment under either such Section than the Bank granting such
participation would have been entitled to receive in connection with the rights
transferred. Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain the sole right
and responsibility to enforce the obligations of the Borrower hereunder,
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided that such participation
agreement may provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement that would (A) increase any Revolving
Credit Commitment of such Bank if such increase would also increase the
participant's obligations, (B) forgive any amount of or postpone the date for
payment of any principal of or interest on any Loan or of any fee payable
hereunder in which such participant has an interest or (C) reduce the stated
rate at which interest or fees in which such participant has an interest accrue
hereunder.
Section 11.12. Assignment of Commitments by Banks. Each Bank shall have
the right at any time, with the written consent of the Borrower, Issuing Agent
and Administrative Agent
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(which consent shall not be unreasonably withheld or delayed), to assign all or
any part of its Revolving Credit Commitment (including the same percentage of
its Note, outstanding Loans and participations in Letters of Credit) to one or
more other Persons; provided that such assignment is in an amount of at least
$10,000,000 or the entire Revolving Credit Commitment of such Bank, and if such
assignment is not for such Bank's entire Revolving Credit Commitment then such
Bank's Revolving Credit Commitment after giving effect to such assignment shall
not be less than $10,000,000; and provided further that neither the consent of
the Borrower, the Issuing Agent nor of the Administrative Agent shall be
required for any Bank to assign all of its Revolving Credit Commitment to any
Affiliate of the assigning Bank. Each such assignment shall set forth the
assignee's address for notices to be given under Section 11.8 hereof hereunder
and its designated Lending Office pursuant to Section 9.4 hereof. Upon any such
assignment, delivery to the Administrative Agent and the Borrower of an executed
copy of such assignment agreement and the forms referred to in Section 11.1
hereof, if applicable, and the payment of a $3,000 recordation fee to the
Administrative Agent, the assignee shall become a Bank hereunder, all Loans,
participations in Letters of Credit and the Revolving Credit Commitment it
thereby holds shall be governed by all the terms and conditions hereof and the
Bank granting such assignment shall have its Revolving Credit Commitment, and
its obligations and rights in connection therewith, reduced by the amount of
such assignment.
Section 11.13. Amendments. Any provision of the Credit Documents may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by (a) the Borrower, (b) the Required Banks, and (c) if the rights or
duties of the Administrative Agent or the Issuing Agent are affected thereby,
the Administrative Agent or the Issuing Agent, as appropriate; provided that:
(i) no amendment or waiver pursuant to this Section 11.13 shall (A)
increase or extend the term of any Commitment of any Bank without the
consent of such Bank or (B) reduce the amount of or postpone any fixed date
for payment of any principal of or interest on any Loan or Reimbursement
Obligation or of any fee payable hereunder without the written consent of
each Bank; and
(ii) no amendment or waiver pursuant to this Section 11.13 shall,
unless signed by each Bank, change this Section 11.13, or the definition of
Required Banks, or affect the number of Banks required to take any action
under the Credit Documents.
Section 11.14. Headings. Section headings used in this Agreement are for
reference only and shall not affect the construction of this Agreement.
Section 11.15. Legal Fees, Other Costs and Indemnification. The Borrower
agrees to pay all reasonable costs and expenses of the Administrative Agent in
connection with the preparation and negotiation of the Credit Documents,
including without limitation, the reasonable fees and disbursements of Chapman
and Cutler, counsel to the Administrative Agent, in connection with the
preparation and execution of the Credit Documents, and any amendment, waiver or
consent related hereto, whether or not the transactions contemplated herein are
consummated. The Borrower further agrees to indemnify each Bank, the Issuing
Agent, the Agents, and their respective directors, agents, officers and
employees, against all
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losses, claims, damages, penalties, judgments, liabilities and expenses
(including, without limitation, all expenses of litigation or preparation
therefor, whether or not the indemnified Person is a party thereto) which any of
them may incur or reasonably pay arising out of or relating to any Credit
Document or any of the transactions contemplated thereby or the direct or
indirect application or proposed application of the proceeds of any Loan or
Letter of Credit (including, without limitation, the application of such
proceeds to an acquisition), other than those which arise from the gross
negligence or willful misconduct of the party claiming indemnification. The
Borrower, upon demand by the Issuing Agent, the Administrative Agent or a Bank
at any time, shall reimburse the Issuing Agent, the Administrative Agent or Bank
for any reasonable legal or other expenses (including allocable fees and
expenses of in-house counsel) incurred in connection with investigating or
defending against any of the foregoing except if the same is directly due to the
gross negligence or willful misconduct of the party to be indemnified.
Section 11.16. Currency. Each reference in this Agreement to U.S. Dollars
or to an Alternative Currency (the "relevant currency") is of the essence. To
the fullest extent permitted by law, the obligation of the Borrower in respect
of any amount due in the relevant currency under this Agreement shall,
notwithstanding any payment in any other currency (whether pursuant to a
judgment or otherwise), be discharged only to the extent of the amount in the
relevant currency that the Person entitled to receive such payment may, in
accordance with normal banking procedures, purchase with the sum paid in such
other currency (after any premium and costs of exchange) on the Business Day
immediately following the day on which such Person receives such payment. If the
amount of the relevant currency so purchased is less than the sum originally due
to such Person in the relevant currency, the Borrower agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify such Person
against such loss, and if the amount of the specified currency so purchased
exceeds the sum of (a) the amount originally due to the relevant Person in the
specified currency plus (b) any amounts shared with other Banks as a result of
allocations of such excess as a disproportionate payment to such Person under
Section 11.7(b) hereof, such Person agrees to remit such excess to the Borrower.
Section 11.17. Entire Agreement. The Credit Documents constitute the
entire understanding of the parties thereto with respect to the subject matter
thereof and any prior or contemporaneous agreements, whether written or oral,
with respect thereto are superseded thereby.
Section 11.18. Construction. The parties hereto acknowledge and agree
that neither this Agreement nor the other Credit Documents shall be construed
more favorably in favor of one than the other based upon which party drafted the
same, it being acknowledged that all parties hereto contributed substantially to
the negotiation of this Agreement and the other Credit Documents.
Section 11.19. Governing Law. This Agreement and the other Credit
Documents, and the rights and duties of the parties hereto, shall be construed
and determined in accordance with the internal laws of the State of New York.
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Section 11.20. Submission to Jurisdiction; Waiver of Jury Trial. The
Borrower hereby submits to the nonexclusive jurisdiction of the United States
District Court for the Southern District of New York and of any New York State
court sitting in the County of New York for purposes of all legal proceedings
arising out of or relating to this Agreement, the other Credit Documents or the
transactions contemplated hereby or thereby. The Borrower irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. The Borrower hereby irrevocably waives any and all
right to trial by jury in any legal proceeding arising out of or relating to any
Credit Document or the transactions contemplated thereby.
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In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the day and
year first above written.
Apogee Enterprises, Inc.
By: /s/ Terry L. Hall
-----------------------------------------------
Name: Terry L. Hall
------------------------------------------
Its: Vice President & Chief Financial Officer
-------------------------------------------
ABN AMRO Bank N.V., as Administrative
Agent and as Issuing Agent
By: ABN AMRO North America, Inc.
its agent
By: /s/ Ricardo Larrabure
-----------------------------------------------
Name: Ricardo Larrabure
Title: Senior Vice President and
Managing Director
By: /s/ Jozef A.C. Henriquez
-----------------------------------------------
Name: Jozef A.C. Henriquez
Title: Assistant Vice President
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Address and Amount of
Commitments:
Address:
135 South LaSalle Street ABN AMRO Bank N.V., Chicago Branch, in
Chicago, Illinois 60674-9135 its individual capacity as a Bank
Attention: Jozef A.C. Henriquez
Telephone: (312) 904-2611 By: ABN AMRO North America, Inc.
Telecopy: (312) 606-8425 its agent
Commitment: $30,000,000 By: /s/ Ricardo Larrabure
----------------------------------
Name: Ricardo Larrabure
Title: Senior Vice President and
Managing Director
By: /s/ Jozef A.C. Henriquez
----------------------------------
Name: Jozef A.C. Henriquez
Title: Assistant Vice President
Lending Offices:
Base Rate Loans:
135 South LaSalle Street
Chicago, Illinois 60674-9135
Attention: Loan Administration
Telephone: (312) 904-2961
Telecopy: (312) 606-8435
Eurocurrency Loans:
135 South LaSalle Street
Chicago, Illinois 60674-9135
Attention: Loan Administration
Telephone: (312) 904-2961
Telecopy: (312) 606-8435
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Address and Amount of
Commitments:
Address:
First Bank Place First Bank National Association
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Kurt D. Egertson, MPFP 0907 By: /s/ Kurt D. Egertson
Telephone: (612) 973-0514 ----------------------------------
Telecopy: (612) 973-0822 Name: Kurt D. Egertson
Title: Vice President
Commitment: $25,000,000
Lending Offices:
Base Rate Loans:
First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Patricia A. Eells, MPFP 0907
Telephone: (612) 973-0505
Telecopy: (612) 973-0822
Eurocurrency Loans:
First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: Patricia A. Eells, MPFP 0907
Telephone: (612) 973-0505
Telecopy: (612) 973-0822
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Address and Amount of
Commitments:
Address:
611 Woodward Avenue NBD Bank
Detroit, Michigan 48226
Attention: M. Mullins
Telephone: (313) 225-2873 By: /s/ Marguerite C. Mullins
Telecopy: (313) 225-1212 ---------------------------------
Name: Marguerite C. Mullins
Title: Second Vice President
Commitment: $22,000,000
Lending Offices:
Base Rate Loans:
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Amal Berry
Telephone: (313) 225-4080
Telecopy: (313) 225-1212
Eurocurrency Loans:
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Amal Berry
Telephone: (313) 225-4080
Telecopy: (313) 225-1212
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Address and Amount of
Commitments:
Address:
227 West Monroe Street Credit Lyonnais Chicago Branch
Suite 3800
Chicago, Illinois 60606
Attention: Matthew Kirst By: /s/ Mary Ann Alemm
Telephone: (312) 220-7307 ----------------------------------
Telecopy: (312) 641-0527 Name: Mary Ann Alemm
Title: Vice President and Group Head
Commitment: $15,000,000
Lending Offices:
Base Rate Loans:
227 West Monroe Street
Suite 3800
Chicago, Illinois 60606
Attention: Matthew Kirst
Telephone: (312) 220-7307
Telecopy: (312) 641-0527
Eurocurrency Loans:
227 West Monroe Street
Suite 3800
Chicago, Illinois 60606
Attention: Matthew Kirst
Telephone: (312) 220-7307
Telecopy: (312) 641-0527
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Address and Amount of
Commitments:
Address:
111 West Monroe Street Harris Trust and Savings Bank
Chicago, Illinois 60603
Attention: Catherine Ciolek
Telephone: (312) 461-7009 By: /s/ Catherine C. Ciolek
Telecopy: (312) 461-2591 ----------------------------------
Name: Catherine C. Ciolek
Title: Vice President
Commitment: $12,500,000
Lending Offices:
Base Rate Loans:
111 West Monroe Street
Chicago, Illinois 60603
Attention: Carrie Reyno
Telephone: (312) 461-3321
Telecopy: (312) 461-2591
Eurocurrency Loans:
111 West Monroe Street
Chicago, Illinois 60603
Attention: Carrie Reyno
Telephone: (312) 461-3321
Telecopy: (312) 461-2591
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Address and Amount of
Commitments:
Address:
One Wall Street, 19th Floor The Bank of New York
New York, New York 10286
Attention: Richard A. Raffetto
Telephone: (212) 635-8044 By: /s/ Richard A. Raffetto
Telecopy: (212) 635-1208 ----------------------------------
Name: Richard A. Raffetto
Title: Assistant Vice President
Commitment: $12,500,000
Lending Offices:
Base Rate Loans:
One Wall Street, 19th Floor
New York, New York 10286
Attention: Yvonne Forbes
Telephone: (212) 635-6691
Telecopy: (212) 635-7923
Eurocurrency Loans:
One Wall Street, 19th Floor
New York, New York 10286
Attention: Yvonne Forbes
Telephone: (212) 635-6691
Telecopy: (212) 635-7923
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Address and Amount of
Commitments:
Address:
Sixth and Marquette Norwest Bank Minnesota, National
Minneapolis, Minnesota 55479-0085 Association
Attention: Alan Thometz
Telephone: (612) 667-6911 By: /s/ Alan Thometz
Telecopy: (612) 667-4145 ----------------------------------
Name: Alan Thometz
Title: Vice President
Commitment: $12,500,000
Lending Offices:
Base Rate Loans:
Sixth and Marquette
Minneapolis, Minnesota 55479-0085
Attention: Edna Harder
Telephone: (612) 667-4747
Telecopy: (612) 667-4145
Eurocurrency Loans:
Sixth and Marquette
Minneapolis, Minnesota 55479-0085
Attention: Edna Harder
Telephone: (612) 667-4747
Telecopy: (612) 667-4145
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Address and Amount of
Commitments:
Address:
311 S. Wacker Dr., Suite 5800 Commerzbank AG, Chicago Branch
Chicago, Illinois 60606
Attention: Mr. William Brent Peterson
Telephone: (312) 408-6913 By: /s/ Mark Monson
Telecopy: (312) 435-1486 ----------------------------------
Name: Mark Monson
Title: Vice President
Commitment: $12,500,000
By: /s/ Roger Todebush
----------------------------------
Lending Offices: Name: Roger Todebush
Title: Assistant Cashier
Base Rate Loans:
311 S. Wacker Dr., Suite 5800
Chicago, Illinois 60606
Attention: Ms. Gabriela Schmidtchen
Telephone: (212) 266-7345
Telecopy: (212) 266-7593
Eurocurrency Loans:
Commerzbank AG, Grand Cayman Branch
c/o Chicago Branch
311 S. Wacker Dr., Suite 5800
Chicago, Illinois 60606
Attention: Ms. Gabriela Schmidtchen
Telephone: (212) 266-7345
Telecopy: (212) 266-7593
-67-
<PAGE>
Address and Amount of
Commitments:
Address:
115 S. LaSalle Street, Suite 2100 The Bank of Tokyo-Mitsubishi, Limited,
Chicago, Illinois 60603 Chicago Branch
Attention: Loan Administration
Telephone: (312) 269-0747
Telecopy: (312) 263-2555 By: /s/ Jeffrey R. Arnold
----------------------------------
Name: Jeffrey R. Arnold
Title: Vice President
With regard to all correspondence regarding
non-operational matters:
The Bank of Tokyo-Mitsubishi, Limited
90 South Seventh Street
Suite 5100
Minneapolis, Minnesota 55402
Attention: Peter Kline
Telephone: (612) 333-0505
Telecopy: (612) 333-3735
Commitment: $8,000,000
Lending Offices:
Base Rate Loans:
115 S. LaSalle Street, Suite 2100
Chicago, Illinois 60603
Attention: Loan Administration
Telephone: (312) 269-0747
Telecopy: (312) 263-2555
Eurocurrency Loans:
115 S. LaSalle Street, Suite 2100
Chicago, Illinois 60603
Attention: Loan Administration
Telephone: (312) 269-0747
Telecopy: (312) 263-2555
-68-
<PAGE>
Exhibit (11)
Statement of Determination of Common Shares and Common Share Equivalents
------------------------------------------------------------------------
Average number of common shares and common share equivalents assumed
outstanding during the three fiscal years ended:
<TABLE>
<CAPTION>
March 2, February 25, February 26,
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
PRIMARY:
Weighted average of common
shares outstanding (a) 13,487,916 13,385,803 13,232,504
Common share equivalents resulting
from the assumed exercise of stock options (b) 140,934 114,771 56,275
----------- ----------- -----------
Total primary common shares and
common share equivalents 13,628,850 13,500,574 13,288,779
=========== =========== ===========
Net earnings before cumulative effect of change
in accounting for income taxes $17,835,000 $13,050,000 $ 3,308,000
Cumulative effect of change in accounting for
income taxes -- -- 525,000
----------- ----------- -----------
Net earnings $17,835,000 $13,050,000 $ 3,833,000
=========== =========== ===========
Earnings per share before cumulative effect
of change in accounting for income taxes $ 1.31 $ .97 $ .25
Cumulative effect of change in accounting for
income taxes -- -- .04
----------- ----------- -----------
Per share amount $ 1.31 $ .97 $ .29
=========== =========== ===========
ASSUMING FULL DILUTION:
Total common shares and common share
equivalents as determined for primary computation 13,628,850 13,500,574 13,288,779
Additional dilutive effect resulting
from the assumed exercise of stock options (c) 5,294 16,007 61,633
----------- ----------- -----------
Total fully diluted common shares
and common share equivalents 13,634,144 13,516,581 13,350,412
=========== =========== ===========
Earnings per share before cumulative effect
of change in accounting for income taxes $ 1.31 $ .97 $ .25
Cumulative effect of change in accounting for
income taxes -- -- .04
----------- ----------- -----------
Per share amount $ 1.31 $ .97 $ .29
=========== =========== ===========
</TABLE>
Notes:
(a) Beginning balance of common stock adjusted for changes in amount
outstanding, weighted by the elapsed portion of the period during which the
shares were outstanding.
(b) Common share equivalents computed by the "treasury" method. Share amounts
represent the dilutive effect of outstanding stock options which have an
option value below the average market value for the current period.
(c) Share amounts represent the additional dilutive effect of outstanding stock
options where the underlying market value of the stock at the end of the
period is in excess of the average market value for the period.
<PAGE>
Exhibit (21)
SUBSIDIARIES OF THE REGISTRANT
------------------------------
The Company is the owner of all of the issued and outstanding stock of the
following corporations, except as noted below.
State or Country of
Name of Subsidiary Incorporation
------------------ -------------------
Apogee Enterprises International, Inc. Barbados
Prism Assurance, Ltd. Vermont
W.S.A., Inc. Minnesota
Full Service, Inc. Minnesota
Norment Industries, Inc. Delaware
Harmon Contract, Inc. (1) Minnesota
Norshield Corporation (1) Alabama
Harmon Contract Asia, Ltd. (2) Minnesota
Harmon Contract Asia Sdn Bhd (3) Malaysia
Harmon Contract U.K., Limited (4) United Kingdom
Harmon Europe S.A. (5) France
Harmon CFEM Facades (UK) Ltd. (6) United Kingdom
Harmon LTS (7) France
Harmon/CFEM Facades S.A. (8) France
Harmon Facalu S.A. (8) France
Harmon Sitraco S.A. (8) France
Viracon, Inc. Minnesota
Marcon Coatings, Inc. (9) Minnesota
Viratec Thin Films, Inc. (10) Minnesota
Viratec International, Inc. (11) Barbados
Viracon/Curvlite, Inc. Minnesota
Tru Vue, Inc. Illinois
Harmon Glass Company Minnesota
First Call, Inc. Florida
Apogee Sales Corporation (12) South Dakota
Harmon Glass of Canada Ltd. (12) (13) Canada
The Glass Depot, Inc. Minnesota
The Glass Depot of New York, Inc. (14) Minnesota
Apogee Wausau Group, Inc. Wisconsin
(1) Owned by W.S.A., Inc.
(2) Owned by Harmon Contract, Inc.
(3) Owned by Harmon Contract Asia, Ltd.
(4) 99.99% owned by Harmon Contract, Inc. and .01% by Apogee Enterprises, Inc.
(5) 70% owned by various Apogee entities
(6) 99.99% owned by Harmon Europe S.A. and .01% by Apogee Enterprises, Inc.
(7) 99.5% owned by Harmon Europe S.A.
(8) Owned by Harmon Europe S.A.
(9) 50% owned by Viracon, Inc.
(10) Owned by Marcon Coatings, Inc.
(11) Owned by Viratec Thin Films, Inc.
(12) Owned by Harmon Glass Company
(13) Inactive
(14) Owned by The Glass Depot, Inc.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-02-1996
<PERIOD-START> FEB-26-1995
<PERIOD-END> MAR-02-1996
<CASH> 7,389
<SECURITIES> 0
<RECEIVABLES> 165,140
<ALLOWANCES> 6,772
<INVENTORY> 54,484
<CURRENT-ASSETS> 258,559
<PP&E> 174,227
<DEPRECIATION> 95,742
<TOTAL-ASSETS> 386,136
<CURRENT-LIABILITIES> 142,477
<BONDS> 0
<COMMON> 4,506
0
0
<OTHER-SE> 134,415
<TOTAL-LIABILITY-AND-EQUITY> 386,136
<SALES> 871,147
<TOTAL-REVENUES> 871,147
<CGS> 752,624
<TOTAL-COSTS> 86,066
<OTHER-EXPENSES> 149
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,697
<INCOME-PRETAX> 26,611
<INCOME-TAX> 9,820
<INCOME-CONTINUING> 17,835
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,835
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
</TABLE>
<PAGE>
EXHIBIT 99
LITIGATION REFORM ACT OF 1995
CAUTIONARY STATEMENTS
---------------------
The following discussion contains certain cautionary statements
regarding Apogee's business and results of operations which should be considered
by investors and others. These statements discuss matters which may in part be
discussed elsewhere in this Form 10-K and which may have been discussed in other
documents prepared by the Company pursuant to federal securities laws. This
discussion is intended to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. The following factors should
be considered in conjunction with any discussion of operations or results by the
Company or its representatives, including any forward-looking discussion, as
well as comments contained in press releases, presentations to securities
analysts or investors, or other communications by the Company.
In making these statements, the Company is not undertaking to address or
update each factor in future filings or communications regarding the Company's
business or results, and is not undertaking to address how any of these factors
may have caused changes to discussions or information contained in previous
filings or communications. In addition, any of the matters discussed below may
have affected Apogee's past results and may affect future results, so that the
Company's actual results for first quarter fiscal 1997 and beyond may differ
materially from those expressed in prior communications. Though the Company has
attempted to list comprehensively these important cautionary factors, the
Company wishes to caution investors and others that other factors may in the
future prove to be important in affecting the Company's business or results of
operations.
INDUSTRY CONDITIONS
The Company is divided into three segments each serving different markets.
The Building Products and Services segment (BPS) serves the United States and
international nonresidential construction markets, which tend to be cyclical in
nature and sensitive to changes in general economic conditions. Nonresidential
construction, particularly the domestic office building segment, has declined
significantly in recent years both in terms of dollars and square feet of new
contract awards. As a result of this declining market, the Company has
experienced reduced margins and operating losses for the segment. While
industry conditions for the domestic nonresidential construction market have
slowly improved, there can be no assurance regarding future market conditions.
BPS is subject to normal subcontractor's risks, including material and wage
increases, construction and
<PAGE>
transportation work stoppages and contractor credit worthiness, in addition,
office vacancy rates, tax laws concerning real estate and interest rates are
important factors which affect nonresidential construction markets. The Auto
Glass segment serves the repair and replacement automotive glass market which
tends to be cyclical in nature and is influenced by a variety of factors,
including new car sales, gasoline prices, speed limits, road conditions, the
economy, weather and average annual number of miles driven. This market's
pricing structure has changed significantly in recent years as insurance
companies seek volume pricing at significant discounts from historical levels
and attempt to enter into preferred or exclusive provider arrangements with a
limited number of providers. As a result, margins have narrowed at the retail
level and, to a lesser extent, at wholesale and manufacturing levels. There can
be no assurance that the Company will be able to improve or maintain its margins
or that it will be selected by insurance companies as a provider of replacement
automotive glass on a regional or national basis. The Glass Technologies segment
serves the high-performance architectural glass, computer, optical imaging and
picture framing glass industries, which are very competitive, highly responsive
to new products and price sensitive. The companies of this segment have been
highly profitable with rapidly growing revenues, especially in the international
markets. There can be no assurance the current growth experience by the segment
will continue or that the introduction of new products or competitors will not
significantly change market conditions.
COMPETITIVE ENVIRONMENT
The Company's business segments operate in industries that are highly
competitive and that, other than the industry in which the Company's Viratec
Thin Films, part of the Glass Technologies segment, competes, are fairly mature.
These competitive factors, as well as difficult or changing industry conditions
in recent years, have caused declines in sales volumes in the Building Products
and Services segment and pricing pressures in the Company's markets, resulting
in over-capacity and consolidation in these markets. The Company expects its
markets to remain highly competitive. The Company faces competition from other
major contractors, subcontractors, manufacturers, fabricators and installers in
each of its markets, certain of which may have greater financial or other
resources than the Company.
The curtainwall subcontractor business is primarily price competitive. The
Wausau Architectural Products group competes against several major aluminum
window manufacturers. Wausau Metals primarily services the custom portion of
this market in which the primary competitive factors are product quality,
reliable service and the ability to provide technical engineering and design
services. The Glass Technologies segment competes with several large integrated
glass manufacturers and numerous smaller specialty fabricators. Product pricing
and service are the primary competitive factors in this market. The Auto Glass
units compete with other auto glass shops, glass distributors warehouses, car
dealers, body shops and fabrication facilities on the basis of pricing and
customer service. Its competition consists of national and regional chains as
well as significant local competition.
<PAGE>
INTERNATIONAL OPERATIONS
The Company has made significant efforts to develop business in
international markets, including Asia and Europe. In order to enter
international markets effectively, the Company faces certain challenges,
including establishing the acceptance of the Company in the local market,
adapting its business practices to local patterns and developing commercial
relationships with local market participants. In addition, the Company's
international businesses are subject to the general risks of doing business
abroad, including that it has less experience in international sales and markets
than in its domestic markets and it is subject to the risk of adverse
fluctuations in currency exchange rates. These factors have contributed to
operating losses by the Building Products and Services segment for its
international operations. The Company's international operations may be
adversely affected by governmental, political, economic and competitive
conditions in other countries in which it does business.
