<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 0-8141
NORSTAN, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0835746
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
605 NORTH HIGHWAY 169, TWELFTH FLOOR, PLYMOUTH, MINNESOTA 55441
---------------------------------------------------------------
612-513-4500
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X . No .
----- -----
On September 4, 1996, there were 8,937,118 shares outstanding of the
registrant's common stock, par value $.10 per share, its only class of equity
securities.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1.
NORSTAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(In thousands, except per share amounts)
Three Months Ended
-----------------------
August 3, July 29,
1996 1995
-------- --------
REVENUES:
Sales of Products and Systems $45,746 $40,670
Telecommunications Services 45,099 30,435
Financial Services 1,386 1,296
------- -------
Total Revenues 92,231 72,401
------- -------
COST OF SALES:
Products and Systems 33,332 30,458
Telecommunications Services 33,125 20,954
Financial Services 443 571
------- -------
Total Cost of Sales 66,900 51,983
------- -------
GROSS MARGIN 25,331 20,418
Selling, General
& Administrative Expenses 22,180 17,680
------- -------
OPERATING INCOME 3,151 2,738
Interest Expense (241) (398)
Interest and Other Income, Net 7 49
------- -------
INCOME BEFORE PROVISION FOR
INCOME TAXES 2,917 2,389
Provision for Income Taxes 1,225 956
------- -------
NET INCOME $ 1,692 $ 1,433
------- -------
------- -------
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ .18 $ .16
------- -------
------- -------
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 9,323 8,948
------- -------
------- -------
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
NORSTAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
August 3, April 30,
1996 1996
-------- --------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS:
Cash $ 2,617 $ 1,133
Accounts receivable, net of allowances
for doubtful accounts of $1,262 and $1,079 66,531 55,723
Current lease receivables 14,784 15,316
Inventories 10,057 10,964
Costs and estimated earnings in excess of
billings of $18,991 and $13,528 11,259 5,202
Prepaid income taxes 3,702 3,427
Prepaid expenses, deposits and other 3,193 2,443
-------- --------
TOTAL CURRENT ASSETS 112,143 94,208
-------- --------
PROPERTY AND EQUIPMENT:
Furniture, fixtures and equipment 83,407 75,126
Less-accumulated depreciation and amortization (45,730) (40,815)
-------- --------
NET PROPERTY AND EQUIPMENT 37,677 34,311
-------- --------
OTHER ASSETS:
Lease receivables, net of current maturities 24,099 24,556
Goodwill, net of amortization of $4,330 and
$3,991 21,382 7,421
Other 28 492
-------- --------
TOTAL OTHER ASSETS 45,509 32,469
-------- --------
$195,329 $160,988
-------- --------
-------- --------
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
NORSTAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
August 3, April 30,
1996 1996
-------- --------
(Unaudited) (Audited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 394 $ --
Current maturities of discounted lease
rentals 11,086 12,202
Accounts payable 22,156 15,053
Deferred revenue 17,420 17,856
Accrued -
Salaries and wages 8,524 10,424
Warranty costs 1,619 1,655
Other liabilities 5,711 6,880
Income taxes payable 1,299 668
Billings in excess of costs and estimated
earnings of $11,858 and $12,595 5,360 4,571
-------- --------
TOTAL CURRENT LIABILITIES 73,569 69,309
-------- --------
LONG-TERM DEBT, net of current maturities 28,287 --
DISCOUNTED LEASE RENTALS, net of current
maturities 13,900 15,961
DEFERRED INCOME TAXES 8,256 8,201
-------- --------
SHAREHOLDERS' EQUITY:
Common stock - $.10 par value; 40,000,000
authorized shares; 8,937,118 and 8,717,538
shares issued and outstanding 894 872
Capital in excess of par value 29,737 27,619
Retained earnings 41,667 39,975
Unamortized cost of stock (16) (94)
Foreign currency translation adjustments (965) (855)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 71,317 67,517
-------- --------
$195,329 $160,988
-------- --------
-------- --------
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
NORSTAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(In thousands)
Three Months Ended
-----------------------
August 3, July 29,
1996 1995
-------- --------
OPERATING ACTIVITIES:
Net Income $ 1,692 $ 1,433
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 3,478 2,490
Deferred income taxes 358 (111)
Changes in operating items:
Accounts receivable (6,751) (4,543)
Inventories 1,129 618
Costs and estimated earnings in excess of
billings (6,062) (1,091)
Prepaid expenses, deposits and other (653) (680)
Accounts payable 4,711 (2,076)
Deferred revenue (824) 601
Accrued liabilities (5,432) (2,836)
Income taxes payable 773 989
Billings in excess of costs and estimated
earnings 797 1,317
-------- --------
Net cash used for operating activities (6,784) (3,889)
-------- --------
INVESTING ACTIVITIES:
Cash paid for acquisition, including
acquisition costs and net of cash acquired (11,794) --
Additions to property and equipment, net (4,370) (3,501)
Investment in lease contracts (1,167) (3,918)
Collections from lease contracts 2,117 4,559
Other, net 499 (134)
-------- --------
Net cash used for investing activities (14,715) (2,994)
-------- --------
FINANCING ACTIVITIES:
Borrowings under revolving credit agreements 80,300 35,590
Repayments under revolving credit agreements (52,650) (23,495)
Repayment of debt assumed in acquisition (1,743) --
Borrowings of long-term debt 105 --
Repayments of long-term debt (88) (34)
Repayments of discounted lease rentals (3,150) (3,138)
Proceeds from sale of common stock 214 21
-------- --------
Net cash provided by financing activities 22,988 8,944
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (5) (5)
-------- --------
NET INCREASE IN CASH 1,484 2,056
CASH, BEGINNING OF PERIOD 1,133 1,308
-------- --------
CASH, END OF PERIOD $ 2,617 $ 3,364
-------- --------
-------- --------
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
NORSTAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 3, 1996
UNAUDITED
The information furnished in this report is unaudited and reflects all
adjustments, which are normal recurring adjustments and, which in the opinion of
management, are necessary to present fairly the operating results for the
interim periods. The operating results for the interim periods presented are
not necessarily indicative of the operating results to be expected for the full
fiscal year. This report should be read in conjunction with the Company's most
recent "Annual Report on Form 10-K."
PRINCIPLES OF CONSOLIDATION -
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
FOREIGN CURRENCY -
For the Company's foreign operations, assets and liabilities are translated at
exchange rates as of the balance sheet date, and revenues and expenses are
translated at average exchange rates prevailing during the period. Translation
adjustments are recorded as a separate component of shareholders' equity.
NORSTAN FINANCIAL SERVICES, INC. (NFS) -
NFS provides financing for customers of the Company. Leases are accounted for
as sales-type leases for consolidated financial reporting purposes. Condensed
unaudited statements of operations of NFS are as follows (in thousands):
Three Months Ended
-----------------------
August 3, July 29,
1996 1995
-------- --------
Revenues $1,336 $1,171
Interest Expense (419) (487)
Other Expenses (361) (244)
------ ------
Income before provision for income taxes 556 440
Provision for income taxes (234) (176)
------ ------
Net Income $ 322 $ 264
------ ------
------ ------
<PAGE>
SUPPLEMENTAL CASH FLOW INFORMATION -
Supplemental disclosure of cash flow information is as follows (in thousands):
Three Months Ended
-----------------------
August 3, July 29,
1996 1995
-------- --------
Cash paid for:
Interest $ 899 $1,001
Income taxes $ 89 $ 69
Noncash investing and financing activities:
Stock issued for acquisition $2,000 $ --
Non-compete agreements related to acquisition $ 667 $ --
RECENTLY ISSUED ACCOUNTING STANDARD -
Effective May 1, 1996, the Company adopted the provisions of Financial
Accounting Standards Board (FASB) Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(Statement 121), which establishes accounting standards for the recognition and
measurement of impairment of long-lived assets, certain identifiable
intangibles, and goodwill either to be held or disposed of. The adoption of
Statement 121 did not have a material impact on the Company's financial position
or results of operations.
USE OF ESTIMATES -
The preparation of 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 disclosures of
contingent assets and liabilities as of the date of the financial statements.
Estimates also affect the reported amounts of revenues and expenses during the
periods presented. Estimates are used for such items as allowances for doubtful
accounts, inventory reserves, depreciable lives of property and equipment,
warranty reserves and other items. Ultimate results could differ from those
estimates.
<PAGE>
ACQUISITION -
On June 4, 1996, the Company acquired Connect Computer Company (Connect), in a
transaction accounted for under the purchase method. Connect is a provider of
consulting, design and implementation services for local and wide area networks,
internets and intranets, client server applications and workgroup computing,
with offices in Minneapolis, Milwaukee, and Des Moines.
The acquisition consideration totaled approximately $15 million, consisting of
$8.2 million cash and $2 million of Norstan common stock, as well as $2.7
million paid in exchange for all outstanding Connect stock options, $1.1 million
in bonuses paid to Connect management and employees, and $1 million payable to
certain members of Connect management under non-compete agreements. In
addition, the Company agreed to pay up to $4 million in contingent consideration
over a three year period ending April 30, 1999, if certain operating income
levels are achieved. The Company financed the cash portions of the acquisition
through borrowings under its existing credit facility.
Pro forma information in the year of acquisition for this acquisition has not
been disclosed as such information was not materially different from the
Company's results of operations.
STOCK SPLIT -
On June 20, 1996, the Company's Board of Directors approved a two-for-one stock
split effected in the form of a stock dividend. The stock split has been
retroactively reflected in the accompanying consolidated financial statements
and related notes. All share and per share data have been restated to reflect
the stock split.
FACTORS THAT MAY AFFECT FUTURE RESULTS -
Certain statements regarding the Company's operations, performance and results
for fiscal 1997 discussed in this report are forward-looking and therefore are
subject to certain risks and uncertainties. There are a number of factors that
could affect the Company's future operating results, including national and
regional economic conditions; pending and future legislation affecting the
telecommunications industry; the Company's operations in Canada; market
acceptance of the Company's products and services; the Company's continued
ability to provide integrated communications solutions for customers in a
dynamic industry, as well as other competitive factors.
Because these and other factors could affect the Company's operating results,
past financial performance should not necessarily be considered as a reliable
indicator of future performance, and investors should not use historical trends
to anticipate future period results.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY -
During the quarter ended August 3, 1996, the Company's net income improved
compared to the quarter ended July 29, 1995, increasing 18% to $1,692,000, or
$.18 per common share, compared to $1,433,000, or $.16 per common share.
RESULTS OF OPERATIONS -
The Company's revenues consist of revenues from the sale of products and
systems, telecommunications services and financial services. Revenues from the
sale of products and systems result from the sale of new products and upgrades,
as well as refurbished equipment. Revenues from telecommunications services
result primarily from communications maintenance services, moves, adds and
changes, long distance services, and network integration services. Financial
services revenues result primarily from leasing activities. The following table
sets forth, for the periods indicated, certain items from the Company's
consolidated statements of operations.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
DOLLAR AMOUNTS AS A
PERCENTAGE OF REVENUES
----------------------- PERCENTAGE
Three Months Ended INCREASE
----------------------- -------------
August 3, July 29, Fiscal
1996 1995 1997 VS 1996
--------- -------- ------------
REVENUES:
Sales of Products and Systems 49.6% 56.2% 12.5%
Telecommunications Services 48.9% 42.0% 48.2%
Financial Services 1.5% 1.8% 6.9%
----- ----- ----
Total Revenues 100.0% 100.0% 27.4%
COST OF SALES 72.5% 71.8% 28.7%
----- ----- ----
GROSS MARGIN 27.5% 28.2% 24.1%
SELLING, GENERAL &
ADMINISTRATIVE EXPENSES 24.1% 24.4% 25.5%
----- ----- ----
OPERATING INCOME 3.4% 3.8% 15.1%
Interest Expense and Other, Net (0.3%) (0.5%) (32.6%)
----- ----- ----
INCOME BEFORE PROVISION FOR
INCOME TAXES 3.1% 3.3% 22.1%
Provision for Income Taxes 1.3% 1.3% 28.1%
----- ----- ----
NET INCOME 1.8% 2.0% 18.1%
----- ----- ----
----- ----- ----
The following table sets forth, for the periods indicated, the gross margin
percentages for sales of products and systems, telecommunications services and
financial services.
Three Months Ended
-----------------------
August 3, July 29,
1996 1995
-------- --------
GROSS MARGIN PERCENTAGES:
Sales of Products and Systems 27.1% 25.1%
Telecommunications Services 26.6% 31.2%
Financial Services 68.0% 55.9%
<PAGE>
RESULTS OF OPERATIONS
REVENUES. Revenues increased 27.4%, to $92,231,000 for the quarter ended
August 3, 1996 as compared to $72,401,000 for the quarter ended July 29, 1995.
Sales of products and systems increased $5,076,000, or 12.5% for the quarter
ended August 3, 1996 as compared to the similar period last year.
Revenues from telecommunications services increased $14,664,000, or 48.2%
in the three month period ended August 3, 1996 as compared to the similar period
last year. Revenues from telecommunications services generally have increased
following the growth in the sales of telecommunications products and systems.
However, in fiscal 1996 as compared to 1995, inclusion of Connect Computer's
results of operations accounted for approximately 40% of the increase in
telecommunications services revenues. Revenues from financial services
increased $90,000, or 6.9% during the three month period ended August 3, 1996 as
compared to the similar period last year.
GROSS MARGIN. The Company's gross margin increased $4,913,000, or 24.1%,
to $25,331,000 for the three months ended August 3, 1996 as compared to
$20,418,000 for the three months ended July 29, 1995. As a percent of total
revenues, gross margin declined to 27.5% for the three month period ended August
3, 1996 as compared to 28.2% for the similar period last year.
Gross margin as a percent of revenues for the sale of products and systems
was 27.1% for the three month period ended August 3, 1996 as compared to 25.1%
for the similar period ended July 29, 1995. This change in the gross margin
percentage from the sale of products and systems is primarily the result of
shifts in the mix of products sold. Gross margin as a percent of revenues
for telecommunications services was 26.6% for the three month period ended
August 3, 1996 as compared to 31.2% for the similar period ended July 29, 1995.
This decrease resulted from changes in the mix of services provided, decreased
margins attributable to moves, adds and changes as well as the impact of
relatively lower gross margins from Connect Computer Company. Gross margin as a
percent of revenues for financial services was 68.0% for the three month period
ended August 3, 1996 as compared to 55.9% for the similar period ended July 29,
1995. This change results from changing borrowing costs in a dynamic interest
rate environment.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $4,500,000, or 25.5% for the quarter ended
August 3, 1996 as compared to the quarter ended July 29, 1995. As a percent of
revenues, selling, general and administrative expenses declined to 24.1% for the
three month period ended August 3, 1996 as compared to 24.4% for the similar
period ended July 29, 1995. The overall decrease in selling, general and
administrative expenses as a percent of revenues resulted from volume related
efficiencies, as sales volume increased without a proportionate increase in
expenses. These efficiencies were offset by approximately $200,000 of goodwill
amortization related to the acquisition of Connect.
OPERATING INCOME. Operating income increased $413,000, or 15.1%, to
$3,151,000 for the quarter ended August 3, 1996 as compared to $2,738,000 for
the quarter ended July 29, 1995. As a percent of revenues, operating income
decreased to 3.4%, for the three month period ended August 3, 1996 as compared
to 3.8% for the similar period ended July 29, 1995.
<PAGE>
OTHER COSTS AND EXPENSES. Interest expense decreased to $241,000 for the
three month period ended August 3, 1996 as compared to $398,000 for the similar
period ended July 29, 1995.
The Company's effective tax rate was 42% and 40% for the three month
periods ended August 3, 1996 and July 29, 1995, respectively. The increase in
the effective tax rate is a result of the Connect acquisition which resulted in
nondeductible goodwill. The Company's effective tax rate differs from the
federal statutory rate primarily due to state income taxes. The provisions for
income tax have been recorded based upon management's estimate of the annualized
effective tax rate.
NET INCOME. Net income was $1,692,000, or $.18 per common share, and
$1,433,000, or $.16 per common share, for the quarters ended August 3, 1996 and
July 29, 1995, respectively.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL. Working capital increased to $38,574,000 at August 3,
1996 from $24,899,000 at April 30, 1996. The current ratio was 1.52 to 1.0 at
August 3, 1996 as compared to 1.36 to 1.0 at April 30, 1996.
CAPITAL RESOURCES. In July 1996, the Company entered into a $40,000,000
unsecured revolving long-term credit agreement with certain banks. Up to
$15,000,000 of borrowings under this agreement may be in the form of commercial
paper. In addition, up to $8,000,000 and $3,000,000 may be used to support the
leasing activities of Norstan Financial Services, Inc. (NFS) and Norstan Canada
Inc. (Norstan Canada), respectively. Borrowings under this agreement are due
July 31, 1999, and bear interest at the banks' reference rate (8.25% at August
3, 1996 and April 30, 1996), except for LIBOR, CD and commercial paper based
options which generally bear interest at a rate lower than the banks' reference
rate. Total consolidated borrowings under this agreement at August 3, 1996, were
$27,650,000. There were no borrowings under this agreement at April 30, 1996.
There were no borrowings on the accounts of NFS or Norstan Canada at August 3,
1996, or April 30, 1996. Borrowings by the Company in fiscal 1997 and 1996 have
been for working capital and general corporate purposes, as well as to invest in
property and equipment. In addition, during fiscal 1997 borrowings were made to
finance the acquisition of Connect Computer Company.
Net capital expenditures for the three months ended August 3, 1996 were
$4,370,000 and $3,501,000 for the similar period last year. These expenditures
were primarily for the purchase of telecommunications equipment used as spare
parts, computer equipment and other facility expansion. At August 3, 1996,
there were no outstanding material commitments for future capital expenditures.
The Company also has a significant investment in lease contracts with its
customers. The investment in lease contracts totaled $1,167,000 for the three
months ended August 3, 1996 and $3,918,000 for the similar period last year.
Net lease receivables decreased to $38,883,000 at August 3, 1996 as compared to
$39,872,000 at April 30, 1996.
In June 1996, the Company acquired all of the common stock of Connect
Computer Company (Connect), a provider of consulting, design and implementation
services. The acquisition consideration totaled approximately $15 million,
consisting of $8.2 million cash and $2 million of Norstan common stock, as well
as $2.7 million paid in exchange for all outstanding Connect stock options, $1.1
million in bonuses paid to Connect management and employees, and $1 million
payable to certain members of Connect management under non-compete agreements.
In addition, the Company has agreed to pay up to $4 million in contingent
consideration over a three year period ending April 30, 1999, if certain
operating income levels are achieved.
<PAGE>
NFS and Norstan Canada utilize their lease receivables and corresponding
underlying equipment to borrow funds from financial institutions at fixed rates
on a nonrecourse or recourse basis by discounting the stream of future lease
payments. Proceeds from discounting are presented on the consolidated balance
sheets as discounted lease rentals. Interest rates on these credit agreements
range from 6% to 10%, and payments are generally due in varying monthly
installments through July 2001. Payments due financial institutions on a
monthly basis are made from monthly collections of lease receivables from
customers.
Discounted lease rentals consisted of the following (in thousands):
August 3, April 30,
1996 1996
-------- --------
Nonrecourse borrowings $ 23,308 $ 26,467
Recourse borrowings 1,678 1,696
--------- ---------
Total discounted lease rentals 24,986 28,163
Less-current maturities (11,086) (12,202)
--------- ---------
$ 13,900 $ 15,961
--------- ---------
--------- ---------
In addition to the recourse as described previously, recourse to Norstan,
Inc. relative to discounted lease rentals was limited to $865,000 as of August
3, 1996 and $883,000 as of April 30, 1996.
Management of the Company believes that a combination of cash to be
generated from operations, existing bank facilities and available borrowing
capacity, in aggregate, are adequate to meet the anticipated liquidity and
capital resource requirements of its business. Sources of additional financing,
if needed, may include further debt financing or the sale of equity or other
securities.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in legal actions in the ordinary course of its
business. Although the outcomes of any such legal actions cannot be
predicted, in the opinion of management there is no legal proceeding
pending against or involving the Company for which the outcome is
likely to have a material adverse effect upon the consolidated
financial position or results of operations of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 10. Credit Agreement dated as of July 23, 1996 among
Norstan, Inc., First Bank National Association, Harris
Trust and Savings Bank, The Sumitomo Bank, Limited,
Chicago Branch.
Exhibit 11. Statement Regarding Computation of Earnings Per Share.
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K and Form 8-K/A No. 1 dated
June 4, 1996, pertaining to its acquisition of all the issued and
outstanding capital stock of Connect Computer Company.
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORSTAN, INC.
----------------------------
Registrant
Date: September 16, 1996 By /s/ PAUL BASZUCKI
------------------------
Paul Baszucki
Co-Chairman of the Board
and Chief Executive Officer
Date: September 16, 1996 By /s/ RICHARD COHEN
------------------------
Richard Cohen
Vice Chairman of the Board
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
EXHIBIT 10
Execution
CREDIT AGREEMENT
BY AND AMONG
NORSTAN, INC.
FIRST BANK NATIONAL ASSOCIATION
HARRIS TRUST AND SAVINGS BANK
THE SUMITOMO BANK, LIMITED, CHICAGO BRANCH
DATED JULY 23, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS. . . . . . . . . . . . . . . . 2
Section 1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Accounting Terms and Calculations . . . . . . . . . . 17
Section 1.3 Computation of Time Periods . . . . . . . . . . . . . 17
Section 1.4 Other Definitional Terms . . . . . . . . . . . . . . . 17
ARTICLE II TERMS OF THE CREDIT FACILITIES . . . . . . . . . . . . . . . . 18
Section 2.1 The Revolving Commitments; Purposes . . . . . . . . . 18
Section 2.2 Procedure for Revolving Loans . . . . . . . . . . . . 18
Section 2.3 Revolving Notes . . . . . . . . . . . . . . . . . . . 20
Section 2.4 Conversions and Continuations . . . . . . . . . . . . 21
Section 2.5 Interest Rates, Interest Payments and Default Interest 22
Section 2.6 Repayment . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.7 Optional Prepayments . . . . . . . . . . . . . . . . . 23
Section 2.8 Commercial Paper Notes . . . . . . . . . . . . . . . . 23
Section 2.8A Standby Letters of Credit . . . . . . . . . . . . . . 24
Section 2.9 Procedures for Issuance of Commercial Paper Notes . . 24
Section 2.9A Procedures for Standby Letters of Credit . . . . . . . 24
Section 2.10 Terms of Commercial Paper Notes . . . . . . . . . . . 25
Section 2.10A Terms of Standby Letters of Credit . . . . . . . . . . 25
Section 2.11 Repayment of Commercial Paper Letter of Credit and
Standby Letter of Credit Drawings; Bank
Participations . . . . . . . . . . . . . . . . . . . . 25
Section 2.12 Optional Reduction of Revolving Commitment
Amounts or Termination of Revolving Commitments . . . 27
Section 2.13 Unused Revolving Commitment Fees . . . . . . . . . . . 27
Section 2.14 Letter of Credit Fees. . . . . . . . . . . . . . . . . 28
Section 2.15 Computation . . . . . . . . . . . . . . . . . . . . . 28
Section 2.16 Agent Fee, First Bank Fees and Placement Agent Fees . 29
Section 2.17 Payments . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.18 Revolving Commitment Ending Date and Extension . . . . 29
Section 2.19 Use of Loan Proceeds . . . . . . . . . . . . . . . . . 30
Section 2.20 Interest Rate Not Ascertainable, Etc . . . . . . . . . 30
Section 2.21 Increased Cost . . . . . . . . . . . . . . . . . . . . 30
Section 2.22 Illegality . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.23 Capital Adequacy. . . . . . . . . . . . . . . . . . . 32
Section 2.24 Funding Losses; Eurodollar Rate Advances and CD Rate
Advances . . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.25 Discretion of Banks as to Manner of Funding . . . . . 33
ARTICLE III CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . 34
Section 3.1 Conditions of Initial Loans and Commercial Paper Note 34
Section 3.2 Conditions Precedent to all Loans, Commercial Paper
Notes and Standby Letters of Credit . . . . . . . . . 36
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ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 37
Section 4.1 Organization, Standing, Etc . . . . . . . . . . . . . 37
Section 4.2 Authorization and Validity . . . . . . . . . . . . . . 37
Section 4.3 No Conflict; No Default . . . . . . . . . . . . . . . 37
Section 4.4 Government Consent . . . . . . . . . . . . . . . . . . 38
Section 4.5 Financial Statements and Condition . . . . . . . . . . 38
Section 4.6 Litigation . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.7 Environmental, Health and Safety Laws . . . . . . . . 39
Section 4.8 ERISA . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.9 Federal Reserve Regulations . . . . . . . . . . . . . 39
Section 4.10 Title to Property; Leases; Liens; Subordination . . . 39
Section 4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.12 Trademarks, Patents . . . . . . . . . . . . . . . . . 40
Section 4.13 Burdensome Restrictions . . . . . . . . . . . . . . . 40
Section 4.14 Force Majeure. . . . . . . . . . . . . . . . . . . . . 40
Section 4.15 Investment Company Act . . . . . . . . . . . . . . . . 40
Section 4.16 Public Utility Holding Company Act . . . . . . . . . . 40
Section 4.17 Retirement Benefits . . . . . . . . . . . . . . . . . 41
Section 4.18 Full Disclosure . . . . . . . . . . . . . . . . . . . 41
Section 4.19 Subsidiaries . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE V AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 41
Section 5.1 Financial Statements and Reports . . . . . . . . . . . 42
Section 5.2 Corporate Existence . . . . . . . . . . . . . . . . . 43
Section 5.3 Insurance . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.4 Payment of Taxes and Claims . . . . . . . . . . . . . 44
Section 5.5 Inspection . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.6 Maintenance of Properties . . . . . . . . . . . . . . 44
Section 5.7 Books and Records. . . . . . . . . . . . . . . . . . . 45
Section 5.8 Compliance . . . . . . . . . . . . . . . . . . . . . . 45
Section 5.9 Notice of Litigation . . . . . . . . . . . . . . . . . 45
Section 5.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 5.11 Environmental Matters; Reporting . . . . . . . . . . . 46
ARTICLE VI NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.2 Sale of Assets . . . . . . . . . . . . . . . . . . . . 46
Section 6.3 Plans . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.4 Change in Nature of Business . . . . . . . . . . . . . 48
Section 6.5 Subsidiaries. . . . . . . . . . . . . . . . . . . . . 48
Section 6.6 Negative Pledges; Subsidiary Restrictions . . . . . . 48
Section 6.7 Restricted Payments . . . . . . . . . . . . . . . . . 48
Section 6.8 Capital Expenditures . . . . . . . . . . . . . . . . . 48
Section 6.9 Subordinated Debt . . . . . . . . . . . . . . . . . . 48
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Section 6.10 Investments . . . . . . . . . . . . . . . . . . . . . 49
Section 6.11 Indebtedness . . . . . . . . . . . . . . . . . . . . . 51
Section 6.12 Liens . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 6.13 Contingent Obligations . . . . . . . . . . . . . . . . 53
Section 6.14 Transactions with Affiliates . . . . . . . . . . . . . 53
Section 6.15 Current Ratio . . . . . . . . . . . . . . . . . . . . 54
Section 6.16 Tangible Net Worth . . . . . . . . . . . . . . . . . . 54
Section 6.17 Cash Flow Leverage Ratio . . . . . . . . . . . . . . . 54
Section 6.18 Adjusted Leverage Ratio . . . . . . . . . . . . . . . 54
Section 6.19 Interest Coverage Ratio . . . . . . . . . . . . . . . 54
Section 6.20 Ratio of NFS Total Senior Debt to NFS Tangible
Net Worth . . . . . . . . . . . . . . . . . . . . . . 54
Section 6.21 NFS Total Reserve as Percentage of NFS Total Gross
Investment . . . . . . . . . . . . . . . . . . . . . . 54
Section 6.22 Total Lease Expense . . . . . . . . . . . . . . . . . 54
Section 6.23 Subsidiary Losses. . . . . . . . . . . . . . . . . . . 55
Section 6.24 Loan Proceeds . . . . . . . . . . . . . . . . . . . . 55
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . 55
Section 7.1 Events of Default. . . . . . . . . . . . . . . . . . . 55
Section 7.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.3 Offset . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE VIII THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.1 Appointment and Authorization . . . . . . . . . . . . 58
Section 8.2 Note Holders . . . . . . . . . . . . . . . . . . . . . 59
Section 8.3 Consultation With Counsel . . . . . . . . . . . . . . 59
Section 8.4 Loan Documents . . . . . . . . . . . . . . . . . . . . 59
Section 8.5 First Bank and Affiliates . . . . . . . . . . . . . . 59
Section 8.6 Action by Agent . . . . . . . . . . . . . . . . . . . 59
Section 8.7 Credit Analysis . . . . . . . . . . . . . . . . . . . 60
Section 8.8 Notices of Event of Default, Etc . . . . . . . . . . . 60
Section 8.9 Indemnification . . . . . . . . . . . . . . . . . . . 60
Section 8.10 Payments and Collections . . . . . . . . . . . . . . . 60
Section 8.11 Sharing of Payments . . . . . . . . . . . . . . . . . 61
Section 8.12 Advice to Banks . . . . . . . . . . . . . . . . . . . 61
Section 8.13 Resignation . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.1 Modifications . . . . . . . . . . . . . . . . . . . . 62
Section 9.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.3 Waivers, etc . . . . . . . . . . . . . . . . . . . . . 63
Section 9.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 63
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Section 9.6 Successors and Assigns; Disposition of Loans;
Transferees . . . . . . . . . . . . . . . . . . . . . 63
Section 9.7 Confidentiality of Information . . . . . . . . . . . . 64
Section 9.8 Governing Law and Construction . . . . . . . . . . . . 64
Section 9.9 Consent to Jurisdiction . . . . . . . . . . . . . . . 65
Section 9.10 Survival of Agreement . . . . . . . . . . . . . . . . 65
Section 9.11 Indemnification . . . . . . . . . . . . . . . . . . . 65
Section 9.12 Captions . . . . . . . . . . . . . . . . . . . . . . . 66
Section 9.13 Entire Agreement. . . . . . . . . . . . . . . . . . . 66
Section 9.14 Counterparts . . . . . . . . . . . . . . . . . . . . . 67
Section 9.15 Borrower Acknowledgements . . . . . . . . . . . . . . 67
Section 9.16 Covenant Rider . . . . . . . . . . . . . . . . . . . . 67
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of July 23, 1996, is by and among NORSTAN,
INC., a Minnesota corporation (the "Borrower"), FIRST BANK NATIONAL ASSOCIATION,
a national banking association ("First Bank"), HARRIS TRUST AND SAVINGS BANK, an
Illinois banking corporation ("Harris"), THE SUMITOMO BANK, LIMITED, CHICAGO
BRANCH ("Sumitomo") and FIRST BANK NATIONAL ASSOCIATION, a national banking
association, one of the Banks, as agent for the Banks (together with any
successor thereto in such capacity, the "Agent").
RECITALS
A. The Borrower, First Bank, Harris and the Agent are parties to a Credit
Agreement dated as of October 28, 1994, (the "Existing Credit Agreement"),
pursuant to which First Bank and Harris, as "Banks" made certain revolving
credit facilities available to the Borrower, said revolving credit facilities
being further evidenced by separate Revolving Notes of the Borrower in favor of
each such Bank, each dated October 28, 1994 (collectively, the "Existing
Revolving Notes").
B. The Borrower's obligations under the Existing Credit Agreement and the
Existing Revolving Notes are guarantied by Norstan Financial Services, Inc., a
Minnesota corporation ("NFS"), Norstan Communications, Inc., a Minnesota
corporation, Norstan Network Services, Inc., a Minnesota corporation, and
Norstan Canada Inc., ("Norstan Canada"), a Minnesota corporation and Connect
Computer Company, a Minnesota corporation ("Connect Computer") (collectively,
the "Guarantors") pursuant to separate Guaranties executed by each Guarantor in
favor of the Agent for benefit of said Banks (collectively, the "Existing
Guaranties").
C. Sumitomo desires to provide a revolving credit facility to the
Borrower upon the terms and conditions set forth herein and to be added as a
"Bank" hereunder.
D. The parties hereto desire to amend and restate the Existing Credit
Agreement and the Existing Revolving Notes and to cause the Existing Guaranties
to be amended and restated in their entireties.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and adequacy of which is hereby acknowledged,
the parties hereto hereby agree that the Existing Credit Agreement be, and it
hereby is, amended and restated to read in full as follows:
ARTICLE I
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DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 DEFINED TERMS. As used in this Agreement the following
terms shall have the following respective meanings (and such meanings shall be
equally applicable to both the singular and plural form of the terms defined, as
the context may require):
"ACCOUNTS": With respect to any Person, the aggregate unpaid
obligations of customers and other account debtors to such Person arising out of
the sale or lease of goods or rendition of services by such Person on an open
account or deferred payment basis.
"ADJUSTED CD RATE": With respect to each Interest Period applicable
to a CD Rate Advance, the sum (rounded upward, if necessary, to the next one
hundredth of one percent) of (a) the rate per annum obtained by dividing (i) the
CD Rate as of the first day of the Interest Period, by (ii) 1.00 minus the
Domestic Reserve Percentage, PLUS (b) the annual rate most recently estimated by
the Agent as the then current net annual assessment rate payable by the Agent to
the Federal Deposit Insurance Corporation (or any successor) for insuring time
deposits made in Dollars at the Agent's domestic offices, PLUS (c) the cost
(converted to an equivalent rate per annum) of customary brokerage fees incurred
by the Agent in obtaining funds by the sale of its negotiable certificates of
deposit.
"ADJUSTED EURODOLLAR RATE": With respect to each Interest Period
applicable to a Eurodollar Rate Advance, the rate (rounded upward, if necessary,
to the next one hundredth of one percent) determined by dividing the Eurodollar
Rate for such Interest Period by 1.00 minus the Eurodollar Reserve Percentage.
"ADJUSTED LEVERAGE RATIO": At the time of any determination, the
ratio of (a) Total Indebtedness less Indebtedness of NFS to (b) Tangible Net
Worth, all as determined in accordance with GAAP (but determined using the
equity method of accounting with respect to NFS).
"ADVANCE": Any portion of the outstanding Revolving Loans by a Bank
as to which the Borrower elected one of the available interest rate options and,
if applicable, an Interest Period. An Advance may be a CD Rate Advance, a
Eurodollar Rate Advance or a Reference Rate Advance.
"AFFILIATE": When used with reference to any Person, (a) each Person
that, directly or indirectly, controls, is controlled by or is under common
control with, the Person referred to, (b) each Person which beneficially owns or
holds, directly or indirectly, five percent or more of any class of voting stock
of the Person referred to (or if the Person referred to is not a corporation,
five percent or more of the equity interest), (c) each Person, five percent of
more of the voting stock (or if such Person is not a corporation, five percent
or more of the equity interest) of which is beneficially owned
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or held, directly or indirectly, by the Person referred to, and (d) each of such
Person's officers, directors, joint venturers and partners. The term control
(including the terms "controlled by" and "under common control with") means the
possession, directly, of the power to direct or cause the direction of the
management and policies of the Person in question.
"AGENT": As defined in the opening paragraph hereof.
"AGENT FEE": As defined in Section 2.16 (a).
"AGGREGATE COMMERCIAL PAPER SUBLIMITS": As of any date, the sum of
the Commercial Paper Sublimits of all the Banks.
"AGGREGATE REVOLVING COMMITMENT AMOUNTS": As of any date, the sum of
the Revolving Commitment Amounts of all the Banks on such date.
"AGGREGATE REVOLVING OUTSTANDINGS": As of any date, the sum of the
Revolving Outstandings of all Banks on such date.
"AGGREGATE STANDBY LETTER OF CREDIT SUBLIMITS": As of any date, the
sum of the Standby Letter of Credit Sublimits of all the Banks on such date.
"AGREEMENT TO ADD ADDITIONAL COMPANY": The Agreement to Add
Additional Company dated as of April 29, 1993 between the Borrower, First Bank,
Mitsubishi Bank and Trust Company of New York, as Depositary, and FBS Capital
Markets Group, a division of First Bank (now FBS Investment Services, Inc.), as
Placement Agent, as the same may be amended, supplemented or restated from time
to time.
"APPLICABLE LENDING OFFICE": For each Bank and for each type of
Advance, the office of such Bank identified pursuant to Section 9.4 or such
other domestic or foreign office of such Bank (or of an Affiliate of such Bank)
as such Bank may specify from time to time to the Agent and the Borrower as the
office by which its Advances of such type are to be made and maintained.
"APPLICABLE MARGIN": With respect to:
(a) Reference Rate Advances -- 0%.
(b) CD Rate Advances -- 1.00%.
(c) Eurodollar Rate Advances -- 1.00%
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"BANK": First Bank, Harris, Sumitomo and any Transferee which becomes
a "Bank" hereunder by assignment in accordance with Section 9.6.
"BOARD": The Board of Governors of the Federal Reserve System or any
successor thereto.
"BORROWER": As defined in the opening paragraph hereof.
"BORROWER LOAN DOCUMENTS": This Agreement, the Revolving Notes and
the Commercial Paper Program Documents to which the Borrower is a party.
"BUSINESS DAY": Any day (other than a Saturday, Sunday or legal
holiday in the State of Minnesota) on which national banks are permitted to be
open in Minneapolis, Minnesota, and Chicago, Illinois.
"CAPITAL EXPENDITURES": For any period, the sum of all amounts that
would, in accordance with GAAP, be included as additions to property, plant and
equipment on a consolidated statement of cash flows for the Borrower during such
period, in respect of (a) the acquisition, construction, improvement,
replacement or betterment of land, buildings, machinery, equipment or of any
other fixed assets or leaseholds, (b) to the extent related to and not included
in (a) above, materials, contract labor (excluding expenditures properly
chargeable to repairs or maintenance in accordance with GAAP), and (c) other
capital expenditures and other uses recorded as capital expenditures or similar
terms having substantially the same effect (including expenditures for
nonrecurrent tangible assets such as software).
"CAPITALIZED LEASE": A lease of (or other agreement conveying the
right to use) real or personal property with respect to which at least a portion
of the rent or other amounts thereon constitute Capitalized Lease Obligations.
"CAPITALIZED LEASE OBLIGATIONS": As to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real or personal property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP (including Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board) and, for purposes
of this Agreement, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP (including such Statement No.
13).
"CASH FLOW LEVERAGE RATIO": For any period of determination, the
ratio of (a) the sum (without duplication) of the aggregate principal amount of
all outstanding Capitalized Lease Obligations of the Borrower and the
Subsidiaries and that portion of Total Indebtedness bearing interest determined
as of the last day of that period, to (b) EBITDA, all as determined in
accordance with GAAP (but determined using the equity method of accounting with
respect to NFS).
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"CD RATE": With respect to any CD Rate Advance for any Interest
Period applicable thereto, the rate of interest determined by the Agent for the
relevant Interest Period to be the average (rounded upward, if necessary, to the
next 1/100th of 1%) of the rates quoted to the Agent at approximately 8:00 a.m.,
Minneapolis time (or as soon thereafter as practicable), or at the option of the
Agent at approximately the time of the request for a CD Rate Advance if such
request is made later than 8:00 a.m., Minneapolis time, in each case on the
first day of the applicable Interest Period by certificate of deposit dealers
selected by the Agent, in its sole discretion, for the purchase from the Agent,
at face value, of certificates of deposit issued by the Agent in an amount and
maturity comparable to the amount and maturity of the Agent's share of the
requested CD Rate Advance, or at the option of the Agent determined for such
amount and maturity based on published composite quotation of certificate of
deposit rates selected by the Agent.
"CD RATE ADVANCE": An Advance with respect to which the interest rate
prior to maturity is determined by reference to the Adjusted CD Rate.
"CLOSING DATE": July 23, 1996.
"CODE": The Internal Revenue Code of 1986, as amended.
"COMMERCIAL PAPER LETTER OF CREDIT": The Commercial Paper Letter of
Credit issued by First Bank for the accounts of the Borrower and other Companies
pursuant to the Commercial Paper Program.
"COMMERCIAL PAPER NOTE": A Commercial Paper Note (Midwest) or a
Commercial Paper Note (Unrated), as the case may be.
"COMMERCIAL PAPER NOTE (MIDWEST)": A promissory note of the Borrower
issued pursuant to the Commercial Paper Program.
"COMMERCIAL PAPER NOTE (UNRATED)": A promissory note of the Borrower
maturing within 270 days, issued by the Borrower other than pursuant to the
Commercial Paper Program.
"COMMERCIAL PAPER PROGRAM": The Midwest Commercial Paper-Service
Mark- I program of First Bank, as amended, supplemented and in effect from time
to time.
"COMMERCIAL PAPER PROGRAM DOCUMENTS": Collectively, the Agreement
to Add Additional Company, the Covenant Rider, the Placement Agent Letter
Agreement, the Depositary Agreement dated as of February 1, 1989, between
First Bank, Mitsubishi Bank Trust Company of New York, as Depositary, and
certain Companies parties thereto, including the Borrower, the Letter of
Credit Agreement dated as of February 1, 1989 between First Bank and said
Companies, the Placement Agreement dated as of
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February 1, 1989 between First Bank and FBS Capital Markets Group (now FBS
Investment Services, Inc.) as Placement Agent, and the Commercial Paper
Letter of Credit, as said documents may be amended, supplemented, restated,
extended or renewed from time to time, and any other documents related
thereto.
"COMMERCIAL PAPER SUBLIMIT": With respect to a Bank, initially the
amount set opposite such Bank's name on Exhibit 1.1A hereto as its Commercial
Paper Sublimit, but as the same may be from time to time reduced pursuant to
Section 2.12.
"CONTINGENT OBLIGATION": With respect to any Person at the time of
any determination, without duplication, any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or otherwise: (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase of) any direct or indirect security therefor, (b)
to purchase property, securities or services for the purpose of assuring the
owner of such Indebtedness of the payment of such Indebtedness, (c) to maintain
working capital, equity capital or other financial statement condition of the
primary obligor so as to enable the primary obligor to pay such Indebtedness or
otherwise to protect the owner thereof against loss in respect thereof, or (d)
entered into for the purpose of assuring in any manner the owner of such
Indebtedness of the payment of such Indebtedness or to protect the owner against
loss in respect thereof; PROVIDED, that the term "Contingent Obligation" shall
not include endorsements for collection or deposit, in each case in the ordinary
course of business.
"CONTRACT DEBT": With respect to any Person, (a) Indebtedness of that
Person for borrowed money, (b) any other Indebtedness of that Person evidenced
by notes, bonds, debentures, guaranties or similar obligations (including
Capitalized Leases, Commercial Paper Notes and reimbursement obligations
hereunder with respect to Standby Letters of Credit), and (c) any other
Indebtedness of that Person that by its terms was not required to be paid in
full within 60 days after it was incurred.
"CONTRACT DEBT PAYMENTS": With respect to a period of four successive
fiscal quarters, the sum of (a) all payments of principal and interest actually
paid by that Person during that period on Contract Debt, and (b) all Letter of
Credit Fees actually paid by that Person during that period; PROVIDED, HOWEVER,
that payment of the principal balance of any Revolving Note or any Commercial
Paper Note shall not constitute a Contract Debt Payment for purposes of this
Agreement.
"COVENANT RIDER": The Covenant Rider dated as of April 29, 1993
between the Borrower and First Bank, as the same may be amended, supplemented or
restated from time to time.
"CURRENT ASSETS": As of any date, the consolidated current assets of
the Borrower, determined in accordance with GAAP.
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"CURRENT LIABILITIES": As of any date, the consolidated current
liabilities of the Borrower, determined in accordance with GAAP.
"CURRENT RATIO": As of any determination, the ratio of (a) Current
Assets to (b) Current Liabilities, all as determined in accordance with GAAP
(but determined using the equity method of accounting with respect to NFS).
"DEFAULT": Any event which, with the giving of notice (whether such
notice is required under Section 7.1, or under some other provision of this
Agreement, or otherwise) or lapse of time, or both, would constitute an Event of
Default.
"DOLLARS" and "$": Lawful money of the United States of America.
"DOMESTIC RESERVE PERCENTAGE": As of any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board for determining the maximum reserve requirement (including without
limitation any basic, supplemental or emergency reserves) for a member bank of
the Federal Reserve System, with deposits comparable in amount to those held by
the Agent, in respect of new non-personal time deposits in dollars having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The rate of interest applicable to any outstanding CD Rate Advance
shall be adjusted automatically on and as of the effective date of any change in
the Domestic Reserve Percentage.
"EBITDA": For any period of determination, the consolidated net
income of the Borrower before deductions for income taxes, Interest Expense,
depreciation and amortization, all as determined in accordance with GAAP (but
determined using the equity method of accounting with respect to NFS).
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE": Any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower is a member and
which is treated as a single employer under Section 414 of the Code.
"EURODOLLAR BUSINESS DAY": A Business Day which is also a day for
trading by and between banks in United States dollar deposits in the interbank
Eurodollar market and a day on which banks are open for business in New York
City.
"EURODOLLAR RATE": With respect to each Interest Period applicable to
a Eurodollar Rate Advance, the average offered rate for deposits in United
States dollars (rounded upward, if necessary, to the nearest 1/16 of 1%) for
delivery of such deposits on the first day of such Interest Period, for the
number of days in such Interest Period, which appears on the Reuters Screen LIBO
page as of 11:00 a.m., London time (or such
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other time as of which such rate appears) two Eurodollar Business Days prior to
the first day of such Interest Period, or the rate for such deposits determined
by the Agent at such time based on such other published service of general
application as shall be selected by the Agent for such purpose; provided, that
in lieu of determining the rate in the foregoing manner, the Agent may determine
the rate based on rates at which United States dollar deposits are offered to
the Agent in the interbank Eurodollar market at such time for delivery in
Immediately Available Funds on the first day of such Interest Period in an
amount approximately equal to the Advance by the Agent to which such Interest
Period is to apply (rounded upward, if necessary, to the nearest 1/16 of 1%).
"Reuters Screen LIBO page" means the display designated as page "LIBO" on the
Reuters Monitor Money Rate Screen (or such other page as may replace the LIBO
page on such service for the purpose of displaying London interbank offered
rates of major banks for United States dollar deposits).
"EURODOLLAR RATE ADVANCE": An Advance with respect to which the
interest rate is determined by reference to the Adjusted Eurodollar Rate.
"EURODOLLAR RESERVE PERCENTAGE": As of any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board for determining the maximum reserve requirement (including any basic,
supplemental or emergency reserves) for a member bank of the Federal Reserve
System, with deposits comparable in amount to those held by the Agent, in
respect of "Eurocurrency Liabilities" as such term is defined in Regulation D of
the Board. The rate of interest applicable to any outstanding Eurodollar Rate
Advances shall be adjusted automatically on and as of the effective date of any
change in the Eurodollar Reserve Percentage.
"EVENT OF DEFAULT": Any event described in Section 7.1.
"EXISTING CREDIT AGREEMENT": As such term is defined in Recital A of
this Agreement.
"EXISTING GUARANTIES": As such term is defined in Recital B of this
Agreement.
"EXISTING REVOLVING NOTES": As such term is defined in Recital A of
this Agreement.
"FEDERAL FUNDS RATE": For any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, PROVIDED that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next
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preceding Business Day as so published on the next succeeding Business Day and
(b) if such rate is not so published for any Business Day, the Federal Funds
Rate for such Business Day shall be the average rate quoted to First Bank on
such Business Day on such transactions as determined by the Agent.
"FIRST BANK": As such term is defined in opening paragraph of this
Agreement.
"FIRST BANK FEES": As defined in Section 2.16 (b).
"FIRST BANK/NFS LOAN DOCUMENTS": Collectively, the Credit Agreement
dated as of June 30, 1992 between NFS and First Bank and all other "Loan
Documents" as defined therein, as amended and as any of said documents may be
further amended, modified or supplemented from time to time.
"GAAP": Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of any date of
determination.
"GUARANTORS": As such term is defined in Recital B of this Agreement.
"GUARANTY": A guaranty in the form of Exhibit 1.1B hereto.
"HARRIS": As such term is defined in the opening paragraph hereof.
"HOLDING ACCOUNT": A deposit account belonging to the Agent for the
benefit of the Banks into which the Borrower may be required to make deposits
pursuant to the provisions of this Agreement, such account to be under the sole
dominion and control of the Agent and not subject to withdrawal by the Borrower,
with any amounts therein to be held for application toward the repayment to
First Bank of any drawings made under the Commercial Paper Letter of Credit for
payment of any outstanding Commercial Paper Notes and any drawings made under
any Standby Letter of Credit. The Holding Account shall be a money market
savings account or substantial equivalent (or other appropriate investment
medium as the Borrower may from time to time request and to which the Agent in
its sole discretion shall have consented) and shall bear interest in accordance
with the terms of similar accounts held by the Agent for its customers.
"IMMEDIATELY AVAILABLE FUNDS": Federal funds or other immediately
available funds.
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"INDEBTEDNESS": With respect to any Person at the time of any
determination, without duplication, all obligations, contingent or otherwise, of
such Person which in accordance with GAAP should be classified upon the balance
sheet of such Person as liabilities, but in any event including: (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person upon which interest charges are customarily paid
or accrued, (d) all obligations of such Person under conditional sale or other
title retention agreements relating to property purchased by such Person, (e)
all obligations of such Person issued or assumed as the deferred purchase price
of property or services, (f) all obligations of others secured by any Lien on
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Capitalized Lease Obligations of such
Person, (h) all obligations of such Person in respect of interest rate
protection agreements, (i) all obligations of such Person, actual or contingent,
as an account party in respect of letters of credit or bankers' acceptances, (j)
all obligations of any partnership or joint venture as to which such Person is
or may become personally liable, and (k) all Contingent Obligations of such
Person to the extent that such Contingent Obligations are or should be
classified as liabilities on the balance sheet of such Person in accordance with
GAAP.
"INTEREST COVERAGE RATIO": For any period of determination, the ratio
of (a) EBITDA, to (b) Interest Expense, in each case determined for said period
in accordance with GAAP (but determined using the equity method of accounting
with respect to NFS).
"INTEREST EXPENSE": For any period of determination, the aggregate
consolidated amount, without duplication, of interest paid, accrued or scheduled
to be paid in respect of any Indebtedness of the Borrower, including (a) all but
the principal component of payments in respect of conditional sale contracts,
Capitalized Leases and other title retention agreements, (b) commissions,
discounts and other fees and charges with respect to letters of credit and
bankers' acceptance financings and (c) net costs under interest rate protection
agreements, in each case determined in accordance with GAAP.
"INTEREST PERIOD": (a) With respect to each Eurodollar Rate Advance,
the period commencing on the date of such Advance or on the last day of the
immediately preceding Interest Period, if any, applicable to an outstanding
Advance and ending one, two, three or six months thereafter, as the Borrower may
elect in the applicable notice of borrowing, continuation or conversion;
PROVIDED THAT:
(i) Any Interest Period that would otherwise end on a day
which is not a Eurodollar Business Day shall be extended to the next
succeeding Eurodollar Business Day unless such Eurodollar Business
Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Eurodollar Business Day;
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(ii) Any Interest Period that begins on the last Eurodollar
Business Day of a calendar month (or a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Eurodollar Business Day of a
calendar month; and
(iii) No Interest Period may be selected that would end after
the Revolving Commitment Ending Date.
(b) With respect to each CD Rate Advance, the period commencing on
the date of such Advance or on the last day of the immediately preceding
Interest Period, if any, applicable to an outstanding Advance and ending 30,
60, 90 or 180 days thereafter, as the Borrower may elect in the applicable
notice of borrowing, continuation or conversion; PROVIDED THAT:
(i) Any Interest Period that would otherwise end on a day
which is not a Business Day shall be extended to the next succeeding
Business Day; and
(ii) No Interest Period may be selected that would end after
the Revolving Commitment Ending Date.
"INVENTORY": With respect to any Person, goods held for sale or lease
or to be furnished under contracts of service by such entity, raw materials, and
work in process or materials used or consumed in the business of such Person.
"INVESTMENT": The acquisition, purchase, making or holding of any
stock or other security, any loan, advance, contribution to capital,
extension of credit (except for trade and customer accounts receivable for
inventory sold or services rendered in the ordinary course of business and
payable in accordance with customary trade terms), any acquisitions of real
or personal property (other than real and personal property acquired in the
ordinary course of business) and any purchase or commitment or option to
purchase stock or other debt or equity securities of or any interest in
another Person or any integral part of any business or the assets comprising
such business or part thereof. The amount of any Investment shall be the
original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.
"LETTER OF CREDIT FEE": As defined in Section 2.14.
"LIEN": With respect to any Person, any security interest, mortgage,
pledge, lien, charge, encumbrance, title retention agreement or analogous
instrument or device (including the interest of each lessor under any
Capitalized Lease), in, of or on
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any assets or properties of such Person, now owned or hereafter acquired,
whether arising by agreement or operation of law.
"LOAN DOCUMENTS": This Agreement, the Revolving Notes and the
Guaranties.
"MAJORITY BANKS": At any time, Banks holding at least 100% of the
aggregate unpaid principal amount of the Revolving Notes or, if no Revolving
Loans are at the time outstanding hereunder, Banks holding at least 100% of the
Aggregate Revolving Commitment Amounts.
"MULTIEMPLOYER PLAN": A multiemployer plan, as such term is defined
in Section 4001 (a) (3) of ERISA, which is maintained (on the Closing Date,
within the five years preceding the Closing Date, or at any time after the
Closing Date) for employees of the Borrower or any ERISA Affiliate.
"NFS": As such term is defined in Recital B of this Agreement.
"NFS LEASE ACCOUNT": An Account arising from a lease of Inventory by
NFS.
"NFS TANGIBLE NET WORTH": As of any date of determination, the sum of
the amounts set forth (or that, in accordance with GAAP, would be set forth) on
the balance sheet of NFS as the sum of the common stock, preferred stock,
additional paid-in capital and retained earnings of NFS (excluding treasury
stock), lESS the book value of all assets of NFS that would be treated as
intangibles under GAAP, including all such items as goodwill, trademarks, trade
names, service marks, copyrights, patents, licenses, unamortized debt discount
and expenses and the excess of the purchase price of the assets of any business
acquired by NFS over the book value of such assets.
"NFS TOTAL GROSS INVESTMENT": As of any date of determination, NFS's
total gross investment in Accounts, including those for which NFS has
established a specific reserve.
"NFS TOTAL RESERVE": As of any date of determination, the total
amount reserved by NFS to cover unpaid Accounts, including amounts reserved to
cover specific unpaid Accounts.
"NFS TOTAL SENIOR DEBT": As of any date of determination, all
Indebtedness of NFS other than Subordinated Debt of NFS.
"NORSTAN CANADA": As such term is defined in Recital B of this
Agreement.
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"NORSTAN CANADA LEASE ACCOUNT": An Account arising from a lease of
Inventory by Norstan Canada.
"OBLIGATIONS": The Borrower's obligations in respect of the due and
punctual payment of principal and interest (including, without limitation and to
the extent permitted by law, interest accruing after the commencement of a case
by or against the Borrower under the Bankruptcy Code (Title 11 of the United
States Code)) on the Revolving Notes and Unpaid Drawings when and as due,
whether by acceleration or otherwise and all fees (including Unused Revolving
Commitment Fees and Letter of Credit fees), expenses, indemnities, reimbursement
and other obligations of the Borrower under this Agreement, any other Borrower
Loan Document, the Commercial Paper Program Documents and any letter of credit
application and reimbursement agreement executed and delivered by the Borrower
to First Bank in connection with the issuance of a Standby Letter of Credit as
provided in Section 2.9A, in all cases whether now existing or hereafter arising
or incurred.
"OTHER REVOLVING LOAN": As defined in Section 2.1.
"PBGC": The Pension Benefit Guaranty Corporation, established
pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to the
functions thereof.
"PERSON": Any natural person, corporation, partnership, joint
venture, firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether acting
in an individual, fiduciary or other capacity.
"PLACEMENT AGENT FEES": As defined in Section 2.16 (c).
"PLACEMENT AGENT LETTER AGREEMENT": The letter agreement dated April
29, 1993 between the Borrower and the FBS Capital Markets Group, a division of
First Bank (now FBS Investment Services, Inc., as assignee and successor), as
Placement Agent, as the same may be amended, modified or restated from time to
time.
"PLAN": Each employee benefit plan (whether in existence on the
Closing Date or thereafter instituted), as such term is defined in Section 3 of
ERISA, maintained for the benefit of employees, officers or directors of the
Borrower or of any ERISA Affiliate.
"PROHIBITED TRANSACTION": The respective meanings assigned to such
term in Section 4975 of the Code and Section 406 of ERISA.
"PROPERTIES": Any right or interest in or to property of any kind,
whether real, personal or mixed and whether tangible or intangible.
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"REFERENCE RATE": The rate of interest from time to time publicly
announced by the Agent as its "reference rate." The Agent may lend to its
customers at rates that are at, above or below the Reference Rate. For purposes
of determining any interest rate hereunder or under any other Loan Document
which is based on the Reference Rate, such interest rate shall change as and
when the Reference Rate shall change.
"REFERENCE RATE ADVANCE": An Advance with respect to which the
interest rate prior to maturity is determined by reference to the Reference
Rate.
"REGULATORY CHANGE": Any change after the Closing Date in federal,
state or foreign laws, regulations, guidelines or orders or the adoption or
making after such date of any interpretations, directives or requests applying
to a class of banks including any Bank under any federal, state or foreign laws,
regulations, guidelines or orders (whether or not having the force of law) by
any court or governmental or monetary authority charged with the interpretation
or administration thereof.
"REPORTABLE EVENT": A reportable event as defined in Section 4043 of
ERISA and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation has waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, PROVIDED that a failure to meet the minimum
funding standard of Section 412 of the Code and of Section 302 of ERISA shall be
a Reportable Event regardless of the issuance of any such waivers in accordance
with Section 412(d) of the Code.
"RESTRICTED PAYMENTS": With respect to the Borrower, collectively,
all dividends or other distributions of any nature (cash, securities other than
common stock of the Borrower, assets or otherwise), and all payments on any
class of equity securities (including warrants, options or rights therefor)
issued by the Borrower, whether such securities are authorized or outstanding on
the Closing Date or at any time thereafter and any redemption or purchase of, or
distribution in respect of, any of the foregoing, whether directly or
indirectly.
"REVOLVING COMMITMENT": With respect to a Bank, the agreement of such
Bank to make Revolving Loans to the Borrower in an aggregate principal amount
outstanding at any time not to exceed such Bank's Revolving Commitment Amount
upon the terms and subject to the conditions and limitations of this Agreement.
"REVOLVING COMMITMENT AMOUNT": With respect to a Bank, initially the
amount set opposite such Bank's name on Exhibit 1.1A hereto as its Revolving
Commitment Amount, but as the same may be from time to time reduced as provided
in Exhibit 1.1A and in Section 2.12.
"REVOLVING COMMITMENT ENDING DATE": As defined in Section 2.18.
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"REVOLVING COMMITMENT PERCENTAGE": With respect to any Bank, the
percentage equivalent of a fraction, the numerator of which is the Revolving
Commitment Amount of such Bank and the denominator of which is the Aggregate
Revolving Commitment Amounts.
"REVOLVING LOAN": As defined in Section 2.1.
"REVOLVING LOAN DATE": The date of the making of any Revolving Loans
hereunder.
"REVOLVING NOTE": A promissory note of the Borrower in the form of
Exhibit 1.1C hereto.
"REVOLVING OUTSTANDINGS": As of any date of determination with
respect to any Bank, the sum of (a) the aggregate unpaid principal balance of
Advances outstanding under such Bank's Note on such date, (b) an amount equal to
the aggregate amount of Commercial Paper Notes outstanding on such date
(including any Commercial Paper Notes issued prior to the Effective Date which
are outstanding on such date) multiplied by such Bank's Revolving Commitment
Percentage, (c) an amount equal to the aggregate stated amount of Standby
Letters of Credit outstanding on such date (including any Standby Letters of
Credit issued prior to the Effective Date which are outstanding on such date)
multiplied by such Bank's Revolving Commitment Percentage, and (d) an amount
equal to the aggregate amount of Unpaid Drawings on such date (after applying
any funds held in the Holding Account to the payment thereof) multiplied by such
Bank's Revolving Commitment Percentage.
"REVOLVING OUTSTANDINGS PERCENTAGE": As of any date of determination
with respect to any Bank, the percentage equivalent of a fraction the numerator
of which is the Revolving Outstandings of such Bank on such date and the
denominator of which is the Aggregate Revolving Outstandings on such date.
"STANDBY LETTER OF CREDIT": A standby letter of credit issued by
First Bank for the account of the Borrower pursuant to Sections 2.8A, 2.9A and
2.10A of this Agreement.
"STANDBY LETTER OF CREDIT SUBLIMIT": With respect to a Bank,
initially the amount set opposite such Bank's name on Exhibit 1.1A hereto as its
Standby Letter of Credit Sublimit, but as the same may be from time to time
reduced pursuant to Section 2.12.
"SUBORDINATED DEBT": Any Indebtedness of the Borrower or any
Subsidiary, now existing or hereafter created, incurred or arising, which is
subordinated in right of payment to the payment of the Obligations in a manner
and to an extent (a) that Majority Banks have approved in writing prior to the
creation of such Indebtedness, or (b) as to any Indebtedness of the Borrower or
any Subsidiary existing
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on the date of this Agreement, that Majority Banks have approved as
Subordinated Debt in a writing delivered by Majority Banks to the Borrower on
or prior to the Closing Date.
"SUBSIDIARY": Any corporation or other entity of which securities or
other ownership interests having ordinary voting power for the election of a
majority of the board of directors or other Persons performing similar functions
are owned by the Borrower either directly or through one or more Subsidiaries.
"SUMITOMO": As such term is defined in the opening paragraph hereof.
"TANGIBLE NET WORTH": As of any date of determination, the sum of the
amounts set forth on the consolidated balance sheet of the Borrower as the sum
of the common stock, preferred stock, additional paid-in capital, retained
earnings, unamortized cost of stock and foreign currency translation adjustments
of the Borrower (excluding treasury stock), LESS the book value of all assets of
the Borrower and its Subsidiaries that would be treated as intangibles under
GAAP, including all such items as goodwill, trademarks, trade names, service
marks, copyrights, patents, licenses, unamortized debt discount and expenses and
the excess of the purchase price of the assets of any business acquired by the
Borrower or any of its Subsidiaries over the book value of such assets.
"TERMINATION DATE": The earliest of (a) the Revolving Commitment
Ending Date, (b) the date on which the Revolving Commitments are terminated
pursuant to Section 7.2 hereof or (c) the date on which the Revolving Commitment
Amounts are reduced to zero pursuant to Section 2.12 hereof.
"TOTAL INDEBTEDNESS": At the time of any determination, the amount,
on a consolidated basis, of all Indebtedness of the Borrower and its
Subsidiaries as determined in accordance with GAAP.
"UNPAID DRAWING": As defined in Section 2.11.
"UNPAID DRAWING REPAYMENT LOAN": As defined in Section 2.1.
"UNUSED REVOLVING COMMITMENT": With respect to any Bank as of any
date of determination, the amount by which such Bank's Revolving Commitment
Amount exceeds such Bank's Revolving Outstandings on such date.
"UNUSED REVOLVING COMMITMENT FEES": As defined in Section 2.13.
Section 1.2 ACCOUNTING TERMS AND CALCULATIONS. Except as may be
expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder shall be made
in accordance with GAAP. To the extent any change in GAAP affects any
computation or determination required
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to be made pursuant to this Agreement, such computation or determination
shall be made as if such change in GAAP had not occurred unless the Borrower
and Majority Banks agree in writing on an adjustment to such computation or
determination to account for such change in GAAP.
Section 1.3 COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
unless otherwise stated the word "from" means "from and including" and the word
"to" or "until" each means "to but excluding".
Section 1.4 OTHER DEFINITIONAL TERMS. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References to Sections, Exhibits, schedules and like references are
to this Agreement unless otherwise expressly provided. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly
requires, "or" has the inclusive meaning represented by the phrase "and/or".
ARTICLE II
TERMS OF THE CREDIT FACILITIES
PART A -- TERMS OF LENDING
Section 2.1 THE REVOLVING COMMITMENTS; PURPOSES. On the terms and
subject to the conditions hereof, each Bank severally agrees to make loans
(each, a "Revolving Loan" and, collectively, the "Revolving Loans") to the
Borrower on a revolving basis at any time and from time to time from the Closing
Date to the Termination Date, during which period the Borrower may borrow, repay
and reborrow in accordance with the provisions hereof, PROVIDED, that no
Revolving Loan will be made in any amount which, after giving effect thereto,
would cause the Aggregate Revolving Outstandings to exceed the Aggregate
Revolving Commitment Amounts. Revolving Loans hereunder shall be made by the
several Banks ratably in the proportion of their respective Revolving Commitment
Amounts. Revolving Loans may be obtained and maintained, at the election of the
Borrower but subject to the limitations hereof, as Reference Rate Advances,
Eurodollar Rate Advances or CD Rate Advances or any combination thereof. The
proceeds of the Revolving Loans shall be used for (i) repayment to First Bank of
Unpaid Drawings (any such Revolving Loan being also referred to herein as an
"Unpaid Drawing Repayment Loan") and (ii) other general corporate purposes of
the Borrower, including, without limitation, repayment of Indebtedness of the
Borrower to First Bank described in Schedule 6.11 hereto (any such Revolving
Loan being also referred to herein as an "Other Revolving Loan").
Section 2.2 PROCEDURE FOR REVOLVING LOANS.
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2.2(a) Any request by the Borrower for Revolving Loans hereunder
shall be in writing, or by telephone promptly confirmed in writing or by
facsimile transmission, and must be given so as to be received by the Agent not
later than 12:00 noon (Minneapolis time) three Eurodollar Business Days prior to
the requested Revolving Loan Date (which shall be a Eurodollar Business Day) if
the Revolving Loans are requested as Eurodollar Rate Advances and not later than
12:00 noon (Minneapolis time) on the requested Revolving Loan Date (which shall
be a Business Day) if the Revolving Loans are requested as CD Rate Advances or
Reference Rate Advances. Each request for Revolving Loans hereunder shall be
irrevocable and shall be deemed a representation by the Borrower that on the
requested Revolving Loan Date and after giving effect to the requested Revolving
Loans the applicable conditions specified in Article III have been and will be
satisfied. Each request for Revolving Loans hereunder shall specify (i) the
requested Revolving Loan Date, (ii) the aggregate amount of Revolving Loans to
be made on such date, which shall be in a minimum amount of $300,000 ($200,000,
in the case of a Revolving Loan which is to be funded as a Reference Rate
Advance) or, if more, an integral multiple of $100,000, (iii) whether such
Revolving Loans are to be funded as Reference Rate Advances, Eurodollar Rate
Advances or CD Rate Advances, (iv) in the case of CD Rate Advances and
Eurodollar Rate Advances, the duration of the initial Interest Period applicable
thereto, and (v) if such Revolving Loans are to be Unpaid Drawing Repayment
Loans, the Unpaid Drawing or Unpaid Drawings which are to be repaid with the
proceeds of such Unpaid Drawing Repayment Loans. Without in any way limiting
the Borrower's obligation to confirm in writing any telephone request for
Revolving Loans hereunder, the Agent may rely on any such request which it
believes in good faith to be genuine; and the Borrower hereby waives the right
to dispute the Agent's record of the terms of such telephone request, absent
gross negligence or willful misconduct on the part of the Agent. The Agent
shall promptly notify each other Bank of the receipt of such request, the
matters specified therein, and of such Bank's ratable share (based on such
Bank's Revolving Commitment Percentage) of the requested Revolving Loans. On
the date of the requested Revolving Loans, each Bank shall provide its share of
the requested Revolving Loans to the Agent in Immediately Available Funds not
later than 4:00 P.M., Minneapolis time. Unless the Agent determines that any
applicable condition specified in Article III has not been satisfied, the Agent
will make available to the Borrower at the Agent's principal office in
Minneapolis, Minnesota in Immediately Available Funds not later than 5:00 P..M.
(Minneapolis time) on the requested Revolving Loan Date the amount of the
requested Revolving Loans. If the Agent has made a Revolving Loan to the
Borrower on behalf of a Bank but has not received the amount of such Revolving
Loan from such Bank by the time herein required, such Bank shall pay interest to
the Agent on the amount so advanced at the Federal Funds Rate from the date of
such Revolving Loan to the date funds are received by the Agent from such Bank,
such interest to be payable with such remittance from such Bank of the principal
amount of such Revolving Loan (provided, however, that the Agent shall not make
any Revolving Loan on behalf of a Bank if the Agent has received prior notice
from such Bank that it will not make such Revolving Loan). If the Agent does
not receive payment from such Bank by the next Business Day
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after the date of any Revolving Loan, the Agent shall be entitled to recover
such Revolving Loan, with interest thereon at the rate then applicable to
such Revolving Loan, on demand, from the Borrower, without prejudice to the
Agent's and the Borrower's rights against such Bank. If such Bank pays the
Agent the amount herein required with interest at the overnight Federal Funds
rate before the Agent has recovered from the Borrower, such Bank shall be
entitled to the interest payable by the Borrower with respect to the
Revolving Loan in question accruing from the date the Agent made such
Revolving Loan. The Borrower shall provide to the Agent each Business Day,
by not later than 4:00 P.M. (Minneapolis time) on such Business Day, a
reconciliation in writing or by telecopier showing (i) the total amount of
Revolving Loans on such day, (ii) whether such Revolving Loans constituted
Unpaid Drawing Repayment Loans or the Other Revolving Loans and the amounts
thereof, and (iii) in the case of Unpaid Drawing Repayment Loans, the Unpaid
Drawing or Unpaid Drawings repaid with the proceeds of such Unpaid Drawing
Repayment Loans. The Agent shall provide copies of such reconciliation to
the Banks on a monthly basis.
2.2(b) Whenever any Unpaid Drawing exists for which there are not
then funds in the Holding Account to cover the same and with respect to which
the Agent has not otherwise received a request from the Borrower for Unpaid
Drawing Repayment Loans pursuant to Section 2.2(a), the Borrower shall
nevertheless, be deemed to have requested the Banks to make Unpaid Drawing
Repayment Loans to pay such Unpaid Drawing and the Agent shall give the other
Banks notice to that effect, specifying the amount of such Unpaid Drawing and
the amount of the Unpaid Drawing Repayment Loan to be made by such Bank with
respect thereto, in which event each Bank is authorized (and the Borrower does
here so authorize each Bank) to, and shall, make an Unpaid Drawing Repayment
Loan (as a Reference Rate Advance) to the Borrower in an amount equal to such
Bank's Revolving Commitment Percentage of the balance of the Unpaid Drawing
which remains unpaid after applying any funds in the Holding Account to the
payment thereof. The Agent shall notify each Bank by 1:00 P.M. (Minneapolis
time) on the date such Unpaid Drawing occurs of the amount of the Unpaid Drawing
Repayment Loan to be made by such Bank. Notices received after such time shall
be deemed to have been received on the next Business Day. Each Bank shall then
make such Unpaid Drawing Repayment Loan (regardless of noncompliance with the
applicable conditions precedent specified in Article III hereof and regardless
of whether an Event of Default then exists) and each Bank shall provide the
Agent with the proceeds of such Unpaid Drawing Repayment Loan in Immediately
Available Funds, at the office of the Agent, not later than 4:00 P.M.
(Minneapolis time) on the day on which such Bank received such notice (or, in
the case of notices received after 1:00 P.M., Minneapolis time, is deemed to
have received such notice). The Agent shall apply the proceeds of such Unpaid
Drawing Repayment Loans directly to reimburse itself for such Unpaid Drawing.
If any portion of any such amount paid to the Agent is recovered by or on behalf
of the Borrower from the Agent in bankruptcy, by assignment for the benefit of
creditors or otherwise, the loss of the amount so recovered shall be ratably
shared between and among the Banks in the manner contemplated by Section 8.11
hereof. If at the time the Banks make funds available to the Agent pursuant to
the
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provisions of this Section, the applicable conditions precedent specified in
Article III shall not have been satisfied, the Borrower shall pay to the Agent
for the account of the Banks interest on the funds so advanced at a floating
rate per annum equal to the sum of the Reference Rate plus the Applicable Margin
for Reference Rate Advances plus one percent (1.00%).
Section 2.3 REVOLVING NOTES. The Revolving Loans and Advances of each
Bank shall be evidenced by a single Revolving Note payable to the order of such
Bank in a principal amount equal to such Bank's Revolving Commitment Amount
originally in effect. Upon receipt of each Bank's Revolving Note from the
Borrower, the Agent shall mail such Revolving Note to such Bank. Each Bank
shall enter in its ledgers and records the amount of each Revolving Loan, the
various Advances made, converted or continued and the payments made thereon, and
each Bank is authorized by the Borrower to enter on a schedule attached to its
Revolving Note a record of such Revolving Loans, Advances and payments;
provided, however that the failure by any Bank to make any such entry or any
error in making such entry shall not limit or otherwise affect the obligation of
the Borrower hereunder and on the Revolving Notes, and, in all events, the
principal amounts owing by the Borrower in respect of the Revolving Notes shall
be the aggregate amount of all Revolving Loans made by the Banks less all
payments of principal thereof made by the Borrower.
Section 2.4 CONVERSIONS AND CONTINUATIONS. On the terms and subject to
the limitations hereof, the Borrower shall have the option at any time and from
time to time to convert all or any portion of the Advances into Reference Rate
Advances, Eurodollar Rate Advances or CD Rate Advances, or to continue a
Eurodollar Rate Advance or CD Rate Advance as such; provided, however that a
Eurodollar Rate Advance or a CD Rate Advance may be converted or continued only
on the last day of the Interest Period applicable thereto and no Advance may be
converted to or continued as a Eurodollar Rate Advance or a CD Rate Advance if a
Default or an Event of Default has occurred and is continuing on the proposed
date of continuation or conversion. Advances may be converted to, or continued
as, Eurodollar Rate Advances or CD Rate Advances only in an amount, as to the
aggregate amount of the Advances of all Banks so converted or continued, equal
to $300,000 or an integral multiple of $100,000 in excess thereof. The Borrower
shall give the Agent written notice of any continuation or conversion of any
Advances and such notice must be given so as to be received by the Agent not
later than 12:30 P.M. (Minneapolis time) three Eurodollar Business Days prior to
the date of the requested date of conversion or continuation in the case of the
continuation of, or conversion to, Eurodollar Rate Advances and not later than
12:30 p.m. (Minneapolis time) on the date of the requested continuation of CD
Rate Advances or conversion to CD Rate Advances or Reference Rate Advances.
Each such notice shall specify (a) the amount to be continued or converted, (b)
the date for the continuation or conversion (which must be (i) the last day of
the current Interest Period for any continuation or conversion of Eurodollar
Rate Advances or CD Rate Advances, (ii) a Eurodollar Business Day in the case of
conversions to or continuations as Eurodollar Rate Advances, and (iii) a
Business Day in the case of continuations as CD Rate Advances or
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conversions to CD Rate Advances or Reference Rate Advances), and (c) in the
case of conversions to or continuations as Eurodollar Rate Advances or CD
Rate Advances, the Interest Period applicable thereto. Any notice given by
the Borrower under this Section shall be irrevocable. If the Borrower shall
fail to notify the Agent of the continuation of any Eurodollar Rate Advance
or CD Rate Advances within the time required by this Section, such Advances
shall, on the last day of the Interest Period applicable thereto,
automatically be converted into Reference Rate Advances of the same principal
amount. All conversions and continuation of specific Advances must be made
uniformly and ratably among the Banks. (E.G., when converting a 60-day CD
Rate Advance of one Bank to a three-month Eurodollar Rate Advance, the
Borrower must simultaneously convert all 60-day CD Rate Advances of all Banks
having Interest Periods ending on the date of conversion into three-month
Eurodollar Rate Advances.)
Section 2.5 INTEREST RATES, INTEREST PAYMENTS AND DEFAULT INTEREST.
Interest shall accrue and be payable on the Advances as follows:
2.5(a) Each Eurodollar Rate Advance shall bear interest on the
unpaid principal amount thereof during the Interest Period applicable thereto at
a rate per annum equal to the sum of (i) the Adjusted Eurodollar Rate for such
Interest Period, plus (ii) the Applicable Margin
2.5(b) Each CD Rate Advance shall bear interest on the unpaid
principal amount thereof during the Interest Period applicable thereto at a rate
per annum equal to the sum of (i) the Adjusted CD Rate for such Interest Period,
plus (ii) the Applicable Margin.
2.5(c) Each Reference Rate Advance shall bear interest on the
unpaid principal amount thereof at a varying rate per annum equal to the sum of
(i) the Reference Rate, plus (ii) the Applicable Margin.
2.5(d) Any Advance not paid when due, whether at the date scheduled
therefor or earlier upon acceleration, shall bear interest until paid in full
(i) during the balance of any Interest Period applicable to such Advance, at a
rate per annum equal to the sum of the rate applicable to such Advance during
such Interest Period plus 1.0%, and (ii) otherwise, at a rate per annum equal to
the sum of (A) the Reference Rate, plus (B) the Applicable Margin for Reference
Rate Advances, plus (C) 1.0%.
2.5(e) Interest shall be payable (i) with respect to each
Eurodollar Rate Advance having an Interest Period of three months or less and
any CD Rate Advance having an Interest Period of 90 days or less, on the last
day of the Interest Period applicable thereto; (ii) with respect to any
Eurodollar Rate Advance having an Interest Period greater than three months and
any CD Rate Advance having an Interest Period greater than 90 days, on the last
day of the Interest Period applicable thereto and on each day that would have
been the last day of the Interest Period for such Advance if such Advance had
successive Interest Periods of three months duration or 90 days
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duration, as the case may be; (iii) with respect to any Reference Rate
Advance, on the last day of each month; (iv) with respect to any Eurodollar
Rate Advance or CD Rate Advance, upon any permitted prepayment (on the amount
prepaid); and (v) with respect to all Advances, on the Termination Date;
PROVIDED, that interest under Section 2.5 (d) shall be payable on demand.
Section 2.6 REPAYMENT. The unpaid principal amount of all Advances,
together with all accrued and unpaid interest thereon, shall be due and payable
on the Termination Date. In addition, if at any time the Aggregate Revolving
Outstandings exceeds the Aggregate Revolving Commitment Amounts, the Borrower
shall prepay the Revolving Notes in an aggregate amount equal to such excess,
which prepayment shall be apportioned among the Bank's Revolving Notes in
accordance with their respective Revolving Outstandings Percentages.
Section 2.7 OPTIONAL PREPAYMENTS. The Borrower may prepay Reference
Rate Advances, in whole or in part, at any time, without premium or penalty.
Except upon an acceleration following an Event of Default or upon termination of
the Revolving Commitments in whole, the Borrower may pay Eurodollar Rate
Advances and CD Rate Advances only on the last day of the Interest Period
applicable thereto. Any such prepayment must, in the case of a Eurodollar Rate
Advance or a CD Rate Advance, be accompanied by accrued and unpaid interest on
the amount prepaid. Each prepayment shall be in an aggregate amount for all the
Banks of $300,000 ($200,000, in the case of a Reference Rate Advance) or an
integral multiple of $100,000 in excess thereof. Amounts paid (unless following
an acceleration or upon termination of the Revolving Commitments in whole) or
prepaid on Advances under this Section 2.7 may be reborrowed upon the terms and
subject to the conditions and limitations of this Agreement. Amounts paid or
prepaid on the Advances under this Section 2.7 shall be for the account of each
Bank in proportion to its share of outstanding Revolving Loans.
PART B -- TERMS OF THE COMMERCIAL PAPER FACILITY
AND STANDBY LETTER OF CREDIT FACILITY
Section 2.8 COMMERCIAL PAPER NOTES. The Borrower may issue Commercial
Paper Notes, either as Commercial Paper Notes (Unrated) or Commercial Paper
Notes (Midwest), or both, and if Commercial Paper Notes (Midwest) are to be
issued, the Borrower and First Bank will enter into such agreements and execute
such other documents as are necessary for the Borrower to be included as a
"Company" under the Commercial Paper Program Documents and to issue Commercial
Paper Notes (Midwest) thereunder; provided, HOWEVER, that:
(a) No Commercial Paper Note shall be issued by the Company in
any amount which, after giving effect thereto, would cause either (i) the
Aggregate Revolving Outstandings to exceed the Aggregate Revolving
Commitment Amounts or (ii) the sum of the Unpaid Drawings under the
Commercial Paper Letter of Credit plus the aggregate face amount of all
outstanding Commercial
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Paper Notes (including such Commercial Paper Note) to exceed the Aggregate
Commercial Paper Sublimits;
(b) No Commercial Paper Note shall have an original principal
amount of less than $300,000; and
(c) No Commercial Paper Note shall mature later than the
earlier of (i) 270 days from the date of issuance thereof and (ii) the
Business Day preceding the Revolving Commitment Ending Date.
Section 2.8A STANDBY LETTERS OF CREDIT. Upon the terms and subject to
the conditions of this Agreement, the Agent agrees to issue Standby Letters of
Credit for the account of the Borrower from time to time prior to the
Termination Date in such amounts as the Borrower shall request up to an
aggregate amount at any time outstanding not exceeding the Aggregate Revolving
Commitment Amounts; PROVIDED, HOWEVER, that:
(a) No Standby Letter of Credit will be issued in any amount
which, after giving effect to such issuance, would cause either (i) the
Aggregate Revolving Outstandings to exceed the Aggregate Revolving
Commitment Amounts or (ii) the sum of the Unpaid Drawings under the
Standby Letters of Credit plus the aggregate amount available to be drawn
under the Standby Letters of Credit (including such Standby Letter of
Credit) to exceed the Aggregate Standby Letter of Credit Sublimits;
(b) No Standby Letter of Credit shall have a stated available
amount of less than $50,000; and
(c) No Standby Letter of Credit shall expire later than the
earlier of (i) 365 days after the date of issuance thereof and (b) the
Business Day preceding the Revolving Commitment Ending Date.
Section 2.9 PROCEDURES FOR ISSUANCE OF COMMERCIAL PAPER NOTES. The
procedures for the issuance of Commercial Paper Notes (Midwest) shall be as set
forth in the Commercial Paper Program Documents. In the event the Borrower
issues Commercial Paper Notes (Unrated), it shall notify the Agent, in writing,
by telex, facsimile transmission or electronic conveyance received by the Agent
no later than the date of issuance of said Commercial Paper Notes. Such notice
shall set forth the aggregate face amount of said Commercial Paper Notes, the
date of issuance and the maturity date or dates thereof, and the giving of such
notice shall be deemed to be a representation by the Borrower that on the date
of issuance of such Commercial Paper Notes and after giving effect thereto the
applicable conditions specified in this Credit Agreement have been and will be
satisfied.
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Section 2.9A PROCEDURES FOR STANDBY LETTERS OF CREDIT. Each request for
a Standby Letter of Credit shall be made by the Borrower in writing, by telex,
facsimile transmission or electronic conveyance received by the Agent by 2:00
P.M., Minneapolis time, on a Business Day which is not less than one Business
Day preceding the requested date of issuance (which shall also be a Business
Day). Each request for a Standby Letter of Credit shall be deemed a
representation by the Borrower that on the date of issuance of such Standby
Letter of Credit and after giving effect thereto the applicable conditions
specified in Article III have been and will be satisfied. The Agent may require
that such request be made on such letter of credit application and reimbursement
agreement form as the Agent may from time to time specify, along with
satisfactory evidence of the authority and incumbency of the officers of the
Borrower making such request. The Agent shall promptly notify the other Banks
of the receipt of the request and the matters specified therein. On the date of
each issuance of a Standby Letter of Credit the Agent shall send notice to the
other Banks of such issuance, accompanied by a copy of the Standby Letter or
Letters of Credit so issued.
Section 2.10 TERMS OF COMMERCIAL PAPER NOTES. The terms of the
Commercial Paper Notes (Midwest) shall be as set forth in the Commercial Paper
Program Documents and Section 2.8 hereof. The terms of Commercial Paper Notes
(Unrated) shall be as set forth in Section 2.8 hereof.
Section 2.10A TERMS OF STANDBY LETTERS OF CREDIT. Standby Letters of
Credit shall be issued in support of obligations of the Borrower and the
Subsidiaries.
Section 2.11 REPAYMENT OF COMMERCIAL PAPER LETTER OF CREDIT AND STANDBY
LETTER OF CREDIT DRAWINGS; BANK PARTICIPATIONS.
2.11(a) REPAYMENT. In the event of a drawing under the Commercial
Paper Letter of Credit to pay any amount due under any Commercial Paper Note,
the Borrower shall be obligated to reimburse First Bank for such drawing in
accordance with the Commercial Paper Program Documents, and in the event of any
drawing on a Standby Letter of Credit, the Borrower shall reimburse First Bank
for such drawing by 12:00 noon (Minneapolis time) on the day such drawing is
honored by First Bank. Any amount by which the Borrower has failed to reimburse
First Bank for the full amount of such drawing under the Commercial Paper Letter
of Credit or any Standby Letter of Credit by 12:00 noon (Minneapolis time) on
the date First Bank honored such drawing, until reimbursed from the proceeds of
Unpaid Drawing Repayment Loans or out of funds available in the Holding Account,
is an "Unpaid Drawing."
2.11(b) PARTICIPATIONS. Each Bank hereby purchases, and First Bank
hereby sells to each Bank, an undivided fractional risk participation interest,
equal to such Bank's Revolving Percentage, in First Bank's obligations with
respect to that portion of the Commercial Paper Letter of Credit which is
available to be drawn in respect of Commercial Paper Notes, in each Standby
Letter of Credit, in all drawings (including Unpaid Drawings) made and honored
under the Commercial Paper Letter of Credit
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with respect to the Commercial Paper Notes issued by the Borrower under the
Commercial Paper Program, in all drawings (including Unpaid Drawings) made
and honored under any Standby Letters of Credit, in First Bank's
reimbursement rights with respect to drawings (including Unpaid Drawings)
made and honored under the Commercial Paper Letter of Credit (as set forth in
the Commercial Paper Program Documents), and in First Bank's reimbursement
rights with respect to drawings (including Unpaid Drawings) made and honored
under any Standby Letter of Credit (as set forth herein and in any letter of
credit application and reimbursement agreement form executed by the Borrower
in favor of First Bank in connection with the issuance of such Standby Letter
of Credit). Upon receipt of the notice given by the Agent pursuant to Section
2.2(b) hereof, each Bank shall pay to First Bank its pro rata share, based on
its Revolving Commitment Percentage, of any Unpaid Drawing, less the amount,
if any, of the Unpaid Drawing Repayment Loan made by such Bank with respect
to such Unpaid Drawing, by not later than 3:00 p.m. (Minneapolis time) on the
day on which such Bank received such notice (or, in the case of notices
received after 1:00 p.m., Minneapolis time, is deemed to have received such
notice). If First Bank has not received such participation payment from such
Bank by the time required in the preceding sentence such Bank shall pay
interest to First Bank at the Federal Funds Rate on the amount of such
participation payment from the date on which such notice was received or was
deemed to have been received, as the case may be, to the date such
participation payment is received by First Bank, such interest to be payable
with the remittance of such participation payment by such Bank. If First
Bank does not receive such participation payment from such Bank by the next
Business Day after the date such notice was given (or was deemed given) by
First Bank to such Bank, First Bank shall be entitled to receive interest on
such participation payment at the Federal Funds Rate, without prejudice to
First Bank's rights against such Bank. The obligations of each Bank to make
payment to First Bank of such Bank's participation payments with respect to
Unpaid Drawings pursuant to this Section 2.11(b), and First Bank's right to
receive the same, shall be absolute and unconditional under any and all
circumstances and irrespective of any rights of setoff, counterclaim,
withholding, reduction or other defense to payment which any Bank may have or
have had against First Bank, the Borrower or any other Person.
2.11(c) INDEMNIFICATION OF FIRST BANK. To the extent that First
Bank is not reimbursed or indemnified by the Borrower or to the extent that any
amounts so received by First Bank are required to be returned to the Borrower or
any statutory representative of the Borrower for any reason whatsoever, each
other Bank will reimburse and indemnify First Bank on demand for and against its
pro rata share, based on its Revolving Commitment Percentage, of the amount of
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed upon, incurred by or asserted against First Bank
in its capacity as such, acting pursuant hereto or in any way relating to or
arising out of this Agreement, the Commercial Paper Letter of Credit, the
Standby Letters of Credit, or any action taken or omitted to be taken by First
Bank under this Agreement, the Commercial Paper Letter of Credit or the Standby
Letters of
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Credit, including, without limitation, any amounts (herein called
"DISGORGEMENT AMOUNTS") received by First Bank from or on behalf of the
Borrower in reimbursement of an Unpaid Drawing which are rescinded in whole
or in part or which First Bank may be otherwise required to pay or repay in
whole or in part to the Borrower, any statutory representative of the
Borrower or creditors of the Borrower acting as such statutory
representative; PROVIDED, HOWEVER, that except with respect to Disgorgement
Amounts, as to which the liability of each Bank to reimbursement and
indemnify First Bank in accordance with its Revolving Commitment Percentage
shall be absolute and unconditional under all circumstances whatsoever, no
other Bank shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from First Bank's own gross negligence or willful
misconduct. The obligations of the Banks to First Bank under this Section
2.11(c) shall survive the termination of this Agreement and the expiration of
the Letter or Credit and the Standby Letters of Credit. Nothing in this
Section 2.11(c) shall be deemed to prejudice the right of any Bank to recover
from First Bank any amounts paid by such Bank to First Bank pursuant to this
Section 2.11(c) in the event that it is determined by a court of competent
jurisdiction that the payment with respect to the Commercial Paper Letter of
Credit or any Standby Letter of Credit by First Bank, in respect of which
payment was made by such Bank, constituted gross negligence or willful
misconduct on the part of First Bank.
.
PART C -- GENERAL
Section 2.12 OPTIONAL REDUCTION OF REVOLVING COMMITMENT AMOUNTS OR
TERMINATION OF REVOLVING COMMITMENTS. The Borrower may, at any time, upon
not less than three Business Days prior written notice to the Agent, reduce
the Revolving Commitment Amounts, ratably, with any such reduction in a
minimum aggregate amount for all the Banks of $1,000,000, or, if more, in an
integral multiple of $500,000; PROVIDED, HOWEVER, that the Borrower may not
at any time reduce the Aggregate Revolving Commitment Amounts below the
Aggregate Revolving Outstandings. If the Revolving Commitment Amounts are
reduced to amounts less than the Commercial Paper Sublimits and/or the
Standby Letter of Credit Sublimits, then each such Sublimit of each Bank
shall be reduced to such lesser Revolving Commitment Amount of such Bank.
The Borrower may, at any time when there are no Commercial Paper Notes or
Standby Letters of Credit outstanding, upon not less than three Business Days
prior written notice to the Agent, terminate the Revolving Commitments in
their entirety. Upon termination of the Revolving Commitments pursuant to
this Section, the Borrower shall pay to the Agent for the account of the
Banks the full amount of all outstanding Advances, all accrued and unpaid
interest thereon, all unpaid Unused Revolving Commitment Fees accrued to the
date of such termination, any indemnities payable with respect to Advances
pursuant to Section 2.24 and all other unpaid obligations of the Borrower to
the Agent and the Banks hereunder.
Section 2.13 UNUSED REVOLVING COMMITMENT FEES. The Borrower shall pay to
the Agent for the account of each Bank fees (the "Unused Revolving Commitment
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Fees") in an amount determined by applying a rate of one-fourth of one percent
(0.25%) per annum to the average daily Unused Revolving Commitment of such Bank
for the period from the Closing Date to the Termination Date; provided, however,
that for purposes of calculating the Unused Revolving Commitment Fees,
"Revolving Outstandings" shall not include any outstanding Commercial Paper
Notes (Unrated). Such Unused Revolving Commitment Fees are payable in arrears
on each January 31, April 30, July 31 and October 31 and on the Termination
Date.
Section 2.14 LETTER OF CREDIT FEES. The Borrower shall pay to the
Agent, for the account of the Banks, fees (collectively, "Letter of Credit
Fees") with respect to the Commercial Paper Program and the Standby Letters of
Credit, determined as follows:
2.14(a) The Company shall pay quarterly in arrears on the last day
of each calendar quarter and on the Termination Date, a Letter of Credit Fee in
an amount determined by applying a per annum rate of 1.00% to the average daily
aggregate principal amount of Commercial Paper Notes (Midwest) issued by the
Borrower and outstanding under the Commercial Paper Program, all as more
specifically set forth in the Commercial Paper Program Documents.
2.14(b) For each Standby Letter of Credit issued, the Company shall
pay in advance, on the date of issuance thereof and on the date of any extension
thereof, a Letter of Credit Fee in an amount determined by applying a rate per
annum of 1.00% to the face amount of the Standby Letter of Credit in effect as
of such date of issuance or extension; PROVIDED, HOWEVER, that in the case of a
Standby Letter of Credit issued for the benefit of Bank of Montreal, the Letter
of Credit Fee shall be calculated at the rate of 1.00% per annum on an amount
equal to the face amount thereof multiplied by the sum of First Bank's and
Sumitomo's Revolving Commitment Percentage (which shall be the amount payable to
First Bank and Sumitomo) and at the rate of 0.75% per annum on an amount equal
to the face amount thereof multiplied by Harris' Revolving Commitment Percentage
(which shall be the amount payable to Harris).
2.14(c) In addition to the foregoing Letter of Credit Fees, the
Company shall pay to First Bank on demand, all issuance, amendment, drawing and
other fees regularly charged by First Bank to its letter of credit customers and
all out-of-pocket expenses incurred by First Bank in connection with the
issuance, amendment, administration or payment of any Standby Letter of Credit.
Such fees and payments shall be retained by First Bank for its own account.
Section 2.15 COMPUTATION. Unused Revolving Commitment Fees and interest
on Advances shall be computed on the basis of actual days elapsed and a year of
360 days.
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Section 2.16 AGENT FEE, FIRST BANK FEES AND PLACEMENT AGENT FEES.
2.16(a) The Borrower shall pay to the Agent, for its separate
account, fees ("Agent Fees") as provided for in a separate letter agreement
between the Borrower and the Agent.
2.16(b) The Borrower shall pay to First Bank, for its separate
account, fees ("First Bank Fees") as provided for in the Commercial Paper
Program Documents.
2.16(c) The Company shall pay to the Placement Agent under the
Commercial Paper Program, for its separate account, fees ("Placement Agent
Fees") as provided for in the Commercial Paper Program Documents.
Section 2.17 PAYMENTS. Payments and prepayments of principal of, and
interest on, the Revolving Notes and all fees, expenses and other obligations
under this Agreement payable to the Agent or the Banks shall be made without
setoff or counterclaim in Immediately Available Funds not later than 1:00 P.M.
(Minneapolis time) on the dates called for under this Agreement and the Notes to
the Agent at its main office in Minneapolis, Minnesota. Funds received after
such time shall be deemed to have been received on the next Business Day. The
Agent will promptly distribute in like funds to each Bank its ratable share of
each such payment of principal, interest, Unused Revolving Commitment Fees and
Letter of Credit Fees received by the Agent for the account of the Banks.
Whenever any payment to be made hereunder or on the Revolving Notes shall be
stated to be due on a day which is not a Business Day, such payment shall be
made on the next succeeding Business Day and such extension of time, in the case
of a payment of principal, shall be included in the computation of any interest
on such principal payment.
Section 2.18 REVOLVING COMMITMENT ENDING DATE AND EXTENSION. The
"Revolving Commitment Ending Date" is July 31, 1999; PROVIDED, HOWEVER, that if
the Borrower by written notice given to the Agent at least 90 days but not more
than 120 days prior to the Revolving Commitment Ending Date requests in writing
an extension of the Revolving Commitment Ending Date for an additional period of
365 days and if each Bank, in its sole and absolute discretion and based on such
review of the Borrower's financial performance and condition and such other
factors as such Bank considers relevant (which may include, without limitation,
future loan policies and other policies adopted by such Bank unrelated to the
Borrower's financial condition), consents in writing to such extension, then the
Revolving Commitment Ending Date shall be extended for such additional period of
time, and in such extended 365-day period the Borrower may repeat its request
within the same time limit and if each Bank consents the Revolving Commitment
Ending Date shall be further extended for an additional period of 365 days. In
the case of any such extension, the "Revolving Commitment Ending Date" shall be
the last day of the 365-day period to which such extension has been granted. No
Bank shall be under any obligation or
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commitment to extend the Revolving Commitment Ending Date, and no such
obligation or commitment on the part of any Bank should be inferred from the
provisions of this Section.
Section 2.19 USE OF LOAN PROCEEDS. The proceeds of the initial Revolving
Loans shall be used first to pay the obligations of the Borrower outstanding
under the Existing Loan Documents. Any remaining balance of the initial
Revolving Loans and the proceeds of any subsequent Revolving Loans shall be used
for the Borrower's general business purposes in a manner not in conflict with
any of the Borrower's covenants in this Agreement. No part of the proceeds of
any Revolving Loans or Advances shall be used, directly or indirectly, to
purchase or carry any margin stock (as defined in Regulation U of the Board) or
to extend credit to others for the purpose of purchasing or carrying such margin
stock.
Section 2.20 INTEREST RATE NOT ASCERTAINABLE, ETC. If, on or prior to
the date for determining the Adjusted Eurodollar Rate or the Adjusted CD Rate in
respect of the Interest Period for any Eurodollar Rate Advance or CD Rate
Advance, any Bank determines (which determination shall be conclusive and
binding, absent error) that:
(a) deposits in dollars (in the applicable amount) are not
being made available to such Bank in the relevant market for such Interest
Period, or
(b) the Adjusted Eurodollar Rate or the Adjusted CD Rate, as the
case may be, will not adequately and fairly reflect the cost to such Bank
of funding or maintaining Eurodollar Rate Advances or CD Rate Advances for
such Interest Period,
such Bank shall forthwith give notice to the Borrower and the other Banks of
such determination, whereupon the obligation of such Bank to make or continue,
or to convert any Advances to, Eurodollar Rate Advances or CD Rate Advances, as
the case may be, shall be suspended until such Bank notifies the Borrower and
the Agent that the circumstances giving rise to such suspension no longer exist.
While any such suspension continues, all further Advances by such Bank shall be
made as Reference Rate Advances. No such suspension shall affect the interest
rate then in effect during the applicable Interest Period for any Eurodollar
Rate Advance or CD Rate Advance outstanding at the time such suspension is
imposed.
Section 2.21 INCREASED COST. If any Regulatory Change:
(a) shall subject any Bank (or its Applicable Lending Office)
to any tax, duty or other charge with respect to its Eurodollar Rate
Advances, its CD Rate Advances, its Revolving Note, its obligation to make
Eurodollar Rate Advances or CD Rate Advances or shall change the basis of
taxation of payment to any Bank (or its Applicable Lending Office) of the
principal of or interest on its Eurodollar Rate Advances or CD Rate
Advances or any other amounts due under this Agreement in respect of its
Eurodollar Rate Advances, its CD Rate
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Advances or its obligation to make Eurodollar Rate Advances or CD Rate
Advances (except for changes in the rate of tax on the overall net income
of such Bank or its Applicable Lending Office imposed by the jurisdiction
in which such Bank's principal office or Applicable Lending Office is
located); or
(b) shall impose, modify or deem applicable any reserve, special
deposit, capital requirement or similar requirement (including, without
limitation, any such requirement imposed by the Board, but excluding with
respect to any Eurodollar Rate Advances or CD Rate Advance any such
requirement to the extent included in calculating the applicable Adjusted
Eurodollar Rate or Adjusted CD Rate, as the case may be) against assets of,
deposits with or for the account of, or credit extended by, any Bank's
Applicable Lending Office or shall impose on any Bank (or its Applicable
Lending Office) or on the United States market for certificates of deposit
any other condition affecting its Eurodollar Rate Advances, its CD Rate
Advances, its Revolving Note or its obligation to make Eurodollar Rate
Advances or CD Rate Advances;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Eurodollar Rate
Advance or CD Rate Advance, or to reduce the amount of any sum received or
receivable by such Bank (or its Applicable Lending Office) under this Agreement
or under its Revolving Note, then, within 60 days after demand by such Bank
(with a copy to the Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such increased cost or
reduction. Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section, setting forth the additional amount or
amounts to be paid to it hereunder and stating in reasonable detail the basis
for the charge and the method of computation, shall be conclusive in the absence
of manifest error. In determining such amount, any Bank may use any reasonable
averaging and attribution methods. Failure on the part of any Bank to demand
compensation for any increased costs or reduction in amounts received or
receivable with respect to any Interest Period shall not constitute a waiver of
such Bank's rights to demand compensation for any increased costs or reduction
in amounts received or receivable in any subsequent Interest Period.
Each Bank shall also be entitled to receive compensation, to the
extent provided for in the Commercial Paper Program Documents, for its increased
costs relating to its participation in the Commercial Paper Letter of Credit
which may result from any Regulatory Change. The Borrower hereby agrees that
First Bank shall be entitled to recover such costs on behalf of itself and each
other Bank under the Commercial Paper Program Documents.
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If any Regulatory Change shall either (a) impose, modify or make
applicable any reserve, deposit, capital adequacy or similar requirement against
Standby Letters of Credit issued by First Bank or any Bank's obligations to make
Unpaid Drawing Repayment Loans or purchase participations in Unpaid Drawings, or
(b) shall impose on any Bank any other conditions affecting this Agreement or
any Standby Letter of Credit; and the result of any of the foregoing is to
increase the cost to First Bank or any other Bank of issuing or maintaining any
Standby Letter of Credit or such Bank's obligations to make Unpaid Drawing
Repayment Loans or purchase participations in Unpaid Drawings, or reduce the
amount of any sum received or receivable by the Agent or any Bank hereunder,
then, upon demand (which demand shall be given by a Bank affected by such
increased cost or reduction promptly after it determines the amount of such
increased cost or reduction) to the Borrower by such Bank, the Borrower shall
pay to such Bank the additional amount or amounts as will compensate such Bank
for such increased cost or reduction. A certificate submitted to the Borrower
by such Bank setting forth the basis for the determination of such additional
amount or amounts necessary to compensate such Bank as aforesaid shall be
conclusive and binding on the Borrower absent error.
Section 2.22 ILLEGALITY. If any Regulatory Change shall make it unlawful
or impossible for any Bank to make, maintain or fund any Eurodollar Rate
Advances or CD Rate Advances, such Bank shall notify the Borrower and the Agent,
whereupon the obligation of such Bank to make or continue, or to convert any
Advances to, Eurodollar Rate Advances or CD Rate Advances shall be suspended
until such Bank notifies the Borrower and the Agent that the circumstances
giving rise to such suspension no longer exist. Before giving any such notice,
such Bank shall designate a different Applicable Lending Office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank
determines that it may not lawfully continue to maintain any Eurodollar Rate
Advances or CD Rate Advances to the end of the applicable Interest Periods, all
of the affected Advances shall be automatically converted to Reference Rate
Advances as of the date of such Bank's notice, and upon such conversion the
Borrower shall indemnify such Bank in accordance with Section 2.24.
Section 2.23 CAPITAL ADEQUACY. In the event that any Regulatory Change
reduces or shall have the effect of reducing the rate of return on any Bank's
capital or the capital of its parent corporation (by an amount such Bank deems
material) as a consequence of its Revolving Commitment and/or its Advances to a
level below that which such Bank or its parent corporation could have achieved
but for such Regulatory Change (taking into account such Bank's policies and the
policies of its parent corporation with respect to capital adequacy), then the
Borrower shall, within five days after written notice and demand from such Bank
(with a copy to the Agent), pay to such Bank additional amounts sufficient to
compensate such Bank or its parent corporation for such reduction. Any
determination by such Bank under this Section and any
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certificate as to the amount of such reduction given to the Borrower by such
Bank shall be final, conclusive and binding for all purposes, absent manifest
error.
Section 2.24 FUNDING LOSSES; EURODOLLAR RATE ADVANCES AND CD RATE
ADVANCES. The Borrower shall compensate each Bank, upon its written request,
for all losses, expenses and liabilities (including any interest paid by such
Bank to lenders of funds borrowed by it to make or carry Eurodollar Rate
Advances and CD Rate Advances to the extent not recovered by such Bank in
connection with the re-employment of such funds and including loss of
anticipated profits if and to the extent that such Bank has match-funded all or
any portion of such Eurodollar Rate Advances or CD Rate Advance through the
issuance of its certificates of deposit or otherwise, it being understood that a
Bank may match-fund this credit facility either separately or in combination
with other credit facilities) which such Bank may sustain: (a) if, at the
request of the Borrower or on account of a Default or an Event of Default, a
funding of a Eurodollar Rate Advance or CD Rate Advance does not occur on the
date specified therefor in the Borrower's request or notice as to such Advance
under Section 2.2 or 2.4, or (b) if, for whatever reason (including, but not
limited to, acceleration of the maturity of Advances following an Event of
Default), any repayment of a Eurodollar Rate Advance or CD Rate Advance, or a
conversion pursuant to Section 2.22, occurs on any day other than the last day
of the Interest Period applicable thereto. A Bank's request for compensation
shall set forth the basis for the amount requested and shall be final,
conclusive and binding, absent manifest error.
Section 2.25 DISCRETION OF BANKS AS TO MANNER OF FUNDING. Each Bank
shall be entitled to fund and maintain its funding of Eurodollar Rate Advances
and CD Rate Advances in any manner it may elect, it being understood, however,
that for the purposes of this Agreement all determinations hereunder (including,
but not limited to, determinations under Section 2.24, but excluding
determinations that the Agent may elect to make from the Reuters screen) shall
be made as if such Bank had actually funded and maintained each Eurodollar Rate
Advance and CD Rate Advance during the Interest Period for such Advance through
the issuance of its certificates of deposit having a maturity corresponding to
the last day of the Interest Period and bearing an interest rate equal to the
Eurodollar Rate, in the case of a Eurodollar Rate Advance, or the CD Rate, in
the case of a CD Rate Advance, for such Interest Period.
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ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS OF INITIAL LOANS AND COMMERCIAL PAPER NOTE. The
making of the initial Revolving Loans and the issuance of the initial Commercial
Paper Note shall be subject to the prior or simultaneous fulfillment of the
following conditions:
3.1(a) DOCUMENTS. The Agent shall have received the following in
sufficient counterparts (except for the Revolving Notes) for each Bank:
(i) A Revolving Note in the form of Exhibit 1.1C hereto,
drawn to the order of each Bank, executed by a duly authorized officer
(or officers) of the Borrower and dated the Closing Date, which
Revolving Note, in the case of First Bank and Harris, shall constitute
an amendment and restatement of their Existing Revolving Notes.
(ii) A Guaranty in the form of Exhibit 1.1B hereto,
prepared separately for each Guarantor and executed by a duly
authorized officer of such Guarantor, which Guaranty shall constitute
an amendment and restatement of the corresponding Existing Guaranty.
(iii) A copy of the corporate resolution of the Borrower
authorizing the execution, delivery and performance of the Borrower
Loan Documents, certified as of the Closing Date by the Secretary or
an Assistant Secretary of the Borrower.
(iv) An incumbency certificate showing the names and titles
and bearing the signatures of the officers of the Borrower authorized
to execute the Borrower Loan Documents and to request Revolving Loans
and conversions and continuations of Advances hereunder, certified as
of the Closing Date by the Secretary or an Assistant Secretary of the
Borrower.
(v) A copy of the Articles of Incorporation of the
Borrower with all amendments thereto, certified by the appropriate
governmental official of the jurisdiction of its incorporation as of a
date not more than eight days prior to the Closing Date.
(vi) A certificate of good standing for the Borrower in the
jurisdiction of its incorporation, certified by the appropriate
governmental officials as of a date not more than eight days prior to
the Closing Date.
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(vii) A copy of the bylaws of the Borrower, certified as of
the Closing Date by the Secretary or an Assistant Secretary of the
Borrower.
(viii) A copy of the corporate resolution of each Guarantor
authorizing the execution, delivery and performance of its respective
Guaranty.
(ix) An incumbency certificate for each Guarantor showing the
names and titles and bearing the signatures of the officers of such
Guarantor authorized to execute the Guaranty of such Guarantor,
certified as of the Closing Date by the Secretary or an Assistant
Secretary of such Guarantor.
(x) A copy of the Articles of Incorporation of each Guarantor
with all amendments thereto, certified by the appropriate governmental
official of the jurisdiction of its incorporation as of a date not more
than eight days prior to the Closing Date.
(xi) A certificate of good standing for each Guarantor in
the jurisdiction of its incorporation, certified by the appropriate
governmental officials as of a date not more than eight days prior to
the Closing Date.
(xii) A copy of the bylaws of each Guarantor, certified as of
the Closing Date by the Secretary or an Assistant Secretary of such
Guarantor.
(xiii) A certificate dated the Closing Date of the chief
executive officer or chief financial officer of the Borrower certifying
as to the matters set forth in Sections 3.2 (a) and 3.2 (b) below.
3.1(b) OPINION. The Borrower shall have requested Mackall, Crounse
& Moore, its counsel, to prepare a written opinion, addressed to the Banks and
dated the Closing Date, covering the matters set forth in Exhibit 3.1 hereto,
and such opinion shall have been delivered to the Agent in sufficient
counterparts for each Bank.
3.1(c) COMPLIANCE. The Borrower shall have performed and
complied with all agreements, terms and conditions contained in this Agreement
required to be performed or complied with by the Borrower prior to or
simultaneously with the Closing Date.
3.1(d) OTHER MATTERS. All corporate and legal proceedings relating
to the Borrower and the Guarantors and all instruments and agreements in
connection with the transactions contemplated by this Agreement shall be
satisfactory in scope, form and substance to the Agent, the Banks and their
special counsel, and the Agent shall have received all information and copies of
all documents, including records of corporate proceedings, as any Bank or such
special counsel may reasonably have
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requested in connection therewith, such documents where appropriate to be
certified by proper corporate or governmental authorities.
3.1(e) FEES AND EXPENSES. The Agent shall have received for itself
and for the account of the Banks all fees and other amounts due and payable by
the Borrower on or prior to the Closing Date, including the fees and expenses of
counsel to the Agent payable pursuant to Section 9.2.
Section 3.2 CONDITIONS PRECEDENT TO ALL LOANS, COMMERCIAL PAPER NOTES
AND STANDBY LETTERS OF CREDIT. The making of any Revolving Loans hereunder
(including the initial Revolving Loans), the issuance of each Commercial Paper
Note (including the initial Commercial Paper Note) and the issuance of each
Standby Letter of Credit (including the initial Standby Letter of Credit) shall
be subject to the fulfillment of the following conditions:
3.2(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Article IV shall be true and correct on and as of the
Closing Date and on the date of each Revolving Loan or the date of issuance of
each Commercial Paper Note and of each Standby Letter of Credit, with the same
force and effect as if made on such date.
3.2(b) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing on the Closing Date and on the date of each Revolving
Loan or the date of issuance of each Commercial Paper Note or of each Standby
Letter of Credit or will exist after giving effect to the Revolving Loans made
on such date or the Commercial Paper Note or Standby Letter of Credit so issued.
3.2(c) NOTICES AND REQUESTS. In the case of Revolving Loans the
Agent shall have received the Borrower's request for such Revolving Loans as
required under Section 2.2 (except as otherwise provided in Section 2.2 (b)),
in the case of Commercial Paper Notes (Midwest), the Borrower shall have
complied with the conditions set forth in the Commercial Paper Program Documents
for the issuance of Commercial Paper Notes (Midwest); in the case of Commercial
Paper Notes (Unrated), the Borrower shall have complied with the requirements of
Sections 2.8 and 2.9; and in the case of Standby Letters of Credit, the Borrower
shall have complied with the requirements of Sections 2.8A, 2.9A and 2.10A for
the issuance of Standby Letters of Credit.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement, to grant the Revolving
Commitments and to make Revolving Loans hereunder, to induce First Bank to
permit the Borrower to participate in and issue Commercial Paper Notes, and
to induce First
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Bank to issue the Standby Letters of Credit, the Borrower represents and
warrants to the Banks:
Section 4.1 ORGANIZATION, STANDING, ETC. The Borrower is a corporation
duly incorporated and validly existing and in good standing under the laws of
the jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now conducted, to enter into this
Agreement and to issue the Revolving Notes and to perform its obligations under
the Borrower Loan Documents. Each Subsidiary is a corporation duly incorporated
and validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has all requisite corporate power and authority to carry
on its business as now conducted. Each of the Borrower and the Subsidiaries (a)
holds all certificates of authority, licenses and permits necessary to carry on
its business as presently conducted in each jurisdiction in which it is carrying
on such business, except where the failure to hold such certificates, licenses
or permits would not have a material adverse effect on the business, operations,
property, assets or condition, financial or otherwise, of the Borrower and the
Subsidiaries taken as a whole, and (b) is duly qualified and in good standing as
a foreign corporation in each jurisdiction in which the character of the
properties owned, leased or operated by it or the business conducted by it makes
such qualification necessary and the failure so to qualify would permanently
preclude the Borrower or such Subsidiary from enforcing its rights with respect
to any assets or expose the Borrower or such Subsidiary to any liability, which
in either case would be material to the Borrower and the Subsidiaries taken as a
whole.
Section 4.2 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Borrower of the Borrower Loan Documents have been duly
authorized by all necessary corporate action by the Borrower, and this Agreement
constitutes, and the Revolving Notes and other Borrower Loan Documents when
executed will constitute, the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their respective
terms, subject to limitations as to enforceability which might result from
bankruptcy, insolvency, moratorium and other similar laws affecting creditors'
rights generally and subject to limitations on the availability of equitable
remedies.
Section 4.3 NO CONFLICT; NO DEFAULT. The execution, delivery and
performance by the Borrower of the Borrower Loan Documents will not (a) violate
any provision of any law, statute, rule or regulation or any order, writ,
judgment, injunction, decree, determination or award of any court, governmental
agency or arbitrator presently in effect having applicability to the Borrower,
(b) violate or contravene any provision of the Articles of Incorporation or
bylaws of the Borrower, or (c) result in a breach of or constitute a default
under any indenture, loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it or any of its
properties may be bound or result in the creation of any Lien thereunder.
Neither the Borrower nor any Subsidiary is in default under or in violation of
any such law, statute, rule or regulation, order, writ, judgment, injunction,
decree, determination or
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award or any such indenture, loan or credit agreement or other agreement,
lease or instrument in any case in which the consequences of such default or
violation could have a material adverse effect on the business, operations,
properties, assets or condition (financial or otherwise) of the Borrower and
its Subsidiaries taken as a whole.
Section 4.4 GOVERNMENT CONSENT. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority is required on the
part of the Borrower to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, the Borrower Loan Documents.
Section 4.5 FINANCIAL STATEMENTS AND CONDITION. The Borrower's audited
consolidated financial statements as at April 30, 1995 and its unaudited
financial statements as at January 27, 1996 as heretofore furnished to the
Banks, have been prepared in accordance with GAAP on a consistent basis (except
for year-end audit adjustments as to the interim statements) and fairly present
the financial condition of the Borrower and its Subsidiaries as at such dates
and the results of their operations and changes in financial position for the
respective periods then ended. As of the dates of such financial statements,
neither the Borrower nor any Subsidiary had any material obligation, contingent
liability, liability for taxes or long-term lease obligation which is not
reflected in such financial statements or in the notes thereto. Other than as
may have been previously disclosed to the Banks in writing, since April 30, 1995
there has been no material adverse change in the business, operations, property,
assets or condition, financial or otherwise, of the Borrower and its
Subsidiaries taken as a whole.
Section 4.6 LITIGATION. Except as disclosed in Schedule 4.6 hereto,
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Subsidiary or any
of their properties before any court or arbitrator, or any governmental
department, board, agency or other instrumentality which, if determined
adversely to the Borrower or such Subsidiary, would have a material adverse
effect on the business, operations, property or condition (financial or
otherwise) of the Borrower and the Subsidiaries taken as a whole or on the
ability of the Borrower or any Subsidiary to perform its obligations under the
Loan Documents.
Section 4.7 ENVIRONMENTAL, HEALTH AND SAFETY LAWS. There does not exist
any violation by the Borrower or any Subsidiary of any applicable federal, state
or local law, rule or regulation or order of any government, governmental
department, board, agency or other instrumentality relating to environmental,
pollution, health or safety matters which will or threatens to impose a material
liability on the Borrower or a Subsidiary or which would require a material
expenditure by the Borrower or such Subsidiary to cure. Neither the Borrower
nor any Subsidiary has received any notice to the effect that any part of its
operations or properties is not in material compliance with any such law, rule,
regulation or order or notice that it or its property is the subject of
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any governmental investigation evaluating whether any remedial action is
needed to respond to any release of any toxic or hazardous waste or substance
into the environment, which non-compliance or remedial action could
reasonably be expected to have a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole.
Section 4.8 ERISA. Each Plan complies with all material applicable
requirements of ERISA and the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and the Code setting forth
those requirements. No Reportable Event has occurred and is continuing with
respect to any Plan. All of the minimum funding standards applicable to such
Plans have been satisfied and there exists no event or condition which would
permit the institution of proceedings to terminate any Plan under Section 4042
of ERISA. The current value of the Plans' benefits guaranteed under Title IV of
ERISA does not exceed the current value of the Plans' assets allocable to such
benefits.
Section 4.9 FEDERAL RESERVE REGULATIONS. Neither the Borrower nor any
Subsidiary is engaged principally or as one of its important activities in the
business of extending credit for the purpose of purchasing or carrying margin
stock (as defined in Regulation U of the Board). The value of all margin stock
owned by the Borrower does not constitute more than 25% of the value of the
assets of the Borrower.
Section 4.10 TITLE TO PROPERTY; LEASES; LIENS; SUBORDINATION. Each of
the Borrower and the Subsidiaries has (a) good and marketable title to its real
properties and (b) good and sufficient title to, or valid, subsisting and
enforceable leasehold interest in, its other material properties, including all
real properties, other properties and assets, referred to as owned by the
Borrower and its Subsidiaries in the most recent financial statement referred to
in Section 4.5 (other than property disposed of since the date of such financial
statements in the ordinary course of business). None of such properties owned
by the Borrower or any Subsidiary is subject to a Lien, except as allowed under
Section 6.12. The Borrower has not subordinated any of its rights under any
obligation owing to it to the rights of any other person.
Section 4.11 TAXES. Each of the Borrower and the Subsidiaries has filed
all federal, state and local tax returns required to be filed and has paid or
made provision for the payment of all taxes due and payable pursuant to such
returns and pursuant to any assessments made against it or any of its property
and all other taxes, fees and other charges imposed on it or any of its property
by any governmental authority (other than taxes, fees or charges the amount or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which reserves in accordance with GAAP have been
provided on the books of the Borrower). No material tax Liens have been filed
and no material claims are being asserted with respect to any such taxes, fees
or charges. The charges, accruals and reserves on the books of the Borrower in
respect of taxes and other governmental charges are adequate and the
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Borrower knows of no proposed material tax assessment against it or any
Subsidiary or any basis therefor.
Section 4.12 TRADEMARKS, PATENTS. Each of the Borrower and the
Subsidiaries possesses or has the right to use all of the patents, trademarks,
trade names, service marks and copyrights, and applications therefor, and all
technology, know-how, processes, methods and designs used in or necessary for
the conduct of its business, without known conflict with the rights of others.
Section 4.13 BURDENSOME RESTRICTIONS. Neither the Borrower nor any
Subsidiary is a party to or otherwise bound by any indenture, loan or credit
agreement or any lease or other agreement or instrument or subject to any
charter, corporate or partnership restriction which would foreseeably have a
material adverse effect on the business, properties, assets, operations or
condition (financial or otherwise) of the Borrower or such Subsidiary or on the
ability of the Borrower or any Subsidiary to carry out its obligations under any
Loan Document.
Section 4.14 FORCE MAJEURE. Since the date of the most recent financial
statement referred to in Section 4.5, the business, properties and other assets
of the Borrower and the Subsidiaries have not been materially and adversely
affected in any way as the result of any fire or other casualty, strike,
lockout, or other labor trouble, embargo, sabotage, confiscation, condemnation,
riot, civil disturbance, activity of armed forces or act of God.
Section 4.15 INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an investment
company within the meaning of the Investment Company Act of 1940, as amended.
Section 4.16 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower
nor any Subsidiary is a "holding company" or a "subsidiary company" of a holding
company or an "affiliate" of a holding company or of a subsidiary company of a
holding company within the meaning of the Public Utility Holding Company Act of
1935, as amended.
Section 4.17 RETIREMENT BENEFITS. Under Statement of Financial
Accounting Standard No. 106 of the Financial Accounting Standards Board and the
accounting rules with respect thereto, the present value of the expected cost to
the Borrower and the Subsidiaries of post-retirement medical and insurance
benefits with respect to employees, as estimated by the Borrower in accordance
with GAAP is not material.
Section 4.18 FULL DISCLOSURE. Subject to the following sentence, neither
the financial statements referred to in Section 4.5 nor any other certificate,
written statement, exhibit or report furnished by or on behalf of the Borrower
in connection with or pursuant to this Agreement contains any untrue statement
of a material fact or omits to state any material fact necessary in order to
make the statements contained
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therein not misleading. Certificates or statements furnished by or on behalf
of the Borrower to the Banks consisting of projections or forecasts of future
results or events have been prepared in good faith and based on good faith
estimates and assumptions of the management of the Borrower, and the Borrower
has no reason to believe that such projections or forecasts are not
reasonable.
Section 4.19 SUBSIDIARIES. Schedule 4.19 sets forth as of the date of
this Agreement a list of all Subsidiaries and the number and percentage of the
shares of each class of capital stock owned beneficially or of record by the
Borrower or any Subsidiary therein, and the jurisdiction of incorporation of
each Subsidiary. Except as otherwise indicated in Schedule 4.19, all shares of
each Subsidiary owned by the Borrower or by any other Subsidiary are validly
issued and fully paid and nonassessable.
ARTICLE V
AFFIRMATIVE COVENANTS
Until any obligation of the Banks hereunder to make the Revolving Loans, to
provide availability hereunder with respect to Commercial Paper Notes (Unrated),
any obligation of First Bank to permit the Borrower to issue Commercial Paper
Notes (Midwest) under the Commercial Paper Program and any obligation of First
Bank to issue the Standby Letters of Credit shall have expired or been
terminated and the Revolving Notes and all of the other Obligations have been
paid in full, all outstanding Commercial Paper Notes (Midwest) and Standby
Letters of Credit shall have been paid in full or the liability of First Bank
thereon shall have otherwise been discharged and no amount is available to be
drawn under the Commercial Paper Letter of Credit with respect to the Commercial
Paper Notes (Midwest) or under any Standby Letter of Credit, unless the Majority
Banks shall otherwise consent in writing:
Section 5.1 FINANCIAL STATEMENTS AND REPORTS. The Borrower will furnish
to the Banks:
5.1(a) As soon as available and in any event within 100 days after
the end of each fiscal year of the Borrower, (i) the consolidated and
consolidating financial statements of the Borrower and the Subsidiaries
consisting of at least statements of operations, cash flows and shareholders'
equity and a consolidated balance sheet as at the end of such year, setting
forth in each case in comparative form corresponding figures from the previous
annual audit, and with respect to the consolidated statements, certified without
qualification by Arthur Andersen or other independent certified public
accountants of recognized national standing selected by the Borrower and
acceptable to the Agent, (ii) the consolidated financial statements of the
Borrower and the Subsidiaries consisting of at least statements of operations
and a consolidated balance sheet as at the end of such year, prepared using the
equity method of accounting with respect to NFS, and (iii) a statement of the
Borrower's Contingent Obligations as at the end of such fiscal year.
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5.1(b) Together with the audited financial statements required
under Section 5.1 (a)(i), a statement by the accounting firm performing such
audit to the effect that it has reviewed this Agreement and that in the course
of performing its examination nothing came to its attention that caused it to
believe that any Default or Event of Default exists, or, if such Default or
Event of Default exists, describing its nature.
5.1(c) As soon as available and in any event within 60 days after
the end of each fiscal quarter of the Borrower, (i) unaudited consolidated and
consolidating statements of operations for the Borrower and the Subsidiaries for
such quarter and for the year to date and cash flows for the period from the
beginning of such fiscal year to the end of such quarter and a consolidated
balance sheet of the Borrower as at the end of such quarter, setting forth in
comparative form figures for the corresponding period for the preceding fiscal
year, accompanied by a certificate signed by the chief financial officer of the
Borrower stating that such financial statements present fairly the financial
condition of the Borrower and the Subsidiaries and that the same have been
prepared in accordance with GAAP, (ii) the consolidated financial statements of
the Borrower and the Subsidiaries for such quarter and for the year-to-date,
including consolidated statements of income and a consolidated balance sheet as
at the end of such quarter, prepared using the equity method of accounting with
respect to NFS, and (iii) a statement of the Borrower's Contingent Obligations
as at the end of such fiscal quarter.
5.1(d) As soon as practicable and in any event within 60 days after
the end of the first three fiscal quarters of the fiscal year of the Borrower, a
statement signed by the chief financial officer of the Borrower demonstrating in
reasonable detail compliance (or noncompliance, as the case may be) with
Sections 6.15 through 6.21 as at the end of such quarter and stating that as at
the end of such quarter there did not exist any Default or Event of Default or,
if such Default or Event of Default existed, specifying the nature and period of
existence thereof and what action the Borrower proposes to take with respect
thereto.
5.1(e) As soon as practicable and in any event within 60 days after
the beginning of each fiscal year of the Borrower, statements of budgeted
consolidated income for the Borrower and the Subsidiaries for each fiscal
quarter in such fiscal year and a budgeted consolidated balance sheet of the
Borrower and the Subsidiaries, as at the end of each fiscal year, all in
reasonable detail and reasonably satisfactory in scope to the Agent.
5.1(f) Immediately upon any officer of the Borrower becoming aware
of any Default or Event of Default, a notice describing the nature thereof and
what action the Borrower proposes to take with respect thereto.
5.1(g) Immediately upon any officer of the Borrower becoming aware
of the occurrence, with respect to any Plan, of any Reportable Event or any
Prohibited
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Transaction, a notice specifying the nature thereof and what action the
Borrower proposes to take with respect thereto, and, when received, copies of
any notice from PBGC of intention to terminate or have a trustee appointed
for any Plan.
5.1(h) Promptly upon the mailing or filing thereof, copies of all
financial statements, reports and proxy statements mailed to the Borrower's
shareholders, and copies of all registration statements, periodic reports and
other documents filed with the Securities and Exchange Commission (or any
successor thereto) or any national securities exchange.
5.1(i) Promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower or any Subsidiary
shall have sent to its stockholders.
5.1(j) Promptly after the sending or filing thereof, copies of all
regular and periodic financial reports (including all Form 10-K and Form 10-Q
reports) which the Borrower or any Subsidiary shall file with the Securities and
Exchange Commission or any national securities exchange.
5.1(k) From time to time, such other information regarding the
business, operation and financial condition of the Borrower and the Subsidiaries
as any Bank may reasonably request.
Section 5.2 CORPORATE EXISTENCE. The Borrower will maintain, and cause
each Subsidiary to maintain, its corporate existence in good standing under the
laws of its jurisdiction of incorporation and its qualification to transact
business in each jurisdiction where failure so to qualify would permanently
preclude the Borrower or such Subsidiary from enforcing its rights with respect
to any material asset or would expose the Borrower or such Subsidiary to any
material liability; provided, however, that nothing herein shall prohibit the
merger or liquidation of any Subsidiary allowed under Section 6.1.
Section 5.3 INSURANCE. The Borrower shall maintain, and shall cause
each Subsidiary to maintain, with financially sound and reputable insurance
companies such insurance as may be required by law and such other insurance in
such amounts and against such hazards as is customary in the case of reputable
firms engaged in the same or similar business and similarly situated.
Section 5.4 PAYMENT OF TAXES AND CLAIMS. The Borrower shall file, and
cause each Subsidiary to file, all tax returns and reports which are required by
law to be filed by it and will pay, and cause each Subsidiary to pay, before
they become delinquent all taxes, assessments and governmental charges and
levies imposed upon it or its property and all claims or demands of any kind
(including but not limited to those of suppliers, mechanics, carriers,
warehouses, landlords and other like Persons) which, if unpaid, might result in
the creation of a Lien upon its property; provided that the
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foregoing items need not be paid if they are being contested in good faith
by appropriate proceedings, and as long as the Borrower's or such
Subsidiary's title to its property is not materially adversely affected, its
use of such property in the ordinary course of its business is not materially
interfered with and adequate reserves with respect thereto have been set
aside on the Borrower's or such Subsidiary's books in accordance with GAAP.
Section 5.5 INSPECTION. The Borrower shall permit any Person designated
by the Agent or any Bank to visit and inspect any of the properties, corporate
books and financial records of the Borrower and the Subsidiaries, to examine and
to make copies of the books of accounts and other financial records of the
Borrower and the Subsidiaries, and to discuss the affairs, finances and accounts
of the Borrower and the Subsidiaries with, and to be advised as to the same by,
its officers at such reasonable times and intervals as the Agent or such Bank
may designate. So long as no Event of Default exists, the expenses of the Agent
or such Bank for such visits, inspections and examinations shall be at the
expense of the Agent (for the accounts of the Banks) and such Bank, but any such
visits, inspections and examinations made while any Event of Default is
continuing shall be at the expense of the Borrower.
Section 5.6 MAINTENANCE OF PROPERTIES. The Borrower will maintain, and
cause each Subsidiary to maintain, its properties used or useful in the conduct
of its business in good condition, repair and working order, and supplied with
all necessary equipment, and make all necessary repairs, renewals, replacements,
betterments and improvements thereto, all as may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
Section 5.7 BOOKS AND RECORDS. The Borrower will keep, and will cause
each Subsidiary to keep, adequate and proper records and books of account in
which full and correct entries will be made of its dealings, business and
affairs.
Section 5.8 COMPLIANCE. The Borrower will comply, and will cause each
Subsidiary to comply, in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject; provided, however, that failure so to comply shall not be a
breach of this covenant if such failure does not have, or is not reasonably
expected to have, a materially adverse effect on the properties, business,
prospects or condition (financial or otherwise) of the Borrower or such
Subsidiary and the Borrower or such Subsidiary is acting in good faith and with
reasonable dispatch to cure such noncompliance.
Section 5.9 NOTICE OF LITIGATION. The Borrower will give prompt written
notice to the Agent of the commencement of any action, suit or proceeding before
any court or arbitrator or any governmental department, board, agency or other
instrumentality affecting the Borrower or any Subsidiary or any property of the
Borrower or a Subsidiary or to which the Borrower or a Subsidiary is a party in
which an adverse determination or result could have a material adverse effect on
the business, operations,
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property or condition (financial or otherwise) of the Borrower and the
Subsidiaries taken as a whole or on the ability of the Borrower or any
Subsidiary to perform its obligations under this Agreement and the other Loan
Documents, stating the nature and status of such action, suit or proceeding.
Section 5.10 ERISA. The Borrower will maintain, and cause each
Subsidiary to maintain, each Plan in compliance with all material applicable
requirements of ERISA and of the Code and with all material applicable rulings
and regulations issued under the provisions of ERISA and of the Code and will
not and not permit any of the ERISA Affiliates to (a) engage in any transaction
in connection with which the Borrower or any of the ERISA Affiliates would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code, in either case in an amount
exceeding $50,000, (b) fail to make full payment when due of all amounts which,
under the provisions of any Plan, the Borrower or any ERISA Affiliate is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency (as such term is defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, with respect to any Plan in an
aggregate amount exceeding $100,000 or (c) fail to make any payments in an
aggregate amount exceeding $100,000 to any Multiemployer Plan that the Borrower
or any of the ERISA Affiliates may be required to make under any agreement
relating to such Multiemployer Plan or any law pertaining thereto.
Section 5.11 ENVIRONMENTAL MATTERS; REPORTING. The Borrower will observe
and comply with, and cause each Subsidiary to observe and comply with, all laws,
rules, regulations and orders of any government or government agency relating to
health, safety, pollution, hazardous materials or other environmental matters to
the extent non-compliance could result in a material liability or otherwise have
a material adverse effect on the Borrower and the Subsidiaries taken as a whole.
The Borrower will give the Agent prompt written notice of any violation as to
any environmental matter by the Borrower or any Subsidiary and of the
commencement of any judicial or administrative proceeding relating to health,
safety or environmental matters (a) in which an adverse determination or result
could result in the revocation of or have a material adverse effect on any
operating permits, air emission permits, water discharge permits, hazardous
waste permits or other permits held by the Borrower or any Subsidiary which are
material to the operations of the Borrower or such Subsidiary, or (b) which will
or threatens to impose a material liability on the Borrower or such Subsidiary
to any Person or which will require a material expenditure by the Borrower or
such Subsidiary to cure any alleged problem or violation.
ARTICLE VI
NEGATIVE COVENANTS
Until any obligation of the Banks hereunder to make the Revolving Loans,
any obligation of First Bank to permit the Borrower to issue Commercial Paper
Notes under
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the Commercial Paper Program and any obligation of First Bank to issue the
Standby Letters of Credit shall have expired or been terminated and the
Revolving Notes and all of the other Obligations have been paid in full, all
outstanding Commercial Paper Notes and Standby Letters of Credit shall have
been paid in full or the liability of First Bank thereon shall have otherwise
been discharged and no amount is available to be drawn under the Commercial
Paper Letter of Credit with respect to the Commercial Paper Notes or under
any Standby Letter of Credit, unless the Majority Banks shall otherwise
consent in writing:
Section 6.1 MERGER. The Borrower will not merge or consolidate or enter
into any analogous reorganization or transaction with any Person or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution) or permit
any Subsidiary to do any of the foregoing; PROVIDED, HOWEVER, any Subsidiary may
be merged with or liquidated into the Borrower or any wholly-owned Subsidiary
(if the Borrower or such wholly-owned Subsidiary is the surviving corporation).
Section 6.2 SALE OF ASSETS. The Borrower will not, and will not permit
any Subsidiary to, sell, transfer, lease or otherwise convey all or any
substantial part of its assets except for:
(a) sales and leases of inventory in the ordinary course of
business;
(b) sales or transfers by a Subsidiary to the Borrower or a
wholly-owned subsidiary;
(c) sales or other transfers by the Borrower or its Subsidiaries
of assets other than pursuant to clause (a) or (b) of this Section 6.2,
PROVIDED that the aggregate book value of assets sold or transferred
pursuant to this clause (c) in any fiscal year of the Borrower shall not
exceed 10% of Tangible Net Worth as of the last day of the previous fiscal
year; and
(d) sales or other transfers of (including the granting of
security interests in) NFS Lease Accounts and related leases and equipment
made by NFS in connection with the permanent financing of NFS Lease
Accounts (and related NFS leases), subject to the following conditions:
(i) the entire proceeds of such permanent financing are applied to pay
outstanding Revolving Loans under this Agreement, (ii) the terms of such
permanent financing are (A) without recourse to the Borrower (except as
provided in Section 6.13(d)) and (B) either without recourse to NFS or
with recourse to NFS only in an amount which does not exceed 20% of the
amount of the permanent financing with respect to such NFS leases
(exclusive of damages resulting from the gross negligence or willful
misconduct of NFS or breach of representations or warranties by NFS), and
(iii) the advance rate on such NFS leases under such permanent financing
must be at least 80% of the total present value of the rental streams
under such NFS leases.
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(e) sales or other transfers of (including the granting of
security interests in) Norstan Canada Lease Accounts and related leases and
equipment made by Norstan Canada in connection with the permanent financing
of Norstan Canada Lease Accounts (and related Norstan Canada leases),
subject to the following conditions: (i) the terms of such permanent
financing are (A) without recourse to the Borrower (except as provided in
Section 6.13(d)) and (B) either without recourse to Norstan Canada or
with recourse to Norstan Canada only in an amount which does not exceed
30% of the amount of the permanent financing with respect to such Norstan
Canada leases (exclusive of damages resulting from the gross negligence or
willful misconduct of Norstan Canada or breach of representations or
warranties by Norstan Canada), and (ii) the advance rate on such Norstan
Canada leases under such permanent financing must be at least 80% of the
total present value of the rental streams under such Norstan Canada leases.
Section 6.3 PLANS. The Borrower will not permit, and will not allow any
Subsidiary to permit, any event to occur or condition to exist which would
permit any Plan to terminate under any circumstances which would cause the Lien
provided for in Section 4068 of ERISA to attach to any assets of the Borrower or
any Subsidiary; and the Borrower will not permit the underfunded amount of Plan
benefits guaranteed under Title IV of ERISA to exceed $100,000.
Section 6.4 CHANGE IN NATURE OF BUSINESS. The Borrower will not, and
will not permit any Subsidiary to, make any material change in the nature of the
business of the Borrower or such Subsidiary, as carried on at the date hereof,
except for changes in business related to the communications industry.
Section 6.5 SUBSIDIARIES. After the date of this Agreement, the
Borrower will not, and will not permit any Subsidiary to, form or acquire any
corporation which would thereby become a Subsidiary, unless (a) 100% of the
issued and outstanding capital stock of such Subsidiary is owned by Norstan,
Inc. or by a 100%-owned Subsidiary of Norstan, Inc., (b) each line of business
of such Subsidiary is within the communications industry and (c) the aggregate
amount of the Borrower's Investment or Investments in all such Subsidiaries
shall not exceed the amounts set for in Section 6.10(l)
Section 6.6 NEGATIVE PLEDGES; SUBSIDIARY RESTRICTIONS. The Borrower
will not, and will not permit any Subsidiary to, enter into any agreement, bond,
note or other instrument with or for the benefit of any Person other than the
Banks which would prohibit the Borrower or such Subsidiary from granting, or
otherwise limit the ability of the Borrower or such Subsidiary to grant, to the
Banks any Lien on any assets or properties of the Borrower or such Subsidiary
(except as may be provided in any documents evidencing or securing Indebtedness
incurred by NFS or Norstan Canada in connection with any financing of NFS Lease
Accounts and Norstan Canada Lease Accounts (and related leases) permitted under
Section 6.2, with respect to the NFS
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Lease Accounts and Norstan Canada Lease Accounts so financed). The Borrower
will not permit any Subsidiary to place or allow any restriction, directly or
indirectly, on the ability of such Subsidiary to (a) pay dividends or any
distributions on or with respect to such Subsidiary's capital stock or (b)
make loans or other cash payments to the Borrower.
Section 6.7 RESTRICTED PAYMENTS. The Borrower will not make any
Restricted Payments; PROVIDED, HOWEVER, that the Borrower may redeem its capital
stock at an aggregate cost not to exceed $1,500,000 for any fiscal year.
Section 6.8 CAPITAL EXPENDITURES. The Borrower will not, and will not
permit any Subsidiary to, make Capital Expenditures in an amount exceeding, on a
consolidated basis in any fiscal year, an amount equal to six percent (6%) of
the consolidated revenues of the Borrower and the Subsidiaries as reported in
their consolidated financial statements for the preceding fiscal year.
Section 6.9 SUBORDINATED DEBT. The Borrower will not, and will not
permit any Subsidiary to, (a) make any scheduled payment of the principal of or
interest on any Subordinated Debt which would be prohibited by the terms of such
Subordinated Debt and any related subordination agreement; (b) directly or
indirectly make any prepayment on or purchase, redeem or defease any
Subordinated Debt or offer to do so (whether such prepayment, purchase or
redemption, or offer with respect thereto, is voluntary or mandatory); (c) amend
or cancel the subordination provisions applicable to any Subordinated Debt; (d)
take or omit to take any action if as a result of such action or omission the
subordination of such Subordinated Debt, or any part thereof, to the Obligations
might be terminated, impaired or adversely affected; or (e) omit to give the
Agent prompt notice of any notice received from any holder of Subordinated Debt,
or any trustee therefor, or of any default under any agreement or instrument
relating to any Subordinated Debt by reason whereof such Subordinated Debt might
become or be declared to be due or payable.
Section 6.10 INVESTMENTS. The Borrower will not, and will not permit any
Subsidiary to, acquire for value, make, have or hold any Investments, except:.
6.10(a) Investments existing on the date of this Agreement;
6.10(b) Travel advances to management personnel and employees in the
ordinary course of business;
6.10(c) Investments in readily marketable direct obligations issued
or guaranteed by the United States or any agency thereof and supported by the
full faith and credit of the United States;
6.10(d) Certificates of deposit or bankers' acceptances issued by
any commercial bank organized under the laws of the United States or any State
thereof
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which has (i) combined capital and surplus of at least $100,000,000, and (ii)
a credit rating with respect to its unsecured indebtedness from a nationally
recognized rating service that is satisfactory to the Agent;
6.10(e) Commercial paper given the highest rating by a nationally
recognized rating service;
6.10(f) Repurchase agreements relating to securities issued or
guaranteed as to principal and interest by the United States of America;
6.10(g) Other readily marketable Investments in debt securities
which are reasonably acceptable to the Majority Banks;
6.10(h) Any existing Investment by the Borrower or any Subsidiary in
the stock of any Subsidiary;
6.10(i) Investments in new Subsidiaries permitted under Section 6.5;
6.10(j) Loans and advances by the Borrower (i) to NFS that do not
exceed at any one time an aggregate of $8,000,000; and (ii) to Norstan Canada to
finance lease account receivables that do not exceed at any one time an
aggregate of $3,000,000.
6.10(k) Loans and advances by the Borrower to Norstan
Communications, Inc., Norstan Network Services, Inc., Connect Computer Company
and (for purposes other than to finance lease account receivables, as specified
in 6.10(j) above) to Norstan Canada;
6.10(l) Purchases of assets of Persons engaged in the communications
industry; provided that the purchase price paid for such assets shall not
exceed, in the aggregate for any such purchase or acquisition, the sum of (i)
$5,000,000, plus (ii) any contingent payments based on profitability of the
assets acquired, not to exceed 50% of the operating income from such assets,
payable for a period not to exceed five years; and provided that there shall be
no more than three such separate purchases or acquisitions during any fiscal
year of the Borrower. In addition to the purchase price limits set forth above,
the Borrower, during any fiscal year, may expend in the aggregate on such
purchases or acquisitions, up to 50% of the net proceeds (after payment of
issuance costs) from any public offering of common stock of the Borrower during
any fiscal year of the Borrower; PROVIDED, HOWEVER, that if the amount of such
net proceeds permitted to be used for the purchase of assets herein is not used,
or fully used, in the fiscal year in which such public offering occurs, the
unused portion may be carried forward and used to purchase assets in any
succeeding fiscal year or fiscal years;
6.10(m) Indebtedness of any Subsidiary to the Borrower on account of
unpaid dividends owed by that Subsidiary to the Borrower;
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6.10(n) Loans to officers and employees of the Borrower or any
Subsidiary (other than indebtedness of the kind described in the following
paragraph (o)) not exceeding at any one time an aggregate of $500,000 as to the
Borrower and all Subsidiaries combined;
6.10(o) Indebtedness of employees to the Borrower arising under the
Borrower's employee personal computer purchase program, so long as the aggregate
amount of such Indebtedness outstanding at any one time does not exceed
$400,000;
6.10(p) Advances in the form of progress payments, prepaid rent or
security deposits; and
6.10(q) Such other investments of the Borrower exceeding $10,000 in
market value for each such investment, as are in existence on the date hereof
and listed in Schedule 6.10 hereto, but not any renewal or extension thereof
(except for renewals or extensions of Investments reasonably determined by the
Borrower to be not material in amount);
PROVIDED, HOWEVER, that any Investments under clauses (c), (d), (e) or (f) above
shall mature within one year of the acquisition thereof by the Borrower or a
Subsidiary.
Section 6.11 INDEBTEDNESS. The Borrower will not, and will not permit
any Subsidiary to, incur, create, issue, assume or suffer to exist any
Indebtedness, except:
6.11(a) The Obligations.
6.11(b) Current Liabilities, other than for borrowed money,
incurred in the ordinary course of business.
6.11(c) Indebtedness existing on the date of this Agreement and
disclosed on Schedule 6.11 hereto, but not including any extension or
refinancing thereof.
6.11(d) Indebtedness secured by Liens permitted under Section
6.12 hereof.
6.11(e) Indebtedness of the Borrower under lines of credit for
foreign exchange transactions and for wire transfers and daylight overdrafts.
6.11(f) Indebtedness of NFS incurred in connection with any
permanent financing of NFS Lease Accounts permitted under Section 6.2(d).
6.11(g) Indebtedness of Norstan Canada incurred in connection with
any permanent financing of Norstan Canada Lease Accounts permitted under Section
6.2(e).
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6.11(h) Indebtedness incurred by Norstan Canada for working capital
which is secured by Standby Letters of Credit issued hereunder; provided that
the aggregate principal amount of such Indebtedness shall not exceed the
aggregate face amount of such Standby Letters of Credit.
6.11(i) Subordinated Indebtedness and renewals thereof.
6.11(j) Contingent Obligations permitted under Section 6.13.
6.11(k) Unsecured Indebtedness of the Borrower (other than as
permitted by other clauses of this Section 6.11); PROVIDED, HOWEVER, that the
aggregate principal amount of such Indebtedness outstanding at any time shall
not exceed $3,000,000.
Section 6.12 LIENS. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien, or enter into,
or make any commitment to enter into, any arrangement for the acquisition of any
property through conditional sale, lease-purchase or other title retention
agreements, with respect to any property now owned or hereafter acquired by the
Borrower or a Subsidiary, except:
6.12(a) Liens existing on the date of this Agreement and
disclosed on Schedule 6.12 hereto.
6.12(b) Deposits or pledges to secure payment of workers'
compensation, unemployment insurance, old age pensions or other social security
obligations, in the ordinary course of business of the Borrower or a Subsidiary.
6.12(c) Liens for taxes, fees, assessments and governmental
charges not delinquent or to the extent that payment therefor shall not at the
time be required to be made in accordance with the provisions of Section 5.4.
6.12(d) Liens of carriers, warehousemen, mechanics and
materialmen, and other like Liens arising in the ordinary course of business,
for sums not due or to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of Section 5.4.
6.12(e) Liens incurred or deposits or pledges made or given in
connection with, or to secure payment of, indemnity, performance or other
similar bonds.
6.12(f) Encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real property and
landlord's Liens under leases on the premises rented, which do not materially
detract from the value of such property or impair the use thereof in the
business of the Borrower or a Subsidiary.
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6.12(g) The interest of any lessor under any Capitalized Lease
entered into after the Closing Date or purchase money Liens on property acquired
after the Closing Date; PROVIDED, that, (i) the Indebtedness secured thereby is
otherwise permitted by this Agreement and (ii) such Liens are limited to the
property acquired and do not secure Indebtedness other than the related
Capitalized Lease Obligations or the purchase price of such property.
6.12(h) Purchase money mortgages, liens, or security interests
(which term for purposes of this subsection shall include conditional sale
agreements or other title retention agreements and leases in the nature of title
retention agreements) upon or in property acquired after the date hereof, or
mortgages, liens or security interests existing in such property at the time of
acquisition thereof, or, in the case of any corporation which thereafter becomes
a Subsidiary, mortgages, liens or security interests upon or in its property,
existing at the time such corporation becomes a Subsidiary, provided that no
such mortgage, lien or security interest extends or shall extend to or cover any
property of the Borrower or any Subsidiary, as the case may be, other than the
property then being acquired and fixed improvements then or thereafter erected
thereon.
6.12(i) Mortgages, liens, pledges and security interests created by
any Subsidiary as security for Indebtedness owing to the Borrower or to another
Subsidiary.
6.12(j) Liens arising out of a judgment or judgments against the
Borrower or any Subsidiary for the payment of money in an aggregate amount not
exceeding $300,000 with respect to which an appeal is being prosecuted and a
stay of execution pending such appeal has been secured.
Section 6.13 CONTINGENT OBLIGATIONS. The Borrower will not, and will not
permit any Subsidiary to, be or become liable on any Contingent Obligations
except:
(a) Contingent Obligations existing on the date of this
Agreement and described on Exhibit 6.13;
(b) the Borrower's guaranty of the limited recourse obligations
of NFS under the First Bank/NFS Loan Documents;
(c) other Contingent Obligations not to exceed $500,000 in
aggregate principal amount at any time outstanding; and
(d) the Borrower's guaranty of the indemnity obligations of NFS
and Norstan Canada under any permanent financing permitted to be incurred
by NFS or Norstan Canada under Section 6.2 and which indemnity obligations
relate to breaches of obligations, representations and warranties, failure
to perfect security interests and breaches of administration or other
services to be performed by NFS or Norstan Canada under any lease.
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Section 6.14 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted
by this Agreement, the Borrower will not, nor will it permit any of its
Subsidiaries to, directly or indirectly: (a) make any Investment in an
Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
Property to an Affiliate if the aggregate book value of all Properties
transferred, sold, leased, assigned or otherwise disposed of at any time would
exceed $100,000; (c) merge into or consolidate with or purchase or acquire
Property from an Affiliate; or (d) enter into any other transaction directly or
indirectly with or for the benefit of an Affiliate (including, without
limitation, guarantees and assumptions of obligations of an Affiliate); PROVIDED
that (x) any Affiliate who is an individual may serve as a director, officer or
employee of the Borrower or any of its Subsidiaries and receive reasonable
compensation for his or her services in such capacity and (y) the Borrower and
its Subsidiaries may enter into transactions (other than extensions of credit by
the Borrower or any of its Subsidiaries to an Affiliate) providing for the
leasing of Property, the rendering or receipt of services or the purchase or
sale of inventory and other Property in the ordinary course of business if the
monetary or business consideration arising therefrom would be substantially as
advantageous to the Borrower and its Subsidiaries as the monetary or business
consideration which would obtain in a comparable transaction with a Person not
an Affiliate.
Section 6.15 CURRENT RATIO. The Borrower will not permit the ratio of
its Current Assets to its Current Liabilities to be less than 1.25 to 1.0 at any
time.
Section 6.16 TANGIBLE NET WORTH. The Borrower will not permit Tangible
Net Worth as of the last day of any fiscal quarter to be less than an amount
equal to the sum of (a) $39,000,000, PLUS (b) 75% of the aggregate consolidated
net income of the Borrower (determined in accordance with GAAP but disregarding
any fiscal quarter for which consolidated net income is negative) for the period
beginning May 1, 1996 and ending on the last day of such fiscal quarter, PLUS
100% of the net proceeds (after payment of issuance costs) from any public
offering of the common stock of the Borrower occurring after May 1, 1996.
Section 6.17 CASH FLOW LEVERAGE RATIO. The Borrower will not permit the
Cash Flow Leverage Ratio, as of the last day of any fiscal quarter for the four
consecutive fiscal quarters ending on that date, to be less than 2.00 to 1.0.
Section 6.18 ADJUSTED LEVERAGE RATIO. The Borrower will not permit the
Adjusted Leverage Ratio to be more than 2.0 to 1.0 as of the end of any fiscal
quarter.
Section 6.19 INTEREST COVERAGE RATIO. The Borrower will not permit the
Interest Coverage Ratio, as of the last day of any fiscal quarter, for the four
consecutive fiscal quarters ending on that date, to be less than 3.25 to 1.0.
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Section 6.20 RATIO OF NFS TOTAL SENIOR DEBT TO NFS TANGIBLE NET WORTH.
The Borrower will not permit the ratio of the NFS Total Senior Debt to the NFS
Tangible Net Worth to be more than 18.0 to 1.0 at any time.
Section 6.21 NFS TOTAL RESERVE AS PERCENTAGE OF NFS TOTAL GROSS
INVESTMENT. The Borrower will not permit the NFS Total Reserve to be less than
2.5% of the NFS Total Gross Investment at any time.
Section 6.22 TOTAL LEASE EXPENSE. The Borrower will not, and will not
permit any Subsidiary to, become or be a party as lessee to any lease with
respect to real or personal property if, after giving effect to such lease, the
aggregate amount of lease expense for any fiscal year of the Borrower and its
Subsidiaries with respect to all such leases (after deducting the aggregate
amount of rent receivable by the Borrower and its Subsidiaries under any
sublease of any such lease to any Person) will exceed an amount equal to five
percent (5%) of the consolidated revenues of the Borrower and the Subsidiaries
as reported in their consolidated financial statements for the preceding fiscal
year. For purposes of this Section, "lease expense," with respect to any lease
or sublease and for any period, means the amount of lease expense as disclosed
in the notes to the consolidated financial statements of the Borrower and its
Subsidiaries under the heading "Total Lease Expense."
Section 6.23 SUBSIDIARY LOSSES. The Borrower will not permit any
Subsidiary to incur a net loss (as determined in accordance with GAAP) in excess
of $1,000,000 for any fiscal year of such Subsidiary.
Section 6.24 LOAN PROCEEDS. The Borrower will not, and will not permit
any Subsidiary to, use any part of the proceeds of any Revolving Loan or Advance
directly or indirectly, and whether immediately, incidentally or ultimately, (a)
to purchase or carry margin stock (as defined in Regulation U of the Board) or
to extend credit to others for the purpose of purchasing or carrying margin
stock or to refund Indebtedness originally incurred for such purpose or (b) for
any purpose which entails a violation of, or which is inconsistent with, the
provisions of Regulations G, U or X of the Board.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 EVENTS OF DEFAULT. The occurrence of any one or more of
the following events shall constitute an Event of Default:
7.1(a) The Borrower shall fail to make when due, whether by
acceleration or otherwise, any payment of principal of or interest on any
Revolving Note or any other Obligation required to be made to the Agent or any
Bank pursuant to this Agreement.
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7.1(b) Any representation or warranty made by or on behalf of the
Borrower, any Subsidiary or any Guarantor in this Agreement or any other Loan
Document or by or on behalf of the Borrower, any Subsidiary or any Guarantor in
any certificate, statement, report or document herewith or hereafter furnished
to any Bank or the Agent pursuant to this Agreement or any other Loan Document
shall prove to have been false or misleading in any material respect on the date
as of which the facts set forth are stated or certified.
7.1(c) The Borrower shall fail to comply with Sections 5.2 or 5.3
hereof or any Section of Article VI hereof.
7.1(d) The Borrower shall fail to comply with any other
agreement, covenant, condition, provision or term contained in this Agreement
(other than those hereinabove set forth in this Section 7.1) and such failure to
comply shall continue for 30 calendar days after whichever of the following
dates is the earliest: (i) the date the Borrower gives notice of such failure
to the Banks, (ii) the date the Borrower should have given notice of such
failure to the Banks pursuant to Section 5.1, or (iii) the date the Agent or any
Bank gives notice of such failure to the Borrower.
7.1(e) The Borrower, any Subsidiary or any Guarantor shall become
insolvent or shall generally not pay its debts as they mature or shall apply
for, shall consent to, or shall acquiesce in the appointment of a custodian,
trustee or receiver of the Borrower, such Subsidiary or such Guarantor or for a
substantial part of the property thereof or, in the absence of such application,
consent or acquiescence, a custodian, trustee or receiver shall be appointed for
the Borrower, a Subsidiary or a Guarantor or for a substantial part of the
property thereof and shall not be discharged within 30 days, or the Borrower,
any Subsidiary or a Guarantor shall make an assignment for the benefit of
creditors.
7.1(f) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by or
against the Borrower, a Subsidiary or any Guarantor, and, if instituted against
the Borrower, a Subsidiary or any Guarantor, shall have been consented to or
acquiesced in by the Borrower, such Subsidiary or such Guarantor, or shall
remain undismissed for 30 days, or an order for relief shall have been entered
against the Borrower, such Subsidiary or such Guarantor.
7.1(g) Any dissolution or liquidation proceeding not permitted by
Section 6.1 shall be instituted by or against the Borrower or a Subsidiary or
any dissolution or liquidation proceeding shall be instituted by or against any
Guarantor, and, if instituted against the Borrower, any Subsidiary or any
Guarantor, shall be consented to or acquiesced in by the Borrower, such
Subsidiary or such Guarantor or shall remain for 45 days undismissed.
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7.1(h) A judgment or judgments for the payment of money in
excess of the sum of $300,000 in the aggregate shall be rendered against the
Borrower or a Subsidiary and the Borrower or such Subsidiary shall not discharge
the same or provide for its discharge in accordance with its terms, or procure a
stay of execution thereof, prior to any execution on such judgment by such
judgment creditor, within 30 days from the date of entry thereof, and within
said period of 30 days, or such longer period during which execution of such
judgment shall be stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal.
7.1(i) The maturity of any material Indebtedness of the Borrower
(other than Indebtedness under this Agreement) or a Subsidiary shall be
accelerated by reason of default, or the Borrower or a Subsidiary shall fail to
pay any such material Indebtedness when due (after the lapse of any applicable
grace period) or, in the case of such Indebtedness payable on demand, when
demanded (after the lapse of any applicable grace period), or any event shall
occur or condition shall exist and shall continue for more than the period of
grace, if any, applicable thereto and shall have the effect of causing, or
permitting the holder of any such Indebtedness or any trustee or other Person
acting on behalf of such holder to cause, such material Indebtedness to become
due prior to its stated maturity or to realize upon any collateral given as
security therefor. For purposes of this Section, Indebtedness of the Borrower
or a Subsidiary shall be deemed "material" if it exceeds $1,000,000 as to any
item of Indebtedness or in the aggregate for all items of Indebtedness with
respect to which any of the events described in this Section 7.1(i) has
occurred.
7.1(j) Any execution or attachment shall be issued whereby any
substantial part of the property of the Borrower or any Subsidiary shall be
taken or attempted to be taken and the same shall not have been vacated or
stayed within 30 days after the issuance thereof.
7.1(k) Any Guarantor shall repudiate or purport to revoke its
Guaranty, or any Guaranty for any reason shall cease to be in full force and
effect as to the Guarantor executing and delivering the same or shall be
judicially declared null and void as to such Guarantor.
7.1(l) 50% or more of any class of the capital stock of the
Borrower shall come to be owned by a single Person, or by two or more Persons
acting together in holding such stock for a common purpose.
7.1(m) The Borrower shall cease to be the sole shareholder of the
stock of any Guarantor.
7.1(n) Any distribution agreement pursuant to which the Borrower or
any Subsidiary sells, installs and/or services new private communications
systems for ROLM Company is canceled or terminates and is not renewed; PROVIDED,
HOWEVER, that an Event of Default shall not exist under this Section 7.1(n) if
and for so long as both the
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Borrower and ROLM Company are negotiating for a renewal of such distribution
agreement in good faith and with reasonable diligence.
Section 7.2 REMEDIES. If (a) any Event of Default described in
Sections 7.1(e), (f) or (g) shall occur with respect to the Borrower, the
Revolving Commitments shall automatically terminate (except as provided in
Section 2.2(b)) and the Revolving Notes and all other Obligations shall
automatically become immediately due and payable, the Borrower shall without
demand pay into the Holding Account an amount equal to the aggregate face amount
of all outstanding Commercial Paper Notes and Standby Letters of Credit, and the
Borrower shall have no right to have any new Commercial Paper Notes or Standby
Letters of Credit issued on its behalf; or (b) any other Event of Default shall
occur and be continuing, then, upon receipt by the Agent of a request in writing
from the Majority Banks, the Agent shall (i) declare the Revolving Commitments
terminated, whereupon the Revolving Commitments shall terminate (except as
provided in Section 2.2(b)), (ii) declare the outstanding unpaid principal
balance of the Revolving Notes, the accrued and unpaid interest thereon and all
other Obligations to be forthwith due and payable, whereupon the Revolving
Notes, all accrued and unpaid interest thereon and all such Obligations shall
immediately become due and payable, in each case without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
anything in this Agreement or in the Revolving Notes to the contrary
notwithstanding, (iii) demand that the Borrower pay into the Holding Account an
amount equal to the aggregate face amount of all outstanding Commercial Paper
Notes and Standby Letters of Credit, whereupon the Borrower shall pay such
amount, (iv) cause First Bank to instruct the Depositary under the Commercial
Paper Documents not to issue any additional Commercial Paper Notes on behalf of
the Company; (v) exercise all rights and remedies under any of the Loan
Documents, and (vi) enforce all rights and remedies under any applicable law.
Section 7.3 OFFSET. In addition to the remedies set forth in Section
7.2, upon the occurrence of any Event of Default and thereafter while the same
be continuing, the Borrower hereby irrevocably authorizes each Bank to set off
any Obligations owed to such Bank against all deposits and credits of the
Borrower with, and any and all claims of the Borrower against, such Bank. Such
right shall exist whether or not such Bank shall have made any demand hereunder
or under any other Loan Document, whether or not the Obligations, or any part
thereof, or deposits and credits held for the account of the Borrower is or are
matured or unmatured, and regardless of the existence or adequacy of any
collateral, guaranty or any other security, right or remedy available to such
Bank or the Banks. Each Bank agrees that, as promptly as is reasonably possible
after the exercise of any such setoff right, it shall notify the Borrower of its
exercise of such setoff right; provided, however, that the failure of such Bank
to provide such notice shall not affect the validity of the exercise of such
setoff rights. Nothing in this Agreement shall be deemed a waiver or
prohibition of or restriction on any Bank to all rights of banker's Lien, setoff
and counterclaim available pursuant to law.
ARTICLE VIII
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THE AGENT
The following provisions shall govern the relationship of the Agent with
the Banks.
Section 8.1 APPOINTMENT AND AUTHORIZATION. Each Bank appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such respective powers under the Loan Documents as are delegated to the Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto. Neither the Agent nor any of its directors, officers or employees
shall be liable for any action taken or omitted to be taken by it under or in
connection with the Loan Documents, except for its own gross negligence or
willful misconduct. The Agent shall act as an independent contractor in
performing its obligations as Agent hereunder and nothing herein contained shall
be deemed to create any fiduciary relationship among or between the Agent, the
Borrower or the Banks.
Section 8.2 NOTE HOLDERS. The Agent may treat the payee of any
Revolving Note as the holder thereof until written notice of transfer shall have
been filed with it, signed by such payee and in form satisfactory to the Agent.
Section 8.3 CONSULTATION WITH COUNSEL. The Agent may consult with legal
counsel selected by it with reasonable care and shall not be liable for any
action taken or suffered in good faith by it in accordance with the advice of
such counsel.
Section 8.4 LOAN DOCUMENTS. The Agent shall not be under a duty to
examine or pass upon the validity, effectiveness, genuineness or value of any of
the Loan Documents or any other instrument or document furnished pursuant
thereto, and the Agent shall be entitled to assume that the same are valid,
effective and genuine and what they purport to be.
Section 8.5 FIRST BANK AND AFFILIATES. With respect to its Revolving
Commitment and the Revolving Loans made by it, First Bank shall have the same
rights and powers under the Loan Documents as any other Bank and may exercise
the same as though it were not the Agent consistent with the terms thereof, and
First Bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower as if it were not the
Agent.
Section 8.6 ACTION BY AGENT. Except as may otherwise be expressly
stated in this Agreement, the Agent shall be entitled to use its discretion with
respect to exercising or refraining from exercising any rights which may be
vested in it by, or with respect to taking or refraining from taking any action
or actions which it may be able to take under or in respect of, the Loan
Documents. The Agent shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Majority Banks, and such instructions shall be binding
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upon all holders of Revolving Notes; provided, however, that the Agent shall
not be required to take any action which exposes the Agent to personal
liability or which is contrary to the Loan Documents or applicable law. The
Agent shall incur no liability under or in respect of any of the Loan
Documents by acting upon any notice, consent, certificate, warranty or other
paper or instrument believed by it to be genuine or authentic or to be signed
by the proper party or parties and to be consistent with the terms of this
Agreement.
Section 8.7 CREDIT ANALYSIS. Each Bank has made, and shall continue to
make, its own independent investigation or evaluation of the operations,
business, property and condition, financial and otherwise, of the Borrower in
connection with entering into this Agreement and has made its own appraisal of
the creditworthiness of the Borrower. Except as explicitly provided herein, the
Agent has no duty or responsibility, either initially or on a continuing basis,
to provide any Bank with any credit or other information with respect to such
operations, business, property, condition or creditworthiness, whether such
information comes into its possession on or before the first Event of Default or
at any time thereafter.
Section 8.8 NOTICES OF EVENT OF DEFAULT, ETC. In the event that the
Agent shall have acquired actual knowledge of any Event of Default or Default,
the Agent shall promptly give notice thereof to the Banks.
Section 8.9 INDEMNIFICATION. Each Bank agrees to indemnify the Agent,
as Agent (to the extent not reimbursed by the Borrower), ratably according to
such Bank's share of the Aggregate Revolving Commitment Amounts from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on or incurred by the Agent in any way relating
to or arising out of the Loan Documents or any action taken or omitted by the
Agent under the Loan Documents, provided that no Bank shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or willful misconduct. No payment by any Bank under this
Section shall relieve the Borrower of any of its obligations under this
Agreement.
Section 8.10 PAYMENTS AND COLLECTIONS. All funds received by the Agent
in respect of (a) any payments made by the Borrower on the Revolving Notes, (b)
any reimbursement payments made by the Borrower with respect to Unpaid Drawings
that were funded by Unpaid Drawing Repayment Loans and/or participation payments
made by the Banks under Section 2.11(b), and (c) any payments by the Bank of
Revolving Commitment Fees, shall be distributed forthwith by the Agent among the
Banks, in like currency and funds as received, ratably according to each Bank's
Revolving Outstandings Percentage. All funds received by the Agent in respect
of any payments made by the Borrower for Letter of Credit Fees shall be
distributed forthwith by the Agent among the Banks, in like currency and funds
as received, ratably according to each Bank's Revolving Commitment Percentage
(except as provided in the
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proviso clause of Section 2.14(b)). After any Event of Default has occurred,
all funds received by the Agent, whether as payments by the Borrower or as
realization on collateral or on any Guaranties, shall (except as may
otherwise be required by law) be distributed by the Agent in the following
order: (a) first to the Agent or any Bank who has incurred unreimbursed
costs of collection with respect to any Obligations hereunder, ratably to the
Agent and each Bank in the proportion that the costs incurred by the Agent or
such Bank bear to the total of all such costs incurred by the Agent and all
Banks; (b) next to the Agent for the account of the Banks (in accordance with
their respective Revolving Percentages) for application on the Revolving
Notes and Unpaid Drawings; (c) next to the Agent for the account of the Banks
(in accordance with their respective Revolving Outstandings Percentages) for
any unpaid Revolving Commitment Fees owing by the Borrower hereunder; (d)
next to the Agent for the account of the Banks (in accordance with their
respective Revolving Commitment Percentages) for any unpaid Letter of Credit
Fees owing by the Borrower; and (e) last to the Agent to be held in the
Holding Account to cover any outstanding Commercial Paper Notes and Standby
Letters of Credit. The provisions of this Section 8.10 shall not apply to
payments of the issuance, amendment, drawing and other fees and out-of-pocket
expenses of First Bank under Section 2.14(c), the Agent Fee under Section
2.16 (a), First Bank Fees under Section 2.16 (b) or Placement Agent Fees
under Section 2.16 (c), which fees shall be solely for the account of First
Bank, the Agent and the Placement Agent, respectively.
Section 8.11 SHARING OF PAYMENTS. If any Bank shall receive and retain
any payment, voluntary or involuntary, whether by setoff, application of deposit
balance or security, or otherwise, in respect of the Obligations owing to such
Bank under this Agreement or the Revolving Notes in excess of such Bank's share,
as determined under this Agreement, of the Obligations then due and payable to
the Banks under this Agreement, then such Bank shall purchase from the other
Banks for cash and at face value and without recourse, such participation in the
Revolving Notes held by such other Banks as shall be necessary to cause such
excess payment to be shared ratably as aforesaid with such other Banks;
provided, that 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. Subject to the participation
purchase obligation above, each Bank agrees to exercise any and all rights of
setoff, counterclaim or banker's lien first fully against any Revolving Notes
and participations therein held by such Bank, next to any other Indebtedness of
the Borrower to such Bank arising under or pursuant to this Agreement and to any
participations held by such Bank in Obligations of the Borrower arising under or
pursuant to this Agreement, and only then to any other Obligations of the
Borrower to such Bank.
Section 8.12 ADVICE TO BANKS. The Agent shall forward to the Banks
copies of all notices, financial reports and other communications received
hereunder from the Borrower by it as Agent, excluding, however, notices, reports
and communications which by the terms hereof are to be furnished by the Borrower
directly to each Bank.
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Section 8.13 RESIGNATION. If at any time First Bank shall deem it
advisable, in its sole discretion, it may submit to each of the Banks and the
Borrower a written notification of its resignation as Agent under this
Agreement, such resignation to be effective upon the appointment of a successor
Agent, but in no event later than 30 days from the date of such notice. Upon
submission of such notice, the Majority Banks may appoint a successor Agent.
ARTICLE IX
MISCELLANEOUS
Section 9.1 MODIFICATIONS. Notwithstanding any provisions to the
contrary herein, any term of this Agreement may be amended with the written
consent of the Borrower; provided that no amendment, modification or waiver
of any provision of this Agreement or any other Loan Document or consent to
any departure therefrom by the Borrower or other party thereto shall in any
event be effective unless the same shall be in writing and signed by the
Majority Banks, and then such amendment, modification, waiver or consent
shall be effective only in the specific instance and for the purpose for
which given. Notwithstanding the foregoing, no such amendment, modification,
waiver or consent shall:
9.1(a) Reduce the rate or extend the time of payment of interest
thereon, or reduce the amount of the principal thereof, or modify any of the
provisions of any Revolving Note with respect to the payment or repayment
thereof, without the consent of the holder of each Revolving Note so affected;
or
9.1(b) Increase the amount or extend the time of any Revolving
Commitment of any Bank, without the consent of such Bank; or
9.1(c) Reduce the rate or extend the time of payment of any fee
payable to a Bank, without the consent of the Bank affected; or
9.1(d) Amend the definition of Majority Banks or otherwise reduce
the percentage of the Banks required to approve or effectuate any such
amendment, modification, waiver, or consent, without the consent of all the
Banks; or
9.1(e) Amend any of Sections 2.20 through 2.25 or any of the
foregoing Sections 9.1 (a) through (d) or this Section 9.1 (e) without the
consent of all the Banks; or
9.1(f) Amend any provision of this Agreement relating to the Agent
in its capacity as Agent without the consent of the Agent; or
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9.1(g) Amend any provision of this Agreement relating to the
Commercial Paper Program or the issuance of Commercial Paper Notes or Standby
Letters of Credit without the consent of First Bank; or
9.1(h) Release any Guarantor from its obligations under its
Guaranty.
Section 9.2 EXPENSES. Whether or not the transactions contemplated
hereby are consummated, the Borrower agrees to reimburse the Agent upon demand
for all reasonable out-of-pocket expenses paid or incurred by the Agent
(including filing and recording costs and fees and expenses of Dorsey & Whitney,
counsel to the Agent), in connection with the negotiation, preparation,
approval, review, execution, delivery, amendment, modification and
interpretation of this Agreement and the other Loan Documents and any commitment
letters relating thereto. The Borrower shall also reimburse the Agent and,
after the occurrence of an Event of Default, each Bank upon demand for all
reasonable out-of-pocket expenses (including expenses of legal counsel) paid or
incurred by the Agent or any Bank in connection with the collection and
enforcement of this Agreement and any other Loan Document. The obligations of
the Borrower under this Section shall survive any termination of this Agreement.
Section 9.3 WAIVERS, ETC. No failure on the part of the Agent or the
holder of a Revolving Note to exercise and no delay in exercising any power or
right hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any power or right preclude
any other or further exercise thereof or the exercise of any other power or
right. The remedies herein and in the other Loan Documents provided are
cumulative and not exclusive of any remedies provided by law.
Section 9.4 NOTICES. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; provided, however, that
any notice to the Agent or any Bank under Article II hereof shall be deemed to
have been given only when received by the Agent or such Bank.
Section 9.5 TAXES. The Borrower agrees to pay, and save the Agent and
the Banks harmless from all liability for, any stamp or other taxes which may be
payable with respect to the execution or delivery of this Agreement or the
issuance of the Revolving Notes, which obligation of the Borrower shall survive
the termination of this Agreement.
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Section 9.6 SUCCESSORS AND ASSIGNS; DISPOSITION OF LOANS; TRANSFEREES.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Borrower may
not assign its rights or delegate its obligations hereunder or under any other
Borrower Loan Document without the prior written consent of all the Banks. Each
Bank may at any time, with the written consent of the Agent and, if no Default
or Event of Default has occurred which is continuing, the Borrower, sell,
assign, transfer, grant participations in, or otherwise dispose of any portion
of its Revolving Commitment, the Revolving Loans and/or Advances (each such
interest so disposed of being herein called a "Transferred Interest") to banks
or other financial institutions ("Transferees"). The Borrower agrees that each
Transferee shall be entitled to the benefits of Sections 2.21, 2.22, 2.23, 2.24
and 9.2 with respect to its Transferred Interest and that each Transferee may
exercise any and all rights of banker's Lien, setoff and counterclaim as if such
Transferee were a direct lender to the Borrower. If any Bank makes any
assignment to a Transferee, then upon notice to the Borrower such Transferee, to
the extent of such assignment (unless otherwise provided therein), shall become
a "Bank" hereunder and shall have all the rights and obligations of such Bank
hereunder and such Bank shall be released from its duties and obligations under
this Agreement to the extent of such assignment. Notwithstanding the sale by
any Bank of any participation hereunder, no participant shall be deemed to be or
have the rights and obligations of a Bank hereunder except that any participant
shall have a right of setoff under Section 7.3 as if it were such Bank and the
amount of its participation were owing directly to such participant by the
Borrower.
Section 9.7 CONFIDENTIALITY OF INFORMATION. The Agent and each Bank
shall use reasonable efforts to assure that information about the Borrower and
its operations, affairs and financial condition, not generally disclosed to the
public or to trade and other creditors, which is furnished to the Agent or such
Bank pursuant to the provisions hereof is used only for the purposes of this
Agreement and any other relationship between any Bank and the Borrower and shall
not be divulged to any Person other than the Banks, their Affiliates and their
respective officers, directors, employees and agents, except: (a) to their
attorneys and accountants, (b) in connection with the enforcement of the rights
of the Banks hereunder and under the Revolving Notes and the Guaranties or
otherwise in connection with applicable litigation, (c) in connection with
assignments and participations and the solicitation of prospective assignees and
participants referred to in the immediately preceding Section, and (d) as may
otherwise be required or requested by any regulatory authority having
jurisdiction over any Bank or by any applicable law, rule, regulation, judicial
process or legal process, the opinion of such Bank's counsel concerning the
making of such disclosure to be binding on the parties hereto. No Bank shall
incur any liability to the Borrower by reason of any disclosure permitted by
this Section 9.7.
Section 9.8 GOVERNING LAW AND CONSTRUCTION. THE VALIDITY, CONSTRUCTION
AND ENFORCEABILITY OF THIS AGREEMENT AND THE
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REVOLVING NOTES SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT
GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL
BANKS. Whenever possible, each provision of this Agreement and the other
Loan Documents and any other statement, instrument or transaction
contemplated hereby or thereby or relating hereto or thereto shall be
interpreted in such manner as to be effective and valid under such applicable
law, but, if any provision of this Agreement, the other Loan Documents or any
other statement, instrument or transaction contemplated hereby or thereby or
relating hereto or thereto shall be held to be prohibited or invalid under
such applicable law, such provision shall be ineffective only to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement, the other Loan
Documents or any other statement, instrument or transaction contemplated
hereby or thereby or relating hereto or thereto.
Section 9.9 CONSENT TO JURISDICTION. AT THE OPTION OF THE AGENT, THIS
AGREEMENT AND THE OTHER BORROWER LOAN DOCUMENTS MAY BE ENFORCED IN ANY FEDERAL
COURT OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA;
AND THE BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND
WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT
THE BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY
TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP
CREATED BY THIS AGREEMENT, THE AGENT AT ITS OPTION SHALL BE ENTITLED TO HAVE THE
CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF
SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.
Section 9.10 SURVIVAL OF AGREEMENT. All representations, warranties,
covenants and agreement made by the Borrower herein or in the other Borrower
Loan Documents and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be deemed to have been relied upon by the Banks and shall survive
the making of the Revolving Loans by the Banks and the execution and delivery to
the Banks by the Borrower of the Revolving Notes, regardless of any
investigation made by or on behalf of the Banks, and shall continue in full
force and effect as long as any Obligation is outstanding and unpaid and so long
as the Revolving Commitments have not been terminated; provided, however, that
the obligations of the Borrower under Section 9.2, 9.5 and 9.11 shall survive
payment in full of the Obligations and the termination of the Revolving
Commitments.
Section 9.11 INDEMNIFICATION. The Borrower hereby agrees to defend,
protect, indemnify and hold harmless the Agent and the Banks and their
respective Affiliates
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and the directors, officers, employees, attorneys and agents of the Agent and
the Banks and their respective Affiliates (each of the foregoing being an
"Indemnitee" and all of the foregoing being collectively the "Indemnitees")
from and against any and all claims, actions, damages, liabilities,
judgments, costs and expenses (including all reasonable fees and
disbursements of counsel which may be incurred in the investigation or
defense of any matter) imposed upon, incurred by or asserted against any
Indemnitee, whether direct, indirect or consequential and whether based on
any federal, state, local or foreign laws or regulations (including
securities laws, environmental laws, commercial laws and regulations), under
common law or on equitable cause, or on contract or otherwise:
(a) by reason of, relating to or in connection with the
execution, delivery, performance or enforcement of any Loan Document,
any commitments relating thereto, or any transaction contemplated by
any Loan Document; or
(b) by reason of, relating to or in connection with any credit
extended or used under the Loan Documents or any act done or omitted by
any Person, or the exercise of any rights or remedies thereunder,
including the acquisition of any collateral by the Banks by way of
foreclosure of the Lien thereon, deed or bill of sale in lieu of such
foreclosure or otherwise;
provided, however, that the Borrower shall not be liable to any Indemnitee for
any portion of such claims, damages, liabilities and expenses resulting from
such Indemnitee's gross negligence or willful misconduct. In the event this
indemnity is unenforceable as a matter of law as to a particular matter or
consequence referred to herein, it shall be enforceable to the full extent
permitted by law.
This indemnification applies, without limitation, to any act, omission,
event or circumstance existing or occurring on or prior to the later of the
Termination Date or the date of payment in full of the Obligations, including
specifically Obligations arising under clause (b) of this Section. The
indemnification provisions set forth above shall be in addition to any liability
the Borrower may otherwise have. Without prejudice to the survival of any other
obligation of the Borrower hereunder the indemnities and obligations of the
Borrower contained in this Section shall survive the payment in full of the
other Obligations.
Section 9.12 CAPTIONS. The captions or headings herein and any table of
contents hereto are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Agreement.
Section 9.13 ENTIRE AGREEMENT. This Agreement and the other Borrower
Loan Documents embody the entire agreement and understanding between the
Borrower, the Agent and the Banks with respect to the subject matter hereof and
thereof. This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof. Nothing contained in this Agreement or
in any other Loan Document,
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expressed or implied, is intended to confer upon any Persons other than the
parties hereto any rights, remedies, obligations or liabilities hereunder or
thereunder.
Section 9.14 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 9.15 BORROWER ACKNOWLEDGEMENTS. The Borrower hereby acknowledges
that (a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement, the other Loan Documents and the Commercial Paper
Program Documents, (b) neither the Agent nor any Bank has any fiduciary
relationship to the Borrower, the relationship being solely that of debtor and
creditor, (c) no joint venture exists between the Borrower and the Agent or any
Bank, and (d) neither the Agent nor any Bank undertakes any responsibility to
the Borrower to review or inform the Borrower of any matter in connection with
any phase of the business or operations of the Borrower and the Borrower shall
rely entirely upon its own judgment with respect to its business, and any
review, inspection or supervision of, or information supplied to, the Borrower
by the Agent or any Bank is for the protection of the Banks and neither the
Borrower nor any third party is entitled to rely thereon.
Section 9.16 COVENANT RIDER. All references to the "Credit Agreement"
contained in the covenant rider shall be deemed to mean and refer to this
Agreement as it may be amended, supplemented or restated from time to time.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
NORSTAN, INC.
By /Richard Cohen/
-----------------------------
Its Chief Financial Officer
ADDRESS:
605 North Highway 169
12th Floor
Plymouth, MN 55441
Attention: Robert J. Vold
Telecopier: (612) 420-1141
WITH COPIES TO:
Mr. Winston Munson
Mackall, Crounse & Moore
1400 At&T Tower
901 Marquette Avenue
Minneapolis, MN 55402
Telecopier: (612) 305-1414
(Signature page to Credit Agreement dated July 23, 1996)
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<PAGE>
FIRST BANK NATIONAL ASSOCIATION,
as Agent and as a Bank
By /Kurt D. Egertson/
-----------------------------
Its Vice President
ADDRESS:
First Bank Place
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Kurt D. Egertson MPFP0907
Telecopier: (612) 973-0822
(Signature page to Credit Agreement dated July 23, 1996)
S-2
<PAGE>
HARRIS TRUST AND SAVINGS BANK
By /George M. Dluhy/
----------------------------
Its Vice President
ADDRESS:
111 West Monroe Street
Chicago, IL 60603
Attention: Catherine C. Ciolek
Telecopier: (312) 461-2591
(Signature page to Credit Agreement dated July 23, 1996)
S-3
<PAGE>
THE SUMITOMO BANK, LIMITED,
CHICAGO BRANCH
By /Michael J. Philippe/
-------------------------
Its Vice President & Manager
--------------------------
By /J.W. Howard, Jr. /
--------------------------------
Its Vice President
--------------------------------
LENDING OFFICE:
233 South Wacker Drive, Suite 5400
Chicago, Illinois 60606
Attention: Vice President-Credit
Administration
Telecopier: (312) 876-1995
ADDRESS FOR NOTICES:
4135 Multifoods Tower
33 South Sixth Street
Minneapolis, MN 55402
Telecopier: (612) 332-6745
(Signature page to Credit Agreement dated July 23, 1996)
S-4
<PAGE>
EXHIBITS
--------
Exhibit 1.1A Revolving Commitment Amounts and Sublimits
Exhibit 1.1B Guaranty
Exhibit 1.1C Revolving Note
Exhibit 3.1 Opinion Letter
SCHEDULES
---------
Schedule 4.19 Subsidiaries
Schedule 6.10 Permitted Investments
Schedule 6.11 Permitted Indebtedness
Schedule 6.12 Permitted Liens
Schedule 6.13 Permitted Contingent Obligations
<PAGE>
EXHIBIT 1.1a TO
CREDIT AGREEMENT
REVOLVING COMMITMENT AMOUNTS AND SUBLIMITS
REVOLVING COMMERCIAL STANDBY
COMMITMENT REVOLVING PAPER LETTER OF CREDIT
BANK AMOUNT PERCENTAGE SUBLIMIT SUBLIMIT
- ---- --------- ---------- ---------- ----------------
First Bank $20,000,000 50% $ 7,500,000 $2,500,000
National
Association
Harris Trust $10,000,000 25% $ 3,750,000 $1,250,000
and Savings
Bank
The Sumitomo $10,000,000 25% $ 3,750,000 $1,250,000
Bank Limited,
Chicago Branch
----------- ---- ----------- ----------
Total $40,000,000 100% $15,000,000 $5,000,000
<PAGE>
EXHIBIT 1.1B TO
CREDIT AGREEMENT
GUARANTY
THIS GUARANTY, dated as of July 23, 1996, is made and entered into by and
between ___________________________, a Minnesota corporation (the "Guarantor"),
and FIRST BANK NATIONAL ASSOCIATION, a national banking association, as Agent
for the benefit of the Agent and the Banks party to the Credit Agreement
referred to below (in such capacity, the "Agent").
RECITALS
A. The Borrower, First Bank National Association ("First Bank"), Harris
Trust and Savings Bank ("Harris") and the Agent are parties to a Credit
Agreement dated as of October 28, 1994 (the "Existing Credit Agreement").
B. The Borrower's obligations under the Existing Credit Agreement are
guarantied by the Guarantor pursuant to a Guaranty executed by the Guarantor in
favor of the Agent for benefit of said Banks, dated as of [October 28, 1994]
[June 4, 1996] (the "Existing Guaranty").
C. First Bank, Harris, The Sumitomo Bank Limited, Chicago Branch
("Sumitomo") and the Agent are, concurrently herewith, entering into a Credit
Agreement of even date herewith (the "Credit Agreement") with the Borrower,
which Credit Agreement constitutes an amendment and restatement of the Existing
Credit Agreement.
D. It is a condition precedent to the effectiveness of the Credit
Agreement and to the obligations of First Bank, Harris and Sumitomo to extend
credit accommodations pursuant to the terms of the Credit Agreement and the
availability of drawings under the Commercial Paper Letter of Credit for the
Commercial Paper Program that the Existing Guaranty be amended and restated in
its entirety.
E. The Guarantor is a wholly owned subsidiary of the Borrower and may
receive a portion of the proceeds received by the Borrower under the Credit
Agreement in the form of loans, capital contributions or other Investments by
the Borrower in the Guarantor.
F. The Guarantor expects to derive benefits from the extension of credit
accommodations to the Borrower under the Credit Agreement and finds it
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advantageous, desirable and in its best interests to amend and restate the
Existing Guaranty.
NOW, THEREFORE, In consideration of the credit accommodations to be
extended to the Borrower and for other good and valuable consideration, the
parties hereto hereby agree that the Existing Guaranty shall be, and it hereby
is, amended and restated to read in full as follows:
Section 1. DEFINED TERMS. Terms defined in the Credit Agreement and not
otherwise defined herein shall, when used herein, have the meanings ascribed
thereto in the Credit Agreement. In addition, the following terms shall have
the meanings indicated:
"ADJUSTED NET WORTH" of the Guarantor shall mean, as of any date of
determination thereof, the excess of (a) the amount of the "present fair
saleable value" of the assets of the Guarantor as of the date of such
determination, over (b) the amount of all "liabilities of the Guarantor,
contingent or otherwise," as of the date of such determination, as such
quoted terms are determined in accordance with applicable federal and state
laws governing determinations of the insolvency of debtors; provided,
however, that in determining the liabilities of the Guarantor for purposes
of calculating the Guarantor's Adjusted Net Worth, the liabilities of the
Guarantor under this Guaranty shall be excluded.
"AGENT" shall mean First Bank National Association in its capacity as
Agent under the Credit Agreement and any successor thereto in such
capacity.
"CREDIT AGREEMENT" shall have the meaning indicated in Recital A.
"DETERMINATION DATE" shall mean the earlier of (a) the date of
commencement of a case under Title 11 of the United States Code in which
the Guarantor is a debtor, or (b) the date enforcement hereunder is sought
with respect to the Guarantor.
"EXTENSION OF CREDIT" shall mean all loans, advances, other extensions
of credit and other credit facilities and accommodations of any kind
whatsoever extended to the Borrower under the Credit Agreement and/or the
Commercial Paper Program Documents.
"GUARANTOR" shall have the meaning indicated in the opening paragraph
hereof.
"MAXIMUM GUARANTEED AMOUNT" for the Guarantor shall mean, as of the
Determination Date, the sum of (a) an amount equal to the aggregate amount
of
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the Extensions of Credit under the Credit Agreement the proceeds of
which are used to make a Valuable Transfer to the Guarantor, plus (b) the
greater of (i) 95% of the Adjusted Net Worth of the Guarantor at the date
of the making of the first of the Extensions of Credit under the Credit
Agreement, or (ii) 95% of the Adjusted Net Worth of the Guarantor on such
Determination Date.
"VALUABLE TRANSFER" shall mean, in respect of the Guarantor, (a) all
loans, advances or capital contributions made to the Guarantor with
proceeds of Extensions of Credit, (b) all debt securities or other
obligations of the Guarantor acquired from the Guarantor, or retired by the
Guarantor, with proceeds of Extensions of Credit, (c) the fair market value
of all property acquired with proceeds of Extensions of Credit and
transferred, absolutely and not as collateral, to the Guarantor (but only
to the extent of the economic benefit to the Guarantor of the property so
transferred), (d) all equity securities of the Guarantor acquired from the
Guarantor with proceeds of Extensions of Credit, and (e) the value of
quantifiable economic benefits not included in clauses (a) through (d)
above accruing to the Guarantor as a result of the Extensions of Credit.
Section 2. THE GUARANTY. The Guarantor hereby absolutely and
unconditionally guarantees to the Agent and the Banks the payment when due
(whether at a stated maturity or earlier by reason of acceleration or otherwise)
and performance of the Obligations; PROVIDED, HOWEVER, that the obligation of
the Guarantor on this Guaranty is limited to the Maximum Guaranteed Amount as
determined at the Determination Date; and PROVIDED, FURTHER, that the Maximum
Guaranteed Amount for which the Guarantor may be liable hereunder shall in no
event exceed the amount which can be guaranteed by the Guarantor under
applicable federal and state laws relating to the insolvency of debtors.
Section 3. CONTINUING GUARANTY. This Guaranty is an absolute,
unconditional, complete and continuing guaranty of payment and performance of
the Obligations, and the obligations of the Guarantor hereunder shall not be
released, in whole or in part, by any action or thing which might, but for this
provision of this Guaranty, be deemed a legal or equitable discharge of a surety
or guarantor, other than irrevocable payment and performance in full of the
Obligations. No notice of the Obligations to which this Guaranty may apply, or
of any renewal or extension thereof need be given to the Guarantor and none of
the foregoing acts shall release the Guarantor from liability hereunder. The
Guarantor hereby expressly waives (a) demand of payment, presentment, protest,
notice of dishonor, nonpayment or nonperformance on any and all forms of the
Obligations; (b) notice of acceptance of this Guaranty and notice of any
liability to which it may apply; (c) all other notices and demands of any kind
and description relating to the Obligations now or hereafter provided for by any
agreement, statute, law, rule or regulation; and (d) any and all defenses of the
Borrower pertaining to the Obligations except for the defense of discharge by
payment. The Guarantor shall
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<PAGE>
not be exonerated with respect to the Guarantor's liabilities under this
Guaranty by any act or thing except irrevocable payment and performance of
the Obligations, it being the purpose and intent of this Guaranty that the
Obligations constitute the direct and primary obligations of the Guarantor
and that the covenants, agreements and all obligations of the Guarantor
hereunder be absolute, unconditional and irrevocable. The Guarantor shall be
and remain liable for any deficiency remaining after foreclosure of any
mortgage, deed of trust or security agreement securing all or any part of the
Obligations, whether or not the liability of the Borrower or any other Person
for such deficiency is discharged pursuant to statute, judicial decision or
otherwise. The acceptance of this Guaranty by the Agent for the benefit of
the Agent and the Banks is not intended and does not release any liability
previously existing of any guarantor or surety of any indebtedness of the
Borrower to the Agent or the Banks.
Section 4. OTHER TRANSACTIONS. The Agent and the Banks are expressly
authorized (a) to exchange, surrender or release with or without consideration
any or all collateral and security which may at any time be placed with it by
the Borrower or by any other Person, or to forward or deliver any or all such
collateral and security directly to the Borrower for collection and remittance
or for credit, or to collect the same in any other manner without notice to the
Guarantor; and (b) to amend, modify, extend or supplement the Credit Agreement,
any note or other instrument evidencing the Obligations or any part thereof and
any other agreement with respect to the Obligations, waive compliance by the
Borrower or any other Person with the respective terms thereof and settle or
compromise any of the Obligations without notice to the Guarantor and without in
any manner affecting the absolute liabilities of the Guarantor hereunder. No
invalidity, irregularity or unenforceability of all or any part of the
Obligations or of any security therefor or other recourse with respect thereto
shall affect, impair or be a defense to this Guaranty. The liabilities of the
Guarantor hereunder shall not be affected or impaired by any failure, delay,
neglect or omission on the part of the Agent or the Banks to realize upon any of
the Obligations of the Borrower to the Agent or the Banks, or upon any
collateral or security for any or all of the Obligations, nor by the taking by
the Agent or the Banks of (or the failure to take) any other guaranty or
guaranties to secure the Obligations, nor by the taking by the Agent or the
Banks of (or the failure to take or the failure to perfect their security
interest in or other Lien on) collateral or security of any kind. No act or
omission of the Agent or the Banks, whether or not such action or failure to act
varies or increases the risk of, or affects the rights or remedies of the
Guarantor, shall affect or impair the obligations of the Guarantor hereunder.
The Guarantor acknowledges that this Guaranty is in effect and binding without
reference to whether this Guaranty is signed by any other Person or Persons,
that possession of this Guaranty by the Agent shall be conclusive evidence of
due delivery hereof by the Guarantor and that this Guaranty shall continue in
full force and effect, both as to the Obligations then existing and/or
thereafter created, notwithstanding the release of or extension of time to any
other guarantor of the Obligations or any part thereof.
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<PAGE>
Section 5. ACTIONS NOT REQUIRED. The Guarantor hereby waives any and all
right to cause a marshalling of the assets of the Borrower or any other action
by any court or other governmental body with respect thereto or to cause the
Agent or the Banks to proceed against any security for the Obligations or any
other recourse which the Agent or the Banks may have with respect thereto and
further waives any and all requirements that the Agent or the Banks institute
any action or proceeding at law or in equity, or obtain any judgment, against
the Borrower or any other Person, or with respect to any collateral security for
the Obligations, as a condition precedent to making demand on or bringing an
action or obtaining and/or enforcing a judgment against, the Guarantor upon this
Guaranty. The Guarantor further acknowledges that time is of the essence with
respect to the Guarantor's obligations under this Guaranty. Any remedy or right
hereby granted which shall be found to be unenforceable as to any Person or
under any circumstance, for any reason, shall in no way limit or prevent the
enforcement of such remedy or right as to any other Person or circumstance, nor
shall such unenforceability limit or prevent enforcement of any other remedy or
right hereby granted.
Section 6. NO SUBROGATION. Notwithstanding any payment or payments made
by the Guarantor hereunder or any setoff or application of funds of the
Guarantor by the Agent or the Banks, the Guarantor shall not be entitled to be
subrogated to any of the rights of the Agent or the Banks against the Borrower
or any other guarantor or any collateral security or guaranty or right of offset
held by the Agent or the Banks for the payment of the Obligations, nor shall the
Guarantor seek or be entitled to seek any contribution or reimbursement from the
Borrower or any other guarantor in respect of payments made by the Guarantor
hereunder, until all amounts owing to the Agent and the Banks by the Borrower on
account of the Obligations are irrevocably paid in full. If any amount shall be
paid to the Guarantor on account of such subrogation rights at any time when all
of the Obligations shall not have been irrevocably paid in full, such amount
shall be held by the Guarantor in trust for the Agent for the benefit of the
Agent and the Banks, segregated from other funds of the Guarantor, and shall,
forthwith upon receipt by the Guarantor, be turned over to the Agent, for the
benefit of the Agent and the Banks, in the exact form received by the Guarantor
(duly indorsed by the Guarantor to the Agent, if required), to be applied
against the Obligations, whether matured or unmatured, in such order as the
Agent and the Banks may determine.
Section 7. APPLICATION OF PAYMENTS. Any and all payments upon the
Obligations made by the Guarantor or by any other Person, and/or the proceeds of
any or all collateral or security for any of the Obligations, may be applied by
the Agent and the Banks on such items of the Obligations as the Agent and the
Banks may elect.
Section 8. RECOVERY OF PAYMENT. If any payment received by the Agent or
the Banks and applied to the Obligations is subsequently set aside, recovered,
rescinded or
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<PAGE>
required to be returned for any reason (including, without limitation, the
bankruptcy, insolvency or reorganization of the Borrower or any other
obligor), the Obligations to which such payment was applied shall for the
purposes of this Guaranty be deemed to have continued in existence,
notwithstanding such application, and this Guaranty shall be enforceable as
to such Obligations as fully as if such application had never been made.
References in this Guaranty to amounts "irrevocably paid" or to "irrevocable
payment" refer to payments that cannot be set aside, recovered, rescinded or
required to be returned for any reason.
Section 9. BORROWER'S FINANCIAL CONDITION. The Guarantor is familiar
with the financial condition of the Borrower, and the Guarantor has executed and
delivered this Guaranty based on the Guarantor's own judgment and not in
reliance upon any statement or representation of the Agent or the Banks.
Neither the Agent nor the Banks shall have any obligation to provide the
Guarantor with any advice whatsoever or to inform the Guarantor at any time of
the Agent's or the Banks' actions, evaluations or conclusions on the financial
condition or any other matter concerning the Borrower.
Section 10. REMEDIES. All remedies afforded to the Agent for the benefit
of the Banks by reason of this Guaranty are separate and cumulative remedies and
it is agreed that no one of such remedies, whether or not exercised by the
Agent, shall be deemed to be in exclusion of any of the other remedies available
to the Agent or the Banks and shall in no way limit or prejudice any other legal
or equitable remedy which the Agent or the Banks may have hereunder and with
respect to the Obligations. Mere delay or failure to act shall not preclude the
exercise or enforcement of any rights and remedies available to the Agent under
or with respect to this Guaranty.
Section 11. BANKRUPTCY OF THE BORROWER. The Guarantor expressly agrees
that the liabilities and obligations of the Guarantor under this Guaranty shall
not in any way be impaired or otherwise affected by the institution by or
against the Borrower or any other Person of any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or any other similar
proceedings for relief under any bankruptcy law or similar law for the relief of
debtors and that any discharge of any of the Obligations pursuant to any such
bankruptcy or similar law or other law shall not diminish, discharge or
otherwise affect in any way the obligations of the Guarantor under this
Guaranty, and that upon the institution of any of the above actions, such
obligations shall be enforceable against the Guarantor.
Section 12. COSTS AND EXPENSES. The Guarantor will pay or reimburse the
Agent and the Banks on demand for all out-of-pocket expenses (including in each
case all reasonable fees and expenses of counsel) incurred by the Agent or the
Banks arising out of or in connection with the enforcement of this Guaranty
against the Guarantor or arising out of or in connection with any failure of the
Guarantor to fully and timely perform the obligations of the Guarantor
hereunder.
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Section 13. WAIVERS AND AMENDMENTS. This Guaranty can be waived,
modified, amended, terminated or discharged only explicitly in a writing signed
by the Agent. A waiver so signed shall be effective only in the specific
instance and for the specific purpose given.
Section 14. NOTICES. Any notice or other communication to any party in
connection with this Guaranty shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first business day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed.
Section 15. GUARANTOR ACKNOWLEDGEMENTS. The Guarantor hereby acknowledges
that (a) counsel has advised the Guarantor in the negotiation, execution and
delivery of this Guaranty, (b) neither the Agent nor any of the Banks has any
fiduciary relationship to the Guarantor, the relationship being solely that of
debtor and creditor, and (c) no joint venture exists between the Guarantor, the
Agent or any of the Banks.
Section 16. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby
represents and warrants to the Agent and the Banks that:
16(a) The Guarantor is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority and the legal right to
own and operate its properties and to conduct the business in which it is
currently engaged.
16(b) The Guarantor has the corporate power and authority and the
legal right to execute and deliver, and to perform its obligations under, this
Guaranty and has taken all necessary corporate action to authorize such
execution, delivery and performance.
16(c) This Guaranty constitutes its legal, valid and binding
obligation enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
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16(d) The execution, delivery and performance of this Guaranty will
not (i) violate any provision of any law, statute, rule or regulation or any
order, writ, judgment, injunction, decree, determination or award of any court,
governmental agency or arbitrator presently in effect having applicability to
the Guarantor, (ii) violate or contravene any provision of its Articles of
Incorporation or bylaws, or (iii) result in a breach of or constitute a default
under any indenture, loan or credit agreement or any other agreement, lease or
instrument to which it is a party or by which it or any of its properties may be
bound or result in the creation of any lien thereunder. The Guarantor is not in
default under or in violation of any such law, statute, rule or regulation,
order, writ, judgment, injunction, decree, determination or award or any such
indenture, loan or credit agreement or other agreement, lease or instrument in
any case in which the consequences of such default or violation could have a
material adverse effect on its business, operations, properties, assets or
condition (financial or otherwise).
16(e) No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by, any
governmental or public body or authority is required on the part of the
Guarantor to authorize, or is required in connection with the execution,
delivery and performance of, or the legality, validity, binding effect or
enforceability of, this Guaranty.
16(f) There are no actions, suits or proceedings pending or, to the
knowledge of the Guarantor, threatened against or affecting it or any of its
properties before any court or arbitrator, or any governmental department,
board, agency or other instrumentality which, if determined adversely to the
Guarantor, would have a material adverse effect on its business, operations,
property or condition (financial or otherwise) or on its ability to perform its
obligations hereunder.
16(g) It expects to derive benefits from the transactions resulting
in the creation of the Obligations. The Agent and the Banks may rely
conclusively on the continuing warranty, hereby made, that the Guarantor
continues to be benefitted by the Banks' extensions of credit accommodations to
the Borrower and neither the Agent nor any of the Banks shall have any duty to
inquire into or confirm the receipt of any such benefits, and this Guaranty
shall be effective and enforceable by the Agent for the benefit of the Agent and
the Banks without regard to the receipt, nature or value of any such benefits.
16(h) The Guarantor (i) is not insolvent as of the Closing Date and
will not become insolvent as a result of the execution, delivery and performance
of this Guaranty, (ii) is not engaged in a business or transaction, or about to
engage in a business or transaction, for which its property is an unreasonably
small capital, and (iii) does not intend to incur, or believe that it will
incur, debts that would be beyond its ability to pay as such debts mature.
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Section 17. CONTINUING GUARANTY; ASSIGNMENTS UNDER CREDIT AGREEMENT. This
Guaranty shall (a) remain in full force and effect until irrevocable payment in
full of the Obligations and the expiration of the obligations, if any, of the
Banks to extend credit accommodations to the Borrower, (b) be binding upon the
Guarantor, its successors and assigns and (c) inure to the benefit of, and be
enforceable by, the Agent and its successors and assigns in such capacity, for
the benefit of the Agent and the Banks and their respective successors,
transferees, and assigns. Without limiting the generality of the foregoing
clause (c), the Banks may assign or otherwise transfer all or any portion of
their respective rights and obligations under the Credit Agreement to any other
Persons to the extent and in the manner provided in the Credit Agreement and may
similarly transfer all or any portion of their respective rights (as derived
through the Agent) under this Guaranty to such Persons.
Section 18. GOVERNING LAW AND CONSTRUCTION. THE VALIDITY, CONSTRUCTION
AND ENFORCEABILITY OF THIS GUARANTY SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT
GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.
Whenever possible, each provision of this Guaranty and any other statement,
instrument or transaction contemplated hereby or relating hereto shall be
interpreted in such manner as to be effective and valid under such applicable
law, but, if any provision of this Guaranty or any other statement, instrument
or transaction contemplated hereby or relating hereto shall be held to be
prohibited or invalid under such applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Guaranty or any other statement, instrument or transaction contemplated hereby
or relating hereto.
Section 19. CONSENT TO JURISDICTION. AT THE OPTION OF THE AGENT, THIS
GUARANTY MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING
IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE GUARANTOR CONSENTS TO THE
JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN
SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE GUARANTOR COMMENCES ANY ACTION
IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING
DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS GUARANTY, THE AGENT
AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE
JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 20. COUNTERPARTS. This Guaranty may be executed in any
-9-
<PAGE>
number of counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument.
Section 21. GENERAL. All representations and warranties contained in this
Guaranty or in any other agreement between the Guarantor, the Agent and/or the
Banks shall survive the execution, delivery and performance of this Guaranty and
the creation and payment of the Obligations. Captions in this Guaranty are for
reference and convenience only and shall not affect the interpretation or
meaning of any provision of this Guaranty.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-10-
<PAGE>
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the date
first above written.
GUARANTOR:
By: __________________________
Title: _________________________
Address:
605 North Highway 169
12th Floor
Plymouth, MN 55441
FIRST BANK NATIONAL ASSOCIATION
as Agent for the benefit of the Agent and
the Banks
By: ___________________________
Title: Vice President
Address:
First Bank National Association
First Bank Place
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Kurt D. Egertson - MPFP0907
Fax (612) 973-0822
-11-
<PAGE>
EXHIBIT 1.1C TO
CREDIT AGREEMENT
REVOLVING NOTE
$ July 23, 1996
Minneapolis, Minnesota
FOR VALUE RECEIVED, NORSTAN, INC., a Minnesota corporation (the
"Borrower"), hereby promises to pay to the order of
________________________________ (the "Bank") at the main office of First Bank
National Association in Minneapolis, Minnesota, in lawful money of the United
States of America in Immediately Available Funds (as such term and each other
capitalized term used herein are defined in the Credit Agreement
hereinafter referred to) on July 31, 1999 the principal amount of
_______________________ AND NO/100 DOLLARS ($______________.00) or,
if less, the aggregate unpaid principal amount of all Loans made by the
Bank under the Credit Agreement, and to pay interest (computed on the basis
of actual days elapsed and a year of 360 days) in like funds on the unpaid
principal amount hereof from time to time outstanding at the rates and times
set forth in the Credit Agreement.
This note is one of the Revolving Notes referred to in the Credit Agreement
dated as of July 23, 1996 (the "Credit Agreement") among the Borrower, the Bank
and the other banks named therein. This note is subject to certain permissive
and mandatory prepayments and its maturity is subject to acceleration, in each
case upon the terms provided in said Credit Agreement.
In the event of default hereunder, the Borrower agrees to pay all costs and
expenses of collection, including reasonable attorneys' fees. The Borrower
waives demand, presentment, notice of nonpayment, protest, notice of protest and
notice of dishonor.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF
THE UNITED STATES APPLICABLE TO NATIONAL BANKS.
NORSTAN, INC.
<PAGE>
First Bank National Association
Harris Trust and Savings Bank
The Sumitomo Bank Limited
July 23, 1996
Page 1
EXHIBIT 3.1 TO
CREDIT AGREEMENT
July 23, 1996
First Bank National Association
First Bank Place
601 Second Avenue South
Minneapolis, MN 55402-4302
Attn: Kurt D. Egertson MPFP0907
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, IL 60603
The Sumitomo Bank Limited,
Chicago Branch
4135 Multifoods Tower
33 South 6th Street
Minneapolis, MN 55402
Gentlemen:
We have acted as counsel for Norstan, Inc. (the "Borrower") and its
subsidiaries, Norstan Financial Services, Inc., Norstan Communications. Inc.,
Norstan Network Services, Inc., Norstan Canada Inc. and Connect Computer
Company, in connection with a Credit Agreement (the "Credit Agreement") of even
date herewith by and among the Borrower, the banks which are signatories thereto
and First Bank National Association, a national banking association, one of the
Banks, as agent for the Banks. Except as otherwise defined herein, all terms
defined in the Credit Agreement shall have the meanings herein that are given to
them in the Credit Agreement.
<PAGE>
First Bank National Association
Harris Trust and Savings Bank
The Sumitomo Bank Limited
July 23, 1996
Page 2
In this connection, we have examined the Borrower Loan Documents and the
Guaranties (the "Documents").
We have examined such legal matters as we have deemed necessary and
relevant in connection with this opinion. We have examined and relied upon the
originals, or copies certified or otherwise identified to our satisfaction, of
the Documents and such records, documents (including certified resolutions of
the Board of Directors of the Company authorizing the financing transaction and
the entering into the Documents) and other instruments as in our judgment are
necessary or appropriate to enable us to render the opinions expressed below.
In all such examinations, we have assumed the genuineness of all signatures
other than those of the Company. As to questions of fact material to the
opinions expressed herein, we have relied on certificates of the officers of
Company and of public officials.
On the basis of the foregoing, we are of the opinion that:
(a) The Borrower is a corporation duly incorporated and validly existing
and in good standing under the laws of the State of Minnesota and has all
requisite corporate power and authority to carry on its business as now
conducted, to enter into the Borrower Loan Documents and to perform all of its
obligations under each and all of the foregoing. The Borrower is duly qualified
and in good standing as a foreign corporation in all of the jurisdictions in
which the character of the properties owned or leased by it or the business
conducted by it makes such qualification necessary and the failure to so qualify
would permanently preclude the Borrower from enforcing its rights with respect
to any material asset or expose the Borrower to any material liability.
(b) The execution, delivery and performance by the Borrower of the
Borrower Loan Documents have been duly authorized by all necessary corporate
action by the Borrower.
(c) The Borrower Loan Documents constitute the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms.
(d) The execution, delivery and performance by the Borrower of the
Borrower Loan Documents will not (a) violate any provision of any law, statute,
rule or regulation or, to the best of our knowledge, any order, writ, judgment,
injunction, decree, determination or award of any court, governmental agency or
arbitrator presently in effect having applicability to the Borrower, (b) violate
or contravene any provision of
<PAGE>
First Bank National Association
Harris Trust and Savings Bank
The Sumitomo Bank Limited
July 23, 1996
Page 3
the Articles of Incorporation or bylaws of the Borrower, or (c) result in a
breach of or constitute a default under any indenture, loan or credit
agreement or any other agreement, lease or instrument known to us to which
the Borrower is a party or by which it or any of its properties may be bound
or result in the creation of any lien thereunder.
(e) No order, consent, approval, license, authorization or validation of,
or filing, recording or registration with, or exemption by, any governmental of
public body of authority is required on the part of the Borrower to authorize,
or is required in connection with the execution, delivery and performance of, or
the legality, validity, binding effect or enforceability of, the Borrower Loan
Documents.
(f) To the best of our knowledge, there are no actions, suits or
proceedings pending or threatened against or affecting the Borrower of any of
its properties before any court or arbitrator, or any governmental department,
board, agency or other instrumentality which (i) challenge the legality,
validity or enforceability of the Borrower Loan Documents, or (ii) if determined
adversely to the Borrower, would have a material adverse effect on the business,
operations, property or condition (financial or otherwise) of the Borrower and
the Subsidiaries as a consolidated enterprise or on the ability of the Borrower
to perform it obligations under the Borrower Loan Documents.
(g) Each subsidiary is a corporation duly incorporated and validly
existing and in good standing under the laws of its jurisdiction of
incorporation indicated on Schedule 4.19 to the Credit Agreement and has all
requisite corporate power and authority to carry on its business as now
conducted, to enter into those Loan Documents to which it is a party and to
perform all of its obligations under each and all of the foregoing. Each
Subsidiary is duly qualified and in good standing as a foreign corporation in
all of the jurisdictions in which the character of the properties owned or
leased by it or the business conducted by it makes such qualification necessary
and the failure to so qualify would permanently preclude such Subsidiary from
enforcing its rights with respect to any material asset or expose such
Subsidiary to any material liability.
(h) The execution, delivery and performance by each Subsidiary of the Loan
Documents to which it is a party have been duly authorized by all necessary
corporate action by such Subsidiary.
<PAGE>
First Bank National Association
Harris Trust and Savings Bank
The Sumitomo Bank Limited
July 23, 1996
Page 4
(i) Each Loan Document executed by a Subsidiary constitutes a legal, valid
and binding obligation of such Subsidiary, enforceable against such Subsidiary
in accordance with its terms.
(j) The execution, delivery and performance by each Subsidiary of the Loan
Documents to which it is a party will not (i) violate any provision of any law,
statute, rule or regulation, or to the best of our knowledge, any order, writ,
judgment, injunction, decree, determination or award of any court, governmental
agency or arbitrator presently in effect having applicability to such
Subsidiary, (ii) violate or contravene any provision of the Articles of
Incorporation or bylaws of such Subsidiary, or (iii) result in a breach of or
constitute a default under any indenture, loan or credit agreement or any other
agreement, lease or instrument known to us to which such Subsidiary is a party
or by which it or any of its properties may be bound or result in the creation
of any Lien thereunder.
(k) No order, consent, approval, license, authorization or validation of,
or filing, recording or registration with, or exemption by, any governmental or
public body or authority is required on the part of any Subsidiary to authorize,
or is required in connection with the execution, delivery and performance of, or
the legality, validity, binding effect or enforceability of, the Loan Documents
to which such Subsidiary is a party.
(l) To the best of our knowledge, there are no actions, suits or
proceedings pending or threatened against or affecting any Subsidiary or any of
its properties before any court or arbitrator, or any governmental department,
board, agency or other instrumentality which (i) challenge the legality,
validity or enforceability of any Loan Document to which such Subsidiary is a
party, or (ii) if determined adversely to such Subsidiary, would have a material
adverse effect on the business, operations, property or condition (financial or
otherwise) of such Subsidiary or on the ability of such Subsidiary to perform
its obligations under the Loan Documents to which it is a party.
The opinions expressed herein are also subject to the following matters (in
addition to the qualifications, exceptions, limitations and assumptions
specified above):
(a) Our opinions as they relate to the validity and enforceability of the
Documents are subject to the qualification that the availability of the remedies
of specific performance or injunctive relief, or any other equitable remedy, is
subject to the discretion of the court before which a proceeding therefor may be
brought and the application of general principles of equity.
<PAGE>
First Bank National Association
Harris Trust and Savings Bank
The Sumitomo Bank Limited
July 23, 1996
Page 5
(b) Our opinions as they relate to the validity and enforceability of the
Documents are subject to the qualification that the same may be limited by the
Uniform Fraudulent Transfer Act, the Uniform Fraudulent Conveyance Act,
bankruptcy, reorganization, insolvency, moratorium and other similar laws
affecting generally the enforcement of creditors' rights, now or hereafter in
effect, and subject to limitations on the availability of equitable remedies.
(c) The validity and enforceability of each of the Documents is subject to
the applicable statute of limitations.
(d) The provision of the Documents specifying that the documents may only
be amended or waived in writing may not be enforceable to the extent that an
oral agreement or an implied agreement by trade practice or course of conduct
has been created modifying any provision of the Documents.
We are licensed to practice law in the State of Minnesota and the opinions
expressed herein are limited to the laws of the State of Minnesota and federal
laws.
This opinion is furnished for the benefit of you and any participants in
the loans evidenced by the Documents, and may be relied upon only by you and
such participants.
Very truly yours,
<PAGE>
SCHEDULE 4.19 TO
CREDIT AGREEMENT
SUBSIDIARIES
STATE OF PERCENTAGE OWNERSHIP
NAME OF SUBSIDIARY INCORPORATION BY NORSTAN, INC.
- ------------------ ------------- --------------------
Norstan Communications, Inc. Minnesota 100%
Norstan Financial Services, Inc. Minnesota 100%
Norstan Canada Inc. Minnesota 100%
Norstan Network Services, Inc. Minnesota 100%
Norstan Information Systems, Inc. Minnesota 100%
Summit Gear, Inc. Minnesota 100%
Norstan Network Services, Inc. New Hampshire (owned 100% by
of New Hampshire Norstan Network
Services, Inc.)
Connect Computer Company Minnesota 100%
<PAGE>
SCHEDULE 6.10 TO
CREDIT AGREEMENT
PERMITTED INVESTMENTS
---------------------
NAME OF COMPANY OWNERSHIP INTEREST
- --------------- ------------------
Storage Technology Corporation $500 Senior Debenture
Storage Technology Corporation 323 shares of common stock
- --
<PAGE>
SCHEDULE 6.11 TO
CREDIT AGREEMENT
PERMITTED INDEBTEDNESS
BALANCE AT
7/19/96 MATURITY
------- --------
Notes payable to First Bank,
financing of leased equipment $ 3,177,177 various
Notes payable to ChiCorp
Financial Services, financing
of leased equipment $ 607,507 12/97
Notes payable to Sanwa Business
Credit Corporation, financing
of leased equipment $19,238,273 various
Notes payable to Tuckahoe
Leasing, Inc., financing
of leased equipment (Canadian $) $ 741,749 3/99
Notes payable to Sanwa
Bank Canada, financing
of leased equipment (Canadian $) $ 3,300,244 4/01
Non-compete agreements payable to
certain members of Connect
management $ 666,667 6/98
Connect Computer capital leases
with Sunrise Lease $ 402,810 various
Connect Computer capital leases
with RP Capital $ 139,309 various
Connect Computer capital lease
with Norwest Equipment $ 26,282 11/96
Connect Computer capital leases
with Lease Finance $ 374,407 various
Connect Computer capital leases
with WinR $ 144,964 various
<PAGE>
SCHEDULE 6.12 T0
CREDIT AGREEMENT
PERMITTED LIENS
DATE OF
COMPANY STATEMENT NO. FILING SECURED PARTY COLLATERAL
- --------------------- -------- ------------- ----------
Norstan, Inc. 1161271 07/11/88 Security Pacific Office furniture
Equipment Leasing, (leased)
Inc.
1269054 09/11/89 Security Pacific Office equipment
Equipment Leasing, (leased)
Inc.
1661545 03/29/94 Deutsche Financial Collateral Inventory
Services
1738335 02/16/95 Hewlett Packard Collateral Inventory
Company
Norstan 1522203 08/12/92 FBNA Leases and
Financial leased equipment
Services, Inc.
1522211 08/12/92 FBNA Lease supplements
and equipment
1552484 12/23/92 Chicorp Financial Contract proceeds
(assigned to pursuant to lease
Mingic & Co.)
1552485 12/23/92 Chicorp Financial Contract proceeds
(assigned to pursuant to lease
Mingic & Co.)
1553088 12/28/92 Chicorp Financial Contract proceeds
(assigned to pursuant to lease
Mingic & Co.)
-1-
<PAGE>
1556033 01/12/93 FBNA Equipment and
Leases
1586418 05/10/93 Sanwa Business Leases and
Credit Corporation leased equipment
1630371 11/16/93 FBNA Lease supplements and
leased equipment
-- 12/93 Sanwa Business Leases and
Credit Corporation leased equipment
1728066 01/05/95 Sanwa Business Leases and
and Credit Corporation leased equipment
1728067
Norstan -- 06/94 Tuckahoe Leasing, Leases and
Canada Inc. Inc. leased equipment
-- 04/96 Sanwa Bank Canada Leases and
leased equipment
Connect
Computer
Company -- -- Sunrise Lease Leased equipment
-- -- RP Capital Leased equipment
-- -- Norwest Leased equipment
Equipment
-- -- Lease Finance Leased equipment
-- -- WinR Leased equipment
-2-
<PAGE>
SCHEDULE 6.13 TO
CREDIT AGREEMENT
PERMITTED CONTINGENT OBLIGATIONS
BALANCE AT
OBLIGOR PAYEE 7/23/96 MATURITY
- --------------------------------------------------------------------------
Norstan, Inc. First Bank National $ 782,000 Various
Association
Norstan, Inc. Guaranty to State of $ 80,000 --
California for
obligations of Norstan
Network Services, Inc.
Norstan, Inc. Guaranty of recourse $ 101,000 3/99
obligations to Tuckahoe
Leasing, Inc.
Norstan, Inc. Connect Computer $4,000,000 Various
Company shareholders,
contingent purchase
consideration
<PAGE>
EXHIBIT 11
NORSTAN, INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
THREE MONTHS ENDED
----------------------
AUGUST 3, JULY 29,
1996 1995
--------- --------
Primary earnings per share -
Weighted average number of
common shares outstanding 8,816 8,436
Effect of:
1986 Long-Term Incentive Plan 381 412
Restated Non-Employee Directors'
Stock Plan 114 94
Employee Stock Purchase Plan 12 6
------ ------
Shares outstanding used to compute
primary earnings per share 9,323 8,948
------ ------
------ ------
Net income $1,692 $1,433
------ ------
------ ------
Primary earnings per share $ .18 $ .16
------ ------
------ ------
Fully diluted earnings per share -
Weighted average number of shares
used for primary earnings per share 9,323 8,948
Effect of:
1986 Long-Term Incentive Plan -- 18
Restated Non-Employee Directors'
Stock Plan -- 2
Employee Stock Purchase Plan -- 2
------ ------
Shares outstanding used to compute
fully diluted earnings per share 9,323 8,970
------ ------
------ ------
Net income $1,692 $1,433
------ ------
------ ------
Fully diluted earnings per share $ .18 $ .16
------ ------
------ ------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> AUG-03-1996
<CASH> 2,617
<SECURITIES> 0
<RECEIVABLES> 67,793
<ALLOWANCES> 1,262
<INVENTORY> 10,057
<CURRENT-ASSETS> 112,143
<PP&E> 83,407
<DEPRECIATION> 45,730
<TOTAL-ASSETS> 195,329
<CURRENT-LIABILITIES> 73,569
<BONDS> 42,187
0
0
<COMMON> 894
<OTHER-SE> 70,423
<TOTAL-LIABILITY-AND-EQUITY> 195,329
<SALES> 45,746
<TOTAL-REVENUES> 92,231
<CGS> 33,332
<TOTAL-COSTS> 66,900
<OTHER-EXPENSES> 22,173
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 241
<INCOME-PRETAX> 2,917
<INCOME-TAX> 1,225
<INCOME-CONTINUING> 1,692
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,692
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
