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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[Fee Required]
For the fiscal year ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[No Fee Required]
For the transition period from _______________ to _______________
Commission File Number 0-19657
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TRM COPY CENTERS CORPORATION
(Exact name of registrant as specified in its charter)
Oregon 93-0809419
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5208 N.E. 122nd Avenue
Portland, Oregon 97230-1074
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 257-8766
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of each class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of July 31, 1997 the aggregate market value of the registrant's Common
Stock held by non affiliates of the registrant was $54.9 million. Solely for
purposes of this calculation, the registrant has treated its Board of Directors
and Executive Officers as affiliates.
As of July 31, 1997, the number of shares of the registrant's Common Stock
outstanding was 6,940,041.
Documents incorporated by reference:
Parts of registrant's 1997 Annual Report to Shareholders are incorporated
by reference into Part II of this Report, and parts of registrant's Proxy
Statement for the annual meeting of shareholders on October 28, 1997 are
incorporated by reference into Part III of this report.
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<PAGE>
PART I
ITEM 1. BUSINESS
General
As of August 1997, TRM Copy Centers Corporation owned and maintained nearly
35,000 self-service photocopiers in retail establishments such as pharmacies,
stationery stores, hardware stores and gift shops in 73 metropolitan areas: 50
in the U.S., five in Canada, 15 in the U.K, two in France and one in Belgium.
TRM installs, maintains and supplies its photocopiers and regularly monitors
their usage. Each retail business collects payment from its customers, shares in
the revenue generated by the Copy Center and benefits from any increase in
walk-in traffic. The Company invoices and collects payment from each retailer
monthly.
Each Copy Center consists of a photocopier, a machine stand and advertising
signs. Copy Centers are identifiable by the Company's trapezoidal yellow and
black "TRM Copies" signs.
TRM became the leading provider in self-service photocopying in many of the
metropolitan areas it serves by focusing on service and convenience. The Company
strives to conveniently locate high numbers of TRM Centers throughout its
service areas. Operations by geographic area are presented in Note 12 to the
Consolidated Financial Statements included in the Annual Report to Shareholders.
The Company services its TRM Centers and provides all necessary supplies.
The retail business supplies space and electrical power for the TRM Center and
supervises its use. Consumers report the number of uses of the TRM Center to the
retail business cashier, who collects payment. Each month, the retail business
keeps a percentage of the TRM Center's revenue, which generally is based on a
sliding scale related to usage, as recorded by the TRM Center's tamper-proof
internal counter, and remits the remainder to TRM.
All accounting, training, purchasing, billing and collection functions, as
well as coordination of customer service, are centralized in the Company's
offices in Portland, Oregon. Generally, the only personnel outside the Portland
offices are service and sales personnel. TRM minimizes costs by buying large
quantities of new photocopiers, by rebuilding used photocopiers and by centrally
purchasing large quantities of parts, paper and toner. The Company believes that
its centralized operating systems and standardized operating procedures enable
it to efficiently open new geographies and to install and service thousands of
TRM Centers.
The Company is an Oregon corporation formed in 1982. From the end of fiscal
1992 through June 30, 1997, TRM opened operations in 18 U.S., three Canadian, 15
U.K., two French and one Belgian metropolitan areas.
As used in this Annual Report, the terms "the Company" and "TRM" refer to
TRM Copy Centers Corporation and its subsidiaries, unless the context requires
otherwise.
Locations
Historically, TRM has focused its sales efforts on a small retail
businesses. During fiscal year 1997 and going forward, the Company is expanding
its corporate chain selling program to better address the retail industry as it
continues to consolidate. The installed customer base is diversified such that
no retail business accounts for a significant portion of revenues or profits.
Further, TRM has diversified geographically to avoid dependence on one or more
market areas. The Company does not believe that the presence of significant
competition in any single geographic market would have a material adverse effect
on the Company.
As of June 30, 1997 the Company has established a local Service Center in
51 major metropolitan areas. Each of these Service Centers consists of leased
premises generally staffed by a service manager and one or more service
technicians and salespeople. TRM locates its Service Centers in sites convenient
to the TRM Centers. Service Centers include a small warehouse for the storage of
photocopiers, other components, spare parts, paper and toner. Eighteen of the
most recently opened metropolitan areas (called "satellites") were opened with
resources from existing Service Centers nearby and do not have stand-alone
facilities. Further, the Company also has three small Service Centers where the
service manager is the only technician. These small Service Centers are based in
the managers' homes.
Expansion
TRM installed 9,233 additional TRM Centers, net of replacements and
removals, from July 1, 1994 to June 30, 1997. In addition to installing 3,077
net TRM Centers in fiscal 1997, the Company focused on improving the profit
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performance of the installed base of machines. During fiscal 1998, the Company
plans to add between 3,000 and 4,000 additional TRM Centers in existing market
areas and in new areas, and to continue to actively manage its installed base.
The Company's planned expansion will require an increase in the number of
installed photocopiers, Service Centers, service technicians, salespeople and
customers. TRM uses both new and used photocopiers to fulfill the requirements
of its expansion strategy. As of July 31, 1997, TRM had over 3,000 uninstalled
photocopiers in its system (see "Photocopiers"), which along with the purchase
of new machines are slotted for its expansion. The Company is purchasing new
machines to use in high-volume, independent and chain locations (see discussion
of NextGen under "New Products and Services Under Development"). The Company
will open a new Service Center in each new geographic market as it is justified.
The service technicians needed for the planned expansion will be trained at
TRM's Technology Center in Portland. TRM sells the TRM Center concept to retail
businesses through sales lead generation programs and local door-to-door
solicitation using independent and Company sales representatives and service
technicians. The Company is increasing its corporate sales efforts directed
toward regional and country-wide retail chains.
The Company has a program called "service selling" in selected North
American cities. The program trains and rewards service technicians to sell the
TRM program in their service areas. Field sales responsibilities and field
operations are grouped together under the Chief Operating Officer. This allows
for the sharing of management teams across the expanse of North America and for
a coordinated effort to grow market share in established cities, particularly in
North America.
In actively managing the profit performance of the installed base,
under-performing machines are removed and put back into stock to be redeployed
at site which offer greater profit potential. Machines that are under-priced for
the supporting copy volume are repriced to higher levels. During fiscal 1996 and
1997, machines were relocated and copy prices were raised at thousands of
locations.
The Company intends to continue to focus on its core photocopy business
with controlled growth from new and existing U.S. market areas, international
expansion and new products and services that can be delivered to its core
customer base and similar consumers.
New Products and Services Under Development
The Company is positioned to add other products or services to further
optimize the use of its in-place network of sales, service, distribution and
support as well as its growing installed customer base. Although sales generated
from additional products currently represent less than 5% of the total sales,
the Company is actively testing multiple new products and services.
During 1997, the Company concluded a twenty-month effort to select a new
technology black and white copier ("NextGen") for further unit growth. NextGen
is an important element in TRM's core programs for high-volume, independent
retailer locations and larger retail chains. TRM's existing base of installed
copy machines will continue to be used for the majority of convenience copying
locations.
Additional investments were made during 1997 in designing an add-on
electronic and receipt printing module for the Company's photocopiers, which
allows for stepped volume pricing (e.g., the first copy for 10(cent), copies 2-5
for 7(cent), etc.) . Market testing began during fiscal 1997 and is expected to
continue in fiscal 1998. Also in 1997, the Company expanded its initial test of
retailer-serviced coin-operated convenience copying with large format chain
stores, where TRM's service quality and worldwide infrastructure is a key
advantage, but where host cashiering is not a desired benefit. The Company also
expanded its initial trial for marketing prepaid telephone cards (to our base of
retailers).
TRM's intent is to invest in developing and market testing these and other
new products and services to identify those that clearly deserve to become
country or system-wide offerings. TRM has had in place about 400 full-color
copiers since 1992. While the Company does not intend to expand the number of
Color Copy Centers during fiscal 1998, it is possible that the color program
will be expanded at some point in the future.
Competition
A person seeking photocopy services has a variety of alternatives to a TRM
Center. These alternatives include specialty full-service business centers and
copy and print shops, coin-operated photocopiers and other photocopiers located
within retail shops. Each of these alternatives may to some extent compete with
the Company. The Company does not attempt to compete directly with most
alternative suppliers of photocopy services. Instead, the Company seeks to
distinguish itself by blanketing its service areas with large numbers of
convenient photocopiers and by providing high quality service to those
locations.
3
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Full-service business centers and copy and print shops generally serve a
market more interested in high volume and sophisticated copying than in
convenience of location.
Coin-operated photocopiers are sometimes located in smaller retail
establishments similar to TRM's locations. While these coin-operated
photocopiers provide an alternative to Copy Centers, the Company believes that
they do not pose a significant competitive threat to the majority of TRM's
retailers. As indicated under the caption "New Products and Services Under
Development," the Company is testing coin-operated copying with major large
format chains and retail stores, which have not been targeted by TRM up to the
present time.
The Company is aware of several self-service non-coin-operated photocopier
businesses using the retail business concept. To the Company's knowledge, each
is limited to a relatively small geographic market and a relatively small number
of photocopiers. Because of barriers to entry in the Company's business, such as
developing operating systems, establishing sources of supply and achieving
economies of scale, the Company does not believe any of these competitors
currently represents a significant threat.
Personal copiers provide a substitute for Copy Centers. While these
photocopiers have been on the market for a number of years, the Company does not
believe that they have had a significant adverse effect on its business. The
Company is unable to predict whether a technological or price breakthrough might
increase sales of personal copiers and reduce demand for the Company's copy
services.
Computers with printers allow convenient production of multiple copies. The
Company does not believe that computer printing will have a significant adverse
effect on its Copy Center business. At present, computer duplicating is
primarily used only for a document which is electronically resident on that
particular computer and not for other paper originals. Both computer printers
and personal copiers currently have per copy costs to the user which are similar
to or higher than TRM's retail copy prices so they are not, in general, a lower
cost alternative.
Quarterly Seasonality
Historically, the Company has experienced slightly higher than average
production per TRM Center in its third and fourth fiscal quarters and slightly
lower than average production per TRM Center in its first fiscal quarter.
Photocopiers
As of August 1997, TRM owned more than 38,000 new and used photocopiers.
Nearly 35,000 of these photocopiers were revenue-producing Copy Centers in the
field. Generally, new photocopiers are shipped direct from the manufacturer to a
TRM Service Center. Used photocopiers are generally rebuilt at the Company's
rebuilding facility in Portland, Oregon. The Company expects to continue to use
both new and used photocopiers to expand its black and white copying business.
Supply
To date in North America, the Company has primarily used two similar
discontinued models of used photocopiers originally manufactured by Ricoh
Company, Ltd. and its affiliates. TRM bought these photocopiers from photocopier
brokers and dealers. These two models of black and white photocopiers have not
been manufactured since 1979 and 1982. During fiscal 1993, TRM developed a
supply relationship with Mita Copystar America, Inc. (Mita), for black and white
photocopiers and related products in North America. The resulting arrangement,
as updated, contains no commitment to purchase any specific number of
photocopiers. Subsequent to fiscal 1997 year end, the Company finalized an
agreement with a major manufacturer for new, state-of-the-art black and white
"NextGen" photocopiers in North America.
During fiscal 1992, the Company developed a supply relationship with Ricoh
Corporation (Ricoh) for full-color photocopiers and related products. TRM is not
currently adding to its inventory of full-color copiers. Ricoh ships related
products directly to the appropriate TRM Service Center as directed by the
Company. The Company will continue to monitor and evaluate models of full-color
photocopiers available for its use.
Also during fiscal 1992, a supply arrangement was entered into with Mita
Europe B.V. (Mita Europe) for black and white photocopiers and related products
in Europe. Under this arrangement, photocopiers and related products are shipped
from Mita Europe directly to the Company's European Service Centers. The Company
continues to monitor and evaluate supplies of new and used photocopiers in
Europe available for its use.
Few of TRM's photocopiers have ever become mechanically obsolete. Because
of their simplicity, the Company believes that its photocopiers are more
dependable than many other models.
4
<PAGE>
Parts
The Company acquires a majority of the parts for its used photocopiers
directly from various parts fabricators. Many parts are built to TRM's
specifications. While TRM's strategy is to use multiple sources for its parts to
reduce dependence on single sources, some parts are purchased from single
sources. Temporary shortages, increased costs and quality control problems could
result if parts from a single or limited source became unavailable. Currently,
parts for the Mita photocopiers and the Ricoh full-color photocopiers are being
supplied primarily by the photocopier manufacturers. The Company will continue
to evaluate available sources of supply for parts.
Paper
Photocopy paper is purchased centrally by the Company's corporate offices
and then shipped directly from the mills to the Service Centers. A number of
paper companies are capable of producing the paper usable by the Company. The
Company believes that sufficient paper should be available to supply the
Company's expanding business.
Toner
The Company currently purchases liquid toner for its North American black
and white rebuilt photocopiers directly from two manufacturers. The Company has
confirmed that other acceptable sources are available and could obtain suitable
toner on reasonable terms from other manufacturers, although some start-up
delays could occur. Currently, toner for the Mita photocopiers and the Ricoh
full-color photocopiers is being supplied primarily by the photocopier
manufacturers. The Company will continue to evaluate available sources of supply
for toner.
Employees
As of June 30, 1997, the Company had approximately 667 employees, most of
whom were full-time. Approximately 419 are in field service, 189 are in sales,
marketing, customer service, purchasing, billing and administration, and 21 are
in training, production and warehouse functions. None of the Company's employees
are represented by unions. The Company believes it has good relations with its
employees. The Company currently engages about 38 independent contractors to
sell the TRM program.
Service Marks
Most Copy Centers are identified by distinctive yellow and black
trapezoidal signs bearing "TRM Copies" and "TRM Color Copies", and the program
price. In France and Belgium, the Company does business under the names of FPC
France Ltd. and FPC Belgium Limited, respectively. Most of TRM and FPC's signs
are registered service marks.
Copy Centers Investment Group, Ltd.
The Company serves as general partner of Copy Centers Investment Group,
Ltd., an Oregon limited partnership. The partnership was formed in 1983 to
acquire certain Copy Centers from the Company. The partnership owns 79 Copy
Centers in the states of Oregon and Washington. The Company receives a
management fee of 25% of the gross revenue from these 79 Copy Centers, plus $20
per month for each of the 79 locations for accounting and administrative
functions. The Company also owns a 1% interest in the profits and losses of the
partnership. The partnership will terminate December 31, 1998 according to the
partnership agreement. The partnership's operations do not constitute a material
part of the business of the Company.
Governmental Regulation
The Company is not subject to significant governmental regulation. Local
zoning and sign regulations occasionally prohibit a retail business from
displaying the "TRM Copies" sign on an exterior wall or window. Local zoning and
use restrictions may not allow opening a Copy Center in an otherwise desirable
retail business. The Company does not expect such restrictions to have a
material adverse effect on the Company's expansion plans.
Forward-Looking Statements
This Form 10-K includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 relating to the Company's plans or expectations as to:
future performance; growth opportunities; expansion; improvements in
efficiencies and cost controls; new products and services; repricing machines;
competition; paper costs and capital expenditures. The following factors are
among the factors that could cause actual results to differ materially from the
forward-looking statements: business conditions in the market areas in which the
Company operates; competitive factors; customer demand for the Company's
services and the Company's
5
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ability to execute its plans successfully. Any forward-looking statements,
including other written or oral forward-looking statements made by the Company
or persons acting on its behalf, should be considered in light of these factors
and other factors referred to from time to time in the Company's press releases,
periodic reports or communications with shareholders.
ITEM 2. PROPERTIES
The Company leases approximately 25,750 square feet of office space for its
corporate offices in Portland, Oregon. The lease expires in 2010, with an option
to renew for an additional five years. The Company leases 31,500 square feet for
training, rebuilding, warehousing, the Portland Service Center and other office
space under a lease that also expires in 2010. This facility is located next to
the corporate offices.
The Company leases warehouse space for 50 Service Centers outside Portland,
Oregon. A Service Center typically consists of approximately 2,000 to 7,000
square feet of non-custom warehouse space. The leases typically run for three to
twelve years, some with extensions available upon exercise of renewal options.
The Company does not anticipate any difficulty in locating or, if necessary,
relocating Service Centers.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various claims and legal proceedings from time to
time in the ordinary course of its business. There are no pending or threatened
matters which in the Company's opinion would have a material effect on the
Company's operations or its financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
6
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PART II
The information required by Part II is incorporated herein by reference
from the TRM Copy Centers Corporation 1997 Annual Report to Shareholders as
indicated below. Except for such information, the 1997 Annual Report to
Shareholders is not to be deemed filed as part of this Report.
Annual Report
Page No.
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND Inside back
RELATED STOCKHOLDER MATTERS cover
ITEM 6. SELECTED FINANCIAL DATA 1
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5-7
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA 8-18
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
The information required by Part III is incorporated herein by reference
from the indicated pages of the Company's definitive Proxy Statement dated
September 12, 1997 for its 1997 annual meeting of shareholders.
Proxy
Statement
Page No.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 3-5
ITEM 11. EXECUTIVE COMPENSATION 6-9
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 1-2
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 5
7
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements (incorporated by reference Annual Report
from the Company's 1997 Annual Report to Page No.
Shareholders): -------------
Consolidated Balance Sheets as of June 30, 1997
and 1996 8
Consolidated Statements of Operations for each
of the three years in the period ended June 30,
1997 9
Consolidated Statements of Stockholders' Equity
for each of the three years in the period ended
June 30, 1997 10
Consolidated Statements of Cash Flows for each
of the three years in the period ended June 30,
1997 11
Notes to Consolidated Financial Statements 12-18
Independent Auditors' Report 19
Form 10-K
Page No.
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2. Financial Statement Schedules:
Consent and Independent Auditors' Report on
Financial Statement S-1
Schedule VIII -- Valuation and Qualifying Accounts S-2
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto.
3. Exhibits:
The exhibits listed in the Index to Exhibits, which appears on page
10 herein, are filed as part of this Annual Report.
(b) No reports on Form 8-K were filed by the Company during the last
quarter of fiscal 1997.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Portland, Oregon,
on September 12, 1997.
TRM COPY CENTERS CORPORATION
By: /s/ FREDERIC P. STOCKTON
-------------------------------------
Frederic P. Stockton
President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Frederic P. Stockton his
attorney-in-fact, with the power of substitution, for him in any and all
capacities, to sign any amendments to this Report, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on September 12, 1997 on
behalf of the Registrant and in the capacities indicated:
Signature Title
- ---------------------------------- ----------------------------------
/s/ FREDERIC P. STOCKTON President, Chief Executive Officer
- ---------------------------------- and Director
Frederic P. Stockton
/s/ FREDERICK O. PAULSELL Chairman of the Board and Director
- ----------------------------------
Frederick O. Paulsell
/s/ EDWIN S. CHAN Vice-Chairman of the Board and Director
- ----------------------------------
Edwin S. Chan
/s/ SHERMAN M. COE Director
- ----------------------------------
Sherman M. Coe
/s/ RALPH R. SHAW Director
- ----------------------------------
Ralph R. Shaw
/s/ MICHAEL D. SIMON Director
- ----------------------------------
Michael D. Simon
/s/ DONALD L. VAN MAREN Director
- ----------------------------------
Donald L. Van Maren
9
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EXHIBIT INDEX
Exhibits
- --------
3.1 Restated Articles of Incorporation (Incorporated herein by
reference to Exhibit 3.1 of Form 10-K for the fiscal year
ended June 30, 1992)
3.2 Restated Bylaws
4.1 Articles V, VI and VII of the Restated Articles of
Incorporation (See Exhibit 3.1)
4.2 Articles I, II, V, VII and X of the Restated Bylaws, as
amended (See Exhibit 3.2)
10.1 Form of Indemnity Agreements with Registrant's directors and
executive officers
10.2 Loan Agreement with United States National Bank of Oregon,
dated March 31, 1997
10.3 a) Lease dated October 14, 1991 between Pacific Realty
Associates, L. P. and Registrant (for Registrant's
training facility in Portland, Oregon) (Incorporated
herein by reference to Exhibit 10.7 of Form S-1 dated
November 8, 1991 [No. 33-43829])
b) Lease amendment dated February 7, 1994, between Pacific
Realty Associates, L.P. and Registrant (Incorporated
herein by reference to Exhibit 10.7 of Form 10-K for the
fiscal year ended June 30, 1994)
c) Lease amendment dated August 10, 1994, between Pacific
Realty Associates, L.P. and Registrant (Incorporated
herein by reference to Exhibit 10.5 of Form 10-K for the
fiscal year ended June 30, 1995)
d) Lease dated August 10, 1994 between Pacific Realty
Associates, L.P. and Registrant (for the Registrant's
corporate headquarters in Portland, Oregon)
(Incorporated herein by reference to Exhibit 10.4 of
Form 10-K for the fiscal year ended June 30, 1995)
10.4 Restated 1986 Stock Incentive Plan (Incorporated herein by
reference to Exhibit 10.8 of Form 10-K for the fiscal year
ended June 30, 1994)
10.5 1996 Stock Option Plan
10.6 Employee Stock Purchase Plan (Incorporated herein by
reference to Exhibit 28.1 of Form S-8 dated December 7, 1992
[No. 33-55370])
10.7 Form of Stock Option Agreements:
a) For option grants before fiscal 1994 (Incorporated
herein by reference to Exhibit 10.9 of Form S-1 dated
November 8, 1991 [No. 33-43829])
b) For option grants during fiscal 1994 (Incorporated
herein by reference to Exhibit 10.10 of Form 10-K for
the fiscal year ended June 30, 1994)
c) For option grants during fiscal 1995 (Incorporated
herein by reference to Exhibit 10.8 of Form 10-K for the
fiscal year ended June 30, 1995)
10.8 Employment Agreements:
a) Employment Agreement dated January 17, 1995 with Michael
D. Simon (Incorporated herein by reference to Exhibit
10.9 of Form 10-K for the fiscal year ended June 30,
1995)
b) Employment Agreement dated April 25, 1996 with Michael
D. Simon (Incorporated herein by reference to Exhibit
10.9 of Form 10-K for the fiscal year ended June 30,
1996)
c) Employment Agreement dated August 18, 1997 with Frederic
P. Stockton
10.9 Executive Supplemental Retirement Agreement with Edwin S.
Chan dated January 9, 1995 (Incorporated herein by reference
to Exhibit 10.9 of Form 10-K for the fiscal year ended June
30, 1995)
13.1 Portions of the 1997 Annual Report to Shareholders
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors (see
Page S-1)
24.1 Power of Attorney (see Signature page)
27.1 Financial Data Schedule
10
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Consent and Independent Auditors' Report
on Financial Statement Schedule
The Board of Directors
TRM Copy Centers Corporation:
The audits referred to in our report dated August 15, 1997 included the related
financial statement schedule as of June 30, 1997 and for each year in the
three-year period ended June 30, 1997, as listed in Item 14(a)(2) of Form 10-K
of TRM Copy Centers Corporation. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits. In our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
We consent to the incorporation by reference on Form S-8 (Nos. 33-55370 and
33-74354) of TRM Copy Centers Corporation of our reports dated August 15, 1997,
relating to the consolidated balance sheets of TRM Copy Centers Corporation and
subsidiaries as of June 30, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity, cash flows, and related schedule
for each of the years in the three-year period ended June 30, 1997, which
reports appear in the June 30, 1997 annual report incorporated by reference in
Form 10-K of TRM Copy Centers Corporation.
KPMG PEAT MARWICK LLP
Portland, Oregon
September 17, 1997
S-1
<PAGE>
TRM COPY CENTERS CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
Years ended June 30, 1995, 1996, and 1997
(In thousands)
Balance at Charged to Charged to Balance at
Beginning of costs and other Deductions - End of
Period expenses accounts write offs Period
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1995
Allowance for doubtful accounts............ $ 183 $ 344 $ -- $ (261) $ 266
============== ============= ============= ============= =============
Year ended June 30, 1996
Allowance for doubtful accounts............ $ 266 $ 700 $ -- $ (679) $ 287
============== ============= ============= ============= =============
Year ended June 30, 1997
Allowance for doubtful accounts............ $ 287 $ 835 $ -- $ (974) $ 148
============== ============= ============= ============= =============
</TABLE>
S-2
BYLAWS OF
TRM COPY CENTERS CORPORATION
ARTICLE I
SHAREHOLDERS: MEETINGS AND VOTING
Section 1. PLACE OF MEETINGS
Meetings of the shareholders of TRM COPY CENTERS CORPORATION, an
Oregon corporation (the "Corporation") will be held at the principal office of
the Corporation, or any other place, either within or without the state of
Oregon, selected by the Board of Directors.
Section 2. ANNUAL MEETINGS
(a) The annual meeting of the shareholders will be held on the fourth
Tuesday of October of each year, if not a legal holiday, and if a legal holiday
then on the next succeeding business day, at such time as may be prescribed by
the Board of Directors and specified in the notice of the meeting. At the annual
meeting, the shareholders will elect by vote a Board of Directors from the
persons nominated pursuant to paragraph (c) below, provided that if pursuant to
the Articles of Incorporation staggered terms for directors are in effect, then
only such members whose terms expire at such meeting shall be elected. The
shareholders shall also consider reports of the affairs of the Corporation and
transact such other business as may properly be brought before the meeting.
(b) At the annual meeting of the shareholders, only such matters as
shall have been properly brought before the meeting shall be considered and
acted upon. To be properly brought before an annual meeting, a matter must be
(i) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (ii) otherwise brought before the
meeting by or at the direction of the Board of Directors, or (iii) properly
brought before the meeting by a shareholder. For any matter to be properly
brought before the annual meeting by a shareholder, the shareholder must have
given prior written notice to the Secretary of the Corporation which must be
received at the principal executive offices of the Corporation not less than 30
days nor more than 60 days prior to the meeting. In the event that less than 30
days' notice of the date of the meeting is given or made to shareholders, notice
by a shareholder shall be timely received if received not later than the close
of business on the tenth day following the date on which such notice of the date
of the annual meeting was mailed. A shareholder's notice to the Secretary in
order to be valid must set forth as to each matter the shareholder proposes to
bring before the annual meeting (i) a brief description of the matter proposed
to be brought before the annual meeting, (ii) the name and address, as they
appear on the Corporation's books, of the shareholder proposing such business,
(iii) the class and number of shares of the Corporation which are beneficially
owned by the shareholder, and (iv) any material interest of the shareholder in
the matter. No matter shall be considered or acted upon at an annual meeting
except in accordance with the procedures set forth in this Section 2. The
presiding officer at any annual meeting shall determine whether any matter was
properly brought before the meeting in accordance with the
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provisions of this section. If he shall determine that any matter has not been
properly brought before the meeting, he shall so declare at the meeting and any
such matter shall not be considered or acted upon.
(c) At the annual meeting of shareholders, only those persons properly
nominated shall be considered in the election for directors. To be properly
nominated, a person must be (i) nominated by the Board of Directors or (ii)
properly nominated by a shareholder. To be properly nominated by a shareholder,
the shareholder must have given prior written notice of the nomination to the
Secretary of the Corporation which must be received at the principal executive
offices of the Corporation not less than 30 days nor more than 60 days prior to
the meeting. In the event that less than 30 days' notice of the date of the
meeting is given or made to shareholders, notice of the nomination by a
shareholder shall be timely received if received not later than the close of
business on the tenth day following the date on which such notice of the date of
the annual meeting was mailed. A shareholder's notice of nomination to the
Secretary in order to be valid must set forth as to each person the shareholder
proposes to nominate to the Board of Directors (i) the information described by
Items 401(a), (e) and (f) and Item 403(b) of Regulation S-K under the Securities
Act of 1933, as amended, or successor provisions, (ii) the class and number of
shares of the Corporation which are beneficially owned by the nominating
shareholder, and (iii) any material interest of the shareholder or of the
nominee in the Corporation. No nominee shall be considered for election as a
director at an annual meeting except in accordance with the procedures set forth
in this Section 2. The presiding officer at any annual meeting shall determine
whether any nomination was properly brought before the meeting in accordance
with the provisions of this section. If he shall determine that any person has
not been properly nominated, he shall so declare at the meeting and any such
nominee shall not be considered in the election.
Section 3. SPECIAL MEETINGS
(a) The Corporation will hold a special meeting of shareholders upon
the call of the President or the Board of Directors, or if the holders of at
least 10 percent of all votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting sign, date and deliver to the
Secretary of the Corporation one or more written demands for the meeting
describing the purpose or purposes for which it is to be held.
(b) The circuit court of the county where the Corporation's principal
office is located, or, if the principal office is not in Oregon, where the
registered office of the Corporation is or was last located, may summarily order
a special meeting to be held upon the application of a shareholder of the
Corporation who signed a valid demand for a special meeting if notice of the
special meeting was not given within 30 days after the date the demand was
delivered to the Corporation's Secretary or if the special meeting was not held
in accordance with the notice.
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Section 4. NOTICE OF MEETINGS
(a) The Corporation will notify shareholders in writing of the date,
time and place of each annual and special shareholders meeting not earlier than
60 days nor less than ten days before the meeting date. Unless Oregon law or the
Articles of Incorporation require otherwise, the Corporation is required to give
notice only to shareholders entitled to vote at the meeting. Such notice is
effective when mailed if it is mailed postage prepaid and is correctly addressed
to the shareholder's address shown in the Corporation's current record of
shareholders. Unless required by law or by the Articles of Incorporation, notice
of an annual meeting need not include a description of the purpose or purposes
for which the meeting is called. However, notice of a special meeting will
include a description of the purpose or purposes for which the meeting is
called.
(b) If an annual or special shareholders meeting is adjourned to a
different date, time or place, notice need not be given of the new date, time or
place if the new date, time or place is announced at the meeting before
adjournment. However, if a new record date for the adjourned meeting is fixed,
or is required by law to be fixed, notice of the adjourned meeting shall be
given to persons who are shareholders as of the new record date. A determination
of shareholders entitled to notice of or to vote at a shareholders meeting is
effective for any adjournment of the meeting unless the Board of Directors fixes
a new record date, which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
(c) A shareholder's attendance at a meeting waives objection to (i)
lack of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; and (ii) consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting notice,
unless the shareholder objects to considering the matter when it is presented.
Section 5. QUORUM AND VOTING REQUIREMENTS FOR VOTING GROUPS
(a) Shares entitled to vote as a separate voting group may take action
on a matter at a meeting only if a quorum of those shares exists with respect to
that matter. Unless otherwise required by law or by the Articles of
Incorporation, a majority of the votes entitled to be cast on the matter by the
voting group constitutes a quorum of that voting group for action on that
matter. Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
(b) In the absence of a quorum, a majority of those present in person
or represented by proxy may adjourn the meeting from time to time until a quorum
exists. Any business that might have been transacted at the original meeting may
be transacted at the adjourned meeting if a quorum exists.
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Section 6. VOTING RIGHTS
(a) The persons entitled to receive notice of and to vote at any
shareholders meeting will be determined from the records of the Corporation on
the close of business on the day before the mailing of the notice or on such
other date not more than 70 nor less than 10 days before such meeting, as will
be fixed in advance by the Board of Directors.
(b) Except as otherwise provided in the Articles of Incorporation or
by law, each outstanding share, regardless of class, is entitled to one vote on
each matter voted on at a shareholders meeting. Only issued and outstanding
shares are entitled to vote.
(c) Unless otherwise provided in the Articles of Incorporation or by
law, if a quorum exists, action on a matter, other than the election of
directors, by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group opposing
the action.
(d) Unless otherwise provided in the Articles of Incorporation,
directors are elected by a plurality of the votes cast by holders of the shares
entitled to vote in the election at a meeting at which a quorum is present.
Section 7. VOTING OF SHARES BY CERTAIN HOLDERS
(a) If the name signed on a vote, consent, waiver or proxy appointment
corresponds to the name of a shareholder, the Corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver or proxy appointment and
give it effect as the act of the shareholder. If the name signed on a vote,
consent, waiver or proxy appointment does not correspond to the name of its
shareholder, the Corporation, if acting in good faith, is nevertheless entitled
to accept the vote, consent, waiver or proxy appointment and give it effect as
the act of the shareholder if:
(i) The shareholder is an entity and the name signed purports to
be that of an officer or agent of the entity;
(ii) The name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if the
Corporation requests, evidence of fiduciary status acceptable to the Corporation
has been presented with respect to the vote, consent, waiver or proxy
appointment;
(iii) The name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the Corporation requests,
evidence of this status acceptable to the Corporation has been presented with
respect to the vote, consent, waiver or proxy appointment;
(iv) The name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the shareholder and, if the Corporation requests,
evidence acceptable to the Corporation of the signatory's authority to sign for
the share-holder has been presented with respect to the vote, consent, waiver or
proxy appointment; or
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(v) Two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all
co-owners.
(b) Shares of the Corporation are not entitled to be voted if (i) they
are owned, directly or indirectly, by another domestic or foreign corporation,
and (ii) the Corporation owns, directly or indirectly, a majority of the shares
entitled to be voted for directors of such other corporation. This paragraph
does not limit the power of a corporation to vote any shares, including its own
shares, held by it in a fiduciary capacity.
(c) Redeemable shares are not entitled to be voted after notice of
redemption is mailed to the holders and a sum sufficient to redeem the shares
has been deposited with a bank, trust company or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares.
Section 8. PROXIES
A shareholder may vote shares either in person or by proxy. A
shareholder may appoint a proxy to vote or otherwise act for the shareholder by
signing an appointment form, either personally or by the shareholder's
attorney-in-fact. An appointment of a proxy is effective when received by the
Secretary or other officer or agent of the Corporation authorized to tabulate
votes. An appointment is valid for 11 months unless a longer period is expressly
provided in the appointment form. An appointment of a proxy is revocable by the
shareholder unless the appointment form conspicuously states that it is
irrevocable and the appointment is coupled with an interest.
Section 9. SHAREHOLDER LISTS
(a) After fixing a record date for a meeting, the Corporation will
prepare an alphabetical list of the names of all of its shareholders who are
entitled to notice of the meeting. The list must be arranged by voting group,
and within each voting group, by class or series of shares and show the address
of and the number of shares held by each shareholder.
(b) The shareholder list must be available for inspection by any
shareholder, beginning two business days after notice of the meeting for which
the list was prepared is given and continuing through the meeting. Such list
will be kept on file at the Corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be held. A
shareholder, or the shareholder's agent or attorney, is entitled on written
demand to inspect and, subject to the requirements of law, to copy the list
during regular business hours and at the shareholder's expense during the period
it is available for inspection.
(c) The Corporation will make the shareholder list available at the
meeting, and any shareholder, or the shareholder's agent or attorney, is
entitled to inspect the list at any time during the meeting or any adjournment.
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(d) Refusal or failure to prepare or make available the shareholder
list does not affect the validity of action taken at the meeting.
ARTICLE II
DIRECTORS: MANAGEMENT
Section 1. POWERS
The Corporation will have a Board of Directors. All corporate powers
will be exercised by or under the authority of, and the business and affairs of
the Corporation managed under the direction of, the Board of Directors, subject
to any limitation set forth in the Articles of Incorporation.
Section 2. NUMBER AND QUALIFICATIONS
The Board of Directors will consist of seven members, until the number
has been changed by the Board of Directors by amendment of these Bylaws. In no
event shall the number of directors be less than three. A decrease in the number
of directors does not shorten an incumbent director's term. In the event the
Board of Directors is divided into classes as set forth in Section 5 below, any
increase in the number of directors shall be allocated by the Board of Directors
among the three classes of directors so as to maintain equal classes to the
extent possible. Without the unanimous consent of the existing Board of
Directors, no more than two additional directors shall be added to the Board of
Directors within any 12-month period. Without the unanimous consent of the Board
of Directors, no person who is affiliated as an owner, director, officer or
employee of a company or business deemed by the Board of Directors to be
competitive with that of the Corporation shall be eligible to serve on the Board
of Directors of the Corporation. Directors need not be residents of the state of
Oregon or shareholders of the Corporation, unless required by the Articles of
Incorporation.
Section 3. ELECTION OF DIRECTORS
The directors will be elected by ballot at the annual meeting of the
shareholders.
Section 4. TENURE OF OFFICE WITHOUT CLASSES
If the Board of Directors consists of five or fewer members, the terms
of all directors shall expire at the next annual shareholders meeting following
their election. The term of a director elected to fill a vacancy expires at the
next shareholders meeting at which directors are elected. Despite the expiration
of a director's term, the director continues to serve until the director's
successor is elected and qualifies or until there is a decrease in the number of
directors. Subject to paragraph (c) of Section 6 of Article II, a director's
term of office will begin immediately after election.
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SECTION 5. TENURE OF OFFICE WITH CLASSES
1. At any time when the Board of Directors shall consist of six or
more members, in lieu of electing the entire number of directors annually, the
Board of Directors of the Corporation shall be divided into three classes. The
three classes shall consist of an equal number of directors to the extent
possible. The initial designation of which current directors shall serve in
which classes shall be made by the director then serving as Chairman of the
Board. The classes shall be Class 1, Class 2 and Class 3. The term of office of
directors of Class 1 shall expire at the first annual meeting of shareholders
after their election, that of Class 2 shall expire at the second annual meeting
after their election, and that of Class 3 shall expire at the third annual
meeting after their election. When classification of directors is in effect, at
each annual meeting of shareholders the number of directors equal to the number
of the class whose term expires at the time of such meeting shall be elected to
hold office until the third succeeding annual meeting. No classification of
directors shall be effective in the event the authorized number of members of
the Board is reduced to fewer than six.
2. If the Board of Directors is divided into classes and in the event
of any increase or decrease in the authorized number of directors, then (i) each
director then serving as such shall nevertheless continue as a director of the
class of which he is a member until the expiration of his current term, or upon
his earlier resignation, removal from office or death; (ii) the newly created or
eliminated directorships resulting from such increase or decrease shall be
allocated by the Board of Directors among the three classes of directors so as
to maintain equal classes to the extent possible; and (iii) in the event such
decrease in the authorized number of directors makes the total number of
directors less than six, then the Board of Directors shall become declassified
and the directors remaining in office shall continue their terms until the next
annual meeting of shareholders, at which time all of said remaining directors
shall be re-elected to one-year terms or until their successors are duly elected
and qualified.
Section 6. VACANCIES
(a) A vacancy in the Board of Directors will exist upon the death,
resignation or removal of any director or upon an increase in the number of
directors.
(b) Unless the Articles of Incorporation provide otherwise, if a
vacancy occurs on the Board of Directors:
(i) The shareholders may fill the vacancy, provided that the
Board of Directors has not already done so; or
(ii) The Board of Directors may fill the vacancy, provided the
shareholders have not already done so. If the directors remaining in office
constitute fewer than a quorum of the Board, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining in office.
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(c) A vacancy that will occur at a specific later date, by reason of a
resignation effective at the later date or otherwise, may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.
Section 7. RESIGNATION OF DIRECTORS
A director may resign at any time by delivering written notice to the
Board of Directors, its chairperson or the Corporation. Unless the notice
specifies a later effective date, a resignation is effective at the earliest of
the following: (a) when received; (b) five days after its deposit in the United
States mail, as evidenced by the postmark, if mailed postage prepaid and
correctly addressed; or (c) on the date shown on the return receipt, if sent by
registered or certified mail, return receipt requested and the receipt is signed
by or on behalf of the addressee. Once delivered, a notice of resignation is
irrevocable unless revocation is permitted by the Board of Directors.
Section 8. REMOVAL OF DIRECTORS
A director may be removed only for cause by the affirmative vote of
the holders of not less than 75 percent of the outstanding shares of Common
Stock. A director may be removed by the shareholders only at a meeting called
for the purpose of removing the director and the meeting notice must state that
the purpose, or one of the purposes, of the meeting is removal of the director.
Section 9. MEETINGS
(a) The Board of Directors may hold regular or special meetings in or
out of the state of Oregon.
(b) Annual meetings of the Board of Directors will be held without
notice immediately following the adjournment of the annual meetings of the
shareholders.
(c) Unless the Articles of Incorporation provide otherwise, regular
meetings of the Board of Directors may be held without notice of the date, time,
place or purpose of the meeting. The Board of Directors may fix, by resolution,
the time and place for the holding of regular meetings.
(d) Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the President or any director. The person
or persons who call a special meeting of the Board of Directors may fix the time
and place of the special meeting.
Section 10. NOTICE OF SPECIAL MEETINGS
(a) Unless the Articles of Incorporation provide for a longer or
shorter period, special meetings of the Board of Directors must be preceded by
at least two days' notice of the date, time and place of the meeting. The notice
need not describe the purpose of the special meeting
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unless required by the Articles of Incorporation. The notice will be given
orally, in person or by telephone, or delivered in writing either personally, by
mail or by private carrier or by telegram. If in writing, such notice is
effective at the earliest of the following: (a) when received; (b) five days
after its deposit in the United States mail, as evidenced by the postmark, if it
is mailed postage prepaid and is correctly addressed to the director's address
shown in the Corporation's records; or (c) on the date shown on the return
receipt, if sent by registered or certified mail, return receipt requested, and
the receipt is signed by or on behalf of the addressee. If given orally, such
notice is effective when communicated.
(b) A director's attendance at or participation in a meeting waives
any required notice to the director of the meeting unless the director at the
beginning of the meeting, or promptly upon the director's arrival, objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
(c) Notice of the time and place of holding an adjourned meeting need
not be given if such time and place are fixed at the meeting adjourned.
Section 11. QUORUM AND VOTE
(a) Unless the Articles of Incorporation provide otherwise, a majority
of the directors in office will constitute a quorum for the transaction of
business. A majority of the directors, in the absence of a quorum, may adjourn
from time to time but may not transact any business.
(b) If a quorum is present when a vote is taken, the affirmative vote
of a majority of directors present is the act of the Board of Directors unless
the Articles of Incorporation require the vote of a greater number of directors.
(c) A director of the Corporation who is present at a meeting of the
Board of Directors, or is present at a meeting of a committee of the Board of
Directors, when corporate action is taken, is deemed to have assented to the
action taken unless (i) the director objects at the beginning of the meeting, or
promptly upon the director's arrival, to holding the meeting or transacting
business at the meeting, (ii) the director's dissent or abstention from the
action taken is entered in the minutes of the meeting, or (iii) the director
delivers written notice of dissent or abstention to the presiding officer of the
meeting before its adjournment or to the Corporation immediately after
adjournment of the meeting. The right of dissent or abstention is not available
to a director who votes in favor of the action taken.
Section 12. COMPENSATION
The Board of Directors may, by resolution, provide that the directors
be paid their expenses, if any, of attendance at each meeting of the Board of
Directors, and provide that directors be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment will preclude any director from serving the Corporation in any other
capacity and receiving compensation for that service.
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ARTICLE III
COMMITTEES
(a) Subject to law, the provisions of the Articles of Incorporation
and these Bylaws, the Board of Directors may appoint such committees as may be
necessary from time to time, consisting of such number of its members and having
such powers as it may designate. Each such committee will have two or more
members, who serve at the pleasure of the Board of Directors.
(b) All actions of a committee will be reflected in minutes to be kept
of such meetings and reported to the Board of Directors at the next succeeding
meeting thereof. The provisions of Article II of these Bylaws governing
meetings, notice and waiver of notice, and quorum and voting requirements of the
Board of Directors apply to committees and their members as well.
(c) An executive committee may be appointed by the Board of Directors
pursuant to the foregoing paragraphs. When appointed, the executive committee
will have the power to exercise all authority of the Board of Directors except
as may be expressly limited by law.
(d) An audit committee shall be appointed by the Board of Directors.
The audit committee shall have such members, duties and powers as may be
necessary or appropriate to qualify such committee as an audit committee within
the rules of the NASDAQ National Market System.
ARTICLE IV
OFFICERS
Section 1. DESIGNATION; ELECTION; QUALIFICATION
(a) The officers of the Corporation will be a President, a Secretary
and such other officers and assistant officers as the Board of Directors will
from time to time appoint, none of whom need be members of the Board of
Directors. The officers will be elected by, and hold office at the pleasure of,
the Board of Directors. A duly appointed officer may appoint one or more
officers or assistant officers if such appointment is authorized by the Board of
Directors. The same individual may simultaneously hold more than one office in
the Corporation.
(b) A vacancy in any office because of death, resignation, removal or
any other cause will be filled in the manner prescribed in these Bylaws for
regular appointments to such office.
Section 2. COMPENSATION AND TERM OF OFFICE
(a) The compensation and term of office of all the officers of the
Corporation will be fixed by the Board of Directors.
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(b) The Board of Directors may remove any officer at any time, either
with or without cause.
(c) Any officer may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the Corporation. Unless
the notice specifies a later effective date, a resignation is effective at the
earliest of the following: (a) when received; (b) five days after its deposit in
the United States mail, as evidenced by the postmark, if mailed postage prepaid
and correctly addressed; or (c) on the date shown on the return receipt, if sent
by registered or certified mail, return receipt requested and the receipt is
signed by or on behalf of the addressee. Once delivered, a notice of resignation
is irrevocable unless revocation is permitted by the Board of Directors. If a
resignation is made effective at a later date and the Corporation accepts the
future effective date, the Board of Directors may fill the pending vacancy
before the effective date, if the Board of Directors provides that the successor
will not take office until the effective date.
(d) This section will not affect the rights of the Corporation or any
officer under any express contract of employment.
Section 3. CHAIRMAN OF THE BOARD
If the Corporation elects a Chairman of the Board, he or she will
preside at all meetings of the Board of Directors and, if requested by the
President, at meetings of the shareholders. The Chairman of the Board shall
perform such other duties as may be prescribed by the Board of Directors from
time to time.
Section 4. PRESIDENT
The President will be the chief executive officer and chief operating
officer of the Corporation. The President will have general supervision,
direction and control of the business and affairs of the Corporation. In the
absence of the Chairman of the Board, the President will perform the duties and
responsibilities of the Chairman of the Board. The President will be ex officio
a member of all the standing committees (including the executive committee, if
any), will have the general powers and duties of management usually vested in
the office of president of a corporation and will have such other powers and
duties as may be prescribed by the Board of Directors or these Bylaws.
Section 5. VICE PRESIDENTS
The Vice Presidents, if any, will perform such duties as the Board of
Directors prescribes. In the absence or disability of the President, the
President's duties and powers will be performed and exercised by a senior Vice
President, as designated by the Board of Directors.
Section 6. SECRETARY
(a) The Secretary will keep or cause to be kept at the principal
office, or such other place as the Board of Directors may order, a book of
minutes of all meetings of directors and
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shareholders showing the time and place of the meeting, whether it was regular
or special and, if special, how authorized, the notice given, the names of those
present at directors' meetings, the number of shares present or represented at
shareholders meetings and the proceedings thereof.
(b) The Secretary will keep or cause to be kept, at the principal
office or at the office of the Corporation's transfer agent, a share register,
or a duplicate share register, showing the names of the shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for such shares and the number and date of cancellation of
certificates surrendered for cancellation.
(c) The Secretary will give or cause to be given such notice of the
meetings of the shareholders and of the Board of Directors as is required by
these Bylaws. The Secretary will keep the seal of the Corporation, if any, and
affix it to all documents requiring a seal, and will have such other powers and
perform such other duties as may be prescribed by the Board of Directors or
these Bylaws.
Section 7. TREASURER
The Treasurer, if any, will be responsible for the funds of the
Corporation, and pay them out only on the checks of the Corporation signed in
the manner authorized by the Board of Directors.
Section 8. ASSISTANTS
The Board of Directors may appoint or authorize the appointment of
assistants to the Secretary or Treasurer, or both. Such assistants may exercise
the powers of the Secretary or Treasurer, as the case may be, and will perform
such duties as are prescribed by the Board of Directors.
ARTICLE V
CORPORATE RECORDS AND REPORTS - INSPECTION
Section 1. RECORDS
The Corporation will maintain all records required by law. All such
records will be kept at its principal office, registered office or at any other
place designated by the President of the Corporation, or as otherwise provided
by law.
Section 2. INSPECTION OF RECORDS
All records of the Corporation will be open to inspection by the
shareholders or the shareholders' agents or attorneys in the manner and to the
extent required by law.
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Section 3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for payment of money, notes or
other evidences of indebtedness, issued in the name of or payable to the
Corporation, will be signed or endorsed by such person or persons and in such
manner as will be determined from time to time by resolution of the Board of
Directors.
Section 4. EXECUTION OF DOCUMENTS
The Board of Directors may, except as otherwise provided in these
Bylaws, authorize any officer or agent of the Corporation to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation. Such authority may be general or confined to specific instances.
Unless so authorized by the Board of Directors, no officer, agent or employee of
the Corporation will have any power or authority to bind the Corporation by any
contract or engagement outside of the ordinary course of business.
ARTICLE VI
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES
(a) Certificates for shares will be in such form as the Board of
Directors may designate, will designate the name of the Corporation and the
state law under which the Corporation is organized, will state the name of the
person to whom the shares represented by the certificate are issued, and will
state the number and class of shares and the designation of the series, if any,
the certificate represents. If the Corporation is authorized to issue different
classes of shares or different series within a class, the designations, relative
rights, preferences and limitations applicable to each class, the variations and
rights, preferences and limitations determined for each series and the authority
of the Board of Directors to determine variations for future series will be
summarized on the front or back of each certificate, or each certificate may
state conspicuously on its front or back that the Corporation will furnish
shareholders with this information on request in writing and without charge.
(b) Each certificate for shares must be signed, either manually or in
facsimile, by the President or a Vice President and the Secretary or an
Assistant Secretary of the Corporation. The certificates may bear the corporate
seal or its facsimile.
(c) If any officer who has signed a share certificate, either manually
or in facsimile, no longer holds office when the certificate is issued, the
certificate is nevertheless valid.
(d) The Corporation will not issue certificates for fractional shares.
Section 2. TRANSFER ON THE BOOKS
Upon surrender to the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, the Corporation
<PAGE>
will issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES
In the event a certificate is represented to be lost, stolen or
destroyed, a new certificate will be issued in place thereof upon such proof of
the loss, theft or destruction and upon the giving of such bond or other
security as may be required by the Board of Directors.
Section 4. TRANSFER AGENTS AND REGISTRARS
The Board of Directors may from time to time appoint one or more
transfer agents and one or more registrars for the shares of the Corporation who
will have such powers and duties as the Board of Directors will specify.
Section 5. CLOSING STOCK TRANSFER BOOKS
The Board of Directors may close the transfer books for a period not
exceeding 70 days nor less than 10 days preceding any annual or special meeting
of the shareholders or the day appointed for the payment of a dividend.
ARTICLE VII
GENERAL PROVISIONS
Section 1. SEAL
If the Corporation elects to have a corporate seal, such corporate
seal will be circular in form and will have inscribed thereon the name of the
Corporation and the state of its incorporation.
Section 2. AMENDMENT OF BYLAWS
(a) Except as otherwise provided by law or by the Articles of
Incorporation, the Board of Directors may amend or repeal these Bylaws unless:
(i) The Articles of Incorporation or Oregon law reserve this
power exclusively to the shareholders in whole or in part; or
(ii) The shareholders in amending or repealing a particular Bylaw
provide expressly that the Board of Directors may not amend or repeal that
Bylaw.
(b) The Corporation's shareholders may amend or repeal these Bylaws
even though these Bylaws may also be amended or repealed by the Board of
Directors.
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(c) Whenever an amendment or new Bylaw is adopted, it will be copied
in the minute book with the original Bylaws in the appropriate place. If any
Bylaw is repealed, the fact of repeal and the date on which the repeal occurred
will be stated in such book and place.
Section 3. WAIVER OF NOTICE
(a) A shareholder may at any time waive any notice required by law,
the Articles of Incorporation or these Bylaws. Except as otherwise provided in
paragraph (c) of Section 4 of Article I of these Bylaws, the waiver must be in
writing, be signed by the shareholder entitled to the notice, and be delivered
to the Corporation for inclusion in the minutes or filing with the corporate
records.
(b) A director may at any time waive any notice required by law, the
Articles of Incorporation or these Bylaws. Except as otherwise provided in
paragraph (b) of Section 8 of Article II of these Bylaws, the waiver must be in
writing, must be signed by the director entitled to the notice, must specify the
meeting for which notice is waived and must be filed with the minutes or
appropriate records.
Section 4. ACTION WITHOUT A MEETING
(a) Action required or permitted by law to be taken at a shareholders
meeting may be taken without a meeting if the action is taken by all the
shareholders entitled to vote on the action. The action must be evidenced by one
or more written consents describing the action taken, signed by all the
shareholders entitled to vote on the action and delivered to the Corporation for
inclusion in the minutes or filing with the corporate records. Action taken
under this Section 4 is effective when the last shareholder signs the consent,
unless the consent specifies an earlier or later effective date. If not
otherwise determined by law, the record date for determining shareholders
entitled to take action without a meeting is the date the first shareholder
signs the consent. A consent signed under this Section 4 has the effect of a
meeting vote and may be described as such in any document.
(b) Unless the Articles of Incorporation or Bylaws provide otherwise,
action required or permitted by law to be taken at a meeting of the Board of
Directors, or at a meeting of a committee of the Board of Directors, may be
taken without a meeting if the action is taken by all members of the Board. The
action must be evidenced by one or more written consents describing the action
taken, signed by each director and included in the minutes or filed with the
corporate records reflecting the action taken. Action taken under this section
is effective when the last director signs the consent, unless the consent
specifies an earlier or later effective date. A consent signed under this
section has the effect of a meeting vote and may be described as such in any
document.
Section 5. TELEPHONIC MEETINGS
Unless the Articles of Incorporation provide otherwise, the Board of
Directors may permit any or all directors to participate in a regular or special
meeting by, or conduct the meeting
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through, use of any means of communication by which all directors participating
may simultaneously hear each other during the meeting. A director participating
in a meeting by this means is deemed to be present in person at the meeting.
ARTICLE VIII
INDEMNIFICATION
(a) The Corporation will indemnify to the fullest extent permitted by
law, any person who is made, or threatened to be made, a party to or witness in,
or is otherwise involved in, any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative, investigative, or
otherwise (including any action, suit or proceeding by or in the right of the
Corporation) by reason of the fact that:
(i) the person is or was a director or officer of the Corporation
or any of its subsidiaries;
(ii) the person is or was serving as a fiduciary within the
meaning of the Employee Retirement Income Security Act of 1974 with respect to
any employee benefit plan of the Corporation or any of its subsidiaries; or
(iii) the person is or was serving, at the request of the
Corporation or any of its subsidiaries, as a director or officer, or as a
fiduciary of an employee benefit plan, of another corporation, partnership,
joint venture, trust or other enterprise.
(b) The Corporation may indemnify its employees and other agents to
the fullest extent permitted by law.
(c) The expenses incurred by a director or officer in connection with
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, investigative, or otherwise, which the director or
officer is made or threatened to be made a party to or witness in, or is
otherwise involved in, will be paid by the Corporation in advance at the written
request of the director or officer, if the director or officer:
(i) furnishes the Corporation a written affirmation of his or her
good faith belief that he or she is entitled to be indemnified by the
Corporation; and
(ii) furnishes the Corporation a written under-taking to repay
such advance to the extent that it is ultimately determined by a court that he
or she is not entitled to be indemnified by the Corporation. Such advances will
be made without regard to the person's ability to repay such expenses and
without regard to the person's ultimate entitlement to indemnification under
this Article or otherwise.
(d) The rights of indemnification provided in this Article VIII will
be in addition to any rights to which a person may otherwise be entitled under
any articles of incorporation, bylaw, agreement, statute, policy of insurance,
vote of shareholders or Board of
<PAGE>
Directors, or otherwise; will continue as to a person who has ceased to be a
director, officer, employee or agent of the Corporation; and will inure to the
benefit of the heirs, executors and administrators of such person.
(e) Any repeal of this Article VIII will be prospective only and no
repeal or modification of this Article VIII will adversely affect any right or
protection that is based upon this Article VIII and pertains to an act or
omission that occurred prior to the time of such repeal or modification.
ARTICLE IX
TRANSACTIONS BETWEEN
CORPORATION AND INTERESTED DIRECTORS
(a) No transaction will be voidable by the Corporation solely because
of a director's interest in the transaction if any one of the following is true:
(i) The material facts of the transaction and the director's
interest were disclosed or known to the Board of Directors or a committee of the
Board of Directors, and the Board of Directors or committee authorized, approved
or ratified the transaction;
(ii) The material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and the
shareholders authorized, approved or ratified the transaction; or
(iii) The transaction was fair to the Corporation.
(b) For purposes of this Article IX, a director of the Corporation has
an indirect interest in a transaction if:
(i) Another entity in which the director has a material financial
interest or in which the director is a general partner is a party to the
transaction; or
(ii) Another entity of which the director is a director, officer
or trustee is a party to the transaction and the transaction is or should be
considered by the Board of Directors.
(c) For purposes of paragraph (a)(i) of this Article IX, a conflict of
interest transaction is authorized, approved or ratified if it receives the
affirmative vote of a majority of the directors on the Board of Directors, or on
the committee, who have no direct or indirect interest in the transaction. A
transaction may not be authorized, approved or ratified under this Article IX by
a single director. If a majority of the directors who have no direct or indirect
interest in the transaction vote to authorize, approve or ratify the
transaction, a quorum is present for the purpose of taking action under this
Article IX. The presence of, or a vote cast by, a director with a direct or
indirect interest in the transaction does not affect the validity of any action
taken under paragraph (a)(i) of this Article IX if the transaction is otherwise
authorized, approved or ratified as provided in paragraph (a) of this Article
IX.
<PAGE>
(d) For purposes of paragraph (a)(ii) of this Article IX, a conflict
of interest transaction is authorized, approved or ratified if it receives the
vote of a majority of the shares entitled to be counted under this Article IX,
voting as a single voting group. Shares owned by or voted under the control of a
director who has a direct or indirect interest in the transaction, and shares
owned by or voted under the control of an entity described in paragraph (b)(i)
of this Article IX may be counted in a vote of shareholders to determine whether
to authorize, approve or ratify a conflict of interest transaction under
paragraph (a)(ii) of this Article IX. A majority of the shares, whether or not
present, that are entitled to be counted in a vote on the transaction under this
Article IX constitutes a quorum for the purpose of taking action under this
Article IX.
ARTICLE X
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by law, no director of the Corporation
will be personally liable to the Corporation or its shareholders for monetary
damages for conduct as a director. For example, without limiting the generality
of the foregoing, if the Oregon Revised Statutes are amended, after this Article
X becomes effective, to authorize corporate action further eliminating or
limiting the personal liability of directors of the Corporation, then the
liability of directors of the Corporation will be eliminated or limited to the
fullest extent permitted by the Oregon Revised Statutes, as so amended. No
amendment or repeal of this Article X, nor the adoption of any provision of
these Bylaws inconsistent with this Article X, nor a change in the law, will
adversely affect any right or protection that is based upon this Article X and
pertains to conduct that occurred prior to the time of such amendment, repeal,
adoption or change. No change in the law will reduce or eliminate the rights and
protections set forth in this Article X unless the change in the law
specifically requires such reduction or elimination.
As amended August 1997.
INDEMNITY AGREEMENT
(Director and Officer)
Date: AUGUST 25, 1997
Between: TRM COPY CENTERS CORPORATION "Corporation"
And: FREDERIC P. STOCKTON "Director"
WHEREAS, it is essential to the Corporation to retain and attract as
directors and officers of the Corporation the most capable persons available and
persons who have significant experience in business, corporate and financial
matters; and
WHEREAS, the Corporation has identified the Director as a person possessing
the background and abilities desired by the Corporation and desires the Director
to serve as a member of its Board of Directors and as an officer of the
Corporation; and
WHEREAS, the substantial increase in corporate litigation may, from time to
time, subject directors and officers to burdensome litigation, the risks of
which frequently far outweigh the advantages of serving in such capacities; and
WHEREAS, in recent times the cost of directors' and officers' liability
insurance has increased and the availability of such insurance has been severely
limited; and
WHEREAS, the Corporation and the Director recognize that serving as a
director and officer of a corporation at times calls for subjective evaluations
and judgments upon which reasonable persons may differ and that, in that
context, it is anticipated and expected that directors and officers of
corporations will and do from time to time commit actual or alleged errors or
omissions in the good faith exercise of their corporate duties and
responsibilities; and
WHEREAS, it is now the express policy of the Corporation to indemnify its
directors and officers to the fullest extent permitted by law; and
WHEREAS, the Articles of Incorporation (the "Articles") and the Bylaws of
the Corporation require indemnification of the directors and officers of the
Corporation to the fullest extent permitted by the Oregon Business Corporation
Act (the "Act"), and the Act expressly provides that the indemnification
provisions set forth therein are not exclusive, and thereby contemplates that
contracts may be entered into between the Corporation and directors and officers
of the Corporation with respect to indemnification of directors and officers;
and
<PAGE>
WHEREAS, the Corporation and the Director desire to articulate clearly in
contractual form their respective rights and obligations with regard to the
Director's service on behalf of the Corporation and with regard to claims for
loss, liability, expense or damage which, directly or indirectly, may arise out
of or relate to such service.
NOW THEREFORE, the Corporation and the Director agree as follows:
1. Agreement to Serve. The Director shall serve as a director and officer
of the Corporation for so long as the Director is duly elected or appointed or
until the Director tenders a resignation in writing.
2. Definitions. As used in this Agreement:
(a) The term "Proceeding" includes, without limitation, any
threatened, pending or completed action, suit or proceeding, whether brought in
the right of the Corporation or otherwise and whether of a civil, criminal,
administrative or investigative nature, in which the Director may be or may have
been involved as a party, witness or otherwise, by reason of the fact that the
Director is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, whether or not serving in such capacity at the time any liability or
expense is incurred for which exculpation, indemnification or reimbursement can
be provided under this Agreement.
(b) The term "Expenses" includes, without limitation, expenses of
investigations, judicial or administrative proceedings or appeals, attorney,
accountant and other professional fees and disbursements and any expenses of
establishing a right to indemnification under Section 12 of this Agreement, but
shall not include amounts paid in settlement by the Director or the amount of
judgments, penalties or fines against the Director.
(c) References to "other enterprise" include, without limitation,
employee benefit plans; references to "fines" include, without limitation, any
excise tax assessed with respect to any employee benefit plan; references to
"serving at the request of the Corporation" include, without limitation, any
service as a director, officer, employee or agent that imposes duties on, or
involves services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants, or its beneficiaries; and a person
who acted in good faith and in a manner reasonably believed to be in the
interest of an employee benefit plan shall be deemed to have acted in a manner
"not opposed to the best interests of the Corporation" as referred to in this
Agreement.
2
<PAGE>
3. Limitation of Liability.
(a) To the fullest extent permitted by law, the Director shall have no
monetary liability of any kind or nature with respect to the Director's conduct
as a director in serving the Corporation or any of its subsidiaries, their
respective shareholders, or any other enterprise at the request of the
Corporation, except that this Section 3(a) shall not affect any liability of the
Director for any of the following when demonstrated by clear and convincing
evidence:
(i) any breach of the Director's duty of loyalty to such
corporations, shareholders or enterprises;
(ii) any act or omission not in good faith or that involved
intentional misconduct or a knowing violation of law;
(iii) any transaction from which the Director derived an improper
personal benefit; or
(iv) any unlawful corporate distribution as defined in the Act
(including dividends, stock repurchases and stock redemptions).
(b) Without limiting the generality of (a) above and to the fullest
extent permitted by law, the Director shall have no personal liability to the
Corporation or any of its subsidiaries, their respective shareholders, or any
other person claiming derivatively through the Corporation, regardless of the
theory or principle under which such liability may be asserted, for:
(i) punitive, exemplary or consequential damages;
(ii) treble or other damages computed based upon any multiple of
damages actually and directly proved to have been sustained;
(iii) fees of attorneys, accountants, expert witnesses or
professional consultants; or
(iv) civil fines or penalties of any kind or nature whatsoever.
4. Indemnity in Third-Party Proceedings. The Corporation shall indemnify
the Director in accordance with the provisions of this Section 4, if the
Director is made, or is threatened to be made, a party to or witness in, any
Proceeding (other than a Proceeding by or in the right of the Corporation to
procure a judgment in its favor), against all Expenses, judgments, penalties,
fines and amounts paid in settlement, actually and reasonably incurred by the
Director in connection with such Proceeding if the conduct of the Director was
in good faith and the Director reasonably believed that the Director's conduct
was in the best interests of the Corporation, or at least not
3
<PAGE>
opposed to its best interests, and, in the case of a criminal proceeding, the
Director, in addition, had no reasonable cause to believe that the Director's
conduct was unlawful. However, the Director shall not be entitled to
indemnification under this Section 4 in connection with any Proceeding charging
improper personal benefit to the Director in which the Director was adjudged
liable on the basis that personal benefit was improperly received by the
Director, unless and only to the extent that the court conducting such
Proceeding or any other court of competent jurisdiction determines upon
application that, despite the adjudication of liability, the Director is fairly
and reasonably entitled to indemnification in view of all the relevant
circumstances.
5. Indemnity in Proceedings by or in the Right of the Corporation. The
Corporation shall indemnify the Director in accordance with the provisions of
this Section 5, if the Director is made, or is threatened to be made, a party to
or witness in, any Proceeding by or in the right of the Corporation to procure a
judgment in its favor, against all Expenses actually and reasonably incurred by
the Director in connection with such Proceeding if the conduct of the Director
was in good faith and the Director reasonably believed that the Director's
conduct was in the best interests of the Corporation, or at least not opposed to
its best interests. However, the Director shall not be entitled to
indemnification under this Section 5 in connection with any Proceeding in which
the Director has been adjudged liable to the Corporation, unless and only to the
extent that the court conducting such Proceeding or any other court of competent
jurisdiction determines upon application that, despite the adjudication of
liability, the Director is fairly and reasonably entitled to indemnification in
view of all the relevant circumstances.
6. Indemnification of Expenses of Successful Party. Notwithstanding any
other provisions of this Agreement, to the extent that the Director has been
successful, on the merits or otherwise, in defense of any Proceeding or in
defense of any claim, issue or matter therein, including the dismissal of an
action without prejudice, the Corporation shall indemnify the Director against
all Expenses actually and reasonably incurred by the Director in connection
therewith.
7. Additional Indemnification.
(a) Notwithstanding any limitation in Section 4, 5 or 6, the
Corporation shall indemnify the Director to the fullest extent permitted by law,
with respect to any Proceeding (including a Proceeding by or in the right of the
Corporation to procure a judgment in its favor), against all Expenses,
judgments, penalties, fines and amounts paid in settlement, actually and
reasonably incurred by the Director in connection with such Proceeding.
(b) For purposes of this Agreement, the meaning of the phrase "to the
fullest extent permitted by law" shall include, but not be limited to:
4
<PAGE>
(i) to the fullest extent authorized or permitted by any
amendments to or replacements of the Act adopted after the date of this
Agreement that increase the extent to which a corporation may indemnify or
exculpate its directors and officers; and
(ii) to the fullest extent permitted by the provision of the Act
that authorizes or contemplates additional indemnification by agreement, or
the corresponding provision of any amendment to or replacement of the Act.
8. Exclusions. Notwithstanding any provision in this Agreement, the
Corporation shall not be obligated under this Agreement to make any
indemnification in connection with any claim made against the Director:
(a) for which payment is made to or on behalf of the Director under
any insurance policy, except with respect to any excess amount to which the
Director is entitled under this Agreement beyond the amount of payment under
such insurance policy;
(b) if a court having jurisdiction in the matter finally determines
that such indemnification is not lawful under any applicable statute or public
policy (and, in this respect, both the Corporation and the Director have been
advised that in the opinion of the Securities and Exchange Commission
indemnification for liabilities arising under the Securities Act of 1933 is
against public policy and is, therefore, unenforceable and that claims for such
indemnification should be submitted to appropriate courts for adjudication
unless, in the opinion of counsel, the matter has been settled by controlling
precedent);
(c) in connection with any Proceeding (or part of any Proceeding)
initiated by the Director, or any Proceeding by the Director against the
Corporation or its directors, officers, employees or other persons entitled to
be indemnified by the Corporation, unless (i) the Corporation is expressly
required by law to make the indemnification, (ii) the Proceeding was authorized
by the Board of Directors of the Corporation, or (iii) the Director initiated
the Proceeding pursuant to Section 12 of this Agreement and the Director is
successful in whole or in part in the Proceeding; or
(d) for any liability for profits made from the purchase and sale by
the Director of securities of the Corporation, which liability arises under
Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar
provision of any state statutory or common law.
9. Advances of Expenses. The Corporation shall pay the Expenses incurred by
the Director in any Proceeding in advance of the final disposition of the
Proceeding at the written request of the Director, if the Director:
5
<PAGE>
(a) furnishes the Corporation a written affirmation of the Director's
good faith belief that the Director is entitled to be indemnified under this
Agreement; and
(b) furnishes the Corporation a written undertaking to repay the
advance to the extent that it is ultimately determined that the Director is not
entitled to be indemnified by the Corporation. Such undertaking shall be an
unlimited general obligation of the Director but need not be secured.
Advances pursuant to this Section 9 shall be made no later than 10
days after receipt by the Corporation of the affirmation and undertaking
described in Sections 9(a) and 9(b) above, and shall be made without regard to
the Director's ability to repay the amount advanced and without regard to the
Director's ultimate entitlement to indemnification under this Agreement. The
Corporation may establish a trust, escrow account or other secured funding
source for the payment of advances made and to be made pursuant to this Section
9 or of other liability incurred by the Director in connection with any
Proceeding.
10. Nonexclusivity and Continuity of Rights. The indemnification,
advancement of Expenses, and exculpation from liability provided by this
Agreement shall not be deemed exclusive of any other rights to which the
Director may be entitled under any other agreement, any articles of
incorporation, bylaws, or vote of shareholders or directors, the Act, or
otherwise, both as to conduct in the Director's capacity as a director or
officer of the Corporation and as to conduct in other capacities. The
indemnification under this Agreement shall continue as to the Director even
though the Director may have ceased to be a director or officer of the
Corporation or a director, officer, employee or agent of an enterprise related
to the Corporation and shall inure to the benefit of the heirs, executors,
administrators and personal representatives of the Director.
11. Procedure Upon Application for Indemnification. Any indemnification
under Section 4, 5, 6 or 7 shall be made no later than 45 days after receipt of
the written request of the Director, unless a determination is made within such
45-day period by (a) the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the applicable Proceeding, or
(b) independent legal counsel in a written opinion (which counsel shall be
appointed if such a quorum is not obtainable) that the Director is not entitled
to indemnification under this Agreement.
12. Enforcement. The Director may enforce any right to indemnification,
advances or exculpation provided by this Agreement in any court of competent
jurisdiction if (a) the Corporation denies the claim for indemnification,
advances or exculpation, in whole or in part, or (b) the Corporation does not
dispose of such claim within the time period required by this Agreement. It
shall be a defense to any such enforcement action (other than an action brought
to enforce a claim for advancement of Expenses pursuant to, and in compliance
with, Section 9 of this Agreement) that the
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<PAGE>
Director is not entitled to indemnification or exculpation under this Agreement.
However, except as provided in Section 13 of this Agreement, the Corporation
shall have no defense to an action brought to enforce a claim for advancement of
Expenses pursuant to Section 9 of this Agreement if the Director has tendered to
the Corporation the affirmation and undertaking required thereunder. The burden
of proving by clear and convincing evidence that indemnification or exculpation
is not appropriate shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors or independent legal counsel) to
have made a determination prior to the commencement of such action that
indemnification or exculpation is proper in the circumstances because the
Director has met the applicable standard of conduct nor an actual determination
by the Corporation (including its Board of Directors or independent legal
counsel) that indemnification or exculpation is improper because the Director
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the Director is not entitled to
indemnification or exculpation under this Agreement or otherwise. The Director's
Expenses incurred in connection with successfully establishing the Director's
right to indemnification, advances or exculpation, in whole or in part, in any
Proceeding shall also be indemnified by the Corporation.
The termination of any Proceeding by judgment, order of court,
settlement, conviction or upon a plea of nolo contendere, or its equivalent,
shall not, of itself, create a presumption that (a) the Director is not entitled
to indemnification under Section 4, 5 or 7 of this Agreement, or (b) the
Director is not entitled to exculpation under Section 3 of this Agreement.
13. Notification and Defense of Claim. Not later than 30 days after receipt
by the Director of notice of the commencement of any Proceeding, the Director
shall, if a claim in respect of the Proceeding is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement of
the Proceeding. The omission to notify the Corporation will not relieve the
Corporation from any liability which it may have to the Director otherwise than
under this Agreement. With respect to any Proceeding as to which the Director
notifies the Corporation of the commencement:
(a) The Corporation shall be entitled to participate in the Proceeding
at its own expense.
(b) Except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense of the Proceeding, with
legal counsel reasonably satisfactory to the Director. The Director shall have
the right to use separate legal counsel in the Proceeding, but the Corporation
shall not be liable to the Director under this Agreement, including Section 9
above, for the fees and expenses of separate legal counsel incurred after notice
from the Corporation of its assumption of the defense, unless (i) the Director
reasonably concludes that there may be a conflict of interest between the
Corporation and the Director in the conduct of the defense of the
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<PAGE>
Proceeding, or (ii) the Corporation does not use legal counsel to assume the
defense of such Proceeding. The Corporation shall not be entitled to assume the
defense of any Proceeding brought by or on behalf of the Corporation or as to
which the Director has made the conclusion provided for in (i) above.
(c) If two or more persons who may be entitled to indemnification from
the Corporation, including the Director, are parties to any Proceeding, the
Corporation may require the Director to use the same legal counsel as the other
parties. The Director shall have the right to use separate legal counsel in the
Proceeding, but the Corporation shall not be liable to the Director under this
Agreement, including Section 9 above, for the fees and expenses of separate
legal counsel incurred after notice from the Corporation of the requirement to
use the same legal counsel as the other parties, unless the Director reasonably
concludes that there may be a conflict of interest between the Director and any
of the other parties required by the Corporation to be represented by the same
legal counsel.
(d) The Corporation shall not be liable to indemnify the Director
under this Agreement for any amounts paid in settlement of any Proceeding
effected without its written consent, which shall not be unreasonably withheld.
The Director shall permit the Corporation to settle any Proceeding that the
Corporation assumes the defense of, except that the Corporation shall not settle
any action or claim in any manner that would impose any penalty or limitation on
the Director without the Director's written consent.
14. Partial Indemnification. If the Director is entitled under any
provisions of this Agreement to indemnification by the Corporation for some or a
portion of the Expenses, judgments, penalties, fines or amounts paid in
settlement, incurred by the Director in connection with such Proceeding, but
not, however, for the total amount thereof, the Corporation shall nevertheless
indemnify the Director for the portion of such Expenses, judgments, penalties,
fines or amounts paid in settlement to which the Director is entitled.
15. Severability. If this Agreement or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
remainder of this Agreement shall continue to be valid and the Corporation shall
nevertheless indemnify the Director as to Expenses, judgments, penalties, fines
and amounts paid in settlement, with respect to any Proceeding, to the fullest
extent permitted by any applicable portion of this Agreement that shall not have
been invalidated or by any applicable law.
16. Subrogation. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of the Director. The Director shall execute all documents
required and shall do all acts that may be necessary to secure such rights and
to enable the Corporation effectively to bring suit to enforce such rights.
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17. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
(a) upon delivery by hand to the party to whom the notice or other communication
shall have been directed, or (b) on the third business day after the date on
which it is mailed by certified or registered mail with postage prepaid,
addressed as follows:
(i) If to the Director, to the address indicated on the signature
page of this Agreement.
(ii) If to the Corporation, to the address of its principal
offices.
or to any other address as either party may designate to the other in writing.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute the original.
19. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the state of Oregon without regard to the
principles of conflict of laws.
20. Successors and Assigns. This Agreement shall be binding upon the
Corporation and its successors and assigns.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
duly executed and signed as of the date first written above.
CORPORATION: DIRECTOR:
TRM COPY CENTERS CORPORATION Frederic P. Stockton
By:
----------------------------------- ------------------------------------
Signature
Title: Chairman
-------------------------------- ------------------------------------
Address
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9
LOAN AGREEMENT
Dated as of: March 31, 1997
Parties: TRM Copy Centers (USA) Corporation ("TRM-USA")
TRM Copy Centers Corporation ("TRM")
FPC Belgium Limited ("FPC")
And: UNITED STATES NATIONAL BANK OF OREGON ("Lender")
RECITALS
A. TRM-USA and U. S. Bank of Idaho (successor to West One Bank, Idaho) have
entered into a Loan Agreement and promissory note in the amount of $26,000,000
("Current TRM-USA Note"), each dated February 7, 1996, pursuant to which U. S.
Bank of Idaho agreed to make a revolving loan and a term loan to TRM-USA in an
aggregate amount of up to $26,000,000 (together with any other documents or
instruments executed by USA in connection therewith, the "Current TRM-USA
Documents").
B. TRM and Lender (successor to West One Bank, Oregon) have entered into a
Business Loan Agreement and promissory note in the amount of $4,000,000
("Current TRM Note"), each dated February 7, 1996, pursuant to which Lender
agreed to make revolving loans to Borrower in an aggregate amount of up to
$4,000,000 (together with any other documents or instruments executed in
connection therewith, the "Current TRM Documents").
C. Subject to the terms and conditions of this Agreement, Lender has agreed to
make revolving loans to Borrower in an aggregate amount of up to $30,000,000,
which loans shall replace the credit accommodations described in Recitals A and
B.
The parties therefore agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Access Laws" means the Americans With Disabilities Act of 1990; the Fair
Housing Amendments Act of 1988; all other federal, state and local laws or
ordinances related to disabled access; and all statutes, rules, regulations,
ordinances, orders of governmental bodies and regulatory agencies and orders and
decrees of any court adopted, enacted or issued with respect thereto; all as now
existing or hereafter amended or adopted.
"Borrower(s)" means either or both of TRM-USA and FPC.
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"Default" means any Event of Default or any event which with the giving or
notice of the passage of time, or both, would constitute an Event of Default.
"Environmental Laws" means all local, state or federal laws, rules,
regulations, or ordinances pertaining to Hazardous Substances and environmental
regulation, contamination or clean-up including, without limitation, the federal
statutes commonly known as CERCLA and RCRA and all other federal or state lien
or environmental clean-up statutes, all as now existing or hereafter amended or
adopted.
"GAAP" means generally accepted accounting principles consistently applied.
"Guarantor" means TRM.
"Guaranty" means each guaranty of any obligations of Borrower to Lender
heretofore, contemporaneously herewith or hereafter executed by any Guarantor or
any other Person.
"Hazardous Substances" means (a) any substance or material defined or
designated as hazardous or toxic waste, hazardous or toxic material, or a
hazardous, toxic or radioactive substance (or designated by any similar term) by
or for purposes of any applicable Environmental Law; (b) asbestos and any
substance or compound containing asbestos; and (c) any other hazardous, toxic or
dangerous waste, substance or material, including but not limited to gasoline,
crude oil, fuel oil, diesel oil, and any other related petroleum products.
"Loan Documents" means this Agreement, the Notes, the Guaranty and all
other documents and instruments attached hereto, referred to herein or
heretofore, contemporaneously herewith or hereafter executed or delivered to
Lender by any Person in connection with any indebtedness of Borrower to Lender.
"Loan Party" means each party hereto other than Lender.
"Maximum FPC Amount" means, as of any date of determination, an amount
equal to the lesser of (a) $2,000,000 or (b) $30,000,000 minus the then
outstanding principal balance of the TRM-USA Note.
"Maximum TRM-USA Amount" means, as of any date of determination, an amount
equal to $30,000,000 minus the then outstanding principal balance of the FPC
Note.
"Note(s)" means either or both of the TRM-USA Note and the FPC Note.
"Person" means an individual or entity, including without limitation a
corporation, general or limited partnership, limited liability company, trust,
unincorporated association, government or government agency.
"Revolving Loan Review Date" means April 1, 2000.
Tangible Net Worth" means for any Person the net book value of (a) all of
such Person's assets exclusive of patents, trademarks, licenses, goodwill and
other intangibles and of loans to and notes and receivables from officers,
employees, directors, shareholders, partners and members of such Person minus
(b) all of such Person's liabilities determined in accordance with GAAP.
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ARTICLE II
CURRENT INDEBTEDNESS
2.1 Promissory Notes.
2.1.1 The principal balance of the Current TRM-USA Note as of March
31, 1997 is $3,500,000.
2.1.2 The principal balance of the Current TRM Note as of the date
hereof is $0.
2.2 Cancellation. TRM-USA and TRM agree that, as of the effective date
hereof, all commitments of U. S. Bank of Idaho pursuant to the Current TRM-USA
Documents and of United States National Bank of Oregon pursuant to the Current
TRM Documents shall be automatically terminated and no further loans will be
made by either Lender or U. S. Bank of Idaho under the Current TRM-USA Documents
or the Current TRM Documents.
ARTICLE III
REVOLVING LOANS
3.1 Maximum Amount. Subject to the terms and conditions of this Agreement,
the Notes and other Loan Documents, Lender agrees to make loans to TRM-USA and
FPC on a revolving credit basis (each a "Revolving Advance" and collectively,
"Revolving Loans"); provided, however, that (a) the aggregate principal amount
of outstanding Revolving Loans shall at no time exceed $30,000,000; (b) the
aggregate principal amount of outstanding Revolving Loans made to TRM-USA
("TRM-USA Loans") shall at no time exceed the Maximum TRM-USA Amount; and (c)
the aggregate principal amount of outstanding Revolving Loans made to FPC ("FPC
Loans") shall at no time exceed the Maximum FPC Amount.
3.2 Use of Proceeds. Borrower shall use the proceeds of the Revolving Loans
for its short-term working capital needs.
3.3 Notes.
3.3.1 The TRM-USA Loans shall be evidenced by a promissory note
executed by TRM-USA in the principal amount of $30,000,000 substantially in the
form attached as Exhibit A ("TRM-USA Note").
3.3.2 The FPC Loans shall be evidenced by a promissory note executed
by FPC in the principal amount of $2,000,000, substantially in the form attached
hereto as Exhibit B ("FPC Note").
3.4 Interest. Interest on the unpaid principal balance of the Notes shall
be due and payable at the times and at the rates set forth in the applicable
Note.
3.5 Principal Payments. The principal balance of the Notes shall be due and
payable on April 1, 2000.
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3.6 Additional Payments. In addition to the payments otherwise required on
the Notes, if at any time the outstanding principal balance of the TRM-USA Note
exceeds the Maximum TRM-USA Amount or the outstanding principal balance of the
FPC Note exceeds the Maximum FPC Amount, Borrower shall pay to Lender on demand
an amount equal to the amount by which such principal balance exceeds the
Maximum TRM-USA Amount or Maximum FPC Amount, as applicable.
3.7 Requests for Revolving Advances. Whenever either Borrower wishes to
request a Revolving Advance, such Borrower shall give Lender notice thereof in
accordance with the provisions of the applicable Note.
3.8 Loan Fee. Borrowers shall pay to Lender a fee in the amount of $35,000
for the Revolving Loans for the time period from the effective date hereof
through April 1, 2000.
3.9 Representation and Warranty of Credit Availability. Each request by
either Borrower for a Revolving Advance shall be deemed to be its representation
and warranty that (a) such Revolving Advance may be made without exceeding the
applicable maximum amount determined in accordance with the provisions of this
Agreement; (b) no Default has occurred, or will occur as a result of making such
Revolving Advance; and (c) all representations and warranties set forth in this
Agreement are true, accurate and complete as of the date of such request.
ARTICLE IV
GUARANTY AND NEGATIVE PLEDGE
4.1 Guaranty. All present and future obligations of Borrower to Lender
shall be guaranteed by Guarantor. Concurrently with execution of this Agreement,
Guarantor shall execute and deliver a guaranty to Lender.
4.2 Negative Pledge.
4.2.1 Without the prior written consent of Lender, no Loan Party shall
grant, create, assume or permit to exist any pledge, assignment for security
purposes, encumbrance, mortgage, hypothecation, or any other security interest
(including without limitation, any conditional sale or other title retention
agreement and any financing or capital lease having substantially the same
economic effect as any of the foregoing) in all or any portion of any real or
personal property now owned or hereafter acquired by such Loan Party
(collectively, "Property").
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ARTICLE V
CONDITIONS PRECEDENT
5.1 Initial Conditions Precedent. The effectiveness of this Agreement is
subject to satisfaction of each of the following conditions precedent
concurrently with or prior to execution of this Agreement:
5.1.1 Lender shall have received executed originals of this Agreement,
the Notes, the Guaranty, and each other Loan Document required by Lender.
5.1.2 Lender shall have received all documents and information Lender
may request relating to the authority for and validity of this Agreement and the
other Loan Documents, and to any other related matters, each in form and
substance satisfactory to Lender.
5.1.3 Lender shall have received the fee required by Section 3.8.
5.1.4 Borrowers shall have irrevocably repaid all amounts owed to
Lender and U.S. Bank of Idaho under the Current TRM-USA Note and the Current TRM
Note (which repayment may be made with the proceeds of a Revolving Advance).
5.1.5 Lender shall have received such additional documents and
information and each Loan Party shall have satisfied such additional
requirements as Lender reasonably requires.
5.2 Conditions Precedent to each Revolving Advance. Lender's Agreement to
make any Revolving Advance is subject to satisfaction of the following
conditions on the date any loan is made.
5.2.1 No default shall have occurred or will occur as a result of the
making of the Revolving Advance.
5.2.2 The representations and warranties in this Agreement shall be
true and correct as of such date.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Each Loan Party hereby represents and warrants:
6.1 Existence and Power. It is a duly organized and validly existing
corporation, is duly qualified and in good standing in each jurisdiction where
the conduct of its business or the ownership of its properties requires such
qualification, and has full power, authority and legal right to carry on its
business as presently conducted, to own and operate its properties and assets,
and to execute, deliver and perform the Loan Documents and all other documents
to be executed and delivered by it.
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6.2 Authorization. Its execution, delivery and performance of the Loan
Documents and all documents to be executed, delivered or performed by it and any
borrowing in connection therewith have been duly authorized by all necessary
corporate action, do not contravene any law, regulation, rule or order binding
on it or its articles of incorporation, and do not contravene the provisions of
or constitute a default under any agreement or instrument to which it is a party
or by which it may be bound or affected.
6.3 Litigation. There are no actions, proceedings, investigations, or
claims pending against it, or to its knowledge, threatened against or affecting
it, before any court or arbitrator or any governmental body or agency which
would be likely to result in a judgment or order against it (in excess of
insurance coverage) for more than $500,000 individually or in the aggregate.
6.4 Financial Condition. Its most recent balance sheet and related
statements of income, retained earnings and changes in financial position
heretofore delivered to Lender fairly present as of the date thereof its
financial condition for the period then ended, all in accordance with GAAP.
Since that date there have been no material adverse changes in its financial
condition or operations, except as disclosed to Lender in writing.
6.5 Taxes. It has filed all tax returns and reports required of it, and has
paid all taxes payable by it which have become due pursuant to such tax returns
and all other taxes and assessments payable by it.
6.6 Other Agreements. It is not in breach of or in default under any
agreement to which it is a party or which is binding on it or any of its assets,
which such breach or default would have a material adverse effect on its
financial condition or operations.
6.7 Good Title and Validity. It is the true and lawful owner of and has
good title to all real and personal property which it now owns and it will have
good title to all such property acquired hereafter, free of any security
interests, liens or encumbrances.
6.8 Compliance with Laws. It is in compliance with all applicable federal,
state, regional and local laws, regulations and ordinances, including without
limitation all environmental permits, Environmental Laws and Access Laws.
6.9 ERISA and FLSA Compliance. Any employee pension benefit plan ("Plan")
maintained for its employees which is subject to the Employment Retirement
Income Security Act of 1974 and any regulations issued thereto complies in all
material respects with ERISA and any other applicable laws and (a) such Plan has
not incurred any material accumulated "funding deficiency" and (b) with respect
to such Plan, no "reportable event" nor "prohibited transaction" has occurred.
It is in full compliance with the Fair Labor Standards Act.
6.10 No Material Misstatements. No report, financial statement,
representation or other information furnished by it to Lender contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
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6.11 Enforceability. This Agreement constitutes, and each other Loan
Document to which it is a party when executed and delivered to Lender will
constitute a legal, valid and binding obligation of such Loan Party, enforceable
in accordance with its terms.
ARTICLE VII
FINANCIAL COVENANTS AND INFORMATION
7.1 Financial Covenants. Until payment and performance in full of all
obligations of each Loan Party under the Loan Documents and termination of
Lender's commitment to make Revolving Advances to Borrowers, each Loan Party
agrees that:
7.1.1 Debt to Worth Ratio. TRM and its subsidiaries (the "TRM
Companies") shall maintain, on a consolidated basis, a debt to Tangible Net
Worth ratio not to exceed 1.0 to 1.0.
7.1.2 Current Ratio. The TRM Companies shall maintain, on a
consolidated basis, a ratio of current assets to current liabilities of at least
1.50 to 1.0. As used herein "current assets" means the total assets of the TRM
Companies that may property be classified as current assets in accordance with
GAAP, but excluding all loans to and notes and receivables from officers,
employees, directors and shareholders of the TRM Companies.
7.1.3 Minimum Tangible Net Worth. The TRM Companies shall maintain, on
a consolidated basis, a minimum Tangible Net Worth of not less than $35,000,000.
7.2 Financial Information.
7.2.1 As soon as available and in any event within 90 days after the
end of each of its fiscal years, Guarantor shall deliver to Lender the TRM
Companies' consolidated audited balance sheet as at the end of such fiscal year;
related statements of income, retained earnings and changes in financial
position for such year; and report, if any to management by the accountant who
prepared the financial statements, in each case certified by a certified public
accountant acceptable to Lender. No document or report shall contain a
disclaimer of opinion or adverse opinion except such as Lender in its sole
discretion may determine to be immaterial.
7.2.2 As soon as available and in any event within 45 days after the
end of each of its fiscal quarters, Guarantor shall deliver to Lender the TRM
Companies' internally prepared consolidated balance sheet and related statements
of income, retained earnings and changes in financial position as at the end of
such quarter, and for the fiscal year to date.
7.2.3 Promptly after filing, Guarantor shall deliver to Lender a
complete copy of each 10-K, 10-Q and each other document filed by any of the TRM
Companies with the Securities and Exchange Commission.
7.2.4 From time to time, each Loan Party shall provide to Lender such
information as Lender may reasonably request concerning the financial condition
and business affairs of such Loan Party.
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ARTICLE VIII
AFFIRMATIVE COVENANTS
Until payment and performance in full of all obligations of each Loan Party
under the Loan Documents and termination of Lender's commitment to make
Revolving Advances to Borrowers, each Loan Parry agrees that:
8.1. Inspection Rights. At any reasonable time, and from time to time, it
will permit Lender to examine and make copies of and abstracts from its records
and books of account, to visit its properties and to discuss its affairs,
finances and accounts with any of its officers or representatives.
8.2 Keeping of Books and Records. It will keep adequate records and books
of account in which complete entries will be made reflecting all material
financial transactions, and except as otherwise specifically provided herein,
will prepare all financial statements, computations and information required
hereunder in accordance with GAAP.
8.3 Other Obligations. It will pay and discharge before the same shall
become delinquent all indebtedness, taxes and other obligations for which it is
liable or to which its income or property is subject and all claims for labor
and materials or supplies which, if unpaid, might become by law a lien upon its
assets, unless it is contesting the indebtedness, taxes, or other obligations in
good faith and provision has been made to the reasonable satisfaction of Lender
for the payment thereof in the event any such contest is determined adversely to
it.
8.4 Insurance. It will provide, maintain and deliver to Lender policies of
insurance upon its properties and operations, carried with companies acceptable
to Lender, in such form and amounts and covering such risks as Lender may
require, with loss payable to Lender.
8.5 ERISA Compliance. It will cause each Plan to comply in all material
respects with ERISA and any other applicable laws, will promptly make all
contributions necessary to meet the minimum funding standards set forth in ERISA
and will promptly notify Lender of the occurrence of any "reportable event" (as
defined in ERISA) or any other event which might constitute grounds for
termination of any ERISA Plan. It will not terminate any ERISA Plan nor permit
to exist any "termination event" (as defined in ERISA).
8.6 Compliance with Laws. It shall comply in all material respects with all
federal, state, regional and local laws, regulations and ordinances (including
but not limited to all Environmental Laws, Access Laws and the Fair Labor
Standards Act) and promptly provide written notice to Lender of the receipt of
any notice of violation thereof from any governmental authority which violation,
alone or together with any other such violations, could reasonably be expected
to have a material adverse effect on its business, assets, operations or
condition, financial or otherwise.
8.7 Notification. Promptly after learning thereof, it will notify Lender in
writing of:
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8.7.1 The occurrence of any Default, and if such Default is then
continuing, a certificate of its chief financial officer or other authorized
officer setting forth the details thereof and the action which it is taking or
proposes to take with respect thereto.
8.7.2 The occurrence of any release of any Hazardous Substances onto
or affecting any of its property or any adjacent property, any Collateral, or
any other environmental problem or liability with respect to any such property;
and
8.7.3 The details of any claim, lien, litigation, administration
proceeding or judgment involving $500,000 or more individually or in the
aggregate threatened, instituted or completed against any Loan Party, or any
assets of any Loan Party, including but not limited to any and all enforcement,
cleanup, removal or other Governmental or regulatory proceedings pursuant to anv
Environmental Laws.
ARTICLE IX
NEGATIVE COVENANTS
Until payment and performance in full of all obligations of each Loan Party
under the Loan Documents, and termination of Lender's commitment to make
Revolving Advances to Borrowers, each Loan Party agrees that except with the
written consent of Lender:
9.1 Liquidation, Merger. It shall not liquidate, dissolve or enter into any
merger, consolidation or other combination.
9.2 Sale of Assets. It shall not sell, lease or dispose of any portion of
its business or assets except in the ordinary course of business.
9.3 Guaranties, Etc. It shall not assume, guarantee, endorse or otherwise
become directly or contingently liable for, nor obligated to purchase, pay or
provide funds for payment of, any obligation or indebtedness of any other
Person.
9.4 Loans and Investments. It shall not make or contract to make any loan
to any Person or purchase or otherwise acquire the capital stock, or any
interest in, any Person.
9.5 Type of Business. It shall not make any material change in the
character of its business.
9.6 Structure. It shall not make any material change in its corporate
structure.
ARTICLE X
DEFAULT
10.1 Events of Default. The occurrence of any of the following shall
constitute an Event of Default under this Agreement, each Note and each of the
other Loan Documents:
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10.1.1 Any default in the payment of anv portion of any principal,
interest, fees or any other amount when due under this Agreement, any Note or
any other Loan Document.
10.1.2 Any other default in the performance of or compliance with any
term of this Agreement, anv other Loan Document, or any other agreement between
Lender and any Loan Party.
10.1.3 Any indebtedness of any Loan Party under any note, indenture,
agreement, undertaking or obligation of any kind to any Person, including
Lender, becomes due by acceleration or otherwise and is not paid.
10.1.4 Any Guaranty shall cease to be, or shall be asserted by any
Person not to be, in full force and effect.
10.1.5 Any warranty, representation, statement, or information made or
furnished to Lender by or on behalf of any Loan Party proves to have been false
or misleading in any material respect when made or furnished or when deemed made
or furnished or becomes false or misleading at any time thereafter.
10.1.6 The commencement of any proceeding under any bankruptcy or
insolvency laws by or against, appointment of a receiver for any part of the
property of, assignment for the benefit of creditors of, insolvency or business
failure of, or any attachment, seizure or levy on any property of, any Loan
Party.
10.1.7 The dissolution or liquidation of any Loan Party or any Loan
Party takes any action to authorize dissolution or liquidation.
10.1.8 The interruption or cessation of a material portion of anv Loan
Party's ordinary business operations.
10.1.9 Any judgment, writ of attachment or similar process in an
amount in excess of $500,000 individually or in the aggregate is entered or
filed against any Loan Party or any property of any Loan Party and remains
unpaid, unvacated, unbonded or unstayed for a period of 30 days or more.
10.1.10 The failure of any Loan Party to provide Lender with financial
information promptly when requested.
10.1.11 Any material adverse change, as determined solely by Lender,
in the financial condition or management of any Loan Party, or Lender reasonably
deems itself insecure with respect to the payment or performance of the
obligations of any Loan Party to Lender.
10.2 Consequences of Default; Lender's Rights and Remedies. Time is of the
essence of this Agreement.
10.2.1 Upon the occurrence of any Event of Default and at any time
thereafter Lender may, at its sole option, do any one or more of the following:
(a) Without notice to any Loan Party, declare the entire outstanding
balance of principal and interest on the Notes and other Loan Documents
immediately due and payable,
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whereupon the same shall become immediately due and payable without presentment,
demand, protest or other requirements of any kind, all of which are expressly
waived by each Loan Party; and
(b) Exercise any and all other rights and remedies provided in the
Loan Documents and in any related agreements and documents. and as otherwise
provided by law.
10.2.2 Notwithstanding any right to cure events of default provided in
any Note or any of the other Loan Documents, each Loan Party agrees that such
Loan Party shall have only such cure rights as may be set forth herein.
ARTICLE XI
ARBITRATION
11.1 Arbitration of Claims. Either Lender or any Loan Party may require
that all disputes, claims, counterclaims, and defenses, including those based on
or arising from any alleged tort ("Claims") relating in any way to this
Agreement, any loan, any of the Loan Documents, or any transaction of which this
Agreement is a part (each a "Credit"), be settled by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association and Title 9 of the U.S. Code. All Claims will be subject to the
statutes of limitation applicable if they were litigated. This provision is void
if the Credit, at the time of the proposed submission to arbitration, is secured
by real property located outside of Oregon or Washington, or if the effect of
the arbitration procedure (as opposed to any Claims of any Loan Party) would be
to materially impair Lender's ability to realize on anv Collateral securing the
Credit.
11.2 Arbitrators. If arbitration occurs and each party's Claim is less than
$100,000, one neutral arbitrator will decide all issues; if any party's Claim is
$100,000 or more three neutral arbitrators will decide all issues. All
arbitrators will be active Oregon State Bar members in good standing. All
arbitration hearings will be held in Portland, Oregon. In addition to all other
powers, the arbitrator(s) shall have the exclusive right to determine all issues
of arbitrability. Judgment on any arbitration award may be entered in any court
with jurisdiction.
11.3 Other Remedies. If any party institutes any judicial proceeding
relating to any Credit, such action shall not be a waiver of the right to submit
any Claim to arbitration. In addition, each has the right before, during, and
after any arbitration to exercise any number of the following remedies, in any
order or concurrently: (a) setoff, (b) self-help repossession; (c) judicial or
non-judicial foreclosure against real or personal property collateral; (d)
provisional remedies, including injunction, appointment of receiver, attachment,
claim and delivery and replevin.
11.4 Governing Provision. Each Loan Party agrees that, notwithstanding any
contrary provision of any Note or any of the other Loan Documents, the
provisions of this Article shall govern the arbitration of all matters described
herein.
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ARTICLE XII
MISCELLANEOUS
12.1 No Waiver by Lender. No failure or delay of Lender in exercising any
right, power or remedy under this Agreement or any Loan Document shall operate
as a waiver of such right, power or remedy of Lender or of any other night. A
waiver of any provision of any Loan Document shall not constitute a waiver of or
prejudice Lender's right otherwise to demand strict compliance with that
provision or any other provision. Any waiver, permit, consent or approval of any
kind or character on the part of Lender must be in writing and shall be
effective only to the extent specifically set forth in such writing.
12.2 Costs and Fees. Without limiting any other provisions of this
Agreement, Borrower hereby agrees to pay Lender on demand an amount equal to all
costs and expenses incurred by Lender in connection with the negotiation,
preparation, execution, administration and enforcement of the Loan Documents,
including without limitation all recording costs, filing fees, costs of
appraisals, collateral audits, costs of perfecting, maintaining and defending
Lender's security interest in any collateral and fees of in-house and outside
counsel.
12.3 Notices. Except as otherwise specifically set forth in any Loan
Document, all notices, requests and demands hereunder shall be in writing, and
shall be deemed to have been given when hand-delivered, when deposited in the
mail as first class, registered or certified mail postage prepaid, or when sent
by telecopier, addressed as set forth below; provided, however, that any request
for a Revolving Advance shall not be effective until received by Lender. Any
party may at any time change its address for notices by giving notice of such
change to the other parties.
If to any Loan Party: If to Lender:
TRM Copy Centers Corporation United States National Bank of Oregon
5208 NE 122nd Avenue Oregon Corporate Banking
Portland, OR 97203-1074 111 SW 5th Avenue (T-4)
Portland, OR 97204
12.4 Collection Costs and Attorney Fees. Whether or not litigation or
arbitration is commenced, each Loan Party promises to pay all costs of
collecting any amounts which may become due to Lender under any of the Loan
Documents. Without limiting the foregoing, if litigation or arbitration is
commenced to enforce or construe any term of any of the Loan Documents, the
prevailing party shall be entitled to recover from the other parry all costs
thereof, including but not limited to such sums as the court or arbitrator(s)
may adjudge reasonable as attorney fees at trial, in any appellate proceeding,
proceeding under the bankruptcy code or receivership and post-judgment attorney
fees incurred in enforcing any judgment.
12.5 Integration; Conflicting Terms. This Agreement together with the other
Loan Documents comprises the entire agreement of the parties on the subject
matter hereof and supersedes and replaces all prior agreements, oral and
written, on such subject matter. If any term of any of the other Loan Documents
expressly conflicts with the provisions of this Agreement, the
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provisions of this Agreement shall control; provided, however, that the
inclusion of supplemental rights and remedies of Lender in any of the other Loan
Documents shall not be deemed a conflict with this Agreement.
12.6 Assignment and Participation. Lender may from time to time assign or
sell participating interests in all or any part of its interest in this
Agreement, the Notes and the other Loan Documents.
12.7 Successors and Assigns. This Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns, except that Borrowers may not assign or
transfer any of their rights or obligations under any Loan Document without the
prior written consent of Lender.
12.8 Partial Invalidity. If any provision of this Agreement or any of the
Loan Documents is held invalid under any applicable laws, such invalidity shall
not affect any other provision of this Agreement that can be given effect
without the invalid provision.
12.9 Governing Law. Except to the extent that Lender has greater rights and
remedies under federal law, this Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Oregon without regard
to conflicts of law principles.
12.10 Additional Acts. Upon request by Lender, each Loan Party will from
time to time provide such information, execute such documents and do such acts
as may reasonably be required by Lender in connection with any indebtedness or
obligations of any of them to Lender.
12.11 Documents Satisfactory to Lender. All information, documents and
instruments required to be executed or delivered to Lender shall be in form and
substance satisfactory to Lender.
12.12 Exhibits. All Exhibits referred to herein are attached hereto and
hereby incorporated by reference as if fully set forth herein.
12.13 Recitals. The Recitals are hereby incorporated by reference as if
fully set forth herein.
12.14 Computations. All interest rates and fees referred to herein shall be
computed on the basis of a 360-day year and applied to the actual number of days
elapsed.
12.15 References.
12.15.1 References to any Loan Document shall mean such Loan Document
as amended, modified, supplemented or extended from time to time and any number
of substitutions, renewals and replacements thereof or therefor.
12.15.2 References to governmental laws, statutes, ordinances, rules
and regulations shall be construed as including all amendments, consolidations
and replacements thereof or therefor.
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12.16 Counterparts. This Agreement may be executed in any number of
counterparts. Each signed counterpart shall be deemed an original, and all of
said counterparts taken together shall be deemed to constitute but one and the
same instrument.
12.17 Disclosure.
Under Oregon law, most agreements promises and commitments made by
lenders after October 3, 1989, concerning loans and other credit extensions
which are not for personal, family or household purposes or secured solely by
the borrower's residence must be in writing, express consideration and be signed
by the lender to be enforceable.
Each Loan Party acknowledges receipt of a copy of this Agreement
TRM COPY CENTERS (USA FPC BELGIUM LIMITED
CORPORATION
By: Michael Simon By: Michael Simon
-------------------------- --------------------------
Title: Pres & CEO Title: Pres & CEO
----------------------- -----------------------
TRM COPY CENTERS CORPORATION UNITED STATES NATIONAL BANK
OF OREGON
By: Michael Simon By:
-------------------------- --------------------------
Title: Pres & CEO Title:
----------------------- -----------------------
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ALTERNATIVE RATE OPTIONS
PROMISSORY NOTE
(PRIME RATE, LIBOR)
$30,000,000 Dated as of March 31, 1997
TRM COPY CENTERS (USA) CORPORATION ("Borrower")
UNITED STATES NATIONAL BANK OF OREGON ("Lender")
1. PROMISE TO PAY. For value received Borrower promises to pay to Lender or
order at PL-7, Oregon Commercial Loan Servicing, 555 S.W. Oak Street, Portland,
OR 97204, the principal sum of $30,000,000 or so much thereof as may be
outstanding from time to time, with interest thereon as provided herein.
2. MAXIMUM PRINCIPAL BALANCE. This note is given to evidence Borrower's
obligation to repay all sums which Lender may from time to time advance to
Borrower ("Advances") under a revolving line of credit. The unpaid principal
balance of all Advances outstanding under this note ("Principal Balance") at any
one time shall not exceed $30,000,000 minus the then outstanding principal
balance of the FPC Note. However, subject to the terms and conditions of the
Loan Agreement and this note, Advances may be borrowed, repaid and reborrowed
and the aggregate Advances loaned hereunder may exceed such maximum amount.
3. LOAN AGREEMENT. This note is the TRM-USA Note referred to in the Loan
Agreement between Borrower, FPC Belgium Limited, TRM Copy Centers Corporation,
and Lender dated as of March 31, 1997 (together with any amendments,
modifications, supplements, extensions, renewals, substitutions or replacements
thereof or therefor, the "Loan Agreement") and is subject to all terms and
conditions of and entitled to the benefits of the Loan Agreement. Capitalized
terms used herein without definition shall have the meanings given to such terms
in the Loan Agreement.
4. INTEREST RATE. The interest rate on the Principal Balance outstanding may
vary from time to time pursuant to the provisions of this note. Subject to the
provisions of this note, Borrower shall have the option from time to time of
choosing to pay interest at the rate or rates and for the applicable periods of
time based on the rate options provided herein; provided, however, that once
Borrower notifies Lender of the rate option chosen in accordance with the
provisions of this note, such notice shall be irrevocable. The rate options are
the Prime Borrowing Rate and the LIBOR Borrowing Rate, each as defined herein.
(a) Definitions. The following terms shall have the following
meanings:
"Business Day" means any day other than a Saturday, Sunday, or other
day that commercial banks in Portland, Oregon or New York City are authorized or
required by law to
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close; provided, however that when used in connection with a LIBOR Rate, LIBOR
Amount or LIBOR Interest Period such term shall also exclude any day on which
dealings in U.S. dollar deposits are not carried on in the London interbank
market.
"LIBOR Amount" means each principal amount for which Borrower chooses
to have the LIBOR Borrowing Rate apply for any specified LIBOR Interest Period.
"LIBOR Interest Period" means as to any LIBOR Amount, a period of
seven days or one, two, three or six months commencing on the date the LIBOR
Borrowing Rate becomes applicable thereto; provided, however, that: (i) the
first day of each LIBOR Interest Period must be a Business Day; (ii) no LIBOR
Interest Period shall be selected which would extend beyond April 1, 2000; (iii)
no LIBOR Interest Period shall extend beyond the date of any principal payment
required under Section 6 of this note, unless the sum of the Prime Rate Amount,
plus LIBOR Amounts with LIBOR Interest Periods ending on or before the scheduled
date of such principal payment, plus principal amounts remaining unborrowed
under a line of credit, equals or exceeds the amount of such principal payment;
(iv) any LIBOR Interest Period which would otherwise expire on a day which is
not a Business Day, shall be extended to the next succeeding Business Day,
unless the result of such extension would be to extend such LIBOR Interest
Period into another calendar month, in which event the LIBOR Interest Period
shall end on the immediately preceding Business Day; and (v) any LIBOR Interest
Period that begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such LIBOR Interest Period) shall end on the last Business Day of a calendar
month.
"LIBOR Rate" means, for any LIBOR Interest Period, the rate per annum
(computed on the basis of a 360-day year and the actual number of days elapsed
and rounded upward to the nearest 1/16 of 1%) quoted by Lender as its LIBOR
Rate, based on Lender's determination, on the basis of such factors as Lender
deems relevant, of the rate of interest at which U.S. dollar deposits would be
offered to Lender in the London interbank market at approximately 11 a.m. London
time on the date which is two Business Days prior to the first day of such LIBOR
Interest Period for delivery on the first day of such LIBOR Interest Period for
the number of months therein; provided, however, that the LIBOR Rate shall be
adjusted to take into account the maximum reserves required to be maintained for
Eurocurrency liabilities by banks during each such LIBOR Interest Period as
specified in Regulation D of the Board of Governors of the Federal Reserve
System or any successor regulation.
"Prime Rate" means the rate of interest which Lender from time to time
establishes as its prime rate and is not, for example, the lowest rate of
interest which Lender collects from any borrower or class of borrowers. When the
Prime Rate is applicable under Section 4(b) or 8, the interest rate hereunder
shall be adjusted without notice effective on the day the Prime Rate changes,
but in no event shall the rate of interest be higher than allowed by law.
"Prime Rate Amount" means any portion of the Principal Balance bearing
interest at the Prime Borrowing Rate.
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<PAGE>
(b) The Prime Borrowing Rate.
(i) The Prime Borrowing Rate is a per annum rate equal to the Prime
Rate.
(ii) Whenever Borrower desires to use the Prime Borrowing Rate option,
Borrower shall give Lender notice orally or in writing in accordance with
Section 11 of this note, which notice shall specify the requested effective date
(which must be a Business Day) and principal amount of the Advance or increase
in the Prime Rate Amount, and whether Borrower is requesting a new Advance or
conversion of a LIBOR Amount to the Prime Borrowing Rate.
(iii) Subject to Section 8 of this note, interest shall accrue on the
unpaid Principal Balance at the Prime Borrowing Rate unless and except to the
extent that the LIBOR Borrowing Rate is in effect.
(c) The LIBOR Borrowing Rate.
(i) The LIBOR Borrowing Rate is the LIBOR Rate plus 1.20% per annum.
(ii) Borrower may obtain LIBOR Borrowing Rate quotes from Lender
between 8:00 a.m. and 10:00 a.m. (Portland, Oregon time) on any Business Day.
Borrower may request an Advance, conversion of any portion of the Prime Rate
Amount to a LIBOR Amount or a new LIBOR Interest Period for an existing LIBOR
Amount, at such rate only by giving Lender notice in accordance with Section
4(c)(iii) before 10:00 a.m. (Portland, Oregon time) on such day.
(iii) Whether Borrower desires to use the LIBOR Borrowing Rate option,
Borrower shall give Lender irrevocable notice (either in writing or orally and
promptly confirmed in writing) between 8:00 a.m. and 10:00 a.m. (Portland,
Oregon time) two (2) Business Days prior to the desired effective date of such
rate. Any oral notice shall be given by, and any written notice or confirmation
of an oral notice shall be signed by, the person(s) authorized in Section 11 of
this note, and shall specify the requested effective date of the rate, LIBOR
Interest Period and LIBOR Amount, and whether Borrower is requesting a ne
Advance at the LIBOR Borrowing Rate, conversion of all or any portion of the
Prime Rate Amount to a LIBOR Amount, or a new LIBOR Interest Period for an
outstanding LIBOR Amount. Notwithstanding any other term of this note, Borrower
may elect the LIBOR Borrowing Rate in the minimum principal amount of $500,000
and in multiples of $100,000 above such amount.
(iv) If at any time the LIBOR Rate is unascertainable or unavailable
to Lender or if LIBOR Rate loans become unlawful, the option to select the LIBOR
Borrowing Rate shall terminate immediately. If the LIBOR Borrowing Rate is then
in effect, (A) it shall terminate automatically with respect to all LIBOR
Amounts (i) on the last day of each then applicable LIBOR Interest Period, if
Lender may lawfully continue to maintain such loans, or (ii) immediately if
Lender may not lawfully continue to maintain such loans through such day, and
(B) subject to Section 8, the Prime Borrowing Rate automatically shall become
effective as to such amounts upon such termination.
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<PAGE>
(v) If at any time after the date hereof (A) any revision in or
adoption of any applicable law, rule, or regulation or in the interpretation or
administration thereof (i) shall subject Lender or its Eurodollar lending office
to any tax, duty, or other charge, or change the basis of taxation of payments
to Lender with respect to any loans bearing interest based on the LIBOR Rate, or
(ii) shall impose or modify any reserve, insurance, special deposit, or similar
requirements against assets of, deposits with or for the account of, or credit
extended by Lender or its Eurodollar lending office, or impose on Lender or its
Eurodollar lending office any other condition affecting any such loans, and (B)
the result of any of the foregoing is (i) to increase the cost to Lender of
making or maintaining any such loans or (ii) to reduce the amount of any sum
receivable under this note by Lender or its Eurodollar lending office, Borrower
shall pay Lender within 15 days after demand by Lender such additional amount as
will compensate Lender for such increased cost or reduction. The determination
hereunder by Lender of such additional amount shall be conclusive in the absence
of manifest error. If Lender demands compensation under this Section 4(c)(v),
Borrower may upon three (3) Business Days' notice to Lender pay the accrued
interest on all LIBOR Amounts, together with any additional amounts payable
under Section 4(c)(vi). Subject to Section 8, upon Borrower's paying such
accrued interest and additional costs, the Prime Borrowing Rate immediately
shall be effective with respect to the unpaid principal balance of such LIBOR
Amounts.
(vi) Borrower shall pay to Lender, on demand, such amount as Lender
reasonably determines (determined as though 100% of the applicable LIBOR Amount
had been funded in the London interbank market) is necessary to compensate
Lender for any direct or indirect losses, expenses, liabilities, costs, expenses
or reductions in yield to Lender, whether incurred in connection with
liquidation or reemployment of funds or otherwise, incurred or sustained by
Lender as a result of: (A) any payment or prepayment of a LIBOR Amount,
termination of the LIBOR Borrowing Rate or conversion of a LIBOR Amount to the
Prime Borrowing Rate on a day other than the last day of the applicable LIBOR
Interest Period (including as a result of acceleration or a notice pursuant to
Section 4(c)(v)); or (B) any failure of Borrower to borrow, continue or prepay
any LIBOR Amount or to convert any portion of the Prime Rate Amount to a LIBOR
Amount after Borrower has given a notice thereof to Lender.
(vii) If Borrower chooses the LIBOR Borrowing Rate, Borrower shall pay
interest based on such rate, plus any other applicable taxes or charges
hereunder, even though Lender may have obtained the funds loaned to Borrower
from sources other than the London interbank market. Lender's determination of
the LIBOR Borrowing Rate and any such taxes or charges shall be conclusive in
the absence of manifest error.
(viii) Notwithstanding any other term of this note, Borrower may not
select the LIBOR Borrowing Rate if an Event of Default hereunder has occurred
and is continuing.
5. COMPUTATION OF INTEREST. All interest will be computed at the applicable rate
based on a 360-day year and applied to the actual number of days elapsed.
However, interest accruing under the Prime Borrowing Rate Index Option shall be
computed on the basis of a year of 365 days for the actual days elapsed.
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<PAGE>
6. PAYMENT SCHEDULE.
(a) Principal. Principal shall be paid on April 1, 2000.
(b) Interest. Interest shall be paid on the first day of April, 1997 and on the
same day of each month thereafter prior to maturity and at maturity.
7. PREPAYMENT.
(a) Prepayments of all or any part of the Prime Rate Amount may be made at
any time without penalty.
(b) Except as otherwise specifically set forth herein, Borrower may not
prepay all or any part of any LIBOR Amount or terminate any LIBOR Borrowing
Rate, except on the last day of the applicable LIBOR Interest Period.
(c) Principal prepayments will not postpone the date of or change the
amount of any regularly scheduled payment. At the time of any principal
prepayment, all accrued interest, fees, costs and expenses shall also be paid.
8. DEFAULT. Any Event of Default described in the Loan Agreement shall be an
Event of Default hereunder. Upon the occurrence of an Event of Default, Lender
may declare the entire unpaid Principal Balance on this note and all accrued
unpaid interest immediately due and payable, without notice. Upon default,
including failure to pay upon final maturity, Lender, at its option, may also,
if permitted under applicable law, increase the interest rate on this note to a
rate equal to the Prime Borrowing Rate plus 5%. The interest rate will not
exceed the maximum rate permitted by applicable law. In addition, if any payment
of principal or interest is 19 or more days past due, Borrower will be charged a
late charge of 5% of the delinquent payment.
9. EVIDENCE OF PRINCIPAL BALANCE; PAYMENT ON DEMAND. Holder's records shall, at
any time, be conclusive evidence of the unpaid Principal Balance and interest
owing on this note. Notwithstanding any other provisions of this note, if the
unpaid Principal Balance of this note, at any time, exceeds $30,000,000 minus
the then outstanding principal balance of the FPC Note, Borrower shall
immediately pay to Lender the amount of such excess.
10. RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this note against any and
all of such accounts.
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<PAGE>
11. REQUESTS FOR ADVANCES.
(a) Any Advance may be made or interest rate option selected upon the request of
Borrower (if an individual), any of the undersigned (if Borrower consists of
more than one individual), any person or persons authorized in subsection (b) of
this Section 11, and any person or persons otherwise authorized to execute and
deliver promissory notes to Lender on behalf of Borrower.
(b) Borrower hereby authorizes any 1 of the following individuals to request
Advances and to select interest rate options:
Robert A. Bruce, Vice President and Chief Financial Officer
- --------------------------------------------------------------------------------
Linda A. Haas, Corporate Controller
- --------------------------------------------------------------------------------
Rosemary H. Evans, Treasurer
- --------------------------------------------------------------------------------
unless Lender is otherwise instructed in writing.
(c) All Advances shall be disbursed by deposit directly to Borrower's account
number 240-0306698 at main branch of Lender, or by cashier's check issued to
Borrower.
(d) Borrower agrees that Lender shall have no obligation to verify the identity
of any person making any request pursuant to this Section 11 and Borrower
assumes all risks of the validity and authorization of such requests. In
consideration of Lender agreeing, at its sole discretion, to make Advances upon
such requests, Borrower promises to pay holder, in accordance with the
provisions of this note, the Principal Balance together with interest thereon
and other sums due hereunder, although any Advances may have been requested by a
person or persons not authorized to do so.
12. NOTICES. Any notice hereunder may be given as set forth in Section 12.3 of
the Loan Agreement.
13. ATTORNEY FEES. Whether or not litigation or arbitration is commenced,
Borrower promises to pay all costs of collecting overdue amounts. Without
limiting the foregoing, in the event that holder consults an attorney regarding
the enforcement of any of its rights under this note or any document securing
the same, or if this note is placed in the hands of an attorney for collection
or if suit or litigation is brought to enforce this note or any document
securing the same, Borrower promises to pay all costs thereof including such
additional sums as the court or arbitrator(s) may adjudge reasonable as attorney
fees, including without limitation, costs and attorney fees incurred in any
appellate court, in any proceeding under the bankruptcy code, or in any
receivership and post-judgment attorney fees incurred in enforcing any judgment.
14. WAIVERS; CONSENT. Each party hereto, whether maker, co-maker, guarantor or
otherwise, waives diligence, demand, presentment for payment, notice of
non-payment, protest and notice of protest and waives all defenses based on
suretyship or impairment of collateral. Without notice to Borrower and without
diminishing or affecting Lender's rights or Borrower's obligations hereunder,
Lender may deal in any manner with any person who at any time is liable for, or
provides any real or personal property collateral for, any indebtedness of
Borrower to
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<PAGE>
Lender, including the indebtedness evidenced by this note. Without limiting the
foregoing, Lender may, in its sole discretion: (a) make secured or unsecured
loans to Borrower and agree to any number of waivers, modifications, extensions
and renewals of any length of such loans, including the loan evidenced by this
note; (b) impair, release (with or without substitution of new collateral), fail
to perfect a security interest in, fail to preserve the value of, fail to
dispose of in accordance with applicable law, any collateral provided by any
person; (c) sue, fail to sue, agree not to sue, release, and settle or
compromise with, any person.
15. ARBITRATION. Either Lender or Borrower may require that all disputes,
claims, counterclaims and defenses, including those based on or arising from any
alleged tort, relating in any way to this note or any transaction of which this
note is a part, be settled by binding arbitration in accordance with the
provisions of Section 11.1 of the Loan Agreement.
16. GOVERNING LAW.
This note stall be governed by and construed and enforced in accordance with the
laws of the State of Oregon without regard to conflicts of law principles;
provided, however, that to the extent that Lender has greater rights or remedies
under Federal law, this provision shall not be deemed to deprive Lender of such
rights and remedies as may be available under Federal law.
17. DISCLOSURE.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDERS
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY THE LENDER
TO BE ENFORCEABLE.
BORROWER HEREBY ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS DOCUMENT.
TRM COPY CENTERS (USA) CORPORATION
MICHAEL SIMON Pres & CEO
- ----------------------------------------
By Title
- ----------------------------------------
By Title
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<PAGE>
ALTERNATIVE RATE OPTIONS
PROMISSORY NOTE
(PRIME RATE, LIBOR)
$2,000,000 Dated as of March 31, 1997
FPC BELGIUM LIMITED ("Borrower")
UNITED STATES NATIONAL BANK OF OREGON ("Lender")
1. PROMISE TO PAY. For value received Borrower promises to pay to Lender or
order at PL-7, Oregon Commercial Loan Servicing, 555 S.W. Oak Street, Portland,
OR 97204, the principal sum of $2,000,000 or so much thereof as may be
outstanding from time to time, with interest thereon as provided herein.
2. MAXIMUM PRINCIPAL BALANCE. This note is given to evidence Borrower's
obligation to repay all sums which Lender may from time to time advance to
Borrower ("Advances") under a revolving line of credit. The unpaid principal
balance of all Advances outstanding under this note ("Principal Balance") at any
one time shall not exceed the lesser of (a) $2,000,000 or (b) $30,000,000 minus
the then outstanding principal balance of the TRM-USA Note. However, subject to
the terms and conditions of the Loan Agreement and this note, Advances may be
borrowed, repaid and reborrowed and the aggregate Advances loaned hereunder may
exceed such maximum amount.
3. LOAN AGREEMENT. This note is the FPC Note referred to in the Loan Agreement
between Borrower, TRM Copy Centers (USA) Corporation, TRM Copy Centers
Corporation, and Lender dated as of March 31, 1997 (together with any
amendments, modifications, supplements, extensions, renewals, substitutions or
replacements thereof or therefor, the "Loan Agreement") and is subject to all
terms and conditions of and entitled to the benefits of the Loan Agreement.
Capitalized terms used herein without definition shall have the meanings given
to such terms in the Loan Agreement.
4. INTEREST RATE. The interest rate on the Principal Balance outstanding may
vary from time to time pursuant to the provisions of this note. Subject to the
provisions of this note, Borrower shall have the option from time to time of
choosing to pay interest at the rate or rates and for the applicable periods of
time based on the rate options provided herein; provided, however, that once
Borrower notifies Lender of the rate option chosen in accordance with the
provisions of this note, such notice shall be irrevocable. The rate options are
the Prime Borrowing Rate and the LIBOR Borrowing Rate, each as defined herein.
(a) Definitions. The following terms shall have the following meanings:
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"Business Day" means any day other than a Saturday, Sunday, or other
day that commercial banks in Portland, Oregon or New York City are authorized or
required by law to close; provided, however that when used in connection with a
LIBOR Rate, LIBOR Amount or LIBOR Interest Period such term shall also exclude
any day on which dealings in U.S. dollar deposits are not carried on in the
London interbank market.
"LIBOR Amount" means each principal amount for which Borrower chooses
to have the LIBOR Borrowing Rate apply for any specified LIBOR Interest Period.
"LIBOR Interest Period" means as to any LIBOR Amount, a period of
seven days or one, two, three or six months commencing on the date the LIBOR
Borrowing Rate becomes applicable thereto; provided, however, that: (i) the
first day of each LIBOR Interest Period must be a Business Day; (ii) no LIBOR
Interest Period shall be selected which would extend beyond April 1, 2000; (iii)
no LIBOR Interest Period shall extend beyond the date of any principal payment
required under Section 6 of this note, unless the sum of the Prime Rate Amount,
plus LIBOR Amounts with LIBOR Interest Periods ending on or before the scheduled
date of such principal payment, plus principal amounts remaining unborrowed
under a line of credit, equals or exceeds the amount of such principal payment;
(iv) any LIBOR Interest Period which would otherwise expire on a day which is
not a Business Day, shall be extended to the next succeeding Business Day,
unless the result of such extension would be to extend such LIBOR Interest
Period into another calendar month, in which event the LIBOR Interest Period
shall end on the immediately preceding Business Day; and (v) any LIBOR Interest
Period that begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such LIBOR Interest Period) shall end on the last Business Day of a calendar
month.
"LIBOR Rate" means, for any LIBOR Interest Period, the rate per annum
(computed on the basis of a 360-day year and the actual number of days elapsed
and rounded upward to the nearest 1/16 of 1%) quoted by Lender as its LIBOR
Rate, based on Lender's determination, on the basis of such factors as Lender
deems relevant, of the rate of interest at which U.S. dollar deposits would be
offered to Lender in the London interbank market at approximately 11 a.m. London
time on the date which is two Business Days prior to the first day of such LIBOR
Interest Period for delivery on the first day of such LIBOR Interest Period for
the number of months therein; provided, however, that the LIBOR Rate shall be
adjusted to take into account the maximum reserves required to be maintained for
Eurocurrency liabilities by banks during each such LIBOR Interest Period as
specified in Regulation D of the Board of Governors of the Federal Reserve
System or any successor regulation.
"Prime Rate" means the rate of interest which Lender from time to time
establishes as its prime rate and is not, for example, the lowest rate of
interest which Lender collects from any borrower or class of borrowers. When the
Prime Rate is applicable under Section 4(b) or 8, the interest rate hereunder
shall be adjusted without notice effective on the day the Prime Rate changes,
but in no event shall the rate of interest be higher than allowed by law.
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"Prime Rate Amount" means any portion of the Principal Balance bearing
interest at the Prime Borrowing Rate.
(b) The Prime Borrowing Rate.
(i) The Prime Borrowing Rate is a per annum rate equal to the Prime
Rate.
(ii) Whenever Borrower desires to use the Prime Borrowing Rate option,
Borrower shall give Lender notice orally or in writing in accordance with
Section 11 of this note, which notice shall specify the requested effective date
(which must be a Business Day) and principal amount of the Advance or increase
in the Prime Rate Amount, and whether Borrower is requesting a new Advance or
conversion of a LIBOR Amount to the Prime Borrowing Rate.
(iii) Subject to Section 8 of this note, interest shall accrue on the
unpaid Principal Balance at the Prime Borrowing Rate unless and except to the
extent that the LIBOR Borrowing Rate is in effect.
(c) The LIBOR Borrowing Rate.
(i) The LIBOR Borrowing Rate is the LIBOR Rate plus 1.20% per annum.
(ii) Borrower may obtain LIBOR Borrowing Rate quotes from Lender
between 8:00 a.m. and 10:00 a.m. (Portland, Oregon time) on any Business Day.
Borrower may request an Advance, conversion of any portion of the Prime Rate
Amount to a LIBOR Amount or a new LIBOR Interest Period for an existing LIBOR
Amount, at such rate only by giving Lender notice in accordance with Section
4(c)(iii) before 10:00 a.m. (Portland, Oregon time) on such day.
(iii) Whether Borrower desires to use the LIBOR Borrowing Rate option,
Borrower shall give Lender irrevocable notice (either in writing or orally and
promptly confirmed in writing) between 8:00 a.m. and 10:00 a.m. (Portland,
Oregon time) two (2) Business Days prior to the desired effective date of such
rate. Any oral notice shall be given by, and any written notice or confirmation
of an oral notice shall be signed by, the person(s) authorized in Section 11 of
this note, and shall specify the requested effective date of the rate, LIBOR
Interest Period and LIBOR Amount, and whether Borrower is requesting a new
Advance at the LIBOR Borrowing Rate, conversion of all or any portion of the
Prime Rate Amount to a LIBOR Amount, or a new LIBOR Interest Period for an
outstanding LIBOR Amount. Notwithstanding any other term of this note, Borrower
may elect the LIBOR Borrowing Rate in the minimum principal amount of $500,000
and in multiples of $100,000 above such amount.
(iv) If at any time the LIBOR Rate is unascertainable or unavailable
to Lender or if LIBOR Rate loans become unlawful, the option to select the LIBOR
Borrowing Rate shall terminate immediately. If the LIBOR Borrowing Rate is then
in effect, (A) it shall terminate automatically with respect to all LIBOR
Amounts (i) on the last day of each then applicable LIBOR Interest Period, if
Lender may lawfully continue to maintain such loans, or (ii) immediately if
Lender may not lawfully continue to maintain such loans through such day, and
Page 3 of 7
<PAGE>
(B) subject to Section 8, the Prime Borrowing Rate automatically shall become
effective as to such amounts upon such termination.
(v) If at any time after the date hereof (A) any revision in or
adoption of any applicable law, rule, or regulation or in the interpretation or
administration thereof (i) shall subject Lender or its Eurodollar lending office
to any tax, duty, or other charge, or change the basis of taxation of payments
to Lender with respect to any loans bearing interest based on the LIBOR Rate, or
(ii) shall impose or modify any reserve, insurance, special deposit, or similar
requirements against assets of, deposits with or for the account of, or credit
extended by Lender or its Eurodollar lending office, or impose on Lender or its
Eurodollar lending office any other condition affecting any such loans, and (B)
the result of any of the foregoing is (i) to increase the cost to Lender of
making or maintaining any such loans or (ii) to reduce the amount of any sum
receivable under this note by Lender or its Eurodollar lending office, Borrower
shall pay Lender within 15 days after demand by Lender such additional amount as
will compensate Lender for such increased cost or reduction. The determination
hereunder by Lender of such additional amount shall be conclusive in the absence
of manifest error. If Lender demands compensation under this Section 4(c)(v),
Borrower may upon three (3) Business Days' notice to Lender pay the accrued
interest on all LIBOR Amounts, together with any additional amounts payable
under Section 4(c)(vi). Subject to Section 8, upon Borrower's paying such
accrued interest and additional costs, the Prime Borrowing Rate immediately
shall be effective with respect to the unpaid principal balance of such LIBOR
Amounts.
(vi) Borrower shall pay to Lender, on demand, such amount as Lender
reasonably determines (determined as though 100% of the applicable LIBOR Amount
had been funded in the London interbank market) is necessary to compensate
Lender for any direct or indirect losses, expenses, liabilities, costs, expenses
or reductions in yield to Lender, whether incurred in connection with
liquidation or re-employment of funds or otherwise, incurred or sustained by
Lender as a result of: (A) any payment or prepayment of a LIBOR Amount,
termination of the LIBOR Borrowing Rate or conversion of a LIBOR Amount to the
Prime Borrowing Rate on a day other than the last day of the applicable LIBOR
Interest Period (including as a result of acceleration or a notice pursuant to
Section 4(c)(v)); or (B) any failure of Borrower to borrow, continue or prepay
any LIBOR Amount or to convert any portion of the Prime Rate Amount to a LIBOR
Amount after Borrower has given a notice thereof to Lender.
(vii) If Borrower chooses the LIBOR Borrowing Rate, Borrower shall pay
interest based on such rate, plus any other applicable taxes or charges
hereunder, even though Lender may have obtained the funds loaned to Borrower
from sources other than the London interbank market. Lender's determination of
the LIBOR Borrowing Rate and any such taxes or charges shall be conclusive in
the absence of manifest error.
(viii) Notwithstanding any other term of this note, Borrower may not
select the LIBOR Borrowing Rate if an Event of Default hereunder has occurred
and is continuing.
5. COMPUTATION OF INTEREST. All interest will be computed at the applicable rate
based on a 360-day year and applied to the actual number of days elapsed.
However, interest accruing under the Prime Borrowing Rate Index Option shall be
computed on the basis of a year of 365 days for the actual days elapsed.
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<PAGE>
6. PAYMENT SCHEDULE.
(a) Principal. Principal shall be paid on April 1, 2000.
(b) Interest. Interest shall be paid on the first day of April, 1997 and on the
same day of each month thereafter prior to maturity and at maturity.
7. PREPAYMENT.
(a) Prepayments of all or any part of the Prime Rate Amount may be made at
any time without penalty.
(b) Except as otherwise specifically set forth herein, Borrower may not
prepay all or any part of any LIBOR Amount or terminate any LIBOR Borrowing
Rate, except on the last day of the applicable LIBOR Interest Period.
(c) Principal prepayments will not postpone the date of or change the
amount of any regularly scheduled payment. At the time of any principal
prepayment, all accrued interest, fees, costs and expenses shall also be paid.
8. DEFAULT. Any Event of Default described in the Loan Agreement shall be an
Event of Default hereunder. Upon the occurrence of an Event of Default, Lender
may declare the entire unpaid Principal Balance on this note and all accrued
unpaid interest immediately due and payable, without notice. Upon default,
including failure to pay upon final maturity, Lender, at its option, may also,
if permitted under applicable law, increase the interest rate on this note to a
rate equal to the Prime Borrowing Rate plus 5%. The interest rate will not
exceed the maximum rate permitted by applicable law. In addition, if any payment
of principal or interest is 19 or more days past due, Borrower will be charged a
late charge of 5% of the delinquent payment.
9. EVIDENCE OF PRINCIPAL BALANCE; PAYMENT ON DEMAND. Holder's records shall, at
any time, be conclusive evidence of the unpaid Principal Balance and interest
owing on this note. Notwithstanding any other provisions of this note, if the
unpaid Principal Balance of this note, at any time, exceeds the lesser of (a)
$2,000,000 or (b) $30,000,000 minus the then outstanding principal balance of
the TRM-USA Note, Borrower shall immediately pay to Lender the amount of such
excess.
10. RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this note against any and
all of such accounts.
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<PAGE>
11. REQUESTS FOR ADVANCES.
(a) Any Advance may be made or interest rate option selected upon the request of
Borrower (if an individual), any of the undersigned (if Borrower consists of
more than one individual), any person or persons authorized in subsection (b) of
this Section 11, and any person or persons otherwise authorized to execute and
deliver promissory notes to Lender on behalf of Borrower.
(b) Borrower hereby authorizes any 1 of the following individuals to request
Advances and to select interest rate options:
Robert A. Bruce, Vice President and Chief Financial Officer
- --------------------------------------------------------------------------------
Linda A. Haas, Corporate Controller
- --------------------------------------------------------------------------------
Rosemary H. Evans, Treasurer
- --------------------------------------------------------------------------------
unless Lender is otherwise instructed in writing.
(c) All Advances shall be disbursed by deposit directly to Borrower's account
number 240-0007-155 at main branch of Lender, or by cashier's check issued to
Borrower.
(d) Borrower agrees that Lender shall have no obligation to verify the identity
of any person making any request pursuant to this Section 11 and Borrower
assumes all risks of the validity and authorization of such requests. In
consideration of Lender agreeing, at its sole discretion, to make Advances upon
such requests, Borrower promises to pay holder, in accordance with the
provisions of this note, the Principal Balance together with interest thereon
and other sums due hereunder, although any Advances may have been requested by a
person or persons not authorized to do so.
12. NOTICES. Any notice hereunder may be given as set forth in Section 12.3 of
the Loan Agreement.
13. ATTORNEY FEES. Whether or not litigation or arbitration is commenced,
Borrower promises to pay all costs of collecting overdue amounts. Without
limiting the foregoing, in the event that holder consults an attorney regarding
the enforcement of any of its rights under this note or any document securing
the same, or if this note is placed in the hands of an attorney for collection
or if suit or litigation is brought to enforce this note or any document
securing the same, Borrower promises to pay all costs thereof including such
additional sums as the court or arbitrator(s) may adjudge reasonable as attorney
fees, including without limitation, costs and attorney fees incurred in any
appellate court, in any proceeding under the bankruptcy code, or in any
receivership and post-judgment attorney fees incurred in enforcing any judgment.
14. WAIVERS; CONSENT. Each party hereto, whether maker, co-maker, guarantor or
otherwise, waives diligence, demand, presentment for payment, notice of
non-payment, protest and notice of protest and waives all defenses based on
suretyship or impairment of collateral. Without notice to Borrower and without
diminishing or affecting Lender's rights or Borrower's obligations hereunder,
Lender may deal in any manner with any person who at any time is liable
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<PAGE>
for, or provides any real or personal property collateral for, any indebtedness
of Borrower to Lender, including the indebtedness evidenced by this note.
Without limiting the foregoing, Lender may, in its sole discretion: (a) make
secured or unsecured loans to Borrower and agree to any number of waivers,
modifications, extensions and renewals of any length of such loans, including
the loan evidenced by this note; (b) impair, release (with or without
substitution of new collateral), fail to perfect a security interest in, fail to
preserve the value of, fail to dispose of in accordance with applicable law, any
collateral provided by any person; (c) sue, fail to sue, agree not to sue,
release, and settle or compromise with, any person.
15. ARBITRATION. Either Lender or Borrower may require that all disputes,
claims, counterclaims and defenses, including those based on or arising from any
alleged tort, relating in any way to this note or any transaction of which this
note is a part, be settled by binding arbitration in accordance with the
provisions of Section 11.1 of the Loan Agreement.
16. GOVERNING LAW.
This note stall be governed by and construed and enforced in accordance with the
laws of the State of Oregon without regard to conflicts of law principles;
provided, however, that to the extent that Lender has greater rights or remedies
under Federal law, this provision shall not be deemed to deprive Lender of such
rights and remedies as may be available under Federal law.
17. DISCLOSURE.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDERS
AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY THE LENDER
TO BE ENFORCEABLE.
BORROWER HEREBY ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS DOCUMENT.
FPC BELGIUM LIMITED
MICHAEL SIMON Pres.
- -----------------------------------
By Title
- -----------------------------------
By Title
Page 7 of 7
TRM COPY CENTERS CORPORATION
1996 STOCK OPTION PLAN
1. Purpose. The purpose of this 1996 Stock Option Plan (the "Plan") is to
enable TRM Copy Centers Corporation (the "Company") to attract and retain the
services of selected key employees, consultants, independent contractors,
officers and directors of the Company.
2. Shares Subject to the Plan. Subject to adjustment as provided below and
in paragraph 9, the shares to be offered under the Plan shall consist of Common
Stock of the Company, and the total number of shares of Common Stock that may be
issued under the Plan shall not exceed 700,000 shares plus any shares that were
available for grant or subject to outstanding options under the Company's
Restated 1986 Stock Incentive Plan (the "1986 Plan") on the effective date of
the Plan and are not issued under the 1986 Plan due to termination or
cancellation of such options. If an option granted under the Plan expires,
terminates or is cancelled, the unissued shares subject to such option shall
again be available under the Plan.
3. Effective Date and Duration of Plan.
(a) Effective Date. The Plan shall become effective when adopted by
the Board of Directors; provided, however, that prior to shareholder approval of
the Plan, any grants shall be subject to and conditioned on approval of the Plan
by a majority of the votes cast at a meeting of shareholders at which a quorum
is present. Options may be granted under the Plan at any time after the
effective date and before termination of the Plan.
(b) Duration. The Plan shall continue in effect until all shares
available for issuance under the Plan have been issued and all restrictions on
such shares have lapsed. The Board of Directors may suspend or terminate the
Plan at any time except with respect to options then outstanding under the Plan.
Termination shall not affect any outstanding options.
4. Administration.
(a) Except as specified in paragraph 4(b) the Plan shall be
administered by the Board of Directors of the Company, which shall determine and
designate from time to time the individuals to whom option grants shall be made
and all terms and conditions of the grants. Subject to the provisions of the
Plan, the Board of Directors may from time to time adopt and amend rules and
regulations relating to administration of the Plan, accelerate any exercise
date, provide for automatic acceleration upon the occurrence of specified
events, waive or modify any restriction applicable to grants (except those
restrictions imposed by law) and make all other determinations in the judgment
of the Board of Directors necessary or desirable for the administration of the
Plan. The interpretation and construction of the provisions of the Plan and
related agreements by the Board of Directors shall be final and conclusive. The
Board of Directors may correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any related agreement in the manner and to
the extent it shall deem expedient to carry the Plan into effect, and it shall
be the sole and final judge of such expediency.
(b) The Board of Directors, if it so determines, may delegate to a
committee of the Board of Directors constituting of one or more members (the
"Committee") any or all authority for administration of the Plan; provided,
however, that only the Board of Directors may amend or terminate the Plan as
provided in paragraphs 3 and 11. If a Committee is appointed, all references to
the Board of Directors in the Plan shall mean and relate to such Committee
except as limited by the immediately preceding sentence and unless the context
requires otherwise.
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5. Types of Awards; Eligibility; Limitations on Certain Awards. The Board
of Directors may, from time to time, take the following actions, separately or
in combination, under the Plan: (i) grant Incentive Stock Options, as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), as
provided in paragraphs 6(a) and 6(b); (ii) grant options other than Incentive
Stock Options ("Nonstatutory Stock Options") as provided in paragraphs 6(a) and
6(c); and (iii) grant foreign qualified options as provided in paragraph 7. Any
such grants may be made to employees, consultants, independent contractors,
officers and directors, provided, however, that only employees of the Company
shall be eligible to receive Incentive Stock Options under the Plan. Except as
for options granted pursuant to paragraph 8, the Board of Directors shall select
the individuals to whom grants shall be made and shall specify the action taken
with respect to each individual to whom a grant is made. The Board of Directors
may not reprice outstanding options, other than adjustments made pursuant to
paragraph 9. No individual may be granted options under the Plan for more than
an aggregate of 300,000 shares of Common Stock in any calendar year.
6. Option Grants.
(a) General Rules Relating to Options.
(i) Terms of Grant. With respect to each option grant (except for
options granted pursuant to paragraph 8), the Board of Directors
shall determine the number of shares subject to the option, the
option price, the period of the option, the time or times at
which the option may be exercised and whether the option is an
Incentive Stock Option or a Nonstatutory Stock Option.
(ii) Exercise of Options. Except as provided in paragraphs
6(a)(iv) and 8 or as determined by the Board of Directors, no
option granted under the Plan may be exercised unless at the time
of such exercise the optionee is employed by or in the service of
the Company or any subsidiary of the Company and shall have been
so employed or provided such service continuously since the date
such option was granted. Absence on leave or on account of
illness or disability under rules established by the Board of
Directors shall not, however, be deemed an interruption of
employment or service for this purpose. Unless otherwise
determined by the Board of Directors, vesting of options shall
not continue during an absence on leave (including an extended
illness) or on account of disability. Except as provided in
paragraphs 6(a)(iv), 8 and 9, options granted under the Plan may
be exercised from time to time over the period stated in each
option in such amounts and at such times as shall be prescribed
by the Board of Directors, provided that options shall not be
exercised for fractional shares. Unless otherwise determined by
the Board of Directors, if the optionee does not exercise an
option in any one year with respect to the full number of shares
to which the optionee is entitled in that year, the optionee's
rights shall be cumulative and the optionee may purchase those
shares in any subsequent year during the term of the option.
(iii) Nontransferability. Each Incentive Stock Option and, unless
otherwise determined by the Board of Directors, each other option
granted under the Plan by its terms shall be nonassignable and
nontransferable by the optionee, either voluntarily or by
operation of law, except by will or by the laws of descent and
distribution of the state or country of the optionee's domicile
at the time of death, and each option by its terms shall be
exercisable during the optionee's lifetime only by the optionee;
provided, however, that a Nonstatutory Stock Option shall also be
transferable pursuant to a qualified domestic relations order as
defined under the Code or Title I of the Employee Retirement
Income Security Act.
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<PAGE>
(iv) Termination of Employment or Service.
(A) General Rule. Unless otherwise determined by the Board
of Directors, except as provided in paragraph 8, in the event the
employment or service of the optionee with the Company or a subsidiary
terminates for any reason other than because of physical disability or
death as provided in subparagraphs 6(a)(iv)(B) and (C), the option may
be exercised at any time prior to the expiration date of the option or
the expiration of three months after the date of such termination,
whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option at the date of such
termination.
(B) Termination Because of Physical Disability. Unless
otherwise determined by the Board of Directors, except as provided in
paragraph 8, in the event of the termination of employment or service
because of physical disability (within the meaning of Section 22(e)(3)
of the Code), the option may be exercised at any time prior to the
expiration date of the option or the expiration of 12 months after the
date of such termination, whichever is the shorter period, but only if
and to the extent the optionee was entitled to exercise the option at
the date of such termination.
(C) Termination Because of Death. Unless otherwise
determined by the Board of Directors, except as provided in paragraph
8, in the event of the death of an optionee while employed by or
providing service to the Company or a subsidiary, the option may be
exercised at any time prior to the expiration date of the option or
the expiration of 12 months after the date of such death, whichever is
the shorter period, but only if and to the extent the optionee was
entitled to exercise the option at the date of such termination and
only by the person or persons to whom such optionee's rights under the
option shall pass by the optionee's will or by the laws of descent and
distribution of the state or country of domicile at the time of death.
(D) Amendment of Exercise Period Applicable to Termination.
The Board of Directors, at the time of grant or at any time
thereafter, may extend the 90-day and 12-month exercise periods any
length of time not later than the original expiration date of the
option, and may increase the portion of an option that is exercisable,
subject to such terms and conditions as the Board of Directors may
determine.
(E) Failure to Exercise Option. To the extent that the
option of any deceased optionee or of any optionee whose employment or
service terminates is not exercised within the applicable period, all
further rights to purchase shares pursuant to such option shall cease
and terminate.
(v) Purchase of Shares. Unless the Board of Directors determines
otherwise, shares may be acquired pursuant to an option granted
under the Plan only upon receipt by the Company of notice in
writing from the optionee of the optionee's intention to
exercise, specifying the number of shares as to which the
optionee desires to exercise the option and the date on which the
optionee desires to complete the transaction, which shall not be
more than 30 days after receipt of the notice, and if required in
order to comply with the Securities Act of 1933, as amended,
containing a representation that it is the optionee's present
intention to acquire the shares for investment and not with a
view to distribution. On or before the date specified for
completion of the purchase of shares pursuant to an option, the
optionee must have paid the Company the full purchase price of
such shares in cash or, with the consent of the Board of
Directors, in whole or in part, in Common Stock of the Company
valued at fair market value. The fair market value of Common
Stock provided in payment of the purchase price shall
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<PAGE>
be the closing price of the Common Stock as reported in The Wall
Street Journal on the day preceding the date that the option is
exercised, or such other reported value of the Common Stock as
shall be specified by the Board of Directors. No shares shall be
issued until full payment therefor has been made. Each optionee
who has exercised an option shall immediately upon notification
of the amount due, if any, pay to the Company in cash amounts
necessary to satisfy any applicable federal, state and local tax
withholding requirements. If additional withholding is or becomes
required beyond any amount deposited before delivery of the
certificates, the optionee shall pay such amount to the Company
on demand. If the optionee fails to pay the amount demanded, the
Company may withhold that amount from other amounts payable by
the Company to the optionee, including salary, subject to
applicable law. With the consent of the Board of Directors an
optionee may satisfy this obligation, in whole or in part, by
having the Company withhold from the shares to be issued upon the
exercise that number of shares that would satisfy the withholding
amount due or by delivering Common Stock to the Company to
satisfy the withholding amount. Upon the exercise of an option,
the number of shares reserved for issuance under the Plan shall
be reduced by the number of shares issued upon exercise of the
option.
(b) Incentive Stock Options. Incentive Stock Options shall be subject
to the following additional terms and conditions:
(i) Limitation on Amount of Grants. No employee may be granted
Incentive Stock Options under the Plan if the aggregate fair
market value, on the date preceding the date of grant, of the
Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by that employee during any
calendar year under the Plan and under any other incentive stock
option plan (within the meaning of Section 422 of the Code) of
the Company or any parent or subsidiary of the Company exceeds
$100,000.
(ii) Limitations on Grants to 10 Percent Shareholders. An
Incentive Stock Option may be granted under the Plan to an
employee possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company or of any
parent or subsidiary of the Company only if the option price is
at least 110 percent of the fair market value of the Common Stock
subject to the option on the date preceding the date it is
granted, as described in paragraph 6(b)(iv), and the option by
its terms is not exercisable after the expiration of five years
from the date it is granted.
(iii) Duration of Options. Subject to paragraphs 6(a)(ii) and
6(b)(ii), Incentive Stock Options granted under the Plan shall
continue in effect for the period fixed by the Board of
Directors, except that no Incentive Stock Option shall be
exercisable after the expiration of 10 years from the date it is
granted.
(iv) Option Price. The option price per share shall be determined
by the Board of Directors at the time of grant. Except as
provided in paragraph 6(b)(ii), the option price shall not be
less than 100 percent of the fair market value of the Common
Stock covered by the Incentive Stock Option at the date the
option is granted. The fair market value shall be deemed to be
the closing price of the Common Stock as reported in The Wall
Street Journal on the day preceding the date the option is
granted, or if there has been no sale on that date, on the last
preceding date on which a sale occurred, or such other value of
the Common Stock as shall be specified by the Board of Directors.
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(v) Limitation on Time of Grant. No Incentive Stock Option shall
be granted on or after the tenth anniversary of the date the Plan
was adopted by the Board of Directors.
(vi) Conversion of Incentive Stock Options. The Board of
Directors may at any time without the consent of the optionee
convert an Incentive Stock Option to a Nonstatutory Stock Option.
(vii) Limit on Shares. Subject to adjustment as provided in
paragraph 9, the total number of Common Shares that may be issued
under the Plan upon exercise of Incentive Stock Options shall not
exceed 700,000 plus up to 200,000 shares that may become
available from the 1986 Plan.
(c) Nonstatutory Stock Options. Nonstatutory Stock Options, other than
options granted pursuant to paragraph 8, shall be subject to the following
additional terms and conditions:
(i) Option Price. The option price for Nonstatutory Stock Options
shall be determined by the Board of Directors at the time of
grant and may be any amount determined by the Board of Directors
not less than 100% of the fair market value in the date preceding
the date of grant. The fair market value of such shares shall be
deemed to be the closing price of the Common Stock as reported in
The Wall Street Journal on the valuation date, or if there has
been no sale on that date, on the last preceding date on which a
sale occurred, or such other reported value of the Common Stock,
or average closing prices for a period of up to 10 trading dates
including or preceding the valuation date, as shall be specified
by the Board of Directors.
(ii) Duration of Options. Nonstatutory Stock Options granted
under the Plan shall continue in effect for the period fixed by
the Board of Directors.
7. Foreign Qualified Option Grants. Options under the Plan may be granted
to such officers and employees of the Company and its subsidiaries and such
other persons described in paragraph 1 residing in foreign jurisdictions as the
Board of Directors may determine from time to time. The Board of Directors may
adopt such supplements to the Plan as may be necessary to comply with the
applicable laws of such foreign jurisdictions and to afford participants
favorable treatment under such laws; provided, however, that no option shall be
granted under any such supplement with terms which are more beneficial to the
participants than the terms permitted by the Plan.
8. Option Grants to Nonemployee Directors.
(a) Grants to Nonemployee Directors. Immediately after the close of
each annual shareholder meeting (commencing with the 1996 annual meeting), each
person then serving as a Nonemployee Director, including any such person who is
elected at such meeting, shall automatically be granted a Nonstatutory Stock
Option to purchase 5,000 shares of Stock. A "Nonemployee Director" is a director
of the Company who is not an employee of the Company or of any parent or
subsidiary of the Company on the date the option is granted.
(b) Additional Grants to Nonemployee Directors Who Serve on Executive
Committee. Immediately after the close of each annual shareholder meeting
(commencing with the 1996 annual meeting), each person who is then serving as a
Nonemployee Director and who also is serving on the Executive Committee of the
Board of Directors shall automatically be granted a Nonstatutory Stock Option to
purchase an additional 2,500 shares of Stock.
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<PAGE>
(c) Terms of Options. The exercise price for options granted under
this paragraph 8 shall be the fair market value of the shares covered by the
option on the date preceding the date of grant, determined pursuant to paragraph
6(b)(iv). Each such option shall have a 10-year term from the date of grant,
unless earlier terminated as provided in 6(a)(iv). Each such option shall become
fully exercisable one year after the date of grant, subject to earlier exercise
pursuant to paragraph 9. If an optionee ceases to be a director of the Company
for any reason, including death or disability, the exercise of the option shall
be subject to 6(a)(iv). Options may be exercised in accordance with paragraph 6.
Options granted under this paragraph 8 shall be governed by all other applicable
provisions of the Plan.
9. Changes in Capital Structure. If the outstanding Common Stock of the
Company is hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company or of
another corporation by reason of any reorganization, merger, consolidation, plan
of exchange, recapitalization, reclassification, stock split-up, combination of
shares or dividend payable in shares, appropriate adjustment shall be made by
the Board of Directors in the number and kind of shares available for grants
under the Plan. In addition, the Board of Directors shall make appropriate
adjustment in the number and kind of shares as to which outstanding options or
portions thereof then unexercised, shall be exercisable, so that the optionee's
proportionate interest before and after the occurrence of the event is
maintained. Notwithstanding the foregoing, the Board of Directors shall have no
obligation to effect any adjustment that would or might result in the issuance
of fractional shares, and any fractional shares resulting from any adjustment
may be disregarded or provided for in any manner determined by the Board of
Directors. Any such adjustments made by the Board of Directors shall be
conclusive. In the event of dissolution of the Company or a merger,
consolidation or plan of exchange affecting the Company, in lieu of providing
for options as provided above in this paragraph 9 or in lieu of having the
options continue unchanged, the Board of Directors, may, in its sole discretion,
provide a 30-day period prior to such event during which optionees shall have
the right to exercise options in whole or in part without any limitation on
exercisability and upon the expiration of such 30-day period all unexercised
options and stock appreciation rights shall immediately terminate.
10. Corporate Mergers, Acquisitions, etc. The Board of Directors may also
grant options under the Plan having terms, conditions and provisions that vary
from those specified in this Plan provided that any such awards are granted in
substitution for, or in connection with the assumption of, existing options
granted by another corporation and assumed or otherwise agreed to be provided
for by the Company pursuant to or by reason of a transaction involving a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to which the Company or a subsidiary is a party.
11. Amendment of Plan. The Board of Directors may at any time, and from
time to time, modify or amend the Plan in such respects as it shall deem
advisable because of changes in the law while the Plan is in effect or for any
other reason. Except as provided in paragraphs 6(a)(iv) and 9 however, no change
in an option already granted shall be made without the written consent of the
holder of such award. Current Nasdaq rules and IRS rules would require
shareholder approval of certain amendments to the 1996 Plan.
12. Approvals. The obligations of the Company under the Plan are subject to
the approval of state and federal authorities or agencies with jurisdiction in
the matter. The Company will use its best efforts to take steps required by
state or federal law or applicable regulations, including rules and regulations
of the Securities and Exchange Commission and any stock exchange on which the
Company's shares may then be listed, in connection with the grants under the
Plan. The foregoing notwithstanding, the Company shall not be obligated to issue
or deliver Common Stock under the Plan if such issuance or delivery would
violate applicable state or federal securities laws.
13. Employment and Service Rights. Nothing in the Plan or any award
pursuant to the Plan shall (i) confer upon any employee any right to be
continued in the employment of the Company or any subsidiary or interfere in any
way with the right of the Company or any subsidiary by whom such
A-6
<PAGE>
employee is employed to terminate such employee's employment at any time, for
any reason, with or without cause, or to decrease such employee's compensation
or benefits, or (ii) confer upon any person engaged by the Company any right to
be retained or employed by the Company or to the continuation, extension,
renewal, or modification of any compensation, contract, or arrangement with or
by the Company.
14. Rights as a Shareholder. The recipient of any award under the Plan
shall have no rights as a shareholder with respect to any Common Stock until the
date of issue to the recipient of a stock certificate for such shares. Except as
otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date occurs prior to the date
such stock certificate is issued.
15. Applicable Law. The law of the State of Oregon will govern all matters
relating to this Plan except to the extent it is superseded by the laws of the
United States.
A-7
Fred Stockton
2096 Wellington Drive
West Linn, Oregon 97068
Phone: (503) 650-6097
Fax: (503) 656-4015
E-mail: [email protected]
August 18, 1997
Mr. Frederick O. Paulsell, Jr.
Olympic Capital Partners
1325 Fourth Avenue
Suite 1900
Seattle, Washington 98101-2505
Dear Fred,
I am extremely pleased to be joining the TRM team. Thank you for selecting me as
the new President and Chief Executive Officer. I look forward to working closely
with you, as we direct TRM's future growth.
The purpose of this correspondence is to outline the agreement we reached
concerning the terms of my employment.
1. Salary
* $210,000 per year
* An annual salary review by the Board of Directors.
2. Bonus
* A $60,000 bonus will be paid if the company achieves the earnings
target that has been established for the 1998 fiscal year.
* An additional $60,000 bonus may be earned based on the
achievement of additional performance criteria to be established
by the Board of Directors.
3. Stock Options
* The initial grant will be 200,000 shares, with an opportunity for
additional grants in the future.
* The shares will granted with a ten-year period to exercise
options.
* Vesting of shares will be 25% per year for four years.
* Automatic acceleration of vesting to 100% will take place if a
change in control of the company occurs.
1
<PAGE>
Frederick O. Paulsell
August 18, 1997
Page 2 of 2
4. Other Benefits
* A company owned vehicle, comparable to the vehicle provided in my
last position, will be provided for my use.
* The company will pay any expenses I incur related to COBRA
insurance, until my family can be covered by the company's benefit
plans, without any exclusion for pre-existing conditions or
required waiting periods.
* Vacation accruals will be based on four weeks per year beginning
with the first day of employment.
* If my employment is terminated, the company will provide me with a
severance benefit, beginning on the first day of employment, with
an amount equal to three months salary at the time of termination.
At the end of each subsequent three-month period, that benefit
will increase by an additional one-month's salary, until a maximum
benefit of twelve-months has been earned. If a change in control
of the company takes place and I am terminated, the full
twelve-months will be owed.
Please review what I have written above and see if it is consistent with your
understanding of our agreement. If you agree with the above I request that you
confirm that agreement in writing to me.
Sincerely,
FRED STOCKTON
Fred Stockton
cc: Michael Simon
<TABLE>
<CAPTION>
Selected Financial Data
(In thousands, except per share data) 1997* 1996 1995 1994 1993**
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended June 30:
Sales $ 69,881 $ 67,538 $ 60,544 $ 47,957 $ 38,774
Net income 2,575 4,124 3,699 3,354 3,236
Net income per share 0.35 0.57 0.53 0.49 0.47
As of June 30:
Working capital $ 9,568 $ 8,860 $ 9,543 $ 8,523 $ 5,667
Total assets 50,160 54,251 55,736 43,504 30,323
Long-term debt 400 8,128 14,238 9,500 850
Stockholders' equity 38,828 35,444 31,528 27,155 23,704
</TABLE>
<TABLE>
<CAPTION>
Selected Quarterly Financial Data
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
(In thousands, except per share data) 1997 1996 1997 1996 1997 1996 1997* 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $ 16,577 $ 15,716 $ 17,347 $ 16,727 $ 18,023 $ 17,394 $ 17,934 $ 17,701
Gross profit 6,436 5,788 6,797 6,263 7,407 6,659 7,300 7,170
Net income (loss) 1,037 844 1,163 910 1,365 1,077 (990) 1,293
Net income (loss) per share 0.14 0.12 0.16 0.13 0.19 0.15 (0.13) 0.18
</TABLE>
* In the fourth quarter of fiscal 1997, the Company recorded a non-cash,
non-recurring accounting charge for the impairment of long-lived assets.
Absent the charge, net income and net income per share would have been:
<PAGE>
<TABLE>
<CAPTION>
4th Quarter 1997 Fiscal Year 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 1,536 $ 5,101
Net income per share $ 0.21 $ 0.70
** In the first quarter of fiscal 1994, the Company retroactively adopted
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes." Accordingly, selected data for periods prior to fiscal
1994 described above as net income, net income per share and stockholders'
equity were adjusted retroactively.
</TABLE>
<PAGE>
Management's Discussion and Analysis
TRM continues to expand in new and existing metropolitan service areas. The
number of service areas served has increased from 50 to 72 over the last three
fiscal years and now includes 49 in the United States, 5 in Canada, 15 in the
United Kingdom, 2 in France and 1 in Belgium. TRM Centers have increased 36
percent over the three year period, from 25,563 to 34,796. In addition to
expanding, the Company is also focused on improving the profit performance of
the installed base of TRM Centers.
Results of Operations
The percentage of change in dollar amounts and the percentage of sales
represented by each item on the Consolidated Statements of Operations (page 9 of
this Annual Report) follow:
<TABLE>
<CAPTION>
Percentage Change As a Percentage of Sales
- -----------------------------------------------------------------------------------------------------
1996-97 1995-96 1997 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales 3.5% 11.6% 100.0% 100.0% 100.0%
Sales discounts (0.4) 5.3 16.7 17.4 18.4
Cost of sales 1.1 11.4 43.3 44.3 44.3
Selling, general and administrative 5.7 17.1 26.6 26.0 24.8
Impairment of long-lived assets 100.0 -- 5.8 -- --
- -----------------------------------------------------------------------------------------------------
Operating income (36.4) 10.2 7.6 12.3 12.5
Interest expense, net (58.6) 1.3 (0.6) (1.4) (1.6)
Other, net 55.2 (1.3) (1.0) (0.7) (0.8)
- -----------------------------------------------------------------------------------------------------
Income before income taxes (39.5) 12.4 6.0 10.2 10.1
Provision for income taxes (42.4) 13.9 2.3 4.1 4.0
- -----------------------------------------------------------------------------------------------------
Net income (37.6%) 11.5% 3.7% 6.1% 6.1%
- -----------------------------------------------------------------------------------------------------
</TABLE>
The 1997 sales growth of 3.5 percent was due primarily to a 10.9 percent
increase in the number of billed units offset by a 6.0 percent decrease in
average net sales per unit. Sales growth during 1997 came primarily from the
Company's foreign operations. Foreign sales grew to $25.9 million in 1997 from
$22.0 million in 1996 and $15.7 million in 1995. Heavy investments in new city
openings and in new copiers in Europe in 1994 and 1995 are now resulting in
higher sales. The Company's business model in the more well-established U.S.
operations differs from that in its foreign operations. In the U.S., the primary
focus over the last three years has been on learning how to better manage the
installed base of copiers. In actively managing the profit performance of the
U.S. installed base, under-performing machines were removed and put back into
stock to be redeployed at better sites. Locations with copy pricing too low to
be profitable at their existing copy volumes were repriced to higher levels. The
majority of the machines repriced showed increased profits and lower sales per
unit. This and the declining performance of test installations of color copiers
and business card equipment, referred to under "Impairment of long-lived
assets," contributed to a decrease in U.S. sales during 1997. The Company plans
to begin using new state-of-the-art black and white copiers to grow the
installed base for the next several years. Further, after two years of opening
cities attached to existing service centers, the Company has now resumed opening
stand-alone cities with three domestic locations opening since October 1996.
Also, much progress has been made on establishing a corporate chain selling
program at TRM to better address the retailer consolidation of the 1990's. This
aggressive new program, along with the NextGen black and white copier discussed
below, are both expected to contribute toward increasing U.S. sales going
forward.
<PAGE>
During 1996, sales growth was 11.6 percent and billed unit growth was 8.9
percent. The number of billed units and average sales per unit were
significantly affected by the aggressive unit growth in Europe, where average
machine performance is above the Company's average.
To date, sales from products not related to black and white photocopying
have been insignificant, amounting to less than 5 percent of total sales.
Sales discounts are the portion of revenue retained by retail customers.
They generally vary at individual retail businesses depending on volume--the
higher the volume, the greater the discount and vice versa. The downward trend
in sales discounts as a percentage of sales in 1997 and 1996 reflects changes
made in business agreements with new customers over the periods.
Cost of sales increased 1.1 percent from 1996 to 1997. This was below the
percentage increase in sales, despite growth in field service payroll, headcount
additions for opening new cities, and copier depreciation costs that were above
the level of sales growth. This was achieved because of lower paper costs
worldwide and lower paper and toner usage under the Company's higher-copy-price
programs.
Comparing 1996 to 1995, cost of sales increased 11.4 percent. This was
primarily due to higher paper costs, though the Company mitigated the adverse
impact of higher paper costs on cost of sales through its active program to
raise copy prices at thousands of locations. This had a decreasing influence on
the number of copies made due to expected demand elasticity. The increase in
cost of sales was also affected by higher field service and field sales payroll
costs.
The rate of growth in selling, general and administrative expense decreased
significantly, from 17.1 to 5.7 percent, from 1996 to 1997. During 1996,
significant investments were made in people and systems. Key additions were made
across all levels of the management team. Investments in our computerized
management information systems were also made and continued throughout 1997. The
increase in selling, general and administrative expense during 1997 was
primarily due to higher employee health care costs in the U.S. and higher
expansion and start-up expenses in both the U.S. and Europe.
During 1997, the Company recorded a non-cash, non-recurring accounting
charge of $4.1 million pretax ($2.5 million and $0.35 per share after tax),
which reflected the Company's application of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." As
discussed with "Sales" above, the Company determined that this action was
necessary after reviewing the affected asset categories. This charge included
impairment write downs of equipment in three categories: color copiers, custom
business card printing components and certain older generation black and white
copiers. Though the Company continues to support its installed color copier and
business card units and expects to pursue other equipment offerings in these two
product categories, it was concluded during 1997 that the initial equipment
purchased in 1993 and 1994 for market testing was technologically dated and that
the full asset carrying amounts were not recoverable. In addition, the Company
recently finalized an agreement with a major copier manufacturer to purchase a
new-generation black and white copier to grow the core business. The Company
intends to use these new, state-of-the-art copiers to grow the installed base
for the next several years. In light of this, the equipment write down included
a provision for the impairment of older generation black and white copiers which
are needed in the service centers to support the installed base, but are no
longer expected to be placed as incremental revenue generating units.
From mid-1996 through 1997, the Company was able to reduce bank borrowings
significantly, which resulted in the lower interest expense. Interest costs were
higher in 1995 and early 1996 because the Company incurred bank borrowings to
help fund its aggressive unit expansion.
The effective tax rate declined from 40.1% in 1996 to 38.2% in 1997 due to
income in the United Kingdom now flowing through a United Kingdom subsidiary and
being taxed at a lower statutory rate than domestic income. The change in
effective tax rates between 1995 and 1996 was not significant.
<PAGE>
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share." SFAS No. 128 requires public companies with
complex capital structures to present both basic and diluted earnings per share
("EPS") on the face of the income statement. The presentation of basic EPS
replaces the presentation of primary EPS currently required by Accounting
Principles Board ("APB") No. 15, "Earnings Per Share." Basic EPS is calculated
as income available to common stockholders divided by the weighted average
number of common shares outstanding during the period. Diluted EPS (previously
referred to as fully diluted EPS) is calculated using the "if converted" method
for convertible securities and the treasury stock method for options and
warrants as prescribed by APB No. 15. This statement is effective for financial
statements issued for interim and annual periods ending after December 15, 1997.
The Company does not believe the adoption of SFAS No. 128 in fiscal 1998 will
have a significant impact on the Company's reported diluted EPS.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which established requirements for disclosure of comprehensive income.
The objective of SFAS No. 130 is to report all changes in equity that result
from transactions and economic events other than transactions with owners.
Comprehensive income is the total of net income and all other non-owner changes
in equity. SFAS No. 130 is effective for fiscal years beginning after December
15, 1997. Reclassification of earlier financial statements for comparative
purposes is required. The Company has not quantified the effect of adoption of
SFAS No. 130.
Liquidity and Capital Resources
During 1997 and 1996, cash flow from operations fully funded capital
expenditures of $4.6 and $5.5 million, respectively, and allowed for repayment
of $7.7 and $9.6 million, respectively, in bank borrowings. This level of
capital expenditures was below the $13.3 million spent in 1995 because the
Company focused on removing and redeploying low-performing customer placements
and working through available inventories of copiers in North America during
1996 and 1997. The primary sources of capital for expansion in 1995 were cash
from operating activities and bank borrowings.
As of June 30, 1997, $400,000 was outstanding under a $30.0 million
unsecured revolving bank
loan. This line expires in April 2000. Interest only is due until April 1, 2000,
at which time no additional borrowings will be available, and the loan balance
outstanding will be due and payable. Under this arrangement, the Company has
interest rate alternatives to choose from, including the bank's reference rate
and LIBOR-based rates.
The Company currently anticipates capital expenditures of $8 to $10 million
during fiscal 1998. The Company expects to finance these capital expenditures
with cash generated from operations and with bank borrowings. The Company
expects that these sources will provide adequate cash to fund its expansion
through at least June 30, 1998.
Forward-Looking Statements
Information in "Management's Discussion and Analysis," the letter to
shareholders and elsewhere in this Annual Report about the Company's goals,
plans and expectations regarding: future operations, growing the installed base;
opening service areas; selling to corporate chains; installing next generation
black and white copiers; addressing the color copying and business card printing
markets and capital expenditures constitutes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The following factors are among the factors
that could cause actual results to differ materially from the forward-looking
statements: business conditions in the market areas in which the Company
operates, competitive factors, consumer demand for the Company's services and
the Company's ability to execute its plans successfully. Any forward-looking
statements should be considered in light of these factors.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
June 30,
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 2,528 $ 873
Accounts receivable, net 7,704 7,264
Inventories (note 2) 4,611 5,253
Prepaid expenses and other 1,399 1,580
- ------------------------------------------------------------------------------------------------------------
Total current assets 16,242 14,970
Equipment and vehicles, less accumulated depreciation (notes 3 and 4) 33,872 39,172
Other assets 46 109
- ------------------------------------------------------------------------------------------------------------
$ 50,160 $ 54,251
- ------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity Current liabilities:
Checks in transit $ 1,409 $ 938
Accounts payable 1,568 1,799
Accrued expenses (note 5) 3,697 3,373
- ------------------------------------------------------------------------------------------------------------
Total current liabilities 6,674 6,110
Long-term debt (note 6) 400 8,128
Deferred income taxes (note 7) 4,258 4,569
- ------------------------------------------------------------------------------------------------------------
Total liabilities 11,332 18,807
Commitments (note 11) -- --
Stockholders' equity (notes 8 and 9): Preferred stock, no par value.
Authorized 5,000 shares; no
shares issued and outstanding -- --
Common stock, no par value.
Authorized 10,000 shares; issued and
outstanding 6,931 and 6,484 shares 16,601 16,214
Retained earnings 22,279 19,704
Cumulative translation adjustment (52) (474)
- ------------------------------------------------------------------------------------------------------------
Total stockholders' equity 38,828 35,444
$ 50,160 $ 54,251
- ------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Operations
Fiscal year ended June 30,
(In thousands, except per share data) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 69,881 $ 67,538 $ 60,544
Less discounts 11,676 11,728 11,138
- ------------------------------------------------------------------------------------------------------------
Net sales 58,205 55,810 49,406
Cost of sales 30,265 29,930 26,857
- ------------------------------------------------------------------------------------------------------------
Gross profit 27,940 25,880 22,549
Selling, general and
administrative expense 18,569 17,569 15,006
Impairment of long-lived assets (note 4) 4,088 -- --
- ------------------------------------------------------------------------------------------------------------
Operating income 5,283 8,311 7,543
Interest expense 396 957 945
Other expense, net 720 464 470
- ------------------------------------------------------------------------------------------------------------
Income before income taxes 4,167 6,890 6,128
Provision for income taxes (note 7) 1,592 2,766 2,429
- ------------------------------------------------------------------------------------------------------------
Net income $ 2,575 $ 4,124 $ 3,699
- ------------------------------------------------------------------------------------------------------------
Net income per share $ 0.35 $ 0.57 $ 0.53
Weighted average common
and common equivalent
shares outstanding 7,337 7,262 6,934
- ------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
Cumulative
Common Stock Retained Translation
(In thousands) Shares Amount Earnings Adjustment Total
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances, June 30, 1994 6,390 $ 15,822 $ 11,881 $ (548) $ 27,155
Exercise of stock options 27 55 -- -- 55
Issuance of stock to employees 15 63 -- -- 63
Foreign currency translation adjustment -- -- -- 556 556
Net income -- -- 3,699 -- 3,699
- ---------------------------------------------------------------------------------------------------------------
Balances, June 30, 1995 6,432 15,940 15,580 8 31,528
Exercise of stock options 36 137 -- -- 137
Tax benefit of stock options -- 26 -- -- 26
Issuance of stock to employees 16 111 -- -- 111
Foreign currency translation adjustment -- -- -- (482) (482)
Net income -- -- 4,124 -- 4,124
- ---------------------------------------------------------------------------------------------------------------
Balances, June 30, 1996 6,484 16,214 19,704 (474) 35,444
Exercise of stock options 468 517 -- -- 517
Purchase of outstanding shares (27) (279) -- -- (279)
Tax benefit of stock options -- 96 -- -- 96
Issuance of stock to employees 6 53 -- -- 53
Foreign currency translation adjustment -- -- -- 422 422
Net income -- -- 2,575 -- 2,575
- ---------------------------------------------------------------------------------------------------------------
Balances, June 30, 1997 6,931 $ 16,601 $ 22,279 $ (52) $ 38,828
- ---------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Fiscal year ended June 30,
(In thousands) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
Operating activities:
<S> <C> <C> <C>
Net income $ 2,575 $ 4,124 $ 3,699
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,591 5,101 4,623
Loss on disposal of equipment and vehicles 234 40 18
Impairment of long-lived assets 4,088 -- --
Changes in items affecting operations:
Accounts receivable (440) (529) (1,789)
Inventories 566 1,292 (2,318)
Prepaid expenses and other (189) 146 745
Accounts payable (231) 306 240
Accrued expenses 324 70 1,161
Deferred income taxes (311) 817 687
- ------------------------------------------------------------------------------------------------------------
Total operating activities 12,207 11,367 7,066
Investing activities:
Proceeds from sale of equipment 456 146 130
Capital expenditures (4,562) (5,494) (13,259)
Other (33) 44 (17)
- ------------------------------------------------------------------------------------------------------------
Total investing activities (4,139) (5,304) (13,146)
Financing activities:
Change in checks in transit 471 (484) 1,033
Principal payments on borrowings (7,728) (9,636) (7,337)
Proceeds from borrowings -- 3,526 12,075
Net proceeds from issuance of common stock 387 274 118
- ------------------------------------------------------------------------------------------------------------
Total financing activities (6,870) (6,320) 5,889
Effect of exchange rate changes 457 375 283
Net increase in cash 1,655 118 92
Beginning cash 873 755 663
- ------------------------------------------------------------------------------------------------------------
Ending cash $ 2,528 $ 873 $ 755
- ------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
1. Description of Business and Summary of Significant Accounting Policies:
Description of Business
TRM Copy Centers Corporation, headquartered in Portland, Oregon, as its
primary business, owns, supplies and maintains nearly 35,000 self-service
photocopiers in pharmacies, stationery stores, hardware stores, convenience
stores and other retail establishments in the United States, Canada, the United
Kingdom, France and Belgium. Each retail establishment collects payment from its
customers, shares in the revenue of the photocopier and benefits from any
increase in customer traffic within the store.
Principles of Consolidation
The consolidated financial statements include the accounts of the parent
and its subsidiary companies (the Company). All significant intercompany
accounts and profits have been eliminated. Assets and liabilities of foreign
operations are translated into U.S. dollars at current exchange rates. Income
and expense accounts are translated into U.S. dollars at average rates of
exchange prevailing during the periods. Adjustments resulting from translating
foreign functional currency financial statements into U.S. dollars are taken
directly to a separate component of stockholders' equity. Foreign currency
transaction gains and losses are included in income and have been immaterial to
date.
Fair Value of Financial Instruments
Financial instruments, including cash, accounts receivable, checks in
transit and accounts payable, approximate fair market value because of the short
maturity for these instruments. Fair value approximates carrying value of the
Company's borrowings under its long-term debt arrangements based upon interest
rates available for the same or similar loans.
Revenue Recognition and Accounts Receivable
A portion of each copy sale is retained by the retail business, generally
depending on copy volume. The Company invoices each retailer via monthly
billings based on usage at the program price per copy less the applicable
discount (the amount retained by the retailer). Total sales activity and
discount amounts are recorded separately in the accounting records and in the
consolidated statements of operations to arrive at net sales.
Accounts receivable are shown net of allowance for doubtful accounts of
$148,000 and $287,000 at June 30, 1997 and 1996, respectively.
Inventories
Inventories are stated at the lower of FIFO cost or market.
Equipment and Vehicles
Equipment and vehicles are recorded at cost. Depreciation begins when the asset
is placed in service and is generally recorded using the straight-line method
over the estimated remaining useful lives of the related assets as follows:
Photocopiers and other centers 5-10 years
Furniture and fixtures 5-7 years
Computer equipment 5 years
Vehicles 5 years
<PAGE>
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and income tax bases of assets and liabilities, and are measured by applying
enacted tax rates and laws to the taxable years in which such differences are
expected to reverse.
Statements of Cash Flows Supplemental Information
Income taxes paid were approximately $1,635,000, $2,465,000 and $1,075,000
for the fiscal years 1997, 1996 and 1995, respectively. Interest paid does not
materially differ from interest expense.
Net Income Per Share
Net income per share is computed based on the weighted average number of
shares of common stock and dilutive common stock equivalents outstanding during
the periods. Common stock equivalents consist of options to purchase stock
(using the treasury stock method).
Stock-Based Compensation
The Company applies APB No. 25, "Accounting for Stock Issued to Employees,"
and the related interpretations in accounting for stock-based compensation
plans. In accordance with SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company has provided the required footnote disclosures (see
note 8).
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Effect of Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share," which requires companies with complex capital
structures that have publicly held common stock or common stock equivalents to
present both basic and diluted earnings per share ("EPS") on the face of the
income statement. The presentation of basic EPS replaces the presentation of
primary EPS currently required by APB No. 15, "Earnings Per Share." This
statement is effective for financial statements issued for interim and annual
periods ending after December 15, 1997. The Company does not believe the
adoption of SFAS No. 128 in fiscal 1998 will have a significant impact on the
Company's reported diluted EPS.
2. Inventories:
June 30,
(In thousands) 1997 1996
- -------------------------------------------------------------------------------
Paper $ 1,231 $ 1,505
Toner and developer 692 828
Parts 2,688 2,920
- -------------------------------------------------------------------------------
$ 4,611 $ 5,253
- -------------------------------------------------------------------------------
<PAGE>
3. Equipment and Vehicles:
June 30,
(In thousands) 1997 1996
- -------------------------------------------------------------------------------
Photocopiers and other centers $ 45,232 $ 47,918
Furniture and fixtures 1,899 1,787
Computer equipment 1,381 1,392
Vehicles 5,109 5,950
- -------------------------------------------------------------------------------
53,621 57,047
Accumulated depreciation 19,749 17,875
$ 33,872 $ 39,172
- -------------------------------------------------------------------------------
4. Impairment of Long-Lived Assets:
The Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," during fiscal
1997. This new accounting standard requires long-lived assets to be reviewed for
impairment when circumstances indicate the carrying amount of an asset may not
be recoverable. The Company considers historical performance and future
estimated results in its evaluation of potential impairment and then compares
the carrying amount of the asset to the estimated future cash flows expected to
result from the use of the asset. If the carrying amount of the asset exceeds
estimated expected undiscounted future cash flows, the Company measures the
amount of the impairment by comparing the carrying amount of the asset to its
fair value.
The Company recognized a non-cash, non-recurring impairment charge of
$4,088,000 pretax ($2,526,000 and $0.35 per share after tax), in fiscal 1997 as
a result of adopting this new accounting standard. This charge included
impairment write downs of equipment in three categories: color copiers, custom
business card printing components and certain older generation black and white
copiers. Though the Company continues to support its installed color copier and
business card units and plans to pursue other equipment offerings in these two
product categories, it was concluded during 1997 that the initial equipment
purchased in 1993 and 1994 was technologically dated and that the full asset
carrying amounts were not recoverable. In addition, the Company recently
finalized an agreement with a major copier manufacturer to purchase a new
generation black and white copier to grow the core business. The Company intends
to use these new, state-of-the-art copiers to grow the installed base for the
next several years. In light of this, the equipment write down included a
provision for the impairment of older generation black and white copiers, which
are needed in the service centers to support the installed base, but are no
longer expected to be placed as incremental revenue-generating units.
5. Accrued Expenses:
June 30,
(In thousands) 1997 1996
- -------------------------------------------------------------------------------
Accrued payroll expenses $ 2,550 $ 2,443
Customer security deposits 250 276
Other accrued expenses 897 654
- -------------------------------------------------------------------------------
$ 3,697 $ 3,373
- -------------------------------------------------------------------------------
<PAGE>
6. Bank Borrowings:
June 30,
(In thousands) 1997 1996
- -------------------------------------------------------------------------------
Bank revolving loan, unsecured, maximum
limit of $30.0 million $ 400 $ 8,128
- -------------------------------------------------------------------------------
The revolving loan agreement calls for monthly payments of interest only
until expiration on April 1, 2000, or as renegotiated. At that time, no
additional borrowings will be available, and the outstanding loan balance will
be due and payable. The arrangement allows the Company to choose from interest
rate alternatives based on the bank's reference rate or on LIBOR. It also calls
for a loan fee which was paid at the date of the loan and is being amortized
over the life of the loan. The interest rate applicable to bank borrowings as of
June 30, 1997 was 8.5%. The loan agreement contains certain restrictive
covenants as to working capital, total liabilities and stockholders' equity. The
Company is in compliance with the covenants.
7. Income Taxes:
Deferred income taxes arise primarily from different depreciation
calculations used for financial statement and income tax purposes. Income before
income taxes is as follows:
<TABLE>
<CAPTION>
(In thousands) 1997* 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 1,223 $ 6,730 $ 5,907
Foreign 2,944 160 221
- -----------------------------------------------------------------------------------
$ 4,167 $ 6,890 $ 6,128
- -----------------------------------------------------------------------------------
* During 1997, the Company recorded a non-cash, non-recurring accounting charge
of $4,088,000 pretax ($2,526,000 and $0.35 per share after tax), for the
impairment of long-lived assets (see note 4).
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 1,074 $ 1,459 $ 1,250
State 459 424 401
Foreign 370 66 91
Deferred:
Federal (1,097) 564 578
State (320) 164 100
Foreign 1,106 89 9
- -----------------------------------------------------------------------------------
$ 1,592 $ 2,766 $ 2,429
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
The effective tax rate differs from the federal statutory tax rate as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal rate 34.0% 34.0% 34.0%
State taxes, net of federal benefit 7.6 5.9 5.9
Benefit of foreign tax rates (4.1) -- --
Other 0.7 0.2 (0.3)
- ------------------------------------------------------------------------------------
38.2% 40.1% 39.6%
- ------------------------------------------------------------------------------------
</TABLE>
8. Stockholders' Equity:
The Company reserved 1,300,000 shares of common stock for issuance under an
incentive and nonqualified stock option plan established in 1986 (the "1986
Plan"). In October 1996, the 1996 Stock Option Plan (the "1996 Plan") was
approved by shareholders of the Company. The 1996 Plan provides for the granting
of a maximum of 700,000 options to purchase common shares to key employees of
the Company. Under both plans ("the Plans"), incentive stock options are granted
at no less than 100% of the fair market value per share of the common stock.
Nonqualified stock options under the 1986 Plan were granted at prices determined
by the Board of Directors, while grants under the 1996 Plan are granted at no
less than 100% of fair market value. The options are exercisable over a period
of ten years from the date of grant. Generally, the options vest over five
years. In fiscal 1995, 300,000 option shares were granted at fair market value
outside the Plans. These options vested over two years and are exercisable for
five years after the last vesting date.
A summary of stock option activity follows:
<TABLE>
<CAPTION>
Shares Weighted Average
Under Option Price Range Exercise Price
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, June 30, 1995 1,237,650 $ .25 - $ 7.375 $ 3.22
Options granted 196,500 $ 6.375 - $ 10.625 $ 9.92
Options exercised (36,100) $ .25 - $ 6.375 $ 4.05
Options canceled (15,000) $ 4.125 - $ 6.375 $ 6.02
- ----------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1996 1,383,050 $ .25 - $ 10.625 $ 4.12
Options granted 146,500 $ 9.875 - $ 10.375 $ 10.28
Options exercised (468,200) $ .25 - $ 6.75 $ 1.11
Options canceled (12,800) $ 6.25 - $ 10.625 $ 7.01
- ----------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1997 (653,954 exercisable,
566,300 available for grant under the Plans) 1,048,550 $ 2.00 - $ 10.625 $ 6.29
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
A summary of stock options outstanding follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Price at June 30, 1997 Contractual Life Price at June 30, 1997 Price
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2.00 to $ 6.00 545,750 6.1 $ 3.90 497,750 $3.87
$6.25 to $ 7.50 176,800 7.7 $ 6.43 66,899 $6.39
$9.25 to $10.625 326,000 9.3 $ 10.22 89,305 $9.99
- --------------------------------------------------------------------------------------------------------------
$2.00 to $10.625 1,048,550 7.4 $ 6.29 653,954 $4.96
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The Company applies APB No. 25 and related interpretations in accounting
for its stock-based compensation plans. Accordingly, no compensation expense has
been recognized for its stock-based compensation plans. Had compensation cost
for the Company's stock option and stock purchase plans been determined based
upon the fair value at the grant date for awards under these plans consistent
with the methodology prescribed under SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company's net income and earnings per share would have been
reduced by approximately $180,000 or $0.02 per share for the year ended June 30,
1997, and approximately $48,000 or $0.01 per share for the year ended June 30,
1996. The weighted-average grant-date fair value of options granted during
fiscal 1997 was $4.13 per share using the Black-Scholes option pricing model
with the following assumptions: dividend yield of 0%, volatility of 39.60%,
risk-free interest rate of 6.40% and an expected life of four years. The
weighted-average grant-date fair value of options granted during fiscal 1996 was
$4.24 per share using the Black-Scholes option pricing model with the following
assumptions: dividend yield of 0%, volatility of 43.65%, risk-free interest rate
of 6.46% and an expected life of four years.
The effects of applying SFAS No. 123 for providing pro-forma disclosure for
1997 and 1996 are not likely to be representative of the effects on reported net
earnings and earnings per share for future years since options vest over several
years and additional awards may be made.
9. Benefit Plans:
Profit Sharing Retirement Plan
On January 1, 1990, the Company established a profit sharing retirement
plan for eligible U.S. employees. The Plan has profit sharing and 401(k)
components. The Company's contribution under the profit sharing portion of the
Plan is discretionary. Under the 401(k) part of the Plan, each employee may
contribute, on a pretax basis, up to 20% of the employee's gross earnings,
subject to certain limitations. The Company also has supplemental retirement
plans in Canada and the United Kingdom. The Company accrued profit sharing
contributions of $260,000 for fiscal 1997, $240,000 for fiscal 1996 and $230,000
for fiscal 1995.
Employee Stock Purchase Plan
The Company's Employee Stock Purchase Plan permits each eligible employee
to purchase shares of common stock through payroll deductions, not to exceed 10%
of the employee's compensation. The purchase price of the shares is the lower of
85% of the fair market value of the stock at the beginning of each six-month
offering period or 85% of the fair market value at the end of such period.
Amounts accumulated through payroll deductions during the offering period are
used to purchase shares on the last day of the offering period. Of the 100,000
shares authorized to be issued under the Plan, 53,694 shares have been
purchased, and 46,306 shares remain available for purchase as of June 30, 1997.
<PAGE>
10. Related Party Transactions:
A company in which the Chairman of the Board is a partner provided
approximately $57,000 in consulting services to the Company during fiscal 1997.
Two members of the Company's Board of Directors also served as consultants to
the Company on various aspects of the Company's business and strategic issues in
fiscal 1997 and 1996 and were paid $60,000 and $32,000, respectively.
11. Lease Commitments:
The Company leases vehicles and office and warehouse space in several
locations under operating leases. Minimum lease payments are as follows:
$2,015,000, $1,836,000, $1,246,000, $1,001,000 and $894,000 for fiscal years
1998, 1999, 2000, 2001 and 2002, respectively, and $4,623,000 thereafter. Rental
expense for fiscal years 1997, 1996 and 1995 was $2,358,000, $1,921,000 and
$1,757,000, respectively.
12. Operations by Geographic Areas:
The Company operates in one industry segment as a service company
maintaining and supporting its programs, which have been developed and placed
with retail establishments. Information about the Company's domestic and foreign
operations are presented below.
<TABLE>
<CAPTION>
Sales Operating Income Assets
(In thousands) 1997 1996 1995 1997* 1996 1995 1997* 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $ 43,949 $ 45,559 $ 44,814 $ 1,416 $ 5,717 $ 6,779 $ 26,451 $ 31,527 $ 33,858
Foreign:
Europe 21,389 17,575 11,677 3,383 2,310 389 20,869 19,786 19,330
Other 4,543 4,404 4,053 484 284 375 2,840 2,938 2,548
- -----------------------------------------------------------------------------------------------------------------
$ 69,881 $ 67,538 $ 60,544 $ 5,283 $ 8,311 $ 7,543 $ 50,160 $ 54,251 $ 55,736
- -----------------------------------------------------------------------------------------------------------------
* During fiscal 1997, the Company recorded a non-cash, non-recurring accounting
charge for the impairment of long-lived assets. Before the accounting charge,
United States Operating Income and Assets for fiscal 1997 would have been
$5,185,000 and $30,221,000, respectively. The effect on foreign Operating
Income and Assets was not significant.
</TABLE>
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
TRM Copy Centers Corporation:
We have audited the accompanying consolidated balance sheets of TRM Copy
Centers Corporation and subsidiaries as of June 30, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended June 30, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of TRM Copy
Centers Corporation and subsidiaries as of June 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 30, 1997, in conformity with generally accepted
accounting principles.
Portland, Oregon
August 15, 1997
<PAGE>
<TABLE>
<CAPTION>
CORPORATE DIRECTORY
<S> <C> <C>
BOARD OF DIRECTORS LEGAL COUNSEL FORM 10-K
Frederick O. Paulsell Stoel Rives LLP A copy of the Company's Annual Report
Chairman of the Board Suite 2300 on Form 10-K, as filed with the
Partner, Olympic Capital 900 S.W. Fifth Avenue Securities and Exchange Commission,
Partners, P.L.L.C. Portland, Oregon 97204 will be made available without charge
Telephone: (503) 224-3380 upon written request to Investor
Edwin S. Chan Relations, TRM Copy Centers Corporation,
Vice Chairman INDEPENDENT AUDITORS 5208 N.E. 122nd Avenue, Portland,
Retired President and KPMG Peat Marwick LLP Oregon 97230-1074.
Chief Executive Officer Suite 2000
1211 S.W. Fifth Avenue COMMON STOCK
Sherman M. Coe Portland, Oregon 97204 TRM Copy Centers Corporation's common
Vice President, Gene Juarez Telephone: (503) 221-6500 stock, of which there are approximately
Salons, Inc. 3,000 beneficial owners, trades on the
CORPORATE OFFICES Nasdaq National Market under the symbol
Ralph R. Shaw TRM Copy Centers Corporation TRMM. The Company has not paid dividends
Chairman 5208 N.E. 122nd Avenue on its common stock and has no plans to
ShawVentures, L.L.C. Portland, Oregon 97230-1074 do so in the near future.
Telephone: (503) 257-8766
Michael D. Simon Facsimile: (503) 251-5473 STOCK PRICE HISTORY
Retired President and The following table sets forth the high
Chief Executive Officer STOCK TRANSFER AGENT and low sale prices for the last two
Registrar and Transfer Company fiscal years.
Frederic P. Stockton 10 Commerce Drive
President and Cranford, New Jersey High Low
Chief Executive Officer 07016-3572 ------------------------------------
Corporate Secretary Telephone: (908) 272-8511 Fiscal 1996:
1st Quarter $ 8 3/8 $ 6 1/4
Donald L. Van Maren ANNUAL MEETING 2nd Quarter 11 3/8 7 3/8
Private Investor, The annual meeting of stockholders 3rd Quarter 11 1/2 10
Retired Doctor of Optometry of TRM Copy Centers Corporation 4th Quarter 11 1/2 10 5/8
will be held at the U.S. Bancorp
Tower, 41st Floor, John Elorriaga Fiscal 1997:
EXECUTIVE OFFICERS Auditorium, 111 S.W. Fifth Avenue, 1st Quarter $11 1/2 $ 9 1/4
Frederic P. Stockton Portland, Oregon 97204, on 2nd Quarter 11 9 3/8
President and October 28, 1997, at 9 a.m. 3rd Quarter 11 1/2 9 1/4
Chief Executive Officer 4th Quarter 11 1/8 9 11/16
Corporate Secretary
James W. Perris
Chief Operating Officer
and Vice President of Operations
Danial J. Tierney
Vice President of Corporate Sales
</TABLE>
Exhibit 21.1
Subsidiaries of TRM Copy Centers Corporation
State or Place
Subsidiary of Incorporation
- ---------- ----------------
TRM Copy Centers (USA) Corporation Oregon
TRM Copy Centres (Canada) Ltd.* Canada
TRM Copy Centres (U.K.) Limited.* U.K.
FPC France Ltd.* Oregon
FPC Belgium Limited* Oregon
BisCard Corporation Oregon
*TRM Copy Centres (Canada) Ltd., TRM Copy Centres (U.K.) Ltd., FPC France Ltd.
and FPC Belgium Limited are subsidiaries of TRM Copy Centers (USA) Corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,528
<SECURITIES> 0
<RECEIVABLES> 7,852
<ALLOWANCES> 148
<INVENTORY> 4,611
<CURRENT-ASSETS> 16,242
<PP&E> 53,621
<DEPRECIATION> 19,749
<TOTAL-ASSETS> 50,160
<CURRENT-LIABILITIES> 6,674
<BONDS> 400
0
0
<COMMON> 16,601
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 50,160
<SALES> 58,205
<TOTAL-REVENUES> 58,205
<CGS> 30,265
<TOTAL-COSTS> 30,265
<OTHER-EXPENSES> 720
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 396
<INCOME-PRETAX> 4,167
<INCOME-TAX> 1,592
<INCOME-CONTINUING> 2,575
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,575
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
